General Mortgage Knowledge

Question 1

Define Covered Transactions

Answer 1

A closed-end consumer credit transaction secured by a dwelling. These not only include transactions secured by a principal dwelling, but also secured by second homes or investment properties

Question 2

Regarding Balloon Payment Qualified Mortgages, which of these is not a requirement

A. The loan must have a fixed interest rate
B. The loan must have a term that is five years or longer, and
C. The small creditor must hold the loan for three years, unless it sells the loan to another small creditor (selling earlier or selling to a creditor that is not a small creditor will result in the loss of qualified mortgage status)
D. The loan must have a cap of over 3%
E. The creditor must be a small creditor serving a rural or underserved area

Answer 2

D. The cap must be no more than 3% of the loan

Fact: The creditor must also show that it made at least one closed-end first-lien loan in a rural or underserved area during the preceding calendar year, or during either of the two preceding calendar years if the creditor receives an application prior to April 1 of the current calendar year

Question 3

A(n) ____ requires proof that the veteran will be able to recoup all of the fees charged to refinance the loan within 36 months of closing

A. HELOC
B. IRRL
C. Balloon payment loan
D. ARM loan

Answer 3

D. 36 months

Question 4

Until January 10, 2021, a mortgage is a qualified mortgage if it includes the following EXCEPT

A. It has amortizing payments
B. It has a loan term of 30 years or less
C. DTI is less than 44%
D. It has points and fees that do not exceed 3% of the loan amount
E. The loan is eligible for purchase by Fannie Mae or Freddie Mac or is a USDA loan

Answer 4

C. DTI must be 43% or less

Question 5

A conventional mortgage is a mortgage that is insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS) of the U.S. Department of Agriculture (USDA)

True or False

Answer 5

False. It is not

Fact: There are two types of conventional mortgages:

• Conforming loans: They meet the standards for Fannie Mae and Freddie Mac
• Non-conforming loans: They DON’T meet Fannie Mae and Freddie Mac standards, aka “Jumbo Loans”

Question 6

A conforming mortgage maximum loan amount for most one-family properties is __ in most locations, and __ in high-cost areas

A. $485,659/$769,456
B. $562,236/$774,896
C. $510,400/$765,600
D. $456,500/$745,600

Answer 6

C. $510,400 in most locations, and $765,600 in high-cost areas

Question 7

Conforming mortgages have down payment requirements of at least __%. However, lenders often require up to __%

A. 2/5
B. 5/15
C. 5/20
D. 3/20

Answer 7

B. 5% and 20%

Question 8

____ are a paid by the seller and used to cover closing costs, and they do not have to be paid back

A. Seller concessions
B. Seller carry-back
C. YSP
D. Discount points

Answer 8

A. Seller concessions

Fact: Seller concessions are limited to 6% of the sale price for borrowers who make a down payment of 10% - 24.9%. Seller concessions are limited to 3% for borrowers who make a down payment of less than 10%. For down payments of 25% or more, seller concessions are limited to 9%.

Question 9

____ mortgages are mortgages guaranteed or insured by government agencies such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and the Rural Housing Service (RHS) of the U.S. Department of Agriculture.

A. Non conforming
B. Non traditional
C. Non conventional
D. Non conditional

Answer 9

C. Non conventional/government loans

Question 10

The origination of an FHA loan begins with completing a loan application and obtaining a(n)

A. Mortgage insurance protection policy
B. Lender endorsement
C. Mortgage insurance ticket
D. FHA case number

Answer 10

D. FHA case number

Question 11

Although late payments and collections are evaluated more leniently under some FHA lending programs, there is no leniency with regard to delinquent federal debt, such as tax liens and unpaid student loans, or for unpaid child support or judgments

True or False

Answer 11

True

Fact: Seller concessions are limited to 6% of the sale price

Question 12

Borrowers cannot secure an FHA loan without paying UFMIPs (Upfront Mortgage Insurance Premiums) and annual MIPs (Annual Mortgage Insurance Premiums)

True or False

Answer 12

True

Fact: The amount of UFMIP is 1.75% of the base loan amount, which is the amount borrowed before other costs are added to the loan amount

Question 13

For borrowers with new FHA loans, there is a requirement to complete a waiting period of __ days before refinancing their existing FHA loans with a streamline refinance

A. 360
B. 240
C. 140
D. 210

Answer 13

D. 210 days

Question 14

Lenders will generally loan up to __ times a veteran’s available entitlement without requiring a down payment, provided that the veteran is qualified and the property appraisal corresponds to the loan amount

A. Two
B. Three
C. Four
D. Five

Answer 14

C. Four times a veterans entitlement

Fact: The basic entitlement for eligible veterans is $36,000, and those who are seeking to purchase a home in a high-cost area may qualify for a “bonus entitlement” that is an additional $68,250

Question 15

As an origination fee, lenders may charge veterans a flat fee of no more than __% of the loan amount

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

Answer 15

A. 1%

Fact: They must use this fee and cannot charge veterans additional amounts for costs such as the lender’s appraisal and inspection, document preparation, interest rate lock-in fees, escrow fees, mailing charges, and closing or settlement fees.

