NMLS Questions Flashcards
What is Freddie Mac’s automated underwriting system called?
Desktop Originator
Underwriter Assistant
Loan Product Advisor
AUS
The answer is Loan Product Advisor. Freddie Mac’s automated underwriting system is called Loan Product Advisor (formerly known as Loan Prospector), while Fannie Mae’s is called Desktop Underwriter.
The S.A.F.E. Act applies to mortgage loan originators who take applications for, or offer or negotiate terms of, residential mortgage loans, which would include:
Land to be used for agricultural purposes
An apartment building with 30 units
A dwelling not secured by a mortgage or trust deed
A mobile home to be used as a residence, even if it is not attached to the land
The answer is a mobile home to be used as a residence, even if it is not attached to the land. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes residential mortgage loan applications, or offers or negotiates terms of residential mortgage loans for compensation or gain. The S.A.F.E. Act’s definition of “residential mortgage loan” includes a loan secured by a consensual security interest on a dwelling and cross-references the definition of the term “dwelling” in the Truth-in-Lending Act (TILA). Regulation Z, which implements TILA, defines a dwelling as a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.
A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n):
HECM
HELOC
Pay-option mortgage
Equity mortgage
The answer is HECM. The FHA’s home equity conversion mortgage (HECM) is a reverse mortgage that enables an individual aged 62 or older to convert some of the equity in his/her primary residence to cash to pay living expenses, or to purchase a primary residence if he/she has the cash for a down payment and closing costs. The HECM requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs).
Under the S.A.F.E. Act, a licensed loan originator’s responsibilities with regard to recordkeeping include all of the following, except:
Not knowingly withholding, removing, or destroying any books or records
Making all of the licensee’s records available to borrowers upon demand
Permitting interviews of principals, loan originators, and independent contractors by state regulators
Making records and books available to the state regulator
The answer is making all of the licensee’s records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand.
Which of the following federal regulations prohibits discrimination based on race, color, religion, sex, marital status, or national origin in a credit transaction?
Regulation C
Regulation B
Regulation Z
Regulation G
The answer is Regulation B. Regulation B implements the provisions of the Equal Credit Opportunity Act (ECOA), which ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract).
Which of the following would convey a property?
Deed rider
Warranty deed
Note
Deed of trust
The answer is warranty deed. A warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. In addition to conveying property ownership, a warranty deed contains the promise of clear title, meaning the property is free of encumbrances.
A lender originally discloses an APR of 6.08%. When the lender begins to prepare closing documents, they realize the actual APR is 6.135%. Which of the following is true?
The lender must re-disclose and wait three business days from mailing the disclosures before closing the transaction
The lender must re-disclose and wait three business days from the borrower’s receipt of the disclosures before closing the transaction
The lender must re-disclose and wait six calendar days from mailing the disclosures before closing the transaction
The lender has no obligation to re-disclose
The answer is the lender has no obligation to re-disclose. The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements, or if it is not more than one quarter of one percentage point (.25%) above or below the APR for an irregular transaction. In this case, the difference between the disclosed APR and the actual APR is within the limits of this tolerance, and does not require re-disclosure.
Combining stated income with a nontraditional mortgage product is an example of:
Risk optimization
Risk premium
Risk layering
Risk enhancement
The answer is risk layering. Risk layering refers to combining, or layering, high-risk loan features, which might include an interest-only or other non-conventional loan, reduced documentation, and a simultaneous second-lien loan.
Ethics:
Is a branch of philosophy dealing with legal behavior
Provides a guideline for answering questions when a choice of actions is available
Defines how a person must act
Is set out in law
The answer is provides a guideline for answering questions when a choice of actions is available. Ethics goes beyond what is required under the law, so ethical rules extend beyond the minimum legal standards in providing guidance for one’s actions. Ethics goes into the realm of what should be done, providing guidelines for answering questions when a choice of actions is available. As a result, ethical rules are often not as clear-cut as the legal rules.
Under the S.A.F.E. Act, a loan originator:
Can be an individual or a business entity
Is any person who takes loan applications secured by personal property
Is an individual who takes residential mortgage loan applications
Is any individual who takes loan applications secured by either real estate or personal property
The answer is is an individual who takes residential mortgage loan applications. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes residential mortgage loan applications, or offers or negotiates terms of residential mortgage loans for compensation or gain.
According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should:
Average the last six months’ worth of pay stubs from the borrower
Average the income shown on the 1040s for the past two years
Use the income shown on the borrower’s most recent two pay stubs
Average the income showing on the W-2s for the past two years
The answer is average the income shown on the 1040s for the past two years. When analyzing a borrower’s income for loan qualification, self-employed or commissioned income is averaged over a two-year period, using tax forms such as Form 1040, U.S. Individual Income Tax Return. When commission income is at least 25% of the borrower’s income, the most recent two years’ personal tax returns may be required.
The NMLS may best be described as a:
Licensing system utilized by all U.S. states and territories
Licensing system available for use by all states but not actually utilized by all states
Federal agency
National mortgage regulator
The answer is a licensing system utilized by all U.S. states and territories. The NMLS is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators. It is utilized by all U.S. states and territories.
Which of the following is not a required element of a company’s safeguard policy, as required by the GLB Act?
Designate one or more employees to coordinate safeguards
Evaluate and adjust procedures in light of relevant circumstances
Select appropriate service providers and contract with them to implement safeguards
Contract with a federally-insured company to destroy documents
The answer is contract with a federally-insured company to destroy documents. Under the GLB Act, a financial institution must have a written information security program that is appropriate to its size and complexity, to the nature and scope of its activities, and to the sensitivity of the customer information it handles. As part of its program, the financial institution must assign one or more employees to oversee the program; conduct a risk assessment; put safeguards in place to control the risks identified in the assessment and regularly test and monitor them; require service providers, by written contract, to protect customers’ personal information; and periodically update its security program. There is no requirement to contract with any external company to handle information security issues of any kind.
Under Regulation X, the term “loan originator” applies to a:
Loan processor
Mortgage broker only
Mortgage broker or lender
Mortgage lender only
The answer is mortgage broker or lender. Regulation X defines a loan originator to include a lender or mortgage broker.
Insurance which guarantees a lender a certain lien position on the title to a property free from undisclosed encumbrances is called:
Guarantee against encumbrances
Lender’s title policy
Owner’s policy
Forced policy
The answer is lender’s title policy. A lender’s title insurance policy insures the lender or mortgagee against loss caused by a borrower’s invalid title or loss of priority of the mortgage or deed of trust, due to legal claims based on undisclosed encumbrances.
The purpose of the Truth-in-Lending Act is to do which of the following?
Ensure meaningful disclosure of credit terms to consumers
Prevent lenders from charging interest rates that are unfair to consumers
Protect consumers from abusively high interest rates
Require consumers be provided with a good faith estimate of closing costs at the time of loan application
The answer is ensure meaningful disclosure of credit terms to consumers. The purposes of TILA include assuring a meaningful disclosure of credit terms so that the consumer will be able to more readily compare the various credit terms available to him or her and avoid uninformed use of credit.
Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower?
UFMIP
Insured amount
Entitlement
Guarantee fee
The answer is entitlement. The VA limits the amount that it can guarantee to repay a lender in the event of a default on the loan. The amount that the government will guarantee to a lender is known as a veteran’s entitlement.
Co-borrower information must be provided on the 1003 when the co-borrower:
Is a minor
Has income being used for loan qualification
Is the borrower’s spouse
Has a credit score that is below average
The answer is has income being used for loan qualification. Co-borrower information is needed on the1003 when the income or assets of a person other than the borrower (e.g., the borrower’s spouse) are to be used as a basis for loan qualification.
When would business tax returns be required as documentation of income for a borrower?
