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1700+ MCQs > 1700+ MCQs 2of4 > Flashcards

1700+ MCQs 2of4 Flashcards

1
Q

Which of the following is NOT a trigger term?

a. 5% interest rate
b. 200 monthly payment
c. Lowest rates in town
d. 48 easy payments

A

c. Lowest interest rates in town

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2
Q

The Right of Rescission does not apply to:

a. Refinance loans
b. Second Mortgage
c. Home improvement
d. First mortgage on a
purchase

A

d. First mortgage on a

purchase

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3
Q

The TILA must be re-disclosed if the APR for a fixed-rate loan changes by more than:

a. 1/8%
b. 1/2%
c. 3/4%
d. 1%

A

a. 1/8%

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4
Q

HOEPA considers a loan to be high cost if the total charges to the borrower exceed what percent of the loan amount?

a. 4%
b. 5%
c. 10%
d. 12%

A

b. 5%

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5
Q

The Truth-in-Lending Disclosure must be delivered within how many business days prior to closing a reverse mortgage?

a. 3
b. 7
c. 10
d. 15

A

b. 7 days

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6
Q

The APR must be finalized at least how many days before closing?

a. 1
b. 3
c. 5
d. 7

A

b. 3 days

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7
Q

The Home Mortgage Disclosure Act (HMDA) was implemented by the:

a. Department of Housing and 
    Urban Development
b. Department of Veteran 
    Affairs
c. Federal Communication 
    Commission
d. Federal Reserve Board
A

d. Federal Reserve Board

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8
Q

HMDA is also known as:

a. Regulation B
b. Regulation C
c. Regulation X
d. Regulation Z

A

b. Regulation C

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9
Q

HMDA does NOT:

a. Send lending quotas for 
    protected classes
b. Require loan amounts to 
    be reported
c. Require the location of the 
    property to be reported
d. Require the race of the 
    borrower to be reported
A

a. Set Lending Quotas for

protected classes

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10
Q

Which of the following is NOT required HMDA borrower information?

a. Loan amount
b. Gender
c. Race
d. Age

A

d. Age

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11
Q

The Fair Credit Reporting Act is enforced by

a. HUD
b. FCC
c. FHA
d. FTC

A

d. FTC Federal Trade

Commission

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12
Q

Bankruptcies can be kept in the credit report for:

a. 2 years
b. 5 years
c. 7 years
d. 10 years

A

d. 10 years

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13
Q

Tax liens can be kept in the credit report for:

a. 2 years
b. 5 years
c. 7 years
d. 10 years

A

c. 7 years

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14
Q

Which of the following is NOT a credit repository?

a. FICO
b. TransUnion
c. Experian
d. Equifax

A

FICO

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15
Q

Borrows are entitled to a free credit report if the lender takes adverse action against them and they ask for their report with how many days of receiving notice of the action?

a. 30
b. 60
c. 90
d. 120

A

b. 60 days

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16
Q

Which Act includes provision to protect consumers personal financial information held by financial institutions?

a. Real Estate Settlement 
    Procedures
b. Fair and Accurate Credit 
    Transaction
c. Truth-in-Lending 
d. Gramm-Leach-Bliley
A

d. GLB, Gramm-Leach-Bililey

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17
Q

Which Act requires companies to give consumers privacy notices?

a. Real Estate Settlement 
    Procedures
b. Fair and Accurate Credit 
    Transaction
c. Truth-in-Lending 
d. Gramm-Leach-Bliley
A

d. GLB, Gramm-Leach-Bililey

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18
Q

What is the fine for Do Not Call violations?

a. $3,000
b. $49,000
c. $42,530
c. $60,000

A

c. $42,530

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19
Q

A company with which a consumer has an established business relationship may call for how many months after the consumer’s last purchase?

a. 6
b. 13
c. 18
d. 24

A

c. 18 months

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20
Q

If a consumer makes an inquiry or submits an application to a company, the company can call for how many months?

a. 3
b. 6
c. 9
d. 12

A

a. 3 months

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21
Q

What organization is allowed to call numbers on the Do Not Call List?

a. Loan originators
b. Charities
c. Car dealerships
d. Dry cleaners

A

b. Charities

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22
Q

The Fair Credit and Accurate Credit Transaction Act:

a. Prohibits kickbacks to title 
    companies
b. Provides that all 
    information in a credit 
    report is verified
c. Allows consumers one free 
    credit report per year from 
    each repository
d. Changes credit scoring to 
    a 1-5 ranking system
A

c. Allows one free credit report
per year from each
repository.

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23
Q

Who does the consumer contact if he has questions about his credit score?

a. Credit Reporting Agency
b. Lender
c. Title company
d. Appraiser

A

a. Credit Reporting Agency (CRA)

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24
Q

The range of possible credit scores is:

a. 200-900
b. 300-850
c. 400-700
d. 500-1000

A

b. 300-850

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25
Q

The Red Flag Rule is:

a. Identity theft
b. kickbacks
c. Disclosure of the APR
d. Regulation of interest rates

A

a. Identity theft

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26
Q

The Red Flag Rule is part of the:

a. Truth-in-Lending Act
b. Real estate Settlement
Procedures Act
c. SAFE Act
d. Fair and Accurate Credit
Transaction Act

A 
d. Fair and Accurate Credit 
    Transaction Act (FACTA)
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27
Q

Which of the following is a creditor as defined by the Red Flag Rule?

a. Mortgage broker
b. Beauty shop
c. Grocery store
d. Appraiser

A

a. Mortgage Broker

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28
Q

Which of the following is NOT a requirement for a company’s Red Flags program?

a. Be in writing
b. Identify and detect
warning signs of identity
theft
c. Detail appropriate
responses to the warning
signs
d. Managed by the Human
Resources department

A

d. Managed by the HR

department

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29
Q

If a loan estimate is mailed, it must be mailed how many days before loan consummation?

a. 1
b. 3
c. 5
d. 7

A

d. 7 days

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30
Q

A lender has how many days to refund excessive variances on a Closing Disclosure?

a. 10
b. 30
c. 60
d. 90

A

c. 60 days

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31
Q

A change to which of the following does NOT trigger a new 3 day waiting period?

a. Seller credits buyer money 
    for landscaping
b. APR
c. Loan product
d. Addition of a prepayment 
    penalty
A

a. Seller credits buyer money

for landscaping

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32
Q

How many business days before loan consummation is a borrower entitled to see a revised Closing Disclosure that did not trigger an additional 3-day waiting period?

a. 1
b. 2
c. 3
d. 4

A

a. 1 day

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33
Q

How many days before loan consummation is a seller entitled to see the Closing Disclosure?

a. 0 (closing day)
b. 1
c. 2
d. 3

A

a. 0 (Closing day)

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34
Q

When a consumer requests the cancellation of their escrow account, the lender has how many business days prior to closing the account to deliver an Escrow Closing Notice?

a. 1
b. 3
c. 10
d. 30

A

b. 3 days

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35
Q

When a lender cancels an escrow account for a reason other than default or termination caused by refinancing, refinancing, repayment or rescission, they have how many business days prior to closing the account to deliver an Escrow Closing Notice?

a. 1
b. 3
c. 10
d. 30

A

d. 30 days

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36
Q

For how many years must a lender retain the Loan Estimate?

a. 2
b. 3
c. 4
d. 5

A

b. 3 years

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37
Q

For how many years must the lender retain the Closing Disclosure?

a. 2
b. 3
c. 4
d. 5

A

d. 5 years

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38
Q

For how many years must the lender retain the Escrow Cancellation Notice?

a. 2 years
b. 3 years
c. 4 years
d. 5 years

A

a. 2 years

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39
Q

For how many years must a lender retain the Partial Payment Policy?

a. 2 years
b. 3 years
c. 4 years
d. 5 years

A

a. 2 years

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40
Q

The borrower must receive the Closing Disclosure how many business days before the consummation?

a. 1
b. 2
c. 3
d. 4

A

c. 3 days

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41
Q

Which of the following is not delivered to a reverse mortgage applicant?

a. TILA Disclosure
b. Loan Estimate
c. Good Faith Estimate
d. HUD1

A

b. Loan Estimate

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42
Q

Which of the following is not protected from discrimination by the Fair Housing Act?

a. HIV patients
b. Elderly
c. Pregnant women
d. Mexicans

A

b. Elderly

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43
Q

ECOA requires that a loan application is retained for how long after a denial?

a. 6 months
b. 25 months
c. 26 months
d. 60 months

A

c. 25 months

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44
Q

What should a loan originator do if an applicant refuses to disclose their nationality?

a. Leave it blank
b. Refuse the application
c. Select the box with their
best guess
d. Pester the applicant until
they answer

A

c. Select the box with their best

guess

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45
Q

What should a loan originator do on a Loan Estimate address field when the borrower request a pre-approval?

a. Leave it blank
b. Enter one or more zip
codes of likely locations
c. enter the applicants
personal address
d. Deny the loan application

A

b. Enter one or more zip codes

of likely locations

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46
Q

How many housing counseling agencies must be listed on the Housing Counseling Disclosure?

a. 1
b. 3
c. 5
d. 10

A

d. 10

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47
Q

What entity does HUD oversee?

a. Department of Health
b. Federal Housing
Administration
c. Department of Veterans
Affairs
d. Consumer Financial
Protection Bureau

A

b. Federal Housing

Administration

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48
Q

What is the maximum term for A HOEPA balloon bridge loan?

a. 12 months
b. 24 months
c. 36 months
d. 60 months

A

a. 12 months

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49
Q

A borrower must indicate an Intent to proceed within how many business days after receiving the Loan
Estimate?

a. 3
b. 10
c. 15
d. 30

A

b. 10 days

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50
Q

Which law enacted mandatory cancellation of PMI under certain circumstances?

a. Truth-in-Lending
b. RESPA
c. Homeowner Protection Act
d. Equal Credit Opportunity
Act

A

c. Home Owner Protection Act

(HPA)

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51
Q

What is the minimum number of hours for loan originator pre-licensing education?

a. 10
b. 20
c. 30
d. 40

A

b. 20 hours

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52
Q

What is the minimum number of hours for annual loan originator continuing education?

a. 2
b. 4
c. 8
d. 12

A

c. 8 hours

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53
Q

Which of the following do NOT need to be a licensed loan originator?

a. Independent contractors 
    who are loan originators
b. Independent contractors 
    who are underwriters
c. Independent contractors 
    who are loan processors
d. Federally chartered bank 
     employees
A

d. Federally Chartered bank

employees

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54
Q

Which of the following does NOT have to be submitted by a loan originator applicant?

a. Credit report authorization
b. Criminal background
check authorization
c. References
d. Finger prints

A

c. References

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55
Q

Mortgage loan originator licenses renew

a. Every 6 months
b. Every year
c. Every 2 years
d. Every 3 years

A

b. Every Year

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56
Q

The minimum passing score on the SAFE loan originator licensing exam is:

a. 65%
b. 75%
c. 80%
d. 90%

A

b. 75%

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57
Q

What is the maximum number of times the SAFE exam can be consecutively taken?

a. 2
b. 3
c. 4
d. 5

A

b, 3 times

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58
Q

What is the minimum number of days a student must wait between his first two SAFE exam retakes?

a. 10
b. 15
c. 30
d. 60

A

c. 30 days

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59
Q

After three consecutive attempts to pass the SAFE exam, what is the minimum amount of time a student must wait before trying again?

a. 1 month
b. 3 months
c. 6 months
d. 9 months

A

c. 6 months

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60
Q

Which of the following is NOT an immediate family member?

a. Adopted brother
b. Aunt
c. Grandfather
d. Stepmother

A

b. An Aunt

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61
Q

What may be true of registered loan originators?

a. They are independent 
    contractors
b. They must take the 
     national loan originator 
     exam
c. They are bank employees
d. They are licensed loan 
    originators
A

c. They are bank employees

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62
Q

Which of the following must be a licensed loan originator?

a. Commercial loan originator
b. Independent contractor
who is an underwriter
c. Supervised loan processor
employee
d. An individual who
negotiates the terms of his
own mortgage loan

A

b. Independent contractor who

is an underwriter.

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63
Q

How often must a mortgage company submit a report on their financial condition?

a. Monthly
b. Quarterly
c. Annually
d. Every 2 years

A

c. Annually

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64
Q

What is the maximum fine for a SAFE Act violation?

a. $1,000
b. $5,000
c. $15,000
d. $25,000

A

d. $25,000.00

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65
Q

Returning MLOs must retake the national exam after how many years of ?

a. 1
b. 3
c. 5
d. 7

A

d. 5 years

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66
Q

The mortgagor is the:

a. Lender
b. Borrower
c. Mortgage broker
d. Real estate Agent

A

b. Borrower

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67
Q

The mortgagee is the:

a. Lender
b. Borrower
c. Mortgage broker
d. Real estate agent

A

a. Lender

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68
Q

Mortgages are a (n):

a. Involuntary lien
b. Voluntary lien
c. Special Assessment
d. Mechanics lien

A

b. Voluntary lien

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69
Q

What establishes the lien position

a. Date and time of signing
b. Date and time the loan
was approved
c. Date and time of recording
d. Date and time of the title
search

A

c. Date and time of recording

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70
Q

Junior mortgages are:

a. Involuntary liens
b. Limited to 30 year terms
c. Limited to a total of 2
d. Voluntary liens

A

d. Voluntary lien

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71
Q

Which is NOT a promise by the mortgagor?

a. Keep the home in good 
    repair
b. Obey all state and county 
    laws
c. pay the hazard insurance
d. pay the mortgage payment
A

b. Obey all state and county

laws

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72
Q

What is the enforcement of a lien?

a. Arrest
b. Bankruptcy
c. Foreclosure
d. Mediation

A

c. Foreclosure

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73
Q

A lender may choose NOT to take a Legal action upon default and this is known as:

a. Forbearance
b. Exculpation
c. Fortitude
d. Deficiency

A

a. Forbearance

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74
Q

Which clause allows the lender to increase the interest rate?

a. Acceleration clause
b. Escalation clause
c. Deficiency judgement
d. Exculpatory clause

A

b. Escalation

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75
Q

Which is NOT beneficial to a developer?

a. Blanket mortgage
b. Subordination clause
c. Development clause
d. Partial release clause

A

c, Development clause

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76
Q

Which is not essential for a valid contract

a. $2,000 in reserves
b. Competent parties
c. Consideration
d. Mutual agreement

A

a. $2,000 in reserve

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77
Q

Tenancy in Common does NOT have:

a. Equal or unequal 
    ownership
b. Buy at same or different 
    times
c. Multiple owners
d. Right of survivorship
A

d. Right of survivorship

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78
Q

How many days after settlement does the lender have to send the Satisfaction of Mortgage letter?

a. 10 days
b. 15 days
c. 30 days
d. 60 days

A

d. 60 days

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79
Q

When there is no new note and the original buyer retains all the liability. this is known as transferring
title by

a. Creative financing
b. Assumption
c. Novation
d. Subject to the mortgage

A

d. Subject to the mortgage

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80
Q

The assignor:

a. Transfers contract rights
b. receives contract rights
c. Must be a United States
citizen
d. Must b an attorney

A

a. Transfers contract rights

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81
Q

Which of the following is not an involuntary lien?

a. Judgement lien
b. Mortgage lien
c. Mechanics Lien
d. IRS tax lien

A

b. Mortgage lien

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82
Q

The pledging of property as collateral for a loan:

a. Defeasance
b. Hypothecation
c. Exculpation
d. Intermediation

A

b. Hypothecation

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83
Q

The conveyor of the deed is the:

a. Grantor
b. Lender
c. Grantee
d. Mortgagor

A

a. Grantor

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84
Q

The receiver of the deed is the:

a. Grantee
b. Grantor
c. Mortgagee
d. Assignee

A

a. Grantee

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85
Q

Which document is not recorded?

a. Note
b. Satisfaction of Mortgage
c. Mortgage
d. Deed

A

a. The Note

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86
Q

The borrower’s IOU is the:

a. Mortgage
b. Note
c. Loan-to Value Ratio
d. Equity

A

b. The Note

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87
Q

A clause in some mortgages which allows subsequent mortgages on the same property to have a higher claim than the current mortgage is a:

a. Subordination clause
b. Penalty clause
c. Privilege clause
d. Inferior clause

A

a. Subordination clause

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88
Q

Which of the following does not include the Right of Survivorship?

a. Good faith Estimate
b. Tenants in Common
c. Joint Tenancy
d. Truth-in-Lending disclosure

A

c. Joint Tenancy

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89
Q

The document conveying title from one party to another and guaranteeing that the title is good is known as a:

a. Good Faith
b. Warranty Deed
c. Usury limit
d. Red Flags document

A

b. Warranty Deed

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90
Q

The mortgage lien on an entire tract of land is known as

a: Buy-down mortgage
b. Chattel mortgage
c. Blanket mortgage
d. Pillow mortgage

A

c. Blanket mortgage

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91
Q

Liens which are subsequent to the first recorded mortgage lien are known as:

a. Junior liens
b. Unavailable lien
c. Estoppel liens
d. Homestead liens

A

a. Junior liens

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92
Q

What percentage of of a FHA loan is insured?

a. 100%
b. Is partially guaranteed
c. Has a 5% late fee
d. Is not assumable

A

a. 100%

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93
Q

FHA maximum loan amounts:

a. Are set by the U.S. 
    Department of State
b. Do not include the Up 
    Front Mortgage Insurance 
    Premium
c. Are set at $500,000
d. Are set at $1,000,000
A

b. Do not include the Up Font
Mortgage Insurance
Premium. (UFMIP)

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94
Q

A VA mortgage does not include:

a. It is partially guaranteed
b. It has mortgage insurance
premium
c. It has a 4% late fee
d. No required down payment

A

b. Mortgage insurance

premium

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95
Q

A VA appraisal is known as a:

a. Qualified appraisal
b. Certificate of reasonable
value
c. Certificate of market value
d. VA designated market
appraisal

A

b. Certificate of reasonable

value.

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96
Q

A USDA loan has:

a. 100% financing
b. No income limits
c. A 5% late fee
d. Has no geographical
restrictions

A

100% financing

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97
Q

A conventional mortgage does NOT have a

a. 3% minimum down 
    payment
b. 5% late fee
c. Due on sale clause
d. Borrower income limit
A

d. Borrower income limit

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98
Q

Interest rates are set by:

a. FHA
b. Lenders
c. VA
d. Fannie Mae

A

b. Lenders

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99
Q

A reverse mortgage is an example of

a. Positive amortization
b. Negative amortization
c. Lender error
d. Bridge loan

A

b. Negative amortization

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100
Q

In an adjustable rate mortgage:

a. Index+Fulling indexed    
    rate= 
    margin
b. Fully indexed 
    rate+margin=index
c. Index+margin= fully index 
    rate
d. Index-margin= fully indexed 
    rate
A

c. Index + Margin = fully

indexed rate

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101
Q

Which of the following is expressed as basis points in an adjustable rate mortgage

a. Index
b. Margin
c. Fully indexed rage
d. Term

A

b. Margin

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102
Q

A 2/3/7 ARM ha a:

a. Lifetime cap of 2%
b. Lifetime cape of 3%
c. Lifetime cap of 7%
d. Lifetime cap of 10%

A

c. Lifetime cap of 7%

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103
Q

If a 15 year ARM has a starting interest rate of 5% and has an adjustment rate cap of 2% and a lifetime cap of 8%, what is the maximum interest rate that can be charged for the first adjustment period?

a. 5 1/4%
b. 5 1/2%
c. 7%
d. 13%

A

c. 7%

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104
Q

A term mortgage is NOT:

a. Non-amortizing
b. Interest only
c. Satisfied by a final lump
sum payment
d. Fully amortized

A

d. Fully amortized

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105
Q

A graduated payment mortgage

a. Is for college graduates 
    only
b. Has payments that start 
    low and increase over time
c. Has payments that start 
    high and decrease over 
    time
d. Is only for borrowers with a 
    minimum age of 62
A

b. Has payments that start low

and increase over time

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106
Q

Borrower’s equity equals

a. Appraised value-loan 
    balance
b. Appraised value-down 
    payment
c. Loan balance+down 
    payment
d. Loan balance-down 
    payment
A

a. Appraisal value - loan

balance

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107
Q

Escrow impounds are collect by the:

a. Lender
b. Attorney
c. Police
d. Seller

A

a. Lender

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108
Q

Private Mortgage Insurance (PMI) is required for:

a. FHA loans
b. VA loans
c. Jumbo loans
d. Conventional loans when
there is less than a 20%
down payment

A

d. Conventional loans when
there is less than a 20%
down payment

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109
Q

What type of mortgage has a fixed interest rate and increasing payments?

a. Adjustable rate mortgage
b. Package mortgage
c. Growing equity mortgage
d. Wraparound mortgage

A

c. Growing equity mortgage

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110
Q

The FHA is an agency with the:

a. Department of the Veterans Affairs
b. Department of HUD
c. Department of Fannie Mae
d. Private organization

A

b. HUD Department

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111
Q

PITI is the acronym for:

a. Property, insurance, taxes 
    and interest
b. Property, interest, taxes 
     and insurance
c. Principle, insurance  taxes 
    and interest
d. Principle, interest, taxes, 
    and insurance
A

d. Principle, interest, taxes, and

insurance

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112
Q

What are the indexes potentially used in an ARM?

a. CD rate
b. The London Inter-Bank
Offered Rate
c. The Chase Fluctuating
Index
d. The New York Times Index

