MLO Test Ready Flashcards

Question 1

Q

When ordering an appraisal, it is illegal to. . .

Answer

A

Request that the appraiser return a minimum or specific value. Mortgage professionals are permitted to communicate their own or the borrower’s opinion when ordering an appraisal; however, requesting a specific or minimum value is considered improper influence of an appraiser and is a serious ethical and legal violation.

Question 2

Q

Borrower credit is…

Answer

A

An amount paid by the lender to borrower for locking an interest rate at a rate higher than the par rate. The borrower credit is used to help the borrower subsidize closing costs in exchange for taking the higher rate.

Question 3

Q

MAP Rule implementing regulations…

Answer

A

Regulation N

Question 4

Q

Equity stripping is…

Answer

A

The unethical practice of basing a loan approval on only the appraised value of the property. The practice does not consider repayment ability. Some states have passed regulations aimed at prohibiting the practice.

Question 5

Q

Three conditions that an affiliated business must meet to satisfy referral requirements…

Answer

A

Disclosure of the relationship

No required use of the referred entity

Limitations on the “things of value” resulting from the arrangement

Question 6

Q

Regulation Z prohibits advertising…

Answer

A

An attractive interest rate or loan term that is not actually available. TILA and Regulation Z include a number of prohibitions and requirements against deceptive advertising practices.

Question 7

Q

The Safeguards Rule and Disposal Rule are concerned with…

Answer

A

Preserving the confidentiality of personal financial information. The FTC’s Disposal Rule and the Gramm-Leach-Bliley Act Safeguards Rule outline the manner in which financial information must be protected while being maintained by an entity and during the process of record disposal.

Question 8

Q

“Fiduciary duty” means…

Answer

A

One person (agent) is acting in the best interests of another. It requires loyalty, good faith, and an obligation of the agent to consider the interests of the other person before their own.

Question 9

Q

An air loan is…

Answer

A

A fraudulent transaction where a fictitious borrower obtains a mortgage and secures it with fictitious property. Air loans may also include fictitious employers, appraisers, and credit agencies in order to obtain verifications necessary to process the loan application.

Question 10

Q

Equity-based lending occurs when…

Answer

A

A lending decision is based on the equity available in the borrower’s home rather than creditworthiness and ability to repay.

Question 11

Q

Yield spread premiums are now known as…

Answer

A

Borrower credits.

Question 12

Q

What are the penalties for violation of RESPA/Section 8?

Answer

A

Section 8 of RESPA prohibits referral fees and other forms of kickbacks/fee splitting. Penalties include fines of up to $10,000 and up to one year in prison.

Question 13

Q

Disclosures due within three business days of loan application…

Answer

A

Loan Estimate

Your Home Loan Toolkit: A Step-by-Step Guide

CHARM Booklet

Variable-rate program disclosures

Home equity plan disclosures

Notice of Right to Receive an Appraisal Report

Question 14

Q

What can result in a $1,000,000 fine and 30 years in prison?

Answer

A

Acts of mortgage fraud.

Question 15

Q

Definition of the term “creditor”

Answer

A

The Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA), and the Fair and Accurate Credit Transactions Act (FACTA) all use the same definition of creditor. A creditor is any person who regularly extends, renews, or continues credit. Loan originators, lenders, and other mortgage professionals are included in this definition.

Question 16

Q

Transactions reported under HMDA…

Answer

A

Purchases

Refinances

Home improvement loans

Pre-qualifications must also be reported, along with their disposition

Question 17

Q

When a borrower’s LTV reaches 80%…

Answer

A

He/she is permitted to request cancellation of PMI. The Homeowners Protection Act sets the requirements for cancellation of PMI. It is at the lender’s discretion to permit cancellation – the borrower must be current on payments.

Question 18

Q

An initial privacy notice is due…

Answer

A

At the time that a customer relationship is established. The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an initial privacy notice “…not later than when you establish a customer relationship…” The initial privacy notice should also be accompanied by the opt-out notice.

Question 19

Q

HMDA requires loan originators to…

Answer

A

Request information on an applicant’s race, ethnicity, and sex. The applicant may decline to answer, in which case the loan originator must make a best guess based on visual observation. This information is necessary to meet the reporting requirements of HMDA.

Question 20

Q

A permissible purpose is required…

Answer

A

When obtaining a credit report. Under FCRA, lenders and mortgage professionals must provide the consumer reporting agency with a certification of permissible purpose in order to pull credit. Loan qualification is considered a permissible purpose.

Question 21

Q

The Gramm-Leach-Bliley Act does not protect…

Answer

A

Publicly-available information. This includes information that can be found in government real estate records, information available from the phonebook, and information included on a public, unrestricted website.

Question 22

Q

The Loan Estimate must be provided…

Answer

A

No later than three business days after receiving a completed application

No later than seven business days prior to consummation

Question 23

Q

The Closing Disclosure must be provided…

Answer

A

At least three business days prior to consummation

Question 24

Q

Exceptions to ECOA prohibited inquiries…

Answer

A

Although ECOA prohibits inquiries about protected personal characteristics, mortgage professionals are permitted to ask about race, ethnicity, and sex for the purposes of compliance with government monitoring programs (such as HMDA). Inquiries about protected characteristics may also be used to determine eligibility for special-purpose credit, such as assistance programs through non-profits.

Question 25

Q

The purpose of the Homeowners Protection Act is to…

Answer

A

Facilitate the cancellation of private mortgage insurance (PMI). Borrowers can request cancellation when their loan reaches 80% loan-to-value (20% equity), but the law requires automatic termination of PMI at 78% LTV (22% equity).

Question 26

Q

Advertising trigger terms for closed-end loans under TILA include…

Answer

A

Amount or percentage of any down payment
Number of payments or period of repayment
Amount of any payment
Amount of any finance charge

Question 27

Q

Use of trigger terms in advertisements requires disclosure of:

Answer

A

Amount and percentage of the down payment
Terms of repayment, such as inclusion of a balloon payment
Annual percentage rate

Question 28

Q

The TRID Rule does not apply to…

Answer

A

HELOCs

Reverse mortgages

Mortgages secured by a mobile home or dwelling not attached to real property

Question 29

Q

Fee splitting is illegal when…

Answer

A

One or both settlement service providers fail to perform enough work to earn the fee.

Question 30

Q

“Low monthly payments” is an example of…

Answer

A

An advertising trigger term under Regulation Z. TILA/Regulation Z requires additional information to be provided in an advertisement that contains trigger terms. Most commonly, APR must be provided if the advertisement includes the note rate.

Question 31

Q

Regulation B…

Answer

A

Is the regulation that issues the rules for the Equal Credit Opportunity Act.

Question 32

Q

Credit not covered by TILA…

Answer

A

Business or agricultural credit

Credit in excess of $25,000, unless it is secured by a dwelling/real property

Public utility credit

Student loans

Home fuel budget plans

Question 33

Q

When a borrower reaches a 20% equity position…

Answer

A

He/she is permitted to request cancellation of PMI (private mortgage insurance). The Homeowners Protection Act sets the requirements for cancellation of PMI. It is at the lender’s discretion to permit the cancellation at 80% LTV – the borrower must be current on payments.

Question 34

Q

The PATRIOT Act requires…

Answer

A

Financial institutions to verify the identity of a person applying for a loan, maintain a record of the information used for verification, and determine whether a potential borrower appears on known terrorist lists.

Question 35

Q

Nonpublic personal information is…

Answer

A

Information derived from a credit report or provided with respect to loan application. Examples might include loan balances, account numbers, unlisted phone numbers, etc. Nonpublic personal information is protected by the provisions of the Gramm-Leach-Bliley Act.

Question 36

Q

Where is borrower credit disclosed?

