1700+ MCQs 4of4

Question 1

Ella Ellerby’s lender failed to provide her with the required rescission notice when she refinanced her home. Ella has not transferred or sold her interest in the property, but is beginning to have second thoughts about the refinance. Under these circumstances, Ella can rescind the loan:

For three years after consummation
For two years after consummation
For five years after consummation
At any time she sees fit

Answer 1

The answer is for three years after consummation. If a creditor/lender fails to provide the required disclosures and notice to effectively initiate the three-day period, the borrower’s right to rescind shall automatically expire at the earliest of three years from consummation of the transaction; transfer of the borrower’s interest in property; or sale of the borrower’s interest in property.

Question 2

When a homeowner allows his/her insurance to lapse, what can the lender do to insure the property?

Mortgage insurance
State-placed insurance
Optional credit life
Force-placed insurance

Answer 2

The answer is force-placed insurance. “Force-placed insurance” might be imposed by the lender if a borrower allows his/her homeowner’s insurance to lapse.

Question 3

When a creditor takes steps legally to force the sale of a property in an effort to collect on a loan in default, it is known as:

Repossession
Foreclosure
Default
Acceleration

Answer 3

The answer is foreclosure. Foreclosure is the sale of property to satisfy unpaid debt after a borrower’s default on payments.

Question 4

The Federal Housing Administration does not make loans; it insures loans. What does the FHA insure against?

Foreclosure
The borrower losing his job
Forbearance
Down payment

Answer 4

The answer is foreclosure. The FHA insures loans against foreclosure.

Question 5

Which unethical behavior involves conspiratorial involvement of individuals using the mortgage market to benefit financially from criminal behavior?

Fraud for property
Money laundering
Identity theft
Fraud for profit

Answer 5

The answer is fraud for profit. Fraud for profit may involve a number of persons, such as sellers, mortgage loan originators (including mortgage brokers and lenders and their individual mortgage loan originators), real estate brokers, appraisers, builders and developers, who conspire to manipulate the mortgage market by inflating property values (and therefore loan amounts) for personal financial gain.

Question 6

The Federal Home Loan Mortgage Corporation is also known as:

Fannie Mae
Ginnie Mae
Freddie Mac
Freddie Mae

Answer 6

The answer is Freddie Mac. The Federal Home Loan Mortgage Corporation is known more commonly as “Freddie Mac,” and also as “FHLMC.”

Question 7

The factors involved in determining the movement on an ARM loan include:

Frequency of change, caps, index, rate
Rate, caps, index, margin
Frequency of change, caps, index, margin
Rate, index, margin, lifetime cap

Answer 7

The answer is frequency of change, caps, index, margin. There are four factors involved in determining an ARM’s movement. They are frequency of change, caps, index, and margin.

Question 8

An originator advertises via the Internet and direct mail a “3.5% fixed payment loan” that was not actually available to any loan applicant. Which federal agency would bring the lawsuit against this originator and his company?

HUD or the FTC
FHFA
FTC or the CFPB
FDIC

Answer 8

The answer is FTC or the CFPB. The CFPB is the federal agency responsible for enforcing violations of TILA prohibitions against misleading advertisements, but shares some enforcement authority with the FTC.

Question 9

A credit report includes all of the following information, except:

Future inquiries
Applicant information
Public records
Current derogatory trade lines

Answer 9

The answer is future inquiries. A credit report would not include future inquiries.

Question 10

Which of the following is true regarding ATR standards for consideration of borrower repayment ability?

General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 60%
General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income
General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 40%
General ATR standards require a consideration of DTI ratio and residual income; residual income must equal at least the monthly loan payment amount, plus 5%

Answer 10

The answer is General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income. General ATR standards require a consideration of DTI ratio and residual income. However, there is no DTI ratio threshold or minimum required residual income.

Question 11

Sharing a borrower’s personal financial information for purposes other than what it was provided for is a violation of what act?

GLB Act
S.A.F.E. Act
TILA
Homeowners Protection Act

Answer 11

The answer is GLB Act. The Gramm-Leach-Bliley Act governs the use of non-public personal information and how it can be shared amongst affiliated third parties.

Question 12

Cindy Williams applied for a loan with MPT Mortgage. After 20 days, she received an Adverse Action Notice informing her that she had been denied. Three months later, Cindy received a women’s clothing catalog in the mail at an address only known to MPT Mortgage as a result of her filling out a loan application. The lender has likely violated which federal law?

TILA
GLB Act
FTC Disposal Rule
RESPA

Answer 12

The answer is GLB Act. This scenario implies that the lender shared non-public personal information with a third party for reasons other than the intent with which it was given to the lender. Selling information given to apply for financial products to a third party who intends to market unrelated products or services to the customer is a violation of the GLB Act.

Question 13

The Fair Housing Act prohibits discrimination based on:

Handicap, familial status, sex, national origin, religion, color, race
Race, color, religion, sex, age
Race, sex, age, color, religion, handicap
Race, sex, color, religion, age, familial status, handicap

Answer 13

The answer is handicap, familial status, sex, national origin, religion, color, race. The Fair Housing Act prohibits discrimination in a manner similar to that of the Equal Credit Opportunity Act; however, the Fair Housing Act is not limited to an application for credit. The Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and handicap.

Question 14

In order to consider overtime pay for an hourly employee, it must:

Be at least 1.5 times the normal rate
Have at least a consistent two-year history and be likely to continue
Be paid in a separate paycheck documenting the hours
Be consistently worked for the next three years

Answer 14

The answer is have at least a consistent two-year history and be likely to continue. Overtime pay is unlikely to be considered (as with bonus pay) unless the applicant can show that he/she has received it consistently for the past two years, and that it is likely to continue.

Question 15

Bill Grunion is required to renew his license for the coming year. In order to have his renewal approved, Bill must meet all the following requirements, except:

Continue to meet the minimum standards for license issuance
Satisfy the annual continuing education requirement
Pay all required fees for renewal of the license
Have originated at least 15 loans in the preceding license period

Answer 15

The answer is have originated at least 15 loans in the preceding license period. To renew a license, a state-licensed loan originator must continue to meet the minimum standards for license issuance, satisfy the annual continuing education requirements, and pay all required renewal fees.

Question 16

A loan processor or underwriter is exempt from licensure under all of the following circumstances, except:

He/she is employed with a licensed mortgage broker
He/she is employed with an exempt mortgage lender
He/she does not represent to the public that he/she can perform any of the activities of a loan originator
He/she takes applications on behalf of the loan originator

Answer 16

The answer is he/she takes applications on behalf of the loan originator. A processor and/or underwriter may only maintain exempt status from licensure if engaged solely in clerical or support duties while employed with either a licensed or exempt entity. Under no circumstances may a processor or underwriter engage in the activities of a loan originator.

Question 17

Homeownership counseling is required in transactions for all of the following, except:

Higher-priced mortgage loan
High-cost mortgage
Reverse mortgage
Negative amortization loan if the loan applicant is a first-time borrower

Answer 17

The answer is higher-priced mortgage loan. Transactions for higher-priced mortgage loans do not include counseling requirements.

Question 18

William is licensed in a state that does not provide a time period in which to make up continuing education deficiencies. Since William did not complete his required eight hours, what will happen to his license?

He will be issued a conditional license
He may apply for an interim license
His license will be revoked
His license will expire

Answer 18

The answer is his license will expire. The license of a mortgage loan originator will expire if he or she fails to satisfy the minimum standards for license renewal, including satisfying the annual continuing education requirement.

Question 19

The chain of title shows:

History of ownership of a property
Any existing liens on the property
Reporting format for an abstractor
Method of perfecting a lien

Answer 19

The answer is history of ownership of a property. The “chain of title” shows the history of ownership of a property.

Question 20

Equity-based lending is a common predatory lending practice, taking advantage of unsuspecting borrowers by using abusive lending terms for increased profits. Often, borrowers may lose money, home equity, or even their homes. Which federal law was the first to expressly prohibit equity-based lending?

Home Ownership and Equity Protection Act
Homeowners Protection Act
Fair Credit Reporting Act
Home Mortgage Disclosure Act

Answer 20

The answer is Home Ownership and Equity Protection Act. The Home Ownership and Equity Protection Act (HOEPA) was the first legislation to prohibit equity-based lending by requiring a borrower to provide documentation of his or her ability to repay the loan prior to closing.

Question 21

The Notice of Right to Cancel PMI is required by the:

Homeowners Protection Act
Equal Credit Opportunity Act
Truth-in-Lending Act
Real Estate Settlement Procedures Act

Answer 21

The answer is Homeowners Protection Act. The Notice of Right to Cancel PMI is required by the Homeowners Protection Act.

Question 22

Dividing the PITI by the amount of a borrower’s monthly gross income determines the:

Total debt ratio
Loan suitability
Net tangible benefit
Housing expense ratio

Answer 22

The answer is housing expense ratio. PITI divided by gross monthly income calculates the housing expense ratio.

Question 23

How are FHA loan limits established?

The FHFA establishes loan limits for FHA loans
The FHA uses loan limits based on CFPB loan limit guidance
Loan limits are set by Ginnie Mae
HUD establishes loan limits for FHA loans based on county-by-county conforming limits

Answer 23

The answer is HUD establishes loan limits for FHA loans based on county-by-county conforming limits. HUD establishes loan limits for FHA loans based on county-by-county conforming loan limits. FHA loan limits are divided into lower-cost and higher-cost areas.

Question 24

Housing counselors must generally be approved by:

The CFPB
The Office of Financial Education
HUD
The NMLS

Answer 24

The answer is HUD. Housing counselors must generally be approved by HUD.

Question 25

A loan with a fixed rate at the start that will adjust regularly after a certain period is commonly referred to as a(n):

Traditional ARM
Nontraditional ARM
Hybrid ARM
Option ARM

Answer 25

The answer is Hybrid ARM. A hybrid ARM is a mortgage loan with a fixed rate during the first few years of the loan. After the initial fixed-rate period expires, the loan becomes an adjustable-rate loan.

Question 26

If a loan has an initial fixed-rate period and then becomes adjustable, it is referred to as a:

Nontraditional ARM
Hybrid ARM
Fixed ARM
Fixed hybrid

Answer 26

The answer is Hybrid ARM. An ARM is known as a “hybrid ARM” if it has an initial fixed-rate period and then, after expiring, turns fully adjustable.

Question 27

The primary purpose of the FTC Red Flags Rule is:

Preventing the overvaluation of real estate
Improving the accuracy of information in consumer credit files
Identifying, mitigating, and preventing identity theft
Establishing methods for protecting consumer personal information

Answer 27

The answer is identifying, mitigating, and preventing identity theft. The FTC Red Flags Rule focuses on methods of detecting a security breach that may lead to identity theft within a financial institution that maintains a covered account on behalf of the customer.

Question 28

The obligation for mortgage brokers to serve as the agent or the fiduciary of borrowers is:

Imposed by the S.A.F.E. Mortgage Licensing Act
Imposed by state licensing laws in some states
Imposed by state licensing laws in every state
Imposed by the Dodd-Frank Act

Answer 28

The answer is imposed by state licensing laws in some states. The obligation for mortgage brokers to serve as the agent or fiduciary of borrowers is imposed by state licensing laws in some states.

Question 29

A piggyback loan is most often used:

As a bridge from one property to the next
In the event a borrower is upside down on his/her loan
To finance home improvement projects
In order to avoid paying PMI

Answer 29

The answer is in order to avoid paying PMI. Borrowers with more than 80% LTV are required by conforming lenders to obtain private mortgage insurance. In a piggyback scenario, a borrower takes out a simultaneous second mortgage in order to avoid paying PMI. However, the lender must, based on provisions of the Ability to Repay Rule, determine that the borrower has the ability to repay both the first and second mortgage according to their loan terms.

Question 30

HUD will not insure single-family home loans that:

Meet QM standards
Include points and fees in excess of the limit set by the QM Rule
Are small creditor qualified mortgages
Have a DTI ratio of less than 43%

Answer 30

The answer is include points and fees in excess of the limit set by the QM Rule. HUD will no longer insure single-family home loans that include points and fees in excess of the limit set by the QM Rule.

Question 31

What characteristic, when used in deciding whether or not to grant credit, is not considered discriminatory?

Income
Race
Marital status
Religion

Answer 31

The answer is income. The provisions of ECOA are meant to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion, national origin, sex, marital status, or age. A lender must consider a person’s income when determining his/her creditworthiness.

Question 32

Appraisers are often pressured by homeowners, originators, or real estate agents to:

Provide appraisals in as short a time period as possible
Include the borrower’s name on the appraisal
Inflate the value in order to make the deal work
Provide the names and numbers of former customers

Answer 32

The answer is inflate the value in order to make the deal work. While most originators like to have appraisals back as quickly as possible, generally, appraisers are most often pressured to “hit the number” even if it means inflating values beyond a reasonable amount.

