Scenarios Flashcards
John and Jane Brown are co-owners of a property that is their principal residence, and are entering into a refinance transaction that is subject to rescission. John is provided with one copy of the Notice of Right to Cancel, and Jane receives none. What is their deadline for rescission?
A. Midnight on the third day following closing
B. Three business days after closing
C. five years after closing
D. Three years after closing
D. Three years after closing
Permissible acts after discovering deposits inconsistent with borrower’s income included on application
Three weeks into the processing of the loan, the loan originator uncovers that a borrower has under reported her current debt obligations what should the MLO do?
(a) Explain the TILA RESPA Integrated Disclosures Rule
(b) Report Abusive Acts or Practices Rule
(c) Proceed but make sure they sign Safeguard Rule
(d) Refuse to process based on Ability to Pay Rule
D
A mortgage loan officer may refuse to accept a loan application from a prospective borrower for which of the following reasons?
(a) The applicant has used several racial insults and you would rather not do business with him
(b) The borrower has indicated that she is willing to provide false documents in order to qualify for a larger loan
(c) The lender doesn’t accept applications from the area where the borrower lives
(d) The applicant has poor credit and you don’t feel there is any way he will meet lender guidelines
B
An applicant has applied for a refinance mortgage with a lender who requires payment of PMI on first liens with loan-to values over 80%. The applicant has an existing HELOC mortgage with a balance of $67,200 and wishes to keep it as a second lien mortgage. The property is valued at $320,000. The borrower has applied for a fixed rate mortgage of $252,800 for 15 years at 6.5%. Which of the following statements is correct?
(a) The LTV is 100%
(b) The lender will require mortgage insurance
(c) The lender will not require mortgage insurance
(d) The LTV is 90%.
C
An attorney and a residential mortgage loan originator (RMLO) enter into an agreement in which the attorney’s country club membership dues are paid by the RMLO each month in return for the referral of prospective loan applicants. Who is in violation of RESPA Section 8?
(a) The RMLO
(b) The Attorney
(c) Both the RMLO & the Attorney
(d) Neither the RMLO nor the Attorney
C
A mortgage loan originator advertises to a real estate office that after “three closings using
their mortgage company” the mortgage broker will give back a referral fee to the real estate
brokerage. This referral fee is on a sliding scale based on the number of loans processed throughthat firm. According to the Real Estate Settlement Procedures Act who has violated the
prohibition regarding kickbacks?
(a) The Realtor
(b) The Mortgage Loan Originator
(c) Both the Realtor and the Mortgage Broker
(d) Either the Realtor or the Mortgage Broker
B
MaxMortgage is a lender that is hoping to revive the subprime lending market with the origination of high-cost mortgages. To ensure that it has an ongoing source of funding, MaxMortgage plans to sell its loans in the secondary market. After consulting with its attorney, MaxMortgage learns that:
a. The Dodd-Frank Act has made it illegal to sell high-cost mortgages in the secondary market
b. MaxMortgage may only sell high-cost mortgages if it agrees that the purchaser will not be liable for HOEPA violations
c. Before selling high-cost mortgages, MaxMortgage must provide purchasers with a notice that the loans are subject to HOEPA
d. MaxMortgage cannot originate high-cost mortgages unless its loan originators provide borrowers with pre-loan counseling
C
Joan Johnson is a salesperson who is paid 100% commission. What type of documentation would you ask her to provide as proof of her income for loan qualification?
a. W-2s for the past two years and a copy of her last pay stub
b. Tax returns for the past two years
c. Her tax return from last year
d. A detailed verification form from her employer
B
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. Application b. Credit report c. Appraisal d. Solicitation
A
If an MLO starts an application and then leaves employment and the lender reassigns the loan to a different
MLO. What should the new MLO do?
a.) verify the information is correct by telephone
b.) verify the information via email
c.) start a new application
d.) continue with the old application
c.) start a new application
Cindy is a loan originator who specializes in refinances. A local appraiser calls her and promises to deliver any appraisal that she needs for her refinances, telling Cindy, “All you have to do is let me know the valuations that you need!” What are Cindy’s obligations under the appraisal rules?
