A borrower locks at 6.625% for 45 days. Rates fall to 6.125% two weeks later and the lock agreement contains a one-time float-down clause.
Correct Answer
A) She may take 6.125% once, on the terms the float-down clause sets out
A float-down is a contractual option, usually once, often with a minimum improvement and sometimes a fee, and it is exercised on the terms written into the lock. Other choices: nothing makes a lender pass a fall on automatically, and none has to honor a drop without the clause; saying a lock binds both sides without exception is nearly right, and the exception is the clause itself; and a 45-day extension fee buys more days rather than a lower rate. Source: Rate lock float-down terms
Why This Is the Correct Answer
A float-down is a contractual option, usually once, often with a minimum improvement and sometimes a fee, and it is exercised on the terms written into the lock. Other choices: nothing makes a lender pass a fall on automatically, and none has to honor a drop without the clause; saying a lock binds both sides without exception is nearly right, and the exception is the clause itself; and a 45-day extension fee buys more days rather than a lower rate. Source: Rate lock float-down terms
More Mortgage Knowledge Questions
A subordinate-lien home equity loan closes at an APR of 9.4% when the average prime offer rate for a comparable transaction is 6.1%.
In a closing-readiness check, a risk reviewer sees facts tied to TILA Truth in Advertising. What should the file reflect?
In a training scenario, a trainee asks which official source controls FHA single-family origination policy. What action best follows the rule?
A compliance analyst compares the file facts with LTV Ratio Calculation during a licensing team review. Which conclusion is accurate?
A branch manager asks about a loan file because a trainee asks which official source controls FHA single-family origination policy. What should happen?
The loan team compares the file facts with ARM Cap Structures during a borrower follow-up call. Which conclusion is accurate?
A borrower has a 30-year fixed-rate mortgage with monthly principal and interest of $1,450. Property taxes increase, and taxes are paid through escrow. What can happen to the total monthly payment?
A loan has an outstanding principal balance of $240,000 and a 6% annual interest rate. Using simple monthly accrual, how much interest accrues for one month?
An annual escrow analysis projects a $780 shortage. The borrower asks how it will be collected.
What does an amortization schedule show for each scheduled payment?
People Also Study
Federal Mortgage-Related Laws
24% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A team member asks about HELOC Terms and Features in an investor-delivery review while trying to match the file facts to the correct rule. Which response should the file reviewer use?
Next Question
A 74-year-old borrower will draw on her reverse mortgage as a line of credit, taking money only as she needs it over several years. A processor is unsure which set of disclosures the file belongs under.