Champions Real Estate Finance Exam
2025 || Questions & Answers (100%
Correct)
The Government National Mortgage Association (GNMA), or Ginnie Mae - ANSWER - ,
was established in the United States in 1968 to promote home ownership. It is a wholly-
owned government association that operates a mortgage-backed securities program
designed to facilitate the flow of capital into the housing industry. ____approved private
institutions issue mortgage-backed securities with payments that are guaranteed even if
borrowers or issuers default on their obligations. ___ securities are the only mortgage
backed securities (MBS) to carry the full faith and credit guaranty of the United States
Government,
The Federal Agricultural Mortgage Corporation (Farmer Mac) - ANSWER - is a
government-sponsored enterprise with the mission of providing a secondary market for
agricultural real estate mortgage loans, rural housing mortgage loans, and rural utility
cooperative loans. Congress established _____in the Agricultural Credit Act of 1987.
Farmer Mac I - ANSWER - purchases, or commits to purchase, qualified agricultural or
rural housing mortgage loans, or obligations backed by qualified loans.
Farmer Mac II - ANSWER - purchases the portions of qualified loans that are
guaranteed by the U.S. Department of Agriculture
front ratio - ANSWER - is used to qualify a borrower for a loan based upon the proposed
house payment and his or her gross monthly income (GMI). The house payment is the
monthly payment of principal, interest, taxes and insurance (PITI). In conventional
lending, a front ratio of 28% means that the house payment (PITI) cannot exceed 28%
of the borrower's gross monthly income.
back ratio - ANSWER - is the ratio of the borrower's total recurring monthly debts,
including such obligations as the house payment, payments on all installment debts,
monthly payments on all junior liens, alimony, car lease payments and other recurring
payment obligations. In conventional lending, it is usually 36%. Both ratios must be
satisfied
Real Estate Mortgage Investment Conduit (REMIC) - ANSWER - allows for the indirect
investment in mortgages through the sale of securities. A ____ purchases "pools" of
mortgages. The mortgages may be of a particular type or level of risk
primary market - ANSWER - The market where borrowers and mortgage lenders come
together to create and negotiate terms of a mortgage transaction is called the
,Pensions - ANSWER - are fed, as with banks and credit unions, by client deposits.
Unlike banks, credit unions return surplus income to their members in the form of
dividends
Life insurance companies - ANSWER - are funded by premiums paid by those insured
Federal National Mortgage Association (FNMA) known as, Fannie Mae - ANSWER -
began in 1938 as an agency of the federal government In 1968, Fannie Mae became a
privately owned and managed corporation Fannie Mae operates exclusively in the
secondary market and provides support to mortgage lending institutions in the primary
market.
Freddie Mac is a federally chartered corporation established as the Federal Home Loan
Mortgage Corporation (FHLMC) - ANSWER - in 1970 for the purpose of purchasing
mortgages in the secondary market. Freddie Mac is a stockholder-owned corporation
chartered by Congress to increase the supply of funds that mortgage lenders, such as
commercial banks, mortgage bankers, savings institutions and credit unions can make
available to homeowners and multi-family investors. Most of its listed stock is owned by
savings associations.
Housing and Economic Recovery Act (HERA) - ANSWER - was enacted on July 30,
2008. HERA created the Federal Housing Finance Agency (FHFA) as the successor
agency to the Office of Federal Housing Enterprise Oversight and the Federal Housing
Finance Board. The Office of Federal Housing Enterprise Oversight had been
established in 1992 to regulate Fannie Mae and Freddie Mac.
On September 7, 2008, the Federal Housing Finance Agency (FHFA) ...... - ANSWER -
placed Fannie Mae and Freddie Mac in conservatorship. As conservator, the FHFA has
taken over the assets and assumed all the powers of the shareholders, directors, and
officers. It may take any necessary action to restore the firms to a sound and solvent
condition. Stockholders' voting rights are suspended during the conservatorship, and
both firms' CEOs have been replaced. Dividends on common and preferred stock have
been suspended, although the shares continue to trade. GSE business operations will
continue as before; the conservator will delegate authority to the companies' new
management to move forward. The conservatorship will end when the FHFA finds that a
safe and solvent condition has been restored
The Real Estate Investment Trust - ANSWER - is an investment vehicle created by
Congress in 1960. The goal of the legislation was an effort to make it possible for small
investors to invest in larger commercial properties by purchasing shares in the
organization that owns the real estate. two forms are equity and mortgage
Lifting clause - ANSWER - A clause which gives the borrower the ability to replace the
primary instrument with another without affecting the subordinate instrument's position.
