Chapter 9 - Financial Institutions

Question 1

Inflation: When the value of something decreases, the value of MONEY _______.

Answer 1

Increases; think of it as… more money can buy you more things.

Question 2

Deflation: Caused when the Feds restrict the amount of money available, thus causes the prices of goods to go ______.

Answer 2

Down; because people have less money to buy things with.

Question 3

Seller’s Market:

Answer 3

When home prices increase because there’s not many selling.

Question 4

Buyer’s Market:

Answer 4

When prices decrease because there are too many homes to be sold.

Question 5

When the Fed increases the amount of available loan funds, interest rates go _______.

Answer 5

Down; does this by buying back bonds

Question 6

When the Fed decreases the amount of available loan funds, interest rates go ______.

Answer 6

Up; does this by selling bonds.

Question 7

________ is determined based upon a borrower’s savings, valuable property, and income, and is evaluated in terms of the reliability of these assets.

Answer 7

Capacity

Question 8

________ is the ease and rate with which an asset can be converted into a medium of exchange (like cash).

Answer 8

Liquidity

Question 9

The three areas of demand for borrowing money are:

Answer 9

1. Construction funds to build
2. Financing a purchase
3. Refinancing

Question 10

FDIC stands for:

Answer 10

Federal Deposit Insurance Corporation for your Institutional Lenders

Question 11

The bank finances long-term loans for existing land and the buildings.

Answer 11

First Trust Deed Loans

Question 12

Money is provided for the construction of a building, to be repaid when the construction is complete.

Answer 12

Construction Loans (or Interim Loans)

Question 13

Permanent long-term loans are made to pay off the interim lender upon completion of construction of commercial or apartment projects and are called “takeout loans” because they take out the interim lender.

Answer 13

Take-Out Loans (Repayment of Interim Loans)

Question 14

This type of loan is for repairing and modernizing existing buildings.

Answer 14

Home Improvement Loans

Question 15

_________ Loans are not insured or guaranteed by the US Government.

Answer 15

Conventional Loans

Question 16

For your credit unions you have NCUA (?) insurance covering up to 250k.

Answer 16

National Credit Union Administration

Question 17

RETI (?) is a type of company that sells securities to invest in real estate properties.

Answer 17

Real Estate Investment Trust

Question 18

For home improvement loans to a maximum of $25,000. The funds can be used only for home improvement purposes only. Which FHA loan?

Answer 18

FHA Title I: Home Improvement Loans

Question 19

For Home purchases or building loans. Which FHA Loan?

Answer 19

FHA Title II

Question 20

MPRs (?) are minimum quality standards established by the FHA and VA.

Answer 20

Minimum Property Requirements

Question 21

A CRV (?) is an appraisal of the property to be purchased by the veteran. The amount of down payment is determined by the CRV.

Answer 21

Certificate of Reasonable Value; the appraisal expires after 6 months.

Question 22

For a VA Loan, there are no prepayment penalties and there is no down payment for any amount, but California lenders will only make a loan up to $________.

Answer 22

$417,000 and usually over 30 years.

Question 23

Land contracts are used by the California Department of Veterans Affairs, who ________ legal title until the loan is paid in full.

Answer 23

Retains legal title.

Question 24

Freddie Mac, Ginnie Mae, or Fannie Mae?
Federal National Mortgage Association
Government National Mortgage Association
Federal Home Loan Mortgage Corporation

Answer 24

Fannie Mae
Ginnie Mae
Freddie Mac

Question 25

________ Loans are higher than the $729,750 set by Fannie Mae and Freddie Mac.

Answer 25

Jumbo Loans

Question 26

__________ ____________ is the requirement of reporting annual and quarterly loan activity (review of trust fund) to the DRE if, within the past 12 months, the broker has negotiated any combination of 20 or more loans to a subdivision or a total of more than $2,000,000 in loans.

Answer 26

Threshold Reporting

Question 27

Article ____: Broker Restrictions; you cannot pool funds.

Answer 27

Article 5

Question 28

Article _____: Real Property Securities Dealer; A DRE broker’s license and endorsement are required. A $100 fee plus a $10,000 surety bond (for Commissioner’s permit). DRE permit is required to sell specific security.

Answer 28

Article 6

Question 29

RPSD (?) is any persona acting as principal or agent who engages in the business of selling real property securities (such as promissory notes or sales contracts). Endorsement fee of $100 along with the 10k.

Answer 29

Real Property Securities Dealer