Prepxl Practice test 4
For the purposes of issuing a revised Loan Estimate, "changed circumstances" that affect estimated settlement charges must result in a change to those charges of more than: - 5% - 1% - Any amount - 10%
10%. For the purposes of issuing a revised Loan Estimate, "changed circumstances" that affect estimated settlement charges must result in a change to those charges of more than 10%.
The FHA offers _____ fixed-rate mortgages to qualifying borrowers. - Only 15-year - Only 30-year - 15- and 30-year - Special 20-year
15- and 30-year. The FHA offers 15- and 30-year fixed-rate mortgages to qualifying borrowers.
On an FHA loan, a borrower is required to make a down payment of at least: - 5% - 3.50% - 0% - 1.50%
3.50%. On an FHA loan, a borrower is required to bring a minimum down payment of 3.5%.
Direct RHS loans may have terms of _____ years. - 15 and 30 - 21 or 29 - 30 and 40 - 33 or 38
33 or 38. Direct RHS loans may have terms of 33 and 38 years.
If a lender wants to obtain copies of a borrower's tax returns, the borrower is asked to sign what? - A waiver of financial information - 4506-T - 1003 - IRS-1040
4506-T. The IRS form 4506-T is used to allow a lender to pull a transcript of the borrower's tax returns.
"5/25" and "7/23" are commonly used to designate loans including which of the following? - A hybrid adjustable rate feature - A balloon payment - A subordinate lien - A temporary interest rate buy-down
A balloon payment. "5/25" and "7/23" are commonly used to designate loans that include a balloon payment.
An "encumbrance" is: - Transfer of title from one owner to another - Transfer of ownership without any guarantees or warranties - Cancellation of a contract - A claim against a property that can affect the ability to transfer title
A claim against a property that can affect the ability to transfer title. An encumbrance is a claim against a property that can affect the ability to transfer title.
A balloon rider, a prepayment penalty rider and a second-home rider may all be part of: - A title insurance policy - A deed of trust - A note - A power-of-attorney agreement
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.
Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information? - Former owners of a particular property - The street address of the property a borrower intends to purchase - The assessed value of a subject property - A loan applicant's current loan balances
A loan applicant's current loan balances. Under the Gramm-Leach-Bliley Act, a loan applicant's current loan balances would be considered nonpublic information.
Concerning ARMs, margin is best defined as: - A number, expressed as a percentage, that represents a lender's operating costs and profit margin - The amount of compensation earned by a mortgage professional for originating an ARM - The range of flexibility an interest rate has between caps on traditional ARMs - The maximum - up or down - that an interest rate can ever adjust on an ARM
A number, expressed as a percentage, that represents a lender's operating costs and profit margin. Concerning ARMs, "margin" is best defined as a number, expressed as a percentage, that represents a lender's operating costs and profit margin.
An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is: - A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees - A violation of RESPA's prohibition against fee-splitting - Permitted only as long as receipts are kept from the processor for five years - A violation of ECOA
A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees. RESPA requires compensation for settlement services to be earned. Any compensation not in direct correlation with an actual service is likely a violation. However, according to a 2012 case, the act of unilaterally marking up a fee and retaining the additional earnings is not illegal, as long as fee-splitting is not involved.
The system that an underwriter uses to help streamline the underwriting process is called: - YSP - AUS - MBS - ABA
AUS. Much of the underwriter's decision-making has now been taken over by an automated underwriting system. These are known by many names, but all do the same thing: they make automated underwriting decisions based on lender guidelines and information entered into the AUS.
A mortgage broker and a title insurance company have common ownership and are considered affiliated businesses under RESPA. If either of these companies refers a consumer to the other, the consumer must receive a(n): - Affiliated Business Determination - Affiliated Business Arrangement Disclosure - Business Agreement Disclosure - Business Control Disclosure
Affiliated Business Arrangement Disclosure. An Affiliated Business Arrangement Disclosure is required anytime a business refers another business with whom it has some common ownership or some other affiliation.
