Fin 3632 ch. 18

A bank is considering making a loan to Alice Granger. The bank is looking at her credit report from Equifax and also examining the reason Alice has put on the loan application for needing the loan. According to the text, what aspect of evaluating a consumer loan application is the bank looking at? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

a

According to the text, which of the following appears to be the most important factor used in the FICO credit scoring system? A. The borrower's payment history B. The amount of money owed C. Marital status D. Employment history and salary E. Age

a

According to the text, which of the following types of loan has the lowest interest rate? A. New automobile loan B. Used automobile loan C. Personal loan D. Credit card loan E. All of the options have the same interest rate

a

Jeremiah Uselton needs a loan to purchase a condo in Sarasota, Florida. Which of the following categories will this loan fall into? A. Residential mortgage loan B. Home equity loan C. Noninstallment loan D. Revolving line of credit E. None of the options is correct

a

Jerry McGuire uses his Visa card to buy a new washer and dryer and a new refrigerator for his home. He plans on paying off the credit card over the next two years. How is Jerry using his credit card? A. As an installment loan B. As a noninstallment loan C. As a lump sum payer D. As a debit card E. None of the options is correct

a

Prepaid cards which carry balances that can be spent electronically in stores until the balance entered in such cards is fully used up are known as: A. smart cards. B. deposit cards. C. match cards. D. credit cards. E. All of the options are correct.

a

Short-term loans drawn upon by individuals and families for immediate cash needs and repayable in a lump sum are known as: A. noninstallment loans. B. installment loans. C. residential mortgage loans. D. nonresidential cash loans. E. None of the options is correct

a

The federal law that requires banks to notify in writing to their credit customers when a loan request is denied is known as the: A. Equal Credit Opportunity Act. B. Competitive Equality in Banking Act. C. Truth-in-Lending Act. D. Community Reinvestment Act. E. None of the options is correct.

a

The first major bank within the U.S. to establish a separate department for granting loans to consumers was: A. First National City Bank of New York. B. BankAmerica. C. Bank One. D. State Street Bank. E. Bank of New York.

a

The net effect of the new code under Bankruptcy Abuse Prevention and Consumer Protection Act, 2005 has generally been to make filing for bankruptcy: A. more expensive and time consuming. B. less expensive and seamless. C. easier for home owners. D. paperless and completely online. E. easier for corporations.

a

Which of the following is not a factor considered in the evaluation process of an installment loan? A. Evidence of caring for and maintaining property B. Evidence of stable employment C. Evidence of residence stability D. Evidence of income stability E. All of the options are factors considered in the evaluation of an installment loan

a

Which of the following is true regarding credit card loans? A. There is evidence that considerable economies of scale exist in credit card loans. B. Credit cards loans cannot act as installment loans. C. Credit cards loans are very inconvenient for consumers. D. Credit cards loans are very inflexible for consumers. E. All of the options are true.

a

A ____________ uses an average of a debtor's last six months of gross income to determine whether an applicant must file for bankruptcy under chapter 7 or 13 of the bankruptcy code. A. ways test B. means test C. income test D. feasibility test E. bankruptcy test

b

A bank is considering making a loan to John Carter. John is a commissioned sales broker. Some months he earns as much as $10,000 and in other months he earns virtually nothing. Which aspect of evaluating a consumer loan would this be concerned with? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

b

A bank is considering making a loan to Ron Weasley. Ron has a gross salary per month of $4,000 but has take-home pay of $2,800 per month. What aspect of evaluating a consumer loan application is this fact most concerned with? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

b

A loan officer asks a customer what race she belongs to. Which law prohibits the loan officer from asking such question? A. The Truth in Lending Act B. The Equal Credit Opportunity Act C. The Community Reinvestment Act D. The Fair Debt Collection Practices Act E. None of the options is correct

b

Alexis Downs uses her credit card to buy furniture but pays off the credit card at the end of the month before she incurs any interest costs. How is Alexis using her credit card? A. As an installment loan B. As a noninstallment loan C. As a home equity loan D. As a debit card E. None of the options is correct

b

An additional charge on a home mortgage loan that a borrower may be asked to pay up front is referred to as: A. loan interest owed. B. points. C. loading. D. tax equity. E. None of the options is correct.

b

In a revolving line of credit, where a customer is subject to high fees and interest costs and is required to make only a small portion of total debt owed, usually called "minimum payment", often results in: A. amortization of debt. B. negative amortization of debt. C. depreciation of debt. D. cumulative depreciation of debt. E. prepayment of debt.

b

Short-term to medium-term loans repayable in two or more consecutive payments are known as: A. noninstallment loans. B. installment loans. C. residential mortgage loans. D. nonresidential cash loans. E. None of the options is correct.

b

Tammy Payne wants to buy a used car and wants a loan that she will pay off over the next three years with monthly payments. Which of the following categories will this loan fall into? A. Residential mortgage loan B. Installment loan C. Noninstallment loan D. Revolving line of credit E. None of the options is correct

b

The federal law that permits consumers to dispute billing errors with a merchant or credit card company and receive a prompt investigation of any billing disputes is the: A. Fair Credit Reporting Act. B. Fair Credit Billing Act. C. Fair Debt Collection Practices Act. D. Truth in Lending Act. E. None of the options is correct.

