Mortgage Loans and Real Estate Financing, Exams of Nursing

Download Mortgage Loans and Real Estate Financing and more Exams Nursing in PDF only on Docsity! 1 | P a g e REAL ESTATE FINANCE EXAMS WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED RATIONALES ANSWERS BY EXPERTS |FREQUENTLY TESTED QUESTIONS AND SOLUTIONS |LATEST 2024 |ALREADY GRADED A+ | GUARANTEED PASS Lenders and mortgage loan originators must provide borrowers who apply for a purchase loan secured by real property: a Special Information Booklet. the Closing Statement. the Lead-based Paint disclosure. a Qualified Mortgage disclosure. a Special Information Booklet. Under the California Veterans' Farm & Home Purchase Plan, the purchaser would initially receive which of the following? Grant deed Warranty deed Land contract State deed Land contract n the language of real estate, which of the following terms does not belong with the others? Joint tenancy Hypothecate Subordination Second mortgage 2 | P a g e Joint tenancy In the course of offering a note for resale, Mr. Kim, an investor, explains that the note contains an alienation clause. This one fact would: prevent transfer. not be acceptable or legal. reduce the face value. make the note more negotiable. make the note more negotiable. What is the document commonly used to secure a loan on personal property? Security agreement Financing statement Mortgage Bill of sale Security agreement What type of property is included in a package loan? Personal property Real property and personal property Real property None of the above Real property and personal property Mr. Smith sells his lot for $10,000 and takes back a promissory note for $5,000. Needing cash, he immediately sells the note at a discount to Mr. Brown for $3,500, assigning the security instrument and endorsing the note "without recourse." The borrower defaults before making any principal payments. What should Mr. Brown do to recover his loss? Foreclose to recover $3,500 Sue for specific performance to recover his $3,500. Recover from Mr. Smith as the transaction was usurious Foreclose to recover $5,000 Foreclose to recover $5,000 The process of depositors removing funds from savings is called: 5 | P a g e takes a residential mortgage loan application. When using a purchase money deed of trust, the trustor: receives a promissory note for the amount borrowed. lends money to the beneficiary. signs the promissory note and deed of trust and gives it to the beneficiary. only signs the deed if trust. signs the promissory note and deed of trust and gives it to the beneficiary. What is any charge payable directly or indirectly by the borrower and imposed directly or indirectly by the lender? A prepayment penalty A finance charge A loan estimate An actual rate A loan estimate If the annual percentage rate provided in the good faith estimate is out of tolerance under TILA, creditors must provide a corrected TIL disclosure statement to a consumer: at the time of consummation of the transaction. one week before the consummation of the transaction. on or before the 3rd business day before consummation of the transaction. no more than 3 business days after the consummation of the transaction. on or before the 3rd business day before consummation of the transaction. Ms. Blue had been showing homes to a young, newly married couple for quite some time and finally found one which they wanted to buy. But even with the best loan available, they did not have enough cash for the down payment. They felt that they could raise the additional money they needed by borrowing against their automobile and other sundry personal property. Under these circumstances, the broker should: advise against it. tell them it is their decision to make, but point out the pitfalls of this kind of financing. advise them to go ahead because real estate always appreciates in value. tell them nothing and let them make their own decision. tell them it is their decision to make, but point out the pitfalls of this kind of financing. 6 | P a g e To buy a car, a man obtained a second on his home for $2,400, payable $77.00 per month, including interest at 6%. When he sold his home, he paid off the entire loan balance of $1,989. What was the face amount of the principal on the loan? $2,400 $2,772 $2,000 $1,989 $2,400 A down payment of $1,000 for the purchase of an apartment house valued at $690,000 is a good example of: plottage. leverage. highest and best value. none of the above leverage. Under the TILA-RESPA rule, what term refers to a charge imposed for paying "all or part of" a transaction's principal before the date on which the principal is due? A finance charge A prepayment penalty An annual percentage rate A loan estimate A prepayment penalty A broker negotiated a hard money $4,000 note secured by a second deed of trust with a term of 4 years, for a client. Considering the above transaction, which of the following is a correct statement? There would be no limit placed upon the commission the broker could charge His maximum legal commission would be $600 His maximum legal commission would be $400 His maximum legal commission could be 5% of the note or $325, whichever was greater His maximum legal commission would be $600 To bring current and restore is to: 7 | P a g e pledge. usury. reinstate. redeem. reinstate. A man sold a lot for $25,000 and took back a note for $9,000. He is now in need of some cash and wants to use the note as security for a loan with the bank. This type of loan transaction would be known as: pledge agreement. mortgage. reconveyance. release of payment. pledge agreement. In a construction loan situation, the lender agrees to an obligatory advance agreement which states that the contractor will receive funds as the construction progresses. The contractor will receive the final payment: when the building is completed. immediately upon recordation of a Notice of Completion. one month prior to completion. when the lien period has expired. when the lien period has expired. A loan covering several properties secured by a mortgage or deed of trust is a: shared equity loan. roll-over loan. installment loan. blanket loan. blanket loan. The actual fees are $459 on a $8,000 1st trust deed with a loan term of 2 years. Under Article 7, the maximum that the broker can charge is: $390. $400. $459. $700. 10 | P a g e uniform license applications and reporting requirements for state licensed-loan originators. a comprehensive licensing and supervisory database. increased accountability and tracking of loan originators. all of the above. all of the above. A purchase money loan is a(n): loan received from a mortgage broker. equity loan. loan made at the time of the sale whose proceeds go to the seller. loan whose proceeds go to the buyer. loan made at the time of the sale whose proceeds go to the seller. Bob purchased an existing loan from a lender for $13,500. At the time he purchased the loan it had just been created and had a loan balance of $15,000. The borrower never made a payment on the loan and Bob decided to foreclose. What is the maximum amount that Bob can foreclose for? $13,500 An investor who purchased an existing loan has no right to foreclose $13,500 minus the trustee fee $15,000 $15,000 Mr. Sloan wishes to purchase a piece of industrial property and apply for a large loan to help him purchase the property. The lender is most interested in: the appraised value of the land and the improvements. the financial condition and credit standing of the applicant for the loan. the demand for the product being manufactured on the property. all of the above. the financial condition and credit standing of the applicant for the loan. Jane offers to purchase Stan's property for $139,000. Jane takes title subject to a VA loan. What is the effect on liability? Jane is primarily liable for the loan Stan and Jane are both liable for the loan Stan is liable for the loan Neither Jane nor Stan is liable for the loan 11 | P a g e Stan is liable for the loan Interest is a very important part of the lending business. Interest calculated on the total amount of the principal, plus accumulated interest, is referred to as: straight interest. compound interest. simple interest. accumulated interest. compound interest. In purchasing a house, which of the following methods of financing could be accomplished without a down payment? FHA Cal-Vet VA Conventional VA Which of the following requires mutual mortgage insurance? Veterans Affairs Cal-Vet FHA Fannie Mae FHA Which of the following documents is not a negotiable instrument? Check Draft Mortgage Promissory note Mortgage A broker (or escrow company) must record a deed of trust created on the sale of a property with the county recorder of the county in which the real property is located within ______ after the closing of the transaction. 12 | P a g e 8 hours 1 day 3 days 1 week 1 week When a trust deed is sold, the parties use an escrow in order to: obey the California Civil Code. make sure that conditions and terms are met prior to the settlement of the transaction. obey the real estate law. do all of the above. make sure that conditions and terms are met prior to the settlement of the transaction. Who gives the power of sale to a trustee in a deed of trust? Beneficiary Trustor Lender Escrow holder Trustor If you desire to borrow money against an existing note that you own, you would be asked to sign a: pledge agreement. secondary deed of trust. mortgage. bill of sale. pledge agreement. Of the following, a primary source of funds for residential financing is: the Federal Home Loan Bank. Freddie Mac. mortgage companies. the Federal Housing Administration. mortgage companies. 15 | P a g e The lender The settlement agent The buyer's attorney The loan servicer The lender Who can pay fees or compensation to a short sale negotiator or to a broker for the work necessary to accomplish a short sale? No one may pay these fees. Only the seller. The buyer under certain circumstances. The closing officer. The buyer under certain circumstances. Doug is a homeowner who has failed to make payments on a trust deed for two months. The trustee has recorded a notice of default. What does Doug have? Right of redemption Right of reinstatement Loan moratorium rights A problem, he has lost his opportunity to stop foreclosure Right of reinstatement Which of the following does not belong with the others? CRV Highest loan-to-value ratio FHA No down payment FHA Which of the following is an institutional lender? Mortgage company Real estate investment trust Insurance companies All of the above 16 | P a g e Insurance companies Assume you purchased a home on a land contract of sale two years ago. Last year the property was completely demolished by a lightning strike. According to the provisions of the Uniform Vendor and Purchaser Risk Act of 1947, which of the following would best state the position of you and the seller? It would be the seller's obligation to restore the improvements of the property Earthquakes are not covered by the above mentioned law Since you, the buyer, have taken possession, even though you do not have the legal title, are liable and must continue to make payments on the land contract Answers (a) and (b) above Since you, the buyer, have taken possession, even though you do not have the legal title, are liable and must continue to make payments on the land contract Gerald, who is a 17-year-old minor, wishes to purchase a home. This can be done legally when: buying a home under the Cal-Vet program. buying a home only under FHA or DVA. seeking any type of conventional financing. none of the above buying a home under the Cal-Vet program. A federal act that provides protection against foreclosures of real property owned by a person in the service is: Serviceman's Readjustment Act of 1944. Servicemembers Civil Relief Act. Moratorium Relief Act of 1968. Release of Obligation Act of 1947. Servicemembers Civil Relief Act. A man bought a home for $160,000 and paid $16,000 down. Later, the value of the property rose to $170,000. This is an example of: escalation. plottage. 17 | P a g e leverage. assemblage. leverage When a loan is "called" by the mortgagee, this means: the borrower has the right to pay off the balance. the lender accelerates all monies due. the mortgagee and the lender have agreed to the terms of the loan. all of the above. the lender accelerates all monies due. The minimum time frame for a foreclosure under a deed of trust is: 6 months and 21 days. 5 months and 21 days. 4 months and 21 days. 3 months and 21 days. 3 months and 21 days. There are many differences between deeds of trust and mortgages. The main difference is: rights of parties in possession as to renting the property. redemption. amounts of money that can be borrowed. number of years money can be borrowed. redemption A real property sales contract for the purchase of property in a subdivision must have: a time and manner of payment. the basis for a tax estimate, if one is made. a legal description of the property. all of the above. all of the above. A seller takes back a deed of trust and note as part of the purchase price and the buyer immediately defaults. What action could the seller take? 20 | P a g e buy the property subject to the existing loan. sign a reconveyance. assume the loan. When a loan broker secures a hard money second loan for $16,300: the Real Estate Law limits the maximum charges. the Real Property Security Law limits the maximum charges. the maximum costs are limited by the Business and Profession Code. none of the above the maximum costs are limited by the Business and Profession Code. A holder in due course is one who has taken a negotiable instrument that is complete and valid on its face, has become the holder before it was overdue, and taken it in good faith without knowledge of defect in the title. Under which of the following circumstances would a person taking a negotiable instrument not be classified as a holder in due course? Taking a note endorsed in blank, that is, where the holder simply signs his name on the back of the note Taking a straight note on which payment is not due for two years Taking a note that is made payable to bearer rather than to the order of a specific person Taking a note properly endorsed by the payee but not signed by the maker Taking a note properly endorsed by the payee but not signed by the maker Under Article 7 of the Business and Professions Code, Section 10242, how much commission can a loan broker charge to negotiate a junior loan for $4,500 to be repaid in a period of 5 years? 5% 10% 15% Does not apply 15% A seasoned loan in a lender's portfolio would indicate: the time of year it was made. the maturity date. an established record of prompt payments. the date after first payment is made. an established record of prompt payments. 