SAFE MLO _ EXAM 3 _ 125 Q's Practice
Q106 Which of the following may engage in residential mortgage loan origination activities as a loan processor or underwriter without a state issued loan originator license? Independent Contractor Temporary worker Employee of lender Employee of a third party company
An independent contractor underwriter or processor is required to be licensed, if they work for a lender or another licensee, they are exempt.
Q40: If the APR on a fixed rate loan increases from the initially disclosed rate by more than what, an additional waiting period is triggered before the loan can close? .250 percent .125 percent .500 percent .375 percent
If the APR goes up by more than 1/8th of a percent (.125) there is a new waiting period triggered per TRID.
Q27: A Mortgage Servicing Disclosure Statement is required by what law? SAFE Act RESPA TILA MDIA
RESPA requires the Mortgage Servicing Disclosure Statement.
Q32: If two people are married, how do they likely hold title? Ownership in severalty Tenancy in Common Tenancy by the Entirety Joint Tenancy
Tenancy by the Entirety is a form of co-ownership that involves only owners who are husband and wife, with each having an equal and undivided share of the property. This form of ownership includes the right to survivorship with the property automatically going to the surviving spouse.
Trevor is looking to obtain an ARM loan, his MLO is required to disclose what within 3 days of application? The Home Loan Toolkit The Goodbye Letter The Closing Disclosures The Consumer Handbook on Adjustable Rate Mortgages
Per TILA, the Consumer Handbook on Adjustable Rate Mortgages must be disclosed within 3 business days of a application on all ARM transactions.
Q76: A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their home's equity is engaging in: equity lending. negative amortization lending. predatory lending. home equity lending.
Predatory lending is unscrupulous actions carried out by a lender to entice, induce or assist a borrower in taking a mortgage that carries high fees, a high-interest rate, strips the borrower of equity, or places the borrower in a lower credit-rated loan to the benefit of the lender.
Q46: After the crisis of the Great Recession according to FHA Standard underwriting when can a borrower repurchase again after a Chapter 13 bankruptcy? 5 years from the credit discharge date 1 year from the credit discharge date 7 years from the credit discharge date 3 years from the credit discharge date
1 year from the credit discharge date
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a short sale? 5 years from the credit report date 3 years from the credit report date 4 years from the credit report date 7 years from the credit report date
4 years from the credit report date
Q83
A borrower's credit score and loan-to-value (LTV) ratio have a big influence on their PMI mortgage premiums. For example, the higher their credit score, the lower their PMI rate can be. Whereas the higher their LTV, they could find themselves with a higher PMI bill.
Q59: Which of the following would NOT be a purpose of a "cash-out refinance"? Pay off a second mortgage with the cash Refinance at a lower interest rate, reducing the monthly payments; and increase the balance to provide immediate cash Refinance at a lower loan amount, by providing a significant amount of cash to make up the difference Increase the amount of the existing first mortgage and provide cash to the borrower
A cash out refinance's goal is to get cash to the borrower from the equity of their home. This can be done for various reasons including paying off a second mortgage, but the ultimate goal is to get a borrower cash not for the borrower to pay cash.
Q43: Which of the following is NOT a finance charge in a residential mortgage loan? Loan origination fee Mortgage broker fee Appraisal fee Mortgage insurance premium
A finance charge is a cost of credit. A good way to think about it is, would the borrower potentially pay this fee if they were paying cash for this home? If the answer is yes, then it's likely not a finance charge. In this situation - if the borrower is paying cash for the home, they will likely still have to pay for an appraisal, so an appraisal fee is not a finance charge. The other fees are all costs of obtaining a loan.
A yield spread premium occurs when: An interest rate is charged above the par rate and is a credit to the borrower. An interest rate is charged below the par rate and is a credit to the borrower. The mortgage rate is bought down. An interest rate that is equal to the lender's par rate is charged.
A yield spread premium occurs when: An interest rate is charged above the par rate and is a credit to the borrower.An interest rate is charged below the par rate and is a credit to the borrower.The mortgage rate is bought down.An interest rate that is equal to the lender's par rate is charged.
