Section 3 Lesson 7 2

1. Question

What is installment debt?

A) Money borrowed that is repaid only at maturity in a lump sum
B) Borrowed money repaid in regular payments over a specific term
C) A revolving line of credit with no fixed term or payment schedule
D) Equity taken out of a home with no repayment required

2. Question

What is the initial interest rate on a mortgage?

A) The rate after the first adjustment on an ARM
B) The original interest rate of the mortgage at closing
C) The rate charged only during the last year of the loan
D) The rate used solely to calculate late fees

3. Question

In real estate terms, what does ingress refer to?

A) The right or act of going in or entering a property
B) The right to exit a property only
C) The process of recording a deed
D) The calculation of loan-to-value ratio

4. Question

What is an in-file credit report?

A) A handwritten summary of the borrower’s debts prepared by the loan officer
B) A full investigative report prepared after a site visit
C) A list of payments made on the current mortgage only
D) An objective, usually computer-generated, report of credit and legal information from a credit repository

5. Question

What does the term “index disclosed to the mortgagor” refer to in an ARM/GPARM?

A) The highest possible index value allowed during the loan term
B) The average of all index values over the past year
C) The value of the selected index that is given to the mortgagor at closing
D) The index value on the first adjustment date only

6. Question

In the context of ARMs/GPARMs, what is an index?

A) The borrower’s gross monthly income
B) A number derived from a formula that serves as an indicator for determining interest rate changes
C) The lender’s internal operating margin
D) The original appraisal value of the property

7. Question

Which statement best describes an independent contractor?

A) A person in business for themselves who contracts to do a complete job and is responsible only for the finished product
B) An employee who is paid hourly and directed in day-to-day tasks
C) A salaried manager who supervises company staff
D) A temporary worker hired through an employment agency

8. Question

In real estate, what is an indenture?

A) A unilateral deed executed only by the grantor
B) A temporary lease agreement for less than one year
C) A simple promissory note
D) A sealed agreement or deed executed by two or more parties

9. Question

An indemnity agreement primarily does which of the following?

A) Transfers title from one party to another
B) Provides that one party will secure another against loss or damage from a specified event
C) Guarantees a fixed rate of return on an investment
D) Sets the listing price for a property

10. Question

What do indemnification contracts in insurance typically cover?

A) Only speculative risks involving potential gains
B) Gambling losses on investment properties
C) Pure risks where there is a possibility of loss but no expectation of gain
D) Administrative penalties imposed by regulators

11. Question

Which of the following is the best description of income property?

A) Property that produces income directly, such as commercial property used in one’s trade or business
B) Owner-occupied residential property only
C) Vacant land held solely for speculative appreciation
D) Any property with a mortgage on it

12. Question

The income approach to value is based primarily on which factor?

A) The original construction cost of the property
B) Recent listing prices of nearby homes
C) The owner’s equity position
D) The market rent or income the property can be expected to earn

13. Question

What does an income and expense statement show?

A) Only the gross rental income for a property
B) The schedule of income and expenses showing net gain or loss over a specific period
C) Only the unpaid loan balance on a property
D) The appraised value compared to the listing price

14. Question

What is the primary purpose of inclusionary zoning?

A) To prohibit multifamily housing in certain areas
B) To limit all development to luxury housing
C) To require some new development be set aside for low and moderate income housing
D) To remove all zoning restrictions from new development

15. Question

Which federal agency is responsible for implementing and administering government housing and urban development programs, including FHA mortgage credit?

A) The Department of Housing and Urban Development (HUD)
B) The Federal Deposit Insurance Corporation (FDIC)
C) The Federal Reserve Board (FRB)
D) The Farm Service Agency (FSA)

16. Question

What is a homestead (exemption) as described in this glossary?

A) Any rental property owned by an investor
B) Only vacation property located out of state
C) The dwelling of the head of a family, often given statutory protection from creditors and sometimes property tax relief
D) Only commercial property used in a trade or business

17. Question

What does a homeowner’s policy (package policy) typically cover?

A) A combination of property and liability coverages for the dwelling and contents
B) Only flood damage to the dwelling
C) Only liability for auto accidents
D) Only theft of personal property off premises

18. Question

What is the primary purpose of a homeowners association (HOA)?

A) To appraise properties in the neighborhood
B) To originate and service mortgage loans
C) To set county-wide tax rates
D) To maintain community facilities and services for residents’ common enjoyment

19. Question

What is a home mortgage in this glossary context?

A) Any commercial mortgage
B) A residential mortgage on a one- to four-family property
C) Only FHA-insured mortgages
D) Mortgages on properties with more than four units

20. Question

What is a home equity line of credit (HELOC) loan?

A) A first mortgage used to purchase a home
B) A fixed lump-sum second mortgage that cannot be drawn on again
C) A usually subordinate loan that allows multiple advances up to a percentage of the borrower’s equity
D) A construction loan for building a new home

21. Question

Who is an heir in the context of real property?

A) A person entitled to inherit real property when someone dies without a will
B) Any current tenant living on the property
C) The listing real estate broker
D) The local tax assessor

22. Question

What does hazard insurance typically cover?

A) Only liability claims for injuries on the property
B) Loss of employment income
C) The borrower’s medical expenses
D) Physical damage to the property from fire, wind, or similar perils

23. Question

What is a guaranty in real estate finance?

A) A document transferring title to real property
B) A contract to be responsible for another party’s debt or default
C) A document setting property tax rates
D) A lease amendment

24. Question

What does it mean when a loan is “guaranteed” by a government agency?

A) The lender has no risk of loss under any circumstances
B) The borrower is not responsible for repayment
C) A third party agrees to reimburse the lender if the borrower defaults
D) The interest rate on the loan is fixed for life

25. Question

In the VA loan program, what is the guarantee?

A) An assurance from the VA to the lender that the loan will be repaid
B) A guarantee from the borrower’s employer
C) A guarantee that the property will increase in value
D) A guarantee that taxes will never increase

26. Question

What is a growing equity mortgage designed to do?

A) Keep payments level over the life of the loan
B) Convert from fixed to adjustable rate automatically
C) Defer principal payments until maturity
D) Increase payments on a schedule so more goes toward principal reduction

27. Question

What is ground rent?

A) Rent paid for both land and building together
B) Money paid for the use of land under a leasehold estate
C) Rent paid only for commercial buildings
D) Rent paid after the mortgage is satisfied

28. Question

In a gross lease, who typically pays the property charges such as taxes and insurance?

A) The tenant pays all property charges
B) Property charges are split evenly between landlord and tenant
C) The landlord pays the operating expenses, taxes, and insurance
D) The local taxing authority pays them

29. Question

What does the term “gross income” refer to for mortgage underwriting purposes?

A) The borrower's total stable and verifiable income before taxes and expenses
B) Income after taxes and all monthly obligations
C) Only overtime and bonus income
D) Net cash flow from rental properties only

30. Question

Who is the grantor?

A) Party conveying real property
B) Buyer
C) Lender
D) Title insurer

31. Question

Who is the grantee?

A) Lender
B) Seller
C) Agent
D) Party receiving interest

32. Question

What is the graduated payment period?

A) Hybrid ARM fixed-rate period
B) Period with below-amortizing payments that increase every 12 months
C) Final 5-year payoff period
D) Time before loan is funded

33. Question

What is a GPM?

A) Loan with fixed payments
B) Loan with decreasing payments
C) Loan with initially low payments increasing yearly
D) Interest-only mortgage

34. Question

What is a graduated payment amount?

A) Payment that fully amortizes from start
B) Graduated-period payment causing negative amortization
C) Final maturity payment
D) Payment that decreases annually

35. Question

What is one responsibility of GNMA?

A) Setting FHA rates
B) Licensing appraisers
C) Collecting PMI premiums
D) Administering the mortgage-backed securities program

36. Question

What backs GNMA MBS?

A) Full faith and credit of the U.S.
B) Private insurers
C) Conventional lenders
D) VA only

37. Question

What is a fully amortized ARM?

A) ARM with fixed payment for 10 years
B) ARM with interest-only payments
C) ARM that becomes fixed
D) ARM whose payment fully amortizes balance over term

38. Question

What is the full payment amount on an ARM?

A) A fixed introductory payment
B) Payment required to amortize at each rate change
C) Final balloon payment
D) Teaser rate payment

39. Question

What is functional depreciation?

A) Loss due to neighborhood decline
B) Loss from external factors
C) Loss from design defects or outdated features
D) Loss from zoning changes

40. Question

What does ‘front-foot’ measure?

A) One foot of property frontage
B) Lot depth
C) Square footage
D) Property perimeter

41. Question

What is a freehold estate?

A) An estate lasting exactly 99 years
B) A leasehold with an expiration date
C) An estate conveying temporary possession
D) An estate for an indeterminate duration

42. Question

Which situation best illustrates fraud in a contract?

A) A borrower misunderstanding a disclosed term
B) A lender charging a higher interest rate than a competitor
C) An appraiser giving an opinion of value that later proves inaccurate
D) A willful misrepresentation of a material fact that induces someone to enter a contract to their detriment

43. Question

What is foreclosure in the context of mortgage lending?

A) The voluntary payoff of a loan before maturity
B) The borrower’s right to redeem property after sale
C) A procedure by which the lender applies the property to payment of a defaulted debt under the mortgage or deed of trust
D) A reduction in the mortgage interest rate

44. Question

What is a flood plain?

A) Any land located above sea level
B) A man‑made drainage system for storm water
C) A federally owned buffer zone along rivers
D) Land adjoining a river that would flood if the river overflowed its banks

45. Question

When is flood insurance typically required by lenders?

A) For all loans regardless of location
B) In areas designated as potential flood areas by federal authorities
C) Only when the borrower requests it
D) Only for properties located in coastal states

46. Question

Which statement best describes a fixed rate mortgage?

A) A mortgage that provides for only one interest rate for the entire term of the loan
B) A mortgage whose rate changes every year with the market
C) A mortgage that starts fixed and always converts to an ARM
D) A mortgage whose rate is renegotiated monthly

47. Question

What is a fiscal year for a business or institution?

A) The calendar year from January 1 to December 31 only
B) Any six-month reporting period for taxes
C) The period between federal elections
D) Any 12‑month period used for financial reporting and statements

48. Question

What is a first mortgage?

A) Any mortgage on commercial property
B) A home equity line of credit
C) A real estate loan that creates a primary lien against real property
D) A second lien used for down payment assistance

49. Question

Which lien generally has first priority against a property?

A) A mechanic’s lien recorded after construction
B) A first lien, such as a tax lien that takes priority over all other liens
C) A junior lien recorded before the first mortgage
D) A leasehold interest held by a tenant

50. Question

What did FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989) accomplish in part?

A) Eliminated all federal thrift regulations
B) Created FHA mortgage insurance programs
C) Established federal flood insurance requirements
D) Modified federal thrift and bank regulation laws and included real estate appraisal reform

51. Question

What is a firm commitment in mortgage lending?

A) A lender’s agreement to make a loan to a specific borrower on a specified property
B) A preliminary rate quote that is not binding
C) An appraisal report used to value the collateral
D) A borrower’s promise to accept any loan terms offered

52. Question

Under the Uniform Commercial Code, what is the purpose of a financing statement?

A) To transfer title to real property from seller to buyer
B) To record a mortgage on a one-to-four family residence
C) To give public notice of a lender’s security interest in personal property collateral
D) To set the maximum interest rate allowed on a loan

53. Question

What does Fannie Mae’s final project acceptance indicate for a condo, PUD, or co-op project?

A) That construction has been completed on time
B) That the project meets all local zoning requirements
C) That only FHA loans may be made in the project
D) That the project’s physical characteristics and marketability are acceptable and loans on units may be delivered to Fannie Mae

54. Question

Who is considered a fiduciary in a real estate or financial transaction?

A) Any third-party vendor hired by the lender
B) Someone in a position of trust or confidence with respect to another person
C) Any party who signs the sales contract
D) A government regulator overseeing the transaction

55. Question

What does a fidelity bond protect an employer against?

A) Economic loss caused by dishonest acts of its employees
B) Losses from market interest rate changes
C) Property damage caused by natural disasters
D) Borrower default on mortgage loans

56. Question

What is fair market value?

A) Price set by seller
B) Tax assessor value
C) Price agreed upon by willing, informed buyer and seller with no compulsion
D) Based on replacement cost only

57. Question

What is external depreciation?

A) Lack of maintenance
B) Physical deterioration
C) Loss in value due to negative external influences
D) Outdated interior decor

58. Question

What does an extended coverage endorsement add?

A) Mold coverage
B) Flood insurance
C) Windstorm, hail, explosion, riot, aircraft/vehicle damage, smoke
D) MIP waiver

59. Question

What is excess yield?

A) Yield lost to servicing
B) Yield refunded
C) Net note rate exceeding required yield plus servicing fee
D) APR reduction

60. Question

What is excess margin in an ARM?

A) Regulatory margin reduction
B) Margin shortfall
C) Net mortgage margin exceeding the required margin
D) Note‑rate difference

61. Question

What is an exception in legal descriptions?

A) Interest rate change
B) Portion of land excluded
C) Closing penalty
D) Requirement for MI

62. Question

What is examination of title?

A) Buyer credit review
B) Lender insurance review
C) Review of chain of title from abstracts or records
D) Seller’s pre‑listing inspection

63. Question

What is eviction?

A) Property tax reassessment
B) Lender removing borrower
C) Landlord’s forcible removal or interference causing constructive eviction
D) Tenant ending lease early

64. Question

What does ‘et ux’ mean?

A) And children
B) And heirs
C) And husband
D) And wife

65. Question

What is an estate in real estate?

A) Inheritance trust
B) Temporary camping right
C) Subdivision map
D) A right or interest in the use, enjoyment, and disposition of land

66. Question

What is an escrow payment?

A) Extra principal
B) Loan officer fee
C) Lender servicing fee
D) Portion of payment held to pay taxes, insurance, and other items

67. Question

What is the purpose of an escrow analysis?

A) Evaluate lender returns
B) Ensure deposits cover taxes, insurance, and bills
C) Calculate loan amortization
D) Prepare payoff statement

68. Question

What is an escrow account?

A) Account for loan officer commissions
B) Temporary closing account
C) Segregated trust account where escrow funds are held
D) Account used for rate adjustments

69. Question

What is the role of escrow in a real estate transaction?

A) To negotiate contract terms
B) To appraise property
C) To underwrite the loan
D) To have a neutral third party handle instructions, documents, and funds

70. Question

When does property typically escheat to the state?

A) When the owner sells the property without recording the deed.
B) When the owner fails to pay property taxes for one year.
C) When the property is condemned for public use.
D) When the owner dies intestate and without heirs, causing the property to revert to the state.

71. Question

What does errors and omissions coverage typically insure against?

A) Losses that occur because of an error or neglect by an employee who was assigned a specific responsibility.
B) Physical damage to the property caused by natural disasters.
C) Losses caused by intentional fraud on the part of the borrower.
D) Any loss resulting from fluctuations in market interest rates.

