500 MLO Flash Cards 2021
1
Q
What law deals with credit, APR & advertising of consumer loans?
A
TILA/REGULATION Z
2
Q
Which regulation
prohibits kickbacks?
A
RESPA
3
Q
Which regulation
requires the lender to
cancel PMI when the loan reaches 78% LTV?
A
HPA – Homeowners Protection Act
4
Q
Which regulation prohibits fee splitting?
A
RESPA
5
Q
“X” is the letter used to describe which Regulation?
A
RESPA
6
Q
RESPA is the acronym used to describe which Law?
A
Real Estate Settlement Procedures Act
7
Q
What type of mortgage requires a non-refundable funding fee?
A
VA Loan
8
Q
What is the provision in a mortgage enabling a lender to demand full repayment if the borrower DEFAULTS on the loan?
A
Acceleration Clause
9
Q
What is the provision in a mortgage enabling a lender to demand full repayment if the borrower TRANSFERS the loan?
A
Alienation Clause
10
Q
What does CFPB Stand for?
A
Consumer Financial Protection Bureau
11
Q
What two laws created the CFPB?
A
Dodd Frank Act and Consumer Finance Protection Act
12
Q
Which regulation is designed to help meet the Credit Needs of the Communities in which it operates?
A
CRA – Community Reinvestment Act
13
Q
Under ECOA rules and regulations, how many days does the borrower have to request a copy of an appraisal report if the application was denied?
A
90 days
14
Q
Under ECOA rules and regulations, if an application for credit is denied, and if requested by the borrower -how many days does the lender have to provide a copy of an appraisal report?
A
30 days
15
Q
If a loan application is APPROVED, under ECOA rules and regulations, when MUST a copy of the appraisal be provided to the borrower?
A
3 business days prior to the loan closing
16
Q
Conforming Loans follow the guidelines of which regulators?
A
Fannie Mae and Freddie Mac
17
Q
Which regulation requires the lenders to
“BE EQUAL” when extending credit to borrowers?
A
ECOA – Regulation B
18
Q
How old must a borrower be to qualify for a Reverse Mortgage?
A
62 Years Old
19
Q
Which regulation has the primary function of preventing Identity Theft?
A
FACT Act or FACTA
20
Q
Which regulation has SECTION 114 Rules?
A
FACT Act or FACTA
21
Q
Which regulation requires the creditor to verify the VALIDITY of any change of address received?
A
SECTION 114 of the FACT ACT OR FACTA
22
Q
What is the payment method used in a reverse mortgage that allows the homeowners to receive a monthly check while living in the property?
A
TENURE Method
23
Q
What is the fraud scheme where a borrower uses someone else’s name to purchase the property, but that person WILL NOT be living at the property?
A
Straw Borrower
24
Q
What type of lender “insures” mortgages?
A
FHA approved lenders
25
What type of lender “guarantees” mortgages?
VA approved lenders and USDA approved lenders
26
What is the entity that loans money to fund purchases in rural areas?
USDA/Dept. of Agriculture
27
What is the value remaining in property after all liens and debts have been paid?
Equity
28
A borrower is refinancing his home. How much time does Reg Z give him to change his mind (rescind)?
3 days
29
Which Regulation established the 3-day right of rescission rule?
TILA/REG Z
30
Redlining is part of which regulation/Law?
Fair Housing Act
31
Blockbusting is part of which regulation/Law?
Fair Housing Act or FHA
32
Steering is part of which Regulation/ Law?
Fair Housing Act
33
Trying to convince a homeowner to SELL his home by implying that another race/ethnicity is moving in the neighborhood is called?
Blockbusting/panic selling
34
Trying to convince a homeowner to PURCHASE in a particular neighborhood based on his race, religion or ethnicity is called?
STEERING
35
Refusing to make loans on a property in a certain neighborhood for discriminatory reasons is called?
Redlining
36
What does HOEPA stand for?
Home Ownership and Equity Protection Act
37
HOEPA Loans are part of which larger regulation?
Reg Z/TILA
38
High Cost Loans are part of which larger regulation?
Reg Z/TILA
39
High Priced Loans are part of which larger regulation?
Reg Z/TILA
40
Section 32 Loans are part of which larger regulation?
Reg Z/TILA
41
Section 35 Loans are part of which larger regulation?
Reg Z/TILA
42
MDIA ACT is part of which larger regulation?
Reg Z/TILA
43
Mortgage Disclosure Improvement Act is part of which larger regulation?
Reg Z/TILA
44
What is another name for Annual Percentage Rate?
Effective Rate
45
What is another name for Interest Rate?
Note Rate or Nominal Rate
46
PITI divided by Gross Monthly income is referred to as what?
Housing Ratio or Front-End DTI
47
PITI + monthly debt divided by Gross Monthly income is referred to as what?
Total Obligation Ratio – Back-end Ratio
48
How long must TILA Disclosures be kept?
```
2 years
(exceptions – LE is kept for 3years and CD is kept for 5 years)
```
49
What is the maximum amount of time that NEGATIVE info can remain on a credit report?
7 years
50
What is the maximum amount of time that a bankruptcy can remain on a credit report?
10 years
51
Which law/regulation states that a Bankruptcy can only remain on your credit for a MAX of 10 years?
FCRA – Fair Credit Reporting Act – Reg V
52
Which law/regulation states that negative information can only remain on your credit for a MAX of 7 years?
FCRA – Fair Credit Reporting Act – Reg V
53
Which law allows a consumer who has had her credit card used by an identity thief to place a credit freeze on her credit report?
FACT ACT or FACTA
54
Which law requires creditors to TRUNCATE debit and credit card info on receipts?
FACT ACT or FACTA
55
Which regulation requires that loan officers must take measures to secure and dispose of (burn and/or shred) a borrower’s sensitive credit information?
FACT ACT or FACTA
56
Which regulation states that if a borrower is denied credit, he can receive a FREE copy of his credit report?
FCRA – Fair Credit Reporting Act
| REG V
57
Which regulation states that if a borrower is unemployed, he can receive a FREE copy of his credit report?
FCRA – Fair Credit Reporting Act – Reg V
58
Which regulation states that if a borrower is on SSI or Disability, he can receive a FREE copy of his credit report?
FCRA – Fair Credit Reporting Act – Reg V
59
Which regulation states that if a borrower has been the victim of fraud, he can receive a FREE copy of his credit report?
FCRA – Fair Credit Reporting Act – Reg V
60
Which regulation states that a
| borrower can receive a FREE copy of his credit report once a year (no reason or requirement necessary)?
FACT Act Or FACTA
61
During the loan process, if you ask a borrower if he is single...which law are you violating?
ECOA – Regulation B
62
Which regulation states that the only correct way to ask about a borrower’s martial status is: are you married, unmarried or separated?
ECOA – Regulation B
63
Who is responsible for providing the closing disclosure to the borrower?
The Creditor/Lender
64
Who is responsible for providing the closing disclosure to the Seller?
Settlement Agent/Title Agent
65
Which regulation requires the borrower to receive the Loan Estimate?
TILA – REG Z
66
Which regulation requires the borrower to receive the Closing Disclosure?
TILA – REG Z
67
Which regulation requires the borrower to receive the Loan Estimate within 3 business days?
RESPA – Regulation X
68
Which regulation requires the borrower to receive the Closing Disclosure within 3 business days?
RESPA – Regulation X
69
As it relates to the loan estimate – what is the definition of a Business day?
