Test Chapter 8-12, 14&16 R Finance

Question 1

The Federal Housing Administration implements its programs with which of the following procedures?

Select one:

a. providing government bonds as collateral for loans

b. issuing an insured commitment covering the loan

c. funding a portion of each loan at closing

d. guaranteeing a portion of each loan

Question 2

Under FHA procedures, all of the following are considered prepaid items EXCEPT:

Select one:

a. down payment

b. property taxes

c. hazard insurance

d. mortgage default insurance

Question 3

In the language of HUD/FHA, "upfront mortgage insurance premium" specifically means:

Select one:

a. any FHA mortgage insurance premium

b. a monthly premium charged for default insurance

c. the insured commitment

d. a premium charged that is paid in full (or added to the loan amount) at the time of closing

Question 4

Loan limits based on geographic location for FHA loans are now established under two laws, which of the following has generally had the lower loan limits?

Select one:

a. Housing and Economic Recovery Act of 2008

b. American Recovery and Reinvestment Act of 2009

c. Economic Stimulus Act of 2008

d. Housing Recovery Act of 2010

Question 5

FHA loans originated on or after December 15, 1989 are restricted to which of the following policies?

Select one:

a. freely assumable but seller remains liable

b. cannot be assumed for first five years of mortgage obligation

c. new buyer must be approved by FHA prior to title transfer

d. no assumptions are permitted

Question 6

Which of the following cash required to close rules apply to an FHA mortgage?

Select one:

a. cash required may be added to loan amount

b. 3.5% cash required may be covered by down payment plus closing costs

c. 3.5% cash must be paid as down payment

d. only required down payment must be in cash

Question 7

One of the better criteria used to determine an applicant's stability of income is

Select one:

a. the amount of income in excess of that needed for approval

b. the record of payment to other creditors

c. the length of time on the job

d. whether or not more than one applicant is liable

Question 8

The percentage ratios used as guidelines in the qualification of an applicant's income by HUD/FHA are based on the applicant's

Select one:

a. effective income not reduced by taxes

b. net effective income after deduction of both income and social security taxes

c. net effective income reduced only by withholding tax

d. net effective income reduced only by social security taxes

Question 9

The VA residual qualification method determines an applicant's residual income,  then measures that against the applicant's

 

Select one:

a. mortgage payment amount

b. other shelter expenses

c. other monthly obligations

d. VA calculated cost of living expense

Question 10

Which of the following best describes the purpose of a loan agreement as part of a corporate business loan?

Select one:

a. it details the terms of loan repayment

b. lender approval is needed for the company to undertake an expenditure that might jeopardize loan repayment

c. to limit all corporate expenditures during term of the loan

d. to provide additional collateral to secure the loan

Question 11

An application for a commercial loan would include all the following items EXCEPT:

Select one:

a. informatioin on the applicant company and the individuals involved

b. complete financial statements and property evaluation

c. a statement of compliance with RESPA requirements

d. projection of income to show source of loan repayment

Question 12

The underlying theories that support evaluation of a property are called:

Select one:

a. approaches to value

b. qualificatioin for designations

c. principles of appraisal

d. whatever local practices prevail

Question 13

Which of the following statements regarding certification of appraisers is correct?

Select one:

a. it is illegal to undertake an appraisal unless that person is properly certified

b. appraisers may be certified by each state as long as federal guidelines are adhered to

c. certified appraisers must be used for every loan whether or not the lender is federally related

d. all appraisers with peer designations have been grandfathered into state certified status

Question 14

The normal method to reach a final estimate of value in a narrative appraisal is

Select one:

a. an adjusted average of the approaches to value as determined by the judgment of the appraiser

b. whatever value is shown by the major approach

c. a mathematically determined average of all approaches

d. only the capitalized value as determined by the current market rate of return

Question 15

The principle of appraising that considers the amount of value that may be added by an improvement is

Select one:

a. substitution

b. anticipation

c. conformity

d. contribution

Question 16

The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is:

Select one:

a. $120,000

b. $200,000

c. $240,000

d. $480,000

Question 17

An application for a commercial loan would include all of the following items EXCEPT:

