General Mortgage Knowledge Practice

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  1. The acronym PFC stands for:

    A. paid from closing costs
    B. prepayment for a creditor
    C. prepaid finance charge
    D. prequalification of financed credit
    C. prepaid finance charge
    (this multiple choice question has been scrambled)
  2. Why are FHA loans beneficial to lenders?

    A. they do not require down payment
    B. they don't require escrows or other complicated accounting
    C. they are insured by the federal government
    D. they are only made to low income borrowers
    C. they are insured by the federal government
    (this multiple choice question has been scrambled)
  3. The Cost of Funds Index is traditionally used to determine interest rates on what type of loans?

    A. reverse mortgages
    B. home equity lines of credit
    C. rate adjustments on adjustable rate programs
    D. 15 and 30 year fixed rate programs
    C. rate adjustments on adjustable rate programs
    (this multiple choice question has been scrambled)
  4. A loan adjustment based on LIBOR is affected by the:

    A. Lifetime Insured Broker's Origination Rate
    B. London Interbank Offered Rate
    C. Lender's Index of Broker Originations
    D. Loan Index Banking Offer Rate
    B. London Interbank Offered Rate
    (this multiple choice question has been scrambled)
  5. 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. option ARM
    B. 80-10-10
    C. reverse mortgage
    D. adjustable rate mortgage
    A. option ARM
    (this multiple choice question has been scrambled)
  6. What does the acronym APR stand for?

    A. annual property ratio
    B. appropriate pricing ratio
    C. annual percentage rate
    D. appraised property ratio
    C. annual percentage rate
    (this multiple choice question has been scrambled)
  7. 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
    B. a non-conforming loan
    (this multiple choice question has been scrambled)
  8. 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. transmittal
    C. reconveyance
    D. redemption
    C. reconveyance
    (this multiple choice question has been scrambled)
  9. A MIP is mandatory when a loan is:

    A. a VA loan
    B. an FHA loan
    C. a non-conforming loan
    D. a conforming loan with a down payment of 20% or less
    B. an FHA loan
    (this multiple choice question has been scrambled)
  10. A mortgage insurance premium is mandatory:

    A. for 1 year
    B. for 5 years
    C. until loan-to-value reaches 80%
    D. until equity reaches 22%
    B. for 5 years
    (this multiple choice question has been scrambled)
  11. Which of the following loan programs does not require credit or income documentation and does not require repayment?

    A. NINA
    B. HELOC
    C. Option ARM
    D. Reverse Mortgage
    D. reverse mortgage
    (this multiple choice question has been scrambled)
  12. If a lender agrees to subordinate a loan, what has occurred?

    A. the loan has been approved
    B. the borrower is defaulting on his/her debt obligation
    C. the borrower has obtained a second lien
    D. the loan has been paid off
    C. the borrower has obtained a second lien
    (this multiple choice question has been scrambled)
  13. 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
    (this multiple choice question has been scrambled)
  14. 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 loan with a balloon payment provision
    B. an adjustable mortgage loan
    C. a reverse mortgage
    D. a 2/1 buy down
    A. a loan with a balloon payment provision
    (this multiple choice question has been scrambled)
  15. Which of the following would address the principal and interest payments due on a loan?

    A. the amortization schedule
    B. the index
    C. life of the loan caps
    D. the margin
    A. the amortization schedule
    (this multiple choice question has been scrambled)
  16. What is Fannie Mae's purpose in the secondary market?

    A. to provide insurance for loans
    B. to approve loans
    C. to fund loans
    D. to provide a source of funds for lenders
    D. to provide a source of funds for lenders
    (this multiple choice question has been scrambled)
  17. Which of the following loans are assumable?

