Q1. _____________ 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.
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.
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.
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.