Exam 6: Finance Part 2

Question 1

Mrs. Jones had Broker Smith negotiate a new $2,500 second trust deed on a home with a term of two years. What are the maximum costs and commission Mrs. Jones will have to pay?
A)
$195
B)
$415
C)
$250
D)
$640

Answer 1

$640
Explanation
Maximum costs: 5% or $390, whichever is greater $390
Maximum commission: Junior TDs of 2 years or more $250
Total costs and commission $640

Question 2

Which single factor would LEAST directly influence the level of movement of mortgage rates?
A)
Inflation
B)
Tight money
C)
Unemployment
D)
Demand for funds

Answer 2

Unemployment

Question 3

Brewer wants to purchase a home, but is denied financing because of an agency’s credit report. Brewer has repeatedly tried to get a copy of this report, but the agency refuses to give it to him. Brewer can bring action under the California Civil Code to
A)
do any or all of these.
B)
recover attorney fees and equitable damages.
C)
recover enough money to compensate him for damage to his credit.
D)
recover punitive damages up to $5,000.

Answer 3

do any or all of these.

Question 4

Through the Mortgage-Backed Securities (MBS) program, GNMA guarantees securities privately issued and backed by pools of mortgages. Securities holders receive a “pass-through” of principal and interest payments from the pool of mortgages. Under this program, GNMA also
A)
acts as a middleman to assure all documents are properly written and executed.
B)
brings buyers and sellers together.
C)
sets a uniform standard for mortgages being accepted into the pool.
D)
ensures that monthly payments are made in a timely manner on all mortgages in the pool.

Answer 4

sets a uniform standard for mortgages being accepted into the pool.

Question 5

In the view of the lender, which of the following characteristics is of importance pertaining to a note secured by a second deed of trust?
A)
The buyer must obtain a note secured by a lien on property.
B)
Risks are higher on a second deed of trust than on a first deed of trust.
C)
No deficiency judgment can be obtained.
D)
Notice of default must always be given to beneficiary of second.

Answer 5

Risks are higher on a second deed of trust than on a first deed of trust.

Question 6

Under the provisions of the Real Estate Settlement Procedures Act, which would NOT be considered a violation?
A)
Kickbacks
B)
Seller designating title insurance company
C)
Buyer designating lender
D)
Unearned fees

Answer 6

Buyer designating lender

Question 7

A broker negotiated a loan secured by a trust deed in which the lender was named as beneficiary. The lender did not state whether the loan funds were to be released before or after recordation of the trust deed. The broker is obligated to record
A)
before funds are disbursed.
B)
within 10 days of date funds are disbursed.
C)
immediately after funds are disbursed.
D)
at the same time funds are disbursed.

Answer 7

before funds are disbursed.

Question 8

A land sales contract is sometimes referred to as a substitute for a note and trust deed when discussing financing. In this context, a land sales contract is considered
A)
a security device.
B)
an option.
C)
the same as a lease.
D)
identical to a mortgage.

Answer 8

a security device.

Question 9

The term used in financing to express the payment where the monthly sum of principal and interest is always the same is
A)
equal.
B)
firm.
C)
level.
D)
fixed.

Answer 9

level

Question 10

A buyer seeking an FHA loan would be LEAST likely to
A)
go to the nearest FHA office for an appraisal.
B)
find a lender willing to give him the loan.
C)
agree to pay mutual mortgage insurance.
D)
agree to make amortized payments.

Answer 10

go to the nearest FHA office for an appraisal.

Question 11

Mr. and Mrs. Crest purchased a home two years ago, financing it with a long-term first trust deed and note. They encountered some financial difficulty and were unable to make their payment for two consecutive months. As a result, the beneficiary initiated foreclosure proceedings and the Crests received a copy of the notice of default that had been recorded. Their BEST course of action at this time is to exercise their right of
A)
refinancing.
B)
loan moratorium.
C)
reinstatement.
D)
redemption.

Answer 11

reinstatement

Question 12

Kathy Morgan, an unlicensed investor, purchased five trust deed notes on February 1. Within three months, she resold them. Within the following eight months, she bought eight more trust deed notes and immediately resold six of them. Which statement is correct?
A)
Kathy is in violation of the Real Estate Law.
B)
These transactions are legal and require no license.
C)
Because no more than six trust deed notes were sold at any one time, there is no violation.
D)
Since the notes were bought and sold all in one year, there is no need to be licensed.

Answer 12

Kathy is in violation of the Real Estate Law.

Question 13

A clause in a second trust deed that permits the first trust deed to be refinanced without affecting its priority would be known as
A)
none of these.
B)
an acceleration clause.
C)
an alienation clause.
D)
a submortgage.

Answer 13

none of these.

Question 14

A subdivider and developer purchased considerable acreage and now plan to construct a tract of 40 homes. In arranging the financing for the new construction, the lender has agreed to advance part of the funds immediately and will release a set amount of additional money as each home is completed. The funds that will be forthcoming as construction progresses are known as
A)
open-end mortgage payments.
B)
release monies.
C)
obligatory advances.
D)
reconveyance funds.

Answer 14

obligatory advances.

Question 15

Interest paid on original principal and also on the accrued and unpaid interest that has accumulated is
A)
compound interest.
B)
multiple interest.
C)
accumulative interest.
D)
simple interest.

Answer 15

compound interest.

Question 16

What is included as part of the finance charge in a Truth-in-Lending Disclosure Statement?
A)
Recording and document fees
B)
Assumption fee
C)
Title insurance fees
D)
Appraisal fee

Answer 16

Assumption fee

Question 17

Which word(s) placed in a promissory note would commit all the borrowers for repayment?
A)
Individually and severally
B)
Jointly
C)
Jointly and severally
D)
Individually

Answer 17

Jointly and severally

Question 18

A builder is selling a house that he had built under a blanket encumbrance. Under normal procedure, the instrument that would be requested of the beneficiary would be a
A)
warranty deed.
B)
quitclaim deed.
C)
grant deed.
D)
partial reconveyance deed.

Answer 18

partial reconveyance deed.

Question 19

A purchase money mortgage may be defined as one
A)
that includes chattels, such as household appliances, as additional collateral.
B)
that provides for additional advances to the mortgagor without the necessity of writing a new mortgage.
C)
taken on all or part of the purchase price.
D)
taken on several parcels.

Answer 19

taken on all or part of the purchase price.

Question 20

The "One-Action" rule pertains MOST closely to
A)
types of real estate licenses allowed.
B)
mortgage loan debt collection.
C)
application of the alienation clause.
D)
enforcement of subordination clauses.

Answer 20

mortgage loan debt collection.

Question 21

A contractor borrowed money to buy and develop a parcel of land into 10 lots for sale. The contractor should request that the lender include in the trust deed a(n)
A)
partial release clause.
B)
acceleration clause.
C)
alienation clause.
D)
timber clause.

Answer 21

partial release clause.

Question 22

Savings and loan institutions obtain MOST of their money for making loans from
A)
individual savings.
B)
corporation savings.
C)
corporation profits.
D)
FNMA.

Answer 22

FNMA