Maryam NMLS

A distressed borrower

is a borrower who is unable to fully repay their debt on time, due to financial difficulties

Ethics

the principles of right and wrong that guide an individual in making decisions

Definition of child-rearing:

the process of taking care of and raising children

RESPA does not apply to

vacant land, large tracts of land (25 acres or more - even if there is a dwelling on it), commercial or business loans, the government, or temporary financing (like bridge loans). Real Estate Settlement Procedures Act. RESPA seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers, and by prohibiting abusive practices in the real estate settlement process.

In order to renew your license, you must annually complete which of the minimum requirements pertaining to Continuing Education:

3 hours of Federal Law, 2 hours of Ethics , 2 hours of non-traditional and 1 Elective

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.

A potential borrower calls you for rates and programs. Assume that they are on the DNC Registry. You are allowed to call them back for what period of time?

3 months

At closing, the borrower should receive a notice of the right to rescind. If two copies are not provided to the borrower at closing, the right to rescind extends from 3 days to:

3 years

All of the following are types of indexes used to calculate the interest rate on ARMs, except: Fixed index MTA index Prime index SOFR index

Fixed index

Traditional loan

Fixed rate 30 years:

Capacity & Payment to Income How is Capacity calculated?

If you are doing a QM mortgage, use a 43% payment to income ratio. Gross verified income x 43% = total payment, including mortgage payment.

A transaction where the buyers have signed a contract to purchase real property, but have the intention of immediately selling it to another buyer can be a sign of:

Illegal Property Flipping

Upon the recovery of any claim on the surety bond, the licensee is required to file a new bond: Within 3 months Within 14 days Within 5 days Immediately

Immediately

A minority borrower is refused a loan because the neighborhood that they have chosen has a high number of foreclosures. This is an example of what illegal practice? Blockbusting Rating Redlining Steering

Redlining is an unethical practice where a financial institution makes it extremely difficult or impossible for residents of a particular neighborhood to borrower money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. Redlining typically occurs in poor inner-city neighborhoods. In the case of redlining, an individual's qualifications and creditworthiness are not considered.

Which of the following would NOT be a purpose of a "cash-out refinance"? Increase the amount of the existing first mortgage and provide cash to the borrower 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 Pay off a second mortgage with the cash

Refinance at a lower loan amount, by providing a significant amount of cash to make up the difference 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.

The Truth in Lending Act does which of the following? Requires all loan applications be made in person Prevents advertising FHA financing to the exclusion of Conventional Regulates advertising regarding interest rates Requires a closing cost breakdown on residential loans

Regulates advertising regarding interest rates TILA (Regulation Z) regulates advertising.

HMDA is implemented as what Regulation? B C X Z

Regulation C

An MLO is required to protect a borrower's non-public personal information, per what federal law?

Regulation P is also known as the Gramm-Leach-Bliley Act or the Financial Modernization Act of 1999. GLBA restricts the disclosure of borrower's non-public personal information (NPI).

Under Regulation Z which of the following advertisements would require full disclosure of the rate term payment and balance? "Interest rates are at an all-time low" "Monthly payments could be under $950 per month" "No money down" "Stop paying rent"

"Monthly payments could be under $950 per month" Per TILA, if the rate is present in the advertisement, the APR must be disclosed. One way to remember is if an MLO lists any number in their advertisement, it will most likely "trigger" the requirement to disclose the APR. A trigger term is a phrase that represents the attractive features of the credit plan within the advertisement.

you borrow the funds and this is referred to as a

"draw"

Under RESPA what is the dollar fine that can be imposed for each instance of a referral fee kickback or unearned fee? $5,000 $7,000 $10,000 $15,000

$10,000 If someone violates Section 8 of RESPA, they are looking at a fine of up to $10,000, up to 1 year in prison or both. They also may be required to make payment to damaged parties up to 3 times the original fee that violated the section and if more than one individual is involved, then all parties are liable to the damaged borrower both jointly and separately.

What are the penalties for violating Section 8 of RESPA?

$10,000 per incident plus one year jail time If someone violates Section 8 of RESPA, they are looking at a fine of up to $10,000, up to 1 year in prison or both. They also may be required to make payment to damaged parties up to 3 times the original fee that violated the section and if more than one individual is involved, then all parties are liable to the damaged borrower both jointly and separately.

A mortgage company telemarketer has been accused of inappropriately calling two consumers on the National Do Not Call Registry. What is the maximum fine the company could face for this violation? $15,000 $32,000 $43,792 $87,584

$87,584 A telemarketer, which includes a mortgage loan originator calling leads, who disregards the National Do Not Call Registry, could be fined up to $43,792 for each call.

An affiliated business arrangement must be given if there is what percent of an ownership interest? 1% ownership over 10% ownership a 25% ownership If more than 5% is owned the affiliated company cannot be used

1% ownership

NINA

(No Income/No Asset)

SISA

(State income/stated asset)

FICO -

(The Fair Isaac Corporation) is not a credit company, but rather a data analytics company that provides financial scoring to lenders to assist them in pricing loans, including mortgages, to consumers.

ARM: the index and margin,

(index (measure of market rate) as the cost and margin as profit). Index is changed in the market. Margin is always the same The most common index is LIBOR - London Interbank Offered Rate. It changes throughout the day.

Each calendar year, the MLO must complete * hours of CE and pay their renewal fees by **

* eight ** December 31. ▪ If not renewed by December 31, the license lapses and the MLO will have to take a Late CE Class and pay any penalties and renewal fees by the date set by each state.

FHA loan needs * credit score but more district to **

*lower **appraisal

A short sale

, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage servicer agrees to a short sale, you can sell your home and pay off a portion of your mortgage balance with the proceeds.

▪ 2nd Mortgage

- All the proceeds are paid out at the closing. They will start monthly P&I payments, usually within 45 days. The term is 15 years and can be an ARM or fixed-rate mortgage.

FHA Maximum LTV is for housing/ overall underwriting ratios ▪ MIP is required for the life of the loan if over

- Federal Housing Administration: ▪ Maximum LTV is 96.5% ▪ 31% for housing/43% overall underwriting ratios MIP is required for the life of the loan if over 90% LTV

Calculating Income Hourly

- Hourly wage times number of hours, times 52, divided by 12 equals the monthly income. Overtime with two years' history is the same calculation, using time and a half.

Calculating Income ▪ Paid every other Friday

- Pay amount, times 26 pay periods, divided by 12.

Calculating Income Social Security

- You can gross it up by 25% if it was taxed before the borrower received it.

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? .125 percent .250 percent .375 percent .500 percent

.125 percent If the APR goes up by more than 1/8th of a percent (.125) there is a new waiting period triggered per TRID.

What is the funding fee for an IRRRL?

.50 percent for everyone

You pull credit on a husband and wife. It turns out their debt-to-income ratio is too high. You notice the majority of the debts belong to the husband. You also note that the wife has enough income to qualify on her own. You remove the husband from the loan, with permission from the borrower, submit the file, and receive approval. This action is: illegal and unethical. legal but unethical. illegal but ethical. legal and ethical.

.legal and ethical (except for communal property sales). Sometimes there are situations where one borrower drags down the entire loan file so if the other borrower can take on the entire burden of the loan then that can be a solution. There is nothing wrong with finding a way to qualify your borrowers request for a loan as long as they are ok with it. This would not work in a communal property state though.

One basis point is equivalent to

0.01% (1/100th of a percent) or 0.0001 in decimal form.

On average, you can expect interest rates for construction loans to be about ? percentage point higher than traditional mortgage rates, usually falling somewhere between 5 and 10 percent.

1

The company application is the MU?. The MU? is a branch application, and the MLO application is the MU?.

1 2 4

Liens -

1 st mortgage, 2nd mortgage, IRS tax Lien, judgments, mechanics liens.

An MLO is looking over a borrower's credit report and sees a fraud alert, under the Economic Growth, Regulatory Relief and Consumer Protection Act, how long can a fraud alert be on a borrower's credit report?

1 year The Economic Growth, Regulatory Relief and Consumer Protection Act amended the fraud alert rules under FCRA and extended the life of a fraud alert from 90 days to 1 year.

After the crisis of the Great Recession according to FHA Standard underwriting when can a borrower repurchase again after a Chapter 13 bankruptcy? 7 years from the credit discharge date 5 years from the credit discharge date 1 year from the credit discharge date 3 years from the credit discharge date

1 year from the credit discharge date Borrowers with a Chapter 13 bankruptcy only have to wait 1 year from the discharge date to apply for FHA financing.

USDA loans include a guarantee fee, what is the initial guarantee fee?

1% There is an initial guarantee fee and a monthly guarantee fee required on USDA loans. The initial is 1% and the monthly is .35%. The initial guarantee fee can be added into the loan amount and push the LTV over 100%.

What are the four elements of the Red Flag Rule?

1) identifying relevant identity theft Red Flags for our firm, 2) detecting those Red Flags, 3) responding appropriately to any that are detected to prevent and mitigate identity theft, and 4) updating our ITPP periodically to reflect changes in risks.

Construction Loan: definition and steps:

1. The borrower applies for a construction loan, submitting financials, plans and project timelines. 2. If approved, the borrower starts drawing funds in conjunction with each phase of the project, typically only repaying interest during construction. Throughout construction, an appraiser or inspector assesses the build to authorize more funds. 3. Once construction finishes, the borrower usually converts to the loan to a permanent mortgage and begins repaying both principal and interest.

FHA need two types of insurance:

1. Upfront insurance (UFMIP), currently is 1.75% & Annual MIP The MIP renewal is 0.0085 (.85%) of the loan amount / by 12 = The monthly MIP premium to be added to the P&I payment.

The current FHA UFMIP is ?% of the base loan amount.

1.75%

If any of the liabilities have less than ? payments left, they don't have to be included in the payment to income ratios.

10 The exception is car leases; you must count the lease payment, no matter the number of remaining payments.

The estimate of closing costs on the mortgage loan disclosed on the Loan Estimate are good for: 3 days 7 days 10 days 21 days

10 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.

According to the Fair Credit Reporting Act, a Chapter 7 bankruptcy could remain on a credit report for how long?

10 years Chapter 7 bankruptcies remain on credit reports for 10 years. Chapter 13 bankruptcies only remain on the credit report for 7 years.

Loan limit of FHA

115% of median home price

When they sell the rights to a mortgage, servicers must provide a goodbye letter _________ days before the effective date of the transfer.

15 days

How many days in advance of transferring a loan to another lender must the current mortgage servicer inform that customer of the transfer to another lender who will subsequently be servicing the loan?

15 days Under RESPA, the former servicer is required to provide a disclosure at least 15 days before the effective date of transfer, this letter is referred to as the Goodbye Letter.

A borrower's name is on the National Do Not Call list. At what point after the loan closes and is sold to another company must the MLO stop contacting the borrower to solicit new business? Immediately After three months One year 18 months

18 months Under the Do Not Call Provision, an MLO can contact a previous client from an established business relationship for up to 18 months after the last transaction, even if the consumer is on the Do Not Call Registry.

The Truth in Lending Act requires that a borrower be given how many copies of the notice of his right to rescind?

2 TILA requires that two (2) copies of the right to rescind notice must be provided to the borrower along with one (1) copy of the disclosure statement.

After the crisis of the Great Recession according to VA underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? 7 years from the discharge date 5 years from the discharge date 2 years from the discharge date 3 years from the discharge date

2 years from the discharge date Borrowers who wish to obtain VA financing have to wait 2 years from any Chapter 7 bankruptcy.

An MLO has a borrower come in who is a veteran, the borrower is looking to obtain a VA loan. The borrower has never received a VA loan before and intends to put 0% down, what would be this borrower's funding fee?

2.3% This borrower has never used their entitlement before so would be eligible for first time use funding fees and since this borrower is putting less than 5% down, they would be required to pay the highest funding fee for first time use which would be 2.3%.

How many hours of pre-licensing education is an individual required to take per the SAFE Act?

20 hours

When was the Housing and Economic Recovery Act signed into law?

2008

What gross percentage of variance on an appraisal report is tolerable when evaluating comparables?

25 Gross adjustments cannot exceed 25% on appraisals or 15% net of the comparable. The maximum line item adjustment is 10%.

ECOA requires the appraisal be given to borrowers: 1 day before settlement. 3 days before settlement. 30 days after settlement. Immediately after settlement.

3 days before settlement. ECOA requires that lenders provide an applicant a copy of all appraisals and other written valuations that were developed in connection with the application, promptly upon completion or at least three (3) business days before the consummation of the transaction, whichever is earlier.

After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a foreclosure? 7 years from the credit report date 5 years from the credit report date 2 years from the credit report date 3 years from the credit report date

3 years from the credit report date FHA allows for a borrower to obtain an FHA mortgage 3 years after a foreclosure. Conventional underwriting is 7 years.

After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a short sale? 7 years from the credit report date 5 years from the credit report date 2 years from the credit report date 3 years from the credit report date

3 years from the credit report date 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.

A loan greater than $100,000 is not considered a qualified mortgage (QM) if the points and fees paid by the consumer exceed what percent (%) of the total loan amount?

3%

Conventionally down payment is

3.5%.

If you or your company receive a notice of a complaint, violation, or audit, you have ? days to comply with the request. If you do not respond, the state will assume you are guilty and assess penalties as they see fit.

30

The FACTA allows a consumer to dispute inaccurate credit information. How many days are allowed for an incorrect item to be investigated? 30 60 90 120

30

A lender has how many business days to notify the borrower of an underwriting decision? 3 10 30 60

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.

The Equal Credit Opportunity Act is a law that requires the lender to provide the borrower a reason for denial within how many days of loan application?

30 days

Lender's are required to file Suspicious Activity Reports under BSA/AML. How long after the date of initial detection are lenders required to file the SAR? 60 days 90 days 30 days 120 days

30 days Lenders are required to file SARs no later than thirty (30) calendar days after the date of the initial detection of the issue. Lenders must maintain a copy of any SAR filed and all supporting documentation for five (5) years from the date of the filing. Suspicious Activity Reports (SARs)

Since Q2 of 2021 CoreLogic reports that transaction fraud has increased by _________, while income fraud risk decreased by __________.

