CA Real Estate Finance Course » 2021 » Sec 6 Unit 1 Exam

Need help with your exam preparation?

Existing Quiz Clients Login here
Question #1
How do falling interest rates impact investors in mortgage-backed securities?
A.   Investor payments cease.
B.   Returns on investments increase.
C.   There is no impact.
D.   Returns on investments decrease.
Question #2
Which of the following contributed to the 2007 financial crisis?
A.   Falling interest rates
B.   Rising home prices
C.   Falling home prices
D.   More home sales
Question #3
Why did investors purchase CMOs prior to the 2007 financial crisis?
A.   Housing price appreciation appeared to be a sure thing.
B.   They were offered for free from thrifts and savings and loan institutions.
C.   More borrowers were in default, leading to additional late payment penalty fees.
D.   hey were AAA rated for safety.
Question #4
What's the term for a group of loans packaged together and then sold to investors on the secondary market?
A.   Home equity line of credit
B.   Reverse annuity mortgage
C.   Mortgage-backed security
D.   Lien
Question #5
Assuming a CMO uses the sequential pay structure, how is interest passed through from borrowers paid to investors?
A.   Only the first tranche receives interest payments.
B.   All tranches receive interest payments.
C.   Only the last tranche receives interest payments.
D.   Interest is first paid to investors holding the greatest number of shares.
Question #6
What could be a consequence if there were no secondary mortgage market?
A.   Interest rates would fall.
B.   Unemployment would rise.
C.   There wouldn't be any institutions available to service loans.
D.   Lenders might not have funds available to make new loans to the public.
Question #7
Assuming a CMO uses the sequential pay structure, how is principal passed through from borrowers paid to investors?
A.   Principal is first paid to investors holding the greatest number of shares.
B.   Principal payments are only made to the first tranche until it retires, then to the second tranche, and so on.
C.   All tranches receive principal payments.
D.   Principal payments are only made to the last tranche until it retires, then to the second-to-last tranche, and so on.
Question #8
Horace recently purchased 1,000 shares of a security that's made up of hundreds of mortgages. The principal and interest that borrowers of these underlying mortgages pay are eventually passed through to Horace and the other investors. What did Horace purchase?
A.   Real property
B.   A mortgage
C.   A cooperative
D.   A mortgage-backed security

Need help with your exam preparation?

Existing Quiz Clients Login here