NMLS Test Wrong answers.
Carrie is obtaining a 90% loan for the purchase of her new home, which she is buying for $225,000. One discount point for her loan would be equal to:
The answer is $2,025. One discount point is equal to 1% of the loan amount. In this case, 90% × $225,000 = $202,500. 1% × $202,500 = $2,025.
Seller concessions for conforming loans are limited to _____ and _____ on LTVs of over 90% and 90% or less, respectiv
he answer is 3%; 6%. Seller concessions for conforming loans are limited to 3% and 6% for LTVs of over 90% and 90% or less, respectively.
A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV?
A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV?
A borrower receives $2,500 per month in rental income. How much of the income may be used to qualify the borrower for a loan?
The answer is $1,875. Generally, 75% of rental income may be used to qualify the borrower for a loan. This formula is based on an industry standard that taxes, insurance, and maintenance costs will equal about 25% of the income that a property generates. In this case, 75% × $2,500 = $1,875.
A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan?
The answer is $12,000. To calculate the annual interest: 6% × $200,000 = $12,000.
In January of 2020, Wella and Kip agreed to purchase a home at a purchase price of $546,300. They would like to hold onto as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings?
The answer is $35,900. The down payment in this scenario will be $35,900. This is just enough to keep them at the $510,400 conforming loan limit which was adjusted January 1, 2020. 546,300-510,400 = 35,900
Richie Rich has been approved for a 90% loan. Richie is under contract to purchase a home for $400,000 and put $5,000 earnest money down with the contract. If Richie's lender is charging 1% origination, 1% discount, and the title company fees total $1,350, how much does Richie need to bring to closing?
The answer is $43,550. 90% LTV means Richie will need to bring 10% of the purchase price, or $40,000, to closing, minus the $5,000 he already paid as earnest money. To this he must add 1% of the $360,000 loan amount, or $3,600, for the 1% origination fee, and an additional 1% of the loan amount ($3,600) for the discount. Finally, he must add the $1,350 title charge: $40,000 − $5,000 + $3,600 + $3,600 + $1,350 = $43,550.
Tom and Cindy Lewis are buying a house with a $300,000 sale price, and their LTV will be 80%. They paid $3,600 in discount points. How many total points did they pay?
The answer is 1.5. Points are a percentage of the loan amount: 1 point = 1% of the loan. The loan amount here is $240,000 (80% of $300,000). On a $240,000 loan, one point would cost $2,400 (1% x $240,000). The Lewises are paying $3,600 in points; to determine how many points this represents, divide $3,600 by $2,400. This comes out to 1.5, meaning that Tom and Cindy paid for 1.5 points.
The Uniform Residential Appraisal Report is commonly known as the:
The answer is 1004. For FHA, VA, and conforming loans, appraisers will use the Uniform Residential Appraisal Report (URAR), also known as Fannie Mae Form 1004 and Freddie Mac Form 70.
Which of the following forms is the appraisal form used for investment
The answer is 1007. The 1004 is the Uniform Residential Appraisal Report, or URAR. These are variations for certain properties; the 1007 is used for single-family properties that are investment properties.
For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is more or less than:
The answer is 15 years. For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is more or less than 15 years.
A balloon mortgage has a:
The answer is 30-year amoritization period, but a requirement to pay the loan balance within a much shorter period of time. A ballon mortgage requires the borrower to make one large payment at the o the laon term. This payment may be referred t as "call," a "demand" or a "bullet. It often has 30-year amortization but is typically due 5,7,10 or 15 years.
Every month, a borrower has a car payment of $350, a credit card payment of $50, HOA dues of $35, a cable bill of $40, and a house payment (including taxes and insurance) of $1,250. The borrower's annual income is $50,000. What is the borrower's front-end debt-to-income ratio?
