Real Estate Finance test prep

According to Fanny May and Freddie Mac guidelines the monthly debt of a borrower should not exceed 36%

28% of this would includePrincipal, interest, taxes, property insurance, private mortgage insurance, homeowner association fees.

A release clause is found in a

Deed of trust

A loan applicant provides data to Fannie Mae. The automatic underwriting system that is used to analyze the data is called a. FICO. b. Loan Prospector®. c. AUS. d. Desktop Underwriter®.

Desktop Underwriter®.

Which of the following is NOT one of the national credit repositories most used today to obtain credit scores for prospective borrowers? a. FICO b. Experian c. Equifax d. TransUnion

FICO

Member banks often borrow on a short-term basis from each other without requiring collateral. The interest charged is called the a. prime rate. b. discount rate. c. federal funds rate. d. open-market rate.

Federal funds rate

Which of the following is NOT a primary market financial institution? a. Commercial bank b. Savings association c. Credit union d. Ginnie Mae

Ginnie May

FHA is under direct administration of

HUD- department of housing and urban development

When Fannie Mae was reorganized in 1954 to include financing by private investors, mortgage loans could be purchased at a. par. b. a premium. c. a discount. d. face value.

a discount

The assets listed on a loan application may include all the following EXCEPT a. $1,200 in a checking account. b. $5,000 in a savings account. c. 1,100 shares of IBM stock. d. a loan on a $50,000 life insurance policy.

a loan on a $50,000 life insurance policy.

An undersritwer can consider income from all the following except

a part-time job that will likely end soon

All bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC) to the amount of a. $50,000. b. $100,000. c. $200,000. d. $250,000.

$250,000

Under the vetrans home improvement program, the VLB will lend eleigible texas veterans upto $10000 on a fixed rate note to make substantial repairs to an existing primary residence. What is the term on this type of loan

10 yrs

FICO credit score is between

300 to 850

FHA allows debt to income ratios

31/43 FHA's maximum qualifying debt ratios for borrowers in 2015 are 31% and 43%. This means the monthly housing payments should not exceed 31% of gross monthly income, while the total debt burden should not exceed 43% of monthly income.

A small city in Oklahoma might apply for funding from HUD for all of the following EXCEPT a. the demolition of uninhabitable buildings in a slum-clearance project. b. the acquisition and rehabilitation of an apartment building to be used for public housing. c. a Community Development Block Grant program to improve water facilities to a depressed area. d. a major renovation of City Hall.

A major Renovation of Ciity Hall

Under the FY2009 Omnibus Appropriations Bill, commercial banks are NOT allowed to perform which of the following services for their customers? a. Market annuities b. Sell title insurance c. Sell stocks and bonds d. Act as real estate brokers

Act as Real Estate Brokers

A couple has been notified that they are in default on their mortgage payments and that the entire amount of the loan is now due. Their loan contract likely included a. a due-on-sale clause. b. an acceleration clause. c. an alienation clause. d. a delinquency clause.

An acceleration clause

A developer in Mississippi planning to market residential building lots throughout the mid-Atlantic states must submit which of the following to the buyer? a. Good-faith estimate of all costs involved b. Statement of record describing plans for future services to be provided c. Complete property report d. Truth in lending statement

Complete Property Report

Which of the following is NOT an example of a physical encumbrance? a. Mortgage lien b. Public utility easement c. Private deed restriction d. Driveway encroachment

Mortgage lien

Which of the following is NOT one of the primary activities of HUD? a. Overseeing Ginnie Mae b. Enforcing the Fair Housing Act c. Regulating thrifts d. Managing the Indian Housing Act

Regulating Thrifts

Open market operations (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system, facilitated by the Federal Reserve (Fed).

Securities are primarily US treasuries, but also include securities issued by federal home loan banking system, FHA, Ginnie May, etc

All of the following may be used as collateral for a loan EXCEPT a. tenant's leasehold rights. b. lender's receivable mortgage rights. c. farmer's unharvested crops. d. unsecured personal property.

Unsecured property

The Housing and economy recovery act (HERA) of 2008 is a government program to help first time home buyers by providing

a refundable tax credit equal to 10 percent of the purchase price of a principal residence, up to $7,500, which buyers were subsequently required to repay in 15 annual installments as a surcharge on their income taxes.

RESPA requires at the beginning of loan process the mortgage lendder must provide

a. a special information booklet b. Good Faith Estimate (GFE) of settlement costs c. mortgage servicing disclosure statement

Fed Open market operations include

a. buying and selling of treasuries b. buying and selling securities issued by fedrally sponsored agencies c.

