MLO Flashcards
Using the cost approach which of the following factors does an appraiser need to determine the factor of a residential property?
The current estimate of replacing the property
The margin for an adj rate mortgage is set by the?
Mortgage lender/investor
A state licensed mortgage loan originator is defined as any individual who for compensation or gain:
Negotiates loans for a mortgage company
What is the initial monthly payment excluding taxes insurance and mortgage insurance on a $200,000 30 year fixed rate mortgage at 5% with a 10 year interest only option?
$833.33
200,000*5%=10,000/12=833.33
A 5.875% interest only loan has an initial balance of 198,250. The annual homeowners insurance premium is $802. The annual property taxes are $1,592. What is the total monthly payment including the escrow?
$1170.10
198,250*5.875%=11647.187/12=970.598+66.83+
132.66=1170.10
A 5.50% interest only loan has an initial balance of $322,300. The annual homeowners insurance premium is $783 and the annual property taxes are $2,729. What is the total monthly payment including the escrow?
1769.87
322,300*5.50%=17726.5/12=1477.2083+65.25+
227.41666=1769.87
An an acceleration clause:
Gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
If the average prime offer rate is 6% a loan secured by a subordinate lien on a dwelling would be considered a higher priced mortgage loan under the truth in lending act if it’s apr is?
9.5%
Under federal law which of the following documents must be reported to have a clear title when a loan is refinanced and a mortgage is paid off?
Reconveyance or satisfaction
What are the traditional or manual qualifying debt to income ratios used by the FHA?
31/43
According to the real estate settlement procedure act(RESPA) if there are no changed circumstances which of the following fees may not increase after the issuance of the GFE?
The Origination Charge/Fee
The fully indexed rate for an adjustable rate mortgage loan with a current index of 1.45%, a margin of 3.00% with a rounding provision to nearest 1/8th percent is?
4.50%
The fully indexed rate for an adjustable rate mortgage loan with a current index of 1.45%, a margin of 3.00% and NO rounding provision is??
4.45%
The provisions of the truth in lending act do not apply when the????
Credit is primarily for commercial or business purposes
According to regulation Z (TILA) the term business days for the purpose of rescission is defined as all calendar days EXCEPT:
Sundays and Federal holidays
A borrower applies for a 30year mortgage loan of 157,600 at a fixed interest rate of 5.75%. The principal and interest payment on the loan is 919.71 additional expenses include annual property taxes of 1,220 and an annual homeowners insurance payment of 410. If the mortgage insurance factor is .0032 what is the borrowers total monthly payment?
1,097.58 First use 919.71+101.6667+34.1667=1055.54 Then, 157,600*.0032/12=42.03 1055.54+42.03=1097.57
The determination of a borrowers ability to repay the loan is required by?
The Truth in Lending Act(TILA)
A borrower applies for a 30 year mortgage loan of $212,100 at a fixed interest rate of 6.125%. The principal and interest payment on the loan is $1,288.74. Additional expenses include annual property taxes of $1719 and annual homeowners insurance payment of $510. If the mortgage insurance factor is .0078, what is the borrowers total monthly payment?
1,612.36
A mortgage loan originator is allowed to do which of the following?
Collect a loan application fee.
What is the MINIMUM amount of hazard insurance dwelling coverage required by a Fannie Mae/ Freddie Mac loan?
The lower of 100% of the insurable value of the improvements or an amount equal to the unpaid principal balance of the mortgage.
According to the SAFE Act, a mortgage loan originator MUST retake the licensing test if the MLO fails to maintain a license for what period of time, excluding any time the individual was a federally registered MLO?
5 years
The TILA-RESPA Integrated Disclosure Rule only applies to which of the following?
Construction loans
Under the TILA-RESPA Integrated Disclosure Rule, which of the following is considered a valid changed circumstance?
A borrower locks in the interest rate.
Which of the following circumstances requires a creditor to issue a corrected Closing Disclosure and provide the borrower with an additional three day waiting period for closing?
The borrower
According to the Home Ownership and Equity Protection Act of 1994, the total points and fees threshold for a first mortgage loan is equal to what percent of the total principal amount?
8%
Which of the following actions is a violation of the Gramm-Leach Bliley Act?
Obtaining customer information by false pretenses.
The determination of a borrower’s ability to repay the loan is REQUIRED by:
TILA, The Truth In Lending Act
The margin for an adjustable-rate mortgage is set by the:
Mortgage lender/Investor
If the average prime offer rate is 6%, a loan secured by a subordinate lien on a dwelling would be considered a “higher priced” mortgage loan under the Truth in Lending Act if its annual percentage rate (APR) is:
9.5%?????
A 7.25% interest-only loan has an initial balance of 239,500. The annual homeowner’s insurance premium is $551, and the annual property taxes are 1,773. What is the total monthly payment including the escrow?
1640.65
239,500*7.25%/12=1,446.98
551/12=45.9167 1773/12=147.75
1446.98+45.9167+147.75=1640.6467
Which of the following is a warning sign of identity theft for financial institutions according to the Red Flag Rules under the Fair and Accurate Credit Transactions Act of 2003?
Fraud alerts on a consumer report.
If a consumer does NOT exercise the right to rescind a mortgage refinance, the rescission period ends on the:
The 3rd business day following the date of settlement.
By honoring the time period the borrower has to exercise the right to rescind a mortgage refinance, a creditor may fund the loan as of:
Midnight after the third business day following the settlement date.
Which of the following is REQUIRED to calculate the interest per diem for a closing?
The interest rate.
A first lien mortgage is subject to the Home Ownership and Equity Protection Act if it exceeds:
limits on interest rate or fees
Which of the following actions is the BEST example of redlining in mortgage lending?
Having a no-lend policy in a particular area of the community.
Which of the following is NOT considered to be a “dwelling” for the purposes of the Home Mortgage Loan Disclosure Act?
8 Unit Apartment Building
Which of the following is NOT to be included in a borrower’s personal data to be collected under the Home Mortgage Disclosure Act?
Religion
Which of the following is the best description of a balloon loan?
The loan becomes due and payable prior to the end of the amortized period.
What type of loan is a 360/180???
A Balloon Mortgage!!!
