Mortgage Markets

This question bank verified by Studydeets

All Questions

Question 1

Free

True/False

Mortgage-backed securities are commonly contained within collateralized debt obligations.

Choose correct answer/s

True

False

Check answer

Question 2

Free

Multiple Choice

Federally insured mortgages guarantee

Choose correct answer/s

loan repayment to the lending financial institution.

that the interest rate will not increase during the life of the mortgage.

the lending financial institution a selling price for the mortgage in the secondary market.

all of the above

Check answer

Question 3

Free

Multiple Choice

At a given point in time, the interest rate offered on a new fixed-rate mortgage is typically ____ the initial interest rate offered on a new adjustable-rate mortgage.

Choose correct answer/s

below

above

equal to

all of the above are very common

Check answer

Question 4

Free

Multiple Choice

An institution that originates and holds a fixed-rate mortgage is adversely affected by interest rates; the borrower who was provided the mortgage is adversely affected by interest rates.

Choose correct answer/s

stable; decreasing

increasing; stable

increasing; decreasing

decreasing; increasing

Check answer

Question 5

Free

Multiple Choice

Rates for adjustable-rate mortgages are commonly tied to the

Choose correct answer/s

average prime rate over the previous year.

Fed's discount rate over the previous year.

average Treasury bill rate over the previous year.

average Treasury bond rate over the previous year.

Check answer

Question 6

Multiple Choice

Caps on mortgage rate fluctuations with adjustable-rate mortgages (ARMs) are typically

Choose correct answer/s

2 percent per year and 5 percent for the mortgage lifetime.

5 percent per year and 15 percent for the mortgage lifetime.

0 percent per year and 10 percent for the mortgage lifetime.

3 percent per year and 8 percent for the mortgage lifetime.

To unlock the question

Question 7

Multiple Choice

From the perspective of the lending financial institution, interest rate risk is

Choose correct answer/s

lower on a 30-year fixed-rate mortgage than on a 15-year fixed-rate mortgage.

lower on a 15-year fixed-rate mortgage than on a 30-year fixed-rate mortgage.

higher on a 15-year fixed-rate mortgage than on a 30-year fixed-rate mortgage.

higher on a 15-year adjustable-rate mortgage than on a 30-year adjustable-rate mortgage.

To unlock the question

Question 8

Multiple Choice

Mortgage companies specialize in

Choose correct answer/s

purchasing mortgages originated by other financial institutions.

investing and maintaining mortgages that they create.

originating mortgages and selling those mortgages.

borrowing money through the creation of mortgages that is used to invest in real estate.

To unlock the question

Question 9

Multiple Choice

For any given interest rate, the shorter the life of the mortgage, the the monthly payment and the the total payments over the life of the mortgage.

Choose correct answer/s

greater; greater

greater; lower

lower; greater

lower; lower

To unlock the question

Question 10

Multiple Choice

A financial institution has a higher degree of interest rate risk on a than a .

Choose correct answer/s

30-year fixed-rate mortgage; 15-year fixed-rate mortgage

30-year variable-rate mortgage; 30-year fixed-rate mortgage

15-year fixed-rate mortgage; 30-year fixed-rate mortgage

15-year variable-rate mortgage; 15-year fixed-rate mortgage

To unlock the question

Question 11

True/False

A balloon-payment mortgage requires interest payments for a 10- to 20-year period, at the end of which the borrower must pay the full amount of the principal.

Choose correct answer/s

True

False

To unlock the question

Question 12

Multiple Choice

Use an amortization schedule. A 15-year $100,000 mortgage has a fixed mortgage rate of 9 percent. In the first month, the total mortgage payment is $ , and $ of this amount representspayment of interest.

Choose correct answer/s

1,014; 264

1,241; 750

1,014; 750

none of the above

To unlock the question

Question 13

Multiple Choice

A mortgage that requires interest payments for a three- to five-year period, then full payment of principal, is a(n)

Choose correct answer/s

chattel mortgage.

balloon-payment mortgage.

variable-rate mortgage.

open-ended mortgage bond.

To unlock the question

Question 14

Multiple Choice

A mortgage with low initial payments that increase over time without ever leveling off is a

Choose correct answer/s

graduated payment mortgage.

growing-equity mortgage.

second mortgage.

shared-appreciation mortgage.