Select one:

a. information on the applicant company and the individals involved

b. complete financial statements and property evaluation

c. a statement of compliance with RESPA requirements

d. projection of income to show source of loan repayment

Question 18

The financial statement most commonly used in preliminary examination of real property investment that show some detail on income and operating expenses is the:

Select one:

a. balance sheet

b. accrual statement

c. profit and loss statement

d. operating statement

Question 19

A release clause in a real estate development loan agreement is one that:

Select one:

a. allows the borrower to withdraw from the agreement

b. defines the conditions under which lots can be released from the mortgage for resale to builders

c. calls for releasing collateral back to the lender

d. triggers the release of a lender from any further participation in the loan

Question 20

A study that projects the potential success or failure of a proposed project is called:

Select one:

a. feasibility study

b. an appraisal

c. a pro forma study

d. a future possiblity study

Question 21

The top designation for an accountant preparing a financial statement is:

Select one:

a. certified management accountant

b. certified public accountant

c. federal approved accountant

d. designated accountant

Question 22

Restating financial information on a standard form accomplishes which of the following?

Select one:

a. adds billable hours to an accountant's fee

b. increases the amount of information that can be filed

c. makes comparisons easier and shows up missing information

d. makes a good impression on clients

Question 23

Unlike the permanent loan, a construction loan usually requires the endorsement of the:

Select one:

a. owner/builder

b. future tenants

c. landowner

d. mortgagee

Question 24

In the financing of special purpose buildings, if a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to:

Select one:

a. agree to endorse the note

b. agree to buy out the dealer

c. re-write the sales agreement

d. all of the above

Question 25

Multifamily housing must comply with a 1988 amendment to Fair Housing Act that adds which of the following to the prohibition against discrimination?

Select one:

a. pets and other personality

b. elderly persons

c. citizenship and employment

d. familial status and handicapped

Question 26

The important reason that shopping center land loads encourage promotioins of their tenant's sales is that:

Select one:

a. it fosters better relations

b. shopping center leases are usually based on a percentage of the tenant's sales

c. it attracts better tenants

d. it encourages faster lease-up

Question 27

A "net lease" means which of the following?

Select one:

a. the tenant pays a net rent after deducting certain listed operating expenses

b. the tenant pays rent based only on the net interior space under lease

c. the tenant pays for all of its own services

d. the tenant pays all maintenance and building operating expenses plus insurance and taxes on the building

Question 28

one of the better ways to assure success with a high rise office building investment is to:

Select one:

a. pick a suitable location

b. prelease as much space as possible, preferable to a major tenant

c. obtain the best possible financing

d. require that the building contractor be bonded

Question 29

Which of the following is true of percentage leases?

Select one:

a. it is the dominant method to lease warehouse space

b. the percentage charged varies with type of business

c. shopping centers have a standard percentage rate which is the same for all tenants

d. all percentage leases allow for an annual change in the percentage charged

Question 30

The least amount of management is needed for operating:

Select one:

a. a warehouse

b. a shopping center

c. an office building

d. an apartment

Question 31

While they require very specialized information, farm loans are based on the same three legs as all mortgage loans, which are:

Select one:

a. a creditworthy borrower, adequate collateral, good crops

b. both crops and livestock, a creditworthy borrower, adequate income

c. income sufficient to repay the loan, assured good weather, a creditworthy borrower

d. creditworthy borrower, adequate collateral, income sufficient to repay the loan

Question 32

The best explanation of computerized loan origination is:

Select one:

a. a loan application can be analyzed by computer and approved if justified

b. information on a loan application can be stored for future use

c. loan information can be transmitted via computer to an underwriter for analysis

d. the computer lists all information required for loan analysis

Question 33

An ownership interest of one percent or more between parties involved with a CLO operation is called a "controlled business arrangement" and must be:

Select one:

a. a required use of any affiliated company

b. disclosed to any consumer

c. prohibited to use an affiliated company

d. at least a 25 percent discount given by an affiliated company

Question 34

An automated underwriting system is one that:

Select one:

a. automatically takes a loan application

b. can only transmit loan information for automatic analysis by a human underwriter

c. can analyze any loan without special software

d. allows a computer with proper software to analyze a loan application and grant approval if justified

Question 35

Which of the following is NOT a loan classificatioin with Freddie Mac's "Loan Prospector"?

