FRL306_quiz1&2_sol[1] - FRL 306 Quiz 1: for Chapter 10...

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FRL 306 Quiz 1: for Chapter 10 April 7, 2008 1. Discuss in detail one type of prepayment penalty Prepayment penalties that are penalties that have to be paid when the mortgage balance is prepaid before the term of the mortgage. A) Percentage of outstanding balance B) Yield maintenance – provide a lump sum payments besides the OLB to provide the same yield to the lender as the future payments would. C) Defeasance - provide US treasury that provide similar cash flows as the mortgage payments would. 2. List and define the two elements of a Californian lien: What is a lien, an example of encumbrance Promissory note: is a promise to repay under certain conditions (with certain fees) Security agreement, this agreement turns the asset into collateral. 3. An $100,000 ARM loan was issued in 2003 January, with a 3% Teaser rate. The ARMs rate adjusts to the one year constant maturity Treasury rate index after three years. The index value in 2005 January is 6.5%, in 2006 January 7.1%, and 6.7% in 2007
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FRL306_quiz1&2_sol[1] - FRL 306 Quiz 1: for Chapter 10...

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