We can work on The QM/ATR rule applies to which types of transactions?

HELOCs

Closed-end consumer credit transactions

Timeshares

Reverse Mortgages

Business Purpose Loans

Question Title

*5. The QM/ATR rule requires which of the following?

An anti-steering disclosure be provided on non-traditional mortgages

Consideration of 8 underwriting factors in mortgage underwriting

The use of a Loan Estimate and Closing Disclosure

Consideration of specific aspects of a borrower’s credit

All mortgage loans are originated to meet safe harbor guidelines

Question Title

*6. Which of the following loan programs would not be permitted under the QM/ATR Rule?

Alternative Documentation – Less than 24 months of income verified

No Documentation – No income provided

Alternative Documentation – Income derived from bank statement deposits

Stated Income – Income is stated but not verified

All of the above

Question Title

*7. Which of the following loan features would exclude a loan from being considered a qualified mortgage?

Interest rates and payments which can increase after closing

Negative amortization

40 year loan term

Interest only option

Prepayment penalty

Question Title

*8. Which of the following are underwriting standards implemented by the QM/ATR rule?

Payment amounts used in qualification are based on the maximum interest rate possible within the first 5 years of the loan term

Payment amounts used for qualification are based on the fully indexed rate

Maximum prepayment penalty amounts excluded from qualified assets

Exclusion of non-occupant co-borrower income to qualify

A back end debt to income ratio not to exceed 43%

Fannie Mae Seller Guidelines
These next 10 multiple choice questions will have one correct answer and refer to current FNMA Seller Guide underwriting criteria.

Question Title

  1. According to Fannie Mae, a borrower must have a history of receiving stable income from employment or other resources and a reasonable expectation that the income will continue in the foreseable future. Fannie defines “foreseable future” as:

18 months

48 months

12 months

36 months

Question Title

  1. What income documentation would not be acceptable to Fannie Mae?

2 years W-2

1 year W-2

Bank Statements

a current paystub

Question Title

  1. What is Fannie Mae’s automated underwriting system called?

Desktop Underwriter

Underwriter Pro

Fannie Mae Underwriter XP

None of the above

Question Title

  1. If a borrower does not currently own a principal residence and does not have a current housing expense, how is the rental income treated to qualify on the subject property according to Fannie Mae?

No restriction on the amount of the rental income that can be added to the borrowers income

No rental income from the subject can be used to qualify the borrower

Rental income can only be added to offset PITIA of the subject property

75% of the rent is added to the income of the borrower

Question Title

  1. What is not an acceptable method of documenting one year property management experience according to Fannie Mae?

Borrower’s must recent tax returns with Schedule 1 and E reflects rental income received for a property for 365 fair rental days

Signed lease agreement and Schedule E shows less than 365 fair rental days

Signed lease agreement to supplement tax returns if property was out of service for any period of time in the previous year supported by Schedule E showing reduced number of days in use

Borrower’s signed declaration stating they have property management experience supplemented with supporting documentation provided by the borrower

Question Title

  1. How many months of reserves are required on a cash out transactions with debt ratio greater than 45%?

2 months reserves

3 months reserves

6 months reserves

None of the above

Question Title

  1. When factoring borrower paid alimony in to the debt ratio, which is the correct calculation method?

The alimony amount is added as a debt

The alimony amount is subtracted from income

The alimony amount is disregarded and not factored in the debt ratio

None of the above

Question Title

  1. When calculating rental income utilizing a schedule E, which of the following can be excluded from the property expenses?

Advertising

Cleaning & maintenance

Mortgage interest

Legal or professional fees

Question Title

  1. When calculating schedule C income, which one of the following expenses can be added back to the net income/loss?

Rent or lease expenses

Utility expenses

Wages paid

Business use of home

Question Title

  1. What are the seasoning requirements for a prior foreclosure?

4 years, 2 years with extenuating circumstances

7 years, 3 years with extenuating circumstances

5 years, 3 years with extenuating circumstances

None of the above

Fraud Red Flags
The following 5 questions will have one correct answer and all pertain to mortgage fraud.

Question Title

*19. Which of the following best describes a fraud for housing scheme?

A borrower misrepresenting investment property as their primary residence on a cash out refinance

A borrower providing false information to obtain a mortgage they might not otherwise qualify for

An appraiser using photos from a different property to justify and inflated appraised value

None of the above

Question Title

*20. Which of the following would be a red flag related to asset fraud?

A borrower’s bank statements to verify assets are for a joint account with their parents

A borrower’s bank statements show several NSF charges in the past 2 months

The address on the borrower’s bank statements match a previous address showing on the credit report

All of the above

Question Title

*21. Which of the following best describes a straw borrower?

A person who obtains a mortgage on behalf of another

A person who enters into a contract to purchase a home then, prior to closing, enters in to separate contract to sell the home to another buyer at higher price.

A person who applies for multiple mortgages on the same property without disclosing to the lenders the other pending loans.

