MLO Prep Flashcards
What must a Maryland reverse mortgage applicant do before a lender may commit to a reverse mortgage loan?
The applicant must attest in writing that the lender provided a statement advising the applicant to get independent information and counseling.
Which of the following types of loans are covered by TILA and Regulation Z?
Reverse mortgages
If a mortgage lender approves a loan application, the approval can be verbal or written. If the lender denies the loan application, the lender must provide ______.
A written adverse action notice
Which one of the following stated justifications for rejecting a mortgage loan application fails to meet the requirements of Regulation B?
The applicant failed to meet the creditor’s internal standards.
Which one of the following laws focuses on unfair high-rate loan practices?
Home Ownership and Equity Protection Act
Which of the following fees is NOT subject to a zero tolerance?
Inspection services
Fees subject to the zero-tolerance category threshold include fees paid to the creditor, the mortgage broker, or any origination fees, such as origination charges, credit charges, adjusted origination charges, and transfer taxes. Inspection services are subject to a no or unlimited tolerance.
How many days after consummation does a creditor have to refund a borrower for a tolerance correction?
60 days
When must a lender provide a copy of a written valuation related to a mortgage loan application to a borrower?
Upon appraisal completion or three business days before loan consummation, whichever is earlier
TRID rules apply to which one of the following types of mortgage loans?
Refinances
A mortgage servicer receives a loss mitigation application from a borrower whose loan is in default. How many days does the servicer have to let the borrower know if there’s a way to save the property from foreclosure?
30 days
A borrower receives a CD that contains a Loan Costs table. The line for Loan Costs Subtotals will break down the sum of origination charges, services the borrower did not shop for, and services the borrower did shop for, according to which criterion?
Whether they were paid at or before closing
The subheading “Loan Costs Subtotals” breaks down the sum of origination charges, services the borrower did not shop for, and services the borrower did shop for, according to whether they were paid at or before closing.
Qualified mortgages have a limit on upfront points and fees. Assuming a loan amount of $50,000, the points can’t exceed ______ of the total loan amount.
5%
If the loan amount is $50,000, the points can’t exceed 5% of the total loan amount to be considered a qualified mortgage.
What is the top debt-to-income ratio limit for qualified mortgages?
43%
All of the following are stages of money laundering process except for which one?
Integration
Placement, layering, and integration are the main stages in money laundering schemes.
What is the minimum number of counseling agencies that the Homeownership Counseling Disclosure must provide to a consumer
10 Counselors
Which of the following is NOT true regarding an FHA loan as compared to conventional financing?
The required mortgage insurance isn’t required for the life of the loan.
All of the statements are true except for the statement about the required mortgage insurance. The mortgage insurance premium is required and is payable for the life of the FHA loan.
Under which circumstance may a creditor create a revised Loan Estimate to provide to the borrower?
New, unforeseen information about the transaction arose.
An MLO found a discrepancy between what a borrower reported on his loan application and the borrower’s documentation. What must the MLO do?
Take the loan file to a supervisor.
In this scenario, if an MLO found a discrepancy between documents and what the borrower reported, the MLO must investigate the discrepancy, then take the loan file to a senior person or supervisor for advisement on how to handle the situation. An MLO may not call a borrower and make accusations of fraud.
What does it mean for an MLO to use proper designations for mortgage products?
The words the MLO uses must reflect a true and clear representation of the loan product, its terms, and the property type.
Gary applied for a home equity line of credit from his federally insured bank so he could make some renovations to his kitchen. The same bank holds the note on Gary’s home mortgage. Will the HELOC be subject to RESPA requirements?
Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including home equity lines of credit.
RESPA applies to home equity lines of credit (HELOCs), so options A and B are incorrect. RESPA regulations apply to HELOCS made by federally insured financial institutions regardless of whether the new lender is the same as the original lender used for the home mortgage, so option D is wrong. Option C is correct.
Which of the following is a true statement regarding RESPA and the foreclosure process?
