30hr real estate finance

Facts about lien property

"First in time" refers to lien priority according to recording date Lifting clauses in a junior instrument allows a senior loan to be refinanced without affecting its senior

Your client, Bruno, is an investor. He is in the process of selling a fourplex and mentions to you that he hates the idea of the capital gains tax he'll be subject to. What should you tell him?

"You might consider a 1031 tax-deferred exchange."

Dale is purchasing a property that has an assessed value of $35,190. If the tax rate is 5%, what will he likely pay annually in property taxes?

$1,759.50

A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month's mortgage payment is interest?

$400,000 × 0.07 = $28,000; then $28,000 ÷ 12 = $2,333.33

A local buyer is purchasing a property for $120,000. What will the seller pay in transfer tax if the rate is $.37 per $100?

$444

A buyer is purchasing a property for $500,000. His lender's loan-to-value ratio is 90%. How much is the buyer financing?

$450,000

Carson is purchasing a $600,000 property by obtaining an 80/20 loan. How much is Carson financing?

$480,000

A lender is charging Clem the borrower two points to buy down the interest rate on his loan. Clems borrowing $250,000 what's the dollar value of the points he'll pay?

$5,000

Lenore makes a 95% offer on a townhouse that's listed at $285,000 and includes an earnest money deposit for 10% of her offer, which the seller accepts. She brings to closing a cashier's check for $35,025 comprising the balance of her 20% down payment and closing costs. What's the amount of her total down payment?

$54,150

What conditions does fair market value imply?

-Neither the buyer nor the seller is being forced into an agreement. -The buyer and seller are acting in their own best interests. -The property has had reasonable exposure to the market. -The buyer is using cash or obtaining financing.

Liens by priority

1 first mortgage 2 mechanic lien 3 second mortgage

What does a point equal?

1% of the loan value

Possible loan origination fee percentages borrowers might expect to incur?

1%, 3%

Ginnie Mae MBS Process

1. Lending institution packages mortgages 2. Lending institution issues an MBS 3. Ginnie Mae guarantees the MBS 4. Investors purchase shares of the MBS 5. Mortgage payments from borrowers flow through loan servicer to MBS to investors

Steps in the process

1.Analyze the subject property 2.Identify comparable properties that have recently sold 3.Compare the comparables to the subject property and make adjustments to the sales price of the comparables (never to the subject property) when they are different 4.Use the data to arrive at an opinion of value for the subject property on the date of appraisal

Charlie and Wendy are purchasing a property with a sales price of $350,000. They'll be financing $335,000. What's their LTV ratio?

95.7%

Assumption or subject to?

A Novation can be used to remove the original borrowers liability- assumption The lender may charge a fee to the new borrower- assumption The sellers credit score may improve although he's not making any mortgage payments- subject to The lender may require the new borrower to meet qualification standards- assumption The lenders permission is not requested- subject to

You have a client who wants to obtain a VA loan. You refer them to

A VA-approved lender

Which of the following is true about a home equity line of credit?

A borrower can use the funds as needed, repay them, and borrow them again.

Which of the following describes housing ratio?

A calculation of a borrower's monthly housing obligation, including principal, interest, taxes, insurance, and any homeowners or condo association fees, as a percentage of the monthly gross income

Which of the following describes loan to value ratio?

A calculation that describes the amount being borrowed compared to the value of a property

Which of the following describes total debt ratio?

A calculation that looks at all recurring (or installment) debt, such as monthly mortgage, car, credit, and loan payments, as a percentage of the borrower's monthly gross income

Defeasance Clause

A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.

What is Fannie Mae most likely to purchase?

A conventional fixed rate mortgage issued by a commercial bank

What happens after a lien foreclosure sale if not enough money we're made from the auctioning of the property to pay off the lien holders?

A deficiency judgement against the property owner for the outstanding balance to the lien holders is issued

A homeowner has been paying her mortgage for several years and has built up equity she decided to take out a home equity line of credit because she needs some cash. The credit will create ___?

A junior lien on the property

Lien types

A lien on a property is a monetary encumbrance

What is a carryback loan?

A second loan financed by the seller

tax deferred exchanges truths

A tax deferred exchange for properties used for investment or business purposes is also referred to as a "like kind" or 1032 exchange The 1031 tax exchange is sued to defer paying taxes when there is an almost immediate repurchase of what's called a like kind property Income producing residential, commercial, and industrial property can qualify for an exchange. Hotels and motels can also qualify Investors can defer capital gains using the 1031 exchange for real estate exchanges only. Personal property such as equipment can't be tax deferred

What's the acronym for the legislation that established processes and procedures for how federal agencies propose and enforce regulations

APA Administrative procedures act

Will you find in deed of trust?

Acceleration clause Reconveyance clause Power of sale clause

Why sell to Fannie Mae?

Access to additional mortgage credit For the collection fees

The FHLB is a secondary market player. What exactly does it do?

Advances funds to member banks

Why choose ARM?

An arm sometimes offers an interest rate that is lower than a fixed rate mortgage for a period of time It's possible for an adjustment period to have many possible ranges such as 3 or ten years apart

When a buyer takes over the sellers original loan with the lenders permission this is called ___?

An assumption

True of PITI

As the interest portion of the mortgage payment decreases more of the payment goes toward principal Hazard and flood insurance may be a part of the monthly payment

Ava is borrowing money to buy some commercial property for her business. The loan agreement she signs includes a lock-in clause. What does that mean?

Ava will not be allowed to pre-pay the loan prior to the date specific in the loan agreement.

Which describes mutual savings bank loans?

Banks focus lending offerings on local businesses and residents

Blanket liens truths

Blanket liens allow the lender to pursue the borrower by placing liens on any current and future property to cover losses

Which 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

Comparing security instruments

Borrows money to pay for property/ mortgagor Lends money- beneficiary Typical when a borrow defaults on a mortgage- judicial foreclosure Typical when a borrower a defaults on a deed of trust- non-judicial foreclosure

Foreclosure processes

By advertisement- notification of pending auction, public auction, notice of eviction By entry and possession- petition to enter, repossession, notice of eviction By writ of entry- petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed

PMI automatically terminates when LTVR reached 78%. Under what circumstances may PMI be cancelled?

By borrower petition when appraisal shows LTVR of 80% or less When borrower reaches the mid point of amortization

How does the federal housing administration fund it's mortgage insurance program?

By charging borrowers a mortgage insurance premium

The USDA rural development program focuses on all residents of rural areas rather than agricultural producers. How does this program provide support for rural Americans?

By providing financing that allows rural Americans to buy safe affordable housing

On a VA loan, the ____ helps the lender determine if the value of the property makes it suitable for use as collateral on the loan

CRV

The is provided by a VA assigned appraiser

CRV Va loans requires a CRV (certificate of reasonable value) provided by a va assigned real estate appraiser

A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in annual gross income. What is the gross income multiplier (GIM)?

Calculate GIM by dividing the $5 million sales price by the $400,000 gross annual income: $5 million ÷ $400,000 = 12.5.

Hamish makes an offer on a loft in the city for $424,900 with a 10% earnest money deposit. The seller agrees, so Hamish secures an 80% loan. He needs to set aside funds for the mortgage tax as part of his closing costs. The rate in his area is $0.115 per $100. Calculate the mortgage tax Hamish will pay.

Calculate the loan amount first: $424,900 x .80 = $339,920. Then calculate the tax: $339,920 x 0.00115 = $390.91.

What's true about the finding fee on a VA loan?

Can be paid by the seller, the buyer or both

Seller concessions on a VA loan

Can't exceed 4% of the sales price

Your buyer client, Percival, was pre-approved for the exact amount he needed to buy the home of his dreams, and he made an offer that was accepted by the seller. What's his next step?

Complete a loan application.

Conforming loans

Conforming loan lit for 2022 is $647,200. If your client needs a loan of $700,000 that would be a non conforming loan (Carrie's higher risk, offered at a higher interest rate, harder to sell to secondary market)

Conforming loans

Conforming loans meet all qualifying guidelines set by Fannie Mae and Freddie Mac which include - loan amount -Down payment requirements -loan to value ratio -housing debt to income ratios Non conforming loans don't meet all qualifying guidelines set these are often referred to as jumbo loans

CFPB (Consumer Financial Protection Bureau) (by Dodd Frank act) facts

Consolidates consumer financial protection into one agency Regulates the actions of large banks as well as non bank financial institutions Works to educate consumers about how credit works Enforces federal consumer financial protection laws Monitors financial markets for risks to consumers

The purpose of the ___ is to promote fairness and transparency for mod and other financial products and services through education, enforcement, and research

Consumer financial protection bureau

The security instrument used to obtain a loan lists as vendee. Which instrument is used for this loan?

Contract for deed

Facts about conventional and government loans

Conventional loan- federal agencies don't participate in insuring or guaranteeing the loan, PMI required if the down payment is less than 20-25% FHA loan- insures loans, MIP always required, typical down payments are 3.5% VA- guarantees loan

What's true of piggyback financing

Conventional loans require PMI if the loan-to value ratio is over 80% The first mortgage in a piggyback loan must be 80% or less of the property's value The second mortgage amount in a piggyback loan is the difference between the remaining balance owed and the amount of the down payment

Debt Coverage Ratio

DCR = net operating income divided by annual debt service

Four significant factors influence value

DUST Demand, utility, scarcity, transferability

Direct and indirect costs

Direct- wood for construction, windows, electrician Indirect- architectural fees, recording fees

Which type of point allows you to buy down your interest rate to lower your monthly payment?

Discount point

A second mortgage on property secured by a VA loan is acceptable under certain conditions one of which that the first and second mortgage liens

Don't exceed the CRV

Criteria if a conventional loan

Down payment Housing or total debt to income ratio Loan amount Loan to value ratio

Piggyback ratio

Down payment- 10% Second mortgage-20% First mortgage- 70%

A note is a negotiable instrument and a mortgage backed security is a common investment in todays market. What's required to transfer ownership of a note?

Endorsement of the note to the new owner Assignment of security instrument to the new owner

Fha loan programs

Energy efficient mortgage- allows the borrower to incorporate the cost of adding energy efficient fesutrues in combination with an fha insured mortgage Good neighbor next door- law enforcement, teachers, firefighters and emts get a 50% discount on certain foreclosed fha insured properties Program for native Americans- mortgage insurance for native Americans to construct, acquire, refinance, or rehabilitate single family housing located on tribal land Disaster relief- a 90 day moratorium on foreclosures for homeowners with an fha loan who are trying to repair or rebuild after a natural disaster

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

The ___ clause protects the borrowers assets that aren't part of the voluntary lien from a deficiency judgement in case of foreclosure

Exculpatory

Farmer Mac is supervised by _______________.

