Ameritrain - Final Exam Questions

A borrower earns $8,750 per month. He has monthly debts of $1,137. The maximum mortgage payment he can afford is?

$2,013.00 *$2,013 [$8,750 x .36 (Conv DTI Ratio) = $3,150 - $1,137 (Mthly Debt) = $2,013 PITI (Mthly Mortgage Payment)]. When the question does not state what type of loan program is in use, always use conventional ratios (28%/36%).

If a borrower was charged 175 basis points on a $120,000 loan, then the fee would be?

$2,100 *$2,100 [$120,000 x .0175 = $2,100]

A borrower earns $24.13 an hour and works 38 hours a week. He is paid semi-monthly. How much does he earn monthly?

$3,973.41 *$24.13 x 38 hours x 52 weeks = $47,680.88 annual income. $47,680.88 ÷12 = $3,973.41 monthly income.

An underwriter requires a borrower to provide evidence of reserves. The borrower provides a copy of her 401K retirement account showing a $42,000 vested balance and a $25,000 non-vested balance. The underwriter will use what amount to satisfy this reserve requirement?

$57,000 *$57,000 [(100% x $42,000 (vested balance ) + (60% x $25,000 (non-vested balance)]

For a loan amount of $130,000 with a 4% APR, the maximum fees a creditor can charge to avoid exceeding the HOEPA threshold is?

$6,500 *The maximum amount a creditor can charge is $6,500 ($130,000 x 5%).

Calculate monthly interest for a $225,000 loan amount with a 3.5% interest rate. What would this be?

$656.25 *$656.25 [$225,000 x 3.5% divided by 12]

A buyer is purchasing a home for $310,000 with a down payment of $30,000. The property appraises for $320,000. He has a 1/1 ARM with an interest rate of 3.5% and closing costs are $8,500. What is the maximum dollar amount the seller can contribute to closing costs?

$8,500 *$9,3000 [$310,000 (Sales Price) - $30,000 (Down Payment) = $280,000 (Loan Amount) $280,000 (Loan Amount) ÷ $310,000 (Sales Price) = 90.32% LTV. Max seller contribution is 6% of the sales price or $18,600. However, the closing costs did not exceed $8,500, the maximum the seller can pay.

An individual investor applies for financing with a lender. He states his rental income from his investment property adds $250 to his qualifying income. Renters pay $1,500 monthly and his mortgage payment for the property is $1,250. The underwriter disagrees calculating his net rental income as?

-$125 *-$125 Net Rental Income [$1,500 (Rental Income) x 75% = $1,125 (Actual Income) - $1,250 (Mortgage Payment on the property]. Investor are only allowed to use 75% of their rental income as 25% is assumed will be used for maintenance, vacancies, etc.

According to the Ability to Repay (ATR) rule, a creditor can earn up to a fixed percentage for loans of a specific size. Assuming a $120,000 loan amount, what is the maximum a creditor can earn in dollars or percentage?

3% *The maximum fees a creditor can earn under the ATR rule is 3%.

Equal Credit Opportunity Act (ECOA) requires lenders to communicate to each borrower a status of their loan application within what specific timeframe?

30 days of the loan application *A lender must provide an update of a loan application within 30 days.

Several builders and straw buyers were recently arrested as part of an elaborate a mortgage fraud ring that defrauded investors of $20 million dollars. The penalty for committing mortgage fraud is punishable by up to?

30 years in federal prison and $1,000,000 in fines, or both *Mortgage fraud is investigated by the Federal Bureau of Investigation (FBI) and is punishable by 30 years in federal prison or $1,000,000 fine or both.

If a prospective MLO fails the exam, they must wait __________ days before retaking it and ___________ days if they fail three consecutive times.

30; 180 *An individual may take a test three consecutive times. Each retest cannot occur less than 30 days after the preceding test. They must wait 6 months before taking the test again if they fail three times.

A borrower earns $8,500 monthly and applies for a mortgage loan with several open debts. His proposed mortgage payment is $1,912, he has a car note of $480; monthly credit card payments of $118; an installment furniture account with a $2,500 deferred billing; utilities of $227; and a monthly $245 HOA. He's applying for an FHA loan. What is his qualifying ratio?

