The Dynamics of Financial Markets
1. Which of the following forms would be required when selling a promissory note served
by a trust deed in which an appraisal of the real property is compulsory as in regards to
the real estate code? –
ANSWER A real property security agreement. When a note is a real property security, an
appraisal is required.
2. You have a customer that is interested in purchasing a home using his G.I. benefits. You
have located a most desirable home for which the owner is asking $120,000. It has been
appraised by the DVA for $118,000. If the customer wants to purchase the home and use
his G.I. benefits you should advise him that: -
ANSWER He can pay more than $118,000 and use his G.I. benefits but must pay cash
for the excess above $118,000.
The DVA permits a veteran to purchase a home for a price that exceeds the CRV but must pay
cash for the amount in excess of the CRV.
3. When a loan broker secures a hard money second loan for $16,300:
a. the Real Estate Law limits the maximum charges.
b. the Real Property Security Law limits the maximum charges.
c. the maximum costs are limited by the Business and Profession Code.
d. none of the above
ANSWER correct answer is c. the maximum costs are limited by the Business and Profession
Code.
Article 7 of the Business and Professions Code limits the charges on hard money junior
loans of less the $20,000.
4. When a contractor receives the money from a construction lender in stages of his
construction, it is called:
ANSWER obligatory advance.
Then lender may withhold portions of the loan until certain stages of construction have
been accomplished, but he is obligated to finally advance the full amount of the loan.
,5. In real estate financing, lenders will sometimes find it necessary to refer to nominal rate
when granting a loan. This means: - ANSWER it is the rate of interest specified in the
promissory note.
The word nominal stems from the word "name" and is the rate named in the note.
6. A promissory note that provides for the payment of interest only during the term of the
note is known as: - ANSWER a straight note.
If interest only is paid during the term, the principal will be paid in one lump sum. This
type of note is called a straight note.
7. Under the FTC red flag Rules, which could be considered a warning sign of identity
theft?
a. suspicious account application documents.
b. suspicious personal identifying information, such as a suspicious address.
c. unusual account activity.
d. all of the above. –
ANSWER correct answer is d. all of the above.
The Interagency Guidelines on Identity Theft Detection, Prevention and Mitigation are
part of the Fair and Accrete Credit Transactions Act of 2003, FACTA. Under the Red
Flags Rules, financial institutions and creditors must develop a written program that
identifies and detect the relevant warning signs, or "red flags", of identity theft. These
may include, unusual account activity, fraud alerts on a consumer report, attempted use of
suspicious account application documents, suspicious address, or notices from customers,
law enforcement authorities or other businesses about possible identity theft in
connection with covered accounts.
8. The majority of real estate loans are made by institutional investors. Which of the
following would be classified as an institutional investor?
a. Trust department of a bank.
, b. insurance company.
c. university.
d. mortgage company.
ANSWER correct answer is b. insurance company.
Institutional lenders include banks, not bank trust departments, savings and loans, and
insurance companies.
9. When do deeds of trust outlaw?
ANSWER never
promissory notes do outlaw but deeds of trust never outlaw since they have conveyed title
to the property.
10. A long term loan to be issued by one lender upon completion of the interim construction
financing by another lender is known as:
ANSWER takeout loan.
Takeout loan takes out the construction loan.
11. When a borrower does not pay on a loan secured by a deed of trust what must be
recorded to start foreclosure?
ANSWER notice of default.
To start foreclosure, first the beneficiary, lender, notifies the trustor, borrower, of default
and requests the trustee to record a notice of default.
12. Mr. Smith sells his lot for $10,000 and takes back a promissory note for $5,000. Needing
cash, he immediately sells the note at a discount to Mr. Brown for $3,500, assigning the
security instrument and endorsing the note "without recourse." The borrower defaults
before making any principal payments. What should Mr. Brown do to recover his loss?
ANSWER Foreclose to recover $5000.
The fact that Mr. Smith sold this promissory note at a discount in order to obtain ready
cash does not change the face value of the note.
13. At times when money is considered tight:
ANSWER a seller may have to pay for all the points in order that the buyer may obtain
an FHA loan.
