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| 1 | |
In a ___________________, a mortgage borrower agrees to give up part of any eventual gain on the property, essentially paying it to the lending institution. |
| | A) | home equity loan |
| | B) | IO strip |
| | C) | reverse annuity mortgage |
| | D) | graduated payment mortgage |
| | E) | shared appreciation mortgage |
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| 2 | |
We've encountered so-called "subprime" loans, which have been especially newsworthy over the last year or two. These are: |
| | A) | loans at interest rates below the prime rate of interest. |
| | B) | loans to finance government-operated enterprises. |
| | C) | loans to municipalities, at tax-shielded interest rates. |
| | D) | loans to higher-risk borrowers. |
| | E) | loans made only to businesses, not to individuals. |
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| 3 | |
A/an ________________ can be viewed as a multi-class pass-through security, arising when mortgage loans are securitized. |
| | A) | graduated payment mortgage |
| | B) | collateralized mortgage obligation |
| | C) | reverse annuity mortgage |
| | D) | balloon payment mortgage |
| | E) | FHA loan |
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| 4 | |
Julie is applying for a home mortgage loan of $190,000. The quoted interest rate is 9.0%. Julie will make equal monthly payments, to pay off the loan over 30 years. The monthly payment amount is _________. (nearest dollar) |
| | A) | $1,849 |
| | B) | $1,710 |
| | C) | $ 864 |
| | D) | $1,529 |
| | E) | $6,632 |
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| 5 | |
"Freddie Mac" and "Fannie Mae" are important institutions that came up in connection with: |
| | A) | the commercial paper market. |
| | B) | securitization of mortgage loans. |
| | C) | the provision of correspondent banking services. |
| | D) | the innovation of balloon payment mortgage loans. |
| | E) | entities that sell private mortgage insurance. |
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| 6 | |
If a mortgage loan is called "conventional," this means that the loan: |
| | A) | has no "points." |
| | B) | is a loan offered to some common-interest group, like members of a trade union or a professional association. |
| | C) | is not a VA or FHA mortgage. |
| | D) | is financing a home no larger than 2,000 square feet. |
| | E) | has a 30-year maturity. |
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| 7 | |
Jerry has an outstanding balance on his home mortgage loan of $53,000. The home itself is worth $130,000. Jerry is applying for another loan of $25,000, which will also be secured by the home. He is applying for a/an: |
| | A) | reverse annuity mortgage. |
| | B) | home equity loan. |
| | C) | equity participation mortgage. |
| | D) | balloon payment mortgage. |
| | E) | pass-through. |
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| 8 | |
Wendy applies for a mortgage loan. The stated loan amount will be $200,000. The bank offers her the following deal: interest rate of 6%, equal monthly payments over 15 years, and "2 points." What is the monthly payment amount? (Nearest dollar) |
| | A) | $1,149 |
| | B) | $1,654 |
| | C) | $1,688 |
| | D) | $1,199 |
| | E) | $1,175 |
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| 9 | |
Terry is applying for a mortgage loan of $90,000. Her bank offers an interest rate of 6.50%, equal monthly payments over 30 years, with "1 point." What's the dollar value of the point? (Nearest dollar) |
| | A) | $ 900 |
| | B) | $ 1,391 |
| | C) | $ 5,850 |
| | D) | $ 14 |
| | E) | $ 4,950 |
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| 10 | |
Consider a mortgage loan of $220,000. The interest rate is 9%, with equal monthly payments of $2,231.39 scheduled over 15 years. What is the total interest to be paid, over the entire 15-year life of the loan? (Nearest dollar) |
| | A) | $803,300 |
| | B) | $181,650 |
| | C) | $297,000 |
| | D) | $148,500 |
| | E) | $401,650 |
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| 11 | |
James applies for a $200,000 mortgage loan. The bank offers: an annual interest rate of 12%, no points, with equal monthly payments of $2,057.23 over 30 years. How much of his first payment will be interest expense? (nearest dollar) |
| | A) | $ 247 |
| | B) | $ 800 |
| | C) | $ 21 |
| | D) | $2,000 |
| | E) | $1,991 |
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| 12 | |
Over recent years, many home mortgages have been ______________. This means that the mortgage loans are pooled, and bonds are issued against the mortgage loan payments represented in the pool. |
| | A) | capitalized |
| | B) | securitized |
| | C) | auctioned |
| | D) | reconstituted |
| | E) | underfunded. |
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| 13 | |
With __________________, the mortgage borrower pays for an insurance contract, protecting the lending institution if the underlying property is worth less than the loan balance. |
| | A) | PMI |
| | B) | a lien |
| | C) | FDIC insurance |
| | D) | a conventional mortgage |
| | E) | a balloon payment mortgage |
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| 14 | |
If the scheduled monthly payment on a mortgage is sufficient to pay off the principal and interest by the maturity date, we would say that this mortgage is fully ______________. |
| | A) | ballooned |
| | B) | balanced |
| | C) | secured |
| | D) | amortized |
| | E) | backed |
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| 15 | |
Ten years ago, Herb borrowed $135,000 for a home, with a 30-year mortgage. The loan has a fixed annual interest rate of 9.0%, with equal (and fully amortizing) payments. The monthly payment is $1,086.24. Herb just made his 120th payment. What is the balance due on his loan? (nearest dollar) |
| | A) | $ 85,750 |
| | B) | $ 90,000 |
| | C) | $125,202 |
| | D) | $260,698 |
| | E) | $120,730 |
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| 16 | |
A/an ________________ mortgage is one in which the interest rate is tied to some market interest rate. As the market rate changes, the mortgage interest rate will be re-set; hence, the payment amount can change. |
| | A) | balloon |
| | B) | discount |
| | C) | graduated payment |
| | D) | home equity |
| | E) | adjustable rate |
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| 17 | |
Consider a mortgage loan of $115,000. The interest rate is 6%, with an equal monthly payment of $970.44, scheduled over 15 years. Within the very first payment, how much is for principal reduction? (Nearest dollar) |
| | A) | $280 |
| | B) | $575 |
| | C) | $395 |
| | D) | $114 |
| | E) | $ 58 |
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