Real Estate Finance

A 30-unit income-producing property has a sales price of $9 million. Annual gross income is estimated at $750,000. What's the gross income multiplier? A. 10x B. 12x C. 14x D. 8x

B

A lender was not able to recover all of the losses incurred during the foreclosure process. What could it pursue to recoup these losses? A. Deed in lieu of foreclosure B. Deficiency judgment C. Non-judicial foreclosure D. Short sale

B

David purchased a house three years ago for $300,000. Considering historical property value fluctuations, what is the likely value of the property today? A. Exactly $300,000 B. It's difficult to tell. Historically, property values fluctuate up and down in the short term. C. Less than $300,000 D. More than $300,000

B

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? A. Melanie B. Stan C. The beneficiary D. The trustee

B

Cassie is helping her buyer client, Gus, prepare for closing. What should she encourage him to verify as soon as he receives the form? A. That her commission amount is accurate B. That his credit rating hasn't changed C. That the borrower and seller names, the property address, and the sales price are accurate and spelled correctly D. That the lender's logo is at the top of every page

C

Direct farm ownership loans from the ______ may be used to buy farmland, construct and repair buildings, and make farm improvements. A. American Agricultural Lending Service B. Farm Bureau Credit System C. USDA Farm Service Agency D. USDA Rural Development Program

C

How is a mortgage banker paid? A. Buying loans for investors and earning a commission B. Commissions from selling loans on the secondary market C. Fees from originating and servicing loans D. Flat fees for documenting loans

C

What's another term for back-end ratio? A. Housing ratio B. Loan-to-value ratio C. Payment ratio D. Total debt ratio

D

Lender Ron is running Sally's credit report. In which section of the credit report might Ron expect to find information regarding her loan that was paid off on time? A. The Accounts in Good Standing section B. The Inquiries section C. The Negative Items section D. The Personal Information section

A

Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing? A. Buy and hold B. Fix and flip C. Passive D. Wholesaling

A

Margo, a mother of three, is in the group most likely to become delinquent on their payments, with a credit score of _______. Margot's tried unsuccessfully to get approved for loans, but she was issued a credit card that included many extra fees and required deposits. A. 579 or lower B. 679 or lower C. 779 or lower D. 879 or lower

A

The FHA EEM program allows modifications such as solar panels as long as ______. A. The cost of the modification is within limits based on the value of the home B. The installation is done by an FHA-approved contractor C. The product is made in America D. The utility company that services the property allows the consumer to sell back energy

A

The interest rate on an FHA Section 251 loan is adjusted based on ______. A. Market indices approved by the FHA B. Ranges set by Congress C. The current loan-to-value ratio and loan term remaining D. The lender's discretion

A

Which of these would be considered a variable, essential expense? A. Ballet lessons B. Electric bill C. Mortgage D. Movie night

B

The percentage recommended for a licensee to allocate when building an emergency fund is ______. A. 15% B. 2% C. 25% D. The largest percentage possible after paying all essential expenses

D

Which of the following has a direct responsibility to pay the nation's bills? A. Congress B. The Federal Reserve C. The President D. U.S. Treasury

D

A VA loan program that allows a veteran to refinance at a lower rate and receive cash proceeds to fund other investments or purchases is ______. A. Cash Out Refinance B. IRRC C. Negative amortization conversion D. Senior disability refinance

A

Buyer Sally is hoping to buy the Sandersons' condo. During a title search, a cloud on the title is discovered. What might happen to the transaction? A. It will come to a halt until the cloud is cleared. B. It will proceed as usual. C. Sally will need to make a more significant down payment on the Sandersons' property. D. The Sandersons will insist that Sally find a new lender.

A

What type of value is of interest to taxing authorities? A. Assessed value B. Insured value C. Investment value D. Value in use

A

Which of the following approaches to value uses a capitalization rate? A. Cost approach B. Income approach C. Price approach D. Sales comparison approach

B

Which of these individuals will have a unique identification number in the Nationwide Mortgage Licensing System and Registry? A. An individual with a national real estate license B. A real estate broker licensed in California C. A real estate licensee with an MLO endorsement D. A salesperson licensed with the California Bureau of Real Estate

C

A lapse in property insurance coverage can result in borrower default because it leaves the lender ______ should something happen to damage the property. A. At fault B. Out of compliance C. Out of the loop D. Vulnerable

