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NMLS Exam Prep > Flash Cards 1-500 > Flashcards

Flash Cards 1-500

1
Q

What law deals with credit, APR, & advertising of consumer loans?

A

TILA/Regulation Z

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2
Q

Which regulation prohibits kickbacks?

A

RESPA/ Reg Z

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3
Q

Which regulation requires the lender to cancel PMI when the loan reaches 78% LTV?

A

HPA - Homeowners Protection Act

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4
Q

Which regulation prohibits fee splitting?

A

Reg X/ RESPA

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5
Q

“X” is the letter used to describe which Regulation?

A

RESPA

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6
Q

What type of mortgage requires a non-refundable funding fee?

A

VA loan

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7
Q

What is the provision in a mortgage enabling a lender to demand full repayment if the borrower DEFAULTS on the loan?

A

Acceleration clause

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8
Q

What is the provision in a mortgage enabling a lender to demand full repayment if the borrower TRANSFERS the loan?

A

Alienation Clause

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9
Q

What does CFPB stand for?

A

Consumer Financial Protection Bureau

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10
Q

What two laws created the CFPB?

A

Dodd-Frank Act and Consumer Finance Protection Act

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11
Q

Which regulation is designed to help meet the Credit Needs of the communities in which it operates?

A

CRA - Community Reinvestment Act

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12
Q

Under ECOA rules and regulations, how many days does the borrower have to request a copy of an appraisal report if the application was denied?

A

90 days

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13
Q

Under ECOA rules and regulations, if an application for credit is denied, and if requested by the borrower - how many days does the lender have to provide a copy of an appraisal report?

A

30 days

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14
Q

If a loan application is approved, under ECOA rules and regulations, when must a copy of the appraisal be provided to the borrower?

A

3 business days prior to the loan closing

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15
Q

Conforming Loan follow guidelines of which regulators?

A

Fannie Mae and Freddie Mac

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16
Q

RESPA is the acronym used to describe which Law?

A

Real Estate Settlements Procedure Act

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17
Q

Which regulation requires the lenders “Be Equal” when extending credit to borrowers?

A

ECOA/ Reg B

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18
Q

How old must a borrower be to qualify for a Reverse Mortgage?

A

62+

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19
Q

Which regulation has the primary function of preventing Identity Theft?

A

FACT Act

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20
Q

Which regulation has Section 114 Rules?

A

FACT Act

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21
Q

Which regulation requires the creditor to verify the Validity of any change of address received?

A

Section 114 of the FACT Act

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22
Q

What is the payment method used in a reverse mortgage tat allows the homeowners to receive a monthly check while living in the property?

A

Tenure Method

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23
Q

What is the fraud scheme where a borrower used someone else’s name to purchase the property, but that person WILL NOT be living in the property?

A

Straw Borrower

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24
Q

What type of lender “insures” mortgages?

A

FHA approved lenders

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25
Q

What type of lender “guarantees” mortgages?

A

VA and USDA approved lenders

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26
Q

What is the entity that loans money to fund purchases in rural areas?

A

USDA/ Department of Agriculture

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27
Q

What is the value remaining in the property after all liens and debts have been paid?

A

Equity

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28
Q

A borrower is refinancing his home. How much time does Reg Z give him to change his mind (rescind)?

A

3 business days

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29
Q

Which regulation established the 3-day right of rescission rule?

A

Reg Z/ TILA

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30
Q

Redlining is part of which Regulation/Law?

A

Fair Housing Act

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31
Q

Blockbusting is part of which Regulation/Law?

A

Fair Housing Act

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32
Q

Steering is part of which regulation/Law?

A

Fair Housing Act

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33
Q

Trying to convince a homeowner to sell his home by implying that another race/ethnicity is moving in the neighborhood is called?

A

Blockbusting/panic selling

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34
Q

Trying to convince a homeowner to purchase in a particular neighborhood based on his race, religion or ethnicity is called?

A

Steering

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35
Q

Refusing to make loans on a property in a certain neighborhood for discriminatory reasons is called?

A

Redlining

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36
Q

What does HOEPA stand for?

A

Home Ownership and Equity Protection Act

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37
Q

HOEPA Loans are part of which larger regulation?

A

Reg Z/TILA

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38
Q

High-cost Loans are part of which larger regulation?

A

TILA/ Reg Z

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39
Q

High Priced Loans are part of which larger regulation?

A

Reg Z/ TILA

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40
Q

Section 32 loans are part of which larger regulation?

A

Reg Z/ TILA

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41
Q

Section 35 loans are part of which larger regulation?

A

Reg Z/ TILA

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42
Q

MDIA Act is part of which larger regulation?

A

Reg Z/TILA

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43
Q

Mortgage Disclosure Improvement Act is part of which larger regulation?

A

Reg Z/ TILA

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44
Q

What is another name for Annual Percentage Rate

A

Effective Rate

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45
Q

What is another name for Interest Rate?

A

Nominal Rate or Note Rate

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46
Q

PITI/Gross income =

A

Housing Expense Ratio (Front End Ratio)

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47
Q

(PITI + monthly debt)/Gross income =

A

Total Obligation Ratio (Back-End DTI)

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48
Q

How long must TILA disclosures be kept?

A

2 years
Loan estimate is 3 years
Closing Disclosure is 5 year

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49
Q

What is the maximum amount of time that Negative info can remain on a credit report?

A

7 years

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50
Q

What is the maximum amount of time that a bankruptcy can remain on a credit report?

A

10 years

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51
Q

Fastest way to remember the ability to repay?

A

MICE DOES

MICE
Monthly mortgage
Income assets
Credit
Employment
DOES
DTI
Other debts
Expenses(taxes/Insurance)
Simultaneous mortgage
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52
Q

Which law/regulation states
that a Bankruptcy can only
remain on your credit for a
MAX of 10 years?

A

FCRA – Fair Credit Reporting Act

Reg V

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53
Q

Which law/regulation states
that negative information can
only remain on your credit
for a MAX of 7 years?

A

FCRA - Fair Credit Reporting Act

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54
Q 
Which law allows a consumer
who has had her credit card used
by an identity thief to place a
credit freeze on her credit
report?
A

FACT Act

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55
Q

Which law requires
creditors to TRUNCATE
debit and credit card info
on receipts?

A

FACT Act

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56
Q 
Which regulation requires that loan
officers must take measures to
secure and dispose of (burn and/or
shred) a borrower’s sensitive credit
information?
A

FACT Act

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57
Q 
Which regulation states
that if a borrower is denied
credit, he can receive a
FREE copy of his credit
report?
A

FCRA – Fair Credit
Reporting Act

REG V

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58
Q

Which regulation states that if
a borrower is unemployed, he
can receive a FREE copy of
his credit report?

A

FCRA – Fair Credit

Reporting Act – Reg V

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59
Q 
Which regulation states that if
a borrower is on SSI or
Disability, he can receive a
FREE copy of his credit
report?
A

FCRA – Fair Credit

Reporting Act – Reg V

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60
Q 
Which regulation states that if
a borrower has been the
victim of fraud, he can
receive a FREE copy of his
credit report?
A

FCRA – Fair Credit

Reporting Act – Reg V

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61
Q 
Which regulation states that a
borrower can receive a FREE
copy of his credit report once a
year (no reason or requirement
necessary)?
A

FACT Act

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62
Q

During the loan process,
if you ask a borrower if
he is single…which law
are you violating?

A

ECOA

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63
Q 
Which regulation states that the
only correct way to ask about a
borrower’s martial status is: are
you married, unmarried or
separated?
A

ECOA

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64
Q

Who is responsible for
providing the closing
disclosure to the
borrower?

A

Lender/Creditor

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65
Q

Who is responsible for
providing the closing
disclosure to the Seller?

A

Settlement Agent/Title Agent

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66
Q

Which regulation
requires the borrower to
receive the Loan
Estimate?

A

TILA

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67
Q

Which regulation
requires the borrower to
receive the Closing
Disclosure?

A

TILA

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68
Q

Which regulation requires
the borrower to receive the
Loan Estimate within 3
business days?

A

RESPA

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69
Q

Which regulation requires
the borrower to receive the
Closing Disclosure within
3 business days?

A

RESPA

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70
Q

As it relates to the loan
estimate – what is the
definition of a Business
day?

