Mlo 7,8,9
When it comes to nontraditional mortgage products, an institutions qualifying standards should avoid an over reliance on which of the following
Credit scores
Which of the following best describes a reverse mortgage
Debt increases while equity decreases
A 3-2-1 buydown is best described as which of the following types of loans
Graduated payment buydown
Which of the following best describe a 2/6 cap on an adjustable rate mortgage
The loan can adjust the interest rate a maximum of 2% at any adjustment with a lifetime cap of 6% above the initial rate
Which of the following best describes the terms of a 5/25 interest only/fixed loan
The loan is interest only for the first five years, and then fully amortized at a fixed rate for the duration of the loan
How will a buydown show on the loan estimate
As a charge to the borrower
A borrower is looking for a permanent buydown. The lender states that on a $100,000 loan one discount point ($1000) buys the interest rate down 0.125%. The borrower pays two discount points. If the interest rate goes from 7.0% to 6.75%, how much money is saved annually on principal and interest
200.40
A borrower is obtaining a loan for $200,000 at 7% for 30 years. If the seller agrees to pay discount points to buy down the interest rate to 6% for the first 3 years, the amount of money the borrower saves in P and I for the first 3 years is closest to which of the following
4733 200,000 * 0.07 / 12 months =1330.60 0.06 = 1199.10 1330 - 1199 =131 per month times by 36 months =4716
A borrower is obtaining a loan for 200,000 at 7% for 30 years. If the seller agrees to pay discount points to buy down the interest rate to 6% for the first three years, and taxes and insurance on the new house amount to 322 per month combines, how much money will the borrower have to make on a monthly basis to qualify for a conventional loan at the buydown rate?
5432 200,000 * 0.06 = 1199/ month add $322 = 1521 per month 1521 divide by 28% = 5432
A borrower is looking for a permanent buydown. The lender states that on a $100,000 loan one discount point ($1000) buys the interest rate down 0.125%. The borrower pays two discount points. The interest rate was going to be 6.75%. What will be the new interest rate?
6.5
The minimum age for all owners on title to obtain a reverse mortgage is which of the following
62
If a subsidy paid by a builder to prepay interest buys the interest rate down 3% for three years, at which of the following rates will the borrower usually qualify
At 2% below the current market interest rates
Which of the following best describes a graduated payment buydown plan
A buydown plan where payments start low but increase each year until they are sufficient to amortize the loan
Which of the following best describes a level payment buydown plan
A buydown plan where the reduction remains constant throughout the buydown period
All of the following are true about interest rate buydowns except
A buydowns is the commission the MLO makes on the loan
Which of the following best describe a hybrid mortgage
A combination of the best features of fixed, amortized, adjustable, and or interest only to best meet the needs of the borrower
Which of the following will a lender require when granting a reverse mortgage
A homeowners insurance policy covering the value of the home, a flood insurance policy if appropriate, and owner occupancy
Which of the following statements best identifies with a conventional loan
A loan not insured or guaranteed by a government entity
A collateral dependent loan is which of the following
A loan that relies on property sale or refinancing once amortization begins
A loan with a temporary buydown is classified as which of the following
A nontraditional loan
According to TILA, when must any notice of change in payment or interest rate be provided to a borrower
At least 25 days before and not earlier than 120 days before a new payment takes effect
To accept secondary financing a lender would probably require which of the following
A subordinate clause to ensure that the first mortgage always take priority, a minimum of a 5% down payment, and regularly scheduled payments
All of the following statements are true regarding fully amortized loans except
At the end of the loan term most of the monthly payment goes toward interest false most goes towards the principal at the end of the end
Which of the following is the lenders concern regarding a borrower taking on negative amortization
At the end of the term, the property value might be lower than the loan balance and not qualify for a refi that could pay the balloon payment
Which of the following statements match up with subprime loans
B-C credit, portfolio loans, and higher interest rates and fees
Which of the following statements are true regarding the index for an ARM loan except
All of the following are true. The rate of the loan is tide to a widely recognized and published index. The index is a statistical report that is generally a reliable indicator of the approximate cost of money at a given time. The loan interest rate will rise and fall with the rates reported by that index.