Question 33

Which of the following is a limit on the amount that the interest rate can increase or decrease at the first adjustment date for an ARM?

Initial rate cap
Periodic rate cap
Lifetime rate cap
Payment cap

Answer 33

The answer is initial rate cap. The initial rate cap is a limit on the amount by which the interest rate can increase or decrease at the first adjustment date for an ARM.

Question 34

Which of the following is required for ARMs and is intended to provide borrowers with information to prepare them for interest rate adjustments that will result in changes in payment amounts?

Loan Estimate
Closing Disclosure
Initial Rate Change Disclosure
Your Home Loan Toolkit

Answer 34

The answer is Initial Rate Change Disclosure. The Initial Rate Change Disclosure is required for ARMs and is intended to provide borrowers with information to prepare them for interest rate adjustments that will result in changes in payment amounts.

Question 35

Which of the following correctly demonstrates how to calculate the annual interest on a mortgage loan?

Interest rate / loan balance = annual interest
Periodic rate / 365 = annual interest
Periodic rate × 365 = annual interest
Interest rate × loan balance = annual interest

Answer 35

The answer is interest rate × loan balance = annual interest. Annual interest is calculated by multiplying the interest rate by the loan balance.

Question 36

Which of the following is least likely to happen if a loan is found to be fraudulent by the servicer?

Broker must buy back the loan
Lender calls the loan due
Originator must pay back commissions
Interest rate is increased on the loan

Answer 36

The answer is interest rate is increased on the loan. If a loan is discovered to be fraudulent by the servicer, a broker may be required to buy the loan back, repay any commissions earned on it, and the lender may actually call the loan due. However, it is very unlikely that a lender would raise the rate and continue collecting payments.

Question 37

Taneka is licensed and has received her unique identifier from the NMLS. Taneka must clearly show her unique identifier on all of the following, except:

Residential mortgage loan applications
Solicitations and advertisements
Websites
Interoffice communications

Answer 37

The answer is interoffice communications. 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 required by rule, regulation, or order of the state licensing agency.

Question 38

Which of the following is considered “reasonably reliable” evidence to verify the repayment ability of a borrower?

IRS W-2s, tax returns, and payroll receipts
IRS W-2s, tax receipts, and bank deposit receipts
Previous mortgage statements and canceled checks
Tax returns, Comptroller’s certification, and CPA letter

Answer 38

The answer is IRS W-2s, tax returns, and payroll receipts. The Ability to Repay Rule requires that a borrower document his/her ability to repay the loan, using “reliable evidence” such as W-2s, tax returns, and payroll receipts.

Question 39

A VA loan that is an IRRRL:

Is a qualified mortgage, but does not have a conclusive presumption of compliance
Is a qualified mortgage, and always has a conclusive presumption of compliance
Is a qualified mortgage, and may have a conclusive presumption of compliance
Is not a qualified mortgage

Answer 39

The answer is is a qualified mortgage, and may have a conclusive presumption of compliance. A VA loan that is an IRRRL may have a conclusive presumption of compliance if certain underwriting standards are met. IRRRLs do not automatically have a conclusive presumption of compliance.

Question 40

A state licensing agency granted Crook Cromwell a license to act as a mortgage loan originator. Subsequent to the granting of the license, the agency received a supplemental criminal history report which indicated that Crook had been convicted of a money laundering charge in another state. What action can the state licensing agency take?

Issue a temporary cease and desist order
Refuse to renew Crook’s license
Require a hearing with Crook before any other action can be taken
Condition issuance of the license against future bad acts

Answer 40

The answer is issue a temporary cease and desist order. The state licensing agency may enter a temporary order requiring a person to cease doing business under a license if it determines that the license was erroneously issued.

Question 41

All of the following are included within the authority of the Commissioner, except:

Enter a cease and desist order
Order restitution and monetary penalties
Subpoena witnesses and documents
Issuing an order to a former employer of a loan originator to turn over records

Answer 41

The answer is issuing an order to a former employer of a loan originator to turn over records. Commissioner does not have authority to examine records of former employers of a loan originator.

Question 42

When is it allowable for an originator to provide a real estate agent with a $50 gift card in exchange for a referral?

If the gift card has no dollar amount listed on it
If the real estate agent’s commission was no more than 25% more valuable than the card
As long as the originator provides equal gift cards to each service provider on the loan
It is a violation of RESPA for the originator to provide the card

Answer 42

The answer is it is a violation of RESPA for the originator to provide the card. RESPA prohibits providing a “thing of value” in exchange for a referral.

Question 43

Which of the following best describes the fiduciary duty that a loan originator owes to a consumer?

It is imposed by federal law and means that the principal (the loan originator) must act in the best interests of the agent (the borrower)
It is imposed by federal law and means that the agent (the loan originator) must act in the best interests of the principal (the borrower)
It is imposed by state law and means that the principal (the loan originator) must act in the best interests of the agent (the borrower)
It is imposed by state law and means that the agent (the loan originator) must act in the best interests of the principal (the borrower)

Answer 43

The answer is it is imposed by state law and means that the agent (the loan originator) must act in the best interests of the principal (the borrower). Fiduciary duty is imposed by state law in some jurisdictions and means that the agent (the loan originator) must act in the best interests of the principal (the borrower).

Question 44

A mortgage broker is working with a client who is requesting an inspection of the condition of the roof prior to closing the loan. The broker refers a roofing company that is certified to complete these inspections. Which of the following is true of this arrangement?

It is illegal and unethical for the broker to refer the borrower to this company for inspection
It is unethical and illegal for the broker to receive a referral fee
It is legal but unethical for the broker to receive a referral fee
It is the borrower’s decision as to how a broker is compensated for referrals

Answer 44

The answer is it is unethical and illegal for the broker to receive a referral fee. It is both illegal and unethical for the broker to be paid a referral fee in this scenario.

Question 45

Determining that an individual licensee has not shown financial responsibility includes all but which of the following?

Judgments as a result of medical expenses
A pattern of seriously delinquent accounts in the past three years
Current outstanding tax liens
Foreclosures within the past three years

Answer 45

The answer is judgments as a result of medical expenses. Judgments related to medical expenses are not considered in assessing an applicant’s level of financial responsibility.

Question 46

When a lender is forced to go before a judge to enter an order of foreclosure, it is referred to as:

Non-judicial foreclosure
Judicial foreclosure
Power of sale
Acceleration

Answer 46

The answer is judicial foreclosure. A mortgage or deed of trust that does not contain a power of sale clause requires the lender to go before a judge to have an order of foreclosure entered. This process is called a “judicial foreclosure.”

Question 47

Title insurance is required for all loans by the:

Borrower’s attorney
Lender
Lender’s title company
Borrower

Answer 47

The answer is lender. Title insurance provides coverage for undisclosed liens or other title defects that may not turn up on a title search and is required by the lender. Lender’s insurance is mandatory for loan approval, but owner’s insurance is voluntary.

Question 48

Which of the following statements does not accurately describe a legal obligation that FCRA requires mortgage lenders to meet when using information contained in a credit report?

Lenders must certify that they are using the information in a credit report for a permissible purpose
Lenders must notify the CRA that provided the credit report of any disputes that the loan applicant has with information shown in the report
When providing a notification of adverse action, lenders must include a statement that the CRA did not make the decision to deny a loan application
When denial is based on information from a lender’s affiliate, the lender must notify the loan applicant of the right to know the nature of this information

Answer 48

The answer is lenders must notify the CRA that provided the credit report of any disputes that the loan applicant has with information shown in the report. Lenders do not have a legal obligation to notify CRAs of disputes that loan applicants have with information presented in a credit report.

Question 49

Which of the following caps on an ARM would limit the amount that an interest rate could adjust over the life of the loan?

Payment cap
Lifetime cap
Periodic cap
Worst-case cap

Answer 49

The answer is lifetime cap. The lifetime cap sets the “rate ceiling” on an ARM based off of the start rate.

Question 50

Caps on ARMs:

Are mandatory for any lender offering ARM products
Prevent a lender from calling a loan due if there is delinquency
Limit whether a loan is eligible for prepayment
Limit the amount the interest rate or payment may change

Answer 50

The answer is limit the amount the interest rate or payment may change. Caps on ARMs limit the amount an interest rate or payment can adjust during any one adjustment period or over the lifetime of the loan.

Question 51

Which of the following would not be required for an adjustable-rate home equity plan?

What You Should Know about Home Equity Lines of Credit
Disclosure of APR, fees, and transaction requirements
Disclosure of frequency of APR changes and a description of how the APR will be determined
Loan Estimate and Closing Disclosure

Answer 51

The answer is Loan Estimate and Closing Disclosure. A Loan Estimate and Closing Disclosure would not be required for an adjustable-rate home equity plan, because this type of loan is exempt from the requirements of the TRID Rule.

Question 52

The diligent matching of loan programs with the current financial circumstances of each customer is known as:

Tangible net benefit
Loan standards
Finance corroboration
Loan suitability

Answer 52

The answer is loan suitability. “Loan suitability” is the term used when matching a borrower’s circumstances with an appropriate product for his/her needs. This also leads to determining whether or not there is an actual tangible net benefit.

Question 53

The diligent matching of loan programs with the current financial circumstances of each customer is known as:

Tangible net benefit
Loan standards
Finance corroboration
Loan suitability

Answer 53

The answer is loan suitability. “Loan suitability” is the term used when matching a borrower’s circumstances with an appropriate product for his/her needs. This also leads to determining whether or not there is an actual tangible net benefit.

Question 54

When a borrower is delinquent, RESPA servicing rules require loan servicers to meet all of the following requirements, except:

Make live contact with the borrower within 36 days of the delinquency
Make written contact with the borrower within 45 days of the delinquency
Make live contact with the borrower within 15 days of the delinquency
Include information on loss mitigation options in written correspondence regarding the delinquency

Answer 54

The answer is make live contact with the borrower within 15 days of the delinquency. Delinquency requires live contact within 36 days, and written contact within 45 days that describes loss mitigation options.

Question 55

Which of the following statements describes a lending practice that is prohibited by HOEPA and its implementing regulations?

Originating a subprime mortgage
Redlining and reverse redlining as a standard company policy
Offering prime mortgages to borrowers in the subprime mortgage market
Making a lending decision based solely on the amount of equity in a loan applicant’s home

Answer 55

The answer is making a lending decision based solely on the amount of equity in a loan applicant’s home. HOEPA prohibits lending decisions based solely on the amount of equity in a loan applicant’s home and requires consideration of repayment ability. This prohibition is intended to discourage reverse redlining.

Question 56

All of the following may affect the amount of a VA funding fee, except:

Marital status
First-time use of the VA eligibility
10% down payment
Disability

Answer 56

The answer is marital status. The funding fee for a VA loan can be affected by a number of factors, which can include previous use of eligibility, any down payment amount, and/or a disability.

Question 57

Unilateral increases in the cost of settlement services made by another provider with the intention of retaining the additional fees are referred to as:

YSP
Markups
SRP
Unearned fees

Answer 57

The answer is markups. The earning of additional revenue through the practice of one settlement service provider increasing the fees of another settlement provider with the intention of retaining the additional fees is a practice known as markup.

Question 58

All of the following are true of a loan origination fee, EXCEPT:

May be adjusted based on terms of the loan
May be charged by a mortgage broker or a lender
May be paid at closing
Covers the administrative costs of making the mortgage

Answer 58

The answer is may be adjusted based on terms of the loan. A loan origination fee is a charge by a mortgage broker or lender to cover the administrative costs of making the mortgage. It is paid at closing and varies by lender. The origination fee may NOT be based on loan terms as per the Loan Originator Compensation Rule.

Question 59

The TRID Rule includes a provision stating that a consumer’s intent to proceed with a lending transaction:

Must be stated in writing
Is made when the consumer submits a completed loan application
Must be submitted on a form provided by the creditor
May be oral or written

Answer 59

The answer is may be oral or written. The TRID Rule allows consumers to indicate their intent to proceed with a transaction orally or in writing.

Question 60

Generally, the first lien recorded has priority, with the possible exception of:

Mortgage liens
Mechanic’s liens
Child support liens
Consensual liens

Answer 60

The answer is mechanic’s liens. The first lien recorded has priority. One possible exception is mechanic’s liens, depending on state law.

Question 61

When a loan is characterized as “conforming,” this means the loan:

Meets standards for a government program
Meets guidelines established by Fannie Mae and Freddie Mac
Is a 30-year fixed
Requires no PMI

Answer 61

The answer is meets guidelines established by Fannie Mae and Freddie Mac. Conventional loans are separated into two categories: conforming and non-conforming. A conforming loan meets (or “conforms”) with the lending guidelines set by Fannie Mae and Freddie Mac.

