Retrainer Flashcards
The basic idea of the new TRID requirements is which of the following:
A. To impose specific penalties on MLOs who are in violation of the new requirements.
B. To provide more information to the consumer so they can make better decisions.
C. To allow consumers to escape liability for loan obligations.
D. To raise the level of competition among MLOs.
The correct answer is B. These requirements are for the benefit of the consumer.
Which of the following best defines appraisal:
A. Same as price
B. An estimate of value
C. Same as cost
D. An estimate of market value
The correct answer is D. There is nothing wrong with “B” as an answer, but in the context of residential mortgages, “D” is the best answer and will contribute to your point total.
With an ARM, what is the difference between a hard prepayment penalty and a soft prepayment penalty:
A. A hard prepayment penalty is a penalty to be paid for prepaying the loan for any reason
B. A soft prepayment penalty is a penalty to be paid only if the borrower refinances the loan
C. A soft prepayment penalty would not require a fee if the property is sold
D. All of these are true
Answer: D. This is correct. Prepayment penalties on ARMS may exist for the first 3-5 years of the loan, and may require fees even if only a partial prepayment is made.
According to Regulation Z, all of the following terms would not trigger additional disclosures in an ad, except: A. Terms to fit your budget. B. 7% APR loan available here. C. 30-year financing available. D. Easy monthly payments.
The correct answer is C. Yes, this would trigger full disclosure.
If the settlement agent takes responsibility for delivery of the Closing Disclosure, he may do which of the following:
A. Deliver a copy of the borrower’s disclosure to the seller.
B. Provide a copy of the Closing Disclosure to the seller even if the disclosure contains only charges and costs of the borrower.
C. Provide a copy of the borrower’s Closing Disclosure to the seller only if it also contains the seller’s charges and costs.
D. If the seller signs a separate Closing Disclosure, the settlement agent need not deliver a copy to the creditor.
The correct answer is C. This is a statement of fact.
15) Which of the following does the Closing Disclosure reveal about negative amortization:
A. If the borrower is scheduled to make payments that do not pay all interest due in a given month.
B. If the borrower may have monthly payments that do not pay all interest due in a given month.
C. If the borrower does not have a negative amortization feature in the mortgage.
D. All of the above.
The correct answer is D. One of the boxes on the form will be checked, indicating one of these answers.
In which of the following ways might a government worker be involved in a fraud scheme:
A. Falsifying deeds or other records
B. Inflating property values
C. Preparing false sales contracts
D. Providing phony accounting documents
The correct answer is A. This is correct.
^^^The final rule, propagated by the Federal Reserve Board in anticipation of the Dodd-Frank amendments to TILA, took effect on what date:
A. July, 2010
B. January, 2010
C. April, 2011
D. January, 2012
C
^^When a loan application has been properly completed, what further information does a lender seek:
A. Insurance
B. Borrower analysis
C. Property analysis
D. All of the above
Answer: D. Yes, all of this information needs to be fleshed out to see the full picture of acceptable risk.
According to RESPA, what is a loan application:
A. A form that presents the borrower’s financial information
B. The submission of a borrower’s financial information in anticipation of a credit decision
C. Primarily information about the property in question
D. It is primarily a statement of the net worth of the
Answer: B. Yes, this is the best definition of a loan application among these answer choices.
The HOEPA notice contains which of the following statements:
A. You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.
B. If you obtain this loan, the lender will have a mortgage on your home.
C. You could lose your home, and any money you have put into it, if you do not meet your obligations under this loan.
D. All of the above.
The correct answer is D. Yes, all of these statements and more are included in the HOEPA notice.
Which of the following best describes obligatory advances regarding construction loans:
A. It is funds paid to the builder as various phases of the construction project are completed.
B. It is the way funds used to be distributed to the builder; however, now all funds are released upfront.
C. Obligatory advances occur when the builder makes payments on the construction loan.
D. Obligatory advances refer to a builder paying subcontractors at the appropriate time.
The correct answer is A. Lenders have learned that projects are more likely to be completed if builders do not receive all of the funds from a construction loan upfront.
Under the Integrated Disclosures, When providing a revised Loan Estimate due to changed circumstances, which of the following is an acceptable definition of business day:
A. Any day the creditor’s offices are open to the public to transact substantially all of the creditor’s business.
B. All calendar days except Sundays and legal public holidays as defined by Reg. Z.
C. Same as calendar days.
D. Any day except Sunday.
Answer B
When providing the initial Loan Estimate, definition A applies. When providing a revised Loan Estimate due to changed circumstances, definition B applies.
According to TILA, the finance charge includes fees and amounts charged by a third party under which of the following circumstances:
A. If the creditor requires the use of the third party as a condition of the extension of credit.
B. If the creditor retains a portion of the third-party charge.
C. So long as the creditor retains none of the third-party charge.
D. A & B.
The correct answer is D.
All of the following statements are true about APR, except:
A. With an ARM, the loan still has one APR.
B. TILA requires that the APR be disclosed to a consumer when they call for an interest rate quote.
C. TILA does not require that the APR be disclosed on an Internet inquiry for a rate.
D. The APR will be a bit more than the interest rate on the note.
The correct answer is C. TILA does require that the APR be disclosed on an Internet inquiry for a rate.
According to the SAFE Act, which of the following do not need to have a unique identifier number to work as an MLO:
A. An employee of an insured depository institution
B. An MLO working under the authority of the DRE
C. An MLO working under the authority of the DBO
D. None of the above
The correct answer is D. All MLO’s need a unique identifyer number. The employee of an insured depository institution, however, is registered with the NMLS, not licensed.
Which of the following is the equivalent of discharge papers for a VA loan:
A. COE
B. DD-214
C. UFMIP
D. AMI
Answer: B. The DD-214 is either Discharge Papers or the Report of Separation issued by the Department of Defense.
Which of the following topics comprise 25% of the MLO exam?
A. Federal mortgage-related laws
B. General mortgage knowledge
C. Mortgage loan origination activities
D. Ethics
The correct answer is C. This is a statement of fact.
According to the SAFE Act, administrative and clerical tasks that do not require an MLO designation include all of the following except:
A. The receipt and collection of information common for the processing or underwriting of a residential mortgage loan
B. Collecting information on behalf of the consumer with regard to a residential mortgage loan
C. The distribution of information common for the processing or underwriting of a residential mortgage loan
D. Communication with a consumer to obtain information necessary for the processing and underwriting of a residential mortgage loan
The correct answer is B. The correct answer involves obtaining information for the consumer from various industry sources. This is part of MLO activities and requires an MLO designation. The other answer choices involve receiving, collecting, distributing, and communicating with the consumer to obtain information from the consumer for the purpose of putting together the loan application package. This is clerical in nature.
If a borrower takes out a $200,000 loan at 6% fixed-rate for 30 years and wants to buy down the rate to 5.75%, what will be the effect on the loan and the borrower:
A. The borrower will lower his/her P&I payment by $41.67
B. The borrower will have to stay in the loan for eight years to realize the advantages of the buydown
C. If the borrower sells or refinances sooner than eight years, he/she will not recapture what they paid in the upfront discount points
D. All of the above are true
Answer: D. One discount point equals one percent of the loan amount. To lower the interest rate 1/8 of one percent on a 30-year loan requires one point, so to lower the interest rate ¼ of one percent as in this question, the borrower must pay 2 points, or $4,000 up front. $4,000 ÷ $41.67 = 96 months, or eight years to break even.
The estimate of the charges and terms for all settlement services must be available for which of the following periods of time:
A. At least 5 business days.
B. At least 10 days.
C. At least 10 business days.
D. At least 15 business days.
The correct answer is C. Keep in mind this does not apply to the interest rate or charges and terms dependent on the interest rate, like per diem interest, or adjusted origination charges, or the charge or credit for the interest rate chosen.
In qualifying a borrower, a lender looks at all of the following, except:
A. Income
B. Debt
C. Character
D. Assets
Answer: C. The level of a person’s character may be inferred from the credit report, but is not otherwise observable in this context. Also assets, liabilities, and qualifying ratios are under examination.
*** According to the FCRA, which of the following is true regarding a credit reporting agency limiting access to a consumer’s credit file:
A. A credit reporting agency would be overstepping its bounds to limit access to a consumer’s credit file.
B. A credit reporting agency may not give out a consumer’s credit file to anyone without the verbal consent of the consumer.
C. A credit reporting agency may not give out a consumer’s credit file to a prospective employer without the written consent of the consumer.
D. The FCRA does not specify which parties are considered to have a valid need to request a consumer’s credit file.
The correct answer is C
The FCRA does specify which parties are considered to have a valid need to request a consumer’s credit file.
Which of the following is information unique to the Loan Estimate form:
A. APR.
B. LTV.
C. TIP.
D. MIP.
The correct answer is C. TIP is the total interest percentage, the total amount of interest the borrower will pay over the loan term as a percentage of the loan amount.
Which of the following is the best definition of an appraisal:
A. A written statement of the price of a property
B. An estimate of value
C. A statement of cost
D. An opinion of market value
The correct answer is D. While there would be nothing wrong with “B” as an answer, in this context, “D” is more applicable.
Which of the following is the best definition of a balloon payment:
A. A final lump sum payment of more than twice the regular payment.
B. A final lump sum payment of $5,000 or more.
C. A final lump sum payment of $10,000 or more.
D. A final lump sum payment of 10 times the smallest payment required during the term of the loan.
The correct answer is A. Many times the balloon payment that is required is much greater than this.
The Home Mortgage Disclosure Act of 1975 applies to which of the following institutions:
A. Institutional depository lenders with assets in excess of $39 million
B. For-profit non-depository lenders with assets in excess of $10 million
C. For-profit non-depository lenders who originate 100 or more loans per year
D. All of the above
The correct answer is D. Yes, this is correct
In which of the following situations could a borrower find him/herself surprised by payment shock:
A. Not calculating for the payment of taxes and insurance in their monthly payment
B. Going through periods of paying less than interest-only when payment options present themselves
C. Having payment caps that keep payments affordable but do not allow the borrower to keep up with interest increases to their loan
D. All of the above
Answer: D. Yes, any and all of these could cause PAYMENT SHOCK for a borrower when they finally have to pay the interest or other fees that have been accruing.
Section 9 of RESPA does essentially which of the following:
A. Prohibits discounts on settlement services
B. Prohibits a seller from requiring a buyer to use a particular title insurance company as a condition of the sale
C. Prohibits fee-splitting and receiving unearned fees
D. Prohibits giving or accepting a kickback
The correct answer is B. Most listing brokers, representing their sellers, will state, “Seller’s choice of services,” which refers to title insurance and escrow. Technically, however, this cannot be made a condition of the sale.