Any day that the Creditor’s office is open for business
70
According to TILA/REG Z – what is the definition of a Business day?
Any calendar day except for Sunday and Legal Holiday
71
During the loan process, where do you find HMDA government monitoring information?
Section 8 of the 1003 application
72
What does HMDA stand for?
Home Mortgage Disclosure Act
73
What appraisal approach is used when appraising property that has been destroyed by a natural disaster?
Cost Approach or replacement cost approach
74
In the sales comparison approach, how many comps are required?
3
75
What is another name for the Financial Services Modernization Act of 1999?
Graham Leach Bliley Act
76
How many days does a CREDITOR have to notify a consumer of the status of a credit application (denied, approved, need more info)?
30 days
77
Which regulation states that a creditor has 30 days to notify a consumer of an application approval or denial?
ECOA – REG B
78
How many hours of Ethics is required to be taught in the 20hr
Pre-licensing course?
3
79
How many hours of Ethics is required to be taught in the 8hr Continuing Education course?
2
80
How many hours of Federal Law is required to be taught in the 20hr Pre-licensing course?
3
81
How many hours of Federal Law is required to be taught in the 8hr Continuing Education course?
3
82
A mortgage that includes more than one parcel of land is called what?
Blanket Mortgage
83
A mortgage that includes appliances such as a stove or refrigerator is called what?
Package Mortgage
84
Which closing document itemizes the final closing cost and items paid in connection with the loan for the borrower?
Closing Disclosure or CD
85
Which law deals with APR and Advertising of credit terms?
TILA – REG Z
86
What is the official name for the 3/7/3 rule?
Mortgage Disclosure Improvement Act or MDIA Act
87
What regulation requires the lender to perform an escrow analysis?
RESPA – REG X
88
Which law states that it is a violation to discriminate against a potential borrower on public assistance?
ECOA – REG B
89
What two classes are protected under Fair Housing Act - but NOT under ECOA?
Disability/Handicap & Familial Status
90
What three classes are protected under ECOA but NOT under Fair Housing?
Age, Marital Status, and Public Assistance
91
What is another name for a non-conforming loan?
Jumbo Loan
92
What is another name for a Jumbo loan?
Non-Conforming Loan
93
The front Ratio for an FHA loan is 31%... what is the back ratio?
43%
94
The front Ratio for a
| Conventional loan is 28%... what is the back ratio?
36%
95
The Ratio for a VA loan is?
41%
96
What is another name for the Bank Secrecy Act?
The anti-money laundering act
97
What is another name for the Anti-Money Laundering Act?
Bank Secrecy Act
98
Which law requires banks (financial institutions) to keep records of deposits of $10,000 made in cash?
Anti-Money Laundering Act/Bank Secrecy Act
99
Which law requires MLOs to file suspicion activity that might be a sign of tax evasion, money laundering, or other possible criminal activity exceeding $5,000.
Anti-Money Laundering Act/Bank Secrecy Act
100
If you fail the test, how long must you wait before retaking the exam?
Required 30-day waiting period before retaking a failed test
101
What does AUS stand for?
Automated Underwriting System
102
What does SAFE Act stand for?
Secure & Fair Enforcement Act
103
What does HERA stand for?
Housing & Economic Recovery Act
104
What does HPA stand for?
Homeowner’s Protection Act
105
What does GLBA stand for?
Graham Leach Bliley Act
106
What type of property is covered under RESPA?
1 – 4 unit Residential Property
107
Which regulation allows lenders to OBTAIN information regarding a
borrower’s ethnicity, to help identify possible discriminatory patterns?
HMDA – Regulation C
108
When can a borrower request cancellation of PMI?
When LTV Reaches 80%
109
When must the lender automatically cancel PMI?
When the LTV reaches 78%
110
What is the primary market?
Where borrowers/consumers obtain mortgage loans
111
What is the secondary market?
Where lenders buy & sell loans from one another
112
Name the two Government Sponsored Enterprises (GSEs)?
Fannie Mae Freddie Mac
113
Which GSE is the Federal National Mortgage Association?
Fannie Mae
114
Which GSE is the Federal Home Loan
| Mortgage Association?
Freddie Mac
115
TILA applies when credit is payable by written agreement in __________ installments?
More than 4 installments
116
Which AUS system does Fannie Mae use?
Desktop Underwriter (DU)
117
Which AUS system does Freddie Mac use?
Loan Product Advisor (formerly Loan Prospector)
118
How often must National DNC and
| internal DNC list be updated?
Every 31 days and records must be maintained for 24 months
119
An appraisal is valid for _____ months?
An appraisal is valid for 6 months (updated 1/1/2020). It must be re-certified if the appraisal will be 4 months (120 days) old or more at closing.
120
What is the penalty for violating the DNC list?
$42,530
121
What is the penalty for violating the DNC list?
$42,530 (use to be)
$43,280 (then was)
$43,792 (2021 Answer)
Be prepared and learn all 3/ know all 3 just in case
122
Which regulation allows the borrower to sue for 3x’s the amount paid for title insurance?
RESPA Section 9
123
If money was collected, and a borrower rescinds, how long does escrow have to return the funds?
20 days
124
MLOs seeking to become licensed in other states or who seek to move from a bank to a non-bank lender will be allowed ____ days of transitional (temporary) authority.
These individuals are allowed to originate loans while completing any state-specific requirements for licensure such as education or testing for up to 120 days while they are applying to the state agency for their new license.
125
What is the only fee that can be collected prior to delivery of the Loan Estimate?
Credit Reporting fee
126
Once an individual is unlicensed for ________ years as an MLO, most states require that the individual retake the 20hrs of pre-licensing education in order to have his MLO license reinstated.
Once an individual is unlicensed for three (3) years as an MLO, most states require that the individual retake the 20hrs of pre-licensing education in order to have his MLO license reinstated.
127
What law requires that the equal housing lender slogan and/or logo be placed on all advertising?
Fair Housing Act
128
How long does a person have to sue for a violation under the Fair Housing Act?
1 year
129
Once unlicensed for ______ years, the individual must retake and pass the National Exam.
Once unlicensed for five (5) years, the individual must retake and pass the National Exam.
If the individual has worked as a registered MLO during this unlicensed period, he is credited for that time.
130
What is the site where you can receive a free copy of your credit report, according to the FACT Act?
www.Annualcreditreport.com
131
The lender must provide the borrower with a list of then ______ HUD approved counselors.
The lender must provide the
| borrower with a list of then (10) HUD approved counselors.
132
What regulation is designed to protect consumer’s non-public information (NPI) and how it can and cannot be shared?
GLBA
133
Which law requires lenders to verify the date of birth, SS# and ethnicity of a person getting a loan in the United States?
U.S. Patriot Act
134
If you fail the test 3 times, what is the waiting period to retest?
Six (6) Months/180 days
135
Under HMDA, how long must a lender keep the Loan Application Register (LAR)?
3 years
136
What day does your license expire each year?
December 31st
137
What is the renewal period to keep your
| license current?
NOV 1 – DEC 31st
138
What are the two (2) types of mortgages that require that the homeowner meet with a counselor – to ensure that the he/she understands how the program works.
Reverse mortgages &
| Higher-Priced (Section 35/HMLS) mortgages.
139
Which Act requires companies to give consumers privacy notices?
Gramm-Leach-Bliley
140
Which act was implemented to promote
| financial stability and to protect consumers from abusive practices?
Dodd Frank Act
141
What is RESPA Section 6 responsible for?
