Mortgage Banking Primer Practice Test

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• Which of the following best describes the role of a loan servicer?
• What characterizes loans that are non-traditional?
• What is a major risk associated with a high loan-to-value (LTV) ratio?
• What is the purpose of a loan modification?
• What is the connection between a home inspection and property value?
• What is the main purpose of a discount point?
• What is the purpose of a home inspection in the mortgage process?
• Which act mandates written notice for borrowers when their loan servicing is transferred?
• What benefit does retaining servicing rights provide to mortgage specialists?
• What is the definition of an assumable mortgage?
• Which of the following describes the types of loans a hard money lender typically provides?
• Which Act was responsible for the creation of the Consumer Financial Protection Bureau (CFPB)?
• What is a mortgage-backed security (MBS)?
• The westward expansion in the U.S. in the 1800s solidified the mortgage lender's primary role as a?
• Which of the following is true regarding the judicial foreclosure process?
• Which are the main objectives of a quality control program in mortgage banking?
• What aspect distinguishes CMOs from other mortgage-backed securities?
• What is a typical function of the loan administration department?
• What defines a hard money lender?
• Which three of the following are important goals of the mortgage servicer?
• Which of the following are basic types of secondary market sales?
• What is a common activity performed by processors to confirm a borrower’s employment?
• What is the function of a title company?
• What does the Closing Disclosure do?
• Which law governs the requirements for notifying borrowers of loan transfers?
• How is amortization best defined?
• Who are the primary investors in the secondary mortgage market?
• Which type of loan is often secured against the property being purchased?
• What roles do Fannie Mae and Freddie Mac serve in the mortgage industry?
• What is the focus of loan servicing in relation to borrower notifications?
• What might higher interest rates on a mortgage indicate?
• What factor primarily influences the loan amount for hard money lenders?
• According to the Truth-in-Lending Act, what must servicers notify borrowers about regarding changes in interest rates on an ARM loan?
• What is the purpose of the Fair Housing Act?
• Which of the following is true regarding the role of Fannie Mae and Freddie Mac?
• What does a mortgage payoff entail?
• Which components make up the acronym PITI in mortgage payments?
• In which payment form is a servicer not required to advance funds for delinquent payments?
• What factors determine the interest rate on a mortgage?
• Which of the following best defines a loan's fallout risk?
• What are the main forms of risk that a mortgage servicer faces?
• Who holds direct control over the daily operations of Government-Sponsored Enterprises (GSEs)?
• What are discount points used for in a mortgage?
• Which regulation is specifically designed to protect consumers in financial markets?
• In terms of mortgage payments, what does 'principal' refer to?
• The loan setup function primarily occurs in which servicing department?
• What does private mortgage insurance (PMI) protect against?
• What does risk-based pricing adjust based on?
• What role does a real estate agent play in the mortgage process?
• What does the delivery process involve?
• What are underwriting guidelines?
• How does a higher loan-to-value (LTV) ratio typically affect mortgage terms?
• The primary function of escrow administration in loan servicing is to?
• Select all that apply: Which of the following would be considered secondary market transactions?
• What is the defining characteristic of a government-backed loan?
• What is a significant risk assessed during the underwriting process?
• What distinguishes a primary market mortgage from a secondary market mortgage?
• What is the primary purpose of packaging a loan for delivery to the investor?
• In hedging, what action does the lender typically take?
• Processors generally perform which of the following duties?
• Which strategies best help the loan production team achieve the goal of producing investor quality loans?
• Which of the following entities is most likely to self-fund a mortgage transaction?
• Generally, how does the projected rise in interest rates affect the value of a servicing portfolio?
• Select all that apply: What strategies may loan originators use to generate business?
• What is typically included in a loan estimate form?
• What characterizes a short sale in real estate?
• What does FHA stand for and what is its main purpose?
• Which mortgage specialists are known to retain servicing rights on the loans they originate?
• What is the main difference between a conforming loan and a non-conforming loan?
• Which process is involved in the management of a mortgage after issuance?
• Which department is responsible for the process of managing loan defaults and foreclosures?
• What term refers to the amount of the mortgage compared to the appraised value of the property?
• Which departments are generally located within the loan administration department?
• What is the function of the secondary mortgage market?
• What is the primary role of a conduit in mortgage banking?
• One reason that the secondary mortgage market is important to the national economy is that it?
• What constitutes ‘fallout’ in mortgage lending?
• What is one main benefit of VA loans?
• Which functional area encompasses origination, processing, underwriting, and closing stages?
• Which requirement does the Equal Credit Opportunity Act impose on lenders beyond prohibiting discrimination?
• Which of the following activities is NOT considered effective pipeline management?
• What does interest rate risk refer to in the mortgage banking context?
• What does the Truth in Lending Act (TILA) aim to achieve?
• What does a lender do in the secondary market?
• What does the failure of a borrower to make mortgage payments signify?
• Which of the following is one key responsibility of a successful mortgage processor?
• What is the purpose of a title search?
• Fannie Mae and Freddie Mac are often referred to as?
• Hedging is primarily used to mitigate which type of risk?
• What is an AUS system primarily used for in mortgage processing?
• What does risk management in mortgage banking primarily aim to avoid?
• What is a common intention shared by loan production, loan administration, and secondary marketing regulation?
