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S.A.F.E. Exam > Exam Questions Prep > Flashcards

Exam Questions Prep Flashcards

1
Q

Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license?

  1. Housing and Economic Recovery Act
  2. Mortgage Professionalism and Accountability Act
  3. Mortgage Disclosure Improvement Act
  4. Secure and Fair Enforcement for Mortgage Licensing Act
A

Secure and Fair Enforcement for Mortgage Licensing Act.

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2
Q

Which of the following would not be on a deed of trust?

  1. Legal description
  2. Loan amount
  3. Interest rate
  4. Borrower’s name
A

Interest rate

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3
Q

The requirement that borrowers receive the Consumer Handbook on Adjustable-Rate Mortgages is required under which regulation?

  1. Regulation X
  2. Regulation Z
  3. Regulation C
  4. Regulation M
A

Regulation Z

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4
Q

Which of the following is true concerning the refundability of a VA funding fee?

  1. VA funding fees are refundable if the borrower is overcharged
  2. VA funding fees are refundable if the borrower is active military
  3. VA funding fees are never refundable
  4. VA funding fees are refundable if the borrower is a wounded veteran
A

VA funding fees are refundable if the borrower is overcharged.

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5
Q

According to the S.A.F.E. Act, all of the following are nontraditional loan products, except:

  1. Interest-only ARMs
  2. Hybrid ARMs
  3. Reverse mortgages with fixed rates
  4. Interest-only fixed-rate 30-year mortgage loans
A

Interest-only 30-year mortgage loans

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6
Q

Applicants for FHA loans must meet a back end ratio of:

  1. 41%
  2. 29%
  3. 36%
  4. 43%
A

43%

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7
Q

Every month, a borrower has a car payment of $350, a credit card payment of $50, HOA dues of $35, a cable bill of $40, and a house payment (including taxes and insurance) of $1,250. The borrower’s annual income is $50,000. What is the borrower’s front-end debt-to-income ratio?

41.4%
30%
40.4%
30.8%

A

$50,000÷12 = $4,166.66. ($1,250+$35)÷$4,166.66 = 0.308 = 30.8%.

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8
Q

Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence?

  1. Insurance on the property
  2. How quickly a borrower must occupy the property
  3. Keeping hazardous substances on the property
  4. Actual amounts for taxes and insurance
A

Actual amounts for taxes and insurance

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9
Q

Which of the following would not be on a promissory note?

  1. Amount owed
  2. Rate of interest and whether the loan is fixed or adjustable
  3. Borrower’s Social Security Number
  4. Loan terms
A

Borrower’s Social Security Number.

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10
Q

What two main aspects of a loan application does an underwriter examine to determine if lender guidelines are being met?

  1. Applicant and collateral
  2. Applicant and credit
  3. Credit and income
  4. Credit and collateral
A

Applicant and collateral

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11
Q

A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct?

  1. Payment of the fee is illegal
  2. The fee is legal as long as the brokers have a pre-existing agreement in place
  3. The fee is legal as long as the brokers do not have a pre-existing agreement in place for payment of referral fees
  4. The fee is illegal unless the brokers provide a disclosure to the client
A

Payment of the fee is illegal

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12
Q

Each of the following is true about the Department of Housing and Urban Development (HUD), except:

  1. The Federal Housing Administration, with its liberal-eligibility FHA loan programs, operates under HUD’s authority
  2. It provides or makes referrals related to housing counseling for loan applicants seeking a HECM or high-cost home loan
  3. Public housing and multi-family housing fall under its purview
  4. It has a major role in overseeing the mortgage industry
A

It has a major role in overseeing the mortgage industry

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13
Q

What is the specific distinction between state-licensed and registered loan originators?

  1. Unlike state-licensed loan originators, registered loan originators are exempt from licensing requirements
  2. State-licensed loan originators are only allowed to originate in the states in which they hold a license, while registered loan originators may obtain one license and conduct business anywhere
  3. Only state-licensed loan originators carry a unique identifier
  4. Registered loan originators need only ten hours of pre-licensing education, while state-licensed loan originators need 20 hours
A

Unlike state-licensed loan originators, registered loan originators are exempt from licensing requirements

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14
Q

Jimmie is purchasing a home with a purchase price of $350,000. He has been approved for a loan with an 85% LTV. What is his down payment?

  1. $52,500
  2. $297,500
  3. $50,000
  4. $35,000
A

15% × $350,000 = $52,500

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15
Q

Which of the following specifies current disclosure requirements under the TILA-RESPA (TRID) Rule?

  1. Regulation Z
  2. Regulation C
  3. Regulation O
  4. Regulation B
A

Regulation Z

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16
Q

Which of the following can usually be added to a self-employed borrower’s net income from the borrower’s tax returns when calculating the borrower’s income?

  1. Total from IRS 2106
  2. Depreciation
  3. Total from IRS 4506
  4. State taxes paid
A

Depreciation

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17
Q

With regard to adjustable loans with interest rate caps, it is true that:

  1. The cap period is always one year
  2. The cap is lower when the adjustment period is longer
  3. The loan payments can go up when the index plus the margin is less than the rate the borrower has been paying before the adjustment
  4. The new interest rate cannot exceed the rate ceiling established by the caps
A

The new interest rate cannot exceed the rate ceiling established by the caps

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18
Q

The S.A.F.E. Act defines a loan processor as:

  1. An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator
  2. An individual employed by a state-licensed mortgage broker
  3. An individual employed by a depository institution
  4. An individual who has applied for licensing as a loan originator but has not yet completed all the licensing requirements
A

An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator

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19
Q

Which of the following is true regarding a borrower’s intent to proceed with a mortgage transaction as required under federal rule?

  1. It must be communicated in writing
  2. It may be communicated however the borrower chooses
  3. It may not be communicated via email
  4. It may not be communicated verbally
A

It may be communicated however the borrower chooses

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20
Q

Carrie is obtaining a 90% loan for the purchase of her new home, which she is buying for $225,000. One discount point for her loan would be equal to:

  1. $1,000
  2. $2,025
  3. $2,000
  4. $2,250
A

90% × $225,000 = $202,500. 1% × $202,500 = $2,025.

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21
Q

Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to process a loan application?

  1. A state-licensed loan originator
  2. An unlicensed loan processor
  3. An unlicensed underwriter
  4. Any of these
A

Any of these

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22
Q

A lender’s title insurance policy would insure against all of the following, except:

  1. Future tax liens
  2. Mechanic’s liens
  3. Judgments
  4. Undisclosed encumbrances
A

Future tax liens

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23
Q

A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan?

  1. $6,000
  2. $12,000
  3. $1,600
  4. $1,200
A

6% × $200,000 = $12,000.

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24
Q

Which of the following would not need to be included in the notice of servicing transfer?

  1. Toll-free number for the old servicer
  2. Borrower’s payment amount
  3. Toll-free number for the new servicer
  4. Effective date of the transfer
A

Borrower’s payment amount

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25
Q

Under TILA’s rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer.

  1. Two
  2. Five
  3. Three
  4. Seven
A

Five

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26
Q

Richie Rich has been approved for a 90% loan. Richie is under contract to purchase a home for $400,000 and put $5,000 earnest money down with the contract. If Richie’s lender is charging 1% origination, 1% discount, and the title company fees total $1,350, how much does Richie need to bring to closing?

  1. $49,350
  2. $46,850
  3. $43,550
  4. $48,550
A

$40,000 − $5,000 + $3,600 + $3,600 + $1,350 = $43,550.

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27
Q

Which of the following would not be considered a settlement service?

  1. Servicing
  2. Escrow services
  3. Origination services
  4. Appraisal services
A

Servicing

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28
Q

Which of the following can be used by state regulators to determine whether a licensee demonstrates the financial responsibility and general fitness to command the confidence of the community to engage in the mortgage business?

  1. Credit report, net worth, payment of federal licensing fees
  2. Credit report, net worth, surety bond, payment into a state fund
  3. Credit report, surety bond, payment of exemption fees
  4. Credit report, payment into a professional fund, $1 million credit line
A

Credit report, net worth, surety bond, payment into a state fund

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29
Q

The residual income method applies to which of the following types of loans?

  1. Jumbo
  2. Conventional
  3. VA
  4. FHA
A

VA

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30
Q

Which of the following loans would not have monthly mortgage insurance at closing?

  1. All options would have monthly mortgage insurance
  2. 30-year FHA loan, 60% LTV
  3. 10-year FHA loan, 85% LTV
  4. 20-year FHA loan, 80% LTV
A

All options would have monthly mortgage insurance

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31
Q

Which of the following best describes the benefit of mortgage insurance to the borrower?

  1. Reduced hazard insurance premiums
  2. Lower down payment requirements
  3. Mortgage insurance only benefits the lender
  4. Relaxed underwriting conditions
A

Lower down payment requirements

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32
Q

The Uniform Residential Appraisal Report is commonly known as the:

  1. 1003
  2. 1040
  3. 1004
  4. 4506
A

1004

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33
Q

A mortgage or deed of trust generally includes a clause that provides for release of the lien when the borrower pays off the debt, called a(n):

  1. Alienation clause
  2. Defeasance clause
  3. Due-on-sale clause
  4. Completion clause
A

Defeasance clause

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34
Q

For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is more or less than:

  1. 15 years
  2. 20 years
  3. 25 years
  4. 30 years
A

15 years

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35
Q

A purpose of the Home Mortgage Disclosure Act (HMDA) is to:

  1. Identify possible discriminatory lending patterns
  2. Ensure that prices of homes are fairly quoted
  3. Help lenders decide on mortgage interest rates
  4. Provide borrowers with property listings and their prices
A

Identify possible discriminatory lending pattern

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36
Q

Which of the following is NOT required by the BSA?

  1. Reporting suspicious activity and transactions
  2. Generating requests for information from FinCEN
  3. Reporting large currency transactions
  4. Implementing an anti-money laundering (AML) program
A

Generating requests for information from FinCEN

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37
Q

The licensing requirements of the S.A.F.E. Act require all but which of the following?

  1. Registered MLOs must complete 20 hours of pre-licensing education
  2. Registration with the NMLS
  3. Successfully pass federal and applicable state components of a test with at least a 75% score
  4. Use of a unique identifier on all advertising materials
A

Registered MLOs must complete 20 hours of pre-licensing education

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38
Q

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?

