CMC Mortgage Products and Practices 2

Question 1

Which loan feature allows a borrower to convert from an adjustable rate to a fixed rate without refinancing?

Accepted Answer

Conversion option

Answer

A conversion option in an ARM allows the borrower to switch to a fixed rate at specified times without a full refinance.

Question 2

What is the primary purpose of a piggyback loan (80-10-10)?

Accepted Answer

To avoid paying private mortgage insurance

Answer

An 80-10-10 piggyback combines an 80% first mortgage and 10% second mortgage so the borrower avoids PMI with only 10% down.

Question 3

A balloon mortgage with a 5/25 structure means the loan has:

Accepted Answer

Payments amortized over 25 years with full balance due in 5 years

Answer

A 5/25 balloon is amortized as a 25-year loan but the remaining balance becomes due in full after 5 years.

Question 4

Which index is commonly used for adjusting rates on Home Equity Lines of Credit (HELOCs)?

Accepted Answer

Prime Rate

Answer

HELOCs are typically indexed to the Prime Rate, which moves with the federal funds rate.

Question 5

Under the TRID rule, when must the Loan Estimate be delivered to the borrower?

Accepted Answer

Within 3 business days of receiving a complete loan application

Answer

TRID requires the Loan Estimate to be provided within 3 business days of receiving the six triggering pieces of application information.

(CMC) Certified Mortgage Consultant Practice Test