Notes

Question 1

What are the 3 basic financing components of the real estate market?

Answer 1

Government influences
Primary mortgage market
Secondary mortgage market

Question 2

What is the primary government influence in the real estate market?

Answer 2

Federal Reserve System

Question 3

What are the 3 government influences in the real estate financing market?

Answer 3

Federal Reserve System
Federal Home Loan Banks
Comptroller of the Currency

Question 4

Under the umbrella of financial policies set by the ___, the ___ originates loans that are bought, sold, and traded in the ___.

Answer 4

Under the umbrella of financial policies set by the Federal Reserve System, the primary mortgage market originates loans that are bought, sold, and traded in the secondary mortgage market.

Question 5

The ___ maintains sound credit conditions, helps counteract inflationary and deflationary trends, and creates a favorable economic climate.

Answer 5

Federal Reserve System

Question 6

The Federal reserve divides the country into ___ Federal Reserve Districts that are each served by a(n) ___.

Answer 6

12
Federal Reserve Bank

Question 7

All nationally chartered banks must join the ___ and purchase ___ in its ___.

Answer 7

All nationally chartered banks must join the federal reserve and purchase stock in its district reserve banks.

Question 8

The ___ regulates the flow of money and interest rates in the marketplace through its ___ and by controlling ___ and ___

Answer 8

Federal Reserve
member banks
Reserve Requirements & discount rates

Question 9

The federal reserve requires that each member bank keep a certain level of ___ on hand as ___.

Answer 9

Assets
Reserve funds

Question 10

Reserve funds are unavailable for ___ or any other use.

Answer 10

Loans

Question 11

The ___ the reserve requirement, the ___ money the lender has to lend, therefore the ___ will climb

Answer 11

higher
less
interest rate

Question 12

Federal reserve member banks borrow money from the ___ in order to to expand their lending operations

Answer 12

District Reserve Banks

Question 13

The discount rate is the rate charged by the Fed when it lends___ to its ___.

Answer 13

Money to its member banks

Question 13

The ___ is the rate charged by the Fed when it lends money to its member banks.

Answer 13

discount rate

Question 14

The Fed has the ability to increase or decrease the supply of money in the market through the purchase and sale of ___.

Answer 14

Securities

Question 15

By ___ securities, the Fed takes money off the market, and the cost of money should increase.

Answer 15

Selling

Question 16

By selling securities, the Fed takes money off the market, and the cost of money should ___.

Answer 16

Increase

Question 17

By ___ securities, the Fed attempts to place more funds into the marketplace and drive the cost of money down.

Answer 17

Purchasing

Question 18

By purchasing securities, the Fed attempts to place more funds into the marketplace and drive the cost of money ___.

Answer 18

Down

Question 19

In addition to income directly related to loans, some lenders derive income from ___ loans for other mortgage lenders or the investors who have purchased the loans

Answer 19

Servicing

Question 20

___ loans involves activities such as collecting payments (including insurance and taxes), accounting, bookkeeping, preparing insurance and tax records, processing payments of taxes and insurance, and following up on loan payment and delinquency.

Answer 20

Servicing

Question 21

A growing number of consumers apply for mortgage loans ___.

Answer 21

Online

Question 22

Many major lenders’ websites offer information regarding their ___ and ___

Answer 22

Current loan programs and requirements

Question 23

Online brokerage or matchmaking organizations link ___ with ___.

Answer 23

Lenders with potential borrowers

Question 24

Some borrowers prefer the ___ for its convenience in shopping for the best rates and terms, accessing a wide variety of loan programs, and speeding up the approval process

Answer 24

internet

Question 25

In the secondary mortgage market, ___ has the function of conventional, VA, and FHA loans.

Answer 25

Fannie Mae

Question 26

In the secondary mortgage market, Freddie Mac handles mostly ___ loans

Answer 26

conventional

Question 27

In the secondary mortgage market, Ginnie Mae handles ___ loans

Answer 27

Special assistance

Question 28

Ginnie Mae is a wholly owned government corporation within the ___

Answer 28

Department of Housing and Urban Development

Question 29

Many lenders use the standardized forms and follow guidelines issued by ___ and ___

Answer 29

Freddie Mac and Fannie Mae

Question 30

Use of standardized forms and guidelines issued by ___ and ___ is mandatory for lenders wishing to sell mortgages in the agencies' secondary mortgage market.

Answer 30

Freddie Mac and Fannie Mae

Question 31

In a straight loan, the borrower makes periodic payments of ___ only, followed by the payment of the ___ in full at the ___.

Answer 31

interest Principal in full at the end of the term

Question 32

The amount of interest due on any one payment date is calculated by computing the ___ interest (based on the ___) and dividing that figure by the ___ made each year.