A lender has five days after receiving a loss mitigation application to acknowledge receipt and request any additional information.
Once the borrower submits a loss mitigation application, the lender has five days to acknowledge that the application was received and request any additional information, if necessary. If a borrower never submits a loss mitigation application, then the mortgage servicer must wait at least 120 days before filing for foreclosure.
A lender that was found to have engaged intentionally in discriminatory practices abandons the practices and instead imposes uniform policies that apply the same criteria to all applicants. How could the lender still be in violation of fair housing laws?
The new policies have a disparate impact on members of a protected class.
Even if the new policies are applied evenly and don’t intentionally discriminate against anyone, they could still violate the law if they have a disparate impact on people who are members of a class that’s protected under fair housing laws.
The Consumer Credit Protection Act, which includes the Truth in Lending Act, is often referred to as
Regulation Z
Albert received the CD on July 5, and consummation took place on July 8. On July 15, the creditor learned about an inaccuracy in the disclosure related to the amount Albert would have to pay. How long does the creditor have to send out corrected disclosures?
Until August 14, or 30 days after the inaccuracy was detected
What is the name of the law that says if advertising for available financing includes a trigger term, the ad must include certain disclosures?
Regulation Z
How must borrower Brenda provide her consent to receive electronic documents and utilize e-signatures?
Electronically
Edna has been notified by her creditor that her loan application was incomplete. Fortunately, she’ll be able to supply all of the missing information. How much time is the creditor required to give Edna to complete her application?
A reasonable amount of time designated by the creditor
What method may be used to provide a Loan Estimate to a consumer?
Not telephone or text message.
Yes on mail, hand delivered, emailed
Conventional loan DTI
36%
Different types of loans have different DTI thresholds. Conventional/conforming qualifying loans typically require 28% front-end ratios and 36% back-end ratios. FHA loans require a 31% front-end ratio and 43% back-end ratio. VA loans require no front-end ratio and 41% back-end ratio.
All of the following are stages of money laundering process except for which one?
Exchange.
Placement, layering, and integration are the main stages in money laundering schemes.
How many identity theft red-flag categories are there?
Five
Marcus is a loan originator whose company is a federal depository and manages the assets of others and is responsible for transferring assets to beneficiaries. Does he need to be licensed as an MLO?
No, he must be registered through the NMLS.
Marcus must be registered through the NMLS. Employees of depository institutions, such as trust companies, credit card banks, and industrial loan banks, don’t need to be licensed.
When does the title insurance company issue the title insurance policy?
Once the requirements have been satisfied, and the seller has delivered the deed to the borrower.
The final title insurance policy on a specific piece of property is issued only after the final settlement on the property has occurred, and specific conditions, as named in the title commitment, have been satisfied.
Which of the following items would an owner’s extended coverage (OEC) title policy cover?
Unrecorded mechanics liens.
Most OEC policies cover the owner’s for claims made based on unrecorded liens and encumbrances.
All of the following types of loans are subject to a right of rescission under TILA, except for which one?
Loans for a new home.
Loans that are being used to purchase a primary residence are exempt from the right of recission, which only applies to the refinancing a mortgage, HELOCs, and home equity loans, but not to purchases of new homes. Rescission rights also do not extend to commercial loans or construction loans.
If a mortgage lender approves a loan application, the approval can be verbal or written. If the lender denies the loan application, the lender must provide ______.
A written adverse action notice.
The written notice must be provided within 30 days, and must give the consumer the specific reasons for the lender’s action and describe what the consumer’s rights are under the ECOA.
When using the right _____, many mortgage calculations are simple arithmetic.
Formula
Which one of the following best describes an assumable loan?
A borrower can pick up paying the mortgage where the seller left off, assuming the buyer qualifies for the loan.
An assumable mortgage transfers to a qualified homebuyer. This can help the buyer realize considerable savings because it may include no points, no interest rate change, and lower closing costs.
