CCC CCC Housing & Mortgage Counseling 2

Question 1

When counseling a client facing foreclosure, what is the primary purpose of a 'loss mitigation' review?

Accepted Answer

To explore options that avoid foreclosure and minimize losses for both borrower and lender

Answer

Loss mitigation refers to a lender's process of working with borrowers to find alternatives to foreclosure that reduce financial loss for both parties.

Question 2

A client wants to sell their home but owes more than the current market value. Which option allows them to sell the property for less than the outstanding mortgage balance with lender approval?

Accepted Answer

Short sale

Answer

A short sale allows a homeowner to sell the property for less than owed on the mortgage, with the lender's agreement to accept the reduced proceeds.

Question 3

What is private mortgage insurance (PMI) and when is it typically required?

Accepted Answer

Insurance protecting the lender against default; typically required when LTV exceeds 80%

Answer

PMI protects the lender if the borrower defaults and is generally required when the down payment is less than 20% (LTV above 80%).

Question 4

Under the Homeowners Protection Act, when must a lender automatically cancel PMI on a conventional mortgage?

Accepted Answer

When the loan reaches 78% LTV based on original amortization schedule

Answer

The Homeowners Protection Act requires automatic PMI cancellation when the loan balance reaches 78% of the original property value based on the scheduled payment date.

Question 5

What is the primary difference between a home equity loan and a home equity line of credit (HELOC)?

Accepted Answer

A home equity loan provides a lump sum at a fixed rate; a HELOC is a revolving credit line

Answer

A home equity loan disburses a lump sum with a fixed interest rate, while a HELOC functions like a revolving credit line with a variable rate.

CCC Practice Test

CCC Practice Test

CCC CCC Housing & Mortgage Counseling 2