CCC CCC Housing & Mortgage Counseling 1 — Questions and Answers
Question 1: Which federal agency oversees the approval of HUD-certified housing counseling agencies in the United States?
- The Federal Reserve
- The U.S. Department of Housing and Urban Development (HUD) (Correct answer)
- The Consumer Financial Protection Bureau (CFPB)
- The Federal Housing Finance Agency (FHFA)
Correct answer: The U.S. Department of Housing and Urban Development (HUD)
HUD approves and oversees housing counseling agencies that provide federally supported counseling services.
Question 2: A client is struggling to pay their mortgage after a job loss. Which foreclosure prevention option allows the lender to temporarily reduce or suspend mortgage payments?
- Deed-in-lieu of foreclosure
- Short sale
- Forbearance agreement (Correct answer)
- Loan modification
Correct answer: Forbearance agreement
A forbearance agreement temporarily reduces or pauses mortgage payments while the borrower experiences a short-term hardship.
Question 3: What does the term 'loan-to-value ratio' (LTV) represent in mortgage lending?
- The borrower's monthly payment divided by their gross income
- The loan amount divided by the appraised value of the property (Correct answer)
- The total interest paid over the life of the loan
- The ratio of principal to interest in each payment
Correct answer: The loan amount divided by the appraised value of the property
LTV is calculated by dividing the mortgage loan amount by the appraised property value, expressed as a percentage.
Question 4: Under the Real Estate Settlement Procedures Act (RESPA), what document must lenders provide to borrowers within three business days of receiving a mortgage application?
- Closing Disclosure
- Truth in Lending Statement
- Loan Estimate (Correct answer)
- Good Faith Estimate
Correct answer: Loan Estimate
RESPA (as amended by TRID rules) requires lenders to provide a Loan Estimate within three business days of application.
Question 5: A client's mortgage payment exceeds 28% of their gross monthly income. According to conventional guidelines, this is referred to as which type of ratio?
- Back-end ratio
- Debt-to-income ratio
- Front-end ratio (Correct answer)
- Housing expense ratio
Correct answer: Front-end ratio
The front-end (or housing expense) ratio measures housing costs as a percentage of gross income, with 28% being the conventional guideline.
Question 6: Which type of mortgage has an interest rate that adjusts periodically based on a financial index after an initial fixed period?
- Fixed-rate mortgage
- Balloon mortgage
- Adjustable-rate mortgage (ARM) (Correct answer)
- Interest-only mortgage
Correct answer: Adjustable-rate mortgage (ARM)
An ARM features a fixed rate for an initial period, after which the rate adjusts periodically based on a benchmark index.
CCC CCC Housing & Mortgage Counseling 1
Which federal agency oversees the approval of HUD-certified housing counseling agencies in the United States?