Which of the following loan provisions/types is NOT related to construction loans?
Reverse Annuity Payments.
What is the borrower REQUIRED to do after closing on a home equity conversion mortgage loan?
Pay taxes and insurance, but not the principal or interest.
???
What is the MINIMUM age requirement to be eligible for a home equity conversion mortgage loan?
62 years
A payment that neither increases nor decreases the principal balance is known as :
an interest only payment
A loan product where payments do NOT change the principal balance requires the borrower to remit:
An interest only payment
Which of the following is a borrower typically REQUIRED to pay on a construction loan during the construction period?
Interest Only Payments
When funds are desired for building a dwelling, which of the following types of interim financing should a borrower acquire?
Construction loan
With a $10,000 down payment, a buyer obtained an 80% first mortgage on a property worth $200,000. The seller agreed to finance $30,000 over 10 years, which also secured by the property. In this situation, the mortgage financing provided by the seller is known as:
A purchase money second mortgage
The APR of a mortgage loan is BEST described as the:
Cost of credit as a yearly rate!
The New Mexico Mortgage Loan Originator Requirements Regulation defines an independent contractor as any person who is NOT a W-2 employee of a licensed mortgage loan company and is a:
Processor
The percentage used to calculate the up-front mortgage insurance for a 30 year single family FHA purchase loan is:
1.75% of the loan after down payment!! Important***
Under the Truth in Lending Act, which of the following is included in the definition of a “finance charge”????
Upfront Mortgage Insurance. ????
Which of the following statement charges are subject to a 10% section tolerance increase from what a borrower was quoted on the Good Faith Estimate?
Title insurance selected by the lender.
Finance Charge:
Anything that is financed that the bank is going to receive return on in the next 12 months.
On the HUD-1 Settlement Statement, which of the following is a typical impound escrow expense?
Mortgage Insurance Premium
Which of the following statements about an assumption clause is TRUE?
Loan assumption clauses must be disclosed…
FHA and VA are assumable loans!!!
If a borrower’s MAXIMUM allowable debt to income ratio is 40%, monthly non-housing debt obligations are $1,000, and the borrower has a gross monthly income of $10,000, which of the following amounts is available for monthly principal, interest, taxes, and insurance payment?
$3,000
10,000*40%=4000-1000(debt)=3000!!!!
A loan applicant applies for a 30 year mortgage loan of $133,200 at a fixed interest rate of 6.50%. The principal and interest payment on the loan is $841.91. Additional expenses include annual property taxes of $1,488 and an annual homeowner’s insurance payment of$332. If the mortgage insurance factor is .0052, what is the applicant’s total monthly payment?
$1,051.30 841.91 1488/12=124 332/12=27.667 993.577 133200*.0052/12=57.72 993.577+57.72=1051.297
Which of the following does NOT need to be a material disclosure on the Truth in Lending act disclosures?
Total cost at closing.
Finance charge, amount financed, total of payments are all on the TIL!
If information necessary for an accurate Truth in Lending disclosure is unknown at the time of initial disclosure, which of the following actions shall a mortgage loan originator take?
Provide an initial Truth in Lending disclosure based on the best and most current information available, and state that the information provided is an estimate.
Which of the following does NOT need to be disclosed by a creditor in a Truth In Lending Act disclosure?
The borrower’s debt to income ratio.
For a loan subject to the Home Ownership and Equity Protection Act, what is the MINIMUM term for a “balloon payment?”
5 years
According to the Truth in Lending Act, the annual percentage rate disclosure for a variable-rate transaction MUST include which of the following?
Fully Indexed Rate
Which of the following loans is subject to the 3-day right of rescission?
The refinancing of a primary residence
According to the Truth in Lending Act, a consumer may rescind certain transactions involving their principal dwelling if done so by midnight of:
The 3rd business day following settlement
A borrower applies to refinance the existing mortgage on a primary residence. The borrower applies for individual credit, but the property is jointly owned. Which of the following is correct?
A creditor may grant the loan to the borrower provided the creditor gives all the parties the right to rescind.
An individual is not required to be licensed to originate mortgage loans if the individual is compensated ONLY with:
Interest!!!! REMEMBER THIS!!!**
According to the New Mexico Mortgage Loan Originator Licensing Act, a licensed real estate broker is EXEMPT from having a mortgage loan originator license for assisting a purchaser in obtaining financing for a residential mortgage loan if the broker receives a:
Customary real estate commission only
Which of the following accurately describes a telephone solicitation that includes the acceptance of information for a residential mortgage loan application?
Requires a mortgage loan originator license if any compensation is paid.
The term “compensation” includes all of the following fees EXCEPT:
Referral!!!!!!!!
Under the New Mexico Mortgage Loan Originator Licensing Act, which of the following is NOT a normal function of a mortgage loan originator?
Funds residential mortgage loans
The New Mexico Mortgage Loan Originator Licensing Act permits a mortgage loan originator to take which of the following actions?
Transfer funds from a borrower to a licensed mortgage loan company.
According to Regulation Z, which of the following is a Prohibited act?
Advertising rates not currently available to applicants.
According to Regulation Z, which of the following is a PROHIBITED act?
Advertising rates not currently available to applicants.
REG Z = TILA(Disclosures about terms & costs)
Which of the following would be considered to be a “bait and switch” scenario?
A lender calls a borrower on the day of closing to report that the borrower does not qualify, and must close with a different loan program.
A mortgage loan processor may be listed on which of the following?
Verifications of deposits requests.
A “high priced mortgage loan” is required to have which of the following?
An escrow account
A “consumer loan” is credit PRIMARILY extended to a natural person for which of the following purposes?
Household purposes.
A real estate broker advises a mortgage loan originator (MLO) that the seller will provide a second mortgage that will not appear on the HUD-1 Settlement Statement at the time of closing. The MLO should:
determine if the borrower has the ability to repay the loan and disclose the second mortgage transaction to all parties.
Mortgage loan originators are required to display their NMLS unique identifier on which of the following?
Rate Sheets!!!!!
The term “loan processor or underwriter” refers to an individual who performs clerical or support duties at the direction of and under the supervision of?
A state licensed mortgage loan originator.
