Adjustable Rate Mortgages (ARMs)
Which of the following terms describes the amount of money that a lender
adds to the index rate to calculate the interest rate of an ARM at each
adjustment?
A. Balloon
B. Margin
C. Principal
D. Negative Amortization - correct answer ✔B. Margin
What is it called when a mortgage is recalculated based on the current index?
A. Recast
B. Redo
C. Recalculate
D. Do over - correct answer ✔A. Recast
What is it called when a large payment is due at the end of a loan?
A. Balloon Payment
B. Negative amortization
C. Interest-only payment
D. Pre-payment penalty - correct answer ✔A. Balloon Payment
T or F: Reg Z requires lenders to include a lifetime rate cap on ALL variable
rate consumer loans - correct answer ✔FALSE. Reg Z does require an
interest rate cap on variable rate loans, but only when they are secured by a
dwelling
, T or F: Hybrid ARMs are advertised as fractions like 3/1 or 5/1 - correct
answer ✔TRUE
Does Reg Z require disclosure of a limitation (cap) on the maximum interest
rate that may be charged if the rate may increase after consummation for
loans secured by dwellings? - correct answer ✔YES
Reg Z requires lenders to provide more information about the features of
closed-end, adjustable rate loans with a term greater than ______ secured by
the borrower's principal dwelling (ARMs)
A. 1 month
B. 6 months
C. 1 year
D. 5 years - correct answer ✔C. 1 year
T or F: A lender must include both a historical example and a statement of a
worst case example to comply with loan program disclosures - correct answer
✔FALSE. A lender can choose EITHER a historical example or a sample
statement of a worst case example to satisfy the loan program disclosures
criteria. A lender isn't required to have both
T or F: Lenders can advertise ARM loans however they choose - correct
answer ✔FALSE. Reg Z has specific criteria that must be followed when
advertising ARM loans
How long must a creditor retain records to comply with Reg Z?
A. 6 months
B. 1 year
C. 2 years
D. 10 years - correct answer ✔C. 2 years
Which of the following terms describes the amount of money that a lender
adds to the index rate to calculate the interest rate of an ARM at each
adjustment?
A. Balloon
B. Margin
C. Principal
D. Negative Amortization - correct answer ✔B. Margin
What is it called when a mortgage is recalculated based on the current index?
A. Recast
B. Redo
C. Recalculate
D. Do over - correct answer ✔A. Recast
What is it called when a large payment is due at the end of a loan?
A. Balloon Payment
B. Negative amortization
C. Interest-only payment
D. Pre-payment penalty - correct answer ✔A. Balloon Payment
T or F: Reg Z requires lenders to include a lifetime rate cap on ALL variable
rate consumer loans - correct answer ✔FALSE. Reg Z does require an
interest rate cap on variable rate loans, but only when they are secured by a
dwelling
, T or F: Hybrid ARMs are advertised as fractions like 3/1 or 5/1 - correct
answer ✔TRUE
Does Reg Z require disclosure of a limitation (cap) on the maximum interest
rate that may be charged if the rate may increase after consummation for
loans secured by dwellings? - correct answer ✔YES
Reg Z requires lenders to provide more information about the features of
closed-end, adjustable rate loans with a term greater than ______ secured by
the borrower's principal dwelling (ARMs)
A. 1 month
B. 6 months
C. 1 year
D. 5 years - correct answer ✔C. 1 year
T or F: A lender must include both a historical example and a statement of a
worst case example to comply with loan program disclosures - correct answer
✔FALSE. A lender can choose EITHER a historical example or a sample
statement of a worst case example to satisfy the loan program disclosures
criteria. A lender isn't required to have both
T or F: Lenders can advertise ARM loans however they choose - correct
answer ✔FALSE. Reg Z has specific criteria that must be followed when
advertising ARM loans
How long must a creditor retain records to comply with Reg Z?
A. 6 months
B. 1 year
C. 2 years
D. 10 years - correct answer ✔C. 2 years
