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Florida RE exam > Chapter 13 > Flashcards

Chapter 13 Flashcards

1
Q

What are the types of mortgage loans?

A

Conventional
FHA
VA

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2
Q

What is a VA loan?

A

Loan for single-family owner-occupied home that guarantees the first 25% of losses in the event of a foreclosure or default
Originated through a VA approved lender

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3
Q

What is a certificate of elegibility?

A

Document that shows a veteran’s eligibility and amount of guarantee for the VA mortgage loan program

To be eligible, the veteran must have served a specified minimum amount of time and have been honorably discharged

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4
Q

What is the purpose of the FHA 203(b) guaranteed loan program?

A

Assist military with financing the purchase of reasonably priced owner-occupied homes with little or no down payment, easier qualifications, and lower interest rates

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5
Q

Which type of loan is insured, protecting the lender from a loss in case of a foreclosure?

A

FHA loan

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6
Q

What is the purpose of the FHA insured loan program?

A

Promotes homeownership for low and moderate income families by lowering the loan costs while encouraging lenders to make loans to creditworthy borrowers who cannot meet conventional loan requirements

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7
Q

What is the minimum down payment required for an FHA loan?

A

3.5%

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8
Q

What is the max LTV ratio allowed for an FHA insured mortgage loan?

A

96.5

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9
Q

What is the max housing expense ratio allowed for an FHA insured mortgage loan?

A

31%

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10
Q

What is the max total obligations ratio allowed for an FHA insured mortgage loan?

A

43%

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11
Q

How much is the mortgage insurance premium for an FHA insured loan?

A

1.75% of the mortgage amount if paid once at closing
0.85% of the annual outstanding loan balance if paid monthly

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12
Q

What is a unique aspect of an FHA loan?

A

FHA insures the lender 100%

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13
Q

What is the purpose of the FHA 342(c) insured loan program?

A

Insures a loan for 30 years for the purpose of a single-unit condominium

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14
Q

Which type of loan is not insured or guaranteed by an agency of the government?

A

Conventional loan

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15
Q

Which loan type is the most difficult to obtain?

A

Conventional loan

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16
Q

Which type of insurance is typically required for a conventional mortgage loan when the loan amount exceeds 80% of the property value?

A

PMI
Private mortgage insurance

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17
Q

When is PMI automatically cancelled with a conventional loan?

A

When the Loan to Value ratio is 78% or less of the property’s original value

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18
Q

What is Usury?

A

Charging an unlawfully high interest rate

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19
Q

What is a term mortgage?

A

Loan repayment method that provides for payments of interest only during the term of the loan with the amount borrowed repaid in a lump sum at the end of the term

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20
Q

What is an amortized mortgage?

A

Loan repayment method with scheduled periodic payments consisting of a portion that applies to interest and a portion that applies to principal

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21
Q

What is fully amortizing?

A

Amortized mortgage when the payments are enough to repay the interest and loan amount in full over the life of the loan

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22
Q

What is partially amortizing?

A

Amortized mortgage when the payments are not enough to repay the interest and loan amount in full over the loan term

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23
Q

What is negative amortization?

A

Amortization that occurs when loan payments fail to cover the interest due and the remaining amount of unpaid interest is added to the loan’s principal

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24
Q

What is a balloon payment?

A

Lump sum payment of any remaining principal amount at the end of a term mortgage or partially amortized loan

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25
Q

What is an adjustable rate mortgage?

A

Loan repayment method in which the interest rate fluctuates over the term of the loan

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26
Q

What is a teaser rate?

A

An initial rate stated in a promissory note for an ARM that is lower than the fully indexed rate

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27
Q

What is a three-year ARM?

A

Adjustable rate mortgage with an adjustment period of 36 months

28
Q

What is a five-year ARM?

A

Adjustable rate mortgage with an adjustment period of 60 months

29
Q

What is a periodic cap rate?

A

Maximum interest rate change at any one time for an ARM

30
Q

What is a payment cap?

A

Maximum limit for any single adjustment to the payment amount for an ARM

31
Q

What is a lifetime cap?

A

Maximum interest rate that can be charged over the life of an ARM

32
Q

What is a biweekly mortgage?

A

Loan repayment method that requires that one half of the mortgage payment be paid every 2 weeks instead of 1 payment per month

33
Q

What is a blanket mortgage?

A

Mortgage that pledges two or more parcels as collateral for a loan. It contains a release clause that allows the borrower to pay a specified amount to release single lots to be sold to buyers

Used by builders and developers when constructing several properties in the same area

34
Q

What is a home equity loan?

A

Single lump sum loan secured by a homeowner’s equity, creating a lien on the property

35
Q

What is a home equity line of credit?

A

Loan with a revolving line of credit and adjustable interest rate allowing a homeowner to borrow against the home’s equity

36
Q

What is a reverse mortgage?