A

b. London Inter-Bank Offered

Rate and the Treasury rate

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113
Q

A bi-weekly mortgage is:

a. Is paid every 2 weeks
b. Is paid ever 2 months
c. Is not legal
d. Has no mandatory
payment schedule

A

a. Is paid every 2 weeks

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114
Q

Which has the superior lien position?

a. Senior Mortgage
b. Junior Mortgage
c. Mortgages under $250,000
d. First signed mortgage

A

a. Senior Mortgage

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115
Q

80 basis points equals what percentage of the loan amount?

a. .08%
b. .8%
c. 8%
d. 80%

A

a. .8%

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116
Q

Which lien will most likely have the lowest lien position?

a. Property tax
b. Senior mortgage
c. Junior mortgage
d. IRS tax lien

A

d. IRS tax lien

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117
Q

A gift letter does NOT include?

a. Donor,s name
b. amount of the gift
c. Terms of repayment
d. Donor’s address

A

c. Terms of repayment

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118
Q

A partially amortized loan which consists of a lump sum payoff at the end of the term is:

a. Balloon mortgage
b. Package mortgage
c. Chattel mortgge
d. Buy-down mortgage

A

a. Balloon mortgage

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119
Q

A mortgage with a payment due every 2 weeks is a

a. Package mortgage
b. Bridge loan
c. Bi-weekly mortgage
d. Blanket mortgage

A

a Bi-weekly mortgage

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120
Q

A VA appraisal is known as a:

a. Certificate of Eligibility
b. Certificate of Occupancy
c. Certificate of Reasonable
Value
d. Certificate of Domicile

A

c. Certificate of Reasonable

Value

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121
Q

The fluctuating economic indicator used in an ARM is
the:

a. Index
b. Margin
c. Collateral
d. Basis point

A

b. the Index

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122
Q

A loan in which interest is subsidized for a stated period of time is a:

a. Buy-down mortgage
b. Term mortgage
c. Bridge loan
d. Collateral loan

A

a. Buy-down mortgage

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123
Q

Who CANNOT contribute money towards the borrower’s down payment?

a. Employer
b. Real estate agent
c. Domestic partner
d. Borrower’s relative

A

b. Real estate agent

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124
Q

What is the maximum FHA seller concession?

a. 3%
b. 4%
c. 6%
d. 9%

A

c. 6%

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125
Q

What is the maximum VA seller concession?

a. 3% + standard closing  
    costs
b. 4% + standard closing costs
c. 6% + standard closing  
    costs
d. 9% + standard closing 
    costs
A

c. 6% + standard closing costs
( answer may be simply 4%
for national exam)

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126
Q

What is the minimum down payment usually required for non-owner occupied rental property?

a. 5%
b. 10%
c. 15%
d. 20%

A

d. 20%

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127
Q

Borrowers must be notified of an ARM rate change how many months before the initial reset?

a. 1
b. 3
c. 6
d. 9

A

6 months

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128
Q

What is the cost of 2 3/4 discount points on s 450,000 loan?

a. $1,237.50
b. $3,375.00
c. $12,375.00
d. $13,750.00

A

c. $12,375.00 Discount points x loan amount

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129
Q

There are 10 days left in the month when the loan closes. The purchase price is $325,000. and the loan amount is $280,000. at 6.75% interest. How much interest does the borrower owe for the remainder of the month?

a. $517.81
b. $601.03
c. $720.15
d. $813.22

A

a. $517.81 loan amount x

interest rate/365x10 =

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130
Q

The purchase price is $300,000; and the appraisal value is $290,000., and the LTV is 80%. What is the loan amount?

a. $220,000
b. $232,000
c. $240,000
d. $248,000

A

b. $232,000. Loan amount or
appraised value whichever is
lower x the LTV

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131
Q

The monthly PITI is $1,000. and the gross monthly income is $5,000. According to standard Fannie Mae guidelines, what is the Housing Expense ratio?

a. 5%
b. 20%
c. 36%
d. 50%

A

b. 20%, PITI x monthly income =

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132
Q

An employee works 40 hours a week at 12.50 per hour. What is his gross monthly income?

a. $ 2,000.00
b. $2,166.67
c. $2,245.78
d. $2,400.00

A

b. $2,166.67, Hourly rate x
hours per week x 52 weeks
in a year/12 months=

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133
Q

The borrowers October mortgage payment has not yet been received on October 17. He has a 175,000. VA loan; monthly P&I is $1,280.; Annual PMI is $1,800.; annual hazard insurance is 2,400., and annual property taxes are 3,350. What is the late charge?

a. $42.20
b. $48.00
c. $51.20
d. $64.30

A

c. $51.20, P&I x VA
allowable percentage rate
4% =

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134
Q

A property originally closed in November 2012. A refinance of that property is closing in March 2013. How many months of hazard insurance will be collected at closing?

a. 3
b. 5
c. 6
d. 7

A

c. 6 Number of months current
annual policy has been in
effect = 2 months cushion=

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135
Q

How many years of home addresses are required on the typical loan application?

a. 1 year
b. 2 years
c. 3 years
d. 4 years

A

b. 2 years

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136
Q

How many years of employment history may be required on the loan application?

a. 1 year
b. 2 years
c. 3 years
d. 4 years

A

b. 2 years

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137
Q

What is usually NOT required by a loan applicant?

a. Photo ID
b. Personal references
c. 2 months of bank or
brokerage statements
d. 30 days previous pay stub

A

b. Personnel references

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138
Q

Commission, bonus or dividend income is usually averaged over:

a. 1 years
b. 2 years
c. 3 years
d. 4 years

A

b. 2 years

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139
Q

In order to be counted as income, retirement income must continue for how long after the loan application is
signed?

a. 1 year
b. 2 years
c. 3 years
d. 4 years

A

c. 3 years

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140
Q

In order to be counted as income, alimony must continue for how long after the loan application is signed?

a. 1 year
b. 2 years
c. 3 years
d. 4 years

A

c. 3 years

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141
Q

If there is no minimum monthly credit card payment what percent of the balance is used in the calculation of monthly debt?

a. 1%
b. 3%
c. 5%
d. 10%

A

c. 5%

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142
Q

How many months must be left on a car lease payment in order to be included as a debt?

a. More than 1 month
b. More than 5 month
c. More than 10 month
d. Automobile lease payments are always included

A

d. Automobile lease payments

are always included

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143
Q

How many months must be left on an installment charge in order to be included as a debt?

a. More than 1 month
b. More than 3 month
c. More than 5 month
d. More than 10 month

A

d. 10 months

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144
Q

Fannie Mae total Total Obligation Ratio is:

a. 10%
b. 26%
c. 36%
d. 46%

A

c. 36%

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145
Q

Payment for alimony must continue for how long after the application date in order to be included as a debt?

a. 1 month
b. 10 months
c. 2 years
d. 3 years

A

b. 10 months

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146
Q

A lock-in agreement does NOT include:

a. Interest rate
b. Expiration date
c. Lock-in-fee
d. APR

A

d. APR

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147
Q

Which IRS form does a lender use to verify a applicants income?

a. 2071
b. 321-ml
c. 911-r
d. 4506-T

A

d. 4506-T

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148
Q

Fannie Mae requires how many years of credit and public records review?

a. 1 year
b. 3 years
c. 5 years
d. 7 years

A

d. 7 years

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149
Q

Bankruptcy can be kept on the credit report for a maximum of:

a. 3 years
b. 5 years
c. 7 years
d. 10 years

A

d. 10 years

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150
Q

Credit reports for new construction cannot be older than:

a. 30 days
b. 90 days
c. 120 days
d. 180 days

A

c. 120 days

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151
Q

FICO stands for:

a. Federal Interest  
    Corporation
b. Fair Isaac Corporation
c. Freddie,insurance  
    Company
d. Fannie's International Credit 
    organization
A

b. Fair Isaac Corporation

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152
Q

If two credit scores are obtained for a single borrower the representative score that is usually used is;

a. The higher score
b. The lower score
c. It doesn’t matter
d. What is the policy of the
Mortgage Broker business

A

b. The lower score

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153
Q

If three credit scores are obtained for a single borrower the representative score the is usually used is:

a. The higher score
b. The lower score
c. The middle score
d. What is the policy of the
Mortgage Broker business

A

c. The middle score

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154
Q

The maximum age limit for a borrower is:

a. 65
b. 75
c. 85
d. There is no maximum age
limit

A

There is no maximum age limit

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155
Q

A guarantor or co-signer signs the:

a. Mortgage
b. Note
c. Deed
d. Mortgage and the note

A

b. Note

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156
Q

Which of the following is NOT a national credit repositories?

a. Experian
b. Fannie Mae
c. TransUnion
d. Equifax

A

b. Fannie Mae

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157
Q

What minimum percentage of ownership of a business is required for an individual to be considered self-employed?

a. 10%
b. 25%
c. 50%
d. 75%

A

b. 25%

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158
Q

Which of the following is NOT an escrow impound?

a. Title insurance
b. Property insurance
c. Flood insurance
d. Hazard insurance

A

a. Title insurance

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159
Q

Fannie Mae generally wants how many months of liquid financial reserves after closing?

a. 1 month
b. 2 months
c. 3 months
d. 4 months

A

b. 2 months

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160
Q

A co-borrower whose income is used to qualify must sign the:

a. Mortgage
b. Note
c. Mortgage and the Note
d. They are not required to
sign anything

A

c. Mortgage and the Note

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161
Q

Fannie Mae requires a non-qualifying spouse whose income is not used in qualifying to sign the:

a. Mortgage
b. Note
c. Mortgage and the Note
d. They are not required to
sign anything

A

a. Mortgage

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162
Q

If a mortgage is secured by the primary residence, Fannie Mae allows how many total properties to be financed?

a. No limit
b. 3
c. 5
d. 10

A

a. No limit

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163
Q

Which form is used to summarize the information in the loan package?

a. Fannie Mae 1006- 
    Verification of Deposit
b. Fannie Mae 1005 - 
    Verification of Employment
c. Fannie Mae 1008 - 
    Transmittal Summary
d. Fannie Mae 1003 - Loan 
    Application
A

c. Fannie Mae 1008 -

Transmittal Summary

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164
Q

Which form is used to verify employment information?

a. Fannie Mae 1006- 
    Verification of Deposit
b. Fannie Mae 1005 - 
    Verification of Employment
c. Fannie Mae 1008 - 
    Transmittal Summary
d. Fannie Mae 1003 - Loan 
     Application
A

b, Fannie Mae 1005 -

Verification of Employment

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165
Q

Which form is used to verify bank accounts?

a. Fannie Mae 1006- 
    Verification of Deposit
b. Fannie Mae 1005 - 
    Verification of Employment
c. Fannie Mae 1008 - 
    Transmittal Summary
d. Fannie Mae 1003 - Loan 
    Application
A

a. Fannie Mae 1006 -

Verification of Deposit

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166
Q

What piece of information is not required in order to have a legal loan application?

a. Consumer name
b. Consumer monthly income
c. Estimated property value
d. Consumer signature

A

d. Consumer signature

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167
Q

Fannie Mae’s automated underwriting system is known as:

a. Loan Prospector (LP)
b. Desktop Underwriter (DU)
c. Daniels Underwriting
System (DUS)
d. Limited Portfolio (LP)

A

b. Desktop Underwriter (DU)

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168
Q

Freddie Mac’s automated underwriting system is known as:

a. Loan Prospector (LP)
b. Desktop Underwriter (DU)
c. Daniels Underwriting
System (DUS)
d. Limited Portfolio (LP)

A

a. Loan Prospector

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169
Q

Who makes the final decision as to whether a loan will be funded?

a. Automated underwriting 
    system
b. The lender
c. The real estate agent
d. The closing agent
A

b. The Lender

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170
Q

The automated underwriting system can NOT be used for what types of loans?

a. FHA
b. VA
c. Conventional
d. Jumbo

A

d. Jumbo loans

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171
Q

Who does Fannie Mae hold responsible for the quality of the appraisal?

a. Appraiser
b. Real estate agent
c. Lender
d. Title company

A

c. The lender

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172
Q

An appraisal must be re-certified if it is older than:

a. 1 month
b. 4 months
c. 6 months
d. 12 months

A

b. 4 months

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173
Q

The most probable price which a property should bring in an open market is:

a. Median price
b. Market value
c. Going rate
d. insurance value

A

b. Market value

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174
Q

The highest and best use of the property is not:

a. Legally permissible
b. Physically possible
c. Financially feasible
d. Based on possible future
zoning changes

A

d. Based on possible future

zoning changes

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175
Q

The appraisal approach that best applies to residential property is:

a. Sales Comparison 
    Approach
b. Cost Approach
c. Residential Approach
d. Income Capitalization 
    Approach
A

a. Sales Comparison Approach

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176
Q

The appraisal approach that best applies to vacant land?

a. Sales Comparison 
    Approach
b. Cost Approach
c. Residential Approach
d. Income Capitalization 
    Approach
A

a. Sales Comparison Approach

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177
Q

The appraisal approach that best applies to a school?

a. Sales Comparison 
    Approach
b. Cost Approach
c. Residential Approach
d. Income Capitalization 
    Approach
A

b. Cost Approach

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178
Q

What is the minimum number of closed sales comparable that can be used in the Sales Comparison Approach?

a. 1
b. 3
c. 6
d. 8

A

b. 3

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179
Q

What is the most important type of comparable used in the Sales Comparison Approach?

a. Active
b. Pending
c. Closed
d. Expired

A

c. Closed

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180
Q

The method used to value income producing properties based on the rental incomes and sales prices of similar properties is call the:

a. GRM
b. BBQ
c. CDR
d. TRA

A

a. GRM

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181
Q

In a completion escrow account, what is the minimum estimated repair cost held in trust by the lender?

a. 50%
b. 90%
c. 120%
d. 200%

A

c. 120%

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182
Q

A legally binding letter from the lender to the mortgagor stating the terms of the loan is:

a. A Commitment letter
b. A Letter of intent
c. A discover notice
d. A conditional letter

A

a. A commitment letter

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183
Q

Who handles complaints regarding mortgage loan rejections?

a. FCC
b. FHA
c. VA
d. CFPB

A

d. CFPB

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184
Q

All of the following apply to a mortgagor’s title insurance policy EXCEPT:

a. It is for the amount of the 
    purchase price
b. It is based on loan amount
c. It is optional
d. It is not transferable
A

b. It is based on loan amount

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185
Q

Surveys are NOT certified to:

a. Lenders
b. Title insurers
c. Buyers
d. Real estate broker

A

d. Real Estate Broker

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186
Q

What gives someone other than the owner the right to be on the property for a specific purpose?

a. Mechanics liens
b. Easement
c. Encumbrance
d. Declaration of intention

A

b. Easement

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187
Q

What is a clause in the deed that limits the future use of a property?

a. Deed restriction
b. Encumbrance
c. Title lien
d. Owner’s privilege

A

a. Deed restriction

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188
Q

The most common type of legal description for residential subdivision is:

a. Monument method
b. Lot and Block
c. Metes and bounds
d. Government land survey
method

A

b. Lot and Block

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189
Q

A fee charged to the borrower for determining whether or not a property was in a flood zone is a:

a. Mapper fee
b. Flood certification fee
c. FEMA fee
d. Reviewer fee

A

b. Flood certification fee

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190
Q

Which form is used as the standard settlement form?

a. HUD/1 Closing disclosure
b. FHA Closing Statement
c. U.S.A. Settlement
Statement
d. National Closing
Statement

A

a. HUD-1/Closing Disclosure

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191
Q

The day of closing is May 15. When is the first loan payment due?

a. June 1
b. July 1
c. August 1
d. June 16

A

b. July 01

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192
Q

The most accurate type of legal description for residential subdivision is:

a. Monument method
b. Lot and Block
c. Metes and bounds
d. Government land survey
method

A

c. Metes and bounds

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193
Q

Which of the following is an acceptable source of funds at closing?

a. Sweat equity
b. Cash on hand
c. Personal check
d. Wire transfer

A

d. Wire transfer

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194
Q

What type of funding occurs when a lender obtains funds from a line of credit at a commercial bank?

a. Credit lending
b. Table funding
c. Warehouse funding
d. Temporary funding

A

c. Warehouse funding

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195
Q

The late fee for FHA and VA loans is:

a. 3% of principle and interest
b. 4% of principle and interest
c. 5% of principle and interest
d. 10% of principle and interest

A

b. 4%

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196
Q

When a lender sells a mortgage loan to another lender this is called?

a. Assignment of mortgage
b. Note transfer
c. Vendor selling
d. Linking a mortgage

A

a. Assignment of mortgage

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197
Q

When a assignor keeps the servicing rights this is known as:

a. Selling a loan with escrow 
    impounds
b. Selling a loan with 
    servicing released
c. Selling a loan with 
    servicing retained
d. Selling a loan pro norma
A

c. Selling a loan with servicing

retained

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198
Q

Ginnie Mae does:

a. Buy loans
b. Sell loans
c. Fund loans
d. Guarantee loans

A

d. Guarantee loans

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199
Q

Fannie Mae was established in:

a. 1914
b. 1938
c. 1962
d. 1980

A

b. 1938

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200
Q

Fannie Mae will not purchase a mortgage secured by a :

a. Urban area residential 
    property
b. Orchard
c. Rural area residential 
    property
d. Suburban area residential 
    property
A

b. Orchard

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201
Q

Which title insurance policy is transferable?

a. Mortgagor
b. Mortgagee
c. Restricted use
d. Conforming

A

b. Mortgagee

202
Q

The title company considers unpaid property taxes to be an:

a. Encroachment
b. Encumbrance
c. Easement
d. Engress

A

b. Encumbrance

203
Q

The principal of value that focuses on the most profitable, legal use to which a property can be put is:

a. Principle of Satisfaction
b. Principle of Substitution
c. Principle of Highest and
Best Use
d. Principle of Conformity

A

c. Principle of Highest and Best Use

204
Q

A Point of Beginning is used in what type of survey?

a. government land survey
b. Plat map
c. Metes and Bounds
d. Circle and Grid

A

c. Metes and Bounds

205
Q

A neighbors fence that crosses over on to another property is an example of an:

a. Encroachment
b. Encumbrance
c. Exculpation
d. Egress

A

a. Encroachment

206
Q

An outstanding claim on a property that limits the ability to sell the property is a:

a. Title defect
b. Subordination
c. Penalty
d. Fault fee

A

a. Title defect

207
Q

The national trade association and voice of the abstract and title insurance industry is:

a. TICOA
b. ATC
c. ALTA
d. TITLE NOW

A

c. ALTA

208
Q

Under the federal fair housing law, the seven protected classes include:

a. Race, color source of 
    income, handicap, national 
    origin, marital status, 
    religion
b. Race, color religion, sex, 
    handicap, familial status, 
    national origin
c. Race , sexual orientation, 
    sex, familial status, 
    handicap, age, national 
    origin
d. Race, color, age, religion, 
    sex, handicap, familial 
    status
A

b. Race, color, religion, sex,
handicap, familial status,
national origin

209
Q

Under RESPA , a real estate professional may give in return for the referral of real estate settlement service business a:

a. Caribbean cruise
b. $50
c. Thank you
d. Kickback

A

c. Thank you

210
Q

A real estate broker may pay a referral fee to:

a. A closing agent
b. A past customer
c. A mortgage broker
d. Another real estate
brokerage firm

A

d. Another real estate

brokerage firm

211
Q

Who can provide closed sales comparables to an appraiser?

a. Real estate agent
b. Underwriter
c. Mortgage broker
d. Lender

A

a. Real estate agent

212
Q

Which of the following is NOT a common type of mortgage fraud?

a. Rehabilitation
b. Equity skimming
c. Inflated appraisal s
d. Property flipping

A

a. Rehabilitation

213
Q

What is the mortgage fraud scam called when a broker invents borrowers properties?

a. Equity skimming
b. Air loan
c. Silent second
d. Property flipping

A

b. Air loan

214
Q

What are the 2 types of mortgage fraud the FBI investigates?

a. Fraud for profit and fraud 
    for housing
b. East coast and west coast 
c. Domestic and international
d. Appraisers and mortgage 
    brokers
A

a. Fraud for profit and fraud for

housing

215
Q

A lender’s refusal to lend in a particular neighborhood is known as:

a. Referential lending
b. Redemption
c. Railroading
d. Redlining

A

d. Redlining

216
Q

A fee charged for the use of money is:

a. Interest
b. Usury
c. Rent
d. Lease

A

a. Interest

217
Q

A mortgage on personal property is a(an);

a. Chattel mortgage
b. Reverse mortgage
c. Ad valorem mortgage
d. Participation mortgage

A

a. Chattel mortgage

218
Q

One discount point equals 1% of the:

a. Purchase price
b. Annual percentage rate
c. Loan amount
d. Appraisal value

A

c. Loan amount

219
Q

Net worth is defined as:

a. Cash plus real property
b. Cash plus stocks and
bonds
c. Assets minus liabilities
d. Liquid assets plus real
property

A

c. Assets minus liabilities

220
Q

The liquidation of a debt by regular, usually monthly installments of principal and interest is:

a. Amortization
b. Hypothecation
c. Assignment
d. Novation

A

a. Amortization

221
Q

The withdrawal of funds out of savings accounts and into stocks and bonds is known as:

a. Intermediation
b. Disintermediation
c. Acceleration
d. Exculpation

A

b. Disintermediation

222
Q

The condemnation of private property for public good is:

a. Eminent Domain
b. Escheat
c. Disintermediation
d. Interstate

A

a. Eminent Domain

223
Q

Notice which is not recorded is known as:

a. Construction notice
b. Actual notice
c. Selective notice
d. Lis pendens notice

A

b. Actual notice

224
Q

Notice which is recorded is known as:

a. Constructive notice
b. Actual notice
c. Selective notice
d. Lis pendens notice

A

a. Constructive notice

225
Q

The use of borrowed funds to increase yield is:

a. Leverage
b. Acceleration
c. Defeasance
d. forbearance

A

a. Leverage

226
Q

A mortgage note that does NOT limit recovery solely from the property is call a:

a. Note endorsed with 
    recourse
b. Hybrid loan
c. Multi-level Loan
d. Non-recourse Note
A

a. Note endorsed with recourse

227
Q

APOR stands for:

a. Average Price of Ratios
b. Annual Percentage of
Refinancing
c. Average Prime Offer Rate
d. Annual Percentage
Reimbursement

A

c. Average Prime Offer Rate

228
Q

A discount point costs?

a. $100
b. $1,000
c. 1 percent of loan amount
d. 10 percent of loan amount

A

1% of loan amount

229
Q

ECOA defines elderly as:

a. 55 years old
b. 62 years old
c. 65 years old
d. 70 years old

A

b. 62 years old

230
Q

The right to use land owned by another is an:

a. Easement
b. Acquisition
c. Exposition
d. Alienation

A

a. Easement

231
Q

The act of lowering the priority of a mortgage lien is:

a. Reduction
b. Subordination
c. Degradation
d. Subtraction

A

b. Subordination

232
Q

A loan offered to a consumer with poor credit is know as:

a. Subjugation
b. Alternative
c. Preliminary
d. Subprime

A

a. Subprime

233
Q

A borrower is purchasing a $200,000 home, using VA eligibility for the first time. What is the minimum down payment required?

