Practice Exam 1 Flashcards by Antonio Rullo

A discount point is BEST described as a charge the borrower pays to

a. A lender to decrease the 
    interest rate on the 
    mortgage loan
b. A mortgage broker at the 
    time of application to 
     obtain 
     a favorable rate
c..The seller  as part of the 
    closing costs of a loan
d. A lender to ensure against 
    foreclosure

a. A lender to decrease the
interest rate on the
mortgage loan

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A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000. in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the don payment at closing?

a. $32,000
b. $27,000
c. $30,000
d, $25,000

d, $25,000

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If an applicant works 40 hours a week and is paid $13.52 per hour, what is the applicants monthly income?

a. $2,136.20
b. $2,343.47
c. .$2,379.52
d. $2,487.68

b. $2,343.47

Hourly x hours worked during week x weeks in a year (52) / 12 months

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The requirements for private mortgage insurance is generally discontinued when the loan -to-value ratio falls below.

a. 20%
b. 50%
c..80%
d, 90%

c..80%

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Which of the following documents itemizes all settlements costs including lender charges?

a. Agreement of Sale
b. HUD-1/Closing Disclosure
c..Form 1003
d, Forbearance agreement

b. HUD-1/Closing Disclosure

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According to the Truth-in-Lending Act (TiLA), the term refinance applies to:

a. A change in payment 
    schedule
b. A reduction in annual 
    percentage rate
c..the renewal of a single 
    payment obligation with no 
    change in the original 
    terms
d, The satisfaction of an 
    existing obligation and its 
    replacement by a new 
    obligation

d, The satisfaction of an
existing obligation and its
replacement by a new
obligation

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What does a loan originator use to determine the estimated value of a property based on an analytical comparison to similar property sales?

a. An appraisal
b. A market survey
c..An area survey
d, A cost-benefit analysis

a. An appraisal

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Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?

a. E-mail
b. Mailed letter
c. Telephone
d, Faxed letter

c. Telephone

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The term “20 basis points” expressed as a percentage is

a. 0.02%
b. 0.20%
c..2.00%
d, 20.00%

b. 0.20%

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According to the Truth-in-Lending Act (TILA), which of the following fees is EXCLUDED from the calculation of the annual percentage rate?

a. Hazard insurance
b. Wire transfer
c..Prepaid interest
d, Mortgage insurance
premiums

a. Hazard insurance

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FHA loans are:

a. Partially guaranteed
b. 100% insured
c. Exempt
d, Entitled

b. 100% insured

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The late fee for a conventional loan is:

a. 3% of principle and interest
b. 4% of principle and interest
c. 5% of principle and interest
d, 10% of principle and interest

c. 5% of principle and interest

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A funding fee is required for a:

a. FHA loan
b. VA loan
c. Jumbo loan
d, Conventional loan

b. VA loan

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A Mortgage Insurance Premium is required on:

a. FHA loan
b. VA loan
c. Jumbo loan
d, Conventional loan

a. FHA loan

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The Mortgagee is:

a. Borrower
b. Lender
c..Closing Agent
d, Mortgage broker

b. Lender

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The borrower does NOT sign which document

a. Deed
b. HUD-1/Loan Disclosure
c..Mortgage
d, Note

a. Deed

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Which document is usually NOT recorded?

a. Assignment of mortgage
b. Note
c..Deed
d, Mortgage

b. Note

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A mortgage title insurance policy is NOT:

a. Based loan amount
b. Transferable
c..Optional
d, Required by the lender

c..Optional

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Which parties sign the deed?

a. Grantor, Grantee and two 
    witnesses
b. Grantor and two witnesses
c. Grantee and two  
    witnesses
d, Grantee only

b. Grantor and two witnesses

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When the mortgagor and the mortgagee title insurance policies are issued at the same time, this is known as:

a. Simultaneous issue
b. Concurrent issue
c. Subsequent issue
d, Dual issue

a. Simultaneous issue

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A shrubbery is on example of an:

a. Encumbrance
b. Easement
c. Entitlement
d, Acceptable title
impediment

d, Acceptable title impediment

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A loan on personal property only is known as:

a. Package mortgage
b. Chattel mortgage
c. Furnishing mortgage
d, Exotic mortgage

b. Chattel mortgage

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Which of the following is not a characteristic of a Tenants in Common form of ownership

a. Equal shares
b. Buy at different times
c. Right of survivorship
d, Ability to share

