Q&A Hero

Q: The refinancing decision is sometimes oversimplified into a few "rules of thumb" that a borrower uses in order to gauge its potential benefits. Which of the following methodologies is criticized for its inability to account for a variation in refinancing benefits due to cost or holding period differences? A. Payback period approach B. Net benefit approach C. Interest rate spread D. Net present value approach

Q: Contractual arbitration is considered: A.Voluntary because both parties have willingly agreed to participate. B.Unconstitutional in most states because it limits redress of grievances. C.Coercive because it provides an unfair advantage to the party originating the contract. D.Restrictive and undesirable because of expense and time considerations.

Q: A common criticism of the annual percentage rate (APR) is that it usually understates the true cost of borrowing. The APR may understate the cost of borrowing because it assumes: A. interest rates will always rise B. the loan always goes to maturity C. the actual life of the loan is shorter than maturity D. upfront fees should be ignored

Q: Which of the following is not an action that would constitute misconduct by an arbitrator and would therefore not warrant vacating an award: A.Accepting gifts from a party to the proceedings. B.Holding hearings without a member of the arbitration panel present. C.Communication with a party to the proceedings with consent of the other party. D.Receipt of evidence as to a material fact without notice to a party.

Q: Since mortgages typically have multiple costs associated with them, a borrower may attempt to reduce these costs into a single measure in order to compare two or more mortgages. Which of the following measures is a popular tool for comparing the cost of several mortgages? A. Upfront fees B. Contracted interest rate C. Annual percentage rate D. Teaser rate

Q: Section 10 of the Federal Arbitration Act provides that an arbitration award can be vacated or set aside for all of the following reasons except: A.The award was procured by fraud. B.The arbitrator was impartial. C.The arbitrator was guilty of prejudicial misconduct. D.The arbitrator exceeded her or his power and no definite award was made.

Q: Mortgage loans made to borrowers with normal credit quality, but who lack the necessary documentation of their financial circumstances typically needed to meet conforming mortgage standards would most likely be considered: A. subprime loans B. option ARM loans C. hybrid ARM loans D. alt-A loans

Q: If arbitration is conducted pursuant to state statute: A.The statute determines what grounds may be used to challenge an award in court. B.If a dispute arises involving interstate commerce, the statute of the state where the dispute is first submitted prevails. C.A disputing party may chose to have Federal Arbitration Act provisions govern any resolution of the dispute if the state statute appears unfavorable to his or her position. D.Only Congress can overturn it.

Q: The hybrid ARM attempts to balance the fixed payment desire of a borrower with the lender's desire to increase interest rates if market rates rise in the future. In its most common form, known as a 2-28, the hybrid ARM will have a fixed-interest rate for: A. 1 year B. 2 years C. 26 years D. 28 years

Q: A party dissatisfied with the mandatory arbitration award has the right to: A.Appeal the award directly to the state supreme court. B.Appeal the award directly to the Supreme Court. C.Reject the award and seek a review in the appropriate trial court. D.Sue the arbitrator.

Q: In contrast to conventional home loans, the interest-only balloon loan requires the borrower to pay off the loan with a "balloon" payment equal to the original balance after: A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years

Q: For mandatory arbitration to be constitutional: A.Proceedings must be bound by standard judicial tenets such as discovery. B.Licensed practitioners must preside over all proceedings. C.All disputing parties agree in advance to be bound by the arbitration award. D.Fair procedures must be provided by the legislature and ultimate judicial review is available.

Q: In recent years, home equity loans have become a popular form of second mortgage. Their popularity has been a result of all of the following EXCEPT: A. Lower interest rates than other consumer debt B. Shorter terms than other consumer debt C. Tax-favored status D. Aggressive marketing by lenders

Q: A caucus generally may occur during a/an: A.Mediation. B.Arbitration. C.Trial. D.Caucuses are illegal because the fact finder, regardless of the type of proceeding may never meet or consult with one party to the dispute without the other party being present.