An example would be the refinance of an existing first lien note on a property with a
, second mortgage. The refinance would not change the priority of the liens, even though
the refinanced first mortgage would be dated after the recording of the second.
alienation clause - ANSWER - reserves the right of the lender to call the note (declare
the entire balance due) if the borrower sells the property without repaying the loan
Cross-defaulting clause: - ANSWER - A clause which states that in the event of a
borrower default on the primary instrument, the secondary instrument is automatically
defaulted. This protects a subordinate lien holder by allowing him or her to foreclose a
property if the first lien went into default, even if the subordinate lien was not in default.
prepayment privilege clause - ANSWER - is included in some loans, and allows the
borrower to pay off the loan prior to the due date without incurring penalties such as
those discussed above
lock-in clause - ANSWER - is a condition of a mortgage loan which prohibits
prepayment of the loan prior to a certain date
a release clause - ANSWER - allows for a portion of the loan to be paid in exchange for
the lender releasing a part of the property from the mortgage
subordination clause - ANSWER - is a clause in which a holder of a mortgage permits a
subsequent mortgage to take priority
exculpatory clause - ANSWER - is used to limit the borrower's personal liability in the
event of a default on a loan.
Nonrecourse clauses - ANSWER - are often used by loan originators when selling loans
on the secondary market.
An acceleration clause - ANSWER - is a provision in a written mortgage or note, stating
that in the event of default, the entire amount of the principal becomes due and payable
An escalation clause - ANSWER - allows the lender to raise the existing interest rate
An assumption clause - ANSWER - allows a new borrower to take over the payments
on an existing loan, under specified terms and conditions
fixed rate mortgage loan - ANSWER - is for a term of 15 or 30 years, with the rate
remaining fixed for the entire term of the loan. In an amortizing loan(most of which are),
the monthly payment includes an amount that is applied first to interest that is due, with
the remainder of the loan payment being applied to the outstanding loan balance
adjustable rate mortgage - ANSWER - the borrower obtains a loan for a certain term,
perhaps 15 or 30 years. The loan is funded at an initial rate of interest that will remain
fixed for a period of time. That period will vary depending on the loan product. Rate
2025 || Questions & Answers (100%
Correct)
The Government National Mortgage Association (GNMA), or Ginnie Mae - ANSWER - ,
was established in the United States in 1968 to promote home ownership. It is a wholly-
owned government association that operates a mortgage-backed securities program
designed to facilitate the flow of capital into the housing industry. ____approved private
institutions issue mortgage-backed securities with payments that are guaranteed even if
borrowers or issuers default on their obligations. ___ securities are the only mortgage
backed securities (MBS) to carry the full faith and credit guaranty of the United States
Government,
The Federal Agricultural Mortgage Corporation (Farmer Mac) - ANSWER - is a
government-sponsored enterprise with the mission of providing a secondary market for
agricultural real estate mortgage loans, rural housing mortgage loans, and rural utility
cooperative loans. Congress established _____in the Agricultural Credit Act of 1987.
Farmer Mac I - ANSWER - purchases, or commits to purchase, qualified agricultural or
rural housing mortgage loans, or obligations backed by qualified loans.
Farmer Mac II - ANSWER - purchases the portions of qualified loans that are
guaranteed by the U.S. Department of Agriculture
front ratio - ANSWER - is used to qualify a borrower for a loan based upon the proposed
house payment and his or her gross monthly income (GMI). The house payment is the
monthly payment of principal, interest, taxes and insurance (PITI). In conventional
lending, a front ratio of 28% means that the house payment (PITI) cannot exceed 28%
of the borrower's gross monthly income.
back ratio - ANSWER - is the ratio of the borrower's total recurring monthly debts,
including such obligations as the house payment, payments on all installment debts,
monthly payments on all junior liens, alimony, car lease payments and other recurring
payment obligations. In conventional lending, it is usually 36%. Both ratios must be
satisfied
Real Estate Mortgage Investment Conduit (REMIC) - ANSWER - allows for the indirect
investment in mortgages through the sale of securities. A ____ purchases "pools" of
mortgages. The mortgages may be of a particular type or level of risk
primary market - ANSWER - The market where borrowers and mortgage lenders come
together to create and negotiate terms of a mortgage transaction is called the
,Pensions - ANSWER - are fed, as with banks and credit unions, by client deposits.
