Exam (elaborations)
NMLS - ProSchools - National Mortgage Exam Prep - Nontraditional Loan Products Topics (V1.2).
NMLS - ProSchools - National Mortgage Exam Prep - Nontraditional Loan Products Topics (V1.2).
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NMLS - ProSchools - National Mortgage Exam Prep - Nontraditional LoProducts Topics (V1.2)
Study online at https://quizlet.com/_3vveiw
1. An FHA 5/1 ARM loan is a nontraditional
loan.
a conventional loan.
a jumbo loan.
a nonconforming loan.
a nontraditional loan.
2. If an ARM has a 1% annual rate cap, the borrower's cannot increase by
interest rate more than 1 per-
centage point per
cannot increase by more than 1 percentage point per year.
year.
will increase or decrease based on changes in the
margin rate.
will always decrease by 1 percentage point.
will increase even if the index rate decreases.
3. All of the following are true relating to the index rate the index rate is
for an adjustable-rate mortgage loan EXCEPT always lower than
the initial rate.
the index rate plus the lender's margin equals the
ARM interest rate.
the index rate is always lower than the initial rate.
LIBOR stands for London Interbank Offered Rate.
COFI stands for Cost of Funds Index.
4. The ARM monthly payment may be affected by which A payment cap
of the following? that can limit the
required minimum
An interest rate cap that can result in negative amor- payment to less
tization. than the interest
A payment cap that can limit the required minimum being charged.
payment to less than the interest being charged.
A margin rate that is adjustable during the loan term.
An index rate that is fixed throughout the loan term.
5. The ARM monthly payment may be affected by which A payment cap
of the following? that can limit the
required minimum
1/6
, NMLS - ProSchools - National Mortgage Exam Prep - Nontraditional Lo
Products Topics (V1.2)
Study online at https://quizlet.com/_3vveiw
An interest rate cap that can result in negative amor- payment to less
tization. than the interest
A payment cap that can limit the required minimum being charged.
payment to less than the interest being charged.
A margin rate that is adjustable during the loan term.
An index rate that is fixed throughout the loan term.
6. An ARM had an initial rate of 3-5/8%. It has a 2/6 cap 5-5/8%
and a margin of 2.50%. If the current Treasury bill rate
of 3-3/8% is its index rate, what would the new ARM
rate be when it is adjusted?
5-3/8%
7-7/8%
5-5/8%
5-7/8%
7. An ARM had an initial rate of 3-5/8%. It has a 2/6 cap Initial rate, index
and a margin of 2.50%. If its index rate is the current rate, margin and
Treasury bill rate of 3-3/8%, what would the new ARM cap
rate be when it is adjusted?
Federal funds rate, cap and initial rate
Initial rate, index rate, margin and cap
Discount rate, index rate and margin
Initial rate, margin and cap
8. The term "margin" is used frequently when describing the amount the
terms for an adjustable-rate loan. The margin is lender adds to
a selected index
the room for error a lender has when calculating profit rate.
on the loan.
the maximum amount the interest rate may be in-
creased at any time.
the amount the lender adds to a selected index rate.
the amount of time between each adjustment period.
9. The typical pattern of payments on an interest-only
payment plan is
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