33.88% *The answer is 33.88% [$1,912 (Mortgage payment) + $480 (Car Note) +$118 (Credit Card payments) +$125 (5% of $2,500 deferred billing) + $245 (HOA)= $2,880 total monthly debt divided by $8,500]. Utilities of $227 are not included since they are not monthly credit reporting debts.

In March a borrower applied for mortgage loan approval; however, she keeps running into issues. While the seller has been extremely patient, it has been several months since the appraisal was done and now the borrower is being asked to pay for another appraisal as the current one has exceeded __ days/months.

4 months *Credit documents (documents used in the approval process), including appraisals, expire in 4 months or 120 days and will require updates to the information.

A 2/1 temporary buydown has a start rate of 2.5%. Therefore the note rate is?

4.50% *4.5%. The note rate is two percentage points above the start rate of 2.5% The start rate begins two percentage points below the note rate. (This represents the 2 in 2/1 temporary buydown). The rate increases each year (This represents the 1 in the 2/1 temporary buydown).

Angela is excited to purchase her first home. She is a veteran, will apply for a VA loan, and knows her maximum debt to income (DTI) ratio cannot exceed a certain percentage of her gross monthly income. What is this percentage?

41% *The qualifying ratio for VA guaranteed loans is 41% of a veteran's gross monthly income.

What is the timeframe closing disclosures must be retained in accordance with TRID?

5 years from the date of consummation

Robert applied for his MLO license with the state regulatory authority. After a few weeks, he received a letter that his license application was denied. One reason he was not denied might be?

581 credit score from a recent credit report *Credit score is not a factor the state regulatory authority will use to determine license approval.

What is the earliest time a borrower can settle their loan transaction?

7 business days after receiving the initial Loan Estimate. *The borrower cannot close earlier than 7 days prior to receiving the initial Loan Estimate.

A homeowner is purchasing a home for $325,750. He has a $48,863 down payment. The property appraises for $333,000. The Loan-to-Value (LTV) is?

85% *$325,750 (Sales Price) - $48,864 (Down Payment) = $276,887 (Loan Amount). $276,887 (Loan Amount) ÷ $325,750 (Sales Price) = 84.999% rounded up to 85% Loan-to-Value (LTV).

Assuming approval through their automated underwriting system (AUS), Fannie Mae or Freddie Mac will take delivery of?

A loan amount of $325,750 for a borrower whose information is fully documented. *The GSEs will purchase loans equal to or less than the conforming loan limit that are fully documented and approved through their automated underwriting system.

Which statement is correct about a higher priced mortgage loan that will attach to a primary residence?

A loan is a HPML if the APR exceeds the APOR by 1.5% or higher for a first lien. *A loan is a HPML if, the APR exceeds the APOR by 1.5% or higher for a first lien. And, if the APR exceeds the APOR by 3.5% or higher for a subordinate lien

Donna was given a loan where the amortization was longer than the term resulting in her having to provide a lump sum to pay off the loan by the term due date. Which is the best example of this loan type?

A loan with a 360-month amortization with a 180-month term. *A mortgage that requires a lump sum payment at the end of the loan term is referred to as a balloon.

A realtor refers a potential buyer to an individual at a mortgage company that she works with regularly. The realtor informs the buyer to provide personal information such as pay stubs, banks statements, and W2's. What should happen next?

A mortgage loan originator will assist the buyer with completing their mortgage loan application to qualify them for a mortgage loan. *Only a licensed mortgage loan originator can qualify the buyer. This stage will proceed before working with a mortgage loan originator assistant, processor, or underwriter.

The following is a true statement:

A: Real estate agents in some states can also originate mortgage loans under their real estate license. B: Real estate agents are always exempt from originating mortgage loans while they have an active real estate license. C: Real estate agents can originate up to 5 loans annually without holding an MLO license. D: Real estate agents can originate mortgage loans once they obtain an MLO license. D - is the correct answer *Real estate agents must obtain an MLO license if they want to originate mortgage loans.

A summary of title examiners findings, including chronological ownership listings and any impediments, is distributed to a lender in a(an)?

Abstract of Title *It is a summary giving details of the title deeds and documents that prove an owner's right to dispose of land, together with any encumbrances that relate to the property.

What clause located within the promissory note allows the lender to raise the interest rate in the event of a default or some other stipulated condition?

Acceleration *An acceleration clause is a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions.

As property values continue to appreciate, several bad actors recruit individuals who can qualify for financing to purchase homes that are not for sale to generate funds from the fictitious sales. This scheme is?

