Real estate finance exam

What is the formula for calculating the total housing ratio?

(Monthly housing expenses ÷ gross monthly income) × 100

Margo, a mother of three, is in the group most likely to become delinquent on their payments, with a credit score of _______. Margot's tried unsuccessfully to get approved for loans, but she was issued a credit card that included many extra fees and required deposits.

579 or lower

In which of the following situations is a lender prohibited from enforcing an alienation clause?

A transfer between parent and child

A standardized measure for interest rates and other costs of the loan is called _______.

Annual Percentage Rate

As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.

Blanket lien

As interest rates rise, what is the number of buyers in the market likely to do?

Decrease

Jonathan has come up with a plan. He's going to offer to buy property belonging to his neighbor, who's struggling financially, collect rent from his neighbor, and not make the mortgage payments. He'll rake in the rent until the bank forecloses. Which type of mortgage fraud scheme is this an example of?

Equity skimming

Dan is being sued by a former client who feels that Dan didn't provide him with adequate service. Which of the following insurance coverage will Dan need?

Errors and omissions

Licensees who stay current with ______ can better serve low- to moderate-income clients looking to purchase.

FHA financing requirements

Federal Home Loan Bank is regulated by what agency?

Federal Housing Finance Agency

Which of these is actually an amendment to the Truth in Lending Act (TILA)?

Home Ownership and Equity Protection Act

Jerry is appraising a five-bedroom home in the suburbs. After identifying the purpose of the appraisal, what does he need to do next?

Identify the data that is needed.

Though not a loan, buyers may be able to enlist the help of ______, who can give them a tax-free gift to help them with their purchase.

Individuals, such as family members

Which of the following is classified as the least liquid on the scale?

Institutional money market funds

Ramon is an independent contractor who is being sued by a client. Luckily, because of the business structure he formed, his personal assets aren't at risk. Ramon likely has a(n) ______.

LLC

Which of these would most likely be found in the "potentially negative items" section of a credit report?

Lien

The ______ is where the borrower finds details about how, when, and by how much the interest rate will change in an adjustable rate mortgage (ARM).

Mortgage note

A beneficiary, trustor, and trustee are the parties involved when the finance instrument is a ______.

Note with Deed of Trust The beneficiary is the lender, the trustor is the borrower, and the trustee is the third party who reconveys title when the loan is paid off.

How common are interest-only loans today?

Rare

Which of these acts has special provisions for borrowers who are victims of over-charging?

Real Estate Settlement Procedures Act

The amount of money a member bank must keep on deposit at its reserve district bank describes ______.

Reserve requirements

The mortgage and the deed of trust are ______ that pledge property as collateral for a loan.

Security instruments

John is looking for a home to purchase. If he represents demand, which of the following represents the supply that best fits his needs?

Single-family house for sale

Which of the following statements best describes the judicial foreclosure and sale process?

The lender must seek the court's permission to foreclose on the property used as collateral for the loan.

How does the VA qualify a property for a VA-guaranteed loan?

Through a VA-approved appraiser

FHA offers a program for loan insurance on adjustable-rate mortgages under ______ of the National Housing Act.

Title II

Which of the following has a direct responsibility to pay the nation's bills?

U.S. Treasury

You attend a business-related conference that includes an overnight stay away from home. Can you deduct the cost of your meals during the conference?

Yes, you can deduct 50% of the cost of your meals

Who is responsible for paying the underwriting fee in a financed real estate transaction?

borrower

The supply of properties available in the market is greater than the number of buyers. What type of market does this describe?

buyer's market

Because of the Mortgage Disclosure Improvement Act, the only advance fee that a creditor can charge to a consumer before providing required loan disclosures is a(n) ______ fee.

credit report

Which of the following actions did the Federal Reserve take in response to the 2007 financial crisis?

decreased rates

One alternative to foreclosure is a voluntary conveyance of ______.

deed

How is Regulation B related to the Equal Credit Opportunity Act?

enforcement

How much of a mutual savings bank's assets come from savings accounts?

more than 70%

In which phase of the real estate market would you expect to see unemployment increasing, prices falling, and foreclosures on the rise?

recession

What kind of communities does Farmer Mac serve?

rural communities

Borrowers who fall into the ______ category may be faced with paying interest 1% to 5% over the current market rate.

subprime

A mortgage lien is a(n) ______ lien.

voluntary and specific

What's the most common ratio for borrowers who use split, or piggyback, mortgages?

