Real Estate Finance Final

If the appropriate present worth factor is .90909 and it is applied to an income stream of $35,000, the discounted value would be

$$31,818

The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is

$240,000

In a settlement procedure, prepaid interest is required for the time period from September 21 (date of closing) through September 30. What amount of prepaid interest is due for a loan of $200,000 at 5% interest? (Banker's year is 360 Days)

$277.78

What is that the maximum time that an approved FHA Appraisers appraisal report is valid on construction loans

120 Days

The Home Affordable Modification Program main provision is that the modified mortgage payment will not exceed _______ percent of their verified monthly gross (pre - tax) income

31

Which of the following is NOT an economic reason for pursuing a Green Building design? A. Energy savings of up to 50% B. 69% fewer CO2 emissions C. Worker productivity increases up to 15% D. Up to 40% reduction in water use

69% fewer CO2 emissions

A stabilized income property is one in which the building has a longer operating history and is usually has a _____% or higher occupancy and is for sale by its current owner for varying reasons.

85

The private mortgage insurance required by regulated depository financial institutions states that for residential mortgage loans with LTV's higher than _______%must have private insurance coverage.

90

Which of the following is a FALSE statement in regard to refinancing a home loan? A. Lenders are free to set their own requirements for refinancing a loan B. Income tax laws may affect the savings in refinancing C. A 2 percent reduction in interest rate is a profitable refinancing in every case D. A major problem is the appraised value of the property may be less than the balance due on the existing mortgage loan

A 2 percent reduction in interest rate is a profitable refinancing in every case

Which of the following is true of loans made on the Internet? A. They are always higher cost mortgage loans B. There is no opportunity for sham operators to take advantage of consumers C. A user must travel to find an Internet outlet D. A seeker of a loan can maintain limited anonymity while asking for information

A seeker of a loan can maintain limited anonymity while asking for information

Which of the following is a prohibited practice as defined by RESPA requirements? A. A listing broker splits the real estate commission with a selling broker B. A lender refuses to accept an insurance company for coverage even though requested by the borrower C. A seller requires the use of a specific title company as a condition of the sale D. A selling broker provides the buyer/borrower with assistance in obtaining a loan in return for a fee

A seller requires the use of a specific title company as a condition of the sale

An application for a commercial loan would include all of the following items EXCEPT: A. information on the applicant company and the individuals involved B. complete financial statements and property evaluation C. a statement of compliance with RESPA re quirements D. projection of income to show source of loan repayment

A statement of compliance with RESPA

Which of the following is NOT an acceptable procedure for proving title to land? A. An attorney's opinion based on research of an abstract B. An accurate survey made by a state - licensed surveyor C. Purchase of title insurance D. A Torrens registration system

An accurate survey made by a state - licensed surveyor

Which of the following statements regarding certification of apprais ers is correct? A. It is illegal to undertake an appraisal unless that person is properly certified B. Appraisers may be certified by each state as long as federal guidelines are adhered to C. Certified appraisers must be used for every loan whether or not the lender is federally related D. All appraisers with peer designations have been grandfathered into state certified status.

Appraisers may be certified by each state as long as federal guidelines are adhered to

In many parts of the country, contaminated areas are being removed from the Superfund program allowing clean- ups to be accomplished and the land returned to useful activity under which of the following programs? A. Restoration program B. Brownfields program C. ASTM's transaction screen D. Contamination release program

Brownfields program

Failure to properly carrying forward approved work - in - place on the Mortgagors Draw Requisition occurs in which of the following type of mortgage loan? A. Single Family Conforming Loan B. FHA REO Property Loan C. Deed for Contract Loan D. Construction Loan

Construction Loan

The principle of appraising that considers the amount of value that may be added by an improvement is

Contribution

Real estate settlement procedures for residential loans, including the required settlement statement, are regulated by the

Department of Housing and Urban Development

The Act that prohibits certain types of discrimination in the granting of credit is the

Equal Credit Opportunity Act

The $8.5 Billion Superfund was created for the purpose of relieving landowners from liability in cleaning up toxic waste sites. True False

FALSE

Which FHA software technology allows a approved FHA seller/servicer to find a FHA approved appraiser?

