Description
Real Estate Finance & Investments 16th Edition by William B Brueggeman
Real Estate Finance & Investments, 16e (Brueggeman)
Chapter 5 Adjustable and Floating Rate Mortgage Loans
1) ARMs were developed because lenders were tired of offering a limited selection of loan alternatives to borrowers.
Answer: FALSE
Difficulty: 1 Easy
Topic: ARMs
Accessibility: Keyboard Navigation
Gradable: automatic
2) ARMs help lenders combat unanticipated inflation changes, interest rate changes, and a maturity gap.
Answer: TRUE
Difficulty: 1 Easy
Topic: ARMs
Accessibility: Keyboard Navigation
Gradable: automatic
3) Characteristics of a PLAM include an increasing mortgage payment and an adjusting loan balance tied to an index.
Answer: TRUE
Difficulty: 1 Easy
Topic: PLAMs
Accessibility: Keyboard Navigation
Gradable: automatic
4) A major benefit of a PLAM is the mortgage payment increases closely follows borrower salary increases.
Answer: FALSE
Difficulty: 1 Easy
Topic: PLAMs
Accessibility: Keyboard Navigation
Gradable: automatic
5) PLAMs have been very popular with lenders.
Answer: FALSE
Difficulty: 1 Easy
Topic: PLAMs
Accessibility: Keyboard Navigation
Gradable: automatic
6) Lender’s can partially avoid estimating interest rates by tying an ARM to an interest rate index.
Answer: TRUE
Difficulty: 1 Easy
Topic: ARMs
Accessibility: Keyboard Navigation
Gradable: automatic
7) Negative amortization reduces the principal balance of a loan.
Answer: FALSE
Difficulty: 1 Easy
Topic: Negative amortization
Accessibility: Keyboard Navigation
Gradable: automatic
8) The floor of an ARM is the maximum reduction of payments or interest rates allowed.
Answer: TRUE
Difficulty: 1 Easy
Topic: ARMs
Accessibility: Keyboard Navigation
Gradable: automatic
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