Lending & the Escrow Process

Question 1

In the early 19th century financing to purchase or build a home was

(a) Readily available to the average working person
(b) Difficult due to liquidity being a constant problem
(c) Easy with a national banking system to inject capital into the banking system
(d) Available from banks n all states

Answer 1

(b) Difficult due to liquidity being a constant problem

Question 2

The Federal Reserve Act

(a) Was established in 1913
(b) Provided the banking system with the central control it required
(c) Offered a regulatory body that could monitor and govern the nation’s money supply
(d) All the above

Answer 2

(d) All the above

Question 3

The first village based lending institutions in the U.S.

(a) Were adopted from the French system
(b) Were called PBS’s (Permanent Building Societies)
(c) Were called TBS’s (Terminating Building Societies)
(d) Paid interest on depositor’s funds

Answer 3

(c) Were called TBS’s (Terminating Building Societies)

Question 4

During the roaring twenties thousands of homeowners went to non-banking sources (the subprime lending community of the time) and pledged the family home in order to

(a) Borrow to buy consumer goods
(b) Borrow to make real estate investments
(c) Buy gold
(d) Purchase stock

Answer 4

(d) Purchase stock

Question 5

The administration of Herbert Hoover and the 1932 Congress also established the

(a) FHA
(b) National Housing Act
(c) Federal Home Loan Bank (FHLB)
(d) HOLC

Answer 5

(c) Federal Home Loan Bank (FHLB)

Question 6

The Federal National Mortgage Association

(a) Was created in 1937
(b) Was the first primary mortgage market lender
(c) Was a private corporation
(d) Was established as a government agency established to provide a secondary mortgage market

Answer 6

(d) Was established as a government agency established to provide a secondary mortgage market

Question 7

The Federal Housing Administration Loan Program (FHA)

(a) Was created based on long term employment lasting for about 20 years
(b) Had a minimum down payment of 20% of the sales price
(c) Was fully amortized term of 20 years
(d) All the above

Answer 7

All the above

Question 8

The Federal Home Loan Mortgage Corporation, (FHLMC or Freddie Mac) was established

(a) In 1938
(b) As a competitor to Fannie Mae
(c) To buy new FHA and VA loans
(d) As a non-profit government agency to recapitalize the Savings and Loan industry

Answer 8

(d) As a non-profit government agency to recapitalize the Savings and Loan industry

Question 9

Fannie Mae and Freddie Mac role in the mortgage process includes

(a) Originating FHA and VA loans
(b) Buying and pooling loans then packing as mortgage backed securities
(c) Buying and holding loan in their own portfolio
(d) Both b and c

Answer 9

(d) Both b and c

Question 10

In the event of the borrower’s default and foreclosure, mortgage insurance

(a) Compensates the lender for losses above 75% LTV
(b) Compensates the lender for losses above 50% LTV
(c) Reimburses the borrower for equity losses
(d) None of the above

Answer 10

(a) Compensates the lender for losses above 75% LTV

The mortgage insurance must cover the amount of the loan above 75%. Mortgage insurance compensates the lender for all or part of any losses that incur in the event of the borrower’s default and foreclosure.

Question 11

The servicer is the company

(a) Responsible for collection of the monthly payments from the borrower
(b) That owns (investor) the loan
(c) That originally made the loan
(d) That packages the loan into mortgage backed securities

Answer 11

(a) Responsible for collection of the monthly payments from the borrower

Question 12

For loans subject to the Real Estate Settlement and Procedures Act (RESPA) a loan originator (mortgage broker) may

(a) Receive compensation from only either the consumer or the lender
(b) May receive compensation from both the consumer and the lender
(c) May not receive compensation from the consumer
(d) May not receive compensation from the lender

Answer 12

(a) Receive compensation from only either the consumer or the lender

Question 13

Private-party lending is relatively common in certain transactions, especially for

(a) Mobile home sales
(b) Single family home sales
(c) Commercial, business brokerage, and apartment sales
(d) All the above

Answer 13

(c) Commercial, business brokerage, and apartment sales

Question 14

The maximum loan amounts for FHA loans are set by FHA

(a) For all states in the same amount
(b) For all states with separate standard and high cost are loan amounts
(c) For each state separately
(d) For each MSA (Metropolitan Statistical Area) separately throughout the United States

Answer 14

(d) For each MSA (Metropolitan Statistical Area) separately throughout the United States

Question 15

FHA Mortgage Insurance

(a) Is required on all FHA loans
(b) Consists of an up-front premium paid at closing
(c) Has an annual mortgage insurance premium included in the monthly loan payment
(d) All the above

Answer 15

(d) All the above

Question 16

CalHFA loans are available for first-time buyers

(a) Who have never owned a home
(b) Subject to income and purchase price restrictions established by federal law
(c) And are not required to possess U.S. citizenship
(d) All of the above