The answer is 30.8%. A housing or front-end ratio compares the applicant's monthly housing costs to his/her gross monthly income. Housing costs are referred to as PITI (principal, interest, taxes, insurance). In addition to PITI, any monthly homeowners' association (HOA) dues, if applicable, would also be included because they are a housing-related debt. Non-housing-related expenses (car payments, credit cards, etc.) are not included in the housing ratio. Housing ratio = housing debts divided by gross monthly income. In this case, $50,000÷12 = $4,166.66. ($1,250+$35)÷$4,166.66 = 0.308 = 30.8%.
Applicants for FHA loans must meet a back end ratio of:
The answer is 43%. In general, applicants for FHA loans must meet a back end ratio limitation of 43%.
A first-lien mortgage loan will exceed the HOEPA APR threshold and qualify as a high-cost mortgage if its APR is:
The answer is 6.5 percentage points above the average prime offer rate for a comparable transaction. First-lien mortgage loan will exceed HOEPA's APR threshold and qualify as a high-cost mortgage if APR is 6.5 more percentage points above the average prime offer rate for a comparable transaction.
A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days?
The answer is 60 days. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his or her primary residence must move in within 60 days after closing.
Lucy closes a refinance on Betty's primary residence. However, Lucy forgets to provide Betty with the proper notice of rescission rights. Which of the following is true?
The answer is Betty can rescind for three years from recording. If the creditor has failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, transfer of all of the consumer's interest in the property, or sale of the property.
A state licensing agency is conducting an examination of the Willow Wand's loan origination activities. In doing so, it may do all of the following, except:
The answer is Close Willow's business for the period examination. In conducting an examination or investigation, state licensing agency may, among other things, administer oaths and affirmations; subpoena witnesses, as well as books and records; require the production of relevant documents; and control access to any documents and records of the person under investigation. The state licensing agency is not authorized to close Wilow's business period of time.
A consumer report is defined under which of the following federal laws?
The answer is FCRA. FCRA defines a consumer report as any information from a consumer reporting agency that relate to consumers credit worthiness, credit standing , credit capacity character, personal characteristics or mode of living, used or expected to be used in order to determine eligibility for credit or insurance, or to evaluate consumer for employment.
Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called:
The answer is earnest money. Money paid by a buyer to a seller at time of entering into a contract to indicate intent and ability out the contract is called earnest money.
Which of the following is least likely to be held in an escrow or reserve account?
The answer is HOA fees. In addition to principal and interest, a borrower's monthly mortgage payment may also include a reserve payment (also known as an escrow or impound payment) that represents approximately 1/12 of the estimated annual hazard and flood insurance premiums, mortgage insurance premiums, and property taxes. While some escrow accounts may include assessments for special improvements, homeowners' association fees, and other recurring charges, these are not a standard component of the escrow account.
The reporting form used to communicate HMDA data is called what?
The answer is Loan/Application Register. The form used reporting HMDA data is called the Loan/Application Register. (LAR)
All of the following are TILA-required disclosures, except:
The answer is Notice of Adverse Action. The Notice of Adverse Action is disclosed required by ECOA, not TILA
Which of the following is not among the initial disclosures that must currently be provided to a mortgage loan applicant?
The answer is Notice of Right to Cancel. While the Loan Estimate, Mortgage Servicing Disclosure, and Special Information Booklet are all among the initial disclosures that must be delivered to a mortgage loan applicant, the Notice of Right to Cancel is provided at closing.
Finance charges that are withheld from the proceeds of the loan are considered to be:
The answer is Prepaid finance charges. A prepaid finance charge (PFC) is any finance charge paid separately, in cash or by check, before or at consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct loan charges paid by the borrower (not a third party) that must be included in computing the annual percentage rate.
If a mortgage broker decides to use telemarketing to establish leads for loan origination, which of the following should occur?
The answer is The broker should obtain access to the Do-Not-Call Registry. The national Do-Not-Call Registry enables consumers to register their phone numbers as numbers not to be called by telemarketers. A company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an established business relationship exists. However, if such a consumer asks not to be contacted, the company must enter that person on their own do-not-call list of such consumers.
The generally-accepted appraisal standards in the United States are known as:
The answer is USPAP. The uniform standards of professional appraisal practice (USPAP) are the recognized standards for appraisal in the United States.
