Arkansas Real Estate Broker Exam — All Questions

In a mortgage insured by the Federal Housing Administration, the FHA:

• a.guarantees the borrower an interest rate that Congress sets
• b.lends the money to the borrower at a subsidized fixed rate
• c.buys the loan and holds it in a federal mortgage portfolio
• d.insures the lender against loss; it does not lend the money✓

FHA operates a mortgage insurance program: an approved private lender makes the loan, and FHA insures that lender against loss if the borrower defaults, in exchange for an up-front and an annual mortgage insurance premium paid by the borrower. FHA does not originate loans, does not set the note rate, and does not buy loans for a portfolio. The VA program is a guaranty rather than insurance, and buying closed loans on the secondary market is the role of Fannie Mae and Freddie Mac.

A person who violates RESPA's prohibition on kickbacks and unearned fees, 12 U.S.C. § 2607, may be:

• a.fined not more than $10,000, imprisoned not more than one year, or both✓
• b.fined not more than $10,000, imprisoned not more than ten years, or both
• c.fined not more than $100,000, imprisoned not more than one year, or both
• d.fined not more than $1,000, imprisoned not more than one year, or both

Section 2607(d)(1) provides that "any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both." Section 2607(d)(2) adds private liability to the person charged, jointly and severally, for three times the amount of the charge paid for the settlement service. The underlying prohibition in Regulation X, 12 C.F.R. § 1024.14(b), is broad: "A company may not pay any other company or the employees of any other company for the referral of settlement service business."

Under Regulation Z, the three-business-day right of rescission applies to a:

• a.commercial mortgage on a small apartment building the borrower owns
• b.purchase-money mortgage on the borrower's new principal dwelling
• c.mortgage on a vacation home the borrower will occupy part-time
• d.home equity loan on the borrower's existing principal dwelling✓

12 C.F.R. § 1026.23(a)(1) gives a consumer the right to rescind a credit transaction in which a security interest is taken in the consumer's principal dwelling, and § 1026.23(f)(1) exempts "a residential mortgage transaction" — the purchase-money loan — from that right. So refinances with a new creditor, home equity loans and home equity lines on the borrower's existing principal dwelling are rescindable, while the loan used to buy the home is not. A dwelling that is not the borrower's principal dwelling, and credit extended primarily for a business purpose under § 1026.3(a), are outside the rule.

Under 12 C.F.R. § 1026.19(e), the creditor must deliver or mail the Loan Estimate no later than:

• a.the third business day after the creditor receives the application✓
• b.the third business day before consummation of the transaction
• c.the seventh business day after the creditor receives the application
• d.the tenth business day after the creditor receives the application

Section 1026.19(e)(1)(iii)(A) requires the creditor to deliver or place in the mail the Loan Estimate "not later than the third business day after the creditor receives the consumer's application." A second, separate clock in § 1026.19(e)(1)(iii)(B) requires delivery or mailing not later than the seventh business day before consummation, and § 1026.19(e)(1)(iv) deems a consumer to have received a mailed disclosure three business days after it is sent. The three-business-day-before-consummation figure belongs to the Closing Disclosure under § 1026.19(f)(1)(ii)(A), not to the Loan Estimate.

After the consumer has received the Closing Disclosure, which change requires a new three-business-day waiting period under 12 C.F.R. § 1026.19(f)(2)(ii)?

• a.The property's appraised value comes in below the contract price
• b.The seller agrees to pay a larger share of the buyer's closing costs
• c.The loan product changes, for example from a fixed rate to adjustable✓
• d.The borrower's homeowners insurance premium rises by two hundred dollars

Section 1026.19(f)(2)(ii) lists exactly three changes that restart the three-business-day clock: the disclosed annual percentage rate becomes inaccurate as defined in § 1026.22; the loan product is changed; or a prepayment penalty is added. Everything else that becomes inaccurate before consummation is handled under § 1026.19(f)(2)(i), which requires corrected disclosures at or before consummation with no new waiting period. That is why a last-minute seller credit, an appraisal result, or an insurance premium change does not delay the closing under this rule.

Section 1 of the Sherman Act declares illegal every contract, combination, or conspiracy in restraint of trade. For a broker, that most directly prohibits:

• a.setting the firm's own commission rate without consulting other firms
• b.declining to cooperate with a firm whose practices the broker distrusts
• c.charging one seller a different commission rate than another seller
• d.agreeing with a competing firm on the commission rate both will charge✓

15 U.S.C. § 1 reaches concerted action, not unilateral conduct: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Horizontal price fixing between competing firms is the classic violation, and the statute makes it a felony punishable by a fine up to $100,000,000 for a corporation or $1,000,000 for an individual, or up to ten years' imprisonment. A single firm setting its own rate, deciding on its own not to work with another firm, or negotiating different rates with different clients is not an agreement among competitors.