Answer

A

Borrower credit – an amount paid to a mortgage loan originator by a lender for locking a loan in at an interest rate above the par rate – must be disclosed on the Loan Estimate and Closing Disclosure. Updated versions of the forms are intended to make disclosure of borrower credit clearer to borrowers.

Question 37

Q

What purpose does escrow analysis serve?

Answer

A

An aggregate escrow analysis (Annual Escrow Statement) is provided to borrowers annually, pursuant to Section 10 of RESPA. Its purpose is to prevent escrow overages. According to Section 10, the cushion of funds maintained in the escrow account cannot exceed one sixth (two months) of the annual cost of taxes and insurance.

Question 38

Q

Regulation X…

Answer

A

Is the regulation that issues the rules for the Real Estate Settlement Procedures Act.

Question 39

Q

Who issues and enforces regulations for TILA?

Question 40

Q

When must APR be initially disclosed?

Answer

A

APR must be initially disclosed within three business days of application.

Question 41

Q

Following initial disclosure of APR, when can the transaction proceed to closing?

Answer

A

The transaction can proceed to closing after seven business days have elapsed from issuance of the initial Loan Estimate.

Question 42

Q

Protected characteristics under ECOA include…

Answer

A

Race

Color

Religion

National origin

Sex

Marital status

Age

Receipt of income from a public assistance program

Exercise of rights under the Consumer Credit Protection Act, including the Truth-in-Lending Act

Question 43

Q

Purpose of HMDA…

Answer

A

The Home Mortgage Disclosure Act is a reporting law that helps the federal government identify discriminatory lending practices. It also ensures that depository institutions are meeting the needs of their communities. HMDA requires mortgage professionals to report information about loan transactions and demographics (race, sex, etc.) of applicants.

Question 44

Q

When multiple parties have rescission rights…

Answer

A

Any one of them may exercise the right to terminate the transaction. Under TILA/Regulation Z, an individual has rescission rights when he/she has an ownership interest in the property. The individual does not necessarily have to be a party to the loan transaction.

Question 45

Q

A revised Loan Estimate is required…

Answer

A

If a floating rate is locked.

Question 46

Q

The definition of a business day that applies to deadlines for providing the Loan Estimate is…

Answer

A

Any day on which the creditor’s offices are open to the public for carrying out substantially all business functions.

Question 47

Q

What is the Servicing Transfer Statement?

Answer

A

Required under Section 6 of RESPA, the Servicing Transfer Statement advises a borrower when their loan has been transferred to another servicer. It must be provided 15 days prior to the servicing transfer. The new servicer must also provide notice within 15 days after the transfer and may not assess late fees for a period of 60 days following the transfer.

Question 48

Q

A revised Loan Estimate is due…

Answer

A

Within three business days of receiving information prompting the change and at least four business days prior to consummation.

Question 49

Q

TILA covers loans when…

Answer

A

The borrower’s dwelling secures the mortgage debt

The homeowner uses the proceeds of the loan for personal, family, or household purposes

Question 50

Q

Prohibitions under ECOA include…

Answer

A

Inquiries about protected characteristics

Discouraging applicants from applying for a loan

Refusing to consider public assistance, alimony/child support, or pension/retirement benefits as income

Assumptions, inquiries, or credit decisions based on childbearing or child-rearing plans

Question 51

Q

What is PMI?

Answer

A

Private mortgage insurance is required by conventional lenders when a borrower makes a down payment of less than 20% (or has less than 20% equity). It is governed by the Homeowners Protection Act and must be discontinued when the loan reaches 78% loan-to-value (22% equity), assuming the borrower has met the terms of the agreement to that point.

Question 52

Q

Borrower identity verification is required under…

Answer

A

The USA PATRIOT Act. The Act requires financial institutions to verify the identity of persons involved in financial transactions, as a counter-terrorism measure.

Question 53

Q

Regulation Z…

Answer

A

Is the regulation that issues the rules for the Truth-in-Lending Act.

Question 54

Q

What is the Notice of Right to Cancel?

Answer

A

It is a disclosure providing notice of the right to rescind certain lending transactions. It is due at closing for refinances and other types of home equity loans, such as HELOCs. Two copies must be provided to each person with ownership interest in the property.

Question 55

Q

When is the Mortgage Servicing Disclosure provided?

Answer

A

It is included on the Loan Estimate, which is due within three business days following application. If the loan application is for a reverse mortgage, open end mortgage or for a temporary loan, the disclosure is due within 3 business days following a loan application.

Question 56

Q

Requirements for “Your Home Loan Toolkit: A Step-by-Step Guide” include:

Answer

A

Only one copy is required for multiple borrowers

The booklet can be reproduced in any form

The booklet can be translated into other languages

The booklet can be stamped with a business/mortgage professional’s name

The booklet cannot be made part of other, larger documents

Question 57

Q

What is APR?

Answer

A

The annual percentage rate is the cost of credit expressed as a percentage. It includes the interest on the loan as well as any finance charges. It must be disclosed to a consumer within three business days of loan application, along with the finance charge, and must be accurate within one eighth of 1%.

Question 58

Q

Loans not covered by RESPA include…

Answer

A

Loans for:

Business, commercial, or agricultural purposes

Temporary financing (bridge loans)

Vacant land

Loan conversions

Question 59

Q

The Closing Disclosure is due…

Answer

A

No later than three business days prior to consummation.

Question 60

Q

What are the penalties for violations of ECOA?

Answer

A

Violators of ECOA can face civil penalties of $5,000 per day. A pattern of misconduct can result in civil penalties of $25,000. Punitive damages can result in fines of up to $10,000 in individual actions or the lesser of $500,000 or 1% of the violator’s net worth.

Question 61

Q

The purpose of FCRA is…

Answer

A

The Fair Credit Reporting Act (FCRA) is aimed at ensuring the accuracy, fairness, and privacy of consumers’ personal information that is assembled and used by consumer reporting agencies.

Question 62

Q

An Opt-Out Notice is due…

Answer

A

At the same time as the Initial Privacy Notice - i.e., when a customer relationship is established. The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an Opt-Out Notice with a method for customers to opt out of the sharing of their personal information.

Question 63

Q

Phone numbers remain on the Do-Not-Call Registry….

Answer

A

Indefinitely. Amendments to the Telemarketing Sales Act in 2007 permit consumers to place their telephone numbers on the Registry indefinitely.

Question 64

Q

Responsibility for delivering the Closing Disclosure belongs to the…

Answer

A

Creditor.

Answer 64

A

At or before consummation.

Answer 65

A

The new servicer cannot assess late fees for a period of 60 days.

Answer 66

A

The finance charge is the cost of credit expressed as a dollar amount. Finance charges include interest and other fees paid in conjunction with the loan transaction, such as broker fees and points. It must be disclosed to a consumer within three business days of loan application, along with the APR, and must not be understated by more than $100

Answer 67

A

Anyone with an ownership interest in the property.

Answer 68

A

Must be taken by consumers within five years of a violation. An exception exists in that if an Attorney General initiates action, the aggrieved consumer may take action within one year of the initiation of proceedings.

Answer 69

A

The Fair and Accurate Credit Transactions Act (FACTA) was passed as an amendment to the FCRA. It includes provisions to address identity theft, facilitate consumers’ access to the information retained by CRAs, and improve the accuracy of consumer reports.

Answer 70

A

Loan Estimate

Answer 71

A

A change in the APR

A change in the loan product

Addition of a prepayment penalty

Answer 72

A

Are prohibited

Answer 73

A

To promote the availability of credit to all creditworthy applicants, regardless of their race, color, religion, national origin, sex, marital status, or age. It also prohibits discrimination against credit applicants based on receipt of public assistance or participation in credit counseling programs (exercise of rights under the Consumer Credit Protection Act).