FCA Farm Credit Administration through office of Secondary market oversight

HUD programs

FHA GNMA

FHA loan program

FHA covers the lender against loss if the borrower defaults FHA collects a mortgage insurance premium on each loan FHA loans are only available from FHA approved lenders The FHA mortgage insurance program helps to stabilize the mortgage market Most FHA approved lenders participate in the direct endorsement program FHA loan insurance helps lenders make riskier loans without assuming more risk FHA is a federal agency

Which default type?

Failing to fix a collapsing basement wall- poor property management Falling behind on mortgage payments- delinquency No repairs to fix damage caused by fire- poor property management Failing to pay property taxes- delinquency Falling behind on homeowners insurance payments- delinquency Knowing there are termites and not having them eradicated- poor property management

FHFA (Federal Housing Finance Agency) regulates certain secondary market players. Which institutions does it regulate?

Fannie Mae Freddie Mac Federal home loan bank

Which three entities issues MBS?

Fannie Mae Freddie mac Farmer mac

Fannie mae truths

Fannie Mae was established as the federal national Mortgage association (FNMA) in 1938 Fannie maes goal is to help ensure that all communities have access to mortgage credit in Fannie Mae packages the loans they purchased into mortgage backed securities

GSE or nah?

Fannie Mae- GSE Ginnie Mae- not a GSE (government agency not a private company) Freddie Mac- GSE Federal Home loan bank- GSE Investors- not a GSE

Farm and Country Bank provides credit to the farmers, ranchers, and other rural residents of its community. What government program helps the bank maintain enough capital to fund those loans?

Farmer Mac

Farmer Mac (Federal Agricultural Mortgage Corporation)

Farmer mac is a stockholder owned company created to deliver capital and increase lender competition for the benefit of American agricultural and rural community

Fannie Mae, Freddie Mac, and federal home loan bank are regulated by?

Federal Housing Finance Agency

Federal home loan bank is regulated by what agency?

Federal Housing Finance Agency

Which entity regulates government sponsored enterprises?

Federal Housing Finance Agency

Credit unions

Federal credit unions are supervised and chartered by the national credit union administration NCUA Credit unions are directed by a board of directors who are elected from the credit union membership In 1998 Clinton enacted the credit union membership access act

To be able to make valid computations of adjustments, the elements of comparison must be applied in a particular order. Which element must be applied first?

Financing terms and cash equivalency

Fixed-rate, Adjustable Rate mortgages

Fixed rate- Interest rate remains the same over the life of the loan, Principle and interest payments remain the same over the life of the loan Adjustable rate- interest rates fluctuate at regular intervals, has a lifetime cap

Which entity buys loans primarily through thrifts

Freddie Mac

Freddie MAc facts

Freddie Mac was created as the federal home loan mortgage corporation (fhlmc) in 1970 Freddie Mac is a government sponsored enterprise

Homes in a new home development have been built with a floor plan that doesn't appeal to today's buyers. In a cost approach valuation of the houses, what sort of depreciation will the appraiser apply?

Functional obsolescence

QM categories

General Qualified mortgage- loan that meets all the requirements set and has a debt to income ration of 43% or less Small creditor qualified mortgage- loan that meets all the requirements and is originated by a lender that makes 500 or fewer mortgages annually and has 2 billion or less in assets GSE eligible qualified mortgage- loan that meets all the requirements and can be purchased, insured, or guaranteed by a GSE, fha, va, or usda

Which HUD program allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market

Ginnie Mae

Are loan modifications successful?

Government statistics show a fairly significant rate of default among those who received a loan modification. 12 months after a loan modification nearly 20% of borrowers will be 60 or more days delinquent on their loan

What's used to calculate the housing debt-to-income ratio and total debt-to-income ratio?

Gross income

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

Growing Equity

What activity does Ginnie mae perform?

Guarantees MBSs with the full faith and credit of the U.S.

Which of these programs is aimed at first time homebuyers

Homeownership voucher assistance

DPA program eligibility requirements

Household income threshold Credit score minimum Property location Property must be primary residence

HERA

Housing and Economic Recovery Act was created to address the subprime mortgage crises Hera includes Two key provisions, SAFE and MDIA which help to provide improved consumer protection by giving borrowers better information when applying for a loan

Which type of real estate investment trust derives it's income from the rent or sale of property and interest dividends

Hybrid REIT

Pledging a property for a mortgage is known as

Hypothecation

Morris still owes his lender for the financing obtained in purchasing his home. Several years later, Morris took out a home equity line of credit. This means that ______.

If Morris is foreclosed on, the home equity line of credit won't be paid until Morris's first loan is paid off

What makes the HECM program safer for borrowers than a traditional reverse mortgage?

If more equity is paid out than remains, the homeowner doesn't have to make up the difference.

What does the income approach analyze?

Income the property could generate

Ginnie Mae only guarantees mortgage-backed securities that contain loans ______.

Insured or guaranteed by U.S. government agencies Federal housing agency insured loans Huds office of public and Indian housing issued loans Loans originated by the department of agricultures rural housing service Loans guaranteed by the department of veterans affairs

Your client has a va loan and wants to refinance to a lower rate. Which of the following is likely the simplest option?

Interest Rate Reduction Refinance

Construction loans are a type of?

Interim financing

What best describes an equity real estate investment trust?

Invests in equity by owning income producing property such as malls, apartments, or office parks

Sean hasn't paid his property tax. The tax collector placed a lien on his property how is this lien classified?

Involuntary, specific

Reconveyance Clause

Is the method used to transfer title for a property following full payment of a loan. Reconveyance is typically used with a deed of trust.

What's the purpose of a typical subordination agreement?

It allows a junior mortgage to move into first lien position

What does the right of redemption allow?

It allows a property owner to pay back any debts or liens against their property until a foreclosure sale is held.

Which of the following best describes the function of a deficiency judgement in the case of a foreclosure?

It allows the lender to recover losses incurred in the foreclosure process

What is the interest rate on a VA loan?

It varies by lender

Tina is purchasing a home that appraised for $10,000 more than the sales price. On which figure will the lender base the loan-to-value ratio?

It will be based on the sales price.

Which describes a mechanics lien?

It's a specific involuntary lien

Kylie has a small farm where she grows vegetables and sells her produce to restaurants. She wants to expand it, and she 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

What is another name for an installment sale contract?

Land contract

Red flags

Large adjustments to the sales price without supporting comparable data or a request that the list price be changed to reflect appraised value The buyer request a particular appraiser The seller contributions include large decor or improvement allowances The mortgage broker refers a pre qualified buyer to an agent It's suspected that the buyer doesn't intend to live on the property The buyers credit history is limited and provided by companies that either charge high interest rates or the buyers loan payoff history doesn't include interest payments The stated income is unrealistic Drastic increase in income from a recent raise or new job Missing or inconsistent information on purchase and sales agreement

Borrowers transfer to lender of rights to whom does the borrower convey the property in this document

Lender

What's the lender called in the mortgage in Fannie Mae standard mortgage sample form

Lender

Items must be included in a promissory note attached to a mortgage or a deed of trust

Lender identity Reference to security instrument Term of loan Interest rate of loan Schedule of payments

Community reinvestment act requirements

Lenders are periodically reviewed by federal agencies for compliance Lenders must post their lending policies Lenders must prepare annual statements about their compliance with the CRA

Which three rights are descended in covenant number 22

Lenders right to call the loan due if the borrower defaults Borrowers right to cure the default and reinstate the loan Right of the lender to sell the property if borrower defaults

Area calculation formulas

Length x width - rectangle Equal side x equal side - square (0.5 x base) x height - triangle

Which document provides an estimate of the costs a buyer is likely to pay at settlement before the closing

Loan Estimate

What's the name of a fee a lender charges for processing a loan?

Loan origination fee

Paul is buying a new home using a va loan which closing costs is he allow to pay and which are not allowed

Loan origination fee of 1.5%- not allowed Discount points- allowed Initial deposit for escrow account- allowed Appraisal fee- allowed Title examination fee- allowed Terminate inspection/ report fee- not allowed

What are advances?

Loans the Federal Home Loan Bank makes to member banks

Adella received money for her down payment in the form of a tax credit for a portion of the mortgage interest paid per year on her federal tax return. This tax credit is known as a __________________________.

Mortgage Credit Certificate

Which REIT focuses on lending money for mortgages and investing in mortgages backed securities?

Mortgage REIT

Which type of real estate investment trust involves both residential and commercial properties?

Mortgage REIT

Beatriz is employed by regional bank and trust. When working with mortgage clients, she discusses a range of products regional bank and trust offers. What is Beatriz?

Mortgage banker

Voluntary and involuntary liens

Mortgage loan- voluntary lien Unpaid property taxes- involuntary lien Unpaid bill for electrician services- involuntary lien

The ____ is where the borrower finds details about how, when and by how much the interest will change in an adjustable rate Mortgage

Mortgage note

A ______ is a tax on the privilege of recording a mortgage on real property located within the state

Mortgage recording tax

Security instrument vs note

Must refer to the mortgage or deed of trust- note Pledges the property as collateral for the loan- security instrument Allows the property to be sold to pay off if the borrower defaults- security instrument Describes who owes money to whom- note States the amount of the loan- note

What U.S department of Veterans affairs program assists Native Americans in financing the purchase, construction, or improvement of homes on federal trust land?

Native American Direct Loan

How are real estate investment trusts sold?

On a major exchange like stocks

REIT Requirements for trust to identify as reit

Owned by at least 100 people During the last half of any year, no more than 50% of shares owned by five or fewer people Minimum 90% of taxable income distributed to shareholders annually

The components that make up a borrowers mortgage payment can best be remembered using which acronyms?

PITI Principal, interest,taxes, and insurance

Vince Parker is purchasing a home for $150,000. He puts 10% down on a conventional loan. Will he be required to obtain PMI or MIP?

PMI

In which four of these property transfers does federal law prohibit a lender from enforcing an alienation clause

Parent to child Spouse to spouse Between parties in a divorce settlement When a borrowers dies and a relative inherits

What's the name of the clause included in a finance instrument that requires the lender to release a portion of the property from the lien when a part of the debt has been paid?

Partial release

Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications.

Participate in the direct endorsement program

After a loan passes Freddie macs underwriting process the institution may purchase the loan then package it into a mortgage backed security (mbs) to be sold to investors. What term does Freddie Mac use to describe its mbs product?

Participation certificate (pc)

What are some factors an appraiser needs to consider when finding properties comparable to the subject property?

Property interest and rights Physical characteristics of the property

A property has just been foreclosed on. Which of the following describes the rules regarding lien priority?

Property tax liens take priority, with all others following a "first in time" rule.

