NCOF EXAM REVIEW QUESTIONS WITH
ACCURATE SOLUTIONS AND RATED A.
A $24,000 interest only, level payment, term loan has a rate of 5% and interest
due in the amount of $600. How long has the loan been outstanding?
6 months
Payments on a fixed rate amortized loan consist of what two components?
Principal and Interest
Which type of loan has payments that are sufficient to repay the loan amount
and the interest owed over the life of the loan?
Fully Amortizing Loans
All of the following statements about a fixed rate or level payment mortgage
loan are accurate, EXCEPT:
a. the original amount of the loan is fully repaid at the end of the life of the
loan.
b. the amount of each payment that is applied to repaying the principal
increases over the life of the loan.
c. the amount of each payment that is applied to paying interest increases over
the life of the loan.
d. The monthly payment is fixed over the life of the loan.
c. the amount of each payment that is applied to paying interest increases over the
life of the loan.
What type of loan has payment adjustments at set intervals and an interest rate
that can fluctuate over the term of the loan?
Adjustable rate mortgage
What determines the interest rate that a borrower must pay on an adjustable
rate mortgage?
the margin added to the index determine the note rate that is the rate the
borrower will pay on the loan. 2 index rates often used bny lenders are the weekly
average yield on US treasury securities called the one-year t-bill rate and the
,eleventh district cost of funds. the lender does not control the fluctuation of interest
rate charge in an ARM.
What is the rate adjustment period on a two-year ARM?
24 month
What are the advantages of a shorter-term mortgage loan over a 30-year loan?
the borrower pays less interest over the life of the loan and the interest rate is
likely to be lower.
What is blanket mortgage?
a mortgage that pledges multiple properties as security for a loan.
All of the following statements about a reverse mortgage are accurate, EXCEPT:
a. a home equity conversion mortgage is an FHA approved reverse mortgage
b. a reverse mortgage allows a homeowner to receive a lump sum or monthly
advance on a line of credit based on the equity in their home.
c. a homeowner must be age 62 or older to be eligible for a reverse mortgage
d. if the loan balance exceed the proceeds from the sale of the property, the
owner or the owner's heirs must pay the difference to the lender.
d. if the loan balance exceed the proceeds from the sale of the property, the
owner or the owner's heirs must pay the difference to the lender.
What is the difference between a package mortgage and a chattel mortgage?
a package mortgage uses both real and personal property as security for a loan;
a chattel mortgage uses only personal property as security for the loan.
A mortgage of $10,000 for 10 years at 5% has a monthly payment of $121.22.
what is the balance of the loan after the first monthly payment?
$9,920.34
What is Intermediation?
the flow of deposits into lending institutions, thereby, creating a mortgage money
supply.
What is Disintermediation?
the flow of money into investments other than lending institutions
,What is the effect of increased intermediation?
the mortgage money supply is increased, and the interest rates are deduce.
What is the effect of increased Disintermediation?
the mortgage money supply is reduced, and interest rates are increased.
All of the following are part of the purpose of the Federal Reserve System,
EXCEPT:
a. supervising the banking industry
b. providing elastic currency
c. setting interest rate
d. providing a system for discounting commercial paper
c. setting interest rate
What is the discount rate?
the rate of interest that a member bank pays to borrow money from a Federal
Reserve Bank
What is the most likely effect of an increase in the discount rate?
a member bank's cost of doing business is increased, and it must charge higher
interest rates to borrowers.
All of the following statements about open market operations are accurate,
EXCEPT:
a. the FOMC raises interest rates by purchasing government securities
b. higher interest rates cause the economy to slow down
c. in a tight money market, less money is available for loans
d. the FOMC stimulates the economy by purchasing government securities.
a. the FOMC raises interest rates by purchasing government securities
When the federal reserve increases the reserve requirements of member banks,
what is the impact on the economy?
the amount of money available for lending is decreased, which may cause interest
rates to increased.
Which Federal Reserve action is considered to be the most effective tool for
controlling the money supply?
, Open Market Operations: buying or selling government securities on the open
market.
All of the following are sources of Primary Mortgage Market Funding, EXCEPT:
a. commercial bank
b. Federal home loan mortgage corporation
c. Mortgage loan originators
d. Life Insurance companies.
b. Federal home loan mortgage corporation
All of the following are secondary mortgage market lenders, EXCEPT:
a. Federal Home Loan Mortgage Corporation
b. Government National Mortgage Association
c. Federal National Mortgage association
d. Real Estate Investment Trusts
d. Real Estate Investment Trusts
What is the largest source of funds for financing of apartment projects and
commercial property?
Life Insurance Companies
What is the purpose of the secondary mortgage market?
to provide a constant source of funds for real estate loans
What was the original purpose of the federal national mortgage association
(FNMA)?
to purchase FHA loans and provide liquidity for lenders of FHA loans.
What is conforming loan?
A loan that is underwritten in accordance with the standards established by Fannie
Mae and Freddie Mac
When compared to conforming loans, non conforming loans have all of the
following characteristics, EXCEPT:
a. lower risk to the lender
b. more flexibility in loan products and loan programs
ACCURATE SOLUTIONS AND RATED A.
