Texas Real Estate Finance Flashcards
Accrued Item
Expense the buyer will pay after closing that must be divided between buyer and seller
Basis
Basis (or cost basis) is the original cost of property, adjusted for factors such as depreciation. When property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property’s basis.
Boot
In a 1031 exchange, any amount an investor gets for sale of his property that isn’t used to purchase another property is taxed normally
Capitalization Rate
Ratio of net operating income to present value. Used to estimate value of a commercial property
CRV (Certificate of Reasonable value
Appraisal conducted by VA approved appraiser
Constructive Notice
If a property is recorded in the public record, other parties are considered to have received constructive notice
Debt Service Ratio (back-end ratio)
Total housing expense and long term debt payment to gross monthly income
Deed of Trust
Security for promissory which conveys temporary (not full) title
Deficiency Judgment
Against borrower to repay remaining mortgage when the foreclosure and sale of property was not enough
Delayed Exchange
An exchange of property under Internal Revenue Code (IRC)
Section 1031 for the sake of tax deferral, where the exchanger sells the relinquished
property no more than 45 days before identifying, and 180 days before acquiring a replacement property or properties.
Discounted Cash Flow Analysis
Method of valuing RE by discounting predicted future cash flow to a net present value
Discount Rate
Interest rated charged by the Fed to its member banks when lending them money
Entitlement
Amount of loan the VA will lend
Federal Funds Rate
Interest rate banks lend money to each other
FOMC (Federal Open Market Committee)
Committee formed by Federal Reserve Board of Governors and 5 other members who are presidents of regional Federal Reserve banks in charge of buying and selling govt securities. Influence over interest rates
Float to Fixed Rate Loans
ARM converts to fixed rate
Forebearance
Lender’s choice not to foreclose
Funding Fee
VA
Graduated Payment Mortgage (GPM)
Negative amortization in early years
Growth Equity Mortgage (GEM)
Periodically increasing principal payments with fixed int rate.
Interest Rate Reduction Refinancing Loan
Guaranteed by VA
Internal Rate of Return
a metric used in capital budgeting to estimate the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
Modified Internal Rate of Return
Internal rate of return of an investment when both the finance rate and the reinvestment rate are considered
Moratorium
Lender suspends payments on principal or interest to help borrower avoid foreclosure
Mortgage Credit Certificate
Allows mortgage interest tax credit
Order of Operations
A mathematical convention that states that the arithmetical
operations are to be performed first inside parentheses, and then in the following order:
exponentiation, multiplication, division, and addition or subtraction
PE Ratio
Dividends that a share in a company returns to investors per dollar of stock purchased
Recaptured Depreciation
Portion of seller’s capital gains that is difference between property’s original price and adjusted basis
Recasting
Change in loan terms (often moratorium)
Redemption
Borrower recovers property after being taken
Reserve Requirement
Percentage of bank’s funds the Fed requires it to reserve in cash
Wraparound Mortgage
subordinate mortgage is created
on a home that already has a mortgage at a lesser rate. The payments on the higherrate
subordinate mortgage are used to pay off the existing mortgage, and the holder of
the subordinate mortgage receives the difference as a profit
Portfolio Lenders
Don’t sell on 2ndary market. More flexible.
Transfer of Servicing (loan service)
15 days notice and new servicer within 15 days of transfer. Cannot be charged late fee for 60 days
Force Placed Insurance
When loan servicer buys insurance on your behalf because you didn’t
Interest only loans
If you think you will be better able to get a better interest rate next year
Real Estate Loans
You can borrow up to 75% against the value of your home between 10-20 years
Equipment Loans
Can borrow 60-80% the value of equipment
SAFE Act (Safe Mortgage Licensing Act)
Mortgage Loan Officers training, testing
Real Estate Cycles
Recovery
Expansion
Hyper supply
Recession
2 largest contributors to inflation
Cost of healthcare and housing
Tax exemptions
Married couples exempt from capital gains tax up to $500,000 and single to $250,000
USDA Home Loan
zero down
Homestead Exemption
Texas $25,000
Senior Citizen Exemption
Texas $10,000
Federal Reserve
12 member banks
President nominates 7 people to serve on the Board of Governors for 14-year terms
Senate confirms nominations
President appoints Chairman and Vice Chairman of the board from the 7
Board of Governors sets discount rate for banks
FOMC (Federal Open Market Committee)
12-members – Fed forms proper part and the remaining 5 members are appointed from the 12 Federal Reserve Banks
In charge of purchase and sale of government securities
The Volcker Rule
Restricts large banks from making speculative, high-risk investments with funds from their own accounts.
