Real Estate Finance
Final Exam Questions
Course Introduction
Real Estate Finance explores the fundamental principles and practices involved in financing real estate properties, including both residential and commercial sectors. The course covers key topics such as mortgage markets, loan types, underwriting standards, risk assessment, capital structure, and investment analysis. Students will examine the roles of various financial institutions, governmental policies, and economic factors that influence real estate finance. Through case studies and practical applications, learners gain an understanding of how to evaluate financing options, structure deals, and use financial tools to make informed decisions in real estate transactions.
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
Source URL: https://quizplus.com/quiz/73998
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) 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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Page 3
Chapter 2: Money and Interest Rates
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11 Verified Questions
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) 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
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Chapter 3: Mortgage Money: Regulated Lenders
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12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/73989
Sample Questions
Q1) The secondary market for mortgage loans can best 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
Answer: C
Q2) The investment policies of commercial banks favor all of the following types o mortgage loans EXCEPT
A) Long term mortgage loans held in portfolio
B) Short term construction loans
C) Warehouse lines of credit granted to mortgage companies
D) Medium term mortgage loans to accommodate major depositors
Answer: A
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 growing complexity of mortgage loans and the need for better consumer protection against poorly qualified brokers has led to
A) great simplification of the mortgage loan process.
B) lowering the qualification requirements of borrowers.
C) state and National education and licensing of mortgage brokers.
D) requirements that all mortgage brokers become mortgage bankers.
Q2) A basic difference between mortgage companies and regulated lenders is that mortgage companies
A) are subject to no regulations
B) hold no deposit assets with which to fund loans
C) are higher cost operators and unable to be competitive
D) handle only FHA and VA loans
Q3) Automated underwriting means
A) used only by Internet operators
B) analysis of loan application by computer software programs that allow loan approval if justified
C) analysis of loan application by elimination of all human input
D) transmission of loan info via a computer
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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) As used in mortgage lending, yield means
A) the flexibility allowed in a mortgage loan.
B) to give priority to another.
C) the return of interest plus discount.
D) the interest earned on the loan.
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) The distinguishing feature of a collateralized mortgage obligation, compared with a pass-through, is that:
A) the collateral is other than mortgage loans.
B) the cash flows are segmented and distributed to different classes of security holders.
C) interest payments on all classes are withheld until maturity.
D) all principal payments are discounted when issued.
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Chapter 6: The Mortgage Documents
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) When you hypothecate an asset it means that you as a borrower have:
A) signed a promissory note
B) given a deed in lieu of foreclosure
C) pledged an asset as collateral without giving up it use
D) assigned their debt to another while retaining liability
Q2) A written agreement that grants priority of claim to another party is called a/an:
A) subordination agreement
B) adjustment of priorities instrument
C) second Lien
D) latent claim
Q3) Which of the following type of liens is the generally thought to be the most favorable towards lienholders right to foreclose?
A) Mortgage
B) Homeowners Associations
C) Deed of Trust
D) Mechanics lien
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Chapter 7: Mortgage Repayment Plans
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) What was the primary early selling point of a borrower being offered a piggyback mortgage from a financial advantage perspective?
A) Not buying private mortgage insurance which was not tax deductible for many years.
B) The interest rate on the piggyback mortgage was always lower than a home equity line of credit.
C) Fannie Mae would buy both the first and second when made together making the closing and funding go faster.
D) When a first and second mortgage were made together it made Loan modification or settlement problems easier to deal with if they occurred.
Q2) 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
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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) Which of the following Federal legislation gives Veterans who were forced to relocate from having to take a loss on the sale of their home due to a drop in fair value?
