Real Estate Practice Exam
Generally, what's the common range for loan origination fees?
1% to 3%
Which act made some mortgage insurance premium deductions available to certain taxpayers?
American Taxpayer Relief Act of 2012
A CMA or a BPO is an example of ______.
An informal estimate of market value
An increase in property value is called ______.
Appreciation
Which of the following is NOT required to transfer ownership of a note?
Assignment of the note to the new owner
When a promissory note is sold, what is recorded in county land records?
Assignment of the security instrument the note is attached to
By when must a borrower be provided with a closing disclosure?
At least three days prior to closing
Ava is borrowing money to buy some commercial property for her business. The loan agreement she signs includes a lock-in clause. What does that mean?
Ava will not be allowed to pre-pay the loan prior to the date specific in the loan agreement.
Linda is estimating her annual income. She expects that her commission will be 2.5%, and she plans to close at least seven transactions in the year. What else does she need to complete her estimate?
Average sale price of homes in the area where she'll be working
Which of the following is the price a lender believes the property will bring at a foreclosure sale?
Mortgage value
A local town has been growing and needs a new elementary school. What kind of bond instrument will the town use to finance this project?
Municipal bond
What information is included on the Loan Estimate form so that the consumer can confirm the reputation of lending institution and individual?
Nationwide Mortgage Licensing System IDs
Maria is a borrower reviewing her Closing Disclosure. She notices a section under "Other Costs" with a number of fees that were not shown on her Loan Estimate, such as the commissions to the real estate brokers and the home inspection fee. Should Maria contact her lender about this issue?
No, these are costs that are part of the total cost to close but aren't part of obtaining the loan, so they weren't required to be on the Loan Estimate.
The Dodd-Frank Act created the CFPB in part to regulate ______, which were among the largest originators of subprime mortgages prior to the financial crisis of 2007‒2008.
Non-bank lenders
Maurice always keeps twice what he'll need to pay his quarterly taxes in his tax savings account. This is ______.
Not the best use of his money
Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?
Note with mortgage, note with deed of trust, or contract for deed
What step of the real estate cycle generally follows recession?
Recovery
When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.
That the work meet FHA's basic energy efficiency and structural standards
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."
The borrower is allowed to prepay the loan without penalty.
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?
They should look for a home in a lower price range.
Borrowers who refinance and use equity to pay off credit card debt should be aware that ______.
They're exchanging short-term debt for long-term debt
In a judicial foreclosure, if the sheriff's sale was enough to pay off the borrower's debt plus foreclosure costs, how long does the borrower's redemption period last?
Three months
A goal written according to the SMART criteria is ______.
Time-bound
Which of the following will be issued only if title is acceptable and an attorney provides a certificate of title opinion?
Title insurance policy
What's one reason a borrower may choose a piggyback (or split) loan?
To avoid paying private mortgage insurance
What's the purpose of California's Covered Loan Law?
To curb predatory lending practices
Which of the following statements is true about the Federal Reserve?
Twelve district banks comprise the Fed.
Mutual savings banks were created to serve ______ during the mid-19th century.
Workers
Remy's mortgage payment is $1,256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?
$1,129.53
Who or what entity directs the activities of credit unions?
A board of directors
What time of year is recommended for performing an annual review of your personal financial plan?
After filing annual income tax
In the event of a client lawsuit against an independent contractor who's operating under an LLC, only ______ are usually at risk.
Business assets
_______ are part of the loan-approval process and are responsible for completing a loan application and supplying supporting documentation.
Buyers
John sells his single-family home and purchases a new home for his family to reside in. Marcus owns a single-family home, but rents it out to a co-worker while he is on an extended two-year military tour overseas. Donald sells an apartment complex and purchases a new complex in a different part of the city. Which of these consumers is most likely to take advantage of a 1031 tax-deferred exchange?
Donald
Which of the following is part of the Consumer Financial Protection Bureau's mission of consumer protection?
Enforce consumer financial protection laws.
Of the institutions listed, which of these is viewed only as a secondary mortgage market player?
Fannie Mae
The CFPB uses education to accomplish its mission, such as the ______ publications.
Know Before You Owe
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan?
$117,687.80
Jane's offer of $310,000 was accepted, but the appraisal just came in at $300,000. Jane plans to finance $250,000. What's the loan-to-value ratio?
83%
Danny and Wendy recently relocated to California. They are buying a three-bedroom home in an established neighborhood where they look forward to raising a family. Their real estate agent, Brunhilda, thinks that their income, which is on the low side, and the property could make them eligible for ______, which would offer reduced, fixed interest rates on a loan.
A CalHFA loan product
What is a loan origination fee?
A fee a lender charges for processing a loan
Which of the following best describes annual percentage rate (APR)?
A standardized measure for interest rates and other loan costs
Completing a residential loan application requires providing information about the loan being requested, the property being purchased, and the ________.
Borrower purchasing the property
Under which section of the Loan Estimate will you find any credits provided by the seller?
Calculated Cash to Close
Mark is a single father applying for a loan to buy a house of his own. Which of these items is a liability on a residential loan application?
Child support payment
Edward is an economic analyst. In his work, he keeps a particularly close eye on this industry, because action or inaction here is a leading indicator of the country's overall economy. Which industry is this?
Construction
In 2001, California legislators enacted the ______ to combat predatory lending practices.
Covered Loan Law
A lender, reviewing a prospective applicant's loan application, wants to verify that he has a solid history of paying obligations on time. What should the lender request from him?
Credit report
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?
FHA
Carmen purchased a single-family residence in Monterey County for $480,000 using an FHA loan and FHA's minimum down payment. At the same time, Yancy made an offer on a single-family residence not far away in Fresno County for $300,000 with FHA's minimum down payment and was told he could not use an FHA loan for the purchase. Why?
