CMP - Certified Mortgage Processor Credit Analysis and Credit Reports Questions and Answers Flashcards
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Read the first 6 CMP - Certified Mortgage Processor Credit Analysis and Credit Reports Questions and Answers flashcards as text
Under the Fair Credit Reporting Act (FCRA), how long can a Chapter 7 bankruptcy remain on a consumer's credit report?
Answer: 10 years from filing date
Under the FCRA, a Chapter 7 bankruptcy can remain on a credit report for up to 10 years from the filing date.
When reviewing a credit report, what does a 'charge-off' status on a tradeline indicate?
Answer: The creditor has written the debt off as a loss after prolonged non-payment
A charge-off means the original creditor wrote the debt off as uncollectible, though the borrower still legally owes the balance.
Which credit score factor carries the most weight in the FICO scoring model?
Answer: Payment history
Payment history accounts for approximately 35% of a FICO score, making it the single most influential factor in the model.
A co-borrower on a mortgage application has a score of 710, 695, and 720 from the three bureaus. The primary borrower has qualifying scores of 640, 630, and 650. What score is used to qualify the loan?
Answer: 640 (primary borrower middle score)
When there are multiple borrowers, the qualifying score is the lower of each borrower's middle score — so 640 (primary) vs 695 (co-borrower) means 640 is used.
What is 'credit layering' as it relates to mortgage risk assessment?
Answer: The accumulation of multiple risk factors on a single loan file that increases overall default risk
Credit layering refers to multiple compounding risk factors (e.g., low credit score + high LTV + low reserves) on one loan file, which significantly increases default risk.
How does a 'non-traditional credit' analysis help borrowers who lack a standard credit score?
Answer: It allows lenders to substitute a rental history report, utility payments, or insurance payment records to establish creditworthiness
Non-traditional credit allows processors to document alternative payment history (rent, utilities, insurance) for borrowers with no traditional credit score, often used for FHA and manual underwriting.