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Champions Real Estate Finance Exam
Questions Rated A+
Chain of Title - ✔️ ✔️ A history or list of all recorded owners all the way back to the sovereignty of the soil.
Commercial Banks - ✔️ ✔️ Perform a variety of functions, from being a depository institution to providing lines of credit and loan products to the communities in which they are charted. Working capital is primarily generated through deposits from clients.
Ad Valorem - ✔️ ✔️ according to value
Assumption Clause - ✔️ ✔️ Allows a new borrower to take over the payments on an existing loan under specified terms and conditions.
Alienation (Due on Sale) Clause - ✔️ ✔️ Reserves the right of the lender to call the note (Declare the entire balance due) if the borrower sells the property without repaying the loan.
Annual Premium - ✔️ ✔️ based on the LTV and its added to the borrower's monthly payment.
Abstract of Title - ✔️ ✔️ A complete history of the title of a piece of property that includes deeds, easements, liens, foreclosure, wills, marriages, deaths, life, estates, fee simple estates, and anything else that had been recorded about a property.
Acceleration Clause - ✔️ ✔️ A provision in a written mortgage or note, stating that in the event of default, the entire amount of the principal becomes payable.
At the treasury level, funds can be raised to pay for government spending by increasing borrowing and - ✔️ ✔️ Raising taxes
Back Ratio - ✔️ ✔️ The ratio of the borrowers total recurring monthly debts.
Balloon Note - ✔️ ✔️ Partially amortized and most commonly done with secondary mortgages.
Blanket Mortgage - ✔️ ✔️ Covers more than one piece of property.
Bonds - ✔️ ✔️ An instrument of corporate or governmental debt. (An IOU)
Borrower, Lender, Trustee - ✔️ ✔️ A deed of trust is a three-party instrument who's parties include:
Budget Mortgage - ✔️ ✔️ The monthly house payment includes principal, interest, taxes and insurance (known as PITI)
Capacity - ✔️ ✔️ Is a measure of the borrower's ability to repay the debt, and is demonstrated through current earnings and job stability.
Capital - ✔️ ✔️ Is the sum of all assets that the borrower has accumulated.
Capital gains tax - ✔️ ✔️ The sale of capital asset results in either a gain or a loss.
Character - ✔️ ✔️ Is a measure of the willingness of a borrower to make on-time payments. Credit character is revealed in the borrower's credit report.
Character, Capacity, Capital and Collateral - ✔️ ✔️ The four C's of good lending:
chronological Age - ✔️ ✔️ The actual age of the property in years.
Chunking - ✔️ ✔️ occurs when a fraudster promises to show investors how to get rich by buying investment properties.
Churning - ✔️ ✔️ Is excessive selling/lending activity for the purpose of generating fees and commissions.
Clauses - ✔️ ✔️ may be used in subordinate finance instruments to reduce the liability of the subordinate lien holder versus the first lien holders liability.
Closed-End Mortgage - ✔️ ✔️ This loan includes a specific dollar amount and does not allow for additional borrowing on the same note and mortgage.
Closing - ✔️ ✔️ The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender.
Closing Disclosure Delivery Requirement - ✔️ ✔️ The TRID rule requires that the consumer receives the Closing Disclosure no later than 3 business days before consummation.
Collateral - ✔️ ✔️ Is something of value that can be pledged as security for repayment.
Transferability
Deed in Lieu - ✔️ ✔️ Cannot be accepted from borrower's who can financially afford their mortgage payments.
Deed in Lieu (DIL) - ✔️ ✔️ Of foreclosure (blank) is a mortgage modification option in which a borrower voluntarily feeds their collateral property in exchange for a release from all obligations under the mortgage.
Default - ✔️ ✔️ Breach or non performance of the terms of a note or covenants of a mortgage
Demand-pull inflation - ✔️ ✔️ When there is more money in the market and less goods for sale.
Department of Housing and Urban Development (HUD) - ✔️ ✔️ A federal cabinet department is active in national housing programs. Its mission is to create strong, sustainable, inclusive communities and quality affordable homes. It prevents housing discrimination through public education and enforcement are administered by the Assistant Secretary for Fair Housing and Equal Opportunity (FHEO)
Depreciation - ✔️ ✔️ Is the reduction of value of property from causes of deterioration or obsolescence.
Discount rate - ✔️ ✔️ The interest rate charged member banks that borrow from the Federal Reserve Systems
Discounted Initial Rate (teaser rate) - ✔️ ✔️ A lower interest rate is offered by the lender during the first year or more of the loan.
Dodd-Frank Wall Street Reform Act - ✔️ ✔️ Increases the ins coverage on all federally insured credit union accounts up to $250,
Effective Age - ✔️ ✔️ An appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades.
