Texas Pre-License- Real Estate Finance
Exam UPDATED QUESTIONS AND
CORRECT ANSWERS
Federal Home Loan Bank Act of 1932 - CORRECT ANSWER Extended $125 million in credit
to savings and loan institutions and created the Federal Home Loan Bank System, setting up the
twelve regional banks
Community Investment Program (CIP) - CORRECT ANSWER Program operated by each
FHLBank that offers below-market-rate loans to members for long-term financing for housing and
economic development that benefits low- and moderate-income families and neighborhoods
What is the Federal Home Loan Bank System? - CORRECT ANSWER The Federal Home
Loan Bank System is a system of regional banks from which local lenders borrow funds to finance
housing, economic development, and jobs.
Federal Home Loan Banks are member owned cooperatives. Banks, thrifts, credit unions, and
insurance companies have the right to become members of the FHLBanks. Each member is a
shareholder. Most lenders take advantage of being able to borrow money from their regional FHLB
office at good terms.
Whose purpose is it to support residential mortgage lending and related community investment? -
CORRECT ANSWER Federal Home Loan Bank
What is the purpose of the Federal Home Loan Bank System? - CORRECT ANSWER provide
access to special affordable housing programs, support residential mortgage lending and related
community investments, provide access to reliable, economical funding and technical assistance
Federal Deposit Insurance Corporation - CORRECT ANSWER The Federal Deposit Insurance
Corporation (FDIC) is an independent agency of the United States federal government that preserves
public confidence in the banking system by insuring bank deposits.
Since the inception of FDIC insurance on January 1, 1934, no depositor has lost a single cent of
insured funds as a result of a failure. (Wow!)
,The Treasury Department - CORRECT ANSWER The Treasury Department is the executive
agency responsible for promoting economic prosperity and ensuring the financial security of the
United States.
The Treasury Department performs a critical and far-reaching role in enhancing national security by
implementing economic sanctions against foreign threats, identifying and targeting the financial
support networks of national security threats, and improving the safeguards of our financial systems.
Money laundering - CORRECT ANSWER generally refers to financial transactions in which
criminals, including terrorist organizations, attempt to disguise the proceeds, sources, or nature of
their illicit activities by funneling the money through otherwise legitimate business transactions.
The Federal Reserve - CORRECT ANSWER The Federal Reserve (commonly referred to as
The Fed) is the centralized United States bank created in 1913 by the Federal Reserve Act in response
to the lack of public trust in, and government regulation of, banks in America.
The purpose of the Federal Reserve is fourfold:
Conduct the monetary policy of the United States
Supervise and regulate financial institutions for the protection of the consumer
Maintain the financial system's stability
Provide services to the government, financial institutions, and the public
The Discount Rate - CORRECT ANSWER The discount rate is the interest rate at which the
Fed lends money to its member banks.
When a member bank in sound financial condition requires a short-term loan, the Fed will advance it
the funds at what is known as the primary credit rate, the most important of the Fed's discount rates
and the one often referred to as "the discount rate." This rate is typically set slightly above the short-
term market interest rate.
Which government agency provides insurance to depositors and preserves confidence in the banking
system? - CORRECT ANSWER FDIC
Which of these supports residential mortgage lending and related community investment by providing
access to special affordable housing programs? - CORRECT ANSWER Federal Home Loan
Banks System
The Federal Reserve uses all of the following instruments to implement its monetary policy EXCEPT:
- CORRECT ANSWER credit checks
,HUD - CORRECT ANSWER The Department of Housing and Urban Development
Real Estate Settlement Procedures Act (RESPA) - CORRECT ANSWER An act designed to
protect consumers from predatory lending and educate them about closing and settlement services
LDP - CORRECT ANSWER Limited Denial of Participation
FHA - CORRECT ANSWER Federal Housing Administration
Public Housing - CORRECT ANSWER Housing provided for people with low incomes,
subsidized by public funds
Subsidized Housing - CORRECT ANSWER Government sponsored economic assistance
programs aimed at alleviating housing costs and expenses for people with low to moderate incomes
Ginnie Mae - CORRECT ANSWER Government National Mortgage Association; a
government owned enterprise that promotes homeownership
FHA Mortgage Insurance - CORRECT ANSWER FHA loans are mortgages insured by the
Federal Housing Administration. FHA mortgage insurance gives lenders protection against losses that
can occur when homeowners default on their mortgage loans. This insurance encourages lenders to
offer FHA loans at attractive interest rates and with less stringent and more flexible qualification
requirements
The Housing and Urban Development Act of 1970 - CORRECT ANSWER The Housing and
Urban Development Act of 1970 introduced the federal Experimental Housing Allowance Program
(EHAP) and the Community Development Corporation, authorizing larger outlays for housing
subsidy programs and rent supplements for moderate-income households.