Under the “Late Payment” heading of a LE, there is a statement that if 10 days pass after a payment is due, a $300 charge will apply. Does this statement conform to federal regulations? Why or why not?
Yes. This statement satisfies all aspects of the relevant regulation.
A Pennsylvania MLO submitted their renewal license application last month but recently learned it was denied. What is the most likely reason?
Having a current criminal conviction on their record
Hattie has hand-delivered a GFE to a loan applicant. However, the loan applicant hasn’t yet indicated whether he wants to proceed with the loan. At this point, what fee, if any, can Hattie impose on the loan applicant?
A fee covering the cost of investigating the applicant’s credit.
At this point, Hattie may charge the applicant an advance fee that is limited to the cost of a credit r
How does HOEPA address predatory lending?
The act includes requirements for certain home equity loans with high rates or high fees.
According to the FTC, HOEPA focuses on predatory practices relating to home equity lending, and includes requirements for certain loans with high rates or high fees.
Generally, what’s range can a borrower expect to pay for loan origination fees?
Loan origination fees can’t legally exceed 3%. When interest rates escalate, loan origination fees can vary greatly among loan service providers.
Which of the following best describes how and when the Dodd-Frank Act was enacted?
The act was a legislative response to the financial crisis of 2007 and2008. At the time of its enactment, it was considered one of the most sweeping legislative changes concerning the financial services industry.
How many identity theft red-flag sources do the identity theft rules identify?
The identity theft rules identify five identity theft red-flag sources for an organization to include in its written identity theft prevention program.
What does the Equal Credit Opportunity Act (ECOA) mandate regarding mortgage applications in Maryland?
ECOA mandates that lenders evaluate mortgage applications regardless of race, color, religion, sex, or national origin.
MLO Maggie asked her teammate Ken to review her first closing statement. The amount of prepaid mortgage insurance, taxes, and interest appear to be correct. In addition to itemizing what the borrower-paid closing costs are, he should also verify the prepaid section includes ______ for accuracy.
The prepaids cover what is paid at closing and what time period is included. This gives the borrower a glimpse into what will need to be paid in the near future.
What is the maximum fine an MLO may be charged for a violation of state rules?
civil penalty of as much as $34,401 per offense may be charged for licensees who violate license law.
The starting interest rate on an ARM is 3.2% and the loan has a cap structure of 2/3/10. What is the maximum possible interest rate for the loan after its initial adjustment?
The first number in an ARM’s cap structure states by how much the interest rate may increase at the initial rate adjustment. In this case, the loan may increase by as much as 2%, which means the 3.2% (start interest rate) may be increased by 2% (maximum increase), which brings it to 5.2%.
TRID rules apply to which one of the following types of mortgage loans?
TRID doesn’t apply to all loan transactions. While most closed-end loans secured by real property are subject to TRID rules, some loans are exempt, including reverse mortgages, HELOCs, loans secured by a mobile home or dwelling that is NOT attached to real property, and loans made by an individual or entity that makes five or fewer mortgages in a year and isn’t a creditor.
An MLO receives an application for a mortgage loan, but the loan applicant doesn’t have a checking account. Because of the unusual nature of the application, what should the MLO do?
A loan applicant without a checking account is an example of suspicious activity, which needs to be reported to the government. The MLO should fill out an SAR and submit it via the FinCEN E-Filing System.
What form assures the title company and the buyer that the seller has not introduced new title defects and has revealed any non-publicly known title defects?
The Affidavit and Agreement, sometimes called an affidavit of title, provides assurance from the seller that no new title defects have been introduced and all non-publicly known defects have been revealed.
If an applicant for an MLO license has been convicted of a felony involving forgery, fraud, or a similar crime, what does that mean for the license application?
At any time preceding the date of application, if the felony involved an act of fraud or dishonesty, a breach of trust, or money laundering the applicant will never be eligible for licensure.
Which one of the following laws focuses on unfair high-rate loan practices?
HOEPA focuses on unfair high-rate loan practices.