Mortgage Servicing
142
What is RESPA Section 8 responsible for?
Kickbacks, Fee Splitting & Unearned fees
143
What is RESPA Section 9 responsible for?
Title Insurance
144
What is RESPA Section 10 responsible for?
Escrow Accounts
145
What is the max mortgage term (length) allowed for a mortgage to be classified as a Qualified Mortgage?
30 years
146
Until the loan estimate has been delivered, what
| fee can a MLO charge?
Credit Report
147
Estimate of charges and terms
for settlement services must be available for at least _________ business days from the time the Loan Estimate is provided?
10
148
If a new (revised) Loan Estimate is required because of a changed circumstance, it must be disclosed and received by the borrower ________ days prior to consummation of the loan?
Four (4) days!
The “initial” loan estimate is due at or “within” 3
days of the application.
A “revised” loan estimate is due “within” 3 days of the notice of change.
But in ALL CASES, it must be delivered four (4) days prior to consummation!
Because the soonest a loan can close (per the MDIA Act is 7 days! (3 + 4 = 7)
149
Flood Insurance must be purchased from the _____________.
Flood Insurance must be
| purchased from the National Flood Insurance Program (NFIP).
150
The minimum amount of flood insurance required for a home in a flood zone is $_______.
$100,000
151
The max amount of flood insurance required for a home in a flood zone is $_______.
$250,000
152
The loan estimate must be retained for how long?
3 years
153
What does HMDA stand for?
Home Mortgage Disclosure Act
| Regulation C
154
What does NOV stand for?
Notice of Value
155
What does CRV stand for?
Certificate of Reasonable Value
156
What does the “R” stand for in the acronym NMLSR
REGISTRY
157
What is a Mortgage Call Report (MCR)?
Quarterly Report required by MLO Company and Mortgage Brokers
158
Loan originator organizations must keep
| compensation records for how many years?
3 years
159
Mortgage companies must submit a residential loan origination activity report to the NMLSR every:
Three months (3 months)
160
Which Act specifically prohibits blockbusting?
Th Fair Housing Act
161
What law protects homeowners from
| foreclosure-prevention scams?
Mortgage Assistance Relief Services Rule
162
Which law requires financial institutions to keep detailed records of cash transactions exceeding $10,000 (withdrawing, depositing or transporting).
Bank Secrecy Act/Anti-Money Laundering (BSA/AML)
163
What type of federal report is filed when
| financial institutions detect suspicious activity?
Suspicious Activity Report
164
Which law requires businesses to print only the last five card numbers on a
credit card receipt?
FACT Act or FACTA
165
What happens if the acceptable variance
| between the Loan Estimate and the Closing Disclosure is exceeded?
The excess is refunded to the borrower within 60 days
166
A higher-priced home loan is one that has:
APR exceeds the average prime rate by at least:
• 1.5% for first-lien mortgage
• 2.5% for a first lien Jumbo loan, or
• 3.5% for a subordinate mortgage lien.
167
What is the shortest time in which a mortgage purchase loan can close?
7 business days
168
Which law states that MLOs are
required to report any suspicious activity exceeding $5,000 that may be a sign of tax evasion, money laundering, or other possible criminal activity.
Bank Secrecy Act/Anti-Money Laundering (BSA/AML)
169
Denise reviewed her credit report and discovered a few discrepancies and would like to dispute them – once disputed, how long does the credit reporting agency have to respond to the dispute?
30 days
170
The Red Flags Rules are also known as
| ________
The Red Flags Rules are also known as Section 114 rules under the FACT Act or FACTA
171
What law requires ARM borrowers to receive the Consumer Handbook on Adjustable Rate Mortgages?
TILA/REG Z
172
Which law requires that the “Know Before You Owe” booklet be given to the borrower?
RESPA
173
Lenders must maintain an escrow account for higher-priced (Section 35) mortgages for a minimum of:
5 years
174
What is the Fannie Mae appraisal report form?
URAR - 1004 Form
175
What lien has the highest priority and is paid off first when a property is sold?
Property Tax
176
What document is assigned along with the mortgage?
Promissory note
177
What term describes the process of a senior mortgage lien-holder voluntarily changing into a junior mortgage lien-holder?
Subordination
178
What does Ginnie Mae do?
Guarantees Ginnie-Mae mortgage-backed securities
179
Which law requires lenders to train employees to recognize the Red Flags of identity theft?
FACT Act or FACTA
180
Which law entitles a borrower to a copy of his appraisal report?
ECOA
181
According to the GLB Act, a person who completes a single transaction with a creditor is known as a(n) customer or a consumer?
A consumer
182
The lowest possible interest rate for an ARM loan is known as the:
Floor
183
If an applicant works 30 hours every week and is paid $25.00 per hour, what is the applicant’s monthly income?
$3,250
| $25.00 x 30hrs a week x 52weeks in year / 12
184
What law prohibits discrimination in the sale & lease of property?
Fair Housing Act
185
The term “20 basis points” expressed as a percentage is:
0.20%
186
The late fee for a conventional loan is:
5% of principal and interest
187
A funding fee is required for a:
VA loan
188
The mortgagee is the:
Lender
189
Who does Fannie Mae hold responsible for the quality of an appraisal?
Lender
190
Which law prohibits discrimination by lenders when extending credit?
Equal Credit Opportunity Act /Reg B
191
A property sold for $200,000
| and was appraised at $180,000. The borrower received a loan for $150,000. What is the loan-to-value?
83.3% ($150,000/$180,000)
192
How many days does a lender have to send an adverse action notice?
30
193
The enforcement of a lien is known as a:
Foreclosure
194
What minimum percentage of ownership qualifies an individual as self-employed?
25%
195
Which law defines the right of rescission?
Truth-in-Lending
196
How long after the application date must
| social security payments continue to be received in order to count as income?
3 years
197
Which clause in a mortgage allows a lender to increase the interest rate?
Escalation
198
A VA appraisal is known as a:
CRV or NOV
199
Which types of loans are meant for rural areas?
USDA – Section 502
200
The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point and 1 origination point. What is the cost of the points?
$3,600 ($180,000 x 2%)
201
What is the maximum allowable amount of VA seller concessions?
4%
202
The late fee for a VA loan is:
4% of principal and interest
203
What is the clause in a mortgage that is also known as a “due on sale” clause?
Alienation
204
Alimony payments must continue to be received for how long after the application date if they are to be included as income?
3 years
205
Credit reports are good for how many days after they are pulled for qualifying purposes?
120
206
Which law protects an individual’s confidential information?
Gramm-Leach-Bliley Act
207
The Mortgage Servicing Disclosure Statement must be sent to the borrower within how many business days of receiving a loan application?
3
208
After an escrow account analysis, money must be refunded if the over-paid amount equals or exceeds:
$50
209
The maximum escrow cushion that a lender can require is:
Equal to 2 months (1/6th)
210
The fluctuating economic indicator used in an ARM is the?
INDEX
211
The Home Mortgage Disclosure Act (HMDA) was implemented by the:
Federal Reserve Board
212
Tax liens can be kept in the credit report for?
7 years
213
The range of possible credit score is:
300-850
214
The Red Flag Rule is concerned with:
Identity theft
215
Which type of mortgage is funded by the United States Department of Agriculture?
Section 502 loans/USDA Loans
216
What type of mortgage
| requires that the lender provide the borrower with the CHARM booklet?
Adjustable Rate Mortgages
217
For how many years must a lender retain the Escrow Cancellation Notice?
