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Texas Real Estate Exam > Texas Real Estate Finance > Flashcards

Texas Real Estate Finance Flashcards

1
Q

Accrued Item

A

Expense the buyer will pay after closing that must be divided between buyer and seller

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2
Q

Basis

A

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.

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3
Q

Boot

A

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

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4
Q

Capitalization Rate

A

Ratio of net operating income to present value. Used to estimate value of a commercial property

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5
Q

CRV (Certificate of Reasonable value

A

Appraisal conducted by VA approved appraiser

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6
Q

Constructive Notice

A

If a property is recorded in the public record, other parties are considered to have received constructive notice

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7
Q

Debt Service Ratio (back-end ratio)

A

Total housing expense and long term debt payment to gross monthly income

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8
Q

Deed of Trust

A

Security for promissory which conveys temporary (not full) title

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9
Q

Deficiency Judgment

A

Against borrower to repay remaining mortgage when the foreclosure and sale of property was not enough

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10
Q

Delayed Exchange

A

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.

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11
Q

Discounted Cash Flow Analysis

A

Method of valuing RE by discounting predicted future cash flow to a net present value

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12
Q

Discount Rate

A

Interest rated charged by the Fed to its member banks when lending them money

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13
Q

Entitlement

A

Amount of loan the VA will lend

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14
Q

Federal Funds Rate

A

Interest rate banks lend money to each other

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15
Q

FOMC (Federal Open Market Committee)

A

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

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16
Q

Float to Fixed Rate Loans

A

ARM converts to fixed rate

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17
Q

Forebearance

A

Lender’s choice not to foreclose

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18
Q

Funding Fee

A

VA

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19
Q

Graduated Payment Mortgage (GPM)

A

Negative amortization in early years

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20
Q

Growth Equity Mortgage (GEM)

A

Periodically increasing principal payments with fixed int rate.

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21
Q

Interest Rate Reduction Refinancing Loan

A

Guaranteed by VA

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22
Q

Internal Rate of Return

A

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.

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23
Q

Modified Internal Rate of Return

A

Internal rate of return of an investment when both the finance rate and the reinvestment rate are considered

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24
Q

Moratorium

A

Lender suspends payments on principal or interest to help borrower avoid foreclosure

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25
Q

Mortgage Credit Certificate

A

Allows mortgage interest tax credit

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26
Q

Order of Operations

A

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

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27
Q

PE Ratio

A

Dividends that a share in a company returns to investors per dollar of stock purchased

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28
Q

Recaptured Depreciation

A

Portion of seller’s capital gains that is difference between property’s original price and adjusted basis

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29
Q

Recasting

A

Change in loan terms (often moratorium)

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30
Q

Redemption

A

Borrower recovers property after being taken

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31
Q

Reserve Requirement

A

Percentage of bank’s funds the Fed requires it to reserve in cash

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32
Q

Wraparound Mortgage

A

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

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33
Q

Portfolio Lenders

A

Don’t sell on 2ndary market. More flexible.

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34
Q

Transfer of Servicing (loan service)

A

15 days notice and new servicer within 15 days of transfer. Cannot be charged late fee for 60 days

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35
Q

Force Placed Insurance

A

When loan servicer buys insurance on your behalf because you didn’t

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36
Q

Interest only loans

A

If you think you will be better able to get a better interest rate next year

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37
Q

Real Estate Loans

A

You can borrow up to 75% against the value of your home between 10-20 years

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38
Q

Equipment Loans

A

Can borrow 60-80% the value of equipment

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39
Q

SAFE Act (Safe Mortgage Licensing Act)

A

Mortgage Loan Officers training, testing

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40
Q

Real Estate Cycles

A

Recovery
Expansion
Hyper supply
Recession

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41
Q

2 largest contributors to inflation

A

Cost of healthcare and housing

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42
Q

Tax exemptions

A

Married couples exempt from capital gains tax up to $500,000 and single to $250,000

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43
Q

USDA Home Loan

A

zero down

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44
Q

Homestead Exemption

A

Texas $25,000

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45
Q

Senior Citizen Exemption

A

Texas $10,000

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46
Q

Federal Reserve

A

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

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47
Q

FOMC (Federal Open Market Committee)

A

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

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48
Q

The Volcker Rule

A

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.

