115 Review
Sarah agrees to purchase a property for $210,000. It appraised for $207,000, and she is a getting an FHA Loan. What is the minimum amount of cash she will need to bring to the closing table if the seller was not willing to adjust the purchase price to match the appraised value?
$10,245 MLO Calculations - 207,000*3.5% = 7,245. 7,245 + 3,000 = 10,245
Tricia earns $14.50 per hour, and works 40 hours per week. She gets an extra 20 hours each month of overtime as well. What is her GMI?
$2948.33 MLO Calculations - ((14.50*40)*52)/12 + ((14.50*1.5)*20) = GMI
A borrower is purchasing a home using a Conventional Conforming loan. The purchase price is $200,000, and they are putting 20% down. The seller is contributing $12,000 in Seller's Concessions. How much will the down payment be in dollar form?
$40,000
Conventional Loan limits are set from October to October by the FHFA. Which of the following loan limit is correct regarding loan limits in normal areas?
$510,400 for a one-unit family home GMK Programs - $510,400 for a one-unit family home.
Jay's house is worth $240,000. The only mortgage on his home is a HELOC with a credit limit of $50,000. He earns $4,800 per month. His credit card debt is $1,947 with a payment of $66 per month. The monthly payment on his HELOC is $164 and its balance is $24,000. What is Jay's TLTV?
10% MLO Calculations - TLTV = balance of all mortgages/appraised value or purchase price
When using income from investment properties, what percentage must be subtracted for maintenance and vacancy factors?
25%
When must the borrower receive the Closing Disclosure?
3 business days before consummation
James is refinancing his summer home. He opts to take a 7/1 ARM with a note rate of 3.875%. The caps are 2/2/5. What is the most his rate could be in year 6?
3.875% MLO Calculations - This is a Hybrid ARM, how many years is the loan fixed for?
If a borrower signs their promissory note and it states their initial rate 6%, what would their note rate be in the second year of a temporary buy down program?
6%
Which of the following are NOT exempt from licensing as a mortgage loan originator?
A MLO at a real estate brokerage who also originates financing USC/The SAFE Act - An individual who performs only real estate brokerage activities is not required to be licensed under the SAFE Act.
Which of the following is a violation of Regulation X?
A MLO gives a client the GFE after 3 business days.
Which of the following is NOT true about interim loans?
A borrower will make principal and interest payments on the loan.
Homeowner's Insurance is:
A form of hazard insurance and is there to protect the collateral from damage
The majority of mortgage loans are nonrecourse. The term "nonrecourse" is best defined in which of the following statements?
A mortgagee's only course of action to recuperate losses is to legally take ownership of the collateral in case of default.
Which of the following BEST describes the role of the Conference of State Bank Supervisors?
A national organization that maintains the state banking system and state regulation of financial services
A loan where the borrower's equity is depleted as the principal balance held by the lender grows through accrued interest and fees is best defined as which of the following?
A reverse mortgage
ABC Mortgage Shop has a policy to reach out to their past clients to make sure they are always in the best loan program possible. This is appreciated by their clients as they know they will always be taken care of. Prior to reaching out to their clients, ABC Mortgage fully qualifies them based on their previous income, previous property value, previous assets, as well as pulling a new credit report. During this process has ABC Mortgage violated any law and if so what law has been violated?
ABC Mortgage has violated FCRA, as they do not have a permissible purpose.
If a mortgage loan originator requests an appraisal, what is allowed to be charged?
Actual cost of the appraisal MLO Specific Program Guidelines - We can only require payment of actual costs.
A mortgage product that allows for a modification of the annualized rate of interest is best described as what?
Adjustable-rate mortgage
A consumer enters your mortgage brokerage and ask for advice on the stock market. What is the proper action to take?
Advise the consumer to seek a licensed stock broker
Which of the following loan programs is best defined as one that is intended for borrowers who may meet Fannie Mae's credit guidelines but not other underwriting criteria, such as debt-to-income ratios?
Alt-A GMK Programs - Alt-A Mortgage Loan is a type of loan intended for borrowers who have good credit but don't meet other underwriting criteria for conforming prime loans. Borrower shortcomings such as high loan-to-value and debt-to-income ratios or limited documentation of the borrower's income make this loan higher risk and may require higher interest rates.
Which of the following is required to obtain a license through a state authority?
An attorney working for a mortgage broker and negotiating mortgage loans not in an ancillary fashion of their attorney duties
How does TILA define a Higher-priced Mortgage Loan?
An closed-end mortgage loan on a consumer's primary residence whose APR is 1.5 or more above the APOR on a 1st lien
Which of the following BEST defines a HOEPA loan?
