Mortgage originators can either hold loans in their portfolios or sell them to investors. When a mortgage originator decides to sell mortgages to another institution, this transaction occurs in what is commonly referred to as the:

• primary mortgage market.

• secondary mortgage market.

• over-the-counter market.

• loan origination market.

Which of the following types of financial institutions is the largest purchaser of residential mortgages?

• commercial banks

• savings and loans

• government sponsored enterprises

• mortgage banking companies

Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government?

• conventional home loan

• Federal Housing Administration loan

• Veterans Affairs loan

• Section 203 loan

Mortgage loans that meet all general underwriting standards established by government sponsored enterprises except for the dollar size limit are more commonly referred to as:

• conventional loans.

• subprime loans.

• jumbo loans.

• Alt-A loans.

Mortgage loans that fail one or more of the underwriting standards established by government sponsored enterprises are more commonly referred to as:

• conforming loans.

• nonconforming loans.

• government sponsored loans.

• conventional loans.

Which of the following government agencies insures mortgage loans made by private lenders that are designated primarily for low-income housing, nursing homes, cooperative apartments, and condominiums?

• Fannie Mae

• Freddie Mac

• Federal Housing Administration

• Veteran’s Affairs

Created by Congress to promote an active secondary market for home mortgages, Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards such as loan size, documentation, and payment to income ratio. The loans that Fannie Mae and Freddie Mac are eligible to purchase are commonly referred to as:

• government sponsored loans

• conforming conventional loans

• nonconforming conventional loans

• FHA loans

Since conforming loans can be much more readily bought and sold in the secondary mortgage market, they carry a(n) ________ interest rate than comparable nonconforming loans.

• higher

• equal

• lower

• more volatile

Mortgage originators often offer many types and forms of available residential loans as part of their mortgage menu. However, the predominant form of prime conventional mortgage remains the:

• (fixed rate) level payment mortgage (LPM)

• adjustable rate mortgage (ARM)

• subprime mortgage

• Alt-A mortgage

Private mortgage insurance (PMI) protects a lender against which of the following?

• losses due to default on the loan

• legal threat to the lender’s mortgage claim

• stoppage of mortgage payment after the death of the insured borrower

• changes in the index rate associated with an adjustable rate mortgage