If the borrower owns 15% of a company
If the borrower owns more than 25% of a company
If the borrower receives a K-1 from a company
If the borrower is an officer of a company
The answer is if the borrower owns more than 25% of a company. A self-employed borrower (i.e., one who owns 25% or more of a business) may need to verify his/her employment with a copy of a current business license, a year-to-date profit-and-loss statement prepared by an accountant, and balance sheets and personal and/or business tax returns for the past two years.
Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM?
No limit
One month
Three months
Six months
The answer is no limit. Federal law does not place general restrictions on the adjustment period allowed on an ARM.
Which of the following is least likely to be considered nonpublic personal information?
Borrower’s home phone number
Employer’s phone number
Borrower’s job title
Borrower’s income
The answer is employer’s phone number. Nonpublic personal information (NPI) is any personally identifiable financial information that a financial institution collects about an individual in connection with providing a financial product or service. NPI does not include information where there is reasonable basis to believe it is lawfully made publicly available, such as an employer’s phone number.
A disclosure that allows a consumer to more easily compare loan options is required under which regulation?
Regulation B
Regulation Z
Regulation V
Regulation H
The answer is Regulation Z. The TILA-RESPA Rule, included in Regulation Z, outlines the requirements for use of the Loan Estimate and the Closing Disclosure, intended to facilitate the ability of consumers to determine whether they can afford a particular loan, and/or compare specific loan products, including their costs over the life of the loan.
The number one ethical problem cited in surveys of professionals and managers is:
False or misleading representation of products or services in marketing, advertising, or sales
Lack of sufficient disclosures
Inaccuracies and lack of documentation in handling client/customer funds
Deliberate attempts at fraud and misrepresentation in face-to-face meetings
The answer is false or misleading representation of products or services in marketing, advertising, or sales. The number one ethical problem cited in surveys of professionals and managers is false or misleading representation of products or services in marketing, advertising, or sales efforts, usually involving various aspects of loan terms. This includes use of false or misleading advertising, use of truthful advertising in a deceptive or misleading manner, and concealing the limitations of the programs or terms being promoted.
Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule?
The state in which the property is located
The amortization term of the loan
Whether or not the loan is an ARM or a fixed-rate loan
The loan program
The answer is the state in which the property is located. If a loan originator’s compensation is based in whole or in part on a factor that is not an actual loan term but acts as a proxy for a term of transaction (such as the term and/or rate of the loan determining whether it is held in the lender’s portfolio or sold), the originator’s compensation is based on a term of the transaction and is prohibited. A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition.
Which of the following is NOT true about the financial responsibility of a mortgage loan originator?
The penal sum of a surety bond must reflect the dollar amount of loans originated
A sponsored mortgage loan originator may be covered under the sponsoring licensee’s surety bond
If a mortgage loan originator pays into a state fund established to pay claims of consumers, he or she is not required to maintain a surety bond
A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year
The answer is a mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated. If the loan originator’s licensing state has developed and administers a fund specifically to provide protection to consumers by making funds available for claims resulting from violations of state or federal laws and regulations, in lieu of a surety bond or net worth requirement, the state may instead require the loan originator to pay a certain amount into the state fund.
On an ARM loan, which of the following will not be found on the note?
Fully-indexed rate after one year
Margin
Adjustment parameters
Identification of index
The answer is fully-indexed rate after one year. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. For an ARM loan, it will typically identify the index, specify the margin, and list adjustment parameters, but will not specify the fully-indexed rate after one year.
The NMLS was established by:
HUD
The Federal Reserve
Each state regulator
The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators
The answer is the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The Nationwide Multistate Licensing System and Registry (NMLS) is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators.
Which of the following statements most accurately describes the term “predominant value”?
The final value an appraiser reports on an appraisal
The most common sales price for the neighborhood
The highest sales price in the neighborhood
The average sales price for the neighborhood
The answer is the most common sales price for the neighborhood. In the context of an appraisal, the term “predominant value” refers to the price or price range appearing most frequently in the market area defined by the appraiser in the report, based on comparable sales.
Which of the following is true regarding a creditor’s duty to give a copy of an appraisal to a borrower?
The lender is always required to provide a copy of the appraisal promptly upon completion
The lender is only required to give a copy of the appraisal for closed-end credit
The lender is never required to give a copy of the appraisal to the borrower
The lender is required to provide a copy of the appraisal promptly upon completion or three business days prior to consummation for closed-end credit, whichever is earlier
The answer is The lender is always required to provide a copy of the appraisal promptly upon completion or three days prior to consummation for closed-end credit, whichever is earlier. A creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion, or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit.
A change in the value of a comparable property, made when comparing the features of the comparable property to the subject property, is known as a(n):
Adjustment
Inflation
Concession
Inspection
The answer is adjustment. Adjustments are made when comparable properties are compared to the subject property in a mortgage loan transaction. Adjustments assign positive or negative values to certain property features to help gauge value.
Redlining is addressed in which federal law?
RESPA
HOEPA
FCRA
ECOA
The answer is ECOA. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in extension of credit based on race, color, religion, national origin, sex, marital status, age, potential to have or raise children, the fact that the applicant receives income from a public assistance program, or the fact that the applicant has exercised his or her rights under the Consumer Credit Protection Act. This includes the discriminatory lending pattern of redlining, in which a lender refuses to provide lending products and services on an equal basis to residents of minority neighborhoods (the term is derived from the practice of drawing red lines around minority areas on a map.)
A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage?
Balloon mortgage
Hybrid ARM
Graduated Payment Mortgage (GPM)
Fixed period ARM
The answer is balloon mortgage. A partially amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance.
Information held by the NMLS relating to the employment history or disciplinary actions taken against a mortgage loan originator:
Is not confidential, but is not available for public access
Is confidential and is not available for public access
Is not confidential and is available for public access
Is confidential, but is available for public access
The answer is is not confidential and is available for public access. The requirements under any federal and/or state law regarding the privacy or confidentiality of any information or material provided to the NMLS continue to apply after such information has been disclosed to the NMLS. However, information or material held by the NMLS relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator, is not protected by confidentiality and is available for public access.
In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table?
“Has this information been verified?”
“Can this amount increase after closing?”
“Is this payment subject to a late fee?”
“Has this information changed from the Loan Estimate?”
The answer is “Can this amount increase after closing?” The first table on page 1 of the Closing Disclosure is the Loan Terms table, which lists the same information given in the Loan Estimate’s Loan Terms table (i.e., loan amount, interest rate, the monthly principal and interest, and space to indicate whether the product has a prepayment penalty or balloon payment). This information is updated to reflect the terms that will be in place at consummation, and the loan originator must answer the question “Can this amount increase after closing?” for each item.
Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following?
Regulation C
Regulation Z
Regulation D
Regulation B
The answer is Regulation B. Under Regulation B, a loan originator may not ask whether an applicant receives alimony, child support, or separate maintenance payments not needed in order to get credit, unless he or she is first told that this information does not have to be provided. If regular alimony, child support, or separate maintenance payments need to be counted as income to qualify for credit, an applicant may be asked to prove that it has been received consistently.
Which of the following best describes the order in which payments will be applied according to the standard deed of trust?
Interest, escrow, principal
Principal, escrow, interest
Late fees, principal, interest
Interest, principal, escrow
The answer is interest, principal, escrow. In a standard deed of trust, payments are applied to interest first, then to principal, and then to escrow items, such as tax and insurance payments. AND THEN LATE FEES ARE LAST
The APR factors in the effects of all of the following expenses, except:
Hazard insurance premium
Processing fee
Origination fee
Mortgage insurance premium
The answer is hazard insurance premium. The annual percentage rate (APR) represents the relationship of the total finance charge to the total amount financed, as a yearly rate. It is not the same as the nominal rate (i.e., the interest rate shown in the note), as it includes all finance charges, not just interest. Among other charges, finance charges include points, loan fees, and mortgage insurance premiums, but not hazard insurance premiums.
Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and calls the originator that day to let them know it was received and they would like to move forward, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal?
Saturday
Thursday
Wednesday
Friday
The answer is Wednesday. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating that he or she wishes to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee.