  1. The hazard insurance company
  2. Both the hazard insurance company and the mortgage broker
  3. The mortgage broker
  4. Neither the hazard insurance company nor the mortgage broker
A

Both the hazard insurance company and the mortgage broker

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39
Q

A “straw buyer” is:

  1. A buyer who is a victim of identity theft
  2. A buyer who uses another individual’s identity in order to obtain a mortgage for which he or she is not eligible
  3. A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application
  4. A buyer who intends to purchase property but does not intend to occupy it
A

A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application

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40
Q

Which of the following fees would NOT be used in calculating the APR?

  1. Closing fee
  2. Underwriting fee
  3. Mortgage insurance
  4. Title insurance
A

Title insurance

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41
Q

The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act?

  1. Encourages responsible behavior through licensing standards
  2. Provides consumers access to information about originators
  3. Allows consumers a full refund if the originator is found to have engaged in unethical acts
  4. Facilitates collection and distribution of consumer complaints between regulators
A

Allows consumers a full refund if the originator is found to have engaged in unethical acts

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42
Q

Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower’s repayment ability?

  1. Home Ownership and Equity Protection Act
  2. Real Estate Settlement Procedures Act
  3. Fair and Accurate Credit Transactions Act
  4. Equal Credit Opportunity Act
A

Home Ownership and Equity Protection Act

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43
Q

A homeowner with an FHA loan would like to sell his home and allow the buyer to assume the existing mortgage. However, he is concerned about violating a due-on-sale clause. Is a due-on-sale clause allowed under the terms of the loan?

  1. No, because the loan is assumable
  2. Yes, because the loan is assumable
  3. Yes, because the loan is an FHA loan
  4. No, because seller financing is illegal
A

No, because the loan is assumable

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44
Q

Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license?

  1. Housing and Economic Recovery Act
  2. Mortgage Professionalism and Accountability Act
  3. Mortgage Disclosure Improvement Act
  4. Secure and Fair Enforcement for Mortgage Licensing Act
A

Secure and Fair Enforcement for Mortgage Licensing Act

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45
Q

Which of the following in an ad for residential mortgage financing would trigger additional disclosures?

  1. “VA financing available”
  2. “Affordable payments”
  3. “5.75% APR”
  4. “5% down payment”
A

“5% down payment”

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46
Q

Which of the following does not appear in the Loan Estimate?

  1. The anticipated ARM rates for the first five years
  2. The loan term
  3. Whether the subject loan is assumable
  4. The property purchase price
A

The anticipated ARM rates for the first five years

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47
Q

A scenario in which a person forces the sale of a home at a much lower value than its true worth, then resells the home at its true value, is known as:

  1. Property flipping
  2. A short sale
  3. An air loan
  4. Property flopping
A

Property flopping

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48
Q

Fannie Mae can best be described as:

  1. A government-sponsored, government-owned enterprise, formed to facilitate home ownership
  2. A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership
  3. A government agency
  4. A public corporation with absolutely no ties to the government
A

A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership

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49
Q

When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred?

  1. Never - this disclosure is not required
  2. Within 30 days of the transfer of servicing
  3. Within 15 days of the transfer of servicing
  4. Either at the time of application or within three business days of application
A

Either at the time of application or within three business days of application

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50
Q

Finance charges that are withheld from the proceeds of the loan are considered to be:

  1. P.O.C. charges
  2. Third-party fees
  3. Prepaid finance charges
  4. Periodic interest charge
A

Prepaid finance charges

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51
Q

When would it be ethical for a mortgage broker to offer a loan with a rate higher than the best rate available to the borrower?

  1. Never
  2. Only when the borrower is unaware and will likely not know
  3. If the lender agrees to subsidize the broker fee
  4. If the borrower chooses the rate and plans to use the additional premium to offset closing costs
A

If the borrower chooses the rate and plans to use the additional premium to offset closing costs

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52
Q

Which of the following is least likely to be held in an escrow or reserve account?

  1. HOA fees
  2. Mortgage insurance premium
  3. Hazard insurance reserve
  4. Property tax reserve
A

HOA fees

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53
Q

A borrower receives $2,500 per month in rental income. How much of the income may be used to qualify the borrower for a loan?

  1. $2,500
  2. $2,000
  3. $1,800
  4. $1,875
A

75% × $2,500 = $1,875.

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54
Q

A borrower wishes to refinance their home, which appraises for $450,000. If their loan amount is $375,000, what is the LTV?

  1. 75%
  2. 83.3%
  3. 80%
  4. 73.3%
A

$375,000 / $450,000 = 0.833 = 83.3%

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55
Q

Which of the following is true when a mortgage product contains a balloon payment?

  1. A loan that has monthly payments that are equal and regular in nature will never have a balloon payment owing at the end of its term
  2. A high-cost bridge loan may include provision for a balloon payment
  3. Under the Dodd-Frank Act, balloon payment loans are no longer permitted
  4. A qualified mortgage may provide for a balloon payment as long as its term is no less than 40 years
A

A high-cost bridge loan may include provision for a balloon payment

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56
Q

A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property.

  1. Straw buyer
  2. Air buyer
  3. Straw seller
  4. Air seller
A

Straw seller

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57
Q

Under which of the following circumstances would flood insurance be required?

  1. Property is within 100 yards of a body of water
  2. Property is in flood zone “X”
  3. Property is in flood zone “A”
  4. Property is at or below sea level
A

Property is in flood zone “A”

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58
Q

When the term “jumbo loan” is used to describe a loan, the loan:

  1. Is subprime
  2. Is nonconforming
  3. Always has a high interest rate
  4. Has a high loan-to-value ratio
A

Is noncomforming

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59
Q

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

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

To help a borrower pay for settlement costs

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60
Q

All of the following individuals are exempt from requirements to obtain a mortgage loan originator license, except for a person who:

  1. Extends credit only for timeshare plans
  2. Negotiates a residential mortgage loan secured by a dwelling that is the individual’s residence
  3. Negotiates the terms of a residential mortgage on behalf of a cousin
  4. Is an employee of a local government agency and who acts as a loan originator in their official duty as an employee
A

Negotiates the terms of a residential mortgage on behalf of a cousin

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61
Q

A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days?

  1. 30 days
  2. 90 days
  3. 45 days
  4. 60 days
A

60 days

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62
Q

In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)?

  1. A portion of it may be applied to the UFMIP of another FHA-insured mortgage
  2. It is refundable
  3. It is pertinent to only a small minority of FHA loans
  4. It takes the place of the annual mortgage insurance premium
A

A portion of it may be applied to the UFMIP of another FHA-insured mortgage

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63
Q

Which of the following is not a requirement for the servicing notice given in the event of a transfer of servicing?

  1. It must include contact information for the current lender
  2. It must be given within 30 days of the transfer
  3. It must include contact information for the new lender
  4. It must inform the borrowers they may make payments to either lender for 60 days
A

It must be given within 30 days of the transfer

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64
Q

Which of the following loans will not require mortgage insurance?

  1. FHA loan at 96.5% LTV
  2. Conventional loan at 85% LTV
  3. VA loan at 100% LTV
  4. Conventional loan at 95% LTV
A

VA loan at 100% LTV

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65
Q

A borrower receives $1,000 per month in rental income. How much of the income may be used to qualify the borrower for a loan?

  1. $1,000
  2. $800
  3. $750
  4. $1,250
A

$750

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66
Q

Under which of the following circumstances would the lender on a conventional loan be required to drop the mortgage insurance?

  1. The appraised value has increased, giving the borrower 20% equity, and the borrower has made their first 12 consecutive payments
  2. The appraised value has increased, giving the borrower 10% equity, and the borrower has made their first 24 consecutive payments
  3. The loan reaches 78% LTV based on the original purchase price
  4. The loan reaches 70% LTV based on a new appraisal, and the borrower requests cancellation
A

The loan reaches 78% LTV based on the original purchase price

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67
Q

What is Freddie Mac’s automated underwriting system called?

  1. Desktop Originator
  2. Underwriter Assistant
  3. Loan Product Advisor
  4. AUS
A

Loan Product Advisor

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68
Q

Which of the following contains only items which should be used in calculating a borrower’s debt-to-income ratio?

  1. Monthly rent expense on current home, credit card payment, car insurance
  2. Car payment, boat payment, child support obligations
  3. Property tax payment, utility payment, cable bill
  4. Mortgage insurance payment, average grocery costs, electric bill
A

Car payment, boat payment, child support obligations

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69
Q

Which of the following would NOT be required if a mortgage company wishes to utilize electronic signatures on required disclosures?

  1. Borrowers must be given the option to receive the disclosures in paper form
  2. Borrowers must be able to withdraw their consent to receive the disclosures electronically
  3. The company must record the IP address from which the documents were accessed
  4. The company must disclose hardware and software requirements to borrowers
A

The company must record the IP address from which the documents were accessed

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70
Q

A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n):

  1. HECM
  2. HELOC
  3. Pay-option mortgage
  4. Equity mortgage
A

HECM

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71
Q

Under the S.A.F.E. Act, a licensed loan originator’s responsibilities with regard to recordkeeping include all of the following, except:

  1. Not knowingly withholding, removing, or destroying any books or records
  2. Making all of the licensee’s records available to borrowers upon demand
  3. Permitting interviews of principals, loan originators, and independent contractors by state regulators
  4. Making records and books available to the state regulator
A

Making all of the licensee’s records available to borrowers upon demand

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72
Q

Which of the following pieces of information is NOT found on the 1003?

  1. Appraised property value
  2. Underwriter’s name
  3. Borrower’s Social Security Number
  4. Subject property address
A

Underwriter’s name

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73
Q

In a mortgage transaction subject to RESPA that is secured by the consumer’s dwelling, a Loan Estimate must be delivered or mailed within three business days after receipt of a written application and no later than:

  1. Three business days before the transaction is consummated
  2. The fifth business day before the transaction is consummated
  3. The seventh business day before the transaction is consummated
  4. The date the transaction is consummated
A

The seventh business day before the transaction is consummated

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74
Q

Which of the following would convey a property?

  1. Deed rider
  2. Warranty deed
  3. Note
  4. Deed of trust
A

Warranty deed

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75
Q

If a borrower’s reserve account for taxes and insurance is found to be short or deficient by an amount in excess of one month’s worth of deposits, which of the following is true?