A

Any day that the Creditor’s office is open for business

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71
Q

According to TILA/REG Z – what is the definition of a Business day?

A

Any calendar day except for Sundays and Legal Holidays

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72
Q

During the loan process, where do you find HMDA government monitoring information?

A

Section X of the 1003

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73
Q

What does HMDA stand for?

A

Home Mortgage Disclosure Act

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74
Q 
What appraisal approach is
used when appraising
property that has been
destroyed by a natural
disaster?
A

Cost Approach or replacement cost approach

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75
Q

In the sales comparison
approach, how many
comps are required?

A

3 comps

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76
Q

What is another name for the Financial Services Modernization Act of 1999?

A

Graham Leach Bliley Act

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77
Q 
How many days does a
CREDITOR have to notify a
consumer of the status of a
credit application (denied,
approved, need more info)?
A

30 days

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78
Q

Which regulation states that a creditor has 30 days to notify a consumer of an
application approval or denial?

A

ECOA - Reg B

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79
Q

How many hours of Ethics is required to be taught in the 20hr Pre-licensing course?

A

3 hours

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80
Q

How many hours of Ethics is required to be taught in the 8hr Continuing Education course?

A

2 hours

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81
Q

How many hours of Federal Law is required to be taught in the 20hr
Pre-licensing course?

A

3 hours

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82
Q 
How many hours of
Federal Law is required to
be taught in the 8hr
Continuing Education
course?
A

3 hours

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83
Q

A mortgage that includes
more than one parcel of
land is called what?

A

Blanket Mortgage

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84
Q

A mortgage that includes appliances such as a stove or refrigerator is
called what?

A

Package Mortgage

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85
Q

Which closing document itemizes the final closing cost and items paid in
connection with the loan for the borrower?

A

Final Closing Disclosure

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86
Q

Which law deals with APR and Advertising of credit terms?

A

TILA/ Reg Z

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87
Q

What is the official

name for the 3/7/3 rule?

A

MDIA - Mortgage Disclosure Improvement Act

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88
Q

What regulation requires the lender to perform an escrow analysis?

A

RESPA - Reg X

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89
Q

Which law states that it is a
violation to discriminate
against a potential borrower
on public assistance?

A

ECOA

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90
Q

What two classes are protected under Fair Housing Act - but NOT under ECOA?

A

Disability and Familial Status

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91
Q

What three classes are protected under ECOA but NOT under Fair Housing?

A

Age, Marital Status, and Public Assistance

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92
Q

What is another name for

a non-conforming loan?

A

Jumbo Loan

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93
Q

What is another name for a Jumbo loan?

A

Non-Conforming Loan

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94
Q

The front Ratio for an
FHA loan is 31%… what
is the back ratio?

A

43%

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95
Q

The front Ratio for a
Conventional loan is
28%… what is the back
ratio?

A

36%

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96
Q

The Ratio for a VA loan is?

A

41%

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97
Q

What is another name for

the Bank Secrecy Act?

A

Anti-Money Laundering Act

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98
Q

What is another name for
the Anti-Money
Laundering Act?

A

Bank Secrecy Act

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99
Q

Which law requires banks (financial institutions) to keep records of deposits of $10,000 made in cash?

A

BSA/AML - Anti-Money Laundering

Act/Bank Secrecy Act

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100
Q

Which law requires MLOs to file
suspicion activity that might be a sign of tax evasion, money laundering, or other possible criminal activity exceeding $5,000?

A

Anti-Money Laundering Act

Bank Secrecy Act (BSA/AML)

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101
Q

If you fail the test, how long must you wait before retaking the exam?

A

Required 30-day waiting period before retaking a failed test

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102
Q

What does AUS stand for?

A

Automated Underwriting System

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103
Q

What does SAFE Act stand for?

A

Secure and Fair Enforcement Act

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104
Q

What does HERA stand for?

A

Housing and Economic Recovery Act

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105
Q

What does HPA stand for?

A

Homeowners’ Protection Act

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106
Q

What does GLBA stand for?

A

Graham Leach Bliley Act

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107
Q

What type of property is

covered under RESPA?

A

1-4 unit residential property

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108
Q 
Which regulation allows lenders to
OBTAIN information regarding a
borrower’s ethnicity, to help
identify possible discriminatory
patterns?
A

HMDA - Regulation C

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109
Q

When can a borrower request cancellation of PMI?

A

When LTV Reaches 80%

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110
Q

When must the lender automatically cancel PMI?

A

When the LTV reaches 78%

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111
Q

What is the primary market?

A

Where borrowers/consumers

obtain mortgage loans

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112
Q

What is the secondary market?

A

Where lenders buy & sell loans from one another

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113
Q

Name the two
Government Sponsored
Enterprises (GSEs)?

A

Fannie Mae (FNMA) and Freddie Mac (FHLMC)

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114
Q

Which GSE is the
Federal National
Mortgage Association?

A

Fannie Mae

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115
Q

Which GSE is the Federal Home Loan

Mortgage Association?

A

Freddie Mac

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116
Q

TILA applies when credit is payable by written agreement in __ installments?

A

More than 4 installments

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117
Q

Which AUS system does Fannie Mae use?

A

Desktop Underwriter (DU)

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118
Q

Which AUS system does Freddie Mac use?

A

Loan Product Advisor (formerly Loan

Prospector)

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119
Q

How often must National DNC and

internal DNC list be updated?

A

Every 31 days and records must be

maintained for 24 months

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120
Q

An appraisal is valid for __ months?

A

An appraisal is valid for 6 months. It

must be re-certified if the appraisal will be 4 months (120 days) old or more at closing.

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121
Q

What is the penalty for

violating the DNC list?

A

$42,530 per call

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122
Q

Which regulation allows the borrower to sue for 3x’s the amount paid for title insurance?

A

RESPA (Section 9)

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123
Q

If money was collected, and a borrower rescinds, how long does escrow have to return the funds?

A

20 days

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124
Q 
MLOs seeking to become licensed
in other states or who seek to
move from a bank to a non-bank
lender will be allowed \_\_\_\_ days of
transitional (temporary) authority.
A

These individuals are allowed to originate loans while completing any state-specific requirements for licensure such as education or testing for up to “120” days while they are applying to the state agency for their new license.

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125
Q

What is the only fee that can be collected prior to delivery of the Loan
Estimate?

A

Credit Report Fee

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126
Q 
Once an individual is unlicensed for
\_\_\_ years as an MLO, most states
require that the individual retake the
20hrs of pre-licensing education in
order to have his MLO license
reinstated.
A

3 - 5, depending on the state

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127
Q

What law requires that the
equal housing lender
slogan and/or logo be
placed on all advertising?

A

Fair Housing Act

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128
Q

How long does a person have to sue for a violation under the Fair Housing Act?

A

1 year

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129
Q

Once unlicensed for __ years, the individual must retake and pass the
National Exam.

A

5

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130
Q

What is the site where you can receive a free copy of your credit report, according to the FACT Act?

A

AnnualCreditReport.com

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131
Q

The lender must provide the
borrower with a list of then
______ HUD approved
counselors.

A

10

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132
Q

What regulation is designed to protect consumer’s non-public information (NPI)
and how it can and cannot be shared?

A

GLB Act

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133
Q

Which law requires lenders to verify the date of birth, SS# and ethnicity of a person getting a loan in the United
States?

A

US Patriot Act

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134
Q

If you fail the test 3 times, what is the waiting period to retest?

A

180 days (6 months)

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135
Q

Under HMDA, how long must a lender keep the Loan Application Register (LAR)?

A

3 years

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136
Q

What day does your

license expire each year?

A

December 31st

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137
Q

What is the renewal period to keep your

license current?

A

Nov 1 - December 31

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138
Q

What are the two (2) types of mortgages
that require the homeowner meet
with a counselor – to ensure that they
understands how the program works.

A

Reverse mortgages & Higher-Priced (Section 35/HMLS) mortgages.

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139
Q

Which Act requires companies to give

consumers privacy notices?

A

Gramm-Leach-Bliley

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140
Q

Which act was implemented to promote

financial stability and to protect consumers from abusive practices?

A

Dodd Frank Act

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141
Q

What is RESPA Section 6 responsible for?