$4,000
$0
$7,000
$9,600

A

The answer is $0. VA loans do not require a down payment. However, all veterans – other than those who are disabled – must make a cash contribution to a lending transaction in the form of a funding fee.

234
Q

The Onyewus are purchasing a home with an agreed-upon sales price of $320,000. They are putting down 20%, and have agreed to pay two points in discount to lower their rate, and two points in origination fees to their lender. What is the total cost of their points?

$10,240
$12,800
$5,120
$6,400

A

The answer is $10,240. Points are paid based on the loan amount. After a 20% down payment, the total loan amount is $256,000. They have agreed to pay two points in discount and two points in origination, for a total of four points. Each point is 1% of the loan amount, so 4% of $256,000 equals $10,240.

235
Q

A borrower is purchasing a house with a sale price of $212,000. It appraises prior to settlement for $210,000, leading to an adjustment in the purchase price. The borrower is making a 10% down payment. What are the loan amount and LTV ratio?

$190,800; 91%
$200,000; 91%
$210,000; 91%
$189,000; 90%

A

The answer is $189,000; 90%. The LTV is always based off of the lower of the purchase price or the appraised value. In cases where the appraisal comes back lower than the purchase price, lenders will typically adjust the figures based on the appraisal value. So, in this case, the purchase price would be adjusted to $210,000 (the appraisal price). From here, after the borrower’s 10% down payment, the loan amount would be $189,000, and the LTV would be 90%.

236
Q

Sue Johnson is a receptionist for a construction company. She receives bi-weekly pay in the amount of $1,153.85. What is her monthly qualifying income?

$2,500
$2,307.70
$1,153.85
$532.55

A

The answer is $2,500. To determine a monthly income based on salary that is not paid on a monthly basis, multiply a biweekly salary by 26 (number of paychecks in a year), and divide by 12 (number of months in a year). In this case ($1,153.85 × 26)/12=$2,500.00.

237
Q

Mr. Bob Brown earns $12.00 per hour and works 38 hours each week for his job at a retail store. His wife Matilda is paid $680 bi-weekly as a medical technician. What is their combined monthly qualifying income?

$3,553.33
$3,449.33
$3,940.00
$3,336.00

A

The answer is $3,449.33. Mr. Brown’s monthly income can be calculated by multiplying his hourly base pay rate wage ($12.00) by the average number of hours worked per week (38), yielding a weekly income of $456.00. To determine his monthly income, weekly income ($456.00) is multiplied by the average number of weeks worked per year (52) and then divided by 12. ($456.00 × 52)/12 = $1,976.00. Mrs. Brown’s income can be determined by multiplying her biweekly salary ($680) by 26 and then dividing by 12. ($680 × 26) / 12 = $1,473.33. Adding the two incomes together ($1,976.00 + $1,473.33), yields a combined monthly income of $3,449.33.

238
Q

The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points?

$4,000
$3,800
$3,600
$2,000

A

The answer is $3,600. Discount points are calculated based on the loan amount, which is determined by subtracting any down payment (in this case, $20,000) from the purchase price ($200,000). Each discount point is 1% of the loan amount. In this transaction, the Smiths are obtaining a $180,000 loan and buying two discount points, equal to 2% of the loan amount. $180,000 × 0.02 = $3,600.

239
Q

The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points?

$4,000
$3,800
$3,600
$2,000

A

The answer is $3,600. The down payment of 10% ($20,000) is based on the purchase price of $200,000. The down payment must be deducted from the purchase price to find the loan amount. The discount points in this transaction are then based on the loan amount of $180,000. Each point is 1% of the loan amount, so a total of 2%. $180,000 × 0.02 = $3,600.

240
Q

Kelsey and Matt have just signed a contract to purchase a home for $360,000. Their mortgage loan is an HPML. Their creditor has discovered that the seller purchased the home four months earlier. The creditor will require a second appraisal if the seller’s purchase price was:

$300,000
$310,000
$320,000
$330,000

A

The answer is $300,000. For transactions involving an HPML (higher-priced mortgage loan), a second appraisal is required if the seller acquired the home 91 to 180 days prior to the consumer’s agreement to purchase it, and the price at which the consumer agreed to purchase the home is 20% more than the price paid by the seller. 20% of $300,000 is $60,000. $300,000 + $60,000 = $360,000.

241
Q

A property is encumbered by two mortgages that have a combined loan-to-value of 90%. The LTV of the second mortgage is 12%. If the value of the property is $500,000, what is the approximate amount of the first mortgage, and is it considered a jumbo loan?

$390,000 and no
$450,000 and yes
$450,000 and no
$405,000 and no

A

The answer is $390,000 and no. The CLTV is 90%, and the second mortgage has an LTV of 12%. This leaves the first mortgage with an LTV of 78%. $500,000 × .78 = $390,000. The value is under the conforming loan limit, so it is not considered jumbo.

242
Q

A lender engaging in telemarketing may be subject to a fine of _____ for violations of federal Do-Not-Call rules.

$43,792
$45,000
$25,359
$25,693

A

The answer is $43,792. Violations of the federal Do-Not-Call rules can lead to fines of $43,792 per violation, as of 2021.

243
Q

A couple is buying a house with a sale price of $187,500 on a conventional loan, putting 3% down. The seller has agreed to pay the allowable 3% seller concession. How much should the seller expect to pay of the buyer’s cost?

$5,456
$5,625
$10,912
$4,325

A

The answer is $5,625. The seller would pay 3% of the sales price, not 3% of the borrower’s loan amount. 187,500 × 3% = $5,625.

244
Q

Which of the following in an ad for residential mortgage financing would trigger additional disclosures?

  1. “VA financing available”
  2. “Affordable payments”
  3. “5.75% APR”
  4. “5% down payment”
A

The answer is “5% down payment.” Under TILA, an ad must disclose a number of additional credit terms if it contains a trigger term. A trigger term includes certain credit terms specifically cited in an ad, including the amount or percentage of any down payment (e.g., “5% down,” “95% financing,” “$6,200 down”), except when the amount of the down payment is zero; the number of payments or period of repayment (e.g., “360 monthly payments,” “a 30-year loan”); the amount of any payment (e.g., “payments of less than $1,400 per month”); and the amount of any finance charge (e.g., “total financing costs of less than $3,000”).

245
Q

Which of the following would be equal to one half of one discount point (.005) on a loan amount of $250,000?

  1. $5,000
  2. $1,250
  3. $2,500
  4. $1,000
A

The answer is $1,250. One discount point is equal to 1% (.01) of the loan amount. Therefore, a charge of 0.005 (one half of one point) on a $250,000 loan is 0.5% (.005) × $250,000 = $1,250.

246
Q

A borrower receives $2,500 per month in rental income. How much of the income may be used to qualify the borrower for a loan?

  1. $2,500
  2. $2,000
  3. $1,800
  4. $1,875
A

The answer is $1,875. Generally, 75% of rental income may be used to qualify the borrower for a loan. This formula is based on an industry standard that taxes, insurance, and maintenance costs will equal about 25% of the income that a property generates. In this case, 75% × $2,500 = $1,875.

247
Q

Mary and Larry are purchasing a house for $198,000. They are making a down payment of $20,000, and they are approved for a conforming loan. How much should they expect to receive in seller help if the seller agrees to contribute the maximum amount?

  1. $5,940
  2. $10,680
  3. $12,440
  4. $11,880
A

The answer is $11,880. For a conforming loan, the max seller contribution in this scenario is 6% (the down payment is more than 10%). The 6% is taken from the purchase price of $198,000, which is $11,880.

248
Q

Mary and Larry are purchasing a house for $198,000. They are obtaining a conforming loan and making a down payment of $20,000. How much should they expect to receive in seller help if the seller agrees to contribute the maximum amount?

  1. $11,880
  2. $5,940
  3. $10,680
  4. $12,440
A

The answer is $11,880. The max seller contribution in this scenario is 6% (the down payment is more than 10%). The 6% is taken from the purchase price of $198,000, which is $11,880.

249
Q

A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan?

  1. $6,000
  2. $12,000
  3. $1,600
  4. $1,200
A

The answer is $12,000. To calculate the annual interest: 6% × $200,000 = $12,000.

250
Q

Ricky and Lucy are buying a house using a conforming loan, and they have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession?

  1. $6,210
  2. $6,900
  3. $13,800
  4. $12,420
A

The answer is $13,800. The seller concession allowed on a conforming loan with a 90% (or less) LTV is 6%. This number is taken from the sales price, not the loan amount. $230,000 × 6% = $13,800.

251
Q

The Foxes are obtaining a mortgage loan of $140,000. They are making a down payment of $35,000, which is 20% of the purchase price. What is the purchase price of the property?

  1. $150,000
  2. $200,000
  3. $175,000
  4. $235,000
A

The answer is $175,000. The purchase price of the home is $175,000. This can be determined by adding together the amount of the mortgage loan ($140,000) and the amount of the Foxes’ down payment ($35,000).

252
Q

A property is valued at $295,000. The property is subject to a first mortgage and a second mortgage, with a CLTV of 77%. The current balance on the second mortgage is $29,500. What is the approximate amount of the first mortgage?

  1. $256,650
  2. $227,150
  3. $204,435
  4. $197,650
A

The answer is $197,650. The approximate amount of the first mortgage is $197,650. This can be calculated using the information given here, according to the following formula: [first mortgage + second mortgage] / appraised value = CLTV. In this case, the question provides the amount of the second mortgage ($29,500), the appraised value of the property ($295,000), and the CLTV (77%); the amount of the first mortgage (x) must be determined. Using this formula would result in the following equation: [x + $29,500] / $295,000 = .77. First, multiply $295,000 by .77 ($227,150). This figure is equal to the first mortgage (x) plus the second mortgage ($29,500). Subtract $29,500 from $227,150 to find the amount of the first mortgage ($197,650).

253
Q

Carrie is obtaining a 90% loan for the purchase of her new home, which she is buying for $225,000. One discount point for her loan would be equal to:

  1. $1,000
  2. $2,025
  3. $2,000
  4. $2,250
A

The answer is $2,025. One discount point is equal to 1% of the loan amount. In this case, 90% × $225,000 = $202,500. 1% × $202,500 = $2,025.

254
Q

In January of 2021, Wella and Kip agreed to purchase a home at a purchase price of $584,150. They would like to hold on to as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings?

  1. $47,900
  2. $35,900
  3. $95,800
  4. $54,900
A

The answer is $35,900. The down payment in this scenario will be $35,900. This is just enough to keep them at the $548,250 conforming loan limit which was adjusted January 1, 2021. 584,150-548,250 = 35,900.

255
Q

The Talleys are buying a home for $180,000. What is the minimum possible down payment they could make in order to avoid paying PMI?

  1. $36,000
  2. $20,000
  3. $18,000
  4. $32,000
A

The answer is $36,000. The LTV for the Talleys must be 80% or less. A down payment of 20% exactly would be $36,000.

256
Q

Tina Louise works as a clerk at a law firm and is paid bi-weekly in the amount of $1,700. Each quarter, she also receives a bonus of exactly $3,200 for her share of a program specifically designed to reward the excellent work by the firm’s support staff. This bonus has been consistent for three years. What is Tina’s qualifying monthly income?

  1. $3,683
  2. $4,466
  3. $4,750
  4. $3,400
A

The answer is $4,750. To calculate qualifying income, first, annual salary is calculated, including the bonus (in effect for three years), and then divided by 12 months. $1,700 × 26 = $44,200. Then the bonus: $3,200 × 4 = $12,800. Add the two, $44,200 + $12,800 = $57,000. Divide $57,000 by 12 = $4,750.

257
Q

Richie Rich has been approved for a 90% loan. Richie is under contract to purchase a home for $400,000 and put $5,000 earnest money down with the contract. If Richie’s lender is charging 1% origination, 1% discount, and the title company fees total $1,350, how much does Richie need to bring to closing?

  1. $49,350
  2. $46,850
  3. $43,550
  4. $48,550
A

The answer is $43,550. 90% LTV means Richie will need to bring 10% of the purchase price, or $40,000, to closing, minus the $5,000 he already paid as earnest money. To this he must add 1% of the $360,000 loan amount, or $3,600, for the 1% origination fee, and an additional 1% of the loan amount ($3,600) for the discount. Finally, he must add the $1,350 title charge: $40,000 − $5,000 + $3,600 + $3,600 + $1,350 = $43,550.

258
Q

Jimmie is purchasing a home with a purchase price of $350,000. He has been approved for a loan with an 85% LTV. What is his down payment?

  1. $52,500
  2. $297,500
  3. $50,000
  4. $35,000
A

The answer is $52,500. The relationship of the loan amount to the value or sales price of the property securing the loan is called the loan-to-value ratio. The loan-to-value ratio (LTV) relates the loan to the lesser of the appraised value or sales price. If Jimmie has been approved for a loan with an 85% LTV, his down payment must cover the remainder of the purchase price, or 15%: 15% × $350,000 = $52,500

259
Q

John and Tina are purchasing a home using an FHA loan. They are excited because, while the price they agreed to pay is $215,000, they just got word that the appraised value came in at $225,000. What is the minimum down payment that John and Tina must make on this loan?

  1. $7,875
  2. $7,255
  3. $7,525
  4. $3,500
A

The answer is $7,525. FHA loans require a minimum borrower investment of 3.5% That amount is calculated by the lesser of the purchase price or the appraised value.

260
Q

Sam Slezee was found to be providing mortgage loan origination services without a state license. A temporary order to cease and desist engaging in such activities was issued against Sam. While under the order, Sam completed three transactions. What is the maximum fine a state licensing agency may impose on him?

  1. $25,000
  2. $50,000
  3. $75,000
  4. $100,000
A

The answer is $75,000. The maximum amount of penalty for each act or omission is $25,000. Each violation or failure to comply with any directive or order of the state licensing authority is a separate and distinct violation.

261
Q

A borrower receives $1,000 per month in rental income. How much of the income may be used to qualify the borrower for a loan?

  1. $1,000
  2. $800
  3. $750
  4. $1,250
A

The answer is $750. Generally, 75% of rental income may be used to qualify a borrower for a loan. This formula is based on an industry standard that taxes, insurance, and maintenance costs will equal about 25% of the income that a property generates. In this case, 75% × $1,000 = $750.

262
Q

A borrower receives a bi-weekly paycheck in the amount of $2,300. The co-borrower earns a semi-monthly paycheck in the amount of $2,500. What is the monthly qualifying income of this couple?

  1. $9,983.33
  2. $10,400
  3. $9,600
  4. $10,983.33
A

The answer is $9,983.33. This question uses both bi-weekly and semi-monthly income, so you must be careful with calculations. The borrower receives bi-weekly pay of $2,300, which must be multiplied by 26, giving an annual salary of $59,800. The co-borrower receives semi-monthly income of $2,500, which must be multiplied by 24, giving an annual salary of $60,000. Combine both, and you have a household salary of $119,800. Divide this by 12, and you arrive at a qualifying income of $9,983.33.

263
Q

A borrower makes $20 per hour and works 35 hours per week. If their loan program allows a front-end debt ratio of 31%, what is the maximum housing payment for which they can qualify?

  1. $940.33
  2. $868.33
  3. $1,074.67
  4. $956.34
A

The answer is $940.33. To calculate the borrower’s monthly income, earnings per hour ($20) are multiplied by hours per week (35) and weeks per year worked (52). This is divided by 12, totaling $3,033.33. To calculate the maximum housing payment (PITI), multiply monthly income by the allowable front-end ratio: $3,033.33 × 31%.(.31) = $940.33.

264
Q

According to TILA, a variation of up to what amount is permitted for the annual percentage rate in a regular fixed-rate mortgage transaction?

  1. 0.25%
  2. 0.5%
  3. 0.125%
  4. .75%
A

The answer is 0.125%. Under TILA and Regulation Z , the APR is considered accurate generally if it is not more than one eighth of one percentage point (0.125%) above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method), or in an irregular transaction, if it is not more than one quarter of one percentage point (0.25%) above or below the annual percentage rate determined in accordance with legal requirements.

265
Q

Sandra is purchasing a home with a first mortgage loan for $548,250, which is the conforming loan limit for the area where she lives at the time that she secures approval. Her interest rate is not a prime rate, and in order to determine if it triggers the threshold for higher-priced mortgage loans, her creditor must determine if the APR for the loan exceeds the average prime offer rate by:

  1. 2.5 percentage points
  2. 1.5 percentage points
  3. 3.5 percentage points
  4. 6.5 percentage points
A

The answer is 1.5 percentage points. For first lien loans with a principal amount that does not exceed the conforming loan limit, Sandra’s creditor must determine if the APR for the loan exceeds the average prime offer rate by 1.5 percentage points.

266
Q

Tom and Cindy Lewis are buying a house with a $300,000 sale price, and their LTV will be 80%. They paid $3,600 in discount points. How many total points did they pay?

  1. 2
  2. 4
  3. 2.5
  4. 1.5
A

The answer is 1.5. Points are a percentage of the loan amount: 1 point = 1% of the loan. The loan amount here is $240,000 (80% of $300,000). On a $240,000 loan, one point would cost $2,400 (1% x $240,000). The Lewises are paying $3,600 in points; to determine how many points this represents, divide $3,600 by $2,400. This comes out to 1.5, meaning that Tom and Cindy paid for 1.5 points.

267
Q

On the Loan Estimate, fees related to third-party service providers chosen from the provider list and not affiliated with the creditor are grouped with the recording fees and subject to a:

  1. No tolerance limitation
  2. 10% tolerance
  3. 15% tolerance
  4. Zero tolerance
A

The answer is 10% tolerance. In regard to tolerances related to settlement costs, fees related to third-party service providers and recording fees are grouped together and subject to a 10% tolerance. The creditor may charge more for a particular service or recording fee than initially disclosed as long as the total for all such charges, when added together, does not exceed 10% of the amount disclosed.

268
Q

For the purposes of issuing a revised Loan Estimate, “changed circumstances” that affect estimated settlement charges must result in a change to those charges of more than:

  1. 5%
  2. 1%
  3. Any amount
  4. 10%
A

The answer is 10%. For the purposes of issuing a revised Loan Estimate, “changed circumstances” that affect estimated settlement charges must result in a change to those charges of more than 10%.

269
Q

The Uniform Residential Appraisal Report is commonly known as the:

  1. 1003
  2. 1040
  3. 1004
  4. 4506
A

The answer is 1004. For FHA, VA, and conforming loans, appraisers will use the Uniform Residential Appraisal Report (URAR), also known as Fannie Mae Form 1004 and Freddie Mac Form 70.

270
Q

Which of the following forms is the appraisal form used for investment properties?

  1. 1007
  2. 1073
  3. 1004
  4. 1005
A

The answer is 1007. The 1004 is the Uniform Residential Appraisal Report, or URAR. There are variations for certain properties; the 1007 is used for single-family properties that are investment properties.

271
Q

The FHA offers _____ fixed-rate mortgages to qualifying borrowers.

  1. Only 15-year
  2. Only 30-year
  3. 15- and 30-year
  4. Special 20-year
A

The answer is 15- and 30-year. The FHA offers 15- and 30-year fixed-rate mortgages to qualifying borrowers.

272
Q

When must a borrower receive notification of a servicing transfer?

  1. 15 days prior to the effective date of the transfer
  2. Ten days prior to the effective date of the transfer
  3. Within 30 days of the effective date of the transfer
  4. With the borrower’s next payment coupon
A

The answer is 15 days prior to the effective date of the transfer. Under RESPA, when a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement (showing the new servicer’s name, address, and toll-free telephone numbers and showing the date the new servicer will begin accepting payments) at least 15 days before the effective date of the servicing transfer.