Mortgage interest rates are influenced by all of the following, except:
Foreclosure rates
Regional property tax rates
Loan fraud
Federal Reserve activities
The answer is regional property tax rates. Interest rates on long-term debt instruments, such as residential mortgages, are influenced by changes in such economic indicators as the gross domestic product (GDP), which measures the amount of goods and services produced in the United States, and the Consumer Price Index (CPI), which measures the average change in prices of consumer goods and services. Features of the economic climate, such as loan fraud, loan payoff rates, and foreclosure rates, will all have an impact on interest rates. Rates are also affected by actions taken by the Federal Reserve (the Fed), which controls the country’s monetary policy, though the Fed does not itself directly set the interest rates that individual lenders will charge borrowers. Each lender will set its own prime rates (i.e., the lowest rates it charges for its best customers), as well as rates for loans to other customers based on its costs and desired profit margin. Regional property tax rates will impact monthly payments, but they do not have a direct relationship with the interest rates set for mortgage loans.
Under RESPA, the servicer may require a borrower to pay into an escrow account to cover disbursements that are unanticipated or disbursements made before the borrower’s monthly payments are available in the account, a cushion or reserve that must be no greater than _____ of the estimated total annual disbursements from the escrow account.
One half
One third
One sixth
One twelfth
The answer is one sixth. Under RESPA, a lender may require the borrower to establish an escrow account at closing. The loan servicer may require a borrower to pay into the account to cover disbursements that are unanticipated or disbursements made before the borrower’s monthly payments are available in the account. This is the escrow cushion or reserve, which must be no greater than one sixth of the estimated total annual disbursements from the escrow account.
A “straw buyer” is:
A buyer who is a victim of identity theft
A buyer who uses another individual’s identity in order to obtain a mortgage for which he or she is not eligible
A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application
A buyer who intends to purchase property but does not intend to occupy it
The answer is a buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application. A straw buyer is a person who purchases the property or applies for the loan in his or her own name for the actual borrower and is typically paid for the use of his or her personally identifying information.
Under the Fair Housing Act:
Lending decisions cannot be made based on residency status
Charging different fees based on race is prohibited
Lenders must provide clear, plain-language disclosures
Lenders are required to report demographic information to the federal government
The answer is charging different fees based on race is prohibited. The Fair Housing Act prohibits discrimination in the sale, rental, and financing of any residential housing based on race, color, religion, national origin, sex, familial status, or mental or physical handicap, and therefore, prohibits charging different fees based on race. Residency status is not a protected category under the Fair Housing Act. Disclosure requirements are not imposed by the Fair Housing Act. Government reporting requirements are covered under the Home Mortgage Disclosure Act (HMDA).
Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license?
Housing and Economic Recovery Act
Mortgage Professionalism and Accountability Act
Mortgage Disclosure Improvement Act
Secure and Fair Enforcement for Mortgage Licensing Act
The answer is Secure and Fair Enforcement for Mortgage Licensing Act. Under the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act), an applicant for a mortgage loan originator license must pass a written national test developed by the NMLS and administered by an approved test provider that covers ethics, federal and state law, and regulations pertaining to mortgage origination, fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues. To pass, the individual must achieve a test score of at least 75%.
Supervisory authority afforded to state agencies over the mortgage industry allows them to impose all of the following sanctions, except:
Order the removal and ban of individuals from employment as loan originators
Suspend, terminate, or refuse renewal of a loan originator license for a violation of state or federal law
Assess jail time for fraudulent activities
Impose civil money penalties for individuals acting as loan originators without a valid license or registration
The answer is assess jail time for fraudulent activities. Under the SAFE Act, the authority of state agencies allows them to impose sanctions including suspending, revoking, or refusing to renew a license in response to violations; ordering restitution and imposing fines; and issuing orders or directives, including ordering or directing licensees to cease and desist from conducting business, including immediate temporary orders to cease and desist. The agencies are not authorized to assess jail time to licensees for any reason.
According to the S.A.F.E. Act, all of the following are nontraditional loan products, except:
Interest-only ARMs
Hybrid ARMs
Reverse mortgages with fixed rates
Interest-only fixed-rate 30-year mortgage loans
The answer is interest-only fixed-rate 30-year mortgage loans. The S.A.F.E. Act defines a nontraditional loan as any loan product other than a 30-year fixed mortgage. All ARMs have rates that are adjustable. A reverse mortgage does not have a 30-year loan term and may have either a fixed rate or adjustable rate of interest. An interest-only loan is considered a traditional loan under the S.A.F.E. Act definition if it has a fixed rate and a 30-year term, even though the period of interest-only payments would be only five, 10, or 15 years. High-risk loans that might still be considered “traditional” under the S.A.F.E. Act include interest-only fixed-rate, no-money-down, subprime, and alternative-documentation (Alt-A) loans.
A husband and wife own their home as joint tenants. When the husband dies, what happens to his share in the property?
Transfers according to the probate code
Transfers to the husband’s heirs
Transfers to the wife
Transfers intestate
The answer is transfers to the wife. Joint tenants share equal ownership of the property and have equal, undivided right to keep or dispose of the property. Joint tenancy creates a right of survivorship; if any of the joint tenants die, the remainder of the property is transferred to the survivors. In this case, when the husband dies, his interest in the property would transfer to his wife.
Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower’s repayment ability?
Home Ownership and Equity Protection Act
Real Estate Settlement Procedures Act
Fair and Accurate Credit Transactions Act
Equal Credit Opportunity Act
The answer is Home Ownership and Equity Protection Act. A lender may not extend credit subject to HOEPA based on the value of the consumer’s collateral without regard to his/her repayment ability as of the date of consummation, including consideration of his/her current and reasonably expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender, and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less.
Which of the following is true regarding a borrower’s intent to proceed with a mortgage transaction as required under federal rule?
It must be communicated in writing
It may be communicated however the borrower chooses
It may not be communicated via email
It may not be communicated verbally
The answer is it may be communicated however the borrower chooses. A prospective borrower can indicate his/her intent to proceed with a loan in a number of ways, including orally, in person, at the time the Loan Estimate is delivered; by telephone; and in a written communication via e-mail. However, the applicant’s silence (i.e., failure to communicate that he/she will not proceed) may not be used as an indication of intent to proceed.
A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan?
$6,000
$12,000
$1,600
$1,200
The answer is $12,000. To calculate the annual interest: 6% × $200,000 = $12,000.
Which of the following would not need to be included in the notice of servicing transfer?
Toll-free number for the old servicer
Borrower’s payment amount
Toll-free number for the new servicer
Effective date of the transfer
The answer is borrower’s payment amount. When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer. This statement must show the name, address, and toll-free telephone numbers of both the old servicer and the new servicer, as well as the date the new servicer will begin accepting payments.
A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property.
Straw buyer
Air buyer
Straw seller
Air seller
The answer is straw seller. A straw seller is a person who falsely claims to own a property being sold (which may or may not exist) and is typically paid in exchange for doing so.
Which of the following is NOT required by the BSA?
Reporting suspicious activity and transactions
Generating requests for information from FinCEN
Reporting large currency transactions
Implementing an anti-money laundering (AML) program
The answer is generating requests for information from FinCEN. Under the BSA, financial institutions are required to establish and maintain procedures designed to ensure their compliance with the law. Federal regulations outline such requirements. Each institution must develop a written anti-money laundering compliance program, which must be approved by the institution’s board of directors. Provisions of the BSA also require a financial institution to report to FinCEN on a CTR any large currency transaction that exceeds $10,000, and to report suspicious activity and transactions to FinCEN using a Suspicious Activity Report (SAR). There is no requirement to generate requests for information from FinCEN.
Which of the following would not be on a promissory note?
Amount owed
Rate of interest and whether the loan is fixed or adjustable
Borrower’s Social Security Number
Loan terms
The answer is borrower’s Social Security Number. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. It shows the payor and payee, amount owed, rate of interest and whether the loan is fixed or adjustable, due dates for payment, and the loan terms.