Answer 32

Yearly interest Based on the unpaid balance The number of payments made

Question 33

The current outstanding balance of a loan is $70,000. The interest rate is 7.5% per year and the monthly payment is $489.30. What is the annual interest rate?

Answer 33

$5,250

Question 34

The current outstanding balance of a loan is $70,000. The interest rate is 7.5% per year and the monthly payment is $489.30. What is the monthly interest?

Answer 34

$437.50

Question 35

The current outstanding balance of a loan is $70,000. The interest rate is 7.5% per year and the monthly payment is $489.30. What is the monthly principal?

Answer 35

$51.80

Question 36

A 10-year loan of $50,000 at 6% has ___ units of $1,000

Answer 36

50

Question 37

A 10-year loan of $50,000 at 6% has 50 units of $1,000. The amortized payment is $1,000 at 6% interest. What is the monthly amortized payment?

Answer 37

$555

Question 38

Interest rate fluctuations and periodic caps have an effect on a(n) ___.

Answer 38

Adjustable rate mortgage

Question 39

Without ___ and ___, a single mortgage's interest rate could fluctuate wildly over several adjustment periods, depending on the behavior of the index to which it is tied.

Answer 39

Rate caps Payment caps

Question 40

Money received through a(n) ___ mortgage may be used for any purpose. Borrowers may opt to receive money in a lump sum, fixed monthly payments, open line of credit, or other options.

Answer 40

Reverse

Question 41

Payments for a reverse mortgage are not due until ___, ___, or ___.

Answer 41

Property is sold Borrower defaults Death

Question 42

The FHA Home Equity Conversion Mortgage is a common ___ mortgage

Answer 42

Reverse

Question 43

The ___ the ratio of debt to value, the ___ the down payment by the borrower

Answer 43

lower the ratio Higher the down payment

Question 44

Mortgage amount divided by appraised value of property = ___

Answer 44

LTV ratio

Question 45

If a property has an appraised value of $100,000 with a loan of $90,000, what is the LTV ratio?

Answer 45

90% Explanation: $90,000 divided by $100,000 = 90%

Question 46

What are the 2 biggest factors to consider when deciding to own or rent a home?

Answer 46

Mortgage terms Payment plans

Question 47

In order for a loan to be eligible for purchase on the secondary market by a government-sponsored enterprise (Fannie Mae or Freddie Mac), it must be a "___."

Answer 47

Qualified mortgage

Question 48

A qualified mortgage requires a debt-to-income ratio of ___%.

Answer 48

43%

Question 49

For a qualified mortgage, the payments on all debtw - total housing plus any long term debts (anything >10 months to pay off) such as car payments, student loans, or other mortgages cannot exceed ___% of the buyer's gross monthly income.

Answer 49

43%

Question 50

Are expenses such as insurance premiums, utilities, and routine medical care included in the 43% of the debt-to-income ratio for a qualified mortgage?

Answer 50

No

Question 51

Usually, the LTV ratio for a conventional loan is ___% of the value of the property

Answer 51

80

Question 52

Why is the LTV ratio for a conventional loan usually 80% of the property value?

Answer 52

Borrower usually makes a down payment of at least 20%

Question 53

The security for a conventional loan is provided solely by the ___.

Answer 53

Mortgage

Question 54

The government is not involved in ___ loans.

Answer 54

Conventional

Question 55

With the exception of ___ loans and a few ___ loans, the interest rate available to borrowers is largely based on credit scores.

Answer 55

FHA loans few nonconforming loans

Question 56

The ___ the credit score, the ___ the risk to the lender.

Answer 56

Higher credit score Lower risk

Question 57

Lenders almost always require a higher ___ and or larger ___ for those with lower credit scores

Answer 57

Higher interest rate Larger down payment

Question 58

A payment is considered late if it is more than ___ days past due.

Answer 58

30

Question 59

Underwrites consider from ___ to ___ years of a potential borrower's repayment history, especially for rent and/or mortgage loans

Answer 59

2 to 7 years

Question 60

Applicants who are consistently more than 30 days late for rent or mortgage payments will most likely be ineligible for ___ and ___ loans and other loans that are sold to ___ and ___.

Answer 60

VA and FHA Freddie Mac and Fannie Mae

Question 61

LTV ratios of up to 95% of the appraised value of the property may be possible with ___.

Answer 61

mortgage insurance

Question 62

PMI protects the top ___ to ___% of the loan against borrower default

Answer 62

20 to 30%

Question 63

Because only a portion of the loan is insured, the lender must allow the borrower to terminate PMI coverage once the loan is...