a. She has no particular obligations
b. Her company must order a new appraisal for any valuation performed by that appraiser
c. She must report the actions of the appraiser to the state appraiser and licensing authorities and submit a request for a new appraisal
d. She must call the appraiser and ask that he refer the assignment to another appraiser who does not have a conflict of interest
C
A title insurance company provides a computer to a mortgage broker. The computer is used to transmit electronic documents from the mortgage broker’s office to the title insurance company. Who is in violation of RESPA?
a. The title insurance company
b. The mortgage broker
c. Both the title insurance company and the mortgage broker
d. Neither the title insurance company nor the mortgage broker
C
It is unethical and illegal to use yield spread premiums for any reason other than:
a. To earn an additional commission on a loan origination
b. To enable a creditor to earn more on a mortgage transaction
c. To help a borrower pay for settlement costs
d. To enable a loan originator to meet a monthly sales quota
C
A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA?
a. The hazard insurance company
b. The mortgage broker
c. Both the hazard insurance company and the mortgage broker
d. Neither the hazard insurance company nor the mortgage broker
C
A real estate company accepted flyers from a mortgage company and made them available to prospective buyers during an open house. Who has violated RESPA?
a. The real estate company
b. The mortgage company
c. Both the real estate company and the mortgage company
d. Neither the real estate company nor the mortgage company
D
A mortgage broker enters into a rental agreement with a real estate agent where the rent for the office space is at the prevailing market price. Who has violated RESPA?
a. The mortgage broker
b. The real estate agent
c. Both the mortgage broker and the real estate agent
d. Neither the mortgage broker nor the real estate agent
D
A title company advertises in a real estate company’s publication by paying the required fees. Who is in violation of RESPA?
a. The real estate company
b. The title company
c. Both the real estate company and the title company
d. Neither the real estate company nor the title company
D
The state in which Jim Jungle works requires a mortgage loan originator be covered by a surety bond. The bond must be maintained in an amount that reflects:
a. The number of loans originated by Jim annually
b. The number of loans Jim’s employer originates annually
c. The dollar value of loans Jim originates annually
d. Jim’s experience as a loan originator
C
Van Gordon, who is an IT tech, has decided to sell his house. He is offering to carry the contract himself and does all the negotiating necessary to reach agreement on the mortgage terms. Must Van be licensed?
a. Van need not be licensed unless he negotiates more than one loan during any 12-month period
b. Yes, individuals who offer or negotiate the terms of a residential mortgage loan must be licensed
c. Van is exempt from the requirement to be licensed as the property on which he was negotiating the terms of the mortgage loan had served as his own residence
d. Van must be licensed because he will receive compensation as a result of the
transaction
C
Mortgage loan originator Juanita has placed an advertisement in the local paper that states the
loan has “payments of less than $1,000.” Under the Truth-in-Lending Act, this statement is:
a. A permissible general statement
b. A trigger term
c. Permissible if the loan is identified as a sample loan product
d. Permissible because it is illustrative only
B
Conrad, a mortgage license originator, has resigned his position with Levenfeld Lenders, his sponsoring employer, to accept a new position as a mortgage loan originator with Joe Franklin, a licensed lender, who is the owner of Franklin Mortgage Company. Which person is required to notify the state regulatory authority through the NMLS system of Conrad’s termination of employment with Levenfeld Lenders?
A. Levenfield, the sponsoring entity must notify the state regulatory authority of the termination
B. Joe Franklin, the new employer must notify the state regulatory authority of the termination
C. Conrad, the mtg loan originator must notify the state regulatory authority of there termination
D. BOTH the mortgage loan originator and the sponsoring entity must notify the state regulatory authority of the termination
D
Oskar is being licensed in a state that requires each loan originator to be covered by a surety
bond. Upon approval of his license application, he will be employed by the Half Nelson
Mortgage Brokerage. Who is required to provide Oskar’s surety bond?
a. Oskar
b. Half Nelson Mortgage Brokerage
c. Both Oskar and Half Nelson
d. Either Oskar or Half Nelson
D
When Michael wanted to purchase a home in 2006, his mortgage broker told him that his income was insufficient to qualify for the mortgage. When Michael insisted on trying to purchase the home, his mortgage broker suggested that he complete an application for a stated-income loan, and told him the minimum income level that he needed to include on the application in order to qualify for a mortgage. Michael completed the loan application, adding $20,000 to the minimum amount that his broker suggested. The broker reviewed the application and Michael signed it. Which of the following statements most accurately describes the liability that can arise from this scenario?