Question 62

When Michael wanted to purchase a home in 2006, his mortgage broker told him that his income was insufficient to qualify for the mortgage. When Michael insisted on trying to purchase the home, his mortgage broker suggested that he complete an application for a stated-income loan, and told him the minimum income level that he needed to include on the application in order to qualify for a mortgage. Michael completed the loan application, adding $20,000 to the minimum amount that his broker suggested. The broker reviewed the application and Michael signed it. Which of the following statements most accurately describes the liability that can arise from this scenario?

The mortgage broker is solely liable because he encouraged Michael to misrepresent his income
Neither Michael nor the mortgage broker is liable since it was common practice in 2006 to exaggerate a loan applicant’s income level
Michael is solely responsible for misrepresentation since he inflated his income more than was necessary to secure the loan
Michael and the mortgage broker are liable for submitting a loan application that contains false information

Answer 62

The answer is Michael and the mortgage broker are liable for submitting a loan application that contains false information. When signing a loan application, loan applicants affirm that all information in the application is true and accurate. Michael has broken the law by submitting false information and misrepresenting that it is true. Mortgage brokers and other originators have an obligation to advise loan applicants that it is a crime to submit false information on a loan application, and those who suggest, encourage, or condone the submission of false information are conspiring with loan applicants to commit fraud.

Question 63

Attorney Mike Hammer has an arrangement with Godfrey Lending to fund all loans that Hammer negotiates on behalf of his clients. In exchange, Godfrey pays Hammer a finder’s fee. Under the S.A.F.E. Act:

As a licensed attorney, Mike is exempt from licensing requirements
Mike must employ a state-licensed loan originator on his staff to engage in this practice
Mike must be licensed as a loan originator
Mike may engage in this practice if the property involved is located outside the state in which he is licensed to practice law

Answer 63

The answer is Mike must be licensed as a loan originator. A licensed attorney is exempt from the requirement to be licensed as a mortgage loan originator if he offers or negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to his/her representation of the client, unless the attorney is compensated by a lender, mortgage broker, or other loan originator, or by any agent of the same.

Question 64

What is the difference between MIP and PMI?

PMI is applicable to FHA loans; MIP is applicable to conventional mortgages
MIP is applicable to FHA loans; PMI is applicable to conventional mortgages
There is no difference between MIP and PMI
MIP is optional; PMI is not

Answer 64

The answer is MIP is applicable to FHA loans; PMI is applicable to conventional mortgages. Mortgage insurance premium (MIP) is applicable to FHA loans. Private mortgage insurance (PMI) is applicable to conventional mortgages. While they serve a similar purpose, they are not the same.

Question 65

Money paid to a mortgage lender for the purpose of paying a third party may not be:

Misrepresented or accounted for untruthfully
Charged in an amount equal to the cost of the third party services
Collected from a borrower to pay for title services
Disclosed to the borrower prior to collection

Answer 65

The answer is misrepresented or accounted for untruthfully. Money paid to a mortgage lender for the purpose of paying a third party may not be misrepresented or accounted for untruthfully.

Question 66

What is not required for a VA loan?

Certificate of Eligibility
Mortgage insurance premium
Primary residence
Total debt ratio

Answer 66

The answer is mortgage insurance premium. A VA loan does not require mortgage insurance premium. VA loans use a funding fee.

Question 67

Jenny has applied for a loan to purchase a home and learns that she is unable to qualify for any loan other than a high-cost mortgage. Her lender, MortgageMax, tells her that she must complete pre-loan counseling to obtain the loan. MortgageMax also tells her that it will pay for the counseling if she uses a counselor from its affiliate company, MortgageMax Counseling, and obtains her certification from this company. Which statement is the most accurate assessment of this arrangement?

MortgageMax followed the law when it required Jenny to complete counseling because she cannot get a high-cost loan until she earns her certification of counseling
MortgageMax should have provided Jenny with a list of at least five HUD-approved counselors that offer counseling in the town where she is attempting to purchase a home
MortgageMax may pay the counseling fees, but is prohibited from steering Jenny towards a particular counselor or allowing her to complete counseling from one of its affiliates
MortgageMax may suggest particular counseling agencies, including its affiliates, but is not allowed to pay the cost of counseling

Answer 67

The answer is MortgageMax may pay the counseling fees, but is prohibited from steering Jenny towards a particular counselor or allowing her to complete counseling from one of its affiliates. MortgageMax may pay the counseling fees, but it is prohibited from steering Jenny towards a particular counselor or allowing her to complete counseling from one of its affiliates.

Question 68

The law requires that first-time borrowers complete counseling with a HUD-approved counselor before accepting a loan that features:

Negative amortization
A fixed interest rate
An adjustable interest rate
A 15-year term

Answer 68

The answer is negative amortization. The law requires that first-time borrowers complete counseling with a HUD-approved counselor before accepting a loan that features negative amortization. This is a requirement that applies specifically to first-time homebuyers.

Question 69

Slim Tipton, a recent widower, has just refinanced his home, which he has been renting to his son ever since he moved into a beachfront condo two years prior. The purpose of this cash out refinance is to help his son, Tiny, start a printing business. In this scenario, who receives copies of the Notice of the Right to Cancel?

Only Slim, since his wife is no longer alive
Neither Slim nor Tiny receives a Notice of the Right to Cancel
Slim and his son Tiny, since Tiny is living in the home securing the refinance
Slim is the only one to receive a Notice of the Right to Cancel

Answer 69

The answer is Neither Slim nor Tiny receives a Notice of the Right to Cancel. TILA allows for a rescission period on the refinance of a borrower’s principal dwelling. Since Slim has been living in a condo as his primary residence for two years, the refinance of his previous home would be considered non-owner-occupied, which is not subject to the right of rescission.

Question 70

Advantages of VA loans include all of the following, except:

100% financing
More lenient underwriting requirements
No closing costs
No prepayment penalties

Answer 70

The answer is no closing costs. Advantages of VA loans include 100% financing, more lenient underwriting requirements, and no prepayment penalties.

Question 71

When a creditor revises a Loan Estimate, the revised version must be received by the consumer:

No later than seven business days prior to consummation
No later than four business days prior to consummation
On the same date that it delivers a Closing Disclosure
At the same time that the revisions are made

Answer 71

The answer is no later than four business days prior to consummation. When a creditor revises a Loan Estimate, the revised version must be received by the consumer no later than four business days prior to consummation.

Question 72

Wanda had been procrastinating on taking her continuing education courses. As the end of the year approached, she saw a course she had taken the previous year was available. Since she had already mastered the information, she decided to take it again. Will this course count towards her continuing education hours for the current year?

The course will count as long as Wanda receives her certificate of completion
The course will count as long as it is an NMLS-approved course
No, the course will not count towards her continuing education hours
The course will not count only if it is taught by the same instructor

Answer 72

The answer is no, the course will not count towards her continuing education hours. A state-licensed loan originator may not take the same approved course in the same or successive years to meet the annual continuing education requirement of eight hours of coursework.

Question 73

What type of loan is a jumbo loan?

Nonconventional
Non-government
Nonconforming
Conforming

Answer 73

The answer is nonconforming. A jumbo loan falls outside of Fannie Mae and Freddie Mac loan limit guidelines, which makes it “nonconforming.”

Question 74

Loans that do not meet guidelines established by Fannie Mae and Freddie Mac are known as:

Unconventional
Government
Nonpermissible
Nonconforming

Answer 74

The answer is nonconforming. A nonconforming loan is a conventional mortgage that exceeds the current lending guidelines established by Fannie Mae and Freddie Mac.

Question 75

Loans that do not meet the guidelines set by Fannie Mae and Freddie Mac are considered to be:

Conventional
Nonconforming
Government
Unconventional

Answer 75

The answer is nonconforming. Loans that do not meet Fannie Mae and Freddie Mac guidelines are considered “nonconforming.”

Question 76

An advertisement that states “Refinance with 30 year fixed rates as low as 4.25%!” is:

A violation of TILA
A TILA violation only if the loans are not available
A TILA violation because it targets struggling homeowners
Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true

Answer 76

The answer is not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true. An advertisement that states “Refinance with 30 year fixed rates as low as 4.25!” is not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true.

Question 77

Jared is struggling to make payments on a high-cost mortgage. He returns to the mortgage lender that made the loan and applies for a loan modification. If the mortgage lender agrees to modify the loan, it may:

Charge Jared the same fees that it would charge for a refinance
Charge a loan origination fee
Not charge any fees for the loan modification
Not charge any fees for the loan modification if Jared is in default

Answer 77

The answer is not charge any fees for the loan modification. HOEPA prohibits creditors, assignees, and agents of these parties from charging any fee to modify, renew, extend, or amend a high-cost home loan, and from charging a fee for payment deferrals.

Question 78

If a loan originator has not renewed his/her license by December 31st, he/she may:

Only see through completion of those loans originated prior to license expiration
Not continue to conduct any loan originator activities until the license has been renewed
Continue to honor existing contracts and be compensated only for those loans already in the pipeline
Continue to conduct business as normal as long as a renewal application is submitted prior to the “late renewal” deadline

Answer 78

The answer is not continue to conduct any loan originator activities until the license has been renewed. While some state regulators will allow for a “late renewal,” after December 31st the license is expired. Therefore, the originator is technically unlicensed and may not continue to engage in any activities that require a license to conduct business.

Question 79

John Walker’s loan application was denied by XYZ Mortgage. XYZ is required to provide a(n) _____ within _____.

Valuation Results Report; three days of denial
Notice of Adverse Action; 30 days of application
Derogatory Action Notice; three days of application
Notice of Action Taken; 60 days of application

Answer 79

The answer is Notice of Adverse Action; 30 days of application. John Walker’s loan application was denied by XYZ Mortgage. XYZ is required to provide a Notice of Adverse Action within 30 days of application.

Question 80

Yield spread premiums are:

Now known as borrower credits, and may only be used to help the borrower pay closing costs
No longer regulated by the Real Estate Settlement Procedures Act
Allow a loan originator to be compensated in a mortgage transaction
Now known as prepayment penalties, and prohibited for almost all loan transactions

Answer 80

The answer is now known as borrower credits, and may only be used to help the borrower pay closing costs. Yield spread premiums are now known as borrower credits, and may only be used to help the borrower pay closing costs.

Question 81

After meeting with the Rolles to discuss their mortgage needs, loan originator Gerta Grimm reviews various available loan products. After selecting what she thinks would best fit their needs, she arranges another meeting to present the terms of each product for the Rolles’ consideration. This is an example of:

Taking a mortgage loan application
Facilitating a mortgage loan
Arranging mortgage loan terms
Offering or negotiating mortgage loan terms

Answer 81

The answer is offering or negotiating mortgage loan terms. An individual offers or negotiates terms of a residential mortgage loan for compensation or gain if the individual presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms.

Question 82

FACTA requires an initial Fraud Alert to be kept in a consumer’s file for what period of time?

One year
Seven years
One month
Until removed by the borrower

Answer 82

The answer is one year. FACTA requires an initial Fraud Alert to be kept in a consumer’s file for a period of one year. An Extended Fraud Alert, meaning there is an actual identity theft report submitted, is required for seven years.

Question 83

The Gramm-Leach-Bliley Act requires that a consumer be given an Initial Privacy Notice:

Only if nonpublic personal information is intended to be shared with nonaffiliated third parties
Within three days of application
Within 30 days of application
After information has been shared with an affiliated or nonaffiliated party

Answer 83

The answer is only if nonpublic personal information is intended to be shared with nonaffiliated third parties. Financial institutions are only required to provide an Initial Privacy Notice to consumers if they intend to share their information.

Question 84

Which of the following fees must be included in the calculation of finance charges?

Appraisal fees
Seller’s points
Credit reporting fees
Origination fees

Answer 84

The answer is origination fees. TILA requires charges for origination fees to be included when calculating the finance charge.

Question 85

Tom, a mortgage loan originator, accepts the Carters’ loan application and negotiates the terms of their loan. Mortgages R Us, the lender, prepares all of the required paperwork and arranges for loan closing. Once the documents are signed, Mortgages R Us funds the loan. All of these actions are considered to be part of:

A consumer credit transaction
Completion of settlement services
The origination of a residential mortgage loan
A state licensing agency’s responsibilities

Answer 85

The answer is origination of a residential mortgage loan. Origination of a residential mortgage loan involves all residential mortgage loan-related activities from the taking of a loan application through completion of all required closing documents and the funding of the residential mortgage loan.