2
218
For how many years must a lender retain the Partial Payment Policy?
2 years
219
The mortgagor is the:
Borrower
220
Which law (regulation) is designed to create financial stability?
The Dodd Frank Act
221
Which appraisal approach is BEST for appraising vacant land, new construction or for unusual or special purpose?
Cost Approach
222
What establishes the lien position?
Date and time of recording
223
What type of mortgage has a fixed interest rate and increasing payments?
Growing equity mortgage
224
A graduated payment mortgage:
Has payments that start low and increase over time
225
If there is no minimum monthly credit card payment, what percent of the balance is used in the calculation of monthly debt?
5%
226
The Fannie Mae Total Obligations Ratio (back-end ratio) is:
36%
227
A borrower is paid $3,500 bi-weekly – what would be considered the gross monthly income?
$7,583.33
$3,500 x 26 ÷ 12 =
$7,583.33 per month
228
Company or individual who, for a fee, places loans with lenders, but does not service such loans is called a ___________?
Mortgage Broker
229
Fannie Mae generally wants how many months of liquid financial reserves after closing?
2 months
230
The Penalty for Mortgage Fraud is ___________.
$1,000,000 or imprisoned not more than 30 years, or both.
231
A co-borrower whose income is used to qualify must sign the:
Mortgage and the note
232
Which form is used to summarize the information in the loan package on a FHA loan?
Fannie Mae 1008 – Transmittal Summary
233
An appraisal must be re-certified if it is older than:
4 Months
234
The most probable price which a property should bring in an open market is:
Market Value
235
The appraisal approach that best applies to vacant land is:
Sales Approach
236
The appraisal approach that best applies to a school is:
Cost Approach
237
Who handles complaints regarding mortgage loan rejections?
CFPB
238
What gives someone other than the owner the right to be on the property for a specific purpose?
Easement
239
What is a clause in the deed that limits the future use of a property?
Deed Restriction
240
The most common type of legal description for residential subdivisions is:
Lot and block
241
The most accurate type of legal description for residential subdivisions is:
Metes and bounds
242
What type of funding occurs when a lender obtains funds from a line of credit at a commercial bank?
Warehouse funding
243
The late fee for FHA and VA loans is:
4%
244
When a lender sells a mortgage loan to another lender this is called:
Assignment of mortgage
245
What type of mortgage fraud scam occurs when a buyer borrows the down payment from seller without the lender’s knowledge?
Silent second
246
What can result in a $1,000,000 fine and 30 years in prison?
Acts of mortgage fraud
247
After loan servicing is transferred, the new servicer cannot assess late fees for a period of ____ if the payment is made to the previous lender by mistake:
60 days
248
Which document is used in place of a mortgage to secure the payment of a promissory note? (This method is used in many states.)
A deed of trust
249
“APR” means...
Annual percentage rate. This is the cost of credit expressed as a percentage.
250
A Reconveyance Clause is:
The method used to transfer title for a property following full payment of a loan. Reconveyance is typically used with deed of trust.
251
A Subordinate lien is:
The same as a second mortgage. It may also be called a junior lien.
252
What is a mortgage?
A legal document that connects a promissory note with the collateral used to secure the note.
253
A deed is:
A legal instrument that conveys title to real property.
254
An amortization schedule is:
A table providing the periodic payments needed to pay off a loan by the end of its term. The payments include principal and interest.
255
Qualified mortgages may not have Back-end DTI exceeding:
43%
256
What is a note?
A legal document that obligates a borrower to repay a loan. It specifies the terms by which the repayment will occur. It may also be called a promissory note.
257
VA underwriters use a debt ratio of:
41%
258
Discount points are paid to?
The lender at closing to reduce the note rate of the loan
259
Securitization is used to?
Pool similar types of loans to create mortgage-backed securities for sale on the financial market. These securities are used to create a renewable source of funds for lenders.
260
When does “Dry Settlement” occur?
Parties meet to execute documents, but funds are not disbursed.
261
When does “Wet Settlement occur”
Parties meet to execute documents and funds are subsequently disbursed.
262
Name four (4) involuntary liens that could be filed on a property.
Tax liens Mechanics liens Judgements Attachments
| *JMAT
263
What type of lien is a voluntary lien on property?
A mortgage is a voluntary lien
264
What is the definition of “Real Property”?
Land and anything that is permanently affixed to it.
265
Tom Brown is a nurse at the local hospital. He has worked the night shift for three years and plans to continue this schedule. His base pay is $29.50 per hour with a 5% shift differential. He averages 35 hours per week. What is his qualifying income?
Answer: C.
• Calculate the shift differential first: $29.50 * 5% = 1.475.
• So he gets an additional $1.475 per hour.
• So, $1.475 + $29.50 = $30.975. $30.975 * 35hrs x 52weeks / 12 = $4,697.87
266
If the purchase price is
| $300,000 and the loan amount is $250,000 and the appraisal value is $275,000...what is the LTV?
90%
| 250,000/275000
267
Suppose the payment is late on a
conventional loan and the monthly principal is $1,000, the monthly interest is $500, the monthly taxes are $125 and the monthly insurance is $25.00...what is the amount of the late payment?
$75 ($1,500 x 5%)
| * Remember – late charges are not calculated on the taxes and insurance!
268
Suppose the payment is late on a FHA loan and the monthly principal is $1,500, the monthly interest is $150, the monthly taxes are $105, the MIP is $210 and the monthly insurance is $33.00...what is the amount of the late payment?
$66
| $1,500 + $150 x 4%
269
Monthly PITI payments are $1,400 and the borrower’s gross monthly income is $5,000. His other debts are $200 a month. What is the Housing Expense Ratio?
28% ($1,400 ÷ $5,000)
270
Monthly PITI payments are $1,400 and the borrower’s gross monthly income is $5,000. His other debts are $200 a month. What is the Debt to Income Ratio?
32% ($1,400 + $200 ÷ $5,000)
271
What type of property is NOT covered by RESPA rules and regulations?
All cash sales, rental units of more then 4, property 25 acres or more & commercial property.
272
According to RESPA Section 6 - a servicer must make contact with a borrower after how many days of a missed payment?
36 days
273
A lender/servicer must inform the borrower of the available loss mitigation options after _____________ days of
missed payments?
45 days
274
Which regulation allows the borrower to sue for “treble” damages?
RESPA Section 9
275
What law requires the lender to provide an annual summary of the activity associated with the borrower’s impound account?
RESPA Section 10
276
The servicing transfer statement must be provided to the borrower ___________ prior to transfer.
15 days
277
What are the six (6) items that make a “complete” application?
Borrower name, Social Security Number, Subject Property address, Borrower’s monthly income, estimated value amount and the loan amount.
278
The “Know Before You Owe” disclosure must be provided within ____________ days of a complete application?
3 days
279
The “Know Before You Owe” disclosure must be provided for what type of transactions?
Purchase Only
280
If the application is withdrawn within the first _________ days or the lender declines the application within the first _________ days, the lender is NOT required to provide the ____________ to the borrowers.
3,3, initial disclosure
281
________________ occurs if the lender chooses the hazard insurance company when the borrower allows the policy to lapse.
Forced-placed insurance
282
Which items have a zero (0) tolerance between the Loan Estimate and the Closing Disclosure?
Real estate transfer taxes, loan origination fees, interest rates, appraisal and credit report
283
Which items have a 10% tolerance between the Loan Estimate and the Closing Disclosure?
Government recording fees, title insurance
284
On what document would you find
| information regarding the “RATE LOCK”?
