National Practice Ch6 National Finance (Questions ONLY, ANSWERS WILL BE REVEALED WITH PROPER SUBSCRIPTION)
1. Which is true about a promissory note?
A. It may not be executed in connection with a loan on real property
B. It is an agreement to do or not to do a certain thing
C. It is the primary evidence of a loan
D. It is the term used for a note that is guaranteed or insured by a governmental agency
2. The term, PITI refers to the parts of a mortgage loan payment, which of the following correctly describes PITI,
A. Principal, Investment, Taxes, and Insurance.
B. Principal, Interest, Tenement, and Insurance.
C. Due on sale (alienation)
D. Principal, Interest, Taxes, and Insurance.
National Practice
3. A buyer assumes the mortgage. How is the seller relieved of the liability?
A. Subject to mortgage
B. Novation
C. Deed of release
D. Defeasance
4. Tom, the borrower, gave Joe, the lender, his mortgage as security for his loan. Under the terms of the mortgage, Tom is identified as the
A. mortgagor.
B. mortgagee.
C. trustee.
D. trustor.
5. Which mortgage clause allows a lender to regain their investment if the borrower does not pay his payment?
A. Alienation
B. Defeasance
C. Acceleration
D. Prepayment
6. When a lender requires tax and/or insurance amounts to be deposited with the lender by placing the monies in an escrow account, a “Budget Mortgage or Deed of Trust” occurs. These escrow accounts may also be referred to as
A. impound or Reserve Accounts.
B. compound or Reserve Accounts.
C. insured or Restricted Accounts.
D. interlocked and Restricted Accounts.
7. A mortgage clause used in refinancing the first mortgage which allows the second mortgage to take the first place is called
A. acceleration.
B. subordination.
C. refinance.
D. priority.
8. A DEBENTURE is defined as a long-term note that is not secured by a specific property. When the lender holds the security so that if the borrower does not pay the promise made in the note they can foreclose on the property, the real estate loan is called
A. a secondary market loan.
B. an upside down loan.
C. a subordinated loan
D. a collateralized loan.
9. In which way are a mortgage document and promissory note similar?
A. Both are non-negotiable instruments
B. Both are debt-reducing instruments
C. Both are contracts
D. Both are fully standardized instruments of conveyance
10. An “Acceleration” clause most nearly means
A. to pay off a debt in equal installments.
B. to sell a property quickly.
C. a clause in a deed.
D. to speed up payment of an overdue debt.
11. Typically, a mortgage loan monthly payment consists of PITI, (P) the amount borrowed from the lender is called
A. the primary loan.
B. the penalty.
C. the principal.
D. the promulgated covenant.
12. When a mortgage is paid off, what clause allows the lender to release the mortgage rights and issue a satisfaction piece?
A. Acceleration
B. Defeasance
C. Codicil – change in a will
D. Writ of execution
13. If prioritizing loans as when recording, a second mortgage or deed of trust is referred to as
A. a secondary loan.
B. an underwater mortgage.
C. a factored loan or mortgage.
D. a junior mortgage.
14. Of the following parties to a mortgage, whose interest is benefitted by an acceleration clause?
A. The mortgagor
B. The mortgagee
C. The trustee
D. The trustor
15. Which clause protects a lender if he does not want the loan to be assumed by another party?
A. Defeasance
B. Subordination
C. Due on sale (alienation)
D. Subrogation
16. Before foreclosure who has the right to reclaim the property forfeited due to a mortgage default
A. the borrower, under the right of Statutory Redemption.
B. the borrower, under the right of Equitable Redemption.
C. the trustee, under the right of Statutory Redemption.
D. the lender, under the right of Strict Redemption.
17. If the amount realized at a Sheriff’s sale upon a delinquent mortgage is more than the indebtedness, the excess belongs to
A. the Sheriff’s office.
B. the mortgagee.
C. the mortgagor.
D. the purchaser.
18. Ronald defaulted on his home mortgage loan payments; therefore, the lender obtained a court order to foreclose on the property. At the foreclosure sale, Ronald’s house sold for only $29,000 and the unpaid balance of his loan is $40,000. What must the lender do to recover the $11,000 Ronald still owes?
A. Sue for damages
B. Sue for specific performance
C. Seek a judgment by default
D. Seek a deficiency judgment
19. Which would be first in priority?
A. First mortgage of $20,000
B. Special assessments
C. Judgment liens
D. You cannot tell unless you know the order of recording
20. The first item to be paid out of foreclosure funds is
A. the Costs of Sale – advertising, attorney fees, trustee fees, etc.
B. the first mortgage.
C. any properly recorded junior liens.
D. special assessment taxes, and general taxes.
21. In a Deed of Trust, the party who holds, “Naked Legal Title” (one without possessory rights), and can claim the property without going through the courts is the
A. grantee.
B. mortgagor.
C. beneficiary.
D. trustee.
22. Foreclosure would terminate which of the following?
A. Statutory redemption rights
B. All rights of redemption by the borrower
C. Equitable redemption rights
D. All liability of the borrower to the lender
23. When a lender is required to foreclose on a Deed of Trust, the lender does not have to go through the courts to foreclose; and the process is quicker. This is known as
A. non-Judicial foreclosure.
B. judicial foreclosure.
C. strict foreclosure.
D. short sale foreclosure.
24. A buyer got a 30 year loan with a loan balance of $65,000 with an interest rate of 10% and a factor of 8.78. What will be the borrowers monthly P & I payment?
