Questions

Question 1

At what credit score does FHA require a minimum 10% down payment?

Answer 1

If the credit score is lower than 580

Question 2

What does the first number in 7/1 ARM mortgage?

Answer 2

How long the rate will stay locked in for

Question 3

What does FCRA stand for?

Answer 3

Fair Credit Reporting Act (FCRA)

Question 4

What does FCRA stand for?

Answer 4

Fair Credit Reporting Act (FCRA)

Question 5

What is FACTA aim to do?

Answer 5

FACTA resulted from an amendment to FCRA to address growing trends in identity theft. Among other considerations, FACTA requires all financial institutions to implement and maintain an identity theft prevention program.

Question 6

What does TRID stand for?

Answer 6

TRID is an acronym for the TILA-RESPA Integrated Disclosure rule. TRID became law as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Question 7

TRID Purpose

Answer 7

TRID, or TILA-RESPA Information Disclosure, informs consumers applying for a mortgage and defines compliance rules for lenders. It’s a consolidation of TILA (Truth in Lending) and RESPA (Real Estate Settlement Procedures Act) disclosures.

Question 8

What does TILA stand for?

Answer 8

TILA (Truth in Lending)

Question 9

RESPA?

Answer 9

(Real Estate Settlement Procedures Act) disclosures. The Act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process.

Question 10

business is fully operational on Saturday, for purposes of the business that it conducts, Saturday is considered to be:

Answer 10

General business day

Question 11

What does a GFE stand for?

Answer 11

Good faith estimate

Question 12

Under TRID what was combined to create the LE?

Answer 12

Under TRID, the Initial TIL and the GFE were combined to create the Loan Estimate

Question 13

What does the Home Mortgage Disclosure Act do?

Answer 13

Home Mortgage Disclosure Act is a United States federal law that requires certain financial institutions to provide mortgage data to the public. Congress enacted HMDA

Question 14

SAFE Act prohibits an individual from obtaining a mortgage loan originator’s license if:

Answer 14

The SAFE Act prohibits an individual from obtaining a mortgage loan originator’s license if he or she has had any felony conviction within the previous seven years, has had a felony conviction at any time involving fraud, money laundering, dishonesty, breach of trust or moral turpitude, or has had a license revoked by any other state or jurisdiction. Please note that some states may apply stricter standards.

Question 15

MAPs Rule serves to promote?

Answer 15

Similar to TILA, the MAPs Rule serves to promote authenticity and accuracy in advertising. Some of the MAPs Rule’s prohibitions surround using the word “fixed” when advertising an adjustable rate mortgage, misrepresenting or implying government endorsement when either the lender is not an endorsed provider or the loan is not a government loan, using an individual’s current lender’s name in a solicitation without indicating that the source of the advertisement is not the referenced lender, and making misleading claims surrounding debt elimination.

Question 16

(MAP) Rule Definition

Answer 16

Mortgage Acts and Practices – Advertising (MAP) rules, effective as of August 19, 2011.

Question 17

URLA stands for:

Answer 17

The Uniform Residential Loan Application, also referred to as FNMA form 1003, FHLMC form 65, and the URLA, is the credit application used for taking residential loan applications.

Question 18

Telemarketing Sales Rule

Answer 18

The Telemarketing Sales Rule requires the telephone numbers of all potential outbound sales call recipients to be scrubbed through the Do Not Call list every 31 days. Exceptions to this requirement consist of current customers, individuals who are not current customers but who were customers within the previous 18 months, and individuals who were never customers but who initiated an inquiry on their own within the previous 90 days. Furthermore, all outbound sales calls may only be placed between 8:00 a.m. – 9:00 p.m. of the call recipient’s time.

Question 19

FCRA stands for

Answer 19

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.

Question 20

FCRA stands for

Answer 20

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.

Question 21

ECOA stands for?

Answer 21

Equal Credit Opportunity Act (ECOA) is a law created by the U.S. government with the aim of giving all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders.

Question 22

Gramm-Leach-Bliley Act pertains to?

Answer 22

Gramm-Leach-Bliley Act (GLB Act or GLBA), also known as the Financial Modernization Act of 1999, is a federal law enacted in the United States to control the ways that financial institutions deal with the private information of individuals.

The Gramm-Leach-Bliley Act was implemented to protect the sanctity of individuals’ non-public, personal information. As such, it requires all financial institutions to protect customers’ and consumers’ information by implementing safeguards contained in the act’s Safeguards Rule. It also requires companies to afford their customers “a reasonable opportunity” to opt out of information sharing. Affording applicants access to credit applications is the role of the Equal Credit Opportunity Act.

Question 23

licensed MLO’s name and unique identifier must appear on?

Answer 23

licensed MLO’s name and unique identifier must appear on the obligatory and security instruments along with the credit application and disclosures required by CFR § 1026.19 (e) and (f).

Question 24

Overtime, bonus, or commission income equal to or greater than what percentage of one’s base salary requires the review of the most recent two years’ worth of federal tax returns?

Answer 24

If an individual earns overtime, bonus, or commission income equal to or greater than 25% of his or her annual base salary, two years’ most recent federal income tax returns must be reviewed to substantiate that income.