72. Question

What is equity of redemption in the foreclosure context?

A) The lender’s right to redeem the property after foreclosure.
B) The mortgagor’s common law right to redeem property during foreclosure and, in some states, a statutory right after foreclosure.
C) The right of junior lienholders to increase their lien amounts before foreclosure.
D) The right of tenants to remain in the property after foreclosure.

73. Question

In real estate, what does a homeowner’s equity represent?

A) The total amount of principal and interest paid over the life of the loan.
B) The total of all closing costs paid at settlement.
C) The difference between the property’s fair market value and the current indebtedness against it.
D) The original loan amount when the mortgage was first made.

74. Question

What is the purpose of an environmental impact report?

A) To establish zoning classifications for undeveloped land.
B) To determine the maximum mortgage amount for a proposed project.
C) To certify that a property is free of all environmental hazards.
D) To report the probable effect of a development on the surrounding area, prepared to governmental guidelines.

75. Question

What is an endorsement in the context of negotiable instruments or insurance?

A) A verbal agreement to modify the terms of a note.
B) A writing on or notation added to an instrument that assigns, transfers, or changes its terms, or modifies insurance coverage.
C) A government guarantee of repayment on a private loan.
D) A court order requiring repayment of a defaulted loan.

76. Question

In mortgage financing, what is an end loan?

A) A short-term loan used only during construction.
B) A bridge loan used to purchase a new home before selling the current one.
C) A loan that automatically converts to a construction loan at closing.
D) The final or permanent mortgage loan made to a borrower, as distinguished from construction or development loans.

77. Question

What is an encumbrance on real property?

A) Anything that affects or limits the fee simple title, such as mortgages, leases, easements, or restrictions.
B) Any document that conveys full fee simple title.
C) Only unpaid real estate taxes on the property.
D) A temporary lease of personal property attached to the land.

78. Question

Which situation best illustrates an encroachment?

A) A recorded easement allowing a neighbor to cross the property.
B) A mortgage lien recorded against the property.
C) An improvement that intrudes illegally onto another person’s property.
D) A restriction in a deed limiting how the property may be used.

79. Question

What is eminent domain?

A) The right of a lender to seize property after a borrower defaults.
B) The authority of a homeowners association to enforce deed restrictions.
C) A private company’s power to condemn property for commercial use.
D) The power of government to appropriate private property for public use or for the public welfare.

80. Question

What is electronic imaging in the context of mortgage documentation?

A) A method of electronically signing loan documents.
B) A method of reproducing a facsimile of a document or photograph with a computer or other electronic device.
C) A process for encrypting borrower data for security purposes.
D) A digital platform for submitting online loan applications.

81. Question

In real estate, what does the term egress refer to?

A) The right to install utilities across adjoining land.
B) The right to occupy a dwelling unit for a specified term.
C) The right of a lender to foreclose on a property after default.
D) The right to go out from or exit a property, usually paired with ingress as access rights.

82. Question

What does effective gross income (personal) generally include?

A) Normal annual income including overtime that is regular or guaranteed, which may come from more than one stable source.
B) Only base salary from a single employer, excluding all other income sources.
C) Irregular income such as occasional gifts or lottery winnings.
D) Projected future bonuses that are not yet guaranteed.

83. Question

What does the effective age of a property represent in appraisal?

A) The number of years since the property was first listed for sale.
B) The legal date when title to the property was first recorded.
C) The age of the property based on its physical condition, which may differ from its chronological age.
D) The average remaining economic life of all properties in the neighborhood.

84. Question

What is the primary purpose of the Equal Credit Opportunity Act (ECOA)?

A) To regulate interest rates on consumer credit.
B) To require all mortgage loans to be sold on the secondary market.
C) To make credit equally available without discrimination on specified prohibited bases.
D) To require lenders to offer the same loan terms to every applicant.

85. Question

Which of the following best describes an easement?

A) Full ownership of another person’s land.
B) A right or interest in the land of another allowing a specific limited use or benefit.
C) A temporary lease of land for agricultural purposes.
D) A mortgage placed on property to secure a debt.

86. Question

What is the primary purpose of an earnest money deposit in a real estate transaction?

A) To pay the buyer’s appraisal and inspection fees.
B) To guarantee the lender’s yield on the mortgage loan.
C) To show that the buyer’s offer is made in good faith when the parties agree to the sale.
D) To pay the seller’s real estate commission in advance.

87. Question

In second mortgages, what is meant by a due‑on‑transfer provision?

A) A clause that forgives the loan balance when the property is transferred to an heir.
B) Another term for a due‑on‑sale clause, typically used in connection with junior liens.
C) A requirement that the borrower transfer title to the lender upon default.
D) A provision that requires the lender to approve any change in property use.

88. Question

What does a due‑on‑sale provision in a conventional mortgage permit the lender to do?

A) Reduce the loan balance when the property is sold.
B) Automatically extend the loan term upon sale of the property.
C) Call the mortgage due and payable if ownership of the property is transferred without the lender’s permission.
D) Convert the loan to interest‑only payments when the property is sold.

89. Question

What does a due‑on‑encumbrance provision in a multifamily mortgage allow the lender to do?

A) Require the borrower to refinance the mortgage every five years.
B) Call the mortgage due or increase the interest rate if an unauthorized subordinate lien is placed on the property.
C) Convert the mortgage automatically to an adjustable‑rate loan.
D) Reduce the interest rate if the property value increases.

90. Question

How is the down payment in a real estate transaction defined?

A) The total of all closing costs paid by the buyer.
B) The difference between the sales price of the property and the mortgage amount.
C) The amount of earnest money given at contract signing.
D) The total equity in the property after one year.

91. Question

In traditional property law, what does dower refer to?

A) The rights that a widower has in the property of his wife at her death.
B) The rights that a widow has in the property of her husband at his death.
C) The right of a lender to foreclose on property after default.
D) The rights of children to inherit property equally from their parents.

92. Question

What is a person’s domicile for legal purposes?

A) Any place where the person owns property.
B) A temporary vacation residence in another state.
C) A fixed and permanent home to which a person intends to return.
D) The address listed on the person’s most recent tax return.

93. Question

What is the role of a document custodian in mortgage lending?

A) To originate new mortgage loans on behalf of investors.
B) To appraise properties securing mortgage loans.
C) To maintain custody of certain mortgage documents on behalf of the lender or investor.
D) To service delinquent mortgage loans for government agencies.

94. Question

What is disintermediation in the context of real estate finance?

A) The process of consolidating multiple mortgages into a single loan.
B) The flow of funds out of savings institutions into higher-yield short‑term investments, reducing funds available for long‑term real estate financing.
C) The sale of mortgage loans from one lender to another in the secondary market.
D) The refinancing of a long‑term mortgage into a shorter‑term mortgage.

95. Question

What does a discount on a mortgage note generally accomplish for the lender or investor?

A) It reduces the borrower’s obligation to repay the note’s full face value.
B) It adjusts the yield upward by selling or purchasing the note for less than its face value.
C) It converts a fixed-rate note into an adjustable-rate note.
D) It eliminates the need to charge any contractual interest rate on the note.

96. Question

In a real estate transaction, what are disbursements?

A) Payments of money made on a previously agreed-upon basis.
B) Only the borrower’s cash brought to closing.
C) Only commissions paid to real estate brokers.
D) Refunds of overpaid escrow funds to the borrower.

97. Question

What does a direct surety bond protect against?

A) Only physical damage to the collateral property.
B) Losses caused by the principal’s negligence, lack of ability, or dishonest act.
C) Only losses due to changes in market interest rates.
D) Only the lender’s legal costs in a foreclosure action.

98. Question

Who is a designated appraiser in mortgage lending?

A) Any real estate agent who provides a price opinion.
B) A county tax assessor who sets property tax values.
C) Someone who determines the value of property and whose expertise is recognized and licensed by a professional association, with appraisals accepted by many lenders.
D) A loan officer who estimates property value during application.

99. Question

In real estate, what is depreciation?

A) An increase in the value of an asset due to market demand.
B) The cost of improvements added to a property.
C) The total amount of principal repaid over the life of a loan.
D) The decline in value of an asset due to physical deterioration, functional obsolescence, or economic obsolescence.

100. Question

What does Demotech, Inc. primarily do in the context of real estate finance?

A) It establishes ratings for hazard insurance carriers by evaluating their assets and liabilities.
B) It appraises residential properties for mortgage lenders.
C) It insures mortgage loans against borrower default.
D) It issues federal regulations for mortgage loan originators.

101. Question

What is a demand note?

A) A note that is only due on a fixed maturity date.
B) A note that is due whenever the holder demands payment.
C) A note that cannot be prepaid under any circumstances.
D) A note that requires no payments until the property is sold.

102. Question

What does delivery in escrow involve?

A) The immediate delivery of a deed directly from seller to buyer.
B) The unconditional delivery of funds to the seller at contract signing.
C) The delivery of loan documents directly to the secondary market.
D) A conditional delivery of something to a third person to be held until a specified event occurs or an act is performed.

103. Question

When is a mortgage typically considered delinquent?

A) When the borrower applies to refinance the loan.
B) When the borrower pays the mortgage ahead of schedule.
C) When a required mortgage payment is past due under the terms of the note.
D) When the borrower changes homeowners insurance companies.

104. Question

What is a deficiency judgment?

A) A court order to pay the balance owed on a loan when the proceeds from the sale of the security are insufficient to pay off the loan.
B) A court order that cancels all remaining mortgage obligations.
C) A judgment that automatically clears all liens on a property.
D) An administrative penalty for paying off a mortgage early.

105. Question

What are deferred payments in a financing arrangement?

A) Payments that must be made weekly instead of monthly.
B) Payments that are scheduled to begin at a future time rather than immediately.
C) Payments that are automatically waived by the lender after the first year.
D) Payments that can never be changed once the loan closes.

106. Question

With respect to an adjustable-rate mortgage, what is deferred interest?

A) Interest that is forgiven if the borrower makes a certain number of on-time payments.
B) Interest that is paid only as a lump sum at closing.
C) Interest that is not covered by the monthly payment and is added to the unpaid principal balance for later years.
D) Interest that remains fixed for the life of the loan.

107. Question

In mortgage lending, what does the term default generally mean?

A) The automatic renewal of a mortgage at maturity.
B) The voluntary prepayment of the mortgage balance.
C) The assignment of the mortgage to a new lender.
D) A breach or nonperformance of the terms of a note or the covenants of a mortgage.

108. Question

What is a deed restriction?

A) A limitation placed on a deed that restricts or limits the use of the real property.
B) A requirement that a deed must be recorded within a certain number of days after closing.
C) A restriction on which lender may finance a particular property.
D) A limitation on the maximum loan amount that may be placed on a property.

109. Question

In a mortgage transaction, what is a deed of trust primarily used for?

A) A document that records only the sales price of a property.
B) A type of security instrument that conveys title in trust to a third party as collateral for a debt, with power of sale in the event of default.
C) A document that transfers personal property from one party to another.
D) A nonbinding letter describing the parties’ intent to buy or sell.

110. Question

What is a DEED-IN-LIEU?

A) A deed used only for new construction properties.
B) A deed used to add a co-borrower to the title of the property.
C) A deed that transfers title from seller to buyer at a standard closing.
D) A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure; also called a voluntary conveyance.

111. Question

What is a DEED?

A) A promissory note containing the borrower’s promise to repay a debt.
B) A written document by which the ownership of land is transferred from one party to another.
C) A lease agreement that grants a tenant temporary possession of the property.
D) An appraisal report estimating the market value of the property.

112. Question

DEBT-TO-INCOME RATIOS are used to:

A) Appraise the current market value of the subject property.
B) Determine whether the title to the property is clear.
C) Determine whether a borrower can qualify for a mortgage by comparing monthly housing expense and total obligations to income.
D) Set the property tax rate for the borrower’s neighborhood.

113. Question

What does DEBT SERVICE refer to?

A) The periodic payment of principal and interest on mortgage loans.
B) The lender’s monthly servicing fee for managing the loan.
C) The annual property tax assessment on the mortgaged property.
D) The borrower’s mortgage insurance premium payments.

114. Question

In mortgage finance, what is DEBT?

A) The equity remaining in the property after closing costs are paid.
B) The appraised value of the property minus the loan amount.
C) Only loans that are secured by real estate as collateral.
D) Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

115. Question

What is a DEBENTURE?

A) A mortgage loan that is fully secured by real property.
B) A negotiable check commonly used to pay closing costs.
C) An unsecured debt instrument backed only by the general credit standing and earning capacity of the issuer or insurer.
D) A deed that conveys title to real property from grantor to grantee.

116. Question

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

A) The borrower’s pay stubs, bank statements, and tax returns.
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.
C) Only the appraisal and inspection reports for the property.
D) The Loan Estimate and Closing Disclosure forms from closing.

117. 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.
B) To establish the property’s assessed value for tax purposes.
C) To verify only the borrower’s employment status.
D) To disclose any defects in the title to the property.

118. Question

What does a borrower’s CREDIT RATING primarily evaluate?

A) The current market value of the borrower’s home.
B) The size of the borrower’s down payment on the property.
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.
D) The total amount of interest the borrower will pay over the life of the loan.

119. Question

What is CREDIT LIFE INSURANCE designed to do?

A) Protect the lender against property damage to the collateral.
B) Cover the borrower’s medical expenses if they become ill.
C) Reimburse the lender for foreclosure and legal costs.
D) Pay off the mortgage debt if the mortgagor dies while the policy is in force.

120. Question

In mortgage banking, what does the COUPON RATE describe?

A) The discount points charged to the borrower at closing.
B) The contract interest rate stated on the face of the note or bond.
C) The annual percentage rate (APR) including all finance charges.
D) The servicing fee retained by the lender on each payment.

121. Question

What are COVENANTS OF TITLE?

A) Promises by a borrower to repay the mortgage debt.
B) Lease provisions that govern tenant responsibilities.
C) Guarantees made by a grantor when real property is conveyed by a warranty deed.
D) Conditions in a mortgage note regarding prepayment penalties.

122. 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.'
B) An informal oral agreement between a buyer and seller.
C) A government zoning restriction imposed on the property.
D) A recorded easement granted to a utility company.

123. 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.
B) Only on the basis of material costs; labor is not included.
C) As the appraised value of the property plus the builder’s profit.
D) As the actual cost of the construction plus a profit allowance to the builder, instead of a fixed price.

124. 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.
B) The weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.
C) The prime rate set by major commercial banks in the 11th District.
D) The average yield on 10-year U.S. Treasury notes.

125. Question

What is the COST APPROACH TO VALUE in appraisal?

A) Valuing property based solely on rental income.
B) Estimating value based on the cost to produce a substitute property with the same use.
C) Determining value using comparable sales only.
D) Using projected future cash flows to determine present value.

126. Question

Who is a CO‑SIGNER in a mortgage transaction?

