Exam 7

Question 1

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

The NMLS
The Governor
The Legislature
The Commissioner

Answer 1

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

Question 2

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 2

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 3

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 3

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 4

Information that would be protected as nonpublic personal information under the Gramm-Leach-Bliley Act includes which of the following?

A consumer’s credit report
Information in government real estate records
Listed telephone numbers provided by consumers
Government records of recorded liens

Answer 4

The answer is a consumer’s credit report. The GLB Act covers “nonpublic personal information.” This does not include information that is readily available to the public through court records, phone books, or land records.

Question 5

A subordinate lien that allows a borrower to pay down principal and continue to make withdrawals is known as:

A reverse mortgage
An ARM
A home equity line of credit
A piggyback loan

Answer 5

The answer is a home equity line of credit. Open-ended credit that allows a borrower to make repeated withdrawals and also make monthly payments based on the outstanding balance is known as a home equity line of credit.

Question 6

Costs anticipated to be charged in a loan transaction, such as origination fees, processing fees, appraisal fees, title fees, and recording fees are called:

Total costs
Estimated closing costs
Purchase price
Pre-paids

Answer 6

The answer is estimated closing costs. Costs anticipated to be charged in a loan transaction, such as origination fees, processing fees, appraisal fees, title fees, and recording fees are called estimated closing costs.

Question 7

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 7

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 8

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 8

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 9

Which regulation details seven specific advertising prohibitions?

Regulation B
Regulation C
Regulation X
Regulation Z

Answer 9

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

Question 10

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 10

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 11

The Homeowners Protection Act is applicable to all but which of the following?

Lenders
Loan servicers
Appraisers
Mortgage insurance companies

Answer 11

The answer is appraisers. The HPA applies to residential mortgages used for primary residences and is applicable to lenders, loan servicers, and insurers.

Question 12

“SIVA” stands for:

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

Answer 12

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

Question 13

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

Undetected encumbrances
Lender legal costs
Survey issues
Foreclosure

Answer 13

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 14

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 14

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

Question 15

All but which of the following must be completed prior to engaging in the business of mortgage loan origination?

Payment of licensing fees
Obtain a unique identifier
Completing pre-licensing education
A letter of recommendation from a former employer

Answer 15

The answer is a letter of recommendation from a former employer. A letter of recommendation is not required from a former employer as a condition of licensure within the NMLS system.

Question 16

Which of the following is required if a borrower receives an Adverse Action Notice?

A suggestion of a loan product for which the consumer may be eligible
A referral to a lender who offers subprime products
A statement that ECOA prohibits discrimination against credit applicants
A statement of the minimum credit score required for loan approval

Answer 16

The answer is a statement that ECOA prohibits discrimination against credit applicants. There must be a statement on the Adverse Action Notice stating that ECOA prohibits discrimination against credit applicants.

Question 17

Under ECOA, a broker is defined as:

A person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made
Any person who sells mortgage loans in the secondary market
Any person who regularly extends, renews, or continues credit
A natural person or entity who regularly extends closed-end or open-end credit

Answer 17

The answer is a person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made. A broker does not technically extend credit. However, ECOA specifically addresses the broker by including persons who “regularly refer applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made.”

Question 18

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 18

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 19

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 19

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 20

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 20

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 21

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

Two years
Five years
Seven years
Ten years

Answer 21

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

Question 22

A state-licensed loan originator who fails to maintain a valid license for a period of _____ years or longer shall be required to retake the NMLS test.

Three
Seven
Five
Ten

Answer 22

The answer is five. The NMLS requires a licensee who fails to maintain a license for five years or longer to retake the exam.

Question 23

What is the primary intent of RESPA?

Protect borrowers from misleading advertising
Eliminate unearned fees, such as referral fees, kickbacks, and fee splitting
Protect the privacy of a borrower’s personal financial information
Provide the borrower an opportunity to rescind certain types of loans

Answer 23

The answer is eliminate unearned fees, such as referral fees, kickbacks, and fee splitting. RESPA’s provisions prohibit the payment of any fee that was not earned.

Question 24

Which of the following fees is not included in the calculation of the finance charge for a mortgage?