D

Celeste hopes to qualify for an FHA loan. She calculates her housing ratio as 31%, and her total debt obligation as 42%. Her credit score is 580. Does she qualify under FHA underwriting guidelines? A. No, she doesn't meet the credit score requirement for an FHA loan. B. No, she doesn't meet the housing ratio requirement for an FHA loan. C. No, she doesn't meet the total debt obligation requirement for an FHA loan. D. Yes

D

When shopping for health insurance, which of the following criteria can you likely discount as less important than the others? A. Coverage limits B. Deductibles C. Premiums D. Using the same carrier you had before

D

What's one reason a borrower may choose a piggyback (or split) loan? A. To avoid paying private mortgage insurance B. To give the lender a little extra commission C. To stay under the radar of the IRS D. To trick the system into a lower combined interest rate

A

When HUD pursues actions that are designed to reduce housing discrimination and help communities recover from disasters, which of its goals is it supporting? A. Build strong, resilient, and inclusive communities B. Meet the need for quality luxury homes C. Strengthen the housing market to prevent another economic collapse D. Utilize housing as a platform for improving health

A

Erica is a California real estate licensee with an MLO endorsement. Which of the following properties falls under the definition of 'dwelling' and would therefore allow her to act as an MLO in a transaction? A. A commercial office space B. A mobile home C. A piece of property that will be used for hunting D. A trailer used for vacations and camping

B

Jackie is 10 days late on her loan payment. Will her lender likely place her loan in default? A. No, she needs to be 15 days late to be in default. B. No, she needs to be 30 days late to be in default. C. Yes, but only if she's been late before within the last 12 months. D. Yes, even if this is her first time being late.

B

Lauren obtained a loan that's insured and that only required a down payment of 3.5%. Which of these is most likely the type of loan Lauren has? A. Conventional B. FHA C. Home equity line of credit D. VA

B

The ______ defines individuals who perform certain foreclosure-related activities for compensation for borrowers. A. California Foreclosure Reduction Act B. Mortgage Foreclosure Consultant Law C. Real Estate License Law D. SAFE Act

B

The ______ restricts refinancing when the new loan has no identifiable benefit to the borrower. A. California Department of Real Estate B. Covered Loan Law C. Federal lending regulations D. IRS

B

The construction of what type of structures is one of the largest indicators on the country's economy? A. Commercial space B. New homes C. Recreational properties D. Warehouses

B

Maurice always keeps twice what he'll need to pay his quarterly taxes in his tax savings account. This is ______. A. A great strategy B. An easy way to get audited C. Not the best use of his money D. Required by law

C

Private mortgage insurance protects the lender in case the borrower takes which of the following actions? A. Chooses to prepay B. Decides to sell C. Defaults on the loan D. Refinances

C

About 50% of the borrowers in Neighborhood One are Hispanic, while only 4% in Neighborhood Two are Hispanic. The median home price in both neighborhoods is the same. However, statistics show that there is a significantly greater percentage of minority and low-income borrows who were denied financing for loans on properties in Neighborhood Two and were offered lower rates to live in Neighborhood One. What act is intended to prevent this type of potentially discriminatory lending pattern? A. Community Credit Act B. Consumer Credit Protection Act C. Equal Credit Opportunity Act D. Home Mortgage Disclosure Act

D

Jackson holds a real estate broker license with an MLO endorsement. When he renews his MLO endorsement, what does he need to submit to the NMLS? A. Credit report B. Fingerprints C. National and state examination results D. Renewal fee

D

Which of the following best describes a non-recourse mortgage? A. A clause that exists in mortgages in every state B. A mortgage clause that allows the borrower to sue the lender if interest rates make their payments difficult C. A mortgage with a clause that allows the lender to sue the borrower for damages if foreclosure occurs D. A mortgage with a clause that prohibits the lender from suing the borrower for unpaid amounts if foreclosure occurs

D

Which of the following is a requirement to qualify for a VA loan? A. $10,000 in liquid assets B. Credit score of 620 or higher C. Homeowner education classes D. Sufficient income

D

Which of the following lending regulations apply to mortgage loans and settlement services? A. Consumer Mortgage Protection Act B. Homeowner and Equity Protection Act C. Honest Lending Education Act D. Real Estate Settlement Procedures Act

D

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? A. Buyer's agent B. Seller's agent C. Settlement agent D. Underwriter

D

Which of these financial tasks should be planned on a quarterly basis? A. Disburse funds from the income tax savings account B. File receipts from daily purchases C. Make a new estimate of annual income D. Pay monthly bills

