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REE 3043 Exam questions with 100% Correct answers
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REE 3043 Exam questions with 100%Correct answers
To encourage borrowers to accept adjustable rate mortgages (ARMs) rather than
fixed rate mortgages, mortgage originators generally offer an initial short-term
introductory rate (i.e. the start rate) that is significantly less than the prevailing
market mortgage rate. This rate is commonly referred to as a(n): - ✔✔Teaser
Rate
The characteristics of a borrower that can be considered by a lender in
underwriting a mortgage loan application are limited by the: - ✔✔Equal
Credit Opportunity Act (ECOA)
A significant number of mortgage loans use adjustable interest rates, in which the
interest rate of the loan is tied to an index rate that fluctuates over time. Which
index is being phased out as a result of a scandal involving manipulation of the
rate by derivatives traders: - ✔✔London Interbank Offered Rate (LIBOR)
The difference between the mortgage primary market and secondary market is -
✔✔that in the primary market, new loans are created by borrowers and
lenders; in the secondary market, existing loans are sold by one investor to
another.
What is a conventional home mortgage loan? - ✔✔standard home loan
that is not insured or guaranteed by an agency of the U.S. government
,Whom does private mortgage insurance protect? Against what? - ✔✔protects
a lender against losses due to default on the loan
Lenders usually require mortgage insurance for loans in excess of____ -
✔✔80% of Value
Traditional (manual) home mortgage underwriting is said to rest on
three elements, the "three C's." The underwriting characteristic
most strongly associated with default is: - ✔✔Collateral
Mortgage originators can either hold loans in their portfolios or sell them
to investors. When a mortgage originator decides to sell mortgages to
another institution, this transaction occurs in what is commonly referred to
as the: - ✔✔Secondary mortgage market
With a mortgage backed security (MBS) issued by one of the government
sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, the issuing GSE
retains the _____ risk while the MBS investor faces the ______ risk? -
✔✔Credit, Prepayment
In the process of deciding whether to extend a mortgage loan to a prospective
borrower, lenders typically examine three elements, more commonly referred
to as the "3 C's." Which of the following metrics does a bank use to evaluate
the collateral piece of the loan agreement? - ✔✔Loan-to-value ratio
, Name two ways that mortgage brokers differ from a typical mortgage banker. -
✔✔Mortgage brokers don't fund mortgage loans nor service them.
The primary source of mortgage banking profit is from - ✔✔servicing the
loans created
The three main government-related entities involved in creation or support of
residential mortgage-backed securities are - ✔✔Ginnie Mae, Fannie Mae,
and Freddie Mac
Fannie Mae and Freddie Mac jointly brought about uniform____ ,_____ ,____
and____ documents for home mortgage loans, and the use among lenders of
uniform____ standards - ✔✔Application; mortgage; note; appraisal;
underwriting
The housing expense ratio is computed as___ - ✔✔PITI/GMI
The "three Cs" of home loan underwriting are
- ✔✔Collateral; Creditworthiness; Capacity
In modern automated underwriting, a critical difference from the traditional
approach is that credit evaluation is accomplished through a - ✔✔credit
score
Two important advantages of automated underwriting are that it is
_____________ and it enables lenders to more safely make _____________
loans. - ✔✔Faster; Affordable Housing
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