  1. The escrow account will be cancelled
  2. The lender can require the borrower to make up the shortage over the next 12 months
  3. The lender can require the borrower to make up the shortage over the next six months
  4. The borrower must remit the shortage to the lender within 90 days of notice of the shortage
A

The lender can require the borrower to make up the shortage over the next 12 months

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76
Q

A licensed mortgage loan originator:

  1. Performs clerical and support duties for his/her sponsoring broker
  2. Advises loan applicants on current rates and loan terms
  3. May take responsibility for servicing a loan after it has been consummated
  4. Negotiates the sale and purchase of residential real estate
A

Advises loan applicants on current rates and loan terms

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77
Q

Combining stated income with a nontraditional mortgage product is an example of:

  1. Risk optimization
  2. Risk premium
  3. Risk layering
  4. Risk enhancement
A

Risk layering

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78
Q

Ethics:

  1. Is a branch of philosophy dealing with legal behavior
  2. Provides a guideline for answering questions when a choice of actions is available
  3. Defines how a person must act
  4. Is set out in law
A

Provides a guideline for answering questions when a choice of actions is available

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79
Q

Which of the following types of mortgages typically carries two different types of mortgage insurance?

  1. VA
  2. Conventional
  3. Subprime
  4. FHA
A

FHA

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80
Q

The acronym LIBOR represents a:

  1. Federal agency
  2. Possible ARM index
  3. Federal law
  4. State law
A

Possible ARM index

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81
Q

According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should:

  1. Average the last six months’ worth of pay stubs from the borrower
  2. Average the income shown on the 1040s for the past two years
  3. Use the income shown on the borrower’s most recent two pay stubs
  4. Average the income showing on the W-2s for the past two years
A

Average the income shown on the 1040s for the past two years

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82
Q

Which of the following is not a required element of a company’s safeguard policy, as required by the GLB Act?

  1. Designate one or more employees to coordinate safeguards
  2. Evaluate and adjust procedures in light of relevant circumstances
  3. Select appropriate service providers and contract with them to implement safeguards
  4. Contract with a federally-insured company to destroy documents
A

Contract with a federally-insured company to destroy documents

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83
Q

The 1003 is also known as the:

  1. Uniform Residential Loan Application
  2. Appraisal
  3. Mortgage Credit Analysis Worksheet
  4. Uniform Underwriting and Transmittal Summary
A

Uniform Residential Loan Application

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84
Q

Insurance which guarantees a lender a certain lien position on the title to a property free from undisclosed encumbrances is called:

  1. Guarantee against encumbrances
  2. Lender’s title policy
  3. Owner’s policy
  4. Forced policy
A

Lender’s title policy

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85
Q

A loan which does not require payments during the life of the loan is most likely:

  1. Illegal
  2. A modified mortgage
  3. A pay-option mortgage
  4. A HECM
A

HECM

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86
Q

All of the following are considered immediate family members, and therefore a mortgage loan originator may negotiate a mortgage loan on their behalf without needing to be licensed, EXCEPT a(n):

  1. Stepparent
  2. Aunt
  3. Adopted sibling
  4. Grandparent
A

Aunt

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87
Q

The purpose of the Truth-in-Lending Act is to do which of the following?

  1. Ensure meaningful disclosure of credit terms to consumers
  2. Prevent lenders from charging interest rates that are unfair to consumers
  3. Protect consumers from abusively high interest rates
  4. Require consumers be provided with a good faith estimate of closing costs at the time of loan application
A

Ensure meaningful disclosure of credit terms to consumers

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88
Q

Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower?

  1. UFMIP
  2. Insured amount
  3. Entitlement
  4. Guarantee fee
A

Entitlement

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89
Q

Co-borrower information must be provided on the 1003 when the co-borrower:

  1. Is a minor
  2. Has income being used for loan qualification
  3. Is the borrower’s spouse
  4. Has a credit score that is below average
A

Has income being used for loan qualification

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90
Q

Loan originator compensation records must be retained for at least:

a) Three years
b) Two years
c) Four years
d) Five years

A

Three years

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91
Q

A borrower owes $200,000 on a first mortgage, and $50,000 on a line of credit with a maximum amount of $100,000. If the property appraises for $500,000, what is the CLTV?

  1. 50%
  2. 60%
  3. 70%
  4. 40%
A

$200,000 + $50,000 / $500,000 = 50%.

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92
Q

According to the Interagency Guidance on Nontraditional Mortgage Product Risks, relying on an individual’s capacity to repay the loan as structured from resources other than monthly income is:

  1. Considered unsafe and unsound
  2. A strong mitigating factor
  3. Acceptable only with property securitization
  4. Acceptable only with proper disclosure
A

Considered unsafe and unsound

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93
Q

Which of the following entities was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government?

  1. Ginnie Mae
  2. Vinnie Mac
  3. Fannie Mae
  4. Federal Housing Administration
A

Fannie Mae

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94
Q

When would business tax returns be required as documentation of income for a borrower?

  1. If the borrower owns 15% of a company
  2. If the borrower owns more than 25% of a company
  3. If the borrower receives a K-1 from a company
  4. If the borrower is an officer of a company
A

If the borrower owns more than 25% of a company

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95
Q

Mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities in the:

  1. Secondary mortgage market
  2. Capital market
  3. Primary mortgage market
  4. Federal reserve market
A

Secondary mortgage market

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96
Q

Which of the following is a government-owned entity which facilitates home ownership in the United States?

  1. Georgie Mac
  2. Ginnie Mae
  3. Freddie Mac
  4. Fannie Mae
A

Ginnie Mae

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97
Q

According to ECOA, when could a lender ask a borrower about their race?

  1. If they ask for monitoring purposes
  2. Never
  3. If the borrower’s race is not evident
  4. If the loan is not federally-regulated
A

If they ask for monitoring purposes

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98
Q

Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM?

  1. No limit
  2. One month
  3. Three months
  4. Six months
A

No limit

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99
Q

A mortgage broker originates and closes a mortgage loan, but it is funded by the lender who is purchasing the loan from the originating broker. This is an example of:

  1. Warehouse lending
  2. Mortgage brokering
  3. Table funding
  4. Wholesale lending
A

Table funding

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100
Q

Which of the following borrowers would be considered self-employed for underwriting purposes?

  1. A borrower who is a vice president for a company, of which she is a 20% owner
  2. A borrower who receives only commission reported on a W-2
  3. A borrower who files Form 2106 with her tax returns
  4. A borrower who is a salesperson for a company, of which she is a 30% owner
A

A borrower who is a salesperson for a company, of which she is a 30% owner

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101
Q

Which of the following is least likely to be considered nonpublic personal information?

  1. Borrower’s home phone number
  2. Employer’s phone number
  3. Borrower’s job title
  4. Borrower’s income
A

Employer’s phone number

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102
Q

A 180 / 360 loan is considered a(n) ___________________ mortgage.

  1. Adjustable-rate
  2. Pay-option
  3. Hybrid
  4. Balloon
A

Balloon

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103
Q

For an FHA loan, how much may the seller contribute toward the borrower’s closing costs?

  1. Nothing
  2. 6% of the sales price
  3. 3% of the sales price
  4. 3% of the loan amount
A

6% of the sales price

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104
Q

A disclosure that allows a consumer to more easily compare loan options is required under which regulation?

  1. Regulation B
  2. Regulation Z
  3. Regulation V
  4. Regulation H
A

Regulation Z

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105
Q

Which of the following is most true concerning a VA funding fee?

  1. It is always refundable
  2. It is nonrefundable
  3. It is not charged to veterans
  4. It is not charged to active members of the military
A

It is nonrefundable

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106
Q

Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT:

  1. The loan satisfies the requirements of a balloon payment qualified mortgage
  2. A nine-month bridge loan is obtained for the construction of the borrower’s primary dwelling
  3. The borrower’s income is seasonal
  4. The borrower signs a waiver consenting to the balloon payment
A

The borrower signs a waiver consenting to the balloon payment

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107
Q

On the Loan Estimate, fees related to third-party service providers chosen from the provider list and not affiliated with the creditor are grouped with the recording fees and subject to a:

  1. No tolerance limitation
  2. 10% tolerance
  3. 15% tolerance
  4. Zero tolerance
A

10% tolerance

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108
Q

Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule?

  1. The state in which the property is located
  2. The amortization term of the loan
  3. Whether or not the loan is an ARM or a fixed-rate loan
  4. The loan program
A

The state in which the property is located

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109
Q

A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts?

a) 8%
b) 7%
c) 6%
d) 9%

A

8%

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110
Q

What does “FHA” stand for, when referring to the agency which oversees the FHA loan program?

  1. Federal Housing Authority
  2. Federal Housing Agency
  3. Federal Housing Association
  4. Federal Housing Administration
A

Federal Housing Administration

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111
Q

A borrower makes $60,000 per year. The borrower’s spouse makes $3,000 per month. The borrowers’ monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple’s back-end DTI?

a) 30.6%
b) 31.25%
c) 32.5%
d) 29.38%

A

60,000/12 = 5,000
3,000 + 5,000 = 8,000
2,350/8000 = 29.38%

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112
Q

Which of the following terms describes the fee charged to the borrower to insure an FHA loan?

  1. Upfront mortgage insurance premium
  2. Guaranty fee
  3. Insuring fee
  4. Funding fee
A

Upfront mortgage insurance premium

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113
Q

If a borrower has an $80,000 first mortgage, a $20,000 second HELOC on which they have $5,000 in remaining credit, and the property appraises for $100,000, what is the CLTV?

a) 100%
b) 80%
c) 75%
d) 95%

A

$80,000 + ($20,000 - $5,000)/$100,000 = 95%.

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114
Q

Which of the following would not be considered an established business relationship under the Do-Not-Call rules?

  1. A consumer purchases a service from a seller
  2. A financial transaction between a consumer and a seller
  3. A consumer inquiry into the purchase of an item six months ago
  4. A consumer purchases an item from a seller
A

A consumer inquiry into the purchase of an item six months ago

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115
Q

On an ARM loan, which of the following will not be found on the note?

  1. Fully-indexed rate after one year
  2. Margin
  3. Adjustment parameters
  4. Identification of index
A

Fully-indexed rate after one year

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116
Q

The NMLS was established by:

  1. HUD
  2. The Federal Reserve
  3. Each state regulator
  4. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators
A

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators

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117
Q

Which of the following statements most accurately describes the term “predominant value”?

  1. The final value an appraiser reports on an appraisal
  2. The most common sales price for the neighborhood
  3. The highest sales price in the neighborhood
  4. The average sales price for the neighborhood
A

The most common sales price for the neighborhood

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118
Q

Redlining is addressed in which federal law?

  1. RESPA
  2. HOEPA
  3. FCRA
  4. ECOA
A

ECOA

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119
Q

A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage?

  1. Balloon mortgage
  2. Hybrid ARM
  3. Graduated Payment Mortgage (GPM)
  4. Fixed period ARM
A

Balloon mortgage

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120
Q

In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table?

