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
Under the Equal Credit Opportunity Act (ECOA), a lender must notify an applicant of an adverse action within how many days of receiving a completed application?
Answer: 30 days
ECOA requires creditors to notify applicants of adverse action within 30 days of receiving a completed credit application.
A borrower has a conventional loan with an LTV of 78%. Under the Homeowners Protection Act, what should automatically occur?
Answer: The lender must automatically cancel PMI
The Homeowners Protection Act mandates automatic PMI cancellation when the loan balance reaches 78% of the original purchase price, provided the borrower is current on payments.
Which type of mortgage product is specifically designed to finance both the purchase price of a home and the cost of renovations in a single loan?
Answer: FHA 203(k) Rehabilitation Loan
The FHA 203(k) rehabilitation loan allows borrowers to finance both the acquisition and renovation costs of a property through one mortgage.
What is the key distinguishing characteristic of a 'stated income' loan compared to a fully documented loan?
Answer: The lender accepts borrower's claimed income without third-party verification
A stated income loan relies on the borrower's self-reported income without requiring W-2s, tax returns, or employer verification.
A lender charges 2 discount points on a $300,000 mortgage. How much will the borrower pay at closing for these points?
Answer: $6,000
Each discount point equals 1% of the loan amount, so 2 points on a $300,000 loan costs $6,000 at closing.
Which secondary market entity primarily purchases conventional conforming loans from lenders and packages them into mortgage-backed securities?
Answer: Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are the GSEs that purchase conventional conforming loans from lenders to create mortgage-backed securities and maintain market liquidity.
A balloon mortgage most commonly requires the borrower to:
Answer: Pay off the remaining loan balance in a lump sum at a specified future date
A balloon mortgage requires the borrower to pay off the remaining principal balance in a single large lump-sum payment at a predetermined maturity date.