Question 25

Compensating factors refer to

Answer 25

underwriting considerations that exceed standard underwriting parameters. The more compensating factors a loan application has, the easier it may be to overlook a weaker area. For example, although a representative credit score may be lower than ideal, if the applicant has low DTI ratios, a sizable down payment, and significant reserves, the underwriter might be able to overlook the lower credit score.

Question 26

Chunking?

Answer 26

Chunking occurs when a third party convinces an uninformed borrower to invest in a property (or properties), with no money down and with the third party acting as the borrower’s agent. … Without the borrower’s knowledge, the third party submits loan applications to multiple financial institutions for various properties.

Question 27

Disparate Impact happens when?

Answer 27

A disparate impact occurs when a lender applies a racially (or otherwise) neutral policy or practice Page 3 Federal Fair Lending Regulations and Statutes: Overview equally to all credit applicants but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis.

Question 28

What loans does it make a difference as to who appears as the primary borrower

Answer 28

With the exception of relocation and VA loans, both the borrower and co-borrower are analyzed equally with regards to creditworthiness. Therefore, unless it is a relocation or a VA loan, it makes no difference as to who appears as the primary borrower and who appears as the additional borrower. In a relocation loan scenario, the person whose job is relocating them should appear as the primary borrower. In a VA loan scenario, the borrower with the COE should be considered the primary borrower.

Question 29

Is an applicant’s race allowed to be asked under ECOA?

Answer 29

An applicant’s race is the best possible answer out of the provided choices. An applicant’s race may never be a part of any decision-making process and, aside from asking the questions through HMDA allowances, race may never be inquired about or discussed. Although a mortgage professional is prohibited from probing into the specifics of an applicant’s marital status, the applicant may be asked whether s/he is married, separated, or unmarried. Although age may never be used as a factor in determining credit worthiness, the applicant may be asked for his or her date of birth to determine that s/he is of the age of majority and legally able to apply. The application’s declaration section asks the applicant to attest to whether or not s/he is a U.S. citizen or a Permanent Resident Alien. If s/he is neither, additional documentation may be required to demonstrate the applicant’s legal ability to reside or be in the U.S.

Question 30

FATCA

Answer 30

Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore.

Question 31

TRID applies to all types of mortgage financing with the exception of ?

Answer 31

home equity lines of credit, reverse mortgages, mortgages not secured by real property, loans made by persons not considered creditors, certain no-interest second mortgage loans used for down-payment assistance, property rehabilitation, energy efficiency, and foreclosure avoidance.

Question 32

TILA - Truth in Lending Act what does it do?

Answer 32

The Truth in Lending Act (TILA) protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans.

Question 33

The document establishing separation from the U.S. military is?

Answer 33

The document establishing separation from the U.S. military is the DD214.

Question 34

VOE stands for?

Answer 34

(verification of employment)

Question 35

VOD stands for? What does it do?

Answer 35

VOD (verification of deposit) - VOD (verification of deposit) may be requested of the financial institution holding the applicant’s assets in order to substantiate the value of the disclosed asset accounts as well as the account activity.

Question 36

Is an offer a violation under RESPA?

Answer 36

Even though no money had changed hands, the offer itself constituted a RESPA violation.

Question 37

URAR stand for?

Answer 37

Uniform Residential Appraisal Report

Question 38

What is the name/number of the form for an appraisal - for residential financing?

Answer 38

The Fannie Mae form 1004 (Freddie Mac form 70) is the primary appraisal type used for residential financing. It is also referred to as the Uniform Residential Appraisal Report (URAR).

Question 39

Purpose of the Patriot Act?

Answer 39

The purpose of the USA Patriot Act is to deter and punish terrorist acts in the United States and around the world.

Question 40

NINA?

Answer 40

A NINA (no income/no assets) mortgage describes a loan extended to a borrower who may have little ability to repay the loan.

Question 41

SECA?

Answer 41

The Self-Employed Contributions Act (SECA) tax is a levy from the U.S. government on those who work for themselves, rather than for an outside company. It requires self-employed workers to contribute tax equivalent to both the employer and employee portions of the Federal Insurance Contributions Act (FICA) tax, which funds Social Security and Medicare.

Question 42

Alt-A loan refers to what?

Answer 42

Alt-A loans often refer to loans with minimal-to-no documentation. The NINA is a no-income, no-asset Alt-A loan.

Question 43

Section 35 covers what?

Answer 43

Higher Priced Mortgage Loans

Question 44

What regulation is Section 35

Answer 44

Regulation Z Section 35 defines an HPML as a loan secured by a primary residence where the APR exceeds Freddie Mac’s “average prime offer rate” (APOR) for a comparable transaction as of the date the interest rate is set by the following:

Conforming and High Balance Loan Amounts

• 1.5% or more for a loan secured by a first lien, or
• 3.5% or more for a loan secured by a subordinate lien.

Question 45

What is Tila section 32?

Answer 45

The Home Ownership and Equity Protection Act (HOEPA) of 1994 defines high-cost mortgages. These also are known as Section 32 mortgages because Section 32 of Regulation Z of the federal Truth in Lending Act implements the law. It covers certain mortgage transactions that involve the borrower’s primary residence.

