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MLO Test > NMLS Flash Cards > Flashcards

NMLS Flash Cards

1
Q

What is the required pass
rate for the NMLS Test and
how long is it?

A

75% of 115 questions. The test has
12 0 questions with 5 questions that
are ungraded.

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2
Q

What is important to
remember about taking the test?

A

Read the questions twice,
slowly, but
do not take over 30 seconds per
question the first time through

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3
Q

What is the requirement under
Fair Lending, Fair Housing, and
ECOA?

A

All consumers have the right to
apply for a loan unless they are
under 18 years of age

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4
Q

Which Law and Regulation is Home Ownership Equity Protect Act (HOEPA) under?

A

Truth in Lending Act (TILA) and REG Z

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5
Q

Which 8 items are restricted under HOEPA NAPPEBAS?

A

NAPPEBAS
Negative Amortization
Abusive Lending Practices,
Predatory Lending
Prepayment Penalties,
Equity Stripping
Balloon Lending,
Ability to Repay (ATR) not meeting requirements
Subprime Lending

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6
Q

What is the minimum period for a Balloon mortgage?

A

A 30-year amortized loan that is due in 60 months

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7
Q

What is the Average Prime Offered Rate?

A

APOR – an index that is published weekly. It is added to High-Cost and Higher-Priced Triggers.

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8
Q

Who publishes the APOR Index?

A

FFIEC, the Federal Financial Institutions Examination Council

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9
Q

What is the Reg for High-Cost Loans?

A

Section 1026.32

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10
Q

What are the three triggers for
High-Cost Lending? (has Percentages)

A

6.5% on a first Mortgage,
8.5% on a second Mortgage,
and a 5% fee trigger for loans over $20,000

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11
Q

What are the triggers for Higher Priced lending?

A

1.5% for first Mortgages,
3.5% for 2nd mortgages
and no fee trigger

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12
Q

How do you calculate whether a loan exceeds the Higher-Priced mortgage limits?

A

Add the APOR index to 1.5% on a first mortgage. The Annual Percentage Rate (APR) cannot exceed the two numbers together.

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13
Q

What are the requirements for a High-Cost Loan?
TIE5-MC-2A-mW-nB

A

Tax and insurance escrows for the first five years of the loan, mandatory counseling and possibly two appraisals. Cannot use an Appraisal Waiver from Fannie or Freddie. No Balloons are allowed.

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14
Q

What are the requirements for a Higher-Priced Loan?
TIE5-nAw

A

Tax and insurance escrows for the first five years of the loan. Cannot use an Appraisal Waiver from Fannie or Freddie.

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15
Q

Prepayment Penalties are not allowed by which agencies?

A

Fannie Mae, Freddie Mac, USDA, FHA, and VA

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16
Q

What is collateral?

A

Property that is used as security against a debt

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17
Q

What is Net Monthly Income?

A

Take home pay after taxes and payroll deductions

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18
Q

What is a non-liquid asset?

A

A type of asset that is not easily turned into cash. Real estate is considered non liquid.

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19
Q

What are the five parts of ECOA?
(UDAAA)

A

Age, Discrimination, Underwriting,
Appraisal, and Adverse Action

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20
Q

What is the minimum age under ECOA to obtain a mortgage loan?

A

18 years or older

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21
Q

ECOA has discriminatory items.
What can’t you do with them?

A

You cannot use them to make or decline a loan

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22
Q

What are the discriminatory items under ECOA?

A

Sex, Marital Status, Race, Color, Age, Religion, National Origin, Public Assistance, and Sexual Orientation

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23
Q

What can you ask on Marital Status?

A

Married, unmarried, or separated

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24
Q

Which four areas should you never ask about?

A

Race, Color, Religion, and Nationality

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25
Q

What is the requirement for Public Assistance?

A

It must be considered, even though you may not be able to use it for qualifying

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26
Q

How long, after a complete underwriting
package is delivered to the underwriter,
does a decision have to be made?

A

30 days, but this may be extended if the
package is not complete

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27
Q

How many days before closing must
the appraisal be delivered to the
borrower?

A

Three business days before, unless there is an
appraisal waiver issued, then the borrower must be informed that an appraisal will not be done unless they request it

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28
Q

How long after a loan is declined or cancelled must an Adverse Action notice be sent?

A

30 days from the decision, explaining the reason

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29
Q

Under the Fair Housing Act, what are three protected bases that are different from those covered by ECOA?
FAD

A

Disability, Familial Status, and Age

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30
Q

Why is Familial Status considered under Fair Housing Act?

A

You cannot discriminate because of the size of family or if a woman is pregnant

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31
Q

Why is age not considered discriminatory under Fair Housing Act?

A

Reverse mortgages require a borrower to be 62 years of age or older, and a 55 and over subdivision requires the borrower or purchaser of property to be 55 and over

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32
Q

What is the Reg Letter for Fair Credit Reporting Act?

A

REG V

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33
Q

How many free credit reports does every consumer have the right to get each year?

A

At least one

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34
Q

Which credit score do you use
when considering a borrower?

A

Three credit scores are issued on each credit
report for each borrower: High, Middle, and
Low. You will use the Middle unless the
program states differently.

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35
Q

Which credit score do you use if the loan is declined because of credit and there are three borrowers?

A

Lowest of the Middle score for all the borrowers. Example: Borrower 1 has a score of 780, borrower 2 has a credit score of 720, and borrower 3 has a credit score of 660. You would use 660.

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36
Q

What additional information is required on the Credit Score Disclosure?

A

Listing of all three national credit agencies, with contact information, so the borrower can contact them in case of an error or dispute. Agencies are Experian, TransUnion, and Equifax

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37
Q

What are the three national Credit Agencies?

A

Experian, TransUnion, and Equifax

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38
Q

Which law did the Fact Act amend?

A

Fair Credit Report Act (FCRA)

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39
Q

What is a fraud alert?

A

An alert put on the credit report, indicating the borrower may have had their identity stolen or credit card or bank accounts compromised

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40
Q

What happens with a Credit Freeze?

A

No one will be able to access the borrower’s
credit without them unfreezing their account.
Credit issuers will be able to report credit
payments.

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41
Q

What is the cost for a fraud alert or credit freeze?

A

Zero cost and should be applied to
all three credit agencies

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42
Q

What is Truncation?

A

When credit card, debit card, or bank deposit
receipts are given, they cannot show more than
the last four digits of the account numbers

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43
Q

What are the two parts of Red Flag Rules?

A

(1) Before the request for change of personal information, the company must send a letter or email asking if the person requested the change. (2) All employees are to be trained on how to identify a breach of security and what the company’s requirement is once the breach has been determined.

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44
Q

Which agency regulates Red Flags?
F
T
C

A

Federal Trade Commission (FTC)

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45
Q

What is a Homeowner’s Warranty?

A

A warranty and insurance program that insures a new home for ten years against major structural defects

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46
Q

If a breach is determined, what is the requirement?

A

It must be reported to Compliance Officer or Senior Officer and, 30 days from that point, the company must send a notice to all people in their database notifying them of the breach and what the company has done to protect them

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47
Q

What does GLB stand for?

A

Gramm-Leach-Bliley

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48
Q

What are the 3 arms of GLB
SOP

A

The Safeguard Rule
The Opt-Out Rule
The Pretexing Rule

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49
Q

What is the REG for Gramm
Leach Bliley?

A

REG P

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50
Q

What is the main emphasis of
Gramm Leach Bliley?

A

Privacy of consumers’ personal
information

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51
Q

What does NPPI stand for?

A

Non-Public Personal Information

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52
Q

What is “Opt-Out” under GLB?

A

The consumer has the right to opt-out of a company sharing, selling, or giving their NPPI to anyone. The Opt-out stays on as long as their name is in the company’s database.

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53
Q

What is Phishing or Pre- Texting?

A

Obtaining personal information by illegal process, like a text, claiming
to be from the IRS, asking for your SSN

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54
Q

What is required under Safe-Guard Rules?

A

Whenever you are not using your files, they are to be locked up in a desk drawer or filing cabinet. If your files are on a computer, there must be a lock-out after a few minutes.

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55
Q

What regulates Safe-Guard Rules?

A

FTC – Federal Trade Commission

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56
Q

What is the required retention of Loan Information?

A

(3) Three years for all loan files and
(5) five years for the CD

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57
Q

Can the hard files be destroyed?

A

Once the files are digitized, they
can be destroyed, but that does not
mean throwing them away

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58
Q

Who is required to file a HMDA report?

