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NMLS Kim > Chapter 7: Underwriting, Closing and the Secondary Market > Flashcards

Chapter 7: Underwriting, Closing and the Secondary Market Flashcards

1
Q 
What automatic underwriting system is used for VA and FHA loans?
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  LP and DU
A

Answer D

both DU and LP can be used for Conventional FHA or VA mortgage loans

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2
Q 
Which of the following is a flexible,
automated underwriting system that analyzes salaried, commission and self-employed borrowers for their credit worthiness and their ability to repay the debt?
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  Limited Portfolio (LP)
A

Answer B

Desktop Underwriter is a flexible, automated underwriting system that analyzes salaried, commission and self-employed borrowers for their credit worthiness and their ability to repay thedebt.

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3
Q 
Which of the following is a flexible,
automated underwriting system that analyzes salaried, commission and self-employed borrowers for their credit worthiness and their ability to repay the debt?
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  Limited Portfolio (LP)
A

Answer B

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4
Q 
Which of the following can can make a recommendation to approve/eligible?
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  LP and DU
A

D

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5
Q 
The system electronically evaluates each individual loan application along with the appropriate credit report information and provides the lender with a recommendation as to whether or not the loan meets the criteria for loan approval is 
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  LP and DU
A

Answer B

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6
Q

This system provides one of three responses to the lender: Approve, Refer or caution

This system responses are: approve a
mortgage, refer it or refer it with caution to the lender’s underwriter.
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  LP and DU
A

B Fannie Mae DU

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7
Q 
Which of the following is designation from the FHA is enabled to approve FHA residential loans for a-lender and proceed to closing without prior approval for mortgage insurance(MIP) from the FHA?
A. Loan Prospector (LP)
B.  Desktop Underwriter (DU)
C.  Daniel’s Underwriting System (DUS)
D.  Direct Endorsement Underwriter (DE)
A

Answer D

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8
Q

Which of the following is true of appraisals from Fannie Mae?
A. Holds the lender responsible, and appraiser paid. Flat fee
B. Requires appraisersto perform a limited home inspection report with the appraisal
C. Approved appraisers operate on a rotation system
D. The appraiser is paid a fee based on the value of the property

A

Answer A

Fannie Mae holds the lender responsiblefor the quality of the appraisal. The appraiser is paid a flat fee for the report, and not a fee based on the value of the property.

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9
Q

Which of the following is true of appraisals from FHA?
A. Holds the lender responsible, and appraiser paid. Flat fee
B. Requires appraisers to perform a limited home inspection report with the appraisal
C. Approved appraisers operate on a rotation system
D. The appraiser is paid a fee based on the value of the property

A

Answer B

The FHA requires appraisersto perform a limited home inspection report with the appraisal,

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10
Q

Which of the following is true of appraisals from VA?
A. Holds the lender responsible, and appraiser paid a flat fee
B. Requires appraisers to perform a limited home inspection report with the appraisal
C. Approved appraisers operate on a rotation system
D. The appraiser is paid a fee based on the value of the property

A

Answer C

VA-approved appraisers operate on a rotation system controlled by the VA.

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11
Q 
An appraisal is valid for how long?
A. 4 months
B. 6 months 
C. 12 months 
D. 30 days
A

Answer C

The property must have been appraised within the 12 months that precede thedate of the note and mortgage

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12
Q 
How long before an appraisal needs to be re-certified and the appraiser need to do an external inspection?
A. 4 months
B. 6 months 
C. 12 months
D. 30 days
A

Answer A

When an appraisal report will be more thanfour months old on the date of the note and mortgage, the appraiser must inspect the exterior of the property and review current market data to determine whether the property declined in value since the date of the original appraisal.

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13
Q

To determine the highest and best use of a property,
A. No encroachment
B. No Encumbrance
C. The use must be legally permissible, physically and functionally feasible.
D. The use must be legally permissible, physically possible and financially feasible.

A

Answer D

Many factors can affect market value, but the primary consideration is the highest and best use of the property. The use must be legally permissible (zoned for the use), physically possible (soil must be able to support any new foundation; property must have adequate drainage, etc.) and financially feasible (the income from the property must cover the cost of improvements).

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14
Q 
Which of the following approach is best for new construction homes?
A. Sales Comparison 
B. Cost Approach
C. Income Capitalization 
D. GMP
A

Answer:
In the Cost Approach, the appraiser estimates the cost to reproduce or replacethe structures as if they were new; he subtracts a value for depreciation
because the structure is not new, and adds in the value of the land and
improvements such as landscaping or a driveway.