A newlywed couple want to purchase a home. They meet with a loan originator who helps them better understand their loan options. Does the MLO need to be licensed?
Under the SAFE Act, anyone engaged in making or brokering residential mortgage loans must be licensed or registered, including MLOs, mortgage bankers, and brokers.
A consumer has $625 in monthly debt obligations, and his anticipated mortgage payment is $1,828. His gross income is $9,869, and his net income is $7,895. What’s his housing ratio?
The housing ratio doesn’t include debt obligations and is calculated using gross income: $1,828 ÷ $9,869 = 0.1852 or 18.52%
Which one of the following is a true statement regarding the MCR in Oregon?
Licensees are required to submit a Mortgage Call Report to the NMLS every quarter. There are two types of MCR filings: expanded and standard. E-MCRs are required for Fannie Mae and Freddie Mac sellers/servicers and Ginnie Mae issuers. All other licensees should complete the Standard Mortgage Call Report (S-MCR)
Mortgage loan rescission allows a borrower to ______.
Retract a first lien mortgage loan after signing
UIs must be displayed on which of the following?
Loan advertisements, loan application forms, solicitations, business cards, websites, and other advertising documents must contain the MLO’s UI as assigned by the NMLS.
Joy and Darnell are selling their home to Earl. They’ve purchased owner’s title insurance for obtaining insurance of good title. Whom does the title insurance protect?
Title insurance is required when financing is being obtained. The owner’s policy protects the buyer from defects in the title, regardless of who made the purchase
Zenobia acquired a house one month ago for $500,000. She is now selling it for $575,000 to Anne, who is trying to secure a higher-priced mortgage loan for her purchase. Will it be necessary to carry out two appraisals of the property in accordance with Regulation Z? Why or why not?
Two appraisals are required in this case because Zenobia bought the property fewer than 90 days before Anne agreed to buy it and the price to be paid by Anne is more than 10% greater than what Zenobia originally paid for it
The Federal Trade Commission uses a “four Ps” test to evaluate whether a representation, act, practice, or omission might mislead a consumer. Which of the following set of terms do the four Ps represent?
Proximity, placement, presented, prominent
Which one of the following is a true statement about title insurance fees?
A borrower may see a change in fees by as much as 10%.
To which of the following fees does the 10% tolerance threshold NOT apply?
Origination fees are at a zero tolerance threshold, which allows no increases between the LE and CD. Recording fees, title services, and the lender’s title insurance are at a 10% tolerance.
What’s the title insurance representative’s responsibility at a closing?
The title insurance representative is responsible for the title search and for providing the buyer with proof of title. Most title representatives will also help prepare the parties, but that responsibility rests with the agents representing them.
Which of the following statements is NOT true about g-fees (also known as guarantee fees)?
A mortgage guarantee fee, also knows as a g-fee, is changed by Fannie Mae and Freddie Mac to guarantee a mortgage loan and cover administrative costs, losses in the event of borrower default, and a return on capital. Lenders indirectly pass these fees on to borrowers through higher interest rates.
Gabriela has sent a GFE to an applicant for a loan. She has learned that the applicant received the GFE today, but she has had no further communication with him. Is Gabriela allowed to charge the applicant a fee for an appraisal? Why or why not?
Gabriela may not charge additional fees until the loan applicant has both received the GFE and indicated his intention of proceeding with the loan described in the GFE
What does RESPA prohibit to protect borrowers from overcharges in a mortgage loan closing?
The Real Estate Settlement and Procedures Act (RESPA) is a consumer protection law that protects borrowers from overcharges by requiring disclosure and prohibiting kickbacks.
What is the primary purpose of the Bank Secrecy Act?
The BSA requires financial institutions and money services business to monitor transactions and keep records of any suspicious activities for any potential money laundering or fraud.
Abby, a loan applicant, has been given an LE. The section on late charges consists of a statement that late charges will apply 15 days after a payment is due. What else should this section of the LE include?
