chapter 11 and 12

Numerous "affordable housing" loan programs were created in the mid-1990s. The dominant strategy for such programs was to alter the "three Cs" of traditional underwriting by relaxing of the three standards while maintaining all else at conventional norms.

1

At their peak, private mortgage conduits accounted for _________ percent of all home outstanding mortgages. Multiple choice question.

20

There have been widely recognized standards for the two customary capacity or ability-to-pay ratios for home mortgage underwriting. The housing expense ratio was to be no more than percent for conventional loans and no more than for FHA loans. The debt-to-income ratio was to be no more than for conventional loans, and no more than for FHA loans.

28, 31, 36, 41

With the widespread default on home mortgages after 2007, it has been asked: what happened to underwriting? The answer seems to be that normal underwriting standards were widely abandoned. A major study found that as much as percent of subprime borrowers failed to document income or assets.

50

The creditworthiness of a mortgage loan applicant was assessed by credit reports and a lot of judgment until the 1990s. In more recent times much more reliance has been place on

: credit Blank 2: score, scoring, or scores

The Federal Home Loan Bank System, originally banker for savings and loan associations, now extends membership to:

all thrifts credit unions banks insurance companies

The Federal Home Loan Bank System, originally banker for savings and loan associations, now extends membership to:

all thrifts insurance companies credit unions banks

Currently, Freddie Mac channels virtually all of it acquired loans into mortgage securities, and purchases the loans from:

all types of lenders

Agencies and private companies that pool and securitize mortgages are sometimes called

conduits

In 2008, loan losses and loss reserves eroded the capital of Fannie Mae and Freddie Mac to the point that they were placed under of the U.S. Government.

conservatorship

Freddie Mac has always focused primarily on the purchase of fixed rate home loans.

conventional

The typical state real estate commission has these responsibilities:

creating and administering exams for licensing Enforce the license law through hearings for violations and administering penalties specifying education and other requirements for licensing overseeing administration of the state licensing law and regulations

Under the Dodd-Frank "ability-to-repay" standard, which of these must a lender consider in underwriting a home mortgage loan?

credit history

Among the most common violations of license law by sale persons and brokers are regulations about the handling of:

deposits and fees

The problem of dual agency can arise within a single brokerage firm if a transaction involves both a listing and a buyer's agency within that firm. One solution that has been attempted is to appoint a separate agent for each party who are to work at "arms length."

designated

Important steps in laying the foundation for a modern home mortgage secondary market, starting in 1968, included:

establishment of Fannie Mae as a quasi-private purchaser of FHA and VA loans creation of Freddie Mac as a purchaser of conforming conventional loans creation of GNMA as a US Government guarantor of FHA/VA mortgage securities

Specific actions that generally violate state real estate broker and sales person license law include:

failure to provide contracts to all parties of a sales agreement paying a commission to an unlicensed person Commingling deposits with personal funds offering property on terms other than those specified by the client

Among the investors that MBS have attracted to greater mortgage investment are:

foreign institutional investors pension funds life insurance companies mutual funds

An agent who is empowered to make commitments or contracts obligating a person of firm within a specific sphere of activity is a agent.

general

Persons who deal with real estate for others but are exempt from licensure include:

government employees dealing with real estate as part of their work those with power of attorney on-site residential managers trustees and executors attorneys

ost commonly, brokers are compensated by a commission that is a percentage of the sale price.

gross

Features of a standard "pass-through" mortgage backed security include:

guarantees protect the investor from losses due to default it is based on a pool of similar mortgages each investor receives a pro-rata share of each dollar of interest, scheduled amortization and prepayment that flows into the pool

In reflecting on the "subprime meltdown" following 2007, it has been argued that virtually every investor, builder, lender, securitizer, and institution involved was depending on one "bet," namely, that:

housing prices would never fall

About half of the states have adopted a weakened form of broker relationship known as transaction broker. Other names for the concept are:

intermediary broker facilitating broker

Select all that apply Issuers of private residential mortgage securities since 2000 have included:

investment banking houses large banks large finance companies

Subprime lending was the subject of controversy from early on in its history. Defenders argued that a high loan-to-value subprime loan was better for many borrowers than accumulating large amounts of credit card debt or personal loans. But critics focused on a high incidence of lending due to absence of adequate regulation

predatory

Typical required qualifications for a real estate license include

prelicensing classroom education, typically 70 hours high school diploma or GED good reputation, sometimes references minimum age (18 - 21) pass a state licensing exam