A) A co‑borrower with equal title rights.
B) Someone who provides a gift for down payment.
C) A broker who represents both parties.
D) A person who is equally responsible for the debt but has no ownership interest in the property.

127. Question

What is CORPOREAL PROPERTY?

A) The land and all physical items affixed to it.
B) Intangible rights such as easements.
C) Personal property not attached to land.
D) Contract rights transferred between parties.

128. Question

What is a CORPORATE RELOCATION MORTGAGE?

A) Any mortgage offered by a corporation.
B) A commercial mortgage secured by business equipment.
C) A mortgage designed to assist an employee’s transfer to a new business location under a structured program.
D) An interest‑only loan used during relocation only.

129. Question

What is CORPORATE RELOCATION?

A) A tax credit for corporations expanding their business.
B) An employer‑arranged move of employees or operations to another area.
C) A merger between two corporations.
D) A federal program providing grants to relocating businesses.

130. Question

What is a COOPERATIVE PROJECT?

A) A condo development with individually deeded units.
B) A commercial project leased to multiple tenants.
C) A trust that holds land for public parks.
D) A building where a corporation holds title and sells shares tied to proprietary leases for unit occupancy.

131. Question

What are COOPERATIVE MORTGAGES?

A) Mortgages related to cooperative projects, usually covering the entire multifamily property.
B) Only individual unit loans in condo buildings.
C) Mortgages used exclusively for corporate relocation.
D) A type of construction financing.

132. Question

What is a COOPERATIVE CORPORATION?

A) A developer that builds multifamily rental units.
B) A corporation that manages condo HOAs.
C) The business entity that holds title to a cooperative project and grants occupancy via proprietary leases.
D) A mortgage lender specializing in co-op loans.

133. Question

What is a COOPERATIVE in real estate?

A) A form of ownership where a corporation holds title and shareholders receive occupancy rights through proprietary leases.
B) A condo building with individually deeded units.
C) A single‑family residence owned in fee simple.
D) A partnership arrangement for vacation rentals.

134. Question

What does it mean to CONVEY real property?

A) To lease property for a short term.
B) To transfer title of real property to another party.
C) To record a deed at the courthouse.
D) To appraise the value of a property.

135. Question

What is a CONVERTIBLE ARM?

A) An ARM that adjusts only once during the loan term.
B) A fixed‑rate mortgage that converts into an ARM.
C) An ARM that cannot change rates for the first 10 years.
D) An ARM with an option for the borrower to convert it to a fixed‑rate mortgage within a set time frame.

136. Question

What is a CONVENTIONAL LOAN?

A) A loan guaranteed by the Department of Veterans Affairs.
B) A loan insured by the Federal Housing Administration.
C) A loan not insured by FHA and not guaranteed by VA.
D) A loan that converts automatically to an ARM.

137. Question

What is a CONTRACT?

A) An agreement between parties to do or not do a lawful act.
B) A verbal promise that is not legally enforceable.
C) A document used only in commercial transactions.
D) A non‑binding agreement that cannot be enforced.

138. Question

What is a CONTINGENCY in a contract?

A) A mandatory fee required to execute a contract.
B) A stated event that must occur before a contract becomes binding.
C) A penalty for canceling a contract early.
D) A clause that guarantees financing regardless of borrower qualifications.

139. Question

What is a CONSUMER REPORTING AGENCY (or bureau)?

A) A government agency that sets maximum interest rates on loans.
B) An organization that prepares reports on an individual’s credit and public records history for use by credit grantors.
C) Any lender that reports loan payments to the IRS.
D) A company that services mortgage loans on behalf of investors.

140. Question

What is a CONSTRUCTION LOAN?

A) A long-term permanent loan on a completed property.
B) A loan used only for purchasing vacant land.
C) A revolving line of credit for home improvements after completion.
D) A short-term interim loan to finance construction costs, with funds disbursed as work progresses.

141. Question

In a condominium project, what are CONSTITUENT DOCUMENTS?

A) The legal documents of a condominium, including the declaration, legal map, association bylaws, and articles of incorporation.
B) The individual sales contracts between buyers and sellers.
C) The appraisals and inspections for each unit.
D) The marketing brochures used to sell units.

142. Question

In contract law, what is CONSIDERATION?

A) The legal description attached to the contract.
B) The earnest money deposit only.
C) The legal right, promise, or thing of value exchanged for the act or promise of another in a contract.
D) The attorney’s fee for drafting the agreement.

143. Question

Which feature best describes a CONDOMINIUM HOTEL (or “condotel”)?

A) A condo project where all units are owner-occupied with no rentals allowed.
B) A condo project operated as a commercial hotel, with services such as rental desks and daily cleaning, while units are individually owned.
C) A hotel owned and operated only by a single corporate entity.
D) Any condominium located in a resort area.

144. Question

What is a CONDOMINIUM CONVERSION?

A) Constructing a new condominium building from the ground up.
B) Changing an office building into industrial space.
C) Rezoning agricultural land for residential use.
D) Changing the ownership of an existing (usually rental) building to the condominium form of ownership.

145. Question

Which choice best defines a CONDOMINIUM?

A) Ownership in a specific unit plus a proportionate interest in the project’s common areas.
B) A long-term lease of a unit with no ownership interest.
C) Ownership of the land only, not the improvements.
D) A time-share interest limited to certain weeks of the year.

146. Question

For Fannie Mae, what is CONDITIONAL PROJECT ACCEPTANCE?

A) Final unconditional approval of a project by Fannie Mae.
B) A construction permit issued by the local municipality.
C) The first stage of Fannie Mae’s acceptance of a condo, PUD, or co-op project, stating conditions required for final acceptance.
D) An HOA’s approval for a buyer to purchase a unit.

147. Question

What is a CONDITIONAL COMMITMENT, most often used with FHA loans?

A) A loan approval that is always transferable to any property.
B) A commitment on a specific property for a definite loan amount and terms for a future unknown purchaser of satisfactory credit.
C) A temporary rate lock with no property identified.
D) A seller’s written promise to carry back financing.

148. Question

What is CONDEMNATION in real estate?

A) A court order requiring repairs to unsafe property.
B) A city’s refusal to issue a building permit.
C) The voluntary sale of land for public purposes.
D) The taking of private property for public use without the owner’s consent, upon payment of just compensation.

149. Question

In the appraisal process, what are COMPARABLES (or “comps”)?

A) Recently sold properties similar in size, location, and amenities to the subject, used to estimate its fair market value.
B) Only unsold listings in the neighborhood.
C) Any properties appraised by the same appraiser.
D) Only distressed sales in the area.

150. Question

In a real estate development, what are COMMON AREAS?

A) Individually deeded private yards behind each unit.
B) Only the lobby and interior hallways of a building.
C) Land or improvements, such as parking lots and parks, for the benefit and use of all tenants and owners in a development.
D) Any area reserved exclusively for commercial tenants.

151. Question

In a condominium or PUD project, what are COMMON AREA ASSESSMENTS?

A) Individual property tax bills for each unit.
B) Levies against unit owners to provide capital for association expenses and upkeep of the common areas.
C) Optional contributions to a neighborhood improvement fund.
D) Charges paid only by commercial tenants in the project.

152. Question

What is a COMMITMENT FEE?

A) A penalty for early payoff of the loan.
B) The fee paid to record the mortgage in public records.
C) The broker’s fee for originating the loan.
D) A fee paid to a potential lender for the promise to lend money at a specified time in the future.

153. Question

In mortgage lending, what is a COMMITMENT?

A) An agreement between lender and borrower to lend money at a future date subject to stated conditions.
B) A notice that a loan application has been denied.
C) A document transferring title from seller to buyer.
D) A request for verification of deposit.

154. Question

What is a COMMISSION in a real estate transaction?

A) The fee charged by the lender to underwrite the loan.
B) The annual property tax due on the home.
C) The amount paid to a broker for services rendered, usually a percentage of the sale price.
D) The buyer’s earnest money deposit.

155. Question

In a condominium or co‑operative project, what is COMMERCIAL SPACE?

A) Storage space reserved for unit owners only.
B) Space used to produce income through leases for commercial or business use.
C) Common hallways and lobbies shared by all residents.
D) Recreational amenities such as pools and gyms.

156. Question

Which statement best defines COMMERCIAL PROPERTY?

A) Property used exclusively for agricultural purposes.
B) Owner-occupied single-family residences.
C) Only large regional shopping centers.
D) Income property, typically zoned for business use, including property held for rental to one or more tenants.

157. Question

What is a COMMERCIAL LOAN in real estate finance?

A) A mortgage loan on property that produces income.
B) Any loan made to an individual for personal use.
C) A home equity line of credit.
D) A construction loan on a single-family residence only.

158. Question

Which functions are typically performed by a COMMERCIAL BANK?

A) Selling only long-term insurance products.
B) Making loans, maintaining checking accounts, receiving time deposits, and discounting negotiable instruments.
C) Regulating other financial institutions.
D) Appraising real estate for mortgage underwriting.

159. Question

In a mortgage transaction, what is COLLATERAL?

A) The borrower’s credit history.
B) The lender’s funds used to make the loan.
C) The commission paid to the real estate broker.
D) Property pledged as security for a debt, such as real estate securing a mortgage.

160. Question

What is CO-INSURANCE in an insurance policy?

A) Sharing the risk of a policy by more than one insurer, each liable for a portion of the loss.
B) Requiring the borrower to pay two deductibles.
C) Insurance that covers both real and personal property.
D) A reinsurance treaty between two carriers.

161. Question

Which statement best describes a CO-BORROWER (CO-MORTGAGOR)?

A) A person who guarantees the loan but has no ownership interest.
B) A non-occupant co-signer with no repayment responsibility.
C) A party equally responsible for repayment who also has an interest in the property’s title.
D) A spouse whose income is not used to qualify.

162. Question

What is a CLOUD ON TITLE?

A) A temporary suspension of property taxes.
B) A condition revealed by title search that adversely affects title and often requires a quitclaim, release, or court action to remove.
C) A weather-related hazard disclosure on the property.
D) A standard easement for utilities.

163. Question

What is the purpose of a CLOSING STATEMENT?

A) To record the listing terms between seller and broker.
B) To set the property’s assessed tax value.
C) To request payoff figures from the seller’s lender.
D) To provide a detailed account of all funds received and paid at closing, including escrow deposits.

164. Question

What is the CLOSING DATE in a real estate contract?

A) The contractually agreed date for transferring title.
B) The date the purchase agreement is first signed.
C) The date the lender issues final loan approval.
D) The date the appraisal report is completed.

165. Question

Which of the following best describes CLOSING COSTS?

A) The down payment made by the buyer at settlement.
B) Only the lender’s origination fee on a new loan.
C) Expenses incidental to a real estate sale, such as loan, title, and appraisal fees.
D) The seller’s net proceeds after the transaction.

166. Question

What does CLOSING mean in a real estate transaction?

A) The date the listing agreement is signed.
B) The buyer’s loan application date.
C) The date the appraisal is completed.
D) The consummation of the real estate transaction when the deed is delivered, documents are signed, and funds are disbursed.

167. Question

Which choice best defines CLEAR TITLE?

A) Title subject only to a first mortgage.
B) Good, marketable title that is free of encumbrance, obstruction, burden, or limitation.
C) Title that cannot be conveyed to another party.
D) Title that includes at least one undisclosed lien.

168. Question

What is a CHATTEL MORTGAGE?

A) A mortgage secured by a one‑to‑four family dwelling.
B) A mortgage used only for vacant land.
C) A lien or security interest on personal property rather than real property.
D) A type of junior lien used in second mortgages.

169. Question

What is meant by the CHAIN OF TITLE for a parcel of real property?

A) The history of all documents transferring title to a parcel from the earliest to the most recent.
B) The list of all liens currently recorded against a property.
C) The order in which multiple offers are presented to a seller.
D) The record of all property tax payments.

170. Question

What is a CERTIFICATE OF TITLE?

A) The original deed conveying title to the first owner.
B) A title insurance policy issued to the lender.
C) A county tax statement for the current year.
D) A statement from a title company or attorney that title is legally vested in the present owner.

171. Question

In a VA loan, what is the CERTIFICATE OF REASONABLE VALUE (CRV)?

A) A certificate confirming that property taxes are current.
B) A VA‑issued document that establishes the maximum value and loan amount for a VA‑guaranteed mortgage.
C) A letter of intent from the veteran to occupy the property.
D) A lender’s appraisal review report.

172. Question

What is a CERTIFICATE OF OCCUPANCY?

A) The deed conveying title to a new owner.
B) A certificate required only for commercial properties.
C) Written authorization from a local municipality allowing a completed structure to be occupied.
D) A document showing all permits have been paid.

173. Question

For a VA loan, what is a CERTIFICATE OF ELIGIBILITY?

A) A certificate from the VA stating that a veteran is eligible for a VA‑insured or guaranteed loan.
B) A document showing that the property meets VA minimum property standards.
C) A lender’s commitment letter to fund the loan.
D) A DD‑214 form verifying military discharge status only.

174. Question

What does the CERTIFICATE OF DEPOSIT INDEX represent for certain ARM plans?

A) The prime rate charged by banks on credit cards.
B) The federal funds rate set by the Federal Reserve.
C) The average yield on 30‑year Treasury bonds.
D) The weekly average of secondary market interest rates on 6‑month negotiable certificates of deposit.

175. Question

What is a CERTIFICATE OF CLAIM in connection with an insured mortgage?

A) A document that transfers title from borrower to lender.
B) A contingent promise to reimburse an insured mortgagee for certain foreclosure costs if sale proceeds are sufficient.
C) A certificate showing the loan is paid in full.
D) A statement of the borrower’s outstanding tax obligations.

176. Question

Which situation best describes a CASH-OUT REFINANCE?

A) Refinancing only to obtain a lower interest rate with no change in loan amount.
B) Refinancing to shorten the loan term with no funds back to the borrower.
C) Refinancing where the new loan exceeds payoff amounts and costs, and the borrower receives extra cash at closing.
D) Refinancing from a fixed-rate loan into an ARM with no equity change.

177. Question

What is the CAPITALIZATION RATE (cap rate)?

A) The rate that reflects the relationship between a property's value and the net income it produces.
B) The maximum interest rate allowed by law on a mortgage.
C) The annual percentage rate (APR) disclosed under TILA.
D) The lender’s cost of funds in the secondary market.

178. Question

What does CAPITALIZATION mean in income property valuation?

A) Writing off the cost of improvements for tax purposes.
B) Increasing the loan balance by adding unpaid interest.
C) Recording a deed in the public records.
D) Converting anticipated future net income into present value using a chosen rate of return.

179. Question

In an adjustable-rate mortgage (ARM), what is a CAP?

A) A fee charged to lock an interest rate for a set period.
B) A limit on how much the interest rate or payment can increase or decrease at adjustment and over the life of an ARM.
C) A penalty for paying off the mortgage early.
D) A feature that converts an ARM to a fixed-rate loan.

