1. Which of the following represent key differences between private mortgage insurance and FHA mortgage insurance?

a. FHA insurance covers all default losses while private mortgage insurance does not.

b. Private mortgage insurance covers all default losses while FHA insurance does not.

c. Private mortgage insurance is always required while FHA is not.

d. Both b and c are key differences between private mortgage insurance and FHA insurance.

2. Which of the following caps on adjustable-rate mortgages can lead to negative amortization?

a. Interest rate caps

b. Payment caps

c. Both a and b can lead to negative amortization

d. Neither a nor b can lead to negative amortization.

3. This type of mortgage enables borrowers to receive monthly payments from a lender who will be repaid when either the house is sold or the borrower dies:

a. Adjustable rate mortgage

b. Interest only mortgage

c. Home equity line of credit

d. Reverse mortgage

e. Principal only mortgage

4. Which of the following is NOT a lender concern when underwriting a home loan?

a. Collateral

b. Conventional

c. Creditworthiness

d. Capacity

5. A ______________ state takes much less time for a lender to take possession during foreclosure than a ______________ state.

a. mortgage; deed of trust

b. title; escrow

c. deed of trust; mortgage

d. escrow; title

6. The Truth-in-Lending Act (TILA) includes all of the following except:

a. Statement of Annual Percentage Rate (APR)

b. Variable rate disclosure

c. Prepayment penalties

d. Right of Rescission for 30 days with regards to the borrower

The following information is to be used to answer Question 7 & 8

Suppose that you have decided to purchase a house for $400,000 using an adjustable-rate mortgage with the terms provided below.

Loan-to-value ratio: 90%

Index rate: one-year Treasury yield (currently 3.00%)

Margin: 250 basis points

Amortization: 15 years with monthly payments and compounding

Annual cap: 1.5 percentage points

Lifetime cap: 5 percentage points

Adjustment period: Annually

Teaser Rate 2.50%

7. What is the monthly payment during the first year of the loan?

$2133.73

$2400.44

$2667.16

$3268.33

None of the above

8. If the yield on one-year Treasuries increases by 2.62% during the first year, what will your payment be during the second year of the loan?

$2152.11

$2270.14

$2826.71

$3180.05

None of the above

9. What is the principal portion of the 188^th months payment for a $450,000 15/15 Hybrid ARM Mortgage (first 15 years are fixed rate and second 15 years are adjustable all payments are fully amortizing) with the following parameters:

Fixed Interest Rate: 5.5%

1^st Year of ARM portion - LIBOR Index: 1.85%

2^nd Year of ARM portion - LIBOR Increase: 1.45%

Margin: 275 basis points

Annual Periodic Cap: 2%

Lifetime Cap: 5%

$786.34

$906.79

$1165.87

$1242.31

None of the above

10. What is the maximum loan amount the bank will lend you if your gross monthly income is $6000, you have $400 in monthly long-term obligations, and you can make a down payment of 15% of the home price given the following lenders loan parameters?

Interest Rate: 6.5%

Loan type: 30 years

Housing Expense Ratio: 28%

Total Debt Ratio: 41%

$246,808.88

$265,794.18

$279,781.82

$290,363.39

None of the above

11. Which of the following is/are decisions which a mortgage borrower must consider?

a. Fixed vs. variable rate

b. How soon the loan will be paid off

c. Increasing vs. level payments

d. All of the above

12. How much interest will you pay during the 14^th year of a $350,000 house price, 30 year, 6.5% monthly compounded, 80 LTV loan?

$7755.94

$8379.86

$13,968.37

$14,627.41

None of the above

13. How much principal will you pay with the 76^th payment of the loan?

$245.11

$379.57

$1119.24

$1390.22

None of the above

14. What is the balance at the end of year 12?

$162,405.56

$184,346.44

$212,621.26

$225,003.69

None of the above

15.An interest-only loan is an example of a:

a. fully-amortizing loan.

b. loan with negative amortization.

c. non-amortizing loan.

d. partially-amortizing loan.

16. In order to obtain the loan in question #12, you had to pay a 0.50% origination fee and 1.5 discount points. If the loan also came with $2,250 in third-party closing costs, what is the effective borrowing cost of this loan if you pay off the loan at the end of the 12^th year?

6.87%

7.02%

7.54%

7.68%

None of the above

17. What is the net benefit (loss) of the borrowers decision to refinance today given the following information and that she intends to move in 5 years?

Current loan closing costs: 2 points New loan type: 15-year fixed rate

Current loan original balance: $350,000 New loan interest: 5.00%

Current loan balance: $263,993.63 New loan total fees: 2.5 points

Current loan interest rate: 7.5% Individual discount rate: 6%

Current loan payment: $2,447.25 Income Tax Rate: 10%

$11,461.06

$13,321.16

$18,601.03

$23,495.89

None of the above

18. How long will it take you to breakeven assuming you take the refinance in question #17 using the same discount rate?

28 months

29 months

30 months

31 months

None of the above

19. Which of the following qualifies as technical default?

30 days late on payment

an assisted sale

90 days late on payments

a violation of the terms of the loan

20. Types of prepayment penalties include all of the following EXCEPT?

Yield maintenance

Assumability

Defeasance penalty

A percentage of the outstanding loan balance

21. Which of the following is NOT a type of conforming loan?

FHA

Jumbo

VA

Conventional

22. The benefits of an FHA loan vs a conventional loan include:

Lower down payment

Lower interest rate

Higher allowable HER and TDR

All of the above

23. Which of the following gives the borrower the ability to choose between a full-, partial-, non-, or negative-amortizing loan payment every year?

IO balloon mortgage

IO amortizing mortgage

Option ARM

Hybrid ARM

24. Loan origination occurs in the:

Primary market

Secondary market

Either of the above

Neither of the above

25. When the interest rate on an ARM either increases or decreases after being recalculated, this is due to movement in which of the following?

Margin

Index

Both

Neither