Question 86

A borrower is considered to be self-employed if he or she:

Has not earned W-2 income in the previous two years
Owns more than 1% of a business
Owns more than 25% of a business
Has ownership of at least 51% of a business

Answer 86

The answer is owns more than 25% of a business. A borrower is considered self-employed if he or she owns more than 25% of a business.

Question 87

What legislation was enacted to strengthen money laundering laws to prevent the financing of terrorist activities?

Money Laundering Act of 2003
PATRIOT Act
HERA
FTC Red Flags Rule

Answer 87

The answer is PATRIOT Act. The USA PATRIOT Act is intended to deter and punish terrorist acts in the United States and around the world. One of the many ways this is accomplished is by attempting to prevent the free-flow of financing for these acts through various money laundering schemes.

Question 88

Which of the following compensation practices is allowed under the Loan Originator Compensation Rule?

Paying originators a commission for originating a loan at a higher rate than the rate for which the loan applicant qualified
Allowing a mortgage broker to accept an origination fee from a borrower and a commission from the lender that funds the loan
Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan
Implementing a policy that encourages loan originators to originate refinances with prepayment penalties

Answer 88

The answer is paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan. Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan, is allowed under the Loan Originator Compensation Rule.

Question 89

Which of the following is a limit on the amount that the payment can change on any adjustment date from the current or previous payment amount on an ARM?

Initial rate cap
Payment cap
Periodic rate cap
Lifetime rate cap

Answer 89

The answer is payment cap. The payment cap is a limit on the amount by which the payment can change on any adjustment date from the current or previous payment amount on an ARM.

Question 90

Standard income qualification for a salaried borrower applying for a conforming loan typically includes:

Two weeks of paystubs and W-2s for three years
Paystubs for the most recent 30-day period and W-2s for the most recent two years
Tax returns for the past two years accompanied by a 4506-C
Paystubs and tax returns documenting all commission income

Answer 90

The answer is paystubs for the most recent 30-day period and W-2s for the most recent two years. Conforming loan programs meet the guidelines set by Fannie Mae and Freddie Mac. The general guidelines set for salaried income include W-2s from the past two years and paystubs from the past 30 days.

Question 91

Property that is transitory and can be moved is known as:

Real property
Diminishing property
Personal property
Depreciated property

Answer 91

The answer is personal property. Personal property is property that is transitory and can be moved.

Question 92

An 80-10-10 loan is an example of a:

Construction loan
Reverse mortgage loan
Higher-priced mortgage loan
Piggyback loan

Answer 92

The answer is piggyback loan. An 80-10-10 loan is an example of a piggyback loan.

Question 93

ACME Home Loans is a private lender with a strict policy of limiting originations to conventional qualified mortgages with minimum loan amounts of $300,000. To ensure compliance with this policy, loan originators are instructed to refuse to accept applications from consumers who want loan amounts of less than $300,000, or who have debt-to-income ratios of 44% or more. This policy is:

Not a violation of any federal fair lending law
Potentially unlawful under the disparate impact theory
An example of disparate treatment of consumers
Legal if there is no discriminatory intent

Answer 93

The answer is potentially unlawful under the disparate impact theory. Even when there is no intent to discriminate, lending policies are potentially unlawful if they could adversely impact creditworthy consumers who belong to a protected class. For example, the lending standards described in this question could adversely impact younger applicants, thereby violating ECOA’s prohibition against age-based discrimination.

Question 94

The legal document that authorizes one person to act on behalf of another is called:

Legal prerogative
Power of attorney
Fiduciary authorization
Proxy agreement

Answer 94

The answer is power of attorney. Power of attorney is a legal document that authorizes one person to act on behalf of another. It can grant complete authority or be limited to certain acts and/or certain periods of time.

Question 95

Foreclosure is the sale of a property after a borrower’s default on payments. The exact procedure the lender follows in order to foreclose is dependent on the absence or presence of a:

Power of attorney
Power of sale clause
Deed in lieu of foreclosure
Mortgagee clause

Answer 95

The answer is power of sale clause. The foreclosure process is determined by the presence or absence of a power of sale clause in the mortgage or deed of trust. If there is no power of sale clause, the lender must go to court to foreclose (called a judicial foreclosure). If a power of sale clause is included in the mortgage or deed of trust, then the lender can begin foreclosure without court involvement (nonjudicial foreclosure).

Question 96

Which of the following statements regarding the calculation of finance charges is not true?

Premiums for optional insurance products are always included
Premiums for optional insurance products are not included if the creditor discloses that coverage is optional and does not extend through the full loan term
Reasonable charges for title insurance that do not result in direct or indirect compensation for the creditor are not included
Charges paid to a title insurer that is not affiliated with the creditor are not included

Answer 96

The answer is premiums for optional insurance products are always included. Charges that result in compensation for creditors and affiliates are included in finance charges, but when required disclosures are provided, charges for optional insurance products are not.

Question 97

Fees charged for an early repayment of a debt are known as:

Acceleration
Prepayment penalty
Finance charges
Deferred payment loan

Answer 97

The answer is prepayment penalty. A prepayment penalty is a fee charged to a borrower for early repayment of a loan.

Question 98

Loans are originated and funded in the:

Secondary mortgage market
Reverse mortgage market
Subprime mortgage market
Primary mortgage market

Answer 98

The answer is primary mortgage market. Loans are originated and funded in the primary mortgage market.

Question 99

The conclusive presumption of compliance applies to:

Subprime loans that meet the qualified mortgage standards
Prime and subprime loans that meet the qualified mortgage standards
Prime loans that meet the qualified mortgage standards
Fixed-rate prime loans that do not meet the qualified mortgage standards

Answer 99

The answer is prime loans that meet the qualified mortgage standards. The conclusive presumption of compliance applies to prime loans that meet the qualified mortgage standards.

Question 100

Loan products that tempted consumers to misrepresent their loan qualifications during the lending boom included all but which of the following?

No-doc loans
Stated-income loans
Low-doc loans
Prime loans

Answer 100

The answer is prime loans. During the lending boom, products such as no-doc, low-doc, and stated-income loans were offered at subprime rates, and they tempted consumers to secure loans with false information. These types of misrepresentations were far less common when consumers were required to produce all of the full documentation that was required to secure a prime loan product.

Question 101

With regard to fiduciary duties in mortgage lending, the borrower is the _____, and the broker is the _____.

Agent; borrower
Principal; agent
Fiduciary; agent
Fiduciary; principal

Answer 101

The answer is principal; agent. Fiduciary duties include loyalty, good faith, and an obligation to put the interests of the principal (borrower) ahead of those of the agent (broker).

Question 102

The lending document that contains the contractual terms for repaying a home loan is the:

Mortgage
Promissory note
Deed of trust
Closing Disclosure

Answer 102

The answer is promissory note. The promissory note is the promise to repay a loan and contains the contractual terms for repayment.

Question 103

Xavier has been charged with alleged violations of his state’s S.A.F.E. Act. Before a civil penalty may be imposed on him, the state is required to:

Request an accounting of Xavier’s assets
Determine a payment plan
Provide Xavier notice and an opportunity for a hearing
Submit a claim against Xavier’s surety bond

Answer 103

The answer is provide Xavier notice and an opportunity for a hearing. The state licensing agency may impose a civil penalty on a mortgage loan originator or person subject to the S.A.F.E. Act if it finds, after notice and an opportunity for hearing, that the mortgage loan originator or person subject to the Act has violated or failed to comply with any requirement of the Act or any regulations prescribed by the state licensing agency.

Question 104

All of the following are responsibilities of the underwriter, except:

Confirming that a potential borrower has sufficient cash assets to close
Providing a borrower with a notice of adverse action
Ensuring the property is eligible and meets lender guidelines for collateral
Examining the overall pattern of credit behavior and isolated occurrences of derogatory credit

Answer 104

The answer is providing a borrower with a notice of adverse action. The underwriter is responsible for confirming that a potential borrower has sufficient cash assets to close, ensuring that the property is eligible and meets lender guidelines for collateral, and examining the overall pattern of credit behavior and isolated occurrences of derogatory credit.

Question 105

Agatha was a licensed loan originator when the housing market slowdown left her with little work. She accepted a job outside the mortgage field over three years ago, and her license expired. Now, Agatha wants to apply for a license again. One of the requirements Agatha must meet in order to be re-licensed is:

Providing proof that she completed all of the continuing education requirements for the year she last held a license
Providing proof that she still meets the qualifications to be a mortgage loan originator
Providing information relating to her previous license
Filing the appropriate paperwork with the NMLS to reinstate her license

Answer 105

The answer is providing proof that she completed all of the continuing education requirements for the year she last held a license. An individual who was previously licensed and is applying to be licensed again must have completed all of the continuing education requirements for the year in which the license was last held.

Question 106

The Truth-in-Lending Act is intended to help consumers by:

Regulating creditors and the rates they can provide
Investigating predatory lending
Limiting the closing costs a broker can charge
Providing the consumer with information on the cost of credit

Answer 106

The answer is providing the consumer with information on the cost of credit. The main purpose of TILA is to provide the consumer protection by requiring disclosure of the cost of credit.

Question 107

Appraisers make adjustments to comparables used in an appraisal based on:

Size, age, and color
Location, owners, and age
Proximity, date of sale, and physical characteristics
Season, size, and age

Answer 107

The answer is proximity, date of sale, and physical characteristics. Adjustments are made to comparables after being analyzed for differences and similarities. The appraiser makes adjustments for location, terms, conditions of the sale, and physical characteristics.

Question 108

In accordance with TILA, all of the following are eligible for a three-day right to rescind, except:

Home equity line of credit
Purchase money mortgage
Home improvement loan
Refinance of a property that is owner-occupied

Answer 108

The answer is purchase money mortgage. No right to rescind exists for a first mortgage to purchase a home.

Question 109

Which of the following mortgage loan types creates a presumption that the loan complies with ability-to-repay standards?

Reverse mortgage
Qualified mortgage
Balloon mortgage
Fixed-rate mortgage

Answer 109

The answer is qualified mortgage. The Qualified Mortgage Rule creates four types of “qualified mortgages.” A loan that falls under the definitions of one of these four QM types will be presumed to comply with ability-to-repay standards.

Question 110

ECOA prohibits creditors from discriminating against credit applicants on the basis of:

Race, color, religion, national origin, sex, marital status, age
Tax bracket, ZIP code, number of children, or immigration status
ECOA was not enacted to address discrimination
Race, color, religion, national origin, sex, marital status, age, because the applicant receives public assistance income, or because an applicant exercised his or her right under the Consumer Credit Protection Act

Answer 110

The answer is race, color, religion, national origin, sex, marital status, age, because the applicant receives public assistance income, or because an applicant exercised his or her right under the Consumer Credit Protection Act. ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, because the applicant receives public assistance income, or because an applicant exercised their right under the Consumer Credit Protection Act.

Question 111

Tom has negotiated a contract for the sale of the Flynns’ home to the Ryders. However, the contract does not involve any financing for the transaction to be completed. Tom has engaged in:

Real estate brokerage activities
Loan origination activities
Loan processing activities
Loan closing activities

Answer 111

The answer is real estate brokerage activities. Real estate brokerage activity is any activity that relates to the offering of or providing real estate brokerage services to the public, including negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental or exchange of real property, other than in connection with providing financing for the transaction.

Question 112

The FTC Disposal Rule requires a loan originator to use _____ to ensure that unauthorized access to or use of consumer information cannot occur as a result of its disposal.

Extraordinary measures
Third-party certified disposal
Locked cabinets
Reasonable methods

Answer 112

The answer is reasonable methods. FACTA requires the use of “reasonable methods” to make sure a borrower’s personal information cannot be accessed as a result of its disposal.

Question 113

The process of releasing a lien on a property is called:

Deliening
Title restoration
Encumbrance
Reconveyance

Answer 113

The answer is reconveyance. Reconveyance is the process of releasing a lien on a property.

Question 114

An individual who is an employee of a depository institution or a subsidiary of a depository institution meets the definition of a loan originator, defined as a(n):

Licensed mortgage loan originator
Exempt mortgage loan originator
Registered mortgage loan originator
Qualified mortgage loan originator

Answer 114

The answer is registered mortgage loan originator. A “registered mortgage loan originator” is an individual who is employed by an exempt depository institution and is therefore also exempt from licensure as a loan originator. The registered mortgage loan originator is merely required to be registered with the NMLS.

Question 115

The Truth-in-Lending Act:

Regulates the time a borrower is required to pay private mortgage insurance
Requires that the borrower be informed of estimated closing costs within three business days of application
Regulates language and terms used in advertising for credit
Prohibits unlicensed brokers from offering government loan products

Answer 115

The answer is regulates language and terms used in advertising for credit. TILA and Regulation Z prohibit the advertisement of lending terms that a lender or creditor is not actually prepared to offer. The law and regulations also seek to prevent publication of advertisements that are deceptive and misleading.

