Question 1

The Federal Deposit Insurance Corporation was enacted to insure:

Accepted Answer

A)  FHA loans 
B)  conventional loans 
C)  savings accounts at depository institutions 
D)  the solvency of pension plans 
A)  FHA loans 
B)  conventional loans 
C)  savings accounts at depository institutions 
D)  the solvency of pension plans C

Question 2

Suppose you take an FRM of $150,000 at 7.5% for 30 years.If you repay this mortgage at the end of year five,what is the outstanding balance?

Accepted Answer

A)  $52,342 
B)  $87,071 
C)  $141,574 
D)  $141,926 
E)  none of the above 
A)  $52,342 
B)  $87,071 
C)  $141,574 
D)  $141,926 
E)  none of the above D

Question 3

A 30-year fixed-rate mortgage has a contract rate of 7.00% with one point.A 15- year fixed-rate mortgage has a contract rate of 6.25%.If both loans have a 15-year holding period,what amount of points on the 15-year loan will equalize the effective costs of these loans over their holding periods? Assume a loan amount of
$80,000.

Accepted Answer

A)  the effective costs cannot be equal because of the different loan amortizations 
B)  5.20 points 
C)  5.31 points 
D)  5.56 points 
E)  none of the above 
A)  the effective costs cannot be equal because of the different loan amortizations 
B)  5.20 points 
C)  5.31 points 
D)  5.56 points 
E)  none of the above C

Question 4

Suppose you take an FRM of $150,000 at 7.5% for 30 years.How much of the payment is interest in month 72?

Accepted Answer

A)  $173.26 
B)  $937.50 
C)  $875.56 
D)  $65,432 
E)  none of the above 
A)  $173.26 
B)  $937.50 
C)  $875.56 
D)  $65,432 
E)  none of the above

Question 5

Lenders are offering different financing options on 30-year FRMs.One lender offers a contract rate of 6% with one discount point while another lender offers a 6% contract rate with two discount points.Since both loans are discounted,which is the better option for the borrower based on the APR? Other factors are held constant and the borrower wants to minimize his/her borrowing cost.

Accepted Answer

A)  6% with one point 
B)  6% with two points 
C)  can't determine without the loan amount 
D)  discounting doesn't matter,the APRs will be the same since the contract rates are the same 
A)  6% with one point 
B)  6% with two points 
C)  can't determine without the loan amount 
D)  discounting doesn't matter,the APRs will be the same since the contract rates are the same

Question 6

A lender gives you a $125,000 thirty-year fixed-rate mortgage at 6.75%,three discount points,monthly payments.Suppose that,before you make any payments,you receive a pay raise so you pay an extra $100 per month in addition to your normal payment.Also,at the end of year five of the mortgage you have an unexpected job transfer thus the house is sold and the mortgage is repaid.The mortgage balance at the end of year five with the extra $100 per month payment is $110,231.What is the effective cost of the loan for the five-year holding period?

Accepted Answer

A)  7.45% 
B)  7.93% 
C)  5.74% 
D)  7.51% 
E)  none of the above 
A)  7.45% 
B)  7.93% 
C)  5.74% 
D)  7.51% 
E)  none of the above

Question 7

While reviewing the documents on your new mortgage you discover that the APR is greater than the contract interest rate even though you paid no discount points.How can this happen?

Accepted Answer

A)  the lender made a mistake,the rates should be equal 
B)  the market rate increased just before the loan was signed and the lender adjusted for that 
C)  you paid financing fees other than discount points 
D)  the contract rate does not account for monthly compounding 
E)  the lender made a mistake,the contract rate is always greater than the APR 
A)  the lender made a mistake,the rates should be equal 
B)  the market rate increased just before the loan was signed and the lender adjusted for that 
C)  you paid financing fees other than discount points 
D)  the contract rate does not account for monthly compounding 
E)  the lender made a mistake,the contract rate is always greater than the APR

Question 8

You take a fixed-rate mortgage for $130,000 at 6.75% for 30 years,monthly payments.At the end of year two,you unexpectedly inherit $15,000 from your now-favorite grandmother.You decide to apply this $15,000 to the principal balance of your loan.How much interest do you save over the life of the loan by doing this assuming that the mortgage is held to maturity?

Accepted Answer

A)  $76,089 
B)  $96,325 
C)  $61,089 
D)  $79,637 
E)  none of the above 
A)  $76,089 
B)  $96,325 
C)  $61,089 
D)  $79,637 
E)  none of the above

Question 9

The ability of a borrower in any state to redeem his or her property after a period of delinquency is called:

Accepted Answer

A)  a statutory right of redemption 
B)  an equitable right of redemption 
C)  a legal right of redemption 
D)  none of the above 
A)  a statutory right of redemption 
B)  an equitable right of redemption 
C)  a legal right of redemption 
D)  none of the above

Question 10

Suppose your FRM monthly payment is $1048.82 with terms of 7.5% for 30 years.How much did you originally borrow?

