Q&A Hero

Q: Most lenders require an amount called ____________________ to be paid to them in advance; the lenders pay real estate taxes from this fund.

Q: The ____________________ cap is the specified overall maximum or minimum rate of an ARM, regardless of index.

Q: The difference between what an item is worth and what is owed on it is called ____________________.

Q: In a(n) ____________________ mortgage, the borrower prepays part of the interest in order to get a lower rate.

Q: A type of fixed rate mortgage in which the entire remaining balance of the loan is due in one single large payment is called a(n) ____________________ mortgage.

Q: A fixed rate mortgage is also known as a(n) ____________________ mortgage.

Q: A(n) ____________________ is a note, usually long-term, secured by real property.

Q: Which of the following contributed to the mortgage crisis? a. some countries had new levels of wealth available for investment b. a shift from using local deposits to finance mortgages to using the bond markets to finance mortgages c. a federal funds rate of 5% d. a and b only e. b and c only f. a and c only g. all of the above

Q: Which of the following statements about HOEPA loans is NOT true? a. Lenders must make disclosures three days before closing. b. Lenders are prohibited from charging an APR that is 10 points higher than a rate on a Treasury Bill. c. Lenders may not require balloon payments in less than five years on most loans. d. Lenders may not make loans that do not adequately consider the borrowers ability to repay.

Q: The Real Estate Settlement Procedures Act was enacted a. to protect consumers from hidden costs at closing time. b. to protect consumers against predatory lending. c. to promote the informed use of consumer credit. d. to require banks to document their lending decisions and demonstrate an effort to serve their local communities.

Q: The ____________________requires banks to record and report data on home lending in order to identify possible discriminatory patterns. a. Equal Credit Opportunity Act b. Community Reinvestment Act c. Home Mortgage Disclosure Act d. Home Ownership and Equity Protection Act

Q: The final step of the mortgage approval process is a. closing. b. recording. c. drawing documents. d. underwriting.

Q: Generally speaking, housing costs should not exceed ____________________ of gross monthly income. a. 10 to 15 percent b. 25 to 28 percent c. 36 to 40 percent d. 50 percent

Q: A reverse mortgage is repaid a. over the term of the loan, typically 30 years. b. in one single large payment at a specified point. c. when the borrower dies. d. by the bank to the borrower.

Q: A point is a value equal to ____________________ of a mortgage loan. a. 1 percent b. 2 percent c. 5 percent d. 10 percent

Q: The rate to which a lenders interest rate is tied is called the a. formula. b. index. c. adjustment interval. d. periodic cap.

Q: Which of the following components of a fixed rate mortgage do not change? a. payments on the loan b. interest rate c. terms d. all of the above

Q: Lowered lending criteria for home mortgages benefited society as the lowered criteria allowed more consumers to achieve their goal of homeownership. a. True b. False

Q: Qualifying veterans may get government-backed mortgage loans with low down payments through the Department of Veterans Affairs. a. True b. False

Q: The Gramm-Leach-Bliley Act requires that financial institutions protect the privacy of consumers. a. True b. False

Q: The first step in the mortgage approval process is documentation. a. True b. False

Q: Private mortgage insurance protects the lender against loan default; it typicallyis not required for borrowers whose down payment is 10 percent or more. a. True b. False

Q: A larger down payment on a home lowers the amount of the monthly payment. a. True b. False

Q: A shared appreciation mortgage (SAM) is a mortgage loan tied to the appreciated value of a property. a. True b. False

Q: Interest rates are usually lower for fixed rate mortgages than for other types. a. True b. False

Q: The "drawing documents" step in the approval process for a mortgage loan involves signing the documents that transfer the property from the seller to the buyer. a. True b. False

Q: A mortgage is the longest and largest debt most people will ever incur. a. True b. False

Q: Explain what it means to be a captive borrower.

Q: For a bank, what is liquidity? What are some loan factors that affect a lending banks liquidity?

Q: What are the three Cs that underwriters use to evaluate loan applications? Briefly define them.

Q: What is a line of credit?

Q: Explain the difference between secured and unsecured loans.

Q: How can a bank limit credit risk?

Q: What does securitization mean?

Q: What is a consumer reporting agency?

Q: What occurs during a loan closing?

Q: What is an acceleration clause?

Q: What is a finance charge?

Q: What are home equity loans based upon?

Q: Dominic has a balance of $1,460.20 on his credit card. The minimum payment requirement is 6%, and the card's APR is 18%. If he makes the minimum payment, how much of it will go toward reducing the balance? Round your answer to the nearest hundredth.

