Exam 9: Mortgage Markets

A(n)_________ problem occurs when a person or institution does not have to bear the full consequences of its behavior and therefore assumes more risk than it otherwise would.

For any given interest rate, the shorter the life of the mortgage, the ____ the monthly payment and the ____ the total payments over the life of the mortgage.

Financial institutions that hold fixed-rate mortgages in their asset portfolios are exposed to ____ risk, because they commonly use funds obtained from short-term customer deposits to make long-term mortgage loans.

Financial institutions may purchase credit default swaps on mortgages if they expect defaults on many mortgages.

The ____ market accommodates originators of mortgages that desire to sell their mortgages prior to maturity.

Which of the following is  NOT  a guarantor of federally insured mortgages?

Strong economic growth tends to reduce the probability that borrowers will default on their mortgage payments and therefore tends to decrease mortgage prices.

A mortgage contract specifies

Mortgage companies specialize in

Fannie Mae and Freddie Mac experienced financial problems during the credit crisis because they

Which of the following is  NOT  a common type of mortgage-backed security according to your text?

From the perspective of the lending financial institution, interest rate risk is

During the early years of a mortgage, most of the monthly payment reflects principal.

In the earlier years of a mortgage,

Mortgage lenders normally charge a higher initial interest rate on adjustable-rate mortgages than on fixed-rate mortgages.

Federally insured mortgages guarantee

Bear Stearns commonly used __________ as collateral when borrowing short-term funds, but its funding was cut off because prospective creditors questioned the quality of the collateral.

Borrowers who have a lower level of income relative to their periodic loan payments are more likely to default on their mortgages.

In a short sale of a home

Non-U.S. financial institutions never hold mortgages on U.S. property.