more wrong answers
Loan suitability refers to: a) A borrower's ability to repay a loan b) The type of product being what the borrower seeks c) The right product to fit the borrower's needs d) The loan products available from which to choose
Answer: a) A loan is deemed suitable for a borrower if her ability to repay is clearly established.
Which of the following disclosures is not required by RESPA for a refinance transaction? a) HUD's Home Loan Toolkit b) Loan Estimate c) Mortgage Servicing Disclosure Statement d) ABAD
Answer: a) Although RESPA requires the issuance of HUD's Home Loan Toolkit, it is only required for purchase-money transactions. The Loan Estimate and Mortgage Servicing Disclosure Statement are required on all transactions, and the ABAD is only required after a referral to a service provider in which the referring party has an ownership interest of 1% or greater or vice versa.
All but which of the following conditions would instigate the repayment of a reverse mortgage? a) One of the two borrowers passes away b) The borrower temporarily relocates to a rehabilitation facility for eighteen months c) Delinquent real estate taxes d) The local municipality exercises its rights under eminent domain
Answer: a) Although a reverse mortgage will become due and payable upon the death of a borrower, if one borrower dies but leaves a surviving borrower, the loan stays in effect. The loan would become due and payable upon the passing of all obligated borrowers and their spouses. Vacating the property for more than one year, allowing real estate taxes to become delinquent, and the exercising of eminent domain would all trigger the repayment of a reverse mortgage.
What is a potential drawback associated with a bi-weekly mortgage? a) Lenders and mortgage servicers generally charge a one-time and/or periodic fee to manage this service b) The loan term is accelerated c) The borrower saves money on interest d) The borrower builds equity at an accelerated pace
Answer: a) Lenders and mortgage servicers generally charge a one-time and/or periodic service fee to transform a borrower's loan to and maintain it on a bi-weekly payment schedule. The borrower can achieve the same results, without any added expense, by remitting one extra monthly payment directly against the principal balance each calendar year.
Which of the following is permissible under the Equal Credit Opportunity Act? a) Asking an applicant to define her race b) Asking about a woman's intention to have more children since the expenses associated with additional children may adversely affect her ability to repay the debt c) Asking an applicant whether or not he is divorced after he discloses alimony payments as one of his liabilities d) Asking the applicant of what country she is a citizen
Answer: a) As an exception to accommodate HMDA, ECOA allows mortgage loan originators to ask their customers to self-define their race, national origin, and sex. Inquiring about an individual's intention to procreate is never acceptable nor is asking an applicant to elaborate about their marital status. Although applicants are required to define themselves as U.S. citizens, permanent resident aliens, or otherwise justify their legitimate presence in the United States, inquiring as to the country of their citizenship is never permitted.
If a homeowner fails to provide evidence of homeowner's insurance, her mortgage servicer may: a) Purchase forced-place coverage b) Call the loan due and payable in full c) Raise the interest rate to compensate for the risk d) Self-insure the property
Answer: a) Demonstrating constant insurance coverage is a requirement of all mortgages. The investor needs to be assured that its investment is continuously insured against loss. In the event that a borrower fails to maintain continuous insurance coverage or provide continuous evidence of such, the mortgage servicer will purchase a non-underwritten, force-placed insurance policy to protect its interests.
For conventional borrowers making a down payment of less than 10%, what percent of the purchase price is the limit on seller's concessions? a) 3% b) 9% c) 6% d) Seller's concessions are prohibited with down payments of less than 10%
Answer: a) If a borrower remits a down payment of less than 10% on a conventional purchase, the seller may offer up to 3% of the purchase price as seller's concessions. A down payment of 10% or greater but less than 25% would limit the concessions to 6%. Lastly, for down payments of 25% or greater, the seller may contribute up to 9% of the purchase price. If the subject property is intended for investment purposes, seller's concessions are limited to 2% regardless of the LTV. FHA seller's concessions are always capped at 6%.
