Real Estate Finance
Exam Materials
Course Introduction
Real Estate Finance explores the fundamental concepts and analytical techniques used to finance residential, commercial, and investment properties. The course covers topics such as mortgage markets, loan structures, risk analysis, valuation, and methods of securing capital for real estate transactions. Students will also examine the roles of financial institutions, government policies, and market trends in shaping real estate financing, as well as learn to analyze the financial feasibility of real estate projects through case studies and practical applications.
Recommended Textbook
Real Estate Finance 9th Edition by John P. Wiedemer
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16 Chapters
189 Verified Questions
189 Flashcards
Source URL: https://quizplus.com/study-set/3714 Page 2
Chapter 1: History and Background
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14 Verified Questions
14 Flashcards
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Sample Questions
Q1) 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
Q2) To create a legally valid security interest, a business must ensure that the interest is:
A) Perfected
B) Debated
C) United
D) Detached
E) Exposed
Answer: A
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Chapter 2: Money and Interest Rates
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11 Verified Questions
11 Flashcards
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Sample Questions
Q1) When the Federal Reserve buys or sells government securities in the financial markets, it is called
A) Juggling the credit markets
B) Cycling the discount rate
C) Discounting the market rates
D) Open market operations
Answer: D
Q2) Fiscal policies of the government can best be described as
A) Budgetary control measures
B) Management of the U.S. Treasury
C) Government taxing and spending policies
D) Policies that control the banking system
Answer: C
Q3) Categories of demand for money are all of the following EXCEPT
A) Government requirements
B) Consumer loans
C) Mortgage loans
D) Deposits in saving associations
Answer: D
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Page 4
Chapter 3: Mortgage Money: Regulated Lenders
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) 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
Q2) 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
Q3) The deposit insurance fund controlled by the FDIC protects
A) Consumer deposits in insured banks
B) Banks against loss in loan accounts
C) Loans to consumers by regulated lenders
D) Regulated lenders against loss in operations
Answer: A
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Page 5
Chapter 4: Other Primary Market Lenders
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12 Verified Questions
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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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) If a discount is taken off the face value of a note, the result is
A) a decrease in the return to the note holder
B) no change in the return since the interest rate is unchanged
C) a higher market value for the note
D) an increase in the return to the note holder
Q2) The secondary market for mortgages can be described as the
A) Operations of Fannie Mae/Freddie Mac.
B) Market for trading second mortgages.
C) Purchase and/or sale of mortgage loans after origination.
D) Market for trading in Ginnie Mae contracts.
Q3) To purchase loans for portfolio means to
A) loans that can be easily carried about
B) purchasing loans primarily for resale
C) holding loans as an investment to earn a return
D) purchasing loans that meet certain income tax requirements
Q4) Which of the following best describe the difference between a CMO and a CDO?
A) The CDO is a security the CMO is not.
B) The CMO can be tranched and the CDO cannot.
C) The CDO can have other asset classes other than mortgage loans.
D) A CMO will always be higher rated by S & P and Moody's than a CDO.
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Chapter 6: The Mortgage Documents
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12 Flashcards
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Sample Questions
Q1) 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.
Q2) Laws that determine how land is owned and rights are conveyed are made by:
A) The Federal Land Office
B) State Law
C) Local customs
D) The Federal Housing and Urban Development
Q3) 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
Q4) Which of the following is a three-party instrument?
A) Construction Mortgage
B) Third Mortgage
C) Deed of Trust
D) Promissory Note
Page 8
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Chapter 7: Mortgage Repayment Plans
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12 Verified Questions
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Sample Questions
Q1) A major advantage for the borrower in a home equity revolving type loan is that
A) the home does not serve as collateral
B) the interest expense has been used as a qualifying tax deduction applicable to a home loan
C) the interest rate charged is limited by law to the same as a first mortgage
D) all lenders freely offer this type of credit
Q2) A buy-down mortgage is distinguished by which of the following?
A) Any mortgage with lower initial monthly payments
B) A mortgage with less-than-market interest rate
C) Payment by seller of a portion of the interest cost at closing to reduce monthly payments in the early years of repayment
D) A second mortgage that reduces, or "buys down, the first mortgage.
Q3) One reasons for the Option ARM's decline in use is
A) better rate adjustment options on new innovative mortgage products.
B) product was used for mortgagors that it was inappropriate for their risk profile.
C) the 15 year option for amortization ceased to exist.
D) the low interest rate environment.
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Chapter 8: Federal Government Underwriting Programs
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) The amount of a VA home loan guarantee (veteran's entitlement) is calculated
A) the same as a HUD/FHA insured commitment.
B) at a flat $27,500 regardless of loan amount
C) at 90% of the Certificate of Reasonable Value
D) on a sliding scale based on a decreasing percentage of the loan amount
Q2) The Federal Housing Administration implements its programs with which of the following procedures?
