Math Law Flashcards
Which of the following lenders are NOT impacted by the stress test borrower qualification rule for the uninsured mortgages implemented in January 2018?
(1) Chartered banks
(2) Trust companies
(3) Credit unions
(4) Federally regulated financial instituitions
- Credit unions
Lenders will always choose constraint that is lower or higher?
Lower
What is “benchmark interest rate”?
Stress test. To determine how easily can the client afford a two or three percentage point increase in interest rate and to understand the client’s liquid assets if the client’s income becomes interrupted 3-6 months.
The risk to a mortgagee can be reduced by…..
(1) Increase the amortization period
(2) Reduce the monthly payments
(3) reduce the LTV ratio
(4) reduce the Debt Coverage Ratio
(3) reduce the LTV ratio
Or lower GDS%
The higher Debt Coverage Ratio, the better for lender. True or false?
True.
Opposite of residential. For residential, the lower GDS% the better for banks
Lenders who are attempting to ration mortgage funds could:
(1) decrease their gross debt service ratio
(2) decrease their interest rate on mortgage loans
(3) increase their maximum LTV ratio
(4) increase the amortization period
(1) decrease their gross debt service ratio
It is never about the payment / amortization. Should be decrease the LTV ratio.
The loan to value ratio is the ration of:
(1) the annual payments on the loan divided by the market value of the mortgage
(2) Actual amount of the mortgage divided by the actual value of the property
(3) the market value of mortgage divided by the market value of the property
(4) the face value of the mortgage loan divided by the lending value of the property
(4) the face value of the mortgage loan divided by the lending value of the property
About insured mortgage loan, which one is FALSE?
(1) default insurance is paid by the borrower
(2) the rate of interest on insured loans tends to be lower than on comparable uninsured loans
(3) if the borrower defaults, the insurance company will guarantee that the lender will recover all the capital invested
(4) the lender has only the personal covenant of the borrower and the value of the property for security
(1) default insurance is paid by the borrower - TRUE
(2) the rate of interest on insured loans tends to be lower than on comparable uninsured loans - TRUE in real life too because that means bank is surely gonna get paid , lower risks of bank so they give u a lower rate
(3) if the borrower defaults, the insurance company will guarantee that the lender will recover all the capital invested - TRUE
(4) the lender has only the personal covenant of the borrower and the value of the property for security - FALSE. You pay the insurance to avoid getting this problem
Lending value is:
(1) equal to market value
(2) a long-term conservative estimate of the value of the interest in land pledged as security
(3) an estimate of the mortgage loan a purchaser will be able to obtain
(4) equal to 95% of purchase price
LV is
(2) a long-term conservative estimate of the value of the interest in land pledged as security
A balloon payment is any payment of:
(1) interest over or above regular interest payments, but only it occurs during the term of the loan
(2) principal over and above the regular payments, whether it occurs during or at the end of the loan term
(3) Principal over and above the regular periodic payments, but only when it occurs at the end of the loan term
(4) interest over and above regular interest payment, whether it occurs during or at the end of the loan term
You pay off the principal, not the interest.
For b. payment, you can pay during the term or at the end of the term.
True or false regarding repayment and refinancing methods:
If a variable rate mortgage is “Open” any principal repayment above and agreed upon threshold will attract an interest.
In graduated payment mortgages, payments are increased during the loan term.
In a variable rate mortgage, if the interest rate is changed periodically but the required payment is never changed.
From the borrwer prospective, the reverse annuity mortgage allows a means by which the equity rich mortgagor my postpone selling his /her resdience.
If a variable rate mortgage is “Open” any principal repayment above and agreed upon threshold will attract an interest. - FALSE. You dont get penalty on open mortgage, only on fix mortgage
In graduated payment mortgages, payments are increased during the loan term. TRUE
In a variable rate mortgage, if the interest rate is changed periodically but the required payment is never changed. FALSE. Required payment will change.
From the borrwer prospective, the reverse annuity mortgage allows a means by which the equity rich mortgagor my postpone selling his /her resdience. TRUE. Reverse annuity mortgage = lenders give the money to the seniors, they can get money from bank as monthly income, they don’t have to move, they may postpone selling their residence.