80/10/10

Which of the following results from the Treasury selling securities?

A decrease in money in the economy

When borrowers miss scheduled mortgage payments, fail to pay property taxes, or ______, they could face loan default.

Allow the property to go into disrepair

Which of the following represents a potential concern when borrowing funds from a pension or retirement plan?

Borrowing without consulting a financial expert can result in unintended consequences, such as income tax liability and loss of retirement income.

Cheyenne is selling the family farm via an installment contract. What is one advantage of selling the farm this way?

Cheyenne will pay less in capital gains taxes by receiving the proceeds from the sale over time, rather than in a lump sum.

Althea is starting her own candle business. Her plan is to rent a space to sell her products for several years, with the hope of expanding. In this scenario, which item represents supply?

Commercial space for lease

Commercial banks offer interim financing in the form of ______ loans.

Construction

With a VA loan, the certificate of reasonable value is used to ______.

Determine the value of the loan that the VA will guarantee

In an installment sales contract arrangement, the seller retains legal title until the contract is paid in full. What type of title does the buyer retain during the contract fulfillment period?

Equitable

Which type of real estate investment trust is designed to deal exclusively in equities?

Equity REITS are owners improved income properties and are designed to deal in equities.

Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.

For a 50% discount off list price and a down payment of only $100

Which type of loan is insured by the Federal Housing Administration?

Government

What's the name of the clause in a promissory note where this language appears: "If the Note Holder has not received the full amount of any monthly payment by the end of ______ calendar days after the date it is due, I will pay a late charge to the Note Holder"?

Late charge provision

Ralph and Mort are neighbors. Ralph is selling, Mort is buying, and Ralph is offering a second loan to help Mort with his down payment, using a contract for deed. When Mort presents this idea to his lender, his lender balks. Why might that be?

Lenders don't like contract for deed arrangements.

When consumers make a small down payment, borrow the remaining amount of the purchase price from a lender, and reap the rewards off of the full investment value, they are demonstrating what concept?

Leveraging

Martha and Ben are selling their home to Linda and her three kids. They've purchased title insurance for obtaining insurance of good title. Whom does the title insurance protect?

Linda and her kids

Kate is looking over the document that provides the approximate loan-related costs, along with the loan's terms. What is Kate reviewing?

Loan estimate

Which of the following is the best example of the economic principal of leveraging, as it applies to a real estate transaction?

Making a down payment

What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?

Market value (Both appraisers and real estate licensees use market value, although their approaches to determining market value may differ.)

Natalie and Sam are reviewing the Loan Estimate form to ensure the date, their names, the property address, and sales price is listed accurately. Additionally, the information provided about their loan term, purpose, product, type, and rate lock should ______.

Match what the lender discussed with both of them

Mary Frances is on her way home from work and stops at the grocery store. The business account she opened recently gave her an ATM card to go with it. Should she use the card to buy groceries?

No, she should not pay for personal items with her business account.

Ron and Dawn hope to qualify for an FHA mortgage so they can buy a home for their family. Their housing ratio is 28%, their total debt obligation is 45%, and their credit score is 650. Do they qualify under FHA underwriting guidelines?

No, they don't meet the total debt obligation requirement.

Lendright Home Loans asked a trustee to begin foreclosure proceedings as permitted by the power-of-sale clause in the security instrument. This action does not need to involve the courts. What type of foreclosure process is being used?

Non-judicial foreclosure

When a buyer uses an FHA loan, the down payment amount is calculated ______.

