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MLO Exam Prep Flashcards

1
Q

What does Reg V stand for?

What is it?

A

FCRA

The Fair Credit Reporting Act is a federal law that regulates how credit information is collected, used, and shared. It ensures the accuracy, privacy, and fairness of consumer credit reports.

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2
Q

What does Reg C stand for?

What is it?

A

HMDA

The Home Mortgage Disclosure Act requires financial institutions to report data on home loans they originate or purchase. The goal is to ensure transparency in lending practices and identify discriminatory patterns in mortgage lending.

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3
Q

What does Reg P stand for?

What is it?

A

GLBA

The Gramm-Leach-Bliley Act is a federal law that protects consumers’ personal financial information held by financial institutions. It mandates privacy practices, including the disclosure of privacy policies and safeguards to protect sensitive data.

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4
Q

What does Reg X stand for?

What is it?

A

RESPA

The Real Estate Settlement Procedures Act is a federal law that ensures transparency in the home buying process by requiring disclosure of settlement costs. It aims to prevent abusive practices, such as kickbacks and fee-splitting, and ensures that consumers receive clear, upfront information about the costs of their mortgage transactions.

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5
Q

What does Reg B stand for?

What is it?

A

ECOA

The Equal Credit Opportunity Act is a federal law that prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. It ensures that all consumers have equal access to credit and are treated fairly by lenders.

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6
Q

What does Reg Z stand for?

What is it?

A

TILA

The Truth in Lending Act is a federal law that requires lenders to disclose key loan terms and costs, including the annual percentage rate (APR), to borrowers. Its goal is to promote transparency and help consumers compare credit offers more easily.

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7
Q

What does Reg O stand for?

What is it?

A

MARS Rule

The Mortgage Assistance Relief Services Rule is a regulation that prohibits mortgage relief companies from charging upfront fees for loan modification services. It aims to protect consumers from fraudulent and deceptive practices in the mortgage assistance industry.

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8
Q

What does Reg N stand for?

What is it?

A

MAP Rule

The Mortgage Acts and Practices Rule prohibits deceptive advertising practices in the mortgage industry. It aims to prevent misleading claims about mortgage terms, rates, or costs that could mislead consumers or harm competition.

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9
Q

What does HOEPA stand for?

And what umbrella does it fall under?

What is it?

A

Home Ownership and Equity Protection Act is part of the Truth in Lending Act (TILA) and was enacted in 1994 to protect consumers from high-cost loans (not high-priced loans) in home equity and mortgage refinancing transactions. It applies to loans with interest rates or fees that exceed certain thresholds, aiming to prevent predatory lending practices.

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10
Q

W

What are the VA Funding Fee Percentages (1st Time and 2nd Time)?

A

First Time VA Borrower: 2.15%

Second Time VA Borrower: 3.33%

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11
Q

What does TRID stand for?

And what umbrella does it fall under?

What is it?

A

Tilla Respa Integrated Disclosure Act

TILA (Reg Z)

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12
Q

What does PUD stand for?

What is it?

A

Planned Unit Development

Development with mix of residential, commercial, and/or recreational properties

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13
Q

What is the USDA Loan Guarantee Fee Percentage?

A

1%

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14
Q

What does CRV stand for?
What is it?

A

Certificate of Reasonable Value

A document issued a Department of Veteran’s Affairs (VA) appraiser or VA-approved appraiser regarding the value of a home. It serves as a basis for the ammount the VA will guarantee for a loan on that property; generally 25% of the CRV.

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15
Q

What does UFMIP stand for?

What is it?

A

Upfront Mortgage Insurance Premium

It is a 1.75% charge as part of FHA mortgage loan origination (paid during closing or financed).

This is separate from MIP, which is also required and paid monthly.

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16
Q

What does ALTA stand for?

What is it?

A

American Land Title Association

A national trade association representing the title insurance industry in the USA.

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17
Q

What are the Five Primary QM Components?

A

1) Loan term ≤ 30 years

2) ≤ 3% in Points and Fees

3) No negative loan ammoritzation

4) Fixed interest rate or ARM with high end interest rate used (won’t increase, will only decrease)

5) ≤ 43% debt to gross income.

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18
Q

What does FHLMC stand for?

A

Federal Home Loan Mortgage Corporation (Freddie Mac)

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19
Q

What does FNMA stand for?

A

Federal Natioanl Mortgage Association (Fannie Mae)

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20
Q

What does SOFR stand for?

A

Secured Overnight Financing Rate

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21
Q

What does NMLS stand for?

A

Nationwide Multistate Licensing System and Registry

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22
Q

Whatd does URAR stand for?

What is it?

A

Uniform Residential Appraisal Report

It is the standard form used by appraisers to report the results of a residential property appraisal.

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23
Q

What does PTR stand for?

What is it?

A

Preliminary Title Report

This report is issued by a title company during the loan estimate to provide rough details about the property’s title status.

It outlines any issues, such as liens, encumbrances, or claims, that could affect the transfer of ownership.

A deeper dive is done for a Final Title Report during **underwritting **if the loan is moved forward with.

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24
Q

Borrowers who are business owners must be marked as self-employed on the 1003 and provide additional tax returns if they own what percentage of a business?

A

On the 1003 loan application, borrowers who own 25% or more of a business are considered self-employed and must provide additional documentation, such as the **last two years **of IRS Form 1040, Schedule C, and/or business tax returns, to assess financial stability.

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25
Q

Is Hazard Insurance required on all Fannie Mae and Freddie Mac loans?

A

Yes

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26
Q

When obtaining hazard insurance, the lender requires a clause to protect them from loss.

What is this called?

A

A mortgagee clause is a provision in a hazard insurance policy that ensures the lender receives the insurance payout directly if the property is damaged, protecting the lender’s interest in the property.

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27
Q

Who pays for Title Insurance?

A

In a real estate transaction, the borrower pays for the lender’s title insurance, which protects the lender against title issues like liens or ownership disputes.

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28
Q

What does TIP stand for?

What is it?

A

Total Interest Percentage

A percentage showing the total interest paid over the life of the loan relative to the loan amount, calculated by dividing total interest by the loan amount.

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29
Q

What does CRV stand for?

What is it?

A

**Certificate of Reasonable Value **

A document issued by the VA that confirms the appraised value of a property for a VA loan. It ensures the property meets VA standards and that the loan amount is in line with the appraised value

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30
Q

What does HPML stand for?

