Fixed Income - Fixed Income Section 1
- Option : A
- Explanation : Barclays Bank has a claim against Sean for the shortfall between the amount of the mortgage balance outstanding and the proceeds received from the sale of the property. This indicates that the mortgage loan is a recourse loan. If Sean had a non- recourse loan, the bank would have only been entitled to the proceeds from the sale of the underlying property.
- Option : A
- Explanation : For a non-recourse loan, the bank can only look to the underlying property to recover the outstanding mortgage balance and has no further claim against the borrower. The bank is simply entitled to foreclose on the home and sell it.
- Option : A
- Explanation : In a non-recourse loan, the lender can only look to the underlying property to recover the outstanding mortgage balance and has no further claim against the borrower.
- Option : C
- Explanation : When the mortgage starts out with a fixed rate and then becomes an adjustable rate after a specified initial term, the mortgage is referred to as a hybrid mortgage. If the mortgage rate is fixed for some initial period and is then adjusted to a new fixed rate, the mortgage is referred to as a rollover or renegotiable mortgage.
70. Which of the following statements about convertible mortgages is most accurate?
- A
The mortgage rate is initially a fixed rate. At some point, the borrower has the option to convert into an adjustable rate for the remainder of the mortgage’s life.
- B
The mortgage rate is initially an adjustable rate. At some point, the borrower has the option to convert into a fixed rate for the remainder of the mortgage’s life.
- C
The mortgage rate is initially either a fixed rate or an adjustable rate. At some point, the borrower has the option to convert into a fixed rate or an adjustable rate for the remainder of the mortgage’s life.
- Option : C
- Explanation : In a convertible mortgage, the mortgage rate is initially either a fixed rate or an adjustable rate. At some point, the borrower has the option to convert into a fixed rate or an adjustable rate for the remainder of the mortgage’s life.
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