The Loan Estimate ONLY
285
What is the penalty for violating RESPA?
$10,000 and/or up to 1-year in jail
286
Which Regulation is Regulation “Z”?
Truth In Lending Act (TILA)
287
Which disclosure requires that entities that purchase or acquire mortgage loans to notify the borrower and provide the name, address and telephone number of the new owner within 30 days of acquisition?
Transfer of Ownership Disclosure
288
The total “interest” being charged on the loan, expressed as a percentage is known as the ____________________?
Total Interest Percentage (TIP)
289
If a borrower was not properly notified of his/her right to rescind, how long can the rescission period be extended?
Three (3) years
290
How many copies of the “Right to Rescind” must each borrower receive?
2 (two)
291
What law requires that the borrower receive the Right to Recession notice?
TILA (Reg Z)
292
What does APOR stand for?
Average Prime Offer Rate
293
When is a loan considered a Section 32 (High Cost) Loan?
A loan will be considered a High Cost (Section 32) loan if its APR exceeds the APOR by more than 6.5% for a first lien or 8.5% for a subordination lien, or when the total points and fees payable in conjunctions with the loan exceed 5% (8% for loans of $20,000 or less).
294
When is a loan considered a Section 35 (High priced) Loan?
A loan will be considered a High Priced (Section 35) loan if it’s APR exceeds the APOR by more than 1.5%, 2.5% for jumbo first-lien loans and 3.5% for subordinate liens.
295
What type of loans “require” an impound account?
Section 35 High Priced Loan
296
When is the CHARM booklet required?
When the consumer received an adjustable rate mortgage
297
What is the regulation/rule that states that a loan originator cannot receive Dual Compensation?
Loan Originator compensation rule
298
Which law states that a loan originator can only be paid a commission by one source, either the borrower or the lender – but not both?
Loan Originator compensation rule
299
If a lender issues a Qualified Mortgage, it is assumed that the borrower has satisfied what rule?
The Ability-To-Repay (ATR) rule
300
What is the max debt-to-income ratio allowed for a mortgage to be considered a qualified mortgage?
43%
301
What is the max term (length) allowed for a mortgage to be considered a qualified mortgage?
30 years
302
What is the max debt-to-income ratio allowed for a mortgage to be considered a qualified mortgage?
43%
303
What type of mortgage is not allowed to have toxic features such as: interest only, negative amortization, no income/no asset income qualifications or prepayment penalties?
Qualified Mortgage
304
What law are you violating if you ask a borrower (on a credit application) if he or she is planning to have any more kids in the future?
ECOA – Reg B
305
What law states that married spouses can keep separate credit bureau files, if requested?
ECOA (REG B)
306
Which law states that if a Loan Originator is taking an application “face-to-face” he/she must complete the Government Monitoring Section (Section 8) of the 1003 application?
ECOA (REG B)
307
Which law states that an adverse action notice (denial) must be in writing?
ECOA (REG B)
308
If an applicant receives an adverse action notice – he can request a statement of “more specific” reason within ______________ of receipt of the notice?
60 days
309
ECOA states that creditors cannot discriminate against the __________ of the borrower’s income, however, they can discriminate against the _____________ of the borrower’s income.
Cannot discriminate against the source, however can discriminate against the amount.
310
How long must ECOA records be kept?
25 months
311
How long does a consumer have to sue for a violation under ECOA?
24 months
312
Which law states that a borrower is entitled to receive a free copy of his credit score once a year?
None. Credit “score” is never free
313
How long do “unpaid” taxes appear on a credit report?
Forever
314
How long does a judgment appear on a credit report?
7 years
315
If a consumer has questions regarding his/her application, who should be contacted?
The lender
316
If a consumer has questions regarding his/her credit scores, who should be contacted?
The credit reporting agency(ies)
317
If a consumer is denied credit, what law states that the credit must provide the name, address, and telephone number of the credit reporting agency used to make the decision?
FCRA – Regulation V
318
What law requires lenders to provide the borrower with the National Credit Score Disclosure, which informs him/her of which credit score was used to approve the mortgage loan?
FACT Act or FACTA
319
What law is the loan originator violating if he leaves the clients file on his desk at the end of the day?
FACT Act or FACTA
320
If a consumer’s file is no longer needed, what is the proper way to dispose of it?
Burn or Shred it
321
What law requires lenders to file monthly reports regarding the ethnicity, race, and sex of all applicants?
HMDA – Regulation C
322
An individual who obtains or has obtained a financial product or service from financial institution for person, family or household reasons is referred to as a ______________________according to the GLBA Act?
Consumer
323
An individual/consumer with a continued relationship with a financial institution is referred to as a _______________ according
to the GLBA Act?
Customer
324
Gaining information under false pretense is referred to as ____________ under the GLBA?
Pretexting
325
According to the DNC list, telemarketers (including loan originators) must search the national DNC list ever _______________ days.
Every 31 days
326
```
A SAR (suspicious activity report) must be filed by a mortgage loan originator (MLO) when a person engages in suspicious activity of $_______________ or
more?
```
$5,000
327
Which law increases the ability of law enforcement agencies to search telephone, email, medical and financial records of consumers?
USA Patriot Act
328
Which law is responsible for the establishment of the anti-money laundering act?
USA Patriot Act
329
Which law was established to identify and prevent redlining?
Home Mortgage Disclosure Act (HMDA)
330
How long must commercial advertising records be kept?
2 years
331
What law was created to prohibit money laundering and financing of terrorist?
USA Patriot Act
332
What is the name of the document that indicates the amount that the Veteran is entitled to?
Certificate of Eligibility (COE), which shows the amount of his entitlement.
333
What is the maximum flat fee that a lender can charge for a VA loan to cover lending cost?
Lender may charge a flat fee, up to 1% of the loan amount, to cover the lender’s costs.
334
An abusive practice in which a loan is refinanced without any tangible net benefit to the borrower is called?
Loan Flipping
335
FHA imposes restrictions requiring the borrower not to resale the property for the first _________ days.
90 days
336
FHA requires the lender to investigate the transfer history of property for the _______________ before resale, in an attempt to identify potential flipping schemes.
Three years (3yrs)
337
What type of loans have PMI (Private Mortgage Insurance)?
Conventional loans where the borrower puts less than 20% down payment
338
What type of loans have Up Front Mortgage Insurance Premium?
FHA Loans
339
In a conventional loan,
| how much of the down payment must come from the borrowers own (personal) funds?
5% of the down payment
340
What does the Debt Services portion of the monthly payment include?
Debt Services includes the principal and interest portion only (P&I)
341
What is a HECM?
Home Equity Conversion Mortgage (aka) a FHA reverse mortgage
342
When is a reverse mortgage due?
Borrowers dies, sells the home, or cease to live in the home for 12 consecutive months
343
What type of mortgage is it when the borrower is not required to make a payment, but the balance of the loan rises and the equity shrinks?
Reverse Mortgage
344
What type of mortgage is it when the balance continues to grow, even though the borrower is making the full payment each month?
Negative amortization
345
A type of seller financing in which the
seller finances enough money to cover the existing loan balance as well as any additional funds needed from the borrower is called a __________________.
Wraparound mortgage
346
What type of mortgage is also called a self-liquidating mortgage and is designed to pay off the entire balance at the end of the loan?
Fully-amortized mortgage
347
A mortgage that is a combination of fixed and adjustable. For example, 5/25 – is known as a __________________
mortgage?
