FIN 340 Final ACTUAL Exam Questions
and CORRECT Answers
Most adjustable rate mortgage (ARM) loans have been marketed with a temporarily reduced
interest rate commonly referred to as a - CORRECT ANSWER - teaser rate
Standard mortgage loans require monthly payments typically composed of two components:
interest and principal repayments. When scheduled mortgage payments are insufficient to pay all
of the accumulating interest, causing some interest to be added to the outstanding balance after
each payment shortfall, the loan is said to be - CORRECT ANSWER - negatively
amortizing.
With most standard home loans, the lender can hold the borrower personally liable in the event
of a default. Such loans are commonly referred to as - CORRECT ANSWER - recourse
loans.
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage
property. The lender, i.e., the individual who receives the mortgage claim, is known as the -
CORRECT ANSWER - mortgagee.
The difference between judicial foreclosure and power of sale in the treatment of defaulted
mortgages can be significant. All of the following statements regarding power of sale are true
except - CORRECT ANSWER - the foreclosed property is typically sold through a public
auction administered by the court.
It is possible to have a secured real estate loan without a mortgage through the use of a contract
for deed. In contrast to the standard real estate sale, which of the following events occurs after
the closing when dealing with a contract for deed? - CORRECT ANSWER - title to the
property passes to the buyer
In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the
following acts created an independent oversight agency tasked with the responsibility of
overseeing and enforcing federal consumer financial protection laws; enforcing
antidiscrimination laws in consumer finance; restricting unfair, deceptive, or abusive acts or
,practices; receiving consumer complaints; promoting financial education; and watching for
emerging financial risks for consumers? - CORRECT ANSWER - Dodd-Frank Wall Street
Reform and Consumer Protection Act
Congress has enacted a number of regulations that have established criteria for evaluating home
loan applicants and mandating disclosures in the origination of home loans. Which of the
following congressional acts requires important disclosures concerning the cost of consumer
credit, including the computation of the annual percentage rate (APR)? - CORRECT
ANSWER - Truth-in-Lending Act (TILA)
When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected.
While borrowers can recover from this reduction in their credit score, if a default goes into the
borrower's records it will remain for - CORRECT ANSWER - seven years.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the
property as long as he or she produces the outstanding mortgage balance and all foreclosure costs
incurred to that point. In a state such as Georgia, this right only extends to the date of the
foreclosure sale. When this occurs, this right is more commonly referred to as - CORRECT
ANSWER - equity of redemption.
Which of the following acts prohibits discrimination in lending practices on the basis of race,
color, religion, national origin, sex, marital status, age, or because all or part of an applicant's
income derives from a public assistance program? - CORRECT ANSWER - Equal Credit
Opportunity Act (ECOA)
Which of the following acts was passed out of concern for abusive predatory practices in
subprime lending? - CORRECT ANSWER - Home Ownership and Equity Protection Act
(HOEPA)
When a borrower defaults on the payment requirements of a loan, there are several options that
the lender has at its disposal. When the lender allows the borrower simply to convey the property
to the lender rather than pursue a court-supervised process of terminating all of the borrower's
claims of ownership of the property, this is commonly referred to as - CORRECT
ANSWER - Deed in Lieu of Foreclosure
, Violations of the requirements of a note that do not disrupt the payments on the loan tend to be
viewed as technical defaults. In practice, how many days must a payment be overdue in order for
lenders to treat a default as serious (i.e., a substantive default)? - CORRECT ANSWER -
90 days
Mortgage originators can either hold loans in their portfolios or sell them to investors. When a
mortgage originator decides to sell mortgages to another institution, this transaction occurs in
what is commonly referred to as the - CORRECT ANSWER - secondary mortgage market.
Considered the most common type of home loan, which of the following refers to any standard
home loan that is not insured or guaranteed by an agency of the U.S. government? - CORRECT
ANSWER - Conventional Home Loan
Created by Congress to promote an active secondary market for home mortgages, Fannie Mae
and Freddie Mac purchase loans that meet specific underwriting standards such as loan size,
documentation, and payment-to-income ratio. The loans that Fannie Mae and Freddie Mac are
eligible to purchase are commonly referred to as - CORRECT ANSWER - conforming
conventional loans.
Lenders generally require private mortgage insurance (PMI) for conventional loans over 80% of
the value of the security property. PMI protects a lender against which of the following? -
CORRECT ANSWER - losses due to default on the loan
Federal Housing Administration (FHA) loans differ from conventional loans in a number of
ways. All of the following statements regarding FHA loans are true except - CORRECT
ANSWER - FHA loans require higher credit scores than are needed for prime
conventional loans.