Prohibits banks from engaging in proprietary trading or acquiring ownership interest in a hedge fund or private equity fund.
Financial Stability Oversight Council
9 members chaired by the Treasury Secretary
Primary Credit Rate
Fed lends to member banks for short term loans which is slightly above the short-term market interest rate
Office of the Comptroller of Currency
regulates all national banks etc..
President appoints the Comptroller to head the agency in 5-year terms
Also director of the Federal Deposit Insurance Corporation and NeighborWorks America
Bank examiners
Paid by banks for examinations
SWIFT (Society for Worldwide Interbank
Financial Telecommunication)
Terrorist Finance Tracking Program (TFTP) Overseen by major central banks: Federal Reserve Bank of England European Central Bank Bank of Japan National Bank of Belgium
The regulations that comprise the Federal Reserve Act include which of the following?
Equal Credit Opportunity Act Fair Credit Reporting Act Truth in Lending Act Home Mortgage Disclosure Act Privacy of Consumer Financial Information Limitations on Interbank Liabilities
When the reserve requirement is low, it causes the demand for real estate to increase, raising prices and increasing the number of sales.
True
When the discount is raised, banks that must borrow money end up paying more for it. This makes financial institutions less willing to lend, as it costs them more money.
True
Open market operations consist of buying government securities, either from the U.S. Treasury or from other federal agencies, and selling them
True
In 1932, the Federal Home Loan Bank Act gave the savings and loan companies the authority to offer 20-year, fixed rate, fully amortized loans for the first time.
True
The Federal
Reserve’s three instruments of monetary policy are open market operations, the
discount rate, and reserve requirements.
True
FDIC
Independent agency of the U.S. federal government that preserves public confidence in the banking system by insuring deposits.
The Federal Home Loan Bank
Extends credit to financial institutions and created the Federal Home Loan Bank System.
FOMC (Federal Open Market Committee)
The top monetary policy making body for the Federal Reserve. They give authorzation to the manager of the System Open Market Account (SOMA) to implement US monetary policy
Office of the Comptroller of Currency
Ensures that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations.
The Federal Deposit Insurance Corporation, FDIC
Insures deposits held in all FDIC-insured depository institutions, including national banks and federal savings associations. The permanent standard insurance amount is $250,000, per depositor,
HUD (created by US Housing Act 1937)
Mission is to increase home ownership, support community development, and
increase access to affordable housing free from discrimination
HUD
HUD has a staff of administrative law judges to oversee cases it prosecutes involving violations of these acts
Truth in Lending Act (TILA)
Designed to promote the informed use of consumer credit, by
requiring disclosures about its terms and cost to standardize the manner in which
costs associated with borrowing are calculated and disclosed
Regulation Z
Most of the specific requirements imposed by TILA are found in
Regulation Z
Consumer Financial Protection Bureau
TILA’s general rule making authority was transferred to the
Consumer Financial Protection Bureau (CFPB), whose authority was established
pursuant to provisions enacted by the passage of the Dodd–Frank Wall Street
Reform and Consumer Protection Act in July of 2010.
APR
Introduced by TILA
Consumer Credit Protection Act
is known as the Truth in Lending Act (TILA).
Regulation M
applies to
leased property
If creditor doesn’t comply with TILA
2 x the amount of the finance charged but not less than $200 or more than $2,000 In a class action not more than $500,000 or 1% of networth If willing doesn't comply, $5,000 and not more than 1 year in prison
RESPA
Within 3 days deliver booklet
RESPA
RESPA also requires that any time the closing agent refers a borrower to a firm with
which the lender is affiliated, the lender must inform the borrower of the connection
through an Affiliate Business Arrangement (AfBA) Disclosure stating the relationship
and that the buyer need not use affiliated firms
RESPA Violations
Up to $10,000 and prison up to a year
Consumer Financial Protection Bureau (CFPB)
Know before you Owe
Regulated consumer financial products including mortgages
CFPB Penalties
$5,000 failure to follow the law
$25,000 for gross negligence
$1,000,000 for intentional violations
Volker Rule
Stops banks from owning hedge funds for their own profit
SAFE Mortgage Licensing Act
Licencing of mortgage loan originators
Administrative Procedure Act (APA)
Governs the way administrative agencies of the government may propose regulations
Max net capital gain tax rate is
20%
Limit on capital losses
$3,000 per year or $1,500 is married filing separately
Mortgage Assistance Relief Services (MARS)
Protects consumers from predators when they are in default on mortgage
CRA
Federal act blamed for causing lenders to make risky loans
TILA
causes lender to be clear and truthful in their advertising loan terms
HFA’s Housing Finance Agencies
State entities goal of increasing housing opportunities for low income, etc.
