Deck 7: Introduction to Real Estate Finance

Question 1

The Equal Credit Opportunity Act requires a lender to:
(a) quote interest rates as annual percentage rates (APR)
(b) disclose all closing costs
(c) use a HUD approved uniform closing statement
(d) not discriminate on the basis of race, creed, color, sex, origin, plus other protected categories

Answer 1

D

Question 2

A negative amortized ARM means:
(a) it can cause some problems in later years.
(b) the payments may not cover the annual interest.
(c) the unpaid interest is added to the principal.
(d) all of the above.

Answer 2

D

Question 3

A real estate promissory note that reads "$50,000 principal payable interest only monthly at a rate of 8%" is what type of promissory note?
(a) straight
(b) installment
(c) principal and interest
(d) accommodation

Answer 3

A

Question 4

The Real Property Loan Law does not apply to first loans of $30,000 or more and second deed of trust loans of:
(a) $5,000
(b) $17,500
(c) $19,500
(d) $20,000

Question 5

An investor wants to acquire income property that will generate a 10% cap rate. A 6-unit apartment complex rents for $950 per unit per month. Vacancies are 5% of gross rents and operating expenses total $20,500 per year. What is the maximum the investor should offer for this property? (round to nearest $1,000)
(a) $684,000
(b) $573,000
(c) $445,000
(d) $403,000

Question 6

The successful bidder at a Trustee's Sale (foreclosure) receives what type of deed?
(a) trustee's
(b) grant
(c) quitclaim
(d) sheriff's

Question 7

A type of financing instrument in which the owner (vendor) retains the legal title until the buyer (vendee) fulfills the terms of the purchase contract:
(a) lease contract
(b) installment sales contract
(c) wraparound contract
(d) junior lien contract

Question 8

Which of the following regarding a Trustee's Sale is false?
(a) the sale must be advertised in a newspaper of general circulation in the area
(b) after the sale, the dispossessed owner has a one-year right of redemption
(c) the sale must be held in a public place
(d) the beneficiary doing the foreclosing is allowed to submit the loan balance and foreclosure costs instead of cash

Question 9

A lot is sold for $180,000, making a 20% profit over cost. What was the cost?
(a) $136,000
(b) $144,000
(c) $148,000
(d) $150,000

Question 10

If a property had a net operating income of $24,000 and the investor wanted an 8% return, how much should he offer for the property?
(a) $240,000
(b) $250,000
(c) $300,000
(d) none of the above

Question 11

An owner sells and the buyer takes over the existing loan. To relieve the seller of primary liability, the buyer must:
(a) sign a non-recourse agreement
(b) take title contingent upon the note and trust deed
(c) take title subject to the note and trust deed
(d) assume the note and trust deed

Question 12

An enforceable due-on-sale clause is correctly called a/an:
(a) acceleration clause
(b) alienation clause
(c) wrap around clause
(d) prepay clause

Question 13

Late charges on a loan:
(a) are charged at a standard $50.00 per month
(b) cannot legally be charged
(c) added to the balance of the loan
(d) may not exceed five dollars or 10 percent of the principal and interest part of an installment payment, whichever is greater

Question 14

Under the Trustee's Sale procedure, after a Notice of Default has been recorded, a borrower has how long to reinstate by making up past due payments, penalties, late charges, and trustee expenses?
(a) 5 days prior to trustee's sale date
(b) 90 days
(c) 3 months
(d) 1 year

Question 15

A real estate promissory note reads "$557.50 per month for 239 payments, then a final monthly payment of $2,011.19." This is an example of a/an:
(a) alienation payment
(b) prepayment
(c) balloon payment
(d) amortized payment

Question 16

A lender foreclosed on a California home that had a VA loan. The proceeds from the sale were not enough to cover the outstanding loan amount. Which of the following statements are true?
(a) The lender takes the loss and cannot do anything about it.
(b) The lender can sue the seller who sold the home to the veteran.
(c) The lender cannot sue because California is an anti-deficiency judgment state.
(d) The lender can sue for a deficiency judgment.

