TEXAS CE 30 HOUR FINANCE
Sophia's annual property taxes are $1,295, and her annual insurance premium is $942. How much of her monthly mortgage payment goes toward taxes and insurance?
$186.42
Your client, Ray, wants to purchase a home listed for $200,000. The home is in a revitalization area, and Ray can purchase it under the Good Neighbor Program. How much will he have to pay for the home?
$200,000, less 50%, plus $100 (Those who qualify may purchase the home at a 50% discount, and with only $100 down.)
Consumers in the _______ range are well above the average credit score and generally have an easy time getting approved for new credit.
800+
What is an encumbrance?
A defect on a title that can be monetary or physical
In a deed of trust, who is the trustee?
A neutral third party
Captain Kirk is a veteran who sells his home to Leonard. Leonard is also a veteran, and they agree to let Leonard assume Captain Kirk's VA loan for the property. They agree to a novation, which is ______.
A new contract with the lender using a substitution of entitlement
Which of the following is a true statement about the use of a promissory note?
A promissory note is a legal instrument that's similar in nature to a contract.
Which of the following best describes annual percentage rate (APR)?
A standardized measure for interest rates and other loan costs
What type of clause is this? "If any monthly installment under this Note is not paid when due and remains unpaid after a date specified by a notice to Mortgagor, the entire principal amount outstanding and accrued interest thereon shall at once become due and payable at the option of the Note holder."
Acceleration clause
Which of the following best describes a recourse mortgage?
Allows the lender to sue the borrower for damages if foreclosure occurs
Which act made some mortgage insurance premium deductions available to certain taxpayers?
American Taxpayer Relief Act of 2012
The energy efficient mortgage program insured by the FHA requires an energy consultant to provide the lender with a report listing recommended modifications for energy efficiency, an estimate of the cost for each recommendation, and ______.
An estimate of the energy savings that would result
Which generation are children of the Silent Generation and products of the U.S. population explosion after World War II?
Baby Boomers
Which of the following is a likely effect when the discount window is closed?
Banks don't have access to additional funds.
In which U.S. market(s) do foreign lenders participate?
Both the primary and secondary mortgage markets
Under which section of the Loan Estimate will you find any credits provided by the seller?
Calculated Cash to Close
Kaycie is a new employee at a mutual savings bank. During orientation, she learned that mutual savings banks have limitations that are set by their ______.
Charter (Limitations are set by the bank's charter and vary from state to state.)
When Fannie Mae purchases a loan, they pay the loan originator a(n) ______ fee.
Collection
Which of these individuals may benefit from USDA Rural Development program offerings?
Community-managed lenders
Commercial banks offer interim financing in the form of ______ loans.
Construction
Because of the Mortgage Disclosure Improvement Act, the only advance fee that a creditor can charge to a consumer before providing required loan disclosures is a(n) ______ fee.
Credit report
Which of the following is a form of commercial bank revenue related to mortgage financing?
Demand deposits (Commercial banks derive most of their funds for mortgage lending from demand deposits)
What type of lien is placed on a property as a result of a court order?
Equitable
In 2008, as a response to the 2007 financial crisis, the Federal Housing Finance Agency began acting as conservator over which institutions?
Fannie Mae and Freddie Mac
Credit flows to rural communities largely through the actions of ______.
Farmer Mac
Which entity provides disclosures and public information about the financial condition of FCS?
Federal Farm Credit Banks Funding Corporation
Which entity regulates government-sponsored enterprises?
Federal Housing Finance Agency
The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time.
Funding fee
What do loans create for banks and other financiers?
Future cash income
Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA?
Get a low 4.925% APR
Sam has a mortgage that has a static interest rate, but monthly payments that increase over time according to a set schedule. What type of mortgage does Sam have?
Growing equity
Scott has plenty of money saved and is ready to make a down payment on his $14 million dream home. One problem: Scott doesn't want to end up with a jumbo loan because he goes over the conforming loan limit. What option does Scott have?