  1. “Has this information been verified?”
  2. “Can this amount increase after closing?”
  3. “Is this payment subject to a late fee?”
  4. “Has this information changed from the Loan Estimate?”
A

“Can this amount increase after closing?”

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121
Q

Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following?

  1. Regulation C
  2. Regulation Z
  3. Regulation D
  4. Regulation B
A

Regulation B

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122
Q

Which of the following best describes the order in which payments will be applied according to the standard deed of trust?

  1. Interest, escrow, principal
  2. Principal, escrow, interest
  3. Late fees, principal, interest
  4. Interest, principal, escrow
A

Interest, principal, escrow

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123
Q

A person who allows the use of their personal identifying information (usually in exchange for a fee) by another individual to take out a loan is known as a:

  1. Straw buyer
  2. Identity thief
  3. Flipper
  4. Flapper
A

Straw buyer

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124
Q

The penal sum of a loan originator’s required surety bond must be maintained:

  1. In an amount that reflects the dollar amount of loans originated
  2. In a flat-rate amount determined by each state
  3. In an amount that reflects the number of loans originated
  4. In an amount that reflects the originator’s years of professional experience
A

In an amount that reflects the dollar amount of loans originated

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125
Q

A borrower makes $20 per hour and works 35 hours per week. If their loan program allows a front-end debt ratio of 31%, what is the maximum housing payment for which they can qualify?

a) $940.33
b) $868.33
c) $1,074.67
d) $956.34

A

$3,033.33 × 31%.(.31) = $940.33.

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126
Q

Which of the following is used to describe a loan amount which exceeds conforming loan limits?

  1. Subprime
  2. Jumbo
  3. Interest-only
  4. No documentation
A

Jumbo

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127
Q

A misleading representation, omission, act, or practice is considered deceptive when, among other conditions, it is:

  1. Malicious
  2. Repeated
  3. Intentional
  4. Material
A

Material

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128
Q

The APR factors in the effects of all of the following expenses, except:

  1. Hazard insurance premium
  2. Processing fee
  3. Origination fee
  4. Mortgage insurance premium
A

Hazard insurance premium

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129
Q

Under Fannie Mae guidelines, the amount of hazard insurance must be equal to:

  1. The appraised value
  2. The purchase price
  3. The lower of the replacement cost or the unpaid loan amount
  4. 80% of the replacement cost
A

The lower of the replacement cost or the unpaid loan amount

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130
Q

Mortgage interest rates are influenced by all of the following, except:

  1. Foreclosure rates
  2. Regional property tax rates
  3. Loan fraud
  4. Federal Reserve activities
A

Regional property tax rates

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131
Q

The preferred debt-to-income ratio for applicants for VA loans is:

35%
43%
50%
41%

A

41%

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132
Q

Seller concessions for conforming loans are limited to _____ and _____ on LTVs of over 90% and 90% or less, respectively.

6%; 3%
3%; 6%
10%; 20%
3.5%; 10%

A

3%; 6%

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133
Q

A balloon mortgage has a:

  1. Short-term payment that can go up or down from month to month throughout the life of the loan
  2. Payment that grows with each month as equity decreases
  3. Large payment required at the onset of the loan and periodic payments thereafter
  4. 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time
A

30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time

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134
Q

Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections?

  1. A broker agreement
  2. A TIL disclosure
  3. A verification of employment
  4. The promissory note
A

A verification of employment

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135
Q

In what scenario would a sales comparison approach be appropriate?

  1. A condo complex for residents aged 55 and over
  2. A bio-dome built in the middle of a residential neighborhood
  3. A commercial office building in an area zoned commercially
  4. A complex of office units in a business park near a residential neighborhood
A

A condo complex for residents aged 55 and over

136
Q

Which of the following is not a prohibited practice regarding loan originator compensation?

  1. A loan originator receives .5% more compensation if a loan contains a prepayment penalty
  2. A loan originator receives compensation for closing over $1 million in volume per month
  3. A loan originator receives 10% more compensation if he/she closes more than ten transactions in a month with an interest rate of 6.5% or more
  4. A loan originator receives compensation from a consumer and from the creditor
A

A loan originator receives compensation for closing over $1 million in volume per month

137
Q

An assumption clause

  1. allows the seller to reassume the mortgage if the buyer falls behind in his payments.
  2. assumes the buyer has the ability to repay the loan based on his credit score.
  3. allows a buyer to assume the seller’s mortgage.
  4. allows the buyer to sell the mortgage without requiring the seller’s authorization.
A

allows a buyer to assume the seller’s mortgage.

138
Q

The generally-accepted appraisal standards in the United States are known as:

ASB
USASB
USPAP
FinCEN

A

USPAP

139
Q

Entities that gather and sell information regarding an applicant’s credit in the form of credit reports are known as:

Consumer finance associations
Consumer reporting agencies
Consumer reporting associations
Consumer finance agencies

A

Consumer reporting agencies

140
Q

In order for a home loan to be a qualified mortgage, the debt-to-income ratio may not exceed:

43%
28%
36%
46%

A

43%

141
Q

Which of the following are considered liens?

  1. Judgment, mortgage, flood insurance
  2. Mortgage, mechanic’s lien, debentures
  3. Chattel, mortgage, attachment
  4. Judgment, attachment, mortgage
A

Judgment, attachment, mortgage

142
Q

The reporting form used to communicate HMDA data is called what?

1073
Loan/Registration Application
1004
Loan/Application Register

A

Loan/Application Register

143
Q

If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.

7
10
20
15

A

15

144
Q

A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this?

  1. Adjustable-rate
  2. FHA buy-down
  3. Option ARM
  4. Interest-only option fixed-rate
A

Interest-only option fixed-rate

145
Q

The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of:

NMLS
CFPB
FHA
HUD

A

CFPB

146
Q

Disclosures for high-risk loans required by the Homeowners Protection Act inform the borrower that:

  1. The loan is considered a high-cost loan because it trips thresholds related to title insurance fees
  2. Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments
  3. There may be a loan more suited for the borrower that is much less expensive
  4. Payment amounts may change based on interest rate changes
A

Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments

147
Q

The “Confirm Receipt” box on the Loan Estimate informs the consumer that:

  1. He or she is now obligated to proceed with the loan transaction
  2. He or she has agreed to all costs and terms stated in the disclosure
  3. He or she is not obligated to accept a loan simply because he or she has signed or received the disclosure
  4. He or she may face legal action for failure to pay fees due at the time of receiving the Loan Estimate
A

He or she is not obligated to accept a loan simply because he or she has signed or received the disclosure

148
Q

Which of the following is not permitted for a HOEPA loan?

  1. Documenting a borrower’s ability to repay the loan
  2. Requiring a balloon payment after the first five years
  3. Refinancing into another HOEPA loan within 12 months if it is in the borrower’s best interest
  4. Making a loan solely based on the collateral value of the property
A

Making a loan solely based on the collateral value of the property

149
Q

Which of the following is true?

  1. Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule
  2. Open-end credit plans, timeshare plans, and closed-end consumer credit loans are exempt from the ATR Rule
  3. Open-end credit plans are covered by the ATR Rule
  4. Reverse mortgage loans are covered by the ATR Rule
A

Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule

150
Q

A borrower is buying a house with a sales price of $210,000, but the appraisal came in at $200,000. The borrower takes out a loan of $160,000. What is the LTV?

76%
90%
80%
75%

A

$160,000 is divided by the appraised value of $200,000 to get 80% LTV

151
Q

When a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called:

  1. A lock-in
  2. A variable rate
  3. A float
  4. An adjustable rate
A

A float

152
Q

Which of the following may be considered an appraisal red flag?

  1. An appraiser’s resume shows substantial experience in the area
  2. Property owner and seller are not the same
  3. Appraisal is dated after the sales contract
  4. Comparables are located within one mile of the subject
A

Property owner and seller are not the same

153
Q

Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan?

  1. Yes, a dwelling includes a structure whether or not that structure is attached to real property
  2. No, dwellings must be permanently attached to real property
  3. No, mobile homes are classified as personal property, not real property
  4. Yes, as long as the real property upon which the mobile home will be located is in the borrower’s name, the loan may be a residential mortgage loan
A

Yes, a dwelling includes a structure whether or not that structure is attached to real property

154
Q

Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the:

  1. Annual percentage rate
  2. Broker fees and the amount charged by a third party
  3. Amount of the payment
  4. Length of the loan
A

Annual percentage rate

155
Q

The Foxes are obtaining a mortgage loan of $140,000. They are making a down payment of $35,000, which is 20% of the purchase price. What is the purchase price of the property?

$150,000
$200,000
$175,000
$235,000

A

This can be determined by adding together the amount of the mortgage loan ($140,000) and the amount of the Foxes’ down payment ($35,000)

$175,000

156
Q

All but which of the following prohibitions or requirements apply to HPMLs?

  1. The loan cannot include prepayment penalties after the first two years of the loan term
  2. The loan cannot include prepayment penalties
  3. The borrower must have an escrow account for taxes and insurance
  4. Consideration of repayment ability must include verification of income using documents such as IRS W-2 forms
A

The loan cannot include prepayment penalties after the first two years of the loan term

157
Q

What is the minimum time period that MIP must be in place for a USDA loan?

Zero years
Three years
Five years
Depends on LTV

A

Zero years

158
Q

Which of the following settlement services would not be covered by RESPA?

  1. Services of a real estate agent
  2. Office supply provider
  3. Processing services
  4. Title abstractor
A

Office supply provider

159
Q

All of the following are considered involuntary liens, except:

  1. Mortgage
  2. Mechanic’s lien
  3. Tax lien
  4. Judgment
A

Mortgage

160
Q

When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as:

  1. For sale by owner (FSBO)
  2. Seller carry-back
  3. Seller concessions
  4. Seller self-financed
A

Seller carry-back

161
Q

What federal legislation requires loan originators to collect demographic data to ensure that creditors are not engaging in discriminatory lending?

ECOA
HMDA
GLB Act
FCRA

A

HMDA

162
Q

Ricky and Lucy are buying a house using a conforming loan, and they have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession?

$6,210
$6,900
$13,800
$12,420

A

The seller concession allowed on a conforming loan with a 90% (or less) LTV is 6%. This number is taken from the sales price, not the loan amount. $230,000 × 6% = $13,800.

163
Q

Which of the following is the least-expensive type of reverse mortgage?

  1. HECM
  2. Proprietary mortgage
  3. Non-recourse
  4. Single purpose
A

Single purpose

164
Q

Which section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application?

  1. Information for Government Monitoring Purposes
  2. Declarations
  3. Details of the Transaction
  4. Acknowledgement and Agreement
A

Declarations

165
Q

Statements in advertising that may lead a consumer to incorrectly assume that a mortgage product or company is directly endorsed by the federal government are in violation of which law?

