Multiple Choice
Identify the letter of the choice that best
completes the statement or answers the question.
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1.
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Which of the following determines the loan discount points on a loan?
a. | The Federal Reserve Bank | c. | The Money
Market | b. | The FDIC | d. | The FHA |
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2.
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All the following participate in the secondary mortgage market
EXCEPT:
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3.
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If a borrower is paying off a loan on an installment basis the loan is called
a/an:
a. | Straight or Term Loan | c. | Balloon Mortgage | b. | Budget Mortgage | d. | Amortized
Mortgage |
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4.
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If a investor acquired a property by putting down a small amount of cash and
financed the balance he would be:
a. | Leveraging his investment | c. | Getting a conventional
loan | b. | Paying loan discount points | d. | Financing by sale-leaseback |
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5.
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A release clause is a part of:
a. | A Blanket Mortgage | c. | A Package Mortgage | b. | A Wrap-Around Mortgage | d. | An FHA Mortgage |
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6.
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Which of the following is a function of FNMA (Federal National Mortgage
Association)?
a. | Making loans to qualified borrowers | c. | Providing a source of money for
approved lenders | b. | Providing money for low income housing loans | d. | Insuring VA
Mortgages |
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7.
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A buyer has found a seller who is willing to remain responsible for the existing
loan on a property and gives the buyer a new larger loan at a higher rate of interest. The new loan
is called a:
a. | Shared appreciation loan | c. | Senior loan | b. | Wrap-Around
Mortgage | d. | Assumed
loan |
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8.
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If a bank gives the owner of a property a flow of payments and takes a lien
position in the property, the loan is called:
a. | A reverse annuity | c. | An open loan | b. | A second loan | d. | A blanket loan |
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9.
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A good faith estimate as required by RESPA must include the:
a. | Costs to bring the property to sound physical condition | c. | Lien releases for
the seller | b. | Loan payoffs | d. | Loan origination fee |
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10.
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Interest rate "caps" would be a part of which of the following types
of loans?
a. | Budget Mortgage | c. | Adjustable Rate Mortgage | b. | Graduated Variable
Payment Mortgage | d. | Fixed Rate
Mortgages |
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11.
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A lender has specified the use of a certain title company as a condition to
obtaining a loan. Which statement is true?
a. | This is illegal under RESPA | c. | Usury laws prohibit this
practice | b. | This is not allowed under Truth-In-Lending | d. | It is common practice but the lender must
provide the borrower the name, address, telephone number and services of each provider with a cost
estimate |
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12.
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Which of the following is true about VA loans?
a. | The down payment is only 5% of the purchase price | c. | The borrower must live in the house
as his/her principal residence | b. | The borrower must be married at the time the
loan is made | d. | The borrower
must pay the mortgage insurance |
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13.
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The buyer does not have enough cash to buy the house and the seller is willing
to take back a purchase money mortgage in the amount of $20,000. The buyer is to pay interest
payments over a six-year period on the note. The principal is paid with an additional payment at the
end of the six years. Which of the following best describes the loan?
a. | A partially amortized loan | c. | A package loan | b. | Straight or term
loan | d. | Amortized loan with
balloon payment |
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14.
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The amount of loan discount points charged by a lender is based on all of the
following factors EXCEPT:
a. | The amount of the loan | c. | The current rate of interest in the market | b. | The borrower's
marital status | d. | The rate of
interest charged on the loan |
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15.
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A mortgage which allows the borrower to receive additional funds on an approved
loan is called:
a. | A Wrap-Around Mortgage | c. | An Open-End Mortgage | b. | A Variable payment | d. | Junior
financing |
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16.
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Which of the following statements best describes "Fannie Mae"
(F.N.M.A.)
a. | It is an agency of the federal government that guarantees loans made by approved
lenders | c. | It is a government-sponsored, privately owned corporation that provides money to
private mortgage money institutions | b. | It is an agency of the federal government that
insures loans made by approved lenders | d. | It regulates approved FHA and VA lenders |
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17.
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When a borrower purchases FHA mortgage insurance the policy insures the:
a. | Mortgagor (borrower) | c. | FHA | b. | Mortgagee (lender) | d. | Lessor |
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18.
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All of the following are true about a sale-leaseback EXCEPT:
a. | It frees the lessee's money for other uses | c. | The seller becomes the
tenant | b. | Ownership of the property never actually passes | d. | The lessee may deduct the entire lease payment
as a business expense |
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19.
