Chapter 4 Quiz: The Secondary Mortgage Market and Federal Credit Agencies

Question 1

An investment is said to be liquid when:

a. it is guaranteed by the government
b. it can be readily sold and turned into cash
c. it is worthless
d. it is difficult to sell

Answer 1

b. it can be readily sold and turned into cash

Question 2

Mortgage-related securities are:

a. easily bought and sold
b. issued by participants in the secondary market
c. securities that have real estate mortgages as their collateral
d. all of the above

Answer 2

d. all of the above

Question 3

When a borrower prematurely stops making loan payments, the loan is said to be:

a. paid off
b. in arrears
c. in suspense
d. in default

Answer 3

d. in default

Question 4

Standard and Poor’s, Fitch, and Moody’s are:

a. primary lenders
b. private secondary lenders
c. rating services
d. mortgage insurance companies

Answer 4

c. rating services

Question 5

FNMA and FHLMC are:

a. banks
b. basically government-chartered private corporations
c. primary lenders
d. none of the above

Answer 5

b. basically government-chartered private corporations

Question 6

A liquid investment may be sold:

a. immediately
b. within a week
c. within a month
d. within a year

Answer 6

a. immediately

Question 7

Private Mortgage Insurance (PMI) is required on loan that exceeds what percentage of the value of the property?

a. 60%
b. 70%
c. 80%
d. 90%

Answer 7

c. 80%

Question 8

The process of tracking mortgages in a pool and comparing their rates to current market rates is called:

a. an investment rating
b. pool analysis
c. market analysis
d. marking to market

Answer 8

d. marking to market

Question 9

Which of the following is true?

a. the FHA insures loans
b. the VA guarantees loans
c. both a and b
d. neither a or b

Answer 9

c. both a and b

Question 10

Which of the following exists solely to provide a secondary market for farm mortgages?

a. Fannie Mae
b. Farmer Mac
c. Freddie Mac
d. none of the above

Answer 10

b. Farmer Mac