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NY “Nontraditional and Alternative Finance” Questions only (no answers)
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1) What is the one thing that all types of loans have in common?
a. Fixed rates of interest
b. State regulations
c. Standard duration
d. Profit

NY Nontraditional and Alternative Finance

2) Which is a risk of nontraditional mortgage products?
a. Interest rate risk
b. Market risk
c. Refinance risk
d. All the choices are correct.
3) The current 30-year, fixed-rate, fully amortizing loan didn’t exist until the
a. 1930s
b. 1940s
c. 1950s
d. 1960s
4) The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet, is known as:
a. crowdfunding.
b. real estate pooling.
c. fundraising.
d. collective venturing.
5) An ideal borrower for a subprime loan is most likely someone who:
a. has an immaculate credit history.
b. experienced bankruptcy or foreclosure in the past.
c. is not perceived as a high credit risk.
d. usually makes his or her loan payments on time.
6) Jim and Alice are purchasing their home with an ARM loan. They established the ARM to change within 60 months of the loan to a fixed-rate. Jim and Alice are aware that when they exercise this feature, that the lenders fee may take away the benefits of the low interest rate charged at the beginning of the loan. What type of ARM loan do Jim and Alice have?
a. Convertible ARM
b. Hybrid ARM
c. Option ARM
d. Reverse ARM
7) Of the following statements regarding ARMs, which is NOT true?
a. The interest rate on an ARM changes periodically.
b. Borrowers of ARM loans sometimes experience payment shock because ARM loans do not have caps.
c. The borrower can pay a discount point to lower the interest rate on the loan.
d. Some ARM loans include a prepayment penalty clause in the promissory note.
8) Which of the following is NOT a type of thrift institution?
a. Savings bank
b. Savings and loan association
c. Mutual savings bank
d. REIT
9) Nontraditional loans are loans that conform to Fannie Mae and Freddie Mac’s underwriting standards.
a. True
b. False
10) A subprime loan sometimes is called a “B” paper loan. Subprime loans may carry interest rates anywhere from 1% to 7% above prime loan rates and are 4% above prime loan rates on average. Which statement is INCORRECT regarding subprime loans?
a. Lenders charge higher fees on subprime loans due to their higher risk.
b. Subprime lenders charge junk fees.
c. Many subprime loans have teaser rates.
d. Lenders charge higher fees on subprime loans due to their lower risk.
11) A jumbo loan exceeds the maximum conforming loan limit set by Fannie Mae and Freddie Mac.
a. True
b. False
12) What type of loan does NOT have government insurance or guarantees and does NOT follow Fannie Mae/Freddy Mac guidelines.
a. Conventional conforming loan
b. Conventional non-conforming loan
c. Unconventional loan
d. Conforming unconventional loan
13) Which of the following loans is NOT amortized?
a. Adjustable-rate mortgage
b. Fixed-rate loan
c. Graduated payment mortgage
d. Straight loan
14) The S.A.F.E. Act define a nontraditional mortgage product as any mortgage product other than a 30-year fixed-rate, fully-amortizing mortgage.
a. True
b. False
15) A traditional mortgage product is a(n):
a. interest-only loan.
b. 20-year partially amortizing, fixed-rate loan.
c. 30-year fully amortizing, fixed-rate loan.
d. 40-year fully amortizing, fixed-rate loan.
16) Which of the following is NOT one of the features of a graduated payment mortgage?
a. Smaller initial monthly payments
b. Reduction of principal
c. Negative amortization
d. More interest paid over time
17) Which of the following is NOT a feature of a reverse mortgage?
a. It is for homeowners aged 62 and older
b. It can be used for properties that are second homes
c. It can turn home equity into an income stream or line of credit
d. It can supplement retirement income
18) Eligibility for a HECM loan is dependent upon all of the following EXCEPT a borrower’s:
a. age.
b. ethnicity.
c. occupancy of the property as a principal residence.
d. federal credit record.
19) What must occur before a HECM loan application is processed?
a. Borrowers must undergo an extensive background check
b. Borrowers must discuss the HECM with a HUD-approved lawyer
c. Borrowers must discuss the HECM with a counselor
d. Borrowers must pass a written examination regarding HECM loans
20) The VA may guarantee a loan for alteration and repair of a residence already owned by the veteran and occupied as a home. The alterations and repairs must be:
a. those ordinarily found on similar property of comparable value in the community.
b. those not found on similar property of comparable value in the community.
c. those ordinarily found on similar property of lesser value in the community.
d. those ordinarily found on similar property of higher value in the community.