c. Right of survivorship

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PITI payments do NOT include which of the following:

a. Principal
b. Funding Fee
c. Hazard Insurance
d, Interest

b. Funding Fee

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Who does Fannie Mae hold responsible for the quality of an appraisal? a. Appraiser b. Borrower c. Mortgage d, Lender

d, Lender

Which law is known as Regulation B? a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Equal Credit Opportunity Act d, Patriot Act

c. Equal Credit Opportunity | Act

which law prohibits discrimination by lenders? a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Equal Credit Opportunity Act d, Patriot Act

c. Equal Credit Opportunity | Act

A property sold for $200,000 and was appraised at 180,000. The borrower received a loan for 150,000. What is the loan-to-value a. 75% b. 83.3% c. 90% d, 92.4%

b. 83.3%

How many days does a lender have to send an adverse action notice? a. 5 b. 10 c. 30 d, 60

c. 30

The GFE/Loan Estimate must be mailed or given to the borrower within how many days after receiving the signed application? a. 3 business days b. 7 business days c. 10 business days d, 30 business days

a. 3 business days

The enforcement of a lien is known as a: a. Closing b. Foreclosure c. Warranty inspection d, Police Action

b. Foreclosure

What minimum percentage of ownership is a related service requires a conflict of interest disclosure? a. 5% b. 10% c. 25% d, 50%

b. 10%

What minimum percentage of ownership qualifies an individual as self-employed? a. 5% b. 10% c. 25% d, 50%

c. 25%

A salaried employee may have to produce which of the following documents to obtain a loan a. 90 day pay stubs b. 2 years W2s c. Profit and Loss statement d, Balance sheet

b. 2 years W2s

How many months must left on an automobile lease to include it as a debt? a. 2 months b. 5 months c. 10 months d, It is always included

d, It is always included

Which law defines the right of rescission? a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Equal Credit Opportunity Act d, Patriot Act

a. Truth-in-Lending

How long after the application date must social security payments continue to be received in order to count as income? a. 3 months b. 10 months c. 2 years d, 3 years

c. 2 years

Credit reports on new construction are good for how many days? a. 90 days b. 120 days c. 180 days d, 225 days

b. 120 days

Which clause in a mortgage allows a lender to increase the interest rate? a. Defeasance b. Escalation c. Acceleration d, Exculpatory

b. Escalation

Which clause in a mortgage prevents the lender from foreclosing unless the borrower is in default? a. Defeasance b. Escalation c. Acceleration d, Exculpatory

a. Defeasance

The lender has how may days to send the Satisfaction of Mortgage letter to the borrower once the loan balance is paid? a. 30 days b. 60 days c. 90 days d, 120 days

b. 60 days

Which of the following increases cap rate? a. Lower purchase price b. Increase purchase price c. Decrease cash flow d, Increase interest rate

a. Lower purchase price

Who should applicants contact if they have questions about their credit score or credit information? a. Credit reporting agency b. Lender c. Mortgage broker d, Attorney

a. Credit reporting agency

Who is responsible for maintaining the national flood maps? a. HUD b. FEMA c. FHA d, VA

b. FEMA

THe VA appraisal is know as a: a. CRV b. Veteran appraisal report c. Fannie Mae 1025 d, AVA

a. CRV Certificate of Reasonable Value

Fannie Mae's automated underwriting system is known as: a. Fannie Mannie b. Software helper c. Desktop Underwriter d, Loan Prospector

c. Desktop Underwriter

There are 10 days left in the month. The purchase price is $150,000, the loan amount is $100,000 and the interest rate is 6%. How much mortgage interest must the borrower pay at closing? a. $164.38 b. $250.00 c. $440.20 d, $2,739.73

a. $164.38 Loan amount x interest rate/number days in year number of days left in month 100,000. x 0.06/365x10 =164.38