Q: Many older, retired households are considered "house poor." Which of the following forms of loans has been designed to help mitigate this problem by offering additional monthly income to these homeowners in exchange for a portion of their housing equity? A. Purchase-money mortgage (PMM) B. Piggyback Mortgage C. Home equity loan D. Reverse mortgage

Q: Courts can use judicial review to change the awards of voluntary arbitration when: A.Either disputing party is dissatisfied with the award. B.The court views the award to be contrary to public policy based on general considerations of presumed public interest. C.The actions of the arbitrator are deemed arbitrary. D.The time allowed for dispute resolution expired prior to the presentation of a formal award.

Q: It would be hard to overstate the importance of the Federal Housing Administration (FHA) in the history of housing finance. Which of the following instruments created by the FHA is considered the single most important financial instrument in modern housing finance? A. Level-payment, fully amortizing loan B. Adjustable rate mortgage C. Partially-amortizing balloon loan D. Subprime mortgage loan

Q: The decision by an arbitrator is called a/an: A.Submission. B.Award. C.Verdict. D.Judgment.

Q: Federal Housing Administration (FHA) loans differ from conventional loans in a number of ways. All of the following statements regarding FHA loans are true EXCEPT: A. FHA loans are targeted toward first-time homebuyers who are in slightly weaker financial circumstances than the typical prime conventional borrower. B. FHA loans are more tolerant in terms of qualifying debt-to-income ratios C. FHA loans require higher credit scores than are needed for prime conventional loans. D. FHA loans contain lower limits on their maximum size than are available through conforming conventional loans.

Q: The Federal Housing Administration (FHA) insures loans made by private lenders that meet FHA's property and credit-risk standards. Which of the following statements concerning FHA insurance is true? A. The insurance is paid by the lender and protects the lender against loss due to borrower default. B. The insurance is paid by the borrower and protects the lender against loss due to borrower default. C. The insurance is paid by the lender and protects the borrower against loss due to lender default. D. The insurance is paid by the borrower and protects the borrower against loss due to lender default.

Q: Courts do not interfere with an arbitration award by: A.Examining the merits of the case. B.The sufficiency of the evidence supporting the award. C.The reasoning supporting the award. D.All of the above.

Q: Mortgage insurance rates vary with the perceived riskiness of the loan. Which of the following scenarios would result in a higher mortgage insurance premium? A. Lower loan-to-value ratio B. Shorter loan term C. Stronger credit record of the borrower D. A "cash-out" refinancing loan

Q: A main distinction between mandatory and voluntary arbitration is: A.The right of the dissatisfied party to reject a mandatory arbitration award. B.The dollar amount involved. C.Whether or not an attorney is required. D.The quality of the arbitrators.

Q: Who frames the issues to be resolved in arbitration? A.The arbitrator. B.The judge. C.The parties to the dispute. D.The Supreme Court.

Q: Lenders generally require private mortgage insurance (PMI) for conventional loans over 80 percent of the value of the security property. PMI protects a lender against which of the following? A. Losses due to default on the loan B. Legal threat to the lender's mortgage claim C. Stoppage of mortgage payment after the death of the insured borrower D. Changes in the index rate associated with an adjustable rate mortgage

Q: Mortgage originators often offer many types and forms of available residential loans as part of their mortgage menu. However, the predominant form of prime conventional mortgage remains the: A. (fixed-rate) level payment mortgage (LPM) B. adjustable rate mortgage (ARM) C. subprime mortgage D. alt-A mortgage

Q: Ben and Jerry enter into a business agreement to assemble and sell prepackaged salads. In their written agreement, they both agree that they will be required to settle all disputes through arbitration. A.This is an example of a mandatory arbitration clause. B.This is an example of a voluntary arbitration clause. C.If arbitration occurs, their arbitration will be required to follow strict and formal rules of evidence. D.If arbitration occurs, either party is entitled to a de novo hearing by the courts if there is dissatisfaction with the award.

Q: Since conforming loans can be much more readily bought and sold in the secondary mortgage market, they carry a(n) _______ interest rate than comparable nonconforming loans. A. higher B. equal C. lower D. more volatile

Q: The resolution technique used in collective bargaining contracts to settle employer/employee grievances is: A.Litigation. B.Arbitration. C.Mediation. D.Minitrial.

