SAFE Act and CSBS/AARMR Model State Law-Prep Xl Flashcards
Gertrude Hopper has not maintained a state loan originator license for just over five years. However, during the last three years of that five-year period, she was employed as a registered loan originator with the Anywhere Bank. Is Gertrude required to retake the licensing test when she decides to apply for a new state license?
A.Yes. She must retake the test because she had not maintained a license for over five years
B.No; once passed, an applicant does not have to take the test again
C.No; her time as a registered loan originator is not counted as part of the time her license has not been maintained
D.Yes; test results are only valid in the year they are taken
The answer is No;
her time as a registered loan originator is not counted as part of the time her license has not been maintained.
If a mortgage loan originator was formerly licensed in a state and fails to maintain a valid license for five years or longer, the individual must retake the test and achieve a test score of not less than 75% in order to be licensed again as a mortgage loan originator.
However, when determining whether a mortgage loan originator has not held a valid license for five years,
“any period during which the individual is a registered mortgage loan originator” is not taken into account.
In Gertrude’s case, it is noted that she has not maintained her license for a total of five years; for three of those five years, however, she was employed as a registered loan originator. Thus, for purposes of determining whether she must retake the test, Gertrude was only unlicensed for two years. This means that she is not required to retake the exam.
If mortgage loan originator Edna Eager produces an ad, which of the following would NOT require additional disclosures?
A.A “5% down payment” promotion
B.A loan with a payment of $500
C.A loan with 100% financing
D.A loan with “low finance charges”
The answer is A loan with 100% financing.
Trigger terms used in advertisement for mortgage products require additional disclosures regarding the promotion.
Trigger terms in closed end loans include:
- the number of payments,
-payment amount,
-down payment and
-finance charges.
Since a loan with 100% financing would require no down payment, there is nothing further to disclose.
An applicant for a loan originator license who fails the license exam may retake it a second time:
A.After a wait of 30 days
B.Immediately
C.After a wait of 24 hours
D.After a wait of six months
The answer is after a wait of 30 days. A license applicant may take the licensing exam up to three times. If he or she fails a test, he or she must wait at least 30 days after the date of the preceding test to retake it. If he or she fails three consecutive tests, at least six months must pass before taking the test again.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 requires that each state:
A.Establish its own loan originator registration system
B.License or register residential and commercial loan originators
C.Deny a license to any person who has a misdemeanor conviction
D.Impose a standard of at least 20 hours of pre-licensing education, plus testing for loan originator licensing
The answer is impose a standard of at least 20 hours of pre-licensing education, plus testing for loan originator licensing. Pursuant to the S.A.F.E. Act, each state must establish licensing standards, including pre-licensing education and testing requirements, and participate in the NMLS. The pre-licensing standard must include a requirement of at least 20 hours of pre-licensing education plus the creation of a licensing exam that is administered by the NMLS.
Safina Marigold, a mortgage loan originator, has received a request for an offer of residential mortgage loan terms together with information about the prospective borrower that will be necessary for her to make a decision on whether or not to offer a loan. Safina has received a(n):
A.Credit report
B.Appraisal
C.Solicitation
D.Application
The answer is application. An application is any request from a borrower, however communicated, for an offer of residential mortgage loan terms, a response to a solicitation of an offer of residential mortgage loan terms, or the information from a borrower that is typically required in order to make an offer of residential mortgage loan terms.
The purpose of adopting minimum uniform standards for the licensing and registration of mortgage loan originators under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 was to:
A.Enhance consumer protection and reduce fraud
B.Create a single federal registry of all mortgage loan originators
C.Prohibit lending activity involving mortgage loan originators
D.Abolish the existing database tracking mortgage-related violations
The answer is enhance consumer protection and reduce fraud. The S.A.F.E. Act was enacted because of abuses and events occurring in the mortgage lending business throughout the country. This led Congress to believe there was a need to increase uniformity in licensing and registration requirements among the states, reduce the regulatory burden of states, enhance consumer protection, and reduce fraud.
Franny is completing the 20 hours of pre-licensing courses required to make application for her mortgage loan originator license. She has taken three hours of federal law and regulations and two hours of training related to lending standards of the nontraditional mortgage product marketplace. What other required coursework must she take?
A.Three hours of ethics
B.Three hours on real estate appraisal
C.Three hours of financing options
D.Three hours of state law and regulations
The answer is Three hours of ethics. The S.A.F.E. Act specifies that a license applicant must complete pre-licensing education of at least three hours of federal law and regulations, three hours of ethics, including instruction on fraud, consumer protection, and fair lending issues, and two hours of training related to lending standards for the nontraditional mortgage product marketplace.
