TX Real Estate Finance

Consumers in the _______ range have an above-average credit score. They tend to qualify for better interest rates than those in the "acceptable" category.

740-799

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?

80,000; 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.

Which of these statements about a buydown is true?

A permanent buydown will cost more than a temporary buydown; a buydown is essentially a prepayment of interest, so a permanent buydown is more costly than a temporary buydown.

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

Which act, which was the first act passed to address the subprime mortgage crisis and was also known as "the stimulus package," sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending?

American Recovery and Reinvestment Act of 2009 (ARRA); the American Recovery and Reinvestment Act of 2009 (ARRA) is "the stimulus package." It included tax cuts, benefits, and funding.

Which act made some mortgage insurance premium deductions available to certain taxpayers?

American Taxpayer Relief Act of 2012

Which of the following represents a potential concern when borrowing funds from a pension or retirement plan?

Borrowing without consulting a financial expert can result in unintended consequences, such as income tax liability and loss of retirement income.

How can a foreclosure process be temporarily stalled?

By filing for Chapter 7 bankruptcy; both Chapter 7 and 11 bankruptcy filings can temporarily stall the foreclosure process.

What's the acronym for the legislation that requires financial institutions to invest in the communities they serve?

CRA; which stands for the Community Reinvestment Act.

Synergy National Bank issued a conventional loan that is eligible for purchase by Fannie Mae. When Fannie Mae purchases the loan, what will Synergy National Bank receive in return?

Collection fee; Fannie Mae pays a collection fee, which can be a significant source of income for loan originators.

The ______ was a response to the practice of redlining and was enacted in 1977.

Community Reinvestment Act

Which of the following could an investor who sells an apartment house buy using a 1031 exchange?

Duplex, office building, or warehouse

When a promissory note is sold, how is ownership transferred?

Endorsement of the note

Another term for a valuation is ______.

Formal Appraisal

Which of the following entities buys loans primarily through thrifts?

Freddie Mac; Freddie Mac buys conventional loans, mainly from small banks or thrifts. (not Fannie Mae)

What do loans create for banks and other financiers?

Future cash income

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)

Which approach to finding value would licensed appraiser Christina probably weigh most heavily when appraising a three-unit rental property?

Income

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

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?

Involuntary, general (because it's attached to all of her properties)

The CFPB uses education to accomplish its mission, such as the ______ publications.

Know before you owe

Zara is reviewing the "Calculating Cash to Close" table on page three of the Closing Disclosure to see what has changed from her Loan Estimate. She found this extremely helpful and easy to understand because the table explicitly lists _______.

Loan estimate and final amounts side-by-side

Veterans who wish to use the Native American Direct Loan must ______ and their tribe must have a valid agreement with the VA to offer the program.

Meet the same eligibility criteria as for the VA-guaranteed loan program

The construction of what type of structures is one of the largest indicators on the country's economy?

New homes; the construction of new homes has a tremendous effect on the economy. A slowdown here is a leading indicator that a slowdown in the overall economy may be on the horizon.

Your client, Yolanda, is a nurse. Does she qualify for the Good Neighbor Program?

Not unless she is also an EMT; The Good Neighbor Next Door program offers specific FHA-foreclosed properties to owner-occupied individuals who are law enforcement officers, K-12 teachers, firefighters, or EMTs.

A ______ is a mortgage-backed security issued by Freddie Mac.

Participation certificate

Which of the following best describes foreclosure by writ of entry?

Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed

Which interest rate do banks use to offer consumer loans?

Prime rate

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

The FHA is part of ______.

The Department of Housing and Urban Development; since 1965

Which of the following statements is true about the MIP on an FHA loan?

The FHA may adjust the percentage used to calculate MIP on FHA loans.

A "homes for sale" magazine contains the following ad: "One-bedroom condo. Corner unit with beautiful ocean views. Financing available, 5.25% APR." Which of these statements is true?

The ad is in compliance with TILA because providing the APR doesn't trigger the required disclosure of all credit terms.

Who holds the promissory note while it's being repaid?

The payee

What is a statutory right of redemption?

The right of a borrower to redeem the property by paying amounts owed plus costs, even after the foreclosure sale

Page four of the Closing Disclosure includes consumer education about ______.

The use of an escrow account

Which of the following is a true statement about HUD's Good Neighbor Program?

Those who qualify may purchase the home at a 50% discount, with only $100 down.

Which of the following statements is true about the Federal Reserve?

Twelve district banks comprise the Fed; it is not a gov't agency.

The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation.

USDA Farm Service Agency

Which factor that influences value considers the property's function?

Utility

When is a loan modification considered?

When a borrower has missed payments but still has some financial security

Page four of the Closing Disclosure lists specific disclosures about the loan, such as the penalty for late payments, whether a demand feature applies, whether the loan can be assumed, and ______.

Whether partial payments are accepted

Which of the following applicants do NOT fall within the guidelines for an FHA-insured loan?

