The supervisor is resolving FHA Loan Limits during a quality-control sample. Which action best fits the rule?
Correct Answer
A) Apply HUD FHA policy before approving the loan
Why this is correct: FHA loans are insured by the Federal Housing Administration, which is part of HUD (the U.S. Department of Housing and Urban Development). All FHA lending must comply with HUD's official policy handbooks and mortgagee letters. Therefore, the required action is to "Apply HUD FHA policy before approving the loan." Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because FHA has its own distinct rules; using another program's rules (like VA or conventional) would be non-compliant. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because FHA's limits and requirements are mandatory, not optional based on preference. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because FHA, VA, and conventional loans have different guidelines; they cannot be treated identically. Exam tip: Think "HUD" for FHA. Approval always requires adherence to current HUD/FHA policy, not lender or borrower preference.
Why This Is the Correct Answer
The correct response is "Apply HUD FHA policy before approving the loan" because FHA loans are HUD-insured loans governed by FHA policy and mortgage-insurance rules.
Why the Other Options Are Wrong
Option B: 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: 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
FHA loan-program requirements: 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 FHA loan-program requirements; 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?
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