Answer 74

A

Charges to record the mortgage

Transfer tax

Other charges established by the state or municipality

Answer 75

A

Under RESPA, “things of value” are any payment, advance, loan, or service, including: money, discounts, commissions, salaries, stock, opportunities to participate in a money-making program, special banking terms, tickets to theatre or sporting events, services at special rates, and trips at another’s expense. Things of value are illegal when they are provided in exchange for referrals.

Answer 76

A

A violation of RESPA/Regulation X. Referral fees are considered unearned fees under RESPA. Any “thing of value” (money, gifts, discounts, etc.) given in exchange for a business referral is illegal under Section 8 of RESPA.

Answer 77

A

For refinances and other home equity loans, such as HELOCs. The loan must be secured by the borrower’s principal residence. The right to rescind the loan generally must be exercised within three business days of closing.

Answer 78

A

Under ECOA, loan applicants must be advised of the status of their application within 30 days of application. If their application is turned down, they must receive a Notice of Adverse Action advising them of the reason for denial as well as a number of other rights.

Answer 79

A

Yield spread premiums were fees paid by a lender to a mortgage loan originator for originating a loan at a rate higher than the par rate. It was intended to provide a resource for originators to subsidize borrower closing costs. Now referred to as borrower credit, these fees are applied to the costs of closing, to benefit the borrower.

Answer 80

A

The lender must return any money or property paid by the borrower in connection with the loan. This might include broker fees, application fees, and third-party settlement fees.

Answer 81

A

Total of payments

Finance charge

Amount financed

APR

Total interest percentage

Other disclosures (appraisal, contract details, liability after foreclosure, refinance, tax deductions)

Questions? box

Contact information

Confirm receipt box (signature of borrower[s])

Answer 82

A

Fines of up to $10,000 and one year in prison. Accepting a fee in exchange for a referral is a violation of RESPA/Regulation X.

Answer 83

A

The Truth-in-Lending Act is a consumer protection law aimed at providing consumers with disclosure of the cost and terms of credit. It also ensures that advertisements are truthful and allows borrowers to rescind (cancel) certain types of transactions.

Answer 84

A

The Do-Not-Call Implementation Act was passed under the Telemarketing Consumer Fraud and Abuse Prevention Act/Telemarketing Sales Rule. It is a consumer protection law that permits consumers to restrict unwanted sales calls to their homes.

Answer 85

A

“Your Home Loan Toolkit: A Step-by-Step Guide” provides information on the settlement process, explains consumer rights under RESPA, and warns against the use of false information on the loan application. It applies to purchase transactions only and is due within three business days of application.

Answer 86

A

The Red Flags Rule was created by the Federal Trade Commission under FACTA. The purpose is to address identity theft by focusing on methods of detecting a security breach.

Answer 87

A

“Calculating Cash to Close” table

Summaries of transactions

Answer 88

A

The Gramm-Leach-Bliley Act does not include any specific penalties, but authorizes regulating agencies to bring enforcement actions and impose penalties. The FTC can bring action against mortgage brokers under the Federal Trade Commission Act. This Act provides for penalties of up to $10,000.

Answer 89

A

Loan Costs table

Other Costs table

Calculating Cash to Close table

Adjustable Payment table

Adjustable Interest Rate table

Answer 90

A

The Affiliated Business Arrangement Disclosure. Required by RESPA, it advises loan applicants that an affiliated business arrangement exists and lets them know that they are not required to use the referred entity.

Answer 91

A

Creditors to create a policy to identify and mitigate the risks of identity theft. The Red Flags Rule was created by the FTC pursuant to FACTA.

Answer 92

A

TILA does not address penalty amounts for open-end mortgage loans. For closed-end loans secured by a dwelling, the civil penalty is at least $400 and up to $4,000. The criminal penalty includes a fine of up to $5,000, imprisonment for up to one year, or both.

Answer 93

A

Federally-regulated mortgage loans. This includes first and second liens and is such a broad definition that RESPA applies to virtually all residential mortgages secured by real property.

Answer 94

A

Title insurance and title examination fees, doc prep fees, notary fees, seller’s points, and appraisal/credit report fees (if they are charged to all applicants as part of loan application).

Answer 95

A

Under ECOA, loan applicants who have been turned down (adverse action) have the right to receive a copy of their appraisal report. They must be provided with disclosure of this right using the Notice of Right to Receive an Appraisal Report. The notice is due no later than three business days after a creditor receives an application for a loan secured by a first lien on a dwelling.

Answer 96

A

TILA-RESPA Integrated Disclosure Rule

Answer 97

A

At the time of the referral. The Affiliated Business Arrangement Disclosure is required only if customers are referred to a settlement service provider that is an affiliated business.

Answer 98

A

Finance charges include: interest, loan origination fees and points, mortgage broker fees, and credit life insurance fees (when insurance is required). Appraisal and credit report fees are not included if they are part of application fees which are charged to all applicants.

Answer 99

A

Each party to the transaction is restored to their previous position. The transaction is canceled and funds and property must be returned.

Answer 100

A

Borrowers who did not receive a notice of the right to rescind or accurate disclosures as required by law.

Answer 101

A

APR threshold

Points and fees threshold

Prepayment penalty threshold

Answer 102

A

Money that a lender earns from a loan. The rate of interest depends on the market rates for the type of loan and the qualifications of the borrower.

Answer 103

A

Limited to 3%. Limitations for seller financing – or seller concessions – are established by Fannie Mae and Freddie Mac for conforming loans. Limits are based on the down payment or loan-to-value (LTV) ratio.

Answer 104

A

Prepaid finance charge. Prepaid finance charges are items paid at closing, such as discount points, prepaid interest, etc.

Answer 105

A

They are insured by the federal government. This provides security for the lender in the event that the borrower defaults on payments.

Answer 106

A

A document used in place of a mortgage to secure the payment of a promissory note. This method is used in many states.

Answer 107

A

The Cost of Funds Index. COFI is a common index used to determine rate adjustments on adjustable-rate programs.

Answer 108

A

Principal and interest
Interest-only
Minimum payment of the loan amount
These flexible payment options made option ARMs popular products, but were often misunderstood by borrowers, leading to negative amortization.

Answer 109

A

Annual percentage rate. This is the cost of credit expressed as a percentage. The Truth-in-Lending Act requires disclosure of this amount to loan applicants.

Answer 110

A

Is one that exceeds Fannie Mae and Freddie Mac’s loan limits or underwriting standards.

Answer 111

A

Is the method used to transfer title for a property following full payment of a loan. Reconveyance is typically used with a deed of trust.

Answer 112

A

An FHA loan. FHA loans require both upfront MIP (UFMIP), calculated at a rate of 1.75%, and annual MIP.

Answer 113

A

A type of loan program that provides the borrower with funds based on equity. They do not have to repay the loan as long as they live in the home. Reverse mortgages are only available to borrowers who meet a certain minimum age (generally 62 years of age or older).

Answer 114

A

The same as a second mortgage. It may also be called a junior lien.

Answer 115

A

A reverse mortgage. The Home Equity Conversion Mortgage is specifically a government reverse mortgage program.

Answer 116

A

A legal document that connects a promissory note with the collateral used to secure the note. In the case of a mortgage, the collateral is the subject property.

Answer 117

A

Is made up of a series of smaller periodic payments with a larger lump sum due at maturity. Many of these loans include a refinance provision so that the borrower can avoid the larger payment and start a new amortization schedule on the remaining loan amount.

Answer 118

A

A legal instrument that conveys title to real property.

Answer 119

A

Is a table providing the periodic payments needed to pay off a loan by the end of its term. The payments include principal and interest.

Answer 120

A

Provide sources of funds for lenders. This is accomplished in the secondary market through securitization.

Answer 121

A

Insures loans. FHA loans are insured by the federal government against borrower default.