Which of the following is true concerning the refundability of a VA funding fee?
The answer is VA funding fees are refundable if the borrower is overcharged. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender's exposure to loss in the event of a borrower's default that results in foreclosure. However, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed, instead of a mortgage insurance premium. The funding fee is only refundable if the borrower was overcharged. There are some exceptions to the imposition of a funding fee, including for veterans with disabilities. A veteran receiving VA compensation for a service-connected disability is exempt from the fee requirement.
Which of the following borrowers is best suited for an HECM?
The answer is a 65-year-old borrower without a mortgage who would like to supplement his income. Home equity conversion mortgages allow elderly borrowers who have significant equity in their homes the opportunity to draw on that equity, without repayment, as long as they continue to live in the home.
Under which of the following scenarios could a borrower cancel a transaction after closing has already occurred?
The answer is a borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later. TILA gives a consumer a right of rescission, allowing him or her to cancel the loan contract within a specified period of time for any reason if the loan is secured by the borrower's principal residence and is a refinance transaction for a first or subordinate mortgage. The right of rescission does not apply to a residential mortgage transaction for a purchase or initial construction of a dwelling. In order to rescind, the consumer must forward a completed rescission form to the creditor no later than midnight of the third business day after the last of certain events occur, including consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind. If the creditor failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, the transfer of all of the consumer's interest in the property, or the sale of the property.
A "straw buyer" is:
The answer is a buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application. A straw buyer is a person who purchases the property or applies for the loan in his or her own name for the actual borrower and is typically paid for the use of his or her personally identifying information.
A balloon rider, a prepayment penalty rider and a second-home rider may all be part of:
The answer is a deed of trust. A deed of trust is used to secure a note. A deed can carry a rider, or an addendum, which may include a balloon rider, a prepayment penalty rider and a second-home rider, among others.
Which of the following is true when a mortgage product contains a balloon payment?
The answer is a high-cost bridge loan may include provision for a balloon payment. Equal and regular payments still may not fully amortize a loan, thus resulting in a balloon payment. A high-cost home loan may not provide for a payment schedule that results in a balloon payment, unless the schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken for the acquisition or construction of the borrower's principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage (among other requirements, the loan must be originated in a predominantly rural or underserved community, have a fixed rate, and be for a term of five to 30 years).
In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)?
The answer is a portion of it may be applied to the UFMIP of another FHA-insured mortgage. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable, except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years. In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV.
Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence?
The answer is actual amounts for taxes and insurance. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. It shows the payor and payee, the amount owed, the rate of interest and whether it is fixed or adjustable, the due date(s) for payment, and the terms of the loan. The mortgage or trust deed secures repayment of the note. Its covenants address topics that include occupancy, insurance, and hazardous materials, but it does not typically specify actual amounts for taxes and insurance.
The Loan Estimate is required for:
The answer is all closed-end federally related mortgage loans. The Loan Estimate is required for all closed-end federally related mortgage loans.
The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act?
The answer is allows consumers a full refund if the originator is found to have engaged in unethical acts. The S.A.F.E. Act includes provisions to enhance professional standards within the mortgage industry by imposing licensing requirements, providing consumers access to information about licensees at no charge through its online registry, and facilitating the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators. While the S.A.F.E. Act does have provisions ensuring compensation to victims of mortgage law violations, it does not guarantee such consumers a full refund in all cases of unethical conduct.
state-licensed loan originator is:
The answer is an employee of a non-depository institution. A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state. An originator employed by a depository or the Farm Credit Administration would be registered.
Which of the following best describes the market approach to appraisal?
The answer is an estimate of market value derived by comparing the subject property to similar properties which have sold. The market or market data approach, also called the sales comparison approach, bases the value of a property on the prices paid for similar, or comparable, properties in the area that have sold recently. It is the most reliable method for appraising single-family homes and land.
Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to process a loan application?
