Real Estate Law Exam Preparation Guide
Course Introduction
Real Estate Law introduces students to the legal concepts and frameworks governing the ownership, use, and transfer of real property. The course covers topics such as property rights, land use regulation, real estate contracts, deeds, mortgages, leasing, title insurance, and the resolution of disputes involving real estate transactions. Students will analyze statutes and case law to understand legal principles while also examining practical considerations for buyers, sellers, landlords, tenants, and real estate professionals. By the end of the course, students will have a solid foundation to identify and navigate legal issues in real estate practice.
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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Sample Questions
Q1) 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
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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Chapter 2: Money and Interest Rates
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Sample Questions
Q1) 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
Q2) Of the following, which can be the best indicator of mortgage interest rates?
A) The discount rate of interest
B) Fannie Mae/Freddie Mac administered yield requirements
C) The results of weekly Treasury bill offerings
D) Reports made by the Farm Credit System
Answer: C
Q3) 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
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Page 4
Chapter 3: Mortgage Money: Regulated Lenders
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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) Federal legislation in 1998 restored the right to membership in credit unions to
A) Anyone solicited by credit unions
B) Those with a common bond plus those working for companies with less than 3,000 employees
C) All members of AARP
D) Anyone not challenged by a commercial bank
Answer: B
Q3) 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
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Chapter 4: Other Primary Market Lenders
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Sample Questions
Q1) 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.
Q2) 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
Q3) The continued acceptance and growth of Real Estate Investment Trust has been enhanced by
A) the sale of REIT stock in the financial markets
B) the collapse of Foreign Investment in real estate
C) improved management
D) greater publicity
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Chapter 5: Mortgage Money: the Secondary Market
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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 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.
Q3) 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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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) 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
Q3) 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
Q4) 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
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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) 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 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) 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
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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Sample Questions
Q1) 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
Q2) 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
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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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) What is that the maximum time that an approved FHA Appraisers appraisal report is valid on construction loans
A) 90 Days
B) 120 Days
C) 180 Days
D) 1 year
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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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) Which of the following is not one of the more common risks of investing in commercial real estate contemplated by the mortgagee and mortgagor?
A) Financial risk
B) Liquidity risk
C) Regulatory risk
D) Management risk
Q3) 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
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Page 13
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) 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
Q2) To create a land syndicate, the most common form of business organization used is the:
A) syndicate itself
B) limited partnership
C) S Corporation
D) land trust
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) 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
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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Sample Questions
Q1) 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
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) 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) 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) 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
Q3) The primary purpose of the Truth-in-Lending Act is to
A) require full disclosure of the amount of the promissory note
B) provide meaningful information to borrowers on the cost of consumer credit
C) discourage excessive loan costs for consumers
D) establish limits on the total charges a lender can assess for a loan
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