Which of the following does not appear in the Loan Estimate?
The anticipated ARM rates for the first five years
The loan term
Whether the subject loan is assumable
The property purchase price
The answer is the anticipated ARM rates for the first five years. In the heading of the Loan Estimate, the licensee must indicate the property address and its sale price, as well as the loan’s term. The Other Considerations table provides the applicant with information on appraisals, the homeowner’s insurance requirement, the lender’s late payment policy, loan servicing information, and whether the loan may be assumed or refinanced. Anticipated ARM rates for the first five years of the loan are not disclosed, although the total the applicant will have paid in principal, interest, mortgage insurance, and loan costs for that time period is, in the Comparisons table.
The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act?
Encourages responsible behavior through licensing standards
Provides consumers access to information about originators
Allows consumers a full refund if the originator is found to have engaged in unethical acts
Facilitates collection and distribution of consumer complaints between regulators
The answer is allows consumers a full refund if the originator is found to have engaged in unethical acts. The S.A.F.E. Act includes provisions to enhance professional standards within the mortgage industry by imposing licensing requirements, providing consumers access to information about licensees at no charge through its online registry, and facilitating the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators. While the S.A.F.E. Act does have provisions ensuring compensation to victims of mortgage law violations, it does not guarantee such consumers a full refund in all cases of unethical conduct.
In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)?
A portion of it may be applied to the UFMIP of another FHA-insured mortgage
It is refundable
It is pertinent to only a small minority of FHA loans
It takes the place of the annual mortgage insurance premium
The answer is a portion of it may be applied to the UFMIP of another FHA-insured mortgage. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable, except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years. In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV.
For which of the following reasons may a state deny an application for licensure?
The applicant had an insurance license in another state that wasn’t renewed two years prior to application
The applicant has current outstanding judgments as a result of medical expenses
The applicant was convicted of vandalism eight years prior to application
The applicant had a property foreclosed two years prior to application
The answer is the applicant had a property foreclosed two years prior to application. In order for a state to approve a license application, the applicant must show that he/she has not been convicted of, or pled guilty or nolo contendere to, any felony in any court during the seven-year period preceding the date of the application; or at any time if the felony involved an act of fraud, dishonesty, or a breach of trust or money laundering. Indications of financial irresponsibility include bankruptcy or pattern of bankruptcies, a foreclosure within the past three years, any unpaid judgments (other than those relating to medical expenses), tax or other government liens, or a pattern of paying creditors late.
Which of the following would not be considered a settlement service?
Servicing
Escrow services
Origination services
Appraisal services
The answer is servicing. Settlement services include a variety of services related to the origination, processing, or funding of a loan, including, among others, rendering credit reports and appraisals, and conducting settlement by a settlement agent (e.g., the originating lender, an attorney, or a licensed escrow agent) and any related services. They do not include loan servicing.
When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred?
Never - this disclosure is not required
Within 30 days of the transfer of servicing
Within 15 days of the transfer of servicing
Either at the time of application or within three business days of application
The answer is either at the time of application or within three business days of application. A mortgage servicing disclosure statement discloses whether the servicing of the loan (i.e., collection of payments) may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. It must be delivered to the borrower at application or within three business days.
Lucy closes a refinance on Betty’s primary residence. However, Lucy forgets to provide Betty with the proper notice of rescission rights. Which of the following is true?
The transaction is rescindable at any time during the life of the loan
The transaction is void and should be cancelled
Betty can rescind for three years from recording
Betty cannot rescind for three days following recording
The answer is Betty can rescind for three years from recording. If the creditor has failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, transfer of all of the consumer’s interest in the property, or sale of the property.
Which of the following best describes the benefit of mortgage insurance to the borrower?
Reduced hazard insurance premiums
Lower down payment requirements
Mortgage insurance only benefits the lender
Relaxed underwriting conditions
The answer is lower down payment requirements. So that he/she may get a loan with a small down payment, a borrower pays a mortgage insurance premium either as a lump sum at closing covering the life of the loan, or by paying the first year’s premium at closing and then paying annual premiums as part of the mortgage payment. The amount of the premium is a percentage of the loan amount based on the borrower’s down payment.
What two main aspects of a loan application does an underwriter examine to determine if lender guidelines are being met?
Applicant and collateral
Applicant and credit
Credit and income
Credit and collateral
The answer is applicant and collateral. Underwriting is the process of deciding whether to make a loan based on credit, employment, assets, and other factors. To ensure that loans are marketable in the secondary market, the underwriter assesses the borrower’s ability and willingness to repay and the property’s ability to serve as collateral for the debt.
If a consumer contacts a mortgage company, for how long does the established business relationship exemption exist?
Nine months
Six months
24 months
Three months
The answer is three months. Under the Do-Not-Call-Act, a company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an “established business relationship” exists. An established business relationship means a relationship between the company and a consumer based on the consumer’s purchase, rental, or lease of the seller’s goods or services or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call. This may also include an inquiry or application regarding an offered product or service, within the three months (90 days) immediately preceding the date of a telemarketing call.
A mortgage or deed of trust generally includes a clause that requires the loan to be paid off immediately if the property is sold. This is a(n):
Assumption clause
Due-on-sale clause
Defeasance clause
Completion clause
The answer is due-on-sale clause. A due-on-sale clause provides that the loan must be immediately paid off if the subject property is sold. These apply to most mortgages/deeds of trust, unless the loan is assumable.
A lender’s title insurance policy would insure against all of the following, except:
Future tax liens
Mechanic’s liens
Judgments
Undisclosed encumbrances
The answer is future tax liens. A lender’s title insurance policy insures the lender or mortgagee against loss caused by a borrower’s invalid title or loss of priority of the mortgage or deed of trust due to legal claims based on undisclosed encumbrances. Title insurance protects the lender against losses caused by problems that arose prior to the purchase of the property, such as mechanic’s liens, judgments, and covenants and restrictions. It would not cover future tax liens.
Which of the following would not be on a deed of trust?
Legal description
Loan amount
Interest rate
Borrower’s name
The answer is interest rate. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. The mortgage or trust deed secures repayment of the note. Housing costs, including principal, interest, taxes, and insurance, are not typically specified on the deed of trust.
Which of the following is not true concerning ECOA?
It requires lenders to notify loan applicants of their application status within 30 days
Its provisions are implemented by Regulation B
It requires lenders to give borrowers a copy of their appraisal and a notice stating they are entitled to a copy of the appraisal
It requires the disclosure of the APR on all advertisements which contain an interest rate
The answer is it requires the disclosure of the APR on all advertisements which contain an interest rate. Regulation B implements the provisions of ECOA. Under ECOA, a creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit. The creditor must mail or provide a notice of the applicant’s right to receive a copy of all written appraisals developed in connection with the application no later than three business days after receiving a completed application. ECOA also requires creditors to notify loan applicants within 30 days regarding application status (i.e., incomplete, accepted, denied, etc.).
Assume that the Loan Estimate is mailed on Tuesday. The office is open six days a week and closed on Sundays. What is the earliest day on which the transaction could close?
Wednesday of the following week
Friday of the following week
Monday of the following week
Tuesday of the following week
The answer is Wednesday of the following week. A creditor must provide the Loan Estimate either in person, via overnight delivery, or by placing it in the mail or delivering it no more than three business days after receipt of the consumer’s application AND no later than seven business days prior to consummation. For the purposes of determining the waiting period that must elapse between providing a Loan Estimate and consummation, a “business day” is defined to mean all calendar days except Sundays and legal public holidays. Here, the Loan Estimate is mailed on Tuesday. Seven business days from Tuesday would be the following Wednesday (Wednesday, Thursday, Friday, Saturday, Monday, Tuesday, Wednesday).
Under TILA’s rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer.
