FREE CMC Mortgage Products and Practices Questions and Answers

Question 1

A 65-year-old borrower is selling their current home and using the proceeds to purchase a new primary residence.
They want to minimize their monthly housing payment in retirement.
They are considering a HECM for Purchase loan.
Which of the following is a key structural feature of this specific mortgage product?

Accepted Answer

The loan requires no monthly mortgage payments, but the borrower must pay property taxes and homeowners insurance.

Answer

The borrower must make interest-only payments for the first 10 years.

Answer

A down payment of at least 20% is required, with the remaining balance financed by the HECM.

Answer

Seller contributions are permitted to cover the entire FHA-required down payment.

Question 2

A veteran is selling their home, which has an existing VA loan with a favorable interest rate. A non-veteran buyer wants to assume the loan. Which statement accurately describes a critical requirement and consequence of this VA loan assumption?

Accepted Answer

The buyer must be approved by the loan servicer and, in most cases, the Department of Veterans Affairs.

Answer

The non-veteran buyer is exempt from paying the VA funding fee.

Answer

The seller's full VA entitlement will be restored immediately upon the non-veteran's assumption of the loan.

Answer

Loan assumption is not possible because the buyer is not an eligible veteran.

Question 3

A client wishes to purchase a fixer-upper that requires moving a load-bearing wall and has estimated repair costs of $45,000. Which renovation loan program is most suitable for this scenario, and why?

Accepted Answer

FHA 203(k) Standard, because the repairs are structural and exceed the typical cost limit for the Limited program.

Answer

FHA 203(k) Limited, because the repair costs are less than $50,000.

Answer

A conventional home equity line of credit (HELOC), because it offers the most flexibility for construction draws.

Answer

A Fannie Mae HomeStyle loan, as it is the only program that allows for major structural alterations.

Question 4

Under Regulation Z's Loan Originator Compensation Rule, which of the following methods for compensating a mortgage loan originator is permissible?

Accepted Answer

A tiered commission structure based on the total dollar volume of loans closed during a calendar quarter.

Answer

A 1.0% commission on loans with an interest rate below 5.0% and a 1.25% commission on loans with an interest rate at or above 5.0%.

Answer

A flat fee paid by the borrower plus a bonus from the lender for originating a loan with a prepayment penalty.

Answer

A bonus payment for each loan that is sold to a specific investor on the secondary market.

Question 5

A self-employed borrower with a strong credit score and significant cash reserves has been in business for five years. Due to substantial, legitimate business expense write-offs, their adjusted gross income on their tax returns does not meet traditional underwriting guidelines. Which mortgage product is specifically designed to address this type of scenario?

Accepted Answer

A portfolio loan, such as a Non-Qualified Mortgage (Non-QM) bank statement loan.

Answer

A government-backed FHA loan with a co-signer.

Answer

A conforming conventional loan with a higher down payment.

Answer

A Hard Money loan from a private investor.

Question 6

When originating a construction-to-permanent loan subject to the TILA-RESPA Integrated Disclosure (TRID) Rule, what option does the creditor have for providing the required disclosures?

Accepted Answer

The creditor may choose to issue either one combined disclosure covering both phases or two separate sets of disclosures for each phase.

Answer

The creditor must always issue two separate sets of Loan Estimates and Closing Disclosures: one for the construction phase and one for the permanent phase.

Answer

TRID rules do not apply to construction loans; disclosures are made using the old Good Faith Estimate (GFE) and HUD-1 settlement statement.

Answer

The creditor must provide a single, combined Closing Disclosure but can issue separate Loan Estimates for each phase of the loan.