Question 17

Under a trust deed (deed of trust) the:
(a) trustor deeds to the beneficiary
(b) trustee deeds to trustor
(c) trustor deeds to trustee
(d) trustee deeds to beneficiary

Question 18

RESPA stands for:
(a) Real Estate Settlement Procedures Act
(b) Real Estate Salesperson Association
(c) Real Estate Syndication Planning Act
(d) Real Estate Settlement Program Act

Question 19

To settle the estate of the deceased, a probate sale is held on a mobile home. The first court bid is $30,000; the next minimum bid must be for at least:
(a) $31,000
(b) $32,000
(c) $33,000
(d) $31,750

Question 20

If a real estate loan is paid off in advance of the due date, some lenders are legally allowed to charge a penalty. This is called what type of penalty?
(a) acceleration
(b) alienation
(c) prepayment
(d) balloon

Question 21

Under the Real Property Loan Law, the maximum amount a borrower can pay for closing costs, excluding commission, regardless of the size of the loan, is:
(a) 5%
(b) $390
(c) $700
(d) $900

Question 22

Any loan payment twice as large as a regular payment is called a:
(a) balloon
(b) wrap
(c) teaser
(d) cap

Question 23

In a trustee's sale, the proceeds of the sale were sufficient to pay the demands of the first and second trust deed holders, foreclosure costs, and provide a small cash surplus. What is the priority schedule for the distribution of the cash proceeds?
(a) trustor; first trust deed; second trust deed; foreclosure costs
(b) foreclosure costs; trustor; first trust deed; second trust deed
(c) first trust deed; second trust deed; foreclosure costs; trustor
(d) second trust deed; first trust deed; foreclosure costs; trustor

Question 24

Real estate advertisements must comply with:
(a) ECOA p. 207 Equal Credit Opportunity Act prohibits lenders from discriminating.
(b) APR p. 207 Annual Percentage Rate is an effective interest rate on the loan.
(c) GPM p. 198 Graduated Payment Mortgage is a type of loan.
(d) Reg Z

Question 25

An annual percentage rate (APR):
(a) is not an interest rate but rather a percentage rate that reflects the effective interest rate on the loan.
(b) is an interest rate that includes tax service fees.
(c) is not an interest rate; it is a fee for lending.
(d) is an interest rate that only applies to refinancing.

Question 26

The loan-to-value ratio on a mortgage is defined as the:
(a) loan amount as a percentage of sales price
(b) loan amount as a percentage of assessed value
(c) loan amount as a percentage of appraised value
(d) monthly payments as a percentage of the face amount of the loan

Question 27

In an ARM loan, the distance between the borrower's rate and the index is called the:
(a) cap
(b) adjustment
(c) margin
(d) teaser

Question 28

For loans that under the California usury law, the maximum interest rate is:
(a) 5% above the Federal Funds Rate
(b) 10% or 5% above the Federal Reserve Discount Rate, whichever is greater
(c) 10% or 5% above the Federal Reserve Discount Rate, whichever is lesser
(d) 10% above the Prime Rate

Question 29

A copy of a Mortgage Loan Disclosure Statement prepared by the broker and signed by the borrower must be retained by the broker for at least:
(a) five years
(b) four years
(c) three years
(d) two years

Question 30

Which of the following words expresses a meaning most completely opposite to the term "alienation"?
(a) amortization
(b) ad valorem
(c) acquisition
(d) acceleration

Question 31

A property is usually appraised in what phase of the financing process?
(a) application
(b) analysis
(c) processing
(d) closing

Question 32

If a broker negotiated a third trust deed for $12,000 payable in five semi-annual installments, the maximum rate of commission allowed by the Mortgage Loan Brokerage Law would be:
(a) 15%
(b) 10%
(c) 5%
(d) no rate is established for third trust deeds

Question 33

$300,000 loan at 8% payable $2,000 per month is what type of note?
(a) installment
(b) straight
(c) wraparound
(d) amortized

Question 34

A clause in a trust deed that states that the lender's rights shall become secondary to a new trust deed is called:
(a) an alienation clause
(b) a subordination clause
(c) a submortgage
(d) an escalation clause