A

All companies that underwrite or fund
loans must file an HMDA report annually. This
includes banks, credit unions, and mortgage
bankers.

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59
Q

What does HMDA stand for?

A

Home Mortgage Disclosure Act

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60
Q

What is the REG letter for HMDA?

A

Reg C

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61
Q

Which agency is responsible for overseeing HMDA data?

A

FFIEC - Federal Financial Institutions Examination Council

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62
Q

What does CRA stand for?

A

Community Reinvestment
Act

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63
Q

What does CRA require?

A

To encourage depository institutions to help meet the credit needs of the communities in which they operate

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64
Q

Do Mortgage Brokers have to report HMDA data?

A

No, because brokers do not underwrite or fund loans

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65
Q

When does the HMDA data have to be reported?

A

In 2019, by March 1st of each year.
In 2020, it is quarterly.

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66
Q

What does PENCIL stand for?

A

P= Property address,
E=Estimated value,
N= Name,
C = Credit or Social Security number,
I = Income,
L = Loan amount

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67
Q

When is an application considered a loan?

A

When you have collected all
the items in PENCIL

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68
Q

What agency regulates and enforces
Do-Not-Call?

A

FTC – Federal Trade Commission

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69
Q

How often do you have to pull new data from the Do-Not-Call website if you are using the data to solicit consumers?

A

The data cannot exceed 31 days. The data includes phone numbers for any person that registers their phone number with DNC.

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70
Q

How long are you to retain your solicitation records?

A

Two years from the date of solicitation

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71
Q

What times can you solicit?

A

8:00am – 9:00pm, depending on where the person being solicited is located

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72
Q

What are the two exemptions for solicitations under Do-Not-Call?

A

18 months for someone with whom you have an existing business relationship and 90 days for a Pre-qualification

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73
Q

What is an in-house Do Not Call List?

A

If a consumer sends a letter or an email to the company indicating they want no solicitations, the company must put that person on an internal do not call list, so no one contacts that person. This overrides the 18-month and 90
day exemption.

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74
Q

What are the eight items covered under TILA? Mallqach

A

Mallqach
MDIA Mortgage Disclosure Improvement Act
Advertising
Loan Estimate (LE)
Loan Officer Compensation
Qualified Mortgage (QM)
Annual Percentage Rate (APR)
CHARM Booklet
HOEPA

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75
Q

What Does MDIA stand for?

A

Mortgage Disclosure Improvement Act

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76
Q

What does Mortgage Disclosure Improvement Act (MDIA) cover?
(pliccia)

A

MDIA is a part of Reg Z and covers timing and delivery requirements for initial disclosures, LE, intent to proceed, and changes to the mortgage loan program, prepayment penalty, or APR calculations. MDIA also addresses when the CD needs to be issued, as well as the waiting period involved.

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77
Q

What is a Changed Circumstance?

A

Any borrower-requested change due to an
extraordinary event beyond anyone’s control. A new LE must be received by the borrower within three business days of the change.

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78
Q

What are the requirements for advertising under TILA?

A

All marketing materials must have the company name, company NMLS number, phone number, address, equal housing logo, and an APR. All advertising must be kept for two years from the last date used.

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79
Q

What is the definition of Annual Percentage Rate (APR)?

A

APR is expressed as a percentage that represents the total costs paid over the term of a loan. This includes any fees or mortgage insurance associated with the transaction.

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80
Q

What does APR stand for?

A

Annual Percentage Rate – the cost of the loan over the life of the loan, quoted as a percentage rate

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81
Q

What is a CHARM booklet?

A

A booklet that is required for all ARM
loans. It is issued at least three days
from the signed application

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82
Q

What is the Loan Estimate (LE)?

A

A disclosure of all terms and costs of the loan,
to be issued when you have all the items under
PENCIL, and within three business days of the
signed application

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83
Q

What does QM stand for?

A

Qualified Mortgage all conforming
conventional loans must meet the
standards

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84
Q

What are the two ways a conventional conforming loan can meet QM Standards?

A

Option #1: 43% maximum DTI and maximum 3% in fees.
Option #2: Approved eligibility from Fannie or Freddie and meet the Higher-Priced Lending triggers

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85
Q

What is Safe Harbor?

A

If you meet either of the two options under QM that showed you proved Ability-to-Repay requirement, you are protected from a lawsuit

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86
Q

What is the punishment if you do not meet QM Standards?

A

Up to three years of interest, all loan costs, and legal costs for both sides

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87
Q

If an MLO is paid commissions, what can the commissions be based on?

A

Basis points under your Loan Originator Agreement, times the loan amount. No terms or costs of the loan can be counted.

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88
Q

What does UDAAP stand for?

A

Unfair, Deceptive, or Abusive Acts or Practices

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89
Q

What does Unfair, Deceptive, or
Abusive Acts or Practices (UDAAP) state?

A

It is unlawful for any provider of
consumer financial products or services or a
service provider to engage in any unfair,
deceptive, or abusive act or practice

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90
Q

If a company pays a bonus or retirement donation, what are the criteria for determining the amount?

A

Number of loans, dollar amount
originated for a specific time, and/or the closing
rate on your applications. Bonuses are limited
to 10% of the last 12 months’ compensation.

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91
Q

What does Reg N Cover?

A

Mortgage Acts and Practices (MAP)

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92
Q

What does (MAP) Mortgage Acts and Practices require?

A

If you don’t have a program or rate, do not advertise it, and do not use Bait and Switch tactics, or language or terms that would indicate to a borrower you do not want them to apply

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93
Q

What is Bait and Switch?

A

Advertising a lower rate or a program that may not exist to entice consumers, and then when they call, you offer them another less-attractive program.

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94
Q

What is not included in Digital Delivery?

A

Faxing or e-mail. Docu-sign or E-sign are acceptable where the person can be verified, and the documents are time stamped as they are sent back and forth.

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95
Q

What are the requirements for Digital Delivery?

A

The borrower must give you written approval, have the right to go back to hard copy, and you must determine, to the best of your ability, if the borrower is technically able to do the process

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96
Q

What does CFPB stand for?

A

Consumer Financial Protection Bureau

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97
Q

What are the duties of the Consumer
Financial Protection Bureau (CFPB)?

A

They have the power to write, implement
regulations, investigate, and issues fines
or other penalties as needed

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98
Q

Who does the CFPB answer to?

A

The President

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99
Q

What is a Consumer?

A

Someone who obtains a financial product or
service from a financial institution that is to be
used primarily for personal, family, or household purposes, like applying for a loan (whether they accept the loan or not).

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100
Q

How many days do you have to send an adverse action notice?

A

30 days, mailed or verbal

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101
Q

TILA Trigger terms
(4 things)

A

Balance, term, APR (rate), payment

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102
Q

Flood Insurance

A

Stays until the loan is paid off

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103
Q

How many months reserves are needed for non-owner-occupied properties?

A

6 months

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104
Q

What is Excessive Value?
(related to appraisal)

A

An appraisal term to express a value higher than the highest in the neighborhood

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105
Q

What is the flood insurance requirement?

A

Enough to cover the loan amount

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106
Q

What is the hazard insurance requirement?

A

Enough to cover the loan amount

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107
Q

What are the payment options for ARMs?

A

15 years, 30 years,
Negative/Minimum

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108
Q

Servicing loan estimates need to be given within what time frame?

A

3 days

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109
Q

What are the manufactured home financing requirements?

A

Home must be on a permanent foundation and the land must be titled as real property. The HUD Data Plate must be on the home

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110
Q

What is the VA back-end ratio?

A

41%, including housing, utilities, and all other debts

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111
Q

How much hazard insurance is required on a reverse mortgage?

A

100% of the loan amount

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112
Q

What is the minimum down payment?
on conventional and FHA

A

Conventional: 3%
FHA: 3.5%

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113
Q

What does the cost approach include?

A

Depreciation, Square Footage,
and Replacement Cost

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114
Q

With the Sales Comparison
Approach, what adjustments are
allowed?

A

Net adjustments of 15%
Gross adjustments of 25%
to comparables

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115
Q

What do riders include?
(4 things) PABP

A

PUD, ARM, Balloon Payment,
Prepayment Penalty

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116
Q

What is a Hybrid Loan?

A

A loan that performs like a fixed and adjustable-rate loan. It has a fixed rate for an initial period before turning into an ARM.

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117
Q

What is a non-warrantable condo?

