NMLS EXAM PART 1

Question 1

1. What is the difference between conforming and nonconforming loans?

Answer 1

1. Conforming loans meet Freddie Mac/Fannie Mae guidelines; nonconforming does not

Question 2

2. What is the difference between conventional and unconventional loans?

Answer 2

2. Nonconventional loans are government-backed, like FHA, VA, USDA. Conventional loans are not backed by governmental agencies because they EXCEED the standards set by Freddie Mac and Fannie Mae. (backed = “insured”)

Question 3

3. What is a nontraditional loan?

Answer 3

3. A Nontraditional loan is anything other than a 30-year fixed rate loan.

Question 4

4. What is the front-end and back-end ratios for:
   a. conforming loans?
   b. FHA?
   c. VA?
   d. USDA/RHA?

Answer 4

4. Ratios for:
   a. Conforming loans – 28% / 41%
   b. FHA – 31% / 43%
   c. VA - / 41%
   d. RDA – 29% / none
   e. Conventional (ATR/QM) – none / 43%

Question 5

5. These Regulations are also known as:
   a. RESPA
   b. ECOA
   c. TILA
   d. MAP
   e. S.A.F.E. Act
   f. HMDA
   g. URLA
   h. URAR
   i. FHA Primary fixed-rate program
   j. Freddie Mac’s software for underwriting?
   k. Fannie Mae’s software for underwriting?
   l. Appraisal for Investment Property

Answer 5

5. Regulations:
   a. X
   b. B
   c. Z
   d. N
   e. G (depository institutions); H (non-depository institutions)
   f. C
   g. 1003 if Fannie Mae; (65 if Freddie Mac)
   h. 1004
   i. 203 (B)
   j. Loan Product Advisor
   k. Desktop Underwriter (lenders) or Desktop Originator (brokers)
   l. 1007

Question 6

6. The MAP Rule PRIMARILY deals with ____________________, and:
   a. Is overseen by ______________
   b. It expressly prohibits _________________ misrepresentation
   c. Requires record-keeping for ___________ months

Answer 6

6. “commercial communications”
   a. CFPB
   b. Material
   c. 24 months

Question 7

7. Combining stated income with a non-traditional mortgage product is called _________ .

Answer 7

7. “Risk layering”

Question 8

8. Trigger Terms for closed-end loans under TILA include:
   a. _____________
   b. _____________
   c. _____________
   d. _____________

Answer 8

8. Trigger terms:
   a. Amount or % of any down payment
   b. Number of payments or periods
   c. Amount of any payment
   d. Amount of any finance charge

Question 9

9. If a Trigger Term is used in advertising, the only trigger term that doesn’t require a disclosure is ______________ .

Answer 9

9. Finance Charge

Question 10

10. Which agency oversees Freddie Mac and Fannie Mae?

Answer 10

10. Federal Housing Finance Agency (FHFA)

Question 11

11. How much is the UFMIP for an FHA loan?

Answer 11

11. 1.75% of the base loan amount (before fees, points, etc.)

Question 12

12. What are the 4 qualifications for Qualified Mortgages?
    a. _____________
    b. _____________
    c. _____________
    d. _____________

Answer 12

12. QMS include:
    a. Loans secured by 2nd home or investment properties
    b. Only Prime mortgages
    c. Presumption of compliance for HPML’s
    d. Payments based on maximum amount that will apply after 5 years

Question 13

13. What are 9 things Qualified Mortgages DO NOT include?
    a. _____________
    b. _____________
    c. _____________
    d. _____________
    e. _____________
    f. _____________
    g. _____________
    h. _____________
    i. _____________

Answer 13

13. QM’s do NOT include:
    a. Loans longer than 30 years
    b. More than 3% of the loan amount as a cap of points and fees
    c. Negative amortization
    d. Balloon payments
    e. Interest-only loans
    f. Open-end home equity loans
    g. Bridge loans of 12 months or less
    h. Reverse mortgages
    i. Timeshares

Question 14

14. A Qualified Mortgage can only contain a balloon payment if the following 3 criteria are met:
    a. _____________
    b. _____________
    c. _____________

Answer 14

14. Balloon payments only allowed in a QM if:
    a. At least a 5-year term
    b. Fixed interest rate
    c. Made by a small rural creditor

Question 15

15. What is “80-10-10” an example of?

Answer 15

15. Piggyback loan

Question 16

16. “Fraud for Housing” includes:
    a. _____________
    b. _____________
    c. _____________
    d. Should “Flipping” be considered? If not, then what is it?

Answer 16

16. Fraud for Housing includes:
    a. Asset Fraud
    b. Income and Employment Fraud
    c. Silent Second
    d. No; flipping is related to predatory lending

Question 17

17. “Fair Housing Act” – protects from discrimination based on the following, and is overseen by _____
    a. _____________
    b. _____________
    c. _____________
    d. _____________
    e. _____________
    f. _____________
    g. _____________

Answer 17

17. Fair Housing Act protects from discrimination based on:
    a. Race
    b. Color
    c. Religion
    d. Sex
    e. National Origin
    f. Disability
    g. Familial Status

Question 18

18. What is the definition of a balloon loan?

a. It has a specific _____________, but ______________ prior to the time it fully ________________.

Answer 18

18. Balloon Loan:

a. Amortization schedule; but matures prior to the time it fully amortizes.

Question 19

19. Which Regulation deals with escrow accounts?

Answer 19

19. Regulation __X___ deals with escrow accounts (RESPA)

Question 20

20. When and how often must a Loan Program Disclosure be provided?

Answer 20

20. For every variable-rate mortgage product in which the applicant expresses an interest.

Question 21

21. When is a Loan Estimate NOT required?

Answer 21

21. When the loan applicant locks the interest rate

Question 22

22. When is a revised loan estimate required?

Answer 22

22. When applying for a HELOC

Question 23

23. Which agency oversees the Fair Housing Act?

Answer 23

23. HUD

Question 24

24. Does a BROKER have a fiduciary duty to the lender? Is this under state or federal law?

Answer 24

24. No; federal law

Question 25

25. A Home Equity Conversion Mortgage (HECM) is a type of _______ that is made pursuant to guidelines established by the _________.

Answer 25

25. Reverse Mortgage; FHA