n 2008, foreclosures reached a record high. Which of the following is NOT a possible reason for foreclosures? A.Property values were increasing too fast. B.Many mortgages were initiated without a down payment. C.Many mortgages were initiated on secondary and investment homes. D.Some mortgages were adjustable rate mortgages which might have dramatically increased monthly payments for some.
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In 2008, foreclosures reached a record high. Which of the following is NOT a possible reason for foreclosures?
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- The figure below shows costs for a current home mortgage versus a refinanced home mortgage. Refinancing has initial costs, but results in a lower monthly payment. Which best describes the lines? ***SEE CHART**** The blue line is for refinancing, which starts cheaper but eventually is costlier The blue line is for refinancing, which starts costlier but eventually is cheaper The orange line is for refinancing, which starts cheaper but eventually is costlier The orange line is for refinancing, which starts costlier but eventually is cheaperEconomics (Dis the risk that a borrower will make additional principal payments on the loan and thus reduce the total amount of interest paid. Consider a traditional pass-through security and a collateralized mortgage obligation (CMO) with three tranches. Suppose 4% of the borrowers do not repay their loans. Which of the following statements are accurate? Check all that apply. a.All holders of pass-through will lose 4% of their money. b.Only the bottom tranche of CMO holders will lose 4% of their money. c.Only the top two tranches of CMO holders will lose their money. d. Only 4% of pass-through holders will lose their moneyConsider two local banks. Bank A has 100 loans outstanding, each for $1.3 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $130 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $☐ million. (Round to two decimal places.)
- Warning: Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced. Use the Estimation Rule for Long-Term Loans to estimate the monthly payment on a loan of $200,000 at an APR of 6% over a period of 25 years. The monthly payment is at least $You are a new loan officer with Alpha Mortgage, and the manager of the loan department has just presented a problem to you. He is unable to complete the APR calculation on an adjustable rate mortgage that a borrower applied for yesterday. The loan features initial payments based on a 5 percent rate of interest at loan closing. The current composite rate on the loan is 7 percent. Two discount points have been paid by the borrower. Any difference between borrower payments and the interest payment required at the composite rate will be accrued in the mortgage balance in the form of negative amortization. The mortgage amount desired by the borrower is $68,000 for a 30-year term. Required: Determine the APR, assuming that the ARM is made with a 2 percent annual and 5 percent over-the-life interest rate cap. (Do not round intermediate calculations.) APRThe amount of money (in billions of dollars) lent to customers with credit scores below 620 for subprime mortgages can be approximated by the function g(x) = 299.2e-0.15x, where x = 1 corresponds to the year 2001. (a) Find the value of subprime mortgage lending in 2011 for the described customer base. (b) If the trend continues, what is the first full year in which subprime lending falls below $4 billion? (a) Which of the following describes how to find the value of subprime mortgage lending in 2011 using the given information? Select the correct choice below and fill in the answer box to complete your choice. (Type an integer or a decimal.) A. To find the value of subprime mortgage lending in 2011, substitute g(x). for x and evaluate to find B. To find the value of subprime mortgage lending in 2011, find the intersection point of the graphs y=299.2e-0.15x and y=. The vahre of subprime mortgage lending in 2011 is represented by the y-coordinate. In 2011, the assets are about $ billion.…
- Consider two local banks. Bank A has 87 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $87 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)A few years down the road you have moved out, buying your own home. You decide to take another look at your finances. Your outstanding loan of $275 per month only has 8 payments left on it (out of the original 60) with an interest rate of 11.75%. a. What is the finance charge “f”? b. What is the unearned interest “u”? c. How much would it cost to pay it off on payment #53?1. When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero-percent financing or cashback deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $30,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest or a $3,000 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $27,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that saves you the most money.) How much would you save over the life of the loan by taking the option you chose? (Round your answer to the…
- he following is a definite statement that "lack of scheduling or poor scheduling costs money. Express this in terms of money lost due to interest payment on loans in the following amounts: a) $5 million b) $2.8 million c) $350,000 "you received 8% annual interest rates on the above loans and each of your projects was late by 5 months, please calculate the amount of simple interest you would have to pay in the following order: 1. Total interest per year 2. Total additional interest for the five months of extension • How much of extra interest would you pay for everyday of extension?Analysts and theorists have debated over the different factors that caused the subprime mortgage meltdown. According to your understanding of the crisis, which of the following factors led to the financial crisis? Check all that apply. A. Real estate appraisers and rating agencies were lax B. Credit default swaps clamied to insure CDOs C. The Fed kept interest rates low to encourage home ownership D. investors were fully aware of the risks involved, yet still settled with low returns.Complete the following table: (Use Table 15.1.) Note: Do not round intermediate calculations. Round your answers to the nearest cent. selling price down payment amount mortgage rate years monthly payment first payment broken down into interest first payment broken down into principal Balance at end of month $236,000 47,200 $188,800 7.00% 15 Monthly payment is NOT 1694.23 first payment broken down into interest is NOT 1,101.23 first payment principal is NOT 592.90 balance at end is NOT 188,207.10 TABLE 15.1 Amortization table (mortgage principal and interest per $1,000) Rate Interest Only 10 Year 15 Year 20 Year 25 Year 30 Year 40 Year 2.000 0.16667 9.20135 6.43509 5.05883 4.23854 3.69619 3.02826 2.125 0.17708 9.25743 6.49281 5.11825 4.29966 3.75902 3.09444 2.250 0.18750 9.31374 6.55085 5.17808 4.36131 3.82246 3.16142 2.375 0.19792 9.37026 6.60921 5.23834 4.42348 3.88653 3.22921 2.500 0.20833 9.42699 6.66789 5.29903 4.48617 3.95121 3.29778 2.625…