Ch 20: Control of Money and Real Estate Finance

Question 1

Which of the following is NOT a violation of the Real Estate Settlement Procedures Act?

a. Accepting a fee or charging for services that were not performed
b. Requiring a particular title insurer
c. Accepting a kickback on a loan subject to RESPA
d. Directing the buyer to a particular lender

Answer 1

d. Directing the buyer to a particular lender

Directing the buyer to a particular lender is NOT a violation of RESPA.

Question 2

The Closing Disclosure form required by TRID is to be received by the borrower (consumer) no later than:

a. Seven business days before consummation of the loan.
b. Four business days before consummation of the loan
c. Five business days before consummation of the loan
d. Three business days before consummation of the loan

Answer 2

d. Three business days before consummation of the loan

For loans that require a Loan Estimate and that proceed to closing the lender must provide a new final disclosure form called the Closing Disclosure Form that reflects the actual terms of the transaction. The lender is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan.

Question 3

The types of credit transactions covered by the Home Ownership and Equity Protection Act (HOEPA) include all of the following EXCEPT:

a. RV that is used as a primary residence
b. Refinances
c. Reverse Mortgages
d. Purchase Money Mortgage

Answer 3

c. Reverse Mortgages

HOEPA does not apply to Reverse Mortgages.

Question 4

Usury laws fix which of the following items?

a. Loan to value ratio.
b. Length of time for repayment terms
c. Maximum rates of interest charged
d. Minimum rates of interest

Answer 4

c. Maximum rates of interest charged

Usury laws establish the maximum rates of interest that can be charged. There is no longer a usury limit on real property loans.

Question 5

Kickbacks to the lender from service providers are prohibited by:

a. Truth-in-Lending
b. The Equal Credit Opportunity Act
c. FHA
d. RESPA

Answer 5

d. RESPA

RESPA prohibits the lender from making any charges for preparation of forms or taking of any kickbacks for referrals to service providers.

Question 6

The primary responsibility for disclosure under TRID rests with the:

a. Escrow
b. Lender
c. Broker
d. Buyer

Answer 6

b. Lender

The broker and escrow officer have some responsibility, but the lender has the primary obligation

Question 7

The HOEPA coverage to determine if the mortgage is a high-cost mortgage includes all of the following EXCEPT:

a. The amount of points and fees paid in connection with the transaction
b. The loan amortization period is more than 30 years
c. The prepayment penalties that may be charged
d. The transaction’s annual percentage rate (APR

Answer 7

b. The loan amortization period is more than 30 years

The loan amortization period is not one of three tests for a high-cost mortgage.

Question 8

Under RESPA, the lender MUST provide the borrower with a:

a. Mortgage insurance policy
b. Home protection warranty
c. Certified appraisal
d. Good faith estimate of closing costs

Answer 8

d. Good faith estimate of closing costs

The lender is required to provide the borrower with a good faith estimate of the settlement cost at the time of application or within three business days

Question 9

The Federal Truth-In-Lending Act requires the lender to disclose to the borrower all of the following amounts EXCEPT:

a. Total property taxes
b. The annual rate of interest to be paid
c. The amount of discount points paid
d. The total amount of finance charges payable during the term of the loan

Answer 9

a. Total property taxes

Property taxes have nothing to do with the loan and the disclosure of the financing costs.

Question 10

Truth-In-Lending is also known as:

a. Federal Usury Law
b. Fair Housing Act
c. Regulation Z
d. Credit Act of 1968

Answer 10

c. Regulation Z

The Federal Reserve System is responsible for supervising the Truth-In-Lending Act and was charged with the responsibility to formulate and issue regulations called Regulation Z.

Question 11

The Federal Reserve could NOT take the following action:

a. Buy government bonds on the open market
b. Raise the reserve requirements of banks
c. Raise taxes
d. Raise the discount rate

Answer 11

c. Raise taxes

The Federal Reserve has no authority over the tax rates. The FED does have authority to raise bank reserve requirements, buy government bonds and to raise the discount rate.

Question 12

The following does NOT describe the borrower’s rights under the Equal Credit Opportunity Act:

a. If a loan is denied, the reason for the denial must be stated
b. Lenders cannot ask questions concerning pregnancy
c. The fact that the borrowers income is primarily from public assistance cannot affect the lender’s decision.
d. Past financial problems cannot be the basis for a denial

Answer 12

d. Past financial problems cannot be the basis for a denial.

Past financial problems is the primary reason for denial of credit; so it is not a borrower’s right under the Equal Credit Opportunity Act. The other answer choices are all borrower’s rights under the Equal Credit Opportunity Act.

Question 13

The owner’s right to rescind within three business days when a lender making a consumer loan places a lien on his or her residence is provided by:

a. RESPA
b. The Uniform Commercial Code
c. The Equal Credit Opportunity Act
d. The Truth-In-Lending Act

Answer 13

d. The Truth-In-Lending Act

The Truth-In-Lending Act requires that if a borrower is refinancing an existing mortgage loan or obtaining a new mortgage loan and is pledging a principal residence already owned as security for such loan, the disclosure statement must provide for a Right of Rescission for the loan transaction.