Origination fees charged by the creditor
Charges for title work by an affiliate of the creditor
Use of a closing attorney required by the creditor
Fees charged by an unaffiliated appraiser

Answer 24

The answer is fees charged by an unaffiliated appraiser. Finance charges always include fees charged by the creditor, charges by an affiliate of the creditor, and fees charged by a third-party provider required by the creditor. Fees charged for real estate-related services, such as appraisal, are not included in the finance charge if they are reasonable, are not charged by affiliates, and the creditor does not receive a direct or indirect fee for those services.

Question 25

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 25

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 26

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 26

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 27

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 27

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 28

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 28

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 29

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 29

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 30

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 30

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 31

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 31

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

Question 32

Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than _____, or a lender may collect PMI until _____ loan-to-value ratio is reached.

65%; 50%
78%; 62%
80%; 78%
80%; 65%

Answer 32

The answer is 80%; 78%. Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than 80%, or a lender may collect PMI until 78% loan-to-value ratio is reached.

Question 33

A borrower obtains an ARM with a start rate of 2%. The ARM has an initial cap of 1%, a periodic cap of 2%, and a lifetime cap of 4%. Assume that the ARM will adjust three times, and that at each adjustment, the rate will increase by the maximum amount possible. What is the maximum amount that the interest rate can reach?

6%
2%
5%
7%

Answer 33

The answer is 6%. At the first adjustment, the ARM rate would increase from 2% to 3%. At the second adjustment, it would increase from 3% to 5%. At the third increase, it would increase from 5% to 7%. However, the lifetime rate cap is 4%, meaning that the rate may never be higher than 6% (2% + 4% = 6%). As a result, the interest rate may never be higher than 6%.

Question 34

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

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

Answer 34

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

Question 35

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

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

Answer 35

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

Question 36

Which of the following would be considered grounds for license denial?

Payment of licensing fees
Conviction of a felony within the seven years immediately preceding application
Compliance with the pre-licensing education requirements
Providing records of previous loan files

Answer 36

The answer is conviction of a felony within the seven years immediately preceding application. A felony conviction within the seven years immediately preceding application is grounds for denial of an initial application.

Question 37

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 37

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

Question 38

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

ECOA
TILA
FACTA
CIP

Answer 38

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 39

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

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

Answer 39

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

Question 40

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 40

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 41

A borrower pays $200,000 for a home and gets a fixed-rate loan from his lender at 5.75%. He puts $40,000 down. What is the LTV on this loan, and does the buyer have to pay PMI?

80% and yes
90% and yes
80% and no
Need to know the term

Answer 41

The answer is 80% and no. This borrower put 20% down on the purchase. Therefore, with an 80% LTV, the borrower does not need PMI.

Question 42

Safina Marigold, a mortgage loan originator, has received a request for an offer of residential mortgage loan terms together with information about the prospective borrower that will be necessary for her to make a decision on whether or not to offer a loan. Safina has received a(n):

Credit report
Application
Appraisal
Solicitation

Answer 42

The answer is application. An application is a request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms and the information about the borrower or prospective borrower that is customary or necessary in order to make a decision on whether to offer a residential mortgage loan.

Question 43

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 43

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 44

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 44

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

Question 45

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 45

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 46

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 46

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 47

The ratio of the total balance of all mortgage liens against a property to the total property value is called:

TLTV
HLTV
LTV
CLTV

Answer 47

The answer is CLTV. The CLTV is the ratio of all mortgages on the property divided by the total value of the property.

Question 48

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 48

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 49

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 49

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 50

Which of the following statements accurately describes the APR threshold used to identify loans regulated by HOEPA?

A first-lien loan with an APR that is 10 percentage points above Treasury securities with a comparable rate
A subordinate-lien loan with an APR that is 8 percentage points above the rate for Treasury securities with a comparable rate
A subordinate-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions
A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions

Answer 50

The answer is a first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions. A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions would meet the APR threshold used to identify loans regulated by HOEPA.

Question 51

What type of loan is a jumbo loan?

Nonconventional
Non-government
Nonconforming
Conforming

Answer 51

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

Question 52

All of the following are examples of nontraditional mortgage products, as defined by the S.A.F.E. Act, except:

A fixed-rate loan with a term of 30 years
An interest-only loan with a term of 40 years
An adjustable-rate mortgage with a term of 30 years
A fixed-rate loan with a term of 15 years

Answer 52

The answer is a fixed-rate loan with a term of 30 years. The S.A.F.E. Act defines a “nontraditional mortgage product” as any loan other than a 30-year, fixed-rate loan.

