1. Under the theory of hypothecation, the lender retains what type of interest in the collateral property?
Equitable
1. When a couple purchased their new home, they obtained a $255,200 loan from the bank. The bank now has an equitable interest in the property, but the borrowers have full rights of possession and control. This is an example of
hypothecation.
1. A manufacturing company has announced that the factory will close as of the first of the year, resulting in the layoff of 1,200 people. Because the factory was the main industry for this small town, what is MOST likely to happen to real estate values?
Prices will decrease
1. Which of the following was NOT one of the advantages the Taxpayer Relief Act of 1997 provided to the seller of an investment property?
Depreciation recapture tax was eliminated
1. A couple purchased their home 20 years ago for $60,000. They were divorced 10 years ago. The husband received title to the property and has continued to live there. If he sells it this year for $300,000, how much of the profit will be subject to capita
None; he has a $250,000 exemption
1. The Office of Thrift Supervision (OTS) has now been transferred to the
Office of the Comptroller of the Currency (OCC).
1. Economic stability in the United States would be MOST upset by
a drop in the supply of money available for mortgage lending.
1. A bank that is a member of the Federal Reserve System has the ability to do all the following EXCEPT
eliminate its check clearing system.
1. The Fed has many functions, but the one MOST closely related to real estate finance is
determining discount and federal funds rates.
1. A Federal Reserve member bank will be required to keep a higher percentage of its assets in reserve if its deposits consist primarily of
checking accounts in a city bank
1. The Office of the Comptroller of the Currency (OCC) falls under the direction of the
Department of the Treasury
1. A well-established builder is seeking construction financing for a development project. A local bank has provided financing for the builder numerous times and considers the builder a prime customer. The bank will probably charge the builder
prime plus two points.
1. To slow economic growth, the Fed could
raise the discount rate and raise the reserve requirement.
1. The primary activity of the Fed's open-market operation is to
buy and sell government securities.
1. Which of the following loans would NOT be subject to regulation under the Truth in Lending Act?
Personal loan of $1,000 to be paid in three installments at no interest
1. The Department of the Treasury collects funds from all the following sources EXCEPT
local property taxes.
1. When the FDIC is appointed as a receiver or conservator to reorganize or liquidate a failed bank it is subject to the direction or supervision of
no one.
1. The MOST significant benefit received by a thrift that was federally chartered through Office of Thrift Supervision (now under the OCC) is that it
may operate in all 50 states.
1. A developer is planning a new retirement home project in Florida. In order to avoid being subject to the Interstate Land Sales Full Disclosure Act, the developer should
make sure that all lot sizes are less than five acres.
1. Real Estate Settlement Procedures Act (RESPA) regulations are now enforced by the Consumer Financial Protection Bureau (CFPB) and include all the following service providers for the purchase of a home EXCEPT
pool installation companies.
1. The Community Reinvestment Act (CRA) requires a financial institution to do all the following EXCEPT
provide below-prime financing.
Due to the cyclical requirements of farm loans, the BEST loan product for a farmer is
an open-end mortgage.
1. When Fannie Mae was first organized to purchase FHA loans, these loans were purchased at
par.
1. Fannie Mae and Freddie Mac have a direct impact on the individual consumer wishing to obtain a mortgage loan because
they set the qualifying guidelines for conforming loans
1. A couple is making a 5 percent down payment on the purchase of a house selling for $150,000. How much will the sellers be allowed to contribute to the purchaser's closing costs under Fannie Mae's guidelines?
$4,500
1. The actual numerical score included on a credit report provided by a credit repository to the lender is there primarily to assist the lender in evaluating
how much risk may be involved in making the loan.
All the following are participants in the residential lending secondary market EXCEPT
Sallie Mae
1. The highest amount that can be borrowed under Fannie Mae maximum loan limits is in
Alaska.
1. Fannie Mae and Freddie Mac qualifying guidelines have all the following similar standards EXCEPT
ratios used for qualifying borrowers.
1. The electronic underwriting system used by Freddie Mac is called
Loan Prospector�.
1. The Ginnie Mae Type 1 mortgage-backed security (MBS) requires all the mortgages in the pool of mortgages to
be all of the same type (for example, single-family).
1. The role of Farmer Mac is MOST similar to that of
Fannie Mae and Freddie Mac.
1. A traditional real estate mortgage investment conduit (REMIC) deals in
commercial mortgage-backed securities.
1. A bank would consider making all the following loans EXCEPT
$100,000 unsecured personal loan.
1. Banks actively compete for home equity loans that became popular with consumers as a result of the
elimination of interest deduction on consumer loans.
1. Banks participate in real estate activities in all the following ways EXCEPT
as real estate brokers.
