Mortgage Affordability and Loss Mitigation Options, Exams of Medicine

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What act came about after the assassination of MLK? - ANS: The Civil Rights Act of 1968 A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? - ANS: Fair Credit Billing Act In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? - ANS: When weighing housing options A client works 40 hours a week making $15 an hour. What is the highest monthly mortgage the client can afford based on income if the client secures a conventional loan? - ANS: Answer is 728. 40x15=x52/12=_.28= Front end ratio for Conventional Loan - ANS: 28% Back End ratio - ANS: Only calculate if you have expenses in the problem. Only include debts that appear on Credit report. If they say Debt to income ratio : - ANS: they are looking for Back End Ratio If it says housing ratio : - ANS: Calculate front end If they say "What is the highest monthly mortgage payment" and they give you expenses: - ANS: You do both front & back end & choose the lowest total A client has a monthly household income of $2,300, monthly debt payments of $450, and an optimal monthly housing ratio of 32%. What is the client's optimal monthly housing payment? - ANS: 2300- 450=_X.32=

What is the back-end ratio for a client with a monthly housing expense of $1,250, a monthly total of $ in other consumer debt payments, and a gross household income of $4,460 per month (rounded to the nearest whole percent)? - ANS: ANSWER IS 30% 1250+88/ How to solve for back end ratio - ANS: back end ratio = total monthly debt expenses/ gross monthly income A client earns a salary of $45,000 at a job held for three years. The client has credit card bills, student loans, and a car loan totaling $500 per month. The client has already saved $3,500 for a down payment and is using an FHA Energy Efficient Mortgage (EEM).If the client wants to make the minimum down payment for a home priced at $150,000, how much more does the client need to save? $1, $2, $4, $5,250 - ANS: Down payment for EEM is 3.5% so you take 150,000 x .035=5250-3500=$ EEM - ANS: Energy Efficient Mortgage A type of FHA loan front end: 33% back end max: 45% Which type of assistance administered by a public housing authority allows for location flexibility? Project-based vouchers USDA Tenant-based vouchers FHA - ANS: Tenant-based vouchers A client's payment history affects which factor of creditworthiness? Collateral

Character Capital Capacity - ANS: Character Which action may a lender take to determine a borrower's character? Examine pay stubs to determine amount of income. Call an employer to verify employment. Calculate housing ratios to see debt obligations. Review the appraisal. - ANS: Call an employer to verify employment A client is in the process of purchasing a home with a sales price of $162,000. The client has a net worth of $50,000, a credit score of 680, and a debt-to-income ratio of 36%. The home has appraised for $155,000. Which factor of creditworthiness will most likely be an obstacle to purchasing the home? Capacity Collateral Character Capital - ANS: Collateral When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered? Collateral Capital Capacity Character - ANS: Capital A first-time buyer wants a conventional loan but does not have the assets to qualify. This client may have to purchase with an FHA loan unless the client saves more money. Which of the Four C's of Credit does this involve? Collateral Character

Capacity Capital - ANS: Capital A counselor's understanding of the client's spending habits and use of credit are most important in which step of the homebuying process? Determining if homeownership is right for the client Making an offer on a home Evaluating housing affordability for the client Obtaining financing - ANS: Determining if homeownership is right for the client Which is the minimum qualifying credit score for an FHA mortgage if the client made a 3.5% down payment? - ANS: 580 A client has saved money for a small down payment and closing costs to purchase a $100,000 home in the city. The client is deciding whether to begin the homebuying process now or continue saving for a larger down payment. Client Profile ► Credit Score - 700 ► Monthly income - $3, ► Savings - $15,000Types of Loans - LTV (%) ► Traditional conventional loan - 80% ► Conventional/piggyback - 80%/10% ► Conventional loan - 90% ► FHA loan - 96.5% Which loan type would provide the highest monthly payment, assuming interest rates and other factors are equal? - ANS: FHA loan A client, who is the surviving spouse of a military servicemember, is interested in buying a home. The client now works at a local nonprofit agency, making $36,000 per year. The client has $4,000 in savings and a credit score of 624.If a client has just received a commitment from a lender to provide a loan for a fixed loan amount based on a review of the complete loan application package by an underwriter, in what stage of the lending process is the client?

