AYPO Real Estate Finance Exam Questions and Answers Grade
A+
Lien Theory vs. Title Theory - Answer-Texas is a lien theory state
buyer/property owner holds equitable title to the property
Title Theory - Answer-the borrower holds "equitable" title.
The full title is given to the borrower when the loan obligation has been fully
satisfied. Because the lender has the full title, foreclosure on the property is easier
than if the mortgage was only secured by a lien, because the title does not need
to be recovered from the defaulting buyer.
Mortgages - Answer-the mortgage and deed of trust are the "instruments" that
document the lender's actual interest in the property
Mortgage Basics - Answer-The promissory note is the piece of the mortgage loan
contract committing the borrower to pay back the loaned money. A failure on the
part of the borrower to repay the loan allows the lender to invoke the mortgage
and initiate any foreclosure procedures that follow.
second mortgage - Answer-is a blanket term for any mortgage that is taken out on
a property that was already mortgaged, there are two specific types of second
mortgages that are commonly issued
Home Equity Loans - 2nd mortgage - Answer-Home equity loans are standard
lump-sum loans that convert the equity of a house into usable funds.
HELOC - 2nd mortgage - Answer-home equity lines of credit operate more like
credit cards. Instead of a lump sum disbursement
Wraparound Mortgages - Answer-the yield to the seller (mortgagee) is usually
greater than the interest rate specified on the note. The seller executes a
promissory note with the buyer, transferring ownership, while the new owner
pays a periodic mortgage payment to the former owner of the property. The
former owner continues to make their mortgage payments and keeps any extra
money from the new owner's payment.
,Chattel Mortgages - Answer-Personal property may be pledged as security or
guarantee promissory notes
Deeds of Trust - Answer-a borrower signs a note, which shows the borrower's
debt to the lender, and then signs a deed of trust, which grants the lender a
security interest in the building and land put up to secure the loan
the title is held by a third-party trustee until the loan is paid off or the borrower
defaults. In the event of a default, the trustee has the right to sell the property in
order to cover the loan, or as much of it as they can get through a sale. The
power-of-sale rights vested in them allow the trustee to foreclose on the property
without going through formal proceedings required for a judicial foreclosure.
Power-of-Sale - Answer-The power-of-sale that is connected to a deed of trust is
regulated by legislation generally requiring notice to be given regarding the sale.
Because this type of sale is not approved officially by a court, it does leave a
slightly larger window for litigation resulting from disagreements over the title.
Amortized Loan - Answer-a loan that is repaid in equal payments over its life
real estate's unique role in the economic system - Answer-- A presence in virtually
all economic sectors, including financial
- A predominance of long-term, and often costly, financial commitments
- Home ownership's intrinsic ties to individual wealth, disposable income, and
employment
Real Estate Cycles - Answer-General swings in real estate activity, resulting in
increasing or decreasing activity and property values during different phases of
the cycle. Every 18 years.
The Four-Phase Cycle - Answer-recovery, expansion, hyper supply, recession
Phase 1: Recovery - Answer-During this first phase of the cycle, the market is no
longer in decline, but now has begun to curve back upward. This, generally, would
be the best time for buyers, because there is really only one real direction for the
, market to go: up! This economic phase of the cycle usually comes with high (but
stabilized) unemployment, a higher number of foreclosures, and a lot of fear and
nervousness in the general economy. Most people will be wary and shy away from
real estate purchases at this point until their confidence in the market returns. The
investor and the bold will be looking to buy while prices are bottomed out.
Phase 2: Expansion - Answer-During the expansion phase, the economic engines
are running with more power and predictability. Businesses are adding employees
and looking to expand their customer base, and confidence in real estate is
gaining momentum.
Phase 3: Hyper Supply - Answer-"boom" time- Overzealous Speculation
Phase 4: Recession - Answer-In Phase 4, the ambitious building projects
undertaken in Phases 1 and 2 aren't selling, so prices start to drop. Foreclosures
rise as owners find themselves underwater and investors begin to flounder.
Compound this with an economic recession and you have a recipe for economic
disaster such as we saw in the mid 2000s.
Factors Influencing the Real Estate Cycle - Answer-- Demographics
- Interest rates
- The Economy
- Government Interventions and Policies
Real Estate Investment Trust (REIT) - Answer-Trust ownership of real estate by a
group of individuals who purchase certificates of ownership in the trust, which in
turn invests the money in real property and distributes the profits back to the
investors free of corporate income tax.
Economy - Answer-Economic indicators such as the GDP, employment data,
manufacturing activity, the prices of goods, etc. all will have an impact on the
availability of mortgage funds and the consumer's ability to access them.