All of the following types of income are not taxed and therefore can be "grossed-up," except: - Social Security - Public assistance - Alimony - Disability
Alimony. Alimony is not "nontaxed income" and therefore is not grossed-up.
A state-licensed loan originator is: - Licensed by the NMLS - An employee of a non-depository institution - Identified by the unique identifier of his/her employer - An employee of a subsidiary which is owned or controlled by a depository institution
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.
One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are: - Interest free - Available to loan applicants regardless of DTI ratios - Assumable - Not funded by private lenders
Assumable. VA loans are assumable, which means that a purchaser of a home that secures a VA loan may assume the mortgage payments of that loan. Except for direct VA loans, most VA loans are funded by private lenders and are subject to underwriting requirements that include DTI ratios.
What is a method of transferring property to a new owner who takes over an outstanding mortgage debt, along with the liability of repayment, without incurring a change in terms? - Conveyance - Assumption - Reconveyance - Seller carry-back
Assumption. Transferring property to a new owner who takes responsibility for the existing mortgage debt without incurring any change in terms is called an assumption.
Which of the following correctly describes entities that have obligations under the Fair Credit Reporting Act? - CRAs, Experian, and FHA - FHFA, CRAs, and furnishers of information to CRAs - CRAs, furnishers of information to CRAs, and users of consumer reports - Users of consumer reports and lenders regulated by RESPA and TILA
CRAs, furnishers of information to CRAs, and users of consumer reports. The FCRA creates a number of obligations for users and furnishers of credit information as well as the credit reporting agencies (CRAs) which receive and report credit information.
Per diem interest is used by a lender in order to: - Allow for a lower payment with a temporary buy-down - Collect interest that accrues between the closing date and the end of the month - Pay the previous lender's costs for selling the loan - Build a borrower's escrow account
Collect interest that accrues between the closing date and the end of the month. Per diem interest is used by a lender in order to collect interest that accrues between the closing date and the end of the month.
Misleading claims of debt elimination in an advertisement may lead a borrower to inaccurately believe that: - Consumer debt is "disappearing" as a result of the new loan - The borrower's new loan will lower the overall monthly outlay - The borrower is extending what may have been a short-term debt out over a longer period - The borrower may gain some tax benefit by rolling consumer debt into the new mortgage loan
Consumer debt is "disappearing" as a result of the new loan. "Debt elimination" is a regular claim of some mortgage professionals that specialize in consolidation loans, and it is often very misleading. Some borrowers will not understand that by "rolling in" the debt to a new mortgage, they are just extending the term and often paying more in interest.
Which of the following might raise a red flag during the underwriter's review of the appraisal? - Photos that appear to show the address of the property on the mailbox - Dated prior to the sales contract - Effective age of the property aligns with that of comparables - Completion notice is dated after the original appraisal
Dated prior to the sales contract. An appraisal dated prior to the sales contract is a red flag.
A lender who refuses to originate loans in a particular neighborhood or ZIP code because of the perceived creditworthiness of consumers living in the area is in violation of: - FCRA - ECOA - HOEPA - RESPA
ECOA. Refusing to originate loans in a particular neighborhood or ZIP code because of perceived creditworthiness is a practice known as "redlining" and is a violation of ECOA.
Which of the following would prevent the conveyance of title? - Paid lien - Owner dies and leaves a legal will - Encumbrance - Father passing title to his son while still living
Encumbrance. An encumbrance would prevent the conveyance of title, meaning there is a debt or lien against the property and title may not change hands until the debt or lien is satisfied.
Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account? - Escrow accounts are required for all HPMLs secured by the borrower's principal dwelling - Escrow accounts are required for all HPMLs secured by a dwelling - Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling - Escrow accounts are required for all HPMLs, including reverse mortgages
Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling. Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling.
As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs. - FNMA - FinCEN - FHLMC - FHFA
FHFA. HERA created and installed the FHFA (Federal Housing Finance Agency) as the conservator of the GSEs (Fannie Mae and Freddie Mac). The FHFA's powers include the responsibility to set the conforming loan limits from year to year.