273
Q

For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is greater than or less than/equal to:

  1. 15 years
  2. 20 years
  3. 25 years
  4. 30 years
A

The answer is 15 years. For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is greater than 15 years or is 15 years or less.

274
Q

If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.

  1. 7
  2. 10
  3. 20
  4. 15
A

The answer is 15. If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has 15 days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.

275
Q

Which of the following labels is most likely for a balloon loan?

  1. 180/360
  2. 1-Mar
  3. 5/2/2005
  4. 1-May
A

The answer is 180/360. A partially amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance. The loan would be labeled by indicating the loan term in months (in this case, 180) and the amortization period in months (in this case, 360).

276
Q

Lisa is submitting an application for a mortgage loan originator license. In order to be able to apply, Lisa must complete how many hours of pre-licensing education?

  1. 20
  2. 8
  3. 15
  4. 30
A

The answer is 20. An applicant for a mortgage loan originator license must satisfactorily complete a pre-licensing course of study that includes at least 20 hours of NMLS-reviewed and -approved education.

277
Q

Under the S.A.F.E. Act, mortgage loan originator license applicants must complete how many hours of pre-licensing education?

  1. 20
  2. 10
  3. 25
  4. 30
A

The answer is 20. In order to obtain a mortgage loan originator license, an individual must complete required pre-licensing education consisting of at least 20 hours of NMLS-approved education. The S.A.F.E. Act specifies that the education must include at least three hours of federal laws and regulations, three hours of ethics, and two hours of training related to lending standards for nontraditional mortgage products.

278
Q

Don is refinancing his home in order to save money. If the loan goes through, his payment will drop from $2,000/month (PITI) to $1,500/month (PITI). Don’s gross income each month is $6,800, but he has a $300 car payment, a $150 credit card payment, and monthly alimony payments of $1,300. What is Don’s housing ratio on the proposed loan?

  1. 29%
  2. 48%
  3. 22%
  4. 31%
A

The answer is 22%. “Housing ratio” refers to the cost of Don’s housing expenses monthly, divided by his gross monthly income. In this case, his proposed housing expense (PITI) will be $1,500/month. $1,500 / $6,800 = 22%.

279
Q

The Phillips family has a joint gross monthly income of $11,300. The $499 lease payment for their car expires in four months. A student loan that has been deferred will kick in at the end of the year, and payments will be $210 monthly. Joe Phillips pays child support for his children with his first wife in the amount of $2,200 per month, but $600 of that will drop off in four months when his oldest son turns 18. They are buying a new home with a loan that carries a $2,700 a month payment. What is their housing ratio?

  1. 29%
  2. 24%
  3. 38%
  4. 41%
A

The answer is 24%. Housing ratio is only concerning the ratio between housing expenses and gross monthly income. In this case, their housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%

280
Q

A borrower who owns more than ____ of a business must submit up to two years’ tax returns in providing income documentation.

  1. 15%
  2. 25%
  3. 10%
  4. 5%
A

The answer is 25%. A borrower who owns more than 25% of a business must submit up to two years’ tax returns in providing income documentation.

281
Q

The Peterson family is buying a new home and their new P&I payment totals $1,800 per month. Their annual tax bill is $3,000, and their annual homeowner’s insurance premium is $720. The family’s annual income totals $98,520. What is their housing (i.e., front-end) ratio?

  1. 22%
  2. 32%
  3. 36%
  4. 26%
A

The answer is 26%. The Petersons’ housing ratio - also known as the front-end ratio - is 26%. This is calculated by comparing monthly housing expenses, such as flood insurance, homeowners insurance, and other monthly housing costs, to gross monthly income. In this case, add together the $1,800 mortgage payment with the $250-per-month tax payment and $60-per-month homeowner’s insurance payment. Divide that total ($2,110) by the total monthly income of $8,210 (annual income of $98,520, divided by 12), equaling 26%.

282
Q

Conforming loan guidelines generally include DTI ratios of:

  1. 26% / 38%
  2. 31% / 43%
  3. 28% / 41%
  4. 28% / 36%
A

The answer is 28% / 36%. The standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).

283
Q

A borrower makes $60,000 per year. The borrower’s spouse makes $3,000 per month. The borrowers’ monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple’s back-end DTI?

  1. 30.6%
  2. 31.25%
  3. 32.5%
  4. 29.38%
A

The answer is 29.38%. Monthly Housing Costs + Monthly Liabilities / Gross Monthly Income = Debt-to-Income Ratio. Borrower 1’s annual income is $60,000, divided by 12 = $5,000. The spouse’s gross monthly income of $3,000 is added to $5,000, for a total monthly income of $8,000. The monthly housing expense ($1,500) is added to the car payment ($500) and the boat payment ($350), totaling $2,350. This figure, divided by $8,000, equals 29.38%. Typical living expenses, such as a phone bill or car insurance, are not included when calculating DTI.

284
Q

Seller concessions for conforming loans are limited to _____ and _____ on LTVs of over 90% and 90% or less, respectively.

  1. 6%; 3%
  2. 3%; 6%
  3. 10%; 20%
  4. 3.5%; 10%
A

The answer is 3%; 6%. Seller concessions for conforming loans are limited to 3% and 6% for LTVs of over 90% and 90% or less, respectively.

285
Q

How many total hours of ethics are required, at minimum, for pre-licensing education?

  1. 20
  2. 8
  3. 16
  4. 3
A

The answer is 3. The NMLS requires, as a federal minimum, at least three hours of ethics training within the total 20 hours of education required for pre-licensing education.

286
Q

On an FHA loan, a borrower is required to make a down payment of at least:

  1. 5%
  2. 3.50%
  3. 0%
  4. 1.50%
A

The answer is 3.50%. On an FHA loan, a borrower is required to bring a minimum down payment of 3.5%.

287
Q

After receiving a mortgage application, a creditor must send a notice of decision to the applicant within:

  1. 10 days
  2. 20 days
  3. 30 days
  4. 90 days
A

The answer is 30 days. Notice of action taken on a mortgage loan application is due within 30 days.

288
Q

Every month, a borrower has a car payment of $350, a credit card payment of $50, HOA dues of $35, a cable bill of $40, and a house payment (including taxes and insurance) of $1,250. The borrower’s annual income is $50,000. What is the borrower’s front-end debt-to-income ratio?

  1. 41.4%
  2. 30%
  3. 40.4%
  4. 30.8%
A

The answer is 30.8%. A housing or front-end ratio compares the applicant’s monthly housing costs to his/her gross monthly income. Housing costs are referred to as PITI (principal, interest, taxes, insurance). In addition to PITI, any monthly homeowners’ association (HOA) dues, if applicable, would also be included because they are a housing-related debt. Non-housing-related expenses (car payments, credit cards, etc.) are not included in the housing ratio. Housing ratio = housing debts divided by gross monthly income. In this case, $50,000÷12 = $4,166.66. ($1,250+$35)÷$4,166.66 = 0.308 = 30.8%.

289
Q

A balloon mortgage has a:

  1. Short-term payment that can go up or down from month to month throughout the life of the loan
  2. Payment that grows with each month as equity decreases
  3. Large payment required at the onset of the loan and periodic payments thereafter
  4. 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time
A

The answer is 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time. A balloon mortgage requires the borrower to make one large payment at the end of a loan term. This payment may also be referred to as a “call,” a “demand,” or a “bullet.” It often has a 30-year amortization, but is typically due in 5, 7, 10, or 15 years.

290
Q

Businesses that conduct telemarketing are required to access the Do-Not-Call Registry every _____ in order to maintain an updated database of people on the Do-Not-Call List.

  1. 31 days
  2. 60 days
  3. 3 months
  4. 45 days
A

The answer is 31 days. A business must update its Do-Not-Call data every 31 days to remain compliant.

291
Q

Direct RHS loans may have terms of _____ years.

  1. 15 and 30
  2. 21 or 29
  3. 30 and 40
  4. 33 or 38
A

The answer is 33 or 38. Direct RHS loans may have terms of 33 and 38 years.

292
Q

VA fixed-rate loans may be made for any of the following terms, except:

  1. 20 years
  2. 40 years
  3. 25 years
  4. 30 years
A

The answer is 40 years. VA fixed-rate loans may be made for terms of 20, 25, and 30 years.

293
Q

Which of the following debt-to-income ratios is used as a guideline for VA loans?

  1. 41% back
  2. 31% front
  3. 28% front
  4. 36% back
A

The answer is 41% back. A VA loan does not require any specific front-end ratio, but does use a general back-end ratio requirement of 41%.

294
Q

The preferred debt-to-income ratio for applicants for VA loans is:

  1. 35%
  2. 43%
  3. 50%
  4. 41%
A

The answer is 41%. The preferred DTI ratio for VA loans is 41%. However, if a veteran cannot meet this limit, creditors may use a residual income analysis.

295
Q

Applicants for FHA loans must meet a back end ratio of:

  1. 41%
  2. 29%
  3. 36%
  4. 43%
A

The answer is 43%. In general, applicants for FHA loans must meet a back end ratio limitation of 43%.

296
Q

In order for a home loan to be a qualified mortgage, the debt-to-income ratio may not exceed:

  1. 43%
  2. 28%
  3. 36%
  4. 46%
A

The answer is 43%. In order for a home loan to be a qualified mortgage, the debt-to-income ratio may not exceed 43%.

297
Q

If a lender wants to obtain copies of a borrower’s tax returns, the borrower is asked to sign what?

  1. A waiver of financial information
  2. 4506-C
  3. 1003
  4. IRS-1040
A

The answer is 4506-C. The IRS form 4506-C is used to allow a lender to pull a transcript of the borrower’s tax returns.

298
Q

A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV?

  1. 47%
  2. 29%
  3. 40%
  4. 65%
A

The answer is 47%. The CLTV accounts for the total encumbrance on the property, which in this case is $78,000. To calculate CLTV, divide the $78,000 total encumbrance by the value of $165,000. This equals 47%.

299
Q

An ARM loan has a 4.00% start rate, and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. What is the highest that the interest rate could be after the first adjustment?

  1. 9%
  2. 7%
  3. 5%
  4. Impossible to answer without the margin and index known
A

The answer is 5%. An ARM with a start rate of 4.00% and a periodic cap of 1% (no initial cap) could move no higher than 5% on its first movement.

300
Q

Doug and Carrie bought their house using a three-year ARM with a start rate of 3.00%. They are making plans for the first rate adjustment on the loan after receiving a notice from their lender informing them of the impending change. The letter states the margin of 3.00% and the current value of the index as 3.75%. It also states that they are protected by a periodic adjustment cap of 2% and a lifetime cap of 6%. What will the adjusted rate be?

  1. 9%
  2. 5%
  3. 6.75%
  4. 6%
A

The answer is 5%. The ARM adjustment would be controlled by the periodic cap, because the “true rate” or “fully-indexed rate” is 6.75% (margin + index). Because the periodic cap prevents the start rate from moving any more than 2% at any given adjustment, the first move can only go as high as 5.00%.

301
Q

A borrower owes $200,000 on a first mortgage, and $50,000 on a line of credit with a maximum amount of $100,000. If the property appraises for $500,000, what is the CLTV?

  1. 50%
  2. 60%
  3. 70%
  4. 40%
A

The answer is 50%. When secondary financing is a line of credit, the loan balance plus any draw amount is used to calculate the combined loan-to-value ratio (CLTV). In this case, the CLTV would be $200,000 + $50,000 / $500,000 = 50%.

302
Q

For an FHA loan, how much may the seller contribute toward the borrower’s closing costs?

  1. Nothing
  2. 6% of the sales price
  3. 3% of the sales price
  4. 3% of the loan amount
A

The answer is 6% of the sales price. The FHA allows the seller to contribute up to 6% of the purchase price toward the buyer’s actual closing costs, prepaid taxes and insurance, discount points, buydown fees, mortgage insurance premiums, and other financing concessions, but nothing toward the down payment.

303
Q

The max seller concession that a borrower may receive on a conventional loan when making a 20% down payment is:

  1. 6%
  2. 0%
  3. 3%
  4. 9%
A

The answer is 6%. On conventional loans, a borrower may receive a seller concession of as much as 6% for an LTV at 90% or less.

304
Q

A borrower obtains a one-year ARM which starts at 4.0% and has a margin of 3.0% and 2/6 caps. At the end of the first year, the index is 5.0%. What is the interest rate after the first adjustment?

  1. 7%
  2. 6%
  3. 8%
  4. 9%
A

The answer is 6. When the interest rate adjusts, the new rate is the lower of index + margin (in this case, 5 + 3 = 8) and the current rate + cap (in this case, 4 + 2 = 6). Therefore, after the first adjustment, the interest rate would be 6%.

305
Q

A first-lien mortgage loan will exceed the HOEPA APR threshold and qualify as a high-cost mortgage if its APR is:

  1. 1.5 percentage points above the average prime offer rate for a comparable transaction
  2. 6.5 percentage points above the average prime offer rate for a comparable transaction
  3. 3 percentage points above the average prime offer rate for a comparable transaction
  4. 4.5 percentage points above the average prime offer rate for a comparable transaction
A

The answer is 6.5 percentage points above the average prime offer rate for a comparable transaction. First-lien mortgage loan will exceed HOEPA’s APR threshold and qualify as a high-cost mortgage if its APR is 6.5 or more percentage points above the average prime offer rate for a comparable transaction.

306
Q

A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days?

  1. 30 days
  2. 90 days
  3. 45 days
  4. 60 days
A

The answer is 60 days. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his or her primary residence must move in within 60 days after closing.

307
Q

A loan originator license applicant must pass the NMLS-required examination with a score of at least __ percent.

  1. 70
  2. 80
  3. 85
  4. 75
A

The answer is 75. Mortgage loan originator license applicants must pass an exam developed by NMLS and administered by an approved test provider with a score of at least 75%.

308
Q

A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts?

  1. 8%
  2. 7%
  3. 6%
  4. 9%
A

The answer is 8%. When the rate adjusts, the new fully-indexed rate is equal to the index plus margin. In this case: 5 + 3 = 8.

309
Q

The Talleys are buying a home and do not have a big enough down payment to lower the LTV below the level that would require them to purchase PMI. Their LTV is higher than:

  1. 70%
  2. 90%
  3. 80%
  4. 95%
A

The answer is 80%. Private mortgage insurance is required when a borrower’s loan-to-value is above 80%.

310
Q

A borrower is buying a house with a sales price of $210,000, but the appraisal came in at $200,000. The borrower takes out a loan of $160,000. What is the LTV?

  1. 76%
  2. 90%
  3. 80%
  4. 75%
A

The answer is 80%. The LTV is calculated using the lesser of the purchase price and the appraised value. In this case, the loan amount of $160,000 is divided by the appraised value of $200,000 to get 80% LTV.

311
Q

A borrower wishes to refinance their home, which appraises for $450,000. If their loan amount is $375,000, what is the LTV?

  1. 75%
  2. 83.3%
  3. 80%
  4. 73.3%
A

The answer is 83.3%. To get the loan-to-value (LTV) ratio, divide the loan amount by the property value: $375,000 / $450,000 = 0.833 = 83.3%

312
Q

If a borrower has an $80,000 first mortgage, a $20,000 second HELOC on which they have $5,000 in remaining credit, and the property appraises for $100,000, what is the CLTV?

  1. 100%
  2. 80%
  3. 75%
  4. 95%
A

The answer is 95%. CLTV stands for combined loan-to-value, which is a ratio used when there are multiple loans secured by the same property. This is calculated by combining the amounts of the loans secured by the property, then dividing by the property value or sales price (whichever is less). In this case, $80,000 + ($20,000 - $5,000)/$100,000 = 95%.

313
Q

Which of the following may be a qualified mortgage?

  1. A 30-year adjustable-rate mortgage loan granted to a borrower with a debt-to-income ratio of 45%
  2. A 40-year fixed-rate mortgage
  3. A 35-year fixed-rate mortgage with points and fees equaling 3.75% of the loan amount
  4. A 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan
A

The answer is a 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan. A qualified mortgage is a covered transaction that provides for substantially-equal, regular periodic payments that do not provide for negative amortization, payment deferral, or (generally) a balloon payment. To be a qualified mortgage, the lender must determine the borrower’s repayment ability based on the monthly payment for mortgage-related obligations, the consumer’s reasonably-expected income and assets, and existing debt obligations. A qualified mortgage may not have a term that exceeds 30 years, provide for points and fees that exceed 3% of the total loan amount, or be granted to a borrower who has a monthly debt-to-income ratio exceeding 43%.

314
Q

Which of the following borrowers is best suited for an HECM?

  1. A borrower who needs money for several home improvement projects
  2. A 62-year old borrower who just cashed in a 401k for a down payment
  3. A borrower who was disabled during service for the military
  4. A 65-year-old borrower without a mortgage who would like to supplement his income
A

The answer is a 65-year-old borrower without a mortgage who would like to supplement his income. Home equity conversion mortgages allow elderly borrowers who have significant equity in their homes the opportunity to draw on that equity, without repayment, as long as they continue to live in the home.

315
Q

Which of the following prefixes indicates the purchase of flood insurance is mandatory?

  1. A and D
  2. A and V
  3. V and D
  4. B, C, and D
A

The answer is A and V. The “A” and the “V” prefixes indicate the zones in which flood insurance is mandatory. In zone “D,” flood insurance is available if a homeowner chooses it, but no other zones require flood insurance.

316
Q

A lender is trying to lure customers with advertisements for “Minimum Monthly Payments to Meet Any Budget!” This advertisement must also include an equally prominent statement in close proximity which alerts consumers that:

The loan may not be paid off by the end of the loan term
The loan is only advised for borrowers with a short-term interest in the dwelling used to secure the loan
The borrower should seek homeownership counseling prior to applying for the loan
A balloon payment may result from minimum periodic payments

A

The answer is a balloon payment may result from minimum periodic payments. The advertisement must include a statement that a balloon payment may result from minimum periodic payments.

317
Q

5/25” and “7/23” are commonly used to designate loans including which of the following?

  1. A hybrid adjustable rate feature
  2. A balloon payment
  3. A subordinate lien
  4. A temporary interest rate buy-down
A

The answer is a balloon payment. “5/25” and “7/23” are commonly used to designate loans that include a balloon payment.

318
Q

Which of the following would not be considered in the loan application process?

  1. Previous housing payment history
  2. Income history
  3. Current liabilities
  4. A bankruptcy from 15 years ago
A

The answer is a bankruptcy from 15 years ago. A bankruptcy from over ten years ago would not be considered in a borrower’s credit qualification.

319
Q

Which of the following would not be considered in the loan application process?

  1. Previous housing payment history
  2. Income history
  3. Current liabilities
  4. A bankruptcy from 15 years ago
A

The answer is a bankruptcy from 15 years ago. A bankruptcy from over ten years ago would not be considered in a borrower’s credit qualification.

320
Q

Under which of the following circumstances could a borrower be charged a fee for the preparation of a settlement statement?

  1. The borrower requests a copy of the settlement statement 24 hours prior to closing
  2. A borrower may not be charged a fee for the preparation of a settlement statement
  3. The borrower requests a copy of the settlement statement 48 hours prior to closing
  4. The borrower requests the lender prepare the settlement statement rather than the escrow agent
A

The answer is a borrower may not be charged a fee for the preparation of a settlement statement. Section 12 of RESPA provides that no fee can be charged by a lender for the preparation and distribution of documents required in connection with the making of a federally-related mortgage loan.

321
Q

A loan with a term of less than one year that is related to the purchase or construction of a home is known as:

  1. A subprime loan
  2. A bridge loan
  3. A balloon mortgage
  4. A nontraditional loan
A

The answer is a bridge loan. Temporary financing related to the construction or purchase of a home is typically referred to as a bridge loan, although these types of loan may have a balloon feature.

322
Q

A “straw buyer” is:

  1. A buyer who is a victim of identity theft
  2. A buyer who uses another individual’s identity in order to obtain a mortgage for which he or she is not eligible
  3. A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application
  4. A buyer who intends to purchase property but does not intend to occupy it
A

The answer is a buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application. A straw buyer is a person who purchases the property or applies for the loan in his or her own name for the actual borrower and is typically paid for the use of his or her personally identifying information.

323
Q

An “encumbrance” is:

  1. Transfer of title from one owner to another
  2. Transfer of ownership without any guarantees or warranties
  3. Cancellation of a contract
  4. A claim against a property that can affect the ability to transfer title
A

The answer is a claim against a property that can affect the ability to transfer title. An encumbrance is a claim against a property that can affect the ability to transfer title.

324
Q

In what scenario would a sales comparison approach be appropriate?

  1. A condo complex for residents aged 55 and over
  2. A bio-dome built in the middle of a residential neighborhood
  3. A commercial office building in an area zoned commercially
  4. A complex of office units in a business park near a residential neighborhood
A

The answer is a condo complex for residents aged 55 and over. The sales comparison approach to appraisals is most commonly used for residential properties within an area that has recent sales data to analyze for comparison.

325
Q

According to fair lending laws, age may be considered as a factor in denying a loan application if:

  1. The applicant is too young or too old to understand the terms of the contract
  2. The applicant is too old to survive the term of the loan
  3. The applicant is too young to have accumulated savings and requires a gift from his/her parents in order to make a down payment
  4. A creditor cannot legally discriminate against an applicant in any aspect of a credit transaction on the basis of age, provided that the applicant is of age to enter into a contract
A

The answer is a creditor cannot legally discriminate against an applicant in any aspect of a credit transaction on the basis of age, provided that the applicant is of age to enter into a contract. The Equal Credit Opportunity Act (ECOA) prohibits discrimination on the basis of age against a loan applicant who is of age to enter into contracts.