A+
Lien Theory vs. Title Theory - Answer-Texas is a lien theory state
buyer/property owner holds equitable title to the property
Title Theory - Answer-the borrower holds "equitable" title.
The full title is given to the borrower when the loan obligation has been fully
satisfied. Because the lender has the full title, foreclosure on the property is easier
than if the mortgage was only secured by a lien, because the title does not need
to be recovered from the defaulting buyer.
Mortgages - Answer-the mortgage and deed of trust are the "instruments" that
document the lender's actual interest in the property
Mortgage Basics - Answer-The promissory note is the piece of the mortgage loan
contract committing the borrower to pay back the loaned money. A failure on the
part of the borrower to repay the loan allows the lender to invoke the mortgage
and initiate any foreclosure procedures that follow.
second mortgage - Answer-is a blanket term for any mortgage that is taken out on
a property that was already mortgaged, there are two specific types of second
mortgages that are commonly issued
Home Equity Loans - 2nd mortgage - Answer-Home equity loans are standard
lump-sum loans that convert the equity of a house into usable funds.
HELOC - 2nd mortgage - Answer-home equity lines of credit operate more like
credit cards. Instead of a lump sum disbursement
Wraparound Mortgages - Answer-the yield to the seller (mortgagee) is usually
greater than the interest rate specified on the note. The seller executes a
promissory note with the buyer, transferring ownership, while the new owner
pays a periodic mortgage payment to the former owner of the property. The
former owner continues to make their mortgage payments and keeps any extra
money from the new owner's payment.
,Chattel Mortgages - Answer-Personal property may be pledged as security or
guarantee promissory notes
Deeds of Trust - Answer-a borrower signs a note, which shows the borrower's
debt to the lender, and then signs a deed of trust, which grants the lender a
security interest in the building and land put up to secure the loan
the title is held by a third-party trustee until the loan is paid off or the borrower
defaults. In the event of a default, the trustee has the right to sell the property in
order to cover the loan, or as much of it as they can get through a sale. The
power-of-sale rights vested in them allow the trustee to foreclose on the property
without going through formal proceedings required for a judicial foreclosure.
Power-of-Sale - Answer-The power-of-sale that is connected to a deed of trust is
regulated by legislation generally requiring notice to be given regarding the sale.
Because this type of sale is not approved officially by a court, it does leave a
slightly larger window for litigation resulting from disagreements over the title.
Amortized Loan - Answer-a loan that is repaid in equal payments over its life
real estate's unique role in the economic system - Answer-- A presence in virtually
all economic sectors, including financial
- A predominance of long-term, and often costly, financial commitments
- Home ownership's intrinsic ties to individual wealth, disposable income, and
employment
Real Estate Cycles - Answer-General swings in real estate activity, resulting in
increasing or decreasing activity and property values during different phases of
the cycle. Every 18 years.
The Four-Phase Cycle - Answer-recovery, expansion, hyper supply, recession
Phase 1: Recovery - Answer-During this first phase of the cycle, the market is no
longer in decline, but now has begun to curve back upward. This, generally, would
be the best time for buyers, because there is really only one real direction for the
, market to go: up! This economic phase of the cycle usually comes with high (but
stabilized) unemployment, a higher number of foreclosures, and a lot of fear and
nervousness in the general economy. Most people will be wary and shy away from
real estate purchases at this point until their confidence in the market returns. The
investor and the bold will be looking to buy while prices are bottomed out.
Phase 2: Expansion - Answer-During the expansion phase, the economic engines
are running with more power and predictability. Businesses are adding employees
and looking to expand their customer base, and confidence in real estate is
gaining momentum.
Phase 3: Hyper Supply - Answer-"boom" time- Overzealous Speculation
Phase 4: Recession - Answer-In Phase 4, the ambitious building projects
undertaken in Phases 1 and 2 aren't selling, so prices start to drop. Foreclosures
rise as owners find themselves underwater and investors begin to flounder.
Compound this with an economic recession and you have a recipe for economic
disaster such as we saw in the mid 2000s.
Factors Influencing the Real Estate Cycle - Answer-- Demographics
- Interest rates
- The Economy
- Government Interventions and Policies
Real Estate Investment Trust (REIT) - Answer-Trust ownership of real estate by a
group of individuals who purchase certificates of ownership in the trust, which in
turn invests the money in real property and distributes the profits back to the
investors free of corporate income tax.
Economy - Answer-Economic indicators such as the GDP, employment data,
manufacturing activity, the prices of goods, etc. all will have an impact on the
availability of mortgage funds and the consumer's ability to access them.
