How are borrowers affected by nonpayment of loans?
It helps bolster their credit report 0%
They get a discount on future loans 0%
They are offered additional credit by the lender 0%
Their credit report begins to indicate late payments, reducing their ability to receive credit in the future 0%
How do consumers abuse loan practices?
They lie on their credit applications to get better interest rates 0%
People obtain loans with no plan to pay them back 0%
People use loan funds for purposes other than they should 0%
All of the above 0%
How do lenders abuse people who are looking to get their homes refinanced?
They buy their homes from them 0%
They refinance people for minimal interest rate improvements, while charging excessive fees for their services 0%
They force them to take out home refinance loans against their will 0%
They increase people's interest rates instead of lowering them 0%
How does a credit card differ from a personal loan?
Credit cards offer more favorable interest rates 0%
Credit cards are usually for higher credit amounts 0%
Credit cards always have a physical card, loans never do 0%
Credit cards have open ended payment schedules 0%
How does a long term loan received in cash affect a firm's quick ratio?
It is not possible to say anything on the basis of the information given 0%
There will be no change 0%
It will decrease 0%
It will increase 0%
How does the payment of a short term loan affect a company's balance sheet?
It reduces cash and short term liabilities 0%
It reduces cash and increases short term liabilities 0%
It decreases short term liabilities and increases long term liabilities 0%
It has no impact 0%
How is interest on a loan shown on the financial statements?
As a long term liability 0%
As a short term liability 0%
As revenue 0%
As an expense incurred during the period 0%
How much is one point worth?
10 percent of the mortgage 0%
0.1 percent of the mortgage 0%
1 percent of the mortgage 0%
$1000 0%
How would a 10 year loan show up on a company balance sheet?
As a short term liability 0%
As a long term liability 0%
As an asset 0%
As revenue 0%
How would a company that purchased a building using a mortgage show it in its account books?
Dr: Cash, Cr: Interest Payable 0%
Dr: Buildings, Cr: Mortgage Liability 0%
Dr: Interest Payable, Cr: Mortgage Liability 0%
Cr: Cash, Cr: Mortgage Liability 0%
Should a loan be taken out just for its tax benefits?
Yes, the tax benefits make any loan amount worth it 0%
Yes, as long as the loan is paid back in the same year 0%
No, unless the loan is for over $100,000 0%
No, the benefit of deduction of loan interest does not offset the cost of the interest 0%
What are low interest loans offered by schools to the neediest students called?
Fair Market Loans 0%
Trustee Loans 0%
Perkins Loans 0%
Beneficiary Loans 0%
What can a lender do if a borrower refuses to pay back a loan?
Nothing — it is a risk the lender takes for high returns 0%
Sue the borrower in a small claims court 0%
Call the bank that helped structure the loan 0%
A loan is a debt contract, and the borrower can be sued for the funds 0%
What does the term "Assignment" denote?
The transfer of ownership of mortgage from one company or individual to another 0%
The process of researching a property's title 0%
Filing for bankruptcy 0%
A provision in a mortgage home loan that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the loan 0%
What does the term "Closing" mean?
The day a price is agreed on for a home transaction 0%
The meeting where the buyers, sellers, and their representatives meet to finalize the legal exchange of property 0%
The process of being approved for a mortgage 0%
A legal document used to transfer the ownership of a property 0%
What does the term "Collateral" mean?
Assets pledged to secure the repayment of a loan 0%
The monthly payment of a loan 0%
Only the principal portion of a loan 0%
A situation where one fails to make a payment, which can lead to foreclosure 0%
What does the term "Covenant" mean?
A bond coupon payment 0%
The principal portion of a loan 0%
The monthly payment on a loan 0%
An agreement or promise to do or not to do a particular thing related to a loan 0%
What does the term "Deferment" denote?
The process of researching loan options 0%
The process of applying for government mortgage funding 0%
An approved temporary suspension of loan payments based on certain events and criteria 0%
Adding interest that has accrued onto the principal balance 0%
What does the term "Endowment" mean?
The percentage of gross monthly income that goes towards paying housing expenses 0%
A fund that contains assets the use of which is restricted only to the income earned by these assets 0%
The same as an escrow account 0%
The process of applying for a mortgage 0%
What does the term "Escrow Payment" mean?
The placing of funds in a special account to cover regular payment of taxes and insurance 0%
The fee charged for borrowing money 0%
An additional payment made to reduce the principal balance of a mortgage 0%
The final payment made to pay off a mortgage 0%
What does the term "Escrow" mean?
