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58 Cards in this Set
- Front
- Back
Personal loans do not require that a specific purpose be stated
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TRUE
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Secured loans are sometimes called signature loans
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FALSE
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The amount a borrower pays to use the principal of a loan is called a fee
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FALSE
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A balloon payment is a single large payment due at the end of a loan
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TRUE
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Subprime rates are higher-than-normal interest rates offered to a less-than-perfect credit applicant.
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TRUE
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If a credit applicant has opened many new accounts recently, that is probably a sign that the applicant is very creditworthy
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FALSE
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Paying off a loan early saves the consumer no money if the sum-of-digits method has been used to figure finance charges
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TRUE
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One consequence of credit overextension is a ruined credit rating
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TRUE
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High consumer debt is good for banks, because banks make most of their money from the interest paid on loans
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FALSE
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The Truth in Lending Act prohibits bill collectors from using deceptive or abusive tactics
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FALSE
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All of the following are considered installment loans except
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lines of credit
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A legal claim a lender has on property to secure a debt is called
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a lien
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Which of the following interest rates is linked to some other rate?
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indexed rate
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Which of the following statements about open-end loans is true?
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The longer you use the money, the more you pay
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Which of the following shows the steps of the credit-approval process in proper order?
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application, documentation, processing underwriting, closing, funding
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Which of the following elements of the FICO credit-scoring system carries the most weight?
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Payment history
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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
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sum-of-digits method
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Documentation of most credit problems stays in a consumer's file for at least
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seven years
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Which of the following attempts to protect the information that credit bureaus may collect?
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Fair Credit Reporting Act
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Which of the following statements is NOT true?
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Credit bureaus may not report information more than one year old
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A home equity loan is essentially a second _________.
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mortgage
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The item of value that backs a secured loan is called _____________.
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collateral
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The process of reviewing a loan for soundness is called _____________.
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underwriting
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_____________ are records of all who have requested a copy of a credit report within the last year.
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Inquiries
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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
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recession
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A mortgage is the longest and largest debt most people will ever incur.
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TRUE
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A borrower cannot use use mortgaged property until the debt is paid in full.
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FALSE
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Interest rates are usually lower for fixed rate mortgages than for other types
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FALSE
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A shared application mortgage is another form of consumer loan tied to the appreciated value of a property
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FALSE
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A larger down payment on a home lowers the cost of the monthly payment.
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TRUE
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Private mortgage insurance protects the lender against loan default; it is not typically required for borrowers whose down payment is 10 percent or greater.
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FALSE
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The first step in the mortgage approval process is documentation
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FALSE
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The Gramm-Leach-Biley Act reqires that financial institutions protect the privacy of consumers
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TRUE
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Any escrow surplus of more than $50 must be returned to the borrower.
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TRUE
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Qualifying veterans may get government-backed mortgage loans with low down payments through the Department of Veteran's Affairs
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TRUE
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Which of the following components of a fixed rate mortgage do not change?
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all of the above
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The rate to which a lender's interest rate is tied is called the...
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index
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A point is a value equal to ______ of a mortgage loan
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1 percent
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A reverse mortgage is repaid...when???
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when the borrower dies
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Generally speaking, housing costs should not exceed ______ of gross monthly income
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25 to 28 percent
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The final step of the mortgage approval process is
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recording
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It requires banks to record and report data on home lending in order to identify possible discriminatory patterns.
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Home Mortgage Disclosure Act
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The Real Estate Settlement Procedures Ace was enacted to...?
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to protect consumers from hiddon costs at closing time
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Which of the following statements about HOEPA loans is NOT true?
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Lenders are prohibited from charging an APR that is 10 points higher than a rate on a Treasury Bill
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Today the home ownership rate in the United States is about...?
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68 percent
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A(n) _______ is a note, usually long-term, secured by real property
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mortgage
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A fixed rate mortgage is also known as a(n)___________ mortgage.
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convential
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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.
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balloon
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In a(n) _________ mortgage, the borrower prepays part of the interest in order to get a lower rate.
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buy-down
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The difference between what an item is worth and what is owed on it is called _______.
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Equity
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The _________ cap is the specified overall maximum or minimum rate of an ARM, regardless of index.
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lifetime
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Most lenders require an amount called ______ to be paid to them in advance, the lenders pay real estate taxes from this fund.
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escrow
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________ mortgage insurance (PMI) protects the lender against loan default.
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Private
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The refusal of banks to lend to residents of certain neighborhoods is called _______.
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redlining
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The Federal Home Loan Mortgage Corporation is better known as _____________.
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Freddie Mac
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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
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$250,000-165,000=$85,000
answer=$85,000 |
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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
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$700
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What is the adjustable interval on an ARM?
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The length of time that a given rate and payment are in effect.
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