^^^According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true regarding confidentiality of customers’ information, except:
A. Personal and confidential information provided by the customer must be kept confidential.
B. Personal and confidential information provided by third parties carries a lower threshold of confidentially than that provided by the customer.
C. Personal and confidential information provided by the customer must be used only for the business purposes for which it was intended.
D. Personal and confidential information provided by the customer or other sources must be kept confidential and protected.
The correct answer is B. This is the correct answer because it is the untrue statement.
All of the following are true statements regarding VA loans,except:
A. VA loans are guaranteed by the federal government through the Veterans Benefits Administration, part of the Department of Veterans Affairs
B. VA-approved lenders submit loan applications to the VA for approval
C. The VA never makes loans directly to borrowers
D. VA-approved lenders may act as VA Automatic Endorsers
Answer: C. This is rarely done, but may be done in remote areas where financing is hard to find.
What does an ad that advertises a 3/27 ARM mean:
A. A lifetime cap of 3% that can adjust every 27 months
B. A 30-year loan at a fixed rate for 3 years, adjustable for the remaining 27 years
C. A 27-year loan fixed for the first 3 years
D. A loan with a starting rate of 3% with a period rate cap of 2.7%
Answer: B. This is correct. The first number tells us how many years the interest rate will be fixed. The second number tells us the number of years the rate will be adjustable. These numbers do not adjust how often the rate will adjust. This will be based on agreement, commonly every 6 months with this structure.
According to the new standards of TILA-RESPA, a complete loan application is defined as which of the following:
A. The initial six items of information that the MLO receives and nothing further.
B. The initial six items of information that the MLO receives plus the borrower’s credit report.
C. The initial six items of information that the MLO receives plus the credit report and income verification.
D. The initial six items of information that the MLO receives plus letters of referral for verification of credit and integrity.
The correct answer is A.
HOEPA covers principal dwellings with the following types of loans, except:
A. Purchase money loans.
B. USDA Section 502 loans.
C. HELOC.
D. Refinances.
The correct answer is B. The rest are covered, as well as junior mortgages.
With a loan that is above 80% LTV, which of the following are likely to be true except
A. Qualifying standards may be more stringent
B. The loan may carry a higher interest rate
C. The user is exempt from PMI
D. Loan origination fees may be higher
Answer: C This is correct.
All the others are correct
There may also be additional conditions and standards because the loan is viewed as less secure.
Professional conduct in the mortgage profession involves which of the following:
A. Reasonable care and skill when acting on behalf of the customer.
B. Never claim expertise where you have no special training or skills.
C. Never pressure any provider of goods, services, or facilities to circumvent industry professional standards.
D. All of the above.
The correct answer is D. Yes, all of these are important to professional conduct in the mortgage profession.
Under the Loan Estimate, the MLO may not obtain a credit/debit card number to pay for miscellaneous fees until which of the following occurs:
A. Required disclosures have been delivered to the borrower.
B. Borrowers acknowledge their intent to proceed with the mortgage loan.
C. Borrowers give their permission for the MLO to collect for the fees.
D. A & B.
The correct answer is D. Once the required disclosures have been delivered to the borrowers and they have indicated their intent to proceed with the loan, the MLO can collect for additional fees.
Subsidies for graduated payment buydowns can come from which of the following sources:
A. Extra money from a buyer’s upfront cash deposit in escrow.
B. A seller’s reduced proceeds from escrow.
C. A builder’s deposit of cash or reduced proceeds.
D. Any of these.
The correct answer is D. Yes, any of these can be the source of subsidies for prepaid interest.
Which of the following percentages represents FNMA’s ceiling for gross adjustments on comps:
A. 10%
B. 20%
C. 25%
D. 27.5%
Answer: C. This means you erase the plusses and minuses of each adjustment and add up the absolute value of the adjustments. So on a comparable property that sold for $100,000, gross adjustments should yield an adjusted value of no more than $125,000. Again, appraisers could exceed that, but would have to clearly support their procedures.
What kind of authority does the Consumer Financial Protection Bureau have:
A. None
B. Limited authority subject to the regulators of the Federal Reserve
C. Rule making and enforcement authority over many consumer financial laws
D. Unlimited power over all federally insured financial institutions
Answer: C. This is correct—a substantial amount of authority.
All of the following are true regarding the counselor who meets with a prospective borrower for a reverse mortgage, except:
A. The counselor explains the cost of the loan and the financial implications of obtaining it.
B. The counselor is paid only if the borrower goes through with the reverse mortgage.
C. At the end of the session, the counselor will provide a required certification of counseling.
D. The counselor will provide guidance and advice on selecting a lender for the reverse mortgage.
The correct answer is B. The counselor is unbiased and independent, and his/her compensation is not dependent on any decision the borrower makes.
Which of the following agencies enforce the National Do Not Call Registry:
A. FTC.
B. FCC.
C. State law enforcement officials.
D. All of the above.
The correct answer is D. Yes, all of these enforce the National Do Not Call Registry.
Under HOEPA, a lender may not call a loan before maturityexcept for which of the following reasons:
A. The borrower has jeopardized the value of the collateral by causing or allowing damage to the property
B. A pattern of late payments
C. Modifications to the property
D. Zoning change
Answer: A. Yes, this and reasons of fraud, material misrepresentation, or default would all be reasonable causes for default.
What is another name for a Wraparound Mortgage? A. ARM. B. AITD. C. Open-end. D. VBM.
The correct answer is B. An AITD is an All-Inclusive Trust Deed.
Which of the following would describe a traditional mortgage to buy a home:
A. It is considered a forward mortgage.
B. It embraces the falling debt, rising equity scenario.
C. After the final payment, home equity equals the value of the home.
D. All of the above.
The correct answer is D. Yes, all of these describe the traditional purchase money loan.
What is the maximum VA loan amount:
A. There is no maximum, but it cannot exceed the appraisal
B. $417,000
C. $585,000
D. $286,400
The correct answer is A. With no down payment, the maximum loan amount is four times the amount of the Veteran’s entitlement.
The comparison of APR to APOR is not made in which of the following types of loans:
A. A reverse mortgage transaction.
B. A HELOC.
C. Initial construction of a dwelling.
D. All of the above.
The correct answer is D. Also true for a bridge (swing) loan where the consumer plans to buy a new dwelling and sell the old one within a year. So these types of loans could not be classified as Higher Priced.
All of the following are true regarding a mortgagor applying for a HECM loan if they have a court-ordered judgment, except:
A. FHA requires the mortgagor to satisfy the judgment prior to closing on the loan.
B. The mortgagee may require the mortgagor to satisfy the judgment prior to closing on the loan.
C. FHA does not require the mortgagor to satisfy the judgment before closing on the loan.
D. Judgment liens must be removed or subordinated to the HECM loan.
The correct answer is A. Yes, surprisingly FHA does not require the mortgagor to satisfy the judgment lien prior to closing, but it must at least be subordinated so the HECM loan has priority.
The integrated Closing Disclosure breaks down fees paid by the borrower and seller according to which of the following:
A. At closing and after closing.
B. At closing and before closing.
C. Before closing and after closing.
D. Paid by personal check or certified funds.
The correct answer is B. Page 2 of the CD. For example, the borrower would pay the credit report fee right up front (before closing) and the seller might pay a home inspection fee to an engineering company before closing, but most fees are paid at closing.
According to the TILA final rule, which of the following best defines creditor in a transaction:
A. The lender
B. Any financial institution, whether or not they fund the loan
C. A financial institution that funds loans with their own capital or a bona-fide warehouse line of credit
D. The beneficiary
Answer: C. This is the most specific and best answer.
All of the following are true about interest rate buydowns, except:
A. A buydown is prepaid interest.
B. A buydown is the commission the MLO makes on the loan.
C. A buydown is only for a limited period of time.
D. A buydown could be for the full term of the loan.
The correct answer is B. The commission the MLO makes on the loan is part of the agreed upon fees made by the lender and broker, not discount points. A buydown for the full term of the loan (D) would be called a permanent buydown.
A lender would be interested in knowing the net worth of a borrower for all of the following reasons except:
A. To ensure that the payment of down payment and closing costs are not borrowed
B. To indicate that the borrower is in the top 50% of wage earners
C. To indicate that the borrower has adequate reserves to handle property-related emergencies
D. To show that the borrower has some ability to handle money
Answer: B. Yes, this is not a requirement.
All of the following laws are enforced by the CFPB, except:
A. Equal Credit Opportunity Act (ECOA).
B. National Do Not Call Registry.
C. Real Estate Settlement Procedures Act (RESPA).
D. Home Mortgage Disclosure Act (HMDA).
The correct answer is B. The National Do Not Call Registry is enforced by the Federal Trade Commission (FTC).
Which of the following could reduce the margin on a borrower’s ARM loan:
A. The lender is not interested in making a large profit
B. The lender is willing to look the other way on administrative expenses
C. The borrower has a better credit rating
D. The feds have reduced it based on the parameters of the loan
Answer: C. The lenders regard a borrower with better credit as less risk.
The flexibility of the HECM program is demonstrated in which of the following answer choices:
A. Modified tenure, which is a combination of line of credit with ongoing monthly payments subject to principal limit.
B. Modified term, which is a combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
C. The HECM program allows homeowners to restructure their payment options for a nominal fee if their circumstances change.
D. Any and all of the above.
The correct answer is D. Yes, all of these answer choices demonstrate the flexibility of the HECM program.
Where in the federal government does the Consumer Financial Protection Bureau exist:
A. As part of the FDIC
B. As an independent entity of the Federal Reserve
C. As a floating agency of the Dept of Housing and Urban Development (HUD)
D. As an agency of the Federal Trade Commission
Answer: B. This is correct.
Which of the following is true regarding a permanent construction loan:
A. There is no such thing as a permanent construction loan as this would mean the construction would be ongoing in perpetuity.
B. There is only one with one closing with no take-out loan.
C. The one loan that is used for construction at the beginning converts to a permanent first mortgage when the construction is finished.
D. Both B and C.
The correct answer is A. On the contrary, a construction loan is known as an interim loan (short term or temporary) and is replaced with a take-out loan.
Which of the following agencies enforce the National Do Not Call Registry:
A. FTC.
B. FCC.
C. State law enforcement officials.
D. All of the above.
The correct answer is D. Yes, all of these enforce the National Do Not Call Registry.
What is the difference between the cost to build a house new and its market value:
A. Plottage
B. Depreciation
C. Assemblage
D. Accession
Answer: B. This is correct.
The purpose of interest rate caps regarding ARMs is which of the following:
A. To eliminate large and frequent mortgage payment increases.
B. To prevent the loan from extending beyond the legal limit.
C. To hinder predatory lending.
D. The keep the loan under 8% over prime.
The correct answer is A. This is the basic idea, so borrowers can pay the loans and resolve the debt.