Question 116

The implementing regulations for the MAP Rule are known as:

Regulation N
Regulation Z
Regulation C
Regulation X

Answer 116

The answer is Regulation N. The implementing regulations for the MAP Rule are known as Regulation N.

Question 117

What legislation regulates the proper management of escrow accounts?

FHA
Homeowners Protection Act
Regulation X
HMDA

Answer 117

The answer is Regulation X. RESPA (Regulation X) regulates the management of escrow accounts.

Question 118

Using misleading language in an advertisement (for example, using language that suggests that an advertised loan is “fixed” when it actually is not) is a practice specifically prohibited under:

Regulation B
Regulation Z
FCRA
Regulation C

Answer 118

The answer is Regulation Z. Regulation Z includes prohibitions against misleading and false advertising, including a prohibition against misleading advertising of “fixed” rates and payments.

Question 119

Which regulation details seven specific advertising prohibitions?

Regulation B
Regulation C
Regulation X
Regulation Z

Answer 119

The answer is Regulation Z. The Truth-in-Lending Act (Regulation Z) details seven specific prohibitions when it comes to advertising for credit.

Question 120

Under the S.A.F.E. Act, a mortgage loan originator must submit to the NMLS:

Reports of condition
Financial reports
Business organization documentation
Trust account information

Answer 120

The answer is reports of condition. Each mortgage licensee must submit to the NMLS reports of condition in the form and containing the information as may be required by the NMLS.

Question 121

Which of the following is considered an “acceptable” communication with an appraiser?

Implying that the appraiser’s services will no longer be used if a minimum value is not met
Explaining to the appraiser that a minimum value must be given to get the deal done
Refusing payment to an appraiser because of a lower-than-expected value
Requesting that an appraiser consider additional information about a property or comparable

Answer 121

The answer is requesting that an appraiser consider additional information about a property or comparable. With regard to appraiser communication, it is considered acceptable to request that an appraiser consider additional information about the subject property or comparables.

Question 122

This is the term for the ability to cancel a transaction.

Subordination
Redlining
Rescission
Prioritization

Answer 122

The answer is rescission. Rescission is the term for the ability to cancel a transaction.

Question 123

Mishandling and/or improperly managing a borrower’s funds is a practice prohibited by:

RESPA
TILA
GLB
FNMA

Answer 123

The answer is RESPA. The mishandling of a borrower’s funds often leads to commingling or misappropriation, which is a practice prohibited by RESPA.

Question 124

A home equity conversion mortgage (HECM) is a type of _____ that is made pursuant to guidelines established by the _____.

Reverse mortgage/Federal Trade Commission
Home equity loan/CFPB
Reverse mortgage/FHA
Home equity loan/HUD

Answer 124

The answer is reverse mortgage/FHA. HECMs are reverse mortgages that are offered in compliance with program guidelines set by the FHA and HUD.

Question 125

The types of high-cost mortgages that may be subject to HOEPA include all of the following, except:

Refinances
Reverse mortgages
Home equity lines of credit
Loans to purchase a home

Answer 125

The answer is reverse mortgages. The Dodd-Frank Act broadened the scope of HOEPA to cover almost all mortgage types, except for reverse mortgages.

Question 126

Assessment of borrower repayment ability is not required for:

Closed-end home loans
Adjustable-rate home loans
HOEPA loans
Reverse mortgages

Answer 126

The answer is reverse mortgages. TILA expressly requires an assessment of repayment ability for virtually all transactions other than those for reverse mortgages.

Question 127

Enhancing protection and reducing fraud by directing states to adopt minimum uniform standards for the licensing and registration of residential mortgage loan originators was the purpose of the federal act known as the:

S.A.F.E. Act
Federal Trade Act
Consumer Financial Protection Act
Dodd-Frank Act

Answer 127

The answer is S.A.F.E. Act. The purpose of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act) was to enhance consumer protection and reduce fraud by directing states to adopt minimum uniform standards for the licensing and registration of residential mortgage loan originators and to participate in a Nationwide Multistate Licensing System and Registry database.

Question 128

Two federal laws that relate to the confidentiality of personal financial information are:

Safeguards Rule and RESPA
RESPA and FTC Disposal Rule
FTC Disposal Rule and FNMA Application Rule
Safeguards Rule and FTC Disposal Rule

Answer 128

The answer is Safeguards Rule and FTC disposal rule. The two important regulations that deal specifically with the confidentiality of personal financial information are the Safeguards Rule and the FTC Disposal Rule.

Question 129

An appraiser uses any one of three appraisal approaches to determine the value of a property. They are:

Sales comparison, market comparison, and subject comparison
Market comparison, cost comparison, and investment approach
Sales, cost, and comparable
Sales comparison (or market), cost, and income

Answer 129

The answer is sales comparison (or market), cost, and income. The three appraisal approaches are the sales comparison approach, the cost approach, and the income approach.

Question 130

Sally and Ben have lived in their home for ten years and are considering shortening their term. Which of the following appraisal approaches would be best?

Income approach
Cost approach
Market comparison approach
Sales comparison approach

Answer 130

The answer is sales comparison approach. The sales comparison approach is most commonly used and involves the comparison of three similar, recently-sold properties.

Question 131

Loans are purchased as investments in the:

Secondary mortgage market
Primary mortgage market
Reverse mortgage market
Subprime mortgage market

Answer 131

The answer is secondary mortgage market. Loans are purchased as investments in the secondary mortgage market.

Question 132

On which portion of the redesigned loan application would one find a street address of the property and whether it will be a primary or secondary residence?

Section 1
Section 9
Section 8
Section 4

Answer 132

The answer is Section 4. Section 4 of the 1003, “Loan and Property Information,” provides information about the property, including its street address and how it will be used.

Question 133

When a loan originator accepts a referral fee from a real estate agent, both are in violation of what section of RESPA?

Section 10
Section 12
Section 6
Section 8

Answer 133

The answer is section 8. Section 8 of RESPA deals with the prohibition against giving or receiving anything of value pursuant to an agreement or understanding.

Question 134

In order to engage in the business of a loan originator, a loan processor who is working for a mortgage broker must:

Secure a license as a loan originator
Request the supervision of a licensed loan originator
Secure new employment with a depository institution, such as a bank
Learn how to perform a mortgage loan repayment analysis

Answer 134

The answer is secure a license as a loan originator. In order to engage in the business of a loan originator, a loan processor who is working for a mortgage broker must secure a license as a loan originator.

Question 135

A transaction in which the seller provides all or most of the financing is best known as:

Self-financing
Owner buy-back
Seller carry-back
Rent credit

Answer 135

The answer is seller carry-back. A seller carry-back loan is a transaction in which the seller provides most or all of the financing. Typically, this type of transaction involves an assumable mortgage.

Question 136

What is the difference between seller financing and seller concessions?

Seller concessions are a gift from the seller used to pay closing costs and do not have to be paid back; seller financing is a loan from the seller that functions as a second mortgage and must be repaid
Seller concessions are a gift from the seller used to pay closing costs and do not have to be paid back; seller financing is the same as purchasing discount points to lower the interest rate
Seller concessions are the same as purchasing discount points to lower the interest rate; seller financing is a gift from the seller to pay closing costs and does not have to be paid back
Seller financing and seller concessions function in the same way and serve the same purpose

Answer 136

The answer is seller concessions are a gift from the seller used to pay closing costs and do not have to be paid back; seller financing is a loan from the seller that functions as a second mortgage and must be repaid. Seller financing is a loan from the seller that is recorded in the second position (i.e., as a second mortgage) and must be repaid. Seller concessions are a gift from the seller used to pay closing costs and do not have to be paid back.

Question 137

For a conventional, conforming loan, the borrower is making a down payment of 12%. The seller wishes to contribute to closing costs for the transaction. What is the most that the seller can contribute?

Seller concessions of 12%
Seller concessions of 3%
Seller concessions of 6%
Seller concessions of 78%

Answer 137

The answer is seller concessions of 6%. Fannie Mae and Freddie Mac permit seller concessions in conforming loan transactions, to help defray the costs of closing. When the borrower makes a down payment of between 10% and 24.9%, seller concessions of up to 6% are permitted.

Question 138

A fee that lenders may receive for selling or transferring their right to service a mortgage loan is called:

Yield spread premium
Margin
Service release premium
Finance charge

Answer 138

The answer is service release premium. When a lender gives up its right to service a loan through sale or transfer of that loan, the lender may receive a service release premium in exchange for relinquishing its right.

Question 139

Inez is applying to renew her loan originator license. She has completed the application, provided proof that she has satisfied the continuing education requirement, and paid the renewal fee. What other requirement for license renewal must Inez meet?

She must submit a report summarizing the loans she originated during the previous licensing period
She must provide proof of continuing employment
She must provide proof she has no pending disciplinary issues from the previous licensing period
She must continue to meet the minimum standards for license issuance

Answer 139

The answer is she must continue to meet the minimum standards for license issuance. In order to renew a license, a state-licensed loan originator must continue to meet the minimum standards for license issuance, satisfy the annual continuing education requirements, and pay all required renewal fees.

Question 140

Which of the following is an example of the discriminatory practice of steering?

Refusing to originate loans for borrowers in a particular ZIP code
Limiting the scope of business to a 100-mile radius of the office
Approving a loan based on the borrower’s equity rather than his or her ability to repay the loan
Showing a borrower of a particular race or ethnicity properties in a specific neighborhood regardless of the borrower’s interests or financial capacity

Answer 140

The answer is showing a borrower of a particular race or ethnicity properties in a specific neighborhood regardless of the borrower’s interests or financial capacity. In fair lending terms, steering is the practice of directing a potential homebuyer in a particular direction based on his or her demographics and without regard to his or her interests or financial capacity. This should not be confused with the separate predatory lending practice called steering, in which mortgage professionals coerce or otherwise guide consumers to accept loan terms that are more expensive than they need in order to increase profits.

Question 141

“SIVA” stands for:

Stated income validation amortization
Simple interest validation account
Stated income verified assets
Stated interest verification account

Answer 141

The answer is stated income verified assets. “SIVA” stands for stated income verified assets.

Question 142

Under TILA guidelines, all of the following disclosures are provided for an adjustable-rate loan, except:

Frequency of changes in the annual percentage rate
Statement that the interest rate will be offered for the duration of the loan
Possibility of changes in the payment amount over time
The index used to determine rate adjustments

Answer 142

The answer is statement that the interest rate will be offered for the duration of the loan. Under TILA guidelines, required disclosures for an adjustable-rate loan include the frequency of changes in the annual percentage rate, the index used to determine rate adjustments, and the fact that the payment amount may change over time.

Question 143

All of the following are common indices used for adjustable rates, except:

London Interbank Offered Rate
Cost of Funds Index
Subordinate Rate Index
Treasury Bill Index

Answer 143

The answer is Subordinate Rate Index. Common indices include the Treasury Bill Index, the 11th District Cost of Funds Indexes (COFI), or the London Interbank Offered Rate (LIBOR).

Question 144

Loan processors and underwriters who are exempt from licensure may not:

Communicate with consumers to obtain information necessary for loan processing
Collect information required to document a loan application
Distribute disclosures required in accordance with federal law
Take a loan application in the absence of a loan originator

Answer 144

The answer is take a loan application in the absence of a loan originator. Exempt processors and underwriters may not take on any of the responsibilities of the loan originator that would ordinarily require a license, such as taking an application.

Question 145

After a cursory examination by the state, it is determined that Quick Dollar Mortgage Co., in all probability, is engaging in prohibited activities. To ensure that Quick Dollar’s files and records are not tampered with during the investigation, state examiners may do which of the following?

Place all records in a separate location undisclosed to the licensee until the investigation is over
Require that all records be transferred to the NMLS for review and safekeeping
Take complete physical control of all records and prohibit the licensee from any access during the investigation
Take possession of records or designate a specific person to control access

Answer 145

The answer is take possession of records or designate a specific person to control access. During the course of an examination or investigation, the state licensing agency may take possession of the documents and records of the person being examined or place a person in exclusive charge of the documents and records in the place where they are usually kept. Licensees generally must still be given access to records for the purposes of conducting normal business, but licensees and their employees are prohibited from any attempt to destroy, conceal, secrete, remove, or otherwise tamper with records and files during investigation or at any time

Question 146

When funds are placed in a separate escrow account to offset the monthly payments required by the terms of a loan, and those funds are used to reduce the payment rate for a period of time, this is known as:

Good faith deposit
Earnest money deposit
Temporary buy-down
Seller concessions

Answer 146

The answer is temporary buy-down. A temporary buy-down occurs when a borrower deposits funds into escrow that are used to offset a portion of the payment for a period of time at the start of a loan. Once the initial buy-down period expires, the payment is then based off of the note rate, which was set at the time the loan was locked and remains the same, even during the lower payment period.

