Real Estate Finance- Mortgages, Economy

What is collateral in real estate finance?

• A type of loan

• A promise to repay a loan

• Something of value pledged to a lender

• A type of insurance

What is the primary market in mortgage lending?

• Where loans are bought and sold

• Where mortgages are first created

• Where interest rates are determined

• Where real estate is appraised

Which of the following is NOT a primary market institution?

• Credit unions

• Commercial banks

• Fannie Mae

• Savings banks

What is the purpose of the secondary market in mortgage lending?

• To create new mortgages

• To sell loans and servicing rights to investors

• To determine interest rates

• To provide insurance for loans

Diagram comparing Primary vs. Secondary Market

• Primary market involves issuing new securities, while secondary market deals with trading existing securities.

• Primary market is where securities are traded among investors, while secondary market is where new securities are issued.

• Primary market is for trading existing securities, while secondary market is for issuing new securities.

• Primary market and secondary market both deal with issuing new securities.

What does the escrow account contain?

• The lender's profits

• The borrower's savings

• Money to pay for home insurance and property taxes

• The servicer's fees

What is the purpose of maintaining home insurance according to the text?

• To increase property value

• To ensure the lender's interest in the property

• To reduce monthly payments

• To avoid paying taxes

How does the sales comparison approach determine property value?

• By comparing the property to the cost of new construction

• By estimating potential rental income

• By comparing the subject property to the sales prices of similar properties

• By evaluating the property's historical significance

What is the cost approach most appropriate for?

• Residential homes

• Public or commercial properties

• Historical landmarks

• Agricultural land

What does the income approach focus on to determine property value?

• The cost of building materials

• The amount of income a property could produce

• The historical value of the property

• The property's location