Mortgage Underwriting & Risk Analysis Flashcards

A non-warrantable condominium project has more than 35% of units owned by a single investor. Which of the following financing options is MOST LIKELY available to a buyer?

Answer: Portfolio loan from a non-agency lender

Non-warrantable condos that fail agency concentration rules are ineligible for conventional or FHA financing and typically require portfolio loans held by lenders on their own books.

Under the Equal Credit Opportunity Act (ECOA), how long must a lender retain records of credit applications?

Answer: 25 months

ECOA requires lenders to retain credit application records for 25 months from the date of notification of action taken on the application.

An underwriter is evaluating a borrower who works as a commissioned salesperson. The borrower's base salary is $40,000 and commission income averaged $30,000 over the past two years. What is the maximum qualifying income?

Answer: $70,000 subject to verification of likely continuation

Commission income averaged over two years can be added to base salary in full, provided it is documented via tax returns and W-2s and appears likely to continue.

Which condition would cause an underwriter to classify a property as a 'declining market' requiring stricter LTV guidelines?

Answer: All of the above could indicate a declining market

Declining markets are identified by any combination of falling median prices, high foreclosure or REO activity, and appraiser notations of adverse market conditions, all of which trigger stricter LTV overlays.

What is a 'cash-out seasoning' requirement most commonly associated with in agency lending?

Answer: Requiring a borrower to own the property for at least 6–12 months before doing a cash-out refinance

Agency guidelines typically require borrowers to have owned and had title to the property for a minimum period (usually 6–12 months) before accessing equity through a cash-out refinance.

A 1004MC (Market Conditions Addendum) is required on all Fannie Mae appraisals. What is its primary purpose?

Answer: To document local market supply and demand trends and price direction

The 1004MC addendum requires appraisers to analyze and document local market conditions, absorption rates, and price trends to help underwriters assess market risk.

Which of the following best describes 'mortgage fraud for property' versus 'mortgage fraud for profit'?

Answer: Fraud for property is committed by borrowers to obtain a home they could not otherwise qualify for; fraud for profit involves industry insiders stealing loan proceeds

Fraud for property is typically borrower-driven misrepresentation to qualify for a home, while fraud for profit involves collusion among industry participants to extract cash from transactions illegally.