The answer is any of these. An unlicensed loan processor or underwriter may obtain and analyze information (such as verifications of income, employment, and deposits) needed in processing and underwriting a residential mortgage loan, and communicate with consumers in order to obtain that information. However, loan processors or underwriters may not take applications or offer, negotiate, or counsel the consumer about residential loan rates or terms; only licensed loan originators are permitted to do so.
Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan?
The answer is any one of the five. Any one of the five siblings would be able to rescind on their own, as each has an ownership interest in the property and therefore has the right to rescind
hen completing the Loan Estimate, costs must be presented:
The answer is by rounding them to the next whole number, except for estimate principal and interest payments. Except for estimated principal and interest payments, costs on the Loan Estimate are rounded to the next whole number.
Which of the following terms applies to a VA mortgage?
The answer is certificate of eligibility. A VA loan is available only to veterans of the armed services, certain active and discharged military personnel, and their spouses; however, the loan is assumable by nonveterans. In order to obtain the loan, the applicant must obtain a certificate of eligibility from the VA (directly online, through the lender online, or by mail). This will determine whether an individual is eligible for a VA loan and whether he/she is eligible for a loan with the full guarantee.
Fiduciary duties include all but which of the following?
The answer is creating a zero-cost borrower credit. A licensee's fiduciary duties toward a client include loyalty and good faith, disclosure of material facts, and holding the client's interests above those of the licensee.
Which section of the URLA contains questions which, depending on the applicant's answer, could result in immediate rejection of the application?
The answer is declarations. The "Declarations" section of URLA contains questions which, depending on the applicants answer, could result in immediate rejection of the application.
Which of the following can usually be added to a self-employed borrower's net income from the borrower's tax returns when calculating the borrower's income?
The answer is depreciation. For a sole proprietorship (a self-employed borrower), the income, expenses, and taxable profits are reported on the Profit or Loss from Business (Schedule C) on the owner's individual tax return (IRS Form 1040). The individual's actual income would be the net income shown on the Schedule C, plus any recurring capital gains or non-cash expenses, such as depletion and depreciation, that was deducted in arriving at the adjusted income, since the borrower did not actually have to spend the amount claimed for non-cash expenses.
Which of the following is not a characteristic of an HPML?
The answer is it has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points is not characteristic of an HPML
When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred?
The answer is either at the time of application or within three business days of application. A mortgage servicing disclosure statement discloses whether the servicing of the loan (i.e., collection of payments) may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. It must be delivered to the borrower at application or within three business days.
Under TILA's rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer.
The answer is five. In regard to higher-priced mortgage loans, under TILA and Regulation Z, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or five years after the loan was consummated, at the request of the consumer.
Which behavior involves conspiratorial involvement of individuals using the mortgage market to benefit financially from criminal behavior?
The answer is fraud for profit. Fraud for profit may involve a number of persons, such as sellers, mortgage loan originators (including mortgage brokers and lenders and their individual mortgage loan originators), real estate brokers, appraisers, builders, and developers, who conspire to inflate property values and therefore loan amounts.
A lender's title insurance policy would insure against all of the following, except:
The answer is future tax liens. A lender's title insurance policy insures the lender or mortgagee against loss caused by a borrower's invalid title or loss of priority of the mortgage or deed of trust due to legal claims based on undisclosed encumbrances. Title insurance protects the lender against losses caused by problems that arose prior to the purchase of the property, such as mechanic's liens, judgments, and covenants and restrictions. It would not cover future tax liens.
Which of the following is NOT required by the BSA?
The answer is generating requests for information from FinCEN. Under the BSA, financial institutions are required to establish and maintain procedures designed to ensure their compliance with the law. Federal regulations outline such requirements. Each institution must develop a written anti-money laundering compliance program, which must be approved by the institution's board of directors. Provisions of the BSA also require a financial institution to report to FinCEN on a CTR any large currency transaction that exceeds $10,000, and to report suspicious activity and transactions to FinCEN using a Suspicious Activity Report (SAR). There is no requirement to generate requests for information from FinCEN.
This term refers to the practice of adjusting certain types of non-taxable income during underwriting.