Special second appraisal requirements apply for a loan that is a(n): - VA loan - Higher-priced mortgage loan - Adjustable-rate mortgage - Refinance
Higher-priced mortgage loan. Special second appraisal requirements apply for a loan that is a higher-priced mortgage loan.
An investigator spends three weeks researching Steve Sample, who is applying for a job. He meets Steve's neighbors, current co-workers, and former teachers and mentors. After interviewing upwards of 30 individuals, the investigator submits his report to the company considering Steve for a position. This is an example of: - FBI mortgage fraud investigation - CRA disclosure - Private investigation methodology - Investigative consumer report
Investigative consumer report. A consumer report using information obtained through personal interviews is known as an investigative consumer report and is meant to give insight into a person's character, general reputation, personal characteristics, and mode of living.
Safe harbor qualified mortgages offer a "safe harbor" from: - Liability for TRID Rule violations - Liability for ATR Rule violations - Liability for ECOA violations - Liability for HOEPA violations
Liability for ATR Rule violations. The Qualified Mortgage Rule extends a safe harbor from liability for ATR Rule violations. The safe harbor is for loans that meet qualified mortgage standards.
If a borrower is required to pay alimony or child support, it must be included as a(n): - Asset - Liability - Qualifier - Mitigating circumstance
Liability. Alimony and child support must be included in a borrower's liabilities if they are required to pay.
An underwriter might look for all of the following during the review of an appraisal report, except: - Location of the mailbox in relation to the house - Visible signs of health or safety hazards - Photos of the house, including checking for the address - Effective age of the property
Location of the mailbox in relation to the house. While the underwriter may indeed look at the mailbox in pictures to verify the address of the home (or on the house itself), it is unlikely that the location of the mailbox is of any concern to the underwriter.
Mortgage loan originator Janine Jetson has had a complaint filed against her. Upon receiving a request from her state licensing agency, Janine must: - Make her books and records available to the agency - Respond to the complaint - Post an additional bond - Request a hearing
Make her books and records available to the agency. Each loan originator must make available, upon request by the state licensing agency, the books and records relating to the operations of the originator.
Germaine Hopper has not maintained a state loan originator license for five years. However, during the last three years of that five-year period, she was employed as a registered loan originator with the Anywhere Bank. Is Germaine required to retake the licensing test when she decides to apply for a new state license? - Yes, she must retake the test because she had not maintained a license for over five years - No, her time as a registered loan originator is not counted as part of the time her license has not been maintained - No, once passed, an applicant does not have to take the test again - Yes, test results are only valid in the year they are taken
No, her time as a registered loan originator is not counted as part of the time her license has not been maintained. A state-licensed loan originator who fails to maintain a valid license for a period of five years or longer must retake the licensing test. However, any time during that five-year period in which the individual was acting as a registered loan originator is not included when determining whether or not the licensing test must be retaken. Because Germaine worked as a registered mortgage loan originator for three out of the five years she was inactive, she is only considered to have been without a license for two years, meaning she does not have to retake the licensing exam.
An Affiliated Business Arrangement Disclosure is: - Required by TILA to be given to a borrower at the time of referral - Only required if the referred party is owned by or has an affiliate relationship with the referring party - Used to disclose whether the loan will be serviced, transferred, or sold - Required to be disclosed within three business days of application
Only required if the referred party is owned by or has an affiliate relationship with the referring party. An Affiliated Business Arrangement Disclosure is required only if the company being referred has some affiliated relationship with the referring party.
An ARM was locked for three years and began adjusting two years ago. It is about to adjust for the third time. What limits the amount the interest rate will increase on this movement? - Payment cap - Starter cap - Initial cap - Periodic cap
Periodic cap. The periodic cap is used to limit rate adjustments for ARMs after the initial adjustment.
