SOMB 1 Practice Test

Betty is under contract to purchase a home for $420k. The home appraised for $415k. Betty's mortgage lender will permit an LTV of 80%. What is the loan amount?

$332K

Documents Servicers may send to a new borrower after closing include

- ACH direct deposit form - Loan amortization schedule - Welcome letter

Adjustable Rate Mortgage characteristics

- Amount of monthly payments may change when the interest rate adjusts - ARMs may have an annual and lifetime cap governing how much the interest rate may change

A fraud scheme might include fabrication of

- Bank accounts - Rental history - Buyer - Income/employment

Sources of loan servicing income

- Float income - Servicing fees

What does the Mortgage Bankers Association Canon of Ethics contain ethical standards pertaining to?

- Honesty in advertising - Confidentiality - Compliance with laws

Goals of the closing process include:

- Legally valid transfer of title and recording of lender's security instrument - Compliance with all lender/investor requirements - Compliance with all applicable laws/regulations

Long-term capital market investments are

- Mortgages - Corporate bonds

Stages of loan production

- Origination - Processing - Underwriting - Closing

Benefits of an AUS system?

- Provides consistency and efficiency - Preliminary underwriting is done at the time of application

Factors that affect an investor's appetite for certain loan products?

- Risk of default or loss - Exaggerated prepayment speeds - Costs to service based upon structure - Risk for potential fraud - Liquidity

The increased number of payments that come with a bi-weekly mortgage results in the following:

- Total interest cost on the loan is reduced - Principal amortizes more quickly - Loan is paid off faster

Wholesale lenders can perfrom

- Underwriting - Closing - Funding

Which of the following is a responsibility of the closer?

- conclude a transaction - interact with the title and escrow companies

Ancillary servicing income includes

- payoff quotes - Late fees

Auditors should audit what percentage of high risk loans?

100%

Relationship between gross monthly income and monthly payment obligation for mortgage principal, income, taxes, insurance and any other applicable housing expenses

Borrower's housing expense ratio or front-end ratio

Yield, stated as a percentage, measures the amount and timing of ___________ a mortgage will generate and the potential for _____________

Cash flow; default

In order to keep ahead of shipping deadlines, a company's shipping department should

Communicate regularly with the secondary marketing department

If a mortgage company refuses to lend money in a particular area/jurisdiction/neighborhood they may be violating the

Community Reinvestment Act (CRA)

Non-interest-paying deposits made by the lender into the lender's demand deposit account at a warehouse bank are called

Compensation balances

If three people purchase a property as joint tenants with right of survivorship and one dies, the other two can

Convey 100% ownership to one of the surviving parties

When real property is conveyed by eminent doman

The govt must pay the owner fair compensation

It is important to record the lender's mortgage so tht

The lender has the correct lien/security position or priortiy

In warehouse process, the warehouse bank is repaid when

The lender sells the loan to an investor

LTV is the relationship between

The loan amount and the lesser of the real property's sale price or appraised value

Escrow is

The portion of the mortgage payment that is used to pay the real estate taxes, insurance, and mortgage insurance

If the interest rate is at par, the price the investor will offer is

The same

The period between the lender's or the warehouse lender's release of funds and its receipt of the collateral documents is called

Wet-funded stage

In fraud for housing/property, people submit false or altered documents related to

Income

An Alt-A product that does not cause the balance of the loan to decrease and does not build equity in the home unless the value increases

Interest Only

What does the Mortgage Banking Association Canon of Ethics say concerning competition?

It supports healthy competition in the real estate finance industry

Real property is

Land and everything permanently attached to it

Secondary market is where

Lenders, investors, and GSE's buy and sell existing mortgages

If a deed clause says that someone may only live at the property for their lifetime, it is a

Life estate deed

Wholesale production is more risky for the mortgage lender because

Loan quality might be more difficult to monitor

Goal of cost minimization in loan administration

Make every effort to avoid foreclsoures

FHA charges a _____________ to protect lenders in the event the borrower fails to repay the mortgage loan

Mortgage Insurance Premium (MIP)

A jumbo or super jumbo loan is considered to be a ____________________ loan product, while a loan that is eligible for purchase by Fannie Mae or Freddie Mac is most likely a _______________ loan product.

Non-comforming; conforming

Borrower purchased a property with a loan that had a residency clause (i.e. must live in home for 3 years), but never lived in the home. This is considered

Occupancy fruad

Wholesale production channels allow mortgage lenders to

Reach groups of customers that they would not have otherwise reached

Offers a guarantee that carries the full faith and credit of the United States and allows lenders to sell the MBSs to investors for a higher price than they would get for the whole mortgages

Ginnie Mae

Stable Income

Has been received by the borrower for two years and is expected to continue for another three years

Loan admin goal to best achieve reducing risk

Hedge the servicing portfolioo

For pre-closing quality assurance audit purposes, loans originated by a newly licensed employee are considered

High risk

Loan admin goal that best achieves Reducing costs

increasing economies of scale by purchasing supplies in bulk

Michael signed a real estate contract to purchase a home for $200k. He is selling a house and will net $60k. If he uses the proceeds as a down payment, what will be his LTV?

70%

A mortgage banker and an investor decide to share the default risk of making a loan on an investment property with which type of agreement?

A participation loan sale

Wholesale lending may involve table funding, which means

A third-party originator closes the loan in its own name for simultaneous assignment to the investo who advanced money to fund the closing

Relationship between gross monthly income and monthly housing expenses and payment obligations on long-term debts

Borrower's DTI ratio or back-end ratio

Which of the following is a responsibility of the underwriter?

Accept or reject loan applications

Mary earns $65.4K/yr. Her car payment is $400/mth. She currently owes MC $2500 and Target $250. She is purchasing a townhouse with $100 HOA and proposed PITI is $965. What is her front-end ratio?

20%

Belinda Borrower earns $48k a year. She leases her car for $200/mth. She currently owes Visa $1500 and Macy's $500. She is purchasing a condo with monthly condo fees of $150 and her proposed PITI is $850. What is her front-end ratio (housing ratio)?

25%

To transfer ownership rights from one mortgage company to another an

Assignment is required

The loan processor should regularly communicate with the underwriter to

Better anticipate the underwriter's concerns about particular loans to ensure "clean" submissions to the underwriter

Security instrument with three parties

Deed of Trust

In TILA, lenders must provide the borrower what info regarding ARMs?

Disclose general and specific info about the loan's variable rate feature

Best strategy for creating customer goodwill in loan administrataion

Display a positive customer service attitude

Terminology used in situations where fraud is suspected, but not proven

Documentation discrepancies

Loan types with the greatest risk of default based solely on the borrower's source of income and loan type?

Self-employed borrower and ARM

What is the process of transferring loan documents to a warehouse bank or an investor called?

Shipping

Allows a borrower in default to sell property for less than what is owed

Short sale

An email message that attempts to fraudulently redirect closing costs to a perpetrator's account is called

Spoofing

Loan admin goal that best achieves creating goodwill

display a customer service attitude