Question 1

Private mortgage insurance is a policy that guarantees to make up any discrepancy between the value of the property and the loan amount,should a default occur.

Accepted Answer

A) True 
 B)False

Question 2

During the early years of an amortizing mortgage loan,the lender applies

Accepted Answer

A)  most of the monthly payment to the outstanding principal balance. 
B)  all of the monthly payment to the outstanding principal balance. 
C)  most of the monthly payment to interest on the loan. 
D)  all of the monthly payment to interest on the loan. 
E)  the monthly payment equally to interest on the loan and the outstanding principal balance. 
A)  most of the monthly payment to the outstanding principal balance. 
B)  all of the monthly payment to the outstanding principal balance. 
C)  most of the monthly payment to interest on the loan. 
D)  all of the monthly payment to interest on the loan. 
E)  the monthly payment equally to interest on the loan and the outstanding principal balance.

Question 3

Subprime loans are those made to borrowers who do not qualify for loans at the usual market rate of interest because of a poor credit rating or because the loan is larger than justified by their income.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following are useful for home buyers who expect their income to fall in the future?

Accepted Answer

A)  GPMs 
B)  RAMs 
C)  GEMs 
D)  Only A and B are useful. 
E)  Only A and C are useful. 
A)  GPMs 
B)  RAMs 
C)  GEMs 
D)  Only A and B are useful. 
E)  Only A and C are useful.

Question 5

What factors are used in determining a person's FICO score?

Accepted Answer

A)  Past payment history 
B)  Outstanding debt 
C)  Length of credit history 
D)  All of the above 
A)  Past payment history 
B)  Outstanding debt 
C)  Length of credit history 
D)  All of the above

Question 6

How has the modern mortgage market changed over recent years?

Accepted Answer

The subprime emergency was the sharp inc

Question 7

Second mortgages serve the following purposes:

Accepted Answer

A)  they give borrowers a way to use the equity they have in their homes as security for another loan. 
B)  they allow borrowers to get a tax deduction on loans secured by their primary residence or vacation home. 
C)  they allow borrowers to convert their conventional mortgages into GEMs. 
D)  all of the above. 
E)  only A and B of the above. 
A)  they give borrowers a way to use the equity they have in their homes as security for another loan. 
B)  they allow borrowers to get a tax deduction on loans secured by their primary residence or vacation home. 
C)  they allow borrowers to convert their conventional mortgages into GEMs. 
D)  all of the above. 
E)  only A and B of the above.

Question 8

During the early years of a balloon mortgage loan,the lender applies

Accepted Answer

A)  most of the monthly payment to the outstanding principal balance. 
B)  all of the monthly payment to the outstanding principal balance. 
C)  most of the monthly payment to interest on the loan. 
D)  all of the monthly payment to interest on the loan. 
E)  the monthly payment equally to interest on the loan and the outstanding principal balance. 
A)  most of the monthly payment to the outstanding principal balance. 
B)  all of the monthly payment to the outstanding principal balance. 
C)  most of the monthly payment to interest on the loan. 
D)  all of the monthly payment to interest on the loan. 
E)  the monthly payment equally to interest on the loan and the outstanding principal balance.

Question 9

Adjustable-rate mortgages generally have lower initial interest rates than fixed-rate mortgages.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following are true of mortgages?

Accepted Answer

A)  More than 80 percent of mortgage loans finance residential home purchases. 
B)  The National Banking Act of 1863 rewarded banks that increased mortgage lending. 
C)  Most mortgages during the 1920s and 1930s were balloon loans. 
D)  All of the above are true. 
E)  Only A and C of the above are true. 
A)  More than 80 percent of mortgage loans finance residential home purchases. 
B)  The National Banking Act of 1863 rewarded banks that increased mortgage lending. 
C)  Most mortgages during the 1920s and 1930s were balloon loans. 
D)  All of the above are true. 
E)  Only A and C of the above are true.

Question 11

Which of the following is true of mortgage interest rates?

Accepted Answer

A)  Mortgage rates are closely tied to Treasury bond rates, but mortgage rates tend to stay below Treasury rates because mortgages are secured with collateral. 
B)  Longer-term mortgages have higher interest rates than shorter-term mortgages. 
C)  Interest rates are higher on mortgage loans on which lenders charge points. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  Mortgage rates are closely tied to Treasury bond rates, but mortgage rates tend to stay below Treasury rates because mortgages are secured with collateral. 
B)  Longer-term mortgages have higher interest rates than shorter-term mortgages. 
C)  Interest rates are higher on mortgage loans on which lenders charge points. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 12

Ginnie Mae

Accepted Answer

A)  insures qualifying mortgages. 
B)  insures pass-through certificates. 
C)  insures collateralized mortgage obligations. 
D)  does only A and B. of the above. 
E)  does only B and C of the above. 
A)  insures qualifying mortgages. 
B)  insures pass-through certificates. 
C)  insures collateralized mortgage obligations. 
D)  does only A and B. of the above. 
E)  does only B and C of the above.

