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Financing

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 
Who is the individual who obtains a real estate loan by signing a note and a mortgage?
a.
Mortgagor
c.
Optionor
b.
Mortgagee
d.
Optionee
 

 2. 
Which of the following describes a mortgage that uses both real and personal property as security?
a.
Blanket mortgage
c.
Purchase-money mortgage
b.
Package mortgage
d.
Wraparound mortgage
 

 3. 
Which of the following describes a mortgage that requires principal and interest payments at regular intervals until the debt is satisfied?
a.
Term mortgage
c.
First mortgage
b.
Amortized mortgage
d.
Balloon mortgage
 

 4. 
What is the clause in a note, mortgage or trust deed that permits a lender to declare the entire unpaid sum due should the borrower default?
a.
Judgment clause
c.
Forfeiture clause
b.
Acceleration clause
d.
Escalator clause
 

 5. 
A mortgage must include a power-of-sale clause to be foreclosed by
a.
action.
c.
judicial procedure.
b.
advertisement
d.
the FHA.
 

 6. 
In many states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is the right called?
a.
the Equitable right of redemption
c.
the Vendee's right of redemption
b.
the Owner's right of redemption
d.
the Statutory right of redemption
 

 7. 
In a title theory state;
a.
the mortgagee takes title to the mortgaged property during the term of the mortgage.
b.
the mortgagor has a lien against the property for the full amount of the mortgage.
c.
the mortgagor may foreclose only by court action.
d.
the mortgagor holds title to the property during the term of the mortgage.
 

 8. 
A woman is qualified to obtain an FHA loan for the purchase of a new home. From which of the following may she obtain this loan?
a.
Federal Housing Administration
b.
Federal National Mortgage Association
c.
A qualified Federal Housing Administration mortgagee
d.
Federal Home Loan Bank System
 

 9. 
A mortgage instrument may include a clause that prevents the assumption of the mortgage by a new purchaser without the lender's consent. What is this clause called?
a.
Alienation clause
c.
Defeasance clause
b.
Power-of-sale clause
d.
Certificate of sale
 

 10. 
The defeasance clause in a mortgage requires that the mortgagee execute a(n)
a.
assignment of mortgage.
c.
subordination agreement.
b.
satisfaction of mortgage.
d.
partial release agreement
 

 11. 
A seller enters into a contract with a buyer to sell his house for $40,000. The buyer cannot get complete financing, and at the closing, the buyer and seller enter into a contract for deed. On signing the contract for deed, The buyer's interest in the property is that of
a.
legal title.
c.
joint title.
b.
equitable title.
d.
mortgagee in possession.
 

 12. 
Which of the following is a lien on real estate?
a.
Easement
c.
Encroachment
b.
Recorded mortgage
d.
Restrictive covenant
 

 13. 
A mortgage loan that requires monthly payments of $1,175.75 for 20 years and a final payment of $25,095 is a(n)
a.
Wraparound mortgage
c.
Balloon mortgage
b.
Accelerated mortgage
d.
Variable mortgage
 

 14. 
The ratio of the property’s net income to the initial investment is the
a.
After-tax cash flow
c.
Equity
b.
Before-tax cash flow
d.
Return on Investment
 

 15. 
The difference between the market value and any liens on the property is the owner’s
a.
Equity
b.
Return
c.
Cash outflow
d.
Capital asset
 

 16. 
The borrower has a 10 percent down payment has applied for a conventional loan. The lender will MOST LIKELY require the borrower to purchase
a.
Conventional mortgage insurance
c.
Life insurance
b.
Private mortgage insurance
d.
Title insurance
 

 17. 
Fannie Mae and Ginnie Mae
a.
work together as primary lenders.
b.
are both owned by the federal government.
c.
are both private agencies.
d.
are both involved in the secondary market
 

 18. 
A deficiency judgment can take place when
a.
a foreclosure sale does not produce sufficient funds to pay a mortgage debt in full.
b.
insufficient taxes have been paid on a real property.
c.
a foreclosure sale is not completed.
d.
property taxes on a forfeited property remains unpaid
 

 19. 
When a buyer assumes the mortgage, which of the following is TRUE?
a.
If the mortgage has an alienation clause, this does not affect the assumption.
b.
Normally, the seller is released from all liability when the mortgage is assumed.
c.
The seller is primarily liable if the buyer defaults on an assumed mortgage.
d.
A buyer who assumes a mortgage is primarily liable for the debt and the original borrower becomes secondarily liable for the debt.
 

