All of the following statements about the online real estate services market are true except

1.    All of the following statements are true about a partially amortized loan, except:
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A.    The periodic payments do not fully amortize the loan by the end of the term.
B.    The final payment is a balloon payment.
C.    A partially amortized loan is a self-liquidating loan.
D.    Interest is being paid throughout the term.

answer

The correct answer is C. Yes, all of these statements are true, except for C.

2.    Which of the following is the best statement regarding a straight term mortgage:
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A.    Payments are made to interest only.
B.    No principal payments are being made.
C.    The last payment is interest for the last period plus the entire principal amount.
D.    It is the same as a partially amortized loan.​

answer

The correct answer is B. This is all we know for sure. Interest may be paid in some manner, or it may be accruing. This is based on agreement.

3.    All of the following statements are true regarding a bi-weekly mortgage, except:
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A.    Payments are made every two weeks.
B.    Payments are made twice a week.
C.    It helps a borrower pay the mortgage off sooner and save interest.
D.    This method equals one extra monthly payment each year.​

answer

The correct answer is B. This is the incorrect statement. The others are true.

4.    All of the following statements are true regarding a blanket mortgage, except:
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A.    A blanket mortgage is often used to finance subdivision developments.
B.    A blanket mortgage covers more than one parcel of land or lot.
C.    A blanket mortgage usually includes a full release clause.
D.    A blanket mortgage allows some of the lots of a subdivision to be released and no longer be encumbered.

answer

The correct answer is C. It is a partial release clause, thus allowing some of the lots to be released as the note is paid down.

5.    At what point in time is a bridge mortgage paid off?
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A.    When the bridge is completed.
B.    When the second loan is taken out.
C.    When the first loan is terminated.
D.    In the transition between two properties.

ANSWER

The correct answer is B. A bridge loan (or swing loan as we call it in California) is taken out when a property owner is selling one property and buying another. The first property has not yet sold, but money is needed to move forward with the purchase of the second one. The bridge loan is an interim loan to fill that purpose, and when the financing has been obtained for the purchase of the second house, the bridge loan can be paid off.

6.    Which of the following are true regarding a cash-out mortgage:
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A.    It could be a junior or senior loan.
B.    It allows borrowers to tap into the equity buildup.
C.    It could be a refi that provides the owner with cash.
D.    Any of these can apply to a cash-out mortgage.

ANSWER

The correct answer is D. Yes, all of these are true of a cash-out mortgage.

7.    All of the following are true regarding a construction mortgage, except:
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A.    The construction mortgage is an interim loan.
B.    The construction mortgage is referred to as a take-out loan.
C.    The construction mortgage involves obligatory advances.
D.    The construction mortgage usually involves extended rate locks.

ANSWER

The correct answer is B. The take-out loan replaces the construction loan, and is the long-term financing, often 30 years.

8.    Which of the following best describes obligatory advances regarding construction loans:
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A.    It is funds paid to the builder as various phases of the construction project are completed.
B.    It is the way funds used to be distributed to the builder; however, now all funds are released upfront.
C.    Obligatory advances occur when the builder makes payments on the construction loan.
D.    Obligatory advances refer to a builder paying subcontractors at the appropriate time.

ANSWER

The correct answer is A. Lenders have learned that projects are more likely to be completed if builders do not receive all of the funds from a construction loan upfront.

9.    Which of the following is true regarding a permanent construction loan:
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A.    There is no such thing as a permanent construction loan as this would mean the construction would be ongoing in perpetuity.
B.    There is only one with one closing with no take-out loan.
C.    The one loan that is used for construction at the beginning converts to a permanent first mortgage when the construction is finished.
D.    Both B and C.

ANSWER

The correct answer is A. On the contrary, a construction loan is known as an interim loan (short term or temporary) and is replaced with a take-out loan.

10.    Which of the following types of loans would probably have been offered in the past to a person desirous of buying a house but who had less than perfect credit.
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A.    Blanket mortgage.
B.    Bridge mortgage.
C.    Easy qualifier loan.
D.    Home equity loan.

ANSWER

The correct answer is C. These loans may have involved stated income, could not be considered a conforming loan, and would probably be classified as a subprime loan. Some lenders may consider making such a loan, but it’s not as easy to obtain one today.

11.    Availability of easy-qualifier loans would depend on which of the following:
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A.    Interest rates.
B.    Current market conditions.
C.    One-year treasury index.
D.    NMP guidelines.

ANSWER

The correct answer is B. Current regulations would not allow such a loan to be sold on the secondary market.

12.    Which of the following would generally be characteristic of easy-qualifier loans:
​
A.    Shorter terms.
B.    Fixed rate.
C.    Higher interest rates and fees.
D.    Adjustable rates.

