The following Loans & Lending Practices MCQs have been compiled by our experts through research, in order to test your knowledge of the subject of Loans & Lending Practices. We encourage you to answer these 80+ multiple-choice questions to assess your proficiency.
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A. The transfer of ownership of mortgage from one company or individual to another
B. The process of researching a property's title
C. Filing for bankruptcy
D. A provision in a mortgage home loan that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the loan
A. The percentage of gross monthly income that goes towards paying housing expenses
B. A fund that contains assets the use of which is restricted only to the income earned by these assets
C. The same as an escrow account
D. The process of applying for a mortgage
A. Because there are laws against it
B. Because there is no increase in the wealth of the person taking a loan
C. Because people lie on their tax returns and do not include it
D. Because taxing them is not fair to people
A. An automobile loan
B. A loan where the debtor's credit is the only thing at stake
C. A loan only for uneducated people
D. A loan with no collateral; the lender has no assets backing the loan
A. Because it is revenue only if over $1,000
B. Because it was earned legally and therefore must be included in revenue
C. Because the SEC requires it
D. Because interest is profit generated by providing a loan and is income to the lender
A. They lie on their credit applications to get better interest rates
B. People obtain loans with no plan to pay them back
C. People use loan funds for purposes other than they should
D. All of the above
A. A loan on which interest accrues only in the second year
B. A loan on which the borrower has to pay back only the interest and not the principal
C. A loan on which the borrower has to pay only the interest for a specified time period, not reducing the principal at all
D. A type of mortgage
A. When the loan to value ratio is greater than 80%
B. When the buyer makes under $40,000 a year
C. When the buyer has unfavorable credit
D. When the buyer is a millionaire
A. Servicing
B. Liability
C. Financing
D. Bond payment
A. The process of researching loan options
B. The process of applying for government mortgage funding
C. An approved temporary suspension of loan payments based on certain events and criteria
D. Adding interest that has accrued onto the principal balance
A. A loan which uses some form of collateral as a guarantee of payment
B. A loan under $10,000
C. A loan for people with bad credit
D. A short term loan for less than a year
A. Exactly half is due
B. Some small portion of the consumer's total balance is due each month
C. They must be paid in full
D. Only interest is due each month
A. Yes, the tax benefits make any loan amount worth it
B. Yes, as long as the loan is paid back in the same year
C. No, unless the loan is for over $100,000
D. No, the benefit of deduction of loan interest does not offset the cost of the interest
A. Mortgages aimed at the poor/uneducated people at higher interest rates
B. Mortgages aimed at the rich and wealthy
C. Mortgages offered at the fair market rate
D. Mortgages geared towards people with jobs
A. Customary costs above and beyond the sale price of a property that must be paid to cover the transfer of ownership at closing
B. The portion of a borrower's monthly payments held by the lender or service provider to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due
C. The time frame of a mortgage
D. The implied interest rate
A. The lender can not sue the borrower for any amount
B. The lender can not sue the borrower to repay the amount beyond what is legally allowed
C. The lender can have the borrower imprisoned for fraud
D. The lender goes bankrupt
A. Recession
B. Default
C. Extraction
D. Extortion
A. A collection of loans held by a borrower
B. Anything offered or given to fulfill the performance of a contract
C. The interest payment of a loan
D. A combination of assets held for its investment benefits including financial and non-financial returns
A. As a long term liability
B. As a short term liability
C. As revenue
D. As an expense incurred during the period
A. The transfer of the seller's existing mortgage to the buyer
B. The process of applying for a mortgage
C. The Legal process by which the lender or the seller forces the sale of a mortgaged property because the borrower has not met the terms of the mortgage.
