CRU MBA TEST EXAM 1 - SOLUTIONS RATED A Question : Functions of Mortg...

CRU MBA TEST EXAM 1

QUESTIONS WITH CORRE CT

SOLUTIONS RATED A

Question : Functions of Mortgage Banking

Correct answer: 1. Loan Production

• Funding, Warehousing, Shipping,
• Secondary Marketing
• Loan Administration

Question : Loan Production

Correct answer: **Origination and manufacturing of

loans

Origination - loan app is taken and originated

Processing - manufacturing starts. All information on the loan app is verified and necessary documentation is collected

Underwriting - determine whether lending risk is acceptable

Closing - preparation and delivery of all legal documents to consummate the loan with the borrower

Question : Funding, Warehousing, Shipping

Correct answer: Funding - mortgage banker's act of

providing money for the loan

Warehousing - ensuring there is enough funds through warehousing to close the loan

Shipping/QC - quality control

Shipping/Delivery - sending the full loan file to the investor that is purchasing the loan

Question : Secondary Marketing

Correct answer: -Finding and maintaining a product mix

to fit the mortgage banker's business model -Setting interest rates that a mortgage banker will offer -Negotiating loan purchase commitments with investors -Managing market risks

Question : Loan Administration

Correct answer: -Receiving payments from borrowers

-Remitting funds received for P and I to the investors -Managing the escrow account -Handling of administrative functions relative to loan payoffs, assumptions, loss mitigations, foreclosures

-Responding to customer inquiries

Question : Mortgage Banker

Correct answer: Refers to companies that fund the loans

at closing and service the loans after closing. Bankers may either sell the loans on the secondary market or keep them in portfolio (less common)

Question : Correspondent

Correct answer: specialized type of mortgage banker

whose function is limited to the production of mortgage loans that are then sold to other mortgage bankers under a specific commitment.

Question : Wholesaler

Correct answer: lender who specializes in the purchase

and servicing of mortgages obtained from other mortgage origination entities, such as brokers, correspondents, thrifts, credit unions, or commercial banks. They generally sell the loans on the secondary market

Question : Conduit

Correct answer: companies that purchase closed loans

and pool the closed loans for sale to investors as securities

Question : Underwriter Responsibilities

Correct answer: 1. Analyze loan file for a thorough

understanding of the parties and transaction

• Determine borrower's ability and willingness to repay

the loan

• Ascertain the property value and ensure that the value

and condition meet investor guidelines

• Validate AUS conditions have been met
• No red flags

Question : 4 Cs of Underwriting

Correct answer: 1. Credit

• Capacity
• Capital
• Collateral

Question : Credit

Correct answer: **Determining if the borrower has the

ability to make the payments and if he/she will be willing to do so on a timely basis for the duration of the loan term

-Determination is based on if the borrower has paid all his or her bills on time in the past