FiCEP Housing and Mortgage Counseling 2

Question 1

What is a 'short sale' in real estate?

Accepted Answer

A sale where the proceeds are less than the outstanding mortgage balance, with lender approval

Answer

A short sale occurs when a lender agrees to accept less than the full mortgage balance owed as payment in full, allowing the homeowner to sell and avoid foreclosure.

Question 2

Which type of mortgage features an interest rate that can change periodically after an initial fixed-rate period, based on a market index?

Accepted Answer

Adjustable-rate mortgage (ARM)

Answer

An adjustable-rate mortgage (ARM) has an interest rate that adjusts periodically after the initial fixed period, typically tied to an index like SOFR or Treasury rates.

Question 3

What is the Home Affordable Modification Program (HAMP) designed to do?

Accepted Answer

Modify existing mortgage terms to make payments more affordable for struggling homeowners

Answer

HAMP was a federal program designed to modify the terms of existing mortgages—through rate reductions, term extensions, or principal forbearance—to make payments affordable for at-risk homeowners.

Question 4

In a mortgage context, what is 'private mortgage insurance' (PMI)?

Accepted Answer

Insurance required by lenders when the down payment is less than 20% to protect the lender against default

Answer

PMI protects the lender (not the borrower) against loss if the borrower defaults, and is typically required when the loan-to-value ratio exceeds 80%.

Question 5

What is a 'deed in lieu of foreclosure'?

Accepted Answer

A voluntary transfer of the property title from the borrower to the lender to avoid foreclosure

Answer

In a deed in lieu of foreclosure, the borrower voluntarily transfers title to the lender, who agrees to release the borrower from mortgage obligations, avoiding the formal foreclosure process.

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP Housing and Mortgage Counseling 2