Question 1

During the early years of a mortgage loan,the lender applies most of the payment to the principal on the loan.

Accepted Answer

A) True 
 B)False

Question 2

________ issues participation certificates,and ________ provides federal insurance for participation certificates.

Accepted Answer

A)  Freddie Mac; Freddie Mac 
B)  Freddie Mac; Ginnie Mae 
C)  Ginnie Mae; Freddie Mac 
D)  Ginnie Mae; Ginnie Mae 
E)  Freddie Mac; no one 
A)  Freddie Mac; Freddie Mac 
B)  Freddie Mac; Ginnie Mae 
C)  Ginnie Mae; Freddie Mac 
D)  Ginnie Mae; Ginnie Mae 
E)  Freddie Mac; no one

Question 3

Which of the following are important ways in which mortgage markets differ from stock and bond markets?

Accepted Answer

A)  The usual borrowers in capital markets are government entities, whereas the usual borrowers in mortgage markets are small businesses. 
B)  The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses. 
C)  The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses and individuals. 
D)  The usual borrowers in capital markets are businesses and government entities, whereas the usual borrowers in mortgage markets are individuals. 
A)  The usual borrowers in capital markets are government entities, whereas the usual borrowers in mortgage markets are small businesses. 
B)  The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses. 
C)  The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses and individuals. 
D)  The usual borrowers in capital markets are businesses and government entities, whereas the usual borrowers in mortgage markets are individuals.

Question 4

Fannie Mae and Freddie Mac together either own or insure the risk on nearly one-fourth of America's residential mortgages.

Accepted Answer

A) True 
 B)False

Question 5

What are mortgage-backed securities,why were they developed,what types of mortgage-backed securities are there,and how do they work?

Accepted Answer

Mortgage back securities are asset based

Question 6

One important advantage to a borrower who qualifies for an FHA or VA loan is the very low interest rate on the mortgage.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following are true of mortgage interest rates?

Accepted Answer

A)  Interest rates on mortgage loans are determined by three factors: current long-term market rates, the term of the mortgage, and the number of discount points paid. 
B)  Mortgage interest rates tend to track along with Treasury bond rates. 
C)  The interest rate on 15-year mortgages is lower than the rate on 30-year mortgages, all else the same. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  Interest rates on mortgage loans are determined by three factors: current long-term market rates, the term of the mortgage, and the number of discount points paid. 
B)  Mortgage interest rates tend to track along with Treasury bond rates. 
C)  The interest rate on 15-year mortgages is lower than the rate on 30-year mortgages, all else the same. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 8

The share of the mortgage market held by savings and loans is

Accepted Answer

A)  over 50 percent. 
B)  approximately 40 percent. 
C)  approximately 20 percent. 
D)  less than 5 percent. 
A)  over 50 percent. 
B)  approximately 40 percent. 
C)  approximately 20 percent. 
D)  less than 5 percent.

Question 9

Explain the features of mortgage loans that are designed to reduce the likelihood of default.

Accepted Answer

Mortgage loans are designed with several

Question 10

Which of the following are useful for home buyers who expect their income to rise 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 11

During the last 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 12

How does an amortizing mortgage loan differ from a balloon mortgage loan?

Accepted Answer

An amortizing mortgage loan and a balloo

Question 13

From 2000 to 2005,housing prices increased,on average,by over 40%. This run up in prices was caused by

Accepted Answer

A)  speculators. 
B)  an increase in subprime loans, which increased demand for new and existing houses. 
C)  both A and B. 
D)  None of the above are correct. 
A)  speculators. 
B)  an increase in subprime loans, which increased demand for new and existing houses. 
C)  both A and B. 
D)  None of the above are correct.

Question 14

(I)ARMs offer lower initial rates and the rate may fall during the life of the loan.
(II)Conventional mortgages do not allow a borrower to take advantage of falling interest rates.

Accepted Answer

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

Exam 14: The Mortgage Markets

During the early years of a mortgage loan,the lender applies most of the payment to the principal on the loan.

________ issues participation certificates,and ________ provides federal insurance for participation certificates.

Which of the following are important ways in which mortgage markets differ from stock and bond markets?

Fannie Mae and Freddie Mac together either own or insure the risk on nearly one-fourth of America's residential mortgages.

What are mortgage-backed securities,why were they developed,what types of mortgage-backed securities are there,and how do they work?

One important advantage to a borrower who qualifies for an FHA or VA loan is the very low interest rate on the mortgage.

Which of the following are true of mortgage interest rates?

The share of the mortgage market held by savings and loans is

Explain the features of mortgage loans that are designed to reduce the likelihood of default.

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

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

How does an amortizing mortgage loan differ from a balloon mortgage loan?

From 2000 to 2005,housing prices increased,on average,by over 40%. This run up in prices was caused by

(I)ARMs offer lower initial rates and the rate may fall during the life of the loan. (II)Conventional mortgages do not allow a borrower to take advantage of falling interest rates.

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

Filters

issues participation certificates,and provides federal insurance for participation certificates.