Chap 13 Flashcards
A partially amortized mortgage has a final payment required to completely pay off the loan called
A) a balloon payment. B) a negative amortization payment. C) Intermediation. D) secondary market activity.
Explanation
The answer is a balloon payment. With a partially amortized mortgage, the buyer makes regular payments smaller than what is required to completely pay off the loan by the date of termination. A single large final payment, called a balloon payment is made at loan maturity.
Which statement is FALSE?
A)
Loans that meet Fannie Mae guidelines are called conforming loans.
B)
Fannie Mae provides master commitments for large real estate projects.
C)
Fannie Mae deals directly with homebuyers.
D)
Fannie Mae created the first secondary market for mortgage loans.
C. FM deals directly with homebuyers
When investors bypass thrift institutions for direct investment elsewhere, the process is called
A) capital-deficit area support. B) disintermediation. C) loan correspondence. D) intermediation.
B. disintermediation
A prospective borrower has a projected PITI of $1,000, an MIP of $260, a monthly car payment of $290, and a student loan payment of $175 per month. The borrower’s gross monthly income is $4,200. What is the borrower’s HER?
A) 30% B) 24% C) 38% D) 28%
Explanation
The answer is 30%. $1,000 PITI + $260 MIP = $1,260 monthly housing expense ÷ $4,200 gross monthly income = .30 or 30% HER
The law requiring lenders to furnish borrowers with the APR disclosure is the
A) Fair Housing and Lending Act. B) Consumer Credit Protection Act. C) Truth in Lending Act. D) Real Estate Settlement Procedures Act.
The answer is Truth in Lending Act. The Consumer Credit Protection Act (Truth in Lending Act) requires lenders to provide borrowers with the APR disclosure.
Which statement is TRUE regarding VA mortgage loans?
A)
The VA buyer may be charged for the real estate commission of the closing statement.
B)
The VA funding fee may be added to the loan amount and financed over the life of the loan.
C)
Lenders use a housing expense ratio and a total obligations ratio to qualify VA borrowers.
D)
The total obligations ratio for a VA mortgage loan is 36%.
The answer is the VA funding fee may be added to the loan amount and financed over the life of the loan. Funding fee expenses may be added to the maximum loan amount and financed over the life of the loan.
The interest portion on the first monthly payment of a 30-year 6% mortgage is $650. If the loan-to-value ratio is 80%, how much did the owner pay for the house?
A) $162,500 B) $68,750 C) $130,000 D) $168,750
The answer is $162,500. Part ÷ rate = total. $650 × 12 months = $7,800 = part (the annual interest). $7,800 part ÷ .06 rate = $130,000 whole = loan amount. $130,000 loan (part) ÷ .80 rate = $162,500 purchase price.
You have a VA loan of $89,000 at 6% with a 30-year term. The monthly principal and interest payment is $533.60. What portion of the second month’s payment will apply to amortization of the mortgage?
A) $177.20 B) $89.04 C) $444.56 D) $88.60
Explanation
The answer is $89.04. $89,000 loan amount × .06 rate = $5,340 annual interest ÷ 12 months = $445 interest month 1. $533.60 monthly payment – $445 interest = $88.60 principal paid month 1. $89,000 loan – $88.60 principal paid = $88,911.40 outstanding balance. $88,911.40 × .06 rate = $5334.684 ÷ 12 months = $444.557 or $444.56 (rounded). $533.60 month payment – $444.56 interest = $89.04 principal paid month 2.
A commercial bank sold a group of 2,000 mortgages directly to Fannie Mae. This is an example of
A) primary market activity. B) intermediation. C) secondary market activity. D) loan correspondence.
The answer is secondary market activity. This situation is an example of secondary market activity.
In an adjustable-rate mortgage, the calculated interest rate is the
A)
margin + payment cap.
B)
index + margin.
C)
interest rate cap + payment cap.
D)
payment cap + adjustment interval.
b. index + margin
Which individual must be state licensed as a mortgage loan originator?
A)
Employee who works as a loan originator for a mortgage brokerage company that is not federally regulated
B)
Employee who works as a loan originator for First USA Credit Union
C)
Employee who processes loans for First National Bank of Orlando
D)
Employee of Bank of Florida who works as a bank teller
Explanation
The answer is employee who works as a loan originator for a mortgage brokerage company that is not federally regulated. Employees who work as loan originators for mortgage brokerage companies that are not federally regulated must be state licensed as a mortgage loan originator.
Which qualifying ratio applies to conventional mortgage loans?
A)
31% HER
B)
31% TOR
C)
41% HER
D)
36% TOR
d. 36