The funding fee for active duty military or veterans using their certificate of eligibility for the first time and with no down payment on a VA purchase transaction is what percentage of the base loan amount?
2.2%
The FHA loan limit established by the Department of Housing and Urban Development is based on the:
median house price in the area.
On an application for a residential mortgage loan, the originator:
Shall request information on the borrower’s ethnicity, sex, marital status, or age
When making a credit decision the lender may consider all of the following EXCEPT:
The age of an applicant in relation to the maturity date of the proposed loan.
According to the SAFE Act, continuing education courses MUST be reviewed and approved by the:
Nationwide Mortgage Licensing System and Registry
To renew a license, a MLO must do which of the following?
Must not have had a felony conviction within the past 7 years.
According to the SAFE Act, which of the following is REQUIRED to be filed annually with the Nationwide Mortgage Licensing System?
A mortgage call report.
Which of the following federal laws promotes the “informed use of consumer credit by requiring disclosures about its terms and costs?
TILA-Truth in Lending Act
Which of the following would be considered to be a finance charge under the Truth in Lending Act?
Mortgage Broker Fees????
According to the Truth in Lending Act, the term “finance charge” is defined as the:
Cost of credit as a dollar amount.
Which of the following is NOT a characteristic of a covered loan?
Greater than the limits prescribed by government-sponsored entities.
The type of loan where an investor CANNOT force a mortgage lender to repurchase is known as:
Non recourse
When a lien agreement is entered into against a property, and an existing recorded mortgage or promissory note is already in effect, the second lien is considered to be:
Junior
Which of the following terms refers to a settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds?
Table Funding
The settlement agent MUST provide a completed HUD-1 Settlement Statement to the :
Lender, where the lender is not the settlement agent.
The settlement agent MUST provide a HUD-1 Settlement Statement to the:
Borrower and seller
Borrower and seller get HUD-1 too!
The charges to be listed on a HUD-1 Settlement Statement are transmitted to the settlement agency by the:
Mortgage Lender
Which of the following must sign the security instrument?
Any person with an ownership interest in the property.
Which of the following may sign security instruments on a behalf of a borrower?
An attorney in-fact.
Which of the following fees is a prepaid expense item typically found on a HUD-1 Settlement Statement?
Daily interest charges..
Escrow accts are on the HUD-1 taxes, insurance
A note on a conventional mortgage loan discloses the:
Last payment due date
Based on the gross monthly income, one spouse earns $2,000 twice per month, and the other spouse earns $553.85 per week. How much can the couple pay on their monthly mortgage payment if the mortgage lender uses a 28%?
$1792
Add both spouses income which would be $2,0002+553.8552/12=6400
6400*28%=1792
A borrower who applies for a conventional loan receives net social security income of $1,010 a month. The income BEFORE Medicare is deducted is $1,066. The highest income that may be used to qualify the borrower is ????
$1,332
You need to take the income before Medicare (1066) and times is by 25% for the buffer for people who get social security.. 1066*25%=266.50
1066+266.50=1332.5
A borrower who applies for a conventional loan receives net social security income of $811 a month. The income BEFORE Medicare is deducted is $856. The highest income that may be used to qualify the borrower is:
$1,070.
Take the income before Medicare and times is by 25% then add it to the income. So, 856*25%=214
856+214=1070
A homebuyer whose income is $28.36 per hour for a 40-hour week applies for a conventional home loan. The borrower is applying for a mortgage of $152,250 with a fixed rate of 6.25%. The total escrow payment is $186. The borrower has monthly payments of $311 for a car loan, $58 for credit card A, $33 for credit card B, and $55 for a student loan. What is the homebuyer’s total debt ratio?
> > > > > > > > 32.2%
The monthly payment for a fixed-rate mortgage loan with escrow can increase if:
Property insurance increases.
Which of the following would be considered a “finance charge” under the Truth-In-Lending Act?
Mortgage Broker fees???
A title report is obtained to:
Verify Ownership
A potential red flag of mortgage fraud activity is when an applicant states on the loan application:
The property is a primary residence when the he/she lives somewhere else.
Which of the following is 7 months interest on a $180,000 interest only loan at 5%?
$5,250??????
A couple contacts a mortgage loan originator (MLO) and expresses an interest in refinancing a current loan for a lower rate before the couple falls behind on the current adjustable-rate loan. The property value needs to be $300,000 to obtain a better rate. When the MLO receives a copy of the appraisal report, it is determined that the property value is $260,000 and the loan will not be able to continue. What option should the MLO pursue?
Inform the applicants the loan will be denied unless the amount of the loan is reduced.
Using the cost approach, which of the following factors does an appraiser need to determine the value of a residential property?
The current estimate of replacing the property
A state licensed mortgage loan originator is defined as any individual who, for compensation or gain:
negotiates a loan for a mortgage company.
What is the initial monthly payment (excluding taxes, insurance, and mortgage insurance) on a $200,000, 30 year fixed rate mortgage at 5% with a 10 year interest only option?
833.33???
A 5.875% interest-only loan has an initial balance of $198,250. The annual homeowner’s insurance premium is $802 and the annual property taxes are $1,592. What is the total monthly payment, including the escrow?
$1,170.10
??????
A 5.50% interest only loan has an initial balance of $322,300. The annual homeowner’s insurance premium is $783 and the annual property taxes are $2,729. What is the total monthly payment, including the escrow?
$1,769.88?????
An acceleration clause:
Gives a lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Under Federal Law, which of the following documents MUST be recorded to have a clear title when a loan is refinanced, and a mortgage is paid off?
Reconveyance or satisfaction.
What are the traditional or manual qualifying debt-to-income ratios used by the FHA?
31%/43%
According to the Real Estate Settlement Procedures Act, if there are no “changed circumstances,” which of the following fees may NOT increase after the issuance of the Good Faith Estimate?
The origination charge.
The “fully indexed” rate for an adjustable-rate mortgage loan with a current index of 1.45%, a margin of 3.00% with a rounding provision to nearest 1/8% is:
4.50%
The “fully indexed” rate for an adjustable-rate mortgage loan with a current index rate of 1.45%, a margin of 3.00% and no rounding provision.