Two
Five
Three
Seven
The answer is five. In regard to higher-priced mortgage loans, under TILA and Regulation Z, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or five years after the loan was consummated, at the request of the consumer.
Which of the following specifies current disclosure requirements under the TILA-RESPA (TRID) Rule?
Regulation Z
Regulation C
Regulation O
Regulation B
The answer is Regulation Z. The TILA-RESPA Rule, or TRID Rule, sets forth disclosure requirements and model forms for the two consolidated disclosures, the Loan Estimate and Closing Disclosure, and provides guidance to ensure compliance by licensees and exempt persons required to follow its provisions. The Rule’s provisions amended Section 19 of Subpart C of Regulation Z (12 C.F.R. §1026.19) and added two sections to Subpart E.
A borrower is refinancing their first mortgage, but leaving their second mortgage in place. Which of the following is true?
The second mortgage holder will need to agree to a subordination
This will not be possible due to lien priority
The second lien holder will need to reconvey
The second lien holder will need to abrogate
The answer is the second mortgage holder will need to agree to a subordination. A mortgage is a second mortgage when it is recorded after another mortgage that is still outstanding on the same property; or when it has a subordination clause specifying that it has lower priority (i.e., is subordinate) even though it may have had priority based on its date of recording, or will remain subordinate in the event that the first mortgage is refinanced. In order to preserve lien priority under the circumstances described, the second mortgage holder will need to agree to a subordination clause.
Which of the following can usually be added to a self-employed borrower’s net income from the borrower’s tax returns when calculating the borrower’s income?
Total from IRS 2106
Depreciation
Total from IRS 4506
State taxes paid
The answer is depreciation. For a sole proprietorship (a self-employed borrower), the income, expenses, and taxable profits are reported on the Profit or Loss from Business (Schedule C) on the owner’s individual tax return (IRS Form 1040). The individual’s actual income would be the net income shown on the Schedule C, plus any recurring capital gains or non-cash expenses, such as depletion and depreciation, that was deducted in arriving at the adjusted income, since the borrower did not actually have to spend the amount claimed for non-cash expenses.
All of the following individuals are exempt from requirements to obtain a mortgage loan originator license, except for a person who:
Extends credit only for timeshare plans
Negotiates a residential mortgage loan secured by a dwelling that is the individual’s residence
Negotiates the terms of a residential mortgage on behalf of a cousin
Is an employee of a local government agency and who acts as a loan originator in their official duty as an employee
The answer is negotiates the terms of a residential mortgage on behalf of a cousin. S.A.F.E. Act exemptions include individuals solely involved in extensions of credit referring to timeshare plans; an individual who is an employee of a federal, state, or local government agency or housing finance agency, acting as a loan originator only pursuant to his or her official duties; and an individual who offers or negotiates terms of a residential mortgage loan secured by his own dwelling, or only with or on behalf of an immediate family member. However, a cousin is not considered an immediate family member under the legal definition, which includes a spouse, child, sibling, parent, grandparent, or grandchild, including stepparents, stepchildren, stepsiblings, and adoptive relationships.
Which of the following is true when a mortgage product contains a balloon payment?
A loan that has monthly payments that are equal and regular in nature will never have a balloon payment owing at the end of its term
A high-cost bridge loan may include provision for a balloon payment
Under the Dodd-Frank Act, balloon payment loans are no longer permitted
A qualified mortgage may provide for a balloon payment as long as its term is no less than 40 years
The answer is a high-cost bridge loan may include provision for a balloon payment. Equal and regular payments still may not fully amortize a loan, thus resulting in a balloon payment. A high-cost home loan may not provide for a payment schedule that results in a balloon payment, unless the schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken for the acquisition or construction of the borrower’s principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage (among other requirements, the loan must be originated in a predominantly rural or underserved community, have a fixed rate, and be for a term of five to 30 years).
What is the maximum cushion that servicers can hold in a borrower’s reserve account?
Two months’ taxes, one month insurance
One month taxes, one month insurance
Two months’ taxes, two months’ insurance
Whatever the lender deems as “reasonable under the circumstances”
The answer is two months’ taxes, two months’ insurance. A borrower’s monthly mortgage payment may include a reserve payment (also known as an escrow or impound payment) that represents approximately 112 of the estimated annual hazard and flood insurance premiums and property taxes. When there is need of an account, the borrower may be required to make an initial deposit into the reserve account at settlement to ensure that the regular monthly deposits will accumulate enough to pay the property taxes, insurance premiums, or other charges when they are due. The maximum amount that a lender can collect for this deposit cannot exceed the sum of an amount sufficient to pay taxes, insurance premiums, or other charges up to the due date of the new loan’s first full monthly mortgage installment payment, plus an additional amount sufficient to pay future estimated taxes, insurance premiums, and other charges, not in excess of two months’ worth, which is 16 of the estimated charges for the following 12 months.
The requirement that borrowers receive the Consumer Handbook on Adjustable-Rate Mortgages is required under which regulation?
Regulation X
Regulation Z
Regulation C
Regulation M
The answer is Regulation Z. Regulation Z cites a series of required disclosures, including the Consumer Handbook on Adjustable-Rate Mortgages (the CHARM Booklet), published by the Federal Reserve Board and the Federal Home Loan Bank Board, or a similar booklet.
Assuming a borrower is not allowed to shop for the credit report provider, which of the following best describes the applicable tolerance?
Zero tolerance
No tolerance requirement
Tolerance depends on certain factors
10% tolerance
The answer is zero tolerance. Fees in the zero-tolerance category, for which the actual charges at settlement may not exceed the amounts included on the Loan Estimate unless there is a change in circumstance, include fees paid to an unaffiliated third-party service provider if the creditor did not permit the consumer to shop for the third-party service provider.
Each of the following is true about the Department of Housing and Urban Development (HUD), except:
The Federal Housing Administration, with its liberal-eligibility FHA loan programs, operates under HUD’s authority
It provides or makes referrals related to housing counseling for loan applicants seeking a HECM or high-cost home loan
Public housing and multi-family housing fall under its purview
It has a major role in overseeing the mortgage industry
The answer is it has a major role in overseeing the mortgage industry. Although the federal Department of Housing and Urban Development (HUD) no longer oversees the mortgage industry (that job has been taken over by the Consumer Financial Protection Bureau, or CFPB), it continues to operate in a number of important areas relating to housing. These areas include programs related to community planning and development, public housing and multi-family housing, and providing counseling for those seeking to purchase a home. The Federal Housing Administration (FHA) also operates under HUD; the FHA sponsors loan programs with relatively liberal qualification requirements, insuring financial institutions that offer loans to individuals who might not qualify for a prime loan.
A homeowner with an FHA loan would like to sell his home and allow the buyer to assume the existing mortgage. However, he is concerned about violating a due-on-sale clause. Is a due-on-sale clause allowed under the terms of the loan?
No, because the loan is assumable
Yes, because the loan is assumable
Yes, because the loan is an FHA loan
No, because seller financing is illegal
The answer is No, because the loan is assumable. A due-on-sale (alienation) clause allows the lender to declare the entire balance of the loan due when the property is sold or transferred. This means that the loan may NOT be assumed. Since FHA and VA loans are generally assumable, a due-on-sale clause would not be included in the security instrument.
According to TILA, a variation of up to what amount is permitted for the annual percentage rate in a regular fixed-rate mortgage transaction?
0.25%
0.5%
0.125%
.75%
The answer is 0.125%. Under TILA and Regulation Z , the APR is considered accurate generally if it is not more than one eighth of one percentage point (0.125%) above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method), or in an irregular transaction, if it is not more than one quarter of one percentage point (0.25%) above or below the annual percentage rate determined in accordance with legal requirements.
A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days?
30 days
90 days
45 days
60 days
The answer is 60 days. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his or her primary residence must move in within 60 days after closing.
