unit 3 Flashcards
1
Q
The Escobars are purchasing a lakefront summer home in a new resort development. The house is completely equipped, and the Escobars have obtained a deed of trust loan that covers the purchase price of the residence, including the furnishings and appliances. This kind of financing is called _________.
A
a package deed of trust.
2
Q
With a fully amortized mortgage or deed of trust loan, _______________
A
each month the total payment is the same, but the allocation to interest is different.
3
Q
What is the primary function of Freddie Mac?
A
To buy and pool blocks of conventional mortgages, selling bonds with such mortgages as security.
4
Q
Fran purchased her home more than 30 years ago. Today, she receives monthly checks from the bank that supplement her income. Fran has MOST likely obtained _______________
A
a reverse mortgage.
5
Q
A developer has obtained a large loan to finance the construction of a planned unit development. Which statement is NOT true?
a. This is a short-term loan, and the developer has arranged for long-term financing to repay it when the construction is completed.
b. The borrowed money is disbursed in installments, ensuring that all subcontractors and laborers have been paid properly before disbursing each installment of the loan
c. The lender inspects the construction that has been completed to date.
d. The construction loan is called a takeout loan.
A
d. The construction loan is called a takeout loan.
6
Q
The D’Angelos purchased a residence for $95,000. They made a down payment of $15,000 and agreed to assume the seller’s existing mortgage, which had a current balance of $23,000. The D’Angelos financed the remaining $57,000 of the purchase price by executing a mortgage and note to the seller. This type of loan, by which the seller becomes the lender, is called _____________.
A
a purchase money mortgage.
7
Q
When the Federal Reserve Board raises its discount rate, which of the following should happen?
A
Interest rates will rise.
8
Q
Discount points on a mortgage are computed as a percentage of ____________
A
the amount borrowed.
9
Q
Which BEST defines the secondary mortgage market?
a. Lenders who deal exclusively in second mortgages.
b. A market where loans are bought and sold after they have been originated
c. The major lender of residential mortgages and trust deeds
d. The major lender of FHA and VA loans
A
b. A market where loans are bought and sold after they have be originated.
10
Q
Terrence purchased a new residence for $175,000. He made a down payment of $15,000 and obtained a $160,000 mortgage loan. The builder of the house paid the lender 3% of the loan balance for the first year and 2% for the second year. This represented a total savings for Terrence of $8,000. What type of mortgage does this represent?
A
Buydown
11
Q
Funds for FHA-insured loans are usually provided by __________
A
approved lending institutions
12
Q
The federal Equal Credit Opportunity Act prohibits lenders from discriminating against potential borrowers on the basis of all of the following EXCEPT
a. sex
b. national origin
c. source of income
d. amount of income
A
d. amount of income
13
Q
A charge of three discount points on a $120,000 loan equals _____
A
$3,600
14
Q
Under the provisions of Regulation Z (the Truth in Lending Act), the annual percentage rate (APR) of a components EXCEPT
a. discount points paid by borrower
b. broker’s commission
c. loan origination fee
d. nominal interest rate
A
b. broker’s commission
15
Q
Which is NOT a secondary market?
a. Fannie Mae
b. Ginnie Mae
c. FHA
d. Farmer Mac
A
c. FHA
16
Q
A developer received a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called __________
A
a blanket loan
17
Q
A borrower obtains a $100,000 mortgage loan for 30 years at 7 1/2 % interest. If the monthly payments of $699.21 are credited first to interest and then to principal, what will be the balance of the principal after the borrower makes the first payment?
A
$99,925.79
18
Q
Helen borrowed $85,000, to be repaid in monthly installments of $509.62 at 6% annual interest. how much of her first month’s payment was applied to reducing the principal amount of the loan?
A
$84.62
19
Q
If a lender agrees to make a loan based on an 80% LTV, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900.