Unlike banks, credit unions return surplus income to their members in the form of
dividends
Life insurance companies - ANSWER - are funded by premiums paid by those insured
Federal National Mortgage Association (FNMA) known as, Fannie Mae - ANSWER -
began in 1938 as an agency of the federal government In 1968, Fannie Mae became a
privately owned and managed corporation Fannie Mae operates exclusively in the
secondary market and provides support to mortgage lending institutions in the primary
market.
Freddie Mac is a federally chartered corporation established as the Federal Home Loan
Mortgage Corporation (FHLMC) - ANSWER - in 1970 for the purpose of purchasing
mortgages in the secondary market. Freddie Mac is a stockholder-owned corporation
chartered by Congress to increase the supply of funds that mortgage lenders, such as
commercial banks, mortgage bankers, savings institutions and credit unions can make
available to homeowners and multi-family investors. Most of its listed stock is owned by
savings associations.
Housing and Economic Recovery Act (HERA) - ANSWER - was enacted on July 30,
2008. HERA created the Federal Housing Finance Agency (FHFA) as the successor
agency to the Office of Federal Housing Enterprise Oversight and the Federal Housing
Finance Board. The Office of Federal Housing Enterprise Oversight had been
established in 1992 to regulate Fannie Mae and Freddie Mac.
On September 7, 2008, the Federal Housing Finance Agency (FHFA) ...... - ANSWER -
placed Fannie Mae and Freddie Mac in conservatorship. As conservator, the FHFA has
taken over the assets and assumed all the powers of the shareholders, directors, and
officers. It may take any necessary action to restore the firms to a sound and solvent
condition. Stockholders' voting rights are suspended during the conservatorship, and
both firms' CEOs have been replaced. Dividends on common and preferred stock have
been suspended, although the shares continue to trade. GSE business operations will
continue as before; the conservator will delegate authority to the companies' new
management to move forward. The conservatorship will end when the FHFA finds that a
safe and solvent condition has been restored
The Real Estate Investment Trust - ANSWER - is an investment vehicle created by
Congress in 1960. The goal of the legislation was an effort to make it possible for small
investors to invest in larger commercial properties by purchasing shares in the
organization that owns the real estate. two forms are equity and mortgage
Lifting clause - ANSWER - A clause which gives the borrower the ability to replace the
primary instrument with another without affecting the subordinate instrument's position.
An example would be the refinance of an existing first lien note on a property with a
, second mortgage. The refinance would not change the priority of the liens, even though
the refinanced first mortgage would be dated after the recording of the second.
alienation clause - ANSWER - reserves the right of the lender to call the note (declare
the entire balance due) if the borrower sells the property without repaying the loan
Cross-defaulting clause: - ANSWER - A clause which states that in the event of a
borrower default on the primary instrument, the secondary instrument is automatically
defaulted. This protects a subordinate lien holder by allowing him or her to foreclose a
property if the first lien went into default, even if the subordinate lien was not in default.
prepayment privilege clause - ANSWER - is included in some loans, and allows the
borrower to pay off the loan prior to the due date without incurring penalties such as
those discussed above
lock-in clause - ANSWER - is a condition of a mortgage loan which prohibits
prepayment of the loan prior to a certain date
a release clause - ANSWER - allows for a portion of the loan to be paid in exchange for
the lender releasing a part of the property from the mortgage
subordination clause - ANSWER - is a clause in which a holder of a mortgage permits a
subsequent mortgage to take priority
exculpatory clause - ANSWER - is used to limit the borrower's personal liability in the
event of a default on a loan.
Nonrecourse clauses - ANSWER - are often used by loan originators when selling loans
on the secondary market.
An acceleration clause - ANSWER - is a provision in a written mortgage or note, stating
that in the event of default, the entire amount of the principal becomes due and payable
An escalation clause - ANSWER - allows the lender to raise the existing interest rate
An assumption clause - ANSWER - allows a new borrower to take over the payments
on an existing loan, under specified terms and conditions
fixed rate mortgage loan - ANSWER - is for a term of 15 or 30 years, with the rate
remaining fixed for the entire term of the loan. In an amortizing loan(most of which are),
the monthly payment includes an amount that is applied first to interest that is due, with
the remainder of the loan payment being applied to the outstanding loan balance
adjustable rate mortgage - ANSWER - the borrower obtains a loan for a certain term,
perhaps 15 or 30 years. The loan is funded at an initial rate of interest that will remain
fixed for a period of time. That period will vary depending on the loan product. Rate