b

The law which was passed to curtail predatory lending is known as the: A. Community Reinvestment Act. B. Home Ownership and Equity Protection Act. C. Equal Credit Opportunity Act. D. Fair Debt Collection Practices Act. E. None of the options is correct.

b

Which of the following consumer loans has grown in popularity as a result of the passage of the Tax Reform Act of 1986? A. Credit card loans B. Home equity loans C. Long-term, noninstallment loans D. Short-term, installment loans E. All of the options are correct

b

A bank is considering making a loan to Sam Snape. Mr. Snape has $1,000 in the bank right now but generally keeps a balance of $4,500 most of the year. What aspect of evaluating a consumer loan application is this fact concerned with? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

c

A bank that is judged as needing to improve under the performance requirements of the Community Reinvestment Act will receive an examiner rating of: A. 0. B. S. C. N. D. SN. E. None of the options is correct

c

A bankruptcy filing usually remains in the credit report of the filer for up to: A. 2 years. B. 5 years. C. 10 years. D. 20 years. E. the individual's life.

c

According to the text, which of the following has been the fastest growing consumer loan category in the last few decades inside the United States? A. Credit card loans B. Auto loans C. Home mortgages D. Personal loans E. Education loans

c

According to the text, which of the following is often the most profitable credit service a lender can offer? A. Government loans B. Business loans C. Consumer loans D. Loans extended to not-for-profit organizations E. Money market loans

c

An abusive practice in which lenders grant loans to weak borrowers and charge them high fees and interest rates, which may cause the borrower to default on the loan is known as: A. installment loaning. B. credit card loaning. C. predatory lending. D. herbivore lending. E. None of the options is correct.

c

As part of the new regulations of the mortgage market, the Federal Reserve Board moved to tighten the rules on mortgage lending in 2008. All of the following would improve transparency of the market except for: A. lenders must verify the borrower's reported income. B. lenders cannot rely on a home's current market value to judge a borrower's creditworthiness. C. lenders must rely on a borrower's stated income. D. lenders must disclose more about the actual terms of a home mortgage loan to a borrower. E. All of the options are included in the new rules.

c

Emily Barnes has gone to the First State Bank and gotten a loan of $5,000 so she can go on vacation. She plans on paying the loan back in one payment in three months. Which of the following categories will this loan fall into? A. Residential mortgage loan B. Installment loan C. Noninstallment loan D. Revolving line of credit E. None of the options is correct

c

FNMA does not purchase home mortgages in the secondary market if the borrower's monthly total debt repayments (including housing costs) exceed _________ percent of the borrower's monthly gross income. A. 28 B. 30 C. 36 D. 40 E. None of the options is correct

c

In lending, ARM is an abbreviation used for: A. automatic rate modulation. B. amortization rate method. C. adjustable rate mortgage. D. adaptable readjusted mortgage. E. None of the options is correct.

c

Loans to individuals and families to finance the purchase of new homes are known as: A. noninstallment loans. B. installment loans. C. residential mortgage loans. D. nonresidential cash loans. E. None of the options is correct.

c

The Equal Credit Opportunity Act requires that: A. a bank make loans to all minority applicants. B. a bank only make loans to people owning large businesses. C. a bank give reasons in writing for denying the loan. D. a bank deny loans if the borrower has only been employed for three months. E. None of the options is correct

c

The principal task of the Consumer Financial Protection Bureau (CFPB) is to: A. design the monetary policy. B. ensure safety and soundness of the banking system. C. write new rules to protect customers of the financial services industry. D. provide insurance to the investors' funds in the banks. E. ensure that the banks conform to the international banking regulations.

c

The requirement that banks must provide their consumer loan customers with a statement of the APR for the proposed loan was established by the: A. Fair Credit Reporting Act. B. Equal Credit Opportunity Act. C. Truth-in-Lending Act. D. Community Reinvestment Act. E. None of the options is correct

c

Which of the following is a challenge in making a consumer loan? A. Audited financial statements are provided by consumers quarterly. B. Consumers must disclose publicly any changes in their health that would affect the loan. C. Consumers can hide pertinent information more easily than corporations. D. Consumers can adjust to financial setbacks more easily than businesses. E. All of the options are challenges of making a consumer loan.

c

A bank is considering making a loan to Sean Finnigan. Sean owns his own home and has lived there for the past four years. What aspect of evaluating a consumer loan application is this fact most concerned with? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

d

According to a proposal under Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders who are pooling and securitizing the mortgage loans they create and then selling them off should remain responsible for at least: A. 10 percent of market risk attached to these loans. B. 5 percent of market risk attached to these loans. C. 10 percent of credit risk attached to these loans. D. 5 percent of credit risk attached to these loans. E. 50 percent of the credit risk attached to these loans.