Calculating LTVR

Purchase price of $600,000 and financing $480,000- 80/20 ltvr $360,000 financed with a $40,000 down payment- 90/10 ltvr Property is valued at $500,000 with $50,000 down payment, financing $450,000- 90/10 ltvr Sales price is $300,000 financing $180,000- 60/40 ltvr

Buy downs

Reduce rate for life of loan, reflected on note- permanent Reduced rate for a specified period of time- temporary Rate increases 1% each year for three years- graduated 3-2-1 Rate increases 1% each year for two years- graduated 2-1

Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?

Request a novation

Who does farmer mac serve directly?

Rural lenders

Which act requires licensing identification be available to consumers

SAFE act (secure and fair enforcement for mortgage licensing)

If a commercial property is difficult to finance, an investor will sometimes buy the property for cash and then lease it back to the owner. What's this called?

Sale leaseback

Gertrude is buying Sam's house, and Sam has agreed to finance the purchase. Gertrude is aware that a seller-financed transaction creates certain risks for her that a conventional loan wouldn't. Which of the following is an issue that Gertrude is protected from via her loan agreement?

Sam could sell the property to another person at any time, canceling Gertrude's equitable interest in the property and her right to possess it.

Three types of value or cost

Site value- assumes the land is vacant and bases opinion on highest and best use Reproduction cost- cost to build an exact replica of the subject with the same materials and deficiencies Replacement cost- reflects the cost to build a functionally equivalent improvement

HOPE aimed to ____ by helping subprime borrowers refinance into more affordable fixed rate mortgages

Stabilize the housing market

Melanie is a buyer who has agreed to purchase Stan's property using a contract for deed. Who holds legal title to the property during the term of the loan?

Stan When a contract for the sale of land is executed equitable title passes to the buyer and the seller holds legal title. When the conditions on the sale contract have been met, legal title passes to the buyer

What intro must be included in a cma?

Statement of purpose and intent Description of the property being value Evidence to support the value Limiting conditions A disclosure of any personal internet the licensee has in the property if applicable A disclaimer that the cma isn't an appraisal

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

Market conditions include

Supply vs demand Interest rates Other economic factors Demographics Market timing

Some countries have banks that issues loans for U.S real estate purchases. What are the main countries that participate?

Taiwan, U.K, and Canada

Notarizing the deed of trust

The Deed of trust must be signed and notarized before it can be recorded. The area at the bottom of the document where it says "space below this line for acknowledgment" gives the notary space to place the stamp and seal

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.

Common mistakes that occurs when the mortgage servicer processes an application for a loan modification?

The application isn't processed in a timely manner The processor gives incorrect information to the borrower The processor tells the borrower that a down payment is required

In the definitions listed on page one of the deed of trust how is the lender described?

The beneficiary under this security instrument

Which statement correctly describes a contract for deed?

The contract for deed is usually used in a seller-financed transaction.

Income approach appraisals truths

The current value of an income property can be determined by using estimates of future income A cap rate is a factor that shows the income a property produces in relation to its price

What is a capitalization rate?

The expected rate of return on investment

What entity oversees Fannie Mae and Freddie Mac and regulates the federal home loan bank?

The federal housing finance agency

Which was created as a result of the housing and economic recovery act

The federal housing finance agency

Which of these best describes a home equity loan?

The funds are often used for home renovations or to fund a college education.

What would happen if a clients rate lock in expires two days prior to closing?

The interest rate will revert to the current rates.

When would an investor who is involved in a 1031 exchange consider entering into a 1031 reverse exchange

The investor closes on the replacement property before selling the original property.

Mortgagee?

The lender

Who's the mortgagee in a mortgage?

The lender

Who's required to sign a promissory note?

The maker only

VA loan truths

The property appraisal must be done by a VA-assigned appraiser The seller may pay the buyers closing costs Seller concessions may not exceed 4% of the sales price The seller may pay for the buyers buydown of interest rate on a fixed rate loan

Why do lenders care so much about property condition?

The property is collateral for the mortgage.

Foreclosure truths

The property is sold at a public auction to the highest bidder Foreclosure occurs when the property owner defaults on a debt or lien that's owed The foreclosed on property is conveyed using a judicial deed

When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?

The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.

When does the mortgage insurance requirement end for a borrower with a VA loan?

There is no mortgage insurance requirement for a VA loan.

Which of the following best explains the alternative foreclosure types, such as foreclosure by writ of entry?

They are an additional means of foreclosure that are to be used as a back-up to the legal process, but not in lieu of that process.

Sophia and Antonio are expecting twins. They want to sell their old house and buy a larger home using a conventional loan. In order to be sure they'll get the PMI waived, what will they need to have?

They should have a loan-to-value ratio of 80% or less.

What is the benefit of Ginnie mae investors have over those who invest in other mbs?

They're able to collect timely principal and interest payments

The PMI act of 1998

This act is also called the homeowners protection act It requires cancellation of PMI when the borrowers equity reaches 22% of the properties original loan value Cancellation of PMI is automatic or by request if criteria is met

VA loan programs

This is a direct home loan program from the VA to eligible Native American veterans- NADL program Available to veterans with total and permanent service related disabilities, used to adapt housing to accommodate the disability- SAH and SHA grants This program can be used to refinance a non-VA loan into a VA loan- Cash out refinancing This program allows a VA loan to be refinanced in order to obtain a lower interest rate- IRRR

What timeframes are best for licensees to use for recently sold properties?

Three, 6 months

Appraisers purpose?

To determine a property's value

Purpose of the appraiser independence requirements? AIR

To protect parties such as investors and homebuyers

What's the purpose of the PMI?

To protect the lender in case of borrower default when the borrower has put down less than 20%

Freddie Mac Underwriting guidelines

Total debt to income ratio Loan to value ratio Loan term Purpose of loan Authorization type

The first three steps when preparing a CMA to proper order

Tour the subject property, taking notes about features, amenities, room size, updates, etc Select three to six similar properties in the area that recently sold and note their selling prices Make price adjustments to competitive properties

"Transfer of rights in the property" to whom does the borrower convey the property?

Trustee

CRV

VA appraisal - Certificate of Reasonable Value

Gross Rent or Gross Income Multipliers

Your client is purchasing a duplex and plans to live in one half while renting out the other half- gross rent multiplier Your client is investing in a six unit apartment building with laundry facilities and a vending machine- gross income multiplier Your client is considering investing in a three unit residential income property- gross rent multiplier Your client wants a value estimate for a 15 unit apartment building- gross income multiplier

Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.

alienation

Which of the following provides everything a lender needs to know in order to value the property used as collateral for a loan?

appraisal

Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?

bill The borrower holds legal title to the property that secured the loan when a mortgage instrument is used

In a deed of trust who is the trustor

borrower

The signature lines of the multi-state Fannie Mae promissory note are set up for ____ to sign

borrower

Which parties must be identified on the promissory note?

borrower, lender

To calculate interest paid per month

calculate interest paid per month you multiply the principal by the interest and divide that number by 12

Synergy National Bank issued a conventional loan that is eligible for purchase by Fannie Mae. When Fannie Mae purchases the loan, what will Synergy National Bank receive in return?

collection fee

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

Which approach to value measures the cost to produce a property including land acquisition and construction costs

cost approach

Interest only loans are a form of ___ buyer financing?

creative

When interest rates are ___ buyers are often priced out of the market

high

Lending is especially impacted by inflation. What two things are you likely to see during inflationary periods?

higher rates and fewer buyers

Bindy received a loan based on the amount of equity she had in her house. She used this lump sum to fund her daughter's college education. What type of loan did she get?

home equity

An appraiser is working to reconcile the value of an office building which approach should he use?

income

Fairwell Lending must seek the court's permission to foreclose on a property used as collateral for a loan that is in default. What type of foreclosure process is likely being used?

judicial foreclosure

In a deed of trust, who is the beneficiary?

lender

An appraiser is most likely to use the cost approach for which of the following properties?

movie theater

In a deed of trust, who is the trustee?

neutral third party

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

Joe works for a life insurance company that funds commercial investment projects and often insures these projects by insisting on an equity position. What type of financing does this describe?

participation

A ___ is a mortgage backed security issued by Freddie Mac

participation certificate

Who holds the promissory note while it's being repaid?

payee

The ___ clause in a deed of trust allows the lender to foreclose non-judicially

power of sale

Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?

power of sale

The ___ clause allows the borrower to pre pay principal on the loan at any time without penalty

pre-payment

Section 255 of the Title II FHA-insured loan program covers ______ mortgages for borrowers age 62 or older.

reverse

This is a type of renegotiable mortgage in which the interest rate on the loan can be renegotiated at specified intervals (usually every Five years)

rollover mortgage

SRT Mortgage has a borrower who has fallen behind on her mortgage. Rather than go through a foreclosure, the borrower is attempting to sell the property. An offer came in for less than the borrower's loan balance and closing costs, but for more than what the lender feels it'd get at a foreclosure sale, so it approves the purchase. What is this an example of?

short sale

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

On which value principle is the sales comparison approach based?

substitution

Timeline of federal real estate finance legislation

1968: the *Truth in lending act* requires full disclosure to a borrower on the terms of credit 1974: the *real estate settlement procedures act* eliminates kickbacks and referral fees among settlement service providers to make settlement more affordable to consumers 1974: as a response to discriminatory practices by lenders *equal credit opportunity act* required credit to be granted according to credit worthiness not protected class status 1977: the practice of redlining was the impetus for the creation of the *community reinvestment act* 2008-2009: HERA and ARRA were both enacted in part to help the nation recover from an economic crisis 2010: the purpose of the *dodd-frank Wall Street reform and consumer protection act* is to create stricter regulation of the financial services industry

______ is a standardized measure for interest rates and other costs of the loan

Annual Percentage Rate

Who needs to obtain a mortgage loan originator endorsement and register with the Nationwide Mortgage Licensing System and Registry?

Anyone who acts as a mortgage loan originator

According to RESPA what must the lender give to the borrower in the days immediately prior to settlement

Closing Disclosure

Commercial bank

Commercial banks rely mostly on demand deposits for their supply of funds Construction loans are a type of interim financing provided by commercial banks Commercial banks provide home equity loans

What's the most common way that a seller can help a buyer come up with the funds to complete a real estate transaction?

Contract for deed

What lead to the economic crisis of 2007_2008?

Easier credit increased the number of subprime mortgages Fannie Maes efforts increased homeownership rates People generally believe that housing prices would continue to rise The SEC relaxed capital requirements on investment firms

Which type of REIT?

