Safe Practice Exam 1 A Flashcards
What is a provision in a mortgage enabling the lender to demand full repayment if the borrower sells the mortgaged property or partial interest in a mortgaged property?
An alienation clause requires the mortgagor to repay the entire balance of the loan if the property is sold, transferred, or otherwise abandoned.
According to ECOA, a borrower can request a copy of the appraisal report used in the decision process__days of a credit decision.
Borrowers have a right to request a copy of the appraisal report used for a decision within a 90 days of that credit decision.
A customer asks for his mortgage broker for the name of a good title company. The broker has a list of several companies with whom she has done business in the past. At what point, according to RESPA, must she give the customer an AfBA disclouse?
If the referring party does not have an ownership or other beneficial interest, an Afficilated Business Arrangement (AfBA) disclosure is not required by RESPA.
What would not be considered a RESPA violation?
A thing of minimal valued used in the course of sales such as pens, mementos, coffee cups hats, etc. is permissible, but the other three arrangements could be considered violations of RESPA. To violate RESPA, the thing of value does not have to be money.
The Real Estate Settlement Procedures Act (RESPA) is also known as
RESPA is also known as Regulation X.
What is the least acceptable factor in evaluation a mortgage loan application?
Creditors may not deny a loan based on the source of income; they may deny a loan based on the likeliness that the income will continue.
Which regulation encourages financial institutions to help meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe and sound lending practices?
The Community Reinvestment Act is intended to ensure that all neighborhoods are served by financial institutions.
According to ECOA, a borrower can request a copy of the appraisal report used in the decision process with __ days of a credit decision.
Borrowers have a right to request a copy of the appraisal report used for a decision within 90 days of that credit decision.
Conforming loans follow the underwriting guidelines of
Traditionally, a loan is considered to be conforming when it meets Fannie Mae/Freddie Mac standards and can be sold on the secondary market.
ECOA is a low that ensures
The Equal Credit Opportunity Act ensures all lenders must make credit available with fairness and without discrimination.
A 65 year old homeowner does not currently have a mortgage on his home but is inn need of funds to make some repairs. Which mortgage option would best address his needs?
A reverse mortgage allows qualified homeowners at least 62 years of age to convert equity in their home into a monthly income stream or line of credit.
The borrower knows that his credit is bad, but he really wants to buy a house. He convinces his cousin to apply for a loan, knowing she will be able to get better terms. He promises her that he will pay the full mortgage amount every month. She could be considered a
A buyer who has no intention of living in the property he or she fraudulently mortgages could be considered a straw buyer. While this situation may seem okay, since it’s just one relative helping out another, it’s still misrepresentation and, therefore, fraud.
An FHA borrower may
FHA loans are not just for low-income borrowers. They can be used to purchase a one- to four family residence. FHA loans do require a down payment but allow borrowers to use a give to cover that.
The value remaining in property after all liens and debt are considered is its
Equity is the difference between market value of a property and the sum of the mortgages and liens against it.
A borrower is refinancing his home and signs the loan papers. How much time does Reg Z give him to change his mind?
When refinancing, Regulation Z gives a borrower three business days to rescind after the contract is signed.
An 80/20 combo loan with the sales price of $175,000, a rate of 6 % for the 80% first mortgage, and a rate of 8.5% for the 20% second mortgage would have a first mortgage loan amount of what?
The first mortgage is 80% of the sale price: $175,000 x 80%= $140,000.
A convertible ARM allows a borrower to change
A convertible adjustable rate mortgage gives a borrower the right to change from an adjustable rate mortgage to a fix rate mortgage one time during the loan term, provided certain conditions are met.
The act of redlining may be defined as
Redlining is the refusal to make loans on property in certain neighborhoods for discriminatory reasons and is an illegal discriminatory act under federal, state, and local fair housing laws.
A borrower wants to get a loan to buy a house. When evaluating his credit obligations, which would not be considered as debit?
His cable service part of his debt for qualifying purpose since cable service can be cancelled.
HOEPA is an addendum to what law?
HOEPA is an addendum to the Truth and Lending Act. HOEPA limits the amount of points that can be charged on loans without additional disclosures.
The relationship between the cost of borrowing and the total amount financed, represented as a percentage, is known as
The APR-annual percentage rate-takes into consideration the cost of borrowing and the total amount financed. It is represented as percentage and is the true cost of lending.