A) Providing government bonds as collateral for loans
B) Issuing an insured commitment covering the loan
C) Funding a portion of each loan at closing
D) Guaranteeing a portion of each loan
Q3) 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
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Chapter 9: Borrower Quali cation
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) The VA residual qualification method determines an applicant's residual income, then measures that against the applicant's
A) mortgage payment amount
B) other shelter expenses
C) other monthly obligations
D) VA calculated cost of living expense
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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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) 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
Q2) The normal method to reach a final estimate of value in a narrative appraisal is
A) an adjusted average of the approaches to value as determined by the judgment of the appraiser.
B) whatever value is shown by the major approach.
C) a mathematically determined average of all approaches.
D) only the capitalized value as determined by the current market rate of return.
Q3) The sales comparison approach to value is most widely used for which of the following types of properties?
A) Residential property
B) Income producing property
C) Buildings serving specialized purposes
D) For transactions involving government agencies
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Chapter 11: Commercial Loans: Construction and Land Loans
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) A release clause in a real estate development loan agreement is one that:
A) allows the borrower to withdraw from the agreement
B) defines the conditions under which lots can be released from the mortgage for resale to builders
C) calls for releasing collateral back to the lender
D) triggers the release of a lender from any further participation in the loan
Q2) A construction loan can include all of the following conditions EXCEPT:
A) disbursement only after certain construction has been completed
B) a release of that portion of the collateral on which disbursement of funds has been made
C) a method of assuring the lender that money disbursed to a borrower/builder is used to pay a project's bills
D) a requirement for periodic inspection to assure the lender that all plans and specifications are being met
Q3) The top designation for a accountant preparing a financial statement is:
A) Certified Management Accountant
B) Certified Public Accountant
C) Federal Approved Accountant
D) Designated Accountant
Page 13
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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) The least amount of management is needed for operating:
A) a warehouse
B) a shopping center
C) an office building
D) an apartment
Q2) Depreciation allowed for tax purposes is a percentage of the:
A) total value of the land and buildings
B) equity interest in the building
C) total value of the building
D) equity interest in the land
Q3) In analysis of a property's income and expense, the calculation of each item as a percentage of the gross operating income helps an analyst to:
A) add paperwork to the analysis
B) more accurately compare income and costs with those of other similar properties
C) compare income and expense with each other
D) determine if a rent increase is needed.
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Chapter 13: Other Financing Practices
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11 Verified Questions
11 Flashcards
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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) While the Securities and Exchange Commission does not directly regulate real estate sales, it can become involved under which of the following circumstances?
A) Whenever any sale of land is across state lines
B) If it suspects mishandling of an escrow account
C) If paper is sold for development without a specific commitment for conveyance of property
D) A sale where payment is made by installment notes
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15
Chapter 14: Technology Advances in Mortgage Lending
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11 Verified Questions
11 Flashcards
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Sample Questions
Q1) An automated underwriting system is one that:
A) automatically takes a loan application
B) can only transmit loan information for automatic analysis by a human underwriter
C) can analyze any loan without special software
D) allows a computer with proper software to analyze a loan application and grant approval if justified
Q2) Mortgage loan origination software must increasingly be compatible with:
A) Microsoft Excel
B) TurboTax
C) Third party originator web portals
D) Mortgagebot
Q3) An ownership interest of one percent or more between parties involved with a CLO operation is called a "controlled business arrangement" and must be:
A) a required used of any affiliated company
B) disclosed to any consumer
C) prohibited to use an affiliated company
D) at least a 25 percent discount given by an affiliated company
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Chapter 15: Environmental Issues
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10 Verified Questions
10 Flashcards
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Sample Questions
Q1) 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
Q2) Insofar as real estate transaction are concerned, all of the following are true about environmental issues EXCEPT
A) most commercial transactions require an environmental site assessment before an agreement can be reached
B) almost all commercial lenders require a site assessment before committing to a loan
C) it is illegal to convey property that harbors hazardous materials.
D) usage of the land may be restricted if certain environmental conditions are present
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Chapter 16: Settlement Procedures
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) In closing a real estate transaction, instructions on how the proceeds of a loan are to be disbursed are issued by the
A) Closing agent
B) Seller's agent
C) Lender
D) Trustee's Attorney
Q2) Real estate settlement procedures for residential loans, including the required settlement statement, are regulated by the
A) Office of Thrift Supervision
B) Fannie Mae-Freddie Mac
C) Department of Housing and Urban Development
D) Federal Reserve Bank
Q3) RESPA requires disclosure of estimated closing costs for residential loans at which of the following times?
A) Any time prior to actual closing
B) Within three days of loan application
C) Only if requested by the borrower
D) Within three days of loan application and again one day prior to closing if the borrower request it
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