Section 32 loans have been so-named since 1994, when the Home Ownership and Equity Protection Act (HOEPA) was passed to curb abusive lending practices that included high fees and high interest rates. The resulting high-cost loans are also called ​HOEPA loans​ or ​Section 32​ loans. It’s a misnomer to refer to a mortgage as an HOEPA Section 35 loan, because these loans are correctly called HOEPA Section 32 loans.

Question 46

Section 8 of RESPA prohibits what?

Answer 46

Section 8 of RESPA prohibits a person from giving or accepting any thing of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed.

Question 47

Certificate of Eligibility (COE) entitlement amount?

Answer 47

All eligible VA borrowers must demonstrate their eligibility by producing a Certificate of Eligibility (COE). To be considered for full entitlement, the COE must reflect an entitlement amount of $36,000.

Question 48

Seller’s concessions Max if down payment is less than 10 on Conventional loans?

Answer 48

Conventional financing guidelines currently limit seller’s concessions to 3% of the purchase price when the borrower’s down payment is less than 10%,

Question 49

Seller’s concessions Max if down payment is equal to or greater than 10% but less than 25% on Conventional loans?

Answer 49

6% of the purchase price when the borrower’s down payment is equal to or greater than 10% but less than 25%

Question 50

Seller’s concessions Max if down payment is equal to or greater than 25%

Answer 50

9% when the borrower’s down payment is equal to or greater than 25%

Question 51

Seller’s concessions Max if home being purchased is for investment purposes

Answer 51

concessions are always limited to 2% of the purchase price when the intended use of the home being purchased is for investment purposes

Question 52

RESPA violation

• prison sentence?
• fine up to?

Answer 52

A RESPA violation can result in a prison sentence of up to one year along with a fine of up to $10,000. These penalties apply per occurrence.

Question 53

earnest funds deposit:

Answer 53

When an offer to buy is accepted and a purchase contract signed, the buyer often pays the seller an earnest funds deposit as a measure of good faith. This deposit gives the seller incentive to remove the home from active MLS sales listings knowing that, if the buyer backs out without cause, the seller may retain the deposit. This deposit is ultimately credited back to the buyer at closing as a settlement fee credit.

Question 54

HMDA stand for?

What Regulation is it?

Answer 54

HMDA, also known as the Home Mortgage Disclosure Act, was enacted in 1975 and operates under Regulation C.

Question 55

HOEPA?

Answer 55

Home Ownership and Equity Protection Act

Question 56

What does HOEPA do?

Answer 56

The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.

Question 57

What does ABAD stand for?

Answer 57

Affiliated Business Arrangement Disclosure

Question 58

What does FIAR stand for?

Answer 58

Fully Indexed Accrual Rate

Question 59

An interest rate below what % is considered a Teaser rate?

Answer 59

3%

Question 60

Is Previous Employment a consideration of HMDA?

Answer 60

NO

Question 61

Can a balloon loan be modified?

Answer 61

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.

Question 62

Qualified Mortgage (QM), the loan’s back-end DTI can be no higher than?

Answer 62

43%

Question 63

Once a loan estimate has been issued, when is the first opportunity that the loan may close?

Answer 63

Seven precise business days must elapse after the issuance of the loan estimate before the loan would be allowed to close. The purpose of this mandatory waiting period is to ensure that the applicant has ample time to review the loan’s particulars and carefully contemplate the transaction into which they’re considering entering.

Question 64

How many days after have a live mortgage application (6) pieces of information does an LE need to be issued?

Answer 64

no later than 3 general business days from the date

Question 65

When is an applicant obligated to disclose child support payments as a liability?

Answer 65

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.

Question 66

What does the Gramm-Leach-Bliley Act protect?

Answer 66

The Gramm-Leach-Bliley Act protects the sanctity of individuals’ non-public, personal information. Non-public, personal information is information that cannot be secured through a general records search or a Freedom of Information/Privacy Act request. Public personal information is information that may be secured through those means.

Question 67

Flopping occurs when?

Answer 67

an unscrupulous individual convinces a lender to release the lien on a property for less than owed based on an artificially deflated value which that individual then pays to the lender to secure ownership of the property. Once the lien is released, the fraudster then sells the property for its higher, true value and pockets the difference.

Question 68

When must a financial institution initially provide its customer with a copy of its privacy notice?

Answer 68

The Gramm-Leach-Bliley Act requires financial institutions to provide all customers with a copy of its privacy notice at the time when the customer relationship is established. This would most often occur at the closing. The financial institution is also required to provide its privacy notice annually thereafter or, in some cases, it may be allowed to post it online.

Question 69

What does CLTV stand for?

Answer 69

The combined loan-to-value (CLTV) ratio is the ratio of all secured loans on a property to the value of a property. Lenders use the CLTV ratio to determine a prospective home buyer’s risk of default when more than one loan is used.

Question 70

By what date would a mortgage loan originator who fails to renew her license by December 31st have to renew it in order to avoid repeating the entire licensing process?