Encumbrances - ✔️ ✔️ A claim, lien, charge, or liability attached to and binding real property. An easement for ingress and egress.
Equal Credit Opportunity Act (ECOA) - ✔️ ✔️ The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status. Ensures that all consumers are given an equal chance to obtain credit.
Equity Theft - ✔️ ✔️ Occurs when fraudsters forge a deed transfer or a satisfaction lien, and then obtain new liens on the property.
Escalation Clause - ✔️ ✔️ a clause allowing the lender to raise the existing interest rate
- although most often associated with an adjustable rate mortgage, it can be used to overcome an alienation clause
Escrow - ✔️ ✔️ The deposit of funds with a neutral third party who is instructed to carry out the provisions of an agreement.
Exculpatory clause - ✔️ ✔️ Is used to limit the borrower's personal liability in the event of a default on a loan.
External Obsolescence - ✔️ ✔️ The loss in value of a property caused by factors outside the property itself.
Farmer Mac - ✔️ ✔️ Is a government-sponsored enterprise with the mission of providing secondary market for agriculture real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans.
Federal Fair Housing Act of 1968 - ✔️ ✔️ An act prohibiting discrimination in the sale or rental of housing on the basis of race, color, religion or national origin sex, handicap and familial status.
Federal Funds Rate - ✔️ ✔️ Is the rate that the Federal reserve charges banks for unsecured loans, most of which are for a very short term.
Federal National Mortgage Association (FNMA) - ✔️ ✔️ Plays a vital role in financing mortgages and increasing homeownership opportunities in the US. Began in 1938 as an agency of the federal government and was created to bring stability to the US housing market. In 1968, it became a privately owned and managed corporation. US Congress re-chartered it as a private company. Mandating that it operate with private capital on a self-sustaining basis to enhance the flow of funds through the secondary market home buyers.The largest investor in home mortgage today.
Federal Reserve (The Fed) - ✔️ ✔️ is the central bank of the United States
FHA mortgage insurance - ✔️ ✔️ Provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans.
FHA ratio - ✔️ ✔️ 31/
FHA, VA and USDA loans - ✔️ ✔️ Governmental loans include
Ginnie Mae (GNMA) - ✔️ ✔️ Was established in the U.S in 1968 to promote homeownership. It is wholly-owned government association that operates a mortgage- backed securities program designed to facilitate the flow of capital into housing industry. Does not issue, sell or buy pass-through mortgage-backed securities or purchases mortgages loans. It simply guarantees (insures).
Growth in employment, Transportation systems, Personal preference, Availability of credit, Federal government policy - ✔️ ✔️ The demand of real estate is affected by:
HOME Investment Partnership Program - ✔️ ✔️ Block grants to develop and support affordable housing for low-income residents.
In a lien theory state - ✔️ ✔️ a state where the mortgage lender has a lien on the property and the borrower has title. I own the title of my house.
In order to qualify for exemption from capital gains, the property must have been the primary residence for two of the previous (blank) years - ✔️ ✔️ 5
In title theory states - ✔️ ✔️ States where a mortgagee holds actual title to property until the loan is repaid. Compare to Lien Theory States.
Income Approach - ✔️ ✔️ Will not be used in a typical residential transaction because it applies only to income-generating rental property.
Index - ✔️ ✔️ is what the lender uses as an instrument for measuring changes in interest rates
Initial Adjustment Cap - ✔️ ✔️ ARMs that offer a fixed rate period during the first years of the loan usually have an initial rate cap that is higher than the per adjustment cap
Interest - ✔️ ✔️ money paid at a particular rate for the use of money loaned to a person or entity, it is the cost of borrowing the money.
Interim Interest - ✔️ ✔️ The accounting for amortized home loans assumes that there are only 12 months in a year, consisting of the first day of each month. The account begins on the first day of the month following the day the loan closes. The borrower pays interest for the period between the closing day and the day the principal repayment record begins. (Prepaid interest)
Intermediary theory states - ✔️ ✔️ the third party trustee holding title to the property in trust has the right to foreclose once the buyer defaults. If the borrower doesn't make the payment we don't take them to court the forecloser starts.
Judicial Foreclosure - ✔️ ✔️ The lender files suit with the (blank) system, and the borrower will receive a note in the mail demanding payment. If payment is not made after a certain time period, the mortgage property is then sold through an auction.
Late payment penalty - ✔️ ✔️ a tax penalty equal to .5 percent of the amount of tax owed for each month (or fraction thereof) that the tax is not paid.
Lien - ✔️ ✔️ Is a right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually by means of a court sale.
