Chapter 4: Mortgage Product Flashcards by Kim L

Which of the following is true of a Package Mortgages?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. can be either amortizing or non-amortizing, and the lien includes personal property as well as real property
C. A revolving credit in which the home serves as collateral is known as
D. mortgage in which the payment starts low and increases over time.

A Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.

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A VA appraisal is known as a:
A. Qualified appraisal
B. Certificate of reasonable value 
C. Certificate of reasonable value
D. VA designated market appraisal

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Who determines the underwriting guidelines for conforming loans?
A. Federal Housing Finance Agency
B. Federal Trade Commission
C. US Department of Housing and Urban Development
D. Fannie Mae

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A combination of a loan in which payments continue for the life of the borrower as long as it remains the principal residence added to a line of credit is known as
A. Tenure
B. Term 
C. Modified Tenure
D. Modified Term

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VA appraisal is known as a:
A. CRV 
B. Veteran's appraisal report
C. Fannie Mae 1025
D. AVA

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Which of the following is an example of a subprime loan?

2/28
3/1
5/1
360/180

2/28

A 2/28 adjustable-rate mortgage (2/28 ARM) is a type of 30-year home loan that has an initial two-year fixed interest rate period. After this 2-year period, the rate floats based on an index plus a margin.

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Which is true of a term loan?
A. It is non-amortized 
B. It is fully amortized 
C. It is a negative amortization 
D. Partially Amortized

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When must borrowers be notified of an ARM rate changes before initial reset?
A. 30 days
B. 60 days
C. Three Months
D. Six Months

Answer: D

Borrowers must be notified of an ARM rate change six months before the initial reset.

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Fannie Mae does NOT require:
A. 6 months of bank statements 
B. Verifiable funds
C. 2 years of addresses
D. Stable 2 year work history

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Loan Prospector can NOT be used for which type of loans?
A.  Conventional
B.  VA
C.  FHA
D.  Commercial

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What is the maximum allowable amount of VA seller concessions? Mark one answer:
A. 2%
B. 3%
C. 4% 
D. 5%

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The automated underwriting systems can NOT be used for what types of loans?
A. FHA
B. VA
C. Conventional
D. Jumbo

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Which of the following is a fully amortized loan?
A. Bridge Loan
B. 360/180 Loan
C. Term Loan
D. Fixed Rate Loan

Answer D

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Which of the following is by definition a conventional non-conforming mortgage?
A. a 30-year fixed-rate first mortage for $350,000 issued by a private lender for a single family home in Ohio
B. a 15-year adjutable rate first mortgage for $600,000 issued by a private lender for a single family home in Alaska
C. a 30-year fixed-rate first mortgage fur issued by a private lender for a single family home in Texas
D. 30-year fixed-rate first mortgage for $150,000 issued by the FHA for a single family home in North Carolina

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Which of the following is not true of jumbo mortgages?
A. They usually require larger down payments.
B. They played a disproportionate role in the housing crisis.
C. They usually have higher interest rates.
D. In the case of default, the underlying property should resell faster than the average property.

Answer D

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A type of combination loan in which borrowers select the desired number of monthly payments and line of credit is known as
A. Alt-A loan 
B. Hybrid 
C. Modified Tenure
D. Modified Term

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Borrowers must be notified of an ARM rate change how many months before the initial reset?
A. 1
B. 3 
C. 6 
D. 9

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—-Any loan that meets the product feature requirements and is eligible for purchase, guarantee, or insurance by a FNMA, FHLMC, FHA, VA, or USDA is QM regardless of the debt-to-income ratio.
A. General Definition QM Loans
B. Temporary QM Exclusion for AUS Approval
C. Small Creditor QM Loans
D. Not a QM loan

Answer B

Temporary QM Exclusion for AUS Approval: Any loan that meets the product feature requirements and is eligible for purchase, guarantee, or insurance by a FNMA, FHLMC, FHA, VA, or USDA is QM regardless of the debt-to-income ratio.

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What type of mortgage has a fixed interest rate and increasing payments?
A.  Adjustable rate mortgage
B.  Package mortgage
C.  Growing equity mortgage
D.  Wraparound mortgage

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Which of the following reverse mortgage does payments continue for the life of the borrower as long as it remains the principal residence?
A. Tenure
B. Term
C. Line of Credit
D. Modified

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At what LTV is a mortgage servicer required to remove PMI on a “high-risk” loan, assuming the borrower's loan is current?
A. 22%
B. 80%
C. 78% 
D. 77%

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Which if true of Home equity Line of Credit?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known
D. mortgage in which the payment starts low and increases over time.

Answer C
A Home Equity Line of Credit is a form of revolving credit in which the home serves as collateral. The amount of the available credit line usually depends on the borrower’s equity in the home (appraised value – loan balance = borrower’s equity).

