Real Estate Financing

Home > Preview

The flashcards below were created by user MeeCha on FreezingBlue Flashcards.


  1. The Government National Mortgage Association, otherwise known as Ginnie Mae, is an agency of the U.S. Department of Housing and Urban Development ( or HUD).  Ginnie Mae’s activities include:
    • a. Management and liquidation functions
    • b. Special assistance functions
    • c. . Mortgage-backed securities program
    • d. All of the above

    The is an agency of HUD, which operates in the secondary mortgage market (mostly in sis commonly known as Ginnie social housing programs).  It is commonly known as Ginne Mae.  It has three major activities that include: Mortgage-backed securities (MBS) Program; Special assistance functions; and Management and liquidation functions.
  2. Home ownership under the Veteran’s Administration allows qualified buyers to buy a property with ______ down payment.
    • Zero
    • 1.5%
    • 2.5%
    • 3.5%

    A different government agency that aids with home ownership is the Veteran’s Administration, which administers special types of home loans made to qualified military veterans.  A VA loan is a type of loan that allows qualified buyers to buy a property without any down payment.
  3. Once a borrower has completely paid off his Cal-Vet loan, the California Department of Veterans Affairs issues a _____ to transfer legal title to the borrowers.
    • Quitclaim deed
    • Grant deed
    • Trust deed
    • Warranty deed

    Cal-vet uses a contract of sale as the financing instrument for their loans (CalVet buys the home the veteran selected and holds legal title to the property at closed of escrow, then resells the property to the veteran using a contract of sale).  Once the loan is paid in full, Cal-Vet issues a grant deed to transfer legal title to the veteran.
  4. The cancellation of a contract and restoration of the parties to the positions they would have taken if no contract had ever been formed is known as
    • Rescission
    • Recession
    • Restriction
    • Retention

    Rescission is the abrogation of a contract and restoration of the parties to the same position they held before the contract was entered into.
  5. The FTC enforces TILA. FTC stands for
    • Federal Trade Communication
    • Federal Trade Commission
    • Federal Trait Commission
    • Federal Trade Commerce

    The Federal Trade Commission (FTC) enforces TILA
  6. At a trustee’s sale, the proceeds will be distributed to the
    • Costs and expenses of the foreclosure sale
    • First trust deed lien
    • Junior liens
    • All of the above



    • At a trustee’s sale, the proceeds are distributed accordingly: First, the costs and expenses of doing the foreclosure sale are paid. Second, the lien that was foreclosed on is paid off.  Third, if there is any money remaining after the foreclosed lien is paid, then any liens junior to the foreclosed lien are paid in their order of priority.  Finally, if any money remains at this point, then the remaining monies are paid to the former owner of the property.
  7. A trust deed is similar to a mortgage, except that there are ____ parties to the transaction.
    • Three
    • Four
    • Two
    • Five



    A trust deed, also called a deed of trust, is a real property security device which is similar to a mortgage, except that there are three parties to the transaction; the trustor, the trustee, and the beneficiary or the lender.
  8. The nominal interest rate is the
    • Interest rate stated in the loan agreement
    • Interest rate sated in the deposit agreement
    • Interest rate quoted on the investment agreement
    • All of the above

    The nominal interest rate is the rate stated in loan and deposit agreements.  It is imply the interest rate quoted on the loan or investment agreement.
  9. ______ is that value that an owner has in property over and above the liens against it
    • Equity
    • Profit sharing
    • Reverse mortgage
    • Retirement plan

    Equity is the monetary interest or value that an owner has in property over and above its mortgage indebtedness.  
  10. The process by which loan correspondents utilize and pull together into one package a number of originated mortgage loans and sells them in the secondary mortgage market is known as:
    • Blockbusting
    • Warehousing
    • Marketing
    • Advertising

    Warehousing is the process wherein loan correspondents utilize and assemble into one package a number of mortgage loans that have been originated by the loan correspondents, and sell them in the secondary mortgage market.
  11. Under the Cal-Vet loan program, the ___ holds title to the veterans’ property until the land contract is fully paid off.
    • California Department of Veterans Affairs
    • Federal Housing Administration
    • Veterans Administration
    • All of the above

    If the veteran qualifies for a Cal-Vet loan, and the property and the price the veteran agreed to pay for the property are approved, Cal-Vet will intercede in the sales transaction by becoming the buyer of the property using a land contract, holding title to the property.  The veteran gets legal title of the property only when the contract is completely paid off.
  12. _____ market is the resale market place of mortgage loans.
    • Secondary
    • Primary
    • Tertiary
    • None of the above

    Under the current economy, a mortgage loan make by a lender will almost certainly be sold in what is called the secondary market.   This secondary mortgage market is the market place where lenders buy and sell existing mortgages, thus supplying greater availability of funds for additional funding.
  13. In a deed of trust, the one who signs the trust deed is called trustor, also known as the
    • Lender
    • Borrower
    • Beneficiary
    • Trustee

    In a trust deed, the trustor is the borrower, who signs the trust deed.
  14. One of the prohibited acts or practices in advertisements for credit secured by a dwelling is misrepresentation about government endorsement.  Unless the advertisements for an FHA loan or a VA loan, it is a misrepresentation to make one of the following statements in an advertisement:
    • ‘government Loan Program’
    • ‘Government-supported Loan’
    • Both a and b
    • Neither a nor b