Answer 70

If a licensee does not renew their license by midnight on December 31st, their license expires, and they are immediately rendered inactive. They have until the last day of February to renew their license by paying the appropriate renewal fees, demonstrating completion of the appropriate continuing education, and paying a late charge. Failure to renew by the last day of February requires that the loan originator repeat the entire licensing process.

Question 71

What is the Model State Law?

Answer 71

Model State Law was a document created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to guide states in implementing legislation required by the SAFE Act.

Question 72

Describing the balloon term first followed by the difference between that and the 30-year term (ie. 7/23) describes a balloon loan what?

Answer 72

containing a conditional right to modify.

Question 73

In accordance with ECOA, the applicant must be issued one of three documents within 30 days of application:

Answer 73

a Notice of Action Taken advising that his or her loan application was approved, an Adverse Action Notice declining the application, or a Notice of Incomplete Application advising that needed documentation is missing and the applicant must provide it within an allotted timeframe for his or her application to receive further consideration.

Question 74

The six items constituting a live application?

Answer 74

social security number, date of birth, income, property address, estimated property value (or property purchase price), and loan amount

Question 75

conditions included in the right to conditionally modify a balloon loan?

Answer 75

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%.

Question 76

When is MIP automatically removed?

Answer 76

MIP is only removed after 11 years as long as the initial down payment was equal to or greater than 10%.

Question 77

What does FACTA stand for?

Answer 77

Fair and Accurate Credit Transactions Act (FACTA)

Question 78

FACTA’s primary purposes

Answer 78

surround affording consumers easy access to accurate credit information along with the prevention of identity theft.

Question 79

right to opt out of information sharing, that right is afforded to them through

Answer 79

the Gramm-Leach-Bliley Act

Question 80

The right to know the identity of the credit reporting agency used to render a credit decision along with the right to receive a free copy of one’s credit report in the event of declined credit is afforded through

Answer 80

FCRA

Question 81

The two types of MIP associated with FHA financing are:

Answer 81

Every FHA loan requires both an annual mortgage insurance premium (AMIP) collected through the monthly payment and an upfront mortgage insurance premium (UFMIP) which, although it can be paid in cash at the time of closing, is generally financed into the loan amount.

Question 82

consumer

Answer 82

an individual who uses a company’s products and services but lacks a formal relationship with that business. (Example using an ATM of that bank but does not have an account with that bank.

Question 83

customer

Answer 83

may also use that business’ products and services - also has a formal business relationship with that institution.

Question 84

Exclusions from higher priced mortgage loan considerations

Answer 84

consist of loans that are used to finance the initial construction of a dwelling, bridge loans with terms of 12 months or less, reverse mortgages, and home equity lines of credit.

Question 85

Fine for violating the Telemarketing Sales Rule?

Answer 85

Violators may be fined up to $43,280 per occurrence.

Question 86

SAFE Act’s main objectives

Answer 86

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.

Question 87

SAR?

Answer 87

Suspicious Activity Reports

Question 88

LPMI?

Answer 88

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.

Question 89

above-par pricing

Answer 89

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

Question 90

Piggyback financing

Answer 90

Piggyback financing would provide two loans, one at 80% and one to supplement the other 10% needed to avoid paying PMI.

Question 91

VA will exempt any eligible veteran pursuing VA financing from having to pay the VA funding fee

Answer 91

is s/he has a militarily-incurred disability defined by the VA medical system as 10% or greater.

Question 92

HOEPA loans

Answer 92

Charges paid by the creditor, other than loan originator compensation paid by the creditor that is required to be included in points and fees can be excluded from points and fees. HOEPA loans may include pre-payment penalties as long as the pre-payment penalty occurs within the first five years (other conditions also apply). Increasing the rate after default is never permitted. When the purpose of the loan is for home improvement, the funds must be disbursed either directly to the homeowner, in the form of a check made payable to both the home owner and the contractor, or to a third-party escrow company agreed upon by all parties. HOEPA balloon loans are permitted as long as the balloon component does not call the loan within the first five years.

Question 93

The cost of originating a loan expressed as an interest rate is known as the:

Answer 93

For comparative shopping purposes, as well as to inform customers of their true interest expenses, the government requires lenders to disclose the cost of the credit as both an interest rate and a dollar amount. As an interest rate, this cost is known as the APR or Annual Percentage Rate.

Question 94

What constitutes a good payment history in terms of PMI removal?

Answer 94

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.

Question 95

If a borrower has a mutual fund, how much of the fund’s face value may be used to satisfy reserve requirements?

Answer 95

When used solely to satisfy reserve requirements, 100% of a mutual fund’s face value may be considered.

Question 96

General Mortgage Knowledge

Answer 96

Although General Mortgage Knowledge is usually a part of 20-hour pre-licensing education, it is actually a part of the 12 hours of electives and therefore not mandatory.

Question 97

The Gramm-Leach-Bliley Act protects the sanctity of individuals’ non-public, personal information. Non-public, personal information is

Answer 97

information that cannot be secured through a general records search or a Freedom of Information/Privacy Act request. Public personal information is information that may be secured through those means.

Question 98

A buyer purchases a home for which the seller pledges to fund a 2-1 buydown. The buyer’s note rate results in a payment of $1,200. If the 2-1 buydown would have the buyer remitting a P&I payment of $1,075 for year one and $1,107 for year two, how much did the 2-1 buydown cost the seller?