Rely on Mortgage Revenue Bonds
Low Income Housing Credit
HOME Investment Partnership Program
Texas Dept of Housing and Community Affairs
TDHCA
Helps Texas achieve improved quality of life through development of better communities
Provides low interest financing, emergency food or shelter, rental subsidy, energy assistance, weatherization, economic development
First time home buyer program (if you haven’t owned in past 3 years)
Taxable Mortgage Program (TMT-79)
My First Texas Home
Competitive fixed interest loans with cost assistance up to 5%
MCC Program
Mortgage Credit Certificate
Tax credits for many years
40% of annual interest paid on loan, but can’t exceed $2,000 per year
Texas State Affordable Housing Corporation (TSAHC)
Every Texan deserves the opportunity to live in safe, decent and affordable housing
Offer low, fixed-rate loans and down payment assistance
Housing Choice Vouchers
Rental Home
Non recourse loan
Lender has no recourse against anyone or anything other than the property.
Commercial Loans
5-20 years
LTV – lender calculates LTV by dividing the amount of the loan by the lesser
of the property’s appraised value or purchase price
Debt Service Coverage Ratio
Calculated by dividing the NOI by the annual debt service
A DSCR of less than 1 indicates a negative cash flow
Defeasance
Substitution of collateral instead of paying cash to lender, treasury securities
Hard Money Loans
Flippers. Not based on buyer’s credit worthiness but value of property itself (After Repair Value)
Can be 10% points higher than conventional loan
Sweet 16 Ratios
Repayment, liquidity, solvency analysis
Top 5 commodities
Cattle, cotton, dairy, broilers, greenhouse/nursery
Spending less than 28% of your pretax income on housing is the first, most
fundamental, rule for determining how much you can truly afford to spend
True
Which two of the following offer down payment and closing cost assistance to first
time home buyers?
TDHCA and TSAHC
What is the TAR website that offers help to consumers regarding loans?
www.texasrealestate.com
Who created the Loan Estimate and the Loan Closing Disclosure forms?
CFPB
The Real Estate Settlement Procedures Act (RESPA)
Enacted in 1974 by the U.S. Department of Housing and Urban Development (HUD). RESPA is a consumer protection statute that aims to help educate consumers about closing and settlement services.
TILA
The Truth in Lending Act is designed to help consumers compare the costs of credit from different lenders with one another and to protect consumers from unfair and inaccurate credit practices.
In the fall of 2015, the initial Truth in Lending form and the Good Faith Estimate became one form called the
Loan Estimate
CFPB
The CFPB is responsible for regulating all consumer financial products including mortgages, jurisdiction over enforcement of the Truth in Lending (TIL) Laws and the Real Estate Settlement Procedures Act (RESPA), and the creation of the new “Know before You Buy” program.
Best Efforts Trade
Selling a single mortgage on secondary market. Smaller banks use this
Major Participants in Secondary Market
Mortgage Originator
Aggregator
Securities Dealers
Mortgage Originators
Make money through origination fees and the difference between interest rate given to borrower and premium a secondary market will pay for that interest rate
Aggregator
Large mortgage originators with ties to Wall Street firms and government-sponsored enterprises (GSEs). Purchase mortgages from smaller originators form pools and either securitize into private label mortgage-backed securities or form agency MBSs.