Lifetime Cap - ✔️ ✔️ Limits the total amount the interest rate may increase over the life of an adjustable-rate mortgage loan.
Lifting Clause - ✔️ ✔️ A clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instrument's position.
Loan Amortization - ✔️ ✔️ the repayment of a loan using equal monthly payments that cover a portion of the principal and the interest on the declining balance. The amount of the monthly payment going toward interest payment starts off large and steadily declines, while the amount going toward the principal starts off small and steadily increases
Loan Estimate (LE) - ✔️ ✔️ Form replaced the GFE form and the initial TILA disclosures and includes some new disclosures. The form must be provided by the mortgage broker or creditor upon receipt of an application. The creditor or broker must give the form to the consumer no later than 3 business days after the consumer applies for a mortgage loan.
Loan-to-Value Ratio (LTV) - ✔️ ✔️ The percentage of the lesser of the appraised value or sales price that the lender will lend.
ex: If a borrower is approved for an 80% loan, it means that the lender will loan up to 80% of the sales price or appraised value, whichever is lower.
Lock-in Clause - ✔️ ✔️ Is a condition of a mortgage loan which prohibits prepayment of the loan prior to a certain date.
M1 - ✔️ ✔️ Is defined as the sum of currency held by the public and transaction deposits at depository institutions.
M2 - ✔️ ✔️ Is defined as M1 plus saving deposits, small-denomination time deposits (those issued in amounts of less than $100,000) and retail money market mutual funds shares.
Office of Consumer Credit Commissioner (OCCC) - ✔️ ✔️ Regulates the credit industry and educates consumers and creditors. Agency efforts help produce a fair, lawful and healthy credit environment for social and economic prosperity in Texas.
Open-End Mortgage - ✔️ ✔️ Permits additional borrowing on the same note. This is sometimes called a credit card mortgage or a home equity line of credit - HELOC.
Originator - ✔️ ✔️ The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower.
Package Mortgage - ✔️ ✔️ Includes both real and personal property ( fixtures and furnishings)
Par loan - ✔️ ✔️ A loan with no discount points
PENSIL Application - ✔️ ✔️ Property Address, Estimated Value, Name of the borrower, SSN, Income, Loan Amount
Physical Deterioration - ✔️ ✔️ Is the loss in a property's value due to daily wear and tear
Points - ✔️ ✔️ Is a unit of measure. (Discount charges)
Portfolio Loans - ✔️ ✔️ Loans that are not sold in the secondary market
Power of Sale - ✔️ ✔️ Also known as a statutory foreclosure. Foreclosure without going to court. (Have no choice)
Predatory Lending - ✔️ ✔️ when an unscrupulous lender takes advantage of a consumer's lack of knowledge regarding lending practices
prepayment penalties - ✔️ ✔️ More than two-thirds of sub-prime loans have this.
Prepayment Privilege Clause - ✔️ ✔️ Is included in some loans, and allows a borrower to pay off the loan prior to the due date without incurring penalties
Primary Mortgage Market - ✔️ ✔️ The market where borrowers and lenders come together to create and negotiate terms of a mortgage transaction.
Private lenders - ✔️ ✔️ Who provides VA home loans?
Private Mortgage Insurance (PMI) - ✔️ ✔️ Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.
Processing - ✔️ ✔️ Once application is complete the file moves into this phase.
promisary note - ✔️ ✔️ A written promise to pay a certain amount of money with a certain interest rate on a certain date
Property Flipping - ✔️ ✔️ Is an elaborate scam in which unsuspecting first-time homebuyers are sold houses in serious states of disrepair for prices far above what the houses are actually worth.
Real Estate Investment Trust (REIT) - ✔️ ✔️ An investment vehicle created by congress in 1960. The effort to make it possible for small investors to invest in larger commercial properties by purchasing shares in the organization that owns the real estate.
Real Estate Mortgage Investment Conduit (REMIC) - ✔️ ✔️ Allows for the indirect investment in mortgages through the sale of securities. Purchases "pools" of mortgages
Real Estate Mortgage Trusts (REMT) - ✔️ ✔️ A special form REIT that invests in mortgages or mortgage-backed securities.
Recasting - ✔️ ✔️ Or re amortizing, a mortgage. This can reduce the borrower's monthly payment, thus making resolving a default situation more manageable. (Extending and reducing payments)
Redlining - ✔️ ✔️ A practice in which banks refuse to make loans to people living in certain geographic locations.
Refinancing options that Harp offers - ✔️ ✔️ Change from an adjustable to a fixed-rate mortgage.
Lower interest rates
Shorter term loans
Regulation X - ✔️ ✔️ The Consumer Financial Protection Bureau's (CFPB)( Blank )which implement the Real Estate Settlement Procedures Act (RESPA) Ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protection from unnecessarily high settlement charges caused by certain abusive practices.
