REE3043 - Final Exam with precise detailed ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
solutions
With respect to bearing the risk of future property price fluctuations, which of the following
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
lending relationships is viewed as the most risky from the borrower's perspective? - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Straight debt ||\\//||
An interest-only balloon mortgage loan is commonly referred to as a(n): - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Bullet loan ||\\//||
Which of the following terms refers to a written agreement that binds the lender to make a
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
loan to the borrower provided the borrower satisfies the terms and conditions of the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
agreement? - correct answer✔✔Loan commitment ||\\//|| ||\\//|| ||\\//|| ||\\//||
Relative to residential loans, the underwriting process for commercial loans is more
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
complicated. The commercial loan underwriting process focuses first on which of the ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
following? - correct answer✔✔Income producing potential of the collateral property ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
If mortgage rates decline significantly, borrowers may decide to prepay the principal on
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
their loan even if they face prepayment penalties. One way that lenders protect themselves
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
from prepayments in such circumstances is by requiring the borrower who prepays to
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
purchase for the lender a set of U.S. Treasury securities whose coupon payments replicate ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
the cash flows the lender will lose as a result of the early retirement of the mortgage. This
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
process is referred to as: - correct answer✔✔Defeasance ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
An alternative vehicle for financing commercial property involves having the lender acquire
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
an ownership (equity) interest in the property by supplying a portion of the required equity
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
capital in addition to providing the permanent debt financing. This type of financing
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
, arrangement is commonly referred to as a(n):Joint venture - correct answer✔✔Joint ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
venture
Which of the following statements is least correct? - correct answer✔✔Similar to LPs
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
(Limited Partnerships), LLCs (Limited Liability Companies) permit only the general
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
partner to participate in management. ||\\//|| ||\\//|| ||\\//|| ||\\//||
The signature risk to Commercial Mortgage lenders is: - correct answer✔✔Default Risk
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Which of the following statements regarding U.S. commercial real estate equity and debt
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
ownership and other U.S. assets, as of 2015, is least correct? - correct answer✔✔Public ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
commercial real estate debt, Commercial Mortgage Backed Securities (CMBSs), totaled ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
approximately $2.926 Trillion while privately held commercial real estate debt totaled ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
approximately $1.012 Trillion. ||\\//|| ||\\//||
Which of the following statements is not correct? - correct answer✔✔In a tax-deferred
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
exchange, real property can be exchanged for a partnership interest. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Because of the possibility that a developer may fail to complete a new project in a timely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
manner, or may not complete the project at all, development and construction loans are
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
often considered: - correct answer✔✔extremely risky.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Which of the following statements regarding UPREITs and related REIT structures is least
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
correct? - correct answer✔✔"UPREIT" stands for an "Upstanding Property REIT" structure.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Given the following information, calculate the loan-to-value ratio of this commercial loan:
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Estimated net operating income in first year: $150,000 ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Debt service in first year: $100,000
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Loan amount: $1,000,000
||\\//|| ||\\//||
solutions
With respect to bearing the risk of future property price fluctuations, which of the following
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
lending relationships is viewed as the most risky from the borrower's perspective? - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Straight debt ||\\//||
An interest-only balloon mortgage loan is commonly referred to as a(n): - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Bullet loan ||\\//||
Which of the following terms refers to a written agreement that binds the lender to make a
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
loan to the borrower provided the borrower satisfies the terms and conditions of the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
agreement? - correct answer✔✔Loan commitment ||\\//|| ||\\//|| ||\\//|| ||\\//||
Relative to residential loans, the underwriting process for commercial loans is more
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
complicated. The commercial loan underwriting process focuses first on which of the ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
following? - correct answer✔✔Income producing potential of the collateral property ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
If mortgage rates decline significantly, borrowers may decide to prepay the principal on
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
their loan even if they face prepayment penalties. One way that lenders protect themselves
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
from prepayments in such circumstances is by requiring the borrower who prepays to
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
purchase for the lender a set of U.S. Treasury securities whose coupon payments replicate ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
the cash flows the lender will lose as a result of the early retirement of the mortgage. This
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
process is referred to as: - correct answer✔✔Defeasance ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
An alternative vehicle for financing commercial property involves having the lender acquire
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
an ownership (equity) interest in the property by supplying a portion of the required equity
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
capital in addition to providing the permanent debt financing. This type of financing
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
, arrangement is commonly referred to as a(n):Joint venture - correct answer✔✔Joint ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
venture
Which of the following statements is least correct? - correct answer✔✔Similar to LPs
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
(Limited Partnerships), LLCs (Limited Liability Companies) permit only the general
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
partner to participate in management. ||\\//|| ||\\//|| ||\\//|| ||\\//||
The signature risk to Commercial Mortgage lenders is: - correct answer✔✔Default Risk
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Which of the following statements regarding U.S. commercial real estate equity and debt
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
ownership and other U.S. assets, as of 2015, is least correct? - correct answer✔✔Public ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
commercial real estate debt, Commercial Mortgage Backed Securities (CMBSs), totaled ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
approximately $2.926 Trillion while privately held commercial real estate debt totaled ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
approximately $1.012 Trillion. ||\\//|| ||\\//||
Which of the following statements is not correct? - correct answer✔✔In a tax-deferred
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
exchange, real property can be exchanged for a partnership interest. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Because of the possibility that a developer may fail to complete a new project in a timely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
manner, or may not complete the project at all, development and construction loans are
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
often considered: - correct answer✔✔extremely risky.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Which of the following statements regarding UPREITs and related REIT structures is least
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
correct? - correct answer✔✔"UPREIT" stands for an "Upstanding Property REIT" structure.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Given the following information, calculate the loan-to-value ratio of this commercial loan:
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Estimated net operating income in first year: $150,000 ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Debt service in first year: $100,000
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Loan amount: $1,000,000
||\\//|| ||\\//||