Question 147

Bankruptcy information will remain on a consumer’s credit report for up to:

Two years
Five years
Seven years
Ten years

Answer 147

The answer is ten years. Bankruptcy information will remain on a consumer’s credit report for ten years.

Question 148

Bankruptcy cases may stay on the credit report for up to how many years?

Five
Two
Ten
Three

Answer 148

The answer is ten. Bankruptcy cases may stay on the credit report for up to ten years.

Question 149

The provisions of the GLB Act specifically require compliance with the:

1. MARS Rule
2. Safeguards Rule
3. PATRIOT Act
4. Truth-in-Lending Act

Answer 149

The answer is the Safeguards Rule. The provisions of the GLB Act specifically require compliance with the Safeguards Rule.

Question 150

In what area of the Loan Estimate would a borrower be able to see if their loan has a balloon payment?

The “Projected Payments” table
The “Comparisons” table
The “Loan Terms” section
This is not listed on the Loan Estimate

Answer 150

The answer is the “Loan Terms” section. The Loan Terms section on page 1 of the Loan Estimate includes, among other things, an indication of whether the loan includes a prepayment penalty or a balloon payment.

Question 151

Lifetime rate caps are used in transactions for adjustable-rate mortgages to limit:

The number of rate adjustments that can occur during a loan’s term
The amount by which periodic payments can change over the loan term
The amount by which an interest rate can change over the loan term
The amount of interest that a borrower can pay during a loan’s term

Answer 151

The answer is the amount by which an interest rate can change over the loan term. Lifetime rate caps limit the amount by which a rate can change during a loan term.

Question 152

Which of the following is least likely to be a sign of mortgage fraud?

Signatures on documents provided by the applicant do not match one another
The applicant appears to be quite young but makes a high salary
Identification documents provided are blurry, hard to read, and appear to be photocopies or faxed documents
Information on W-2s does not match the income of the applicant

Answer 152

The answer is the applicant appears to be quite young but makes a high salary. An applicant who appears to be young but has a high salary would not necessarily be a sign of mortgage fraud.

Question 153

An acceleration clause is sometimes added to reverse mortgages. This means that the loan could become due and payable under certain circumstances, which may include all but which of the following?

A new owner is added to the title
The borrower adds MIP to the loan
New debt against the home is taken out
All or part of the home is rented out

Answer 153

The answer is the borrower adds MIP to the loan. Reverse mortgages may contain acceleration clauses which can cause a loan to become due and payable. Reasons for this may include adding an owner to the title, taking out new debt against the home, or renting out all or part of the home. Some reverse mortgages do include MIP, which helps to guarantee that the borrower will never owe more than the value of the home.

Question 154

Under Regulation Z, an advertisement for a home equity line of credit that exceeds the fair market value of a home must include which of the following statements?

Interest on the portion of the credit that exceeds market value is deductible at 50% of its normal value
Only a portion of interest that is charged in excess of $10,000 annually is deductible from income taxes
The borrower should consult a tax advisor regarding deductibility of interest
The borrower may no longer deduct interest on a home equity line of credit

Answer 154

The answer is the borrower should consult a tax advisor regarding deductibility of interest. An advertisement for a home equity line of credit that exceeds the fair market value of a home must include a statement that the borrower should consult a tax advisor regarding deductibility of interest.

Question 155

Which of the following is responsible for determining whether to issue a license approval?

The NMLS
The Governor
The Legislature
The Commissioner

Answer 155

The answer is The Commissioner. The Commissioner or state regulator for financial institutions determines licensing eligibility.

Question 156

A qualified mortgage may only include a balloon payment if all of the following are true, except:

The consumer has specifically requested a balloon payment
The loan has a term of at least five years
The loan is made by a small creditor
The loan has a fixed interest rate

Answer 156

The answer is the consumer has specifically requested a balloon payment. A qualified mortgage may only include a balloon payment if the loan has a term of at least five years, has a fixed interest rate, and is made by a small creditor.

Question 157

Which of the following is least likely to be a sign of fraudulent behavior?

The applicant currently rents an apartment, but is purchasing a second home by the beach
The consumer is making a significant cash down payment
Signatures on various documents do not match
Identification documents appear to be smudgy photocopies

Answer 157

The answer is the consumer is making a significant cash down payment. A consumer who makes a significant cash down payment is not necessarily engaging in fraudulent behavior.

Question 158

Which appraisal approach is most commonly used to appraise new home construction?

The income approach
The cost approach
The sales comparison approach
The market approach

Answer 158

The answer is the cost approach. The cost approach is an appraisal method commonly used to appraise new home construction.

Question 159

In order to meet the federal S.A.F.E. Act requirements, a state licensing agency must provide for all of the following, except:

Participation in the NMLS
Setting renewal or reporting dates
The creation of a separate agency
Conducting background checks

Answer 159

The answer is the creation of a separate agency. In overseeing mortgage loan originators, a state must provide effective supervision and enforcement. Effective supervision by a state includes participation in the NMLS, the writing of rules and regulations necessary to the licensing of loan originators, conducting background checks, the setting and resetting of renewal or reporting dates, and taking appropriate enforcements actions.

Question 160

A lending transaction has been rescinded by a consumer with cold feet. What happens as a result?

The rescission may be challenged by the creditor as long as the dispute is stated in writing within seven business days of the rescission
The creditor has three business days to offer the borrower a loan with a different interest rate and lending terms
After cancellation, the creditor retains any money or property paid by the borrower and the borrower returns loan funds to the creditor
The creditor no longer has a security interest in the property and must return to the borrower all fees paid during the loan process, and the borrower must return loan funds to the creditor

Answer 160

The answer is the creditor no longer has a security interest in the property and must return to the borrower all fees paid during the loan process, and the borrower must return loan funds to the creditor. As a result of rescission, the creditor no longer has a security interest in the property and must return to the borrower all charges paid during the loan process, and the borrower must return loan funds to the creditor.

Question 161

The state in which Jim Jungle works requires a mortgage loan originator be covered by a surety bond. The bond must be maintained in an amount that reflects:

The dollar value of loans Jim originates annually
The number of loans originated by Jim annually
The number of loans Jim’s employer originates annually
Jim’s experience as a loan originator

Answer 161

The answer is the dollar value of loans Jim originates annually. The penal sum of the surety bond must be maintained in an amount that reflects the dollar value of loans originated.

Question 162

“E-Sign Act” is short for:

The Electronic Signatures Legitimization Act
The Electronic Signatures in Global and National Commerce Act
The Electronic Safety of Giving Net Authorization Act
The Electronic Safety in Global and National Transactions Act

Answer 162

The answer is The Electronic Signatures in Global and National Commerce Act. “E-Sign Act” is short for the Electronic Signatures in Global and National Commerce Act.

Question 163

The act of guiding homebuyers in a particular direction based on demographics is prohibited by:

ECOA and RESPA
The Fair Housing Act and ECOA
TILA and RESPA
RESPA and the Fair Housing Act

Answer 163

The answer is The Fair Housing Act and ECOA. The Fair Housing Act and ECOA both prohibit the practice of “steering,” which is directing or recommending a buyer or borrower in a particular direction based on their demographics. This should not be confused with the separate predatory lending practice called steering, in which mortgage professionals coerce or otherwise guide consumers to accept loan terms that are more expensive than they need in order to increase profits.

Question 164

HUD is still responsible for implementation of:

RESPA
The Fair Housing Act
TILA
The Equal Credit Opportunity Act

Answer 164

The answer is The Fair Housing Act. HUD is still responsible for implementation of the Fair Housing Act.

Question 165

This federal law was enacted with the intent to make it easier to prosecute mortgage fraud.

The Fraud Enforcement and Recovery Act
The Dodd-Frank Act
The Consumer Financial Protection Act
The Mortgage Acts and Practices Act

Answer 165

The answer is The Fraud Enforcement and Recovery Act. The Fraud Enforcement and Recovery Act was enacted with the intent to increase enforcement against those who commit mortgage fraud.

Question 166

For an adjustable-rate mortgage, the interest rate that should be listed on the Loan Terms table of the Loan Estimate is:

The rate at consummation
The fully-indexed rate
The rate after the first adjustment
The average of all rates that may apply over the life of the loan

Answer 166

The answer is the fully-indexed rate. For an adjustable-rate mortgage, the interest rate that should be listed on the Loan Terms table of the Loan Estimate is the fully-indexed rate.

Question 167

Payments for non-qualified mortgages must be based on:

The maximum interest rate that will apply over the life of the loan
The maximum interest rate that will apply during the first five years after the date of the first payment
The fully-indexed rate
The introductory rate

Answer 167

The answer is the fully-indexed rate. Payments for non-qualified mortgages must be based on the fully-indexed rate.

Question 168

RESPA requires _____ to be provided within 45 days of closing. It provides information regarding an estimate of related payments (for expenses such as taxes and insurance) that will be required in the first 12 months of the loan.

The HUD-1
The Initial Escrow Statement
The Loan Estimate form
The Initial Rate Change Disclosure

Answer 168

The answer is The Initial Escrow Statement. The Initial Escrow Statement is due within 45 days of closing, though it is often provided on the day of closing. It provides information to the borrower about estimates for escrow payments, such as those for taxes and insurance.

Question 169

In an ARM, margin is determined by:

The lender and represents the amount of commission paid to the broker
The lender and represents the lender’s operating costs and profit margin
The broker and is the amount of profit split between the broker and lender
The underwriter and represents the percentage of error allowable for debt-to-income ratio

Answer 169

The answer is the lender and represents the lender’s operating costs and profit margin. The margin is a fixed number set by the lender and is not subject to change. It represents the lender’s operating costs and profit margin, and varies from lender to lender.

Question 170

A mortgage lender regularly shares loan applicants’ nonpublic personal information with an underwriter who works as an independent contractor. What must the lender do to comply with the GLB Act?

The lender must require the underwriter to contractually agree that it will only share the nonpublic personal information with affiliated companies
The lender must provide an opt-out notice to its loan applicants, because the underwriter is a nonaffiliated service provider
The lender must offer its loan applicants a choice of providers for underwriting services
The lender must require the underwriter to contractually agree that it will only use the nonpublic personal information to perform the services requested

Answer 170

The answer is the lender must require the underwriter to contractually agree that it will only use the nonpublic personal information to perform the services requested. When sharing nonpublic personal information with third party settlement service providers, a mortgage lender must require that the service providers enter a contract agreeing to use the information only for the performance of requested services.

Question 171

How is the margin determined?

The broker determines margin based on the commission structure on the loan
The lender sets the margin by choosing an index to tie it to
The borrower chooses which margin he or she prefers
The lender sets the margin based on its costs and sought-after profit margin

Answer 171

The answer is the lender sets the margin based on its costs and sought-after profit margin. The lender determines margin, which represents the lender’s cost of doing business and its profit margin. Borrowers do not choose – but may negotiate – the margin.

Question 172

A revised Loan Estimate is required when:

There is any change in circumstances
Interest rates drop
Interest rates increase
The loan applicant locks his or her interest rate

Answer 172

The answer is the loan applicant locks his or her interest rate. A revised Loan Estimate is required when a loan applicant locks the interest rate. Offering revised estimates for a change in circumstances is restricted to limited situations.

Question 173

If two appraisals are necessary in order to complete a transaction, these appraisals must meet all but which of the following requirements?

The loan applicant must pay for both appraisals
Each appraisal must be performed by a different appraiser
Both appraisals must include a physical visit of the interior of the dwelling used to secure the loan
Both appraisals must be performed by a certified or licensed appraiser

Answer 173

The answer is the loan applicant must pay for both appraisals. When two appraisals are required, the creditor may not charge the consumer for the second appraisal.

Question 174

All of the following may be reasons why a lender may call a reverse mortgage due and payable, except:

The loan balance increases
The homeowner dies
An act of fraud or misrepresentation occurs
The homeowner declares bankruptcy

Answer 174

The answer is the loan balance increases. Reverse mortgage interest is charged on the outstanding balance and added to the debt, which means the debt increases with each payment or draw. This is how a reverse mortgage is designed to be implemented.

Question 175

Once a loan application is received, a creditor may not require additional information or verification until:

The Closing Disclosure is provided
The origination fee is paid
The loan closes
The Loan Estimate is provided

Answer 175

The answer is The Loan Estimate is provided. Once an application is received, a creditor must issue the Loan Estimate to a loan applicant and may not require additional information or verification until that document is provided.