The answer is grossing up. Certain types of income may be grossed-up during underwriting. Underwriters may gross-up Social Security income, child support, and some other forms of income, subject to limitations based on product type and other guidelines.
When would it be ethical for a mortgage broker to offer a loan with a rate higher than the best rate available to the borrower?
The answer is if the borrower chooses the rate and plans to use the additional premium to offset closing costs. While a licensee is ethically obligated to offer borrowers the best rates available to them, the concept of suitability emphasizes that the licensee must make a conscientious effort to ascertain and understand all relevant circumstances surrounding the client, and take these circumstances into account. This may include suggesting loan products that might not initially seem to be the best option, but effectively serve a particular borrower's circumstances.
A broker has originated two loans this month, one of which is for his father. Both borrowers are equally qualified and are looking for exactly the same loan. If the broker charges his father a total of $500 in origination fees, what is the origination fee that should be charged to the other borrower?
The answer is if the borrowers are equally qualified, fees should be comparable. From an ethical and legal standpoint, origination fees should reflect objective factors pertaining to loan terms and borrower qualification, rather than non-pertinent factors, including a relationship with the originating licensee.
Leslee is a loan processor who is not required to perform her duties at the direction of or subject to the supervision and instruction of an individual who is licensed or exempt. Leslee is a(n):
The answer is independent contractor. An independent contractor is an individual who preforms his/her duties other than at the director of and subject to the supervision of and instruction of an individual who is licensed and registered as required under the SAFE Act or is exempt from licensing. An independent contractor may not engage in residential mortgage loan origination activities as.a loan processor or underwriter unless he /she has mortgage loan originator license.
A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this?
The answer is interest only option fixed rate. The loan has a rate of 6% for 30 years, meaning it has a fixed rate. This loan has an interest only feature for the first five years.
Which of the following would not be on a deed of trust?
The answer is interest rate. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. The mortgage or trust deed secures repayment of the note. Housing costs, including principal, interest, taxes, and insurance, are not typically specified on the deed of trust.
Each of the following is true about the Department of Housing and Urban Development (HUD), except:
The answer is it has a major role in overseeing the mortgage industry. Although the federal Department of Housing and Urban Development (HUD) no longer oversees the mortgage industry (that job has been taken over by the Consumer Financial Protection Bureau, or CFPB), it continues to operate in a number of important areas relating to housing. These areas include programs related to community planning and development, public housing and multi-family housing, and providing counseling for those seeking to purchase a home. The Federal Housing Administration (FHA) also operates under HUD; the FHA sponsors loan programs with relatively liberal qualification requirements, insuring financial institutions that offer loans to individuals who might not qualify for a prime loan.
Which of the following is true regarding a borrower's intent to proceed with a mortgage transaction as required under federal rule?
The answer is it may be communicated however the borrower chooses. A prospective borrower can indicate his/her intent to proceed with a loan in a number of ways, including orally, in person, at the time the Loan Estimate is delivered; by telephone; and in a written communication via e-mail. However, the applicant's silence (i.e., failure to communicate that he/she will not proceed) may not be used as an indication of intent to proceed.
Which of the following is not a requirement for the servicing notice given in the event of a transfer of servicing?
The answer is it must be given within 30 days of the transfer. When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer. This statement must show the name, address, and toll-free telephone numbers of both the old servicer and the new servicer, as well as the date on which the new servicer will begin accepting payments. The statement also informs the borrower that he or she cannot be penalized for making a timely payment to the prior servicer within 60 days of the servicing transfer.
Which of the following are considered liens?
The answer is judgement, attachment, mortgage. Judgements attachments, and mortgages are all considered liens.
Which of the following best describes the benefit of mortgage insurance to the borrower?
The answer is lower down payment requirements. So that he/she may get a loan with a small down payment, a borrower pays a mortgage insurance premium either as a lump sum at closing covering the life of the loan, or by paying the first year's premium at closing and then paying annual premiums as part of the mortgage payment. The amount of the premium is a percentage of the loan amount based on the borrower's down payment.
Which of the following is not permitted for a HOEPA loan?