A

Mortgage Servicing

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142
Q

What is RESPA Section 8 responsible for?

A

Kickbacks, Fee Splitting & Unearned fees

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143
Q

What is RESPA Section 9 responsible for?

A

Title Insurance

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144
Q

What is RESPA Section 10 responsible for?

A

Escrow Accounts (Impounding/Reserve)

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145
Q

What is the max mortgage term (length) allowed for a mortgage to be classified
as a Qualified Mortgage?

A

30 years

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146
Q

Until the loan estimate has been delivered, what fee can a MLO charge?

A

Credit Report

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147
Q

Estimate of charges and terms for settlement services must be available for at least __ business days from the time the Loan Estimate is provided?

A

10

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148
Q

If a new (revised) Loan Estimate is
required because of a changed circumstance, it must be disclosed
and received by the borrower __ days prior to consummation of the loan?

A

Four (4) days!

The “initial” loan estimate is due at or “within” 3 days of the application.

A “revised” loan estimate is due “within” 3 days of the notice of change.

But in ALL CASES, it must be delivered four (4) days prior to consummation!

Because the soonest a loan can close (per the MDIA Act) is 7 days! (3 + 4 = 7)

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149
Q

Flood Insurance must be
purchased from the
__.

A

Flood Insurance must be purchased from the National Flood Insurance Program (NFIP).

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150
Q

The minimum amount of
flood insurance required
for a home in a flood
zone is $_______

A

$100,000

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151
Q

The max amount of flood
insurance required for a
home in a flood zone is
$_______

A

$250,000

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152
Q

The loan estimate must
be retained for how
long?

A

3 years

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153
Q

What does HMDA stand for?

A

Home Mortgage Disclosure Act

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154
Q

What does NOV stand for?

A

Notice of Value

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155
Q

What does CRV stand for?

A

Certificate of Reasonable Value

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156
Q

What does the “R” stand
for in the acronym
NMLSR

A

Registry

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157
Q

What is a Mortgage Call Report (MCR)?

A

Quarterly Report required by MLO

Company and Mortgage Brokers

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158
Q

Loan originator organizations must keep

compensation records for how many years?

A

3 years

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159
Q

Mortgage companies must submit a residential loan origination activity report to the NMLSR every:

A

three months

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160
Q

Which Act specifically

prohibits blockbusting?

A

Fair Housing Act

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161
Q

What law protects homeowners from

foreclosure-prevention scams?

A

Mortgage Assistance

Relief Services

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162
Q 
Which law requires
financial institutions to
keep detailed records of
cash transactions exceeding
$10,000 (withdrawing,
depositing or transporting).
A

Bank Secrecy Act/ Anti-Money Laundering

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163
Q

What type of federal report is filed when

financial institutions detect suspicious activity?

A

Suspicious Activity Report

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164
Q

Which law requires businesses to print only the last five card numbers on a
credit card receipt?

A

FACT Act

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165
Q

What happens if the acceptable variance between the Loan Estimate
and the Closing Disclosure is exceeded?

A

The excess is refunded to the borrower within 60 days

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166
Q

A higher-priced home loan is one that has:

A 
APR exceeds the average prime rate by at least:
- 1.5% for first-lien mortgage
- 2.5% for a first lien Jumbo loan, or
- 3.5% for a subordinate mortgage
lien.
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167
Q

What is the shortest time in which a mortgage purchase loan can close?

A

7 business days

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168
Q 
Which law states that MLOs are
required to report any suspicious
activity exceeding $5,000 that may
be a sign of tax evasion, money
laundering, or other possible criminal
activity.
A

BSA/AML Act

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169
Q 
Denise reviewed her credit report
and discovered a few discrepancies
and would like to dispute them –
once disputed, how long does the
credit reporting agency have to
respond to the dispute?
A

30 days

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170
Q

The Red Flags Rules are also known as:

A

Section 114 Rules under the FACT Act

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171
Q

What law requires ARM borrowers to receive the Consumer Handbook on
Adjustable Rate Mortgages?

A

TILA

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172
Q

Which law requires that the “Know Before You Owe” booklet be given
to the borrower?

A

RESPA

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173
Q

Lenders must maintain an escrow account for higher-priced (Section 35)
mortgages for a minimum of:

A

5 years

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174
Q

What is the Fannie Mae appraisal report form?

A

URAR - 1004 Form

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175
Q

What lien has the highest priority and is paid off first when a property is sold?

A

Property Tax

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176
Q

What document is assigned along with the mortgage?

A

Promissory note

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176
Q

What document is assigned along with the mortgage?

A

Promissory note

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177
Q

What term describes the process of a senior mortgage lien-holder voluntarily changing into a junior mortgage lien-holder?

A

Subordination

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177
Q

What term describes the process of a senior mortgage lien-holder voluntarily changing into a junior mortgage lien-holder?

A

Subordination

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178
Q

What does Ginnie Mae do?

A

Guarantees Ginnie-Mae mortgage-backed securities

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179
Q

Which law requires
lenders to train employees
to recognize the Red Flags
of identity theft?

A

FACT Act

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180
Q

Which law entitles a borrower to a copy of his appraisal report?

A

ECOA

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181
Q

According to the GLB Act, a person who completes a single transaction with a
creditor is known as a customer or a consumer?

A

Consumer

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182
Q

The lowest possible
interest rate for an ARM
loan is known as the:

A

Floor

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183
Q

If an applicant works 30 hours every week and is paid $25.00 per hour, what
is the applicant’s monthly income?

A

$3250.

$25/hr * 30 hours/wk * 52 weeks/yr / 12 months in a year

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184
Q

What law prohibits discrimination in the sale & lease of property?

A

Fair Housing Act

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185
Q

The term “20 basis points” expressed as a percentage is:

A

.2%

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186
Q

The late fee for a conventional loan is:

A

5% of the P&I

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187
Q

A funding fee is required for a:

A

VA loan

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188
Q

The mortgagee is the:

A

Lender

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188
Q

The mortgagee is the:

A

Lender

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189
Q

Who does Fannie Mae hold responsible for the quality of an appraisal?

A

Lender

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190
Q

Which law prohibits discrimination by lenders when extending credit?

A

ECOA

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191
Q 
A property sold for $200,000
and was appraised at
$180,000. The borrower
received a loan for $150,000.
What is the loan-to-value?
A

83.33%

150000/180000

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192
Q

How many days does a lender have to send an adverse action notice?

A

30

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193
Q

The enforcement of a lien is known as a:

A

Foreclosure

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194
Q

What minimum percentage of ownership

qualifies an individual as self-employed?

A

25%

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195
Q

Which law defines the right of rescission?

A

TILA

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196
Q

How long after the application date must

social security payments continue to be received in order to count as income?

A

3 years

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197
Q

Which clause in a mortgage allows a lender to increase the interest rate?

A

Escalation

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198
Q

A VA appraisal is known as a:

A

Certificate of Reasonable Value (CRV) or Notice of Value (NOV)

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199
Q

Which types of loans are meant for rural areas?

A

USDA (Section 502) loans

200
Q 
The purchase price of a home is
$200,000 and the loan amount is
$180,000. The borrower pays 6%
interest with 1 discount point and 1
origination point. What is the cost
of the points?
A

$3600.

$180000 X 2%

201
Q

What is the maximum allowable amount of VA seller concessions?

A

4%

202
Q

The late fee for a VA loan is:

A

4% of the P&I

203
Q

What is the clause in a mortgage that is also known as a “due on sale” clause?

A

Alienation

204
Q

Alimony payments must continue to be received for how long after the application date if they are to be included as income?

A

3 years

205
Q

Credit reports are good for how many days after they are pulled for qualifying purposes?

A

120 days

206
Q

Which law protects an individual’s confidential information?

A

Gramm Leach Bliley Act

207
Q 
The Mortgage Servicing
Disclosure Statement must be
sent to the borrower within how
many business days of receiving
a loan application?
A

3 business days

208
Q

After an escrow account
analysis, money must be
refunded if the over-paid
amount equals or exceeds:

A

$50

209
Q

The maximum escrow
cushion that a lender can
require is:

A

Equal to 2 months (1/6th)

210
Q

The fluctuating economic indicator used

in an ARM is the…

A

Index

211
Q

The Home Mortgage Disclosure Act (HMDA) was implemented by the:

A

Federal Reserve Board

212
Q

Tax liens can be kept in the credit report for?