Answer 122

A

The sale of a property after a borrower has defaulted on payments to the lender. The exact procedure for handling foreclosure varies from state to state.

Answer 123

A

Negative amortization. This occurs when the borrower makes payments at an introductory rate which are not sufficient to pay the interest on the loan. The unpaid amount is added to the loan balance resulting in negative amortization.

Answer 124

A

The secondary market. Mortgage-backed securities are an investment vehicle used to generate revenue based on an underlying pool of loans. This revenue provides renewable access to funds for lenders.

Answer 125

A

A loan program permits a borrower to pay less than the required amount of interest on the loan. The unpaid interest is added to the loan balance and eventually results in a balance greater than the original loan amount.

Answer 126

A

VA loans. The VA program requires a funding fee for participation in the program. The amount is used to support the guaranty against borrower default. USDA loans charge a similar fee, called a guarantee fee.

Answer 127

A

The stated interest rate on a mortgage or loan agreement.

Answer 128

A

Made by Fannie Mae and Freddie Mac. Unlike FHA or VA loans, they are not insured or guaranteed by a government agency.

Answer 129

A

Subordinate lien. Subordinate liens sit in second (or third, etc.) place behind a first or primary lien. In the event of foreclosure, subordinate liens are satisfied only after the first lien is satisfied.

Answer 130

A

Be serving a rural or underserved area

Hold the loan in its portfolio for at least three years or sell the loan to another small creditor

Answer 131

A

Limited to 6% between 90% - 75.1%. At 75% or less concessions are up to 9%. Limitations for seller concessions are established by Fannie Mae and Freddie Mac for conforming loans. Limits are based on the down payment or loan-to-value (LTV) ratio.

Answer 132

A

No rate caps

A low introductory rate that expires after a short period

Limited documentation for loan approval

Prepayment penalties

Answer 133

A

Effectively makes an extra mortgage payment every year. By making payments every two weeks (26 payments), the borrower technically pays 13 months of mortgage payments in a calendar year.

Answer 134

A

The amount above the index that an interest rate can adjust for an ARM. The margin is set by the lender and is the amount above the index that the interest rate can adjust. Index plus margin is the formula used to determine a new interest rate on an adjustable-rate mortgage.

Answer 135

A

Is analyzed to determine the size of the borrower’s existing debt load. It is a primary factor in the lender’s analysis of the borrower’s ability to repay a loan.

Answer 136

A

Finance properties in amounts that exceed conforming guidelines. Jumbo loans are loans that exceed Fannie Mae/Freddie Mac loan limits; however, there are GSE-eligible loans available.

Answer 137

A

Determine the interest rate change on an ARM. The index is the basis for future rate changes. The margin is set by the lender and is the amount above the index that the interest rate can adjust at the time of the rate change.

Answer 138

A

$726,200. This amount is set annually by the Federal Housing Finance Agency – the agency which oversees Fannie Mae and Freddie Mac.

Answer 139

A

Areas of the country with higher conforming loan limits. High-cost areas exist all over the country, with the exception of the Midwest.

Answer 140

A

Paystubs for the most recent 30-day period and W-2s for the most recent two-year period.

Answer 141

A

With an LTV of less than or equal to 90%, for the first 11 years of the loan term or until the end of the loan term, whichever comes first. With an LTV of greater than 90%, for the first 30 years of the loan term or until the end of the loan term, whichever comes first.

Answer 142

A

A uniform measurement of the cost of a loan, including interest and financed closing costs, expressed as a percentage.

Answer 143

A

Provide up to two years of tax returns for income qualification.

Answer 144

A

Rural areas. Loans under the USDA’s Rural Development Housing & Community Facilities Programs are made for the purpose of assisting low-income borrowers to purchase homes in rural areas.

Answer 145

A

Credit capacity and credit character. These answer the questions of whether the borrower is both willing and able to repay the loan.

Answer 146

A

Safe harbor qualified mortgages.

Answer 147

A

A payment made by a lender to a loan originator for originating a loan at a rate higher than the par rate.

Answer 148

A

The secondary market. The secondary market helps fund the primary market where loans are made to borrowers.

Answer 149

A

3.5%. FHA loans also require upfront and annual MIP.

Answer 150

A

Called 203(b). It is used to purchase or refinance one- to four-unit family dwellings.

Answer 151

A

A legal document that obligates a borrower to repay a loan. It specifies the terms by which the repayment will occur. It may also be called a promissory note.

Answer 152

A

Guarantees loans. VA loans provide a guaranty to lenders for a certain percentage of the loan amount.

Answer 153

A

Qualify at the note rate. However, funds placed in an escrow account will allow them to pay a discounted monthly payment based on a lower interest rate for two years - 2% in the first year and 1% the second year.

Answer 154

A

Certificate of Eligibility. Eligibility is based on length of service. COEs are not issued to veterans who are dishonorably discharged.

Answer 155

A

The type of loan and whether the veteran’s eligibility has been used before. Disabled veterans are generally exempt from paying the funding fee.

Answer 156

A

Limited to 1%. There are limitations on certain types of charges, and closing costs cannot be financed in purchase transactions.

Answer 157

A

41%. The VA only looks at the total debt ratio. However, underwriters do look at the veteran’s residual income for qualification purposes.

Answer 158

A

Discount points are used to adjust the price of a loan. One discount point is equal to 1% of the loan amount.

Answer 159

A

Entitlement. VA guarantees a loan amount four times greater than the eligibility listed on the veteran’s Certificate of Eligibility.

Answer 160

A

30 years, offered in a fixed rate only. They do not require a down payment, but lenders must use debt ratios to ensure the borrower can repay the loan.

Answer 161

A

Used for consumers who do not represent the credit risk of subprime borrowers but who do not meet the underwriting requirements for conforming prime rate loans.

Answer 162

A

Loans with higher interest rates made to borrowers with blemished credit or other qualification issues. The loans do not conform with Fannie Mae and Freddie Mac underwriting requirements.

Answer 163

A

Any mortgage product other than a 30-year fixed-rate mortgage loan.

Answer 164

A

Called 251. It is based on the 203(b) program and offers a number of adjustment options ranging from one to ten year(s).

Answer 165

A

The interest rate is set at the time of settlement and does not change during the life of the loan. Monthly payments would only change if the loan servicer finds a shortage or surplus in the escrow amount (i.e., taxes and insurance premiums).

Answer 166

A

The interest rate may change one or more times over the life of the loan. ARMs are often initially made at lower interest rates than fixed rate mortgages.

Answer 167

A

A limit on the amount that the interest rate can increase during the first adjustment period for an ARM.

Answer 168

A

A limit on the amount that an interest rate can change during any adjustment period for an ARM, with exception of the initial adjustment, assuming an initial cap is in place on that particular product.

Answer 169

A

The limit on the amount by which an interest rate can change over the life of an ARM. It is also known as a rate ceiling.

Answer 170

A

How often an interest rate adjustment can occur on an ARM. The frequency can be annually, every few years, or even monthly.

Answer 171

A

To the lender at closing to reduce the note rate of the loan.

Answer 172

A

Pool similar types of loans to create mortgage-backed securities for sale on the secondary mortgage market. These securities are used to create a renewable source of funds for lenders.

Answer 173

A

On the early ARM disclosure provided at application and on the promissory note when the loan goes to closing.

Answer 174

A

The loan agreement contains a conditional refinance provision. This gives the borrower the option to convert the loan to a regular fixed-rate loan at its maturity date.

Answer 175

A

Closed-end credit. A cash-out refinance is an example of a home equity loan.

Answer 176

A

Provide up to two years of tax returns for income qualification.

Answer 177

A

Open-end credit. In a HELOC, a borrower pays off the principal and can then continue to make withdrawals. This is similar to a credit card.

