Unit 16 - Real Estate Financing: Practice

Question 1

The real estate financing market has these basic components

Answer 1

Government Influences
Primary Mortgage market
Secondary mortgage market

Question 2

The federal reserve

Answer 2

Maintains sound credit conditions
Helps inflation and deflation
Creates a favorable economy

Question 3

The fed requires

Answer 3

That each member bank keep a certain level of assets on hand

Question 4

Define Primary Rate

Answer 4

The short term interest rate charged to a banks largest, most credit worthy customers

Question 5

Define a Primary Mortgage Market

Answer 5

Made up of the lenders that originate mortgage loans

Question 6

Income on a loan is realized from

Answer 6

Finance charges

Recurring income

Question 7

Servicing loans involves

Answer 7

Collecting payments
Accounting
Bookkeeping
Processing payments

Question 8

Some of the major lenders in the primary market include

Answer 8

Thrifts
Savings associations
Commercial banks
Insurance companies
Credit unions

Question 9

Define the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008

Answer 9

Requires that each individual state must license and register mortgage loan originators (MLO’s)

Question 10

Define the Secondary Mortgage Market

Answer 10

Where various agencies purchase existing mortgage from banks and savings associations

Question 11

Define Fanie Mae

Answer 11

A government sponsored enterprise that provides a secondary for morgage loans

Question 12

Define Ginnie Mae

Answer 12

Administers special assistant programs and guarantees mortgage backed securities using FHA & VA collateral

Question 13

Define Freddie Mac

Answer 13

A government sponsored enterprise that provides secondary market primarily for conventional loans

Question 14

Define a Straight Loan

Answer 14

A nonamortized loan that essentially divides that loan into two amounts to be paid off separately

Question 15

Define Amortized Loan

Answer 15

A loan in which the payment partially pays off both principle and interest

Question 16

Define a Fully Amlrtized Loan

Answer 16

A loan in which the mortgagor pays a constant amount usually monthly

Question 17

Define an Adjustable Rate Mortgage

Answer 17

A mortgage that generally originate at one rate of interest then fluctuate up or down during the loan term

Question 18

What are the common components of an adjustable rate mortgage

Answer 18

An index
Rate caps
Payment cap
Adjustment period 
Conversion option

Question 19

Define a Balloon Payment

Answer 19

When the final payment in a loan is larger than the others

Question 20

Define a Growing Equity Mortgage

Answer 20

A mortgage that uses a fixed interest rate, but payments of principle are increased according to an index

Question 21

Define a Reverse Mortgage

Answer 21

A mortgage that allows people age 62 or older to borrow money against equity they’ve built in their home

Question 22

Define a Non Recourse Loan

Answer 22

A loan is one in which the borrow is not held personally responsible for the loan

Question 23

Mortgage loans are classified based on their

Answer 23

Loan to value ratio

Question 24

Define a Loan To Value Ratio (LVT)

Answer 24

The ratio of debt to value of the property

Question 25

Define a Conventional Loan

Answer 25

A loan in which the LTV ratios are the lowest

Question 26

The key element in qualifying for a conventional loan is the borrowers

Answer 26

Creditworthiness

Question 27

One way a borrower can obtain a mortgage loan with a lower down payment is by obtaining

Answer 27

Private Mortgage Insurance (PMI)

Question 28

Define Private Mortgage Insurance

Answer 28

An insurance policy that provides the lender funds in the event the borrow defaults on the loan

Question 29

Define an FHA loan

Answer 29

Refers to a loan that is insured by the Federal Housing Administration

Question 30

FHA loans charge the borrow

Answer 30

Mortgage Insurance Premiums (MIP)

Question 31

Define a VA Loan

Answer 31

A loan guaranteed by the Department of Veteran Affairs

Question 32

For the property being purchased, the VA issues a

Answer 32

Certificate of Reasonable Value (CRV)

Question 33

Define Purchase Money Mortgage

Answer 33

A note and mortgage created at the time of purchase when the seller agrees to finance or part of the purchase price

Question 34

Define Package Loans

Answer 34

A loan that includes real and personal property

Question 35

Define Blanket Loans

Answer 35

A loan that covers more that one parcel or lot, usually used to finance subdivisions

Question 36

Define Wraparound Loans

Answer 36

A loan thag enables a borrower with an existing mortgage to obtain financing from an additional lender

Question 37

Define an Open End Loan

Answer 37

A loan that secures a note executed by the borrower to the lender

Question 38

Define a Construction Loan

Answer 38

A loan made to finance the construction of improvements on real estate

Question 39

Define a Sale-Leaseback Arrangement

Answer 39

An arrangement used to finance large commercial properties

Question 40

Define a buy down

Answer 40

A way to temporarily lower the initial interest rate on a mortgage

Question 41

Define a Home Equity Loan

Answer 41

A loan that provides a source of funds using the equity built up in a home

Question 42

Define the Truth in Lending Act

Answer 42

Also referred as Regularion Z, requires that credit institutions inform borrows of all finance charges and interest rate before the loan is completed

Question 43

Define the Equal Credit Opportunity Act

Answer 43

An act that prohibits lenders from discriminating against applicants based on color, race, religion, sex and national origin

Question 44

Define the Real Estate Procedures Act (RESPA)

Answer 44

An act that applies to any residential real estate transaction involving a new first mortgage loan