SOMB II Practice Test All Possible Questions and Answers
Complete
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?
, When interest rates are declining
What loan attributes create a pricing adjustment that increases the rate charged
to the borrower?
- Occupancy status
- Geographical location
For what does SRP stand?
Servicing Released Premium
When you sell a loan "servicing-retained" into the capital markets, for what are
you responsible?
- Pay property taxes and insurance on behalf of the loan borrowers
- Remitting principal and interests to the investor
- Receive and account for monthly payments received from the borrower
Under what circumstances would you buyup a guarantor fee (G-Fee)?
When your excess servicing is a positive number
What loan attributes cause investors to pay-up for certain loan pools?
- Small loan balances
- Geographic location
- Low LTV's
Which delivery commitment offers a lower purchase price and the least amount of
income?
Best efforts
If you fail to deliver loans under a best efforts delivery, are you required to pay a
pair-off fee?
No
Firms are allowed to deliver whole loans to FNMA or FHLMC without being an
approved seller:
Never
What do mortgage banking firms gain from using "best execution" software for
pricing?
- Real-time investor pricing comparisons
- Access to more products
- The ability to evaluate servicing price from both a servicing-released and servicing-
retained point of view
What is the ratio of the number of interest rate lock commitments in the pipeline
that close to the number of interest rate lock commitments that were started?
Pull-thru
What type of risk is involved when the market moves, causing a change in the
value of locked or closed loans?
Price (or market risk
Is a pair-off fee due when a best efforts loan is committed to an investor and the
loan does not close and cannot be delivered?
No
If interest rates are going up, what will the pipeline pull-thru rate (%) be expected
to do?
Increase
Complete
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?
, When interest rates are declining
What loan attributes create a pricing adjustment that increases the rate charged
to the borrower?
- Occupancy status
- Geographical location
For what does SRP stand?
Servicing Released Premium
When you sell a loan "servicing-retained" into the capital markets, for what are
you responsible?
- Pay property taxes and insurance on behalf of the loan borrowers
- Remitting principal and interests to the investor
- Receive and account for monthly payments received from the borrower
Under what circumstances would you buyup a guarantor fee (G-Fee)?
When your excess servicing is a positive number
What loan attributes cause investors to pay-up for certain loan pools?
- Small loan balances
- Geographic location
- Low LTV's
Which delivery commitment offers a lower purchase price and the least amount of
income?
Best efforts
If you fail to deliver loans under a best efforts delivery, are you required to pay a
pair-off fee?
No
Firms are allowed to deliver whole loans to FNMA or FHLMC without being an
approved seller:
Never
What do mortgage banking firms gain from using "best execution" software for
pricing?
- Real-time investor pricing comparisons
- Access to more products
- The ability to evaluate servicing price from both a servicing-released and servicing-
retained point of view
What is the ratio of the number of interest rate lock commitments in the pipeline
that close to the number of interest rate lock commitments that were started?
Pull-thru
What type of risk is involved when the market moves, causing a change in the
value of locked or closed loans?
Price (or market risk
Is a pair-off fee due when a best efforts loan is committed to an investor and the
loan does not close and cannot be delivered?
No
If interest rates are going up, what will the pipeline pull-thru rate (%) be expected
to do?
Increase
