CHAPTER 4: THE SECONDARY MORTGAGE MARKET & FEDERAL CREDIT AGENCIES

Question 1

An investment is said to be “liquid” when:

Answer 1

it can be readily sold and turned into cash

Question 2

Mortgage-related securities are:

Answer 2

• easily bought and sold
• issued by participants in the secondary market
• securities that have real estate mortgages as their collateral

Question 3

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

Answer 3

in default

Question 4

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

Answer 4

rating services

Question 5

FNMA & FHLMC are:

Answer 5

Government-chartered private corporations

Question 6

A liquid investment may be sold:

Answer 6

immediately

Question 7

Private Mortgage Insurance (PMI) is required on loans that exceed what percentage of the value of a property?

Answer 7

80%

Question 8

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

Answer 8

marking to market

Question 9

T or False: The FHA insures loans and the VA guarantees loans

Answer 9

TRUE

Question 10

Who exists solely to provide a secondary market for farm mortgages?

Answer 10

Farmer Mac

Question 11

Participants who make up the secondary mortgage market:

Answer 11

Raise the necessary funds to purchase the mortgages

Question 12

When an investor has an “undivided interest” in the mortgage pool, it is commonly referred to as a:

Answer 12

Pass-through security

Question 13

The different classes of securities are called:

Answer 13

Tranches

Question 14

If established as REMIC, collateralized mortgage obligations may be issued by:

Answer 14

A trust
A corporation
A partnership

Question 15

The FHFA refers to the:

Answer 15

Federal Housing Finance Agency

Question 16

FAMC is also referred to as:

Answer 16

Farmer Mac