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All of the following are advantages of assuming an existing loan
EXCEPT:
a. | Paying a lower rate of interest rate | c. | Avoiding the payment of loan
origination points or fees | b. | Avoiding the payment of loan discount
points | d. | A. Avoiding the payment of the loan assumption
fee
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20.
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When a buyer gives the seller a note and a mortgage for part or all of the price
of a property it is:
a. | A Purchase Money Mortgage | c. | An Open-End
Mortgage | b. | A Wrap-Around Mortgage | d. | A Blanket Mortgage |
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21.
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In order for a qualified veteran to secure a VA loan he/she would have to get
from the Veteran's Administration a certificate of:
a. | Appraisal | c. | Entitlement | b. | Eligibility | d. | Approval |
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22.
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All are lenders in the primary mortgage market EXCEPT:
a. | Banks | c. | Federal Reserve Banks | b. | Savings and
Loans | d. | Individuals |
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23.
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Which of the following is a part of a blanket loan?
a. | An alienation clause | c. | An acceleration clause | b. | A subordination
clause | d. | A release
clause |
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24.
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RESPA (Real Estate Settlement and Procedures Act) requires that the lender
provide to the borrower which of the following within 3 days of loan application?
a. | An estimate of the sales commission | c. | An estimate of the closing
costs | b. | The name of the closing agent | d. | The annual percentage rate on the
loan |
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25.
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The Federal National Mortgage Association (FNMA):
a. | Guarantees loans | c. | Buys mortgages from lenders | b. | Make loans to
qualified borrowers | d. | Sets
interest rates on VA loans |
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26.
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A buyer is assuming the seller's mortgage. If the seller wants to be
relieved of all liability, he should:
a. | Assign the mortgage to a third party | c. | Get a signed
statement | b. | Get title insurance | d. | Get a release from the lender (Novation) |
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27.
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If the interest rate on a mortgage is subject to changes over the life of the
loan, the mortgage is called a/an:
a. | Participation Mortgage | c. | Adjustable Rate Mortgage | b. | Package
Mortgage | d. | Variable Payment
Loan |
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28.
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The loan origination fee:
a. | Is charged by a lender to set up the loan | c. | Is called the loan discount
point | b. | Is never more than 1% of the loan | d. | Is usually paid by the
seller |
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29.
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A mortgage that covers more than one piece of property so that single parcels
may be released from the lien is called a mortgage
a. | Blanket | c. | Package Multiple | b. | Junior | d. | Multiple |
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30.
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Who is the mortgagee under a purchase money mortgage?
a. | Seller | c. | Approved Lending Institution | b. | Buyer | d. | Broker |
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31.
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What is the purpose of charging loan discount points on a loan?
a. | To reduce the amount of the loan. | c. | To reduce the amount the seller has
to pay. | b. | To raise the yield on a below market rate loan to the market
rate. | d. | To increase the
amount borrowed on the loan. |
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32.
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Tom Murry has applied for a new VA mortgage to finance his purchase of a
four-plex. He intends to live in one of the units. Does he have the right to review his closing costs
prior to the closing on his property?
a. | Yes, RESPA stipulates he must be given a copy of his final HUD-1 settlement statement
1 day prior to the closing on a VA loan. | c. | Yes, Truth-In-Lending (Regulation
Z) requires he be given a good faith copy of the closing statement 3 days prior to the
closing. | b. | No, four-plex units are not covered by RESPA. | d. | A. No, VA loans
are not covered by RESPA.
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33.
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Another name for the "profit and
loss" statement is the: a. | Balance Sheet | c. | Quarterly Report | b. | Cash Flow Statement | d. | Income
Statement |
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34.
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Mortgage brokers:
a. | Must be licensed by the Federal Reserve System | c. | Bring borrowers and lenders
together for a fee | b. | Can not hold a real estate broker's
license | d. | Service loans made
with other's
money |
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35.
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When making a loan, the loan value is:
a. | The value estimated by a licensed appraiser. | c. | The value of comparable properties
in the area. | b. | The contract price as agreed by the buyer and seller. | d. | The contract price or the appraised value as
estimated by the appraiser, whichever is lower. |
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36.
