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Free Financial AFE Exam Questions (page: 5)

Page 5 of 59
PDF with 286 Questions

Direct serving loans method requires a system of good internal control and requires that the functions be split between the Accounting Department and the Investment Department. The Investment Department is responsible for promptly supplying the Accounting Department with:

  1. Accounting data on new loans
  2. Resolving few exceptions reported to it by the Accounting Department, i.e., when a borrower defaults on a loan payment
  3. Data related to changes in existing loans, which affects the accounting function
  4. Alerting the Investment Department promptly whenever an exception to the normal processing routine occurs

Answer(s): A,B



Generally, a company earns a servicing fee when it retains the servicing of a block of loans in which it has sold all or part of the block. Service fees received from sales of participations are recorded as:

  1. Gross income and not netted against interest income remitted to the acquiring party
  2. Unearned revenue and not netted against interest income remitted to the acquiring party
  3. Gross income
  4. Netted against interest income remitted to the acquiring party

Answer(s): A



A mortgage servicer performs all of the servicing functions. The servicer remits all funds received on the serviced loans to the company on a monthly or other periodic basis and usually reports all transactions, including foreclosures and transactions related to foreclosed property.The contract between the company and servicer should provide that the:

  1. Company can periodically audit the servicer's records and files pertaining to the loans owned by the company. In lieu of making the audit, the company can agree to receive an annual audit report pertaining to its loans from the servicer's independent certified public accountants. This is the single audit concept
  2. Servicer should not have a fidelity bond and an errors and omission policy of stipulated minimum amounts
  3. Servicer must have a fidelity bond and an errors and omission policy of stipulated minimum amounts
  4. Servicer must have an annual independent audit, with a copy of the audited financial statements sent to the company within a certain period of time after the end of the servicer's fiscal year

Answer(s): A,C,D



A company that has its loans serviced, for whatever reason, is usually charged a servicer's fee. This fee is usually expressed:

  1. As an annual fraction of a percentage of each interest payment
  2. As an annual fraction of a percent of the principal balance of the loans or based on a percentage of each interest payment
  3. As a monthly fraction of a percent of the principal balance of the loans or based on a percentage of each interest payment
  4. As a monthly fraction of a percentage of each interest payment

Answer(s): B



Accounting transactions that occur after the initial investment in a loan and during the period the loan is being serviced fall into two broad categories. Which one of the following is out of those categories?

  1. Processing transactions, which are recurring and similar in nature for all mortgage loans,
  2. processing transactions, which are not recurring and opposite in nature for all mortgage loans
  3. Unusual transactions
  4. None of these

Answer(s): A



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