A. $425.30
B. $570.70
C. $3,456.98
D. $570,700
25. Based on the theory, (a rule of thumb) how many discount points are required to increase the percentage yield on a mortgage from 11% to 12%?
A. 4 points
B. 6 points
C. 12 points
D. 8 points
26. The cost of points is not deducted from the loan. Points are treated as a
A. separate credit on a settlement statement, charged to the party who has agreed to pay them.
B. proration on the settlement statement.
C. credit to the borrower and a debit to the seller.
D. separate debit or charge on a settlement statement, charged to the party who has agreed to pay them.
27. The loan amount is $60,000, and the monthly principal and interest payment will be $459.00 a month for 30 years. How much interest will be paid over the term of the loan?
A. $105,240
B. $108,000
C. $30,000
D. Cannot be determined.
28. A lender charges discount points on a loan to
A. make their ads more attractive.
B. lower the borrower’s down payment.
C. improve the lender’s yield.
D. be competitive in the market place.
29. The loan amount is $60,000, and the monthly principal and interest payment will be $459.00 a month for 30 years. How much interest will be paid over the term of the loan?
A. $105,240
B. $108,000
C. $30,000
D. Cannot be determined.
30. On a $150,000 loan, the lender charges a 1 point service charge. How much does the borrower have to pay?
A. $15
B. $150
C. $1,500
D. $15,000
31. The buyer was required to pay $4,000 in discount points. The loan balance was $80,000. How many points did the lender require?
A. 3
B. 4
C. 5
D. 6
32. The loan amount is $80,000, and the monthly principal and interest payment will be $499.00 a month for 30 years. How much interest will be paid over the term of the loan?
A. $99,640
B. $89,820
C. $75,000
D. Cannot be determined.
33. The loan amount is $70,000, and the monthly principal and interest payment will be $479.00 a month for 30 years. How much interest will be paid over the term of the loan?
A. $126,000
B. $102,440.00
C. $50,000
D. Cannot be determined.
34. How many discount points will a lender charge the borrower if they want a 15% loan and the current rate is 15.75%?
A. 4
B. 5
C. 6
D. 7
35. If a borrower purchases a property for $200,000, and borrows $160,000 he/she is said to have a LTV ratio of?
A. 100%
B. 80%
C. 90%
D. Cannot be determined.
36. What is the balance on an amortized loan of $340,000 after the first payment if the interest rate is 6% with a monthly P&I payment of $2,028?
A. $338,300
B. $339,672.00
C. $339,020.00
D. $337,972
37. Steps I and 2 deal with calculating the monthly interest amount, solve for the amount of monthly interest based on the following facts; Loan amount $36,000, annual interest rate of 5%?
A. $1,800.00
B. $150.00
C. $300.00
D. $5.00
38. Determine the monthly interest on a loan with a balance of $168,300, a monthly payment of $1,356.80, and an interest rate of 7.75%?
A. $1,086.94.
B. $1,304.33
C. $866.67
D. Cannot be determined.
39. When determining a mortgage loan balance, the monthly loan payment
A. interest is added to the balance.
B. principal is added to the balance.
C. interest is deducted from the payment.
D. principal is deducted from the payment.
40. To determine the monthly principal portion of a monthly loan payment you must deduct the
A. monthly interest from the monthly payment.
B. monthly principal from the monthly payment.
C. yearly interest from the monthly payment.
D. monthly interest from the yearly payment.
41. A mortgage has a balance of $70,000 at 11.5% interest for a period of 25 years. The monthly P & I payment is $711.53, what is the interest charge for the second monthly payment?
A. $690.72
B. $711.53
C. $670.44
D. $40.70
42. A homeowner has a mortgage balance of $149,570.75. If the interest rate on the loan is 9.5% and the monthly payment is $1,303.55 what will be the mortgage balance after the next two payments?
A. $148,630.90
B. $149,850.21
C. $148,300.00
D. $149,330.91
43. Remember for purposes of determining the new loan balance, you will not have to know how to determine the
A. principal portion of the loan payment.
B. interest portion of the payment.
C. payment amount.
D. monthly interest amount.
44. A loan on real estate, that includes fixtures, and appliances used extensively in the sale of condominiums is a (an)
A. reverse annuity mortgage.
B. blanket mortgages.
C. open-end mortgage.
D. package mortgage.
45. The purchaser of real estate by deed or the buyer under a contract for deed is called the
A. beneficiary.
B. vendor.
C. vendee.
D. obligor.
46. An Adjustable Rate Mortgage (ARM) contains an escalator clause that allows the interest to adjust over the loan term. How often the loan rate may be changed is determined by the
A. life margin cap.
B. index cap.
C. adjustment period.
D. LTV ratio.
47. A final payment of a mortgage loan that is considerably larger than the other monthly payments because the loan was not fully amortized is called a
A. margin payment.
B. package payment.
C. balloon payment.
D. graduated payment.
48. A real estate loan where a homeowner receives monthly payments based on accumulated equity rather than a lump sum and is repaid upon the death of the owner or sale of the property is a (an)
A. open-end mortgage.
B. blanket mortgage.
C. contract for deed.
D. reverse annuity mortgage.
49. A type of payment plan where a buyer pays interest only and the final payment is principal at the end of the loan period.