An open-end or closed-end loan that has either a fixed or variable rate and has points and fees that exceed 5% of the total loan amount of $21,980 or more. MLO Qualifications and Disclosures - HOEPA/High Cost Loans/Section 32. High Cost loans can be open or closed end, fixed or ARM. Their points and fees need to exceed 5% of the total loan amount of $21,980 or more.
Which of the following is always a third party provider?
Appraiser
You are a mortgage loan originator who has just completed an application with a potential borrower. You then present to them the Loan Estimate. After doing so you ask if they intend to proceed, but they do not answer. Which of the following next steps are appropriate?
Ask the borrower again if they intend to proceed, they may just not of heard or understood you.
Which of the following is considered a violation of ECOA?
Asking about someone's national origin
The CFPB's Home Loan Toolkit is to be provided when?
At the earliest possible date
Although co-signers and co-borrowers are not entirely the same thing, a characteristic that is the same for both is which of the following?
Both must meet the qualifying criteria for loan being applied for
Which of the following are NOT considered "customary and reasonable" on a VA loan?
Brokerage fee MLO Specific Program Guidelines - A brokerage fee is not considered customary and reasonable on a VA loan.
A mortgage lender/broker requires that the borrower sign a document at closing that states the mortgage lender/broker's policies and regulations. What does the law allow the mortgage lender/broker to do if the borrower forgets to sign the document?
Call the borrower and ask that they sign the document after closing
The VA will issue a specific certification on the appraisal on a subject property is completed. This will show the property's current market value based on the appraisal. This is known as what?
Certificate of Reasonable Value MLO Specific Program Guidelines - Once the appraisal is complete, the VA will issue a Certificate of Reasonable Value (CRV) that shows the property's current market value based on the appraisal. The CRV does not include information regarding any defects associated with the property.
What form is used to reflect all costs in a real estate transaction for both the buyer and seller?
Closing Disclosure MLO Closing - The Closing Disclosure form is used to reflect all costs in a real estate transaction for both the buyer and seller.
All of the following activities are prohibited under the SAFE Act and related federal laws, EXCEPT?
Commercial lending UST The SAFE Act - Per RESPA commercial lending is not prohibited, however, it is not covered under RESPA.
Another name for a Reset Option is what?
Conditional Refinance Provision
Connor is an MLO working for his father's brokerage firm. He receives a call from Mary, a prospective client, about refinancing her home. After a good conversation, Connor comes to the conclusion based on her credit alone, that Mary is a well-qualified borrower with a great loan opportunity. After reviewing the terms, conditions and specifics of the loan, Mary is extremely happy about the new loan's savings potential. How has Connor's qualification habits prevented him from originating a qualified mortgage?
Connor failed to identify Mary's income to repay the loan.
According to ATR a creditor must consider & verify eight factors when underwriting a mortgage loan. Which of the following are included in the eight verifying factors?
Consumer's expected income & assets, consumer's current employment, consumer's monthly debt obligations, consumer's monthly debt-to-income ratio.
Which of the following loan programs would Lonnie qualify for if he was trying to refinance his vacation home based on his 32% Front End, 41% Back End, and 95% LTV?
Conventional, Conforming FHA VA None of the above
Today you closed your very first mortgage loan as a MLO! You chose to attend closing since it was your first, and you couldn't have been more excited to witness your client's excitement of purchasing their own home. Once you return to the office, you decide to look over all of the disclosures and documents from your first ever closing. Shockingly, when reviewing the CD, you discover an error. According to TRID, which of the following is the appropriate action to take as the MLO?
Correct the CD, notify the client, send any refund if applicable, and retain a copy of the new CD for 5 years. Fed Law TILA/TRID - The right to cure says that if there's an error found on the CD after closing, the MLO must correct the error within 30 days.
Which of the following is NOT considered immediate family?
Cousin GMK Terminology - Parents, Siblings, Grandparents related by marriage, blood, or adoption
Which of the following is a loan originator allowed to charge for during the initial stages of a loan transaction?
Credit report fee
With regards to licensing qualifications, MLOs must provide the NMLS all of the following, EXCEPT?
Driver's license
According to the FACT Act which of the following would designate a Red Flag?
During your initial conversation a potential borrower tells you they have forgot their social security number and will have to give it to you at a later date.
During a face-to-face meeting, David, an MLO, is assisting some perspective borrowers looking to get a loan on a principal residence. While filling out the application, the clients inform David they are in a hurry, so David skips asking the questions in section 10 of the 1003 and fills it out based on "visual observation." What law has David violated?