He can take out a piggyback loan to avoid going over the conforming loan limit and ending up with a jumbo loan.
Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?
Her rate will be 3% for the first year, 4% the second year, and 5% after that.
Appraiser John is determining how a property is being used to determine a more optimal function. What is he determining?
Highest and best use (looks past the current use to determine if another use provides a higher value.)
Historically, what do property values tend to do over long periods of time?
Increase
Historically, what do property values tend to do over short periods of time?
Increase and decrease
In the early years of a mortgage loan term, which portion of the payment is likely to be the largest?
Interest receives proportionally more of the mortgage payment in the beginning; over time, more and more of the payment goes toward principal.
Interest-only loans are a form of ______ buyer financing.
Interest-only loans are a form of creative buyer financing.
What did a 2019 National Association of REALTORS® study say about foreign investment in U.S. real estate?
It's less stable than in previous years.
The CFPB uses education to accomplish its mission, such as the ______ publications.
Know Before You Owe
The Tierney family obtained their four-bedroom home with an FHA loan 10 years ago. In another 20 years, they will have paid it off. Which FHA benefit applies here?
Long-term amortized loan
Which type of real estate investment trust involves both residential and commercial properties?
Mortgage REIT
Who originates their own loans?
Mortgage bankers
What piece of information would an appraiser NOT find in the Subject and Contract sections of the report?
Neighborhood characteristics
Yancey purchased a home six months ago using a VA loan. Due to an inheritance, he is suddenly able to pay off his mortgage. Will he pay a pre-payment penalty?
No - VA home loan doesn't include a pre-payment penalty.
Which of the following is NOT a benefit government-sponsored enterprises receive?
Non-profit status
What's the definition of a qualified mortgage?
One that meets stringent CFPB guidelines
Leslie has applied for a loan modification. As part of the process, her lender will likely ______.
Perform a title search
The two most common methods used when a bank fails are the payout method and the ______ method.
Purchase and assumption
What's the purpose of the Home Mortgage Disclosure Act?
Requires financial institutions to maintain, report, and publicly disclose information about their mortgages
Which of the following made mortgages attractive investments?
Rising home prices
What type of investment strategy is most similar to a 1031 tax-deferred exchange?
Rolling over funds from one IRA into another
Hugh works as a loan officer at a bank. Because of the ______, he must be registered with the Nationwide Mortgage Licensing System.
SAFE Act
Zack and April are purchasing a home. They apply to three different lenders and review the Loan Estimates they receive. Each form includes a field identifying the National Mortgage Licensing System ID number for the lender. What is the act that requires this licensing identification to be available to consumers?
SAFE Act ( The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires that mortgage loan originators obtain a license that consumers can identify and research.)
Some countries have banks that issue loans for U.S. real estate purchases. What are the main countries that participate?
Taiwan, the U.K., and Canada
The ______ was enacted in 1946 in response to the creation of several new federal agencies. It established a process for how the agencies could propose and establish regulations.
The Administrative Procedure Act balances the power of federal agencies by regulating how they may propose and establish regulations.
Rules and regulations that protect consumers of financial services are now the responsibility of ______, which was created by the Dodd-Frank Act.
The CFPB
What is the purpose of the Federal Reserve System?
The Fed regulates the U.S. depository institutions.
The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.
The borrower
Which of these best describes a home equity loan?
The funds are often used for home renovations or to fund a college education.
Carla and Sven have a previous foreclosure, but now they are a few years away from that. They make good money with their jobs, and have about $30,000 available to use for a down payment and closing costs. Why might they consider an FHA 203(b) loan, even if they have sufficient down payment for a conventional loan?
The lender can consider compensating factors, even if their credit history isn't great.
Which of the following describes the discount rate?
The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral
What is a potential cause for a decrease in local economy driven by the Fed?
The reserve percentage is increased by the Fed.
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. Although 640 is an acceptable score for an FHA loan, its underwriting requirements specify a housing ratio of no more than 31%. A less-expensive home might help this couple meet the FHA underwriting guidelines for housing ratio.