Answer 98

If the buyer remits $1,075 for the first year, he is saving $125 monthly over his note rate (1,200 – 1,075). If the buyer remits $1,107 for the second year, he is saving $93 per month during the second year (1,200 – 1,107). When 12 payments of $125 ($1,500) are added to twelve payments of $93 ($1,116) the seller will spend $2,616 to fund the 2-1 buydown.

Question 99

How do you calculate a 2 1 buydown?

Answer 99

With a 2/1 buydown, the rate would be 4 percent for the first year and 5 percent for the second year, with monthly payments of $716.12 and $805.23 , respectively. Subtract the two lower monthly payment amounts from the regular monthly mortgage payment calculated at the full rate and multiply each difference times 12.

Question 100

If the closing disclosure is sent to the customer electronically on Monday, when would the first opportunity to close be?

Answer 100

Unless the borrower confirms receipt prior, if the closing disclosure is issued via US mail or electronically, the three-day precise waiting period must be extended to six in order to account for delivery time. If the closing disclosure was issued on Monday, the sixth precise business days thereafter would be the following Monday. The loan, therefore, would be allowed to close no earlier than the next day (Tuesday).

Question 101

Conventional/conforming DTI guidelines are:

Answer 101

Although conventional/conforming DTI guidelines are established at 28/36, they are just that … guidelines. With compensating factors, conventional/conforming QM loans may be approved up to a 43% back-end DTI ratio.

Question 102

The National Mortgage Licensing Exam, containing the UST component, consists of how many questions?

Answer 102

The national examination contains 100 multiple choice questions while the UST component adds an additional 25 for a total of 125.

Question 103

Once a loan estimate has been issued, when is the first opportunity that the loan may close?

Answer 103

Seven precise business days must elapse after the issuance of the loan estimate before the loan would be allowed to close. The purpose of this mandatory waiting period is to ensure that the applicant has ample time to review the loan’s particulars and carefully contemplate the transaction into which they’re considering entering.

Question 104

In the event that a mortgage servicer does not have a certificate of homeownership counseling in the reverse mortgage file?

Answer 104

it does not have an enforceable lien.

Question 105

The term “Caveat Emptor” means:

Answer 105

Let the buyer beware implies that a customer must look out for his or her own interests when entering into a transaction. When the law of agency directs a mortgage professional’s fiduciary responsibility to the customer, the term “caveat emptor” is rendered inapplicable.

Question 106

The Transfer of Servicing disclosure must be issued by the releasing entity no later than

Answer 106

15 days prior to a servicing release and by the receiving entity no later than 15 days after the receipt of servicing.

Question 107

The Servicing Disclosure Statement is the disclosure that must be issued

Answer 107

within three precise business days of the receipt of an application.

Question 108

The USA Patriot Act is primarily concerned with:

Answer 108

The USA Patriot Act was enacted as a direct result of the terrorist attacks of September 11, 2001. The primary concerns of the Patriot Act are to thoroughly identify each customer in order to ensure that criminals are prevented from receiving loan proceeds (similar to when an individual attempts to purchase an airline ticket and is compared against the no-fly list) along with ensuring that all money utilized in and as a part of any financial transaction are legitimate and have been legally acquired.

Question 109

Principal pre-payments remitted against the balance of an adjustable rate mortgage affect

Answer 109

future payment amounts. At the time of the next scheduled interest rate change, the mortgage servicer calculates the new payment amount considering the currently-applicable interest rate, the remaining term, and the existing principal balance. A balance that is lower than it otherwise would be due to the previous remittance of principal pre-payments will cause the new payment to be lower than it would have been had the balance been higher at the time of the interest rate change.

Question 110

One way to safe harbor against steering is to:

Answer 110

Product steering is a practice through which a lender or loan originator encourages a particular product or price point that rewards the lender or MLO at the expense of the customer’s best interests. To ensure that the customer was duly provided with all appropriate pricing options, the customer should be offered three loan scenarios including the highest rate and lowest costs (above-par pricing to offset settlement costs), par pricing, and the lowest rate with the highest costs (discount points). Ultimately the customer decides with which option to proceed and must qualify for whichever options he or she selects.

Question 111

piggyback loan number breakdown 1st / 2nd / 3rd

Answer 111

first number always represents the LTV of the primary mortgage / The second number represents the LTV of the second mortgage / third number represents the borrower’s down payment. All three numbers must add up to 100% since LTVs + equity must always equal 100%.

Question 112

retirement funds as a source of settlement funds

Answer 112

unless the amount contained in any one specific retirement account equates to or exceeds 120% of the total amount of cash needed for the down payment and closing costs, the applicant will have to document that the account is theirs, it is vested, it allows for withdrawals regardless of the applicant’s current employment status, and their actual receipt of funds realized from the sale or liquidation of the asset.

Question 113

HOEPA mortgage to finance home improvements payments must be made:

Answer 113

payable directly to the customer, jointly to the customer and the contractor, or to a third-party escrow company, agreed upon by all interested parties.