ECOA applies to the extension of credit for: - Loans secured by a first or subordinate lien on residential property - Residential, business, commercial, and agricultural loans - Business, commercial, and agricultural loans - All credit other than government loans
Residential, business, commercial, and agricultural loans. ECOA has a wider range than RESPA and TILA, beyond just loans related to residential properties. The law also covers loans for businesses, commercial, and agricultural loans.
When a consumer is preapproved for a line of credit and can use this line freely, making repeat transactions, and can pay it off at any time without closing the line, this is an example of: - Subordinate lien - Reverse mortgage - Revolving debt - Mortgage
Revolving debt. Revolving debt allows a borrower to draw from and pay down a credit line at his/her own discretion, as long as the borrower makes timely payments for the interest due.
The VA has stated that loans made in compliance with VA standards and guaranteed or insured by the VA are: - Small creditor qualified mortgages - Safe harbor qualified mortgages - Non-qualified mortgages - Exempt from qualified mortgage standards
Safe harbor qualified mortgages. The VA has stated that loans made in compliance with VA standards and guaranteed or insured by the VA are safe harbor qualified mortgages.
Liabilities may include which of the following? - Real estate - Net worth of businesses - Student loans - Stocks and bonds
Student loans. Liabilities may include student loans.
A document that changes the order of priority of mortgage liens is referred to as the: - Deed of trust - Payee clause - Promissory note - Subordination agreement
Subordination agreement. A subordination agreement changes the order in which creditors are paid in the event of foreclosure.
Which of the following is not a threshold that the Home Ownership Equity Protection Act (HOEPA) has established to identify loans as high-cost mortgages? - APR threshold - Points and fees threshold - Subprime interest rate threshold - Prepayment penalty threshold
Subprime interest rate threshold. HOEPA uses APR, points and fees, and prepayment penalty thresholds to identify high-cost mortgages.
HOEPA is federal legislation enacted by Congress through amendments to: - FACTA - ECOA - TILA - HMDA
TILA. The Home Ownership and Equity Protection Act is part of TILA. Created in 1994, it was the first legislation specifically created to combat predatory lending. Its regulations are found in Section 32 of Regulation Z.
A revised Loan Estimate may be provided if an applicant waits more than _____ after the creditor provides a Loan Estimate before indicating an intent to proceed. - Three business days - Ten business days - Five days - 24 hours
Ten business days. A revised Loan Estimate may be provided if an applicant waits more than ten business days after the creditor provides a Loan Estimate before indicating an intent to proceed.
This federal law amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection. - RESPA - ECOA - The Consumer Fairness Act - The Dodd-Frank Act
The Dodd-Frank Act. The Dodd-Frank Act amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection.
According to the HPML Rule, which of the following transactions would require a second appraisal? - A higher-priced mortgage loan that also meets qualified mortgage standards - The purchase price is 10% higher than the seller's acquisition price 100 days ago - All higher-priced mortgage loans are required to have two appraisals - The purchase price is 20% higher than the seller's acquisition price 150 days ago
The purchase price is 20% higher than the seller's acquisition price 150 days ago. According to the HPML Rule, a transaction will require a second appraisal if the purchase involves a possible case of "loan flipping." This is true when the consumer's purchase price is 10% more than the seller's acquisition price (if the seller acquired the property 90 or fewer days ago) or 20% more than the seller's acquisition price (if the seller acquired the property 91 to 180 days ago).
How many total hours of ethics are required, at minimum, for continuing education? - Three - Eight - Two - Eleven
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.
Upon meeting all the requirements and being approved by her state for licensing as a mortgage loan originator, Kelly Greene was assigned a number that permanently identifies her as a loan originator. This number is her: - Unique identifier - License number - Authorization number - Employment number
Unique identifier. The unique identifier is a number that permanently identifies a loan originator, assigned by the NMLS to facilitate electronic tracking of loan originators.
Recording of the deed happens where? - At closing - At the borrower's house - At the local courthouse - Within the office of the Supervisor of Banks
at the local courthouse. Recording is when the deed, deed of trust, or other recordable documents are submitted to the courthouse for filing.