A. Straight
B. Graduated
C. Adjustable
D. Amortized
50. With an Adjustable-rate Loan the interest rate fluctuates and is usually tied to an index. The interest rate for any given period is the indexed rate plus the
A. points.
B. margin amount.
C. cap adjustment
D. markup factor.
51. A type of long term permanent financing for residential construction or large construction projects, that replaces the construction loan is called a (an)
A. bridge loan.
B. construction loan.
C. takeout loan.
D. wraparound loan.
52. A type of loan where interest and principal are paid on an equal basis until the final payment, which is larger, is called a Balloon Loan or
A. partially amortized loan.
B. blanket mortgage.
C. reverse annuity mortgage.
D. open-end mortgage.
53. When a real estate loan uses both real and personal property as collateral for the loan it is called a (an)
A. contract for deed.
B. participation mortgage.
C. blanket mortgage.
D. package mortgage.
54. What kind of a loan would be fully paid out over the life of the loan?
A. Fully amortized loan
B. Straight term loan
C. Balloon loan
D. Package loan
55. A mortgage given as part of the buyer’s consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction is a (an)
A. Purchase Money Mortgage (PMM).
B. wraparound mortgage.
C. participation mortgage.
D. blanket mortgage.
56. A developer would most likely obtain which of the following types of mortgage on a new subdivision?
A. Open end mortgage
B. Package mortgage
C. Blanket mortgage
D. Wraparound mortgage
57. A Budget Mortgage is a loan, which has a payment composed of the following?
A. Principal and interest only
B. Principal, interest, taxes and insurance
C. Interest only
D. Principal and compound interest
58. A situation where an owner sells his or her improved property and at the same time, signs a long-term lease with the buyer is called a (an)
A. bridge Loan.
B. sale-leaseback.
C. contract for deed.
D. wraparound loan.
59. On a government backed loan, which of the following would be permitted concerning pre-payment penalties?
A. An FHA loan with a maximum of a 2% pre-payment penalty of the outstanding loan balance
B. On an FHA or VA loan as long as the pre-payment penalty did not exceed 2% of the original loan amount
C. A VA loan may contain a maximum of a 3% pre-payment penalty on the loan balance at the time of payoff
D. Prepayment penalties are not allowed, under any circumstances, on VA or FHA loans.
60. For a veteran to obtain a VA loan, the VA must issue a certificate of
A. eligibility.
B. entitlement.
C. endorsement.
D. enterprise.
61. A borrower applied for a VA guaranteed first time mortgage for $50,000; however, the property appraised for $46,000. If the buyer still wanted to buy the property which could happen?
A. The broker could write up a contract, different from the actual offer price, to take to the lender
B. The VA could allow the borrower to make up the difference in cash
C. The VA could make the borrower get a second mortgage for the difference
D. The veteran could not get a VA loan because it appraised for over $35,000
62. Rural Economic and Community Development (RECD) loans are either made
A. directly by RECD or made by a private lender with RECD guaranteeing a certain percentage.
B. directly by RECD or made by a private lender with the FHA insuring a certain percentage.
C. directly by RECD or made by a private lender with RECD insuring a certain percentage.
D. directly by HUD or made by a private lender with HUD guaranteeing a certain percentage.
63. Conventional mortgage loans are
A. guaranteed by a government agency.
B. insured by a government agency.
C. guaranteed by private insurance.
D. not guaranteed or insured by any government agency.
64. In 1975 a veteran paid off his VA loan and sold his house. Would he be entitled to another VA loan?
A. Yes, veterans can apply for more than one loan in their lifetime as long as the first is paid off.
B. Yes, because he paid off the first loan and sold the mortgaged property.
C. No, a veteran can only have one VA loan in his lifetime.
D. No, because he is only entitled to one allotment in his lifetime even if he paid off his loan and sold the mortgaged property.
