General Mortgage Knowledge

Question 1

PFC stands for:

Answer 1

Prepaid finance charge

Question 2

Why are FHA loans beneficial to lenders?

Answer 2

They are 100% insured by the federal government

Question 3

A loan-level price adjustment (LLPA) is best described as:

Answer 3

GSE charges that result in higher interest rates when consumer eligibility or loan features present a higher risk of default

Question 4

A(n) _______ is a loan with an interest rate that can adjust monthly and also offers a borrower a number of payment choices, such as 30- or 15- year P&I, interest-only, or a 1% minimum payment, which may result in negative amortization.

Answer 4

Option ARM

Question 5

WHich of the following is the best example of a conventional loan that exceeds fannie mae and freddie mac’s maximum loan limit?

Answer 5

a nonconforming loan

Question 6

Balloon payment qualified mortgages:

Answer 6

May be made by small creditors in rural/underserved areas

Question 7

example of loans that are typically secured by a subordinate lien include all but which of the follow?

Answer 7

A purchase money mortgage

Question 8

A borrower is a 65 year old retiree with a fixed income and significant equity in his home. Which of the follow would be the best option to supplement his cash flow?

Answer 8

HECM

Question 9

which of the following would detail the principal and interest payments due on a loan?

Answer 9

The amortization schedule

Question 10

Which of the following is true of VA loans?

Answer 10

They are assumable

Question 11

The Federal Housing Administration:

Answer 11

They insure loans

Question 12

After refinancing, a borrower receives his first mortgage statement and can choose from payments of 1% of the loan amount, interest-only, or 30-year. What type of loan does he have?

Answer 12

Option ARM

Question 13

Construction loans generally come in two different forms. These are:

Answer 13

construction-to-permanent and standalone construction loans

Question 14

Fannie mae and freddie mac securitize what type of mortgage loans?

Answer 14

conventional/conforming loans

Question 15

Which of the following types of loans offers backing from the federal government without using taxpayer dollars?

Answer 15

FHA loans

Question 16

which of the following is an example of open-ended credit?

Answer 16

HELOC

Question 17

Which of the following is another term for a junior lien?

Answer 17

Subordinate lien

Question 18

In order for a small creditor balloon payment mortgage to be a qualified mortgage, the small creditor must hold the loan in its portfolio for:

Answer 18

three years

Question 19

Community Mortgage Bank (CMB) is a small creditor is a rural area. CMB holds the loans it originates in its portfolio until they are paid in full. CMB tries to limit its transactions to those for qualified mortgages. In a balloon payment QM transaction, the transaction must meet all of the following criteria, except:

Answer 19

The borrower must have a debt-to-income ratio of no more than 43%

Question 20

A creditor may include a prepayment penalty provision in which of the following mortgages?

Answer 20

A fixed-rate qualified mortgage that is not a higher-priced mortgage

Question 21

Concerning ARMs, margin is best defined as:

Answer 21

A number expressed as a percentage, that represents a lender’s operating costs and profit margin

Question 22

If a veteran’s loan goes into foreclosure, the government will:

Answer 22

REimburse the lender up to the guaranteed amount of the loan