ANSWER

The correct answer is C. The borrower pays one way or the other.

13.    With an easy-qualifier loan, the lender typically modifies the terms of the loan based on which of the following:
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A.    The economy.
B.    The cost of funds.
C.    Customer needs.
D.    Lack of down payment.

ANSWER

The correct answer is C. This creates the need for customized treatment.

14.    An Equity Participation Mortgage allows a lender to share in which of the following:
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A.    Earnings.
B.    Income.
C.    Profits.
D.    Any and all of the above.

answer

The correct answer is D. Yes, any of these can be arranged based on agreement.

15.    Equity Participation Mortgages are done primarily on which of the following  kinds of projects:
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A.    Residential.
B.    Residential income.
C.    Commercial real estate projects.
D.    Industrial.

answer

The correct answer is C. Commercial investors are much more amenable to sharing equity when the project is sold in exchange for more favorable terms.

16.    Which of the following is known as an open-end loan:
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A.    A purchase money loan.
B.    A home equity line of credit.
C.    A package mortgage.
D.    A balloon loan.

answer

The correct answer is B. This means the balance of the loan can increase without rewriting the loan documents and the line of credit can be used as needs arise.

17.    Which of the following best expresses the difference between a home eqityloan and a home equity line of credit:
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A.    They each tap the equity in one’s house.
B.    The HELOC requires approval every time the borrower wants more money.
C.    The home equity loan is usually a one-time loan for a specific amount of money.
D.    The HELOC is a closed-end loan.

answer

The correct answer is C. This is the only statement that addresses the difference between a home equity loan and HELOC.

18.    How is the monthly payment on an interest only loan determined?
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A.    It is based on interest paid in advance.
B.    It is based on interest paid in arrears.
C.    It is based on multiplying the interest rate by the loan amount and dividing by 12.
D.    It is based on negative amortization, times 12.

answer

The correct answer is C. Simple and correct.

19.    Which of the following statements is false regarding interest only loans:
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A.    The loan balance never decreases throughout the term.
B.    Paying accrued interest means paying interest in advance.
C.    Paying interest only decreases monthly payments significantly.
D.    The balloon payment on an interest only loan is the original amount borrowed.

answer

The correct answer is B. Paying accrued interest means paying interest in arrears.

20.    Which of the following is true regarding an open-end mortgage:
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A.    It allows the borrower to request additional  funds from the  lender.
B.    These loans are usually set up with a predefined limit.
C.    The borrower can borrow money that has already been paid back.
D.    All of the above.

answer

The correct answer is D. Yes, all of these are true.

21.    Which of the following would most likely have an open-end mortgage:
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A.    Builders and farmers.
B.    Congressmen.
C.    Gamblers.
D.    Teachers.

answer

The correct answer is A. These entrepreneurs need a steady cash flow to fund their ongoing business needs. And ok, maybe gamblers, but A is much more likely to get you a point.

22.    An open-end mortgage is often set up in which of the following ways:
​
A.    As a direct line from the ATM.
B.    As a home equity line of credit.
C.    As a reduction option mortgage.
D.    As a wraparound mortgage.​

answer

The correct answer is B. This way the interest rate is adjustable.

23.    All of the following are true about a package mortgage, except:
​
A.    A package mortgage includes both real and personal property.
B.    A package mortgage includes furniture and appliances.
C.    A package mortgage does not utilize personal property as collateral because it is movable.
D.    A package mortgage finances both real and personal property together in one contract.​

answer

The correct answer is C. A package mortgage does hold personal property as collateral.

24.    All of the following are true about a purchase money mortgage, except:
​
A.    It is called a soft money mortgage because the buyer receives credit instead of cash.
B.    It is always a senior lien.
C.    It  secures money that is borrowed to purchase property.
D.    It is sometimes called a seller-held mortgage.

answer

The correct answer is B. It could be a senior lien depending on the priority desired.

25.    All of the following are true statements about a Reduction Option Mortgage, except:
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A.    It is a fixed rate loan.
B.    It is an ARM with an option to convert to a fixed rate.
C.    The borrower does not have to pay appraisal fees or credit checks.
D.    Refinancing costs can be avoided if the borrower operates within a certain window of time.

answer

The correct answer is B. It is a fixed rate loan with an opportunity to reduce the interest rate within a certain window of time.

26.    Which of the following is the true statement about a Reduction Option Mortgage:
​
A.    There is no fee for the interest rate reduction.
B.    It is a Fannie Mae approved program with an option to reduce the interest rate one time between the 13th and 59th month of the 30-year loan.
C.    Market interest rates must decline at least 2% before the borrower can reduce the rate.
D.    The appraisal fee is only $100.

answer

The correct answer is C. Yes, this is the true statement. Regarding B, the program is Freddie Mac approved, not Fannie Mae.