21 | P a g e A man had a promissory note for $2,000. He sold it to a friend for $1,500. What is this practice called? Prepayment Hypothecation Usury Discounting Discounting The largest loans would most likely be made by a(n): mutual savings bank. commercial bank. federal savings bank. insurance company. insurance company. Land contracts, also referred to as installment contracts, are commonly used when the purchaser does not have sufficient cash to take title and pay the balance of the purchase price. Of the following, which is a correct statement concerning a land contract? It normally involves a third-party lender. A purchaser may never assign his interest in the property prior to full payment of the purchase price. An agreement prohibiting the recording of the contract is enforceable. It is a security instrument. It is a security instrument. The Loan Estimate is the form that replaces the: Good Faith Estimate. Borrower's Intent to Proceed. Closing Disclosure. Summary of Costs. Good Faith Estimate. When must a borrower receive the Closing Disclosure from a lender? No later than 3 business days after consummation No later than 3 business days prior to consummation 22 | P a g e One week following consummation One week prior to consummation No later than 3 business days prior to consummation Mr. Dunn purchsed his home from Mr. Spring using seller carry-back financing. Later, Mr. Kirk bought the property subject to the loan. If Mr. Kirk immediately defaulted, Mr. Spring: may get a deficiency judgment against Mr. Dunn. may get a deficiency judgment against Mr. Kirk. may get a deficiency judgment against Mr. Dunn and Mr. Kirk. may not get a deficiency judgment because it was a purchase money loan. may not get a deficiency judgment because it was a purchase money loan. You purchase a negotiable note and have no knowledge of any defects. You are known as: the new trustor. the new mortgagor. the holder in blank. the holder in due course. the holder in due course. A collection service is trying to collect a note at the insistence of a holder in due course. The maker of the note could use as a real defense: that there was fraud in the inducement of the note. that there was no consideration to the maker. that the face of the note was materially altered. none of the above that the face of the note was materially altered. The seller under a land contract, not recorded, may: encumber the property for any amount a lender agrees to loan. not encumber the property, because the buyer has title. not encumber the property in excess of the amount due on the contract. not sell the property under any circumstances. not encumber the property in excess of the amount due on the contract. In the lending business, many terms are synonymous. All of the following terms are NOT synonymous, except: 25 | P a g e Once the Closing Disclosure is delivered, the transaction can be consummated 72 hours later. A clause in a loan document describing certain events that would cause the entire loan to be due is called: assumption clause. subordination clause. or more clause. acceleration clause. acceleration clause. When a seller carries back a note secured by a deed of trust from the buyer, the seller becomes the ___, and the buyer becomes the ___. beneficiary, trustor trustor, beneficiary trustee, trustor trustor, trustee beneficiary, trustor A lender would revise the Loan Estimate for any of the following reasons, except: changed circumstances affecting eligibility of the seller. changed circumstances affecting the settlement charges. revision is requested by the borrower. the points can change because the interest rate is not locked. changed circumstances affecting eligibility of the seller. A(n) ____________ is a person who is an innocent purchaser of a negotiable note without knowledge of any defect: receiver of the trust original payee of the note holder in due cause holder in due course holder in due course If a seller wanted to relieve himself of the primary liability for payment of a promissory note, he must find a buyer who is willing to: 26 | P a g e assume the liability for the promissory note. sign a release agreement. take title subject to the promissory note. take title contingent upon the promissory note. assume the liability for the promissory note. Of the following, the largest number of home loans are made by: savings banks. the Department of Veterans Affairs. FHA. commercial banks. savings banks. A business day means all calendar days except Sundays and the Federal legal public holidays. Which of the following holidays would be considered a business day? Valentine's Day Memorial Day New Year's Day Columbus Day Valentine's Day Under the Truth in Lending Act, when a borrower wishes to borrow money as a hard-money junior loan and agrees to use his residence as security for the loan, how many business days has he to rescind his offer? 5 days 3 business days No set time limit One week 3 business days The lender does not have to give the borrower a revised Closing Disclosure until the day of consummation, unless there is a(n): addition of a prepayment penalty. change to the APR change to the loan product All of the choices apply. All of the choices apply. Trustor is to beneficiary as: lessee is to lessor. vendee is to vendor. mortgagor is to mortgagee. none of the above 27 | P a g e mortgagor is to mortgagee. The Federal National Mortgage Association (Fannie Mae) was created under Title III of the National Housing Act for the purpose of: lending money on Title II loans when the bank will not. buying Title II loans to keep the market sound. buying Title I home improvement loans. none of the above buying Title II loans to keep the market sound. What kind of a promissory note has an interest rate that varies upward or downward over the term of the loan? Straight note Partially amortized installment note Fully amortized installment note Adjustable note Adjustable note When a borrower does not pay on a loan secured by a deed of trust, what must be recorded to start foreclosure? Notice of unlawful detainer Notice of default Notice of sale Notice to vacate Notice of default The least complicated loan to assume would be: institutional. Cal-Vet. FHA. savings bank. FHA Consideration is to a contract as endorsement is to a(n): deed of trust. promissory note. land contract. option. promissory note. For certain costs or terms, lenders are permitted to charge borrowers more than the amount disclosed on the Loan Estimate without any tolerance limitation. Which of the following would not be a permitted variations to tolerance limitation? 30 | P a g e no later than 7 days after receiving a consumer's application for a dwelling-secured closed-end loan. no later than 7 business days after receiving a consumer's application for a dwelling-secured closed-end loan. no later than 3 business days after receiving a consumer's application for a dwelling-secured closed-end loan. The factor exerting the greatest influence on interest rates pertaining to real estate loans is: demand. the cost for arranging state bond issues. the economic condition of the country. the availability of loan funds. the availability of loan funds. Which of the following activities would not require licensure or an endorsement under the SAFE Act? Negotiating terms of a residential mortgage loan for compensation Offering a residential mortgage loan for compensation Taking a commercial loan application Taking a residential mortgage loan application Taking a commercial loan application One of the disadvantages of a land contract to a buyer is: the possibility that the buyer would not get the title free and clear of loans. if the seller dies there might be litigation to obtain the title. lending institutions view land contracts as poor collateral. all of the above. all of the above. A hard money loan is: a loan of money when money is hard to get. a loan made to the trustor to help him purchase a piece of real property. a loan of cash to an existing owner of real property to buy an automobile. none of the above a loan of cash to an existing owner of real property to buy an automobile. Who benefits the most from the issuance of a notice of default on a second deed of trust? Beneficiary Borrower Trustee Trustor 31 | P a g e Beneficiary A veteran applies for a loan to purchase a home. He requests that the loan be processed as a guaranteed loan by the Department of Veterans Affairs. A VA appraiser, in processing the CRV for the loan, would be most concerned with: the credit rating of the borrower. the neighborhood in which the home is located. the loan to value ratio of the requested loan. the veteran's access to additional funds. the neighborhood in which the home is located. An "assignment of rents" clause in a deed of trust would most likely benefit: trustor. beneficiary. trustee. lessee. beneficiary. A deed of trust is the most common method of financing the purchase of real property in California. All of the following are correct statements concerning a trust deed except: the chief purpose of a trust deed is to create a lien. a trust deed may be foreclosed without court action or approval. a trust deed has no redemption period. the promissory note is held by the beneficiary as his prime security for the loan. the promissory note is held by the beneficiary as his prime security for the loan. According to TILA, for purposes of rescission and the 3-day or 7-day waiting period, how is a business day defined? A business day is defined as: all calendar days except Sundays and legal public holidays. a day in which the creditor's offices are open to the public for carrying on substantially all of its business functions. Monday through Friday and 1/2 day on Saturday. all weekdays except legal holidays. all calendar days except Sundays and legal public holidays. A person can borrow money on personal property with a: bill of sale. deed of trust. mortgage. security agreement. security agreement. 32 | P a g e Broker, Jenny Johnson, was approved for the $200,000 bank loan that she needed to open up her real estate office, as long as she agreed to keep $20,000 in a savings account at the bank at all times during the term of the loan. This is known as: compensating balance. security deposit. collateral. risk control. compensating balance. A release clause in a mortgage allows: the lender's option to extend. the release of a guarantor from further liability under specified conditions. portions of the security to be released from a mortgage lien when multiple properties are being used to secure the loan. the mortgagor to be released from liability. portions of the security to be released from a mortgage lien when multiple properties are being used to secure the loan. Mortgages and deeds of trust are considered: real property. personal property. chattels real. estates. personal property. In real estate financing, reference is sometimes made to take out loans. This refers to: net amount after points and prepaid interest are deducted. a blanket encumbrance. a construction loan. long term loan taken out after construction. long term loan taken out after construction. In checking trust deed documents in the county recorder's office, you will find that the recorded deed of trust refers to standard clauses contained in a previously recorded deed of trust. This previously recorded trust deed is known as a: prima facie deed of trust. 35 | P a g e that the rate of interest in the final granting of the loan will be greater than the commitment. points will be required as the rate required by the lender would exceed the legal rate of interest. the term used by lenders when the maximum rate of interest allowed by law is obtainable on financing a property. it is the rate of interest specified in the promissory note. it is the rate of interest specified in the promissory note. The primary mortgage market is the market in which lenders make loans directly to the: secondary market. borrowers. FED. FHFB. borrowers Under the FTC Red Flag Rules, which could be considered a warning sign of identity theft? Suspicious account application documents Suspicious personal identifying information, such as a suspicious address Unusual account activity All of the above All of the above Which of the following loans would not be insured by FHA or guaranteed by the VA? Federal bank Insurance company Institutional lenders Private lenders Private lenders Buyer gives seller a purchase money second trust deed and note. Shortly afterward, buyer defaults in payments on the second trust deed. Seller can, in due course, bring court action and obtain against the buyer: an attachment. a deficiency judgment. a reconveyance deed. none of the above none of the above The TILA-RESPA rule created integrated disclosure forms for closed-end mortgage loan transactions by consolidating: four TILA and RESPA disclosures. three RESPA disclosures. 36 | P a g e two TILA disclosures. one TILA disclosure and three RESPA disclosures. four TILA and RESPA disclosures. Following the consummation of a loan, a lender must keep copies of closing disclosures for: 24 months. 36 months. 48 months. 60 months. 60 months. Under TILA-RESPA, which of the following is a triggering event that requires the amount of the periodic payments to be outlined in a table? A balloon payment A foreclosure A loan default A short sale A balloon payment The primary mortgage market is the market in which lenders make mortgage loans directly to: veterans. mortgage bankers. borrowers. the secondary market. borrowers When a lender accepts a deed in lieu of foreclosure, the lender: must also have the power of sale. must take ownership of property free and clear of all liens. must go to court and get deficiency judgment. assumes junior loans. assumes junior loans. A man bought unimproved property and executed a first mortgage for 10 years. He plans to build on the property within 2 years. The lack of which clause in the first mortgage could cause him future concern? Alienation Subrogation Subordination Acceleration Subordination 37 | P a g e Which of the following best expresses your understanding of the terms assume and subject to? When a buyer assumes a purchase money loan he takes the liability for any deficiency that may occur in a foreclosure. When a buyer takes title subject to an existing loan he takes no liability for the note. When a buyer takes title subject to an existing loan he takes secondary liability for the note. When a buyer assumes an existing loan he does so with the consent of the beneficiary; however, the seller retains the primary liability on the note. When a buyer takes title subject to an existing loan he takes no liability for the note. What circumstances allow lenders to charge more than disclosed on the loan estimate? Amount charged falls within explicit tolerance thresholds. Charges that may exceed the disclosed amount. Changed circumstances. All of the choices apply. All of the choices apply. A mortgagor is one who: sells the property. signs the note. holds the trust. takes a mortgage. signs the note. Of the following, which is a correct statement concerning the promissory note and mortgage? The mortgage is worthless without the promissory note. The mortgage is negotiable in the ordinary course of business. The promissory note is the instrument used to bring a deficiency action to court. A promissory note is non-negotiable in the secondary mortgage market. The promissory note is the instrument used to bring a deficiency action to court. The transfer of property to a lender to be held as security for repayment of a debt; is known as: hypothecation. pledge. novation. subordination. pledge. Assume a husband and wife are going to purchase a piece of real property. Which of the following would carry the least weight in granting the loan for the purchase of the property? Husband's overtime pay 40 | P a g e Notes are said to be negotiable and non-negotiable. Which of the following best defines a negotiable note? If it is endorsed without recourse it is non-negotiable. An alienation clause in the note would make it non-negotiable. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. To be negotiable a note must be endorsed by the maker. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. What is a swing loan? Long term loan Temporary equity loan Construction loan Loan using playground equipment as security Temporary equity loan Discount points paid for a loan would affect the: principal amount. taxes. interest paid on the loan. impounds. interest paid on the loan. What type of contract does a veteran receive in a Cal-Vet purchase? Trust deed Mortgage Land contract Any of the above Land contract In 1968 a new organization was formed to assume many of the functions of the Federal National Mortgage Association (Fannie Mae). This organization also works hand in hand with the Department of Housing and Urban Development (HUD). This organization is known as: Freddie Mac Ginnie Mae. Sallie Mae Farmer Mac Ginnie Mae. 41 | P a g e Mr. Gold sold his home for $180,000 to Mr. Smith and accepted a first trust deed for $80,300. The property was later resold to Mr. Johnson who did not make his monthly payments. Mr. Gold: could get a deficiency judgment against Mr. Smith. could get a deficiency judgment against Mr. Johnson. could not get a deficiency judgment because it was a purchase money trust deed. could not get a deficiency judgment against Mr. Smith because he no longer had possession of the property. could not get a deficiency judgment because it was a purchase money trust deed. When purchasing a property under the California Farm and Home Purchase Act, would it be possible to obtain secondary financing at the time of purchase? Yes, but only if purchaser is a wounded veteran or a widow of a qualified veteran No, no secondary financing is allowed under this program Yes, secondary financing is allowed at the time of purchase and all during the loan period Yes, but the house must appraise for at least 10% more than the purchase price Yes, secondary financing is allowed at the time of purchase and all during the loan period For a credit transaction in which the security interest is a consumer's principal residence, the consumer can exercise his or her right to rescind the transaction until: midnight of the 3rd day following consummation. midnight of the 3rd business day following consummation. 5:00PM of the 3rd business day following consummation. 5:00PM of the 7th calendar day following consummation. midnight of the 3rd business day following consummation. Of the following, which is a correct statement concerning a deed of trust and note? The deed of trust is held by the trustee. The deed of trust is acknowledged by a notary public. The beneficiary holds naked legal title; however, the trustee has the power of sale. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender. A fast rule of thumb way for mortgage companies to figure out the monthly interest payment on loans at 7.2% interest would be: multiply the principal by 0.006. multiply the interest by 0.072. divide the principal by .12, then multiply by 0.072. divide the principal by 12 and multiply by 0.0072. 42 | P a g e multiply the principal by 0.006. The lender must arrange for delivery of the Closing Disclosure by providing it to the borrower in person or by mailing or emailing it. If it is mailed or emailed, the borrower is considered in receipt of the Closing Disclosure: 3 business days after it is delivered or placed in the mail. 3 days after it is delivered or placed in the mail. upon actual receipt of the Closing Disclosure by the borrower. at the time the lender sends the email or puts the letter into the mail. 3 business days after it is delivered or placed in the mail. There are many clauses that could be placed in promissory notes that would prohibit the borrower from doing certain things. A clause that would prohibit the borrower from paying off the loan before the maturity date is called a: prevention clause. lock-in clause. defeasance clause. release clause. lock-in clause. Liquidation of an obligation most nearly means: annexation. amortization. acceleration. condemnation. amortization. When there is more than one borrower on a promissory note, the lender will include the term: due on sale. power of sale. no grace period. jointly and severely. jointly and severely. A secured real property loan usually consists of: a financing statement and security instrument. the debt and the lien. FHA or PMI insurance. a security agreement and a financing statement. the debt and the lien. Wesley needs $2,000 to close. He holds a $6,000 note secured by a second mortgage on a farm. The bank agrees to lend him the necessary amount if Wesley will put up the note as security. This type of security is known as a: 45 | P a g e 3 years. In a promissory note and mortgage signed by two or more co-borrowers, when one of the co-borrowers defaults, what is the liability? Personal and corporate liability All are together liable as individual borrowers Each is jointly and severally liable Each is individually and severally liable Each is jointly and severally liable A lender may charge the borrower more than the amount disclosed on the Loan Estimate so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than: 10%. 15%. 20%. 25%. 10%. The loan which allows the terms of the interest rate to increase or decrease over time is called a(n): secured loan. interim loan. fixed rate loan. variable interest rate loan. variable interest rate loan. Mr. Dunn bought a house. The seller took back a second trust deed and note. Mr. Kirk later buys the property subject to the loan. If Mr. Kirk immediately defaults, the seller: may get a deficiency judgment against Mr. Dunn. may get a deficiency judgment against Mr. Kirk. may get a deficiency judgment against Mr. Dunn and Mr. Kirk. cannot get a deficiency judgment because it was a purchase money loan. cannot get a deficiency judgment because it was a purchase money loan. Anyone who sells a promissory note for less than its value is: leveraging an investment. liquidating a piece of real property. discounting a note. subordinating a debt. discounting a note. A borrower was notified that the payment on his FHA loan was increased $4.00 per month. This was probably due to: an increase in the interest rate. 46 | P a g e an increase in the tax rate. an increase in the insurance rate. an increase in impounds for either taxes or insurance. an increase in impounds for either taxes or insurance. The terms blank, restricted, and qualified refer to: contracts. endorsements. leases. deeds. endorsements. Which of the following statements is incorrect? A reconveyance deed is signed by the trustee. A trustee's deed is signed by the trustee. A deed of trust is signed by the trustee. A note secured by a deed of trust is signed by the trustor. A deed of trust is signed by the trustee. A borrower on a new loan is required to advance $412.00 for an impound account. He would do so for the benefit of: the trustor only. the trustor and the beneficiary. Fannie Mae. the beneficiary, primarily. the beneficiary, primarily. The Closing Disclosure generally contains: an estimate of the terms and costs of a loan transaction. the actual terms and costs of a loan transaction. the estimate of costs for selling a home. the actual costs of selling a home. the actual terms and costs of a loan transaction. What is a junior loan? A loan recorded before a first deed of trust or mortgage A loan recorded after a first deed of trust or mortgage A loan made by a mortgage broker A loan made by a minor A loan recorded after a first deed of trust or mortgage A check is a: negotiable instrument. promissory note. 47 | P a g e holder in due course. security for a loan. negotiable instrument. If a Cal-Vet Loan is paid off during the first 5 years, the penalty (service charge) would be: 1%. 2%. 5%. no penalty. no penalty. You, as an agent, have sold a home for which you negotiated a first loan with a bank and a second loan to be taken back by the seller. You have been requested to record a Request for Notice of Default on the first loan. This is usually to protect: trustee of the first loan. trustee of the second loan. trustor of the second loan. beneficiary of the second loan. beneficiary of the second loan. Title to real property would immediately pass to the purchaser under which of the following contracts? Land Contract of Sale Installment Sales Contract Agreement of Sale None of the above None of the above Who benefits from a subordination clause in a deed of trust? Trustor Trustee Beneficiary Mortgagee Trustor What clause is used to change the priority of a financial instrument? Alienation clause Subordination clause Or more clause Acceleration clause Subordination clause A notice of trustee's sale may be recorded: three months after a notice of default is recorded. two months after a notice of default is recorded. 50 | P a g e hypothecation. third deed of trust. tenants in common. tenants in common. Ms. Brown takes a second trust deed on Mr. Black's home. The face value of this note is $5,000. Ms. Brown sells the note to her friend at a discounted price of $3,000. Mr. Black has not made any payments on the note and lets the second trust deed go into default. Ms. Brown's friend who now holds the note should sue for: $1,500. $5,000. $8,500. $3,500. $5,000. Another name for a wrap-around mortgage is: swing loan. shared appreciation loan. reverse annuity loan. all inclusive trust deed. all inclusive trust deed. A long term loan to be issued by one lender upon completion of the interim construction financing by another lender is known as a: discount loan. redemption loan. takeout loan. renewal loan. takeout loan. The finance charge includes the following types of charges, except for charges that are specifically excluded, such as: seller's points interest. loan fees. assumption fees. seller's points Which of the following institutions invests most of their funds in home loans? Insurance companies Mortgage brokers Federal savings banks Private individuals 51 | P a g e Federal savings banks Which of the following courses of action would the Federal Reserve Board take to alleviate a period of tight money? Decrease the discount rate for bank members Purchase large blocks of government bonds Lower the reserve requirements of bank members Any of the above Any of the above Following a trustee sale, the money is dispersed in the following manner: first trust deed, second trust deed, cost and expenses of sale, balance to the trustor. cost and expenses of sale, first trust deed, second trust deed, balance to the trustor. equity in property to trustor, first trust deed, second trust deed, cost and expenses of sale. trustee's decision as to disbursing the funds. cost and expenses of sale, first trust deed, second trust deed, balance to the trustor. The right or power to sell property in the event of default under the terms of the deed of trust are given by: trustee to trustor. buyer to beneficiary. buyer to seller. trustor to trustee. trustor to trustee. The lender under a mortgage is called: mortgagor. grantor. mortgagee. assignee. mortgagee. Which type of government financing insures lenders against loss? VA HUD Conventional FHA FHA Lenders must provide revised Closing Disclosures to correct clerical errors no later than ______ calendar days after consummation. 60 30 1 | P a g e REAL ESTATE FINANCE EXAMS WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED RATIONALES ANSWERS BY EXPERTS |FREQUENTLY TESTED QUESTIONS AND SOLUTIONS |LATEST 2024 |ALREADY GRADED A+ | GUARANTEED PASS Lenders and mortgage loan originators must provide borrowers who apply for a purchase loan secured by real property: a Special Information Booklet. the Closing Statement. the Lead-based Paint disclosure. a Qualified Mortgage disclosure. a Special Information Booklet. Under the California Veterans' Farm & Home Purchase Plan, the purchaser would initially receive which of the following? Grant deed Warranty deed Land contract State deed Land contract n the language of real estate, which of the following terms does not belong with the others? Joint tenancy Hypothecate Subordination Second mortgage 2 | P a g e Joint tenancy In the course of offering a note for resale, Mr. Kim, an investor, explains that the note contains an alienation clause. This one fact would: prevent transfer. not be acceptable or legal. reduce the face value. make the note more negotiable. make the note more negotiable. What is the document commonly used to secure a loan on personal property? Security agreement Financing statement Mortgage Bill of sale Security agreement What type of property is included in a package loan? Personal property Real property and personal property Real property None of the above Real property and personal property Mr. Smith sells his lot for $10,000 and takes back a promissory note for $5,000. Needing cash, he immediately sells the note at a discount to Mr. Brown for $3,500, assigning the security instrument and endorsing the note "without recourse." The borrower defaults before making any principal payments. What should Mr. Brown do to recover his loss? Foreclose to recover $3,500 Sue for specific performance to recover his $3,500. Recover from Mr. Smith as the transaction was usurious Foreclose to recover $5,000 Foreclose to recover $5,000 The process of depositors removing funds from savings is called: 5 | P a g e takes a residential mortgage loan application. When using a purchase money deed of trust, the trustor: receives a promissory note for the amount borrowed. lends money to the beneficiary. signs the promissory note and deed of trust and gives it to the beneficiary. only signs the deed if trust. signs the promissory note and deed of trust and gives it to the beneficiary. What is any charge payable directly or indirectly by the borrower and imposed directly or indirectly by the lender? A prepayment penalty A finance charge A loan estimate An actual rate A loan estimate If the annual percentage rate provided in the good faith estimate is out of tolerance under TILA, creditors must provide a corrected TIL disclosure statement to a consumer: at the time of consummation of the transaction. one week before the consummation of the transaction. on or before the 3rd business day before consummation of the transaction. no more than 3 business days after the consummation of the transaction. on or before the 3rd business day before consummation of the transaction. Ms. Blue had been showing homes to a young, newly married couple for quite some time and finally found one which they wanted to buy. But even with the best loan available, they did not have enough cash for the down payment. They felt that they could raise the additional money they needed by borrowing against their automobile and other sundry personal property. Under these circumstances, the broker should: advise against it. tell them it is their decision to make, but point out the pitfalls of this kind of financing. advise them to go ahead because real estate always appreciates in value. tell them nothing and let them make their own decision. tell them it is their decision to make, but point out the pitfalls of this kind of financing. 