Chapter 4_Consumer Loans, Credit Cards, and Real Estate Lending

Short-term to medium-term loans repayable in two or more consecutive payments are known as:

• Noninstallment loans
• Installment loans
• Residential mortgage loans
• Nonresidential cash loans
• None of the above

Loans to individuals and families to finance the purchase of new homes are known as:

• Noninstallment loans
• Installment loans
• Residential mortgage loans
• Nonresidential cash loans
• None of the above

Short-term loans drawn upon by individuals and families for immediate cash needs and repayablein a lump sum when the borrower's note matures are known as:

• Noninstallment loans
• Installment loans
• Residential mortgage loans
• Nonresidential cash loans
• None of the above

In order to be eligible for purchase by FNMA a home mortgage cannot have a maturity of lessthan 10 years nor more than:

• 25 years
• 30 years
• 35 years
• 40 years
• None of the above

The bank's real estate loan officer should consider which of the following aspects of thecustomer's loan application carefully when making a home mortgage?

• The amount and stability of the borrower's income
• The borrower's available savings and where the down payment is coming from
• The borrower's track record in caring for and managing property.
• The outlook for real estate sales in the local market area
• All of the above are things that need to be looked at carefully

An abusive practice is which lenders grant loans to weak borrowers and charge them high feesand interest rates which may cause the borrower to default on the loan is known as:

• Installment loans
• Credit card loans
• Predatory lending
• Herbivore lending
• None of the above

Which of the following is true regarding credit card loans?

• There is evidence that considerable economies of scale exist
• Credit cards cannot act as installment loans
• Credit cards are very inconvenient for consumers
• Credit cards are very inflexible for consumers
• All of the above are true

Which of the following is not part of the evaluation of an installment loan?

• The borrower's track record in caring for and maintaining property
• Evidence of stable employment
• Evidence of residence stability
• Evidence of income stability
• All of the above are part of the evaluation of an installment loan

Which of the following is an advantage of a credit scoring model?

• Credit scoring models rely on the evaluation of an experienced credit officer
• Credit scoring models are immune from charges of discrimination
• Credit scoring models never make mistakes
• Credit scoring models can handle a large volume of applications in a short period of time
• All of the above are advantages of credit scoring models

When interest owed on a loan is added to the principal amount of the loan to determine a borrowing customer's required installment payments, this is known as the _________method for figuring a customer's loan rate. Fill in the blank with an appropriate response below.

• Simple interest
• APR
• Discount
• Add-on
• None of the above