A pre-closing checklist raises a Conforming Loan Limits question for a risk reviewer. What answer should guide the file?
Correct Answer
D) Classify the loan as conventional and then test conforming eligibility
Why this is correct: Conventional loans are not government-insured. A key step is determining if they meet the loan limit, credit, and other criteria to be "conforming" (eligible for sale to Fannie Mae or Freddie Mac). Classifying the loan as conventional is the necessary first step before testing against conforming limits. The original explanation correctly distinguishes conventional from government loans. Why the other choices are wrong: "Treat the Conforming Loan Limits review as complete because the file contains a related anti-steering note" is wrong because an anti-steering note addresses loan originator compensation, not loan limits or eligibility. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because conforming limits are set by the FHFA and are not waivable by borrower preference. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because conforming limits differ by county and property type, and government loans have separate limits. Exam tip: Remember that conforming loan limits are published annually and vary by county. Always check the current limits for the property location.
Why This Is the Correct Answer
The correct response is "Classify the loan as conventional and then test conforming eligibility" because Conventional loans are not government insured and may be conforming or nonconforming.
Why the Other Options Are Wrong
Option A: Treat the Conforming Loan Limits review as complete because the file contains a related anti-steering note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: 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 C: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
conventional and conforming loan rules: 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 conventional and conforming loan rules; 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
More Mortgage Knowledge Questions
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