    Making any statement in an advertisement that the product offered is a “ government loan program’, “ government-supported loan,’  or is otherwise endorsed or sponsored by any federal, state, or local government entity, unless the advertisement is for an FHA loan, VA loan, or similar loan program this is, in fact, endorsed or sponsored by a federal, state, or local government entity [12 CFR Section 226.24(i) (3) is misrepresentations about government endorsement.
  15. The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders throughout the
    • United States
    • United States territories
    • Both a and b
    • Neither a nor b

    The Federal Housing Administration, generally known as “FHA,” gives mortgage insurance on loans made by FHA-approved lenders all over the United States and its territories.  In an FHA loan, the FHA insures the whole loan amount.  FHA is the largest insurer of mortgages in the world.
  16. The beneficiary under a deed of trust is the lender.  Lenders can generally be
    • Mortgage bankers
    • Commercial banks
    • Savings banks
    • All of the above

    Under a deed of trust, the beneficiary is the holder of the note (lender).  Lenders may include mortgage bankers, commercial banks, credit unions, thrift institutions, savings banks, and savings & loan associations, to name a few.
  17. _____ is the gain or loss on an investment over a particular period.
    • Return on deposits
    • Rate of investment
    • Rate of return
    • Return on income

    Rate of return is the gain or loss on an investment over a specific period, expressed as a percentage increase over the original investment cost.  (Financial securities are usually judged base on their past rates of return that are comparable against assets of similar type to decide which investments are the most attractive).
  18. A package mortgage is a method of financing used to cover real property, improvements, and appliances.  Examples of basic appliances covered by a package mortgages are:
    • Stove
    • Refrigerator
    • Washer and dryer
    • All of the above

    A package mortgage is a type of mortgage used to finance real property, improvements, and appliances such as a washer and dryer, refrigerator, stove and other specified appliances.
  19. In general, foreclosure time on a deed of trust in California takes about
    • 110 days
    • 1 day
    • 10 days
    • None of the above

    To foreclose on a deed of trust in California, a trustee has to wait at least 90 days.  By statute, the trustee must wait at least this long before doing anything else after sending the notice of default and election to sell.  Throughout that time, California law gives the borrower the right to reinstate the mortgage by paying off the full delinquent amount.  Additionally, the trustee must publish a notice of trustee’s sale in local newspaper.  California statutory law requires the trustee to publish this notice at least 20 days before the trustee intends to hold the public auction to sell the property.  The notice must mention the date, time, and location of the public sale.
  20. California has created it won residential mortgage loan program for California Veterans, known as Cal-Vet program.  Under this program, a veteran may purchase a residential or farm property, specifically, with a
    • Promissory note
    • Land contract of sale
    • Bill of sale
    • Pink slip

    California has created its own residential mortgage loan program for California Veterans, known as Cal-Vet program (a program administered by the California Department of Veterans Affairs [CDVA]).  The CDVA purchases residential or farm properties chosen by veterans to be ‘sold back’ to the veterans over a period of time with a land contract of sale authorized by the Military and Veterans Code describing the chosen property as the security property.
  21. Financial deregulation includes the following provisions, except:
    • It simplified restrictions against commercial banks making home loans.
    • It allowed savings and loan associations to engage in commercial lending and consumer banking.
    • It allowed lenders to pay any interest rate on the their deposits
    • None of the above

    Financial deregulation included these provisions: It allows lenders to pay any rate of interest on their deposits; it allows savings and loan associations to engage in consumer banking and commercial lending; it simplified restrictions against commercial banks making home loans.
  22. One of the following statements about the California Department of Veterans Affairs is not true:
    • It does not fund loans to be sold in the secondary market.
    • It buys residential or farm properties selected by the veteran to be resold to the veteran.
    • It holds title to the property selected by the veteran.
    • It does fund loans to be sold in the secondary market.

    The California DVA buys residential or farm properties selected by veterans to be resold to the veterans over the time with a land contract of sale.  These land contracts of sale are held on to by the California DVA and generally are not sold in the secondary market.
  23. Amortization is the liquidation of a financial obligation on an installment basis where at the end of the period there is a ______ balance.
    • Negative
    • Zero
    • Positive
    • All of the above

    Amortization is the continuing repayment of a debt by means of regular payments of principal and interest over a fixed period, where at the end of period there is a zero balance.
  24. A deficiency judgment is a judgment made by a court against a debtor showing that the sale on the foreclosed property was insufficient to cover the full mortgage debt.  If the debtor refuses to pay the money owed, the lender can enforce the judgment by
    • Placing a judgment lien on the debtors’ property
    • Attaching the debtor’s bank accounts
    • Garnishing the debtors’ wages
    • All of the above

    A deficiency judgment is a judicial court ruling that a debtor is liable for the difference between the outstanding loan balance and the proceeds obtained by the lender through a foreclosure.  If the lender obtains a deficiency judgement and the debtor does not pay the amount owed, the lender can enforce the judgement by garnishing the debtor’s wages, attaching the debtors’ bank accounts, and placing a judgment lien on the debtor’s real property.
  25. The deed of conveyance is a transfer instrument issued by the trustee indicating that the trustor is released from the mortgage debt. This document includes the following, except:
    • A legal description of the property
    • The property’s’ parcel number
    • Notarization
    • None of the above

    A deed of conveyance is commonly used to transfer the property’s legal title from the trustee to the trustor (borrower) after a trust deed debt has been paid in full.  It is a document issued by a mortgage holder indicating that the borrower is released from the mortgage debt. It includes a legal description of the property and the property’s’ parcel number and is often notarized.
  26. A deed of trust is a security device wherein the borrower transfers legal title to a trustee with a ‘power of sale’.  A power of sale provision is a clause in the trust deed that provides the trustee the power to sell the secured property_______ to pay off the loan balance in the event of a default.
    • Without judicial proceedings
    • Through a non-judicial foreclosure
    • Without any court oversight
    • All of the above