In the 1970s, studies began to show that the biggest housing problem afflicting low-income families
and individuals was no longer substandard housing, but instead the high percentage of income spent
on housing. With this knowledge, Congress passed the Housing and Community Development Act of
1974, amending the Housing Act again to create the Section 8 Program.
, Community Reinvestment Act (CRA) - CORRECT ANSWER Helps commercial banks and
savings associations meet the needs of borrowers in all segments of their communities, including low-
and moderate-income neighborhoods
Truth in Lending Act (TILA) - CORRECT ANSWER Educates and protects consumers against
inaccurate and unfair credit billing and credit card practices by requiring lenders to standardize the
way costs associated with borrowing are calculated and disclosed
Regulation Z - CORRECT ANSWER Under TILA, prohibits specific acts and practices in
connection with an extension of credit secured by a consumer's dwelling
APR - CORRECT ANSWER Annual Percentage Rate, a numeric representation of an interest
rate
Regulation M - CORRECT ANSWER Prevents manipulation by individuals with an interest in
the outcome of an offering, and prohibits activities and conduct that could artificially influence the
market for an offered security
Dodd-Frank Act - CORRECT ANSWER The Dodd-Frank Wall Street Reform and Consumer
Protection Act
Volcker Rule - CORRECT ANSWER Federal regulation prohibiting banks from conducting
certain investment activities with their own accounts, also limits their ownership of and relationship
with hedge funds and private equity funds, also called covered funds
CFPB - CORRECT ANSWER Consumer Financial Protection Bureau; works to protect
consumers from unfair, deceptive, and abusive practices
SAFE Act - CORRECT ANSWER The Safe Mortgage Licensing Act; sets a minimum standard
for licensing and registering mortgage loan originators
Administrative Procedure Act: - CORRECT ANSWER Governs the way administrative
agencies of the federal government may propose and establish regulations
Exam UPDATED QUESTIONS AND
CORRECT ANSWERS
Federal Home Loan Bank Act of 1932 - CORRECT ANSWER Extended $125 million in credit
to savings and loan institutions and created the Federal Home Loan Bank System, setting up the
twelve regional banks
Community Investment Program (CIP) - CORRECT ANSWER Program operated by each
FHLBank that offers below-market-rate loans to members for long-term financing for housing and
economic development that benefits low- and moderate-income families and neighborhoods
What is the Federal Home Loan Bank System? - CORRECT ANSWER The Federal Home
Loan Bank System is a system of regional banks from which local lenders borrow funds to finance
housing, economic development, and jobs.
Federal Home Loan Banks are member owned cooperatives. Banks, thrifts, credit unions, and
insurance companies have the right to become members of the FHLBanks. Each member is a
shareholder. Most lenders take advantage of being able to borrow money from their regional FHLB
office at good terms.
Whose purpose is it to support residential mortgage lending and related community investment? -
CORRECT ANSWER Federal Home Loan Bank
What is the purpose of the Federal Home Loan Bank System? - CORRECT ANSWER provide
access to special affordable housing programs, support residential mortgage lending and related
community investments, provide access to reliable, economical funding and technical assistance
Federal Deposit Insurance Corporation - CORRECT ANSWER The Federal Deposit Insurance
Corporation (FDIC) is an independent agency of the United States federal government that preserves
public confidence in the banking system by insuring bank deposits.
Since the inception of FDIC insurance on January 1, 1934, no depositor has lost a single cent of
insured funds as a result of a failure. (Wow!)
,The Treasury Department - CORRECT ANSWER The Treasury Department is the executive
agency responsible for promoting economic prosperity and ensuring the financial security of the
United States.
The Treasury Department performs a critical and far-reaching role in enhancing national security by
implementing economic sanctions against foreign threats, identifying and targeting the financial
support networks of national security threats, and improving the safeguards of our financial systems.
Money laundering - CORRECT ANSWER generally refers to financial transactions in which
criminals, including terrorist organizations, attempt to disguise the proceeds, sources, or nature of
their illicit activities by funneling the money through otherwise legitimate business transactions.
