Mortgage Federal Mortgage-Related Laws 4

Question 1

Under HOEPA, a mortgage is classified as a 'high-cost mortgage' if the APR exceeds the Average Prime Offer Rate (APOR) by more than how many percentage points for a first-lien loan?

Accepted Answer

6.5 percentage points

Answer

Under HOEPA as amended by Dodd-Frank, a first-lien loan is high-cost if its APR exceeds APOR by more than 6.5 percentage points.

Question 2

The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good-faith determination that borrowers can repay their loans based on how many underwriting factors?

Accepted Answer

8 factors

Answer

The ATR rule specifies eight underwriting factors lenders must consider, including income, assets, employment, credit history, and monthly debt obligations.

Question 3

A Qualified Mortgage (QM) under Dodd-Frank generally prohibits a debt-to-income (DTI) ratio exceeding what threshold (under the General QM standard)?

Accepted Answer

43%

Answer

The original General QM definition capped borrower DTI at 43%; later amendments shifted to a price-based threshold, but 43% remains a foundational benchmark.

Question 4

Which feature is expressly prohibited in a Qualified Mortgage under the Dodd-Frank ATR/QM rule?

Accepted Answer

Balloon payment (for most QMs)

Answer

QMs generally cannot contain balloon payments (except for certain small creditor and rural/underserved area loans), negative amortization, or interest-only features.

Question 5

Under the Homeowners Protection Act (PMI Cancellation Act), a borrower may request cancellation of PMI once the loan-to-value ratio reaches:

Accepted Answer

80%

Answer

The Homeowners Protection Act allows borrowers to request PMI cancellation when LTV reaches 80% based on the original property value.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Federal Mortgage-Related Laws 4