Finance multiple choice Flashcards

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1
Q

An individual selling a piece of property wanted to be sure that she would be relieved of primary liability for the existing loan was transferred to the buyer, which of the following would be MOST correct?

A. The buyer must take the property “subject to” the existing loan
B. The buyer must pay cash
C. The buyer is to assume the existing loan
D. the buyer is to insure the seller against liability

A

C

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2
Q

Which is correct statement?

A. The effective interest rate is the interest rate paid, and the nominal interest rate is the minimal rate that is charged
B The nominal interest rate is the percentage of interest that is actually paid by the borrower, and the effective interest rate is the percentage of interest that is stated in the loan.
C. The effective interest rate is the percentage of interest that is actually paid by the borrower and the nominal interest rate is the percentage of interest that is stated in the loan
D. The nominal interest rate is the same as the annual percentage rate (APR)

A

C

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3
Q

Liquidation of a financial obligation on an installment basis is

A. acceleration
B. Amortization
C. conventional
D. Conversion

A

B

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4
Q

A person who is an innocent purchaser of a negotiable note for value without knowledge of any defect is customarily called

A an assignor
B. a receiver in trust
C an endorser in blank
D. A holder in due course

A

D

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5
Q

The most important factor to a lender who is contemplating a loan to a developer of a shopping center would be

A. the long-term leases
B. the credit of the purchaser
C. the number of tenants
D. the anchor tenant

A

D

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6
Q

An investor purchased an apartment building with a very small down payment was able to secure financing for the balance. A year later, he sold the property for profit with no increase in his investment. This is an example of

A. debt reduction
B. leverage
C. appreciation
D. inflation

A

B

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7
Q

The quickness with which assets can be converted into cash is known as

A. yield
B. leverage
C. liquidity
D. risk

A

B

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8
Q

Which would NOT likely cause a loss to a lender?

A. inflation
B. recession
C. unemployment
D. Prepayment without penalty

A

D

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9
Q

The secondary money market create a marketplace for the transfer of mortgages between which parties?

A. Mortgagors and mortgagors
B. Mortgagees and mortgagors
C. Mortgagees and mortgagees
D. Trustors and mortgagees

A

C

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10
Q

Which factor would be LEAST likely to influence the level and movement of mortgage rates?

A. inflation
B. tight money
C. Unemployment
D. Demand for funds

A

C

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11
Q

In real estate finance, a beneficiary statement refers to

A. the amount of profit realized by a lender.
B. the terms of a lease
C. the amount of principal due on a loan
D. The amount of money an heir would inherit

A

C

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12
Q

What is the lender’s BEST protection against default if the purchaser makes no down payment?

A. Low interest rate
B Length of loan
C. Low monthly payments
D. appreciation of the property

A

D

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13
Q

In a real estate transaction, a prepayment penalty is usually paid by

A. The buyer
B. The lender
C. The seller
D. none of these.

A

C

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14
Q

The factor that exerts the greatest influence on mortgage interest rates is
A. the condition of the money market
B. the value of the property
C. the term of the loan
D. the offsetting influence of conservative vs. nonconservative

A

A

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15
Q

Which is NOT a result of a subordination clause?
A. Permits a first trust deed to be refinanced and extended without losing priority
B. Allows for a construction loan to take priority
C. Causes hardship on the buyer by placing the lender of a larger sum in the favored position
D. is more of a risk to the seller and may cause increased cost of the land and a more stringent release clause

A

C

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16
Q

The term DEFAULT in most mortgages commonly means that the mortgagor

A. Is delinquent in monthly payments
B is not using the property for its intended purpose
C. failed to maintain the property
D. did any of these

A

D

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17
Q

Interest rates will normally decline when

A. inflationary trends accelerate
B. The Federal Reserve Board increases reserve requirements
C. there is an excess of mortgages funds available.
D. the federal budget deficit is high

A

C

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18
Q

The person who would benefit the MOST from appreciation of a mortgaged property would be

A. the trustor
B. the trustee
C. the beneficiary
D. none of these

A

A

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19
Q

In setting up a release schedule under a blanket encumbrance, the beneficiary will usually require a disproportionate amount of money to release a particular lot

A to have better security on the remaining lots.
B. because the best lots usually sell first
C. to protect the investment as individua lots are sold
D. for all of these reasons.

A

D

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20
Q

Regarding warehousing operations with respect to real estate finance, what would apply?