FHA Connection

Multifamily housing must comply with a 1988 amendment to Fair Housing Act that adds which of the following to the prohibition against discrimination? A. Pets and other personality B. Elderly persons C. Citizenship and employment D. Familial status and handicapped

Familial status and handicapped

. Which of the following is not one of the more common risks of investing in commercial real estate contemplated by the mortgagee and mortgagor? A. Financial risk B. Liquidity risk C. Regulatory risk D. Management risk

Financial risk

The kind of depreciation most closely associated with inadequate building design is

Functional obsolescence

While the Securities and Exchange Commission does not directly regulate real estate sales, it can become involved under which of the following circumstances?

If paper is sold for development without a specific commitment for conveyance of property

Which of the following statements is FALSE in regard to asbestos in a building? A. Ingestion of microscopic fibers can cause asbestosis, a noncancerous disease B. The real danger lies in loose, or "soft," asbestos not that occurring in hard form C. In all cases where asbestos is found, the EPA recommends immediate removal D. The EPA will accept an in - place management program rather than require removal of all asbestos

In all cases where asbestos is found, the EPA recommends immediate removal

Which of the following is true about credit scoring? A. It is a new method of credit analysis B. It is a number compiled from credit records that show a person's creditworthiness C. It has no variation and can be the sole criteria for creditworthiness D. It is used only for analysis of car loan

It is a number compiled from credit records that show a person's creditworthiness

Which of the following is correct in regard to an owner's title insurance policy? A. It is transferable to a new property owner B. The policy terminates when the mortgage loan is paid off C. The policy terminates when the property is transferred to a new owner D. It protects the policy holder against adverse claims even beyond the term of property ownership

It protects the policy holder against adverse claims even beyond the term of property ownership

LEED stands for: A. Land Environmental Enforcement Department B. Local Energy Environment Disturbance Division C. Leadership in Energy & Environmental Design D. Lead Elements Encroachment Detection

Leadership in Energy & Environmental Design

Which of the following types of legal description is most commonly found in urba n areas? A. Geodetic or government survey B. Metes and Bounds C. General Survey D. Lot and Block

Lot and Block

Restating financial information on standard form accomplishes which of the following A. Adds billable hours to an accountant's fee B. Increases the amount of information that can be filed C. Makes comparisons easier and shows up missing information D. Makes a good impression on clients

Makes comparisons easier and shows up missing information

The variance 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan if the Good Faith Estimate turns out to be off by more than the variance percentages established by which of the foll owing new legislative actions? A. Mortgage Disclosure Improvement Act of 2008 B. American Recovery and Reinvestment Act of 2009 C. The Frank - Dodd Act of 2011 D. The Community Reinvestment Act

Mortgage Disclosure Improvement Act of 2008

After initial closing deposits have been made, RESPA limits the continuing escrow or reserve account cushion held by lenders on residential loans to which of the following? A. Not more than is reasonable and customary B. Not more than one sixth of the annual recurring charges C. Not more than one twelfth of the annual recurring charges D. No restrictions apply after the initial deposits have been made

Not more than one sixth of the annual recurring charges

The financial statement most commonly used in preliminary examination of real property investment that show some detail on income and operating expenses is the

Operating Statement

Unlike the permanent loan, a construction loan usually requires the endorsement of the

Owner/Builder

A Condominium type of unit is more popular than a cooperative apartment unit because

Ownership rights in a condo permit resale without approval of others

All of the following charges involved with the settlement of a residential mortgage loan must be paid at time of closing EXCEPT: A. Prepaid principal B. Property taxes C. Hazard insurance premium D. Prepaid interest

Prepaid principal

The underlying theories that support evaluation of a property are called:

Principles of appraisal

The Truth - in- Lending Act allows certain transactions to be rescinded by consumers; Transactions exempt from this right of rescission include which of the following residential mortgage transactions?

Purchase Money Mortgage

Which of the following is NOT a lo an classification with Freddie Mac's "Loan Prospector"? A. Rejected B. Accepted C. Refer D. Caution

Rejected

The sales comparison approach to value is most widely used for which type of property.