While underwriting a loan file, you calculate this formula
A borrower’s housing expense ratio is the relationship of the borrower’s total monthly housing expense to income, expressed as a percentage.
An opinion of value is also known as
The definition is “an opinion of value.”
TILA requires creditors to maintain records that they complied with the disclosure requirements for how many years?
Tila law requires creditors to maintain records for two years after the disclosure were required to be made.
What is the maximum length of time that collection information can be reported on a credit report according to the Fair Credit Reporting Act?
Seven years is the maximum length of time such information can be reported on a credit report according to the Fair Credit Reporting Act, except for criminal convictions, which can be reported indefinitely.
A borrower has a stable monthly income of $4,000 and recurring debts of $600. If he’s getting an FHA loan, what’s the maximum monthly payment for which he would qualify?
Using the payment to income ratio of 31 %, we get $1,240. But using the total debt to income ratio, we find: $4,000 (income) multiplied by 0.42, which equals $1,720. From that, you subtract monthly debts of $600, leaving $1,120.
Which law allows a consumer who has had her credit card used by an identify thief to place a freeze on her credit report?
FACTA has provisions that allow consumers to freeze their credit under certain circumstances, such as when they have experienced identity theft.
You are pre-qualifying a borrower for a purchase loan. She has debt equaling $950 each month and gross monthly income totaling $5,200 each month. What is the maximum qualifying house payments, including principal, interest, taxes and insurance on a conventional loan.
Two calculations need to be done: $5,200 x 28%= $1,456, then $5,200.00 x 36% = $1,872 - $950 = $922. Take the lower of the two. If you did not complete both calculations, you might have allowed Sue to hve a payment of $1,456; by the time you added the debt and divided by the $5,200, you back ratio would be too high ($5,200 x 28% = $1,456 + $950 = $2,406 divided $5,200) = 46%.
Under the FCRA, consumers do NOT have the right to
All consumers have the right to review their credit reports for accuracies, challenge inaccurate information, and receive a free copy of their credit report annually. They do NOT have the right to have bankruptcies removed after five years. That timeline is seven to ten years.
Which situation is NOT a red flag that illegal flipping may be taking place?
Purchasing and remodeling a house then selling it for a quick profit is good side of flipping, which is perfectly legal. The illegal side of flipping is when colluding parties profit from the sale of property with an inflated appraisal that supports a loan. It may involve a series of sales and quick resales, with one property and a group of sellers and buyers changing ownership among them.
A borrower closes a loan with ABC Mortgage. His name is NOT on the National Do Not Call Registry NOR on ABC’s internal do not call list. ABC Mortgage can call the borrower to solicit new business.
A consumer who does not place his name on either the National Do Not Call Registry or a company’s internal do not call list has no protection from phone calls. ABC can call the borrower indefinitely.
You are refinancing a $200,000 mortgage with a prepayment penalty of six months of interest at 6.5%. How much prepayment penalty?
Simply multiply the original loan amount by the interest rate for the annual interest, then divide by 2 to get six months interest. In this case, $200,000 x 6.5% (0.065) = $13,000 divided by 2= $6,500.
A borrower reports income of $40,000 from rental properties. How much should be considered when applying for a mortgage loan?
Income from rental properties should be counted only at 75% allows for vacancy losses.
The document that created a lien against real property as security for promise to repay a loan is called a
A mortgage created a lien against real property as security for the payment of a note. The mortgage is a type of security instrument where the borrower (mortgagor) pledges property to the lender (mortgagee) as collateral for the debt.
What is the maximum LTV on a Rural Development loan?
Borrowers who meet the income in designated rural areas do not need a down payment to get Rural Development loan.
During the application process, an MLO asks if the borrower is widowed; he is violating which law?
ECOA states that an MLO can ask if the borrower is married, unmarried, or seperated. The MLO may not ask if the borrower is widowed or single.
Under Regulation Z, which advertisement would require full disclosure of credit terms?
Regulation Z requires that once you state any type of credit terms in advertising such as 8% interest, you must disclose all finance charges and total annual percentage rate (APR).
The privacy Rule of the Gramm-Leach-Bliley Act requires that financial instututions provide the consumer with a Consumer Privacy Policy.
According to the Gramm-Leach-Bililey Act, this policy is required to be provided before disclosing information to non-affiliated third parties.
