What happens to conforming loan limits in areas where home prices have declined significantly?
Correct Answer
B) Limits can decrease but not below the baseline conforming loan limit
When home prices decline, conforming loan limits can decrease in high-cost areas, but they cannot fall below the baseline conforming loan limit that applies to most of the country. This provides a floor to ensure continued access to conforming loans even in declining markets.
Why This Is the Correct Answer
When home prices decline, conforming loan limits can decrease in high-cost areas, but they cannot fall below the baseline conforming loan limit that applies to most of the country. This provides a floor to ensure continued access to conforming loans even in declining markets.
More Mortgage Knowledge Questions
A borrower refinances their home with a cash-out refinance loan of $750,000. The original loan balance was $400,000, and they're taking $300,000 in cash. If conforming limits allow $766,550, how is this loan classified?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
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Under TRID regulations, discount points must be disclosed on the Loan Estimate in which section?
A borrower is refinancing a $350,000 property. The existing first mortgage balance is $200,000, and they want to take $75,000 cash out. What will be the new LTV ratio?
During the draw period of a HELOC, what type of payments are borrowers typically required to make?
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A borrower's homeowners insurance policy is cancelled mid-term due to non-payment, but the escrow account shows the premium was paid. Investigation reveals the insurance company applied the payment to a different policy number. What should the servicer do?
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Previous Question
A borrower's home is worth $400,000 with an existing first mortgage balance of $250,000. If a lender's policy allows a maximum combined loan-to-value (CLTV) ratio of 80% for HELOCs, what is the maximum HELOC amount available?
Next Question
Which of the following is a key difference between rate and term refinances and cash-out refinances regarding borrower rights?