A

FNMA will not do the loan
Condo-conversion= non-warrantable
HOA, 51% owner occupied

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118
Q

FHA loans are only for what types of properties?

A

Owner-Occupied Properties

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119
Q

What is a grace period?

A

A period of extra time allowed for making a payment without incurring a late penalty

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120
Q

What does Title VII (7) include?
(3 things)

A

Discrimination, Sexual Harassment,
Hostile Workplace

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121
Q

What is the FHA loan verification of
child support?

A

Divorce decree and 3 months
of canceled checks

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122
Q

What are the types of title policies?

A

Final, Termite,
Engineer Certification of Foundation

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123
Q

What must happen in order to transfer an FHA case number?

A

Request must come from borrower

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124
Q

What is the UFMIP % (percent)?

A

1.75%

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125
Q

How is monthly MIP calculation done?

A

On base loan amount before UFMIP

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126
Q

What is the active-duty vet 1st time
funding fee at 100%?

A

2.30%

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127
Q

What is the FHA loan minimum living time before resale?

A

91 days from consummation with second appraisal

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128
Q

How is a GLBA notice delivery given out?

A

Mailed, given personally, or faxed

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129
Q

How do tenants in common
mortgages work?

A

Each owner has their own share of
the property that they can pass on
in their will

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130
Q

What information is covered in
the privacy rule of GLBA?

A

Non-public information, including any
information an individual gives you to get a
financial product or service; i.e., credit reports,
banking info, unlisted home telephone numbers

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131
Q

What is on the deed of trust agreement?

A

Metes and bounds, legal description, attached riders, name of the borrower

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132
Q

What is an ongoing business relationship?

A

Customer

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133
Q

How long is the FIRREA statute of limitations on loan fraud?

A

10 years

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134
Q

How often must the aggregate accounting escrow be reviewed?

A

Every 12 months, cushion up to 2 months

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135
Q

What is a Chain of Title?

A

The ownership history of a piece of land, from its first owner to the present one

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136
Q

Which types of loans are Assumable?

A

VA, FHA if stated in the deed

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137
Q

How much is title insurance coverage
on reverse?

A

150% of the original loan amount

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138
Q

What is AQB?

A

National appraiser group

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139
Q

What is settlement service per RESPA?

A

Up to 50% of a loan up to $45,000.

Between 45,000 and $144,000, the minimum is $22,500

and the max of up to 40% of the loan is up to $36,000.

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140
Q

What is a notice of transfer?

A

Includes toll free number of new and old servicer and effective date, 15 days before transfer

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141
Q

When are LE requirements not required?
(3 things)

A

They are not required on commercial loans, loans denied within three days, or bridge/swing loans

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142
Q

What is a “due on sale” clause?

A

A clause in a loan or promissory note that stipulates that the full balance of the loan may be called due (repaid in full) upon sale or transfer of ownership of the property used to secure the note

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143
Q

How often do telemarketers update the DNC?

A

31 days

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144
Q

After someone requests you to put
them on your DNC list, how many days
do you have to do so?

A

30 days

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145
Q

How long does a conventional loan owner agree to occupy the property?

A

1 year

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146
Q

What are the guidelines for appraisers?

A

USPAP

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147
Q

Where is the Prepayment penalty disclosed?
(3 places)

A

Rider to trust deed
and LE/CD

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148
Q

Which loan requires a large final loan payment, as it does not fully amortize?

A

Balloon

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149
Q

What is included in typical property inspections?
(5 things)

A

Verification that required repairs have been made, termite, well, septic, and roof

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150
Q

Joint Tenants

A

Ownership automatically transferred on death to other owners, cannot be a corporation

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151
Q

What is a Bridge loan?

A

A loan which occurs between the termination of one mortgage and the beginning of the next.

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152
Q

What affects mortgage interest rates?

A

Unemployment report,
consumer price index,
federal reserve board

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153
Q

What affects PMI?
(4 things)

A

LTV, ARM, Term, F I CO

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154
Q

What is an indemnity agreement?

A

With a real estate indemnity agreement, one party is pledging to protect another from any kind of financial loss or from a lawsuit of some kind

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155
Q

What is the required fire/hazard insurance amount?

A

Enough to cover the loan amount

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156
Q

What is LIBOR?

A

London Inter Bank Offered Rate

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157
Q

What is the max seller-paid closing costs for Conventional, FHA/USD, and VA loans?

A

CONVENTIONAL <10% then 3% - 10 to 25% then 6% - 25+% then 9%

FHA/USD: 6%

VA: 4%

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158
Q

What is the max seller-paid closing costs for Conventional, FHA/USD, and VA loans?

A

Down Payment on Conventional
<10% - Seller Paid = 3%
10-25% Seller Paid = 6%
25+% Seller Paid = 9%

FHA/USD: 6%

VA: 4%

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159
Q

What is the right of rescission?

A

A right, set forth by TILA, of a borrower to cancel a home equity or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee, within three days of closing

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160
Q

Which form states that the borrower
must occupy the property as a primary
residence within 60 days?

A

FNMA FHLML Form 3072

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161
Q

What are the different appraisal types?

A

Cost: Cost to replace; usually newer construction

Income: Income-producing properties

Sales Comparison (Market): Compare to other
similar properties

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162
Q

When was the Dodd Frank Act created?

A

2010

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163
Q

What are Mortgage-Backed Securities?

A

A type of asset-backed security that is secured by a mortgage or collection of mortgages

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164
Q

Lower-cost MI with loan-level price adjustment

A

Borrower with high credit scores. The borrower can have lower MI but FNMA will pay less for the loan

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165
Q

What does plain language title insurance do?
(MERF)

A

Protects the buyers:
1. Rights of claims of 3rd parties
2. Easements or claims of it not in the public record
3. Forced removal of an existing structure
4. Mechanics lien coverage (unrecorded)

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166
Q

What is the appraiser trainee period?

A

12 months

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167
Q

Who are the big players on the Secondary Market?

A

FNMA, FHLMC, and GNMA

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168
Q

Someone on the DNC list contacts you.
How long can you continue to call?

A

3 months

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169
Q

What are the high-cost limits with
APR and point fees?

A

APR: LOOK THIS UP AND VERIFY
6.5 on 1st or 8.5% on 1st less than 501c or 2nd

Points Fees:
5% + on $20,000+ loan or
8% on less than 20,000

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170
Q

Where can acceptable down
payments come from?

A

Selling an asset
An employer
Family
A fiancé

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171
Q

Which financial and non-financial companies are covered by the Bank Secrecy Act?

A

Banks, Credit Unions, Mortgage Bankers, and Mortgage Brokers

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172
Q

Who is required to take the AML and Fraud Training?

A

All staff and management

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173
Q

How often does the AML and fraud training have to be done?

A

Once a year

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174
Q

Does fraud or money laundering have to be proven or just detected?

A

Only detected

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175
Q

If AML or fraud is detected, who do you report it to?

A

Compliance officer or Senior Officer

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176
Q

What is the name of the report
that is to be filed if fraud or AML is
detected?

A

SAR
Suspicious Activity Report

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177
Q

Which government agency is
responsible for the
Bank Secrecy Act?

A

FinCEN
Financial Crimes Enforcement Network

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178
Q

If a SAR is reported, how long does the file have to be kept in a secure place?

A

Five years

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179
Q

Can the borrower be told a SAR has been reported on them?

A

No – information on SARs is to be kept confidential for a five-year period

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180
Q

Who is allowed to see the file once it has been reported as a SAR?

A

Police Authority or anyone approved by FinCEN to see the information

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181
Q

Who is the person responsible for SAR files and releasing information?

A

Compliance Officer or Senior Officer

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182
Q

What is the penalty for violating the Bank Secrecy Act?

A

person convicted of money laundering can face up to 20 years in prison and a fine of up to $500,000

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183
Q

What is required under the U.S. Patriot Act?

A

All borrowers are required to show personal identification:
either a driver’s license or passport

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184
Q

What does OFAC stand for?

A

Office of Foreign Asset Control

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185
Q

What is required if a borrower is on the OFAC watch list?

A

The lender must call OFAC and report the person and ask what is to be done with the loan

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186
Q

What does HPA stand for?

A

Homeowners Protection Act

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187
Q

What is required under the Homeowners Protection Act?

A

All loans about 80% LTV must have Mortgage Insurance if they are Conventional Conforming Loans

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188
Q

What is the purpose of Private Mortgage Insurance?

A

To provide security to the lender in case of default. Also allows borrower to make a smaller down payment.

