- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 19. Mortgage-Backed Security (MBS) Instrument and Market Features
- Subject 2. Mortgage Loans and Their Characteristic Features
CFA Practice Question
A mortgage loan may fail to be conforming because ______
II. the loan-to-value ratio is too high.
III. the payment-to-income ratio is too high.
IV. the average life is too short.
I. the loan balance exceeds the maximum permitted by the underwriting standard.
II. the loan-to-value ratio is too high.
III. the payment-to-income ratio is too high.
IV. the average life is too short.
Correct Answer: I, II and III
Loans that do not qualify are called non-conforming loans and are not included in a mortgage pool underlying an agency mortgage-backed security.
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | What does conforming mean? |
| danlan2 | Conforming: qualified for agency as MBS |
| quanttrader | conforming -- ie. agency mbs |
| warnggg | Why iii? I couldn’t find it anywhere |