Under TILA, when creditors offer credit but before the transaction is consummated, which of the following is true:
A. Disclosures must be made clearly and conspicuously.
B. Disclosures must be made in writing.
C. Disclosures must be made in a form the consumer can keep and read prior to the loan closing.
D. All of the following.
The correct answer is D.
What is wrong with the buyer giving the seller a silent second?
A. The first lien holder thinks the new buyer has greater equity in the property
B. The second is not recorded
C. It is illegal to not record a lien against a property
D. Nothing, as long as the buyer intends to pay the second
The correct answer is A. This puts the seller at greater risk in case of default and the first lien holder is uninformed about it.
Under which of the following circumstances would the lender be able to demand early repayment of the loan Except
A. Default on payments.
B. Fraud in obtaining the loan.
C. Severe damages to the collateral property.
D. Forbearance
The correct answer is D. Under these circumstances, the lender is allowed to protect its position.
Which of the following would best define what a mortgage loan originator is:
A. An individual who, in expectation of compensation or gain, takes a mortgage loan application.
B. A company in the business of originating mortgage loans for compensation or gain.
C. An individual who, in expectation of compensation or gain, offers or negotiates terms of a residential mortgage loan.
D. A and C.
The correct answer is D.
After a complete loan application has been provided by the borrower, which of the following has the ultimate responsibility for correct and timely delivery of disclosures to the consumer:
A. The MLO.
B. The creditor.
C. The trustee.
D. The MLO and lender have equal responsibility.
The correct answer is B. Though the mortgage broker (MLO) often acts as an extension of the creditor, the law places the responsibility for correct and timely delivery of disclosures on the creditor.
Adjustable Rate Mortgage disclosures required to be signed at closing need to be provided to which of the following:
A. All borrowers on the loan.
B. All borrowers with the power to rescind.
C. Only to a borrower who expresses an interest in receiving a copy.
D. None of the borrowers are entitled to receive a copy of the ARM disclosure.
The correct answer is C. This is a statement of fact.
All of the following are generally true in a Conversion Option in an ARM, except:
A. The ARM often carries a higher interest rate.
B. There is a limited time to convert.
C. The conversion fee is expensive, usually several thousand dollars.
D. The initial rate and the converted rate are often higher.
The correct answer is C. The conversion fee is usually several hundred dollars, not several thousand.
The Home Valuation Code of Conduct (HVCC) applies to which of the following transactions:
A. All loans
B. All loans sold to Fannie or Freddie
C. All federally related loans
D. All purchase-money loans
The correct answer is B. This is correct.
According to the 2009 amendment to TILA, all of the following are true regarding the average prime offer rate, except:
A. An APR is derived from average interest rates, points, and other loan pricing terms currently offered to consumers.
B. They represent mortgage transactions that have low-risk pricing charactertistics.
C. The average prime offer rate for both fixed and adjustable rate loans is published in a table and updated at least weekly.
D. The average prime offer rate includes data used for a construction loan.
The correct answer is D. Yes, loans for the initial construction of a dwelling are not included in the average prime offer rate.
All of the following are true about finance charges in a loan transaction, except:
A. It is expressed as the cost of consumer credit as a dollar amount.
B. It is expressed as the cost of consumer credit as a rate.
C. It is as a condition of the extension of credit.
D. It is a charge paid directly or indirectly by the consumer.
The correct answer is B. A finance charge is expressed as a dollar amount, not a rate.
The Rate-Checker is which of the following:
A. Essentially a handbook of amortization tables showing monthly payments.
B. A booklet available from any lender or MLO showing the PITI monthly payment based on a specified interest rate.
C. A CFPB Owning a Home Tool that helps consumers explore interest rate options available to them.
D. A device which discriminates against borrowers who don’t have Internet access.
The correct answer is C. Again, the objective is to have more information to benefit the consumer in the decision-making process.
Which of the following could mitigate having a prepayment penalty on an ARM:
A. Lower origination fees
B. Lower interest rates
C. Lower upfront costs
D. Any of the above
Answer: D. This is correct. A borrower would have to analyze the prepayment penalty fees as they are offset by lower origination fees, interest rates, and other upfront costs. There could be a tradeoff, and the lender may be willing to reduce or eliminate a prepayment penalty based on the amount the borrower pays for these other costs.
Which of the following would be an indication of predatory lending:
A. Requiring the borrower to extract from savings enough cash to provide a 20% down payment
B. Pay a higher interest rate because of negative credit issues
C. Increasing interest rates for late payments
D. Refusing the borrower a negative amortization loan
Answer: C. This is a violation of the Home Ownership and Equity Protection Act (HOEPA). The other actions strengthen the loan and enhance the borrower’s chances of being successful in repayment of the loan.
Which of the following is true regarding an open-end mortgage:
A. It allows the borrower to request additional funds from the lender.
B. These loans are usually set up with a predefined limit.
C. The borrower can borrow money that has already been paid back.
D. All of the above.
The correct answer is D. Yes, all of these are true.
Loan origination fees on a reverse mortgage are best described as which of the following:
A. The standard charge is 1% of the loan amount.
B. The standard charge is 1% of the appraised value, since the loan balance may increase.
C. The charge varies with the value of the property, but is capped at $6,000.
D. The charge cannot exceed $4,000.
The correct answer is C. If the property appraises for less than $125,000, the origination fee is capped at $2,500. If the property is worth more than $125,000, the lender can charge 2% of the first $200,000 of the property’s value, plus 1% of the amount over $200,000, up to a cap of $6,000.
Using the same numbers as Question 45, which of the following is closest to the annual subsidy for the first year:
A. $3000
B. $4000
C. $5000
D. $6000
Answer: C. The subsidy is $417/mo x 12 = $5004.
Regarding the right to rescind under TILA, consumers may exercise the right to rescind under any of the following circumstances, except:
A. Until midnight of the third business day following loan consummation.
B. Until midnight of the third business day following delivery of the required rescission notice.
C. Until midnight of the third business day following delivery of all material disclosures.
D. Until midnight of the third business day following the final inspection of the property
The correct answer is D. Notice that choice A refers to the signing of the loan documents.
Which of the following can the lender do relative to hazard insurance:
A. Place hazard insurance on the property if the homeowner does not
B. Require buyers to pay 12 months worth of premiums prior to closing
C. Require homeowners to deposit money into an impound account for payment of hazard insurance
D. All of the above
Answer: D. This is correct.
The agencies that wrote “Guidance on Nontraditional Mortgage Product Risk,” include all of the following, except:
A. The Office of the Comptroller of the Currency (OCC).
B. The Department of Housing and Urban Development (HUD).
C. The Office of Thrift Supervision (OTS).
D. The National Credit Union Administration (NCUA).
The correct answer is B. Yes, the Dept. of HUD did not participate in preparing this document. The other participating agencies were The Board of Governors of the Federal Reserve System (Board), and The Federal Deposit Insurance Corporation (FDIC).
All of the following are true of the loan origination fee for a HECM loan, except:
A. The loan origination fee is paid as a fee for services rendered to the lender for making the loan.
B. The loan origination fee is based on the selling price of the home.
C. If the value of the home is less than $125,000, the HECM loan origination fee is capped at $2,500.
D. If the value of the home is more than $125,000, the lender can charge 2% of the first $200,000 of value plus 1% of the amount over $200,000 up to a cap of $6,000.
The correct answer is B.
You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge the greater of $2,500 or 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.
^^^Which of the following is SRP:
A. Salvage recovery price
B. Separate record of purchase
C. Service release premium
D. Secondary recapture plan
Answer: C. This is paid to a creditor institution as a secondary transaction when a lender buys funded loans from another lender.
The Closing Disclosure is intended to be compared to which of the following:
A. The Initial Escrow Statement.
B. The Mortgage Servicing Disclosure Statement.
C. The Loan Estimate.
D. The Servicing Transfer Disclosure Statement.
The correct answer is C. The borrower compares the two forms. This will tell if the loan costs were provided in good faith.
The APR for an ARM that must be disclosed on the Loan Estimate and the Closing Disclosure must be based on which of the following:
A. The initial payment rate.
B. The lender’s margin.
C. The lender’s margin and the composite APR.
D. The APR is not required for an ARM because the interest rate is constantly changing.
The correct answer is C. The composite APR is based on the initial payment rate and the fully indexed rate that would exist for the remaining years on the loan term.
TILA defines an irregular transaction as any of the following, except:
A. One large advance equaling at least three (3) installment payments.
B. Multiple advances.
C. Irregular payment periods.
D. Irregular payment amounts.
The correct answer is A. This is not one of the characteristics of an irregular transaction.
After the death of a mortgagor, all of the following statements are true, except:
A. The mortgagee is not required to obtain approval from HUD to call the loan due and payable at the end of the deferral period.
B. The mortgagee may not require immediate payment in full until the end of the deferral period.
C. By the end of the deferral period, the mortgagor’s estate no longer has the authority to dispose of the property.
D. At the end of the deferral period, the HECM loan becomes due and payable, to include all principal, interest, and other charges owed to the lender.
The correct answer is C. The estate does have the authority to dispose of the property.
A local survey is ordered and the creditor discloses a charge of $400. The survey is waived by the borrower and never obtained. Since the charge falls into the category of 10% cumulative tolerance, how should this be handled?
A. Remove the $400 charge, but charge the borrower a $100 penalty for the change.
B. Remove the charge from the aggregate calculation prior to analyzing the amount for a 10% variance.
C. Follow the complex formula to deduct the 10% cumulative tolerance charge after all totals have been included.
D. Charge $40 for the 10% tolerance factor.
The correct answer is B. Extract the survey charge prior to analyzing the aggregate calculation.
All of the following statements are true regarding negative amortization and the HOEPA loan, except:
A. Negative amortization loans are prohibited with HOEPA loans.
B. Negative amortization is permitted to occur with HOEPA loans only if due to interest rate changes or payment schedule caps.
C. Negative amortization loans would cause an increase in the borrower’s total principal debt.
D. Negative amortization loans do not fully pay off the debt by the end of the term.
The correct answer is B. An experienced MLO will try to avoid negative amortization even under these circumstances.
Federal Banking Agencies include all of the following except:
A. Comptroller of the Currency
B. Director of the Office of Thrift Supervision
C. Department of Housing and Urban Development
D. Federal Deposit Insurance Corporation
The correct answer is C. Other Federal Banking Agencies include the Board of Governors of the Federal Reserve system and the National Credit Union Administration. The Department of Housing and Urban Development (HUD) is not a federal banking agency.
The credit under TILA must be offered under which of the following circumstances:
A. Subject to a prepayment penalty.
B. Subject to a finance charge.
C. Payable by written agreement in more than four (4) installments.
D. B & C.
The correct answer is D.
