Practice Test Geeks(CMPS) Certified Mortgage Planning Specialist Practice Test
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Financial and Housing Markets Flashcards

7 cards from real CMPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial and Housing Markets flashcards as text

  1. When the Federal Reserve increases the federal funds rate, what typically happens to long-term mortgage rates?

    Answer: They generally rise over time

    Rising federal funds rates push up borrowing costs across the economy, which generally causes long-term mortgage rates to increase as well.

  2. What does a steepening yield curve typically signal about the economy?

    Answer: Investors expect stronger future growth and potential inflation

    A steepening yield curve — where long-term rates rise relative to short-term rates — generally reflects market expectations of stronger economic growth and higher inflation ahead.

  3. Which index is most commonly used as the benchmark for 5/1 adjustable-rate mortgages in the U.S.?

    Answer: SOFR (Secured Overnight Financing Rate)

    Since LIBOR's phase-out, SOFR has become the primary benchmark index used for adjustable-rate mortgages in the United States.

  4. A borrower's home value drops 15% after purchase with a 10% down payment. What is their approximate current loan-to-value ratio?

    Answer: 106%

    With 10% down on, say, a $200,000 home, the loan is $180,000; if value drops 15% to $170,000, LTV = $180,000/$170,000 ≈ 106% (underwater).

  5. What is the primary purpose of Fannie Mae and Freddie Mac in the housing finance system?

    Answer: To purchase mortgages and create mortgage-backed securities, providing liquidity

    Fannie Mae and Freddie Mac operate in the secondary market by purchasing loans from lenders, packaging them into MBS, and thereby replenishing lender capital to make more loans.

  6. Which economic indicator most directly measures construction activity in the new housing market?

    Answer: Housing Starts

    Housing Starts measures the number of new residential construction projects begun during a given period, directly reflecting new-construction activity.

  7. How does rising consumer price inflation (CPI) typically affect fixed-rate mortgage demand?

    Answer: It increases demand as buyers rush to lock in rates before further increases

    When inflation signals rising interest rates ahead, buyers often rush to lock in current fixed rates, temporarily increasing mortgage demand.