Q&A Hero

Q: The due process clause has been utilized to require the integration of public schools.

Q: In ascertaining whether a borrower has the ability to pay off his loan over time, a mortgage bank may rely on calculating a total debt ratio as part of its underwriting process. Utilizing the following information, calculate the total debt ratio. Monthly principal and interest on mortgage loan: $635, Monthly Tax and insurance payments into escrow: $125, Monthly Car lease payment (lease term is 3 years): $350, Gross monthly income: $2,500 A. 25.4% B. 30.4% C. 44.4% D. 53.2%

Q: Loan servicing includes a number of responsibilities such as collecting monthly mortgage payments from the borrower, remitting principal and interest payments to investors, ensuring sufficient escrow payments are being made by the borrower, and managing default if it should arise. In exchange for these services, mortgage bankers receive a fee. If the outstanding loan balance is $250,000 and the annual servicing fee is 0.35%, what is the monthly fee for servicing the loan? A. $72.92 B. $729.17 C. $875.00 D. $8,750.00

Q: The strict scrutiny test would apply to a racial classification.

Q: In analyzing a borrower's credit worthiness, the lender will typically examine the borrower's FICO score (a product developed by the Fair Isaac Corporation). High quality (prime) borrowers are those with a credit score above:A. 350B. 620C. 660D. 850

Q: Freedom of press and speech protects popular ideas and viewpoints but is not a defense to unpopular ideas and viewpoints.

Q: Traditional home mortgage underwriting is said to rest on three elements, the "three C's." Recent research (e.g., Archer and Smith, 2011) has confirmed that the underwriting characteristic most strongly associated with default is: A. Collateral B. Creditworthiness C. Capacity D. Capability

Q: Due process means that government may not act in a manner that is arbitrary, capricious, or unreasonable.

Q: Despite many innovations in the lending process that made mortgage loans more accessible and affordable to the general public, many potential borrowers faced considerable barriers in qualifying for a loan and making a down payment. Which of the following types of loans was designed for a borrower with weak credit, those who seek 100 percent financing, or who cannot document their income?A. Conventional prime home loanB. Affordable housing loanC. Subprime mortgage loanD. Bridge loan

Q: The direct day-to-day impact on business by administrative agencies is probably greater than the impact of the three branches of government.

Q: The development of Fannie Mae and Freddie Mac established the framework for a liquid secondary market for residential mortgages. In 2010, the share of all residential mortgage loans owned or securitized by Fannie Mae and Freddie Mac approached approximately: A. 5% B. 16% C. 44% D. 76%

Q: All actions of administrative agencies are subject to judicial review as a matter of Due Process.

Q: Suppose that a mortgage bank "locked in" an interest rate for a prospective borrower at 8.5%. However, prior to the loan closing, the market mortgage rate falls to 7.5 %. In this scenario, the mortgage banker would be most concerned with which of the following risks? A. Interest rate risk. B. Pipeline fallout risk. C. Default risk. D. Liquidity risk.

Q: The concept of preemption applies to statutes but does not apply to or effect administrative regulations.

Q: Despite the risks that are inherent in the mortgage lending process, mortgage bankers have various tools at their disposal to hedge risk exposure. For example, since mortgage bankers know that only part of the loan commitments that they issue will be taken down by borrowers, they can purchase the right to sell a certain dollar amount of a certain loan type in the secondary market through what is commonly referred to as a: A. Standby forward commitment B. Mortgage pipeline C. Conduit D. Collateral

Q: Most business-related freedom of religion cases involve the establishment clause of the First Amendment.

Q: Recently, mortgage banking has become the natural method for doing mortgage lending. Within the mortgage lending process, which of the following roles serves as the primary revenue source for mortgage banks? A. Loan commitment B. Loan funding C. Loan servicing D. Loan sales

Q: When a court reviews an agency's decision, if substantial evidence to support the decision exists, the court will not disturb the agency's findings, even if they would have reached a different conclusion on the basis of other conflicting evidence also on record.

Q: States can regulate some aspects of foreign commerce that occur within its state borders.