A primary indicator of real estate market rebounding is

a. increase in new home constructions

ARM stands for

adjustable-rate mortgage

Old English law established an equitable redemption period that allowed for the a. lender to immediately take possession of property on a defaulted loan. b. borrower to have a specified amount of time to clear the default. c. lender to sell the property. d. borrower to remain in the property after it was sold.

b.

The Office of Federal Housing Finance Agency (FHFA) is responsible for regulating a. HUD. b. Fannie Mae and Freddie Mac. c. Housing Choice Voucher Program. d. Real Estate Settlement Procedures Act (RESPA) regulations.

b. Fannie May and Freddie Mac

A new federally chartered savings bank will come under the regulation of the a. Federal Home Loan Bank Board. b. Office of the Comptroller of the Currency. c. Federal Reserve System. d. FDIC.

b. Office of the Comptroller of the currency

Rules and regulations for FHA appraisers require appraisers to do all the following EXCEPT a. pay detailed attention to physical defects. b. guarantee that the property is free of defects. c. complete a "valuation condition" disclosure package. d. recommend additional inspections where indicated.

b. guarantee that the property is free of defects

A 15-year fixed-rate mortgage provides all the following benefits EXCEPT a. the borrower pays less interest. b. it provides greater tax deduction. c. it is at below market rate. d. it builds equity faster.

b. provides greater tax deduction

The primary activity that distinguishes a mortgage broker from a mortgage banker is that a mortgage Broker will

bring borrowers with lenders but do not fund the loan

A bank's trust department would probably agree to provide any of the following services EXCEPT a. act as executor of a widow's estate. b. serve as a guardian for a six-year-old. c. manage a man's small individual retirement account (IRA) account. d. act as trustee for the bond portfolio of the largest business in town.

c. Manage a man's small individual retirement account (IRA)

The Federal Housing Administration (FHA) was organized in 1934 to do all the following EXCEPT a. stimulate new jobs in the construction industry. b. stabilize the real estate mortgage market. c. provide direct funding for mortgage loans. d. facilitate financing for repairs and sales of existing homes.

c. Provide direct funding for mortgage loans

Lenders would be required to fund a loan for all of the following except a. single parent who uses public assistance to qualify b. an unmarried couple who meet the underwriters standards c. a married couple with poor credit who uses public assistance to qualify d. a single parent with good credit and a full-time job who also receives daycare vouchers

c. a married couple with poor credit

If a buyer offered $110000 for a property apparaised at $105000 all of the following options would be valid EXCEPT a. negotiate the price down to appraised price b. make up the difference c. order a new apparisal and request that it come in for the sales price d. terminate the contract

c. order a new appraisal and request it come in for the sales price

An FHA section 203(k) loan would provide a loan for a. purchase of a condominium. b. a one-year adjustable-rate plan. c. the purchase and rehabilitation of a property. d. a graduated-payment plan.

c. the purchase and rehabilitation of a property

Processing a mortgage loan includes all the following procedures EXCEPT a. determining the ability of the borrower to repay the loan. b. estimating the value of the property. c. analyzing the marketability of the collateral's title. d. checking the Dun and Bradstreet listing for the lender

checking Dun and Bradstreet listing for the lender

Loans created using the underwriting guidelines of Fannie May or Freddie Mac are called

conforming loans

Home buyers can avoid paying PMI by putting a. 3.5% down on a FHA loan with a 16.5% secondary loan b. 10% down on a FHA loan c. 10% down on Fanny Mae loan d. 20% down on a Freddie Mac loan

d.

The MOST common way of financing private mortgage insurance today is to a. pay the entire premium at settlement. b. pay a portion of the premium up front and finance the rest. c. add the premium to the loan amount. d. divide the annual premium by 12 and add to the principal, interest, taxes, and insurance (PITI) payment

d. divide annual premium by 12 and add to the principal, interest, taxes and insurance (PITI) payment

Nationally chartered commercial banks must join the Federal Reserve System and are required to do all of the following EXCEPT a. purchase capital stock in a Federal Reserve district bank. b. maintain required monetary reserves. c. clear all checks through the system. d. sell mortgage-backed securities to the Fed.

d. sell mortgage-backed securities to the FED

. The biggest change in mortgage financing procedures has been the a. switch to 15-year amortized loans. b. the average age of a real estate loan. c. emphasis on the risk assessment of the purchaser. d. regular payments of principal and interest.

emphasis on the risk assessment of the purchaser.