Question 16

In a VA loan, the funding fee ranges from __% to __% of the loan amount, depending on the type of loan the veteran is obtaining and whether the transaction involves his/her first use of loan eligibility or the subsequent use

A. 1.50/3.5
B. .75/3.30
C. .25/5.0
D. .50/3.30

Answer 16

D. .50% to 3.30%

Fact: The VA funding fee can be financed

Question 17

VA loans are generally made based on a total debt-to-income ratio, or back-end ratio, of up to __%

A. 40
B. 41
C. 42
D. 43

Answer 17

C. 42%

Question 18

Rate change disclosures: creditors or loan servicers must make these post-closing disclosures no less than __ days, and no more than __ days, prior to the effective date of a rate change

A. 20/30
B. 30/60
C. 60/120
D. 60/140

Answer 18

C. 60/120

Question 19

Traditional ARMs guaranteed by the VA typically limit annual adjustment to _% and include a cap of __% on the maximum interest rate increase over the life of the loan

A. 1/5
B. 2/6
C. 1/4
D. 2/7

Answer 19

A. Annual adjustment to 1% and a cap of 5% on the maximum interest rate increase over the life of the loan

Question 20

The disclosures for HOEPA loans are due at least __business days prior to the consummation of a mortgage

A. 3
B. 5
C. 7
D. 15

Answer 20

A. 3 Business days

Question 21

Payoff statements are due within __ business days of receipt of a request for the statement

A. 3
B. 5
C. 10
D. 15

Answer 21

B. 5 business days

Question 22

On high-cost mortgages, late charges may not exceed __% of the amount of the payment past due

A. 2
B. 5
C. 3
D. 4

Answer 22

D. 4% of the amount of the past due payment

Fact: Late payments may not be charged unless a payment is late by at least 15 days

Question 23

Escrow accounts for higher-priced mortgage loans must be established and maintained for a minimum of __ years

A. 3
B. 4
C. 5
D. 6

Answer 23

C. 5 years

Fact: After this five-year period has expired, the consumer may request cancellation of the escrow account; however, this may only occur if the loan’s unpaid principal balance is less than 80% of the original value of the property securing the debt

Question 24

Did you know?

Answer 24

An escrow account is not required for:

• Subordinate-lien HPMLs
• A transaction secured by shares in a cooperative
• A transaction to finance the initial construction of a dwelling
• A temporary or bridge loan with a term of 12 months or less
• A reverse mortgage
• Open-end credit (such as HELOCs), or
• Insurance premiums purchased by the consumer and not required by the creditor

Question 25

Did you know?

Answer 25

The appraisal requirements for HPMLs do not apply to:

• Qualified mortgages
• Transactions secured by a manufactured home
• Transactions secured by a mobile home, boat, or trailer
• Transactions to finance the initial construction of a dwelling
• Bridge loans with terms of 12 months or less, used by a consumer to purchase a new home while selling his/her current principal residence, or
• Reverse mortgages

Question 26

A new manufactured home and land is exempt from the requirement for an appraiser to visit the interior of the home

True or False

Answer 26

True

Fact: A manufactured home “and not land” is exempt from the appraisal requirements if the creditor obtains one of the following documents and provides it to the consumer three days prior to consummation:

• The manufacturer’s invoice (provided that the date of manufacture is no earlier than 18 months prior to receipt of the application for credit)
• A cost estimate for the value of the home from an independent cost service provider, or
• A valuation provided by a person with no interest in the property

Question 27

Did you know?

Answer 27

In some cases, a creditor is prohibited from making an HPML to finance the acquisition of a consumer’s principal dwelling without obtaining two written appraisals prior to consummation. These circumstances include those in which:

• The seller acquired the home 90 or fewer days prior to the consumer’s agreement to purchase it, and the price at which the consumer has agreed to purchase the home is 10% more than the price paid by the seller.
• The seller acquired the home 91 to 180 days prior to the consumer’s agreement to purchase it, and the price at which the consumer has agreed to purchase the home is 20% more than the price paid by the seller

Question 28

A lender is prohibited from releasing more than 60% of the principal limit with the initial disbursement from a HECM

A. 40%
B. 50%
C. 60%
D. 70%

Answer 28

C. 60%

Question 29

Generally, borrowers are allowed to obtain HELOCs up to 85% of the appraised value of the home, less the amount owed on any first mortgage

A. 60%
B. 85%
C. 80%
D. 65%

Answer 29

B. 85%, less the amount owed on any first mortgage