Which of the following is an example of disparate treatment? a) A mortgage company located in an Asian community only conducts business in English b) A mortgage originator who only speaks English refers an applicant to a colleague who speaks the customer's native language c) A mortgage originator refuses to work with anyone who is not a U.S. citizen d) An east coast mortgage company does not operate after 5:00 p.m. EST
Answer: a) Only conducting business in English is not disparate treatment in and of itself. What causes it to potentially and adversely affect a particular population subset and be considered disparate treatment is the fact that the company is located in an Asian community. By only offering services in English, while located within an Asian community, the Asian population who may not speak English may be adversely affected. The loan originator who refers a customer who does not speak their language is not committing any type of offense because she does not speak their language. She is going the extra mile by referring that customer to someone with whom they can work. Refusing to work with non-U.S. citizens is an example of discrimination not disparate treatment. Operating up until 5:00 p.m. EST is fine because it affects all potential customers nationwide, not just some.
Which of the following credit score ranges affords the applicant access to standard mortgage pricing? a) 740+ b) 680 - 739 c) 640 - 679 d) 620 - 639
Answer: a) Standard mortgage pricing is the pricing associated with the highest credit scores. Lower scores result in higher pricing to offset risk.
An individual falsely representing an ownership interest in and the right to sell a property is known as a: a) Straw seller b) Property flipper c) Straw buyer d) Conspirator
Answer: a) Straw sellers falsely claim ownership to a property for a fee and often appear at closings to act as the legitimate seller.
Qualified mortgages limit pre-payment penalties to: a) Two percent of the balance during the loan's first two years b) Five percent of the balance for the life of the loan c) One percent of the balance up through year four d) QM's prohibit pre-payment penalties
Answer: a) With the implementation of QM's through the Dodd-Frank Act, pre-payment penalties are limited to 2% of the outstanding balance during the loan's first two years, 1% of the loan's outstanding balance during the third year, and no penalty thereafter.
The requirement to include the credit repository's name and address on the adverse action notice is established through: a) ECOA b) FCRA c) ECOA & FCRA d) FACTA
Answer: b) FCRA requires that financial institutions provide their applicants with the name and address of the credit repository from which they secured the applicant's credit report so that the applicant may request a free copy of their credit report from the credit repository whenever they are denied credit due to credit-related reasons.
What is another common term for a home equity loan? a) HELOC b) Subordinate lien c) Private mortgage d) Assumption
Answer: b) Home equity loans are often originated along with or after the origination of a first mortgage. As such, they take a subordinate lien position against the property's title and are therefore typically referred to as subordinate liens. Any lien, whether a home equity loan, line of credit, or otherwise occupying a secondary or lower lien position may be referred to as a subordinate lien. A HELOC is a home equity line of credit.
Julie suspects that her loan originator may be participating in a sham affiliated business arrangement (AFBA). Which of the following situations does HUD consider a factor indicating the possibility of the AFBA being a sham? a) The title company is located out of state b) The independent home inspector only performs inspections for this one particular lender c) The Realtor only works part time d) The hazard insurance agent is newly-licensed
Answer: b) One of ten factors that HUD considers suspect when evaluating an entity for a sham affiliated business arrangement is whether or not that entity conducts business with other members of the lending industry aside from its affiliate. If it does not, that may be an indication of a sham AFBA. It might be a good idea to know those ten factors for this exam!
Which of the following is not a characteristic of a sub-prime borrower as defined by the Statement on Subprime Lending? a) Foreclosure, repossession, or charge off within the previous 23 months b) Possessing more than two mortgages c) Two or more 30-day delinquencies within the previous 12 months d) Bankruptcy within the previous five years
Answer: b) Owing multiple mortgages is not a concern as long as the borrower is qualified and managing the payments as agreed.
Which of the following is not a responsibility of the CFPB under the Dodd Frank Wall Street Reform and Consumer Protection Act? a) Supervising and examining financial entities for compliance b) Identifying risks to consumers c) Educating consumers d) Licensing mortgage loan originators
Answer: d) The licensing of mortgage loan originators is the responsibility of the Nationwide Multistate Licensing System and Registry.
The Truth-in-Lending Act addresses all of the following except: a) Right of rescission b) Comparative shopping c) The cost of the credit d) Advertising
Answer: b) The three main purposes of TILA consist of disclosing the cost of the credit to the customer, establishing the right of rescission applicable to non-purchase, primary residential transactions, and overseeing advertising. Comparative shopping considerations are addressed through RESPA.
A company falsely promoting that a particular product it offers is endorsed by the federal government is in violation of which regulation? a) ECOA b) TILA c) GLBA d) Patriot Act
Answer: b) The truth-in-Lending Act prohibits advertising and promotion that falsely implies that the government has endorsed a particular program, product, or service.
