Question 1

Which of the following is most descriptive of the primary market?&#10;A) The loan origination market&#10;B) Trading in second mortgages&#10;C) The buying and selling of mortgage loans&#10;D) The market created by Fannie Mae and Freddie Mac

Accepted Answer

The primary market involves the loan origination process, where lenders make loans and borrowers obtain financing.

Question 2

The investment policies of commercial banks favor all of the following types o mortgage loans EXCEPT&#10;A) Long term mortgage loans held in portfolio&#10;B) Short term construction loans&#10;C) Warehouse lines of credit granted to mortgage companies&#10;D) Medium term mortgage loans to accommodate major depositors

Accepted Answer

Commercial banks typically favor short to medium-term loans due to their lower risk and greater liquidity compared to long-term mortgage loans held in portfolio. Long-term loans tie up capital for extended periods, which is less desirable for banks that need to manage liquidity and credit risk effectively.

Question 3

Federal legislation in 1998 restored the right to membership in credit unions to&#10;A) Anyone solicited by credit unions&#10;B) Those with a common bond plus those working for companies with less than 3,000 employees&#10;C) All members of AARP&#10;D) Anyone not challenged by a commercial bank

Accepted Answer

The Federal legislation in 1998 restored the right to membership in credit unions to those with a common bond plus those working for companies with less than 3,000 employees. This means that members must have some kind of connection or association, such as living in the same community or working for the same employer.

Question 4

The deposit insurance fund controlled by the FDIC protects&#10;A) Consumer deposits in insured banks&#10;B) Banks against loss in loan accounts&#10;C) Loans to consumers by regulated lenders&#10;D) Regulated lenders against loss in operations

Accepted Answer

The deposit insurance fund controlled by the FDIC (Federal Deposit Insurance Corporation) protects consumer deposits in insured banks up to a certain amount (currently $250,000 per depositor per insured bank). This protects individual consumers and businesses that have deposits in insured banks against loss due to bank failures or other issues. The fund is financed by premiums paid by banks and is designed to ensure confidence in the banking system and prevent runs on banks.

Question 5

Most of the money available for mortgage lending comes from&#10;A) Federal Government sponsored funding programs&#10;B) State and municipal housing agencies&#10;C) Private sources of investment capital&#10;D) Federal agencies that underwrite loans

Accepted Answer

The majority of mortgage lending comes from private sources of investment capital, such as banks, credit unions, and other financial institutions. While government-sponsored funding programs and federal agencies can play a role, they are not the primary source of funding for most mortgages. State and municipal housing agencies also play a smaller role in mortgage lending.

Question 6

A basic difference between mortgage companies and regulated lenders is that mortgage companies&#10;A) Are subject to no regulations&#10;B) Hold no deposit assets with which to fund loans&#10;C) Are higher cost operators and unable to be competitive&#10;D) Handle only FHA and VA loans

Accepted Answer

Mortgage companies typically do not hold any deposit assets and rely on funding loans through borrowing from other institutions or selling the loans to investors on the secondary market. Regulated lenders, on the other hand, typically hold deposit assets and have access to funding through deposits and other sources.

Question 7

The secondary market for mortgage loans can best be described as the -&#10;A) Operations of Fannie Mae/Freddie Mac&#10;B) Market for trading second mortgages&#10;C) Purchase and /or sale of mortgage loans after origination&#10;D) Market for trading in Ginnie Mae contracts

Accepted Answer

The secondary market for mortgage loans refers to the purchase and/or sale of mortgage loans after they have been originated. This market includes investors purchasing loans from lenders, and then selling them to other investors or government-sponsored entities such as Fannie Mae or Freddie Mac. It does not refer to the market for trading second mortgages or Ginnie Mae contracts specifically.

Question 8

While the distinction between mortgage bankers and brokers is diminishing, a full service mortgage banker means being capable of all of the following EXCEPT&#10;A) Originating or negotiating a loan&#10;B) Funding a loan a closing&#10;C) Servicing a loan until pay off&#10;D) Holding a whole loan in portfolio

Accepted Answer

The answer of While the distinction between mortgage bankers and...

Question 9

All life insurance companies are chartered and regulated by&#10;A) The federal Life Insurance Commission&#10;B) Various state and federal authorities&#10;C) State commissions only&#10;D) Are not regulated

Accepted Answer

Life insurance companies are regulated by state commissions only, with each state having its own set of regulations and governing body to oversee the industry. There is no federal Life Insurance Commission.

Question 10

While differing to their chartering agencies and purposes, both savings association and saving banks are commonly referred to as&#10;A) Banks&#10;B) Long term depositor institutions&#10;C) Thrifts&#10;D) Banking societies

Accepted Answer

The answer of While differing to their chartering agencies and...

Question 11

The purpose of federal agency underwriting of mortgage loan pools is to&#10;A) Enhance the credit-worthiness of mortgage-backed securities thus reducing the costs of interest&#10;B) Provide an additional source of income for the federal government&#10;C) Expand government control over mortgage lending&#10;D) Regulate qualification for borrowers

Accepted Answer

The answer of The purpose of federal agency underwriting of...

Question 12

A basic purpose of the Community Reinvestment Act is to&#10;A) Increase regulatory authority over possible abuses in loan closing practices&#10;B) Expand the offering of HUD/FHA and VA loans&#10;C) Establish guidelines to encourage lending institutions to serve the needs of their local community&#10;D) Increase the kind of credit services offered by all local lending institutions

Accepted Answer

The answer of A basic purpose of the Community Reinvestment...

Deck 3: Mortgage Money: Regulated Lenders