Real Estate Finance & Mortgages 3

Question 1

RESPA (Real Estate Settlement Procedures Act) primarily protects consumers by:

Accepted Answer

Requiring disclosure of settlement costs and prohibiting kickbacks

Answer

RESPA requires lenders to provide a Loan Estimate and Closing Disclosure, and prohibits kickbacks, referral fees, and unearned charges in the settlement process.

Question 2

TILA (Truth in Lending Act) requires lenders to disclose the:

Accepted Answer

Annual Percentage Rate (APR) and total finance charges

Answer

TILA mandates clear disclosure of the APR, total cost of credit, and other loan terms so borrowers can compare loan offers accurately.

Question 3

An escrow account held by a mortgage servicer is used to pay:

Accepted Answer

Property taxes and insurance premiums on behalf of the borrower

Answer

Lenders often require escrow accounts to collect monthly portions of property tax and insurance, ensuring these bills are paid and protecting the collateral.

Question 4

PITI stands for:

Accepted Answer

Principal, Interest, Taxes, Insurance

Answer

PITI represents the four components of a typical monthly mortgage payment: Principal, Interest, Taxes (property), and Insurance (homeowners/hazard).

Question 5

A wraparound mortgage is a form of seller financing where:

Accepted Answer

A new loan wraps around and includes the existing mortgage balance

Answer

In a wraparound, the seller creates a new mortgage that includes the existing loan balance; the buyer pays the seller, who continues to pay the underlying lender.

Real Estate Practice Test

Real Estate Practice Test

Real Estate Finance & Mortgages 3