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189
Q

What does MIP stand for?

A

Mortgage Insurance Premium for FHA Loans

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190
Q

Under the Homeowners Protection Act, what is available to the borrower at 80% LTV?

A

The borrower can request that the PMI be dropped but it is at the option of the lender

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191
Q

When is PMI required to be dropped under the Homeowners Protection

A

78% Loan to Value (LTV)

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192
Q

What does QM stand for?

A

Qualified Mortgage

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193
Q

What is one of the options for a loan to meet QM standards?

A

Approved eligibility from Fannie Mae
or Freddie Mac
and higher-priced lending standards are met

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194
Q

What is the penalty if you close a
Conventional Conforming loan without QM approval?

A

Up to three years of interest, all loan
costs, and legal costs for both
sides of the lawsuit

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195
Q

What does Safe Harbor mean?

A

The lender has proven the borrower has the Ability to Repay (ATR)

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196
Q

What does LO Comp stand for?

A

Loan Officer Compensation

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197
Q

What law is LO Comp covered under?

A

TILA – Truth in Lending Act

198
Q

What can commissions be paid on?

A

Basis points of the loan amount.
80 basis point loan officer X a
$200,000 = $1,600 commission

199
Q

What items can LO Compensation be paid on?

A

Loan amount only

200
Q

What is the limit of bonus money
that can be paid to MLO?

A

10% of the last twelve months
compensation

201
Q

What are the two ways that
compensation can be paid?

A

By the customer or the mortgage
the company, but not both

202
Q

What does TRID stand for?

A

TILA, RESPA Integrated Disclosure

203
Q

What are the two booklets required within three business days of the signed application?

A

Loan Tool Kit for all purchases and CHARM booklet for all ARM Products

204
Q

What is the requirement for the Intent to Proceed?

A

When the borrower brings the signed Intent to Proceed to the company, the borrower indicates they are obligated to the loan

205
Q

When can an appraisal be ordered?

A

When the borrower signs and delivers the Intent to Proceed

206
Q

How many days from the signed application are the initial disclosures, including the LE, to be delivered?

A

Three business days

207
Q

How many days does the borrower have to wait to close after the signed Intent to Proceed is delivered to the lender?

A

Seven business days

208
Q

What is a Regulatory Authority?

A

An entity that has the power to regulate the
mortgage industry

209
Q

What are the four ways the initial disclosures can be delivered to the borrower?

A

Electronic signature, in-person,
mail, or overnight

210
Q

What is required to use electronic signatures?

A

Borrower’s written authorization, ability to
go back to hard copy if they wish, and
determining whether they are able to do
electronic signatures

211
Q

What is a Changed Circumstance?

A

Any change requested by the borrower (loan amount, locking the loan, program, etc.) or a natural disaster

212
Q

How many days does a new Loan Estimate (LE) have to be delivered after a Changed Circumstance?

A

Three business days

213
Q

How many business days before closing is the Final Loan Estimate (LE) required to be received by the borrower?

A

No less than four business days

214
Q

How many business days before the closing does the borrower have to receive the Initial Closing Disclosure?

A

Three business days

215
Q

What are the three things that would require a new CD and a three-business day delay in the closing?

A

One of the following: Mortgage program changes, prepayment penalty is added, or the APR tolerances are exceeded (1/8% on a
fixed or 1/4% on an ARM)

216
Q

What is the definition of Consummation?

A

When the borrower becomes
obligated to the loan

217
Q

What is a business day for the
closing?

A

Any day the business is open, not
including Sunday or federal
holidays

218
Q

What are the three stages of a
mortgage loan life cycle?

A

Borrower’s consideration,
the primary market, and the
secondary market

219
Q

What items are considered ZERO tolerance items?

A

Appraisal, origination fee, lender fee, and transfer taxes

220
Q

What are the three categories for fees on the LE?

A

Zero tolerance, 10% tolerance, and no tolerance

221
Q

What is covered under 10% tolerance?

A

Title policy or lender required inspection or recording fees

222
Q

What does 10% tolerance mean?

A

When you quote title or lender-required inspection or recording fees, and the amount is higher than quoted, the borrower is liable for 10% and you are responsible for the balance

223
Q

When is an MLO or company not liable under the 10% tolerance?

A

When the borrower selects their own title or inspection company

224
Q

What does no tolerance mean?

A

No liability for the MLO and
company because the borrower
selects the items

225
Q

What items are included in the
NO tolerance items on the LE?

A

Attorney’s fees, realtor fees,
Homeowners insurance, escrows,
per diem interest

226
Q

How do you calculate per diem (daily)
interest?

A

Principal balance times

interest rate (note rate)

divided by 360 days on
conventional loans,

or 365 on a government loan (VA/USDA) gives interest per day

227
Q

What is the Lien Priority?

A

The chronological order in which liens are filed against a property. Lenders want first priority.

228
Q

What does HUD stand for?

A

Housing and Urban Development

229
Q

What are the responsibilities of HUD?
(FFFE)

A

1) Manage Federal Housing Administration (FHA) and
2) monitor companies and MLOs for Fair Lending, Fair Housing, and
3) complying with ECOA

230
Q

What does ECOA Stand for?

A

Equal Credit Opportunity Act

231
Q

What is the Reg letter for ECOA?

A

Reg B

232
Q

What is the Reg Letter for
Fair Credit Reporting Act?

A

Reg V

233
Q

What is the Reg Letter for
RESPA?

A

Reg X

234
Q

What does RESPA stand for?

A

Real Estate Settlement
Procedures Act

235
Q

Which three laws does the Federal Trade Commission (FTC) regulate?

A

Red Flags,
Safeguard Rules, and
Do-Not-Call

236
Q

On the Loan Estimate (LE), can the Interest Rate be quoted as a fraction? (i.e. 3 7/8%)

A

Only decimal format (i.e.
3.875%)

237
Q

On the Loan Estimate, if “Yes” is shown for Loan Amount, Interest Rate and P&I payment, what does that mean?

A

The loan is an Adjustable-Rate Mortgage (ARM)

238
Q

What is a Prepayment Penalty?

A

If you attempt to pay the loan off in the first two or three years, there could be a penalty

239
Q

Who is required to complete the Loan ID on the Loan Estimate?

A

The company funding the loan

240
Q

What items may be included in
the escrow portion of your
monthly mortgage payment?

A

Real Estate taxes, Homeowners
Insurance, Flood Insurance, or HOA
fees if the property is a condo

241
Q

On the loan estimate, what is
included in the estimated closing
costs?

A

All the costs and fees that will be
paid by the borrower at closing

242
Q

When a borrower locks their
loan, what does that mean?

A

The interest rate and fees are
locked, as long as the loan is
funded by the expiration date

243
Q

What are the different lock options for loans?

A

15, 30, 45, or 60 days. The lock period will cost more as the lock gets longer.

244
Q

Can a mortgage broker issue an extended lock agreement?

A

No, only a lender that funds loans can issue an extended lock agreement

245
Q

What is an extended lock?

A

A lock of interest rates and fees for a period longer than 60 days

246
Q

What four items must be on an extended lock agreement?

A

Program, interest rate, cost of the lock, and the expiration date

247
Q

How many days from the issue date of the loan estimate does the borrower have to bring the signed Intent to Proceed to the lender to protect their costs?

A

Ten business days

248
Q

What happens if the borrower does not return the signed Intent to Proceed to the lender within 10 days of the issue date of the LE?

A

The costs of the loan are subject to
change and the LE continues to be
active

249
Q

What must be put on the top
left side of page 3 of the Loan
Estimate?

A

The lender that is funding the
loan

250
Q

What must be put on the top right side of page 3 of the Loan Estimate?

A

If the loan is originated by a
Mortgage Broker, their contact
information is to be listed

251
Q

What three comparisons are required on page 3 of the Loan Estimate?

A

Total cost for the first five years, Annual Percentage Rate (APR), and Total Interest Percentage (TIP)

252
Q

What is Annual Percentage Rate (APR)?

A

The cost of the loan, including interest rate and all costs over the life of the loan

253
Q

What does TIP stand for?

A

Total Interest Percentage

254
Q

What does TIP tell you?

A

The total interest paid over the life of the loan

255
Q

How is Total Interest Percentage calculated?

A

P&I payment, times the number of payments on the loan, then subtract the principal balance (total interest paid over the life of the loan), divided by the principal = TIP
Ex: $1750 * 360 = $630,000
minus loan amount of $350,000
equals $280,000
$280,000/$350,000=8%

256
Q

When is the appraisal to be
delivered to the borrower?

