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Terms in this set (65)
81. Short-term to medium-term loans repayable in two or more consecutive payments are known as:
B) Installment loans
82. Loans to individuals and families to finance the purchase of new homes are known as:
C) Residential mortgage loans
83. Short-term loans drawn upon by individuals and families for immediate cash needs and repayable in a lump sum when the borrower's note matures are known as:
A) Noninstallment loans
84. The federal law that requires banks to notify their credit customers in writing when a loan request is denied is known as the:
A) Equal Credit Opportunity Act
85. Major laws and regulations which must be complied with in the mortgage lending area include which of the following?
A) National Affordable Housing Act
B) Community Reinvestment Act
C) Financial Institution Reform Recovery and Enforcement Act
D) All of the above
E) B and C only
86. Which of the following factors have proven most important in credit scoring models?
A) Credit Bureau ratings
B) Income bracket
C) Number of loans the customer has had
D) All of the above
E) A and B only
87. The requirement that banks must provide their consumer loan customers with a statement of the APR for the proposed loan was established by:
C) The Truth-in-Lending Act.
88. Which of the following consumer loans has grown in popularity as a result of the passage of the Tax Reform Act of 1986?
B) Home equity loans
89. A bank that is judged by examiners as needing to improve under the performance requirements of the Community Reinvestment Act will receive an examiner rating of:
90. In order to be eligible for purchase by FNMA a home mortgage cannot have a maturity of less than 10 years nor more than:
B) 30 years
91. FNMA will not purchase home mortgages in the secondary market if the borrower's monthly debt repayments (including housing costs) exceed _________ percent of the borrower's monthly gross income. The correct percentage figure to complete the sentence above is:
92. How did the Tax Reform Act of 1986 increase the appeal of home equity loans?
D) It eliminated individuals' tax deduction for interest payments on other types of loans
93. The federal law that permits consumers to dispute billing errors with a merchant or credit card company and receive a prompt investigation of any billing disputes is the:
B) Fair Credit Billing Act
94. The bank's real estate loan officer should consider which of the following aspects of the customer's loan application carefully when making a home mortgage?
A) The amount and stability of the borrower's income
B) The borrower's available savings and where the down payment is coming from
C) The borrower's track record in caring for and managing property.
D) The outlook for real estate sales in the local market area
E) All of the above are things that need to be looked at carefully
95. An abusive practice is which lenders grant loans to weak borrowers and charge them high fees and interest rates which may cause the borrower to default on the loan is known as:
C) Predatory lending
96. The law which was passed to reduce predatory lending is known as:
B) Home Ownership and Equity Protection Act
97. Which of the following is true regarding credit card loans?
A) There is evidence that considerable economies of scale exist
98. A loan officer asks a customer what race she belongs to. Which law prohibits the loan officer from asking that question?
B) Equal Credit Opportunity Act
99. Which of the following is not part of the evaluation of an installment loan?
A) The borrower's track record in caring for and maintaining property
100. Which of the following is an advantage of a credit scoring model?
D) Credit scoring models can handle a large volume of applications in a short period of time
101. When interest owed on a loan is added to the principal amount of the loan to determine a borrowing customer's required installment payments, this is known as the _________method for figuring a customer's loan rate. Fill in the blank with an appropriate response below.
102. The symbols ARM in lending means:
C) Adjustable rate mortgage
103. The charge on a home mortgage loan that a borrower may be asked to pay up front is referred to as:
104. Which of the following has the highest interest rate according to the book?
D) Credit card loan
105. Which of the following has the lowest interest rate according to the book?
A) New automobile loan
106. A customer seeks a $150,000 home mortgage. The bank requires the customer to pay 1 ¾ points up front. How much of the loan is actually available to the customer?
107. A customer wants to borrow $1200 from Edmond State Bank. Edmond State Bank has an add-on loan with an interest rate of 12 percent and monthly payments for one year. What are the monthly payments this customer will need to make on this loan?
B) $112 per month
108. A customer wants to borrower $25,000 for one year. TRC State Bank has a discount loan with an interest rate of 15 percent. How much of the loan will be available to the customer?
109. A customer wants to borrow $125,000 to purchase a new home. The APR on this loan is 10 percent and it is a 30-year mortgage with monthly payments. What monthly payment will this customer face on this loan?
110. Mark Brown receives a $2000 loan with the intention of repaying the loan in 12 months. However, at the end of one month, Mr. Brown discovers he can repay the loan in full. What percentage of the interest charge is Mr. Brown entitled to receive as a rebate?
D) 63.33 percent
111. Paul Carter requests an automobile loan of $15,000 that will be repaid over the next four years in monthly repayments. The First National Bank tells Mr. Carter that his total finance charges will be $4675.20. What is the APR on this loan?
C) 14 percent
112. Jane Smith has asked for a 30 year mortgage to purchase a home in Oklahoma City, Oklahoma. The purchase price of the home is $150,000 of which $125,000 must be borrowed. If the APR on this loan is 8 percent, how much will Jane's total financing charges be?