In the failure of home mortgage underwriting preceding the Great Recession, a major factor that disrupted established underwriting practice was the explosive growth of mortgages created and channeled to ________.

private securities

In all states a real estate license is required to perform for anyone other than yourself all real estate activities, including:

renting or leasing managing purchasing selling auctioning

In today's complex and confusing home mortgage world, some possible guides to shopping for a loan are these:

the shorter the lending chain, the lower should be the cost banks have an affinity for ARM loans and might be expected to make the best ARM offers mortgage brokers and mortgage bankers are commission compensated and motivated to provide strong service. shop!

WarningDue in less than 1 hour Question Mode Fill in the Blank Question Fill in the blanks to complete the sentence. The most widely used arrangement to avoid dual agency is to change the listing relationship from the traditional fiduciary relationship to what is most commonly called a broker.

transaction

In about 2011, twenty years of rapid concentration in mortgage banking reversed as the largest banks gave up market share to smaller mortgage banking companies and to Internet home lenders. This was caused by:

troubled experience of large banks with home loans stricter regulation and capital requirement for banks for home mortgages rise of on-line lenders such as Quicken

Fannie Mae and Freddie Mac jointly brought about standardization in home mortgage lending, including:

uniform appraisal practices and forms uniform loan applications uniform underwriting practices standardized mortgage and note

The most troublesome form of dual agency is hBlank 1Blank 1 h , Incorrect Unavailable dual agency, which can occur quite easily in the common case where a salesperson from one firm shows a property listed by another firm.

unintended

An agent who is empowered to act in all matters for a person, personal and financial, is called a universalBlank 1Blank 1 universal , Correct Unavailable agent.

universal

On the question of whether a down payment is a necessary part of home mortgage lending, the strictly rational view is that:

value is the amount one can recover at sale and the initial down payment is irrelevant

Obligations of a principal to a fiduciary is to be , , and to the fiduciary.

open, honest, fair

Numerous industry designations are maintained by affiliates of the of .

Blank 1: National Blank 2: Association Blank 3: Realtors

Driven by concern about dual agency, states have imposed strict requirements of explicit and written concerning whom a broker or salesperson represents.

Blank 1: disclosures Blank 2: consent

A dual agent owes equal to both parties of a transaction. In this situation the broker cannot reveal to the seller that the buyer will pay than the listing price, nor to the buyer that the seller will accept different than are listed or a price than is listed.

Blank 1: loyalty Blank 2: more, higher, or greater Blank 3: terms Blank 4: lower, less, or smaller

Four channels of capital flow into home mortgage lending are lending, external guarantee or credit enhancement, purchase and securitization with internal guarantee, senior-subordinate securities.

Blank 1: portfolio or direct Blank 2: GNMA Blank 3: GSE Blank 4: private

Views diverge on the importance of a down payment in underwriting a home mortgage loan. Underwriters tend to believe that the down payment is a of the buyer's sincerity or intention to meet the obligation. Economists tend to believe that what matters is not the cash a borrower has put into a house, but what the borrower can from it.

Blank 1: signal, indicator, or gauge Blank 2: recover, get, or gain

Among MLS members, a broker selling a listing of another broker traditionally became a of the listing broker which implies duties to the seller of the property.

Blank 1: subagent Blank 2: fiduciary or agency

Almost all loans created by mortgage banking find their way into mortgage securities. Conforming conventional loans will end up in securities of

Fannie, Mae, Freddie, Mac

Specific actions that generally violate state real estate broker and sales person license law include:

Commingling deposits with personal funds paying a commission to an unlicensed person offering property on terms other than those specified by the client failure to provide contracts to all parties of a sales agreement

The typical state real estate commission has these responsibilities:

Enforce the license law through hearings for violations and administering penalties creating and administering exams for licensing overseeing administration of the state licensing law and regulations specifying education and other requirements for licensing

Ginnie Mae securities are for pools of FHABlank 1Blank 1 FHA , Correct Unavailable and VABlank 2Blank 2 VA , Correct Unavailable home mortgages, plus a very small amount of US Rural Housing Services home loans.