    A trust deed is a security device wherein the borrower transfers legal title to a trustee with a ‘power of sale’. A power of sale provision is a clause in the trust deed in which the borrower pre-authorizes the sale of the property without judicial proceedings, or by way of a non-judicial foreclosure, to pay off the loan balance in the event of a default.  With a power of sale foreclosure, the trustee has the power to foreclose without oversight (however, in judicial states, the lender must foreclose through the state court system.)
  27. A type of loan that has been on the lender’s books for a year or more which has a good payment history is called
    • Equity loan
    • Unseasonal loan
    • Seasoned loan
    • None of the above

    A seasoned loan is a loan that has been out for at least a year in which the borrower has a good repayment record.   This is a sign that the loan is not likely to default.  Hence, this type of loan may command higher prices on the secondary market.
  28. RESPA’s basic coverage is any related mortgage loan.
    • California
    • State
    • Locally
    • federally

    The basic coverage of RESPA is any federally related mortgage loan.  Since most residential loans end up federally related in some way by means of federal loan guarantees and mortgage funding consolidation, RESPA covers the enormous majority of real estate transactions.
  29. Under a mortgage, proof of debt repayment is also called
    • Certificate of satisfaction of mortgage
    • Certificate of satisfaction of indebtedness
    • Both a and b
    • Neither a nor b

    In a mortgage, the manner by which to evidence the repayment of the debt or loan is traditionally known as a certificate of satisfaction of mortgage or indebtedness.
  30. Under an “ assumption,” should the lender agree to a substitution of liability, the _____ would no longer be accountable for the loan.
    • Buyer
    • Seller
    • Lender
    • All of the above

    In the case of an assumption of a mortgage, the seller remains secondarily liable for the payments and any subsequent deficiency judgment.  If the lender agrees to a substitution of liability (substituting the liability of the buyer for the liability of the seller), the seller would no longer be accountable for the loan.
  31. Changing reserve and margin requirements are ways wherein the FRB can increase or decrease the money supply.  FRB stands for
    • Federal Reserve Board
    • Federal Restoration Bill
    • Federal Release Ban
    • None of the above

    The Federal Reserve Board can increase or decrease the money supply by: open market operations; changing reserve requirements; changing the discount rate; changing the margin requirements, and moral suasion.  If inflation begins to speed up, the FRB can opt to restrict the growth of, or even contract, the money supply by selling U.S. government securities.
  32. The main purpose of TILA is to promote the informed use of consumer credit by increasing consumer understanding about the true costs of financing.  TILA is short for
    • Truth in Lending Action
    • Truth in Lending Act
    • Truth in Lending Activity
    • Truth in Lending Auction

    The principal goal of TILA is to promote the informed use of consumer credit by increasing consumer understanding about the true costs of financing, including the effective interest rates imposed for extensions of credit.
  33. The trustee in the deed of trust is the
    • Holder of bare legal title
    • Debtor
    • Beneficiary
    • Lender

    In a trust deed, the trustee holds bare legal title to the property (that is, carrying with it none of the privileges of ownership).
  34. Even if a trust deed includes a power of sale provision, the lender may occasionally decide to pursue a judicial foreclosure for a number of reasons, but mainly because of
    • A deficiency judgment
    • Refinancing
    • Reinstating
    • A sufficiency judgment

    Occasionally, even if the deed of trust includes a power of sale provision, the lender may decide to pursue foreclosure through the courts.  Lenders often choose the judicial method if there are title issues, errors in the security instrument, or mainly to pursue a deficiency judgment since, in some states,the lender could not obtain a deficiency judgment unless a judicial foreclosure is pursued.
  35. Trustee in non-judicial foreclosures are not required to locate junior lienholders.  A consequence of this may result with junior liens being
    • Wiped out
    • Considered
    • Paid off
    • Owed to

    A California appeals court rules in 2010 that trustees in non-judicial foreclosures (the normal procedure in a number of states) are not required to identify or locate junior lienholders.  In that particular case, California’s McBride Law states, the money remaining after the senior lienholder was paid off was returned to the homeowner, and the junior liens were wiped out.  The court ruled that it is up to the lienholders to request a notice of default and take action after they received one.
  36. To be subordinate is to be inferior to or to be
    • First
    • Junior
    • At the very end
    • All of the above

    To be subordinate is to be junior or inferior to.
  37. The MMI fund is a fund that insures mortgages made by the FHA on single-family homes. MMI is the acronymic name for
    • Manual Mortgage Insurance
    • Mutual Mortar Insurance
    • Mutual Mortgage Insurance
    • Mutual Mortgage Issuance

    The mutual mortgage insurance fund is a fund that insures mortgages made by the Federal Housing Administration on single-family homes.  It protects lenders from mortgage default.
  38. The provision in a loan agreement requiring the borrower to immediately pay off the loan under certain conditions is called
    • Acceleration Clause
    • Abrogation Clause
    • Liquidate Damages Clause
    • Exhilaration Clause

    An Acceleration Clause is a condition in a loan agreement giving the lender the power to assert all sums owing lender due and payable immediately upon the occurrence of an event, such as sale of the property or a delinquency in the repayment of the loan.
  39. RESPA covers loans secured with a mortgage on
    • An income producing property
    • A vacant land
    • A one to four residential property
    • None of the above

    RESPA covers loans secured with a mortgage on a one-to-four family residential property.  These consist of most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.
  40. To get a deficiency judgment in California, a lender must
    • Go through the judicial court process
    • Mediate with the borrower
    • Go to the court of appeals
    • File a lawsuit in small claims court

    To get a deficiency judgment in California, a lender must file a lawsuit against the borrower and go through the judicial court process.  A deficiency judgement is not considered by the court unless the lender makes a motion for it to be granted.  If the lender does not make the motion, then the court considers the money obtained from the foreclosed property to be adequate.
  41. Some trust deeds have an ‘assignment of rents’ provision.  Generally included in rental property trust deeds, this provision
    • Let the lender collect the rents
    • Gives tenants free rents.
    • Provides incentive to the prospective tenants
    • Lets the landlord keeps the rents.

