Chapter 12 Quiz

Question 1 of 15

1. Question

A loan that doesn’t meet the standards set by Fannie Mae and Freddie Mac is called a/an:

nonconforming loan
unconventional loan
disamortized loan
secondary market loan

Question 2 of 15

2. Question

In connection with an ARM, an index is:

a limit on the amount the payment can increase per year
2% to 3% of the loan amount
the interval at which the loan’s interest rate is adjusted
a published statistical report that indicates changes in the cost of money

Question 3 of 15

3. Question

If a loan’s monthly payments don’t cover all the interest owed, the lender may add the unpaid interest to the principal balance. This is called:

negative amortization
partial amortization
a conversion option
the lender’s margin

Question 4 of 15

4. Question

Lenders use loan-to-value ratios to:

increase the yield on their loans
reduce the interest rate charged to the borrower
set maximum loan amounts
amortize their loan

Question 5 of 15

5. Question

Private mortgage insurance is generally required only for:

90% and 95% conventional loans
95% conventional loans
80%, 90%, and 95% conventional loans
None of the above

Question 6 of 15

6. Question

Points paid at closing to increase the lender’s yield on the loan are called:

fee points
discount points
index points
margin points

Question 7 of 15

7. Question

A predatory lender encourages a borrower to engage in repeat refinances, and profits off the fees for each transaction. This is known as:

loan flipping
fee packing
lending in excess of value
predatory steering

Question 8 of 15

8. Question

The lower the loan-to-value ratio:

the larger the loan amount and the smaller the downpayment
the smaller the loan amount and the larger the downpayment
the smaller the loan amount and the smaller the downpayment
none of the above

Question 9 of 15

9. Question

The right of rescission under the Truth in Lending Act lasts for:

five days and applies to all consumer loans
five days and applies to home equity loans and refinances with new lenders
three days and applies to all consumer loans
three days and applies to home equity loans and refinances with new lenders

Question 10 of 15

10. Question

A conventional borrower generally:

must have a residual income of at least $1,800
must have a stable monthly income of at least $3,000
can’t use any gift funds for the downpayment
should have at least two months’ mortgage payments in reserve after closing

Question 11 of 15

11. Question

For most ARMs, the monthly mortgage payment is adjusted:

each time the interest rate is adjusted
more often than the interest rate
once every five years
only at the beginning of the loan term

Question 12 of 15

12. Question

An advantage to FHA loans is that the borrower:

doesn’t need mortgage insurance
doesn’t have to occupy the home purchased with the loan
can deduct the entire mortgage payment
may use a smaller downpayment

Question 13 of 15

13. Question

The property purchased with a VA loan can be any:

single-family home, whether occupied by the owner or not
duplex, whether occupied by the owner or not
real estate that meets federal collateral standards
one- to four-unit residence, as long as the veteran intends to occupy a unit

Question 14 of 15

14. Question

In comparison to a 30-year loan for the same amount, a 15-year loan:

will require a higher monthly payment
is likely to have a lower interest rate
will save the borrower thousands of dollars in total interest charges over the life of the loan
all of the above

Question 15 of 15

15. Question

Which of the following charges would not be included in the total finance charge under federal Truth in Lending Act rules?

Appraisal fee
Discount points
Finder’s fee
Origination fee

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