Chapter 3 Quiz: Loan Fund Sources - Primary Market Flashcards
What percentage of its net income must a REIT distribute to its investors/shareholders annually?
a. 95%
b. 90%
c. 50%
d. 100%
b. 90% (p. 58)
“People invest in /REITs because they are not taxed twice (as with a typical stock corporation) if the REIT annually distributes 90% of its total revenue to its investors. The stock market now considers REITs a separate and distinct investment class.”
The collection of principal and interest payments by one lender on behalf of another is called:
a. loan seasoning
b. loan participation
c. loan portfolio
d. loan servicing
d. loan servicing (p. 52)
- servicing loans means doing the accounting necessary for a loan
- mortgage bankers generally want to service the loans they make and resell
- advantage is the control of impound accounts for taxes and insurance when they are collected in advance with loan payments; these funds, when deposited in a bank, give mortgage bankers tremendous clout when they are borrowers from banks holding such funds
A federally related transaction is:
a. any transaction that involves the federal government
b. any loan by a bank
c. any loan by a credit union
d. all of the above
a. any transaction that involves the federal government (p. 48)
A mortgage broker:
a. acts as a loan coordinator
b. loans his/her own money
c. services loans
d. all of the above
a. acts as a loan coordinator (p. 54)
“Mortgage brokers are financial ‘go-betweens’ or coordinators. They arrange financing for borrowers and work as intermediaries between the lender and the borrower.”
-mortgage bankers/companies lend their own money
The practice of holding a loan for a specified period before it may be sold into the secondary market is called:
a. loan seasoning
b. loan participation
c. loan portfolio
d. loan servicing
a. loan seasoning (p. 50)
“A seasoned loan is one that has been held for a sufficient time to establish that the borrower is making his/her payments in a timely manner, often 6-12 months.”
The deposit insurance fund for banks is managed by:
a. FSLIC
b. FNMA
c. FDIC
d. none of the above
c. FDIC (p. 48)
“Financial Institutions Reform, Recovery, and Enforcement ACT (FIRREA) protects the federal insurance funds from bank failure by requiring the Federal Deposit Insurance Corporation (FDIC) to insure individual deposits up to $250,000.”
Requiring a percentage of a developer’s profit, as well as principal and interest, is known as:
a. loan seasoning
b. loan participation
c. loan portfolio
d. loan servicing
b. loan participation (p. 57)
“A participation loan is one in which the lender assumes a percentage of ownership in addition to the loan proceeds. This gives them an ongoing permanent share of the profits of the business to which they have loaned the money.”
Money market funds are:
a. privately insured
b. federally insured
c. not insured
d. none of the above
c. not insured (p. 47)
Loans that are not sold into the secondary market are called:
a. seasoned loans
b. participation loans
c. portfolio loans
d. serviced loans
c. portfolio loans (p. 51)
“Portfolio loans are loans held by a lender as an investment. It is rare for a mortgage banker to tie up capital in a portfolio of loans. Lending is a capital intensive activity that requires a great deal of capital or the availability of such capital.”
The usage of mobile apps and increased FinTech:
a. increases productivity
b. saves time
c. lowers consumer cost
d. all of the above
d. all of the above (p. 59)
“The adoption of computerization and the Internet has both lowered consumer costs and increased productivity throughout the industry–thanks to the remarkable advances in FinTech.”
