Chapter Exercises Flashcards
Chapter 1:
Exercise 1.1:
Apply Your Knowledge:
Match the term with the statement that best describes it.
TERM:
A. FDIC
B. FHA
C. Fully Amortizing
D. Jumbo Loans
E. Mortgage Insurance
STATEMENT:
1. Covers loss due to default and property value decline
2. Insures bank deposits
3. Largest mortgage loan insurer
4. Level loan payments
5. Non-conforming loan
A. FDIC - 2. Insures bank deposits
B. FHA - 3. Largest mortgage loan insurer
C. Fully Amortizing - 4. Level loan payments
D. Jumbo Loans - 5. Non-conforming loan
E. Mortgage Insurance - 1. Covers loss due to default and property value decline
Chapter 1:
Exercise 1.2:
Knowledge Check:
The ______ was created in 1933 as part of the NEW DEAL to insure consumer deposits.
A. Department of Housing and Urban Development (HUD)
B. Federal Deposit Insurance Corporation (FDIC)
C. Federal Housing Finance Agency (FHFA)
D. National Credit Union Administration (NCUA)
B. Federal Deposit Insurance Corporation. The FDIC was created in 1933 as part of the New Deal, to insure commercial bank deposits against bank failures and bank runs.
Chapter 1:
Exercise 1.3:
Knowledge Check:
1. When borrowers and MLOs come together to negotiate terms and close mortgage loan transactions, this is referred to as:
A. hypothecation.
B. mortgage-brokered loans.
C. the primary mortgage market.
D. the secondary mortgage market.
C. the primary market. - When borrowers and lenders negotiate mortgage terms and close mortgage loans, they are acting in the primary market.
Chapter 1:
Exercise 1.3:
Knowledge Check:
2. Mortgage bankers fund mortgage loans with all the following EXCEPT:
A. borrowed capital.
B. in-house cash.
C. hedge funds.
D. warehouse lines of credit.
C. hedge funds. - The mortgage banker, as a correspondent, closes the loan with internally-generated funds in its own name or with funds borrowed from a warehouse lender.
Chapter 1:
Exercise 1.4:
Knowledge Check:
1. Conforming loans follow loan-to-value and income expense guidelines that are set by secondary market agencies such as:
A. the CFPB.
B. the FFIEC.
C. the FNMA.
D. PMI companies.
C. the FNMA. - FNMA (Fannie Mae) creates national underwriting criteria, which is the guideline for the loan characteristics that it will purchase in the secondary market.
Chapter 1:
Exercise 1.4:
Knowledge Check:
2. _______ guarantees investors the timely payment of principal and interest on MBSs backed by federally-insured or guaranteed loans - mainly loans insured by the FHA or guaranteed by the VA.
A. Fannie Mae
B. Freddie Mac
C. Ginnie Mae
C. Ginnie Mae - Ginnie Mae guarantees investors the timely payment of principal and interest on MBSs backed by federally-insured or guaranteed loans
- mainly loans insured by the FHA or guaranteed by the VA.
Chapter 1:
Exercise 1.4:
Knowledge Check:
3. By participating in the secondary mortgage market, mortgage lenders can:
A. close more conventional loans.
B. obtain government backing for their closed loans.
C. provide competitive interest rates.
D. replenish the funds used to make mortgage loans.
D. replenish the funds used to make mortgage loans. - When mortgage lenders sell their mortgage loans to secondary market participants, the source of money used to fund the sold loans is replenished and becomes available to make loans to new consumers.
Chapter 1:
Exercise 1.5:
Knowledge Check:
1. Section ____ of Subtitle ___ of Title ___ under the Dodd-Frank Act established the:
A. Consumer Financial Protection Bureau.
B. Federal Deposit Insurance Corporation.
C. National Credit Union Administration.
D. Nationwide Multistate Licensing System & Registry.
A. Consumer Financial Protection Bureau - Section
1011 of Subtitle A of Title X under the Dodd-Frank Act created the Consumer Financial Protection Bureau, whose task is to enforce consumer financial protection laws.
Chapter 1:
Exercise 1.5:
Knowledge Check:
2. The Mortgage Reform and Anti-Predatory Lending
Act established by Title ____ under the Dodd-Frank Act requires MLOs to apply qualifying minimum standards and defines a category of qualified loans to prevent
A. borrower fraud.
B. high-cost home loans.
C. mortgage fraud.
D. predatory lending practices.
D. Title A - predatory lending practices - The Mortgage Reform and Anti-Predatory Lending Act addresses abusive or predatory lending practices in the mortgage industry.
For example, Subtitle B of Title XIV requires MLOs to apply minimum qualifying standards and defines a new category of “QUALIFIED” loans.
Chapter 1:
Chapter Quiz:
1. Which is NOT a function of the secondary market?
A. moderate effects of local real estate cycles
B. provide lenders with money to make more loans
C. serve as a depository for consumer assets
D. standardize loan criteria
C. serve as a depository for consumer assets -
Secondary markets are non-depository entities that purchase closed loans, which conform to the guidelines set by the secondary market. They are not depository institutions and cannot accept consumer deposits.
Chapter 1:
Chapter Quiz:
2. The Consumer Financial Protection Bureau was created by the:
A. Dodd-Frank Act.
B. Federal Home Loan Bank Act.
C. Federal Reserve Act.
D. National Housing Act.
A. Dodd-Frank Act. - The Dodd-Frank Act established the CFPB.
Chapter 1:
Chapter Quiz:
3. Mortgage brokers:
A. act as intermediaries between borrowers and lenders.
B. originate and service mortgage loans.
C. provide funding for mortgage loans.
D. underwrite mortgage loans.
A. act as intermediaries between borrowers and lenders. - A lender is a financial institution that makes loans directly to you. A broker does not lend money. A broker finds a lender. A broker may work with many lenders.
Chapter 1:
Chapter Quiz:
4. Which entity was established in 1932 as a cooperative to finance housing in local communities?
A. Federal Home Loan Banks (FHL)
B. Federal Home Loan Mortgage Corporation (FHLMC)
C. Federal Housing Finance Agency (FHFA)
D. Government National Mortgage Association (GNMA)
A. Federal Home Loan Banks - Created by Congress, the Federal Home Loan Banks have been the largest source of funding for mortgage lending for eight decades and were established in 1932 as a cooperative to finance housing in local communities.
Chapter 1:
Chapter Quiz:
5. Which is NOT a primary lender for residential properties?
A. commercial banks
B. insurance companies
C. mortgage companies
D. savings and loan associations
B. insurance companies - Insurance companies are NOT primary lenders of residential mortgages.
Chapter 1:
Chapter Quiz:
6. Which statement about Ginnie Mae is TRUE?
A. Ginnie Mae buys loans from commercial banks and mortgage companies.
B. Ginnie Mae guarantees mortgage-backed securities.
C. Ginnie Mae is a participant in the primary market.
D. Ginnie Mae is a private corporation.
B. Ginnie Mae guarantees mortgage-backed securities. - Ginnie Mae guarantees investors the timely payment of principal and interest on MBSs are backed by FEDERALLY-insured or GUARANTEED loans - These are mainly loans insured by the FHA or guaranteed by the VA.