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49
Q

Financial Stability Oversight Council

A

9 members chaired by the Treasury Secretary

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50
Q

Primary Credit Rate

A

Fed lends to member banks for short term loans which is slightly above the short-term market interest rate

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51
Q

Office of the Comptroller of Currency

A

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

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52
Q

SWIFT (Society for Worldwide Interbank

Financial Telecommunication)

A 
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
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53
Q

The regulations that comprise the Federal Reserve Act include which of the following?

A 
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
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54
Q

When the reserve requirement is low, it causes the demand for real estate to increase, raising prices and increasing the number of sales.

A

True

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55
Q

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.

A

True

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56
Q

Open market operations consist of buying government securities, either from the U.S. Treasury or from other federal agencies, and selling them

A

True

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57
Q

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.

A

True

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58
Q

The Federal
Reserve’s three instruments of monetary policy are open market operations, the
discount rate, and reserve requirements.

A

True

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59
Q

FDIC

A

Independent agency of the U.S. federal government that preserves public confidence in the banking system by insuring deposits.

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60
Q

The Federal Home Loan Bank

A

Extends credit to financial institutions and created the Federal Home Loan Bank System.

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61
Q

FOMC (Federal Open Market Committee)

A

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

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62
Q

Office of the Comptroller of Currency

A

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.

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63
Q

The Federal Deposit Insurance Corporation, FDIC

A

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,

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64
Q

HUD (created by US Housing Act 1937)

A

Mission is to increase home ownership, support community development, and
increase access to affordable housing free from discrimination

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65
Q

HUD

A

HUD has a staff of administrative law judges to oversee cases it prosecutes involving violations of these acts

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66
Q

Truth in Lending Act (TILA)

A

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

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67
Q

Regulation Z

A

Most of the specific requirements imposed by TILA are found in
Regulation Z

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68
Q

Consumer Financial Protection Bureau

A

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.

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69
Q

APR

A

Introduced by TILA

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70
Q

Consumer Credit Protection Act

A

is known as the Truth in Lending Act (TILA).

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71
Q

Regulation M

A

applies to

leased property

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72
Q

If creditor doesn’t comply with TILA

A 
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
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73
Q

RESPA

A

Within 3 days deliver booklet

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74
Q

RESPA

A

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

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75
Q

RESPA Violations

A

Up to $10,000 and prison up to a year

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76
Q

Consumer Financial Protection Bureau (CFPB)

A

Know before you Owe

Regulated consumer financial products including mortgages

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77
Q

CFPB Penalties

A

$5,000 failure to follow the law
$25,000 for gross negligence
$1,000,000 for intentional violations

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78
Q

Volker Rule

A

Stops banks from owning hedge funds for their own profit

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79
Q

SAFE Mortgage Licensing Act

A

Licencing of mortgage loan originators

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80
Q

Administrative Procedure Act (APA)

A

Governs the way administrative agencies of the government may propose regulations

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81
Q

Max net capital gain tax rate is

A

20%

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82
Q

Limit on capital losses

A

$3,000 per year or $1,500 is married filing separately

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83
Q

Mortgage Assistance Relief Services (MARS)

A

Protects consumers from predators when they are in default on mortgage

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84
Q

CRA

A

Federal act blamed for causing lenders to make risky loans

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85
Q

TILA

A

causes lender to be clear and truthful in their advertising loan terms

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86
Q

HFA’s Housing Finance Agencies

A

State entities goal of increasing housing opportunities for low income, etc.
Rely on Mortgage Revenue Bonds
Low Income Housing Credit
HOME Investment Partnership Program

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87
Q

Texas Dept of Housing and Community Affairs

TDHCA

A

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)

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88
Q

Taxable Mortgage Program (TMT-79)

A

My First Texas Home

Competitive fixed interest loans with cost assistance up to 5%

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89
Q

MCC Program

Mortgage Credit Certificate

A

Tax credits for many years

40% of annual interest paid on loan, but can’t exceed $2,000 per year

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90
Q

Texas State Affordable Housing Corporation (TSAHC)

A

Every Texan deserves the opportunity to live in safe, decent and affordable housing
Offer low, fixed-rate loans and down payment assistance

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91
Q

Housing Choice Vouchers

A

Rental Home

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92
Q

Non recourse loan

A

Lender has no recourse against anyone or anything other than the property.

