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CA REAL ESTATE PREP EXAM > Financing > Flashcards

Financing Flashcards

1
Q
  1. The licensing of mortgage loan originators is overseen by which of the following
    a. The Equal Credit Opportunity Act
    b. The Secure and Fair Enforcement for Mortgage Licensing Act
    c. The Department of Housing and Urban Development
    d. The Truth-in-Lending Act
A

b. The Secure and Fair Enforcement for Mortgage Licensing Act

i. In 2008, the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) created a uniform nationwide system of licensing oversight for mortgage loan originators (MLOs) as well as the Nationwide Mortgage Licensing System and Registry for registering MLOs.

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2
Q
  1. In a judicial foreclosure, how long does a homeowner have to redeem their property?
    a. Three months
    b. Six months
    c. One year
    d. Eighteen months
A

a. Three months

i. In a judicial foreclosure, the property has three months after the judicial sale to redeem the property by paying off the entire debt and court costs.

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3
Q
  1. This term refers to making periodic payments on a debt until the principal has been fully repaid:
    a. Power-of-sale provision
    b. Reinstatement
    c. Amortization
    d. Assumption
A

c. Amortization

i. The constant periodic payment of principal until the principal has been fully repaid is referred to as amortization.

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4
Q
  1. When a homeowner who has received a notice of default (NOD) pays the entire amount due on the mortgage as well as foreclosure charges, it is known as which of the following?
    a. Reinstatement
    b. Redemption
    c. Nullification
    d. Acceleration
A

b. Redemption

i. An owner whose home has been sold at a foreclosure sale may still reclaim the property by paying the tire amount due on the mortgage as well as any costs incurred during foreclosure. When this occurs, it is called redemption.

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5
Q
  1. A buyer who makes a down payment of less than 20% will likely also have to pay:
    a. Duplicated fees
    b. Negative equity
    c. Private mortgage insurance
    d. None of the above
A

c. Private mortgage insurance

i. Private mortgage insurance (MI) is default mortgage insurance coverage provided to a lender by private insurers on conventional mortgages when the loan-to-value ratio is higher than 80%.

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6
Q
  1. If a client believes that a mortgage lender violated the Real Estate Settlement and Procedures Act, the person has how long to bring a suit?
    a. 4 months
    b. 1 year
    c. 8 months
    d. 2 years
A

b. 1 year

i. The Real Estate Settlement and Procedures Act allows consumers up to one year to file suit if they believe that a mortgage lender has violated the act by receiving kickbacks or engaged in other improper behavior.

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7
Q
  1. The Federal Fair Housing Act protects consumers in which of the following situations?
    a. Obtaining housing assistance
    b. Renting a home
    c. Getting a mortgage
    d. All of the above
A

d. All of the above

i. The Federal Fair Housing Act protects consumers when they are renting or buying a home, getting a mortgage, obtaining housing assistance, or engaging in other housing-related activities.

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8
Q
  1. The federal law that is intended to protect consumers from unscrupulous lenders and give them better education about the actual costs of credit is known as which of the following?
    a. Regulation Z
    b. Regulation R
    c. Consumer Lending Protection Act
    d. None of the above
A

a. Regulation Z

i. Regulation Z, which is also the Truth in Lending Act, was passed in order to protect consumers from unscrupulous lenders by providing them with detailed information about the true costs of borrowing.

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9
Q
  1. Carryback financing occurs when:
    a. A buyer purchases a home at a foreclosure auction
    b. A homeowner takes out a second mortgage on a property
    c. A lender extends credit to a buyer with a low credit score
    d. A seller extends credit to the buyer and receives the proceeds over time instead of in a lump sum
A

d. A seller extends credit to the buyer and receives the proceeds over time instead of in a lump sum

i. Carryback financing, or seller financing, occurs when a seller provides financing for the property buyer. In other words, the seller agrees to carryback a note and deed of trust, usually in the form of a second mortgage.

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10
Q
  1. Which of the following must be provided to a buyer under the terms of the Real Estate Settlement and Procedures Act (RESPA)?
    a. A loan estimate
    b. A closing disclosure
    c. A list of homeownership counseling organizations
    d. All of the above
A

d. All of the above

i. When a mortgage is made through a RESPA-controlled lender, the lender is required to provide the buyer with certain information, including all of the following: a loan estimate, a closing disclosure, a list of homeownership counseling organizations, and a special information booklet published by the Consumer Financial Protection Bureau.

