Instructions: Circle your response and go to Appendix B to read the complete explanation for each question.
1. The most effective method for the Federal Reserve to create a tight money market is to:
a. buy government bonds and increase the reserve requirement.
b. sell government bonds and decrease the reserve requirement.
c. buy government bonds and raise the discount rate.
d. sell government bonds and raise the discount rate.
2. What federal agency insures deposits in all federally chartered banks and savings institutions?
a. GLBA b. HUD c. FIRREA d. FDIC
3. Which of the following is the best description of the term mortgage yield?
a. The total amount of balloon payments
b. A net increase in the equity value of a mortgaged property c. The effective return of interest to the investor
d. Subrogation of the original mortgage
4. The process of gradually relaxing regulatory restraints is called:
a. disintermediation.
b. deregulation.
c. depreciation.
d. none of the above
5. The type of lenders having the greatest percentage of its assets invested in residential real estate mortgages are:
a. commercial banks.
b. credit unions.
c. life insurance companies.
d. thrifts.
6. Which of the following lenders would be most likely to loan funds for construction costs for a single-family residence?
a. Commercial bank b. Pension fund
c. Savings and loan association d. Life insurance company
7. Which real estate lender has lending policies characterized by long-term financing, few construction loans, larger loans preferred, and loans that usually are not serviced?
a. Commercial banks b. Mortgage companies c. Insurance companies
d. Savings and loan associations
8. Life insurance companies that do not deal directly with mortgagors or trustors usually make real estate loans to purchase indirectly through ����������, for which they pay a loan preparation and service fee.
a. the FHA
b. mortgage companies
c. savings and loan associations d. the VA
9. In the context of financing real property, the term warehousing most closely refers to:
a. a large loan on a storage facility.
b. a mortgage banker collecting loans before selling them.
c. loans regulated by Article 7 of the California Real Estate Law.
d. underwriting stock issues with loans secured by industrial property.
10. Which of the following are not considered institutional lenders?
a. Mortgage companies b. Commercial banks c. Insurance companies
d. Savings and loan associations
11. Most junior loans negotiated in today’s market are secured from:
a. private lenders.
b. commercial banks.
c. private mortgage insurance companies.
d. savings and loan associations.
12. In the field of real estate financing, the term secondary mortgage market usually refers to:
a. junior liens.
b. secondary financing.
c. unsecured financial instruments.
d. the resale or transfer of existing trust deed loans.
13. The original purpose of the Federal National Mortgage Association (FNMA) was:
a. buying and selling FHA-insured and VA -guaranteed loans in the secondary market.
b. buying and selling conventional loans in the secondary market.
c. buying FHA and VA loans in the primary market.
d. selling FHA and VA loans in the primary market.
14. Which of the following does not participate in the secondary mortgage market for real estate loans?
a. GNMA b. FHA c. FNMA d. FHLMC
15. Regulation Z requires that consumers be informed of credit terms by the:
a. broker.
b. trustee.
c. creditor.
d. escrow officer.
16. The main purpose of the federal Truth in Lending Act is to:
a. eliminate or minimize usury.
b. establish the maximum annual percentage rate.
c. limit the cost of credit available to consumers.
d. require disclosure of credit terms so consumers can compare loans.
17. Which of the following would be exempt from Regulation Z?
a. Loan for agricultural purposes made by a federally chartered bank.
b. Loan for household purposes obtained from a credit union.
c. $90,000 mortgage from a savings and loan institution secured by a single-family residence.
d. $15,000 loan used to purchase an owner occupied mobile home.
18. If only the annual percentage rate (APR) is disclosed in an advertisement for property, which additional disclosures must be made?
a. The amount or percentage of the down payment b. The terms of repayment
c. The amount of any finance charge d. No other disclosures are required
19. Which of the following fees may not be included in the finance charge according to the federal Truth in Lending Act?
a. Interest b. Finder’s fees c. Buyer’s points d. Appraisal fees
20. In advertising the availability of real estate loans, using any of the following phrases by itself would be a violation of the federal Truth in Lending Act’s Regulation Z, except:
a. 5% down payment.
b. 360 payments.
c. easy terms available.
d. 30-year loans.
21. When advertising a property for sale, which of the following statements would place the broker in violation of the federal Truth in Lending Act?
a. 3-bedroom, 2 bath, excellent FHA or VA financing available; total price
$225,000
b. 4-bedroom, 2 baths, easy terms; total price $225,000
c. 3-bedroom, 2 bath, large lot, with 10% down; total price $225,000 d. 3-bedroom, 3 bath, owner will help finance; total price $225,000
22. The main purpose of RESPA is to:
a. regulate all real estate loans.
b. choose a lender that can process applications for loans.
c. regulate home improvement loans.
d. require that disclosures be made by lenders that make loans on 1-to-4 unit dwellings.
23. The Federal Real Estate Settlement Procedure Act of 1974 (RESPA) pertains to:
a. all residential property.
b. residential properties with 1-to-4 units.
c. commercial properties only.
d. agricultural property.
24. On loans governed by RESPA, a buyer or seller may legally be charged for all of the following, except:
a. preparation of the loan documents.
b. conducting an appraisal prior to the loan.
c. preparation of the Uniform Settlement Statement.
d. preparation of credit reports.
25. The maximum commission that can be charged by a licensee for negotiating a second trust deed of $7,500 for a period of five (5) years is:
a. 5%.
b. 10%.
c. 15%.
d. unlimited because this loan is not regulated by Article 7.