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FINANCE FINAL Flashcards

1
Q

Which Act prohibits discrimination in granting credit
a. ECOA
b. Home Mortgage Disclosure Act
c. RESPA
d. There is no law prohibiting discrimination

A

a. ECOA

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2
Q

In real estate finance, disintermediation means
a. a borrower has possession of property
b. a lender has possession of property
c. money flows out of savings institutions into higher return investments
d. an owner has a property free of debt

A

c. money flows out of savings institutions into higher return investments

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3
Q

Interest rates are a measure of the
a. cost of money
b. demand for money
c. supply of money
d. value of money

A

a. cost of money

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4
Q

A lender that makes a secured loan for the purchase of real estate is known as the
a. mortgagee
b. mortgagor
c. trustee
d. vendor

A

a. mortgagee

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4
Q

The secondary market for mortgage loans can best be described as the
a. actions of private investors
b. market for trading future contracts
c. operations of the FHA and the VA
d. purchase and/or sale of mortgage loans after origination

A

d. purchase and/or sale of mortgage loans after origination

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5
Q

The purpose of an acceleration clause in a mortgage instrument is to
a. allow the interest rate to be increased
b. define that, in the event of default , all future payments become due immediately
c. define that one late payment is an act in default
d. increase payments at periodic intervals

A

b. define that, in the event of default , all future payments become due immediately

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6
Q

When assuming a loan, the buyer would
a. be required to be a veteran
b. make sure the lender accelerates the loan
c. not be responsible to make payments on time
d. pay the seller the equity in their property

A

d. pay the seller the equity in their property

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7
Q

Which is NOT a way for a buyer to avoid PMI on a conventional loan
a. obtain an 80-10-10 loan
b. obtain a “no PMI’ loan
c. make a 10% down payment on a house
d. make a 20% or more down payment on a house

A

c. make a 10% down payment on a house

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8
Q

Which is NOT a method used by the Federal reserve to control monetary policy
a. open market operations
b. raise or lower the discount rate
c. raise or lower the prime rate
d. raise or lower reserve requirements

A

c. raise or lower the prime rate

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9
Q

The interest rate charged by the Federal Reserve loans to member banks is called the
a. bank rate
b. base rate
c. discount rate
d. prime rate

A

c. discount rate

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10
Q

Funds for making FHA loans are provided by
a. any gov’t agency
b. the Federal Reserve
c. the FHA
d. qualified lending institutions

A

d. qualified lending institutions

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11
Q

The property value acceptable to the FHA as loan collateral is determined
a. as the less of the appraised value or the purchase price
b. by the amount of thee MIP commitment
c. by the opinion of the loan underwriter
d. by the real estate agent

A

a. as the less of the appraised value or the purchase price

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12
Q

Which information can be found in a note
a. appraised value of property
b. details of the purchase
c. legal description of property
d. terms and repayment provisions

A

d. terms and repayment provisions

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13
Q

Which charge is used to increase a lender’s yield on real estate loans
a. appraisal
b. credit report
c. origination fee
d. title insurance

A

c. origination fee

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14
Q

A loan that includes periodic payments of principal and interest followed by a balloon payment is known as a
a. fully amortized loan
b. hybrid mortgage
c. partially amortized loan
d. straight note

A

c. partially amortized loan

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15
Q

The Equal Credit Opportunity Act, which is designed to limit discrimination in credit transactions, includes which restrictions
a. credit reports cannot be required if an applicant objects
b. no questions amy be asked about a borrower’s credit history
c. no reasons have to be given if credit is denied
d. no restrictions can be placed on the source of income received.

A

d. no restrictions can be placed on the source of income received.

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16
Q

Which is NOT included in a borrower’s income analysis?
a. pensions, interest, and dividends
b. regular earnings and overtime
c. revealed alimony and child support
d. sporadic overtime and commissions

A

d. sporadic overtime and commissions

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17
Q

Qualifying guidelines on most FHA loans are ___ housing ratio and __ total debt ratio
a. 28%;33%
b. 28%;36%
c. 31%;43%
d. 36%;41%

A

c. 31%;43%

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18
Q

The minimum cash payment investment needed for a home with and FHA appraised value of $90,000 is a. $900
b. $3,150
c. $4,500
d. $9,000

A

b. $3,150

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19
Q

Which statement regarding VA loans is FALSE
a. property is appraised and a CRV is issued
b. VA loans are available for investors who are veterans
c. veteran may pay points on a purchase
d. veteran needs a Certificate of Eligibility

A

b. VA loans are available for investors who are veterans

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20
Q

Ann makes a 20% down payment on her $85,000 purchase. Her loan amount is
a. 17,000
b. $20,000
c. $68,000
d. $85,000

A

c. $68,000

21
Q

Private mortgage insurance covers the risk of the possibility of
a. death of the borrower
b. default in loan repayment
c. failure of lender who makes the loan
d. loss in value of the collateral property

A

b. default in loan repayment

22
Q

The interest or value remaining in a property after all liens and other debts are taken into account is known as
a. assessment
b. equity
c. surety
d. valuation

A

b. equity

23
Q

A mortgage that covers a number of parcels of real property , and that may provide for the separate sale of each parcel, is known as a
a. adjustable rate mortgage
b. blanket mortgage
c. open-end mortgage
d. package mortgage

A

b. blanket mortgage

24
Q

On an adjustable rate loan,
a. the rate is tied to the lender’s profitability
b. the rate is tied to a specific index
c. the rate is tied to what the borrower can afford
d. there is always negative amortization

A

b. the rate is tied to a specific index

24
Q

With a fixed rate loan,
a. assumptions must be allowed
b. interest rate may increase if the index goes up
c. a lender may increase the interest rate if the borrower misses two payments in a year
d. principal and interest payments must remain constant