What regulation oversees it?

A

Higher-Priced Mortgage Loan

Defined under Section 35 of the Truth in Lending Act (TILA), Higher-Priced Mortgage Loans (HPMLs) have First Lien interest rates 1.5% above the average prime offer rate (APOR).

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31
Q

If the borrower owns the land and the house, they hold title in what fashion?

A

Fee Simple

If the borrower owns both the land and the house, they hold title in fee simple, the most complete form of property ownership, granting full rights to use, sell, or transfer the property, subject to legal restrictions like zoning and taxes.

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32
Q

What does NOV stand for?

What is it?

A

Notice of Value

It is the modern term for the VA CRV.

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33
Q

What does APOR stand for?

What is it?

A

Average Prime Offer Rate

The Average Prime Offer Rate (APOR) is the interest rate offered to borrowers with the best credit profiles, used to determine if a loan is a Higher-Priced Mortgage Loan (HPML).

Published weekly by the FFIEC, it reflects the average rate on prime loans.

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34
Q

LO Comp stands for what?

What Federal Law covers it?

A

Loan Originator Compensation

This refers to federal regulations under the Dodd-Frank Act that govern loan originator (LO) compensation. The rules prevent LOs from being paid based on loan terms (like interest rates or fees) to avoid steering borrowers into higher-cost loans, protecting consumers from unfair lending practices.

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35
Q

What does COE stand for?

What is it?

A

Certificate of Eligibility

A document issued by the VA to verify a veteran’s eligibility for a VA loan. It confirms the borrower qualifies based on their service record, and ensures the government will guarantee about 25% of the loan, up to the VA’s limit.

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36
Q

What does HOEPA stand for?

What regulation oversees it?

A

Home Ownership and Equity Protection Act

Section 32 and Section 35 of the Truth in Lending Act (TILA) address high-cost loans, aiming to protect consumers from predatory lending practices.

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37
Q

How long must an MLO wait to reapply for a license after revocation?

(Assuming they are eligible to)

A

At least 5 years per the SAFE act

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38
Q

What does CSBS stand for?

What is it?

A

Conference of State Bank Supervisors

The CSBS is a national organization representing state banking regulators, supporting their efforts to ensure the safety and soundness of state-chartered financial institutions, including banks and mortgage companies.

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39
Q

What does AARMR stand for?

What is it?

A

American Association of Residential Mortgage Regulators

AARMR represents state regulators overseeing residential mortgage lending and servicing, promoting uniformity and fairness in state mortgage regulations and providing guidance to ensure consistent enforcement.

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40
Q

What is the difference between a Rule and a Statue

A

A statute is a law enacted by a legislative body, while a rule is a regulation created by a regulatory agency to interpret and implement the statute.

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41
Q

CE Instructors can receive CE credit at a rate of how many hours per hour taught?

A

2:1; for example, if an instructor taught 8 hours of coursework, they would receive 16 hours of CE

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42
Q

What is the difference between a mortgage banker and a mortgage broker?

A

A mortgage banker funds and closes their own loans with their own funds. A mortgage broker negogiates loans and closes with funds from other entit(ies).

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43
Q

A cease and desist order from a regulatory authority is effective when?

A

When the licensee is served papers

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44
Q

What is the differerence between a Real Estate Broker and a Mortgage Broker?

A

A Real Estate broker negotiates the buying/selling of a home. A mortgage broker negotiates the financing of the home purchase.

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45
Q

Who insures FHA loans?

A

Department of Housing and Urban Development, and it insures FHA loans.

The FHA is a department within HUD. It provides mortgage insurance on loans made by approved lenders to borrowers with low to moderate incomes

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46
Q

What is an AUS?

A

Automated Underwriting System

Software used by lenders to evaluate a borrower’s mortgage application.

It automatically assesses financial data like credit score, income, and debt-to-income ratio to determine loan eligibility. The system generates a decision—approve, refer, or deny—based on preset criteria, making the underwriting process faster and more consistent.

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47
Q

What is the violation of Chunking?

A

Chunking is the practice of making numerous small loans to a borrower to generate fees (rather than one larger loan), often with little regard for the borrower’s ability to repay.

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48
Q

What is the violation of Redlining?

A

Redlining is illegal practice of denying loans or offering less favorable terms based on the geographic location of a borrower, typically targeting minority or economically disadvantaged neighborhoods.

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49
Q

What is the violation of Churning?

A

Churning is the practice of repeatedly refinancing loans for the purpose of generating fees, often without providing a clear benefit to the borrower.

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50
Q

What is the violation of Reverse Redlining?

A

Reverse Redlining is the illegal practice of targeting minority or low-income borrowers in specific neighborhoods with higher interest rates or unfavorable loan terms based on their race or economic status.

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51
Q

Which law prohibits discrimination based upon disability?

A

The Fair Housing Act prohibits discrimination in housing based on several protected characteristics, including disability.

This law ensures that individuals with disabilities have equal access to housing and are not discriminated against in the housing process, whether renting or buying a home.

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52
Q

What is Occupancy Fraud?

A

Occupancy fraud occurs when a borrower misrepresents the intended use of a property to obtain more favorable loan terms.

In Logan’s case, he plans to buy an investment property but falsely claims it will be his primary residence in order to secure better terms (such as lower interest rates or down payment requirements). This is a classic example of occupancy fraud.

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53
Q

What are the four classes protected by Reg. B?

A

(1) Sex
(2) Religion
(3) National Origin
(4) Age

(not disability)

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54
Q

Under ECOA, the lender is required to provide the borrower a reason for denial after how long?

A

30 Days

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55
Q

What federal law created the idea of a Qualified Mortgage?

A

One of Dodd-Frank’s (2008) key provisions was the creation of the Qualified Mortgage (QM) rule.

The Dodd-Frank Act instructed the Consumer Financial Protection Bureau (CFPB) to define the criteria for what constitutes a qualified mortgage.

A qualified mortgage is designed to ensure that lenders offer loans that are more likely to be affordable for borrowers.

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56
Q

What is a Straw Buyer?

A

A straw buyer is an individual who acts as a proxy for another person, usually to commit fraud in a real estate or loan transaction.

The straw buyer typically applies for and obtains a mortgage or purchase loan under false pretenses, often because the actual buyer (the person who intends to live in or benefit from the property) cannot qualify for the loan due to poor credit or other financial reasons.