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93
Q

Commercial Loans

A

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

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94
Q

Debt Service Coverage Ratio

A

Calculated by dividing the NOI by the annual debt service

A DSCR of less than 1 indicates a negative cash flow

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95
Q

Defeasance

A

Substitution of collateral instead of paying cash to lender, treasury securities

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96
Q

Hard Money Loans

A

Flippers. Not based on buyer’s credit worthiness but value of property itself (After Repair Value)
Can be 10% points higher than conventional loan

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97
Q

Sweet 16 Ratios

A

Repayment, liquidity, solvency analysis

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98
Q

Top 5 commodities

A

Cattle, cotton, dairy, broilers, greenhouse/nursery

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99
Q

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

A

True

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100
Q

Which two of the following offer down payment and closing cost assistance to first
time home buyers?

A

TDHCA and TSAHC

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101
Q

What is the TAR website that offers help to consumers regarding loans?

A

www.texasrealestate.com

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102
Q

Who created the Loan Estimate and the Loan Closing Disclosure forms?

A

CFPB

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103
Q

The Real Estate Settlement Procedures Act (RESPA)

A

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.

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104
Q

TILA

A

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.

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105
Q

In the fall of 2015, the initial Truth in Lending form and the Good Faith Estimate became one form called the

A

Loan Estimate

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106
Q

CFPB

A

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.

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107
Q

Best Efforts Trade

A

Selling a single mortgage on secondary market. Smaller banks use this

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108
Q

Major Participants in Secondary Market

A

Mortgage Originator
Aggregator
Securities Dealers

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109
Q

Mortgage Originators

A

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

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110
Q

Aggregator

A

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

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111
Q

Securities Dealers

A

Buy MBSs – trading desk.. Make a spread in the price at which they buy and sell

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112
Q

Investors

A

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

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113
Q

GSE (Government Sponsored Enterprises)

A

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

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114
Q

Mortgage Servicing

A

Collecting payments, paying taxes and insurance and processing
defaults – These are sold too

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115
Q

Home Ready mortgage

A

Fannie. Provides lenders with more flexibility serving credit-worthy low income borrowers and areas hit by disaster

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116
Q

Ginnie Mae

A

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

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117
Q

Farmer Mac

A

Secondary market for agricultural loans and not a lender

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118
Q

REMIC (Real Estate Mortgage Investment Conduits)

A

Assembles mortgages into pools and issues pass-through certificates, multiclass bonds, or other securities to investors in the secondary mortgage market

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119
Q

FHLB (Federal Home Loan Bank)

A

Provided secondary market funds to the savings and loan industry during
the savings and loan crisis

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120
Q

Fannie Mae

A

Created to provide secondary market for FHA-insured loans

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121
Q

Freddie Mac

A

Created to provide secondary market for conventional loans

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122
Q

Ginnie Mae

A

Provide primary market loans for housing projects

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123
Q

Throughout the latter half of the 19th century, mortgage companies acted as conciliators between East Coast investors and frontier farmers who needed financing

A

True

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124
Q

Between 1931 and 1935, there were 250,000 foreclosures per year, and by 1935 20% percent of all homes were owned by lenders

A

True

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125
Q

The National Housing Act of 1934 created the Federal Housing Administration (FHA) and its government-backed insurance programs

A

True

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126
Q

REMICs

A

Real Estate Mortgage Investment Conduits (REMICs) are entities that pool mortgages and issues pass-through certificates in the secondary market.

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127
Q

REMICs

A

Real Estate Mortgage Investment Conduits (REMICs) are entities that pool mortgages and issues pass-through certificates in the secondary market.

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128
Q

Garn-St. Germain Depository Institutions Act was passed

A

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

129
Q

Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

A

1989 Bail-out of S&Ls

130
Q

QTL (Qualified Thrift Lender) Test

A

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

131
Q

Commercial Bank Regulations

A

 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

132
Q

Prior to the 1980s most mortgage loans for homes were made by

A

Savings and Loans

133
Q

What is responsible for regulating, supervising and insuring S&Ls

A

FIRREA

134
Q

The Act that was passed in 2010 and is intended to decrease various risks in the U.S.
financial system was the

A

Dodd-Frank Act

135
Q

The largest share of life insurer assets is comprised of

A

Corporate bonds

136
Q

Life insurance companies’ 3 biggest holdings

A

Stocks
Bonds
Real Estate

137
Q

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

A

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

138
Q

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.

A

True

139
Q

Where are reserve deposits for banks kept?