4.45%
The provisions of the Truth in Lending Act do NOT apply when the:
Credit is primarily for commercial or business purposes.
According to Regulation Z of the Truth in Lending Act, the term “business days” for the purpose of rescission is defined as all calendar days EXCEPT:
Sundays and federal holidays
According to the Home Ownership and Equity Protection Act of 1994, the total points and fees threshold for a first mortgage loan is equal to what percent of the total principal loan amount?
8%?????
If a mortgage loan originator fails to request a hearing concerning actions of the loan originator that are suspected of being fraudulent, the loan originator:
Consents to the issuance of an order in accordance with the notice.
Which of the following is NOT considered a dishonest practice?
A loan originator inadvertently does not include the loan originator’s unique identification number on and advertisement.
(Inadvertently=by accident)
Which federal legislation requires that a credit decision be made within 30 days of application?
ECOA
The Equal Credit Opportunity Act requires that a credit decision be made within 30 days of application.
A borrower signs the note and mortgage for a refinance on his principal residence on Thursday, Dec. 31. What is the earliest day the funds for this loan could be disbursed (assuming no bona fide financial hardship)?
Wednesday Jan. 6
Federal holidays and Sundays do not count toward the three business-day rescission period for loans on principal residences. So, the borrower has until midnight on these three business days after the loan papers were signed; Saturday, Monday, and Tuesday. The earliest the funds could be disbursed would be Wednesday the 6th.
Who is in violation of the Section 8 provisions of RESPA?
a title company who allows a mortgage broker to lease office space at below market rent.
Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally-related mortgage loan. Below market rent is something of value.
Which law allows a consumer who has had her credit card used by an identify thief to place a freeze on her credit report?
FACT Act
The FACT Act has provisions that allow consumers to freeze their credit under certain circumstances, such as when they have experienced identity theft.
Which law requires lenders to give consumers a Loan Estimate of closing costs?
RESPA
One of RESPA’s requirements is to provide consumers with a Loan Estimate of closing costs within three days of applying for a mortgage loan.
Based on 2013 updates to Mortgage Servicing Rules, mortgage servicers are required to establish or make good faith effort to contact borrowers by Day ___ of their delinquency on a loan to inform them of available options to avoid foreclosure.
36
The updates to the mortgage servicing rules state the mortgage servicer is required to attempt to establish contact by the 36th day of delinquency.
Which is NOT a purpose for the Mortgage Servicing Disclosure Statement?
to inform the consumer the likelihood that the mortgage could be sold
All mortgages are sold and the consumer is not affected by the selling of the mortgage. The consumer is only affected if the “servicing” of the mortgage is sold (who the customer makes the payments to).
On the GFE, an average charge calculation must be based on a time period of between ________ and ________.
30 days and 6 months
A GFE may use “average charge” calculations for settlement services if based on the period of time between 30 days and six months, among other conditions.
Which item is NOT required to appear on the Truth in Lending Statement?
interest rate
The Truth in Lending Statement does not require that the interest rate appear since the TIL deals with the total cost of financing, which must be translated into an annual percentage rate.
While it is illegal to ask or consider the race or national origin of an applicant, which federal legislation requires that this information be requested from every applicant to monitor whether discriminatory practices are being used?
Home Mortgage Disclosure Act
The Home Mortgage Disclosure Act requires that the applicant be asked their race or national origin for monitoring purposes.
Which agency manages the National Do Not Call Registry?
Federal Trade Commission
The National Do Not Call Registry is managed by the Federal Trade Commission (FTC), the nation’s consumer protection agency.
A mortgage broker may NOT be compensated for
providing referrals.
That would be a violation. A broker may be compensated for participating in loan closing, taking applications, and verifying property information.
Which rule mandates disclosure to consumers that mortgage relief providers have NO connection to any government program or agency?
MARS Rule
The MARS final rule mandates disclosure to consumers of what the total cost of the mortgage relief services will be, that providers have NO connection to any government program or agency, and that homeowners are free to reject any offer from their lender or servicer with NO requirement to pay a fee to the relief provider.
The SAFE Act mandates specific topics that must be covered as part of a loan originator’s continuing education every year. Which topic is NOT required?
conventional mortgage products
The SAFE Act does not require continuing education on conventional mortgage products but is a topic for prelicensing education.
A telemarketer can be fined how much for calling someone registered on the National Do Not Call Registry?
$16,000
The National Do Not Call Registry includes provisions that a telemarketer can be charged $16,000 for each instance of calling a number that is on the list.
Which federal law requires financial institutions to file reports of cash transactions exceeding a daily aggregate amount of $10,000?
BSA/AML
It is the Bank Secrecy Act/Anti-Money Laundering Act that includes this requirement.
According to the Fair Credit Reporting Act, which situation does NOT entitle someone to a free copy of his credit report?
An applicant was refused credit due to insufficient income.
An applicant is entitled to a free credit report if information in that report resulted in adverse action. Denying credit for another reason does not entitle the consumer to a free copy.
Construction permanent loans
allow for a cash-out in a two-time close if the equity exists.
In a two-time close, since the home is finished and another appraisal may be required, FNMA allows a cash-out, if there is sufficient equity.
A construction loan is categorized as nontraditional under the SAFE Act because it is a type of
short term loan.
Construction loans are short-term loans, with the usual term being between six and twenty-four months. Anything other than a 30 year or less fully amortizing fixed rate loan is considered nontraditional under the SAFE Act definition.
The type of survey done to show the builder where to dig the foundation, walks, and driveways is the
construction survey
Construction surveys are used to show the builder where to start digging for the foundations and other areas such as walks and driveways.
What type of loan is disbursed in stages, according to a preset schedule, to fund a building project?
construction loan
A construction loan is disbursed in stages to pay subcontractors to work on a building project. The final disbursement pays the general contractor his profit.
Someone who, for a fee, places mortgage loans with investors but typically does not service loans is the
broker.
Mortgage brokers do not underwrite or fund their loans, but act as a conduit in residential mortgages.
Dave got a mortgage loan where he pays only interest for the first 5 years, then begins paying both interest and principal for the next 25 years. This arrangement could best be referred to as a(n)
hybrid loan.