A

7 years

213
Q

The range of possible credit score is:

A

300-850

214
Q

The Red Flag Rule is concerned with:

A

Identity theft

215
Q

Which type of mortgage is funded by the United States Department of
Agriculture?

A

USDA/502 loans

216
Q

What type of mortgage requires that the lender provide the borrower with the CHARM booklet?

A

Adjustable Rate Mortgages

217
Q

For how many years must a lender retain the Escrow Cancellation Notice?

A

2 years

218
Q

For how many years must a lender retain the Partial Payment Policy?

A

2 years

219
Q

The mortgagor is the:

A

Borrower/Payee

220
Q

Which law (regulation) is designed to create financial stability?

A

Dodd-Frank Act

221
Q

Which appraisal approach is BEST for appraising vacant land, new construction or for unusual or special purpose?

A

Cost Approach

222
Q

What establishes the lien position?

A

Date and time of recording

223
Q

What type of mortgage has a fixed interest rate and increasing payments?

A

Growing equity mortgage

224
Q

A graduated payment mortgage:

A

Has payments that start low and increase over time

225
Q

If there is no minimum monthly
credit card payment, what
percent of the balance is used in
the calculation of monthly debt?

A

5%

226
Q

The Fannie Mae Total Obligations Ratio

(back-end ratio) is:

A

(PITI +monthly debts)/Gross income = 36%

227
Q

A borrower is paid
$3,500 bi-weekly – what
would be considered the
gross monthly income?

A

$7583.33

3500 X 26/12

228
Q

Company or individual who, for a fee, places loans with lenders,
but does not service such loans is called
a __?

A

Mortgage Broker

229
Q

Fannie Mae generally wants how many months of liquid financial reserves after closing?

A

2 months

230
Q

The Penalty for Mortgage Fraud is:

A

$1,000,000 and/or up to 30 years in prison

231
Q

A co-borrower whose income is used to qualify must sign the:

A

Mortgage and the note

232
Q

Which form is used to summarize the

information in the loan package on a FHA loan?

A

Fannie Mae 1008 –

Transmittal Summary

233
Q

An appraisal must be re-certified if it is older than:

A

4 months

234
Q

The most probable price which a property should bring in an open market
is:

A

Market Value

235
Q

The appraisal approach that best applies to vacant land is:

A

Cost Approach

236
Q

The appraisal approach
that best applies to a
school is:

A

Cost Approach

237
Q

Who handles complaints regarding mortgage loan rejections?

A

CFPB

238
Q

What gives someone other than the owner the right to be on the property for a specific purpose?

A

Easement

239
Q

What is a clause in the deed that limits the future use of a property?

A

Deed restriction

240
Q

The MOST COMMON TYPE of legal description for residential subdivisions
is:

A

Lot and block

241
Q

The MOST ACCURATE type
of legal description for
residential subdivisions
is:

A

Metes and bounds

242
Q

What type of funding occurs when a lender obtains funds from a line of
credit at a commercial bank?

A

Warehouse funding

243
Q

The late fee for FHA and VA loans is:

A

4%

244
Q

When a lender sells a mortgage loan to another lender this is called:

A

Assignment of mortgage

245
Q

What type of mortgage fraud

scam occurs when a buyer borrows the down payment from seller without the lender’s knowledge?

A

Silent second

246
Q

What can result in a $1,000,000 fine and 30 years in prison?

A

Acts of mortgage fraud

247
Q 
After loan servicing is transferred,
the new servicer cannot assess late
fees for a period of \_\_\_\_ if the
payment is made to the previous
lender by mistake:
A

60 days

248
Q 
Which document is used in
place of a mortgage to secure the
payment of a promissory note?
(This method is used in many
states.)
A

Deed of trust

249
Q

“APR” means…

A

Annual percentage rate.
This is the cost of credit
expressed as a
percentage.

249
Q

A Reconveyance Clause is:

A 
The method used to transfer title
for a property following full
payment of a loan.
Reconveyance is typically used
with deed of trust.
250
Q

A Subordinate lien is:

A

The same as a second mortgage.

It may also be called a junior lien.

251
Q

What is a mortgage?

A

A legal document that connects a promissory note with the collateral
used to secure the note.

252
Q

A deed is:

A

A legal instrument that conveys title to real property.

253
Q

An amortization schedule is:

A 
A table providing the periodic
payments needed to pay off a
loan by the end of its term. The
payments include principal and
interest.
254
Q

Qualified mortgages may not have Back-end DTI exceeding:

A

43%

255
Q

What is a note?

A 
A legal document that obligates a
borrower to repay a loan. It
specifies the terms by which the
repayment will occur. It may also be
called a promissory note.
256
Q

VA underwriters use a debt ratio of:

A

41%

257
Q

Discount points are paid to?

A

The lender at closing to reduce the note rate of the loan

258
Q

Securitization is used to?

A 
Pool similar types of loans to create
mortgage-backed securities for sale
on the financial market. These
securities are used to create a
renewable source of funds for
lenders.
259
Q

When does “Dry Settlement” occur?

A

Parties meet to execute documents, but funds are not disbursed.

260
Q

When does “Wet Settlement occur”

A

Parties meet to execute documents and funds are subsequently disbursed.

261
Q 
Name four (4) involuntary liens that
could be filed on a property.
A

Tax liens
Mechanics liens
Judgements
Attachments

262
Q

What type of lien is a voluntary lien on

property?

A

A mortgage

263
Q

What is the definition of “Real Property”?

A

Land and anything that is permanently affixed to it.

264
Q 
Tom Brown is a nurse at the local
hospital. He has worked the night shift
for three years and plans to continue this schedule. His base pay is $29.50 per hour with a 5% shift differential. He
averages 35 hours per week. What is his
qualifying income?
A 
Calculate the shift differential first:
$29.50 * 5% = 1.475.
So he gets an additional $1.475 per
hour.
So, $1.475 + $29.50 = $30.975.
$30.975 * 35hrs x 52weeks / 12 =
$4,697.87
265
Q

If the purchase price is $300,000 and the loan amount is $250,000 and the
appraisal value is
$275,000…what is the LTV?

A

90% (250/275)

266
Q 
Suppose the payment is late on a
conventional loan and the monthly
principal is $1,000, the monthly interest
is $500, the monthly taxes are $125 and
the monthly insurance is $25.00…what
is the amount of the late payment?
A

$75 = ($1000+$500) X 5%

267
Q

Suppose the payment is late on a FHA loan and the monthly principal is $1,500, the monthly interest is $150, the monthly taxes are $105, the MIP is $210 and the monthly insurance is $33.00…what is the amount of the late payment?

A

$66 = ($1500 + 150) X 4%

268
Q 
Monthly PITI payments are $1,400
and the borrower’s gross monthly
income is $5,000. His other debts
are $200 a month. What is the
Housing Expense Ratio?
A

28% = $1400/$5000

269
Q 
Monthly PITI payments are $1,400
and the borrower’s gross monthly
income is $5,000. His other debts
are $200 a month. What is the Debt
to Income Ratio?
A

32% = ($1,400 + $200) ÷

$5,000

270
Q

What type of property is NOT covered by RESPA rules and regulations?

A

All cash sales, rental units of more then 4, property 25 acres or more &
commercial property.

271
Q

According to RESPA Section 6 - a servicer must make contact with a
borrower after how many days of a missed payment?

A

36 days

272
Q

A lender/servicer must inform the borrower of the available loss mitigation
options after ___ days of missed payments?

A

45 days

273
Q

Which regulation allows the borrower to sue for “treble” damages?

A

RESPA Section 9

274
Q

What law requires the lender to provide an annual summary of the activity associated with the borrower’s impound account?

A

RESPA Section 10

275
Q

The servicing transfer statement must be provided to the borrower ________ prior to transfer.

A

15 days

276
Q

What are the six (6) items that make a

“complete” application?

A 
PENCIL
Property Address
Estimate value
Name(s) of borrower(s)
Credit/SSN
Income
Loan amount
277
Q

The “Know Before You Owe” disclosure must be provided within _________ days of a complete application?

A

3 days

278
Q

The “Know Before You Owe” disclosure must be provided for what type of transactions?