6 | P a g e To buy a car, a man obtained a second on his home for $2,400, payable $77.00 per month, including interest at 6%. When he sold his home, he paid off the entire loan balance of $1,989. What was the face amount of the principal on the loan? $2,400 $2,772 $2,000 $1,989 $2,400 A down payment of $1,000 for the purchase of an apartment house valued at $690,000 is a good example of: plottage. leverage. highest and best value. none of the above leverage. Under the TILA-RESPA rule, what term refers to a charge imposed for paying "all or part of" a transaction's principal before the date on which the principal is due? A finance charge A prepayment penalty An annual percentage rate A loan estimate A prepayment penalty A broker negotiated a hard money $4,000 note secured by a second deed of trust with a term of 4 years, for a client. Considering the above transaction, which of the following is a correct statement? There would be no limit placed upon the commission the broker could charge His maximum legal commission would be $600 His maximum legal commission would be $400 His maximum legal commission could be 5% of the note or $325, whichever was greater His maximum legal commission would be $600 To bring current and restore is to: 7 | P a g e pledge. usury. reinstate. redeem. reinstate. A man sold a lot for $25,000 and took back a note for $9,000. He is now in need of some cash and wants to use the note as security for a loan with the bank. This type of loan transaction would be known as: pledge agreement. mortgage. reconveyance. release of payment. pledge agreement. In a construction loan situation, the lender agrees to an obligatory advance agreement which states that the contractor will receive funds as the construction progresses. The contractor will receive the final payment: when the building is completed. immediately upon recordation of a Notice of Completion. one month prior to completion. when the lien period has expired. when the lien period has expired. A loan covering several properties secured by a mortgage or deed of trust is a: shared equity loan. roll-over loan. installment loan. blanket loan. blanket loan. The actual fees are $459 on a $8,000 1st trust deed with a loan term of 2 years. Under Article 7, the maximum that the broker can charge is: $390. $400. $459. $700. 10 | P a g e uniform license applications and reporting requirements for state licensed-loan originators. a comprehensive licensing and supervisory database. increased accountability and tracking of loan originators. all of the above. all of the above. A purchase money loan is a(n): loan received from a mortgage broker. equity loan. loan made at the time of the sale whose proceeds go to the seller. loan whose proceeds go to the buyer. loan made at the time of the sale whose proceeds go to the seller. Bob purchased an existing loan from a lender for $13,500. At the time he purchased the loan it had just been created and had a loan balance of $15,000. The borrower never made a payment on the loan and Bob decided to foreclose. What is the maximum amount that Bob can foreclose for? $13,500 An investor who purchased an existing loan has no right to foreclose $13,500 minus the trustee fee $15,000 $15,000 Mr. Sloan wishes to purchase a piece of industrial property and apply for a large loan to help him purchase the property. The lender is most interested in: the appraised value of the land and the improvements. the financial condition and credit standing of the applicant for the loan. the demand for the product being manufactured on the property. all of the above. the financial condition and credit standing of the applicant for the loan. Jane offers to purchase Stan's property for $139,000. Jane takes title subject to a VA loan. What is the effect on liability? Jane is primarily liable for the loan Stan and Jane are both liable for the loan Stan is liable for the loan Neither Jane nor Stan is liable for the loan 11 | P a g e Stan is liable for the loan Interest is a very important part of the lending business. Interest calculated on the total amount of the principal, plus accumulated interest, is referred to as: straight interest. compound interest. simple interest. accumulated interest. compound interest. In purchasing a house, which of the following methods of financing could be accomplished without a down payment? FHA Cal-Vet VA Conventional VA Which of the following requires mutual mortgage insurance? Veterans Affairs Cal-Vet FHA Fannie Mae FHA Which of the following documents is not a negotiable instrument? Check Draft Mortgage Promissory note Mortgage A broker (or escrow company) must record a deed of trust created on the sale of a property with the county recorder of the county in which the real property is located within ______ after the closing of the transaction. 12 | P a g e 8 hours 1 day 3 days 1 week 1 week When a trust deed is sold, the parties use an escrow in order to: obey the California Civil Code. make sure that conditions and terms are met prior to the settlement of the transaction. obey the real estate law. do all of the above. make sure that conditions and terms are met prior to the settlement of the transaction. Who gives the power of sale to a trustee in a deed of trust? Beneficiary Trustor Lender Escrow holder Trustor If you desire to borrow money against an existing note that you own, you would be asked to sign a: pledge agreement. secondary deed of trust. mortgage. bill of sale. pledge agreement. Of the following, a primary source of funds for residential financing is: the Federal Home Loan Bank. Freddie Mac. mortgage companies. the Federal Housing Administration. mortgage companies. 15 | P a g e The lender The settlement agent The buyer's attorney The loan servicer The lender Who can pay fees or compensation to a short sale negotiator or to a broker for the work necessary to accomplish a short sale? No one may pay these fees. Only the seller. The buyer under certain circumstances. The closing officer. The buyer under certain circumstances. Doug is a homeowner who has failed to make payments on a trust deed for two months. The trustee has recorded a notice of default. What does Doug have? Right of redemption Right of reinstatement Loan moratorium rights A problem, he has lost his opportunity to stop foreclosure Right of reinstatement Which of the following does not belong with the others? CRV Highest loan-to-value ratio FHA No down payment FHA Which of the following is an institutional lender? Mortgage company Real estate investment trust Insurance companies All of the above 16 | P a g e Insurance companies Assume you purchased a home on a land contract of sale two years ago. Last year the property was completely demolished by a lightning strike. According to the provisions of the Uniform Vendor and Purchaser Risk Act of 1947, which of the following would best state the position of you and the seller? It would be the seller's obligation to restore the improvements of the property Earthquakes are not covered by the above mentioned law Since you, the buyer, have taken possession, even though you do not have the legal title, are liable and must continue to make payments on the land contract Answers (a) and (b) above Since you, the buyer, have taken possession, even though you do not have the legal title, are liable and must continue to make payments on the land contract Gerald, who is a 17-year-old minor, wishes to purchase a home. This can be done legally when: buying a home under the Cal-Vet program. buying a home only under FHA or DVA. seeking any type of conventional financing. none of the above buying a home under the Cal-Vet program. A federal act that provides protection against foreclosures of real property owned by a person in the service is: Serviceman's Readjustment Act of 1944. Servicemembers Civil Relief Act. Moratorium Relief Act of 1968. Release of Obligation Act of 1947. Servicemembers Civil Relief Act. A man bought a home for $160,000 and paid $16,000 down. Later, the value of the property rose to $170,000. This is an example of: escalation. plottage. 17 | P a g e leverage. assemblage. leverage When a loan is "called" by the mortgagee, this means: the borrower has the right to pay off the balance. the lender accelerates all monies due. the mortgagee and the lender have agreed to the terms of the loan. all of the above. the lender accelerates all monies due. The minimum time frame for a foreclosure under a deed of trust is: 6 months and 21 days. 5 months and 21 days. 4 months and 21 days. 3 months and 21 days. 3 months and 21 days. There are many differences between deeds of trust and mortgages. The main difference is: rights of parties in possession as to renting the property. redemption. amounts of money that can be borrowed. number of years money can be borrowed. redemption A real property sales contract for the purchase of property in a subdivision must have: a time and manner of payment. the basis for a tax estimate, if one is made. a legal description of the property. all of the above. all of the above. A seller takes back a deed of trust and note as part of the purchase price and the buyer immediately defaults. What action could the seller take? 20 | P a g e buy the property subject to the existing loan. sign a reconveyance. assume the loan. When a loan broker secures a hard money second loan for $16,300: the Real Estate Law limits the maximum charges. the Real Property Security Law limits the maximum charges. the maximum costs are limited by the Business and Profession Code. none of the above the maximum costs are limited by the Business and Profession Code. A holder in due course is one who has taken a negotiable instrument that is complete and valid on its face, has become the holder before it was overdue, and taken it in good faith without knowledge of defect in the title. Under which of the following circumstances would a person taking a negotiable instrument not be classified as a holder in due course? Taking a note endorsed in blank, that is, where the holder simply signs his name on the back of the note Taking a straight note on which payment is not due for two years Taking a note that is made payable to bearer rather than to the order of a specific person Taking a note properly endorsed by the payee but not signed by the maker Taking a note properly endorsed by the payee but not signed by the maker Under Article 7 of the Business and Professions Code, Section 10242, how much commission can a loan broker charge to negotiate a junior loan for $4,500 to be repaid in a period of 5 years? 5% 10% 15% Does not apply 15% A seasoned loan in a lender's portfolio would indicate: the time of year it was made. the maturity date. an established record of prompt payments. the date after first payment is made. an established record of prompt payments. 21 | P a g e A man had a promissory note for $2,000. He sold it to a friend for $1,500. What is this practice called? Prepayment Hypothecation Usury Discounting Discounting The largest loans would most likely be made by a(n): mutual savings bank. commercial bank. federal savings bank. insurance company. insurance company. Land contracts, also referred to as installment contracts, are commonly used when the purchaser does not have sufficient cash to take title and pay the balance of the purchase price. Of the following, which is a correct statement concerning a land contract? It normally involves a third-party lender. A purchaser may never assign his interest in the property prior to full payment of the purchase price. An agreement prohibiting the recording of the contract is enforceable. It is a security instrument. It is a security instrument. The Loan Estimate is the form that replaces the: Good Faith Estimate. Borrower's Intent to Proceed. Closing Disclosure. Summary of Costs. Good Faith Estimate. When must a borrower receive the Closing Disclosure from a lender? No later than 3 business days after consummation No later than 3 business days prior to consummation 22 | P a g e One week following consummation One week prior to consummation No later than 3 business days prior to consummation Mr. Dunn purchsed his home from Mr. Spring using seller carry-back financing. Later, Mr. Kirk bought the property subject to the loan. If Mr. Kirk immediately defaulted, Mr. Spring: may get a deficiency judgment against Mr. Dunn. may get a deficiency judgment against Mr. Kirk. may get a deficiency judgment against Mr. Dunn and Mr. Kirk. may not get a deficiency judgment because it was a purchase money loan. may not get a deficiency judgment because it was a purchase money loan. You purchase a negotiable note and have no knowledge of any defects. You are known as: the new trustor. the new mortgagor. the holder in blank. the holder in due course. the holder in due course. A collection service is trying to collect a note at the insistence of a holder in due course. The maker of the note could use as a real defense: that there was fraud in the inducement of the note. that there was no consideration to the maker. that the face of the note was materially altered. none of the above that the face of the note was materially altered. The seller under a land contract, not recorded, may: encumber the property for any amount a lender agrees to loan. not encumber the property, because the buyer has title. not encumber the property in excess of the amount due on the contract. not sell the property under any circumstances. not encumber the property in excess of the amount due on the contract. In the lending business, many terms are synonymous. All of the following terms are NOT synonymous, except: 25 | P a g e Once the Closing Disclosure is delivered, the transaction can be consummated 72 hours later. A clause in a loan document describing certain events that would cause the entire loan to be due is called: assumption clause. subordination clause. or more clause. acceleration clause. acceleration clause. When a seller carries back a note secured by a deed of trust from the buyer, the seller becomes the ___, and the buyer becomes the ___. beneficiary, trustor trustor, beneficiary trustee, trustor trustor, trustee beneficiary, trustor A lender would revise the Loan Estimate for any of the following reasons, except: changed circumstances affecting eligibility of the seller. changed circumstances affecting the settlement charges. revision is requested by the borrower. the points can change because the interest rate is not locked. changed circumstances affecting eligibility of the seller. A(n) ____________ is a person who is an innocent purchaser of a negotiable note without knowledge of any defect: receiver of the trust original payee of the note holder in due cause holder in due course holder in due course If a seller wanted to relieve himself of the primary liability for payment of a promissory note, he must find a buyer who is willing to: 26 | P a g e assume the liability for the promissory note. sign a release agreement. take title subject to the promissory note. take title contingent upon the promissory note. assume the liability for the promissory note. Of the following, the largest number of home loans are made by: savings banks. the Department of Veterans Affairs. FHA. commercial banks. savings banks. A business day means all calendar days except Sundays and the Federal legal public holidays. Which of the following holidays would be considered a business day? Valentine's Day Memorial Day New Year's Day Columbus Day Valentine's Day Under the Truth in Lending Act, when a borrower wishes to borrow money as a hard-money junior loan and agrees to use his residence as security for the loan, how many business days has he to rescind his offer? 