Question

*5. The QM/ATR rule requires which of the following?

An anti-steering disclosure be provided on non-traditional mortgages

Consideration of 8 underwriting factors in mortgage underwriting

The use of a Loan Estimate and Closing Disclosure

Consideration of specific aspects of a borrower's credit

All mortgage loans are originated to meet safe harbor guidelines

*6. Which of the following loan programs would not be permitted under the QM/ATR Rule?

Alternative Documentation - Less than 24 months of income verified

No Documentation - No income provided Alternative Documentation

Income derived from bank statement deposits Stated Income

Income is stated but not verified

All of the above

*7. Which of the following loan features would exclude a loan from being considered a qualified mortgage?

Interest rates and payments which can increase after closing

Negative amortization 40 year loan term Interest only option

Prepayment penalty

*8. Which of the following are underwriting standards implemented by the QM/ATR rule?

Payment amounts used in qualification are based on the maximum interest rate possible within the first 5 years of the loan term

Payment amounts used for qualification are based on the fully indexed rate

Maximum prepayment penalty amounts excluded from qualified assets

Exclusion of non-occupant co-borrower income to qualify

A back end debt to income ratio not to exceed 43%

Answer 1

To solve this question just input those variables which are to be used in logistic regression, as the question talks about using two variables only that is total loans and leases to total assets & total expenses/ total assets, so we will not input total cap/assets as an input variable in our excel, here we go

As one can see, we have taken only two variables , total exp/assets and total lns & leases/ assets in calculation, follwing steps have been followed to construct the above table

1. Assume logit= b0+ b1* independent variable1+ b2* independent variable 2 , take values of b0=0.1, b1=0.1, b2=0.1, note that these values of b0, b1 and b2 are just taken for calculation, one could assume any values here for bo , b1 and b2

2. Calculate exponential of logit in the next column by using exp (value in previous column)

3. Calculate probability by using formula, probability= exp (logit)/ { 1+ exp(logit)} in the next column

4. In next column, calculate log likelihood by using formula : financial condition value (i.e. 1 or 0) * LN( probability calculated in previous column) + (1- financial condition value)* LN( 1- probability calculated in previous column)

5. take the total of the column values of log likelihood

6. use solver function in excel to change this total by putting max value of 0 and changing the variable cells containing assumed values of b0, b1 and b2 , by clicking on solve, you will get actual values of b0, b1 and b2

which comes out to be b0=-14.72, b1=89.83, b2= 8.37

therefore you will get logit as

-14.72+ 89.83* Total exp/assets+8.37*Total lns & lsses/ assets

With values given in the question as total exp/ assets= 0.11 and total loans & leases/ assets= 0.6 , we get

logit as -14.72+ 89.83* 0.11+ 8.37*0.6= 0.1833

exp (logit) = 1.20

Probability= 0.546

Loglikelihood= 1*LN(0.546)+0*LN(1-0.546)= LN(0.546)= -0.605