21) The lender subtracts a few percentage points, or margin, to the index to determine the interest rate that a borrower pays.
a. True
b. False
22) Which of the following improvements cannot be financed with a Section 203(k) loan?
a. Interior and exterior painting
b. Adding an attached garage
c. Improvements to a detached garage
d. Luxury items and improvements
23) Who pays the interest during the construction period on a construction/permanent loan?
a. The lender
b. The builder
c. The borrower
d. The city
24) All of the following are features of growing equity mortgages EXCEPT:
a. continually larger payments.
b. no deferred interest.
c. no negative amortization.
d. negative amortization.
25) A Section 203(k) loan can be used for all of the following EXCEPT:
a. financing for a home-based business.
b. structural alterations.
c. modernization improvements.
d. eliminating obsolescence.
26) Which of the following is NOT a way to utilize a Specially Adapted Housing (SAH) grant?
a. Constructing a specially adapted home on land to be acquired
b. Building a home on land already owned if it is suitable for specially adapted housing
c. Remodeling an existing home if it can be made suitable for specially adapted housing
d. Purchasing a timeshare to rent out and earn more disposable income
27) Which program is paramount for the revitalization of neighborhoods and communities?
a. Section ARM Adjustable-Rate Mortgage Program
b. Section 203(k) Home Rehabilitation Program
c. The 1-year Constant Maturity Treasury Index program
d. Programs advocating higher qualification standards for loans
28) Eligibility for the Section 203 (h) program is determined by the home’s location in an area designated by the President as a:
a. short-term sanctuary.
b. temporary shelter.
c. disaster area.
d. safe haven.
29) The FHA 203(b) Residential Loan offers financing on the purchase or construction of owner-occupied residences of _____.
a. 1-4 units
b. 1 unit only
c. 1-2 units
d. 1-3 units
30) The Loan Guaranty Certificate (LGC) on a construction/permanent home loan will NOT be issued until a(n):
a. clear final compliance inspection report has been received by the VA.
b. loan application has been received by the VA.
c. funding fee has been received by the VA.
d. appraisal report has been received by the VA.
31) All of the following are TRUE regarding manufactured homes, EXCEPT they:
a. are homes built in a factory after June 15, 1976.
b. must conform to the U.S. government’s Manufactured Home Construction and Safety Standards (HUD code).
c. must meet federal standards relating to strength and durability.
d. are constructed on a chassis and wheels.
32) The features of a VA adjustable loan include a(n):
a. interest rate that varies upward or downward.
b. rate that is dependent on money market conditions and the agreed-upon index.
c. payment that stays the same only for a specified time.
d. All the choices are correct.
33) All of the following are ways veterans can use SHA grants, EXCEPT:
a. adapting an existing home that the Veteran or a family member already owns in which the Veteran lives.
b. adapting a home that the Veteran or family member intends to purchase in which the Veteran will live.
c. helping a Veteran purchase a home already adapted in which the Veteran will live.
d. helping a Veteran purchase a home used for rental income purposes.
34) A graduated payment mortgage (GPM) is a mortgage with:
a. initial low payments that decrease yearly.
b. initial low payments that increase yearly.
c. high initial payments that decrease yearly.
d. high initial payments that increase yearly.
35) The interest rate of an ARM is comprised of the ___________ and the ______________.
a. index / interest
b. COFI / CMT
c. index / margin
d. indent / margin
36) All of the following are eligible for housing grants for disabled veterans, EXCEPT the:
a. Army.
b. commissioned corps of the National Oceanic and Atmospheric Administration.
c. Coast Guard.
d. commissioned corps of the Federal Reserve.
37) Before borrowers can obtain an EEM, they must:
a. have energy efficient appliances already installed for reimbursement.
b. have an appraiser estimate the value of the energy efficient savings.
c. have a home energy rater conduct a pest inspection.
d. have a home energy rater conduct a home energy rating.
