Paulo Jeff T.

Cantones
BSREM – 3rd Year

Part 1: 2 Points Each

1. A security interest is a lender’s legal claim on a property to make sure

they get paid back. Since the Industrial Revolution, this has helped people
buy homes by using the property as a guarantee for the loan.

2. Collateral is something you own (like a house) that you promise to give
the lender if you can’t pay back the loan Hypothecation means you can keep
using your property while it’s being used as collateral for the loan.

3. A promissory note is a written promise that you’ll pay back the money you
borrowed and mortgage is a contract that gives the lender the right to take
your property if you don’t pay back the loan.

4. A loan discount happens when you get a loan for less than what it will
eventually cost you. If the interest rate is lower than what’s normal, making
the loan more appealing to you as the borrower.

5. The primary mortgage market is where banks give loans directly to

homebuyers and secondary mortgage market is where banks sell those loans
to other investors. This helps them have more money to lend to new buyers.

6. The Treasury raises money by selling things like Treasury bills and bonds.
Investors buy these, effectively lending money to the government, which
pays them back later with interest.

7. Factors Influencing Interest Rates

Inflation

Economic growth

Federal Reserve policies

Market Demand for Credit

8. Fiscal policies are about how the government spends and collects money
(like taxes) and Monetary policies are about how the central bank controls
money supply and interest rates.
9. The discount rate is the interest the central bank charges banks when
they borrow money and prime rate is the best interest rate that banks give
to their best customers.

10. Four Major Areas of Demand for Money

Transaction Demand

Precautionary Demand

Speculative Demand

Investment Demand

PART 2: Underline the best answer. (2 Points Each)

Security interest gives the right ___________________ the to bring about

sale of a loan if there is default.

a. mortgagor

b. borrower

c. mortgagee

d. grantee

2. Compensation for borrowed money is called

a. hypothecation

b. interest

c. collateral

d. none of the above

3. This is normally executed contemporaneously with a mortgage

and creates the obligation of repayment.

a. Promissory note

b. Payment insurance

c. Charges and liens

 d. Deed covenants

4. The allodial system of land ownership that forms the basis of

ownership in the United States is best described as the

a. right to occupy and use land owned by a superior

b. right of a democratic government to control how land is used

c. ownership of land is free and absolute subject only to

governmental and voluntary restrictions

d. origin and development of community property laws.

5. Which of the following is a charge that is itemized separately

loan fees as a primary purpose to raise the yield?

a. Statutory costs

b. Loan closing costs

c. Effective interest

d. Discount points

6. Of the following, the more precise description of a share of

stock is

a. an indication of an obligation

b. a form of unsecured debt

c. an evidence of ownership

d. a kind of security

7. Bond are sold in the financial market by corporations for the

purpose of

a. raising equity cash

b. borrowing money

c. providing additional brokerage fees

d. generating greater income

 8. The process of creating mortgage-backed securities is called

a. mortgage pooling

b. Ginnie Mae Pass-Through Certificates

c. mortgage securitization

d. Federal Home Loan Bonds

9. The FHA is regulated by which of the following?

a. Federal Housing Finance Agency

b. First Housing Administration

c. Farmers Home Administration

d. Department of Housing and Urban Development

10. The mortgage crisis that started in late 2007 has caused
a shift in the emphasis in the primary loan origination from
subprime to which of the following loan types?

a. Veterans Administration Mortgage Loans

b. Conventional Conforming Mortgage Loans

c. Alternate – A Mortgage Loans

d. Federal Housing Administration Mortgage Loans

11. What is Real Estate Finance primarily concerned with?

a) Investing in stocks and bonds.

b) Investing money or wealth in real estate.
c) Investing in precious metals.
d) Investing in crypto currencies.

12. Which of the following is NOT a key aspect of Real Estate

Finance?

a) Allocation of monetary resources.

b) Generation of monetary resources.
c) Use of monetary resources over time.
d) Investing in the stock market.

13. What is the main purpose of Monetary Policy?

a) To control the price of goods and services.

b) To control the amount of taxes collected.
c) To control the supply of money in the economy.
d) To control the amount of government spending.

