WorksheetsTest bank NHTM- CHAP 18
Total questions: 89
Worksheet time: 45mins
The dominant lender in the United States to households is the finance company with commercial banks ranked second as consumer lenders.
True
False
Nonresidential consumer loans include credit to finance the purchase of home appliances.
T
F
Credit cards offer convenience to customers plus a revolving line of credit.
T
F
Consumer loans appear to have virtually no sensitivity to the business cycle, staying relatively level through both recessions and expansions.
T
F
Households tend to be interest-inelastic borrowers.
T
F
Lenders in the consumer loan field prefer to measure a borrowing customer's income by the amount of take-home pay.
T
F
The "right of offset" allows a bank to sell a customer's property to the highest bidder to repay a customer's loan if the loan is in default.
T
F
Credit-scoring systems tend to be valid over long periods of time (usually several years) and need not be periodically retested.
T
F
The Truth-in-Lending Act of 1968 gave consumers access to the information from their credit files kept at local and regional credit bureaus.
T
F
Small business owners with gross annual revenues of $1 million or less who apply for credit have the right to receive a written notice if their loan request is turned down by a bank.
T
F
The symbol "SN" indicates that a bank has been judged to be an outstanding performer under the terms of the Community Reinvestment Act.
T
F
Banks awarded top CRA marks usually get strong commitments from their boards of directors and senior management to promote community involvement
T
F
FNMA will buy home mortgages provided the borrower's monthly house payment does not exceed 35 percent of monthly gross income.
T
F
Under FNMA rules for buying home mortgages FNMA will not usually purchase a borrower's mortgage if the borrower's credit report is more than 45 days old
T
F
An installment loan is a loan in which the customer repays the loan in two or more consecutive payments. These payments are often monthly or quarterly.
T
F
The Equal Credit Opportunity Act authorizes individuals and families to review their credit file for accuracy and to demand an investigation and correction of any apparent inaccuracies.
T
F
The burden of proof is on the bank to demonstrate that its credit scoring system successfully identifies quality loan applications at a statistically significant level.
T
F
Real estate loans are smaller in size and shorter in maturity than most other types of bank loans.
T
F
The Community Reinvestment Act is designed to prevent a lender from arbitrarily marking out certain neighborhoods as undesirable and refusing to lend to people who live in those neighborhoods.
T
F
There is usually a positive relationship between the interest rate a consumer is asked to pay and the amount of deposits the consumer is willing to keep with the bank.
T
F
Competition for consumer loans tends to drive the interest rates on these loans down closer to loan production costs
T
F
Shorter term cash loans to consumers are normally secured, but longer-term consumer loans are usually unsecured.
T
F
An auto loan usually carries with it a chattel mortgage, giving the bank a claim against the property covered by the loan.
T
F
Most consumer loans are priced off some base or cost rate
T
F
The APR is the internal rate of return on a loan that equates total payments with the amount of the loan.
T
F
The quotation to customers of the APR on the loan they are requesting usually discourages consumers from shopping around according to recent research findings.
T
F
Unlike the APR method for calculating consumer loan rates, the simple interest approach adjusts for the length of time a borrower actually has use of credit.
T
F
Under the simple interest method the customer saves on interest as an installment loan approaches maturity.
T
F
With the discount rate method interest is deducted first before the customer has use of the proceeds of a loan.
T
F
The majority of installment and lump-sum payment loans to families and individuals are made with floating interest rates.
T
F
Points on a home mortgage loan result in a lender earning a higher effective interest rate on the loan than just the loan rate quoted to the borrower.
T
F
According to the table presented in the book personal loans tend to have lower rates than automobile loans.
T
F
According to the table presented in the book credit card loans tend to have the highest interest rates of all consumer loans.
T
F
According to the table presented in the book new car loans have a lower interest rate than used car loans.
T
F
There are very little economies of scale (cost savings) in the credit card business.
T
F
Currently the debit card market is almost as large as the credit card market.
T
F
One of the elements used in the FICO credit scoring system is the borrower's employment history and salary
T
F
The most important factor used in the FICO credit score is the borrower's payment history.