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57
Q

What is the Cost Approach of Appraisal?

A

Takes the cost of rebuilding the property, plus the cost of the land the property is on and subtracts any depreciation to determine a value of the property

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58
Q

What are the Three Appraisal Methods?

A

Sales Comparison approach, Income approach, Cost approach

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59
Q

What is the difference between FHA and USDA Mortgage Insurance?

A

Both are paid partially upfront (1.7% for FHA and 1% for USDA), then through follow-up payments.

The payments for FHA mortgages are monthly as a variable rate while USDA are annually as .35% of the outstanding loan balance.

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60
Q

What is Residual Income?

A

Residual income is the amount of money left over after a borrower has paid all of their monthly obligations, including their mortgage payment, taxes, insurance, credit card bills, and other living expenses.

It also includes additional sources of income such as child support, Social Security, and investment income. These sources contribute to the borrower’s overall financial capacity and are factored in when calculating residual income.

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61
Q

What is the Red Flags Rule and what law is it part of?

A

The Red Flags Rule is part of the Fair and Accurate Credit Transactions Act (FACTA), which was enacted in 2003 as an amendment to the Fair Credit Reporting Act (FCRA).

The Red Flags Rule requires financial institutions and creditors to implement written programs designed to detect, prevent, and mitigate identity theft.

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62
Q

For MLO Prelicensing Eduction, what are the four areas covered and how many hours cover each area?

A

(1) Federal Law - 3 Hours
(2) Ethics - 3 Hours
(3) Non-traditional Mortgage Products - 2 Hours
(4) Elective Education - 12 Hours

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63
Q

What is the Ability to Repay Rule and under what law does it fall?

A

The Ability to Repay (ATR) Rule falls under TILA (Truth in Lending Act), as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The ATR rule requires lenders to ensure that a borrower has the ability to repay the loan before issuing a mortgage.

This ensures the loan is not “predatory” and that the borrower will not face undue financial hardship.

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64
Q

Can a licensed mortgage loan originator work for more than one company simultaneously?

A

No

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65
Q

Which rule prohibits loan originators from being paid based on the terms of a loan?

A

The Loan Originator Compensation Rule (found in Regulation Z, which is part of the Truth in Lending Act - TILA) prohibits mortgage loan originators (MLOs) from being paid based on the terms of a loan, such as the interest rate or the size of the loan. This rule was implemented to prevent steering borrowers into loans that are not in their best interest in order to increase the loan originator’s compensation.

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66
Q

What is a Non-Conforming Loan?

A

A loan that doesn’t follow Fannie Mae and Freddie Mac guidelines

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67
Q

What is the Home Loan Toolkit, when must it be given to a borrower, what regulation dictates its distribution?

A

The Home Loan Toolkit is a disclosure required by RESPA within three business days or less of initial Loan Application.

It provides key information about the home buying process and is intended to help consumers understand their mortgage options and the costs involved.

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68
Q

What is the purpose of RESPA?

A

RESPA (Real Estate Settlement Procedures Act) is the law that promotes informed shopping by requiring the disclosure of settlement services to the borrower. It ensures that consumers receive accurate and clear information about the costs and fees involved in the real estate settlement process.

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69
Q

What type of a loan is IRRRL?

A

An IRRRL stands for Interest Rate Reduction Refinancing Loan, and it is a type of VA refinance loan designed to help veterans and active military service members reduce their existing mortgage interest rate.

It is often referred to as a VA Streamline Refinance because it has a simpler, faster approval process compared to a traditional refinance.

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70
Q

What disclosure must be sent three days after application, and indicates to the borrower whether or not their loan may be sold or transferred?

A

The Mortgage Servicing Disclosure is a required document under RESPA (Real Estate Settlement Procedures Act) that must be provided to borrowers within 3 business days of the loan application. It informs the borrower whether the lender intends to service the loan or transfer the servicing to another company

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71
Q

What law allows for e-signatures as long as the borrower gives permission?

A

The Electronic Signatures in Global and National Commerce Act (E-Sign Act).

It is a Federal Law that gives legal recognition to electronic signatures and records, ensuring that they are as valid and enforceable as traditional paper-based signatures.

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72
Q

What type of loan products does TRID not govern?

A

Reverse Mortgages and HELOCs

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73
Q

What regulatory letter is TRID?

A

It doesn’t have one! It just means the combilation of TILA (Z) and RESPA (X)

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74
Q

What are the three pillars of the FTC Red Flags Rule?

A

(1) Require the implementation of a written plan to detect and prevent indentity theft.

(2) Protect sensitive personal data.

(3) Create specific disposal policies.

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75
Q

Which section of the 1003 ULA collects demographic inofrmation? And what federal law is that for?

A

Section 8 of the Uniform Residential Loan Application (1003), also called the Demographic Information Addendum, is where a borrower’s demographic information (such as race, ethnicity, and sex) is collected.

This data is required for HMDA (Home Mortgage Disclosure Act) reporting purposes.

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76
Q

What is the difference between ECOA and HDMA?

A

HDMA (Home Mortgage Disclosure Act) collects information to ensure fair lending practices and ensure that ECOA isn’t violated

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77
Q

What is FCRA and what does it do?

A

The FCRA (Fair Credit Reporting Act) is the federal law that governs the use of credit reports and ensures the **accuracy, fairness, and privacy **of the information contained in consumer credit reports.

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78
Q

What item does HDMA not require the loan originator to collect?

A

Maritial Status

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79
Q

What does HDMA (home mortgage disclosure act) require MLOs to collect from loan applicants?

A

(1) Race
(2) Ethnicity
(3) Sex
(4) Age

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80
Q

What is blockbusting?

A

Blockbusting is an illegal and unethical practice in real estate where individuals or companies (often real estate agents or developers) induce homeowners to sell their property at a lower price by creating fear or panic about the neighborhood’s racial, ethnic, or economic composition changing. The fear is often based on the false idea that a specific group of people moving into the area (e.g., a racial or ethnic group) will lower property values.

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81
Q

What are the three rules outlined with the Gramm Leach Bliley Act?

A

(1) Safeguards Rule: Requires financial institutions to implement security programs to protect consumer information from threats or unauthorized access.

(2) Opt-Out Rule: Gives consumers the right to opt out of having their personal financial information shared with non-affiliated third parties.

(3) Pretexting Rule: Prohibits the practice of pretexting (obtaining private information under false pretenses), such as when someone impersonates a customer to access their information.

