Qualified, Conventional & Government Programs: practice questions

A creditor wants to offer a fixed-rate QM with a prepayment penalty. What must it also offer?

1. The same kind of loan and term without a penalty, if the consumer likely qualifies ✓
2. A written waiver of the penalty if the home is sold in the first year
3. A lower interest rate, set at least half a point below the rate on the other loan
4. An adjustable-rate loan with no penalty and a shorter loan term

Why: 12 CFR 1026.43(g)(3) requires an alternative without a prepayment penalty that has a rate that cannot increase and the same type of rate, the same loan term, QM payment and points-and-fees conditions, and for which the creditor has a good faith belief the consumer likely qualifies.

Source: 12 CFR 1026.43(g)(3)

For a first-lien small-creditor portfolio QM, how far above the APOR must the APR be before it is a higher-priced covered transaction?

1. 1.5 or more percentage points
2. 2.25 or more percentage points
3. 6.5 or more percentage points
4. 3.5 or more percentage points ✓

Why: 12 CFR 1026.43(b)(4) uses "3.5 or more percentage points for a first-lien covered transaction that is a qualified mortgage under paragraph (e)(5), (e)(6), or (f)" and for subordinate liens, against 1.5 for other first liens.

Source: 12 CFR 1026.43(b)(4)

May a USDA guaranteed loan finance an investment property?

1. Yes, if the property is in an eligible rural area
2. No; the borrower must occupy it as a principal residence ✓
3. Yes, if the rental income covers the full payment
4. No, unless the borrower already owns a home there

Why: 7 CFR 3555.151(c): applicants must agree and be able to occupy the dwelling as their principal residence; "Rural Development will not guarantee loans for investment properties, or temporary, short-term housing."

Source: 7 CFR 3555.151(c)

Which of these does the 2007 Statement on Subprime Mortgage Lending list as an element of predatory lending?

1. Repeatedly refinancing a borrower to charge high points and fees ✓
2. Charging a higher rate to a borrower with a weaker credit record
3. Offering an adjustable rate to a borrower with a low credit score
4. Requiring an escrow account for property taxes and insurance

Why: FR Doc. 07-3316 (72 FR 37569), Predatory Lending Considerations: predatory lending typically involves lending on collateral value rather than ability to repay; "Inducing a borrower to repeatedly refinance a loan in order to charge high points and fees each time the loan is refinanced ('loan flipping')"; or fraud or deception. It states that subprime lending is not synonymous with predatory lending. It is agency guidance, not rule text.

Source: FR Doc. 07-3316 (72 FR 37569), Predatory Lending Considerations

A small creditor sells a small-creditor portfolio QM, 18 months after consummation, to a bank too large to meet the small-creditor tests. What happens to its QM status?

1. Nothing; QM status is fixed at consummation and cannot be lost afterwards
2. It keeps QM status as long as the buyer does not change any of the loan terms
3. It becomes a seasoned QM automatically, as it has passed 12 months of payments
4. It loses that QM status, having been sold too soon to a large bank ✓

Why: 12 CFR 1026.43(e)(5)(ii): a small-creditor QM "immediately loses its status" if legal title is transferred, except, among others, a transfer "three years or more after consummation" or to another creditor meeting the small-creditor conditions in (e)(5)(i)(D).

Source: 12 CFR 1026.43(e)(5)(ii)

A buyer finances her purchase with a first mortgage and a second mortgage from the same lender at the same closing. Under the ability-to-repay rule, what is the second loan?

1. A separate loan that the first lender may disregard
2. A home equity line, exempt from the repayment rules
3. A simultaneous loan; its payment must be counted ✓
4. A bridge loan, outside the ability-to-repay rule

Why: 12 CFR 1026.43(b)(12): a simultaneous loan is another covered transaction or HELOC "secured by the same dwelling and made to the same consumer at or before consummation". Under (c)(2)(iv) and (c)(6) the creditor must consider the consumer's payment on it.

Source: 12 CFR 1026.43(b)(12), (c)(6)

Under 24 CFR 203.18, what is the maximum FHA mortgage amount on a dwelling to be occupied as a secondary residence?

1. The same limits as a principal residence, with no separate cap
2. 100 percent of the price, as FHA does not limit loans on second homes
3. Nothing; FHA never insures loans on a secondary residence
4. 85 percent of the appraised value, if lower than the other limits ✓

Why: 24 CFR 203.18(a): the mortgage must not exceed the lesser of the applicable amounts, including "(3) An amount equal to 85 percent of the appraised value if the mortgage covers a dwelling that is to be occupied as a secondary residence".

Source: 24 CFR 203.18(a)(3)

In 2026, what is the points and fees limit for a general QM with a loan amount of $100,000?

1. $3,000
2. $1,380
3. $4,139 ✓
4. $10,000

Why: Comment 43(e)(3)(ii) to 12 CFR 1026.43(e)(3) as updated by FR Doc. 2025-22773 sets, for 2026, a flat $4,139 for loan amounts of $82,775 or more but less than $137,958. 3% would give only $3,000, which applies above $137,958.

Source: 12 CFR 1026.43(e)(3); FR Doc. 2025-22773