    The assignment of rents clause in the trust deed gives the lender the right to collect any rents that the property makes if the borrower does not pay his or her loan payments.  An assignment of rents clause is important for the lender because leases are technically agreements between the borrower and the borrower’s tenants.  Without the borrower’s permission, the lender may not be able to collect the rents from the tenants.
  42. _____ is the legal procedure in which a homeowner’s right to property is terminated due to failure to pay the mortgage.
    • Refinance
    • Foreclosure
    • Short sale
    • All of the above

    Foreclosure is the legal process where a homeowner’s right to a property is terminated because of failure to pay mortgage.  This course of action included selling the encumbered property and using the sale proceeds to satisfy the loan of the lender.
  43. The _____ ration shows what portion of an individual’s monthly income goes to paying debts.
    • Middle-end
    • Back-end
    • Forward-end
    • Last-end

    The back-end ration indicates the percentage of income that goes to paying all recurring debt payments and other debts such as credit card payments, car loan payments, student loan payments, child support payments, spousal support payments, and legal judgements.
  44. A developer is in need of a $100 million loan for the financing of a shopping center.  One of the most likely lenders would be a
    • Loan shark
    • Major insurance company
    • Predatory lender
    • None of the above

    Insurance companies are neither depository institutions nor non-banks.  They collect premiums from policyholders and often make real estate-related loans (they tend to prefer large loans for commercial properties).
  45. A private money lender loans money to people generally for funding a real estate transaction.  A private lender could be a non-bank
    • Individual
    • Company
    • Both a and b
    • Neither a nor b

    A private money lender is a non-bank individual or company that lends money, generally collateralized by a note and trust deed, for the purpose of funding a real estate transaction or investment, or to add on funds borrowed from a bank for down payments or renovation expenses.
  46. Lien priorities are numbered according to the _____ of recording
    • Time
    • Date
    • Both a and b
    • Neither a nor b

    Lien priority in California is based completely on who records their lien first. The first in time to record their interest gets a priority over all subsequently recorded liens.
  47. A security agreement is a contract between a borrower and a lender, providing the lender a security interest in a specified property pledged as collateral.  In the event the borrower defaults, the pledged collateral can be
    • Seized
    • Sold
    • Both a and b
    • Neither a nor b

    A security agreement is a document that gives a lender a security interest in a specified property that is pledged as collateral.  In the event the borrower defaults, the pledged collateral can be seized and sold.
  48. Some states have laws that give a homeowner the right to redeem his or her mortgage for a time period after the foreclosure sale, by paying the foreclosure sale price, with interest and fees, to the foreclosure sale buyer.  This right is known as the
    • Statutory right of redemption
    • Statewide right of redemption
    • Stateside right of redemption
    • None of the above

    Under the statutory right of redemption, some states have laws that give homeowners the right to redeem their mortgages for a time period after the foreclosure sale, unusually by paying the foreclosure sale price, with interest and fees, to the foreclosure sale buyer.   If a home sells at a foreclosure public sale for a price below its fair market value, the homeowner may be able to get back the equity by selling the home to a buyer for the fair market value, thus, redeeming the property for the foreclosure sale price and keeping the difference.
  49. A provision in a mortgage agreement stating that a penalty will be charged if the mortgage is prepaid within a certain time period is referred to as a
    • Prepayment penalty clause
    • Repayment penalty clause
    • Early termination clause
    • All of the above

    A prepayment clause is a clause in a mortgage contract that states if the mortgage is prepaid within a certain period of time, a penalty will be charged.  The penalty is generally based on percentage of the outstanding mortgage balance, or a number of months’ worth of interest.
  50. Generally, straight notes are _____ nots made for short terms and are renewable at the end of the term.
    • Non-amortized
    • Interest only
    • Both a and b
    • Neither a nor b

    A straight note is usually a non-amortized note, also referred to as an ‘interest only’ loan, made for a short term and is renewable at the end of the term.
  51. The following are traditional sources of loan funds of institutional lenders, except:
    • Savings and loan associations
    • Credit unions
    • Banks
    • None of the above

    The traditional sources of loan funds of institutional lenders include savings and loan associations, savings banks, commercial banks, thrifty and loans, and credit unions.  (Other non-institutional sources distinguished as “non-banks” include mortgage bankers, finance lenders, private individuals and entities, pension funds, mortgage trusts, investment trusts, and hedge funds).
  52. If a qualified individual applies for a VA loan, an appraisal called CRV will be issued by an assigned VA-approved appraiser.  CRV is the acronym for
    • Certificate of Reasonable Volume
    • Certificate of Reasonable Value
    • Certificate of Resonance Value
    • None of the above