To unlock the question

Question 15

Multiple Choice

The interest rate on a second mortgage is on a first mortgage created at the same time, because the second mortgage is the existing first mortgage in priority claim against the propertyin the event of default.

Choose correct answer/s

higher than; behind

equal to that; equal to

lower than; ahead of

higher than; ahead of

lower than; behind

To unlock the question

Question 16

Multiple Choice

Which of the following mortgages allows the home purchaser to obtain a mortgage at a below-market interest rate throughout the life of the mortgage?

Choose correct answer/s

second mortgage

growing-equity mortgage

graduated-payment mortgage

shared-appreciation mortgage

To unlock the question

Question 17

Multiple Choice

A ____ mortgage allows the borrower to initially make small payments on the mortgage. The payments then increase over the first 5 to 10 years and then level off.

Choose correct answer/s

graduated-payment mortgage

growing-equity mortgage

second mortgage

shared-appreciation mortgage

To unlock the question

Question 18

Multiple Choice

____ was created in 1968 as a corporation that is wholly owned by the federal government. It guarantees payment on mortgages that meet specific criteria.

Choose correct answer/s

Freddie Mac

Ginnie Mae

Fannie Mae

None of the above

To unlock the question

Question 19

True/False

"Securitization" refers to the private insurance of conventional mortgages.

Choose correct answer/s

True

False

To unlock the question

Question 20

Multiple Choice

The difference between the 30-year mortgage rate and the 30-year Treasury bond rate is primarily attributable to

Choose correct answer/s

interest rate risk.

reinvestment rate risk.

credit risk.

insurance risk.

To unlock the question

Mortgage Markets

Mortgage-backed securities are commonly contained within collateralized debt obligations.

Federally insured mortgages guarantee

At a given point in time, the interest rate offered on a new fixed-rate mortgage is typically ____ the initial interest rate offered on a new adjustable-rate mortgage.

An institution that originates and holds a fixed-rate mortgage is adversely affected by ____ interest rates; the borrower who was provided the mortgage is adversely affected by ____ interest rates.

Rates for adjustable-rate mortgages are commonly tied to the

Caps on mortgage rate fluctuations with adjustable-rate mortgages (ARMs) are typically

From the perspective of the lending financial institution, interest rate risk is

Mortgage companies specialize in

For any given interest rate, the shorter the life of the mortgage, the ____ the monthly payment and the ____ the total payments over the life of the mortgage.

A financial institution has a higher degree of interest rate risk on a ____ than a ____ .

A balloon-payment mortgage requires interest payments for a 10- to 20-year period, at the end of which the borrower must pay the full amount of the principal.

Use an amortization schedule. A 15-year $100,000 mortgage has a fixed mortgage rate of 9 percent. In the first month, the total mortgage payment is $ ____ , and $ ____ of this amount representspayment of interest.

A mortgage that requires interest payments for a three- to five-year period, then full payment of principal, is a(n)

A mortgage with low initial payments that increase over time without ever leveling off is a

The interest rate on a second mortgage is ____ on a first mortgage created at the same time, because the second mortgage is ____ the existing first mortgage in priority claim against the propertyin the event of default.

Which of the following mortgages allows the home purchaser to obtain a mortgage at a below-market interest rate throughout the life of the mortgage?

A ____ mortgage allows the borrower to initially make small payments on the mortgage. The payments then increase over the first 5 to 10 years and then level off.

____ was created in 1968 as a corporation that is wholly owned by the federal government. It guarantees payment on mortgages that meet specific criteria.

"Securitization" refers to the private insurance of conventional mortgages.

The difference between the 30-year mortgage rate and the 30-year Treasury bond rate is primarily attributable to

An institution that originates and holds a fixed-rate mortgage is adversely affected by interest rates; the borrower who was provided the mortgage is adversely affected by interest rates.

For any given interest rate, the shorter the life of the mortgage, the the monthly payment and the the total payments over the life of the mortgage.

A financial institution has a higher degree of interest rate risk on a than a .

Use an amortization schedule. A 15-year $100,000 mortgage has a fixed mortgage rate of 9 percent. In the first month, the total mortgage payment is $ , and $ of this amount representspayment of interest.

The interest rate on a second mortgage is on a first mortgage created at the same time, because the second mortgage is the existing first mortgage in priority claim against the propertyin the event of default.