Q: Created by Congress to promote an active secondary market for home mortgages, Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards such as loan size, documentation, and payment to income ratio. The loans that Fannie Mae and Freddie Mac are eligible to purchase are commonly referred to as: A. government sponsored loans B. conforming conventional loans C. nonconforming conventional loans D. FHA loans

Q: In most cases, an arbitrator's award is required to specifically discuss: A.A summary of the facts and evidence leading to and justifying the decision. B.Reasons and supporting facts to justify the amount of the award. C.Both a and b. D.None of the above.

Q: Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government? A. Conventional home loan B. Federal Housing Administration loan C. Veterans Affairs loan D. Section 203 loan

Q: In a typical binding arbitration clause regarding an issue that arose in interstate commerce, the parties agree to each of the following except: A.They waive their rights to a jury trial. B.They agree that the arbitrator will have the right to impose both legal and equitable remedies. C.State arbitration acts enacted in the state in which the controversy arose will be the controlling law. D.The arbitration to be conducted by a singe arbitrator.

Q: Which of the following types of institutions has historically been the largest purchaser of residential mortgages? A. Commercial banks B. Savings and Loans C. Government sponsored enterprises D. Mortgage banking companies

Q: Federal policy clearly favors ________ of commercial disputes. A.Arbitration. B.Mediation. C.Med-Arb. D.Litigation.

Q: Mortgage originators can either hold loans in their portfolios or sell them to investors. When a mortgage originator decides to sell mortgages to another institution, this transaction occurs in what is commonly referred to as the: A. primary mortgage market B. secondary mortgage market C. over-the-counter market D. loan origination market

Q: When Steve Garvey sued major league baseball for collusion in Major League Baseball Player's Association v. Garvey, the Supreme Court said that: A.Once a case has been submitted to arbitration, the courts may examine the amount of the award but not the rational for granting the award. B.Once a case has been submitted to arbitration, the courts may exercise jurisdiction and hear the case only if both plaintiff and defendant agree to submit to the court's jurisdiction. C.If an arbitrator has issued an erroneous decision, the courts may vacate the award and may themselves decide the case on the basis of the arbitration record. D.If an arbitrator has issued an erroneous award, the courts may vacate the award but must remand the case back to the arbitrator for further arbitration proceedings.

Q: The act of referring a matter to arbitration is called: A.A submission. B.A summons. C.Appealing. D.De novo review.

Q: Chapter 10 " Residential Mortgage Types and Borrower Decisions

Q: If a homeowner in mortgage distress owes more than the value of the home, and is unable make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT:A. Legal costs should be lower with a short sale than with foreclosureB. A short sale usually enables a better sale price and a faster sale than foreclosureC. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan soonerD. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

Q: Which of the following negotiation styles has the highest degree of assertiveness? A.Avoidance. B.Accommodation. C.Collaboration. D.Compromise.

Q: In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Dodd-Frank Wall Street Reform and Consumer Protection Act

Q: Most people instinctively use a negotiation technique called: A.Positional bargaining. B.Principled negotiation. C.Interest based negotiation. D.Egocentric negotiation.

Q: Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: A. Equity of redemption B. Statutory redemption C. Strategic default D. Substantive default

Q: Types of contracts commonly containing arbitration clauses include each of the following except: A.Stockbroker and client. B.Doctor and patient. C.Attorney and client. D.Insurance company and insured.

Q: A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the: A. Mortgage (Deed of Trust) B. Listing Contract C. Note D. Assignment of Mortgage

Q: Prior to the enactment of the Federal Arbitration Act, disputes were usually resolved by: A.Litigation. B.Negotiation. C.Med-Arb. D.Mediation.

Q: In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as: A. Title theory states B. Lien theory states C. Conforming states D. Nonconforming states

Q: Which of the following is a false statement? A.Polls show that a majority of Americans prefer to have their day in court and have a judge and jury decide their dispute rather than an arbitrator. B.In years ahead the trend may be toward mediation clauses rather than arbitration clauses in contracts. C.The Arbitration Fairness Act of 2007 has not yet been enacted D.In mediation, the parties have more control over the final outcome of the dispute.