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
The FHA Section 203(h) program assists ______ with an insured mortgage.
Victims of a presidentially declared disaster
The Mortgage Disclosure Improvement Act gives applicants a three-day ______ to review and approve the Loan Estimate and Closing Disclosure form.
Waiting period
Celeste hopes to qualify for an FHA loan. She calculates her housing ratio as 31%, and her total debt obligation as 42%. Her credit score is 580. Does she qualify under FHA underwriting guidelines?
Yes - Underwriting requirements for an FHA loan specify a housing ratio of no more than 31%, a total debt obligation that doesn't exceed 43%, and a minimum credit score of 500, with 620 or higher being preferable.
Gus has applied for a home equity line of credit from his federally insured bank so that he can make some renovations to his kitchen. The same bank is his lender for his home mortgage. Will this loan be subject to Real Estate Settlement Procedures Act requirements?
Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit.
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
A mortgage banker gets paid through fees from ______ and servicing loans.
Originating
How do falling interest rates impact investors in mortgage-backed securities?
Returns on investments decrease.
Where can a party reviewing a title commitment find basic details about the transaction?
Schedule A
Where can a party reviewing a title commitment find requirements that must be met before a title insurance policy will be issued?
Schedule B-1
Which section of a commitment identifies exceptions to title insurance coverage?
Schedule B-2
Janice is planning to borrow money from her retirement savings. Which of the following is a true statement about her situation?
She should consult with a financial expert before withdrawing the funds.
Krista is obtaining a loan to buy a home. Her loan agreement consists of one document called a note and one called a deed of trust. What's the role of the note?
States who owes money to whom, how much, and how it will be repaid
______ make homeownership available for many who otherwise could not qualify for a mortgage loan.
Subprime lenders
Ken and Sue are purchasing a home but are short on the down payment required by their lender. Sue's mother offered to give them cash to help with the down payment. How much can Sue's mother give under current tax laws?
Sue's mother can give $15,000 to Ken and another $15,000 to Sue. This is a tax-free gift from Sue's mother. Sue's mother and father could each gift $15,000 to both Ken and Sue, for a total of $60,000.
Which of the following would the FDIC most likely insure?
The FDIC protects deposits in checking, saving, and money market accounts and insured banks and thrifts, as well as certificates of deposits at these institutions.
Dana and Phil have evaluated their situation, and have decided to purchase a unit in a cooperative housing project. Which FHA loan program might work for them?
The FHA has a program specifically for the purchase of a unit in a cooperative housing project: Title II Section 203(n).
Which of the following was created as part of the Homeowner Affordability and Stability Plan?
The Home Affordable Modification Program (HAMP) was part of the Homeowner Affordability and Stability Plan.
Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's the purpose of this document?
The Loan Estimate, which the lender must provide within three days of loan application, provides an estimate of mortgage loan costs.
Which organization manages and charters credit unions?
The National Credit Union Administration (NCUA) manages and charters credit unions.
Which of these acts has special provisions for borrowers who are victims of over-charging?
The Real Estate Settlement Procedures Act has special provisions for borrowers who have fallen victim to predatory lending practices, including those who are victims of over-charging.
Bart is selling his home and has accepted an offer from a buyer, who's obtaining a VA loan. The sale price is agreed upon and is in the purchase contract. Then Bart receives a call from his agent, explaining that the buyer is hoping that Bart will lower the sale price because ______, and there is a risk the buyer will not be able to get the VA loan as a result.
The VA appraiser completed the CRV and it is less than the sale price
Borrower Max is reviewing his Closing Disclosure to check the amount of prepaid mortgage insurance, taxes, and interest. In addition to itemizing what his borrower-paid closing costs are, the prepaid section includes ______ for each item.
The applicable time period
The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.
The program is called a Streamline Refinance because no verification of income or assets is needed, although the borrower must be currently using an FHA-insured loan.
Which of the following describes the federal funds rate?