On the lesser of the sales price or the appraised value of the property

When does PMI end?

Once the loan-to-value ratio reaches 78% of the original value.

Chanel is buying a brand new home with a VA loan. She's obtained a certificate of reasonable value. For how long is that CRV valid?

One year

A ______ is a mortgage-backed security issued by Freddie Mac.

Participation certificate

In which type of partnership does each mortgagee receive a share of the mortgage payment?

Partnerships among mortgagees

The two most common insolvency methods put in place when a bank fails are the purchase and assumption method and the ______ method.

Payout

Which of these tasks is performed by the U.S. Mint?

Produces commemorative coins and medals

Your client, Shelby, a veteran using a VA loan to finance her purchase, just learned that the CRV came in lower than the sales price. But no problem: Shelby's brother is willing to loan her the difference. If the loan is approved, ______.

Shelby must still be under the VA's debt-to-income ratio

What's the first step an appraiser will perform when conducting an appraisal?

State the problem

Regina has defaulted on the terms of her mortgage, and now her lender has foreclosed. The property was sold at a sheriff's sale three months ago. Regina suddenly learns that she has inherited a great deal of money. She wants her property back. Under a judicial foreclosure, what right might allow her to buy her property from the winner of the foreclosure auction?

Statutory right of redemption

A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?

Subordination

When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.

That the work meet FHA's basic energy efficiency and structural standards

The FHA is part of ______.

The Department of Housing and Urban Development

A borrower who has received a certificate of eligibility will qualify for a VA loan under which of the following circumstances?

The borrower also has sufficient credit and income.

Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."

The borrower is allowed to prepay the loan without penalty.

What's true about the draw period on a home equity line of credit (HELOC)?

The draw period varies.

The annual MIP is recalculated each year using ______.

The end-of-year loan balance, plus the balance after the next 11 payments

For tax years 2018 to 2025, a borrower can write off the interest on a home equity loan only if ______.

The funds are used to buy, build, or improve the home that secures the loan

Which of the following statements about the VA guaranteed home loan program is true?

The service member's length of service, duty status, and character of service determine eligibility.

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

One of HUD's goals reflects a response to financial issues experienced in the housing market during the 2007 economic crisis. The goal is ______ to bolster the economy and protect consumers.

To strengthen the housing market

Which of the following is a description of leveraging?

Using a small amount of cash to obtain a loan of a larger amount

With this alternative to foreclosure, a borrower hands over the property to the lender rather than face foreclosure proceedings.

Voluntary conveyance of deed

A lapse in property insurance coverage can result in borrower default because it leaves the lender ______ should something happen to damage the property.

Vulnerable

The total amount that's treated as home acquisition debt for tax purposes has to be less than ______ for married couples filing jointly.

$750000

What feature is a key benefit of the VA guaranteed loan for veterans?

100% financing

According to the PMI Act of 1998, at what percentage of equity position does personal mortgage insurance cancel for homeowners?

22%

For whose estate would a living trust be most beneficial?

A business owner

Which of these actions represent a common interaction between the primary and secondary mortgage markets?

A local bank sells a mortgage to a secondary market player

When a loan is recasted, what does it essentially become?

A new loan

Regional State Bank is a member bank of the Federal Home Loan Bank. In exchange for mortgage collateral, Regional State Bank received a loan from the FHLB so it can make additional loans to consumers. What is the loan called that Regional State Bank received?

An advance

Three types of savings that a good personal financial plan should include are money for retirement, money for taxes, and money for ______.

An emergency fund

Which of these is a requirement for a property purchased using the VA guaranteed loan program?

Be owner-occupied

Why do some financial experts recommend that those with outstanding debt on several credit cards pay off the card with the lowest balance first, regardless of interest rate?

Because getting a card paid off quickly is motivating, and the lowest balance will be paid off soonest

Seller concessions on a VA loan ______.

