PT Ch22

PT Ch22 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A mortgage ________. 1) A) is a collection of markets, which includes a primary (or origination) market and a secondary market where mortgages trade. B) gives the borrower right to foreclose the loan and seize the property in order to ensure that it is repaid. C) is a pledge of property to secure payment of a debt. D) refers to real estate. 2) ________ is the risk associated with a mortgage's cash flow due to prepayments. 2) A) Price risk B) Prepayment risk C) Credit risk D) Liquidity risk 3) In recent years several types of nontraditional amortization schemes have become popular in the mortgage market. The most popular is the ________. 3) A) hybrid - only product. B) interest - only product. C) lockout period product. D) ARM - only product. 4) Which of the below statements is FALSE? 4) A) Several firms collect data on the payment histories of individuals from lending institutions and, using statistical models, evaluate and quantify individual creditworthiness in terms of a credit score. B) In assessing the credit quality of a mortgage applicant, lenders look at various measures with the starting point being the applicant's credit score. C) Basically, a credit score is a qualitative grade of the credit history of the borrower. D) Although the credit scores have different underlying methodologies, the scores generically are referred to as FICO scores where a higher FICO score indicates lower the credit risk. 5) Which of the below statements is TRUE? 5) A) The loan - to - value ratio (LTV) is the ratio of monthly payments to monthly income, which measures the ability of the applicant to make monthly payments (both mortgage and real estate tax payments). B) The lower the loan - to - value ratio (LTV), the greater the likelihood that the applicant will be able to meet the required payments. C) The two primary quantitative underwriting standards are (1) the payment - to - income ratio (PTI), and (2) the loan - to - value ratio (LTV). D) All of these 6) One of the underwriting standards is the loan balance at the time of origination. Conventional loans that meet the underwriting standards of the two GSEs are called conforming limits. But there are other important underwriting standards that must be satisfied. These include ________. 6)
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PT Ch22 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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