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Fannie Mae will not purchase a mortgage secured by a:
A. Urban area residential property
B. Orchard 
C. Rural area residential property
D. Suburban area residential property

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A USDA loan has:
A. 100% financing 
B. No income limits
C. A 5% late fee
D. Has no geographical restrictions

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``` What type of mortgage has a fixed interest rate and increasing payments? A. Adjustable rate mortgage B. Package mortgage C. Growing equity mortgage D. Wraparound mortgage ```

``` The FHA is an agency within: A. Department of the Veteran's Affairs B. Department of HUD C. Department of Fannie Mae D Private organization ```

``` Which is true of a balloon mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

``` Which of the following is NOT a benefit of an FHA loan? A. Favorable interest rates B. Low down payment C. No monthly mortgage insurance D. Assumable ```

``` A loan in which interest is subsidized for a stated period of time is a: A. Buy-down mortgage B. Term mortgage C. Bridge loan D. Collateral loan ```

Which of the following is required for an FHA Streamline refinance loan? A. Credit verification B. New appraisal C. Current on mortgage payments for the last three months D. Income and debt verification

``` What is the minimum down payment usually required for non-owner occupied rental properties? A. 5% B. 10% C. 15% D. 20% ```

``` Borrower’s equity equals A. Appraised value – loan balance B. Appraised value – down payment C. Loan balance + down payment D. Loan balance – down payment ```

A | Market Value minus amount owed do not get confused with assets

``` Loan Prospector can NOT be used for which type of loans? A. Conventional B. VA C. FHA D. Commercial ```

``` A lender won't lose money funding what type of loan? FHA VA Conventional Construction ```

FHA

``` What type of loan has a non-refundable funding fee? conventional loan FHA loan subprime loan VA loan ```

VA Loan

``` The requirement for private mortgage insurance is generally discounted when the loan-to-value ratio falls below: A. 20% B. 50% C. 80% D. 90% ```

``` Which of the following is a non amortized loan? A. Interest Only B. 360/180 Loan C. Reverse Mortgage D. Fixed Rate Loan ```

A A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.

Private Mortgage Insurance is required for: A. FHA loans B. VA loans C. Jumbo loans D. Conventional loans when there is less than a 20% down payment

``` How much IPC is a borrower allowed if the loan is conventional with LTV of 95%? A. 3% B. 5% C. 6% D. 9% ```

Answer is A 3% LTV/CLTV Greater than 90% = 3%, LTV/CLTV = 75-90% = 6%, LTV/CLTV = 75% or less= 9%

``` How much IPC is a borrower allowed if the loan is conventional with LTV of 85%? A. 3% B. 5% C. 6% D. 9% ```

Answer is C 6% LTV/CLTV Greater than 90% = 3%, LTV/CLTV = 75-90% = 6%, LTV/CLTV = 75% or less= 9%

Which of the following is true of a wrap around mortgage? A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? C. A revolving credit in which the home serves as collateral is known as D. mortgage in which the payment starts low and increases over time.

Answer B On a Wrap-around-mortgage, The original loan cannot have adue-on-sale clause since the seller will continue to make these payments after title is transferred to the new purchaser.

How much hazard insurance does FNMA require on a property? A. 80% of the value of the property B. 100% of the replacement cost C. 100% of the appraised value D. 100% of the lesser of the loan amount or the cost to restore the improvements to the property

Which of the following is true of qualified mortgages? A. $3,297 on $109,898 B. $3,297 on loan between $65,939 - $109,898 C. $3,297 on loan between $13,737-21,980 D. $3,297 on loan under $ 13,737

Answer B $3,297 on loan between $65,939 - $109,898 ``` 3% on $109,898 loan or above $3,297 for a loan amount between $65,939 - $109,898 5% $21,980 - $65,939 $1,099 $13,737 - $21,980 8% less than $13,737 ```

``` FHA loans are: A. Partially guaranteed B. 100% insured C. Exempt D. Entitled ```

``` Which of the following require title insurance to equal full value of the house at the time of closing? A. Bridge Loan B. Reverse Mortgage C. Interest Only D. Fixed Rate Loan ```

Answer: B | Reverse mortgage title insurance must equal the full value of the house at the time of closing.

``` Which federal agency guarantees mortgage backed securities that are based on FHA and VA loans? A. FHA B. VA C. Ginnie Mae D. Fannie Mae ```

A co-borrower whose income is used to qualify must sign the: A. Mortgage B. Note C. Mortgage and the note D. They are not required to sign anything

C Co-borrower: A person that signs on a loan with the applicant. The co-borrower does receive ben-efits from the loan. Both the co-borrower and the borrower are equally responsible for repaying the debt.

Private Mortgage Insurance is required for: A. FHA loans B. VA loans C. Jumbo loans D. Conventional loans when there is less than a 20% down payment

Which of the following is true of qualified mortgages? A. 8% on $109,898 B. 8% on loan between $65,939 - $109,898 C. 8% on loan between $13,737-21,980 D. 8% on loan under $ 13,737

Answer D 8% on loan under $ 13,737 ``` 3% on $109,898 loan or above $3,297 for a loan amount between $65,939 - $109,898 5% $21,980 - $65,939 $1,099 $13,737 - $21,980 8% less than $13,737 ```

``` Which of the following is a common index used in ARMs: A. CD rate B. The London Inter-Bank Offered Rate C. The Chase Fluctuating Index D. The New York Times Index ```

``` If the Gross Rent Multiplier (GRM) decreases, the property value: A. Increases B. Decreases C. Does not change D. Can increase or decrease ```

Answer C GRM = Price/Gross Annual Rent

Payment shock is defined as: A. The reaction to learning the payment amount of the loan one is considering B. The difference between the proposed loan's P&I and PITI payments C. The difference between the borrower's current housing expense and the proposed housing expense through the loan they're considering D. The difference between the borrower's current back-end ratio and the back-end ratio they'd endure if they pursued the loan they're considering

``` Conforming loans follow the underwriting guidelines of Mark one answer: A. Fannie Mae and Freddie Mac. B. FHA and VA. C. Freddie Mac and Ginnie Mae. D. Ginnie Mae and HUD. ```

``` A mortgage on personal property is a(n): A. Chattel mortgage B. Reverse mortgage C. Ad valorem mortgage D. Participation mortgage ```

``` A loan that can be amortizing or non-amortizing, and the lien includes personal property as well as real property is called a A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: B Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.