Can't exceed 4% of the sales price

Which type of loan provides short-term financing for the purpose of developing improvements on vacant land or on land that has improvements, but will soon have more?

Construction loan

After reviewing the final page of the Closing Disclosure, Gloria is concerned that she's being charged excessive points and fees. Page five provides her options for making a credit-related complaint to the ______.

Consumer Financial Protection Bureau

______ is directly influenced by factors such as employment levels and wages, interest rates, population changes, confidence in the market, and availability of loans.

Demand

The lender, the loan applicant, and the _______ all complete parts of the request for verification of deposit form.

Depository institution

A bank obtaining a loan from its Federal Reserve bank is likely to do so at what rate?

Discount rate

An investor receives title to a property, but she never makes mortgage payments and rents out the home until foreclosure occurs. What type of mortgage fraud does this describe?

Equity skimming

What is an advantage of using a personal finance system that allocates money to expenses by percentage of income?

Every budgeted item and savings goal is funded with every income check received.

What instrument is used to record the conversion to an ARM from a fixed rate of interest?

Fixed/adjustable rate note

Fannie Mae, Freddie Mac, and the Federal Home Loan Bank are examples of ______.

Government-sponsored enterprises

Which loan type is a fixed-rate mortgage where the monthly payments increase over time, according to a set schedule?

Growing Equity

Melvina has a Home Equity Conversion Mortgage. She feels secure because she knows that ______.

Her lender will continue to make payments to her as long as she remains in her home

A line of credit that's based on a percentage of the equity a person has in a property and which can be drawn upon for a number of years is known as a ______.

Home Equity Line of Credit

When evaluating the income listed on a loan application, what will the lender consider?

Income amount and source

The FHA 203(k) loan benefits a buyer who ______.

Is purchasing a home and needs money for rehabilitating the home, as well

When Brenda applied to have her FHA loan refinanced under the Streamline Refinance program, one requirement of the loan was that ______.

It resulted in a reduced mortgage payment

Kylie has a small farm where she grows vegetables and sells her produce to restaurants. She want to expand it, and needs a loan to purchase some additional acreage. What makes it unlikely that most lenders will want to offer Kylie the loan that she needs?

Kylie won't be able to make payments on the loan until she harvests her crops.

Which type of business structure shelters personal assets in the event of a lawsuit against the business owner?

LLC

Bambi is buying a property on an installment sales contract. Due to her financial interest in the property, she retains equitable title. What does the seller retain?

Legal title

Shelly received Brian's loan application and provided him with a loan estimate. Who does Shelly most likely represent?

Lender

The Veterans Land Program in Texas ______.

Offers qualified veterans help with the purchase of land in Texas

The Community Reinvestment Act requires federal ______ for compliance.

Oversight

A seller decides to help the buyer qualify for a loan by paying for a ______ buydown of the interest rate, which will be reflected on the borrower's note.

Permanent

This statement is part of a promissory note attached to a security instrument: "I have the right to make payments of Principal at any time before they are due." What's the name of the clause where this statement is included?

Pre-payment clause

Assuming a CMO uses the sequential pay structure, how is principal passed through from borrowers paid to investors?

Principal payments are only made to the first tranche until it retires, then to the second tranche, and so on.

Completing a residential loan application requires providing information about the borrower, the loan being applied for, and the ________.

Property being purchased

Which type of lien is a specific lien?

Real property tax lien

Which of the following discriminatory practice does the Home Mortgage Disclosure Act (HMDA) seek to address?

Redlining

Which of the following conditions contributed to the 2007 financial crisis?

Rising interest rates and falling property values

According to the IRS, a foreclosure is viewed as a ______.

Sale

Clark is selling his home to Myrna. Clark will retain the title to the property until Myrna has paid the loan in full. What type of financing is used in this transaction?

Seller-financed contract for deed

The Bakers are selling their home, and they've picked the perfect time. The market isn't saturated with a lot of properties for sale, but there are many buyers looking to make a purchase. What type of market is this?