A
$91,600
20
Q
A homeowner needs to refinance her home to avoid foreclosure. Although her monthly income is actually $4,000, she tells the loan officer that her income is $4,800 a month so she can qualify for the loan. She is able to persuade a friend at work to verify the higher amount. This is an example of ____________
A
mortgage fraud
21
Q
For a financial institution, the Red Flag Rule under FACTA includes all of the following practices EXCEPT
a. identifying a suspicious address
b. taking planned action upon receiving a consumer credit report containing a fraud alert
c. detecting unusual account activity
d. pressuring a borrower to accept a high-risk loan.
A
d. pressuring a borrower to accept a high-risk loan
22
Q
A VA loan _____________
A
is available to veterans or qualifying spouses only.
23
Q
Which term, when used alone, is acceptable under TIL advertising rules?
A
Selling price
24
Q
A promissory note __________
A
is a negotiable instrument
25
The person who obtains a real estate loan and signs a mortgage (deed of trust) is called ___________
the mortgagor
26
The Escalantes sold their farmland to the Crawfords but retained the rights to and ownership of all coal and other minerals in the land. The Crawfords obtained a mortgage loan from their bank and executed a mortgage to the bank as security. Which statement is TRUE regarding this transaction?
a. The Crawfords' mortgage covers the land and the minerals.
b. The Crawfords' mortgage covers the land but not the minerals.
c. The Crawfords' mortgage covers only the minerals.
d. If the Crawfords default, the bank automatically acquires the mineral rights.
b. The Crawfords' mortgage covers the land but not the minerals.
27
The lender under a deed of trust is known as ___________
the beneficiary
28
A borrower obtains a $76,000 mortgage loan at 11 1/2% interest. If the monthly payments of $785 are credited first on interest and then on principal, what will the balance of the principal be after the borrower makes the first payment.
$75,943.33
29
A mortgage or deed-of-trust document requires that the mortgagor perform certain duties. Which of the following is NOT one of these?
a. Maintain the property in good condition at all times
b. Obtain the mortgagee's permission before renting a room to a boarder.
c. Maintain adequate insurance on the property.
d. Forbear from disposing of hazardous waste on the property.
b. Obtain the mortgagee's permission before renting a room to a boarder.
30
Which is NOT a necessary element of a deed-of-trust mortgage?
a. Consideration
b. Signature of trustee
c. Legal capacity of parties
d. Written document
b. Signature of trustee
31
A state law provides that lenders cannot charge more than 18% interest on a loan. This law is called _______________
a truth-in-lending law.
32
A monthly mortgage insurance premium (MIP), with an annual rate of what percentage, is paid on the base loan amount as part of the borrower's monthly payment on a 30-year Federal Housing Administration (FHA) loan?
0.85
33
What are the two parts to them mortgage called?
The promissory note and the deed of trust
34
When using a CLO system, a real estate license holder may ______________.
a. explain the services offered by the various lenders
b. help a buyer select a lender and apply for a loan while in the real estate broker's office
c. do all of these
d. assist an applicant in answering the no-screen questions
do all of these.
35
Under which financing technique would no payment be due until the property is sold, the borrowers move from the home for longer than 12 months, all borrowers have died, or the borrower defaults
reverse mortgages
36
If a lender has made loans that exceed the conforming loan limit, which secondary market would provide the BEST opportunity for the lender to sell the loans?
a. private mortgage packagers
b. Freddie Mac
c. Fannie Mae
d. Ginnie Mae
Private mortgage packagers
37
The advertising section of Regulation Z covers all media EXCEPT
a. newspaper advertising
b. internet advertising
c. radio and television advertising
d. none of these because Regulation Z covers all form of advertising without exception
d. none of these because Regulation Z covers all form of advertising without exception
38
Which is a loan instrument that is a contract between the borrower and the lender and is a negotiable instrument?
Promissory note
39
Which secondary market entity issues pass-through certificates that are guaranteed by that entity and backed by the full faith and credit of the United States?