A

Loan allowing homeowners age 62 and older to take a lump sum or a monthly advance on a line of credit based on the equity in their home

37
Q

What is a purchase money mortgage?

A

Loan obtained by a buyer from the seller to purchase the property (seller financing)

38
Q

What is a package mortgage?

A

Loan that includes real and personal property such as major appliances and furniture as collateral for a loan

39
Q

What is a Chattel mortgage?

A

Loan that includes only personal property as collateral

40
Q

What happens to the monetary system when more deposits are made? (Intermediation)

A

More funds are available for lending purposes

41
Q

What happens to mortgage interest rates when intermediation occurs? (more deposits are made)

A

Interest rates decrease

42
Q

What does the Federal Reserve System do?

A

sets monetary policy, lends money to banks, and regulates cost and availability of credit

43
Q

How does the Federal reserve board of governors regulate the money supply?

A

Reserve requirement
Discount rate
Open market operations

44
Q

What is the reserve requirement imposed by the federal reserve?

A

Increasing or decreasing the percentage of depositor’s money that is required to be kept in reserves and not lent out

This results in increases or decreases in interest rate because it affects how much money is available to be loaned out

45
Q

What is the federal reserve action associated with changes in the discount rate?

A

They increase or decrease the discount rate for banks which results in direct increase or decrease to interest rate that banks provide to borrowers

46
Q

What is the federal reserve action associated with open market operations?

A

The federal reserve can purchase or sell government securities on the open market altering the amount of money available in the monetary system, which affects interest rates for lending

When they purchase securities they put more money into the monetary system (intermediation), which means lower interest rates

When they sell securities, they take money out of the monetary system (disintermediation), causing higher interest rates

47
Q

What is the most abrupt method for the Federal Reserve to control the supply of money?

A

Raising or lowering the reserve requirement

48
Q

What is the least effective method for the Federal Reserve to control the cost of money?

A

Changes in the discount rate

49
Q

What is the most effective method for the Federal Reserve to control the cost of money?

A

Purchasing or selling government securities on the open market

50
Q

In which mortgage market are loans originated?

A

Primary Mortgage market

51
Q

Who provides loans in the primary mortgage market?

A

Savings associations
Credit Unions
Commercial Banks
Life Insurance Companies (also 2ndary market)
Real estate Investment Trusts
Mortgage Bankers

52
Q

Which of the lenders in the primary mortgage market has the largest source of funds for financing both apartment and commercial properties?

A

Life Insurance Companies

53
Q

Which primary lending source is used primarily for short-term constructions loans for large projects?

A

Commercial Banks

54
Q

Which primary lending source is used primarily by private investment groups to purchase real estate for inevstment?

A

Real Estate Investment Trusts

55
Q

What do Mortgage Loan Originators do?

A

They do not make loans
They accept residential loan applications
They offer to negotiate terms of a residential mortgage loan
for compensation

56
Q

Who employs mortgage loan originators?

A

Mortgage Brokers

57
Q

What is the secondary mortgage market?

A

Mortgage market in which loans that were originated in the primary market get sold in order to provide a constant source of funds for real estate transactions (frees up the money in the primary market)

58
Q

Who are the primary lenders in the secondary mortgage market?

A

Fannie Mae (FNMA)
Ginnie Mae (GNMA)
Freddie Mac (FHLMC)

59
Q

Who is the largest and oldest participant in the secondary mortgage market which purchases FHA, VA, and conventional loans?

A

Fannie Mae (FNMA)

60
Q

Which secondary lender is government owned and primarily purchases federally subsidized residential mortgages (FHA, VA)?

A

Ginnie Mae (GNMA)

61
Q

Which secondary lender is stockholder-owner that primarily purchases conventional loans?

A

Freddie Mac (FHLMC)

62
Q

What are the common types of mortgage fraud?

A

Foreclosure rescue schemes
Borrower identity theft
Reverse Mortgage scams
Straw borrowers
Appraisal fraud
No document (no doc) loans

63
Q

Which red flags point to mortgage fraud?

A

Unsolicited offers
Upfront fees
Request for payment to foreclosure service
Requests for quitclaim deed
Names added or deleted from contract
Requests to sign incomplete documents
Inflated appraisals or contract prices

64
Q

What are the RESPA (Real Estate Settlement Procedures Act) requirements for residential loans used to finance the purchase of single-family to four-family properties?

A

Loan estimate no later than 3 business days after application
Information booklet needs to be provided
Closing disclosures at least 3 days before closing
Prohibits kickbacks & rebates except those defined

65
Q

When does RESPA allow for kickbacks?

A

When a service has been provided by a person with the appropriate license, and all parties to the transaction have been advised of the payment

66
Q

Which terms in advertising require disclosures under the truth-in-lending act? Triggering terms

A

Amount of down payment, or any payment
Number of payments
Period of repayment
Amount of any finance charge

Florida RE exam (18 decks)

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