A

No less than three business
days before the closing

257
Q

Can a borrower appeal an appraisal?

A

Yes, with information that shows the
reason; they cannot just say they
feel the property is worth more

258
Q

What is the rule on how much
Homeowners Insurance is
required?

A

The lower of value of the
property or the mortgage
amount.

259
Q

When must a Late Payment be applied?

A

After the 15th of the month, a fee of 5% of the P&I payment can be added to the amount due for the month

260
Q

What items are required to refinance a loan?
(3 things)

A

Value of the property, credit, and income

261
Q

What does Servicing mean?

A

The collection of monthly payments, paying the investor, and setting aside the escrow money into separate accounts other than operating accounts for the servicer. Paying taxes and insurances as they come due.

262
Q

Do the signatures on Loan Estimate obligate the borrower to the loan?

A

No, the signatures only indicate the borrower received a copy of the LE. The signed Intent to Proceed is the document that obligates the borrower.

263
Q

What is a Mortgage Broker?

A

A company that originates a loan but cannot underwrite or fund a loan. A MB cannot claim they are a mortgage lender.

264
Q

What type of properties are
covered under the laws of TILA,
RESPA, ECOA, and HMDA?

A

1-4 family residences. Any residential is not correct. Units more than 4 units may be residential but are not covered under the laws.

265
Q

What is a third-party provider?

A

Any company that provides a service for the origination of a mortgage loan,
like appraisals, title insurance, or
credit reports

266
Q

Can a mortgage be called a TPO?

A

Yes, they could be called a
third party originator

267
Q

When can the foreclosure process begin?

A

When the loan is 120 days delinquent

268
Q

What is covered under the Initial Escrow Disclosure?

A

How the escrows are collected and the servicer’s responsibilities

269
Q

What circumstances can result in a declination?

A

Credit, insufficient assets, the borrower does not have sufficient income, or the appraisal is not high enough to make the loan

270
Q

What is required to be in the Adverse Action notice?

A

The reason for the cancellation or declination

271
Q

What is Comparative Evidence of Disparate Treatment?

A

When similar applicants receive different treatment that cannot be explained by non-discriminatory factors

272
Q

What is evidence of
Disparate Impact?

A

When a policy or practice negatively impacts individuals on a prohibited
basis

273
Q

What is the responsibility of a
Cosigner?

A

They are as responsible as the borrowers when the loan becomes delinquent or goes into foreclosure. The cosigner’s credit will be affected the same as the borrower’s credit

274
Q

What are the types on income
eligible to be used in underwriting?

A

Any income that can be verified and
has a two-year history and
the potential of lasting for
three years in the future

275
Q

If the borrower refuses to volunteer their ethnicity, what are you to do as an MLO?

A

You cannot require the borrowers to provide the information, but you are required to complete the information based on your observation of the borrowers

276
Q

What are the core items of the Truth in Lending Act (TILA)?

A

MDIA, Advertising, APR, LE, HOEPA, CHARM Booklet, QM, and
LO Compensation

277
Q

What are the limitations for seller/lender concessions?

A

3% on a conventional conforming loan over 90%, and
6% on loans between 75% and 90%

278
Q

What are permissible fees and charges?

A

Any fees that the borrower is charged to obtain the loan and are disclosed on the LE

279
Q

Which loans require a Right of Rescission?

A

Owner occupied primary residences

280
Q

How many copies of the Right of
Rescission are to be given to the
borrowers and owners of the property?

A

Two copies to each person

281
Q

How many of the people that were
given the Right of Rescission are
required to rescind the loan?

A

One person

282
Q

When does the Right of Rescission start?

A

Three complete business days
after the closing

283
Q

What are the two fee thresholds?

A

3% on Qualified Mortgage and
5% on a High-Cost Loan

284
Q

Where does the origination fee go on page 2 of the LE?

A

Under Loan Costs

285
Q

What is required to be on the Annual Escrow Analysis report?

A

How much the borrower has paid in and how much was paid on their behalf for taxes and insurances and if there is an overage or shortage

286
Q

What is required if there is an overage on the escrow analysis?

A

If the amount is over $50.00, the overage must be paid to the borrower within 30 days

287
Q

What is required if there is a shortage on the escrow analysis?

A

The borrower must pay it in one lump sum within 30 days or spread it over the next 12 months

288
Q

What is the Acceleration
Clause?

A

If the borrower is delinquent and it
reaches 120 days, the lender has the
right to call the balance due

289
Q

What is the Alienation Clause?

A

If the borrower sells their house and does not notify the lender or allow the new buyer to take over the mortgage, the lender has the right to start foreclosure

290
Q

Which loan products will not
allow assumptions?

A

Conventional conforming or
USDA loans

291
Q

Which loan products will allow assumptions?

A

FHA and VA, if the new buyer is approved by the lender. If it is a VA loan, the new buyer must be a veteran.

292
Q

What is an assumption?

A

The new buyer can take over the original borrower’s loan and continue to make the payments, but only on FHA and VA loans

293
Q

What is required to be reported on your HMDA report?

A

All loans that meet the definition of a legal loan whether declined, approved, or cancelled

294
Q

What is a Tri-Merge credit report?

A

A credit report that has information from Experian, TransUnion and Equifax

295
Q

What is a Deed?

A

A written instrument by which land is conveyed

296
Q

When a credit report is reviewed,
what are the items that should be
checked against the application?

A

Social Security number, residency history, employment history, payment history, and debts that are on the application

297
Q

When are you allowed to pull
credit?

A

When the borrower authorizes you in
writing or on a pre-qual, if the borrower discloses their SSN and you document it in your records

298
Q

What is the definition of a
creditor?

A

Any company or business that advances credit to a consumer

299
Q

How long does a Chapter 11 or 13 bankruptcy show on the credit report?

A

Seven years

300
Q

How long does a Chapter 7 bankruptcy show on the credit report?

A

Ten years

301
Q

What is the fine for Red Flag violations?

A

$3,500, plus $2,500 for FTC violations

302
Q

What is the penalty for Section 8 RESPA anti-kickback rules?

A

$10,000, plus up to one year in jail

303
Q

What are the penalties if you violate Dodd-Frank Tier One, Federal Consumer Financial laws?

A

$5,639 per violation per day

304
Q

What are the penalties if you
violate Dodd Frank Tier two,
Federal Consumer Financial laws?

A

$28,139 per day for each
violation

305
Q

What are the penalties if you
violate Dodd Frank Tier three,
Federal Consumer Financial laws?

A

$1,127,779 maximum per
violation

306
Q

What are the requirements for
Conventional Conforming loans
over 80% LTV?

A

All loans over 80% must have
escrows and PMI mortgage
insurance

307
Q

What is the definition of a Conventional Conforming Loan?

A

97%

308
Q

What are the debt-to-income ratios on a Conventional Conforming Loan?

A

28% for Housing (up-front) and 36% for overall debt (back-end)

309
Q

Do Fannie Mae and Freddie Mac allow non-owner-occupied loans?

A

Yes, at lesser loan-to-value and may have increased rates and fees

310
Q

What is the Underwriting system for Fannie Mae?

A

DU – Desktop Underwriter

311
Q

What does approve eligible mean?

A

A loan that has been run through the Fannie or Freddie underwriting systems that says they will be accept the loan if the documents match what was put into the system

312
Q

What is allowed for down payment on Conventional Conforming, FHA, USDA, and VA loans?

A

Verified liquid assets, a gift from a blood relative, employer or close friend with no repayment required, or down payment assistance from
agencies helping first-time homebuyers

313
Q

What does USDA stand for?

A

United States Department of
Agriculture

314
Q

What are the underwriting
ratios for a USDA loan?

A

29% for housing and 41% for
overall debt

315
Q

What are the restrictions on USDA loans?

A

The home must be in areas of less than 35,000 people, income limitations, and all loans must be underwritten and funded by USDA

316
Q

What does FHA stand for?

A

Federal Housing Agency

317
Q

Does FHA insure or guarantee loans?

A

Yes, they insure and will pay a claim after the lender forecloses

318
Q

What is the maximum Loan-to-Value on FHA loans?

A

96.5%

319
Q

What is the maximum loan amount allowed?

A

It is set by the government at the end of each year and set for areas in each state

320
Q

What are the debt to income
ratios on FHA loans?