Make profit by difference in price paid for mortgages and price for which they can sell
Securities Dealers
Buy MBSs – trading desk.. Make a spread in the price at which they buy and sell
Investors
Foreign governments, pension funds, insurance companies, banks, hedge funds
Get paid more on higher rate mortgages but low rates are more valuable since they are less likely to be paid off early
GSE (Government Sponsored Enterprises)
Largest investment portfolios of MBSs 90%
Fannie – FHA, VA, conventional and doesn’t necessarily own the securities but exchanges guaranteed securities for the mortgages. Attractive because easily liquidated and are guaranteed
Freddie
Farmer
Ginnie
Financing Corporation (FICO)
Federal Farm Credit Banks
Mortgage Servicing
Collecting payments, paying taxes and insurance and processing
defaults – These are sold too
Home Ready mortgage
Fannie. Provides lenders with more flexibility serving credit-worthy low income borrowers and areas hit by disaster
Ginnie Mae
Guarantee investors the timely payment of principal and
interest on MBS backed by federally insured or guaranteed loans
Largest issuer of mortgage-backed securities
Only issuer of government guaranteed mortgage-backed securities
Farmer Mac
Secondary market for agricultural loans and not a lender
REMIC (Real Estate Mortgage Investment Conduits)
Assembles mortgages into pools and issues pass-through certificates, multiclass bonds, or other securities to investors in the secondary mortgage market
FHLB (Federal Home Loan Bank)
Provided secondary market funds to the savings and loan industry during
the savings and loan crisis
Fannie Mae
Created to provide secondary market for FHA-insured loans
Freddie Mac
Created to provide secondary market for conventional loans
Ginnie Mae
Provide primary market loans for housing projects
Throughout the latter half of the 19th century, mortgage companies acted as conciliators between East Coast investors and frontier farmers who needed financing
True
Between 1931 and 1935, there were 250,000 foreclosures per year, and by 1935 20% percent of all homes were owned by lenders
True
The National Housing Act of 1934 created the Federal Housing Administration (FHA) and its government-backed insurance programs
True
REMICs
Real Estate Mortgage Investment Conduits (REMICs) are entities that pool mortgages and issues pass-through certificates in the secondary market.
REMICs
Real Estate Mortgage Investment Conduits (REMICs) are entities that pool mortgages and issues pass-through certificates in the secondary market.
Garn-St. Germain Depository Institutions Act was passed
In the 80’s, Money Market accounts became popular because of higher interest rates, so investors pulled money out of savings accounts.
In 1982, S&L banks asked Congress to remove low interest rate restrictions. Allowed S&Ls to raise interest rates on savings deposits. In addition, the banks were no
longer restricted to mortgages, but were allowed to make commercial and
consumer loans. Removed restrictions on LTV
By 1982-1985 S&Ls grew significantly but in 1983, 35% weren’t profitable
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
1989 Bail-out of S&Ls
QTL (Qualified Thrift Lender) Test
At least 70 percent of an S&Ls assets must be housing-related (for
example, home mortgages, home equity loans and mortgage-backed securities) for it to
meet the QTL test
Commercial Bank Regulations
The Glass-Steagall Act was passed in 1933
The Gramm–Leach–Bliley Act was passed in 1999
The Dodd-Frank Act was passed in 2010
Prior to the 1980s most mortgage loans for homes were made by
Savings and Loans
What is responsible for regulating, supervising and insuring S&Ls
FIRREA
The Act that was passed in 2010 and is intended to decrease various risks in the U.S.
financial system was the
Dodd-Frank Act
The largest share of life insurer assets is comprised of
Corporate bonds
Life insurance companies’ 3 biggest holdings
Stocks
Bonds
Real Estate
If a debt-ratio problem is preventing a senior from getting a new,
low-interest-rate mortgage and they’ve got substantial untapped retirement funds, that
might help qualify them on income
Freddie Mac’s “little known” policy revision now allows seniors and others to use
certain retirement account balances to supplement their incomes for underwriting
purposes—without actually tapping those balances or drawing down cash
Many people do not realize that it is perfectly legal to use money in a selfdirected
IRA to invest in real estate. You can buy a home to flip quickly for a
profit, a rental unit to bring in a steady flow of income, or even a commercial
property. As long as the profit you make goes back into the IRA account, you do
not have to pay capital gains tax on the amount until you take the money out of
the IRA for your retirement, ideally years in the future.
True
Where are reserve deposits for banks kept?
Bank Vault
The Federal Reserve
Why do banks keep reserves?
Required by Fed
Prepare for large withdrawals
Prepare for run on bank
A legal investment for money in an IRA account is?
