Podcast
Questions and Answers
When business is booming, local community’s demand for mortgage funds may exceed local lenders’ supply.
When business is booming, local community’s demand for mortgage funds may exceed local lenders’ supply.
True (A)
In an economic slump, local lenders’ supply of mortgage funds may exceed local demand.
In an economic slump, local lenders’ supply of mortgage funds may exceed local demand.
True (A)
The secondary market restricts the flow of mortgage funds and limits home ownership.
The secondary market restricts the flow of mortgage funds and limits home ownership.
False (B)
Fannie Mae was created by the U.S. government in 1938 to buy FHA-insured loans from lenders.
Fannie Mae was created by the U.S. government in 1938 to buy FHA-insured loans from lenders.
Signup and view all the answers
Ginnie Mae is a private corporation that manages mortgage-backed securities.
Ginnie Mae is a private corporation that manages mortgage-backed securities.
Signup and view all the answers
Which entity guarantees securities backed by FHA and VA loans?
Which entity guarantees securities backed by FHA and VA loans?
Signup and view all the answers
What was the primary reason for the creation of Freddie Mac?
What was the primary reason for the creation of Freddie Mac?
Signup and view all the answers
What is a key benefit of standardized underwriting guidelines set by GSEs for loan sales?
What is a key benefit of standardized underwriting guidelines set by GSEs for loan sales?
Signup and view all the answers
In 2008, what action did Congress take regarding GSEs?
In 2008, what action did Congress take regarding GSEs?
Signup and view all the answers
What are real estate cycles characterized by?
What are real estate cycles characterized by?
Signup and view all the answers
What is the role of the GSE in relation to mortgage-backed securities?
What is the role of the GSE in relation to mortgage-backed securities?
Signup and view all the answers
What was established by the federal government in 2008 to supervise GSEs?
What was established by the federal government in 2008 to supervise GSEs?
Signup and view all the answers
What is a portfolio loan?
What is a portfolio loan?
Signup and view all the answers
Which organization is specifically not authorized to purchase certain types of loans?
Which organization is specifically not authorized to purchase certain types of loans?
Signup and view all the answers
What is a significant benefit of the development of the secondary market?
What is a significant benefit of the development of the secondary market?
Signup and view all the answers
What typically happens to a loan once it is purchased by Fannie Mae or Freddie Mac?
What typically happens to a loan once it is purchased by Fannie Mae or Freddie Mac?
Signup and view all the answers
What effect can disintermediation have on local financial institutions?
What effect can disintermediation have on local financial institutions?
Signup and view all the answers
Which secondary market entity does not purchase conventional loans?
Which secondary market entity does not purchase conventional loans?
Signup and view all the answers
Fannie Mae and Freddie Mac do not do which of the following?
Fannie Mae and Freddie Mac do not do which of the following?
Signup and view all the answers
Which initiative was undertaken by the government in response to the mortgage and foreclosure crisis?
Which initiative was undertaken by the government in response to the mortgage and foreclosure crisis?
Signup and view all the answers
Study Notes
Primary and Secondary Markets
- Lending takes place in the primary market
- Real estate cycles affect real estate markets
- Primary and secondary markets are related; mortgage funds flow from investors to lenders to home buyers
- Major secondary market entities include government-sponsored enterprises (GSEs)
- Mortgage-backed securities function in the secondary market
- Underwriting guidelines are important for GSEs
- GSEs increase mortgage fund availability
- Recent developments in GSEs relate to the 2007 mortgage and financial crisis
- Primary market is traditionally a local arena for home buyers to apply for loans, and lenders originate them
- Secondary market is a national market where mortgage loans are bought and sold
- Mortgage loans can be sold like other investments (based on yield and risk)
- Mortgage-backed securities pool many mortgages, and investors receive principal and interest payments on their investments
Suggested Lesson Plan
- Students should review the previous chapter on Federal Fiscal and Monetary Policy using Exercise 3.1
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz explores the concepts of primary and secondary markets, particularly in relation to real estate and mortgage funding. It covers the roles of government-sponsored enterprises (GSEs) and discusses the impact of real estate cycles and mortgage-backed securities. Students will also review previous material on Federal Fiscal and Monetary Policy.