A

31% for housing and 43% for
overall debt. (overall means mortgage payment and all other debt payments)

321
Q

What is CAIVRS?

A

A database that shows liens, defaults, and debt owed to federal agencies, including government insured student loans. This needs to be checked for FHA loans

322
Q

What is the (UFMIP) upfront premium
for FHA loans?

A

1.75%; this may be added
into the loan amount

323
Q

What is the renewal premium on FHA loans?

A

.85% of the loan amount divided by 12 = the amount added to the monthly payment

324
Q

What is the maximum loan-to-value on VA loans?

A

100% if the veteran has 100% benefits

325
Q

What is a DD214?

A

The document that tells you the veteran has benefits, but does not say how much

326
Q

What is the COE?

A

Certificate of Eligibility, which provides proof of a veteran’s service and tells the lender that an applicant has met the minimum service requirement. This will determine the amount of down payment required, if any.

327
Q

Does VA insure or guaranty loans?

A

Guaranty loans (up to a maximum of $144,000)

328
Q

What is the debt-to-income ratio for VA loans?

A

41% overall; they don’t have a
housing ratio

329
Q

What are non-conforming loans?

A

Any loan that cannot be sold
to Fannie Mae or Freddie Mac

330
Q

Who sets the underwriting
rules, programs, and pricing
for non Conforming loans?

A

The companies buying the loans

331
Q

What is “payment shock”?

A

A borrower who is renting for $900 a month and now buying a home with a payment of $1,300 a month with no reserves to show where the extra
$400 a month is coming from

332
Q

What is a non-traditional loan?

A

Any loan that is not 30-year fixed

333
Q

Is a 40-year amortized loan considered conforming or
non-conforming?

A

Non-conforming – any loan above 30 year fixed cannot be sold to Fannie or Freddie

334
Q

What is a Purchase Money Second?

A

A second mortgage that is used to eliminate Mortgage Insurance. Terms like 80/10/10 mean an 80% first mortgage, a 10% second, and a 10% down payment.

335
Q

Can the interest rate change on a fixed-rate mortgage?

A

No- it is fixed for the life of the loan

336
Q

What are the five parts of an
ARM loan?
(PCmif)

A

Program, caps, margin, index, and fully indexed
rate

337
Q

What program is a 5/1 ARM?

A

Initial interest rate fixed for 5 years and then an annual adjustment

338
Q

What does a 2/5 cap mean?

A

The 2 is the adjustment cap, meaning the interest rate cannot go up or go down any more than 2%. The 5 is the life cap, which requires you to add the starting rate to the life cap of 5 which equals the highest interest rate that can go over the life
of the loan

339
Q

What is the margin on an ARM loan?

A

The only number on an ARM loan that does not change over the life of the loan and it is the floor, meaning the interest rate cannot go below the margin.

340
Q

What is the most common index today?

A

LIBOR – London Interbank Offered Rate

341
Q

What two numbers do you add together to obtain the Fully- Indexed Rate?

A

Margin and index

342
Q

How long before the interest adjustment is the first ARM disclosure to be sent to the borrower?

A

Seven months before the adjustment is required

343
Q

What three items are required to calculate the mortgage payment?

A

Remaining balance, interest rate, and remaining term

344
Q

Which law covers Balloon Loans and what is the
minimum balloon?

A

HOEPA
Home Owners Equity Protection Act.
The minimum balloon is five years.

345
Q

What does 360/180 mean?

A

15 year balloon

346
Q

What are the five parts of a Reverse Mortgage?

A

Negative amortization, the borrower pays their
own taxes and insurance, must be 62 or
older, mandatory counseling, a non
recourse mortgage

347
Q

What does a non-recourse mortgage mean on a Reverse Mortgage?

A

At the end of the mortgage, if the balance is higher than the value, and the borrowers have passed, the government absorbs the deficiency

348
Q

What is the minimum age to obtain a Reverse Mortgage?

A

62 years of age. If the spouse is only 60, the spouse cannot be on the loan.

349
Q

What does HELOC stand for?

A

Home Equity Line of Credit

350
Q

Is interest charged if you do not draw any proceeds?

A

No, only after you draw money; you will then pay interest from the day of the draw till the end of the month, and pay interest on the balance at the end of each month

351
Q

Are principal payments required on HELOCs?

A

They are at the option of the borrower whether to pay the principal each month

352
Q

Is the interest rate fixed or floating on
HELOCs?

A

The interest rate floats, usually based on the Prime Rate

353
Q

What is the difference between a
2 nd mortgage and a HELOC?

A

On a 2nd, all the proceeds are paid out at closing, while on a HELOC, the borrower chooses when to draw principal

354
Q

What are the two types of Construction Loans?

A

Construction with a Permanent
take out and Construction Permanent

355
Q

How many loans are on a Construction Permanent?

A

One loan and one set of closing costs

356
Q

In an Interest Only Loan, what is the amount you pay each month?

A

Only interest is paid, but the borrower must qualify for the full principal & interest payment

357
Q

What would the balance be on an Interest Only loan if the loan were $100,000 and it is 5 years later?

A

$100,000. The principal balance stays the same because you are only required to pay interest.

358
Q

What is Table Funding?

A

Any loan that the originating company is having the lender fund, predominately for Brokers

359
Q

What are the APR Tolerances?

A

1/8 on a fixed rate loan, ¼% on an ARM Loan. If you exceed either, a new LE or CD must be issued within three business days.

360
Q

Which loans are considered Federal Loans?

A

Conventional conforming, FHA, VA, USDA

361
Q

What is Premium Pricing?

A

The amount above PAR that can be used to
pay the borrower’s closing costs. Not
discount points, just costs and fees.

362
Q

What is Accrued Interest?

A

If your payment is due on May 1st, you are paying interest for April. Accrued interest is the interest you pay on the mortgage each month.

363
Q

What is a Conveyance?

A

Transfer of ownership via a Deed

364
Q

What is a 2-1 Temporary Buydown? If the interest/note rate is 5%, what are the payment rates?

A

Usually for two years. A buydown account is established by the seller or the borrower. The first year the payment rate is 2% below the note rate and the second year it would 1% below the interest rate. The borrower is qualified at the note rate.

365
Q

What does SAFE stand for?

A

Secure and Fair Enforcement – the licensing law that covers all originating companies and Mortgage Loan Originators

366
Q

Who must be registered with NMLS?

A

All MLOs employed by banks, credit unions, mortgage bankers, and mortgage brokers

367
Q

What does NMLS stand for?

A

Nationwide Multistate Licensing System and Registry

368
Q

Who must be licensed?

A

All mortgage bankers, mortgage brokers and
all mortgage loan originators that work for
either company

369
Q

Can you work or be licensed with more than one originating company?

A

Your license only allows you to originate for one financial or non financial company

370
Q

What is an MU1?

A

MU1 is the application for a mortgage company.

371
Q

Do you receive a state license or federal license?

A

State license only; there is no such thing as a federal or national license. You must be licensed in each state where you want to originate

372
Q

Can you be licensed in a state where your company is not licensed?

A

No, you can apply for a license in any state where your company is licensed. Banks and Credit Unions are exempt from licensing and can originate in any state.

373
Q

What are the duties of the NMLS?

A

Approve all education providers and courses. Prepare and maintain a national test. Provide a service for the MLOs and owners of companies to obtain a background check.

374
Q

What makes up the 20 hours of the pre-licensing course?

A

3 hours of law, 3 hours of ethics, 2 hours of non-traditional and 12 hours of mortgage topics

375
Q

What makes up the 8 hour CE course that is required each year?

A

3 hours of Law, 2 hours of ethics, 2
hours of non-traditional lending, and
1 hour of another mortgage topic

376
Q

What are the requirements for gift funds for
FHA loans?

A

Gift funds can come from the borrower’s
family members, employer, close friend, or
a charitable organization

377
Q

What is the term of your license?

A

One calendar year: January 1st through
December 31 st

378
Q

One calendar year: January 1st through December
31 st

A

Between November 1st and December 31st

379
Q

What happens if you do not renew by
December 31st?

A

Your license lapses and you must take a Late CE class and pay a renewal fee and penalties by March 1st. Until your license is reinstated, you cannot originate loans. If you do not complete your renewal by March 1st, your license is suspended.

380
Q

What is the consumer access website?

A

Once you are licensed, your information will be on the consumer access website so the consumer can check who you are working for and if you have any complaints or violations

381
Q

What are the two groups that oversee NMLS?