Regulation A
Regulation Z
Regulation B
Regulation X

A

Regulation Z

166
Q

A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV?

47%
29%
40%
65%

A

To calculate CLTV, divide the $78,000 total encumbrance by the value of $165,000. This equals 47%.

167
Q

Which of the following forms is the appraisal form used for investment properties?

1007
1073
1004
1005

A

The 1007 is used for single-family properties that are investment properties.

168
Q

Mortgage insurance may be cancelled at what LTV percentage on a VA loan?

Mortgage insurance is not required
80%
75%
After five year

A

Mortgage insurance is not required

169
Q

Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan?

  1. All five
  2. A majority of the five
  3. At least two of the five
  4. Any one of the five
A

Any one of the five

170
Q

Muny Baggins regularly extends credit that is subject to a finance charge and payable in a written agreement of more than four installments. Under the Truth-in-Lending Act, Muny is a:

  1. Mortgage servicer
  2. Mortgagee
  3. Mortgagor
  4. Creditor
A

Creditor

171
Q

When would a license be suspended without a hearing?

  1. If a licensee fails to renew
  2. If a licensee fails to request a hearing with the state regulator
  3. If a licensee has failed to complete pre-licensing requirements
  4. If a licensee has already executed a right to a hearing for a previous violation
A

If a licensee fails to request a hearing with the state regulator

172
Q

What document would an underwriter rely on for detailed information concerning the collateral for a mortgage loan?

  1. The property appraisal
  2. The borrower’s asset statements
  3. The URLA
  4. The borrower’s employment documentation
A

The property appraisal

173
Q

Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will:

  1. Be required because the seller acquired the home 90 days prior to the date that Nicole agreed to purchase the home
  2. Be required if there is any evidence that the sale constitutes property flipping
  3. Not be required unless Nicole has agreed to purchase it for 20% more than the Marine paid
  4. Not be required since purchases from servicemembers are not subject to the requirement for two appraisals
A

Not be required since purchases from servicemembers are not subject to the requirement for two appraisals

174
Q

Those who disagree with the idea of a fiduciary duty in mortgage loan transactions feel that _____ is ultimately responsible for ensuring that a certain loan product has appropriate terms and conditions.

  1. The mortgage broker
  2. The lender
  3. The consumer
  4. The underwriter
A

The consumer

175
Q

All of the following loans are covered by RESPA, except:

  1. A loan assumption made without lender approval
  2. A 30-year fixed loan made by a federally regulated credit union
  3. An FHA loan
  4. A conforming loan
A

A loan assumption made without lender approval

176
Q

All of the following are TILA-required disclosures, except:

CHARM Booklet
Notice of Adverse Action
Right to Rescind
Loan Estimate

A

Notice of Adverse Action

177
Q

The size of the government’s guarantee on a VA loan depends on:

  1. Whether the interest rate is fixed or adjustable
  2. Whether this is the first time a veteran uses the guarantee or a subsequent transaction
  3. The length of the loan term
  4. The size of the loan being obtained
A

The size of the loan being obtained

178
Q

All of the following requirements are applicable to HECMs, except:

  1. The loan must be secured by the borrower’s principal residence
  2. The applicant must complete a consumer information session on reverse mortgages loans
  3. The applicant must not have an existing mortgage on the residence
  4. The applicant must be at least 62 years old
A

The applicant must not have an existing mortgage on the residence

179
Q

How long must flood insurance be in place?

  1. The borrower can cancel at 80% of the loan balance
  2. Until the loan reaches the halfway point in the amortization table
  3. It cannot be canceled as long as the property remains in a mandatory flood zone
  4. Until the loan balance is completely paid off
A

Until the loan balance is completely paid off

180
Q

If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer at what point?

  1. Within seven business days of a customer providing nonpublic personal information sufficient to pull a credit report
  2. Within three business days of initial contact between the consumer and the financial institution
  3. No later than three business days prior to settlement
  4. No later than the time at which a customer relationship is established
A

No later than the time at which a customer relationship is established

181
Q

The Talleys are buying a home for $180,000. What is the minimum possible down payment they could make in order to avoid paying PMI?

$36,000
$20,000
$18,000
$32,000

A

A down payment of 20% exactly would be $36,000.

182
Q

Negative amortization:

  1. Describes the result of a default
  2. Occurs when the mortgage payment is not sufficient to pay the interest currently due
  3. Occurs when a borrower pays only interest due each month
  4. Defers principal
A

Occurs when the mortgage payment is not sufficient to pay the interest currently due

183
Q

“Equity” is defined as:

  1. The difference between the fair market value of a property and the current balances of any liens
  2. The difference between the appraised value and the purchase price
  3. The relationship between the value of the house and a borrower’s assets
  4. The balance of any liens divided by the proposed value of any new loan
A

The difference between the fair market value of a property and the current balances of any liens

184
Q

In January of 2020, Wella and Kip agreed to purchase a home at a purchase price of $546,300. They would like to hold onto as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings?

$47,900
$35,900
$95,800
$54,900

A

546,300-510,400 = 35,900.

185
Q

Leslee is a loan processor who is not required to perform her duties at the direction of or subject to the supervision and instruction of an individual who is licensed or exempt. Leslee is a(n):

  1. Registered loan originator
  2. Mortgage loan originator
  3. Independent contractor
  4. Licensed loan processor
A

Independent contractor

186
Q

If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by:

$35
$10
More than $35
More than $100

A

More than $35

187
Q

An underwriter:

  1. Is responsible for approving an originator’s license
  2. Verifies that the applicant and subject property meet lender guidelines
  3. Looks for red flags in marketing
  4. Facilitates the Safeguards Rule for the lender
A

Verifies that the applicant and subject property meet lender guidelines

188
Q

Which of the following is not a characteristic of an HPML?

  1. It is secured by the borrower’s principal dwelling
  2. It has an APR that exceeds the average prime offer rate by 1.5 percentage points for a loan secured by a first lien on the home
  3. It has an APR that exceeds the average prime offer rate by 3.5 percentage points for a loan secured by a subordinate lien on the home
  4. It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points
A

It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points

189
Q

What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage?

  1. A deed with conflicting ownership information
  2. A utility easement
  3. A second mortgage
  4. A judgment that was secured by a property lien, but recently paid in full
A

A deed with conflicting ownership information

190
Q

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
2.5
1.5

A

The loan amount here is $240,000 (80% of $300,000). On a $240,000 loan, one point would cost $2,400 (1% x $240,000). The Lewises are paying $3,600 in points; to determine how many points this represents, divide $3,600 by $2,400. This comes out to 1.5, meaning that Tom and Cindy paid for 1.5 points.

191
Q

Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called:

  1. Down payment
  2. Earnest money
  3. Escrow funds
  4. Service release premium
A

Earnest money

192
Q

Which of the following features would be permitted for a non-qualified mortgage, but not for a qualified mortgage?

  1. A term of 15 years
  2. An adjustable interest rate
  3. A debt-to-income ratio of 43%
  4. An interest-only option
A

An interest-only option

193
Q

The Loan Estimate is required for:

  1. All mortgage loans
  2. All closed-end federally related mortgage loans
  3. All nontraditional mortgage loans
  4. All open-end mortgage loans
A

All closed-end federally related mortgage loans

194
Q

A mortgage and a lien are both examples of

  1. deeds of trust.
  2. concepts which are legal in some states but not in others.
  3. easements.
  4. encumbrances.
A

Encumbrances

195
Q

Which of the following might raise a red flag and suggest that further investigation is necessary to ensure that there is no fraud in an application?

  1. The applicant uses a co-borrower with a different last name
  2. Information in corporate-produced W-2s matches that given in the application
  3. The borrower’s employment is not consistent with education level
  4. Savings patterns and accumulated assets make sense considering the borrower’s level of income
A

The borrower’s employment is not consistent with education level

196
Q

A balloon rider, a prepayment penalty rider and a second-home rider may all be part of:

  1. A title insurance policy
  2. A deed of trust
  3. A note
  4. A power-of-attorney agreement
A

A deed of trust

197
Q

“UFMIP” stands for:

  1. Uniform Funded Mortgage Insurance Premium
  2. Upfront Mortgage Insurance Premium
  3. Uniform Financed Mortgage Insurance Premium
  4. Uniform Front-End Mortgage Insurance Premium
A

Upfront Mortgage Insurance Premium

198
Q

Recording of the deed happens where?

  1. At closing
  2. At the borrower’s house
  3. At the Office of the County Recorder
  4. Within the office of the Supervisor of Banks
A

At the Office of the County Recorder

199
Q

Safe harbor qualified mortgages offer a “safe harbor” from:

  1. Liability for TRID Rule violations
  2. Liability for ATR Rule violations
  3. Liability for ECOA violations
  4. Liability for HOEPA violations
A

Liability for ATR Rule violations

200
Q

Per diem interest is used by a lender in order to:

  1. Allow for a lower payment with a temporary buy-down
  2. Collect interest that accrues between the closing date and the end of the month
  3. Pay the previous lender’s costs for selling the loan
  4. Build a borrower’s escrow account
A

Collect interest that accrues between the closing date and the end of the month

201
Q

A borrower receives a bi-weekly paycheck in the amount of $2,300. The co-borrower earns a semi-monthly paycheck in the amount of $2,500. What is the monthly qualifying income of this couple?

$9,983.33
$10,400
$9,600
$10,983.33

A

The borrower receives bi-weekly pay of $2,300, which must be multiplied by 26, giving an annual salary of $59,800. The co-borrower receives semi-monthly income of $2,500, which must be multiplied by 24, giving an annual salary of $60,000. Combine both, and you have a household salary of $119,800. Divide this by 12, and you arrive at a qualifying income of $9,983.33.

202
Q

Which of the following rules requires mortgage professionals to take reasonable steps to ensure that service providers are able to maintain appropriate protection for the privacy of consumer information?

  1. The Qualified Mortgage Rule
  2. The ATR Rule
  3. The Safeguards Rule
  4. Title X of the Dodd-Frank Act
A

The Safeguards Rule

203
Q

“5/25” and “7/23” are commonly used to designate loans including which of the following?

  1. A hybrid adjustable rate feature
  2. A balloon payment
  3. A subordinate lien
  4. A temporary interest rate buy-down
A

The balloon payment

204
Q

According to the SAFE Act, which of the following is defined as a nontraditional mortgage product?