34.2%, 2%

What is the conventional mortgage back end DTI ratio on a manually underwritten loan? 28% 29% 36% 41%

36% Currently the maximum back-end DTI on a manually underwritten conventional loan is 36%.

How many days prior to consummation or closing is the final Loan Estimate required to be provided to the borrower? 21 days before consummation or closing 10 days before consummation or closing 7 days consummation or closing 4 days consummation or closing

4 days consummation or closing The Final LE must be received no later than four (4) business days before closing.

In compliance with Regulation Z, how long is a lender required to maintain the Closing Disclosure?

5 years

Conventional loan limit in 2022

647,200$ and 970,800$

If an MLO has a borrower who has had a foreclosure in the past and is looking to obtain a conventional mortgage, how long does that foreclosure have to be seasoned on the credit report before the borrower can qualify?

7 years For conventional financing, a foreclosure must be seasoned for 7 years before the borrower can be eligible for the financing.

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 5 years from the credit report date 2 years from the credit report date 3 years from the credit report date

7 years from the credit report date Conventional underwriting is 7 years for foreclosure while FHA is 3 years.

How is rental income calculated when the borrower owns rental properties other than the subject property?

75% of the income less the PITI. If the net is positive, include as income; if the net is negative, include as a monthly debt Generally rental income is calculated, 75 percent of the rental income, 25 percent vacancy factor, or an average of the Schedule E (this is a schedule of the borrower's tax return) income with depreciation added back. You would have to subtract any payments being made for a loan on the property. The borrower must list all properties that they own and if there are any liens against those properties.

An MLO is working with a borrower who wants to purchase a home using an FHA loan, what is the maximum LTV allowed on an FHA loan?

96.5%

Any loan that can be sold to Fannie Mae of Freddie Mac: ▪ Maximum LTV - ? ▪ Any loan above 80% must have ?

97% PMI and escrows

Home Equity Conversion Mortgage (HECM) Reverse Mortgage

: 62 years or older, own a single family or 2-4 unit, .... The only reverse mortgage insured by the U.S. Federal Government is called a

What is NOT likely to happen if the lender/investor finds fraud? A 1% interest rate increase on the loan The lender and/or broker will be required to repurchase the loan The entire loan can be called due and payable The loan officer must pay back any premium made on the loan

A 1% interest rate increase on the loan When a lender finds fraud on a loan and they did not originate it, most of the time the originating lender will have to retake possession of the loan and deal with the fraud. Finding of fraud does not constitute any change in the terms of the loan but can cause the loan to become due and payable.

Junior Lien -

A 2nd Mortgage or HELOC

If an underwriter needs to verify a borrower's down payment, what might they request the processor order? A VOD A VOE A VOM A VOR

A VOD A VOD is a Verification of Deposit. It is used to verify if X amount of money is in a borrower's bank account.

A 5/25 or 7/23 is what type of mortgage: Bridge Loan Interest-Only Loan Hybrid ARM Balloon Mortgage

A balloon payment is more than two times the loan's average monthly payment and can often be thousands to tens of thousands of dollars. Most balloon loans require one large payment that pays off your remaining balance at the end of the loan. Examples of how these mortgages look are 5/25 or 7/23. Summation:30 5/25 Balloon mortgage - the rate is fixed for a period of 5 years and then converts to a new fixed rate for the remaining 25 years.

According to the Fair and Accurate Credit Transaction Act, when are borrowers entitled to get a copy of their credit scores for no reason?

A borrower has no right to a free copy of his credit scores FACTA, an amendment to FCRA, implemented the rule that requires the credit bureaus to provide a free credit report to everyone yearly. This does not include their credit scores.

Credit scores are determined by all the following EXCEPT: Items from public records like bankruptcies or foreclosure A borrower's income Payment history Credit mix

A borrower's income

Bridge Loan, (Cross collateral Loan):

A bridge loan is a short-term loan used to bridge the gap between buying a home and selling your previous one. Sometimes you want to buy before you sell, meaning you don't have the profit from the sale to apply to your new home's down payment. Bridge loans are meant to be temporary devices to free up money that is tied up pending the sale of the real estate asset. Bridge loan terms are typically six months but can range from 90 days to 12 months or longer. To qualify for a bridge loan, a firm sale agreement must be in place on your existing home. Bridge loans are also called Cross-Collateral loans.

When the borrowers pay a fee to get a lower interest rate, but the interest rate will not remain at that level for the life of the loan, but over time will raise to the quoted fixed rate. What is this called? Origination fee Discount points Adjustable rate A buydown

A buydown he most common type of buydown is a temporary 2-1 buydown. A temporary 2-1 buydown means the first year of the loan; the borrower will be making payments based on an amortization schedule computed using a rate which is two percent (2%) less than the rate stated in the Note. In the second year of the loan, the borrower will be making payments based on an amortization schedule computed using a rate which is one percent (1%) less than the rate stated in the Note, then the third year the borrower makes the payments on the full Note Rate.

Which of the following is not an acceptable source for the borrower's down payment on a Fannie Mae loan? Funds the borrowers have saved in their checking account Funds from an inheritance A secured loan from a car that the borrowers own that's payment is calculated into the borrower's debt-to-income A cash advance from a credit card if it doesn't show on the credit report

A cash advance from a credit card if it doesn't show on the credit report

Down payment Assistance -

A city, county, or state agency that will help the first -time homeowner with down payment money.

Which of the following would be considered in determining gross living space? A basement A finished attic space An attached garage A backyard shed

A finished attic space All gross living space must be above grade and finished space. A basement will never be considered in square footage as it is below grade, a garage is an unfinished space so can't be counted and a shed again is an unfinished space. The finished attic is both above grade and finished.

When would a subordination agreement be appropriate? A first mortgage is being refinanced and doesn't want to lose priority to an existing 2nd mortgage. A first mortgage is being paid off, and the holder of the second mortgage wants to ensure they will have first priority. A second mortgage is obtained, and the lender wants to ensure that it will be second in priority. Subordination clauses are never used in the creation of loans, since they create confusion as relates to priority.

A first mortgage is being refinanced and doesn't want to lose priority to an existing 2nd mortgage. If a borrower has a second mortgage and wishes to refinance their first mortgage without losing or combining their second mortgage, the second mortgage holder would have to agree to subordinate. This would mean that the second mortgage would stay in second lien position allowing the new first mortgage to be in first position.

HELOC (Home Equity Lines Credit):

A home equity line of credit, or HELOC, is a revolving type of secured loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the borrower's property.

Which is considered an illegal referral fee? A lead generating company getting a higher fee if the lead closes MLOs buying leads from a legitimate lead generating company MLOs pursuing lead from past borrowers An employee of a lead generating company referring a potential borrower to an MLO

A lead generating company getting a higher fee if the lead closes Section 8 of RESPA prohibits referral fees. A lead generating company receiving a higher fee because the leads loan closed would be paying them for the referral so it would be illegal.

Which of the following is the best comparable to use for a loan? An almost identical home, recently sold in foreclosure Three similar homes currently listed on the same street A similar home that is currently under contract A recently sold home, in the neighborhood, similar to the subject property

A recently sold home, in the neighborhood, similar to the subject property Comparables must be within one (1) mile of the subject property and have been sold in the past six (6) months.

What occurs when an QM loan is presumed to comply with ATR requirements? A safe harbor A rebuttable presumption A high-cost home loan A higher priced mortgage

A safe harbor ATR requirements: The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requires a creditor to make a reasonable, good faith determination of a consumer's ability to repay a residential mortgage loan according to its terms. Safe harbor qualified mortgage means a mortgage that meets the Ability-to-Repay requirements of sections 129B and 129C of the Truth-in-Lending Act (TILA) regardless of whether the loan might be considered a high cost mortgage transaction as defined by section 103bb of TILA (15 U.S.C. 1602bb). A QM loan that is not higher-priced has a safe harbor. If the loan has a safe harbor, then they are conclusively presumed to comply with the ATR requirements. Under a safe harbor, if a court finds that a mortgage a lender originated was a QM, then that finding conclusively establishes that the lender complied with the ATR requirements when they originated the mortgage.

Conforming Loan

A standardized conventional loan that meets Fannie Mae's or Freddie Mac's purchase requirements.

What is the period between rate changes in an ARM called? Change period Index period Term period Adjustment period

Adjustment period The period between rate changes is called the adjustment period. Some examples include: an ARM that has an adjustment period of one (1) year is called a one-year ARM, and the interest rate and payment can change once every year. An ARM with a three-year adjustment period is called a three-year ARM, and the interest rate can adjust every three (3) years.

If a creditor denies a loan, what document must be sent to the client to inform him of the denial? Adverse Action Notice GFE TIL Statement Nothing is required to be sent if the information is verbally relayed to the client

Adverse Action Notice 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. FCRA requires an adverse action disclosure be provided to the borrower if their credit is the reasoning for all or part of the decision to deny the loan application, FCRA requires that the disclosure be given within 30 days of a credit decision.

____________ occurs when perpetrators rely on a common bond and exploit the trust and friendship that typically exists in the group of individuals to support the scheme.

Affinity Fraud

When are the funds disbursed for an owner-occupied residential refinance? After the loan documents are recorded At the time of the loan closing Within seven days after the application After the three business-day right of rescission period has expired

After the three business-day right of rescission period has expired The right of rescission applies on owner-occupied refinance transactions and so funds are held until the right of rescission expires which is 3 days from closing.

Under the Fair Housing Act, which of the following is NOT one of the protected classes: Race Color Age Sex

Age The Fair Housing Act prohibits discrimination in housing because of race, color, national Origin, religion, sex, familial status & disability. ECOA prevents discrimination against age.

ABCTV

Agriculture Business Commercial Temporary financing Vacant land

According to Regulation B, which of the following is not recommended?

Always referring to the man as the borrower and the woman as a co-borrower could be considered discrimination under ECOA. ECOA prohibits discrimination in lending based on specific protected classes, including sex.

All the following would be considered to be performing clerical or support duties EXCEPT: A loan processor An underwriter An MLO An appraiser

An MLO

Who of the following is in violation of the Section 8 provisions of RESPA? An attorney who also earns fees for performing multiple settlement services An employer who pays her employees for referrals A real estate broker who pays a cooperating real estate broker for a referral An MLO who leases office space in a real estate office at an above market amount

An MLO who leases office space in a real estate office at an above market amount It is a violation of Section 8 of RESPA. The overpaying of rent could be considered a thing of value and could be construed as a kickback. Think about it this way ---- if you are a real estate agent and you have an MLO renting office space for you at way above what it actually costs to do that are you more likely to refer your borrower's to that MLO? Probably, yes. We do talk about this on Page 153-154 of the textbook under Section 8 of RESPA.

A Mortgage Lender shall maintain capital of not less than $______ per licensed location:

An amount determined by the state Regulatory Authority that reflects the dollar amount of loans originated. Surety Bond and Net Worth requirements are outlined by the state regulatory authority at their discretion. The SAFE Act does not outline a minimum requirement.

An MLO purchases tickets for a sporting event and provides those tickets to a local real estate agent as a thank you for a referral and also in the hopes that that real estate agent will continue to send clients, this would be considered:

An illegal practice RESPA Section 8 prohibits the payment of referral fees and kickbacks between parties to a real estate transaction. The tickets would be considered a "thing of value" and so would fall under Section 8's prohibition.

Which of the following is not exempt for licensure under the SAFE Act? A processor An independent contractor underwriter Loan closer Escrow Officer

An independent contractor underwriter An underwriter or processor does not have to be licensed unless they operate as an independent contractor. If they operate as an independent contractor, they are required to obtain an MLO license.

A loan originator is: A person who only performs real estate brokerage activities and is not compensated by a lender, a mortgage broker, or other loan originator. A person or entity solely involved in extensions of credit relating to timeshare plans. An individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. A person who only handles clerical or data entry functions.

An individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. A mortgage loan originator or MLO is an individual who for compensation or gain or in the expectation of compensation or gain; takes a residential mortgage loan application; or offers or negotiates terms of a residential mortgage 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. An interest rate that is equal to the lender's par rate is charged. The mortgage rate is bought down.

An interest rate is charged above the par rate and is a credit to the borrower. YSPs are paid to the broker for giving a borrower a higher interest rate on a loan in exchange for lower up-front costs generally paid in origination fees, broker fees or discount points.

Repurchase -

An investor requiring the originating lender to buy the loan back because of fraud, unacceptable underwriting, or appraisal.

When a trust deed (or deed of trust) is recorded, which of the following is true? Ownership is conveyed A lien is released An lien is created It verifies both the lender and borrower signed the document

An lien is created Voluntary liens are placed against property with the consent of the owner. A mortgage or deed of trust is a written instrument that uses a specific real property to secure payment of a debt. When the trust deed or mortgage is recorded it creates the lien.

An individual is looking to obtain a mortgage loan originator license, should be aware that they cannot obtain a licensee if which of the following appears on their credit report: A medical collection A foreclosure from 10 years ago A bankruptcy An open tax lien

An open tax lien An applicant is required to show financial responsibility. Things that can call into question an applicant's financial responsibility include current outstanding judgments (except medical ones), current outstanding tax liens, foreclosures within the past 3 years, and a pattern of seriously delinquent accounts in the past 3 years.

A fee charged to the borrower by lenders to cover such costs as preparation of documents and other services provided by the primary lender and computed as a percentage of the loan is known as: P.O.C. (paid outside of closing). An origination fee. Discount point(s). Yield spread premium.

An origination fee. An origination charge or fee is the fee paid to compensate the lender for originating the loan and covers the costs that the lender has in originating the loan.

