P3-98 quiz

1. Question

For certain ARM plans, what does the Cost of Funds Index (COFI) represent?

A) The national average interest rate on 30-year fixed-rate mortgages.

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B) The weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

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C) The prime rate set by major commercial banks in the 11th District.

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D) The average yield on 10-year U.S. Treasury notes.

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2. Question

In a COST-PLUS CONTRACT for construction, how is the contract price determined?

A) As a fixed lump sum, regardless of the actual cost of construction.

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B) Only on the basis of material costs; labor is not included.

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C) As the appraised value of the property plus the builder’s profit.

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D) As the actual cost of the construction plus a profit allowance to the builder, instead of a fixed price.

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3. Question

What is a COVENANT in real estate terminology?

A) A promise in writing under seal, often used as a substitute for the verb 'contract.'

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B) An informal oral agreement between a buyer and seller.

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C) A government zoning restriction imposed on the property.

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D) A recorded easement granted to a utility company.

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4. Question

What are COVENANTS OF TITLE?

A) Promises by a borrower to repay the mortgage debt.

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B) Lease provisions that govern tenant responsibilities.

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C) Guarantees made by a grantor when real property is conveyed by a warranty deed.

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D) Conditions in a mortgage note regarding prepayment penalties.

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5. Question

In mortgage banking, what does the COUPON RATE describe?

A) The discount points charged to the borrower at closing.

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B) The contract interest rate stated on the face of the note or bond.

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C) The annual percentage rate (APR) including all finance charges.

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D) The servicing fee retained by the lender on each payment.

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6. Question

What is CREDIT LIFE INSURANCE designed to do?

A) Protect the lender against property damage to the collateral.

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B) Cover the borrower’s medical expenses if they become ill.

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C) Reimburse the lender for foreclosure and legal costs.

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D) Pay off the mortgage debt if the mortgagor dies while the policy is in force.

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7. Question

What does a borrower’s CREDIT RATING primarily evaluate?

A) The current market value of the borrower’s home.

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B) The size of the borrower’s down payment on the property.

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C) The borrower’s ability to repay a loan based on current financial situation and past debt-repayment performance, including any defaults and delinquent payments.

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D) The total amount of interest the borrower will pay over the life of the loan.

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8. Question

What is the purpose of a CREDIT REPORT?

A) To provide a prospective lender with a report on a prospective borrower’s credit standing to help determine creditworthiness.

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B) To establish the property’s assessed value for tax purposes.

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C) To verify only the borrower’s employment status.

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D) To disclose any defects in the title to the property.

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9. Question

Which of the following best describes CUSTODY DOCUMENTS in mortgage servicing?

A) The borrower’s pay stubs, bank statements, and tax returns.

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B) The original mortgage note, an original unrecorded assignment (or copy of the recorded assignment) to the investor, and, when applicable, the original mortgage insurance or loan guaranty certificate and any modification agreement.

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C) Only the appraisal and inspection reports for the property.

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D) The Loan Estimate and Closing Disclosure forms from closing.

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10. Question

What is a DEBENTURE?

A) A mortgage loan that is fully secured by real property.

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B) A negotiable check commonly used to pay closing costs.

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C) An unsecured debt instrument backed only by the general credit standing and earning capacity of the issuer or insurer.

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D) A deed that conveys title to real property from grantor to grantee.

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11. Question

In mortgage finance, what is DEBT?

A) The equity remaining in the property after closing costs are paid.

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B) The appraised value of the property minus the loan amount.

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C) Only loans that are secured by real estate as collateral.

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D) Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

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12. Question

What does DEBT SERVICE refer to?

A) The periodic payment of principal and interest on mortgage loans.

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B) The lender’s monthly servicing fee for managing the loan.

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C) The annual property tax assessment on the mortgaged property.

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D) The borrower’s mortgage insurance premium payments.

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13. Question

DEBT-TO-INCOME RATIOS are used to:

A) Appraise the current market value of the subject property.

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B) Determine whether the title to the property is clear.

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C) Determine whether a borrower can qualify for a mortgage by comparing monthly housing expense and total obligations to income.

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D) Set the property tax rate for the borrower’s neighborhood.

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14. Question

What is a DEED?

A) A promissory note containing the borrower’s promise to repay a debt.

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B) A written document by which the ownership of land is transferred from one party to another.

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C) A lease agreement that grants a tenant temporary possession of the property.

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D) An appraisal report estimating the market value of the property.

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15. Question

What is a DEED-IN-LIEU?

A) A deed used only for new construction properties.

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B) A deed used to add a co-borrower to the title of the property.

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C) A deed that transfers title from seller to buyer at a standard closing.

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D) A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure; also called a voluntary conveyance.

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