Ree Exam 2 True And False

Front 1

the applicants personal willingness and ability to service the debt on a commercial mortgage loan is not as crucially important as with residential loans

Back 1

true

Front 2

equity participants are designed to protect the lender from unexpected increases in inflation and interest rates

Back 2

true

Front 3

the additional payments the lender receives on participation mortage whether from operating cash flows or sale proceeds are classified as personal interest

Back 3

false
contingent interest

Front 4

in a sale leaseback arrangement the lender (investor) is essentially taking an all equity position

Back 4

true

Front 5

a convertible mortgage gives the borrower the option to convert his equity in the project to debt after a specified number of years

Back 5

false
lender

Front 6

the risk that the NOI on a property will be less than the debt service requiredis often referred to as the financial risk

Back 6

true

Front 7

the expected variability of the return to the equity investor decreases with the amount of financial leverage

Back 7

false
increases

Front 8

in contrast to residential mortgage loans the terms and provisions of commercial mortgage loans are highly standardized

Back 8

false
they can vary greatly with each particular loan

Front 9

commercial property lenders seldom require a third party appraisal of the property to estimate its market value

Back 9

false
require a third party fee as an estimate of its market value

Front 10

the lender's mininum accectpable DCR may be used to calculate the maximum allowable loan on a project

Back 10

true

Front 11

mortgage loans on commercial properties represent the largest portion of mortgage debt outstanding

Back 11

false
residential properties

Front 12

commercial banks often indirectly provide additional funds for the housing market by providing short term funds to mortgage banking companies

Back 12

true

Front 13

mortgage brokers are full service mortgage companies, they process, close, and sell the loans they originate in the secondary mortgage market

Back 13

false
mortgage bankers

Front 14

a standby forward commitment from the secondary market gives the lender the right but not the obligation to sell a presecified dollar amount of a certain type of loan to the seller of the standby commitment

Back 14

true

Front 15

the largest purchaser of mortgages in the secondary mortgage is the government national mortgage assosication

Back 15

false
gennie purchases few compared to frannie and freddie

Front 16

FHA loans are originated by federal housing association on properties that meet FHA's property and credit risk standards

Back 16

false
originated by private lenders and meet FHA standards

Front 17

the VA charges a funding fee that is a percentage of the loan with the percentage based on the down payment

Back 17

true

Front 18

in developing and facilitating the secondary market mortgages frannie mac and freddie mac have served to cause a standardization of the mortgage application and procedures required to obtain a mortgage

Back 18

true

Front 19

the most important activity of Gennie Mae is not to purchase and sell mortgages but to guarantee many pass through mortgage based securities issued

Back 19

true

Front 20

the PITI to monthly income ratio on an FHA loan is not as difficult for borrowers to qualify for when compared to the typical PITI to monthly income ratio required on a conventional mortgage

Back 20

true

Front 21

approximately 25% of provate homes now carry a home-equity mortgage

Back 21

true

Front 22

borrowers who expect to move relatively soon should pay discount points to avoid high interest payments

Back 22

false should pay few to no discount points

Front 23

the truth in lending act is a federal law that requires lenders to provide information on all the costs associated with closing a residential loan

Back 23

false
RESPA requires that

Front 24

if the risj adjusted cost of self financing is equal to the effective borrowing cost of debt financiing the borrower ins indifferent between the two options for financing perspective

Back 24

true

Front 25

the most accurate guide to refinancing decision is achieved through the use of the 2% rule. refinance is the market rate is 2% below the borrower's exisiting contract rate

Back 25

false
most accurate is caculating the net present value of the expected cash flows

Front 26

one of the primary determinants of mortgage loan default s the size of the borrower's equity on the property

Back 26

true

Front 27

agencies and private companies that pool mortgages and sell mortgage backed securities (MBSs) are termed conduits

Back 27

true

Front 28

the annual percentage rate (APR) is the same as the effective cost of borrowing

Back 28

flase
assume loan will be held into maturity, holding period?