Which mortgage clause prevents someone from assuming a loan?
alienation clause
An alienation clause requires the mortgagor to repay the entire balance of the loan if the property is sold, transferred, or otherwise abandoned.
A second mortgage loan that allows the borrower to obtain multiple advances of funds up to an approved amount is known as a(n)
HELOC.
A Home Equity Line of Credit (HELOC) is a mortgage loan (usually in second lien position) that allows a borrower to use and payoff, then use and payoff the loan up to a pre-determined amount. It is just like a credit card but secured by real estate.
Rural Development loans are administered by what government agency?
Department of Agriculture
The Rural Development agency is under the Department of Agriculture.
Which statement about the Federal Reserve is FALSE?
The Federal Reserve sets the prime rate.
The prime rate is the lowest interest rate that banks charge their best commercial customers. The Federal Reserve does not set the prime rate, and the Fed’s actions have no direct effect on the prime rate.
With an adjustable rate mortgage, what happens to a borrower’s payments if interest rates increase?
Payments go up.
With an adjustable rate mortgage, if interest rates climb, the borrower’s payments go up; if interest rates decline, payments go down.
What is the maximum seller concession for an FHA loan?
6%
A seller can pay up to 6% of the sale price toward closing costs, on behalf of the buyer, for a purchase loan.
Which of the following typical causes of delinquency is the most difficult to prove?
addiction
Many times no documentation can be provided for underwriting when investigating a borrower for addiction.
When qualifying a borrower for a loan, what type of loan requires that family size be considered in calculating maximum allowable monthly payment?
VA
VA requires the reporting of residual income based on family size. The larger the number of family members, the more money must be left over for typical expenses other than debt repayment.
A mortgage loan originator must make the settlement charges detailed in a Loan Estimate available for how many business days?
10
The settlement charges in the Loan Estimate must be available for 10 business days.
The acquisition cost of a property is $220,000 (sale price is $215,000 and the closing costs are $5,000) and the loan amount is $200,000. The seller is paying $2,000 of the closing costs. What is the total amount the borrower will need to bring to closing if the earnest money is $1,000 and is being credited on the Closing Disclosure at closing?
$17,000
$220,000 - $200,000 - $2,000 - $1,000 = $17,000.
Who is most generally responsible for completing the accurate final Closing Disclosure once a closing date has been scheduled?
settlement agent
The settlement agent, acting as an escrow agent, is responsible for tabulating all figures from the lender, broker, and government agencies, as well as any items being paid out to creditors.
Which rule prohibits compensation based on loan terms or conditions such as interest rate, annual percentage rate (APR), loan-to-value (LTV)?
Loan Originator Compensation Rule
Compensation based on loan terms or conditions such as interest rate, annual percentage rate, or loan-to-value (LTV) is prohibited under the Loan Originator Compensation Rule.
Gary has a stable monthly income of $4,000 and recurring debts of $600. If he’s getting an FHA loan, what’s the maximum monthly payment for which he would qualify?
$1,120
Using the payment-to-income ratio of 31%, we get $1,240. But using the total debt to income ratio, we find: $4,000 (income) multiplied by 0.43, which equals $1,720. From that, you subtract monthly debts of $600, leaving $1,120.
If the Annual Percentage Rate (APR) is off by more than _____ from the initial GFE, the Truth in Lending (TIL) Statement must be redisclosed to the borrower.
125%
If the Annual Percentage Rate (APR) increases more than .125% from the initial disclosed APR, the Truth in Lending (TIL) statement must be redisclosed. This is commonly referred to as the 3/7/3 rule.
If a buyer buys a $100,000 home and gets an $80,000 mortgage loan at an interest rate of 8%, how much is 4 points?
$3,200
A point is 1% of the loan amount, so $80,000 x .01 = $800 per point. Four points is $3,200 (800 x 4).
Credit scoring refers to the
numerical values the credit agency assigns to a creditor.
Credit scoring involves the credit agency assigning specified numerical values to different aspects of the borrower. These numbers may be adjusted up and down based on the strength or weakness of a particular borrower’s qualification.
A buyer of a house with a sales price of $150,000 is paying a $30,000 down payment and three discount points on the $120,000 loan. What is the total cost of the discount points?
$3,600
The discount points are figured as 1% of the total loan amount ($120,000) not the sales price. Each discount point costs the borrower $1,200. Three discounts points costs the borrower $1,200 x 3 equals for a total of $3,600.
Under the provisions of the interim final rule on Valuation Independence, which would NOT be prohibited?
obtaining multiple valuations and selecting the most reliable
Under the interim final rule, it is acceptable to obtain multiple valuations and select the most reliable.
Alice’s loan applicant calls her late in the evening before the closing, informing her he is being laid-off the coming Monday. All the loan papers are at the title company and the HUD-1 statement is approved. The buyer stills wants the home. Alice decides to let the loan close; otherwise, the buyer would be homeless. What type of fraud is this?
material omission
By Alice not alerting the lender that the borrower has had a change of employment status, she has committed a material omission.
Betty is a loan processor for ABC Mortgage Corp. and is not licensed as a loan originator. Which of the following activities would be illegal for her to engage in?
giving advice to a borrower about which loan program is most appropriate
Unless Betty is licensed as a mortgage loan originator, it is illegal for her to advise borrowers about loan programs.
Protected classes under the Fair Housing Act include race, color, national origin, sex, disability, religion, and
familial status.
The Fair Housing Act prohibits discrimination in housing based on “race, color, religion, sex, national origin, disability, or familial status in the sale or lease of residential property.”
Rufus knows that his credit is bad, but he really wants to buy a house. He convinces his cousin Ruth to apply for a loan, knowing she will be able to get better terms. Rufus promises Ruth that he will pay the full mortgage amount every month. Ruth could be considered a/an
straw buyer.
A buyer who has no intention of living in the property he or she fraudulently mortgages could be considered a straw buyer. While this situation may seem okay, since it’s just one relative helping out another, it’s still misrepresentation and, therefore, fraud.
When taking a mortgage loan application, what may a mortgage loan originator NOT ask the applicant?
Do you receive any child support?
Creditors taking an application may only ask, “Is there additional income you would like to use as a basis of repaying this obligation?” The customer is not required to disclose child support or separate maintenance income.
