SOMB II Exam Review Questions with Verified
Correct Answers
When refinances as a percentage of total originations rise, does profitability at large
banks tend to rise or to fall?
Fall
What are the top three Mortgage lender's main sources of income?
- Fees negotiated at origination
- Gain on sale
- Interest Income
Interest income earned at the note rate from the date a loan closes until it is sold belongs
to?
The lender
Which type of loan sale generates the most revenue for the lender on the date the loan is
sold?
Servicing released
What are the two additional mortgage lender's main sources of income?
Servicing Release Premium (SRP)
Servicing Income
What are the feature adjustments that could change the price an investor will pay for a
loan?
- Geography
- Loan Amo.
, - FICO score
- LTV
- Property Type
- Loan features
- CRA eligibility
A loan for which an investor pays exactly 100% of the loan's unpaid principal balance is
said to have sold for
Par
As interest rates fall, bond/security/MBS prices
Rise
In a basic REMIC structure, when do the B class holders receive their principal
payments?
After the A class holders have been completely repaid
When short-term interest rates are higher than long-term interest rates, what is the
yield curve is said to be?
Inverted
Is inflation a type of fixed-income risk?
Yes
Which type of a strip security is a natural hedge for a portfolio of MSRs?
A principal-only strip
Under what conditions are borrowers most likely to "float" a rate quote for a
mortgage?
Correct Answers
When refinances as a percentage of total originations rise, does profitability at large
banks tend to rise or to fall?
Fall
What are the top three Mortgage lender's main sources of income?
- Fees negotiated at origination
- Gain on sale
- Interest Income
Interest income earned at the note rate from the date a loan closes until it is sold belongs
to?
The lender
Which type of loan sale generates the most revenue for the lender on the date the loan is
sold?
Servicing released
What are the two additional mortgage lender's main sources of income?
Servicing Release Premium (SRP)
Servicing Income
What are the feature adjustments that could change the price an investor will pay for a
loan?
- Geography
- Loan Amo.
, - FICO score
- LTV
- Property Type
- Loan features
- CRA eligibility
A loan for which an investor pays exactly 100% of the loan's unpaid principal balance is
said to have sold for
Par
As interest rates fall, bond/security/MBS prices
Rise
In a basic REMIC structure, when do the B class holders receive their principal
payments?
After the A class holders have been completely repaid
When short-term interest rates are higher than long-term interest rates, what is the
yield curve is said to be?
Inverted
Is inflation a type of fixed-income risk?
Yes
Which type of a strip security is a natural hedge for a portfolio of MSRs?
A principal-only strip
Under what conditions are borrowers most likely to "float" a rate quote for a
mortgage?