ECOA
One of the FHA loan programs allows for borrowers to use financing toward appliances and other household improvements that reduce the amount of impact a home has on the environment. What is the name of this program?
EEM General Mortgage Knowledge - Energy Efficient Mortgage (EEM) A Federal Housing Administration program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding new energy efficiency features to a new or existing home as part of the home purchase.
A mortgage loan originator must consider a borrower's repayment ability by considering all of the following, EXCEPT?
Equity in the home
The most common reverse mortgage is insured by which government agency?
FHA
Regulation V is which of the following acts?
Fair Credit Reporting Act
When the borrower intentionally misrepresents his income to qualify for a mortgage on the property he is purchasing, he is engaging in what?
Fraud for property
Thomas wants to take advantage of the low interest rates and refinance his home. Thomas is working with Heavenly Mortgage. The program that provides Thomas with the greatest tangible net benefit is an adjustable-rate mortgage. During the application process what disclosures will Thomas NOT receive?
GFE, TIL, Closing Disclosure
Nate makes $2,300 bi-weekly. He is applying for a Conventional Conforming loan, because he's looking to buy an investment property. His PITI payment will be $1200. He has a car payment of $502, and Visa Payment of $356, and a Discover Card payment of $57. Given this information, which of the following statements is true?
He doesn't qualify for this loan program. MLO Calculations - Calculate Front and Back End ratios and Program Guidelines
If someone is purchasing a home, what disclosure must they always receive?
Home Loan Toolkit
Which of the following must the MLO disclose to a borrower?
If the loan has an assumption clause If the loan has a demand feature If the loan has negative amortization All of the above
Small Town Savings, a small bank that serves Small Town, USA, has been doing less than 500 Loans per year and has less than $2 Billion in assets. Due to the mortgage meltdown Small Town Savings has decided to implement the provisions of QM to lend more responsibly. Small Town Mortgage verifies all income and assets according to QM, but decides to allow for qualifying DTI to exceed the 43% requirement of QM. Upon review and confirmation of these standards, these types of loans being originated are?
In Safe Harbor GMK Terminology - Because small town savings is a small creditor they are in compliance with QM.
The FHA _________ loans made by approved lenders. What word should be in the blank space?
Insures
On the final page of the Closing Disclosure, a consumer will NOT be able to identify which of the following?
Interest Rate MLO Closing - Page Five is the final page of the CD. It contains four sections: Loan Calculations, Other Disclosures, Contact Information, and Confirm Receipt. You can find the finance charge, APR, and TIP on this page.
Which of the following is NOT an advantage of a VA loan?
It allows a borrower to have considerably lower prepayment penalties.
Which of the following BEST describes a loan that is alternative to prime?
It allows for borrowers with some riskier qualifications to obtain a loan.
Rob has started working for Shoreline Mortgage and is excited at the possibility of making a substantial income. Trying to learn the ropes as quickly as possible, Rob asks one of the veterans, Megan, for best practices. Megan tells Rob that to really make some decent money he should charge an "Ease of Service" fee to his clients as well as making the regular commission on the loan. If Rob follows Megan's advice what violation will occur?
It is a violation of Section 36 under TILA.
A fixed-rate loan is BEST defined as which of the following?
Its interest rate does not adjust throughout the term.
Bryan wants to take advantage of the low interest rates and refinance his home. Bryan is working with Hope Mortgage. The program that provides Bryan with the greatest tangible net benefit is an adjustable-rate mortgage. At application what disclosures must Bryan's MLO provide him?
Loan Estimate, Notice of Right to Receive a Credit Score, CHARM, Early ARM
"Amount Financed" is a dollar figure comprised of which of the following?
Loan amount minus prepaid finance charges
Which fee is NOT allowed to be charged to the borrower in an FHA loan?
Loan expediting fee GMK Programs - Only Customary and reasonable fees are allowed per FHA guidelines.
A borrower makes $4,000 monthly income. The mortgage broker requires $6,000 in monthly income to qualify the borrower on the desired loan amount. What should the mortgage broker do?
Lower the desired loan amount
Which of the following two disclosures fall under RESPA Section 6?
MSDS and Notice of Transfer Statement Federal Law RESPA - MSDS and Notice of Transfer Statement both fall under RESPA Section 6.
Which responsibility describes a function of the NMLS?
Maintaining an identification database of loan originators
What are the two main components that make up an ARM's fully-indexed rate?
Margin and Index
Which of the following is true regarding a mortgage loan originator's attendance at a loan closing?
May attend closing MLO Closing - MLOs are not required to be present at closing.