Question 114

The main objective of HOEPA is to prevent:

Answer 114

HOEPA was implemented as an attempt to protect individuals from unscrupulous financial predators who might otherwise take advantage of them through predatory lending tactics and practices.

Question 115

For what does VVOE stand?

Answer 115

A verbal verification of employment is usually performed within 10 days of the note date. The lender will contact the applicant’s employer to confirm that the applicant is still gainfully employed.

Question 116

Types of Qualified Mortgages (QMs)

Answer 116

Currently, the four types of QMs are: General, Temporary, Small-Creditor, and Balloon-Payment.

Effective January 10, 2014, mortgage lenders are required to demonstrate that they have verified their borrowers’ abilities to repay. The CFPB implemented the Ability to Repay Rule defining all Qualified Mortgages (QMs) as meeting that criteria.

Question 117

major components of the Dodd Frank Act?

Answer 117

Prior to the Dodd Frank Act, borrowers were regularly approved for mortgage loans that they were incapable of repaying. This, in part, led to the mortgage market collapse of the late 2000’s. Dodd Frank ensures that, through its Ability to Repay rule, all mortgage recipients have clearly demonstrated their ability to repay their loan. Positively identifying one’s customer is a requirement established through the USA Patriot Act. Ensuring that a customer’s interest rate is reasonable is governed through TILA.

Question 118

seller’s concession are based upon what?

Answer 118

Seller’s concessions are based upon the purchase price.

Question 119

FACTA’s primary purposes

Answer 119

FACTA’s primary purposes surround affording consumers easy access to accurate credit information along with the prevention of identity theft. Although consumers do have the right to opt out of information sharing, that right is afforded to them through the Gramm-Leach-Bliley Act. The right to know the identity of the credit reporting agency used to render a credit decision along with the right to receive a free copy of one’s credit report in the event of declined credit is afforded through FCRA.

Question 120

discount points

Answer 120

If the purchase price is $300,000, the loan amount, at 80% LTV, would be $240,000. Points are calculated based on the loan amount and the borrowers paid $3,600 for them. Since one point on this loan amount equates to $2,400 and the borrowers spent $3,600, the $3,600 equates to 1.5 points (3,600/2,400).

Question 121

What is a recast

Answer 121

A mortgage servicer may, at its sole discretion, affect a recast by recalculating the payment amount of a fixed-rate loan after receiving a principal pre-payment. Doing so retains the original term at the fixed interest rate while lowering the payment amount. Servicers may do this as a courtesy and may also charge a fee to accommodate this request.

Question 122

TLTV

Answer 122

The TLTV represents all outstanding encumbrances in relation to a property’s value. When the sum total of the first mortgage ($112,000) and the line of credit amount ($70,000) is divided by the property value (182,000/325,000), the resulting TLTV is 56%.

Question 123

PMI appraised or purchase price?

Answer 123

A purchase loan’s LTV is calculated by dividing the loan’s principal balance by the lesser of the property’s purchase price or appraised value. Even though the home appraised higher than its purchase price, the purchase price will be the basis for calculating the LTV. The homeowner will most likely be unable to access the equity difference for one full year.

Question 124

A licensed mortgage originator instructing how many hours of approved CE satisfy their 8hr CE requirement?

Answer 124

A licensed mortgage originator may satisfy their annual eight-hour CE requirement after instructing four hours of approved CE.

Question 125

credit score ranges affords the applicant access to standard mortgage pricing?

Answer 125

740+

Question 126

NMLS&R requires Mortgage Call Reports to be filed how often?

Answer 126

Mortgage Call Reports are required quarterly of all lenders. The reports transmit details pertaining to the loans originated by that lender during the previous quarter.

Question 127

The maximum amount of homeowner’s insurance coverage a lender may require is:

Answer 127

Full replacement coverage protects the lender’s interests and covers the replacement cost of the property in the event of a loss.

Question 128

What are air loans?

Answer 128

Air loans are loan files submitted to lenders for funding whereby everything contained within the file is false, fabricated, and fraudulent. Air loans are an extreme example of fraud for profit.

Question 129

Qualified mortgages limit pre-payment penalties

Answer 129

With the implementation of QM’s through the Dodd-Frank Act, pre-payment penalties are limited to 2% of the outstanding balance during the loan’s first two years, 1% of the loan’s outstanding balance during the third year, and no penalty thereafter.

Question 130

The FHA 203(k) loan is the FHA’s:

Answer 130

The 203(k) is the FHA rehabilitation program allowing for the acquisition of a property along with financing needed renovation. It may be used as both a purchase and refinance option.

Question 131

The four elements of mortgage fraud, as defined by Fannie Mae, are:

Answer 131

1) misrepresentation to the consumer or lender, 2) the omission of important and relevant information 3) neglect of fiduciary responsibility to the customer or lender, 4) Intent to defraud

Question 132

Loan Originator Compensation Rule

Answer 132

requires that any money resulting from the utilization of above-par pricing gets fully credited to the customer at closing. Prior to this rule, loan originators would often sell higher-than-market interest rates to customers and pocket resulting the “overages.” Because of this rule, that practice that is no longer permitted.

Question 133

A consumer who accesses their credit capacity beyond

Answer 133

30% causes a potential creditor to question whether or not that individual is living beyond his or her means and utilizing credit responsibly.

Question 134

Higher-priced mortgage loans are addressed in Section or what Act?

Answer 134

Section 35 of TILA addresses the requirements surrounding higher-priced mortgage loans.

Question 135

What is the utilization one’s own funds to lend to borrowers.

Answer 135

Portfolio lending. When a lender lends its own money, it makes its own rules and earns the interest itself. Loans such as these are generally held in “portfolio” and may take a lender a while to achieve its return on investment. Portfolio lenders also usually retain all of the risk.

Question 136

YSP is ?

Answer 136

The “yield spread premium,” or YSP as it’s known in the industry, is the fee (commission) paid by the mortgage lender to the broker in exchange for a higher interest rate, or an above market mortgage rate.

Question 137

HOEPA is Section ___________ of ____________?

Answer 137

Section 32 of TILA - The Truth-in-Lending Act was amended in 1994 when Section 32 was added enacting the Home Ownership and Equity Protection Act (HOEPA). This regulation was enacted to address and stop predatory lending practices in purchases, refinances, open-ended credit plans, and closed-ended home equity loans that abusively charged excessive points, interest rates, and fees.

Question 138

NINA / NINANE / SIVA Loans

Answer 138

The NINA is a “no income/no asset” loan. The NINANE is a “no income/no asset/no employment” loan. The SIVA is a “stated income/verified asset” loan.

Question 139

what at prohibits advertising and promotion that falsely implies that the government has endorsed a particular program, product, or service.

Answer 139

The truth-in-Lending Act

Question 140

VA financing DTI guideline is:

Answer 140

The only ratio guideline applicable for VA financing is the 41% back-end ratio. The VA does not consider a housing expense ratio when analyzing an applicant’s ability to repay.

Question 141

HEQ?

Answer 141

home equity loan

Question 142

home equity loan is open or closed ended?

Answer 142

is a closed-ended fixed-rate

Question 143

home equity line of credit

Answer 143

(HELOC) is an open-ended, adjustable-rate financial vehicle.

Question 144

Niche loans?

Answer 144

offer financing on unique property types or for individuals with unique borrowing needs. They are generally retained in portfolio and not sold into the secondary market.

Question 145

four components of an ARM

Answer 145

frequency of change, index, margin, and caps.

Question 146

CHARM?

Answer 146

Consumer Handbook on Adjustable Rate Mortgages (CHARM) - TILA requires that a Consumer Handbook on Adjustable Rate Mortgages (CHARM) be issued within three days of an application for a closed-ended ARM.

Question 147

owner’s title insurance

Answer 147

Although it is never required, owner’s title insurance is always recommended since it protects the homeowner’s ownership interests in the property.

Question 148

In accordance with the E-Sign Act, with what must a consumer be provided prior to consenting to the use of an electronic record?

Answer 148

The E-Sign Act requires that all consumers be made aware of the technical requirements necessary for the utilization of electronic records prior to making the decision as to whether or not they wish to utilize that modality.

Question 149

What is the maximum penalty that the Commissioner may impose against a licensee?

Answer 149

$25,000. Each violation or failure to comply with any directive or order of the Commissioner is a separate and distinct violation or failure.

Question 150

According to 12 CFR 1026.35 – Requirements for higher-priced mortgage loans, a higher-priced mortgage loan is a loan secured by the consumer’s principal dwelling bearing an annual percentage rate (APR) that exceeds the Average Prime Offer Rate (APOR) by what percentage for loans secured by a first lien with a principal obligation that does not constitute jumbo financing

Answer 150

1.5% or more for loans secured by a first lien with a principal obligation that does not constitute jumbo financing

Question 151

higher-priced mortgage loan is a loan secured by the consumer’s principal dwelling bearing an annual percentage rate (APR) that exceeds the Average Prime Offer Rate (APOR) by what % for loans secured by a first lien with a principal obligation that constitutes jumbo financing

Answer 151

2.5% or more for loans secured by a first lien with a principal obligation that constitutes jumbo financing

Question 152

higher-priced mortgage loan is a loan secured by the consumer’s principal dwelling bearing an annual percentage rate (APR) that exceeds the Average Prime Offer Rate (APOR) by what % for loans secured by subordinate liens.

Answer 152

3.5% or more for loans secured by subordinate liens.

Question 153

APOR

Answer 153

Average Prime Offer Rate

Question 154

when a loan meets the criteria that classifies it as a higher-priced mortgage,

Answer 154

an escrow account managing the homeowner’s insurance and real estate taxes becomes mandatory for the first five years. Additionally, a written appraisal with an interior inspection is required. Higher-priced mortgages are permitted as long as the above-referenced conditions apply. Lastly, there is no change to the standard right of rescission requirements.

Question 155

Straw sellers

Answer 155

Straw sellers falsely claim ownership to a property for a fee and often appear at closings to act as the legitimate seller.

Question 156

Asset renting

Answer 156

Asset renting is fraudulently representing ownership of funds to enhance one’s ability to qualify for financing.

Question 157

HUD’s Home Loan Toolkit is it required for Refis?

Answer 157

no. it is only required for purchase-money transactions

Question 158

title binder

Answer 158

Schedule B is the section of the title insurance binder on which any and all outstanding liens and encumbrances appear.