A jumbo loan is a mortgage loan that a. covers multiple properties. b. exceeds $500,000. c. exceeds the FHA maximum loan limit. d. exceeds the current Fannie/Freddie maximum loan limit.

exceeds the current FannieMay/Freddie Mac max loan limit

Although many types of interests in real property may be used as security for a real estate loan, the MOST common is a a. leasehold interest. b. life-estate interest. c. fee simple interest d. trade fixture.

fee simple interest

The impact of a foreclosure on a borrower does not include

higher tax rates for future car loans

A foreclosure sale in texas is conducted

in the vicinity of the courthouse where the property is located

a balloon note is one in which

last payment is greater than other payments

Private mortgage insurance is issued for the protection of the a. borrower. b. lender. c. title insurer. d. trustee.

lender

Homeowners should only consider foreclosure if the house is worth a. more than they owe but they cannot afford the payments. b. more than they owe and they can afford the payments. c. less than they owe and they cannot afford the payments. d. less than they owe and they can afford the payments.

less than they owe and they cannot afford the payments.

A statutory period of redemption gives the borrower the opportunity to a. make up the outstanding balance prior to the foreclosure sale. b. make up the outstanding balance after the foreclosure sale. c. receive a moratorium on payments. d. be released of all payments.

make up the outstanding balance after the foreclosure sale

Money can be viewed as all of the following EXCEPT a. as a medium of exchange. b. storehouse of purchasing power. c. standard of value. d. measure of personal worth.

measure of personal worth

a drwback of balloon loan financing is that the borrower might have difficulty

meeting the final payment (not amortized) when it becomes due, and if necessary, refinancing at that time.

The underwriter generally uses the borrowers

middle credit score

Real estate mortgage trusts REMT derives income from

mortgage interest, loan origination fees, and profits earned from buying and selling mortgages

Interim financing (construction financing)

open-ended mortgage loan, usually for a short term, obtained to finance the actual construction of a building on a property

The primary activity that distinguishes a mortgage broker from a mortgage banker is that a mortgage banker will

prepare the loan for underwriting

Double-digit interest rates in the 1980s led to all of the following EXCEPT a. eliminating many participants in the real estate market. b. creating broad range of creative financing tools. c. encouraging participation financing between lenders and borrowers. d. reducing capital gains tax rate.

reducing capital gains tax rate

The focus of lenders shifted in the 1990s to a. jumbo loans. b. adjustable-rate mortgages. c. refinancing existing mortgage loans. d. variable-payment loans.

refinancing existing mortgage loans

One of the primary duties of the FHFA is

regulate Freddie M and Fanny M

A seller is willing to allow a purchaser to assume his current conventional loan but the lender will not allow it. The lender was exercising his rights under the

release clause

In an 80-15-5 loan scenario the 15 stands for

second loan. 5% down payment. The first loan is 80% or less of the purchase price or value of the home and the second loan covers the difference after taking into account your down payment or home equity. This strategy can also be used to avoid a jumbo loan amount.

ECOA: The Equal Credit Opportunity Act (ECOA) is a United States law (codified at 15 U.S.C. § 1691 et seq.), enacted 28 October 1974,[1] that makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract);[2] to the fact that all or part of the applicant's income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

sexual orientation

Pools of loans are originated in the primary market and

sold in secondary market

Specific lien differs from a general lien as

specific lien apply to only a single property of the debtor

The federal agencies empowered to control the supply and cost of money include all of the following EXCEPT a. the Federal Reserve. b. the Department of the Treasury. (US treasury) c. the Office Thrift Supervision. d. the Federal Home Loan Bank.

the Office of Thrift Supervision

Aspect of FHA loans that attracts lenders is

the government insured the full amount of loan, lenders were willing to make loans with low down payments

Under regulation z, a consumer who obtains financing for a remodeling project ( or refinancing or equity) has a right to rescind the transaction up to how many business days after the loan application

three days

The system whereby the lender holds title to the property and may dispossess the borrower without notice upon any default of the loan agreement is called a. equitable rights. b. title theory. c. lien theory. d. intermediate theory.

title theory

Freddie Mac is currently a. a government agency. b. under conservatorship. c. a subsidiary of the Federal Home Loan Bank System. d. a company under control of the Federal Home Loan Bank Board.

under conservatorship

A couple will need to have 3.5 percent of the sales price to qualify for their FHA loan. They may NOT obtain the funds from which of the following sources? a. Borrower's own funds b. Unsecured loan c. Gift from parents d. Grant from housing assistance program

unsecured loan

Financial leverage is described as

use of borrowed money to finance the purchase of an investment

Depending on the circumstances of the default, a lender may be willing to give delinquent homeowners any of the following options EXCEPT a. waive the principal portion of the payment for some period. b. recast the entire loan to lower the payments. c. accept a deed in lieu of foreclosure. d. forgive six months worth of payments.

waive 6 months worth of payments