Front 29

jumbo loans carry a lower contract interest rate than standard conventional loans due the economies of scale inherent in writing larger loans

Back 29

false
higher interest rates

Front 30

the margin on an adjustable rate mortgage can be determined by subtracting the initial contract interest rate from the market interest rate

Back 30

false
subtracting the index from the inital contract interest rate

Front 31

in all states the borrower's rights in a mortgage contract end with the foreclosure sale

Back 31

false
in many states a statutory right of redemption period exisits

Front 32

in lien theory states mortgage instruments contain power of sale clauses that allow foreclosure without going to court

Back 32

false
in nonjudicual title theory states mortgage instruments may contain a power of sale clause

Front 33

real investment in England and Japan occur without highly competitive private mortgage markets

Back 33

true

Front 34

money that flows to the lender from two sources enables the lender to participate in the creation of a mortgage these sources are depositis and the sale of mortgage to the secondary mortgage market

Back 34

true

Front 35

in title theory states lenders technically receive title to property in mortgage contracts

Back 35

true

Front 36

money invested directly in properties by those who take ownership and operate the properties is termed private debt

Back 36

false
private equity

Front 37

construction loans generally have higher interest rates than permanent loans due to their increase risk characteristics

Back 37

true

Front 38

an agreement in which the buyer obtains a first mortgage from the seller and this an institutional lender never becomes a party to the agreement is termedn a purchase money mortgage

Back 38

true

Front 39

the construction loan may often by extended for a long term as a standard first mortgage loan

Back 39

false
construnction loan financies the development and construction furing the construction period

Front 40

the repayment of land development loans often occur in a lump sum with the completion of the development or with the sale of individual lots

Back 40

true

Front 41

the capitalization rate found by dividing the noi of a recently sold property by its selling price does not take into account any estimate of the properties future cash flows

Back 41

false

Front 42

the allowance known as the reserve for replacements and other nonrecurring expecses is estmiated by annualizing all the costs of periodically replacing the components of improvement that depreciation faster than the building itself such as carpeting

Back 42

true

Front 43

the equity divided rate is obtained by dividing the before tax cash flow by the over all value of the property

Back 43

false edr=btcf/ve

Front 44

the preferred method to estimate RO if good price, income, and expense data are available is mortgage equity analysis

Back 44

false durect market extraction from comparable sales data

Front 45

the mortgage constant can be thought of as the capitalization rate of debt financing

Back 45

true

Front 46

discount rates are the largest component of most capitalization rates

Back 46

true

Front 47

the notion that private property cannot be taken for public use without just compensation stems from local government ordinances hence this concept differs widely among various communities

Back 47

false
in us constitution

Front 48

courts have overturned zoning ordinances that do not provide for low- and moderate income housing on the grounds that they are exclusionary

Back 48

true

Front 49

a variance is a rezoning that involves a proposal to change the zoning classification of a particular parcel

Back 49

false
it invovles a minor change in the rules in an exisiting zone

Front 50

concurrency requires the developer to pay for all new public services and facilitates required as a result of development (intersection improvements)

Back 50

false
only requires that the public facilities and services are in place not that the developer has to pay for it

Front 51

the use of performance standards such as traffic capcity to a site may be used in some communities in place of sire specific zoning classifications

Back 51

true

Front 52

an urban service area establishes of a boundary beyond which urban development is discouraged or prohibited

Back 52

true

Front 53

many communities have established permanent growth moratoria to eliminate future growth

Back 53

false
it is a temporary measure to restrict growth to allow adequate infrastructure to be developed

Front 54

radon is a waste component of the nuclear energy process

Back 54

false
radon is a naturally occuring radio active gas

Front 55

a phase II EVA is required when a phase III report reveals the presence of significant amounts of toxic waste

Back 55

false
Phase II requred when phase I reports not III

Front 56

easements are generally identified and recoreded in the subdivision plat, and they bind all future purchasers by references in deeds to restrictions and easements of record

Back 56

true

Front 57

the monthly gross mulitplier is defined as the monthly gross rent divided by the sale price of the property

Back 57

false

Front 58

the cost approach is most valuable for estimating the value of properties more than 30 years old and some historical properties

Back 58

False

Front 59

the sales comparison approach is applicable to almost all one to four family resudential properties and to many larger income producing properties

Back 59

trye

Front 60

if the subject property is better than the comparable property with respect to a characteristic requiring an adjustment the subject property's sale price would be adjusted upward

Back 60

false

Front 61

a nonarms length transaction is one in which the buyer or sellers do not have equal bargaining poweres with respect to negotiating the sale price

Back 61

trye

Front 62

an adjustment to the normal sale price due to changes in market conditions results in a market adjusted normal sale price estimate

Back 62

true

Front 63

mulitiple regression anaylsis is espcially useful in estimating the value of residential properties when transaction data is limited

Back 63

false

Front 64

in multiple regression models the R2 statistic measures how well the model fits the data

Back 64

true

Front 65

the estimated beta coefficent on the square footage of living area variable represents its marginal value

Back 65

true

Front 66

curable elements of depreciation are those whose costs exceed the value added when they are fixed or replaced

Back 66

false