Hybrid Mortgage
348
A written instrument used to convey title or transfer ownership?
Deed
349
The document that protects the homeowner against defects that occurred in the past, such as undisclosed liens, heirs, fraudulent documents, etc. is called ____________________?
Title insurance
350
A _________________ loan is a short-term cash out loan made on the equity in the applicant’s current property in order to allow them to close on the purchase of a new transaction.
Bridge loan
351
The area medium income (AMI) cannot exceed __________ in order to be approved for a USDA/Section 502 loan?
115%
352
What type of loan program provides 100% financing in rural or farm communities/areas?
USDA Loans
353
If a credit report doesn’t show the required minimum payment amount, the lender must use ___________________ for underwriting purposes?
5% of the outstanding balance
354
If a borrower rents a room for $1,500 a month, how much would the underwriter count as income?
$1,125.00
| $150,000 x 75% = $1,125
355
If a borrower receives $1,500 a month child support income, how much would the underwriter count as income?
$1,875.00
| $1,500 x 1.25% = $1,875
356
If a borrower receives $1,200 a month SSI income, how much would the underwriter count as income?
$1,500.00
| $1,200 x 1.25% = $1,500
357
Calculate 3 points if the loan amount is $500,000 and the sales price is $525,000.
$15,000
| $500,000 x 3% = $15,000
358
On a conventional loan where the borrower is making a down payment of $20,000, how much of the down payment must be from the borrower’s own funds?
$1,000
5% of the down payment must be from the borrower’s own funds.
$20,000 x 5% = $1,000
359
An individual that meets the definition of a loan originator, but works for a bank is called a ___________________?
Registered Loan Originator
360
To be approved as a Loan Originator, a licensee must not have been found guilty of any felony in the past ____________ years.
7 years
361
The only exception to a person being granted a license if he/she has been found guilty of a felony in the past 7 years (or if the felony deals with money crimes) is if he/she has received a __________________.
Pardon
362
What are the three (3) protection options each state must have in place for loan originators?
Minimum net worth, surety bond or reserve account
363
What is the penalty for violating the safe act?
$28,474 as of January 12, 2018 (previously $25,000)
364
When must the borrower receive the Initial Escrow Account Disclosure?
Within 45 days after the closing date (if it was not received at closing)
365
When must the borrower receive Affiliated Business Arrangement Disclosure (afba)?
When the referral is made (immediately) if not then, prior to doc signing.
366
When must the borrower receive the Privacy Policy Notice?
At first contact, and thereafter, once a year as long as he/she remains a customer
367
An applicant is purchasing a home for $100,000 utilizing FHA financing. The home appraises for $98,000. What is the minimum dollar amount that the borrower must contribute as a down payment on this transaction?
$98,000 x 3.5%
368
How long would an unpaid tax lien remain on a consumer’s credit report?
Forever
369
What is the penalty for knowingly violating the TRID rules?
1,000,000 per day
370
What are the two agencies that created the NMLS System?
AARMR and the CSBS
| American Association of Residential Mortgage Regulators and the Conference of State Bank Supervisors
371
Mary wants to obtain FHA insured financing on her primary home. Her housing expense will be $800.65. She also has the following debt: $192.65 (auto payment) and $40 (credit account). Based on her debt, what would be Mary’s required stable monthly income to qualify for this loan using the total debt-to-income ratio?
$2,403.02.
You MUST know the ratios for FHA to do this problem. The back-end (total DTI) for FHA is 43%.
$800.65 + 192.65 + $40 = $1,033.30 $1,033.30/43% = $2,403.02
372
For an ARM, an introductory rate that is lower than the fully indexed rate at the time of closing is called a _________ rate?
Teaser Rate
373
According to the TRID Rules, if the Closing Disclosure is mailed to the borrower, when is it considered received?
Three (3) days after it was mailed/sent
374
What is the formula for calculating the CLTV?
1st Mortgage + 2nd Mortgage ÷ the sales price or appraised value (whichever is lower)
375
What is the monthly PMI on a 90% LTV loan for a property valued at $500,000 if the monthly PMI factor is .60%?
$225.00
| $500,000 x 90% x .60% ÷ 12
376
Harold is refinancing his home. The property appraised for $260,000, and Harold’s loan amount is $195,000. What is the Loan-to-value for this transaction?
75%
377
What is the penalty when a loan applicant makes a false statement on the 1003?
May face a five-year jail term
378
3/1, 5/1, 7/1 and 10/1 ARMs; these are examples of what types of mortgage?
These are adjustable rate mortgages, in which, rate is fixed for three year, five year, seven year and 10 year periods, respectively, but may adjust annually after that. Also called Hybrid ARMS
379
What is the official name for the 1003 form?
Form 1003 is also known as the Uniform Residential Loan Application (URLA).
Freddie Mac also uses the same application form and is known as the Freddie Mac Form 65.
380
What is a 1031 Exchange?
A tax deferred exchange of “like” real estate, used to offset or avoid capital gain tax.
381
What is the name of the form that the IRS uses to retrieve past tax returns, W-2, and 1099 transcripts that are on file with the IRS?
4506-T FORM
382
What documents is a summary of recorded transactions, concerning a particular property?
Abstract of title
383
What is the clause/condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made or for breach of other conditions of the mortgage?
Acceleration Clause
384
Interest earned but not yet paid is called what?
Accrued Interest
385
What is included in Acquisition Costs?
Purchase price, plus closing costs, minus seller credits.
386
What type of mortgage, is a mortgage in which, the interest rate is adjusted periodically based on a pre-selected index?
Adjustable Rate Mortgage (ARM)?
387
An opinion of market value as of a specific date is known as what?
Appraisal
388
The date that the interest rate changes on an adjustable rate mortgage (ARM) is known as what?
Adjustment Date
389
The measurement of the full cost of a loan, including interest and loan fees, expressed as a yearly percentage rate is known as what?
Annual Percentage Rate (APR)
390
If there is greater than one percent (1%)
ownership interest of a party in both the business referring out the service and the business receiving the referral, what document is required?
Affiliated business arrangement (ABA)
391
Loan payment, divided into equal periodic payments, calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance is known as what?
Amortization
392
What does the Consumer Reporting Agency (or Bureau) do?
▪ An organization that handles the preparation of reports used by lenders to determine a potential borrower’s credit history.
▪ The agency gets data for these reports from a credit repository and other sources.
▪ The Big 3: Experian, Equifax and Trans Union
393
What is a Contingency?
▪ A condition that must be satisfied, before a contract is legally binding, before a sale can close.
▪ Real estate sales contracts often have a specific date or number of days, in which, the contingencies must be removed.
394
The “When Your Home Is In The Line” disclosure is required by which regulation?
TILA – Regulation Z
395
What is a Conventional Loan?
A mortgage not insured by FHA or guaranteed by VA.
396
When would a Conversion Clause/Option be used?
▪ A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term.
▪ Usually conversion is allowed at the end of the first adjustment period.
▪ The conversion feature may cost extra.
▪ Also referred to as a Convertible ARM
397
What is a Conveyance?
The transfer of a deed
| Or possibly a lease or mortgage.
398
Covenants, Conditions and Restrictions (CC&Rs) are what type of documents?
A document defining the use,
| requirements and restrictions of a property.
399
What is a Credit Report?
A report documenting the credit history and current status of a borrower’s credit standing.
400
How long can a registered MLO, who is transferring from a depository institution, in order to become a state-licensed MLO originate mortgages, prior to completing the 20hr course?