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82
Q

What are the maximum seller concension values for FHA loans?

A

6% if LTV is < 90%
3% if LTC is >90%

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83
Q

Does an Act of God against a property (earthquake, fire, etc) require re-disclosure under TRID?

A

No

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84
Q

How dong does a Chapter 7 bankruptcy stay on a credit report?

A

10 Years

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85
Q

What is HPA? What is it’s signifigance?

A

The Homeowners Protection Act (HPA), also known as the PMI Cancellation Act, was enacted in 1998. It allows borrowers to request the cancellation of Private Mortgage Insurance (PMI) when their loan-to-value (LTV) ratio reaches 80%.

Under this law, borrowers have the right to ask their lender to cancel PMI once the LTV reaches 80% based on the original property value or the current market value, as long as they are current on their mortgage payments. Additionally, the law also requires lenders to automatically cancel PMI when the LTV reaches 78% (for most loans) without the borrower needing to request it.

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86
Q

How is mortgage insurance handled for different loan types?

A

Conventional loans have PMI.

FHA loans, VA loans, and USDA loans have different rules regarding mortgage insurance.

FHA loans: FHA mortgage insurance (MIP) is paid upfront and then monthly and remains for the life of the loan unless the borrower refinances.

VA loans: There is no PMI, but the borrower may need to pay a funding fee.

USDA loans: There is an upfront and annual guarantee fee, but not PMI.

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87
Q

How many years of employment is required to be disclosed on the 1003 ULA?

A

2 Years

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88
Q

What are the three triggers for additional HOEPA protections?

A

Home Ownership Equity Protection Act kicks in if any on of the three applies:

APR Test: APR Over 8.5%
Points and Fees Test: Points and Fees collectively over 5%
Prepayment Penalty: A prepayment penalty exists

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89
Q

What is the cash transcation threshold where a transaction must be reported?

What entity mandates it?

A

$10,000

BSA/AML
(Bank Secrecy Act/ Anti Money Laundering)

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90
Q

What is the maximum PITI payment ratio for a Conventional Mortgage?

A

28%

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91
Q

Section 35 of TILA governs what type of loan?

What are the details behind that type of loan?

A

Section 35 of TILA governs higher-priced loans (HPLs). These are loans that have an APR (Annual Percentage Rate) that exceeds a certain threshold, which is set by regulation.

Higher-priced loans are defined as loans where the APR exceeds the average prime offer rate (APOR) by a certain percentage (1.5% for first liens, 3.5% for subordinate liens).

A requirement for additional appraisal protections.
Restrictions on prepayment penalties (they cannot last longer than 3 years and can’t exceed 2%/1%/.5% of the original loan balance for each of the first three years).

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92
Q

What are Higher Cost loans?

What section of TILA do they fall under?

A

These loans are defined under HOEPA (Home Ownership and Equity Protection Act), which is an amendment to TILA as Section 32

A loan is considered high-cost if it exceeds certain thresholds for:
APR (it must exceed the APOR by 6.5% for first liens or 8.5% for second liens).
Points and fees (they must exceed 5% of the loan amount or a set dollar amount).
Prepayment penalties that are excessive or last too long.

High-cost loans are subject to much stricter regulations, including:
A mandatory 3-day right of rescission after closing.
A ban on balloon payments for certain loans.
Limits on fees, prepayment penalties, and other practices that might be considered predatory.

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93
Q

What law required identification be provided on a mortgage transcation?

A

The USA Patriot Act requires lenders and other financial institutions to verify the identity of individuals involved in mortgage transactions as part of Know Your Customer (KYC) regulations. This is aimed at preventing money laundering, terrorist financing, and other financial crimes. Specifically, it mandates that lenders:

Verify the identity of any borrower or customer (including individuals and businesses) before conducting business with them.

Collect identifying information such as name, address, date of birth, and taxpayer identification number.

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94
Q

RESPA requires servicers to issue an initial escrow account statement within how many days of closing?

A

45 calendar days of closing

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95
Q

A Section 203K loan is another word for what?

A

An FHA loan for the purchase and rehab of a property

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96
Q

What is the MAX percentage limit on total DTI ratio for a General Qualified Mortgage?

A

43%

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97
Q

What is the Total Debt Ratio?

A

Total Debt Ratio = ( All Debt Expenses (monthly) ) / ( Borrower’s Gross (monthly) Income )

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98
Q

What is the Housing Ratio?

A

Housing Ratio = ( All Housing Expenses (monthly) ) / ( Borrower’s Gross (monthly) Income )

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99
Q

What are the Maximum Points and Fees allowable on a Qualified Mortgage?

A

3%

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100
Q

What are the Maximum fee change percentages allowable under TRID for Loan Origination and 3rd Party Services?

A

0% and 10% respectively

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101
Q

What are the key points for the borrower’s right to rescind?

A

Here’s a breakdown of the key points:

1) 3 years if required notice is not given: If the borrower does not receive the required notice of the right to rescind, they can exercise the right to rescind the loan within 3 years.

2) 3 business days to rescind: The borrower has 3 business days after closing or receiving the required disclosures (whichever is later) to rescind the loan.

3) Only for owner-occupied refinances: The right of rescission applies only to refinance loans on primary residences (owner-occupied properties). It does not apply to purchases or home equity lines of credit (HELOCs).

4) Required notice: The lender is required to provide the borrower with two copies of the Notice of Right to Rescind at closing.

102
Q

What is Blockbusting?

A

Blockbusting occurs when real estate agents and building developers attempt to convince property owners to sell their houses at low prices by promoting fears in those homeowners that racial minorities would soon be moving into the neighborhood.

103
Q

What is Redlining?

A

Redlining is a discriminatory practice in which financial institutions, such as banks or mortgage lenders, refuse to offer loans or provide services to residents in certain neighborhoods based on the racial or ethnic composition of those areas.

104
Q

What is Chunking?

A

Chunking is the sale of properties at artificially inflated prices, pitched as investment opportunities to naïve real estate investors who are promised improbably high returns and loan risks.

You would usually see this type of fraud scheme presented as a “get rich quick” real estate seminar.

105
Q

What are Disparate Treatment and Disparate Impact?

What is the difference between them?

A

Disparate Treatment occurs when someone is intentionally treated unfairly based on a protected characteristic, such as race or gender.