Question 53

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

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

Answer 53

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

Question 54

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 54

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 55

A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA?

Both the hazard insurance company and the mortgage broker
The hazard insurance company
The mortgage broker
Neither the hazard insurance company nor the mortgage broker

Answer 55

The answer is both the hazard insurance company and the mortgage broker. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally related mortgage loan will be referred to any person. The term “thing of value” includes any payment, advance, funds, loan, service or other consideration, such as payments of another person’s expenses. The above is an example of an instance in which both parties are in violation of the prohibition against the payment or receipt of a thing of value in exchange for referrals.

Question 56

Which of the following statements most accurately describes HOEPA’s prepayment penalty threshold for high-cost mortgages?

A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, and requires the prepayment penalties to exceed 2% of the amount prepaid
A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid
A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 24 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid
A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 24 months after consummation, and requires the prepayment penalties to exceed 3% of the amount prepaid

Answer 56

The answer is a loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid. A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid.

Question 57

The Federal Home Loan Mortgage Corporation is also known as:

Fannie Mae
Ginnie Mae
Freddie Mac
Freddie Mae

Answer 57

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

Question 58

In lien theory states, the _____ holds the title to the home securing a mortgage throughout the loan term.

Borrower
Lender
Title company
Loan servicer

Answer 58

The answer is borrower. In lien theory states, the borrower holds the title to the home securing a mortgage, and when the loan is paid in full, the lien on his or her home is released.

Question 59

If a purchase loan closes on January 20th, how many days of per diem interest must be collected to put the loan on schedule?

12
10
20
31

Answer 59

The answer is 12. 12 days of per diem interest would be collected to place this loan on schedule for a first payment date of March 1. Remember, per diem interest needs to count the day of closing. There are 31 days in January - so, per diem interest must be paid for 12 days (January 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31).

Question 60

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 60

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 61

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 61

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 62

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

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

Answer 62

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

Question 63

Which of the following is not a qualified mortgage?

A mortgage with a 40-year loan term
VA loan
FHA loan
A mortgage with a debt-to-income ratio of 43%

Answer 63

The answer is a mortgage with a 40-year loan term. VA and FHA loans are qualified mortgages, as are loans with DTI ratios that do not exceed 43%. Qualified mortgages may not have loan terms that exceed 30 years.

Question 64

The TRID Rule’s zero tolerance for variances between estimated and actual charges applies to which of the following fees?

Fees paid to non-affiliated third-party settlement service providers chosen by the borrower and not included on the creditor’s recommended list of providers
Fees paid for prepaid interest
Fees paid to third-party providers of optional insurance products, such as credit life and credit disability insurance
Fees paid to a creditor

Answer 64

The answer is fees paid to a creditor. Fees that are subject to a zero tolerance for variances between estimated and actual fees include those for creditors, mortgage brokers, and their affiliates.

Question 65

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 65

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 66

The S.A.F.E. Act requires which of the following to fulfill responsibilities including participating in the NMLS, conducting background checks, and writing rules and regulations?

A state legislature
A state Attorney General
A state licensing agency
The federal government

Answer 66

The answer is a state licensing agency. In having oversight and supervisory authority over loan originators, a state licensing agency must participate in the NMLS, conduct background checks, and write rules and regulations.

Question 67

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 67

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 68

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 68

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 69

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

Unconventional
Government
Nonpermissible
Nonconforming

Answer 69

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 70

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 70

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 71

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 71

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

Question 72

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 72

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 73

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 73

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 74

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 74

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

Question 75

Which of the following loans may include a prepayment penalty?

An adjustable-rate qualified mortgage
A fixed-rate qualified mortgage that is not a higher-priced mortgage loan
An adjustable-rate qualified mortgage that is not a high-cost mortgage
A fixed-rate qualified or non-qualified mortgage

Answer 75

The answer is a fixed-rate qualified mortgage that is not a higher-priced mortgage loan. The only loans that may include prepayment penalties are fixed-rate qualified mortgages that are not higher-priced mortgage loans.