Answer 178

A

A piggyback loan. In a piggyback loan scenario, a borrower takes a simultaneous second mortgage. In an 80-10-10 loan, the first lien is 80% LTV, the second is 10% LTV and the borrower makes a 10% down payment.

Answer 179

A

An interim loan used to pay for the construction of a home. They are short-term financing and often handled as interest-only transactions. A construction loan can be considered a type of “bridge loan.”

Answer 180

A

Pay only the monthly interest due on the loan, which keeps monthly payments low. However, at the end of the term, the borrower still owes the principal amount of the loan.

Answer 181

A

Loan limits and underwriting standards established by Fannie Mae and Freddie Mac.

Answer 182

A

Identification of the borrower and the lender

The borrower’s promise to repay the loan

Amount of the loan

Interest rate charged on the unpaid principal

Period of the term for repayment of the loan

Reference to the real estate used to secure the loan

Provisions for the imposition of late charges for overdue payments

Signature(s) of borrower(s)

Answer 183

A

Grossed up by as much as 25% for income qualification purposes. Other non-taxed income, such as disability and public assistance, may be grossed up as well.

Answer 184

A

Origination fees

Property taxes

Title insurance

Escrow costs

Appraisal fees

Taxes

Fees owed to state and local government

Answer 185

A

The relationship between a borrower’s monthly debt obligations and his/her gross monthly income. It is expressed as a percentage.

Answer 186

A

The difference between the fair market value of a property and the current balances of any liens against the property.

Answer 187

A

Prepayment and bi-weekly payments. Prepayment allocates more funds to the loan principal as time goes by. A bi-weekly plan amounts to an additional mortgage payment every year.

Answer 188

A

UFMIP (upfront mortgage insurance premiums) and annual MIPs (annual mortgage insurance premiums)

Answer 189

A

The fully-indexed rate. This requirement applies to all ARM transactions except for open-end home equity loans.

Answer 190

A

Qualified mortgages, unless the loan is a balloon payment qualified mortgage from a small creditor. Balloon payments are also generally prohibited for loans covered by HOEPA.

Answer 191

A

Presumption of compliance with ability-to-repay standards and a safe harbor from liability for loan originators making qualified mortgages.

Answer 192

A

Prime mortgages, not subprime or higher-priced mortgage loans.

Answer 193

A

Higher-priced mortgage loans.

Answer 194

A

No negative amortization

No deferment of principal (e.g., no interest-only payments)

No balloon payment feature (unless a small creditor balloon payment QM)

Term does not exceed 30 years

Points and fees do not exceed 3% total loan amount

APR does not exceed APOR for a comparable transaction by more than 2.25%

Answer 195

A

No negative amortization

Term of at least five years; does not exceed 30 years

Compliance with 3% points and fees cap

Verification of consumer’s income and assets

Determination of consumer’s DTI (43% limit does not apply)

Loan has a fixed rate

Loan will be held by the creditor for at least three years

Creditor is a small creditor in a rural/underserved area

Answer 196

A

No Ratio

No Income, No Assets (NINA)

Stated Income, Stated Assets (SISA)

No Income, Verified Assets (NIVA)

Stated Income, Verified Assets (SIVA)

No Doc

Answer 197

A

Interest-only payments

Negative amortization

A payment-option feature

Balloon payments

Answer 198

A

Limited to 6% of sales price

Answer 199

A

25% of the loan amount, for a loan greater than $144,000

Answer 200

A

The Uniform Residential Loan Application (URLA). 1003 is Fannie Mae’s form number. Freddie Mac refers to the same form as Form 65.

Answer 201

A

If the appraiser notes that the property is located in a flood zone. Zones A and V require mandatory flood insurance.

Answer 202

A

Voluntary for loan applicants. If they decline to provide the demographic information requested on the 1003, loan originators should make a best guess based on visual observation and note that they have done so.

Answer 203

A

A borrower’s ability to meet monthly housing and other fixed debt expenses based on monthly income.

Answer 204

A

Information available in public records and data reported by creditors (including derogatory information, such as late payments).

Answer 205

A

Fair, Isaac and Company - now the Fair Isaac Corporation (FICO). Credit scores are often known as FICO scores.

Answer 206

A

Based on loan amount, loan term, and loan-to-value. The mortgage insurance premium required on all FHA loans is collected as an upfront premium (UFMIP) and on a monthly basis (annual MIP, divided into 12 equal parts).

Answer 207

A

An appraisal method which compares the subject property to recently-sold comparable properties in close proximity. It is also called the “market approach.”

Answer 208

A

The ratio of the principal loan balance to the appraised value of the property. Loan-to-value is used in borrower qualification to assess risk.

Answer 209

A

Recently opened accounts

Misspellings and errors

Uncharacteristic use or sudden increase in use of credit

Large number of recent inquiries

Credit history that does not match what the originator knows about the applicant

Answer 210

A

The back-end ratio. The back-end ratio looks at the percentage of a borrower’s housing debt plus other consumer debts compared to his/her monthly gross income.

Answer 211

A

50%. The back-end ratio (or total debt ratio) is a comparison of all monthly debts (including housing) to the applicant’s monthly income.

Answer 212

A

1% of the loan amount. Discount points are often used to buy down the interest rate on a loan.

Answer 213

A

The ability to meet the financial demands of loan repayment. Existing debt and its ratio to a borrower’s income – also known as the debt-to-income ratio – is a primary factor in a lender’s analysis of a borrower’s ability to repay a loan.

Answer 214

A

43%. The back-end ratio (or total debt ratio) is a comparison of all monthly debts (including housing) to the applicant’s monthly income.

Answer 215

A

States that a loan has payment or loan terms that can change. When a borrower obtains an ARM which is secured by their principal dwelling and has a term of more than one year, creditors must provide the special disclosures for variable-/adjustable-rate mortgages.

Answer 216

A

For new home purchases. It explains the settlement process and the borrower’s rights under RESPA.

Answer 217

A

41%. The back-end ratio (or total debt ratio) is a comparison of all monthly debts (including housing) to the applicant’s monthly income. VA programs only use the back-end ratio – they do not consider the front-end ratio.

Answer 218

A

Determining loan approval based on lender guidelines and borrower qualifications. The underwriter is responsible for making sure a loan applicant and subject property meet the requirements for a specific loan program.

Answer 219

A

Uniform Residential Appraisal Report (URAR). It is the standard form appraisers use to document the findings from an appraisal.

Answer 220

A

Capture information from the applicant in order to complete the loan application. It may take place in person, over the phone, or online.

Answer 221

A

A loan-to-value ratio used when dealing with second liens. CLTV is calculated by combining the cost of all mortgages on a home and comparing the combined cost to the value of the home securing the loans.

Answer 222

A

“Borrower Information.” It is used to collect basic identifying information about the potential borrower and the type of credit they are seeking.

Answer 223

A

The applicant will be asked to provide supporting documentation. The documentation supports information disclosed on the application and may include employment verification, tax and income documents, etc.

Answer 224

A

A verification of employment. It is one form of loan application documentation used for applicants who are not self-employed.

Answer 225

A

Must be consistently received for a period of two years in order to be used for income qualification. The employer must verify that the additional income is likely to continue.

Answer 226

A

Loan programs are diligently matched to the current financial circumstances of each customer. Some states have passed laws making loan suitability a regulated standard.

Answer 227

A

Considers the replacement value of the property. It is often used for new properties and analyzes what it would cost to build a substitute residence, plus the value of the land.

Answer 228

A

Tangible net benefit.

Answer 229

A

Cash reserves

Gift funds

Stocks and bonds

IRA/401K Accounts

Other real estate

Cash surrender value of life insurance

Value of automobiles

Answer 230

A

Automated underwriting systems (AUSs). Fannie Mae’s system is called Desktop Underwriter, and Freddie Mac’s system is known as Loan Product Advisor. FHA and VA also have their own proprietary systems.

