6. Pre-Test M/C

Play an AI-generated podcast conversation about this lesson

What does exercising the conversion option in an ARM usually lead to?

the market rate at the time the loan was originated

2% above the loan’s original adjustable rate

the index rate at the time of conversion

the market rate at the time of conversion (correct)

In the given scenario, what type of loan do the Willards have?

package mortgage

hybrid ARM (correct)

wraparound mortgage

blanket loan

What is NOT an advantage of a 15-year loan?

borrower equity builds up quickly

a lower interest rate

a lower amount of total interest paid

lower monthly payments (correct)

What is the purpose of a negative amortization cap?

total amount the borrower can owe above the original loan amount Signup and view all the answers

What type of ARM is described for the Mitchells, with an initial 7-year rate adjustment period and subsequent annual adjustments?

7/1 ARM Signup and view all the answers

What is the purpose of a discount rate in the Federal Reserve System?

To charge interest when borrowing from a Federal Reserve Bank Signup and view all the answers

What does a mortgage insurance primarily protect the lender from?

Foreclosure loss in case of default Signup and view all the answers

In a 3/1 hybrid ARM, when can the lender adjust the interest rate after the initial fixed-rate period?

Annually Signup and view all the answers

What does a negative amortization cap limit for a borrower?

The loan amount above the original sum Signup and view all the answers

What does a 7/1 ARM represent in terms of rate adjustment periods?

Annual rate adjustments for 7 years Signup and view all the answers

6. Pre-Test M/C

Podcast Beta

Questions and Answers

What does exercising the conversion option in an ARM usually lead to?

In the given scenario, what type of loan do the Willards have?

What is NOT an advantage of a 15-year loan?

What is the purpose of a negative amortization cap?

What type of ARM is described for the Mitchells, with an initial 7-year rate adjustment period and subsequent annual adjustments?

What is the purpose of a discount rate in the Federal Reserve System?

What does a mortgage insurance primarily protect the lender from?

In a 3/1 hybrid ARM, when can the lender adjust the interest rate after the initial fixed-rate period?

What does a negative amortization cap limit for a borrower?

What does a 7/1 ARM represent in terms of rate adjustment periods?

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