Which type of lender specializes in taking in savings deposits and then lending money out to consumers through mortgages and other loans?
Credit union
Mortgage banker
Mortgage broker
Savings and loan
In what way could the Fed make it harder for people to obtain mortgages?
By increasing regulation in the secondary mortgage market
By increasing reserve requirements
By purchasing more securities
By purchasing more stock from the stock market
Shelly’s flower business is blooming and it’s time for her business to grow. She plans to take out a business loan to open two more shops on the north side of town. Which lending institution would she most likely go to for the loan?
A commercial bank
A credit union
An investment group
A savings and loan
Mick focuses on originating mortgage loans at a company that has in-house loan processors and underwriters. The options he offers consumers are limited to the products his company offers. What’s Mick’s position?
Mortgage banker
Mortgage broker
Mortgage servicer
Real estate investor
Cheryl is getting her mortgage through her small-town credit union, called Mid-State Meadows Credit Union. Mid-State recently needed extra funding. Which of these agencies most likely provided that funding?
A Federal Home Loan bank
The Federal Housing Finance Agency
The Federal Mortgage Lending Institution
The Federal Reserve System
What is the most likely effect when the Fed buys securities on the open market?
Banks will have less money to lend.
Interest rates will increase.
The economy may grow due to an increased money supply.
The economy may slow down due to a smaller money supply.
The rate at which a bank can obtain an overnight loan from another bank without providing collateral is called the ______ rate.
Adjustable
Discount
Federal funds
Prime
Gunther’s gross monthly income is $3,800, and he has no monthly debt payments. The lender’s qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What’s the maximum housing payment Gunther can afford?
$1,064
$1,297
$1,368
$1,492
Jane is purchasing a property for $310,000 and plans to finance $250,000. What is the loan-to-value ratio? (Round to the nearest percentage.)
79%
81%
83%
85%
The secondary mortgage market buys loans from the primary market. How does this aid the lending market?
Avoid foreclosure of borrower properties
Ensure funds are available to borrowers
Prevent bank runs by consumers
Streamline lenders’ bankruptcy processes
The Federal Reserve System has just raised interest rates. Which of the following situations is the most likely outcome?
A year later, the economy experiences another financial crisis like the one of 2007.
Eight months later, many people who could not have afforded mortgages before are able to get them.
Six months later, the Connors can no longer afford the mortgage for the house they’ve been keeping their eye on.
The cost of renting commercial properties decreases.
Which of the following statements is true of the secondary mortgage market?
Borrowers have a say in which entity may purchase their mortgages in this market.
Lenders don’t purchase loans from other lenders in this market.
The borrower’s rights are unaffected.
The loan originator continues to service the loan after it’s sold.
Patel and Rakhi just had twins, so they need a bigger home. The loan amount on their new home is $205,000, and their interest rate is 3.7%. Their lender is charging them a 2% loan commitment fee, and when they close in two weeks they expect to pay $6,150 in closing costs. Patel and Rakhi will pay a ______ commitment fee.
$0
$4,100
$6,150
$7,585
How does the lender determine whether the property is worth the sales price?
Appraisal
Demographics of the area
Prior history with borrower
Style of home
A buyer is purchasing a property for $400,000. His lender’s loan-to-value ratio is 80%. How much is the buyer financing?
$320,000
$360,000
$400,000
$80,000
How does the Federal Housing Finance Agency affect mortgages?
It acts as a watchdog and focuses specifically on educating consumers about mortgage loans.
It controls how much money is available to banks. It also controls interest rates, which affect how much mortgages cost.
It lends money to other financial institutions (not end-users), which makes more money available for mortgages and keeps down the costs of borrowing money.
It sets limits for conforming loans and controls the amount of money that lower-income people can borrow.
What’s the role of the primary mortgage market?
To convert packaged loans into securities
To provide personal and consumer loans
To purchase loans from individual lenders
To work with borrowers in originating and funding mortgage loans
George and Annette are refinancing their home. They’re borrowing $267,500 at a 5% interest rate, and their lender is charging them a flat commitment fee of $1,500. They’ll pay $6,600 in closing costs. Whether they close or not, George and Annette will pay a ______ loan commitment fee.
$0
$13,425
$1,500
$6,600
What is the most likely effect when the Fed sells securities on the open market?
Banks will have more money to lend.
Interest rates will decrease.
The economy may grow due to an increased money supply.
The economy may slow down due to a decreased money supply.
If Emily has received pre-approval for her mortgage loan, it means which of the following steps has been completed?