The Federal Reserve - CORRECT ANSWER The Federal Reserve (commonly referred to as
The Fed) is the centralized United States bank created in 1913 by the Federal Reserve Act in response
to the lack of public trust in, and government regulation of, banks in America.
The purpose of the Federal Reserve is fourfold:
Conduct the monetary policy of the United States
Supervise and regulate financial institutions for the protection of the consumer
Maintain the financial system's stability
Provide services to the government, financial institutions, and the public
The Discount Rate - CORRECT ANSWER The discount rate is the interest rate at which the
Fed lends money to its member banks.
When a member bank in sound financial condition requires a short-term loan, the Fed will advance it
the funds at what is known as the primary credit rate, the most important of the Fed's discount rates
and the one often referred to as "the discount rate." This rate is typically set slightly above the short-
term market interest rate.
Which government agency provides insurance to depositors and preserves confidence in the banking
system? - CORRECT ANSWER FDIC
Which of these supports residential mortgage lending and related community investment by providing
access to special affordable housing programs? - CORRECT ANSWER Federal Home Loan
Banks System
The Federal Reserve uses all of the following instruments to implement its monetary policy EXCEPT:
- CORRECT ANSWER credit checks
,HUD - CORRECT ANSWER The Department of Housing and Urban Development
Real Estate Settlement Procedures Act (RESPA) - CORRECT ANSWER An act designed to
protect consumers from predatory lending and educate them about closing and settlement services
LDP - CORRECT ANSWER Limited Denial of Participation
FHA - CORRECT ANSWER Federal Housing Administration
Public Housing - CORRECT ANSWER Housing provided for people with low incomes,
subsidized by public funds
Subsidized Housing - CORRECT ANSWER Government sponsored economic assistance
programs aimed at alleviating housing costs and expenses for people with low to moderate incomes
Ginnie Mae - CORRECT ANSWER Government National Mortgage Association; a
government owned enterprise that promotes homeownership
FHA Mortgage Insurance - CORRECT ANSWER FHA loans are mortgages insured by the
Federal Housing Administration. FHA mortgage insurance gives lenders protection against losses that
can occur when homeowners default on their mortgage loans. This insurance encourages lenders to
offer FHA loans at attractive interest rates and with less stringent and more flexible qualification
requirements
The Housing and Urban Development Act of 1970 - CORRECT ANSWER The Housing and
Urban Development Act of 1970 introduced the federal Experimental Housing Allowance Program
(EHAP) and the Community Development Corporation, authorizing larger outlays for housing
subsidy programs and rent supplements for moderate-income households.
In the 1970s, studies began to show that the biggest housing problem afflicting low-income families
and individuals was no longer substandard housing, but instead the high percentage of income spent
on housing. With this knowledge, Congress passed the Housing and Community Development Act of
1974, amending the Housing Act again to create the Section 8 Program.
, Community Reinvestment Act (CRA) - CORRECT ANSWER Helps commercial banks and
savings associations meet the needs of borrowers in all segments of their communities, including low-
and moderate-income neighborhoods
Truth in Lending Act (TILA) - CORRECT ANSWER Educates and protects consumers against
inaccurate and unfair credit billing and credit card practices by requiring lenders to standardize the
way costs associated with borrowing are calculated and disclosed
Regulation Z - CORRECT ANSWER Under TILA, prohibits specific acts and practices in
connection with an extension of credit secured by a consumer's dwelling
APR - CORRECT ANSWER Annual Percentage Rate, a numeric representation of an interest
rate
Regulation M - CORRECT ANSWER Prevents manipulation by individuals with an interest in
the outcome of an offering, and prohibits activities and conduct that could artificially influence the
market for an offered security
Dodd-Frank Act - CORRECT ANSWER The Dodd-Frank Wall Street Reform and Consumer
Protection Act
Volcker Rule - CORRECT ANSWER Federal regulation prohibiting banks from conducting
certain investment activities with their own accounts, also limits their ownership of and relationship
with hedge funds and private equity funds, also called covered funds
CFPB - CORRECT ANSWER Consumer Financial Protection Bureau; works to protect
consumers from unfair, deceptive, and abusive practices
SAFE Act - CORRECT ANSWER The Safe Mortgage Licensing Act; sets a minimum standard
for licensing and registering mortgage loan originators
Administrative Procedure Act: - CORRECT ANSWER Governs the way administrative
agencies of the federal government may propose and establish regulations