Question 159

If a homeowner fails to provide evidence of homeowner’s insurance, her mortgage servicer may:

Answer 159

the mortgage servicer will purchase a non-underwritten, force-placed insurance policy to protect its interests. Demonstrating constant insurance coverage is a requirement of all mortgages. The investor needs to be assured that its investment is continuously insured against loss. In the event that a borrower fails to maintain continuous insurance coverage or provide continuous evidence of such, the mortgage servicer will purchase a non-underwritten, force-placed insurance policy to protect its interests.

Question 160

HUD’s mission

Answer 160

to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination, and transform the way HUD does business.”

Question 161

Regulatory violations processed by individual state Commissioners must also be reported to the:

Answer 161

The NMLS&R must be informed of any action taken against a licensee.

Question 162

The Dodd-Frank Act is responsible for the creation of the:

Answer 162

The Dodd-Frank Act consolidated many various regulatory authorities and centralized oversight of the U.S. financial industry under the Consumer Financial Protection Bureau (CFPB).

Question 163

VA ARM cap structure?

Answer 163

VA loans generally limit the periodic rate change to 1% above or below the previous rate and the life-of-loan cap to no more than 5% above the initial interest rate.

Question 164

If a mortgagor chooses an “odd-year term,” that term is usually priced how?

Answer 164

to the next highest five-year increment. Mortgage terms typically run between 10 and 30 years in increments of five.

Question 165

Fraud for profit

Answer 165

Fraud for profit is when some or all of the professional players orchestrating a fraudulent transaction benefit from the fraud. Although artificially-inflated values are often a component to illegal property flipping, that is not the best possible answer since the question did not indicate how long ago the property was initially acquired.

Question 166

Name of idexes?

Answer 166

The COFI is the Cost of Funds Index. The LIBOR is the London Interbank Offered Rate. The COSI is the Cost of Savings Index.

Question 167

Residual income requirements for VA financing are based on:

Answer 167

the household’s size and the location of the property.

Question 168

When will her mortgage servicer automatically remove her PMI?

Answer 168

Although Lucy is at 78% LTV, she will not be released of her obligation to pay PMI until she either becomes current or reaches her loan’s amortization midpoint.

Question 169

The FHA was established in 1934 as a result of the:

Answer 169

The National Housing Act, establishing the FHA, was one of the federal government’s responses to improve conditions resulting from the Great Depression.

Question 170

Truth-in-Lending Act (TILA ) addresses

Answer 170

consist of disclosing the cost of the credit to the customer, establishing the right of rescission applicable to non-purchase, primary residential transactions, and overseeing advertising.

Question 171

Comparative shopping considerations are addressed through

Answer 171

RESPA

Question 172

Each violation of the Gramm-Leach-Bliley Act may subject the violator to a fine of up to

Answer 172

fine of up to $10,000

Question 173

Number to divide by for weekly and bi-weekly pay

Answer 173

52 weeks and 26

Question 174

According to the SAFE Act, when does the fiduciary responsibility towards the customer begin?

Answer 174

the moment that a customer accepts the assistance of a mortgage professional as the moment when that mortgage professional has a fiduciary responsibility towards that customer.

Question 175

RESPA covers:

Answer 175

loans made with funds insured by the federal government, loans made with funds from a lender regulated by the federal government, loans that are intended for sale to Fannie Mae or Freddie Mac, loans made by a creditor regulated under the Truth-in-Lending Act, and loan transactions involving federally related mortgage loans. Loans that are exempt from RESPA coverage consist of loans for 25 acres or more, loans for business, commercial, or agricultural purposes, temporary financing (bridge loans), loans secured by vacant land, loan assumptions that are permissible without lender approval (a simple assumption falls within this category), loans sold on the secondary market, and loan conversions when a new note is not required and the provisions are consistent with those of the original mortgage.

Question 176

RESPA requires mortgage servicers to refund escrow overages amounting to?

Answer 176

$50.00 or more in the form of a credit to the next periodic mortgage payment or via check to the borrower. Although the servicer may opt to refund the $35.00 overage, it isn’t compelled to do anything since overages of less than $50.00 may stay in escrow to be absorbed by future shortages or added to future overages.

Question 177

FHA loan limits are often defined by:

Answer 177

FHA loan limits vary by geographic location, specifically, the county in which the property is located. FHA loan limits may be ascertained at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Question 178

Financing regulated by TILA involves

Answer 178

the extension of credit to individuals for personal, family, or household purposes when the borrower’s dwelling secures the debt. TILA does not regulate loans applicable to business, agricultural, or organizational credit, credit in excess of $25,000 that is not secured by real property or a dwelling, public utility credit, credit extended by a broker registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission, home fuel budget plans, and student loans.

Question 179

To receive credit for earned child support it must be:

Answer 179

A court order or other legal obligation must be established in order for an individual to have child support considered as qualifying income. The most recent six months’ worth of receipt must be documented along with evidence of continuance for a minimum of 36 additional months.

Question 180

The four types of ARM caps are:

Answer 180

initial adjustment, periodic, life-of-loan, and payment.