Real estate
Before moving their IRA money to real estate, consumers are advised to meet with a
Tax professional
What are the largest source of investment funds in the United States?
Commercial banks
AAA rated life insurance companies prefer to invest in
Commercial multi-family real estate
3 types of REITs
Equity – hold income producing properties
Mortgage – extend credit to real estate owners
Hybrid
5 or fewer people cannot own more than 50%
Some say someone can’t own more than 9.8%
REIT
At least 75% of the annual gross income must be from RE related income
An additional 20% income must be from other sources (interest)
No more than 5% from non-qualifying sources like service fees
REMT (Real Estate Mortgage Trust)
REIT that buys and sells real estate mortgages instead of real property
PE Ratio
Stock price $144/share and dividend is $12 – 144/12=12
Below 16 is low = solid earnings in near future (established companies)
Above 18 high = rapidly expanding sectors and may indicate fast growth and high future yields but risky
2 types of Mortgage Back Securities
Pass-throughs – trusts where mortgage payments are passed through to investors and maturities of 5, 15 and 30 years
Collateralized Mortgage Obligations (CMOs) – multiple pools of securities (slices or traunches). Traunches given credit ratings
RE Bonds
Bond secured by mortgage or pool of. Mortgage interest rates pay yield on bond
Foreign Lenders and Homebuyers
Buyer – 30% of value of home as down
Easement Appurtenant
Benefits one parcel of land (dominent vs. servient) and runs with the land
Easement in Gross
Benefits a person or entity. Utility company gas pipeline. When property sold, utility company has to get consent from new owner
Express Easement
Written agreement between owners
Implied Easement
When property is divided
Prescriptive Easement
If someone has used an easement for a number of years (5-30)– like squatting
Easement Termination
Express Agreement
Abandonment – no use
Merger – two properties merge
By Necessity – no need anymore
In a commercial triple net lease the who pays all of the expenses
Tenant
How do you get homestead exemption for property tax
File for the exemption at the property tax office
Recording a deed provides _______ of the conveyance of the property
Constructive notice
Mortgage documents are used in title theory states and Deeds of Trust are used
in Lien Theory States
True
Deed of Trust
3 party instrument (mortgagee, mortgager, trustee who holds the deed of trust)
Contract for Deed
Seller keep title and pays the original mortgage
40 or 48 Rule in Property Code
In Contract for Deed, If buyer has paid in 40% or more of purchase price or equivalent of 48 monthly payments, a 60-day notice is required and foreclosure (not eviction) used to regain title
Mortgage Subordination Agreement
When 2 mortgage on a home and owner is refinancing. It says which mortgage takes precedence
Wraparound Mortgage
are not issued by a lender but rather by the seller. Seller lends money to buyer which buyer pays back
The clause in the mortgage documents that say the property cannot be sold unless
the loan is paid in full is the _______ clause.
Alienation and Due on Sale
Using real estate property as collateral for a loan is called
Hypothecation
A Texas homeowner has a right of redemption
Before the foreclosure sale
After the note has been accelerated
In various documents the buyer is known as
Mortgagor
Trustor
Grantee
Executory contracts in Texas include:
Leases with option to buy
Contracts for deed
Lease purchases
The Fannie Mae Deed of Trust says the borrower must occupy the property for at
least
1 year
The Fannie Mae Deed of Trust say that in the case of an insurance loss the lender
has the right to
Hold the funds until the repairs are complete and inspected
The power of sale in the deed of trust gives the lender the right to
Conduct a non-judicial foreclosure
Defeasance Clause
The clause in a mortgage document that promises title will be transferred to the
borrower when all the payments are paid
Liens and Easements are
Encroachments
The right of the lender to sell a property at a foreclosure auction without going to
court to get permission is given in the ______ clause in the Deed of Trust
Power of Sale
In the deed the buyer is called the
Grantee
Anything that affects the title to the property negatively is an encumbrance
That
includes easements, encroachments, liens, leases and more.
Executory contracts are heavily regulated under Chapter 5 of the Texas Property Code.
True
It is not permissible to simply evict a buyer under an executory contract if there is a default.
