National Flood Insurance Act and Mortgage Market Supply and Demand Quiz

What document outlines details such as debt amount, loan term, method and timing of repayment, interest rate, and promise to pay?

Promissory note

Which account is established as a reserve account for periodic payments of taxes and insurance?

Escrow account

What acronym encompasses the borrower's monthly payment beyond principal and interest?

PITI

What clause allows lenders to inspect properties related to loan agreements at reasonable times?

Inspection clause Signup and view all the answers

What happens if a borrower sells their interest without obtaining consent from relevant parties according to the text?

Immediate repayment could be demanded Signup and view all the answers

When do lenders have the right to take steps necessary to protect their rights in the property according to the text?

When borrowers default on obligations Signup and view all the answers

What type of mortgage requires a lump-sum payment at the end of the term?

Partially amortized mortgages with a balloon payment Signup and view all the answers

Which loan type finances personal property along with mortgage loans?

Package mortgage Signup and view all the answers

What is the term used for the positive or negative amount of income an investment produces after expenses and debt service?

Cash flow Signup and view all the answers

What is the relationship between the yield rate of an investment and the interest rate on borrowed funds called?

Leverage Signup and view all the answers

Which loan type involves pledging equity to a lender in exchange for periodic payments?

Reverse annuity mortgage Signup and view all the answers

What is the term for an investment producing depreciation or non-cash losses that can be deducted from other income to reduce tax liability?

Tax shelter Signup and view all the answers

What are redemption clauses designed to help borrowers avoid?

Forced sales Signup and view all the answers

When do release clauses come into effect for debtors?

Upon full payment completion Signup and view all the answers

What is the purpose of defeasance clauses?

To require satisfaction of mortgage releases after repayments Signup and view all the answers

How does the Equal Credit Opportunity Act (ECOA) aim to prevent discrimination in lending?

Based on protected classes like race or religion Signup and view all the answers

What does the Loan-to-Value Ratio (LTV) express?

The loan amount as a percentage of property value Signup and view all the answers

What is the main purpose of Private Mortgage Insurance (PMI)?

To insure portions of the purchase price as LTVs become risky Signup and view all the answers

What is a promissory note in a mortgage transaction?

A written promise to repay the loan Signup and view all the answers

What is hypothecation in a mortgage context?

Using real estate as security for a mortgage loan Signup and view all the answers

What does the Loan-to-value ratio (LTV) represent in a mortgage transaction?

The loan’s share of the total property value Signup and view all the answers

What is defined as equity in a mortgage transaction?

At closing, borrower’s cash invested in the property; thereafter, it is defined as the difference between market value and loan balance Signup and view all the answers

What does the term 'Principal amount' refer to in a mortgage transaction?

The initial capital borrowed on which interest payments are calculated Signup and view all the answers

What is Annual Percentage Rate (APR) in a mortgage context?

Includes interest and all other finance charges; lenders must disclose this information on residential properties Signup and view all the answers

What is the role of Federal Home Loan Bank System (FHLBS) in relation to savings & loan associations?

It serves as a counterpart to the Federal Reserve for savings & loan associations Signup and view all the answers

What action does the Federal Reserve take to reduce money supply and increase interest rates?

Sell T-bills Signup and view all the answers

What is the function of the Federal Deposit Insurance Corporation (FDIC)?

To insure deposits up to $250,000 per depositor per insured bank account ownership category Signup and view all the answers

What is the key characteristic of conventional mortgages?

They typically necessitate 20% down payments Signup and view all the answers

What is the primary function of a mortgage broker?

To act as an intermediary bringing together borrowers and lenders but not using their own funding source Signup and view all the answers

What is the difference between amortized fixed-rate and adjustable loans?

Fixed-rate loans have constant interest rates, while adjustable loans have fluctuating rates based on an index Signup and view all the answers

What type of investor buys and personally manages their investments?

Direct Investor Signup and view all the answers

Which type of investment entity involves a group of investors pooling their funds to purchase, develop, and/or operate a property?

Syndicate Signup and view all the answers

What is the primary responsibility of limited partners in a Limited Partnership investment entity?

Only own the investment but not manage it Signup and view all the answers

How are returns shared among investors in a Real Estate Investment Trust (REIT)?

Based on ownership percentage Signup and view all the answers

Who is responsible for paying taxes on the capital gain from selling their primary residence?

Seller of the residence Signup and view all the answers

What is the term used to refer to the amount realized minus the adjusted basis when selling real estate?

Capital gain Signup and view all the answers

How is taxable income calculated for real estate investments generating income?

Deducting allowable expenses and deductions from gross income Signup and view all the answers

What does cost recovery, or depreciation, allow for in real estate investment taxation?

No deduction from gross income Signup and view all the answers

What does the table in the text represent?

Calculation of pre-tax cash flow in income property investment Signup and view all the answers

What is calculated using the formula 'Net Operating Income (NOI) plus reserves, minus interest and depreciation'?

Taxable earnings calculation Signup and view all the answers

What document transfers ownership of the borrower/trustor's property to a third-party trustee?

