COMMERCIAL BANKING FINAL EXAM WITH ALL
CORRECT & 100% VERIFIED ANSWERS|LATEST UPDATE|
ALREADY GRADED A+
The Community Reinvestment Act requires that banks:
A. Define their assessment area and offer services without discrimination in the area
B. Cannot conduct "redlining" -- making loan decisions based solely on the location of the residence
C. All these answers are correct
D. Be assessed a public CRA rating by their primary federal regulator ✔Correct Answer-All these
answers are correct
How is the interest income from the pool of prime mortgages in an MBS split between the parties
involved in the securitization?
A. The mortgage servicing bank earns approximately 25bp, the GSE also earns 25bp for the
guarantee fee, and the MBS investor earns the remaining interest income
B. The MBS investors as holders of the securities receive all the interest income
C. The GSE and the MBS investors each earn 1/2 of the interest income, and the servicing bank earns
no revenue
D. The mortgage servicing bank, the GSE, and the MBS investors each earn 1/3 of the interest income
✔Correct Answer-The mortgage servicing bank earns approximatly 25bp, the GSE also earns 25bp for
the guarantee fee, and the MBS investor earns the remaining interest income
The stated interest rate is higher than the annual percentage rate (APR) on a loan when there are
fees assessed by the lender that reduce the net amount borrowed.
A. True
B. False ✔Correct Answer-False
Commercial banks originate the majority of the residential mortgages in the U.S.
A. True
B. False ✔Correct Answer-False
Joseph Mobely has a 30-year fixed-rate home mortgage for $124,079. He paid no point or up-front
fees, but he must make monthly principal and interest payments of $920. Assuming he holds the
loan to maturity, how much in total interest charges will he pay over the life of the loan? ✔Correct
Answer-207,121
(920)*(30*12)-(124079)
The Home Mortgage Disclosure Act (HDMA) requires:
A. All these answers are correct
B. Mortgage originators to make their residential mortgage application data public
C. Households to register their homes and property with the respective county where the house is
located
, D. Banks to report the volume of 1-4 family mortgage loans on their balance sheets each quarter
✔Correct Answer-Mortgage originators to make their residential mortgage application data public
Select which items are included in the calculation of your FICO credit score
Your race
Amounts you owe
Length of your credit history
Your salary or income
Your payment history
Your age ✔Correct Answer-Amounts you owe
Length of your credit history
Your payment history
After a pool of prime mortgages have been securitized, match the remaining risk held by each party
in the secularization process:
Originating bank
GSE
MSB Investors
None- no risk retained
Credit risk
Interest rate risk ✔Correct Answer-Originating bank
None - no risk retained
GSE
Credit risk
MBS Investors
Interest rate risk
A home is often financed by a bank with primary lien and a junior lien. Relative to the primary lien, a
junior lien:
A. Is more likely to be kept on the bank's balance sheet than the primary lien, which is typically sold
to Fannie or Freddie
B. Typically has such smaller principal balance
C. All these answers are correct
D. Is riskier because it has a lower priority claim to the real estate collateral in case of default
✔Correct Answer-All these answers are correct
Scale economies exist in credit card lending but not in mortgage originations.
A. True
B. False ✔Correct Answer-False
Credit Bureaus are:
A. All these answers are correct
B. The largest providers of consumer loans in the US
CORRECT & 100% VERIFIED ANSWERS|LATEST UPDATE|
ALREADY GRADED A+
The Community Reinvestment Act requires that banks:
A. Define their assessment area and offer services without discrimination in the area
B. Cannot conduct "redlining" -- making loan decisions based solely on the location of the residence
C. All these answers are correct
D. Be assessed a public CRA rating by their primary federal regulator ✔Correct Answer-All these
answers are correct
How is the interest income from the pool of prime mortgages in an MBS split between the parties
involved in the securitization?
A. The mortgage servicing bank earns approximately 25bp, the GSE also earns 25bp for the
guarantee fee, and the MBS investor earns the remaining interest income
B. The MBS investors as holders of the securities receive all the interest income
C. The GSE and the MBS investors each earn 1/2 of the interest income, and the servicing bank earns
no revenue
D. The mortgage servicing bank, the GSE, and the MBS investors each earn 1/3 of the interest income
✔Correct Answer-The mortgage servicing bank earns approximatly 25bp, the GSE also earns 25bp for
the guarantee fee, and the MBS investor earns the remaining interest income
The stated interest rate is higher than the annual percentage rate (APR) on a loan when there are
fees assessed by the lender that reduce the net amount borrowed.
A. True
B. False ✔Correct Answer-False
Commercial banks originate the majority of the residential mortgages in the U.S.
A. True
B. False ✔Correct Answer-False
Joseph Mobely has a 30-year fixed-rate home mortgage for $124,079. He paid no point or up-front
fees, but he must make monthly principal and interest payments of $920. Assuming he holds the
loan to maturity, how much in total interest charges will he pay over the life of the loan? ✔Correct
Answer-207,121
(920)*(30*12)-(124079)
The Home Mortgage Disclosure Act (HDMA) requires:
A. All these answers are correct
B. Mortgage originators to make their residential mortgage application data public
C. Households to register their homes and property with the respective county where the house is
located
, D. Banks to report the volume of 1-4 family mortgage loans on their balance sheets each quarter
✔Correct Answer-Mortgage originators to make their residential mortgage application data public
Select which items are included in the calculation of your FICO credit score
Your race
Amounts you owe
Length of your credit history
Your salary or income
Your payment history
Your age ✔Correct Answer-Amounts you owe
Length of your credit history
Your payment history
After a pool of prime mortgages have been securitized, match the remaining risk held by each party
in the secularization process:
Originating bank
GSE
MSB Investors
None- no risk retained
Credit risk
Interest rate risk ✔Correct Answer-Originating bank
None - no risk retained
GSE
Credit risk
MBS Investors
Interest rate risk
A home is often financed by a bank with primary lien and a junior lien. Relative to the primary lien, a
junior lien:
A. Is more likely to be kept on the bank's balance sheet than the primary lien, which is typically sold
to Fannie or Freddie
B. Typically has such smaller principal balance
C. All these answers are correct
D. Is riskier because it has a lower priority claim to the real estate collateral in case of default
✔Correct Answer-All these answers are correct
Scale economies exist in credit card lending but not in mortgage originations.
A. True
B. False ✔Correct Answer-False
Credit Bureaus are:
A. All these answers are correct
B. The largest providers of consumer loans in the US