Accepted Answer

A)  $377,575 
B)  $150,000 
C)  $376,575 
D)  $1,413,228 
E)  cannot be determined 
A)  $377,575 
B)  $150,000 
C)  $376,575 
D)  $1,413,228 
E)  cannot be determined

Question 11

A lender offers you a fixed-rate mortgage for $145,000 at 6.25% for 30 years, monthly payments,with 0.75 discount points.If you repay the loan balance at the end of year four,what is the effective cost of the loan?

Accepted Answer

A)  6.32% 
B)  6.47% 
C)  7.00% 
D)  6.25% 
E)  none of the above 
A)  6.32% 
B)  6.47% 
C)  7.00% 
D)  6.25% 
E)  none of the above

Question 12

The amortization schedule of a mortgage shows:

Accepted Answer

A)  that the principal balance declines with each payment 
B)  that the interest portion of the payment declines with each payment 
C)  that the portion of the payment representing payment of principal increases with each payment 
D)  all of the above 
A)  that the principal balance declines with each payment 
B)  that the interest portion of the payment declines with each payment 
C)  that the portion of the payment representing payment of principal increases with each payment 
D)  all of the above

Question 13

You need a 30-year fixed-rate mortgage for $100,000,monthly payments.One lender offers 7.5% with no discount points while another lender offers 7.125% with some points.What amount of points on the second loan would give the loans the same APR?

Accepted Answer

A)  no points necessary - the 30-year amortization will force the APRs to be equal 
B)  3.65 points 
C)  3.75 points 
D)  with different contracts rates these loans cannot have the same APR 
A)  no points necessary - the 30-year amortization will force the APRs to be equal 
B)  3.65 points 
C)  3.75 points 
D)  with different contracts rates these loans cannot have the same APR

Question 14

A lender offers you a fixed-rate mortgage for $145,000 at 6% for 30 years,monthly payments,with 2.625 discount points.What is the APR for this loan?

Accepted Answer

A)  6.17% 
B)  9.75% 
C)  6.25% 
D)  8.625% 
E)  none of the above 
A)  6.17% 
B)  9.75% 
C)  6.25% 
D)  8.625% 
E)  none of the above

Question 15

The Federal National Mortgage Association was formed in part to:

Accepted Answer

A)  buy and sell VA mortgages 
B)  buy and sell FHA mortgages 
C)  buy and sell conventional mortgages 
D)  none of the above 
A)  buy and sell VA mortgages 
B)  buy and sell FHA mortgages 
C)  buy and sell conventional mortgages 
D)  none of the above

Question 16

The mortgage constant (MC)factor calculates the payment per dollar borrowed. The numerator of the MC factor is (i)(1 + i)n.The denominator of the MC factor is:

Accepted Answer

A)  (1 + i)n 
B)  (1 + i)n - 1 
C)  in 
D)  i 
E)  there is no denominator 
A)  (1 + i)n 
B)  (1 + i)n - 1 
C)  in 
D)  i 
E)  there is no denominator

Question 17

You take a fixed-rate mortgage for $132,000 at 6.75% for 30 years,monthly payments.At the end of the second year,you unexpectedly inherit $18,000 from your now-favorite uncle.You decide to apply this $18,000 to the principal balance of your loan.How many payments are remaining after the extra lump sum payment is made?

Accepted Answer

A)  233.33 
B)  126.67 
C)  121.15 
D)  272.00 
E)  none of the above 
A)  233.33 
B)  126.67 
C)  121.15 
D)  272.00 
E)  none of the above

Question 18

You wish to purchase real property.The lender will give you a $145,000 fixed?-rate,thirty?year mortgage at 7.50%,three discount points,monthly payments.Suppose that,before you make any payments,you receive a pay raise so you pay an extra $100 per month with your normal payment.How many payments are required to fully amortize the loan assuming the extra $100 is paid each month?

Accepted Answer

A)  360 
B)  269.63 
C)  209.63 
D)  130.18 
E)  none of the above 
A)  360 
B)  269.63 
C)  209.63 
D)  130.18 
E)  none of the above

Question 19

You need a 30-year FRM and have two choices.Option one is 6.50% contract rate with 2.50 discount points and an APR of 6.75%.Option two is 6.75% contract rate with no discount points.Neither loan has any other financing fees.If you plan to hold the loan for five years,which is the better option to minimize your effective borrowing costs?

Accepted Answer

A)  6.50% with 2.50 points 
B)  6.75% with no points 
C)  doesn't matter,the effective cost is the same 
D)  can't determine without knowing the loan amount 
A)  6.50% with 2.50 points 
B)  6.75% with no points 
C)  doesn't matter,the effective cost is the same 
D)  can't determine without knowing the loan amount

Question 20

Your monthly payment on a $125,000 fixed-rate mortgage at 8% for 30 years is:

Accepted Answer

A)  $917.21 
B)  $925.28 
C)  $4611.04 
D)  $1,000 
E)  cannot be determined 
A)  $917.21 
B)  $925.28 
C)  $4611.04 
D)  $1,000 
E)  cannot be determined

The Federal Deposit Insurance Corporation was enacted to insure:

Suppose you take an FRM of $150,000 at 7.5% for 30 years.If you repay this mortgage at the end of year five,what is the outstanding balance?