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15
Q 
Which of the following approach is best for residential homes?
A. Sales Comparison 
B. Cost Approach
C. Income Capitalization 
D. GMP
A

Answer A

In the Sales Comparison Approach, the appraiser researches a minimum ofthree closed sales that are similar in characteristics to the subject property (the property being appraised).

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16
Q 
Which of the following appraisal approach is best for income producing homes?
A. Sales Comparison 
B. Cost Approach
C. Income Capitalization 
D. GMP
A

Answer C

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17
Q 
Which of the following is used to determine a ballpark figure for the value of a property based on the average sale price and rents of the area’s comparable properties?
A. Sales Comparison 
B. Cost Approach
C. Income Capitalization 
D. Gross Rent Multiplier (GMP)
A

Answer D

The GRM is an additional way to quickly determine a ballpark figure for the value of a property based on the average sale price and rents of the area’s comparable properties.

Market Value / Monthly Rent = Neighborhood Gross Rent Multiplier (GRM)

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18
Q 
Which of the following is another quick method to determine appraisals and uses  uses annual gross incomethat includes the rent and any other generated income including money from Vending machines, washers and dryers, and parking?
A. Cost approach
B. Comparison Approach
C. Gross Income Multiplier (GIM)
D. Gross Rent Multiplier (GRM)
A

Answer C

The GIM is very similar to the GRM except that it uses annual gross incomethat includes the rent and any other generated income including money fromvending machines, washers and dryers, and parking.
Market Value / Annual Gross Income = GIM

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19
Q 
A commitment that lists all the known defects on the home is known as a 
A. Title Insurance Binder
B. Title Insurance Premium
C. Survey
D. Hazard Insurance
A

Answer A

A title insurance binder is a commitment that lists all the known defects. Theinsurance policy itself is issued after closing

20
Q 
A  one-time closing cost to either the seller or borrower.
A. Title Insurance Binder
B. Title Insurance Premium
C. Survey
D. Hazard Insurance
A

Answer B

21
Q 
A drawing of the property showing the perimeter boundaries andmarking the location of the house and other improvement is known as a
A. Title Insurance Binder
B. Title Insurance Premium
C. Survey
D. Hazard Insurance
A

Answer C

22
Q 
A method of property description that Is the crudest of these and in which property lines are delineated based on natural landmarks such as rivers, trees and boulders is the
A. Lot and Block Method 
B. Government Land Survey Method
C. Monument Method
D. Metes and Bounds Method
A

Answer C

The crudest of these approaches is the Monument Method in which property lines are delineated based on natural landmarks such as rivers, trees and boulders.

23
Q 
A method of property description that  was developed after the Revolutionary War and is based on a grid of intersecting lines that divide a state into townships, ranges and sections is the
A. Lot and Block Method 
B. Government Land Survey Method
C. Monument Method
D. Metes and Bounds Method
A

Answer B

The Government Land Survey Method was developed after the
Revolutionary War and is based on a grid of intersecting lines that divide state into townships, ranges and sections.

24
Q 
The most common property description method that occurs after a subdivision is platted is known as  
A. Lot and Block Method 
B. Government Land Survey Method
C. Monument Method
D. Metes and Bounds Method
A

Answer A

The Lot and Block Method is the most common and occurs after a
subdivision is platted. A plat map is a recorded drawing showing all the
blocks in a subdivision which have been subdivided into individual lots. Theplat map may also indicate streets, green areas, utility lines, etc.

25
Q 
A property description method that is the most accurate and involves a surveyor measuring the distance and direction between the metal plaques in the corners of the property is known as  
A. Lot and Block Method 
B. Government Land Survey Method
C. Monument Method
D. Metes and Bounds Method
A

Answer D

The Metes and Bounds Method is the most accurate and involves a surveyor measuring the distance (metes) and direction (bounds) between the metal plaques in the corners of the property. The direction of a boundary line is expressed using compass directions and is given in degrees, minutes and seconds. Distances are measured in feet. The surveyor must start and end hismeasurements at the same place (the Point of Beginning (POB)).

26
Q 
which of the following occurs when the lender deals directly with theborrower without any middlemen?
A. Direct investor funding
B. Table funding 
C. Warehouse funding
D. Retail Funding
A

Answer A

Direct investor funding occurs when the lender deals directly with the borrower without any middlemen.

27
Q 
which of the following occurs when the lender uses borrowed money from an investorto fund the loan, and after closing, the mortgage and note are immediately assigned to that investor. 
A. Direct investor funding
B. Table funding 
C. Warehouse funding
D. Retail Funding
A

Answer B

Table funding occurs when the lender uses borrowed money from an investorto fund the loan, and after closing, the mortgage and note are immediately assigned to that investor. Funds for closing are usually wired to the closing agent’s escrow account.