326
Q

What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage?

  1. A deed with conflicting ownership information
  2. A utility easement
  3. A second mortgage
  4. A judgment that was secured by a property lien, but recently paid in full
A

The answer is a deed with conflicting ownership information. Creditors protect their investment in a mortgage by placing a lien on the home used as security. A title search shows whether other liens are in place that will have priority over the creditor’s lien. When a refinance pays off an existing first mortgage, the second mortgage will have priority, but creditors can use subordination agreements to ensure that the new mortgage has priority over the existing second mortgage. The title search might also uncover problems in the chain of title which could stop a transaction - for instance, a deed with conflicting ownership information (sometimes these are “wild deeds” with names that appear nowhere else on record) will require additional research and might demand legal action or could fully stop the refinance.

327
Q

Which of the following forms of compensation is a violation of RESPA?

  1. A fee paid by a title company to an originator for referral of settlement services
  2. Borrower credit
  3. Money earned by a title company for closing a loan
  4. Broker fee
A

The answer is a fee paid by a title company to an originator for referral of settlement services. RESPA requires any fees to be “earned.” Referral fees are considered a violation.

328
Q

When a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called:

  1. A lock-in
  2. A variable rate
  3. A float
  4. An adjustable rate
A

The answer is a float. If a borrower chooses to float the interest rate, the rate will not be set until closing unless the borrower obtains a lock-in (also called a rate lock or rate commitment).

329
Q

Fannie Mae can best be described as:

  1. A government-sponsored, government-owned enterprise, formed to facilitate home ownership
  2. A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership
  3. A government agency
  4. A public corporation with absolutely no ties to the government
A

The answer is a government-sponsored, private, publicly-held corporation, formed to facilitate home ownership. The Federal National Mortgage Association (FNMA), or Fannie Mae, was established in 1938 by amendments to the National Housing Act, in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. It is a government-sponsored enterprise (GSE) and, since 1968, a publicly-traded company.

330
Q

A loan which does not require payments during the life of the loan is most likely:

  1. Illegal
  2. A modified mortgage
  3. A pay-option mortgage
  4. A HECM
A

The answer is a HECM. The FHA’s home equity conversion mortgage (HECM) is a reverse mortgage that enables individuals aged 62 or older to convert some of the equity in their primary residence to cash to pay living expenses, or to purchase a primary residence if they have the cash to pay the down payment and closing costs. It requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs).

331
Q

Which of the following is true when a mortgage product contains a balloon payment?

  1. A loan that has monthly payments that are equal and regular in nature will never have a balloon payment owing at the end of its term
  2. A high-cost bridge loan may include provision for a balloon payment
  3. Under the Dodd-Frank Act, balloon payment loans are no longer permitted
  4. A qualified mortgage may provide for a balloon payment as long as its term is no less than 40 years
A

The answer is a high-cost bridge loan may include provision for a balloon payment. Equal and regular payments still may not fully amortize a loan, thus resulting in a balloon payment. A high-cost home loan may not provide for a payment schedule that results in a balloon payment, unless the schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken for the acquisition or construction of the borrower’s principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage (among other requirements, the loan must be originated in a predominantly rural or underserved community, have a fixed rate, and be for a term of five to 30 years).

332
Q

A loan which has an initial fixed-rate period, after which the rate is adjustable for the remainder of the loan term, is called:

  1. An I-O ARM
  2. A hybrid ARM
  3. A subprime loan
  4. A conversion loan
A

The answer is a hybrid ARM. A hybrid ARM is a mix (hybrid) of a fixed-rate loan and an adjustable-rate loan. It has an initial period during which the rate is fixed; after this expires, the rate is adjustable for the rest of the term.

333
Q

The NMLS may best be described as a:

  1. Licensing system utilized by all U.S. states and territories
  2. Licensing system available for use by all states but not actually utilized by all states
  3. Federal agency
  4. National mortgage regulator
A

The answer is a licensing system utilized by all U.S. states and territories. The NMLS is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators. It is utilized by all U.S. states and territories.

334
Q

The FCRA places all of the following limitations on the inclusion of negative information in credit reports, EXCEPT:

  1. A limit on bankruptcies that are more than ten years old
  2. A limit on accounts placed for collection that are more than seven years old
  3. A limit on civil lawsuits that are more than seven years old
  4. A limit on bankruptcies that are more than seven years old
A

The answer is a limit on bankruptcies that are more than seven years old. Most negative information that is more than seven years old is not included in a credit report; however, bankruptcies may be reported for up to ten years.

335
Q

Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information?

  1. Former owners of a particular property
  2. The street address of the property a borrower intends to purchase
  3. The assessed value of a subject property
  4. A loan applicant’s current loan balances
A

The answer is a loan applicant’s current loan balances. Under the Gramm-Leach-Bliley Act, a loan applicant’s current loan balances would be considered nonpublic information.

336
Q

All of the following loans are covered by RESPA, except:

  1. A loan assumption made without lender approval
  2. A 30-year fixed loan made by a federally regulated credit union
  3. An FHA loan
  4. A conforming loan
A

The answer is a loan assumption made without lender approval. RESPA covers loans secured by first or subordinate liens on residential property but does not extend to an assumable loan which can be assumed without lender approval.

337
Q

Which of the following is not a prohibited practice regarding loan originator compensation?

  1. A loan originator receives .5% more compensation if a loan contains a prepayment penalty
  2. A loan originator receives compensation for closing over $1 million in volume per month
  3. A loan originator receives 10% more compensation if he/she closes more than ten transactions in a month with an interest rate of 6.5% or more
  4. A loan originator receives compensation from a consumer and from the creditor
A

The answer is a loan originator receives compensation for closing over $1 million in volume per month. A loan originator is prohibited from receiving compensation based on the terms of a loan, such as prepayment penalties or interest rates, and is prohibited from receiving dual compensation (i.e., from both the consumer and the creditor).

338
Q

Arabella Ash works for and is supervised by loan originator Jerry Jenkins, collecting and analyzing data related to residential mortgage loans. She communicates with borrowers, but does not offer or negotiate loan rates or terms or advise consumers about residential mortgage loan rates or terms. Under S.A.F.E. Act definitions, Arabella is:

  1. A loan originator
  2. A real estate broker
  3. A loan processor
  4. Required to be licensed
A

The answer is a loan processor. A loan processor or underwriter is an individual who performs clerical or support duties at the direction of and subject to the supervision and instruction of a state-licensed loan originator or a registered loan originator. Clerical or support duties include the receipt, collection, distribution, and analysis of information common for the processing and underwriting of a residential mortgage loan. These duties also include communicating with a consumer to obtain the information necessary for processing and underwriting a loan as long as such communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms. A person working solely as a loan processor or underwriter is not required to be licensed under the S.A.F.E. Act.

339
Q

Which of the following describes an air loan?

  1. A loan that is obtained with inflated property values
  2. A loan that is repeatedly refinanced with no benefit to the borrower
  3. A loan that is presented to the borrower with hidden fees
  4. A loan that is obtained by a fictitious borrower using a fictitious property
A

The answer is a loan that is obtained by a fictitious borrower using a fictitious property. Air loans are loans secured by non-existent property (“air”), which leave the lender without collateral. The schemer invents borrowers and properties, establishes fake accounts for payments, and maintains custodial accounts for escrows. He or she may even set up an office with a bank of telephones for verification purposes, with each phone representing the employer, appraiser, credit agency, etc.

340
Q

The S.A.F.E. Act applies to mortgage loan originators who take applications for, or offer or negotiate terms of, residential mortgage loans, which would include:

  1. Land to be used for agricultural purposes
  2. An apartment building with 30 units
  3. A dwelling not secured by a mortgage or trust deed
  4. A mobile home to be used as a residence, even if it is not attached to the land
A

The answer is a mobile home to be used as a residence, even if it is not attached to the land. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes residential mortgage loan applications, or offers or negotiates terms of residential mortgage loans for compensation or gain. The S.A.F.E. Act’s definition of “residential mortgage loan” includes a loan secured by a consensual security interest on a dwelling and cross-references the definition of the term “dwelling” in the Truth-in-Lending Act (TILA). Regulation Z, which implements TILA, defines a dwelling as a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.

341
Q

Which of the following is NOT true about the financial responsibility of a mortgage loan originator?

  1. The penal sum of a surety bond must reflect the dollar amount of loans originated
  2. A sponsored mortgage loan originator may be covered under the sponsoring licensee’s surety bond
  3. If a mortgage loan originator pays into a state fund established to pay claims of consumers, he or she is not required to maintain a surety bond
  4. A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year
A

The answer is a mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated. If the loan originator’s licensing state has developed and administers a fund specifically to provide protection to consumers by making funds available for claims resulting from violations of state or federal laws and regulations, in lieu of a surety bond or net worth requirement, the state may instead require the loan originator to pay a certain amount into the state fund.

342
Q

Which of the following situations would be acceptable under RESPA?

  1. A mortgage loan originator requires all borrowers to use an appraisal company which is owned by the mortgage loan originator’s mortgage company, though this ownership is not disclosed
  2. A mortgage loan originator requires all borrowers to use his son’s title company and takes an undisclosed share in profits from that company
  3. A mortgage loan originator refers all borrowers to use the title company which is located in the same building as the mortgage loan originator, but with which the mortgage loan originator or the mortgage loan originator’s company has no other relationship
  4. A mortgage loan originator does not require the use of a certain title company, but receives a financial bonus from a certain title company if the borrowers that she refers use that provider
A

The answer is a mortgage loan originator refers all borrowers to use the title company which is located in the same building as the mortgage loan originator, but with which the mortgage loan originator or the mortgage loan originator’s company has no other relationship. An affiliate relationship exists when one company controls, is controlled by, or is under common control of another company. Under RESPA, when a settlement service provider refers a borrower to one or more affiliates with whom it has an ownership or other beneficial interest, an Affiliated Business Arrangement (AfBA) Disclosure Statement must be given on a separate piece of paper to the borrower. Among other things, the AfBA Disclosure informs the borrower that he/she is generally not required to use the affiliate and is free to shop for other providers. Kickbacks and referral fees are also prohibited under RESPA.

343
Q

Under the Truth in Lending Act, a creditor is defined as:

  1. A natural person, business, or financial organization that services mortgage loans
  2. A natural person that extends at least 10 open-end loans per calendar year
  3. A natural person, business, or financial organization that regularly extends credit to consumers
  4. A natural person, business, or financial organization that extends at least 15 open-end loans per year
A

The answer is a natural person, business, or financial organization that regularly extends credit to consumers. A creditor is defined by TILA as “a natural person, business, or financial organization that regularly extends credit to consumers”.

344
Q

Concerning ARMs, margin is best defined as:

  1. A number, expressed as a percentage, that represents a lender’s operating costs and profit margin
  2. The amount of compensation earned by a mortgage professional for originating an ARM
  3. The range of flexibility an interest rate has between caps on traditional ARMs
  4. The maximum – up or down – that an interest rate can ever adjust on an ARM
A

The answer is a number, expressed as a percentage, that represents a lender’s operating costs and profit margin. Concerning ARMs, “margin” is best defined as a number, expressed as a percentage, that represents a lender’s operating costs and profit margin.

345
Q

An interest-only loan might be suitable for any of the following, except:

  1. A corporate executive who receives large quarterly bonuses
  2. A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time
  3. An investor who would prefer to pay as little as possible while holding the property
  4. A self-employed borrower whose company is busiest during a six-month period over the holidays
A

The answer is a part-time hourly worker who may get overtime in the summer and plans to pay principal at that time. An interest-only loan is suitable when a borrower is savvy enough to manage it properly. A part-time, hourly worker who “may” get overtime in the summer likely would not be the best candidate for an interest-only loan.

346
Q

In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)?

  1. A portion of it may be applied to the UFMIP of another FHA-insured mortgage
  2. It is refundable
  3. It is pertinent to only a small minority of FHA loans
  4. It takes the place of the annual mortgage insurance premium
A

The answer is a portion of it may be applied to the UFMIP of another FHA-insured mortgage. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable, except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years. In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV

347
Q

The acronym LIBOR represents a:

  1. Federal agency
  2. Possible ARM index
  3. Federal law
  4. State law
A

The answer is a possible ARM index. The LIBOR, which stands for London Interbank Offered Rate, is a standard financial index used in U.S. capital markets.

348
Q

Mortgage loan originator Bill Zeppalin contacted the appraisal company that had been routinely performing appraisals for his company. In talking with the appraiser, Bill noted that recent appraisals had been coming in “kind of low” and perhaps he would be making other arrangements for future appraisals. This comment is:

  1. Permissible in business discussions
  2. A prohibited act
  3. Permissible since it did not involve a specific property
  4. Permissible since a desired valuation was not stated
A

The answer is a prohibited act. It is prohibited for any person engaging in mortgage origination activity to make any payment, threat or promise, directly or indirectly, to any appraiser of property for the purpose of influencing the independent judgment of the appraiser with respect to the value of the property.

349
Q

Property flipping occurs when:

  1. The title to a property is passed to a family member
  2. Someone accepts a fee to falsely claim ownership of a property
  3. A property is bought and resold within a very short period of time
  4. Someone secures a loan with fictitious property
A

The answer is a property is bought and resold within a very short period of time. “Flipping” refers to buying and reselling property within a short period of time. In the context of mortgage fraud, flipping, also called churning, is repeated refinancing of a loan within a short period of time without any real benefit to the borrower. The primary objective of the mortgage broker and/or lender is to generate additional loan points, loan fees, prepayment penalties, and fees from financing the sale of credit-related products. When a borrower has to return to a lender to refinance the loan, possibly to avoid foreclosure, he or she is charged additional points and fees. Typically, the new loan is just as unaffordable as the first, and the result may still be foreclosure.

350
Q

What is the best definition of an Initial Escrow Statement?

  1. A statement of the amount of escrow the borrower must bring to the closing table
  2. A disclosure that explains escrow to the borrower
  3. A statement provided to the borrower following the first payment of any charges from the escrow fund
  4. A statement of the estimated taxes, insurance premiums, and other charges the borrower will pay from the escrow fund during the first 12 months of the loan
A

The answer is a statement of the estimated taxes, insurance premiums, and other charges the borrower will pay from the escrow fund during the first 12 months of the loan. The Initial Escrow Statement is a statement of the estimated taxes, insurance premiums, and other charges the borrower will pay from the escrow fund during the first 12 months of the loan. Borrowers typically receive this notification at the time of closing; however, the lender has 45 days from the date of closing to deliver the Initial Escrow Statement to the borrower.

351
Q

Which of the following situations would constitute a kickback as defined in the Real Estate Settlement Procedures Act?

  1. A mortgage loan originator pays for a borrower’s appraisal because the borrower is the mortgage loan originator’s sister
  2. A builder offers clients a free three-car garage if they use the builder’s mortgage company for financing
  3. A mortgage loan originator sends a borrower a $250 gift certificate to thank them for doing business with the mortgage loan originator
  4. A title company sends a mortgage loan originator a $25 gift certificate, because of the business the loan originator sends the title company
A

The answer is a title company sends a mortgage loan originator a $25 gift certificate, because of the business the loan originator sends the title company. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. A business entity may not pay any other business entity, or the employees of any other business entity, for the referral of real estate settlement service business. Therefore, a title company that sends a mortgage loan originator a gift certificate because of the business the loan originator sends the title company would be guilty of a kickback in violation of RESPA.

352
Q

The term “table funding” refers to:

  1. A situation in which a loan without a rescission period closes and funds the same day
  2. A situation in which a loan funds and is returned to the lender because of a borrower refusing to sign at the table
  3. The funding of pools of loans that create securitization
  4. A type of lending arrangement where brokers are permitted to originate, close, and fund loans using the lender’s warehouse line of credit
A

The answer is a type of lending arrangement where brokers are permitted to originate, close, and fund loans using the lender’s warehouse line of credit. Mortgage brokers sometimes engage in table funding which allows them to, in theory, be a lender on a loan and close in their own name. Once the loan closes, it is quickly assigned to another entity.

353
Q

An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is:

  1. A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees
  2. A violation of RESPA’s prohibition against fee-splitting
  3. Permitted only as long as receipts are kept from the processor for five years
  4. A violation of ECOA
A

The answer is a unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees. RESPA requires compensation for settlement services to be earned. Any compensation not in direct correlation with an actual service is likely a violation. However, according to a 2012 case, the act of unilaterally marking up a fee and retaining the additional earnings is not illegal, as long as fee-splitting is not involved.

354
Q

Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections?

  1. A broker agreement
  2. A TIL disclosure
  3. A verification of employment
  4. The promissory note
A

The answer is a verification of employment. Generally, a verification of employment is signed by the borrower with blank spaces remaining, with the understanding the borrower has signed to give permission for the employer to complete it.

355
Q

In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table?

  1. “Has this information been verified?”
  2. “Can this amount increase after closing?”
  3. “Is this payment subject to a late fee?”
  4. “Has this information changed from the Loan Estimate?”
A

The answer is “Can this amount increase after closing?” The first table on page 1 of the Closing Disclosure is the Loan Terms table, which lists the same information given in the Loan Estimate’s Loan Terms table (i.e., loan amount, interest rate, the monthly principal and interest, and space to indicate whether the product has a prepayment penalty or balloon payment). This information is updated to reflect the terms that will be in place at consummation, and the loan originator must answer the question “Can this amount increase after closing?” for each item.

356
Q

Which of the following statements would be permissible when communicating with an appraiser?

  1. “Can you explain why this property is valued so low, compared to the current market?”
  2. “Your appraisals have been coming in lower than expected lately. We are going to start using another appraiser.”
  3. “Your last appraisal did not meet the minimum value we expected. We are going to have to wait on paying your invoice until we obtain a second opinion.”
  4. “I need this property to value at a minimum of $200,000.”
A

The answer is “Can you explain why this property is valued so low, compared to the current market?”. When communicating with an appraiser, it would be permissible to ask the appraiser to provide more information about appraisal results.

357
Q

The responsibilities of a loan servicer include:

  1. Disbursing escrow funds, managing trust accounts, and adjudicating foreclosure proceedings
  2. Sending closing documents, collecting escrow funds, and obtaining loan funds for clients
  3. Accepting payments, disbursing escrow funds, maintaining records, and managing delinquent accounts
  4. Accepting applications, disbursing interest and principal, and maintaining origination records
A

The answer is accepting payments, disbursing escrow funds, maintaining records, and managing delinquent accounts. Loan servicers handle many tasks, including accepting payments, disbursing escrow funds, maintaining records, and managing delinquent accounts.

358
Q

Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence?

  1. Insurance on the property
  2. How quickly a borrower must occupy the property
  3. Keeping hazardous substances on the property
  4. Actual amounts for taxes and insurance
A

The answer is actual amounts for taxes and insurance. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. It shows the payor and payee, the amount owed, the rate of interest and whether it is fixed or adjustable, the due date(s) for payment, and the terms of the loan. The mortgage or trust deed secures repayment of the note. Its covenants address topics that include occupancy, insurance, and hazardous materials, but it does not typically specify actual amounts for taxes and insurance.

359
Q

A change in the value of a comparable property, made when comparing the features of the comparable property to the subject property, is known as a(n):

  1. Adjustment
  2. Inflation
  3. Concession
  4. Inspection
A

The answer is adjustment. Adjustments are made when comparable properties are compared to the subject property in a mortgage loan transaction. Adjustments assign positive or negative values to certain property features to help gauge value.

360
Q

A licensed mortgage loan originator:

  1. Performs clerical and support duties for his/her sponsoring broker
  2. Advises loan applicants on current rates and loan terms
  3. May take responsibility for servicing a loan after it has been consummated
  4. Negotiates the sale and purchase of residential real estate
A

The answer is advises loan applicants on current rates and loan terms. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan for compensation or gain. The S.A.F.E. Act provides that an individual assists a consumer in obtaining or applying to obtain a residential mortgage loan by, among other things, advising on loan terms, including rates, fees, and other costs; preparing loan packages; or collecting information on behalf of the consumer with regard to a residential mortgage loan.

361
Q

A mortgage broker and a title insurance company have common ownership and are considered affiliated businesses under RESPA. If either of these companies refers a consumer to the other, the consumer must receive a(n):

  1. Affiliated Business Determination
  2. Affiliated Business Arrangement Disclosure
  3. Business Agreement Disclosure
  4. Business Control Disclosure
A

The answer is Affiliated Business Arrangement Disclosure. An Affiliated Business Arrangement Disclosure is required anytime a business refers another business with whom it has some common ownership or some other affiliation.

362
Q

Mike B. Leeve is a dreamer. He loves to invent borrowers and properties, establish fake accounts for payments, and maintain custodial accounts for escrows. He has even set up an office with a bank of telephones, with one phone representing the employer, another the appraiser, another the credit agency, etc., so he can take money from lenders and then go on a long international vacation. The loans Mike is getting are called:

  1. Cash-outs
  2. No cash-outs
  3. Subprime
  4. Air loans
A

The answer is air loans. Air loans are loans secured by nonexistent property which leave the lender without collateral. The schemer invents borrowers and properties, establishes fake accounts for payments, and maintains custodial accounts for escrows. He may even set up an office with a bank of telephones for verification purposes, with each phone representing the employer, appraiser, credit agency, etc.

