Finance Mid-Term
What is the formula for calculating the total housing ratio?
(Monthly housing expenses ÷ gross monthly income) × 100
Which percentage reflects the top debt-to-income ratio limit for qualified mortgages?
43%
Recently retired Admiral Bongo and his wife, Lucy, contact you. They want you to help them purchase their dream house now that he's retired, but one that has the necessary accommodations for the admiral's disability. They also confide in you that they don't have a lot of money saved up for a down payment. Which type of financing may work best for them?
A VA loan, which requires no down payment.
Who or what entity directs the activities of credit unions?
A board of directors
Client Bette asked licensee Frank about a home equity line of credit versus home equity loan. Which of the following offers an brief overview of what a home equity line of credit is?
A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest.
What type of professional must an investor use to conduct a tax-deferred exchange?
A qualified intermediary
Which of the following sources can provide real estate professionals with important market data?
Banking, bond, and investment analysts
Which of the following situations would make a borrower ineligible for a loan modification?
Borrower has filed for bankruptcy
Mario lives in a state that requires an abstract of title for property conveyance. The chain of title is broken approximately 50 years prior to the current date. Which of these properly identifies the status of Mario's title?
Depending on his state's laws, Mario may have marketable title.
John uses the VA home loan to purchase property. His mortgage is $200,000. Then, two years later, John defaults on his loan. How much will the VA reimburse the lender?
$50,000
Which of the following is a potential ramification to the seller if a short sale is completed?
A short sale can negatively impact the seller's credit, and the lender may seek a deficiency judgment for the amount not repaid.
As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.
Blanket lien
In which U.S. market(s) do foreign lenders participate?
Both the primary and secondary mortgage markets
A lender requires a title search to finance a transaction. Who pays for this search?
Buyer
Which party pays for the appraisal in a financed real estate transaction?
Buyer
The supply of properties available in the market is greater than the number of buyers. What type of market does this describe?
Buyer's market
A local company wants to build a new office building. What type of loan will it most likely be seeking from its commercial bank?
Construction loan
The three types of finance instruments that can be used when financing a real estate purchase are the note with mortgage, note with deed of trust, and ______.
Contract for deed
Freddie Mac targets which type of loans to purchase?
Conventional
River City Bank needs to cut back on lending. For several months, the bank has seen more withdrawals from customers than deposits. This has led to a decrease in deposits typically used for lending. What term can be used to describe what the bank has experienced?
Disintermediation
What type of lien is placed on a property as a result of a court order?
Equitable
Which process temporarily stalls foreclosure?
Filing for Chapter 7 bankruptcy
Kobi, an appraiser, is appraising a single-family home used for a rental. If he wants to use the income approach, which of the following will come into play?
GRM
A loan made based on the amount of equity available in an person's home or property is called a ______.
Home equity loan
Which of the following best describes the state of the market during the expansion phase of the real estate cycle?
Increases in hiring, employment, and public confidence, and lots of buyers in the market
Which of the following 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 places a lien on his property. How is this lien classified?
Involuntary, specific
During which phase of the real estate cycle do residents engage with local amenities and services?
Living
Which of the following entities commonly acts in the primary market?
Local credit union
Babs is buying Kirk's property. Babs needs help with the down payment, and Kirk offers to supplement Babs' bank loan with a second loan, allowing her to meet her lender's down payment requirements. Which finance instrument(s) may be used for the agreement between Babs and Kirk?
Mortgage or deed of trust
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
What's the term for a group of loans packaged together and then sold to investors on the secondary market?
Mortgage-backed security
Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs.
Native Americans living on tribal land
Life insurance companies sometimes like to insure their investment in commercial projects by insisting on an equity position. This is known as ______ financing.
Participation
During which phase of the real estate cycle is local government most directly involved?
Planning
In which phase of the real estate market would you expect to see unemployment increasing, prices falling, and foreclosures on the rise?
Recession
Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?
Reconveyance
What step of the real estate cycle generally follows recession?
Recovery
The characteristics of value include which of the following?
Scarcity
Institutions that purchase loans, package them into mortgage-backed securities, then sell these to investors may commonly be referred to as ______.
Secondary market players
______ sets conforming loan limits for mortgages.
The Federal Home Financing Agency
Under RESPA, a rebate of a licensee's commission may be offered to a transaction party, provided which of the following is true?
The rebate is not required for referral of business.
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.
