Exam 2

Question 1

A mortgage broker also owns a title company. Is this business arrangement allowed by RESPA.

Answer 1

Respa allows a mortgage broker to own a title company; however, the title company with a place of business, have employee, etc. If the title company is used in the same transaction, that relationship must be disclosed.

Question 2

The minimum down payment contribution needed for a home with an FHA-apprased value of $132,000 (assuming appropriate FICO score) is

Answer 2

The minimum down payment on an FHA loan is 3.5%, so $4,520 (if the FICO score is 580 or above).

Question 3

As a mortgage broker puts together an ad to attract some new customers, what law should be most concerned about?

Answer 3

The National Association of Mortgage Brokers (NAMB) Code of Ethics reinforces the obligation to avoid false advertising, but it is the Truth in Lending Act (TILA) contains very specific requirements for advertising the terms of mortgage loan.

Question 4

For a loan that has escrow included, RESPA requires a lender to perform an escrow analysis

Answer 4

The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage.

Question 5

A seller agrees to pay two points on a buyer’s loan. The price is $60,000 and the buyer is making a 20% down payment. Two points equal.

Answer 5

A point is equal to 1% of the loan amount. So for this loan: $60,000 x 80%= $48,000 loan amount; so two points is $48,000 x 2%= $960.

Question 6

Which regulation allows a lender to obtain information (and file monthly reports) regarding the age, ethnicity and sex of every applicant that applies for a home loan, to help identify possible discrimination?

Answer 6

HMDA allows a lender to obtain information (and file monthly reports) regarding the age, ethnicity, and sex of every applicant that applies for a home loan, to identify possible discrimination.

Question 7

What two regulations require financial disclosures be provided to the applicant within three business days of a completed mortgage loan application?

Answer 7

Regulation X (RESPA) requires the LE and Regulation Z (TILA) requires TIL.

Question 8

Which is purpose for the Mortgage Servicing Disclosure

Answer 8

Nearly all mortgages are sold and the consumer is not affected if the “servicing” of the mortgage is sold (who the customer makes the payment to).

Question 9

Identify which attributes is NOT considered illegal discrimination in granting credit under the Equal Credit Opportunity Act.

Answer 9

ECOA prohibits discrimination in granting credit to people based on sex, age, (if at least 18), marital status, race, color, religion, national origin, receipt of public assistance, exercised rights under the Consumer Credit Act.

Question 10

What is the proper title of the SAFE Act?

Answer 10

The Secure and Fair Enforcement for Mortgage Licensing Act is more commonly known as the SAFE ACT.

Question 11

Which of these circumstances would NOT be an acceptable reason to provide a revised Loan Estimate to a borrower?

Answer 11

The MLO’s mistake, even if done unintentionally, would not be considered a change of circumstance.

Question 12

The Fair Credit Reporting Act is also known as

Answer 12

FCRA is also known as Regulation V

Question 13

A borrower’s stable monthly income is $6,800. Every month he pays: $485 car payment, $200 revolving credit payment, and $1,500 alimony. What is the maximum monthly mortgage payment for which he would qualify on an FHA mortgage loan?

Answer 13

Using the payment-to-income ration of 31% for an FHA loan, we get $2,108. But using the total debt service ration of 43% for this loan, we find: $6,800 (income) multiplied by 0.43, which equals $2,924. From that, you subtract monthly debts (485 + 200 + 1,500) which total $2,185, leaving $739.

Question 14

Which federal legislation allows a borrower three business days to reconsider an owner-occupied refinance transaction?

Answer 14

The truth in Lending Act ( TILA ) allows for a three business-day right of rescission. Furthermore, the act specifies that the three business day time limit requires only notification and that the right to rescind document does not have to be delivered to the lender within that time as long as notification was provided by mail prior to midnight of the third business day.

Question 15

Which fee would NOT be considered a finance charge and would NOT be part of the APR calculation?

Answer 15

Escrow deposits are never part of calculating the APR.

Question 16

What is the loan-to value ratio if the loan amount is $100,000, the appraised value is $125,000 and the sales price is $127,000?

Answer 16

$100,000 divided by $125,000 (the lowest of the sales price or appraised value) equals 80%.

Question 17

Generally speaking, a credit agency may not report negative credit information that is more than seven years old?

Answer 17

Under the Fair Credit Reporting Act, consumer reporting agencies may not report negative information that is more than seven years old, in most cases.

Question 18

Which act is primarily focused on protecting consumer from identity theft?

Answer 18

The fair and Accurate Credit Transaction Act 2003-also known as FACTA or the FACT Act-added new sections to the federal Fair Credit Reporting Act, intended primarily to help consumers fight the growing crime of identify theft.

Question 19

What is the earliest that a mortgage loan may close after a potential borrower completes an application?

Answer 19

TILA imposes a waiting period of 7 days after receiving the required disclosures or the disclosures are mailed before a loan may close.

Question 20

Which is NOT a triggering term according to TILA, requiring additional disclosing in advertising?

Answer 20

Generic statements that do not state specific loan information are exempt from additional disclosing of referencing specific information concerning loan terms.