FHA, VA

Through the 1970s Fannie Mae primarily was a buyer of FHABlank 1Blank 1 FHA , Correct Unavailable and VABlank 2Blank 2 VA , Correct Unavailable mortgages.

FHA, VA

Through the 1970s Fannie Mae primarily was a buyer of and mortgages.

FHA, VA

In modern home mortgage underwriting, the credit score most widely used is the three C'sBlank 1Blank 1 three C's , Incorrect Unavailable from the Fair Isaac Company. A score above 20Blank 2Blank 2 20 , Incorrect Unavailable is generally regarded as high, while a score below 10Blank 3Blank 3 10 , Incorrect Unavailable is generally regarded as risky.

FICO, 660, 620

Many state and local housing authorities are able to fund low and moderate income housing with below-market interest rate loans. They can do this because they are allowed to:

Fund the loans with tax-exempt bonds

The first modern mortgage security was the MBS.

Ginnie, Mae

Characteristics of real estate brokerage as a vocation include

High visibility. Low capital requirements. High potential personal and monetary rewards. High required knowledge, skill, and effort.

Characteristics of a real estate listing contract include:

It can be oral or written. It normally specifies a time interval and a required price. It traditionally has created a special agent relationship.

The most recent kind of lender to engage significantly in home mortgage lending is the:

Large online mortgage lender

Fannie Mae has become a major issuer o

MBS

Which of these home mortgage lenders is most likely interested primarily in making standard fixed rate loans rather than adjustable rate loans?

Mortgage banker Large online lender

Select all that apply Which of these are correct statements about a state real estate commission?

Responsible for the rules and regulations to implement state license law Usually includes prominent real estate brokers Oversees implementation of real estate licensing education and licensing exams

Which of these are correct statements about a state real estate commission?

Oversees implementation of real estate licensing education and licensing exams Usually includes prominent real estate brokers Responsible for the rules and regulations to implement state license law

Survey data from about a decade ago indicates that most potential home buyers working with a real estate agent still believe that the agent represents them, despite years of efforts to inform persons otherwise. If the real estate sales person is, in fact, an agent, he probably has violate fiduciary duties to whom?

The buyer, violating duty of disclosure The seller, violating duty of loyalty

Characteristics of the Ginnie Mae securitisation program include:

The loans in a Ginnie Mae pool are created by private mortgage lenders the Ginnie Mae guarantee gives its MBS the same credit quality as US Treasury securities Ginnie Mae never originates or owns the mortgages involved in its securities Ginnie Mae guarantees timely payment of interest and principal to every investor in a pool

WarningDue in less than 4 hours Question Mode Multiple Select Question Select all that apply Reasons why the Federal Home Loan Bank system can be an attractive source of borrowing at low interest rates for its member clients is (are):

Their stock is not publicly traded, and so they don't feel pressure for earnings They are treated as if they have the same risk of default as the U.S. government

A transaction involving both a listing broker and a buyer broker can pose a special problem if the brokers are MLS members. In that case, the buyer broker is an agent of the buyer, but also may be automatically a of the

agent, seller

The implementing of state laws concerning real estate licenses is a matter of writing specific rules and regulations and overseeing their implementation. This task generally is the responsibility of:

a state real estate commission

Traditional duties of a fiduciary include:

accounting skill and care loyalty confidentiality disclosure obedience

In mortgage lending to marginal borrowers during the years preceding the Great Recession three kinds of accommodative loans were "affordable housing" loans, Alt-A and subprime. The most cautious and systematic underwriting among these types was for:

affordable housing loans

In the years preceding the Great Recession, there were three types of accommodative home loans programs for borrowers unable to qualify for standard home loans. The type that showed the least evidence of failure was:

affordable housing loans

The Dodd-Frank Act sets out a standard of "ability-to-repay" for home mortgages. This standard is required of ______ lender underwriting ______ home mortgage loan(s).

any; any

Mortgage loan underwriters traditionally use a(n) to confirm the value of the securing property. More recently this frequently has been replaced by models.

appraisal Blank 2: automated Blank 3: valuation

In modern home mortgage underwriting, the traditional examination of the "three Cs" has largely been displaced by the use of underwriting, where all the information from the borrower's application is combined electronically along with a credit score in a statistical equation developed from massive amounts of historical data to predict the likelihood of .

