Conventional Loan Programs and Secondary Market Flashcards
7 cards from real CMP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Conventional Loan Programs and Secondary Market flashcards as text
Freddie Mac's automated underwriting system is called:
Answer: Loan Product Advisor (LPA)
Freddie Mac uses Loan Product Advisor (LPA), formerly known as Loan Prospector, as its automated underwriting system.
What is the maximum debt-to-income (DTI) ratio typically approved on a conventional loan when the automated underwriting system (AUS) issues an Approve/Eligible finding?
Answer: 50%
DU and LPA can approve conventional loans with DTI ratios up to 50% when strong compensating factors such as high credit scores or significant reserves are present.
How long must a borrower typically wait after a Chapter 7 bankruptcy discharge before qualifying for a conventional conforming loan under Fannie Mae guidelines?
Answer: 4 years
Fannie Mae requires a 4-year waiting period after a Chapter 7 bankruptcy discharge before a borrower is eligible for a new conventional loan.
Under Fannie Mae guidelines, which of the following is an acceptable source of gift funds for a conventional loan down payment?
Answer: A blood relative of the borrower
Fannie Mae allows gift funds from family members such as blood relatives, spouses, and domestic partners, but not from those with a financial interest in the transaction.
What is a mortgage-backed security (MBS) in the context of the secondary mortgage market?
Answer: A bond-like investment backed by a pool of mortgage loans
An MBS is an investment security backed by a pool of mortgage loans, enabling investors to receive payments derived from borrowers' principal and interest payments.
When a conventional loan is sold to Fannie Mae, the originating lender typically retains the right to:
Answer: Service the loan and collect monthly payments on Fannie Mae's behalf
Lenders often retain mortgage servicing rights (MSR) after selling loans to GSEs, collecting payments and handling borrower communications on behalf of the investor.
What is the minimum credit score generally required to qualify for a conventional conforming loan?
Answer: 620
Most conventional conforming loan programs require a minimum credit score of 620, though borrowers with higher scores receive better pricing through Loan-Level Price Adjustments.