Financial Markets and Institutions Exam 2 Complete Questions And Answe
| Verified
1. Mortgage Loans to individuals or businesses to purchase homes, land, or other real proper-
ty.
-they are securitized
-backed by a specific piece of real property
2. Mortgages Char- -Collateral: lenders place liens against properties that remain in place until loans
acteristics: are fully paid ott
-A down payment is a portion of the purchase price of the property a financial
institution requires the borrower to pay up front
-Federally insured mortgages
3. Conventional mortgages that are NOT federally insured
Mortgages
4. Amortized mort- have fixed principal and interest payments that fully pay ott the mortgage by its
gages maturity date
-Maturities are usually either 15 or 30 years
5. Fixed-rate mort- lock in borrower's interest rate
gages -required monthly payments are fixed over the life of the mortgage
-lenders assume interest risk
6. Adjustable-rate tie the borrower's interest rate to some market interest rate or interest rate index
mortgage (ARMs) -required monthly pmts can change over the life of the mortgage
-rates or pmt changes must be 'capped'
-borrowers assume interest risk
-Can increase default risk
7. Subprime Mort-
gage
, Financial Markets and Institutions Exam 2 Complete Questions And Answe
| Verified
are mortgages where the borrower's do not qualify for a 'prime' credit rating be-
cause of a low credit score arising from prior credit problems such as delinquencies
and defaults
8. Collateral lenders place liens against properties that prevent sale until loans are fully paid ott
9. Down Payment a portion of the purchase price of the property a financial institution requires the
borrower to pay up from
10. Private Mortgage generally required when the loan-to-value ratio is more than 80%
Insurance (PMI)
11. Discount points fees or pmts made when a mortgage loan is issued
12. Mortgage Refi- When a borrower takes out a new mortgage and uses the proceeds to pay ott an
nancing existing mortgage
13. Jumbo Mort- mortgages for loan amounts that exceed the max "conforming" limits allowed by
gages the mortgage agencies Fannie Mae and Freddie Mac
14. Alt-A mortgages mortgages that are riskier than prime but not as risky as subprime
15. Reverse-annuity retirees or homeowners with a substantial amount of equity in their home can sell
mortgages the equity back to a bank over time
(RAMs)
16. Federal Nation- established by US government in the 1930s to buy FHA and VA mortgages from
al Mortgage As- thrifts so they could make more mortgage loans
sociation "Fannie
1) provide liquidity in secondary markets
Mae"
2) a part of mortgage insurance where is insures against principle loss
3) hold mortgages on balance sheet and collect interest
4) take and sell mortgage back securities
| Verified
1. Mortgage Loans to individuals or businesses to purchase homes, land, or other real proper-
ty.
-they are securitized
-backed by a specific piece of real property
2. Mortgages Char- -Collateral: lenders place liens against properties that remain in place until loans
acteristics: are fully paid ott
-A down payment is a portion of the purchase price of the property a financial
institution requires the borrower to pay up front
-Federally insured mortgages
3. Conventional mortgages that are NOT federally insured
Mortgages
4. Amortized mort- have fixed principal and interest payments that fully pay ott the mortgage by its
gages maturity date
-Maturities are usually either 15 or 30 years
5. Fixed-rate mort- lock in borrower's interest rate
gages -required monthly payments are fixed over the life of the mortgage
-lenders assume interest risk
6. Adjustable-rate tie the borrower's interest rate to some market interest rate or interest rate index
mortgage (ARMs) -required monthly pmts can change over the life of the mortgage
-rates or pmt changes must be 'capped'
-borrowers assume interest risk
-Can increase default risk
7. Subprime Mort-
gage
, Financial Markets and Institutions Exam 2 Complete Questions And Answe
| Verified
are mortgages where the borrower's do not qualify for a 'prime' credit rating be-
cause of a low credit score arising from prior credit problems such as delinquencies
and defaults
8. Collateral lenders place liens against properties that prevent sale until loans are fully paid ott
9. Down Payment a portion of the purchase price of the property a financial institution requires the
borrower to pay up from
10. Private Mortgage generally required when the loan-to-value ratio is more than 80%
Insurance (PMI)
11. Discount points fees or pmts made when a mortgage loan is issued
12. Mortgage Refi- When a borrower takes out a new mortgage and uses the proceeds to pay ott an
nancing existing mortgage
13. Jumbo Mort- mortgages for loan amounts that exceed the max "conforming" limits allowed by
gages the mortgage agencies Fannie Mae and Freddie Mac
14. Alt-A mortgages mortgages that are riskier than prime but not as risky as subprime
15. Reverse-annuity retirees or homeowners with a substantial amount of equity in their home can sell
mortgages the equity back to a bank over time
(RAMs)
16. Federal Nation- established by US government in the 1930s to buy FHA and VA mortgages from
al Mortgage As- thrifts so they could make more mortgage loans
sociation "Fannie
1) provide liquidity in secondary markets
Mae"
2) a part of mortgage insurance where is insures against principle loss
3) hold mortgages on balance sheet and collect interest
4) take and sell mortgage back securities