A

Bank Vault

The Federal Reserve

140
Q

Why do banks keep reserves?

A

Required by Fed
Prepare for large withdrawals
Prepare for run on bank

141
Q

A legal investment for money in an IRA account is?

A

Real estate

142
Q

Before moving their IRA money to real estate, consumers are advised to meet with a

A

Tax professional

143
Q

What are the largest source of investment funds in the United States?

A

Commercial banks

144
Q

AAA rated life insurance companies prefer to invest in

A

Commercial multi-family real estate

145
Q

3 types of REITs

A

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%

146
Q

REIT

A

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

147
Q

REMT (Real Estate Mortgage Trust)

A

REIT that buys and sells real estate mortgages instead of real property

148
Q

PE Ratio

A

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

149
Q

2 types of Mortgage Back Securities

A

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

150
Q

RE Bonds

A

Bond secured by mortgage or pool of. Mortgage interest rates pay yield on bond

151
Q

Foreign Lenders and Homebuyers

A

Buyer – 30% of value of home as down

152
Q

Easement Appurtenant

A

Benefits one parcel of land (dominent vs. servient) and runs with the land

153
Q

Easement in Gross

A

Benefits a person or entity. Utility company gas pipeline. When property sold, utility company has to get consent from new owner

154
Q

Express Easement

A

Written agreement between owners

155
Q

Implied Easement

A

When property is divided

156
Q

Prescriptive Easement

A

If someone has used an easement for a number of years (5-30)– like squatting

157
Q

Easement Termination

A

Express Agreement
Abandonment – no use
Merger – two properties merge
By Necessity – no need anymore

158
Q

In a commercial triple net lease the who pays all of the expenses

A

Tenant

159
Q

How do you get homestead exemption for property tax

A

File for the exemption at the property tax office

160
Q

Recording a deed provides _______ of the conveyance of the property

A

Constructive notice

161
Q

Mortgage documents are used in title theory states and Deeds of Trust are used
in Lien Theory States

A

True

162
Q

Deed of Trust

A

3 party instrument (mortgagee, mortgager, trustee who holds the deed of trust)

163
Q

Contract for Deed

A

Seller keep title and pays the original mortgage

164
Q

40 or 48 Rule in Property Code

A

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

165
Q

Mortgage Subordination Agreement

A

When 2 mortgage on a home and owner is refinancing. It says which mortgage takes precedence

166
Q

Wraparound Mortgage

A

are not issued by a lender but rather by the seller. Seller lends money to buyer which buyer pays back

167
Q

The clause in the mortgage documents that say the property cannot be sold unless
the loan is paid in full is the _______ clause.

A

Alienation and Due on Sale

168
Q

Using real estate property as collateral for a loan is called

A

Hypothecation

169
Q

A Texas homeowner has a right of redemption

A

Before the foreclosure sale

After the note has been accelerated

170
Q

In various documents the buyer is known as

A

Mortgagor
Trustor
Grantee

171
Q

Executory contracts in Texas include:

A

Leases with option to buy
Contracts for deed
Lease purchases

172
Q

The Fannie Mae Deed of Trust says the borrower must occupy the property for at
least

A

1 year

173
Q

The Fannie Mae Deed of Trust say that in the case of an insurance loss the lender
has the right to

A

Hold the funds until the repairs are complete and inspected

174
Q

The power of sale in the deed of trust gives the lender the right to

A

Conduct a non-judicial foreclosure

175
Q

Defeasance Clause

A

The clause in a mortgage document that promises title will be transferred to the
borrower when all the payments are paid

176
Q

Liens and Easements are

A

Encroachments

177
Q

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

A

Power of Sale

178
Q

In the deed the buyer is called the

A

Grantee

179
Q

Anything that affects the title to the property negatively is an encumbrance

A

That

includes easements, encroachments, liens, leases and more.

180
Q

Executory contracts are heavily regulated under Chapter 5 of the Texas Property Code.

A

True

181
Q

It is not permissible to simply evict a buyer under an executory contract if there is a default.

