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Real Estate Finance
Terms in this set (147)
Freddie Mac is a(n)
Freddie Mac is a(n)
Which agency guarantees that investors will receive timely payments of principal and interest on mortgage-backed securities backed by the FHA or DVA?
Fannie Mae currently buys loans at
an administered price.
Which of the following types of loans do lenders generally keep in their own investment portfolios rather than sell on the secondary market?
When Fannie Mae purchases mortgage loans from lending institutions, they are packaged into
Fannie Mae is a
a quasi-private corporation with government oversight
The term used to describe loans that conform to the Fannie Mae/Freddie Mac qualifying guidelines is
Loan originators that sell mortgages to Fannie Mae can
continue to service the loans.
All of the following agencies are participants in the secondary mortgage market except
The Federal Housing Finance Agency (FHFA) regulates
Fannie Mae, Freddie Mac, and the FHLB.
Which of the following amounts is the interest adjustment on a new $100,000 loan at 7% issued on March 20th, if the first payment is not due until May 31? (Use 360 days)
If the property taxes and insurance premiums are due in November and a new loan closes on the following first day of January, how many months' impounds will be charged to the borrower?
The two-point discount on the sale of a $175,000 home subject to a new $150,000 loan is
Which of the following items is usually charged to the buyer?
Impound fund balance on assumed loan
In the real estate lending business, assignment refers to
sale of a loan on the secondary market.
In order to remove a cloud from a property's title, the owner must file a(n)
suit to quiet title.
Title insurance guarantees the validity and accuracy of the
synopsis of the recorded history of a property.
In real estate finance, an abstract is a(n)
synopsis of the recorded history of a property.
Which of the following items is usually charged to the seller?
All of the following items are categorized as actual notices except a(n)
The income approach estimate of value for an apartment project generating $200,000 gross annual income with a 40% operating ratio and a 10% market capitalization rate is
Borrowers are considered good credit risks and eligible for real estate loans when their
current ratio is 2:1.
The cost approach estimate of the value of a 10-year old house (50-year life expectancy, straight line depreciation), with 2,500 square feet at an $82 replacement cost per square foot, and a lot value of $15,000 is
When creating a loan for 50 percent of a collateral property's value, most of the underwriting will be focused on the
value of the collateral.
Credit scoring reflects a borrower's
credit risk factors.
Underwriting a loan for real estate finance includes all of the following procedures except checking the
willingness of the lender to make the loan.
If an appraiser finds that the market, cost, and income approaches indicate values of $100,000, $105,000 and $110,000, and they are weighted 50%, 30% and 20% respectively, then the reconciliation value will be
What is meant by the phrase "net worth is anything you want it to be, while cash is king"?
Lenders place great weight upon a borrower's cash position.
When checking on a loan applicant's employment circumstances, all of the following items will be questioned except
Under a conventional loan with principal, interest, taxes, insurance, and homeowners fees totaling $850 per month, a borrower must earn at least which of the following gross monthly incomes to qualify?
A Covenant of Seisin in a loan document
stipulates that the borrower has the authority to pledge the property as collateral.
Covenants that "run with the land" mean that they
endure no matter how many times the property sells.
Where possible, lenders prefer to use the deed of trust as a financing instrument primarily because it
avoids the time and costs of a judicial foreclosure.
A charge against a property wherein the property itself is made security for the performance of a certain act describes a(n)
The note executed for a loan
is a fully enforceable promise to pay.
When a property is purchased "subject-to" the balance of an existing loan, all of the following statements are true except that the
buyer becomes personally liable for the loan.
A mortgage is a(n)
lien on the property.
The power of sale clause in a trust deed in a nonjudicial foreclosure allows the lender
a shorter foreclosure period.
The inclusion of a Due-On-Sale clause in a loan contract
requires the lender's permission for its assumption.
The provisions of a real property sales contract
retain title in the name of the vendor.
A graduated payment loan with less than interest-only payments results in
Under HUD's Home Equity Conversion Mortgage, monthly payments are paid to borrowers for
as long as equity is available.
A construction lender requires all of the following activities to take place before advancing any draws except that the
builder will pay additional points at each draw to offset the time value of money.
