NMLS Practice Exam
Gregory's loan is $125,000. For it to be considered a qualified mortgage, the points and fees cannot exceed what amount? $6,250 $3,750 $10,000 $5,000
$3,750 - For a loan to be considered a qualified mortgage the points and fees on it cannot exceed 3%. 3% of $125,000 is $3,750.
What would be the minimum down payment on a VA loan of $150,000? $5,250 $0 $4,500 $7,500
$0 - VA loans require as little as 0 down on their loans. So the minimum down payment on this loan is 0.
Andrew has been paying interest-only payments on his mortgage of $500 a month for the past 10 years, the interest rate on the loan was 4%. At year 15, he will be required to pay a balloon payment. The principal balance at the time the loan closed was $172,000. What will be the balloon payment? $68,800 $172,000 $170,000 $103,200
$172,000 - only required to pay interest only.
A mortgage loan originator is required to keep a record of compliance with TILA for how many years? 7 years 5 years 3 years 2 years
2 years - Under TILA, it is required that lenders keep documentation that they have complied with TILA for 2 years. Other disclosures like the Closing Disclosure must be kept for 5 years.
When must the Home Loan Toolkit be provided to the borrower? 3 days after application At the time of application 3 days before closing 7 days after application
3 days after application - The Home Loan Toolkit must be provided 3 days after application on purchase transaction per the TILA-RESPA Integrated Disclosure Rule.
What is used to buy down a person's interest rate and costs 1% of the loan amount? A discount point Prime rate Par rate An origination point
A discount point is used to buy down a borrower's rate. The cost of a discount point is 1% of the loan amount.
Which of the following is a government sponsored entity? Ginnie Mae Fannie Mae
A government sponsored entity or GSE is an entity like Fannie Mae or Freddie Mac. Ginnie Mae is a wholly-owned government entity.
Which federal law was put into place to improve consumer's access to credit information? Gramm-Leach-Bliley FCRA Red Flags Rule FACTA
FACTA - The Fair and Accurate Credit Transaction Act specifically was put into place to allow consumers access to credit information, improve consumer access to credit information, help with the resolution of consumer disputes and help with the prevention and detection of identity theft. FACTA requires the "Notice to Home Loan Applicant" disclosure. This disclosure discloses the borrowers credit score to the borrower, score factors, ranges of scores, date score computed and is provided solely by the credit reporting agency.
The Red Flags Rule is part of what law? FCRA Gramm-Leach-Bliley Act The MAP Rule FACTA
FACTA - The Red Flags Rule falls under FACTA and is specifically in place to help detect and prevent identity theft by requiring lenders to have written policies in place to detect and prevent identity theft.
What type of mortgage requires upfront mortgage insurance and monthly mortgage insurance? FHA VA USDA Conventional
FHA
A Section 203K loan is a: A Fannie Mae program A VA program A reverse mortgage FHA program
FHA program - A Section 203K loan is an FHA rehabilitation mortgage used by homebuyers to purchase properties in need of rehabilitation.
What law prohibits loan originators compensation from being based on terms of a loan? Regulation X Ability to Repay Qualified Mortgage Loan Originator Compensation
Loan Originator Compensation - The Loan Originator Compensation Rule specifically prohibits mortgage loan originators compensation from being based upon any terms of a loan. The Rule was put in place to help to eliminate steering of customers into programs that are less or not at all beneficially for them financially just because that mortgage loan originator was paid higher on that specific product or on a specific term of that loan.
What is the name of the automatic underwriting system used by Freddie Mac? Desktop Underwriter Loan Prospector Loan Underwriter Direct Endorser
Loan Prospector is the automatic underwriting system (AUS) used to underwrite Freddie Mac loans.
What type of mortgage requires a funding fee? VA USDA Conventional FHA
VA - VA loans require a funding fee. USDA loans require guarantee fees. FHA loans require UFMIP and MMI and Conventional loans over 80% LTV requires PMI.
