P3-39 quiz

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Question 1 of 8

1. Question
What should product descriptions disclose regarding negative amortization?
- A) That negative amortization will never affect loan terms
- B) That negative amortization reduces monthly payments permanently
- C) The effect of negative amortization on loan balances and home equity, and possible consequences of making minimum payments
- D) That negative amortization eliminates the need to refinance
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Question 2 of 8

2. Question
What should consumers be told if an institution may impose a prepayment penalty?
- A) That the penalty will be waived under all circumstances
- B) That they should be alerted to the penalty and ask the lender about the amount
- C) That prepayment penalties apply only to fixed-rate loans
- D) That prepayment penalties apply only after five years
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Question 3 of 8

3. Question
What should consumers be informed of regarding reduced documentation loans?
- A) That reduced documentation always results in a lower interest rate
- B) That reduced documentation programs require higher down payments
- C) That a pricing premium may apply to reduced documentation programs
- D) That reduced documentation programs eliminate underwriting requirements
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Question 4 of 8

4. Question
What information should monthly statements for payment option ARMs provide?
- A) Only the minimum payment amount with no details
- B) Information enabling consumers to make informed payment choices, including the effect of each option on loan balances
- C) Only the interest rate index history
- D) Information solely about escrow changes
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Question 5 of 8

5. Question
What should be included next to the minimum payment amount on payment option ARM statements?
- A) A guarantee that the loan balance will decrease
- B) A statement that making the minimum payment will reduce the interest rate
- C) A warning that making the minimum payment may increase the loan balance
- D) Only a reminder of the due date
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Question 6 of 8

6. Question
What additional information could payment statements provide to help consumers understand their loan balances?
- A) Only the original loan terms
- B) Only the escrow balance
- C) The current loan balance and how the previous payment was allocated to principal and interest, including any increase in principal
- D) Only the amount due for the next payment
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Question 7 of 8

7. Question
What practice should institutions avoid when presenting payment option ARM statements?
- A) Providing amortizing payment information
- B) Leading borrowers toward selecting non-amortizing or negatively amortizing payment options
- C) Disclosing the loan balance on monthly statements
- D) Showing how payments apply to principal and interest
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Question 8 of 8

8. Question
What should institutions avoid when advertising nontraditional mortgage products?
- A) Providing clear and balanced information about risks
- B) Emphasizing only lower initial payments without comparably prominent risk disclosures
- C) Giving hypothetical examples of maximum payment amounts
- D) Providing detailed descriptions of payment shock risk
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