General Mortgage Knowledge Practice

The acronym PFC stands for:

A. prepaid finance charge
B. prepayment for a creditor
C. paid from closing costs
D. prequalification of financed credit

Why are FHA loans beneficial to lenders?

A. they don't require escrows or other complicated accounting
B. they are insured by the federal government
C. they do not require down payment
D. they are only made to low income borrowers

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

A. reverse mortgages
B. rate adjustments on adjustable rate programs
C. 15 and 30 year fixed rate programs
D. home equity lines of credit

A loan adjustment based on LIBOR is affected by the:

A. Lifetime Insured Broker's Origination Rate
B. Loan Index Banking Offer Rate
C. London Interbank Offered Rate
D. Lender's Index of Broker Originations

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. 80-10-10
B. option ARM
C. adjustable rate mortgage
D. reverse mortgage

What does the acronym APR stand for?

A. appraised property ratio
B. annual percentage rate
C. annual property ratio
D. appropriate pricing ratio

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

A. a conventional loan
B. a non-conforming loan
C. a government loan such as FHA or VA
D. a subprime 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. transmittal
B. acceleration
C. reconveyance
D. redemption

A MIP is mandatory when a loan is:

A. a VA loan
B. an FHA loan
C. a conforming loan with a down payment of 20% or less
D. a non-conforming loan

A mortgage insurance premium is mandatory:

A. for 5 years
B. for 1 year
C. until equity reaches 22%
D. until loan-to-value reaches 80%

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

A. NINA
B. Reverse Mortgage
C. HELOC
D. Option ARM

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

A. the loan has been paid off
B. the borrower has obtained a second lien
C. the loan has been approved
D. the borrower is defaulting on his/her debt obligation

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. ARM
B. SISA
C. HECM
D. HELOC

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. an adjustable mortgage loan
C. a loan with a balloon payment provision
D. a 2/1 buy down

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

A. the index
B. life of the loan caps
C. the margin
D. the amortization schedule

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

A. to fund loans
B. to approve loans
C. to provide insurance for loans
D. to provide a source of funds for lenders

Which of the following loans are assumable?

A. Conforming loans
B. FHA loans
C. Jumbo loans
D. VA loans

The Federal Housing Administration:

A. guarantees loans
B. makes loans
C. securitizes loans
D. insures loans

USDA loans are primarily for properties located in:

A. rural areas
B. suburban areas
C. metropolitan areas
D. urban 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. reverse mortgage
B. option ARM
C. adjustable rate mortgage
D. 80-10-10

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

A. stock market volatility
B. the secondary market
C. increased subprime originations
D. the primary market

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

A. lower credit scores
B. negative amortization
C. payment shock
D. negative equity

VA loans require which of the following?

A. eligibility fee
B. mortgage insurance premium
C. VA appraiser premium
D. funding fee

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

A. non-conforming loans
B. conventional loans
C. VA loans
D. subprime loans

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

A. conforming loan
B. conventional loan
C. Ginnie Mae loan
D. USDA loan

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

A. HELOC
B. Adjustable Rate Mortgage
C. Graduated Payment Mortgage
D. HECM

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

A. subordinate lien
B. real property mortgage
C. HELOC
D. first mortgage

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

A. a subprime loan
B. a non-conforming loan
C. a government loan such as FHA or VA
D. a conventional 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 inability of the borrower to refinance the loan due to HOEPA restrictions
B. the high probability of default on these types of loans
C. the possibility of payment shock when amortizing payments begin
D. the fact that nontraditional ARMs are often linked to predatory lending

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

A. no rate caps
B. a refinance provision
C. limited documentation
D. a low introductory rate that expires after a short period

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. the borrower ends up making an extra mortgage payment per year
C. there is a greater potential for late payments
D. interest rates are usually not as competitive for bi-weekly loans

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

A. index only
B. yield curve
C. caps only
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

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

A. non-conventional loan
B. loan with a balloon feature
C. reverse mortgage
D. 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 borrower's existing debt burden
B. value of the subject property
C. length of the loan term
D. size of the loan the borrower is applying for