``` VA loans are: A. Partially guaranteed B. Insured C. Exempt D. Entitled ```

``` An ARM was locked for three years and began adjusting two years ago. It is about to adjust for the third time. What limits the amount the interest rate will increase on this movement? A. Periodic cap B. Initial Cap C. Payment cap D. Starter cap ```

``` Which of the following is correct for an adjustable-rate mortgage? A. Index - margin = fully indexed rate B. Margin - index = fully indexed rate C. Index + margin = fully indexed rate D. Index - margin = fully indexed rate ```

``` MIP is associated with what type of loan? A. FHA B. VA C. Interest-only D. Conventional ```

``` Fannie Mae was established in: Mark one answer: A. 1914 B. 1938 C. 1962 D. 1980 ```

``` Which is true of a fixed rate loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

Each of the following are key differences found in the FHA loan program when compared to the conforming, conventional loan program except: A. The maximum loan amount is determined by the county in which the property is located B. More liberal acceptance of borrowers with credit history problems C. Down payments of as low as 3.5% D. Mortgage insurance premium is require

Fannie Mae requires a non-qualifying spouse whose income is not used in qualifying to sign the: A. Mortgage B. Note C. Mortgage and the note D. They are not required to sign anything

``` The lowest possible interest rate for an ARM loan is known as the: A. Floor B. Basin C. Basement D. Ground ```

``` High-cost home loans require a borrower to: A. Receive quotes from multiple lenders B. Receive homeownership counseling C. Receive free flood insurance D. Based on the performance of the loan ```

``` Ginnie Mae does: A. Buy loans B. Sell loans C. Fund loans D. Guarantee loans ```

Which of the following is true of qualified mortgages? A. 5% on $109,898 B. 5% on loan between $65,939 - $109,898 C. 5% on loan between $21,980 - $65,939 D. 5% on loan between $13,737 - $21,980

Answer C 5% $21,980 - $65,939 ``` 3% on $109,898 loan or above $3,297 for a loan amount between $65,939 - $109,898 5% $21,980 - $65,939 $1,099 $13,737 - $21,980 8% less than $13,737 ```

``` What is the FHA minimum down payment? A. $0 B. 3.5% C. 5% D. 10% ```

``` Which lien will most likely have the lowest lien position? A. Property tax B. Senior mortgage C. Junior mortgage D. IRS Tax Lien ```

D Typical lien priority and order of payoff areas follows: 1. Government expenses of sale. 2. Delinquent property taxes. 3. Special assessment liens. 4. Federal estate tax lien. 5. 1st mortgage (Senior Mortgage). 6. 2nd mortgage (Junior Mortgage). 7. 3rd mortgage (Junior Mortgage). Unlimited possible number of additional junior mortgages, in order ofrecording time. 8. IRS Tax Liens and other creditors.

``` A VA mortgage has all the following features EXCEPT: A. It is partially guaranteed B. It has a mortgage insurance premium C. It has a 4% late fee D. No required down payment ```

``` A reverse mortgage is an example of: A. Positive amortization B. Negative amortization C. Lender error D. Bridge loan ```

``` A balloon amortized over 30 years with a lump-sum payment due after 15 years is known as A. Bridge Loan B. 360/180 Loan C. ARM loan D. Fixed Rate Loan ```

Answer: B | A 360/180 loan is a balloon amortized over 30 years with a lump sum payment due after 15 years.

Which of the following is true regarding ATR standards for consideration of borrower repayment ability? A. General ATR standards require a consideration of DTI ratio and residual income; residual income must equal at least the monthly loan payment amount, plus 5% B. General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 60% C. General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income D. General ATR standards require a consideration of DTI ratio residual income; the DTI ratio threshold is 43%

``` Which of the following is a fully amortized loan? A. Bridge Loan B. 360/180 Loan C. Term Loan D. Fixed Rate Loan ```

``` The maximum FHA seller concession is: A. 3% B. 4% C. 6% D. 9% ```

``` Which of the following can be either amortizing or non-amortizing? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: B Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.

What are the terms of the "cooling off" period if a loan falls under HOEPA? - Three business days prior to closing - Three business days after closing - Seven business days prior to closing - 30 business days after closing

Three business days prior to closing

``` Which is true of a balloon mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

The law requires that the VA be paid a funding fee on guaranteed loans. The only exceptions are loans made to all of the following except: a. Veterans receiving compensation for service-connected disabilities b. Veterans who would be entitled to receive compensation if they were not receiving military retirement pay c. Loans made to surviving spouses of veterans who died in service or from service-connected disabilities d. Veterans who provide more than 20 % down payment toward the purchase of the property

Which of the following loan types indicates that the borrower is obtaining a second mortgage and making a down payment? (a) 3/1 ARM (b) 30 year fixed rate with a balloon feature (c) An 80-10-10 loan (d) A bridge loan

C Also known as piggyback

``` A balloon amortized over 30 years with a lump-sum payment due after 15 years is known as A. Bridge Loan B. 360/180 Loan C. ARM loan D. Fixed Rate Loan ```

Answer: B | A 360/180 loan is a balloon amortized over 30 years with a lump sum payment due after 15 years.

``` Which of the following has a maximum loan value depending on county? A. Conventional B. FHA C. USDA D. VA ```

Answer B | FHA loans have a maximum loan amount in each county, which does not include the Up Front Mortgage Insurance Premium.

FHA maximum loan amounts: A. Are set by the U.S. Department of State B. Do not include the Up Front Mortgage Insurance Premium C. Are set at $500,000 D. Are set at $1,000,000

Answer B | FHA loans have a maximum loan amount in each county, which does not include the Up Front Mortgage Insurance Premium.

``` Which is true of HELOC? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

A. HELOC falls under open end non-amortized Loan

``` Who does Fannie Mae hold responsible for the quality of an appraisal? A. Appraiser B. Real estate agent C. Lender D. Title company ```

``` *** Which of the following CANNOT contribute money towards theborrower’s down payment: A. Employer B. Real estate agent C. Domestic partner D. Borrower’s relative ```

B | Those who can contribute on IPC include family relatives, employer, charity, domestic partners

Which of the following is true of qualified mortgages? A. 3% on $109,898 B. 3% on loan between $65,939 - $109,898 C. 3% on loan between $21,980 - $65,939 D. 3% on loan between $13,737 - $21,980

Answer A 3% on $109,898 loan or above $3,297 for a loan amount between $65,939 - $109,898 5% $21,980 - $65,939 $1,099 $13,737 - $21,980 8% less than $13,737 Loan term not >30 yrs (except in high cost areas)

``` If an ARM loan started at 3%, was locked for five years and then adjusted annually, how many moves will it have made as it moves into the seventh year? A. Five B. Two C. One D. Impossible to determine ```

``` Which of the following is used to calculate how much a borrower can borrow for reverse mortgage? A. Age, Interest Rate, Value of Home B. Age, years till death, Appraisal C. Age, Income, Stability D. Age, Principal balance and Income ```

Answer: A Lenders calculate how much a borrower is authorized to borrow overall, based on age, the interest rate, and the value of the home.

``` What is the minimum down payment for a USDA loan? A. $0 B. 3.5% C. 5% D. 10% ```

``` A fully amortized loan with terms of 15-30 years is known as A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Fixed Rate Loan ```

Answer D A Fixed-Rate Mortgage is one example of a fully amortized loan. During the first few years of the loan, most of the monthly P & I is going toward paying the interest. Payments during the last few years are almost entirely principal repayment

``` Which of the following is true when purchasing a non owner occupied rental property? A. Requires LP B. Requires manual underwriting C. Require DE D. Requires a down payment ```

Answer B

``` A funding fee is required for a: A. FHA loan B. VA loan C. Jumbo loan D. Conventional loan ```

``` Which of the following is usually not assumable? A. Conventional Loan B. FHA C. VA D. USDA ```

Answer A | Most conventional mortgages are not assumable; they do have a due-on-sale clause.

``` A revolving credit in which the home serves as collateral is known as A. Home Equity Line of Credit B. Growing Equity Mortgage (GEM) C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: A A Home Equity Line of Credit is a form of revolving credit in which the Home serves as collateral. The amount of the available credit line usually depends on the borrower’s equity in the home (appraised value – loan balance = borrower’s equity).

``` A reverse mortgage is an example of: A. Positive amortization B. Negative amortization C. Lender error D. Bridge loan ```

``` Which of the following requires the use of an approved appraiser? A. Conventional B. FHA C. USDA D. VA ```

Answer: B | FHA loans require the use of an FHA-approved appraiser.

Which of the following is true of reverse mortgages? A. Reverse mortgage interest can be fixed or an ARM that adjusts annually B. Reverse mortgage interest can be fixed or interest Only C. Reverse mortgage interest cannot be fixed D. Reverse mortgages can be a balloon

Answer A Reverse mortgage interest can be fixed or an ARM that adjusts annually with a 2% annual cap and a 5% lifetime cap. Lenders may also offer an ARM that adjusts monthly with only a lifetime cap. The type of interest cannot be changed after closing,

``` Interest rates are set by: A. FHA B. Lenders C. VA D. Fannie Mae ```

Which of the following is true of loan that meets the product feature requirements with a debt-to-income ratio of 43% or less? A. General Definition QM Loans B. Temporary QM Exclusion for AUS Approval C. Small Creditor QM Loans D. Not a QM loan

Answer A General Definition QM Loans: Any loan that meets the product feature requirements with a debt-to-income ratio of 43% or less is a QM.

Which of the following is true of Graduated Payment Mortgages? A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? C. A revolving credit in which the home serves as collateral is known as D. mortgage in which the payment starts low and increases over time.

Answer D A Graduated Payment Mortgage (GPM) is a mortgage in which the payment starts low and increases over time.

``` A loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount is known as a? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: A A Buy-Down Mortgage is a loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.

For a loan to be considered a QM loan, it must meet certain requirements. Which of the following is not one of those requirements? - The loan cannot have any negative amortization - The loan cannot have an interest only payment - The loan cannot have a balloon payment - The loan cannot have a prepayment penalty

he loan cannot have a prepayment penalty

``` PMI on an FHA loan must be kept in place: A. For at least three years B. For at least five years C. FHA loans do not require PMI D. Until the LTV reaches 80% ```

``` Which is true of reverse mortgages? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

Construction loans are typically short term with a maximum of one year and have variable rates that move up and down with the: (a) One Year Constant Maturity Treasury Rate. (b) 11th District Cost of Funds Index. (c) London Interbank Offered Rate. (d) Lender's Prime Rate plus a margin.

``` Mortgage Insurance Premium is required on: A. FHA loans B. VA loans C. Jumbo loans D. Conventional loans ```

FHA maximum loan amounts: A. Are set by the U.S. Department of State B. Do not include the Up Front Mortgage Insurance Premium C. Are set at $500,000 D. Are set at $1,000,000

Which of the following factors deemed customers to be a higher credit risk according to the Statement of Subprime Lending? A. Bankruptcy within the previous seven years B Debt-to-income ratios of higher than 36% C. Two or more 30-day delinquencies within the previous 12 months D. Foreclosure within the previous 36 months

``` What protects lenders against losses when a borrower defaults on a loan? A. Transactional account B. Mortgage insurance C. Deed restrictions D. Title insurance ```

``` Freddie Mac was originally known as: A. Federal Home Loan Mortgage Corporation B. Federal National Mortgage Association C. Fair Discount Interest Rates D. Free Certificate of Deposits ```

A higher-priced home loan is one that has: A. More than 5 points in fees and points B. More than 8 points in fees and points C. APR exceeds the average prime rate by at least 1.5% for first-lien loans D. Interest rate is higher than 10%

Answer C

``` Borrowers must be notified of an ARM rate change how many months before the initial reset? A. 1 B. 3 C. 6 D. 9 ```

C | Borrowers must be notified of an ARM rate change six months before theinitial reset.

``` What is the adjustable number used to compute the interest rate on an ARM called? A. prepayment B index C. margin D. cap ```

``` The lowest possible interest rate for an ARM loan is known as the: Mark one answer: Floor Basin Basement Ground ```

Floor

``` Which of the following is expressed as basis points in an adjustable rate mortgage. A. Index B. Margin C. Fully indexed rate D. Term ```

B. The margin is expressed in basis points where 100 points = 1%.

``` Which of the following is a non amortized interest only loan? A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Term Reverse Mortgage ``` .

Answer: C | A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment

On a reverse mortgage, how much of the initial payment limit calculation is allowed to be withdrawn? A. 60% of initial principal limit or 70% if enough to pay off existing mortgage B. 60% of initial principal limit or 100% if enough to pay off existing mortgage C. 80% of initial principal limit or 70% if enough to pay off existing mortgage D. 80% of initial principal limit or 78% if enough to pay off existing mortgage

Answer: A 60% of the initial principal limit OR Enough to pay off an existing mortgage (if it’s more than the 60%, plus 10% of the principal limit.

Which of the following is NOT true of high-cost home loans? A. Borrower must have documented ability to pay the loan B. Borrower must have a minimum credit score of 650 C. Prepay penalties are prohibited D. Most balloon payments are prohibited

All of the following are true of FHA fixed-rate loans except: A. They're available in 15- and 30-year terms B. They require upfront MIP on all loans C. Borrower must make at least a 3.5% investment D. The borrower is only required to carry MIP until the loan's LTV reaches 78%

Which of the following is true of qualified mortgages? A. $1,099 on $109,898 B. $1,099 on loan between $65,939 - $109,898 C. $1,099 on loan between $13,737-21,980 D. $1,099 on loan under $ 13,737

Answer C ``` 3% on $109,898 loan or above $3,297 for a loan amount between $65,939 - $109,898 5% $21,980 - $65,939 $1,099 $13,737 - $21,980 8% less than $13,737 ```

``` The factors used to calculate how much one can borrow in a reverse mortgage is known as A. TIL Disclosures B. Partial Payment Limit C. initial principal limit D. Initial payment limit ```

Answer C | This number is known as the initial principal limit, and it increases every year of the loan.

Who of the following is in violation of the Section 8 provisions of RESPA? - An attorney who also earns fees for performing multiple settlement services - An employer who pays her employees for referrals - A real estate broker who pays a cooperating real estate broker for a referral - An MLO who leases office space in a real estate office at an above market amount

An MLO who leases office space in a real estate office at an above market amount

``` mortgage lien on an entire tract of land is known as a: A. Buy-down mortgage B Chattel mortgage C. Blanket mortgage D. Pillow mortgage ```

What is true of FNMA and Freddy Mac Loan? A. They are assumable and do not have a due n sale clause B. are not assumable; they do have a due-on-sale clause. C. They are Partially assumable D. They have no due-on-sale clause

Answer B | Most conventional mortgages are not assumable; they do have a due-on-sale clause.

FHA allows loans on all property types except: - non-owner occupied. - manufactured housing. - 2-4 Units. - condominiums.

non-owner occupied.

A Section 203K loan is a: - FHA program - A reverse mortgage - A VA program - A Fannie Mae program

FHA

Which of the following allows a prepayment penalty during the first three years after the loanis consummated? (a) Safe Harbor Qualified Mortgage Loan (b) FHA Mortgage Loan (c) Home Ownership and Equity Protection Act Loan (d) Higher-Priced Mortgage Loan

Answer C

``` Which of the following is a negative amortized loan? A. Balloon loan B. Reverse Mortgage C. Term Loan D. Fixed Rate Loan ```

Answer B

``` Which of the following is not involved in the bundling of mortgages for sale in the secondary market? A. Private-label investors B. FNMA C. FHLMC D. FHA ```

``` Fannie Mae's automated underwriting system is known as: Mark one answer: A. Fannie Mannie B. Software Helper C. Desktop Underwriter D. Loan Prospector ```

The USDA's Section 502 Single Family Guaranteed Rural Housing Loan Program (SFHGLP) is available in: (a) areas where the median income is below $35,000. (b) agricultural communities only. (c) areas rural in character with a population of less than 10,000. (d) areas contained within Metropolitan Statistical Areas and has a population above 10,000 butbelow 20,000.

``` A reverse loan that borrowers select the desired number of monthly payments is A. Tenure Reverse Mortgage B. Tenure Mortgage C. Term Mortgage D. Term Reverse Mortgage ```

Answer D.

``` Which of the following is a seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: D On a Wrap-around-mortgage, The original loan cannot have adue-on-sale clause since the seller will continue to make these payments after title is transferred to the new purchaser.

``` The factors used to calculate how much one can borrow in a reverse mortgage is known as A. TIL Disclosures B. Partial Payment Limit C. initial principal limit D. Initial payment limit ```

Answer C | This number is known as the initial principal limit, and it increases every year of the loan.

``` How much IPC is a borrower allowed if the loan is conventional with LTV of 73%? A. 3% B. 5% C. 6% D. 9% ```

Answer is D 9% LTV/CLTV Greater than 90% = 3%, LTV/CLTV = 75-90% = 6%, LTV/CLTV = 75% or less= 9%

An IRRRL is what type of loan? - A VA streamline loan - An FHA streamline loan - A USDA purchase loan - A VA cash-out loan

A VA streamline loan

``` A mortgage in which the payment starts low and increases over time. A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: C A Graduated Payment Mortgage (GPM) is a mortgage in which the payment starts low and increases over time.

Which of the following are Reverse mortgage loans? A. GPM, GEM, 360/180, Tenure, Modified B. GPM, GEM, 360/180, Tenure, Term C. Tenure, Term, Line of Credit, Modified Tenure and Modified Term D. Tenure, Term, Line of Credit, Modified Tenure and Balloon

``` An FHA mortgage: A. Is 100% insured B. Is partially guaranteed C. Has a 5% late fee D. Is not assumable ```

``` A term mortgage is NOT: A. Non-amortizing B. Interest only C. Satisfied by a final lump sum payment D. Fully amortized ```

``` Which of the following is a negative amortized loan? A. Balloon loan B. Reverse Mortgage C. Term Loan D. Fixed Rate Loan ```

Which of the following is NOT a feature of a qualified mortgage? Mark one answer: A Positive amortization B. 30 year maximum loan term C. Maximum debt-to-income ratio of 50 percent D. No interest-only periods

``` Which is true of Term Mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

Answer A | A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.

``` The late fee for a conventional loan is: A. 3% of principal and interest B. 4% of principal and interest C. 5% of principal and interest D. 10% of principal and interest ```

``` A VA appraisal is known as a: A. Certificate of Eligibility B. Certificate of Occupancy C. Certificate of Reasonable Value D. Certificate of Domicile ```

``` The maximum VA seller concession is: A. 3% + standard closing costs B. 4% + standard closing costs C. 6% + standard closing costs D. 9% + standard closing costs ```

``` A conventional mortgage does NOT have a: A. 3% minimum down payment B. 5% late fee C. Due-on-sale clause S. Borrower income limit ```

``` The maximum FHA seller concession is: A. 3% B. 4% C. 6% D. 9% ```

C LTV/CLTV Greater than 90% = 3%, LTV/CLTV = 75-90% = 6%, LTV/CLTV = 75% or less= 9% FHA = 6% VA = 4% RHS = No Max

On a reverse mortgage, what type of disclosure is required? A. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, CRV Certification B. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, Appraisal Certification C. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Counseling D. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Certification

Answer D A reverse mortgage requires the following disclosure: Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Certification

``` A loan in which interest is subsidized for a stated period of time is a: A. Buy-down mortgage B. Term mortgage C. Bridge loan D. Collateral loan ```

Answer A.

What agency became the conservator of Fannie Mae and Freddie Mac? A. Federal Housing Finance Agency B. Consumer Financial Protection Bureau C. US Department of Housing and Urban Development D. Internal Revenue Service

``` A loan with a fixed period at the start that will adjust regularly after a certain period is commonly referred to as a(n): A. Non traditional ARM B. Hybrid ARM C. Traditional ARM D. Option ARM ```

``` Which has the superior lien position? A. Senior mortgage B. Junior mortgage C. Mortgages under $250,000 D. First signed mortgage ```

Which of the following is true of Buy-Down Mortgages? A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? C. A revolving credit in which the home serves as collateral is known as D. loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.

Answer D A Buy-Down Mortgage is a loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.

``` The maximum term for a FHA loan is: A. 15 years B. 30 years C. 40 years D. 50 years ```

``` A conventional mortgage does NOT have a: A. 3% minimum down payment B. 5% late fee C. Due-on-sale clause D. Borrower income limit ```

``` What does a loan originator use to determine the estimated value of aproperty based on an analytical comparison of similar property sales? A. An appraisal B. A market survey C. An area survey D. A cost-benefit analysis ```

Answer A

``` If a mortgage is secured by the primary residence. Fannie Mae allows how many total properties to be financed? A. No limit B. 3 C. 5 D. 10 ```

``` A mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly is known as A. Home Equity Line of Credit B. Growing Equity Mortgage (GEM) C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage ```

Answer: B Growing Equity Mortgage (GEM) has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly.