363
Q

The Loan Estimate is required for:

  1. All mortgage loans
  2. All closed-end federally related mortgage loans
  3. All nontraditional mortgage loans
  4. All open-end mortgage loans
A

The answer is all closed-end federally related mortgage loans. The Loan Estimate is required for all closed-end federally related mortgage loans.

364
Q

Mortgage insurance premiums are required for:

  1. All conventional loans with an LTV greater than 80%
  2. The first five years of the loan term as long as equity position is less than 20%
  3. All FHA loans
  4. All FHA loans until 20% equity position is attained
A

The answer is All FHA loans. Mortgage insurance premiums are required for all FHA loans.

365
Q

Which of the following loans would not have monthly mortgage insurance at closing?

  1. All options would have monthly mortgage insurance
  2. 30-year FHA loan, 60% LTV
  3. 10-year FHA loan, 85% LTV
  4. 20-year FHA loan, 80% LTV
A

The answer is all options would have monthly mortgage insurance. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV. For all mortgages involving an original principal obligation (excluding financed UFMIP) less than or equal to 90% LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first. For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90%, the FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.

366
Q

All of the following are prohibited practices under the FCRA, except:

  1. Allowing the FBI access to a borrower’s file for an investigation
  2. An auto finance company knowingly reporting a borrower late when the payment was accepted on time
  3. A CRA releasing a credit report containing disputed information without marking it as such
  4. Releasing a credit report without written permission
A

The answer is allowing the FBI access to a borrower’s file for an investigation. Exceptions to the FCRA allow for FBI access to a consumer report for the purposes of investigations.

367
Q

An assumption clause

  1. allows the seller to reassume the mortgage if the buyer falls behind in his payments.
  2. assumes the buyer has the ability to repay the loan based on his credit score.
  3. allows a buyer to assume the seller’s mortgage.
  4. allows the buyer to sell the mortgage without requiring the seller’s authorization.
A

The answer is allows a buyer to assume the seller’s mortgage. An assumption clause is a provision in the terms of a loan that allows a buyer to assume the seller’s mortgage.

368
Q

The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act?

  1. Encourages responsible behavior through licensing standards
  2. Provides consumers access to information about originators
  3. Allows consumers a full refund if the originator is found to have engaged in unethical acts
  4. Facilitates collection and distribution of consumer complaints between regulators
A

The answer is allows consumers a full refund if the originator is found to have engaged in unethical acts. The S.A.F.E. Act includes provisions to enhance professional standards within the mortgage industry by imposing licensing requirements, providing consumers access to information about licensees at no charge through its online registry, and facilitating the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators. While the S.A.F.E. Act does have provisions ensuring compensation to victims of mortgage law violations, it does not guarantee such consumers a full refund in all cases of unethical conduct.

369
Q

All of the following are examples of prohibited misleading advertising, EXCEPT:

  1. A mailed flyer with a mortgage loan refinancing offer in an envelope stating “Preapproved!” although, in fact, there is no preapproval in place for the consumer
  2. An ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates
  3. A commercial communication that claims to originate from the consumer’s current mortgage lender, although it is actually from a different lender
  4. A mailer that attempts to create a visual impression that it is sent from a government agency, though it is in fact generated by a commercial mortgage lender
A

The answer is an ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates. Under the Mortgage Acts and Practices Rule (MAP Rule or Regulation N), it is a violation of the advertising regulations for any person to make a material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product, including misrepresenting loan terms (claiming a loan product is preapproved when it is not) and misrepresenting the source of a loan offer (claiming it originates from the consumer’s current mortgage lender or from a government agency when this is not the case). Referring a consumer to a consumer protection website which is not operated by the lender is not misleading nor is it a violation of the law.

370
Q

ECOA requires that:

  1. An incomplete loan application be discarded
  2. An applicant be informed whether an application was accepted or rejected within 60 days of filing a complete application
  3. Every applicant be granted some type of loan
  4. An applicant be given notification of the status of his/her loan application within 30 days
A

The answer is an applicant be given notification of the status of his/her loan application within 30 days. An applicant has the right to receive, within 30 days of the creditor’s receipt of an incomplete application, notice of incompleteness with a reasonable time to respond, and within 30 days after receipt of a completed credit application, notice of action taken (i.e., acceptance or adverse action).

371
Q

A state-licensed loan originator is:

  1. Licensed by the NMLS
  2. An employee of a non-depository institution
  3. Identified by the unique identifier of his/her employer
  4. An employee of a subsidiary which is owned or controlled by a depository institution
A

The answer is an employee of a non-depository institution. A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state. An originator employed by a depository or the Farm Credit Administration would be registered.

372
Q

Which of the following best describes the market approach to appraisal?

  1. A guarantee of value from the appraiser derived by using comparable sales of like properties
  2. An estimate of market value derived by comparing the subject property to similar properties which have sold
  3. A comparison of similar properties within two miles of the subject property
  4. An estimate of value using projected cash flow from the subject property
A

The answer is an estimate of market value derived by comparing the subject property to similar properties which have sold. The market or market data approach, also called the sales comparison approach, bases the value of a property on the prices paid for similar, or comparable, properties in the area that have sold recently. It is the most reliable method for appraising single-family homes and land.

373
Q

Once the Closing Disclosure is delivered, which of the following would require a new Closing Disclosure to be delivered to the borrower and a new waiting period before closing?

  1. An increase of more than 1% in cash required to close
  2. A change in the loan amount
  3. An increase in the APR by more than .125%
  4. The addition of any costs to the borrower
A

The answer is an increase in the APR by more than .125%. A new three-business-day waiting period applies to a corrected disclosure if there are changes or corrections that relate to the annual percentage rate, the loan product, or the addition of a prepayment penalty. For other types of changes, the corrected disclosure may be provided at or before consummation. The APR is generally considered to be accurate if it is not more than one eighth of one percentage point (0.125%) above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method); or in an irregular transaction, if it is not more than one quarter of one percentage point above or below the annual percentage rate determined in accordance with legal requirements.

374
Q

The S.A.F.E. Act defines a loan processor as:

  1. An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator
  2. An individual employed by a state-licensed mortgage broker
  3. An individual employed by a depository institution
  4. An individual who has applied for licensing as a loan originator but has not yet completed all the licensing requirements
A

The answer is an individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator. Under the S.A.F.E. Act’s definition, a loan processor or underwriter is an individual who, with respect to the origination of a residential mortgage loan, performs clerical or support duties at the direction of and subject to the supervision and instruction of a state-licensed loan originator or a registered loan originator.

375
Q

Which of the following features would be permitted for a non-qualified mortgage, but not for a qualified mortgage?

  1. A term of 15 years
  2. An adjustable interest rate
  3. A debt-to-income ratio of 43%
  4. An interest-only option
A

The answer is an interest-only option. An interest-only option is permitted for a non-qualified mortgage, but not for a qualified mortgage.

376
Q

It is a violation of TILA for a loan originator to collect _____ before providing a loan applicant with _____.

  1. A fee for a credit report/a Loan Estimate
  2. An origination fee/a Closing Disclosure
  3. Information on income and assets/a Good Faith Estimate
  4. An origination fee/a Loan Estimate
A

The answer is an origination fee/a Loan Estimate. The collection of an origination fee prior to providing a Loan Estimate is illegal.

377
Q

All of the following are true regarding the origination of non-qualified mortgages, except:

  1. Non-QMs may include features such as balloon payments or negative amortization
  2. Borrowers are not held to the 43% debt-to-income ratio limitation
  3. Non-QMs may include features such as interest-only payments or payment-option provisions
  4. Analysis of borrower repayment ability is not required
A

The answer is analysis of borrower repayment ability is not required. Non-qualified mortgages may include features such as balloon payments, negative amortization, interest-only payments, or payment-option provisions. Borrowers are not held to a debt-to-income ratio limitation. Analysis of borrower repayment ability is still required.

378
Q

Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the:

  1. Annual percentage rate
  2. Broker fees and the amount charged by a third party
  3. Amount of the payment
  4. Length of the loan
A

The answer is annual percentage rate. A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at the consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct loan charges paid by the borrower that must be included in computing the annual percentage rate.

379
Q

Under RESPA, in order to provide the escrow analysis statement, a borrower’s escrow account must be analyzed:

  1. Annually
  2. Monthly
  3. Quarterly
  4. Twice a year
A

The answer is annually. The purpose of the aggregate escrow analysis is to ensure that the proper amount is being held in escrow or reserve accounts (i.e., accounts to hold funds on behalf of borrowers for the payment of taxes and insurance). Under Regulation X, a servicer may hold funds to cover two months of taxes, insurance, and mortgage insurance, as applicable, and may only collect one month’s worth of escrowed items in each payment, unless there is a shortage in the account. All accounts must be analyzed once every 12 months and any overage over $50 refunded to the borrower within 30 days or credited towards the borrower’s next year’s escrow payments.

380
Q

Under the Bank Secrecy Act, each institution must develop a written _____ compliance program, which must be approved by the institution’s board of directors.

  1. Anti-money laundering
  2. Anti-trust account fraud
  3. Anti-terrorist financing
  4. Anti-discrimination
A

The answer is anti-money laundering. Under the Bank Secrecy Act, financial institutions are required to develop a written anti-money laundering compliance program, which must be approved by the institution’s board of directors. Minimum requirements for the program include internal controls and metrics to ensure compliance; independent auditing of compliance; the designation of individuals responsible for managing compliance; and staff training for compliance.

381
Q

For the purposes of providing a Loan Estimate, a “business day” is:

  1. Any day except for Sundays
  2. Any day except for Sundays and legal public holidays
  3. Any day on which the creditor’s offices are open to the public for carrying out substantially all business functions
  4. Any day of the week
A

The answer is any day on which the creditor’s offices are open to the public for carrying out substantially all business functions. For the purposes of providing a Loan Estimate, a “business day” is any day on which the creditor’s offices are open to the public for carrying out substantially all business functions.

382
Q

According to the SAFE Act, which of the following is defined as a nontraditional mortgage product?

  1. Any mortgage product other than a 30-year fixed-rate mortgage
  2. A 30-year fixed-rate mortgage
  3. An ARM loan with a 5-year fixed-rate period
  4. A 15-year fixed-rate mortgage
A

The answer is any mortgage product other than a 30-year fixed-rate mortgage. The SAFE Act defines a “nontraditional mortgage product” as any product other than a 30-year fixed-rate mortgage.

383
Q

Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to process a loan application?

  1. A state-licensed loan originator
  2. An unlicensed loan processor
  3. An unlicensed underwriter
  4. Any of these
A

The answer is any of these. An unlicensed loan processor or underwriter may obtain and analyze information (such as verifications of income, employment, and deposits) needed in processing and underwriting a residential mortgage loan, and communicate with consumers in order to obtain that information. However, loan processors or underwriters may not take applications or offer, negotiate, or counsel the consumer about residential loan rates or terms; only licensed loan originators are permitted to do so.

384
Q

Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan?

  1. All five
  2. A majority of the five
  3. At least two of the five
  4. Any one of the five
A

The answer is any one of the five. Any one of the five siblings would be able to rescind the loan on their own, as each has an ownership interest in the property and therefore has the right to rescind.

385
Q

An underwriter examines what two main aspects of a loan application to determine if lender guidelines are being met?

  1. Applicant and credit
  2. Credit and income
  3. Credit and collateral
  4. Applicant and collateral
A

The answer is applicant and collateral. An underwriter must make a determination as to whether both the applicant and the subject property meet the guidelines of the investor.

386
Q

What two main aspects of a loan application does an underwriter examine to determine if lender guidelines are being met?

  1. Applicant and collateral
  2. Applicant and credit
  3. Credit and income
  4. Credit and collateral
A

The answer is applicant and collateral. Underwriting is the process of deciding whether to make a loan based on credit, employment, assets, and other factors. To ensure that loans are marketable in the secondary market, the underwriter assesses the borrower’s ability and willingness to repay and the property’s ability to serve as collateral for the debt.

387
Q

The _____ is responsible for determining if a property is in a flood zone, and the _____ is responsible for verifying that proper flood insurance is in place.

  1. Underwriter; appraiser
  2. Appraiser; underwriter
  3. Appraiser; title insurer
  4. Underwriter; title insurer
A

The answer is appraiser; underwriter. The appraiser is responsible for determining whether a property is located in a flood zone, and the underwriter verifies that proper flood insurance is in place.

388
Q

Title searches and title insurance:

  1. Are covered under the provisions of RESPA, but are not considered settlement services
  2. Are not covered under the provisions of RESPA but are considered settlement services
  3. Are covered under the provisions of RESPA and are considered settlement services
  4. Are not covered under the provisions of RESPA and are not considered settlement services
A

The answer is are covered under the provisions of RESPA and are considered settlement services. The provisions of RESPA cover settlement services including title searches, title examinations, and title insurance.

389
Q

Gift funds may be used as a source for down payment:

  1. As long as they are accompanied by a letter including the name of the donor and an indication that the funds are not expected to be repaid
  2. As long as it is within the 3.5% minimum; anything more than 3.5% must be the borrower’s own funds
  3. As long as the donor documents the debt and it is payable in more than four installments
  4. Only for a first-time homebuyer
A

The answer is as long as they are accompanied by a letter including the name of the donor and an indication that the funds are not expected to be repaid. The donor must provide a gift letter clearly indicating that he/she does not expect repayment.

390
Q

Supervisory authority afforded to state agencies over the mortgage industry allows them to impose all of the following sanctions, except:

  1. Order the removal and ban of individuals from employment as loan originators
  2. Suspend, terminate, or refuse renewal of a loan originator license for a violation of state or federal law
  3. Assess jail time for fraudulent activities
  4. Impose civil money penalties for individuals acting as loan originators without a valid license or registration
A

The answer is assess jail time for fraudulent activities. Under the SAFE Act, the authority of state agencies allows them to impose sanctions including suspending, revoking, or refusing to renew a license in response to violations; ordering restitution and imposing fines; and issuing orders or directives, including ordering or directing licensees to cease and desist from conducting business, including immediate temporary orders to cease and desist. The agencies are not authorized to assess jail time to licensees for any reason.

391
Q

One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are:

  1. Interest free
  2. Available to loan applicants regardless of DTI ratios
  3. Assumable
  4. Not funded by private lenders
A

The answer is assumable. VA loans are assumable, which means that a purchaser of a home that secures a VA loan may assume the mortgage payments of that loan. Except for direct VA loans, most VA loans are funded by private lenders and are subject to underwriting requirements that include DTI ratios.

392
Q

What is a method of transferring property to a new owner who takes over an outstanding mortgage debt, along with the liability of repayment, without incurring a change in terms?

  1. Conveyance
  2. Assumption
  3. Reconveyance
  4. Seller carry-back
A

The answer is assumption.Transferring property to a new owner who takes responsibility for the existing mortgage debt without incurring any change in terms is called an assumption.

393
Q

For a face-to-face referral, an affiliate business relationship must be disclosed:

  1. At or before the time of the referral
  2. At the time of the loan application
  3. Within three days of the loan application
  4. Within three days of the referral
A

The answer is at or before the time of the referral. When a settlement service provider refers a borrower to one or more affiliates with whom it has an ownership or other beneficial interest, an Affiliated Business Arrangement (AfBA) Disclosure Statement must be given on a separate piece of paper to the borrower at or before the time the referral is made (if in person, writing, or electronically), within three business days after a referral made by telephone (provided an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written disclosure will be provided within three business days is made during the telephone referral), or at the time the Loan Estimate is provided, in the case of a referral by a lender (including one to an affiliated lender).

394
Q

Recording of the deed happens where?

  1. At closing
  2. At the borrower’s house
  3. At the Office of the County Recorder
  4. Within the office of the Supervisor of Banks
A

The answer is at the Office of the County Recorder. Recording is when the deed, deed of trust, or other recordable documents are submitted to the County Recorder (or County Clerk) for filing.

395
Q

Bob Bachman is applying for a mortgage with MZ Mortgage. He is referred by MZ Mortgage to a title company in which MZ Mortgage has a 10% ownership interest. At what point must Bob be made aware of the relationship between the two companies?

  1. At the time of the referral
  2. It is not necessary, because MZ Mortgage owns less than 25% of the title company
  3. Within three business days of application
  4. Within three business days after the referral
A

The answer is at the time of the referral. The borrower must be provided with the Affiliated Business Arrangement Disclosure at the time of referral. Only if the referral is made over the phone would MZ Mortgage have three business days to provide disclosure. Considering the information provided, “at the time of the referral” is the best answer.

396
Q

What is the name of the rule that increases requirements for the consideration of a borrower’s ability to repay?

  1. The HOEPA Rule
  2. The Valuations Rule
  3. ATR/QM Rule
  4. The HPML Appraisal Rule
A

The answer is ATR/QM Rule. The ATR/QM Rule expanded requirements for the consideration of a borrower’s ability to repay when originating closed-end loans.

397
Q

All of the following are considered immediate family members, and therefore a mortgage loan originator may negotiate a mortgage loan on their behalf without needing to be licensed, EXCEPT a(n):

  1. Stepparent
  2. Aunt
  3. Adopted sibling
  4. Grandparent
A

The answer is aunt. Despite the broad definition of a mortgage loan originator in the SAFE Act, there are some limited circumstances in which offering or negotiating residential mortgage loan terms would not make an individual a mortgage loan originator. These include an individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member, including a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

398
Q

The system that an underwriter uses to help streamline the underwriting process is called:

  1. YSP
  2. AUS
  3. MBS
  4. ABA
A

The answer is AUS. Much of the underwriter’s decision-making has now been taken over by an automated underwriting system. These are known by many names, but all do the same thing: they make automated underwriting decisions based on lender guidelines and information entered into the AUS.

399
Q

According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should:

  1. Average the last six months’ worth of pay stubs from the borrower
  2. Average the income shown on the 1040s for the past two years
  3. Use the income shown on the borrower’s most recent two pay stubs
  4. Average the income showing on the W-2s for the past two years
A

The answer is average the income shown on the 1040s for the past two years. When analyzing a borrower’s income for loan qualification, self-employed or commissioned income is averaged over a two-year period, using tax forms such as Form 1040, U.S. Individual Income Tax Return. When commission income is at least 25% of the borrower’s income, the most recent two years’ personal tax returns may be required.

400
Q

Which term is used to describe knowingly advertising or offering one set of terms that is very appealing but is not readily available and then pressuring a person into signing a contract with other, more expensive terms?

  1. Bait and switch
  2. Cut and run
  3. Steering
  4. Nonconforming
A

The answer is bait and switch. Bait and switch advertising involves advertising a loan at very attractive terms and then informing potential customers that, while the advertised loan is not available, a substitute, usually more expensive or involving less appealing terms, is.

401
Q

A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage?

  1. Balloon mortgage
  2. Hybrid ARM
  3. Graduated Payment Mortgage (GPM)
  4. Fixed period ARM
A

The answer is balloon mortgage. A partially amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance.

402
Q

If a loan agreement includes terms requiring the borrower to pay the remaining loan balance in one larger payment at the end of the loan term, this is known as a(n):

  1. Recast
  2. Interest-only feature
  3. Balloon payment
  4. Graduated payment schedule
A

The answer is balloon payment. If a loan agreement includes terms requiring the borrower to pay the remaining loan balance in one larger payment at the end of the loan term, this is known as a balloon payment.

403
Q

A 180 / 360 loan is considered a(n) ___________________ mortgage.

  1. Adjustable-rate
  2. Pay-option
  3. Hybrid
  4. Balloon
A

The answer is balloon mortgage. A partially-amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance. The loan would be labeled by indicating the loan term in months (in this case, 180) and the amortization period in months (in this case, 360).

404
Q

A mortgage in which a large, one-time payment is made at the end of a loan term is known as a:

  1. Fixed-rate loan
  2. Hybrid ARM
  3. Fully-amortized loan
  4. Balloon mortgage
A

The answer is balloon mortgage. In a balloon mortgage, a large portion of the borrowed principal is repaid in a single payment at the end of the loan period.

405
Q

A conditional refinance provision might be a feature of what type of loan?

  1. Option ARM
  2. 15-year fixed
  3. Interest-only ARM
  4. Balloon
A

The answer is balloon. A balloon loan may be eligible for refinance if it carries a conditional refinance provision. This means the loan may qualify for refinance if certain conditions are met, including: borrower must live in the house; no second liens in place; must be current and not have been late in 12 months; new rate cannot exceed 5% over the note; docs must be signed and fees paid.

406
Q

All of the following are part of the underwriter’s review of collateral, except:

  1. Sales contract
  2. Bank statements
  3. Appraisal
  4. Flood zone verification
A

The answer is bank statements. Bank statement review is part of an underwriter’s assessment of the borrower, not the collateral.

407
Q

An independent contractor is required to:

  1. Become state-licensed as a loan originator
  2. Pay a registration fee to the NMLS to be included in the state fund
  3. Complete six additional hours of education annually
  4. Originate loans within the limitations of the requisite surety bond
A

The answer is become state-licensed as a loan originator. An independent contractor is required to become state-licensed in order to increase accountability within the NMLS system.

408
Q

Lucy closes a refinance on Betty’s primary residence. However, Lucy forgets to provide Betty with the proper notice of rescission rights. Which of the following is true?