A sum a borrower pays to a lender to decrease the interest rate of a mortgage 0%
The market value of a home 0%
A neutral third party that carries out the instructions of both the buyer and the seller to handle all the paperwork of settlement or closing 0%
The amount by which a home is overpriced above the market price 0%
What does the term "Flipping" denote?
A fee charged for the use of money 0%
Buying expensive properties and renting them out 0%
Buying undervalued properties and renting them out 0%
The process of buying a property and then attempting to sell it relatively quickly for a profit 0%
What does the term "Foreclosure" denote?
The transfer of the seller's existing mortgage to the buyer 0%
The process of applying for a mortgage 0%
The Legal process by which the lender or the seller forces the sale of a mortgaged property because the borrower has not met the terms of the mortgage. 0%
The process of finding undervalued properties for investment purposes 0%
What does the term "General Recourse" mean?
Rights to demand payment from the general assets of the debtor, without seniority in access to any specific assets 0%
The process taken to apply for a mortgage 0%
The payment of escrow to the seller 0%
The closing process 0%
What does the term "Margin" mean?
The ratio of debt to equity 0%
The claim a lender may place on property in return for making a loan 0%
The amount the lender adds to the predetermined index rate of an Adjustable-Rate Loan to determine the new interest rate at each adjustment. 0%
The borrowing of money 0%
What does the term "Survey" imply?
An assessment of a person's credit 0%
The intentional and voluntary giving up of rights or claims 0%
The ability of a lender to provide clients with a better rate 0%
The determination of the exact boundaries and location of a property 0%
What happens if a lender charges a rate beyond what is legally allowed and the borrower does not pay?
The lender can not sue the borrower for any amount 0%
The lender can not sue the borrower to repay the amount beyond what is legally allowed 0%
The lender can have the borrower imprisoned for fraud 0%
The lender goes bankrupt 0%
What is "Equity"?
The value of the assets inside the house 0%
The total value of the house 0%
The value of the house after loans are subtracted 0%
The amount of the mortgage 0%
What is a 'custom loan repayment schedule'?
Payments which are large initially but become smaller over time 0%
Paying interest only for several years, then increasing the payment to repay the principal as well 0%
The making of the scheduled monthly payments to the lender by the borrower 0%
One large payment at a predetermined time 0%
What is a down payment?
Always 20% of the price of the house 0%
Payment on a house required by law 0%
The monthly mortgage payment 0%
Money put down towards the payment of the house by the buyer at the time of purchase which is deducted from the price 0%
What is a loan that has a fixed rate of interest over a period of time known as?
Coupon Payment Loan 0%
Conforming Mortgage loan 0%
Balloon Loan 0%
Term Loan 0%
What is a typical mortgage loan term?
30 years 0%
10 years 0%
2 years 0%
100 years 0%
What is a written document that transfers the title to personal property callled?
Bill of Sale 0%
Bill of lading 0%
Sales contract 0%
Depreciation 0%
What is an interest only loan?
A loan on which interest accrues only in the second year 0%
A loan on which the borrower has to pay back only the interest and not the principal 0%
A loan on which the borrower has to pay only the interest for a specified time period, not reducing the principal at all 0%
A type of mortgage 0%
What is an unsecured loan?
An automobile loan 0%
A loan where the debtor's credit is the only thing at stake 0%
A loan only for uneducated people 0%
A loan with no collateral; the lender has no assets backing the loan 0%
What is meant by a secured credit card?
An open line of credit 0%
A credit card with a fixed monthly amount of payment 0%
A credit card by someone other than a major bank 0%
A credit card to get which a deposit account must be established; often 100% of the available credit is required as a deposit 0%
What is meant by a secured loan?
A loan which uses some form of collateral as a guarantee of payment 0%
A loan under $10,000 0%
A loan for people with bad credit 0%
A short term loan for less than a year 0%
What is meant by Housing Expense Ratio?
The same as income to debt ratio 0%
The percentage of living expenses to housing expenses 0%
The percentage of monthly income that goes towards the housing payment 0%
The ratio of the house price to those of other similar houses 0%
What is meant by Predatory Lending?
Lending money to people who are extended beyond their means in an attempt to get them to spend more than they should 0%
Lending money to high net worth individuals 0%
Lending people money to buy a car 0%
Lending money to students to pay for their education 0%
What is meant by Subprime Lending?
Mortgages aimed at the poor/uneducated people at higher interest rates 0%
Mortgages aimed at the rich and wealthy 0%
Mortgages offered at the fair market rate 0%
Mortgages geared towards people with jobs 0%
What is meant by the term "Assumption"?