120 days Transitional Authority
401
What is a CRV?
▪ Certificate of Reasonable Value.
| ▪ A property appraisal performed by a VA-approved appraiser that established the limit on the principal of the VA loan.
402
When should an ARM disclosure be provided to a borrower?
Within three days of the application, whenever an adjustable-rate mortgage transaction is contemplated. (TILA)
403
Who receives the CHARM Handbook?
The Consumer Handbook to Adjustable-Rate Mortgages (“CHARM” booklet) must be presented to the consumer within three days of applying for an ARM (adjustable rate mortgage) loan. (TILA)
404
What is an Assessment?
A local tax, levied against a property, for a specific purpose, such as: a sewer or street lights.
405
The transfer of a mortgage from one person to another is known as what?
Assignment
406
A document showing the financial situation-assets, liabilities and net worth of a person at a specific point in time is known as what?
balance sheet
407
What is a Basis point?
▪ A unit of measure: 1/100th of one percent
▪ For example, the difference
between a 9.0 percent loan and a 9.5 percent loan is 50 basis points
408
What is a Bi-weekly Payment Mortgage?
A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). There are 26 bi-weekly payments a year
409
What is a Blanket Mortgage?
A mortgage that covers more than one parcel of land
410
Bona fide is also known as what?
“In good faith” - A “bona fide” offer, is an offer made in good faith.
411
Who’s considered a Borrower (Mortgagor)?
The borrower/mortgagor is the one who applies for and receives a loan, in the form of a mortgage, with the intention of repaying the loan in full.
412
What are Caps (Payment)?
Consumer safeguards, which limit the amount of change to the interest rate, for an adjustable rate mortgage
413
Who receives a Certificate of Eligibility?
The document given to qualified veterans, which entitles them to VA guaranteed loans for homes, business and mobile homes.
414
What is a Certificate of occupancy?
Document, issued by local government agency, stating that a property meets the requirements of health and building codes.
415
What is a Certificate of Reasonable Value (CRV)?
An appraisal issued by the Veterans Administration showing the property’s current market value
416
What is the Chain of title?
The chronological order of conveyance of a property, from the original owner to the present owner
417
What is a Clear title?
A marketable title, free of clouds and disputes
418
COFI/Cost of Funds Index is used to calculate what?
▪ An index used to calculate the rate of an adjustable-rate mortgage.
▪ The rate adjusts based on a cost-of-funds index often the 11th
District Cost of Funds.
419
What is Combined Loan-to-Value (CLTV)?
The ratio of the total mortgage liens against the subject property, to the lesser of either the appraised value or the sales price
420
Conforming Loans are what type of loans?
A mortgage loan under the maximum amount of loans that FNMA (Fannie Mae) and FHLMC (Freddie Mac) are legally allowed to buy
421
When are Construction Loans used?
A short-term interim loan to pay for the construction of buildings or homes
422
What is the name of the agency who is enforces laws that protect consumers of financial products and services such as mortgages, credit cards and deposit accounts?
Consumer Financial Protection Bureau (CFPB)
423
What is a Rate Lock?
A commitment issued by a lender, to a borrower guaranteeing a specified interest rate and lender costs for a specified period of time
424
The Real Estate Settlement Procedures Act (RESPA) protects who?
▪ A consumer protection law, which
requires lenders to give borrowers advance notice of closing costs/settlement services.
▪ Also known as Regulation X
▪ Memory tool: REXPA
425
What is Real Property?
Land and everything, which is Permanently Affixed to it
426
Reclamation is the right of which person?
The right of the person, with title to a property, to recover it from the debtor in case of a bankruptcy
427
Reconveyance transfers a property to whom?
The transfer of property back to the owner when a mortgage is fully repaid
428
What is a Recording?
The act of entering documents concerning title to a property into public records
429
Refinance/Refinancing a loan occurs when?
Obtaining a new mortgage loan on a property, already owned, often to replace existing loans on the property
430
Regulation B (ECOA) is also known as what?
The equal Credit Opportunity Act.
Makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age public assistance program
431
Regulation V (FCRA) regulates what?
▪ The Fair Credit Reporting Act.
▪ The Fair Credit Reporting Act (FCRA)
is a United States federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information.
▪ Memory tool: V= Very Fair
432
Regulation Z (TILA) was designed to promote what?
▪ The Truth in Lending Act
▪ designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner
▪ Memory Tool: TILA- TILA the GodZilla
433
Rescission gives the homeowner the right to do what?
The cancellation of a contract.
434
What is a Reverse Annuity Mortgage (RAM)?
▪ A form mortgage, in which, the lender
makes periodic payments to the borrower, using the borrower’s equity in the home as collateral for and repayment of the loan.
▪ More commonly called a HECM (Home Equity Conversion Mortgage)
or simply a Reverse Mortgage.
435
What is a Reverse Mortgage (HECM)?
▪ HECM or Home Equity Conversion Mortgage
▪ Reverse mortgages unlock the equity in the home.
▪ Multiple payout options
▪ For borrowers 62+
436
The Safe Act (2008) was designed for what?
Secure and Fair Enforcement for Mortgage Licensing Act
The S.A.F.E. Mortgage Licensing Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators.
437
Who issues a Satisfaction of Mortgage?
▪ The document is issued by the mortgage company when the mortgage
loan is paid in full.
▪ Also called a “release of mortgage.”
438
What is a Second Mortgage?
A mortgage made subsequent to another mortgage and subordinate to the first one
439
Who’s part of the Secondary Mortgage Market?
▪ The market, into which, primary
mortgage lenders sell the mortgages they make to obtain funds to originate more new loans.
▪ This includes investors such as Fannie Mae, Ginnie Mae and Freddie Mac.
440
What is a Security?
The property that will be pledged as collateral for a loan
441
A Seller Carry Back is what type of agreement?
An agreement in which the owner of a property provides financing often in combination with an assumable mortgage.
442
Who is a Servicer?
An organization that collects principal and interest payments from borrowers and manages the borrower’s escrow accounts
443
What is Servicing?
All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
444
What are Settlement/Settlement Costs?
▪ Expenses over and above the price of the
property that are incurred by buyers and sellers when transferring ownership of a property. Also called Closing Costs.
▪ Closing costs normally include an originator fee, property taxes, charges for title insurance
and escrow costs, appraisal fees, etc.
▪ Closing costs will vary according to the area country and the lenders used.
445
Who creates Sweat Equity?
Equity created by a purchaser performing work on a property being purchased
446
A Tax Lien is a claim against what?
A claim against a property for unpaid taxes
447
What is a Tax Sale?
Public sale of property, by a government authority, as result of nonpayment of taxes
448
A Title shows what?
A document, which gives evidence of an individual’s ownership of property
449
A Total Expense Ratio (back-end ratio/total debt ratio) includes what?
Total obligations (PITI + all debt) divided by the gross monthly income –expressed as a percentage.
450
What is the law that requires that the Annual Percentage be disclosed to a home buyer, shortly after they apply for the loan?
TILA
| Also known as Regulation Z. Memory tool: TILA the GodZilla
451
Evaluating a loan application package and making the decision, whether to make a loan to a potential home buyer, based on credit, employment, etc is a process known as?
Underwriting
452
What federal legislation allows the borrower to challenge the value stated in an appraisal report?
ECOA – Regulation B
453
Pretexting is prohibited based on what law/regulation?
GLBA
454
Which regulation states that it is a violation to discriminate against a borrower who’s only income is social security benefits?