14. Which of the following is NOT a goal of Monetary Policy?

a) Controlling inflation.
b) Stabilizing currency.
c) Increasing government spending.
d) Influencing economic growth.

15. What is the other major economic policy tool besides

Monetary Policy?

a) Fiscal Policy.
b) Trade Policy.
c) Environmental Policy.
d) Social Policy.

16. How does Monetary Policy impact the cost of borrowing?

a) Lower interest rates increase the cost of borrowing.

b) Higher interest rates decrease the cost of borrowing.
c) Lower interest rates decrease the cost of borrowing.
d) Higher interest rates increase the cost of borrowing.

17. What is the primary effect of lower interest rates on

investment activity?

a) It decreases investment activity.

b) It has no impact on investment activity.
c) It increases investment activity.
d) It makes investment activity more risky.
 18. Which of the following is NOT a channel through which
Monetary Policy impacts the economy?

a) Interest Rate Channel.

b) Exchange Rate Channel.
c) Wealth Channel.
d) Social Media Channel.

19. What is the main purpose of the "Credit Channel" in

Monetary Policy transmission?

a) To influence the exchange rate.

b) To influence the price of assets.
c) To influence the amount of credit available.
d) To influence the cost of borrowing.

20. What is Leverage in Real Estate Finance?

a) The use of borrowed money to increase the potential return on an

investment.
b) The use of borrowed money to decrease the potential return on an
investment.
c) The use of borrowed money to reduce the risk of an investment.
d) The use of borrowed money to increase the risk of an investment.

21. What is the difference between Positive Leverage and

Negative Leverage?

a) Positive leverage occurs when the return on an investment is greater than

the cost of borrowing, while negative leverage occurs when the return on an
investment is less than the cost of borrowing.
b) Positive leverage occurs when the return on an investment is less than
the cost of borrowing, while negative leverage occurs when the return on an
investment is greater than the cost of borrowing.
c) Positive leverage occurs when the return on an investment is equal to the
cost of borrowing, while negative leverage occurs when the return on an
investment is less than the cost of borrowing.
d) Positive leverage occurs when the return on an investment is equal to the
cost of borrowing, while negative leverage occurs when the return on an
investment is greater than the cost of borrowing.

22. What is a Mortgage?

a) A loan that is secured against a property.

b) A loan that is not secured against a property.
c) A loan that is used to purchase a property.
d) A loan that is used to refinance a property.

23. Which of the following is NOT a basic concept of

Mortgages?

a) Property.
b) Mortgage.
c) Borrower.
d) Stock Market.

24. What is the difference between a Fixed Rate Mortgage

and an Adjustable Rate Mortgage?

a) A fixed rate mortgage has a fixed interest rate for the life of the loan,
while an adjustable rate mortgage has an interest rate that can change over
time.
b) A fixed rate mortgage has an interest rate that can change over time,
while an adjustable rate mortgage has a fixed interest rate for the life of the
loan.
c) A fixed rate mortgage has a lower interest rate than an adjustable rate
mortgage.
d) A fixed rate mortgage has a higher interest rate than an adjustable rate
mortgage.

25. What is the Loan to Value Ratio (LTV)?

a) The amount of the loan divided by the value of the property.

b) The amount of the down payment divided by the value of the property.
c) The amount of the interest rate divided by the value of the property.
d) The amount of the principal divided by the value of the property.

26. What is a Wraparound Mortgage?

a) A mortgage that includes the existing mortgage on a property.
b) A mortgage that is used to purchase a property that is already
mortgaged.
c) A mortgage that is used to refinance a property that is already
mortgaged.
d) A mortgage that is used to purchase a property that is not already
mortgaged.

27. What is the main purpose of a Blanket Mortgage?

a) To finance the purchase of a single property.

b) To finance the purchase of multiple properties.
c) To refinance a single property.
d) To refinance multiple properties.