38) The current index value is 6.5% and the loan has a margin of 2.5%. What is the fully indexed rate?
a. 8%
b. 8.75%
c. 9%
d. 9.15%
39) A loan with an interest rate that adjusts in accordance with a movable economic index is a(n):
a. swing loan.
b. adjustable-rate mortgage.
c. fixed-rate mortgage.
d. static-rate mortgage.
40) The authority of a lender to close VA-guaranteed loans without the prior approval of the VA is:
a. manual authority.
b. automatic authority.
c. entitlement authority.
d. funding authority.
41) A publicly published number that is used as the basis for adjusting the interest rates of adjustable-rate mortgages is a(n):
a. initial rate.
b. index.
c. market rate.
d. adjustment number.
42) Which of the following is NOT TRUE regarding the FHA Section 251 mortgage program?
a. Initial interest rates and monthly payments are low, but these may change during the life of the loan.
b. The 1-year Constant Maturity Treasury (CMT) index or the 1-year London Interbank Offered Rate (LIBOR) index is used to determine interest rate changes.
c. Only 30-year mortgages are permitted.
d. 40-year mortgages are permitted.
43) A supplemental loan will require the prior approval of the VA if the loan will be made by a lender who:
a. only offers adjustable-rate loans.
b. only offers fixed-rate loans.
c. is the holder of the currently guaranteed obligation
d. is not the holder of the currently guaranteed obligation.
44) Which of the following is NOT TRUE regarding a mobile home?
a. It is a factory-built home manufactured prior to June 15, 1976.
b. It is constructed on a chassis and wheels.
c. It is designed for permanent attachment to land.
d. It is never designed for semi-permanent attachment to land.
45) All of the following are eligible for housing grants for disabled veterans, EXCEPT the:
a. Army.
b. commissioned corps of the National Oceanic and Atmospheric Administration.
c. Coast Guard.
d. commissioned corps of the Federal Reserve.
46) Which of the following is a loan involving one veteran and one nonveteran (NOT spouse)?
a. A veteran loan
b. A nonveteran loan
c. A veteran/veteran joint loan
d. A veteran/nonveteran joint loan
47) The Section 248 Indian Reservations and Other Restricted Lands Program provides opportunities for:
a. high-income Native Americans.
b. low-income Americans.
c. moderate-income Americans.
d. low- and moderate-income Native Americans.
48) A movable economic index will alter an interest rate upwards or downwards for what type of loan?
a. Adjustable-rate loan
b. Closed-end loan
c. Fixed-rate loan
d. Interest-only loan
49) What is the period called between rate changes in an adjustable-rate loan?
a. Adjustment period
b. Initial period
c. Floor and ceiling cap
d. Fixed-rate period
50) What is a loan involving two veterans who are NOT married to each other and both using their entitlement?
a. A two veteran joint loan
b. A partnership joint loan
c. A multi-veteran loan
d. A non-veteran joint loan
51) All of the following is true about FHA loans EXCEPT
a. FHA insures the loan
b. They are assumable
c. They have low down payments
d. They have prepayment penalties
52) For a limited period of time, every ARM has a(n):
a. prepayment penalty.
b. interest rate buydown.
c. initial interest rate and payment.
d. closing interest rate and payment.
53) Which of the following is NOT TRUE regarding the FHA Energy Efficient Mortgages Program (EEM)?
a. It enables homebuyers or homeowners to finance energy-efficiency costs.
b. It cannot be used as part of FHA Section 203(b) or 203(k) financing.
c. It helps homebuyers or homeowners save money on utility bills.
d. It can be used for new or existing housing.
54) Which of the following is NOT a requirement for a Section 247 loan?
a. A borrower must be a native Hawaiian
b. A borrower must use the purchased property as a secondary residence
c. A borrower must use the purchased property as a primary residence
d. The purchased property must be located on Hawaiian home lands
55) A manufactured home loan may be used for:
a. purchasing home business equipment.
b. financing medical expenses.
c. paying education costs.
d. purchasing a new or existing home.
56) A borrower who wishes to obtain financing for the exclusive right to occupy a property for a specified period of time is seeking to purchase a:
a. co-op.
b. mixed-use property.
c. timeshare.
d. commercial development.
