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Bbm 413: Property Development And Management Question Paper

Bbm 413: Property Development And Management

Course:Bachelor Of Business Management

Institution: Moi University question papers

Exam Year:2012

2011/2012 SECOND SEMESTER EXAMINATION

BBM 413: PROPERTY DEVELOPMENT AND MANAGEMENT
MAIN EXAMINATION

TIME: 3 HOURS
INSTRUCTIONS

ANSWER ALL QUESTIONS IN SECTION A AND ANY OTHER TWO QUESTIONS IN SECTION B. MARKS ALLOCATION IS SHOWN AT THE END OF EACH QUESTION.

SECTION A: COMPULSORY

QUESTION ONE
a. Explain what DEFAULT IN MORTGAGE FINANCING is. What constitutes default mortgage financing? (6mks)

b. "FORECLOSURE is an expensive and tedious exercise both to the mortgagor and mortgagee". Explain what is foreclosure and the various alternatives to a full foreclosure. (12mks)

c. "AGENCY THEORY is very well expounded in real estate management and thus involves AGENCY COSTS." Describe the various types of Agency costs that a real estate owner is likely to incur. (6mks)

d. Discuss the various methods of TITLE ASSURANCE. (6mks)

QUESTION TWO
a. A borrower obtains a fully amortizing CPM mortgage loan for £ 125,000 at 11% interest for 20 years. What will be the monthly payment on the loan? Prepare a repayment schedule for the first six months with a CPM and a CAM. (24mks)

b. What would be the outstanding loan balance at the end of ve 5th year? (6mks)

SECTION B: ANSWER ANY TWO QUESTIONS

QUESTION THREE
A price level adjusted mortgage (PLAM) is made with the following terms;

AMOUNT = £95,000
INITIAL RATE = 4%
TERM = 30 YEARS
POINTS = 6%

Payments to be adjusted at the beginning of each year. Assuming inflation is expected to increase at the rate of 6% p.a. for the next five years;
a. Compute the payments at the beginning of each year (BOY) (10mks)
b. What is the loan balance at the end of the fifth year? (5mks)
c. What is the yield to the lender on such a mortgage? (5mks)

QUESTION FOUR
a. Explain the UNDERWRITING PROCESS used in the real estate financing. (12mks)

b. Discuss the nature of risks likely to face a real estate developer. (8mks)

QUESTION FIVE
a. What is a SECONDARY MORTGAGE MARKET? Why does it exist and highlight the main characteristics of securities traded in such a market. (8mks)

b. Discuss the types of securities traded in the SECONDARY MORTGAGE MARKET. (12mks)

Bbm 413: Property Development And Management Question Paper

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