Robbie wants to purchase as 4-unit dwelling and rent out 3 of the units. He knows he will need reserves to make the purchase, what would not be an acceptable form of reserves? Robbie's checking account Robbie's investment account An unsecured loan that Robbie gets Robbie's vested 401K

An unsecured loan that Robbie gets

Which of the following is not considered "prohibited conduct"? Accepting a fee for best efforts Asking an appraiser to look at additional information Committing fraud Acting as an MLO without a license

Asking an appraiser to look at additional information

RESPA requires disclosure to the consumer of: Any affiliated business arrangement (AfBA). The annual percentage rate (APR) The number of business days before settlement Use of race, ethnicity, and gender for government reporting purposes

Any affiliated business arrangement (AfBA). The AfBA disclosure must be delivered to the borrower at the time of the referral. An example of an AfBA is a mortgage lender's CEO has an ownership interest in a title insurance company, if the mortgage lender's MLOs want to refer their borrowers to use that title insurance company then the relationship must be disclosed between the CEO of the mortgage lender and the title insurance company at the time the MLO refers them.

Liabilities

Any debt, including bank loans, credit cards, student loans, car loans, car leases, mortgage loans, judgments, tax liens, and alimony/child support.

Federal Mortgage Loan -

Any loan originated and closed under Fannie Mae, Freddie Mac, FHA , VA, or USDA requirements.

Delinquent loan -

Any loan over 30 days due.

Non -Conforming -

Any loan that cannot be sold to Fannie Mae or Freddie Mac. Also, Jumbo or any loans that are using non verified income.

HMDA requires lenders to request what information from applicants in a face to face interview for home mortgage loans? Number of children the applicant has Religion of the applicant Source and seasoning of the down payment Applicants race

Applicants race HMDA requires that financial institutions collect and report specific data. The data is collected and analyzed to prevent and detect discriminatory lending practices and to determine whether a financial institution is lending fairly in all areas they serve. The information includes race, ethnicity and sex.

AIR

Appraisal Independence Requirements (AIR) are part of Regulation Z (TILA)

AMC

Appraisal Management Company. The middleman between appraisers and mortgage companies.

Which of the following is NOT a finance charge in a residential mortgage loan? Loan origination fee Appraisal fee Mortgage insurance premium Mortgage broker fee

Appraisal fee 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.

Which of the following participants in a mortgage loan transaction would be most likely to overvalue a property? Appraiser Attorney Surveyor Title Company

Appraiser The appraiser is the one responsible for determining the value of the property on a real estate transaction.

he NMLS is responsible for all the following EXCEPT: Assigning the unique identifier Collecting licensing fees Housing licensing information like the education record Approving or denying license applications

Approving or denying license applications The NMLS is a licensing database that helps the states communicate with licensees and applicants. They do not deny or approve a license application, the individual states regulatory authorities do that. They do collect things like licensing fees and house a licensee's education record. They also assign the licensees unique identifier (NMLS ID#).

Which of the following is true about asking a borrower questions about divorce? Asking questions about divorce is permissible if there is any documentation in the loan file that suggests a divorce. Questions about divorce are always allowed. If you suspect a divorce based on visual evidence, questions may be asked. Questions about divorce are never allowed.

Asking questions about divorce is permissible if there is any documentation in the loan file that suggests a divorce. There are situations where a divorce affects the title of a property or the continuance of types of income (assuming the borrower wants to use and discloses that income on their own), if there is a reason that the divorce is pertinent to the transaction then questions are acceptable.

Which of the following questions is not prohibited while taking a loan application? Asking about childbearing intentions Asking the borrower to add a spouse to the application Asking questions to discouraging a borrower from applying Asking the borrower his/her marital status

Asking the borrower his/her marital status When an applicant applies for individual credit, an MLO cannot ask the applicant's marital status, except when the credit transaction is to be secured. The lender can ask the applicant's marital status and if the applicant either resides in a community property state.

According to RESPA, when must an Affiliated Business Arrangement (AfBA) disclosure be provided? At the time of application even if there are no AfBAs At or prior to the time a referral is made if there is an AfBA Within three business days of settlement even if there are no AfBAs Never; TILA, not RESPA, requires this disclosure

At or prior to the time a referral is made if there is an AfBA The AfBA disclosure must be delivered to the borrower at the time of the referral. An example of an AfBA is a mortgage lender's CEO has an ownership interest in a title insurance company, if the mortgage lender's MLOs want to refer their borrowers to use that title insurance company then the relationship must be disclosed between the CEO of the mortgage lender and the title insurance company at the time the MLO refers them.

AUS

Automated Underwriting System

Which of the following programs allows the highest back-end DTI qualification?

FHA

An MLO advertises a low interest rate for qualified applicants. A prospective borrower meeting the qualifications applies. The MLO moves the borrower into another loan which makes more profit to the lender. This is an example of: Ponzi scheme Bait and switch Extortion Loan flipping

Bait and switch Bait and switch occurs when a licensee advertising specific rates and terms to get a borrower in the door and then puts them in an entirely different product than they advertised. This is prohibited conduct.

To hold an active license, an MLO must: Be sponsored by a licensed entity Pay a $500 fee Also be licensed as a broker Complete 60 hours of pre-licensing education

Be sponsored by a licensed entity

Which one of the following occurs when a real estate agent or buyer persuades an owner to sell their property at a deflated amount, based on the notion that other houses in the neighborhood are being acquired by individuals from another race or class?

Blockbusting

The practice of getting people to sell their homes at bargain prices by suggesting that certain ethnic groups are going to move into the area is nicknamed:

Blockbusting is the practice of persuading owners to sell property cheaply because of the fear of people of another race or class moving into the neighborhood, and thus profiting by reselling at a higher price.

A borrower is looking to purchase a new home, this new home is smaller than their current home and less expensive. They tell the MLO that they intend to sell their current home once they've gotten a new home. The borrower closes on their new home and promptly defaults on their old home, this is called:

Buy and Bail A buy and bail is when a homeowner is current on their mortgage, but the value of their home has fallen below the amount owed, also known as being underwater, so they apply for a purchase money mortgage on another home. After the new property has been secured, the borrower will allow the first home to go into foreclosure (i.e., bail on that previous property).

allows assumption and requires UFMIP

FHA

Occupancy Fraud -

FHA requires the borrower to owner occupy for 60 days. Fannie, Freddie, USDA, and VA require the Borrower to occupy the property.

Underwriters and lenders use FHA's 4 Cs

C1: credit history C2: Capacity, make payment C: Cash C4: Collateral (evaluate the value of the home)

What are the Two Booklets required within three business days of application?

CHARM booklet for all ARM products and Loan Tool Kit for all purchase loans.

CAIVRS

CREDIT ALERT INTERACTIVE VOICE RESPONSE SYSTEM (CAIVRS) What is CAIVRS? CAIVRS is a Federal government database of delinquent Federal debtors that allows federal agencies to reduce the risk to federal loan and loan guarantee programs. FHA ▪ All borrowers must be run through CAIVRS. It will tell the lender if the borrower has an open FHA loan, default on an FHA mortgage, or government insured student loan. The borrower may not be eligible for another FHA loan.

NMLS is managed by

CSBS and AARMR. They are responsible for making sure NMLS is completing the licensing and overseeing of the licensees. The Conference of State Bank Supervisors and The American Association of Residential Mortgage Regulators

Extended lock agreement -

Cannot be issued by a broker and must contain four items: Program, interest rate, cost, and expiration date.

When performing the sales comparison approach, what does "adjusting properties" involve? Changing the subject property to make it more like the comparables Changing the comparables to make them more like the subject property Always using comparables that are exactly like the subject property Finding comparables that sold for the same price as the subject property

Changing the comparables to make them more like the subject property No two homes are ever the same, if for no other reason than no two houses sit on the same lot. There will always be differences between comparable sales and the subject property. Appraisers adjust the sales price of the comparable to give them a better-indicated value of the subject property and make the property more similar to the one that they are appraising.

▪ Reverse Redlining -

Charging more for interest rates and costs in a certain area, because of risk factors or the area itself.

Which of the following sources of income would NOT be allowed on a conforming conventional loan? Salary income when the borrower has worked for only 6 months Social Security income Income from a rental property that has been owned only 2 years Child support received for a 16-year-old child

Child support received for a 16-year-old child In order to use child support received as income for a loan, the child support must continue for at least 3 years. Most child support agreements expire when the child is 18 years old, which in this situation would only be 2 years in the future, so it cannot be used as it cannot be confirmed it will continue.

An investor is pitching the sale of properties as opportunities to new real estate investors, promising improbably high returns and loan risks, this could be considered: Affinity Fraud Chunking Buy and Bail Churning

Chunking Chunking is the sale of properties at artificially inflated prices, pitched as investment opportunities to naïve real estate investors who are promised improbably high returns and loan risks. The third-party helping the investor may use the investor's information to apply for loans at multiple institutions and then retain the proceeds leaving the borrower with multiple loans that cannot be repaid.

Net tangible benefit helps prevent harmful refinancing by lenders that potentially takes away a homeowner's equity with unnecessary loans, also referred to as _________.

Churning

What is the term for excessive selling or lending activity to generate fees and commissions?

Churning

The penalties issued by the State Regulatory Authority are levy ____ penalties on mortgage loan originators.

Civil

Which was the first major legislation to directly affect equal rights to ownership of real property? Emancipation Proclamation Federal Fair Housing Act Homeowners Protection Act Civil Rights Act of 1964

Civil Rights Act of 1964 The Civil Rights Act of 1964 was the nation's premier civil rights legislation. The Act outlawed discrimination on the basis of race, color, religion, sex, or national origin, required equal access to public places and employment, and enforced desegregation of schools and the right to vote.

Surrender of an MLO license does not affect the MLO's: Ability to originate loans as an employee for a licensed lender. Civil or criminal liability for acts committed prior to the surrender. Ability to process loans as a contract processor. Ability of taking loan applications as an independent contractor.

Civil or criminal liability for acts committed prior to the surrender. Even if a licensee surrender's their license they are still civilly and criminally liable for their actions during the time they were licensed.

requires PMI when the LTV is higher than 80%

Conventional loan

A borrower wants to purchase a second home and tells you that they intend to rent the property out when they are not living in it. You have reviewed their financial information and realize that the borrower would qualify for financing if the property is classified as a second residence. However, if the property is classified as an investment property, the borrower is unlikely to qualify. What should you do?

Classify the property as a rental property even though the borrower intends to reside there part of the year.

Which of the following is responsible for the accurate disbursements of all funds due to and from all parties in a mortgage transaction? MLO Appraiser Real estate agent Closing Attorney, settlement or escrow agent

Closing Attorney, settlement or escrow agent

On which two documents would a Pre-Payment Penalty be disclosed?

Closing Disclosure and Loan Estimate Page 1 of both the CD and LE contain questions related to whether there is a prepayment penalty exists on the loan.

If there are two borrowers on the loan but the two borrowers are unmarried, they would be considered what:

Co-mortgagors Only borrowers who are married can be included on the same 1003 and be considered co-borrowers. If there are two unmarried borrowers, they must fill out two separate 1003s. These two borrowers are called co-mortgagors

TILA cannot be applied to COBA:

Commercial Agriculture Business Organizational credit

There are two borrowers, one is White and the other is African American. They have very similar credit profiles. The White applicant is approved, and the African American is denied. These loans were approved and denied at the discretion of the lender and an automated underwriting system was not used. This is an example of: Comparative Evidence Over Discrimination Disparate Impact Redlining

Comparative Evidence Comparative evidence of disparate treatment is often not intentional (though it could be) as this type of discrimination is typically a result of lender discretion in the underwriting process - meaning that discretion results in inconsistencies in the approval and denial process. These inconsistencies then result in a protected class applicant receiving less favorable terms than a control group applicant.

Which of the following are powers/duties of State Regulatory Authorities? Arrest and imprison Conduct examinations of licensee's books and records Prevent a licensee from taking Continuing Education classes Create new laws regulating mortgage professionals in their state

Conduct examinations of licensee's books and records State regulatory authority has a broad responsibility to protect the consumers in that state, this includes things like conducting examinations of a borrower's books and records. They do not have the authority to arrest or imprison a licensee for a violation or prevent a licensee from taking a continuing education class. They also can only enforce the law, they do not create it.

Who is required to pay for the seller's and owner's policy.

The seller is required to pay for the seller's and owner's policy. The borrower is required to pay for the lender's policy.

Land is given as a separate value in which of the following appraisal methods? Cost approach Income method Market or sales approach Land is never given a separate value

Cost approach 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.

When you order an Insurance binder on a borrower's loan file, the one-page sheet that summarizes all the insurance information is known as the:

Declaration page. Borrowers often need home insurance binders to provide proof of insurance coverage when purchasing a house with a mortgage. The insurance binder specifies all the protections for which the borrower is covered while they wait for a new policy, as well as any coverage limits, deductibles, fees, terms and conditions, this is all included on the declaration page. The declaration page is the front page (or pages) of the policy that specifics all the pertinent details of the policy.

DU

Desktop Underwriter (Fannie Mae's AUS)

When determining if a loan is a HOEPA loan, there are three tests. The first test: Determines if the APR exceeds the APOR Determines if the TIP exceeds the APOR Determines whether there is a prepayment penalty Determines whether the points and fees are excessive

Determines if the APR exceeds the APOR The first test for a HOEPA loan is the APR Test. If the APR on the mortgage exceeds the Average Prime Offer Rate (APOR) for a comparable transaction by more than specific percentages then the loan is considered a high-cost home loan.

The adverse action notice must be in writing and contain the specific reasons for why the action was taken or: Disclose to the applicant that they can request the reasons for the denial within 60 days of receiving the lenders notification Disclose to the applicant that they can request the reasons for the denial within 30 days of receiving the lenders notification Disclose to the applicant that they can request the reasons for the denial within 90 days of receiving the lenders notification Disclose to the applicant that they can request the reasons for the denial within 10 days of receiving the lenders notification

Disclose to the applicant that they can request the reasons for the denial within 60 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.

A lender has a minimum loan amount of $150,000. The lender serves a large area including a minority neighborhood. The minority neighborhood's home value is usually $125,000 or less. This policy is an example of: Comparative Evidence Overt Discrimination Disparate Impact Redlining

Disparate Impact Disparate Impact occurs when a facially neutral policy or practice is applied equally to all applicants, but the policy or practice disproportionately excludes or burdens certain groups of people on a prohibited basis.

