Texas Real Estate Finance (Edited by me)

The Consumer Financial Protection Bureau (CFPB) has launched a program called?

"know before you buy"

Suppose a home owner purchased a three year hazard insurance policy for $2,000. Based upon a banker's year, what is the daily rate for the policy?

$1.85/per day (360 days/2000)

Suppose a lender foreclosure on a property worth $95,000. She bids her total losses $110,000 and receives the property at auction. If the loan was guaranteed by the VA, and the borrower's entitlement was $36,000, how much will the lender receive from the VA?

$15,000 the difference between the property's appraisal value and the lender's losses.

The buyer of a $450,000 residential property obtains 80% loan. The seller, who must pay off the $247,000 remaining on his mortgage, agrees to pay the total 7% commission to the tow real estate firms involved. ABC Realty will receive 4% commission and XYS Realty will receive 3% commission. What is the dollar amount each real estate firm will receive from the sale?

$18,000 to ABC Realty; and $13,500 to XYZ Realty - Use the 450k number -.04x450k is 18k and .03 of 450k is 13.5k

Suppose the borrower wants to qualify for a conforming loan (total debt service ratio 36%) with a monthly PITI payment of $600. She has $300 in other long term obligations. What is the minimum gross monthly income she must make in order to qualify for this loan?

$2,500. (PITI + Long term obligations)/Income = Debt service ratio

If an owner has $225,000 tax appraisal on his property and has a $15,000 homestead exemption and a $10,000 disability exemption he will pay taxes on?

$200,000 (225-25)

Suppose that a borrower has a gross monthly income of $3000 and wants to qualify for a conforming loan (total debt service ratio of 36%) with a monthly PITI payment of $800. What is the minimum amount of additional long-term obligations this borrower may have?

$280 (PITI + Long term obligations)/Monthly income = Debt Service ratio

A borrower wishes to take out an FHA insured loan for a home that has a sales price of $100,000. What is the minimum cash investment (down payment) that the borrower must have in the property?

$3,500 (3.5%)

What is the 2015 conforming loan limit set by Fannie Mae and Freddie Mac for a single family home in Texas?

$417,000

What is the daily penalty for failure to follow the regulations of the CFPB (Consumer Financial Protection Bureau)

$5,000.00

What is the formula for determining a borrower's total debt service ratio?

(PITI + Long Term Liabilities)/ Gross Monthly Income -PITI (Principle, interest, taxes, insurance)

What is one discount point?

1 percent of the loan amount

FHA insured loans, what is the origination fee limit?

1%

When was the FHA created?

1934

What is the minimum down payment that allows a borrower to avoid buying mortgage insurance premium (MIP)?

20%

Suppose a borrower has a monthly PITI payment of $650 and other long term liabilities totaling $250 per month. If she makes $3,300 a month, what is her total debt service ratio?

27% (PITI + Longer term)/Monthly income (650+250)/3300 = .27

A banker's year, during a leap year, contains how many days?

360

What is a moratorium?

A period during which a lender allows a borrower in financial difficulty to not make principal and/or interest payments.

In addition to a $10,000 senior citizen tax deduction in Texas, the school taxes become?

A tax ceiling, cannot raise

What type of report contains the previous title holders, how the current owner obtained the title, and the location of title records used in the report?

A title search

What is a "float to fixed" loan?

A type of loan that allows borrowers to take advantage of lower rates initially and avoid the risk of later rate increases. No fixed rate over life of instrument.

A transfer of title that is recorded in the public records is an example of?

Actual notice Constructive notice : A way of giving notice that may not immediately bring the matter to the attention of the individual that is intended to receive the notice. Constructive notice includes, among other methods, service on an agent or family member, service by posting (on the front door), and service by publication (as in a newspaper).

When a lender, in Texas, wants to foreclose on a property for default in payments, the first step is to send the borrower to notice that gives the borrower at least 30 days to cure the default. What must the notice include?

All of these things. The exact amount to pay, when the payment must be paid, and where to pay.

What entity assembles mortgages into pools and issues pass through certificates, multiclass bonds, or other securities to investors in the secondary mortgage market?