A

CSBS – Conference of State Bank Supervisors and AARMR – American Association of Residential Mortgage Regulators

382
Q

What does USC stand for and what does it do?

A

Uniform State Content - allows MLOs that pass the National Test to apply for a license in any state where your company is approved

383
Q

What does the SAFE Act allow
each state to do?

A

License mortgage bankers and mortgage
brokers and complete audits and
examinations of the companies if they
suspect the consumer is at risk

384
Q

What does sponsorship
require you to do?

A

The company you will be employed by
needs to request that your NMLS number
be moved under their company NMLS
number

385
Q

When a company or MLO receives
a notice of violation or complaint,
what is the requirement?

A

They must supply all documents in response
to the complaint or violation within 30 days
or they are assumed to be guilty and the
state will assess the fines as they see fit

386
Q

If an applicant for a license has a non- financial felony, what is the soonest they could apply for a license?

A

Seven years from the date of conviction

387
Q

If an applicant for a license has a financial felony, what is the soonest they could apply for a license?

A

They cannot, as they are banned for life

388
Q

If an applicant for a license has had a license revoked, what is the soonest they could apply for a license?

A

They cannot, as they are banned
for life

389
Q

What is the 1003?

A

Uniform Residential Loan Application:
The document where you collect the data to assist in underwriting

390
Q

When verifying assets for closing, what items are included?

A

Down payment and closing costs

391
Q

Can long term/retirement assets be used for the two months’ reserve for escrows?

A

Yes, and they don’t have to be cashed; they just have to show they are available

392
Q

What are the requirements for gift funds for conventional loans?

A

Gift funds can only come from a relative: Spouse,
child, other dependent, or anyone related by
blood, marriage, adoption, or legal guardianship;
and there can be no expectation of repayment

393
Q

What are Concessions?

A

Voluntarily yielding to a demand for the
sake of a settlement in a real estate
transaction, such as closing costs

394
Q

What are the three questions you cannot ask on an application?

A

Religion, nationality, and whether they receive child support or alimony

395
Q

How may MLOs accept loan applications?

A

Face to Face, on the phone, computer, or by mail

396
Q

Who is allowed to offer and negotiate terms of a loan?

A

Only those who are licensed as an MLO working for a Mortgage Broker or Mortgage Banker

397
Q

What is the “AUTHORIZATION TO
RELEASE MORTGAGE
INFORMATION”?

A

A form which, when signed by the borrower(s), authorizes a third party to receive information about them and their mortgage, for things like verification of employment, deposits, etc

398
Q

What methods are used to verify assets?

A

Two months bank statements, investment statements, and/or a Verification of Deposit

399
Q

What methods are used to verify
employment?

A

W2, 1099, Tax returns with 4506T, and/or Verification of Employment

400
Q

What are the mandatory items on
the Loan Estimate (LE)?

A

Terms of the product, all costs and
fees, comparisons, and mortgage
process explanations

401
Q

What information is required on
the Adjustable Rate Mortgage (ARM)

A

Which type of program, caps (adjustment
and life), margin, index, fully indexed
rate, and how the adjustments are
calculated

402
Q

What does AML stand for?

A

Anti-Money Laundering

403
Q

What does CHARM stand for?

A

Consumer Handbook on Adjustable Rate Mortgages

404
Q

For a Reverse Mortgage, what must the disclosure tell the borrowers?

A

Negative Amortization, taxes and insurance to be paid by the borrower, must be 62 or older to apply for the mortgage, mandatory counseling, and the borrower could lose their home if they do not comply with all of the requirements of the loan

405
Q

What are the five items included in the “Zero Tolerance” items on the LE?

A

Appraisal, origination fee, discounts, lender fee, and transfer taxes

406
Q

What items are included in the
“10% Tolerance” items?

A

Title, recording fees, lender required inspection. The borrower selects these and you no longer have any liability.

407
Q

Which items are included in “No Tolerance”?

A

Realtor fees, Attorney fees,
Escrows, Homeowners Insurance,
Flood Insurance, Prepaid Interest

408
Q

When do the early disclosures after application have to be delivered?

A

No more than three business days from signed
application. If they are mailed, you must show
proof that they were mailed within the three-day requirement.

409
Q

When does the early Closing Disclosure have to be delivered to the borrowers?

A

No less than three business days
before closing

410
Q

When do the fees and charges expire from the issue date of the Loan Estimate (LE)?

A

10 business days, if the signed Intent to Proceed has not been delivered to the lender

411
Q

When would you not have to give an LE?

A

When you do not have all the items under PENCIL (Property address, estimated value, name, credit, income, or loan amount)

412
Q

Who created Credit Scoring?

A

The Fair Isaac Company. Credit scores are also knowns as FICO scores.

413
Q

What law requires the appraisal to be delivered three business days before closing?

A

ECOA – Equal Credit Opportunity Act

414
Q

How many days after a “Changed Circumstance” has been determined must the new LE be issued?

A

Three business days

415
Q

When does the Preferred Providers list (REG H) have to be delivered to the borrower?

A

Within three business days from when a conflict of interest has been determined

416
Q

What are the valid delivery methods in delivering a Loan Estimate or Closing Disclosure?

A

Person to Person, Digital Delivery with written
borrower approval, Mail, and Ove rnight, as long
as you have proof that it was done in the three
business day requirement

417
Q

How many business days before the
closing is the Closing Disclosure to be
delivered to the borrower?

A

Three business days

418
Q

What does Consummation mean?

A

Once the borrower is obligated on the loan (funding date)

419
Q

What items will require a new Closing Disclosure to be issued and a three-business day for the closing?

A

Program change, prepayment penalty added to the mortgage or the APR tolerances are exceeded (1/8% on a fixed or 1/4% on an ARM loan)

420
Q

What is an MU4?

A

The application for MLO licensing used by the NMLS

421
Q

How many counselors are required to be listed on the Homeownership Counseling?

A

10, and they must be in the borrower’s area

422
Q

Is counseling required on the Homeownership Counseling Disclosure?

A

Counseling is not required, but it is recommended, and it is at the cost of the borrower

423
Q

What are the classifications of assets?

A

Assets for the down payment and closing costs must be liquid. Long-term assets can be used for
reserves they don’t need to have the cash ; they
just need to show as available

424
Q

What are you not able to do in regard to Verifications?

A

It must be done digitally via e-mail or mail;
it cannot be done in person

425
Q

What liabilities are to be listed on
the application?

A

Any debt listed on the Credit Report or volunteered by the borrower

426
Q

What are the types of debts?

A

Bank loans, student loans, car loans, credit cards, mortgages, leased cars, IRS tax liens, judgments, alimony, and child support

427
Q

How many payments would remain for a debt not to be counted in the Debt-to-Income (DTI) ratio?

A

Any loan that has less than 10 payments remaining, except car leases; no matter how many payments are left, they must be counted in the DTI

428
Q

How do you calculate the payment on a student loan if there isn’t a loan payment on the credit report?

A

For Fannie Mae and FHA loans, you use 1% of the balance. For Freddie Mac and USDA, you use ½% of the balance.

429
Q

What is the required documentation for a self-employed borrower?

A

Two years of Tax Returns. If the borrower owns 25% or more of the company, they must provide two years of business tax returns, plus a
year-to-date operating statement.

430
Q

If a self-employed borrower owns 25% or more of their company, what is required for income verification?

A

If the borrower owns 25% or more of the company, they must provide two years of business tax returns plus a year-to-date operating statement

431
Q

What is a surety bond?

A

A promise to be liable for the default of
another. It is like malpractice insurance for
a doctor.

432
Q

Can a borrower use Capital Gains
for qualifying for a loan?

A

Yes, if they show two years’ history of
income from capital gains and they can
show that the income will continue for
an additional three years

433
Q

What type of income can be used for loan
qualification?

A

Any income that can be verified and has
at least two to three years continuation.
Cash income cannot be used.

434
Q

Can rental income be used?

A

Only if it is claimed on the borrower’s income taxes

435
Q

What percentage of income can be used on rental property?

A

75%. A 25% vacancy must be deducted from the gross rental income.

436
Q

When would a debt payment be required on a rental property?

A

If the rental income minus the 25% vacancy is less than the mortgage payment

437
Q

What are the rules for counting overtime income?

A

Two years history and assurance the income will continue for two to three years in the future

438
Q

How do you calculate bonus income if the bonus income reduced in the last two years?

A

You use last year’s bonus amount and provide assurance that the bonus income will continue in the future

439
Q

How do you calculate bonus income if
the bonus income increased over the
last two years?