A lender has a minimum loan amount that they will lend on, that minimum loan amount is $150,000. The average home value to a minority in the neighborhood is $100,000, so the lender does not help anyone in that minority lender, this would be:

Disparate Impact: occurs when a facially neutral policy or practice is applied equally to all applicants, but the policy or practice disproportionately excludes or burdens certain groups of people on a prohibited basis.

According to the Disposal Rule, which of these could be considered a failure to secure private information? Burning old files in a steel drum behind the office once a month Hiring a document destruction company to remove all old files Shredding documents and throwing them in the trash Disposing of documents into the trash bins for the janitorial service to empty nightly

Disposing of documents into the trash bins for the janitorial service to empty nightly According to the Disposal Rule, any person who maintains or otherwise possesses consumer information for a business purpose must properly dispose of such information by taking reasonable measures to protect against unauthorized access to or use of the information. Throwing things in a trash bin for janitorial services to empty would not be protecting the borrower's information and would allow unauthorized access by the janitorial staff to the borrower's personal information.

Income Fraud -

Do the verifications match the documentation provided by the borrower? The 4506-C must match their tax returns. You need to verify that overtime and bonuses are likely to continue.

Under which federal legislation does the consumer have the right to receive a copy of the appraisal report on a dwelling that is to be used as collateral for a loan? HMDA RESPA TILA ECOA

ECOA ECOA requires that lenders provide an applicant a copy of all appraisals and other written valuations that were developed in connection with the application, promptly upon completion or at least three (3) business days before the consummation of the transaction, whichever is earlier.

As the lender looks over the borrower's loan application and is deciding whether or not to make the loan, the lender may consider the: Economic health of the borrower. Psychological state of the borrower. Physical state of the borrower. The borrower's race.

Economic health of the borrower. The lender can only take into consideration the borrower's financial situation and qualifications when making a loan decision.

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 Employee of lender Employee of a third party company Temporary worker

Employee of lender An independent contractor underwriter or processor is required to be licensed, if they work for a lender or another licensee, they are exempt.

Which is not a disclosure required within 3 business days of receiving an application? The Loan Estimate Environmental hazard disclosure The Home Loan Toolkit The CHARMS bookklet for Adjustable Rate Mortgages

Environmental hazard disclosure The Loan Estimate, Home Loan Toolkit and CHARMS booklet are all required under TILA to be disclosed within 3 business days of application.

Borrower(s) may decide to disclose income from child support or alimony. What federal law states that a lender cannot refuse to consider alimony or child support as income? Real Estate Settlement Procedures Act Equal Credit Opportunity Act Fair and Accurate Credit Transactions Act Truth in Lending Act

Equal Credit Opportunity Act ECOA states that if the borrower discloses and wants to use child support or alimony as income than the lender cannot refuse to consider that income.

The three credit bureaus are

Equifax, TransUnion and Experian. Tri-Merge - A three-agency credit report needed for underwriting

The lender is requiring repairs on the home to be completed. Those repairs can be done after the loan closes by including them in a(n):

Escrow Holdback. An escrow holdback is simply money set aside that assures the seller will finish agreed upon work at a later time. It is kind of like an insurance policy.

The SAFE Act: Prevents MLOs from practicing without a license Establishes minimum standards for licensing and registering of mortgage loan originators Prevents abuses in consumer mortgage transactions Prevents kickbacks referral fees and unearned fees

Establishes minimum standards for licensing and registering of mortgage loan originators

The SAFE Act: Prevents MLOs from practicing without a license Establishes minimum standards for licensing and registering of mortgage loan originators Prevents abuses in consumer mortgage transactions Prevents kickbacks referral fees and unearned fees

Establishes minimum standards for licensing and registering of mortgage loan originators

__________ are moral principles that govern a person's behavior or conduct.

Ethics

How often must a lender perform an escrow account analysis to ensure that excess funds are not being kept?

Every year Per RESPA, each year the lender must send an Escrow Analysis to the borrower showing all monies paid by the borrower and the amounts paid by the lender. If there is an overage of greater than $50.00, it must be refunded to the borrower within 30 days.

TRUE OR FALSE: Assets can only be included in the financial information section if they are paid off and owned free and clear.

F

ARM F/S/T meaning

F: the amount of interest rate can increase/decrease at the first adjustment S: Subsequent adjustment cap, the amount of interest rate can increase/decrease at the adjustment period follow the first adjustment T: The interest rate can be increased at most by this rate

An MLO leaves a borrower's file open on his/her desk for just a moment. An Identity thief sees the borrower's credit report which contains a huge amount of information. Fortunately the MLO quickly returns. What potential Federal laws is the MLO violating?

FACTA and GLBA

Assumable loans example

FHA, VA and USDA loans can all be assumable. Conventional loans, such as the ever popular 30-year-loans, are not assumable.

The most commonly used conventional underwriter guidelines are established by: Federal Reserve. VA/FHA. GNMA and FNMA. FNMA and FHLMC.

FNMA and FHLMC. Fannie Mae and Freddie Mac are the government sponsored entities that buy almost all conventional loans. To that end, they set the guidelines and lenders follow them.

Relevant financial information about an applicant who applies for an FHA or conventional residential mortgage is entered on: FNMA form 1008. FNMA form 1003. FNMA form 1005. FHLMC form 95.

FNMA form 1003. The 1003 is the loan application, all pertinent information about the loan and the borrower goes on the 1003.

The Federal National Mortgage Association is also known as which of the following? Fannie Mae Freddie Mac Ginnie Mae Sallie Mae

Fannie Mae

FHFA

Federal Housing Finance Agency

Under FHA loan rules, effective June 2013, loans beginning at 90% LTV or more will pay an annual mortgage insurance premium (MIP): For at least 11 years For the life of the loan Until the LTV reaches 78% Until the LTV reaches 80%

For the life of the loan

What federal legislation prohibits the exchange of information between consumer creditors unless certain disclosures are made to the consumer? Equal Credit Opportunity Act Fair Credit Reporting Act Gramm-Leach-Bliley Act Truth in Lending Act

GLBA protects NPI and if a financial institution shares (or sells) NPI with a third party for uses other than the original intention, the financial institution is required to provide a detailed privacy policy disclosure to the application with the option to opt-out.

Why was Regulation Z enacted? Require lenders to protect borrower's non-public information Enable banks to sell mortgages more easily Give borrowers disclosures regarding the APR on a transaction and to protect consumers Prevent discrimination based on race ethnicity or gender

Give borrowers disclosures regarding the APR on a transaction and to protect consumers

An MLO referred his pre-approved borrower to a real estate company that both he and his partner own. According to RESPA the MLO must: Also provide a list of alternative real estate companies to the borrower. Disclose the relationship only if the borrower asks. Give full disclosure to the borrower at or prior to the time the referral is made. Not make the referral. Referrals are prohibited by RESPA.

Give full disclosure to the borrower at or prior to the time the referral is made. This would be considered an AfBA and must be disclosed per RESPA at the time of referral.

The Homeowners Protection Act of 1998 does which of the following? Gives buyers the right to cancel a contract based on property condition Requires a buyer to sign a disclosure regarding home inspections Gives borrowers the right to cancel or terminate PMI Provides consumers a means of protection through PMI

Gives borrowers the right to cancel or terminate PMI The Homeowners Protection Act or HPA regulates the cancellation of PMI depending on the borrower's LTV.

What are Fannie Mae and Freddie Mac also known as? Congress owned enterprises Government supervised but privately owned entities Government sponsored enterprises Privately owned entities

Government sponsored enterprises Fannie Mae and Freddie Mac are both government sponsored entities or GSEs.

What federal legislation prohibits the exchange of information between consumer creditors unless certain disclosures are made to the consumer? Equal Credit Opportunity Act Fair Credit Reporting Act Gramm-Leach-Bliley Act Truth in Lending Act

Gramm-Leach-Bliley Act GLBA protects NPI and if a financial institution shares (or sells) NPI with a third party for uses other than the original intention, the financial institution is required to provide a detailed privacy policy disclosure to the application with the option to opt-out.

For elderly borrowers include negative amortization features

HECM

Which of the following is not an index that is typically used for adjustable rate mortgages? COFI HELOC U.S. Treasury Bond SOFR

HELOC

What law requires the lender to collect a borrower's demographic information for first mortgages and home improvement loans?

HMDA

Lenders submit Loan/Application Registers in order to comply with what law? CRA FACT Act FCRA HMDA

HMDA HMDA require the Loan Application Registers (LARS). The HMDA report is due to the respective regulating body by March 1st of every calendar year. The Financial Institution or lender must retain its full (unmodified) HMDA-LAR for at least three (3) years for examination purposes.

▪ Liability Fraud -

Has the borrower disclosed all debts, alimony, or child support payments?

Omar is closing his purchase transaction, he was not provided the right to rescind information, how long does Omar now have to rescind his loan? He does not have a right to rescind his loan as this is a purchase transaction Thirty days One year Three years

He does not have a right to rescind his loan as this is a purchase transaction The right of rescission under TILA only applies to owner-occupied refinance transactions. If on an owner-occupied refinance transaction the right of rescission notices and disclosures are not provided or not handled correctly the borrower has three years to rescind their loan.

An MLO must be be licensed if: He/She called a borrower to gather missing information needed to complete an application. He/She counseled a borrower about loan terms and interest rates. He/She explained the GFE sent to a borrower. He/She reviewed the borrower.

He/She counseled a borrower about loan terms and interest rates.

On Form 1003 Section X: Information for Government Monitoring Purposes is used in order to comply with which federal law? Community Reinvestment Act Fair Credit Reporting Act Home Mortgage Disclosure Act Truth in Lending Act

Home Mortgage Disclosure Act The final section of the 1003 is the information for government monitoring purposes. This section includes a statement that the borrower should read, and requests that the borrower furnish information regarding their ethnicity, race, and sex. MLOs obtain this information to ensure they comply with the Home Mortgage Disclosure Act (HMDA, Regulation C). If the borrower does not volunteer the information, you have to do the best you can to determine the information.

Advertised as 3/1 or 5/1

Hybrid ARM - 5/1 = Rate fixed for 5 years and then adjusts every year thereafter.

There are three types of ARMs:

Hybrid ARMs: Interest rate 3-1 is fixed for three years and then adjust every one year. Hybrid ARMs are a blend of fixed rate and adjustable loans. Interest Only ARM: allow to pay only interest between 3-10 years (smaller monthly payment) Payment Option ARM: choose different types: interest only, Min payment, combined

One purpose of the Fair and Accurate Credit Transaction Act is to prevent: Predatory lending Discrimination in lending Loss of borrower Identity theft

Identity theft 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.

Subordination Agreement -

If a borrower has a first mortgage, as well as a second mortgage with another lender.

Under what circumstances would it be possible to consider capital gains as income for a Fannie Mae or Freddie Mac loan?

If the borrowers can verify a minimum of two years income on their tax returns and still own the asset Most income can be used as long as it can be verified for 2 years and there can be reasonable belief that the income will continue, in this case, the borrower would still need to own the assets for the underwriter to believe that the income will continue.

When an MLO accepts any third-party fee from a borrower, the funds should be placed: In an investment account In an escrow account Mixed with the general funds of the company On the loan

In an escrow account All third-party fees collected before closing should be put into an escrow account until they are disbursed.

How can a Loan Officer accept Applications -

In person, computer application, written application, and phone application.

Caroline is purchasing an investment property; she already has a primary residence. What type of appraisal could a lender potentially order for this particular property? Sales Comparison Approach Income Approach Cost Approach Market Research Approach

Income Approach An income approach appraisal is most often used with investment properties. This approach is going to use the earning potential of the property to determine the value of the property. The appraiser will determine the value of a property from the potential income that the property could bring the borrower over time.

Which of the following is true of an ARM? Index rate + margin = ARM rate Initial rate + margin = ARM rate ARM rate + margin = index rate Margin + cap = ARM rate

Index rate + margin = ARM rate

TRID requires a borrower to: Indicate their intent to proceed Provide their verifying documentation before an LE can be sent out Pay an upfront fee before an LE is sent Provide a downpayment at the time of application

Indicate their intent to proceed

A lender charges $500 for an appraisal but the actual appraisal only costs $395, this is an example of what predatory lending practice? Padding closing costs Inflated appraisal costs Unbundling Churning

Inflated appraisal costs Charging above and beyond for an appraisal is considered inflated appraisal costs.

What does the Homeownership Counseling Disclosure do?

Informs the borrower they have the option to go to counseling voluntarily and how much it costs. 10 counseling agencies are to be listed.

Through the life of a loan, the servicer is allowed to cushion a borrower's escrow account. What is true about that cushion? It cannot exceed 1/6 of the estimated total annual payment from the account It cannot exceed 1/12 of the estimated total annual payment from the account RESPA actually does not allow a cushion It can be up to a years' worth of escrow payments

It cannot exceed 1/6 of the estimated total annual payment from the account

Which of the following is the most correct concerning a mortgage or deed of trust? It must be signed by the borrower and the lender in order to make it legally enforceable. It encumbers the borrower's title to the real estate. It conveys title to the property. It allows the lender to occupy the premises.

It encumbers the borrower's title to the real estate.

When is it acceptable to discourage a borrower from making a formal loan application due to the fact that the borrower receives income from public assistance? When the credit score is below normal loan parameters It is never correct to discourage a borrower from applying for a mortgage loan When the income is below the government disclosed poverty line When the loan size makes it a non-conforming loan

It is never correct to discourage a borrower from applying for a mortgage loan' It is a violation of ECOA to discourage a borrower from applying for a mortgage loan, it is never acceptable.

All of the following are actions the Commissioner can take, except: Denying or revoking licenses Imposing fines or penalties Investigating consumer complaints Issuing a unique identifier

It might be Imposing fines or penalties OR Issuing a unique identifier

Exceed the Conventional Loan limit

Jumbo Loans

You have a customer who has been approved by the lender and is ready to close. The customer backs out at the last minute because of a recent interest rate drop and opts to go with a different loan officer. You paid for the appraisal and want to invoice the customer and be reimbursed. This course of action would be considered: illegal and unethical. legal but unethical. illegal but ethical. legal and ethical.