T
F
Home mortgage real estate loans soared to record levels at the beginning of the 21st century.
T
F
Short-term to medium-term loans repayable in two or more consecutive payments are known as:
A) Noninstallment loans
B) Installment loans
C) Residential mortgage loans
D) Nonresidential cash loans
E) None of the above
A
B
C
D
E
Loans to individuals and families to finance the purchase of new homes are known as:
A) Noninstallment loans
B) Installment loans
C) Residential mortgage loans
D) Nonresidential cash loans
E) None of the above
A
B
C
D
E
Short-term loans drawn upon by individuals and families for immediate cash needs and repayable in a lump sum when the borrower's note matures are known as:
A) Noninstallment loans
B) Installment loans
C) Residential mortgage loans
D) Nonresidential cash loans
E) None of the above
A
B
C
D
E
The federal law that requires banks to notify their credit customers in writing when a loan request is denied is known as the:
A) Equal Credit Opportunity Act
B) Competitive Equality in Banking Act
C) Truth-in-Lending Act
D) Community Reinvestment Act
E) None of the above.
A
B
C
D
E
Major laws and regulations which must be complied with in the mortgage lending area include which of the following?
A) National Affordable Housing Act
B) Community Reinvestment Act
C) Financial Institution Reform Recovery and Enforcement Act
D) All of the above
E) B and C only
A
B
C
D
E
Which of the following factors have proven most important in credit scoring models?
A) Credit Bureau ratings
B) Income bracket
C) Number of loans the customer has had
D) All of the above
E) A and B only
A
B
C
D
E
The requirement that banks must provide their consumer loan customers with a statement of the APR for the proposed loan was established by:
A) The Fair Credit Reporting Act.
B) The Equal Credit Opportunity Act.
C) The Truth-in-Lending Act.
D) The Community Reinvestment Act.
E) None of the above
A
B
C
D
E
Which of the following consumer loans has grown in popularity as a result of the passage of the Tax Reform Act of 1986?
A) Credit card loans
B) Home equity loans
C) Long-term, noninstallment loans
D) Short-term, installment loans
E) All of the above
A
B
C
D
E
A bank that is judged by examiners as needing to improve under the performance requirements of the Community Reinvestment Act will receive an examiner rating of:
A) 0
B) S
C) N
D) SN
E) None of the above
A
B
C
D
E
In order to be eligible for purchase by FNMA a home mortgage cannot have a maturity of less than 10 years nor more than:
A) 25 years
B) 30 years
C) 35 years
D) 40 years
E) None of the above
A
B
C
D
E
FNMA will not purchase home mortgages in the secondary market if the borrower's monthly debt repayments (including housing costs) exceed _________ percent of the borrower's monthly gross income. The correct percentage figure to complete the sentence above is:
A) 28
B) 30
C) 36
D) 40
E) None of the above
A
B
C
D
E
How did the Tax Reform Act of 1986 increase the appeal of home equity loans?
A) It allowed customers to borrow up to 100 percent of the value of their home
B) It eliminated bank income taxes from this type of loan
C) It protected homes under Chapter 13 bankruptcy
D) It eliminated individuals' tax deduction for interest payments on other types of loans
E) It required banks to lend on homes in the geographic area of their deposits
A
B
C
D
E
The federal law that permits consumers to dispute billing errors with a merchant or credit card company and receive a prompt investigation of any billing disputes is the:
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Fair Debt Collection Practices Act
D) Truth in Lending Act
E) None of the above
A
B
C
D
E
The bank's real estate loan officer should consider which of the following aspects of the customer's loan application carefully when making a home mortgage?
A) The amount and stability of the borrower's income
B) The borrower's available savings and where the down payment is coming from
C) The borrower's track record in caring for and managing property.