  1. Any mortgage product other than a 30-year fixed-rate mortgage
  2. A 30-year fixed-rate mortgage
  3. An ARM loan with a 5-year fixed-rate period
  4. A 15-year fixed-rate mortgage
A

Any mortgage product other than a 30-year fixed-rate mortgage

205
Q

ECOA applies to the extension of credit for:

  1. Loans secured by a first or subordinate lien on residential property
  2. Residential, business, commercial, and agricultural loans
  3. Business, commercial, and agricultural loans
  4. All credit other than government loans
A

Residential, business, commercial, and agricultural loans

206
Q

Which of the following is not a threshold that the Home Ownership Equity Protection Act (HOEPA) has established to identify loans as high-cost mortgages?

  1. APR threshold
  2. Points and fees threshold
  3. Subprime interest rate threshold
  4. Prepayment penalty threshold
A

Subprime interest rate threshold

207
Q

This federal law amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection.

  1. RESPA
  2. ECOA
  3. The Consumer Fairness Act
  4. The Dodd-Frank Act
A

The Dodd-Frank Act

208
Q

One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are:

  1. Interest free
  2. Available to loan applicants regardless of DTI ratios
  3. Assumable
  4. Not funded by private lenders
A

Assumable

209
Q

Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under:

  1. TILA
  2. Homeowners Protection Act
  3. HOEPA
  4. RESPA
A

HOEPA

210
Q

The front-end ratio is also known as the:

  1. Back-end ratio
  2. Housing ratio
  3. Principal ratio
  4. Total debt ratio
A

Housing ratio

211
Q

What is a method of transferring property to a new owner who takes over an outstanding mortgage debt, along with the liability of repayment, without incurring a change in terms?

  1. Conveyance
  2. Assumption
  3. Reconveyance
  4. Seller carry-back
A

Assumption

212
Q

A lender who refuses to originate loans in a particular neighborhood or ZIP code because of the perceived creditworthiness of consumers living in the area is in violation of:

  1. FCRA
  2. ECOA
  3. HOEPA
  4. RESPA
A

ECOA

213
Q

Which of the following correctly describes entities that have obligations under the Fair Credit Reporting Act?

  1. CRAs, Experian, and FHA
  2. FHFA, CRAs, and furnishers of information to CRAs
  3. CRAs, furnishers of information to CRAs, and users of consumer reports
  4. Users of consumer reports and lenders regulated by RESPA and TILA
A

CRAs, furnishers of information to CRAs, and users of consumer reports

214
Q

HOEPA is federal legislation enacted by Congress through amendments to:

  1. FACTA
  2. ECOA
  3. TILA
  4. HMDA
A

TILA

215
Q

Which of the following is true of a loan that allows for negative amortization?

  1. The payments are not sufficient enough to cover the interest due, so the principal balance increases
  2. The interest rate decreases because payments are not sufficient enough to pay the interest due
  3. The principal amount increases because the borrower’s payments cover more than the interest due
  4. The payments are less than necessary to cover the interest due, so the principal does not increase
A

The payments are not sufficient enough to cover the interest due, so the principal balance increases

216
Q

An “encumbrance” is:

  1. Transfer of title from one owner to another
  2. Transfer of ownership without any guarantees or warranties
  3. Cancellation of a contract
  4. A claim against a property that can affect the ability to transfer title
A

A claim against a property that can affect the ability to transfer title

217
Q

When providing services related to a residential mortgage transaction, appraisers have responsibility for all but which of the following?

  1. Maintaining direct contact with the loan originator that ordered the appraisal
  2. Refusing to accept assignments in which compensation for services depends on delivering a predetermined value for the property securing the loan
  3. Performing assignments with impartiality and objectivity
  4. Complying with Uniform Standards of Professional Appraisal Practice
A

Maintaining direct contact with the loan originator that ordered the appraisal

218
Q

A state-licensed loan originator is:

  1. Licensed by the NMLS
  2. An employee of a non-depository institution
  3. Identified by the unique identifier of his/her employer
  4. An employee of a subsidiary which is owned or controlled by a depository institution
A

An employee of a non-depository institution

219
Q

Sandra is purchasing a home with a loan amount of $510,400, which is the conforming loan limit for the area where she lives at the time that she secures approval for the loan. Her interest rate is not a prime rate, and in order to determine if it triggers the threshold for higher-priced mortgage loans, her creditor must determine if the APR for the loan exceeds the average prime offer rate by:

  1. 5 percentage points
  2. 5 percentage points
  3. 5 percentage points
  4. 5 percentage points
A

1.5 percentage points

220
Q

Which of the following would prevent the conveyance of title?

  1. Paid lien
  2. Owner dies and leaves a legal will
  3. Encumbrance
  4. Father passing title to his son while still living
A

Encumbrance

221
Q

Oversight and enforcement of FCRA is left to what government agency?

FNMA
CFPB
FHFA
HUD

A

CFPB

The CFPB has primary oversight and enforcement authority for the Fair Credit Reporting Act. However, it shares some of its enforcement authority with the FTC.

222
Q

According to the HPML Rule, which of the following transactions would require a second appraisal?

  1. A higher-priced mortgage loan that also meets qualified mortgage standards
  2. The purchase price is 10% higher than the seller’s acquisition price 100 days ago
  3. All higher-priced mortgage loans are required to have two appraisals
  4. The purchase price is 20% higher than the seller’s acquisition price 150 days ago
A

The purchase price is 20% higher than the seller’s acquisition price 150 days ago

223
Q

Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account?

  1. Escrow accounts are required for all HPMLs secured by the borrower’s principal dwelling
  2. Escrow accounts are required for all HPMLs secured by a dwelling
  3. Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling
  4. Escrow accounts are required for all HPMLs, including reverse mortgages
A

Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling

224
Q

HMDA data is collected and aggregated to determine:

  1. The success rate of nontraditional mortgage loans
  2. Whether the success of lending terms varies in different geographic areas
  3. The extent of creditor compliance with privacy protection laws
  4. Whether different credit terms are offered to members of protected classes
A

Whether different credit terms are offered to members of protected classes

225
Q

As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs.

  1. FNMA
  2. FinCEN
  3. FHLMC
  4. FHFA
A

FHFA

226
Q

Tina Louise works as a clerk at a law firm and is paid bi-weekly in the amount of $1,700. Each quarter, she also receives a bonus of exactly $3,200 for her share of a program specifically designed to reward the excellent work by the firm’s support staff. This bonus has been consistent for three years. What is Tina’s qualifying monthly income?

$3,683
$4,466
$4,750
$3,400

A

To calculate qualifying income, first, annual salary is calculated, including the bonus (in effect for three years), and then divided by 12 months. $1,700 × 26 = $44,200. Then the bonus: $3,200 × 4 = $12,800. Add the two, $44,200 + $12,800 = $57,000. Divide $57,000 by 12 = $4,750.

227
Q

An ARM was locked for three years and began adjusting two years ago. It is about to adjust for the third time. What limits the amount the interest rate will increase on this movement?

  1. Payment cap
  2. Starter cap
  3. Initial cap
  4. Periodic cap
A

Periodic cap

228
Q

If a lender wants to obtain copies of a borrower’s tax returns, the borrower is asked to sign what?

A waiver of financial information
4506-T
1003
IRS-1040

A

The IRS form 4506-T is used to allow a lender to pull a transcript of the borrower’s tax returns.

229
Q

An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is:

  1. A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees
  2. A violation of RESPA’s prohibition against fee-splitting
  3. Permitted only as long as receipts are kept from the processor for five years
  4. A violation of ECOA
A

A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees

230
Q

What action must a creditor take if it is discovered that the APR is outside of the range of tolerance?

  1. Provide disclosure of the corrected discrepancy and wait three business days before closing
  2. Keep records of the discrepancy for three years
  3. Adjust the APR and close the loan as scheduled
  4. Restart the seven-business-day waiting period after the new disclosure has been made
A

Provide disclosure of the corrected discrepancy and wait three business days before closing

231
Q

The term “adjustment frequency” or “adjustment interval” is associated with:

  1. The spread between a lender’s margin and its cost
  2. The 60-day period after a transfer of servicing that a customer has to send his or her first payment
  3. The adjustments of an ARM loan
  4. The percentage amount an ARM can increase from its start rate to its rate ceiling
A

The adjustments of an ARM loan

232
Q

How many total hours of ethics are required, at minimum, for continuing education?

Three
Eight
Two
Eleven

A

Two

233
Q

An Affiliated Business Arrangement Disclosure is:

  1. Required by TILA to be given to a borrower at the time of referral
  2. Only required if the referred party is owned by or has an affiliate relationship with the referring party
  3. Used to disclose whether the loan will be serviced, transferred, or sold
  4. Required to be disclosed within three business days of application
A

Only required if the referred party is owned by or has an affiliate relationship with the referring party

234
Q

The system that an underwriter uses to help streamline the underwriting process is called:

  1. YSP
  2. AUS
  3. MBS
  4. ABA
A

AUS

Automated Underwriting System

235
Q

A type of reverse mortgage offered to low-income borrowers for a designated purpose, such as to pay taxes or to complete a home repair, is known as a:

  1. Single purpose reverse mortgage
  2. Home equity conversion mortgage
  3. Proprietary mortgage
  4. Designated use reverse mortgage
A

Single purpose reverse mortgage

236
Q

Liabilities may include which of the following?

  1. Real estate
  2. Net worth of businesses
  3. Student loans
  4. Stocks and bonds
A

Student loans

237
Q

Loan originator Zena Mendez is preparing an advertisement in which more than one simple interest rate will apply over the term of the loan. In order to be in compliance with Regulation Z, Zena must clearly and conspicuously disclose all of the following, except:

  1. Each applicable simple annual rate
  2. The period of time each simple annual rate applies
  3. The frequency with which the rate will change
  4. The annual percentage rate for the loan
A

The frequency with which the rate will change

238
Q

Direct RHS loans may have terms of _____ years.

15 and 30
21 or 29
30 and 40
33 or 38

A

33 or 38

239
Q

Mortgage loan originator Janine is assisting the Barstows in obtaining a residential mortgage loan. Her assistance may include all of the following, except:

  1. Providing advice on loan terms
  2. Preparing loan packages
  3. Making a loan commitment
  4. Collecting information on behalf of the consumer
A

Making a loan commitment

240
Q

Don is refinancing his home in order to save money. If the loan goes through, his payment will drop from $2,000/month (PITI) to $1,500/month (PITI). Don’s gross income each month is $6,800, but he has a $300 car payment, a $150 credit card payment, and monthly alimony payments of $1,300. What is Don’s housing ratio on the proposed loan?