Disparate Impact refers to policies or practices that, while unintentional, result in unintentional discrimination by disproportionately affecting a protected group.

106
Q

What is MDIA?

How long does it mandate Initial Disclosure Documents are distributed ahead of Loan Closure?

A

MDIA is the Mortgage Disclosure Improvement Act.

It mandates at least 7 business days between the delivery of the Initial Disclosure Documents and Loan Closing

107
Q

What is FACTA?

How is it related to FCRA?

A

FACTA (Fair and Accurate Credit Transactions Act) was an ammendment to FCRA (Fair Credit Reporting Act)

FACTA mandated four new things:

**(1) Free annual credit reports (not scores).

(2) Identity theft protections (the ability to place fraud alerts and credit freezes on credlit lines).

(3) Red flags rule, which requires financial institutions to implmenet programs to detect and repond to identity theft.

(4) Secure disposal of consumer credit information to protect against identity theft.

108
Q

What is the name of Fannie Mae’s AUS System?

A

Desktop Underwritter (DU)

109
Q

What is the name of Freddie Mac’s AUS system?

A

Loan Prospector (LP)

110
Q

What is Desktop Underwritter?

A

Fannie Mae’s Automated Underwritting System

111
Q

What is Loan Prospector?

A

Freddie Mac’s Automated Underwritting System

112
Q

What regulation letter is the Fair Credit Reporting Act?

A

FCRA = Reg V

113
Q

What type of loan uses residual income as part of the qualifying process?

A

VA

114
Q

Which is the Mortgage Services Disclosure Statement used for?

A

The Mortgage Servicing Disclosure Statement (MSDS) is required by the Real Estate Settlement Procedures Act (RESPA).

It is provided to the borrower at the time of the loan application or within three business days of receiving a complete application.

The purpose of the MSDS is to inform the borrower that the mortgage servicing may be transferred, assigned, or sold to another company during the life of the loan.

115
Q

The Homeowners Protection Act of 1998 does what?

A

Right to cancel PMI: The Act allows borrowers to request the cancellation of PMI once their loan balance reaches 80% of the original home value (based on the original property value or the appraised value at the time of purchase, depending on the loan). The borrower must be current on payments and request cancellation in writing.

Automatic termination of PMI: The Act also requires PMI to be automatically terminated when the loan balance reaches 78% of the original property value, provided the borrower is current on payments.

116
Q

Under FCRA, a Chapter 7 bankruptcy could remain on a credit file for how long?

A

10 Years

117
Q

What are the **three **required GLBA notices?

A

Initial Privacy Notice – This must be provided when a customer relationship is established, typically when the customer first opens an account or engages in a financial service with the institution.

Annual Privacy Notice – This must be provided at least once a year as long as the customer relationship exists. It updates the consumer on the institution’s privacy practices.

Opt-Out Notice – This informs consumers about their right to opt out of the sharing of their information with non-affiliated third parties. The institution must provide a way for the consumer to exercise this opt-out right.

118
Q

HDMA Reports are due to the CFPB by what day annually?

A

March 1st

119
Q

How many days ahead of time must a lender send a Goodbye Letter before servicing is transfered?

A

15 Days

120
Q

What is a YSP? Who receives it?

A

The Yield Spread Premium (YSP) is a payment made by the lender to the broker for originating a loan with an interest rate higher than the par rate (the rate that would have resulted in no premium).

In other words, the broker earns the YSP for facilitating the loan and securing a higher rate for the lender. The YSP is considered compensation for the broker’s role in brokering the loan between the borrower and the lender.

121
Q

What is Gross Percentage Adjustment? During appraisal, what is the industry standard during residential property appraisal?

A

Gross percentage Adjustment refers to the total amount of adjustments made to each of the comparable properties in the appraisal, including adjustments for differences in features, size, condition, location, etc.

Industry standards suggest that the total of all adjustments should generally stay below 15% of the value of each property, to ensure that the appraisal which is based on those comps is based on reliable and comparable data.

122
Q

What does NPI stand for?

A

Non-public Personal Information

123
Q

How long do lenders have to file a Suspicious Activity Report under BSA/AML?

A

30 Days

124
Q

What is the 3/7/3 rule?

What Reg is it?

A

The rule is governed by TILA

(1): The lender must provide the borrower with a LE within 3 business days of receiving a completed LA.

(2): The borrower must receive the Loan Estimate at least 7 business days before the loan is consumated.

(3): If there are any changes to the loan terms that affect the Loan Estimate (such as an increase in the APR or certain fees), the lender must provide the borrower with a revised LE within 3 business days of those changes, and the borrower must wait an additional 3 business days before closing.

125
Q

What is the annual CE hourly breakdown for MLOs?

A

3 hours of Federal Law

2 hours of Ethics

2 hours of State Law

1 hour of Electives

126
Q

What is not a protected class under the Fair Housing Act?

A

Age

127
Q

If two people are married, what is the word for how they hold title?

A

Tenancy by the Entirety

128
Q

An affilianted business arrangement must be disclosed under RESPA at what percentage?

A

1%

129
Q

What section of TILA coveres higher priced loans?

A

Section 35

130
Q

How much longer must child support be perceived to continue to count as income on a loan application?

A

3 Years

131
Q

In Conventional Underwritting, after how long can a borrower purchase again after a Chapter 7 Bankruptcy?

A

4 Years from the Discharge Date

132
Q

What is the fee charged to the borrower by lenders to cover costs involving the preparation of documents (as a percentage of the loan)

A

Orgination Fee

133
Q

According to ECOA, how many business days does a lender have to notify the borrower of an underwritting decision?

A

30 Days

134
Q

How often does RESPA dictate borrower’s must analyze an escrow account to ensure excess funds aren’t being kept?

A

Annually. Borrowers must perform the analysis, refund excess funds (if they exist), and provide an annual escrow disclosure statement (with account details)

135
Q

HOEPA mandates a counseling disclosure be given to the borrower within how long of application?

A

Within 3 days of loan application

136
Q

How many housing counselors must be included in the HOEPA counseling disclosure?

A

10 Housing Counselors

137
Q

Under TILA, what loan type includes the Right to Rescind?

A

Owner Occupied Refinance

138
Q

After Consumation, a buyer excersizes their Right to Rescind during a refinance transaction; what happens?

A

The refinance is cancelled and the buyer is refunded all fees

139
Q

Under TILA, how long is the Right to Rescind valid for?

