Real Estate Test Unit 13

Question 1

annual percentage rate (APR)

Answer 1

the relationship of the total finance charges associated with a loan. this must be disclosed to borrowers by lenders under the truth in lending act

Question 2

blanket loan

Answer 2

a mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt

Question 3

buydown

Answer 3

a financing technique used to reduce the monthly payments for the first few years of a loan. funds in the form of discount points are given to the lender by the builder or the seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time

Question 4

certificate or reasonable value (CRV)

Answer 4

a form indicating the appraised value of a property being financed with a VA loan

Question 5

computerized loan origination (CLO)

Answer 5

an electronic network for handling loan applications through remote computer terminals linked to various lenders’ computers

Question 6

community reinvestment act of 1977 (CRA)

Answer 6

under the act, which was revised in 2008, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms

Question 7

conventional loan

Answer 7

a loan that requires no federally sponsored insurance or guarantee

Question 8

discount rate

Answer 8

the interest rate set by the federal reserve that member banks are charged when they borrow money through the fed

Question 9

equal credit opportunity act (ECOA)

Answer 9

the federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, marital status, or receipt of public assistance

Question 10

Fannie Mae

Answer 10

a government-supervised enterprise established to purchase any kind of mortgage market from the primary lenders

Question 11

Farmer Mac

Answer 11

the Federal Agricultural Mortgage Corporation- a privately owned and publicly traded company established by congress to create a secondary market for agricultural mortgage and rural utilities loans and the portions of agricultural and rural development loans guaranteed by the U.S. Department of Agriculture (USDA)

Question 12

federal deposit insurance corporation (FDIC)

Answer 12

an independent federal agency established by congress to examine and supervise financial institutions, manage receiverships, and insure deposits (currently up to $250,000 per depositor per financial institution)

Question 13

federal reserve system (Fed)

Answer 13

the country’s central banking system, which establishes the nation’s monetary policy by regulating the supply of money and interest rates

Question 14

FHA- insured loan

Answer 14

a loan insured by the federal housing administration and made by an approved lender in accordance with FHA regulations

Question 15

Freddie Mac

Answer 15

a government-supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market

Question 16

ginnie mae

Answer 16

a government agency that plays an important role in the secondary mortgage market. it guarantees mortgage-backed securities using FHA-insured and VA-guaranteed loans as collateral

Question 17

government-sponsored enterprises (GSEs)

Answer 17

Organizations created by the federal government (Fannie Mae, Freddie Mac, Farmer Mac, Ginnie Mae) to help increase loan opportunities for homebuyers

Question 18

interim financing

Answer 18

a short-term loan usually made during the construction phase of a building project (often referred to as a construction loan)

Question 19

home equity loan

Answer 19

a loan under which a property owner uses the property as collateral and can then draw funds up to a prearranged amount against the property. Also called a home equity line of credit, or HELOC

Question 20

loan-to-value ratio (LTV)

Answer 20

the relationship between the amount of the mortgage loan and the value of the real estate being pegged as collateral

Question 21

mortgage insurance premium (MIP)

Answer 21

the FHA insurance that is a percentage of the loan amount that the borrower is charged as a premium

Question 22

nonconforming loan

Answer 22

a loan that exceeds the federal housing finance agency (FHFA) loan limits; also called a jumbo loan

Question 23

open-end loan

Answer 23

a mortgage loan that is expandable by increments up to a maximum dollar amount, with the full loan being secured by the same original mortgage

Question 24

Office of the Comptroller of the Currency (OCC)

Answer 24

government agency which sets standards and regulations for fiduciary lenders

Question 25

package loan

Answer 25

a real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances

Question 26

primary mortgage market

Answer 26

the mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mutual savings banks

Question 27

private mortgage insurance (PMI)

Answer 27

insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency

Question 28

real estate settlement procedures act (RESPA)

Answer 28

the federal law that requires certain disclosures to consumers about mortgage loan settlements. the law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees

Question 29

regulation Z

Answer 29

implements the truth in lending act, requiring credit institutions to inform borrowers of the true cost or obtaining credit

Question 30

sale-and-leaseback

Answer 30

a transaction in which the owner sells improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises

Question 31

secondary mortgage market

Answer 31

a market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages. mortgages are first originated in the primary mortgage market

Question 32

truth in lending act

Answer 32

federal government regulates the lending practices of mortgage lenders through this act

Question 33

triggering terms

Answer 33

specific credit terms, such as down payment, monthly payment, and amount of finance charge or per of loan

Question 34

VA-guaranteed loan

Answer 34

a mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the U.S. Department of Veterans Affairs in order to limit the lender’s possible loss

Question 35

variable rate mortgage

Answer 35

a mortgage loan in which the interest rate varies depending on market conditions

Question 36

wraparound loan

Answer 36

a method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. in essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage