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Question:

When the Federal Reserve (the Fed) increases the reserve requirements, referred to as tight money policy, it will ____

A decrease loan activity.
explanation

The tightening of money allows less money to be available for lending, resulting in a decrease of loan activity.

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Related Questions

One of the primary purposes of the Real Estate Settlement Procedures Act (RESPA) is to ____

provide consumers with enough information to enable them to effectively shop for settlement services.

While standardizing costs may seem likely a reasonable goal, the Real Estate Settlement Procedures Act (RESPA) is primarily intended to insure that consumers are not being charged hidden fees and have the information they need to make an educated decision between competing lenders.

In the context of mortgage finance, a beneficiary statement is made ____

by the lender to state the current balance required to pay off a real estate loan.

A lender (beneficiary) delivers a beneficiary statement to escrow as a statement of required funds to release the existing debt.

Compared to a loan insured by a government entity, a conventional loan has a ____

lower loan-to-value (LTV) ratio.

Conventional loan programs generally require a lower loan-to-value ratio.

An owner’s right to bring current any monetary or curable default stated in the notice of default (NOD) prior to five business days before the date of the sale is called ____

reinstatement.

When full payment of arrears and costs have been made, the loan has been reinstated, bringing the loan current and placing the borrower in good standing.

Which of the following is true regarding promissory notes?

They are the evidence of the debt.

Promissory notes are the evidence of debt. Trust deeds are security for debt. Though promissory notes and trust deeds are frequently used as the loan instruments, there are alternatives, such as a land sales contract. Note when the word “always” appears in an answer choice, one exception defeats its accuracy.

Lenders use a debt-to-income ratio (DTI) to determine ____

whether a borrower qualifies for a loan.

The debt-to-income ratio (DTI) sets the amount of debt a borrower can carry in relation to their income. A higher DTI represents a higher degree of risk of borrower default.

In real estate financing, the acronym “PMI” means ____

private mortgage insurance.

PMI is the acronym for private mortgage insurance paid to a private mortgage insurer. Alternatively, a mortgage insurance premium (MIP) is paid on a government-insured loan.

The beneficiary of a trust deed is most likely a ____

bank.

The beneficiary is the lender. Therefore, the only answer selection that applies is the bank.

The sale of property in which the amount of the net proceeds is less than the principal balance owed but is accepted by the lender in full satisfaction of the loan is called a (n) ____

short sale.

Short sales are those where a lender has accepted as full consideration sale proceeds that are short of the amount owed.

Lenders use a debt-to-income ratio (DTI) to determine ____

whether a borrower qualifies for a loan.

The debt-to-income ratio (DTI) sets the amount of debt a borrower can carry in relation to their income. A higher DTI represents a higher degree of risk of borrower default.

A(n) ____provision in a trust deed allows future loans on the property to have priority.

subordination clause

To subordinate a loan indicates the loan is to take a secondary position. In finance this implies that future loans will have a priority over the subordinated loan.

The beneficiary of a trust deed is most likely a ____

bank.

The beneficiary is the lender. Therefore, the only answer selection that applies is the bank.

The primary purpose behind the creation of the Federal National Mortgage Association (FNMA) was ____

to increase the money available to housing.

The Federal National Mortgage Association (FNMA) was created to repurchase qualifying loans, thus placing cash in the lenders’ hands to facilitate a continuing source of monies to loan.

The loan program that requires payment of mortgage insurance premiums (MIPs) and will make loan payments for up to six months if the borrower becomes involuntarily unemployed is called:

California Housing Finance Agency (CalHFA).

Only the California Housing Finance Agency (CalHFA) offers a loan program on these terms.