A mortgage loan originator advertises: "Loan programs available for all credit types." Following the advertisement, the originator takes an application for a consumer that has a 427 credit score and a bankruptcy 3 years ago. The originator is unable to find a loan that the lender will approve and provides an adverse action notice to notify the client of the denial of credit. Which of the following has occurred?
Misleading advertising
A mortgage loan originator structures a mortgage loan as a primary residence transaction for a borrower that is buying an investment property. What does this action constitute?
Mortgage fraud or misrepresentation
Of the mortgage professionals listed, who bears the responsibility of renewing a mortgage loan originator license if the licensee is employed by a mortgage lender?
Mortgage loan originator UST The State Model - The mortgage loan originator bears the responsibility of renewing a mortgage loan originator license if the licensee is employed by a mortgage lender.
RESPA requires the lender to provide which of the following disclosures within 3 days after completed application, if mailed?
Mortgage servicing disclosure statement
Mom and Pop's Mortgage Shop is very focused on making sure they have the most technological process available for their clients. As a result, they require all of their clients to use e-sign procedures to sign their documents associated with the loan. To make sure that at all times their clients are able to sign the appropriate documents electronically, Mom and Pop's tell their clients the software and hardware requirements to do so. Are Mom and Pop's in compliance?
No, they have violated the E-Sign Act. Federal Law E-Sign Act - Per the E-Sign Act, borrowers must have the option to get physical copies of their disclosures.
Which of the following is the BEST example of a loan that exceeds Fannie Mae and Freddie Mac's maximum loan limits?
Non-conforming loan
Which of the following would be considered an unethical lending practice?
Not allowing a borrower who receives alimony in excess of $10,000 per month to use the alimony as income Ethics Violations - Per ECOA, we cannot refuse to use income used for repayment if it is verifiable.
You are talking with a potential borrower about qualifying income and they tell you that they work for their family business and have just been promoted from clerk to president. They also mention their pay has increased substantially because of the promotion. Which of the following should you do?
Notify your compliance officer about the situation after you are done speaking to the client Ethics Fairness in Lending - Give a heads up to what is going on. It may be nothing, but we won't know unless we're looking for it.
FHA MIP is mandatory:
On all FHA insured Loans GMK Programs - FHA MIP is mandatory on all FHA insured loans
Suzanne is purchasing a home. She is getting a conventional, conforming mortgage. She has completed an application with her local lender. When Calculating Cash to Close on the Loan Estimate, which of the following may not be included?
Owner's Title Policy
Amortization is BEST defined as which of the following statements?
Periodic payments made toward paying off a loan
Which of the following would prevent a mortgage loan originator from renewing their license?
Pleading guilty to a felony charge
Which of the following fees are not considered "customary and reasonable" by the FHA?
Processing Fee GMK Programs - Per FHA guidelines the lender charging a processing fee is deemed unnecessary for the lender to originate an FHA mortgage.
To obtain a license, a mortgage loan originator applicant must submit to the NMLS all of the following, EXCEPT?
Proof of completed continuing education UST The SAFE Act - Mortgage loan originator applicants must provide the NMLS with fingerprints for a criminal history background check; personal history and experience; and authorization for an independent credit report.
Which of the following would be a violation under Gramm-Leach-Bliley?
Providing a non-affiliated business with a customer's information 6 months after the customer elected to opt-out Federal Law GLBA - If a borrower has opted-out of their information being shared we must stop the practice of sharing information unless the client opts-in
Chris, an MLO, was recently approached by a local developer that offered him a flat 100 dollar fee for anyone he referred to his new development project. Chris told the developer that as per federal law, not only could he not accept referral fee but that his compensation as an MLO was clearly defined. What two laws support Chris' claim?
RESPA and TILA
Another name for ECOA is what?
Regulation B
Which of the following regulations applies to Non-depository institutions?
Regulation H
A MLO can do each of the following to contest a temporary cease and desist order EXCEPT which action?
Request a judicial review of the order prior to a hearing before the Director UST The State Model - During the appeal process you must first appear at a hearing with the State Authority prior to appealing to the judicial system.
If a borrower lives in a home 40% of the year, the home is considered a(n)?
Second home
Jackie has been looking to purchase a home for over 2 years and is excited about closing on her new home with BlazingFast Mortgage Shop. Jackie knows that this will be her final home, so she decided to lock into a fixed-rate mortgage loan program. While searching for her home, she was able to save up 20% for a down payment. Due to the additional cash that she has left over at the end of the year, she won't need her taxes and insurance managed. She's fine with paying them on her own. Which of the following documents will Jackie receive at closing?
