National Component Test PRACTICE EXAM #1 Flashcards
National Component Test
A discount point is BEST described as a charge the borrower pays to:
A lender to decrease the interest rate on the mortgage loan
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A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing?
$25,000
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If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?
$2,343.47
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The requirement for private mortgage insurance is generally discontinued when the-loan-to-value ratio is falls below:
80%
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Which of the following documents itemizes all settlement costs including lender charges?
HUD-1 form
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According to the Truth-in-Lending Act (TILA), the term “refinance” applies to:
The satisfaction of an existing obligation and its replacement by a new obligation
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What does a loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?
An appraisal
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Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?
Telephone
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The term “20 basis points” expressed as a percentage is:
0.20%
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According to the Truth-in-Lending-Act (TILA), which of the following fees is EXCLUDED from the calculation of the annual percentage rate?
Hazard insurance
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TILA is overseen by:
FRB - Federal Reserve Board
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RESPA allows for the borrower to inspect the HUD-1 Settlement how many days prior to the actual settlement?
1 day
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What three RESPA federally required disclosures must be provided within three days of receipt of the loan application for a purchase money loan?
GFE, Mortgage Disclosure Servicing Statement, a Special Information Booklet, which contains consumer information regarding various real estate settlement services
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Another name for TILA is:
Regulation Z
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The Equal Credit Opportunity Act is overseen by which agency:
FTC - Federal Trade Commission for Mortgage Broker and the OCC - The Office of the Comptroller of the Currency for Mortgage Bankers
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Reg. B Section 202.5 of the Equal Credit Opportunity Act states that you cannot discourage an application for the following reasons:
Information regarding a spouse, Marital status, Income from alimony/child support, Sex of applicant, Dependent information, Race, color, religion, origin
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The Fair and Accurate Transactions Act of 2003 (“FACT Act”) amended the Fair Credit Report (FCRA). This regulation is overseen by:
FTC - Federal Trade Commission
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The Entities Regulated by the Fair and Accurate Transactions Act (The FACT Act) are:
Consumer Reporting Agencies (CRAs), users of Consumer Repots, and furnishers of information to Consumer Reporting Agencies (CRAs)
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The Truth-in-Lending Act (TILA or Reg Z) regulates the following disclosure requirements:
Truth-in-Lending Disclosure Statement, Adjustable-Rate Disclosures, Right of Rescission (Right to Cancel), High-Priced Mortgage (Section 35), High-Fee Mortgages (Section 32)
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The Truth-in-Lending Act (TILA or Reg Z) requires that disclosures must be:
Clear and Conspicuous, in writing, retainable by the consumer, reflect terms of the legal obligation, use estimates appropriately (and if based on estimates indicate this fact), provide to the applicant within 3 business days after receipt of an application for credit
National Component Test
The Home Ownership and Equity Protection Act of 1994 (HOEPA) addresses certain deceptive and unfair practices in home equity lending. It amends the Truth-in-Lending Act (TILA) and establishes requirements for certain loans with high rates and/or high fees. The rules for these loans are contained in what Section of Regulation Z?
Section 32
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The Home Mortgage Disclosure Act - Regulation C (HMDA) was passed in 1975 and is overseen by what entity?
FRB - Federal Reserve Board
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Which of the following types of loans are exempt from RESPA?
Loans on property with 25 acres or more
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The National Flood Insurance Reform Act Regulation H, was passed in 1994 and is overseen by:
FRB - Federal Reserve Board
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Violations for not determining the flood status, not notifying the borrower of the status and insurance requirements, failing to escrow premium if an escrow account is required for the other payments and/or failing to place insurance when required are:
$360 for each violation with a maximum $100,000 per calendar year
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When the APR is out of tolerance, the creditor must do what?
Disclose the changes or provide a completely new disclosure statement so it is received at least three (3) business days before consummation.
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Each early TILA disclosure must include what statement?
“You are not required to compete this agreement merely because you have received these disclosures or signed a loan application.”
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HMDA data allows government agencies to do what?
Evaluate lender compliance with anti-discrimination laws
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How is the conforming loan set each year?