FHA loan limits in Fresno County are lower than they are in Monterey County.
The Farm Credit System is overseen by the ______, an agency of the federal government.
Farm Credit Administration
Which entity provides disclosures and public information about the financial condition of FCS?
Federal Farm Credit Banks Funding Corporation
Which of the following resources will give you reports and statistics including house price index, foreclosures, and refinancing?
Federal Housing Finance Agency
Which of the following may cause the Loan Estimate to be revised?
Interest rate change, switch to fixed-rate loan, down payment amount change, and property appraisal reveals increase in value
Which of the following describes a "buy and hold" investment strategy?
It's a more conservative investment method than a fix and flip.
David purchased a house three years ago for $300,000. Considering historical property value fluctuations, what is the likely value of the property today?
It's difficult to tell. Historically, property values fluctuate up and down in the short term.
Because of the Secure and Fair Enforcement for Mortgage Licensing Act, borrowers can determine if mortgage loan originator is ______.
Licensed and registered
How much of a mutual savings bank's assets come from savings accounts?
More than 70%
Iris is planning to purchase her first home. Based on what you know about the nature of real estate finance in our country, which approach is she most likely to use?
Obtaining a loan to purchase the home
How long is an MLO endorsement valid?
One year
Stacy is opening three savings accounts as part of her personal financial plan. What would be a recommended option for finding low fees and higher interest rates?
Online banks
Leslie has applied for a loan modification. As part of the process, her lender will likely ______.
Perform a title search
Which of the following is an MLO violation?
Performing MLO activities before notifying the Bureau of Real Estate
In which section of a credit report may a lender expect to find a loan that the consumer is delinquent on?
Potentially negative items
Which of these items is an asset to list on a residential loan application?
Real estate
A goal written according to the SMART criteria is ______.
Realistic
In which phase of the real estate market would you expect to see unemployment increasing, prices falling, and foreclosures on the rise?
Recession
Annual MIP can be removed from an FHA loan by ______.
Refinancing to a conventional loan
The CFPB promotes consumer protection in the credit market through a number of strategies, including ______.
Responding to and investigating consumer complaints regarding financial services
Hugh works as a loan officer at a bank. Because of the ______, he must be registered with the Nationwide Mortgage Licensing System.
SAFE Act
The Addams family has an FHA-insured loan. The family's mortgage payment has a fixed interest rate, but after the first five years, the rate will adjust annually. Which FHA loan insurance program are they using?
Section 251
What is the name of the federal act that sets requirements for mortgage loan originators (MLOs)?
Secure and Fair Enforcement for Mortgage Licensing Act
Which of these items did the Federal Housing Administration (FHA) implement to stabilize and improve the mortgage market?
Set construction standards for homes purchased with FHA loans
The FHA Energy Efficient Mortgage allows modifications such as solar panels as long as ______.
The cost of the modification is within limits based on the value of the home
In response to the increase in foreclosures and losses on their balance sheets, not to mention a reduced market for subprime loans, many lenders slowed their lending activities. What was the impact of this on the overall economy?
The economy headed into a recession.
Who's the mortgagee in a mortgage?
The lender
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?
Yes, but only the mileage driven for business purposes is eligible for a deduction and should be recorded.
The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?
$210,000, the sales price
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount of interest he'll pay over the course of the loan?
$608,292.40
A buyer obtained a 30-year, $205,000 loan with a 5.0% interest rate. How much of the monthly payment is interest?
$854.17
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?
12x
The minimum down payment for an FHA 203(b) loan is ______.
3.5%
Horace recently purchased 1,000 shares of a security that's made up of hundreds of mortgages. The principal and interest that borrowers of these underlying mortgages pay are eventually passed through to Horace and the other investors. What did Horace purchase?
A mortgage-backed security
Which of the following describes amortized debt?
Debt that's paid off by making periodic payments
As foreclosures increased in 2007, what was the response from lenders?
Decrease lending activity
What's the term for an extended period of time during which banks experience more withdrawals than deposits?
Disintermediation
The ______ was enacted in 1974 as a response to discriminatory practices by lenders. It was created to help ensure that access to consumer credit was not based on protected class status, but on creditworthiness.
Equal Credit Opportunity Act
Jackson holds a real estate broker license with an MLO endorsement. How often must he renew his MLO endorsement?
Every year
Which of the following is NOT an accurate statement regarding the title?
Foreclosed properties rarely have clouded titles.
As independent contractors, licensees may form a(n) ______ to protect personal assets.
LLC
What does the concept "first in time" refer to when discussing lien priority?
Liens are paid based on date of filing.
Shannon is a new licensee not making much money. She considers dropping insurance to cut her expenses. Which insurance could she drop without too much risk?
Life
Which of the following entities commonly acts in the primary market?
Local credit union
Business expenses, personal expenses, and financial goals can all be tracked easily when you ______.
Manage cash flow through appropriate accounts
Store of value, unit of account, and what other factor define money?
Medium of exchange
Julia is trying to buy a house and is going through the loan application process. As part of the process, her credit score was run. Which of these issues would harm her score?
Missed payments
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?
Her down payment of $50,000 isn't at least 20% of the purchase price.
Jeffrey has accepted an offer of $310,000 for his house. The buyer is making a $50,000 down payment, and the buyer's appraisal came in at $300,000. On what number will the buyer's lender base the loan-to-value ratio?
$300,000
A buyer with a $400,000 loan has a monthly principal and interest payment of $2,661.21. If $2,333.33 is interest, what is the new principal balance after the first payment is applied?
$399,672.12
The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?
Purchase money mortgage