Applying for a mortgage 0%
A loan secured by the equity value in a borrower's home 0%
The transfer of the seller's existing mortgage to the buyer 0%
None of the above 0%
What is meant by the term "Credit Repository"?
The physical location where all mortgage papers are signed 0%
An organization that gathers, records, updates, and stores the information about the financial, public and payment records of the individuals who are being considered for credit 0%
A central clearing house for all loan transactions 0%
The loss of money, property, rights, or privileges due to a breach of legal obligation 0%
What is meant by the term "Floor"?
The minimum amount a loan can be made for 0%
The interest rate below which the rate of an Adjustable-Rate Loan cannot be adjusted 0%
The minimum amount of time a mortgage can be set for 0%
A professional opinion of the current market value of a property 0%
What is meant by the term "Forbearance"?
A postponement of payment on a loan, typically if the borrower doesn't qualify for a deferment and is unable to make payments for a reason such as poor health 0%
A step taken during bankruptcy 0%
An extra loan payment made to pay down principal 0%
None of the above 0%
What is meant by the term "Impound"?
Customary costs above and beyond the sale price of a property that must be paid to cover the transfer of ownership at closing 0%
The portion of a borrower's monthly payments held by the lender or service provider to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due 0%
The time frame of a mortgage 0%
The implied interest rate 0%
What is meant by the term "Portfolio"?
A collection of loans held by a borrower 0%
Anything offered or given to fulfill the performance of a contract 0%
The interest payment of a loan 0%
A combination of assets held for its investment benefits including financial and non-financial returns 0%
What is meant by the term "Recoverable Grants"?
Funds provided by a philanthropist to fulfill a role similar to equity 0%
Interim financing for a home buyer 0%
A short term loan used to pay closing costs 0%
A bond that does not earn any interest 0%
What is meant by the term "Usury"?
Charging people a fair market interest rate based on their credit 0%
Charging people zero interest rate 0%
Financing a car using an auto loan 0%
Charging interest rates in excess of what is standard and customary 0%
What is something that has been made payable and is overdue and unpaid called?
Commission 0%
Promissory note 0%
Delinquent 0%
Repossessed 0%
What is the collateral under a mortgage loan?
The family automobile 0%
The borrower's job 0%
All the borrower's cash in the bank 0%
The house which the mortgage is used to purchase 0%
What is the debt that must be repaid before a subordinated debt receives any payment in the event of default called?
Down Payment 0%
Senior Debt 0%
Subsequent Debt 0%
Second Round Debt 0%
What is the definition of a loan?
A type of debt, the redistribution of assets between a borrower and a lender with a promise to repay 0%
Something similar to an asset 0%
Always a short term obligation to repay someone 0%
The same as a draft or check 0%
What is the payment of the monthly installment by the borrower to the lender called?
Servicing 0%
Liability 0%
Financing 0%
Bond payment 0%
What is the process of evaluating a loan application to determine the advisability of making the loan called?
Debt-to-income ratio 0%
Underwriting 0%
Surveying 0%
Assessing 0%
What is the purpose of covenants?
They are required by law to be placed on all borrowers 0%
To force a borrower to abide by rules which compel the borrower to stay in a situation where they can repay the loan 0%
The IRS forces the lenders to place them on all commercial loans 0%
To protect the borrower 0%
What is the short-term loan that provides temporary financing until more permanent financing is available called?
Interim Financing 0%
Contingency 0%
Overdraft 0%
Mortgage Modification 0%
What is the term used when a borrower does not pay back their loan?
Recession 0%
Default 0%
Extraction 0%
Extortion 0%
What options does a bank have if a company breaks a covenant?
None, the bank has to stick to the loan agreement 0%
None, required by the IRS to not give any forgiveness 0%
The bank can temporarily waive the covenants to give the borrower time to become compliant 0%
The bank will permanently waive the covenants 0%
What purpose do mortgage brokers serve?
They work for the bank and sell mortgages 0%
They work for the borrowers, aggregating all loan options and provide the borrowers with options 0%
They work for the real estate companies and sell property 0%
They are the buyers of real estate 0%
What purpose does a title serve?
It is required by the mortgagee 0%
It is the legal document showing the ownership of the property 0%
It lists out the interest rate of the mortgage 0%
None of the above 0%
What type of debt do credit cards fall under?
Revolving debt 0%
Unsecured debt 0%
Secured debt 0%
All of the above 0%
What type of repayment plans do credit cards typically have?
Exactly half is due 0%
Some small portion of the consumer's total balance is due each month 0%
They must be paid in full 0%
Only interest is due each month 0%
What typically happens if a borrower breaks one of the loan covenants?