automated default

The original candidates for subprime loans included:

borrowers seeking 100 percent financing borrowers who could not document their income borrowers with a poor credit rating

Most states have two levels of real estate licensing; the senior one is broker while the lower level one is salesperson. Which license enables the licensee to operate his or her own brokerage firm?

broker only

Select all that apply Problems that led to serious difficulties in mortgage brokerage included:

broker qualification requirements and monitoring were extremely deficient broker fees were biased toward least desirable loans for the borrower broker compensation is purely "front end" for a service that has lasting consequences

In a agency agreement, the broker agrees to use his or her best efforts to find properties meeting the requirements of a person seeking a property. Commonly this broker, if successful, will share a commission with the broker.

buyer, selling

In a real estate world where transaction brokerage is predominant, advice to a person working with a broker would include:

clarify whom the broker represents unless the broker is your single agent, do not rely on the broker's word alone for critical decisions. unless the broker is your single agent give the broker personal information only as necessary to the transaction.

In a traditional listing placed in MLS the buyer is not a but a of the selling broker.

client,customer

In private senior-subordinate mortgage securities, the subordinate securities absorb all default , thus protecting the senior securities.

losses

Dual agency is controversial due mainly to divided

loyalty

If a broker recommended a price for a listing that the broker believed was below market in order to get a quick sale, and was not candid about it, this would violate the fiduciary duty of:

loyalty

Factors to be considered by lenders in meeting the Dodd-Frank "ability-to-repay" standard for home mortgage loans include current:

monthly loan payment income or assets payments on other obligations employment status

Modern electronic underwriting for home mortgages has displaced traditional "three Cs" underwriting due to several advantages. These include:

more accurate than the average underwriter cost, because it is purely electronic speed, because it is purely electronic speed, because it is purely electronic

In today's complex and confusing home mortgage world, some possible guides to shopping for a loan are these:

mortgage brokers and mortgage bankers are commission compensated and motivated to provide strong service. banks have an affinity for ARM loans and might be expected to make the best ARM offers shop! the shorter the lending chain, the lower should be the cost

Occasionally a broker is compensated based on a predetermined sale price, and the broker retains any amount of the actual sale price above that amount. This is known as a listing.

net

Freddie Mac was originally created to provide a secondary mortgage market for:

savings and loan associations

Fill in the blanks to complete the sentence. In dual agency, the broker is an agent to both the and the

seller. buyer

The absence of an efficient secondary mortgage market before 1968 had numerous consequences, including:

sharp variation by region in the level of interest rates higher mortgage interest rates fewer home loans vulnerability of local mortgage lenders to "shut-downs" when interest rates increased

Dual agency is viewed as troublesome by many observers. It has been questioned whether a single broker can "stand in the " of both buyer and seller.

shoes

Fill in the blanks to complete the sentence. The most troublesome form of dual agency is dual agency, which can occur quite easily in the common case where a salesperson from one firm shows a property listed by another firm.

shorter sale time reduced demand on personal time higher (net) price due to more complete market exposure fewer disruptions and mistakes

Industry designations can serve as a of professionalism and expertise.

signal

WarningDue in less than 1 hour Question Mode Fill in the Blank Question Fill in the blanks to complete the sentence. Virtually every active real estate licensee will affiliate with a local Association of Realtors as a of professionalism and as a business resource.

signal

The importance of requiring a down-payment for a mortgage loan is debated. An important argument for it is that making any cash down payment:

signals sincere intent to perform

The traditional agency relationship in real estate brokerage has come to be called a agency relationship (whether with buyer or seller) to distinguish it from more recent forms of broker agreements.

single

An agent who is empowered to act on behalf of a person or firm for one specific event or transaction is a specialBlank 1Blank 1 special , Correct Unavailable agent.

special

Besides Freddie Mac, Fannie Mae, and Ginnie Mae, other government agencies that support home lending, for first-time buyers or for low and moderate income households, include:

state housing finance agencies USDA Rural Housing Service local housing finance agencies

In most states a person can obtain a broker's license only after obtaining a salesperson's license, plus the person must:

take additional prescribed license education have an active salesperson's license for, generally, 1-3 years