Legal and ethical

A discount point is calculated as being 1% of what?

Loan Amount Discounts points are a fee equal to 1 percent of the loan amount that is prepaid interest on the mortgage loan. The more points, the lower the interest rate. Discount Points can only be used to reduce the interest rate. Borrowers can typically pay from 0-4 poi

The SAFE Act outlines all of the following EXCEPT: Pre-licensing education requirements Testing requirements Continuing education requirements Loan Originator Compensation requirements

Loan Originator Compensation is a rule under Regulation Z.

Lp

Loan Product Advisor (Freddie mac's AUS)

subprime loans

Loans made to homeowners who do not qualify for standard (prime) home loans. Subprime loans can have high fees, and costly prepayment penalties that "lock in" the borrower to a high interest rate.

MIP

MIP (mortgage insurance premium) which last the entire loan life

▪ It is ? responsibility to report any loan files to your Compliance Officer on which you feel the borrower is providing fraudulent information

MLO

When filling out the Disciplinary Actions section of the MU4 Form, which of the following is not required, or does not need further explanation when answering "YES" to any of the questions? Action Type (Criminal, Regulatory, Civil Judicial, or Civil Regulatory) Official Documentation related to the Action (e.g., court order or letter from regulatory authority), to be uploaded as a PDF file Mandatory explanation of the disciplinary action written and provided by the MLO Name of Authority that took the Action being disclosed

Mandatory explanation of the disciplinary action written and provided by the MLO Any "yes" response to a disclosure question requires an explanation by the MLO.

HMDA reports are due to the regulator by which of the following dates?

March 1st

There are two main components of determining the interest rate on an ARM, which part of an ARM is set at the beginning and never changes?

Margin

What would the lender use to compute the adjustment on an ARM loan? Periodic annual and lifetime caps Margin, Index, and APR Index and APR Margin, Index and Lifetime caps

Margin, Index and Lifetime caps

Which of the following requires the lender to disclose to borrowers the possibility that their loan will be sold, assigned or transferred to another? Affiliated Business Arrangement Disclosure GFE Mortgage Servicing Disclosure Service Providers List

Mortgage Servicing Disclosure RESPA requires that a mortgage lender that anticipates that they may sell the servicing rights of a loan is required to let the borrower know. The lender must notify the borrower that that may occur within three (3) days after the receipt of the application.

What is mortgage compliance?

Mortgage compliance is the industry's general term that refers to the rules and regulations that control the mortgage process.

Discount points would only be used if the interest rate offered to the borrower were which of the following? Above par The prime rate Below par Par or anything below par

Par or anything below par 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.

Calculating Income ▪ Paid on the 15th and 30th -

Pay amount, times 24, divided by 12.

According to the SAFE Act a mortgage loan originator employed by a federally insured depository institution: Is not required to be registered or licensed Must be both registered and licensed Must be registered Must be licensed

Must be registered The MLOs that work in bank branches or credit union branches are not currently required to obtain a license. They are required to be registered and are not required to take pre-licensing or continuing education, nor are they required to take the National Test Component with the Uniform State Test.

Per Diem Interest -

Needed for daily interest that will be charged from the day of funding to the end of the month. Principal, times the interest rate, divided by 360 days for a conventional loan, and 365 days for a government loan.

Is a referral fee ever allowed? No, unless disclosed on the HUD and paid for by borrower No Only to a disclosed provider Only to a lawyer that refers a loan

No

All of the following are red flags on a sales contract, except: Power of attorney is used No credit history or "thin" credit files No real estate agent is involved Real estate commission is excessive

No credit history or "thin" credit files

Jumbo Loans are considered what type of loan: investment. Non-Conforming. Vacation Sub-Prime.

Non-Conforming.

does not conform to fennie Mac but does ATR

Non-QM loans

Each mortgage loan originator must renew their license in NMLS beginning .

November 1 through December 31 annually

MLO license renewals with NMLS open each year on:

November 1st

Occupancy Fraud Risk

Occupancy fraud occurs when mortgage applicants deliberately misrepresent their intended use of a property (primary residence, secondary residence, or investment).

How long must an applicant wait to receive a new license if they have previously had their license revoked? 7 years 10 years 5 years Once an individual's license has been revoked, that person is never eligible for a future license.

Once an individual's license has been revoked, that person is never eligible for a future license.

Who can negotiate terms with the borrower? -

Only licensed individuals.

A lender may keep the: credit report fee and yield spread premium. discount points and appraisal fee. yield spread premium and discount points. Origination Fee

Origination Fee An origination fee is a fee charged by a lender to cover the administrative costs of making a loan.

A credit card company has a written policy that anyone between the age of 21-27 can only have a credit limit of $1,000 and anyone over 30 automatically gets a credit limit of $5,000. This is an example of:

Overt discrimination

According to the Truth in Lending Act which loan type includes the right to rescind? Construction Owner occupied refinance Purchase Non-owner-occupied refinance

Owner occupied refinance The right of rescission only applies to owner-occupied refinance transactions.

Front End DTI (Housing ratio)

PITI (MI & HOA) / Gross Monthly Income

TRUE OR FALSE: Enter "investment" if the borrower(s) do not intend to occupy the property.

T

Your customer calls you in the morning and tells you to lock the interest rate at the 5.5% you initially disclosed. You commit to lock the rate, but your day becomes busy and you aren't able to lock it until later in the day. When you go to lock the rate, you notice that the pricing has changed since this morning and the rate of 5.5% is now going to cost an additional $500.00. What is the most appropriate course of action?

Pay the $500 cost and lock the rate

ARM that allows borrower to choose several payments

Payment Option ARMs

When is the funding on a residential construction loan made? At the time the loan documents are signed Periodically, as the home is being built When the home is complete and an occupancy permit issued When the filing period for all mechanics liens has expired

Periodically, as the home is being built The money borrowed through a construction loan is provided in a series of advances as the construction progresses.

Background checks performed by the State Regulatory Authority cannot include: fingerprints. state, national, and international criminal history. Personal history and experience. Personal checking account information.

Personal checking account information.

PUD

Planned Unit Development

PUD is the acronym for:

Planned Unit Development A PUD or Planned Unit Development is a land area zoned for a single-community subdivision with flexible restrictions on residential, commercial, and public uses.

A lender refusing to report timely payments to the credit reporting agencies is an example of: Fraud Predatory Lending Price Gouging Negligence

Predatory Lending This is an example of predatory lending. Some creditors do not report timely payments to the credit reporting agencies. A borrower's payment history will not reflect correctly in this situation. Predatory lenders will not report to try to maintain the borrower for them.

Out of the following MLO Responsibilities, which of the following is a mortgage underwriter main responsibility? Source and develop loans for all aspects of our market including but not limited to: HELOC, residential real estate, and new construction Preparing reports on assessment findings. Making loan eligibility decisions and approving or rejecting applications Complete necessary credit investigations on each loan application as appropriate for keeping credit files current for the duration of the loan including responsibility for collecting payments in a timely manner Analyze and Submit All Applicant's Required Documentation

Preparing reports on assessment findings. Making loan eligibility decisions and approving or rejecting applications

Out of the following MLO Responsibilities, which of the following is a mortgage underwriter main responsibility? Source and develop loans for all aspects of our market including but not limited to: HELOC, residential real estate, and new construction Preparing reports on assessment findings. Making loan eligibility decisions and approving or rejecting applications Complete necessary credit investigations on each loan application as appropriate for keeping credit files current for the duration of the loan including responsibility for collecting payments in a timely manner Analyze and Submit All Applicant's Required Documentation

Preparing reports on assessment findings. Making loan eligibility decisions and approving or rejecting applications An underwriter is responsible for making credit decisions and analyzing the borrower's loan file.

___________ occurs when a vendor takes advantage of a consumer by charging high prices, either through fraudulent acts or because the consumer has no available alternative.

Price gouging

primary vs secondary mortgage market

Primary mortgage markets give borrowers access to the funds needed to purchase a home. The secondary mortgage market replenishes those funds by allowing lenders to sell those mortgages to Ginnie Mae, Fannie Mac, Freddie Mae, and other private investors.

PITI:

Principal Interest Taxes Insurance

PMI

Private Mortgage Insurance (PMI):

Which of the following is NOT one of the four basic elements that a company should have in its Red Flags Rule Policy? Procedures to identify employees to develop the policy Processes to identify false IDs or other documents Actions to take when a red flag is detected Plan to keep policy updated

Procedures to identify employees to develop the policy

What is the name of Freddie Mac's automated underwriting system?

Product Advisor Freddie Mac's AUS is Loan Product Advisor, Fannie Mae uses Desktop Underwriter.

Which of the following circumstances would disqualify the use of income generated from a basement apartment in qualifying for a Freddie/Fannie loan? Property was appraised as a single-family dwelling The property is zoned for 2-4 units LTV is calculated as a 2-unit property The apartment was vacant for 4 months

Property was appraised as a single-family dwelling For income to be considered from a basement apartment, the property would need to be appraised as a multi-unit dwelling.

Which of the following situations is not a red flag that illegal flipping may be taking place? A group of sellers and buyers changing ownership of one property among them An inflated appraisal Purchasing and remodeling a house and selling it for a quick profit A series of sales within a short period of time such as multiple sales within the last 12 months

Purchasing and remodeling a house and selling it for a quick profit Illegal property flipping occurs when the property is purchased and resold quickly at an artificially inflated price by utilizing fraudulently inflated appraisals. Illegal property flips typically have not been improved or renovated since the purchase and are quickly resold at a much higher price. Sometimes the property is only owned for twenty-four (24) hours before it is resold.

Dodd-Frank mandated which of the following rules that now appear under TILA: The Safeguard Rule FACTA The Disposal Rule Qualified Mortgage

Qualified Mortgage Rule Dodd-Frank mandated the creation of the Qualified Mortgage Rule, the Ability to Repay Rule and Loan Originator Compensation. All three of these rules fall under Regulation Z or TILA.

The Opt-Out Rule under GLBA requires privacy notice, which of the following is not one of those notices? Initial Opt-Out Annual Quarterly

Quarterly The Opt-Out Rule requires initial, opt-out, annual and revised privacy notices.

A Mortgage Servicing Disclosure Statement is required by what law? MDIA RESPA SAFE Act TILA

RESPA RESPA requires the Mortgage Servicing Disclosure Statement.

HMDA requires the lenders to obtain what information for each borrower?

Race and Sex HMDA requires the collection of demographic data in order to prevent redlining, reverse redlining, blockbusting and other forms of discrimination in the mortgage industry.

What fee is not included in the Loan Estimate? Appraisal fee Credit reporting fee Mortgage broker fee Real estate broker fee

Real estate broker fee

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: Redisclose because of a changed circumstance Redisclose because of a change of program Withdraw the initial application and start over Suspend the initial application for 30 days

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.

Under what law is a lender required to provide an adverse action disclosure if the borrower's credit is the reasoning for all or part of the decision to deny the loan application:

Regulation V or the Fair Credit Reporting Act require that an adverse action notice be provided to a borrower within 30 days of a credit decision if the borrower's credit is the reasoning for all or part of the decision to deny the loan application.

The 3/7/3 Rule is associated with which law or regulation? Regulation B FACT Act SAFE Act Regulation Z

Regulation Z The 3/7/3 Rule is part of MDIA which is part of TILA (or Regulation Z). 3 Days - Delivery of the Initial TILA disclosure 7 Days from Initial Disclosure - Mortgage Closing Waiting Period 3 Days prior to Mortgage Closing - APR Waiting Period

Which of the following is not included in the debt-to-income qualifying ratio? Installment loans Rent on current housing Housing payment Monthly revolving payments

Rent on current housing

Which best describes the 4506-T? Request for Tax Return Transcripts Transmittal Summary Permission for E-signatures Permission for appraisal waiver

Request for Tax Return Transcripts The 4506-T is sent to the IRS to confirm the numbers on the tax returns are the same, the IRS sends the transcripts they have of the borrower's tax returns.

What is the name of the act that created the NMLS?

SAFE ACT

Flood insurance -

Same rule as homeowners insurance and must be obtained if the property is in zone "A" or "V".

In qualifying the income of a sole proprietor borrower, the originator should consider which of the following to be most important? Form 1040 adjusted gross income Schedule C net income Expenses reported on Form 2106 Schedule C net income plus non-cash expenses and depreciation

Schedule C net income plus non-cash expenses and depreciation 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.

What is HOEPA also known as? Section 30 Section 32 Section 33 Section 34

Section 32 HOEPA (Homeownership and Equity Protection Act) is Section 32 of TILA (Truth in Lending Act, Regulation Z).

Where, in the TILA, is the explanation for higher-priced loans located? Section 32 Section 35 Section 23 Section 42

Section 35 Section 35 of TILA deals with higher-priced mortgage loans.

S.A.F.E. Act is the acronym for: Safe And Federal Enforcement Act. Secondary Amortizing Federal Efficiency Act. Safe And Sound Financial Emergency Act. Secure and Fair Enforcement for Mortgage Licensing Act.

Secure and Fair Enforcement for Mortgage Licensing Act.

In a typical mortgage loan, what are the mortgage note and the property called? Financing instrument/deed Hypothecation/security Lien/appraised value Security instrument/collateral

Security instrument/collateral The mortgage or deed of trust is the security instrument that the borrower gives to the lender that protects the lender's interest in the property. When the borrower signs the mortgage or deed of trust, they are giving the lender the right to take the property by foreclosure if they fail to pay their mortgage properly. The property is considered collateral for that security instrument.

TRUE OR FALSE: Under the loan purpose section, select "Other" if the loan is a temporary construction loan.

T

Regulation Z is also known as which of the following? ECOA FHA RESPA TILA

TILA Regulation Z is also known as TILA or The Truth in Lending Act.

If a borrower is going to be denied financing based on an incomplete application, which of the following can be done?

Send a written notice of incompleteness within 30 days of the last action taken or of the incompleteness. ECOA gives a lender the ability for a lender to send a notice to the borrower if their application is incomplete and give the borrower time to respond. This has to happen within 30 days of the last action taken on the transaction or the incompleteness.