Q: In the modern framework of home mortgage lending, there are four channels by which first mortgage home loans are created. Within which of the following channels would you typically find a Wall Street investment bank obtaining loans, pooling loans, and creating a senior-subordinate security structure? A. Traditional direct (portfolio) lending B. FHA/VA loan securitization C. Conforming conventional loan securitization D. Nonconforming Conventional loan securitization

Q: The federal government can prohibit foreign commerce entirely.

Q: The establishment clause deals with freedom of speech.

Q: The Federal National Mortgage Association (Fannie Mae) was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans. All of the following statements regarding Fannie Mae are true EXCEPT: A. Fannie Mae lends money directly to homebuyers B. Fannie Mae was once a private, self-supporting company with publicly traded stock that has now been placed into conservatorship by the United States government following the mortgage crisis of 2007-2008. C. Fannie Mae fully guarantees timely payment of interest and principal to investors. D. Fannie Mae is authorized to buy both conventional home loans and government-sponsored residential mortgages.

Q: When a federal statute has preempted a field, any state or local law pertaining to the same subject matter is unconstitutional.

Q: In the securitization process, mortgages are pooled together and cash flows are packaged into securities to be sold in the secondary market. Agencies and private companies that pool mortgages and sell mortgage-backed securities (MBS) are often referred to as: A. thrifts B. credit unions C. conduits D. automated underwriters

Q: The equal protection language of the 14th amendment allows people to be treated differently if sufficient reason can be shown.

Q: In the late 1960's, Congress created a number of agencies designed to address a struggling secondary market for residential mortgages. Which of the following organizations was developed primarily to guarantee mortgage-backed securities based on pools of FHA, VA and Rural Housing Service loans, rather than issue, buy or sell mortgages? A. Federal National Mortgage Association (Fannie Mae) B. Government National Mortgage Association (Ginnie Mae) C. Federal Home Loan Mortgage Corporation (Freddie Mac) D. Federal Agricultural Mortgage Corporation (Farmer Mac)

Q: The commerce clause grants to the federal government the power to regulate interstate commerce as well as foreign commerce.

Q: When a mortgage is used as collateral for the issuance of a mortgage-backed security (MBS), the underlying mortgage is said to be "securitized." As of the end of 2010, approximately what percentage of residential mortgage loans in the U.S. was being sold into the secondary market and being used as collateral for the issuance of MBS? A. 25% B. 40% C. 85% D. 100%

Q: Recent decisions have expanded the group of persons with standing to sue regarding administrative agency actions to include those who have noneconomic interests such as First Amendment rights.

Q: Throughout the process of originating and selling mortgages, mortgage companies face a number of risks. Therefore, it is important for a lending institution to evaluate the risks of mortgage loan default through a process commonly referred to as: A. mortgage fallout B. loan servicing C. warehousing D. loan underwriting

Q: Preemption applies only to federal statutes.

Q: Mortgage banks typically will attempt to sell loans as quickly as possible after they are originated by either issuing mortgage securities or selling the loan to an intermediary that will subsequently sell the loan in the secondary market. The period between loan commitment and loan sale is referred to as the: A. mortgage pipeline B. mortgage note C. mortgage fallout D. mortgage term

Q: The emergence of mortgage securities propelled the development of mortgage companies, an entity significantly different from the thrifts and banks that previously dominated the mortgage landscape. Which of the following parties is responsible for providing mortgage origination services and initial funding within this new framework? A. Mortgage banker B. Mortgage broker C. Portfolio lender D. Security analyst

Q: That there must be sufficient contact between a business and a taxing state is called the nexus.

Q: "Administrative agency" is used to describe all the boards, bureaus, commissions, agencies, and organizations that make up the bureaucracy.

Q: In addition to providing home mortgages, large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market. This type of financing is commonly referred to as: A. Mortgage pipeline B. Loan servicing C. Warehousing D. Loan underwriting

Q: When an employee files a complaint with the EEOC, is the EEOC bound by a mandatory arbitration remedy included in the employment contract?

Q: In 1989, Congress took major steps to establish depository institution accountability by requiring these institutions to hold more capital as they take on riskier assets. Which of the following Congressional acts imposed these capital standards on depository institutions? A. Depository Institutions Deregulation and Monetary Control Act B. Financial Institutions Reform, Recovery, and Enforcement Act C. Secure and Fair Enforcement for Mortgage Licensing Act D. Riegle Community Development and Regulatory Improvement Act

Q: What are the typical steps in the mediation process?