Hannah is purchasing a new property. The taxes on her new home are $1200 a year and the hazard insurance on her new home are $1400 a year. How much can the lender collect at closing to start Hannah's escrow account? $200 $217 $316 $432
$432 - RESPA allows for the lender to collect 2 months of escrow payments at closing to begin the process of building up the escrow account. In this situation, Hannah will pay $100 a month for her taxes and $116 a month for her hazard insurance. To determine 2 months, it would be $200 and $232 and add them together for a total of $432 for two months.
Liza is purchasing a new home. The purchase price of the home is $200,000. She has put down $2,000 in earnest money. If she is receiving FHA financing, how much more will she need for her down payment? $18,000 $4,000 $7,000 $5,000
$5,000 - FHA requires 3.5% down payment
Agatha wants to purchase two discount points, and there are two origination points on her loan. The sales price of the property is $150,000, and she is putting 10% down on the property. How much are the discount points and origination points going to cost her? $6,000 $5,400 $1,350 $1,500
$5,400.00
For an interest-only loan of $210,000 with an interest rate of 3%, what would the monthly interest payment be? $630 $360 $750 $525
$525 -To determine the answer to this question, first you need to know what 3% of $210,000 is. $210,000 x 3% = $6300. Now, that is what the borrower pays in interest in 1 year. To determine how much interest the borrower pays monthly, you would divide $6300 by 12 to get $525. So $525 of the borrower's payment will be interest.
What would be the minimum down payment on a FHA loan of $200,00? $20,000 $6,000 $7,000 $40,000
$7,000 - FHA loans require a minimum down payment of 3.5% so 3.5% of $200,000 is $7,000.
Reginald works a full-time job as a schoolteacher and makes $43,000 a year. He also has been working a part-time job for the last two years working 10 hours a week at $10.50 an hour. His wife, Julia, works as a medical assistant and makes $22.50 an hour and works 45 hours a week. What is their gross monthly income? $8,426 $7,207 $4,631 $3,762
$8,426
Jamie is looking to refinance his property. He currently owes $55,000 on a first mortgage and pays a 4% interest rate on it. He also owes $5,000 on a HELOC paying 6% interest on it. He wants to obtain some cash-out and is expecting to get at least $30,000. The appraisal came in at $200,000. He also has a tax lien of $1,200 on the property and $4,000 in credit card debt he'd also like to eliminate. He qualifies for an 80% LTV and the closing costs are going to be $3,000 on the new loan. How much cash will Jamie have available? $97,000 $91,800 $93,000 $95,800
$91,800 - $160,000(after 20%)-60,000(current mtg)-8,200(other costs)=$91,800
Allie is looking to purchase a new property. She currently makes $3,200 a month gross. What would be the maximum payment she could have on her new property? $2,308 $1,376 $2,208 $992
$992 - To determine the maximum amount that Allie can pay on her mortgage, all you need to determine is her housing debt to income ratio, since Allie does not have any debts, she'll need to fit into the smallest ratio. 31% of $3,200 is $992.
Jordan has a bankruptcy on her credit report. How long can that bankruptcy continue to stay on her credit report? 2 years 10 years 5 years 7 years
10 years
As part of a mortgage loan originator applicants pre-licensing education, how many hours must be focused on federal law? 2 hours 3 hours 4 hours 10 hours
3 hours - An applicant for a mortgage loan originator license is required to take at least 20 hours of pre-licensing education. That education must include 3 hours of federal law, 3 hours of ethics, and 2 hours of education on the nontraditional mortgage product marketplace.
Carlisle currently has an ARM and his ARM is going to adjust for the first time. The margin on his ARM is 2.25 and his ARM is tied to the LIBOR, and it's currently sitting at 1.25. What would be his interest rate if it adjusted today? 4.50% 1.25% 2.25% 3.50%
3.50% - To figure out what his interest rate would be today, add the index and the margin together. 2.25 + 1.25 = 3.50%.