Answer 63

repaid to a certain level

Question 64

Under the Homeowners Protection Act of 1998, PMI must automatically terminate when the borrower reaches a(n) ___% equity position based on the original value of the property at the time the loan was originated with no allowance for appreciation or depreciation if the loan was written after July 29 1999, and the borrower is current on mortgage payments

Answer 64

22%

Question 65

FHA qualifying ratios are ___% and ___%

Answer 65

31% 43%

Question 66

The 203(b) fixed-rate loan is a popular ___ loan, especially among first time buyers.

Answer 66

FHA

Question 67

As of 2013, the 203(b) FHA loan will finance up to __% of the borrower's loan

Answer 67

97%

Question 68

The VA does not normally ___, but instead it ___ made by approved lending institutions

Answer 68

Does not lend money Guarantees loans

Question 69

To determine what portion of a mortgage a VA loan will guarantee, the veteran must apply for a(n) ___.

Answer 69

Certificate of eligibility

Question 70

A VA loan guarantee is tied to the current conforming loan limit for __ and __.

Answer 70

Fredie Mac and Fannie Mae

Question 71

Lenders typically loan ___ times the guarantee for a VA loan

Answer 71

4 times

Question 72

A conforming loan of $424,100 would equal how much of a VA guarantee?

Answer 72

106,025 424,100 divided by 4 = 106,025

Question 73

In regards to VA loans, if the purchase price is greater than the amount cited in the ___, the veteran may pay the difference in cash.

Answer 73

CRV

Question 74

The ___ offers programs to help families purchase or operate family farms.

Answer 74

Farm Service Agency (FSA)

Question 75

Through the ___, the FSA also provides loans to help families purchase or improve single-family homes in rural areas.

Answer 75

Rural Housing and Community Development Service (RHCDS)

Question 76

Through the Rural Housing and Community Development Service (RHCDS), the FSA also provides loans to help families purchase or improve single-family homes in ___.

Answer 76

rural areas

Question 77

What are the 2 categories of FSA loans?

Answer 77

1) Guaranteed loans (made & serviced by private lenders and guaranteed for a specific percentage by the FSA) 2) Loans made directly by the FSA

Question 78

Purchase Money Mortgage (PMM) payments are made to the ___ according to the terms of the note.

Answer 78

Seller

Question 79

If the buyer stops making payments on a Purchase Money Mortgage (PMM), the ___ has recourse to foreclose on the property.

Answer 79

seller

Question 80

Package loans include ___ and ___ property.

Answer 80

Real and personal property

Question 81

___ loans usually include furniture, drapes, and appliances as part of the sales price of the home.

Answer 81

Package

Question 82

In an open-end loan, the interest rate on the initial amount is ___, but the interest rate on future advances may be ___.

Answer 82

Initial amount is fixed Future advances may be charged at market rate

Question 83

A(n) ___ is often a less costly alternative to a home improvement loan.

Answer 83

Open-end loan

Question 84

In a construction loan, before each payment , the lender has the right to...

Answer 84

inspect the work

Question 85

In a construction loan, the general contractor must provide the lender with adequate waivers that release all ___ for the work covered by the payment.

Answer 85

Mechanic's lien rights

Question 86

When a home equity loan is taken, the ___ remains in place, and the home equity loan is ___ to the ___

Answer 86

Original mortgage loan Junior to the original lien

Question 87

___ are an alternative to refinancing and can be used for a variety of financial needs such as: financing purchase of expensive items, consolidating existing installment loans on credit card debt, and paying for medical, education, home improvements, or other expenses.

Answer 87

Home equity loans

Question 88

The federal government regulates lending practices of mortgage lenders through which 5 laws?

Answer 88

1) Truth in Lending Act 2) Equal Credit Opportunity Act 3) Community Reinvestment Act 4) Real Estate Settlement Procedures Act 5) TILA and RESPA Integrated Disclosure Rule

Question 89

In order for an advertisement to use trigger terms, it must also include which 5 things?

Answer 89

1) Cash price 2) Required down payment 3) Number, amounts, and due dates of all payments 4) Annual percentage rate 5) Total payments to be made over term of the mortgage

Question 90

The ___ must be delivered or placed in the mail no later than the 3rd business day after receiving the consumer's application.

Answer 90

Loan Estimate

Question 91

The Equal Credit Opportunity Act requires notice of reason for rejection or termination to be provided in writing within ___ days.

Answer 91

30

Question 92

The Equal Credit Opportunity Act provides that a borrower is entitled to a copy of the ___ if the borrower paid for the appraisal

Answer 92

Appraisal

Question 93

Financial institutions are periodically reviewed by 1 of 3 federal financial supervisory agencies. What are these 3 agencies?

Answer 93

1) Office of the Comptroller of the Currency 2) Federal Reserve's Board of Governors 3) FDIC

Question 94

Financial institutions must post a public notice that their ___ activities are subject to federal review, and they must make the results of these reviews ___.

Answer 94

community reinvestment activities public