Finance Practice exam 1 & 2

$2,333.33

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?

$3,593.75 $750,000 x .0575 = $43,125 $43,125 ÷ 12 = $3,593.75

A buyer has a 30-year, $750,000 loan with a 5.75% interest rate. How much of the monthly payment is interest?

The Farm Credit System

A government-sponsored enterprise that works through a cooperative system to provide agricultural and rural loans.

Deposit it into a business account separate from his personal account

Amos is a new licensee who has just earned his first commission check. What should he do with it?

XYZ Lending will receive $145,000, the HELOC lender will receive $5,000, and the lien holder for his student loan will not be repaid.

Brandon's home has been foreclosed on. He had an outstanding loan balance of $145,000, which he owed to his lender, XYZ Lending. There's also a lien against the property recorded in 2014 for an unpaid student loan of $25,000, and a HELOC established in 2012 of $30,000, of which he'd used $10,000. If his foreclosure nets $150,000, how much will each creditor be paid?

FHA loan limits in Fresno County are lower than they are in Monterey County.

Carmen purchased a single-family residence in Monterey County for $480,000 using an FHA loan. At the same time, Yancy made an offer on a single-family residence not far away in Fresno County for $300,000, and was told he could not use an FHA loan for the purchase. Why?

Construction

Edward is an economic analyst. In his work, he keeps a particularly close eye on this industry, because action or inaction here is a leading indicator of the country's overall economy. Which industry is this?

Creates a secondary market

Farmer Mac is a program that ____________ for agricultural property loans, rural utility loans, and certain loans guaranteed by the U. S. Department of Agriculture.

20 days

In a judicial foreclosure, if a deficiency judgment will be sought, how soon after the Notice of Levy is recorded can the Notice of Sale be issued?

Partnership between mortgagees and mortgagors

In which type of partnership is the lender a partner as well as the financier?

The loan will go against their debt load.

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?

Credit report

Kelly is reviewing Steve's loan application. She wants to verify that he has a solid history of paying obligations on time. What should she request to do this?

Participation

Life insurance companies sometimes like to insure their investment in commercial projects by insisting on an equity position. This is known as ___________ financing.

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

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

It must have been received regularly over the last three years.

Normal wages are considered when a lender is evaluating an applicant's income. Which of the following must be true for overtime pay to be considered?

The Exculpatory clause

Protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.

Non-bank lenders

The Dodd-Frank Act created the CFPB in part to regulate ______, which were among the largest originators of subprime mortgages prior to the financial crisis of 2007‒2008.

The cost of the modification is within limits based on the value of the home

The FHA Energy Efficient Mortgage allows modifications such as solar panels as long as ______.

By charging borrowers a mortgage insurance premium

The Federal Housing Administration funds its mortgage insurance program ______.

May 15, 2015 (the date for lien priority is the day the contractor had began work)

The Morris family home went into foreclosure December 15, 2016, and sold January 1, 2017. Their contractor had begun work on May 15, 2015, and was not paid, and finally filed a mechanic's lien on October 1, 2016. What date will be used for lien priority for the mechanic's lien?

Equal Credit Opportunity Act

The ______ was created in response to the practice of redlining.

Buyer's market

The supply of properties available in the market is greater than the number of buyers

U.S. Department of Agriculture loan through the Farm Service Agency

To be eligible for an ___________________ ,an applicant must have participated in farm or ranch management for at least three years.

$14,000

Under current tax law, what's the maximum tax-free gift an individual can give to another individual annually?

SAFE Act

Under the ______________ , every mortgage loan originator must be fully licensed and carry a mortgage surety bond.

A Life insurance company

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

Interest Rate Reduction Refinance

Veterans using the ______ program aren't required to submit a COE, get a new appraisal, or verify income.

Request a novation

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?

Loans the Federal Home Loan Bank makes to member banks

What are advances?

Liens are paid based on date of filing.

What does the concept "first in time" refer to when discussing lien priority?

Verify it

What must a prudent lender do with the information received on a loan application?

Variable or fixed

What type of interest rate might a HELOC have?

Rolling over funds from one IRA into another

What type of investment strategy is most similar to a 1031 tax-deferred exchange?

Falsely inflated appraisal

What's the most common indicator of illegal property flipping?

Late charge provision

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

Recasting

What's the term for a loan modification in which the outstanding loan balance is reconfigured?

When a borrower has missed payments but still has some financial security

When is a loan modification considered?

The state

When the Torrens system is used to perform a title search, who acts as title guarantor in case a claim is filed?

The buyer has the advantage.

When there are more properties than there are buyers...

Assets exceed liabilities

Which of the following net worth examples may a lender view most favorably?

2%

Which of the following percentages is an allowable loan origination fee?

Receipts for parking fees when visiting a client's condo

Which of the following should be retained for tax purposes?

Involuntary liens

unpaid property taxes

junior lien on the property.

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

The Buyer

A lender requires a title search to finance a transaction. Who pays for this search?

Deficiency judgement

A lender was not able to recover all of the losses incurred during the foreclosure process. What could it pursue to recoup these losses?

Non-conforming

Conventional loans that are outside Fannie Mae or Freddie Mac guidelines are said to be ______.

Buy and hold

Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing?

Lock box fee

Melissa is a new licensee. Which of these items will be among the expenses she will incur as she begins her business?

Lenders don't like contract for deed arrangements.

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

Buy and hold

Shelly's real estate investment strategy is to look for smaller multi-family properties, fix them up, and rent them out. Her investment strategy most closely matches which of the following?

non-recourse mortgage.

Siobhan has a mortgage with a clause that prohibits her lender from suing her for unpaid amounts if foreclosure occurs. This is called a

Prepayment

The _________________ clause allows the borrower to prepay principal on the loan at any time without penalty.

