Question 1

During the last 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 2

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 3

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 4

Borrowers tend to prefer ________ to ________, whereas lenders prefer ________.

Accepted Answer

A) fixed-rate loans; ARMs; fixed-rate loans 
B) ARMs; fixed-rate loans; fixed-rate loans 
C) fixed-rate loans; ARMs; ARMs 
D) ARMs; fixed-rate loans; ARMs 
A) fixed-rate loans; ARMs; fixed-rate loans 
B) ARMs; fixed-rate loans; fixed-rate loans 
C) fixed-rate loans; ARMs; ARMs 
D) ARMs; fixed-rate loans; ARMs

Question 5

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

Accepted Answer

A) 50 percent. 
B) 25 percent. 
C) 15 percent. 
D) 5 percent. 
A) 50 percent. 
B) 25 percent. 
C) 15 percent. 
D) 5 percent.

Question 6

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 7

What are points? What is their purpose?

Accepted Answer

Points can refer to various concepts dep

Question 8

Which of the following are true of mortgages?

Accepted Answer

A) A mortgage is a long-term loan secured by real estate. 
B) Borrowers pay off mortgages over time in some combination of principal and interest payments that result in full payment of the debt by maturity. 
C) Less than 65 percent of mortgage loans finance residential home purchases. 
D) All of the above are true of mortgages. 
E) Only A and B of the above are true of mortgages. 
A) A mortgage is a long-term loan secured by real estate. 
B) Borrowers pay off mortgages over time in some combination of principal and interest payments that result in full payment of the debt by maturity. 
C) Less than 65 percent of mortgage loans finance residential home purchases. 
D) All of the above are true of mortgages. 
E) Only A and B of the above are true of mortgages.

Question 9

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 10

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 11

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 10 percent. 
A) over 50 percent. 
B) approximately 40 percent. 
C) approximately 20 percent. 
D) less than 10 percent.

Question 12

Nearly half the funds for mortgage lending comes from mortgage pools and trusts.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true of mortgage interest rates?

Accepted Answer

A) Longer-term mortgages have lower interest rates than shorter-term mortgages. 
B) Mortgage rates are lower than Treasury bond rates because of the tax deductibility of mortgage interest rates. 
C) In exchange for points, lenders reduce interest rates on mortgage loans. 
D) All of the above are true. 
E) Only A and B of the above are true. 
A) Longer-term mortgages have lower interest rates than shorter-term mortgages. 
B) Mortgage rates are lower than Treasury bond rates because of the tax deductibility of mortgage interest rates. 
C) In exchange for points, lenders reduce interest rates on mortgage loans. 
D) All of the above are true. 
E) Only A and B of the above are true.

Question 14

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 15

A FICO score below 660 is considered good while a score above 720 is likely to cause problems in obtaining a loan.

Accepted Answer

A) True 
 B)False

Question 16

(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.

Question 17

Evaluate the advantages and disadvantages, from both the lender's and borrower's perspectives, of fixed-rate and adjustable-rate mortgages.

Accepted Answer

Fixed-rate mortgages offer the advantage

Question 18

Which of the following are true of mortgages?

Accepted Answer

A) A mortgage is a long-term loan secured by real estate. 
B) A borrower pays off a mortgage in a combination of principal and interest payments that result in full payment of the debt by maturity. 
C) Over 80 percent of mortgage loans finance residential home purchases. 
D) All of the above are true of mortgages. 
E) Only A and B of the above are true of mortgages. 
A) A mortgage is a long-term loan secured by real estate. 
B) A borrower pays off a mortgage in a combination of principal and interest payments that result in full payment of the debt by maturity. 
C) Over 80 percent of mortgage loans finance residential home purchases. 
D) All of the above are true of mortgages. 
E) Only A and B of the above are true of mortgages.

Question 19

The interest rate borrowers pay on their mortgages is determined by

Accepted Answer

A) current long-term market rates. 
B) the term. 
C) the number of discount points. 
D) all of the above. 
A) current long-term market rates. 
B) the term. 
C) the number of discount points. 
D) all of the above.

Question 20

The most common type of mortgage-backed security is

Accepted Answer

A) the mortgage pass-through, a security that has the borrower's mortgage payments pass through the trustee before being disbursed to the investors. 
B) collateralized mortgage obligations, a security which reduces prepayment risk. 
C) the participation certificate, a security which passes the borrower's mortgage payments equally among all the owners of the certificates. 
D) the securitized mortgage, a security which increases the liquidity of otherwise illiquid mortgages. 
A) the mortgage pass-through, a security that has the borrower's mortgage payments pass through the trustee before being disbursed to the investors. 
B) collateralized mortgage obligations, a security which reduces prepayment risk. 
C) the participation certificate, a security which passes the borrower's mortgage payments equally among all the owners of the certificates. 
D) the securitized mortgage, a security which increases the liquidity of otherwise illiquid mortgages.

Exam 14: The Mortgage Markets

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

Ginnie Mae

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

Borrowers tend to prefer ________ to ________, whereas lenders prefer ________.

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

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

What are points? What is their purpose?

Which of the following are true of mortgages?

Second mortgages serve the following purposes:

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

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

Nearly half the funds for mortgage lending comes from mortgage pools and trusts.

Which of the following is true of mortgage interest rates?

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

A FICO score below 660 is considered good while a score above 720 is likely to cause problems in obtaining a loan.

(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.

Evaluate the advantages and disadvantages, from both the lender's and borrower's perspectives, of fixed-rate and adjustable-rate mortgages.

Which of the following are true of mortgages?

The interest rate borrowers pay on their mortgages is determined by

The most common type of mortgage-backed security is

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

Borrowers tend to prefer to , whereas lenders prefer .