The federal Fair Housing Act, 42 U.S.C. § 3604, lists which of these as a protected class?

• a.Military service
• b.Marital status
• c.Source of income
• d.Familial status✓

The classes protected by 42 U.S.C. §§ 3604 and 3605 are race, color, religion, sex, familial status, national origin and handicap. Familial status, added by the Fair Housing Amendments Act of 1988, protects households with a child under eighteen and people who are pregnant or securing custody. Marital status, source of income and military or veteran status are not federal fair housing classes, though state and local ordinances add some of them. Section 3607(b) exempts qualifying housing for older persons from the familial status provisions only.

The Fair Housing Act exemption in 42 U.S.C. § 3603(b)(2) covers rooms or units in a dwelling occupied by no more than four families living independently, provided that:

• a.the owner has not used a real estate broker or agent within twelve months
• b.the owner owns no more than three such dwellings anywhere in the country
• c.the owner has published no advertisement for the vacancy in thirty days
• d.the owner actually maintains and occupies one of the units as a residence✓

Section 3603(b)(2) exempts "rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence." Owner occupancy is the whole condition. Two limits survive the exemption in any event: § 3603(b) does not reach § 3604(c), so discriminatory advertising stays unlawful, and § 3606 on brokerage services and § 3617 on coercion still apply. The three-house and no-broker conditions belong to the separate single-family exemption in § 3603(b)(1).

Title III of the Americans with Disabilities Act reaches a real estate brokerage's office because the office is:

• a.a federally assisted facility subject to Section 504 of the Rehabilitation Act
• b.a commercial facility exempt unless it employs fifteen or more people
• c.a place of public accommodation, where readily achievable barriers must go✓
• d.a dwelling covered by the Fair Housing Act's design and construction rules

42 U.S.C. § 12181(7)(E) lists "a bakery, grocery store, clothing store, hardware store, shopping center, or other sales or rental establishment" among the twelve categories of public accommodation, and § 12181(7)(F) covers a service establishment. Section 12182(a) then bars discrimination on the basis of disability in the full and equal enjoyment of such a place, and § 12182(b)(2)(A)(iv) requires removal of architectural barriers in existing facilities "where such removal is readily achievable." Title III has no employee-count threshold; the fifteen-employee floor belongs to Title I, which governs employment.

Federal lead-based paint disclosure rules apply to "target housing," which 40 C.F.R. § 745.103 defines as housing:

• a.built before 1978, except elderly or disabled housing and 0-bedroom units✓
• b.built before 1978, including every rental unit whatever its bedroom count
• c.built before 1950, except elderly or disabled housing and 0-bedroom units
• d.built before 1992, except elderly or disabled housing and 0-bedroom units

Section 745.103 defines target housing as "any housing constructed prior to 1978, except housing for the elderly or persons with disabilities or any 0-bedroom dwelling (unless any child who is less than 6 years of age resides or is expected to reside in such housing)." Section 745.101 further excludes foreclosure sales, leases of housing certified lead-based paint free, short-term leases of 100 days or less with no renewal, and renewals where the lessor has already disclosed and has no new information. 1978 is the year residential lead paint was banned; 1992 is the year the disclosure statute was enacted.

EPA recommends that a home be fixed when the measured indoor radon level reaches or exceeds:

• a.0.4 picocuries per liter of air
• b.40 picocuries per liter of air
• c.4 picocuries per liter of air✓
• d.4 parts per million of air

EPA's guidance is that homes be fixed if the radon level is 4 pCi/L, equivalent to 150 becquerels per cubic meter, or more. Radon is a colorless, odorless radioactive gas from the natural decay of uranium in soil and rock; it enters through foundation cracks, sump openings, and other gaps, and EPA identifies it as a leading cause of lung cancer. Mitigation is typically a sub-slab depressurization system. There is no federal statute requiring a radon test or a radon disclosure in a resale, so the licensee's exposure runs through the general duty not to misrepresent a known material condition.

A developer wants to place fill material in a wetland on a tract being sold. Under Section 404 of the Clean Water Act, 33 U.S.C. § 1344, a permit must be obtained from:

• a.the U.S. Fish and Wildlife Service
• b.the Bureau of Land Management
• c.the Federal Emergency Management Agency
• d.the U.S. Army Corps of Engineers✓

33 U.S.C. § 1344(a) provides that "the Secretary may issue permits, after notice and opportunity for public hearings for the discharge of dredged or fill material into the navigable waters at specified disposal sites," and § 1344(d) identifies the Secretary as the Secretary of the Army, acting through the Chief of Engineers. EPA writes the § 404(b)(1) guidelines and may veto a disposal site under § 1344(c), but the permit itself comes from the Corps. The Fish and Wildlife Service administers the Endangered Species Act, FEMA administers flood insurance and flood maps, and the Bureau of Land Management has no role here.