A

Up to 3 days after Consumation

140
Q

The Loan Estimate components must be valid for how many business days (TILA)?

A

10 Days

141
Q

ECOA requires the Appraisal be given to borrowers how long ahead of consumation?

A

3 Days

142
Q

What is form 1008?

A

The Transmittal Summary sent to Fannie and Freddie for underwritting with loan application details after the borrower’s intent to proceeed following the initial Loan Estimate.

143
Q

If the APR on a fixed rate loan changes by more than what number, a new 3 business day waiting period is required before consumation

A

≥ .125 Percent

144
Q

How long after a foreclosure can a borrower repurchase using a Conventional loan?

A

7 years

145
Q

What are loan finance charges?

A

Charges associated with obtaining the loan financing. NOT insurance.

146
Q

What is the DNC violation per call?

A

$50,120

147
Q

When a borrower opts to proceed with a different program, what must happen? IE they applied for a conventional but want to proceed with FHA?

A

Redisclosure - an additional Loan Estimate must be sent out

148
Q

For VA underwritting, how long after Chapter 7 bankruptcy can a borrower repurchase?

A

2 years

149
Q

If an applicant was denied financing, they can request reasons for the denial within how long?

A

60 days of of receiving the lender notification

150
Q

Does RESPA cover a loan securited by a residential property for business purposes? (EG HELOC to cover business expenses elsewhere)

A

Yes! Because the collateral was a residential property

151
Q

What is the Market Conditions Addendum?

A

A Market Conditions Addendum (often used in the context of an appraisal or as part of a loan application) is a document that provides insights into the local real estate market and economic conditions surrounding the subject property. This information helps lenders, buyers, and other parties understand how market trends are influencing property values and the risk associated with the loan.

152
Q

FACTA allows a cunsumer to dispute inaccurate credit information.

How many days are allowed for an incorrec titem to be investigated?

A

30 Days

153
Q

What is a VOD?

A

A Verification of Deposit. An underwritter can request the borrower secure documentation from their financial institution showing they have proper funds for a down payment.

154
Q

What form is used to collect qualifying income data from a borrower that owns a business?

A

Schedule C Net Income Plus Non-cash Expenses and Depreciation

155
Q

What does a 7/1 ARM stand for?

A

The intereste rate is fixed for 7 years, then it adjusts 1 time per year.

156
Q

According to VA underwritting, when can a borrower repurchase again after a Chapter 13 bankruptcy?

A

1 Year

157
Q

What is a cash out refinance?

A

A cash-out refinance involves replacing an existing mortgage with a new one (generally lower interest rate but sometimes not) that has a higher balance than the current loan, allowing the borrower to take out the difference in cash.

158
Q

What are the three categories of fee tolerances on the Loan Estimate?

A

Zero, 10%, and No Tolerance

159
Q

Where does the Mortgages Services Disclosure Statement appear? What reg mandates it?

A

Page 3 of LE and Page 5 of CD. RESPA (X)

160
Q

What is the only reasonable fee a Lender can collect from a borrower for a mortgage transaction before they indicate intent to proceed?

A

A Credit Report fee

161
Q

How many days prior to Consummation is the final Loan Estimate required to be provided to the borrower?

A

4 Days

162
Q

If someone violates Section 8 of RESPA, what fine are they lookin at?

A

$10,000 and up to 1 year in prison (per instance)

163
Q

When do underwritters and processors need to be licensed?

A

If they are an Independent Contractor; if they are employees there is no need to be licensed.

164
Q

What is the difference between a Chapter 7 Bankruptcy and a Chapter 11 or 13 Bankruptcy?

A

Chapter 7 involves liquidating all debts. Chapter 13 and 11 involve restructuring debt.

165
Q

The VA allows for a maximum origination fee of what percentage?

A

1%

166
Q

What percentage is the funding fee on a VA Interest Rate Reduction Refinance Loan (IRRRL)?

A

.5%

167
Q

What is the minimum downpayment on a USDA loan?

A

1%

168
Q

What is the maximum penalty under the SAFE Act?

A

$25,000

169
Q

What is the Maximum Front-end DTI ratio for FHA loans?

A

31%

170
Q

What’s the difference between a FHA Streamline Refi and a FHA 203K Loan?

A

Both are to refinance, however the 203k loan is specifically for borrowers who want to addditionally renovate their home as well.

171
Q

What are the HOEPA repayment penalty guidelines?

A

The HOEPA prepayment penalty test is a requirement under the Home Ownership and Equity Protection Act (HOEPA) to determine whether a prepayment penalty is allowed on certain high-cost loans.

To pass the test, a loan cannot have a prepayment penalty that exceeds the following:

Three years after consummation: The penalty cannot be charged if the borrower pays off the loan within the first three years.

Amount limit: If the penalty is charged, it must not exceed 2% of the amount of the loan in the first year, 1% in the second year, and 0.5% in the third year.

172
Q

What is the maximum front-end DTI ratio for a VA loan?

A

There isn’t one. The VA only has back end DTI criteria and it’s 41%

173
Q

Jason has an FHA 2/1 buy-down. His Note rate is 4.5 percent. What will Jason’s rate be in year 3?

A

4.5%. The buydown means the loan will be below the note rate by 2% the first year, 1% the second year, and at the note rate the third year.

174
Q

If the borrower intends to rent out a property for any reason and length of time, what must that property be classified as?

A

It must be classified as a rental/investment property (not a second home)

175
Q

Per TILA, the right to rescind must be provided as two copies to all owners or borrowers?

A

Owners! Even if they aren’t a borrower. Since they could be affected by the lien.

176
Q

A APR above what percentage of the APOR is considered High Cost?

A

6.5%; E.G. if APOR was 5%, the APR would have to be 11.5% or higher.

177
Q

What is the maximum back-end DTI for conventional loans?

A

45%

178
Q

A basis point is what portion of a percentage?

A

1/100. E.G. 50 basis points is .5%

179
Q

Who violates RESPA Section 8, the payer of kickbacks or the reciever?

A

Both of them

180
Q

Can a lender deny a loan application to someone under 18?

A

Yes, they are not legally allowed to enter a traditional mortgage contract

181
Q

What are the four types of QMs?

A

General, temporary, small creditor, and balloon

182
Q

If an advertisement lists a finance charge, what must be disclosed within it?

A

The APR

183
Q

What is the only way you can inquire about maritial status according to ECOA?

A

Are you married, unmarried, or separated?