Hybrid- earns income from rent or sale of property and interest dividends, invests in both real estate and mortgage backed securities Mortgage- lends money for mortgages and invests in mortgage backed securities, earns income from interest dividends, Equity- deals in real estate sales only, provides income from rent or sale of property

Hera and ARRA

Included the safe mortgage licensing act- Hera Included the mortgage disclosure improvement act- ARRA Created tax credits for financing low income housing construction- ARRA Provided rental assistance to prevent homelessness- ARRA

Loan estimate components

Included whether or not the lender intends to transfer service of your loan Includes an estimate of the amount of cash to bring to close Displays the total interest, insurance, and loan costs you will have paid off in 5 years Included the projected monthly principal and interest payments for the entirety of the loan

How does the administrative procedure act APA impact how federal agencies work?

It requires agencies to keep the public informed of their organization, procedures, and rules It balances the powers of regulating agencies to

Lending regulations

Lenders must disclose the terms and conditions of loans- Truth in lending act Lenders must provide written disclosure of estimated settlement costs to borrowers- RESPA Lenders must provide residential loan borrowers with all important information related to the loan such as the annual percentage rate- Regulation Z Lenders must not discriminate based on protected class- equal credit opportunity act Lenders must show that they serve the community low to moderate income housing needs- community reinvestment act

Life insurance

Life insurance companies prefer to finance large commercial projects like shopping malls Participation financing is a way for life insurance companies to have partial ownership in large projects They participate in the secondary mortgage market It's a good idea to seek financing from a life insurance company because they're solid and generate billions annually

Underwriting Criteria Fannie Mae uses

Location Type of dwelling Loan to value ratio Property type Debt to income ratio Down payment

Which type of real estate investment trust derived a portion of its income from interest dividends?

Mortgage REITs

Nature of bonds

Municipal bonds are used to pay for community improvements After bonds are sold, their value goes up and down with the market Mortgage revenue bonds are a variety of industrial development bonds Bonds are used to secure financing for real estate and real estate development projects Businesses use bonds to raise capital and municipalities use them to raise funds for community improvements, while there is some risk in investing there is also great potential for financial gain

What type of residential dwellings do life insurance companies purchase from the secondary mortgage market

Single family on one lot

Components of HUDs stated mission

Strong, sustainable, inclusive communities Quality, affordable homes for all

Qualified mortgage facts

The consumer financial protection bureau sets qualified mortgage rules Qualified mortgages are safer for consumers Consumers should be able to repay a qualified mortgage Consumers have more communication from lenders when they fall behind on their payment Loan term of 30 years or fewer Points and fees equal to or less than 3% of the loan amount

Joe decided to borrow funds from his retirement account to fund the down payment on his new house. It's now two years later and he lost his job. What is true about his pension plan?

The loan must be repaid immediately.

Janie and Sam are newly married and are looking for their first home. They're fortunate that Janie's mom set aside some money to help with this purchase. Janie's mom says it's a loan, though, and they will have to pay her back. What's wrong with this?

The loan will go against their debt load.

GSE (Government Sponsored Enterprise) truths

They make borrowing easier for certain sectors of the economy. They're exempt from paying local or state corporate income tax GSEs have a line of credit with the U.S treasury

Private loan companies take on substantial risk when they issue a loan to a borrower who's unable to secure financing elsewhere. What are way they insulate themselves from that risk?

They may charge up the maximum allowable interest for the loan They may put a lien on the property for which the loan is being taken They may require collateral to secure the loan They may charge higher loan fees

Why are life insurance companies less concerned with liquidity than long term security of an investment?

They prefer financing larger projects, which inherently have more long-term security.

Redlining

Established in 1975 the home mortgage disclosure act seeks to address discriminatory practices like redlining. The consumer financial protection bureau is responsible for HMDA which requires lenders to maintain, report, and disclose data for the purposes of showing whether the needs of the neighborhoods and communities are being met and assist in identifying discriminatory lending practices HMDA data is public

Program purpose

Federal housing administration- insured mortgages on single-family and multi family homes Ginnie Mae- guarantees the timely payment of principal and interest on MBSs that are secured by pools of government home loans FHEO- works to eliminate housing discrimination, promote economic opportunity and achieve diverse, inclusive communities

Municipal vs Corporate Bonds

Municipal- general obligation, revenue (industrial revenue), industrial development (mortgage revenue) mortgage loan, zero coupon Corporate- secured, debentures (unsecured), coupon, registered, nature of issuer or security, maturity date, types of termination

Banker or broker

Originate their own loans- banker Work with many lenders- broker Stay with the loan for its entire lifecycle- banker Don't derive the loan beyond placemat- broker Paid a placement fee for matching borrower with lender- broker Paid through fees from originating and servicing loans- bankers

MDIA facts

This act amends the timing of TILA disclosures It prohibits lenders from charging anything other than a credit report fee prior to disclosing the terms of the loan Changes to the disclosed fees or APR on the closing disclosure retrigger a three day window for a borrower to evaluate the loan Following MDIA rules for disclosure could put a scheduled closing in jeopardy

SAFE facts

This act sets minimum standards for licensing of mortgage loan originators SAFE helps consumers make an informed choice about the lending professionals they use SAFE should help drive dishonest mortgage loan originators out of business

To be eligible for a _____ an applicant must have participated in farm or ranch management for at least three years

USDA loan through the Farm Service Agency

Farm Credit System

A federal agency of the Department of Agricultural that offers programs to help families purchase or operate family farms. Fcs is a government sponsored enterprise like Fannie Mae It provides financing for buyers of agricultural properties such as farms and ranches and housing in rural communities The fcs institutions that provide loans don't accept deposits The fcs is a network of financial cooperatives that are owned and operated by the customers it serves

Points and fees

A few charges by the lender to give the borrower a loan interest rate- discount points A fee charged by the lender to cover the cost of processing the loan- loan origination fee p

By stabilizing and improving the mortgage market the FHA helped to build

A global market for mortgage-backed securities

Down payment assistance truths

A home grant is money that doesn't have to be paid back as long as the buyer meets certain requirements Mortgage credit certificates allow qualified buyer to claim some of the mortgage interest they paid as a credit on their tax returns Both the buyer and the home must meet eligibility requirements as specified by the chosen DPA program

The Kimballs and their lender have agreed to a loan modification. How is the loan modification documented?

A loan modification agreement is signed, notarized and recorded

Mortgage

A mortgage is a legally binding document that creates a lien (or security interest) on a piece of property and gives the lender the right to foreclose on property is the borrower defaults

Temporary Buydown

A mortgage loan option through which a home buyer gets his or her interest payments temporarily reduced for the first few years of the loan

Mortgage broker

A person who brings together the user of capital (borrower) and the supplier of capital (lender). For this service, a finder's fee is usually paid by the borrower.

Which of the following statements best describes a mortgage banker?

A person who works for a specific lender and can offer products provided by that institution

Dale and Barbara, your buyer clients, aren't thrilled about the current interest rates on home loans. They opt to pay two discount points to their lender to bring down their monthly payment. They're financing $235,000 on their new $400,000 home, so how much can they expect to pay for points at closing?

A point is 1% of the loan amount. Dale and Barbara's loan is $235,000, and they're paying two points (2%) at closing, which comes to $4,700 ($235,000 × 0.02).

Mortgage vs. Promissory Note

A promise on the part of the borrower to repay a certain some of money to another party- promissory note A negotiable instrument- promissory note Provides security for the loan- mortgage Gives the lender the right to foreclose if borrower defaults- mortgage A deed of trust is also called his- mortgage

What is an acceleration clause in a mortgage?

A provision that allows the lender to call for the loan balance to be repaid immediately on borrower default

Junior finance instrument facts

A second loan is second in lien position to the first loan Both the open end and closed end home equity loans are junior mortgages

Two ways in which a seller can be released from liability?

A signed agreement between the lender and the original borrower- release of liability A substitution of the maker of the note- Novation

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the vas loan guarantee be based?

$210,000, the sales price

Adam owes $125,000 on his home. It's currently worth $340,000. How much equity does Adam have in his home?

$215,000

A local residential property has been appraised at $94,675 in an area with assessment ratio of 25% what is its assessed value?

$23,669

Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?

$254,200

A buyer is purchasing a property for $400,000. His lenders loan-to-value ratio is 80%. How much is the buyer financing?

$320,000

The VA loan program offers a basic entitlement amount of

$36,000

Maurice received an offer of $480,000 for his home. The commission on the sale is 6%. Maurice's mortgage payoff is $78,500. He has additional closing expenses totaling $2,200. What will Maurice net from the sale of his home, rounded to the nearest whole dollar?

$370,500

Jamal is selling his townhome for $242,000, and closing is set for July 20. He has a loan balance of $193,000 at a 3.7% interest rate, and he's current on his payments. Jamal has prepaid the property taxes ($1,165) and insurance ($745). Using a calendar year proration method for calculations, how will these amounts appear on Jamal's closing statement?

$523.16 seller credit First, calculate tax daily rates: ($1,165 ÷ 365 days per year = $3.19). Multiply $3.19 × 164 days from closing until year end = a $523.16 seller credit. Remember that insurance is typically repaid by the insurance company directly to the seller, so it doesn't factor into the transaction between the buyer and seller.

A buyer is purchasing a house for $500,000. She's making a down payment of $50,000, and is financing the remainder. How much is her loan origination fee if the lender charges one-and-half points?

$6,750

In light of economic conditions lenders consider borrower credit and property value. Property value is important because it factors into the loan the value (ltv) ratio calculated by the lender. Buyer and seller agreed to a sales price of $90,000 but the property appraised at $100,000 what value would the lender use to calculate LTV?

$90,,000 sales price

John wants to do a 1031 tax exchange. He just sold his property how many days does he have to close on a new property

180 Must identify property property within 45 days and close within 180

Administrative procedures act

1946 Act requiring bureaucratic agencies to appeal to the affected parties before adopting new policies. Legislative check on Bureaucracy.

GRM and GIM are used depending on the number of units the property contains

20 unit apartment complex- gross income multiplier Duplex- gross rent multiplier Condominium complex with 5 units- gross rent multiplier •1-4 units- sales price divided by monthly gross rent = gross rent multiplier • 5 or more units- sales price divided by annual gross income= gross income multiplier

Identification rules

200% rule- when exchanging more than one property combined fair market value of the properties can't be more than 200% of the value of the relinquished property 95% rule- an investor can exchange multiple properties as long as properties total at least 95% if the value of the relinquished property Three property rule- an investor can identify up to three replacement properties with no fair market value restriction provided they the meet the debt load requirement

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

22%

Typical low end of the housing ratio to qualify for a conventional loan?

25

Typical high end of the housing ratio to qualify for a conventional loan?

28

Minimum down payment on an FHA loan?

3.5%

A buyer anticipates a house payment of $1,000 per month, with monthly homeowner association fees of $150. The buyer also has a car payment of $400 per month. If the buyer earns a monthly gross income of $5,000, what's the total debt ratio?

31%

Typical debt to income ratio to qualify for a conventional loan?