5 days 3 business days No set time limit One week 3 business days The lender does not have to give the borrower a revised Closing Disclosure until the day of consummation, unless there is a(n): addition of a prepayment penalty. change to the APR change to the loan product All of the choices apply. All of the choices apply. Trustor is to beneficiary as: lessee is to lessor. vendee is to vendor. mortgagor is to mortgagee. none of the above 27 | P a g e mortgagor is to mortgagee. The Federal National Mortgage Association (Fannie Mae) was created under Title III of the National Housing Act for the purpose of: lending money on Title II loans when the bank will not. buying Title II loans to keep the market sound. buying Title I home improvement loans. none of the above buying Title II loans to keep the market sound. What kind of a promissory note has an interest rate that varies upward or downward over the term of the loan? Straight note Partially amortized installment note Fully amortized installment note Adjustable note Adjustable note When a borrower does not pay on a loan secured by a deed of trust, what must be recorded to start foreclosure? Notice of unlawful detainer Notice of default Notice of sale Notice to vacate Notice of default The least complicated loan to assume would be: institutional. Cal-Vet. FHA. savings bank. FHA Consideration is to a contract as endorsement is to a(n): deed of trust. promissory note. land contract. option. promissory note. For certain costs or terms, lenders are permitted to charge borrowers more than the amount disclosed on the Loan Estimate without any tolerance limitation. Which of the following would not be a permitted variations to tolerance limitation? 30 | P a g e no later than 7 days after receiving a consumer's application for a dwelling-secured closed-end loan. no later than 7 business days after receiving a consumer's application for a dwelling-secured closed-end loan. no later than 3 business days after receiving a consumer's application for a dwelling-secured closed-end loan. The factor exerting the greatest influence on interest rates pertaining to real estate loans is: demand. the cost for arranging state bond issues. the economic condition of the country. the availability of loan funds. the availability of loan funds. Which of the following activities would not require licensure or an endorsement under the SAFE Act? Negotiating terms of a residential mortgage loan for compensation Offering a residential mortgage loan for compensation Taking a commercial loan application Taking a residential mortgage loan application Taking a commercial loan application One of the disadvantages of a land contract to a buyer is: the possibility that the buyer would not get the title free and clear of loans. if the seller dies there might be litigation to obtain the title. lending institutions view land contracts as poor collateral. all of the above. all of the above. A hard money loan is: a loan of money when money is hard to get. a loan made to the trustor to help him purchase a piece of real property. a loan of cash to an existing owner of real property to buy an automobile. none of the above a loan of cash to an existing owner of real property to buy an automobile. Who benefits the most from the issuance of a notice of default on a second deed of trust? Beneficiary Borrower Trustee Trustor 31 | P a g e Beneficiary A veteran applies for a loan to purchase a home. He requests that the loan be processed as a guaranteed loan by the Department of Veterans Affairs. A VA appraiser, in processing the CRV for the loan, would be most concerned with: the credit rating of the borrower. the neighborhood in which the home is located. the loan to value ratio of the requested loan. the veteran's access to additional funds. the neighborhood in which the home is located. An "assignment of rents" clause in a deed of trust would most likely benefit: trustor. beneficiary. trustee. lessee. beneficiary. A deed of trust is the most common method of financing the purchase of real property in California. All of the following are correct statements concerning a trust deed except: the chief purpose of a trust deed is to create a lien. a trust deed may be foreclosed without court action or approval. a trust deed has no redemption period. the promissory note is held by the beneficiary as his prime security for the loan. the promissory note is held by the beneficiary as his prime security for the loan. According to TILA, for purposes of rescission and the 3-day or 7-day waiting period, how is a business day defined? A business day is defined as: all calendar days except Sundays and legal public holidays. a day in which the creditor's offices are open to the public for carrying on substantially all of its business functions. Monday through Friday and 1/2 day on Saturday. all weekdays except legal holidays. all calendar days except Sundays and legal public holidays. A person can borrow money on personal property with a: bill of sale. deed of trust. mortgage. security agreement. security agreement. 32 | P a g e Broker, Jenny Johnson, was approved for the $200,000 bank loan that she needed to open up her real estate office, as long as she agreed to keep $20,000 in a savings account at the bank at all times during the term of the loan. This is known as: compensating balance. security deposit. collateral. risk control. compensating balance. A release clause in a mortgage allows: the lender's option to extend. the release of a guarantor from further liability under specified conditions. portions of the security to be released from a mortgage lien when multiple properties are being used to secure the loan. the mortgagor to be released from liability. portions of the security to be released from a mortgage lien when multiple properties are being used to secure the loan. Mortgages and deeds of trust are considered: real property. personal property. chattels real. estates. personal property. In real estate financing, reference is sometimes made to take out loans. This refers to: net amount after points and prepaid interest are deducted. a blanket encumbrance. a construction loan. long term loan taken out after construction. long term loan taken out after construction. In checking trust deed documents in the county recorder's office, you will find that the recorded deed of trust refers to standard clauses contained in a previously recorded deed of trust. This previously recorded trust deed is known as a: prima facie deed of trust. 35 | P a g e that the rate of interest in the final granting of the loan will be greater than the commitment. points will be required as the rate required by the lender would exceed the legal rate of interest. the term used by lenders when the maximum rate of interest allowed by law is obtainable on financing a property. it is the rate of interest specified in the promissory note. it is the rate of interest specified in the promissory note. The primary mortgage market is the market in which lenders make loans directly to the: secondary market. borrowers. FED. FHFB. borrowers Under the FTC Red Flag Rules, which could be considered a warning sign of identity theft? Suspicious account application documents Suspicious personal identifying information, such as a suspicious address Unusual account activity All of the above All of the above Which of the following loans would not be insured by FHA or guaranteed by the VA? Federal bank Insurance company Institutional lenders Private lenders Private lenders Buyer gives seller a purchase money second trust deed and note. Shortly afterward, buyer defaults in payments on the second trust deed. Seller can, in due course, bring court action and obtain against the buyer: an attachment. a deficiency judgment. a reconveyance deed. none of the above none of the above The TILA-RESPA rule created integrated disclosure forms for closed-end mortgage loan transactions by consolidating: four TILA and RESPA disclosures. three RESPA disclosures. 36 | P a g e two TILA disclosures. one TILA disclosure and three RESPA disclosures. four TILA and RESPA disclosures. Following the consummation of a loan, a lender must keep copies of closing disclosures for: 24 months. 36 months. 48 months. 60 months. 60 months. Under TILA-RESPA, which of the following is a triggering event that requires the amount of the periodic payments to be outlined in a table? A balloon payment A foreclosure A loan default A short sale A balloon payment The primary mortgage market is the market in which lenders make mortgage loans directly to: veterans. mortgage bankers. borrowers. the secondary market. borrowers When a lender accepts a deed in lieu of foreclosure, the lender: must also have the power of sale. must take ownership of property free and clear of all liens. must go to court and get deficiency judgment. assumes junior loans. assumes junior loans. A man bought unimproved property and executed a first mortgage for 10 years. He plans to build on the property within 2 years. The lack of which clause in the first mortgage could cause him future concern? Alienation Subrogation Subordination Acceleration Subordination 37 | P a g e Which of the following best expresses your understanding of the terms assume and subject to? When a buyer assumes a purchase money loan he takes the liability for any deficiency that may occur in a foreclosure. When a buyer takes title subject to an existing loan he takes no liability for the note. When a buyer takes title subject to an existing loan he takes secondary liability for the note. When a buyer assumes an existing loan he does so with the consent of the beneficiary; however, the seller retains the primary liability on the note. When a buyer takes title subject to an existing loan he takes no liability for the note. What circumstances allow lenders to charge more than disclosed on the loan estimate? Amount charged falls within explicit tolerance thresholds. Charges that may exceed the disclosed amount. Changed circumstances. All of the choices apply. All of the choices apply. A mortgagor is one who: sells the property. signs the note. holds the trust. takes a mortgage. signs the note. Of the following, which is a correct statement concerning the promissory note and mortgage? The mortgage is worthless without the promissory note. The mortgage is negotiable in the ordinary course of business. The promissory note is the instrument used to bring a deficiency action to court. A promissory note is non-negotiable in the secondary mortgage market. The promissory note is the instrument used to bring a deficiency action to court. The transfer of property to a lender to be held as security for repayment of a debt; is known as: hypothecation. pledge. novation. subordination. pledge. Assume a husband and wife are going to purchase a piece of real property. Which of the following would carry the least weight in granting the loan for the purchase of the property? Husband's overtime pay 40 | P a g e Notes are said to be negotiable and non-negotiable. Which of the following best defines a negotiable note? If it is endorsed without recourse it is non-negotiable. An alienation clause in the note would make it non-negotiable. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. To be negotiable a note must be endorsed by the maker. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. What is a swing loan? Long term loan Temporary equity loan Construction loan Loan using playground equipment as security Temporary equity loan Discount points paid for a loan would affect the: principal amount. taxes. interest paid on the loan. impounds. interest paid on the loan. What type of contract does a veteran receive in a Cal-Vet purchase? Trust deed Mortgage Land contract Any of the above Land contract In 1968 a new organization was formed to assume many of the functions of the Federal National Mortgage Association (Fannie Mae). This organization also works hand in hand with the Department of Housing and Urban Development (HUD). This organization is known as: Freddie Mac Ginnie Mae. Sallie Mae Farmer Mac Ginnie Mae. 41 | P a g e Mr. Gold sold his home for $180,000 to Mr. Smith and accepted a first trust deed for $80,300. The property was later resold to Mr. Johnson who did not make his monthly payments. Mr. Gold: could get a deficiency judgment against Mr. Smith. could get a deficiency judgment against Mr. Johnson. could not get a deficiency judgment because it was a purchase money trust deed. could not get a deficiency judgment against Mr. Smith because he no longer had possession of the property. could not get a deficiency judgment because it was a purchase money trust deed. When purchasing a property under the California Farm and Home Purchase Act, would it be possible to obtain secondary financing at the time of purchase? Yes, but only if purchaser is a wounded veteran or a widow of a qualified veteran No, no secondary financing is allowed under this program Yes, secondary financing is allowed at the time of purchase and all during the loan period Yes, but the house must appraise for at least 10% more than the purchase price Yes, secondary financing is allowed at the time of purchase and all during the loan period For a credit transaction in which the security interest is a consumer's principal residence, the consumer can exercise his or her right to rescind the transaction until: midnight of the 3rd day following consummation. midnight of the 3rd business day following consummation. 