Question 1

Each of the following statements about open-end mortgage clauses is true EXCEPT

Accepted Answer

This is not true of open-end mortgage clauses.

Question 2

What feature in an adjustable rate mortgage protects the borrower against very large monthly payment increases?

Accepted Answer

Interest rate caps protect the borrower against very large monthly payment increases.

Question 3

The interest rate of a loan from a local savings and loan may be increased or decreased during the life of the loan. This is an example of

Accepted Answer

Increasing or decreasing the interest rate during the life of the loan would be characteristic of a variable interest rate.

Question 4

An elderly couple is "house rich, money poor". To obtain money now while still living in their magnificent home, they should look for a

Accepted Answer

To obtain money now while still living in their home, an elderly couple should look for a reverse annuity mortgage.

Question 5

All of the following may be used for setting ARM interest rates EXCEPT

Accepted Answer

Gross National Product is not used to set ARM interest rates.

Question 6

When two or more properties serve as collateral for the same loan, it is called a

Accepted Answer

When two or more properties serve as collateral for the same loan, it is called a blanket mortgage.

Question 7

The phrase "taking back paper" applies to

Accepted Answer

The phrase "taking back paper" applies to seller financing.

Question 8

When considering a ARM loan, the lender must explain to the borrower, in writing, the

Accepted Answer

The lender is required to disclose the worst-case scenario to the prospective borrower.

Question 9

When an existing loan at a low interest rate is refinanced by a new loan at an interest rate between the current market rate and the rate of the old loan, the result is a

Accepted Answer

Refinancing a low interest rate loan for a higher rate loan results in blended rate loan.

Question 10

Equity sharing is based on the concept of someone who has assets sharing those assets in exchange for

Accepted Answer

Equity sharing is based on the concept of someone who has assets sharing those assets in exchange for a share of the ownership.

Question 11

In a graduated payment mortgage, the graduated part is the

Accepted Answer

In a graduated payment mortgage, the graduated part is the monthly payment.

Question 12

A new home developer who is including appliances with the sale of each house most probably would assist the buyer in obtaining a

Accepted Answer

A new home developer who is including appliances with the sale of each house most probably would assist the buyer in obtaining a package mortgage.

Question 13

In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer

Accepted Answer

Lenders offer lower initial interest rates in order to make adjustable rate mortgage loans more attractive to borrowers.

Question 14

A loan arrangement whereby a lender extends a line of credit is

Accepted Answer

A loan arrangement whereby a lender extends a line of credit is an open-end mortgage.

Question 15

A builder bought all 20 lots in a subdivision from the developer, who carried most of the purchase price on one loan. To sell the lots, he must include a

Accepted Answer

To sell the lots the builder must have a partial release clause to release each lot from the blanket loan.

Question 16

Prior to the introduction of adjustable rate mortgages, the FHLBB approved the use of

Accepted Answer

The first non-fixed-rate mortgage plan was the adjustable rate mortgage known as a variable rate mortgage.

Question 17

Construction loans are

Accepted Answer

Construction loans are short term, high risk.

Question 18

Which of the following involves the greatest risk to a lender?

Accepted Answer

Construction loans involve the greatest risk to a lender.

Question 19

A blended-rate loan arrangement is designed to

Accepted Answer

A blended-rate loan arrangement is designed to attract buyers who are discouraged by high interest rates.

Question 20

The interest rate of an adjustable rate mortgage may rise or fall based on the

Accepted Answer

The interest rate of an adjustable rate mortgage may rise or fall based on the applicable index.

Quiz 13: Types of Financing