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Financial Markets and Institutions – Mortgage MCQ Answers

mortgage mcq answersQ1. _____________ are mortgages to borrowers who do not qualify for prime mortgages because of weakened credit histories, including payment delinquencies, charge-offs, judgments, and bankruptcies.

  • Jumbo mortgages
  • Subprime mortgages
  • Adjustable-rate mortgages
  • Second mortgages

Q2. Mortgage borrowers must pay 20 percent of the home’s purchase price at closing as a down payment.

  • True
  • False

Q3. As a fixed-rate mortgage nears maturity, the portion of the monthly mortgage payment that is applied to principal _________ while the amount that is applied to interest ___________.

  • Decreases; increases
  • Increases; decreases
  • Does not change; decreases
  • Increases; does not change

Q4. _________ paid at closing can reduce the interest rate used to determine the monthly payments on a mortgage.

  • Discount points
  • Down payments
  • Loan origination fees
  • Amortization rates

Q5. Which government agency does not securitize mortgage but provides direct and indirect guarantees that allow private entities to create mortgage-backed securities?

  • Freddie Mac
  • Federal Housing Administration
  • Fannie Mae
  • Ginnie Mae

Q6. What type of mortgages are used to finance the acquisition of apartment complexes, townhouses, and condominiums?

  • Commercial mortgages
  • Single family mortgages
  • Farm mortgages
  • Multifamily dwelling mortgages

Q7. As part of a mortgage agreement, a financial institution places a lien on the property until the loan is paid in full.

  • True
  • False

Q8. Benefits of securitization include all of the following EXCEPT:

  • Reduced credit risk
  • Generation of income
  • Greater reserve requirements
  • Increased liquidity

Q9. FHA mortgages and VA mortgages are conventional mortgages.

  • True
  • False

Q10. When a financial institution sells a mortgage with recourse, the financial institution retains a credit risk liability in the event the buyer returns the mortgage.

  • True
  • False