Under ECOA, the lender is required to provide the borrower a reason for denial. How long does the lender have to provide that reason? 90 days 60 days 30 days 120 days
30 days - ECOA requires that a lender gives a credit decision within 30 days and send out an Adverse Action Notice stating the reasons for the denial.
According to the Qualified Mortgage Rule, what is the maximum percentage limit on the total obligation debt to income ratio for a qualified mortgage? 41% 43% 28% 36%
43% - The Qualified Mortgage Rule specifies that the maximum total obligation debt to income ratio is 43% for a loan to be considered a QM loan.
Hugo is looking to refinance his current property. He currently pays $1200 a month on his home. He also pays $500 a month in child support, $200 for his cell phone, $300 for his student loans, $150 for his credit cards and $200 for his car insurance. Hugo makes $4000 a month gross. What is Hugo's total debt ratio? 53% 50% 51% 43%
53% - If Huge pays $1200 for his house, $500 in child support, $300 for student loans and $150 on credit cards he has a total debt payment of $2150. To determine then how much his total debt ratio is he would need to divide his monthly income of $4000 by $2150 to get 53%. Keep in mind this question gives you more information than you need.
FHA allows seller concessions. What is the maximum amount of seller concessions allowed on an FHA loan? 6% 8% 10% 4%
6%
According to MDIA, what is the waiting period once initial disclosures are provided to the borrower before the loan can close? 10 business days 5 business days 7 business days 3 business days
7 business days - According to MDIA a loan can close no sooner than 7 days from when the waiting period for initial disclosure is over. An example would be a loan originator gets an application on Monday, they disclose on Thursday (3 business days from application), the loan then cannot close then for 7 more business days.
What type of loan is a HECM?
A Home Equity Conversion Mortgage or HECM is a type of reverse mortgage, and it is an FHA product for people over the age of 62 years of age.
An IRRRL Loan is what type of loan? FHA Cash out Conventional Cash out VA Streamline VA Cashout
A Interest Rate Reduction Refinance Loan or an IRRRL is a VA product. It is considered a streamlined product and allows for veterans already in possession of a VA loan to reduce their interest rate.
Anna is looking to purchase a new home. She lives in a small town of under 20,000 people. What loan program would be a good option for her? A VA loan An FHA loan A USDA loan A conventional loan
A USDA loan - A USDA loan is a zero-down home loan meant for low- to moderate-income home buyers. You might qualify if you have an average salary for your area, and want to buy a home in a rural or suburban neighborhood. Typically, only areas with a population under 20,000 qualify.
Trevor just received a promotion at work that is going to require him to move across the country. What type of loan might Trevor use to help him between selling his previous home and buying his new home? A reverse mortgage A bridge mortgage A graduated payment mortgage An adjustable rate mortgage
A bridge mortgage - A bridge mortgage is used to bridge the gap between one mortgage and another mortgage. Trevor is a good example because he needs to move quickly and purchase his new home but he also has to sell his current home.
Which of the following would not be a prohibited under the Loan Originator Compensation Rule? A mortgage loan originator receives 10% additional for each ARM that they close A mortgage loan originator receives a $5,000 bonus for loans over $250,000 that they close A mortgage loan originator receives a flat fee for each loan that they close A mortgage loan originator receives $1,000 for selling a loan with an interest rate of over 4%
A mortgage loan originator receives a flat fee for each loan that they close. - The Loan Originator Compensation Rule prohibits a mortgage loan originator from receiving compensation based upon a term of the loan. A mortgage loan originator that receives a flat fee for each loan that they close would be an acceptable form of compensation. If a mortgage loan originator receives additional compensation because they sell an ARM or they, sell a loan at a certain interest rate or a certain loan amount that would be unacceptable.
Which of the following transactions is not governed by the new TRID Rules? A reverse mortgage A refinance transaction A closed-end second mortgage A purchase money transaction
A reverse mortgage - All transactions except reverse mortgages and HELOCs require the new TRID disclosures. HELOCs and Reverses are still required to use the GFE, TIL, and HUD-1.
