What is MOST TRUE of DEFAULT RISK on a mortgage loan? Group of answer choices It is always lower with lower interest rates. It increases with greater leverage. It increases with a lock-out provision. It does not effect the borrower due to lack of recourse.
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- What is MOST TRUE of DEFAULT RISK on a mortgage loan? It is always lower with lower interest rates. O It increases with greater leverage. O It increases with a lock-out provision. O It does not effect the borrower due to lack of recourse.When the default risk is high, ___. the debtor charges high interest the debtor earns more the creditor earns less the creditor charges high interest Please answer immediately thanks :)Collateral security is used by the lender when * interest is not paid on time the loan is not repaid and prime security is insufficient to cover the dues the loan term is over the interest rates in the market change
- Which of the following is FALSE regarding ARM loans? ○ Lenders only originate ARMs if the expected benefit from shifting interest rate risk is greater than the increased risk of borrower default caused by adjusting composite rates none of the answer choices is FALSE ARMs with shorter term index means increased risk to borrower because shorter term index rates have more volatility ARMs with more frequent adjustments to the composite rate are more risky to lenders than ARMs with less frequent adjustmentsWhich of the following situations are likely to result in higher loan defaults? Mortgages are held by originating institutions in their portfolios. Borrowers have higher equity in their homes. Lenders who require documentation of income, liabilities and asset ownership. Borrowers with low credit scores.Given a decrease in interest rates, Mortgage-Backed Securities (MBS) prepayments will be slower causing expected reinvestment return to decrease. will be faster causing expected reinvestment return to increase. changes in interest rates do not effect MBS prepayments. will be slower causing expected reinvestment return to increase. will be faster causing expected reinvestment return to decrease.
- Which of these is NOT likely to lead to more expensive mortgages? O Higher origination loan to value ratios Uncertainty in the ability of banks to access properties through repossession More variable rate mortgages than fixed Longer mortgage duration (or "mortgage term")The definitions of default events are fairly standard, but what really constitutes a default? a. The second missed payment O b. Default only happens when you cannot pay the interest on the outstanding debt c. The first missed payment O d. Depends on what kind of grace period is granted and the agreement with the borrowerURGENT How does high interest rate and setting ceiling on loans (limited credit) compensate for the possibility of defaulting?
- Which of the following statement is (are) TRUE of collateralized loan obligation (CLO)? A: A CLO pools a group of loans and creates multiple tranches with different levels of risk B: The less risky tranches in a CLO have a lower pay-off (i.e. lower coupons) C: A tranch of a CLO can have a high credit rating even though the underlying loans in a CLO are risky D: All of the Above Please answer fast i give you upvote.Consider two loans that are otherwise identical, except that Loan A has a higher chance of borrower default and Loan B has a lower chance of borrower default. Which loan would you expect to charge more interest-all else equal-and why? O Loan A would charge more interest because it is less risky than Loan B. O Loan A would charge more interest because it is riskier than Loan B. O Loan B would charge more interest because it is less risky than Loan A. O Loan B would charge more interest because it is riskier than Loan A.Explain Negative Amortizing, Constant Payment Mortgage (CPM) Loans?
