REE 4204 EXAM 4 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

REE 4204 EXAM 4 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS

Question:
1. Refinancing
Answer:
Replaces an existing mortgage with a new mortgage without a property transaction

Question:
2. When will borrowers refinance?
Answer:
When market rates are low

Question:
3. Refinancing decision compares..
Answer:
the present value of the benefits (payment savings) to the present value of the costs (PPP on existing,
financing costs on new)

Question:
4. Payoff of existing loan
Answer:
Balance + Prepayment Penalty

Question:
5. Secondary Mortgage Market
Answer:
Market where existing mortgages are bought and sold

Question:
6. Mortgages are used as..
Answer:
collateral for mortgage-related securities

Question:
7. Secondary mortgage market reduces: and was developed to:
Answer:
reliance on deposits solve the mismatch problem

Question:
8. Characteristics of mortgage-backed securities
Answer:
- have some form of credit enhancement
- avoid double taxation
- tailor cash flows of MBS to appeal to investors