180. Question

What is a BASIS POINT?

A) One one-hundredth of one percent, used to describe yield changes.
B) Ten percent of the note rate.
C) One full percent of loan amount.
D) Equal to ten basis units.

181. Question

Who is considered BANKRUPT?

A) Anyone who is behind on debt payments.
B) A person whose credit score falls below 500.
C) A person or entity relieved from debts through a court proceeding after surrendering assets to a court-appointed trustee.
D) A homeowner who has received a notice of default.

182. Question

What is a BALLOON NOTE?

A) A note that is fully amortized with equal payments.
B) A note with interest-only payments for the entire term.
C) A note requiring escalating payments with no final lump sum.
D) A note whose periodic payments do not fully amortize the loan, leaving a final lump-sum payment due at maturity.

183. Question

Who is an ATTORNEY IN FACT?

A) A lawyer automatically authorized to act for any client.
B) A person appointed to act for another under a power of attorney, limited to the authority granted.
C) A court-appointed representative for minors only.
D) A government auditor assigned to real estate transactions.

184. Question

What is an ASSUMPTION OF MORTGAGE?

A) When a buyer assumes liability under an existing mortgage, and the seller remains secondarily liable unless released by the lender.
B) When a lender forgives the remaining balance of a mortgage.
C) When a seller pays off the mortgage before transferring title.
D) When a mortgage is converted into a line of credit.

185. Question

What does an ASSIGNMENT OF RENTS allow a lender or creditor to do?

A) Refinance the borrower’s loan without consent.
B) Take legal ownership of the property immediately.
C) Collect rents, manage the property, and apply net income toward delinquent mortgage payments without owning the property.
D) Evict all tenants automatically.

186. Question

What is an ASSIGNMENT OF MORTGAGE?

A) A document that creates a new mortgage lien on property.
B) A document evidencing the transfer of ownership of a mortgage from one party to another.
C) A release of mortgage recorded when the loan is paid off.
D) A clause stating that property acquired later becomes collateral.

187. Question

In real estate, what is an ASSESSMENT?

A) A mandatory home inspection.
B) A voluntary improvement project.
C) The appraisal required by a mortgage lender.
D) A value placed on property for taxation, or a levy for a specific purpose such as a sewer assessment.

188. Question

What is ASSESSED VALUATION?

A) The value placed on property by a taxing authority for purposes of taxation.
B) The value determined by a licensed appraiser for loan approval.
C) The price a buyer agrees to pay for the property.
D) The replacement cost of improvements.

189. Question

What is an APPURTENANCE?

A) A loan feature allowing early payoff without penalty.
B) A government tax lien applied to real property.
C) Something attached or closely related to the land that becomes the owner’s property, such as a structure or easement.
D) A mortgage clause relating to future advances.

190. Question

What is APPRECIATION as defined in the glossary?

A) The decrease in value caused by depreciation.
B) A tax credit given to homeowners annually.
C) Any increase in value caused solely by inflation.
D) An increased value of property due to positive improvements or elimination of negative factors.

191. Question

Who is an APPRAISER?

A) A person engaged in estimating the value of property as a professional or employee.
B) A real estate agent listing properties for sale.
C) A mortgage broker arranging loans.
D) A county official determining tax rates.

192. Question

What is the definition of APPRAISED VALUE?

A) The price a buyer agrees to pay for a property.
B) An estimate of property value made by a qualified expert (an appraiser).
C) The value assigned by the county tax assessor.
D) The replacement cost of improvements only.

193. Question

What is the definition of BASIS POINT?

A) One one-hundredth of one percent.
B) Ten percent of note rate.
C) One full percent.
D) Equal to ten basis units.

194. Question

What is the definition of BANKRUPT?

A) Anyone behind on payments.
B) Anyone with low credit.
C) Relieved of debts after surrendering assets to trustee.
D) Anyone receiving foreclosure notice.

195. Question

What is the definition of BALLOON NOTE?

A) Fully amortized note.
B) Interest-only note.
C) Escalating payment note.
D) Payments don't amortize; lump-sum due at maturity.

196. Question

What is the definition of ATTORNEY IN FACT?

A) A lawyer automatically authorized.
B) A person appointed under power of attorney to act for another.
C) A court guardian for minors.
D) A government auditor.

197. Question

What is the definition of ASSUMPTION OF MORTGAGE?

A) Buyer assumes liability; seller remains secondarily liable unless released.
B) Lender forgives remaining balance.
C) Seller pays off mortgage first.
D) Mortgage converted to equity line.

198. Question

What is the definition of ASSIGNMENT OF RENTS?

A) Refinance the borrower's loan.
B) Take ownership immediately.
C) Collect rents/manage property/apply income to delinquency.
D) Evict tenants automatically.

199. Question

What is the definition of ASSIGNMENT OF MORTGAGE?

A) A document creating a new mortgage.
B) A document evidencing transfer of ownership of a mortgage.
C) A release of mortgage when paid off.
D) A clause about after-acquired property.

200. Question

What is the definition of ASSESSMENT?

A) A mandatory inspection.
B) A voluntary improvement project.
C) An appraisal for a loan.
D) A value placed for taxation or a special levy.

201. Question

What is the definition of ASSESSED VALUATION?

A) The value placed on property by a taxing authority.
B) The value determined by an appraiser.
C) The price agreed in a contract.
D) The replacement cost of improvements.

202. Question

What is the definition of APPURTENANCE?

A) A loan feature allowing early payoff.
B) A government tax lien.
C) Something attached or related to land, such as a structure or easement.
D) A mortgage clause for future advances.

203. Question

What is the definition of APPRECIATION?

A) The decrease in value caused by depreciation.
B) A tax credit for homeowners.
C) Any increase in value caused solely by inflation.
D) An increased value due to improvements or removal of negative factors.

204. Question

What is the definition of APPRAISER?

A) A person engaged in estimating the value of property as a professional or employee.
B) A real estate agent listing properties.
C) A mortgage broker arranging loans.
D) A county tax official.

205. Question

What is the definition of APPRAISED VALUE?

A) The price a buyer agrees to pay for a property.
B) An estimate of property value made by a qualified expert (an appraiser).
C) The value assigned by the county tax assessor.
D) The replacement cost of improvements.

206. Question

What is an APPRAISAL in real estate?

A) The assessed value set by the tax assessor.
B) The final sales price agreed upon by buyer and seller.
C) An estimate of value on real property and the process of preparing such an estimate.
D) The replacement cost of improvements only.

207. Question

Which statement best describes an ANNUITY?

A) A one-time lump sum paid at loan closing.
B) An amount, especially of money, payable yearly until the death of the recipient.
C) A fee paid once to obtain a mortgage loan.
D) A variable payment tied only to stock market performance.

208. Question

Under the Truth-in-Lending Act, what does the ANNUAL PERCENTAGE RATE (APR) represent?

A) The note rate stated on the promissory note only.
B) The borrower’s credit score expressed as a percentage.
C) The lender’s cost of funds in the secondary market.
D) The percentage relationship of the total finance charge to the amount of the loan.

209. Question

What does an AMORTIZATION SCHEDULE show?

A) A table showing the principal and interest due at regular intervals and the remaining unpaid balance after each payment.
B) A list of all closing costs and who pays them.
C) The appraised value of the property each year.
D) A record of tax payments made on the property.

210. Question

What is AMORTIZATION of a loan?

A) Extending the loan term without changing the payment.
B) The gradual reduction of a debt by periodic payments sufficient to pay principal and interest and liquidate the debt.
C) Paying only interest with a lump sum principal payment at maturity.
D) Replacing one loan with another at a lower rate.

211. Question

In real estate, what is an AMENITY?

A) The legal description of a property.
B) The assessed value assigned by the tax assessor.
C) An aspect or feature of a property that enhances its value, such as parking, transportation access, or recreational facilities.
D) The type of zoning assigned to the property.

212. Question

What is the ALTA (AMERICAN LAND TITLE ASSOCIATION)?

A) A national association of title insurance companies, abstractors, and attorneys that specializes in real property law and sets standards and policy forms.
B) A federal agency that regulates national banks.
C) A state licensing board for real estate brokers.
D) A trade association for mortgage loan originators.

213. Question

What is ALL-RISK INSURANCE as described in the glossary?

A) A policy that covers only fire and extended coverage risks.
B) A policy that provides coverage for every conceivable risk except those specifically excluded by the policy.
C) A policy that covers only perils named in the policy.
D) A government-backed flood insurance policy.

214. Question

What does ALIENATION mean in real property law?

A) The government’s taking of land for public use.
B) The process of subdividing land into lots.
C) The recording of liens against real property.
D) The transfer of property and possession of lands or other things from one person to another.

215. Question

What is an AGREEMENT OF SALE?

A) A deed conveying legal title from seller to buyer.
B) A financing agreement between buyer and lender.
C) A contract in which the buyer agrees to purchase a specific property and the seller agrees to sell under stated conditions (a sales contract).
D) A lease granting possession without title.

216. Question

In real estate, who is an AGENT?

A) A person legally authorized by another to represent them or act on their behalf, such as a broker hired to sell property.
B) Any person who attends a closing.
C) Only an attorney licensed in the state.
D) A county tax assessor.

217. Question

What is the purpose of an AFTER ACQUIRED PROPERTY CLAUSE in a mortgage?

A) To limit the collateral only to property owned on the date of the loan.
B) To provide that property acquired by the borrower after the date of the loan automatically becomes additional security for the loan.
C) To allow substitution of collateral without lender consent.
D) To release all collateral once the loan is seasoned.

218. Question

Which of the following best defines an AFFIDAVIT?

A) An oral statement made under oath in court.
B) A written statement not requiring any oath or acknowledgment.
C) A promissory note secured by a mortgage.
D) A sworn statement in writing, made before a public official, usually a notary.

219. Question

What is ADVERSE POSSESSION?

A) A method of acquiring title to real property by possession for a statutory period under certain conditions.
B) The process of transferring title by a recorded deed.
C) A foreclosure action filed by a lender.
D) A voluntary gift of property from one owner to another.

220. Question

What does AD VALOREM mean in the context of property taxation?

A) A fixed flat tax charged per parcel regardless of value.
B) A tax based only on the original purchase price of the property.
C) A tax or duty based on value and levied as a percentage of that value (for example, 30 mills per dollar of property value).
D) A transfer tax paid only when title changes hands.

221. Question

Which statement best describes an ADJUSTABLE RATE MORTGAGE (ARM)?

A) A mortgage with a fixed interest rate for the entire term.
B) A mortgage that permits the lender to adjust its interest rate periodically based on a specified index.
C) A mortgage in which the interest rate can only decrease over time.
D) A mortgage that requires interest-only payments until maturity.

222. Question

What is meant by ADD-ON INTEREST in an installment loan?

A) Interest charged only on the declining balance of the loan.
B) Interest charged only during the final year of the loan term.
C) The full amount of interest calculated on the original principal for the loan term, added to principal as part of the face amount of the note.
D) Interest that is waived if the loan is prepaid.

223. Question

Which of the following is the correct definition of an ACRE?

A) 43,560 square feet; 4,840 square yards; 160 square rods.
B) 40,000 square feet only.
C) 50,000 square feet.
D) 10,000 square feet.

224. Question

In the law of contracts and descents, to ACQUIRE property means to:

A) Lease the property from another owner.
B) Place a lien on the property.
C) Appraise the property for tax purposes.
D) Become owner of property; to make property one’s own.

225. Question

Which option best describes ACCRUED INTEREST?

A) Interest paid in advance at closing.
B) Interest earned for the period of time that has elapsed since interest was last paid.
C) Interest forgiven by the lender at payoff.
D) Interest that will not be charged until the final year of the loan.

226. Question

What is an ACCIDENT AND HEALTH PREMIUM in connection with a mortgage?

A) A premium for standard homeowners insurance.
B) A premium for private mortgage insurance (PMI).
C) An insurance premium paid monthly that insures payment of the mortgage if the borrower becomes disabled.
D) A life insurance premium that pays off the loan at death.

227. Question

In real property law, what does ACCESS (EASEMENT OF) mean?

A) The right of the owner of land adjoining a road or highway to go and return from the land to the highway without obstruction.
B) The right to cross any neighboring property at will.
C) The right to park vehicles on a public street indefinitely.
D) The right to build a structure over a public sidewalk.

228. Question

What does an ACCELERATION CLAUSE in a mortgage most commonly provide?

A) The right to prepay the loan without penalty.
B) Automatic reduction of the interest rate after five years.
C) Conversion of a fixed-rate loan to an ARM.
D) That the entire principal becomes immediately due and payable in the event of default.

229. Question

Who is an ABUTTING OWNER?

A) Any owner within the same subdivision.
B) An owner of land which abuts or adjoins another parcel.
C) A tenant who occupies a neighboring property.
D) A lender holding a lien on adjacent property.

230. Question

What is an ABSTRACT OF TITLE?

A) The legal description of a parcel prepared by a surveyor.
B) A title insurance policy insuring against future defects.
C) A written history of title transactions or conditions bearing on the title to a parcel, summarizing all subsequent instruments of public record.
D) A summary of a borrower’s credit history.

231. Question

Which choice best describes ABSOLUTE TITLE?

A) Title that is exclusive to the person who has it, with no other right, interest, or claim in the same property.
B) Title held by two or more owners as joint tenants.
C) Title subject to an outstanding tax lien.
D) Title that is contingent on the approval of a lender.

232. Question

In the glossary, what does ABATEMENT refer to?

A) An increase in a property’s assessed value for tax purposes.
B) A permanent reduction in the loan’s interest rate.
C) A waiver of the loan’s prepayment penalty.
D) The suspension or cessation in whole or in part of a continuing charge, such as rent.

233. Question

Which statement best defines ABANDONMENT in real property?

A) Leaving a property vacant for more than 30 days.
B) Voluntary relinquishment of all right, title, claim and possession, with the intention of not reclaiming it.
C) Loss of property due to unpaid taxes.
D) Transfer of title to a lender through foreclosure.

234. Question

Which situation best illustrates “payment shock” as defined in the text?

A) A borrower’s payment jumps sharply when an interest-only or payment-option ARM begins amortizing, making the new amount unaffordable.
B) A borrower’s payment decreases after refinancing to a lower rate.
C) A borrower’s payment remains level for 30 years on a fixed-rate loan.
D) A borrower’s payment includes taxes and insurance in an escrow account.

235. Question

What does an “assignment of mortgage” indicate?

A) The borrower has completed paying off the mortgage in full.
B) The lender has modified the interest rate and term of the loan.
C) The mortgage has been subordinated to a new lien.
D) The mortgage has been transferred from the original lender or borrower to a third party.

236. Question

Which of the following is listed as an example of an origination service in the text?

A) Purchasing closed loans from lenders to hold in an investment portfolio.
B) Completing the loan application, collecting borrower documentation, and preparing the file for underwriting.
C) Performing yearly escrow analysis on existing loans.
D) Issuing property tax bills on behalf of local governments.