A

Purchase Only

279
Q

If the application is withdrawn within the first ____days or the lender declines the application within the first _________ days, the lender is NOT required to provide the ____________ to the borrowers.

A

3; 3; Initial Disclosure

280
Q

_____ occurs if the lender chooses the

hazard insurance company when the borrower allows the policy to lapse.

A

Force-placed insurance

281
Q

Which items have a zero (0) tolerance between the Loan Estimate and the
Closing Disclosure?

A

Real estate transfer taxes, loan origination fees, interest rates, appraisal and credit report

282
Q

Which items have a 10% tolerance between the Loan Estimate and the
Closing Disclosure?

A

Government recording fees, title insurance

283
Q

On what document would you find

information regarding the “RATE LOCK”?

A

The Loan Estimate ONLY

284
Q

What is the penalty for violating RESPA?

A

$10,000 and/or up to 1-year in jail

285
Q

Which Regulation is Regulation “Z”?

A

TILA Truth-In-Lending Act

286
Q 
Which disclosure requires that entities
that purchase or acquire mortgage
loans to notify the borrower and
provide the name, address and
telephone number of the new owner
within 30 days of acquisition?
A

Transfer of Ownership Disclosure

287
Q 
The total “interest” being
charged on the loan,
expressed as a percentage
is known as the
\_\_\_\_\_\_?
A

Total Interest Percentage (TIP)

288
Q

If a borrower was not properly notified of his/her right to rescind, how long can
the rescission period be extended?

A

Three (3) years

289
Q

How many copies of the “Right to Rescind” must each borrower receive?

A

Two

290
Q

What law requires that the borrower receive the Right to Recession notice?

A

TILA (Reg Z)

291
Q

What does APOR stand for?

A

Average Prime Offer Rate

292
Q

When is a loan considered a Section 32

(High Cost) Loan?

A

A loan will be considered a High Cost
(Section 32) loan if its APR exceeds the APOR by more than “6.5%” for a first lien or “8.5%” for a subordination lien, or
when the total points and fees payable in conjunctions with the loan exceed “5%” (8% for loans of $20,000 or less).

293
Q

When is a loan considered a Section 35

(High priced) Loan?

A 
A loan will be considered a High
Priced (Section 35) loan if it’s APR
exceeds the APOR by more than
1.5%, 2.5% for jumbo first-lien
loans and 3.5% for subordinate
liens.
294
Q

What type of loans “require” an impound

account?

A

Section 35 High Priced Loans

295
Q

When is the CHARM booklet required?

A

When it’s an Adjustable Rate Mortgage

296
Q

What is the regulation/rule that states that a loan originator cannot receive
Dual Compensation?

A

Loan Originator compensation rule

297
Q

Which law states that a loan originator can only be paid a commission by one source, either the borrower or the lender – but not both?

A

Loan Originator compensation rule

298
Q

If a lender issues a Qualified Mortgage, it is assumed that the borrower
has satisfied what rule?

A

The Ability-To-Repay (ATR) rule

299
Q 
What is the max
debt-to-income ratio
allowed for a mortgage to
be considered a qualified
mortgage?
A

43%

300
Q

What is the max term (length) allowed for a mortgage to be considered
a qualified mortgage?

A

30 years

301
Q 
What is the max
debt-to-income ratio
allowed for a mortgage to
be considered a qualified
mortgage?
A

43%

302
Q

What type of mortgage is not allowed to have toxic features such
as: interest only, negative amortization, no income/no asset income qualifications or prepayment penalties?

A

Qualified Mortgage

303
Q

What law are you violating if you ask a borrower (on a credit application) if he or she is planning to have any more kids in the future?

A

ECOA

304
Q

What law states that married spouses can keep separate credit bureau files,
if requested?

A

ECOA

305
Q 
Which law states that if a Loan
Originator is taking an application
“face-to-face” he/she must complete
the Government Monitoring Section
(Section X) of the 1003 application?
A

ECOA

306
Q

Which law states that an adverse action notice (denial) must be in writing?

A

ECOA

307
Q

If an applicant receives an adverse
action notice – he can request a
statement of “more specific” reason
within _____ of receipt of the notice?

A

60 days

308
Q

ECOA states that creditors cannot
discriminate against the ________ of the borrower’s income, however, they can discriminate against the _____ of the borrower’s income.

A

Source; Amount

309
Q

How long must ECOA records be kept?

A

25 months

310
Q

How long does a consumer have to sue for a violation under ECOA?

A

24 months

311
Q

Which law states that a borrower is entitled to receive a free copy of his
credit score once a year?

A

None. Credit “score” is never free

312
Q

How long do “unpaid” taxes appear on a credit report?

A

Indefinitely

313
Q

How long does a judgment appear on a

credit report?

A

7 years

314
Q

If a consumer has questions regarding

his/her application, who should be contacted?

A

The lender

315
Q

If a consumer has questions regarding his/her credit scores, who should be contacted?

A

The credit reporting agency(ies)

316
Q 
If a consumer is denied credit, what
law states that the credit must
provide the name, address, and
telephone number of the credit
reporting agency used to make the
decision?
A

FCRA

317
Q

What law requires lenders to provide the borrower with the National Credit Score Disclosure, which informs him/her of which credit score was used to approve the mortgage loan?

A

FACT Act

318
Q

What law is the loan originator violating if he leaves the clients file on his
desk at the end of the day?

A

FACT Act

319
Q

If a consumer’s file is no longer needed, what is the proper way to dispose of it?

A

Burn/Shred it

320
Q

What law requires lenders to file monthly reports regarding the ethnicity,
race, and sex of all applicants?

A

HMDA

321
Q 
An individual who obtains or has obtained a financial product or service
from financial institution for person,
family or household reasons is referred
to as a \_\_\_\_\_\_\_\_\_\_\_\_\_
according to the GLBA Act?
A

Consumer

322
Q

An individual/consumer with a
continued relationship with a
financial institution is referred to
as a _______________ according

to the GLBA Act?

A

Customer

323
Q

Gaining information under
false pretense is referred to
as ____________ under the
GLBA?

A

Pretexting

324
Q 
According to the DNC list,
telemarketers (including loan
originators) must search the
national DNC list every
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ days.
A

Every 31 days

325
Q 
A SAR (suspicious activity
report) must be filed by a
mortgage loan originator (MLO)
when a person engages in
suspicious activity of $\_\_\_\_ or more?
A

$5000

326
Q

Which law increases the ability of law enforcement agencies to search
telephone, email, medical and financial records of consumers?

A

US Patriot Act

327
Q

Which law is responsible for the establishment of the anti-money
laundering act?

A

USA Patriot Act

328
Q

Which law was established to identify

and prevent redlining?

A

Home Mortgage Disclosure Act (HMDA)

329
Q

How long must commercial advertising

records be kept?

A

2 years

330
Q

What law was created to prohibit money

laundering and financing of terrorist?

A

USA Patriot Act

331
Q

What is the name of the
document that indicates
the amount that the
Veteran is entitled to?

A

CoE

Certificate of Eligibility

332
Q

What is the maximum flat fee that a lender can charge for a VA loan to
cover lending cost?

A

Lender may charge a flat fee, up to 1% of the loan amount, to cover the lender’s costs.

333
Q

An abusive practice in which a loan is refinanced without any tangible net
benefit to the borrower is called?

A

Loan flipping

334
Q

FHA imposes restrictions
requiring the borrower not
to resale the property for
the first _________ days.

A

90 days

335
Q

FHA requires the lender to investigate the transfer history of property for the ____ before resale, in an attempt to identify potential flipping schemes.

A

3 years

336
Q

What type of loans have PMI (Private Mortgage Insurance)?

A

Conventional loans where the borrower puts less than 20% down
payment

337
Q

What type of loans have Up Front Mortgage Insurance Premium?

A

FHA Loans

338
Q

In a conventional loan, how much of the down payment must come from the borrowers own (personal) funds?

A

5% of the down payment

339
Q

What does the Debt Services portion of the monthly payment include?

A

Debt Services includes the principal and interest portion only (P&I)

340
Q

What is a HECM?

A

Home Equity Conversion Mortgage (aka) a FHA reverse mortgage

341
Q

When is a reverse mortgage due?