Q: In the early 1970's, home mortgage lenders were predominantly depository institutions. By the end of the decade, the growth of deposits at these institutions became negative due to the emergence of more attractive investment opportunities such as money market funds. This change in the distribution chain of funds is more commonly referred to as: A. Deregulation B. Disintermediation C. Warehousing D. Underwriting

Q: What is the role of judicial review regarding voluntary contract based arbitration awards?

Q: To put into perspective the amount of residential mortgage debt outstanding, it is useful to compare this market to other prominent sources of available debt. Listing the issuer with the largest amount of debt outstanding first, which of the following choices best depicts the relative rank ordering amongst the major sources of outstanding debt in the U.S. as of the end of 2011? A. Residential mortgage debt, marketable U.S. government bonds, corporate bonds, consumer debt B. Marketable U.S. government bonds, residential mortgage debt, corporate bonds, consumer debt C. Corporate bonds, marketable U.S. government bonds, residential mortgage debt, consumer debt D. Consumer debt, residential mortgage debt, marketable U.S. government bonds, corporate bonds

Q: Why would a business choose to settle a dispute with a customer rather than litigate, even if the business is likely to prevail?

Q: Total mortgage debt outstanding as of the third quarter of 2011 approached $13.6 trillion. Which of the following types of mortgage loans accounts for the greatest percentage of mortgage debt outstanding? A. Residential (1-4 family) B. Apartment (multifamily) C. Commercial D. Farm

Q: Compare and contrast voluntary and mandatory arbitration.

Q: In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or RAM, a lender agrees to pay the homeowner a monthly payment, or annuity, and expects to be repaid from the homeowner's equity when he or she sells the home or obtains other financing to pay off the RAM. Consider a household that owns a $150,000 home freeand clear of mortgage debt. The RAM lender agrees to a $100,000 RAM for 10 years at 6 percent. Assume payments are made annually, at the beginning of each year to the homeowner. Calculate the annual payment on the RAM.A. $7,157.35B. $7,586.80C. $12,817.73D. $13,586.80

Q: What are the four grounds that section 10 of the Federal Arbitration Act provides for vacating an arbitration award?

Q: Suppose you have obtained a 6%, 30 year fully-amortizing FHA mortgage loan of $152,625 to finance the purchase of your primary residence. In so doing, you must pay an additional mortgage insurance premium (MIP) of 1.10%. If the first-year average loan balance is $151,775.25, determine the first-year monthly insurance premium payment. A. $139.13 B. $1,025.69 C. $1,669.53 D. $1,678.88

Q: What are some of the constitutional challenges to mandatory arbitration?

Q: With regard to dispute resolution, what is a focus group and why and when might one be utilized?

Q: Suppose you are interested in taking an FHA mortgage loan for $350,000 in order to purchase your principal residence. In order to do so, you must pay an additional up-front mortgage insurance premium (UFMIP) of 1.0% of the mortgage balance. If the interest rate on the fully-amortizing mortgage loan is 6% and the term is 30 years and the UFMIP is financed (i.e., it is included in the loan amount), what is the dollar portion of your monthly mortgage payment that is designated to cover the UFMIP? A. $20.98 B. $291.67 C. $2,119.41 D. $3,500.00

Q: Suppose you are interested in taking a mortgage loan for $250,000 in order to purchase your principal residence. Your lender has suggested that you might be interested in taking an FHA loan. In order to do so, you must pay an additional up-front mortgage insurance premium (UFMIP) of 1.0% of the mortgage balance. If the interest rate on the fully-amortizing mortgage loan is 5% and the term is 30 years, what is your monthly mortgage payment assuming the UFMIP is financed? A. $1,342.05 B. $1,355.47 C. $1,498.88 D. $2,500

Q: What is arbitral misconduct and name five instances of arbitrator misconduct that would lead to the vacating of an arbitrator's award?

