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California Financing — Printable Practice Pack
California state portion · the Business and Professions Code, DRE trust-fund rules and California's disclosure regime · 20 questions · Answer key on the last page · agentexamcoach.com
15.Who holds 'bare legal title' under a California deed of trust, in the classic description?
(A)The beneficiary, until the loan is fully repaid
(B)The county recorder, as statutory custodian
(C)The trustor, jointly with the beneficiary
(D)The trustee, for the limited purpose of sale or reconveyance
16.A borrower chooses a 5/1 ARM. What does the '5' represent?
(A)Years the initial rate stays fixed
(B)The lifetime cap in percentage points
(C)Years before the loan matures
(D)The margin over the index
17.A property is worth $600,000 with a $390,000 first and a $60,000 second. What is the combined loan-to-value?
(A)Ten percent
(B)Eighty-five percent
(C)Sixty-five percent
(D)Seventy-five percent
18.A borrower with a $350,000 loan at 6% makes an extra $200 principal payment monthly. What is the primary effect?
(A)Lower monthly payment immediately
(B)Lower interest rate
(C)Higher escrow balance
(D)Shorter loan term and less total interest
19.What is the effect of the Federal Reserve raising the reserve requirement?
(A)Deposit insurance limits are increased
(B)Loan applications are processed faster
(C)Banks must lower their mortgage rates
(D)Banks have less money available to lend
20.A buyer takes over an existing assumable loan and the lender charges a fee. What is that fee for?
(A)Reducing the interest rate on the loan
(B)Processing and approving the new borrower
(C)Releasing the property from the trust deed
(D)Extending the remaining loan term
Answer key & explanations
1. B — Certain refinances of a principal residence carry a three-business-day right of rescission. Purchase-money loans do not.
2. C — The broker-arranged exemption is why hard money lending routes through licensees; private unarranged loans face the cap.
3. D — Open market operations expand or contract the money supply, indirectly moving mortgage rates.
4. A — TRID tolerance limits increases in lender-controlled fees.
5. A — Loans exceeding statutory rate or fee thresholds are high-cost loans and carry additional disclosures and restrictions.
6. B — The guarantee amount ties to the veteran's entitlement, which can be restored after payoff.
7. C — Steering to inferior products based on protected class is unlawful.
8. B — The payment less the interest portion is what amortises principal: $2,100 minus $1,850 is $250.
9. D — 28% of $9,000 is $2,520, the front-end ratio limit for principal, interest, taxes and insurance.
10. B — Fannie Mae (and Freddie Mac) buy conforming conventional loans; Ginnie Mae guarantees government-loan securities.
11. A — RESPA governs closing disclosures and prohibits kickbacks.
12. D — California restricts commissions, costs and balloon terms on certain smaller owner-occupied loans arranged by licensees.
13. B — Underwriting evaluates borrower and collateral risk before the lender commits to fund.
14. D — Judicial foreclosure on a non-purchase-money loan can support a deficiency. Purchase-money loans on owner-occupied dwellings and trustee's sales generally cannot.
15. D — Title theory language survives in the trustee's bare legal title, held only to reconvey or sell on default.
16. A — A 5/1 ARM is fixed for five years, then adjusts annually.
17. D — Total debt is $450,000. Divided by $600,000 that is 0.75, or 75%.
18. D — Extra principal reduces the balance faster, cutting interest and term.
19. D — A higher reserve requirement forces banks to hold more against deposits, reducing funds available for lending.
20. B — An assumption fee covers underwriting the new borrower and documenting the transfer of liability.
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