exam 5
Jim decided to refinance his three-year-old mortgage that has a balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called? 1 A prepayment penalty 2 Closing costs 3 Origination fee 4 Points
1 A prepayment penalty Some lenders charge a prepayment fee if all or part of a mortgage is paid off early. Clients considering a loan that has a prepayment penalty should understand exactly the circumstances under which they will have to pay, and how much the prepayment penalty will be.
Which of the following statements about the promissory note is true? 1 A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms. 2 A promissory note isn't a legal document. 3 A promissory note isn't transferable, so it must be held by the original lender until paid in full. 4 A promissory note serves as collateral for a mortgage loan.
1 A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms. The promissory note is evidence of the debt that specifies the borrower's financial obligations. Collateral for the note is typically the property on which the loan is made. It's a negotiable instrument.
Which of these is a type of seller financing used in Hawaii? 1 Agreement of sale 2 Conforming loan 3 FHA-insured loan 4 Seller co-sign mortgage
1 Agreement of sale Hawaii uses an agreement of sale for seller-financed loans, typically when the buyer isn't able to obtain a conventional loan
Bobbi Jo wants to purchase a house for $350,000. She's pre-approved for $300,000, but wants to buy a $350,000 house and doesn't have $50,000 in cash. A down payment assistance program approves her for a second mortgage for $40,000, and the sale closes two weeks later. What made this a legal second mortgage, and not fraud? 1 Bobbi Jo disclosed the down payment assistance to the lender. 2 Bobbi Jo referred to it as a gift, not a silent second mortgage. 3 Bobbi Jo signed an affidavit stating that she had independently secured the full $50,000. 4 The lender provided the down payment assistance.
1 Bobbi Jo disclosed the down payment assistance to the lender. Borrowers who use a down payment assistance program must disclose to the lender where the money came from.
Which of the following documents is an example of a promissory note? 1 Borrower Keesha just signed a document that states that she pledges to pay back her mortgage loan of $310,000. 2 First Financial drafted a document for a borrower that includes, among other things, an acceleration clause. 3 The document that Darren is about to sign includes an acceleration clause. 4 The document that Sandra will sign also includes spaces for her lender's and her trustee's signatures.
1 Borrower Keesha just signed a document that states that she pledges to pay back her mortgage loan of $310,000. Keesha's document is a promissory note; it's essentially an IOU, where the borrower pledges to pay the lender back.
What are a borrowers' redemption rights under Hawaii foreclosure law? 1 Borrowers have an equitable right of redemption, which permits them to bring all payments and fees current before a foreclosure sale takes place. 2 Borrowers have a statutory right to redeem a foreclosed property for up to one year after the foreclosure sale. 3 Borrowers have a two-year statutory right of redemption in the case of foreclosure for non-payment of property taxes. 4 Hawaii doesn't recognize either equitable or statutory rights of redemption.
1 Borrowers have an equitable right of redemption, which permits them to bring all payments and fees current before a foreclosure sale takes place. Hawaii recognizes a borrower's rights to equitable redemption before a foreclosure sale, but no statutory right of redemption is provided except for a one-year redemption period in the case of foreclosure for non-payment of property taxes.
Which of these is an example of a purchase money mortgage? 1 Buyer Jethro doesn't have the full 20% down payment his lender requires. To close the sale, seller Cindy will finance a loan for the gap between Jethro's down payment and the amount the institutional lender will loan. She'll place a lien on the property. 2 Charles is selling his property to Seth. Charles is financing part of the transaction for Seth, who will make payments to Charles while Charles retains the property title. 3 Elizabeth wants to make a 20% down payment on her mortgage loan. She's short on cash right now, but will get a big payout soon. She finances her home with a first mortgage, and takes out a second mortgage to finance the down payment. 4 Manuel is selling his home to Selena. He has an existing loan that he'll continue to make payments on, and he's extending credit to Selena for the balance of the purchase price. She will make monthly payments to him.
1 Buyer Jethro doesn't have the full 20% down payment his lender requires. To close the sale, seller Cindy will finance a loan for the gap between Jethro's down payment and the amount the institutional lender will loan. She'll place a lien on the property. A purchase money mortgage involves the seller providing some or all the financing for a buyer. The buyer holds title, and the seller holds a lien.
How does the Federal Housing Administration fund its mortgage insurance program? 1 By charging borrowers a mortgage insurance premium 2 From federal taxes 3 From the sale of foreclosed homes 4 Through fees paid by lenders that participate in the direct endorsement program
1 By charging borrowers a mortgage insurance premium Every borrower with an FHA loan pays mortgage insurance premiums, which are used to fund the insurance program.