The rate at which a bank can obtain a loan from another bank
When a lender has a lien on a property via a mortgage, what rights does the lender hold?
The right to foreclose
When a buyer obtains an FHA loan, the seller may ______.
The seller may pay up to 6% of the sales price or appraisal value, whichever is less, toward the buyer's closing costs. The seller may not contribute toward the buyer's down payment.
What role did CMOs play in the financial crisis of 2007?
They increased market speculation.
What is the benefit Ginny Mae investors have over those who invest in other MBSs?
They're able to collect timely principal and interest payments.
Susan's cat bit and scratched her neighbor, who's suing Susan. The lawsuit resulted in a judgment against her. Susan does not want to pay the neighbor according to the judgment, so the court placed a lien against her property. How is this lien classified?
This is an involuntary general lien, since Susan didn't agree to it and it's attached to all of Susan's property.
Government-Sponsored Enterprises (GSEs) were created by the U.S. Congress for what purpose?
To make a percentage of loans available to low and moderate income borrowers
What is the purpose of the loan transfer disclosure?
To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments
Monica is selling her house in Hawaii. Her appraiser, Tom, is using a less common title search method, only going back as far as when the last title search was performed. The method he's using assumes the last search was done accurately and legally, and that any issues were resolved. Which method is Tom using?
Torrens system
The _______ requires lenders to disclose financing terms to consumers in a manner that's not misleading or deceitful.
Truth in Lending Act
A Treasury bond is a Treasury security ______.
With a maturity term of 30 years
______ is a legal action that liquidates or restructures debt. It can have a long-lasting negative impact on the borrower's ability to obtain financing.
Bankruptcy
Which of the following describes mutual savings bank loans?
Banks focus lending offerings on local businesses and residents.
Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?
Bill - The borrower holds legal title to the property that secures the loan when a mortgage instrument is used.
Which agency is responsible for the production of paper currency?
Bureau of Engraving and Printing
Lewis is reviewing his Loan Estimate and notices under "Other Costs" that there are items listed that don't include an amount. What does this mean?
Lewis should ask his lender about it.
When an adjustable rate mortgage (ARM) makes its initial adjustment, it does so to its fully indexed rate. What makes up the fully indexed rate?
Margin plus index
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
The ______ was enacted in 2010 to create stricter regulation of the financial services industry to reduce costs for consumers from (for instance), undisclosed kickbacks.
The aim of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to regulate the financial services industry more effectively.
What is the most likely effect when the Fed buys securities on the open market?
The economy may grow due to an increased money supply.
Which was NOT part of the Fed's program quantitative easing?
The funds available to consumers froze.
Which of the following statements about the VA guaranteed home loan program is true?
The service member's length of service, duty status, and character of service determine eligibility.
What is the purpose behind Appraiser Independence Requirements?
To protect appraisers' ability to assess an accurate value for a property by avoiding outside pressure or influence
Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?
To roll the cost of rehabilitating the purchased home into the mortgage
How long does the borrower have to pay private mortgage insurance?
Until the borrower reaches a 22% equity position
When HUD pursues actions that are designed to end homelessness and promote the health and housing stability of vulnerable populations, which of its goals is it supporting?
Use housing as a platform for improving quality of life.
A Treasury bill is a Treasury security ______.
With a maturity term of one year or less
The _______ section contains the seller's existing mortgage loan payoff amount that must be paid to complete the transaction.
"Due from Seller at Closing"
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
Under current tax law, what's the maximum tax-free gift an individual can give to another individual annually?
$15,000
Which range of credit scores represents subprime borrowers?
580-669
The median credit score for most consumers is _______.
670-739
A homeowner has been paying her mortgage for several years and has built up equity. She decides to take out a home equity line of credit because she needs some cash. This credit will create ______.
A junior lien on the property
What is a government-sponsored enterprise?
A private company the U.S. Congress created to make certain borrowing easier and cheaper
Which of the following actions toward an appraiser would be considered "proper"?
Asking an appraiser to correct errors in the appraisal report
Which of the following is NOT required to transfer ownership of a note?
