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

Fannie Mae allows DTI up to 45–50% with DU approval or strong compensating factors, but 43% may require scrutiny beyond the standard 36% guideline.

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

Self-employed borrowers generally must provide two years of personal and business tax returns along with a year-to-date profit and loss statement.

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

Layered risk occurs when a borrower presents multiple marginal risk factors simultaneously, such as high LTV combined with low credit score and high DTI.

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

Lenders use the lesser of appraised value or purchase price; the loan of $270,000 divided by the appraised value of $280,000 yields ~96.4% LTV.

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

A VOE confirms that the borrower is actively employed, validates their stated position, and verifies income figures provided on the application.

(CMA) Certified Mortgage Advisor Practice Test

(CMA) Certified Mortgage Advisor Practice Test

CMA Underwriting and Risk Assessment 2