``` The late fee for a VA loan is: A. 3% of principal and interest B. 4% of principal and interest C. 5% of principal and interest D. 10% of principal and interest ```

Which of the following is a government sponsored entity? - Fannie Mae - Ginnie Mae - FHA - The USDA

Fannie Mae is sponsored by FHFA

``` APOR stands for: A. Average Price of Ratios B. Annual Percentage of Refinancing C. Average Prime Offer Rate D. Annual Percentage of Reimbursement ```

Which of the following is required for an FHA Streamline refinance loan? Mark one answer: A. Credit verification B. New appraisal C. Current on mortgage payments for the last three months D. Income and debt verification

Answer C

``` Which of the following is partially amortized? A. Balloon loan B. Interest Only Loan C. Reverse Mortgage D. Fixed Rate Loan ```

Answer: A Balloon Mortgage is partially amortized. Monthly payments are usuallycalculated as if it was a 30-year term but the balance of the loan will come due before that time and has to be paid in one lump sum; 5, 7, and 10-year terms are popular.

``` Which of the following is a non amortized loan? A. Balloon loan B. 360/180 C. Term Loan D. Fixed Rate Loan ```

Answer C | A term mortgage also known as an interest Only mortgage is non-amortized.

``` Which of the following increases cap rate? A. Lower purchase price B. Increase purchase price C. Decrease cash flow D. Increase interest rate ```

Answer A

``` The Fannie Mae Total Obligations Ratio is: A. 10% V. 26% C. 36% D. 46% ```

``` Which types of loans are meant for rural areas? A. VA B. FHA C. USDA D. RAL ```

``` Placing a subordinate loan behind a conventional first mortgage to eliminate the need for PMI when the applicant has less than 20% to put down on a home purchase is known as: A. Circumventing the system B. PMI avoidance C. Piggyback financing D. Loan subordination ```

``` Which is true of a fixed rate loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

``` The maximum term for a FHA loan is: A. 15 years B. 30 years C. 40 years D. 50 years ```

``` What type of mortgage is not guaranteed or insured by the government? A. FHA B. VA C. USDA D. Conventional ```

``` The ability-to-repay regulation applies to: A. Equity lines of credit B. Reverse mortgages C. Investment home purchases D. Construction loans ```

``` Lenders must maintain an escrow account for higher-priced mortgages fora minimum: A. 1 year B. 3 years C. 5 years D. No escrow account is required ```

C HPML Escrow = 5 years

the disadvantage of holding an interest in property as a leasehold instead of holding it in fee simple is that: a) A leasehold agreement cannot be sold b) Under a leasehold agreement, the consumer may not occupy the property as a renter c) A leasehold agreement can only secure an interest in property for a short period of time d) Holding property as a leasehold does not give the consumer unconditional power of disposition of the property during his/her life and the ability to pass the property onto his/her heirs

d) Holding property as a leasehold does not give the consumer unconditional power of disposition of the property during his/her life and the ability to pass the property onto his/her heirs

Which of the following best describes the types of conventional mortgages that are available? A. Prime loans and subprime loans B. Forward mortgages and reverse mortgages C. Conforming loans and nonconforming loans D. Traditional mortgages and nontraditional mortgages

Caps on ARMs: A. Are mandatory for any lender offering ARM products B. Prevent a lender from calling a loan due if there is delinquency C. Limit the amount the interest rate or payment may change D. Limit whether a loan is eligible for prepayment

``` The Federal Home Loan Mortgage Corporation is also known as: A. Ginnie Mae B. Freddie Mae C. Freddie Mac D. Fannie Mae ```

``` Which of the following is NOT a fully amortized loan? A. Term mortgage B. Fixed-rate mortgage C. Adjustable-rate mortgage D. Bi-weekly mortgage ```

``` Fannie Mae does NOT require: A. 6 months of bank statements B. Verifiable funds C. 2 years of addresses D. Stable 2 year work history ```

Answer A | Fannie Mae requires Verifiable funds, 2 years address and stable 2 year work history

Which home buyer would benefit most from a balloon loan? A. A buyer who plans on selling the home before the balloon payment is due. B. A buyer who is afraid he may fall behind on his payments. C. A buyer who plans on staying in the home the full 30 years that the loan payment rate is based on. D. A buyer who feels he cannot afford an ARM if the rates increase beyond his means.

``` Which of the following is a non amortized interest only loan? A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Term Reverse Mortgage ```

Answer C | A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.

``` UFMIP is associated with what type of loan? FHA VA Interest-only Conventional ```

FHA

``` A VA appraisal is known as a: A. Qualified appraisal B. Certificate of reasonable value C. Certificate of market value D. VA designated market appraisal ```

A graduated payment mortgage: A. Is for college graduates only B. Has payments that start low and increase over time C. Has payments that start high and decrease over time D. Is only for borrowers with a minimum age of 62

``` The monthly payments on which of the following types of mortgages become less valuable during times of higher inflation? fixed VA adjustable FHA ```

Fixed

Fannie Mae allows what amount of fees to be charged to a credit card? Mark one answer: A. 1% of the loan amount plus $500 for the appraisal and credit report B. 2% of the loan amount plus $500 for the appraisal and credit report C. 3% of the loan amount plus $500 for the appraisal and credit reportc D. 4% of the loan amount plus $500 for the appraisal and credit report

``` A _____ is defined as any mortgage product other than a 30 year fixed rate mortgage. A. Subordinate lien B. Nontraditional mortgage C. Piggyback loan D. Nonconventional mortgage ```

``` A VA mortgage has all the following features EXCEPT: A. It is partially guaranteed B. It has a mortgage insurance premium C. It has a 4% late fee D. No required down payment ```

Answer B | VA loans require no monthly insurance premium.

