Argosy University Accounting Quiz Questions (check The QM/ATR rule applies to which types of transactions? all that apply) HELOCs Closed-end consumer cre

Argosy University Accounting Quiz Questions (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

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

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

Question Title

10. 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

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

Desktop Underwriter

Underwriter Pro

Fannie Mae Underwriter XP

None of the above

Question Title

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

Question Title

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

Question Title

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

Question Title

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

Question Title

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

Question Title

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

Question Title

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.

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

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

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%.

Question Title

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

$900

$1,000

$1,100

Not enough information provide to calculate

Question Title

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

$200,000

$205,000

$210,000

Not enough information provided to calculate

Question Title

*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

Question Title

Question Title

*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

Question Title

Question Title

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:

Question Title

*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.

Question Title

*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

Question Title

*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

Question Title

*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

v The QM/ATR rule applies to which types of transactions?
(check all that apply)
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
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
Question Title
10. 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
11. What is Fannie Mae’s automated underwriting system
called?
Desktop Underwriter
Underwriter Pro
Fannie Mae Underwriter XP
None of the above
Question Title
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
Question Title
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
Question Title
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
Question Title
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
Question Title
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
Question Title
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
Question Title
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.
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
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
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%.
Question Title
*27. How much will Jane’s new Interest Only payment
amount be?
$900
$1,000
$1,100
Not enough information provide to calculate
Question Title
*28. What was Jane’s original loan amount prior to this
refinance?
$200,000
$205,000
$210,000
Not enough information provided to calculate
Question Title
*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
Question Title
Question Title
*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
Question Title
Question Title
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:
Question Title
*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.
Question Title
*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
Question Title
*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
Question Title
*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
v

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