28. What is a Leasehold Financing?

a) A financing arrangement where the borrower owns the property and

leases it to a tenant.
b) A financing arrangement where the borrower leases the property and
uses the leasehold interest as collateral.
c) A financing arrangement where the borrower purchases the property and
leases it to a tenant.
d) A financing arrangement where the borrower leases the property and
uses the property as collateral.

29. What is a Joint Venture in Real Estate Finance?

a) A partnership between two or more individuals to purchase and develop a

property.
b) A loan that is secured against a property owned by multiple individuals.
c) A financing arrangement where the borrower leases the property and
uses the leasehold interest as collateral.
d) A financing arrangement where the borrower purchases the property and
leases it to a tenant.

30. What is a "Sliding Mortgage"?

a) A mortgage with an interest rate that changes over time.
b) A mortgage where the borrower can make payments on a sliding scale.
c) A mortgage where the borrower can transfer the mortgage from one
property to another.
d) A mortgage where the borrower can prepay the mortgage without
penalty.

31. What is "Double Finance"?

a) A financing arrangement where the borrower uses two or more different

financing methods.
b) A financing arrangement where the borrower uses two or more different
lenders.
c) A financing arrangement where the borrower uses two or more different
properties as collateral.
d) A financing arrangement where the borrower uses two or more different
types of mortgages.

32. What is a "Glue Transaction"?

a) A financing arrangement where the borrower uses a third party to help

secure financing.
b) A financing arrangement where the borrower uses a third party to help
manage the property.
c) A financing arrangement where the borrower uses a third party to help
sell the property.
d) A financing arrangement where the borrower uses a third party to help
purchase the property.

33. What is "Discounted Paper"?

a) A financing arrangement where the borrower receives a discount on the

purchase price of the property.
b) A financing arrangement where the borrower receives a discount on the
interest rate of the mortgage.
c) A financing arrangement where the borrower purchases a note or
mortgage at a discount.
d) A financing arrangement where the borrower receives a discount on the
property taxes.
 34. What is "Zero-coupon Financing"?

a) A financing arrangement where the borrower makes no payments on the

mortgage for a period of time.
b) A financing arrangement where the borrower makes a single lump sum
payment at the end of the mortgage term.
c) A financing arrangement where the borrower makes payments on a
sliding scale.
d) A financing arrangement where the borrower makes payments that are
less than the interest accrued on the mortgage.

35. What is "Split Funding"?

a) A financing arrangement where the borrower uses two or more different

lenders.
b) A financing arrangement where the borrower makes payments on a
sliding scale.
c) A financing arrangement where the borrower makes a single lump sum
payment at the end of the mortgage term.
d) A financing arrangement where the borrower splits the down payment or
purchase price into multiple payments without interest.

36. What is "Future Rent"?

a) A financing arrangement where the borrower receives rent payments

from a tenant.
b) A financing arrangement where the borrower makes rent payments to a
landlord.
c) A financing arrangement where the borrower agrees to pay rent in the
future.
d) A financing arrangement where the borrower receives rent payments in
the future.

37. What is a "Management Interest"?

a) A financing arrangement where the borrower receives a share of the

profits from the property.
b) A financing arrangement where the borrower receives a share of the
equity in the property.
c) A financing arrangement where the borrower receives a share of the rent
payments from the property.
d) A financing arrangement where the borrower receives a share of the
management fees from the property.

38. What is a "Three Party Blanket"?

a) A financing arrangement where three parties are involved in the

mortgage.
b) A financing arrangement where three properties are used as collateral for
the mortgage.
c) A financing arrangement where three different types of mortgages are
used.
d) A financing arrangement where three different financing methods are
used.

39. What is the primary risk associated with a "Three Party

Blanket"?

a) The borrower may default on the mortgage.

b) The lender may default on the mortgage.
c) The third party may default on the mortgage.
d) The property may decrease in value.

40. Which of the following is NOT a common use of a

Wraparound Mortgage?

a) To increase the effective yield earned on the mortgage.

b) To introduce the seller to hold secondary paper.
c) To refinance a property that is already mortgaged.
d) To provide a solution when prepayment of the existing financing is
difficult or costly.