Ginnie Mae
40
Which of the following is NOT a requirement of the My First Texas Home Program?
a. The applicant must be a first-time homebuyer or a person who has not owned a home in the past three years.
b. The applicant must be a very-low-income to moderate-income Texas Resident.
c. The applicant must use the loan either for the purchase of a principal residence or a property to be used for rental purposes.
d. The applicant must have an income of no more than 115% of area median family income or 140% of area median family income in targeted areas.
c. The applicant must use the loan either for the purchase of a principal residence or a property to be used for rental purposes.
41
Most residential notes specify that interest is paid __________
in arrears
42
A homebuyer is told he will be required to have private mortgage insurance (PMI). What does the PMI cover?
PMI insures the lender against borrower default on the loan and loss due to foreclosure
43
There are two qualifying criteria set by the VA for loans: debt-to-income ratio and _________
residual income
44
which loan package, typically used in commercial lending, rewards both the lender and the borrower?
shared-appreciation mortgages
45
which person would likely NOT be able to get a mortgage loan?
a. large retail corporation financing remodeling work in rented space in a shopping center
b. owner of a cooperative interest
c. owner of a condominium unit
d. owner of a fee simple estate in a home
b. owner of a cooperative interest
46
the provisions of the truth in lending act (regulation z) require all of the following to be disclosed to the residential buyer EXCEPT
a. discount points
b. a loan origination fee
c. the loan interest fee
d. the real estate brokerage commission
d. the real estate brokerage commission
47
which is NOT a provision of the Fair and Accurate Credit Transactions Act of 2003 (FACTA)?
a. consumers may obtain one free credit report per year from all three major credit-reporting bureaus
b. consumers may lock up credit reports to prevent a credit-reporting agency from releasing a credit report or a credit score
c. merchants may print only the last five digits of a credit card number on a receipt
d. reasonable measures must be taken to protect against unauthorized access to consumer information during record disposal
b. consumers may lock up their credit reports to prevent a credit-reporting agency from releasing a credit report or a credit score.
48
a loan-to-value ratio is calculated by __________
dividing the loan amount by the lesser of sales price or appraisal
49
in which does the mortgagee (lender) take title subject to any other existing liens?
deed in lieu of foreclosure
50
a low-income Texas resident who is purchasing his first home and needs down payment and closing cost assistance could apply to which program?
the my first Texas home program
51
A power-of-sale clause in a deed of trust usually gives the power of sale to whom?
Trustee
52
If a house sells for $110,000 and the appraisal is $100,000, the maximum FHA-insured commitment is
$96,500.
53
Under the Consumer Finance Protection Bureau's ability-to-repay rule, what information must lenders consider before deciding how much to loan an individual?
Mortgage-related obligations such as property taxes, insurance, and HOA fees
54
Closing costs on equity loans may NOT exceed
a. 3%.
b. 3.5%.
c. 5%.
d. 4%.
a. 3%.
55
The federal Equal Credit Opportunity Act (ECOA) allows lenders to discriminate against potential borrowers on the basis of
amount of income.
56
Which of the following is NOT generally a reason for lenders to sell loans into the secondary market?
a. To avoid interest-rate risks
b. To raise capital to continue making mortgage loans
c. To realize profits upon the sale of the loans
d. To meet minimum loan sales requirements set by the government-sponsored secondary markets
To meet minimum loan sales requirements set by the government-sponsored secondary markets
57
For Texas residents who are purchasing their first home or who have not owned a home in the past three years, which agency channels below-market interest rate mortgage money through participating Texas lending institutions to very-low-income to moderate-income persons and families?
The Texas Department of Housing and Community Affairs
58
Which of the following serves as security on a loan in the event of nonpayment?
Deed of trust
59
A party other than the borrower pays interest in advance to the lender and the loan rate is reduced for the first couple of years in
a loan buydown.
60
What are the two theories of mortgage law?
