General Mortgage Knowledge Practice

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Author:
Holly
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372
Filename:
General Mortgage Knowledge Practice
Updated:
2009-10-19 13:16:21
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Mortgage
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General Mortgage Knowledge Practice Questions
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  1. The acronym PFC stands for:

    A. prepaid finance charge
    B. prepayment for a creditor
    C. prequalification of financed credit
    D. paid from closing costs
    A. prepaid finance charge
    (this multiple choice question has been scrambled)
  2. 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
    (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. rate adjustments on adjustable rate programs
    B. 15 and 30 year fixed rate programs
    C. home equity lines of credit
    D. reverse mortgages
    A. 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. Lender's Index of Broker Originations
    C. Loan Index Banking Offer Rate
    D. London Interbank Offered Rate
    D. 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. adjustable rate mortgage
    C. 80-10-10
    D. reverse mortgage
    A. option ARM
    (this multiple choice question has been scrambled)
  6. What does the acronym APR stand for?

    A. appropriate pricing ratio
    B. annual property ratio
    C. appraised property ratio
    D. annual percentage rate
    D. 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 non-conforming loan
    B. a government loan such as FHA or VA
    C. a subprime loan
    D. a conventional loan
    A. 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. redemption
    B. transmittal
    C. acceleration
    D. reconveyance
    D. reconveyance
    (this multiple choice question has been scrambled)
  9. A MIP is mandatory when a loan is:

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

    A. for 1 year
    B. until equity reaches 22%
    C. until loan-to-value reaches 80%
    D. for 5 years
    D. 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. HELOC
    B. Reverse Mortgage
    C. NINA
    D. Option ARM
    B. 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 paid off
    B. the borrower is defaulting on his/her debt obligation
    C. the borrower has obtained a second lien
    D. the loan has been approved
    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. HECM
    C. ARM
    D. SISA
    B. 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 2/1 buy down
    B. an adjustable mortgage loan
    C. a reverse mortgage
    D. a loan with a balloon payment provision
    D. 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. life of the loan caps
    B. the index
    C. the margin
    D. the amortization schedule
    D. the amortization schedule
    (this multiple choice question has been scrambled)
  16. What is Fannie Mae's purpose in the secondary market?

    A. to provide a source of funds for lenders
    B. to fund loans
    C. to provide insurance for loans
    D. to approve loans
    A. 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. Jumbo loans
    C. FHA loans
    D. Conforming loans
    A. VA loans
    (this multiple choice question has been scrambled)
  18. The Federal Housing Administration:

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

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

    A. increased subprime originations
    B. stock market volatility
    C. the primary market
    D. the secondary market
    D. 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. negative equity
    B. payment shock
    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. VA appraiser premium
    B. funding fee
    C. mortgage insurance premium
    D. eligibility fee
    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. VA loans
    C. subprime loans
    D. non-conforming 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. USDA loan
    C. conventional loan
    D. Ginnie Mae loan
    C. conventional loan
    (this multiple choice question has been scrambled)
  26. Which of the following is an example of open-ended credit?

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

    A. the amount of compensation earned by a mortgage professional for originating an ARM
    B. the maximum -up or down- that an interest rate can ever adjust on an ARM
    C. the amount above the index that an interest rate can adjust for an ARM
    D. the range of flexibility an interest rate has between caps on traditional ARMs
    C. 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. reverse mortgage
    B. non-conventional loan
    C. loan with a balloon feature
    D. jumbo loan
    D. 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. value of the subject property
    B. size of the loan the borrower is applying for
    C. length of the loan term
    D. size of the borrower's existing debt burden
    D. size of the borrower's existing debt burden
    (this multiple choice question has been scrambled)

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