33-36

Calculating the perimeter

4 x length - square (2 x length) + (2 x width) - rectangle Add lengths of each side- triangle

Which percentage reflects the top debt to income ratio limit for qualified mortgages?

43%

Borrowers should be wary of lenders who offer mortgages at more than ______ over current market interest rates.

5%

In the residential mortgage market charging borrowers more than ___ over market rate for interest is considered a predatory lending practice

5%

You're working with buyers who are pre approved for a loan up to $150,000 if they estimate paying $625 per month toward interest what interest rate are they assuming?

5%

Ratio among those acceptable in a piggyback financing arrangement

80/10/10

Jane's offer of $310,000 was accepted, but the appraisal just came in at $300,000. Jane plans to finance $250,000. What's the loan-to-value ratio?

83%

A property valued at $500,000 generates a net operating income of $45,000. What is the rate of return?

9%

Calvin purchased a house for $220,000, financing $200,000 using a 30-year conventional mortgage at 4% interest. His monthly payment is $955, including both principal and interest. The annual property taxes are $1,400 and the combined annual insurance premium is $900. What's Calvin's PITI payment each month?

$1,146.67

Using the income approach, determine the value of a property that has a net operating income of $15,000 and a cap rate of 15%.

$100,000

Sherman owes $225,000 on his home. It's currently worth $240,000. How much equity does Sherman have in his home?

$15,000

A property generates $30,000 in net operating income and has a 15% cap rate. Using the income approach, what is its value?

$200,000

A loan agreement may be documented using any one the three basic finance instruments. In order for any of these to be valid contracts which of these 3 items must be included?

Accurate legal description of property being pledged as collateral Statement of the amount of the loan and how it will be repaid Signatures from the parties to the agreement

Residential loan types

Adjustable rate- a loan with a rate that fluctuates based on the economic index with which it is associated Amortized- debt that is paid off by making periodic payments mostly consisting of interest and principal Straight- a mortgage where only interest is paid until the end of the term when the principal is paid Straight- a mortgage where only interest is paid until the end of the term when the principal is paid Graduated payment- a loan where the payments are adjusted (usually up) at specified periods over the life of the loan Growing equity- a fixed rate mortgage where the monthly payments increase over time according to a set schedule Shared appreciation- a loan where the borrower receives a below market interest rate in exchange for the lender receiving equity

Loan types that may be eligible for purchase by Fannie Mae

Adjustable-rate mortgages Fixed-rate mortgages Renovation loans Refinancing loans

The ______ balances the powers of federal agencies by requiring them to follow specific processes and procedures such as providing for public participation in rulemaking

Administrative procedure act

Albert wants to sell his house to his cousin whose willing to assume his FHA loan. What clause in alberts mortgage requires him to obtain the lenders permission to do this?

Alienation clause

Clause that allows the lender to make entire loan due and payable immediately if property is sold

Alienation clause

If you look at covenant 18 what clause is included that was also seen in the promissory note?

Alienation clause

Loan processing and underwriting

All the information about the property and borrower is analyzed and a recommendation is made- underwriting The lender collects documentation from the consumer about income and credit as well as the property- loan processing

ARRA

American Recovery and Reinvestment Act of 2009 was enacted called the "stimulus package" its goals were to create and save jobs, spur economic activity and increase accountbakiky and transparency in government spending

Amortization

Amortization is the paying off of a loan over time Two numbers are required to use an amortization chart. Loan term and interest rate.

Calculating mortgage record tax

Amount financed x mortgage recording tax rate = Mortgage tax amount

Terms used on the amortization table

Amount to be sent for payment- schedule payment/total amount Amount of payment that will be applied to the loan balance- principal Amount of payment that will be paid toward interest- interest Loan balance prior to the monthly payment being applied- beginning balance Loan balance after payment is applied- ending balance Rate of interest for the loan- annual interest rate

What provision is that?

An investor purchased the mortgage and the borrower has now defaulted but the investor can't sue the original lender for reimbursement- non-recourse A lender has foreclosed on Pam but isn't allowed to ask for a deficiency judgement as well- exculpatory Dennis wishes he could pay his loan off early but he would have to pay a penalty if he did- lock in Paula makes additional payments on her loan each year and pays it off three years early. The lender can't charge a penalty- pre payment

What's the first step in the overall process that the appraiser uses with the sales comparison approach?

Analyze the subject property to identify its characteristics particularly those that are in demand in the current market

Andrea's lender has notified her of its intent to foreclose. Her loan is secured with a security deed. What rights does she have to redeem her property?

Andrea can cure the default and reinstate the loan.

Identify and exchange 1031 truths

Any cash an investor receives from the proceeds of a sale is called boot and it's taxable An investor can revoke and submit a new property for exchange as long as formal identification is made to the qualified intermediary within the 45 day identification period If an investor fails to identify a property within 45 days or if the deal falls through and the investor isn't able to identify a new property within the 45 day window the investors chance to complete a 1031 exchange for that property is over An investor must complete the 1031 exchange by the earlier of either midnight on the 180th calendar day following the close of the relinquished property or the due date of the investors federal income tax return for the tax year in which the relinquished property was sold including any extensions

Mortgage recording tax

Applies when a mortgage associated with real property is recorded.

Transfer tax or mortgage recording tax?

Applies when an interest in real property is transferred- transfer tax Applies when a mortgage associated with real property is recorded- mortgage recording tax

Appraisal terms

Appraisal- unbiased estimate of value of a specific property on a specific date Valuation- process of forming an opinion of a property's value Evaluation- study of a property potentially for land use or marketability

How is equity calculated?

Appraised home value less the amount of any indebtedness against the home

Equity formula

Appraised value- amount owed= equity

Which of the following is true about the federal housing administrations qualifying standards for a mortgage loan?

Are somewhat less stringent than standards for conventional loans

Benefits and risks of locking rates

Benefits: locks ins protect against rising interest rates, protect against a borrower initially qualifying for a loan and then being denied because higher interest rates cause higher payments pushing the borrower over the debt limits, can be set up with a locked rate, locked points, and floating rates and points which gives the borrower the ability to take advantage of falling rates. Lock in periods usually 30-60 days which gives the lender time to complete the loan processing. Some lenders offer longer lock in periods even up to 120 days Risks: locks ins limit a borrower ability to take advantage of falling interest rates, lock ins can have addition lender fees based on the length o the lock in the longer the time period the higher the fees borrowers should factor in natural delays and select a lock in period accordingly Locks ins are effective for a set period of time if the lock expires before the loan closes, rates will be charged at the current market rate

Who's the mortgagor in a mortgage?

Borrower

Required feautures of a promissory note

Borrower name Promise to repay Amount of loan Borrower signature Date of signature

Mortgage who's who

Borrower- mortgagor or trustor Lender- mortgagee or beneficairy Title holder in lien theory state- mortgagor or trustor Title holder in a title theory state- mortgagee or beneficiary Deed holder in a title theory state- mortgagor or trustor Entity that retains rights of ownership- mortgagee or trustor

Down payment truths

Borrowers may reduce the amount of taxes withers from paychecks and save that money for their down payment Gifted funds are an acceptable source for a down payment if provided far enough in advance

Appraiser Niles uses ______ to determine a range of values based on comparing a subject property to comparable sales. He makes sure to use some comparables that lack features of his subject property, and others that have even more desirable features, to balance out the comparison.

Bracketing

______ is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison, such as age, transaction price, etc

Bracketing

Interest paid over life of loan

Brian took out a 30 year 500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59 how much will he have paid in total interest at the end of the loan term? 360 (total payments for 30 year loan) $3,078.59 x 360 = $1,108,292.40 - 500,000 = $608,292.40

Temporary or short term loans

Bridge loan- a loan that provides funds in addition to an existing loan until permanent financing can be obtained Swing loan- a loan from the equity in a property that is used to obtain another property

Triggering term examples

Buy a new home for $1,500 month Own a home for 3.5% down Assume an FHA loan with 5% interest

Which of the following VA programs requires a credit check, new appraisal, and income verification?

Cash out refinance

What do you need to qualify for va home loan?

Certificate of eligibility Sufficient income Sufficient credit You'll need a COE to find out if you're eligible for a VA loan The amount of entitlement you're eligible for is shown on your COE You can build a home with VA loan You can buy manufactured home with loan You can buy condo

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.

Investing

Chinese investors were the largest investors in U.S real estate in 2017 Fifty percent of foreign real estate sales in 2017 were in just 5 states

When Fannie Mae purchase a loan they pay the originator a ___ fee

Collection

The formula for net to seller is sale price x (100%-_____)

Commission rate

In the sales comparison approach which of these are selected and evaluated both quantitatively and qualitatively against the subject property?

Comparables

Closing disclosure components

Contains a summary of both the borrowers and sellers transactions and the gross amount due from both parties Includes a section for both the borrower and the seller where adjustments can be taken into account for items unpaid by the seller Has a place to compare the loan estimates with the actual closing charges Identifies the total settlement charges which include but are not limited to real estate broker fees, reserves deposited with the lender and title charges Includes detailed information about the terms of the loan

Which of these principles of value is related to how a change to a portion of a property impacts the value as a whole?

Contribution. The principle of contribution says that a change to a portion of a property impacts the overall value. For example, adding a swimming pool could add to the value for some buyers and detract from the value for others.

Conventional or government loans

Conventional loan- aren't insured or guaranteed by the government, lenders loan- to value ratio threshold typically 75-80% Government loan- regularly originates loans where borrowers put down less than 4%, mortgage insurance premium required

Types of participation agreement

Cooperative- partnership of mortgagors REIT- partnership of mortgagees Shared responsibility for a single mortgage payment- partnership of mortgagors REMIC- partnership of mortgagees Shared financing for a large real estate project- partnership of mortgagees REMT- partnership of mortgagees

Secured corporate bonds use ____ as collateral

Corporate assets Corporate assets are used as collateral so that bond purchasers can repossess the asset in the event of default.

Each appraisal approach relies on something different to determine value. What does the cost approach measure?

Cost to rebuild the property

Permanent or temporary

Costs about 6 points to buy down rate one point- permanent Can be level or graduated- temporary Changes the rate on the note- permanent More common type of buydown- temporary

A real estate transaction has a closing date of May 20. The seller, who's responsible for closing costs up to but not including the day of closing, has already paid annual proof taxes of $1,949. How will the closing statement reflect the proration for the seller?

Credited $1,207

When reviewing the document that says you pledge property you purchased as collateral for your loan you notice the terms trustor, beneficiary, trustee. What type of security instrument is being used?

