Financial Markets and Institutions – Exam 2, 2026 – Study Material
and Practice Questions
What are mortgages? - ANS✔✔ loans to individuals or businesses to purchase a home, land, or
other real property
largest loan category? - ANS✔✔ home mortgages (one to four families)
second largest loan category? - ANS✔✔ commercial mortgages
third largest loan category? - ANS✔✔ multi family dwellings
fourth largest loan category (last 1 or 4)? - ANS✔✔ farms
mortgages have no set size or denomination for primary mortgages (T or F) - ANS✔✔ true
(depends on borrowers needs and ability to repay)
Primary mortgages generally involve (single or multiple) investor/s? - ANS✔✔ single
home mortgages are used to purchase _______________ - ANS✔✔ one to four family dwellings
multifamily dwelling mortgages are used to finance purchases of __________________ -
ANS✔✔ apartment complexes, town houses, and condominiums
Most financial institutions sell their mortgage loans on the ____________________ market -
ANS✔✔ secondary
, When mortgages are not securitized, financial institution can be more (strict/ flexible) with
acceptance/ rejection guidelines - ANS✔✔ flexible
what is a lien? - ANS✔✔ public record attached to title of property that gives financial
institution right to sell property if borrower defaults
As part of mortgage agreement , financial institution will place ______ against property that
remains in place until loan is fully paid off - ANS✔✔ lien
if someone tries to buy the home before loan in paid off - ANS✔✔ financial institution can file
notice of the lien and stop transaction
Mortgage agreements require borrower to _______________________ as down payment -
ANS✔✔ pay portion of purchase price
down payment ______________ probability borrower will default - ANS✔✔ decreases
size of down payment depends on financial situation of borrower, but generally _______% is
required - ANS✔✔ 20
Borrowers or a mortgage who put up less than 20% are required to purchase - ANS✔✔ PMI
(private mortgage insurance)
In event of default __________ guarantees to pay financial institution portion of difference
between ___________________________ - ANS✔✔ PMI; value of property and balance
remaining on mortgage
mortgages are classified as either - ANS✔✔ federally insured or conventional
and Practice Questions
What are mortgages? - ANS✔✔ loans to individuals or businesses to purchase a home, land, or
other real property
largest loan category? - ANS✔✔ home mortgages (one to four families)
second largest loan category? - ANS✔✔ commercial mortgages
third largest loan category? - ANS✔✔ multi family dwellings
fourth largest loan category (last 1 or 4)? - ANS✔✔ farms
mortgages have no set size or denomination for primary mortgages (T or F) - ANS✔✔ true
(depends on borrowers needs and ability to repay)
Primary mortgages generally involve (single or multiple) investor/s? - ANS✔✔ single
home mortgages are used to purchase _______________ - ANS✔✔ one to four family dwellings
multifamily dwelling mortgages are used to finance purchases of __________________ -
ANS✔✔ apartment complexes, town houses, and condominiums
Most financial institutions sell their mortgage loans on the ____________________ market -
ANS✔✔ secondary
, When mortgages are not securitized, financial institution can be more (strict/ flexible) with
acceptance/ rejection guidelines - ANS✔✔ flexible
what is a lien? - ANS✔✔ public record attached to title of property that gives financial
institution right to sell property if borrower defaults
As part of mortgage agreement , financial institution will place ______ against property that
remains in place until loan is fully paid off - ANS✔✔ lien
if someone tries to buy the home before loan in paid off - ANS✔✔ financial institution can file
notice of the lien and stop transaction
Mortgage agreements require borrower to _______________________ as down payment -
ANS✔✔ pay portion of purchase price
down payment ______________ probability borrower will default - ANS✔✔ decreases
size of down payment depends on financial situation of borrower, but generally _______% is
required - ANS✔✔ 20
Borrowers or a mortgage who put up less than 20% are required to purchase - ANS✔✔ PMI
(private mortgage insurance)
In event of default __________ guarantees to pay financial institution portion of difference
between ___________________________ - ANS✔✔ PMI; value of property and balance
remaining on mortgage
mortgages are classified as either - ANS✔✔ federally insured or conventional