Release Clause - ✔️ ✔️ When included in a loan instrument, a (Blank clause) allows for a portion of the loan to be paid in exchanged for the lender releasing part of the property from the mortgage. Also called blanket Mortgage
Rental assistance - ✔️ ✔️ In the form of section 8 certificates or vouchers for low- income households.
the court, ownership the property is transferred directly to the mortgage holder. The take place only when the debt amount is greater than the value of the property.
Sub-Prime Loans - ✔️ ✔️ Have risk-based pricing. The rates are not published on these loans. Borrowers are rated A-F with a prime borrower having an A rating. A minus to F- rated borrowers will pay 1 to 5 % higher than those with good credit. These are non- conforming loans.
Subordinate Clause - ✔️ ✔️ A clause in which a holder of a mortgage permits a subsequent mortgage to take priority.
Supply and Demand - ✔️ ✔️ an economic concept that states that the price of a good rises and falls depending on how many people want it and depending on how much of the good is available.
Texas Department of Housing and Community Affairs (TDHCA) - ✔️ ✔️ Is responsible for affordable housing, housing related and community service programs, and the regulation of the states manufactured housing industry.
Texas Veterans Land Board (VLB) - ✔️ ✔️ a division of the General Land Office of Texas that administers three programs to assist Texas veterans in purchasing a principal residence and/or land and in financing home improvements
The (blank) loan was developed by HUD for the rehabilitation and repair of single family properties. - ✔️ ✔️ 203(k)
The Community Reinvestment Act enacted in (blank) ensures that banks serve the needs of the community in which they where charted. - ✔️ ✔️ 1977
The entire term of the loan - ✔️ ✔️ A fixed rated mortgage remains fixed for?
The Fed uses three primary monetary policy tools to influence the cost and availability of credit: - ✔️ ✔️ 1. Open market operations
- The discount rate
- Reserve requirements
The Federal Deposit Insurance Corporation (FDIC) - ✔️ ✔️ An agency created in 1933 to insure individuals' bank accounts, protecting people against losses due to bank failures (Insures deposits only)
The Federal Fair Credit Reporting Act (FCRA) - ✔️ ✔️ Sometimes called the Fair Credit Reporting Dispute Act, is a federal law designed to protect consumers against unfair credit reporting practices and protect and credit privacy. To assure the consumer that these agencies are fair, accurate and exhibit confidentiality in their credit reporting methods.
The Federal Home Loan Bank (FHLB) System - ✔️ ✔️ A system of regional banks from which local lending institutions everywhere in America borrow funds to finance housing, economic development, infrastructure and jobs.
The Federal Housing Administration (FHA) - ✔️ ✔️ Provides mortgage insurance on loans made by blank- approved lenders throughout the US and its territories. Insures mortgages on single-family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
The Housing and Economic Recovery Act (HERA) - ✔️ ✔️ Enacted on July 30, 2008, is a major housing law that serves multiple purposes:
The modernization of the Federal Housing Administration (FHA) , foreclosure prevention, and the enhancement of consumer protections.
The SAFE ACT is a KEY component of HERA :
- it is designed to enhance consumer protection and reduce Fraud by requiring national minimum standards for mortgage training, including prelicensing education and annual continuing education
Way to Remember: in order to be SAFE, you need a HERA! (female version of a hero)
The interest rate that is determined by individual banks. - ✔️ ✔️ What is the prime rate?
The Safe Act - ✔️ ✔️ Designed to enhance consumer protection and reduce fraud. (Key component of HERA)
The sale of mortgage loans as investments - ✔️ ✔️ The secondary mortgage market was designed to provide greater liquidity to the residential real estate market, primarily by
The single Family Housing Direct Home loan is also known as - ✔️ ✔️ Section 502 Direct Loan Program
The size of a loan a veteran may receive determine by this service - ✔️ ✔️ Entitlement
Through which avenue does the US Treasury promote economic growth. - ✔️ ✔️ Policies that support job creation
Trigger Terms - ✔️ ✔️ Specific credit terms that may not be advertised unless the advertisement includes other detailed information.
USDA Farm Loans (FSA) - ✔️ ✔️ Is an agency of the US Dept of Agriculture. Farm Loan Programs for a farmer or rancher who is unable to obtain credit elsewhere to start, purchase, sustain, or expand a family farm.
Up-front mortgage insurance premium (UFMIP) - ✔️ ✔️ a one-time mortgage insurance fee paid at closing on FHA mortgage loans. And it can be added to the loan even if it causes the loan to exceed the appraised value of the property.