Trust Deed Signup and view all the answers

What may result in penalties according to the text?

Creating hazardous waste on-site Signup and view all the answers

What does the acronym PITI stand for in real estate financing terms?

Principal, Interest, Taxes, and Insurance Signup and view all the answers

What is required if loans aren't backed by FHA or VA and have down payments less than 20% of the property's value?

Private Mortgage Insurance (PMI) Signup and view all the answers

What happens if a borrower sells their interest without obtaining consent from relevant parties?

Immediate loan repayment could be demanded Signup and view all the answers

What does the Condemnation Clause address in real estate agreements?

Eminent domain proceedings Signup and view all the answers

What impact does an increase in reserve requirements for member banks have on the money supply and interest rates?

Decreases money supply and raises interest rates Signup and view all the answers

Which entity serves as a counterpart to the Federal Reserve for savings and loan associations?

Farmer Mac/FAMC Signup and view all the answers

What is the role of Federal National Mortgage Association (FNMA) in the mortgage market?

Buying conventional FHA-VA backed loans Signup and view all the answers

What is the primary function of mortgage loan originators?

Solicit/negotiate mortgage loans Signup and view all the answers

In the context of adjustable loans, what do rate and payment caps aim to protect borrowers from?

Unaffordable increases in interest rates and payments Signup and view all the answers

What distinguishes amortized fixed-rate loans from adjustable loans in terms of interest rates?

Interest rates remain constant throughout the loan term Signup and view all the answers

What is the purpose of a promissory note in a mortgage transaction?

To outline details such as debt amount, loan term, and interest rate Signup and view all the answers

What does the Loan-to-Value ratio (LTV) represent in a mortgage transaction?

The loan's share of the total property value Signup and view all the answers

What is the main function of a Trust Deed in a real estate transaction?

A written promise made by the trustor to repay a loan Signup and view all the answers

What is the significance of Equity in a mortgage transaction?

Representing the difference between market value and loan balance Signup and view all the answers

What does Hypothecation refer to in the context of real estate financing?

Using real estate as security for a mortgage loan Signup and view all the answers

What is meant by the Loan origination fee in a mortgage process?

Charged by lenders at origination to obtain required return Signup and view all the answers

What type of mortgage involves payments that are interest-only with the principal balance retired using a balloon payment at maturity?

Interest-only loans Signup and view all the answers

What is the key characteristic of a purchase money mortgage?

It covers portions of the purchase price Signup and view all the answers

In a reverse annuity mortgage, what do borrowers receive in exchange for pledging equity to the lender?

Periodic payments Signup and view all the answers

Which type of loan requires a lump-sum 'balloon' payment at the end of the term because payments do not reduce the principal balance?

Partially amortized mortgages Signup and view all the answers

What is the relationship between yield rate and loan rate when there is positive leverage in an investment?

Yield rate is higher than loan rate Signup and view all the answers

What type of loan finances articles of personal property along with mortgage loans in a single transaction?

Package mortgage Signup and view all the answers

How does a release clause benefit debtors?

By releasing lien obligations upon full payment completion Signup and view all the answers

What is the primary purpose of escalation clauses in loans?

To tailor pricing structures for individual cases Signup and view all the answers

How do lenders evaluate a borrower's payment behavior?

By obtaining credit reports of the borrower Signup and view all the answers

What does the Equal Credit Opportunity Act (ECOA) prohibit discrimination based on?

Race, color, marital status, and public assistance dependency among others Signup and view all the answers

What is the purpose of Private Mortgage Insurance (PMI)?

To safeguard lenders in case of borrower default Signup and view all the answers

How are housing expense maximums determined for borrowers?

By applying the debt ratio to gross income Signup and view all the answers

What is the primary responsibility of limited partners in a Limited Partnership investment entity?

Owning but not managing the investment entity Signup and view all the answers

What is the term for an investment producing depreciation or non-cash losses that can be deducted from other income to reduce tax liability?

Tax shelter Signup and view all the answers

How are returns shared among investors in a Real Estate Investment Trust (REIT)?

Proportional to ownership percentage Signup and view all the answers

What is the purpose of defeasance clauses in real estate transactions?

To protect lenders by substituting collateral for debt repayment Signup and view all the answers

What does the Loan-to-Value Ratio (LTV) express in a mortgage transaction?

The percentage of the property's value financed by the loan Signup and view all the answers

What is the key characteristic of conventional mortgages?

High down payment requirements Signup and view all the answers

What does the term 'Principal amount' refer to in a mortgage transaction?

The amount borrowed from the lender. Signup and view all the answers

What is the role of Federal Home Loan Bank System (FHLBS) in relation to savings & loan associations?

Providing liquidity and support through advances. Signup and view all the answers

What is calculated using the formula 'Net Operating Income (NOI) plus reserves, minus interest and depreciation'?

Pre-tax cash flow. Signup and view all the answers

National Flood Insurance Act and Mortgage Market Supply and Demand Quiz

Questions and Answers

What document outlines details such as debt amount, loan term, method and timing of repayment, interest rate, and promise to pay?

Which account is established as a reserve account for periodic payments of taxes and insurance?

