Mortgage Products and Lending Practices Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Products and Lending Practices flashcards as text
A borrower wants to minimize monthly payments for the first 5 years and then plans to sell before the rate adjusts. Which loan product best fits this strategy?
Answer: 5/1 ARM
A 5/1 ARM offers a fixed rate for 5 years, then adjusts annually, making it ideal for borrowers who plan to sell before the adjustment period begins.
Under RESPA, the Good Faith Estimate (now replaced by the Loan Estimate) was required to be delivered to the borrower within how many business days of receiving the loan application?
Answer: 3 business days
RESPA required the Good Faith Estimate to be delivered within 3 business days of receiving a completed loan application.
Which of the following best describes a 'piggyback loan' structure?
Answer: A second mortgage used simultaneously with a first to avoid PMI
A piggyback loan pairs a first mortgage with a simultaneous second mortgage (commonly 80/10/10) so the borrower can avoid private mortgage insurance.
What is the primary purpose of the Home Ownership and Equity Protection Act (HOEPA)?
Answer: To protect consumers from predatory high-cost mortgage lending
HOEPA was enacted to protect consumers by imposing additional disclosure requirements and restrictions on high-cost mortgage loans.
A reverse mortgage borrower must meet which of the following eligibility requirements?
Answer: Must be at least 62 years old and the home must be a primary residence
HECM reverse mortgages require borrowers to be at least 62 years old and must use the home as their primary residence.
Which loan feature allows the lender to demand full repayment of a mortgage before the scheduled maturity date under specific circumstances?
Answer: Acceleration clause
An acceleration clause permits the lender to demand immediate full repayment of the outstanding loan balance upon a triggering event such as default.
A non-QM loan differs from a qualified mortgage primarily because it:
Answer: Does not meet CFPB's ability-to-repay safe harbor standards
Non-QM loans fall outside the CFPB's Qualified Mortgage definition, meaning they don't receive the same legal safe harbor protections regarding ability-to-repay.