#1
What does PMI stand for in the context of mortgages?
Private Mortgage Insurance
ExplanationInsurance protecting lenders in case of borrower default.
#2
What is the Loan-to-Value (LTV) ratio used for in mortgage lending?
Evaluating the property's risk for the lender
ExplanationAssessing the risk based on property value and loan amount.
#3
Which regulatory body oversees mortgage lenders in the United States?
Consumer Financial Protection Bureau (CFPB)
ExplanationRegulates consumer financial laws, including mortgages.
#4
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
Interest rate is fixed for a certain period, then adjusts periodically (ARM), fixed for the entire term (fixed-rate)
ExplanationARM has changing rates, fixed-rate stays constant.
#5
In the context of mortgages, what does the term 'escrow' refer to?
An account to hold funds for property-related expenses like taxes and insurance
ExplanationManages payments for property-related expenses.
#6
What is the difference between a pre-qualification and a pre-approval in the mortgage application process?
Pre-qualification is a preliminary assessment, while pre-approval involves a more in-depth analysis of the borrower's financial situation
ExplanationPre-approval is a stronger commitment.
#7
What is the debt-to-income ratio used for in the context of mortgage underwriting?
Assessing the borrower's ability to repay the loan
ExplanationDetermines if borrower can manage payments.
#8
What is the purpose of the Truth in Savings Act (TISA) in the context of financial regulations?
Disclosing terms and conditions of savings accounts to consumers
ExplanationEnsures transparency in savings account information.
#9
What is the purpose of the Home Mortgage Disclosure Act (HMDA) in the United States?
Requiring lenders to disclose information about their mortgage lending practices
ExplanationPromotes transparency in mortgage lending.
#10
What is a mortgage-backed security (MBS), and how does it relate to the mortgage market?
A financial instrument representing an ownership interest in a pool of mortgage loans
ExplanationPools mortgage loans to sell as securities.
#11
What is the purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act in relation to mortgage regulations?
To establish regulatory reforms and consumer protections in the financial industry, including mortgage regulations
ExplanationAddresses issues leading to the 2008 financial crisis.