True/False
1) APR is known as the annual principal rate.
2) Points are loan charges designed to boost the lender's effective rate of return.
3) Origination fees are loan charges designed to cover the lender's costs of processing the application and loan.
4) A mortgage whose periodic payments are only sufficient to cover the interest due is known as interest-only mortgage.
5) Homes do always appreciate in value, as the recent bursting of the housing bubble has reminded us, but often they do.
Multiple Choice
6) A variable rate or payment mortgage that periodically adjusts to a specified index is:
a) adjustable rate mortgage
b) annual percent rate
c) reverse annuity mortgage
d) none of the above
7) Negative amortization is the increase in the outstanding mortgage balance that arises in some ARMs and GPMs when periodic payments are _____ than the interest due for the period and the shortfall is added to the principal balance.
a) more
b) less
c) equal
d) none of the above
8) A mortgage product designed to meet the needs of elderly homeowners by providing an annuity or line of credit secured by a mortgage to be paid off when the house is sold or refinanced or the state of probated is known as:
a) adjustable rate mortgage
b) graduated payment mortgage
c) interest-only mortgage
d) none of the above
Key
1) F 2) T 3) T 4) T 5) F 6) a 7) b 8) d
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