Which of the following are potential consequences of a borrower not having an impound account Except
A. The borrower will have to pay property costs directly.
B. The borrower may fall behind in property taxes and have to pay penalties and fines.
C. The lender may add any costs it has had to pay on behalf of the borrower to the loan amount.
D. The lender will increase rate on the loan
The correct answer is D. Lender cannot increase interest on a loan if a borrower do not have impound account. In addition, the lender may buy property insurance for the borrower and force the borrower to pay for it.
The amendment to Regulation Z that addresses compensation issues must be followed by which of the following:
A. Mortgage bankers
B. Mortgage brokers and their employees
C. Loan officers employed by insured depository institutions
D. All of the above
D
Regarding a loan, the term “principal” means closest to which of the following:
A. The amount due and payable in a balloon payment, excluding interest.
B. The amount due and payable in a balloon payment, including interest.
C. The amount originally borrowed.
D. The amount owed on the loan at any given time, excluding interest.
The correct answer is C. This is the best way to think of principal.
According to the TILA final rule, which of the following areprohibited:
A. Basing compensation on terms of previous transactions
B. Basing compensation on fees and income
C. Penalizing an MLO for GFE violations or misquotes of fees
D. All of the above
Answer: D. Yes, all of these are prohibited.
Which of the following disclosures is provided at settlement, or within 45 days of closing:
A. Servicing Transfer Statement.
B. Mortgage Servicing Disclosure Statement.
C. Initial Escrow Statement.
D. Closing Disclosure.
The correct answer is C.
HOEPA does not cover any of the following loans, except:
A. Reverse mortgages.
B. Loans on second homes.
C. Home Equity Loans.
D. A new construction loan.
The correct answer is C.
Compensation for an MLO can be based on any of the following, except:
A. The quality of an MLO’s loan files, sometimes known as a “pull-through” rate
B. Whether the customer is a new or existing customer
C. Whether the loan is for a primary residence or vacation home
D. Long-term loan performance
Answer: C. Yes, no distinction between primary residence or vacation home can be made to establish compensation.
A lender’s employment documentation requirements may include all of the following except:
A. Self-employed borrowers will have to provide personal and corporate tax returns for a minimum of two years
B. Original pay stubs for a 60-day period
C. Verification of Employment form
D. Appropriate W-2 forms
Answer: B. Thirty days, not 60.
All of the following would be loan disclosures required only in specific circumstances, except:
A. Charm Booklet.
B. Notice of Right to Rescind.
C. Mortgage Servicing Disclosure Statement.
D. Balloon Disclosure.
The correct answer is C. Yes, the Mortgage Servicing Disclosure Statement is a standard form issued within three (3) business days of receiving the loan application.
Used properly, the Rate-Checker can accomplish for a borrower which of the following:
A. Approve or deny their loan.
B. Give personal advice as to whether the loan the consumer is getting is good for them.
C. Shows the rates borrowers like them are being offered.
D. It incorporates information from the lenders’ external rate sheets.
The correct answer is C. The Rate-Checker provides useful information for the consumer to incorporate into the decision making process.
According to TILA, acceptable tolerances for the disclosure of finance charges are which of the following:
A. ½ of one percent tolerance if the loan is with a new creditor and there is no new advance.
B. One percent tolerance if refinancing with a new creditor and there is no new advance and no consolidation of existing loans.
C. ½ of one percent tolerance if the disclosed finance charge is understated by no more than 0.5% of the face amount of the note or $100, whichever is greater.
D. Both B and C.
The correct answer is D.
If applicable, and if the settlement service provider is other than the lender, which of the following disclosures is required before settlement but is not required within 3 business days after receipt of a completed application:
A. Mortgage Servicing Disclosure Statement.
B. Affiliated Business Arrangement (AfBA) Disclosure.
C. Initial Escrow Statement.
D. Servicing Transfer Statement.
The correct answer is B. In this case, the AfBA must be given at the time of the referral, or before if the borrower requests it.
Which of the following is true for the duration of compensation agreements:
A. They are in effect for the duration of the employment of the individual
B. They must remain in effect for 30 days
C. They must remain in effect for 90 days
D. They can be adjusted periodically and the time period is not specifically defined
Answer: D. Correct. Quarterly or semi-annually is the expectation.
NMLS
The NMLS online system was built and is maintained by which of the following organizations:
A. ABA
B. FFIEC
C. FINRA
D. CFPB
The correct answer is C. Yes, this is the Financial Industry Regulatory Authority and they operate several similar systems in the securities industry.
CFPB and AARMR stayed the NMLS but the system used to maintain is FINRA
Which of the following is responsible for ensuring that the content, delivery, and timing requirements of the Closing Disclosure set by the CFPB are met: A. Settlement agent. B. MLO. C. Mortgage broker. D. Creditor.
The correct answer is D. While all of these may cooperate in the closing of the loan, the law holds the creditor ultimately responsible for the content, delivery, and timing of the Closing Disclosure.
Which of the following would have to be disclosed to a borrower on a reverse mortgage:
A. All costs, including the cost of an annuity if purchased by the borrower.
B. Additional creditor compensation, if any.
C. Limitations on consumer liability, if applicable.
D. All of the above.
The correct answer is D. You can figure that all material facts will have to be disclosed.
When loans meet Fannie Mae/Freddie Mac standards and can be sold on the secondary market, they are called which of the following: A. Conforming. B. Conventional. C. Traditional. D. Subprime.
The correct answer is A. Conforming is the term that should jump out when considering meeting secondary market standards.
All of the following are true about interest rate buydowns, except:
A. A buydown refers to discount points.
B. Buydowns must be paid by the seller.
C. A discount point is one percent of the loan amount.
D. A buydown lowers the payment for the borrower.
The correct answer is B. A buydown can be paid by the buyer or seller, or even the builder or developer.
According to TILA, the final APR is considered accurate if it does not vary above or below the APR initially disclosed on the Loan Estimate by which of the following:
A. 1/8 of 1% for an irregular transaction.
B. ¼ of 1% for a regular transaction.
C. ½ of 1% for a regular transaction.
D. ¼ of 1% for an irregular transaction.
The correct answer is D. For information about an irregular transaction, move to the next question.
A consumer may waive or modify the three (3) day business day waiting period under which of the following circumstances:
A. The extension of credit is needed for a bona fide personal financial emergency.
B. The consumer has already received the Closing Disclosure.
C. The consumer specifically describes the financial emergency.
D. All of the above.
The correct answer is D. These circumstances and actions enable an early closing.
On the issue of financial accountability, the MLO must be covered by which of the following:
A. A net worth commensurate with the dollar amount of loans produced annually by the MLO.
B. A surety bond commensurate with the dollar amount of loans produced annually by the MLO.
C. A state recovery fund.
D. Any of the above.
The correct answer is D. A mortgage broker would be covered by the state recovery fund, which protects all real estate licensees. A mortgage banker would be covered either by net worth or a surety bond.
Creditors shall furnish TILA-required disclosures for reverse mortgages in which of the following manners:
A. Three days before closing.
B. Three business days before closing a closed-end credit transaction.
C. Three business days before closing the first transaction of an open-end credit plan.
D. Either B or C.
The correct answer is D.
What will happen with an ARM loan with a fully-indexed rate of 6% with a periodic adjustment cap of 2% if the index rate has risen 3% prior to the first 1-year adjustment:
A. The second year payment will be capped at 8%
B. The second year payment will be at 9% because a floating index rate supersedes a periodic adjustment cap the first year
C. The second year payment will be the same as without a periodic adjustment cap
D. The margin will adjust, causing the payment to rise
Answer: A. Yes, the 2% periodic adjustment cap allows the interest to rise to only 6%.
All of the following statements are true regarding Rural Development Section 502 loan programs, except:
A. A Section 502 loan may be guaranteed
B. A Section 502 loan is available to rural areas with a population of no more than 30,000
C. A Section 502 loan can be made directly to a borrower if no local lender is available
D. A Section 502 loan applies to single-family homes only
Answer: B. The definition of “rural” is generally up to 20,000 in population.
What happens if a revised Closing Disclosure is delivered to the borrower?
A. The borrower is given a new three (3) business day waiting period prior to loan consummation.
B. At this point in the process, costs are locked in and are not subject to change.
C. The loan still must close on the scheduled date.
D. The borrower and lender must honor the original closing disclosure that was provided.
The correct answer is A. Valid changed costs must be changed on the new form.
In applying for a HECM loan, if one of the borrowers does not meet the minimum age requirement of 62, which of the following can be done to obtain the loan anyway:
A. The younger borrower relinquishes title.
B. A non-borrowing spouse can disclose their status to the mortgagee at the origination of the loan.
C. The younger borrower gets a waiver from the CFPB.
D. A & B.
The correct answer is D. The non-borrowing spouse must have been the spouse of the HECM mortgagor at the time of closing and have remained the spouse of the mortgagor for the duration of the HECM mortgagor’s lifetime and continue to occupy the property. This way they will be able to continue to remain in the property after the death of the qualifying mortgager.
^^ Which of the following would be considered violations of HOEPA:
A. Leading a borrower to believe that he/she must complete the credit transaction even though they could rescind
B. Include three advance payments from the loan proceeds
C. Increasing interest rates on the consumer if he/she falls behind on payments
D. All of the above
Answer: D. Yes, all of these are prohibitions of HOEPA. Consumer protection is the obvious reason.
TILA does which of the following:
A. Sets limits on interest rates.
B. Sets limits on certain finance charges.
C. Regulates the disclosure of interest rates and finance charges.
D. Establishes a three (3) business day right of rescission on all purchase money loans.
The correct answer is C. The three (3) day right of rescission is for refinancing your home.
A Growth Equity Mortgage (GEM) uses which type of interest rate? A. Fixed. B. Adjustable. C. Interest only. D. Negative amortization.
The correct answer is A. The payment level increases regularly, but the interest rate is fixed
An Equity Participation Mortgage allows a lender to share in which of the following: A. Earnings. B. Income. C. Profits. D. Any and all of the above.
The correct answer is D. Yes, any of these can be arranged based on agreement.
All of the following are true regarding the issue of race and ethnicity for the Loan Application Register, except:
A. MLOs must ask the applicant for this information.
B. If the applicant declines to provide this information on the phone or Internet, the information need not be provided.
C. If the applicant is in the presence of the MLO and declines to answer these questions, the MLO must provide information as to the race and ethnicity as well as can be determined.
D. If the applicant declines to provide this information, their lack of cooperation could be held against them in the application for the loan.
