Exam 7: Mortgage Markets

Which of the following statements about mortgage markets is/are true? I. Mortgage companies service more mortgages than they originate. II. Servicing fees typically range from 2 percent to 4 percent. III. Most mortgage sales are with recourse. IV. The government is involved in the residential mortgage markets.

The least used form of mortgage securitization is the ______________________.

A homeowner can obtain a $250,000,30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. If you will keep the mortgage for 30 years,what is the net present value of paying the points (to the nearest dollar)?

Explain each term of the following pass-through quote:

Rank the following types of mortgages by amount outstanding from largest to smallest. I. Home mortgages II. Multifamily mortgages III. Farm mortgages IV. Commercial mortgages

Discount points are paid to reduce the down payment required.

Which one of the following entities is an actual government agency dealing with mortgages?

Which one of the following types of mortgages is likely to become more popular as the average age of the U.S. population increases?

Which of the following statements about GNMA is/are true? I. GNMA provides timing insurance. II. GNMA creates pools of mortgages and issues securities. III. GNMA insures only FHA,VA,and FMHA loans. IV. GNMA requires that all mortgages in the pool have the same interest rate.

A homebuyer bought a house for $245,000. The buyer paid 20 percent down but decided to finance closing costs of 3 percent of the mortgage amount. If the borrower took out a 30-year fixed-rate mortgage at a 5 percent annual interest rate,how much interest will the borrower pay over the life of the mortgage?

What three major ways has the federal government assisted the mortgage markets? Explain.

The largest category of mortgages by dollar volume is commercial mortgages.

As compared to fixed-rate mortgages,ARMs result in which of the following for the lender? I. Higher interest rate risk II. Lower default risk III. Greater prepayment penalty fees

Why do mortgage lenders prefer ARMs while many borrowers prefer fixed-rate mortgages,ceteris paribus.

The process of mortgage securitization results in a separation between mortgage origination and mortgage financing.

You want to buy a $250,000 house and you will use a conventional mortgage. What is the minimum down payment you have to make to avoid having to purchase mortgage insurance?

The process of packaging and/or selling mortgages that are then used to back publicly traded debt securities is called

You purchase a $325,000 town home and you pay 25 percent down. You obtain a 30-year fixed-rate mortgage with an annual interest rate of 5.75 percent. After five years you refinance the mortgage for 25 years at a 5.1 percent annual interest rate. After you refinance,what is the new monthly payment (to the nearest dollar)?

Who are the major buyers of mortgages after they have been originated? What is the difference between selling with recourse or without recourse? Which is most common?

How does GNMA improve mortgage marketability?