1. Typically, if investors expect to stay in the house or will pay off the loan in the near future (say, in less than 5 years), should they pay the discount points in exchange for lower monthly payments? (Hint: see the real world application example that we went through in class)
A. Yes, they should pay the discount points
B. No, they should not pay the discount points
2. During the early years of an amortizing mortgage loan, the lender applies
A. Most of the monthly payment to the outstanding principal balance.
B. All of the monthly payment to the outstanding principal balance.
C. Most of the monthly payment to interest on the loan.
D. All of the monthly payment to interest on the loan.
E. The monthly payment equally to interest on the loan and the outstanding principal balance.
3. What is loan servicing?
A-Loan servicing is the process of the lender making a loan to a borrower. This term is only used in regards to mortgages.
B-Loan servicers are the people in an investment bank who packaged together many mortgages into an MBS for selling to investors.
C-Loan servicers did the pre-qualifying of potential borrowers as commercial banks could not keep up with the demand.
D-Loan servicers collect monthly payments and manage the paper work associated with a loan, usually keeping a portion of the payments received.