false | The largest category of mortgages by dollar volume is commercial mortgages. |

true | The process of mortgage securitization results in a separation between mortgage origination and mortgage financing. |

true | subprime mortgage is a mortgage made to a borrower who has a below normal credit rating. |

false | Federally insured mortgages are called conventional mortgages. |

false | Private mortgage insurance (and hence, that part of the homeowner’s monthly payment) is automatically removed from a mortgage when the loan-to-value ratio on the mortgage falls below 80 percent. |

true | A borrower using a conventional mortgage will have to put up at least a 20 percent down payment or purchase private mortgage insurance. |

false | Discount points are paid to reduce the down payment required. |

true | On a fixed-rate mortgage the dollars of interest the homeowner pays falls each year the mortgage is outstanding. |

homecommercialmultfarm | 9. Rank the following types of mortgages by amount outstanding from largest to smallest.I. Home mortgagesII. Multifamily mortgagesIII. Farm mortgagesIV. Commercial mortgages A. I, II, III, IVB. I, II, IV, IIIC. II, I, IV, IIID. IV, II, III, IE. I, IV, II, III |

securitization | 10. The process of packaging and/or selling mortgages that are then used to back publicly traded debt securities is called A. collateralization.B. securitization.C. market capitalization.D. stock diversification.E. mortgage globalization. |

lien | 11. A ___________ placed against mortgaged property ensures that the property cannot be sold (except by the lender) until the mortgage is paid off. A. collateralB. lienC. writ of habeas corpusD. down paymentE. writ of certiorari |

none | 12. If a borrower makes a 20 percent down payment on a conventional mortgage, she will be required to obtain A. FHA insurance.B. VA insurance.C. private mortgage insurance.D. GNMA payment guarantees.E. none of the options. |

higher and less interest | 13. Mortgage payments are ____________ on a 15-year fixed-rate mortgage than on a 30-year fixed-rate mortgage, and ____________ is paid on a 15-year mortgage than on a 30-year mortgage; ceteris paribus. A. lower; less interestB. lower; less principalC. higher; less interestD. higher; more principalE. higher; more interest |

lender ;borrower | With a fixed-rate mortgage, the ____________ bears the interest rate risk and with an ARM the ______________ bears the interest rate risk. A. borrower; lenderB. borrower; borrowerC. lender; lenderD. lender; borrowerE. federal government; pool organizer |

amoritization schedule | 15. The schedule showing how monthly mortgage payments are split into principal and interest is called a(n) A. securitization schedule.B. balloon payment schedule.C. graduated payment schedule.D. amortization schedule.E. growing equity schedule. |

1203.48.80 * $255,000 = Pmt × PVIFA (0.0585/12, 360 months); Pmt = $1,203.48 | 16. You purchase a $255,000 house and you pay 20 percent down. You obtain a fixed-rate mortgage where the annual interest rate is 5.85 percent and there are 360 monthly payments. What is the monthly payment? A. $1,215.27 B. $1,203.48 C. $1,194.45 D. $1,367.22 E. $1,504.35 0 |

$265,000 = [Pmt × PVIFA (0.0625/12, 180 months)] + $275 = $2,547 | You obtain a $265,000, 15-year fixed-rate mortgage. The annual interest rate is 6.25 percent. In addition to the principal and interest paid, you must pay $275 a month into an escrow account for insurance and taxes. What is the total monthly payment (to the nearest dollar)? A. $2,272 B. $1,632 C. $2,547 D. $1,907 E. $2,311 |

0.75 * $325,000 = Pmt × PVIFA (0.0575/12, 360 months); Balance after five years = $226,107.8; New Pmt = $226,107.8/PVIFA (0.051/12,300) = $1,335.01 | 18. You purchase a $325,000 town home and you pay 25 percent down. You obtain a 30-year fixed-rate mortgage with an annual interest rate of 5.75 percent. After five years you refinance the mortgage for 25 years at a 5.1 percent annual interest rate. After you refinance, what is the new monthly payment (to the nearest dollar)? A. $1,422 B. $1,401 C. $1,366 D. $1,335 E. $1,296 |

$2,250,000 = Pmt × PVIFA (0.072/12, 360 months); Pmt = $15,272.73; New Balance = $15,272.73 × PVIFA (0.072/12, 300 months) = $2,122,425.62 | 19. A borrower took out a 30-year fixed-rate mortgage of $2,250,000 at a 7.2 percent annual rate. After five years, he wishes to pay off the remaining balance. Interest rates have by then fallen to 7 percent. How much must he pay to retire the mortgage (to the nearest dollar)? A. $2,122,426 B. $2,225,330 C. $2,015,678 D. $2,212,041 E. $1,999,998 |

0.80 * 245,000 * 1.03 = Pmt × PVIFA (0.05/12, 360 months); Pmt = $1,083.74; Total interest = (360 * 1,083.74) – (0.80 245,000 1,083.74) – (0.80 = Pmt × PVIFA (0.05/12, 360 months); Pmt = $1,083.74; Total interest = (360 * 1,083.74) – (0.80 * 245,000 * 1.03) = $188,265 | A homebuyer bought a house for $245,000. The buyer paid 20 percent down but decided to finance closing costs of 3 percent of the mortgage amount. If the borrower took out a 30-year fixed-rate mortgage at a 5 percent annual interest rate, how much interest will the borrower pay over the life of the mortgage? A. $224,655 B. $180,622 C. $228,477 D. $188,265 E. $248,575 |