A state licensing agency may do each of the following, except:
A.Refer a licensee for criminal prosecution
B.Examine the books and records of a licensee
C.Waive the pre-licensing education requirement for an applicant
D.License individuals as mortgage loan originators
The answer is waive the pre-licensing education requirement for an applicant. A state licensing agency is charged with licensing individuals in its state and ensuring that its licensing provisions are in compliance with the federal S.A.F.E. Act. It may examine the books and records of licensees to ensure they are in compliance with both state and federal mortgage law and, if a criminal violation is discovered, refer the matter for criminal prosecution.
Edna Eager is planning an ad campaign to draw more business to her company. In order to avoid trouble with her advertising, Edna must comply with the advertising requirements of the:
A.Truth-in-Lending Act and Regulation Z
B.Real Estate Settlement Procedures Act and Regulation X
C.Equal Opportunity Credit Act
D.Federal Trade Act
The answer is Truth-in-Lending Act and Regulation Z. A licensee advertising mortgage products and services must comply with the advertising laws and rules as set forth in the Truth-in-Lending Act and Regulation Z. Additional advertising rules for mortgage credit products are found in Regulation N (12 C.F.R. 1014).
All of the following have to be licensed as mortgage loan originators, except:
A.An employee of a mortgage lender taking mortgage loan applications
B.An individual negotiating loans on behalf of friends in exchange for a fee
C.An employee of a banking institution taking mortgage applications
D.An individual taking mortgage applications for a mortgage broker
The answer is an employee of a banking institution taking mortgage applications. An individual who takes a residential mortgage loan application for compensation must be licensed as a mortgage loan originator, unless the individual is employed by an exempt financial institution or is exempt him or herself. A bank employee would be exempt, as would an individual engaged solely in administrative and/or clerical tasks. An individual who offers or negotiates the terms of a residential mortgage loan with or on behalf of a member of his or her immediate family or for a transaction involving the financing of his or her own property would also be exempt from the requirement to be licensed.
Bill Grunion is required to renew his license for the coming year. In order to have his renewal approved, Bill must meet all the following requirements, except:
A.Continue to meet the minimum standards for license issuance
B.Satisfy the annual continuing education requirement
C.Pay all required fees for renewal of the license
D.Have originated at least 15 loans in the preceding license period
The answer is have originated at least 15 loans in the preceding license period. To renew a license, a mortgage loan originator must continue to meet the minimum standards for initial licensure, complete the required continuing education, and pay all fees. There is no requirement that a licensee originate a specific number of loans in the preceding year.
In order to protect consumers, states must provide for financial compensation in the event of a violation of state or federal law by a licensee. To fulfill that requirement, a mortgage loan originator is NOT required to:
A.Provide a surety bond
B.Provide a fidelity bond
C.Maintain a minimum net worth
D.Participate in a state fund
The answer is provide a fidelity bond. In order to protect consumers in the event of a licensee’s violation of mortgage law, the S.A.F.E. Act requires a mortgage loan originator to maintain a surety bond, a minimum net worth, or pay into a state fund. The loan originator is not required to maintain a fidelity bond. A fidelity bond provides protection to employers for the bad acts of its employees.
The advertisement of mortgage products that Edna is planning to use indicates the number of payments required to pay off a specific loan. This statement is a:
A.Prohibited statement
B.Trigger term
C.Permissible representation if it is accurate
D.Hypothetical only
The answer is trigger term. If a trigger term is used in an advertisement, additional disclosures must be made to the potential borrower. A trigger term may be any of the following if specified in the ad: the amount or percentage of any down payment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge
Which of the following would be considered material information when soliciting or originating a residential mortgage loan?
A.The length of time the loan originator has been licensed
B.Whether the loan product provides for a prepayment penalty
C.The number of lenders with which a loan originator works
D.An explanation of how title will be held
The answer is Whether the loan product provides for a prepayment penalty. A representation, omission, act, or practice is material if it is likely to affect a consumer’s choice of or conduct regarding the product or service. Information about a loan product’s terms, including whether the loan provides for a prepayment penalty, would be considered material information.
What is the federal rule or regulation that provides parameters for advertising residential mortgage loan products?
A.Regulation X
B.The MARS Rule
C.The ATR Rule
D.The MAP Rule
The answer is The MAP Rule. Under the Mortgage Acts and Practices Rule (MAP Rule, or Regulation N), it is a violation of the advertising regulations for any person to make a material misrepresentation in any commercial communication regarding any term of any mortgage credit product.