    If a qualified individual applies for a VA loan, a VA-approved appraiser is an assigned to issue an appraisal called Certificate of Reasonable Value or CRV.  One of the primary provisions of a VA loan is that the veteran can borrow up to this appraised value.
  53. Commercial bank construction loans are given only during the periods when the buildings are under construction. Construction loans are typically termed for
    • Only 30 days
    • 30 yrs
    • 6 months to 3 yrs
    • 6 yrs

    Before financial deregulation, commercial banks concerted their real estate lending endeavors in making construction loans.  Construction loans are short-term loans, typically six months to three years, which are made available only during the periods that the building are under construction.
  54. Second trust deeds have typically
    • Lower interest rates than first deeds
    • Higher interest rates than first deeds
    • Lower risks for the lender
    • None of the above

    Second trust deeds usually have higher interest rates, like second mortgages.  Second trust deeds’ risks are higher for the lenders since they will be paid second.
  55. A ______ clause provided in a blanket mortgage allows the mortgagor to obtain partial releases of particular parcels from the mortgage upon payment.
    • Subordinated
    • Release
    • Hypothecated
    • Conveyance

    A release clause is a provision generally found in blanket mortgages allowing the mortgagor to obtain partial releases of particular parcels from the mortgage upon payment.  With a blanket mortgage, a release clause allows the sale of parts of the secured property and corresponding partial repayment of the loan.  This is done to facilitate purchases and sales of multiple units of property with the ease of a single mortgage.
  56. A legal notice filed after completion of construction is referred to as a
    • Notice of Completion
    • Notice of Delinquency
    • Notice of Insufficient Funds
    • Notice of Disbursement

    A notice of completion is a legal notice filed by the project contractor, in the county records office, indicating that construction has been completed and all creditors have been paid.  After the notice is filed, unpaid creditors may generally file a mechanics lien within a given period of time to protect a security interest in the construction project.
  57. A mortgagor and mortgagee relationship is comparable to a
    • Trustee and trustor relationship
    • Trust and trustee relationship
    • Trustor and beneficiary relationship
    • Trust and trustor relationship

    Mortgagor and mortgagee relationship is comparable to trustor and beneficiary relationship in that they both relate to borrower and lender relationship.
  58. The disclosure and advertising of credit terms and disclosure of settlement costs are regulated by the government under the
    • Truth in Lending Act
    • RESPA
    • Both a and b
    • Neither a nor b

    The government controls the disclosure and advertising of credit terms under the Truth in Lending Act, and the disclosure of settlement costs under the Real Estate Settlement Procedures Act.
  59. Saving and loan associations are ______ chartered deposit institutions that lend money mostly for real estate purposes.
    • State or federally
    • Internationally
    • Globally
    • None of the above

    Savings and loan associations are state or federally chartered financial intermediaries that accept deposits from the public and invest those funds mostly in residential mortgage loans.  Traditionally, they have concerted their lending activities for owner-occupied single-family residences, or one-to-four-unit rental properties.
  60. All of the following are true regarding insurance companies, except:
    • Insurance companies get their money mainly from scholarships.
    • Insurance companies’ real estate investments include long-term commercial and industrial financing.
    • Insurance companies are state chartered
    • Insurance companies are less regulated which result in liberal lending.

    Insurance companies obtain their money through the payment of premiums by their policyholders.  Insurance companies’ real estate investments included long-term commercial and industrial financing All insurance companies are state chartered since there is no federal agency that issues charters.  Less regulation generally results in liberal lending disposition.
  61. A balloon loan is an example of a
    • Partially amortized loan
    • Fully amortized loan
    • Non-amortized check
    • Non-amortized money order

    A balloon loan is an example of a partially amortized loan because at the end of the loan term, the entire debt is not fully paid.  Hence, one huge payment is due at the end of the term, which is the balloon payment.
  62. All of the following statements are true regarding mortgage, except:
    • A mortgage is a common specific lien
    • A mortgage is a non-negotiable instrument
    • A mortgage is a pledge of property to the lender as security of payment of the debt
    • None of the above

    A mortgage is a very common specific lien wherein property is hypothecated or pledged to secure payment of money.  A mortgage is not a negotiable instrument.
  63. The ratio of the amount of money one borrows compared to the value of the property is known as
    • Value-to-debt ration
    • Loan-to-value ratio
    • Income-to-appraisal ratio
    • Payment-to-default ratio

    A loan-to-value ratio (LTV) is a ratio utilized by lenders in figuring out what amount of mortgage they will loan a borrower based on the appraised value of the property or the purchase price of the property, whichever is lower.
  64. The Mortgage Loan Disclosure Statement is a mortgage loan good-faith estimate required in California.  This statement must be kept on file by the broker for
    • One year
    • Two years
    • Three years
    • Four years

    A Mortgage Loan Disclosure Statement is a mortgage loan good-faith estimate required by the state of California.  It must be provided to the prospective buyer of a property by his or her real estate broker within three business days after receipt of a completed loan application, or before the borrower becomes obligated on the note, whichever is earlier.  The broker must keep the statement on file for three years.
  65. All of the following statements are true concerning a deed of trust, except:
    • A deed of trust is a document recorded in the public records
    • A deed of trust is the security of the debt, secured by the property
    • A deed of trust makes a real property collateral for a loan
    • None of the above

    A trust deed makes a real property collateral for a loan.  It is the security of the deb, secured by the property.  It is a document that is recorded in the public records.
  66. In a mortgage loan application, one of the following incomes would probably not be give full value if the applicant has no history of receiving it and no likelihood of its continuance:
    • Bonus
    • Overtime
    • Commission
    • All of the above

