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20 Cards in this Set
- Front
- Back
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1. A couple purchased their home for $125,000. They financed the purchase with an 80% conventionalloan. The mortgagee charged 2 ½ points. Calculate the actual cost in dollars of the points.
a. $1,600 b. $2,000 c. $2,500 d. $3,125 |
c. $2,500 |
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2. Which individual must be state licensed as a mortgage loan originator?
a. Employee who processes loans for First National Bank of Orlando b. Employee of Bank of Florida who works as a bank teller c. Employee who works as a loan originator for a mortgage brokerage company that is not d. Employee who works as a loan originator for First USA Credit Unionfederally regulated |
c. Employee who works as a loan originator for a mortgage brokerage company that is not
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3. When the Fed increases the reserve requirements,
a. The supply of money increases b. The supply of money decreases c. Inflation usually immediately follows d. Mortgage interest rates decline immediately |
b. The supply of money decreases
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4. A commercial bank sold a group of 2,000 mortgages directly to Fannie Mae. This is an example of
a. Primary market activity b. Secondary market activity c. Loan correspondence d. Intermediation |
b. Secondary market activity
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5. Fannie Mae currently buys and sells a. FHA mortgages b. VA mortgages c. Conventional mortgages d. All three types of mortgages |
d. All three types of mortgages
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6. Which statement does NOT apply to Fannie Mae?
a. Loans that meet Fannie Mae guidelines are called conforming loans b. Fannie Mae provides master commitments for large real estate projects c. Fannie Mae created the first secondary market for the mortgage loans d. Fannie Mae deals directly with homebuyers |
d. Fannie Mae deals directly with homebuyers
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7. Which entity originates loans and typically services the loans but is NOT a financial intermediary? a. Mortgage company b. Mortgage loan originator c. Life insurance company d. Fannie Mae |
a. Mortgage company
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8. When the Fed purchases securities, what happens? a. The supply of money in circulation is reduced b. Interest rates begin to rise c. Loanable funds are released into circulation d. Pressure is applied to increase the discount rate |
c. Loanable funds are released into circulation
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9. How does the Federal Reserve compete with other financial institutions for consumer funds?
a. Sells mortgages on the secondary market b. Increases the federal deficit c. Regulates thrift institutions d. Sells treasury bonds |
d. Sells treasury bonds
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10. The market where mortgage loans are created, supplying funds to finance real estate purchasesdirectly to borrowers, is called the
a. Primary market b. Secondary market c. Capital market d. Real estate market |
a. Primary market
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11. The primary purpose of Fannie Mae is to
a. Reduce and stabilize mortgage interest rates b. Purchase real estate loans to replenish the supply of mortgage money c. Make loans to lo-income families d. Do all of these |
b. Purchase real estate loans to replenish the supply of mortgage money
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12. The demand for residential real estate mortgage money is influenced by
a. Household formations b. Shifts in geographic preference for housing c. Household income d. Any of these |
d. Any of these
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13. The Office of Thrift Supervision regulates
a. Savings associations b. Commercial banks c. Credit unions d. The Rural Housing Service |
a. Savings associations |
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14. The discount rate is
a. 1% of the loan amount b. A rate adjustment factor used to increase the lender’s yield on a loan c. The interest rate charged member banks for borrowing funds from the Federal Reserve Bank d. Approximately 1/8 of 1% for each point charged. |
c. The interest rate charged member banks for borrowing funds from the Federal Reserve Bank
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15. The primary purpose of Freddie Mac is to
a. Purchase conventional loans from savings associations b. Regulate savings associations c. Insure mortgage loans d. Regulate conventional mortgage loan interest rates |
a. Purchase conventional loans from savings associations
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16. When investors bypass thrift institutions for direct investment elsewhere, the process is called
a. Loan correspondence b. Intermediation c. Disintermediation d. Capital-deficit are support |
c. Disintermediation |
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17. All of these are sources of income to lenders EXCEPT a. The discount rate b. Origination fees c. Servicing fees d. Commitment fees |
a. The discount rate
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18. The rule of thumb used to convert discount points to an annual percentage rate is that each discountpoint increases the yield by approximately a. 1/8 of 1% b. ¼ of 1% c. ½ of 1% d. 1% |
a. 1/8 of 1% |
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19. A lender charged 7% plus 3 points. What is the approximate yield on this loan? a. 7 ¼% b. 7 3/8% c. 7 ½% d. 7 ¾% |
b. 7 3/8% |
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20. The MOST commonly used method of controlling the national money supply is for the Fed to a. Engage in open-market activities b. Change the discount rate c. Change the reserve requirements d. Issue new currency |
a. Engage in open-market activities
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