A. Contract for sale
B. long term debentures insured collaterally by real estate loans
C. The mortgages banker collecting loans before sale
D. holding notes for investment

A

C

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21
Q

There was a second trust deed for $5,000. The holder sold it to a friend for $3,500. In the language of real estate practice, this would be known as

A. liquidating
B. Discounting
C. hypothecation
D. depreciation

A

B

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22
Q

The loan-to-value ratio in a mortgage is defined as

A. the monthly payment of the loan on a mortgage.
B. the amount of a loan as a percentage of the appraised value
C. the amount of a loan as a percentage of the purchase price
D. The amount of a loan as a percentage of the assessed value

A

B

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23
Q

Depending on the availability of funds and market rates, the rate of interest MOST likely to be charged is

A. a variable interest rate
B. an interior loan rate
C. a fluctuating money market rate
D. the rate charged on a short-term land contract of sale

A

C

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24
Q

When referring to real estate finance, the term impounds MOST nearly means

A. Moratorium
B. attachment
C. reserves
D. penalty

A

C

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25
Q

A low loan-to-value ratio indicates

A. large loan
B. a low down payment
C. a high equity
D. a government-guaranteed loan

A

C

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26
Q

Lenders have become confident and have been lending up to 95% on residential mortgages due to the availability of

A. Fannie Mae insurance
B. mortgage cancellation insurance
C. guaranteed mortgage insurance
D. private mortgage guaranty insurance

A

D

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27
Q

An agreement with a lender that prohibits early payoff of a loan is known as

A. a prepayment penalty
B. an exculpatory clause
C. An open-end mortgage
D. a lock-in clause

A

D

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28
Q

Most lending institutions are limited as to the amount they can lend, the types of loans they offer, and the length of loans. Because of certain limitation, some lenders are not interested or are unable to give construction loans, but are willing to issue long term financing after the construction is completed. Long term loans, to be issued by one lender upon completion of the interim construction financing by another lender, are known as

A. discount loans
B. takeout loans
C. redemption loans
D. renewal loans

A

B

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29
Q

Which definition BEST describes an open-end mortgage?

A. One in which personal property is held for added collateral
B. One in which the mortgage represents a partial payment for the parcel of the land
C. one in which additional financing could be obtained without rewriting the contract
D. one under which several parcels of land are included under one mortgage

A

C

30
Q

A balloon payment would be a characteristic of

A. a partially amortized loan
B. an amortized loan
C. a self-liquidating loan
D. a standing loan

A

A

31
Q

A person who wanted to transfer equitable title and retain legal title would use

A. a mortgage
B. a grant deed
C. a security agreement
D. a land contract

A

D

32
Q

A broker negotiates a hard money loan secured by a deed of trust for which he receives a commission in this transaction, hard money MOST nearly means

A. a tight money loan
B. a secondary loan
C. a cash loan
D. a purchase

A

C

33
Q

A real property sales contract is defined as an agreement wherein one party agrees to convey title to another party upon the satisfaction of specified conditions set forth in the contract and that

A. must be acknowledged by both buyer and seller to be eligible for recording
B. does not require conveyance of title within one year from date of formation of the contract
C. must be recorded to be enforceable
D. is not required to be in writing if the contract period is for one year or less

A

B

34
Q

A “tight money” situation in which the federal reserve board has taken action to reduce the money supply would MOST likely result in an increase in

A. new first trust deeds and mortgages
B. new second trust deeds and mortgages
C. new home construction
D. real estate sales

A

B

35
Q

What is the MOST important influence affecting the interest rates on trust deed loans?

A. Exchange rate overseas
B. Gross national product
C. Supply and demand of funds
D. None of these

A

C

36
Q

All of the following are advantages of FHA financing EXCEPT

A. low mortgage insurance costs protect the borrower
B. short-term financing is eliminated
C. building standards are improved
D. The loan amount is appropriate for the borrower’s income

A

A

37
Q

FHA mortgage insurance program loans for homes, as part of HUD, are made by

A. FHA
B. VA
C. FNMA
D. bank, savings and loans, or mortgage companies

A

D

38
Q

A subdivider desiring to know the maximum FHA financing for a property would MOST likely go to

A. an FHA appraiser for a firm FHA commitment
B. an FHA appraiser for a conditional commitment
C. a conventional lender for a firm FHA commitment
D. a lender for a conditional commitment

A

D

39
Q

FHA charges a premium to insure a mortgage. Premiums are designed to compensate the lenders if and when a borrower defaults on the FHA- insured mortgage. Which statement is TRUE with regards to most FHA loans?

