About the mortgage interest rates

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Reference no: EM132024276

1. Securitization of mortgages involves which of the following?

A. Guaranteeing that banks will be made whole if they lose money on a mortgage offering.

B. The SEC (stands for Security and Exchange Commission) validating the mortgage qualifications.

C. Pooling hundreds of mortgages to reduce the risk of either default or prepayment and servicing.

D. Ensuring that all borrowers have FICO scores of at least 700..

2. If you have a fixed rate mortgage of 5% and the Feds decide to increase interest rates, what happens to your monthly payments?

A. Theyincrease

B. Theydecrease

C. They stay the same

D. It depends on the amount of the Fed’s increase

3. In the world of securitization of mortgages, a CMO is a structured MBS where investor tranches have different rights to different sets of cash flows (think champagne fountain). This was created to protect the investor from:

A- No-Doc risk

B- Re-sale risk

C- Defaultrisk

D- Prepayment risk

5. Which of the following is true of mortgage interest rates?

A- Longer-term mortgages have lower interest rates than shorter-term mortgages.

B- Mortgage interest rates tend to track along with Treasury bond rates.

C- Interest rates are higher on mortgage loans on which lenders charge points.

E- All of the above are true.

Reference no: EM132024276

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