CMC Advanced Mortgage Products 5

Question 1

A portfolio loan differs from a conforming loan primarily because:

Accepted Answer

The lender retains the loan on its own books instead of selling it to the secondary market

Answer

Portfolio loans are held by the originating lender rather than sold, allowing lenders to apply their own underwriting criteria outside of agency guidelines.

Question 2

An energy-efficient mortgage (EEM) allows a borrower to finance the cost of energy improvements. How does this benefit the borrower's qualification?

Accepted Answer

It allows the borrower to exceed standard debt-to-income ratios by the projected energy savings

Answer

An EEM allows borrowers to stretch qualifying ratios by the amount of projected monthly energy savings, recognizing that lower utility costs improve overall payment affordability.

Question 3

Which statement correctly describes the 'teaser rate' on an ARM product?

Accepted Answer

It is a below-market introductory rate that does not reflect the index plus margin

Answer

A teaser rate is an artificially low introductory rate offered on an ARM that is not calculated from the index plus margin, designed to attract borrowers with lower initial payments.

Question 4

A lender offers a 'no-cost' mortgage refinance. What actually happens to the costs in this arrangement?

Accepted Answer

The costs are rolled into the loan balance or offset by a higher interest rate (lender credit)

Answer

In a no-cost mortgage, closing costs are either added to the loan amount or the borrower accepts a higher interest rate that generates a lender credit to cover the fees.

Question 5

When a lender offers a 'hybrid ARM,' what does the 'hybrid' designation specifically refer to?

Accepted Answer

A fixed-rate period at the start followed by an adjustable-rate period

Answer

A hybrid ARM combines a fixed-rate initial period (e.g., 5 or 7 years) with a subsequent adjustable-rate period, blending features of both fixed and adjustable mortgages.

(CMC) Certified Mortgage Consultant Practice Test

(CMC) Certified Mortgage Consultant Practice Test

CMC Advanced Mortgage Products 5