    In a mortgage loan application, it is crucial that the applicant show a history of receiving stable income and a realistic expectation that the income will continue.  For bonus, overtime, or commission income to be considered, the applicant must have a history of receiving it and it must be likely to continue. If the applicant has not been receiving bonus, overtime, or commission income for at least a year, it probably could not be given full value when the applicant’s loan is evaluated for approval.
  67. Commercial bank real estate loans primarily involve ____ loans.
    • Long-term
    • Short-term
    • 30 yr fix
    • 10 yr adjustable-rate mortgage



    Commercial banks are deposit institutions that use its depositors’ monies to make different kinds of loans (from consumer loans to corporate loans to real estate loans).  Commercial banks’ primary real estate activity involves short-term loans, predominately construction loans, and to a lesser quantity, home improvement loans.
  68. All of the following statements regarding Fannie Mae and Ginnie Mae are true except:
    • Ginnie Mae is a publicly traded company.
    • Ginnie Mae is a government-owned corporation that finances government guaranteed home mortgages through selling bonds.
    • Fannie Mae is a government-sponsored private corporation that supplies funds for home mortgages through buying mortgages from lending institutions.
    • Fannie Mae is a publicly traded company.

    The Federal National Mortgage Association, or Fannie Mae, is a U.S. government-sponsored private corporation which supplies funds for home mortgages through purchases of mortgages from lending institutions.  Fannie Mae is a publicly-traded company which operates under a congressional charter.  The Government National Mortgage Association, or Ginnie Mae, is a U.S. government-owned corporation which finances government-guaranteed home mortgages through the sale of bonds.  Unlike Fannie Mae, Ginnie Mae is not a publicly-traded company.  Additionally, Ginnie Mae securities are the only ones that are federally-guaranteed by the full faith and credit of the U.S. Government.
  69. A government-backed loan is described as
    • Loans that have higher down payment requirements
    • Loans that are insured by the U.S. government
    • Loans that have higher credit score requirements
    • All of the above

    A government-backed loan is insured, either completely or partly, by the U.S. government. The government does not loan money to the borrower, instead, it guarantees to repay some or all of the money to the lender if the borrower defaults.  This reduces the risk for the lender when making a loan.  Government backed loans have lower down payment and credits score requirements.  However, it may carry a higher interest rate and require the borrower to pay mortgage insurance.
  70. Institutional lenders are financial institutions or intermediaries that pool money of its depositors and then invest in loans and other securities.  Loans made by institutional lenders are regulated by
    • The central bank
    • Other financial institutions
    • Law
    • Fort Knox
  71. The FNMA, usually referred to the by the name Fannie Mae, was federally organized in 1938.  Today, Fannie Mae is a quasi-government agency, whose stock may be bought on the New York stock exchange.  FNMA stands for
    • Federal National Mortgage Amalgamation
    • Federal National Mandated Association
    • Federal Neutral Mortgage Association
    • Federal National Mortgage Association

    The Federal National Mortgage Association (FNMA), which is usually referred to by the name Fannie Mae, was originally an agency of the United States government in 1938 to buy FHA insured mortgage.  Today, Fannie Mae is a quasi-government agency, which is privately-owned, and whose stock may be bought on the New York stock exchange.
  72. Mortgage lenders use front-end ratios to decide whether an individual has sufficient income in order to qualify for a mortgage.  The front-end ration is calculated as the
    • Individual’s monthly housing expenses divided by his or her monthly gross income.
    • Individual’s monthly housing expenses multiplied by his or her monthly gross income.
    • Individual’s monthly housing expenses subtracted from his or her monthly gross income.
    • Individual’s monthly housing expenses added to his or her monthly gross income. Slide 144

    The front-end ratio is a ratio of an individual’s monthly mortgage expenses to his or her monthly income.  Mortgage lenders regularly use front-end ratios to decide whether an individual has adequate income to qualify for a mortgage.  It is calculated as an individual’s monthly expenses divided by his or her monthly gross income and is expressed as a percentage.
  73. The one who hypothecates or puts up his or her property as security for a debt is called the
    • Borrower
    • Mortgagor
    • Landowner
    • All of the above

    The mortgagor is the one who gives a mortgage as security for a debt-the borrower or debtor, usually the landowner.  The mortgagor is the one who hypothecates or puts up his property as security for an obligation.
  74. All of the following are advantages of an FHA loan, except:
    • People who have been foreclosed upon may be able to still qualify for an FHA loan.
    • An FHA loan can be assumable
    • An FHA loan requires a 3.5 down payment
    • An FHA loan requires the house to be appraised by a CalBRE appraiser.

    In general, an FHA loan is one of the simplest types of mortgages loans to qualify for because it only requires a low down payment of 3.5 percent and you can have less-than-perfect credit. Another advantage of an FHA loan is that it can be assumable, meaning if you want to sell your house, the buyer can ‘assume’ the loan you have. Also, if you have gone through a bankruptcy or have been foreclosed upon, you may still be able to qualify for an FHA loan.   However, because an FHA loan does not have the rigorous standards of a conventional loan, it requires two kinds of mortgage insurance premiums:  one paid in full upfront (or it can be financed into the mortgage) and the other is a monthly payment. Additionally, FHA loans require that the house meet certain conditions and must be appraised by an FHA-approved appraiser.
  75. The FHA Title I loan Program insures loans to finance the following, except:
    • Light rehabilitation of properties
    • Construction of non-residential building on the property
    • Moderate rehabilitation of properties
    • None of the above

    The FHA’s Title I loan program insures loans to finance rehabilitation of properties, including the construction of non-residential buildings on or the property.  It is meant for light or moderate repairs or rehabilitation.
  76. The mutual mortgage insurance fund has been designed to be self-funding: the FHA collects premiums from _____ and pays lender claims on losses from mortgage defaults.
    • Mortgagors
    • Creditors
    • Mortgagees
    • All of the above

