Question 1

Why has the online lending market developed in recent years and what are the advantages and disadvantages of this development?

Accepted Answer

The online lending market has developed

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 is a disadvantage of a second mortgage compared to credit card debt?

Accepted Answer

A) The loans are secured by the borrower's home. 
B) The borrower gives up the tax deduction on the primary mortgage. 
C) The borrower must pay points to get a second mortgage loan. 
D) The borrower will find it more difficult to qualify for a second mortgage loan. 
A) The loans are secured by the borrower's home. 
B) The borrower gives up the tax deduction on the primary mortgage. 
C) The borrower must pay points to get a second mortgage loan. 
D) The borrower will find it more difficult to qualify for a second mortgage loan.

Question 4

A loan-servicing agent will

Accepted Answer

A) package the loan for an investor. 
B) hold the loan in their investment portfolio. 
C) collect payments from the borrower. 
D) do both A and C of the above. 
E) do both B and C of the above. 
A) package the loan for an investor. 
B) hold the loan in their investment portfolio. 
C) collect payments from the borrower. 
D) do both A and C of the above. 
E) do both B and C of the above.

Question 5

Down payments are designed to reduce the likelihood of default on mortgage loans.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults?

Accepted Answer

A) a lien 
B) a down payment 
C) private mortgage insurance 
D) borrower qualification 
E) amortization 
A) a lien 
B) a down payment 
C) private mortgage insurance 
D) borrower qualification 
E) amortization

Question 7

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 8

A point on a mortgage loan refers to one monthly payment of principal and interest.

Accepted Answer

A) True 
 B)False

Question 9

A borrower with a 30-year loan can create a GEM by

Accepted Answer

A) simply increasing the monthly payments beyond what is required and designating that the excess be applied entirely to the principal. 
B) converting his ARM into a conventional mortgage. 
C) converting his conventional mortgage into an ARM. 
D) converting his conventional mortgage into a GPM. 
A) simply increasing the monthly payments beyond what is required and designating that the excess be applied entirely to the principal. 
B) converting his ARM into a conventional mortgage. 
C) converting his conventional mortgage into an ARM. 
D) converting his conventional mortgage into a GPM.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

The answer of What are mortgage-backed securities, why were they...

Question 12

Discount points (or simply points)are interest payments made at the beginning of a loan.

Accepted Answer

A) True 
 B)False

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

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 15

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 16

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 17

A problem that initially hindered the marketability of mortgages in a secondary market was that they were not standardized.

Accepted Answer

A) True 
 B)False

Question 18

REMICs are most like

Accepted Answer

A) Freddie Mac pass-through securities. 
B) Ginnie Mae pass-through securities. 
C) participation certificates. 
D) collateralized mortgage obligations. 
A) Freddie Mac pass-through securities. 
B) Ginnie Mae pass-through securities. 
C) participation certificates. 
D) collateralized mortgage obligations.

Question 19

A loan for 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 is

Accepted Answer

A) a subprime mortgage. 
B) a securitized mortgage. 
C) an insured mortgage. 
D) a graduated-payment mortgage. 
A) a subprime mortgage. 
B) a securitized mortgage. 
C) an insured mortgage. 
D) a graduated-payment mortgage.

Question 20

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.

Exam 14: The Mortgage Markets

Why has the online lending market developed in recent years and what are the advantages and disadvantages of this development?

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

Which of the following is a disadvantage of a second mortgage compared to credit card debt?

A loan-servicing agent will

Down payments are designed to reduce the likelihood of default on mortgage loans.

Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults?

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

A point on a mortgage loan refers to one monthly payment of principal and interest.

A borrower with a 30-year loan can create a GEM by

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

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

Discount points (or simply points)are interest payments made at the beginning of a loan.

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

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

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 last years of a balloon mortgage loan, the lender applies

A problem that initially hindered the marketability of mortgages in a secondary market was that they were not standardized.

REMICs are most like

A loan for 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 is

Which of the following are true of mortgage 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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

Filters

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