The answer is making a loan solely based on the collateral value of the property. Under HOEPA, you may not make a loan soley based on the value of the borrower's collateral without considering his/her ability to repay the loan.
The six factors that constitute the definition of an application are:
The answer is name, address, social security number, income, estimate property value, loan amount. The six factors that constitute the definition an application are name, address, social. security number, income, estimate property value, and loan amount if any of of the six factors is missing, the information does not techinically constitute an application.
All of the following individuals are exempt from requirements to obtain a mortgage loan originator license, except for a person who:
The answer is negotiates the terms of a residential mortgage on behalf of a cousin. S.A.F.E. Act exemptions include individuals solely involved in extensions of credit referring to timeshare plans; an individual who is an employee of a federal, state, or local government agency or housing finance agency, acting as a loan originator only pursuant to his or her official duties; and an individual who offers or negotiates terms of a residential mortgage loan secured by his own dwelling, or only with or on behalf of an immediate family member. However, a cousin is not considered an immediate family member under the legal definition, which includes a spouse, child, sibling, parent, grandparent, or grandchild, including stepparents, stepchildren, stepsiblings, and adoptive relationships.
Which of the following is NOT an example of "liquid assets"?
The answer is net worth of businesses. Liquid assets include things like earnest money, cash, checking or savings accounts, stocks bonds, and the cash value and face amount of life insurance policies. Non-liquid include things such as retirement account, real estate, and net worth of businesses.
Wilbur Green is applying for a loan originator license. His credit report indicates that he has a number of judgments filed against him, all related to a serious medical condition his wife suffered four years prior. Will Wilbur be denied a license because of the judgments?
The answer is no, because the judegements are a result of medical expenses, they will not be held against him. Evidence that an individual has no shown financial responsibility may include may include current outstanding judgments, except those solely as a result of medical expenses
The Pois have just closed on their mortgage loan at a formal settlement meeting. What is mortgage loan originator Leilani Luau's responsibility after loan closing?
The answer is none; Leilani's task are complete. After loan settlement, there are some cases in which additional disclosures are due, however, these would be provided by the creditor rather than the loan originaotr.
Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will:
The answer is not be required since purchases from servicemembers are not subject to the requirement for two appraisals. Purchases from servicemembers are not subject to the requirement of two appraisals.
Under RESPA, the servicer may require a borrower to pay into an escrow account to cover disbursements that are unanticipated or disbursements made before the borrower's monthly payments are available in the account, a cushion or reserve that must be no greater than _____ of the estimated total annual disbursements from the escrow account.
The answer is one sixth. Under RESPA, a lender may require the borrower to establish an escrow account at closing. The loan servicer may require a borrower to pay into the account to cover disbursements that are unanticipated or disbursements made before the borrower's monthly payments are available in the account. This is the escrow cushion or reserve, which must be no greater than one sixth of the estimated total annual disbursements from the escrow account.
Which of the following is true?
The answer is open-end credit plans, timeshare plans and reverse mortgage loans are excempt from the ATR Rule. Open-end credit plans, timeshare, and reverse mortgage loans are excluded from the ATR rule. The ATR Rule applies to almost all closed-end consumer credit transactions secured by a dwelling, including attached real property.
A scenario in which a person forces the sale of a home at a much lower value than its true worth, then resells the home at its true value, is known as:
The answer is property flopping. Property flopping is associated with short sales, and it typically occurs when a short sale is approved based on a misrepresentation of the value of the property. The fraud is usually perpetrated by the buyer purchasing the property from the short sale seller. In some cases, the seller's real estate agent is the buyer. The buyer presents a low offer to purchase the property to the lender along with an artificially low valuation of the property, in order to convince the lender that the property is worth less than it really is. Any higher offers from bona fide buyers are withheld from the lender, who would most likely reject the low offer if it knew that higher offers were on the table. Once the lender approves the short sale at the artificially-low price, the fraudster contacts the bona fide buyer or markets the property at its true market value.
Under which of the following circumstances would flood insurance be required?
