Credit Analysis & Risk Assessment Flashcards
7 cards from real CRU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Credit Analysis & Risk Assessment flashcards as text
A borrower had a short sale 4 years ago with a deficiency balance that was forgiven. Under standard Fannie Mae guidelines, what is the waiting period?
Answer: 4 years from the date of the short sale
Fannie Mae requires a 4-year waiting period for a short sale without extenuating circumstances under standard guidelines.
When analyzing credit risk for a borrower with a 700 FICO score, which additional factor would cause the most concern for a mortgage underwriter?
Answer: A mortgage late payment from 18 months ago
A mortgage late payment, even 18 months ago, is a severe derogatory event that signals willingness-to-pay issues specific to mortgage debt.
Under Freddie Mac guidelines, student loan debt in income-driven repayment (IDR) with a $0 monthly payment should be included in DTI at:
Answer: 0.5% of the outstanding loan balance
Freddie Mac requires that student loans in IDR with a $0 payment be calculated at 0.5% of the outstanding balance for DTI purposes.
A mortgage underwriter is reviewing a borrower's credit and finds a tax lien that was withdrawn by the IRS. The underwriter should:
Answer: Verify it is fully released and confirm it will not affect title to the new property
Even a withdrawn lien must be confirmed as released from title so it does not cloud the property's title or affect the new mortgage.
Which of the following credit events would trigger the LEAST restrictive waiting period under FHA guidelines?
Answer: Chapter 7 bankruptcy discharge
FHA requires only a 2-year waiting period after Chapter 7 discharge, which is less restrictive than its 3-year foreclosure waiting period.
A borrower's credit report shows a charge-off from a credit card account three years ago with a $2,000 balance. Under Fannie Mae guidelines, the underwriter's required action is to:
Answer: Evaluate it as part of the overall credit profile without mandatory payoff
Fannie Mae does not mandate payoff of charge-off accounts; the underwriter considers the charge-off within the context of the borrower's overall credit history.
What is the primary purpose of the credit risk layering analysis performed by a mortgage underwriter?
Answer: To assess how multiple marginal risk factors compound the overall probability of default
Layering analysis evaluates how the combination of individually acceptable risk factors — such as low credit score, high LTV, and high DTI together — creates elevated aggregate risk.