27.    Better loan terms in a Refinance Mortgage would include any of the following, except:
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A.    Change a 30-year loan to a 15-year loan.
B.    Change a fixed-rate loan to an adjustable.
C.    Lower the interest rate.
D.    Consolidate multiple mortgages into one.

answer

The correct answer is B. Better loan terms mean the opposite—changing from an adjustable rate to a fixed-rate loan.

28.    All of the following would be true in a Refinance Mortgage, except:
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A.    It is the same as a loan modification.
B.    It could involve cash out to the borrower, or not.
C.    An MLO should be able to show a net tangible benefit to the borrower.
D.    The borrower should get better loan terms.

answer

The correct answer is A. A loan modification involves changes to an existing mortgage, not getting a new mortgage.

29.    A Variable Balance Mortgage (VBM) is of most interest to which kind of borrower?
​
A.    A borrower who can afford to make higher payments.
B.    A borrower on a fixed income.
C.    A borrower who wants to take advantage of a variable interest rate, but is worried about payment increases.
D.    A borrower who is not afraid of fluctuating interest rates.

answer

The correct answer is C. Even when interest rates change, payments do not.

30.    An unusual characteristic of a Variable Balance Mortgage (VBM) is which of the following:
​
A.    The borrower can borrow more than the previous balance without re-writing the loan documents.
B.    The VBM covers both real and personal property.
C.    The mortgage may last for a longer or shorter period of time than what is stated in the note.
D.    It is a soft money mortgage.

answer

The correct answer is C. This is because as the rate increases or decreases, the balance due on the mortgage changes. Hence, it may take a longer period of time or a shorter period of time to retire the debt.

31.    The interest rate changes on a Variable Balance Mortgage (VBM). What does not change?
​
A.    Loan balance.
B.    Payment amount.
C.    Index.
D.    Tax implications.

answer

The correct answer is B. When the interest rate changes on a VBM, the payment does not change. Rather, the balance of the loan changes.

32.    What is another name for a Wraparound Mortgage?
​
A.    ARM.
B.    AITD.
C.    Open-end.
D.    VBM.​

answer

The correct answer is B. An AITD is an All-Inclusive Trust Deed.

33.    All of the following are true about a Wraparound Mortgage, except:
​
A.    The buyer will have to write a check for each underlying note secured on the property.
B.    The buyer writes one check payable to the seller of the property for all loans secured against the property.
C.    The Wraparound Mortgage is also called an All Inclusive Trust Deed.
D.    To structure a Wraparound Mortgage properly, the first mortgage should be assumable, and lender approval for the Wraparound should be obtained.

34.    When would a seller be most likely to sell a property using a Wraparound Mortgage?

A.    When he doesn’t want to refinance an existing low-interest loan.
B.    When he wants to retain favorable low-interest financing on the property.
C.    In a tight money market when new financing is difficult to obtain.
D.    Any and all of these situations

35.    Regarding a loan, the term “principal” means closest to which of the following:
​
A.    The amount due and payable in a balloon payment, excluding interest.
B.    The amount due and payable in a balloon payment, including interest.
C.    The amount originally borrowed.
D.    The amount owed on the loan at any given time, excluding interest.

answer

The correct answer is C. This is the best way to think of principal.

36.    All of the following are true regarding points, except:
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A.    A point is one percent of the loan amount.
B.    A point is always a fee paid for services rendered.
C.    A point may be charged for any reason.
D.    A point is often a discount point to buy down the interest rate.​

answer

The correct answer is B. It can be a fee for services rendered, as in a commission to a broker. But often it is a discount point to buy down the interest rate. So you can’t say “always” with B.

37.    General principles of conduct that would lean toward good ethical practices would include which of the following:
​
A.    Be honest.
B.    Treat everyone equally.
C.    Give full disclosure.
D.    All of the above.​

answer

The correct answer is D. Yes, these and “don’t take advantage of people,” and “keep good documentation” are practices that would ensure good ethical standing in the profession.

38.    According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true about honesty and integrity, except:
​
A.    Mortgage professionals should conduct business in a manner reflecting honesty and integrity.
B.    Mortgage professionals should be truthful in all advertisements and solicitations they make.
C.    While you conduct business in a manner reflecting honesty and integrity, you have no control over those with whom you do business.
D.    As a mortgage professional, reasonable care and skill should always be used when acting on behalf of a customer.

answer

The correct answer is C. The Code of Ethics requires you to insist that those with whom you do business also act with honesty and integrity.