237. Question

Which description best matches “Loan Payment Collection” as discussed in the text?

A) The process of setting interest rates for newly originated loans.
B) The borrower’s voluntary prepayment of principal to shorten the loan term.
C) The process of pursuing payments of debts owed, often through collection agencies that work for a fee or percentage of the amount owed.
D) The lender’s internal quality control review of closed loans.

238. Question

What role does a mortgage investor play in the mortgage market?

A) Buying mortgage loans from lenders to free up funds for more lending.
B) Originating loans directly to consumers on behalf of lenders.
C) Performing property appraisals before loans are approved.
D) Collecting monthly payments on behalf of borrowers.

239. Question

According to the text, which statement about a mortgage lender is accurate?

A) Mortgage lenders only service loans and can never fund them.
B) Mortgage lenders are government agencies that insure all residential loans.
C) Mortgage lenders may not work with mortgage brokers under any circumstances.
D) Mortgage lenders issue loans and may handle application, underwriting, and funding directly, or receive applications through mortgage brokers.

240. Question

Which of the following best describes consumer credit as used in the text?

A) Any loan used to purchase or refinance a home.
B) Personal, usually unsecured debt taken on to buy everyday goods and services, such as credit cards.
C) Only long-term investment loans such as mortgages.
D) Only student loans used to pay for education.

241. Question

How does the SAFE Act and most state laws define a non-traditional mortgage product?

A) Only mortgages with terms longer than 30 years.
B) Only interest-only or balloon mortgages.
C) Any mortgage that requires a down payment of less than 20%.
D) Any mortgage product other than a 30-year fixed-rate mortgage.

242. Question

Which statement best describes the focus of mortgage underwriting as defined in the text?

A) Evaluating whether the borrower’s overall risk profile is acceptable by analyzing the five C’s of credit.
B) Determining only the property’s value without regard to the borrower.
C) Setting interest rates based solely on current market conditions.
D) Preparing closing documents after the loan is fully approved.

243. Question

According to the text, which items are typically included as “Prepaids” at closing?

A) Only discount points and origination fees paid to the lender.
B) Prepaid interest, first-year hazard or flood insurance, and escrowed portions of annual taxes and insurance.
C) Only government recording fees and transfer taxes.
D) The buyer’s down payment and seller concessions.

244. Question

Which scenario best illustrates a cash-out refinance?

A) The borrower refinances only to obtain a lower rate with no change in loan amount.
B) The borrower makes a large principal curtailment to pay the loan down faster.
C) The borrower refinances to shorten the term from 30 years to 15 years with the same balance.
D) The borrower refinances into a larger loan than needed to pay off existing liens and costs, receiving the difference in cash.

245. Question

What does the Average Prime Offer Rate (APOR) represent in mortgage lending?

A) The average property tax rate in a given county.
B) The average note rate on all subprime loans originated last year.
C) A survey-based estimate of APRs currently offered on prime mortgage loans for various terms.
D) The maximum rate a lender may charge on any consumer mortgage.

246. Question

What does the Annual Percentage Rate (APR) represent in a mortgage loan?

A) Only the note (interest) rate stated on the mortgage.
B) The property’s annual appreciation rate.
C) The borrower’s annual income growth rate.
D) The annual cost of borrowing that includes the interest rate plus certain lender-related finance charges paid at closing.

247. Question

Which statement about an assumable loan is most accurate according to the text?

A) Assumable loans can only be taken over without any credit qualification.
B) A buyer may take over the seller’s existing mortgage, but the seller remains liable unless released by the lender, and FHA/VA assumptions require credit qualification.
C) Assumable loans are never subject to due-on-sale clauses.
D) Only conventional conforming loans are assumable.

248. Question

Which of the following is an example of a third party provider in a mortgage transaction?

A) The mortgage lender that funds the loan.
B) The mortgage broker who originates the loan.
C) The borrower’s employer verifying income.
D) An independent appraiser hired to value the property.

249. Question

What happens in the secondary mortgage market?

A) Borrowers apply for new mortgage loans from retail banks.
B) Only government agencies purchase delinquent loans.
C) Mortgage loans and servicing rights are bought, sold, securitized, and ultimately owned by investors.
D) Real estate agents list homes for sale to first-time buyers.

250. Question

Which best describes the primary mortgage market?

A) The market where borrowers receive mortgage loans from primary lenders like banks and mortgage companies.
B) The market where mortgage-backed securities are traded between investors.
C) The market where government agencies insure or guarantee loans.
D) The market where only FHA and VA loans are originated.

251. Question

What does the term “conveyance” refer to in real estate?

A) The lender’s internal underwriting of a mortgage file.
B) The appraisal inspection of a property’s condition.
C) The process of paying off a mortgage ahead of schedule.
D) The act of transferring ownership of real property from one party to another using a legal instrument such as a deed.

252. Question

Which statement best describes subordination in mortgage lending?

A) Placing a HELOC ahead of the first mortgage in repayment priority.
B) Ranking home loans by order of priority so a second mortgage is wiped out if the first mortgage is foreclosed.
C) Removing all liens from a property automatically at payoff.
D) Allowing a borrower to skip payments without penalty.

253. Question

What is a first mortgage?

A) Any mortgage on commercial property
B) A home equity line of credit
C) A real estate loan that creates a primary lien against real property
D) A second lien used for down payment assistance

254. Question

Which lien generally has first priority against a property?

A) A mechanic’s lien recorded after construction
B) A first lien, such as a tax lien that takes priority over all other liens
C) A junior lien recorded before the first mortgage
D) A leasehold interest held by a tenant

255. Question

What did FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989) accomplish in part?

A) Eliminated all federal thrift regulations
B) Created FHA mortgage insurance programs
C) Established federal flood insurance requirements
D) Modified federal thrift and bank regulation laws and included real estate appraisal reform

256. Question

What is a firm commitment in mortgage lending?

A) A lender’s agreement to make a loan to a specific borrower on a specified property
B) A preliminary rate quote that is not binding
C) An appraisal report used to value the collateral
D) A borrower’s promise to accept any loan terms offered

257. Question

Under the Uniform Commercial Code, what is the purpose of a financing statement?

A) To transfer title to real property from seller to buyer
B) To record a mortgage on a one-to-four family residence
C) To give public notice of a lender’s security interest in personal property collateral
D) To set the maximum interest rate allowed on a loan

258. Question

What does Fannie Mae’s final project acceptance indicate for a condo, PUD, or co-op project?

A) That construction has been completed on time
B) That the project meets all local zoning requirements
C) That only FHA loans may be made in the project
D) That the project’s physical characteristics and marketability are acceptable and loans on units may be delivered to Fannie Mae

259. Question

Who is considered a fiduciary in a real estate or financial transaction?

A) Any third-party vendor hired by the lender
B) Someone in a position of trust or confidence with respect to another person
C) Any party who signs the sales contract
D) A government regulator overseeing the transaction

260. Question

What does a fidelity bond protect an employer against?

A) Economic loss caused by dishonest acts of its employees
B) Losses from market interest rate changes
C) Property damage caused by natural disasters
D) Borrower default on mortgage loans

261. Question

What is fair market value?

A) Price set by seller
B) Tax assessor value
C) Price agreed upon by willing, informed buyer and seller with no compulsion
D) Based on replacement cost only

262. Question

What is external depreciation?

A) Lack of maintenance
B) Physical deterioration
C) Loss in value due to negative external influences
D) Outdated interior decor

263. Question

What does an extended coverage endorsement add?

A) Mold coverage
B) Flood insurance
C) Windstorm, hail, explosion, riot, aircraft/vehicle damage, smoke
D) MIP waiver

264. Question

What is excess yield?

A) Yield lost to servicing
B) Yield refunded
C) Net note rate exceeding required yield plus servicing fee
D) APR reduction

265. Question

What is excess margin in an ARM?

A) Regulatory margin reduction
B) Margin shortfall
C) Net mortgage margin exceeding the required margin
D) Note‑rate difference

266. Question

What is an exception in legal descriptions?

A) Interest rate change
B) Portion of land excluded
C) Closing penalty
D) Requirement for MI

267. Question

What is examination of title?

A) Buyer credit review
B) Lender insurance review
C) Review of chain of title from abstracts or records
D) Seller’s pre‑listing inspection

268. Question

What is eviction?

A) Property tax reassessment
B) Lender removing borrower
C) Landlord’s forcible removal or interference causing constructive eviction
D) Tenant ending lease early

269. Question

What does ‘et ux’ mean?

A) And children
B) And heirs
C) And husband
D) And wife

270. Question

What is an estate in real estate?

A) Inheritance trust
B) Temporary camping right
C) Subdivision map
D) A right or interest in the use, enjoyment, and disposition of land

271. Question

What is an escrow payment?

A) Extra principal
B) Loan officer fee
C) Lender servicing fee
D) Portion of payment held to pay taxes, insurance, and other items

272. Question

What is the purpose of an escrow analysis?

A) Evaluate lender returns
B) Ensure deposits cover taxes, insurance, and bills
C) Calculate loan amortization
D) Prepare payoff statement

273. Question

What is an escrow account?

A) Account for loan officer commissions
B) Temporary closing account
C) Segregated trust account where escrow funds are held
D) Account used for rate adjustments

274. Question

What is the role of escrow in a real estate transaction?

A) To negotiate contract terms
B) To appraise property
C) To underwrite the loan
D) To have a neutral third party handle instructions, documents, and funds

275. Question

When does property typically escheat to the state?

A) When the owner sells the property without recording the deed.
B) When the owner fails to pay property taxes for one year.
C) When the property is condemned for public use.
D) When the owner dies intestate and without heirs, causing the property to revert to the state.

276. Question

What does errors and omissions coverage typically insure against?

A) Losses that occur because of an error or neglect by an employee who was assigned a specific responsibility.
B) Physical damage to the property caused by natural disasters.
C) Losses caused by intentional fraud on the part of the borrower.
D) Any loss resulting from fluctuations in market interest rates.

277. Question

What is equity of redemption in the foreclosure context?

A) The lender’s right to redeem the property after foreclosure.
B) The mortgagor’s common law right to redeem property during foreclosure and, in some states, a statutory right after foreclosure.
C) The right of junior lienholders to increase their lien amounts before foreclosure.
D) The right of tenants to remain in the property after foreclosure.

278. Question

In real estate, what does a homeowner’s equity represent?

A) The total amount of principal and interest paid over the life of the loan.
B) The total of all closing costs paid at settlement.
C) The difference between the property’s fair market value and the current indebtedness against it.
D) The original loan amount when the mortgage was first made.

279. Question

What is the purpose of an environmental impact report?

A) To establish zoning classifications for undeveloped land.
B) To determine the maximum mortgage amount for a proposed project.
C) To certify that a property is free of all environmental hazards.
D) To report the probable effect of a development on the surrounding area, prepared to governmental guidelines.

280. Question

What is an endorsement in the context of negotiable instruments or insurance?

A) A verbal agreement to modify the terms of a note.
B) A writing on or notation added to an instrument that assigns, transfers, or changes its terms, or modifies insurance coverage.
C) A government guarantee of repayment on a private loan.
D) A court order requiring repayment of a defaulted loan.

281. Question

In mortgage financing, what is an end loan?

A) A short-term loan used only during construction.
B) A bridge loan used to purchase a new home before selling the current one.
C) A loan that automatically converts to a construction loan at closing.
D) The final or permanent mortgage loan made to a borrower, as distinguished from construction or development loans.

282. Question

What is an encumbrance on real property?

A) Anything that affects or limits the fee simple title, such as mortgages, leases, easements, or restrictions.
B) Any document that conveys full fee simple title.
C) Only unpaid real estate taxes on the property.
D) A temporary lease of personal property attached to the land.

283. Question

Which situation best illustrates an encroachment?

A) A recorded easement allowing a neighbor to cross the property.
B) A mortgage lien recorded against the property.
C) An improvement that intrudes illegally onto another person’s property.
D) A restriction in a deed limiting how the property may be used.

284. Question

What is eminent domain?

A) The right of a lender to seize property after a borrower defaults.
B) The authority of a homeowners association to enforce deed restrictions.
C) A private company’s power to condemn property for commercial use.
D) The power of government to appropriate private property for public use or for the public welfare.

285. Question

What is electronic imaging in the context of mortgage documentation?

A) A method of electronically signing loan documents.
B) A method of reproducing a facsimile of a document or photograph with a computer or other electronic device.
C) A process for encrypting borrower data for security purposes.
D) A digital platform for submitting online loan applications.

286. Question

In real estate, what does the term egress refer to?

A) The right to install utilities across adjoining land.
B) The right to occupy a dwelling unit for a specified term.
C) The right of a lender to foreclose on a property after default.
D) The right to go out from or exit a property, usually paired with ingress as access rights.

287. Question

What does effective gross income (personal) generally include?

A) Normal annual income including overtime that is regular or guaranteed, which may come from more than one stable source.
B) Only base salary from a single employer, excluding all other income sources.
C) Irregular income such as occasional gifts or lottery winnings.
D) Projected future bonuses that are not yet guaranteed.

288. Question

What does the effective age of a property represent in appraisal?

A) The number of years since the property was first listed for sale.
B) The legal date when title to the property was first recorded.
C) The age of the property based on its physical condition, which may differ from its chronological age.
D) The average remaining economic life of all properties in the neighborhood.

289. Question

What is the primary purpose of the Equal Credit Opportunity Act (ECOA)?

A) To regulate interest rates on consumer credit.
B) To require all mortgage loans to be sold on the secondary market.
C) To make credit equally available without discrimination on specified prohibited bases.
D) To require lenders to offer the same loan terms to every applicant.

290. Question

Which of the following best describes an easement?

A) Full ownership of another person’s land.
B) A right or interest in the land of another allowing a specific limited use or benefit.
C) A temporary lease of land for agricultural purposes.
D) A mortgage placed on property to secure a debt.

291. Question

What is the primary purpose of an earnest money deposit in a real estate transaction?

A) To pay the buyer’s appraisal and inspection fees.
B) To guarantee the lender’s yield on the mortgage loan.
C) To show that the buyer’s offer is made in good faith when the parties agree to the sale.
D) To pay the seller’s real estate commission in advance.

292. Question

In second mortgages, what is meant by a due‑on‑transfer provision?

A) A clause that forgives the loan balance when the property is transferred to an heir.
B) Another term for a due‑on‑sale clause, typically used in connection with junior liens.
C) A requirement that the borrower transfer title to the lender upon default.
D) A provision that requires the lender to approve any change in property use.

293. Question

What does a due‑on‑sale provision in a conventional mortgage permit the lender to do?

A) Reduce the loan balance when the property is sold.
B) Automatically extend the loan term upon sale of the property.
C) Call the mortgage due and payable if ownership of the property is transferred without the lender’s permission.
D) Convert the loan to interest‑only payments when the property is sold.

294. Question

What does a due‑on‑encumbrance provision in a multifamily mortgage allow the lender to do?