Lien theory and title theory
61
If a loan is already delinquent or is in jeopardy of becoming delinquent, what is an option available to the lender?
Accommodate the borrower by either lowering the interest rate or extending the duration of the loan so that the payment is below 31% of the borrower’s gross monthly income
62
What government-sponsored enterprise (GSE) is available to help creditworthy farmers and ranchers maintain their businesses?
Farmer Mac
63
If a borrower runs into financial trouble and believes he will be unable to make future payments on his home, he should
contact the lender immediately and discuss options for reduced payments.
64
May a lender maintain a property without evicting an owner who is in default (or who is even current in his mortgage)?
Yes, to protect its interest in a property’s value, a lender could order home repairs and other maintenance.
65
34. Which technique finances more than one property?
Blanket loan
66
One of the duties of the mortgagor in a deed-of-trust mortgage document is the mortgagor's promise to maintain an adequate amount of which of the following on the property?
Insurance
67
If a lender makes first-mortgage agricultural real estate loans, which secondary market would be a potential buyer of these loans?
Farmer Mac
68
If state law says that a mortgage conveys ownership to the mortgagee and the mortgagee may take possession of and rents from the property upon default by the mortgagor, this state follows the
title theory.
69
Written notice of a proposed foreclosure sale must be given at LEAST how many days before the date of the sale?
21
70
When a buyer purchases a property with an existing loan and agrees to be personally obligated for the payment of the debt, the property has been sold
on assumption.
71
What is a deed in lieu of foreclosure?
A situation in which the borrower has no option but to send the keys to the home back to the lender and abandon the property
72
What is often the only option for troubled borrowers who are behind on their payments?
Loan modification
73
What is a mortgage modification?
A procedure by which troubled borrowers may work with lenders to avoid foreclosure
74
In which proceeding is the property sold at auction to the highest bidder in order to satisfy the debt?
a. Both of these
b. None of these
c. Power-of-sale foreclosure
d. Judicial foreclosure
Both of these
75
Loans that follow guidelines established by Fannie Mae and Freddie Mac in the secondary market are called
conforming loans.
76
What is the consumer rationale behind an adjustable-rate mortgage?
The borrower theoretically pays a low interest rate (meaning a lower payment) for the first few years, anticipating his income will have gone up by the time the higher rate kicks in.
77
If a loan's principal is reduced under forbearance, can the lender make that money back?
Yes, the amount the loan is reduced is added to the end of the mortgage term and usually is paid back in a balloon payment.
78
If the foreclosure sales price exceeds the amount the borrower owes (plus costs and fees), who receives the excess money?
The borrower
79
The Straders plan to purchase a home within the next two months. To strengthen their position when their offers are presented to sellers, they get which of the following from a lender?
Preapproved, after the lender has verified income, debt, and savings and has run a thorough credit check
80
How many parts are there to a mortgage loan?
Two, the debt itself and the security for the debt
81
Which BEST defines the secondary mortgage market?
a. The major lender of residential mortgages and trust deeds
b. The major lender of Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans
c. A market where loans are bought and sold after they have been originated
d. Lenders who deal exclusively in second mortgages
c. A market where loans are bought and sold after they have been originated
82
What are the main reasons for refinancing a mortgage?
To take advantage of lower interest rates or change from an adjustable-rate to a fixed-rate loan
83
Private mortgage insurance (PMI) on a conventional loan usually insures the top what percentage of the loan?
25‒30
84
If a borrower loses his job or must take a job at a lower pay scale, what is an acceptable option regarding his mortgage payment?
Working with the lender to temporarily reduce the amount owed
85
What is a short sale?
A lender-agreed sale in which the sales price is well below the balance of the mortgage, meaning the lender will take a substantial loss
86
Under Regulation Z, if a sales agent advertises a down payment of $50,000 with monthly payments of $2,000, what other information must be included?
