chapter 5: adjustable and floating rate mortage loans

Which provides for a more timely adjustment for lenders?

ARM

At the time of origination, will an ARM or FRM have a higher expected yield?

FRM

A PLAM provides a more timely adjustment for lenders than an ARM.

False

A PLAM loan balance can _______.

go up or down

A loan that has a fixed rate period and then floats is called a

hybrid loan

the amount of ___________ rate risk held by the lender may be adjusted by changing the terms of an ARM.v

interest

With a fixed rate mortgage, the _________bears the interest rate risk.

lender

Under an adjustable rate mortgage, who bears interest rate risk?

lenders and borrowers

Maximum caps will ______ the risk to borrowers of ARMS.

lower

The terms of an ARM are negotiated ________.

when the loan is made

Inclusion of caps or floors on the interest rate will impact the yield of an ARM.

True

A price level adjusted mortgage adjusts the loan balance by what?

price index

If an ARM has a payment cap and negative amortization, the receipt of cash flow can be _______.

pushed into the future

Which of the following determine the expected yield of an ARM?

the margin the initial interest rate an interest rate index