 20. 
An eligible veteran made an offer of $250,000 to purchase a home to be financed with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of reasonable value (CRV) for $247,000 was issued for the property. In this case, the veteran may
a.
withdraw from the sale with a 1 percent penalty.
b.
purchase the property with a $3,000 down payment.
c.
purchase the property or be in breach of contract to the seller
d.
withdraw from the sale on payment of $3,000 commission to the seller’s broker.
 

 21. 
In an FHA insured transaction, the
a.
discount points may be paid by the seller or the buyer.
b.
origination fee must be paid by the seller.
c.
mortgage insurance premium must be paid in cash at settlement.
d.
mortgage insurance premium must be paid by the seller.
 

 22. 
A government-backed loan that guarantees the lender against a loss is a(n)
a.
FHA mortgage.
c.
FNMA mortgage
b.
VA mortgage.
d.
PMI mortgage
 

 23. 
The loan which is MOST LIKELY to create negative amortization is the
a.
Blanket mortgage
b.
Budget mortgage
c.
Construction loan
d.
Graduated payment mortgage
 

 24. 
The mortgage that includes both real and personal property is called a
a.
Growing equity mortgage
b.
Package mortgage
c.
Shared depreciation mortgage
d.
Wraparound mortgage
 

 25. 
Which of the following is TRUE regarding a purchase-money mortgage?
a.
The seller retains possession of the property and transfers equitable title.
b.
The seller executes and delivers a home equity line of credit at closing.
c.
The seller finances a portion of the purchase price and places a junior lien on the property.
d.
The seller agrees to the mortgage and repurchases the property if the buyer defaults.
 

 26. 
Regulation Z applies to
a.
business loans.
c.
commercial loans under $10,000.
b.
residential loans made to a person.
d.
installment sales.
 

 27. 
A seller lent money to a buyer, and in return took a mortgage as security for the debt. The seller immediately recorded the mortgage. Later, The buyer negotiated a loan with another lender who recorded a lien on the property. The buyer defaulted and a court determined that second the lender had priority over the first lender. for this to occur;
a.
the first lender knew of the second loan prior to the first lender negotiated the loan.
b.
the second lender’s loan was larger than the first lender's loan.
c.
the first lender signed a subordination agreement in favor of the second lender
d.
the second lender had signed a satisfaction of the mortgage
 

 28. 
Borrowers who are classified as high risk will MOST LIKELY negotiate a
a.
Prime loan.
b.
Paper loan.
c.
Subterranean loan
d.
subprime loan
 

 29. 
In a declining market, the sellers consider themselves fortunate. Their house has the same market value as it did on the date they purchased it three years ago when they used their life savings of $20,000 as a down payment. since that time, they have paid $14,400 in mortgage payments, of which $10,000 was used to pay interest. In this scenario, the $24,400 that the sellers have paid toward their principal is considered their
a.
homestead.
c.
redemption.
b.
profit.
d.
equity.
 

 30. 
A lender agreed to accept less than the current principal balance from a distressed homeowner. This lender process is known as a:  
a.
judicial foreclosure.
c.
strict foreclosure.
b.
redemption sale.
d.
short sale.
 