Select one:

a. rejected

b. accepted

c. refer

d. caution

Question 36

Freddie Mac offers an "expedited" collateral assessment which means

Select one:

a. no appraisal is necessary

b. must only assure that property exists

c. a short appraisal at lender's option which may be completed within two hours

d. it can only be used if property is in a recognized subdivision

Question 37

Fannie Mae offers two automated underwriting programs, one called "Desktop Originator" that is for use:

Select one:

a. by an agent taking information on a laptop computer for transmittal to a seller/servicer who verifies and transmits the information to Fannie Mae

b. to transmit information directly to Fannie Mae's Desktop Underwriter system

c. probhibited to a real estate broker

d. by any individual

Question 38

Which of the following is true about credit scoring?

Select one:

a. it is a new method of credit analysis

b. it is a number compiled from credit records that show a person's creditworthiness

c. it has no variation and can be the sole criteria for creditworthiness

d. it is used only for analysis of car loans

Question 39

Even though greatly diminished in market share subprime loans offer all of the following EXCEPT

Select one:

a. a higher profit margin if carefully made

b. a market that has been shunned before high tech analysis allowed better selection for carefully documented loans

c. greater depth of loan analysis has eliminated all risks

d. an expansion of the loan market beyond higher quality "A" rated borrowers

Question 40

Which of the following is true of loans made on the Internet?

Select one:

a. they are always higher cost mortgage loans

b. there is no opportunity for sham operators to take advantage of consumers

c. a user must travel to find an internet outlet

d. a seeker of a loan can maintain limited anonymity while asking for information

Question 41

Which of the following is a prohibited practice as defined by RESPA requirements?

Select one:

a. a listing broker splits the real estate commission with a selling broker

b. a lender refuses to accept an insurance company for coverage even though requested by the borrower

c. a seller requires the use of a specific title company as a condition of the sale

d. a selling broker provides the buyer/borrower with assistance in obtaining a loan in return for a fee

Question 42

The underlying purpose of RESPA requirements is to:

Select one:

a. require disclosures that give a buyer/borrower sufficient information to make informed decisions

b. increase federal control over real estate deals

c. introduce complex questions that necessitate employing legal counsel

d. limit costs of closing a real estate transaction

Question 43

RESPA requires disclosure of estimated closing costs for residential loans at which of the following times?

Select one:

a. any time prior to actual closing

b. within three days of loan application

c. only if requested by the borrower

d. within three days of loan application and again one day prior to closing if the borrower requests it

Question 44

The primary purpose of the Truth-in-Lending Act is to

Select one:

a. require full disclosure of the amount of the promissory note

b. provide meaningful information to borrowers on the cost of consumer credit

c. discourage excessive loan costs for consumers

d. establish limits on the total charges a lender can assess for a loan

Question 45

Real estate settlement procedures for residential loans, including the required settlement statement, are regulated by the

Select one:

a. Office of Thrift Supervision

b. Fannie Mae-Freddie Mac

c. Department of Housing and Urban Development

d. Federal Reserve Bank

Question 46

In a settlement procedure, prepaid interest is required for the time period from September 21 (date of closing) through September 30.  What amount of prepaid interest is due for a loan of $200,000 at 5% interest? (Banker's year is 360 days)

Select one:

a. $250.00

b. $277.78

c. $246.57

d. $208.33

Question 47

After initial closing deposits have been made, RESPA limits the continuing escrow or reserve account cushion held by lenders on residential loans to which of the following?

Select one:

a. not more than is reasonable and customary

b. not more than one sixth of the annual recurring charges

c. not more than one twelfth of the annual recurring charges

d. no restrictions apply after the initial deposits have been made

Question 48

A mortgagee's title policy protects which of the following against an adverse claim of title?

Select one:

a. borrower

b. trustee

c. real estate agent

d. lender

Question 49

In closing a real estate transaction, instructions on how the proceeds of a loan are to be disbursed are issued by the

Select one:

a. closing agent

b. seller's agent

c. lender

d. trustee's attorney

Question 50

All of the following charges involved with the settlement of a residential mortgage loan must be paid at time of closing EXCEPT:

Select one:

a. prepaid principal

b. property taxes

c. hazard insurance premium

d. prepaid interest

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