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11
Q
  1. California law prohibits charging interest of more than 10%. Lending money at unreasonably high rates is known as:
    a. Profiteering
    b. Usury
    c. Racketeering
    d. Redlining
A

b. Usury

i. Usury refers to lending money at unreasonably high rates. California’s usury law limits the interest rate on non-exempt real estate loans to the greater of: 10% or the discount rate charged by the Federal Reserve Bank of San Francisco, plus 5%.

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12
Q
  1. A home equity line of credit (HELOC) would be considered which of the following?
    a. A junior mortgage
    b. A senior mortgage
    c. An éscrow account
    d. A short sale
A

a. A junior mortgage

i. A home equity line of credit is an example of a junior mortgage, which is a second or subsequent loan a property. It may also be referred to as a junior lien or second mortgage.

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13
Q
  1. When a financial institution packages a number of mortgage loans together for sale on the secondary market, this is known as which of the following?
    a. Interim loans
    b. Warehousing
    c. Blanket mortgages
    d. Reverse mortgages
A

b. Warehousing

i. Warehousing is the term used to describe the packaging of multiple mortgage loans by a financial institution or mortgage banker for sale on the secondary market.

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14
Q
  1. A borrower’s agreement to give up a particular asset in order to secure a loan is known as which of the following?
    a. Hypothecation
    b. Amortization
    c. Warehousing
    d. Trust deed
A

a. Hypothecation

i. Hypothecation occurs when a borrower agrees to give up a particular asset in order to secure a loan without giving up possession of that asset. In most mortgages, the property itself is used to secure the loan, meaning that if the borrower defaults, the lender will repossess the property.

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15
Q
  1. Julian is delinquent on his mortgage and is facing foreclosure. He ultimately decides to sell his home but for less than what he owes. This is known as a/an
    a. Redemption
    b. Home equity line of credit
    c. Balloon payment
    d. Short sale
A

d. Short sale

i. A financially troubled homeowner might opt to sell their property for less than they owe, simply to avoid foreclosure and be rid of the burden. When this occurs, it is known as a short sale.

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16
Q
  1. A portfolio lender is most likely to be a/an:
    a. Insurance company
    b. Seller
    c. Bank
    d. None of the above
A

c. Bank

i. There are several types of mortgage lenders available to borrowers, including portfolio lenders, which would include banks, thrifts, and credit unions. They typically keep their mortgages and do not sell them on the secondary market.

17
Q
  1. A borrower’s debt-to-income ratio is used for which of the following?
    a. To set lending amounts
    b. To determine the value of a property
    c. To determine construction costs for a new development
    d. None of the above
A

a. To set lending amounts

i. When a buyer applies for financing, a lender uses the buyer’s debt-to-income ratio, or the amount a buyer owes in relation to their income, to determine whether the buyer qualifies for a loan.

18
Q
  1. Monies held by a mortgage holder to pay the owner’s annual obligations owed for property taxes, hazard insurance premiums, assessment liens, and improvement bonds are known as which of the following?
    a. A junior mortgage
    b. A trust deed
    c. An impound account
    d. Straight notes
A

c. An impound account

i. An impound account, also known as an escrow account, includes money from a property owner that is held in reserve by a mortgage holder in order to pay the property owner’s annual obligations, such as property

19
Q
  1. Which of the following does NOT offer assistance to homebuyers through down payment assistance or mortgage modification?
    a. Federal Housing Administration
    b. California Department of Housing and Community Development
    c. US Department of Veterans Affairs
    d. Federal National Mortgage Association (Fannie Mae)
A

b. California Department of Housing and Community Development

i. California Department of Housing and Community Development oversees programs that fund local public agencies that produce affordable housing for rental or for purchase but does not offer down payment assistance or mortgage modification programs, as the other agencies do.

20
Q
  1. A homeowner must be -..- days delinquent before a mortgage holder can file a notice of default (NOD):
    a. At least 60 days
    b. At least 90 days
    c. At least 120 days
    d. At least 180 days
A

c. At least 120 days

i. A first mortgage on a homeowner’s principal residence needs to be at least 120 days delinquent before the mortgage holder may cause a notice of default (NOD) to be recorded.

CA REAL ESTATE PREP EXAM (2 decks)

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