A. Premiums are paid up front and annually
B. Premiums must be paid entirely in cash
C. Premiums are only paid annually in the loan
D. The seller must pay the MVP

A

A

40
Q

In a period of inflation, the Federal Reserve Board would take which action to curb inflation?

A. Reduce reserve requirements
B. lower discount rates
C. Raise reserve requirements and sell bonds
D. raise discount rates and buy bonds

A

C

41
Q

If the Federal Reserve Board wanted to create a tight money market, it would

A. lower discount rates
B. raise discount rates
C. raise discount rates and buy bonds
D. lower discount rates and sell bonds

A

B

42
Q

When the Federal Reserve Board raises the discount rate to it borrowers, it has what effect on the money market

A. has no effect
B. Makes more marginal loans available
c. makes money more available
D. Makes money less available

A

D

43
Q

A bank will usually make a conventional loan and charge a higher interest rate than the interest rate charged on an FHA loan on the same property. What would be the determining factor in choosing to make an FHA loan instead of a conventional loan?

A. higher return
B. degree of risk
C. needs of the borrower for lower interest
D. number of properties sold by the seller

A

B

44
Q

A buyer seeking an FHA loan would be LEAST likely to

A. find a lender willing to give him the loan
B. go to the nearest FHA office for an appraisal
C. agree to pay mutual mortgage insurance
D. agree to make amortized payments

A

B

45
Q

Points are NOT charged on which type of home loans?

A. Federal Housing Administration
B. Veterans administration
C. California Department of Veteran Affairs
D. None of these

A

C

45
Q

Points are NOT charged on which type of home loans?

A. Federal Housing Administration
B. Veterans administration
C. California Department of Veteran Affairs
D. None of these

A

D

46
Q

What is included in an FHA loan?

A. Prepayment penalty
B. Secondary financing
C. schedule of payments
D. Mortgage life insurance

A

C

47
Q

In the lending field, if there is a conflict in the note and mortgage provisions,

A. the note provisions will generally control
B. the note is the security instrument
C. a mortgage gives validity to an unenforceable note
D. the mortgage provisions will generally control

A

A

48
Q

A three-party instrument in which real property is used as security for a loan is

A. a chattel agreement
B. a bill of sale
C. a trust deed
D. a certificate of sale

A

C

49
Q

Johnson agreed to purchase Smith’s property and to use the existing conventional loan of record on the property. Johnson agrees to relieve Smith of primary liability. The loan balance is $80,000 payable at $784 per month, including 11% per annum. In accordance with Johnson’s agreement, which of the following is the correct insertion on the deposit receipt?

A. Buyer to take property subject to loan of record
B. buyer to make payments according to first trust deed term
C. Buyer to agree to insure seller against all liability on existing trust deed
D. Neither trustor under a deed of trust nor vendee under a land sales contract

A

D

50
Q

Which would hold equitable title?

A. Trustor under a deed of trust
B. Vendee under a land sales contract
C. Both trustor under a deed of trust and vendee under a land sales contract
D. Neither trustor under a deed of trust nor vendee under a land sales contract

A

C

51
Q

A due-on-sale clause, whether it is enforceable or not, contained in a mortgage or trust deed is a type of

A. acceleration clause
B. defeasible clause
C. executed clause
D. legally enforceable clause

A

A

51
Q

A statement provided by the payor on a promissory note that would list payments, term period of the note, principal balance, interest, etc. is called

A. beneficiary statement
B. release clause
C. request for partial reconveyance
D. offset statement

A

D

52
Q

A clause in a second trust deed that permits the first trust deed to be refinance without affecting its priority would be known as

A. an alienation clause
B. an acceleration
C. a subordination clause
D. a lien waiver

A

C

53
Q

Who benefits MOST from a subordination clause in a trust deed?

A. Trustor
B. Trustee
C. Beneficiary
D. None of these

A

A

54
Q

Broker Wilson sells a house, and a loan for the buyer is secured through a savings and loan association. Wilson carefully explains all loan costs to the buyer. According to the Real Estate Settlement Procedures Act (RESPA), which statement is TRUE?

A. The lender must provide an estimate of settlement costs to the buyer immediately
B. The lender must provide the buyer with a Loan Estimate within three business days
C. Broker Wilson must provide the buyer with an estimate of settlement costs within one week
D. Broker Wilson would not have to provide an estimate of settlement costs to the buyer because he had explained all costs

A

B

55
Q

The three-day right of rescission provided under the federal Truth in Lending Act would MOST likely apply to

A. A first trust deed loan to purchase a home using FHA, VA, or conventional financing
B. a first trust deed loan to purchase a new business or commercial company
C. A first trust deed loan to purchase a house for rental
D. a new second trust deed loan against a home

A

D

56
Q

The Jackson bought a residence with a first trust deed loan from saving and loan. The Londons bought a residence with a trust deed loan from a bank. The Londons refinanced, obtaining a first trust deed loan from a savings and loan, to get money for a business opportunity. Which statement is correct?