A conversation with the lender in which Emily discloses her income and debt
The appraisal, showing that the home is valued appropriately
The inspection, showing that no major repairs are required
The loan application and lender verification of data
When considering loan risk, which two items will lenders consider in equal measure?
Borrower and property
Credit and employment
Debt and income
Loan and value
George has $625 in monthly debt obligations, and his anticipated mortgage payment is $1,828. His gross income is $9,869, and his net income is $7,895. What’s his housing ratio?
15.23%
18.52%
23.15%
30.71%
You’re a farmer. Which loan program might be tailor-made for you?
Farmer Mac
FHA
Freddie Mac
Ginnie Mae
The buying and selling of government securities as a way to influence the money supply and balance economic growth describes ______.
Discount window
Federal funds rate
Open-market operations
Reserve requirements
Your buyer clients have been pre-approved for a $325,000 mortgage. Which of the following must be true?
The home has appraised for at least $325,000.
The inspection indicated that no major repairs are required.
They have an accepted offer and are under contract for a home.
They’ve submitted a loan application, and the lender has verified their financial information.
How does a lender in the primary mortgage market earn money when a loan is originated?
By charging loan origination fees
By preparing tax records
By purchasing loans
By setting interest rates
Which interest rate do banks use to offer consumer loans?
Adjustable rate
Discount rate
Federal funds rate
Prime rate
Roger has a sufficient income, has never missed a loan or credit payment, and has an adequate credit history. His credit score makes him a very creditworthy consumer. When obtaining a loan, which rate will he most likely get?
Adjustable rate
Discount rate
Federal funds rate
Prime rate
The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral is called the ______ rate.
Discount
Federal funds
Fixed
Prime
What institution was established in 1938 to purchase FHA-insured loans from individual lenders, group the loans together, and sell them as mortgage-backed securities to investors?
Fannie Mae (FNMA)
Farmer Mac
Freddie Mac (FHLMC)
Ginnie Mae (GNMA)
Which of the following is regulated by the Federal Housing Finance Agency?
Fannie Mae
Farmer Mac
Ginnie Mae
Real estate licensees
A commitment fee may be a percentage of the loan amount or ______.
A flat fee
A percentage of the appraised value
A percentage of total amount financed
The amount of the down payment
What can a borrower obtaining a mortgage for a home purchase expect from the lender?
The borrower will be working with a lender in the secondary mortgage market.
The borrower will work with a lender in the primary mortgage market.
The primary lender is prohibited from making money on the loan.
The primary lender is required to sell the loan on the secondary mortgage market.
A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What’s the amount of the loan origination fee if the lender charges one-and-a-half points?
$5,000
$6,750
$750
$7,500
Which type of lender is a member-based cooperative that provides credit for auto loans and home loans, takes deposits, and offers savings vehicles and money markets?
Credit union
Mortgage banker
Mortgage broker
Savings and loan association
What institution was formed in 1968 and took over the sale of the government loan market?
Fannie Mae (FNMA)
Farmer Mac
Freddie Mac (FHLMC)
Ginnie Mae (GNMA)
Rachel loves convenience. As you can imagine, she was thrilled when she was able to finance her mortgage through the same institution where she deposits her payroll checks. Which of these most likely financed Rachel’s mortgage?
Insurance company
Investment group
Mortgage broker
Savings and loan
Which of the following is part of the Consumer Financial Protection Bureau’s mission of consumer protection?
Enforce consumer financial protection laws.
Level discrimination penalties and fines.
Provide loan programs for first-time homebuyers.
Provide low fee loans to consumers.
What function does the primary mortgage market serve?
To loan money to banks
To originate and fund mortgage loans to consumers
To provide personal and consumer loans to individuals
To purchase loans from banks
A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a one-point loan origination fee. How much is the loan origination fee?
$3,200
$3,600
$4,000
$800
Darrel loves working in the mortgage lending industry. On a daily basis, he works with multiple lenders to find and negotiate the best deals for his customers. What is Darrel’s profession?
Mortgage banker
Mortgage broker
Mortgage servicer
Real estate investor
A buyer is purchasing a home for $400,000 and is financing $300,000. What is the loan-to-value ratio?
72%
75%
82%
96%
Which of the following statements about loan pre-qualification and loan pre-approval is true?
Pre-qualification and pre-approval are the same thing.
Pre-qualification requires a thorough review of the borrower’s financial status, whereas a pre-approval is a cursory overview.
