Practice Questions Flashcards
What law pertains to why a mortgage loan originator would need to be licensed?
SAFE Act
Where would an NMLS number (unique identifier) not need to be displayed?
Inter-office communications and company signage
As part of minimum standards to verify your identity, what is something a mortgage loan originator would be required to do?
Be fingerprinted
What is the purpose of finger printing?
To ensure that the individual has not had a felony in the past 7 years, or a financial related felony ever
Adrian Beltre was convicted of felony assault 8 years ago, Michael Young was convicted of fraud 35 years ago. Which individual would be able to hold an NMLS license?
Adrian Beltre. Tolerance level for non-financial felonies is 7 years, where the tolerance for financial related felonies is indefinite
State licensed originators work for ____ institutions
Non-depository
Registered Loan originators work for:
Banks, credit unions, etc. They are exempt from testing
What are the step for NMLS licensing?
- 20 hours of pre licensing education
- Pass the SAFE Test
- Fingerprinting for background information
- 8 hours of continued education
What is the total number of hours for pre-licensing education?
20. 3 hours of federal laws 3 hours of ethics 2 hours of non traditional 12 hours of electives
What is something the state regulatory may never do?
Waive the mandatory 20 hours of pre licensed education
What is the hour breakdown of the 8 hours of continued education?
3 hours of federal laws
2 hours of ethics
2 hours non traditional
1 elective hour
If a MLO fails the SAFE test, how long will they need to wait before taking it again?
30 calendar days
An MLO has just failed their test for the third time, how long must they wait before testing again?
6 months;180 calendar days
Who would not be exempt from holding a state license?
A processor or underwriter that is NOT a W2ed employee
Independent contractor
What is the purpose of RESPA?
To allow the borrower to shop for settlement services, ensure accurate disclosure , and prevent against unearned fees
Who is in charge of RESPA?
CFPB
What law was the CFPB created under?
Dodd Frank
What by definition is a transaction that would be covered by RESPA?
Residential transactions with 1-4 units for permanent financing
Which of the following transactions would not be applicable to RESPA?
a. An apartment building
b. A duplex occupied by the owner and a renter
c. A single family home
d. a condominium occupied by the owner
a.
What loan is exempt from RESPA?
A construction loan.
This is an example of temporary financing
The loan estimate is required to be disclosed after what 6 pieces of information are collected?
A- Address L- Loan amount I- Income for qualification E- Estimated home value N- Name of Applicant S- Social Security
When is the LE due to the customer?
Within 3 business days of application
starts the day after application
What is the only fee a customer could be charged prior to receiving an LE
The credit report fee
Whose responsibility is it to ensure the borrower receives the LE on time?
The lender
Based on the date that the loan estimate is issued, how long would a consumer have to wait before consummation of the loan?
7 business days
A customers loan estimate is generated on Tuesday, what is the earliest the loan can be consummated?
Wednesday of the following week
When the LE is disclosed, how long are the rates valid for?
10 business days
What is needed before the applicant can be financial committed to the loan?
Intent to proceed
How long must the intent to proceed be kept?
3 years
Once intent to proceed has been given, what is the only lender fee that the customer could incur?
Application fee
If a change of circumstance occurs, how long does the lender have to re disclose the LE
3 business days of the discovery of the change of circumstance
Once a revised loan estimate has been given to the customer, how long must they wait before signing
4 business days
What type of charge has 0% tolerance?
Any lender fee or fee required by the lender
What type of fee has a 10% tolerance rate?
Any fee that the applicant can shop for but instead uses a lender suggested settlement service
What type of fee has no tolerance?
Any fee that the borrower can shop for
escrow, prepaid interest
Which of the following would not be an accepted change of circumstance?
a. Act of God
b. New information
c. Changes in information on original LE
d. The consumer decides to change mortgage companies
d.
In a purchase transaction, the Real Estate Settlement Procedures Act requires what document be disclosed within 3 business days?
The Special Information booklet- Your Home Loan Tool Kit: a Step by Step Guide
When is the Affiliated Business Arrangement due?
At the time of referral
When is a ABA necessary?
When a lender is suggesting a service that they own 1% or more stake in
The Closing disclosure is due how many days before closing?
3 business days
Who must receive a closing disclosure?
All parties with ownership rights of the property
What is the purpose of an aggregate adjustment?
To prevent escrow overages
How much can an individual be charged for a preparation fee of any federal document?
zero
The servicing transfer notice is due how many days before transfer?
15 days
The new servicing company must notify the customer within how many days of taking over the loan?