Q: The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following?A. DefeasanceB. Yield Maintenance ProvisionC. Demand ClauseD. Lockout Provision

Q: Arbitration may be used when: A.The parties submit to it. B.The contract calls for it instead of litigation. C.When a statute requires it. D.All of the above.

Q: Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the: A. demand clause B. insurance clause C. escrow clause D. exculpatory clause

Q: Which of the following statements is false: A.Arbitration is historically the most popular ADR method. B.Arbitration is more common now than 10 years ago. C.Arbitrators must be licensed pursuant to the American Arbitration Association. D.An arbitrator is a neutral third party.

Q: In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: A. rescinding B. redlining C. assuming D. holdout

Q: In Howsam v. Dean Witter Reynolds, Inc., the court discussed the "question of arbitrability", specifically, what should be decided by courts and what should be decided by arbitrators. With regard to the statute of limitations to begin an arbitration the court said: A.The arbitrator should decide because they are more expert about the meaning of their particular rules. B.The arbitrator should decide because once a matter has been started in arbitration, the courts are not allowed to interfere and may only rule on appeal after a decision is rendered. C.The court should decide because whether a statute of limitations has run or not is a gateway question that is solely under a judge's discretion. D.The court should decide because any procedural matters are always under a courts discretion with the arbitrator's sole job being the determination of facts as they apply to the issue in controversy.

Q: Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Home Ownership and Equity Protection Act (HOEPA)

Q: Positional bargaining begins with each side stating their respective expectations.

Q: It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? A. Offer B. Acceptance C. Possession of the property passes to the buyer D. Title to the property passes to the buyer

Q: Historically, mediation has been the most commonly used ADR system.

Q: Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between: A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years

Q: The Supreme Court has decided that if both parties to an arbitration agree to set a standard of review of an arbitrator's award that is different from Federal Arbitration Act standards, their agreement will be honored by the courts.

Q: When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to: A. assume the old loan B. purchase the property subject to the existing loan C. obtain the property through the use of a contract for deed. D. foreclose on the property

Q: The failure of a party to be present at an arbitration hearing constitutes a waiver of the right to reject the award and seek de novo judicial review.

Q: The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business? A. Chapter 1 bankruptcy B. Chapter 7 bankruptcy C. Chapter 11 bankruptcy D. Chapter 13 bankruptcy

Q: If an arbitrator makes a clearly erroneous ruling pursuant to a voluntary contract based arbitration, there will be sufficient grounds for a judge to set aside the award.

Q: The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT: A. The power of sale treatment is faster than judicial foreclosure B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale.

Q: The judicial review of an arbitrator's award in a voluntary proceeding is quite restricted and is more limited than the appellate review of a trial court's decision.

Q: Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT: A. Foreclosure is a costly process for all parties involved. B. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. . D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.

Q: When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as: A. Bankruptcy B. Foreclosure C. Deed in lieu of foreclosure D. Equity right of redemption

Q: From the perspective of judicial review, voluntary arbitration is a more effective alternative to litigation than mandatory arbitration.

Q: Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? A. One day B. 30 days C. 60 days D. 90 days

Q: Absent fraud or other inappropriate behavior, arbitration awards in voluntary proceedings are not subject to judicial review on the merits of the decision.

Q: The arbitrator frames the issues of the hearing to be resolved.

Q: In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the: A. broker B. mortgagor C. agent D. mortgagee

Q: Rules related to court annexed mediation are federally mandated.

Q: With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as: A. recourse loans B. nonrecourse loans C. conforming loans D. nonconforming loans

Q: Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: A. fully amortizing B. partially amortizing C. nonamortizing D. negatively amortizing

Q: Each state has its own licensing regulations for arbitrators.

Q: Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? A. Federal Housing Administration (FHA) loan B. Veterans Affairs (VA) loan C. Conventional home loan D. An assumable home loan

Q: Normally, the decision to submit a dispute to arbitration is irrevocable.