colorado practice test Flashcards
Increasing loan balances resulting from the application of periodic payments creates
negative amortization
what kind of transaction would a HUD settlement booklet be provided
a new home purchase
what form of insurance coverage insure an investor against homeowner default
PMI
Colorado Consumer Equity Protection Act established stricter guidelines than federal law
HOEPA
Homeowner counseling and borrower education has proven to lead to …
minimizing predatory lending issues
Six stage loan cycle begins with
origination
What agency is responsible for insuring compliance with the Colorado mortgage Broker registration act
DORA
Department of regulatory Agencies
Pre-qualification involves
informal review of the borrowers credit
Pre-approval involves
formal review
discrimination in mortgage lending address
ECOA and the Fair housing Act
What federal regulation governs procedures for handling an incomplete loan application
ECOA
What should an originator do if they discover a borrower will repay gift funds
inform the lender
Colorado Consumer Caution Disclosure be provided
3 days prior to closing
If a loan applications is denied due to information on the applicants credit report which of the following must be included in a notice of the denial
statement explaining that the credit reporting agency did not make the decision to deny the consumer credit
What loan processing step would an originator typically take to fulfill the requirements of the Patriot Act
obtain a copy of the applicants driver license or other identification
Which disclosure is required under Colorado law to discourage borrowers from accepting a lending agreement with prepayment penalties provisions
Loan Product Choice Disclosure
What document would a underwriter rely on for detailed information concerning the collateral for mortgage loan
the property appraisal
Which entities has urged Colorado residents to purchase flood insurance
FEMA
What gives a mortgagor the right to a property following fulfillment of their obligation to the mortgagee
defeasance clause
Property appraisal requirements are established by what federal entity
Federal reserve broad
What are two types of title insurance
Lenders and owners
Who is responsible for conducting a title search
Abstractor
Lenders who are subject to the disclosure requirements of RESPA are regulated by
HUD
Mortgage trans action will provide a consumer with opportunity to deduct interest on there income taxes
purchasing a home
Colorado, appraiser regulation is found where
Chapter 10 of DORA real estate manual
Colorado an appraiser with the designation “Licensed Appraiser” is permitted to appraise non-complex properties with transaction values of no more than
$1,000,000
Bankruptcy chapters allows a debtor to completely liquidate their debts
chapter 7
Errors and omissions insurance requirement for mortgage brokers in Colorado
$100,000 with deductible no greater than $10,000
In Colorado a potential borrower has summited an application and paid fees but the loan does not make to closing, through no fault of the broker what is the most amount of fees that a broker may retain
$300
How often must a Colorado mortgage broker license be renewed
3 years
What protects a lender from misuse if its funds by the title company
insured lender letter
Colorado Mortgage Broker Licensing Act applies to individuals or companies
Individuals
What action is required on an FHA loan if the appraiser notes a cosmetic defect on the property
no action is necessary
Loan Servicer is responsible for
- maintaining detailed records of the borrowers loan payment
- disbursing funds from escrow account to pay bills related to the property
- managing delinquent accounts
Colorado Trustee Foreclosures on a property by what method is the property sold
through public sale
What would percentage of owners trigger a ABA disclosure
1%
Define mortgage broker
Who arranges funding or negotiates mortgage loan for potential borrower and charges a fee for these service
In the state of Colorado what would terminate foreclosure proceedings provide that homeowner makes any past due payments prior to sale
Filing an Intent to Cure Notice 15 days prior to the foreclosure
What booklet must be provided to a potential borrower who is specifically shopping for Open-End Financing
“When Your Home Is On The Line What You Should know About Home Equity Lines of Credit”
What is the only legal request that can be made of an appraiser
Asking the appraiser to consider additional , appropriate property information
True or False
The settlement cost booklet provides the borrower with information on their right to negotiate the terms of a loan and warns them that use of false information on loan application can lead to prosecution for fraud
TRUE
When would a Tangible Net Benefit Disclosure be provided in Colorado
When the broker is recommending a refinance transaction to a borrower
What mandatory disclosures are due 3 days after application
- GFE GOOD FAITH ESTAIMATE
- MORTGAGE SERVICE DISCLOSURE
- HUD SETTLEMENT BOOKLET
TRUE OR FALSE
With such important consumer interests to protect TILA never allows borrowers to accelerate a lending transaction by waiving the right to rescind
TRUE
Critics of RESPA feel the GFE is not very helpful in preparing loan applicants to meet the costs of settlement because
the estimate of costs provided on the GFE is often significantly lower then the actual costs of settlement
What is the purpose of a loss payee clause on hazard insurance policy
it names the lender as payee in the event of property loss
What is USPAP
*The uniform standard used by appraisers
*Federal Reserve Broad
THE UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE
What time period does a homeowner in Colorado have to cancel after signing a foreclosure consultancy agreement
75 days
Who requires Good Faith Estimate
RESPA
How long must a mortgage broker retain records in Colorado
4 years following closing