An REMIC (Real Estate Mortgage Investment Conduit) -Conduit is an agency or means of access, communication

Which of the following could cause real estate prices to fall?

An increase in interest rates.

How is a borrower's net worth calculated?

Assets minus liabilities

Which of the following mortgages is a common type of open end mortgage?

Balloon Mortgage

Which of the following terms describes a mortgage that has more than one property for collateral?

Blanket Mortgage

In Texas, which of the following is an executory contract?

Condominium Contract -An executory contract is a contract made by two parties in which the terms are set to be fulfilled at a later date. The contract stipulates that both sides still have duties to perform before it becomes fully executed. The contract is often in place between a debtor or borrower and another party

Conventional loans can be?

Conforming (Conform to guidelines by Freddie Mac and Fannie Mae) or Non conforming (These mortgages include both "jumbo loans" which exceed the loan limits imposed by government-backed agencies, niche products for unusual circumstances and riskier products that are much less common these days.)

The Dodd Frank Wall Street Reform Law created an independent agency to set and enforce clear, consistent rules for the financial market place. What is the name of the agency?

Consumer financial protection bureau (CFPB)

Convertible balloon mortgages are usually convertible to which type of mortgage?

Conventional fixed rate mortgaged.

To determine the value of a highly specialized building, like a museum, an appraiser would most likely use and heavily weight which of the following appraisal methods?

Cost Approach

Hazard Insurance covers which one of the following things?

Damage caused by fires, severe storms, earthquakes or other natural events

What effect does a debit to the seller have on charges made to the parties involved in the transaction?

Decreases the amount the seller receives after closing.

Which of the following is a legally written contract that transfers a property's title (temporarily in case of default) to a third party as security for a loan?

Deed of Trust

Which of the following is NOT one of the three most common types of title insurance?

Deed of Trust Title Insurance

What is another term for negative amortization?

Deferred Interest

The Federal Housing Administration (FHA) is part of what other government agency?

Department of Housing and Urban Development

Some FHA lenders have the authority to approve FHA loans in house. This is called?

Direct Endorsement

A type of interest paid up front that a lender charges to lower the interest rate is called?

Discount point

Which method involves transmitting loan application information from a computer terminal to a major lender's mainframe computer?

Electronic loan transfer

Which of the following Acts disallows lenders from asking whether an applicant is widowed or divorced?

Equal Credit Opportunity Act

What is not a property tax incentive?

Estate Tax

Which of the following is NOT a common way for a lender to recast the loan of a borrower in financial difficulty after a moratorium?

Extend the term of the loan.

Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector do NOT use which of the following information in qualifying applicants for conforming loans?

FICO Credit Scores -FICO (Type of credit score created by Fair Isaac Corporation)

Which one of the following is not one of the three major credit reporting bureaus?

Fair Isaac Corporation (FICO)

A conventional forming/conforming loan follows which guidelines?

Fannie Mae and Freddie Mac Guidelines

What is the secondary market investor for agricultural loans?

Farmer mac

What is the purpose of tax service fees?

For a service that checks to make sure tax payments are current

Which is not an example of title limitation?

Frauds

Which of the following is NOT a legal requirement of all deeds?

Grantor

Fannie Mae's Desktop Underwriter encourages the applicant to complete a web version of which form?

HUD 1 Settlement Statement

The closing disclosure form that was required in the fall of 2015 takes the place of?

HUD-1 And the Truth in Lending

What is (Are) the qualifying income ratio(s) for conforming loans?

Housing expense ratio of 36% Total debt service ratio of 41%. -Same as FHA insured loans

What is (are) the qualifying ratio(s) for FHA insured loans?

Housing expense ratio of 36% Total debt service ratio of 41%. -Same as conforming loans

What effect does a debit to the buyer have on charges made to the parties involved in the transaction?

Increases the amount due from the buyer at closing.

Which is the following is an example of a prepaid item?

Insurance (Often Hazard) or prepaid rent sometimes

Which of the following is true of a VA hybrid loan?

