Florida Real Estate Sales Associate — All Questions

The primary mortgage market is where:

• a.The government sets national interest rates
• b.Appraisers are licensed and regulated
• c.Existing loans are pooled and sold to investors
• d.Lenders originate loans directly to borrowers✓

The primary market is where borrowers obtain loans directly from originating lenders. The secondary market is where those existing loans are bought and sold to provide lenders more capital.

A charge a lender collects for processing and originating a loan, typically about one percent of the loan and not used to lower the rate, is a(n):

• a.Prepayment penalty
• b.Loan origination fee✓
• c.Discount point
• d.Intangible tax

An origination fee compensates the lender for making the loan and is usually about one percent of the amount. Unlike discount points, it does not buy down the interest rate.

In a temporary '2-1 buydown,' the borrower or seller pays upfront so that the interest rate is:

• a.Eliminated entirely for the life of the loan
• b.Reduced in the first two years, then rises to the note rate✓
• c.Fixed below market for the entire 30-year term in all cases under Florida law
• d.Increased for the first two years only

A 2-1 buydown lowers the effective rate by two points the first year and one point the second, then it reaches the full note rate. The upfront cost funds the early payment reduction.

Charging interest at a rate higher than the maximum allowed by law is known as:

• a.Amortization
• b.Hypothecation
• c.Subordination
• d.Usury✓

Usury is charging an unlawfully high rate of interest. States, including Florida, set maximum permissible rates, and violations can carry penalties.

An adjustable-rate mortgage typically limits how much the rate can change with:

• a.A balloon payment in month one
• b.Periodic and lifetime interest rate caps✓
• c.A prohibition on any index
• d.A fixed rate that never changes in all cases

ARMs use periodic caps to limit each adjustment and a lifetime cap to limit the total increase over the loan's life. Caps protect borrowers from sudden large payment jumps.

The low starting rate on some adjustable-rate mortgages, set below the fully indexed rate, is commonly called the:

• a.Index
• b.Cap
• c.Margin
• d.Teaser (initial) rate✓

A teaser or introductory rate is a temporarily discounted initial rate on an ARM. When it expires, the rate resets to the index plus the margin, often increasing the payment.

A lender that collects money each month toward the borrower's property taxes and hazard insurance is maintaining a(n):

• a.Trust account for commissions
• b.Intangible tax fund
• c.Discount point reserve
• d.Escrow (impound) account✓

An escrow or impound account holds monthly amounts the lender uses to pay taxes and insurance when they come due. It ensures these obligations are paid and protects the lender's collateral.

At closing, a lender commonly collects prepaid 'per diem' interest to cover:

• a.The buyer's homeowner association dues in all cases under Florida law
• b.The interest from the closing date to the end of that month✓
• c.The seller's capital gains tax
• d.A full year of interest in advance

Because the first regular payment covers the prior month, lenders collect daily interest from closing through the end of the closing month. This aligns the loan's interest accrual with the payment cycle.

A higher loan-to-value ratio generally means:

• a.A smaller loan relative to value
• b.Lower risk and no need for insurance
• c.A larger down payment by the borrower in all cases under Florida law in every transaction
• d.Greater lender risk and a higher likelihood of required mortgage insurance✓

A high LTV means the borrower has less equity, which increases the lender's risk of loss on default. Lenders typically require private mortgage insurance when the LTV exceeds 80 percent.

Florida's documentary stamp tax on a promissory note secured by a mortgage is charged at:

• a.$1.00 per $100 of the note amount
• b.$0.35 per $100 of the note amount✓
• c.2 mills per $100 of the note amount
• d.$0.70 per $100 of the note amount

Florida imposes documentary stamp tax on notes at $0.35 per $100. This is separate from the $0.70 per $100 deed stamps and the intangible tax on the mortgage.

Florida's intangible tax on a new mortgage is imposed at:

• a.2 mills ($0.002 per $1) of the mortgage amount✓
• b.$0.70 per $100 of the mortgage amount in all cases
• c.6 percent of the mortgage amount
• d.$0.35 per $1 of the mortgage amount

Florida charges a nonrecurring intangible tax of 2 mills, or $0.002 per dollar, on new mortgages. It is paid once when the mortgage is recorded.

The Dodd-Frank Ability-to-Repay rule requires that a lender making a residential mortgage:

• a.Approve any applicant who requests a loan in all cases under Florida law in every transaction
• b.Guarantee the loan will never default
• c.Make a reasonable, good-faith determination that the borrower can repay the loan✓
• d.Ignore the borrower's income and debts

The Ability-to-Repay rule obligates lenders to verify income, assets, and obligations before making most home loans. A 'qualified mortgage' provides a safe harbor for compliance.

Steering borrowers into needlessly costly loans, inflating fees, or using deceptive terms is generally described as:

• a.Conforming lending
• b.Secondary marketing
• c.Subordination
• d.Predatory lending✓

Predatory lending involves abusive or deceptive loan practices that harm borrowers, such as hidden fees or unsuitable terms. Federal and state laws prohibit many of these practices.

A loan assumption in which the lender releases the original borrower from liability and substitutes the new buyer is accomplished through:

• a.Hypothecation
• b.Novation✓
• c.Reconveyance
• d.Subrogation

Novation substitutes a new borrower for the original and releases the original from liability, with the lender's consent. Without novation, the seller may remain secondarily liable after an assumption.

Compared with a fully amortized loan, an interest-only loan during its interest-only period:

• a.Does not reduce the principal balance✓
• b.Pays the loan off faster
• c.Increases the principal each month in all cases
• d.Charges no interest at all

During the interest-only period, payments cover only interest, so the principal balance stays the same. Once that period ends, payments rise to begin amortizing the balance.

Fannie Mae and Freddie Mac are best described as:

• a.Federal agencies that originate loans directly to buyers in all cases under Florida law
• b.Private title insurance companies
• c.State agencies that license appraisers
• d.Government-sponsored enterprises that buy loans on the secondary market✓

Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase and securitize conforming loans. By buying loans, they give primary lenders fresh capital to keep lending.