A

What is TRID? A. Terminating and Reducing Inappropriate Disclosures B. TILA-RESPA Integrated Disclosures C. Timely and Rapid Integrity through Disclosures D. Truth In Disclosing

B

What is the name for a loan that creates a lien against property that already has been pledged as collateral? A. Additional loan B. Junior loan C. Step loan D. Sub loan

B

Which consumer inquiry has Zachary initiated that may appear on a credit report? A. Account monitoring B. Application for a loan C. Employer credit report D. Pre-approved credit offer

B

One of these actions is considered an MLO activity. Which one? A. Explaining the steps the consumer needs to take to obtain a loan offer B. Informing a consumer of the loan rates that are publicly available C. Presenting a revised loan offer to the consumer after they requested a lower rate D. Scheduling the loan closing

C

Though not a loan, buyers may be able to enlist the help of ______, who can give them a tax-free gift to help them with their purchase. A. Credit unions B. Employers C. Individuals, such as family members D. Local small businesses

C

What does it mean when a life insurance company uses participation financing? A. The life insurance company gives a discount on the loan if the borrower allows them to help with the project. B. The life insurance company participates by finding the borrower the best lender for their project. C. The life insurance company participates by taking partial ownership of the project in exchange for funding the loan. D. The life insurance company pays exactly 50% of the loan, and the borrower comes up with the other 50%.

C

Which statement most accurately describes the right of rescission? A. It's another term for squatting, in which a consumer unlawfully occupies a residence. B. It's the right of a consumer to take ownership of a property through the foreclosure process. C. The three-business-day period from the date a transaction is consummated or disclosures are delivered to the borrower, whichever is later, during which the borrower can cancel the loan D. The two-business-day period after a loan closes, during which the borrower can cancel the loan.

C

A refinance is always a ______. A. Loan increase B. Loan modification C. Loan reduction D. New loan

D

A veteran who has received a certificate of eligibility will qualify for a VA loan ______. A. One time only B. Provided there's money left in the funding program that year C. Under all circumstances D. With proof of sufficient credit and income

D

In which phase of the real estate market cycle would you expect to see property undervalued and a large supply of homes on the market? A. Expansion B. Oversupply C. Recession D. Recovery

D

In which type of partnership do participants have shared responsibility for a single mortgage? A. Limited liability partnership B. Partnership between mortgagees C. Partnership between mortgagees and mortgagors D. Partnership between mortgagors

D

Jennifer drives her car for business purposes as well as for personal errands. She records every mile she drives, regardless of the purpose. Is any of the mileage on the car eligible for a deduction on her income tax return? A.No, she can't take deductions because the car isn't used 100% for business. B. No, the IRS only allows deductions for business if it is a fleet car. C. Yes, all mileage is always deductible. D. Yes, but only the mileage driven for business purposes is eligible for a deduction and should be recorded.

D

Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA? A. 10% down payment B. 30-year fixed rate with no points C. A monthly payment of $900 D. Get a low 4.925% APR

D

Kara is a lender who is working with prospective buyer, Stan. What does Kara ask Sam to provide to show his work history and earning information? A. Account statement B. Credit card C. Loan application D. Paystub

D

Rick is required to file quarterly estimated taxes. Why might this be? A. He failed to file last year's taxes. B. He makes too much income. C. He's on IRS tax probation. D. He's self-employed.

D

Sandra retired from a career in the Navy and is ready to buy her first home, a small bungalow in a quiet neighborhood, for $169,900. Her military service gives her the benefit of Veterans Affairs (VA) loan. What's her required down payment? A. $0 B. $1,699 C. $2,548.50 D. $500

A

Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing." A. The borrower is allowed to prepay the loan without penalty. B. The borrower will be charged a late fee if the monthly payment isn't received on the proper date. C. The borrower will be charged a penalty if the loan is paid off early. D. The lender is allowed to determine the amount of each monthly payment that will go to principal rather than interest.