A

True

182
Q

Contracts for deed, lease-purchases, and lease-options for longer than 180 days are defined as executory contracts

A

True

183
Q

Signature Loan

A

No collateral and backed only by signature

184
Q

Rising interest rates cause

A

Falling property values

185
Q

Included in lender’s APR calculation

A 
Application fee
Discount points
Document prep fees
Origination fee
PMI
Process fee
Underwriting fee
186
Q

Not included in lender’s APR calculation

A 
Appraisal fee
Attorneys' fees
Credit report fee
Home inspection fee
Notary fees
Pest inspection fee
Recording fee
Title insurance
187
Q

Interest in excess of $1 million is not deductible

A

True

If you bought a $1.5 million home, the first million would be deductible

188
Q

RESPA sets limits on amount of money a lender is allowed to keep in an escrow account

A

12 months + another 2 months or 1/6 of the annual payments

189
Q

Real estate taxes

A

are deductible. Special assessments are not

190
Q

Mortgage Interest Tax Credit

Must get a Mortgage Credit Certificate before obtaining a mortgage

A

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

191
Q

First time home buyer

A

Anyone who has not owned a property for 3 years

192
Q

ARM Lookback Period

A

Number of days before the adjustment period that the last published rate for the index becomes the index rate for that period.

193
Q

Margin

A

1,000 basis points = a rate of 1%

194
Q

80-10-10 Mortgage

A

2 loans (one small and one large) No PMI. Less monthly payment, but can’t deduct as much interest

195
Q

Graduated Payment Mortgage

A

Low initial payments that increase over time and then are fixed.
Some are Negative Amortization

196
Q

Growth Equity Mortgage

A

Much like Graduated but no negative amortization

197
Q

Balloon Mortgage

A

.25 - .5 %less interest

Great for those who are going to sell their home in 5-7 years

198
Q

Fannie Mae Balloon

A

7 years with conversion option to a 23-year mortgage
Also called 7/23
For single homes, second homes, condos and investment property

199
Q

Freddie Mac Balloon

A

5 and 7 year (which is underwritten for A-minus credit)

200
Q

Wraparound Mortgage

A

Agents cannot write an offer for a wraparound.

201
Q

Home Equity Loan

A

80% of value of property

202
Q

Open End Mortgage

A

Great for people who want to buy new furniture or appliances

203
Q

Construction Mortgage

A

Funds paid in installments/draws as construction progresses.75% of property value.

204
Q

Sale Leaseback

A

Great for investor who wants to use the money to buy another property

205
Q

PMI

A

$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

206
Q

Refinancing costs

A

$2800-4,000

207
Q

A conforming conventional loan conforms to

A

Fannie Mae/Freddie Mac rules*

208
Q

What is the loan limit for a conforming loan

A

$417,000

209
Q

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

A

Blanket mortgage

210
Q

Participation Loans

A

Multiple lenders to single borrower for a large loan

211
Q

Buyer Rebates

A

Anything that causes money to back to buyer at or after closing without the knowledge of lender – ILLEGAL

212
Q

Interest plus other finance charges is the

A

APR

213
Q

In Equity Participation Mortgage the lender receives a portion of the income from the property during ownership

A

True

214
Q

An equity participation mortgage is a mortgage loan in which the lender has a partial equity interest in the property.

A

True

215
Q

FHA LDP List (Limited Denial of Participation)

A

suspended or disqualified borrowers who defaulted on an FHA loan or fraud

216
Q

GSA – Government Services Administration Pro/Non Pro List

A

Lenders are required to check this list

217
Q

Lenders can be approved by FHA to underwrite loans

A

HUD 71101 application and $1,100. FHA lenders save borrowers 10-14 days in processing

218
Q

CAIVRS (Credit Alert Interactive Voice Response System)

A 
FHA lenders can credit check for:
No cases
A claim
Default
Foreclosure
DOJ judgment
Multiple cases
219
Q

PEI (Private Initiative Grants)

A

Help nonprofit fair housing organizations to prevent discrimination

220
Q

EOI (Education and Outreach Initiative Grants)

A

HUD awards to groups educating public and housing providers about rights and responsibilities

221
Q

FHOI (Fair Housing Organization Initiative Grants)

A

HUD awarded to help build nonprofit fair housing organizations

222
Q

FHA Title 1

A

Home Improvement Loan
$25,000
No equity required
Multi-Family = $12,000/Family unit not to exceed $60,000

223
Q

FHA Title XI (Section 202)