29%
48%
22%
31%

A

“Housing ratio” refers to the cost of Don’s housing expenses monthly, divided by his gross monthly income. In this case, his proposed housing expense (PITI) will be $1,500/month. $1,500 / $6,800 = 22%.

241
Q

John and Tina are purchasing a home using an FHA loan. They are excited because, while the price they agreed to pay is $215,000, they just got word that the appraised value came in at $225,000. What is the minimum down payment that John and Tina must make on this loan?

$7,875
$7,255
$7,525
$3,500

A

The answer is $7,525. FHA loans require a minimum borrower investment of 3.5% That amount is calculated by the lesser of the purchase price or the appraised value.

242
Q

The FHA offers _____ fixed-rate mortgages to qualifying borrowers.

  1. Only 15-year
  2. Only 30-year
  3. 15- and 30-year
  4. Special 20-year
A

The FHA offers 15- and 30-year fixed-rate mortgages to qualifying borrowers.

243
Q

If a broker is preparing to publish an ad to bring in new clients, with which law should he/she be familiar?

TILA
FNMA
FCRA
FACTA

A

TILA

244
Q

Nontraditional credit includes all of the following, except:

  1. Payments to a landlord
  2. Car loans
  3. Electric bills
  4. Telephone bills
A

Car loans

245
Q

An ARM loan has a 4.00% start rate, and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. What is the highest that the interest rate could be after the first adjustment?

9%
7%
5%
Impossible to answer without the margin and index known

A

5%

246
Q

Which of the following is a limit on the amount that the interest rate can change, up or down, on any adjustment date?

Initial rate cap
Periodic rate cap
Lifetime rate cap
Payment cap

A

Periodic rate cap

247
Q

A property is valued at $295,000. The property is subject to a first mortgage and a second mortgage, with a CLTV of 77%. The current balance on the second mortgage is $29,500. What is the approximate amount of the first mortgage?

$256,650
$227,150
$204,435
$197,650

A

First, multiply $295,000 by .77 ($227,150). This figure is equal to the first mortgage, plus the second mortgage ($29,500). Subtract $29,500 from $227,150 to find the amount of the first mortgage ($197,650).

248
Q

The Nationwide Multistate Licensing System and Registry was developed and is maintained by:

  1. The FHFA and CFPB
  2. The CSBS and AARMR
  3. The CFPB and CSBS
  4. The AARMR and CFPB
A

The CSBS and AARMR.

The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR)

249
Q

The Phillips family has a joint gross monthly income of $11,300. The $499 lease payment for their car expires in four months. A student loan that has been deferred will kick in at the end of the year, and payments will be $210 monthly. Joe Phillips pays child support for his children with his first wife in the amount of $2,200 per month, but $600 of that will drop off in four months when his oldest son turns 18. They are buying a new home with a loan that carries a $2,700 a month payment. What is their housing ratio?

29%
24%
38%
41%

A

Housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%

250
Q

A loss payee clause protects whom?

  1. The lender in the event the property is damaged by fire or other risks
  2. The borrower from losing all of his/her investment
  3. The lender in the event the borrower defaults on the loan
  4. The borrower by using mortgage insurance to offset interest rate adjustment
A

The lender in the event the property is damaged by fire or other risks

251
Q

Mortgage insurance premiums are required for:

  1. All conventional loans with an LTV greater than 80%
  2. The first five years of the loan term as long as equity position is less than 20%
  3. All FHA loans
  4. All FHA loans until 20% equity position is attained
A

All FHA loans

252
Q

The Qualified Mortgage Rule applies to which of the following?

  1. Bridge loans of 12 months or less
  2. Open-end home equity loans
  3. Reverse mortgages
  4. Loans secured by non-owner-occupied homes
A

Loans secured by non-owner-occupied homes

253
Q

The priority of liens is based on:

  1. The order of recordation
  2. The newest debt paid first
  3. Lien holders must file for payment after a default
  4. The order of recordation, unless a tax lien or subordination agreement changes the order
A

The order of recordation, unless a tax lien or subordination agreement changes the order

254
Q

Under the GLB Act, a customer relationship is established:

  1. As soon as a borrower inquires about a loan
  2. When the borrower’s loan is funded
  3. Once the loan servicing begins
  4. Upon application
A

Upon application

255
Q

According to the federal guidances on nontraditional lending, all of the following loan programs are considered to be nontraditional, except:

  1. Interest-only
  2. Payment-option ARM
  3. Hybrid ARM
  4. Stated income
A

Hybrid ARM

256
Q

Servicers are required to respond to a _____ from a borrower within five days.

  1. Loan application
  2. Qualified written request
  3. Request for servicing transfer
  4. Notice of rescission
A

Qualified written request

257
Q

Before engaging in a refinance transaction, consumers and mortgage professionals should consider whether the transaction:

  1. Is for a qualified mortgage
  2. Has a tangible net benefit to the loan originator
  3. Has a tangible net benefit to the borrower
  4. Will reach closing in time for the borrower to use the funds as he or she wishes
A

Has a tangible net benefit to the borrower

258
Q

Underwriting of non-qualified mortgages must compute periodic payments that:

  1. Include consideration of periodic rate caps
  2. Do not take periodic rate caps into consideration
  3. Do not take lifetime rate caps into consideration
  4. Include consideration of the value of the dwelling as a borrower asset
A

Do not take periodic rate caps into consideration

259
Q

Conforming loan guidelines generally include DTI ratios of:

26% / 38%
31% / 43%
28% / 41%
28% / 36%

A

28% / 36%

The standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).

260
Q

An underwriter would expect to see _____ in order to document the income of a commissioned borrower.

  1. Two years’ tax returns if the borrower’s commissions represent 20% of his/her income
  2. 1099s from the previous year
  3. Profit and loss statement and two years’ tax returns
  4. Two years’ tax returns and all schedules if the commission income is more than 25% of income
A

Two years’ tax returns and all schedules if the commission income is more than 25% of income

261
Q

For ARMS characterized by figures like “3/1,” “5/1,” “7/1,” or “10/1,” the first number represents _____, and the second number represents _____.

  1. The start rate; the periodic cap
  2. The locked term; the adjustment frequency
  3. The initial cap; the periodic cap
  4. The locked term; the adjustment cap
A

The locked term; the adjustment frequency

262
Q

Annual insurance for USDA/RHS guaranteed loans is:

  1. More expensive than those for private mortgage insurance
  2. Equal to that charged for mortgage insurance for FHA loans
  3. More expensive than the premiums for FHA loans
  4. Less expensive than that charged for FHA loans and for private mortgage insurance
A

Less expensive than that charged for FHA loans and for private mortgage insurance

263
Q

In order to comply with the advertising rules found in Regulation Z, creditors that advertise rates and payments for mortgages must:

  1. Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments
  2. Use model forms
  3. Follow the rules for formatting advertisements that the CFPB prescribes
  4. Disclose all of the terms for the mortgage loan that the creditor is advertising
A

Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments

264
Q

When a mortgage or deed of trust contains a power of sale clause:

  1. The lender can sell the home at its discretion
  2. A judge must enter an order of foreclosure before the home can be sold
  3. The lender may foreclose without first obtaining a court order
  4. The lender is made whole for losses by MIP
A

The lender may foreclose without first obtaining a court order

265
Q

The Loan Estimate must be provided at least how many days prior to consummation?

Seven days
Three days
Seven business days
Three business days

A

Seven days

266
Q

What is the name of the rule that increases requirements for the consideration of a borrower’s ability to repay?

  1. The HOEPA Rule
  2. The Valuations Rule
  3. ATR/QM Rule
  4. The HPML Appraisal Rule
A

ATR/QM Rule

267
Q

Which of the following documents connects the promissory note to the collateral?

  1. Note
  2. Commitment letter
  3. Mortgage
  4. Broker agreement
A

Mortgage

268
Q

The Peterson family is buying a new home and their new P&I payment totals $1,800 per month. Their annual tax bill is $3,000, and their annual homeowner’s insurance premium is $720. The family’s annual income totals $98,520. What is their housing (i.e., front-end) ratio?

22%
32%
36%
26%

A

Add together the $1,800 mortgage payment with the $250-per-month tax payment and $60-per-month homeowner’s insurance payment. Divide that total ($2,110) by the total monthly income of $8,210 (annual income of $98,520, divided by 12), equaling 26%.

269
Q

The practice of intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is known as:

  1. Reverse redlining
  2. Steering
  3. Misappropriation
  4. Redlining
A

Reverse redlining

270
Q

What was the first law that Congress enacted to combat predatory lending?

TILA
Fair Housing Act
HOEPA
RESPA

A

HOEPA

271
Q

Which legislation sets the disclosure requirements for the Affiliated Business Arrangement Disclosure?

TILA
RESPA
ECOA
HOEPA

A

RESPA

272
Q

An upfront mortgage insurance premium is required for _____ loans, and borrowers can pay this amount directly or finance the cost.

VA
USDA
FHA
Conventional

A

FHA

273
Q

A due-on-sale clause requires:

  1. That the loan be paid off if the property is sold
  2. That all moneys be transferred at closing
  3. That consummation take place within 30 days of the date on which the borrower receives the Loan Estimate
  4. That the seller address any issues arising from the home inspection prior to closing
A

That the loan be paid off if the property is sold

274
Q

The URLA is also known as:

  1. The application
  2. The appraisal
  3. The 1004
  4. 4506-T
A

The application

275
Q

A covered loan under HOEPA is commonly known as a:

  1. Non-prime
  2. Non-conventional
  3. Low-cost, high-fee
  4. High-cost mortgage
A

High-cost mortgage

276
Q

When a creditor revises a Loan Estimate, it must deliver the revised disclosure to the loan applicant:

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

No later than four business days prior to consummation

277
Q

A conditional refinance provision might be a feature of what type of loan?

  1. Option ARM
  2. 15-year fixed
  3. Interest-only ARM
  4. Balloon
A

Balloon

278
Q

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

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

Safeguards Rule

279
Q

Marketing campaigns for the solicitation of credit are covered by the provisions of:

  1. GLB
  2. TILA
  3. RESPA
  4. ECOA
A

TILA

280
Q

The implementing regulations for the Home Mortgage Disclosure Act are known as:

  1. Regulation X
  2. HDA
  3. Regulation C
  4. Section 32
A

Regulation C

281
Q

Annual PMI is determined by multiplying:

  1. The loan amount and the interest rate
  2. The mortgage insurance rate and the number of months in a year
  3. The interest rate and the number of months in a year
  4. The loan amount and the mortgage insurance rate
A

The loan amount and the mortgage insurance rate

282
Q

In a transaction for a fixed-rate mortgage to finance a home purchase, the loan applicant should receive:

  1. The CHARM Booklet
  2. Your Home Loan Toolkit: A Step-by-Step Guide
  3. What You Should Know about Home Equity Lines of Credit
  4. The Consumer Handbook on Fixed-Rate Mortgages
A

Your Home Loan Toolkit: A Step-by-Step Guide

283
Q

Which of the following is offered on conventional mortgages?

