Exam 11: Sources of Funds for Home Mortgages

In addition to providing home mortgages,large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market.This type of financing is commonly referred to as:

In the securitization process,mortgages are pooled together and cash flows are packaged into securities to be sold in the secondary market.Agencies and private companies that pool mortgages and sell mortgage-backed securities (MBS)are often referred to as:

The Federal National Mortgage Association (Fannie Mae)was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans.All of the following statements regarding Fannie Mae are true EXCEPT:

Suppose an institution has purchased a $250,000 mortgage loan from the loan originator and wishes to create a mortgage pass-through security.In doing so,this institution will generate revenue by charging a servicing fee of 35 basis points.If the monthly mortgage payment on the loan is $1,250,how much income is passed through to the investor in the mortgage pass through each month (rounded to the nearest dollar)?

Throughout the process of originating and selling mortgages,mortgage companies face a number of risks.Therefore,it is important for a lending institution to evaluate the risks of mortgage loan default through a process commonly referred to as:

Utilizing the following information,calculate the housing expense ratio.Monthly Principal and interest on mortgage loan: $635;Monthly Tax and insurance payments into escrow: $125;Gross monthly income: $2,500