A $920,000 first-lien loan is classified as a jumbo by a processor who applied the standard national limit. The property is in a county the team believes is designated high-cost. What has to be checked?
Correct Answer
B) Check high-cost-area limits before classifying the loan
Why this is correct: The original explanation states FHFA conforming loan limits define maximum principal amounts for Fannie Mae and Freddie Mac acquisition. The governing concept is that conforming loan limits vary by county, with higher limits in designated high-cost areas. Therefore, when asked about conforming loan limits during an operations checklist, one must check high-cost-area limits to properly classify the loan amount. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because substituting, for example, FHA loan limits would misclassify a conventional conforming loan. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong as borrower preference cannot override the maximum loan amount set by FHFA. "Treat the Conforming Loan Limits review as complete because the file contains a related servicing transfer note" is wrong because a servicing transfer note does not confirm the loan amount is within the applicable limit. Exam tip: Conforming limits are set annually by FHFA; always verify the current year's limit for the specific county.
Why This Is the Correct Answer
The correct response is "Check high-cost-area limits before classifying the loan" because FHFA conforming loan limits define maximum principal amounts for Fannie Mae and Freddie Mac acquisition.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Treat the Conforming Loan Limits review as complete because the file contains a related servicing transfer note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
conforming loan limits: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to conforming loan limits; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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