The Federal Housing Finance Agency (FHFA) uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Agency (FHFA) to adjust the conforming loan limits for the subsequent year.
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Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to what:
30 years in federal prison or $1,000,000 fine, or both
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Overvaluation of the fair market value of real estate is an ethical concern that may violate regulations or provisions of all but which of the following federal laws?
The Homeownership and Equity Protection Act
The Truth-in-Lending Act, The Financial Institutions Reform, Recovery and Enforcement Act, The Fair Housing Act
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Yield spread premium is defined as:
A tool that a borrower uses to accept a higher interest rate in exchange for lower fees
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Yield spread premium (YSP) must be disclosed on:
The GFE and The HUD-1
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Amendments to which of the following federal laws created requirements for the verification and documentation of a borrower’s repayment ability?
Homeownership and Equity Protection Act
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The Truth-in-Lending Act was enacted for what reason?
To protect consumers in credit transactions
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Which of the following practices could cause a mortgage professional to violate RESPA’s escrow provisions and may constitute misappropriation?
Commingling funds
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Advertising an attractive interest rate which a mortgage professional is not at liberty to offer is a major ethical offense and a violation of:
Regulation Z
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Which of the following constitutes a “thing of value” that would violate RESPA?
A loan originator gives an airline travel voucher to an attorney for introducing a customer
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Which of the following would address the principal and interest payments due on a loan?
The Amortization schedule
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A(n)______is a loan with an interest rate that can adjust monthly and that offers a borrower a number of payment choices such as: 30 year fixed P&I / Interest-Only / 1% of the loan resulting in negative amortization.
Option ARM
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Which of the following is BEST defined as a loan that exceeds Fannie Mae and Freddie Mac’s maximum loan limits?
A non-conforming loan
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USDA loans are primarily for properties located in:
Rural areas
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What is Fannie Mae’s purpose in the secondary market?
To provide a source of funds for lenders
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Which of the following loan program does not require credit or income documentation and does not require repayment?
Reverse mortgage
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MIP is mandatory when a loan is:
An FHA loan
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Increasing loan balances resulting from the application of periodic payments creates which of the following for borrowers:
Negative amortization
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The Federal Housing Administration:
Insures loans
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Which of the following terms specifically refers to a loan that is NOT obtained through a program of the federal government?
Conventional loan
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Which of the following terms is defined as the method in which a lien is removed from property following full payment of a loan on the property?
Reconveyance
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The cost of Funds Index is traditionally used to determine interest rates on what type of loans?
Rate adjustments on adjustable rate programs
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Fannie Mae and Freddie Mac securitize what type of mortgage loans?
Conventional loans
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What is used to determine the interest rate change on an ARM?
Index and margin
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A borrower obtains and FHA loan. What entity insures this loan?
Federal Housing Administration
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Which of the following would not be included on the loan application?
Closing costs
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Which of the following provisions is available to a borrower when the subject property is located in a flood zone and flood insurance is required?
FEMA/s National Flood Insurance Program
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Which of the following best describes the LTV ratio?
It is the ratio of the borrower’s principal loan balance to the appraised value of the property
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How is the mortgage insurance premium on an FHA loan determined?
It is based o the principal loan amount
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A couple ahs qualified for a $245,600 loan. The are told that the broker fee will cost two points. What is the dollar amount of the broker fee?
$4,912
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Why would a borrower pay discount points in conjunction with his/her loan transaction?
They would change the note rate
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Which of the following real estate appraisal approaches consider the replacement value of the property?
Cost approach
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Which of the following pieces of personal information is a borrower asked to provide voluntarily on the loan application?
Race and sex
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“1003” is another title for which of the following mortgage industry documents?
Uniform Residential Loan Application
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A property is valued at $342,000. There is a first and second mortgage with an 85% CLTV. The second mortgage has an 8% LTV. What is the approximate amount of the first mortgage?
$263,340
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Which type of disclosure must have a statement “loan terms can change”?
Adjustable Rate Mortgage Disclosure
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Tom Brown is a nurse at the local hospital. He has worked the night shift for three years and plans to continue this schedule. His base pay is $29.50 per hour with a 5% shift differential. He averages 35 hours per week. What is his qualifying income?