A

Borrowers dies, sells the home, or cease to live in the home for 12 consecutive months

342
Q 
What type of mortgage is it
when the borrower is not
required to make a
payment, but the balance of
the loan rises and the
equity shrinks?
A

Reverse Mortgage

343
Q

What type of mortgage is it when the balance continues to grow, even though the borrower is making the full
payment each month?

A

Negative amortization

344
Q 
A type of seller financing in which the
seller finances enough money to cover
the existing loan balance as well as any
additional funds needed from the
borrower is called a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A

Wraparound mortgage

345
Q

What type of mortgage is also called a

self-liquidating mortgage and is designed to pay off the entire balance at the end of the loan?

A

Fully-amortized mortgage

346
Q

A mortgage that is a
combination of fixed and adjustable. For example, 5/25 – is known as a
____________ mortgage?

A

Hybrid Mortgage

347
Q

A written instrument used to convey title or transfer ownership?

A

Deed

348
Q 
The document that protects the
homeowner against defects that
occurred in the past, such as
undisclosed liens, heirs, fraudulent
documents, etc. is called
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_?
A

Title Insurance

349
Q 
A \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ loan is a
short-term cash out loan made on the
equity in the applicant’s current
property in order to allow them to close
on the purchase of a new transaction.
A

Bridge loan

350
Q

The area medium income (AMI) cannot exceed __________ in order to be
approved for a USDA/Section 502 loan?

A

115%

351
Q

What type of loan program provides 100% financing in rural or farm communities/areas?

A

USDA

352
Q

If a credit report doesn’t show the required minimum payment amount, the lender must use __________ for
underwriting purposes?

A

5% of the outstanding balance

353
Q

If a borrower rents a room for $1,500 a month, how much would the underwriter count as income?

A

$1125

75% of 1500

354
Q

If a borrower receives $1,500 a month child support income, how much would the underwriter count as income?

A

$1,875.00

$1,500 x 125% = $1,875

355
Q

If a borrower receives $1,200 a month SSI income, how much would the underwriter count as income?

A

$1,500.00

$1,200 x 125% = $1,500

356
Q

Calculate 3 points if the loan amount is $500,000 and the sales price is
$525,000.

A

$15,000

$500,000 x 3% = $15,000

357
Q

On a conventional loan where the borrower is making a down payment of $20,000, how much of the down payment must be from the borrower’s own funds?

A

$1,000

5% of the down payment must be from the borrower’s own funds. $20,000 x 5% = $1,000

358
Q 
An individual that meets
the definition of a loan
originator, but works for a
bank is called a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_?
A

registered LO

359
Q 
To be approved as a Loan
Originator, a licensee must
not have been found guilty
of any felony in the past
\_\_\_ years.
A

7 years

360
Q 
The only exception to a person
being granted a license if he/she has
been found guilty of a felony in the
past 7 years (or if the felony deals
with money crimes) is if he/she has
received a \_\_\_\_\_\_\_\_\_\_\_.
A

Pardon

361
Q

What are the three (3) protection options each state must have in place for loan originators?

A

Minimum net worth, surety bond or reserve account

362
Q

What is the penalty for

violating the SAFE act?

A

$28,474 as of January 12, 2018

363
Q

When must the borrower receive the Initial Escrow Account Disclosure?

A

Within 45 days after the closing date (if it was not received at closing)

364
Q

When must the borrower receive Affiliated Business Arrangement
Disclosure (AfBA)?

A

When the referral is made (immediately) if not then, prior to doc signing.

365
Q

When must the borrower receive the Privacy Policy Notice?

A

At first contact, and thereafter, once a year as long as he/she remains a
customer

366
Q 
An applicant is purchasing a home for
$100,000 utilizing FHA financing. The
home appraises for $98,000. What is
the minimum dollar amount that the
borrower must contribute as a down
payment on this transaction?
A

$3,430

$98,000 x 3.5%

367
Q

How long would an
unpaid tax lien remain on
a consumer’s credit
report?

A

Indefinitely

368
Q

What is the penalty for knowingly violating the TRID rules?

A

$1,000,000 per day

369
Q

What are the two agencies that created the NMLS System?

A 
AARMR and the CSBS
American Association of
Residential Mortgage Regulators
and the Conference of State
Bank Supervisors
370
Q

Mary wants to obtain FHA insured financing on her primary home. Her housing expense will be $800.65.
She also has the following debt: $192.65 (auto payment) and $40 (credit
account). Based on her debt, what would be Mary’s required stable monthly income to qualify for this loan using the total debt-to-income ratio?

A

$2,403.02.
You MUST know the ratios for FHA to do this problem.
The back-end (total DTI) for FHA is 43%.

$800.65 + 192.65 + $40 = $1,033.30
$1033.30/x = 43%
$1,033.30/43% = x = $2,403.02

371
Q

For an ARM, an introductory rate that is

lower than the fully indexed rate at the time of closing is called a _________ rate?

A

Teaser Rate

372
Q

According to the TRID Rules,
if the Closing Disclosure is mailed to the
borrower, when is it considered received?

A

Three (3) days after it was mailed/sent

373
Q

What is the formula for

calculating the CLTV?

A

(1st mortgage + 2nd mortgage) / the sales price or appraised value (whichever is lower)

374
Q

What is the monthly PMI on a 90% LTV loan for a property valued at
$500,000 if the monthly PMI factor is .60%?

A

$225.00

$500,000 x 90% x .60% ÷ 12

375
Q 
Harold is refinancing his home.
The property appraised for
$260,000, and Harold’s loan
amount is $195,000. What is the
Loan-to-value for this
transaction?
A

75%

376
Q

What is the penalty when a loan applicant makes a false statement on the 1003?

A

May face a five-year jail term

377
Q

3/1, 5/1, 7/1 and 10/1 ARMs; these are examples of what types of mortgage?

A 
These are adjustable rate mortgages, in
which, rate is fixed for three year, five
year, seven year and 10 year periods,
respectively, but may adjust annually
after that.

Also called Hybrid ARMs

378
Q

What is the official

name for the 1003 form?

A

Form 1003 is also known as the
Uniform Residential Loan Application
(URLA).

Freddie Mac also uses the same
application form and is known as the
Freddie Mac Form 65.

379
Q

What is a 1031 Exchange?

A

A tax deferred exchange of “like”
real estate, used to offset or avoid
capital gain tax.

380
Q

What is the name of the form that
the IRS uses to retrieve past tax
returns, W-2, and 1099 transcripts
that are on file with the IRS?

A

4506-T FORM

381
Q

What documents is a
summary of recorded
transactions, concerning
a particular property?

A

Abstract of title

382
Q 
What is the clause/condition in a
mortgage that gives the lender the right
to require immediate repayment of the
loan balance if regular mortgage
payments are not made or for breach of
other conditions of the mortgage?
A

Acceleration Clause

383
Q

Interest earned but not yet paid is

called what?

A

Accrued Interest

384
Q

What is included in Acquisition Costs?

A

Purchase price, plus closing

costs, minus seller credits.

385
Q

What type of mortgage, is a
mortgage in which, the interest rate
is adjusted periodically based on a
pre-selected index?

A

ARM

386
Q

An opinion of market
value as of a specific
date is known as what?

A

Appraisal

387
Q

The date that the interest rate
changes on an adjustable rate
mortgage (ARM) is known as what?

A

Adjustment Date

388
Q

The measurement of the full cost of
a loan, including interest and loan
fees, expressed as a yearly
percentage rate is known as what?

A

APR

389
Q

If there is greater than one percent (1%)
ownership interest of a party in both the
business referring out the service and the business receiving the referral, what
document is required?

A

Affiliated business

arrangement (ABA)

390
Q 
Loan payment, divided into equal
periodic payments, calculated to pay
off the debt at the end of a fixed
period, including accrued interest on
the outstanding balance is known as
what?
A

Amortization

391
Q

What does the Consumer Reporting

Agency (or Bureau) do?

A

An organization that handles the
preparation of reports used by lenders to determine a potential borrower’s credit history.

The agency gets data for these reports from a credit repository and other sources.

The Big 3: Experian, Equifax and Trans
Union

392
Q

What is a Contingency?

A

A condition that must be satisfied,
before a contract is legally binding,
before a sale can close.