A) Economic Stimulus Act of 2008
B) American Recovery and Reinvestment Act of 2009
C) VA Home Equity Conversion
D) Housing and Economic Recovery Act in 2008
Q2) In the language of HUD/FHA, "upfront mortgage insurance premium" specifically means:
A) any FHA mortgage insurance premium
B) a monthly premium charged for default insurance
C) the insured commitment
D) a premium charged that is paid in full (or added to the loan amount) at the time of closing
Q3) To qualify property to be pledged as collateral for a VA guaranteed loan, it must meet VA standards as determined by
A) written affidavit of the veteran seller
B) inspection and approval of the lender's agent
C) any approved VA builder
D) a VA approved appraiser
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Page 10
Chapter 9: Borrower Quali cation
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) The assistance given by a credit report to borrower qualification is primarily to:
A) verify the applicant's place of residence
B) show the applicant's payment record to other creditors
C) confirm employment and banking relations
D) disclose any liens against applicant's property
Q2) 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
Q3) 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.
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Chapter 10: Property Analysis
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) 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.
Q2) 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
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 Verified Questions
12 Flashcards
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Sample Questions
Q1) 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
Q2) 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
Q3) 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
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13
Chapter 12: Commercial Building and Farm Loans
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) 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
Q2) A "net lease" means which of the following?
A) The tenant pays a net rent after deducting certain listed operating expenses
B) The tenant pays rent based only on the net interior space under lease
C) The tenant pays for all of its own services
D) The tenant pays all maintenance and building operating expenses plus insurance and taxes on the building
Q3) 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
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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) Which of the following is correct in regard to an owner's title insurance policy?
A) It is transferable to a new property owner
B) The policy terminates when the mortgage loan is paid off
C) The policy terminates when the property is transferred to a new owner
D) It protects the policy holder against adverse claims even beyond the term of property ownership
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
Q3) Which of the following is NOT an acceptable procedure for proving title to land?
A) An attorney's opinion based on research of an abstract
B) An accurate survey made by a state-licensed surveyor
C) Purchase of title insurance
D) A Torrens registration system
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Chapter 14: Technology Advances in Mortgage Lending
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11 Verified Questions
11 Flashcards
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Sample Questions
Q1) Fannie Mae offers two automated underwriting programs, one called " Desktop Originator" that is for use:
A) by an agent taking information on a laptop computer for transmittal to a seller/servicer who verifies and transmits the information to Fannie Mae
B) to transmit information directly to Fannie Mae's Desktop Underwriter system
C) prohibited to a real estate broker
D) by any individual
Q2) Freddie Mac offers an "expedited" collateral assessment which means
A) no appraisal is necessary
B) must only assure that property exists
C) a short appraisal at lender's option which may be completed within two hours
D) it can only be used if property is in a recognized subdivision
Q3) 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.
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Chapter 15: Environmental Issues
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10 Flashcards
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Sample Questions
Q1) Which of the following is NOT an economic reason for pursuing a Green Building design?
A) Energy savings of up to 50%
B) 69% fewer CO2 emissions
C) Worker productivity increases up to 15%
D) Up to 40% reduction in water use
Q2) Regulation implementing the Endangered Species Act Define a "taking" as:
A) abusing land that harbors an endangered species
B) only if its habitat is destroyed
C) killing an endangered species and/or damaging or destroying its habitat
D) failure to report the presence of an endangered species
Q3) Lead poisoning can result from inhalation an/or ingestion of lead from all the following sources EXCEPT:
A) Emissions from internal combustion engines
B) Water passing through plastic pipes
C) Powdering or blistering paint in place prior to 1978
D) Household dust and soil around a house
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Chapter 16: Settlement Procedures
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) After initial closing deposits have been made, RESPA limits the continuing escrow or reserve account cushion held by lenders on residential loans to which of the following?
A) Not more than is reasonable and customary
B) Not more than one sixth of the annual recurring charges
C) Not more than one twelfth of the annual recurring charges
D) No restrictions apply after the initial deposits have been made
Q2) The underlying purpose of RESPA requirements is to:
A) require disclosures that give a buyer/borrower sufficient information to make informed decisions
B) increase federal control over real estate deals
C) introduce complex questions that necessitate employing legal counsel
D) limit costs of closing a real estate transaction
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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Page 18