A) Require the borrower to refinance the mortgage every five years.
B) Call the mortgage due or increase the interest rate if an unauthorized subordinate lien is placed on the property.
C) Convert the mortgage automatically to an adjustable‑rate loan.
D) Reduce the interest rate if the property value increases.

295. Question

How is the down payment in a real estate transaction defined?

A) The total of all closing costs paid by the buyer.
B) The difference between the sales price of the property and the mortgage amount.
C) The amount of earnest money given at contract signing.
D) The total equity in the property after one year.

296. Question

In traditional property law, what does dower refer to?

A) The rights that a widower has in the property of his wife at her death.
B) The rights that a widow has in the property of her husband at his death.
C) The right of a lender to foreclose on property after default.
D) The rights of children to inherit property equally from their parents.

297. Question

What is a person’s domicile for legal purposes?

A) Any place where the person owns property.
B) A temporary vacation residence in another state.
C) A fixed and permanent home to which a person intends to return.
D) The address listed on the person’s most recent tax return.

298. Question

What is the role of a document custodian in mortgage lending?

A) To originate new mortgage loans on behalf of investors.
B) To appraise properties securing mortgage loans.
C) To maintain custody of certain mortgage documents on behalf of the lender or investor.
D) To service delinquent mortgage loans for government agencies.

299. Question

What is disintermediation in the context of real estate finance?

A) The process of consolidating multiple mortgages into a single loan.
B) The flow of funds out of savings institutions into higher-yield short‑term investments, reducing funds available for long‑term real estate financing.
C) The sale of mortgage loans from one lender to another in the secondary market.
D) The refinancing of a long‑term mortgage into a shorter‑term mortgage.

300. Question

What does a discount on a mortgage note generally accomplish for the lender or investor?

A) It reduces the borrower’s obligation to repay the note’s full face value.
B) It adjusts the yield upward by selling or purchasing the note for less than its face value.
C) It converts a fixed-rate note into an adjustable-rate note.
D) It eliminates the need to charge any contractual interest rate on the note.

301. Question

In a real estate transaction, what are disbursements?

A) Payments of money made on a previously agreed-upon basis.
B) Only the borrower’s cash brought to closing.
C) Only commissions paid to real estate brokers.
D) Refunds of overpaid escrow funds to the borrower.

302. Question

What does a direct surety bond protect against?

A) Only physical damage to the collateral property.
B) Losses caused by the principal’s negligence, lack of ability, or dishonest act.
C) Only losses due to changes in market interest rates.
D) Only the lender’s legal costs in a foreclosure action.

303. Question

Who is a designated appraiser in mortgage lending?

A) Any real estate agent who provides a price opinion.
B) A county tax assessor who sets property tax values.
C) Someone who determines the value of property and whose expertise is recognized and licensed by a professional association, with appraisals accepted by many lenders.
D) A loan officer who estimates property value during application.

304. Question

In real estate, what is depreciation?

A) An increase in the value of an asset due to market demand.
B) The cost of improvements added to a property.
C) The total amount of principal repaid over the life of a loan.
D) The decline in value of an asset due to physical deterioration, functional obsolescence, or economic obsolescence.

305. Question

What does Demotech, Inc. primarily do in the context of real estate finance?

A) It establishes ratings for hazard insurance carriers by evaluating their assets and liabilities.
B) It appraises residential properties for mortgage lenders.
C) It insures mortgage loans against borrower default.
D) It issues federal regulations for mortgage loan originators.

306. Question

What is a demand note?

A) A note that is only due on a fixed maturity date.
B) A note that is due whenever the holder demands payment.
C) A note that cannot be prepaid under any circumstances.
D) A note that requires no payments until the property is sold.

307. Question

What does delivery in escrow involve?

A) The immediate delivery of a deed directly from seller to buyer.
B) The unconditional delivery of funds to the seller at contract signing.
C) The delivery of loan documents directly to the secondary market.
D) A conditional delivery of something to a third person to be held until a specified event occurs or an act is performed.

308. Question

When is a mortgage typically considered delinquent?

A) When the borrower applies to refinance the loan.
B) When the borrower pays the mortgage ahead of schedule.
C) When a required mortgage payment is past due under the terms of the note.
D) When the borrower changes homeowners insurance companies.

309. Question

What is a deficiency judgment?

A) A court order to pay the balance owed on a loan when the proceeds from the sale of the security are insufficient to pay off the loan.
B) A court order that cancels all remaining mortgage obligations.
C) A judgment that automatically clears all liens on a property.
D) An administrative penalty for paying off a mortgage early.

310. Question

What are deferred payments in a financing arrangement?

A) Payments that must be made weekly instead of monthly.
B) Payments that are scheduled to begin at a future time rather than immediately.
C) Payments that are automatically waived by the lender after the first year.
D) Payments that can never be changed once the loan closes.

311. Question

With respect to an adjustable-rate mortgage, what is deferred interest?

A) Interest that is forgiven if the borrower makes a certain number of on-time payments.
B) Interest that is paid only as a lump sum at closing.
C) Interest that is not covered by the monthly payment and is added to the unpaid principal balance for later years.
D) Interest that remains fixed for the life of the loan.

312. Question

In mortgage lending, what does the term default generally mean?

A) The automatic renewal of a mortgage at maturity.
B) The voluntary prepayment of the mortgage balance.
C) The assignment of the mortgage to a new lender.
D) A breach or nonperformance of the terms of a note or the covenants of a mortgage.

313. Question

What is a deed restriction?

A) A limitation placed on a deed that restricts or limits the use of the real property.
B) A requirement that a deed must be recorded within a certain number of days after closing.
C) A restriction on which lender may finance a particular property.
D) A limitation on the maximum loan amount that may be placed on a property.

314. Question

In a mortgage transaction, what is a deed of trust primarily used for?

A) A document that records only the sales price of a property.
B) A type of security instrument that conveys title in trust to a third party as collateral for a debt, with power of sale in the event of default.
C) A document that transfers personal property from one party to another.
D) A nonbinding letter describing the parties’ intent to buy or sell.

315. Question

What is a DEED-IN-LIEU?

A) A deed used only for new construction properties.
B) A deed used to add a co-borrower to the title of the property.
C) A deed that transfers title from seller to buyer at a standard closing.
D) A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure; also called a voluntary conveyance.

316. Question

What is a DEED?

A) A promissory note containing the borrower’s promise to repay a debt.
B) A written document by which the ownership of land is transferred from one party to another.
C) A lease agreement that grants a tenant temporary possession of the property.
D) An appraisal report estimating the market value of the property.

317. Question

DEBT-TO-INCOME RATIOS are used to:

A) Appraise the current market value of the subject property.
B) Determine whether the title to the property is clear.
C) Determine whether a borrower can qualify for a mortgage by comparing monthly housing expense and total obligations to income.
D) Set the property tax rate for the borrower’s neighborhood.

318. Question

What does DEBT SERVICE refer to?

A) The periodic payment of principal and interest on mortgage loans.
B) The lender’s monthly servicing fee for managing the loan.
C) The annual property tax assessment on the mortgaged property.
D) The borrower’s mortgage insurance premium payments.

319. Question

In mortgage finance, what is DEBT?

A) The equity remaining in the property after closing costs are paid.
B) The appraised value of the property minus the loan amount.
C) Only loans that are secured by real estate as collateral.
D) Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

320. Question

What is a DEBENTURE?

A) A mortgage loan that is fully secured by real property.
B) A negotiable check commonly used to pay closing costs.
C) An unsecured debt instrument backed only by the general credit standing and earning capacity of the issuer or insurer.
D) A deed that conveys title to real property from grantor to grantee.

321. Question

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

A) The borrower’s pay stubs, bank statements, and tax returns.
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.
C) Only the appraisal and inspection reports for the property.
D) The Loan Estimate and Closing Disclosure forms from closing.

322. 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.
B) To establish the property’s assessed value for tax purposes.
C) To verify only the borrower’s employment status.
D) To disclose any defects in the title to the property.

323. Question

What does a borrower’s CREDIT RATING primarily evaluate?

A) The current market value of the borrower’s home.
B) The size of the borrower’s down payment on the property.
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.
D) The total amount of interest the borrower will pay over the life of the loan.

324. Question

What is CREDIT LIFE INSURANCE designed to do?

A) Protect the lender against property damage to the collateral.
B) Cover the borrower’s medical expenses if they become ill.
C) Reimburse the lender for foreclosure and legal costs.
D) Pay off the mortgage debt if the mortgagor dies while the policy is in force.

325. Question

In mortgage banking, what does the COUPON RATE describe?

A) The discount points charged to the borrower at closing.
B) The contract interest rate stated on the face of the note or bond.
C) The annual percentage rate (APR) including all finance charges.
D) The servicing fee retained by the lender on each payment.

326. Question

What are COVENANTS OF TITLE?

A) Promises by a borrower to repay the mortgage debt.
B) Lease provisions that govern tenant responsibilities.
C) Guarantees made by a grantor when real property is conveyed by a warranty deed.
D) Conditions in a mortgage note regarding prepayment penalties.

327. 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.'
B) An informal oral agreement between a buyer and seller.
C) A government zoning restriction imposed on the property.
D) A recorded easement granted to a utility company.

328. 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.
B) Only on the basis of material costs; labor is not included.
C) As the appraised value of the property plus the builder’s profit.
D) As the actual cost of the construction plus a profit allowance to the builder, instead of a fixed price.

329. 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.
B) The weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.
C) The prime rate set by major commercial banks in the 11th District.
D) The average yield on 10-year U.S. Treasury notes.

330. Question

What is the COST APPROACH TO VALUE in appraisal?

A) Valuing property based solely on rental income.
B) Estimating value based on the cost to produce a substitute property with the same use.
C) Determining value using comparable sales only.
D) Using projected future cash flows to determine present value.

331. Question

Who is a CO‑SIGNER in a mortgage transaction?

A) A co‑borrower with equal title rights.
B) Someone who provides a gift for down payment.
C) A broker who represents both parties.
D) A person who is equally responsible for the debt but has no ownership interest in the property.

332. Question

What is CORPOREAL PROPERTY?

A) The land and all physical items affixed to it.
B) Intangible rights such as easements.
C) Personal property not attached to land.
D) Contract rights transferred between parties.

333. Question

What is a CORPORATE RELOCATION MORTGAGE?

A) Any mortgage offered by a corporation.
B) A commercial mortgage secured by business equipment.
C) A mortgage designed to assist an employee’s transfer to a new business location under a structured program.
D) An interest‑only loan used during relocation only.

334. Question

What is CORPORATE RELOCATION?

A) A tax credit for corporations expanding their business.
B) An employer‑arranged move of employees or operations to another area.
C) A merger between two corporations.
D) A federal program providing grants to relocating businesses.

335. Question

What is a COOPERATIVE PROJECT?

A) A condo development with individually deeded units.
B) A commercial project leased to multiple tenants.
C) A trust that holds land for public parks.
D) A building where a corporation holds title and sells shares tied to proprietary leases for unit occupancy.

336. Question

What are COOPERATIVE MORTGAGES?

A) Mortgages related to cooperative projects, usually covering the entire multifamily property.
B) Only individual unit loans in condo buildings.
C) Mortgages used exclusively for corporate relocation.
D) A type of construction financing.

337. Question

What is a COOPERATIVE CORPORATION?

A) A developer that builds multifamily rental units.
B) A corporation that manages condo HOAs.
C) The business entity that holds title to a cooperative project and grants occupancy via proprietary leases.
D) A mortgage lender specializing in co-op loans.

338. Question

What is a COOPERATIVE in real estate?

A) A form of ownership where a corporation holds title and shareholders receive occupancy rights through proprietary leases.
B) A condo building with individually deeded units.
C) A single‑family residence owned in fee simple.
D) A partnership arrangement for vacation rentals.

339. Question

What does it mean to CONVEY real property?

A) To lease property for a short term.
B) To transfer title of real property to another party.
C) To record a deed at the courthouse.
D) To appraise the value of a property.

340. Question

What is a CONVERTIBLE ARM?

A) An ARM that adjusts only once during the loan term.
B) A fixed‑rate mortgage that converts into an ARM.
C) An ARM that cannot change rates for the first 10 years.
D) An ARM with an option for the borrower to convert it to a fixed‑rate mortgage within a set time frame.

341. Question

What is a CONVENTIONAL LOAN?

A) A loan guaranteed by the Department of Veterans Affairs.
B) A loan insured by the Federal Housing Administration.
C) A loan not insured by FHA and not guaranteed by VA.
D) A loan that converts automatically to an ARM.

342. Question

What is a CONTRACT?

A) An agreement between parties to do or not do a lawful act.
B) A verbal promise that is not legally enforceable.
C) A document used only in commercial transactions.
D) A non‑binding agreement that cannot be enforced.

343. Question

What is a CONTINGENCY in a contract?

A) A mandatory fee required to execute a contract.
B) A stated event that must occur before a contract becomes binding.
C) A penalty for canceling a contract early.
D) A clause that guarantees financing regardless of borrower qualifications.

344. Question

What is a CONSUMER REPORTING AGENCY (or bureau)?

A) A government agency that sets maximum interest rates on loans.
B) An organization that prepares reports on an individual’s credit and public records history for use by credit grantors.
C) Any lender that reports loan payments to the IRS.
D) A company that services mortgage loans on behalf of investors.

345. Question

What is a CONSTRUCTION LOAN?

A) A long-term permanent loan on a completed property.
B) A loan used only for purchasing vacant land.
C) A revolving line of credit for home improvements after completion.
D) A short-term interim loan to finance construction costs, with funds disbursed as work progresses.

346. Question

In a condominium project, what are CONSTITUENT DOCUMENTS?

A) The legal documents of a condominium, including the declaration, legal map, association bylaws, and articles of incorporation.
B) The individual sales contracts between buyers and sellers.
C) The appraisals and inspections for each unit.
D) The marketing brochures used to sell units.

347. Question

In contract law, what is CONSIDERATION?

A) The legal description attached to the contract.
B) The earnest money deposit only.
C) The legal right, promise, or thing of value exchanged for the act or promise of another in a contract.
D) The attorney’s fee for drafting the agreement.

348. Question

Which feature best describes a CONDOMINIUM HOTEL (or “condotel”)?

A) A condo project where all units are owner-occupied with no rentals allowed.
B) A condo project operated as a commercial hotel, with services such as rental desks and daily cleaning, while units are individually owned.
C) A hotel owned and operated only by a single corporate entity.
D) Any condominium located in a resort area.

349. Question

What is a CONDOMINIUM CONVERSION?

A) Constructing a new condominium building from the ground up.
B) Changing an office building into industrial space.
C) Rezoning agricultural land for residential use.
D) Changing the ownership of an existing (usually rental) building to the condominium form of ownership.

350. Question

Which choice best defines a CONDOMINIUM?

