Residential and Commercial Financing Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Residential and Commercial Financing flashcards as text
What distinguishes a 'portfolio loan' from a conventional conforming loan?
Answer: Portfolio loans are held by the originating lender and not sold to the secondary market
Portfolio loans are kept on the lender's books rather than sold, allowing more flexible underwriting outside agency guidelines.
In commercial real estate, what is the purpose of a 'partial release clause' in a blanket mortgage?
Answer: It permits individual properties to be released from the lien upon partial paydown
A partial release clause lets a borrower sell or refinance individual properties within a blanket mortgage by paying down a specified portion of the loan.
A property's gross rent multiplier (GRM) is 12, and the annual gross rent is $96,000. What is the estimated property value?
Answer: $1,152,000
Property Value = GRM × Annual Gross Rent = 12 × $96,000 = $1,152,000.
Which entity sets conforming loan limits for conventional mortgages backed by Fannie Mae and Freddie Mac?
Answer: Federal Housing Finance Agency (FHFA)
The FHFA sets annual conforming loan limits based on home price indices, determining the maximum loan size eligible for purchase by the GSEs.
What is the primary benefit of an SBA 504 loan for commercial real estate borrowers?
Answer: Long-term, fixed-rate financing for owner-occupied commercial property with as little as 10% down
SBA 504 loans provide long-term fixed-rate financing for owner-occupied commercial properties, typically requiring only a 10% borrower equity injection.
In residential lending, what is the purpose of a 'subordination agreement'?
Answer: To allow a junior lien to remain in place when a senior lien is refinanced
A subordination agreement allows an existing second mortgage or lien to remain junior when the first mortgage is refinanced, maintaining the lien priority structure.
Which type of commercial loan structure features constant principal payments with declining total payments over the loan term?
Answer: Straight-line amortization loan
Straight-line amortization requires equal principal payments each period, so as the balance declines, the interest portion decreases, reducing total payments over time.