MLO Activities Flashcards
A false statement on a loan application intended to influence the recipient of the application to grant credit for the applicant may lead to a __ year jail term
A. 2
B. 3
C. 4
D. 5
D. It may lead to a five-year jail term
Fact: The FBI states “Mortgage fraud is investigated by the Federal Bureau of Investigation and is punishable by up to 30 years in federal prison or $1,000,000, or both”
In section II of the 1003 - “Property information and purpose of loan” - when providing the property address which will be used as the loan collateral, what information is NOT needed?
A. City
B. State
C. Previous primary residence
D. Zip code
C. Liens are not needed information at this point
Fact: Designation of the property type – a single-family home or a multi-unit – is disclosed here. After, a “legal description” is required, either “metes and bounds system” or the “rectangular survey system” for rural property, and the “subdivision lot and block system” for subdivisions
When applying for a Construction or construction-permanent loan, what does an applicant NOT need to state?
A. The year the lot was acquired B. The original cost C. Previous owner's information D. Any existing liens against the lot E. The present value of the lot plus the cost of improvements
C. Previous owners information is not needed
When applying for a Refinance, what does an applicant NOT need to state?
A. The year the property was acquired B. The original cost C. Previous owner's information D. The amount of existing liens E. The cost of improvements made or to be made F. The purpose of the refinance
C. Previous owners information is not needed
Did you know?
The final information requested in Section II is information on the “Source of Down Payment, Settlement Charges, and/or Subordinate Financing.”
Section III is titled “____”
A. Borrower information
B. Property information and purpose of loan
C. Type of mortgage and terms of loan
D. Employment information
A. Borrower information
Fact: If the applicant has lived in his/her home for less than two years, residency information must be provided for the past two years. This information includes the other addresses where the borrower resided and an indication of whether the home was owned or rented. Contact information for the applicant is also necessary
The applicant must provide personal information including Social Security Number, age and number of dependents
Section I is titled “____”
A. Borrower information
B. Property information and purpose of loan
C. Type of mortgage and terms of loan
D. Employment information
C. Type of mortgage and terms of loan
Section II is titled “____”
A. Borrower information
B. Property information and purpose of loan
C. Type of mortgage and terms of loan
D. Employment information
B. Property information and purpose of loan
Section IV is titled “____”
A. Borrower information
B. Property information and purpose of loan
C. Type of mortgage and terms of loan
D. Employment information
D. Employment information
Fact: Continuous employment in the same line of work or profession is an attribute that lenders like to see on a loan application because it shows that the potential borrower has marketable skills and job stability
Section V is titled “____”
A. Borrower information
B. Property information and purpose of loan
C. Monthly income and combined housing expense information
D. Employment information
C. Monthly income and combined housing expense information
Fact: Applicants are not required to list alimony and/or child support unless they decide to use these to demonstrate eligibility for a mortgage loan
Section VI is titled “____”
A. Assets and liabilities
B. Property information and purpose of loan
C. Monthly income and combined housing expense information
D. Employment information
A. Assets and liabilities
Fact: if the application includes the assets of a spouse, partner or co-borrower, the application must indicate that the Statement of Assets and Liabilities is prepared “Jointly.”
Section VII is titled “____”
A. Assets and liabilities
B. Property information and purpose of loan
C. Monthly income and combined housing expense information
D. Details of transactions
D. Details of transactions
Section VIII is titled “____”
A. Assets and liabilities
B. Declarations
C. Monthly income and combined housing expense information
D. Details of transactions
B. Declarations
Fact: This section contains questions that enable a lender to determine if the potential borrower is subject to other matters that may impact his/her ability to repay the loan
The lender must ultimately verify the responses through a third party verification process
Section IX is titled “____”
A. Acknowledgment and agreement
B. Declarations
C. Monthly income and combined housing expense information
D. Details of transactions
A. Acknowledgment and agreement
Fact: This section allows applicants to affirm that they understand the purpose of the loan application and any loan that is offered as a result of the application will be secured by a deed of trust on the property described in the application
Section X is titled “____”
A. Acknowledgment and agreement
B. Declarations
C. Information for government monitoring purposes
D. Details of transactions
C. Information for government monitoring purposes
Applicants must be made aware of the status of their loan application in writing within 30 days of the date of application
A. 3
B. 5
C. 15
D. 30
D. 30 days of the date of application