The correct answer is D. It is their right to decline to provide this information and will not be held against them in the loan process
Which of the following best describes how a borrower with payment caps on an ARM loan could get in trouble:
A. They can’t. They are basically protected and able to stay within their budget
B. If their loan has payment caps but not period adjustment rate caps
C. Negative amortization
D. Both “B” and “C”
Answer: D. Correct. Let’s say a borrower’s monthly payment is $1000 P&I with a payment cap of 7.5%. Let’s say the index rate on their loan goes up 3%, raising the payment by $300. Because of their payment cap, the borrowers don’t have to pay $1300 per month. They have to pay only $1075 per month. But the rate is the rate, and the $225 per month they are not paying is being added to the balance of their loan. $225 x 12 months = $2700 additional loan balance after just one year. This is called negative amortization. After fives years of this, the loan balance would be $13,500 more than the initial balance. At that point, the lender will recast (recalculate) the loan payment so that the loan will fully amortize during the last 25 years of the term. The payment can go up substantially, and the payment cap does not apply to this adjustment. This is one way to experience PAYMENT SHOCK
According to the definitions in the model state law, all of the following would meet the definition of a depository institution, except: A. Bank. B. Savings & Loan. C. Mortgage Broker. D. Credit union.
The correct answer is C. Consumers do not make deposits with a mortgage broker.
^^^ABC Mortgage is originating a loan of $250,000 with an origination fee of 1%, a floor of $1,000, and caps that ensure the loan complies with all high cost tests. What is the origination fee paid to ABC Mortgage:
A. $1000
B. $2000
C. $2500
D. $3000
Answer: C. 1% of $250,000 is $2500.
Which of the following statements best identifies with a conventional loan:
A. A loan insured or guaranteed by a government entity.
B. A loan purchased by a government-sponsored enterprise.
C. A loan not insured or guaranteed by a government entity.
D. A loan that meets Fannie Mae/Freddie Mac standards and can be sold on the secondary market.
The correct answer is C. B and D would be similar, but the fact that the loan meets Fannie and Freddie standards and is acceptable for purchase makes it a conforming loan, not conventional.
The disclosure required within 3 business days of application that leads to advice for the borrower about whether a particular set of mortgage loan terms is a good fit based on the borrower’s objectives and circumstances is which of the following:
A. Mortgage Servicing Disclosure Statement.
B. List of HUD-Approved Housing Counselors.
C. Home Loan Tool Kit.
D. Loan Estimate.
The correct answer is B. This feature places another set of eyes on the process and ensures the loan is a good fit.
With a temporary buydown, underwriters will qualify a borrower using what rate of interest? A. The starting rate. B. The note rate. C. COFI. D. LIBOR.
The correct answer is B. Underwriters must be conservative and they are usually not willing to qualify the borrower at the starting rate for an interest rate reduction that may last only two or three years. They must use the note rate.
All of the following are prohibited practices in the residential loan business, except:
A. Receiving a loan application without having a valid MLO license.
B. While licensed, receiving a loan application that is not on a proper 1003 form.
C. Engage in any unfair or deceptive practice toward any person.
D. Advertising an interest rate that is not available at the time of solicitation.
The correct answer is B. If the information received from the borrower contains the initial six items of information (name of borrower, social security number, gross monthly income, loan amount sought, address of subject property, and estimate of property value) and is a request for a response to a solicitation of an offer, it is considered an application, whether on a 1003 form or not.
According to TILA, fees charged by a third party that conducts the loan closing (like an escrow, title company, or attorney) are considered finance charges under which of the following circumstances:
A. If the creditor requires the particular services.
B. If the creditor requires the closing agent to impose the charge.
C. If the creditor retains a portion of the third party charge.
D. All of the above.
The correct answer is D. These are circumstances unique to working with a mortgage broker.
Under HOEPA, a lender must verify a borrower’s income in any of the following ways except:
A. By compiling written income verifications
B. FICO scores
C. Debt to income ratios
D. Cash flow analysis
Answer: B. FICO scores will not verify income, cash flow, or ability to repay the loan.
Which of the following best describes the margin with an ARM loan Except
A. The difference between the fully indexed rate and the index
B. Extra percentage points of interest added by the lender to ensure coverage of expenses and earning of profits
C. A padding of profit margin authorized by the feds and fluctuating throughout the term of the loan
D. The profit margin that stays the same
Answer C - the rest are descriptive of margin
The buyer has a 3/27 loan. After three years, it changes every year and includes principal and interest. By the end of the term, the buyer pays off the loan amount. This loan is best described as which of the following:
A. Fixed.
B. Adjustable.
C. Graduated payment.
D. Balloon payment.
The correct answer is B. This loan is not fixed nor balloon. A graduated payment loan is by definition a graduated payment starting with year one. This is an adjustable loan.
All of the following statements regarding compensation agreements are true, except:
A. Each employer can have only one compensation agreement with the employee they pay
B. Each employee or entity that receives compensation can have only one compensation agreement with the party that pays them
C. An employer of retail loan officers could have different agreements with each of their employees
D. An MLO or employee could have different agreements with a lender depending on the type or terms of different loans
Answer: D. Yes, this is not true. The agreement applies to all types of loans on all types of residential property.
Under TILA, creditors must inform consumers of their right to rescind by providing how many copies of the Notice of Right to Rescind to each consumer entitled to rescind?
A. One.
B. Two.
C. One in triplicate.
D. One in quadruplicate.
The correct answer is B. The law requires two copies that are separate from the sale or credit documents at loan consummation.
According to RESPA, a direct or beneficial ownership interest exists when a person owns at least what percentage in a settlement service provider?
A. 1%
B. 5%
C. 10%
D. 25%
The correct answer is A. Yes, a 1% beneficial interest in a settlement service provider results in an affiliated business arrangement.
According to TILA, for ARMs, the payment summary table must include all of the following, except:
A. The maximum interest rate possible in the first five years of the loan.
B. The maximum payment possible in the first five years of the loan.
C. The minimum and easiest the payment can be in the first five years of the loan.
D. The worst case example showing the maximum payment and rate over the life of the loan.
The correct answer is C. This information would not prepare the borrower for the challenge they may face.
If the mortgagee, during the Financial Assessment of a prospective borrower seeking to purchase a home with a HECM loan, discovers a Chapter 7 Bankruptcy, all of the following are true, except:
A. If two years have elapsed since the discharge date of the bankruptcy, the borrower may be able to get the HECM loan.
B. With a Chapter 7 Bankruptcy, even after two years, the borrower definitely will not be considered for the loan.
C. If during the two years since the discharge of the bankruptcy the borrower has been able to establish good credit, he/she may get the loan.
D. If during the two years since the discharge of the bankruptcy the borrower has chosen not to incur new credit obligations, he/she may get the loan.
The correct answer is B. Based on these conditions in the other answer choices, the borrower may be able to get the loan.
To waive or modify the three (3) business day waiting period, the CFPB provides guidelines regarding the bona fide personal financial crisis to include which of the following:
A. An imminent foreclosure will proceed unless loan proceeds are made available.
B. Borrowers must request the waiver in a hand-written statement.
C. The handwritten statement must be signed by all primary obligors on the loan.
D. All of the above.
The correct answer is D.
Under all of the following circumstances a revised Loan Estimate may not be provided to a borrower, except:
A. If it cannot be received by the borrower four days prior to consummation of the loan.
B. When there will be no changes to the original Loan Estimate.
C. When the Closing Disclosure has already been provided to the borrower.
D. When valid changed circumstances exist.
The correct answer is D. Of this list of answers, this is the only under which a revised Loan Estimate may be provided.
Until the Loan Estimate disclosure and other required disclosures are delivered to the borrower, an MLO may charge the borrower which of the following fees:
A. Appraisal fee.
B. Termite inspection fee.
C. Credit report fee.
D. Survey fee.
The correct answer is C. This is the only fee that can be collected prior to delivery of required disclosures at this stage of the loan origination process.
How often may a state regulatory agency examine, review, or investigate an MLO under the SAFE Act?
A. Annually.
B. Bi-annually.
C. Not more than three times per year.
D. As often as necessary to carry out the purposes of the SAFE Act.
The correct answer is D.
Which of the following is disclosed on the integrated Closing Disclosure for the borrower that previous forms did not contain:
A. APR.
B. Nominal interest rate.
C. Whether or not changes had occurred between the initial Loan Estimate and the Closing Disclosure.
D. Total closing costs due at closing.
The correct answer is C. This is on page 3 of the CD, Calculating Cash to Close.
With an ARM, the period of time between rate changes is called which of the following:
A. The margin
B. The carryover
C. The adjustment period
D. The interim
Answer: C. This is correct.
Better loan terms in a Refinance Mortgage would include any of the following, except:
A. Change a 30-year loan to a 15-year loan.
B. Change a fixed-rate loan to an adjustable.
C. Lower the interest rate.
D. Consolidate multiple mortgages into one.
The correct answer is B. Better loan terms mean the opposite—changing from an adjustable rate to a fixed-rate loan.
Which one of these classes of people is protected under the Fair Housing Act but not under the Equal Credit Opportunity Act:
A. Race
B. Sex
C. Disability
D. Religion
The correct answer is C. This is correct.
According to the TILA final rule, how are seller paid closing costs classified:
A. As seller funds
B. As a credit to the seller
C. As borrower funds
D. As funds to be used at the discretion of the broker
Answer: C. This is correct.
In a loan transaction not subject to rescission provisions, which of the following must receive a Closing Disclosure Except
A. Any consumer with primary liability for the mortgage loan.
B. All consumers on the loan.
C. Each and every borrower on the loan.
D. The non-signing spouse
The correct answer is D. This is a statement of fact.
How can income that is seasonal, sporadic, or occasional help a borrower qualify for a loan:
A. It can’t
B. It must be verified
C. It must be averaged
D. It must be verified and averaged
Answer: D. Yes, if it is verified to occur and is averaged throughout the year, it is real.
All of the following are true regarding APR on an ARM, except:
A. The APR is an important part of comparing the costs of getting a loan
B. The APR on an ARM can be compared directly to the APR on a fixed-rate loan
C. The APR on an ARM can be compared directly to the APR of a similar ARM
D. The APR on an ARM must be based on the lender’s margin and the composite annual percentage rate
Answer: B. The composite annual percentage rate is based on the initial payment rate and the fully indexed rate that would exist for the remaining years on the loan term. This is why the APR on an ARM cannot be compared directly to the APR on a fixed-rate loan.
A borrower wishes to have a graduated 2/1 buydown. To help pay for the buydown, the borrower will deposit cash into an interest-bearing escrow account. If the loan is for $200,000 at 6% for 30 years, and the borrower wants 2% below the interest rate the first year, and 1.5% the second year, which of the following is closest to the total subsidy to pay for the buydown:
A. $3,000
B. $5,000
C. $7,000
D. $7,500
Answer: C. At 6%, the payment on a $200,000 loan for 30 years is $1,000. At 4%, the payment is $667. The subsidy is $333/mo x 12 = $3996. At 4.5%, the payment is $750. The subsidy is $250/mo x 12 = $3000. $3000 + $3996 = $6996, or $7,000. At the end of the second year, the effective interest rate for the loan reverts to the agreed upon 6%.