D. The process of finding undervalued properties for investment purposes
A. Down Payment
B. Senior Debt
C. Subsequent Debt
D. Second Round Debt
A. Credit cards offer more favorable interest rates
B. Credit cards are usually for higher credit amounts
C. Credit cards always have a physical card, loans never do
D. Credit cards have open ended payment schedules
A. Revolving debt
B. Unsecured debt
C. Secured debt
D. All of the above
A. There will be no impact
B. The company would be out of compliance with loan covenants
C. There will be gain on the sale of automobiles, and a reduction in debt
D. There will be loss on the sale of automobiles, and an increase in debt
A. Because there is no reduction in their assets — there is only a change from cash assets to receivables
B. Because it is considered the income of the borrower
C. Because it has minimal impact on tax revenue
D. Because there is no need to include it as long as the loan is paid back within a year
A. Dr: Cash, Cr: Interest Payable
B. Dr: Buildings, Cr: Mortgage Liability
C. Dr: Interest Payable, Cr: Mortgage Liability
D. Cr: Cash, Cr: Mortgage Liability
A. An assessment of a person's credit
B. The intentional and voluntary giving up of rights or claims
C. The ability of a lender to provide clients with a better rate
D. The determination of the exact boundaries and location of a property
A. Rights to demand payment from the general assets of the debtor, without seniority in access to any specific assets
B. The process taken to apply for a mortgage
C. The payment of escrow to the seller
D. The closing process
A. The physical location where all mortgage papers are signed
B. An organization that gathers, records, updates, and stores the information about the financial, public and payment records of the individuals who are being considered for credit
C. A central clearing house for all loan transactions
D. The loss of money, property, rights, or privileges due to a breach of legal obligation
A. Because no credit history is required to get a credit card
B. Because they are inexpensive
C. Because regular loans are no longer available to everyday consumers
D. Because they enable a person to make purchases without having any money at the time of the purchases
A. A bond coupon payment
B. The principal portion of a loan
C. The monthly payment on a loan
D. An agreement or promise to do or not to do a particular thing related to a loan
A. Nothing — it is a risk the lender takes for high returns
B. Sue the borrower in a small claims court
C. Call the bank that helped structure the loan
D. A loan is a debt contract, and the borrower can be sued for the funds
A. Debt-to-income ratio
B. Underwriting
C. Surveying
D. Assessing
A. Lending money to people who are extended beyond their means in an attempt to get them to spend more than they should
B. Lending money to high net worth individuals
C. Lending people money to buy a car
D. Lending money to students to pay for their education
A. Charging people a fair market interest rate based on their credit
B. Charging people zero interest rate
C. Financing a car using an auto loan
D. Charging interest rates in excess of what is standard and customary
A. 10 percent of the mortgage
B. 0.1 percent of the mortgage
C. 1 percent of the mortgage
D. $1000
A. An open line of credit
B. A credit card with a fixed monthly amount of payment
C. A credit card by someone other than a major bank
D. A credit card to get which a deposit account must be established; often 100% of the available credit is required as a deposit
A. The placing of funds in a special account to cover regular payment of taxes and insurance
B. The fee charged for borrowing money
C. An additional payment made to reduce the principal balance of a mortgage
D. The final payment made to pay off a mortgage
A. A postponement of payment on a loan, typically if the borrower doesn't qualify for a deferment and is unable to make payments for a reason such as poor health
B. A step taken during bankruptcy
C. An extra loan payment made to pay down principal
D. None of the above
A. A fee charged for the use of money
B. Buying expensive properties and renting them out
C. Buying undervalued properties and renting them out
D. The process of buying a property and then attempting to sell it relatively quickly for a profit
A. The same as income to debt ratio
B. The percentage of living expenses to housing expenses
C. The percentage of monthly income that goes towards the housing payment
D. The ratio of the house price to those of other similar houses
A. As a short term liability
B. As a long term liability
C. As an asset
D. As revenue
A. It reduces cash and short term liabilities
B. It reduces cash and increases short term liabilities
C. It decreases short term liabilities and increases long term liabilities
D. It has no impact
A. The day a price is agreed on for a home transaction
B. The meeting where the buyers, sellers, and their representatives meet to finalize the legal exchange of property
C. The process of being approved for a mortgage
D. A legal document used to transfer the ownership of a property
A. Interim Financing
B. Contingency
C. Overdraft
D. Mortgage Modification
A. Assets pledged to secure the repayment of a loan
B. The monthly payment of a loan
C. Only the principal portion of a loan
D. A situation where one fails to make a payment, which can lead to foreclosure
A. The minimum amount a loan can be made for
B. The interest rate below which the rate of an Adjustable-Rate Loan cannot be adjusted
C. The minimum amount of time a mortgage can be set for
D. A professional opinion of the current market value of a property
A. In the year the loan was taken out
B. In the year the final payment on the loan is made
C. It is not allowed to be deducted at all
D. In the year the interest is paid
A. They are required by law to be placed on all borrowers
B. To force a borrower to abide by rules which compel the borrower to stay in a situation where they can repay the loan
C. The IRS forces the lenders to place them on all commercial loans
D. To protect the borrower
A. Funds provided by a philanthropist to fulfill a role similar to equity
B. Interim financing for a home buyer
C. A short term loan used to pay closing costs
D. A bond that does not earn any interest