RESPA requires a list of homeownership counseling organizations be provided to borrowers. This list may be no more than __ days old when provided
A. 3
B. 5
C . 15
D. 30
D. No more than 30 days old
The closing disclosure is due no later than __ business day(s) before consummation
A. 1
B. 3
C . 5
D. 7
B. No later than 3 business days prior to consummation
FACT: If a revised Closing Disclosure is issued, it must be provided at or before consummation and within three business days of receiving the information prompting the revision. Certain changes (APR, prepayment penalties, or loan product changes) would require a new three-business-day waiting period before consummation could occur
for a regular transaction, re-disclosure is required at least three business days prior to closing anytime the APR varies by more than __ of 1%
A. 1/2
B. 1/4
C. 1/8
D. 1/10
C. 1/8th of 1%
Fact: For an irregular transaction, re-disclosure is required if the APR varies by more than one-fourth of 1%
RESPA requires the initial escrow account statement be disclosed __ day(s) after consummation
A. 3
B. 15
C. 30
D. 45
D. 45 days after consummation
Fact: this disclosure is often provided at the time of closing and provides an estimate of escrow payments (taxes, insurance, etc.) that will be required in the first 12 months of the loan
The Escrow Closing Notice is due no later than __ business days before the account closes
A. 15
B. 30
C. 45
D. 60
B. 30 business days before the account closes
Fact: When a borrower requests cancellation of an escrow account, the notice is due three business days before the closing of the consumer’s escrow account
The Initial Rate Change Disclosure of an ARM must be disclosed at least __ days, but no more than __ days, before the initial rate change occurs and the first payment based on the new rate is due
A. 200/220
B. 210/240
C. 160/180
D. 30/60
B. 210/240
Fact: This disclosure may be made at consummation if the first rate and payment changes are due within 210 days after consummation
Subsequent rate change disclosures are generally due no less than 60 days, and no more than 120 days, prior to an interest rate and payment change
Which of these types of mortgage transactions DOESN’T require the TIL Disclosure or the HUD-1/HUD-1A
A. Reverse Mortgage B. HPML C. HELOC D. Loans made by entities that are not creditors Regulation Z E. Chattel-dwelling Mortgage
B. Higher-priced mortgage loans do not use these forms
Fact: The HUD-1 Settlement Statement is due at closing, but may be requested by the consumer one day prior to settlement. The HUD-1A is used for refinance transactions
A Balloon Payment Notice is due at least __ business day(s) prior to closing
A. 1
B. 3
C . 5
D. 7
B. 3 days prior to closing
Fact: Notice regarding the presence of a balloon payment provision is also required on the Loan Estimate for all residential mortgage transactions
The “Notice that completion of loan application and receipt of disclosure does not obligate borrower to complete transaction” disclosure is due withing __ business days of application
A. 1
B. 3
C . 5
D. 7
B. 3 business days after receipt of application
The Notice of Right to Receive Appraisal Report is due no later than __ business day(s) after a creditor receives an application for a first lien on a dwelling
A. 1
B. 3
C . 5
D. 7
B. 3 business days
Did you know?
Notice of Right to Financial Privacy and Right to Opt Out of the Sharing of Personal Information: required by the GLB Act at the time of establishing a customer relationship (at the time of application)
Notice of Action Taken is required by ECOA and due no later than __ days after the receipt of a loan application
A. 15
B. 30
C. 45
D. 60
B. 30 days after the receipt of a loan application
Notice of Adverse Action is required by ECOA and due no later than 30 days after the receipt of a loan application
A. 15
B. 30
C. 45
D. 60
B. 30 days after the receipt of a loan application
Notice of Incomplete Application: required by ECOA and due no later than 30 days after the receipt of an application
A. 15
B. 30
C. 45
D. 60
B. 30 days after the receipt of a loan application
The Mortgage Servicing Disclosure Statement is required by RESPA and due __ business day(s) after completion of a loan application
A. 1
B. 3
C . 5
D. 7
B. 3 business days after completion of a loan application
Fact: This disclosure now appears on page three of the Loan Estimate
The Servicing Transfer Statement is required by RESPA and due __ days prior to the effective date of the transfer
A. 3
B. 5
C . 15
D. 30
C. 15 days prior to the effective date of the transfer
TILA requires re-disclosure of the APR if it varies by more than one eighth of 1%. This re-disclosure is due at least __ business days prior to closing
A. 1
B. 3
C . 5
D. 7
B. 3 business days prior to closing
Did you know?
TILA requires that a loan cost disclosure form be provided to reverse mortgage borrowers
When 3 business day TILA disclosures are provided via the Postal Service, receipt by the consumer is considered to take place __ business days after the disclosures are placed in the mail
A. 1
B. 3
C . 5
D. 7
B. 3 business days after the disclosures are placed in the mail
Fact: When disclosures are provided electronically, they are considered received when acknowledged (opened) by the consumer
One of the most important developments under the Qualified Mortgage Rule is the establishment of a 43% debt-to-income ratio requirement for qualified mortgages
A. 41%
B. 43%
C. 45%
D. 80%
B. 45% DTI
Did you know?