a. The mortgage broker is solely liable, because he encouraged Michael to misrepresent his income
b. Michael and the mortgage broker are liable for submitting a loan application that contains false information
c. Neither Michel nor the mortgage broker is liable, since it was common practice in 2006 to exaggerate a loan applicant’s income level
d. Michael is solely responsible for misrepresentation, since he inflated his income more than was necessary to secure the loan
B
Germaine Hopper has not maintained a state loan originator license for 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 Germaine 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. Yes, test results are only valid in the year they are taken
d. No, her time as a registered loan originator is not counted as part of the time her license has not been maintained
D
The client’s appraisal came in lower than expected, requiring the borrower to bring an extra $10,000 to closing. The borrower advises the MLO that he only has $8000 available What should the MLO advise the client to do?
A) Ask a relative for the rest
B) Ask the borrower if they have any undeclared assets
C) Loan the borrower $2,000 and have them repay after closing
D) Tell the borrower to take a cash advance on one of the credit cards being paid off
D
You overhear another residential mortgage loan originator (RMLO)
in your office making negative (and possibly untrue) comments
about another mortgage company to a potential customer. What do you do?
Ignore the comment?
Confront the RMLO?
A. Talk to your office manager?
B. Report this matter to the NAMB ethics committee?
C. Report this matter to the NMLS
D. This is not unethical.
A
Sam Slezee was found to be providing mortgage loan origination services without a state
license. A temporary order to cease and desist engaging in such activities was issued against
Sam. While under the order, Sam completed three transactions. What is the maximum fine a
state licensing agency may impose on him?
a. $25,000
b. $50,000
c. $75,000
d. $100,000
C
You recommend a specific loan to a past customer who then asks you to check out a mortgage product they recently heard was better suited for them. You are too
busy to do the research; however you tell the customer that you did the research and the mortgage product in question is not suitable for the customer. Have you actedethically?
A. Illegally
B. Unethical
C. Illegally and Unethical
D. Legal and ethical
B
You receive a verbal loan approval from one of your lenders. When you get the conditions in writing, it seems the underwriter failed to list a condition that is essential to the salability of the loan. What would you do?
A. Bring it to the attention of the underwriter
B. Tell your boss
C. Ask the borrower to notify the lender
D. Call the lender directly
A
The loan officer suspects the social security number in an FHA application is incorrect, what must he/she do?
A. Contact the Social Security administration to verify it.
B. Proceed with the loan, because FHA will verify the social security number.
C. Proceed with the loan and HUD will verify it.
D. Give the borrower five days to bring in the verification.
Answer D
Contact the Social Security administration to verify it.
What is not likely to happen if the lender/investor finds fraud?
A. A 1% interest rate increase on the loan
B. The lender and/or broker will be required to repurchase the loan
C. The entire loan can be called due and payable
D. The loan officer must pay back any premium made on the loan
A. A 1% interest rate increase on the loan
A borrower wants to purchase a 2nd home and tells you that they intend to rent the property out when they are not living in it. You have reviewed their financial information and realize that the borrower would qualify for financing if the property is classified as a 2nd residence. However, if the property is classified as an investment property, the borrower is unlikely to qualify. What should you do?
A. Classify the property as a rental property even though the borrower intends to reside there part of the year.
B. Classify the property as a 2nd residence; since the borrower intends to use the property for part of the year, this is acceptable.
C. Classify the property as a 2nd residence because it is not legal for the borrower to personally reside in a property classified as a rental for any length of time.
D. Deny the borrower because it is neither legal to rent out a 2nd residence or reside in a rental property for any length of time.
A. Classify the property as a rental property even though the borrower intends to reside there part of the year.
A potential client is shopping around for a competitive rate and a 15-day lead time to close. The brokerage you work for offers highly competitive rates, has an average lead to close time of 30 days, and a fast lead to close time of 21 days. Understanding these figures, you tell the client you can meet their demands and secure their business. This action is:
- legal but unethical.
- illegal but ethical.
- illegal and unethical.
- legal and ethical.
legal but unethical.