A

Which of the following items directly increases the supply of real estate properties on the market? A. Conversion of properties B. High employment wages C. Loan availability D. Low interest rates

A

Who or what entity directs the activities of credit unions? A. A board of directors B. A branch manager C. The head of the FDIC D. The NCUA chairperson

A

With which type of mortgage does the interest rate vary according to a specified index? A. Adjustable rate B. Balloon rate C. Fixed rate D. Straight term

A

Which of the following best describes an equity real estate investment trust? A. Gets its income from property rent or sale as well as mortgage interest, fees, and profits earned from buying and selling mortgages B. Invests in equity by owning income-producing property, such as malls, apartments, or office parks C. Makes mortgage loans and invests in mortgage-backed securities D. Owned exclusively by banks and insurance companies

B

Interest rates that are more than ______ over the current market rate are considered predatory lending. A. 12% B. 3% C. 5% D. 8%

C

Licensing by the California Residential Mortgage Lending Act allows a mortgage banker to ______. A. Assume residential mortgages on properties facing foreclosure B. List and sell residential real estate C. Make and service any federally related mortgage loan D. Make and service any mortgage loan that is not federally related

C

Kendra has applied for a mortgage from Best Bank. When is Best Bank required to provide Kendra with a Loan Estimate? A. 10 business days B. 24 hours C. Five business days D. Three business days

D

Seth is purchasing a vacant piece of land, on which he'll build a new single-family home for his growing family. His real estate agent, Dani, is authorized to assist him with the loan he uses to buy the property because Dani has her MLO endorsement and this is a ______ loan. A. Conforming B. Construction C. Nonconforming D. Residential mortgage

D

Sherman is required to file quarterly estimated taxes. Why might this be? A. He failed to pay last year's taxes. B. He makes too much income. C. He's on IRS tax probation. D. He's self-employed.

D

Store of value, medium of exchange, and what other factor define money? A. Depreciating asset B. Diminishing value C. Permanence D. Unit of value

D

The house payment Tim and Vickie are considering would give them a housing ratio of 34% and a total debt obligation of 40%. Their credit score is 640. What do they need to change to meet the underwriting requirements for an FHA loan? A. They need to improve their credit score. B. They need to reduce both their housing ratio and their total debt obligation. C. They need to reduce their overall debt. D. They should look for a home in a lower price range.

D

Travis made the final payment on his loan according to the loan terms. What must the note holder do to acknowledge that the debt has been repaid? A. Assign the note to Travis. B. Destroy the note. C. Endorse the note and return it to Travis. D. Sign the note, mark it "paid in full," and return it to Travis.

D

Which government program assists rural Americans by offering loans, grants, and loan guarantees for housing? A. Farm Credit Administration B. Farm Credit System C. Farmer Mac D. USDA Rural Development

D

Which of the following best describes a home equity line of credit? A. A loan in which the lender makes payments to the homeowner for a specified period of time and gains equivalent ownership B. A temporary (usually 90-day) loan that provides funds in addition to an existing loan until permanent financing can be obtained C. Funds received in one lump sum and frequently used for home renovations, to fund a college education, or for other major purchases D. Used as an open-end account similar to the revolving credit of a credit card from which borrowers can take advances, repay money, and even borrow money again

D

Who distributes the trust assets of a person who died? A. A court-appointed administrator B. An executor C. The nearest relative to the trust maker D. The successor trustee

D

Which agency sets the guidelines for qualified mortgages? A. The Consumer Financial Protection Bureau B. The Federal Home Loan Bank C. The Federal Housing Finance Agency D. The U.S. Congress

A

Which of the following is a cooperative? A. Fannie Mae B. FHLB C. Freddie Mac D. Ginnie Mae

B

Which of these items is a demand deposit? A. 401(k) retirement account B. Checking account C. Home equity line of credit D. Individual retirement account

B

Mark and Nancy purchased a municipal bond to help with the funding of a new school gymnasium. In exchange for their investment, what will they receive? A. A certificate of appreciation B. Five times their investment in return C. Interest D. Special benefits

C

What is a moratorium (or forbearance)? A. A lender forbids any modifications to a property. B. A lender makes a loan due immediately. C. A lender temporarily suspends a borrower's payments. D. A loan application is going through the approval process.

C

What type of property is Valerie appraising if she's using the sales comparison approach? A. A rental duplex B. A rental property C. A single-family residence built six years ago D. A theatre

C

What's another name for California's Foreclosure Reduction Act? A. Anti-foreclosure Bill of Rights B. CalRedeem C. Homeowner Bill of Rights D. Lender Foreclosure Regulations Act

C

Which of the following programs broke the normal 80/20 ratio rule usually required as a loan-to-value and offered favorable interest rates? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Home Affordable Modification Program (HAMP) C. Home Affordable Refinance Program (HARP) D. Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

C

Which of the following statements is true about buydowns with a VA loan? A. The seller isn't allowed to pay for a buydown. B. They aren't allowed. C. They're allowed only on fixed rate loans. D. They're limited to two discount points.