1. A mutual savings bank located in New York would MOST likely approve which of the following loans?
$150,000 mortgage loan on property in New York
1. Members of the Federal Home Loan Bank System are regulated by the
FHFA
1. An insurance company is MOST likely to provide financing for
an office building.
1. Pension funds have taken a more active role in real estate financing through the
purchase of mortgage-backed securities.
1. Under the Credit Union Membership Access Act, members of a credit union would be able to invite any of the following to join their credit union EXCEPT
members of their poker club.
1. Which of the following would NOT be considered a noninstitutional lender?
Bank trust department
1. A couple has applied for a mortgage loan. The loan officer will qualify the borrowers, prepare the loan package, and submit it for underwriting to one of several investors. The loan officer works for a
mortgage broker.
1. The only banking service offered by a mortgage "banker" is a
mortgage loan origination.
1. An investor recently invested in a real estate mortgage trust (REMT). He expects to receive a return on his investment derived through all of the following EXCEPT
rental income on properties.
1. An investment company was recently turned down when it applied as a real estate investment trust (REIT). Which of the following would have been grounds for denying the application?
The REIT holds property for sale in the ordinary course of business
1. An individual has invested in a REIT and expects to receive a return on the investment derived from which of the following?
Capital gains when properties are sold
1. Sellers usually participate in real estate finance with
carryback junior loans.
1. A town issued municipal bonds to obtain funding for a new city park. The administration of these funds will be handled by
a trustee.
1. A privately owned factory is interested in issuing corporate bonds. The bonds may be classified as any of the following EXCEPT
general obligation bonds.
1. A county floated a bond issue at a 6 percent rate of interest three years ago. The average interest rate on bonds has now risen to 8 percent. The value of the county bonds has
decreased by an indeterminate amount.
1. A well-known national department store issues bonds that are a claim against its general assets. These bonds are called
debentures.
1. A city may use general obligation bonds to raise funds for all the following projects EXCEPT
expanding its inventory of local merchants.
1. A city wishes to attract more light industry to a location near two major highways. A new industrial park that would produce rental income to repay the bonds could be developed through the sale of
industrial revenue bonds.
1. A young couple is trying to buy their first home but do not have funds available for the down payment and closing costs. The husband's father is a widower. How much can he give the young couple without there being any tax consequence?
$26,000
1. A couple has purchased their first home. They will retain legal rights to their property, but their mortgage lender will have equitable rights. They live in a state that has adopted the
lien theory.
1. A general lien differs from a specific lien in that it
applies to all properties owned by a debtor
1. Lenders establish their priority lien position based on the doctrine of
first in time, first in right.
1. The three basic instruments used to finance a real estate loan include all the following EXCEPT
the promissory note.
Homeowners live in a state that has an equitable period of redemption. They defaulted on their mortgage loan three months ago. When will they have an opportunity to redeem the loan?
After the default, but before the foreclosure sale
1. Which of the following statements regarding a note is FALSE?
A note may not be sold or assigned to another person.
1. In states where a note and deed of trust are used in the sale of property, a lender is able to foreclose
within a relatively short period.
1. A note is actually a contract and should include all the following EXCEPT
the signature of the lender.
1. A couple has purchased a home in Lake County, Florida. They live in Fairfax County, Virginia, and have their real estate brokerage firm in Prince Georges County, Maryland. The lender on their Lake County property will require that the mortgage be recor
Lake County, Florida.
1. When homeowners pay off their $300,000 mortgage loan, the bank that holds the mortgage must now record a satisfaction of mortgage based on the
defeasance clause.
1. A couple won the lottery and wants to pay off their mortgage loan. Much to their surprise, the lender refuses to let them pay off the balance due before the time specified in their original note and mortgage. The loan document must have included a
lock-in clause.
1. Interest-only loans may have any of the following options for paying off the total amount of principal and interest due on a mortgage loan EXCEPT
pay interest only for the full term of the loan.
1. A couple is buying a home for $300,000 with a 5 percent down payment. Their lender is requiring them to purchase mortgage insurance at the rate of 0.85 percent. How much will be added to their monthly principal, interest, taxes, and insurance (PITI) pa
$201.88
1. In some cases, the lender pays for the private mortgage insurance and charges the borrowers a slightly higher rate of interest. One disadvantage of this for the borrower is that the
higher interest rate remains for the life of the loan.
1. Under standard Fannie Mae/Freddie Mac guidelines, all the following would be included in calculating the monthly housing expense EXCEPT
utilities.
1. A couple is buying a house for $280,000. They have a combined monthly income of $6,000 with approximately $400 per month in long-term debt. Using standard Fannie Mae ratios of 28/36, how much will they be allowed for all housing expenses plus other deb
$1,680
1. The Fannie Mae/Freddie Mac maximum loan limit set by the FHFA for a single-family home as of 2014 is
$417,000.
