Exam 22: Mortgage Market and Mortgage Instruments

In 21st-century the conventional home mortgage loan has an average maturity around 29 years and in 2009 the average loan amount was $258,900.

Savings and loans' share of the total mortgage market has declined in recent years.

A mortgage loan is one of the most difficult of all financial instruments to establish a true value for.

The loan mortgage debt outstanding in the United States at year-end 2009 was over $19 trillion.

A security developed in recent years to deal with prepayment risk in mortgage-backed securities is the:

Savings banks invest primarily in commercial mortgages.

Over the past two decades, the median purchase price of the conventional single-family residence nearly tripled.

This type of mortgage instrument is characterized by installment payments which are set lower than those required under a comparable fixed-rate mortgage, but rise over time with inflation, borrower income or some other index. It is a/an:

Most bank mortgage loans are made to finance residential, single family homes.

Commercial banks are the principal mortgage lending institutions in the U.S. today.

The collateralized mortgage obligation (CMO) creates different maturity classes from the cash flows coming from a pool of mortgages.

Securitized mortgages make it easier for mortgage lenders to get old, low-yielding mortgages off their books.

Adjustable mortgages unfortunately face severe legal restrictions that must first be overcome in order to make them a viable mortgage instrument.

The convertible mortgage instruments (CMIs) have initial adjustable interest rates that are usually lower than those on new fixed-rate mortgages and the switch to a fixed-rate loan in the future typically is cheaper than refinancing an old mortgage.

A _____________ can provide an incentive for households to refinance their homes simply to capture some of the additional equity associated with rising home prices.

Mortgage pools serve as a very effective hedge against risk, insulating their holders against fluctuations in the housing market.

According to the textbook, as a practical matter if mortgage market interest rates have dropped at least ____ full percentage points since the borrower took out his or her first mortgage loan and the borrower plans to remain in the home normally about ____ to ____ years then refinancing through a cheaper new loan is usually an attractive move.

Mortgage bankers supply important financial services to both institutional investors and property developers.

The conventional home mortgage loan has an average maturity nearing 29 years and in 2009 the average loan amount was:

Loan fees on refinanced property are immediately tax deductible just as they are under a first mortgage.