The percentage the down payment represents and the annual percentage rate
87
A seller has an assumable $80,000 loan and is selling a property for $125,000. If the seller makes a $125,000 loan to the purchaser but continues making the payments on the original loan himself, what type of loan did the seller make to the purchaser?
Wraparound loan
88
When the owner of a rental property is declared in default of his mortgage, can he continue to receive rent collections?
Yes, the landlord may continue to collect rents on properties.
89
What is the primary difference between Freddie Mac and Fannie Mae?
Freddie Mac deals only with conventional, conforming loans.
90
Two borrowers take out a loan for the same amount and at the same rate. If borrower A makes payments of $1,000 each month and borrower B makes payments of $500 every two weeks, which is TRUE?
a. Borrower B will pay off less of the loan each year than borrower A.
b. None are true.
c. Borrower B will pay off more of the loan each year than borrower A.
d. Borrower B will pay the same amount each year as borrower A.
c. Borrower B will pay off more of the loan each year than borrower A.
91
Which of the following service mortgage loans, even those loans they have sold to investors?
Mortgage bankers
92
The money supply decreases and the economy slows if the Federal Reserve (the Fed)
sells government securities.
93
If a college student leases a whole house in a college town, can she sublease portions of it to other students to help offset the rent?
It depends on the agreement with the property owner, but generally yes.
94
Which is TRUE regarding an FHA loan?
a. It is insured for the full amount of the property's appraised value by the Federal Housing Administration.
b. It is insured up to a specific limit by the Federal Housing Administration.
c. It is administered, but not insured, by the Federal Housing Administration.
d. It is insured for the full amount of the property's purchase price by the Federal Housing Administration.
b. It is insured up to a specific limit by the Federal Housing Administration.
95
The foreclosure process is faster, less expensive, and less complex when the security instrument is
a deed of trust.
96
If a property sells for $100,000 at a foreclosure sale, but the debt owed was $110,000, the lender may be entitled to which against the borrower?
Deficiency judgment
97
In which situation does the mortgagor have no statutory redemption rights?
a. Foreclosure under the power-of-sale clause
b. Deed in lieu of foreclosure
c. Foreclosure of a home equity lien
d. All of these
d. All of these
98
Under the Texas Veterans Home Improvement Loan Program, veterans are permitted to borrow up to what amount for 20 years for an FHA-insured loan?
$25,000
99
Which applies to the funding fee and discount points on a VA loan?
a. VA discount points cannot be added to the loan amount.
b. VA discount points must be paid by the veteran.
c. VA funding fees must be paid by the seller.
d. VA funding fees cannot be added to the loan amount.
a. VA discount points cannot be added to the loan amount.
100
The person or institution that lends the money in a mortgage is
a mortgagee.
101
If a property owner defaults on a mortgage loan, on what document has he defaulted?
The deed of trust
102
When a loan is made using a deed of trust, the title is conditionally conveyed to the trustee by whom for whose benefit?
By the borrower for the lender's benefit
103
If a lender forces the auction of a property in default, how long does the borrower (or tenant) have to leave the premises?
Immediately upon sale
104
Using the total-debt ratio, the PITI (principal, interest, taxes, and insurance) + the MIP (mortgage insurance premium) + recurring expenses (installment accounts of 10 or more months remaining, all revolving accounts, and child support payments) usually may NOT exceed what percentage of monthly gross income on an FHA loan?
a. 43
b. 36
c. 29
d. 33
a. 43
105
How long after delivering the early disclosure form must a lender wait before closing on the loan?
The lender must wait seven days before closing the loan.
106
Are Fannie Mae, Freddie Mac, and Ginnie Mae the only entities that make real estate loans available for purchase on the secondary market?
No, private mortgage packagers exist outside the GSEs.
107
A borrower has defaulted on a home loan. Which clause permits the lender to declare the unpaid balance of the debt due and payable immediately?
Acceleration clause
108
Which person(s) would qualify for a VA loan?