Under an open-end loan calling for obligatory future advances, the borrower is able to secure additional funds
under the terms of the original mortgage.
A lender's annual return on a $100,000 wraparound loan drawn at 10% interest-only for five years, subject to an existing $65,000 loan at 7.5% interest is
A completion bond for a construction loan is generally issued by
an insurance company.
Borrowers are attracted to 15-year mortgages because they allow them to
save money on interest.
An adjustable rate loan drawn at 8% with an annual interest rate cap of 2% and an overall interest rate cap of 4% can be adjusted to which of the following rates in the second year?
When two or more properties are pledged as collateral for one loan, one of the properties may be removed from the obligation through the loan contract's
A three-year adjustable-rate loan
has its interest adjusted every three years.
Lenders solicit borrowers for home equity loans because they can mitigate the risks of these loans by controlling the interest rate and
periodically checking the value of the collateral.
When home equity loans become due, borrowers usually
refinance the entire property.
Unlike other types of home equity loans, home improvement loans may have
longer repayment terms.
Land developers sometimes use junior financing to pay for
The risk inherent in junior finance is that the
senior lender will get all the money at a foreclosure.
Equity in one's home is generally acquired through a paydown of the first mortgage balance or a(n)
increase in the property's value.
Home equity loans are popular among borrowers because the interest they pay on these loans is
deductible on federal income taxes.
A lifting clause in a junior loan contract allows the
borrower to refinance without disturbing the status of the junior loan.
A property seller may choose to carry back a portion of the sale price when the buyer
has insufficient cash for the deposit.
Some lenders provide combinations of first and second mortgages which are known as
The Department of Housing and Urban Development includes all of the following functions except the
Supervision of the FDIC.
Community Redevelopment Agencies are sometimes funded by which of the following programs?
All of the following developments are exempt from the provisions of the Interstate Land Sales Full Disclosure Act except
subdivisions of 25 or more lots to be sold nationally.
The USDA Rural Development Program aims to
reverse the trend of job loss.
Which of the following entities controls the Farm Credit System?
The Community Reinvestment Act is designed primarily to
require banks to meet the needs of all residents in the neighborhoods.
The required property reports delivered to potential buyers of lots in subdivisions under HUD's jurisdiction must include information on all of the following items except
Which of the following types of loans is NOT exempt from California's usury ceilings?
The federal regulator of the Farm Credit System is the
Farm and ranch loans are unique types of real estate finance because their success depends to a large degree on the
Property serving as collateral for an FHA-insured loan
must meet certain minimum standards of acceptability.
Which document stipulates the DVA loan amount that establishes the maximum loan available on a specific property?
Certificate of reasonable value
A veteran's total monthly obligations equal $1,500. What is the gross monthly income required to qualify for the loan?
All of the following statements describe the advantages of the FHA except that it has
lower than market interest rates.
Most loans today are
The FHA is responsible for which of the following actions?
Insuring new loans
According to Fannie Mae and Freddie Mac guidelines, private mortgage insurance is required on conventional loans when the loan-to-value ratio is in excess of
A conventional guaranteed loan may be insured by
a private insurance company.
The FHA allows second mortgages to be acquired on the collateral property, but the second mortgage must not contain
a prepayment penalty.
Under the CAL-VET program, during the period that the veteran is living in the home and making payments, the veteran
is party to a land contract.
Mortgage brokers assume a large part of the responsibility for
Mortgage banking services include providing
real estate loans.
manage real estate loans.
All of the following terms are associated with a syndicate except
Mortgage brokers earn most of their profits from
individuals participate as lenders in real estate mainly by creating
Real estate investment trusts are created for all of the following reasons except to
avoid probate costs.
The payments on revenue bonds come from
income from developments.
The payment for the entire amount of principal due at the end of a mortgage loan term is called a(n)
Private loan companies deal mainly in
Savings institutions, major providers of home mortgage loans, are also referred to as
All of the following sources of funds for real estate finance are considered financial intermediaries except
sellers as lenders.
Which of the following statements is true regarding life insurance companies?
They are more concerned with safety than with liquidity.
The department in a commercial bank that manages relatively large quantities of money and property for their beneficiaries is the
State-chartered savings and loan associations regulated by the California Department of Savings and Loans are authorized to lend up to what percent of the appraised value of the collateral for a real estate mortgage loan?