Air loan *An air loan exists when there is a straw buyer and straw seller making the complete transaction fraudulent and fictitious.

All are false about the Gramm, Leach, Bliley Act (GLBA), except?

Allows consumer to opt out or say no to having their information shared with certain third parties *Consumer can opt out or say no to having their information shared with certain third parties.

Per the SAFE Act, this individual must have a unique identifier number through the NMLS and need to hold a mortgage loan originator license. What would this individual be called?

An independent loan processor *Independent loan processors must have a unique identifier number and maintain a mortgage loan originator license.

It is an MLO's responsibility to determine if a borrower has an ability to repay their loan before it closes. Which is not one of the factors an MLO must consider under the ATR rule?

Appraised value *While the MLO must review any expected income and assets, this does not include the value of the property securing the loan.

Bobby is panicked. His MLO just informed him that he needs an additional $1,500 verified funds in his bank account to close on his home purchase. Desperate, Bobby reaches out to his best friend to ask for a favor. Bobby instructs his friend to temporarily deposit the funds he needs into Bobby's bank account to meet the underwriting condition. Once the loan closes, Bobby will return the funds to his friend with interest. This action is an example of?

Asset fraud *Whenever funds are fraudulently placed in a borrower's account to meet an underwriting condition, this is asset fraud.

The commissioner of the regulatory authority in each state can do all, but:?

Bring charges *Only a state's Attorney General's office can bring charges against a licensee. The commissioner's sole purpose is to enforce the laws for which he or she has authority.

Now that interest rates are rising, Jonathan, a builder, has several of his properties available for purchase. However, he cannot obtain a new financing from his bank until he sells the remaining houses. So, he solicits several individuals to help him get the properties sold with straw buyers, or by any means necessary. This is a(n)?

Builder Ballout Scheme

A fraudster submits mortgage loan applications, each for owner-occupied purchases, to several mortgage companies in the area within one week. This scheme is known as?

Chunking *When an individual tries to obtain multiple loans at the same time as primary residence purchases, this would be chunking.

Jerry has first and second liens attached to his primary residence. He wants to refinance the first lien and keep the second lien in place. What would his MLO advise as the first step in the process?

Contact the second lien holder to get an agreement to remain in second lien potion and allow a new first to go ahead of it. *If a borrower wants to refinance a first mortgage and keep the second mortgage in place, the second mortgage holder must agree to subordinate to the new first lien holder. To subordinate means the second mortgage creditor agrees to hold a second lien position to a new first mortgage that will replace the existing first mortgage.

Once a property is sold automatic maturity and payoff of the loan is required and it is not assumable. This loan type?

Conventional loan *Conventional loans have "due on sale clauses" and cannot be assumed. Only government loans are assumable.

A primary mandate of the Dodd Frank Act was to?

Create the CFPB (Consumer Financial Protection Bureau) *The CFPB was created to enforce the provisions of the Dodd-Frank Act.

What section of the Uniform Residential Loan Application form would a borrower note if they have ever defaulted on a federal debt?

Declarations

What funds are paid to the selling agent, on behalf of the seller, and are treated as an asset that will be reflected on the Uniform Residential Loan Application?

Earnest Money *The borrower will receive credit towards their closing costs for any earnest money paid to the seller associated with the purchase of real property.

A municipal county government recently approved plans to build a waste treatment plant near a particular community. According to the county, homeowners should not be affected by the addition to the area. While attempting to sell a six-bedroom home with four and one-half bathrooms, an agent is not getting a lot of interest. The problem is likely?

Economic Obsolescence *Economic obsolescence refers to the loss of value of a real estate property due to factors that are external to the property such as construction of a landfill nearby,

Under the Home Mortgage Disclosure Act (HMDA), depository and non-depository institutions must report certain data to CFPB on the ________________ of each borrower by ____________ of the preceding calendar year.

Ethnicity, race, and sex; March 1

Which entity establishes the loan limits for conventional loans based on average home sales?

Federal Housing Finance Agency (FHFA) *The Federal Housing Finance Agency (FHFA) issues the maximum loan limits that apply to conventional loans acquired by Fannie Mae and Freddie Mac annually, effective on January 1 each year.

The enforcement agencies for the Do Not Call Improvement Act are shared with ____________ and the ____________?

