SAFE General Mortgage Knowledge 4

Question 1

What is a 'jumbo loan'?

Accepted Answer

A loan that exceeds the conforming loan limits set by the FHFA

Answer

A jumbo loan exceeds the FHFA's conforming loan limits and cannot be purchased by Fannie Mae or Freddie Mac.

Question 2

A 'balloon mortgage' is characterized by:

Accepted Answer

A large lump-sum payment due at the end of a shorter loan term

Answer

A balloon mortgage has smaller periodic payments followed by one large final payment (the balloon) that pays off the remaining balance.

Question 3

Which entity sets the guarantee fee (g-fee) on loans sold to Fannie Mae and Freddie Mac?

Accepted Answer

The FHFA

Answer

The Federal Housing Finance Agency (FHFA) oversees the GSEs and sets policies governing guarantee fees charged on conforming loans.

Question 4

What does 'negative amortization' mean?

Accepted Answer

The outstanding loan balance increases because payments don't cover all interest due

Answer

Negative amortization occurs when monthly payments are insufficient to cover accrued interest, causing the unpaid interest to be added to the loan balance.

Question 5

Which of the following is a characteristic of a reverse mortgage?

Accepted Answer

Monthly payments are made by the lender to the borrower

Answer

In a reverse mortgage, the lender makes payments to the borrower or provides a line of credit, drawing on the homeowner's equity.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

SAFE General Mortgage Knowledge 4