Which of the following indexes is most commonly used for adjustable-rate mortgages and is considered the most stable?
Correct Answer
C) Secured Overnight Financing Rate (SOFR)
SOFR has replaced LIBOR as the preferred benchmark for ARMs. It's based on actual transactions in the Treasury repo market, making it more stable and transparent than other indexes.
Why This Is the Correct Answer
SOFR has replaced LIBOR as the preferred benchmark for ARMs. It's based on actual transactions in the Treasury repo market, making it more stable and transparent than other indexes.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
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?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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