Federal Trade Commission (FTC); Consumer Financial Protection Bureau (CFPB) *Both the FTC and CFPB share enforcement responsibilities.

According to TRID, how long are terms of the Loan Estimate available, not including the interest rate, to give a borrower time to comparison shop?

For a minimum of 10 days

Megan owns a piece or property her grandparents left her in their will. She decides to sell it since she does not plan to move back to the state. When she sells the property, Megan will be the ____________ and the new owner the ___________?

Grantor; Grantee *The warranty deed in an instrument that transfers real property from a seller to a buyer. The seller signs the deed and is referred to as the grantor. The buyer receives the warranty deed is known as the grantee.

Don works as an MLO for a lender who provides financing for high-cost loans. He refers his customer to his sister who works as a HUD-approved housing counselor to expedite getting the certificates of completion. What is the best course of action?

Having an affiliation between the referring MLO and the counseling agency is prohibited. *The homeownership counselor cannot be affiliated with or employed by an MLO's organization.

After working in the industry for a few years, a licensed MLO decides to deactivate his license to pursue other interests. Which of the following statements is correct?

If he completely leaves the industry and returns within 5 years, he will not be required to retake the test. *As long as he returns to the industry within 5 years or less, he does not have to take the test again.

Beth lacks sufficient funds to close after making several upgrades for her new home purchase. She convinces her grandmother, who has a home with significant equity, to get a cash-out refinance and give Beth the funds she needs. Beth refers her grandmother's loan to her MLO. How should Beth's MLO handle this scenario once he becomes aware of her plan?

Inform Beth of the legal implications of structuring the loan in this manner. *It would be a fraudulent nominee loan if these transactions were to move forward. A nominee loan occurs when a loan is made to one individual; however, the proceeds of the loan benefit another individual without the lender's knowledge.

Under regulations Z, all are exempt from finance charges except?

Interest *Interest is a cost of financing a loan and is a finance charge. A finance charge is paid to the lender as a condition of financing a debt.

Mark and Ariana purchased their dream home two years ago in a well sought-after community near great schools for their two kids. Ariana just received a letter from the builder's attorney, notifying them an ancient Indian burial ground was found near the back of their property. There was no damage to their home at the time they received the communication from the attorney. What is their best course of action?

Locate their owner's title policy which they purchased at closing and contact the title company for further assistance. *Owner's title policy protects the homeowners in the event there is a title issue after the purchase.

After the passage of the SAFE Act, the federal government wanted to ensure states could implement the SAFE Act in their states. Therefore, states were given a template to implement the SAFE Act in their states. This tool is referred to as?

MSL *The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) created the Model State Law (MSL) which is a template that states used to implement the SAFE Act in their states.

A new MLO is reviewing information about similarities with the laws relating to mortgage licensing. Three of these items have a common element except?

Model State Law *The SAFE Act is Title V of the Housing and Economic Recovery Act (HERA) which was re-coded by the CFPB and is now known as Regulation H. The Model State Law (MSL) is a template states use to implement the SAFE Act at the state level.

A broker uncovers her Mortgage Loan Originator had took an application and unintentionally fails to record pertinent information, such as child support payment, due to being unaware of the expense. This new information could impact the loan application approval and the MLO is guilty of?

Negligent Fraud *Not intentionally withholding information is negligent fraud as compared to actual fraud which is a knowing intent to deceive by providing false or inaccurate information.

An insurance agent who provides coverage for a homeowner who recently closed on an owner-occupied property has been unable to reach the homeowner for a couple of weeks to sign several documents. He decides to visit the property to make contact. When he returns to his office, he notifies the mortgagee that the homeowner's policy has been canceled. What most likely is the basis for this decision?

No evidence borrower lives in the property since they closed on the transaction. *Generally, primary purchase borrowers must occupy their residence within 60 days of consummation.

After submitting the initial Loan Estimate to a borrower, an MLO realizes she forgot to include the origination fee and sends her customer a revised Loan Estimate. Is this acceptable?

No, because no changes can be made to fees that meet the zero-tolerance threshold requirement. *Origination fees are a zero-tolerance item. Therefore, fees in this category may not change once disclosed to a loan applicant.

A borrower is retiring to Florida from Michigan after working for 35 years. She just entered into a contract to sell her house and will purchase a home in Florida. Both transactions will happen at the end of the month. Her MLO in Florida discussed the possibility of getting a second mortgage against her Michigan home for her down payment. Is this a plausible option?