Suppose you take an FRM of $150,000 at 7.5% for 30 years.How much of the payment is interest in month 72?

While reviewing the documents on your new mortgage you discover that the APR is greater than the contract interest rate even though you paid no discount points.How can this happen?

The ability of a borrower in any state to redeem his or her property after a period of delinquency is called:

Suppose your FRM monthly payment is $1048.82 with terms of 7.5% for 30 years.How much did you originally borrow?

A lender offers you a fixed-rate mortgage for $145,000 at 6.25% for 30 years, monthly payments,with 0.75 discount points.If you repay the loan balance at the end of year four,what is the effective cost of the loan?

The amortization schedule of a mortgage shows:

You need a 30-year fixed-rate mortgage for $100,000,monthly payments.One lender offers 7.5% with no discount points while another lender offers 7.125% with some points.What amount of points on the second loan would give the loans the same APR?

A lender offers you a fixed-rate mortgage for $145,000 at 6% for 30 years,monthly payments,with 2.625 discount points.What is the APR for this loan?

The Federal National Mortgage Association was formed in part to:

The mortgage constant (MC)factor calculates the payment per dollar borrowed. The numerator of the MC factor is (i)(1 + i)ⁿ.The denominator of the MC factor is:

Your monthly payment on a $125,000 fixed-rate mortgage at 8% for 30 years is:

Finance and Real Estate

Money Credit and the Determination of Interest Rates

Finance Theory and Real Estate

Modern Residential Finance

Alternative Mortgage Instruments

Financing and Property Values

Federal Housing Policies: Part 1

Federal Housing Policies: Part 2

The Secondary Mortgage Market

Valuation of Mortgage Securities

Controlling Default Risk Through Borrower Qualification Loan Underwriting and Contractual Relationships

Loan Origination, Processing, and Closing

Mortgage Default Insurance, Foreclosure, Title Insurance

Value, Leverage, and Capital Structure

Federal Taxation and Real Estate Finance

Sources of Funds for Commercial Real Estate Properties

Acquisition, Development, and Construction Financing

Permanent Financing of Commercial Real Estate Properties

Ownership Structures for Financing and Holding Real Estate

Real Estate in a Portfolio Context

Liability, Agency Problems, Fraud, and Ethics in Real Estate Finance

Filters

Exam 4: The Early History of Residential Finance and Creation of the Fixed Rate Mortgage

The Federal Deposit Insurance Corporation was enacted to insure:

Suppose you take an FRM of $150,000 at 7.5% for 30 years.If you repay this mortgage at the end of year five,what is the outstanding balance?

Suppose you take an FRM of $150,000 at 7.5% for 30 years.How much of the payment is interest in month 72?

While reviewing the documents on your new mortgage you discover that the APR is greater than the contract interest rate even though you paid no discount points.How can this happen?

The ability of a borrower in any state to redeem his or her property after a period of delinquency is called:

Suppose your FRM monthly payment is $1048.82 with terms of 7.5% for 30 years.How much did you originally borrow?

A lender offers you a fixed-rate mortgage for $145,000 at 6.25% for 30 years, monthly payments,with 0.75 discount points.If you repay the loan balance at the end of year four,what is the effective cost of the loan?

The amortization schedule of a mortgage shows:

You need a 30-year fixed-rate mortgage for $100,000,monthly payments.One lender offers 7.5% with no discount points while another lender offers 7.125% with some points.What amount of points on the second loan would give the loans the same APR?

A lender offers you a fixed-rate mortgage for $145,000 at 6% for 30 years,monthly payments,with 2.625 discount points.What is the APR for this loan?

The Federal National Mortgage Association was formed in part to:

The mortgage constant (MC)factor calculates the payment per dollar borrowed. The numerator of the MC factor is (i)(1 + i)n.The denominator of the MC factor is:

Your monthly payment on a $125,000 fixed-rate mortgage at 8% for 30 years is:

Finance and Real Estate

Money Credit and the Determination of Interest Rates

Finance Theory and Real Estate

Modern Residential Finance

Alternative Mortgage Instruments

Financing and Property Values

Federal Housing Policies: Part 1

Federal Housing Policies: Part 2

The Secondary Mortgage Market

Valuation of Mortgage Securities

Controlling Default Risk Through Borrower Qualification Loan Underwriting and Contractual Relationships

Loan Origination, Processing, and Closing

Mortgage Default Insurance, Foreclosure, Title Insurance

Value, Leverage, and Capital Structure

Federal Taxation and Real Estate Finance

Sources of Funds for Commercial Real Estate Properties

Acquisition, Development, and Construction Financing

Permanent Financing of Commercial Real Estate Properties

Ownership Structures for Financing and Holding Real Estate

Real Estate in a Portfolio Context

Liability, Agency Problems, Fraud, and Ethics in Real Estate Finance

Filters

The mortgage constant (MC)factor calculates the payment per dollar borrowed. The numerator of the MC factor is (i)(1 + i)ⁿ.The denominator of the MC factor is: