Practice Questions 2 Flashcards
Loan originators may be compensated through all but which of the following methods:
The Loan Originator Compensation Rule defines the terms under which a loan originator may be compensated. Being paid based on the terms of the transaction (mortgage type, interest rate, loan term, etc.) is prohibited.
When is an applicant obligated to disclose child support payments as a liability?
Obligated payments of child support stem from court orders and/or divorce decrees. Whether an individual is actively paying it or not is irrelevant. If someone is court ordered or otherwise required to pay child support, that support payment must be included in his or her DTIs and the liability manually entered onto the application. The only time when court ordered child support could be excluded from an applicant’s DTIs is when there are 10 or fewer months left to pay it.
What is the penalty for violating the Telemarketing Sales Rule?
The penalty for violating the Telemarketing Sales Rule is not cheap! Violators may be fined up to $43,280 per occurrence.
If two loans together achieve an 83% CLTV and the second loan is at 23% LTV, what is the LTV of the first loan?
If the two loans together comprise 83% of the property’s value and the LTV of the second loan is 23%, the first loan must equate to a 60% LTV (83 – 23 = 60).
What constitutes a good payment history in terms of PMI removal?
According to the Homeowners Protection Act, a good payment history requires a 24-month payment history review. During the most recent 24 months, the customer may not have had any 60-day late payments, and, within the most recent 12 months, the customer may not have had any 30-day late payments.
Charlie Chancetaker likes the low interest rate offered by the 360/60 balloon loan on which he settles. He is not worried about going into foreclosure because his company transfers him every four years and he intends to sell the home and pay off the loan well in advance of the balloon call. Which of the following would not represent a possible problem when the time to address the balloon call arrives?
A 360/60 is a balloon loan with a payment calculated at the 30-year amortized rate that contains a call term after five years. As the loan is described by the overall term followed by the balloon call term, this type of balloon loan does not contain a conditional right to modify.
Which of the following communications would be acceptable to direct to an appraiser?
Asking an appraiser to justify or explain his or her position in valuing a property is acceptable. Conditioning compensation on value or pressuring an appraiser to provide a certain value is an egregious violation of appraiser independence guidelines.
All but which of the following are conditions included in the right to conditionally modify a balloon loan?
The conditions for which a balloon loan may be conditionally modified are: the home must be owner occupied, the loan must be current, there cannot be any subordinate liens attached to the property, and the new rate may not exceed the original rate by more than 5%.
Reverse Redlining refers to:
Reverse redlining specifically focuses on particular geographic areas to pursue predatory lending practices in order to take advantage of the people living in that area who are often financially naive.
The E-Sign Act requires that all of the individuals needed to electronically sign documentation be provided with:
The E-Sign Act affords individuals who do not wish to receive and sign documents electronically with the right to receive and sign on paper and/or in non-electronic format.
Anyone applying for a reverse mortgage must have:
nswer: b) Independent, third-party homeownership counseling is a mandatory requirement for all reverse mortgages. In the event that a mortgage servicer does not have a certificate of homeownership counseling in the reverse mortgage file, it does not have an enforceable lien.
Joan applies for a mortgage on Tuesday. By the end of what day must the Transfer of Servicing disclosure be issued?
The Transfer of Servicing disclosure must be issued by the releasing entity no later than 15 days prior to a servicing release and by the receiving entity no later than 15 days after the receipt of servicing. The Servicing Disclosure Statement is the disclosure that must be issued within three precise business days of the receipt of an application.
A loan officer takes an application on Friday. His business fully operates Monday through Saturday. By when must the loan estimate be issued?
In accordance with TRID, the loan estimate must be issued within three general business days from the date of application. Since this loan originator’s company fully operates on Saturday, Saturday must be considered as one of the three business days. If he took the loan application on Friday, the loan estimate would have to be issued by the close of business the following Tuesday.
A buyer buys a home for $395,000 and puts 25% down. What is the amount of his down payment?
Twenty-five percent of a $395,000 sales price equates to $98,750 (395,000 x 25%).
A borrower has 10% to put down but desperately wishes to avoid paying a monthly PMI premium. Which of the following options would not be a way for her to avoid paying this monthly expense?
Although above-par pricing would provide funds which could be used to supplement cash towards a down payment, it would be highly unlikely that the credit could equate to 10% of any home’s purchase price. Piggyback financing would provide two loans, one at 80% and one to supplement the other 10% needed to avoid paying PMI. Financed MI would entail a one-time PMI premium financed into the loan amount negating the need for a monthly premium, and Lender Paid Mortgage Insurance (LPMI), would result in the lender paying a one-time PMI premium on the borrower’s behalf, typically in exchange for a higher interest rate.
