In a pricing desk question, a closing coordinator sees facts tied to Conforming vs Non Conforming Loans. What should the file reflect?
Correct Answer
D) Use the FHFA conforming loan limit for the property and year
Why this is correct: The definitive rule for classifying a loan as conforming is the FHFA conforming loan limit. This limit is specific to the county where the property is located and the year of the loan's origination. The file must reflect the correct application of this limit to determine if the loan amount is at or below the maximum for that area, making it eligible for sale to Fannie Mae or Freddie Mac. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because it advocates for an arbitrary action that bypasses the necessary fact-based analysis of the loan amount versus the official limit. "Resolve the Conforming vs Non Conforming Loans issue with the ability-to-repay exception that does not fit the facts" is wrong because the Ability-to-Repay rule is a separate, fundamental underwriting requirement; it is not the mechanism for determining conforming loan limits. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because conforming limits apply only to conventional loans intended for GSE purchase; FHA, VA, and USDA loans have separate insurance or guarantee limits that are not the FHFA conforming limit. Exam tip: For pricing and eligibility, the conforming limit is the absolute gatekeeper. Always verify: Loan Amount <= FHFA Limit for that property's county and year.
Why This Is the Correct Answer
The correct response is "Use the FHFA conforming loan limit for the property and year" 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: Resolve the Conforming vs Non Conforming Loans issue with the ability-to-repay 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.
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
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
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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?
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What does an amortization schedule show for each scheduled payment?
A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
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