After failing three (3) exams, an applicant must wait how long before taking the exam again?

Six (6) Months

All of the following are pieces of information that make up an application, except: Address Name Social Security Number Birthdate

Social Security

The borrower applies for a loan and asks about the impact the loan could have on their taxes. Which of the following should be told to the borrower by the MLO? Origination fees are tax deductible. Get tax advice from a trusted friend. Speak with a tax advisor for tax deductibility. Mortgage interest is tax deductible.

Speak with a tax advisor for tax deductibility. MLO's are not tax professionals and cannot give tax advice. If a borrower asks a tax related question, then the MLO should refer them to a tax professional.

If an MLO or real estate agent suggests to a client that he move to a particular area to reside in a community that he will fit into, what would that mortgage loan originator or real estate agent be guilty of? Blockbusting Flipping Redlining Steering

Steering

The borrower knows that he has derogatory credit. He convinces his brother who has better credit and income to apply. The brother of the borrower is considered a(n): Identity thief Investor Mortgage rescuer Straw buyer

Straw buyer Straw buyers are individuals used by fraudsters to obtain mortgages. The straw buyer's personal information is used to obtain a mortgage loan fraudulently. The fraudster compensates the straw buyer for the use of their information.

Which of the following would be considered in the borrower's back-end DTI? Student loan payments and car payments Life insurance premiums and credit card payments Gym Membership dues and monthly cell phone bill Utility payments and monthly health insurance payments

Student loan payments and car payments

An alternative documentation loan is a type of: Subprime loan Reverse mortgage Adjustable rate loan Seller financing

Subprime loan

MLOs are required to be covered by a: Payment Bond Surety Bond Performance Bond Statutory Bonds

Surety Bond A surety bond is like malpractice insurance; it protects the consumers from any wrongdoing by a licensee. MLOs are generally covered by their sponsoring entities' surety bonds.

TRUE OR FALSE: An adverse action notice must be sent within 90 days if the lender is making a counteroffer.

T

Underwriters calculate overtime income for a loan by: Using a year-to-date average of the overtime income. Taking a one year average of the overtime income. Taking a two year average of the overtime income. Never allowing overtime income.

Taking a two year average of the overtime income.

Cash Out Refinance -

Taking equity from the loan.

MLOs are prohibited from which of the following? Asking an appraiser to consider other comparable properties Obtaining multiple appraisals on a property Telling an appraiser a minimum value needed to approve the loan Withholding fees from appraisers for substandard performance

Telling an appraiser a minimum value needed to approve the loan

If two people are married, how do they likely hold title? Tenancy by the Entirety Joint Tenancy Tenancy in Common Ownership in severalty

Tenancy by the Entirety 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.

Which of the following is not a requirement under HOEPA? Housing counseling on high-cost home loans Full appraisals on high-cost home loans Escrows for at least the first 5 years on high-cost home loans The APR must be disclosed on all advertisements

The APR must be disclosed on all advertisements HOEPA requires additional and specific disclosure requirements, restricts terms on transactions, restricts fees and practices, adds additional ability to repay requirements. HOEPA requires pre-loan counseling for all high-cost home loans, full appraisals and escrows for the first five (5) years.

Who receives the YSP? The Broker The Lender The Borrower

The Broker YSPs are paid to the broker for giving a borrower a higher interest rate on a loan in exchange for lower up-front costs generally paid in origination fees, broker fees or discount points A yield spread premium (YSP) is additional compensation paid to a mortgage broker as compensation for placing a higher-interest loan with a borrower.

The responsibility of financial institutions to meet both the deposit and credit needs of the community, including the needs of low-income families, is called?

The Community Reinvestment Act (CRA), enacted in 1977, requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods.

Which of the following is not considered a Federal Banking Agency? The Consumer Financial Protection Bureau The Director of the Office of Thrift Supervision The National Credit Union Administration The Federal Deposit Insurance Corporation

The Consumer Financial Protection Bureau The CFPB is a federal regulatory authority not a federal banking agency.

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 Consumer Handbook on Adjustable Rate Mortgages The Closing Disclosures The Goodbye Letter

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.

You and the borrower believe an Adjustable Rate Mortgage would be best for the borrower. What is the name of the booklet you are required to give?

The Consumer Handbook on Adjustable-Rate Mortgages (CHARM Booklet) is a required disclosure per TILA on all adjustable-rate mortgages (regardless of whether they are a purchase or a refinance). This document is also required to be disclosed by the lender within three (3) business days of application.

Which rule dictates how instructions are required to dispose of consumer's information?

The Disposal Rule under FACTA dictates how lenders should dispose of consumer information, this includes a requirement for lenders to come up with reasonable measures to protect against unauthorized access. The Disposal Rule is why you are required to shred documents!

What law was created to protect a borrower's NPI? The US Patriot Act The Gramm-Leach-Bliley Act The HPA BSA/AML

The Gramm-Leach-Bliley Act GLBA restricts the disclosure of non-public personal information (NPI).

Holly is purchasing her very first home, what disclosure must the MLO ensure goes out within three days of application? The Home Loan Toolkit The Consumer Handbook on Adjustable Rate Mortgages The Closing Disclosures The Goodbye Letter

The Home Loan Toolkit Per TRID, the Home Loan Toolkit must be disclosed on all purchased within 3 business days of application.

An MLO is working on disclosing a borrower's Loan Estimate, which of the following is true: The MLO can collect an application fee before disclosing that LE The MLO can only collect a credit report fee before disclosing that LE The MLO can collect an application fee and appraisal fee before disclosing the LE The MLO cannot collect any fee before disclosing the LE

The MLO can only collect a credit report fee before disclosing that LE Lenders are not allowed to impose any fee to the borrower for a mortgage transaction until the borrower has received the LE, and they have indicated an intent to proceed with the transaction. The only exception to the rule is for a bona-fide and reasonable fee for obtaining a consumer's credit report.

What rule made it illegal to charge upfront fees and requires disclosures in ads for mortgage assistance relief providers?

The Mortgage Assistance Relief Services Rule or the MARs Rule made it illegal to charge upfront fees and requires specific disclosures in ads for mortgage assistance relief providers. These rules protect distressed borrowers from foreclosure rescue schemes.

All advertising of a Mortgage Loan Originator must include which of the following? A photograph of the Mortgage Loan Originator The Mortgage Loan Originator's unique identifier Types of loans the Mortgage Loan Originator makes A disclaimer from the NMLS

The Mortgage Loan Originator's unique identifier

After meeting with the borrowers to complete a loan application, you return to your office and order a Tri-Merged credit report. Now that you have a credit report, what Loan Disclosure must you now prepare and mail (or give) to them?

The Notice to Home Loan Applicant is required under FACTA and must provide information like the consumer's credit score, the range of possible credit scores, any factors that adversely affected the score (up to 4 key factors), the date the score was received and the name of the company that provided the report.

What are two of the most important documents that the borrower signs at settlement? Error and Omissions and the Loan Note The Loan Note and First Payment Letter The Mortgage and Right of Rescission The Promissory Note and the Deed of Trust or mortgage

The Promissory Note and the Deed of Trust or mortgage A note or promissory note is a written, legally binding promise to repay a debt. The note creates the debt, and the mortgage secures the payment. When the property is foreclosed on, the lender is foreclosing on the note. The mortgage or deed of trust is the security instrument that the borrower gives to the lender that protects the lender's interest in the property. When the borrower signs the mortgage or deed of trust, they are giving the lender the right to take the property by foreclosure if they fail to pay their mortgage properly.

All of the following changes are because of The Dodd-Frank Wall Street Reform and Consumer Protection Act except? The Consumer Financial Protection Bureau (CFPB) The Ability to Repay Rule (ATR) The Red Flag Rule (RFR) The Qualified Mortgage Rule (QM)

The Red Flag Rule (RFR) The Red Flags Rule is rule under FACTA and was not mandated by Dodd-Frank.

Which of the following is NOT calculated into the APR? Fixed interest rate Lender's origination fee Realtor's commission Discount points

The realtor's commission is paid by the seller and not the borrower. It is also not financed into the loan so it would not be calculated into the APR like the interest rate, origination fee and any discount points.

The SAFE Act is designed to do all of the following except: Reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators. Establish and maintain a nationwide mortgage licensing system and registry Reduce fraud by creating an enforcement agency that prosecutes unethical activity Provide consumers with easily accessible information, offered at no charge, through electronic media, including the Internet

The SAFE Act implemented the NMLS and standardized minimum requirements for licensure for MLOs over all 50 states. This would help increase the integrity of the industry as a whole, enhance consumer protection and reduce fraud by limiting who can and cannot be an MLO.

How many hours of annual continuing education are required by the SAFE Act for state-licensed mortgage loan originators?

The SAFE Act requires 8 hours of state-specific continuing education yearly.

Early Payment Default -

The borrower does not make the 1st, 2nd, or possibly the third payment. This is most likely fraud.

Which of the following would be considered a red flag in an owner-occupied refinance loan? The borrower owns a second home further than 50 miles away. The borrower lives with his/her parents in the subject property. The borrower owns another home in the same neighborhood. The borrower resides in a home in the same neighborhood as 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.

If fraud is discovered by the servicer, what is LEAST likely to occur? The borrower will experience a rate increase A buyback by the originating lender Calling the note due The originating lender returns any premium fees

The borrower will experience a rate increase

The borrower's gross monthly income is $5,000. The new mortgage loan will reduce his monthly payment to only $1,000 per month. The borrower will still owe a car payment of $350 and a student loan payment of $250. The borrower also has a cell phone bill of $90 per month. What is the borrower's new Housing Ratio?

The borrower's housing ratio is $1,000 divided by $5,000 which is 20%. The car payment and student loan payment would be considered in the back-end DTI but not the front-end/housing ratio. The cell phone bill would never be counted in either.

Which of the following is an acceptable source of funds for reserves: Personal credit card The cash value of a vested life insurance policy Cash proceeds from a cash-out refi on subject property Stock held in an unlisted corporation

The cash value of a vested life insurance policy

What is the best way to explain APR to borrowers? Yield spread premium or service release premium plus all closing costs Yield spread premium or service release premium plus the interest rate Interest rate plus all closing costs and prepaids The cost of the loan over the life of the loan expressed as a rate

The cost of the loan over the life of the loan expressed as a rate It is not the interest rate! It is the cost of credit expressed as a rate. In this scenario, the costs of the loan make up 4.274 percent of what the borrower will pay over the loan term.

Josh, an MLO, is working with Javier. Josh knows that HOEPA requires a specific disclosure on all federally related transactions, what is not true about that disclosure? The disclosure is a list of housing counselors The disclosure must be sent within 3 business days of application The disclosure must be sent 3 days prior to consummation The disclosure must include 10 housing counselors

The disclosure must be sent 3 days prior to consummation HOEPA requires that all federally-related loan applicants receive a list of housing counselors. The list of housing counselors must be sent three (3) business days after receiving the application.

Which of the following is true concerning Service Release Premium (SRP)? Loan term is a factor of the SRP Type of loan does not affect the SRP The interest rate is a factor of the SRP There is no such thing as SRP

The interest rate is a factor of the SRP The amount of SRP is generally based on the market value of the mortgage note, influenced by several key variables, such as interest rate, loan type, margin (for ARM loans). Also considered are factors such as the loan's LTV (loan to value), the borrower's credit score, the presence of private mortgage insurance (PMI), pre-payment risk of the borrower and other factors.

Which of the following is not true about HOEPA? It makes recommending default on a high-cost transaction illegal It makes charging fees for a payoff statement prohibited It prohibits negative amortization on high-cost home loans The late fee on a high-cost home loan cannot exceed 3%

The late fee on a high-cost home loan cannot exceed 3% Under HOEPA, late fees cannot exceed 4% of the past due payment and it prohibits the pyramiding of late fees.

Homeowners policy -

The lender cannot require the policy for more than the mortgage, but the borrower can get as much as they want.

There are two exceptions when dealing with an adverse action notice, what happens if the lender provides a counteroffer and the applicant does not accept it? The lender has 90 days to provide the adverse action notice The lender does not have notify the applicant of the adverse action notice The lender has 60 days to provide the adverse action notice The lender is required to provide a second counteroffer

The lender has 90 days to provide the adverse action notice The lender must notify an applicant of adverse action within ninety (90) days after making a counteroffer, unless the applicant accepts or uses the credit during that time. The lender may not have to notify the applicant of adverse action if the application was incomplete, and the lender sent the applicant notice that the application was incomplete.

On an FHA annually adjusting ARM, assume that the starting rate was 5%; the margin is 2.5%; the index in 6 months is 3%; the index in 12 months is 3.5%; the index in 18 months is 3.25%. What is the borrower's interest rate in 18 months?

The margin plus the index as 12 months is 6%. There is additional superfluous information in this question. The loan adjusts annually so you only need the index at 12 months.

Annie is purchasing a new home and the seller is willing to do some concessions. Annie is getting an FHA loan; how much can the seller concede?

The maximum amount of seller concessions on an FHA loan is 6%. Seller concessions are closing costs that the seller has agreed to pay.

The State Regulatory Authority may impose penalties for each violation up to, and not exceeding:

The maximum penalty under the SAFE Act is $25,000.

Depreciation

The monetary value of an asset decreases over time due to use, wear and tear or obsolescence

During the term of a fully amortized loan which of the following is true? The monthly amount going to principle increases The monthly amount going to interest increases The monthly payment amount going to principal decreases The principal balance increases

The monthly amount going to principle increases Through the course of amortization, the amount of a borrower's payment that goes to principal increases while the amount that goes to interest decreases.

What is the note rate for a $150,000 loan with a 2/1 buy down when the borrowers start with a payment rate of 4% for 12 months; then 5% for another 12 months; then 6% for the rest of the payment term?

The note rate is the interest rate after the buydown which in this situation is 6%.

When a self-employed borrower is a 25% owner of his business, which of the following documents is required? The past two years balance sheets The past two years tax returns The past two years profit and loss statements Articles of incorporation

The past two years tax returns 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.

Who determines continuing education requirements and dates for license renewal?