1. Which of the following forms would be required when selling a promissory note served
by a trust deed in which an appraisal of the real property is compulsory as in regards to
the real estate code? –
ANSWER A real property security agreement. When a note is a real property security, an
appraisal is required.
2. You have a customer that is interested in purchasing a home using his G.I. benefits. You
have located a most desirable home for which the owner is asking $120,000. It has been
appraised by the DVA for $118,000. If the customer wants to purchase the home and use
his G.I. benefits you should advise him that: -
ANSWER He can pay more than $118,000 and use his G.I. benefits but must pay cash
for the excess above $118,000.
The DVA permits a veteran to purchase a home for a price that exceeds the CRV but must pay
cash for the amount in excess of the CRV.
3. When a loan broker secures a hard money second loan for $16,300:
a. the Real Estate Law limits the maximum charges.
b. the Real Property Security Law limits the maximum charges.
c. the maximum costs are limited by the Business and Profession Code.
d. none of the above
ANSWER correct answer is c. the maximum costs are limited by the Business and Profession
Code.
Article 7 of the Business and Professions Code limits the charges on hard money junior
loans of less the $20,000.
4. When a contractor receives the money from a construction lender in stages of his
construction, it is called:
ANSWER obligatory advance.
Then lender may withhold portions of the loan until certain stages of construction have
been accomplished, but he is obligated to finally advance the full amount of the loan.
,5. In real estate financing, lenders will sometimes find it necessary to refer to nominal rate
when granting a loan. This means: - ANSWER it is the rate of interest specified in the
promissory note.
The word nominal stems from the word "name" and is the rate named in the note.
6. A promissory note that provides for the payment of interest only during the term of the
note is known as: - ANSWER a straight note.
If interest only is paid during the term, the principal will be paid in one lump sum. This
type of note is called a straight note.
7. Under the FTC red flag Rules, which could be considered a warning sign of identity
theft?
a. suspicious account application documents.
b. suspicious personal identifying information, such as a suspicious address.
c. unusual account activity.
d. all of the above. –
ANSWER correct answer is d. all of the above.
The Interagency Guidelines on Identity Theft Detection, Prevention and Mitigation are
part of the Fair and Accrete Credit Transactions Act of 2003, FACTA. Under the Red
Flags Rules, financial institutions and creditors must develop a written program that
identifies and detect the relevant warning signs, or "red flags", of identity theft. These
may include, unusual account activity, fraud alerts on a consumer report, attempted use of
suspicious account application documents, suspicious address, or notices from customers,
law enforcement authorities or other businesses about possible identity theft in
connection with covered accounts.
8. The majority of real estate loans are made by institutional investors. Which of the
following would be classified as an institutional investor?
a. Trust department of a bank.
, b. insurance company.
c. university.
d. mortgage company.
ANSWER correct answer is b. insurance company.
Institutional lenders include banks, not bank trust departments, savings and loans, and
insurance companies.
9. When do deeds of trust outlaw?
ANSWER never
promissory notes do outlaw but deeds of trust never outlaw since they have conveyed title
to the property.
10. A long term loan to be issued by one lender upon completion of the interim construction
financing by another lender is known as:
ANSWER takeout loan.
Takeout loan takes out the construction loan.
11. When a borrower does not pay on a loan secured by a deed of trust what must be
recorded to start foreclosure?
ANSWER notice of default.
To start foreclosure, first the beneficiary, lender, notifies the trustor, borrower, of default
and requests the trustee to record a notice of default.
12. Mr. Smith sells his lot for $10,000 and takes back a promissory note for $5,000. Needing
cash, he immediately sells the note at a discount to Mr. Brown for $3,500, assigning the
security instrument and endorsing the note "without recourse." The borrower defaults
before making any principal payments. What should Mr. Brown do to recover his loss?
ANSWER Foreclose to recover $5000.
The fact that Mr. Smith sold this promissory note at a discount in order to obtain ready
cash does not change the face value of the note.
13. At times when money is considered tight:
ANSWER a seller may have to pay for all the points in order that the buyer may obtain
an FHA loan.