65. What can the VA require a veteran do when obtaining a loan?
A. Make the down payment directly to the VA
B. Make a down payment in cash
C. Make the veteran automatically assume liability for the loan
D. Not allow the veteran to make prepayments on that amount
66. An FHA mortgage loan is obtained through which of the following?
A. Qualified lending institutions
B. Any government agency
C. The Federal Housing Authority
D. The Federal Deposit Insurance Corporation
67. What is the purpose of FHA?
A. To loan money for first mortgages
B. To loan money for second mortgages
C. To act as an insurance company of first mortgages
D. To loan money in areas of high risk
68. Rural Economic and Community Development (RECD) loans may be
A. insured loans or direct loans.
B. guaranteed loans or direct loans.
C. guaranteed loans or insured loans.
D. direct loans only.
69. A veteran desired a loan to buy a 200 acre residence. There are no VA lenders in the area. Which could happen?
A. The VA could loan the money themselves.
B. The VA cannot loan the money but the Federal National Mortgage Company will.
C. You cannot get a VA loan for a farm.
D. The VA can require local lenders to make the VA loan.
70. Private mortgage insurance is associated with
A. FHA loans.
B. VA loans.
C. conventional loans.
D. RECD loans.
71. A veteran had a VA loan using his full entitlement. He allows another veteran to assume the loan without VA approval. Could he immediately get another VA loan?
A. Yes, because another veteran assumed the loan.
B. Yes, because he is no longer liable for the loan.
C. No, because he is still liable for the loan.
D. No, as he can NOT use VA eligibility more than once.
72. Conventional mortgages usually require
A. insurance by FHA.
B. guarantee by VA.
C. A larger down payment.
D. A loan by FNMA.
73. If a Veteran wanted to buy a $60,000 house in a city with a population of 100,000 people, which of the following loans could he NOT apply for?
A. VA loan
B. FHA loan
C. RECD loan
D. Conventional loan
74. The primary purpose of private mortgage insurance (PMI) is to protect the
A. lender.
B. borrower.
C. lender and borrower.
D. borrower and the VA
75. Protection to an owner of property against losses sustained as a result of a defective title to real estate can be accomplished by
A. title search.
B. title abstract.
C. title Insurance.
D. title Opinion.
76. The legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence is known as
A. disintermediation.
B. exculpation.
C. laches.
D. estoppel.
77. When underwriting a mortgage loan a lender considers all of the following, except
A. quality of the property that is being financed.
B. credit worthiness of the buyer.
C. quality of the title to the property being financed.
D. credit worthiness of the seller.
78. A list of successive changes of ownership, each one linked to the next, is called a:
A. underwriting title.
B. chain of title.
C. abstract of title.
D. equitable title.
79. A lender will look at which items when deciding to qualify a property?
A. Location
B. Condition (repairs and predications)
C. Type of property (residential, commercial, agricultural)
D. All of these items.
80. A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms is a
A. conditional approval.
B. application analysis.
C. estoppel letter.
D. application settlement.
81. Prior to closing, a final walkthrough of the property should be performed to ensure that everything has remained as stated in the sales contract. The walkthrough is generally completed by the
A. appraiser.
B. lender.
C. seller.
D. buyer.
82. A Buyer has demonstrated the financial capacity and creditworthiness required to afford the asking price by providing the lender with all of the following, except
A. an appraisal equal to or higher than the contract price.
B. explanation of derogatory items (judgments, late payments, tax liens etc).
C. a satisfactory Credit Report.
D. a satisfactory mortgage history rating.
83. A type of closing where a third party acts as the escrow agent for the buyer and seller and conducts all the closing activities is called a
A. face to face closing.
B. qualified closing.
C. non-recourse closing.
D. closing in escrow.
84. When qualifying a buyer the lender will calculate the Debt Coverage ratio, which measures
A. the ratio of monthly net income to annual debt service.
B. the ratio of annual net income to monthly debt service.
C. the ratio of annual net income to annual debt service.
D. the ratio of annual gross income to annual debt service.
85. Many states charge what is called a transfer tax when the property is conveyed by one of the following means
A. condemnation.
B. inheritance.
C. deed.
D. gift.
86. Assets include all of the following, except
A. revolving and installment loan accounts.
B. liquid savings, checking, CD’s.
C. personal property.
D. real estate.
87. Most lenders require an impound or escrow account to cover future payments of
A. negative amortization.
B. homeowners insurance and real estate taxes.
C. title insurance premiums.
D. transfer taxes.
88. Settlement is another name for closing and
A. brings the real estate transaction to completion.
B. is always a face to face meeting between buyer and seller.
C. is always conducted at the office of the seller’s attorney.
D. requires the presence of an appraiser, underwriter and notary public.
89. Under which of the following would one MOST likely see an estoppel certificate?
A. A lender sells a loan and the new mortgagee wants to know the existing balance
B. A lender attempts to prevent a loan assumption to an unqualified party
C. A developer attempts to have a parcel released from under a blanket mortgage
D. A lender calls for full payment of a note
90. A settlement agent could be
A. an attorney.
B. a real estate agent.
C. a lender.
D. all of the above.
91. Transfer taxes are generally paid by the
A. broker.
B. seller.
C. buyer.
D. lender.
92. The primary purpose of the secondary mortgage market is to
A. improve employment in the construction industry.
B. provide low cost mortgages to consumers.
C. provide liquidity (funds) for the primary market.
D. regulate the interest rates on residential mortgages.
93. S&Ls are now regulated by the Federal Housing Finance Board (FHFB) and deposits are insured by the
A. Deposit Insurance Fund for at least $250,000.
B. Federal Deposit Insurance Corporation for up to $250,000 per account.
C. Deposit Insurance Fund for at least $100,000.
D. Federal Deposit Insurance Corporation for up to $1,000,000 per account.
94.The primary distinction/s between the primary and secondary mortgage market is?