No. The borrower will no longer owe the house and therefore cannot attach a second lien to get equity for down payment. *Since the house will be sold, the borrower can no longer attach any lien to the property in Michigan.

Sherry wants to open a company to process mortgage loans, therefore she should?

Obtain a unique identifier number from NMLS and apply for her MLO license *Sherry will need to be licensed as a MLO in order to work as an independent contract processor.

Mortgage brokers can?

Originate loans through the wholesale channel where they can represent multiple lenders. *Brokers do not access to their own financing and therefore cannot fund their loans or sell to the secondary market.

A new homeowner in his 20s was attempting to explain what type of loan she has by describing key aspects. All items are associated with the loan program except?

Private mortgage insurance *Mortgage insurance premium, 100% gift for down payment and maximum 6% seller contributions would all be associated with a FHA transaction. Private mortgage insurance (PMI) is associated with conventional loans only.

This document contains loan repayment terms and is signed by the mortgagor or trustor. It is referred to as a?

Promissory Note *Borrowers sign a separate promissory note, also referred to as note, giving a personal guarantee to repay the outstanding loan. The note is secured by the security property using the Deed of Trust or Mortgage. It is not a recorded document.

Which document, once signed, is an indication that the borrower is contractually obligated for a mortgage?

Promissory note *Once a borrower signs the promissory note they are contractually obligated for the mortgage debt.

According to Dodd Frank and the Equal Credit Opportunity Act, how soon must a borrower receive a copy of an appraisal? (select the best response questions)

Promptly, or within 3 business days prior to consummation *Once a lender receives an appraisal, they are to deliver it promptly (immediately) or within 3 business days to the consumer. Promptly is faster than 3 business days.

A borrower submitted his loan application for approval, but it was declined. She contacts her MLO to inquire about the appraisal status as it has been a couple of weeks since it was completed. How should the MLO respond to the request?

Provide a copy of the appraisal within 30 days of determining the loan will not close. *A borrower must receive a copy of the appraisal, if one was done, within 30 days of determining the loan will not close in accordance with the Equal Credit Opportunity Act (Act).

Investors with multiple properties must list all properties they own in which section of the Uniform Residential Loan Application?

Real Estate

This regulation addresses discrimination of creditworthy applicants.

Regulation B *Regulation B is the Equal Credit Opportunity Act that ensures credit is equally available to all credit worthy customers without regard to the following prohibited basis: • sex • marital status • race • color • religion • national origin

According to the Equal Credit Opportunity Act (ECOA), a creditor does not need permission to ask for this form of income?

Salary *A borrower must provide permission to an MLO if they wish to use other forms of income to qualify for mortgage financing other than salaries, such as separate maintenance, alimony, and child support.

An MLO in reviewing an appraisal and discovers several recent comparables were not included in the appraisal report. What can she do?

Share her findings with the appraiser and ask for consideration of the additional comparables. *An MLO can ask a person that prepares a valuation to consider additional, appropriate property information, including information about comparable properties, to make or support a valuation.

John, an MLO, and Marie, a real estate agent, have been doing business together for many years. After closing their last transaction together, Marie invited John on an all-expenses-paid trip to Destin, FL, for the Memorial Day weekend as a thank you for the referral. Unfortunately, John's boss has an issue with this arrangement. What could be the concern?

Someone could view the trip as a kickback for getting the loan closed. *It is a violation of RESPA to provide a kickback, anything of value, which would include a trip.

A soldier on active duty is deployed overseas. He decides to refinance to reduce his monthly mortgage payment. During the application process, the MLO tells the borrower he will have to sign and forward original signatures of a document giving his family member the right to facilitate the closing on his behalf. What is this document?

Specific power of attorney *Typically, the lender will only allow the use of a specific power of attorney in real estate transactions.

Michelle wants to purchase a home. After starting the loan process, her MLO informs her she's unable to secure mortgage financing due to several credit challenges. Michelle asks her cousin Amanda for her assistance by applying for the loan instead of Michelle, who will take possession of the property once it closes and make the payments. Amanda is considered a?

Straw buyer *A person used to buy property in order to conceal the actual owner is a straw buyer.

The vehicle used to track mortgage fraud activity is called?

Suspicious Activity Reports (SAR) *The Financial Crimes Enforcement Network (FinCEN) tracks fraud activity and requires companies to report Suspicious Activity Reports (SAR).