a.)Loan application b.)Pre-qualification c.)Pre-approval d.)Loan committee review - ANS: Pre-approval What are key differences between PMI and MIP? - ANS: Conventional loans may require PMI, removed at 78% LTV. FHA loans require MIP, removed upon fulfillment of loan terms MIP - ANS: for FHA only, paid for life of loan PMI - ANS: for conventional only, removed at 78% LTV Which borrower information is contained in the Uniform Residential Loan Application (URLA)? a.)Credit score b.)Asset information c.)Education d.)Tax information - ANS: Asset information In order to comply with the Know Before You Owe rule, which disclosures were replaced with new versions that more clearly outline mortgage terms to borrowers? - ANS: Good Faith Estimate (GFE) and HUD-1 Settlement Statement Which entity would be most likely to issue a Housing Choice Voucher? - ANS: Local housing authority What is the purpose of the Veterans Affairs Supportive Housing (VASH) program? - ANS: To end veteran homelessness A tenant's apartment building has been sold. The new owners have informed the tenant that the rent will immediately increase by $100 a month despite having four months left on the written lease. Which best describes the situation? - ANS: New landlord has to honor the existing lease

A client is currently renting month to month (tenancy at sufferance). What advice should a housing counselor recommend to better secure the housing? - ANS: Seek a new written lease agreement Which circumstance is generally covered by renter's insurance? - ANS: A pipe burst in the apartment above the tenant's unit and causes water damage to the tenant's personal belongings. Which family is most likely to qualify for the Earned Income Tax Credit (EITC)? - ANS: A individual employed part time in a minimum wage job Delinquency on which type of payment can cause a lien to be placed on a client's property? - ANS: Homeowners association dues Which is a possible outcome for member residents if a homeowners association (HOA) imposes a community assessment? - ANS: Residents would be required to pay a share of expenses related to capital improvements to the common areas. A homeowner has decided to remodel the basement over the next 12 months. The project should cost just under $24,000, and the hope is to borrow the money in increments as the project progresses. Which home financing option would work best? - ANS: HELOC Which item is critical to consider when working with a client to prepare a household system maintenance plan? - ANS: Target replacement date Which strategy most effectively increases a home's energy efficiency? - ANS: Increase attic insulation. Which best describes the ENERGY STAR program? - ANS: A voluntary program that helps businesses and individuals save money and protect the climate through superior energy efficiency. Which action would most likely increase the energy efficiency of a home? - ANS: Repair caulking on windows. Which should a housing counselor recommend that a client include in a household maintenance plan? - ANS: Coverages for home warranty

Which item should be included in an emergency preparedness plan? - ANS: Identify a meeting location outside the immediate area. A client with limited financial resources wants to improve safety in the home to prepare for natural disasters. Which is the best resource for the client to use in researching this topic? - ANS: Ready.gov Which would be the best location to identify in a household emergency preparedness plan as a safe place to meet in the event of an evacuation? The family home A local hospital The nearest police station A motel in a neighboring community - ANS: A motel in a neighboring community What was the primary purpose of the Making Home Affordable program? - ANS: To assist homeowners in avoiding foreclosure The terms Ability to Repay and Qualified Mortgage were defined in regulations implemented by the Consumer Finance Protection Bureau (CFPB) because of what industry wide problem? - ANS: Subprime lending What should a counselor and tenant focus on when developing an emergency budget? - ANS: Increasing income and decreasing expenses A client is delinquent on the mortgage and at risk of default. The client is considering signing the deed over to a real estate investor to avoid foreclosure. What should the housing counselor recommend? - ANS: Advise against signing over the deed to a real estate investor as a solution to avoid foreclosure. Which option would be most likely to require that the mortgage is current for eligibility? Principal reduction Refinance Unemployment forbearance

Loan modification - ANS: Refinance A family suffers a loss of income due to unemployment and is now facing a pending foreclosure. After reviewing the family's budget, the housing counselor learns that the family has a negative cash flow of almost $300.The housing counselor recommends adjusting expenses, which results in a positive cash flow of $400 per month. The family would like to pursue an FHA retention option. They are seven months behind on the mortgage and their debt-to-income ratio is 29%. Which option is best for this situation? - ANS: Special Forbearance Which aspect of a loan may a client be able to modify when seeking a loan modification due to a financial hardship because of a divorce? - ANS: Loan term What information is needed to counsel every client through the loss mitigation process? - ANS: Type of mortgage Why is it important to include a 4506-T form when submitting a loss mitigation package? - ANS: Because it authorizes the servicer to obtain the client's tax returns Which retention option would most likely offer a principal reduction? - ANS: Loan modification A client who is not behind on the mortgage was recently informed of a reduction of income for two months by the client's employer. The client has an FHA loan and would like to take action as soon as possible to avoid a mortgage delinquency. Which FHA Loss Mitigation option is likely best for this client?

• ANS: Informal/Formal Forbearance - fact check this one What loss mitigation option may allow a borrower an FHA Partial Claim? - ANS: FHA-HAMP Loan Modification Which option allows the borrower to avoid foreclosure by disposing of a property for an amount less than the outstanding mortgage balance? - ANS: Short sale Under what circumstance must a servicer refrain from beginning the foreclosure process? - ANS: The client has a pending loan modification application.

