1i.What is the primary purpose of the risk-based capital requirements that Congress enacted as part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)?
1ii.Mortgage banking companies:
a.Collect monthly payments and forward them to the mortgage investor.
b.Arrange home loan originations, but do not make the actual loans.
c.Make home loans and fund them permanently.
d.None of the above.
2. Explain what is meant by forward commitments and standby forward commitments. Which part of the mortgage banker’s pipeline is often hedged with forward commitments? With standby forward commitments? Why?
3i. Describe the basic activities of Fannie Mae in the secondary mortgage market. How are these activities financed?
3ii.Currently, which type of financial institution in the primary mortgage market provides the most funds for the residential (owner-occupied) housing market?
a.Life insurance companies.
4i. Explain the importance of Fannie Mae and Freddie Mac to the housing finance system in the United States.
4ii.For all except very high loan-to-value conventional home loans, the standard payment ratios for underwriting are:
a.28 percent and 36 percent.
b.25 percent and 33 percent.
c.29 percent and 41 percent.
d.33 percent and 56 percent.
5i.What went wrong with mortgage brokerage? Is it being fixed?
5ii.The numerator of the standard housing expense (front-end) ratio in home loan underwriting includes:
a.Monthly principal and interest.
b.Monthly principal, interest, and property taxes.
c.Monthly principal, interest, property taxes, and hazard insurance.
d.All of these plus monthly obligations extending 10 months or more.
6i.Describe the mechanics of warehouse financing in mortgage banking.
6ii.The most profitable activity of residential mortgage bankers is typically:
c.Loan sales in the secondary market.
d.Loan brokerage activities.
7i. Explain how affordable housing loans differ from standard home loans.
7ii.Potential justifiable subprime borrowers include persons who:
a.Are creditworthy but want a 100 percent or higher LTV loan.
c.Persons with no documentation of their income.
d.All of these.
8i.List three “clients” for subprime home mortgage loans.
8ii.The normal securitization channel for jumbo conventional loans is:
9i.You have just signed a contract to purchase your dream house. The price is $120,000 and you have applied for a $100,000, 30-year, 5.5 percent loan. Annual property taxes are expected to be $2,000. Hazard insurance will cost $400 per year. Your car payment is $400, with 36 months left. Your monthly gross income is $5,000. Calculate:
a.The monthly payment of principal and interest (PI).
b.One-twelfth of annual property tax payments and hazard insurance payments.
c.Monthly PITI (principal, interest, taxes, and insurance).
d.The housing expense (front-end) ratio.
e.The total obligations (back-end) ratio
9ii.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?
a.Commercial bankers; thrifts.
b.Mortgage bankers; commercial banks.
c.Commercial banks; mortgage bankers.
d.Thrifts; mortgage bankers.
10i.Contrast automated underwriting with the traditional “three Cs” approach.
10ii. Warehousing in home mortgage lending refers to:
a.Short-term loans made by mortgage bankers to commercial banks.
b.Short-term loans made by commercial banks to mortgage bankers.
c.Long-term loans made by commercial banks to mortgage bankers.
d.Short-term loans to finance the construction of builder warehouses.