15 days
No late fees can be incurred for how many days following transfer of a loan?
60 days
After transfer of a loan to the servicing company, they have _______ days to complete the initial escrow analysis
45
What would happen to an overage of $40 in escrow
It will remain in escrow
What would happen to an escrow overage of $51?
It would be refunded to the customer within 30 days
If an escrow shortage occurs, what may the borrower do?
Spread it over 12 months in order to catch up
What is escrowed?
taxes, flood insurance, mortgage insurance, home owner’s insurance
What fee is never escrowed?
HOA fee
fee splitting is only allowed under RESPA if:
Both parties render a service
If a processor charges a $500 fee, but the loan originator charges the borrower $800, they are guilty of what
A markup or unilateral increase
If a customer does not have HOI, the servicer will disclose ______ notices and give the borrower _____ days to prove that they have insurance
2;45
If a borrower is wrongfully given force placed insurance, the lender has how many days to refund any overlapping fees?
15 days
What is the maximum cushion that can be placed on an escrow account?
2 months or 1/6 of total annual disbursements
when would live contact be required when a customer has their loan with a servicing company and are delinquent on payments?
Must be made by the 36th day
How long does a servicing company have to provide written contact to a borrower delinquent on payments?
No later than the 45th day
A customer has an ARM that is soon to be subject of adjustment. how long does the servicing company have to send the customer the rate change disclosure?
No later than 60 days before adjustment, but no sooner than 120 to adjustment
this allows customer time to refinance
Which transaction would not apply to TILA
An investment property
How is the cost of credit displayed as a dollar amount?
Finance charges
P- Processing Fee O- Origination Fee D- Discount Points I- Interest U- underwriting M- Mortgage Broker fee M- MIP
How is the cost of credit displayed as a percentage?
APR
If APR changes by more than ______ a revised LE must be sent to the customer
.125% or 1/8%
What would always be a finance charge?
lender fees
What is never a finance charge?
escrow
Along with an LE and a CD what is the customer always going to receive with an ARM
CHARM booklet and a loan program disclosure for ever ARM they show interest in
What does the borrower receive when applying for a HELOC
“What you should know when your home is on the line”
In addition to the CFPB who would also help regulate for advertising under the Truth in Lending Act
FTC- Federal Trade commission
If only APR is disclosed in an advertisement, what other information is needed?
Nothing
In order to stay in compliance with the Truth in Lending Act, how long would a lender need to keep record of an advertisement?
36 Months
Which of the following transactions allows rescission rights?
a. refinance of a investment property
b. purchase transaction
c. purchase of land
d. a refinance transaction
d. refinance transaction
only applies to primary residence
A husband and wife show up to closing. The husband receives 2 copies of the rescission rights while the wife receives 1 copy. How long are the rescission rights now?
3 years
If the borrower exercises rescission rights, how long does the lender have to place them back in the prior financial situation before the loan?
20 business days
What would be a situation where the customer could waive their right to rescission
Bona fide financial emergency
When does the rescission period begin?
the day after closing
The loan closes on Tuesday, when would the loan be scheduled to fund?
Saturday
the day after the rescission period ends
What is considered a business day when disclosing the initial LE?
Any day that the financial institution is open
What is considered a business day in all situations except disclosure of the initial LE?
Any day except Sunday and public holidays
What 6 elements constitute an active application?
A- Address L- Loan Amount I- Income Used E- Estimated home value N- Name of applicants S- Social security Number
How long does the lender have to refund any overages between the LE and CD to stay in compliance with TRID
within 60 days of consummation
How long must record of the LE be kept?
3 years
How long must record of the CD be kept?
5 Years
What is the only way a MLO can be paid?
basis points on the volume of loans generated
What is the definition of steering?
Pushing an applicant towards a program for the personal gain of the MLO, not the customer
How could a loan originator help a loan applicant who is struggling to bring all the funds to closing?
May suggest a higher rate than par and use borrower credit to offset closing costs
What is considered a non traditional mortgage?
anything other than a 30 year fixed rate
can be FHA, VA, Conventional, etc. Just has to be 30 years with a fixed rate
What 2 loan options are exempt from the ATR rule under Dodd Frank?
HELOC and reverse mortgage
What entity would be responsible for setting guidelines and managing conduct for appraisers?