Unintentional breach of a legal duty is unethical and is considered
negligence.
Negligence is an unintentional breach of a legal duty.
Lucy and Ricky have both worked as mortgage loan originators for five years. They decided to start a mortgage brokerage and called it Babalu Mortgage Corp. They are not making enough money yet to hire a processor and prefer to spend their time selling. What is their best solution?
use a third party processing company
A third party processing company is the best solution to this situation.
Which mortgage industry insider is LEAST LIKELY to be involved in a fraud scheme using inflated property values?
title company officer
A title company officer is generally responsible simply for preparing documents for closing. An inflated appraisal scheme would be more likely to involve someone who wants to hit a specific property value, such as an appraiser, a mortgage broker, or a real estate agent.
Which industry insider would be the one most likely to falsify a deed?
government worker
Government workers participate in mortgage fraud by falsifying deeds and other records.
What may an underwriter use as a basis of approving a mortgage loan application?
likelihood of continued income
Underwriters may not base the decision to approve a loan on race, sex, age, national origin, marital status, or receipt of public assistance.
The unlawful act of steering is
channeling buyers to certain neighborhoods based on their race or ethnic background.
Steering is the discriminatory practice of channeling buyers to certain neighborhoods based on their race or ethnic background.
Under regulatory laws, it is considered a predatory practice for a loan originator to
delay closing of any mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower.
Any lender who delays the closing of any mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower is guilty of predatory practice.
A nontraditional loan is defined by the SAFE Act as
anything other than a 30-year or less fixed rate loan.
The SAFE Act defines a nontraditional loan as anything other than a 30-year or less fixed rate loan.
The national database that tracks mortgage industry licensees and their licenses is the
NMLS.
The Nationwide Mortgage Licensing System and Registry was developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, and was initiated as part of the SAFE Act.
A background check for a loan originator license would NOT include
a medical history.
The medical history of an applicant would not be considered for determination of the issue of a license.
All are characteristics of a home equity conversion loan EXCEPT for
low initial payments based on a fixed introductory rate that expires after a short period and then adjusts to a variable index rate plus a margin for the remaining term of the loan.
Low initial payments on a fixed introductory rate that expires after a short period of time is a characteristic of a type of adjustable rate mortgage associated with non-prime loans. All the other choices are characteristics of a home equity conversion loan also referred to as a reverse mortgage loan.
The SAFE Act requires state-licensed originators to have a minimum of how many hours of approved prelicensing education?
20
The SAFE Act requires a minimum of 20 hours of prelicensing education. Some states require additional hours of prelicensing instruction.
Which language in an advertisement placed by a mortgage broker would NOT be prohibited?
“5% APR available to qualified applicants!”
Stating the APR in an advertisement is allowed. Using any of the other statements in advertisements would constitute violations under fair advertising guidelines.
Fingerprint images are required of every applicant as part of an initial loan originator application in order to.
conduct a criminal background check.
Fingerprint cards are required in order to conduct a criminal background check. The applicant must register to obtain a unique identifier from the Nationwide Mortgage Licensing System and Registry (NMLS).
Licensed mortgage lenders are required to keep the money for any escrow accounts they maintain for borrowers
in a separate special account not comingled with any other business funds.
All monies required by a mortgage lender to be paid by borrowers in escrow to defray costs must be kept in separate special account that is segregated from all other accounts of the lender and may not be commingled with any other funds.
A borrower is defined as any person who
is obligated to repay a mortgage loan.
A borrower is any natural person obligated to repay a mortgage loan, including the co-borrower or co-signer.
The SAFE Act
establishes minimum standards for licensing and registering mortgage loan originators.
The SAFE Act establishes minimum standards for licensing and registering mortgage loan originators.
In order to ensure a loan closes, a mortgage loan originator conceals the fact that the down payment is made with borrowed funds. This could be considered
actual fraud.
If the broker decided to ignore a critical fact, he could be accused of actual fraud.
Which occurrence WOULD NOT require the licensee to file a written report with the state regulatory authority?
Marsha, a licensed mortgage loan originator, is cited for driving while intoxicated.
While it is indeed a serious offense that may result in other lawful consequences, Marsha’s citation for a traffic violation would not require filing a written report with the state regulatory authority. A written report describing the event and its expected impact on the activities of the licensee in this state must be after the filing for bankruptcy or reorganization by the licensee; the institution of revocation or suspension proceedings against the licensee by any state or governmental authority; the denial of the opportunity to engage in business by any state or governmental authority; any felony indictment of the licensee or any of its officers, directors, or principals; or any felony conviction of the licensee or any of its officers, directors, or principals.
An individual’s act is “for compensation or gain” only when that individual
receives anything of value.
An individual act is for compensation or gain if the individual receives in connection with the individual’s activities anything of value, including, but not limited to, payment of a salary, bonus, or commission. The concept anything of value is interpreted broadly and is not limited only to payments that are contingent upon the closing of a loan.
Which topic is required to be included as part of the 8 hours of a MLO’s annual continuing education for license renewal?
ethics
MLOs are required to complete 8 hours of approved continuing education to renew their license. At least 3 hours must be related to ethics, 3 hours on federal laws and regulations, and 2 hours on nontraditional mortgage products.
A Mortgage lender is any person who
makes a residential mortgage loan OR lends money secured by a mortgage or deed of trust.
Any person who makes a residential mortgage loan or holds himself or herself out as able to make a residential mortgage loan or who in the regular course of business lends money that is secured by a mortgage or deed of trust. Any person who assumes responsibility for servicing and accepting payments for a mortgage loan is considered a mortgage servicer. Any person who communicates with customers to obtain basic administrative information necessary to process a residential mortgage loan is considered a mortgage processor or underwriter. Any person who for compensation or gain solicits, places, or negotiates mortgage loans for others is considered a mortgage broker.
How often may the state regulatory authority investigate a mortgage licensee’s books, accounts, records, and files?
at any time
The state regulatory authority has the right to investigate a licensee’s books at any time.
If a loan originator or real estate agent suggests to a client that he move to a particular area to reside in a community that he will fit into, that loan originator or real estate agent would be guilty of
steering.