It converts to fixed rate loans after three years.

Which of the following statements is TRUE of the FHA's mortgage insurance premiums?

It is required for all FHA loans.

Which of the following Statements is true of private mortgage insurance (PMI)?

It may be paid in a lump sum at closing, in some instances.

When an appraiser conducts an appraisal using the cost approach, for which things will he or she use the sales comparison approach to value?

Land

The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the US. The Department is NOT responsible for which of the following activities?

Manufacturing and distributing U.S. coins. -U.S Mint does so

What is the responsibility of the U.S. Mint?

Manufacturing and distributing of U.S. Coins

At an adjustment period, the interest rate for an adjustable rate mortgage (ARM) is determined by adding what to the index rate?

Margin

Which of the following factors is relevant to an appraisal using the sales comparison approach?

Market Demand

Which professionals are a mortgage group that acts as an intermediary, loaning out money they receive from their investors?

Mortgage Banker

The title is in whose name with a deed of trust?

New Owner's name.

If the heirs cannot pay off a debt when the borrower passes away, the lender will foreclose on the property. If the lender loses money, who will have to pay the deficiency?

No one, if it is a non-recourse loan.

Which FNMA (Federal National Mortgage Association) loan document starts out by saying "I promise to pay"?

Note

What is not part of the required lender disclosures?

Number of loans originated to women.

What is the big difference between seller financing and a contract for deed?

On a contract for deed, the new owner does not own title until all the payments are paid.

Which of the following clauses in the loan contract allows the lender to foreclose without judicial proceedings?

Power of Sale Clause

What are the goals of the consumer financial protection bureau?

Prevent surprises at the closing table AKA "know before you owe"

Which of the following actions is the main focus of FIRPTA (Foreign Investment in Real Property Tax Act of 1980)?

Purchases of real property from non-U.S. citizens.

VA loan may be used for all of the following EXCEPT?

Purchasing an investment property.

What happens in the secondary market?

Real Estate Loans are bought and sold.

If a buyer wants to purchase a property from a seller who currently has a mortgage with an interest rate well below the market level, which of the following arrangements would be most beneficial to the borrower?

Receive a wrap around mortgage from the seller. or assume the seller's mortage -A wraparound mortgage, more commonly known as a "wrap", is a form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property.

Which of the following is NOT one of the principal buyers of real estate loans on the secondary market?

Sallie Mae (SLM, Student Loan Marketing Association)

Which calculations on the Closing Disclosure (aka HUD-1) form are usually completed first?

Settlement Charges

Which of the following features are not available in Texas?

Statutory Redemption Period

Which of the following terms describes the period of time after the sale of a foreclosed property during which the foreclosed party may still recover the property?

Statutory Redemption Period

In a title theory state, which party has equitable rights to a property?

The Mortgagor. -an equitable right applies against everyone, except when no notice of applying the right is given to the true owner of the property involved. * vs. legal right that applies to everyone without exception

Who does the title of the property belong to when the borrower passes away?

The borrower's heirs.

When does a lock in fee allow the borrower to lock in the fixed rate?

The time of approval

Which of the following statements are true of construction loans?

They are paid out in a series of installments called draws.

Which of the following statements is true concerning FHA ARM (Adjustable Rate Mortgages)?

They can convert to fixed rate loans.

Which of the following statements is TRUE of the electronic underwriting systems provided by Fannie Mae and Freddie Mac?

They use three bureaus, merged credit reports

Which of the following is true of interest rates?

When interest rates fall, property values rise. When interest rates rise, property values fall

Which of the following loan programs is NOT insured by the FHA?

Wraparound Mortgage

Jerry sold his last home five years ago and moved into an apartment. Now Jerry is thinking about buying a home and has seen some great programs for first time home buyers. Will Jerry qualify as a "first time home buyer"? He has owned no other real estate.

Yes, because legally, anyone that has not owned for three years is a first time home buyer.

When a loan is paid off in equal monthly payments that contribute to both principal and interest until the entire loan is paid, it is ?

amortized

What is the amount the VA loan guarantee?

entitlement