Non-remarried spouses of vets who died in the line of duty
109
What is the fundamental purpose of the secondary mortgage market?
To make sure lenders can replenish their supply of money to keep making loans
110
Which financing technique includes NOT only the real estate but also all personal property and appliances installed on the premises?
Package mortgage
111
When the Federal Reserve Board raises the discount rate, which of the following should happen?
Interest rates will rise
112
Which secondary market entity primarily provides a secondary market for conventional loans?
Freddie Mac
113
A borrower who has a mortgage reduced on a second home through mortgage forgiveness will have his payments lowered but
could face tax consequences on the amount the mortgage was lowered.
114
Which of the following gives financial information about the borrower, such as loan balances, payment histories, and personal bankruptcies?
Credit report
115
When the Hackworths apply for a conventional home loan, they are told that they would be qualified by the lender on the basis of two ratios. Which statement describes the ratios to be used by the lender?
The housing-expense ratio is the total of the principal, interest, taxes, and insurance on the loan.
116
The maximum rate of interest charged for business, commercial, investment, or similar-purpose loans may be raised via the floating index to what percentage per year?
28
117
To obtain a mortgage in Texas, what is the minimum number of documents that must be signed?
Two
118
Can a mortgage lien be enforced if only one document—a promissory note or a deed of trust—is signed?
No, both the promissory note and deed of trust must be signed.
119
Conventional lenders will usually NOT lend more than what percentage of a property's value without mortgage insurance?
80
120
Under the title theory of mortgages, who owns the property while the mortgage is being paid off?
The lender
121
If a forced sale fails to bring in enough money to pay off the mortgage, costs, and other fees, is the buyer still free of any additional action?
No, the lender may file for a deficiency judgment against the borrower to repay the loss.
122
Which of the following statements BEST characterizes a note, a mortgage, or a deed of trust?
a. A deed of trust is the form of promissory note generally used in Texas to secure payment of a debt.
b. A mortgage creates a lien, conveying real estate as security for payment of a note.
c. A mortgage is a negotiable instrument and, as such, can be sold as an investment.
d. The terms note and deed of trust are synonymous.
b. A mortgage creates a lien, conveying real estate as security for payment of a note.
123
In case of foreclosure, under Texas law, how long does a borrower have to redeem and repossess the forfeited property?
No provision under Texas law for redemption of owner-occupied property foreclosed under a deed of trust
124
Which of the following is a qualifying ratio for a conventional loan?
a. A fixed total-debt ratio of no more than 43% of gross monthly income
b. A fixed housing-expense ratio of no more than 31% of gross monthly income
c. A fixed total-debt ratio of no more than 41% of gross monthly income
d. A variable total-debt ratio based on a borrower's credit score, cash reserves, and residual income
d. A variable total-debt ratio based on a borrower's credit score, cash reserves, and residual income
125
A borrower has applied to the Texas Veterans Land Board (VLB) for a loan to buy land. Which should he NOT expect to be a requirement?
a. A minimum of 5% must be paid as a down payment.
b. The maximum loan will be $150,000.
c. He must purchase at least one acre of land.
d. The loan must be repaid over a 15-year term.
d. The loan must be repaid over a 15-year term.
126
When is mortgage forbearance typically allowed?
When there is a verifiable loss of income or an increase in living expenses
127
Must all mortgages be sold on the second market?
No, lenders can keep portfolio loans.
128
97. If a lender makes first-mortgage agricultural real estate loans, which secondary market would be a potential buyer of these loans?
Farmer Mac
129
Which is NOT a characteristic of home loans through the Rural Development program?
a. No down payment
b. No guaranty fees
c. No monthly mortgage insurance
d. No loan limits
b. No guaranty fees
130
If a promissory note "creates debt," then what does the deed of trust do?
The deed of trust is the document used in Texas to guarantee payment of the debt.
131
When is a buyer's "debt" actually created in a home purchase?
When he signs a promissory note (or notes) agreeing to repay the debt