Will has a credit score of 650. Her housing ratio is 35%, and her total debt obligation is 41%.

Annual MIP can be removed from an FHA loan by ______.

refinancing to a conventional loan

Which of the following made mortgages attractive investments?

rising home prices

What's the most common way that a seller can help a buyer come up with the funds to complete a real estate transaction?

with a contract for deed

The _______ section contains the seller's existing mortgage loan payoff amount that must be paid to complete the transaction.

"Due FROM Seller at Closing" section, which lists transaction-related amounts that the seller must pay in order to complete the transaction.

Regional State Bank has made a lot of loans to consumers in the community and is running low on funds. It seeks a loan from the Federal Home Loan Bank. This loan is called a(n) ______.

Advance; FHLB lends money, called advances, to member banks in exchange for collateral.

Which of the following is NOT required to transfer ownership of a note?

Assignment of the note to the new owner (The note is endorsed, and the security instrument is assigned.)

With a VA loan, the certificate of reasonable value is used to ______.

Determine the value of the loan that the VA will guarantee

What information does Schedule B-2 of a title commitment provide?

Exceptions and flaws that the title insurance policy will not cover; lists items that will not be covered by the title insurance policy.

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; an exculpatory clause protects the borrower's other assets in case of foreclosure. In a judicial foreclosure, the lender can choose to ask for a deficiency judgment, which allows the lender to include a request for money over and above the proceeds from the foreclosure sale. The exculpatory clause protects the borrower from that possibility.

A homeowner who's preparing to sell can't transfer the property until an encumbrance is removed. Which of the following is an encumbrance that would delay the property sale?

Existing mortgage

The ______ is a government-sponsored enterprise that works through a cooperative system to provide agricultural and rural loans.

Farm Credit System

What does it mean if the Fed increases reserve requirements?

Member banks must keep more assets on deposit at the reserve bank.

Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications.

Participate in the direct endorsement program

Joe works for a life insurance company that funds commercial investment projects and often insures these projects by insisting on an equity position. What type of financing does this describe?

Participation

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

A lender qualifies a borrower for a VA loan based on ______.

Residual income and debt-to-income

A loan that's offered based on a homeowner's equity in which funds are drawn over time and the bank gains corresponding property ownership is called a ______.

Reverse annuity mortgage or RAM

The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.

Streamline Refinance; 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.

A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?

Subordination

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

Which agency sets the guidelines for qualified mortgages?

The Consumer Financial Protection Bureau (CFPB)

Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?

The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.

What role did CMOs play in the financial crisis of 2007?

They increased market speculation.

Janie's a lender at Super National Bank. She's working with the Downings to perform a title search. Why did she also request a property survey?

To identify any changes to the legal description of the 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

Vantagestar Ltd. would like to construct a high-end condominium complex. Where will they likely go for financing this project?

life insurance company

Which term describes the legal regulation of a property to the detriment of the owner, and must include reimbursement for the property owner?

taking

How is title usually conveyed to the buyer during a foreclosure process?

through a referees deed

Which of the following is a potential ramification to the seller if a short sale is completed?

A short sale can negatively impact the seller's credit, and the lender may seek a deficiency judgment for the amount not repaid.

Which of the following best describes annual percentage rate (APR)?

A standardized measure of interest rates and other loan costs; Regulation Z requires lenders to use a standardized measure for interest rates, which is the APR.

What's the acronym for the legislation that established processes and procedures for how federal agencies propose and enforce regulations?

APA (Administrative Procedure Act)

Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.

Alienation; a due-on-sale clause, also known as an alienation clause. Paragraph 10 of the note describes the right of the lender to accelerate the loan if the borrower transfers ownership of the property.

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 actions did the Federal Reserve take in response to the 2007 financial crisis?

Decreased rates; the Fed decreased the federal funds rate and purchased securities on the open market. These activities made borrowing and lending more affordable and made more money available for lending and purchasing.

The ______ was enacted in 2010 to create stricter regulation of the financial services industry to reduce costs for consumers from (for instance), undisclosed kickbacks.

Dodd-Frank Wall Street Reform and Consumer Protection Act; the aim of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to regulate the financial services industry more effectively.

How might a borrower avoid paying the mortgage insurance premium required by an FHA loan?

Get conventional financing; borrowers may avoid mortgage insurance payments by financing with a conventional loan.

About 50% of the borrowers in Neighborhood One are Hispanic, while only 4% in Neighborhood Two are Hispanic. The median home price in both neighborhoods is the same. However, statistics show that there is a significantly greater percentage of minority and low-income borrows who were denied financing for loans on properties in Neighborhood Two and were offered lower rates to live in Neighborhood One. What act is intended to prevent this type of potentially discriminatory lending pattern?

Home Mortgage Disclosure Act

Which of the following are potential private loan resources that may be willing to finance a home?

Individual entrepreneurs

Jamal is active military. His cousin, Piper, is in the National Guard. If they both qualify for a VA loan ______.