Federal regulations state that the “Late Payment” section of the LE must include both the amount of the late payment and the number of days that must pass before a late charge is imposed.
What’s the difference between conventional and federal mortgage loans?
Federal loans open the door to homeownership to many people who can’t get conventional loans, because federal mortgages require a lower down payment. They also tolerate buyers with lower credit scores than conventional mortgages do.
A borrower just received a large bonus, which she plans to use for the down payment of her house. For how many days must the money be in her bank account for her to be able to use the funds?
Moneys deposited in a financial institution must be in the borrower’s name and have been deposited for 60 days or more to be used.
At what stage of the loan transaction are title insurance fees due?
The title insurance fees are due at closing.
Manny is in the process of securing a mortgage loan. As he goes through his LE, he becomes curious about what penalty there might be for a late payment. In which section would he find this information?
Late payments are covered in the Other Considerations section on page three.
To accept a cash down payment gift from a donor, what will borrowers need to submit during loan origination?
To accept a cash gift from a donor and use it toward a down payment, borrowers will need to supply a written gift letter stating the amount and that it does not need to be paid back, as well as evidence of the fund transfer.
What is a loan’s APR?
A percentage showing the annual cost of a loan to the borrower, including interest
A lender has 90 days to provide a consumer with notice _____
That the lender is extending a counter-offer
Which Gramm-Leach-Bliley Act rule requires financial institutions to disclose policies and practices to consumers regarding information use and sharing and permit them to opt out.
The Privacy Rule.
Financial institutions are required under the GLBA to provide all customers with written notice of privacy policies and practices, regardless of whether the financial institution shares customer NPI with other third parties. If the financial institution does share NPI with third parties, privacy notices must also be provided to consumers who are not customers.
Which of the following fees may increase from the number provided on the Loan Estimate?
Fees paid to a third party selected by the borrower.
Fees that may not increase from the LE include fees paid to the creditor, the mortgage broker, an affiliate of the creditor or mortgage broker, transfer taxes, and fees paid to a third party if the creditor didn’t allow the borrower to shop for a provider.
What’s the first step in determining loan suitability for a consumer?
Determine the loan(s) for which the borrower qualifies.
Determining which loan for which a borrower qualifies is the first step in deciding loan suitability. Ultimately, if they are eligible for multiple loans, you must determine which loan will give them the most significant net benefit.
What is the applicable tolerance threshold when a borrower shops for lender’s title insurance and chooses a provider listed on the creditor’s preferred provider list?
10% tolerance threshold.
A 10% tolerance threshold includes fees related to third-party service providers and recording fees.
What type of insurance is a form of indemnity insurance that can protect both borrowers and their lender?
Title insurance.
Lenders require that borrowers obtain title insurance to protect them from financial loss due to title defects.
Which of the following statements about early disclosures, such as the CHARM booklet or Notice of Right to Receive Credit Score, is true?
The disclosures are required by law and must be provided within three business days from the date the application is signed.
Certain federal laws require additional specific disclosures to be provided to the borrowers within three business days from the date the application is signed, such as the CHARM booklet.
How many rules does the Gramm-Leach-Bliley Act have for financial institutions and consumer information privacy?
Three.
The Gramm-Leach-Bliley Act has three primary rules related to financial institutions and consumer information privacy: the Safeguards Rule, the Privacy Rule, and the Pretexting Rule
Susan is changing employers and has submitted her resume to a state-licensed mortgage company. The company is located in Florida, and Susan is in Georgia. While waiting to hear back from the company on an offer, she plans to proactively obtain temporary authority to continue working as an MLO. What’s wrong with Susan’s plan? Choose the best answer based on the scenario.
She’s not yet employed by the state-licensed mortgage company where she applied.
In this scenario, we don’t know if Susan has been a registered MLO one year preceding the application submission or for 30 days preceding the application date. We know that the state-licensed mortgage company does not yet employ her, therefore Susan can’t ask for temporary authority.
authority.
What is the purpose of the verification of deposit form?