28
Q 
which of the following occurs when a lender obtains funds for closing from aline of credit extended by a commercial bank. 
A. Direct investor funding
B. Table funding 
C. Warehouse funding
D. Retail Funding
A

Warehouse funding occurs when a lender obtains funds for closing from a line of credit extended by a commercial bank. The lender pledges the mortgage and note as collateral for the funds, and the bank will hold them fora short period of time until they are sold to a permanent investor.

29
Q

Who makes the final decision as to whether a loan will be funded?A. The automated underwriting system
B. The lender
C. The real estate agent
D. The closing agent

A

Answer B

30
Q 
An appraisal must be re-certified if it is older than:
A.  1 month
B.  4 months
C.  6 months
D. 12 months
A

Answer B

31
Q

The highest and best use of the property is NOT:A. Legally permissible
B. Physically possible
C. Financially feasible
D. Based on possible future zoning changes

A

Answer D

32
Q 
In a completion escrow account, what is the minimum estimated repair Cost held in trust by the lender?
A.  50 %
B.  90 %
C.  120 %
D.  200 %
A

Answer C

The lender establishes a “completion escrow” for the postponed
improvements, by withholding from the purchase proceeds funds equal to atleast 120 percent of the estimated cost for completing the improvements.

33
Q

All of the following apply to a mortgagor’s title insurance policy EXCEPT:
A. It is for the amount of the purchase price
B. It is based on loan amount
C. It is optional
D. It is not transferable

A

C

34
Q 
Surveys are NOT certified to:
A.  Lenders
B.  Title insurers
C.  Buyers
D.  Real estate broker
A

Answer D

Surveys are certified to lenders, title Insurers and buyers.

35
Q 
The most common type of legal description for residential subdivisions:
A.  The monument method
B.  Lot and block
C.  Metes and bounds
D.  Government land survey method
A

Answer B

The Lot and Block Method is the most common and occurs after asubdivision is platted.

36
Q 
Which form is used as the standard settlement form?
A.  HUD-1/Closing Disclosure
B.  FHA Closing Statement
C.  U.S.A. Settlement Statement
D.  National Closing Statement
A

Answer A

37
Q 
Which of the following is an acceptable source of funds at closing?
A.  Sweat equity
B.  Cash on hand
C.  Personal check
D.  Wire transfer
A

Answer C

Typical sources of funds are checking and savings accounts, vested
retirement funds, trust accounts, stocks, bonds, mutual funds and personalgifts (under certain circumstances).

38
Q 
What type of funding occurs when a lender obtains funds from a line ofcredit at a commercial bank?
A.  Credit lending
B.  Table funding
C.  Warehouse funding
D.  Temporary funding
A

Answer B

Warehouse funding occurs when a lender obtains funds for closing from aline of credit extended by a commercial bank.

39
Q 
When a lender sells a mortgage loan to another lender this is called:
A.  Assignment of mortgage
B.  Note transfer
C.  Vendor selling
D.  Linking a mortgage
A

Answer A

When a lender sells a mortgage loan to an investor, this is called an
assignment of mortgage and is recorded to give constructive notice of thetransfer of ownership of the mortgage and note.

40
Q

When an assignor keeps the servicing rights this is known as:
A. Selling a loan with escrow impounds
B. Selling a loan with servicing released
C. Selling a loan with servicing retained
D. Selling a loan pro norma

A

Answer C

The assignor can keep the servicing rights (selling a loan with servicing retained), or it can sell the servicing rights along with the mortgage and note to the assignee (selling aloan with servicing released).

41
Q 
The title company considers unpaid property taxes to be an:
A.  Encroachment
B.  Encumbrance
C.  Easement
D.  Engress
A

Answer B

42
Q 
The principle of value that focuses on the most profitable, legal use towhich a property can be put is:
A.  Principle of Satisfaction
B.  Principle of Substitution
C.  Principle of Highest and Best Use
D.  Principle of Conformity
A

Answer C

43
Q 
A Point of Beginning is used in what type of survey?
A.  Government Land Survey
B.  Plat Map
C.  Metes and Bounds
D.  Circle Grid
A

Meets and Bound

44
Q 
An outstanding claim on a property that limits the ability to sell theproperty is a:
A.  Title defect
B.  Subordination
C.  Penalty
D.  Fault fee
A

Answer A

45
Q 
The national trade association and voice of the abstract and title
insurance industry is:
A.  TICOA
B.  ATC
C.  ALTA
D.  TITLE NOW
A

Answer C

The American Land Title Association (ALTA), founded in 1907, is thenational trade association and voice of the abstract and title insurance
industry, and it standardized the forms used by the title companies.

NMLS Kim (11 decks)

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