Question 13

Between 2000 and 2005,home prices increased an average of ________ per year.

Accepted Answer

A)  2% 
B)  4% 
C)  8% 
D)  12% 
A)  2% 
B)  4% 
C)  8% 
D)  12%

Question 14

Closing for a mortgage loan refers to the moment the loan is paid off.

Accepted Answer

A) True 
 B)False

Question 15

A borrower who qualifies for an FHA or VA loan enjoys the advantage that

Accepted Answer

A)  the mortgage payment is much lower. 
B)  only a very low or zero down payment is required. 
C)  the cost of private mortgage insurance is lower. 
D)  the government holds the lien on the property. 
A)  the mortgage payment is much lower. 
B)  only a very low or zero down payment is required. 
C)  the cost of private mortgage insurance is lower. 
D)  the government holds the lien on the property.

Question 16

The share of the mortgage market held by commercial banks is approximately

Accepted Answer

A)  50 percent. 
B)  30 percent. 
C)  15 percent. 
D)  5 percent. 
A)  50 percent. 
B)  30 percent. 
C)  15 percent. 
D)  5 percent.

Question 17

Growing-equity mortgages (GEMs)

Accepted Answer

A)  help the borrower pay off the loan in a shorter time. 
B)  have such low payments in the first few years that the principal balance increases. 
C)  offer borrowers payments that are initially lower than the payments on a conventional mortgage. 
D)  do all of the above. 
E)  do only A and B of the above. 
A)  help the borrower pay off the loan in a shorter time. 
B)  have such low payments in the first few years that the principal balance increases. 
C)  offer borrowers payments that are initially lower than the payments on a conventional mortgage. 
D)  do all of the above. 
E)  do only A and B of the above.

Question 18

Which of the following terms are found in mortgage loan contracts to protect the lender from financial loss?

Accepted Answer

A)  Collateral 
B)  Down payment 
C)  Private mortgage insurance 
D)  All of the above 
A)  Collateral 
B)  Down payment 
C)  Private mortgage insurance 
D)  All of the above

Question 19

Retired people can live on the equity they have in their homes by using a

Accepted Answer

A)  GEM. 
B)  GPM. 
C)  SAM. 
D)  RAM. 
A)  GEM. 
B)  GPM. 
C)  SAM. 
D)  RAM.

Question 20

(I)Conventional mortgages are originated by private lending institutions,and FHA or VA loans are originated by the government.
(II)Conventional mortgages are insured by private companies,and FHA or VA loans are insured by the government.

Accepted Answer

A)  (I) is true, (II) false. 
B)  (I) is false, (II) true. 
C)  Both are true. 
D)  Both are false. 
A)  (I) is true, (II) false. 
B)  (I) is false, (II) true. 
C)  Both are true. 
D)  Both are false.

Exam 14: The Mortgage Markets

Private mortgage insurance is a policy that guarantees to make up any discrepancy between the value of the property and the loan amount,should a default occur.

During the early years of an amortizing mortgage loan,the lender applies

Subprime loans are those made to borrowers who do not qualify for loans at the usual market rate of interest because of a poor credit rating or because the loan is larger than justified by their income.

Which of the following are useful for home buyers who expect their income to fall in the future?

What factors are used in determining a person's FICO score?

How has the modern mortgage market changed over recent years?

Second mortgages serve the following purposes:

During the early years of a balloon mortgage loan,the lender applies

Adjustable-rate mortgages generally have lower initial interest rates than fixed-rate mortgages.

Which of the following are true of mortgages?

Which of the following is true of mortgage interest rates?

Ginnie Mae

Between 2000 and 2005,home prices increased an average of ________ per year.

Closing for a mortgage loan refers to the moment the loan is paid off.

A borrower who qualifies for an FHA or VA loan enjoys the advantage that

The share of the mortgage market held by commercial banks is approximately

Growing-equity mortgages (GEMs)

Which of the following terms are found in mortgage loan contracts to protect the lender from financial loss?

Retired people can live on the equity they have in their homes by using a

(I)Conventional mortgages are originated by private lending institutions,and FHA or VA loans are originated by the government. (II)Conventional mortgages are insured by private companies,and FHA or VA loans are insured by the government.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

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