Sample Test Questions

1. A lender may modify several different attributes (terms) of the mortgage. For example, the interest rate is one of them. List five more.

2. How long does the loan modification typically take to complete. What factors do you think may delay the process?

3. What is a DTI ratio? What does it tell you about your client’s finances?

4. If your client spends $1850 servicing debts and your client’s gross income is $5000 then what is your client’s DTI ratio?

5. List eight items that must be on a hardship letter. For example, loan account number is one.

6. Write an example of a hardship letter for the following circumstance. Do this in a separate document and attach it to the same email in which you submit your test for grading. It is up to you to decide which, if not all, or the following information is relevant to the hardship letter.

A woman got divorced 12 months ago and subsequently took over the mortgage payment after the home was awarded to her by the divorce court. She has a full time job that pays $37,000 per annum and she also took on a part-time job that pays $6000 per annum so that she could make ends meet. Her ex-husband is not contributing in any way. She has become pregnant and will soon have to quit her part-time job when the baby is born as the child care would cost as much as the part-time job pays. With both jobs she has $450 per month remaining for groceries after she has paid all of her outgoings. Her mortgage PITI payment is currently $1106.28 per month at a 7% interest rate. She has a 30 year mortgage and the first 60 payments have been completed. The original loan amount was $150,000 and it was a 100% mortgage. The current value of the property is $120,000.

7. Detail three options that your client may have for staying in their home if the modification was denied.

8. There may federal and state tax implications for forgiven debt in cases when a homeowner receives a forgiveness of debt from a lender. Explain the tax implications of the following situation.

In a state where there are no forgiveness of debt tax implications on a primary residence, Paul has had his mortgage principal on his primary reduced by $50,000 as part of a loan modification. He purchased the property for $200,000 with a 100% mortgage. Twelve months after purchasing the property he refinanced the property for $240,000 taking out $55,000 in cash. He spent $20,000 of the cash building a new garage and the remainder was spent paying off his credit card debts and his student loan.

9. In regards to an FDIC loan, what is the NPV (Net Present Value)? Why is it used? How can knowing how it is used help you present a loan modification proposal?