57) A __________ payment is the final payment that is larger than the other installment payments provided under the terms of the note.
a. Take-out
b. Balloon
c. Breakdown
d. Consummate
58) In an equity participation mortgage, the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the:
a. straight interest rate.
b. variable interest rate.
c. teaser interest rate.
d. none of the choices apply.
59) Which of the following is true regarding a blanket loan?
a. Developers use blanket loans when they buy large tracts of land to be subdivided into parcels and sold separately.
b. Blanket loans allow the developer to sell the land a parcel at a time and receive cash from the sale.
c. Individuals can acquire a blanket loan when they have an existing home and are purchasing another one.
d. All of the choices apply.
60) If a manufactured home is not permanently attached to the land, financing is available through a:
a. grant deed.
b. personal property loan.
c. HELOC.
d. interim loan.
61) Rural property includes all of the following, except:
a. in a forest.
b. on farmland.
c. near a riverbank.
d. in a suburb.
62) Hard money loans are usually offered by __________ who want to earn a return on their investment.
a. city officials
b. credit unions
c. private lenders
d. savings and loan corporations
63) What network of lenders provides financing alternatives for a borrower who is seeking to purchase a rural property for agricultural production?
a. AITD
b. Farm Credit System
c. WRAP
d. Future Farmers of America
64) Which of the following is a type of alternative financing?
a. Seller financing
b. Secondary financing
c. Financing based on type of property and loan purpose
d. All of the choices apply
65) In a shared appreciation mortgage, in return for the shared equity, the __________ is offered beneficial loan terms.
a. borrower
b. lender
c. broker
d. seller
66) Since the cost of borrowing is tied directly to the index rate, it is important to find out which of the following?
a. The index and margin each lender uses
b. How often the index changes
c. How high it has risen in the past
d. All of the choices apply
67) Upon the advice of her attorney, Sherry takes a second note from the buyer for a portion of the purchase of her property. Sherry receives a substantial amount from the proceeds of the first loan, plus the buyer’s down payment. Her acceptance of installment payments on the second reduces her tax liability. What type of alternative financing is Sherry providing to the buyer?
a. Capital resource loan
b. Carrot and stick financing
c. Carryback financing
d. Carryover loan
68) A __________ is unusually low and often only lasts for an introductory period, such as 6 months.
a. variable interest rate
b. fixed interest rate
c. teaser interest rate
d. none of the choices apply
69) Allen specializes in creative financing for his niche market of first-time homebuyers. His buyer referrals continue to grow based upon his ability to find funds to complete a purchase. What is the method that Allen uses?
a. Advance funded plan
b. Alternative financing
c. Carryover funds
d. Credit enhancement
70) A __________ is a letter that promises to deliver a takeout loan in the future if the property is built according to plans and specifications and leased at the target rental rate.
a. proprietary-takeout commitment
b. forward-takeout commitment
c. blanket commitment
d. none of the choices apply
71) A contract for deed is also known as ______________________.
a. A contract of sale
b. An agreement of sale
c. A land sales contract
d. All of the above
72) Which of the following is not a type of alternative financing?
a. Seller financing
b. Secondary financing
c. Credit card financing
d. Financing based on type of property and purpose of loan
73) If included in a financial instrument, a __________ changes its priority.
a. forward-takeout commitment
b. release clause
c. cooperative
d. subordination clause
74) Who is the seller in a contract for deed?
a. Vendee
b. Vendor
c. Borrower
d. Grantee
75) An advantage of seller financing is that it helps a borrower:
a. increase the value in his or her home that is being purchased.
b. avoid private mortgage insurance (PMI).
c. improve his or her credit score.
d. sell the property faster later on.
76) When a seller carries the paper on the sale of his or her home, it is known as a:
a. purchase-money loan.
b. discount.
c. contract for deed.
d. wraparound mortgage.
77) What type of loan should a developer who wishes to temporarily finance construction costs obtain?
a. Interim loan
b. Share loan
c. Takeout loan
d. Takeover loan
78) A __________ is unusually low and often only lasts for an introductory period, such as 6 months.
a. variable interest rate
b. fixed interest rate
c. teaser interest rate
d. none of the choices apply
79) Which of the following is a disadvantage of a pledged-asset mortgage (PAM)?
a. The borrower or relative can keep the investment that is pledged.
b. The borrower is protected from having to purchase mortgage insurance on the loan.
c. The interest that is paid on the loan without the normal down payment is greater.
d. None of the choices apply.