It allows the lender to verify the cash deposits listed on the applicant’s loan application.
The institution provides an average balance for the previous two months. The form allows the lender to verify cash deposits. Privacy acts prohibit the depository institution from releasing this information without the account holder’s authorization.
Which two forms are required by TRID rules to be used in all lender-financed residential closings?
Loan Estimate and Closing Disclosure.
TRID rules require the LE and CD to be used for all residential closings.
The Federal Housing Administration (FHA) adjusts loan limits for each county ______
Annually
Loan limits are reviewed annually and may be adjusted at each review.
If a non-U.S. citizen who is in the country on a work visa wants to obtain a mortgage loan, which one of the following documents is a lender least likely to want to examine?
A form of identification issued by a U.S. state.
Because lenders want confirmation that borrowers of this kind will stay in the United States long enough to pay off their loans, they might also ask to see a work contract lasting up to three years, along with a positive credit history, bank statements, and tax returns for the previous two years.
Which of the following loan types is exempt from the requirement to provide an LE?
An adjustable-rate home mortgage equity plan.
An adjustable-rate home mortgage equity plan is exempt from the TRID rule requirements.
Before closing a mortgage loan, which of the following must the lender provide to the borrower to confirm the lender’s commitment to fulfill the loan’s terms?
A lock-in agreement.
Before closing a mortgage loan, the lender must provide a lock-in agreement to the borrower. This serves as the lender’s commitment to fulfill the loan terms.
Which of these borrowers would benefit the most by receiving lender credits?
Anne, who has very little money to put down, but expects her salary to increase soon.
Anne is the most likely to benefit from lender credits, because they help borrowers who can handle a higher interest rate in exchange for receiving help with down payments or closing costs
Andy ran an advertisement that misrepresented the interest, payments, or other terms with inaccurate usage of “fixed” to describe them. This is misrepresentation of the ______ of the terms.
Variability.
“Variability” refers to the interest, payments, or other terms, and the loose usage of “fixed” to describe them. Variable terms must be clearly represented in an ad so that a consumer doesn’t misunderstand and believe the terms are fixed for the life of the loan.
Variability
“Variability” refers to the interest, payments, or other terms, and the loose usage of “fixed” to describe them. Variable terms must be clearly represented in an ad so that a consumer doesn’t misunderstand and believe the terms are fixed for the life of the loan.
Until August 31, or 30 days later.
A creditor must notify an applicant taken with 30 days after receiving a completed application concerning the creditor’s adverse action on the application
What is the purpose of the Fair Credit Reporting Act?
It regulates how lenders may use consumers’ credit report data.
Which of the following best defines an annual percentage rate (APR)?
A standardized measure for interest rates and other costs of the loan.
Regulation Z requires lenders to use a standardized measure for interest rates, which is the APR.
The Simons have a $300,000 mortgage loan for their home. A month after closing, the previous owner’s heir claims that he should own the house. After a court battle, the court rules in favor of the heir. Since the lender required the Simons to pay for a(n) ______, the lender’s investment is protected and the lender will be reimbursed for the damages.
Lender’s title insurance policy.
The lender’s title insurance policy is issued to mortgage lenders. The lender’s policy provides coverage only to the mortgage lender. The primary purpose for a lender’s policy is to protect current and future lenders from losses.
What portion of the MCR needs to be filed with the NMLS only once a year in Oregon?
Standard FC.
The RMLA must be filed quarterly for both expanded and standard filers. For standard filers, the FC must be filed annually, but no later than 90 days after the end of the fiscal year. For expanded filers, the FC must be filed every quarter.
Rob and Jill obtained a mortgage from Taylor Bank & Trust in 1998. In 2014, they obtained a second mortgage from Quail Loans. What is the loan with Quail Loans considered?
Junior mortgage.
Second mortgages are generally placed in junior position (subordinate to the first mortgage).
What does the CFPB’s loan originator rule do?
It regulates how compensation is paid to a loan originator in most closed-end mortgage transactions.