Value will be pushed downward. (Value = supply) More sellers than buyers = low demand = downward pressure on value. More buyers = value will be pushed upward

There are a lot more sellers than buyers in the current market. How will this demand influence value?

Seller's market

When there is more demand in the market than the number of available properties.

Consumer Financial Protection Bureau

Which agency sets the guidelines for qualified mortgages?

Chain of title

Which document is used to establish the path and proof of ownership?

A mortgage with a clause that prohibits the lender from suing the borrower for unpaid amounts if foreclosure occurs

Which of the following best describes a non-recourse mortgage?

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

Which of the following best describes an equity Real Estate Investment Trust?

It's a more conservative investment method than a fix and flip.

Which of the following describes a "buy and hold" investment strategy?

A Treasury security with a maturity term of one year or less

Which of the following describes a Treasury bill?

A Treasury security with a maturity term between two and 10 years

Which of the following describes a Treasury note?

Inability to immediately resell the property for a profit

Which of the following is a risk most associated with wholesaling as a real estate investment strategy?

Payment of closing costs may be negotiated.

Which of the following statements is true regarding closing costs on a VA loan?

Rental income

Which of the following taxes apply while an investor holds an investment property?

A toll fee for a business trip and/or a receipt from the purchase of a toaster

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

Increase and decrease

Historically, what do property values tend to do over short periods of time?

More than $50,000

Robert and Jill purchased a single-family home in the suburbs for $50,000 nearly 40 years ago. Considering historical property value fluctuations, what is the likely value of the property today?

Yes, Sissy can apply to have her entitlement restored and can buy a second house using a VA loan.

Sissy is a veteran who used her full entitlement to purchase a home. The loan has since been paid off, and Sissy still owns the home. Now, she'd like to buy a second home using another VA loan. Is Sissy allowed to do this?

They're insured or guaranteed by the government.

Which statement is true regarding government loans?

$399,672.12 If $2,333.33 of the $2,661.21 is interest, that leaves $327.88 for principal. Subtract $327.88 from $400,000 for a new principal balance of $399,672.12.

A buyer with a $400,000 loan has a monthly principal and interest payment of $2,661.21. If $2,333.33 is interest, what is the new principal balance after the first payment is applied?

Loan being applied for

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

Closing costs aren't considered a seller concession.

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?

Mortgage

Financing for a real estate transaction can use a note with a ___________________ or a note with a deed of trust.

Guaranteed loans

Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. He's able to do this in part because of the ______ offered by the USDA Farm Service Agency.

Either insured or guaranteed by the government.

Government loans are most often

Through a funding fee charged to most borrowers

How does the VA fund the mortgage guarantee program so that lenders can be reimbursed for any losses from borrower default?

The buyer and seller both sign an assumption agreement.

How is a loan assumption documented?

Just over what you expect to owe

How much should you keep in your tax savings account in order to be prepared to pay your quarterly estimated tax?

Nationwide Mortgage Licensing System. (NMLS)

Hugh works as a loan officer at a bank. Because of the SAFE Act, he must be registered with the

A transfer between parent and child

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

Industrial development bond

Mortgage revenue bonds are a variety of what other type of bond?

Voluntary conveyance of deed

Rather than face foreclosure, Tony decides to cut his losses. He voluntarily conveys his property to his lender. What type of foreclosure alternative is this?

Limited partnership

Which of the following is a passive type of real estate investment?

Pre-approved credit

Which of the following is an example of an inquiry initiated by a creditor that may appear on a credit report?

Borrower has filed for bankruptcy

Which of the following situations would make a borrower ineligible for a loan modification?

The approach is only used in a handful of states.

Which of the following statements about the Torrens system is true?

It will decrease each year as the loan is paid down.

Which of the following statements is true about the annual MIP on an FHA mortgage?

No

Yancey purchased a home six months ago using a VA loan. Due to an inheritance, he is suddenly able to pay off his mortgage. Will he pay a pre-payment penalty?

SAFE Act

Zack and April are purchasing a home. They apply to three different lenders and review the loan estimates they receive. Each form includes a field identifying the National Mortgage Licensing System ID number for the lender. What is the act that requires this licensing identification to be available to consumers?

General contractors

Real estate professionals keep a multitude of other professionals busy during the buying and selling process. Which of these professionals or entities are most active outside of the buying and selling process?

Property lot size (if property lot size is not listed for the answers, then the second would be population size.

Which of the following is a piece of specific data an appraiser may gather?

Vacant lot

Which of the following is considered an ineligible property type for which a loan to purchase or refinance wouldn't be purchased by Fannie Mae?

Savings accounts

Which of the following items would be included in the M2 money measure?

Conventional

Which of the following loans may require compliance with Appraiser Independence Requirements?

Account statement

Which of the following may a lender request to verify an applicant's bank deposit information?

Homeowner and Equity Protection Act (HOEPA)

Which of the following specifies a requirement of pre-loan counseling for consumers?

The FHA may adjust the percentage used to calculate MIP on FHA loans.

Which of the following statements is true about the MIP on an FHA loan?

Homeowner and Equity Protection Act (HOEPA)

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

Mortgage broker

Which person or entity works with many different lenders to find the best loan for the customer?

Taking (eminent domain)

Which term describes the legal regulation of a property to the detriment of the owner, and must include reimbursement for the property owner?

Four-unit residence being purchased with a conventional loan

Which transaction must comply with Appraiser Independence Requirements?

Mortgage REIT

Which type of Real Estate Investment Trusts derives a portion of its income from interest dividends?

Lunch with your mom to discuss the sale of her town home

Which of the following is a legitimate business deduction that you, as a real estate licensee, could claim on your income tax return?

Limited Partnership

Which of the following is a passive type of real estate investment?