All of the above

Question Title

  1. A transaction in which a home is purchased and then quickly sold at an artificially inflated value is called what?

Buy and bail

Loan churning

Property Flipping

None of the above

Question Title

*23. Which of the following best describes a non-arms length transaction?

A parent selling a property to their child

A realtor who is operating in a dual capacity also as the loan officer

A purchase transaction where the seller was also the appraiser who performed the appraisal

All of the above

Underwriting Scenarios
Analyze the following underwriting scenarios and provided loan documentation to answer the corresponding questions. Some of these questions may be subjective so choose what you think is the best answer.

Scenario 1
John Smith is a first time buyer purchasing a home in Texas for $250,000. John will be putting $20,000 down and have remaining liquid assets totaling $4,500. John’s 30 year fixed rate mortgage will have a PITI payment of $1,500. His credit score is 620. He currently only has one open loan secured by his truck with a balance owing of $6,050 and a monthly payment of $650. John works on cattle farm and receives a fixed salary of $50,000 per year. Using this scenario answer the following questions about John’s transaction:

Question Title

*24. What is the loan to value ratio of John’s home purchase?

80%

82%

90%

92%

Question Title

*25. What is John’s back end Debt ratio for this transaction?

36%

38%

43%

52%

Question Title

*26. How many months of reserves will John have left after putting $20,000 down?

1 month

2 months

3 months

Insufficient information to calculate reserves

Scenario 2
Jane Smith is refinancing a home she purchased 3 months prior for $300,000. Jane originally put 30% down and took out a 30-year fixed rate mortgage at 5%. Jane now wants to take some of that cashback out to purchase a new car. Jane is applying for an 80% LTV, 5/1 Interest Only adjustable rate mortgage with an interest rate of 5%.

Sample Solution

– From this criterion, we first look at the country of Nigeria. Nigeria has the strongest GDP of the African continent. To complement that, Nigeria has a population median age of 17.9 years and 19.61% of its population in the 15-24 Y/O bracket. This means that Nigeria’s demographics are very attractive for Vans as the bracket from 15-29 years old is Vans’ target market. – The advantages with New Zealand are that the country possesses a wealthy population, an open environment and more importantly, it possesses a Skiable mountain range seen with Mount Whakapapa, an abundance of skate parks and loads of ocean water all around it. This means that Vans can offer all its skiing, surfing, skateboarding and BMX goods all in the same country. This translates into an important business opportunity. – Looking closer into Argentina, we have acknowledged that skateboarding is a major way of life in the bursting city of Buenos Aires, making Vans a potential hotspot for the skateboarding community. Furthermore, the presence of a large amount of street art shows that Argentina and its capital Buenos Aires have a significant rebellious youth which may be strongly attracted by Vans apparel. – Finally, our last country is Morocco. The reasoning behind this lies in the huge increase in skateboarders the country has seen in the last 5 years. This huge increase highlights potential in the country. The fact that Morocco has the 6th highest GDP in the African continent also emphasizes potential. Hence, we shall now proceed to a process of elimination to find the one best country. – Despite Nigeria’s promising demographics, the country’s corruption, poverty and crime mean that the consumers’ tendency to buy expensive Vans footwear and apparel is minimal. Furthermore, skateboarding and surfing, even though they are growing, are to no extent major ways of life in Nigeri>

– From this criterion, we first look at the country of Nigeria. Nigeria has the strongest GDP of the African continent. To complement that, Nigeria has a population median age of 17.9 years and 19.61% of its population in the 15-24 Y/O bracket. This means that Nigeria’s demographics are very attractive for Vans as the bracket from 15-29 years old is Vans’ target market. – The advantages with New Zealand are that the country possesses a wealthy population, an open environment and more importantly, it possesses a Skiable mountain range seen with Mount Whakapapa, an abundance of skate parks and loads of ocean water all around it. This means that Vans can offer all its skiing, surfing, skateboarding and BMX goods all in the same country. This translates into an important business opportunity. – Looking closer into Argentina, we have acknowledged that skateboarding is a major way of life in the bursting city of Buenos Aires, making Vans a potential hotspot for the skateboarding community. Furthermore, the presence of a large amount of street art shows that Argentina and its capital Buenos Aires have a significant rebellious youth which may be strongly attracted by Vans apparel. – Finally, our last country is Morocco. The reasoning behind this lies in the huge increase in skateboarders the country has seen in the last 5 years. This huge increase highlights potential in the country. The fact that Morocco has the 6th highest GDP in the African continent also emphasizes potential. Hence, we shall now proceed to a process of elimination to find the one best country. – Despite Nigeria’s promising demographics, the country’s corruption, poverty and crime mean that the consumers’ tendency to buy expensive Vans footwear and apparel is minimal. Furthermore, skateboarding and surfing, even though they are growing, are to no extent major ways of life in Nigeri>

Is this question part of your assignment?

Place order