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M & B

Chapter 9 Test Questions

Which of the following types of mortgages would be most advantageous to have on your house if you expected the annual rate of inflation would be higher than most people thought? fixed-rate mortgage
Which one of the following is not true about Privately Issued Pass Throughs (PIP)? They are similar to "Ginnie Maes" in that they are backed by mortgages that qualify for FHA or VA guarantees
A contract designed to use the equity in a home for retirement income without any required payments is called: reverse equity mortgage
What is the monthly payment on a $200,000 conventional fixed-rate mortgage, 7%, financed for 15 years? $1797
With reference to the question above, what is the loan balance after 10 years if paid as agreed? $90,785
What is the monthly payment on a $100,000 fixed rate loan with a 6.5% rate with a term of 30 years? $632
With reference to the question above, if you added $100 to the monthly payment, how soon would your loan be paid off? 249 months
You have just purchased a home and borrowed $50,000, 7 % for 25 years, payable monthly. What is your monthly payment? $353
With reference to the question above, what is the amount of interest paid in the first month of the loan? (Assume and Jan. payment in a 365 day year) $297
How long does it take to repay one-half of the principal on a $70,000, 7%, 15 year mortgage loan? 112 months
Which of the following mortgages would you most like to hold if you were a lender and you expected inflation of uncertain magnitude? adjustable rate mortgage loan
Which of the following holds the largest percentage of mortgages outstanding in the United States? mortgage pools
If you were a manager of a thrift instituition and you expected interest rates to increase, what type of mortgage would you most like to hold? adjustable rate mortgage, monthly
Which of the following statements is not true of all pass-through securities? their interest and principal repayments are predictable
State and local governments make mortgage loans at below-market rates of interest because.. they can obtain funds for mortgage financing cheaply be selling tax-exempt sercurities
Two mortgage investors, who have increased the percentage of mortgages outstanding in the last 20 years, are... mortgage pools and commerical banks
Private mortgage insurance protects the... lender
Which of the following is true about GNMA pass through securities? Interest from borrowers are passed-through to investor, Federally insured mortgage loans guaranteed by the FHA and other federal agencies, GNMA pass-throughs are secured by mortgage pools originated by mortgage banks or other mortgage instituitions.
A savings and loan with a very low net worth position would take which action? make and sell eligible loans to the FHLMC
What is the monthly payment on a home costing $150,000, 30% down, 25 years at 9%? $881.16
With reference to the questions above, what was the amount of interest paid in the first month of the loan? $787.50
With reference to the two questions above, what is the remaining balance on the mortgage after 60 months? $97,936
Which of the following is true about Ginnie Mae I pass through securities? have the same interest rate
A savings and loan writing ARMs and expecting mortgage interest rates to decrease in the future would want... to lengthen the "adjusting" time period
Which of the following is not used to adjust ARM rates? Dow Jones Mortgage Rate Index
In an increasing rate enviroment a thrift institution would probably make the following ARM adjustments: increase the borrower's payments
Which of the following statements is not true about he Federal National Mortgage Association? The FNMA issues pass-through mortgage securities on federally-insured mortgages only
Which of the following questions about REMIC securities is false? REMIC securities provide tax-free income to investors
Mortgage loans are different from other campital market securities in all but one way? issuers are small, risky borrowers
"Amortizing" a mortgage loan means... the loan is repaid in equal, consecutive payments
Conventional mortgages are usually insured by what governmental agency? none of the above
Mortgage-backed securities often have payment patterns that are "doubly convex", which means... that significant changes in the level of interest rates, up and down, produces losses for the investor
Flexiable ARMs protects both lender and borrower form interest rate risk because the mortgage contract stays fixed for a time before it begins to vary with interest rates
Flexiable ARMs would be preferred by borrowers... seeking a rate lower than comparable fixed rates, who may be selling thier home soon, and seeking a fixed payment for a few years
The Tax Reform Act of 1986 increased the popularity of home equity line of credit because... interest incurred under home equity line were deductible, but interest on other household financing was not
All but one of the follwoing are reasonable expectations for investors in pass-through mortgage securities? the timing of the cash flow return form the securities is quite predictable
The original purpose of the Federal Home Loan Mortgage Corporation (Freddie Mac) was... purchase the conventional mortgages from thrift institutions
All but one of the following are advantages of mortgage-backed bonds compared to investing in direct mortgages? they are issued by individuals with limited credit experience
Interest rate caps or rate caps: limit the size of the increase in the loan rate in any year, limit the size of the increase in the loan rate over the loan's life and typically, the annual cap is 1-2%, and the lifetime cap is 5%
An investor in a first level tranche with claims on a pool of mortgages is likely to... have more certain returns and less default-risk exposure
Mortgages with government or private mortgage insurance: offer the investor less default risk than conventional mortgages
All but one of the following has been associated with the increased efficiency of the mortgage markets? the use of varied types of mortgage contracts
Mortgage bankers are mostly likely to be involved in the ________ of a mortgage contract. origination
All but one of the following is associated with tightened mortgage credit standards. an increase in the required loan/value ratio
Which of the following is associated with a loosening of mortgage credit standards? increased loan/value ratios
All but one of the following is associated with determining the creditworthiness of a mortgage borrower? loan/value ratio
All but one of the following is more likely to be associated with mortgage banking activity. permanently funding the mortgage
Mortgage rates, relative to other capital market rates... tend to vary with other rates, tend to be higher than other rates and are becoming more uniform across the country (all of the above)
The largest sector of the capital debt market is associated with... mortgages
Which of the following is not true about Interest Only Mortgages? Low payments in initial years (10 to 15 years)- only includes principal repayment on borrowed amount
Which of the following is not true about Construction-to Permanent Mortgages? both interest and principal payment are made until construction is completed
Which of the following is true about Reverse Annuity Mortgages (RAMs)? RAMs allow homeowners to borrow aganist the equity on thier homes, typically obtained by older people whose home loans have been paid off, typical term is no more than 20 years and homeowners equity declines by amount borrowed.
All but one of the following is true of Balloon Payment Mortgages Rate is variable over the contract term
Which of the following statements about FHA and VA mortgages is false? the borrower is protected in case of default
Created by: callieco