Life insurance companies become partners with project developers through the use of commercial loans called
Which of the following institutional lenders is increasing its participation in real estate finance?
The pension funds tend to invest in which of the following types of real estate investments?
Commercial banks tend to make loans for
Which institutional lender has the most flexibility in mortgage lending activities?
When the Federal Reserve raises its members' reserve requirements, it is acting to
decrease financial activities.
Deposits in banks and thrifts are insured by the
From an economic theory point of view, money can best be described as a
standard of value.
The Federal Reserve is
a central banking system.
The Federal Home Bank System
provides its members with a national market for their securities.
Economic stability is linked with the supply and costs of money. Thus, all of the following statements are correct, except the
higher the costs of money, the greater the economic activity.
The California Department of Real Estate
investigates complaints against licensees.
Which agency is responsible for handling the assets of failed savings institutions?
Federal Deposit Insurance Corporation.
All of the following statements about the FDIC are true, except that it
has been eliminated.
The Federal Reserve is currently responsible for all of the following operations except
Real estate finance is basically a manifestation of our
credit system economy.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was designed to
minimize the potential for fraudulent lending activities
The demographics of a real estate cycle would probably include all of the following inputs except the population's
The real estate cycle begins anew when
demand exceeds supply
Lenders having a cash surplus in a low demand area would most likely
purchase loans in the secondary market.
A fundamental aspect of real estate finance is the ability of borrowers to remain in possession and control of their property. This is defined as
Reliance on borrowed capital more than on equity funds would be known as the use of
Disintermediation occurs when
savings withdrawals exceed savings deposits.
The fact that a 1,500 square foot house sells for $300,000 in Los Angeles, $85,000 in Fresno, and $45,000 in El Centro is based on the property's fixity and its being subject to the economies of which of the following markets?
One way to increase a property's value without adding any physical improvements is to
Prior to actually foreclosing, many lenders attempt all of the following strategies except a(n)
advance of more funds.
Under a DVA foreclosure, the lender usually recovers the
top portion of the loan balance.
After a foreclosure of an FHA insured loan, the lender will receive compensation in the form of
the balance owed plus costs.
Recasting a real estate loan involves all of the following activities except
forgiving any delinquent payments.
The clause in a real estate loan that triggers a foreclosure in the event of a default is the
A Deed in Lieu of Foreclosure accepted by the lender
ends the borrower's liability for the loan balance.
In California, borrowers pay a fee for a service company that track the borrowers' payments of
As a practical matter, a foreclosure should occur only when the I. market value of the collateral is less than the balance of the loan. II. borrowers can no longer make the payments.
I. market value of the collateral is less than the balance of the loan.
II. borrowers can no longer make the payments.
Most foreclosures occur as a result of the nonpayment of
principal and interest.
A judicial foreclosure involves all of the following actions except
In real estate finance, a kicker refers to a(n)
The portion of realized capital gain that is subject to income tax in the year received is called
recognized capital gain.
Under a split-fee financing agreement, a lender purchases land, leases it to a developer, and then
finances the improvements to be constructed.
Money acquired by refinancing is
not subject to tax.
A seller might refinance a property prior to a planned sale in order to secure a loan
that can be assumed by the buyer.
Investors who use pyramiding anticipate that the
original property will increase in value.
An investor who periodically refinances owned properties and then uses proceeds from the new loans to purchase new properties is
If the lease in a sale-leaseback is written for 30 years or longer, the IRS tends to consider the transaction a(n)
A sale-leaseback offers the property owner an opportunity to
free capital for other investments.
In an equity participation agreement, lenders assume a second role as
The present value of money to be received in the future is worth
less than its face value.
Simple interest is described as interest paid on
the principal balance only.
When points are charged to make a loan, the effective rate of interest is
higher than the nominal rate.
When employing an add-on interest schedule, the effective rate of interest is
Compound interest is described as interest paid on
What is the interest portion of the first payment on a $2,500 loan to be repaid in 12 equal monthly payments at 9% interest?
Using the rule-of-thumb approach, which of the following amounts will a 15% investor pay for a one-year old, three-year loan for $10,000 payable at 10% interest only?