Uniform Standards of Professional Appraisal Practice
Which of the following would be allowed when conversing with an appraiser?
a. misrepresenting or mischaracterizing the appraised value of security collateral
b. Seeking to influence the appraisal or encouraging a target value
c. withholding or threatening to withhold payment for an appraisal contingent on value or loan settlement
d. asking an appraiser why that specific property appraised for the amount that it did
d. asking an appraiser why that specific property appraised for the amount that it did
How does a qualified mortgage benefit a lender?
Gives a safe harbor that upon sale make the loan non transferable back to the lender
How long can a prepayment penalty be place on a loan?
3 years
in the first 2 years they cannot be charged more than 2% and in the last year they cannot be charged more than 1%
How long does the customer have to manage an escrow account in an HPML
5 years
What section is HOEPA in TILA
Section 32
What transaction would be considered a High cost loan for a first lien if the APOR today is 3%?
Any loan above 9.5%
APOR+ trigger of 6.5% for a first lien
What is something an individual applying for an high cost loan would have to do?
HUD approved counseling with 10 local counselors
To be a qualified mortgage, points and fees cannot exceed what percentage of the loan amount?
3%
ex. $2,500 in fees and points on a $100,000 loan
If a customer is doing a second mortgage it would be considered a high cost mortgage loan if the APR exceeds more than what percentage over the APOR?
8.5% is the trigger for subordinate liens
For High Cost Loans, fees and points exceed:
5% of the loan amount
What are the three scenarios where HUD counseling is required?
High cost loans, reverse mortgages, and loan that results in negative amortization
To be considered a Higher Priced Mortgage loan (HPML), APR must exceed APOR by what percentage for first liens?
1.5% above APOR
To be considered a Higher Priced Mortgage loan (HPML), APR must exceed APOR by what percentage for subordinate liens?
3.5% above APOR
To be considered a Higher Priced Mortgage loan (HPML), APR must exceed APOR by what percentage for first lien jumbo loans?
2.5% above APOR
To be considered a higher priced mortgage loan, points and fees must be:
Above 3% but below 5% of the loan amount
If a loan is given to a customer based on the amount of equity they have in their home, which law does this violate?
HOEPA
What is something a borrower cannot do when refinancing a HOEPA (high cost) loan?
go from one high cost loan to another high cost loan within 12 months without establishing a net tangible benefit to the borrower
What is a reason to allow a customer to go from one HOEPA loan to another HOEPA loan?
if their payment is decreasing
net tangible benefit
If the APR on a first lien is higher than _____ above the APOR it is considered high cost
6.5%
What law directly addresses private mortgage insurance?
HPA- the Homeowners protection act
When can a customer request for PMI to be removed from a mortgage?
at 80% LTV or 20% equity
When would a servicing company be required to remove PMI?
at 78%LTV, 22% equity
The removal of PMI is based on…
The original transaction
How is the removal of PMI beneficial to the customer?
It reduces the down payment requirement
What transactions apply to ECOA?
All credit transactions
What is required to be asked on an application for HMDA to police for ECOA?
Race, sex, ethnicity
Used for government monitoring requirements
ECOA prohibits discrimination based on:
Age, sex, ethnicity, color, marital status, religion, national origin
What are the three acceptable reasons to deny an application?
- Insufficient credit
- Excessive obligations
- Insufficient collateral
The NOAT has to be sent within how many days of application?
30
What essentially serves as a rejection letter?
Adverse action
The notice of incomplete application must be sent how many days from application?
30
Under ECOA, when does a customer need to receive the final appraisal report
at least 3 days prior to settlement
When is the customer required to receive the Notice of right to receive the appraisal?
within 3 days of application
Who is in charge of the Fair Housing Act?
HUD
When is the Loan Application Report due?
Information must be sent by March 1st, no later than March 31st
What loans are not covered under HMDA?
Personal property (A travel trailer)
The property must be affixed to the land
Who does the FCRA police?
the CRA’s
FACTA specifically addresses what?
Identity theft
How long would a fraud report remain on a customers credit report under FACTA?
As long as the customer wishes
The Red Flag rule is part of FACTA, but is overseen by who?
The FTC
What methods of disposal are permitted under the FTC disposal rule?
Burning, shredding, pulverizing. should also properly discard any electronic information
The USA PATRIOT ACT addresses what?
Money laundering
Who is in charge of the USA PATRIOT Act
FinCEN- Financial Crimes Enforcement Network
If suspicious activity is suspected, what should the MLO do under the USA PATRIOT Act
Complete a Suspicious Activity Report (SAR)
How many days within speculation of suspicious activity must a SAR be completed?
30 days
How much currency exchange would require a Cash Transaction Report?