If a borrower waives the right to receive a copy of an appraisal:
They must receive a copy within 30 days of closing
The lender is never required to give the borrower a copy of the appraisal
They must receive a copy seven days before closing
They must receive a copy at or before consummation
The answer is they must receive a copy at or before consummation. Under ECOA, a creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit. An applicant may waive the timing requirement and agree to receive a copy at or before consummation or account opening.
Which of the following in an ad for residential mortgage financing would trigger additional disclosures?
“VA financing available”
“Affordable payments”
“5.75% APR”
“5% down payment”
The answer is “5% down payment.” Under TILA, an ad must disclose a number of additional credit terms if it contains a trigger term. A trigger term includes certain credit terms specifically cited in an ad, including the amount or percentage of any down payment (e.g., “5% down,” “95% financing,” “$6,200 down”), except when the amount of the down payment is zero; the number of payments or period of repayment (e.g., “360 monthly payments,” “a 30-year loan”); the amount of any payment (e.g., “payments of less than $1,400 per month”); and the amount of any finance charge (e.g., “total financing costs of less than $3,000”).
Which of the following is true concerning the refundability of a VA funding fee?
VA funding fees are refundable if the borrower is overcharged
VA funding fees are refundable if the borrower is active military
VA funding fees are never refundable
VA funding fees are refundable if the borrower is a wounded veteran
The answer is VA funding fees are refundable if the borrower is overcharged. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender’s exposure to loss in the event of a borrower’s default that results in foreclosure. However, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed, instead of a mortgage insurance premium. The funding fee is only refundable if the borrower was overcharged. There are some exceptions to the imposition of a funding fee, including for veterans with disabilities. A veteran receiving VA compensation for a service-connected disability is exempt from the fee requirement.
Under which of the following scenarios could a borrower cancel a transaction after closing has already occurred?
A borrower closes on a refinance transaction for a primary residence on Monday and changes his mind the following Monday. The week contained no holidays and all disclosures were proper.
A borrower closes on a refinance transaction for an owner-occupied vacation home on Monday and changes his mind two days later.
A borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later.
A borrower closes on a purchase transaction for a primary residence, but changes his mind within three days of closing.
The answer is a borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later. TILA gives a consumer a right of rescission, allowing him or her to cancel the loan contract within a specified period of time for any reason if the loan is secured by the borrower’s principal residence and is a refinance transaction for a first or subordinate mortgage. The right of rescission does not apply to a residential mortgage transaction for a purchase or initial construction of a dwelling. In order to rescind, the consumer must forward a completed rescission form to the creditor no later than midnight of the third business day after the last of certain events occur, including consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind. If the creditor failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, the transfer of all of the consumer’s interest in the property, or the sale of the property.
Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence?
Insurance on the property
How quickly a borrower must occupy the property
Keeping hazardous substances on the property
Actual amounts for taxes and insurance
The answer is actual amounts for taxes and insurance. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. It shows the payor and payee, the amount owed, the rate of interest and whether it is fixed or adjustable, the due date(s) for payment, and the terms of the loan. The mortgage or trust deed secures repayment of the note. Its covenants address topics that include occupancy, insurance, and hazardous materials, but it does not typically specify actual amounts for taxes and insurance.
Under HOEPA, verifying the consumer’s repayment ability in an open-end, high-cost mortgage:
Is recommended, but not required
Is based on verifying income, assets, and current obligations
Is based on the borrower’s notarized financial statement
Must be carried out by an independent third party
The answer is is based on verifying income, assets, and current obligations. A lender extending mortgage credit subject to HOEPA in an open-end high-cost mortgage may not extend credit based on the value of the consumer’s collateral without regard to repayment ability as of the date of consummation, including consideration of current and reasonably-expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender, and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less.
For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is greater than or less than/equal to:
15 years
20 years
25 years
30 years
The answer is 15 years. For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is greater than 15 years or is 15 years or less.
When would a license be suspended without a hearing?
If a licensee fails to renew
If a licensee fails to request a hearing with the state regulator
If a licensee has failed to complete pre-licensing requirements
If a licensee has already executed a right to a hearing for a previous violation
The answer is if a licensee fails to request a hearing with the state regulator. The NMLS does not require a hearing. Under most circumstances, the licensee has the right to request a hearing with the state banking department. If one is not requested, a hearing is not conducted.
After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after:
Five years have passed
The home is sold to a new owner
The original VA loan is satisfied
The original VA loan is moved from his or her name into the name of the assuming borrower
The answer is the original VA loan is satisfied. A VA loan is assumable; however, the veteran’s VA eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan.
Wilbur Green is applying for a loan originator license. His credit report indicates that he has a number of judgments filed against him, all related to a serious medical condition his wife suffered four years prior. Will Wilbur be denied a license because of the judgments?
Yes, current outstanding judgments show a lack of financial responsibility
Yes, because they indicate a pattern of seriously delinquent accounts within the past three years
No, because the judgments are a result of medical expenses, they will not be held against him
The judgments will not be held against him because they were entered more than three years ago
The answer is no, because the judgments are a result of medical expenses, they will not be held against him. Evidence that an individual has not shown financial responsibility may include current outstanding judgments, except those solely as a result of medical expenses.
What legislation was enacted because of anecdotal evidence that women were not treated on an equal basis with men in credit markets, particularly in mortgage credit markets?
HOEPA
FACTA
ECOA
Fair Housing Act
The answer is ECOA. The Equal Credit Opportunity Act is a fair lending law passed primarily because of anecdotal evidence that women were not treated on an equal basis with men in credit markets.
The Pois have just closed on their mortgage loan at a formal settlement meeting. What is mortgage loan originator Leilani’s responsibility after loan closing?
She must provide any required re-disclosures
None; Leilani’s tasks are complete
She must provide another set of disclosures, showing final costs and expenses
She must record the transaction with the county recorder
The answer is none; Leilani’s tasks are complete. After loan settlement, there are some cases in which additional disclosures are due, however, these would be provided by the creditor rather than the loan originator.
In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for:
Twelve months
Three years
Two years
Five years
The answer is three years. In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for three years.
Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan?
Yes, a dwelling includes a structure whether or not that structure is attached to real property
No, dwellings must be permanently attached to real property
No, mobile homes are classified as personal property, not real property
Yes, as long as the real property upon which the mobile home will be located is in the borrower’s name, the loan may be a residential mortgage loan
The answer is yes, a dwelling includes a structure whether or not that structure is attached to real property. A residential mortgage loan is any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or will be constructed a dwelling. A dwelling is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home and trailer, if it is used as a residence.
When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as:
For sale by owner (FSBO)
Seller carry-back
Seller concessions
Seller self-financed
The answer is seller carry-back. In a purchase transaction involving an assumable mortgage, when the party selling the property provides all or part of the financing, it is referred to as a seller carry-back.
Which section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application?
Information for Government Monitoring Purposes
Declarations
Details of the Transaction
Acknowledgement and Agreement
The answer is declarations. The “Declarations” section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application.
Which of the following is not within the authority of the state regulators responsible for the effective system of supervision and enforcement of the SAFE Act?
Determine criminal sentences for non-licensed entities under the Act
Issue licenses to conduct business under the Act
Deny, suspend, revoke licenses issued under the Act
Examine, investigate, and conduct enforcement actions
The answer is determine criminal sentences for non-licensed entities under the Act. A state regulator has the responsibility to carry out the administration of the SAFE Act, but is not involved in criminal prosecution or penalty decision making.
If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer at what point?
Within seven business days of a customer providing nonpublic personal information sufficient to pull a credit report
Within three business days of initial contact between the consumer and the financial institution
No later than three business days prior to settlement
No later than the time at which a customer relationship is established
The answer is no later than the time at which a customer relationship is established. If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer no later than the time at which a customer relationship is established.
Which of the following is not a part of the definition of a loan originator?
For compensation or gain, takes residential mortgage applications
For the expectation of compensation or gain, offers or negotiates terms of a residential mortgage loan
Person or entity that only performs real estate brokerage activities
For compensation or gain, negotiates residential mortgage loans
The answer is person or entity that only performs real estate brokerage activities. Real estate brokerage activities are not considered within the definition of a loan originator.