True
Contracts for deed, lease-purchases, and lease-options for longer than 180 days are defined as executory contracts
True
Signature Loan
No collateral and backed only by signature
Rising interest rates cause
Falling property values
Included in lender’s APR calculation
Application fee Discount points Document prep fees Origination fee PMI Process fee Underwriting fee
Not included in lender’s APR calculation
Appraisal fee Attorneys' fees Credit report fee Home inspection fee Notary fees Pest inspection fee Recording fee Title insurance
Interest in excess of $1 million is not deductible
True
If you bought a $1.5 million home, the first million would be deductible
RESPA sets limits on amount of money a lender is allowed to keep in an escrow account
12 months + another 2 months or 1/6 of the annual payments
Real estate taxes
are deductible. Special assessments are not
Mortgage Interest Tax Credit
Must get a Mortgage Credit Certificate before obtaining a mortgage
1st time home buyers with Annual income less than $30,000 = 20% of mortgage interest payments
10% if over $30,000.
The remaining 80% can be deductible and any unused portion can be carried forward for up to 3 years
First time home buyer
Anyone who has not owned a property for 3 years
ARM Lookback Period
Number of days before the adjustment period that the last published rate for the index becomes the index rate for that period.
Margin
1,000 basis points = a rate of 1%
80-10-10 Mortgage
2 loans (one small and one large) No PMI. Less monthly payment, but can’t deduct as much interest
Graduated Payment Mortgage
Low initial payments that increase over time and then are fixed.
Some are Negative Amortization
Growth Equity Mortgage
Much like Graduated but no negative amortization
Balloon Mortgage
.25 - .5 %less interest
Great for those who are going to sell their home in 5-7 years
Fannie Mae Balloon
7 years with conversion option to a 23-year mortgage
Also called 7/23
For single homes, second homes, condos and investment property
Freddie Mac Balloon
5 and 7 year (which is underwritten for A-minus credit)
Wraparound Mortgage
Agents cannot write an offer for a wraparound.
Home Equity Loan
80% of value of property
Open End Mortgage
Great for people who want to buy new furniture or appliances
Construction Mortgage
Funds paid in installments/draws as construction progresses.75% of property value.
Sale Leaseback
Great for investor who wants to use the money to buy another property
PMI
$30-70 per month for every $100,000 borrowed
Cancelled when loan balance is 78% or original value but if you buy down your mortgage to 80%, you can ask for it to be removed
If you can show you have 20% equity, you don’t need mortgage insurance
You can do a piggyback loan to get up to 20% down payment to avoid paying PMI
Refinancing costs
$2800-4,000
A conforming conventional loan conforms to
Fannie Mae/Freddie Mac rules*
What is the loan limit for a conforming loan
$417,000
A type of mortgage that is sometimes used by developers, covers several pieces of
property, and has release clauses so that properties can be released as portions of the
loan are paid is a
Blanket mortgage
Participation Loans
Multiple lenders to single borrower for a large loan
Buyer Rebates
Anything that causes money to back to buyer at or after closing without the knowledge of lender – ILLEGAL
Interest plus other finance charges is the
APR
In Equity Participation Mortgage the lender receives a portion of the income from the property during ownership
True
An equity participation mortgage is a mortgage loan in which the lender has a partial equity interest in the property.
True
FHA LDP List (Limited Denial of Participation)
suspended or disqualified borrowers who defaulted on an FHA loan or fraud
GSA – Government Services Administration Pro/Non Pro List
Lenders are required to check this list
Lenders can be approved by FHA to underwrite loans
HUD 71101 application and $1,100. FHA lenders save borrowers 10-14 days in processing
CAIVRS (Credit Alert Interactive Voice Response System)
FHA lenders can credit check for: No cases A claim Default Foreclosure DOJ judgment Multiple cases
PEI (Private Initiative Grants)
Help nonprofit fair housing organizations to prevent discrimination
EOI (Education and Outreach Initiative Grants)
HUD awards to groups educating public and housing providers about rights and responsibilities
FHOI (Fair Housing Organization Initiative Grants)
HUD awarded to help build nonprofit fair housing organizations
FHA Title 1
Home Improvement Loan
$25,000
No equity required
Multi-Family = $12,000/Family unit not to exceed $60,000
FHA Title XI (Section 202)
Helps elderly with interest-free federal capital
FHA 203b
Most used FHA loan
Interest rates are negotiated between borrower and lender
FHA Loan Requirements
3.5% down Income Ratio 29% - 35% Debt Ratio 41% MIP for 78% LTV Credit Score 2 years employment 2 years income BKs at least 2 years old Foreclosures 3 years Upfront MIP fee 1.75% 1.35 Loan limits
1-Year Treasury Constant Maturities Index
Used for determining interest rate changes
FICO
Fair Issac Company
VA Loans
up to $729,000
IRRRL (Interest Rate Reduction Refinancing Loan)
VA refinance
VA Funding Fee
Don’t have to pay if you have on duty disability or surviving spouse of veteran who died on active duty
Anyone can assume a VA loan
True and no qualifying
.5% funding fee
TLB (Texas Veterans Land Board)
Zero down
Up to $125,000 for land
5% down
VLB (Veterans Land Board) Home Improvement loan
3.86% discounted to 3.36%
$50,000 for 20-year
$10,000 for 10-year
USDA Loans
Zero down
Mortgage Insurance 2%
Annual MIP .40%
Which of the following are not included on the HUD LDP list concerning FHA loans?