80) Ownership of an apartment unit in which the owner has purchased shares in the corporation that holds title to the entire building is called ________________.
a. A condominium
b. A timeshare
c. A cooperative
d. A townhouse
81) When traditional bank financing and seller financing are not sufficient, other financing is available based on:
a. property type or familial status.
b. discriminatory practices or personality type.
c. the purpose of the loan or age of the borrower.
d. property type or the purpose of the loan.
82) Which of the following is not a type of secondary financing?
a. HELOC
b. Swing loan
c. Home equity loan
d. Contract for deed
83) Which of the following options includes seller financing?
a. Contract for deed
b. All-inclusive trust deed
c. Wraparound mortgage
d. All of the choices apply
84) Which of the following is NOT a feature of a VA adjustable loan?
a. The interest rate varies upward or downward.
b. The rate is dependent on money market conditions and the agreed-upon index.
c. The interest rate remains the same if the chosen index changes.
d. The payment stays the same only for a specified time.
85) __________ originates the widest range of loans.
a. Savings banks
b. Finance companies
c. Commercial banks
d. Credit unions
86) Of the following, which is a characteristic of a payment option ARM loan?
a. Fully amortizing payment schedule
b. Borrower chooses the monthly payment
c. Never creates negative amortization
d. Combines features of a fixed-rate loan with those of an adjustable-rate loan
87) Which of the following is NOT CORRECT regarding the index and margin on an ARM?
a. The initial interest rate is determined by the rate of the chosen index.
b. The margin is what the lender subtracts from the index.
c. The margin is what the lender adds to the index.
d. The index is a measure of interest rates.
88) Which of the following is NOT a disadvantage of a reverse mortgage?
a. High upfront costs
b. Equity in the home cannot be used by the homeowner
c. Equity in the home can be completely used up
d. Reverse mortgages are not tax deductible until the loan is paid off in part or whole
89) What is the fee charged for paying off a loan early in some adjustable-rate loans?
a. Negative amortization penalty
b. Prepayment penalty
c. Principal reduction penalty
d. Adjustable-rate mortgage penalty
90) Which statement is INCORRECT regarding nonconforming loan and nontraditional mortgages?
a. They are the same.
b. Nonconforming loans don’t meet Fannie Mae and Freddie Mac’s underwriting standards.
c. Nontraditional mortgages don’t meet Fannie Mae and Freddie Mac’s underwriting standards.
d. Nontraditional mortgages don’t have typical repayment schedules.
91) What program allows a borrower to finance the costs of energy efficient improvements?
a. The Green Energy Mortgage Program (GEM)
b. The Growing Equity Mortgage Program (GEM)
c. The Energy Efficient Mortgage Program (EEM)
d. The Graduated Payment Mortgage Program (GPM)
92) Lenders who are seeking to earn a higher return on their investment through the loan interest rate typically offer what type of loan?
a. Hard money loan
b. Interim loan
c. Retailer loan
d. WRAP loan
93) Flexible Funding is a mortgage lender that focuses on loans that do NOT meet Fannie Mae and Freddie Mac requirements. Flexible Funding can assist with all of the following situations where non-conforming loans would be necessary, EXCEPT if
a. the borrower’s income is difficult to verify.
b. a subprime loan is necessary for the transaction.
c. the loan meets Fannie Mae and Freddie Mac limits.
d. a jumbo loan is required.
94) What does the lender add to the index to determine the interest rate that a borrower will pay?
a. The adjustment number
b. The margin
c. The fixed rate
d. The buydown
95) A borrower of a HECM loan must be at least:
a. 60 years of age.
b. 62 years of age.
c. 65 years of age.
d. 70 years of age.
96) Which of the following represent the two grant programs that exist for veterans?
a. The Specially Adapted Housing grant and the Special Housing Adaptation grant
b. The Specially Adapted Housing grant and the Housing Authority grant
c. The Special Housing Adaptation grant and the Housing Authority grant
d. the Special Housing Adaptation grant and the Joint Veteran grant
97) All residential mortgage loan products that allow borrowers to defer repayment of principal or interest are:
a. conforming mortgage products.
b. nontraditional mortgage products.
c. subprime mortgage products.
d. traditional mortgage products.
