REE4204 FINAL Exam Questions With
Revised Answers
Default occurs when the borrow fails to: - answer-make payment on time
-repay the interest on the loan
-repay the principle of the loan
The fact that a lender pays special attention to control ratio between the borrower's total housing
expense...
Default occurs when the borrow fails to: - answer✔✔-make payment on time
-repay the interest on the loan
-repay the principle of the loan
The fact that a lender pays special attention to control ratio between the borrower's total housing
expense and income is consistent to - answer✔✔the ability to pay theory
A theory states that no borrower with substantial positive equity in a property would choose to
default, even though they may face difficulty to make monthly payments, is known as -
answer✔✔equity theory
The so called Rule of 4C is represented by four words that begin with the letter C. Which of the
following is NOT one of the four words? - answer✔✔Conditions
The primary difference between mortgage and security deed is - answer✔✔Security deed can be
foreclosed without going to court but mortgage must be foreclosed by the court
Which of the following ratios on the borrower is LEAST important in the underwriting process?
- answer✔✔Current ratio or quick ratio
The due-on-sale clause in a promissory note stipulates - answer✔✔The entire loan balance must
be repaid when the property is sold
The residual method pf mortgage underwriting is used by which of the loan programs? -
answer✔✔VA loans
In a lending transaction between the lender and the borrower, which of the following is TRUE? -
answer✔✔The borrower signs both the promissory note and the mortgage in order to receive
money from the lender
A mortgage applicant makes $6,000 gross income per month. The bank estimated the
conventional loan requires monthly payment of $1160, plus $400 per month escrow toward
property tax and insurance. The borrower currently has no other debt except a car loan payment
of $510 per month and he lives in florida so there is no state and local income tax. Assuming his
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