$195,000 = Pmt × PVIFA (0.055/12, 180 months); Pmt of $1,593.31 × 180 = $91,796; $195,000 = Pmt × PVIFA (0.061/12, 360 months); Pmt of $1,181.69 × 360 = $230,408; $230,408 – $91,796 = $138,612 | 21. A homeowner could take out a 15-year mortgage at a 5.5 percent annual rate on a $195,000 mortgage amount, or she could finance the purchase with a 30-year mortgage at a 6.1 percent annual rate. How much total interest over the entire mortgage period could she save by financing her home with the 15-year mortgage (to the nearest dollar)? A. $230,408 B. $190,105 C. $155,612 D. $144,325 E. $138,612 |

No Points: Pmt = $250,000/PVIFA (0.06/12, 360 months); Pmt = $1,498.88; Pay Points: Pmt = $250,000/PVIFA (0.055/12, 360 months); Pmt = $1,419.47; Pmt savings = $1,498.88 – $1,419.47 = $79.40; NPV of points: [$79.40 × PVIFA (0.055/12, 360 months)] – (0.0225 × $250,000) = $8,360 | 22. A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar)? A. $9,475 B. $8,360 C. $7,564 D. $7,222 E. $6,578 |

$5,625 points cost = $79.40 payment savings× PVIFA (0.055/12, N); N = 85.85 months/12 = 7.15 years | 23. A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly? A. 7.15 years B. 3.33 years C. 6.04 years D. 5.90 years E. more than 30 years |

$5,625 points cost/79.40 payment savings = N = 70.84 months/12 = 5.90 years Refer To: 07-22 | 24. A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is not invested? A. 7.15 years B. 3.33 years C. 6.04 years D. 5.90 years E. more than 30 years |

mortgage backed bond | 25. The least used form of mortgage securitization is the ______________________. A. second mortgageB. mortgage-backed bondC. mortgage pass-throughD. CMOE. home equity loan |

$50,000 | 26. You want to buy a $250,000 house and you will use a conventional mortgage. What is the minimum down payment you have to make to avoid having to purchase mortgage insurance? A. $10,000B. $20,000C. $30,000D. $40,000E. $50,000 |

.5 percent of the loan amount | 27. The FHA charges the homeowner __________________ to insure an FHA mortgage. A. nothingB. 0.5 percent of the loan amountC. $500D. 1 percent of the loan amountE. $1,500 |

ram | 28. A(n) ___________________ is used to help retired people receive monthly income in exchange for the equity in their home. A. SAMB. Equity Participation MortgageC. RAMD. PLAME. GEM |

Mortgage companies service more mortgages than they originate.The government is involved in the residential mortgage markets | 29. Which of the following statements about mortgage markets is/are true? I. Mortgage companies service more mortgages than they originate. II. Servicing fees typically range from 2 percent to 4 percent. III. Most mortgage sales are with recourse. IV. The government is involved in the residential mortgage markets. A. I, III, and IV onlyB. II, III, and IV onlyC. I, II, and IV onlyD. II and III onlyE. I and IV only |

I. GNMA provides timing insurance. III. GNMA insures only FHA, VA, and FMHA loans.IV. GNMA requires that all mortgages in the pool have the same interest rate. | 30. Which of the following statements about GNMA is/are true? I. GNMA provides timing insurance. II. GNMA creates pools of mortgages and issues securities. III. GNMA insures only FHA, VA, and FMHA loans. IV. GNMA requires that all mortgages in the pool have the same interest rate. A. I, II, III, and IV are trueB. I, III, and IV onlyC. I, II, and III onlyD. II, III, and IV onlyE. III and IV only |

I. the pass-through yield is 103 basis points above the comparable maturity Treasury bond.II. the pass-through is being prepaid more quickly than standard PSA | 31. A $25,000 face value GNMA pass-through quote sheet lists a spread to average life of 103, PSA of 220, and a price of 101-09. This means thatI. the pass-through yield is 103 basis points above the comparable maturity Treasury bond.II. the pass-through is being prepaid more quickly than standard PSA.III. the pass-through is priced at $25,272.50. A. I, II, and III are correctB. I and II onlyC. I and III onlyD. II and III onlyE. III only |

prepayment penalty | 32. Mortgage fees paid by the homeowner at, or prior to, closing upon the purchase of a house typically include all but which one of the following? A. application feeB. title search feeC. title insurance feeD. appraisal feeE. prepayment penalty |

I. the MBB does not result in the removal of mortgages from the balance sheet.II. a MBB holder has no prepayment risk.III. cash flows on a MBB are not directly passed through from mortgages. | 33. An MBB differs from a CMO or a pass-through in thatI. the MBB does not result in the removal of mortgages from the balance sheet.II. a MBB holder has no prepayment risk.III. cash flows on a MBB are not directly passed through from mortgages. A. I, II, and IIIB. I and II onlyC. II and III onlyD. I and III onlyE. I only |

probably has a higher couponwill mature more quickly | 34. One fixed-rate mortgage pool has a 750 PSA and a second fixed-rate pool has 150 PSA. The pool with the higher PSA ______________________ than the pool with the lower PSA.I. probably has a higher couponII. probably has lower default riskIII. will mature more quickly A. I, II, and IIIB. I and II onlyC. II and III onlyD. I and III onlyE. I only |

none | 35. As compared to fixed-rate mortgages, ARMs result in which of the following for the lender?I. Higher interest rate riskII. Lower default riskIII. Greater prepayment penalty fees A. I, II, and IIIB. I and II onlyC. II and III onlyD. I and III onlyE. none of the options |

ram | 36. Which one of the following types of mortgages is likely to become more popular as the average age of the U.S. population increases? A. GEMB. GPMC. SAMD. PLAE. RAM |

gnma | 37. Which one of the following entities is an actual government agency dealing with mortgages? A. GNMAB. FNMAC. FHLMCD. PIPE. CMO |

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