Deed of trust

Default type truths

Default doesn't mean foreclosure is imminent Non payment of property taxes places the borrower in default Most lenders have a grace period for late payments which varies from lender to lender

Which three are in the same maximum baseline loan amount category

District of columbia Puerto Rico Contiguous states

Appraiser dos and donts

Do: ask an appraiser to consider additional appropriate property information Ask for more detail or an explanation of the appraisers value determination Ask an appraiser to correct errors in an appraisal report

Protect from fraud

Document everything Disclose everything to the appropriate parties Verify the accuracy of closing statements Bring the situation to the attention of your broker Withdraw from the transaction if it seems to be fraudulent

Covenant 21

Environmental law and the presence of hazardous materials on the property

FHFA conservatorship truths

Fannie Mae and Freddie Mac stock was purchased by the us treasury to keep them solvent The FHFA sued financial institutions who misrepresented the quality of the MBSs or their underlying mortgages Sets conforming loan limits Sets targets for the percentage of loans made to low to moderate income borrowers

Clint is interested in making an offer on a house with hardwood floors that will need to be replaced. The hallway is 18' x 6'. The kitchen is 20' x 30'. The living room is 25' x 45'. Two bedrooms are 12' x 16', and the master bedroom is 14' x 20'. If the cost of the flooring is $5.48 per square foot, and the cost of installation is $1.49 per square foot, how much can Clint plan to spend to replace the floors?

First, find the area of each room and add them together to get the total square footage. 108 + 600 + 1125 + 192 + 192 + 280 = 2,497 square feet. The total cost of the flooring per sq. ft. is $5.48 + $1.49 = $6.97. 2,497 x $6.97 = $17, 404.09.

Which of the following statements related to 1031 tax deferred exchange is true?

Foreign investors may participate

The U.S department of veterans affairs offers special programs which can be used to adapt housing to accommodate the disability, to veterans or military members with permanent and total service connected disabilities. What are these programs?

Grants

Down Payment Assistance Programs

Grants- these aren't repaid if the buyer meets certain requirements such as owning and living in the home for a specific length of time Silent second- these tend to have low or zero interest rates and they payments are deferred Mortgage credit certificates- these allow qualified buyers to claim some of the mortgage interest they paid as a credit on their tax returns USDA rural development program- this program provides funding to low and moderate income families living in eligible rural areas Housing finance agencies- these offer buyers a wide range of home buying support and assistance at a more local level Department of veterans affairs- this organization provides service members, veterans, and their eligble surviving spouses with a wide range of homebuying services

Approaches to income capitalization

Gross rent multiplier- divide the sales price of a comparable property by its gross rental income. Use the result on the subject property to determine a value Gross income multiplier- divide the sales price of a comparable property by its annual gross income. Use the result on the subject property to determine a value Direct capitalization- calculate the projected net operating income for a property over the next year then apply a capitalization rate Yield capitalization- apply an expected rate of return to income from the entire holding period to find the current property value

What's the acronym for the legislation that requires financial institutions to document and publicly disclose lending practices

HMDA

Assisting in purchase of repossessed homes, ensuring that all clients receive fair and and equitable treatment and recommending FHA financing to a client are all ways that a licensee can make use of ____?

HUD and it's programs

Scott has plenty of money saved and is ready to make a down payment on his $14 million dream home. One problem: Scott doesn't want to end up with a jumbo loan because he goes over the conforming loan limit. What option does Scott have?

He can take out a piggyback loan.

Your client exchanged one property for a similar property and did not have to pay capital gains taxes that year. How did he do this?

He did a tax-deferred exchange.

Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?

He will pay 1/12 of it monthly with his mortgage payment.

Funding fee situations

Helicopter pilot in national guard, no disability, first va loan purchase, 12% down payment- 1.40% Coast guard lieutenant, no disability, second va loan purchase, no down payment- 3.60% Retired marine captain, no disability, first va loan purchase, no down payment- 2.30% Widow of army corporal who died in service- no funding fee Air Force major, no disability, first va loan purchase, 5% down payment- 1.65%

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?

Her down payment of $50,000 isn't at least 20% of the purchase price.

Melvina has a home equity conversion mortgage. She feels secure because she knows that

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

Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?

Her rate will be 3% for the first year, 4% the second year, and 5% after that.

Which loan program is only available to homeowners who are 62 or older?

Home equity conversion mortgage

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

Equity related financing

Home equity loan- a lump sum loan that must be repaid by the homeowners Reverse annuity mortgage- all funds are drawn by the homeowners over time the bank gains ownership of the property Home equity line of credit- used similarly to a credit card

Equity Loans

Home equity- loans taken against the equity in a home Reverse mortgage-Generally used by the elderly to receive income from the equity in their home

Effect of these clauses

If borrower defaults allows the property to be sold using non-judicial foreclosure process- power of sale Allows the lender to make the loan immediately due and payable if the borrower doesn't abide by the terms of the agreement- acceleration clause Allows the lender to make the loan immediately due and payable if the property is transferred- alienation clause Ensures that the borrower will regain full title to the property once the loan is fully repaid- defeasance/reconveyance

Points

If borrowers want to secure a lower interest rate, they pay discount points. When a borrower purchases discount points the points are good for the entire loan term. Discount points are essentially pre paid interest, paid at the beginning of a loan to drive down overall monthly payments on a loan. One point is equal to 1% of the mortgage balance.

Mortgagees and mortgagors as partners

In exchange for partial ownership in the project a financier may offer a lower interest rate This kind of agreement is used for large commercial real estate projects

What is reconciliation?

In reconciliation appraiser rely on their experience, expertise, and professional findings to resolve differences between the comparable properties when using the different approaches determine the value of the subject property

Characteristics of RESPA?

Includes provisions for buyers who are victims of over charging Applies to mortgage loans and settlement services

Which one of these would not be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation?

Income generated

How do VA loan programs compute "residual income"?

Income minus shelter expenses and debts

IRV?

Income/Rate = Value These are the factors in the capitalization formula

Farmer Mac (Federal Agricultural Mortgage Corporation)

It buys agricultural loans from lenders to pool and sell in the secondary market as securities It helps agricultural lenders and borrowers by providing capital for making new loans Without farmer mac fewer lenders would be able or willing to make agricultural and rural loans

Which of the following describes a blanket lien?

It gives lenders the ability to recover losses due to a foreclosure sale from any current or future property the borrower owns

Which of these is true about the assessed value of real estate

It's the value used to calculate the property taxes, and it's based on a percentage of the market value.

How common is judicial foreclose?

It's used frequently when the property is collateral for the mortgage loan and no power of sale clause exists

Joseph's got b-rated credit and his commercial bank suggested he check with the specialty mortgage company because they deal with subprime loans. Which is NOT true about Jospeh's situation?

Joseph should avoid taking the commercial banks advice since a subprime loan is most likely made by a predatory lender

Joyce just closed on a condo for $366,900 and put down 20% to obtain an 80% loan and avoid having to pay for private mortgage insurance. How much equity does she have in her condo?

Joyce's equity is $73,380. The value of her condo is $366,900. She put $73,380 down ($366,900 x .20). Because she just closed, her equity is exactly the same as her down payment.

Mortgage or deed of trust

Judicial foreclosure- mortgage Non-judicial foreclosure- deed of trust Time and cost to foreclose tend to be less- deed of trust Borrower has statutory right of redemption- mortgage Mortgagee executes satisfaction of mortgage- mortgage Trustee executed deed of reconveyance- deed of trust

Blue Water Navy Vietnam Veterans Act

June 25 2019 Makes changes to va loan lending guidelines Eliminates va loan lending limits Eliminates funding fee differences for borrowers who are veterans vs those that are members of the reserve Exempts Purple Heart recipients from paying loan fees Removed the loan limit for the Native American direct loan program Authorizes VA designated appraisers to rely on third parties for appraisal related information Temporarily increases rates for certain loans by .15 to .30 percent Changes effective January 1 2020

AIR sets certain criteria when selecting an appraiser which of these requirements does air specify?

Licensed or certified in the state where the property is located Knowledge about the local market Qualified to appraise the property Involved in the transaction Able to access the data needed to perform an appraisal

MIP truths

MIP is required of all FHA borrowers Borrowers will pay an upfront premium when they close on the loan and annual premiums for the life of the loan

Maggie has a neighbor, Jim, who is facing foreclosure. She likes Jim and wants to help him out, so they agree to do a "subject to" purchase. What does this mean?

Maggie will take over Jim's loan payments without telling his lender she's doing so.

What's the purpose of a loan modification?

Make the loan more affordable for the borrower Avoid the need for foreclosure

When the lender gathers all kinds of information about the borrower's assets, debts, income, employment history, and pulls their credit report, the buyer is ___________________.

Making an application for a loans

Which of the following is an example of an involuntary statutory lien?

Materialmans lien Mechanics lien

hEcm program elements

Michelle and Ray must maintain homeowners insurance or risk defaulting on their reverse mortgage The lender is required to counsel them about the possibility that there will be no equity left in the home by the time the reverse mortgage ends The fha collects an insurance premium from the loan

Calculating interest amount

Monthly interest amount- loan balance x interest rate) divided by number of payments annually

Lorena and Julio purchased a home for $205,950. Their loan amount was $164,760, and the assessed value is now $200,500. Their tax rate is 1.5%. How much will their monthly taxes be?

Monthly taxes are calculated by multiplying the assessed value by the tax rate and dividing by 12: $200,500 × .015% = $3,007.50 ÷ 12 = $250.62.

Buy down advantages

More affordable loan for the borrower Higher yield for the lender More qualified borrower for the lender Incentivize buyer for the seller

Mortgage banker vs. mortgage broker

Mortgage Banker: works for the mortgage companies, makes loans, fund loans from their own sources Mortgages Broker: bring borrowers and lenders together but do not lend their own money, charge a fee for their service

Types of deductions for homeowners

Mortgage interest Property taxes Under TCIA married homeowners who purchase property in years 2018-2025 and file jointly may deduct interest on up to $750,000 in housing debt whereas those who file separately may deduct interest on up to $375,000 in debt-Home acquisition financing The deduction applies to any type of real property you own including your personal residence a vacation home, investment property, vacant land, time share, etc- property taxes The loan associated with this type of deduction must only be for the purchase and improvement of the property- home acquisition financing Interest can be deducted from a mortgage used to buy, build or improve a main home or even a second home with the loan amount secured by the property itself- home acquisition financing Homeowners can itemize this deduction on schedule a for primary residence and on schedule e for a rental property- property taxes

Beth needs help with the down payment to buy Mark's property. Mark is going to supplement Beth's bank loan with a second loan, allowing her to meet her lender's down payment requirements. What finance instruments may be used for this agreement?

Mortgage or deed of trust

Which scenarios would an appraiser likely use the cost approach?

Movie theatre Winery and vineyard Newly constructed home 10 million property

When using an amortization chart, you use the interest rate and the loan term to arrive at a factor, such as 5.17808. Now what do you do?

