Champions Real Estate Finance Exam Questions and Answers 2024.pdf, Exams of Law

Download Champions Real Estate Finance Exam Questions and Answers 2024.pdf and more Exams Law in PDF only on Docsity! Champions Real Estate Finance Exam Questions and Answers 2024 Loan-to-Value Ratio (LTV) - Answer- The percentage of the lesser of the appraised value or sales price that the lender will lend. ex: If a borrower is approved for an 80% loan, it means that the lender will loan up to 80% of the sales price or appraised value, whichever is lower. Package Mortgage - Answer- Includes both real and personal property ( fixtures and furnishings) Blanket Mortgage - Answer- Covers more than one piece of property. Wraparound Mortgage - Answer- Method of financing which preserves the low, existing interest rate on the original note. Open-End Mortgage - Answer- Permits additional borrowing on the same note. This is sometimes called a credit card mortgage or a home equity line of credit - HELOC. Budget Mortgage - Answer- The monthly house payment includes principal, interest, taxes and insurance (known as PITI) Collateral -Dependent Loans - Answer- A hard money loan is a specific type of asset- based financing in which a borrower receives funds secured by the value of a parcel of real estate. Character - Answer- Is a measure of the willingness of a borrower to make on-time payments. Credit character is revealed in the borrower's credit report. Capacity - Answer- Is a measure of the borrower's ability to repay the debt, and is demonstrated through current earnings and job stability. Capital - Answer- Is the sum of all assets that the borrower has accumulated. Collateral - Answer- Is something of value that can be pledged as security for repayment. Yield - Answer- Is the return that the investor recieves over the life of the loan. (Also known as profit) Originator - Answer- The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower. Mortgage Broker - Answer- Typically functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to larger investors. At one time originated up to 80% of all mortgage loans. (Back on the rise) Mortgage Banker - Answer- Entities which provide their own funds for the purpose of providing mortgage financing, as opposed to commercial banks/savings associations. (Held, or "Warehoused") Correspondent Lender - Answer- Usually smaller in scale than mortgage bankers or brokers, these lenders typically extend loans with their own funds, at their own risk. Processing - Answer- Once application is complete the file moves into this phase. Underwriting - Answer- The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Closing - Answer- The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender. Servicing - Answer- Includes collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance ( and managing escrow and impound funds) remitting funds to the note holder, and following up on delinquencies. Supply and Demand - Answer- an economic concept that states that the price of a good rises and falls depending on how many people want it and depending on how much of the good is available. Funding - Answer- The process of transferring funds to a title or escrow company for disbursement The Safe Act - Answer- Designed to enhance consumer protection and reduce fraud. (Key component of HERA) M1 - Answer- Is defined as the sum of currency held by the public and transaction deposits at depository institutions. M2 - Answer- Is defined as M1 plus saving deposits, small-denomination time deposits (those issued in amounts of less than $100,000) and retail money market mutual funds shares. Truth in Lending Act (TILA) - Answer- A United States federal law that is designed to protect consumers in any credit transactions by requiring clear disclosure of key terms of lending arrangments all associated cost. Trigger Terms - Answer- Specific credit terms that may not be advertised unless the advertisement includes other detailed information. The Federal Fair Credit Reporting Act (FCRA) - Answer- Sometimes called the Fair Credit Reporting Dispute Act, is a federal law designed to protect consumers against unfair credit reporting practices and protect and credit privacy. To assure the consumer that these agencies are fair, accurate and exhibit confidentiality in their credit reporting methods. U.S. Department of Agriculture (USDA) - Answer- Also referred to a "Section 502 loan" is insured by the U.S. Department of Agriculture. The program offers 100% financing (no down payment) for qualified borrowers. First time and repeat home buyers can obtain this loan. The program is for primary residence only; no second homes or investor financing is available under this program. The program is for purchases and refinancing only and cash-out refinances are Not allowed. USDA Farm Loans (FSA) - Answer- Is an agency of the US Dept of Agriculture. Farm Loan Programs for a farmer or rancher who is unable to obtain credit elsewhere to start, purchase, sustain, or expand a family farm. Office of Consumer Credit Commissioner (OCCC) - Answer- Regulates the credit industry and educates consumers and creditors. Agency efforts help produce a fair, lawful and healthy credit environment for social and economic prosperity in Texas. Texas Department of Housing and Community Affairs (TDHCA) - Answer- Is responsible for affordable housing, housing related and community service programs, and the regulation of the states manufactured housing