Which does a servicer do in the non-judicial foreclosure process? - ANS: Issues a Notice of Default (NOD) to the borrower In which circumstance may a tenant terminate a lease without financial repercussions? - ANS: Tenant's spouse is relocated for a military assignment When a housing counselor is assisting a low-income client in danger of eviction, which referral would be most appropriate? - ANS: Legal aid services Which strategy used by an unemployed client will most likely result in the client moving out of a shelter into permanent affordable housing? - ANS: Participate in the shelter's transitional housing programs. A client recently experienced an unexpected car expense, which resulted in the client using half the rent to pay for the expense. The client, who still has a full-time job, would like to avoid making a late payment. Which resource should a housing counselor recommend first? - ANS: Contact United Way 211 A counselor is working with a client who has recently been evicted. What would be the most appropriate housing referral? - ANS: Local emergency shelter A tenant has a Housing Choice Voucher for a two-bedroom apartment, but lives in a three-bedroom apartment and pays the difference in rent. Due to a recent job change, the tenant is behind on rent but wishes to keep the voucher. What should the counselor encourage the client to do? - ANS: Move into a two-bedroom unit to reduce costs and negotiate a repayment plan Which practice is a legal exception to the Fair Housing Act? - ANS: Making housing operated by a religious organization unavailable to those who are not members of the organization Which practice remained legal after the passage of the Civil Rights Act of 1964? - ANS: Assigning renters to specific floors in a privately owned apartment complex, based on race Which are protected characteristics under the federal Fair Housing Act? - ANS: Race, religion, disability

Which is a potential violation of the Fair Housing Act? - ANS: An apartment owner only rents ground- level apartments to tenants of Asian ethnicity. A single, gay, African-American parent with four kids is turned away from a property because the landlord does not want the kids to destroy the property. Which protected characteristic of discrimination most likely fits this case? - ANS: Familial status Which HUD program provides funding to nonprofits that assist people who may have been victims of housing discrimination? - ANS: Fair Housing Initiatives Program (FHIP) When filing a fair housing complaint, why is it important to provide the date of the alleged violation? - ANS: Because complaints are only valid if they are filed within a given period of time While meeting with a housing counselor, a client describes a possible housing discrimination situation. Which is the best way to handle the violation? - ANS: File a complaint online with HUD Which is a campaign to inform the public about fair housing rights? - ANS: Affirmatively Furthering Fair Housing Program If question asks for "maximum monthly mortgage payment" - how do you solve the problem? - ANS: do front & back end ratio calculations and choose the lowest number Making Home Affordable Program ( MHA) - ANS: -Created by the Treasury and HUD -help avoid foreclosure, stabilize country's housing market, and improve economy -Standardized process for requesting workout plans , especially required documents Servicemembers Civil Relief Act - ANS: -protects military personnel & dependents in issues such as protections against default judgments, foreclosure, and eviction

Joint State-Federal National Mortgage Settlements (NMS) - ANS: -requirement to honor modification agreements made by a prior servicer -end dual tracking -penalized five financial institutions for deceptive lending and foreclosure practices CFPB - ANS: To create a federal agency charged with addressing failures of consumer protections Issuance of New Mortgage Rules - ANS: To make it easier for borrowers to understand loan terms, to require homeownership counseling for some mortgages, and to expand protections Hardest-Hit Fund - ANS: To enable 18 states and the District of Columbia to develop locally tailored programs to assist struggling homeowners in their communities Delinquent - ANS: when all or part of a monthly payment is unpaid after the due date. Default - ANS: conventional: default when a payment has not been paid after 60 to 90 days. FHA: in default after 30 days Foreclosure Timeline - ANS: servicers cannot begin until after 120 days delinquent (4months) Consumer complaints about mortgages - ANS: (CFPB) visit www.consumerfinance.gov/complaint Loan Acceleration - ANS: The process of accelerating the payment of the full loan balance. Judicial Foreclosure - ANS: -client fights foreclosure in court -servicer cant take foreclosure action until judge grants permission Non-judicial foreclosure - ANS: -Client received NOD in mail -communication occurs bet. servicer & homeowner

-client has 5 days before foreclosure sale to cure delinquency and stop sale Imminent Default - ANS: a borrower who is not yet in default but is delinquent and has a high risk of defaulting Home Affordable Modification Program (HAMP) - ANS: -offered greatly reduced interest rates for 5 yrs -after 5 years, interest rate will increase at 1 percent for 3-4 yrs