The state Regulatory Authority as established under the SAFE Act Each state has the authority to add to the requirements under the SAFE Act. They cannot have requirements that are less than what's required under the SAFE Act.

Difference between deed and title

The title to a house is a legal concept that establishes your ownership of the property and gives you certain rights to it. The deed is a legal document that transfers ownership of a property from a seller to a buye

Which of the following is true about General QMs? They can be longer than 30 years They must be fully amortizing They can include interest only payments They can negatively amortize

They must be fully amortizing

▪ Wire Fraud -

This is an ever-increasing fraud where the borrower receives a request for funds to be wired to someone that is not connected to the transaction. It's crucial to tell the borrower not to wire funds without asking you or the title company if the request is real.

Lenders are required to provide a closing disclosure at least _____ business days prior to the consummation of the loan.

Three

What are the terms of the "cooling off" period if a loan falls under HOEPA? Three business days prior to closing Three business days after closing Seven business days prior to closing 30 business days after closing

Three business days prior to closing HOEPA includes a three-day "cooling off" period between the time the borrowers are furnished with disclosures and the time that they are obligated under the terms of the loan.

Trevor provided all six pieces of an application to his MLO on Monday, by what day does the MLO have to provide the LE?

Thursday Per TRID, the lender is required to provide the LE within three (3) business days following the receipt of the borrower's loan application.

A person was purchasing an income property which was scheduled to close and fund on June 25th. Rent of $1800 was paid for the month of June on the 1st. What was the buyer's proration amount?

To determine prorated rent you take the amount of rent divide it by the number of days in the month and multiple by the days the rent is prorated. In this case, $1800 divided by 30 (June has 30 days) multiple by 6 days = $360.

A history showing the title changes regarding a property is required by an underwriter for what purpose?

To give a chronological record of all liens A title report will show a chain of title, this chain of title will show how often a property has been sold or transferred. This chain of title can show potential illegal property flipping. Illegal property flipping occurs when the property is purchased and resold quickly at an artificially inflated price by utilizing fraudulently inflated appraisals.

Which of the following is a purpose for the Mortgage Servicing Disclosure Statement? To disclose the percentages of loans this lender has serviced in the last 3 years To inform the borrowers that they have certain rights under the law To inform the borrower that the servicing of the mortgage may be or has been transferred To inform the borrower the percentages of servicing that has been sold, assigned or transferred

To inform the borrower that the servicing of the mortgage may be or has been transferred

Which of the following statements best describes Form 1008? FHA loan application FNMA/FHLMC loan application Transmittal summary Underwriter request for more information

Transmittal summary The Uniform Underwriting and Transmittal Summary Form 1008 summarizes key data from the loan application package. Lenders use this information in reaching the underwriting decision. Form 1008 (or a similar document) must be retained in the mortgage file for manually underwritten mortgage loans. Lenders may, but are not required to, retain Form 1008 for loans underwritten with DU.

TRUE OR FALSE. As a consumer the best person to work with is an MLO who has referred by a past client, family, or a friend.

True

TRUE OR FALSE: Borrowers must complete Section 1D if they have not been at their current job for at least two years.

True

TRUE OR FALSE: Churning loans refers to the repeated refinancing of loans that have no benefits to the borrower.

True

TRUE OR FALSE: It is not a RESPA violation to provide coffee and content for training and new laws.

True

TRUE OR FALSE: The income approach is used to appraise an investment or multi-unit property.

True

Calculating Income Bonuses -

Two-year history and the company has to indicate if it will continue. Bonus was $10,000 two years ago and $4,000 last year, you use $4,000. Bonus was $4,000 two years ago and $10,000 last year, you use $7,000; average of the two.

Which form is used most frequently for residential appraisals? HVCC URAR USPAP 1025

URAR URAR stands for Uniform Residential Appraisal Report (Form 1004).

Which form is used most frequently for residential appraisals? HVCC URAR USPAP 1025

URAR URAR stands for Uniform Residential Appraisal Report (Form 1004).

USDA loan:

US department of Agriculture loan Available in rural less than 35000 people No down payment Lower interest rate 30-year loan To low income Initial guarantee fee is 1% Monthly guarantee fee is 3.5% To qualify for USDA the income should not be higher than 115% of the median salary

Requires a garantee fee

USDA loans

What is a Preferred Provider List?

Under Regulation H it shows all the preferred third -party companies, such as title, inspection companies, appraisal, and credit reporting agencies. Not all are the borrower's options, such as the appraisal and credit report; those are the lender's choice.

Who of the following would be an appropriate person to discuss the borrower's credit with to determine whether they qualify for the proposed loan or not?

Underwriter

Who reviews all the loan documents, verifications, and gives final approval or disapproval to a loan?

Underwriter

Undisclosed Real Estate Debt

Undisclosed real estate debt fraud occurs when a loan applicant intentionally fails to disclose additional real estate debt or past foreclosures

What is the maximum penalty for providing false information on a federally related loan?

Up to $1,000,000 fine and jail time The Fraud Enforcement and Recovery Act of 2009 (FERA) implemented additional more stringent penalties to combat mortgage fraud including an increase penalty for providing false information on a federally related loan. The fine is up to $1,000,000 and the perpetrator can also face jail time.

Premium pricing -

Used to help the borrower pay their closing costs. The premium results from the interest rate being increased.

Which of the following would be considered unethical? Using Social Security number of a client Using the identity of a prior borrower to obtain a loan for a borrower unable to qualify on their own Using the borrower's current occupancy of the property Using employment history of a client

Using the identity of a prior borrower to obtain a loan for a borrower unable to qualify on their own

If a mortgage loan originator (MLO) originates a loan while his license is suspended or revoked, the loan is: Closed, nothing needs to be done Fraudulent and will need to be immediately repaid Valid but the MLO violated the law Void and will need to be rewritten

Valid but the MLO violated the law

How much money is required for fire insurance on a refinance at settlement? 14 months 1 year 2 months Whatever is needed to renew coverage when the insurance expires

Whatever is needed to renew coverage when the insurance expires

In which of the following situations would an MLO license be required? When an individual performs real estate brokerage activities When an individual is solely involved in the extension of credit for time shares When an individual is engaged solely as a loan processor or underwriter When an individual offers or negotiates the terms of a residential mortgage loan

When an individual offers or negotiates the terms of a residential mortgage loan

According to the Fair and Accurate Credit Transactions Act, when is a borrower entitled to get a copy of their credit score? Four times a year When the borrower has applied for a loan and had his/her credit reviewed When the borrower is on public assistance A borrower has no right to a free copy of their credit score.

When the borrower has applied for a loan and had his/her credit reviewed FACTA states that "any person who makes or arranges loans" and uses consumer credit scores must follow specific disclosure guidelines. FCRA applies to loan applications completed by a consumer for a closed-end or an open-end loan that is secured by a 1-4 family unit dwelling. This disclosure includes the borrower's credit scores.

When is a loan officer authorized to refuse to accept a loan application?

When the information supplied by the applicant appears fraudulent

When the mortgage loan amount is at 78% LTV or less of the purchase price of the home, private mortgage insurance: Will be cancelled upon written request of the borrower Will be cancelled automatically by the title company Will be cancelled automatically by the lender Will be required for the life of the loan

Will be cancelled automatically by the lender

Redlining -

You cannot refuse to take an application, no matter the location of the property.

▪ Steering -

You cannot steer the borrower to live in a certain area or force them to take a specific program.

What are the three Tolerance categories on the LE:

Zero tolerance - If you quote a number and it is incorrect, you or the company will pay the shortage. 10% tolerance/title insurance and recording fees - If you misquote, you are responsible for any amount over 10% of the error. ▪ If the borrower selects their own third -party company, you have no liability. No Tolerance - Any fee selected by the borrower, including Realtor fees, Attorney fees , Homeowners Insurance, and escrows.

All fees on the Loan Estimate fall into three (3) categories, these are? Zero, 10% Cumulative and No Tolerance Zero, 10% and Unlimited tolerance Zero, 3% and 10% tolerance 10%, 10% and Zero tolerances

Zero, 10% Cumulative and No Tolerance There are three fee tolerance, zero, 10% cumulative and no-tolerance.

VA loan

a $0-down mortgage option issued by private lenders and partially backed, or guaranteed, by the Department of Veterans Affairs (VA). Just for primary residence. entitlement is the amount that VA can avoid paying. Do Not have mortgage insurance but have funding fees. VA Interest Rate Reduction Refinance Loan VA IRRRL, 0.5% funding fee for everyone. Not require an appraisal or a credit underwriting package Down payment is determined by obtaining the DD214 from the veteran, which tells you they have benefits. The information is loaded into the VA website and then a Certificate of Entitlement or Eligibility (COE) is issued. The higher the benefits, the higher the loan-tovalue. Maximum Loan-to-Value is 100%. The maximum guarantee authorized by the VA is 25 percent of the loan amount, up to $113,275. The maximum VA home loan is Fannie or Freddie loan limits. Overall ratio is 41%

A default on a home loan occurs when

a borrower stops making the required payments on a debt.

Consummation is the date that

a consumer becomes contractually obligated to the creditor on the loan (i.e., the day they sign the note).

A settlement statement is

a document summarizing all costs owed by or credits due to the homebuyer and seller (or borrower if refinancing).

Mortgage default occurs when

a homeowner fails to uphold the agreed-upon terms defined in their promissory note or deed of trust they signed when taking out their mortgage.

A balloon payment is

a larger-than-usual one-time payment at the end of the loan term. If you have a mortgage with a balloon payment, your payments may be lower in the years before the balloon payment comes due, but you could owe a big amount at the end of the loan. Balloon mortgages are home loans with a large, one-time payment due at the end of the mortgage term. The final payment repays the loan in full and is often significantly larger than the initial payments. (have a higher interest rate) (or band aid loan). Like 30/5 loan: it means it is a 30 years but the ballon payment due is after five years

A lien is

a legal right that gives an individual or entity a claim to a collateral property until the outstanding debt is paid off.

Equity Stripping is when

a lender is after the equity in the borrower's home.

A discount point is best described as a charge that the borrower pays to:

a lender to decrease the interest rate on a mortgage loan.

lump-sum payment

an amount paid all at once, as opposed to an amount that is divvied up and paid in installments.

Comparative evidence of Disparate Treatment occurs when

a protected class applicant is treated less favorably than other applicants, it is often not intentional, though it could be.

Blockbusting occurs when

a real estate agent or buyer persuades an owner to sell their property at a deflated amount, based on the notion that other houses in the neighborhood are being acquired by individuals from another race or class.

Credit insurance packing is

a scheme that occurs when a lender sneaks in paperwork at closing that provides credit insurance the borrower did not request.

What Is an Adverse Action? In finance, the term "adverse action" refers to

a type of notice given by a lender when a borrower's credit application has been denied.

Table funding - Any loan that is funded by

a wholesale lender for a mortgage broker (brokers cannot underwrite or fund loans).

Private Mortgage Insurance is required on conforming 1st mortgage loans when the Loan-To-Value is:

above 80%.

What is the name for a loan that has a straw or non-existent buyer, or a non-existent property?

air loan

debt-to-income ratio (DTI)

all your monthly debt payments divided by your gross monthly income.

An Affiliated Business Disclosure is required if

an MLO is licensed as a Realtor and Loan Officer or if they or their family own as little as 1% of a third -party company

An escrow cushion is

an extra amount above your mortgage payments that your lender or servicer is allowed to collect and hold.

Kickback in the context of real estate transaction refers to

an illegal payment intended as a compensation for referral for real estate settlement services.

All of the following are required to be licensed except: any Mortgage Lender making less than five mortgage loans within any 12 consecutive months. any person who acts as a Mortgage Broker less than 5 times within any 2 consecutive months. an independent contractors who engage in loan origination activities as a loan processor or underwriter. an individual negotiating a residential mortgage loan with or on behalf of an immediate family member.

an individual negotiating a residential mortgage loan with or on behalf of an immediate family member.

A wholesale mortgage lender is

an institution that funds mortgages and offers them to third parties, such as a bank, credit union, mortgage broker or independent mortgage company or professional.

Referral is

anything of value being given or received from a third - party company, Realtor, or Builder.

Kickbacks

are not allowed in receiving or paying on any transaction.

Mortgagor:

borrower(customer)

The right of rescission provided under Regulation Z is the right to: pay discount points. cancel a refinance transaction. receive a refund of unpaid mortgage insurance premiums.

cancel a refinance transaction. If a borrower uses their right to rescind, the transaction is cancelled. The creditor is required to return any money or property or take any action that shows the transaction was canceled within twenty (20) calendar days after the borrower remits a rescission notice.

Seller concessions are

closing costs that the seller has agreed to pay.

Regulatory authorities have the authority to 1) investigate, 2) impose penalties, 3) provide supervision, 4) combination of all three.

combination of all three.

A loan originator who applies to be licensed again must: receive a new unique identifier. complete the Continuing Education requirements for the last year in which the license was held. write a letter to the Regulatory Authority requesting a new license. None of the above.

complete the Continuing Education requirements for the last year in which the license was held. It is required under the SAFE Act if a licensee becomes unlicensed, they must prove they completed their continuing education requirements for the last year in which they did hold a valid license before applying for a new or renewed license.

Restrictive Covenants (Deed Restrictions)

covenants that impose restrictions on land use; created at conveyance of land to a new owner

The borrower uses his home's equity for a mortgage loan for business purposes. The borrower will use $80,000 to buy restaurant equipment. This loan will be: exempt from RESPA because it is a business purpose loan. covered by RESPA, as the collateral is a mortgage on the borrower. covered by RESPA because it is to an individual no matter the purpose of the loan. exempt from RESPA because restaurant equipment loans are not federally related.

covered by RESPA, as the collateral is a mortgage on the borrower. Generally, RESPA does not cover commercial or business loans but because the collateral in this situation is a home then it would be covered by RESPA.

Your borrower has a joint-asset account with another person. Most of the money in the account belongs to the non-borrower. The lender requires two months of bank statements. Under this circumstance, the documentation needed by the lender requires you to:

disclose and document deposits for the borrower and non-borrower.

