FREDDIE MAC CREDIT SMART EXAM QUESTIONS WITH 100% VERIFIED
ANSWERS
1. The percentage of your gross monthly income that goes toward
paying for your housing expenses is called the:
A) Debt-to-income ratio
B) Housing expense ratio
C) Credit utilization ratio
D) Payment-to-income ratio
Correct Answer: B - The housing expense ratio specifically measures the
percentage of gross monthly income that goes toward housing
expenses including principal, interest, property taxes, homeowner's
insurance, mortgage insurance, and association fees.
2. Which of the following is NOT included in the housing expense ratio
calculation?
A) Principal and interest
B) Property taxes
C) Utility bills
D) Homeowner's insurance
Correct Answer: C - Utility bills are not included in the housing expense
ratio. The ratio only includes principal, interest, property taxes,
homeowner's insurance, mortgage insurance, and homeowner's or
condo association fees.
3. Lenders include your future housing payment in your debt-to-
income ratio calculation.
,A) True
B) False
Correct Answer: A - Lenders do include your future housing payment
when calculating your debt-to-income ratio to determine if you can
afford the new mortgage payment along with your other debts.
4. A scam where someone offers to loan you money for home repairs
while you wait for your insurance money is called:
A) Foreclosure rescue scam
B) Loan modification scam
C) Post-Disaster Insurance Scam
D) Equity skimming scam
Correct Answer: C - This is a Post-Disaster Insurance Scam where
scammers target homeowners who have experienced damage and need
immediate funds for repairs.
5. A homeowner is charged rent to stay in his/her home with the
promise that he/she can purchase the home back when financial
situation improves. This is called:
A) Rent-to-own scam
B) Foreclosure Rescue Scam
C) Lease-purchase scam
D) Reverse mortgage scam
Correct Answer: B - This describes a Foreclosure Rescue Scam where
the scammer charges rent with false promises of allowing the
homeowner to repurchase the property later.
6. It is important for consumers to be aware of online scams and
practice good cybersecurity habits.
,A) True
B) False
Correct Answer: A - Consumers should be vigilant about online scams
and practice good cybersecurity habits to protect their personal and
financial information.
7. Selling your home for less than what you owe on the mortgage with
the loan servicer writing off the remaining mortgage balance is called:
A) Deed in lieu
B) Short Sale
C) Forbearance
D) Loan modification
Correct Answer: B - A short sale occurs when the property is sold for
less than the mortgage balance and the lender agrees to accept the
proceeds and forgive the remaining debt.
8. If the loan servicer is agreeable, this permits another qualified
buyer to take over your mortgage debt and the mortgage payments:
A) Assumption
B) Assignment
C) Novation
D) Subrogation
Correct Answer: A - An assumption allows a qualified buyer to take over
the existing mortgage debt and continue making payments under the
original terms.
9. The loan servicer might agree to put the foreclosure on hold to give
you some time to sell your home. This is called:
A) Forbearance
, B) Selling Your Home
C) Deferment
D) Moratorium
Correct Answer: B - The option of putting foreclosure on hold while
selling your home is referred to as "Selling Your Home" as a foreclosure
alternative.
10. The loan servicer accepts the transfer of the title of the home back
to them in exchange for cancellation of your mortgage debt. This is
called:
A) Deed in Lieu of Foreclosure
B) Short sale
C) Foreclosure deed
D) Quitclaim deed
Correct Answer: A - A Deed in Lieu of Foreclosure involves voluntarily
transferring the property title to the lender to satisfy the mortgage debt
and avoid foreclosure proceedings.
11. Which of the following is an alternative to foreclosure?
A) Bankruptcy only
B) Reinstatement
C) Debt settlement only
D) Property abandonment
Correct Answer: B - Reinstatement is a valid foreclosure alternative
where the borrower pays the past-due amount to bring the loan
current.
12. All of the following are alternatives to foreclosure EXCEPT:
A) Forbearance
ANSWERS
1. The percentage of your gross monthly income that goes toward
paying for your housing expenses is called the:
A) Debt-to-income ratio
B) Housing expense ratio
C) Credit utilization ratio
D) Payment-to-income ratio
Correct Answer: B - The housing expense ratio specifically measures the
percentage of gross monthly income that goes toward housing
expenses including principal, interest, property taxes, homeowner's
insurance, mortgage insurance, and association fees.
2. Which of the following is NOT included in the housing expense ratio
calculation?
A) Principal and interest
B) Property taxes
C) Utility bills
D) Homeowner's insurance
Correct Answer: C - Utility bills are not included in the housing expense
ratio. The ratio only includes principal, interest, property taxes,
homeowner's insurance, mortgage insurance, and homeowner's or
condo association fees.
3. Lenders include your future housing payment in your debt-to-
income ratio calculation.
,A) True
B) False
Correct Answer: A - Lenders do include your future housing payment
when calculating your debt-to-income ratio to determine if you can
afford the new mortgage payment along with your other debts.
4. A scam where someone offers to loan you money for home repairs
while you wait for your insurance money is called:
A) Foreclosure rescue scam
B) Loan modification scam
C) Post-Disaster Insurance Scam
D) Equity skimming scam
Correct Answer: C - This is a Post-Disaster Insurance Scam where
scammers target homeowners who have experienced damage and need
immediate funds for repairs.
5. A homeowner is charged rent to stay in his/her home with the
promise that he/she can purchase the home back when financial
situation improves. This is called:
A) Rent-to-own scam
B) Foreclosure Rescue Scam
C) Lease-purchase scam
D) Reverse mortgage scam
Correct Answer: B - This describes a Foreclosure Rescue Scam where
the scammer charges rent with false promises of allowing the
homeowner to repurchase the property later.
6. It is important for consumers to be aware of online scams and
practice good cybersecurity habits.
,A) True
B) False
Correct Answer: A - Consumers should be vigilant about online scams
and practice good cybersecurity habits to protect their personal and
financial information.
7. Selling your home for less than what you owe on the mortgage with
the loan servicer writing off the remaining mortgage balance is called:
A) Deed in lieu
B) Short Sale
C) Forbearance
D) Loan modification
Correct Answer: B - A short sale occurs when the property is sold for
less than the mortgage balance and the lender agrees to accept the
proceeds and forgive the remaining debt.
8. If the loan servicer is agreeable, this permits another qualified
buyer to take over your mortgage debt and the mortgage payments:
A) Assumption
B) Assignment
C) Novation
D) Subrogation
Correct Answer: A - An assumption allows a qualified buyer to take over
the existing mortgage debt and continue making payments under the
original terms.
9. The loan servicer might agree to put the foreclosure on hold to give
you some time to sell your home. This is called:
A) Forbearance
, B) Selling Your Home
C) Deferment
D) Moratorium
Correct Answer: B - The option of putting foreclosure on hold while
selling your home is referred to as "Selling Your Home" as a foreclosure
alternative.
10. The loan servicer accepts the transfer of the title of the home back
to them in exchange for cancellation of your mortgage debt. This is
called:
A) Deed in Lieu of Foreclosure
B) Short sale
C) Foreclosure deed
D) Quitclaim deed
Correct Answer: A - A Deed in Lieu of Foreclosure involves voluntarily
transferring the property title to the lender to satisfy the mortgage debt
and avoid foreclosure proceedings.
11. Which of the following is an alternative to foreclosure?
A) Bankruptcy only
B) Reinstatement
C) Debt settlement only
D) Property abandonment
Correct Answer: B - Reinstatement is a valid foreclosure alternative
where the borrower pays the past-due amount to bring the loan
current.
12. All of the following are alternatives to foreclosure EXCEPT:
A) Forbearance