Question 76

Examples of loans that are typically secured by a subordinate lien include all but which of the following?

A home equity line of credit
A home equity loan
A purchase money mortgage
A piggyback loan

Answer 76

The answer is a purchase money mortgage. Loans that are typically secured by a subordinate lien may include a home equity line of credit, a home equity loan, or a piggyback loan.

Question 77

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

2
4
1.5
2.5

Answer 77

The answer is 1.5. Points are paid off of the loan amount. The loan amount is $240,000 (80% of $300,000). On a $240,000 loan, points costs $2,400. To calculate, divide $3,600 by $2,400, resulting in 1.5 points.

Question 78

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 78

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 79

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 79

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 80

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 80

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 81

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 81

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 82

Loans are purchased as investments in the:

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

Answer 82

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

Question 83

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 83

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 84

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 84

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 85

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 85

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 86

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 86

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 87

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 87

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 88

If a homebuyer is using an ARM to finance his/her home, the _____ is a mandatory disclosure.

AARMR
CSBS
HUD
CHARM

Answer 88

The answer is CHARM. The CHARM Booklet is an educational disclosure that is mandatory under TILA.

Question 89

Virtually every residential transaction involves an estate that is held in _____, the desired form of holding ownership to property because it has the fewest restrictions.

Foreclosure
Fee simple
Short sale
Deed-in-lieu

Answer 89

The answer is fee simple. Virtually every residential transaction involves an estate that is held in fee simple, the desired form of holding ownership to property because it has the fewest restrictions.

Question 90

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 90

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 91

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

RESPA
TILA
GLB
FNMA

Answer 91

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 92

Revisions to a Loan Estimate are:

Allowed when certain changed circumstances arise
Always allowed
Never allowed
Allowed only when the interest rate was not locked and rates have changed

Answer 92

The answer is allowed when certain changed circumstances arise. Revisions to a Loan Estimate are allowed when certain changed circumstances arise.

Question 93

In order to contain a prepayment penalty in compliance with federal law, a mortgage loan must include all of the following features, except:

A term of no more than 40 years
A debt-to-income ratio of no more than 43%
Points and fees that do not exceed 3% of the loan amount
A fixed interest rate

Answer 93

The answer is a term of no more than 40 years. In order to contain a prepayment penalty in compliance with federal law, a mortgage loan must be a fixed-rate qualified mortgage. This means that the loan must have a debt-to-income ratio of no more than 43%, points and fees that do not exceed 3% of the loan amount, and a fixed interest rate, as well as meeting other qualified mortgage underwriting standards. Qualified mortgages are limited to terms of 30 years or less; any term longer than 30 years is prohibited, and therefore such a loan would not be permitted to include a prepayment penalty.

Question 94

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 94

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 95

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 95

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 96

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 96

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 97

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 97

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 98

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 98

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 99

The Qualified Mortgage Rule establishes a debt-to-income ratio standard of _____ for qualified mortgages.

60%
43%
78%
80%

Answer 99

The answer is 43%. The Qualified Mortgage Rule establishes a debt-to-income ratio standard of 43%. For the first seven years during which the Rule is in effect, this ratio will not be enforced for temporary qualified mortgages.

Question 100

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 100

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 101

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 101

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 102

Originators who mislead borrowers about the contents of their credit histories and/or their credit scores in an effort to steer them into disadvantageous loans are in violation of:

ECOA
FHA
HPA
FCRA

Answer 102

The answer is FCRA. Failing to give borrowers accurate information about their credit in an effort to steer them into a loan they may be overqualified for is an ethical and legal violation of the Fair Credit Reporting Act

Question 103

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 103

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 104

There is a _____ accuracy tolerance for amounts stated on the Loan Estimate and the actual closing costs if the consumer is allowed to shop for his/her own settlement service provider and chooses one from the list.

0%
10%
5%
15%

Answer 104

The answer is 10%. Creditors have a 10% tolerance for discrepancies between estimated and actual closing costs if consumers do not have to pay the creditor or one of its affiliates for settlement services, are allowed to shop for their own services, and choose one from the provided settlement service provider list.