  1. The transaction is rescindable at any time during the life of the loan
  2. The transaction is void and should be cancelled
  3. Betty can rescind for three years from recording
  4. Betty cannot rescind for three days following recording
A

The answer is Betty can rescind for three years from recording. If the creditor has failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, transfer of all of the consumer’s interest in the property, or sale of the property.

409
Q

Which of the following borrowers would be considered self-employed for underwriting purposes?

  1. A borrower who is a vice president for a company, of which she is a 20% owner
  2. A borrower who receives only commission reported on a W-2
  3. A borrower who files Form 2106 with her tax returns
  4. A borrower who is a salesperson for a company, of which she is a 30% owner
A

The answer is borrower who is a salesperson for a company, of which she is a 30% owner. A self-employed borrower is one who owns 25% or more of a business.

410
Q

Which of the following would not need to be included in the notice of servicing transfer?

  1. Toll-free number for the old servicer
  2. Borrower’s payment amount
  3. Toll-free number for the new servicer
  4. Effective date of the transfer
A

The answer is borrower’s payment amount. When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer. This statement must show the name, address, and toll-free telephone numbers of both the old servicer and the new servicer, as well as the date the new servicer will begin accepting payments.

411
Q

Which of the following would not be on a promissory note?

  1. Amount owed
  2. Rate of interest and whether the loan is fixed or adjustable
  3. Borrower’s Social Security Number
  4. Loan terms
A

The answer is borrower’s Social Security Number. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. It shows the payor and payee, amount owed, rate of interest and whether the loan is fixed or adjustable, due dates for payment, and the loan terms.

412
Q

Andy Agent likes to refer clients to Larry Lender, because Larry will frequently send Andy a gift certificate for the referrals. Which of the following is most true?

  1. Larry could be fined up to $1,000,000, imprisoned for up to 30 years, or both for violating RESPA
  2. Both Andy and Larry could be fined up to $10,000, imprisoned for up to 1 year, or both for each incidence, because they are both violating RESPA
  3. As long as the gift certificate is for $50 or less and is not solicited by Andy, neither party is violating federal law
  4. Only Larry is violating RESPA and is subject to the maximum statutory penalty
A

The answer is both Andy and Larry could be fined up to $10,000, imprisoned for up to 1 year, or both for each incidence, because they are both violating RESPA. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. Since a gift certificate is a thing of value, both Larry and Andy are guilty of violating RESPA and may suffer the legal consequences of this violation.

413
Q

When Connie’s sister Callie loses her job due to downsizing, Connie suggests that Callie work with her in originating mortgages while she looks for another position. Callie could originate loans using Connie’s unique identifier, saving Callie the time and expense of obtaining her own loan originator license. Connie would then split the fees with her sister. Which of the sisters would be guilty of engaging in a prohibited act if they pursue this scheme?

  1. Connie, but not Callie
  2. Callie, but not Connie
  3. Both Connie and Callie
  4. Neither sister
A

The answer is Both Connie and Callie. Both Connie and Callie would be guilty of engaging in a prohibited act. Callie would be conducting loan origination business without holding a valid license, while Connie is assisting Callie, an unlicensed individual, in conducting loan origination business.

414
Q

A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA?

  1. The hazard insurance company
  2. Both the hazard insurance company and the mortgage broker
  3. The mortgage broker
  4. Neither the hazard insurance company nor the mortgage broker
A

The answer is both the hazard insurance company and the mortgage broker. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, verbal or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. Since a free dinner is a thing of value, both the hazard insurance company and the mortgage broker are guilty of violating RESPA and may suffer the legal consequences of this violation.

415
Q

Lisa and Ryan are moving out of state and have sold their home. Unfortunately, the closing on their old home is not for another two months, and they need funds to begin making payments on their new home, which they have closed on and plan to move into immediately. Their lender is likely to suggest that they secure:

  1. A construction-to-permanent loan
  2. A subprime loan
  3. An interest-only loan
  4. Bridge financing
A

The answer is bridge financing. Bridge financing is used to help homeowners who are selling one home and buying another to make payments on their new home loan while waiting for the closing date on their old home to arrive.

416
Q

An originator’s unique identifier must be shown on all but which of the following documents?

  1. Business signage
  2. Mortgage loan applications
  3. Advertisements
  4. Business cards
A

The answer is business signage. The unique identifier of any person originating a residential mortgage loan must be clearly shown on all residential mortgage loan application forms; solicitations or advertisements, including business cards or websites; and any other documents as established by rule, regulation, or order of the state licensing agency (MSL.210).

417
Q

When completing the Loan Estimate, costs must be presented:

  1. In dollars and cents
  2. In dollars and cents, except for appraisal costs
  3. By rounding them to the next whole number, except for estimated principal and interest payments
  4. By rounding them to the next whole number, except for third-party costs
A

The answer is by rounding them to the next whole number, except for estimated principal and interest payments. Except for estimated principal and interest payments, costs on the Loan Estimate are rounded to the next whole number.

418
Q

If a borrower selects a mortgage loan covered by HOEPA, he or she:

  1. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver
  2. Cannot waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan
  3. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan with the creditor’s approval
  4. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after signing a preprinted lender-provided form which states that the credit is needed to meet a bona fide personal emergency
A

The answer is Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver. If a borrower selects a mortgage loan covered by HOEPA, he/she can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver.

419
Q

When an ARM contains a limit on the amount that an interest rate can adjust, it is called a(n):

  1. Cap
  2. Index
  3. Margin
  4. Frequency
A

The answer is cap. Consumer protections that limit the amount that an interest rate or payment on an ARM may change are known as caps.

420
Q

Nontraditional credit includes all of the following, except:

  1. Payments to a landlord
  2. Car loans
  3. Electric bills
  4. Telephone bills
A

The answer is car loans. Nontraditional credit includes payments for things not traditionally tracked by or reported to the credit bureaus. This includes things like rent and utility bills.

421
Q

Which of the following contains only items which should be used in calculating a borrower’s debt-to-income ratio?

  1. Monthly rent expense on current home, credit card payment, car insurance
  2. Car payment, boat payment, child support obligations
  3. Property tax payment, utility payment, cable bill
  4. Mortgage insurance payment, average grocery costs, electric bill
A

The answer is car payment, boat payment, child support obligations. A debt-to-income ratio compares an applicant’s total monthly debt to his or her total monthly income. Total monthly debt would include simultaneous loans, debt obligations, alimony, and child support. Typical living expenses (e.g., utilities, health and disability insurance, food, phone or cable bills, etc.) are not included when calculating DTI.

422
Q

Which of the following terms applies to a VA mortgage?

  1. Certificate of eligibility
  2. Mortgage insurance certificate
  3. UFMIP
  4. Insuring fee
A

The answer is certificate of eligibility. A VA loan is available only to veterans of the armed services, certain active and discharged military personnel, and their spouses; however, the loan is assumable by nonveterans. In order to obtain the loan, the applicant must obtain a certificate of eligibility from the VA (directly online, through the lender online, or by mail). This will determine whether an individual is eligible for a VA loan and whether he/she is eligible for a loan with the full guarantee.

423
Q

What is required of a veteran to obtain a VA loan?

  1. Approval for mortgage insurance premium
  2. 3.5% down payment
  3. Eligibility fee
  4. Certificate of Eligibility
A

The answer is Certificate of Eligibility. A VA loan requires the borrower to obtain a Certificate of Eligibility.

424
Q

Oversight and enforcement of FCRA is left to what government agency?

  1. FNMA
  2. CFPB
  3. FHFA
  4. HUD
A

The answer is CFPB. The CFPB has primary oversight and enforcement authority for the Fair Credit Reporting Act. However, it shares some of its enforcement authority with the FTC.

425
Q

Which government agency is responsible for policing and enforcing misleading advertisement for credit?

  1. HUD
  2. CFPB
  3. TILA
  4. Federal Reserve
A

The answer is CFPB. The CFPB now has primary enforcement responsibility over TILA. The FTC does still retain some authority.

426
Q

The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of:

  1. NMLS
  2. CFPB
  3. FHA
  4. HUD
A

The answer is CFPB. The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of the CFPB.

427
Q

Which of the following is most likely to be considered a violation of Regulation B?

  1. Charging a minority borrower a higher interest rate due to a low down payment
  2. Declining a loan for a single woman due to a low credit score
  3. Charging a minority borrower a higher interest rate than a similarly situated non-minority borrower
  4. Declining a loan for a borrower who is 75 due to a high debt-to-income ratio
A

The answer is charging a minority borrower a higher interest rate than a similarly situated non-minority borrower. Regulation B prohibits discrimination in credit transactions based on criteria such as race, color, religion, national origin, sex, marital status, and age. An example of such discrimination would be charging a minority borrower a higher interest rate than a similarly situated non-minority borrower. Decisions based on creditworthiness, rather than discriminatory criteria, are not prohibited under Regulation B.

428
Q

Under the Fair Housing Act:

  1. Lending decisions cannot be made based on residency status
  2. Charging different fees based on race is prohibited
  3. Lenders must provide clear, plain-language disclosures
  4. Lenders are required to report demographic information to the federal government
A

The answer is charging different fees based on race is prohibited. The Fair Housing Act prohibits discrimination in the sale, rental, and financing of any residential housing based on race, color, religion, national origin, sex, familial status, or mental or physical handicap, and therefore, prohibits charging different fees based on race. Residency status is not a protected category under the Fair Housing Act. Disclosure requirements are not imposed by the Fair Housing Act. Government reporting requirements are covered under the Home Mortgage Disclosure Act (HMDA).

429
Q

A state licensing agency is conducting an examination of Willow Wand’s loan origination activities. In doing so, it may do all of the following, except:

  1. Require her to compile reports related to her mortgage loan transactions
  2. Close the business for the period of the examination
  3. Subpoena books and records
  4. Control access to Willow’s books and records
A

The answer is Close the business for the period of the examination. In conducting an examination or investigation, a state licensing agency may, among other things, administer oaths and affirmations; subpoena witnesses, as well as books and records; require the production of relevant documents; and control access to any documents and records of the person under investigation. The state licensing agency is not authorized to close the business for any period of time.

430
Q

Per diem interest is used by a lender in order to:

  1. Allow for a lower payment with a temporary buy-down
  2. Collect interest that accrues between the closing date and the end of the month
  3. Pay the previous lender’s costs for selling the loan
  4. Build a borrower’s escrow account
A

The answer is collect interest that accrues between the closing date and the end of the month. Per diem interest is used by a lender in order to collect interest that accrues between the closing date and the end of the month.

431
Q

Your borrower does not wish to complete the demographics questions in the Demographic Information section of the 1003. What should you do?

  1. Complete the section based on a visual observation of the borrower during a face-to-face application
  2. Leave the section blank
  3. Tell the borrower his/her loan cannot be funded until the information is obtained
  4. Refuse to take the application
A

The answer is complete the section based on a visual observation of the borrower during a face-to-face application. The section titled “Demographic Information” is required by the Home Mortgage Disclosure Act to aid the federal government in monitoring compliance with ECOA. Because supplying this information is strictly voluntary, an applicant who does not wish to do so should check the box provided to indicate his/her decision. When an applicant does not provide this information, an originator taking the application on a face-to-face basis must note the applicant’s sex, race, and ethnicity on the form, based on his/her visual observation and/or the applicant’s surname.

432
Q

Your borrower does not wish to complete the demographics questions in the Demographic Information section of the 1003. What should you do?

  1. Leave the section blank
  2. Tell the borrower his/her loan cannot be funded until the information is obtained
  3. Complete the section based on a visual observation of the borrower during a face-to-face application
  4. Refuse to take the application
A

The answer is complete the section based on a visual observation of the borrower during a face-to-face application. When an applicant chooses not provide this information, an originator taking the application on a face-to-face basis must note the applicant’s sex, race and ethnicity on the form, based on his/her visual observation and/or the applicant’s surname.

433
Q

An underwriter examines title documents for issues that may cloud the title or affect marketability. All of the following are items that may affect title, except:

  1. Easements
  2. Land locks
  3. Leaseholds
  4. Completion notice
A

The answer is completion notice. A completion notice is required of an appraiser, typically to document the completion of new construction prior to closing a loan on the property. Easements, land locks, and leaseholds are all examples of title issues that may affect marketability or cloud title.

434
Q

As an industry partner in mortgage lending transactions, investors in the secondary mortgage market have an obligation to:

  1. Conduct an adequate review of the loans that they purchase to ensure that the underlying transactions are stable and safe
  2. Purchase as many loans as possible
  3. Purchase an equal number of prime and subprime loans to promote lending in all communities
  4. Restrict their purchases to those loans that are guaranteed by Ginnie Mae
A

The answer is conduct an adequate review of the loans that they purchase to ensure that the underlying transactions are stable and safe. As an industry partner in mortgage lending transactions, investors in the secondary mortgage market have an obligation to conduct an adequate review of the loans that they purchase to ensure that the underlying transactions are stable and safe.

435
Q

Which of the following best describes the types of conventional mortgages that are available?

  1. Forward mortgages and reverse mortgages
  2. Prime loans and subprime loans
  3. Conforming loans and nonconforming loans
  4. Traditional mortgages and nontraditional mortgages
A

The answer is conforming loans and nonconforming loans. There are two types of conventional mortgage loans: conforming loans, which meet GSE loan limits and standards, and nonconforming loans, which do not meet GSE loan limits and standards (for example, “jumbo” loans).

436
Q

According to the Interagency Guidance on Nontraditional Mortgage Product Risks, relying on an individual’s capacity to repay the loan as structured from resources other than monthly income is:

  1. Considered unsafe and unsound
  2. A strong mitigating factor
  3. Acceptable only with property securitization
  4. Acceptable only with proper disclosure
A

The answer is considered unsafe and unsound. The Interagency Guidance on Nontraditional Mortgage Product Risks emphasizes the importance of establishing a borrower’s ability to repay a loan based on the borrower’s existing resources, primarily monthly income, rather than the value of the collateral pledged. Loans to borrowers who do not demonstrate the capacity to repay the loan from sources other than the collateral pledged are generally considered unsafe and unsound.

437
Q

A person wanting a loan to build a house would apply for what type of loan?

  1. Take out
  2. Adjustable
  3. Construction
  4. Reverse mortgage
A

The answer is construction. A construction loan or construction financing is high-interest interim (or temporary) financing that serves to finance the cost of labor and materials used during construction. It extends from the start to the completion of the work, when it is paid off, often with the proceeds of a more permanent form of financing (a take-out loan).

438
Q

Two types of loans used to finance the construction of a property are:

  1. Pre-construction and full construction
  2. Fully-amortized and interest-only
  3. Interim and permanent construction
  4. Construction-to-permanent and stand-alone construction
A

The answer is construction-to-permanent and stand-alone construction. Construction-to-permanent and stand-alone construction loans are two options used to finance the construction of a home being built. Both have advantages and disadvantages based on the borrower’s needs and the timeline of the construction.

439
Q

LL Mortgage Company is advertising “120% LTV Home Equity Loans!” In order to ensure compliance with Regulation Z, which of the following statements is also required?

  1. Shop for options with lower loan-to-value ratios
  2. Interest on high loan-to-value ratios is not deductible
  3. Interest on the portion of credit exceeding market value is deductible at 50% of the normal value
  4. Consult a tax adviser regarding deductibility of interest
A

The answer is consult a tax adviser regarding deductibility of interest. Advertising rules under Regulation Z provide that advertisements for loans exceeding the home’s fair market value must clearly and conspicuously state “The interest on the portion of credit that exceeds market value is NOT deductible.” The advertisement must also state that the borrower should consult a tax advisor regarding the deductibility of interest and charges.

440
Q

Misleading claims of debt elimination in an advertisement may lead a borrower to inaccurately believe that:

  1. Consumer debt is “disappearing” as a result of the new loan
  2. The borrower’s new loan will lower the overall monthly outlay
  3. The borrower is extending what may have been a short-term debt out over a longer period
  4. The borrower may gain some tax benefit by rolling consumer debt into the new mortgage loan
A

The answer is consumer debt is “disappearing” as a result of the new loan. “Debt elimination” is a regular claim of some mortgage professionals that specialize in consolidation loans, and it is often very misleading. Some borrowers will not understand that by “rolling in” the debt to a new mortgage, they are just extending the term and often paying more in interest.

441
Q

The agency that focuses its actions directly on consumers, consolidates responsibilities and supervision of financial entities, products, and services, and protects consumers from unfair, deceptive, and abusive acts and practices is the:

  1. Consumer Protection Agency
  2. Consumer Financial Protection Bureau
  3. Federal Housing Administration
  4. Department of Housing and Urban Development
A

The answer is Consumer Financial Protection Bureau. The mission of the CFPB is to make markets for consumer financial products and services work for Americans. It is focused on one goal: watching out for American consumers in the market for consumer financial products and services. This includes ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families by making sure prices are clear upfront, risks are visible, and nothing is concealed in fine print. A working market allows consumers to make direct comparisons among products and prohibits providers from using unfair, deceptive, or abusive practices.

442
Q

Which of the following would not be considered an established business relationship under the Do-Not-Call rules?

  1. A consumer purchases a service from a seller
  2. A financial transaction between a consumer and a seller
  3. A consumer inquiry into the purchase of an item six months ago
  4. A consumer purchases an item from a seller
A

The answer is consumer inquiry into the purchase of an item six months ago. Under the Telemarketing Sales Rule, a company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an “established business relationship” exists. An established business relationship means a relationship between the company and a consumer based on the consumer’s purchase, rental, or lease of the seller’s goods or services, or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call, or the consumer’s inquiry or application regarding an offered product or service within the three months immediately preceding the date of a telemarketing call. However, if such a consumer asks not to be contacted, the company must enter him or her on their own do-not-call list of such consumers.

443
Q

Entities that gather and sell information regarding an applicant’s credit in the form of credit reports are known as:

  1. Consumer finance associations
  2. Consumer reporting agencies
  3. Consumer reporting associations
  4. Consumer finance agencies
A

The answer is consumer reporting agencies. Consumer reporting agencies (or CRAs) gather and sell information regarding an applicant’s credit in the form of credit reports.

444
Q

The time at which a consumer becomes contractually obligated on a credit transaction is:

  1. Application
  2. Consummation
  3. Upon receiving a Loan Estimate
  4. Upon receiving a Closing Disclosure
A

The answer is consummation. Consummation is the time at which a consumer becomes contractually obligated on a credit transaction.

445
Q

Which of the following is not a required element of a company’s safeguard policy, as required by the GLB Act?

  1. Designate one or more employees to coordinate safeguards
  2. Evaluate and adjust procedures in light of relevant circumstances
  3. Select appropriate service providers and contract with them to implement safeguards
  4. Contract with a federally-insured company to destroy documents
A

The answer is contract with a federally-insured company to destroy documents. Under the GLB Act, a financial institution must have a written information security program that is appropriate to its size and complexity, to the nature and scope of its activities, and to the sensitivity of the customer information it handles. As part of its program, the financial institution must assign one or more employees to oversee the program; conduct a risk assessment; put safeguards in place to control the risks identified in the assessment and regularly test and monitor them; require service providers, by written contract, to protect customers’ personal information; and periodically update its security program. There is no requirement to contract with any external company to handle information security issues of any kind.

446
Q

A state is conducting an examination of mortgage loan originator Basil Thyme. During the examination, the agency is authorized to do all of the following, except:

  1. Administer oaths or affirmations
  2. Control access to Basil’s office
  3. Subpoena witnesses
  4. Require production of relevant documents
A

The answer is control access to Basil’s office. In conducting an examination or investigation, the state licensing agency is authorized to administer oaths or affirmations; subpoena witnesses; require the production of relevant documents; and control access to any documents and records of any person under examination or investigation.

447
Q

An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a:

  1. Conversion option
  2. Conditional provision
  3. Conversion rider
  4. Conversion requirement
A

The answer is conversion option. The option on an ARM that gives a borrower the opportunity to convert his/her loan to a fixed rate is called a conversion option.

448
Q

Which of the following approaches to appraisal is most commonly used for new construction or for special use properties?

  1. Market
  2. Comparable
  3. Cost
  4. Income
A

The answer is cost. The cost approach can be used for any property, but because of the knowledge of construction costs that is required, it is most often used to appraise value for new buildings, where costs are easy to obtain, and for properties such as churches and public service buildings, which cannot be compared to others that have sold or to those that produce income. The appraiser estimates the value of the land and the depreciated value of the improvements on the land separately, and then adds the two values to arrive at an estimate of the property’s total value. The depreciated value is equal to the cost to replace or reproduce the improvements less depreciation.

449
Q

Which of the following correctly describes entities that have obligations under the Fair Credit Reporting Act?

  1. CRAs, Experian, and FHA
  2. FHFA, CRAs, and furnishers of information to CRAs
  3. CRAs, furnishers of information to CRAs, and users of consumer reports
  4. Users of consumer reports and lenders regulated by RESPA and TILA
A

The answer is CRAs, furnishers of information to CRAs, and users of consumer reports. The FCRA creates a number of obligations for users and furnishers of credit information as well as the credit reporting agencies (CRAs) which receive and report credit information.

450
Q

Fiduciary duties include all but which of the following?

  1. Loyalty
  2. Good faith
  3. Creating a zero-cost borrower credit
  4. Putting the borrower’s interests first
A

The answer is creating a zero-cost borrower credit. A licensee’s fiduciary duties toward a client include loyalty and good faith, disclosure of material facts, and holding the client’s interests above those of the licensee.

