A mortgage file is paused during a risk-control review because of Conforming Loan Limits. Which answer should match the file facts to the correct rule?
Correct Answer
C) Classify loans above the limit as nonconforming or jumbo
Why this is correct: Conforming loan limits are set annually by the FHFA. Loans with a principal balance at or below the limit for the county are eligible for purchase by Fannie Mae or Freddie Mac. Loans exceeding this limit are classified as nonconforming, often called jumbo loans, and have different underwriting and pricing. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts." is wrong because it suggests using an incorrect rule instead of the specific conforming limit rule. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan." is wrong because the conforming limit is a factual ceiling, not a preference-based limit. "Resolve the Conforming Loan Limits issue with the quality-control exception that does not fit the facts." is wrong because it applies a procedural exception instead of the correct classification based on the loan amount. Exam tip: Conforming limits vary by county (standard vs. high-cost). Know that exceeding the limit makes a loan nonconforming/jumbo.
Why This Is the Correct Answer
The correct response is "Classify loans above the limit as nonconforming or jumbo" 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 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 D: Resolve the Conforming Loan Limits issue with the quality-control exception that does not fit the facts.
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
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