A

Helps elderly with interest-free federal capital

224
Q

FHA 203b

A

Most used FHA loan

Interest rates are negotiated between borrower and lender

225
Q

FHA Loan Requirements

A 
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
226
Q

1-Year Treasury Constant Maturities Index

A

Used for determining interest rate changes

227
Q

FICO

A

Fair Issac Company

228
Q

VA Loans

A

up to $729,000

229
Q

IRRRL (Interest Rate Reduction Refinancing Loan)

A

VA refinance

230
Q

VA Funding Fee

A

Don’t have to pay if you have on duty disability or surviving spouse of veteran who died on active duty

231
Q

Anyone can assume a VA loan

A

True and no qualifying

.5% funding fee

232
Q

TLB (Texas Veterans Land Board)

A

Zero down
Up to $125,000 for land
5% down

233
Q

VLB (Veterans Land Board) Home Improvement loan

A

3.86% discounted to 3.36%
$50,000 for 20-year
$10,000 for 10-year

234
Q

USDA Loans

A

Zero down
Mortgage Insurance 2%
Annual MIP .40%

235
Q

Which of the following are not included on the HUD LDP list concerning FHA loans?

A

Qualified

236
Q

The money to originate an FHA loan comes from the _______.

A

Lender

237
Q

Which FHA program allows the buyer to finance the purchase and restore the property all is
one loan with one monthly payment?

A

203K

238
Q

FHA requires the house payment not to exceed _______% of the total gross monthly
income.

A

29%

239
Q

FHA wants the total monthly, long term, debt not to exceed _______% of the total gross
monthly income.

A

41

240
Q

FHA loans made prior to _______ can be assumed without FHA approval

A

Dec 1, 1986

241
Q

Why did old FHA loans not have to be approved to be assumed?

A

The Deed of Trust did not provide a requirement for FHA to approve assumptions until a
1986.*

242
Q

FHA has existed since 1934. During that time, they have insured about $_______ home
mortgages in the USA.

A

34 million

243
Q

How long after a bankruptcy has been discharged does a person need to wait to get an FHA
loan?

A

2 years

244
Q

How long after a mortgage foreclosure does a person need to wait to get an FHA loan?

A

3 years

245
Q

When the FHA loan makes it through underwriting it can be

A

Approved, suspended, denied

246
Q

The seller can pay up to _______% of buyer’s closing cost, all prepaid and discount or
origination fees on an FHA loan.

A

6

247
Q

What percentage of living veterans has used their VA benefits?

A

10%

248
Q

How are VLB programs paid for?

A

Self funded

249
Q

Eligible for VLB loan

A

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

250
Q

Other FHA programs include loans for condominiums, adjustable rate mortgages and
graduated equity mortgages.

A

True

251
Q

A vet must have received a hardship or early-out discharge (USC 1173 and 1171, respectively) after completing

A

181 days

252
Q

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.

A

True

253
Q

FHA program for purchase of condo

A

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.

254
Q

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.

A

True

255
Q

Debt Service Ratio

A

PITI+all long term debts/gross income

256
Q

Fannie Mae Underwriting

A

Desktop Underwriter

257
Q

Freddie Mac’s Loan Prospector

A

BK – 7 years

258
Q

Good Faith Estimate and Truth-in-Lending

A

within 3 days after loan application

259
Q

3 types of surveys

A

Geodetic
Cadastral
Topographic

260
Q

Paid By Seller

A

Transfer Tax
Brokers’ commission
Title expenses
Recording Expenses

261
Q

Paid by either party or both, by agreement

A

Attorney Fees

262
Q

Paid by Buyer

A

Tax and Insurance Reserves
Appraisal Fees
Survey Fees

263
Q

Paid by Both

A

Loan Fees

264
Q

Lender closing costs can include appraisal fees, assumption fees, underwriting fees, discount points, origination fees, and flood certification fees

A

True

265
Q

If a borrower is self-employed, the underwriter verifies income with two years income tax returns.

A

True

266
Q

Equitable redemption is derived from common law

A

True

267
Q

There is no statutory redemption in Texas

A

True

268
Q

Equitable redemption allows payment.

A

True

269
Q

Statutory Exemption

A

Allows debtors to redeem a property after a foreclosure sale

270
Q

Occurs before the sale (auction) of a property

A

Equitable Redemption

271
Q

Non-judicial foreclosures are also known as

A

Strict foreclosures

272
Q

Non-judicial foreclosures are also known a

A

True

273
Q

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.

A

True

274
Q

What is the length of service for a member of the Real Estate Broker Law Committee?