5:00PM of the 3rd business day following consummation. 5:00PM of the 7th calendar day following consummation. midnight of the 3rd business day following consummation. Of the following, which is a correct statement concerning a deed of trust and note? The deed of trust is held by the trustee. The deed of trust is acknowledged by a notary public. The beneficiary holds naked legal title; however, the trustee has the power of sale. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender. A fast rule of thumb way for mortgage companies to figure out the monthly interest payment on loans at 7.2% interest would be: multiply the principal by 0.006. multiply the interest by 0.072. divide the principal by .12, then multiply by 0.072. divide the principal by 12 and multiply by 0.0072. 42 | P a g e multiply the principal by 0.006. The lender must arrange for delivery of the Closing Disclosure by providing it to the borrower in person or by mailing or emailing it. If it is mailed or emailed, the borrower is considered in receipt of the Closing Disclosure: 3 business days after it is delivered or placed in the mail. 3 days after it is delivered or placed in the mail. upon actual receipt of the Closing Disclosure by the borrower. at the time the lender sends the email or puts the letter into the mail. 3 business days after it is delivered or placed in the mail. There are many clauses that could be placed in promissory notes that would prohibit the borrower from doing certain things. A clause that would prohibit the borrower from paying off the loan before the maturity date is called a: prevention clause. lock-in clause. defeasance clause. release clause. lock-in clause. Liquidation of an obligation most nearly means: annexation. amortization. acceleration. condemnation. amortization. When there is more than one borrower on a promissory note, the lender will include the term: due on sale. power of sale. no grace period. jointly and severely. jointly and severely. A secured real property loan usually consists of: a financing statement and security instrument. the debt and the lien. FHA or PMI insurance. a security agreement and a financing statement. the debt and the lien. Wesley needs $2,000 to close. He holds a $6,000 note secured by a second mortgage on a farm. The bank agrees to lend him the necessary amount if Wesley will put up the note as security. This type of security is known as a: 45 | P a g e 3 years. In a promissory note and mortgage signed by two or more co-borrowers, when one of the co-borrowers defaults, what is the liability? Personal and corporate liability All are together liable as individual borrowers Each is jointly and severally liable Each is individually and severally liable Each is jointly and severally liable A lender may charge the borrower more than the amount disclosed on the Loan Estimate so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than: 10%. 15%. 20%. 25%. 10%. The loan which allows the terms of the interest rate to increase or decrease over time is called a(n): secured loan. interim loan. fixed rate loan. variable interest rate loan. variable interest rate loan. Mr. Dunn bought a house. The seller took back a second trust deed and note. Mr. Kirk later buys the property subject to the loan. If Mr. Kirk immediately defaults, the seller: may get a deficiency judgment against Mr. Dunn. may get a deficiency judgment against Mr. Kirk. may get a deficiency judgment against Mr. Dunn and Mr. Kirk. cannot get a deficiency judgment because it was a purchase money loan. cannot get a deficiency judgment because it was a purchase money loan. Anyone who sells a promissory note for less than its value is: leveraging an investment. liquidating a piece of real property. discounting a note. subordinating a debt. discounting a note. A borrower was notified that the payment on his FHA loan was increased $4.00 per month. This was probably due to: an increase in the interest rate. 46 | P a g e an increase in the tax rate. an increase in the insurance rate. an increase in impounds for either taxes or insurance. an increase in impounds for either taxes or insurance. The terms blank, restricted, and qualified refer to: contracts. endorsements. leases. deeds. endorsements. Which of the following statements is incorrect? A reconveyance deed is signed by the trustee. A trustee's deed is signed by the trustee. A deed of trust is signed by the trustee. A note secured by a deed of trust is signed by the trustor. A deed of trust is signed by the trustee. A borrower on a new loan is required to advance $412.00 for an impound account. He would do so for the benefit of: the trustor only. the trustor and the beneficiary. Fannie Mae. the beneficiary, primarily. the beneficiary, primarily. The Closing Disclosure generally contains: an estimate of the terms and costs of a loan transaction. the actual terms and costs of a loan transaction. the estimate of costs for selling a home. the actual costs of selling a home. the actual terms and costs of a loan transaction. What is a junior loan? A loan recorded before a first deed of trust or mortgage A loan recorded after a first deed of trust or mortgage A loan made by a mortgage broker A loan made by a minor A loan recorded after a first deed of trust or mortgage A check is a: negotiable instrument. promissory note. 47 | P a g e holder in due course. security for a loan. negotiable instrument. If a Cal-Vet Loan is paid off during the first 5 years, the penalty (service charge) would be: 1%. 2%. 5%. no penalty. no penalty. You, as an agent, have sold a home for which you negotiated a first loan with a bank and a second loan to be taken back by the seller. You have been requested to record a Request for Notice of Default on the first loan. This is usually to protect: trustee of the first loan. trustee of the second loan. trustor of the second loan. beneficiary of the second loan. beneficiary of the second loan. Title to real property would immediately pass to the purchaser under which of the following contracts? Land Contract of Sale Installment Sales Contract Agreement of Sale None of the above None of the above Who benefits from a subordination clause in a deed of trust? Trustor Trustee Beneficiary Mortgagee Trustor What clause is used to change the priority of a financial instrument? Alienation clause Subordination clause Or more clause Acceleration clause Subordination clause A notice of trustee's sale may be recorded: three months after a notice of default is recorded. two months after a notice of default is recorded. 50 | P a g e hypothecation. third deed of trust. tenants in common. tenants in common. Ms. Brown takes a second trust deed on Mr. Black's home. The face value of this note is $5,000. Ms. Brown sells the note to her friend at a discounted price of $3,000. Mr. Black has not made any payments on the note and lets the second trust deed go into default. Ms. Brown's friend who now holds the note should sue for: $1,500. $5,000. $8,500. $3,500. $5,000. Another name for a wrap-around mortgage is: swing loan. shared appreciation loan. reverse annuity loan. all inclusive trust deed. all inclusive trust deed. A long term loan to be issued by one lender upon completion of the interim construction financing by another lender is known as a: discount loan. redemption loan. takeout loan. renewal loan. takeout loan. The finance charge includes the following types of charges, except for charges that are specifically excluded, such as: seller's points interest. loan fees. assumption fees. seller's points Which of the following institutions invests most of their funds in home loans? Insurance companies Mortgage brokers Federal savings banks Private individuals 51 | P a g e Federal savings banks Which of the following courses of action would the Federal Reserve Board take to alleviate a period of tight money? Decrease the discount rate for bank members Purchase large blocks of government bonds Lower the reserve requirements of bank members Any of the above Any of the above Following a trustee sale, the money is dispersed in the following manner: first trust deed, second trust deed, cost and expenses of sale, balance to the trustor. cost and expenses of sale, first trust deed, second trust deed, balance to the trustor. equity in property to trustor, first trust deed, second trust deed, cost and expenses of sale. trustee's decision as to disbursing the funds. cost and expenses of sale, first trust deed, second trust deed, balance to the trustor. The right or power to sell property in the event of default under the terms of the deed of trust are given by: trustee to trustor. buyer to beneficiary. buyer to seller. trustor to trustee. trustor to trustee. The lender under a mortgage is called: mortgagor. grantor. mortgagee. assignee. mortgagee. Which type of government financing insures lenders against loss? VA HUD Conventional FHA FHA Lenders must provide revised Closing Disclosures to correct clerical errors no later than ______ calendar days after consummation. 60 30 52 | P a g e 45 90 60 Article 7 of the Real Estate Law provides that interest on a loan may not be charged: prior to the date of the note. until the proceeds of the loan have been made available to the borrower. until the proceeds of the loan have been deposited in escrow. all of the above are requirements of Article 7 all of the above are requirements of Article 7 A purchaser under a sale-leaseback transaction would be least interested in: the location of the property. the seller's depreciated book value. a general well-constructed building. the credit of the prospective seller. the seller's depreciated book value. Which of the following documents is not a negotiable instrument? Check Draft Mortgage Promissory note Mortgage The Truth in Lending Act applies to all real estate loans except: personal loans. two-unit income property to be owner occupied within a year. business loans. family loans. business loans. Who pays the FHA discount points? Either the buyer or seller Only the buyer Only the seller Lender Either the buyer or seller A warehouse line is: a large building where mortgages are kept. a revolving line of credit extended to a mortgage company from a warehouse lender to make loans to borrowers. 55 | P a g e 3 years from the date of the last payment 5 years from the date of execution Never When a loan is fully amortized by equal monthly payments of principal and interest. The amount(s) applied to the principal: remains the same. decreases while the interest payment increases. increases while the interest payment decreases. increases by a constant amount. increases while the interest payment decreases. I = P x R x T has to do with which of the following? Land descriptions Real property taxes Insurance prorations in escrow Real estate loans Real estate loans The relationship between effective and nominal interest is that: effective interest is what the buyer pays. Nominal interest is what is named in the loan application. effective interest is what the buyer pays. Nominal interest is what is named in the advertising. effective interest is what the buyer pays. Nominal interest is what is specified in the note. there is no difference. effective interest is what the buyer pays. Nominal interest is what is specified in the note. Francesca and Robert bought their first home, qualifying for a 30-year loan. The lender required regular equal payments of sufficient size and number to pay all interest on the loan and reduce the amount owed to zero by the loan's maturity date. What kind of loan did they probably have? Partially amortized loan ARM Fully amortized loan Interest only loan Fully amortized loan Who holds the title to a property bought with a Cal-Vet entitlement? The veteran The trustee The California Department of Veterans Affairs The US Department of Veterans Affairs The California Department of Veterans Affairs 56 | P a g e Of the following, which would most likely REQUIRE a judicial foreclosure? Mortgage Land contract with power of sale Deed of trust Security deed Mortgage Notes are said to be negotiable and non-negotiable. Which of the following is true about a negotiable note? If it is endorsed without recourse, it is non-negotiable. An alienation clause in the note would make it non-negotiable. If a note is secured by a mortgage, the note is negotiable, but the mortgage is non-negotiable. To be negotiable, a note must be endorsed by the maker. If a note is secured by a mortgage, the note is negotiable, but the mortgage is non-negotiable. Which party benefits the most from the recordation of a Request for Notice of Default? The trustee of the second deed of trust The trustor of the second deed of trust Beneficiary of the second deed of trust None of the above Beneficiary of the second deed of trust Who benefits from a prepayment penalty? Lender Trustor Mortgagor Borrower Lender A trustee's sale is related to: yard sale. foreclosure. installment sale. deficiency judgment. 