It would be hard to overstate the importance of the Federal Housing Administration (FHA) in the
history of housing finance. Which of the following instruments created by the FHA is considered
the single most important financial instrument in modern housing finance? - CORRECT
ANSWER - level-payment, fully amortizing loan
and CORRECT Answers
Most adjustable rate mortgage (ARM) loans have been marketed with a temporarily reduced
interest rate commonly referred to as a - CORRECT ANSWER - teaser rate
Standard mortgage loans require monthly payments typically composed of two components:
interest and principal repayments. When scheduled mortgage payments are insufficient to pay all
of the accumulating interest, causing some interest to be added to the outstanding balance after
each payment shortfall, the loan is said to be - CORRECT ANSWER - negatively
amortizing.
With most standard home loans, the lender can hold the borrower personally liable in the event
of a default. Such loans are commonly referred to as - CORRECT ANSWER - recourse
loans.
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage
property. The lender, i.e., the individual who receives the mortgage claim, is known as the -
CORRECT ANSWER - mortgagee.
The difference between judicial foreclosure and power of sale in the treatment of defaulted
mortgages can be significant. All of the following statements regarding power of sale are true
except - CORRECT ANSWER - the foreclosed property is typically sold through a public
auction administered by the court.
It is possible to have a secured real estate loan without a mortgage through the use of a contract
for deed. In contrast to the standard real estate sale, which of the following events occurs after
the closing when dealing with a contract for deed? - CORRECT ANSWER - title to the
property passes to the buyer
In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the
following acts created an independent oversight agency tasked with the responsibility of
overseeing and enforcing federal consumer financial protection laws; enforcing
antidiscrimination laws in consumer finance; restricting unfair, deceptive, or abusive acts or
,practices; receiving consumer complaints; promoting financial education; and watching for
emerging financial risks for consumers? - CORRECT ANSWER - Dodd-Frank Wall Street
Reform and Consumer Protection Act
Congress has enacted a number of regulations that have established criteria for evaluating home
loan applicants and mandating disclosures in the origination of home loans. Which of the
following congressional acts requires important disclosures concerning the cost of consumer
credit, including the computation of the annual percentage rate (APR)? - CORRECT
ANSWER - Truth-in-Lending Act (TILA)
When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected.
While borrowers can recover from this reduction in their credit score, if a default goes into the
borrower's records it will remain for - CORRECT ANSWER - seven years.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the
property as long as he or she produces the outstanding mortgage balance and all foreclosure costs
incurred to that point. In a state such as Georgia, this right only extends to the date of the
foreclosure sale. When this occurs, this right is more commonly referred to as - CORRECT
ANSWER - equity of redemption.
Which of the following acts prohibits discrimination in lending practices on the basis of race,
color, religion, national origin, sex, marital status, age, or because all or part of an applicant's
income derives from a public assistance program? - CORRECT ANSWER - Equal Credit
Opportunity Act (ECOA)
Which of the following acts was passed out of concern for abusive predatory practices in
subprime lending? - CORRECT ANSWER - Home Ownership and Equity Protection Act
(HOEPA)
When a borrower defaults on the payment requirements of a loan, there are several options that
the lender has at its disposal. When the lender allows the borrower simply to convey the property
to the lender rather than pursue a court-supervised process of terminating all of the borrower's
claims of ownership of the property, this is commonly referred to as - CORRECT
ANSWER - Deed in Lieu of Foreclosure
, Violations of the requirements of a note that do not disrupt the payments on the loan tend to be
viewed as technical defaults. In practice, how many days must a payment be overdue in order for
lenders to treat a default as serious (i.e., a substantive default)? - CORRECT ANSWER -
90 days
Mortgage originators can either hold loans in their portfolios or sell them to investors. When a
mortgage originator decides to sell mortgages to another institution, this transaction occurs in
what is commonly referred to as the - CORRECT ANSWER - secondary mortgage market.
Considered the most common type of home loan, which of the following refers to any standard
home loan that is not insured or guaranteed by an agency of the U.S. government? - CORRECT
ANSWER - Conventional Home Loan
Created by Congress to promote an active secondary market for home mortgages, Fannie Mae
and Freddie Mac purchase loans that meet specific underwriting standards such as loan size,
documentation, and payment-to-income ratio. The loans that Fannie Mae and Freddie Mac are
eligible to purchase are commonly referred to as - CORRECT ANSWER - conforming
conventional loans.
Lenders generally require private mortgage insurance (PMI) for conventional loans over 80% of
the value of the security property. PMI protects a lender against which of the following? -
CORRECT ANSWER - losses due to default on the loan
Federal Housing Administration (FHA) loans differ from conventional loans in a number of
ways. All of the following statements regarding FHA loans are true except - CORRECT
ANSWER - FHA loans require higher credit scores than are needed for prime
conventional loans.
It would be hard to overstate the importance of the Federal Housing Administration (FHA) in the
history of housing finance. Which of the following instruments created by the FHA is considered
the single most important financial instrument in modern housing finance? - CORRECT
ANSWER - level-payment, fully amortizing loan