Question 176

Renewal of a loan originator license is the responsibility of:

The loan originator
The loan originator and the sponsoring entity
The sponsoring entity
The sponsoring entity and the state regulator

Answer 176

The answer is the loan originator. The loan originator’s individual license is the sole responsibility of the originator. While the sponsoring entity is responsible for the actions of the originator while employed, renewal of an individual license is not the entity’s responsibility.

Question 177

Payments for qualified mortgages must be based on:

The maximum interest rate that will apply over the life of the loan
The fully-indexed rate
The introductory rate
The maximum interest rate that will apply during the first five years after the date of the first payment

Answer 177

The answer is the maximum interest rate that will apply during the first five years after the date of the first payment. Payments for qualified mortgages must be based on the maximum interest rate that will apply during the first five years after the date of the first payment.

Question 178

Virginia has entered an agreement for a home loan after a contractor came to her door offering home improvement services and a card for a mortgage broker who could help her get a loan. Virginia contacted the mortgage broker and secured the loan. Which of the following arrangements for paying the contractor is not in compliance with HOEPA?

Virginia can pay the contractor directly
Virginia can place the funds with a third-party escrow agent who can disburse them pursuant to a written agreement
Virginia and the contractor can enter an agreement for her to pay him when the work is complete
The mortgage broker can pay the contractor directly

Answer 178

The answer is the mortgage broker can pay the contractor directly. HOEPA prohibits direct payments to home improvement contractors, unless payment is a joint payment to the borrower and the contractor, or is made to a third-party escrow agent pursuant to a written agreement between the lender, borrower, and contractor.

Question 179

In addition to information about disciplinary and enforcement action taken against a mortgage loan originator, the NMLS may also make available for public access:

A mortgage loan originator’s home address
The number of loans originated by a loan originator
The mortgage loan originator’s employment history
Former clients of the mortgage loan originator

Answer 179

The answer is the mortgage loan originator’s employment history. Information or material held by the NMLS relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator is not protected by confidentiality laws. Such information/material is available for public access.

Question 180

Which document actually contains the borrower’s promise to repay the loan?

The deed
The note
The mortgage
The TIL

Answer 180

The answer is the note. Neither the mortgage nor the deed of trust actually contain the borrower’s contractual promise to repay the loan. The note, or promissory note, is the borrower’s promise to repay the loan.

Question 181

Which of the following would be a red flag of attempted mortgage fraud?

The consumer is fairly young but makes a substantial salary, as stated on the loan application and W-2s
The consumer’s Social Security Number begins with zero
The applicant runs a small business from home and only lists a home phone number
The property owner and the property seller are two different individuals

Answer 181

The answer is the property owner and the property seller are two different individuals. A transaction in which the property owner and the property seller are two different individuals may be a red flag of attempted mortgage fraud.

Question 182

Which of the following statements accurately describes the scope of HOEPA?

The provisions of HOEPA apply to first-lien loans where the home securing the loan is located in a neighborhood targeted by subprime lenders
The provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower’s principal residence
The provisions of HOEPA apply to subordinate-lien loans when the home securing the loan is either owner occupied or non-owner occupied
The provisions of HOEPA apply only to first-lien loans that are secured by a borrower’s principal residence

Answer 182

The answer is the provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower’s principal residence. HOEPA applies to first- and subordinate-lien transactions that are secured by the borrower’s principal residence.

Question 183

For a fee, a real estate licensee offers a mortgage company the names and telephone numbers of all of the people who attended an open house, but the mortgage company does not accept the offer. Who is in violation of RESPA?

The mortgage company
The real estate licensee
Both the mortgage company and the real estate licensee
Neither the mortgage company nor the real estate licensee

Answer 183

The answer is the real estate licensee. The real estate licensee is in violation of RESPA. The real estate licensee is attempting to provide referrals of business to a mortgage licensee in exchange for a fee, in direct violation of RESPA’s prohibition against such activity. By refusing to accept the offer, the mortgage company avoids also violating the law.

Question 184

In accordance with Section 8 of the Real Estate Settlement Procedures Act, a mortgage broker may lawfully receive compensation for which of the following?

The reasonable value of goods and/or services actually performed or provided
Referring a borrower to a real estate agent
Taking information to be used in a loan application and submitting the file to processing
Submitting a loan to a lender

Answer 184

The answer is the reasonable value of goods and/or services actually performed or provided. RESPA prohibits any unearned fees or unreasonable charges even if there were services performed.

Question 185

Which of the following transactions would be most likely to raise concern over tangible net benefit to the borrower?

The refinance of a mortgage loan that originated ten years ago
The origination of a mortgage loan with a fixed interest rate for a borrower with a high salary and low debt
The refinance of a high-cost mortgage loan that was originated six months ago
The origination of an adjustable-rate mortgage loan

Answer 185

The answer is the refinance of a high-cost mortgage loan that was originated six months ago. The refinance of a high-cost mortgage loan that was originated six months ago should be most concerned about the tangible net benefit to the borrower.

Question 186

If a changed circumstance in a mortgage loan transaction occurs fewer than four business days prior to consummation:

Closing must be postponed until the borrower consents to reschedule
The loan must be re-approved
The borrower must sign a waiver consenting to the use of the original Loan Estimate
The revised charges may be provided to the consumer on a revised Closing Disclosure

Answer 186

The answer is the revised charges may be provided to the consumer on a revised Closing Disclosure. If a changed circumstance occurs fewer than four business days prior to consummation, the revised charges may be provided to the consumer on a revised Closing Disclosure.

Question 187

The term “adjustment interval” refers to:

The amount an ARM can adjust between the start rate and rate ceiling
The time it takes for a margin to move from start rate to rate ceiling
The time period between adjustments for an ARM
The movement of the index to which an ARM is tied

Answer 187

The answer is the time period between adjustments for an ARM. Adjustment interval is the time period between ARM adjustments.

Question 188

Which of the following best describes what is considered in the calculation of a borrower’s back-end ratio?

Principal and interest payments
The cost of credit in relation to the value of the loan
The total amount of monthly payments made on long-term debt carried by the consumer
Only non-housing consumer debt, such as credit card payments and auto loan payments

Answer 188

The answer is the total amount of monthly payments made on long-term debt carried by the consumer. The back-end ratio is the total amount of monthly payments made on long-term debt carried by the consumer, such as car loans, student loans, and other debt in addition to housing expenses.

Question 189

VA loans require a funding fee under all of the following conditions, except:

The veteran makes a 10% down payment
The veteran is disabled
The veteran is using his/her eligibility for a second time
The veteran is using his/her eligibility for the first time

Answer 189

The answer is the veteran is disabled. A veteran who is disabled does not pay a funding fee.

Question 190

Which of the following would be considered a credit report red flag?

Names on credit report match names on application
There is a DBA or an AKA
The debts the applicant disclosed are accurately reflected on the credit report
Paystubs, W-2s, or other income docs are handwritten

Answer 190

The answer is there is a DBA or an AKA. The presence of a DBA (doing business as) or AKA (also known as) would be a credit report red flag.

Question 191

An escrow account analysis has been completed on Mary Thompson’s loan. It is discovered that there is a $40 overage in her account. How many days does the servicer have to return the money?

There is no refund
The servicer would not return the money; it would be applied toward the principal amount
The servicer has 30 days from completion of the analysis to return the overage
Ms. Thompson must be refunded within 90 days

Answer 191

The answer is there is no refund. RESPA requires a refund if an escrow analysis uncovers an overage of greater than $50. Smaller overages are applied to the next year’s escrow payments; anything above $50 is then required to be refunded within 30 days.

Question 192

Which of the following is not true regarding qualified mortgages?

They generally may not have a DTI ratio of more than 43%
They must have a fixed interest rate
The loan term may not exceed 30 years
The loan may not include a feature that permits negative amortization

Answer 192

The answer is they must have a fixed interest rate. Qualified mortgages generally may not have a DTI ratio of more than 43%. The loan term may not exceed 30 years, and may not include a feature that permits negative amortization. A fixed interest rate is not required.

Question 193

Which of the following is subject to a 10% tolerance?

Third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers
Fees paid for third-party provider services for which the consumer was not allowed to shop off of the creditor’s list of service providers
Amounts required to be placed into escrow accounts
Fees paid to the creditor

Answer 193

The answer is third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers. Fees and charges which, in total, may differ from the total amount of the specific fees and charges set forth in the Loan Estimate subject to a 10% tolerance limitation include recording fees; and third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers.

Question 194

Goh Getter has developed an advertisement he wants to use to solicit more business. In the advertisement, Goh is stating specific terms relating to a mortgage loan product. Is this permissible?

No, the terms of a particular product may not be included in an ad
This is permissible if those stated terms actually are or will be arranged for a consumer
It is permissible if the terms are identified as being for illustrative use only
This is not permissible as the terms of the loan may change

Answer 194

The answer is this is permissible if those stated terms actually are or will be arranged for a consumer. An advertisement may state specific credit terms only if those terms actually are or will be arranged or offered to a consumer.

Question 195

Which of the following regulates advertising for credit?

HPI or Regulation C
TILA or Regulation Z
FCRA or Regulation B
FACTA or Regulation H

Answer 195

The answer is TILA or Regulation Z. TILA and Regulation Z impose regulations for advertising practices in the mortgage industry.

Question 196

A mortgage broker advertises a 30-year fixed-rate loan at a 2.00% rate. After the borrower arrives at the office and begins an application, the broker explains that the 2.00% is no longer available, as his office was only able to do a limited number of them. This broker is in violation of what law?

RESPA
FCRA
TILA
Fair Housing Act

Answer 196

The answer is TILA. Common violations of TILA with regard to marketing and sales include the advertisement of mortgage products that are not actually available.

Question 197

The Home Ownership and Equity Protection Act, enacted in 1994, amended what legislation?

ECOA
TILA
FACTA
CIP

Answer 197

The answer is TILA. In 1994, TILA was amended to provide greater protection to borrowers who chose or were coerced into loans with high costs or high rates. This section of TILA is known as Section 32.

Question 198

A mortgage company starts a marketing campaign in which coupons appearing to be FHA rebate checks are sent to consumers. Advertising in this manner is a prohibition of rules covered by what legislation?

RESPA
FTC
TILA
HOEPA

Answer 198

The answer is TILA. Regulation Z prohibits seven specific advertising practices, including misrepresentations of government endorsement.

Question 199

The CHARM Booklet is an educational disclosure required by which piece of federal legislation?

RESPA
Regulation B
TILA
FACTA

Answer 199

The answer is TILA. The Consumer Handbook on Adjustable Rate Mortgages (CHARM) is one of a number of disclosures required by the Truth in Lending Act (TILA) to be provided to any consumer interested in an ARM product.

Question 200

Which federal law includes provisions that address misleading and deceptive advertising practices?

TILA
RESPA
HMDA
ECOA

Answer 200

The answer is TILA. TILA includes provisions that address misleading and deceptive advertising practices.

Question 201

All of the following are included in the calculation of the APR, except:

Underwriting fees
Buy-down fees
Origination fees
Title insurance fees

Answer 201

The answer is title insurance fees. In addition to charges paid over the term of the loan (e.g., interest and mortgage insurance premiums paid over the loan’s term), the calculation of the APR includes many prepaid finance charges, including, among others, underwriting fees, buy-down fees, and origination fees. However, some fees are not included in the prepaid finance charges used in APR calculations, including title insurance fees.

Question 202

Which of the following describes a state where the lender holds legal title until the debt is paid?

Lien theory
Conveyance theory
Due-on-sale clause
Title theory

Answer 202

The answer is title theory. In a title theory state, the lender holds legal title until the debt is paid, which, in theory, means the lender actually owns the home until the borrower has paid the mortgage.

Question 203

A state licensing agency may conduct examinations and investigations for all of the following reasons, except:

To determine the maximum licensing fees
Initial licensing or license renewal
License suspension, conditioning, revocation, or termination
To determine compliance with state law

Answer 203

The answer is to determine the maximum licensing fees. A state licensing agency may conduct examinations and investigations for the purpose of initial licensing or license renewal; license suspension, conditioning, revocation, or termination; and to determine compliance with state law.

Question 204

What is the purpose of the Fair Credit Reporting Act?

To prevent lenders from using credit to determine creditworthiness in order to mitigate the losses incurred by borrowers who were under-qualified for loans
To ensure accuracy, fairness, and the privacy of consumers’ personal information assembled and used by consumer reporting agencies
To use special obligations on users and furnishers to limit credit availability
To protect the rights of lenders in the event of default

Answer 204

The answer is to ensure accuracy, fairness, and the privacy of consumers’ personal information assembled and used by consumer reporting agencies. The FCRA was enacted to protect the consumer in any transaction involving the use of credit reports. It is meant to govern the accuracy, fairness, and privacy of a consumer’s information when it is assembled for the purposes of credit evaluation.