  1. UFMIP
  2. Guarantee fee
  3. COE
  4. PMI
A

PMI

284
Q

Before accepting a loan that is a high-cost mortgage, borrowers must complete counseling with a counselor approved by:

  1. CFPB
  2. HUD
  3. FTC
  4. HOEPA
A

HUD

285
Q

Once a state licensing agency has provided private or confidential information to the NMLS, what is the status of the information?

  1. Privacy and confidentiality requirements continue to apply
  2. It becomes a matter of public record
  3. It remains confidential only if the state requests it
  4. States do not provide private or confidential information to the NMLS
A

Privacy and confidentiality requirements continue to apply

286
Q

If a lender is comfortable with existing data on a property being used as collateral for a rate and term refinance, what might be permitted?

  1. A waiver of the rescission period
  2. A silent second
  3. A property inspection waiver
  4. A streamline close
A

A property inspection waiver

287
Q

A VA loan that is an IRRRL:

  1. Is a qualified mortgage, but does not have a conclusive presumption of compliance
  2. Is a qualified mortgage, and always has a conclusive presumption of compliance
  3. Is a qualified mortgage, and may have a conclusive presumption of compliance
  4. Is not a qualified mortgage
A

Is a qualified mortgage, and may have a conclusive presumption of compliance

288
Q

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

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

A

The Fair Housing Act and ECOA

289
Q

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

  1. To determine the maximum licensing fees
  2. Initial licensing or license renewal
  3. License suspension, conditioning, revocation, or termination
  4. To determine compliance with state law
A

To determine the maximum licensing fees

290
Q

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

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

Within 30 days of application, if the application is missing required information

291
Q

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

  1. Construction loan
  2. Reverse mortgage loan
  3. Higher-priced mortgage loan
  4. Piggyback loan
A

Piggyback loan

292
Q

Which of the following terms is allowed in a high-cost mortgage?

  1. Terms that permit a payment schedule resulting in negative amortization
  2. An advanced payment
  3. A variable interest rate
  4. A prepayment penalty
A

A variable interest rate

293
Q

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

  1. Home Ownership and Equity Protection Act
  2. Homeowners Protection Act
  3. Fair Credit Reporting Act
  4. Home Mortgage Disclosure Act
A

Home Ownership and Equity Protection Act

294
Q

Regulations in Section 32 of TILA deal strictly with:

  1. The interactions between mortgage professionals and real estate agents
  2. Consumer protections triggered by high-cost loans covered under HOEPA
  3. The amount a borrower should expect to be charged as an annual percentage rate
  4. Licensing standards placed in effect by the Housing and Economic Recovery Act
A

Consumer protections triggered by high-cost loans covered under HOEPA

295
Q

A Loan Program Disclosure must be provided:

  1. For each variable-rate mortgage product available at the time
  2. Only for the product for which the applicant is most likely to qualify
  3. For each variable-rate mortgage product in which the applicant expresses an interest
  4. Only for the product which the lender feels is best for the applicant
A

For each variable-rate mortgage product in which the applicant expresses an interest

296
Q

The chain of title shows:

  1. History of ownership of a property
  2. Any existing liens on the property
  3. Reporting format for an abstractor
  4. Method of perfecting a lien
A

History of ownership of a property

297
Q

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

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

There is a DBA or an AKA

298
Q

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

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

Making a lending decision based solely on the amount of equity in a loan applicant’s home

299
Q

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

  1. Make live contact with the borrower within 36 days of the delinquency
  2. Make written contact with the borrower within 45 days of the delinquency
  3. Make live contact with the borrower within 15 days of the delinquency
  4. Include information on loss mitigation options in written correspondence regarding the delinquency
A

Make live contact with the borrower within 15 days of the delinquency

300
Q

“E-Sign Act” is short for:

  1. The Electronic Signatures Legitimization Act
  2. The Electronic Signatures in Global and National Commerce Act
  3. The Electronic Safety of Giving Net Authorization Act
  4. The Electronic Safety in Global and National Transactions Act
A

The Electronic Signatures in Global and National Commerce Act

301
Q

Which of the following would be subject to the ATR Rule?

  1. A purchase money mortgage
  2. A reverse mortgage loan
  3. A construction loan
  4. A purchase money mortgage made by a housing finance agency
A

A purchase money mortgage

302
Q

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

  1. Frequency of change, caps, index, rate
  2. Rate, caps, index, margin
  3. Frequency of change, caps, index, margin
  4. Rate, index, margin, lifetime cap
A

Frequency of change, caps, index, margin

303
Q

Civil monetary penalties resulting from the failure to report data for HMDA are:

  1. $1,000 per violation, with a maximum of $300,000 in fines annually
  2. Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved
  3. Calculated based on a percentage of total loan amounts of mortgages in violation
  4. $11,000 per violation, but can be increased to $25,000 for willful and knowing violations
A

Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved

304
Q

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

  1. Foreclosure
  2. The borrower losing his job
  3. Forbearance
  4. Down payment
A

Foreclosure

305
Q

On which portion of the loan application would one find a street address and legal description of the property?

Section X
Section XV
Section III
Section II

A

Section II

306
Q

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

Income approach
Cost approach
Market comparison approach
Sales comparison approach

A

Sales comparison approach

307
Q

A rent credit is used in a purchase transaction:

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

When the seller credits a portion of previous rent paid as a source of down payment

308
Q

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

Mortgage liens
Mechanic’s liens
Child support liens
Consensual liens

A

Mechanic’s liens

309
Q

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

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

The mortgage loan originator’s employment history

310
Q

Which of the following types of loans is not a conventional mortgage?

Nonconforming loan
Non-qualified mortgage
FHA loan
Subprime loan

A

FHA loan

311
Q

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

Mortgage
Promissory note
Deed of trust
Closing Disclosure

A

Promissory note

312
Q

HUD will not insure single-family home loans that:

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

Include points and fees in excess of the limit set by the QM Rule

313
Q

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

One year
Seven years
One month
Until removed by the borrower

A

One year

314
Q

Mary is purchasing her first home with an HPML. When her loan officer is reviewing the transaction with her, he tells her that she must establish an escrow account:

  1. Three business days after consummation of the loan
  2. Before consummation of the loan
  3. Before the first periodic payment is due
  4. At the time of consummation
A

Before consummation of the loan

315
Q

The promissory note contains all of the following, except:

  1. A legal description of the property
  2. A provision requiring notices be done in writing
  3. The loan amount
  4. The loan terms
A

A legal description of the property

316
Q

What is the difference between MIP and PMI?

  1. PMI is applicable to FHA loans; MIP is applicable to conventional mortgages
  2. MIP is applicable to FHA loans; PMI is applicable to conventional mortgages
  3. There is no difference between MIP and PMI
  4. MIP is optional; PMI is not
A

MIP is applicable to FHA loans; PMI is applicable to conventional mortgages

317
Q

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

The deed
The note
The mortgage
The TIL

A

The note

318
Q

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

  1. Higher-priced mortgage loan
  2. High-cost mortgage
  3. Reverse mortgage
  4. Negative amortization loan if the loan applicant is a first-time borrower
A

Higher-priced mortgage loan

319
Q

Which of the following correctly demonstrates how to calculate the periodic rate on a mortgage loan?

  1. Annual rate / number of payments in a year = periodic rate
  2. Annual rate × number of payments in a year = periodic rate
  3. Loan balance / annual rate = periodic rate
  4. Annual rate × monthly payment = periodic rate
A

Annual rate / number of payments in a year = periodic rate

320
Q

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

Initial rate cap
Periodic rate cap
Lifetime rate cap
Payment cap

A

Initial rate cap

321
Q

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

Appraisal fees
Seller’s points
Credit reporting fees
Origination fees

A

Origination fees

322
Q

The 1004 is the form number for:

URLA
CSBS
FNMA
URAR

A

URAR

323
Q

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

Regulation B
Regulation Z
FCRA
Regulation C

A

Regulation Z

324
Q

What legislation regulates the proper management of escrow accounts?

FHA
Homeowners Protection Act
Regulation X
HMDA

A

Regulation X

325
Q

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

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

A

Homeowners Protection Act

326
Q

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

TILA
RESPA
HMDA
ECOA

A

TILA

327
Q

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

Section 10
Section 12
Section 6
Section 8

A

Section 8

328
Q

A property is encumbered by two mortgages that have a combined loan-to-value of 90%. The LTV of the second mortgage is 12%. If the value of the property is $500,000, what is the approximate amount of the first mortgage, and is it considered a jumbo loan?

$390,000 and no
$450,000 and yes
$450,000 and no
$405,000 and no

A

The CLTV is 90%, and the second mortgage has an LTV of 12%. This leaves the first mortgage with an LTV of 78%. $500,000 × .78 = $390,000. The value is under the conforming loan limit, so it is not considered jumbo.

329
Q

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

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

Use 5% of the debt as the payment

330
Q

Oversight for FCRA is shared between the FTC and:

Federal Reserve
HUD
TILA
CFPB

A

CFPB

331
Q

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

Underwriting fees
Buy-down fees
Origination fees
Title insurance fees

A

Title insurance fees

332
Q

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

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

The total amount of monthly payments made on long-term debt carried by the consumer

333
Q

For which of the following does rescission not exist?

  1. A refinance of a principal residence
  2. Opening a home equity line of credit
  3. A refinance in which a husband has requested a rescission waiver without his wife’s signature
  4. A purchase of a principal residence with a conventional loan
A

A purchase of a principal residence with a conventional loan

334
Q

The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points?

$4,000
$3,800
$3,600
$2,000

A

$180,000 × 0.02 = $3,600.

335
Q

The term “grossing up” means a borrower’s non-taxed income is allowed to be increased by as much as:

125%
15%
28%
25%

A

25%

336
Q

In which of the following scenarios would it be appropriate to conduct an appraisal using a cost approach?

  1. An appraisal is done on a new home being built for a first-time homebuyer
  2. A borrower wants to refinance his/her primary residence to lower the cost
  3. An investor is having an appraisal done on his/her rental
  4. A buyer is determining the value of a home he/she has under contract
A

An appraisal is done on a new home being built for a first-time homebuyer

S.A.F.E. Exam (5 decks)

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