Assignment of the note to the new owner
Which event led to the establishment of the FDIC?
Bank failures during the Great Depression
River City Bank needs to cut back on lending. For several months, the bank has seen more withdrawals from customers than deposits. This has led to a decrease in deposits typically used for lending. What term can be used to describe what the bank has experienced?
Disintermediation
The contract Jack is signing has a clause that protects his assets from a deficiency judgment in case of foreclosure. What is this called?
Exculpatory
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
On an FHA 203(k) loan, the combined cost of home value and rehab must ______.
Fall within the FHA mortgage limit for the area where the property is located.
Which of the following is an example of a government-sponsored enterprise (GSE)?
Fannie Mae
Farmer Mac is an entity that ______ for agricultural property loans, rural utility loans, and certain loans guaranteed by the U. S. Department of Agriculture.
Farmer Mac creates a secondary market for agricultural loans.
From a secondary market player, Regional State Bank received an advance in exchange for collateral in the form or mortgages. Which entity likely issued this advance?
Federal Home Loan Bank
HUD's strategic plan outlines the ______ that support its mission.
Four goals
Stacy is preparing to sell her home, but learns she can't transfer the property until she removes an encumbrance. Which of these is encumbering her property?
Her existing mortgage
Which type of real estate investment trust derives its income from the rent or sale of property and interest dividends?
Hybrid REIT
A lender benefits from selling loans to Fannie Mae by ______.
Increasing capital to offer loans with larger sale prices
Freddie Mac and Fannie Mae set guidelines for conforming loans. Which of these are qualifying guidelines?
Loan amount, down payment requirement, loan-to-value ratio, and housing debt-to-income ratio
Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?
The VA guarantees up to a quarter of the total loan amount, up to $104,250, so Millie and Jerry's loan is guaranteed for one-fourth of $320,000, which is $80,000.
Bella is a lender. Joshua is the loan applicant. They both complete their part of the request for verification of the deposit form. The last party to complete the deposit form will be the _______.
Depository institution
Chapter 5 of the Texas Property Code set requirements and penalties for ______.
Executory contracts (applies to sellers who provide owner financing, and sellers who violate its provisions may have to pay back all money received from the buyer.)
Which of the following is one a way a loan may be modified when a borrower is having difficulty making payments?
Extend the amortization schedule.
Ralph and Mort are neighbors. Ralph is selling, Mort is buying, and Ralph is offering a second loan to help Mort with his down payment, using a contract for deed. When Mort presents this idea to his lender, his lender balks. Why might that be?
Lenders don't like contract for deed arrangements.
When consumers make a small down payment, borrow the remaining amount of the purchase price from a lender, and reap the rewards off of the full investment value, they are demonstrating what concept?
Leveraging
Which agency regulates FHLBanks?
The Federal Housing Finance Authority
Which of the following programs broke the normal 80/20 ratio rule usually required as a loan-to-value and offered favorable interest rates?
Home Affordable Refinance Program (HARP)
Life insurance companies participate in real estate in the ______ arena.
Mortgage blocks from secondary mortgage market
Babs is buying Kirk's property. Babs needs help with the down payment, and Kirk offers to supplement Babs' bank loan with a second loan, allowing her to meet her lender's down payment requirements. Which finance instrument(s) may be used for the agreement between Babs and Kirk?
Mortgage or deed of trust (A lender would not approve a contract for deed, because the seller holds legal title in a contract for deed, making foreclosure difficult.)
An industrial development bond is a variety of ______ bond.
Municipal -they give private investors an opportunity to take advantage of tax-exempt funds in exchange for helping to fund municipal projects, such as apartment buildings.
Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?
Reconveyance
Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?
Request a novation
Veterans who use the VA's Specially Adapted Housing grant must _____.
The VA's specially adapted housing grants are given to veterans with permanent and total service-connected disability.
How does the VA fund the mortgage guarantee program so that lenders can be reimbursed for any losses from borrower default?
Through a funding fee charged to most borrowers