Question 205

The ethical reason that loan processors are prohibited from negotiating a mortgage loan for a consumer is:

To ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals
To ensure that only licensed originators receive commissions from creditors
To reduce the competition between employees of depository and non-depository institutions
To steer consumers towards lending transactions with depository institutions

Answer 205

The answer is to ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals. The ethical reason that loan processors are prohibited from negotiating a mortgage loan for a consumer is to ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals.

Question 206

It is unethical and illegal to use yield spread premiums for any reason other than:

To earn an additional commission on a loan origination
To enable a creditor to earn more on a mortgage transaction
To help a borrower pay for settlement costs
To enable a loan originator to meet a monthly sales quota

Answer 206

The answer is to help a borrower pay for settlement costs. It is unethical and illegal to use yield spread premiums for any reason other than to help a borrower pay for settlement costs. Yield spread premiums are now known as “borrower credit.”

Question 207

Why might a borrower take a piggyback loan?

To avoid MIP
To get a lower rate on his or her first mortgage
To shorten the term of his or her first mortgage
To limit the cash necessary to bring to the table

Answer 207

The answer is to limit the cash necessary to bring to the table. A borrower may take on a piggyback loan to avoid mortgage insurance, but not “MIP,” because that is required for FHA loans. Of the answers given, the best is to limit the cash necessary to bring to the table.

Question 208

For which of the following reasons would a borrower be more likely to choose a 15-year fixed loan over a 30-year fixed?

To minimize the monthly payment amount
To maximize the tax credit for mortgage interest
To minimize closing costs
To pay less interest over the life of the loan

Answer 208

The answer is to pay less interest over the life of the loan. A 15-year mortgage shortens the amortization period and therefore decreases the amount of interest paid over the life of the loan. While the term of the loan would not make a difference in total principal paid back, the interest amount would be considerably less on a $200,000 loan for a 15-year term than for a 30-year term.

Question 209

Which of the following scenarios describes a “straw buyer”?

Charlie cuts and pastes her income documentation to reflect a higher income
Tom’s sister has bad credit and cannot qualify for a loan, so he agrees to let her get the loan using his name and allows his sister to live in the house and cover the mortgage payments
Will asks his buddy to be on alert to verify his employment when the lender calls
Cindy asks her father to co-sign a loan for her

Answer 209

The answer is Tom’s sister has bad credit and cannot qualify for a loan, so he agrees to let her get the loan using his name and allows his sister to live in the house and cover the mortgage payments. A straw buyer is someone who agrees to let someone use his/her name, Social Security Number, and other financial information to qualify for a loan he/she has no intention of paying back or occupying the home.

Question 210

The back-end ratio compares:

Monthly mortgage payments to monthly gross income
Total monthly housing expenses (including principal, interest, taxes, and insurance) to monthly gross income
Total monthly debts (including housing expenses plus other debts) to monthly gross income
Total monthly debts unrelated to housing expenses to monthly gross income

Answer 210

The answer is total monthly debts (including housing expenses plus other debts) to monthly gross income. Unlike the front-end ratio, which focuses only on housing-related expenses, the back-end ratio focuses on housing expenses plus other debts.

Question 211

The front-end ratio compares:

Monthly mortgage payments to monthly gross income
Total monthly debts unrelated to housing expenses to monthly gross income
Total monthly housing expenses (including principal, interest, taxes, and insurance) to monthly gross income
Total monthly debts (including housing expenses plus other debts) to monthly gross income

Answer 211

The answer is total monthly housing expenses (including principal, interest, taxes, and insurance) to monthly gross income. The front-end ratio compares housing-related expenses to monthly gross income.

Question 212

Mortgage loan originator Edna is planning an advertisement that indicates the number of payments required to pay off a specific loan. This statement is a:

Prohibited statement
Trigger term
Permissible representation if it is accurate
Hypothetical only

Answer 212

The answer is trigger term. A trigger term is any of the following specific credit terms: the amount or percentage of any down payment, except when the amount of the down payment is zero; the number of payments or period of repayment; the amount of any payment; and the amount of any finance charge.

Question 213

Edna Eager is planning an ad campaign to draw more business to her company. In order to avoid trouble with her advertising, Edna must comply with the advertising requirements of the:

Truth-in-Lending Act and Regulation Z
Real Estate Settlement Procedures Act and Regulation X
Equal Credit Opportunity Act
Federal Trade Act

Answer 213

The answer is Truth-in-Lending Act and Regulation Z. A mortgage loan originator placing an advertisement (e.g., flyer, billboard, window display, direct mail literature, telephone solicitation) for consumer credit must comply with the advertising requirements of the Truth-in-Lending Act and Regulation Z.

Question 214

According to the Telemarketing Sales Rule, which of the following is permitted?

Trying several times to return the call of someone responding to an advertisement
Not transmitting a telephone number on caller ID
Initiating a call to someone on the Do-Not-Call List
Calling a consumer who did business with the licensee 24 months ago

Answer 214

The answer is trying several times to return the call of someone responding to an advertisement. A mortgage professional is permitted to contact consumers for a period of three months following a relationship that is based on an inquiry by the customer.

Question 215

If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, how many adjustments will occur by the end of year seven?

Two
Five
One
Impossible to determine

Answer 215

The answer is two. If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, two adjustments will have occurred by the end of year seven (once at the start of year six and once at the start of year seven).

Question 216

Which of the following statements describes the legal relationship between a loan applicant and a mortgage broker?

Under federal law, a mortgage broker has a fiduciary relationship with a loan applicant
Under federal law, a mortgage broker does not have a fiduciary relationship with a loan applicant
Under all state laws, a mortgage broker has a fiduciary relationship with a loan applicant
Under state and federal law, a mortgage broker has a fiduciary relationship with a loan applicant

Answer 216

The answer is under federal law, a mortgage broker does not have a fiduciary relationship with a loan applicant. Federal law does not require a mortgage broker to serve a loan applicant as a fiduciary. Only a few state laws impose this requirement on mortgage brokers and loan originators.

Question 217

_____ are responsible for ensuring that loan applicants meet the requirements established by lenders and investors for loan programs.

Loan processors
Loan originators
Investors
Underwriters

Answer 217

The answer is underwriters. Underwriters are responsible for ensuring that loan applicants meet the requirements established by lenders and investors for loan programs.

Question 218

In regard to title insurance, a standard owner’s policy covers:

Undetected encumbrances
Lender legal costs
Survey issues
Foreclosure

Answer 218

The answer is undetected encumbrances. The owner’s policy protects the owner of the property against ownership disputes or undetected liens or encumbrances on the property. The standard owner’s policy does not cover survey issues, legal costs to the lender, or protection against foreclosure.

Question 219

Which of the following is used as a method of identifying and holding licensees accountable, according to the S.A.F.E. Act?

Loan originator financial and ethical disclosures
Records of annual loan originator volume
Unique identifier
CSBS number

Answer 219

The answer is unique identifier. The “unique identifier” is the official description of the NMLS number, which is used to track and hold accountable all licensed entities and individuals in the mortgage lending industry.

Question 220

The 1004 is the form number for:

URLA
CSBS
FNMA
URAR

Answer 220

The answer is URAR. The 1004 is the form number for the Uniform Residential Appraisal Report (URAR).

Question 221

When a credit report shows only a balance on a revolving debt, rather than a payment, an originator should:

Eliminate the debt if it is below $300
Use 5% of the debt as the payment
Only use 50% of the debt against the DTI
Divide the total debt by 12 to get monthly payments

Answer 221

The answer is use 5% of the debt as the payment. If reported revolving debt does not show a payment amount, an originator should use 5% of the remaining debt on that account as the monthly payment.

Question 222

Which of the following statements offers the most accurate description of the effect of using a “trigger term” in an advertisement for a loan?

Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence
Use of a trigger term in an advertisement violates Regulation Z
Use of a trigger term requires clear and conspicuous disclosure of HUD-approved housing counselors
Use of a trigger term requires the disclosure of all the lending terms of the mortgage described in the advertisement

Answer 222

The answer is use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence.

Question 223

Specific prohibitions in advertising for mortgages include all but which of the following?

Misleading advertisement of a “fixed” rate
Claims of debt “elimination”
Use of the advertiser’s name
Misrepresentation of government endorsement

Answer 223

The answer is use of the advertiser’s name. An advertiser using its own name in an advertisement is actually a requirement, not a prohibition.

Question 224

Which of the following loan types considers residual income in qualification?

VA
HPML
FHA
USDA

Answer 224

The answer is VA. The VA loan considers residual income as part of qualification.

Question 225

The term “maximum guaranty amount” applies to _____ loans, and it refers to _____.

FHA; the lending limit
Fixed-rate; the maximum amount that a bank can lend to a particular consumer
VA; the maximum amount that the VA will pay to a lender if the borrower defaults on a loan
VA; the maximum amount that a lender can loan to a veteran in a transaction for a home purchase

Answer 225

The answer is VA; the maximum amount that the VA will pay to a lender if the borrower defaults on a loan. The VA limits the amount that it can guarantee to repay a lender in the event of a default on the loan. This amount is referred to as the “maximum guaranty amount.”

Question 226

Van Gordon, who works in the tech industry, has decided to sell his house. He is offering to carry the contract himself and does all the negotiating necessary to reach agreement on the terms of the mortgage loan. Must Van be licensed?

Van does not need to be licensed unless he negotiates more than one loan during any 12-month period
Van is exempt from the requirement to be licensed as the property on which he is negotiating the terms of the mortgage loan was his own residence
Yes, any individuals who offer or negotiate the terms of any residential mortgage loan must be licensed
Van must be licensed because he will receive compensation as a result of the transaction

Answer 226

The answer is Van is exempt from the requirement to be licensed as the property on which he is negotiating the terms of the mortgage loan was his own residence. An individual is not required to be licensed if he or she offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as his or her residence.

Question 227

In the verification and documentation process of loan application, “VOD” means:

Void of default
Verification of deposit
Verification of documentation
Verification of disclosure

Answer 227

The answer is verification of deposit. “VOD” means verification of deposit. It is the verification of banking or asset information while qualifying a borrower.

Question 228

All of the following methods can be used by an originator to detect fraudulent documents, except:

Verifying that the purchase price is not greater than the average for the area
Check paystubs for watermarks or fraud prevention patterns
Track chain of custody of all verifications
Compare earnings claims to public databases for industry and region

Answer 228

The answer is verifying that the purchase price is not greater than the average for the area. A purchase price that is slightly higher than the average area is not, in and of itself, an indicator of a fraudulent transaction. There are a number of reasons for a higher purchase price, such as property features, age, improvements, and more.

Question 229

Which of the following occurs when the parties to a loan transaction meet to execute documents, and immediately afterwards, funds are disbursed?

Dry settlement
Wet settlement
Table funding
Rescission

Answer 229

The answer is wet settlement. Wet settlement occurs when the parties to a loan transaction meet to execute documents, and afterwards, funds are disbursed. In contrast, at a dry settlement, parties meet to execute documents but funds are not disbursed until certain specified conditions are met.

Question 230

What is the name of the disclosure required for HELOCs?

Financial Advantages of Second Mortgages
CHARM Booklet
Your Home Loan Toolkit: A Step-by-Step Guide
What You Should Know about Home Equity Lines of Credit

Answer 230

The answer is What You Should Know about Home Equity Lines of Credit. The disclosure required by TILA for HELOCs is called “What You Should Know about Home Equity Lines of Credit.”

Question 231

A rent credit is used in a purchase transaction:

If the seller is “renting back” after closing until he/she is ready to move into the new home
If the buyer has to rent a place to live until the purchase is settled
When the seller credits a portion of previous rent paid as a source of down payment
When there is a delay in settling, and the builder is forced to put the buyer up in a hotel

Answer 231

The answer is when the seller credits a portion of previous rent paid as a source of down payment. A rent credit is used to help a borrower with down payment when purchasing a home he/she previously rented. The previous owner would credit a portion of the rent toward the down payment.

Question 232

The Equal Credit Opportunity Act requires a Notice of Incomplete Application be provided to a borrower:

Within 15 days of application, if the application is missing required information
Within 30 days of application, if the application is missing required information
If the borrower has provided less than five years’ residence history
Within three days of discovery of incomplete application

Answer 232

The answer is within 30 days of application, if the application is missing required information. ECOA requires the borrower to know the status of his/her loan within 30 days of application. This includes letting the borrower know, within 30 days, that his/her application needs to be completed in order for any further consideration of the file.