Practice test questions

Marketing campaigns for the solicitation of credit are covered by the provisions of: GLB TILA RESPA ECOA

The answer is TILA. General marketing and advertising for credit is covered by TILA.

The Nationwide Multistate Licensing System and Registry was developed and is maintained by: The FHFA and CFPB The CSBS and AARMR The CFPB and CSBS The AARMR and CFPB

The answer is The CSBS and AARMR. The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) are the two organizations responsible for creating and implementing the NMLS.

The Telemarketing Sales Rule prohibits calls: Made to a customer after 8:00 a.m. or before 9:00 p.m. Made to consumers who have specifically asked a mortgage professional not to contact them To consumers not listed on the Do-Not-Call Registry To customers who established a business relationship within the last 12 months

The answer is made to consumers who have specifically asked a mortgage professional not to contact them. The Telemarketing Sales Rule prohibits calls made to consumers before 8:00am or after 9:00pm. Also, mortgage professionals may not make calls to consumers listed on the Do-Not-Call List or if an established business relationship is over 18 months old. Finally, mortgage professionals must respect a consumer's specific request to be removed from a contact list.

Businesses that conduct telemarketing are required to access the Do-Not-Call Registry every _____ in order to maintain an updated database of people on the Do-Not-Call List. 31 days 60 days 3 months 45 days

The answer is 31 days. A business must update its Do-Not-Call data every 31 days to remain compliant.

The max seller concession that a borrower may receive on a conventional loan when making a 20% down payment is: 6% 0% 3% 9%

The answer is 6%. On conventional loans, a borrower may receive a seller concession of as much as 6% for an LTV at 90% or less.

In most cases, a mortgage loan requires monthly payments. All of the following loan types require monthly payments, except: HECMs ARMs Fixed-rate loans HELOCs

The answer is HECMs. The home equity conversion mortgage (HECM) does not require repayment as long as the borrower continues to live in the home.

All of the following are prohibited practices under the FCRA, except: Allowing the FBI access to a borrower's file for an investigation An auto finance company knowingly reporting a borrower late when the payment was accepted on time A CRA releasing a credit report containing disputed information without marking it as such Releasing a credit report without written permission

The answer is allowing the FBI access to a borrower's file for an investigation. Exceptions to the FCRA allow for FBI access to a consumer report for the purposes of investigations.

Title searches and title insurance: Are covered under the provisions of RESPA, but are not considered settlement services Are not covered under the provisions of RESPA but are considered settlement services Are covered under the provisions of RESPA and are considered settlement services Are not covered under the provisions of RESPA and are not considered settlement services

The answer is are covered under the provisions of RESPA and are considered settlement services. The provisions of RESPA cover settlement services including title searches, title examinations, and title insurance.

An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a: Conversion option Conditional provision Conversion rider Conversion requirement

The answer is conversion option. The option on an ARM that gives a borrower the opportunity to convert his/her loan to a fixed rate is called a conversion option.

All of the following may be considered employment red flags, except: Credit history is missing entirely Paystub check numbers that are out of sequence or do not correspond with payroll dates W-2s that are handwritten and may not include a company logo Social Security Numbers on the application which do not match those on the income documents

The answer is credit history is missing entirely. Missing credit history is a credit report red flag, not an employment red flag.

The first step in the closing process is: Rescission Funding Application Steering

The answer is funding. The first step in the closing process is funding. This occurs when the lender wires funds to the title company or closing attorney. Once the closing has occurred, the title company is authorized to release funds to the parties (disbursement). Depending on state law and the type of transaction, disbursement could occur at closing or several days later.

The purpose of the S.A.F.E. Act is to: A. Protect consumers by ensuring that the mortgage lending industry operates without unfair and deceptive practices B. Provide the opportunity for credit to all creditworthy applicants C. Provide information about closing costs to the consumer D. Protect consumers by creating privacy provisions for mortgage lenders

The answer is protect consumers by ensuring that the mortgage lending industry operates without unfair and deceptive practices.

Which of the following is considered a loan primarily for personal, family, or household use that is secured by a mortgage or deed of trust? Nontraditional mortgage product Residential mortgage loan Commercial mortgage loan Residential real estate

The answer is residential mortgage loan. The phrase "primarily for personal, family, or household use" is legal terminology commonly used to identify a residential mortgage loan.

Which of the following claims, if used in an advertisement, is not a violation of Regulation Z or the MAP Rule? Using images, such as American eagles and flags, to suggest that a loan is offered through a federal program Using language to suggest that the loan is from the borrower's current lender Stating that a borrower can take advantage of an opportunity to refinance an ARM with a fixed-rate loan Claiming that a borrower will not have to make mortgage loan payments anymore

The answer is stating that a borrower can take advantage of an opportunity to refinance an ARM with a fixed-rate loan. Regulation Z and the Map Rule prohibit misleading practices. These prohibitions do not include advertising the availability of refinances from adjustable- to fixed-rate products, unless the ad includes misleading or inaccurate information in the benefits of a refinance.

A due-on-sale clause requires: That the loan be paid off if the property is sold That all moneys be transferred at closing That consummation take place within 30 days of the date on which the borrower receives the Loan Estimate That the seller address any issues arising from the home inspection prior to closing

The answer is that the loan be paid off if the property is sold. A due-on-sale clause requires that the loan be paid off if the property is sold. If the loan is assumable, the new borrowers must qualify with the lender.

For ARMS characterized by figures like "3/1," "5/1," "7/1," or "10/1," the first number represents _____, and the second number represents _____. The start rate; the periodic cap The locked term; the adjustment frequency The initial cap; the periodic cap The locked term; the adjustment cap

The answer is the locked term; the adjustment frequency. ARMS are often named for their features. In other words, a 3/1 ARM is locked for three years, and then adjusts annually each year thereafter. The first number represents the locked term and the second number represents the adjustment frequency.

An underwriter would expect to see _____ in order to document the income of a commissioned borrower. Two years' tax returns if the borrower's commissions represent 20% of his/her income 1099s from the previous year Profit and loss statement and two years' tax returns Two years' tax returns and all schedules if the commission income is more than 25% of income

The answer is two years' tax returns and all schedules if the commission income is more than 25% of income. Commissioned borrowers must show two years' tax returns if their commission income is more than 25% of their total income.

Of the following, which factor may lawfully be considered when evaluating an applicant's eligibility for a mortgage loan? Visa or immigration status None of these factors may be considered Sexual orientation Marital status

The answer is visa or immigration status. ECOA does not allow for the denial of credit to creditworthy applicants. Basing a decision on someone's sexual orientation or marital status would be considered discriminatory. However, someone's visa or immigration status can certainly be questioned, as it may help to determine if additional items are needed to document a borrower's qualifications.

Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer? Within 90 days of loan application Within three business days of loan application Within 30 days of closing At the time of Notice of Action Taken

The answer is within three business days of loan application. Under ECOA, a notice concerning the applicant's right to obtain a copy of the appraisal is due within three business days of receiving a loan application.

Which of the following inquiries is considered lawful when asked for the purposes of credit approval as governed by ECOA? Years on the job Race Marital status Age

The answer is years on the job. ECOA protects against discrimination in credit transactions. Asking how many years someone has been at their job is not considered discriminatory. It is a gauge of income stability.