Question 1

If an ARM index increased 15%, the negative amortization on a loan with a 5% annual payment cap is calculated by:

Accepted Answer

A)  Using the same payment as last year and deducting 5% from the principal balance 
B)  Increasing the payment by 5% 
C)  Totaling the difference between the payment as if no cap existed and the 5% capped payment 
D)  Compounding the difference between the payment as if no cap existed and the 5% capped payments 
A)  Using the same payment as last year and deducting 5% from the principal balance 
B)  Increasing the payment by 5% 
C)  Totaling the difference between the payment as if no cap existed and the 5% capped payment 
D)  Compounding the difference between the payment as if no cap existed and the 5% capped payments

Question 2

A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year 3 monthly payment be?

Accepted Answer

A)  $955 
B)  $1,067 
C)  $1,071 
D)  $1,186 
E)  Because of the rate cap, the payment would not change. 
A)  $955 
B)  $1,067 
C)  $1,071 
D)  $1,186 
E)  Because of the rate cap, the payment would not change.

Question 3

Which of the following clauses leads to higher risk for an ARMs lender?

Accepted Answer

A)  Negative amortization is not allowed when interest is not covered by the payment due to a payment cap 
B)  There is floor for payments 
C)  Adjustment interval is longer than one year 
D)  All of the above 
A)  Negative amortization is not allowed when interest is not covered by the payment due to a payment cap 
B)  There is floor for payments 
C)  Adjustment interval is longer than one year 
D)  All of the above

Question 4

Which of the following is a disadvantage of PLAMs?

Accepted Answer

A)  Lenders face high levels of interest rate risk under PLAMs. 
B)  Fewer homebuyers are likely to qualify for financing using PLAMs in comparison to CPMs. 
C)  The price level used to index PLAMs is measured on an ex post basis and historic prices may not be an accurate reflection of future price. 
D)  All of the above. 
A)  Lenders face high levels of interest rate risk under PLAMs. 
B)  Fewer homebuyers are likely to qualify for financing using PLAMs in comparison to CPMs. 
C)  The price level used to index PLAMs is measured on an ex post basis and historic prices may not be an accurate reflection of future price. 
D)  All of the above.

Question 5

Which of the following statements regarding negative amortization in the previous question is true?

Accepted Answer

A)  The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2. 
B)  The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2. 
C)  The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2. 
D)  The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2. 
A)  The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2. 
B)  The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2. 
C)  The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2. 
D)  The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2.

Question 6

A major benefit of a PLAM is the mortgage payment increases closely following borrower salary increases.

Accepted Answer

A) True 
 B)False

Question 7

Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.

Accepted Answer

A) True 
 B)False

If an ARM index increased 15%, the negative amortization on a loan with a 5% annual payment cap is calculated by:

Which of the following clauses leads to higher risk for an ARMs lender?

Which of the following is a disadvantage of PLAMs?

Which of the following statements regarding negative amortization in the previous question is true?

A major benefit of a PLAM is the mortgage payment increases closely following borrower salary increases.

Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.

Real Estate Investment: Basic Legal Concepts

Real Estate Financing: Notes and Mortgages

Mortgage Loan Foundations: the Time Value of Money

Fixed Interest Rate Mortgage Loans

Mortgages: Additional Concepts, Analysis, and Applications

Single Family Housing: Pricing, Investment, and Tax Considerations

Underwriting and Financing Residential Properties

Income-Producing Properties: Leases, Rents, and the Market for Space

Valuation of Income Properties: Appraisal and the Market for Capital

Investment Analysis and Taxation of Income Properties

Financial Leverage and Financing Alternatives

Risk Analysis

Disposition and Renovation of Income Properties

Financing Corporate Real Estate

Financing Project Development

Financing Land Development Projects

Structuring Real Estate Investments: Organizational Forms and Joint Ventures

The Secondary Mortgage Market: Pass-Through Securities

The Secondary Mortgage Market: Cmos and Derivative Securities

Real Estate Investment Trusts Reits

Real Estate Investment Performance and Portfolio Considerations

Real Estate Investment Funds: Structure, Performance

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Exam 5: Adjustable and Floating Rate Mortgage Loans

If an ARM index increased 15%, the negative amortization on a loan with a 5% annual payment cap is calculated by:

Which of the following clauses leads to higher risk for an ARMs lender?

Which of the following is a disadvantage of PLAMs?

Which of the following statements regarding negative amortization in the previous question is true?

A major benefit of a PLAM is the mortgage payment increases closely following borrower salary increases.

Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.

Real Estate Investment: Basic Legal Concepts

Real Estate Financing: Notes and Mortgages

Mortgage Loan Foundations: the Time Value of Money

Fixed Interest Rate Mortgage Loans

Mortgages: Additional Concepts, Analysis, and Applications

Single Family Housing: Pricing, Investment, and Tax Considerations

Underwriting and Financing Residential Properties

Income-Producing Properties: Leases, Rents, and the Market for Space

Valuation of Income Properties: Appraisal and the Market for Capital

Investment Analysis and Taxation of Income Properties

Financial Leverage and Financing Alternatives

Risk Analysis

Disposition and Renovation of Income Properties

Financing Corporate Real Estate

Financing Project Development

Financing Land Development Projects

Structuring Real Estate Investments: Organizational Forms and Joint Ventures

The Secondary Mortgage Market: Pass-Through Securities

The Secondary Mortgage Market: Cmos and Derivative Securities

Real Estate Investment Trusts Reits

Real Estate Investment Performance and Portfolio Considerations

Real Estate Investment Funds: Structure, Performance

Filters