A

d. principal and interest payments must remain constant

25
Q

The Closing Disclosure is NOT required in the settlement of a transaction of a
a. condominium
b. owner-occupied four-family housing unit
c. retail store building
d. single family home

A

c. retail store building

26
Q

The Real Estate Settlement Procedures Act does not require
a. a good faith estimate of closing costs at the time of the loan application
b. prohibiting agents from owning shares in lending companies
c. prohibiting agents from receiving kickbacks
d. a settlement statement be given to the buyer and the seller

A

b. prohibiting agents from owning shares in lending companies

27
Q

RESPA does NOT prohibit and/or place limits on
a. the amount paid for origination fees
b. the “cushion” of the borrower’s prepaid items that a lender may hold in escrow
c. kickbacks
d. the length of time for delivery of required information to the applicant/borrower

A

a. the amount paid for origination fees

28
Q

An FHA buyer may currently
a. be eligible only if he is low income
b. buy a rental property as an investment
c. use a gift for his entire down payment
d. use the program for vacation homes

A

c. use a gift for his entire down payment

29
Q

The VA guarantee program provides eligible veterans with
a. cash for home down payments
b. low interest education loans
c. low interest home loans
d. the opportunity to buy a home with little or no down payment

A

d. the opportunity to buy a home with little or no down payment

30
Q

In a purchase transaction a major source of second mortgages could be
a. FHA and VA lending agencies
b. insurance companies and pension funds
c. real estate investment trusts
d. sellers

A

d. sellers

31
Q

The annual percentage rate (APR) as required to be disclosed on a Loan Estimate is
a. the actual interest rate on the face of the note
b. always the same as the interest rate
c. the relationship between total cost of borrowing and the actual amount borrowed
d. the sum of all costs required to obtain credit

A

c. the relationship between total cost of borrowing and the actual amount borrowed

32
Q

What statement regarding the Federal Reserve is false
a. all federally chartered banks must be members
b. it sets the discount rate
c. it sets the prime rate
d. there are 12 Federal Reserve districts

A

c. it sets the prime rate

33
Q

Which mortgage requires principal and interest payments at regular intervals until the debt is satisfied
a. balloon mortgage
b. first mortgage
c. fully amortized mortgage
d. partially amortized mortgage

A

c. fully amortized mortgage

34
Q

In which market can lenders sell mortgages
a. acceleration market
b. mortgagee market
c. primary market
d. secondary market

A

d. secondary market

35
Q

Which clause in a mortgage allows a lender to declare the entire unpaid balance due upon the borrower’s default
a. acceleration clause
b. escalator clause
c. foreclosure clause
d. forfeiture clause

A

a. acceleration clause

36
Q

The act of depositing something of value with a disinterested third party creates a
a. bond
b. covenant
c. deed of trust
d. escrow

A

d. escrow

37
Q

The Goldbergs, who own their house free of any encumbrances , are selling it to the Irwins for $115,000. The Goldbergs are taking back a straight note for $75,000 at 10% interest for 20 years. The first monthly payment will be
a. $625
b. $750
c. $1,000
d. $7,500

A

a. $625

38
Q

The federal Truth in Lending law
a. dictates that all loan applications must be made in person
b. regulates advertising with references to a mortgage interest rate. c. requires a lender to estimate the seller’s closing costs on all residential loans
d. would prevent a broker from advertising “ FHA financing available “ on a property

A

b. regulates advertising with references to a mortgage interest rate.

39
Q

An agent should NOT refer a prospective buyer to a lawyer for advice about
a. a lien waiver
b. market interest rates
c. a mechanic’s lien
d. an opinion of title

A

b. market interest rates

40
Q

A seller agrees to pay two points on a buyer’s loan. The price is $120,000 and the buyer is making a 20% down payment . Two points equal
a. $1,200
b. $1,920
c. $2,000
d. $2,400

A

b. $1,920

41
Q

A mortgage clause that prevents someone else fro assuming a loan is a(n)
a. acceleration clause
b. alienation clause
c. estoppel clause
d. power of sale clause

A

b. alienation clause

42
Q

In a real estate ad for mortgage financing , which statement is permissible if no other information is given
a. “$2,000 down”
b. “Interest rate only 9%”
c. “Liberal terms available to qualified buyer “
d. “Monthly payment only $400”

A

c. “Liberal terms available to qualified buyer “

43
Q

An adjustable rate mortgage where the loan balance increases is experiencing
a. defeasance
b. disintermediation
c. negative amortization
d. reconveyance.

A

c. negative amortization

44
Q

With a VA loan, a veteran has the option of
a. defaulting on the loan without incurring any personal liability
b. offering the home for rent immediately after purchasing it
c. selling the home and transferring his loan to a new home
d. selling the home to a non-veteran , who may then assume the balance of the loan.

A

d. selling the home to a non-veteran , who may then assume the balance of the loan.

45
Q

Gloria qualifies for an FHA loan. She should make her loan application
a. at the Cleveland regional FHA office b. on a form that’s available from any real estate broker
c. through any FHA-approved lender
d. with the State of Ohio Division of Real Estate .

A

c. through any FHA-approved lender

46
Q

In a foreclosure, the debtor can get the house back through
a. acceleration
b. confirmation
c. defeasance
d. redemption

A

d. redemption

47
Q

The Federal National Mortgage Association is
a. able to purchase only FHA and VA loans
b. designed to increase the availability of money to primary lenders
c. owned and operated by the federal government
d. owned and operated by the Federal Reserve

A

b. designed to increase the availability of money to primary lenders

48
Q

The Government National Mortgage Association is
a. also known as Ginnie Mae
b. the largest buyer of conventional loans in the market
c. a private corporation
d. under the direction of Fannie Mae

A

a. also known as Ginnie Mae

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