ECOA
455
What is a Deposit/Earnest Money Deposit?
▪ Cash paid when a formal sales contract is signed.
▪ The deposit is usually held by a third party until the sale is
complete.
456
Depreciation happens when?
When the value of property declines
457
What are Discount Points?
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100000 mortgage would cost $2000).
458
What was the purpose of the Dodd-Frank Act?
Purpose:
Answer 457:
1. To promote financial stability
2. To end “too big to fail”
3. To protect taxpayers by ending bailouts
4. To protect consumers from abusive practices
Established the Consumer Financial Protection Bureau (CFPB)
459
Which law requires notification to the borrower before the servicing of the loan is transferred to someone else?
RESPA
460
What’s an Encumbrance?
▪ A legal right or interest in a property that affects title and
lessens the property value.
▪ Encumbrances can take the form of
claims, liens, unpaid taxes and so on.
461
The value remaining in property after all liens and debts are considered is known as what?
EQUITY
462
What type of ARM allows the borrower to change from an adjustable rate mortgage to a fixed rate mortgage?
CONVERTIBLE ARM
463
The FACT Act (2003) was an amendment to what earlier law?
▪ Fair and Accurate Credit Transactions Act amended Fair Credit Reporting Act (Reg V).
▪ The act allows consumers to request and obtain
a free credit report one every twelve months from each of the three nationwide consumer credit reporting companies.
▪ The act also contains provisions to help reduce identity theft.
464
A veteran’s entitlement for a VA loan is specified in what document?
The Certificate of Eligibility (COE) is the document issued by the VA that specifies the amount of loan guarantee for which the veteran is eligible
465
The APR on a Loan Estimate for a 30-year fixed-rate loan is 6.25% and the APR on the Closing Disclosure is 6.5%. After redisclosure, the borrower must wait ___________ to close the loan.
THREE BUSINESS DAYS
466
According to the GLB Act, an individual who obtains or has obtained a financial product or service from a financial institution is known as a what?
CONSUMER
467
If Martin sells his home five months after purchasing the property, the sale price must exceed Martin’s acquisition cost by more than _____ to require a second appraisal.
20%
A seller who acquired a home within six months of resale and is selling the home for more than 20% of the original acquisition cost must have a second property appraisal performed on the property.
468
What is the Federal Reserve?
▪ The central bank of the United
States and major regulatory agency for many commercial banks.
▪ Commonly referred to as “The Fed”.
469
Fee simple is what type of ownership?
Absolute ownership of real property
470
What is a written agreement between lienholders on a property that changes the priority of mortgages, judgments, and other lien?
A subordination agreement is a written agreement between lienholders on a property that changes the priority of mortgages, judgments, and other liens.
471
What is a First Mortgage?
The primary lien against a property
472
A Fixed Rate (Mortgage) has what type of interest rate?
An interest rate is fixed for the term of the loan
473
Flood Insurance is what type of insurance?
A form of hazard insurance required by lenders to cover properties in flood zones
474
What is FNMA?
▪ The Federal National Mortgage Association is a secondary
mortgage institution.
▪ FNMA buys VA, FHA and conventional mortgages from
primary lenders.
▪ Also known as “Fannie Mae.”
475
What is Forbearance?
Grace period given when a lender
| postpones foreclosure, to give the borrower time to catch up on overdue payments.
476
Foreclosure is known as?
▪ A legal process, by which, the
lender or the seller forces a sale of a mortgaged property, because the borrower has not met the terms of the mortgage.
▪ Also known as a repossession of property.
477
Freddie Mac is a nickname for who?
The nickname most commonly used for the Federal Home Loan Mortgage Corporation
478
A Fully Amortized ARM is what type of rate?
An adjustable rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance at the interest accrual rate over the amortization term.
479
Ginnie Mae (GNMA) is also known as what?
The nickname most commonly used for the Government National Mortgage Association
480
Government National Mortgage Association (GNMA) is also known as what?
▪ Also known as “Ginnie Mae.”
▪ Provides sources of funds for
residential mortgages insured or guaranteed by FHA or VA.
481
A type of flexible payment mortgage, where the payments increase for a specified period of time and then level off is known as __________________.
A Graduated Payment Mortgage (GPM)
482
Usury is interest charged when?
Interest charged in excess of the legal rate established by law
483
What is a Variable Rate Mortgage (VRM)?
Another name for an Adjustable Rate Mortgage (ARM)
484
A document, signed by the borrower’s financial institution (BANK), verifying the status and balance of his/her financial accounts is known as what?
A Verification of Deposit (VOD)
485
A document, signed by the borrower’s employer, verifying his/her position, salary overtime, bonuses and the likelihood of continued employment is known as what?
A Verification of Employment (VOE)
486
A document, signed by the borrowers servicer, verifying the status of the mortgage is called what?
A Verification of Mortgage (VOM)
487
A document, signed by the borrowers landlord, verifying their rental/lease payment history is called what?
A Verification of Rent (VOR) / 1007
488
A Margin is added to what to determine the fully-indexed rate?
▪ The amount a lender adds to the
index on an adjustable rate mortgage to establish the fully-indexed rate.
▪ The margin is the lender’s profit.
▪ Index + Margin = adjusted interest rate.
489
What is a Marketable Title?
A title which is free and clear of liens, clouds or other defects, which would prevent the sale of the property.
490
A Mechanic’s Lien is used when?
▪ A mechanic’s lien is a security interest
in the title to property for the benefit of those who have supplied labor or materials that improve the property.
▪ The lien exists for both real property and personal property.
▪ It is considered a cloud on title.
491
MIP (Mortgage Insurance Premium) is purchased by whom?
▪ Insurance from FHA, to the lender, against incurring a loss, if the
borrower’s were to default.
▪ Insurance purchased by borrower to insure against default on a FHA
loans.
▪ MIP protects the LENDER
492
A Monthly Housing Expense includes what?
```
▪ Total monthly expense of principal, interest, taxes, hazard insurance an
mortgage insurance (PITI).
▪ It also includes any HOA (Home Owners Association) dues. (PITIA)
```
493
What is a Mortgage?
A legal document, which pledges a property to the lender as security for payment of a debt
494
The Mortgage Disclosure Improvement Act (MDIA) 2008 amended what?
▪ An amendment to Reg. Z.
▪ Requires disclosures (LE) to be sent to the
borrower within three (3) business days after receiving borrowers application.
▪ The loan may not close until after the
seventh (7th) business day after disclosures have been delivered or mailed to the borrower.
495
Who is a Mortgagee?
The lender in a mortgage loan transaction
496
What is Private Mortgage Insurance?
Money paid to insure the mortgage when the down payment is less than 20 percent
497
Who is a Mortgagor?
The borrower or homeowner.
498
What is Negative Amortization?
▪ When your monthly payments are not large enough to pay all the interest due on
the loan.
▪ This unpaid interest is added to the unpaid balance of the loan.
▪ If the borrower does not increase
payments, the home buyer will end up owing more than the original amount of the loan.
499
A Non-Conforming Loan cannot be sold to who?
▪ A conventional loan that cannot be sold to Fannie and Freddie
Mac.
▪ Often, these loans are larger than the conforming loan amount.
500
A Notice of Default (NOD) is given to who?
Written notice to a borrower, that a default has occurred and that legal action may be taken.
501
Question 500:
| What is the Office of Comptroller Currency?
The federal financial regulatory body, which oversees the nation’s federally chartered banks and savings institutions.