Which of the following is not a part of the mortgage licensing application process?
Checking personal references is not a part of the mortgage licensing process. Each of the other options is.
What does CRA stand for?
CRA stands for Consumer Reporting Agency. The three major CRAs are Equifax, Experian, and Trans Union.
A purchase price is $400,000 and the buyer wishes to apply $30,000 as a down payment. The seller is offering a 3% seller’s concession. What is the value of the seller’s concessions?
Seller’s concessions are based upon the purchase price. Since the purchase price is $400,000 and the seller is offering 3% in concessions, the seller’s concession will amount to $12,000.
If a HOEPA loan is originated for purposes of home improvement:
To prevent homeowners from being cheated by unscrupulous home improvement contractors, proceeds from the refinancing of a HOEPA mortgage to finance home improvements must either be made payable directly to the customer, jointly to the customer and the contractor, or to a third-party escrow
What is the definition of a Mortgage Loan Originator in accordance with the SAFE Act?
Both taking a mortgage application and doing so for profit or gain constitutes the SAFE Act’s definition of a mortgage loan originator.
How long does a mortgage license remain in effect before requiring renewal?
Licenses expire annually on December 31st and must be renewed in order for the loan originator to maintain his or her ability to originate mortgages.
The process by which a fixed-rate loan repays is referred to as:
With each remitted principal and interest payment, more of the payment amount is allocated against the principal balance and less to interest. This process is referred to as amortization.
If a borrower has a mutual fund, how much of the fund’s face value may be used to satisfy reserve requirements?
When used solely to satisfy reserve requirements, 100% of a mutual fund’s face value may be considered.
The National Mortgage Licensing Exam, containing the UST component, consists of how many questions?
The national examination contains 100 multiple choice questions while the UST component adds an additional 25 for a total of 125.
The E-Sign Act:
In order to consummate transactions electronically, consumers must first consent to this method and may not have rescinded their consent on, at, or prior to their transaction’s consummation.
Barry is told that he is lacking reserves and may not be able to close. What might he use to supplement his assets?
Although they don’t have to be liquidated, reserves need to be liquid and accessible in case they’re needed. A whole life insurance policy carrying a cash value may be the perfect solution to Barry’s needs. He couldn’t use a blood-relative’s asset statement but he could accept an actual monetary gift. A term life insurance policy carries no cash value and, in order to use the value of his car as reserves, he would have to sell it, thoroughly document the transaction, and deposit the cash.
If an individual were to have her mortgage license revoked in a particular state she:
If an individual were to lose her license in a particular state, she would have to notify the NMLS&R as well as every other state in which she was licensed. Consequently, she would lose her license in every other state and would be prevented from securing a license in any state going forward.
What would the most ethical response be to a potential mortgage applicant who asks, “How much income do I need to earn in order to qualify for a purchase price of $325,000?”
A loan originator should never guide a customer towards presenting a more approvable application. The loan originator should simply analyze what the customer presents and offer options based on the customer’s true qualifications.
At the conclusion of the application, a loan officer observes her customer becoming noticeably uneasy after reading the URLA discloser containing the FBI’s fraud warning notice. Additionally, the customer hesitates to sign the 1003 for a few moments after reading it. She finally signs it, thanks the loan officer, gets up, and hurries out of the office. What rule, if any, requires the loan officer to take further action?
The FTC Red Flags Rule makes it compulsory for any mortgage professional to act upon experiencing anything or witnessing behavior that might be considered a red flag. At the very least she should have e-mailed her superior to advise him of what she observed and to ask for his advice. If the loan officer failed to act and the applicant was, in fact, committing fraud or some other offense, the loan officer could be held accountable along with the applicant for aiding and abetting the offense.
A veteran may be exempt from paying the funding fee associated with her VA loan if:
The VA will exempt any eligible veteran pursuing VA financing from having to pay the VA funding fee is s/he has a militarily-incurred disability defined by the VA medical system as 10% or greater.
What is one of the SAFE Act’s main objectives?
“The purpose of (the SAFE) … Act is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry is operating without unfair, deceptive, and fraudulent practices on the part of mortgage loan originators.”
Which of the following loans would require MIP?
All FHA loans, regardless of their initial LTV, require MIP. A conventional mortgage at an 85% LTV would require PMI not MIP. USDA and VA loans do not utilize MIP. Only FHA loans utilize MIP.