 31. 
Which of the following would be the beneficiary in the deed of trust security instrument used in a title-theory state?
a.
Buyer
c.
Lender
b.
Seller
d.
Attorney
 

 32. 
What is the MAJOR DIFFERENCE between conventional and unconventional loans?
a.
A conventional loan is guaranteed or insured by the government while an unconventional loan is not.
b.
An unconventional loan is guaranteed or insured by the government while a conventional loan is not.
c.
A conventional loan is sold on the secondary market while an unconventional loan is not.
d.
An unconventional loan is sold on the secondary market while a conventional loan is not.
 

 33. 
On an adjustable rate mortgage, a margin is added to the index to determine the new interest rate. This margin will
a.
change every six months.
b.
decrease as the term of the loan decreases.
c.
change as the index changes.
d.
remain constant over the life of the loan.
 

 34. 
A defaulted borrower's right to redeem property before a foreclosure is known as:
a.
the statutory right of redemption.
c.
the borrower's right of redemption.
b.
the equitable right of redemption.
d.
the lender's right of redemption.
 

 35. 
Laws that determine the maximum interest rate a lender can charge are known as
a.
maximum interest rate laws.
c.
truth-in-lending laws.
b.
usury laws.
d.
borrower protection laws.
 

 36. 
A developer placed a mortgage on his housing development. When he sold a lot to the buyer, a partial release was obtained for the lot purchased. The mortgage the developer obtained was a(n)
a.
blanket mortgage.
c.
package mortgage.
b.
purchase-money mortgage.
d.
open-end mortgage.
 

 37. 
In the purchase of  commercial property, the investors negotiated a loan in which none of the investors were personally liable for the payment of the debt. The investors negotiated a
a.
Shared appreciation mortgage
c.
Nonrecourse loan
b.
Purchase-money mortgage
d.
Wraparound loan
 

 38. 
Which of the following requires that finance charges be stated as an annual percentage rate?
a.
Truth in lending act
c.
Equal Credit Opportunity Act
b.
Real Estate Settlement Procedures Act
d.
Community Reinvestment Act
 

 39. 
In determining whether to extend a loan to the purchaser of a house, lending institutions MOST LIKELY consider most important?
a.
the sale price.
b.
the stability of the purchaser's financial position.
c.
the appraised value.
d.
the term of the loan.
 

 40. 
The act that requires that lenders inform both buyers and sellers of all fees and charges is the
a.
ECOA.
c.
RESPA.
b.
REIT.
d.
TILA
 

 41. 
All of the following are ways that a borrower may default on a loan EXCEPT
a.
Lack of maintenance of the property
b.
Forgetting to pay property taxes
c.
Not securing permission from the lender to improve the property
d.
Making timely payments of principal and interest
 

 42. 
According to Truth-in-Lending, a lender must reveal all of the following EXCEPT
a.
discount points.
c.
title fees.
b.
interest rate.
d.
origination fee.
 

 43. 
Several brokers had a continuing education class we're in the back of the room discussing the new discount broker who just opened her business. One of the brokers said, “The best way to deal with this discount broker is to not show her listings.”  Is this statement legal?
a.
Yes, because the comment was just one broker’s opinion
c.
No, the brokers or price fixing. Which is a violation of the Sherman Antitrust Act
b.
Yes, because the comment was part of a hypothetical classroom discussion.
d.
No, brokers our group boycotting. Which is a violation of the Sherman Antitrust Act
 

 44. 
A buyer purchases a property through a loan assumption. The seller has requested that the old note and mortgage be substituted for a new note and mortgage in the buyer's name. If the lender allows this change, it is known as the granting of :
a.
an attachment.
c.
a satisfaction piece.
b.
a release of mortgage.
d.
a novation.
 

 45. 
A person was paid $8000 to let someone else use his identification and credit information to obtain a loan the person using identification is called a(n)
a.
promissor
c.
mortgagor
b.
imposter
d.
straw buyer
 

 46. 
The seller agreed to lend the buyer $10,000 as part of the down payment to purchase the seller's property. This loan was not disclosed to the lender, and as a result, the lender believes the borrower has a larger down payment than he actually has. The term that BEST describes this type of mortgage fraud
a.
Equity Skimming
c.
A silent second
b.
House stealing
d.
The sellers’ rescue
 

 47. 
An owner negotiated a home equity loan on his property. The owner's right to rescind this agreement within three days is provided by
a.
FHA.
c.
Regulation B.
b.
Regulation Z.
d.
VA.
 

