A6) 1. Pre-payment penalties are a lesser concern to a homeowner than to a lender because(a) the lender usually has newer higher yielding mvestment opportunities(b) the borrower has the knowledge that the mortgage loan was kept in portfolio(c) the lender cannot always the repaid loan proceeds to make buy Treasuries and stay liquid(d) state statutes often permit homeowners to pre-pay owner-occupied mortgage loans without penalty(e) both (c) and (d)(f) all of the above

Prepayment penalty refers to the charges charged by the lenders if all or some part of the…

Answered: (e) both (c) and (d) 11

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Finance

(e) both (c) and (d) 11

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ISBN:9781337485913

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Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 6.1EC

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

A6)

1. Pre-payment penalties are a lesser concern to a homeowner than to a lender because
(a) the lender usually has newer higher yielding mvestment opportunities
(b) the borrower has the knowledge that the mortgage loan was kept in portfolio
(c) the lender cannot always the repaid loan proceeds to make buy Treasuries and stay liquid
(d) state statutes often permit homeowners to pre-pay owner-occupied mortgage loans without penalty
(e) both (c) and (d)
(f) all of the above

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