Sellers usually perceive that a borrower with a pre-approval is more serious about buying, since pre-approval requires verifying the borrower’s financial status.
Sellers usually prefer pre-qualification because it’s easier to understand.
A buyer is purchasing a property for $500,000. His lender’s loan-to-value ratio is 90%. How much is the buyer financing?
$400,000
$450,000
$50,000
$500,000
A buyer anticipates a house payment of $1,000 per month, with monthly homeowner association fees of $150. The buyer also has a car payment of $400 per month. If the buyer earns a monthly gross income of $5,000, what’s the housing ratio?
20%
23%
28%
31%
Jane found a house she loved that was listed at $345,000. Her offer of $330,000 was accepted, but the appraisal came in at $300,000. Jane plans to finance $275,000. What’s the loan-to-value ratio?
81%
82%
92%
97%
What is a characteristic of the primary mortgage market?
It earns money from buying packages of loans.
It’s prohibited from making money by collecting fees from borrowers.
It’s required to sell loans on the secondary market.
It works directly with borrowers to fund loans.
Which of the following describes the prime rate?
The rate at which a bank can obtain a loan from another bank
The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral
The rate at which a bank or lender may loan money to its most creditworthy borrowers
The rate at which borrowers can refinance their mortgages
Ivan locked in a 3.04% interest rate for his home purchase. His lender charged him a 3% loan commitment fee. His loan amount was $424,000 and his appraised value was $525,000. Unfortunately, Ivan’s financing fell through. He owes the lender ______.
$12,720
$12,889
$15,750
$15,960
Lenders often look at the appraised value of a property compared to the amount of the loan when considering how much a borrower must provide as down payment. What is this value called?
Credit score
Debt-to-income ratio
Loan-to-value ratio
Net worth
Traditionally, lenders’ qualifying mortgage rules use a range of percentages to qualify for both the housing debt-to-income ratio and the total debt-to-income ratio. What are those ratio ranges?
25% to 28% for housing; 33% to 36% for total debt
25% to 28% for total debt; 33% to 36% for housing
25% to 33% for housing; 28% to 36% for total debt
25% to 33% for total debt; 28% to 36% for housing
Noah owns an LLC that buys and sells stocks on the NASDAQ 100. He needs some additional financing. To which type of lending institution might he prefer to go?
A commercial bank
A credit union
An investment group
A savings and loan
Which of the following is a likely effect when the discount window is closed?
Banks are restricted from making loans to consumers.
Banks don’t have access to additional funds.
Banks have access to additional funds through their district reserve bank.
Interest rates plummet.
Tanya has received a loan pre-qualification, which means that which of the following steps has been completed?
Correspondence with a lender, in which she provides some basic financial information
The appraisal, showing that the home is valued appropriately
The inspection, showing that no major repairs are required
The loan application and lender verification of data
What could be a consequence if there were no secondary mortgage market?
Interest rates would fall.
Lenders might not have funds available to make new loans to the public.
There wouldn’t be any institutions available to service loans.
Unemployment would rise.
Which of the following describes the discount rate?
The rate at which a bank can obtain a loan from another bank
The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral
The rate at which a bank or lender may loan money to its most creditworthy borrowers
The rate at which borrowers can refinance their mortgages
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase?
$208,000
$220,000
$300,000
$312,000
Phoebe’s gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender’s qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What’s the maximum housing payment she can afford?
$1,075
$1,152
$1,176
$1,512
Tess has $385 in monthly non-housing debt obligations, and her anticipated mortgage payment is $1,103. Her gross income is $7,598, and her net income is $5,815. What’s her total DTI (debt-to-income ratio)?
14.51%
18.96%
19.58%
25.58%
Your buyer client, Max, just signed a purchase agreement for a $520,000 home. He has a 60% LTV ratio, and his lender’s charging a 1.5% loan origination fee. What loan origination fee can Max expect to pay at closing?
$2,200
$3,120
$4,200
$4,680
Georgia and Stan are savvy house hunters who have been pre-approved for a $250,000 mortgage. Which of the following must be true?
The home has appraised for at least $250,000.
The inspection indicated that no major repairs are required.
They have an accepted offer and are under contract for a home.
They’ve submitted a loan application, and the lender has verified their financial information.
Which of the following describes the federal funds rate?