Residential Property

A home builder may offer the home buyer a lower - than - market interest rate because of purchasing a loan commitment A. True B. False

TRUE

Which of the following is true of percentage leases? A. It is the dominant method to lease warehouse space B. The percentage charged varies with type of business C. Shopping centers have a standard percentage rate which is the same for all tenants D. All percentage leases allow for an annual change in the percentage charged

The percentage charged varies with type of business

A "net lease" means which of the following? A. The tenant pays a net rent after deducting certain listed operating expenses B. The tenant pays ren t based only on the net interior space under lease C. The tenant pays for all of its own services D. The tenant pays all maintenance and building operating expenses plus insurance and taxes on the building

The tenant pays all maintenance and building operating expenses plus insurance and taxes on the building

Mortgage loan origination software must increasingly be compatible with:

Third party originator web portals

The VA residual qualification method determines an applicant's residual income, then measures that against the applicant's

VA calculated cost of living

Lead poisoning can result from inhalation an/or ingestion of lead from all the following sources EXCEPT: A. Emissions from internal combustion engines B. Water passing through plastic pipes C. Powdering or blistering paint in place prior to 1978 D. Household dust and soil around a house

Water passing through plastic pipes

RESPA requires disclosure of estimated closing costs for residential loans at which of the following times? A. Any time prior to actual closing B. Within three days of loan application C. Only if requested by the borrower D. Within three days of loan application and again one day prior to closing if the borrower request it

Within three days of loan application and again one day prior to closing if the borrower request it

A construction loan can include all of the following conditions EXCEPT: A. disbursement only after certain construction has been completed B. a release of that portion of the collateral on which disbursement of funds has been made C. a method of assuring the lender that money disbursed to a borrower/builder is used to pay a project's bills D. a requirement for periodic inspection to assure the lender that all plans and specifications are being met

a release of that portion of the collateral on which disbursement of funds has been made

Freddie Mac offers an "expedited" collateral assessment which means

a short appraisal at lender's option which may be completed within two hours

An application for a commercial loan would include all the following items EXCEPT: A. information on the applicant company and the individuals involved B. complete Financial statements and property evaluation C. a statement of compliance with R ESPA requirements D. projection of income to show source of loan repayment

a statement of compliance with RESPA requirements

The least amount of management is needed for operating:

a warehouse

In the financing of special purpose buildings, if a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to

agree to endorse the note

All of the following are true of maximum and minimum limits for conventional loans EXCEPT: A. Fannie Mae/Freddie Mace set new limits each year for their conventional/conforming loans B. if a prospective loan exceeds an institution's in - house limit, other lenders may join in a participation loan C. setting minimum limits for loan amounts is a possible violation of the Fair Housing Act D. all states set limits on the maximum amount for residential loans within the state

all states set limits on the maximum amount for residential loans within the state

An automated underwriting system is one that:

allows a computer with proper software to analyze a loan application and grant approval if justified

Speculative financing of a construction loan for houses usually requires the borrower to arrange:

an acceptable take-out commitment

The normal method to reach a final estimate of value in a narrative appraisal is

an adjusted average of the approaches to value a s determined by the judgment of the appraiser.

The advantage of a web site offering mortgage loans is:

an individual can obtain a mortgage loan without paying for or dealing with an agent or loan officer

When seeking funding which of the following is not one kinds of information that a religious institution facilities lender might feel was key? A. Minimum of three years average adult worship attendance. B. Annual contributions from each of the largest 15 donors for the previous year (the names of the donors are not usua lly required). C. Annual salaries/income of ministerial staff D. Cash on hand in building fund

annual salaries /income of ministerial staff

Fannie Mae offers two automated underwriting programs, one called " Desktop Originator" that is for use:

by an agent taking information on a laptop computer for transmittal to a seller/servicer who verifies and transmits the information to Fannie Mae

The top designation for a accountant preparing a financial statement is

certified public accountant

While they require very specialized information farm loans are based on the same three legs as all mortgage loans, which are

creditworthy borrower, adequate collateral, income sufficient to repay the loan

A release clause in a real estate development loan agreement is one that

defines the conditions under which lots can be released from the mortgage for resale to builders

The purpose of a Phase I Assessment as defined by CERCLA is to

determine if any prior use of the property would indicate the presence of environmental contamination

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was enacted to make it more ___

difficult for well off borrowers to file for Chapter 7 by having to go through a means test

