Commercial Real Estate Finance
Practice Exam
Course Introduction
Commercial Real Estate Finance explores the principles and practices of financing income-producing properties such as office buildings, retail centers, industrial properties, and multifamily apartments. The course covers topics including mortgage structures, underwriting processes, risk analysis, valuation methods, capital markets, and debt and equity financing options. Students learn to evaluate financial statements, negotiate loan terms, and assess the impact of economic, legal, and market factors on commercial real estate investments. Real-world case studies and industry tools are used to understand current trends and develop effective investment and financing strategies in commercial real estate markets.
Recommended Textbook
Real Estate Finance 9th Edition by John P. Wiedemer
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16 Chapters
189 Verified Questions
189 Flashcards
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Chapter 1: History and Background
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14 Verified Questions
14 Flashcards
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Sample Questions
Q1) When a lender who's primary aim is to pool mortgages to resell or commit them to a Mortgage Back Security and then service the mortgages uses a funding vehicle called a:
A) REMIC
B) Mortgage Conduit
C) Ginnie Mae
D) Warehouse Line
Answer: B
Q2) A word that has the legal meaning of a borrower remaining in possession of property pledged as security for a loan is
A) Possession
B) Collateral
C) Security
D) Hypothecate
Answer: D
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Chapter 2: Money and Interest Rates
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11 Flashcards
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Sample Questions
Q1) The purpose of cash reserves as required by the FED are best described as
A) Cash placed on deposit with the FED at no interest as a cushion to meet emergency requirements of member banks
B) Cash held off the market to controlled interest rates
C) A source of income for the fed
D) A better control over a bank's lending policies
Answer: A
Q2) Monetary policies in this country are under the control of the A) Office of Thrift Supervision
B) Secretary of the Treasury
C) Federal Reserve Bank Board
D) Federal Deposit Insurance Corporation
Answer: C
Q3) The major source of money funding residential mortgage loans today is
A) Money market funds
B) Commercial bank time deposits
C) The federal government
D) The sale of mortgage backed securities
Answer: A
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Page 4
Chapter 3: Mortgage Money: Regulated Lenders
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12 Flashcards
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Sample Questions
Q1) All life insurance companies are chartered and regulated by
A) The federal Life Insurance Commission
B) Various state and federal authorities
C) State commissions only
D) Are not regulated
Answer: C
Q2) While differing to their chartering agencies and purposes, both savings association and saving banks are commonly referred to as
A) Banks
B) Long term depositor institutions
C) Thrifts
D) Banking societies
Answer: A
Q3) The purpose of federal agency underwriting of mortgage loan pools is to
A) Enhance the credit-worthiness of mortgage-backed securities thus reducing the costs of interest
B) Provide an additional source of income for the federal government
C) Expand government control over mortgage lending
D) Regulate qualification for borrowers
Answer: A
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Chapter 4: Other Primary Market Lenders
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12 Flashcards
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Sample Questions
Q1) The fee a mortgage lender charges for assembling a loan package and determining acceptance or rejection of an applicant is all a loan ________________.
A) Underwriting Fee
B) Servicing Fee
C) Assembling Fee
D) Origination Fee
Q2) Mortgage brokers residential mortgage loan market share has decreased substantially because of
A) the rapid consolidation of the mortgage banking industry and new compensation disclosure rules.
B) the complexity of mortgage loans has grown beyond the capabilities of mortgage brokers .
C) legislation that restricts major company lenders.
D) a decline in the number of companies that qualify as mortgage bankers.
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6
Chapter 5: Mortgage Money: the Secondary Market
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Sample Questions
Q1) State and municipal housing authorities are able to offer lower cost home loans because
A) the money loaned is raised through the sale of tax-exempt bonds.
B) tax money is used to subsidize the home buyer's costs.
C) administrative costs are paid for by the government agencies involved.
D) all issues are of such large scale that costs are lower.
Q2) Which of the following entities in not considered a Government Sponsored Enterprise?
A) FHA
B) Fannie Mae
C) Federal Home Loan Bank
D) Freddie Mac
Q3) A unit of measure when used as a real estate finance term amounting to one hundredth of one percent is:
A) One Discount Point
B) One Basis Point
C) A Fraction
D) One Point
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Chapter 6: The Mortgage Documents
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12 Flashcards
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Sample Questions
Q1) Which of the following folds the highest priority of claim if properly filed against property?
A) Property Taxes
B) First Mortgage Lien
C) Second Mortgage Lien
D) Homestead Claim
Q2) The primary purpose for recording a mortgage instrument is to
A) establish its validity
B) comply with tax laws
C) give public notice of its existence
D) safeguard the document
Q3) A prepayment penalty could be due if
A) the loan is foreclosed.
B) the monthly payment is delinquent.
C) payment is made prior to maturity.
D) the lender grants a payment moratorium.
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Chapter 7: Mortgage Repayment Plans
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Sample Questions
Q1) Which of the following is the most important distinguishing feature of an adjustable rate mortgage?
A) The payment amount is fixed for the life of the loan.
B) The lender has the right to change the interest rate during the term of the loan.
C) The term of the loan may be extended.
D) The borrower has the right to reject a change in the payment amount.
Q2) A shared equity mortgage allows
A) the lender to share in any appreciation made by the property pledged
B) two or more parties to share property ownership and the mortgage obligation
C) one party to undertake the mortgage obligation and another to take or share ownership
D) a partial obligation on the mortgage commensurate with their ownership interest\
Q3) A reverse annuity mortgage is intended to
A) provide a source of income for an elderly person
B) make monthly payments in reverse order of date due and amount
C) reduce the principal due
D) allow interest to be escrowed and remitted at a later date
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Chapter 8: Federal Government Underwriting Programs
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Sample Questions
Q1) 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?