What acronym encompasses the borrower's monthly payment beyond principal and interest?

What clause allows lenders to inspect properties related to loan agreements at reasonable times?

What happens if a borrower sells their interest without obtaining consent from relevant parties according to the text?

When do lenders have the right to take steps necessary to protect their rights in the property according to the text?

What type of mortgage requires a lump-sum payment at the end of the term?

Which loan type finances personal property along with mortgage loans?

What is the term used for the positive or negative amount of income an investment produces after expenses and debt service?

What is the relationship between the yield rate of an investment and the interest rate on borrowed funds called?

Which loan type involves pledging equity to a lender in exchange for periodic payments?

What is the term for an investment producing depreciation or non-cash losses that can be deducted from other income to reduce tax liability?

What are redemption clauses designed to help borrowers avoid?

When do release clauses come into effect for debtors?

What is the purpose of defeasance clauses?

How does the Equal Credit Opportunity Act (ECOA) aim to prevent discrimination in lending?

What does the Loan-to-Value Ratio (LTV) express?

What is the main purpose of Private Mortgage Insurance (PMI)?

What is a promissory note in a mortgage transaction?

What is hypothecation in a mortgage context?

What does the Loan-to-value ratio (LTV) represent in a mortgage transaction?

What is defined as equity in a mortgage transaction?

What does the term 'Principal amount' refer to in a mortgage transaction?

What is Annual Percentage Rate (APR) in a mortgage context?

What is the role of Federal Home Loan Bank System (FHLBS) in relation to savings & loan associations?

What action does the Federal Reserve take to reduce money supply and increase interest rates?

What is the function of the Federal Deposit Insurance Corporation (FDIC)?

What is the key characteristic of conventional mortgages?

What is the primary function of a mortgage broker?

What is the difference between amortized fixed-rate and adjustable loans?

What type of investor buys and personally manages their investments?

Which type of investment entity involves a group of investors pooling their funds to purchase, develop, and/or operate a property?

What is the primary responsibility of limited partners in a Limited Partnership investment entity?

How are returns shared among investors in a Real Estate Investment Trust (REIT)?

Who is responsible for paying taxes on the capital gain from selling their primary residence?

What is the term used to refer to the amount realized minus the adjusted basis when selling real estate?

How is taxable income calculated for real estate investments generating income?

What does cost recovery, or depreciation, allow for in real estate investment taxation?

What does the table in the text represent?

What is calculated using the formula 'Net Operating Income (NOI) plus reserves, minus interest and depreciation'?

What document transfers ownership of the borrower/trustor's property to a third-party trustee?

What may result in penalties according to the text?

What does the acronym PITI stand for in real estate financing terms?

What is required if loans aren't backed by FHA or VA and have down payments less than 20% of the property's value?

What happens if a borrower sells their interest without obtaining consent from relevant parties?

What does the Condemnation Clause address in real estate agreements?

What impact does an increase in reserve requirements for member banks have on the money supply and interest rates?

Which entity serves as a counterpart to the Federal Reserve for savings and loan associations?

What is the role of Federal National Mortgage Association (FNMA) in the mortgage market?

What is the primary function of mortgage loan originators?

In the context of adjustable loans, what do rate and payment caps aim to protect borrowers from?

What distinguishes amortized fixed-rate loans from adjustable loans in terms of interest rates?

What is the purpose of a promissory note in a mortgage transaction?

What does the Loan-to-Value ratio (LTV) represent in a mortgage transaction?

What is the main function of a Trust Deed in a real estate transaction?

What is the significance of Equity in a mortgage transaction?

What does Hypothecation refer to in the context of real estate financing?

What is meant by the Loan origination fee in a mortgage process?

What type of mortgage involves payments that are interest-only with the principal balance retired using a balloon payment at maturity?

What is the key characteristic of a purchase money mortgage?

In a reverse annuity mortgage, what do borrowers receive in exchange for pledging equity to the lender?

Which type of loan requires a lump-sum 'balloon' payment at the end of the term because payments do not reduce the principal balance?

What is the relationship between yield rate and loan rate when there is positive leverage in an investment?

What type of loan finances articles of personal property along with mortgage loans in a single transaction?

How does a release clause benefit debtors?

What is the primary purpose of escalation clauses in loans?

How do lenders evaluate a borrower's payment behavior?

What does the Equal Credit Opportunity Act (ECOA) prohibit discrimination based on?

What is the purpose of Private Mortgage Insurance (PMI)?

How are housing expense maximums determined for borrowers?

What is the primary responsibility of limited partners in a Limited Partnership investment entity?

What is the term for an investment producing depreciation or non-cash losses that can be deducted from other income to reduce tax liability?

How are returns shared among investors in a Real Estate Investment Trust (REIT)?

What is the purpose of defeasance clauses in real estate transactions?

What does the Loan-to-Value Ratio (LTV) express in a mortgage transaction?

What is the key characteristic of conventional mortgages?

What does the term 'Principal amount' refer to in a mortgage transaction?

What is the role of Federal Home Loan Bank System (FHLBS) in relation to savings & loan associations?