D) The outlook for real estate sales in the local market area
E) All of the above are things that need to be looked at carefully
A
B
C
D
E
An abusive practice is which lenders grant loans to weak borrowers and charge them high fees and interest rates which may cause the borrower to default on the loan is known as:
A) Installment loans
B) Credit card loans
C) Predatory lending
D) Herbivore lending
E) None of the above
A
B
C
D
E
The law which was passed to reduce predatory lending is known as:
A) Community Reinvestment Act
B) Home Ownership and Equity Protection Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) None of the above
A
B
C
D
E
Which of the following is true regarding credit card loans?
A) There is evidence that considerable economies of scale exist
B) Credit cards cannot act as installment loans
C) Credit cards are very inconvenient for consumers
D) Credit cards are very inflexible for consumers
E) All of the above are true
A
B
C
D
E
A loan officer asks a customer what race she belongs to. Which law prohibits the loan officer from asking that question?
A) Truth in Lending Act
B) Equal Credit Opportunity Act
C) Community Reinvestment Act
D) Fair Debt Collection Practices Act
E) None of the above
A
B
C
D
E
Which of the following is not part of the evaluation of an installment loan?
A) The borrower's track record in caring for and maintaining property
B) Evidence of stable employment
C) Evidence of residence stability
D) Evidence of income stability
E) All of the above are part of the evaluation of an installment loan
A
B
C
D
E
Which of the following is an advantage of a credit scoring model?
A) Credit scoring models rely on the evaluation of an experienced credit officer
B) Credit scoring models are immune from charges of discrimination
C) Credit scoring models never make mistakes
D) Credit scoring models can handle a large volume of applications in a short period of time
E) All of the above are advantages of credit scoring models
A
B
C
D
E
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.
A) Simple interest
B) APR
C) Discount
D) Add-on
E) None of the above
A
B
C
D
E
102. The symbols ARM in lending means:
A) Automatic rate modulation
B) Amortization rate method
C) Adjustable rate mortgage
D) Adaptable readjusted mortgage
E) None of the above.
A
B
C
D
E
The charge on a home mortgage loan that a borrower may be asked to pay up front is referred to as:
A) Loan Interest Owed
B) Points
C) Loading
D) Tax equity
E) None of the above.
A
B
C
D
E
Which of the following has the highest interest rate according to the book?
A) New automobile loan
B) Used automobile loan
C) Personal loan
D) Credit card loan
E) All of these have the same interest rate
A
B
C
D
E
Which of the following has the lowest interest rate according to the book?
A) New automobile loan
B) Used automobile loan
C) Personal loan
D) Credit card loan
E) All of these have the same interest rate
A
B
C
D
E
The largest credit card lender (as a group) in the U.S. are:
A) Thrifts
B) Insurance companies
C) Finance companies
D) Oil companies
A
B
C
D
Prepaid cards which compete with credit cards and debit cards are:
A) Smart cards
B) Deposit cards
C) Match cards
D) All of the above
E) None of the above
A
B
C
D
E
The first major bank within the U.S. to establish a separate department for granting household loans was:
A) First National City Bank of New York
B) BankAmerica
C) Bank One
D) State Street Bank
E) Bank of New York
A
B
C
D
E
The fastest growing consumer loan category is:
A) Credit card loans
B) Auto loans
C) Home mortgages
D) Personal loans
E) Education loans
A
B
C
D
E
The very popular FICO credit scoring system provides credit scores in the range:
A) 0 to 10
B) 0 to 1000
C) 100 to 1000
D) 300 to 850
E) 20 to 80
A
B
C
D
E
The most important factor used in the FICO credit scoring system is:
A) The borrower's payment history
B) The amount of money owed
C) Marital status
D) Employment history and salary
E) Age
A
B
C
D
E
120. Jeremiah Uselton needs a loan to purchase a condo in Sarasota, Florida. What type of loan does Jeremiah need?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
A
B
C
D
E
Tammy Payne wants to buy a used car and wants a loan that she will pay off over the next three years with monthly payments. What type of loan does Tammy want?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
A
B
C
D
E
120. Emily Barnes has gone to the First State Bank and gotten a loan of $5000 so she can go on vacation. She plans on paying the loan back in one payment in three months. What type of loan has Emily gotten?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
A
B
C
D
E
120. Bill Wells uses his Discover card to buy new furniture for his apartment. The interest rate on this card is 18% and the minimum payment that is due is $100. What type of loan has Bill gotten?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
