Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Association) O cannot invest in subprime mortgages. None of the provided answers S correct provide a secondary market purchasing consumer and commercial mortgage loans from lenders ALEare not subject to moral hazard. provide a secondary market purchasing consumer mortgage loans from lenders.
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- 1. if a small bank lends to a customer who wants a mortgage that is too large for the small bank to hold on its' balance sheet, which of the following can the small bank do to assist in this lending? a. engage in a participation b. pass- through the mortgage payments c sell part of the loan through correspondent banking d. make a no-recourse loan.Would you not agree that the financial institutions and federal authorities are equally to blame for the subprime mortgage problem?The Tax Reform Act of 1986 eliminated the deduct·ibility of interest payments on consumer d.Wt (mostlycredit cards and auto loans) but maintained thedeductibility of interest payments on mortgages andhome equity loons. What do you think happened tothe :relative amounts of borrowing through consumerdobt and home equity debt?
- A lender whose mortgagor has defaulted may be offered a deed in lieu of foreclosure. If he accepts, which of the following will be TRUE? a. Because it is voluntary, it will not be an adverse item on the buyer's credit. b. The lender will take the title subject to any junior liens. c. The lender will usually retain his rights under mortgage insurance or VA guarantee. d. The loan will still be assumable.Which one of the following statements regarding the loans market is false? a) The principal-agent problem leads to credit rationing in the loans market b) One solution for the principal-agent problem in loans is for the borrower to provide equity or collateral c) Credit rationing increases inequality d) The principal-agent problem in loans can not be resolved by writing a binding contract for the borrower to exert full effort e) The principal-agent problem exists in loans due to a positive possibility of the agent not being repaiWhich innovation has caused the most trouble for financial institutions that issue residential mortgage loans? A. Securitization B. Junk bonds C. Commercial paper D. None of the above
- Which of the following hindered the development of a secondary market for mortgages in the early 20th century? Check all that apply. Institutional investors could not assess the default risk of every single mortgage. It was impossible to turn illiquid assets such as real estate into liquid financial instruments. Institutional investors avoided dealing with financial instruments backed by the federal government, such as mortgages. Institutional investors were not interested in small non-standardized financial instruments. Which of the following helped foster the development of a market for collateralized debt obligations (CDOs) and collateralized mortgage obligations (CMOs) in the 2000s? Check all that apply. Inflows of foreign capital Establishment of the Government National Mortgage Association (Ginnie Mae) and the Federal Home Loan Mortgage Corp (Freddie Mac) Development of mathematical models to price CDOs and CMOs Establishment of the Federal National Mortgage Association (Fannie…Which of the following is not an example of commercial mortgage covenant: If the borrower sells a large portion of its assets, it must notify the lender tens day before the sale. A restriction on the amount of dividends the firm can pay its shareholders The borrower must file periodic GAAP reports with the lenders demonstrating compliance with the loan agreement. The borrower must notify the lender if it becomes involved in a lawsuit.Which of the following situations are likely to result in higher loan defaults? Mortgages are held by originating institutions in their portfolios. Borrowers have higher equity in their homes. Lenders who require documentation of income, liabilities and asset ownership. Borrowers with low credit scores.
- Which of the following is not a way in which banks lend short-term unsecured loans? a. Through a guaranteed credit line that has a commitment fee for any unused amount for the year b. Through credits cards lines with a certain credit limit c. By sending the amount earned from trust and investment products offered by the bank d. By lending a single date maturity loan to a debtorCommercial loan agreements should contain which of the following: a. representations b. fees and charges c. means of repayment d. all of the above In order for the seller of securitized securities to remove the assets (i.e. mortgages) from the balance sheet, the sale must a. have a service agreement b. be overcollateralized c. be without recourse d. be made at a discount (original issue discount) Banks may deny creditworthy borrowers loan requests if a. they are non-corporate entities b. they are on late on paying taxes c. the loan is too risky d. they are individuals Chattel mortgages refer to a. a security agreement using corporate assets b. a security agreement using commercial equipment c. a security agreement using intangible property d. a security agreement using tangible personal propertyWhich of the following is true of an unsecured loan?A. They are exclusively for cars, houses, and other large purchasesB. Collateral could be collected by the lender if the debt is not paidC. They never have any interest added onto themD. Items of value that the borrowers owns are not at risk of repossession