Q: Markita has a balance of $3,400 on her credit card. The minimum payment requirement is 5%, and the card's APR is 17%. If she makes the minimum payment, how much of it will go toward paying the interest? Round your answer to the nearest hundredth.

Q: Becky has a balance of $2,000 on her credit card. The minimum payment requirement is 4%. How much is the minimum payment?

Q: Suppose you borrow $5,000 and make 12 equal payments to retire the debt. If the finance charge for the loan is $400, what will the amount of each monthly payment be?

Q: Suppose you borrow $1,000 and pay the loan back in 12 equal payments of $95.50. What is the finance charge for this loan?

Q: Specific property that secures a loan is called ____________________.

Q: ____________________ refers to using deposits to generate revenue by putting deposits to work via loans.

Q: Services provided by banks that generate revenue but that are not included on their balance sheets are called ____________________.

Q: The annual ____________________ rate is the amount of interest charge on a loan principal expressed as a yearly figure.

Q: ____________________ are records of all who have requested a copy of a credit report within the last year.

Q: The process of reviewing a loan for soundness is called ____________________.

Q: A(n) ____________________ period is an amount of time you have to pay a credit card bill in full and avoid any finance charges.

Q: The amount you borrow in a loan is called the ____________________.

Q: When banks refuse to provide a loan, or when they lend less than the customer requested, they are engaging in____________________.

Q: A home equity loan is essentially a second ____________________.

Q: A(n) ____________________ loan is a loan for which the amount of the payments, the rate of interest, and the number of payments are fixed.

Q: The risk that a bank will have to sell its assets at a loss to meet its cash demands is called a. credit risk. b. market risk. c. liquidity risk. d. security risk.

Q: The concept that the borrowers who are most willing to accept a high interest rate are the same borrowers who are most likely to default on their loans is called a. moral hazard. b. captive borrowers. c. adverse selection. d. asset transformation.

Q: Documentation of most credit problems stays in a consumers file for at least a. six months. b. one year. c. five years. d. seven years.

Q: This finance charge method takes the total finance charge, divides it by the number of months in the loan term, and assigns a higher ratio of interest to the early payments. a. previous balance method b. average daily balance method c. sum-of-digits method d. adjusted balance method

Q: Which of the following elements of the FICO credit-scoring system carries the most weight? a. types of credit b. payment history c. length of credit history d. new credit

Q: Which of the following shows the steps of the credit-approval process in proper order? a. underwriting, application, documentation, processing, closing, funding b. documentation, application, underwriting, closing, processing, funding c. application, processing, documentation, underwriting, closing, funding d. application, documentation, processing, underwriting, closing, funding

Q: Which of the following statements about open-end loans is true? a. An automobile loan is probably the most common type of open-end loan. b. The longer you use the money, the more you pay. c. The amount owed is fixed. d. The term is fixed.

Q: Which of the following is NOT an example of an account service fee? a. certified check fee b. fee for returned checks c. financing fee d. verbal funds transfer fee

Q: A legal claim a lender has on property to secure a debt is called a. a lien. b. collateral. c. an acceleration clause. d. a garnishment.

Q: All of the following are considered installment loans except a. automobile loans. b. home equity loans. c. education loans. d. lines of credit.

Q: A lending policy is a written statement of the guidelines and standards a bank must follow in making credit decisions. a. True b. False

Q: Keeping large amounts of currency on hand as protection against possible increases in customers demand for withdrawals reduces a banks ability to make profits from loans. a. True b. False

Q: The term moral hazard means that consumers with poor moral character are a high credit risk. a. True b. False

Q: High consumer debt is good for banks, because banks make most of their money from the interest paid on loans. a. True b. False

Q: One consequence of credit overextension is a ruined credit rating. a. True b. False

Q: Paying off a loan early saves the consumer no money if the sum-of-digits method has been used to compute finance charges. a. True b. False

Q: If a credit applicant has opened many new accounts recently, that is probably a sign that the applicant is very creditworthy. a. True b. False

Q: Subprime rates are higher-than-normal interest rates offered to a less-than-perfect credit applicant. a. True b. False

Q: The three general categories of loans are consumer loans, commercial loans, and mortgage loans. a. True b. False

Q: Balance sheets for all banks are private documents seen only by bank management. a. True b. False

Q: Secured loans are sometimes called signature loans. a. True b. False

Q: Personal loans do not require the borrower to state a specific purpose for the funds. a. True b. False

Q: Why was the Expedited Funds Availability Act (EFAA) of 1987 passed, and what rules did it direct the Fed to set?

Q: What is the difference between electronic check conversion and Check 21?

Q: Name and describe the technology used most frequently in the U.S. for contactless payments.