A. The primary market is not active in the origination of mortgage loans.
B. The secondary market is fundamentally a holding or warehousing process.
C. The homebuyers can get a mortgage from both primary and secondary markets.
D. Only lenders can get loans in the primary market.
95. The two biggest money lenders of residential real estate mortgages are
A. banks and insurance companies.
B. mortgage brokers and mutual banks.
C. savings and loans and banks.
D. insurance companies and mutual savings banks.
96. All of the following are sources for obtaining a residential mortgage for the purchase of a single-family residence, except
A. savings and loans.
B. commercial banks.
C. mortgage brokers.
D. FNMA.
97. Which is not an agency that deals (buys loans) in the secondary market?
A. Government National Mortgage Association
B. Federal Home Loan Mortgage Corporation
C. Federal Housing Administration
D. Federal National Mortgage Association
98. All of the following purchase mortgages from savings and loans in the secondary market EXCEPT the
A. Government National Mortgage Association.
B. Federal National Mortgage Association.
C. Federal Home Loan Mortgage Corporation.
D. Federal Housing Administration.
99. The Federal Reserve controls the money supply by
A. maintaining a fund from which member banks may borrow.
B. requiring how much of a bank’s assets have to be on reserve.
C. lending money to qualified customers.
D. setting the maximum interest rate that can be charged.
100. Which of the following is considered a part of the secondary mortgage market?
A. Mutual Savings Bank Assoc. (MSBA)
B. Federal Reserve Board (FED)
C. American Credit Union Board (ACUB)
D. Federal Home Loan Mortgage Corporation (FHLMC)
101. A mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return is called
A. participation financing.
B. coop-purchase money mortgaging (CMM).
C. wraparound financing.
D. co-underwriting mortgage partnering.
102. The Federal National Mortgage Association is authorized to purchase which of the following types of mortgage loans?
A. FHA only
B. VA only
C. FHA and VA, but not conforming conventional
D. FHA , VA, and conventional
103. A commercial bank would usually make all of the following loans EXCEPT,
A. construction.
B. home improvement loans.
C. loans for a mobile home.
D. a pension fund loan.
104. An increase in the availability of money would lead to which effects?
A. Interest rates would go up
B. Interest rates would go down
C. Interest rates would NOT be affected due to RESPA guidelines.
D. Interest rates would not be affected due to Truth in Lending laws.
105. All of the following were originally established to buy and sell mortgages in order to stimulate mortgage lending, except
A. Fannie Mae (FNMA).
B. Maggie Mae (MGIC).
C. Freddie Mac (FHLMC).
D. Ginnie Mae (GNMA).
106. Which private organization has been under the Federal Government’s conservatorship since 2008?
A. Ginnie Mae
B. Fannie Mae
C. Sallie Mae
D. FHA
107. The Federal National Mortgage Association (FNMA) sells seasoned mortgages and deeds of trust to individual investors and financial institutions. A seasoned mortgage is one that has been
A. in existence for some time and has a good record of repayment by the mortgagor.
B. in existence for some time and has a good record of repayment by the mortgagee.
C. in existence for more than ten years and has a fair record of repayment by the mortgagor.
D. in existence for some time and has been certified by the FDIC.
108. Which of the following secondary market organizations is a quasi-government corporation?
A. Fannie Mae (FNMA)
B. Maggie Mae (MGIC)
C. Freddie Mac (FHLMC)
D. Ginnie Mae (GNMA)
109. As a group, the three secondary mortgage market participants; Fannie Mae, Ginnie Mae and Freddie Mac
A. insure mortgage loans originated by primary market lenders.
B. regulate the low cost housing market.
C. provide an outlet for primary lenders to sell their mortgage loans.
D. guarantee any losses suffered by primary lenders.
110. Real estate can be a poor investment if
A. the inflation rate is high.
B. the investor plans to hold the investment for a long time.
C. the investor needs ready cash.
D. land values are appreciating in the area.
111. Under the ECOA, a lender can base lending decisions on all of an individual’s information, except
A. income.
B. job stability.
C. credit rating.
D. sex.
112. Real estate is generally a good investment because it
A. is highly liquid.
B. keeps up with inflation trends.
C. is inflation proof.
D. delivers a very high return for no risk.
113. The Real Estate Settlement Procedures Act and Regulation Z
A. prohibits lenders from discriminating in the granting of credit to consumers.
B. mandates material fact disclosures by brokers.
C. apply to both residential and commercial properties.
D. are separate acts dealing with separate financing issues.
114. In terms of stating mortgage rate interest, the standardized rate required by the Truth in Lending Act to facilitate comparison loan shopping is called the