 48. 
Which of the following would restore a veteran's benefits after he has sold under an assumption?
a.
substitution of novation from the lender
b.
subject to certificate of assumption taken by the seller
c.
Subject to VA mortgage taken by a buyer
d.
Substitution of eligibility by another veteran
 

 49. 
A borrower negotiated a second mortgage on her property. This mortgage is subordinate to the first mortgage and the borrower makes one monthly payment. She MOST LIKELY secured ?
a.
a shared-appreciation mortgage.
c.
a wraparound mortgage.
b.
a purchase-money mortgage.
d.
a growing-equity mortgage.
 

 50. 
An offer $120,000 was accepted by the sellers. The buyers had $12,000 for the down payment. The Borrowers would negotiate a loan with a(n)
a.
80 percent loan-to-value ratio
c.
90 percent loan-to-value ratio
b.
85 percent loan-to-value ratio
d.
95 percent loan-to-value ratio
 

 51. 
A retired couple would like additional spendable income. They talked to their financial adviser and learned that they could use the equity in their property to negotiate a loan in which they will receive a monthly check from the lender for the next five years. This arrangement is known as a(n)
a.
open mortgage.
c.
reverse annuity mortgage.
b.
closed mortgage.
d.
open-end mortgage.
 

 52. 
A borrower has secured a guarantee from the lender that the interest rate quoted on loan application would not change prior to closing. This is known as a(n)
a.
fixed-rate mortgage.
c.
extender clause.
b.
anaconda agreement.
d.
lock-in agreement.
 

 53. 
Which of the following parties must sign the note and the mortgage?
a.
Mortgagor/promisee
c.
Mortgagor/promisor
b.
Mortgagee/promisor
d.
Mortgagee/promisee
 

 54. 
Which of the following actions is NOT a sign of possible mortgage fraud?
a.
The buyer insisted that the agent write the offer contingent upon the use of a certain appraiser
b.
Leaving blanks an offer to purchase for the seller to fill in at a later date
c.
Rewriting a sale contract with an inflated purchase price
d.
The consideration stated on the sales contract and the new deed are the same.
 

 55. 
A construction loan is an example of a(n)
a.
amortized loan
b.
partially amortized loan
c.
nonamortized loan
d.
balloon mortgage
 

 56. 
A qualified veteran is purchasing a duplex. Under these circumstances, the VA will
a.
set the rate of interest.
c.
set the limit on the guarantee.
b.
determine the maximum loan amount.
d.
determine the term of the loan.
 

 57. 
A first-time home buyer seeking advice from an agent regarding the difference between a mortgage broker and a mortgage banker. The agent will tell her that
a.
free checking is a typical incentive to negotiate a loan through a mortgage banker, but not a mortgage broker.
b.
mortgage bankers normally deal in conforming loans, but mortgage brokers deal in non-conforming loans.
c.
mortgage bankers normally hold their loans in portfolio, but mortgage brokers sell their loans on the secondary mortgage market.
d.
mortgage bankers originate loans, package and sell them to investors, while mortgage brokers bring borrowers and lenders together and are paid a percentage on the loan amount.
 

 58. 
The lender is requiring that a buyer set up an escrow account for taxes and insurance. This is known as?
a.
a buydown mortgage.
c.
a balloon mortgage.
b.
a budget mortgage.
d.
a blanket mortgage.
 

 59. 
A VA-guaranteed loan is an example of a(n)
a.
conventional mortgage.
c.
conventional insured mortgage.
b.
conventional uninsured mortgage.
d.
unconventional mortgage.
 