The answer is property is in flood zone "A". Flood insurance is required for property improvements located in an SFHA Zone A (an area subject to inundation by a 1%-annual-chance flood event) or a Zone V (an area along the coast subject to inundation by a 1%-annual-chance flood event with additional hazards associated with storm-induced waves).
Which of the following is not prohibited by RESPA?
The answer is reasonable fees paid for services actually preformed. RESPA does not prohibit the charging of reasonable fees for services actually preformed.
The licensing requirements of the S.A.F.E. Act require all but which of the following?
The answer is registered MLOs must complete 20 hours of pre-licensing education. The S.A.F.E. Act includes requirements for registration with the NMLS, pre-licensing education and federal and state testing, and obtaining and displaying a unique identifier on documents, including advertising materials. Pre-licensing education requirements pertain to state-licensed loan originators, not to registered loan originators, who are not subject to licensing requirements.
When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as:
The answer is seller carry-back. In a purchase transaction involving an assumable mortgage, when the party selling the property provided all or part of the financing, it is referred to as a seller carry-back
Which of the following is the least-expensive type of reverse mortgage?
The answer is single purpose. A single-purpose reverse mortgage is a low-cost offered to low-income borrowers by state an local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.
Typical violations of advertising provisions include the use of trigger terms without:
The answer is stating the less advantageous terms of repayment the use of a trigger term in advertising requires the additional disclosure of the less advantageous terms of agreement, like ballon payments, negative amortization, or interest only payments.
A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property.
The answer is straw seller. A straw seller is a person who falsely claims to own a property being sold (which may or may not exist) and is typically paid in exchange for doing so.
Disclosures for high-risk loans required by the Homeowners Protection Act inform the borrower that:
The answer is termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments. The term "high-risk loans" pertains specifically in in this case to legislation related to the HPA which facilitates the cancellation of private mortgage insurance. The HPA requires PMI on high-risk loans to be terminated automatically at the midpoint of the amortization schedule, when the borrower is current.
Under the S.A.F.E. Act, states and their regulatory agencies have the duty and the authority to enact licensing standards that meet the requirements of the Act, while overall responsibility for interpretation, implementation, and compliance currently lies with:
The answer is the CFPB. Under the S.A.F.E. Act, states and their regulatory agencies have the duty and the authority to enact licensing standards that meet S.A.F.E. Act requirements. Overall responsibility for interpretation, implementation, and compliance with the S.A.F.E. Act was originally delegated to the U.S. Department of Housing and Urban Development (HUD). However, effective July 21, 2011, all of HUD's authorities and duties were delegated to the Consumer Financial Protection Bureau (CFPB).
Which of the following does not appear in the Loan Estimate?
The answer is the anticipated ARM rates for the first five years. In the heading of the Loan Estimate, the licensee must indicate the property address and its sale price, as well as the loan's term. The Other Considerations table provides the applicant with information on appraisals, the homeowner's insurance requirement, the lender's late payment policy, loan servicing information, and whether the loan may be assumed or refinanced. Anticipated ARM rates for the first five years of the loan are not disclosed, although the total the applicant will have paid in principal, interest, mortgage insurance, and loan costs for that time period is, in the Comparisons table.
Those who disagree with the idea of a fiduciary duty in mortgage loan transactions feel that _____ is ultimately responsible for ensuring that a certain loan product has appropriate terms and conditions.
The answer is the consumer. Those who disagree with the idea of a fiduciary duty in mortgage transactions feel that the consumer is ultimately responsible for ensuring that a certain loan product appropriate terms and conditions.
Which of the following is true regarding preparation and delivery of the Closing Disclosure?
The answer is the creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure. Creditors are responsible for the preparation and delivery of the Closing Disclosure to the borrower. While they may use settlement agents to provide the Closing Disclosure on their behalf, the creditor is ultimately responsibility for ensuring that the borrower receives the document.
According to federal law, which of the following circumstances would require the lender to drop a borrower's private mortgage insurance (PMI) without the borrower's request?