451
Q

All of the following may be considered employment red flags, except:

  1. Credit history is missing entirely
  2. Paystub check numbers that are out of sequence or do not correspond with payroll dates
  3. W-2s that are handwritten and may not include a company logo
  4. Social Security Numbers on the application which do not match those on the income documents
A

The answer is credit history is missing entirely. Missing credit history is a credit report red flag, not an employment red flag.

452
Q

Which of the following can be used by state regulators to determine whether a licensee demonstrates the financial responsibility and general fitness to command the confidence of the community to engage in the mortgage business?

  1. Credit report, net worth, payment of federal licensing fees
  2. Credit report, net worth, surety bond, payment into a state fund
  3. Credit report, surety bond, payment of exemption fees
  4. Credit report, payment into a professional fund, $1 million credit line
A

The answer is credit report, net worth, surety bond, payment into a state fund. The S.A.F.E. Act mandates that states include a minimum net worth requirement or surety bond requirement for applicants, or require the applicant to pay into a state recovery fund. Licensing requirements also include criminal history and credit background checks, including a credit report. These are all factors used to establish a licensee’s financial responsibility and general fitness.

453
Q

Which of the following fees may a creditor charge before offering disclosures to a loan applicant?

  1. Application fee
  2. Credit reporting fee
  3. Appraisal fee
  4. Broker fee
A

The answer is credit reporting fee. A credit report fee is the only fee that a creditor may charge before offering disclosures to a loan applicant.

454
Q

Muny Baggins regularly extends credit that is subject to a finance charge and payable in a written agreement of more than four installments. Under the Truth-in-Lending Act, Muny is a:

  1. Mortgage servicer
  2. Mortgagee
  3. Mortgagor
  4. Creditor
A

The answer is creditor. The Truth-in-Lending Act identifies a creditor as a person, including a lender and a table funding mortgage broker, that regularly extends credit that is subject to a finance charge or is payable by written agreement in more than four installments. A creditor may also be a credit card issuer.

455
Q

Which of the following might raise a red flag during the underwriter’s review of the appraisal?

  1. Photos that appear to show the address of the property on the mailbox
  2. Dated prior to the sales contract
  3. Effective age of the property aligns with that of comparables
  4. Completion notice is dated after the original appraisal
A

The answer is dated prior to the sales contract. An appraisal dated prior to the sales contract is a red flag.

456
Q

Which section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application?

  1. Information for Government Monitoring Purposes
  2. Declarations
  3. Details of the Transaction
  4. Acknowledgement and Agreement
A

The answer is declarations. The “Declarations” section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application.

457
Q

Which of the following is most likely to be a violation of the Equal Credit Opportunity Act?

  1. Failing to give a borrower notice of the right to rescind
  2. Denying an application based on economic characteristics
  3. Requiring a borrower to verify residency or citizenship status
  4. Declining a loan due to the borrower’s race
A

The answer is declining a loan due to the borrower’s race. The Equal Credit Opportunity Act (ECOA) ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract). Declining a loan due to the borrower’s race is a violation of ECOA.

458
Q

In a title theory state, title to residential real estate is granted with a _____, naming the lender as the beneficiary of the trust, the borrower as the trustor, and the third party that holds the deed until the loan is fully paid as the _____.

  1. Mortgage / assignee
  2. Deed of trust / assignor
  3. Mortgage / trustor
  4. Deed of trust / trustee
A

The answer is deed of trust / trustee. In a title theory state, title to residential real estate is granted with a deed of trust, naming the lender as the beneficiary of the trust, the borrower as the trustor, and the third party that holds the deed until the loan is fully paid as the trustee.

459
Q

Which of the following documents conveys title to real property?

  1. Deed
  2. Mortgage
  3. Note
  4. Promissory note
A

The answer is deed. The deed is a written instrument properly signed and delivered that conveys title to real property.

460
Q

The federal agency that implements and enforces rules related to the origination of FHA loans is the:

  1. Consumer Financial Protection Bureau (CFPB)
  2. Department of Housing and Urban Development (HUD)
  3. Federal Trade Commission (FTC)
  4. National Credit Union Administration (NCUA)
A

The answer is Department of Housing and Urban Development (HUD). The Department of Housing and Urban Development implements and enforces rules related to FHA lending.

461
Q

Which of the following can usually be added to a self-employed borrower’s net income from the borrower’s tax returns when calculating the borrower’s income?

  1. Total from IRS 2106
  2. Depreciation
  3. Total from IRS 4506
  4. State taxes paid
A

The answer is depreciation. For a sole proprietorship (a self-employed borrower), the income, expenses, and taxable profits are reported on the Profit or Loss from Business (Schedule C) on the owner’s individual tax return (IRS Form 1040). The individual’s actual income would be the net income shown on the Schedule C, plus any recurring capital gains or non-cash expenses, such as depletion and depreciation, that was deducted in arriving at the adjusted income, since the borrower did not actually have to spend the amount claimed for non-cash expenses.

462
Q

Which of the following is not within the authority of the state regulators responsible for the effective system of supervision and enforcement of the SAFE Act?

  1. Determine criminal sentences for non-licensed entities under the Act
  2. Issue licenses to conduct business under the Act
  3. Deny, suspend, revoke licenses issued under the Act
  4. Examine, investigate, and conduct enforcement actions
A

The answer is determine criminal sentences for non-licensed entities under the Act. A state regulator has the responsibility to carry out the administration of the SAFE Act, but is not involved in criminal prosecution or penalty decision making.

463
Q

The primary reason for adopting special appraisal requirements for HPMLs was to:

  1. Discourage the use of inflated appraisals to flip properties
  2. Discourage subprime lending
  3. Ensure that appraisals include a physical inspection of the interior and exterior of a home securing a loan
  4. Encourage the use of certified and licensed appraisers
A

The answer is discourage the use of inflated appraisals to flip properties. The primary reason for adopting special appraisal requirements for HPMLs was to discourage the use of inflated appraisals to flip properties.

464
Q

Sue Ellen has been a mortgage loan originator for nine years and knows her hometown very well. She meets with a couple who have moved to her town from Ecuador. Checking their application, Sue Ellen sees that the neighborhood they are hoping to move to is higher-income and predominantly white. Without discussing it or checking their financial paperwork, Sue Ellen tells the couple they are likely “aiming too high” in their requested loan amount, and she suggests that they keep looking “elsewhere” for “something more appropriate.” Sue Ellen is engaging in:

  1. Streamlining
  2. Discouragement
  3. Steering
  4. Redlining
A

The answer is discouragement. Discouragement is a form of discrimination in which borrowers belonging to certain protected classes are discouraged from applying for a loan on the basis of their personal characteristics. Here, Sue Ellen has no idea as to the couple’s financial qualifications to purchase a property in their desired neighborhood. She bases her discouragement solely on perceived racial characteristics, which is a discriminatory act that is prohibited under federal law.

465
Q

Underwriting of non-qualified mortgages must compute periodic payments that:

  1. Include consideration of periodic rate caps
  2. Do not take periodic rate caps into consideration
  3. Do not take lifetime rate caps into consideration
  4. Include consideration of the value of the dwelling as a borrower asset
A

The answer is do not take periodic rate caps into consideration. Underwriting of non-qualified mortgages must compute periodic payments that do not take periodic rate caps into consideration.

466
Q

_____ occurs when a loan originator receives direct compensation from a borrower and additional indirect compensation from a creditor in the same mortgage loan transaction.

  1. Equity-based lending
  2. Steering
  3. Dual compensation
  4. Yield spread premium
A

The answer is dual compensation. Dual compensation is an instance in which a loan originator receives direct compensation from a borrower and additional indirect compensation from a creditor in the same mortgage loan transaction.

467
Q

A mortgage or deed of trust generally includes a clause that requires the loan to be paid off immediately if the property is sold. This is a(n):

  1. Assumption clause
  2. Due-on-sale clause
  3. Defeasance clause
  4. Completion clause
A

The answer is due-on-sale clause. A due-on-sale clause provides that the loan must be immediately paid off if the subject property is sold. These apply to most mortgages/deeds of trust, unless the loan is assumable.

468
Q

Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called:

  1. Down payment
  2. Earnest money
  3. Escrow funds
  4. Service release premium
A

The answer is earnest money. Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called earnest money.

469
Q

A lender who refuses to originate loans in a particular neighborhood or ZIP code because of the perceived creditworthiness of consumers living in the area is in violation of:

  1. FCRA
  2. ECOA
  3. HOEPA
  4. RESPA
A

The answer is ECOA. Refusing to originate loans in a particular neighborhood or ZIP code because of perceived creditworthiness is a practice known as “redlining” and is a violation of ECOA.

470
Q

Redlining is addressed in which federal law?

  1. RESPA
  2. HOEPA
  3. FCRA
  4. ECOA
A

The answer is ECOA. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in extension of credit based on race, color, religion, national origin, sex, marital status, age, potential to have or raise children, the fact that the applicant receives income from a public assistance program, or the fact that the applicant has exercised his or her rights under the Consumer Credit Protection Act. This includes the discriminatory lending pattern of redlining, in which a lender refuses to provide lending products and services on an equal basis to residents of minority neighborhoods (the term is derived from the practice of drawing red lines around minority areas on a map.)

471
Q

What legislation was enacted because of anecdotal evidence that women were not treated on an equal basis with men in credit markets, particularly in mortgage credit markets?

  1. HOEPA
  2. FACTA
  3. ECOA
  4. Fair Housing Act
A

The answer is ECOA. The Equal Credit Opportunity Act is a fair lending law passed primarily because of anecdotal evidence that women were not treated on an equal basis with men in credit markets.

472
Q

In order to meet the annual continuing education requirement, a state-licensed loan originator must complete at least _____ hours of NMLS-reviewed and -approved coursework.

  1. Six
  2. Eight
  3. Ten
  4. Twelve
A

The answer is eight. A state-licensed mortgage loan originator must renew his/her license annually and must satisfy the continuing education requirement of at least eight hours of courses that have been reviewed and approved by the NMLS.

473
Q

When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred?

  1. Never - this disclosure is not required
  2. Within 30 days of the transfer of servicing
  3. Within 15 days of the transfer of servicing
  4. Either at the time of application or within three business days of application
A

The answer is either at the time of application or within three business days of application. A mortgage servicing disclosure statement discloses whether the servicing of the loan (i.e., collection of payments) may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. It must be delivered to the borrower at application or within three business days.

474
Q

Oskar is being licensed in a state that requires each loan originator to be covered by a surety bond. Upon approval of his license application, he will be employed by the Half Nelson Mortgage Brokerage. Who is required to provide Oskar’s surety bond?

  1. Oskar
  2. Half Nelson Mortgage Brokerage
  3. Both Oskar and Half Nelson
  4. Either Oskar or Half Nelson
A

The answer is Either Oskar or Half Nelson. Each mortgage loan originator must be covered by a surety bond. If he/she is an employee or exclusive agent of a person subject to the state’s SAFE Act, the surety bond of the employing licensee or exempt person may be used to satisfy the loan originator surety bond requirement.

475
Q

April Byrd’s work in the mortgage industry requires her to work at a specific location and be present at specific hours in exchange for a salary. April is a(n):

  1. Independent contractor loan processor
  2. Loan processor consultant
  3. Exclusive agent
  4. Employee
A

The answer is employee. An employee is an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation, for federal income tax purposes, is reported on a W-2 form issued by the controlling person.

476
Q

Which of the following is least likely to be considered nonpublic personal information?

  1. Borrower’s home phone number
  2. Employer’s phone number
  3. Borrower’s job title
  4. Borrower’s income
A

The answer is employer’s phone number. Nonpublic personal information (NPI) is any personally identifiable financial information that a financial institution collects about an individual in connection with providing a financial product or service. NPI does not include information where there is reasonable basis to believe it is lawfully made publicly available, such as an employer’s phone number.

477
Q

Which of the following would prevent the conveyance of title?

  1. Paid lien
  2. Owner dies and leaves a legal will
  3. Encumbrance
  4. Father passing title to his son while still living
A

The answer is encumbrance. An encumbrance would prevent the conveyance of title, meaning there is a debt or lien against the property and title may not change hands until the debt or lien is satisfied.

478
Q

A mortgage and a lien are both examples of

  1. deeds of trust.
  2. concepts which are legal in some states but not in others.
  3. easements.
  4. encumbrances.
A

The answer is encumbrances. An encumbrance is a claim or liability on the title to a property, such as a lien or a mortgage.

479
Q

The purpose of the Truth-in-Lending Act is to do which of the following?

  1. Ensure meaningful disclosure of credit terms to consumers
  2. Prevent lenders from charging interest rates that are unfair to consumers
  3. Protect consumers from abusively high interest rates
  4. Require consumers be provided with a good faith estimate of closing costs at the time of loan application
A

The answer is ensure meaningful disclosure of credit terms to consumers. The purposes of TILA include assuring a meaningful disclosure of credit terms so that the consumer will be able to more readily compare the various credit terms available to him or her and avoid uninformed use of credit.

480
Q

Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower?

  1. UFMIP
  2. Insured amount
  3. Entitlement
  4. Guarantee fee
A

The answer is entitlement. The VA limits the amount that it can guarantee to repay a lender in the event of a default on the loan. The amount that the government will guarantee to a lender is known as a veteran’s entitlement.

481
Q

Which of the following is defined as the difference between the fair market value of a property and the current balances of any liens against the property?

  1. Amortization
  2. Equity
  3. Finance charge
  4. Debt-to-income ratio
A

The answer is equity. Equity is defined as the difference between the fair market value of a property and the current balances of any liens against the property.

482
Q

Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account?

  1. Escrow accounts are required for all HPMLs secured by the borrower’s principal dwelling
  2. Escrow accounts are required for all HPMLs secured by a dwelling
  3. Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling
  4. Escrow accounts are required for all HPMLs, including reverse mortgages
A

The answer is escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling. Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling.

483
Q

When dealing with third-party service providers, banks and nonbanks must establish risk management programs that include all but which of the following elements?

  1. Conducting due diligence to assess the service providers’ ability to comply with the law
  2. Entering contracts with service providers that include enforceable consequences for failing to comply with the law
  3. Establishing compensation programs that withhold payment for services until the service provider can demonstrate compliance with the law
  4. Reviewing the service provider’s employee training programs, particularly for those employees that have direct contact with consumers
A

The answer is establishing compensation programs that withhold payment for services until the service provider can demonstrate compliance with the law. Establishing compensation programs to withhold payment for services is not a required element of a risk management program.

484
Q

All of the following types of information must be reported for government monitoring purposes in accordance with HMDA, except:

  1. Identification of loans subject to HOEPA
  2. Action taken on the loan and the location of the subject property
  3. Ethnicity, race, sex, and income of the applicant
  4. Ethnicity, race, sex, and religion of the applicant
A

The answer is ethnicity, race, sex, and religion of the applicant. HMDA monitoring requires the collection of extensive data about each mortgage loan application and origination. This includes any action taken on the loan, indication of whether the loan is subject to HOEPA, and the ethnicity, race, sex, and income of the applicant. HMDA does not require the collection of information about an applicant’s religion.

485
Q

Securitization helps lenders to:

  1. Make more loans to lesser-qualified customers
  2. Increase the menu of products available to their customers
  3. Provide funds to the highest bidder on the secondary market
  4. Exchange active loans to another entity to generate new funds to make more loans
A

The answer is exchange active loans to another entity to generate new funds to make more loans. The securitization process allows lenders to transfer active loans to another entity in exchange for funds to make more loans.

486
Q

The number one ethical problem cited in surveys of professionals and managers is:

  1. False or misleading representation of products or services in marketing, advertising, or sales
  2. Lack of sufficient disclosures
  3. Inaccuracies and lack of documentation in handling client/customer funds
  4. Deliberate attempts at fraud and misrepresentation in face-to-face meetings
A

The answer is false or misleading representation of products or services in marketing, advertising, or sales. The number one ethical problem cited in surveys of professionals and managers is false or misleading representation of products or services in marketing, advertising, or sales efforts, usually involving various aspects of loan terms. This includes use of false or misleading advertising, use of truthful advertising in a deceptive or misleading manner, and concealing the limitations of the programs or terms being promoted.

487
Q

Which form of fraud is most prevalent involving borrowers in the mortgage process?

  1. Falsified applications
  2. Foreclosure rescue scams
  3. Identity theft
  4. Straw sellers
A

The answer is falsified applications. Applications using fraudulent information are the most common type of mortgage fraud involving borrowers. Inconsistent information is present in over 35% of cases.

488
Q

Underwriting guidelines for conforming loans are created by:

  1. Fannie Mae and Freddie Mac
  2. HUD
  3. FHA
  4. Freddie Mac and Ginnie Mae
A

The answer is Fannie Mae and Freddie Mac. Conforming loans are subject to loan limits, down payment requirements, income requirements, debt-to-income ratios, and other underwriting guidelines established by Fannie Mae and Freddie Mac.

489
Q

Which of the following entities was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government?

  1. Ginnie Mae
  2. Vinnie Mac
  3. Fannie Mae
  4. Federal Housing Administration
A

The answer is Fannie Mae. The Federal National Mortgage Association (FNMA), or Fannie Mae, was established in 1938 by amendments to the National Housing Act, in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. It is a government-sponsored enterprise (GSE) and, since 1968, a publicly traded company.

490
Q

Of the following qualifying pieces of information, which carries the highest risk of being fraudulent?

  1. Tax transcripts obtained through the execution of a 4506-C
  2. Social Security Numbers cross-checked against credit reports
  3. Faxed or Internet documents
  4. Original copies of a borrower’s W-2s and paystubs
A

The answer is faxed or Internet documents. Documentation and verification is perhaps the most important step in the qualifying process. Careful examination of all supporting documents is critical to preventing fraud.

491
Q

A consumer report is defined under which of the following federal laws?

  1. FACTA
  2. FCRA
  3. ECOA
  4. HMDA
A

The answer is FCRA. FCRA defines a consumer report as any information from a consumer reporting agency that relates to a consumer’s creditworthiness, credit standing, credit capacity, character, personal characteristics, or mode of living, used or expected to be used, in order to determine eligibility for credit or insurance, or to evaluate a consumer for employment.

492
Q

What does “FHA” stand for, when referring to the agency which oversees the FHA loan program?

  1. Federal Housing Authority
  2. Federal Housing Agency
  3. Federal Housing Association
  4. Federal Housing Administration
A

The answer is Federal Housing Administration. “FHA” stands for Federal Housing Administration.

493
Q

Which of the following does not control the discount that may be charged on permanent buydowns?

  1. Financial markets
  2. Lenders
  3. Federal Reserve
  4. Mortgage companies
A

The answer is Federal Reserve. A permanent buydown is a payment of discount points to lower the interest rate for the entire term of the mortgage. One discount point is equal to 1% of the loan amount. The interest rate reduction received for buying points is not set and depends on individual lenders and the financial marketplace, rather than being determined by the Federal Reserve.

494
Q

RESPA applies to:

  1. Reverse mortgages
  2. Construction loans
  3. Federally-related mortgage loans
  4. Loans for business, commercial, or agricultural purposes
A

The answer is federally-related mortgage loans. RESPA applies to federally-related mortgage loans.

495
Q

Which of the following is not a consideration when determining the financial responsibility of a licensee?

  1. Net worth
  2. Surety bond or state fund
  3. Credit score
  4. Felony convictions of company officers
A

The answer is felony convictions of company officers. While felony convictions are certainly a consideration in determining license eligibility, it is not considered in determining financial responsibility.

496
Q

Which of the following types of mortgages typically carries two different types of mortgage insurance?

  1. VA
  2. Conventional
  3. Subprime
  4. FHA
A

The answer is FHA. In FHA loans, the FHA insures the issuing lender against loss in the event of default. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years). In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV.

497
Q

An upfront mortgage insurance premium is required for _____ loans, and borrowers can pay this amount directly or finance the cost.

  1. VA
  2. USDA
  3. FHA
  4. Conventional
A

The answer is FHA. UFMIP is required for FHA loans, and borrowers can add this cost to the loan amount.

498
Q

As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs.

  1. FNMA
  2. FinCEN
  3. FHLMC
  4. FHFA
A

The answer is FHFA. HERA created and installed the FHFA (Federal Housing Finance Agency) as the conservator of the GSEs (Fannie Mae and Freddie Mac). The FHFA’s powers include the responsibility to set the conforming loan limits from year to year.

499
Q

Under the Gramm-Leach-Bliley Act, the Safeguards Rule and Financial Privacy Rule apply to which of the following?

  1. All commercial institutions
  2. Financial institutions
  3. Educational institutions
  4. Mortgage lenders only
A

The answer is financial institutions. The Gramm-Leach-Bliley Act’s Safeguards Rule requires all financial institutions to design, implement, and maintain safeguards to ensure the security and confidentiality of customer information and protect customer information against unauthorized access. Financial institutions covered by the rule include lenders and other traditional institutions, as well as payday lenders, check-cashing businesses, professional tax preparers, auto dealers engaged in financing or leasing, electronic funds transfer networks, mortgage brokers, credit counselors, real estate settlement companies, and retailers that issue credit cards to consumers. The Financial Privacy Rule of the GLB Act governs the collection and disclosure of customers’ personal financial information by financial institutions.

500
Q

Under TILA’s rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer.

  1. Two
  2. Five
  3. Three
  4. Seven
A

The answer is five. In regard to higher-priced mortgage loans, under TILA and Regulation Z, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or five years after the loan was consummated, at the request of the consumer.

1700+ MCQs (4 decks)

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