According to Colorado Law under what circumstance may a prepayment penalty be included in a loan covered by the Consumer Equity Protection Act
A prepayment penalty may be included if the borrower has the option of choosing a loan without a prepayment penalty
What fees are consider when calculating finance charges
PMI Mortgage broker fee origination fees discount points document preparation
What would begin a non-judicial foreclosure
Notice of Election and Demand
The federal agency with authority to bring enforcement action against mortgage broker for violation of Reg Z TILA
Federal trade Commission
What federal agency that is responsible for writing the implementing regulations for TILA is
The Board of Governors
The Colorado “duty of good faith” requirement mean a broker must do
- Make reasonable inquiry into a borrower current income and obligations
- Recommend mortgage products that are beneficial to a borrower
- Make an effort to ensure a borrower can repay the loan
A loan applicant who has been ordered by the courts to make child support payments would list those payments as which of the following on the 1003
A Liability
Discount points are used to do what
Lower the note rate
For what reason do lenders make use of the 1003 mandatory
it is required by Fannie Mae and Freddie Mac
What may be used to evaluate an applicants income stability
Education level
how long been employed at his current job
how long he has been in his current profession
the guidelines allowing an affiliated business to receive a return of ownership interest is a part of what federal regulation
REG X RESPA
Lender is also called “legal terms’
Mortgagee
Colorado mortgage broker may work as both a broker and a real state
TRUE OR FALSE
TRUE
Which of the following creates the requirement for uniform settlement disclosure
RESPA
For purpose of underwriting, Stocks, Bonds, 401k and retirement accounts may only be counted at ___ % of their face value
70%
What is the required in an agreement for Foreclosure Consulting in the state of Colorado
- Right to rescission
- Notarizing signatures of all parties to the contract
- Contract must written in English and accompanied by certified translation into there language spoken to the home owner
by providing their signature in section X of a loan application the interviewers is attesting to what
That all applicable disclosure have been provided pursuant to the application
who obtains the title to a Colorado residence in a foreclosure
Equity purchaser
comparable sale search prior to appraisal is only needed if
it may be requested as needed
A mortgage broker recommends a refinance transaction to a borrower will have no tangible net benefit from obtaining the refinance what Colorado requirement has been broken
Duty of good faith
Is Home Equity Conversation Mortgage tax deductible
true
Define escrow
A statement of the estimated taxes insurance premiums and other charges the borrower will pay from escrow fund during the first 12 months of the loan
In the state of Colorado what governs mortgages made for manufactured homes
Titles to Manufactured Homes Act
According to Colorado law a title company is not allowed to set their own fees for …
obtaining a tax certificate
The Interagency Guidance on Nontraditional Mortgage Product Risk is
A guidance that the federal banking regulatory agencies drafted to ensure that lending institutions do not make nontraditional mortgages without adequate evaluation of the borrower institutional risk management and consumer protection
Legal term for a borrower or homeowner in a standard mortgage transaction
Mortgagor
Colorado Good Fund Law is used to ensure that
Loan funding is available at the time of closing
Who is responsible for paying the premium for the mortgage title insurance
Buyer
While waiting for a criminal background check what are Colorado mortgage broker license applicants permitted to do
they may apply for temporary license under a sponsoring broker
An individual negotiates a loan in the state of Colorado with out license or valid temporary license this individual is guilty of
Misdemeanor
How long is a temporary broker license valid in Colorado
120 days
Option ARMs typically recast
When the debt reaches 125% of the original amount owed or 5 years
How many days does the Department of Regulatory Agencies have to issue or deny a Colorado mortgage broker license
21 days
If a Colorado mortgage broker increase their fee prior to a loan going to settlement what must occur
Provide the borrower with a written explanation
Penalties for violation under HOPEA are the same as
Truth-in Lending Act
What forms of insurance coverage insure a homeowner against damages caused by fire
Hazard
In lieu of posting a Surety Bond in the sate of Colorado a licensed mortgage broker may do
Obtain a business insurance policy
When is a Colorado Mortgage broker Compensation Disclosure given to a borrower
3 days of application
The application fee for licensure under the Colorado Mortgage Broker Licensing Act is
$200
One of the best question an originator can ask is
Does this loan make sense
What best describes the purpose of a surety bond for Colorado mortgage broker licensees
to ensure a broker has access to funds for compensation of losses
When a Colorado mortgage broker enters a lock in agreement with a borrower how long do they have to deliver written agreement confirmation of the agreement
3 business days
The FBI targets mortgage fraud committed by industry insiders because
Fraudulent activity by industry insiders cause the greatest losses to the mortgage lending industry
Public support for the enactment of additional laws such the GLB Act to protect the privacy of personal information resulted from
the unauthorized and profitable sale of personal information by financial institutions
Many States predatory lending laws tend to be different than HOPEA because they
- Cover a broader range of loans
- create additional disclosure requirements
- create loan suitability standards