Security Instrument, Promissory Note, Closing Disclosure
A state authority does NOT have the power to do which of the following?
Sentence a licensee to 6 months in prison
All of the following are covered under TILA, EXCEPT?
Student loans made by the federal government
The Guidance identifies three main concepts where lenders should take extra consideration when underwriting. Which of the following is NOT one of those three?
Subordinate Liens
Which of the following disclosures are NOT covered under TILA?
TIL, Right to Rescind, Notice of Right to Receive An Appraisal Federal Law TILA - Notice of Right to Receive An Appraisal is under ECOA's Valuation Rule. It informs the borrower they get a copy of their appraisal promptly upon completion. Think of it this way, if borrower does not get a copy of their appraisal, they may think the valuation of their home was done in a discriminatory manner.
Which of the following is NOT true about the Loan Estimate?
The LE replaced the GFE & TIL to provide a more efficient disclosure, so the borrower is informed about all of the costs in obtaining a loan.
A bi-weekly mortgage is a strategy some borrowers use to achieve interest savings. However, there can be drawbacks. Which of the following is NOT considered a drawback to a bi-weekly mortgage?
The borrower ends up making an extra mortgage payment per year. GMK Programs - One of the primary benefits of a bi-weekly payment schedule is it helps the borrower pay the home off faster.
Which of the following BEST describes the information necessary for an application to be considered complete according to Regulation X?
The borrower's name, the borrower's monthly income, the borrower's social security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought
All of the following are to be considered when qualifying a borrower under the Ability-to-Repay rule, EXCEPT?
The consumer's debt obligations to subscription periodicals MLO Specific Program Guidelines - Because periodicals are not contractual debts and can be canceled at any time they are not included with a client's ATR or their DTI.
Which of the following could allegedly be predatory lending?
The lender changes the terms of the loan at closing.
If a veteran has previously used their entitlement and it has not been fully restored due to any number of circumstances, then which of the following is true?
The maximum guaranty amount available is decreased accordingly.
Sally is reviewing her Closing Disclosure and notices that some of the numbers do not match what was on her Loan Estimate. Sally sees that the origination charge has increased by $50 and that her Home Owners Insurance has decreased by $20. She also notices that the cost of her appraisal has stayed the same. What is true in this scenario?
The origination charge should have stayed the same.
Which of the following acts would be considered predatory lending?
The potential lender asks you to provide inflated income on your loan application Ethics Predatory Lending - All information used for qualifying must be accurate to the best of the borrower's knowledge
Which of the following is NOT true regarding the state regulatory authority in relation to the SAFE Act?
The state authority may amend the SAFE Act.
The conditions of the residential housing market is ever-changing and the values of the homes can rise or fall accordingly. Which of the following BEST describes a home or group of homes that are showing signs of appreciation?
The value of the home(s) are increasing in value.
A borrower tells an MLO, Kelly, that they've found a mortgage loan with a rate of 5% with no points at a separate lender. Kelly, the mortgage loan originator has a 5% rate available for 1 point and a 5.25% rate for 0 points at her loan shop. What should the originator tell the borrower?
They have a 5% for 1 point.
An individual is working with a borrower on acquiring a mortgage loan. They have assisted the borrower in completing a URLA and have been advising the borrower on programs and rates. If the loan closes, the individual will receive commission from a non-depository creditor. Which of the following statements is true about this individual?
They will need to register with the NMLS and obtain a license from the state.
Why would a borrower pay discount points in conjunction with his/her loan transaction?
They would lower their note rate.
What is the primary role of the loan originator?
To assist with completing the loan application and negotiate the terms of the loan
Why was the CFPB established?
To help consumers better understand the risks of long-term credit agreements
The primary function of any State Authority is what?
To protect consumers
What is the purpose of having two purchase money loans close simultaneously at the same time when this produces a 100% CLTV for the borrower?
Typically the first mortgage is only 80% LTV, which allows a borrower to forego paying PMI
Which of the following individuals typically determines a final loan approval or denial based on lender guidelines?
Underwriter
Which of the following is not a part of the Department of Housing and Urban Development?
VA GMK Products - The Dept. of Housing and Urban Development (HUD) oversees all aspects of FHA loans
Which term below BEST fits within the definition of a mortgage?
Voluntary Lien
On the fourth page of the Closing Disclosure there are some loan disclosures for the loan that is being applied for. Which is NOT one of those disclosures found here?
Whether or not the loan has prepayment penalty MLO Qualifications and Disclosures - This information is found on page one of both the LE and CD
Which of these is NOT considered a commercial advertisement?
White Pages