Application fraud occurs when

information on the credit report and application do not match, such as the name, Social Security number, residency, and work history.

Assuming there has been no fraud or adverse action, a borrower is entitled to a free copy of his/her credit report:

every year

Comparative analysis is a method used by

examiners to compare protected class applicants with control group applicants.

TRUE OR FALSE: Lenders must use the Equal Housing Opportunity Logo. truefalse

false

If a loan originator is in a face-to-face loan interview with the applicant, and the applicant does not wish to answer the questions in Section 8 on the 1003, the loan officer must:

fill out the information based on visual observation. HMDA requires that if an MLO is doing a face-to-face interview and the applicant does not wish to answer the demographic questions on the 1003 that the MLO fill in the information based on their own visual observation.

The Final LE must be received by the borrower no less than X business days before closing.

four

You interview a customer and collect all the information needed to fill out the 1003 and run credit. Before running credit, you specifically ask the client if it is okay to run their credit, and they consent. You should now: .

have the customer sign a Borrower's Authorization form and then pull credit.

subprime borrowers were defined as

having FICO scores below 600, although this threshold has varied over time.

An institution is subject to HMDA Reg C

if it originated at least 25 closed end mortgage loans in each of the proceeding two calendar years.

You have completed the necessary Pre-licensure education, testing, and application requirements to obtain your mortgage license. You have been hired by a brokerage and expect your background check to clear shortly. You have a friend who is eager to proceed with a loan application and your manager at the brokerage has said that you can start the file under his/her name, then switch it back to your name once your license arrives. This action is: illegal and unethical. legal but unethical. illegal but ethical. legal and ethical.

illegal and unethical This is considered unlicensed activity and is prohibited under the SAFE Act. Not only would you be in trouble, but your manager would also be considered to be aiding and abetting your unlicensed activity.

You are working with a customer who has disclosed they have new payment obligations that do not appear on their credit report. You realize that your customer qualifies for a loan based on figures calculated using only payment obligations reported on their credit. In order to ensure your client qualifies, you decide to exclude the payment obligations that do not appear on the credit report. This action is: legal and ethical. legal but unethical. illegal and unethical. illegal but ethical

illegal and unethical.

credit insurance

is a policy of insurance purchased by a borrower to protect their lender from loss that may result from the borrower's insolvency, disability, death, or unemployment. The policy pays off the loan in the event the borrower dies.

A jumbo loan

is a type of financing that exceeds the limits set by the Federal Housing Finance Agency and cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. Homeowners must undergo more rigorous credit requirements than those applying for a conventional loan.

A graduated payment mortgage (GPM)

is a type of fixed-rate mortgage with an amortization schedule that provides lower payments early on that then gradually increase over time. The purpose of a GPM is to allow homeowners to start off with lower monthly mortgage payments to help certain people qualify for their loans.

Evasion

is a violation of law, a cutting of corners or an illegal hurdling of legal barriers, and constitutes a wrongful or illegal act.

A triggering term

is a word or phrase that legally requires one or more disclosures when used in advertising.

Mortgage discrimination or mortgage lending discrimination

is the practice of banks, governments or other lending institutions denying loans to one or more groups of people primarily on the basis of race, ethnic origin, sex or religion.

"Steering"

is the practice of influencing a borrower about the loan which benefits for MLO

On a Federal Residential Loan Application: You initially disclose a rate of 5% to the customer but are floating the rate. Over the next few days, rates improve and you have the option to lock the customer in at a rate of 4.75% and earn the same compensation. This behavior would be considered:

legal and ethical

Considering the legislation of the Secure and Fair Enforcement Act (S.A.F.E. Act) of 2008, originating a loan for a family member or other blood relation is considered: legal and ethical. legal but unethical. illegal and unethical. illegal but ethical

legal and ethical.

A potential client is shopping around for a competitive rate and a 15-day lead time to close. The brokerage you work for offers highly competitive rates, has an average lead to close time of 30 days, and a fast lead to close time of 21 days. Understanding these figures, you tell the client you can meet their demands and secure their business. This action is:

legal but unethical.

You have been working with a client for the past six months who has finally been approved by the lender and is ready to close. Two days before closing, interest rates drop and you explain to your customer that you are unable to go with a different lender at the better rate because of the standing commitment to the current lender. You also inform your client that breaking a rate with a lender is very damaging to the broker-lender relationship. After explaining the situation, your client still chooses to back out of the loan and go with a different loan officer. Your client's action in this situation is: illegal and unethical. legal but unethical. illegal but ethical. legal and ethical.

legal but unethical. The borrower can legally back out anytime for any reason, but the actions of the borrower in this situation might be considered unethical.

Mortgagee

lender

Title Insurance guarantees to the lender and the borrower that there are no

liens or encumbrances against the property prior to the funding.

The GLBA and Red Flags Rule

look to prevent and detect identity theft.

Section 8 of RESPA says that

no one may receive compensation for referring a potential borrower to a mortgage company or servicer on a federally regulated mortgage loan.

All of the following are grounds for the Regulatory Authority to revoke a license except: material misstatements in an application. conviction of any crime of moral turpitude. failure to account for funds received or disbursed. not completing Continuing Education before Dec 31st.

not completing Continuing Education before Dec 31st.

breakeven point

number of years the borrower benefit of discount point

FHA loan is 65% of the national conforming loan limit

of 647,200$ which is 420,680$.

Definition of childbearing:

of or relating to the process of conceiving, being pregnant with, and giving birth to children women of childbearing age.

FACTA includes the Disposal Rule which

outlines specific requirements for handling the disposal of a borrower's personal information

It is unethical to

overpromise just to secure a loan. If you can't meet the demand of the client, don't tell the borrower you can.

LTV (Loan to Value)

percentage- ratio of loan/smaller of sale price or appraised value- in conventional LTV=80%

A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their home's equity is engaging in: home equity lending. predatory lending. negative amortization lending. equity lending.

predatory 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.

You just closed a loan with a customer and would like to take them out to dinner to celebrate their new home purchase. Midway through the meal, you realize paying for your clients' meals may be considered a violation of RESPA. You should:

proceed; it is ok to for you to pay for their meals.

The purpose of Fannie Mae and Freddie Mac is to: make all loans. insure all loans. reinsure or guarantee just FHA and VA loans. provide a source of funds to the primary market mortgage lenders.

provide a source of funds to the primary market mortgage lenders. Fannie and Freddie were created to add liquidity to the market.

According to the Fair Credit Reporting Act if adverse action is taken against a prospective borrower because of information on a credit report, the lender who used that report is required to: dispute the decision in writing for the customer. provide the agency contact information required for the consumer to obtain a free copy of the credit report used. recommend credit counseling to the borrower. review the credit report with the borrower for inaccuracies.

provide the agency contact information required for the consumer to obtain a free copy of the credit report used. FCRA requires an adverse action disclosure be provided to the borrower if their credit is the reasoning for all or part of the decision to deny the loan application. The disclosure must include what credit reporting agency provided the credit information, disclose that the credit reporting agency is not responsible for the denial of the loan, disclose that the credit reporting agency will provide a free copy of the exact report used (you as an MLO cannot do this as you are not a credit reporting agency - MLOs can tell their borrower their scores), and this disclosure must be given within 30 days of a credit decision (remember - according to ECOA, a decision must be made on an application within 30 days of application).

The purpose of a Market Conditions Addendum is to: replace the need for a full appraisal. reveal prior marketing efforts by any realtor. provide the lender with an understanding of the market trends and conditions in the subject property. provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.

provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The Market Conditions Addendum (Form 1004MC) is designed to enhance the transparency of the market trends and conditions conclusions made by the appraiser.

An assumable mortgage

provides a buyer the opportunity to purchase a home by taking over the seller's mortgage loan. One reason buyers decide to buy a home with an assumable mortgage is to take advantage of financing with a lower interest rate if rates have risen since the seller originally purchased the home.

You are working on a file referred to you by a realtor. The realtor calls you to see if there is going to be any problem getting the customer qualified. The realtor wants to know what the borrower's credit scores are before presenting the offer. The most appropriate course of action is: obtain permission from the borrower to disclose the information. never disclose a borrower's information to a realtor. tell the realtor the credit score. refer the realtor to the borrower.

refer the realtor to the borrower.

Affinity fraud

refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.

HOEPA - Home Ownership and Equity Protection Act

restricts encouraging a default on a current loan that is going to be refinanced.

The Homeowners Protection Act states that when a loan-to-value falls below 78% PMI is to be:

terminated

A mortgage underwriter is the person

that approves or denies your loan application.

A red flag is activity

that indicates that there might be fraud or identity theft occurring.

A triggering term is a word or phrase

that legally requires one or more disclosures when used in advertising.

▪ You must consider Public Assistance, but you only have to count it if

the assistance meets program requirements for income.

One of the acknowledgments in the signature section of the 1003 loan application, signifies that: both the MLO and the borrower acknowledge that the borrower has received all appropriate disclosures. the borrower commits to the repayment of the loan if granted. the borrower represents that all information contained in the form is the truth. the MLO has properly explained all blanks on the 1003 loan application.

the borrower represents that all information contained in the form is the truth. The acknowledgement states: Each of the undersigned hereby acknowledges that any owner of the Loan, its servicers, successors and assigns, may verify or reverify any information contained in this application or obtain any information or data relating to the Loan, for any legitimate business purpose through any source, including a source named in this application or a consumer reporting agency.

disbursement date

the date that Direct Loan funds are made available to the borrower

home's equity is

the difference between how much your home is worth and how much you owe on your mortgage.

The closing agent is responsible for

the figures approved by the lender and explaining all of the documents to the borrower.

When a loan has a safe harbor it means that

the lender complied with ATR and QM regulations.

Your customer owns several rental properties, one-third of which have a Negative Net Lease. Therefore, you can conclude that:

the rents are equal to or less than the mortgage amount due each month. If your borrower has negative net lease it means the amount they get from the income they receive is equal to or less than the amount they have to pay on the mortgage for the investment property on a monthly basis.

mortgage compliance

the rules and regulations that control the mortgage process

chunking schemes

the sale of properties at artificially inflated prices

"Disposition" or "Dispose" means

the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction)

sales contract red flag

the sellers name should match the owners name on the title

Finished Space

the space must be heated, have finished walls, have a finished ceiling (no exposed floor joists), and have a finished floor (painted concrete does not count).

An MLO only has to take and pass the test once unless

they become unlicensed for 5 or more years. MLOs do have to take yearly continuing education, pay yearly renewal fees and maintain the same level of qualifications at renewal as they did at initial licensure.

If a mistake is made on the Right of Rescission, the rescission period extends to ? years.

three

Initial Loan Estimate (LE), Intent to Proceed, Loan Tool Kit, CHARM Booklet, Preferred Providers List, AFBA, and Homeownership Counseling Disclosure are to be delivered within X business days from signed application.

three

The Borrower is entitled to the disclosure of the costs of a mortgage loan through the Loan Estimate within ? business days of the loan application.

three TRID requires the Loan Estimate be provided within 3 business days of application. Remember PENCIL -once you have those six things, you have an application.

The initial CD must be received by the borrower at least

three business days before closing.

The length of the rescission period for a refinanced mortgage loan is: three business days including Saturday and excluding Sunday and holidays. three business days including Saturday and Sunday excluding holidays. five business days including Saturday and excluding Sunday and holidays. five business days, excluding legal public holidays

three business days including Saturday and excluding Sunday and holidays. The borrower must notify the creditor of their wish to rescind the loan before midnight on the third business day, including Saturday and excluding Sunday and holidays, after signing the loan documents, receiving the right to rescind notice or delivery of all disclosures (whichever comes last).

Any Changed Circumstance requested by the borrower or a Natural Disaster requires a new LE to be issued within

three business days of the change.

The APR includes all fees that are required in order to get the loan. Not included is: title Insurance. daily Interest charge. MIP or PMI. origination fee.

title Insurance

The purpose of the Suspicious Activity Report (SAR) is

to report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations of the Bank Secrecy Act (BSA).

Back End DTI Ratio

total debts/gross monthly income. <36%

Price gouging occurs

when a vendor takes advantage of a consumer by charging high prices, either through fraudulent acts or because the consumer has no available alternative.

Transaction Fraud Risk

when the nature of the transaction is misrepresented, such as undisclosed agreements between parties and falsified down payments.

Fraud Check: Power of Attorney (POA) refers to

who is given the right to use it and whether it is a limited or full POA. Any POA must be approved by your underwriter. (a legal document that gives individuals the power to act for another person on their behalf.)

Under FACTA consumers have the right to one free credit report every ________ from the credit reporting agencies.

year

Any person that does one of the following is required to be licensed: ▪ Takes or solicits loan applications ▪ Negotiates terms ▪ Expects compensation on the loan.

yes

It is okay to advertise for specific interest rates, points, or terms if: you have offered those terms in the past. your competitors offer similar rates, points, or terms. you currently offer the terms advertised. You have considered RESPA

you currently offer the terms advertised.

Sonya lives in a small rural community and is looking to purchase a new home. Her MLO has recommended a USDA loan. The purchase price of her new home is $167,000. How much does Sony have to put down to qualify for the USDA loan?

zero USDA loans allow for 100% financing, so Sony does not need to put down any money on this new loan.

2 nd Liens - You will see terms like 80/15/5 or 80/10/10

▪ 80 means the LTV on the first lien, thus no MI ▪ 15 or 10 = The amount of the 2nd mortgage ▪ 10 or 5 = The amount of the verified assets for down payment

Right of Rescission -

▪ Primary Residences only. ▪ Three business days from the closing date, not including the closing day. ▪ All borrowers and Owners are to receive a Right of Rescission notice. ▪ If the loan is rescinded, a full refund of all costs paid by the borrower must be refunded within 20 calendar days. If there is a mistake on the Right of Rescission disclosure, the rescission period extends to three years.

Three requirements the borrowers must fulfill to maintain a Reverse Mortgage (The borrower could lose their home if they don't do the following):

▪ The property must be their primary residence. They must maintain the property. ▪ Taxes and insurance must be paid by the borrower.