Loans Mortgage Loan 5

Question 1

What is 'mortgage forbearance'?

Accepted Answer

A temporary pause or reduction of mortgage payments approved by the lender

Answer

Forbearance is a temporary agreement between lender and borrower to pause or reduce mortgage payments during a period of financial hardship.

Question 2

What distinguishes a USDA loan from other mortgage programs?

Accepted Answer

It offers 100% financing for eligible rural and suburban homebuyers

Answer

USDA loans, backed by the U.S. Department of Agriculture, offer zero-down-payment financing to eligible borrowers in qualified rural and suburban areas.

Question 3

Which factor most directly determines the interest rate a lender offers on a mortgage?

Accepted Answer

The borrower's credit score, LTV ratio, and current market rates

Answer

Lenders price mortgage rates primarily on creditworthiness (credit score), loan-to-value ratio, and prevailing market rates tied to Treasury benchmarks.

Question 4

What is 'negative amortization' on a mortgage?

Accepted Answer

When monthly payments are insufficient to cover interest, causing the loan balance to grow

Answer

Negative amortization occurs when a borrower's payment doesn't cover all accrued interest, so the unpaid interest is added to the principal balance.

Question 5

Under the Dodd-Frank Act, what is a 'Qualified Mortgage' (QM)?

Accepted Answer

A loan meeting specific ability-to-repay standards that affords legal protection to lenders

Answer

A Qualified Mortgage is a loan that meets CFPB standards under Dodd-Frank's ability-to-repay rule, granting lenders a safe harbor from certain legal claims.

Loans Practice Test

Loans Practice Test

Loans Mortgage Loan 5