Answer 231

A

Only considers the housing debt. Debt ratios look at the percentage of debt to monthly income. The front-end or housing ratio only takes the mortgage payment (or rental payment) into consideration.

Answer 232

A

Sales comparison approach.

Answer 233

A

Determine the value of the property. The appraisal is also used to establish any deficiencies that affect the marketability of the property.

Answer 234

A

An important consideration for most loan programs. In the past, nontraditional programs did not always verify income. However, today, lenders take a close look at a borrower’s ability to repay a loan.

Answer 235

A

Paystubs for the last 30-day period and W-2s for the last two-year period.

Answer 236

A

An example of a voluntary lien is…

Answer 237

A

Promissory notes payable to financial institutions and other creditors/lenders

Credit accounts with outstanding balances

Unpaid income taxes and interest

Child support and alimony

Previous bankruptcies

Answer 238

A

25%. This type of income typically includes Social Security, public assistance, and disability. Loan applicants must still provide comprehensive documentation for these types of income.

Answer 239

A

3.5%. This amount is based on the sales price or appraised value of the property and can be the borrower’s own funds, gift funds, or a grant.

Answer 240

A

75%. Investment properties generating rental income are just one type of special income that cannot be used at 100% for qualification purposes.

Answer 241

A

Obtain a transcript of a loan applicant’s tax returns. Lenders use this to perform an independent verification of tax documentation. Form 8821 is also used to authorize release of other tax information.

Answer 242

A

{base rate} x {hours} = {weekly income}

{weekly income} × {weeks worked} = {annual income}

{annual income} ÷ 12 = {monthly income}

Answer 243

A

Is called “Current Employment/Self-Employment and Income.” It is used to collect information about the applicant’s employment status and accompanying details. It is followed by Section 1c and 1d, which collect the same information if the consumer has more than one source.

Answer 244

A

{bi-weekly salary} × 26 = {annual income}

{annual income} ÷ 12 = {monthly income}

Answer 245

A

Usually averaged over a two-year period. Self-employed income would come from the tax return; commissioned income may be taken from W-2s or tax returns.

Answer 246

A

Ten years. This is longer than standard credit account information, which is purged after seven years.

Answer 247

A

Evaluating the capacity of the borrowers’ ability to repay a loan. This is because these forms of income are often less stable than traditional salaried employees

Answer 248

A

“Financial Information - Assets and Liabilities.” It is used to capture information about the potential borrower’s financial circumstances, including their assets, accounts, and existing debts.

Answer 249

A

Gathered and sold by consumer reporting agencies. The credit report (or consumer report) is the method for obtaining credit information.

Answer 250

A

Using a statistically-validated system. This is required by consumer protection laws such as ECOA and FCRA.

Answer 251

A

Generally reported for a period of seven years. There are some exceptions for information that may be reported for a longer period.

Answer 252

A

“Financial Information - Real Estate.” It is used to capture information about any properties that the applicant currently owns, if any, and what they owe on them. For potential borrowers who do not currently own any real estate, this section would not apply.

Answer 253

A

May be used for income qualification if they are court-ordered. The loan applicant must be able to show a stable history of receiving the payments.

Answer 254

A

“Loan and Property Information.” It is used to find out more about the purpose of the loan that the applicant is seeking and the property that will secure it. Section 4b also collects information about other loans secured by the same property (for example, a piggyback loan to finance a down payment).

Answer 255

A

The company name

Date the account was opened

Date any information for the account was reported

Months reviewed/date of last activity

Credit limit (“high credit”)

Balance and past due amounts

Timeliness of payments

Answer 256

A

Equifax, Experian, and TransUnion. Not all creditors report to all three agencies.

Answer 257

A

Payments for items such as rent and utilities. First-time homebuyers or consumers with little credit history may sometimes use nontraditional credit to establish creditworthiness.

Answer 258

A

“Declarations.” It is used to ask the applicant specific questions about the property they wish to buy or refinance, the funding they are using, and their financial history.

Answer 259

A

28%. The front-end ratio (or housing ratio) is the comparison of housing debt to the applicant’s monthly income.

Answer 260

A

“Acknowledgments and Agreements.” In this section, the consumer is informed of the legal obligations they take on by signing the application, and they are prompted to give their signature. Primarily, this prompts the consumer to affirm that the information they provided was truthful and to acknowledge their understanding that lying on the application can have criminal consequences.

Answer 261

A

31%. The front-end ratio (or housing ratio) is the comparison of housing debt to the applicant’s monthly income.

Answer 262

A

“Military Service of Borrower.” This section contains questions about the applicant’s military service, if they are serving or have served. Some loan products (e.g., VA loans) are meant for and only available to servicemembers, and the URLA can be used to apply for these loans. If this section is not applicable to the applicant, it is not required.

Answer 263

A

“Demographic Information.” Here, consumers are prompted to self-identify demographic data. This data is collected for reporting purposes in compliance with HMDA, to ensure fair lending practices. Consumers may choose not to self-identify, in which case the loan originator must use broad categories to attempt identification based on visual observation and surname only, and must indicate that they did this.

Answer 264

A

Dividing the amount of the mortgage by the appraised value or purchase price of the home, whichever is less. Loan-to-value ratio determines the loan program an applicant may qualify for.

Answer 265

A

Contractually hold the interest rate and points for a loan. They are usually made in writing and the lender is bound to honor the rate at closing.

Answer 266

A

“Loan Originator Information.” Here, the loan originator gives the name of their employer, its address, and its NMLS unique identifier and state license ID. The loan originator must also add their own individual name, unique identifier, state license ID, and signature, as well as the date.

Answer 267

A

A borrower’s attitude toward credit obligations and a prediction of his/her future actions. Creditors/lenders assume that if an individual has met his/her obligations in the past, he/she will continue to do so in the future.

Answer 268

A

W-2s and 1040s. Substantial income increases and decreases must be addressed.

Answer 269

A

The underwriter will review:

The appraisal report

The preliminary title report

Any inspections requested by the borrower or required by the lender

Answer 270

A

In case the borrower defaults and the lender is required to foreclose.

Answer 271

A

They are looking for an explanation of the derogatory credit. Without an explanation or documentation that makes sense, the derogatory information can be used as the basis for loan denial.

Answer 272

A

Current and reasonably-expected income or assets

Employment

Credit history

Current debt obligations

Mortgage-related obligations

Payments on any simultaneous loans

Answer 273

A

Ensure that the value of the property is adequate to serve as security – or collateral – for the loan. For this reason, a licensed appraiser must conduct the appraisal.

Answer 274

A

For investment properties. It would generally not be used for a single-family home being used as a borrower’s primary residence.

Answer 275

A

Provides protection for the borrower for potential title liabilities. These include mechanic’s liens, unreleased mortgages, and other third-party rights. Obtaining this type of policy is voluntary on the part of the homeowner.

Answer 276

A

Protects the lender from title defects or undisclosed liens that should have been cleared up prior to closing. Lenders typically make this type of policy mandatory; the borrower is required to cover the cost of obtaining it.

Answer 277

A

Land and anything that is permanently affixed to it. Personal property includes items that can be moved.

Answer 278

A

Monetary claims that provide a creditor with the right to foreclose. A mortgage is an example of a lien.

Answer 279

A

Tax liens

Mechanic’s liens

Judgments

Attachments

Answer 280

A

The chronological order in which liens are filed against a property. The order establishes the priority of the liens in the event the property is foreclosed. Lenders want first priority for the mortgage on a property.

Answer 281

A

Provide security to the lender in the event of default. PMI also allows the borrower to make a smaller down payment.

Answer 282

A

All FHA loans.