Jamal will pay less than Piper for his funding fee; active military members with the same loan amount as a reservist or National Guard serve member will pay a slightly lower funding fee.

Which generation financed their homes due to also having other debt obligations?

Millennials; financing is how Millennials were able to purchase homes since they were also paying off school loans.

On the Loan Estimate under "Loan Costs," the points, application fee, and underwriting fee are considered ______.

Origination charges

In order for the spousal support Kayla receives to be considered in the lender's income evaluation when Kayla applies for a home loan, what must be true?

Payments must have been received for at least one year, and must be expected to continue for at least three more years.

The two most common insolvency methods put in place when a bank fails are the purchase and assumption method and the ______ method.

Payout

Which of the following can a lender do if a borrower fails to keep homeowner's insurance on the collateral property?

Place lender-acquired insurance on the property and bill the borrower; if not solved, foreclosure activities may be initiated.

Which of the following is a piece of general data an appraiser may gather?

Population size; general data is related to the area where the property is located, not the property itself.

The ______ clause in a deed of trust allows the lender to foreclose non-judicially.

Power of Sale; the power-of-sale clause can be understood as the borrower granting to the lender a right to sell the property in case of default, making this a non-judicial foreclosure.

Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?

Power of sale; the power of sale clause is standard in a deed of trust and allows the non-judicial foreclosure process to be used in case of default.

Which of the following resources are extremely helpful when working with investors?

REIT analysts and bond rating agencies

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 Secure and Fair Enforcement for Mortgage Licensing Act of 2008 sets a minimum standard for licensing and registering mortgage loan originators through the Nationwide Mortgage Licensing System Registry.

What did the Troubled Asset Relief Program allow the U.S. Treasury to do in response to the 2007 financial crisis?

Spend millions; in an effort to stabilize our financial system, boost credit markets, help families avoid foreclosure, and promote economic growth, TARP gave the Treasury permission to spend as much as $700 billion (later reduced to $475 billion).

What's the first step an appraiser will perform when conducting an appraisal?

State The Problem; The first step is to state the problem so the appraiser can identify what data is needed. After that, the appraiser will identify the data needed, then gather and analyze it.

Regina has defaulted on the terms of her mortgage, and now her lender has foreclosed. The property was sold at a sheriff's sale three months ago. Regina suddenly learns that she has inherited a great deal of money. She wants her property back. Under a judicial foreclosure, what right might allow her to buy her property from the winner of the foreclosure auction?

Statutory right of redemption

The funding fee on a VA loan is waived when ______.

The veteran has a 10% or higher VA disability

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

Roger is a veteran with a service-connected disability that requires him to use a wheelchair. He is eligible for the VA's Specially Adapted Housing grant. What can he use this grant for?

To remodel a home he owns to accommodate his disability

With this alternative to foreclosure, a borrower hands over the property to the lender rather than face foreclosure proceedings.

Voluntary conveyance of deed

The American Recovery and Reinvestment Act provided mortgage assistance to ______.

Wounded servicemen and servicewomen

Which of the following may a lender request to verify an applicant's bank deposit information?

account statement

Secured corporate bonds use ______ as collateral.

corporate assets

Which of the following is a form of commercial bank revenue related to mortgage financing?

demand deposits

Chapter 5 of the Texas Property Code set requirements and penalties for ______.

executory contracts

What's the purpose of a typical subordination agreement?

it allows a junior mortgage to move into first lien position

Which of the following is a true statement about FHLBanks?

member banks may offer up to one year without collatoral

Information about how the lender will handle assumptions and late payments is included on ______ of the Loan Estimate.

page three

Which of the following would the FDIC most likely not insure?

stock certificates

What's true about the draw period on a home equity line of credit (HELOC)?

The draw period varies

How does a 3-2-1 buydown work?

The interest rate starts low but increases by 1% each year for three years until it reaches the rate stated in the note.

A CMA or a BPO is an example of ______.

An informal estimate of market value

Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?

Bill, the borrower

In which type of partnership do participants have shared responsibility for a single mortgage?

Partnerships between morgtagors

What term is used to describe the housing inventory in default or foreclosure?

Shadow inventory

Which act temporarily removed the requirement that taxpayers whose homes were sold as a result of a foreclosure had to include the loan write-off amount as taxable income?

Mortgage Forgiveness Debt Relief Act of 2007; this benefit expired in 2014.

Albert wants to sell his house to his cousin, who's willing to assume his FHA loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?

Alienation Clause; the alienation clause requires the property owner to obtain lender permission for a buyer to assume the loan, or risk having the loan accelerated.

Molly's father has a service-related disability. He lives with Molly and her family in a home that she owns. Can funds from a VA-specific housing grant be used to modify Molly's home to accommodate her father's disability?

Yes, the smaller Special Housing Adaptation grant may be used to adapt a home owned by a family member where the eligible veteran lives.