98) Subprime loans can also be referred to as __________ paper loans.
a. “A” or “B”
b. “A” or “C”
c. “C” or “D”
d. “B” or “C”
99) Proceeds from a Section 203(k) rehabilitation loan must be partly used for:
a. small business expenses.
b. education expenses.
c. home improvements.
d. medical expenses.
100) All the following are requirements for prospective Title I borrowers EXCEPT:
a. the home must be used as the principal residence.
b. borrowers must meet specific credit requirements.
c. borrowers must pass an extensive background check.
d. borrowers must make a down payment.
101) A developer is building condominium units and receives an interim loan to finance the construction costs. After the construction is complete, the developer will need to obtain permanent financing to pay off the interim loan. What type of loan can the developer get?
a. Takeover loan
b. Takeout loan
c. Proprietary lease
d. Share loan
102) The Section 247 Hawaiian Home Lands Program insures loans for native Hawaiians purchasing:
a. commercial property on Hawaiian home lands.
b. one- to four-family dwellings on Hawaiian home lands.
c. residential property outside of Hawaiian home lands.
d. investment property outside of Hawaiian home lands.
103) Of the following, which is not a type of secondary financing?
a. HELOC
b. HEL
c. Swing loan
d. Contract for deed
104) When the security instrument is a mortgage, it is called a(n) __________, and when a deed of trust is used, it is a(n) __________.
a. wraparound mortgage; all-inclusive trust deed
b. all-inclusive trust deed; wraparound mortgage
c. all-inclusive trust deed; carryback mortgage
d. contract for deed; wraparound mortgage
105) A __________ is the final payment that is larger than the other installment payments provided under the terms of the note.
a. balloon payment
b. discounted note
c. contract for deed
d. none of the choices apply
106) What are the two parts of the interest rate in an adjustable-rate mortgage?
a. The index and the adjustment
b. The index and the margin
c. The margin and the adjustment
d. The margin and the alteration
107) Which of the following is NOT a feature of the Section 251 ARM mortgage program?
a. Low initial interest rate
b. Fixed interest rate during life of the loan
c. Adjustable interest rate during the life of the loan
d. Rate changes determined by a movable economic index
108) A way to finance several properties under one loan is to obtain a:
a. blanket loan.
b. takeout loan.
c. subordination loan.
d. timeshare.
109) A(n) __________ is a type of mortgage that allows the lender to share in part of the income or resale proceeds from a property owned by the borrower.
a. interim loan
b. equity participation mortgage
c. shared appreciation mortgage
d. pledged account mortgage
110) In a reverse mortgage, the __________ amount specifies the total amount of equity a homeowner can borrow from his or her home.
a. expected rate
b. principal limit
c. maximum claim amount
d. minimum claim amount
111) A __________ is a type of lender whose principal business is the origination, closing, selling, and servicing of residential loans secured by real property.
a. pension fund
b. mortgage company
c. life insurance company
d. savings and loan
112) Carryback financing, contract for deed, and a wraparound mortgage are examples of:
a. bank financing.
b. buyer financing.
c. seller financing.
d. government financing.
113) A-Plus Funding is a mortgage lender that specializes in loans that do NOT have government insurance or guarantees and do NOT follow Fannie Mae/Freddy Mac guidelines. What is this type of loan?
a. Conventional conforming loan
b. Conventional non-conforming loan
c. Unconventional loan
d. Conforming unconventional loan
114) A person who served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable is a:
a. serviceman.
b. non-commissioned corp.
c. commissioned corp.
d. veteran.
115) A mortgage lender offers loans containing terms that must follow the guidelines set forth by Fannie Mae and Freddie Mac. The lender offers all of the following loans, EXCEPT:
a. “A” paper loans.
b. conforming loans
c. loans with minimal documentation required.
d. loans that typically require high credit scores and clean credit histories.
116) What gives borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage?
a. An energy-efficient mortgage
b. A construction/permanent loan
c. A construction/alternative energy loan
d. An alternative energy mortgage
117) When evaluating a potential borrower for a reverse mortgage, a lender checks the borrower’s:
a. credit report.
b. current employment situation.
c. level of income.
d. employment history.