Answer 16

(b) Subject to income and purchase price restrictions established by federal law

Question 17

VA loans are available for qualified veterans with

(a) Up to 100% financing
(b) No down based on four based on four times the maximum entitlement, presently $104,250
(c) Both a and b
(d) Neither a nor b

Answer 17

(c) Both a and b

Question 18

The VA allows all the following fees to be paid by the veteran except:

(a) Discount points
(b) Credit report
(c) Lender’s underwriting fee
(d) Loan origination fee (1%)

Answer 18

(c) Lender’s underwriting fee

Question 19

For qualifying purposes, CalVet requires

(a) Housing Debt to Income (DTI) ratio no greater than 33%
(b) Total Debt to Income (DTI) ratio no greater than 40%
(c) 40% of net income to remain after subtracting the housing payment and long term debt
(d) Both a 40% DTI and 40% of net income remaining after housing payment and long term debt

Answer 19

(c) 40% of net income to remain after subtracting the housing payment and long term debt

Question 20

California’s right of rescission law prohibits the borrowers’ new loan for an investment property from funding and closing for at least

(a) Three calendar days following the date of signing loan documents including weekend days
(b) Three business days following the date of signing loan documents including weekend days
(c) Three calendar days following the date of signing loan documents not including weekend days
(d) Three business days following the date of signing loan documents not including weekend days

Answer 20

(d) Three business days following the date of signing loan documents not including weekend days

Question 21

Liens sometimes appear on the preliminary title report that must be eliminated for made an exception, such as

(a) Income tax liens may be subordinated to the new loan with the approval of the taxing authority
(b) Property tax liens, which supersede all liens, usually must be paid
(c) Both a and b
(d) Neither a nor b

Answer 21

(c) Both a and b

Question 22

If any one thing delays escrow closing for a refinance loan it is usually

(a) The appraisal value questioned by the lender
(b) The preliminary title report not delivered to the lender yet
(c) The borrower’s hazard insurance policy not delivered from the insurance agent
(d) The borrower’s loan officer not being available for loan signing

Answer 22

(c) The borrower’s hazard insurance policy not delivered from the insurance agent

Question 23

If the property is owner-occupied, funding for a refinance loan may take place

(a) The next business day after the borrowers signed the documents
(b) Not before two business days after the borrowers signed the documents
(c) Not before three business days after the borrowers signed the documents
(d) Not before five business days after the borrowers signed the documents

Answer 23

(c) Not before three business days after the borrowers signed the documents

Question 24

The Federal Housing Administration was established by

(a) the National Housing Act of 1934.
(b) the HOLC.
(c) the FHLB.
(d) Herbert Hoover.

Answer 24

(a) the National Housing Act of 1934.

Question 25

The government agency responsible today for promoting affordable housing, economic opportunity, and a suitable living environment free from discrimination is

(a) NHA.
(b) HHFA.
(c) HUD.
(d) HOLC.

Answer 25

(c) HUD.

Question 26

The largest and BEST known investor in the secondary mortgage market is

(a) FHA.
(b) HUD.
(c) Fannie Mae.
(d) the VA.

Answer 26

(c) Fannie Mae.

Question 27

Mortgage insurance is required for all loans sold to Fannie Mae and Freddie Mac

(a) without exception.
(b) having LTVs greater than 80%.
(c) having LTVs less than 80%
(d) having LTVs greater than 75% but less than 80%.

Answer 27

(b) having LTVs greater than 80%.

Question 28

All mortgage brokers in California must be licensed by the

(a) Department of Real Estate only.
(b) Department of Real Estate or Department of Corporations.
(c) Department of Housing and Urban Development.
(d) Department of Finance.

Answer 28

(b) Department of Real Estate or Department of Corporations.

Question 29

FHA loans require that impound accounts be established for taxes

(a) and insurance regardless of loan-to-value.
(b) and insurance only if LTV exceeds 90%.
(c) only regardless of LTV.
(d) only if LTV exceeds 90%.

Answer 29

(a) and insurance regardless of loan-to-value.

Question 30

The borrower obtaining an FHA loan cannot pay

(a) the lender’s closing costs, such as processing and underwriting.
(b) the escrow and title insurance.
(c) discount points to obtain a lower interest rate.
(d) the tax service.

Answer 30

(d) the tax service.

Question 31

The practice of adding to the estimated closing statement a surplus to the amount of funds necessary for the buyer to close escrow is

(a) called padding.
(b) called packing.
(c) unethical.
(d) illegal.

Answer 31

(a) called padding.

Question 32

The loan underwriter’s approval letter may require additional conditions that must be satisfied before the loan may close and that include

(a) PTD items, meaning “prior to documents” being drawn by the lender.
(b) PTF items, meaning “prior to funding” the loan.
(c) Both a and b.
(d) Neither a nor b.

Answer 32

(c) Both a and b.

Question 33

When all the lender’s conditions have been satisfied and funding is approved by the lender, the person who initiates the request for funding is the

(a) loan officer.
(b) lender’s processor.
(c) escrow officer.
(d) title officer.

Answer 33

(c) escrow officer.