57 | P a g e foreclosure A written promise to pay or evidence of a debt is called a: deed of trust. promissory note. mortgage. deed. promissory note. Liquidation of an obligation means: annexation. amortization. acceleration. condemnation. amortization. Most hard money loans that are available today are obtained from: private lenders. state chartered savings banks. federal chartered savings banks. federal national mortgage associations. private lenders. Will needs $2,000 to close an escrow. He holds a $6,000 promissory note secured by a second mortgage on a farm. Manny agrees to lend him the necessary amount if Will puts up the note as security. This type of security is known as a: pledge. chattel mortgage. purchase money mortgage. subordination clause. pledge In dealing with a sale with a land contract subject to a blanket encumbrance containing a release clause, funds are deposited in an account approved by the Real Estate Commissioner for the protection of: 60 | P a g e reconveyance deed. warranty deed. reconveyance deed. CRV is a common phrase used in the financing of real estate. CRV is issued by the: Fannie Mae. Department of Veterans Affairs. Federal Housing Administration. California Department of Veterans Affairs. Department of Veterans Affairs. What does the Closing Disclosure Form integrate and replace? The existing HUD-1 and final TILA disclosure The existing HUD-1 and preliminary TILA disclosure The existing HUD-1 The final TILA disclosure The existing HUD-1 and final TILA disclosure All of the following are elements under the definition of "application" under Regulation Z, except the: borrower's monthly income. borrower's credit score. loan amount. value of the property. borrower's credit score. Mr. Noro bought a property using a purchase money trust deed. A few years later he sold the property to Ms. Hassen for all cash. Which of the following would not be disclosed by the public records? A grant deed to Mr. Noro The original trust deed that Mr. Noro used in purchasing the property A reconveyance deed to Mr. Noro A reconveyance deed to Ms. Hassen A reconveyance deed to Ms. Hassen What consolidated four disclosures under TILA and RESPA into two disclosure forms? The Loan Estimate and the Summary of Costs The Loan Estimate and the Finance Charge Disclosure 61 | P a g e The Loan Estimate and the Closing Disclosure The Summary of Costs and the Closing Disclosure The Loan Estimate and the Closing Disclosure FHA uses MPR in connection with loans they insure. MPR means: maximum percentage rate. minimum percentage rate. minimum property requirement. maximum property requirement. minimum property requirement. A father needed money to send his son to college. He borrowed enough money from the bank to pay off his existing loan and have enough for his son's college. Later, he sold his home subject to the first trust deed and took a second trust deed as part of the purchase price. In the event of default on both trust deeds, which of the following is true? The bank could obtain a deficiency judgment against the purchaser of the home The bank could obtain a deficiency judgment against the father The father could get a deficiency judgment against the purchaser on the second trust deed None of the above The bank could obtain a deficiency judgment against the father How many points is a buyer/borrower limited to paying on FHA Loans? One Two Four No limitation No limitation JoAnn, a licensed real estate broker, decides to stop selling real estate and start brokering real estate loans. What kind of a license does she need? A MLO license endorsement A real property securities dealer's license 62 | P a g e A lender's license No license other than the real estate broker's license she already has A MLO license endorsement The person who loans money secured by a mortgage on a parcel of real property is called a: mortgagee. trustee. mortgagor. trustor. mortgagee. Which of the following would distinguish between a first and second deed of trust? Date of recording County recorder's permission Term of each loan Amount of each loan Date of recording Under TILA-RESPA, consummation of the loan occurs when the: borrower becomes contractually obligated to the lender on the loan. borrower becomes contractually obligated to a seller on a real estate transaction. buyer and seller sign a purchase agreement. seller becomes contractually obligated to the lender on the loan. borrower becomes contractually obligated to the lender on the loan. Under the provisions of FHA the borrower is required to pay the non-recurring closing costs unless the seller agrees to pay part or all of them. Which of the following are not considered non-recurring closing costs? Credit information costs and loan points (fees) Structural, pest control fees, and FHA appraisal fees Drawing and escrow fees; title search and title insurance Currently due property taxes and hazard insurance on property 65 | P a g e Assume you are employed and compenstated by an insurance company to originate first trust deed loans. This activity requires: an active real estate license. an active real estate broker's license with MLO endorsement. no license at all. a MLO license according to the California Residential Mortgage Lending Act. no license at all. Which of the following is the borrower on a promissory note secured by a deed of trust? Grantor Vendor Trustor Mortgagor Trustor Which of the following are synonymous? Take-out loan and construction loan Construction loan and interim loan Interim loan and take-out loans Construction loan and open end loan Construction loan and interim loan According to the Real Property Loan Law (Article 7), when a loan is secured by a borrower's residence, a prepayment penalty is allowed within ________ of the executation of the instrument. 4 years 5 years 6 years 7 years 7 years Considering construction financing, the lender will usually release the final payment to the borrower when: 66 | P a g e the lien period has expired. notice of completion is recorded. work has stopped for 30 days. none of the above the lien period has expired. The buyer under the terms of a land contract is referred to as: vendee. equitable title owner. purchaser. all of the above. all of the above. There are many differences between mortgages and deeds of trust. All of the following are differences, except the: number of parties involved in the instrument. conveyance of title.. security for the loan. remedy for default. security for the loan. The power of sale is given to the trustee by the: beneficiary. seller. vendor. trustor. trustor. Mr. Small sells his house for $100,000 and takes back a trust deed and note for $50,000. Needing cash, he immediately sells the trust deed and note at a discount to Mr. Big for $35,000, assigning the trust deed and endorsing the note "without recourse." If the trustor defaults before making any principal payments (disregarding costs of collection), by which method would Mr. Big get the greatest amount in the shortest period of time? Foreclosure by trustee's sale to collect $35,000 Sue for specific performance 67 | P a g e Recover from Mr. Small because the transaction was usurious Foreclosure by trustee's sale to recover $50,000 Foreclosure by trustee's sale to recover $50,000 What loan product requires a Loan Estimate? Closed-end mortgages Open-end mortgages Home equity lines of credit Reverse mortgages Closed-end mortgages Long term loans to be issued by one lender upon completion of the interim construction financing by another lender are known as: discount loans. take out loans. redemption loans. renewal loans. take out loans. The largest loans would most likely be made by a(n): mutual savings bank. commercial bank. federal bank. insurance company. insurance company. The most important factor in the qualification of a buyer for a loan is his: number of dependents. savings account. adequacy of income. type of job. adequacy of income. A hard money loan is one made in exchange for: 70 | P a g e An investor who is interested in the amount of money an investment will produce is primarily concerned about the investment's: Yield One way an investor can minimize the likelihood of suffering serious losses on her investments is to: Focus on investments with a high rate of return Generally, the longer the loan term: The higher the risk of loss A lender received a return on a mortgage loan in a form of: Interest Gina bought her house 5 yrs ago for $250000. She's decided to move to the country, so she puts the house up for sale. Todd buys it for $375000. Gina's profit on the sale is the result of : Appreciation Which of these types of investments has the slowest rate of capital turnover? Real estate Jenny has saved up $4000 over the past yr and she'd like to invest the money. She's uncertain about the stability of her job, however, and she wants quick access to her money in the event that she's laid off. Liquidity To protect the yields they expect from their loans, mortgage lenders sometimes charge a penalty for: Prepayment The original principal amount of a mortgage loan is the: Amount of the lender's investment Someone who buys an asset or a property interest in an asset is making a/an: Ownership investment Mortgage loans are pooled together and sold on the secondary market as: Mortgage backed securities Which of the following is NOT true of market interest rates? High market interest rates encourage refinancing Stocks and bonds are traded in specialized markets that are regulated by the: Securities and Exchange Commission Mortgage lenders screen loan applicants to evaluate the: 71 | P a g e Risk of default Risk of loss Interest rate risk A mortgage lender's risk of loss relates to: The likelihood that the borrower will default on the loan An investor invests money in expectation of a return on the investment. Depending on the type of investment, the return may be anything of the following except: Depreciation A certificate of indebtedness issued by a governmental body or a corporation is a: Bond Which of the following statements about securities is true? Securities give the holder a property interest or a right to payment The federal government's actions in raising revenue, spending money, and managing debt are referred to as: Fiscal policy A federal deficit occurs when, in a given year, the federal government: Spends more than it receives in revenue An unmarried homeowner may deduct mortgage interest on a loan to purchase a first or second residence, up to a loan amount of: $1,000,000 Which of the following is a type of deduction that an owner of income-producing property can take, but a homeowner can't? Depreciation deduction The Federal Reserve System was created through the: Federal Reserve Act of 1913 and 1916 How many members of the Federal Reserve Board are there? 7 Frequent and widespread bank panics led to the creation of the: Federal Deposit Insurance Corporation Which of the following is NOT a tool the Federal Reserve System may use to influence the economy? Tax rates 72 | P a g e The interest rate that a bank charges each other for overnight loans is the: Federal funds rate A bank must keep a certain percentage of its deposits either in its own vault or on deposit with the Federal Reserve Bank in order to comply with the Fed's: Reserve requirements When a Fed buys and sells government securities, the transactions are known as: Open market operations If the government wants to increase the money supply, it can: Buy government securities and decrease reserve requirements When the Fed tried to control inflation by decreasing the money supply in the early 1980s: Interest rates went up sharply Which of the following is not a component of the federal government's fiscal policy? Key interest rates An unmarried taxpayer sells her principal residence and turns a large profit on the transaction. How much of the gain is excluded from taxation? $250,000 Which of the following is not one of the responsibilities of the Federal Reserve System? Issue interest-bearing securities A Federal Reserve Bank is owned by: Member banks within its district If the economy grows too quickly, what is likely to be the undesirable result? Inflation Which of the following is set by each Federal Reserve Bank, with the approval of the Federal Reserve Board? Discount rate The Federal Open Market Committee could try to stimulate a sluggish economy by: Buying government securities in an effort to reduce market interest rates Reliable Savings Bank accepts deposits and originates loans for the purchase of homes. Reliable operates in the : Primary market 75 | P a g e Acts as an intermediary between lenders and borrowers, for a fee The most common private source of funding for purchase of residential real estate is: Sellers Which of the following agencies was not created as part of the New Deal in order to stabilize the real estate industry? Government National Mortgage Association Each of the following is true about a standard loan prior to the Depression, except: It was amortized Which type of deposit may be withdrawn without penalty only after a specific period of time has elapsed? Time deposit What happened in the early 1980s that changed the savings and loan industry and precipitated the savings and loan crisis? Deregulation allowing savings and loans to branch out from residential loans into riskier types of loans What law passed into 1989 in order to limit high-risk transactions by savings and loans, and to reorganize the federal agencies that supervised financial institutions? Financial Institution Reform, Recovery and Enforcement Act By the late 1990s, the majority of home mortgages were originated by? Mortgage companies Which of the following is not considered to be at least a contributing cause of the growth of the housing bubble in the 2000s? Improved accuracy in credit scoring techniques A lender that does not deal directly with home buyers but makes loans through a loan correspondent is a: Wholesale lender Which bill, passed in 1999, removed barriers between commercial banks, investment banks, and insurance companies? Financial Services Modernization Act A borrower takes out a primary loan to cover 80% of a house's purchase price, and then another loan to cover the remaining 20%. This is known as a/an: Piggyback loan Which of the following was not a component of the Housing and Economic Recovery Act of 2008? 76 | P a g e Bailouts for struggling financial institutions Which piece of legislation included a provision that lifted the Federal Deposit Insurance Corporation insurance amount from $100,000 to $250,000? Troubled Asset Relief Program A promissory note is usually a/an: Negotiable instrument A note that calls for payments that include principal as well as interest is a/an: Installment note In a deed of trust, the lender is called the: Beneficiary Which of the following is not a feature of the judicial foreclosure process? Trustee's sale Which alternative to foreclosure involves deeding the property back to the lender in exchange for satisfaction of the debt? Deed in lieu of foreclosure Post-sale redemption is possible with: Judicial foreclosure From a lender's point of view, which of the following is the primary advantage of nonjudicial foreclosure over judicial foreclosure? Its usually faster and less expensive than judicial foreclosure Which finance instrument provision gives a mortgage lower priority than another mortgage that will be recorded later? Subordination clause Under a partial release clause, a lender: Removes the lien from part of the property when part of the debt has been paid What type of mortgage has payments that include a share of the property taxes and hazard insurance premiums in addition to principal and interest? Budget mortgage/ impounded loan A buyer would like to use the proceeds from the sale of her old house towards the purchase of her new house, but the old house hasn't sold yet. She could obtain the funds she needs from a: Bridge loan 77 | P a g e Louie is starting a new restaurant; he uses one mortgage to cover the purchase of both the building and some kitchen equipment already in the building. This would be a: Package mortgage An elderly homeowner who has a lot of home equity but needs a source of income might use a : Reverse mortgage In a promissory note, the lender is known as the: Payee In a mortgage, the borrower is known as the: Mortgagor The equitable right of redemption in a judicial foreclosure: Begins with the filing of the lawsuit and ends with the sheriff's sale A due on sale clause is also known as a/an: Alienation clause A borrower does not plan to move out of his house, but would like his mortgage payment to reflect current interest rates, which have dropped significantly since he bought his home. He would use a: Refinance mortgage Which of the following phrases is not associated with a constructional loan? Shared appreciation A partially amortized loan: Includes both interest and principal in each payment Requires a balloon payment at the end of the loan term A balloon payment will be necessary with a/an: Interest only loan Partially amortized loan Compared with a 30yr loan borrower , a 15yr loan borrower; Will make larger monthly payments Which loan term would result in the borrower paying the least amount of interest over the life of the loan? 15yrs A borrower takes out a loan with an 80% LTV to purchase a $400,000 property. What is the loan amount? 