118) A __________ is a purchase-money loan that includes both the unpaid principal balance of the first loan and a new second loan against the property. This type of financing is commonly used when a seller acts as the lender in the sale of his or her own property.
a. contracted loan
b. discounted note
c. contract for deed
d. wraparound loan
119) What is a loan used to finance the construction/purchase of a residence?
a. Residential/permanent loan
b. Residential/temporary loan
c. Construction/permanent loan
d. Construction/temporary loan
120) A mortgage that has lower payments initially (with potential negative amortization) which increase each year until the loan is fully amortized is a(n):
a. graduated payment mortgage.
b. adjustable-rate mortgage.
c. fixed-rate mortgage.
d. accelerated-rate mortgage.
121) A(n) __________ is a type of loan in which cash is placed in an account and drawn upon during the beginning years of a loan.
a. Pledged account mortgage
b. Shares appreciation mortgage
c. Rollover mortgage
d. Interim loan
122) Which of the following statements is NOT TRUE of ARMs?
a. The interest rate on an ARM changes periodically.
b. Borrowers of ARM loans sometimes experience payment shock because ARM loans do not have caps.
c. The borrower can pay a discount point to lower the interest rate on the loan.
d. Some ARM loans include a prepayment penalty clause in the promissory note.
123) What program benefits homeownership for Native Americans with low to moderate income levels?
a. The Section 248 Indian Reservations and Other Restricted Lands Program
b. The Section 258 Restricted Native Lands Program
c. The Section 268 Indian Reservations Program
d. The Section 278 Indian Reservations and Native Lands Program
124) Stan and Harriet find a perfect high-end co-op apartment. They go to a commercial bank that offers financing for cooperatives. Based on their type of property purchase, what type of financing did Stan and Harriet secure?
a. Apartment loan
b. Deferred group loan
c. Mixed-use loan
d. Co-op share loan
125) A temporary grant may be available to SAH/SHA eligible Veterans and Service members who are or will be:
a. permanently residing in a home owned by a family member.
b. temporarily residing in a home owned by a family member.
c. purchasing the home of a family member.
d. modifying or repairing the home a family member.
126) Home equity plans typically have:
a. variable interest rates.
b. fixed interest rates.
c. teaser interest rates.
d. none of the choices apply.
127) A 30-year fully amortizing, fixed-rate loan is considered a(n):
a. balloon mortgage.
b. payment option mortgage.
c. nontraditional mortgage.
d. traditional mortgage.
128) Which of the following is seller financing?
a. Carryback financing
b. Bank financing
c. Contract financing
d. Carryout loans
129) The Smiths’ home was damaged by turbulent winds during a severe hurricane. Under the Section 203 (h) program, can the Smiths finance the purchase of a new home in an area other than where their damaged home is located?
a. No, the Smiths can only repair the damaged home
b. No, the Smiths must purchase a new home in the same area as the damaged home
c. Yes, the Smiths can purchase a new home in a different location
d. Yes, but the new home must be approved by the President’s review team
130) __________ is the extension of credit by a seller who takes back a note for a portion or the entire purchase price of a property.
a. Contracting a deed
b. Discounting a note
c. Carryback financing
d. Wraparound loan
131) A __________ is a loan for anything movable that is not real property.
a. personal property loan
b. share loan
c. proprietary loan
d. non-real property loan
132) The contract for deed is also known as a(n):
a. grant deed.
b. installment sales contract.
c. wraparound mortgage.
d. all-inclusive trust deed.
133) An ARM loan features:
a. interest rates that are NOT flexible.
b. more flexible interest rates.
c. fixed payments throughout the loan.
d. no periodic adjustments over time.
134) Special Housing Adaptation (SHA) grants are useful for veterans:
a. experiencing financial difficulties.
b. with certain service-connected disabilities.
c. looking for investment income.
d. who need money for education.