• What is a critical concern when managing a loan pipeline?
• What condition might lead to a buyer being classified as a subprime borrower?
• Which entity typically oversees compliance with mortgage regulations?
• What task does a loan originator typically perform?
• Which expenses are typically included in closing costs?
• Loan production regulations are intended to do which of the following?
• Random sampling of loans in quality control is intended to?
• Which department is responsible for borrower communication after a loan is disbursed?
• What is the primary responsibility of cash processing within the accounting department?
• What is a primary function of a mortgage servicer?
• What is meant by the mortgage market?
• What does the loan-to-value (LTV) ratio represent?
• In mortgage terms, what does "default" mean?
• What was the primary purpose of the Dodd-Frank Act in mortgage banking?
• Why must the secondary marketing department coordinate with the shipping department?
• Loans would be considered nonconforming if they do which of the following?
• How do loan production regulations protect borrower information?
• What is the primary purpose of the Dodd-Frank Act in the mortgage industry?
• How does loss mitigation specifically help in the mortgage industry?
• Which of the following is NOT a task involved in determining the value of a servicing portfolio?
• What is the impact of a servicing portfolio when interest rates are anticipated to rise?
• If a secondary marketing team wants to reduce their production and the volume of loans in their pipeline, what action might it take?
• What is the function of a loan estimate form in mortgage lending?
• Why is leveraging systems to validate property value important for mortgage servicing?
• Which area is responsible for notifying loan originators of changes in loan prices during the day?
• Which area encompasses the activities of receiving borrower payments and managing foreclosures?
• What is the main role of the Mortgage Bankers Association (MBA)?
• What might reduce the risk of loss due to borrower default?
• What is the primary role of the Consumer Financial Protection Bureau (CFPB)?
• What functions does the loan administration customer service department typically handle?
• Default management primarily involves?
• What is the primary benefit of a VA loan?
• What outcome occurs when a property is foreclosed?
• What is a "non-conforming loan"?
• What is the primary role of underwriting in mortgage lending?
• What often prompts the need for a borrower to seek pre-approval?
• Which statement best describes the function of a closing statement?
• Which document must be provided to borrowers as part of the Truth-in-Lending disclosure?
• What characterizes a Collateralized Mortgage Obligation (CMO)?
• What best describes a home equity line of credit (HELOC)?
• What is one of the servicer's responsibilities regarding hazard insurance?
• Which activity would most likely be administered by the loan administration customer service department?
• What does the term pre-qualification refer to?
• What is the most significant recent legislation impacting the mortgage industry?
• What does it mean to clear a title in a real estate transaction?
• What is float revenue?
• During a warehouse process, what is the benefit of maintaining a compensating balance with a warehouse bank?
• Which of the following is a benefit of a fixed-rate mortgage?
• Who is mainly responsible for preparing, assembling, and reviewing closing documents?
• What is the main duty of escrow administration?
• What is indicated by a property appraisal in the mortgage lending process?
• In an adjustable-rate mortgage (ARM), when does the interest rate typically change?
• Which regulatory goal is common to loan production and secondary marketing?
• What is the function of a mortgage broker?
• What does the debt-to-income (DTI) ratio measure?
• Why is a credit score important in obtaining a mortgage?
• What defines a balloon mortgage?
• A scenario where the investor pays $98,000 for a $100,000 note is an example of what type of pricing?
• What distinguishes pre-approval from pre-qualification?
• What is the legal process called when a lender takes possession of a property due to default?
• What does a mortgage note typically include?
• What is a construction loan primarily used for?
• What are common methods for processors to verify loan application information?
• Which document does a loan originator commonly assist clients in completing?
• What type of mortgage allows for lower payments at the expense of a higher remaining balance at the end of the term?
• Why is the annual percentage rate (APR) important for borrowers?
• What characterizes a fixed-rate mortgage?
• What is a conventional loan?
• What does mortgage servicing include?
• Which function is associated with early intervention to prevent delinquencies?
• The Truth-in-Lending Act mandates lenders to inform applicants about which of the following?
• Which of the following are core functional areas of the mortgage banking industry?
• What happens when a borrower pays off their mortgage entirely?
• Which of the following best describes a successful communication process in loan production?
• What is primarily used as collateral in a mortgage?
• How does a loan origination fee differ from a discount point?
• What does a Land Contract entail?
• What key factor can significantly influence the DTI ratio of a borrower?
• Which strategy is often utilized to detect mortgage fraud?
• What is the purpose of a closing statement in a mortgage transaction?
• What is typically true about a lender's requirements for a high LTV mortgage?
• What is the primary goal of pipeline management in mortgage banking?
• What does escrow involve in a mortgage context?
• Which of the following exceeds the maximum loan amount eligible for sale to the GSEs?
• What happens to fallout risk when interest rates drop?
• What is the fee called that a servicer earns for administering a loan?
• Who typically qualifies for a subprime mortgage?
• Which calculation does an underwriter use to determine the loan-to-value ratio?
• The underwriter uses the housing-to-income ratio to evaluate the applicant's ability to?
• What is a crucial responsibility of the loan closer during the closing process?
• What must servicers do if a borrower fails to obtain adequate hazard insurance?
• What is the primary function of an appraiser in the mortgage lending process?
• What is a lien in the context of mortgage loans?