Advanced Mortgage Products 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 Advanced Mortgage Products flashcards as text
A portfolio loan differs from a conforming loan primarily because:
Answer: The lender retains the loan on its own books instead of selling it to the secondary market
Portfolio loans are held by the originating lender rather than sold, allowing lenders to apply their own underwriting criteria outside of agency guidelines.
An energy-efficient mortgage (EEM) allows a borrower to finance the cost of energy improvements. How does this benefit the borrower's qualification?
Answer: It allows the borrower to exceed standard debt-to-income ratios by the projected energy savings
An EEM allows borrowers to stretch qualifying ratios by the amount of projected monthly energy savings, recognizing that lower utility costs improve overall payment affordability.
Which statement correctly describes the 'teaser rate' on an ARM product?
Answer: It is a below-market introductory rate that does not reflect the index plus margin
A teaser rate is an artificially low introductory rate offered on an ARM that is not calculated from the index plus margin, designed to attract borrowers with lower initial payments.
A lender offers a 'no-cost' mortgage refinance. What actually happens to the costs in this arrangement?
Answer: The costs are rolled into the loan balance or offset by a higher interest rate (lender credit)
In a no-cost mortgage, closing costs are either added to the loan amount or the borrower accepts a higher interest rate that generates a lender credit to cover the fees.
When a lender offers a 'hybrid ARM,' what does the 'hybrid' designation specifically refer to?
Answer: A fixed-rate period at the start followed by an adjustable-rate period
A hybrid ARM combines a fixed-rate initial period (e.g., 5 or 7 years) with a subsequent adjustable-rate period, blending features of both fixed and adjustable mortgages.
What is the purpose of the 'seasoning' requirement often applied to cash-out refinances?
Answer: To confirm the borrower has owned and made payments on the property for a minimum period before accessing equity
Seasoning requirements ensure that borrowers have held title and built payment history for a set period before a lender allows them to take cash out, reducing fraud and flip risk.
A lender underwrites a non-QM loan using bank statements instead of tax returns. This product is primarily designed for:
Answer: Self-employed borrowers whose tax returns understate actual cash flow
Bank statement loans are non-QM products created for self-employed borrowers whose tax deductions reduce their documented income below what their actual cash flow would support.