A $24,000 interest only, level payment, term loan has a rate of 5% and interest
due in the amount of $600. How long has the loan been outstanding?
6 months
Payments on a fixed rate amortized loan consist of what two components?
Principal and Interest
Which type of loan has payments that are sufficient to repay the loan amount
and the interest owed over the life of the loan?
Fully Amortizing Loans
All of the following statements about a fixed rate or level payment mortgage
loan are accurate, EXCEPT:
a. the original amount of the loan is fully repaid at the end of the life of the
loan.
b. the amount of each payment that is applied to repaying the principal
increases over the life of the loan.
c. the amount of each payment that is applied to paying interest increases over
the life of the loan.
d. The monthly payment is fixed over the life of the loan.
c. the amount of each payment that is applied to paying interest increases over the
life of the loan.
What type of loan has payment adjustments at set intervals and an interest rate
that can fluctuate over the term of the loan?
Adjustable rate mortgage
What determines the interest rate that a borrower must pay on an adjustable
rate mortgage?
the margin added to the index determine the note rate that is the rate the
borrower will pay on the loan. 2 index rates often used bny lenders are the weekly
average yield on US treasury securities called the one-year t-bill rate and the
,eleventh district cost of funds. the lender does not control the fluctuation of interest
rate charge in an ARM.
What is the rate adjustment period on a two-year ARM?
24 month
What are the advantages of a shorter-term mortgage loan over a 30-year loan?
the borrower pays less interest over the life of the loan and the interest rate is
likely to be lower.
What is blanket mortgage?
a mortgage that pledges multiple properties as security for a loan.
All of the following statements about a reverse mortgage are accurate, EXCEPT:
a. a home equity conversion mortgage is an FHA approved reverse mortgage
b. a reverse mortgage allows a homeowner to receive a lump sum or monthly
advance on a line of credit based on the equity in their home.
c. a homeowner must be age 62 or older to be eligible for a reverse mortgage
d. if the loan balance exceed the proceeds from the sale of the property, the
owner or the owner's heirs must pay the difference to the lender.
d. if the loan balance exceed the proceeds from the sale of the property, the
owner or the owner's heirs must pay the difference to the lender.
What is the difference between a package mortgage and a chattel mortgage?
a package mortgage uses both real and personal property as security for a loan;
a chattel mortgage uses only personal property as security for the loan.
A mortgage of $10,000 for 10 years at 5% has a monthly payment of $121.22.
what is the balance of the loan after the first monthly payment?
$9,920.34
What is Intermediation?
the flow of deposits into lending institutions, thereby, creating a mortgage money
supply.
What is Disintermediation?
the flow of money into investments other than lending institutions
,What is the effect of increased intermediation?
the mortgage money supply is increased, and the interest rates are deduce.
What is the effect of increased Disintermediation?
the mortgage money supply is reduced, and interest rates are increased.
All of the following are part of the purpose of the Federal Reserve System,
EXCEPT:
a. supervising the banking industry
b. providing elastic currency
c. setting interest rate
d. providing a system for discounting commercial paper
c. setting interest rate
What is the discount rate?
the rate of interest that a member bank pays to borrow money from a Federal
Reserve Bank
What is the most likely effect of an increase in the discount rate?
a member bank's cost of doing business is increased, and it must charge higher
interest rates to borrowers.
All of the following statements about open market operations are accurate,
EXCEPT:
a. the FOMC raises interest rates by purchasing government securities
b. higher interest rates cause the economy to slow down
c. in a tight money market, less money is available for loans
d. the FOMC stimulates the economy by purchasing government securities.
a. the FOMC raises interest rates by purchasing government securities
When the federal reserve increases the reserve requirements of member banks,
what is the impact on the economy?
the amount of money available for lending is decreased, which may cause interest
rates to increased.
Which Federal Reserve action is considered to be the most effective tool for
controlling the money supply?
, Open Market Operations: buying or selling government securities on the open
market.
All of the following are sources of Primary Mortgage Market Funding, EXCEPT:
a. commercial bank
b. Federal home loan mortgage corporation
c. Mortgage loan originators
d. Life Insurance companies.
b. Federal home loan mortgage corporation
All of the following are secondary mortgage market lenders, EXCEPT:
a. Federal Home Loan Mortgage Corporation
b. Government National Mortgage Association
c. Federal National Mortgage association
d. Real Estate Investment Trusts
d. Real Estate Investment Trusts
What is the largest source of funds for financing of apartment projects and
commercial property?
Life Insurance Companies
What is the purpose of the secondary mortgage market?
to provide a constant source of funds for real estate loans
What was the original purpose of the federal national mortgage association
(FNMA)?
to purchase FHA loans and provide liquidity for lenders of FHA loans.
What is conforming loan?
A loan that is underwritten in accordance with the standards established by Fannie
Mae and Freddie Mac
When compared to conforming loans, non conforming loans have all of the
following characteristics, EXCEPT:
a. lower risk to the lender
b. more flexibility in loan products and loan programs
