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CMB Exam with complete solutions 2024_2025
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CMB Exam with complete solutions2024/2025
According to federal law, which of the following transactions are subject to the
three-day right of rescission? - ANSWER-Primary residence for rate/term and/or
cash-out refinance.
What federal law governs the 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 instead use 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 regarding a non-purchasing spouse in a community
property state? - ANSWER-The non-purchasing spouse's obligations must be
considered in the DTI unless excluded by state law. Lenders must provide a
credit report for the non-purchasing spouse, collections and judgments are also
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 expectations of an appraiser during their inspection of a property? -
ANSWER-Fannie requires the appraiser:
* conduct a complete visual inspection of the accessible areas of the interior and
exterior of the property.
* responsibility to note any adverse conditions that were apparent during the
inspection.
* expected to 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 these situations when an appraiser cannot determine if the condition
requires immediate repair, the property must be appraised subject to and an
inspection must be completed by a qualified 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 is VA residual income calculated? - ANSWER-Residual income is calculated
as 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.
Define liquidation value in mortgage servicing - ANSWER-the amount a servicing
portfolio is worth if sold by a creditor or other liquidation scenario.
What influences 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 the prepayment adjusted cash flow for each strategy
7. Add results together
8. Review results for reasonableness.
Name some characteristics in servicing that can be categorized as predictable -
ANSWER-* service fee
* average loan balance
* P&I constants
* T&I constants
* interest paid on escrows
Name some characteristics in servicing that can be characterized as judgmental -
ANSWER-* prepayment expectations
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