Answer 283

A

The desired form of holding ownership to property because it has the fewest restrictions. Almost all residential mortgage loan transactions involve an estate held in fee simple.

Answer 284

A

The owner is entitled to the entire property and has “unconditional power of disposition” during his/her lifetime, and the property will descend to his/her heirs upon death.

Answer 285

A

Any borrower accepting a high-cost home loan

First-time borrowers accepting a negative amortization loan

Any borrower seeking a reverse mortgage loan from the FHA

Counseling is encouraged for any borrowers choosing an ARM instead of a fixed-rate loan

Answer 286

A

In January 2014

Answer 287

A

Reasonably-reliable third-party documents, such as tax returns, W-2 forms, payroll statements, bank statements, etc.

Answer 288

A

Open-end credit plans

Timeshare plans

Reverse mortgage loans

Temporary/bridge loans with terms of 12 months or less

Construction phase of 12 months or less in a construction-to-permanent loan

Designated extensions of credit from certain entities/agencies

Answer 289

A

Current/reasonably-expected income/assets (not including equity)

Current employment status

Monthly mortgage payments

Monthly payments on any simultaneous loans secured by the property

Monthly payments for property taxes/insurance, other property-related obligations

Debts/alimony/child support

Monthly DTI or residual income

Credit history

Answer 290

A

The borrower gives legal title to the lender, but retains equitable title. The lender “owns” the property via a deed of trust. The lender has a right to possession of the property in the event of default. Legal title is returned to the borrower upon repayment and satisfaction of the debt.

Answer 291

A

The borrower retains legal and equitable title to the property. The mortgage is a lien against the property. In the event of default, the lender must institute a foreclosure proceeding to obtain legal title.

Answer 292

A

A process in which a broker originates and closes a loan in his/her own name, then transfers the loan to a lender at closing. The lender provides funds for disbursement.

Answer 293

A

Parties meet to execute documents, but funds are not disbursed and property is not conveyed until certain specified conditions are met.

Answer 294

A

Parties meet to execute documents and funds are subsequently disbursed. Lenders involved in purchase transactions are required to ensure that the closing agent has adequate funds to close.

Answer 295

A

May face a five-year jail term

Answer 296

A

Deposit or “earnest money” held in escrow

Cash

Checking/savings accounts, with account numbers

Stocks and bonds

Cash value of life insurance policies

Answer 297

A

Real estate

Retirement accounts

Net worth of businesses

Automobiles

Answer 298

A

At least three business days before closing, any time the APR varies by more than one eighth of 1% (0.125%).

Answer 299

A

No later than three business days after receiving an application for credit secured by a first lien on a dwelling.

Answer 300

A

A property is bought and resold within a very short period of time. The resale usually involves the use of an inflated appraisal of the property’s value. The HPML Rule works to curb property flipping by creating second appraisal requirements for certain transactions.

Answer 301

A

Fees lenders can earn when selling loans in the secondary market. They are often cited in the controversy over yield spread premiums earned by mortgage loan originators before the establishment of borrower credit requirements.

Answer 302

A

Unilaterally increasing the charges of another settlement service provider and retaining the difference. HUD considers mark-ups a form of illegal fee-splitting and a violation of RESPA.

Answer 303

A

A person who accepts a fee for the use of his/her Social Security Number and other personal information on a mortgage application. Straw buyers are often unaware that they are liable for fraud and for making false statements to the government.

Answer 304

A

Financial institutions to provide customers with a privacy notice as well as an opt-out notice. This is aimed at protecting their nonpublic personal information.

Answer 305

A

A creditor makes an unfavorable decision. An example would be a lender rejecting a loan application. ECOA requires notice of adverse action within 30 days of application

Answer 306

A

In person, via U.S. mail, or via facsimile. Email and secure document handling are also becoming acceptable means. Providing the information verbally or via a public posting are not acceptable methods for most disclosures.

Answer 307

A

Be on the lookout for and report anything that could indicate fraudulent behavior.

Answer 308

A

An appraiser places a much higher value on a property than can be justified. This practice has been commonly used in conjunction with other forms of mortgage fraud.

Answer 309

A

An individual who accepts a fee to falsely claim ownership to a property. Straw sellers are sometimes used in conjunction with straw buyers in elaborate mortgage fraud schemes.

Answer 310

A

Violates the Federal Reserve’s Staff Commentary on Regulation Z revisions. This example is considered a misleading claim of debt elimination.

Answer 311

A

Providing fair housing throughout the United States

Prohibiting discrimination in the sale and renting of housing

Prohibiting discrimination in mortgage lending transactions

Answer 312

A

Falsified applications. Generally, they are trying to obtain a loan they do not qualify for, but for the most part do intend to repay the loan.

Answer 313

A

Factual data. Loan programs such as stated income loans (also called liar’s loans) led to an increase in loan applicant fraud. This has been blamed for increased foreclosures.

Answer 314

A

The purchase price being higher than the list price. This could be a sign that a legitimate buyer is not involved in the transaction.

Answer 315

A

Using another person’s name, Social Security Number, and other personal information to secure credit or make purchases. It often figures into elaborate mortgage fraud schemes.

Answer 316

A

Compensation based on transaction terms

Dual compensation

Steering

Answer 317

A

Any material misrepresentation, express or implied, in any commercial communication regarding any term of a mortgage credit product.

Answer 318

A

If a loan features a prepayment penalty in force for more than 36 months or exceeding 2% of the amount prepaid, the loan is subject to HOEPA and the penalty is prohibited.

Answer 319

A

Closed-end loans, open-end loans, and purchase money mortgages secured by the borrower’s principal dwelling.

Answer 320

A

The practice of targeting neighborhoods that are primarily occupied by members of vulnerable and/or protected classes and offering expensive, risky loan products.

Answer 321

A

Government-owned, not stockholder-owned

Primarily intended to guarantee securities backed by FHA, VA, RHS loans (does not buy loans)

Not involved in guaranteeing or dealing with conventional mortgages

Answer 322

A

Agent for the borrower and owes them fiduciary duties, including loyalty, good faith, and an obligation to put the borrower’s interests ahead of the broker’s.

Answer 323

A

Regulations G and H

Answer 324

A

Increase uniformity
Reduce regulatory burden
Enhance consumer protection
Reduce fraud

Answer 325

A

Participating in the NMLS
Writing rules and regulations or adopting procedures
Conducting background checks
Setting and accepting licensing fees
Setting or resetting renewal or reporting dates
Approving or denying loan originator applications and renewals
Implementing laws for amending or surrendering licenses
Bringing enforcement actions

Answer 326

A

Establishing a process to verify licensure
Examining books, papers, records, or other data
Summoning persons to appear and produce records
Administering oaths and affirmations
Examining, taking, and preserving testimony
Reporting violations of law

Answer 327

A

Providing procedures for challenging information
Requiring loans to be included in reports of condition
Entering cease and desist orders
Suspending, terminating, and refusing renewal of licenses
Ordering the removal and ban of individuals from employment
Imposing civil penalties

Answer 328

A

Any licensed loan originator
Any individual required to have a loan originator license

Answer 329

A

Withhold, abstract, remove, mutilate, destroy, or secrete books, records, or other information

Answer 330

A

Initial licensing or license renewal
License suspension, conditioning, revocation, or termination
Determining compliance with the law

Answer 331

A

Criminal, civil, and administrative history information
Personal history and experience information
Any other documents or evidence relevant to an investigation

Answer 332

A

Account compilations
Information lists
Data concerning loan transactions

Answer 333

A

Administer oaths
Subpoena witnesses
Require the production of relevant documents
Control access to records of person under investigation

Answer 334

A

Remove the records without a court order or the regulatory agency’s consent

Answer 335

A

Access them in order to conduct regular business affairs

Answer 336

A

Retain attorneys, accountants, or other professionals to assist with examination
Enter into agreements with other government officials to reduce regulatory burden
Use, hire, contract, or employ analytical systems, methods, or software
Accept or rely on reports from other government officials or audit reports by independent CPA

Answer 337

A

Shared with other state and federal officials involved with mortgage industry oversight without the loss of privilege and confidentiality protections provided by law

Answer 338

A

Disclosure under federal or state law allowing for disclosure to the public of information held by a government officer or agency
Subpoena, discovery, or admission into evidence in civil action or administrative process

Answer 339

A

Employment history
Disciplinary and enforcement actions

Answer 340

A

Nationwide Multistate Licensing System

Answer 341

A

Any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands

Answer 342

A

A natural person

Answer 343

A

A natural person, corporation, company, limited liability company, partnership, or association

Answer 344

A

Take a residential mortgage loan application, or
Offer or negotiate the terms of a residential mortgage loan

Answer 345

A

Request for an offer of residential mortgage loan terms and the information about the borrower that is necessary in a decision on whether to make such an offer.