On an owner-occupied refinance, the three (3) day right of rescission must be signed by which of the following:
A. Just one borrower.
B. All borrowers must be in agreement.
C. Escrow.
D. The mortgage broker.
The correct answer is A. The exercise of the right by one consumer is effective for all consumers who have the right to rescind on that loan.
Which of the following represents a beneficial ownership interest in a business that provides settlement services:
A. A 1% ownership interest.
B. More than 1% ownership interest.
C. An affiliate relationship with or a direct or beneficial interest of more than 1% ownership interest.
D. 25% ownership interest.
The correct answer is C. This is the most complete and best answer.
How does RESPA regard an affiliated business relationship in the transaction of a residential mortgage loan?
A. Affiliated business relationships are illegal within the context of RESPA
B. Affiliated business relationships are discouraged within the context of RESPA
C. Affiliated business relationships are legitimate but must be disclosed
D. If the affiliated business relationship brings profit to the MLO in the transaction, they are forbidden to take advantage of them
The correct answer is C. This is true.
To obtain a reverse mortgage, if one of the owners is 64 and the other is 60, how must they proceed to obtain the loan?
A. They would have to wait two years.
B. The younger borrower would have to be removed from title.
C. They would have to seek a waiver from HUD.
D. They would have to consent to a higher interest rate.
The correct answer is B.
How are additional payments of principal with the monthly payment regarded on an ARM:
A. Most of the time they are regarded as a partial prepayment and incur a penalty
B. Most of the time the lender allows such payments of principal and they do not incur a prepayment penalty
C. It is based on the agreement between borrower and lender
D. Both “B” and “C”
Answer: D. Correct. A borrower should understand the lender’s terms on this before entering into the loan.
According to the TILA final rule, all of the following would be considered payments made directly by the consumer, except:
A. The consumer writes a check to cover some of their closing costs
B. Payments from loan proceeds
C. Yield spread premiums
D. None of the above
Answer: C. Yes, yield spread premiums are not considered direct payments from the consumer.
All the following are true regarding the note rate with buydowns, except:
A. On a permanent buydown, the note rate will be the actual reduced interest rate
B. On a temporary buydown, the qualifying rate will generally be start rate, not the note rate
C. On a temporary buydown, the qualifying rate will generally be the note rate, not the start rate
D. The note rate refers to the nominal rate, the rate stated in the note
Answer: B. This is the correct answer because the note rate more accurately reflects the rate the borrower will have to pay for most of the term.
Stable monthly income that helps a borrower qualify for the loan includes all of the following except:
A. Regular income from a primary job
B. Any tax-free income
C. Occasional bonuses that cannot be verified
D. Pensions
Answer: C. Bonuses must be consistent and verifiable.
All of the following are activities in the residential loan business that require a license, except:
A. Advising on loan terms.
B. Collecting information on behalf of the consumer pertaining to a residential mortgage loan.
C. Extending credit related to timeshare plans.
D. Preparing loan packages.
The correct answer is C. Extending credit on timeshare plans is not an activity requiring an MLO license.
If a consumer exercises his right to rescind the loan, all of the following statements are true, except:
A. The right exercised by one consumer is effective for all consumers on the loan.
B. The borrowers have no liability for the loan including finance charges.
C. The creditor must return all monies it collected related to the loan within 30 calendar days.
D. The mortgage is void.
The correct answer is C. The creditor must return all monies collected with 20 calendar days.
In a reverse mortgage, TILA requires which of the following regarding disclosure in the area of payments to the consumer Except
A. Any advance to the consumer must be disclosed.
B. Any costs of an annuity and annuity payments must be disclosed.
C. Regular payments to the consumer must be disclosed.
D. The amount of services that customer can choose on their own
The correct answer is D. According to TILA, all of this must be disclosed.
An open-end mortgage is often set up in which of the following ways: A. As a direct line from the ATM. B. As a home equity line of credit. C. As a reduction option mortgage. D. As a wraparound mortgage.
The correct answer is B. This way the interest rate is adjustable.
^^^According to Regulation Z, if an ad is for credit secured by a dwelling, no other rate but APR can be stated in the ad, except: A. The yield. B. APR plus 1/8 of 1%. C. The simple annual rate. D. The truncated rate.
The correct answer is C. This is known as the nominal rate, or interest rate. It is the rate that is multiplied against the balance of the loan to determine how much interest is due from this month’s payment.
The expiration period for the availability of charges and terms is located where on the Loan Estimate?
A. Page 2 of the Loan Estimate in the Loan Costs section.
B. Page 1 of the Loan Estimate in the Loan Terms section.
C. Page 3 of the Loan Estimate in the Other Considerations section.
D. Page 1 of the Loan Estimate in the Rate Lock section.
The correct answer is D. For good test preparation, it is recommended that the student get very familiar with the new forms—what’s on the forms, where different items are located, what the various provisions mean and what their purpose is. Look for what benefit there is to the consumer.
An initial index value plus a lifetime cap equals which of the following: A. Current index rate. B. Current index value. C. Fully indexed rate. D. Maximum index rate.
The correct answer is D. For example, if the initial index rate is 5.75% and the lifetime cap is 6.25%, the maximum interest rate is 12.00%.
All of the following statements are true regarding a blanket mortgage, except:
A. A blanket mortgage is often used to finance subdivision developments.
B. A blanket mortgage covers more than one parcel of land or lot.
C. A blanket mortgage usually includes a full release clause.
D. A blanket mortgage allows some of the lots of a subdivision to be released and no longer be encumbered.
The correct answer is C. It is a partial release clause, thus allowing some of the lots to be released as the note is paid down.
Which of the following best describes a graduated payment buydown plan:
A. A buydown plan that reduces the interest throughout the term of the loan.
B. A buydown plan where payments in the early years are subsidized by prepaid interest.
C. A buydown plan where payments start low but increase each year until they’re sufficient to amortize the loan.
D. A buydown plan where the interest rate is reduced for at least three years of the loan.
The correct answer is C. Hence the term graduated payment buydown plan.
The “deed scam” fraud scheme involves which of the following:
A. Reinstate the suspension without a hearing
B. Reinstate the suspension after a hearing
C. Simply revoke the license for lack of cooperation
D. Forgive and reinstate the licensee to full standing
The correct answer is A. Yes, correct according to B&P Code 10175.2.
Which of the following statements is true regarding FNMA’s use of the housing expense ratio:
A. Their standards are identical to FHA, 31%/43%
B. They put most emphasis on the front end ratio because that is the housing expense ratio in relation to value
C. They put most emphasis on the back end ratio because it considers all of the borrower’s recurring debt obligations and the benchmark is 36%
D. FNMA operates by its own standards and does not use housing expense ratios
Answer: C. This is correct.
DTI Ratios FNMA/FHLMC: 28/36% FHA: 31/43% VA: 41% back end only or residual income RHS: 29/41%
Financial institutions must submit their report to their supervisory agencies regarding loans and applications how often and when:
A. Bi-monthly starting in January of each year.
B. Bi-annually starting in January of each year.
C. Once a year every March.
D. At the end of every year in December
The correct answer is C.
Which of the following statements are true regarding federally mandated waiting periods prior to closing a loan:
A. They are federal mandates and there are no exceptions.
B. There are exceptions for holidays when spending money is needed.
C. There are exceptions such as a bona fide personal financial emergency, like imminent foreclosure.
D. Only state guidelines permit exception.
The correct answer is C. This is a statement of fact.
None of the following would be defined as receiving a loan application, except:
A. A mortgage broker receives a loan application but does not verify the information on the application.
B. A mortgage broker receives a loan application through the mail and forwards it without review to loan approval personnel.
C. An individual explains the contents of an application to a borrower and where information is to be provided on the application.
D. Responding to an inquiry about a prequalified offer that a prospective borrower has received from a lender.
The correct answer is A. When an individual takes a loan application, they are not responsible for verifying the information on it. And physically handling a completed application form is not taking an application.
Which of the following represents the front and back end ratios for Conventional loans:
A. 28%-32%
B. 28%-36%
C. 31%-43%
D. 32%-45%
Answer B
DTI Ratios FNMA/FHLMC: 28/36% FHA: 31/43% VA: 41% back end only or residual income RHS: 29/41%
^^^According to the Code of Ethics of the National Association of Mortgage Brokers (NAMB), all of the following are true regarding the disclosure of financial interests, except:
A. MLOs must avoid all conflict of interest between your self interest and your professional duty.
B. MLOs must avoid even an apparent conflict of interest.
C. Any financial interest an MLO has in a property being offered as collateral should be disclosed.
D. Any financial interest an MLO has in a property that was received as part of an inheritance in the family estate does not have to be disclosed.
The correct answer is D. Yes, this is the incorrect statement.
The Home Loan Toolkit replaces which of the following:
A. The Loan Estimate
B. HUD Special Information Booklet
C. The “Know Before You Owe” Booklet
D. The Mortgage Servicing Disclosure Statement
The correct answer is B. The HUD Special Information Booklet still contains good information, but the Home Loan Toolkit offers a new format for interactivity.
How do Home Equity Conversion Mortgages (HECMs) differ from standard reverse mortgages regarding basic features?
A. With a HECM loan, the minimum age is 60.
B. With a HECM loan, the property must be unencumbered.
C. With a HECM loan, there are no income or credit requirements.
D. Regarding basic features, HECMs and standard reverse mortgages are about the same.
The correct answer is D. HECM loans, of course, are insured by FHA for the protection of the approved lender.
If the amount paid by the consumer at closing exceeds the amounts disclosed on the Loan Estimate beyond the acceptable tolerance threshold, the creditor must refund the excess to the consumer within what time frame?
A. Within 30 days of closing.
B. Within 60 days of consummation.
C. Within 75 days of funding.
D. Within 45 days of closing.
The correct answer is B. This is a new CFPB rule.
According to TILA, all of the following charges would be excluded from the finance charge, except:
A. Appraisal fee.
B. Fees for inspections for assess the condition of the property.
C. Appraisal review fees.
D. Credit report fees.
The correct answer is C. An appraisal review fee is a legitimate finance charge that would be added to the APR
All of the following are true according to Reg. Z regarding revised disclosures, except:
A. Revised disclosures may not be delivered on the same day as the Closing Disclosure.
B. If a changed circumstance occurs prior to loan consummation, a creditor must provide a revised Loan Estimate within four (4) business days of loan consummation.
C. If a changed circumstance occurs too close to loan closing, the valid changed circumstance and it’s applicable revision may be noted on the Closing Disclosure.
