Mixed Deck — All CMA Topics Flashcards
99 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 20 Mixed Deck — All CMA Topics flashcards as text
A borrower chooses a 15-year mortgage over a 30-year mortgage at the same rate. Compared to the 30-year loan, the 15-year mortgage will:
Answer: Have a higher monthly payment and significantly less total interest
A 15-year mortgage has higher monthly payments but dramatically reduces total interest paid and builds equity far more quickly.
A non-English-speaking client is applying for a mortgage. What is the advisor's responsibility under fair lending principles?
Answer: Provide or arrange for translated materials and clear communication to ensure the client understands all loan terms and disclosures
Fair lending principles and the Equal Credit Opportunity Act prohibit discrimination based on national origin, requiring advisors to make reasonable accommodations.
An investor purchases a duplex with an FHA loan and lives in one unit while renting the other. This strategy is commonly called:
Answer: House hacking
House hacking involves living in one unit of a multi-family property while renting the others to offset or eliminate housing costs.
During a period of economic recession, what is the most probable government and market response regarding interest rates?
Answer: The Federal Reserve will lower key interest rates to stimulate economic activity.
In an economic downturn or recession, the Federal Reserve's typical response is to lower the federal funds rate. This action makes borrowing cheaper for banks, and these savings are generally passed on to consumers and businesses, leading to lower mortgage rates. The goal is to encourage borrowing and spending to stimulate economic growth.
Under federal mortgage servicing rules, a borrower's loan is generally considered delinquent when a payment is how many days past due?
Answer: 30 days past the due date
A mortgage is typically reported as delinquent and triggers servicer action protocols when a payment is 30 days past the contractual due date.
When a client asks for an advisor's personal opinion on whether home prices will rise or fall, the ethical response is to:
Answer: Clarify that market timing is uncertain and provide factual current market data instead
Advisors must distinguish between factual data and speculation, avoiding predictions that could unduly influence major client decisions.
Which mortgage product typically offers the lowest initial interest rate but carries the most payment uncertainty after the initial period?
Answer: Adjustable-rate mortgage (ARM)
ARMs offer lower initial 'teaser' rates, but after the fixed period ends, payments can fluctuate based on market index changes.
What is the primary purpose of a Verification of Employment (VOE) in underwriting?
Answer: To verify current employment status, position, and income accuracy
A VOE confirms that the borrower is actively employed, validates their stated position, and verifies income figures provided on the application.
In the TBA (To-Be-Announced) market, what is typically settled on trade settlement date?
Answer: The specific pool identifiers, face value, and price
At TBA settlement, the seller announces the specific pool(s) — including CUSIP, face value, and price — that will be delivered to fulfill the forward trade.
What does 'market value' mean in the context of a real estate appraisal?
Answer: The most probable price a property would sell for in an arm's-length transaction
Market value is the most probable price a property would fetch in a competitive, open market under fair conditions between informed parties.
What is a 'clear to close' (CTC) in the mortgage process?
Answer: The underwriter's final approval indicating all conditions have been satisfied
A 'clear to close' is issued by the underwriter once all loan conditions and prior-to-close (PTC) conditions have been satisfied.
What is the minimum credit score typically required for an FHA loan with a 3.5% down payment?
Answer: 580
FHA guidelines require a minimum 580 FICO score for the 3.5% down payment option; scores between 500–579 require 10% down.
Under the TILA-RESPA Integrated Disclosure (TRID) rule, which of the following events would trigger a new three-business-day waiting period for the Closing Disclosure?
Answer: The lender adds a prepayment penalty to the loan terms.
According to the TRID rule, a new three-business-day waiting period for the Closing Disclosure is required if there is a change to the loan product, the APR becomes inaccurate (generally a change of more than 1/8 of a percent for fixed-rate loans), or a prepayment penalty is added. A decrease in the loan amount, a seller credit, or a small decrease in the APR would not typically trigger a new waiting period.
What is a key factor considered in mortgage underwriting?
Answer: The borrower's credit score and income level
In mortgage underwriting, a borrower's credit score and income level are paramount factors. The credit score reflects their history of managing debt and indicates their likelihood of repaying the new loan, while their income level demonstrates their capacity to make regular mortgage payments. Underwriters use these metrics to assess financial stability and determine the borrower's overall eligibility and the terms of the loan.
Under the Dodd-Frank Act's mortgage servicing rules, a servicer must acknowledge receipt of a written borrower request for loss mitigation within:
Answer: 5 business days
Servicers must acknowledge a complete loss mitigation application within 5 business days as required by CFPB mortgage servicing rules under Dodd-Frank.
The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to investigate disputes within how many days?
Answer: 30 days
The FCRA generally requires consumer reporting agencies to complete their investigation of a consumer's dispute within 30 days of receiving it.
A borrower receives a Closing Disclosure (CD) from their lender. Three days later, but before closing, the lender discovers a tolerance violation that requires a refund to the borrower. Which of the following is the correct procedure for the lender to follow?
Answer: A new 3-day waiting period is not required, and the correction can be shown on a revised CD provided at closing.
According to the TILA-RESPA Integrated Disclosure (TRID) rule, a new 3-day waiting period for the Closing Disclosure is only triggered by three specific changes: 1) The APR becomes inaccurate, 2) The loan product changes, or 3) A prepayment penalty is added. A tolerance violation refund does not fall into these categories, so a revised CD can be provided at or before consummation without restarting the waiting period.
What is the purpose of IRS Form 4506-C in the mortgage lending process?
Answer: To authorize the lender to obtain the borrower's tax transcripts directly from the IRS
Form 4506-C authorizes lenders to request tax return transcripts from the IRS to verify borrower-provided income documentation.
Which mortgage feature allows a borrower to recapture principal payments and redraw them like a line of credit?
Answer: All-in-one mortgage
An all-in-one mortgage combines a checking account with a mortgage, allowing borrowers to deposit income directly and redraw funds as needed, reducing interest daily.
Which of the following best describes a 'full documentation' loan?
Answer: A loan requiring complete income, asset, and employment verification with supporting documents
Full documentation loans require borrowers to provide verifiable proof of income, employment, and assets, giving lenders the most complete risk picture.