Multiply the number of thousands in the loan by the factor.

What type of bond is used to pay for community improvements?

Municipal

Your buyer, Chet, is a veteran trying to buy a house, but the certificate of reasonable value came in $10,000 lower than the agreed-upon sales price. What can Chet do?

Negotiate with the seller

When a loan is recasted what does it essentially become?

New moan

Jackie is 10 days late on her loan payment. Will her lender likely place her loan in default?

No she needs to be 30 days late to be in default

Adam has lost his job and is no longer able to make his house payments. He applied for a loan modification at the same time that he files for bankruptcy. Will the lender approve the loan modification?

No. A borrower who has filed for bankruptcy won't be eligible for a loan modification which is only viable if the borrower has the financial ability to continue making payments

Which clause is used in a security instrument to protect the original note holder of the security instrument is sold and the borrower subsequently defaults?

Non recourse

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

Of the secondary market players discussed which issue loans fired to consumers?

None of them (Fannie, farmer, Freddie, Ginnie, etc)

What percentage of closing costs can be included in a VA loan?

None; Closing costs may not be included in the loan, but the borrower may negotiate with the seller to pay these.

Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?

Note with mortgage, note with deed of trust, or contract for deed

Your buyer client Percy, wants to start searching for his dream house and knows he needs to obtain financing to accomplish that. What's his first step?

Obtain a pre qualification letter

Which HUD program is responsible for protecting individuals against discrimination in housing based membership in a protected class?

Office of Fair Housing and Equal Opportunity

How are real estate-related prorations usually calculated?

On a 360- or 365-day basis

Alana and Michael want to build a 5,000-square-foot ranch home on two acres of land they just bought. Once the house is built, how many acres of land will remain unbuilt?

One acre is equal to 43,560 square feet, so their parcel is 87,120 square feet (43,560 x 2). Subtract the house's 5,000 square feet from that, and you get 82,120 square feet. Divide that by 43,560, and you end up with approximately 1.89 acres.

Which of the following financing types involved the sale of personal property with the real property?

Package

What paragraph in sample note contains required reference to the security instrument

Paragraph 10

Schedule of repayments

Paragraph 3

Paragraph in sample note includes late charge provision?

Paragraph 6a

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

Partnership among mortgagees

Which type of partnership may involve several mortgagors financing a multi family dwelling?

Partnership among mortgagors

An adjustable rate mortgage has an initial rate of 5%. When the first interest rate adjustment can be adjusted s maximum of 1%. At all subsequent adjustment dates, the interest rate can be adjusted a maximum of 2%. The highest rate of interest that may be charged at any given time is 9%. What does the 2% rate represent?

Periodic cap

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 borrowers note

Permanent

Three types of depreciation

Physical deterioration- improper maintain of property Functional obsolescence- house is overbuilt for the area External depreciation- airport noise

Qualified Intermediary responsibilities

Place proceeds of the first fake with escrow with instructions Handle transactional paperwork with escrow Provide transfer documents for the exchange Submit a 1099 to the taxpayer and to the IRS for any gross proceeds paid out

Marcus bought two adjoining pieces of land that were zoned for commercial use. When he realized that combining the two parcels would dramatically increase the land's value, he jumped at the opportunity. What's this an example of?

Plottage

Which may result in borrower default?

Poor property management Not paying for homeowners insurance Not paying personal income taxes, resulting in a lien on the property

What is the name of the clause that's standard in a deed of trust and allows the lender to foreclose non-judicially? It can also be included in a mortgage if the state allows it

Power of sale

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

CMA or appraisal

Prepared by a real estate agent- cma Determines property value which lenders use in the mortgage process- appraisal Helps estimate a property's market price range for the listing - cma

Paragraph four of promissory note

Prepayment clause

The two formulas for price per sq ft

Price of home divided by square footage Square footage x price per sq ft

Type of bankruptcy

Primarily used by individuals, the title is conveyed to a trustee and cancels all debt secured by the property- chapter 7 Primarily used by corporations or partnerships - chapter 11 Temporarily stalls foreclosure actions- both

PITI

Principal, Interest, Taxes, Insurance Piti often comprises the sun total of a buyers mortgage payment because property taxes and hazards insurance are added to loan payback amount

loan terminology

Principal- the amount actually borrowed Interest- the cost of borrowing money from someone else Term- the length of the loan Amortization- the process of paying a loan off over time

Purpose of PMI?

Private Mortgage Insurance (PMI) is insurance for conventional loans that protects the lender from incurring a loss in the event of default by the borrower.

You're obtaining a loan to buy a home. Your loan ageeement includes two documents and you're careful to review the amount of principal and how it will be repaid. What document are you reviewing?

Promissory note

Two areas of vulnerability for the lender occur when homeowners insurance is allowed to lapse. What are they?

Property damage and judgment liens

Common schemes for mortgage fraud

Property flipping: illegal when a home is bought, appraised for more than it's worth and sold within a short time frame. Kickbacks to the parties are commonplace. Inflated appraisals: an appraiser intentionally submits a misleading report to a lender that indicates an inflated property value Silent second: a property buyer accepts a second mortgage without disclosing it the original lender often used when a buyer can't afford the down payment on a home Nominee loans/straw buyers: concealing a buyers identity by using another persons name and credit information to obtain a loan Equity skimming: an investor receives title to a property often by using a straw buyer, doesn't make mortgage payments and usually rents out the home until foreclosure occurs False identity: borrowed may use a stolen or fictitious identity to obtain a home loan Undisclosed buyer rebate: the seller or another party provides funds that aren't included in the settlement statement. In order to be legal rebates must be disclosed to the lender and must appear on the settlement statement

How does farmer mac meet its goal of making credit available in rural communities?

Purchasing loans issued by agricultural and rural lenders

What's the acronym for the legislation that regulates closing costs and settlement procedures?

RESPA

Regulations to prevent predatory lending

Real estate settlement procedures act (RESPA) Homeowner and equity protection act (HOEPA) Truth in lending act (TILA)

What type of lien is a specific lien?

Real property tax lien

Forms of loan adjustments?

Recasting Moratorium (forbearance)

Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?

Reconveyance

Which form clause?

Reconveyance clause- deed of trust Defeasance clause/ mortgage Late charge provision- promissory note

A mortgage that allows the lender to sue the borrower for damages if foreclosure occurs is called a ______ mortgage?

Recourse

Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?

Reduce lender risk by establishing borrower qualification standards

Ways in which a loan may be modified when a borrower has had difficulty making payments?

Reduce required monthly payment Reduce interest rate Extend amortization schedule Reduce principal amount

True of interest rates in a 3-2-1 buydown?

Reduced by 3% the first year, 2% the second year, and 1% the third year Set to full interest rate in the fourth year

Covenant 6

Requirement to occupy property

Which type of property takes 27.5 years to completely depreciate?

Residential property

A lender qualifies a borrower for a VA loan based on ______.

Residual income and debt-to-income

Qualifying for a va loan

Residual income- the amount of money left after housing expenses, debts, obligations, and monthly shelter expenses are met Debt-to-income- total monthly debt payments against gross monthly income

Characteristics of the home ownership and equity protection act (HOEPA)?

Restricts fees Requires pre-loan counseling for consumers

Types of value

Return on investment a property may provide-investment value Cost to replace or rebuild a property- insured value Value of importance to insurance companies- insured value Of great importance to a lender- mortgage value Price at which the property can be loaned on or sold at foreclosure sale- mortgage value

Varieties of municipal bonds?

Revenue Zero coupon Industrial development

Bank revenue sources

Savings account - demand deposit IRA- other revenue Checking account- demand deposit Trust account- other revenue Bond- other revenue

The number of properties available describes this factor that influences value?

Scarcity Scarcity is related to demand, and reflects the supply of property, or lack thereof.

Examples of junior finance instruments

Second mortgage Home equity loan

Costs that seller can pay for the buyer with a va loan truths

Seller may pay buyers va funding fee Seller may include washer and dryer as a seller concession If seller pays for buyers prepaid property taxes and insurance this is considered a seller concession The total amount of seller concessions may not exceed 4% of the sales price

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

Sometimes when a buyer can't qualify for a loan, a property seller drops the price and accepts a second mortgage within disclosing it to the original lender. What is this form of mortgage fraud known as?

Silent second

Freddie Mac only purchases loans used to finance or refinance the purchase of certain property types. Which properties are eligible?

Single family primary residence Duplex Single unit secondary home Manufactured home

LTV (Loan to Value) % examples to be eligible for Fannie Mae

Single unit principal residence using a fixed rate mortgage- 97% Fixed rate mortgage for second home for vacations - 90% Adjustable rate mortgage for duplex used as investment property- 75%

Which two of these loan transactions must comply with AIR

Single- family residence conventional loan Four unit residence conventional loan

Loan types

Straight loan- a mortgage in which only interest payments are made and the entire principal is paid at the end of the term ARM- a mortgage with a rate that is adjusted usually annually based on the behavior of the economic index with which it's associated Amortized loan- a mortgage where the principal is paid down over the life of the loan typically through equal payments

HUD goals

Strengthen the housing market to bolster the economy and protect consumers Meet the need for quality affordable rental homes Utilize housing as a platform for improving quality of life Build inclusive and sustainable communities free from discrimination

Junior lien priority and power

Subordination agreement- allows a junior lien to take a lien position ahead of a senior lien Lifting clause- allows senior liens to be refinanced without affecting the lien position of the junior loan

What documents that a borrower submits would a lender likely review to determine whether a borrower is a good credit risk?

Tax returns W-2 Pay stub Bank statements

A like kind exchange or 1031 exchange is also referred to as a

Tax-deferred exchange

What calculation is used to determine the accrued taxes owed by a seller at closing?

Taxes owed divided by 12 months = taxes owed per month and taxes owed per month x number of full months passed = accrued taxes owed by the seller at closing

NADL vs VA home loan

The VA services the loan-NADL program The VA provides guarantee to the lender- VA home loan The property must be located on a federal trust land- NADL program The property may be located anywhere in the u.s- VA home loan The veteran applies for the loan through a VA approved lender- VA home loan The veteran applies directly to the VA for the loan- NADL program

Lien theory or title theory

The borrower holds legal title to the property and owns the house- lien theory A promissory note gives the lender the right to seize and sell the house should the borrower default- lien theory The borrower receives the deed but the lender has the legal title- title theory The lender has legal title and owns the house until the borrower pays off the loan- title theory It's much easier for a loner to forclose- title theory

Contrasting security instruments

The borrower is required to maintain the property- both The lender has right to inspect the property- both Always creates a lien against property- mortgage A third party mag hold title on behalf of lender- deed of trust

Foreclosure by Advertisement truths

The borrower who has defaulted on the mortgage is notified by the lender of the impending foreclosure and that the property will be sold at public auction It's not a replacement for the legal foreclosure process After auction the new owner has to petition the court for a notice of eviction to legally remove the previous owner from the property

Right if redemption

The defaulting homeowner must repay the principal amount of the debt owed including any accrued interest The defaulting homeowner must repay the lenders costs associated with the foreclosure

Statements apply to home equity line of credit

The draw period varies An appraisal is often required No interest is paid by the borrower until funds are drawn on the loan

When you look at the first page of the deed of trust youll see a space at the top with the note "space above this line for recording data" why is this space important?