80 | P a g e Borrowers credit score Which of the following is not considered a liability for an applicant? Life insurance policy Document an applicant will always need for a loan application include all of the following except: Address and legal description of property being purchased A loan closes on march 15. When will the first mortgage payment be due? May 1 The interest paid at closing for the period between the closing date and the end of the month in which closing occurs is known as: Interim interest Which of the following does not in any sense commit a lender to making a loan? Prequalification letter All of the following are primary aspects of a borrower's financial situation except: Earnings potential The dependability of the sources of an applicant's income is known as its: Quality All of the following would be considered stable monthly income, except: Income from unemployment compensation Which of the following sources of income is likely to be considered stable monthly income? Seasonal employment as a commercial fisherman over several decades The owner lives in a unit of the investment property. This occupancy may affect how much is counted as stable monthly income for which of the following? Rental income In which of the following instances are child support payments likely to be excluded from stable monthly income? One of the payments within the last year was never received The child in question is 16 yrs old Which of the following would NOT appear on an individual's credit report? Unpaid utility bills 2 yrs ago 81 | P a g e Which of the following would NOT be an additional consideration which might increase or decrease risk, according to a lender? A borrower received her income from public assistance rather than employment The ratio that measures the borrower's proposed mortgage payment and all other regular monthly installment debt payments against monthly income is the: Debt to income ratio A lender has a maximum housing expense to income ratio of 28% and a maximum debt to income ratio of 36%. The Connells have a monthly income of $6000.00 their proposed monthly PITI payment is $2000. They have no other regular monthly debt payments. They will: Qualify under the debt to income ratio, but not the housing expense to income ratio With regards to a loan, a primary borrower and a cosigner each have: Joint and several liability To calculate net worth: Subtract liabilities from assets Sheila received her first credit card in college 9 yrs ago, and she has used credit consistently since then. This describes her: Credit history An appraiser in a residential loan transaction is concerned with a property's: Market value The principle of value that states that the maximum value of a property is determined by the cost of obtaining am equally desirable property is: Substitution Lenders will base the loan amount on: The appraised value or sales price, whichever is less Which federal law requires appraisals used in federally related loan transactions to be performed by state licensed or state certified appraisers? Financial Institutions Reform, Recovery, and Enforcement Act Which of the following loans would be considered the least risky to a lender? $80,000 loan amount for a $100,000 property Which of the following is the first step in the appraisal process? Issue the appraisal report 82 | P a g e Which of the following is not one of the three basic methods of appraising real estate? Square foot method Any key difference between an appraisal and a competitive market analysis is that a CMA may use____, while an appraisal may not. Current listings Expired listings Which of the following is not one of the key factors in determining whether a recent sale is a suitable comparable? Cost of construction In a typical market, an appraiser should make adjustments to compensate for inflationary or deflationary trends when using a comparable that sold: More than several months in the past, but less than a yr A subject property has a hot tub. The comparable sale doesn't have a hot tub. A hot tub adds $5,000 in value to the property. The appraiser should: Add $5,000 to the sale price of the comparable An appraiser finds it would cost $380,000 to construct an exact replica of the subject property. This is an example of: Reproduction cost An older house has problems with peeling paint and warped siding. This is an example of: Deferred maintenance An example of external obsolescence would be: Rising crime rates in the subject property's neighborhood The gross income multiplier method is appropriate primarily when valuing: A single-family residence used as a rental The process of analyzing value indicators from the various appraisal methods in order to arrive at a final value estimate is known as: Reconciliation If an appraisal comes in low why is this likely to lead to the termination of the transaction? A buyer may be reluctant to pay more for the property than its worth A lender may not issue the loan because the property does not offer adequate collateral If a low appraisal occurs, a real estate agent should approach this person to find out the final value estimate and comparable used: 85 | P a g e An owner occupied primary residence Which of the following is true regarding the maximum loan amount for an FHA loan? The maximum loan amount varies according to area housing prices In a high-cost area, the maximum FHA loan amount is: 125% of the median housing price in the area Which of the following will be counted toward a borrower's minimum cash investment? None :Closing costs Discount points Prepaid expenses Which FHA loan program provides mortgage insurance for reverse equity mortgage? Section 255 An FHA buyer would apply for a section 203(k) loan to: Purchase and rehabilitate a property To obtain FHA insurance for an adjustable-rate loan, a borrower would use a : Section 251 loan The upfront mortgage insurance premium for FHA loans is ____of the loan balance. 1.75% For a 30yr loan that closed in2010, the annual FHA mortgage insurance premium would be canceled: When the LTV reached 78% of the original sales price A buyer buys a house for $100,000 using an FHA loan. The seller offers to pay $4,000 in discount points on the buyer's behalf. What contributions would be considered to be inducements to purchase rather than seller contributions? $0 Which of the following would be considered an inducement to purchase, if a seller paid for part or all of it? Moving expenses Who may provide secondary financing to cover the minimum cash investment for an FHA borrower? A borrower's parent Which of the following is a rule the FHA uses to prevent abusive property flipping? More than 90days must have passed since the seller bought the property 86 | P a g e Which of the following would not be considered a compensating factor which allows the borrower to exceed maximum income ratios? Applicant lives in an area with low median housing prices An FHA borrower will not need to have cash available at closing for: Reserves Which of the following is not a way for an FHA borrower to cover the minimum cash investment? Use gift funds from his real estate agent A VA guaranteed loan is originated by: An institutional lender Which of the following is NOT a characteristic of a VA loan? The borrower will make annual mortgage insurance payments Which of the following is NOT available through the VA loan program? An investor loan Which of the following statements about VA loans is true? VA loans are easier to qualify for compared with conventional or FHA loans A vet borrower who was a member of the regular military obtains a non-downpayment VA loan for $100,000. The funding fee will be: (2.15%) $2150 Who of the following is probably not eligible for a VA guaranteed loan? A soldier 70 days into the 1st tour of duty The guaranty amount available to a particular vet is known as the veteran's: Entitlement A VA loan that closed in 1999 may be assumed by: Anyone who is creditworthy How is a veteran's full guaranty entitlement restored? The veteran sells the property and repays the loan in full from the proceeds Tim and Teri are both veterans. They are buying a $450,000 house. They each have a full guaranty of $ 104,250 available. Their guaranty amount would be: $104.250 ( can only use one entitlement) A VA loan can be used to refinance: 87 | P a g e A VA loan,an FHA loan,a Conventional loan The document issued by a VA approved appraiser which sets forth the value of a property is known as a : Certificate of reasonable value Notice of value Which of the following is the standard maximum debt to income ratio for a VA borrower? 41% A VA borrower may use a secondary financing to cover a down payment if: The buyer has enough income to qualify based on both loans The second loan doesn't restrict the borrower's ability to sell the property more than the VA loan does The total of all financing doesn't exceed the property's appraised value Which if the following would not be a compensating factor that would help a VA loan applicant who has inadequate income? Long term employment Which of the following factors would, without any other compensating factors, allow approval of a VA loan where the borrower's income ratio is too high? Residual income at least 20% over the required minimum Rather than using an institutional loan, a seller extends credit to a buyer and the buyer gives the seller a deed of trust. This would be known as a/an: Purchase money loan Which of the following would NOT be a reason for a seller to use seller financing? It provides a large lump sum to a seller who needs to be cashed out. Seller financing can provide significant tax benefits for a seller because it involves: An installment sale A seller second is used to supplement: A new institutional loan An assumption Which of the following is NOT a consideration when structuring the combination of a first mortgage and a seller second? The buyer's credit history A seller might be affected by the IRS's imputed interest rule if: The seller second uses an interest rate that is too far below market rates To be able to use a seller second in conjunction with an assumption: 90 | P a g e After receiving a written loan application, how many days does a lender have in order to give applicants a good faith estimate of closing costs? 3 Which of the following actions NOT prohibited by the Real Estate Settlement Procedures Act? Property flipping Which of the following is NOT considered an example of predatory lending? Redlining A lender charges a borrower an extremely high above market interest rate and a large origination fee than is justified by the services provided. This is known as: Fee packing Use of which kind of insurance may be considered predatory, if a lender requires a borrower to pay a large, upfront premium for it at closing? Credit life insurance Which law requires certain disclosures and prohibits certain predatory provisions in high cost home equity and refinance loans? Home Ownership and Equity Protection Act What is the purpose of the Community Reinvestment Act? Require depository institutions to disclose numbers of loans made to low to middle income borrowers Which of the following items would be included in a loans total finance charge ? Buyer paid discount points What are the 3 tests used by lenders to determine if income can be considered Stable Monthly Income? Durability Quantity Quality How does a 5/25 two step loan work? Fixed interest for 5 years remaining 25 years at market rate and reamortized. Which agency guarantees that investors will receive timely payments of principal and interest on mortgage-backed securities backed by the FHA or DVA? Ginnie Mae Fannie Mae currently buys loans at an administered price. 91 | P a g e Which of the following types of loans do lenders generally keep in their own investment portfolios rather than sell on the secondary market? Jumbo When Fannie Mae purchases mortgage loans from lending institutions, they are packaged into mortgage-backed securities. 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 conforming. 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 CalHFA 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) $797.22 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? 3 months The two-point discount on the sale of a $175,000 home subject to a new $150,000 loan is $3,000.00 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 92 | P a g e 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? Prepayment penalties All of the following items are categorized as actual notices except a(n) unrecorded lien. 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 $1.2 million. 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 $179,000. 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 $103,500.00 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 95 | P a g e 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 piggy-back loans. 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? Tax-increment financing 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? Its members 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 churches. Which of the following types of loans is NOT exempt from California's usury ceilings? Business loans 96 | P a g e The federal regulator of the Farm Credit System is the property's productivity. Farm and ranch loans are unique types of real estate finance because their success depends to a large degree on the property's productivity. 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? $3,658 All of the following statements describe the advantages of the FHA except that it has lower than market interest rates. Most loans today are conventional loans. 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 80% 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 97 | P a g e qualifying borrowers. Mortgage banking services include providing real estate loans. Mortgage bankers manage real estate loans. All of the following terms are associated with a syndicate except active income. Mortgage brokers earn most of their profits from placement charges. individuals participate as lenders in real estate mainly by creating junior loans. 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) balloon. Private loan companies deal mainly in junior financing Savings institutions, major providers of home mortgage loans, are also referred to as thrifts. 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 trust department.