A. The Jackson do have the right of rescission, the Londons do
B. The Londons do not have the right oof rescission. The Jacksons do.
C. Both have the right of rescission
D. Neither has the right of rescission

A

D

57
Q

Under the provisions of the Real Estate Settlement Procedures Act, which would NOT be considered a violation?

A. Kickbacks
B. Unearned fees
C. Buyer designating lender
D. Seller designating title insurance company

A

C

58
Q

Under the Real Estate Settlement Procedures Act (RESPA), lenders are required to give borrowers

A. A bill of sale
B. A Loan Estimate
C. the amount of mortgage interest
D. an invoice not exceeding $10 for the special information booklet

A

B

59
Q

What is included as part of the finance charge in a Truth-in-lending Disclosure Statement?

A. Appraisal Fee
B. Assumption fee
C. Recording and documents fee
D. Title insurance fees

A

B

60
Q

According to the Federal Reserve System’s Regulation Z, which would be the proper usage in an advertisement relating to housing?

A. Assume a 7 1/2% mortgage
B. Assume a 7 1/2% annual percentage rate mortgage
C. Take over a 7 1/2% mortgage
D. Any of these

A

B

61
Q

Which loan costs are NOT required to be disclosed as a finance charge to the customer under the federal truth-in-lending rules?

A. Credit investigation
B. Buyer’s points
C. Time-price differential
D. Finder’s fees

A

A

62
Q

Which would be covered by the Real Estate Settlement Procedures Act (RESPA)?

A. Land for development
B. An addition of a room in a single-family residence
C. A commercial building
D. An initial lien on a one-to-four-unit residential building

A

D

63
Q

Which would be covered by the Real Estate Settlement Procedures Act (RESPA)?

A. Land for development
B. An addition of a room in a single-family residence
C. A commercial building
D. An initial lien on a one-to-four-unit residential building

A

C

64
Q

Don Sanderson, a real estate broker, works alone in his independent brokerage firm, Sanderson Real Estate, Sanderson helps clients buy and sell commercial real estate, and manages property for owners of income-producing property. Sanderson also serves as a broker for mortgage loans, bringing together prospective borrowers with prospective lenders. Which of the following statements is correct?

A. Sanderson’s real estate license authorizes him to work as a mortgage loan broker
B. provided Sanderson has an MLO endorsement on his real estate license, serving as a mortgage loan broker is legal
C. Serving as a mortgage loan broker is always illegal for real estate licensees
D. Real Estate licensees serving as a mortgage loan brokers may not legally receive compensation for their mortgage loan brokerage activities

A

B

65
Q

ARegarding the fees and commissions as a mortgage loan broker can charge for regulated loans, all of the following statements are correct EXCEPT

A. for regulated loans, the commissions that loan brokers can charge are limited, but the costs are not
B. California law regulated the fees and commissions a loan brokerage firm can charge for regulated loans
C. the ceiling placed on loan broker commissions is an exception to the general rule that commissions are negotiable
D. regulated loans are first mortgages of less than $30,000 and second mortgages of less that $20,000

A

A

66
Q

Which lender participates in and supervises construction loans, solicits loans from anyone, involves itself in the secondary money market, and represents other lending institutions?

A. Insurance company
B. Mortgage company
C. Commercial bank
D. Savings and loan association

A

B

67
Q

A certain lender has the following lending policies and characteristics:
Makes many loans on commercial properties
Makes relatively few construction loans
Usually seeks to avoid administering loans
Prefers to make long-term loans

This describes which lender?
A. Life insurance companies
B. Federal savings and loans
C. Mortgage companies
D. Savings and loan associations

A

A

68
Q

A primary source of funds for residential financing is
A. the Federal Home Loan Bank
B. the Federal Savings and Loan Insurance Corporation
C. the Federal Savings and Loan Association
D. the Federal Housing Administration

A

C

69
Q

The lenders that invest a major portion of their assets in long-term real estate loans do not like to service their own loans and that like large loans commercial property would be
A. commercial banks
B. insurance companies
C. savings and loan associations
D. mutual mortgage companies

A

B