A loan originator, processor, underwriter, appraiser, and closer are all in cahoots to defraud lenders of closing funds for their own personal gain. They fabricate complete files to submit to lenders for funding. This is an example of: a) Straw buying b) Straw selling c) Creating air loans d) Committing affiliate fraud
Answer: c) Air loans are loan files submitted to lenders for funding whereby everything contained within the file is false, fabricated, and fraudulent. Air loans are an extreme example of fraud for profit.
The four elements of mortgage fraud, as defined by Fannie Mae, are: a) Intent, material misrepresentation, neglect, and deceit b) Misrepresentation, reliance, harm, and damages c) Intent, misrepresentation, omission, and neglect d) Misrepresentation, deceit, steering, and neglect
Answer: c) Fannie Mae considers mortgage fraud to contain the elements of an intent to defraud, a misrepresentation to the consumer or lender, the omission of important and relevant information, and neglect of fiduciary responsibility to the customer or lender.
All but which of the following are not covered by RESPA? a) Simple assumptions b) The sale of loans on the secondary market c) Loans intended for sale to Freddie Mac d) Bridge loans
Answer: c) RESPA covers: loans made with funds insured by the federal government, loans made with funds from a lender regulated by the federal government, loans that are intended for sale to Fannie Mae or Freddie Mac, loans made by a creditor regulated under the Truth-in-Lending Act, and loan transactions involving federally related mortgage loans. Loans that are exempt from RESPA coverage consist of loans for 25 acres or more, loans for business, commercial, or agricultural purposes, temporary financing (bridge loans), loans secured by vacant land, loan assumptions that are permissible without lender approval (a simple assumption falls within this category), loans sold on the secondary market, and loan conversions when a new note is not required and the provisions are consistent with those of the original mortgage.
Regulatory violations processed by individual state Commissioners must also be reported to the: a) FBI b) CFPB c) NMLS&R d) U.S. Department of the Treasury
Answer: c) The NMLS&R must be informed of any action taken against a licensee.
Which of the following may be considered an advantage to FHA financing? a) Qualification is not required b) Credit is not considered c) Lower minimum down payment amount d) No limitation on property usage
Answer: c) The minimum down payment permitted through FHA financing is 3.5%, much lower than its standard conventional counterpart's of 5%.
Under the Bank Secrecy Act/Anti Money Laundering Rule (BSA/AML), what is the cash transaction amount at or above which additional documentation is required? a) $3,000 b) $25,000 c) $100,000 d) $10,000
Answer: d) As a part of the U.S.A. Patriot Act, the Bank Secrecy Act/Anti Money Laundering Rule (BSA/AML)is dedicated to preventing money laundering and the financing of terrorism. All cash transactions amounting to $10,000 or more trigger additional reporting requirements.
Although she remits a payment monthly, Lucy Loanpayer became 60-days delinquent months ago and cannot seem to catch up. Her last month's payment reduced her conventional mortgage to a 78% LTV. When will her mortgage servicer automatically remove her PMI? a) Never - PMI is a life-of-loan requirement b) Immediately now that she has achieved a 78% LTV c) Once she submits an appraisal demonstrating that her equity is 22% or greater d) Once she becomes current
Answer: d) The Homeowners Protection Act mandates that PMI be automatically removed once a loan reaches 78% LTV as long as the loan is current. Although Lucy is at 78% LTV, she will not be released of her obligation to pay PMI until she either becomes current or reaches her loan's amortization midpoint.
MLO Monica is refinancing the only mortgage secured by her customer's primary residence. She just realized that the APR of the interest rate that her customer locked exceeds the APOR by 1.625%. Which of the following statements now applies? a) An escrow account is mandatory b) A 2055 drive-by appraisal is sufficient c) MLO Monica must offer a lower rate to her borrower d) The three-day right to rescind is now extended to three years
With only a few exceptions, when a loan meets the criteria that classifies it as a higher-priced mortgage, an escrow account managing the homeowner's insurance and real estate taxes becomes mandatory for the first five years. Additionally, a written appraisal with an interior inspection is required. Higher-priced mortgages are permitted as long as the above-referenced conditions apply. Lastly, there is no change to the standard right of rescission requirements
