Question 1

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:

Accepted Answer

Service fees received from sales of participations are recorded as gross income and not netted against interest income remitted to the acquiring party, as they represent a separate revenue stream for the company.

Question 2

___________ is an amount of money, loaned at interest for a specified term, secured by real estate and by its improvements such as buildings and infrastructure. This form of instrument itself varies by jurisdiction, but the debt is always evidenced by an accompanying promissory note.

Accepted Answer

A mortgage loan is a loan secured by real estate, with the debt evidenced by a promissory note, fitting the description provided.

Question 3

The Annual Statement reporting requirements for the participating and nonparticipating branches is limited to major and secondary lines of business, but a company would:

Accepted Answer

A company would usually carry the separation of participating and nonparticipating branches throughout all of its premium classifications to maintain consistency and clarity in financial reporting.

Question 4

Subsequent to the funding of a loan, the most common document/s obtained is/are:

Accepted Answer

These documents provide evidence of the current value, financial strength, and physical condition of the property, which are all important factors in assessing the risk of a loan.

Question 5

Admitted assets are those specifically prescribed by the NAIC Accounting Practices and Procedures Manual or prescribed or permitted by the various jurisdictions. An admitted asset is defined as having probable future economic benefits. It also has three essential characteristics. Which one of the following is out of those characteristics?

Accepted Answer

All of the listed characteristics are essential for an asset to be considered an admitted asset.

Question 6

There are many different sources of CMBS. Conduits and aggregate pools generally consist of loans newly originated, purchased or held by investment bankers until the pool is large enough for an efficient execution. Government agencies such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corp. (FHLMC) are important sources of:

Accepted Answer

Government agencies like FNMA and FHLMC are primarily involved in residential financing, providing liquidity and stability to the mortgage market.

Question 7

Evidences the fair market value of the property that is security for the mortgage loan. The appraisal value is used to determine that the loan to market value ratio is in compliance with regulatory requirements. It also is used to determine any non-admitted mortgage loan amount. Appraisals are obtained from:

Accepted Answer

The answer of Evidences the fair market value of the...

Question 8

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. In such a case the Accounting Department is responsible for all of the following EXCEPT:

Accepted Answer

The Accounting Department should ensure that its records provide the needed data to support reporting functions, so option D is not a responsibility of the Accounting Department.

Question 9

________ allow investments to be made, up to a certain percent of invested or total admitted assets, in assets that do not otherwise meet regulatory requirements. If their domiciliary jurisdiction regulations have a this, a life insurer with a business purpose for doing so can make a limited amount of mortgage loans that do not meet regulatory requirements without a reduction in surplus. However, some jurisdictions do exercise some extraterritorial jurisdiction related to it.

Accepted Answer

The answer of ________ allow investments to be made, up...

Question 10

All operations under common control are combined, intercompany balances and transactions are eliminated and the effects of minority interests are recorded through:

Accepted Answer

Consolidation is the process where all operations under common control are combined, intercompany balances and transactions are eliminated, and the effects of minority interests are recorded.

Question 11

Policy loan:

Accepted Answer

Policy loans are valuable to policyholders as they provide access to cash in emergencies without surrendering the policy.

Question 12

These are securities whose underlying assets consist of commercial mortgage loans. The commercial loans are pooled, which brings diversification and liquidity to the asset class. What are these?

Accepted Answer

CMBS (Commercial Mortgage-Backed Securities) are securities backed by a pool of commercial mortgage loans, providing diversification and liquidity to the asset class.

Question 13

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:

Accepted Answer

The answer of Direct serving loans method requires a system...

Question 14

Permanent stockholders' equity represents an outside claim (from the permanent stockholders' perspective) on the net assets of a subsidiary.

Accepted Answer

Permanent stockholders' equity represents the residual interest in the net assets of a subsidiary after all other claims have been satisfied. This residual interest is an outside claim from the perspective of the permanent stockholders, as they are not entitled to any specific assets of the subsidiary.

Question 15

GAAP have two important functions. First, they provide a set of standards that endeavor to measure with reasonable accuracy the assets held, liabilities owed, revenue earned, and expenses incurred by the company. For life insurance companies these measurement rules have been prescribed specifically for their specialized products. The second important function of GAAP is:

Accepted Answer

GAAP ensures the comparability of financial data from year to year within each company and with similar data prepared by other companies, allowing stakeholders to make informed decisions.

Question 16

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:

Accepted Answer

The company should be able to audit the servicer's records (A), the servicer must have a fidelity bond and errors and omissions policy to protect against potential losses (C), and an annual independent audit ensures transparency and accountability (D).

Question 17

Sales of securities are recorded as of the trade date. A receivable due from the broker is established in instances when a security has been sold, but the proceeds from the sale have not been received. Receivable for securities not received within settlement date are non-admitted, and are classified as other than invested assets.

Accepted Answer

Sales of securities are recorded as of the trade date. A receivable due from the broker is established in instances when a security has been sold, but the proceeds from the sale have not been received. Receivable for securities not received within settlement date are non-admitted, and are classified as other than invested assets. The settlement date is typically 2 business days after the trade date. Therefore, the correct answer is A: 15 days.

Question 18

Federal Housing Administration:

Accepted Answer

The answer of Federal Housing Administration:
...

Question 19

Many companies have developed an asset/liability management approach that is founded on understanding product liabilities. Mortgages meet the primary objective of maintaining:

Accepted Answer

The answer of Many companies have developed an asset/liability management...

Question 20

Generally, residential loans are open to prepayment at any time without penalty. To protect against a deficiency, mortgage loans should not exceed the market value of the mortgaged property and in fact are usually made for:

Accepted Answer

Mortgage loans are typically made for no more than 80 percent of the property's value to protect lenders against the risk of default and potential loss.

Exam 1: Accredited Financial Examiner