    A. VA loans
    B. FHA loans
    C. Conforming loans
    D. Jumbo loans
    A. VA loans
    (this multiple choice question has been scrambled)
  18. The Federal Housing Administration:

    A. securitizes loans
    B. guarantees loans
    C. makes loans
    D. insures loans
    D. insures loans
    (this multiple choice question has been scrambled)
  19. USDA loans are primarily for properties located in:

    A. rural areas
    B. suburban areas
    C. urban areas
    D. metropolitan areas
    A. rural areas
    (this multiple choice question has been scrambled)
  20. 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. 80-10-10
    C. option ARM
    D. adjustable rate mortgage
    C. option ARM
    (this multiple choice question has been scrambled)
  21. Mortgage backed securities (MBSs) are a product of which of the following?

    A. the secondary market
    B. the primary market
    C. stock market volatility
    D. increased subprime originations
    A. the secondary market
    (this multiple choice question has been scrambled)
  22. Increasing loan balances resulting from the application of periodic payments creates which of the following for borrowers:

    A. payment shock
    B. negative equity
    C. lower credit scores
    D. negative amortization
    D. negative amortization
    (this multiple choice question has been scrambled)
  23. VA loans require which of the following?

    A. eligibility fee
    B. funding fee
    C. mortgage insurance premium
    D. VA appraiser premium
    B. funding fee
    (this multiple choice question has been scrambled)
  24. Fannie Mae and Freddie Mac securitize what type of mortgage loans?

    A. conventional loans
    B. subprime loans
    C. non-conforming loans
    D. VA loans
    A. conventional loans
    (this multiple choice question has been scrambled)
  25. 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. USDA loan
    D. Ginnie Mae loan
    B. conventional loan
    (this multiple choice question has been scrambled)
  26. Which of the following is an example of open-ended credit?

    A. Adjustable Rate Mortgage
    B. Graduated Payment Mortgage
    C. HELOC
    D. HECM
    C. HELOC
    (this multiple choice question has been scrambled)
  27. 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
    (this multiple choice question has been scrambled)
  28. 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 conventional loan
    C. a government loan such as FHA or VA
    D. a non-conforming loan
    D. a non-conforming loan
    (this multiple choice question has been scrambled)
  29. 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 inability of the borrower to refinance the loan due to HOEPA restrictions
    C. the high probability of default on these types of loans
    D. the fact that nontraditional ARMs are often linked to predatory lending
    A. the possibility of payment shock when amortizing payments begin
    (this multiple choice question has been scrambled)
  30. 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
    (this multiple choice question has been scrambled)
  31. 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. there is a greater potential for late payments
    B. the borrower ends up making an extra mortgage payment per year
    C. lenders/servicers often charge a fee for administering the bi-weekly plan
    D. interest rates are usually not as competitive for bi-weekly loans
    B. the borrower ends up making an extra mortgage payment per year
    (this multiple choice question has been scrambled)
  32. 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
    D. index and margin
    (this multiple choice question has been scrambled)
  33. Margin is defined as:

    A. the maximum -up or down- that an interest rate can ever adjust on an ARM
    B. the amount above the index that an interest rate can adjust for an ARM
    C. the range of flexibility an interest rate has between caps on traditional ARMs
    D. the amount of compensation earned by a mortgage professional for originating an ARM
    B. the amount above the index that an interest rate can adjust for an ARM
    (this multiple choice question has been scrambled)
  34. Which of the following loans might be used to finance a property in a high cost geographic region of the country?

    A. jumbo loan
    B. loan with a balloon feature
    C. reverse mortgage
    D. non-conventional loan
    A. jumbo loan
    (this multiple choice question has been scrambled)
  35. What factors do lenders analyze in order to determine if a borrower will be financially able to meet the demands of loan repayment?

    A. length of the loan term
    B. value of the subject property
    C. size of the borrower's existing debt burden
    D. size of the loan the borrower is applying for
    C. size of the borrower's existing debt burden
    (this multiple choice question has been scrambled)
Author:
Holly
ID:
372
Card Set:
General Mortgage Knowledge Practice
Updated:
2009-10-19 17:16:21
Tags:
Mortgage
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General Mortgage Knowledge Practice Questions
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