Exam 22: Mortgage Market and Mortgage Instruments

Multifamily and commercial mortgage loans have shown a significant increase in relative importance in recent years.

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter a. Securities issued against a pool of mortgage loans held by a financial institution whose interest and principal payments will be passed on to security holders. b. A federal agency created in 1970, but now privately owned that was designed to improve the secondary market for certain types of home mortgages. c. A type of mortgage-backed security offered in a variety of maturity classes. d. Home mortgage loan that carries an unchanging loan rate. e. Home mortgage loan with a loan rate that may be adjusted during the life of the loan.

The Federal Home Loan Bank (FHLB) system is organized somewhat like the Federal Reserve System today, with ___________ supervised by the Federal Housing Finance Board.

A recently developed mortgage-backed security in which an investor can receive either principal or interest payments from a pool of home mortgages, depending upon the individual investor's preferences for maturity and risk is known as:

Tens of thousands of homeowners refinanced their mortgages to take advantage of lower interest rates, reducing the expected return on Fannie and Freddie's asset portfolios and creating a bigger mismatch between the maturities of their assets and liabilities.

According to your text, savings and loans associations are expected to increase the portion of their asset portfolios devoted to residential mortgage loans in future years.

The average maturity of conventional home mortgage loans had declined to less than 25 years by 2009.

Mortgage-backed securities in which an investor can receive either principal payments or interest payments from a pool of home mortgages are known as strips.

"Equity kickers" permit the lender to receive a portion of the earnings from the project being financed.

A ____ starts with an adjustable interest rate, but the home buyer can switch to a fixed-rate mortgage at a later date.

The type of financial institution which provides more residential mortgage credit than any other institutional lender is the:

The Chicago mercantile exchange has developed housing futures and options that are settled in cash based on real estate prices in 10 large American cities.

Savings and loan associations are primarily local lenders.

Life insurance companies have been placing more emphasis on single-family home mortgages in recent years.

As the new century unfolded, mortgage loan pools accounted for about _______ of all mortgages.

CMOs differ from other mortgage-backed securities in that they contain several different tranches.

REMICs are a type of:

Which federal mortgage agency is being described below? a. A federal agency created in 1938 to buy and sell selected residential mortgages in the secondary market. b. A federal agency created in 1970 to improve the resale market for predominantly conventional mortgages and to assist private lenders in securitizing pools of mortgage loans. c. An agency of the federal government established in 1934 to guarantee mortgage loans for low- and medium-priced homes. d. A federal agency aimed at providing loans through its regional banks to S&Ls and other depository mortgage lenders having significant liquidity needs. e. A federal government agency created in 1968 to assist the home mortgage market by purchasing mortgages to finance low-income family housing projects and guaranteeing certain mortgage loans made by private lenders. Association (GNMA).

The development of a secondary market for mortgage instruments has led to greater participation in mortgage lending by "long-distance" lenders.

Claims against a pool of mortgages in which interest is paid semiannually like corporate bonds are known as GMCs.