The ______ requires specific disclosures and was enacted in 1968 as part of the Consumer Credit Protection Act.
Truth in Lending Act
What does TILA stand for?
Truth in Lending Act
Which party to the loan approval process evaluates the loan application, the supporting documentation and data, and the property appraisal in order to make an approval recommendation?
Underwriter
How long does a homeowner have to pay off outstanding liens against his property?
Until the foreclosure sale is held
Mutual savings banks were created to serve ______ during the mid-19th century.
Workers
Which of these items is a liability on a residential loan application?
Child support
While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.
Only total debt-to-income
What are the types of institutions that issue loans directly to consumers commonly called?
Primary market players
Which of the following best describes a seller's market?
Demand is greater than supply
What's the definition of a qualified mortgage?
One that meets stringent CFPB guidelines
Which of the following resources are extremely helpful when working with investors?
REIT analysts and bond rating agencies
Kaycie is a new employee at a mutual savings bank. During orientation, she learned that mutual savings banks have limitations that are set by their ______.
Charter
Georgette and Elise are buying a home together, and have taken out a loan with a private loan company. They'll pay a bit more interest, and larger fees, but they feel it's worth it to have the home they've always dreamed of. What else might the private loan company require?
Collateral
When obtaining a mortgage to purchase a home, for what does the borrower use the property?
Collateral
The U.S. ______ is the federal agency with the mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Department of Housing and Urban Development
What information does the appraiser complete for the section used for the income approach?
Gross rent multiplier
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.
Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ______.
Roll the funding fee into the loan
You may see a ______ named as a land contract, real estate contract, contract for sale, agreement for deed, or as articles of agreement.
Contract for deed
Who holds the promissory note while it's being repaid?
Payee
Which of the following features is shared by the mortgage and the deed of trust?
The borrower is required to maintain the property and pay property taxes and insurance.
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.
Which governmental legislation established the Consumer Financial Protection Bureau?
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
Which of these items is a demand deposit?
checking account
Which of the following statements related to 1031 tax-deferred exchanges is true?
Foreign investors may participate.
Which of these transactions must comply with Appraiser Independence Requirements?
Four-unit residence being purchased with a conventional loan
Which of the following is true about the Federal Housing Administration's qualifying standards for a mortgage loan?
Are somewhat less stringent than standards for conventional loans
Which of the following best 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.
In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market?
Low interest rates and high property values
Which of the following is the best example of the economic principal of leveraging, as it applies to a real estate transaction?
Making a down payment
FHA-insured loan programs cover all of the following EXCEPT ______.
Recreational vehicles
The intent of the Consumer Credit Protection Act, which includes the Truth in Lending Act, is to safeguard the consumer by ______.
Requiring full disclosure of the terms and conditions in any offers of credit
When interest rates increase, what is the impact on mortgage-backed security investors?
Returns on investments increase.
Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?
$80,000 = 1/4 of total
In which of the following situations is a lender prohibited from enforcing an alienation clause?
A transfer between parent and child
Esmerelda makes regular monthly payments on her loan. In addition to paying interest, she's slowly paying down the principal of the loan. With each payment she makes, more will go towards the principal and less to interest. What type of loan does she have?
Amortized
Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?
Bill
Matt owns Pic Bar Ranch and is looking to purchase the adjacent ranch. When he talked to his local lender, the lender offered Matt a loan that will likely be backed by _____.
Farmer Mac
Tonia is buying a new home. She has a down payment of $30,000 and will obtain a $250,000 mortgage from a local bank to make up the remainder of the purchase price. What is this an example of?
Leveraging
When consumers make a small down payment, borrow the remaining amount of the purchase price from a lender, and reap the rewards off of the full investment value, they are demonstrating what concept?
Leveraging
Which of the following is a requirement for veterans who wish to use the Native American Direct Loan?
Meet the same eligibility criteria as for the VA-guaranteed loan program
Iris is planning to purchase her first home. Based on what you know about the nature of real estate finance in our country, which approach is she most likely to use?
Obtaining a loan to purchase the home
In order for the spousal support Kayla receives to be considered in the lender's income evaluation when Kayla applies for a home loan, what must be true?
Payments must have been received for at least one year, and must be expected to continue for at least three more years.
Which of the following can a lender do if a borrower fails to keep homeowner's insurance on the collateral property?
Place lender-acquired insurance on the property and bill the borrower
Which generation financed their homes due to also having other debt obligations?
Millenials