#1
Which of the following is a characteristic of a fixed-rate mortgage?
The interest rate remains constant throughout the life of the loan.
ExplanationStable interest rate throughout the loan.
#2
What is Private Mortgage Insurance (PMI) typically required for?
Conventional mortgages with a down payment less than 20%
ExplanationRequired for low down payment conventional loans.
#3
What is the term for the legal document that pledges a property to the lender as security for repayment of the mortgage loan?
Mortgage deed
ExplanationDocument securing the loan with property.
#4
What does LTV stand for in the context of mortgages?
Loan to Value
ExplanationLoan amount compared to property value.
#5
Which of the following is NOT typically considered when determining a borrower's eligibility for a mortgage?
Marital status
ExplanationMarital status usually not considered.
#6
What is an advantage of an adjustable-rate mortgage (ARM) compared to a fixed-rate mortgage?
Lower initial interest rates
ExplanationLower initial rates compared to fixed-rate.
#7
What is the role of Fannie Mae and Freddie Mac in the mortgage market?
They purchase mortgages from lenders and package them into securities for investors.
ExplanationPurchase mortgages for securitization.
#8
What is the primary function of a mortgage broker?
To facilitate the negotiation of mortgage terms between borrowers and lenders.
ExplanationFacilitate mortgage terms negotiation.
#9
What is a balloon mortgage?
A mortgage that requires a large, lump-sum payment at the end of the loan term.
ExplanationLarge final payment at loan end.
#10
What is a prepayment penalty in the context of a mortgage?
A fee charged by lenders for paying off a mortgage before the end of its term.
ExplanationFee for early mortgage payoff.
#11
What is a collateralized mortgage obligation (CMO)?
A complex derivative security created from pools of mortgage-backed securities.
ExplanationComplex derivative from mortgage pools.
#12
Which entity is responsible for setting the federal funds rate in the United States?
The Federal Reserve
ExplanationFederal Reserve sets federal funds rate.
#13
In the context of mortgage-backed securities (MBS), what does the term 'tranche' refer to?
A portion of a pool of mortgages with similar characteristics that are grouped together for investment purposes.
ExplanationSegment of similar mortgages in MBS.