Florida Real Estate Lic Exam 13-14 with complete verified solutions

Each discount point paid to the lender will increase the lender's yield (return) by approximately 1/8 of 1 percent. TRUE. Florida statute requires that the mortgagee send the recorded satisfaction to the mortgagor within 60 days. State-chartered commercial banks must display the word "National" somewhere in their name. FALSE. Commercial banks chartered by the federal government must display the word "National" or the initials "N.A." somewhere in their name. Deposit accounts are insured to $300,000 per depositor in each bank or thrift the FDIC insures. FALSE. Deposit accounts are insured to $250,000 per depositor in each bank or thrift the FDIC insures. The coverage limit will return to $100,000 (except for IRAs), effective January 1, 2014. The amount that Federal Reserve member banks are required to keep on deposit is the reserve requirement. TRUE. The amount that member banks are required to keep on deposit is the reserve requirement. Raising or lowering this reserve requirement is one of three primary methods used by the Fed to control the supply of money in circulation and thereby balance the economy. Federally chartered SAs are required to be members of their district Federal Home Loan Bank. TRUE. All federally chartered savings associations are required to be members of their district FHLB. While membership is optional for state-chartered savings associations, mutual savings banks, and insurance companies, many that meet federal standards and can qualify elect to join because only member institutions are allowed to borrow from their district FHLB for up to one year without collateral. Fannie Mae does NOT make loans directly to consumers; rather, Fannie Mae purchases loans for its own portfolio. TRUE. Fannie Mae (formerly called the Federal National Mortgage Association or FNMA) was established by Congress in 1938 for the purpose of creating a secondary market for mortgage loans. It is authorized to either purchase loans for its own portfolio or underwrite loans. The cost of 5 discount points on a $100,000 loan is $5,000. TRUE. Each discount point is equal to 1 percent of the loan amount. Five discount points is equal to five percent of $100,000 or $5,000. The discount rate is another term for mortgage points. FALSE. The discount rate is the interest rate charged member banks for borrowing from the Federal Reserve Bank. When the Fed decides to sell securities through open-market bulk trading, the supply of money in circulation increases. FALSE. When the Fed decides to sell securities through openmarket bulk trading, all funds received are held by the FRS. This reduces the supply of money in circulation, which in turn causes a drop in loanable funds and causes interest rates to rise. Mortgage loan originators create loans with either their own funds or money borrowed from financial institutions. FALSE. Mortgage lenders (mortgage companies) originate loans with either their own funds or money borrowed from financial institutions. The role of the mortgage loan originator is limited to acting as an agent. A mortgage loan originator submits loan applications from prospective borrowers to various mortgage companies and other lenders until the loans are approved or abandoned. If a loan application is approved, the mortgage loan originator earns a negotiated loan origination fee and drops out of the loan transaction. Which statement is TRUE regarding the SAFE Act? STATE-LICENSED MORTGAGE LOAN ORIGINATORS ARE REQUIRED TO COMPLETE PRELICENSE EDUCATION AND PASS A WRITTEN QUALIFICATIONS EXAM. Mortgage loan originators (MLOs) who are not employed by agency-regulated institutions are licensed by the state. State-licensed MLOs must complete prelicensure education, pass a written qualification exam, and take continuing education courses. Which interest rate is charged member banks for borrowing money from the Federal Reserve? DISCOUNT. The discount rate is the interest rate charged member banks for borrowing from the Fed. Lenders sometimes handle the loan payment collection and record keeping associated with mortgage loans known as SERVICING THE MORTGAGE. Some lenders "service" (handle the loan payment collecting and record keeping) the mortgages they originate. The Fed periodically buys and sells an inventory of securities to increase or decrease the amount of money in circulation known as OPEN-MARKET OPERATIONS. Open-market operations involve the purchase and sale of U.S. Treasury and federal agency securities. The process of consolidating many small savings accounts belonging to individual depositors and investing the funds into larger, diversified projects is known as The process of consolidating many small savings accounts belonging to individual depositors and investing the funds into larger, diversified projects is known as Which entity is NOT part of the primary mortgage market? FEDERAL NATIONAL MORTGAGE ASSOCIATION. The Federal National Mortgage Association (Fannie Mae) is a secondary mortgage market participant. Charging 2 discount points has the effect of increasing the lender's yield on a mortgage loan by what percent? .25. Each discount point increases the lender's yield by approximately 1/8 of 1 percent or .00125. Therefore, 2 discount points would increase the yield by approximately 2 × .00125 = .0025 or .25 percent. A local lender charged 7 percent interest plus 4 points on a conventional mortgage loan. What was the approximate yield on the loan? 7 1/2 PERCENT. The solution is: 4 points × 1/8 percent = 1/2 percent; 7 + 1/2 = 7 1/2 percent yield. What is the result of increasing the discount rate? THE MONEY SUPPLY DECREASES. If the discount rate is increased, member banks have to pay a higher interest rate for money borrowed from their district bank. The higher interest rate is passed on in the form of higher interest to consumers. This reduces the number of loans made and less money circulates in the marketplace. Which activity is performed by a secondary mortgage market participant? BUY EXISTING MORTGAGES. The secondary mortgage market is an investor market that buys and sells existing mortgages