Banking Chapter 7 Review

Front 1

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

Back 1

True

Front 2

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

Back 2

False

Front 3

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

Back 3

False

Front 4

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

Back 4

False

Front 5

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

Back 5

True

Front 6

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

Back 6

False

Front 7

The first step in the mortgage approval process is documentation.

Back 7

False

Front 8

The Gramm-Leach-Bliley Act requires that financial institutions protect the privacy of consumers.

Back 8

True

Front 9

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

Back 9

True

Front 10

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

Back 10

True

Front 11

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

Back 11

all of the following

Front 12

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

Back 12

index

Front 13

A point is a value equal to what percent of a mortgage loan?

Back 13

1 percent

Front 14

A reverse mortgage is repaid

Back 14

when the borrower dies.

Front 15

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

Back 15

25 to 28 percent

Hint 15

percent

Front 16

The final step of the mortgage approval process is

Back 16

recording

Front 17

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

Back 17

Home Mortgage Disclosure Act

Front 18

The Real Estate Settlement Procedures Act was enacted

Back 18

to protect consumers from hidden costs at closing time.

Front 19

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

Back 19

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

Front 20

Today the home ownership rate in the United States is about

Back 20

68 percent

Hint 20

percent

Front 21

A _________ is a note, usually long term, secured by real property.

Back 21

Mortgage

Front 22

A fixed rate mortgage is also known as a ___________ mortgage.

Back 22

convential

Front 23

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 ___________ mortgage.

Back 23

balloon

Front 24

In this kind of mortgage, the borrower prepays part of the interest in order to get a lower rate.

Back 24

buy-down

Front 25

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

Back 25

Equity

Front 26

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

Back 26

lifetime

Front 27

_________mortgage insurance (PMI) protects the lender against loan default.

Back 27

Private

Front 28

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

Back 28

redlining

Front 29

The Federal Home Loan Mortgage Corporation is better known as

Back 29

Freddie Mac

Front 30

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

Back 30

escrow