CMA Underwriting and Risk Assessment 2

Question 1

A borrower has a 43% back-end DTI ratio. Under conventional Fannie Mae guidelines, what is the most likely outcome?

Accepted Answer

Approval may require compensating factors or DU approval

Answer

Automatic approval with no conditions

Answer

Automatic denial regardless of other factors

Answer

The loan must be restructured to a 15-year term

Question 2

Which documentation is typically required to verify self-employment income for a mortgage application?

Accepted Answer

Two years of personal and business tax returns plus a year-to-date P&L

Answer

One year of W-2s and a recent pay stub

Answer

A signed letter from the borrower's accountant

Answer

Six months of bank statements only

Question 3

In mortgage underwriting, what does the term 'layered risk' refer to?

Accepted Answer

The combination of several risk factors that together increase default probability

Answer

Multiple lenders participating in a single loan

Answer

A tiered pricing structure based on credit score

Answer

The process of splitting a loan into senior and junior tranches

Question 4

A property appraises for $280,000 but the purchase price is $300,000. The borrower is putting 10% down based on purchase price. What is the LTV the lender will use?

Accepted Answer

96.4% based on appraised value ($270,000 loan / $280,000)

Answer

90% based on purchase price ($270,000 loan)

Answer

93.3% based on appraised value

Answer

100% because the loan exceeds appraised value

Question 5

What is the primary purpose of a Verification of Employment (VOE) in underwriting?

Accepted Answer

To verify current employment status, position, and income accuracy

Answer

To confirm the borrower's educational credentials

Answer

To check for criminal background at the workplace

Answer

To establish the borrower's net worth

Question 6

A borrower's credit report shows a mortgage late payment 18 months ago. Under standard conventional guidelines, how is this typically treated?

Accepted Answer

It may result in a risk overlay, rate adjustment, or denial depending on severity and lender guidelines

Answer

It is ignored if the borrower provides a letter of explanation

Answer

It automatically disqualifies the borrower for 7 years

Answer

It only matters if it occurred within the past 12 months

Question 7

Which of the following best describes a 'full documentation' loan?

Accepted Answer

A loan requiring complete income, asset, and employment verification with supporting documents

Answer

A loan requiring only a credit report and application

Answer

A loan where the borrower's stated income is accepted without verification

Answer

A loan insured by a government agency