D. Upon redisclosure of a corrected Loan Estimate, the borrower receives a new three (3) business day period to review the disclosures prior to consummation.
The correct answer is B. Under these circumstances, a creditor may not provide a revised Loan Estimate within four (4) business days of loan consummation. Closing would have to be extended.
Business and commercial use under TILA would include all of the following, except:
A. Owner-occupied single family residence.
B. Non-owner occupied single family residence.
C. Tenant-occupied fourplex.
D. When credit is extended to purchase or rehabilitate a non-owner occupied house.
The correct answer is A. TILA does not apply to business and commercial use, but would apply to the owner-occupied single family residence.
When a reverse mortgage becomes due and payable, all of the following are true statements, except:
A. The lender can sell the house right away.
B. The heirs of the last surviving mortgagor can deed the property to the lender in lieu of selling it.
C. The borrower or borrower’s heirs cannot owe more than fair market value of the property.
D. The lender has no claims on other assets owned by the mortgagor or heirs to the estate.
The correct answer is A. The lender is not the owner of the house, and cannot sell it. The lender usually waits for payment for 12 months if the loan is terminated by death of the mortgagor, and could foreclose if that becomes necessary.
A fundamental question that the underwriter must answer in the underwriting process is which of the following:
A. In the event of default, does the borrower have sufficient cash to reinstate the loan?
B. If this loan is approved, will hypothecation play an important part in the process?
C. In the event of default, will the property pledged as collateral be of sufficient value to assure recovery of the loan amount for the lender?
D. Will the note be secured by a mortgage contract or deed of trust?
Answer: C. This is what is significant to the lender. If the borrower defaults, does the lender lose, or are they able to recover the amount loaned?
The cost approach is used on all of the following types of properties, except:
A. Income Producing Property
B. Non-income producing properties
B. Special properties
C. Houses
Answer A
According to the TILA final rule, which of the following best describes compensation received by an MLO employed by a broker or an insured depository institution:
A. The paycheck the MLO receives for originating the loan
B. All origination fees
C. Contract processing fees as well as loan origination fees
D. All up-front fees, but not the yield spread premium
Answer: A. That’s it! The broker or institution will separate the MLO’s compensation from other fees paid out to non-affiliated third parties.
Which of the following approaches to value would be used to appraise a five-unit apartment building:
A. Capitalization
B. Unit-in-place method
C. Gross rent multiplier
D. Sales comparison approach
Answer: A. Capitalization is used for properties of five units or more. Four units and less require comparison, or the gross rent multiplier approach.
Which of the following is handled differently on the new Loan Estimate form from previous disclosure forms:
A. Charge for homeowner’s insurance.
B. Estimated cash to close shows earnest money deposit deducted.
C. Daily interest charges.
D. Cost of services borrower can shop for.
The correct answer is B. Once again, this is to clarify for the borrower the amount of cash due at closing. This helps a first time buyer understand exactly what they need to provide at closing.
If a lender is in violation of HOEPA, what recourse does a consumer have?
A. Sue for recovery for statutory and actual damages.
B. Sue for court costs and attorney fees.
C. Rescind the loan for up to three (3) years.
D. All of the above.
The correct answer is D. Yes, the consumer can do all of these if the lender violates their rights.
In claiming a bona fide personal financial emergency, the consumer must do which of the following:
A. Give the creditor a dated, written statement that describes the emergency, like imminent foreclosure.
B. Specifically modify or waive the waiting period.
C. Include the signatures of all consumers who are primarily liable for the mortgage.
D. All of the above.
The correct answer is D. Yes, these are the steps that must be taken.
An applicant on a 1003 must not conceal which of the following:
A. If they are obligated to pay alimony or child support
B. If they intend to occupy the property as their primary residence
C. If they have any outstanding judgments, bankruptcies, or foreclosures
D. All of the above
Answer: D. Yes, all of these must be freely disclosed on a loan application.
None of the following is considered an MLO, except:
A. A loan agent at Bank of America.
B. A loan processor or underwriter.
C. A real estate broker engaged exclusively in listing and selling homes.
D. An individual solely involved in extending credit for timeshare plans.
The correct answer is A. Yes, this person is an MLO working for Bank of America and is registered as an MLO but not licensed.
How many pages does the new integrated Closing Disclosure form contain? A. 2. B. 3. C. 4. D. 5.
The correct answer is D. Five pages.
All of the following are true about the rate adjustment period with ARMS, except:
A. They are regulated by statute to be every six months.
B. They could be every few months up to seven years.
C. One of the common rate adjustment periods is every year.
D. The rate could adjust every six months, but not necessarily.
The correct answer is A. ARMs could have more flexibility than this.
A borrower can use the yield spread premium from the loan in which of the following ways:
A. Closing costs.
B. Down payment.
C. Points.
D. Kickback.
The correct answer is A. Closing costs are a way the borrower can use the yield spread premium from the loan. The YSP can no longer be paid to the MLO as compensation as a secondary source of income in the transaction.
Which of the following laws are enforced by the CFPB:
A. Gramm-Leach Bliley Act.
B. Home Ownership and Equity Protection Act. (HOEPA)
C. Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act).
D. All of the above.
The correct answer is D.
To obtain a reverse mortgage, all of the following are required, except:
A. That there be sufficient equity in the home.
B. That the home be paid off free and clear.
C. That the home have no secondary financing on it.
D. That the home have no financing requiring a balloon payment.
The correct answer is B. Yes, it is not required that the home be paid off free and clear.
All of the following statements are true regarding the deferral period of the due and payable clause of a HECM loan, except:
A. A HECM loan is not assumable during the deferral period.
B. Because the spouse was identified in the loan documents during the origination of the loan, the surviving, non-borrowing spouse will be able to receive loan proceeds during the deferral period.
C. The surviving, non-borrowing spouse will not be able to receive loan proceeds during the deferral period.
D. Escrowed monies from a Set-Aside fund are allowed to be disbursed per terms and conditions of the loan.
The correct answer is B. Yes, because the HECM is not assumable during the deferral period (after the death of the qualified mortgagor), no loan proceeds can be paid to the surviving, non-borrowing spouse.
When required, the CHARM Booklet must be provided at which of the following times:
A. When the loan application is made.
B. Before the payment of any non-refundable fees.
C. Whichever occurs first between A and B.
D. Within 10 business days of receiving a completed loan application.
The correct answer is C. This is a statement of fact.
Under TILA, what is the test that separates owner-occupancy from a business or commercial loan?
A. If the owner will occupy the house for more than three (3) business days.
B. If the owner will occupy the house for 51% of the year.
C. If the owner will occupy the house for more than 14 days.
D. If the owner will occupy the house for a minimum of a year.
The correct answer is C. This makes the house an owner-occupied property, and exemptions from TILA regulations are not applicable.
Effective with case numbers assigned on or after April 27, 2015, A Life Expectancy Set-Aside on a HECM loan can be reserved for which of the following charges:
A. Property taxes and special assessments.
B. Hazard insurance premiums.
C. Flood insurance premiums, if applicable.
D. All of the above.
The correct answer is D. This, of course, to ensure that these property charges are paid in a timely manner.
According to the FCRA, what is the time limit a credit reporting agency may report a criminal conviction?
A. Five (5) years.
B. Seven (7) years.
C. Ten (10) years.
D. There is no time limit for a criminal conviction.
The correct answer is D. While a bankruptcy is a serious event, a criminal conviction has more serious consequences than a bankruptcy.
A creditor may issue a revised Loan Estimate in which of the following circumstances:
A. When a borrower receives a Loan Estimate from an MLO and does not provide an intent to proceed, and the borrower re-engages in the transaction after the expiration date of the Loan Estimate.
B. When the transaction involves the financing of new construction and the creditor reasonably expects that settlement will occur more than 60 calendar days after the original Loan Estimate has been provided.
C. Any time a valid changed circumstance has occurred that has altered the material facts of the transaction.
D. All of the above.
The correct answer is D. All of these are legitimate reasons to issue a revised Loan Estimate.
Consumers are entitled to a free copy of their credit report under all of the following circumstances, except:
A. When the consumer was a victim of identity theft and a fraud alert was placed in their credit file.
B. When the credit file contains inaccurate information as a result of fraud.
C. When the consumer is on public assistance or is unemployed.
D. When the information in the credit file resulted in a Notice of Incomplete Application.
The correct answer is D. A Statement of Adverse Action would trigger a free copy of their credit report, but not a Notice of Incomplete Application.
Which of the following contributes to the definition of a residential mortgage loan originator:
A. The person is engaged in the business of residential mortgage loan origination.
B. The business is conducted in a commercial environment.
C. The business is conducted with some degree of habitualness and repetition.
D. All of the above.
The correct answer is D. Also, the MLO is engaged in the business with the intent of financial gain.
Which of the following best describes the fully-indexed rate:
A. The rate currently indicated by one of the traditional well-recognized indexes such as LIBOR, COFI, or CMT
B. The current rate indicated by one of the well-recognized indexes plus the margin
C. The current rate indicated by one of the well-recognized indexes minus the margin
D. The fully-indexed rate equals the initial index value
Answer: B. This is correct.
The SAFE Act refers to a residential mortgage loan as any loan primarily for the following purpose except:
A. Personal use
B. Family use
C. 1-4 owner-occupied use
D. Household use
The correct answer is C. The SAFE Act does not mention owner occupied properties. The SAFE Act defers to TILA, Sec 103 (v), which defines a dwelling as a residential structure or mobile home which contains one-to-four family housing units, or individual units of condominiums or cooperatives.
A reverse mortgage is also known as which of the following: A. Reverse equity mortgage. B. Reverse annuity mortgage. C. Home Equity Conversion Mortgage. D. All of the above.
The correct answer is D. The HECM is an FHA insured loan and is the most popular reverse mortgage program
Which of the following does not require an MLO license:
A. An individual who indirectly takes a mortgage loan application.
B. An individual who offers or negotiates terms of a loan.
C. An attorney who originates mortgage loans as part of his law practice.
D. None of the above.
The correct answer is D. Yes, even a licensed attorney in good standing with the Bar Association needs an MLO license if they are originating loans.
All of the following are true for an interest-only (I-O) ARM, except:
A. The payment can never increase during the I-O period
B. An interest-only ARM is still fully amortized
C. The longer the I-O period, the higher the monthly payments will be after the I-O period ends
D. Payments can increase after the I-O period, even if interest rates go down
Answer: A. The payments can increase because for some I-O ARMS, the interest rate adjusts during the I-O period as well.
RESPA allows a lender to establish an escrow account cushion of which of the following:
A. 1/3
B. 1/6
C. 1/4
D. 1/8
The correct answer is B. Yes, the allowed cushion is 1/6 of the total disbursements for the year. This usually amounts to two months worth of disbursements.