This scenario describes the illegal practice of steering.
Which fee is NOT permitted to be included in a high cost loan?
loan modification fee
Charging a fee for loan modification or deferral of payment is prohibited. The other fees may be included as finance charges.
A mortgage loan originator assists a consumer by:
Advising on loan terms.
A mortgage loan originator licensee is not required to
Perform clerical or administrative tasks
When a sales contract is reviewed, which of the following is a cause for concern about the legitimacy of the transaction?
All parties did not sign the contract.
Which type of loan has a residual income qualification test?
VA!!
A mortgage loan originator is limited to concurrent employment with:
One mortgage loan company.
After a loan application has been made, if a mortgage loan originator receives income documentation from a borrower used in the decision of whether or not to extend credit, a copy of the documentation MUST be maintained in the loan file:
For 6 years!
A person may engage in the business being of a mortgage loan originator by first doing all of the following EXCEPT:
Being licensed as a mortgage broker.
If a mortgage loan originator communicates via electronic mail with any party regarding a loan transaction, the correspondence MUST be:
Maintained as part of the loan file.
According to the Mortgage Loan Company Act, when the Director issues a temporary cease and desist order against a mortgage loan company , the Director will:
Promptly notify the loan company in writing.
An independent loan processor or underwriter may engage in residential mortgage loan origination activities if the loan processor or underwriter:
Is a licensed mortgage loan originator.
How long does a lender have to cure a tolerance violation?
within 30 calendar days after settlement
RESPA allows lenders to cure the tolerance violation by reimbursing to the borrower the amount by which the tolerance was exceeded, at settlement or within 30 calendar days after settlement.
A borrower elects to buy down the interest rate on his mortgage loan. This appears on the Loan Estimate as a:
Charge to the borrower
A buydown such as this is money out of the borrower’s pocket at closing, so it appears on the Loan Estimate as a charge.
Which statement about loan origination fees on a Loan Estimate is FALSE?
Lender and mortgage broker fees for the same transaction must be itemized.
Actually, the fees for the lender and mortgage broker are not itemized; they must be shown as a lump sum.
A mortgage loan originator is NOT required to provide a Loan Estimate if the borrower:
Withdraws the application before the end of the three business day period.
If the applicant withdraws the application or the lender turns down the loan before the end of the three business-day period after application, RESPA does not require the loan originator to provide a Loan Estimate.
Your applicant receives child support for her seven-year-old son. Can you gross up the child support payments she receives?
Yes, gross up all net income if it is verified and likely to continue for three years.
Since child support is paid after taxes, once you have established that this income is likely to continue for three years it should be grossed up. Using Nontaxable Income to Adjust the Borrower’s Gross Income- The lender should give special consideration to regular sources of income that may be nontaxable, such as child support payments, Social Security benefits, workers’ compensation benefits, certain types of public assistance payments, and food stamps. The lender must verify that the particular source of income is nontaxable. Documentation that can be used for this verification includes award letters, policy agreements, account statements, or any other documents that address the nontaxable status of the income. If the income is verified to be nontaxable, and the income and its tax-exempt status are likely to continue, the lender may develop an “adjusted gross income” for the borrower by adding an amount equivalent to 25% of the nontaxable income to the borrower’s income.
Which of the following is an acceptable condition on which to base a mortgage loan originator’s compensation?
A fixed percentage of the loan amount.
The new Federal Reserve Mortgage Loan Originator Compensation Rule prohibits a MLO from being paid based on any loan terms other than the loan amount. Any payment based on the fees or costs or other such loan terms is illegal.
What information is a mortgage loan originator NOT allowed to ask a borrower who is applying for a home mortgage?
Receipt of public assistance
A mortgage loan originator may not ask a borrower if the source of income is public assistance. The other issues may be asked in order to comply with the Home Mortgage Disclosure Act.
“Higher-priced loans” are defined by which law?
TILA
The Mortgage Disclosure Improvement Act, which defines higher-priced loans, is an amendment to the Truth in Lending Act.
A mortgage broker hands the borrower a Loan Estimate in his office the day after the application was completed. The broker can charge the borrower for an appraisal:
That day.
The mortgage broker may charge additional fees once the applicant has received the Loan Estimate.
Each of these loans would be considered nontraditional EXCEPT a:
30 year fixed rate loan.
A nontraditional mortgage loan is defined as anything other than a 30-year or less fixed rate loan.
A mortgage loan originator who supplies a revised Loan Estimate to a borrower must maintain the related documentation for at least:
3 years
RESPA requires loan originators to document the reason for the revised Loan Estimate and then retain that documentation for no less than three years after settlement.
The Homeownership Equity Protection Act does NOT require a lender to verify a borrower’s ability to repay the loan if the:
The loan is a temporary or a bridge loan for 12 months or less.
Certain loan programs are exempt from ability to repay requirements, including bridge loans, time-share plans, reverse mortgages and open end credit plans.
How soon after a borrower is provided with all required disclosures may a loan close?
On the 7th business day after the disclosures were provided.
The amended Truth in Lending Act requires a 7-business day waiting period before a loan can close.
Each of these loans would be excluded under the definition of a higher-priced loan EXCEPT:
A purchase loan
A purchase loan, if it meets the mandated triggers, could qualify as a higher-priced loan under the Mortgage Disclosure Improvement Act.
A mortgage broker rents office space from a title company at a discount in exchange for referring customers for settlement services. Which federal law does this arrangement violate?
RESPA
This would be considered a kickback or thing of value, and it is prohibited under Section 8 of RESPA.
At what point can a lender collect a loan origination fee?
three business days after mailing the required disclosures.
An origination fee may not be collected until the third business day after mailing the required disclosures.
Which act provides a specific definition of a nontraditional loan?
Mortgage Disclosure Improvement Act
The SAFE Act provides a definition of nontraditional mortgage products and requires prelicensing and continuing education on this topic.
In order for a junior mortgage on a primary residence to be considered a higher-priced loan, the APR(Annual Percentage Rate) Relationship between the cost of borrowing and the total amount financed, represented as a percentage. must exceed the applicable average prime offer rate by at least:
3.5%
The Mortgage Disclosure Improvement Act defines a higher-priced junior mortgage loan as one that exceeds the applicable average prime offer rate by at least 3.5%.
