Multiple Choice - True/False Questions for Chapter 10

Multiple Choice Questions:

1.

A mortgagor´s monthly salary or stable income is called what?

a) HER

b) ARM

c) SMI

d) IRR

2.

The gradual reduction of a debt through systematic principal repayments over the life of the loan is called what?

a) Debt service

b) Mortgage payment

c) Collateral

d) Amortization

3.

A personal promise to repay the loan backed up with collateral is called what?

a) Secured debt

b) Prepayment penalty

c) Unsecured debt

d) SMI

True/False Questions:

1.

A limit on a contract interest rate change over an adjustment period is called overall cap.

- True

- False

2.

A charge paid by the mortgagor at origination to reduce or buy down the mortgage contract rate is called a discount point.

- True

- False

3.

A series of cash flows of the same amount is called debt service.

- True

- False

4.

The risk that interest rates will change and positively affect the interest rate spread is called interest rate risk.

- True

- False

5.

A document transferring legal title to a trustee is called deed of trust.

- True

- False

Answers:

c) d) a)

False, True, False, False, True