Real estate sales contracts often
have a specific date or number of
days, in which, the contingencies
must be removed.

393
Q

The “When Your Home Is In The Line” disclosure is required by which
regulation?

A

TILA

394
Q

What is a Conventional Loan?

A

A mortgage not insured by FHA or

guaranteed by VA.

395
Q

When would a Conversion Clause/Option be used?

A 
A provision in an ARM allowing the
loan to be converted to a fixed-rate at
some point during the term.
Usually conversion is allowed at the end of the first adjustment period.
The conversion feature may cost extra.
Also referred to as a Convertible ARM
396
Q

What is a Conveyance?

A

The transfer of a deed or possibly a lease or mortgage.

397
Q

Covenants, Conditions and Restrictions (CC&Rs) are what type of documents?

A

A document defining the use,
requirements and restrictions of a
property.

398
Q

What is a Credit Report?

A

A report documenting the credit
history and current status of a
borrower’s credit standing.

399
Q 
How long can a registered MLO, who
is transferring from a depository
institution, in order to become a
state-licensed MLO originate
mortgages, prior to completing the
20hr course?
A

120 days (Transitional Authority)

400
Q

What is a CRV?

A

Certificate of Reasonable Value.

A property appraisal performed by a VA-approved appraiser that established the limit on the principal of the VA loan.

401
Q

When should an ARM disclosure be provided to a borrower?

A

Within three days of the application,
whenever an adjustable-rate
mortgage transaction is contemplated. (TILA)

402
Q

Who receives the CHARM Handbook?

A

The Consumer Handbook to
Adjustable-Rate Mortgages (“CHARM”
booklet) must be presented to the consumer within three days of applying for an ARM (adjustable rate mortgage) loan. (TILA)

403
Q

What is an Assessment?

A

A local tax, levied against a property,
for a specific purpose, such as: a
sewer or street lights.

404
Q

The transfer of a mortgage from
one person to another is known as
what?

A

Assignment

405
Q

A document showing the financial
situation-assets, liabilities and net
worth of a person at a specific
point in time is known as what?

A

Balance sheet

406
Q

What is a Basis point?

A

A unit of measure: 1/100th of one
percent

For example, the difference
between a 9.0 percent loan and a
9.5 percent loan is 50 basis
points

407
Q

What is a Bi-weekly

Payment Mortgage?

A

A plan to reduce the debt every two
weeks (instead of the standard
monthly payment schedule). There
are 26 bi-weekly payments a year

408
Q

What is a Blanket Mortgage?

A

A mortgage that covers more than

one parcel of land

409
Q

Bona fide is also known as what?

A

“In good faith” - A “bona fide” offer,

is an offer made in good faith.

410
Q

Who’s considered a Borrower (Mortgagor)?

A

The borrower/mortgagor is the one
who applies for and receives a loan,
in the form of a mortgage, with the
intention of repaying the loan in full.

411
Q

What are Caps (Payment)?

A

Consumer safeguards, which limit
the amount of change to the interest
rate, for an adjustable rate mortgage

412
Q

Who receives a Certificate of Eligibility?

A

The document given to qualified
veterans, which entitles them to VA
guaranteed loans for homes, business
and mobile homes.

413
Q

What is a Certificate of occupancy?

A

Document, issued by local
government agency, stating that a
property meets the requirements of
health and building codes.

414
Q 
What is a Certificate of 
Reasonable Value (CRV)?
A

An appraisal issued by the Veterans
Administration showing the
property’s current market value

415
Q

What is the Chain of title?

A

The chronological order of
conveyance of a property, from the
original owner to the present owner

416
Q

What is a Clear title?

A

A marketable title, free of clouds and

disputes

417
Q

COFI/Cost of Funds Index is used to calculate what?

A

An index used to calculate the rate
of an adjustable-rate mortgage.

The rate adjusts based on a
cost-of-funds index often the 11th
District Cost of Funds.

418
Q

What is Combined Loan-to-Value (CLTV)?

A

The ratio of the total mortgage liens
against the subject property, to the
lesser of either the appraised value or
the sales price

419
Q

Conforming Loans are what type of loans?

A

A mortgage loan under the maximum
amount of loans that FNMA (Fannie
Mae) and FHLMC (Freddie Mac) are
legally allowed to buy

420
Q

When are Construction Loans used?

A

A short-term interim loan to pay for

the construction of buildings or homes

421
Q 
What is the name of the agency who is
enforces laws that protect consumers of
financial products and services such as
mortgages, credit cards and deposit
accounts?
A

CFPB

422
Q

What is a Rate Lock?

A

A commitment issued by a lender, to
a borrower guaranteeing a specified
interest rate and lender costs for a
specified period of time

423
Q 
The Real Estate Settlement
Procedures Act (RESPA) protects who?
A

A consumer protection law, which
requires lenders to give borrowers
advance notice of closing
costs/settlement services.

Also known as Regulation X

424
Q

What is Real Property?

A

Land and everything, which is

Permanently Affixed to it

425
Q

Reclamation is the right of which person?

A

The right of the person, with title to a
property, to recover it from the
debtor in case of a bankruptcy

426
Q

Reconveyance transfers a property to whom?

A

The transfer of property back to the
owner when a mortgage is fully
repaid

427
Q

What is a Recording?

A

The act of entering documents
concerning title to a property into
public records

428
Q

Refinance/Refinancing a loan occurs when?

A

Obtaining a new mortgage loan on a
property, already owned, often to
replace existing loans on the property

429
Q 
Regulation B (ECOA)
is also known as what?
A

The Equal Credit Opportunity Act.

Makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color,
religion, national origin, sex, marital status, or age public assistance program

430
Q

Regulation V (FCRA) regulates what?

A 
The Fair Credit Reporting Act (FCRA)
is a United States federal law that
regulates the collection, dissemination,
and use of consumer information,
including consumer credit information.
431
Q

Regulation Z (TILA) was designed to promote what?

A

The Truth in Lending Act

Designed to promote the informed use of consumer credit, by requiring disclosures about its terms an cost to standardize the manner

432
Q

Rescission gives the homeowner the right to do what?

A

The cancellation of a contract.

433
Q

What is a Reverse Annuity Mortgage

(RAM)?

A 
A form mortgage, in which, the lender
makes periodic payments to the
borrower, using the borrower’s equity
in the home as collateral for and
repayment of the loan.

More commonly called a HECM
(Home Equity Conversion Mortgage)
or simply a Reverse Mortgage.

434
Q

What is a Reverse Mortgage (HECM)?

A

HECM or Home Equity Conversion Mortgage
Reverse mortgages unlock the
equity in the home.

Multiple payout options

435
Q

The Safe Act (2008) was designed for what?

A

The Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act is
designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing
and registration of state-licensed mortgage loan originators.

436
Q

Who issues a Satisfaction of Mortgage?

A

The document issued by the
mortgage when the mortgage
loan is paid in full.

Also called a “release of
mortgage.”

437
Q

What is a Second Mortgage?

A

A mortgage made subsequent to
another mortgage and subordinate to
the first one

438
Q

Who’s part of the Secondary Mortgage

Market?

A

The market, into which, primary
mortgage lenders sell the mortgages
they make to obtain funds to originate
more new loans.

This includes investors such as Fannie
Mae, Ginnie Mae and Freddie Mac.

439
Q

What is a Security?

A

The property that will be pledged as

collateral for a loan

440
Q

A Seller Carry Back is what type of agreement?

A

An agreement in which the owner of
a property provides financing often in
combination with an assumable
mortgage.

441
Q

Who is a Servicer?

A

An organization that collects
principal and interest payments from
borrowers and manages the
borrower’s escrow accounts

442
Q

What is Servicing?

A

All the steps and operations a lender
performs to keep a loan in good
standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

443
Q

What are Settlement/Settlement Costs?

A

Expenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property.
Also called Closing Costs.

Closing costs normally include an originator fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc.

Closing costs will vary according to the area country and the lenders used.

444
Q

Who creates Sweat Equity?

A

Equity created by a purchaser performing work on a property being
purchased

445
Q

A Tax Lien is a claim against what?

A

A claim against a property for unpaid

taxes

446
Q

What is a Tax Sale?

A

Public sale of property, by a
government authority, as result of
nonpayment of taxes

447
Q

A Title shows what?

