CMP Conventional Loan Programs and Secondary Market 2

Question 1

Freddie Mac's automated underwriting system is called:

Accepted Answer

Loan Product Advisor (LPA)

Answer

Freddie Mac uses Loan Product Advisor (LPA), formerly known as Loan Prospector, as its automated underwriting system.

Question 2

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?

Accepted Answer

50%

Answer

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.

Question 3

How long must a borrower typically wait after a Chapter 7 bankruptcy discharge before qualifying for a conventional conforming loan under Fannie Mae guidelines?

Accepted Answer

4 years

Answer

Fannie Mae requires a 4-year waiting period after a Chapter 7 bankruptcy discharge before a borrower is eligible for a new conventional loan.

Question 4

Under Fannie Mae guidelines, which of the following is an acceptable source of gift funds for a conventional loan down payment?

Accepted Answer

A blood relative of the borrower

Answer

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.

Question 5

What is a mortgage-backed security (MBS) in the context of the secondary mortgage market?

Accepted Answer

A bond-like investment backed by a pool of mortgage loans

Answer

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.

CMP - Certified Mortgage Processor Practice Test

CMP - Certified Mortgage Processor Practice Test

CMP Conventional Loan Programs and Secondary Market 2