Nothing 0%
The loan becomes 'in default', and can be called by the lender 0%
The borrower has to pay double the amount of the loan 0%
The IRS will tax the borrower 0%
What would a company that wants to decrease their debt to equity ratio do?
Take out a new long term loan 0%
Take out a new short term loan 0%
Pay off a short term loan 0%
Collect on receivables 0%
What would happen to the balance sheet of a company that has automobiles with loans associated with them, and sells the automobiles for more than the carrying value of the loan?
There will be no impact 0%
The company would be out of compliance with loan covenants 0%
There will be gain on the sale of automobiles, and a reduction in debt 0%
There will be loss on the sale of automobiles, and an increase in debt 0%
What would the entry be for a monthly interest payment on a long term loan?
Dr: Interest Expense, Cr: Cash 0%
Dr: Cash, Cr: Interest Expense 0%
Dr: Long Term Liability, Cr: Interest Expense 0%
Dr: Interest Expense, Cr: Long Term Liability 0%
When can interest paid be deducted on a tax return?
In the year the loan was taken out 0%
In the year the final payment on the loan is made 0%
It is not allowed to be deducted at all 0%
In the year the interest is paid 0%
When do lenders require Private Mortgage Insurance (PMI)?
When the loan to value ratio is greater than 80% 0%
When the buyer makes under $40,000 a year 0%
When the buyer has unfavorable credit 0%
When the buyer is a millionaire 0%
When does a mortgage payer have to pay a late payment penalty?
When the payment is late by 4 days 0%
When the payment is late by15 days 0%
When the payment is late by the number of days stipulated in the loan agreement 0%
Never 0%
Which of the following is a reason for the proliferation of credit cards?
The government promotes the use of credit cards 0%
It is healthy for people to spend beyond their means 0%
People want to use them for vacations 0%
It is easy to apply for and get a credit card 0%
Who is a mortgagee?
The borrower 0%
The lending institution 0%
The mortgage broker 0%
The lender 0%
Why are "Pay Day Loans" considered predatory?
They target people with jobs 0%
They are offered in stores 0%
They charge interest rates lower than credit cards 0%
They are short term loans with interest rates far higher than those on any standard loan and are typically aimed at the poor and/or the uneducated people 0%
Why can a borrower not deduct loan repayments from their income when calculating taxes?
Because there is no precedent allowing it 0%
Because the lender will be deducting them on their side 0%
Because they were not taxed on the proceeds of the loan, they can not deduct repayments either 0%
Because it is unfair to the borrowers 0%
Why can a lender not deduct the loans made from their net income?
Because there is no reduction in their assets — there is only a change from cash assets to receivables 0%
Because it is considered the income of the borrower 0%
Because it has minimal impact on tax revenue 0%
Because there is no need to include it as long as the loan is paid back within a year 0%
Why have credit cards become a popular method of payment?
Because no credit history is required to get a credit card 0%
Because they are inexpensive 0%
Because regular loans are no longer available to everyday consumers 0%
Because they enable a person to make purchases without having any money at the time of the purchases 0%
Why have the lenders been restricting the issuance of credit cards in recent years?
Because consumer credit ratings have been going down rapidly 0%
Because higher bankruptcy and non payment levels by consumers have been eating into the profit levels 0%
Because consumers have nothing else to buy 0%
Because there is a tendency among consumers to take out home loans instead 0%
Why is a loan not taxable income?
Because there are laws against it 0%
Because there is no increase in the wealth of the person taking a loan 0%
Because people lie on their tax returns and do not include it 0%
Because taxing them is not fair to people 0%
Why is interest earned on a loan considered taxable revenue?
Because it is revenue only if over $1,000 0%
Because it was earned legally and therefore must be included in revenue 0%
Because the SEC requires it 0%
Because interest is profit generated by providing a loan and is income to the lender 0%
Why is interest paid by the borrower deductible on their tax return?
Because interest paid represents the cost of having a loan and is an expense to the borrower 0%
Because it is revenue to the lender and should be income as well to the borrower 0%
Because it is unfair for the borrower to have this deduction 0%
Because the SEC requires it 0%
Why is the repayment of a loan not considered income to the lender?
Because it only converts assets from receivables into cash 0%
Because the amount is too small to impact tax collections 0%
Because it is too complicated to track 0%
Because there is no set law about how to handle it 0%
Why would someone not use a credit card to purchase a car?
Credit limits on a credit card are not high enough to purchase a car 0%
Car dealers force consumers to use loans 0%
Interest rates on credit cards tend to be higher than on a loan for a car or a house 0%
It is illegal to pay for a car using credit cards 0%