Foe mortgage brokers the legal and ethical requirements to protect the nonpublic personal information of a consumers begins when
the consumer provides personal information to the broker
Individuals and institutions which are exempt from the mortgage broker licensing act must complete a mandatory exemption form
TRUE OR FALSE
False
A misleading advertisement in Colorado can place a mortgage broker at the risk of enforcement action under what regulation(s)
TILA
CPA
FTC
Total damages for class action lawsuit pertaining to violations of RESPA section 6 may not exceed
1% or $500,000 of the net worth
Predatory lending and subprime lending are synonymous terms
true or false
False
What law contributed to the development of subprime lending market
Tax reform act of 1986
If a Colorado homeowner has not paid their taxes for the pervious year by what date must they make a payment in order to avoid penalties
April 30
What does DRE stand for
Division of Real Estate
Colorado Broker Licensing Act includes 3 important disclosures
- Tangible Net Benefit Disclosure
- Lock-in-agreement
- Compensation Disclosure
What is the main purpose of DORA
Impose regulations on occupation and professions only when it is necessary to protect health safety or welfare also called (sunrise review)
Does DORA require those who directly supervise individuals who negotiate or originate loans to have license
Yes
If a mortgage broker loses their license how long do they have to wait to obtain a new license
2 years
When is a Tangible Net Benefit Disclosure due
Same time as application for non traditional loans (refi,interest only , ARM )
What is Risk Layering
Risk Layering is offering a Nontraditional Mortgage to a borrower with Poor Credit and using Reduced Documentations
Colorado Broker Licensing Act includes 3 important disclosures
- Tangible Net Benefit Disclosure
- Lock-in-agreement
- Compensation Disclosure
Lock-in-agreement can be locked for __ to __ Days
7 to 120 (but most are 30 to 60 days)
GAO stand for
Government Accountability Office
Conducted study on how much consumer know about non traditional mortgage products
What agency is responsible for ensuring compliance with the Colorado Mortgage BrokerRegistration Act
DORA
What document in a mortgage loan transaction pledges a property to lender as a security for a payment of debt
Mortgage
What is the most important consideration for originator when hiring an appraiser
Wether the appraiser is endorsed by a lender
In addition to protection provided to borrowers of covered loans the colorado Consumer Equity Protection Act creates a list of prohibitions that apply to the ordination of all loans in the state
Originator may not facilitate an unconscionable loan agreement
Deceptive advertising
Misrepresentation and use of false information on a loan application
What is included in a Loan File
Formal written loan application
Copy of the notice of the right to receive an appraisal
GFE
What is the legal document that obligates a borrower to repay a mortgage loan and specifies the terms by which the repayment will occur
Promissory note
What would a processor need from an applicant to conduct a verification of deposit
A signed authorization to gather information
What is the underwriters principle responsibly
To act on behalf of the lender to determined if the borrowers meets the lenders guidelines
The Fair Housing Act is regulated by which of the following authorities
HUD
What items can cloud a title
Easement
Land-lock
Leasehold
When is an escrow account typically established
At settlement
What affiliated business violation was uncovered by a colorado official leading to resolve by HUD to put an end to the practice
Sham title reinsurance arrangement
What must happen before a title binder can be issued to a lender
All liens judgments and ownership must be determined
What agency is responsible for managing flood disaster requirements
FEMA
Federal emergency management flood agency
What does a title company use to determine the amount of funds to disburse to the old lender in a refinance transaction
Payoff statement from the lien holder
What could result in a three year right to rescission
Failure to disclose all of the terms of the lending transaction as required by TILA
What guarantees a lender priority of lien
Subordination agreement
What is the best description of a mortgage back security
Bonds which are financed by residential mortgage payments
What in the general course of business negotiates loans for borrowers while a separate entity provides the funds for the loans
Mortgage broker
Can a Mortgage Broker Compensation Disclosure increase in fees after the disclosure was issued
only in certain circumstances
*additional charge was not reasonably foreseen
(must be done 3 days prior to close with an explanation)
Tenancy in common means
Shared ownership with each buyer owing a separate but equal share of the property
Do not inherit
Joint tenancy means
Married couples when one member of joint tenancy dies
The other inherits
What type of loan does not require insurance
Subprime and VA
Interest on a HECM loans are tax deductible
False
In subprime refinance borrowers are generally taking cash against equity versus taking advantage of lower interest rates.
True or false
True
The interest rate tigger for first lien mortgage under HOPEA
8% points above the rate for treasury securities with a comparable rate
Title insurances is the preferred method of showing evidence of title
True or false
True
Abstract and opinion is
Summary of every record filed that affects the title of the property
Buyer disclosure is
If a buyer needs to sell their own property before they can complete the transaction
CIC
Common Interest Community Documents
If the property is subject to a homeowners association or other kind of common interest community
When do loan officer have to pay a third party
No later than 30 days after the recording of the loan closed or
90 days after third party completion of task which ever comes first
