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CMB Exam - Study Questions And Verified Detailed Answers
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CMB Exam - Study Questions And VerifiedDetailed Answers
Which of the following transactions are subject to the three-day right of rescission per
federal law? Answer Primary residence for rate/term and/or cash-out refinance.
What federal law governs right of rescission? Answer Truth in Lending Act
What are 3 borrower qualifications unique to the VA loan product? Answer 1. Certificate
of Eligibility
2. Active or previous duty service w/ entitlement available
3. VA loans do not use a front-end ratio but residual income to qualify the borrower.
Right of Rescission - Answer A provision in the federal Truth-in-Lending Act that allows
borrowers to cancel certain kinds of loans within three days of signing.
This is provided to consumers in refinance transactions on their primary residence as
well as providing non-borrowers that also have ownership interest in the primary
property subject to the loan. -Answer Right of Rescission
What does USDA require with regard to a non-purchasing spouse in a community
property state? - Answer The non-purchasing spouse's obligations are to be considered
in the DTI unless excluded by applicable State law. Lenders must obtain a credit report
for the non purchasing spouse, collections and judgments also are included and data
entry is required in USDA's AUS engine "GUS".
Name 3 community property states - Answer Arizona, California, Idaho, Louisiana,
Nevada, New Mexico, Texas, Washington and Wisconsin.
,What formula is used to calculate the front end DTI ratio? - Answer PITI / Monthly Income
What formula is used to calculate the back end DTI ratio? - Answer PITI + Monthly debt /
Monthly Income
What are 4 requirements an appraiser can expect while inspecting a property? - Answer
Fannie is requiring the appraiser to:
* make a thorough visual inspection of the accessible areas of the interior and exterior
of the subject property
* note any adverse conditions apparent during the inspection
* consider and describe the overall condition and quality of the property
* identify items that require immediate repair as well as items where maintenance may
have been deferred or which may not require immediate repair.
If an appraiser observes an adverse property condition, what must the appraiser do? -
Answer Fannie does not consider the appraiser to be an expert in all fields. In those
situations where the appraiser cannot render an opinion of whether or not conditions
exist that require immediate repair, the property must be appraised subject to and an
inspection completed by a competent professional. The appraiser would then complete
the as is or final inspection to incorporate the results, measure the impact and decide
on the final opinion of market value.
How does VA determine residual income? - Answer Residual income is net effective
income (gross income less taxes, social security, and defined reductions) less monthly
shelter expense. VA has calculated guidelines for residual income based on income,
family size and location on a VA table;
What is Mortgage Servicing? -Answer The contractual right to receive mortgage
payments from mortgagors for a fee and remit pieces of those payments: Principle,
interest, taxes and insurance to appropriate recipients).
Define Fair Value/Market Value for mortgage servicing -Answer the amount a servicing
portfolio is worth when offered for sale, in the open market, to a reasonably
knowledgeable buyer, given a sufficient time to analyze the portfolio and enough
, information upon which to base a bid.
Define Economic Value for mortgage servicing -Answer the amount a servicing portfolio
is worth to a specific entity given its unique operating environment.
Define Book Value for mortgage servicing - Answer the amount a particular servicing
portfolio is worth as reflected on the balance sheet.
What is impairment of value in relation to mortgage servicing? - Answer The
unamortized portion of the MSA that represents the book value of the portfolio.
Liquidation Value - The value of a servicing portfolio in the event it would be sold by a
creditor or otherwise liquidated.
Market Value - What determines the market value of a servicing portfolio? Answer *
timing of payments
* rep/warrants associated with the nominal proce
* buy-back provisions normally found in Purchase and sale agreements regarding fraud
originations
Define regulatory value of mortgage servicing - Answer amount a particular servicing
portfolio is worth under risk-based capital regulations. Requires institutions to
mark-to-market and adjust book values on MSA's quarterly.
Name the steps in the valuation process for a servicing portfolio - Answer 1. Divide
portfolio into like-kind subsets for strategies
2. ID relevant characteristics and project them for the life of the portfolio regarding
each strategy (from #1)
3. Convert the characteristics into income flows
4. project operating costs
5. Estimate probability loans will repay
6. Determine best yield requirement (discount rate) for each strategy, net present value
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