industry. Texas Veterans Land Board (VLB) - Answer- a division of the General Land Office of Texas that administers three programs to assist Texas veterans in purchasing a principal residence and/or land and in financing home improvements Regulation X - Answer- The Consumer Financial Protection Bureau's (CFPB)( Blank )which implement the Real Estate Settlement Procedures Act (RESPA) Ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protection from unnecessarily high settlement charges caused by certain abusive practices. RESPA Section 8 - Answer- Prohibits kickbacks, fee-splitting, and unearned fees. Loan Estimate (LE) - Answer- Form replaced the GFE form and the initial TILA disclosures and includes some new disclosures. The form must be provided by the mortgage broker or creditor upon receipt of an application. The creditor or broker must give the form to the consumer no later than 3 business days after the consumer applies for a mortgage loan. Closing Disclosure Delivery Requirement - Answer- The TRID rule requires that the consumer receives the Closing Disclosure no later than 3 business days before consummation. Secondary Market - Answer- Exists for the purchase and sale of existing mortgages to investors. Designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. Wherein loan originators such as mortgage bankers and brokers can sell their loans and thus recover cash for originating more loans. Federal National Mortgage Association (FNMA) - Answer- Plays a vital role in financing mortgages and increasing homeownership opportunities in the US. Began in 1938 as an agency of the federal government and was created to bring stability to the US housing market. In 1968, it became a privately owned and managed corporation. US Congress re-chartered it as a private company. Mandating that it operate with private capital on a self-sustaining basis to enhance the flow of funds through the secondary market home buyers.The largest investor in home mortgage today. Freddie Mac (FHLMC) - Answer- Federally chartered corporation. Established in 1970 for the purpose of purchasing mortgages in the secondary market. Is a stockholder- owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, saving institutions and credit unions can make available to homeowners and multi-family investors. Conservatorship - Answer- Legal right given to a person to manage the property and financial affairs of a person deemed incapable of doing that for himself or herself. The Housing and Economic Recovery Act (HERA) - Answer- Enacted on July 30, 2008, is a major housing law that serves multiple purposes: The modernization of the Federal Housing Administration (FHA) , foreclosure prevention, and the enhancement of consumer protections. The SAFE ACT is a KEY component of HERA : -it is designed to enhance consumer protection and reduce Fraud by requiring national minimum standards for mortgage training, including prelicensing education and annual continuing education Way to Remember: in order to be SAFE, you need a HERA! (female version of a hero) FHFA (Federal Housing Finance Agency) - Answer- On September 7, 2008 this agency placed Fannie Mae and Freddie Mac in Conservatorship. Appoint (blank) as a conservator or receiver of the GSEs. Farmer Mac - Answer- Is a government-sponsored enterprise with the mission of providing secondary market for agriculture real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans. Front Ratio - Answer- Is used to qualify a borrower for a loan based upon the proposed house payment and his or her gross monthly income (GMI). The house payment is the monthly payment of principal, interest, taxes and insurance (PITI). Back Ratio - Answer- The ratio of the borrowers total recurring monthly debts. Conventional Loan - Answer- Refers to a loan made with real estate as security and which does not involve government participation in the form of insuring or guaranteeing the loan. Real Estate Mortgage Investment Conduit (REMIC) - Answer- Allows for the indirect investment in mortgages through the sale of securities. Purchases "pools" of mortgages Primary Mortgage Market - Answer- The market where borrowers and lenders come together to create and negotiate terms of a mortgage transaction. Commercial Banks - Answer- Perform a variety of functions, from being a depository institution to providing lines of credit and loan products to the communities in which they are charted. Working capital is primarily generated through deposits from clients. Credit Unions - Answer- Not-for-profit banks set up by organizations that exist to serve their members. Return surplus income to their members in the form of dividends. Bonds - Answer- An instrument of corporate or governmental debt. (An IOU) Real Estate Investment Trust (REIT) - Answer- An investment vehicle created by congress in 1960. The effort to make it possible for small investors to invest in larger commercial properties by purchasing shares in the organization that owns the real estate. Lifting Clause - Answer- A clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instrument's position. Lock-in Clause - Answer- Is a condition of a mortgage loan which prohibits prepayment of the loan prior to a certain date. Capital gains tax - Answer- The sale of capital asset results in either a gain or a loss. chronological Age - Answer- The actual age of the property in years. Effective Age - Answer- An appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. Income