Question 1

Mortgage-backed securities have declined in popularity in recent years as institutional investors have sought higher returns in other markets.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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 5

Typically, discount points should not be paid if the borrower will pay off the loan in ________ years or less.

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20 
A) 5 
B) 10 
C) 15 
D) 20

Question 6

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 7

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 8

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 9

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 10

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 11

(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 12

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 13

How has the modern mortgage market changed over recent years?

Accepted Answer

The answer of How has the modern mortgage market changed...

Question 14

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

Accepted Answer

Mortgage loans are designed with several

Question 15

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%

Exam 14: The Mortgage Markets

Mortgage-backed securities have declined in popularity in recent years as institutional investors have sought higher returns in other markets.

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

Second mortgages serve the following purposes:

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

Typically, discount points should not be paid if the borrower will pay off the loan in ________ years or less.

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

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

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

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

(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.

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

How has the modern mortgage market changed over recent years?

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

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

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

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