113. Beverly Frickerson asks for a $15,000 loan for one year. The bank tells her that they will give her $13,050 immediately and deduct $1950 in interest up front. What is the effective rate of interest on this loan?
A) 14.94 percent
114. The largest credit card lender (as a group) in the U.S. are:
C) Finance companies
115. Prepaid cards which compete with credit cards and debit cards are:
A) Smart cards
116. The first major bank within the U.S. to establish a separate department for granting household loans was:
A) First National City Bank of New York
117. The fastest growing consumer loan category is:
C) Home mortgages
118. The very popular FICO credit scoring system provides credit scores in the range:
D) 300 to 850
119. The most important factor used in the FICO credit scoring system is:
A) The borrower's payment history
120. Jeremiah Uselton needs a loan to purchase a condo in Sarasota, Florida. What type of loan does Jeremiah need?
A) Residential mortgage loan
121. Tammy Payne wants to buy a used car and wants a loan that she will pay off over the next three years with monthly payments. What type of loan does Tammy want?
B) Installment loan
122. Emily Barnes has gone to the First State Bank and gotten a loan of $5000 so she can go on vacation. She plans on paying the loan back in one payment in three months. What type of loan has Emily gotten?
C) Noninstallment loan
123. Bill Wells uses his Discover card to buy new furniture for his apartment. The interest rate on this card is 18% and the minimum payment that is due is $100. What type of loan has Bill gotten?
D) Revolving line of credit
124. Jerry McGuire uses his Visa card to buy a new washer and dryer and a new refrigerator for his home. He plans on paying off the credit card over the next two years. How is Jerry using his credit card?
A) As an installment loan
125. The most profitable credit card customers for a bank are those that:
D) Use their credit card as a source of installment loans
126. Alexis Downs uses her credit card to buy furniture but pays off the credit card at the end of the month before she incurs any interest costs. How is Alexis using her credit card?
B) As a noninstallment loan
127. Donna Carlon is using her plastic card to buy groceries. The money is taken from her checking account immediately to pay for her groceries. How is Donna using her card?
D) As a debit card
128. A bank is considering making a loan to Alice Granger. The bank is looking at her credit report from Equifax and also examining the reason Alice has put on the loan application for needing the loan? What aspect of evaluating a consumer loan application is the bank looking at?
A) Character and purpose
129. A bank is considering making a loan to Ron Weasley. Ron has a gross salary per month of $4000 but has take-home pay of $2800 per month. What aspect of evaluating a consumer loan application is this fact most concerned with?
B) Income level
130. A bank is considering making a loan to Sean Finnigan. Sean owns his own home and has lived there for the past four years. What aspect of evaluating a consumer loan application is this fact most concerned with?
D) Employment and residential stability
131. A bank is considering making a loan to Sam Snape. Mr. Snape has $1000 in the bank right now but generally keeps a balance of $4500 most of the year. What aspect of evaluating a consumer loan application is this fact concerned with?
C) Deposit balance
132. A bank is considering making a loan to Neville Langdon. Neville has bounced three checks in the last year and already has $10,000 on a credit card and an automobile loan with a large balance. What aspect of evaluating a consumer loan application is this fact concerned with?
E) Pyramiding of debt
133. A bank is considering making a loan to John Carter. John is a commissioned sales broker. Some months he earns as much as $10,000 and in other months he earns virtually nothing. Which aspect of evaluating a consumer loan would this be concerned with?
B) Income level
134. Which of the following is a challenge of making a consumer loan?
C) Consumers can more easily hide pertinent information
135. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. What is the minimum down payment that Mark can make?
136. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. If Mark makes the minimum down payment on the car, what is the amount of the loan that Mark will receive?
137. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. What is the size of Mark's monthly payments if he makes the minimum down payment on the car?
138. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. Mark's monthly payments are 353.50 per month. What is Mark's total finance charge if he takes the full 4 years to pay off the loan?
139. The Equal Credit Opportunity Act requires that:
C) A bank give reasons in writing for denying the loan
140. Credit reports provided by credit bureaus provide lenders:
A) With personal identifying data
B) With personal credit histories derived from data submitted by lenders
C) With public information that may bear on a borrower's honesty and stability
D) With the volume of inquiries from lenders about the borrower
E) All of the above
141. Which regulation requires out-of-state-banks that acquire local banks to commit to continued lending in the area and not use the acquired banks simply as deposit gatherers?
E) Community Reinvestment Act
142. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments. If the loan is a discount loan, what is the monthly payment?
143. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments. If the loan quoted has an add-on rate, what are the net proceeds of the loan?
144. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments. If the loan quoted has an add-on rate, what is the approximate annual percentage rate (APR) on the loan?
145. As part of the new regulations of the mortgage market, the Federal Reserve Board moved to tighten the rules on mortgage lending in 2008. All of the following would improve transparency of the market except for:
C) Lenders must rely on a borrower's stated income
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