    The mutual mortgage insurance fund is a government-sponsored mortgage insurance managed by the Federal Housing Administration (FHA), which insures mortgage loans on one-to-four-family residential housing.  It is a designed to be self-funding- the FHA collects premiums from mortgagors and pays lender claims on losses from mortgage defaults.
  77. A borrower who puts a down payment of 5% would have a loan of 95% of the value of the property, resulting to a high LTV radio.  This means
    • A higher LTV generally represents less risk for the lender
    • Upon approval of the mortgage, the loan will generally cost the borrower more to borrow
    • The lender will need to buy mortgage insurance
    • All of the above

    A higher LTV ratio represents more risk for the lender, therefore, if the mortgage is approved, the loan will generally cost the borrowers more to borrow, or he or she will need to buy mortgage insurance.
  78. A ______ loan usually has a 30 year fixed interest rate and typically requires at least 20% down payment
    • Non-conventional
    • Conventional
    • Non-conforming
    • None of the above

    Generally, a conventional loan is a 30 year fixed rate mortgage in which the interest rate does not change during the 30-year term of the loan.  A conventional loan usually requires at least a 20% down payment.  A conventional loan is a mortgage that is not insure or guaranteed by the government.
  79. Initially, Fannie Mae provided a _____ market for FHA and VA insured loans.
    • Primary
    • Secondary
    • Tertiary
    • None of the above

    FNMA or Fannie Mae originally provided a secondary market for FHA and VA insured or indemnified loans.   FNMA is the biggest investor in the secondary residential mortgage market.
  80. If the promissory note is the evidence of the loan, the deed of trust is the
    • Negotiable instrument
    • Non-negotiable cashier’s check
    • Security instrument
    • None of the above

    In a real estate transaction, a promissory note is the principal instrument and if there are inconsistencies in the provisions of the note and deed of trust or mortgage, the terms of the promissory note, generally, are controlling.  The deed of trust or mortgage is the security instrument that makes the real property described within the security for the mortgage that the promissory note evidences.
  81. The _____ is the legal right of homeowners to redeem their mortgages and save their homes from foreclosure by paying off the whole mortgage balance.
    • Equitable right of redemption
    • Equitable right of retention
    • Equitable right of reflection
    • None of the above

    The equitable right of redemption is the homeowner’s legal right to redeem his or her mortgage and save his or her home from foreclosure by paying off the whole mortgage balance, plus charges and penalties, prior to foreclosure sale.  Although most homeowners in foreclosure swill find it hard to come up with all the cash required to redeem in a lump sum, mortgages may also be redeemed by refinancing the mortgage debt or selling the home to a buyer.
  82. A promissory note is a written contract between a borrower and a lender that provides evidence of borrower’s indebtedness to the lender.  One of the following statements is not true regarding this type of note:
    • All promissory notes are non-negotiable instruments.
    • Promissory notes can be freely transferred from the person to person
    • Promissory notes are negotiable instruments
    • Promissory notes are generally unconditional and unsecured debt instruments.

    A promissory note is a written, signed, unconditional, and unsecured promise by one party (the maker), to another (the payee), which obligates the maker to pay a specific amount on demand or on a fixed determinable date.  Promissory notes (such as bank or currency) are negotiable instruments, meaning, they can be freely transferred from one person to another.
  83. Cal-Vet loans operate in a different way than do VA loans in that the
    • Borrower does not go through a bank to finance the property.
    • Property is financed directly by the CDVA
    • Program is funded through the sale of bonds
    • All of the above

    Cal-Vet loans operate differently than do VA loans.  The main difference is that the borrowers does not go through a bank to finance the property, instead, the property is financed directly by the California Department of Veterans Affairs.  Furthermore, the program is funded through the sale of bonds (where money is taken on loan from the investing public).
  84. A VA loan is different from an FHA loan in that
    • VA loans are not insured
    • VA loans are guaranteed by the Veteran’s Administration.
    • The Veterans’ Administration guarantees about 60% of the loan.
    • All of the above

    One of the key differences between a VA loan and an FHA loan is that VA loans are not insured (an FHA loan, on the other hand, insures the entire loan amount).  VA loans are guaranteed; the Veteran’s Administration guarantees 60% of the loan.
  85. A promissory note where payments of “interest only” are Q2 with the principal payment due in one lump sum upon maturity is called
    • A straight note
    • An amortized check
    • A non-negotiable instrument
    • An undeferred note

    A straight note is a promissory note wherein payments of “interest only” are made periodically during the term of the note with the principal balance due in one lump sum upon maturity.
  86. Cal-Vet homes loans are funded through the sale of tax-exempt bonds that included the following except:
    • Veterans General Obligation Bonds
    • DVA Home Purchase Revenue Bonds
    • Zero-Coupon Bonds
    • None of the above

    Cal-Vet home loans are funded through the sale of tax-exempt bonds, including State of California Veterans General Obligation Bonds (Veterans G.O. Bonds) and Department of Veterans Affairs of the State of California Home Purchase Revenue Bonds (Revenue Bonds).
  87. Lower down payments for a home and LTV ratios in excess of ______ percent will normally require mortgage insurance.
    • 5
    • 25
    • 80
    • 100

    Lower down payment and loan-to-value ratios in excess of 80% generally require mortgage insurance.
  88. To pledge a things as collateral for a debt obligation without giving up possession of such thing is called
    • Acceleration
    • Hypothecation
    • Subrogation
    • Liquidation slide 176