The CFPB’s loan originator rule regulates how loan originators receive compensation in closed-end mortgage transactions.
The SAFE Act requires all MLOs to complete at least ______ hours of continuing education each year to maintain an active license.
Eight.
To keep their license active, MLOs must complete at least eight hours of continuing education, broken down into three hours on federal laws and regulations, two hours on ethics, and two hours on nontraditional mortgage products. States may require additional CE hours.
An applicant who has been found guilty of which of the following crimes would automatically be denied an MLO license?
Applicant A has a misdemeanor for fraud on her record from eight years ago.
An applicant guilty of any misdemeanor of fraud, breach of trust, dishonesty, or any felony relating to such does not qualify for an MLO license or registration.
Which document is used to establish proof of ownership and to transfer the title?
Deed
The USA PATRIOT Act expanded the scope and requirements of which other federal law?
The Bank Secrecy Act
What is a preliminary title report?
An agreement by a title insurer to issue the final title insurance policy on the property
Sarah is worried that there might be defects with the title on the property she is purchasing. Which document will best protect her from any title defects after closing?
The title commitment comes before closing; the title insurance policy is issued after closing. The commitment says that a title company is willing to issue title insurance under certain conditions. The policy provides coverage for the property.
Can a non-U.S. citizen who is in the country on a work visa get an FHA loan?
Yes. However, proof of employment and a Social Security number are required.
People who are here on a work visa can buy property, and they can even take out FHA loans. However, to secure the loan, they must provide proof of employment and a Social Security number.
The federal Fair Housing Act includes the protected classes of ______.
The federal Fair Housing Act includes seven protected classes (race, color, religion, national origin, sex, familial status, and disability) and applies to the sale, rental, or financing of residential property.
Which one of the following best describes an HPML?
Any loan for which the lender charges points and fees that exceed certain established limits
A prospective borrower applied for an FHA-insured loan. The lender determined that the borrower may qualify for a similar conventional mortgage loan product. What must the lender do?
The lender must provide an Informed Consumer Choice Disclosure Notice to the applicant within three business days of receiving the loan application.
One of the primary purposes of the USA PATRIOT Act is to require financial institutions to ______.
Turn in suspected terrorists
RESPA prohibits kickbacks between _____.
Settlement service providers
Before an MLO is sponsored, what must happen?
A company relationship with the individual must be established.
The longest repayment period for conventional loans is ______.
While 15- and 30-year loans are frequently seen, conventional loans may be for terms as long as 40 years.
Which of the following tasks may a servicer NOT charge for when working with an escrow account?
Sending regular reports to borrower for escrow status.
The servicer may charge fees for the initial escrow account establishment, annual account management, and for the borrower choosing to pay property fees without an escrow account.
If an appraiser is hired to appraise a property in her neighborhood, does she face a potential conflict of interest?
Yes, if she has a personal or financial relationship with anyone involved in the transaction.
Appraisers must avoid conflicts of interest, including those arising from personal or financial relationships with buyers, sellers, or anyone involved in the transaction. Even working in the same area as the appraiser doesn’t automatically create a conflict unless there’s a direct connection to the transaction.
Which of the following illustrates commingling in Arizona?
Placing a client’s escrow funds into a non-escrow fund account.
Commingling is combining trust funds with non-trust funds, and it’s illegal.
One difference between the USDA-guaranteed loan and the USDA direct loan is that ______.
The borrower must be extremely low income to qualify for a USDA direct loan.
The direct loan is only available to very low-income families (50 to 80% of the median income for the area) who must be without safe and sanitary housing conditions and unable to obtain a loan elsewhere. Payment subsidies are available.
The CFPB’s interpretation of the requirements for the Prepaids section of the CD connects this section to the parallel section in which other document?
The LE.
The CFPB guidance on prepaids in the CD connects this section to the requirements for the corresponding section in the LE.
What is the purpose of a preliminary title report?
Offers to issue a title insurance policy.