183
Q

How long does the MIP on an FHA loan apply for?

A

The full term of the loan, if it is a 30 year loan.

For loan terms 15 years or less, the MIP will be paid for 11 years.

184
Q

According to TILA, how long must the lender keep records for the Loan Estimate (LE), Closing Disclosure (CD) and everything else?

A

5 years for both the LE and CD; 2 years for everything else.

185
Q

What does the Economic Growth, Regulatory Relief and Consumer Proection Act do?

A

It requires credit reporting agencies to allow individuals to freeze their credit for free, preventing lenders from accessing their credit information. If a lender attempts to check the borrower’s credit, they will be notified of the freeze, stopping new credit from being issued until the freeze is lifted.

186
Q

What does the 1003 have regarding children that doensn’t violate ECOA?

A

Questions asking the borrower to list the number of dependents they have and their ages.

187
Q

What is Concurrent Ownership?

A

Situations where two or more individuals own a property together. This is a generalized term and could apply to either Joint Ownership or Ownership in Common for instance.

188
Q

What is Joint Tenancy?

A

A form of co-ownership where co-owners have equal shares and the right of survivorship (if one owner dies, their share passes to the surviving co-owners)

189
Q

What is Tenancy in Common?

A

Another form of co-ownership where each owner has a share of the property that can be unequal, and there is no right of survivorship.

190
Q

What is Ownership in Severalty?

A

Refers to a property owned by a single individual, not co-owned.

191
Q

What is the difference between a wet and dry closing?

A

A wet closing refers to a situation where the loan documents are signed, the loan is balanced, funded, and recorded on the same day.

A dry closing is where the loan is signed but not funded or recorded on the same day, which may occur if certain conditions aren’t met. A wet closing typically happens when all conditions for closing are satisfied promptly, allowing for immediate disbursement and recording.

192
Q

What is the difference between a pre qualification letter and a pre approval letter?

A

A pre-qualification letter is issued based on the borrower’s self-reported financial information, such as income and employment, but does not require verification of those details. Since the borrower has not provided verifying documentation, a pre-qualification letter is appropriate.

pre-approval letter requires verified financial information and a more thorough review.

193
Q

If an MLO fails to renew their mortgage loan originator license by December 31, reinstatement must be completed by what date?

A

March 31st

194
Q

When a borrower or MLO knowingly makes a false statement on a mortgage application, what is the potential punishment and fine from violating federal law?

A

Fine up to $1,000,000 and/or imprisonment up to 30 years

195
Q

What is a depository institution?

A

Depository Institutions (such as banks, credit unions, and savings and loan associations) typically have credit card or bank accounts, originate loans, and may also service loans. These institutions offer a variety of financial services, including loan origination and servicing, and they hold deposits from customers.

196
Q

What is a servicer?

A

Servicer: A servicer is responsible for managing and administering loans after they are originated, including collecting payments, managing escrow accounts, and handling defaults. They do not typically originate loans.

197
Q

What is a correspondent lender?

A

Correspondent Lender: A correspondent lender originates loans, but often sells them to other lenders or investors after closing. They may not service loans in the same way as a depository institution.

198
Q

What is a Mortgage Banker?

A

Mortgage Banker: A mortgage banker originates, funds, and may service loans, but they typically do not offer other banking services like credit cards or checking accounts.

199
Q

The GSEs developed a dataset to improve the quality and consistency of loan application data collection. What is this dataset called?

A

The dataset developed by the GSEs (Government-Sponsored Enterprises) to improve the quality and consistency of loan application data collection is called the Uniform Loan Application Dataset (ULAD).

The ULAD is used to standardize the data collected during the mortgage application process to ensure that lenders provide consistent and accurate information, making it easier for the GSEs (like Fannie Mae and Freddie Mac) to evaluate and purchase loans.

200
Q

What is the Telamarketing and Consumer Fraud and Abuse Prevention Act?

A

It is an act to help regulate against unwanted calling and deceptive calls. Included are the Telemarketing Sales Rules (TSR) which prevent deceiption and Do Not Call PRovision

201
Q

What can a lender procure to insure lender’s lien position?

A

Lender’s title insurance. Borrowers title insurance generally only covered them. While lenders title insurance generally only covers the lender.

202
Q

Who is responsible for correct completion of the URLA?

A

The MLO must insure it is complete and accurate to the best of their ability.

203
Q

What are the typical vanacy factor and occupancy factors underwritters use?

A

25% for vacancy and 75% for occupancy

204
Q

If a MLO fails to renew their license by December 31st, reinstanntement must be comleted by what date?

A

In general, February 28th.

However, some states require January 31st, and other states require a new MLO application.

205
Q

Dodd Frank considers an act or practice ____ (what) if it materially interferes with the abilility of the consumer to understand the term of conditions of the loan product.

A

Abusive

206
Q

A MLO who consistently understates APR is in violation of TILA and subject to what?

A

A fine of up to $5,000 and up to one year in prison

207
Q

Dodd frank defines a misleading act or practice as ___ (what) when it cannot be reasonabily avoided by consumers?

A

Unfair

208
Q

Howhigh above the APOR does the quoted rate need to be to be high priced?

What about non QM?

A

> 1.5% = high priced

> 2.25% = Non-QM

209
Q

What is a qualified mortgage?

A

A qualified mortgage is a loan that meets specific regulatory requirements set by the Consumer Financial Protection Bureau (CFPB). It ensures the borrower’s ability to repay and restricts risky features like interest-only payments, balloon payments, and negative amortization.

Loan structures covered: Fixed-rate mortgages, adjustable-rate mortgages (ARMs), and other standard loan types, as long as they do not include prohibited features like interest-only or balloon payments.

210
Q

What is a conforming mortgage?

A

A conforming loan is a mortgage that meets the standards set by Fannie Mae or Freddie Mac, such as maximum loan limits, credit score, and debt-to-income ratio requirements.
Loan structures covered: Primarily conventional loans (fixed-rate and adjustable-rate mortgages), but it can also include other government-backed loans if they meet GSE requirements (e.g., FHA, VA, USDA loans) within the conforming loan limits. However, most FHA, VA, and USDA loans are typically not considered “conforming” because they have separate eligibility and funding criteria outside Fannie Mae and Freddie Mac’s guidelines.

211
Q

How long can you call someone on the DNC list if you performed prior business for them?

