General_Mortgage_Knowledge_Practice.txt

The acronym PFC stands for:





a. prepaid finance charge


b. paid from closing costs


c. prepayment for a creditor


d. prequalification of financed credit

a. prepaid finance charge

Why are FHA loans beneficial to lenders?





a. they are only made to low income borrowers


b. they are insured by the federal government


c. they do not require down payment


d. they don't require escrows or other complicated accounting

b. they are insured by the federal government

The Cost of Funds Index is traditionally used to determine interest rates on what type of loans?





a. home equity lines of credit


b. reverse mortgages


c. 15 and 30 year fixed rate programs


d. rate adjustments on adjustable rate programs

d. rate adjustments on adjustable rate programs

A loan adjustment based on LIBOR is affected by the:





a. Lifetime Insured Broker's Origination Rate


b. Lender's Index of Broker Originations


c. Loan Index Banking Offer Rate


d. London Interbank Offered Rate

d. London Interbank Offered Rate

A/An_______is a loan with an interest rate that can adjust monthly and that offers a borrower a number of payment choices such as: 30 year fixed P&I/Interest-Only/1% of the loan resulting in negative amortization.





a. adjustable rate mortgage


b. 80-10-10


c. option ARM


d. reverse mortgage

c. option ARM

What does the acronym APR stand for?





a. appraised property ratio


b. appropriate pricing ratio


c. annual percentage rate


d. annual property ratio

c. annual percentage rate

Which of the following is the best defined as a loan that exceeds Fannie Mae and Freddie Mac's maximum loan limits?





a. a government loan such as FHA or VA


b. a subprime loan


c. a non-conforming loan


d. a conventional loan

c. a non-conforming loan

Which of the following terms is defined as the method in which a lien is removed from property following full payment of a loan on the property?





a. acceleration


b. reconveyance


c. transmittal


d. redemption

b. reconveyance

A MIP is mandatory when a loan is:





a. a conforming loan with a down payment of 20% or less


b. a non-conforming loan


c. an FHA loan


d. a VA loan

c. an FHA loan

A mortgage insurance premium is mandatory:





a. for 1 year


b. until loan-to-value reaches 80%


c. until equity reaches 22%


d. for 5 years

d. for 5 years

Which of the following loan programs does not require credit or income documentation and does not require repayment?





a. NINA


b. Reverse Mortgage


c. Option ARM


d. HELOC

b. reverse mortgage

If a lender agrees to subordinate a loan
what has occurred?




a. the borrower is defaulting on his/her debt obligation


b. the loan has been paid off


c. the borrower has obtained a second lien


d. the loan has been approved

c. the borrower has obtained a second lien

A borrower is a 65 year old retiree with significant equity in his home. Which of the following would be the best option to assist him with paying for repairs on his home?





a. HELOC


b. ARM


c. HECM


d. SISA

c. HECM

Which of the following loan types is best described as a loan with a payment schedule made up of a series of small periodic payments and a larger lump sum due upon maturity?





a. a reverse mortgage


b. a loan with a balloon payment provision


c. an adjustable mortgage loan


d. a 2/1 buy down

b. a loan with a balloon payment provision

Which of the following would address the principal and interest payments due on a loan?





a. the amortization schedule


b. the index


c. the margin


d. life of the loan caps

a. the amortization schedule

What is Fannie Mae's purpose in the secondary market?





a. to approve loans


b. to fund loans


c. to provide insurance for loans


d. to provide a source of funds for lenders

d. to provide a source of funds for lenders

Which of the following loans are assumable?





a. FHA loans


b. Conforming loans


c. VA loans


d. Jumbo loans

c. VA loans

The Federal Housing Administration:





a. makes loans


b. insures loans


c. guarantees loans


d. securitizes loans

b. insures loans

USDA loans are primarily for properties located in:





a. urban areas


b. metropolitan areas


c. suburban areas


d. rural areas

d. rural areas

A/An_______is a loan with an interest rate that can adjust monthly and that offers a borrower a number of payment choices such as: 30 year fixed P&I/Interest-Only/1% of the loan resulting in negative amortization.





a. adjustable rate mortgage


b. 80-10-10


c. option ARM


d. reverse mortgage

c. option ARM

Mortgage backed securities (MBSs) are a product of which of the following?





a. the secondary market


b. stock market volatility


c. increased subprime originations


d. the primary market

a. the secondary market

Increasing loan balances resulting from the application of periodic payments creates which of the following for borrowers:





a. negative equity


b. negative amortization


c. lower credit scores


d. payment shock

b. negative amortization

VA loans require which of the following?





a. mortgage insurance premium


b. eligibility fee


c. funding fee


d. VA appraiser premium

c. funding fee

Fannie Mae and Freddie Mac securitize what type of mortgage loans?





a. subprime loans


b. VA loans


c. conventional loans


d. non-conforming loans

c. conventional loans

Which of the following terms specifically refers to a loan that is NOT obtained through a program of the federal government?





a. conventional loan


b. conforming loan


c. Ginnie Mae loan


d. USDA loan

a. conventional loan

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





a. HECM


b. Adjustable Rate Mortgage


c. HELOC


d. Graduated Payment Mortgage

c. HELOC

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





a. subordinate lien


b. first mortgage


c. real property mortgage


d. HELOC

a. subordinate lien

Which of the following is the best defined as a loan that exceeds Fannie Mae and Freddie Mac's maximum loan limits?





a. a government loan such as FHA or VA


b. a subprime loan


c. a non-conforming loan


d. a conventional loan

c. a non-conforming loan

According to the Guidance on Nontraditional Mortgage Product Risks
which of the following risks would be important to communicate to loan applicants with regard to nontraditional ARMs?




a. the possibility of payment shock when amortizing payments begin


b. the high probability of default on these types of loans


c. the fact that nontraditional ARMs are often linked to predatory lending


d. the inability of the borrower to refinance the loan due to HOEPA restrictions

a. the possibility of payment shock when amortizing payments begin

Nontraditional ARMs are considered the riskiest of loans when they include any of the following except:





a. no rate caps


b. a low introductory rate that expires after a short period


c. a refinance provision


d. limited documentation

c. a refinance provision

A bi-weekly mortgage is a strategy some borrowers use to achieve interest savings. However
there can be drawbacks. Which of the following is not considered a drawback to a bi-weekly mortgage?




a. lenders/servicers often charge a fee for administering the bi-weekly plan


b. interest rates are usually not as competitive for bi-weekly loans


c. the borrower ends up making an extra mortgage payment per year


d. there is a greater potential for late payments

c. the borrower ends up making an extra mortgage payment per year

What is used to determine the interest rate change on an ARM?





a. index only


b. caps only


c. yield curve


d. index and margin

d. index and margin

Margin is defined as:





a. the amount above the index that an interest rate can adjust for an ARM


b. the amount of compensation earned by a mortgage professional for originating an ARM


c. the range of flexibility an interest rate has between caps on traditional ARMs


d. the maximum -up or down- that an interest rate can ever adjust on an ARM

a. the amount above the index that an interest rate can adjust for an ARM

Which of the following loans might be used to finance a property in a high cost geographic region of the country?





a. loan with a balloon feature


b. non-conventional loan


c. jumbo loan


d. reverse mortgage

c. jumbo loan

What factors do lenders analyze in order to determine if a borrower will be financially able to meet the demands of loan repayment?





a. size of the loan the borrower is applying for


b. length of the loan term


c. value of the subject property


d. size of the borrower's existing debt burden

d. size of the borrower's existing debt burden