    Hypothecation is the traditional practice of a borrower pledging an asset as collateral for a loan, while retaining ownership of the asset. With hypothecation the lender has the right to seize the asset if the borrower could not service the loan as set by the terms in the loan agreement.
  89. An open-end mortgage is regarded as an expandable loan.  All of the following are benefits of an open-end mortgage, except:
    • Additional funds can be borrowed immediately without going through another loan process.
    • Additional fees required when taking out an additional loan is avoided
    • Borrowing additional funds (up to a set limit) is under the same loan agreement
    • None of the above

    The open-end mortgage is regarded as an expandable loan because the borrower can continue borrowing additional funds, up to a set limit, under the same loan agreement, and pays interest only on the money he or she takes.  One benefit of an open-end mortgage is avoiding additional fees required when taking out an additional loan.  With the open-end loan, the funds are already there waiting for the borrower, if needed without going through another loan process.
  90. A clause in an agreement stating that the primary lender’s lien against the property surpasses any other claims is referred to as the
    • Summarization clause
    • Subordination clause
    • Insubordination clause
    • Suborgation clause

    Because a mortgage is a claim against the property, a subordination clause guarantees that the primary lender retains first position rights.  Meaning, the primary lender’s lien against the property supersedes any other mortgage or claims.  Typically, the agreement must be not notarized it can be recorded in the official county records.
  91. A Veteran’s Administration (VA) loan could be used by military veterans to
    • Refinance their mortgage
    • Make energy-efficient home improvements
    • Build their house
    • All of the above

    The aim of the Veterans’ Administration (VA) home loan benefits was to help veterans buy or refinance a house in appreciation for the sacrifices they made by serving our country.  A VA loan could be used to buy a house, condominium, or townhouse.  Veterans can also build a house, make energy efficient home improvements, or refinance their mortgage.
  92. The trustee holds bare legal title to the property.  Bare legal title is also known as
    • Unclothed title
    • Clouded title
    • Raw title
    • Naked title

    When the loan is acquired, the trustor will sign a trust deed that gives ‘naked title’ to the property to the trustee.  The trustee has only one right to the property: the right to sell it if the loan goes into default.
  93. Discounting is defined as the
    • Practice of determining the present value of a payment
    • Technique used to figure out how much future payments are worth today
    • Both a and b
    • Neither a nor b

    Discounting is the method of determining the present value of a payment or a flow of payments that is to be received in the future.  Discounting is the process used to figure out how much of these future payments are worth today.
  94. One of the following statements is not true regarding mortgage bankers and mortgage brokers:
    • Mortgage brokers originate loans
    • Mortgage bankers are direct mortgage lenders
    • Mortgage brokers act as the negotiators between consumers and lenders in mortgage transactions
    • None of the above

    Mortgage bankers are companies that are privately-owned and are usually affiliated with banks or with their own holding companies.   They are direct mortgage lenders.  One the other hand, mortgage brokers are financing professionals acting as the negotiators between consumers and lenders in mortgage transactions.  In summary, mortgage brokers originate loans while mortgage lenders actually fund the loans.
  95. A ‘default’ occurs when the borrower
    • Fails to promptly pay interest or principal when due
    • Is unable to meet the legal obligation of debt repayment
    • Is unwilling to honor the debt
    • All of the above

    Default occurs when a borrower is unable to meet the legal obligation of debt repayment.  To put is another way, default is the failure to promptly pay interest or principal when due.   Borrowers may default when they are unwilling to honor the debt.
  96. The lending of money at an exorbitant interest rate usually in excess of the legal rate is known as
    • Corruption
    • Loan shark practice
    • Usury
    • User

    Usury is the practice of lending money at an exorbitant interest rate particularly in excess of the legal rate.
  97. A loan that is completely paid off at the end of the loan term is said to be a
    • Partially amortized loan
    • Ballooned prepaid loan
    • Fully amortized loan
    • Fully non-amortized loan

    A fully amortized loan is a loan that will be entirely paid off at the end of the loan term.
  98. One of the advantages of a Cal-Vet home loan is that it provides borrowers complete protection to ensure that the borrower’s home is safe and sound.   Among these insurance plans are the following, except:
    • Multiple-party liability benefit
    • Floods protection plan
    • Fire and hazard insurance coverage
    • Earthquake and mudslide protection plan

    Cal-Vet provides comprehensive coverage for their borrowers to ensure that their borrower’s home is safe and sound.  Cal-Vet loan holders are offered home and loan protection plans that included full protection against floods, earthquake and mudslide damages.  Also included is fire and hazard insurance coverage.
  99. Violations of anti-kickback under the Real Estate Settlement Procedures Act (RESPA) are subject to
    • Criminal and civil penalties
    • A fine of up to $10,000
    • Imprisonment of up to a year
    • All of the above

    Violations of Section 8’s anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties.  In a criminal case, anybody who violates Section 8 may be fined up to $10,000 and imprisoned up to one year.  In a private lawsuit, anybody who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.
  100. A tight money market is an economic situation wherein
    • The supply of money is restricted
    • The demand for money is high
    • Interest rates are high
    • All of the above

    A tight money market is an economic situation where the supply of money is limited but he demand for it is great which results in high interest rates being charged.

Card Set Information

Author:
MeeCha
ID:
332770
Filename:
Real Estate Financing
Updated:
2017-07-10 02:47:41
Tags:
financing
Folders:

Description:
Financing on real estate
Show Answers:

Home > Flashcards > Print Preview