Correct answer: b
Savings associations dominated the residential mortgage market until deregulation of the banking industry in the 1980s. In the past,
... [Show More] these institutions made most of their mortgage loans with depositors' funds. The loans were held full term, with the savings association receiving the principal and interest payments from the borrower.
Reference: Chapter 13, The Primary Mortgage Market, Mortgage Lenders, Savings Associations - correct answer Prior to deregulation of the banking industry in the 1980s, which institutions were dominant in providing funds for the purchase of single-family residences?
(a) Commercial banks
(b) Saving associations
(c) The FHA
(d) Mortgage loan originators
Correct answer: c
Mortgage loan originators (MLOs) do not make loans. They arrange loans by taking mortgage applications and searching for lenders who offer the lowest interest rates and easiest borrower qualification. MLOs charge borrowers an application fee and often earn a finder's fee or commission for arranging loans.
Reference: Chapter 13, The Primary Mortgage Market, Mortgage Lenders, Mortgage Loan Originators - correct answer How are mortgage loan originators usually compensated for their services?
(a) Monthly loan service fee
(b) Salary
(c) Finder's fee or commission
(d) Share of the borrower's assets
Correct answer: b
Disintermediation occurs when depositors bypass traditional depository institutions and invest directly in the stock market, mutual funds, artwork, and so on. Large-scale disintermediation can reduce the mortgage money supply and cause interest rates to rise.
Reference: Chapter 13, Money in the Marketplace, Disintermediation - correct answer When does disintermediation occur?
(a) When deposits exceed the demand for loans
(b) When depositors withdraw their savings from depository institutions
(c) When the Internal Revenue Service taxes earnings of investments
(d) When the Federal Reserve Board reduces the discount rate
Correct answer: d
A blanket mortgage is a single mortgage given by a borrower that pledges two or more parcels as security for a loan. Builders and developers when constructing several properties in the same area commonly use blanket mortgages.
A blanket mortgage typically contains a release clause, thereby allowing the borrower to pay a specified amount to release a single lot from the blanket so it can be sold to a buyer upon completion of construction. - correct answer 9. Which clause in a blanket mortgage allows for the release of a single parcel upon payment of a specified sum?
(a) Defeasance
(b) Acceleration
(c) Satisfaction
(d) Release
Correct answer: a
The interest rate for an FHA-insured loan is determined by negotiation between the lender and the borrower. Interest rates are established by supply and demand in the marketplace. - correct answer Interest rates for Federal Housing Administration mortgages are determined by which of the following? [Show Less]