Sellers market

Which of the following did the Dodd-Frank Act accomplish?

Split residential and commercial appraisal oversight to the newly created Consumer Financial Protection Bureau (CFPB)

The question, "What's the purpose of this appraisal?" can be answered by which step of the appraisal process?

State the problem

Which of the following may be used to defer paying taxes when there is an almost immediate repurchase of what's called a "like-kind" property?

Tax-deferred exchange

Cassie is helping her buyer client, Gus, prepare for closing. What should she encourage him to verify as soon as he receives the form?

That the borrower and seller names, the property address, and the sales price are accurate and spelled correctly

Which Texas act defines a mortgage loan originator and sets licensing requirements for those serving in this role?

The Texas SAFE Act

What is one of the main differences between the U.S. Mint and the Bureau of Engraving and Printing?

The U.S. Mint produces coins, and the Bureau of Engraving and Printing produces paper notes.

Tom's CRV came in low and he's decided to make up the difference in cash. What else will be required?

The VA may require Tom to prove the source of his funds.

What are reserve requirements?

The amount of money a member bank must keep on deposit at their reserve district bank

Which of the following outcomes is most likely if the Fed decreases reserve requirements?

The economy will heat up

Which of the following statements about junior loans is true?

The interest rate is usually higher than for a senior loan.

One of the ways that the FHA has stabilized and improved the mortgage market is through the introduction of ______.

The long-term amortized loan

What is a margin, as it relates to an adjustable rate mortgage?

The number of percentage points that are added to the index to determine the rate

Why do lenders care so much about property condition?

The property is collateral for the mortgage.

How can lapsed homeowner's insurance lead to default of the mortgage loan?

The property was used as collateral for the loan and is an asset for the lender. A lapse in homeowner's insurance puts the lender's investment at risk.

What is a lifetime cap, as it relates to an adjustable rate mortgage?

The value that limits the amount the rate can adjust over the life of the loan

The primary FHA loan program used to purchase a one- to four-family home is ______ of the National Housing Act.

Title 2

How do licensees use the funnel?

To calculate the number of leads required to generate a certain amount of income

What is HUD's stated mission?

To create strong, sustainable, inclusive communities and quality affordable homes for all

What's the most likely reason borrowers would choose a private loan company?

To provide extra funding to reach their goal when they can't secure it elsewhere

Which title search method only goes back as far as when the last title search performed, and assumes the last search was done accurately, legally, and that any issues were resolved?

Torrens system

Which entity guarantees government loans?

VA

Which governmental legislation established the Consumer Financial Protection Bureau?

Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

When establishing guidelines for conforming loans, Fannie Mae and Freddie Mac use loan limits set by which entity?

When establishing guidelines for conforming loans, Fannie Mae and Freddie Mac use loan limits set by which entity?

What's another term for voluntary conveyance?

deed in lieu of foreclosure

When reviewing her mortgage documents, Reva learns that should she miss scheduled payments, fail to pay property taxes, or allow the property to fall into disrepair, she may be in ______.

default

The Johnsons are shopping for a mortgage loan and are attracted to the below-market interest rate offered for the first year of an adjustable rate mortgage. What's this type of rate called?

teaser rate

Which of the following describes the Housing Choice Voucher Program?

A program to help very low-income families, the elderly, and disabled individuals to afford decent, safe, and sanitary housing in the private market

A foreclosure occurs January 1, 2016. Of the following, which lien takes priority?

A property tax lien filed January 1, 2014

Which of the following would be a receipt you should save for tax purposes?

A toll fee for a business trip

What is the three-property rule as it relates to tax-deferred exchanges?

An investor can identify up to three replacement properties and not encounter a restriction regarding fair market value as long as debt load requirement is met.

Mortgage, homeowners, and flood ______ may be included the mortgage payment.

insurance

Vantagestar Ltd. would like to construct a high-end condominium complex. Where will they likely go for financing this project?

life insurance company