Chapter 6 & 7 Test Review - Zapper

Front 1

Personal loans do not require that a specific purpose be stated

Back 1

TRUE

Front 2

Secured loans are sometimes called signature loans

Back 2

FALSE

Front 3

The amount a borrower pays to use the principal of a loan is called a fee

Back 3

FALSE

Front 4

A balloon payment is a single large payment due at the end of a loan

Back 4

TRUE

Front 5

Subprime rates are higher-than-normal interest rates offered to a less-than-perfect credit applicant.

Back 5

TRUE

Front 6

If a credit applicant has opened many new accounts recently, that is probably a sign that the applicant is very creditworthy

Back 6

FALSE

Front 7

Paying off a loan early saves the consumer no money if the sum-of-digits method has been used to figure finance charges

Back 7

TRUE

Front 8

One consequence of credit overextension is a ruined credit rating

Back 8

TRUE

Front 9

High consumer debt is good for banks, because banks make most of their money from the interest paid on loans

Back 9

FALSE

Front 10

The Truth in Lending Act prohibits bill collectors from using deceptive or abusive tactics

Back 10

FALSE

Front 11

All of the following are considered installment loans except

Back 11

lines of credit

Front 12

A legal claim a lender has on property to secure a debt is called

Back 12

a lien

Front 13

Which of the following interest rates is linked to some other rate?

Back 13

indexed rate

Front 14

Which of the following statements about open-end loans is true?

Back 14

The longer you use the money, the more you pay

Front 15

Which of the following shows the steps of the credit-approval process in proper order?

Back 15

application, documentation, processing underwriting, closing, funding

Front 16

Which of the following elements of the FICO credit-scoring system carries the most weight?

Back 16

Payment history

Front 17

This finance charge method takes the total finance charge, divides it by the number of months in the loan term, and assigns a higher ratio of interest to the early payments

Back 17

sum-of-digits method

Front 18

Documentation of most credit problems stays in a consumer's file for at least

Back 18

seven years

Front 19

Which of the following attempts to protect the information that credit bureaus may collect?

Back 19

Fair Credit Reporting Act

Front 20

Which of the following statements is NOT true?

Back 20

Credit bureaus may not report information more than one year old

Front 21

A home equity loan is essentially a second _________.

Back 21

mortgage

Front 22

The item of value that backs a secured loan is called _____________.

Back 22

collateral

Front 23

The process of reviewing a loan for soundness is called _____________.

Back 23

underwriting

Front 24

_____________ are records of all who have requested a copy of a credit report within the last year.

Back 24

Inquiries

Front 25

The right of _________ allows a consumer to change his or her mind about the loan until midnight of the third business day following the signing of papers

Back 25

recession

Front 26

A mortgage is the longest and largest debt most people will ever incur.

Back 26

TRUE

Front 27

A borrower cannot use use mortgaged property until the debt is paid in full.

Back 27

FALSE

Front 28

Interest rates are usually lower for fixed rate mortgages than for other types

Back 28

FALSE

Front 29

A shared application mortgage is another form of consumer loan tied to the appreciated value of a property

Back 29

FALSE

Front 30

A larger down payment on a home lowers the cost of the monthly payment.

Back 30

TRUE

Front 31

Private mortgage insurance protects the lender against loan default; it is not typically required for borrowers whose down payment is 10 percent or greater.

Back 31

FALSE

Front 32

The first step in the mortgage approval process is documentation

Back 32

FALSE

Front 33

The Gramm-Leach-Biley Act reqires that financial institutions protect the privacy of consumers

Back 33

TRUE

Front 34

Any escrow surplus of more than $50 must be returned to the borrower.

Back 34

TRUE

Front 35

Qualifying veterans may get government-backed mortgage loans with low down payments through the Department of Veteran's Affairs

Back 35

TRUE

Front 36

Which of the following components of a fixed rate mortgage do not change?

Back 36

all of the above

Front 37

The rate to which a lender's interest rate is tied is called the...

Back 37

index

Front 38

A point is a value equal to ______ of a mortgage loan

Back 38

1 percent

Front 39

A reverse mortgage is repaid...when???

Back 39

when the borrower dies

Front 40

Generally speaking, housing costs should not exceed ______ of gross monthly income

Back 40

25 to 28 percent

Front 41

The final step of the mortgage approval process is

Back 41

recording

Front 42

It requires banks to record and report data on home lending in order to identify possible discriminatory patterns.

Back 42

Home Mortgage Disclosure Act

Front 43

The Real Estate Settlement Procedures Ace was enacted to...?

Back 43

to protect consumers from hiddon costs at closing time

Front 44

Which of the following statements about HOEPA loans is NOT true?

Back 44

Lenders are prohibited from charging an APR that is 10 points higher than a rate on a Treasury Bill

Front 45

Today the home ownership rate in the United States is about...?

Back 45

68 percent

Front 46

A(n) _______ is a note, usually long-term, secured by real property

Back 46

mortgage

Front 47

A fixed rate mortgage is also known as a(n)___________ mortgage.

Back 47

convential

Front 48

A type of fixed rate mortgage in which the entire remaining balance of the loan is due in one single large payment is called a(n) ________ mortgage.

Back 48

balloon

Front 49

In a(n) _________ mortgage, the borrower prepays part of the interest in order to get a lower rate.

Back 49

buy-down

Front 50

The difference between what an item is worth and what is owed on it is called _______.

Back 50

Equity

Front 51

The _________ cap is the specified overall maximum or minimum rate of an ARM, regardless of index.

Back 51

lifetime

Front 52

Most lenders require an amount called ______ to be paid to them in advance, the lenders pay real estate taxes from this fund.

Back 52

escrow

Front 53

________ mortgage insurance (PMI) protects the lender against loan default.

Back 53

Private

Front 54

The refusal of banks to lend to residents of certain neighborhoods is called _______.

Back 54

redlining

Front 55

The Federal Home Loan Mortgage Corporation is better known as _____________.

Back 55

Freddie Mac

Front 56

Four years ago, Mavis and Lester purchased a $200,000 home with $25,000 down. The remaining principal on the home is $165,000. Suppose the home has appreciated in value during that time to $250,000. Find Mavis and Lester's equity in the home

Back 56

$250,000-165,000=$85,000

answer=$85,000

Front 57

Metropilis Bank prefers that mortgage loan payments not exceed 28 percent of a borrower's fross monthly income. Suppose Anders makes $30,000 per year. What is the maximum PITI that Metropolis Bank would consider acceptable

Back 57

$700

Front 58

What is the adjustable interval on an ARM?

Back 58

The length of time that a given rate and payment are in effect.