The percentage ratios used as guidelines in the qualification of an applicant's income by HUD/FHA are based on the applicant's

effective income not reduced by taxes

. Insurance companies no longer write any kind of environmental risk coverage. A. True B. False

false

A study that projects the potential success or failure of a proposed project is c alled:

feasibility study

Even though greatly diminished in market share subprime loans offer all of the following EXCEPT A. a higher profit margin if carefully made B. a market that has been shunned before high tech analysis allowed better selection for carefully documented loans C. greater depth of loan analysis has eliminated all risks D. an expansion of the loan market beyond higher quality "A" rated borrowers

greater depth of loan analysis has eliminated all risks

Determining for sure whether or not a particular land area falls under the definition of wetlands must be made by:

inspection and determination by the U.S. Corps of Engineers

In so far as real estate transaction are concerned, all of the following are true about environmental issues EXCEPT A. most commercial transactions require an environmental site assessment before an agreement can be reached B. almost all commercial lenders require a site assessment before committing to a loan C. it is illegal to convey property that harbors hazardous materials. D. usage of the land may be restricted if certain environmental conditions are present

it is illegal to convey property that harbors hazardous materials

the major difficulty in obtaining a raw land purchase loan is

it produces no income while expenses like taxes and insurance continue

Regulation implementing the Endangered Species Act Define a "taking" as:

killing an endangered species and/or damaging or destroying its habitat

A mortgagee's title policy protects which of the following against an adverse claim of title?

lender

In closing a real estate transaction, instructions on how the proceeds of a loan are to be disbursed are issued by the

lender

Which of the following best describes the purpose of a loan agreement as part of a corporate business loan? A. It details the terms of loan repayment B. Lender approval is needed for the company to undertake an expenditure that might jeopardized loan repayment C. To limit all corporate expenditures during term of the loan D. To provide additional collateral to secure the loan

lender approval is needed for the company to undertake an expenditure that might jeopardize loan repayment

To create a land syndicate, the most common form of business organization used is the

limited partnership

The best explanation of computerized loan origination is: A. a loan application can be analyzed by computer and approved if justified B. information on a loan application can be stored for future use C. loan information can be transmitted via computer to an underwriter for analysis D. the computer lists all information required for loan analysis

loan information can be transmitted via computer to an underwriter for analysis

an ownership interest of one percent or more between parties involved with a CLO operation is called a "controlled business arrangement" and must be

loan information can be transmitted via computer to an underwriter for analysis

In analysis of a property's income and expense, the calculation of each item as a percentage of the gross operating income helps an analyst to:

more accurately compare income and costs with those of other similar properties

Which of the following conditions would allow a lender to ask questions about income received from child support? A. The lender suspects that all income has not been properly reported B. The children eligible for the support will be living in the home to be acquired C. The property to be acquired is located in a community pro perty state D. The child support income is offered as a part of the money that will be used to repay the loan

only if the child support money is offered as a part of the money that will be used to repay the loan

One of the better ways to assure success with a high rise office building investment is to:

prelease as much space as possible, preferably to a major tenant

The primary purpose of the Truth - in - Lending Act is to

provide meaningful information to borrowers on the cost of consumer credit

The Federal Credit Reporting Acts primary provisions are to

provide satisfactory procedures to ensure the confidentiality and accuracy of consumer credit information

The underlying purpose of RESPA requirements is to:

require disclosures that give a buyer/ borrower sufficient information to make informed decisions

The important reason that shopping center land loads encourage promotions of their tenant's sales is that

shopping center leases are usually based on a percentage of the tenant's sales

The assistance given by a credit report to borrower qualification is primarily to

show the applicant's payment record to creditors

The private mortgage insurance carrier and the amount of insurance coverage required are determined by the:

the Mortgagee

One of the better criteria used to determine an applicant's stability of income is

the length of time on the job

the source of repayment of a home loan is expected to come from

the personal income of the borrower

The loan to value ratio is a measure used by lenders for all the following purposes EXCEPT: A. to determine acceptability of the property as loan collateral B. as a basis for pricing the loan C. to determine the need for private mortgage insurance D. to protect against exceeding legal loan limits

to determine acceptability of the property as loan collateral

Depreciation allowed for tax purposes is a percentage of the:

total value of the building

In a non - judicial foreclosure, the power of sale clause in a mortgage grants the right to take the action to the:

trustee

If a builder holds an unsubordinated leasehold interest in land, it means that a building constructed on the land

would pass to the landowner if the land rent is not paid