Gerard has been offered a 4% interest rate on a $300,000 mortgage. His monthly mortgage payment would run about $950 per month. He plans to pay $2,000 up front to drop his interest rate to 3.75% and his payment to $920 per month. What is this upfront charge called? 1 Discount point 2 Interest 3 Notes 4 Usury
1 Discount point A discount point is an up front charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires.
What's an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires? 1 Discount point 2 Interest 3 Note 4 Usury
1 Discount point A lender may charge discount points to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires.
Who are the parties to a property management agreement? 1 The property manager and property owner 2 The property manager and the tenant 3 The property manager, property owner, and tenant 4 The property owner and the tenant
1 The property manager and property owner The licensee acting as property manager and the property owner are the parties to a property management agreement that establishes a general agency relationship.
Which of the following is a characteristic of a U.S. Department of Veterans Affairs loan? 1 3.5% down 2 Borrower flexibility 3 PMI 4 Prepayment penalties
2 Borrower flexibility Though they are mainly used to buy or build single-family homes, VA loans are more flexible than other loans, such as FHA loans, for example.
Myra is preparing a monthly report pursuant to the terms of a property management agreement. This report details actual income received from rent and other fees, along with actual expenses paid. What report is she preparing? 1 Budget comparison statement 2 Cash flow report 3 Operating budget 4 Profit and loss statement
2 Cash flow report The cash flow report is usually created monthly and shows the current financial status of a property. It accounts for income received (such as rent, late fees, etc.) and expenses (such as utilities, personnel, repairs, etc.) paid.
The contract Jack is signing has a clause that protects his assets from a deficiency judgment in case of foreclosure. What is this called? 1 Cross-default 2 Exculpatory 3 Non-recourse 4 Subordination
2 Exculpatory An exculpatory clause protects the borrower's other assets in case of foreclosure. In a judicial foreclosure, the lender can choose to ask for a deficiency judgment, which allows the lender to include a request for money over and above the proceeds from the foreclosure sale. The exculpatory clause protects the borrower from that possibility
The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure. 1 Cross-default 2 Exculpatory 3 Non-recourse 4 Subordination
2 Exculpatory If a lender uses a judicial foreclosure, it may also ask for a deficiency judgment, unless the exculpatory clause is present in the security instrument.
Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have? 1 Conventional 2 FHA 3 Standard 4 VA
2 FHA
Conventional loans may be conforming or nonconforming, depending on whether they meet ______ guidelines. 1 Department of the Treasury 2 Fannie Mae and Freddie Mac 3 FDIC 4 State banking law
2 Fannie Mae and Freddie Mac Depending on whether or not they meet Fannie Mae and Freddie Mac guidelines, conventional loans may be conforming or nonconforming.
All of the following are typically common property manager duties EXCEPT ______. 1 Accepting rental applications 2 Making mortgage payments 3 Re-keying a property 4 Showing vacant units
2 Making mortgage payments While property managers handle a plethora of duties, certain tasks, including making mortgage payments, are usually conducted by the property owner
What is the borrower charged for all FHA loans? 1 Discount point 2 Mortgage insurance premium 3 Pre-payment penalty 4 Private mortgage insurance
2 Mortgage insurance premium Similar to private mortgage insurance, MIP covers the insurance provided by the FHA for FHA loans.
Which of the following is true about loan assumptions under the VA program? 1 No VA approval is required to assume a VA loan. 2 The VA must approve loan assumptions on loans made after 1988. 3 VA loans are assumable only by other veterans. 4 VA loans aren't assumable.
2 The VA must approve loan assumptions on loans made after 1988. VA loans made after March 1, 1988 are assumable with VA approval
Melissa is applying for a loan that she qualifies for based on her military service. What type of loan is this? 1 A balloon loan 2 A conventional loan 3 A loan guaranteed by the VA 4 A loan insured by the FHA
3 A loan guaranteed by the VA
Which of these borrowers would most likely be eligible for funding from the Hula Mae loan program? 1 Carson is purchasing a leasehold property on which the remaining term is 27 years. 2 Cynthia is selling the home that she's lived in for 10 years; she's researching the best financing options for her next home purchase. 3 Jessie has been saving her money and finally has enough for a down payment on her first home. 4 Mitzi was so pleased with how her first Hula Mae loan worked that she wants to use the loan program for her upcoming new home purchase.
3 Jessie has been saving her money and finally has enough for a down payment on her first home. Borrowers must meet age, income, and first-time homebuyer restrictions to qualify for Hula Mae loans.