According to the SAFE act, which of the following must have the MLO license
Anyone who for compensation or expectation of it, originates loans, and contract loan processors
Which of the following is the best, most inclusive definition of a non traditional mortgage product
Anything other than a 30 year, fully amortized, fixed rate loan
Why do lenders like ARMs
Because they spread the risk of Fisk of fluctuating interest rates on to the borrower
All of the following are true about interest rate buydowns, is except
Buydowns must be paid by the seller False it can be paid by buyer or seller
The interest rate on a ARM is determined by which of the following
By the current value of the selected index plus the agreed to margin
When loans meet Fannie Mae/Freddie mac standards and can be sold on the secondary market they are called which of the following
Confirming
Which of the following statements is true about adjustable rate mortgages (ARMs)
Conventional mortgages can involve ARMs
Loan programs are broadly classified as which of the following
Conventional, government agency, and confirming or non confirming
All of the following statements are true regarding a permanent buydown except
Even though it is a permanent buydown the lender is unable to write the reduced interest rate into the note false the lender does write it in the note
Subsidies for graduated payment buydowns can come from which of the following sources
Extra money from buyer's upfront cash deposit in escrow, a sellers reduced proceeds from escrow, or a builders deposit of cash or reduced proceeds
An initial index value plus the margin equals which of the following
Fully indexed rate
The final version of guidance on nontraditional mortgage product risk includes comment and input from which of the following
Financial institutions, trade associations, and consumer and community organizations
A growth equity mortgage (GEM) uses which type of interest rate
Fixed Payment level increases regularly, but the interest rate is fixed
Factors working against loan applicants applying for nontraditional mortgage products include which of the following
High LTVs, high debt/ income ratios, and low credit scores
How many payment options be disbursed to a borrower with a reverse mortgage
In fixed monthly payment for as long as the the homeowners remains in the home, in a lump sum payment up front, or in a line of credit, giving the borrower access to funds on an as needed basis
ARMs provide for regularly scheduled, periodic re-amortization of the loan under which of the following conditions
Instead of rate caps, in addition to negative amortization caps, or instead of or in addition to rate caps and payment caps
Which of the following are advantages to a lender of a fixed rate loan
It is a guaranteed rate of return, and the rate the lender receives cannot go down
Which of the following would describe a traditional mortgage to buy a home
It is considered a forward mortgage, it embraces the falling debt rising equity scenario, and after the final payment home equity equals the value of the home
A hybrid ARM is closest to which of the following
It is fixed for a certain number of years, then the interest rate adjusts for the remainder of the term until the debt is liquidated
What is the significance of the creditor or mortgage broker receiving an official loan application from a consumer
It starts the processing of the loan request, it triggers mandated disclosures to the borrower, and it places the creditor and broker under obligation to the borrower
A lender makes a loan for 220,000 at 7% interest for 30 years. Some interest is prepaid for three years, reducing the interest rate for those three years to 6%. Which of the following best describes this type of loan?
Level payment buydown
For loans with a planned period of negative amortization which of the following is the best way to handle that to protect borrowers
Repayment analysis should be based on the initial loan amount plus any balance increase that may accrue from the negative amortization provision
An initial index value plus a lifetime cap equals which of the following
Maximum index rate
All of the following are common indexes for the cost of funds regarding ARMs except
Money cost index (MCI)
A cap used with ARMs to protect the borrower from large payment increases in which of the following
Mortgage payment Caps
In the guidance on non traditional mortgage product risk the agencies that jointly wrote this document define nontraditional mortgage products (NMPs) as
Mortgage products that allow borrowers to defer principal and sometimes interest
All of the following types of homes are generally eligible for standard reverse mortgages except
Multi family residential units
Regarding negative amortization caps with ARMs, which of the following is true
Negative amortization caps require that loan payments be recast when the cap is reached
The mortgage payment adjustment period occurs most often for which of the following situations
Negative amortization loans
Which of the following best defined negative amortization
Not only is no principal being paid, but not all of the interest due is being paid, hence the loan balance is growing due to this deffered interest
If a loan is made with introductory interest rates, which of the following would be serious concern for underwriters
Payment shock and early recastings
In the guidance on nontraditional mortgage product risk the agencies that jointly wrote this document are concerned with which of the following issues
Payment shock, competitive pressures, and ceding underwriting standards to third party originations
Overall, the guidance on nontraditional mortgage product risk addresses issues of
Prudent underwriting, and consumer protection principles
All of the following are true regarding a seller paid buydown except
The lender deducts the right amount from the proceeds advanced to the borrower
What is the advantage to the borrower of a growth equity mortgage (GEM)
Save interest Any increase in payments goes directly to reduce the principal balance. This pays the loan off sooner and saves interest for the borrower.
