Exam 11: Sources of Funds for Home Mortgages

Traditional home mortgage underwriting is said to rest on three elements, the "three C's." The housing expense ratio is one tool that lenders will use to address concerns associated with which of the "three C's?"

The Federal National Mortgage Association (Fannie Mae) was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans. All of the following statements regarding Fannie Mae are true EXCEPT:

When the contract rate at closing is less than the current market rate (i.e., interest rates have increased since the time of the loan commitment), the mortgage banker will have to sell the newly originated loan at a discount. This scenario best depicts the mortgage banker's exposure to which of the following risks?

Total mortgage debt outstanding as of the third quarter of 2015 approached $13.7 trillion. Which of the following types of mortgage loans accounts for the greatest percentage of mortgage debt outstanding?

The emergence of mortgage securities propelled the development of mortgage companies, an entity significantly different from the thrifts and banks that previously dominated the mortgage landscape. Which of the following parties is responsible for providing mortgage origination services and initial funding within this new framework?

When the mortgage banker originates a home loan, she actually creates two assets: the loan and the servicing rights. When the mortgage bank sells the servicing right to the loan, it historically has had a value of:

Recently, mortgage banking has become the natural method for doing mortgage lending. Within the mortgage lending process, which of the following roles serves as the primary revenue source for mortgage banks?

Despite many innovations in the lending process that made mortgage loans more accessible and affordable to the general public, many potential borrowers faced considerable barriers in qualifying for a loan and making a down payment. Which of the following types of loans was designed for a borrower with weak credit, those who seek 100 percent financing, or who cannot document their income?

The development of Fannie Mae and Freddie Mac established the framework for a liquid secondary market for residential mortgages. In 2015, the share of all residential mortgage loans owned or securitized by Fannie Mae and Freddie Mac approached approximately:

In analyzing a borrower's credit worthiness, the lender will typically examine the borrower's FICO score (a product developed by the Fair Isaac Corporation). High quality (prime) borrowers are those with a credit score above:

Let's suppose that a lender has established a 90 percent loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, which of the following best describes the lender's decision on whether or not to approve the loan along this dimension?