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
Q2) Which FHA Program Section has been phased out and is now covered by FHA's Section 203(b) program with higher restrictions on collateral approval?
A) Section 354
B) Section 203(k)
C) Section 234(d)
D) Section 1492
Q3) FHA loans originated on or after December 15, 1989 are restricted to which of the following assumption policies?
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
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10
Chapter 9: Borrower Quali cation
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Sample Questions
Q1) The percentage ratios used as guidelines in the qualification of an applicant's income by HUD/FHA are based on the applicant's
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
Q2) The Federal Credit Reporting Acts primary provisions are to:
A) make available to the mortgagor procedures for disputing accurate information on their credit report.
B) create a rule that all credit report users provide a copy of the credit reports to the borrower.
C) provide satisfactory procedures to ensure the confidentiality and accuracy of consumer credit information.
D) allow practical procedures to deny credit to credit-worthy borrowers.
Q3) The source of repayment of a home loan is expected to come from:
A) income derived from the property itself
B) additional borrowing
C) the personal income of the borrower
D) other rental income
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Page 11
Chapter 10: Property Analysis
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Sample Questions
Q1) The principle of appraising that considers the amount of value that may be added by an improvement is
A) Substitution
B) Anticipation
C) Conformity
D) Contribution
Q2) Which of the following types of legal description is most commonly found in urban areas?
A) Geodetic or government survey
B) Metes and Bounds
C) General Survey
D) Lot and Block
Q3) The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is:
A) $120,000
B) $200,000
C) $240,000
D) $480,000
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Chapter 11: Commercial Loans: Construction and Land Loans
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12 Flashcards
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Sample Questions
Q1) The major difficulty in obtaining a raw land purchase loan is:
A) the land is hard for the lender to inspect
B) the value is difficult to determine
C) it is not certain that its value will increase
D) it produces no income while expenses like taxes and insurance continue
Q2) A study that projects the potential success or failure of a proposed project is called:
A) feasibility study
B) an appraisal
C) a pro forma study
D) a future possibility study
Q3) Unlike the permanent loan, a construction loan usually requires the endorsement of the:
A) Owner/builder
B) Future tenants
C) Landowner
D) Mortgagee
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Chapter 12: Commercial Building and Farm Loans
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) A stabilized income property is one in which the building has a longer operating history and is usually has a _____% or higher occupancy and is for sale by its current owner for varying reasons.
A) 75
B) 80
C) 85
D) 90
Q2) One of the better ways to assure success with a high rise office building investment is to:
A) pick a suit able location
B) prelease as much space as possible, preferably to a major tenant
C) obtain the best possible financing
D) require that the building contractor be bonded
Q3) Which of the following is true of percentage leases?
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
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14
Chapter 13: Other Financing Practices
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Sample Questions
Q1) All of the following are true of maximum and minimum limits for conventional loans
EXCEPT:
A) Fannie Mae/Freddie Mace set new limits each year for their conventional/conforming loans
B) if a prospective loan exceeds an institution's in-house limit, other lenders may join in a participation loan
C) setting minimum limits for loan amounts is a possible violation of the Fair Housing Act
D) all states set limits on the maximum amount for residential loans within the state
Q2) Which of the following is a FALSE statement in regard to refinancing a home loan?
A) Lenders are free to set their own requirements for refinancing a loan
B) Income tax laws may affect the savings in refinancing
C) A 2 percent reduction in interest rate is a profitable refinancing in every case
D) A major problem is the appraised value of the property may be less than the balance due on the existing mortgage loan
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Chapter 14: Technology Advances in Mortgage Lending
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Sample Questions
Q1) The best explanation of computerized loan origination is:
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
Q2) The advantage of a web site offering mortgage loans is:
A) an individual can obtain a mortgage loan without paying for or dealing with an agent or loan officer
B) the availability of loans is very limited
C) the cost is generally higher than with regular channels
D) it is a time consuming procedure as careful analysis is needed.
Q3) Mortgage loan origination software must increasingly be compatible with:
A) Microsoft Excel
B) TurboTax
C) Third party originator web portals
D) Mortgagebot
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16
Chapter 15: Environmental Issues
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10 Flashcards
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Sample Questions
Q1) In many parts of the country, contaminated areas are being removed from the Superfund program allowing clean-ups to be accomplished and the land returned to useful activity under which of the following programs?
A) Restoration program
B) Brownfields program
C) ASTM's transaction screen
D) Contamination release program
Q2) Which of the following statements is FALSE in regard to asbestos in a building?
A) Ingestion of microscopic fibers can cause asbestosis, a noncancerous disease
B) The real danger lies in loose, or "soft," asbestos not that occurring in hard form
C) In all cases where asbestos is found, the EPA recommends immediate removal
D) The EPA will accept an in-place management program rather than require removal of all asbestos
Q3) LEED stands for:
A) Land Environmental Enforcement Department
B) Local Energy Environment Disturbance Division
C) Leadership in Energy & Environmental Design
D) Lead Elements Encroachment Detection
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Chapter 16: Settlement Procedures
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Sample Questions
Q1) Which of the following is a prohibited practice as defined by RESPA requirements?
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
Q2) 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)
A) $250.00
B) $277.78
C) $246.57
D) 208.33
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