Private Mortgage Insurance is automatically canceled when the loan to value reaches what level? a. 55% b. 70% c. 78% d, 80%

c. 78%

Which types of loans are meant for rural areas? a. VA b. FHA c. USDA d, RAL

c. USDA

The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point and 1 origination point. What is the cost of the points a. $1,800 b. $2,000 c. $3,600 d, $4,000

c. $3,600 Discount points x loan amount = Point value $180,000. x .02 = $3600.00

If the Gross Rent Multiplier (GRM) decreases, the property value: a. Increases b. Decreases c. Does not change d, Can increase or decrease

b. Decreases

What is the maximum amount of VA seller concessions a. 2% b. 3% c. 4% d, 5%

c. 4%

When a property increases in value for any reason this is known as: a. Acceleration b. Appreciation c. Accumulation d, Acclimation

b. Appreciation

Which appraisal approach is most suitable for an office building ``` a. Sales comparison approach b. Cost approach c. Income capitalization approach d, Tenant collection approach ```

c. Income capitalization | approach

Which of the following is incorrect regarding an adjustable rate mortgage? a. The index is fixed b. The margin is fixed c. There are rate caps on both the adjustment period and the life of the loan d. LIBOR is a typical index used

a. The index is fixed

Which of the following is NOT a fully amortized loan? a. Term mortgage b. Fixed-rate mortgage c. Adjustable-rate mortgage d, Bi-weekly mortgage

a. Term mortgage

Which of the following is a negatively amortizing loan? a. Reverse mortgage b. Balloon mortgage c. Term mortgage d, Wrap mortgage

a. Reverse mortgage

Fannie Mae does NOT require: ``` a. 6 months of bank statements b. Verifiable funds c. 2 years of addresses d, Stable 2 year work history ```

a. 6 months of bank | statements

A note is: a. Document that coveys title b. Pledge of the property as collateral for the loan c. Borrower's IOU d, Document that transfers contractual rights to another investor

c. Borrower's IOU

A mortgage is the: ``` a. Document that conveys title b. Pledge of the property as collateral for the loan c. Borrower's IOU d, Document that transfers contractual rights to another investor ```

b. Pledge of the property as | collateral for the loan

An adjustable-rate mortgage can adjust after 2 years with an adjustment cap of 3% per period and a lifetime cap of 7%. The starting interest rate is 4%. What is the maximum interest that can be charged at the time of the first adjustment a. 5% b. 7% c. 10% d, 11%

b. 7%

What is the FHA minimum down payment a. $0 b. 3.5% c. 5% d, 10%

b. 3.5%

Which law is known as regulation C? ``` a. Real Estate Settlement Procedures Act b. Truth-in-Lending Act c. Equal Credit Opportunity Act d. Home Mortgage Disclosure Act ```

d, Home Mortgage Disclosure | Act

What is the minimum down payment for a USDA loan? a. $0 b. 3.5% c. 5% d. 10%

a. $0

How many hours of continuing education are minimally required? a. 8 hours every year b. 14 hours every years c. 14 hours every 2 years d, 20 hours every 2 years

a. 8 hours every year

Who is responsible for completing the HUD-1/Loan Disclosure a. The borrower b. The closing agent c. Loan originator d, The Grantor

b. The closing agent

A mortgagor 's title insurance policy is: a. Transferable b. Required c. Based on purchase price d, Never used

b. Required

The assignee of a mortgage and note is participating in the a. Primary lending market b. Capital market c. Secondary mortgage market d, Options market

c. Secondary mortgage | market

VA loans are: a. Partially guaranteed b. Insured c. Exempt d, Entitled

a. Partially guaranteed

The late fee for a VA loan is a. 3% of principle and interest b. 4% of principle and interest c. 5% of principle and interest d, 10% of principle and interest

b. 4% of principle and interest

The purchase price of a home is $375,000 and the appraisal price is $350,000. If the first mortgage is in the amount of $200,000 and the second mortgage is $60,000. What is the combined loan-to-value ratio a. 74.3% b. 80.0% c. 86.7% d, 92.3%

a. 74.3%

The purchase price of a home is $375,000 and the buyer will assume a $175,000 first mortgage. The loan-to-value cannot exceed 85%. What is the maximum amount of the new second mortgage a. $130,000 b. $143,750 c.$162,030 d, $171,260

b. $143,750

What clause in a mortgage allows the lender to call the entire loan balance due? a. Defeasance b. Escalation c. Acceleration d, Exculpatory

c. Acceleration

Which clause in a mortgage prevents the lender from recovering additional assets from the mortgagor if there is a shortfall in the foreclosure proceeds? a. Forbearance b. Escalation c. Acceleration d. Exculpatory

d. Exculpatory

What term describes the intentional delay of action on the part of the lender upon a borrower's default? a. Forbearance b. Escalation c. Acceleration d. Exculpatory

a. Forbearance

Which of the following does not appear in a lock-in-agreement? a. Expiration date b. APR c. Lock-in-fee d, Interest Rate