A) Ownership in a specific unit plus a proportionate interest in the project’s common areas.
B) A long-term lease of a unit with no ownership interest.
C) Ownership of the land only, not the improvements.
D) A time-share interest limited to certain weeks of the year.

351. Question

For Fannie Mae, what is CONDITIONAL PROJECT ACCEPTANCE?

A) Final unconditional approval of a project by Fannie Mae.
B) A construction permit issued by the local municipality.
C) The first stage of Fannie Mae’s acceptance of a condo, PUD, or co-op project, stating conditions required for final acceptance.
D) An HOA’s approval for a buyer to purchase a unit.

352. Question

What is a CONDITIONAL COMMITMENT, most often used with FHA loans?

A) A loan approval that is always transferable to any property.
B) A commitment on a specific property for a definite loan amount and terms for a future unknown purchaser of satisfactory credit.
C) A temporary rate lock with no property identified.
D) A seller’s written promise to carry back financing.

353. Question

What is CONDEMNATION in real estate?

A) A court order requiring repairs to unsafe property.
B) A city’s refusal to issue a building permit.
C) The voluntary sale of land for public purposes.
D) The taking of private property for public use without the owner’s consent, upon payment of just compensation.

354. Question

In the appraisal process, what are COMPARABLES (or “comps”)?

A) Recently sold properties similar in size, location, and amenities to the subject, used to estimate its fair market value.
B) Only unsold listings in the neighborhood.
C) Any properties appraised by the same appraiser.
D) Only distressed sales in the area.

355. Question

In a real estate development, what are COMMON AREAS?

A) Individually deeded private yards behind each unit.
B) Only the lobby and interior hallways of a building.
C) Land or improvements, such as parking lots and parks, for the benefit and use of all tenants and owners in a development.
D) Any area reserved exclusively for commercial tenants.

356. Question

In a condominium or PUD project, what are COMMON AREA ASSESSMENTS?

A) Individual property tax bills for each unit.
B) Levies against unit owners to provide capital for association expenses and upkeep of the common areas.
C) Optional contributions to a neighborhood improvement fund.
D) Charges paid only by commercial tenants in the project.

357. Question

What is a COMMITMENT FEE?

A) A penalty for early payoff of the loan.
B) The fee paid to record the mortgage in public records.
C) The broker’s fee for originating the loan.
D) A fee paid to a potential lender for the promise to lend money at a specified time in the future.

358. Question

In mortgage lending, what is a COMMITMENT?

A) An agreement between lender and borrower to lend money at a future date subject to stated conditions.
B) A notice that a loan application has been denied.
C) A document transferring title from seller to buyer.
D) A request for verification of deposit.

359. Question

What is a COMMISSION in a real estate transaction?

A) The fee charged by the lender to underwrite the loan.
B) The annual property tax due on the home.
C) The amount paid to a broker for services rendered, usually a percentage of the sale price.
D) The buyer’s earnest money deposit.

360. Question

In a condominium or co‑operative project, what is COMMERCIAL SPACE?

A) Storage space reserved for unit owners only.
B) Space used to produce income through leases for commercial or business use.
C) Common hallways and lobbies shared by all residents.
D) Recreational amenities such as pools and gyms.

361. Question

Which statement best defines COMMERCIAL PROPERTY?

A) Property used exclusively for agricultural purposes.
B) Owner-occupied single-family residences.
C) Only large regional shopping centers.
D) Income property, typically zoned for business use, including property held for rental to one or more tenants.

362. Question

What is a COMMERCIAL LOAN in real estate finance?

A) A mortgage loan on property that produces income.
B) Any loan made to an individual for personal use.
C) A home equity line of credit.
D) A construction loan on a single-family residence only.

363. Question

Which functions are typically performed by a COMMERCIAL BANK?

A) Selling only long-term insurance products.
B) Making loans, maintaining checking accounts, receiving time deposits, and discounting negotiable instruments.
C) Regulating other financial institutions.
D) Appraising real estate for mortgage underwriting.

364. Question

In a mortgage transaction, what is COLLATERAL?

A) The borrower’s credit history.
B) The lender’s funds used to make the loan.
C) The commission paid to the real estate broker.
D) Property pledged as security for a debt, such as real estate securing a mortgage.

365. Question

What is CO-INSURANCE in an insurance policy?

A) Sharing the risk of a policy by more than one insurer, each liable for a portion of the loss.
B) Requiring the borrower to pay two deductibles.
C) Insurance that covers both real and personal property.
D) A reinsurance treaty between two carriers.

366. Question

Which statement best describes a CO-BORROWER (CO-MORTGAGOR)?

A) A person who guarantees the loan but has no ownership interest.
B) A non-occupant co-signer with no repayment responsibility.
C) A party equally responsible for repayment who also has an interest in the property’s title.
D) A spouse whose income is not used to qualify.

367. Question

What is a CLOUD ON TITLE?

A) A temporary suspension of property taxes.
B) A condition revealed by title search that adversely affects title and often requires a quitclaim, release, or court action to remove.
C) A weather-related hazard disclosure on the property.
D) A standard easement for utilities.

368. Question

What is the purpose of a CLOSING STATEMENT?

A) To record the listing terms between seller and broker.
B) To set the property’s assessed tax value.
C) To request payoff figures from the seller’s lender.
D) To provide a detailed account of all funds received and paid at closing, including escrow deposits.

369. Question

What is the CLOSING DATE in a real estate contract?

A) The contractually agreed date for transferring title.
B) The date the purchase agreement is first signed.
C) The date the lender issues final loan approval.
D) The date the appraisal report is completed.

370. Question

Which of the following best describes CLOSING COSTS?

A) The down payment made by the buyer at settlement.
B) Only the lender’s origination fee on a new loan.
C) Expenses incidental to a real estate sale, such as loan, title, and appraisal fees.
D) The seller’s net proceeds after the transaction.

371. Question

What does CLOSING mean in a real estate transaction?

A) The date the listing agreement is signed.
B) The buyer’s loan application date.
C) The date the appraisal is completed.
D) The consummation of the real estate transaction when the deed is delivered, documents are signed, and funds are disbursed.

372. Question

Which choice best defines CLEAR TITLE?

A) Title subject only to a first mortgage.
B) Good, marketable title that is free of encumbrance, obstruction, burden, or limitation.
C) Title that cannot be conveyed to another party.
D) Title that includes at least one undisclosed lien.

373. Question

What is a CHATTEL MORTGAGE?

A) A mortgage secured by a one‑to‑four family dwelling.
B) A mortgage used only for vacant land.
C) A lien or security interest on personal property rather than real property.
D) A type of junior lien used in second mortgages.

374. Question

What is meant by the CHAIN OF TITLE for a parcel of real property?

A) The history of all documents transferring title to a parcel from the earliest to the most recent.
B) The list of all liens currently recorded against a property.
C) The order in which multiple offers are presented to a seller.
D) The record of all property tax payments.

375. Question

What is a CERTIFICATE OF TITLE?

A) The original deed conveying title to the first owner.
B) A title insurance policy issued to the lender.
C) A county tax statement for the current year.
D) A statement from a title company or attorney that title is legally vested in the present owner.

376. Question

In a VA loan, what is the CERTIFICATE OF REASONABLE VALUE (CRV)?

A) A certificate confirming that property taxes are current.
B) A VA‑issued document that establishes the maximum value and loan amount for a VA‑guaranteed mortgage.
C) A letter of intent from the veteran to occupy the property.
D) A lender’s appraisal review report.

377. Question

What is a CERTIFICATE OF OCCUPANCY?

A) The deed conveying title to a new owner.
B) A certificate required only for commercial properties.
C) Written authorization from a local municipality allowing a completed structure to be occupied.
D) A document showing all permits have been paid.

378. Question

For a VA loan, what is a CERTIFICATE OF ELIGIBILITY?

A) A certificate from the VA stating that a veteran is eligible for a VA‑insured or guaranteed loan.
B) A document showing that the property meets VA minimum property standards.
C) A lender’s commitment letter to fund the loan.
D) A DD‑214 form verifying military discharge status only.

379. Question

What does the CERTIFICATE OF DEPOSIT INDEX represent for certain ARM plans?

A) The prime rate charged by banks on credit cards.
B) The federal funds rate set by the Federal Reserve.
C) The average yield on 30‑year Treasury bonds.
D) The weekly average of secondary market interest rates on 6‑month negotiable certificates of deposit.

380. Question

What is a CERTIFICATE OF CLAIM in connection with an insured mortgage?

A) A document that transfers title from borrower to lender.
B) A contingent promise to reimburse an insured mortgagee for certain foreclosure costs if sale proceeds are sufficient.
C) A certificate showing the loan is paid in full.
D) A statement of the borrower’s outstanding tax obligations.

381. Question

Which situation best describes a CASH-OUT REFINANCE?

A) Refinancing only to obtain a lower interest rate with no change in loan amount.
B) Refinancing to shorten the loan term with no funds back to the borrower.
C) Refinancing where the new loan exceeds payoff amounts and costs, and the borrower receives extra cash at closing.
D) Refinancing from a fixed-rate loan into an ARM with no equity change.

382. Question

What is the CAPITALIZATION RATE (cap rate)?

A) The rate that reflects the relationship between a property's value and the net income it produces.
B) The maximum interest rate allowed by law on a mortgage.
C) The annual percentage rate (APR) disclosed under TILA.
D) The lender’s cost of funds in the secondary market.

383. Question

What does CAPITALIZATION mean in income property valuation?

A) Writing off the cost of improvements for tax purposes.
B) Increasing the loan balance by adding unpaid interest.
C) Recording a deed in the public records.
D) Converting anticipated future net income into present value using a chosen rate of return.

384. Question

In an adjustable-rate mortgage (ARM), what is a CAP?

A) A fee charged to lock an interest rate for a set period.
B) A limit on how much the interest rate or payment can increase or decrease at adjustment and over the life of an ARM.
C) A penalty for paying off the mortgage early.
D) A feature that converts an ARM to a fixed-rate loan.

385. Question

What is a BASIS POINT?

A) One one-hundredth of one percent, used to describe yield changes.
B) Ten percent of the note rate.
C) One full percent of loan amount.
D) Equal to ten basis units.

386. Question

Who is considered BANKRUPT?

A) Anyone who is behind on debt payments.
B) A person whose credit score falls below 500.
C) A person or entity relieved from debts through a court proceeding after surrendering assets to a court-appointed trustee.
D) A homeowner who has received a notice of default.

387. Question

What is a BALLOON NOTE?

A) A note that is fully amortized with equal payments.
B) A note with interest-only payments for the entire term.
C) A note requiring escalating payments with no final lump sum.
D) A note whose periodic payments do not fully amortize the loan, leaving a final lump-sum payment due at maturity.

388. Question

Who is an ATTORNEY IN FACT?

A) A lawyer automatically authorized to act for any client.
B) A person appointed to act for another under a power of attorney, limited to the authority granted.
C) A court-appointed representative for minors only.
D) A government auditor assigned to real estate transactions.

389. Question

What is an ASSUMPTION OF MORTGAGE?

A) When a buyer assumes liability under an existing mortgage, and the seller remains secondarily liable unless released by the lender.
B) When a lender forgives the remaining balance of a mortgage.
C) When a seller pays off the mortgage before transferring title.
D) When a mortgage is converted into a line of credit.

390. Question

What does an ASSIGNMENT OF RENTS allow a lender or creditor to do?

A) Refinance the borrower’s loan without consent.
B) Take legal ownership of the property immediately.
C) Collect rents, manage the property, and apply net income toward delinquent mortgage payments without owning the property.
D) Evict all tenants automatically.

391. Question

What is an ASSIGNMENT OF MORTGAGE?

A) A document that creates a new mortgage lien on property.
B) A document evidencing the transfer of ownership of a mortgage from one party to another.
C) A release of mortgage recorded when the loan is paid off.
D) A clause stating that property acquired later becomes collateral.

392. Question

In real estate, what is an ASSESSMENT?

A) A mandatory home inspection.
B) A voluntary improvement project.
C) The appraisal required by a mortgage lender.
D) A value placed on property for taxation, or a levy for a specific purpose such as a sewer assessment.

393. Question

What is ASSESSED VALUATION?

A) The value placed on property by a taxing authority for purposes of taxation.
B) The value determined by a licensed appraiser for loan approval.
C) The price a buyer agrees to pay for the property.
D) The replacement cost of improvements.

394. Question

What is an APPURTENANCE?

A) A loan feature allowing early payoff without penalty.
B) A government tax lien applied to real property.
C) Something attached or closely related to the land that becomes the owner’s property, such as a structure or easement.
D) A mortgage clause relating to future advances.

395. Question

What is APPRECIATION as defined in the glossary?

A) The decrease in value caused by depreciation.
B) A tax credit given to homeowners annually.
C) Any increase in value caused solely by inflation.
D) An increased value of property due to positive improvements or elimination of negative factors.

396. Question

Who is an APPRAISER?

A) A person engaged in estimating the value of property as a professional or employee.
B) A real estate agent listing properties for sale.
C) A mortgage broker arranging loans.
D) A county official determining tax rates.

397. Question

What is the definition of APPRAISED VALUE?

A) The price a buyer agrees to pay for a property.
B) An estimate of property value made by a qualified expert (an appraiser).
C) The value assigned by the county tax assessor.
D) The replacement cost of improvements only.

398. Question

What is the definition of BASIS POINT?

A) One one-hundredth of one percent.
B) Ten percent of note rate.
C) One full percent.
D) Equal to ten basis units.

399. Question

What is the definition of BANKRUPT?

A) Anyone behind on payments.
B) Anyone with low credit.
C) Relieved of debts after surrendering assets to trustee.
D) Anyone receiving foreclosure notice.

400. Question

What is the definition of BALLOON NOTE?

A) Fully amortized note.
B) Interest-only note.
C) Escalating payment note.
D) Payments don't amortize; lump-sum due at maturity.

401. Question

What is the definition of ATTORNEY IN FACT?

A) A lawyer automatically authorized.
B) A person appointed under power of attorney to act for another.
C) A court guardian for minors.
D) A government auditor.

402. Question

What is the definition of ASSUMPTION OF MORTGAGE?

A) Buyer assumes liability; seller remains secondarily liable unless released.
B) Lender forgives remaining balance.
C) Seller pays off mortgage first.
D) Mortgage converted to equity line.

403. Question

What is the definition of ASSIGNMENT OF RENTS?

A) Refinance the borrower's loan.
B) Take ownership immediately.
C) Collect rents/manage property/apply income to delinquency.
D) Evict tenants automatically.

404. Question

What is the definition of ASSIGNMENT OF MORTGAGE?

A) A document creating a new mortgage.
B) A document evidencing transfer of ownership of a mortgage.
C) A release of mortgage when paid off.
D) A clause about after-acquired property.

405. Question

What is the definition of ASSESSMENT?

A) A mandatory inspection.
B) A voluntary improvement project.
C) An appraisal for a loan.
D) A value placed for taxation or a special levy.

