(D)The NOI is used to find the capitalization rate as in choice (D); the capitalization rate is not used to find the NOI as in choices (A), (B), and (C) are used to find the NOI.
(C) Choice (C) is typically found in a mortgage document (or in a lease), but not in the promissory note that accompanies the mortgage. Choices (A), (B), and (D) are typically found in a promissory note, so they are incorrect answers to the question.
(A)Choice (B) is not true; it can be a clause in both a lease and a mortgage. Choice (C) is incorrect because the assumption of a mortgage is different from the assignment of a mortgage. Choice (D) is incorrect. It uses the explanation of the “subject to the mortgage†clause used in some rights of assumption, but choice (D) misstates the clause.
(D) Choices (A), (B), and (C) do business in the primary mortgage market.
(B) Choice (A) insures mortgages that have low down payments. Choices (C) and (D) do not deal directly with homebuyers.
(C) Choice (A) would get a conventional mortgage. Choices (B) and (D) would need nonconforming mortgages.
(D) All four choices are elements of an ARM that a person shopping for an ARM should check, but only choice (D) can result in a mortgagor not having paid the entire principal off by the end of the term of the mortgage.
(A) Choice (B) has increasing payments over the time of the mortgage according to a set schedule. Choice (C) is also called a bridge loan and is used to enable the buyer to purchase the new home while waiting for his/her own home to sell. Choice (D) is used when the buyer is purchasing both real and personal property from the seller.
(C) Choice (A) is incorrect because Ginnie Mae does not insure, buy, or securitize mortgages. Choice (B) is incorrect because Ginnie Mae operates in the secondary mortgage market. Choice (D) is incorrect because the GSEs do not issue mortgages; they insure them.
(D) Choices (A), (B), and (C) would be funded by some other method such as bond issues rather than by a special assessment, which has a more narrow focus.
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