Loan Servicing and Portfolio Management Flashcards
7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Loan Servicing and Portfolio Management flashcards as text
In mortgage portfolio management, which metric is most commonly used to measure the speed at which borrowers are prepaying their mortgages?
Answer: Constant Prepayment Rate (CPR)
The Constant Prepayment Rate (CPR) expresses the annualized percentage of the outstanding loan balance expected to be prepaid in a given period, a key metric in portfolio analysis.
When Fannie Mae or Freddie Mac purchases a mortgage from a lender, the lender typically retains the right to continue servicing that loan under a:
Answer: Servicing retained agreement
Under a servicing retained arrangement, the originating lender sells the loan to an investor like Fannie Mae or Freddie Mac but keeps the servicing rights and the associated servicing fee income.
The 'servicing spread' in mortgage portfolio management refers to:
Answer: The difference between the note rate and the rate passed through to investors
The servicing spread is the portion of the note rate retained by the servicer as compensation for administering the loan, representing the difference between what the borrower pays and what the investor receives.
Which government program, introduced during the 2008 financial crisis, provided a framework for servicers to offer standardized loan modifications to eligible distressed borrowers?
Answer: Making Home Affordable (MHA) / HAMP
The Home Affordable Modification Program (HAMP), part of Making Home Affordable, established standardized guidelines for servicers to modify qualifying loans for borrowers facing financial hardship.
A mortgage servicer's 'advancing obligation' means that the servicer must:
Answer: Advance funds to the investor even when the borrower has not made a payment
Most mortgage-backed securities (MBS) require servicers to advance scheduled principal and interest payments to investors even when borrowers are delinquent, creating significant liquidity demands on servicers.
Which of the following best describes 'escrow analysis' in loan servicing?
Answer: An annual review to verify that escrow collections are sufficient to cover upcoming tax and insurance payments
Servicers perform an annual escrow analysis to ensure the account balance is adequate to cover projected property tax and insurance payments, adjusting monthly contributions as needed.
When a mortgage is in active foreclosure, which party typically has the authority to approve a short sale or other loss mitigation option?
Answer: The investor or investor's authorized servicer managing the loan
The investor who owns the mortgage (or their authorized servicer acting on their behalf) must approve any loss mitigation option including short sales, as these decisions affect the investor's financial interest.