b. APR

Freddie Mac was originally known as: ``` a. Federal Home loan Mortgage Corporation b. Federal National Mortgage Association c. Fair Discount Interest Rates d, Free Certificate of Deposits ```

a. Federal Home loan | Mortgage Corporation

Fannie Mae allows what amount of fees to be charged to a credit card? ``` a. 1% of the loan amount plus $500 for the appraisal and credit report b. 2% of the loan amount plus $500 for the appraisal and credit report c. 3% of the loan amount plus $500 for the appraisal and credit report d, 4% of the loan amount plus $500 for the appraisal and credit report ```

a. 1% of the loan amount plus $500 for the appraisal and credit report

Loan Prospector can NOT be used for which type of loan a. Conventional b. VA c. FHA d, Commercial

d. Commercial

A five bedroom, one bathroom house is an example of a. Appreciation b. Functional obsolescence c. Economic obsolescence d. Residential allowance

b. Functional obsolescence

Which of the following is NOT a benefit of a FHA loan? a. Favorable interest rates b. Low down payment c. No monthly mortgage insurance d. Assumable

c. No monthly mortgage | insurance

A loan closes on May 14. When is the first mortgage payment due? a. May 15 b. June 01 c. Jun 15 d. July 01

d. July 01

Alimony payments must continue to be received for how long after the application date if they are to be included as income? a. 10 months b. 2 years c. 3 years d. 4 years

b. 2 years

Credit reports are good for how many days after they are pulled for qualifying purposes? a. 60 b. 90 c. 120 d. 180

c. 120

When title is transferred and the buyer assumes no liability for the note, this type of transference is known as: a. Free and clear b. Subject to mortgage c. Assumption d. Novation

c. Subject to mortgage

Which of the follwoing is correct for an adjustable-rate mortgage? ``` a. index - margin = fully indexed rate b. Margin - index = fully indexed rate c. Index + Margin = fully indexed rate d. Index - margin = fully indexed rate ```

c. Index + Margin = fully | indexed rate

The maximum term for a FHA loan is: a. 15 years b. 30 years c. 40 years d. 50 years

b. 30 years

Which of the following is not an involuntary lien? a. IRS lien b. Judgement lien c. Mortgage lien d. Mechanic's lien

c. Mortgage lien

The most comprehensive form of ownership is: ``` a. Real Estate Investment Trust b. Fee simple absolute c. Tenants in common d. Joint tenancy ```

b. Fee simple absolute

Which is NOT a component of a valid contract a. Agreement b. Consideration c. Two Witnesses d. Competent parties

c. Two Witnesses

Which type of co-ownership permits the property to pass to an heir? a. Collaboration b. Tenants in common c. Joint tenancy d. Subordination

b. Tenants in Common

The economic concept which state that a knowledgeable buyer will pay no more for one property than they would pay for an equally desirable comparable property is: a. Principle of Substitution b. Principle of Highest and Best Use c. Principle of Market Value d. Principle of Intelligent Purchases

a. Principle of Substitution

Which law requires the interviewer to complete the Government Monitoring section on the 1003 ``` a. Homeowner's Protection Act b. The Fair and Accurate Credit Transaction Act c. Truth-in-Lending d. The Equal Credit Opportunity Act ```

d. The Equal Credit | Opportunity Act

Which law entitles an applicant to a copy of his property appraisal report? ``` a. Homeowner's Protection Act b. The Fair and Accurate Credit Transaction Act c. Truth-in-Lending d. The Equal Credit Opportunity Act ```

c. Truth-in-Lending | Opportunity Act

Which law is also known as Regulation X a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Homeowner's Protection Act d. The Equal Credit Opportunity Act

b. Real Estate Settlement | Procedures Act

Which law protects an individual confidential information? a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Homeowner's Protection Act d. Gramm-Leach-Bliley Act

d. Gramm-Leach-Bliley Act

Who Enforces RESPA violations a. FTC b. CFPB c. FHA d. FCC

b. CFPB

Which law requires that the Special Information booklet be given to borrowers? a. Truth-in-Lending b. Real Estate Settlement Procedures Act c. Homeowner's Protection Act d. The Equal Credit Opportunity Act

``` b. Real Estate Settlement Procedures Act (RESPA) ```

What is the fine for violating the Federal Do Not Call rules a. $5,000 b. $11,000 c. $42,350 d. $60,000

c. $42,350