Q: Suppose you have just purchased your first home for $300,000. At the time of purchase you could only afford to commit to a down-payment of $15,000. In order to make the loan, the lender requires you to obtain private mortgage insurance (PMI) on their behalf. Suppose over time you paid down the principal of the loan to $280,000 and at that point in time you can no longer make any mortgage payments (i.e., you default on the loan). If the lender were to foreclose on your property and sell it for $228,000, what would the lender's loss of principal be taking into consideration the protection of mortgage insurance? (Let's assume that the PMI in this case covers the top 30% of the loan) A. $0 B. $52,000 C. $57,000 D. $72,000

Q: What impact has the Federal Arbitration Act had, and how do the courts view arbitration?

Q: Which of the following is not a style of negotiation?A.Avoiding.B.Competing.C.Collaborating.D.All of the above are styles of negotiation.

Q: The seven elements of interest-based negotiations include all of the following except: A.Commitment. B.Communication. C.Concern. D.Options.

Q: Suppose that you are in the process of deciding whether or not to refinance your fixed rate mortgage at a lower rate and you are interested in using the payback period rule of thumb to help you in your decision. Your lender has informed you that the cost of refinancing would be $4,300. If your original monthly mortgage payment was $1,250 and your new monthly mortgage payment would be $1,150 after refinancing, determine the payback period. A. 3 months B. 4 months C. 43 months D. 158 months

Q: Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years, Current loan balance: $100,000; Current loan interest: 7%; Current loan mortgage payment: $898.33; Remaining term on current mortgage: 15 years; New loan interest: 5.5%; New loan mortgage payment: $817.08; New loan term: 15 years; Cost of refinancing: $5,000. Assume that the opportunity cost is the interest rate on the new loan (5.5%). A. -$5,000.00 B. -$1,155.27 C. $3,844.73 D. $8,844.73

Q: Interest-based negotiations are superior to position-based negotiation because: A.The difference between the strict expectations of the parties may be too vast to bring into agreement. B.Interest-based negotiations allow room for consideration of non-factual concerns, such as relationships and long-term interests. C.Varying levels of importance can be given to elements of negotiation based on each party's perspective. D.All of the above.

Q: When parties agree to resolve all the matters of contention that they can and to arbitrate the unresolved matters, they are said to be using a variation of resolution known as: A.Med-Arb. B.Meditration. C.Med-Lit. D.Arb-Lit.

Q: The final step of a successful mediation is: A.Submitting any conclusions to a judge for judicial approval prior to implementation. B.Writing down the basic agreement reached and having it signed by all the parties. C.Providing all evidence given during the mediation to the parties' attorneys for use in the next phase of litigation. D.Agreeing that all future disputes be resolved in the same manner.

Q: Assume that a veteran decides to purchase a house for $150,000 using a VA loan that amounts to $44,000. If the buyer were to defaults on the loan, what is the maximum amount that the VA guarantees the lender? A. $11,000 B. $22,000 C. $33,000 D. $44,000

Q: In addition to the UFMIP (up-front mortgage insurance premium), the owner-occupant borrower who decides to use an FHA mortgage loan will normally pay an additional annual mortgage insurance premium (MIP) that depends on the loan-to-value ratio and the term of the loan. For loans with maturity longer than 15 years and a loan to value ratio that is greater than 95 percent, the MIP will be what percentage of the average annual loan balance? A. 0.25% B. 0.50% C. 1.10% D. 1.15%

Q: The meeting between a mediator and one disputant outside the presence of the other disputant is called __________. A.Caucus. B.Consensus. C.Convention. D.Convocation.

Q: FHA mortgage insurance covers any lender loss after conveyance of title of the property to the U.S. Department of Housing and Urban Development (HUD). FHA mortgage insurance requires two premiums to be paid: the UFMIP (up-mortgage insurance premium) and the MIP (monthly insurance premium). Currently, the UFMIP is what percentage of the loan for normal loans used to purchase a personal residence? A. 1.0% B. 1.5% C. 2.0% D. 4.0%

Q: The Magnuson-Moss Warranty Act provides that a company can require a customer to participate in ________ when a customer has a product warranty complaint before the customer may resort to litigation. A.Negotiation. B.Mediation. C.Arbitration. D.Med-Arb.