d

According to the text, which of the following types of loan has the highest interest rate? A. New automobile loan B. Used automobile loan C. Personal loan D. Credit card loan E. All of the options have the same interest rate

d

Bill Wells uses his Discover card to buy new furniture for his apartment. The interest rate on this card is 18 percent and the minimum payment that is due is $100. Which of the following categories will this loan fall into? A. Residential mortgage loan B. Home equity loan C. Noninstallment loan D. Revolving line of credit E. None of the options is correct

d

Donna Carlon is using her plastic card to buy groceries. The money is taken from her checking account immediately to pay for her groceries. How is Donna using her card? A. As an installment loan B. As a noninstallment loan C. As a lump sum payer D. As a debit card E. None of the options is correct

d

FICO credit scoring system provides credit scores in the range of: A. 0 to 10 B. 0 to 1000 C. 100 to 1000 D. 300 to 850 E. 20 to 80

d

How did the Tax Reform Act of 1986 increase the appeal of home equity loans? A. It allowed customers to borrow up to 100 percent of the value of their home. B. It eliminated bank income taxes from this type of loan. C. It protected homes under Chapter 13 bankruptcy. D. It allowed the difference between the market value and amount of loans against a mortgage to be used as a borrowing base. E. It required banks to lend on homes in the geographic area of their deposits.

d

Michelle Woods, a 64 year old retired professor, has applied for a home equity loan from a bank in her neighborhood. The bank structured a loan against her property in a manner that she receives $5,000 every month. This is an example of: A. mortgage loan. B. construction loan. C. retirement benefits. D. reverse mortgage loan. E. pass-through loan.

d

The ______________________ Act requires that applicants for mortgage loans must be given a disclosure statement indicating whether the servicing rights could be transferred to another institution that borrowers will have to deal with during the loan tenure. A. Equal Credit Opportunity B. National Bank C. Federal Lending D. National Affordable Housing E. Fair Credit Reporting

d

The method for figuring out the loan rate wherein the interest amount owed on a loan is added to the principal amount of the loan to determine a borrowing customer's required installment payments is known as: A. simple interest. B. APR. C. discount rate. D. add-on rate. E. None of the options is correct.

d

The most profitable credit card customers for a bank are those that: A. use their credit card frequently. B. pay off any charges incurred within a few days. C. charge at least $10,000 per year. D. use their credit card as a source of installment loans. E. None of the options is correct

d

Which of the following has(have) proven to be important factor(s) in credit scoring models? A. Credit Bureau ratings B. Income bracket C. Home ownership D. Number and type of deposit accounts owned E. All of the options are correct.

d

Which of the following is an advantage of a credit scoring model? A. Credit scoring models rely on the evaluation of an experienced credit officer B. Credit scoring models are immune from charges of discrimination C. Credit scoring models never make mistakes D. Credit scoring models can handle a large volume of applications in a short period of time E. All of the options are advantages of credit scoring models

d

Which of the following is the principal risk faced by a home equity lender? A. Interest rates in the economy may rise B. Interest rates in the economy may fall C. Home prices in the area may rise D. Home prices in the area may decline E. There is no risk associated with home equity lending.

d

A bank is considering making a loan to Neville Langdon. Neville has bounced three checks in the last year and already has $10,000 on a credit card and an automobile loan with a large balance due. What aspect of evaluating a consumer loan application is this fact concerned with? A. Character and purpose B. Income level C. Deposit balance D. Employment and residential stability E. Pyramiding of debt

e

Credit reports provided by credit bureaus provide lenders with: A. personal identifying data. B. personal credit histories derived from data submitted by lenders. C. public information that may bear on a borrower's honesty and stability. D. the volume of inquiries from lenders about the borrower. E. All of the options are correct.

e

Regulations under which of the following law(s) must be complied with by the banks dealing in mortgage lending? A. National Affordable Housing Act B. Community Reinvestment Act C. Financial Institutions Reform, Recovery, and Enforcement Act D. Truth-in-Lending Act E. All of the options are correct

e

Which of the following aspects of a customer's loan application should a bank's real estate loan officer consider carefully when making a home mortgage? A. The amount and stability of the borrower's income B. The borrower's available savings and where the down payment is coming from C. The borrower's track record in caring for and managing property D. The outlook for real estate sales in the local market area E. All of the options are factors that need to be looked into carefully

e

Which of the following bodies is created under the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act? A. Federal Reserve Board B. Securities and Exchange Commission C. Federal Deposit Insurance Commission D. Comptroller of the Currency E. Consumer Financial Protection Bureau

e

Which of the following makes the most amount of credit card loans in the United States? A. Thrifts B. Insurance companies C. Finance companies D. Credit Unions E. Commercial banks

e

Which of the following regulations requires lending institutions to delineate the trade territory it plans to serve and to offer all of its services without discrimination to all the residents in that particular trade territory? A. Equal Credit Opportunity Act B. National Bank Act C. Federal Lending Act D. Fair Credit Reporting Act E. Community Reinvestment Act

e