Question 105

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 105

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 106

The acronym “CHARM” stands for:

Cost Handbook for Adjustable-Rate Mortgages
Credit History on Adjustable-Rate Mortgages
Consumer Handbook on Adjustable-Rate Mortgages
Customer Highlights for Adjustable-Rate Mortgages

Answer 106

The answer is Consumer Handbook on Adjustable-Rate Mortgages. The acronym “CHARM” stands for “Consumer Handbook on Adjustable-Rate Mortgages.”

Question 107

If a borrower intends to use rental income for qualification, what amount of that income is allowable?

The first $750
100% if the home is unencumbered
The income is not allowable unless a lease has been in effect for five years or more
75% of the rental income

Answer 107

The answer is 75% of the rental income. Rental income is allowable in calculating qualifying income, but only at 75%.

Question 108

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 108

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 109

Which of the following loans are covered by RESPA?

First liens
Both first and subordinate liens
Subordinate liens
Neither first nor subordinate liens

Answer 109

The answer is both first and subordinate liens. RESPA covers first and second liens on residential property.

Question 110

Which of the following federal agencies is responsible for the enforcement of Regulation B?

FTC
FDIC
NCUA
CFPB

Answer 110

The answer is CFPB. The regulations promulgated under ECOA are known as Regulation B. The federal regulatory agency responsible for ECOA is the CFPB.

Question 111

A 15-year loan allows a borrower to pay his or her loan off in a shorter term than a 20- or 30-year loan and provides significant interest savings. Which of the following is a drawback of a 15-year mortgage?

The rate is often lower than a 30-year mortgage
The down payment can be less
The borrower owns the home sooner
Because of the shorter amortization period, the payments are often much higher than the 30-year loan

Answer 111

The answer is because of the shorter amortization period, the payments are often much higher than the 30-year loan. One of the biggest drawbacks of a 15-year term is the higher monthly payments, due to a shorter amortization period.

Question 112

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 112

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 113

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

Future inquiries
Applicant information
Public records
Current derogatory trade lines

Answer 113

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

Question 114

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 114

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 115

Which of the following federal agencies is responsible for the enforcement of Regulation X?

FTC
FDIC
CFPB
NCUA

Answer 115

The answer is CFPB. The regulations promulgated under RESPA are known as Regulation X. The federal regulatory agency responsible for RESPA is the CFPB.

Question 116

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 116

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 117

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 117

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 118

All of the following are responsibilities of the closing agent, except:

Verify identity and notarize documents
Explain the risks and benefits of the ARM product on which the client is closing
Coordinate the closing process
Verify that all parties have copies of forms and disclosures required for settlement

Answer 118

The answer is explain the risks and benefits of the ARM product on which the client is closing. In broad terms, it is the closer’s job to “review” the terms of the loan with the borrower; it is not their job to “re-sell” the loan to the borrower. Full disclosure and discussion of all fees are the obligations of the borrower and should take place prior to closing.

Question 119

An incorrect calculation of income can result in:

The borrower being denied a loan after it is sent to underwriting
All of these answers are correct
The borrower needing to put more money down to lower the DTI
The loan being delayed because of the inaccurate calculation

Answer 119

The answer is All of these answers are correct. All are examples of common underwriting pitfalls that can delay a loan or cause its denial.

Question 120

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 120

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 121

Which of the following was enacted primarily because of anecdotal evidence that women were not treated on an equal basis to men when applying for credit?

RESPA
TILA
ECOA
FHA

Answer 121

The answer is ECOA. The Equal Credit Opportunity Act (ECOA) is intended to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion, national origin, sex, marital status, or age.

Question 122

Which of the following loan types is exempt from the HPA?

FHA loans
Fixed-rate loans
Conventional loans
Non-conforming loans

Answer 122

The answer is FHA loans. The Homeowners Protection Act (HPA) is used to facilitate the cancellation of private mortgage insurance, or PMI. FHA loans require upfront and annual mortgage insurance premiums; they do not rely on private mortgage insurance to protect their investment.

Question 123

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 123

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 124

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 124

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 125

Debt ratios for an FHA loan are:

31% / 41%
28% / 36%
28% / 41%
31% / 43%

Answer 125

The answer is 31% / 43%. The general debt ratios for an FHA loan are 31% housing, and 43% total debt.