When is the typical reverse mortgage due and payable Except
A. When the borrower dies.
B. When the borrower sells the house.
C. When the borrower ceases to live in the house for 12 consecutive months.
D. When the borrower ceases to live in the house for 6 consecutive months.
The correct answer is D. Yes, these are typically the occasions when the borrower must repay the loan.
All of the following are true about the rate adjustment period with ARMS, except:
A. They are regulated by statute to be every six months.
B. They could be every few months up to seven years.
C. One of the common rate adjustment periods is every year.
D. The rate could adjust every six months, but not necessarily.
The correct answer is A. ARMs could have more flexibility than this.
Clerical or support duties in mortgage loan origination include all of the following, except:
A. Receiving information needed for the processing of a residential mortgage loan.
B. Distributing information needed for the processing of a residential mortgage loan.
C. Negotiating loan rates or terms with the consumer.
D. Analysis of information needed for the processing of a residential mortgage loan.
The correct answer is C. Clerical and support duties are performed under the supervision of a licensed individual, and do not involve negotiating with the consumer.
According to the model state law, the term person refers to which of the following: A. A natural person. B. A corporation. C. A partnership. D. Any of the above.
The correct answer is D. Person could also refer to company, limited liability company, or association.
According to the SAFE Act, Mortgage Call Reports must be submitted through the NMLS how frequently? A. Monthly. B. Quarterly. C. Bi-annually. D. Annually.
B
If an individual verifies the information in the file, sends out employment verification forms, and works with the title company, which function does this represent:
A. Processing
B. Origination
C. Underwriting
D. Servicing
Answer: A. Yes, this is processing, a very necessary function.
The new Loan Estimate form does not apply to which of the following, according to federal regulation:
A. Mobile homes.
B. Time shares.
C. Reverse mortgages.
D. All of the above.
The correct answer is D. The Loan Estimate also does not apply to loans made by a person or entity that makes five or fewer loans per year, and a loan made to a business entity rather than a natural person.
All of the following statements are true about a Graduated Payment Mortgage (GPM), except:
A. The GPM carries a scheduled period of negative amortization.
B. The borrower makes larger payments at the beginning of the loan, with payments decreasing yearly in the later years.
C. Over the term, the payments fully amortize the loan.
D. The borrower makes increasingly higher payments until they are sufficient to amortize the loan.
The correct answer is B. This is the incorrect statement. The others are true
According to ECOA, borrowers have the right to request a copy of the appraisal report used in the decision-making process within what time frame?
A. 30 days.
B. 60 days.
C. 90 days.
D. 120 days.
The correct answer is C. This is so the creditor cannot use the appraisal report as the reason for the decision to decline.
All of the following would meet a lender’s continuous employment requirements except:
A. The borrower has been employed by the AG Disposal Company for fifteen years
B. The borrower has been employed by U.C. Irvine as a professor for six months after recently obtaining his Ph.D
C. The borrower has been a parole officer for 18 months—previous employment with a supermarket chain
D. The borrower has been a sales manager with Burlington Coat Factory for one year—previous employment as sales manager for Sears for four years
Answer: C. This does not meet the requirement for continuous employment because the employment has been in different fields. “B” is acceptable because of special education and training.
Which of the following are the housing expense ratios used on a VA loan:
A. Front end 28%/Back end 36%
B. Front end 31%/Back end 43%
C. Front end 32%/Back end 41%
D. VA does not use a front end ratio/back end 41%
D
DTI Ratios FNMA/FHLMC: 28/36% FHA: 31/43% VA: 41% back end only or residual income RHS: 29/41%
The Federal Financial Institutions Examination Council (FFIEC) publishes information about red flags of mortgage fraud. All of the following would be considered a red flag of mortgage fraud except:
A. Stated income
B. Multiple owners with the same last name
C. Sale subject to seller acquiring title
D. Steering buyers to a specific lender
D
According to the TILA final rule, which of the following best describes the originator:
A. Must be an individual who originates the loan
B. Refers only to an institution that originates a loan
C. Could be either an individual or a company, depending on the circumstances
D. Not enough information given to answer
Answer: C. According to the TILA final rule, the originator is either an individual loan originator at a “creditor” institution, or an entity not acting as a creditor, such as a company that uses the lender funds to close a loan.
Which of the following best expresses the difference between a home eqityloan and a home equity line of credit:
A. They each tap the equity in one’s house.
B. The HELOC requires approval every time the borrower wants more money.
C. The home equity loan is usually a one-time loan for a specific amount of money.
D. The HELOC is a closed-end loan.
The correct answer is C. This is the only statement that addresses the difference between a home equity loan and HELOC.
NMP Guidance states that the mortgage loan underwriting standards should address the effect of a substantial payment increase on the borrower’s capacity to repay a nontraditional mortgage loan when amortization begins. In the case of an interest only loan, this means which of the following:
A. The amount of cash the borrower has in the bank at the time of underwriting.
B. The amount of cash the borrower has in the bank at the time of the beginning of amortization of the loan.
C. The borrower’s ability to pay the debt by final maturity at the fully indexed rate (if an ARM) or note rate (if fixed).
D. The borrower’s ability to delay amortization as long as possible.
The correct answer is C. The borrower will have to be able to start making fully amortized payments and continue to make those payments until the debt is liquidated.
The mortgage payment adjustment period occurs most often for which of the following situations:
A. Interest only loans with a hybrid adjustment period.
B. Negative amortization loans.
C. Standard ARMs.
D. Growth Equity Mortgages (GEMs).
The correct answer is B. Here, the borrower’s actual principal and interest payments are recast usually for negative amortization loans.
If a change renders the APR inaccurate prior to closing, the Mortgage Disclosure Improvement Act (MDIA, 2009) requires which of the following:
A. That the borrower be given a corrected disclosure of the monthly payments.
B. That the borrower be given a corrected disclosure of the APR only.
C. That the borrower be given a corrected disclosure of all terms.
D. That the borrower be given a corrected disclosure of the total finance charge.
The correct answer is C. This in the interest of consumer protection and having all of the material facts in hand.
If an individual maintains a loan after it has closed, receives payments, and provides an accounting of the loan, which function does this represent:
A. Processing
B. Origination
C. Underwriting
D. Servicing
Answer: D. Yes, this process is called servicing.
Which of the following time frames must be observed by the lender to correct non-numerical clerical errors and refunds for tolerance violations: A. Three (3) business days. B. Ten (10) business days. C. Thirty (30) days. D. Sixty (60) days.
The correct answer is D. This according to TILA.
The final version of “Guidance on Nontraditional Mortgage Product Risk,” includes comment and input from which of the following:
A. Financial institutions.
B. Trade associations.
C. Consumer and community organizations.
D. All of the above.
The correct answer is D. Yes, and state and financial regulatory organizations, as well as other members of the public.
At or within three business days of receipt of the application, the lender is required to provide to the consumer all of the following disclosures, except:
A. Home Loan Toolkit
B. Loan Estimate
C. Initial Escrow Statement
D. Mortgage Servicing Disclosure Statement
The correct answer is C. The initial escrow statement is provided at settlement, or within 45 days of closing.
All of the following are required in the mortgagee’s Financial Assessment of a borrower for a HECM loan, except:
A. The HECM Financial Assessment must be conducted by a Direct Endorsement underwriter registered in FHA Connection by the mortgagee.
B. The HECM Financial Assessment must be conducted with the TOTAL Scorecard.
C. The HECM Financial Assessment must be performed in a non-discriminatory way.
D. Information on income, expenses, assets, and liabilities must be included in the original case binder.
The correct answer is B. TOTAL stands for Technology Open to Approved Lenders and is not permitted in a Financial Assessment for HECM loans. It is designed for forward loans only.
In the “Guidance on Nontraditional Mortgage Product Risk,” the agencies that jointly wrote this document are concerned with which of the following issues:
A. Payment shock.
B. Competitive pressures.
C. Ceding underwriting standards to third-party originations.
D. All of the above.
The correct answer is D. Yes, the agencies are concerned with all of these issues obstructing the borrower from being able to retire the debt.
The Rate-Checker Owning a Home Tool is available where?
A. CFPB Website.
B. NMLS Resource Center.
C. HUD Website.
D. U.S. Government Printing Office.
The correct answer is A.
Comparing the following types of loans, with minimum payments being made, which of the following loans will result in the highest payments after seven years:
A. 30-year fixed
B. 5/1 ARM
C. 5/1 I-O ARM
D. Payment-option mortgage
Answer: D. Deferment of interest due will ultimately cost the borrower more. He or she will be paying interest on interest. Based on a $200,000 loan at 30 years and 6% interest, minimum payments on the payment-option loan will be $1708.22 in the 7th year, whereas payments in the 7th year of the 30-year fixed rate loan will be $1199.10, same as the first year.
Which of the following disclosures are Not provided some time after settlement:
A. Servicing Transfer Statement.
B. Annual Escrow Statement.
C. Mortgage Servicing Disclosure Statement.
D. Survey
Answer C
If a borrower’s payment is late, under which time-frame will the lender charge a late fee? A. 45 days late. B. More than 60 days late. C. 15 days late. D. More than 15 days late.
The correct answer is D. This is a statement of fact.
60 days late is for service transfer
Which of the following accurately describes the income requirement to qualify for a HECM loan:
A. The borrower must have a minimum of $25,000 in fixed income on an ongoing basis.
B. There is no income requirement for a reverse mortgage.
C. The borrower must have a minimum of $30,000 in fixed or variable income on an ongoing basis.
D. The income requirement is waived if the borrower has the ability to raise money in emergencies.
The correct answer is B. Although there is no hard and fast dollar amount required as income, the mortgagee will want to see that the borrower has enough income to pay ongoing property charges like property taxes, hazard insurance, and maintenance of the property.
Under the TILA final rule, compensation can be based differently in which of the following situations:
A. FHA loan vs. conventional
B. Purchase loan vs. refinance
C. Primary residence vs. second home
D. None of the above
Answer: D. Yes, none of these situations allow for compensation to be based differently. .
According to the SAFE Act and TILA, a residential mortgage loan could be secured in all of the following situations, except:
A. As a home equity loan.
B. As a subordinate lien on a dwelling.
C. As a timeshare in a residential development.
D. On a mobile home.
The correct answer is C. According to TILA and the SAFE Act, in addition to A, B, and D, a residential mortgage loan could be a home purchase or refi, a first trust deed, a loan secured by a dwelling that is a principal residence, second home, or vacation home, a one-to-four unit residence, cooperative, or manufactured home. In answer A, home equity loan is not to be confused with home equity line of credit.
Which of the following would generally be characteristic of easy-qualifier loans: A. Shorter terms. B. Fixed rate. C. Higher interest rates and fees. D. Adjustable rates.
The correct answer is C. The borrower pays one way or the other.