A

18 Months

212
Q

How often must MLOs scrub their telemarketing lists against the DNC registry?

A

Every 31 Days

213
Q

How long do gift funds need to sit in an account to be able to be used in a mortgage transcation?

A

60 Days

214
Q

What system does a lender use to determine if a borrower is deliquent on any federal debt payments?

A

CAIVRS (Credit Alert Interactive Voice Response System) is the system used by underwriters to determine if a borrower is delinquent on any federal debt when underwriting an FHA loan. CAIVRS is a database maintained by the federal government that tracks borrowers who have defaulted on federal loans, such as student loans, government-backed mortgages, and other federal debts.

215
Q

Per FACTA, in a situation where a creditor discloses to a consumer credit reporting agency negative information the creditor must disclose that information to the consumer. The disclosure must be made to the consumer no later than:

A

30 Days after the negative information was provided

216
Q

A lender who does NOT comply with the Ability to Repay rules may be liable for how long if the borrower can prove it in court they did not qualify at the time of closing?

A

Up to 3 years

217
Q

To be exempt from a funding fee, the veteran must:

A

Be receiving VA compensation for a service-connected disability

218
Q

According to ECOA can you ask about maritial status if the person is looking to borrow as an individual?

A

no

219
Q

What type of loan does hoepa not apply to?

A

HOEPA applies to high cost loans only.

More specifically, it doesn’t apply to high cost Construction Loans.

220
Q

How far in the past must a (qualifying) felony be on a persons record for them to qualify as a MLO?

A

7 years

221
Q

What law requires risk-based pricing notices to applications that were denied or who are going to receive less favorable offers of credit?

A

FCRA

222
Q

What laws requirements can be satisfied by disclosing the Notice to Home Loan Applicant to borrowers?

A

FACTA

223
Q

What is Safe Harbor called when a QM loan is not considered a higher-priced mortgage?

A

A presumption of compliance and safe harbor

224
Q

If a borrower has filled out an applicated but not opted into communcaiton and they are registered on the DNC list, how long can you solicit them?

A

3 months

225
Q

How long does a MLO have to find a sponsor after passing the MLO test?

A

3 years

226
Q

How long is a MLO license valid for before they have to re-take the test if they leave the industry?

A

5 years

227
Q

NMLS requires how many years of employment history during application?

A

10 years

228
Q

How does the mortgage industry describe cash on hand?

A

In the mortgage industry, cash-on-hand refers to money that borrowers keep at home instead of depositing it into a bank account. This can be a concern for lenders because cash-on-hand is difficult to verify and may not be considered a reliable or acceptable source of funds for the down payment, closing costs, or reserves in a loan transaction.

229
Q

What NMLS form is used to apply for a license, amend a license, establish a relationship with a company, terminate a relationship with a company, or surrender/cancel a license?

A

MU4

230
Q

What are the different sections of the 1003?

A

Section 8 of the 1003 application (Uniform Residential Loan Application) notes the borrower’s sources of funds for closing costs, including information about the borrower’s assets and how they intend to cover closing costs (e.g., savings, gift funds, or a seller contribution).

Here’s what the other sections are used for:

Section 3: This section is used for Borrower Information and Employment History.
Sections 2a, 2b, & 4d: These sections are used for Property Information, Loan Terms, and Income & Employment Information, but not specifically for closing costs.

Section 1b: This section is for the borrower’s personal information like name, address, and contact details.

231
Q

NMLS licensing requires how many years past residence history with no gap without explanation.

A

10 years

232
Q

Which disclosure informs the consumer if the funding lender will retain their loan for servicing?

A

Loan Estimate

233
Q

What federal law requires yearly training on it of all employees for a lender to be compliant?

A

The BSA/AML (Bank Secrecy Act/Anti-Money Laundering) regulations require that all employees of a lender receive yearly training to ensure compliance with anti-money laundering and financial crime prevention laws. This training is essential for understanding how to detect and report suspicious activities, including money laundering and fraud, in accordance with the BSA/AML requirements.

234
Q

Under TILA, a lender is considered to have regularly offered credit if they extend more than how many times in the preceding calendar year:

A

25 times

235
Q

What section of the new URLA does the borrower have to declare whether or not they have had a foreclosure or bankruptcy?

A

Section 5b

236
Q

What is the name of the federally mandated website consumers may use to obtain a free copy of their credit reports annually?

A

annualcreditreport.com

237
Q

When reviewing a borrower’s bank statements, what is considered a large deposit?

A

Large deposits are defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan.

238
Q

If a borrower is refinancing their home and it is a multi-unit property and the borrower wants to use those rental funds, what will the underwriter require in addition to the appraisal?

A

If the subject property is the income property, the underwriter will require an additional addendum called the “Single-Family Comparable Rent Schedule”, form 1007. The addendum compares the rent generated by the subject property in comparison to other rental properties in the area.

239
Q

What is cross collateralization?

A

Cross collateralization is the act of using an asset that’s collateral for an initial loan as collateral for a second loan. In a situation with a mortgage that would be using the same house to collateralize two loans – so a first mortgage and second mortgage.

The borrower may get access to the equity in the home they are exiting, i.e. Selling, by getting a loan on the home which may secure the home they are leaving and buying.

240
Q

An MLO that commits a felony, not money related, he can obtain his MLO license after how many years?

A

7 years

241
Q

A client that is DNC registered but optened in by writting to receive communications can receive them for how long?

A

Unspecified. As long as they are opted in.

242
Q

If a MLO made a sale, how long are they legally allowed to contact that person if they are dnc registered?

A

18 months

243
Q

A mortgage broker licensee wishes to surrender his license. How is this handled?

A

They must notify the state licensing agency before closing their office

244
Q

Which fees can a borrower pay before closing?

A

The borrower can pay third party fees like appraisal fees or credit report fees as well as an application fee or commitment fee. The lender can’t require the borrower to pay other fees before closing.

245
Q

What are the current loan limtis for low and high cost areas for FHA mortgages?

A

$498k and $1,149k

246
Q

What are the current VA loan limits?

A

$766k for most counties and $1,149k for high cost areas

247
Q

What are the current conforming (conventional) loan limits for normal and high cost areas?

A

$766k and $1,149k

248
Q

What is the current USDA loan limit?

A

Generally $398k

249
Q

What are the 3 types of primary fha loans?

A

203b - purchase
203k - rehab
streamline refi - refi

SAFE MLO (1 decks)

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