A. contract rate.
B. annual percentage rate.
C. discount rate.
D. effective rate.
115. A standardized yardstick expressing the true annual cost of borrowing is expressed as the “APR” and includes
A. title insurance premiums.
B. the contract interest rate and points.
C. survey fees.
D. legal fees to prepare deeds.
116. As with most investments, there is a high degree of risk in buying and selling investment real estate because
A. market conditions are changing all the time.
B. market equilibrium is dictated by the global market.
C. market conditions are always driving prices down.
D. market conditions have taken all the profit out of real estate investment due to national rent control regulations.
117. Under the Real Estate Settlement Procedures Act (RESPA), lenders are
A. allowed to take kickbacks.
B. encouraged to take kickbacks to increase yield.
C. limited to $1,000 of kickbacks per loan.
D. prohibited from taking kickbacks or unearned fees.
118. The two major sections of the Truth In Lending law, includes
A. advertising and Annual Percentage Rate (A.P.R.).
B. Consumer Protection Rate (C.P.R.) and Annual Percentage Rate (A.P.R.)
C. advertising and disclosure of material facts.
D. lender profit transparency and Annual Percentage Rate (A.P.R.).
119. The Equal Credit Opportunity Act prohibits lenders from discriminating against consumers in the granting of credit based on the following protected classes;
A. race, income, religion, national origin, sex, marital status, age or dependency on public assistance.
B. race, color, religion, national origin, sex, marital status, age or dependency on public assistance.
C. race, national origin, age or dependency on public assistance.
D. race, color, religion, national origin, sex, or dependency on public assistance.
120. Regulation Z is not concerned with
A. the disclosure of loan cost information to a consumer.
B. the loan to value ratio
C. the annual percentage rate.
D. finance charges.
121. Which of the following mortgage closing transactions require compliance under TRID rules?
A. Unimproved property
B. Reverse mortgages
C. Home equity loans
D. Mobile homes
122. The following real estate financing statements all contain trigger terms under Regulation Z of the Truth in Lending Act, except
A. “Only $12,000 down and $750 a month payments”.
B. “Owner financing available at 6%.”
C. “Great assumable low interest rate loan”.
D. “Easy to qualify on this 30 year loan.”
123. Which of the following laws require(s) that finance charges be stated as an annual percentage rate (APR)?
A. Equal Credit Opportunity Act
B. Real Estate Settlement and Procedures Act
C. Fair Housing Act
D. Truth in Lending Act, Regulation Z
124. A settlement agent must provide the seller with the Closing Disclosure
A. three days before consummation of the mortgage.
B. at consummation of the mortgage.
C. three business days before consummation of the mortgage
D. six business days before consummation of the mortgage
125. The Truth-in-Lending Act applies to which of the following?
A. An owner extends a second mortgage to a buyer.
B. A broker assists a buyer with finding an available source of credit.
C. An advertisement for a house for sale by a broker which discloses financing terms.
D. A broker recommends that a buyer go to a bank of their choice and get pre-qualified for a loan amount.
126. Real estate can be a poor investment if
A. the inflation rate is high.
B. the investor plans to hold the investment for a long time.
C. the investor needs ready cash.
D. land values are appreciating in the area.
127. Real estate is generally a good investment because it
A. is highly liquid.
B. keeps up with inflation trends.
C. is inflation proof.
D. delivers a very high return for no risk.
128. Which agency administers RESPA?
A. Consumer Federal Protection Bureau (CFPB)
B. Consumer Federal Consumer Board (CFCB)
C. Consumer Financial Protection Bureau (CFPB)
D. Consumer Financial Credit Bureau (CFCB)
129. A primary purpose of the Truth in Lending Act is to
A. enforce usury mortgage laws.
B. set and standardize loans on FHA and VA mortgages.
C. protect lenders from losses due to foreclosure.
D. make loan cost information readily available to consumer borrowers.
130. A settlement agent must provide the seller with the Closing Disclosure
A. three days before consummation of the mortgage.
B. at consummation of the mortgage.
C. three business days before consummation of the mortgage
D. six business days before consummation of the mortgage
131. RESPA requires lenders to provide a HUD “Guide to Settlement” booklet and a Good Faith Estimate (GFE) of all costs related to settlement to borrowers within
A. 5 days of loan application.
B. 3 days of loan application.
C. 2 days of loan application.
D. at time of loan application.
132. Unsophisticated investors should seek
A. advice from only their broker as they know everything.
B. advice from a stockbroker before investing in real estate.
C. legal and tax counsel before making any real estate investments.
D. Never purchase investment real estate.
133. The Truth in Lending laws apply to the financing of
A. single family residences.
B. industrial plants.
C. multi-family housing projects over 25 units.
D. business assets.
134. Purchasing an investment property , like an apartment complex may be more rewarding if the investor has the required
A. computer skills.
B. trade skills.
C. management skills.
D. human relations skills.
135. An advantage of real estate investment is tax savings, the capital gain exclusion on a principal residence excludes the gain up to
A. $250,000 per individual (up to $750,000 for a couple).
B. $250,000 per individual (up to $500,000 for a couple).
C. $500,000 per individual (up to $1,000,000 for a couple).
D. $500,000 per individual (up to $750,000 for a couple).
136. The Truth in Lending Law is also known as _______.
137. All of the following are true of conventional loans except what?
A. They are made to the buyer without governmental insurance or guarantee.
B. The policy requirements of the lenders are not uniform.
C. The requirements to qualify are uniformly fixed by state law.
D. They require a higher down payment than non-conventional loans.
138. When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment is called:
A. An escalation payment
B. A balloon payment
C. A satisfaction payment
D. An acceleration payment
139. A home improvement company was negotiating with a home owner to add two rooms onto a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan?