A

You average the last two years to determine
the income and provide assurance that the
bonus income will continue in the future

440
Q

How do you calculate social
security or disability income?

A

If the monthly amount paid has taxes taken out
before being paid to the borrower, the amount
received by the borrower can be grossed up by
25% (Ex. $1000 received can be counted as
$1,250 for qualification purposes)

441
Q

What is the calculation for determining the monthly income for an hourly waged borrower?

A

Hourly wage X the number of hours
per week X 52 weeks / by 12 months
= monthly income

442
Q

What is the calculation for determining income for someone who is paid every other week?

A

Bi-weekly income X 26 pay periods
/ by 12 months = monthly income

443
Q

What is the calculation for determining income for someone is paid on the 15th and 30th of the month?

A

Income paid on the 15th and the 30th X 24 pay periods / by 12 months

444
Q

What is the Fannie Mae self- employed document to calculate income?

A

Fannie Mae form 1084

445
Q

What is the Freddie Mac self- employed document to calculate income?

A

Freddie Mac Form 91

446
Q

What information is on the credit report?

A

Legal name, employment history, residency history, Social Security number, credit history, credit inquiries

447
Q

Which credit score do you use to
qualify the borrower?

A

You will always use the middle score for each borrower

448
Q

How is the Credit Score established?

A

No one is sure of the formula, but payment history and credit utilization are two factors that are used. Credit utilization means the amount of credit that is available to you and how much of it you are using (The more you use, the lower the credit score)

449
Q

How do you calculate “capacity”?

A

If you are using 43% overall ratio, multiply the
gross income by 43% and the answer will be the
maximum allowed for the mortgage payment and
all monthly debt (ex. $5000 X .43 = $

450
Q

How do you determine Debt-to-Income Ratio (DTI)?

A

Gross verified income divided into total monthly debt payments = Debt-to-Income Ratio

451
Q

What do LTV, CLTV, and TLTV mean?

A

LTV = Loan-to-Value;
CLTV = Combined Loan-to-Value;
TLTV = Total Loan-to-Value

452
Q

How do you calculate Loan-to-Value (LTV)?

A

Value or Purchase Price, whichever is lowest, divided into the Loan Amount = LTV (i.e., $500,000 value divided into $250,000 loan amount = 50%)

453
Q

How do you calculate Combined Loan-to-Value (CLTV), assuming the borrower has a first mortgage and a $100,000 HELOC of which they have drawn $50,000?

A

Value is divided into the Loan Amount + the drawn HELOC=CLTV (ex. $500,000 value divided into $250,000 first mortgage
+$50,000 drawn HELOC = 60%)

454
Q

How do you calculate Total Loan-to-Value (TLTV), assuming the borrower has a first mortgage and a $100,000 HELOC of which they have drawn $50,000?

A

Value is divided into the Loan Amount + the HELOC amount =TLTV (ex. $500,000 value divided into $250,000 first mortgage
+$100,000 HELOC = 70%)

455
Q

If a borrower wants a conventional
conforming loan, has $5,000 monthly income
and $500 in monthly debt payments, which
payment income ratios would you use?

A

28% housing and 36% overall

456
Q

If a borrower wants a conventional conforming
loan, has $5,000 monthly income and $500 in
monthly debt payments, what is the PITI that the
borrower would qualify for?

A

$5,000 X 28% = $1,400 housing limit.
$5,000 X 36% = $1,800 overall limit (includes housing and debt payments).
You subtract the $500 debt payments
from $1,800 = $1,300 for housing. You take the
lower of $1,400 or $1,300 for PITI

457
Q

What is another name for Front End Ratio?

A

Housing Ratio program ratio for
housing X verified income

458
Q

What is another name for Back-End Ratio?

A

Overall Ratio – program ratio for overall debt X verified income

459
Q

What is the maximum overall debt if you are calculating the Qualified Mortgage limit?

A

43% of gross verified income

460
Q

What factors should be used to determine if a borrower has the Ability to Repay?

A

Meeting QM standards is essential, so the MLO is required to find out and document a borrower’s income, assets, employment, credit history, and monthly expenses

461
Q

What is the definition of Tangible Net Benefit?

A

MLOs cannot refinance without determining if the loan will benefit the borrower, by giving them benefits like a reduced interest rate, loan term, and/or monthly payment; debt consolidation; cash-out benefits, etc.

462
Q

What are the three occupancy types?

A

Primary, 2nd home, Non-owner

463
Q

Which of the occupancy types (primary, 2nd home or Non-owner require the Right of Rescission?

A

Primary residence only

464
Q

What would raise a red flag with a Verification of Deposit?

A

If the average balance on the verification is different than the average on the bank statements

465
Q

What is the purpose of an appraisal?

A

It is an opinion of value that is determined by the market approach

466
Q

What is the Sales Comparison Approach in establishing the value?

A

An appraisal method that compares one property to comparables or other recently sold properties in the area with similar characteristics

467
Q

When does the appraisal have to be delivered to the borrower?

A

No less than three business days before closing

468
Q

What are the three Flood Zones that require
Flood Insurance?

A

ZONE “A”, “V”, or “D”

469
Q

What is Fair Market Value?

A

The price that a seller is willing to accept and a buyer is willing to pay on the open market

470
Q

On the appraisal, if it says, “As Is,” what does that mean?

A

The property does not require any repairs and is eligible to close

471
Q

How is monthly interest calculated?

A

Principal balance X note or interest rate /
12= Interest for the month. Should match
up with the interest due on the payment
slip.

472
Q

How is the new P&I payment
calculated on each adjustment?

A

On an ARM loan at adjustment time,
remaining principal balance X the new
interest rate divided by the remaining term =
New P&I payment

473
Q

How is Per Diem interest calculated?

A

Principal balance X the note or interest rate
divided by 360 days on conventional loans, or
365 days on government loans

474
Q

How would you calculate the interest rate on a loan if you don’t know the interest rate?

A

Remaining balance divided into interest paid in the last twelve months = note rate. This is a very rough calculation.

475
Q

What is a Discount Point?

A

1% of the loan amount for each discount point to be used for interest rate reduction only. They can be paid by the seller, borrower, or their employer.

476
Q

What is not included in the APR and 3% fee limit on QM calculations?

A

Prepaids = Appraisal, credit report, title and prepaid interest

477
Q

What fees and costs are shown on the Closing Disclosure?

A

ALL COSTS DISCLOSED ON THE LOAN ESTIMATE AND NO MORE THAN A 10% TOLERANCE

478
Q

For an ARM, a limit on the amount that payments can increase or decrease over the life of the mortgage

A

Lifetime Payment Cap

479
Q

Qualified Mortgage allows a maximum
Debt to Income (DTI) to meet
requirements. What is that percentage?

A

43% of the verified gross income =
maximum debt to income, including
mortgage payment + monthly debt
payments

480
Q

What does an Approved Eligible
mean to meet QM requirements?

A

Based on the information submitted by the
mortgage company into Fannie Or Freddie
underwriting systems, it the information meets
their requirements, the Approved Eligible means
they will buy the loan

481
Q

What is a Certified Appraiser?

A

The appraiser who can sign the
appraisal attesting the final value

482
Q

What does a Title Report tell you?

A

Who owns the property and what liens and encumbrances are against the property, including unpaid real estate taxes

483
Q

Who is protected by the Title Insurance policy?

A

The lender and the borrower, that from the date of funding, there are no liens or encumbrances, thus ensuring that the lender and borrower are in the first position with their recorded mortgage

484
Q

What are the balloon limits?

A

$250,000 on the property and
$100,000 in-personal property

CHECK THIS FOR ACCURACY

485
Q

What portion of the property has to be in the flood plain as determined by FEMA?

A

Any portion of the house that is occupied. Garages and outside buildings not included.

486
Q

What does FEMA stand for?

A

Federal Emergency Management Agency

487
Q

What are some examples of Involuntary Liens?

A

Tax liens, mechanics liens, judgments, and attachments

488
Q

What does FHA stand for?

A

Federal Housing Agency oversees and publishes guidelines for all FHA-insured loans

489
Q

What does FHAct stand for?

A

Federal Housing Act governs discriminatory practices

490
Q

What does PMI stand for?

A

Private Mortgage insurance – insurance for conventional loans over 80%

491
Q

What does MIP stand for?

A

Mortgage Insurance Premium – FHA loan premium for mortgage insurance on all FHA loans

MLO Test (7 decks)

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