Chapter 11 True/False

Question 1

Freddie Mac and Fannie Mae standardize loan qualification and underwriting standards in the primary market.

True
False

Answer 1

True: Freddie Mac and Fannie Mae influence but do not participate directly in the primary market.

Question 2

The buyer’s offer to purchase indicates that the seller is giving cash to the buyer at closing. The buyer is going to use the money to make minor repairs. The buyer’s lender will not issue a loan if the seller gives money to the buyer at closing. The licensee drafts an amendment to the offer stating that the seller will not provide repair money at closing. The buyer gives the amended offer to the bank. The buyer and seller, however, have an oral agreement about the repair money that the seller will provide at closing. As long as the buyer and seller are in agreement, the licensee has no obligation to inform the bank of the oral agreement.

True
False

Answer 2

False: A licensee who becomes aware of the fact that a party to a transaction has not disclosed that party’s entire agreement to a lender shall disclose this in writing and in a timely manner to the lender.

Question 3

The VA certificate of reasonable value sets the maximum guarantee to which a veteran is entitled.

True
False

Answer 3

False: For a VA loan, the certificate of eligibility sets the maximum guarantee to which the veteran is entitled.

Question 4

The federal government insures FHA loans.

True
False

Answer 4

True: If the homeowner defaults on the mortgage, the lending institution does not incur any significant loss since the FHA insured the lender against risk.

Question 5

Reverse mortgages provide financing for first-time homebuyers with low down payments but good future earning potential.

True
False

Answer 5

False: Individuals ages 62 and over may benefit from a reverse mortgage by receiving monthly payments drawn from the equity in their homes.

Question 6

When a buyer purchases property on a land contract, the buyer receives legal title at the time of possession.

True
False

Answer 6

False: A land contact requires the transfer of legal title to the vendee when the vendor is paid in full.

Question 7

The seller maintains legal title under a purchase money mortgage.

True
False

Answer 7

False: A buyer obtains legal title under a purchase money mortgage.

Question 8

Regulation Z does not apply to small business loans.

True
False

Answer 8

True: Regulation Z regulates consumer credit that either involves a finance charge or by written agreement to be payable in more than four installments.

Question 9

A land contract is the same as an installment contract or a contract for deed.

True
False

Answer 9

True: Under a land contract, the seller agrees to finance the sale for a specified period.

Question 10

The FHA requires certain construction standards before insuring a loan.

True
False

Answer 10

True: FHA appraisals require a basic survey of the physical aspects of the home. Home defects must be disclosed by the appraiser to the borrower and typically must be repaired prior to closing.

Question 11

RESPA requires a lender to disclose all the terms of a loan if the lender uses triggering terms in advertising.

True
False

Answer 11

False: The Truth in Lending Act requires a lender to disclose financing charges if triggering terms are used in advertising.