135) Which of the following is a method for financing manufactured homes?
a. Share loans
b. Retailer financing
c. Proprietary leasing
d. Takeout loans
136) What type of loan is subordinate to the first lien?
a. First mortgage
b. First deed of trust
c. Second lien loan
d. First lien loan
137) What program has provided eligible Native American Veterans and their spouses the opportunity to use their VA home loan guaranty benefit on Federal trust land?
a. The Native American Veteran Direct Loan program
b. The American Veteran Loan program
c. The Energy-efficient Direct Loan program
d. The Graduated Payment Loan program
138) Rebecca is looking for a repayment plan with an interest rate that is fixed with payments that are level for the life of the loan. The type of loan that Rebecca is looking for is:
a. a partially amortized loan.
b. a fully amortized fixed-rate note.
c. an interest-only loan.
d. a fully amortized adjustable-rate note.
139) What is a loan used for the alteration, improvement, or repair of a residential property?
a. A swing loan
b. A bridge loan
c. A supplemental loan
d. An attachment loan
140) Households that are in the early stages of home ownership and expect their incomes to rise in the future can benefit from a(n):
a. mortgage investment program.
b. graduated payment mortgage.
c. high income expectancy mortgage.
d. growing equity mortgage program.
141) Amortization is the:
a. date on which a debt becomes due for payment.
b. liquidation of a financial obligation on an installment basis.
c. period between rate changes.
d. interest rate lenders charge their most creditworthy customers.
142) Harry and Sally purchased their home 18 years ago when their quintuplets were born. The children are now all beginning college. Harry thought he had carefully saved for the children’s college expenses, but, based on the current economy, the expense of sending the children to college has doubled. If Harry seeks to obtain secondary financing on his home to provide additional funds, which loan will he most likely pick?
a. Hard money loan
b. Home equity line-of-credit loan
c. Share loan
d. Swing loan
143) In order for a veteran to obtain a VA loan to purchase a farm, the property must:
a. have a residence where the veteran intends to live.
b. not have a residence where the veteran intends to live.
c. not contain any farm animals.
d. not contain any farm equipment.
144) A(n) __________ is a type of loan in which the borrower and lender agree to share the appreciation in a property’s market value.
a. pledged account mortgage
b. shared appreciation mortgage
c. rollover mortgage
d. interim loan
145) An adjustable-rate mortgage has an interest rate that adjusts according to a:
a. borrower’s credit rating.
b. moving economic index.
c. monthly appraisal value.
d. housing report issued by the government.
146) Which of the following statements can be associated with jumbo loans? Jumbo loans:
a. meet Fannie Mae guidelines.
b. meet Freddie Mac guidelines.
c. require additional underwriting conditions.
d. have lower interest rates.
147) A loan for which a veteran and another person(s) are liable, and the veteran and the other obligor(s) own the security is a(n):
a. joint loan.
b. separate loan.
c. individual loan.
d. partnership.
148) A(n) __________ loan is a temporary, hard money loan that is secured against the borrower’s home equity.
a. interim or short-term
b. bridge or equity
c. swing or take-out
d. bridge or swing
149) An advantage of seller financing is that it helps a property:
a. appear more attractive to buyers.
b. increase its market value.
c. improve the neighborhood.
d. extend its lot size.
150) The __________ is a federal agency that helps make loans for low-income borrowers who wish to purchase a farm.
a. Farm Service Agency
b. Farm Credit System
c. WRAP
d. Future Farmers of America
151) ARM loans help avoid payment shock with built-in protections called:
a. caps.
b. teaser rates.
c. indexes.
d. margins.
152) Life insurance companies are a major supplier of money for:
a. initial public offerings.
b. retail customers who invest in the stock market.
c. large commercial loans to developers and builders.
d. borrowers purchasing personal residences.
153) Nontraditional mortgage loans are usually characterized by all the following traits, EXCEPT:
a. harder to qualify for than conventional loans.
b. flexible repayment terms.
c. higher risk due to abnormal payment terms.
d. nonstandard amortization schedule.
154) Which is NOT a risk of nontraditional mortgage products?
a. Interest rate risk
b. Market risk
c. Principal loan amount risk
d. Refinance risk
155) How does the S.A.F.E. Act define a nontraditional mortgage product?
a. All 30-year fixed-rate, fully-amortizing mortgages
b. Any mortgage product other than a 30-year fixed-rate, fully-amortizing mortgage
c. Some adjustable-rate-mortgage products
d. Subprime mortgages
156) An adjustable-rate mortgage has an interest rate that adjusts according to a:
a. borrower’s credit rating.
b. moving economic index.
c. monthly appraisal value.
d. housing report issued by the government.

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