Approach - Answer- Will not be used in a typical residential transaction because it applies only to income-generating rental property. Physical Deterioration - Answer- Is the loss in a property's value due to daily wear and tear Functional Obsolescence - Answer- Is the loss in desirability of the style, layout, or function of an element of a property over time. External Obsolescence - Answer- The loss in value of a property caused by factors outside the property itself. Depreciation - Answer- Is the reduction of value of property from causes of deterioration or obsolescence. Market Value - Answer- Is the most probable price a property should bring in a competitive and open market under all conditions requisite to fair sale, under guidelines published by federal institutions Fannie Mae and Freddie Mac. Ad Valorem - Answer- according to value Chain of Title - Answer- A history or list of all recorded owners all the way back to the sovereignty of the soil. Abstract of Title - Answer- A complete history of the title of a piece of property that includes deeds, easements, liens, foreclosure, wills, marriages, deaths, life, estates, fee simple estates, and anything else that had been recorded about a property. Recasting - Answer- Or re amortizing, a mortgage. This can reduce the borrower's monthly payment, thus making resolving a default situation more manageable. (Extending and reducing payments) Deed in Lieu (DIL) - Answer- Of foreclosure (blank) is a mortgage modification option in which a borrower voluntarily feeds their collateral property in exchange for a release from all obligations under the mortgage. Judicial Foreclosure - Answer- The lender files suit with the (blank) system, and the borrower will receive a note in the mail demanding payment. If payment is not made after a certain time period, the mortgage property is then sold through an auction. Power of Sale - Answer- Also known as a statutory foreclosure. Foreclosure without going to court. (Have no choice) Strict Foreclosure - Answer- The lender files a lawsuit on the homeowner that has defaulted. If the borrower cannot pay the mortgage within a specific timeline ordered by the court, ownership the property is transferred directly to the mortgage holder. The take place only when the debt amount is greater than the value of the property. Encumbrances - Answer- A claim, lien, charge, or liability attached to and binding real property. An easement for ingress and egress. Lien - Answer- Is a right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually by means of a court sale. The interest rate that is determined by individual banks. - Answer- What is the prime rate? Private lenders - Answer- Who provides VA home loans? The single Family Housing Direct Home loan is also known as - Answer- Section 502 Direct Loan Program Through which avenue does the US Treasury promote economic growth. - Answer- Policies that support job creation The (blank) loan was developed by HUD for the rehabilitation and repair of single family properties. - Answer- 203(k) When was HARP introduced? - Answer- 2009 Dodd-Frank Wall Street Reform Act - Answer- Increases the ins coverage on all federally insured credit union accounts up to $250,000 Neutral inquiries that are not rated as either positive or negative on a credit report. - Answer- Periodic review, Pre-approval and consumer initiated At the treasury level, funds can be raised to pay for government spending by increasing borrowing and - Answer- Raising taxes Reverse Mortgage - Answer- An arrangement where the lender agrees to pay money to an elderly homeowner, either regularly or occasionally, and to be repaid from the homeowner's equity when he or she sells the home or obtains other financing. Deed in Lieu - Answer- Cannot be accepted from borrower's who can financially afford their mortgage payments. Private Mortgage Insurance (PMI) - Answer- Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. Real Estate Mortgage Trusts (REMT) - Answer- A special form REIT that invests in mortgages or mortgage-backed securities. FNMA/FHLMC Ratios - Answer- 28% / 36% FHA ratio - Answer- 31/43 VA Ratio - Answer- 41% OCCC-Regulate real estate transactions include: - Answer- Home Equity Loans Secondary Mortgages Home Improvement Loans Property Tax Lien Lenders The Fed uses three primary monetary policy tools to influence the cost and availability of credit: - Answer- 1. Open market operations 2. The discount rate 3. Reserve requirements Growth in employment, Transportation systems, Personal preference, Availability of credit, Federal government policy - Answer- The demand of real estate is affected by: VA Qualification - Answer- Approval is based on two separate evaluations: residual income and debt-to-income ratio. Both are considered to be a guide to underwriting, and while residual income is the primary consideration, it must be considered along with other credit factors. Gift Funds - Answer- cannot be cash on hand or be from a party related to the transaction (i.e. realtor, broker, seller) Only received by immediate family. Escrow - Answer- The deposit of funds with a neutral third party who is instructed to carry out the provisions of an agreement. FHA's Single Family programs are limited to one-to four Family Property secured by - Answer- Detached or semi-detached dwelling Manufacturered Housing Townhouses or Row houses Individual units within FHA- approved Condominium Projects