C

What is a potential cause for a decrease in local economy driven by the Fed? A. Consumers are closing accounts at local banks. B. Consumers are no longer using cash. C. Consumers are using more cash. D. The reserve percentage is increased by the Fed.

D

What is a wrap-around mortgage? A. One that involves more than one property B. One that involves personal property in addition to real property C. One that involves unqualified borrowers D. One that may involve seller financing

D

What is the benefit Ginny Mae investors have over those who invest in other MBSs? A. Returns are guaranteed to increase due to the payment scale. B. They collect lump-sum payments. C. They're able to charge interest. D. They're able to collect timely principal and interest payments.

D

What's the purpose of the Community Reinvestment Act? A. It requires financial institutions to maintain, report, and publicly disclose information about their mortgages. B. It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status. C. It requires that lenders disclose all credit terms in any advertisement that offers credit, allowing consumers to make informed comparisons. D. It requires that lenders invest in development and rehabilitation efforts that enable low- and moderate-income individuals and families to afford a home.

D

Everyone can benefit from following a personal financial plan. Why is this especially important for the independent contractor? A. Because a documented financial plan can replace paystubs when applying for credit B. Because income is not as reliable as it is for a regular employee C. Because independent contractors tend to be undisciplined D. Because it will make bankruptcy proceedings easier

B

Which type of partnership may involve several mortgagors financing a multi-family dwelling? A. Partnership among mortgagees B. Partnership among mortgagors C. Partnership between financiers D. Partnership between mortgagees and mortgagors

B

What's one reason a homeowner would want to refinance their mortgage? A. To change mortgage brokers B. To change the bank that owns their loan C. To get a lower interest rate D. To increase their equity

C

When a buyer uses an FHA loan, the down payment amount is calculated ______. A. According to the FHA requirements for LTV at the time of origination B. On the FHA median price for similar properties in the area C. On the greater of the sales price or the appraised value of the property D. On the lesser of the sales price or the appraised value of the property

D

Which HUD program is responsible for protecting individuals against discrimination in housing based membership in a protected class? A. Community Development Block Grant B. FHA C. Housing Anti-Discrimination Department D. Office of Fair Housing and Equal Opportunity

D

Which item would an appraiser find in the Improvements section of the Uniform Residential Appraisal Report? A. Property dimensions B. Utilities C. Whether the present use of the property is the highest and best use D. Year built

D

What is the purpose of the loan transfer disclosure? A. To notify the borrower how to obtain a cashier's check for closing B. To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments C. To notify the lender that the buyer is relying on borrowed funds D. To notify the seller that the buyer is relying on borrowed funds

B

Which of the following could be different from the amount on the initial Loan Estimate and can impact the monthly payment? A. Closing costs B. Interest rate C. Loan amount D. Prepayment penalty

B

Which of the following statements is true about usury laws in California? A. California's usury laws prohibit interest rates above 15%. B. In the case of usury, state law preempts federal law. C. Loans secured by real property and arranged for by a real estate broker are exempt from state usury laws. D. Usury laws apply only to residential mortgage loans.

C

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan? A. To create a loan-to-value ratio that's more acceptable to the lender B. To reduce the amount of the MIP paid on the loan C. To roll the cost of rehabilitating the purchased home into the mortgage D. To shorten the term of the mortgage loan

C

Which statement best describes a reverse annuity mortgage? A. Personal property is included with the real property in the sale. B. The borrower receives payment from the lender through regular monthly advance payments. C. The borrower receives payment in a lump sum at the end of the loan term. D. The seller carries a portion (or sometimes all) of the loan for the buyer.

B

In order for earnings from a second or part-time job to be considered as part of a lender's income evaluation, what must be true? A. The applicant must have been employed for at least one year, and the employment must be expected to continue. B. The applicant must have been employed for at least six months, and the employment must be expected to continue. C. The applicant must have been employed for at least three years, and the employment must be expected to continue. D. The applicant must have been employed for at least two years, and the employment must be expected to continue.

D

In a deed of trust, who is the trustee? A. A neutral third party B. The agent C. The borrower D. The lender

A

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? A. Her down payment of $50,000 isn't at least 20% of the purchase price. B. Her lender is a subprime lender. C. PMI is triggered at the $50,000 down payment amount. D. She has poor credit.

A