``` The late fee for a VA loan is: A. 3% of principal and interest B. 4% of principal and interest C. 5% of principal and interest D. 10% of principal and interest ```

``` The late fee for FHA and VA loans is: A. 3% of principal and interest B. 4% of principal and interest C. 5% of principal and interest D. 10% of principal and interest ```

``` Borrowers must be notified of an ARM rate change how many months before the initial reset? A. 1 B. 3 C. 6 D. 9 ```

``` HOEPA applies to which of the following types of loans? A. Construction B. a Mortgage to buy a home C. a mortgage to build a home D. a reverse mortgage ```

``` What type of loan gives a borrower money each month? A. Graduated payment mortgage B. Reverse mortgage C. Package mortgage D. Wholesale mortgage ```

``` A conventional mortgage does NOT have a: A. 3% minimum down payment B. 5% late fee C. Due-on-sale clause D. Borrower income limit ```

Answer D Conventional Loans do not have a borrower Income Limit. Most conventional mortgages are not assumable; they do have a due-on-sale clause.

Which of the following properties is ineligible for FHA mortgage insurance? (a) Manufactured Housing (b) Row Houses (c) Detached or Semi-Detached Dwellings (d) Vacation Homes.

``` What is the minimum down payment usually required for non-owner occupied rental properties? A. 5% B. 10% C. 15% D. 20% ```

D Because non-owner occupied rental properties are considered riskier thanowner-occupied ones, lenders will usually charge a higher interest rate and a larger down payment (usually a minimum of 20%).

``` A partially amortized loan which consists of a lump sum payoff at theend of the term is: A. Balloon mortgage B. Package mortgage C. Chattel mortgage D. Buy-down mortgage ```

Two types of loans used to finance the construction of a property are: A. Construction-to-permanent and construction B. Pre-construction and construction C. Interim and permanent construction D. Fully-amortized and interest-only

``` Under Fannie Mae guidelines, what is the maximum loan-to-value ratio for a fixed-rate mortgage for a four-unit investment property? 97% 75% 65% 50% ```

75% | Investment property

Fannie Mae allows what amount of fees to be charged to a credit card? A. 1 % of the loan amount plus $500 for the appraisal and credit report B. 2 % of the loan amount plus $500 for the appraisal and credit report C. 3 % of the loan amount plus $500 for the appraisal and credit report D. 4 % of the loan amount plus $500 for the appraisal and credit report

``` Private Mortgage Insurance is automatically cancelled when the loan-to-value reached what level? A. 55% B. 70% C. 78% D. 80% ```

On a reverse mortgage, how much of the initial pay,ent limit calculation is allowed to be withdrawn? A. 60% of initial principal limit or 70% if enough to pay off existing mortgage B. 60% of initial principal limit or 100% if enough to pay off existing mortgage C. 80% of initial principal limit or 70% if enough to pay off existing mortgage D. 80% of initial principal limit or 78% if enough to pay off existing mortgage

Answer: A 60% of the initial principal limit OR Enough to pay off an existing mortgage (if it’s more than the 60%, plus 10% of the principal limit.

Which is true of a GEM mortgage? A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? C. A revolving credit in which the home serves as collateral is known as D. mortgage in which the payment starts low and increases over time.

Answer: A Growing Equity Mortgage (GEM) has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly.

``` An FHA mortgage: A. Is 100% insured B. Is partially guaranteed C. Has a 5% late fee D. Is not assumable ```

A | FHA loans are insured 100%

Answer: A Lenders calculate how much a borrower is authorized to borrow overall, based on age, the interest rate, and the value of the home.

``` Fannie Mae generally wants how many months of liquid financial reserves after closing? A. 1 month B. 2 months C. 3 months D. 4 months ```

graduated payment mortgage: A. Is for college graduates only B. Has payments that start low and increase over time C. Has payments that start high and decrease over time D. Is only for borrowers with a minimum age of 62

``` Which of the following is a negative amortization loan? A. Bridge Loan B. Reverse Mortgage C. Interest Only D. Fixed Rate Loan ```

``` Which of the following CANNOT contribute money towards the borrower's down payment: A. Employer B. Real estate agent C. Domestic partner D. Borrower's relative ```

``` Which is true of a term loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized ```

``` An FHA reverse mortgage loan is a: Mark one answer: FHARM HECM RMFHA UFFHA ```

HECM

``` A client that adds credit-worthiness to the loan application, legally responsible for paying the debt but but does not obtain benefits from the mortgage is known as a A. Co-Applicant B. Co-borrower C. Co-signer D. Grantor ```

Answer C Co-signer: A client that adds credit-worthiness to the loan application., legally responsible for paying the debt but but does not obtain benefits from the mortgage

``` An individual joining the applicant in requesting a loan is known as a A. Co-Applicant B. Co-borrower C. Co-signer D. Grantor ```

A Co-applicant: An individual joining the applicant in requesting a loan.

``` A person that signs on a loan with the applicant. A. Co-borrower B. Co-applicant C. Co-signer D. Assignee ```

``` A tax based on the assessed value of an item, such as real estate or personal property is a A. Chattel B. MIP C. PMI D. Ad Valorem ```

Answer D

``` A contract in which the contract price is equal to the cost of the construction plus a profit allowance to the builder, as opposed to a fixed price contract is known as A. Construction to Permanent B. As Valorem C. Permanent D. Cost-Plus Contract: ```

Answer D Remember this is a contract not a loan