Which fee can be collected prior to delivery of a Loan Estimate and Closing Disclosure?
Credit Report Fee
Mortgage loan originators are forbidden from imposing or collecting any fee–other than a credit report fee–prior to delivering the required disclosures.
A loan on a borrower’s primary dwelling where the APR(Annual Percentage Rate) Relationship between the cost of borrowing and the total amount financed, represented as a percentage. exceeds at least 1.5% of the applicable average prime offer rate for a first lien loan is known as a:
Higher-priced loan
This is a higher-priced loan as defined by the Mortgage Disclosure Improvement Act.
Which cost would be included in the APR(Annual Percentage Rate) Relationship between the cost of borrowing and the total amount financed, represented as a percentage. calculation on the TIL integration forms?
Mortgage Insurance
The APR reflects the total cost to borrow money. Mortgage insurance is one of those costs, but the others are merely costs associated with buying property, not necessarily with a mortgage, and so would not be part of the APR calculation shown on the Truth in Lending Statement.
A person must have a mortgage loan originator license to:
Discuss loan terms with a potential borrower.
An individual must be approved as a mortgage loan originator in each state the loan originator:
Offers or negotiates the terms of a residential mortgage loan for compensation.
According to the state regulatory statute, a mortgage loan originator may do which of the following?
Assist borrowers in completing the mortgage loan application.
A mortgage loan originator is permitted to take which of the following actions?
Accept the mortgage application from the borrower.
According to the SAFE Act, a mortgage loan processor or underwriter must obtain a state mortgage loan originator license if the loan processor or underwriter performs clerical or support duties:
And is an independent contractor.
Which of the following BEST describes the services provided by a mortgage loan originator?
Taking a residential mortgage loan application or negotiating the terms of the loan for compensation.
A natural person employed by a mortgage loan company who takes a residential mortgage loan application for compensation is a:
mortgage loan originator.
Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting equity stripping and other abusive practices in connection with “high-cost” mortgages?
HOEPA
The Home Ownership and Equity Protection Act (HOEPA), a 2002 amendment to the Truth in Lending Act, establishes disclosure requirements and prohibits deceptive and unfair practices in lending. HOEPA also establishes requirements for certain loans with high interest rates and/or fees.
To comply with the Bank Secrecy/Anti-Money Laundering Act, financial institutions must keep records of any
Cash purchases of negotiable instruments.
When taking an application for a mortgage loan, what are creditors NOT permitted to ask?
Do you receive child support?
Which is NOT regulated by RESPA?
Racial Discrimination
Racial discrimination is prohibited by the Civil Rights Act and the Fair Housing Act. RESPA is concerned with real estate settlement procedures.
The Privacy Rule of the Gramm-Leach-Bliley Act requires financial institutions to provide the borrower with a Consumer Privacy policy
Before disclosing information to non-affiliated 3rd parties.
The Privacy Rule of the GLB Act requires that financial institutions provide the borrower with a Consumer Privacy policy before disclosing information to a non-affiliated third party.
Who does NOT share responsibility for enforcing the provisions of the National Do Not Call Registry?
Federal Reserve Board
The Federal Reserve Board has no enforcement authority over the National Do Not Call Registry.
Which law ensures that some borrowers have the right of rescission for three business days after a loan contract is signed?
Reg Z
Regulation Z or the Truth in Lending Act ensures that some borrowers have the right of rescission for three business days.
While it is unlawful to consider race when underwriting a loan, what federal legislation requires that this information be included on the loan application?
HMDA
The Home Mortgage Disclosure Act requires that this information be reported in order to determine whether discriminatory practices are being used.
Which act requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application?
ECOA
The Equal Credit Opportunity Act or ECOA requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application.
Which federal act created the Consumer Financial Protection Bureau?
Dodd Frank Act
Title X of the Dodd-Frank Act creates the Consumer Financial Protection Bureau (CFPB) as an independent entity with rule-making and enforcement authority over many consumer financial laws.
Which law prohibits discrimination based on sex, race, age, national origin, marital status, and source of income?
ECOA
The Equal Credit Opportunity Act allows qualifying consumers to obtain credit based on credit worthiness alone.
Which federal law requires financial institutions to file reports of cash transactions exceeding a daily aggregate amount of $10,000?
BSA/AML
It is the Bank Secrecy Act/Anti-Money Laundering Act that includes this requirement.
Which law ensures lenders use an annual percentage rate Relationship between the cost of borrowing and the total amount financed, represented as a percentage. (APR) so that the borrowers have the information they need to make informed comparisons?
Regulation Z
Under Regulation Z, lenders must use an annual percentage rate (APR) so that the borrowers have the information they need to make informed comparisons among different lenders.
Which item is NOT included in the calculation that determines the annual percentage rate?
Title insurance premium
The title insurance premium is not included in calculating the APR since it is paid to the title underwriter to insure the title
Which legislation does NOT allow a lender, when qualifying income, to consider the possibility of a borrower having additional children?
ECOA
Family size may not be considered in qualifying income under ECOA.
Which is a disclosure that RESPA requires creditors to give to customers at the time of the mortgage loan closing?
The Closing Disclosure is the document prepared at the time of closing that “breaks down” the final settlement charges. The other three are given within three business days of the application.
What is the only website authorized by the FTC from which consumers can get their free credit report each year?
www.annualcreditreport.com
The only vendor authorized by the FTC and the credit reporting agencies under the Fair and Accurate Credit Transactions Act to provide this service for free is www.annualcreditreport.com.
What data is NOT part of the data collected for HMDA monitoring?
Family size
Family size is not part of the information needed for HMDA monitoring.
A $100,000 loan will be considered a Section 32 loan if the the points and fees are greater than
5% of the loan amount
The total fees and points payable by the borrower at or before closing that will exceed (a) 5 percent of the total loan amount for a transaction with a loan amount of $20,000 or more or (b) the lesser of 8 percent of the total loan amount or $1,000 for a transaction with a loan amount of less than $20,000. The amount is adjusted annually by the Consumer Financial Protection Bureau, based on changes in the Consumer Price Index.