Q: A conventional mortgage loan is one that is not insured or guaranteed by an agency of the U.S. government. The lender, however, can still pursue a private mortgage insurance (PMI) policy to provide a guarantee for the fulfillment of the borrower's obligations. Typically PMI is required for all loans that have a loan to value (LTV) ratio greater than: A. 20% B. 40% C. 60% D. 80%

Q: The number of mediations has increased for each of the following except: A.Mediators tend to be more expert in the field than arbitrators so their decisions are less likely to be erroneous. B.The disputing parties have control over the process deciding when to settle and when to continue the dispute. C.Mediation is generally cheaper than litigation and arbitration. D.The reduction of the legal systems governance of the process is minimal and thus more attractive to business.

Q: When a borrower decides to stop making payments on an existing mortgage loan despite having the ability to make payments (typically when the home has lost value), this is more commonly referred to as a(n): A. Equity redemption B. Statutory redemption C. Strategic default D. Reverse mortgage

Q: The difference between a mediator and an arbitrator is: A.A mediator is not a neutral party. B.There is no difference. C.An arbitrator can force a binding solution on both parties to avoid litigation. D.A mediator can impose a binding solution on the parties.

Q: In recent years, mortgage lenders responded to the demand from home buyers who were unable to put 20 percent down on their purchase and were looking to avoid the private mortgage insurance (PMI) requirement that would typically accompany such a loan by developing a second mortgage that is created simultaneously with the first mortgage in an amount of ten percent of the value of the home. This enabled the borrower to obtain 90 percent financing while avoiding the additional cost of PMI. These loans are more commonly referred to as: A. Reverse mortgages B. Home equity loans C. Piggyback mortgage loans D. Subprime mortgage loans

Q: Typically, mediators utilize the principle of: A.Positional bargaining. B.Egocentric negotiation. C.Option based negotiation. D.Interest based negotiation.

Q: Suppose a homeowner is reluctant to refinance until he is reasonably sure that interest rates are not going to fall appreciably from where they currently are. In this case, the homeowner appears to be concerned about which of the following costs associated with refinancing?A. Opportunity costB. Tax consequencesC. Default riskD. Upfront fees

Q: Which of the following is not a reason that the number of mediations is increasing? A.The rules of evidence are relaxed in mediation so the attorney can take a more active role allowing the businessperson more time to tend to their business. B.Mediation is less costly than litigation and even arbitration. C.There is less involvement of the legal system in the governing of the process. D.The disputing parties retain more control over when to settle and when to continue disputing.

Q: Suppose a buyer agrees to purchase a tract of land for $40,000. The buyer is only able to obtain a mortgage for $32,000. Rather than let the deal fall through, the seller agrees to accept $4,000 in cash and a note from the buyer for the remaining $4,000. This type of transaction is commonly referred to as a:A. conventional loanB. home equity mortgageC. purchase money mortgageD. reverse mortgage

Q: In Green Tree Financial Corp. v. Randolph, Randolph sought to overturn a mandatory arbitration clause in her mobile home purchase contract because the agreement failed to designate the costs and responsibility to pay the cost of the arbitration. A.Randolph was successful because speculative costs put the corporation in a superior position and make customers unfairly vulnerable. B.Randolph was successful because whenever there is a disagreement regarding the applicability of an arbitration agreement, litigation is the only fair way to resolve the dispute. C.Green Tree was successful because the court is not permitted to interpret mandatory arbitration agreements because that is the sole job of the arbitrator. D.Green Tree was successful because Randolph's risk was too speculative and she did not meet her burden of proving that the costs would be prohibitively expensive.

Q: With the arrival of subprime mortgages in recent years, a new kind of "trigger" event became apparent in leading households to default. Which of the following trigger events is primarily associated with most defaults that have occurred during the most recent subprime mortgage crisis? A. Death in the family B. Divorce C. Unemployment D. Mortgage payment spikes

Q: The outcome of mediation: A.Is binding on all parties. B.Helps point out weaknesses in a case without an actual trial. C.Is a legal finding that may be used in court if the dispute proceeds to litigation. D.Can have no impact on dispute resolution in any way.