A. Tuesday, midnight
B. Thursday, midnight
C. Friday, midnight
D. There is no rescission on a house.
140. RESPA would prohibit which of the following acts?
A. Steering
B. Paying of kickbacks
C. Blockbusting
D. Redlining
141. The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT:
A. Loan fees charged by the lender
B. Insurance premiums for mortgage insurance payment
C. Discount points and service fees
D. Recording fees and title insurance premiums
142. In a repayment of a mortgage loan, which type of interest is used?
A. Simple
B. Discount
C. Compound
D. Floating
143. On an 8% straight term loan of $6,071 the borrower paid total interest of $1,700. What is the term of the loan?
A. 30 months
B. 36 months
C. 42 months
D. 48 months
144. If advertised alone, which would be in violation of TRUTH IN LENDING?
A. “FHA financing available”
B. “Assumable loan”
C. “No down payment required”
D. “Easy financing terms”
145. A buyer wanted to use a promissory note for consideration on the purchase of a property. Can he do this?
A. Yes, the buyer can do as he wishes since he is making the contract.
B. Yes, this is acceptable as long as the seller agrees.
C. No, only money can be used for consideration.
D. No, only the seller can write a promissory note.
146. In which of the following markets may a lender sell a loan that a mortgage banker has previously originated?
A. Primary market
B. Secondary market
C. Mortgage market
D. Consumer market
147. The primary purpose of Truth in Lending is to _____________
A. control interest rates on behalf of the consumer.
B. control the true costs to close a transaction.
C. disclose the true costs of only an FHA loan.
D. disclose the true costs of obtaining credit.
148. ______ is the cost per thousand that is required to create the principal and interest payment necessary to pay off a loan.
A. A rate
B. A point
C. A factor
D. A power
149. Under Regulation Z, consummation is defined as the time when a consumer
A. requests a loan application.
B. becomes contractually obligated on a credit transaction.
C. is within three days of closing a transaction.
D. is given a completed Loan Estimate.
150. A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called:
A. Blanket financing
B. Packing financing
C. Warehousing
D. Discounting
151. In an installment land contract, what type of title did the seller retain?
A. Joint
B. Legal
C. Equitable
D. Record
152. Which of the following would usually occur in a sale-and-leaseback transaction?
A. The seller gets a return on the purchase in the form of rental payments.
B. The property is sold on the condition that the new owner lease it back to the seller at the time title passes.
C. The buyer keeps capital in inventories rather than in realty.
D. The rent that the seller pays is not income-tax deductible.
153. A house sold for $42,000. The buyer made a 20% down payment. Monthly interest on the loan was $252. What was the interest rate on the loan?
A. 5%
B. 7%
C. 9%
D. 11%
154. On a $50,000 loan the borrower is required to pay 2 points. How much does the borrower have to pay the lender?
A. $49,000.00
B. $50,000.00
C. $51,000.00
D. $52,000.00
155. An increase in the availability of money would lead to which effect?
A. Interest rates would go up.
B. Interest rates would go down.
C. Interest rates would NOT be affected due to RESPA guidelines.
D. Interest rates would NOT be affected due to TRUTH IN LENDING.
156. An owner was selling his own home. Can he advertise the down payment?
A. No, because it violates RESPA
B. No, because it violates Regulation Z
C. Yes, as long as it was listed with a broker
D. Yes, because it was his own home
157. The clause in a trust deed or mortgage which permits the mortgagee to declare the entire unpaid sum due upon a default by a mortgagor is called a(n) ______________