In January of 2022, Wella and Kip agreed to purchase a home at a purchase price of $683,100. They would like to hold on to as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings?
$47,900
$35,900
$95,800
$54,900
The answer is $35,900. The down payment in this scenario will be $35,900. This is just enough to keep them at the $647,200 conforming loan limit which was adjusted January 1, 2022. 683,100-647,200 = 35,900.
The Nationwide Multistate Licensing System and Registry seeks to accomplish all of the following objectives, except:
Provide uniform license applications and reporting requirements for state-licensed originators
Provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace
Provide increased accountability and tracking of loan originators
Facilitate the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators
The answer is provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace. The NMLS is a measure aimed at increasing responsible behavior and accountability and protecting consumers, not expanding the subprime marketplace.
Which of the following is the least-expensive type of reverse mortgage?
HECM
Proprietary mortgage
Non-recourse
Single purpose
The answer is single purpose. A single-purpose reverse mortgage is a low-cost loan offered to low-income borrowers by state and local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.
What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage?
A deed with conflicting ownership information
A utility easement
A second mortgage
A judgment that was secured by a property lien, but recently paid in full
The answer is a deed with conflicting ownership information. Creditors protect their investment in a mortgage by placing a lien on the home used as security. A title search shows whether other liens are in place that will have priority over the creditor’s lien. When a refinance pays off an existing first mortgage, the second mortgage will have priority, but creditors can use subordination agreements to ensure that the new mortgage has priority over the existing second mortgage. The title search might also uncover problems in the chain of title which could stop a transaction - for instance, a deed with conflicting ownership information (sometimes these are “wild deeds” with names that appear nowhere else on record) will require additional research and might demand legal action or could fully stop the refinance.
All of the following are TILA-required disclosures, except:
CHARM Booklet
Notice of Adverse Action
Right to Rescind
Loan Estimate
The answer is Notice of Adverse Action. The Notice of Adverse Action is a disclosure required by ECOA, not TILA.
The size of the government’s guarantee on a VA loan depends on:
Whether the interest rate is fixed or adjustable
Whether this is the first time a veteran uses the guarantee or a subsequent transaction
The length of the loan term
The size of the loan being obtained
The answer is the size of the loan being obtained. The size of the government’s guarantee on a VA loan depends on the size of the loan being obtained.
An assumption clause
allows the seller to reassume the mortgage if the buyer falls behind in his payments.
assumes the buyer has the ability to repay the loan based on his credit score.
allows a buyer to assume the seller’s mortgage.
allows the buyer to sell the mortgage without requiring the seller’s authorization.
The answer is allows a buyer to assume the seller’s mortgage. An assumption clause is a provision in the terms of a loan that allows a buyer to assume the seller’s mortgage.
A _____ is an individual who accepts a fee to falsely claim ownership to a property.
Straw buyer
Air buyer
Straw seller
Air seller
The answer is straw seller. A straw seller is an individual who accepts a fee to falsely claim ownership to a property.
A _____ is defined as any mortgage product other than a 30-year fixed-rate mortgage.
Piggyback loan
Subordinate lien
Nontraditional mortgage
Nonconventional mortgage
The answer is nontraditional mortgage. A nontraditional mortgage is defined as any mortgage product other than a 30-year fixed-rate mortgage.
Which of the following may be considered an appraisal red flag?
An appraiser’s resume shows substantial experience in the area
Property owner and seller are not the same
Appraisal is dated after the sales contract
Comparables are located within one mile of the subject
The answer is property owner and seller are not the same. If the property owner and property seller are not the same, it is likely more questions should be asked about the deal.
An interest-only loan might be suitable for any of the following, except:
A corporate executive who receives large quarterly bonuses
A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time
An investor who would prefer to pay as little as possible while holding the property
A self-employed borrower whose company is busiest during a six-month period over the holidays
The answer is a part-time hourly worker who may get overtime in the summer and plans to pay principal at that time. An interest-only loan is suitable when a borrower is savvy enough to manage it properly. A part-time, hourly worker who “may” get overtime in the summer likely would not be the best candidate for an interest-only loan.
When completing the Loan Estimate, costs must be presented:
In dollars and cents
In dollars and cents, except for appraisal costs
By rounding them to the next whole number, except for estimated principal and interest payments
By rounding them to the next whole number, except for third-party costs
The answer is by rounding them to the next whole number, except for estimated principal and interest payments. Except for estimated principal and interest payments, costs on the Loan Estimate are rounded to the next whole number.
If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by:
$35
$10
More than $35
More than $100
The answer is more than $35. If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by more than $35.
A mortgage and a lien are both examples of
deeds of trust.
concepts which are legal in some states but not in others.
easements.
encumbrances.
The answer is encumbrances. An encumbrance is a claim or liability on the title to a property, such as a lien or a mortgage.
The generally-accepted appraisal standards in the United States are known as:
ASB
USASB
USPAP
FinCEN
The answer is USPAP. The Uniform Standards of Professional Appraisal Practice (USPAP) are the recognized standards for appraisals in the United States.
If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.
7
10
20
15
The answer is 15. If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has 15 days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.
Which of the following are considered liens?
Judgment, mortgage, flood insurance
Mortgage, mechanic’s lien, debentures
Chattel, mortgage, attachment
Judgment, attachment, mortgage
The answer is judgment, attachment, mortgage. Judgments, attachments, and mortgages are all considered liens.
All of the following loans are covered by RESPA, except:
A loan assumption made without lender approval
A 30-year fixed loan made by a federally regulated credit union
An FHA loan
A conforming loan
The answer is a loan assumption made without lender approval. RESPA covers loans secured by first or subordinate liens on residential property but does not extend to an assumable loan which can be assumed without lender approval.
A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this?
Adjustable-rate
FHA buy-down
Option ARM
Interest-only option fixed-rate
The answer is interest-only option fixed-rate. The loan has a rate of 6% for 30 years, meaning it has a fixed rate. This loan has an interest-only feature for the first five years.
Which of the following is not permitted for a HOEPA loan?
Documenting a borrower’s ability to repay the loan
Requiring a balloon payment after the first five years
Refinancing into another HOEPA loan within 12 months if it is in the borrower’s best interest
Making a loan solely based on the collateral value of the property
The answer is making a loan solely based on the collateral value of the property. Under HOEPA, you may not make a loan solely based on the value of the borrower’s collateral without considering his/her ability to repay the loan.
All but which of the following prohibitions or requirements apply to HPMLs?
The loan cannot include prepayment penalties after the first two years of the loan term
The loan cannot include prepayment penalties
The borrower must have an escrow account for taxes and insurance
Consideration of repayment ability must include verification of income using documents such as IRS W-2 forms
The answer is the loan cannot include prepayment penalties after the first two years of the loan term. HPMLs cannot include prepayment penalties at all, so it is false to say that the loan cannot include prepayment penalties after the first two years of the loan when they are prohibited altogether.
How long must flood insurance be in place?
The borrower can cancel at 80% of the loan balance
Until the loan reaches the halfway point in the amortization table
It cannot be canceled as long as the property remains in a mandatory flood zone
Until the loan balance is completely paid off
The answer is until the loan balance is completely paid off. Flood insurance must stay in place at least until the loan balance is paid off and the lender no longer needs to be protected from the hazard.
Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will:
Be required because the seller acquired the home 90 days prior to the date that Nicole agreed to purchase the home
Be required if there is any evidence that the sale constitutes property flipping
Not be required unless Nicole has agreed to purchase it for 20% more than the Marine paid
Not be required since purchases from servicemembers are not subject to the requirement for two appraisals
The answer is not be required since purchases from servicemembers are not subject to the requirement for two appraisals. Purchases from servicemembers are not subject to the requirement for two appraisals.