39.    According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true regarding confidentiality of customers’ information, except:
​
A.    Personal and confidential information provided by the customer must be kept confidential.
B.    Personal and confidential information provided by third parties carries a lower threshold of confidentially than that provided by the customer.
C.    Personal and confidential information provided by the customer must be used only for the business purposes for which it was intended.
D.    Personal and confidential information provided by the customer or other sources must be kept confidential and protected.

answer

The correct answer is B. This is the correct answer because it is the untrue statement.

40.    According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true regarding the law, except:
​
A.    Mortgage loan originators must abide by the law.
B.    Mortgage loan originators must know the law.
C.    Mortgage loan originators must understand and apply the law.
D.    Mortgage loan originators cannot be expected to stay current with changes to the law as laws are changing constantly and this is beyond the scope of the job of the MLO.

answer

The correct answer is D. Yes, this statement is incorrect. The MLO does annual Continuing Education and must keep abreast of changes to the law.

41.    According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true regarding the disclosure of financial interests, except:
​
A.    MLOs must avoid all conflict of interest between your self interest and your professional duty.
B.    MLOs must avoid even an apparent conflict of interest.
C.    Any financial interest an MLO has in a property being offered as collateral should be disclosed.
D.    Any financial interest an MLO has in a property that was received as part of an inheritance in the family estate does not have to be disclosed.

answer

The correct answer is D. Yes, this is the incorrect statement.

42.    Professional conduct in the mortgage profession involves which of the following:
​
A.    Reasonable care and skill when acting on behalf of the customer.
B.    Never claim expertise where you have no special training or skills.
C.    Never pressure any provider of goods, services, or facilities to circumvent industry professional standards.
D.    All of the above.

answer

The correct answer is D. Yes, all of these are important to professional conduct in the mortgage profession.

43.    The basic idea behind the advertising requirements of Regulation Z is which of the following:
​
A.    Attract borrowers by advertising the best and most appealing parts of the financing.
B.    The advertiser must clearly tell the whole story of the financing.
C.    The ad must state credit terms that are generally available to borrowers.
D.    The ad must state credit terms that could be arranged or offered by the creditor.

answer

The correct answer is B. Advantages and disadvantages. The balance of these answers don’t measure up to this standard.

44.    According to Regulation Z, if an ad is for credit secured by a dwelling, no other rate but APR can be stated in the ad, except:
​
A.    The yield.
B.    APR plus 1/8 of 1%.
C.    The simple annual rate. 
D.    The truncated rate.

answer

The correct answer is C. This is known as the nominal rate, or interest rate. It is the rate that is multiplied against the balance of the loan to determine how much interest is due from this month’s payment.

45.    According to Regulation Z, if an ad for credit secured by a dwelling states the simple annual rate, which of the following is true:
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A.    The simple annual rate must be no more conspicuous than the APR.
B.    The simple annual rate must be in a smaller font than the APR.
C.    The simple annual rate should be more conspicuous than the APR to emphasize the monthly payment.
D.    The simple annual rate must not be stated if the APR is conspicuously stated.

answer

The correct answer is A. The APR must not be disguised or minimized.

46.    According to Regulation Z, all of the following would be a triggering term that would require additional disclosures in an ad, except:
​
A.    10% down payment.
B.    No down payment.
C.    1% finance charge.
D.    Pay only $1200 per month principal and interest.

answer

The correct answer is B. Yes, this item would not trigger additional disclosures.

47.    According to Regulation Z, all of the following terms would not trigger additional disclosures in an ad, except:
​
A.    Terms to fit your budget.
B.    7% APR loan available here.
C.    30-year financing available.
D.    Easy monthly payments.

answer

The correct answer is C. Yes, this would trigger full disclosure.

48.    All of the following statements about Regulation Z-required disclosures are true, except:
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A.    Any ad that uses the APR does not have to disclosure other terms.
B.    Required disclosures must be made clearly and conspicuously.
C.    If an ad discloses only the APR, additional disclosures are not required.
D.    None of the above.

answer

The correct answer is A. The ad could include the APR and one or more triggering terms, thus requiring additional disclosures.

49.    Which of the following are disclosures required by triggering terms:
​
A.    Amount or percentage of down payment.
B.    Terms of  repayment.
C.    Whether or not the interest rate may increase (ARM).
D.    All of the above.​

answer

The correct answer is D. Yes, as well as the annual percentage rate (APR).

50.    According to Regulation Z, if an ad states “100% VA financing available,” which of the following is true:
​
A.    It’s like saying “no down payment,” so it triggers other disclosures.
B.    It’s like saying the amount of the down payment (zero), so it triggers other disclosures.
C.    It triggers other disclosures.
D.    It’s like saying “no down payment,” so it does not trigger other disclosures.

answer

The correct answer is D. “No down payment” is a non-triggering term. This is the way to think of it.