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Which of the following properties could be financed with an FHA 203b
loan?
a. | A 10-unit apartment building | c. | A four-plex where the owner lives
in one unit | b. | A farm that is leased | d. | A commercial lot |
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37.
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At closing, which of the following items would show as a credit to the buyer on
the settlement sheet?
a. | The Sale Price | c. | Property Taxes paid in advance | b. | The Earnest Money
deposit | d. | Payoff of a
existing loan |
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38.
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Which of the following statements are true?
a. | The Veteran's Administration (the Department of Veteran's Affairs) insures
loans made to qualified veterans if the property is owner occupied. | c. | Neither the Veteran's
Administration (The Department of Veteran's Affairs) nor the Federal Housing Administration
protect the lender's interest on owner-occupied properties. | b. | The Federal Housing
Administration guarantees loans on owner-occupied properties. | d. | The Veteran's Administration guarantees
loans and the Federal Housing Administration insures loans. |
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39.
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Which of the following conditions would encourage the sale of property?
a. | Low interest rates and high loan discount points | c. | Low interest rates and low
loan
discount points | b. | High interest rates and high loan discount
points | d. | Interest rates and
loan discount points have no effect on sales |
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40.
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The clause in a mortgage that permits the lender to raise the interest rate upon
certain stipulated conditions such as a raise in the prime interest rate is called a clause.
a. | Prepayment | c. | Escalator | b. | Right to raise | d. | Escape |
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41.
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A seller has an existing loan on a property with a favorable lower than market
interest rate with a balance of $24,600. The buyer has agreed to pay $87,500 for the property and is
willing to put $10,000 down. If the seller agrees to finance the property with a Wrap-Around Mortgage
of $77,500 at the current rate of interest:
a. | The seller will continue to make payments on the original mortgage and collect
payments on the Wrap-Around Mortgage. | c. | The buyer must make payments on the original loan and the
Wrap-Around Mortgage. | b. | The seller must pay off the original loan in
order to do the wrap. | d. | The
wrap-around can only be written if the original loan has a due-on-sale
clause. |
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42.
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All of the following would be covered by RESPA EXCEPT:
a. | A FHA Mortgage on a condo. | c. | A commercial loan on a
5-plex. | b. | A VA loan on a duplex. | d. | A conventional loan made on a triplex by a bank insured by the
FDIC. |
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43.
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If homeowner secured a home equity loan on his property it would be a :
a. | Second Mortgage | c. | Personal note | b. | Unsecured note | d. | Violation of the due-on-sale
clause |
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44.
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Which lien is in the highest position?
a. | A mechanic's lien | c. | A judgement lien | b. | A tax lien | d. | A first
mortgage |
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45.
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Which of the following is allowed to get a VA loan.
a. | Qualified veterans only. | c. | Qualified veterans and their
children | b. | Qualified veterans and their un-remarried widows or widowers. | d. | Any one who served in the
military |
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46.
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Which of the following properties would be financed with an FHA 203b
loan?
a. | A 6-plex | c. | A small store in a residential area | b. | An owner occupied
4-plex | d. | Two lots in a
subdivision |
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47.
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What does the Government National Mortgage Association (GNMA) do?
a. | Act as a watchdog over FHA lenders. | c. | Buys commercial loans in
the
secondary market. | b. | Guarantees VA loans. | d. | Buys FHA and VA loans in the secondary
market. |
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48.
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When would a lender enforce a due-onsale clause on a property?
a. | The owner's divorce is final. | c. | The owner sells the property by a
contract for deed. | b. | The sale of the property with a loan assumption
approved by the mortgagee. | d. | The value of the property increases sharply. |
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49.
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What is the effect of the release clause in a blanket mortgage?
a. | It allows the borrower to get more money from the lender. | c. | It eliminates the
lender's security on sold lots. | b. | It creates an Open-End
Mortgage. | d. | It prohibits the
lender form charging a prepayment penalty. |
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50.
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When a loan is a fully-amortized fixed rate loan?
a. | The same amount of interest is paid each year. | c. | It does not have a prepayment
penalty. | b. | The principal and interest payment (P & I) is constant over the life of the
loan. | d. | The interest rate
changes annually. |
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51.
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To qualify a prospective buyer the licensee should do all of the following
EXCEPT:
a. | Ask buyers what they can afford | c. | Have a credit report on the
buyer | b. | Have a lender qualify the buyer | d. | Show buyers a wide range
ofproperties |
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