Question 14

Under RESPA, when must a lender provide a copy of the HUD information booklet to a borrower?

a. Within three business days of receiving the loan application
b. At closing
c. When requested by the borrower
d. 48 hours prior to closing

Answer 14

a. Within three business days of receiving the loan application

The HUD booklet entitled Settlement Costs and You must be supplied by the lender within three business days of receiving the loan application.

Question 15

The rescission provisions of truth-in-lending apply to:

a. Consumer credit
b. Commercial property purchase loans
c. Small business loans
d. Home purchase loans

Answer 15

a. Consumer credit

The refinancing of a loan with the residence as the collateral is considered consumer credit

Question 16

Truth-In-Lending disclosures would be required in an advertisement stating:

a. $3,000 down
b. Ten percent annual percentage rate
c. Low, low down
d. No down payment

Answer 16

a. $3,000 down

Regulation Z of the Truth-in-Lending Act applies to advertising the credit terms available in the purchase of a home. The only specific thing that may be stated in the advertising without making a full disclosure in the ad is the annual percentage rate spelled out in full. If any other specific credit terms are included in the advertisement, a full disclosure must be provided. No down payment and Low, low down would not be considered a specific credit term.

Question 17

The Loan Estimate required by TRID must be delivered or placed in the mail no later than:

a. Fifth day after consummation of the loan and no later than the tenth day before consummation of the transaction.
b. Third day after consummation of the loan and no later than the seventh day before consummation of the transaction.
c. Third day after receiving the application and no later than the seventh day before consummation of the transaction.
d. Fifth day after receiving the application and no later than the tenth day before consummation of the transaction.

Answer 17

c. Third day after receiving the application and no later than the seventh day before consummation of the transaction.

The lender is responsible for ensuring that it delivers or places in the mail the Loan Estimate form no later than the third business day after receiving the consumer’s application and no later than the seventh business day before consummation of the transaction.

Question 18

Mortgage bankers:

a. Obligations end when a loan is finalized
b. Do not originate loans
c. Use savings deposits to make loans
d. Service real estate loans

Answer 18

d. Service real estate loans

Mortgage bankers generally service real loans meaning that they collect the monthly payment, etc. The mortgage banker DOES originate loans, does NOT use savings deposits to make loans and has continuing obligations after the loan is originated.

Question 19

The owner’s right to rescind within three business days when a lender making a consumer loan places a lien on his or her residence is provided by:

a. The Truth-In-Lending Act
b. RESPA
c. The Equal Credit Opportunity Act
d. The Uniform Commercial Code

Answer 19

a. The Truth-In-Lending Act

The Truth-In-Lending Act requires that if a borrower is refinancing an existing mortgage loan or obtaining a new mortgage loan and is pledging a principal residence already owned as security for such loan, the disclosure statement must provide for a Right of Rescission for the loan transaction.

Question 20

The interest which an owner has in a parcel of real estate over and above the mortgage indebtedness is:

a. Redemption
b. Homestead exemption
c. Profit
d. Equity

Answer 20

d. Equity

An individual’s equity in real estate owned is computed by subtracting the dollar amount of the balance due on the mortgage or other related debt from the value of the real estate.

Question 21

A mortgage banker making an 80 % loan-to-value on a triplex selling for $420,000 would make a loan of:

a. $336,000
b. $399,000
c. $371,200
d. $294,000

Answer 21

a. $336,000

The loan would be for $336,000 which is 80% of the selling price.

Question 22

The purchaser’s down payment is considered:

a. Leveraged funds
b. Borrowed funds
c. Equity funds
d. Capital funds

Answer 22

c. Equity funds

Equity funds are the purchasers own assets while debt funds are borrowed or leveraged funds.

Question 23

The secondary mortgage market refers to:

a. Loan made by non-institutional lenders
b. The resale mortgage marketplace
c. Second trust deeds
d. High risk loans

Answer 23

b. The resale mortgage marketplace

The secondary mortgage market allows the loan originator to sell the loans to buyers who invest in long term, low risk investments. The major buyers of mortgage loans originated are warehousing agencies that purchase a number of mortgage loans. The agency assembles the loans purchased for resale to investors as mortgage backed securities.

Question 24

The following term does NOT belong with the others:

a. Pass through certificate
b. Funding fees
c. Mortgage backed securities
d. Tandem plan

Answer 24

b. Funding fees

Funding fees are related to the origination of a VA loan. Pass through certificates, mortgage backed securities and tandem plans are all related to the Secondary Mortgage Market.

Question 25

Which of the following is a buyer in the secondary mortgage market?

a. Veterans Administration
b. Federal Reserve Banks
c. Federal National Mortgage Association
d. Federal Housing Administration

Answer 25

c. Federal National Mortgage Association

The Federal National Mortgage Association is commonly known as “Fannie Mae” Is the major participant in the secondary mortgage market.