The rate at which a bank can obtain a loan from another bank
The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral
The rate at which a bank or lender may loan money to its most creditworthy borrowers
The rate at which borrowers can refinance their mortgage
Harley and Quinn are refinancing their home and their lender is charging them 1% for their loan commitment fee. Their loan amount is $192,000, their interest rate is 4.75%, and their appraised value is $275,000. Harley and Quinn will pay a ______ loan commitment fee.
$1,920
$2,750
$3,650
$9,120
The amount of money a member bank must keep on deposit at its reserve district bank describes ______.
Down payments
Principal
Reserve loans
Reserve requirements
You’re working with a buyer who’s purchasing a home that appraised at $80,000. The buyer is obtaining a 90% loan, and the lender will charge a one-point origination fee at closing. How much will the loan origination fee be?
$712
$720
$728
$800
Tom and Allie are buying an investment property for $279,500. Their loan amount is $215,000, and their interest rate is 4.375%. The lender is charging them a flat commitment fee of $1,500. Whether they close or not, Tom and Allie will pay a ______ loan commitment fee.
$12,228
$1,500
$4,825
$9,406
In which market do lenders that originate real estate loans operate?
Government market
Primary mortgage market
Real estate investment trust market
Secondary mortgage market
Which government entity oversees open-market operations?
Federal Open Market Committee
International Monetary Fund
U.S. Mint
U.S. Treasury
The Federal Reserve System is made up of 12 Federal Reserve districts. Which of the following statements about the Fed is true?
All national banks must be part of the Fed.
All state banks must be part of the Fed.
All state banks must purchase stock in the national banks.
Each district is served by two Federal Reserve Banks.
In the eyes of a lender, when financing a residence, what advantage does an investor have over owner-occupied borrowers?
Investors always pay cash.
Investors are less of a risk.
Investors can use rental income to qualify.
Investors maintain their property better.
Identify an example of a loan that originated in the primary mortgage market.
ABC Bank loan
Fannie Mae loan
Freddie Mac loan
Ginnie Mac loan
A commitment fee is calculated based on the undisbursed loan amount and is usually paid ______.
At closing
At the time of the loan application
When the appraisal is done
When the borrowers lock in their rate
13sect.unit3.CeSh.PreLic.Qonly.txt
A qualified mortgage may not include interest-only payments and balloon payments, or lender fees and points that total more than 3% of the loan because these are considered ______ in relation to the qualified mortgage.
FHA and VA loan provisions
Qualified and allowable
Toxic loan features
Updated financing provisions
A buyer has received a Closing Disclosure from the lender. What’s the purpose of this form?
To detail all costs the buyer will owe at closing
To disclose the distribution of commissions that will occur at closing
To estimate closing costs
To estimate the seller’s net proceeds
Mike’s been friends with Tim since college. They often work together: Mike flips houses and Tim’s an appraiser that he uses frequently. It works out great for both friends and Mike definitely gets a better appraised value on the flips Tim handles. For every appraisal Tim handles for him, Mike gives him a $100 gift card. In what illegal practice does it sound like they’re engaging?
Equity skimming
Falsely inflating appraisals
Under-valuing the homes
Violating fair housing laws
Which of the following is an example of a prime lender, as compared to a subprime lender?
Offers higher interest rates
Offers lower fees
Refuses to work with minorities
Targets low credit scores
Which percentage reflects the top debt-to-income ratio limit for qualified mortgages?
28%
35%
38%
43%
Which of the following is a characteristic of predatory lending?
Disclosing fees
Disclosing the true nature of the loan obligation
Linking interest rates charged to consumer creditworthiness
Making loans the consumer can’t afford
Which of the following is the process the lender uses to evaluate whether to make the loan?
Application
Appraisal
Commitment
Underwriting
What’s the minimum number of business days prior to closing that lenders have to provide borrowers with the Closing Disclosure form?
Five
Four
Three
Two
Which of the following prohibits lenders from discriminating based on protected class status?
Community Reinvestment Act
Equal Credit Opportunity Act
RESPA
Truth in Lending Act
Mortgages may still, but only rarely, contain which of the following clauses?
Alienation clause
Amortization clause
Prepayment penalty clause
Underwriting clause
Which consumer protection act enacted in 1974 prohibits kickbacks and referral fees and requires written lender disclosure of estimated and final settlement costs?
ECOLA
Real Estate Settlement Procedures Act
The Community Reinvestment Act
The Equal Credit Opportunity Act
To whom does the subprime market cater?
High-wealth individuals
Investors
Less creditworthy borrowers
Property managers
How long does the borrower have to rescind or cancel a new mortgage obtained for an already owned property?