A
B
C
D
E
120. Jerry McGuire uses his Visa card to buy a new washer and dryer and a new refrigerator for his home. He plans on paying off the credit card over the next two years. How is Jerry using his credit card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
A
B
C
D
E
120. The most profitable credit card customers for a bank are those that:
A) Use their credit card frequently
B) Pay off any charges incurred within a few days
C) Charge at least $10,000 per year
D) Use their credit card as a source of installment loans
E) None of the above
A
B
C
D
E
120. Alexis Downs uses her credit card to buy furniture but pays off the credit card at the end of the month before she incurs any interest costs. How is Alexis using her credit card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
A
B
C
D
E
120. Donna Carlon is using her plastic card to buy groceries. The money is taken from her checking account immediately to pay for her groceries. How is Donna using her card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
A
B
C
D
E
120. A bank is considering making a loan to Alice Granger. The bank is looking at her credit report from Equifax and also examining the reason Alice has put on the loan application for needing the loan? What aspect of evaluating a consumer loan application is the bank looking at?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. A bank is considering making a loan to Ron Weasley. Ron has a gross salary per month of $4000 but has take-home pay of $2800 per month. What aspect of evaluating a consumer loan application is this fact most concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. A bank is considering making a loan to Sean Finnigan. Sean owns his own home and has lived there for the past four years. What aspect of evaluating a consumer loan application is this fact most concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. A bank is considering making a loan to Sam Snape. Mr. Snape has $1000 in the bank right now but generally keeps a balance of $4500 most of the year. What aspect of evaluating a consumer loan application is this fact concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. A bank is considering making a loan to Neville Langdon. Neville has bounced three checks in the last year and already has $10,000 on a credit card and an automobile loan with a large balance. What aspect of evaluating a consumer loan application is this fact concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. A bank is considering making a loan to John Carter. John is a commissioned sales broker. Some months he earns as much as $10,000 and in other months he earns virtually nothing. Which aspect of evaluating a consumer loan would this be concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
A
B
C
D
E
120. Which of the following is a challenge of making a consumer loan?
A) Audited financial statements are provided by consumers quarterly
B) Consumers must disclose publicly any changes in their health that would affect the loan
C) Consumers can more easily hide pertinent information
D) Consumers can more easily adjust to financial setbacks than can businesses
E) All of the above are challenges of making a consumer loan
A
B
C
D
E
120. The Equal Credit Opportunity Act requires that:
A) A bank make loans to all minority applicants
B) A bank only make loans to white male applicants
C) A bank give reasons in writing for denying the loan
D) A bank deny loans if the borrower has only been employed for three months
E) None of the above
A
B
C
D
E
120. Credit reports provided by credit bureaus provide lenders:
A) With personal identifying data
B) With personal credit histories derived from data submitted by lenders
C) With public information that may bear on a borrower’s honesty and stability
D) With the volume of inquiries from lenders about the borrower
E) All of the above
A
B
C
D
E
120. Which regulation requires out-of-state-banks that acquire local banks to commit to continued lending in the area and not use the acquired banks simply as deposit gatherers?
A) Equal Credit Opportunity Act
B) National Bank Act
C) Federal Lending Act
D) Fair Credit Reporting Act
E) Community Reinvestment Act
A
B
C
D
E
120. As part of the new regulations of the mortgage market, the Federal Reserve Board moved to tighten the rules on mortgage lending in 2008. All of the following would improve transparency of the market except for:
A) Lenders must verify the borrower’s reported income
B) Lenders cannot rely on a home’s current market value to judge a borrower’s creditworthiness
C) Lenders must rely on a borrower’s stated income
D) Lenders must disclose more about the actual terms of a home mortgage loan to a borrower
E) All of the above are included in the new rules
A
B
C
D
E