A

A document, which gives evidence of

an individual’s ownership of property

448
Q

A Total Expense Ratio (back-end ratio/total debt ratio) includes what?

A

Total obligations (PITI + all debt)
divided by the gross monthly income
– expressed as a percentage.

449
Q

What is the law that requires that
the Annual Percentage be disclosed
to a home buyer, shortly after they
apply for the loan?

A

TILA

450
Q 
Evaluating a loan application
package and making the decision,
whether to make a loan to a
potential home buyer, based on
credit, employment, etc is a process
known as?
A

Underwriting

451
Q

What federal legislation allows the borrower to challenge the value stated
in an appraisal report?

A

ECOA – Regulation B

452
Q

Pretexting is prohibited based on what

law/regulation?

A

GLB Act

453
Q

Which regulation states that it is a
violation to discriminate against a
borrower who’s only income is
social security benefits?

A

ECOA

454
Q

What is a Deposit/Earnest Money

Deposit?

A

Cash paid when a formal sales
contract is signed.

The deposit is usually held by a
third party until the sale is
complete.

455
Q

Depreciation happens when?

A

When the value of property declines

456
Q

What are Discount Points?

A 
Prepaid interest assessed at closing
by the lender. Each point is equal to 1
percent of the loan amount (e.g. two
points on a $100,000 mortgage would
cost $2,000).
457
Q

What was the purpose of

the Dodd-Frank Act?

A

-To promote financial stability
-To end “too big to fail”
-To protect taxpayers by ending bailouts
-To protect consumers from abusive
practices
Established the Consumer Financial Protection Bureau (CFPB)

458
Q

Which law requires notification to
the borrower before the servicing of
the loan is transferred to someone
else?

A

RESPA

459
Q

What’s an Encumbrance?

A

A legal right or interest in a
property that affects title and
lessens the property value.

Encumbrances can take the form of
claims, liens, unpaid taxes and so
on.

460
Q

The value remaining in
property after all liens and
debts are considered is
known as what?

A

Equity

461
Q

What type of ARM allows the
borrower to change from an
adjustable rate mortgage to a
fixed rate mortgage?

A

Convertible ARM

462
Q

The FACT Act (2003) was an amendment to what earlier law?

A

Fair and Accurate Credit Transactions Act amended Fair Credit Reporting Act (Reg V).

The act allows consumers to request and obtain a free credit report one every twelve months from each of the three nationwide consumer
credit reporting companies.

The act also contains provisions to help reduce identity theft.

463
Q

A veteran’s entitlement for a VA loan

is specified in what document?

A

CoE - Certificate of Eligibility

464
Q

The APR on a Loan Estimate for a 30-year fixed-rate loan is 6.25% and the APR on the Closing Disclosure is 6.5%. After redisclosure, the borrower must wait _____ to close
the loan.

A

3 days

465
Q 
According to the GLB Act, an
individual who obtains or has
obtained a financial product or
service from a financial
institution is known as a what?
A

Consumer

466
Q

If Martin sells his home five months after
purchasing the property, the sale price must exceed Martin’s acquisition cost by more than _____ to require a second appraisal.

A

20%
A seller who acquired a home within six months of resale and is selling the home for more than 20% of the original acquisition cost must have a second
property appraisal performed on the property.

467
Q

What is the Federal Reserve?

A

The central bank of the United
States and major regulatory
agency for many commercial banks.

Commonly referred to as “The Fed”.

468
Q

Fee simple is what type of ownership?

A

Absolute ownership of real property

469
Q

What is a written agreement between
lienholders on a property that
changes the priority of mortgages,
judgments, and other lien?

A

Subordination agreement

470
Q

What is a First Mortgage?

A

The primary lien against a property

471
Q

A Fixed Rate (Mortgage) has what type of interest rate?

A

An interest rate is fixed for the term

of the loan

472
Q

Flood Insurance is what type of insurance?

A

Hazard insurance

A form of hazard insurance required
by lenders to cover properties in
flood zones

473
Q

What is FNMA?

A

The Federal National Mortgage
Association is a secondary
mortgage institution.

FNMA buys VA, FHA and
conventional mortgages from
primary lenders.

Also known as “Fannie Mae.”

474
Q

What is Forbearance?

A

Grace period given when a lender
postpones foreclosure, to give the
borrower time to catch up on overdue
payments.

475
Q

Foreclosure is known as?

A

Also known as a repossession of

property.

476
Q

Freddie Mac is a nickname for who?

A

Federal Home Loan Mortgage Corp.

477
Q

A Fully Amortized ARM is what type of rate?

A

An ARM

478
Q 
Ginnie Mae (GNMA) is
also known as what?
A

Government National

Mortgage Association

479
Q

Government National Mortgage Association (GNMA) is also known as
what?

A

Also known as “Ginnie Mae.”

Provides sources of funds for
residential mortgages insured or
guaranteed by FHA or VA.

480
Q 
A type of flexible payment
mortgage, where the payments
increase for a specified period of
time and then level off is known as
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A

A Graduated Payment

Mortgage (GPM)

481
Q

Usury is interest charged when?

A

Interest charged in excess of the legal

rate established by law

482
Q

What is a Variable Rate Mortgage (VRM)?

A

Another name for ARM

483
Q 
A document, signed by the
borrower’s financial institution
(BANK), verifying the status and
balance of his/her financial
accounts is known as what?
A

A Verification of Deposit (VOD)

484
Q 
A document, signed by the
borrower’s employer, verifying
his/her position, salary overtime,
bonuses and the likelihood of
continued employment is known as
what?
A

A Verification of Employment

VOE

485
Q

A document, signed by the
borrowers servicer, verifying the
status of the mortgage is called
what?

A

A Verification of Mortgage (VOM)

486
Q

A document, signed by the
borrowers landlord, verifying their
rental/lease payment history is
called what?

A

A Verification of Rent

VOR

487
Q

A Margin is added to
what to determine the
fully-indexed rate?

A

Index

488
Q

What is a Marketable

Title?

A

A title which is free and clear of
liens, clouds or other defects, which
would prevent the sale of the
property.

489
Q

A Mechanic’s Lien is

used when?

A

A mechanic’s lien is a security interest
in the title to property for the benefit of
those who have supplied labor or
materials that improve the property.

The lien exists for both real property
and personal property.

It is considered a cloud on title.

490
Q

MIP (Mortgage
Insurance Premium) is
purchased by whom?

A

Insurance from FHA, to the lender,
against incurring a loss, if the
borrower’s were to default.

Insurance purchased by borrower to
insure against default on a FHA
loans.

MIP protects the LENDER

491
Q

A Monthly Housing

Expense includes what?

A 
Total monthly expense of principal,
interest, taxes, hazard insurance an
mortgage insurance (PITI).

It also includes any HOA (Home
Owners Association) dues. (PITIA)

492
Q

What is a Mortgage?

A

A legal document, which pledges a
property to the lender as security for
payment of a debt

493
Q

The Mortgage Disclosure
Improvement Act (MDIA)
2008 amended what?

A

TILA

Requires disclosures (LE) to be sent to the borrower within three (3) business days after receiving borrowers application.

The loan may not close until after the
seventh (7th) business day after disclosures have been delivered or mailed to the borrower.

494
Q

Who is a Mortgagee?

A

The lender in a mortgage loan

transaction

495
Q

What is Private Mortgage Insurance?

A

Money paid to insure the mortgage
when the down payment is less than
20 percent

496
Q

Who is a Mortgagor?

A

The borrower or homeowner.

497
Q

What is Negative Amortization?

A

When your monthly payments are not
large enough to pay all the interest due on the loan.

This unpaid interest is added to the
unpaid balance of the loan.

If the borrower does not increase
payments, the home buyer will end up
owing more than the original amount of
the loan.

498
Q

A Non-Conforming Loan cannot be sold to who?

A

Fannie Mae and Freddie Mac

499
Q

A Notice of Default (NOD) is given to who?

A

Written notice to a borrower, that a
default has occurred and that legal
action may be taken.

500
Q

What is the Office of

Comptroller Currency?

A

The federal financial regulatory
body, which oversees the nation’s
federally chartered banks and savings
institutions.

NMLS Exam Prep (8 decks)

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