CMB Underwriting & Risk Management 2

Question 1

A borrower has gross monthly income of $8,000, a proposed PITI of $2,000, and other monthly debts of $800. What is the back-end DTI ratio?

Accepted Answer

35%

Answer

Back-end DTI = ($2,000 + $800) / $8,000 = 35%.

Question 2

Under the CFPB's Ability-to-Repay rule, how many underwriting factors must a creditor consider at minimum?

Accepted Answer

Eight

Answer

Regulation Z §1026.43(c) lists eight factors, including income, employment, payment, simultaneous loans, obligations, DTI or residual income, and credit history.

Question 3

Which of these is generally treated as a valid compensating factor for a DTI ratio above standard guidelines?

Accepted Answer

Significant post-closing cash reserves

Answer

Substantial verified liquid reserves show the borrower can absorb payment shocks, so they are a common compensating factor.

Question 4

A property appraised at $400,000 is purchased for $380,000 with a first mortgage of $304,000 and a second lien of $38,000. What is the CLTV?

Accepted Answer

90%

Answer

CLTV uses the lesser of price or value: ($304,000 + $38,000) / $380,000 = 90%.

Question 5

For a self-employed borrower, how many years of tax returns do conventional underwriting guidelines typically require?

Accepted Answer

Two years, though one may be allowed with strong AUS findings

Answer

Fannie Mae and Freddie Mac usually require two years of returns, with one year sometimes acceptable when AUS findings support it.

CMB - Certified Mortgage Banker Practice Test

CMB - Certified Mortgage Banker Practice Test

CMB Underwriting & Risk Management 2