$10,000
A foreign account under the US PATRIOT Act is known as what?
A correspondent account
What specifically does GLB cover?
Protection of Non-public personal information
The MARS Rule prevents what?
charging of upfront fees for loan modification purposes
What is a product of the Secondary Market?
A Mortgage Backed Security (MBS)
The process of pooling loans and selling them off as a securitized asset is know as what?
Securitization
If a customer is doing a conventional loan, what is the max housing ratio allowed?
28%
If a customer is doing a conventional loan, what is the Total Debt Ratio allowed?
36%
If a customer puts 10% down on a conventional loan, what are sellers concessions limited to?
6%
If a customer puts less than 10% down on a conventional loan, what are sellers concessions limited to?
3%
If a customer puts more than 25% down on a conventional loan, what are sellers concessions limited to?
Will allow up to 9%
What are sellers concessions based on?
The sales price
Who supervises FNMA and FHLMC and sets their loan limits?
The FHFA- Federal Housing Finance Agency
What is the automated underwriting system for FNMA?
Desktop Underwriter
What is the automated underwriting system for FHLMC?
Loan Product Advisor
What is the automated origination system for FNMA
Desktop Originator
A loan taking an inferior lien on a title is known as a what?
a second mortgage
What is a loan offered to an applicant with below a 580 credit score?
a subprime loan
What loan product would give the customer the option to pick which payment they want to make on a monthly basis and typically result in negative amortization?
An Option ARM
Who is in charge of the FHA?
HUD
In order to obtain the minimum down payment for an FHA loan, what credit score is needed?
580
If a customer is putting less than 5% down on an FHA loan, seller concessions are capped at:
3%
If a customer is putting 5% down or more on an FHA loan, seller concessions are capped at:
6%
What 2 forms of insurance are charged on all FHA loans?
UFMIP and monthly MIP
If a customer is putting less than 10% down on an FHA loan, how long does monthly MIP last?
the life of the loan
If a customer is putting 10% or more down on an FHA loan, how long does monthly MIP last?
11 years
who sets loan limits for FHA loans?
HUD
What is the primary fixed rate program when someone is purchasing or re financing an FHA loan?
203(b)
If a customer is obtaining a loan in order to rehab (remodel) a property, what would be the FHA product code that the customer would receive?
203(k)
What is the max entitlement allowed on the COE on a VA loan?
$36,000 or 25% of the loan amount
Do VA loans carry mortgage insurance?
no
A customer is doing a VA loan for the first time. What is the funding fee?
2.3%
What is the max DTI for a customer obtaining a VA loan?
41%
What is the max housing ratio for a customer obtaining a FHA loan?
31%
What is the max DTI for a customer obtaining a FHA loan?
43%
A customer is currently on a VA loan and rates have reduced. What type of mortgage loan product may a MLO recommend to the borrower?
an IRRRl- Interest Rate Reduction Refinance Loan
VA version of streamline
A customer is currently on a VA loan and rates have reduced. What type of mortgage loan product may a MLO recommend to the borrower?
an IRRRl- Interest Rate Reduction Refinance Loan
(VA version of streamline)
What is the name of the value when someone is obtaining a VA appraisal?
Certificate of Reasonable Value
What type of loan would not be covered under RESPA?
A construction loan.
This is temporary financing
How many extra payments woy someone pay if they are on a bi weekly loan program?
1 extra full payment per year
reduces a 30 year loan to 24.5 years
Second mortgages are:
Conventional but non conforming
In order to manipulate lien priority, what must a lender be able to do to assure they are in the proper lien position
a subordination agreement
What clause could make a balloon mortgage less risky to an applicant?
A conditional refinance provision
Due to the absence of a power of sale clause, what type of foreclosure transaction would ensue?
A judicial foreclosure
What is a temporary reduction or suspension of payments for an agreed upon period?
Forbearance
Because of the presence of the power of sale clause, what type of foreclosure transaction would take place?
Non-judicial foreclosure
A customer has not made payments on time and are now delinquent. At what point of delinquency is a servicing company allowed to recapture the collateral?
120 days
What does the original lender receive as compensation for selling or transferring the rights to servicing on a loan?
a SRP or Service Release Premium
What type of transaction occurs when one company uses a warehouse line of credit to originate, fund, and close a loan and then assign it to another entity?
Table funding
What is the loan application called?
the 1003, or the URLA- Uniform Residential Loan Application
If a customer is receiving rental income, where would this information be shown on the 1003?
