Question 1

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

Accepted Answer

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

Question 2

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.

Question 3

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.

Question 4

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.

Question 5

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.

Question 6

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

How has the modern mortgage market changed over recent years?

Accepted Answer

The subprime emergency was the sharp inc...

Question 9

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

Question 10

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.

Question 11

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.

Question 12

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.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

(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.

Question 15

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.

Question 16

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.

Question 17

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.

Question 18

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 19

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.

Question 20

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

Exam 14: The Mortgage Markets

(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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true of mortgage interest rates?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How has the modern mortgage market changed over recent years?

Correct AnswerverifiedThe subprime emergency was the sharp inc...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Second mortgages serve the following purposes:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Growing-equity mortgages (GEMs)

Correct AnswerverifiedShow Answer

Ginnie Mae

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following are true of mortgages?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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The subprime emergency was the sharp inc...
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