A. judgment clause.
B. acceleration clause.
C. escalator clause.
D. forfeiture clause.
158. Why would a mortgagee (beneficiary) have an appraisal on the property?
A. To make sure the buyer did not pay too much
B. To determine the property’s potential for appreciation
C. To protect the buyer from fraud
D. To assure the property value is sufficient to cover the loan
159. Effective October 1, 2015, the real estate industry has new requirements as specified in the
A. HUD-1A Rules.
B. TILT/RESPA Loan Disclosure (TRLD) Rule.
C. Consumer Protection Rules (CPR).
D. TILA/RESPA Integrated Disclosure (TRID) Rule.
160. Which of the following is considered a conventional loan?
A. FHA insured
B. VA guaranteed
C. Commercial bank ARM loan
D. FNMA mortgages
161. Usury MOST nearly means ______________
A. making loans without the benefit of co-signors.
B. lending money at fluctuating interest rates.
C. being capable of multiple usage.
D. illegal interest.
162. A borrower bought a $74,000 house with no down payment. The loan was probably ______________
A. a conventional insured loan.
B. a VA loan.
C. a FHA loan.
D. a conventional loan.
163. The Smiths’ purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller’s existing mortgage, which had a current balance of $23,000. The Smiths’ financed the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a
A. Wraparound mortgage
B. Package mortgage
C. Balloon note
D. Purchase money mortgage
164. An impound or reserve account MOST benefits whom?
A. The borrower
B. The lender
C. The trustee
D. The trustor
165. Which transaction requires a securities’ license?
A. Leasing a commercial building
B. Selling a commercial warehouse
C. Selling shares in Fannie Mae
D. Arranging a sale-leaseback on a commercial property
166. A buyer assumes the mortgage. How is the owner relieved of the liability?
A. Subject to mortgage
B. Novation
C. Substitution
D. Graduation
167. An owner advertised “beautiful acreage only $5,000 down, owner will personally finance down payment.” Would this be in violation of the Truth in Lending Act?
A. Yes, acreage is not exempt from Reg Z.
B. Yes, since a down payment was stated.
C. No, owners are not covered by Reg. Z.
D. No, brokers can advertise the down payment.
168. Which of the following describes a mortgage that requires principal and interest payments at regular intervals and calls for the liquidation of the debt by periodic installments until the debt is satisfied?
A. Amortized loan
B. Annuity loan
C. Acceleration loan
D. Assemblage loan
169. The Pickets are purchasing a home for $78,000 and the lender is giving them a 90% loan at 10% interest, plus a 2% loan origination fee. How much is the loan origination fee?
A. $1,404
B. $1,560
C. $1,650
D. $7,020
170. A mortgage broker _____________
A. arranges loans between borrowers and investors.
B. is a lender.
C. buys mortgages in the secondary mortgage market.
D. buys mortgages and resells them at a profit.
171. A buyer wants to take out an FHA loan. The broker should refer the buyer directly to ______________
A. any approved lending institution such as a bank or savings and loan association.
B. an FHA appraiser in the area.
C. the Federal Housing Administration office.
D. the Federal National Mortgage Association.
172. The seller under a land contract is called _____________
A. the grantor.
B. the grantee.
C. the vendor.
D. the vendee.
173. The maximum permissible “loan to value ratios” are _____________
A. based on sale price or appraised value, whichever is lower.
B. not determined by federal statute in the case of FHA loans.
C. based on the banker’s competitive market analysis.
D. fixed by law for conventional loans.
174. In most states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is this right called?
A. Equitable right of redemption
B. Owner’s right of redemption
C. Vendee’s right of redemption
D. Statutory right of redemption
175. A VA loan may be granted for the purchase of a one-family to four-family if _________________
A. the veteran certifies the rent collected will equal the mortgage payments.
B. the loan will be amortized for not more than 20 years.
C. the down payment will be at least ten percent.
D. the veteran agrees to live there.
176. The Loan Estimate must be delivered to an applicant
A. at the time the loan request is first made.
B. within three calendar days prior to closing.
C. within three calendar days of loan application.
D. within three business days of loan application.
177. The discount points charged by a lender on a federal VA or FHA loan are a percentage of the ________________
A. sale price.
B. appraised price.
C. loan amount.
D. down payment.
178. Which of the following is true of a second mortgage?
A. It has priority over a first mortgage.
B. It cannot be used as a security instrument.
C. It is not negotiable.
D. It is usually issued at a higher rate of interest.
179. When the lender under a deed of trust required title insurance, who would be the most likely person to pay for it?
A. The mortgagee
B. The trustee
C. The trustor
D. The beneficiary
180. Who is NOT an originator of primary loans?
A. Savings and loans
B. Credit unions
C. Mortgage brokers
D. FHA
181. A standardized yardstick expressing the true annual cost of borrowing is expressed as a/an
A. ECOA
B. Regulation Z
C. APR
D. RESPA
182. The lender is not insured or guaranteed against a loss, by reason of the borrower’s default in repayment, under which type of loan?
A. FHA
B. Conventional
C. VA
D. GI
183. If a single parent is applying for a real estate loan, when would the fact have to be revealed that part of the parent’s income is from child support?
A. When applying for a VA or FHA loan if the parent’s income is less than $25,000
B. If more than 50% of the parent’s income is non-wage sources
C. If the parent was relying on the income for repayment of the loan
D. This type of income never needs to be disclosed. It would be a violation of ECOA.
184. Discrimination is prohibited in lending practices under _____________
A. ECOA.
B. RESPA.
C. Truth in Lending Act.
D. FNMA.
185. Under an FHA graduated payment mortgage, which of the following fluctuates over the term of the loan?
A. Interest rate
B. Monthly payments
C. Finance charge
D. Annual rate
186. Who is the largest purchaser in the secondary market?
A. Ginnie Mae
B. Fannie Mae
C. FHA
D. Freddie Mac
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