The evidence of official recording is placed here The document isn't valid until it has been recorded

Why is 2.5 a better debt service ration then 1.8?

The higher the debt service ratio the more income the investor will have to cover the debt and therefore the less risk

Which form of adjustment?

The lender agreees to temporarily suspend payments in an effort to help the borrower avoid default and foreclosure- moratorium The lender reconfigures the loan, including the term, to reduce the payment amount- recasting

When a borrower has paid off the loan, how is the release handled if the security instrument is a mortgage?

The lender executes and records a satisfaction of mortgage and returns the note to the borrower.

Johnston can't keep up with his mortgage payments so his bank foreclosed on his property. He owns another property, a farm across town that he bought for his mother in law. What may happen to that property if the bank experienced losses in the process of foreclosing?

The lender may seek a deficiency judgement and blanket lien and put a lien against the farm until the debt on the foreclosed property is paid

Pre approval pre qualification or application

The lender requires documentation from the borrower although no property is yet identified- pre approval There is usually no cost to the consumer- pre qualification Information the consumer provided will be validated during loan processing- application The lender performs no verification of information the consumer provided- pre qualification The consumer works with the lender to select a loan product- application

Ricki's loan modification application is in process. Before approving, her lender performs a title search on her property. Why?

The lender wants to ensure that another lien won't take priority over the modified loan

Covenant 22 rights described

The lenders right to call the loan due if the borrower defaults The borrowers right to cure the default and reinstate the loan The lenders right to sell the property if the borrower defaults

Note facts

The maker gives the note to the payee to hold A note doesn't need a security instrument to be a valid contract When the debt is paid in full the payee signs the note and returns it to the maker

When completing a CMA what might be indicated if a comparable property had a quick sale?

The market for similar homes is good.

Debt service

The monthly mortgage payment multiplied by the number of months in a year is called the annual debt service on a mortgage. To get debt service simply multiply the monthly payment by 12

Foreclosure by entry and possession is not a common practice in every state. In those where this method of foreclosure is used what may happen after court permission is obtained to physically take possession of the property?

The mortgagee can take the property peacefully, and in the presence of a witness.

Fixed/adjustable rate truths

The note converts the interest rate in an ARM from fixed to adjustable The lender will specify on the form how much the fixed interest rate will be

What did a 2021 national association of realtors study say about foreign investment in U.S real estate?

The pandemic may be affecting some these purchase numbers

In pricing a property what might expired listings tell the real estate professional?

The price at which a property won't sell

Which factors does a certified appraiser consider when determining a property's value?

The property Similar properties in proximity to the subject property Recent sales and listings Land value Construction costs

What is a statutory right of redemption?

The right of a borrower to redeem the property by paying amounts owed plus costs, even after the foreclosure sale

Why do junior instruments usually have a higher interest rate than the senior loan?

The risk of the principal being lost is greater in case of default due to the junior loan's lower lien priority.

Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?

The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.

Which one of the following statements is true for a sale that's subject to an existing mortgage lien?

The sellers credit score may improve although he's not making any mortgage payments

True about calculating LTV?

The smaller the LTV ratio (lower percentage) the more comfortable the lender is likely to be with the investment An 80/20 means that 80% of the purchase has been financed

Private loan truths

There are nationwide private loan companies There are nationwide, regional, and local loan companies Some loan companies are individual entrepreneurs

Benefits of HECM

There are no income qualifications requirements Fha covers any negative balance after the sale of the home Michelle and Ray will receive their payments as long as one of them remains in the home There's no repayment requirement until both Michelle and Ray no longer live in the home There are limits on the amount of origination fees that can be charged for them to obtain loan

Which is true about buydown with a va loan

They're allowed only on fixed rate loans

Non judicial foreclosure truths

They're an alternative to judicial foreclosure They may be used if the deed of trust includes a power of sale clause

For what reason do borrowers commonly seek the assistance of private lenders?

They're unable to find complete financing elsewhere

Writ of entry truths

This is an additional action used almost exclusively in Maine, Massachusetts, and New Hampshire With this method of foreclosure the mortgagor is given a final deadline when delinquencies must be paid If the mortgagor misses the final deadline the mortgagee becomes full legal owner of the property

Alternatives to foreclosure

This is an option for a borrower who is in serious financial distress and is not to be taken lightly- bankruptcy If this can be arranged with the lender it can help the borrower get caught up and avoid foreclosure- repayment plan This results in proceeds that aren't enough to cover what is owed and has to be negotiated with the lender- short sale This helots the borrower avoid the stigma of foreclosure, but can still have a serious impact on credit. It is initiated by the borrower- voluntary conveyance of deed

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

Through a VA-approved appraiser

FHA loan programs

Title 1 property improvements- moderate rehabilitation of properties such as alterations, Repairs, and site improvements on single family homes Title 1 manufactured housing- purchase of a manufactured house on a developed lot, development of a lot for a manufactured home or a combination of the two Title II section 203b- purchase of one to four family homes Title II section 203h- reconstruction in a disaster zone TitleII section 234c- purchase of a single condominium unit Title II section 223e- purchase or rehab of a home in an older declining urban area

What's the purpose of a short sale?

To avoid foreclosure

Loan payment applied to principal

To calculate the amount of a loan payment that's applied to the principal you take the monthly principal and interest payment and subtract the interest paid per month from that number Monthly principal and interest payment - interest paid per month

Charlie and Wendy took out a loan for $335,000 for 30 years with an interest rate of 5%

To find the amount multiply the factor by the thousands for our situation. So 335,000/1000=$335 multiply this by 5.36822 (number according to amortization chart) = $1,798.35

Bryant is purchasing a three-bedroom home with an appraised value of $120,000 and an assessed value of $30,000. If the tax rate is 3%, about how much will Bryant pay annually in taxes?

To find the estimated tax amount use the assessed value and apply the tax rate ($30,000 x 0.03) $900

What is the trustees role when a deed of trust is used to secure property for a loan?

To hold legal title to the property on behalf of the beneficiary until the loan is repaid

Which of the following acts created regulations for advertising credit services

Truth in Lending Act

The federal housing administration is part of the

U.S. Department of Housing and Urban Developments

Sylvia is a single mother living in a small town surrounded by ranch and farm land. She would like to buy a house there, but her income level and her status as an independent contractor makes it hard for her to qualify for a conventional loan. What government program might provide her with a direct loan to purchase a home?

USDA Rural Development Single Family Housing Program

General or specific liens

Unpaid income tax- general Mortgage loan- specific Unpaid property tax- specific Unpaid estate tax- general

Where do these provisions belong?

Usually appears in the promissory note- late charge provision Used in the mortgage to describe borrowers right to regain title when debt is repaid- defeasance clause Used in the deed of trust to describe borrowers right to regain title when debt is repaid Standard in the deed of trust but may be included in a mortgage- power of sale

Appraiser and real estate differences

Usually hired by the buyer or seller- real estate Usually hired by the lender or buyer or sometimes seller- appraiser Determines what a buyer may pay for a property- real estate Determines a property's worth- appraiser Provides an estimate of value that may be influenced by the consumer- real estate Provides an unbiased estimate of value- appraiser

VA loans

VA program provides veterans who wouldn't qualify for conventional financing with financing options with favorable terms Va loans are provided by participating lenders, va guarantees up to 25% of the loan enabling the lender to give borrowers more favorable terms. If borrower defaults on the loan the va reimbursed the lender for the loss up to the amount of the guarantee on the particular loan

What does the sales comparison approach rely upon?

Value of similar properties in the market

Calculating Transfer Tax

Value of the property x transfer tax rate = transfer tax amounts

Rich wants to add a room to his house so he takes out a home equity loan this creates a lien?

Voluntary and specific

Permanent Buydown

When points are paid to a lender to reduce the interest rate and loan payments for the entire life of the loan

Judicial vs non judicial foreclosure

With this method of foreclosure the property is sold by the court after the lender has provided sufficient public note - judicial This method may be used if a power of sale clause is included in the mortgage or deed of trust- non judicial

Charles is selling his home to Sheila. Charles has an existing loan that he will continue to make payments on. Charles is also extending credit to Sheila for the balance of the purchase price. Sheila will make monthly payments to Charles. What type of financing is used in this transaction?

Wrap-around loan

What statement describes the hybrid REITs?

A mortgage reit is similar to a mutual fund but it invests in properties instead of stocks and bonds Mortgage reits earn income in part from the interest earned on mortgage loans made

Foreign lenders

China U.K Canada

Credit unions in regard to real estate loans?

Credit unions do a lot of business making personal property loans Credit unions lend money for traditional mortgages

RESPA

RESPA disclosed include costs associated with the settlement, lender servicing, and escrow account practices, and business relationships between settlement service providers

Where do mutual savings banks (msb) do business?

They prefer to keep their business nearby so they can monitor loans more efficiently

Which products and services does the USDA rural development program offer to is rural customers?

Direct loans Grants Loan guarantees Advisory services

Who do GSEs serve?

Farmers Homeowners Students

Violation of regulation z

For intentional violations they could face fines up to $5,000 and or imprisonment up to 12 months For unintentional violations they could face fines of two times the finance charge up to a maximum of $1,000

Mutual savings banks limitations truths

Limitations are set by the banks charter Limitations vary from state to state

FSA components

Loans can be used to purchase a farm The maximum amount you can receive from a direct FSA loan to purchase property is $300,000 You can apply for a loan from an FCS bank and the lender can receive an FSA guarantee on the loan With a direct loan from the FSA a down payment isn't required

What is NOT a benefit government sponsored enterprises receive?

Non profit status

HMDA applicant information

Race Ethnicity Sex Property information? Occupancy, property type

Sellers as Lenders truths

Sellers who agree to carry part of a loan for a buyer should understand the risks involved Sellers have to option to go to a bank and agent a loan for a buyer or to provide a loan to them directly One option for seller financing is a contract-for-deed

Safe act

Signed into law in 2008 Provides more consumer protection

Real estate investment funds

The real estate investment trust act of 1960 gave us REITs which were designed to give investors opportunities to invest in real estate while maintaining some of the benefits of other investments like mutual funds