Answer 346

A

Any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling

Answer 347

A

Contains one to four units, whether or not the structure is attached to real property

Answer 348

A

Any real property located in a state upon which is constructed or intended to be constructed a dwelling.

Answer 349

A

Advising on loan terms
Preparing loan packages
Collecting information on behalf of the consumer

Answer 350

A

Individuals engaged solely as loan processors/underwriters performing clerical tasks
Persons or entities only performing real estate brokerage activities, unless compensated by a mortgage professional
Persons or entities solely involved in extensions of credit relating to timeshare plans

Answer 351

A

Acting as a real estate agent/broker for a buyer, seller, lessor, or lessee of real property
Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property
Negotiating any portion of a contract relating to the sale, purchase, leaser, rental, or exchange of real property
Engaging in any activity for which a person engaged in the activity is required to be licensed as a real estate agent/broker

Answer 352

A

Individual who performs clerical or support duties at the direction of and subject to the supervision of a licensed loan originator.

Answer 353

A

The receipt, collection, distribution, and analysis of information used for the processing and underwriting of a loan
Communicating with a consumer to obtain information necessary for the processing and underwriting of a loan

Answer 354

A

Offer or negotiate loan rates or terms
Counsel consumers about loan rates or terms
Represent to the public that they can perform the activities of a loan originator

Answer 355

A

All residential mortgage loan-related activities from the taking of a loan application through the completion of all loan closing documents and funding of the loan.

Answer 356

A

Meets the definition of a loan originator
Is an employee of a depository institution or an institution regulated by the Farm Credit Administration
Is registered with, and maintains a unique identifier through, the NMLS

Answer 357

A

Manner and means of performance of work are subject to the right of control of a person
Compensation for federal income tax purposes is reported on a W-2 form issued by the controlling person

Answer 358

A

Board of Governors of the Federal Reserve System
Comptroller of the Currency
National Credit Union Administration
Federal Deposit Insurance Corporation

Answer 359

A

A loan originator
Not an employee of a depository institution, a subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration
Licensed by a state or by the CFPB and maintains a unique identifier

Answer 360

A

Permanently identifies a loan originator
Is assigned by the NMLS to track and identify loan originators

Answer 361

A

Residential mortgage loan application forms
Solicitations or advertisements, including business cards and websites
Other documents established by rule or order of the licensing agenc

Answer 362

A

Taking a residential mortgage loan application
Offering or negotiating the terms of a residential mortgage loan for compensation or gain
Representing to the public that he/she can or will perform these activities

Answer 363

A

Receiving an application for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower.

Answer 364

A

Presenting for consideration particular loan terms
Communicating with a borrower or prospective borrower to reach a mutual understanding of loan terms
Recommending, referring, or steering a borrower or prospective borrower to a particular lender or loan terms
Receiving payment of any thing of value in connection with these activities

Answer 365

A

Engage in residential mortgage loan activities as a loan processor/underwriter unless a state-licensed loan originator

Answer 366

A

Loan processor/underwriter
Registered loan originator employee of a bank/credit union
Only real estate brokerage activities
Only extensions of credit related to timeshare plans
For an immediate family member
For a dwelling that served as the individual’s residence
Licensed attorney negotiating on behalf of a client
Employee of a government agency or housing finance agency
Employee of a nonprofit organization

Answer 367

A

Spouse
Child
Sibling
Parent
Grandparent and grandchild
Stepparent, stepchild, and stepsibling
Adoptive relationship

Answer 368

A

Chartered by a state to help meet affordable housing needs of residents
Supervised by the state government
Subject to audit and review by the state
Whose activities make it eligible to be a member of the National
Council of State Housing Agencies (NCSHA)

Answer 369

A

Periodically examine its books and activities
Revoke its status if it doesn’t continue to meet criteria

Answer 370

A

Fingerprints
Personal history and experience

Answer 371

A

Three hours of federal law and regulation
Three hours of ethics
Two hours of nontraditional mortgage products

Answer 372

A

Ethics
Federal and state law and regulation relating to mortgage origination
Fraud, consumer protection, nontraditional mortgages, and fair lending

Answer 373

A

He/she may retake twice with at least 30 days between each attempt

Answer 374

A

Wait at least six months before re-testing

Answer 375

A

A surety bond

Answer 376

A

The dollar amount of loans originated

Answer 377

A

Net worth in an amount that reflects the dollar amount of loans originated

Answer 378

A

Claims resulting from violations of state or federal laws and regulations

Answer 379

A

No prior license revocation
No felony conviction or guilty/nolo contendere plea during the seven-year period preceding application date, or at any time if the felony involved fraud, dishonesty, a breach of trust, or money laundering
Completion of pre-licensing education
Passage of the written test
Satisfaction of the surety bond/net worth/state fund requirements
Demonstration of financial responsibility, character, and general fitness

Answer 380

A

Current outstanding judgments
Current outstanding tax liens
Foreclosures or pattern of seriously delinquent accounts in past three years

Answer 381

A

Eight hours

Answer 382

A

Three hours of federal law and regulation
Two hours of ethics
Two hours of nontraditional mortgage products

Answer 383

A

Only receive credit for a course in the year which the course was taken
Not take the same approved course in the same or successive years

Answer 384

A

Two hours for every one hour taught

Answer 385

A

Continue to meet minimum standards for initial licensure
Satisfy annual continuing education requirement
Pay required fees

Answer 386

A

An expired license

Answer 387

A

Mortgage Call Reports

Answer 388

A

Depository institutions
Subsidiaries controlled by depository institutions
Institutions regulated by the Farm Credit Administration

Answer 389

A

Requirements for individuals to obtain a license before engaging in loan origination activities
Authority for the CFPB to determine whether a state licensing program for loan originators meets the standards established in the S.A.F.E. Act

Answer 390

A

Defraud or mislead borrowers or lenders
Engage in unfair or deceptive practices
Obtain property by fraud or misrepresentation
Enter into a contract providing for fees earned through “best efforts”
Enter into a contract for specific loan terms that are not actually available
Conduct business without a valid license
Fail to make required disclosures

Answer 391

A

Fail to comply with state or federal laws
Make false or deceptive statements or representations
Knowingly make omission of material fact
Make payment, threat, or promise for the purpose of influencing a person’s independent judgment
Collect or charge prohibited fees
Require excessive property insurance coverage
Fail to truthfully account for fund

Answer 392

A

Deny, suspend, revoke, condition, or decline to renew a license
Order a restitution
Impose fines
Issue orders or directives

Answer 393

A

Separate and distinct violation

Answer 394

A

The CFPB to follow if it determines that a state has not adopted laws satisfying the S.A.F.E. Act’s licensing requirements

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