A

6 years

275
Q

When a member reaches their term limit or leaves early, who appoints a successor?

A

The person who appointed the other

276
Q

To become accredited, real estate educational institutions need to post a bond in the amount of:

A

$20,000 payable to TREC

277
Q

Accreditation for a continuing education institution is:

A

2 years

278
Q

Accreditation for a continuing education institution is:

A

13

279
Q

Who appoints the lawyers who are part of the Texas Real Estate Broker Lawyer Committee?

A

State Bar of Texas

280
Q

Who appoints the public member of the Texas Real Estate Broker Lawyer Committee?

A

The governor

281
Q

Who appoints the 6 brokers on the Texas Real Estate Broker Lawyer Committee

A

TREC

282
Q

If a license goes out-of-effect, how soon must the licensee be reactivated before the entire education requirement begins again?

A

2 years

283
Q

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?

A

He/she must make full payment within 20 days or lose his/her Texas license

284
Q

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?

A

10 days to appeal and 10 days notice for the hearing

285
Q

An applicant taking the exam must be notified no later than how long regarding the results of the test?

A

30 days

286
Q

When a salesperson renews for the first time he/she must successfully complete at least how many semester hours of post-secondary education?

A

14 semester hours or 210 clock hours

287
Q

When a salesperson renews for the first time he/she must complete how many additional hours of core real estate courses?

A

4 semester hours or 60 clock hours

288
Q

Currently, licensees that have completed 3 renewals only have to meet how many hours of continuing education courses?

A

15

289
Q

If a certificate holder moves their place of business they must notify the Commission by:

A

10th day

290
Q

If the buyer or seller decides to go to litigation (sue) rather than mediation, who pays the legal costs?

A

the party who loses

291
Q

If the buyer backs out of a transaction, the earnest money:

A

is used to pay escrow costs first

292
Q

Seller’s disclosure of lead-based paint requires the broker to keep a copy of the form for:

A

3 years

293
Q

The State of Texas gives the buyer 14 days to terminate once learning of lead-paint within the subject’s residence.

A

true

294
Q

Which of the following statements is correct regarding real estate brokering?

A

in an exclusive agency listing, a seller may sell without being liable for paying a commission

295
Q

Water rights to property are considered which of the following?

A

Real property

296
Q

Which of the following would transfer ownership with a bill of sale

A

a mobile home located at a mobile home park

297
Q

A life tenant is a person who has:

A

a freehold estate

298
Q

A freehold estate may be

A

a lifetime lease

a fee simple estate

299
Q

Which of the following is a less than absolute fee simple estate?

A

property that has an easement on it
property held under a lease
real estate minus the mineral, oil, and gas rights

300
Q

A form of co-ownership with an undivided interest and no right of survivorship is:

A

tenancy in common

301
Q

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:

A

Tenants by entirety

302
Q

Right of survivorship is a feature of:

A

Joint tenancy

303
Q

If title to real property is held by tenants in common, all tenants have:

A

an interest in the land, but no specific part of the land

304
Q

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:

A

Special lien

305
Q

The right to limited use, but not to the possession of someone else’s real property is:

A

An easement

306
Q

An item that “belongs to” and passes with the title of the real property is:

A

an appurtenance

307
Q

Which of the following statements about an appurtenant easement is correct?

A

It is an interest in land capable of transfer. Runs with the land

308
Q

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:

A

Easement by necessity

309
Q

How are private property restrictions enforced?

A

by a court injunction

310
Q

Life insurance company debt investments are mainly placed upon:

A

large commercial and apartment loans

311
Q

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.

A

True

312
Q

When a contractor wants to build a spec home, the construction financing is usually designed as:

A

a holding agreement

313
Q

Which of the following parties would normally pay the loan origination fee on an FHA loan?

A

Seller

314
Q

Under Title II of the the Federal National Mortgage Association (FNMA) the primary purpose is to:

A

buy Title II loans to keep the market liquid

315
Q

Which type of interest is usually charged when financing a house?

A

Simple annual

316
Q

A buyer taking title “subject to” a mortgage the buyer is not assuming should request a:

A

reduction certificate

317
Q

A mortgage may properly be regarded as a:

A

Specific Lien and Contractual Lien

318
Q

Under a lawsuit, a court order to sell property in order to satisfy a judgment by the court is called:

A

Writ of Execution

Texas Real Estate Exam (5 decks)

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