 60. 
The federal act that prohibits a lender from discriminating based on race, color, religion, national origin, sex, marital status, age or source of income is the
a.
Federal Fair Housing Act.
c.
Community Reinvestment Act.
b.
Equal Credit Opportunity Act.
d.
Truth-in-Lending Act.
 

 61. 
A couple that is 70 years old owns their home, and they have no liens on their property. They would like to negotiate a loan where they make no monthly payments and have no income or credit ratios to qualify. Is there a loan product that will meet their needs?
a.
Yes, because they own their home without liens they can negotiate a home equity line of credit with any lender.
b.
Yes, because they are over the age of 62, they can negotiate a reverse mortgage where they will make no monthly payments and have no income or credit ratios to qualify.
c.
No, there is no loan program where the borrower does not make monthly payments or have no income or credit ratios to qualify.
d.
No, Truth-in-Lending does not allow anyone over the age of 65 to negotiate a loan.
 

 62. 
A credit bureau will analyze the borrower’s employment history, outstanding debts, and repayment history to compute the borrower’s
a.
credit score
c.
back-end score
b.
front-end score
d.
debt-to-service score
 

 63. 
A veteran is negotiating a GI loan. The appraiser will issue?
a.
a certificate of reduction
c.
a certificate of deposit
b.
a certificate of reasonable value.
d.
a certificate of indebtedness
 

 64. 
What is the MAJOR DIFFERENCE between an open mortgage and an open-ended mortgage?
a.
An open mortgage is negotiated on fixed-rate mortgages, and the open-ended mortgage is negotiated on adjustable rate mortgages.
b.
An open mortgage is used to purchase new construction, and the open-end mortgage is used to purchase manufactured homes.
c.
An open mortgage allows prepayment of the loan during the long term; an open-end mortgage is expandable by increments up to a maximum dollar amount, under the original security document.
d.
An open mortgage allows prepayment not to exceed 5 percent of the loan balance if repaid within 5 years; an open-end mortgage does not allow a prepayment penalty.
 

 65. 
The act of pledging property to the lender without giving up possession rights is known as
a.
Conventional pledge
c.
Confirming pledge
b.
Unconventional pledge
d.
Hypothecation
 

 66. 
Which government body is responsible for creating money, regulating money, regulating reserve requirements and setting the discount rate of interest?
a.
Federal Housing Administration
c.
Federal Reserve
b.
Federal National Mortgage Association
d.
Federal Register
 

 67. 
What party will review the loan package and make the final decision regarding the risk of the loan?
a.
Loan Originator
c.
Settlement agent
b.
Processor
d.
Underwriter
 

 68. 
The buyer was pre-approved for a loan and his offer of $160,000 was accepted. circumstances changed, and three weeks before the closing the seller did not want to sell and the buyer did not want to buy. Can the parties release each other from the contract?
a.
Yes, they can release each other from the contract, and the process is known as rescission.
b.
Yes, they can release each other from the contract, and the process is known as reconciliation.
c.
No, once a sales contract is executed by both parties, changes result in mortgage fraud
d.
No, because the broker fulfilled the terms of the listing agreement, the buyer and seller must fulfill the terms of the sales contract.
 

 69. 
Which federal law requires a loan originator to provide a potential buyer with a good faith estimate within three days of application?
a.
Community Reinvestment Act
c.
Truth in Lending Act
b.
Equal Credit Opportunity Act
d.
Real Estate Settlement Procedures Act
 

 70. 
While listening to the radio a consumer heard “For qualified borrowers, we have 30-year fixed-rate mortgages with an annual percentage rate of 6.35 percent. This is a limited offer, so call today.” Is this loan in compliance with Regulation Z?
a.
Yes, this ad meets RESPA requirements.
b.
Yes, this ad meets Truth-in-Lending requirements.
c.
No, lenders are not allowed to advertise interest rates on the radio.
d.
No, the APR is a trigger item that requires full disclosure.
 



 
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