chapter 11 quiz

For conforming conventional home loans, the standard payment ratios for underwriting are:

28 percent and 36 percent

Mortgage banking companies:

Collect monthly payments and forward them to the mortgage investor

Currently, which type of financial institution in the primary mortgage market provides the most funds for the residential (owner-occupied) housing market?

Commercial banks

The Federal National Mortgage Association (Fannie Mae) was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans. All of the following statements regarding Fannie Mae are true EXCEPT:

Fannie Mae lends money directly to homebuyers

In 1989, Congress took major steps to establish depository institution accountability by requiring these institutions to hold more capital as they take on riskier assets. Which of the following Congressional acts imposed these capital standards on depository institutions?

Financial Institutions Reform, Recovery, and Enforcement Act

The most profitable activity of residential mortgage bankers is typically

Loan servicing

The numerator of the standard housing expense (front-end) ratio in home loan underwriting includes:

Monthly principal, interest, property taxes, and hazard insurance

The normal securitization channel for jumbo conventional loans is

Private conduits

In recent years, the mortgage banking industry has experienced:

Rapid consolidation

In the last 20 years, the mortgage banking industry has experienced:

Rapid consolidation

Total mortgage debt outstanding as of the third quarter of 2015 was just over $13.7 trillion. Which of the following types of mortgage loans accounts for the greatest percentage of mortgage debt outstanding?

Residential (1-4 family)

Warehousing in home mortgage lending refers to

Short-term loans made by commercial banks to mortgage bankers.

The reduced importance of certain institutions in the primary mortgage market has been largely offset by an expanded role for others. Which has diminished and which has expanded?

Thrifts; mortgage banking and commercial banks

In the securitization process, mortgages are pooled together and cash flows are packaged into securities to be sold in the secondary market. Agencies and private companies that pool mortgages and sell mortgage-backed securities (MBS) are often referred to as:

conduits

Potential justifiable subprime borrowers include persons who: a) are creditworthy but want a 100 percent or higher LTV loan b) are credit-impaired c) persons with no documentation of their income d) all of these

d) all of these

Throughout the process of originating and selling mortgages, mortgage companies face a number of risks. Therefore, it is important for a lending institution to evaluate the risks of mortgage loan default through a process commonly referred to as:

loan underwriting

In contrast to a Mortgage Broker, a Mortgage Banker usually:

retains the right to service the loan for a fee

In addition to providing home mortgages, large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market. This type of financing is commonly referred to as:

warehousing