Which of the following is a promise from the borrower to repay a certain sum of money to another party (the lender or holder of the note) under specified terms? 1 Deed of trust 2 Mortgage lien 3 Promissory note 4 Usury
3 Promissory note A promissory note (often called a "note") is the borrower's documented promise to repay the loan.
Tanner, a property owner, wants Gina, a real estate licensee, to manage the property he owns while he's living out of state for a few years. In return, Tanner will pay Gina a flat monthly fee. What type of agreement must be in place between Tanner and Gina? 1 Lease agreement 2 Listing agreement 3 Property management agreement 4 Rental agreement
3 Property management agreement Real estate licensees can only receive compensation for managing others' properties if a property management agreement is in place.
Property managers must recognize the federally protected classes under ADA and the federal Fair Housing Act. Which list most accurately lists these classes? 1 Race, color, religion, national origin, familial status, or disability 2 Race, color, religion, national origin, sex, familial status, age, marital status, or disability 3 Race, color, religion, national origin, sex, familial status, or disability 4 Race, color, religion, national origin, sex, marital status, or disability
3 Race, color, religion, national origin, sex, familial status, or disability Under the Americans with Disabilities Act and the federal Fair Housing Act, it's illegal to use race, color, religion, national origin, sex, familial status, or disability to discriminate in the sale, lease, or financing of housing.
What, in addition to ensuring that rent is paid on time, is a tenant obligated to do? 1 Develop a partnership with building maintenance to schedule weekly fixes. 2 Reduce the landlord's effective workload by making things as easy as possible. 3 Take reasonable care of the property. 4 Unionize with other tenants to ensure the landlord stays on top of maintenance.
3 Take reasonable care of the property. Both parties to a lease are expected to take reasonable care of the property while in a lease.
Title II of The Americans with Disabilities Act of 1990 prohibits discrimination based on disability in programs, services, and activities provided or made available by public entities. Which agency enforces Title II when it relates to state and local public housing, housing assistance, and housing referrals? 1 ADA 2 FHA 3 HHS 4 HUD
4 HUD The U.S. Department of Housing and Urban Development enforces fair housing laws.
When property with a pre-existing lease is sold, the new owner ______. 1 Doesn't have to honor the lease unless it's recorded 2 Isn't obligated by the terms of that lease 3 Must give the tenants at least 30 days to vacate 4 Must honor the lease terms unless the lease states otherwise
4 Must honor the lease terms unless the lease states otherwise When property with a pre-existing lease is sold, the new owner must honor the lease terms unless the lease states otherwise.
Sophie only has 15% to put down on her new home. What might the lender require in order for Sophie to obtain conventional financing? 1 A co-signer 2 A letter of reference 3 A mortgage insurance premium 4 Private mortgage insurance
4 Private mortgage insurance Because Sophie's LTV ratio will be greater than 80%, most lenders will require private mortgage insurance to cover the lender's interests, though there are exceptions. PMI covers the gap between required down payment (e.g., 20%) and actual down payment.
Which of the following is true regarding property management agreements? 1 A property management agreement establishes a relationship between a broker and a client, where the broker provides real estate services. 2 Property management agreements are synonymous with brokerage agreements. 3 Property management agreements may be oral or in writing to be enforceable. 4 Property managers must have a written property management agreement with all clients.
4 Property managers must have a written property management agreement with all clients. Property management agreements are written contracts between a client and a broker where the broker is given compensation to manage the client's property. Property management agreements must be in writing to be enforceable.
If a negotiable instrument is transferrable, it must be ___________. 1 Include a "not to exceed" clause 2 On a government-issued form 3 Payable at an indefinite time 4 Signed
4 Signed To be transferrable, a negotiable instrument must be in writing, be payable on demand or at a definite time, contain a promise or order to pay, state a specific or fixed sum of money, and be signed.
Which of the following statements about an assumption is NOT true? 1 A novation can be used to remove the original borrower's liability. 2 The lender may charge a fee to the new borrower. 3 The lender may require the new borrower to meet qualification standards. 4 The seller's credit score may improve although he's not making any mortgage payments.
4 The seller's credit score may improve although he's not making any mortgage payments. A seller's credit score may improve in a sale subject to the existing mortgage lien, not an assumption.
Which of the following is a reason for a tenant remedy to be applied? 1 The tenant had a party, and a window got broken. After two days, the window was still not fixed. 2 The tenant hadn't informed the landlord about the issue. 3 The tenant had the issue repaired without telling the landlord and deducted the cost of repair from the next month's rent. 4 The tenant informed the landlord of the problem, and it's still not fixed more than 30 days later.
4 The tenant informed the landlord of the problem, and it's still not fixed more than 30 days later. The Uniform Residential Landlord Tenant Act provides for tenants to remedy the situation only after first notifying the landlord in writing and allowing reasonable time for the landlord to correct the issue.