Real Estate Finance
Final Exam Questions
Course Introduction
Real Estate Finance explores the fundamental concepts and analytical techniques used to evaluate and fund real estate investments. This course covers topics such as mortgage markets, financing instruments, risk analysis, valuation methods, investment decision-making, and the impact of market conditions on real estate finance. Students will learn to assess financing alternatives, structure financial deals, and understand the regulatory, legal, and tax implications involved in real estate transactions. Case studies and practical exercises provide real-world context, equipping students with the skills necessary to navigate the complexities of real estate financial management and investment.
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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Page 2
Chapter 1: History and Background
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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) After the recent financial crisis Fannie Mae and Freddie Mac were put into conservatorship and the new government agency that has responsibility for their oversight is:
A) Federal Reserve Bank
B) The Office of Federal Housing Enterprise Oversight
C) Federal Housing Finance Agency
D) Department of Housing and Urban Development
Answer: C
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Page 3
Chapter 2: Money and Interest Rates
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Sample Questions
Q1) One of the tools used by the Federal Reserve to influence the economy is
A) Changing the discount rate of interest
B) Limiting a bank's authority to accept deposits
C) Changing the prime rate of interest
D) Encouraging competition with non-bank banks
Answer: A
Q2) 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
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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Sample Questions
Q1) Which of the following is most descriptive of the primary market?
A) The loan origination market
B) Trading in second mortgages
C) The buying and selling of mortgage loans
D) The market created by Fannie Mae and Freddie Mac
Answer: A
Q2) While the distinction between mortgage bankers and brokers is diminishing, a full service mortgage banker means being capable of all of the following EXCEPT
A) Originating or negotiating a loan
B) Funding a loan a closing
C) Servicing a loan until pay off
D) Holding a whole loan in portfolio
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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Sample Questions
Q1) The fee a mortgage lender charges for assembling a loan package and determining acceptance or rejection of an applicant is called a loan
A) Underwriting Fee
B) Servicing Fee
C) Assembling Fee
D) Origination Fee
Q2) 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.
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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Chapter 5: Mortgage Money: the Secondary Market
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Sample Questions
Q1) The primary purpose of federal agency underwriting of securities backed by mortgage loan pools is to
A) earn greater fees for the government.
B) enhance the credit-worthiness of an investment in mortgage-back securities.
C) exercise more control over the mortgage business.
D) direct more funds into low-income housing.
Q2) 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.
Q3) 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
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Chapter 6: The Mortgage Documents
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Sample Questions
Q1) The instrument that provides the security for a promissory note is the:
A) Mortgage or Deed of Trust
B) Warranty Deed
C) Property Assignment
D) Contract for Deed
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.
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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Sample Questions
Q1) 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
Q2) 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.
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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Sample Questions
Q1) 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
Q2) 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
Q3) 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
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Chapter 9: Borrower Quali cation
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Sample Questions
Q1) An application for a commercial loan would include all the following items EXCEPT:
A) information on the applicant company and the individuals involved
B) complete Financial statements and property evaluation
C) a statement of compliance with RESPA requirements
D) projection of income to show source of loan repayment
Q2) 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
Q3) The Act that prohibits certain types of discrimination in the granting of credit is the:
A) Fair Credit Reporting Act
B) Equal Credit Opportunity Act
C) Real Estate Settlements Procedures Ace
D) Fair Housing Act
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Chapter 10: Property Analysis
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Sample Questions
Q1) A condominium type of unit is more popular than a cooperative apartment unit because
A) It generally provides more living space
B) They are located in more desirable living areas
C) Ownership rights in a condo permit resale without approval of others
D) A greater number are available
Q2) 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
Q3) 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
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12
Chapter 11: Commercial Loans: Construction and Land Loans
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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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Sample Questions
Q1) When seeking funding which of the following is not one kinds of information that a religious institution facilities lender might feel was key?
A) Minimum of three years average adult worship attendance.
B) Annual contributions from each of the largest 15 donors for the previous year (the names of the donors are not usually required).
C) Annual salaries/income of ministerial staff
D) Cash on hand in building fund
Q2) 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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14
Chapter 13: Other Financing Practices
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Sample Questions
Q1) If a builder holds an unsubordinated leasehold interest in land, it means that a building constructed on the land
A) would pass to the landowner if the land rent is not paid
B) would pass to the mortgagee if the land rent is not paid
C) the builder would only forfeit ownership if the mortgage loan is not paid
D) would remain in possession of the builder as long as the land rent if paid
Q2) 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
Q3) The private mortgage insurance required by regulated depository financial institutions states that for residential mortgage loans with LTV's higher than _______%must have private insurance coverage.
A) 75
B) 80
C) 85
D) 90
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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) Which of the following is NOT a loan classification with Freddie Mac's "Loan Prospector"?
A) Rejected
B) Accepted
C) Refer
D) Caution
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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16
Chapter 15: Environmental Issues
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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) The purpose of a Phase I Assessment as defined by CERCLA is to
A) determine if any prior use of the property would indicate the presence of environmental contamination
B) examine the property for existing contamination only on the surface
C) discover any existing contamination and determine methods of resolving the problem
D) provide the landowner with absolute protection against any subsequent liability
Q3) 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
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Chapter 16: Settlement Procedures
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Sample Questions
Q1) The variance 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan if the Good Faith Estimate turns out to be off by more than the variance percentages established by which of the following new legislative actions?
A) Mortgage Disclosure Improvement Act of 2008
B) American Recovery and Reinvestment Act of 2009
C) The Frank-Dodd Act of 2011
D) The Community Reinvestment Act
Q2) 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
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