Jack, a mortgage broker, has an opportunity to work with a new developer in the area. He plans to take advantage of a process where his company name will appear on the closing disclosure as the funding lender. This is referred to as?

Table-funding * Table funding occurs when a loan closes, and the broker is listed as the creditor or lender on the settlement statement. Under this scenario, a broker uses the lender's funds and then transfers the loan to the lender immediately after closing.

A borrower purchased a primary residence near the beach several states away during the pandemic. She has an existing primary residence in her home state that she does not plan to sell and where she currently holds a full-time job that requires her to work from her corporate office. A few months after closing on the beach property, the borrower was contacted by the FBI and charged with fraud. Can the FBI do this?

The borrower disclosed on the loan application she intends to occupy the property as her primary residence. *By disclosing she intends to occupy the property as her primary residence, she committed fraud as she cannot have two primary residences.

A Hispanic single mother of three small children with a credit score of 685 applies for mortgage financing using government assistance which she receives. Eventually, the lender declined her application. As a result, she files a complaint alleging income discrimination and violating the Equal Credit Opportunity Act. What is the likely basis of the lender's decision?

The borrower had other risk factors other than receiving income from government assistance. *While a lender cannot discriminate against a borrower who receives income from public assistance, they must review the borrower's file in totality to assess it's overall risk (ex. rental history, down payment, reserves, etc.)

An MLO submits a borrower's loan application for underwriting as an adjustable-rate mortgage. The loan is not approved based on this product selection. Instead, the underwriter encourages the MLO to restructure the loan, and it will be approved. What's the possible scenario?

The borrower is receiving social security income only, but as a fixed-rate product the underwriter is inclined to approve the loan. The borrower has 90 days to respond to the counteroffer. *If a borrower is receiving fixed income, the underwriter will likely approve a loan as a fixed rate product. The borrower has 90 days to respond to the counteroffer.

Missy has an impressive resume. She came highly recommended by a seasoned MLO who has worked in the industry for two decades. Yet, after working with her new employer for approximately 60 days, suddenly, Missy was let go. What's the most likely scenario?

The company found adverse information about Missy from the SARs report. *Information can be reported to SARs about borrowers and industry professionals.

After closing her loan with a mortgage company, a consumer received several emails from the company stating its plan to share her information with its marketing affiliate. The consumer opted out, but the company shared her information any way. What options are available?

The consumer can file a complaint against the mortgage company which could receive a fine up to $100,000 for each violation. *Institutions violating the law can be fined up to $100,000 for each violation.

A homeowner lives in a state where they hold legal title to the real property and equitable title, therefore this means?

The property is located in a lien theory state *In lien theory states, the buyer, who is also the borrower, will hold the deed (title) to the real estate property for the life of the mortgage while they are living in the property.

The sellers of a property receive news that the appraised value was significantly less than they had hoped. The appraiser noted this is due to Geographic and Market analysis data. Which is the best reason for the appraiser's finding?

There were several foreclosures in the community affecting property values for homeowners. *Foreclosures impact the marketability of homes within a community which would be an adverse factor that an appraiser would note in an appraisal report. Crime would be an economic obsolescence. Not having enough bedrooms would be an internal obsolescence. Making changes to the value by not more than 15% would be a net adjustment.

Mack and Joanna are siblings who decide to start two businesses in the mortgage industry. One will open a mortgage brokerage company, while the other will work as an independent mortgage loan processor. How should they disclose their relationship to customers they refer to each other?

They must provide each borrower with an Affiliated Business Arrangement Disclosure Form. *The ABA disclosure form is a requirement with there is an associate relationship between service providers referring business to each other.

After closing her refinance loan on her home, Corey changes his mind and decides to rescind the following day. Corey must exercise her right to rescind by midnight of the _________ business day.

Third *Following consummation, delivery of the notice, or delivery of all material disclosures, whichever occurs last, the consumer may exercise the right to rescind until midnight of the third business day.

Several weeks ago, a young lady decided to purchase a home. However, after speaking with her MLO, she will need additional income to qualify for the property she wants. So, she contacts her friend who works in the human resources department to verify a slightly higher income so the lender will approve her loan for a higher dollar amount. What's the issue here?

This is fraudulent and is considered fraud for housing. *Fraud for housing generally involves material representation or omission of information with the intent to deceive or mislead a lender to extend credit that would likely not be offered if the true facts were known.