The borrower has 24 hours after loan application to rescind or cancel.
The borrower has 48 hours after loan application to rescind or cancel.
The borrower has three days after loan application to rescind or cancel.
The borrower must do this at the time of application.
The Truth in Lending Act requires lenders to make certain ______ to consumers.
Concessions
Disclosures
Loans
Rates available
Which of the following loan transactions would be exempt from TILA disclosure requirements?
Duplex, with office building used as collateral
Grocery store, with personal funds used as collateral
Hobby farm
Vacation home
Which of the following is a type of subprime loan usually offered to consumers with insufficient or marginal credit history?
Qualified mortgage with a safe harbor
Qualified mortgage with the rebuttable presumption
Qualified with ability to repay
Qualified with cash
Which practice involves talking the consumer into refinancing over and over so a lender can charge fees?
Loan flipping
Poison lending
Premeditated lending
Turnover lending
Ted’s property is in foreclosure, but he has some equity in his property. An investor suggests that she and Ted enter into a sales contract for a substantially higher price than the investor would actually pay. The investor pockets the cash and allows the house to be foreclosed on. What sort of scheme is this?
Equity skimming
Inflated appraisal
Silent second
Straw buyer
Samuel and Yoshi have worked at the same firm for a few months and get along well. Samuel mentions he has a credit score in the low 800s. Yoshi, who’s just starting out, persuades Samuel to sign for a loan to help Yoshi buy a property, since his credit isn’t good enough. Yoshi promises to make the mortgage payments, but two months after the deal closes, Yoshi moves across the country. Samuel’s now stuck with a $400,000 mortgage. What type of scheme is this?
Equity skimming
Inflated appraisal
Silent second
Straw buyer
When must lenders provide borrowers with a disclosure statement regarding finance charges, annual percentage rate, etc.?
At loan application or within three days after loan application
Prior to loan application
Prior to or within 10 days after the loan application
Prior to or within three days after the loan application
Your buyer plans to shop around for their mortgage loan to be sure they’re getting the best interest rate and terms. What lender-provided document outlines loan rates and fees so they can make comparisons?
The buyer’s net sheet provides all the figures necessary for comparing loan products.
The buyer’s settlement statement details all closing costs, so they can use it to compare lender loan products.
The Closing Disclosure discloses all loan costs, so they can compare costs between lenders.
The Loan Estimate provided by the lender permits the buyer to comparison shop.
Which of the following is most susceptible to a predatory lender?
A borrower with poor credit
A family
A minority
An investor
Identify the forms that current law requires to be used in all lender-financed residential closings.
GFE and Loan Estimate
GFE and TIL
Loan Estimate and Closing Disclosure
Loan Estimate and TIL
Loans for ______ purposes don’t require TILA disclosure.
Business
Consumer
Housing
Personal
Loans made to high-risk borrowers, at higher interest rates and with higher fees, are ______.
Highly qualified loans
Prime loans
Secondary loans
Subprime loans
Which act was created to safeguard the consumer in the use of credit by requiring full disclosure of the terms and conditions of that credit?
Community Reinvestment Act
Consumer Credit Protection Act
Equal Credit Opportunity Act
Real Estate Settlement Procedures Act
Why are lenders required to provide the Loan Estimate and Closing Disclosure forms to loan applicants and borrowers?
Because interest rates may rise if the buyer doesn’t close on time
So borrowers can compare loans and make decisions regarding the affordability of loans offered
So government entities can track the numbers of borrowers who decline certain types of loans
So they can collect information about loan applicants and borrowers
You’ve just learned that your buyer, Kirk, can’t obtain a qualified mortgage for his dream home because his debt-to-income ratio would be above the threshold. What is Kirk’s best option?
Get a sub-prime loan.
No options here; Kirk will need to wait until his debt-to-income ratio meets qualified lending standards.
Offer a shared equity situation with the lender.
Pay off his other debt and/or increase monthly income.
What information does the Loan Estimate provide to buyers under required disclosures law?
Broker commission rates
Final closing costs
Loan payment schedule
Referral fees
Which of the following is a mortgage where the consumer cannot later claim that the lender did not comply with the ability to repay requirements?
Qualified mortgage with ability to repay
Qualified mortgage with a safe harbor status
Qualified mortgage with cash payment option
Qualified mortgage with the rebuttable presumption
Which of the following is a tactic used by a predatory lender?
Charging minorities lower interest rates
Encouraging debt
Refusing to loan to minorities
Selling mortgages on the secondary market