CMC Mortgage Products and Practices 5

Question 1

Under the Ability-to-Repay (ATR) rule, which of the following loan types is presumed to comply if it meets safe harbor criteria?

Accepted Answer

Qualified Mortgages (QM)

Answer

Qualified Mortgages receive either a conclusive or rebuttable presumption of ATR compliance depending on the loan's pricing relative to APOR.

Question 2

A borrower has a 5/1 ARM with a 2/2/5 cap structure. This means the rate can increase a maximum of:

Accepted Answer

2% at first adjustment, 2% at each subsequent adjustment, and 5% over the initial rate lifetime

Answer

A 2/2/5 cap means: 2% cap at first adjustment, 2% cap at each subsequent adjustment, and 5% maximum lifetime increase over the start rate.

Question 3

Which mortgage practice involves charging a higher interest rate in exchange for the lender paying some or all closing costs?

Accepted Answer

Yield spread premium (lender credit)

Answer

A lender credit (formerly yield spread premium) means the borrower accepts a higher rate and the lender uses the extra revenue to cover closing costs.

Question 4

What is the maximum allowable seller concession on a conventional conforming loan with an LTV between 75.01% and 90%?

Accepted Answer

3%

Answer

Fannie Mae limits seller concessions to 3% of the purchase price for conventional loans with LTV between 75.01% and 90%.

Question 5

A 2-1 buydown temporarily reduces the borrower's rate by:

Accepted Answer

2% in year 1 and 1% in year 2, then the note rate applies

Answer

A 2-1 buydown reduces the interest rate by 2% in year 1 and 1% in year 2, with the full note rate in effect from year 3 forward.

(CMC) Certified Mortgage Consultant Practice Test

(CMC) Certified Mortgage Consultant Practice Test

CMC Mortgage Products and Practices 5