A first-lien loan above the Freddie Mac conforming limit prices at 2.2 points over the average prime offer rate. The desk asks whether the higher-priced rules bite.
Correct Answer
A) No: a jumbo first lien is measured against a 2.5-point spread over APOR
Exceeding the conforming limit moves the first-lien test from 1.5 points to 2.5, and 2.2 falls short of it. Other choices: 1.5 points is the figure for a loan within the limit, and using it here is what the separate jumbo threshold exists to prevent; loan size alone does not make a loan higher-priced; and jumbo loans are covered, at the higher spread. Source: 12 CFR 1026.35(a)(1)(i)
Why This Is the Correct Answer
Exceeding the conforming limit moves the first-lien test from 1.5 points to 2.5, and 2.2 falls short of it. Other choices: 1.5 points is the figure for a loan within the limit, and using it here is what the separate jumbo threshold exists to prevent; loan size alone does not make a loan higher-priced; and jumbo loans are covered, at the higher spread. Source: 12 CFR 1026.35(a)(1)(i)
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