REE 3043 EXAM 3 QUESTIONS AND ANSWERS 2026
Private mortgage insurance (PMI) is usually required on _____ loans with loan-to-value
ratios greater than _____ percent.
Home, 80
Home, 60
Income property, 75
Income property, 80 - Answers - Home, 80
The type of mortgage loan that best fits the asset-liability mix of most depository
institutions is a(an):
Fixed-payment, fully amortized mortgage
Adjustable rate mortgage
Purchase-money mortgage
Interest-only, fixed-rate mortgage - Answers - Adjustable rate mortgage
Which of the following mortgage types generally will have the most default risk,
assuming the initial loan-to-value ratio, contract interest rate, and all other loan terms
are identical?
Interest-only loans.
Fully amortizing loans.
Partially amortized loans.
There is no difference in the default risk of these loans. - Answers - Interest-only loans
A mortgage that is intended to enable older households to "liquify" the equity in their
home is the:
Graduated payment mortgage (GPM)
Adjustable rate mortgage (ARM)
Purchase-money mortgage (PMM)
,Reverse annuity mortgage (RAM) - Answers - Reverse annuity mortgage (RAM)
A jumbo loan is:
A conventional loan that is large enough to be purchased by Fannie Mae or Freddie
Mac
A conventional loan that is too large to be purchased by Fannie Mae or Freddie Mac
A multiproperty loan
A VA loan that exceeds the normal limits - Answers - A conventional loan that is too
large to be purchased by Fannie Mae or Freddie Mac
The maximum loan-to-value ratio for an FHA loan is approximately:
90%
97%
99%
100% - Answers - 97%
The maximum loan-to-value ratio on a VA-guaranteed loan is:
90%
98%
99%
100% - Answers - 100%
Conforming conventional loans are loans that:
Are eligible for FHA insurance
Are eligible for VA guarantee
Are eligible for purchase by Fannie Mae and Freddie Mac
Meet federal Truth-in-Lending standards - Answers - Are eligible for purchase by Fannie
Mae and Freddie Mac
Home equity loans typically:
, Are fixed-rate, fixed-term loans
Are first mortgage loans
Are originated by mortgage bankers
Have tax-deductible interest charges - Answers - Have tax-deductible interest charges
A simple but durable method of determining whether to refinance is to use:
Net benefit analysis
Cost of borrowing
An interest rate spread rule
APR - Answers - Net benefit analysis
Probably the greatest contribution of FHA to home mortgage lending was to:
Establish the use of the level-payment home mortgage
Create mortgage insurance for conventional loans
Create the adjustable rate mortgage
Create the home equity loan - Answers - Establish the use of the level-payment home
mortgage
Explain why a home equity mortgage loan can be a better source of funds forhousehold
needs than other types of consumer debt. - Answers - Because the interest paid on the
first $100,000 of a home equity loan is completely deductible
Discuss the role and importance of private mortgage insurance in the residential
mortgage market. - Answers - Private mortgage insurance protects a lender against
losses due to a default
Mortgage banking companies:
Collect monthly payments and forward them to the mortgage investor
Arrange home loan originations, but do not make the actual loans
Make home loans and fund them permanently
Private mortgage insurance (PMI) is usually required on _____ loans with loan-to-value
ratios greater than _____ percent.
Home, 80
Home, 60
Income property, 75
Income property, 80 - Answers - Home, 80
The type of mortgage loan that best fits the asset-liability mix of most depository
institutions is a(an):
Fixed-payment, fully amortized mortgage
Adjustable rate mortgage
Purchase-money mortgage
Interest-only, fixed-rate mortgage - Answers - Adjustable rate mortgage
Which of the following mortgage types generally will have the most default risk,
assuming the initial loan-to-value ratio, contract interest rate, and all other loan terms
are identical?
Interest-only loans.
Fully amortizing loans.
Partially amortized loans.
There is no difference in the default risk of these loans. - Answers - Interest-only loans
A mortgage that is intended to enable older households to "liquify" the equity in their
home is the:
Graduated payment mortgage (GPM)
Adjustable rate mortgage (ARM)
Purchase-money mortgage (PMM)
,Reverse annuity mortgage (RAM) - Answers - Reverse annuity mortgage (RAM)
A jumbo loan is:
A conventional loan that is large enough to be purchased by Fannie Mae or Freddie
Mac
A conventional loan that is too large to be purchased by Fannie Mae or Freddie Mac
A multiproperty loan
A VA loan that exceeds the normal limits - Answers - A conventional loan that is too
large to be purchased by Fannie Mae or Freddie Mac
The maximum loan-to-value ratio for an FHA loan is approximately:
90%
97%
99%
100% - Answers - 97%
The maximum loan-to-value ratio on a VA-guaranteed loan is:
90%
98%
99%
100% - Answers - 100%
Conforming conventional loans are loans that:
Are eligible for FHA insurance
Are eligible for VA guarantee
Are eligible for purchase by Fannie Mae and Freddie Mac
Meet federal Truth-in-Lending standards - Answers - Are eligible for purchase by Fannie
Mae and Freddie Mac
Home equity loans typically:
, Are fixed-rate, fixed-term loans
Are first mortgage loans
Are originated by mortgage bankers
Have tax-deductible interest charges - Answers - Have tax-deductible interest charges
A simple but durable method of determining whether to refinance is to use:
Net benefit analysis
Cost of borrowing
An interest rate spread rule
APR - Answers - Net benefit analysis
Probably the greatest contribution of FHA to home mortgage lending was to:
Establish the use of the level-payment home mortgage
Create mortgage insurance for conventional loans
Create the adjustable rate mortgage
Create the home equity loan - Answers - Establish the use of the level-payment home
mortgage
Explain why a home equity mortgage loan can be a better source of funds forhousehold
needs than other types of consumer debt. - Answers - Because the interest paid on the
first $100,000 of a home equity loan is completely deductible
Discuss the role and importance of private mortgage insurance in the residential
mortgage market. - Answers - Private mortgage insurance protects a lender against
losses due to a default
Mortgage banking companies:
Collect monthly payments and forward them to the mortgage investor
Arrange home loan originations, but do not make the actual loans
Make home loans and fund them permanently