What was the reason for the passage of the Dodd Frank Act?

To regulate consumer protections activities of the financial services industry. *The Dodd Frank Act is designed to provide increased consumer protections over the entire financial services industry.

When a portion of a Home Equity Line of Credit (HELOC) is used to purchase a property, when combined with the first lien, the total outstanding liens and available credit is referred to as?

Total Loan-to-Value (TLTV) *All outstanding loans, plus any available Home Equity Line of Credit (HELOC), is referred to as Total Loan-to-Value (TLTV) also referred to as High Combined Loan-to-Value (HCLTV) HCLTV under Fannie Mae.

A borrower is located in a state where they use a three-party security instrument. The borrower and lender are referred to as?

Trustor; trustee *The three-party security instrument is referred to as a deed of trust. It is comprised of the borrower who signs the document and is referred to as the Trustor. The third party is the Trustee. The Lender is the beneficiary.

An MLO advertises for customers on his social media page and lists several characteristics of people likely to get a loan approval (e.g., 600+ credit scores, steady employment). This is in accordance with?

Truth in Lending Act (TILA) *TILA covers this part of advertising guidelines.

This act serves as an enhancement to existing law enforcement tools designed to detect and punish domestic and foreign terrorist activities.

USA PATRIOT Act *The USA PATRIOT Act is meant to deter and punish terrorist acts in the United States and around the world, including to prosecute international money laundering and financing of terrorism.

Every fall, a title company hosts a luncheon for mortgage professionals in the industry. This year a real estate company decided to make a financial contribution towards some expenses to offset the cost. Is this a RESPA violation?

Under this scenario neither party violates RESPA 8. *If mortgage professionals are not compelled to use the services of either party, there is no RESPA violation.

While taking a loan application, a borrower shares with his MLO that he recently financed a jewelry account not currently showing on his credit report. The debt will not likely appear on the borrower's credit report until after consummation. How should the MLO handle this situation?

Update the loan application with the new information and resubmit to underwriting. *This is the best course of action. Disclosure demonstrates the loan originator is ethical.

Terry and her ex-husband have been divorced for two years. Now she is applying for a mortgage loan to purchase a home and wants to use her alimony, which she will receive for 1,275 more days. Can she leverage these funds to purchase a home?

Yes, since she will receive these funds for additional 3+ years. *Terry can use alimony to qualify for a mortgage if she will continue to receive those funds for three years or more.

After attending a real estate investment class, a borrower decides to purchase a home that will generate rental income from two families while building a primary residence mortgage payment history for himself. Is this possible?

Yes. He will purchase a tri-plex allowing him to live in one unit and rent the other two. *A tri-plex would allow a borrower to live in one unit as a primary residence while generating rental income from the other two units.

In accordance with the Fair Credit Reporting Act (FCRA), this item will remain in an individual's credit file:

a bankruptcy for 10 years *Bankruptcies will remain in an individual's credit file for 10 years. Collections, charged off accounts and paid tax liens will remain for 7 years.

The Regulation X applies to?

all federally related mortgage loan transactions financed for consumer use.

A new MLO is splitting the advertising costs for ads with an online real estate publication. His compliance department contacts him requesting the removal of the advertisement. Use of the following language would not be a basis for the removal?

financing available *Financing available is not a term that would trigger additional disclosures.

Members of an investment club are advised to use a particular real estate ownership right. They should consider this method because?

it protects owners' heirs by transferring ownership to the investor's heirs upon death. *Tenants in Common refers to property owned by two or more persons at the same time. Upon death, the decedent's interest passes to his/her heirs designated in a will, who then become new tenants in common with the surviving tenants in common.

A lender's insurance policy protects the ______ and is ________ when the property is assigned to a new owner.

lender; transferable

John, a new MLO, was attempting to explain to his customer how a lender provides public notice that there is an outstanding claim against their real property that is recorded in a county courthouse where the property is located. Which document will John say provides this information?

security instrument *The security instrument is a document pledging an item, in this case the borrower's home, as security for a loan that is recorded. Another word for security instrument is lien.

Flood insurance is required if?

the structure is located in a Special Flood Hazard Area (SFHA) *SFHA is defined as the area that will be inundated by a flood event having a 1-percent chance of being equaled or exceeded in any given year.