Qualified
The money to originate an FHA loan comes from the _______.
Lender
Which FHA program allows the buyer to finance the purchase and restore the property all is
one loan with one monthly payment?
203K
FHA requires the house payment not to exceed _______% of the total gross monthly
income.
29%
FHA wants the total monthly, long term, debt not to exceed _______% of the total gross
monthly income.
41
FHA loans made prior to _______ can be assumed without FHA approval
Dec 1, 1986
Why did old FHA loans not have to be approved to be assumed?
The Deed of Trust did not provide a requirement for FHA to approve assumptions until a
1986.*
FHA has existed since 1934. During that time, they have insured about $_______ home
mortgages in the USA.
34 million
How long after a bankruptcy has been discharged does a person need to wait to get an FHA
loan?
2 years
How long after a mortgage foreclosure does a person need to wait to get an FHA loan?
3 years
When the FHA loan makes it through underwriting it can be
Approved, suspended, denied
The seller can pay up to _______% of buyer’s closing cost, all prepaid and discount or
origination fees on an FHA loan.
6
What percentage of living veterans has used their VA benefits?
10%
How are VLB programs paid for?
Self funded
Eligible for VLB loan
An active duty military member
A member of the Texas National Guard
A surviving spouse of a Veteran listed as missing in action or whose death was service
connected
Other FHA programs include loans for condominiums, adjustable rate mortgages and
graduated equity mortgages.
True
A vet must have received a hardship or early-out discharge (USC 1173 and 1171, respectively) after completing
181 days
An unmarried partner who is a co-borrower with a veteran may not have her or his portion of the loan amount guaranteed by the VA.
True
FHA program for purchase of condo
The FHA has the 234(c) program for the purchase of a condominium if the building is FHA approved and at least 51% owner occupied.
The FHA has the 234(c) program for the purchase of a condominium if the building is FHA approved and at least 51% owner occupied.
True
Debt Service Ratio
PITI+all long term debts/gross income
Fannie Mae Underwriting
Desktop Underwriter
Freddie Mac’s Loan Prospector
BK – 7 years
Good Faith Estimate and Truth-in-Lending
within 3 days after loan application
3 types of surveys
Geodetic
Cadastral
Topographic
Paid By Seller
Transfer Tax
Brokers’ commission
Title expenses
Recording Expenses
Paid by either party or both, by agreement
Attorney Fees
Paid by Buyer
Tax and Insurance Reserves
Appraisal Fees
Survey Fees
Paid by Both
Loan Fees
Lender closing costs can include appraisal fees, assumption fees, underwriting fees, discount points, origination fees, and flood certification fees
True
If a borrower is self-employed, the underwriter verifies income with two years income tax returns.
True
Equitable redemption is derived from common law
True
There is no statutory redemption in Texas
True
Equitable redemption allows payment.
True
Statutory Exemption
Allows debtors to redeem a property after a foreclosure sale
Occurs before the sale (auction) of a property
Equitable Redemption
Non-judicial foreclosures are also known as
Strict foreclosures
Non-judicial foreclosures are also known a
True
Equitable redemption occurs before the sale (auction) of a property. It allows defaulting debtors to pay the defaulted portion of the debt (as well as costs the lender incurred) in order to reinstate the loan and prevent a foreclosure sale.
True
What is the length of service for a member of the Real Estate Broker Law Committee?