406. Question

What is the definition of ASSESSED VALUATION?

A) The value placed on property by a taxing authority.
B) The value determined by an appraiser.
C) The price agreed in a contract.
D) The replacement cost of improvements.

407. Question

What is the definition of APPURTENANCE?

A) A loan feature allowing early payoff.
B) A government tax lien.
C) Something attached or related to land, such as a structure or easement.
D) A mortgage clause for future advances.

408. Question

What is the definition of APPRECIATION?

A) The decrease in value caused by depreciation.
B) A tax credit for homeowners.
C) Any increase in value caused solely by inflation.
D) An increased value due to improvements or removal of negative factors.

409. Question

What is the definition of APPRAISER?

A) A person engaged in estimating the value of property as a professional or employee.
B) A real estate agent listing properties.
C) A mortgage broker arranging loans.
D) A county tax official.

410. Question

What is the definition of APPRAISED VALUE?

A) The price a buyer agrees to pay for a property.
B) An estimate of property value made by a qualified expert (an appraiser).
C) The value assigned by the county tax assessor.
D) The replacement cost of improvements.

411. Question

What is an APPRAISAL in real estate?

A) The assessed value set by the tax assessor.
B) The final sales price agreed upon by buyer and seller.
C) An estimate of value on real property and the process of preparing such an estimate.
D) The replacement cost of improvements only.

412. Question

Which statement best describes an ANNUITY?

A) A one-time lump sum paid at loan closing.
B) An amount, especially of money, payable yearly until the death of the recipient.
C) A fee paid once to obtain a mortgage loan.
D) A variable payment tied only to stock market performance.

413. Question

Under the Truth-in-Lending Act, what does the ANNUAL PERCENTAGE RATE (APR) represent?

A) The note rate stated on the promissory note only.
B) The borrower’s credit score expressed as a percentage.
C) The lender’s cost of funds in the secondary market.
D) The percentage relationship of the total finance charge to the amount of the loan.

414. Question

What does an AMORTIZATION SCHEDULE show?

A) A table showing the principal and interest due at regular intervals and the remaining unpaid balance after each payment.
B) A list of all closing costs and who pays them.
C) The appraised value of the property each year.
D) A record of tax payments made on the property.

415. Question

What is AMORTIZATION of a loan?

A) Extending the loan term without changing the payment.
B) The gradual reduction of a debt by periodic payments sufficient to pay principal and interest and liquidate the debt.
C) Paying only interest with a lump sum principal payment at maturity.
D) Replacing one loan with another at a lower rate.

416. Question

In real estate, what is an AMENITY?

A) The legal description of a property.
B) The assessed value assigned by the tax assessor.
C) An aspect or feature of a property that enhances its value, such as parking, transportation access, or recreational facilities.
D) The type of zoning assigned to the property.

417. Question

What is the ALTA (AMERICAN LAND TITLE ASSOCIATION)?

A) A national association of title insurance companies, abstractors, and attorneys that specializes in real property law and sets standards and policy forms.
B) A federal agency that regulates national banks.
C) A state licensing board for real estate brokers.
D) A trade association for mortgage loan originators.

418. Question

What is ALL-RISK INSURANCE as described in the glossary?

A) A policy that covers only fire and extended coverage risks.
B) A policy that provides coverage for every conceivable risk except those specifically excluded by the policy.
C) A policy that covers only perils named in the policy.
D) A government-backed flood insurance policy.

419. Question

What does ALIENATION mean in real property law?

A) The government’s taking of land for public use.
B) The process of subdividing land into lots.
C) The recording of liens against real property.
D) The transfer of property and possession of lands or other things from one person to another.

420. Question

What is an AGREEMENT OF SALE?

A) A deed conveying legal title from seller to buyer.
B) A financing agreement between buyer and lender.
C) A contract in which the buyer agrees to purchase a specific property and the seller agrees to sell under stated conditions (a sales contract).
D) A lease granting possession without title.

421. Question

In real estate, who is an AGENT?

A) A person legally authorized by another to represent them or act on their behalf, such as a broker hired to sell property.
B) Any person who attends a closing.
C) Only an attorney licensed in the state.
D) A county tax assessor.

422. Question

What is the purpose of an AFTER ACQUIRED PROPERTY CLAUSE in a mortgage?

A) To limit the collateral only to property owned on the date of the loan.
B) To provide that property acquired by the borrower after the date of the loan automatically becomes additional security for the loan.
C) To allow substitution of collateral without lender consent.
D) To release all collateral once the loan is seasoned.

423. Question

Which of the following best defines an AFFIDAVIT?

A) An oral statement made under oath in court.
B) A written statement not requiring any oath or acknowledgment.
C) A promissory note secured by a mortgage.
D) A sworn statement in writing, made before a public official, usually a notary.

424. Question

What is ADVERSE POSSESSION?

A) A method of acquiring title to real property by possession for a statutory period under certain conditions.
B) The process of transferring title by a recorded deed.
C) A foreclosure action filed by a lender.
D) A voluntary gift of property from one owner to another.

425. Question

What does AD VALOREM mean in the context of property taxation?

A) A fixed flat tax charged per parcel regardless of value.
B) A tax based only on the original purchase price of the property.
C) A tax or duty based on value and levied as a percentage of that value (for example, 30 mills per dollar of property value).
D) A transfer tax paid only when title changes hands.

426. Question

Which statement best describes an ADJUSTABLE RATE MORTGAGE (ARM)?

A) A mortgage with a fixed interest rate for the entire term.
B) A mortgage that permits the lender to adjust its interest rate periodically based on a specified index.
C) A mortgage in which the interest rate can only decrease over time.
D) A mortgage that requires interest-only payments until maturity.

427. Question

What is meant by ADD-ON INTEREST in an installment loan?

A) Interest charged only on the declining balance of the loan.
B) Interest charged only during the final year of the loan term.
C) The full amount of interest calculated on the original principal for the loan term, added to principal as part of the face amount of the note.
D) Interest that is waived if the loan is prepaid.

428. Question

Which of the following is the correct definition of an ACRE?

A) 43,560 square feet; 4,840 square yards; 160 square rods.
B) 40,000 square feet only.
C) 50,000 square feet.
D) 10,000 square feet.

429. Question

In the law of contracts and descents, to ACQUIRE property means to:

A) Lease the property from another owner.
B) Place a lien on the property.
C) Appraise the property for tax purposes.
D) Become owner of property; to make property one’s own.

430. Question

Which option best describes ACCRUED INTEREST?

A) Interest paid in advance at closing.
B) Interest earned for the period of time that has elapsed since interest was last paid.
C) Interest forgiven by the lender at payoff.
D) Interest that will not be charged until the final year of the loan.

431. Question

What is an ACCIDENT AND HEALTH PREMIUM in connection with a mortgage?

A) A premium for standard homeowners insurance.
B) A premium for private mortgage insurance (PMI).
C) An insurance premium paid monthly that insures payment of the mortgage if the borrower becomes disabled.
D) A life insurance premium that pays off the loan at death.

432. Question

In real property law, what does ACCESS (EASEMENT OF) mean?

A) The right of the owner of land adjoining a road or highway to go and return from the land to the highway without obstruction.
B) The right to cross any neighboring property at will.
C) The right to park vehicles on a public street indefinitely.
D) The right to build a structure over a public sidewalk.

433. Question

What does an ACCELERATION CLAUSE in a mortgage most commonly provide?

A) The right to prepay the loan without penalty.
B) Automatic reduction of the interest rate after five years.
C) Conversion of a fixed-rate loan to an ARM.
D) That the entire principal becomes immediately due and payable in the event of default.

434. Question

Who is an ABUTTING OWNER?

A) Any owner within the same subdivision.
B) An owner of land which abuts or adjoins another parcel.
C) A tenant who occupies a neighboring property.
D) A lender holding a lien on adjacent property.

435. Question

What is an ABSTRACT OF TITLE?

A) The legal description of a parcel prepared by a surveyor.
B) A title insurance policy insuring against future defects.
C) A written history of title transactions or conditions bearing on the title to a parcel, summarizing all subsequent instruments of public record.
D) A summary of a borrower’s credit history.

436. Question

Which choice best describes ABSOLUTE TITLE?

A) Title that is exclusive to the person who has it, with no other right, interest, or claim in the same property.
B) Title held by two or more owners as joint tenants.
C) Title subject to an outstanding tax lien.
D) Title that is contingent on the approval of a lender.

437. Question

In the glossary, what does ABATEMENT refer to?

A) An increase in a property’s assessed value for tax purposes.
B) A permanent reduction in the loan’s interest rate.
C) A waiver of the loan’s prepayment penalty.
D) The suspension or cessation in whole or in part of a continuing charge, such as rent.

438. Question

Which statement best defines ABANDONMENT in real property?

A) Leaving a property vacant for more than 30 days.
B) Voluntary relinquishment of all right, title, claim and possession, with the intention of not reclaiming it.
C) Loss of property due to unpaid taxes.
D) Transfer of title to a lender through foreclosure.

439. Question

Which situation best illustrates “payment shock” as defined in the text?

A) A borrower’s payment jumps sharply when an interest-only or payment-option ARM begins amortizing, making the new amount unaffordable.
B) A borrower’s payment decreases after refinancing to a lower rate.
C) A borrower’s payment remains level for 30 years on a fixed-rate loan.
D) A borrower’s payment includes taxes and insurance in an escrow account.

440. Question

What does an “assignment of mortgage” indicate?

A) The borrower has completed paying off the mortgage in full.
B) The lender has modified the interest rate and term of the loan.
C) The mortgage has been subordinated to a new lien.
D) The mortgage has been transferred from the original lender or borrower to a third party.

441. Question

Which of the following is listed as an example of an origination service in the text?

A) Purchasing closed loans from lenders to hold in an investment portfolio.
B) Completing the loan application, collecting borrower documentation, and preparing the file for underwriting.
C) Performing yearly escrow analysis on existing loans.
D) Issuing property tax bills on behalf of local governments.

442. Question

Which description best matches “Loan Payment Collection” as discussed in the text?

A) The process of setting interest rates for newly originated loans.
B) The borrower’s voluntary prepayment of principal to shorten the loan term.
C) The process of pursuing payments of debts owed, often through collection agencies that work for a fee or percentage of the amount owed.
D) The lender’s internal quality control review of closed loans.

443. Question

What role does a mortgage investor play in the mortgage market?

A) Buying mortgage loans from lenders to free up funds for more lending.
B) Originating loans directly to consumers on behalf of lenders.
C) Performing property appraisals before loans are approved.
D) Collecting monthly payments on behalf of borrowers.

444. Question

According to the text, which statement about a mortgage lender is accurate?

A) Mortgage lenders only service loans and can never fund them.
B) Mortgage lenders are government agencies that insure all residential loans.
C) Mortgage lenders may not work with mortgage brokers under any circumstances.
D) Mortgage lenders issue loans and may handle application, underwriting, and funding directly, or receive applications through mortgage brokers.

445. Question

Which of the following best describes consumer credit as used in the text?

A) Any loan used to purchase or refinance a home.
B) Personal, usually unsecured debt taken on to buy everyday goods and services, such as credit cards.
C) Only long-term investment loans such as mortgages.
D) Only student loans used to pay for education.

446. Question

How does the SAFE Act and most state laws define a non-traditional mortgage product?

A) Only mortgages with terms longer than 30 years.
B) Only interest-only or balloon mortgages.
C) Any mortgage that requires a down payment of less than 20%.
D) Any mortgage product other than a 30-year fixed-rate mortgage.

447. Question

Which statement best describes the focus of mortgage underwriting as defined in the text?

A) Evaluating whether the borrower’s overall risk profile is acceptable by analyzing the five C’s of credit.
B) Determining only the property’s value without regard to the borrower.
C) Setting interest rates based solely on current market conditions.
D) Preparing closing documents after the loan is fully approved.

448. Question

According to the text, which items are typically included as “Prepaids” at closing?

A) Only discount points and origination fees paid to the lender.
B) Prepaid interest, first-year hazard or flood insurance, and escrowed portions of annual taxes and insurance.
C) Only government recording fees and transfer taxes.
D) The buyer’s down payment and seller concessions.

449. Question

Which scenario best illustrates a cash-out refinance?

A) The borrower refinances only to obtain a lower rate with no change in loan amount.
B) The borrower makes a large principal curtailment to pay the loan down faster.
C) The borrower refinances to shorten the term from 30 years to 15 years with the same balance.
D) The borrower refinances into a larger loan than needed to pay off existing liens and costs, receiving the difference in cash.

450. Question

What does the Average Prime Offer Rate (APOR) represent in mortgage lending?

A) The average property tax rate in a given county.
B) The average note rate on all subprime loans originated last year.
C) A survey-based estimate of APRs currently offered on prime mortgage loans for various terms.
D) The maximum rate a lender may charge on any consumer mortgage.

451. Question

What does the Annual Percentage Rate (APR) represent in a mortgage loan?

A) Only the note (interest) rate stated on the mortgage.
B) The property’s annual appreciation rate.
C) The borrower’s annual income growth rate.
D) The annual cost of borrowing that includes the interest rate plus certain lender-related finance charges paid at closing.

452. Question

Which statement about an assumable loan is most accurate according to the text?

A) Assumable loans can only be taken over without any credit qualification.
B) A buyer may take over the seller’s existing mortgage, but the seller remains liable unless released by the lender, and FHA/VA assumptions require credit qualification.
C) Assumable loans are never subject to due-on-sale clauses.
D) Only conventional conforming loans are assumable.

453. Question

Which of the following is an example of a third party provider in a mortgage transaction?

A) The mortgage lender that funds the loan.
B) The mortgage broker who originates the loan.
C) The borrower’s employer verifying income.
D) An independent appraiser hired to value the property.

454. Question

What happens in the secondary mortgage market?

A) Borrowers apply for new mortgage loans from retail banks.
B) Only government agencies purchase delinquent loans.
C) Mortgage loans and servicing rights are bought, sold, securitized, and ultimately owned by investors.
D) Real estate agents list homes for sale to first-time buyers.

455. Question

Which best describes the primary mortgage market?

A) The market where borrowers receive mortgage loans from primary lenders like banks and mortgage companies.
B) The market where mortgage-backed securities are traded between investors.
C) The market where government agencies insure or guarantee loans.
D) The market where only FHA and VA loans are originated.

456. Question

What does the term “conveyance” refer to in real estate?

A) The lender’s internal underwriting of a mortgage file.
B) The appraisal inspection of a property’s condition.
C) The process of paying off a mortgage ahead of schedule.
D) The act of transferring ownership of real property from one party to another using a legal instrument such as a deed.

457. Question

Which statement best describes subordination in mortgage lending?

A) Placing a HELOC ahead of the first mortgage in repayment priority.
B) Ranking home loans by order of priority so a second mortgage is wiped out if the first mortgage is foreclosed.
C) Removing all liens from a property automatically at payoff.
D) Allowing a borrower to skip payments without penalty.

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