Unit 10

The maximum commission that can be charged by a licensee for negotiating a second trust deed of $7,500 for a period of five (5) years is: a. 5%. b. 10%. c. 15%. d. unlimited because this loan is not regulated by Article 7.

15%.

Which of the following statements violates the federal Truth in Lending Act? a. 3-bedroom, 2 bath, excellent FHA or VA financing available; total price $225,000 b. 4-bedroom, 2 baths, easy terms; total price $225,000 c. 3-bedroom, 2 bath, large lot, with 10% down; total price $225,000 d. 3-bedroom, 3 bath, owner will help finance; total price $225,000

3-bedroom, 2 bath, large lot, with 10% down; total price $225,000

Real Estate Investment Trust

A company with a minimum of 100 shareholders that owns operatesincome-producing real estate or engages in financing real estate.

redlining

A discriminatory lending practice prohibited by the Holden Act.

Compensating balance

A minimum credit balance that a bank requires a borrower to keep on deposit as a condition for granting a loan.

Deregulation

A process whereby regulatory restraints are gradually relaxed

Secondary Mortgage Market

A resale marketplace for mortgage loans

Credit Scoring

A statistical method lenders use to assess a borrower's credit risk

Monetary Policy

Actions taken by the Fed to influence the availability and cost of money and credit as a means of promoting national economic goals

Tight Money

An economic situation in which the supply of money is limited, and the demand for money is high, as evidenced by high interest rates.

For a real estate loan, which of the following fees may not be included in the finance charge according to the federal Truth in Lending Act? a. Interest b. Finder's fees c. Buyer's points d. Appraisal fees

Appraisal fees

Mortgage loan disclosure statement

California-required statement that disclosed expected maximum costs an expenses of making the loan that are to be paid by the borrower.

The secondary mortgage market is for buying and selling existing mortgages from the primary mortgage market or from each other. Which of the following is not a major participant in the secondary mortgage market? A. Fannie Mae B. Freddie Mac C. Carlie Mac D. Ginnie Mae

Carlie Mac

Truth & Lending Act

Consumer-protection law passed to promote the informed use of consumer credit by requiring disclosures about its terms and costs.

FDIC

Corporation that insures deposits in all federally chartered banks and savings institutions up to $250,000 per depositor.

What shows the borrower's payment history, balance of outstanding debt, credit history, number of credit inquiries, and types of credit held? a. FICO score b. Credit score c. Loan application d. Credit report

Credit report

Loan estimate

Document that lists the charges the buyer is likely to pay at settlement.

Which Act established the Consumer Financial Protection Bureau and authorized it to regulate consumer financial products and enforce several consumer protection laws? A. Dodd-Frank Act B. Gramm-Leach-Bliley Act C. Garn-St. Germain Act D. Financial Institutions Reform, Recovery & Enforcement Act

Dodd-Frank Act

What federal agency insures deposits in all federally chartered banks and savings institutions? a. GLBA b. HUD c. FIRREA d. FDIC

FDIC

Equal Credit Opportunity Act

Federal act ensuring that all consumers have an equal chance to obtain credit.

Credit Union

Lender whose members usually have the same type of occupation.

Mortgage Companies

Lender whose principal business is the origination, closing, funding, selling, and servicing of loans secured by real property.

Primary Mortgage Market

Market in which lenders make mortgage loans directly to borrowers.

Pass-through securities

Mortgage backed securities that pass through the principal and interest of the underlying loans to investors

Which of the following activities is not commonly performed by a mortgage broker? A. Mortgage brokers qualify borrowers. B. Mortgage brokers take applications. C. Mortgage brokers underwrite loans and fund them at closing. D. Mortgage brokers send completed loan packages to the lender.

Mortgage brokers send completed loan packages to the lender.

Which of the following lenders frequently uses a warehouse line to make loans to borrowers? a. FHA b. Mortgage companies c. Savings and loan associations d. VA

Mortgage companies

If only the annual percentage rate (APR) is disclosed in an advertisement for property, which additional disclosures must be made? a. The amount or percentage of the down payment b. The terms of repayment c. The amount of any finance charge d. No other disclosures are required

No other disclosures are required

Mortgage-backed securities

Pools of mortgages used as collateral for the issuance of securities in the secondary market.