The answer is the current principal balance is 78% of the original purchase price. Federal law requires automatic termination of PMI on the date when the principal balance is scheduled to reach 78% of the original purchase price. For PMI to be cancelled on that date, the borrower needs to be current on payments on the anticipated termination date.
In the absence of caps, adjustments on an ARM loan would be determined solely by:
The answer is the fully-indexed rate. If there were no caps involved, an ARM would adjust based on the movement of the fully-indexed rate (margin + index). It would not be adjusted based on index alone or margin alone. While the margin does not change over time, it must be combined with the fluctuating index to find the new rate. It is not sufficient to apply only the index or only the margin to the adjustment - they must be combined into the fully-indexed rate.
Under which of the following situations would an appraiser use the income approach to appraise a property?
The answer is the new buyer is going to use the property as a rental property. The income (or capitalization) approach is used to appraise properties that produce rental income (e.g., apartments, office buildings, and rental units). It bases the value of the property on the net income the owner will receive and a rate of return (capitalization rate) the owner should find acceptable. The estimated net income is calculated by subtracting an allowance for vacancies and bad debts from scheduled gross income to arrive at effective gross income, and then subtracting fixed expenses, operating expenses, and reserves to replace items that will wear out.
After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after:
The answer is the orginal VA loan is satisfied. A VA loan is assumable;however,the veteran's eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan.
If a borrower waives the right to receive a copy of an appraisal:
The answer is they must receive a copy at or before consummation. Under ECOA, a creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit. An applicant may waive the timing requirement and agree to receive a copy at or before consummation or account opening.
If a consumer contacts a mortgage company, for how long does the established business relationship exemption exist?
The answer is three months. Under the Do-Not-Call-Act, a company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an "established business relationship" exists. An established business relationship means a relationship between the company and a consumer based on the consumer's purchase, rental, or lease of the seller's goods or services or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call. This may also include an inquiry or application regarding an offered product or service, within the three months (90 days) immediately preceding the date of a telemarketing call.
In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for:
The answer is three years, In order for a small creditor to orignate balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for three years.
Which of the following fees would NOT be used in calculating the APR?
The answer is title insurance. The annual percentage rate (APR) represents the relationship of the total finance charge to the total amount financed, as a yearly rate. It is not the same as the nominal rate (i.e., the interest rate shown in the note), as it includes all finance charges, not just interest. Among other charges, finance charges include points, loan fees, and mortgage insurance premiums, but not title insurance premiums.
How many total hours of ethics are required, at minimum, for continuing education?
The answer is two. The NMLS requires, as a federal minimum, at least two hours of ethics training within the total eight hours of education required for continuing education.
How long must flood insurance be in place?
The answer is until the loan balance is completely paid. Flood insurance must stay in place at least until the loan balance is paid off and the lender no longer needs to be protected from the hazard.
The right to rescind is one that consumers may:
The answer is waive if they do so in writing in order to meet a bona fide financial emergency. The right to rescind is one that consumers may waive if they do so in writing in order to meet a bona fide financial emergency.
HMDA data is collected and aggregated to determine:
The answer is whether different credit terms are offered to members of protected classes. HMDA data is collected and aggregated to determine whether different credit terms are offered to members of different protected classes.
Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan?
The answer is yes, a dwelling includes a structure whether or not that structure is attached to real property. A residential mortgage loan is any loan primarily, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or will be a dwelling. A dwelling is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperate unit, mobile home and trailer , if its used as a residence.
Assuming a borrower is not allowed to shop for the credit report provider, which of the following best describes the applicable tolerance?
The answer is zero tolerance. Fees in the zero-tolerance category, for which the actual charges at settlement may not exceed the amounts included on the Loan Estimate unless there is a change in circumstance, include fees paid to an unaffiliated third-party service provider if the creditor did not permit the consumer to shop for the third-party service provider.
What is the maximum number of hours of continuing education that may be carried over from any given year to the next in order to meet requirements for license renewal?
The answer is zero. Continuing education hours are valid only for the year they are taken, and may not be carried over from year to year.