Income and Housing
If an applicant is asked of their marital status, and report they are separated, what else would be needed?
the court documented separation agreement
Under what section of the 1003 is the customer asked to disclose information?
Declarations
Under what section of the 1003 is the applicant required to list the amount they are receiving or paying in child support or alimony?
assets and liabilities
Where is the MLO’s unique identifier listed on the 1003?
Information for Government monitoring
What is never listed under liabilities on the 1003?
The opening date or opening amount of the loan
The transmittal summary is referred to as the:
1008
Diligently matching customers with loan products to meet their financial needs is known as what?
Loan suitability
Which of the following is not a suitable asset as a source of down payment for someone applying for a loan?
a. unsecured cash
b. checking or savings act
c. whole life insurance
d stocks or bonds
a.
What is something the lender requires to be signed in order to obtain tax transcripts from the IRS
4506-T
The tax return documents are also known as what?
the 1040
If a customer is receiving $1,000 a month in social security, how much can be used as a qualifying income?
$1,250
it is ‘grossed up’ by 25%
If a customer is receiving $1,000 a month in social security, how much can be used as a qualifying income?
$1,250
it is ‘grossed up’ by 25%
If a customer is receiving $1,000 a month in rent, how much can be used as a qualifying income?
$750
75% of rental income is used to compensate for vacancy
What document would show AKA (also known as) information?
The Credit Report
What are the 3 credit bureaus?
Experian, TransUnion, Equifax
An opinion of value is referred to as a(n)
appraisal
Who sets the guidelines and manages the conduct of appraisers?
The USPAP or Uniforms Standards Professional Appraisal Practice
What is the most common and comprehensive appraisal form?
the 1004 or URAR
what is the certificate of completion for appraisals?
form 442
What appraising method would be used to determine the value of the collateral used in a transaction?
Sales comparison or market approach
What appraising practice would be used when trying to establish the replacement cost of a dwelling for insurance purposes?
cost approach
what appraisal method would be used when someone is applying for an investment property?
Income Approach
When looking at the sales comparison approach on an appraisal, what is the maximum line adjustment allowed between the subject property and the comparable sale?
10%
When evaluating the sales comparison approach to appraising, what is he maximum net adjustment that can used between the subject property and the comparable sale?
15%
When evaluating the sales comparison approach to appraising, what is he maximum gross adjustment that can used between the subject property and the comparable sale?
25%
What conveys something as fixed property?
If it is fixed to the land
HMDA does not apply to personal property
What is something that could prevent a title from transferring free and clear?
An unpaid encumbrance
What is something that would allow an individual onto a property without the consent of the homeowner?
an easement
Why is title insurance not escrowed?
It is a one time fee
A chain of title looks for what?
sequence of ownership
What protects the owner against liens that are not their responsibility?
owners title insurance
In a purchase transaction, transferring ownership right from the seller to the buyer is known as:
conveyance of title
What would be listed in the original deed of trust agreement relaying to the customer that the lien against their home will be removed once the mortgage is paid in full?
Defeasance clause
What is the act of transferring the title to a homeowner after the lien is paid in full?
Re-conveyance
What is the security instrument in a lending transaction?
Mortgage or deed of trust
under the Power of attorney document, who is allowed to sign for a borrower not able to be present?
The attorney in fact or a court appointed guardian
How much hazard insurance is required on a property?
enough to cover the loan amount or the replacement cost of the home, the lower of the two
How long must HOI be kept?
until the lien is paid off
How is the lender listed on a homeowners insurance policy?
as the loss payee
After closing on a loan, how long does the borrower have to movie into the property?
60 days
What is never listed on the promissory note?
the servicer’s name
a MLO gives an applicant a loan without verifying ability to repay. This is a violation of what law?
HOEPA
Who is responsible for regulating the SAFE Act
The CFPB
How often can a state regulator or the CFPB investigate under SAFE?
at any time
what determines the amount held in a surety bond under SAFE?
the total amount of loan originations
When does a surety bond need to be replenished?
Immediately upon action is filed against it
A MLO takes a loan application on December 27th, but the loan does not fund until January 7th and they have not yet renewed their license. Can the MLO still be compensated?
No. Application must be taken and funded within the same calendar year to count in the act of non renewal of a license
If a registered loan originator wants to become a state licensed originator, they can be granted a temporary license of how many days?
120
In order for someone to become a temporary MLO to become state licensed, how long must have they needed to serve as a registered loan originator
1 year
what is the max penalty for violated the SAFE act?
$25,000 per violation
