SOMB 1 Practice Test
What is the process of transferring loan documents to a warehouse bank or an investor
called? - ANS-Shipping
Which of the following is a responsibility of the underwriter? - ANS-Accept or reject loan
applications
Which of the following is a responsibility of the closer? - ANS-- conclude a transaction
- interact with the title and escrow companies
What does the Mortgage Banking Association Canon of Ethics say concerning
competition? - ANS-It supports healthy competition in the real estate finance industry
What does the Mortgage Bankers Association Canon of Ethics contain ethical standards
pertaining to? - ANS-- Honesty in advertising
- Confidentiality
- Compliance with laws
Factors that affect an investor's appetite for certain loan products? - ANS-- Risk of
default or loss
- Exaggerated prepayment speeds
- Costs to service based upon structure
- Risk for potential fraud
- Liquidity
A jumbo or super jumbo loan is considered to be a ____________________ loan
product, while a loan that is eligible for purchase by Fannie Mae or Freddie Mac is most
likely a _______________ loan product. - ANS-Non-comforming; conforming
FHA charges a _____________ to protect lenders in the event the borrower fails to
repay the mortgage loan - ANS-Mortgage Insurance Premium (MIP)
The increased number of payments that come with a bi-weekly mortgage results in the
following: - ANS-- Total interest cost on the loan is reduced
- Principal amortizes more quickly
- Loan is paid off faster
, Adjustable Rate Mortgage characteristics - ANS-- Amount of monthly payments may
change when the interest rate adjusts
- ARMs may have an annual and lifetime cap governing how much the interest rate may
change
An Alt-A product that does not cause the balance of the loan to decrease and does not
build equity in the home unless the value increases - ANS-Interest Only
Wholesale lenders can perfrom - ANS-- Underwriting
- Closing
- Funding
Wholesale production is more risky for the mortgage lender because - ANS-Loan quality
might be more difficult to monitor
Wholesale lending may involve table funding, which means - ANS-A third-party
originator closes the loan in its own name for simultaneous assignment to the investo
who advanced money to fund the closing
Wholesale production channels allow mortgage lenders to - ANS-Reach groups of
customers that they would not have otherwise reached
Stages of loan production - ANS-- Origination
- Processing
- Underwriting
- Closing
Relationship between gross monthly income and monthly housing expenses and
payment obligations on long-term debts - ANS-Borrower's DTI ratio or back-end ratio
Relationship between gross monthly income and monthly payment obligation for
mortgage principal, income, taxes, insurance and any other applicable housing
expenses - ANS-Borrower's housing expense ratio or front-end ratio
Stable Income - ANS-Has been received by the borrower for two years and is expected
to continue for another three years
Belinda Borrower earns $48k a year. She leases her car for $200/mth. She currently
owes Visa $1500 and Macy's $500. She is purchasing a condo with monthly condo fees
What is the process of transferring loan documents to a warehouse bank or an investor
called? - ANS-Shipping
Which of the following is a responsibility of the underwriter? - ANS-Accept or reject loan
applications
Which of the following is a responsibility of the closer? - ANS-- conclude a transaction
- interact with the title and escrow companies
What does the Mortgage Banking Association Canon of Ethics say concerning
competition? - ANS-It supports healthy competition in the real estate finance industry
What does the Mortgage Bankers Association Canon of Ethics contain ethical standards
pertaining to? - ANS-- Honesty in advertising
- Confidentiality
- Compliance with laws
Factors that affect an investor's appetite for certain loan products? - ANS-- Risk of
default or loss
- Exaggerated prepayment speeds
- Costs to service based upon structure
- Risk for potential fraud
- Liquidity
A jumbo or super jumbo loan is considered to be a ____________________ loan
product, while a loan that is eligible for purchase by Fannie Mae or Freddie Mac is most
likely a _______________ loan product. - ANS-Non-comforming; conforming
FHA charges a _____________ to protect lenders in the event the borrower fails to
repay the mortgage loan - ANS-Mortgage Insurance Premium (MIP)
The increased number of payments that come with a bi-weekly mortgage results in the
following: - ANS-- Total interest cost on the loan is reduced
- Principal amortizes more quickly
- Loan is paid off faster
, Adjustable Rate Mortgage characteristics - ANS-- Amount of monthly payments may
change when the interest rate adjusts
- ARMs may have an annual and lifetime cap governing how much the interest rate may
change
An Alt-A product that does not cause the balance of the loan to decrease and does not
build equity in the home unless the value increases - ANS-Interest Only
Wholesale lenders can perfrom - ANS-- Underwriting
- Closing
- Funding
Wholesale production is more risky for the mortgage lender because - ANS-Loan quality
might be more difficult to monitor
Wholesale lending may involve table funding, which means - ANS-A third-party
originator closes the loan in its own name for simultaneous assignment to the investo
who advanced money to fund the closing
Wholesale production channels allow mortgage lenders to - ANS-Reach groups of
customers that they would not have otherwise reached
Stages of loan production - ANS-- Origination
- Processing
- Underwriting
- Closing
Relationship between gross monthly income and monthly housing expenses and
payment obligations on long-term debts - ANS-Borrower's DTI ratio or back-end ratio
Relationship between gross monthly income and monthly payment obligation for
mortgage principal, income, taxes, insurance and any other applicable housing
expenses - ANS-Borrower's housing expense ratio or front-end ratio
Stable Income - ANS-Has been received by the borrower for two years and is expected
to continue for another three years
Belinda Borrower earns $48k a year. She leases her car for $200/mth. She currently
owes Visa $1500 and Macy's $500. She is purchasing a condo with monthly condo fees