_____ is a federal law that requires disclosure to borrowers of closing costs and procedures by means of a pamphlet and forms approved by the United States Department of Housing and Urban Development (HUD). A. RESPA B. CCP C. Regulation Q D. Regulation Z

RESPA

Mortgage broker

Real estate licensee who is a third party originator.

Since the security for a mortgage loan is the property, a lender will want to ensure fair market value for the property by: A. Requiring an appraisal B. using electronic underwriting software C. making a calculated guess on the property's value. D. employing a mathematician to algebraically estimate value.

Requiring an appraisal

Warehousing

Revolving line of credit extended to a mortgage company from a warehouse lender.

Finance charge

The dollar amount the credit will cost the borrower.

Loan-to-value

The percentage of appraised value to the loan

Which of the following statements is true regarding the mortgage market? A. The secondary mortgage market sells loans to the primary market B. The secondary market is where lenders make mortgages to borrowers C. The primary mortgage market is where lenders make mortgages to borrowers D. the primary mortgage market replenishes mortgage funds for the secondary market

The primary mortgage market is where lenders make mortgages to borrowers

Underwriting

The process of evaluating a borrower's risk factors before the lender will make a loan.

APR

The relative cost of credit expressed as a yearly percentage rate.

Mortgage yield

The total interest, fees, and points earned by the lender expressed expressed as a percentage.

The type of lenders having the greatest percentage of its assets invested in residential real estate mortgages are: a. commercial banks. b. credit unions. c. life insurance companies. d. Thrifts.

Thrifts

_____ is the process of evaluating a borrower's risk factors before the lender will make a loan. A. Overwriting B. Underwriting C. Overestimating D. Underestimating

Underwriting

The original purpose of Fannie Mae was: a. buying and selling FHA and VA loans in the secondary market. b. buying and selling conventional loans in the secondary market. c. buying FHA and VA loans in the primary market. d. selling FHA and VA loans in the primary market.

buying and selling FHA and VA loans in the secondary market

Which institutional lender commonly makes short-term construction loans? A. Savings & Loan institutions B. credit union C. commercial banks D. thrifts

commercial banks

The Truth-In-Lending Act (Regulation Z) requires: A. a cap on interest rates. B.creditors to disclose credit terms so consumers can make comparisons. C. anyone negotiating a loan to have a real estate license. D. the Fed to regulate the flow of money.

creditors to disclose credit terms so consumers can make comparisons.

The process of gradually relaxing regulatory restraints is called: a. disintermediation. b. deregulation. c. depreciation. d. none of the above

deregulation.

The underlying security for the mortgage loan is the: a. creditworthiness of the borrower. b. loan-to-value. c. property. d. borrower's FICO score.

property.

The Housing Financial Discrimination Act of 1977 prohibits the discriminatory practice known as: a. red flagging. b. red taping. c. redlining. d. red lighting.

redlining.

The Federal Real Estate Settlement Procedure Act of 1974 (RESPA) pertains to: a. all residential property. b. residential properties with 1-to-4 units. c. commercial properties only. d. agricultural property

residential properties with 1-to-4 units.

The __________ market is the market that does not originate loans. A. lender-to-borrower B. retail C. primary mortgage D. secondary mortgage

secondary mortgage

The most effective method for the Federal Reserve to create a "tight" money market is to: a. buy government bonds and increase the reserve requirement. b. sell government bonds and decrease the reserve requirement. c. buy government bonds and raise the discount rate. d. sell government bonds and raise the discount rate.

sell government bonds and raise the discount rate.

In the field of real estate financing, the term "secondary mortgage market" usually refers to: a. junior liens. b. secondary financing. c. unsecured financial instruments. d. the resale or transfer of existing trust deed loans.

the resale or transfer of existing trust deed loans.