Practice test qs and answers Flashcards
The SAFE Act:
Establishes minimum standards for licensing and registering of mortgage loan originators
-The SAFE Act established all the licensing requirements for MLOs.
Borrowers come to you for a mortgage loan. Which of the following would be appropriate to tell them about a fixed-rate mortgage?
The interest rate never changes
-A fixed-rate mortgage has an interest rate that never changes.
Through the life of a loan, the servicer is allowed to cushion a borrower’s escrow account. What is true about that cushion?
It can’t exceed 1/6 of the estimated total annual payment from the account
-Per RESPA, throughout the life of the escrow account, the servicer may charge the borrower a monthly sum equal to 1/12 of the total annual escrow payments for taxes and insurance that the servicer reasonably anticipates paying from the account. Also, the servicer can add an amount to maintain a cushion of no greater than 1/6 of the estimated total annual payment from the account
Which of the following is responsible for the accurate disbursements of all funds due to and from all parties in a mortgage transaction?
Closing attorney, settlement or escrow agent
-Closing Attorney’s, Settlement Agents or Escrow Agents are all terms for the person who is responsible for the closing of the loan. This includes the signing of all documents and the disbursing of all funds.
HMDA reports are due to the regulator by which of the following dates?
March 1st
Which of the following is not included in the debt-to-income qualifying ratio?
Rent on current housing
-Only housing payments, installment payments and monthly revolving payments are considered in debt-to-income ratios. The current rent would not be considered because it is being replaced with the new housing payment.
When the borrowers pay a fee to get a lower interest rate, but the interest rate will not remain at that level for the life of the loan, but over time will raise to the quoted fixed rate. What is this called?
A buy down
-The most common type of buydown is a temporary 2-1 buydown. A temporary 2-1 buydown means the first year of the loan; the borrower will be making payments based on an amortization schedule computed using a rate which is two percent (2%) less than the rate stated in the Note. In the second year of the loan, the borrower will be making payments based on an amortization schedule computed using a rate which is one percent (1%) less than the rate stated in the Note, then the third year the borrower makes the payments on the full Note Rate.
What are Fannie Mae and Freddie Mac also known as?
Gov’t sponsored enterprises
-Fannie Mae and Freddie Mac are both government sponsored entities or GSEs.
Assuming there has been no fraud or adverse action, a borrower is entitled to a free copy of his/her credit report:
Every year
-All consumers have the right to have one (1) free credit report each year (they can get more if they pay for it).
What federal legislation prohibits the exchange of information between consumer creditors unless certain disclosures are made to the consumer?
Gramm-leach-bliley act
-GLBA protects NPI and if a financial institution shares (or sells) NPI with a third party for uses other than the original intention, the financial institution is required to provide a detailed privacy policy disclosure to the application with the option to opt-out.
An MLO must be licensed if:
He/She counseled a borrower about loan terms and interest rates.
-All mortgage loan originators must be licensed (unless they are exempt). If a person is taking applications or talking about terms and rates then they are acting as an MLO and must be licensed.
Which of the following participants in a mortgage loan transaction would be most likely to overvalue a property?
Appraiser
-The appraiser is the one responsible for determining the value of the property on a real estate transaction
A lender refusing to report timely payments to the credit reporting agencies is an example of:
Predatory lending
-This is an example of predatory lending. Some creditors do not report timely payments to the credit reporting agencies. A borrower’s payment history will not reflect correctly in this situation. Predatory lenders will not report to try to maintain the borrower for them
The only loan considered a traditional loan in America today is:
30 year fixed rate
Which attribute is NOT considered illegal discrimination in granting credit under the Equal Credit Opportunity Act?
Income
-The protected classes under ECOA do not include income. They do include color, race and sex.
Trevor provided all six pieces of an application to his MLO on Monday, by what day does the MLO have to provide the LE?
Thursday
-Per TRID, the lender is required to provide the LE within three (3) business days following the receipt of the borrower’s loan application.
What is the loan-to-value ratio if the loan amount is $93,750, the appraised value is $125,000 and the sales price is $130,000?
75%
-Loan to Value is the Loan amount divided by the lessor of the appraised value or purchase price. In this case, $93,750 divided by $125,000.
When money is not paid out and withheld from the funding at a loan closing, these monies are usually held as:
An Escrow
-An escrow account is where all money is held until it is dispersed to the third-party service provider, the seller or the borrower.
With an ARM, what happens to a borrower’s payments if the index increases?
Payments go up
-To determine the borrower’s payments at adjustment, the lender adds the index and the margin. If the index goes up, then the interest rate will go up.
What is the funding fee for an IRRRL?
0.50% for everyone
What occurs when an QM loan is presumed to comply with ATR requirements?
A safe harbor
-A QM loan that is not higher-priced has a safe harbor. If the loan has a safe harbor, then they are conclusively presumed to comply with the ATR requirements. Under a safe harbor, if a court finds that a mortgage a lender originated was a QM, then that finding conclusively establishes that the lender complied with the ATR requirements when they originated the mortgage.
RESPA requires disclosure to the consumer of:
Any affiliated business arrangement (AfBA).
-The AfBA disclosure must be delivered to the borrower at the time of the referral. An example of an AfBA is a mortgage lender’s CEO has an ownership interest in a title insurance company, if the mortgage lender’s MLOs want to refer their borrowers to use that title insurance company then the relationship must be disclosed between the CEO of the mortgage lender and the title insurance company at the time the MLO refers them.
A lender has a minimum loan amount of $150,000. The lender serves a large area including a minority neighborhood. The minority neighborhood’s home value is usually $125,000 or less. This policy is an example of;
Disparate Impact
-Disparate Impact occurs when a facially neutral policy or practice is applied equally to all applicants, but the policy or practice disproportionately excludes or burdens certain groups of people on a prohibited basis.
Borrower(s) may decide to disclose income from child support or alimony. What federal law states that a lender cannot refuse to consider alimony or child support as income?
Equal credit opportunity act
-ECOA states that if the borrower discloses and wants to use child support or alimony as income than the lender cannot refuse to consider that income.