Which of the following would be a way for a borrower to get a conventional loan without making a 20% down payment
Secondary financing
Which of the following terms goes with a fully amortized loan
Self liquidating
Which of the following would be acceptable ways for a borrower to obtain secondary financing
Seller carry back, an additional junior lien from an outside source, and the seller could offer a conventional 80/20 loan
Which of the following would be a primary reason for a loan to be classified as nonconforming
Size of the loan and jumbo loan
One main advantage to a buydown plan is which of the following
The lender may qualify the borrower on the basis of the reduced payments after the buydown
The APR for an ARM that must be disclosed on the Loan estimate and the closing disclosure must be based on which of the following
The lenders margin and the composite APR
Which of the following would be a primary reason for a loan to be classified as nonconforming
Substandard credit of the borrower
The balance that may accrue from a negative amortization provision may be calculated in which of the following ways
Take the lesser of the negative amortization cap per mortgage note. This would represent the highest percentage the loan amount can increase through negative amortization.and Take the maximum negative amortization percentage that the loan may accrue based on the spread between the introductory rate and the accrual rate before the end of the initial payment option period
To obtain a reverse mortgage, all of the following are required except
That the home be paid off free and clear That is false it doesn't not pay to be paid off
Which of the following would describe a reverse mortgage taken out by a senior homeowner
The balance of the loan rises as interest incurs to the outstanding loan balance, the homeowner makes no payments, and when the loan becomes due, the loan balance could be more than the home is worth
Which of the following are advantages to a borrower of a fixed rate loan
The borrower doesn't have to worry about rates going up, the borrower doesn't have to worry about a sudden increase in the payment amount, and the borrower can refinance if the rates go down
All of the following statements are true about a graduated payment mortgage except
The borrower makes larger payments at the beginning of the loan, with payments decreasing yearly in the later years
NMP guidance states that the mortgage loan underwriting standards should address the effect of a substantial payment increase on the borrower's capacity to repay a nontraditional mortgage loan when amortization begins. In the case of an interest only loan, this means which of the following
The borrowers ability to pay the debt by final maturity at the fully indexed rate (if an ARM) or note rate (if fixed)
When underwriting a loan, the main consideration should be which of the following
The borrowers repayment capacity by final maturity at the fully indexed rate
All of the following are generally true in a conversion option in an ARM except
The conversion fee is expensive usually several thousand dollars false it is several hundreds of dollars
The agencies that wrote guidance on nontraditional mortgage product risk include all of the following except
The department of housing and urban development (HUD)
Why are such a wide variety of mortgage products offered by lenders
To meet the varied needs of borrowers
The consumer handbook on adjustable rate mortgage (CHARM booklet) is prepared by which of the following agencies
The federal reserve and federal home loan bank board
When a reverse mortgage becomes due and the balance is greater than the worth of the home, which of the following scenarios plays out
The house may have to be sold to pay the debt, but any shortfall is forgiven and cannot become a deficiency judgement against the borrowers or their heirs
With an adjustable rate mortgage, fully indexed rate means which of the following
The index value prevailing at the time of underwriting plus the applicable margin that will apply after the expiration of any introductory interest rate period
If the seller agrees to buy down the interest rate for the buyer, who determines how much money needs to be paid for the buydown
The lender
All of the following are true about the margin on an ARM except
The margin fluctuates like the index fluctuates with the cost of funds false margin stays the same
With a temporary buydown, underwriters will qualify a borrower using what rate of interest
The note rate
Which of the following best describes combined loan to value ratio
The percentage of the property value that is borrowed through a combination of more than one loan
Which of the following would be considered a legitimate purpose for using the proceeds from a reserve mortgage
To pay off debt, for a vacation, or home repairs and upkeep
The interest rate on an adjustable rate mortgage (ARM) is adjusted periodically for which of the following reasons
To reflect fluctuations in the cost of money
To obtain a reverse mortgage, if one of the owners is 64 and the other is 60, how must they proceed to obtain the loan
The younger borrower would have to be removed from title
Which of the following are income requirements to qualify for a reverse mortgage
There are no minimum income requirements to qualify for a reverse mortgage
In a conventional loan with a 15 year term which of the following is the primary reason that interest rate is lower than for a 30 year term loan
There is less risk for the lender
Which of the following are concerns expressed by the guidance on nontraditional mortgage product risk regarding simultaneous second lien loans
There should be no period of interest only payments and there should be no negative amortization
Which of the following statements refer to nonconforming loans
These loans do not meet the standards to be sold to Fannie Mae or Freddie Mac
All of the following are true about the rate adjustment period with ARMS except
They are regulated by statute to be every six months False they are more flexible
What is the basic idea behind risk layering features in a nontraditional mortgage product
They should be compensated for with risk mitigating factors
A payment option ARM would allow borrowers which of the following choices
To choose a traditional payment of principal and interest, to choose an interest only payment, or to choose a minimum payment that could be less than interest only
Which of the following best describes the object of a convertible ARM
To convert from an adjustable to a fixed rate loan
The purpose of interest rate caps regarding ARMs is which of the following
To eliminate large and frequent mortgage payment increases
Which of the following is the most adequate definition of rescind
To withdraw, to take back, or to annul or to vacate
Which of the following is a false statement regarding buydown plans
When discount points enter the equation, qualifying standards are more stringent for the borrower
When required, the CHARM booklet must be provided at which of the following times
When the loan application is made or before the payment of any non-refundable fees