CMB - Certified Mortgage Banker Mortgage Risk Management Questions and Answers

Question 1

A mortgage company's secondary marketing manager is managing interest rate risk on a pipeline of locked loans.
If interest rates rise, the value of the locked loans decreases.
Conversely, if rates fall, the value increases, but the likelihood of the loan closing (pull-through) decreases.
Which of the following is a key risk that rises significantly when interest rates fall?

Accepted Answer

Fallout Risk

Answer

Credit Risk

Answer

Liquidity Risk

Answer

Operational Risk

Question 2

A lender is performing a post-closing quality control audit and discovers that a fee in the 10% tolerance category on the Loan Estimate increased by 12% on the final Closing Disclosure. A valid changed circumstance occurred, but a revised Loan Estimate was not issued. According to TRID rules, what action must the lender take?

Accepted Answer

Provide a lender credit to the borrower for the amount exceeding the 10% tolerance.

Answer

Request the borrower pay the full increased amount as it was a valid change.

Answer

Issue a revised Closing Disclosure within 30 days and absorb the cost.

Answer

Cancel the loan and re-originate it with the correct fees.

Question 3

Which of the following best describes the primary purpose of a warehouse line of credit in mortgage banking?

Accepted Answer

To provide short-term financing for originating mortgages until they are sold on the secondary market.

Answer

To fund the long-term holding of mortgage-servicing rights (MSRs).

Answer

To cover potential losses from loan repurchases and buybacks.

Answer

To finance the development of new loan origination software (LOS).

Question 4

A mortgage lender's portfolio of Mortgage Servicing Rights (MSRs) serves as a natural hedge against which type of risk in their origination business?

Accepted Answer

Rising Interest Rate Risk

Answer

Loan Repurchase Risk

Answer

Early Payment Default Risk

Answer

Consumer Complaint Risk

Question 5

A mortgage bank is facing an increased number of loan repurchase demands from a GSE. The audits reveal that the primary cause is underwriting errors related to income calculation and insufficient documentation. Which area of risk management should the bank prioritize to address this issue?

Accepted Answer

Operational Risk Management

Answer

Liquidity Risk Management

Answer

Interest Rate Hedging Strategy

Answer

Vendor Management

Question 6

According to the CFPB, an effective Compliance Management System (CMS) is crucial for managing regulatory risk. Which of the following are the two essential, interdependent components of a sound CMS?

Accepted Answer

Board/Management Oversight and a Compliance Program

Answer

Marketing Policies and Sales Incentives

Answer

Technology Infrastructure and Data Security

Answer

Third-Party Vendor Selection and Contract Negotiation