6 years
When a member reaches their term limit or leaves early, who appoints a successor?
The person who appointed the other
To become accredited, real estate educational institutions need to post a bond in the amount of:
$20,000 payable to TREC
Accreditation for a continuing education institution is:
2 years
Accreditation for a continuing education institution is:
13
Who appoints the lawyers who are part of the Texas Real Estate Broker Lawyer Committee?
State Bar of Texas
Who appoints the public member of the Texas Real Estate Broker Lawyer Committee?
The governor
Who appoints the 6 brokers on the Texas Real Estate Broker Lawyer Committee
TREC
If a license goes out-of-effect, how soon must the licensee be reactivated before the entire education requirement begins again?
2 years
If a Colorado broker is licensed in the State of Texas as well, what happens if he/she has to meet a court awarded judgment payable to a Texas client?
He/she must make full payment within 20 days or lose his/her Texas license
If the Commission denies a license to an applicant, they must give cause. The individual can appeal at a hearing set by the Commission. What is the requirement regarding days notice to appeal and for the hearing?
10 days to appeal and 10 days notice for the hearing
An applicant taking the exam must be notified no later than how long regarding the results of the test?
30 days
When a salesperson renews for the first time he/she must successfully complete at least how many semester hours of post-secondary education?
14 semester hours or 210 clock hours
When a salesperson renews for the first time he/she must complete how many additional hours of core real estate courses?
4 semester hours or 60 clock hours
Currently, licensees that have completed 3 renewals only have to meet how many hours of continuing education courses?
15
If a certificate holder moves their place of business they must notify the Commission by:
10th day
If the buyer or seller decides to go to litigation (sue) rather than mediation, who pays the legal costs?
the party who loses
If the buyer backs out of a transaction, the earnest money:
is used to pay escrow costs first
Seller’s disclosure of lead-based paint requires the broker to keep a copy of the form for:
3 years
The State of Texas gives the buyer 14 days to terminate once learning of lead-paint within the subject’s residence.
true
Which of the following statements is correct regarding real estate brokering?
in an exclusive agency listing, a seller may sell without being liable for paying a commission
Water rights to property are considered which of the following?
Real property
Which of the following would transfer ownership with a bill of sale
a mobile home located at a mobile home park
A life tenant is a person who has:
a freehold estate
A freehold estate may be
a lifetime lease
a fee simple estate
Which of the following is a less than absolute fee simple estate?
property that has an easement on it
property held under a lease
real estate minus the mineral, oil, and gas rights
A form of co-ownership with an undivided interest and no right of survivorship is:
tenancy in common
If two purchasers, who are husband and wife, state on the deed that they wish title at 100% for each, the title would be conveyed to them as:
Tenants by entirety
Right of survivorship is a feature of:
Joint tenancy
If title to real property is held by tenants in common, all tenants have:
an interest in the land, but no specific part of the land
When the county places a lien on property where the property tax has not been paid, the lien only affects that specific parcel of property. This is why it called a:
Special lien
The right to limited use, but not to the possession of someone else’s real property is:
An easement
An item that “belongs to” and passes with the title of the real property is:
an appurtenance
Which of the following statements about an appurtenant easement is correct?
It is an interest in land capable of transfer. Runs with the land
When a party owns landlocked property and requires access over the land of an adjacent owner to reach his/her property he/she would likely be entitled to:
Easement by necessity
How are private property restrictions enforced?
by a court injunction
Life insurance company debt investments are mainly placed upon:
large commercial and apartment loans
A mortgage banker is like a mortgage broker. They broker bank mortgage around the financial community. They do not use their own money, but are simply a secondary market for convention lender mortgages.
True
When a contractor wants to build a spec home, the construction financing is usually designed as:
a holding agreement
Which of the following parties would normally pay the loan origination fee on an FHA loan?
Seller
Under Title II of the the Federal National Mortgage Association (FNMA) the primary purpose is to:
buy Title II loans to keep the market liquid
Which type of interest is usually charged when financing a house?
Simple annual
A buyer taking title “subject to” a mortgage the buyer is not assuming should request a:
reduction certificate
A mortgage may properly be regarded as a:
Specific Lien and Contractual Lien
Under a lawsuit, a court order to sell property in order to satisfy a judgment by the court is called:
Writ of Execution