1. The Federal Housing Administration (FHA) is under the direct supervision of the
Department of Housing and Urban Development (HUD).
1. Special HUD/FHA loan programs include all the following EXCEPT
HomeKeeper� mortgages.
1. An individual is buying a small town house for $130,000 with an FHA loan. The required down payment will be
$4,725.
1. The maximum loan allowed by FHA in a designated high-cost area may not exceed a percentage of
an index chosen by the FHFA.
1. A young couple is purchasing their first home for $120,000. They will obtain an FHA loan, which will require them to provide 3.5 percent of the sales price to be used toward down payment or closing costs. The $4,200 may come from any of the following s
a gift from the husband's college roommate.
1. A young graduate is attempting to buy a condominium for $50,000. If his total housing expense will be $575 and he has long-term debts of $395 per month, will he qualify for an FHA loan based on his $24,000 annual salary?
No, he meets the 31 percent housing ratio, but not the 43 percent total debt ratio.
1. A couple exceeds the allowable percentage for housing expense on their FHA loan by 2 percent. The lender may be willing to approve the loan anyway based on any of the following factors EXCEPT
the wife occasionally works part-time at a drug store.
1. A veteran used her VA eligibility in 1978 when the entitlement was $25,000. She had let her loan be assumed but recently learned that the original loan was paid off and her eligibility will now be restored at
the current entitlement.
A couple wants to purchase a home listed for $460,000 using one of the spouse's VA entitlement. If the maximum VA loan is $417,000 and the property receives a certificate of reasonable value (CRV) of $457,000, how much down payment will be required?
$10,000
1. If a veteran borrower has no debt obligations other than a housing expense, it would appear that 41 percent of the veteran's gross monthly income could be allocated for the housing expense; however, the lender must also take into consideration the
age of the borrower.
1. The person responsible for ordering the title search and title insurance policy is the
settlement agent.
1. In order for a lender to verify information provided on the loan application, the borrower may be asked to sign all of the following EXCEPT
permission to order an appraisal.
1. An applicant has indicated the following monthly debts on a loan application. In determining the applicant's debt ratio, the lender may choose NOT to include the
$200 voluntary alimony (not court-ordered).
1. In preparing a direct sales comparison appraisal, the best comparable for a subject property would be a
similar house in the same neighborhood sold three months ago.
1. To determine the net annual market rent income on an apartment building, all the following would be deducted from the gross annual rents EXCEPT
depreciation.
1. A couple is settling on their new home in California, where they will receive a bargain and sale deed. The closing on their purchase will most likely be held by
an escrow agent.
1. A bank originated a mortgage loan for a couple that was included in a package of loans sold to Fannie Mae. The bank then assigned the servicing of the loan to a servicing company who will now be responsible for all of the following EXCEPT
providing title insurance.
1. Provisions for a permanent long-term mortgage that will be used to pay off the interim construction loan are usually made
before the origination of the construction loan.
1. A borrower on a residential property loan is seldom found in default for nonpayment of property taxes because
the lender impounds sufficient funds as part of the monthly payment.
1. All the following are examples of adjustments that a lender may be willing to make in order to avoid foreclosure EXCEPT
cancel the total obligation.
1. A couple was declared in default on their mortgage loan in September 2013. A foreclosure sale was held in March 2014. They have the right to redeem the loan and regain the property anytime up to February 2015 due to their state's
statutory redemption period.
1. Foreclosed properties are sold at public auction in order to
establish the true market value of the property.
1. An investor holds a second mortgage of $20,000 on a property going to foreclosure. There is a first mortgage of $110,000. If the property sells at auction for $110,000, the investor will receive
$0.
1. A bank is foreclosing on an FHA-insured property with a loan balance of $85,000 and $5,000 in other charges. It appears that the property could be sold for around $92,000. The bank will probably
bid the debt at the auction and then resell the property.
1. A couple lost their investment property through foreclosure. The loan balance at the time of foreclosure was $120,000. Their adjusted book value for the property was $100,000. They may find they owe income tax on
$20,000.
1. To protect the lender's interest in case of default on the loan, leasehold mortgage financing generally includes
both the tenant's pledge of improvements and landlord's pledge of land.
1. A couple purchased a new home in Kansas that is scheduled for settlement on June 1. They have their present home in Tennessee on the market but do NOT have a contract for it. They may need to consider taking out a
bridge loan.
1. An investor has owned a rental property for many years but is now interested in selling it for retirement income. Another investor has offered to buy the property for $20,000 down, making $10,000 payments for each of the next ten years. The original in
installment sale.