ch. 9 Understanding the Finance Process

real estate

Of the three parties to a trust deed in California, which one is the beneficiary?
a. Trustee
b. Lender
c. None of the answers are correct
d. Borrower

b. Lender

The practice of purchasing real estate using a small amount of your own money and a larger proportion of borrowed funds is called:
a. debt mortgaging
b. leverage
c. all answers are correct
d. loan floating

b. leverage

A charge based on the loan amount that is collected as compensation by the lender for processing the loan is called:
a. interest
b. boot
c. a loan origination fee
d. usury

c. a loan origination fee

Points are figured on the:
a. the selling price of the property.
b. amount of commission.
c. all of the answers are correct.
d. amount of the new loan

d. amount of the new loan

A charge to the borrower for paying off all or part of a loan balance before the due date (only enforceable during the first five years of an owner occupied one- to four-unit home) is called:
a. a prepayment penalty.
b. usury.
c. illegal.
d. interest

a. a prepayment penalty.

The interest rate the borrower is actually paying (including interest, points, and loan fees) is called the:
a. cumulative interest rate
b. nominal interest rate
c. effective interest rate
d. origination rate

c. effective interest rate

Impound accounts are prepaid items consisting of reserves for:
a. property taxes.
b. all answers are correct
c. mortgage insurance.
d. hazard insurance.

b. all answers are correct

Which of the following is considered an institutional lender?
a. Life insurance companies
b. Commercial banks
c. Savings banks
d. All answers are correc

d. All answers are correc

Which of the following are direct lenders who fund loans themselves using an investor's guidelines then sell the loan to that investor?
a. Mortgage lenders.
b. Mortgage trustees.
c. Mortgage bankers
d. Mortgage brokers

c. Mortgage bankers

Which of the following are licensed and shop for a lender for the borrowers and earn a fee by putting lender and borrower together?
a. Mortgage finders.
b. Mortgage brokers
c. None of the answers are correct.
d. Mortgage bankers

b. Mortgage brokers

A mortgage broker with a DRE MLO endorsement is required to keep "Mortgage Loan Disclosure Statements" on file for:
a. three years.
b. two years.
c. one year.
d. five years.

a. three years.

The nation's largest investor in residential mortgages on the secondary mortgage (trust deed) market is:
a. Fannie Mae (FNMA).
b. Ginnie Mae (GNMA).
c. Freddie Mac (FHLMC).
d. none of the answers are correct.

a. Fannie Mae (FNMA).

With which loan product can the borrower receive monthly installments, or a lump sum, and the loan is usually only due and payable if the borrower discontinues occupying the property?
a. Unamortized Mortgage Loan
b. Reverse Mortgage Loan
c. FEMA Mortgage Loan
d. SBA Mortgage Loan

b. Reverse Mortgage Loan

With a qualified mortgage, which ensures that borrowers have the ability to repay the loan, the total debt ratios must be 43% or less and cannot charge points to exceed:
a. 5.5 points
b. 3 points
c. 5 points
d. 10 points

b. 3 points

The interest rate the borrower is actually paying (including interest, points, and loan fees) is called the:
a. cumulative interest rate
b. nominal interest rate
c. effective interest rate
d. origination rate

c. effective interest rate

What occurs when monthly installment payments are insufficient to pay the interest accruing on the principle balance, so that the unpaid interest must be added to the principle due?
a. Reverse amortization
b. Forensic amortization
c. Accelerated amortization
d. Negative amortization

d. Negative amortization

A loan for which the payments are usually the same each month for the life of the loan is a(n):
a. all answers are correct
b. graduated payment mortgage
c. adjustable rate mortgage
d. fixed rate mortgage

d. fixed rate mortgage

Some government backed loans only insure or guarantee loans. Which of the following actually is a direct lender of funds?
a. VA
b. FHA
c. none of the answers are correct
d. Cal-Vet

d. Cal-Vet

Charging more than the legally allowed percentage of interest is called:
a. usury.
b. commingling.
c. coercion.
d. none of the answers are correct.

a. usury.

Which of the following federal acts allows loan applicants who have data collected to see their files?
a. The Equal Credit Opportunity Act
b. The Equal Access Act
c. The Fair Credit Reporting Act
d. The Truth in Lending Act

c. The Fair Credit Reporting Act

A Certificate of Eligibility is issued by:
a. FHA
b. FHLMC
c. VA
d. FNMA

c. VA

A clause in a trust deed which states the entire note becomes due and payable if the property is sold is called:
a. Balloon Payment Clause
b. Alienation Clause
c. Prepayment Clause
d. Payback Clause

b. Alienation Clause

The law that requires lenders to make credit available to all creditworthy customers without regard to sex, marital status, race, color, religion, national origin, or age:
a. All of these
b. Equal Credit Opportunity Act (ECOA)
c. Fair Reporting Act
d. Truth in Lending Act (TILA)

b. Equal Credit Opportunity Act (ECOA)

he SAFE Act stands for the:
a. Secure and Fair Enforcement Mortgage Licensing Act.
b. State and Federal Expedience Act.
c. Securitization After Funding Enforcement Act.
d. State and Federal Experience Act.

a. Secure and Fair Enforcement Mortgage Licensing Act.

A charge based on the loan amount that is collected as compensation by the lender for processing the loan is called:
a. interest
b. boot
c. a loan origination fee
d. usury

c. a loan origination fee