$4,698.63
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The Fair Credit Reporting Act is enforced by:
Federal Trade Commission
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The regulation with the prime purpose of prevention of discrimination?
ECOA
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Loans covered under HOEPA are called:
Section 32 loans
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A lender has how many days to notify the borrower of an underwriting decision?
30
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According to HMDA, a first mortgage will be considered a sub-prime loan when the difference between the annual percentage rate and the rate spread is greater than:
8%
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The record retention requirement outlined by TILA is how many years?
Two
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The SAFE Act:
Establishes minimum standards for licensing and registering mortgage loan originators
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RESPA requires the use of the HUD-1 for:
One-to-four-family residences
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A Mortgage Servicing Disclosure Statement is required by what law?
RESPA
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Which act requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application?
Equal Credit Opportunity Act
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What percentage is the fee threshold that triggers HOEPA disclosures?
8%
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Seven years is the maximum length of time information can be reported on a credit report according to the Fair Credit Reporting Act, EXCEPT for:
Criminal convictions
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Which law requires new loan originators to take approved pre-licensing education?
SAFE Act
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HMD is also known as Regulation
C
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Which law ensures lenders use an annual percentage rate (APR) so that the borrowers have the information they need to make informed comparisons?
Regulation Z
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An applicant submitted a home loan application and the loan was approved on the same day. According to the Real Estate Settlement Procedures Act (RESPA), within how many business days of the application must the Good Faith Estimate (GFE) document be sent?
3
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A mortgage broker discloses third-party charges in a Good Faith Estimate (GFE) using the typical charges of the third-party provider. Which of the following must the mortgage broker provide in the GFE?
Estimated charges of the provider
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How many days prior to closing may a borrower request a copy of the HUD-1 settlement statement?
One business day
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RESPA is administered by:
HUD
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The special Information Booklet must be provided by a lender to a borrower, as required by the:
Real Estate Settlement Procedures Act (RESPA)
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The HUD-1 is a uniform settlement disclosure created following the requirements of:
RESPA
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Which of the following practices by mortgage brokers is a prohibited practice?
Referring a real estate agent to a customer for a fee
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On the GFE, the limit for negative amortization is expressed as:
A dollar amount
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According to the Truth-in-Lending Act (TILA), which of the following fees is included in the calculation of the annual percentage rate?
Closing agent charges
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For which of the following types of loans does the Truth-in-Lending Act (TILA) apply?
Residential
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The maximum amount guaranteed for a VA loan:
Varies by the amount of entitlement of the veteran
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All of the following are considered finance charges EXCEPT:
EXCEPT: Home inspection fee paid by the borrower
These are considered finance charges:
Loan origination fee
Initial mortgage insurance premium
Discount points
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In a loan transaction in which there are four co-owners of the property, what is the minimum number of co-owners who must request rescission, for the request to be valid, under TILA?
One
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Under the rules for the Do-Not-Call Registry, a mortgage broker may make an unsolicited call to a client or customer with whom he has established a business relationship, for up to ______ months after his last transaction.
18
National Component Test
If an applicant chooses not to disclose his or her national origin in a residential credit application, what action must the creditor take in order to comply with the HMDA and ECOA?
Note that the applicant does not wish to disclose national origin and write down the national origin based on visual observation
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The place on the Truth-in-Lending Disclosure where the required disclosures are grouped together and shown separately from any other information is called:
The Federal Box
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According to the Truth-in-Lending Act (TILA), what change from the annual percentage rate is generally considered as accurate during disclosures?
1/8 percent
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Which of the following is true about the right of rescission granted under the Truth-in-Lending Act (TILA)?
It only applies to a loan secured by the borrower’s principal residence
National Component Test
What regulation forbids the seller to require the use of a particular title company as a condition of sale?
Regulation X
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A mortgage broker has advertised “$1,200 down” for a house in a local newspaper. According to the Truth-in-Lending Act (TILA), which of the following information must be disclosed in the same advertisement?
The annual percentage rate