All of the following are part of the underwriter’s review of collateral, except:
Sales contract
Bank statements
Appraisal
Flood zone verification
The answer is bank statements. Bank statement review is part of an underwriter’s assessment of the borrower, not the collateral.
Jake Pearson applies for a loan with TNT Mortgage on June 1. TNT is required to inform Jake whether it has approved his loan by:
June 4th
June 15th
July 15th
June 30th
The answer is June 30th. The Equal Credit Opportunity Act requires lenders to inform applicants of the status of their loan within 30 days of application.
A borrower is buying a house with a sales price of $210,000, but the appraisal came in at $200,000. The borrower takes out a loan of $160,000. What is the LTV?
76%
90%
80%
75%
The answer is 80%. The LTV is calculated using the lesser of the purchase price and the appraised value. In this case, the loan amount of $160,000 is divided by the appraised value of $200,000 to get 80% LTV.
Ricky and Lucy are buying a house using a conforming loan, and they have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession?
$6,210
$6,900
$13,800
$12,420
The answer is $13,800. The seller concession allowed on a conforming loan with a 90% (or less) LTV is 6%. This number is taken from the sales price, not the loan amount. $230,000 × 6% = $13,800.
Which of the following forms is the appraisal form used for investment properties?
1007
1073
1004
1005
The answer is 1007. The 1004 is the Uniform Residential Appraisal Report, or URAR. There are variations for certain properties; the 1007 is used for single-family properties that are investment properties.
Which of the following loans requires the collection of HMDA data?
Refinance of a second home
Financing of a recreational vehicle
Student loan
SBA loan
The answer is refinance of a second home. HMDA data is required for purchase loans, refinance loans, and home improvement loans, as long as the loans are secured by a dwelling.
The federal agency that implements and enforces rules related to the origination of FHA loans is the:
Consumer Financial Protection Bureau (CFPB)
Department of Housing and Urban Development (HUD)
Federal Trade Commission (FTC)
National Credit Union Administration (NCUA)
The answer is Department of Housing and Urban Development (HUD). The Department of Housing and Urban Development implements and enforces rules related to FHA lending.
The reporting form used to communicate HMDA data is called what?
1073
Loan/Registration Application
1004
Loan/Application Register
The answer is Loan/Application Register. The form used for reporting HMDA data is called the Loan/Application Register (LAR).
Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections?
A broker agreement
A TIL disclosure
A verification of employment
The promissory note
The answer is a verification of employment. Generally, a verification of employment is signed by the borrower with blank spaces remaining, with the understanding the borrower has signed to give permission for the employer to complete it.
The Jepsons have brought mortgage loan originator Stanley Rothke a check to pay for loan origination fees, the private mortgage insurance premium, and the commitment fee. These charges are:
Paid-outside-of-closing charges
Prepaid finance charges
Third-party charges
Mortgage loan transaction fees
The answer is prepaid finance charges. A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct charges paid by the borrower and include loan origination, discount, and commitment fees; any prepaid private mortgage insurance; underwriting, processing, tax service, and courier fees; buy-down funds; and prepaid interest.
Disclosures for high-risk loans required by the Homeowners Protection Act inform the borrower that:
The loan is considered a high-cost loan because it trips thresholds related to title insurance fees
Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments
There may be a loan more suited for the borrower that is much less expensive
Payment amounts may change based on interest rate changes
The answer is termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments. The term “high-risk loans” pertains specifically in this case to legislation related to the HPA which facilitates the cancellation of private mortgage insurance. The HPA requires PMI on high-risk loans to be terminated automatically at the midpoint of the amortization schedule, when the borrower is current.
All of the following types of information must be reported for government monitoring purposes in accordance with HMDA, except:
Identification of loans subject to HOEPA
Action taken on the loan and the location of the subject property
Ethnicity, race, sex, and income of the applicant
Ethnicity, race, sex, and religion of the applicant
The answer is ethnicity, race, sex, and religion of the applicant. HMDA monitoring requires the collection of extensive data about each mortgage loan application and origination. This includes any action taken on the loan, indication of whether the loan is subject to HOEPA, and the ethnicity, race, sex, and income of the applicant. HMDA does not require the collection of information about an applicant’s religion.
Which of the following borrowers is best suited for an HECM?
A borrower who needs money for several home improvement projects
A 62-year old borrower who just cashed in a 401k for a down payment
A borrower who was disabled during service for the military
A 65-year-old borrower without a mortgage who would like to supplement his income
The answer is a 65-year-old borrower without a mortgage who would like to supplement his income. Home equity conversion mortgages allow elderly borrowers who have significant equity in their homes the opportunity to draw on that equity, without repayment, as long as they continue to live in the home.
ECOA applies to the extension of credit for:
Loans secured by a first or subordinate lien on residential property
Residential, business, commercial, and agricultural loans
Business, commercial, and agricultural loans
All credit other than government loans
The answer is residential, business, commercial, and agricultural loans. ECOA has a wider range than RESPA and TILA, beyond just loans related to residential properties. The law also covers loans for businesses, commercial, and agricultural loans.
The examination of county and municipal records to determine the legal status of a property is called:
Title insurance
Title search
Title binder
Title commitment
The answer is title search. The title search is the first step in the title process. It involves an abstractor or an attorney searching county or municipal records to determine the status of a property.
A state-licensed loan originator is:
Licensed by the NMLS
An employee of a non-depository institution
Identified by the unique identifier of his/her employer
An employee of a subsidiary which is owned or controlled by a depository institution
The answer is an employee of a non-depository institution. A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state. An originator employed by a depository or the Farm Credit Administration would be registered.
A balloon rider, a prepayment penalty rider and a second-home rider may all be part of:
A title insurance policy
A deed of trust
A note
A power-of-attorney agreement
The answer is a deed of trust. A deed of trust is used to secure a note. A deed can carry a rider, or an addendum, which may include a balloon rider, a prepayment penalty rider and a second-home rider, among others.
Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under:
TILA
Homeowners Protection Act
HOEPA
RESPA
The answer is HOEPA. HOEPA prohibits the intentional targeting of poor or underserved areas with expensive high-cost loans, which is a practice known as reverse redlining.
What action must a creditor take if it is discovered that the APR listed on the Closing Disclosure is outside of the range of tolerance?
Provide disclosure of the corrected discrepancy and wait three business days before closing
Keep records of the discrepancy for three years
Adjust the APR and close the loan as scheduled
Restart the seven-business-day waiting period after the new disclosure has been made
The answer is provide disclosure of the corrected discrepancy and wait three business days before closing. When the APR listed on the Closing Disclosure is inaccurate, the APR must be re-disclosed to the borrower, and the loan cannot close for at least three business days from the re-disclosure date.
Oversight and enforcement of FCRA is left to what government agency?
FNMA
CFPB
FHFA
HUD
The answer is CFPB. The CFPB has primary oversight and enforcement authority for the Fair Credit Reporting Act. However, it shares some of its enforcement authority with the FTC.
Investigations conducted by state licensing authorities may include all of the following, except:
Interviews with employees of an entity
Examination of mortgage applications
Suspension of a license without notice of a right to a hearing
Scheduling a review of advertising examples used by the licensee
The answer is suspension of a license without notice of a right to a hearing. As a result of an investigation, state licensing authorities may not suspend a license without making the licensee aware of why an action may be taken and that the licensee may request a hearing.
HOEPA is federal legislation enacted by Congress through amendments to:
FACTA
ECOA
TILA
HMDA
The answer is TILA. The Home Ownership and Equity Protection Act is part of TILA. Created in 1994, it was the first legislation specifically created to combat predatory lending. Its regulations are found in Section 32 of Regulation Z.
“5/25” and “7/23” are commonly used to designate loans including which of the following?
A hybrid adjustable rate feature
A balloon payment
A subordinate lien
A temporary interest rate buy-down
The answer is a balloon payment. “5/25” and “7/23” are commonly used to designate loans that include a balloon payment.