A lender may keep the: discount points and appraisal fee. yield spread premium and discount points. Origination Fee credit report fee and yield spread premium.
An origination fee is a fee charged by a lender to cover the administrative costs of making a loan.
When a self-employed borrower is a 25% owner of his business, which of the following documents is required? The past two years tax returns The past two years profit and loss statements Articles of incorporation The past two years balance sheets
Any borrower is going to have to provide 2 years of tax returns, that includes self-employed borrowers. The underwriter might also require 2 years of the business tax returns.
Q12: After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? 5 years from the discharge date 4 years from the discharge date 7 years from the discharge date 2 years from the discharge date
Borrowers must wait 4 years from a Chapter 7 bankruptcy to apply for conventional financing.
Q109 After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a foreclosure? 7 years from the credit report date 2 years from the credit report date 3 years from the credit report date 5 years from the credit report date
Conventional is 7 years Foreclosure FHA is 3 years Foreclosure.
Q84 Discount points would only be used if the interest rate offered to the borrower were which of the following? Above par Par or anything above par Below par The prime rate
Discount points are used to buydown the rate. If the borrower is receiving par rate the lender might offer discount points as an option to lower the borrower's interest rate.
Q55: After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a short sale? 3 years from the credit report date 5 years from the credit report date 2 years from the credit report date 7 years from the credit report date Back to Top
FHA's three-year waiting period starts from: The date of the short sale, OR. If the prior mortgage was also an FHA-insured loan, from the date that FHA paid the claim on the short sale.
Q87 The purpose of Fannie Mae and Freddie Mac is to: provide a source of funds to the primary market mortgage lenders. make all loans. insure all loans. reinsure or guarantee just FHA and VA loans.
Fannie and Freddie were created to add liquidity to the market.
Q120 HOEPA is an addendum of: Regulation B. ECOA Regulation C. HMDA Regulation X. RESPA Regulation Z. TILA
HOEPA (Homeownership and Equity Protection Act) is Section 32 of TILA (Truth in Lending Act, Regulation Z).
Q28: Which of the following would be considered a red flag in an owner-occupied refinance loan? The borrower owns another home in the same neighborhood. The borrower owns a second home further than 50 miles away. The borrower lives with his/her parents in the subject property. The borrower resides in a home in the same neighborhood as subject property
Most borrowers are not going to buy a new home in the same neighborhood as their current home. This could be a red flag for occupancy fraud - they're trying to purchase the home as primary residence when it'll actually be an investment property. This could also be a red flag of a buy and bail scheme.
Q81 A borrower is looking to obtain conventional financing for a refinance, the appraisal comes in lower than expected and the borrower no longer qualifies for conventional financing. They want to go ahead and proceed with FHA financing; the lender would have to what: Suspend the initial application for 30 days Redisclose because of a change of program Redisclose because of a changed circumstance Withdraw the initial application and start over
Redisclose because of a changed circumstance This situation would be an acceptable changed circumstance because information specific to the transaction that the lender relied upon when providing disclosure is inaccurate or changed after the disclosures were provided. The lender would have to re-disclose the Loan Estimate within 3 days of the changed circumstance.
Where, in the TILA, is the explanation for higher-priced loans located? Section 32 Section 23 Section 42 Section 35
Section 35 of TILA deals with higher-priced mortgage loans.
Q65: An alternative documentation loan is a type of: Subprime loan Reverse mortgage Adjustable rate loan Seller financing
Subprime or Alt-A loans are loans designed for borrowers with less than perfect qualifications. Subprime loans generally lack verification and are marketed as alternative documentation, or no documentation required.
Q62: One purpose of the Fair and Accurate Credit Transaction Act is to prevent: Predatory lending Identity theft Loss of borrower Discrimination in lending
The Fair and Accurate Credit Transaction Act or FACTA is an amendment to FCRA and adds provisions to improve the accuracy of consumers' credit-related records. This law specifically aims to prevent identity theft through allowing a consumer access to their credit information.
Q118
The Market Conditions Addendum (Form 1004MC) is designed to enhance the transparency of the market trends and conditions conclusions made by the appraiser.
In order to meet the pre-licensing education requirement, a person shall complete at least 20 hours of approved education. Which of the following is NOT included in the minimum educational requirements? 3 hours of Federal law and regulations 2 hours of training related to predatory lending laws 2 hours of training related to nontraditional mortgage products 3 hours of ethics training
The SAFE Act requires 20 hours of pre-licensing education including 3 hours of federal law, 3 hours on ethics and 2 hours on nontraditional mortgage products. The remaining hours are elective hours.
Q75: The length of the rescission period for a refinanced mortgage loan is: three business days including Saturday and Sunday excluding holidays. three business days including Saturday and excluding Sunday and holidays. five business days including Saturday and excluding Sunday and holidays. three business days excluding Sunday and legal public holidays.
The borrower must notify the creditor of their wish to rescind the loan before midnight on the third business day after signing the loan documents, receiving the right to rescind notice or delivery of all disclosures (whichever comes last).
Q16: Land is given as a separate value in which of the following appraisal methods? Market or sales approach Cost approach Land is never given a separate value Income method
The cost approach is a way to discover the value by determining the value of the land plus how much it would cost to build this house again.
Q114 The estimate of closing costs on the mortgage loan disclosed on the Loan Estimate are good for: 21 days 7 days 10 days 3 days
The initial Loan Estimate expires 10 business days from the date the creditor provided the LE to the consumer if the consumer does not expressly provide their Intent to Proceed.
How many business days after a mortgage loan application does a mortgage loan originator have to mail the Loan Estimate to the borrower? Three Four Two One
The lender is required to provide the LE within three (3) business days following the receipt of the borrower's loan application. The LE must contain a good faith estimate of credit costs and transaction terms and be in writing and contain the information required under TRID. The LE must also be delivered or placed in the mail no later than the seventh (7th) business day before consummation of the transaction.
Q26: The NMLS will not charge fees for which of the following? A processing fee for ACH payments Course Renewal Fee Criminal Background Fee Credit Report Fee
The primary fees charged by the NMLS are a processing fee, the state required renewal or application fee, and a fee for criminal background checks and credit reports.
Q36: In qualifying the income of a sole proprietor borrower, the originator should consider which of the following to be most important? Schedule C net income plus non-cash expenses and depreciation Expenses reported on Form 2106 Schedule C net income Form 1040 adjusted gross income
Usually when determining sole proprietor income, you're going to use the net income to add things back in like depletion and depreciation and subtract meals and entertainment.
A lender has how many business days to notify the borrower of an underwriting decision? 3 60 10 30
Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on the applicant's request for credit, whether favorable or adverse, within thirty (30) days of receiving the completed application.
Q102: The adverse action notice must be in writing and contain the specific reasons for why the action was taken or: A] Disclose to the applicant that they can request the reasons for the denial within 60 days of receiving the lenders notification B] Disclose to the applicant that they can request the reasons for the denial within 10 days of receiving the lenders notification C] Disclose to the applicant that they can request the reasons for the denial within 90 days of receiving the lenders notification D] Disclose to the applicant that they can request the reasons for the denial within 30 days of receiving the lenders notification
Under ECOA, the adverse action notice must either disclose the reasons for the denial or allow the borrower 60 days to request that information.
Q85 Which of the following is not true about HOEPA? It makes recommending default on a high-cost transaction illegal The late fee on a high-cost home loan cannot exceed 3% It makes charging fees for a payoff statement prohibited It prohibits negative amortization on high-cost home loans
Under HOEPA, late fees cannot exceed 4% of the past due payment and it prohibits the pyramiding of late fees.
Q82 Underwriters calculate overtime income for a loan by: Using a year-to-date average of the overtime income. Never allowing overtime income. Taking a two year average of the overtime income. Taking a one year average of the overtime income.
You can only use income if there is a two-year history of it, that includes overtime income.