Examples of other types of income documentation that is commonly used include:
- Paystubs for the most recent 30-day period and W-2s for the most recent two-year period
- Up to two years’ tax returns for individuals earning more than 25% of their income in commissions. Their tax returns must document receipt of commission payments for a period of up to 12 months.
- Up to two years’ tax returns for individuals who own more than 25% of a business
- Comprehensive documentation relevant to the type of income received for individuals who earn non-taxed income such as Social Security, public assistance, or disability income
Federal lending laws do not require borrowers to disclose all of their income
True or False
True
Fact: They are only required to disclose and verify the income on which they are relying to show that they are eligible for the mortgage loan. Generally, undisclosed income only becomes an issue in fraudulent transactions
Did you know?
Form 1005 (Fanny Mae’s Request for Verification of Employment Form) includes instructions stating that for first lien mortgages, the consumer may not deliver the verification form to the employer; for second lien mortgages, this is permitted. In transactions for both first and second mortgages, Fannie Mae requires the employer to mail the completed verification form to the creditor. Delivery of completed forms by loan applicants is prohibited
Did you know?
Whenever the issue of gift funds arises, loan originators should be quick to explain that there are verification requirements in play. These requirements must be met in order for the cash to be considered for qualification purposes. Lenders will ask loan applicants with gift funds to provide a letter that includes:
- A description of the relationship between the loan applicant and the donor
- A statement that the gift funds must be used for a home purchase
- The address of the home that the applicant will purchase
- An assurance that the donor does not expect repayment of the funds
- Identification of the source of the funds, and
- The signature of the donor
Did you know?
If a lender is making a loan that will be sold to Fannie Mae, it is important to also be aware of the GSE’s standards. Fannie Mae requires that the donor be a relative, fiancé, or domestic partner of the recipient. Gift funds from builders, developers, real estate agents, or any other party with an interest in the transaction are prohibited
Did you know?
Vacation time is built into the annual base salary
For conventional mortgage loans that conform to Fannie Mae and Freddie Mac guidelines, the maximum front end ratio has traditionally been %
A. 26
B. 28
C. 30
D. 32
B. 28%
Fact: Front end ratios for FHA loans and VA loans are less difficult to meet. Applicants for FHA loans must meet a front end ratio of 31%. Lenders who make VA loans look primarily at the back end ratio
Did you know?
It is important to note, however, if the appraisal is less than the purchase price, the borrower will have to increase his/her down payment or obtain mortgage insurance when calculating LTV%
Did you know?
Most lenders that offer conventional conforming mortgages will not allow the LTV to exceed 80% because Fannie Mae and Freddie Mac will not purchase a mortgage with an LTV over 80%
Did you know?
The LTV for some VA loans is 100%
Did you know?
The LTV for FHA loans can be as high as 96.5%
Did you know?
The only mortgage loans not subject to the ATR Rule are:
- Open-end home equity plans
- Reverse mortgages
- Bridge loans with terms of 12 months or less
- Construction loans
- Loans made by a housing finance agency
Define the Sales Comparison Approach
This approach is an analysis of recent sales that are the most comparable to the subject property. An appraiser must analyze a minimum of three comparable sales that were settled or closed within the last 12 months. An appraiser must comment on sales that are more than six months old
Transactions with LTV over 90% are limited to __% seller concessions. Concessions on loans with LTV under 90% are limited to __%
A. 1/2
B. 3/4
C. 6/8
D. 3/6
D. 3% and 6%
Define Cost Approach
This approach assumes that a potential purchaser would consider building a substitute residence that has the same utility and use as the subject property being appraised. The appraiser arrives at the indicated value of the property by estimating the reproduction cost of improvements, subtracting the amount of depreciation by all causes, and adding the estimated value of the site as if it were vacant. The appraiser estimates land value by analyzing comparable sized land sales
Define Income Approach
Normally this approach is not applicable to single-family properties. However, if a single-family home is being utilized as an investment property, the appraiser must prepare a single-family comparable rental schedule in addition to the appropriate appraisal report
Did you know?
Lock-in agreements may be effective for as little as seven days from the date of loan approval up to 120 days; most are effective for 30 to 60 days
As a standard rule, the underwriter will use __% of rental income stated on the rental or lease agreement unless otherwise documented by 1040s
A. 25%
B. 50%
C. 75%
D. 85%
C. 75%
