A) is a collection of markets, which includes a primary (or origination) market and a secondary market where mortgages trade. B) refers to real estate. C) is a pledge of property to secure payment of a debt. D) gives the borrower right to foreclose the loan and seize the property in order to ensure that it is repaid. A) is a collection of markets, which includes a primary (or origination) market and a secondary market where mortgages trade. B) refers to real estate. C) is a pledge of property to secure payment of a debt. D) gives the borrower right to foreclose the loan and seize the property in order to ensure that it is repaid.

Exam 22: The Residential Mortgage Market

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The two primary quantitative underwriting standards are (1) the payment-to-income ratio (PTI), and (2) the loan-to-value ratio (LTV). Describe these two ratios.

(Essay)

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Question 21

The loan applications being processed and the commitments made by a mortgage originator together are called its pipeline. Pipeline risk refers to the risks associated with originating mortgages. This risk has two components. Name and describe the two components.

(Essay)

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Question 22

The ________ of a mortgage loan indicates the loan's seniority in the event of the forced liquidation of the property due to default by the obligor.

(Multiple Choice)

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Question 23

The main risks faced by investors when investing in residential mortgage loans include ________.

(Multiple Choice)

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Question 24

One of the underwriting standards is the loan balance at the time of origination. Conventional loans that meet the underwriting standards of the two GSEs are called conforming limits. But there are other important underwriting standards that must be satisfied. These include ________.

(Multiple Choice)

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Question 25

The LTV has proven to be a good predictor of default: the the LTV, the the likelihood of default.

(Multiple Choice)

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Question 26

Although the sources of revenue attributable to the origination function are technically origination fees and secondary marketing profits, another potential source is ________.

(Multiple Choice)

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Question 27

The original mortgage balance (MB₀) is $250,000; and, the number of months of the mortgage loan (n) is 360. What is the monthly mortgage payment (MP) if the initial note rate (i) is 8.50%?

(Multiple Choice)

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Question 28

Effectively, the borrower's right to prepay a loan in whole or in part without a penalty is a put option.

(True/False)

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Question 29

All mortgage loans have a "due on sale" clause, which means that the remaining balance of the loan does not have to be paid when the house is sold.

(True/False)

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Question 30

A type of prepayment in which the entire mortgage balance is paid off is called a partial prepayment or curtailment.

(True/False)

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Question 31

In recent years several types of nontraditional amortization schemes have become popular in the mortgage market. The most popular is the ________.

(Multiple Choice)

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Question 32

Mortgage originators can protect themselves against fallout risk by entering into an agreement with a government-sponsored enterprises (GSE) or private conduit for mandatory rather than optional delivery of the mortgage.

(True/False)

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Question 33

Which of the below statements is TRUE?

(Multiple Choice)

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Question 34

A mortgage ________.

(Multiple Choice)

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Question 35

Which of the below statements is FALSE?

(Multiple Choice)

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Question 36

Loans that qualify as conforming loans have a lesser probability of being purchased by Fannie Mae and Freddie Mac to be packaged into a mortgage-backed security.

(True/False)

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Question 37

The amount of the payment made in excess of the monthly mortgage payment is called a prepayment.

(True/False)

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Question 38

________ is the risk that the homeowner/borrower will default.

(Multiple Choice)

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Question 39

Freddie Mac and Fannie Mae receive a charter from the federal government that ________.

(Multiple Choice)

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Question 40

Showing 21 - 40 of 58

Exam 22: The Residential Mortgage Market

The two primary quantitative underwriting standards are (1) the payment-to-income ratio (PTI), and (2) the loan-to-value ratio (LTV). Describe these two ratios.

The loan applications being processed and the commitments made by a mortgage originator together are called its pipeline. Pipeline risk refers to the risks associated with originating mortgages. This risk has two components. Name and describe the two components.

The ________ of a mortgage loan indicates the loan's seniority in the event of the forced liquidation of the property due to default by the obligor.

The main risks faced by investors when investing in residential mortgage loans include ________.

One of the underwriting standards is the loan balance at the time of origination. Conventional loans that meet the underwriting standards of the two GSEs are called conforming limits. But there are other important underwriting standards that must be satisfied. These include ________.

The LTV has proven to be a good predictor of default: the ________ the LTV, the ________ the likelihood of default.

Although the sources of revenue attributable to the origination function are technically origination fees and secondary marketing profits, another potential source is ________.

The original mortgage balance (MB₀) is $250,000; and, the number of months of the mortgage loan (n) is 360. What is the monthly mortgage payment (MP) if the initial note rate (i) is 8.50%?

Effectively, the borrower's right to prepay a loan in whole or in part without a penalty is a put option.

All mortgage loans have a "due on sale" clause, which means that the remaining balance of the loan does not have to be paid when the house is sold.

A type of prepayment in which the entire mortgage balance is paid off is called a partial prepayment or curtailment.

In recent years several types of nontraditional amortization schemes have become popular in the mortgage market. The most popular is the ________.

Mortgage originators can protect themselves against fallout risk by entering into an agreement with a government-sponsored enterprises (GSE) or private conduit for mandatory rather than optional delivery of the mortgage.

Which of the below statements is TRUE?

A mortgage ________.

Which of the below statements is FALSE?

Loans that qualify as conforming loans have a lesser probability of being purchased by Fannie Mae and Freddie Mac to be packaged into a mortgage-backed security.

The amount of the payment made in excess of the monthly mortgage payment is called a prepayment.

________ is the risk that the homeowner/borrower will default.

Freddie Mac and Fannie Mae receive a charter from the federal government that ________.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters

The LTV has proven to be a good predictor of default: the the LTV, the the likelihood of default.