A preliminary title report is only an offer to issue a policy of title insurance. It also provides an overview of the title’s condition.
What significant change in forms occurred with the Know Before You Owe special initiative?
The disclosure rule replaced four forms with only two disclosure forms: the LE and CD.
The Know Before You Owe special initiative disclosure rule replaced four forms with only two forms, the LE and CD, which are easier to understand and use.
A creditor received an incomplete loan application and has chosen not to reject the application just yet. Does the creditor have any option at this point other than sending the applicant a written notification that the application is incomplete?
Yes. The creditor can ask the applicant orally to complete the application.
A creditor who has received an incomplete loan application has the option of informing the applicant verbally that more information will be needed to complete the application.
In addition to prohibiting kickbacks and referral fees that drive up the cost of closing, what does RESPA focus on?
Consumer disclosures relating to financing costs.
RESPA focuses on the prevention of kickbacks or referral fees and on proper disclosures to consumers related to the cost of a mortgage loan.
MLO applicants must permit a credit report to be pulled so states can evaluate whether the applicant demonstrates ______.
Financial responsibility
If a lender takes adverse action on an applicant’s mortgage loan application, what must the lender provide to the applicant?
Notification describing the adverse action taken, but use of the term “adverse action” is not required.
Either a statement of specific reasons for the adverse action must be included in the notification, or a disclosure of the applicant’s right to such a statement must be provided to the applicant. Either way, lenders must notify the applicant of adverse action, but the term “adverse action” doesn’t need to be used.
During an MLO’s loan application file review, he noted that a deposit of $8,000 was put in the applicant’s checking account 30 days ago. Before this deposit, the applicant typically had $1,800 deposits every two weeks from her employer. The applicant didn’t include any documentation related to the deposit. What type of red flag is this?
Bank activity.
In this scenario, the red flag involves the applicant’s bank activity. The $8,000 deposit stands out because it’s unusual, it’s larger than typical deposits in the account, and there’s no documentation to support it. The MLO should ask for additional documentation.
Enacting the Dodd-Frank Act led to all of the following except for which one?
Requiring financial customer verification programs.
When the Dodd-Frank Act was first passed, it placed a lot of restrictions on smaller institutions, including community banks, by implementing the Qualified Mortgage Rule. Dodd-Frank also led to the creation of the CFPB and revisions to existing loan disclosures (which resulted in the TILA-RESPA Integrated Disclosure, or TRID).
Which loan disclosure is published by the CFPB to help consumers understand real estate transactions?
Special Information Booklet.
The Special Information Booklet is a document published by the CFPB to help consumers who apply for mortgage loans understand real estate transactions. It must be provided to consumers within three business days of a loan application being submitted, just like the Loan Estimate.
A non-U.S. citizen who has received refugee status may apply for a mortgage after securing which document or documents?
Form I-94, or an official employment authorization document and residency verification.
Once refugees or asylum grantees have obtained a Form I-94, or an official employment authorization document and residency verification, they may apply for a mortgage.
Patrick’s clients have had two revised LEs. When must they receive the final LE?
At least four business days before closing.
When is the final deadline for renewing licenses?
MLOs who do not renew by December 31, will have a status of “Terminated – Failed to Renew”. MLOs who do not renew or reinstate their license will be required to reapply for licensure.
How long does a mortgage servicer have to refund escrow funds to the borrower?
A mortgage servicer has 20 business days to disburse any balance from the escrow account.
What is the name of the disclosure that provides a list of counselor agencies to consumers, providing independent advice as to whether the mortgage loan terms are a good fit for them?
The Homeownership Counseling Disclosure
Creditors must retain completed CD forms for at least ______ years from the date of completion.
5 Years
Creditors must retain completed CD forms for at least five years from the date of completion. Should a creditor sell or transfer a mortgage loan to another party, the creditor must provide the new owner with a copy of the disclosures.
When can loan transaction disclosures be sent to consumers electronically?
Only when the consumer provides written consent
