Accounting Quiz - check The QM/ATR rule applies to which types

Argosy University Accounting Quiz Questions

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*4. (check The QM/ATR rule applies to which types of transactions? all that apply)

 HELOCs

 Closed-end consumer credit transactions

 Timeshares

 Reverse Mortgages

 Business Purpose Loans

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*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

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*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

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*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

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*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.

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9. 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

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

 2 years W-2

 1 year W-2

 Bank Statements

 a current paystub

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11. What is Fannie Mae's automated underwriting system called?

 Desktop Underwriter

 Underwriter Pro

 Fannie Mae Underwriter XP

 None of the above

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12. 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

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13. 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

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14. 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

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15. 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

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16. 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

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17. 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

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18. 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.

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*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

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*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

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*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

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22. 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

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*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:

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

 80%

 82%

 90%

 92%

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

 36%

 38%

 43%

 52%

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*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%.

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*27. How much will Jane's new Interest Only payment amount be?

 $900

 $1,000

 $1,100

 Not enough information provide to calculate

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*28. What was Jane's original loan amount prior to this refinance?

 $200,000

 $205,000

 $210,000

 Not enough information provided to calculate

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*29. Approximately how much cash out will Jane receive from this refinance?

 $10,000

 $20,000

 $30,000

 Not enough information provided to calculate

Scenario 3

Schedule E income

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*30. Using only the above schedule E, what is the approximate NET monthly rental income of the 3 properties?

 $10,148

 $13,427

 $20,501

 Unable to calculate

Scenario 4

Wage Earner Income

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31. Using only the 2 years of W2s provided, what is the borrower's average income over the previous 2 years?

 $6,299

 $7,719

 $7,837

 $7,955

Scenario 5

A self employed borrower is applying for a mortgage but is unable to qualify for traditional financing. Instead the borrower is being qualified under a non-QM loan program where the lender will utilize bank statements to calculate his income. Answer the following questions on how the lender might reasonably qualify the borrower:

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*32. When qualifying a borrower based on bank statement income, what percentage of the total deposits are generally used?

 80% of personal bank statement deposits and 40% of business statement deposits.

 100% of personal bank statement deposits and 50% of business statement deposits.

 100% of personal bank statement deposits. Business statement deposits are not eligible.

 100% of business bank statement deposits. Personal statement deposits are not eligible.

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*33. When adding up the deposits on bank statements, what line item should be backed out of the total deposits used to qualify as income?

 Transfers from other accounts

 Deposits with non-consecutive check numbers

 Deposits from merchant account or credit card transactions

 None of the above

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*34. A borrower's reserves must be easily accessed liquid or near liquid financial assets. Which of the following items must not be considered reserved funds?

 Savings Account

 Bonds

 Certificate of Deposit(s)

 Stock Options

 ROTH IRA

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*35. When all other risk factors are constant, the default rate for a self- employed borrower is significantly higher than a salaried borrower.

 True

 False