CMC Mortgage Products and Practices 3

Question 1

What distinguishes a USDA Rural Development Guaranteed Loan from a USDA Direct Loan?

Accepted Answer

Direct loans are made by USDA itself; Guaranteed loans are made by approved lenders with USDA backing

Answer

USDA Direct loans are funded and serviced by USDA for very-low-income borrowers, while Guaranteed loans are made by approved lenders and backed by USDA.

Question 2

In a hybrid ARM, the notation '7/1 ARM' means:

Accepted Answer

The rate is fixed for 7 years then adjusts annually

Answer

In a hybrid ARM, the first number is the fixed-rate period in years and the second is the adjustment frequency in years thereafter.

Question 3

Which of the following best describes a 'teaser rate' on an ARM?

Accepted Answer

An artificially low introductory rate below the fully-indexed rate

Answer

A teaser rate is an introductory ARM rate set below the fully-indexed rate (index + margin) to attract borrowers.

Question 4

What is the MIP structure for an FHA loan with a term greater than 15 years and LTV above 90% at origination?

Accepted Answer

MIP is required for the life of the loan

Answer

FHA loans with original LTV above 90% and terms over 15 years require annual MIP for the entire loan term.

Question 5

Which mortgage product allows seniors to receive loan proceeds as monthly payments, a lump sum, or a line of credit without making monthly mortgage payments?

Accepted Answer

Home Equity Conversion Mortgage (HECM)

Answer

The FHA-insured HECM is the standard reverse mortgage allowing seniors 62+ to access home equity with no required monthly payments.

(CMC) Certified Mortgage Consultant Practice Test

(CMC) Certified Mortgage Consultant Practice Test

CMC Mortgage Products and Practices 3