Michael does not have enough money to put 20% down on his conventional loan to avoid PMI but really can't afford the payment with the additional cost. Instead of looking for the additional money to put down in cash, Michael contacts a second lender who lends him the additional money he needs to put the 20% down. That second lender and the loan Michael receives is never disclosed to the 1st lender. What would that second loan be considered? A payday loan A silent second A home equity line of credit A second lien loan
A silent second. Obtaining a second loan for the purpose of avoiding PMI or for avoiding paying anything out of pocket and then not disclosing it to the mortgage company doing the first lien would be considered a silent second.
Which of the following is not one of the three rules outlined within the Gramm-Leach-Bliley Act? Ability to Repay Rule Safeguards Rule Opt-Out Rule Pretexting Rule
Ability to repay rule - Gramm-Leach-Bliley has three specific rules housed within it, the Safeguards Rule, the Pretexting Rule and the Opt-Out Rule. The Safeguards Rule specifically deals with the protection of a borrower's nonpublic personal information. The Pretexting Rule prohibits the sharing of information with pretenders. The Opt-Out Rule requires lenders to allow borrowers to opt-out of sharing information with non-affiliated third parties.
Which of the following is not one of the new disclosures required under TRID? The Home Loan Toolkit The Closing Disclosure The Adverse Action Notice The Loan Estimate
Adverse Action Notice - The Loan Estimate was created under TRID to replace the initial Good Faith Estimate (GFE) and the initial TIL (Truth in Lending Disclosure). The Closing Disclosure was created under TRID to replace the final TIL (Truth in Lending Disclosure) and the HUD-1 Settlement Statement. The Home Loan Toolkit was created to replace the Settlement Services Booklet and is only required on purchase transactions.
What type of scheme is usually occurring when there is a nonexistent property? Illegal Property Flipping Air Loan Churning Chunking
Air Loan - An Air Loan scheme is occurring when there is a nonexistent property or nonexistent borrower. It is exactly what it sounds like, a loan full of air.
Which of the following would be considered a mortgage loan originator? Jane is requesting a verification of employment from a borrowers employer Alexia is discussing a rate lock with a borrower Henry is determining whether a borrower can repay the proposed loan Jackson is discussing with a borrower the need for additional documentation for their loan
Alexia is discussing a rate lock with a borrower. - Henry is acting as an underwriter while Jane and Jackson are acting as processors. Alexia is the only one performing a duty of a mortgage loan originator because she is discussing rates and terms with a borrower specifically locking the rate of the borrowers loan.
What law requires that a cash transaction of more than $5,000 be reported? Dodd-Frank FTC Red Flags BSA/AML RESPA
BSA/AML - The Bank Secrecy Act/Anti-Money Laundering (BSA/AML) specifically deals with cash transaction and the detection of money laundering. Within its scope; there is a requirement that any cash transaction of more than $5,000 must be reported. It also requires that if there is any suspicious activity that it be reported to FinCEN in the form of a SAR (Suspicious Activity Report).
Renee is a real estate broker working for a property developer. She has been going door-to-door discussing with homeowners in a certain area the possibility of them selling. She often tells these homeowners that there has been an increase of Latinos moving into the area and that they really should move now before their property values drop because of this influx of lower income individuals. This would be considered: Blockbusting Reverse Redlining Churning Redlining
Blockbusting - A real estate agent attempting to get people to sell their home by using racially motivated reasons would be considered blockbusting.
What type of fraud scheme usually includes a "get rich quick" real estate seminar? Redlining Churning Illegal Property Flipping Chunking
Chunking - Chunking occurs when a third party convinces an uninformed borrower to invest in a property (or properties), with no money down and with the third party acting as the borrower's agent. The third party is also typically the owner of the property or part of a larger group organizing the scheme.
Travis is a mortgage loan originator, and he primarily does refinances for borrowers. He has a borrower, Steve, who calls him once a year to refinance and every time Travis refinances his property even though Steve does not need to refinance. Travis does this to make sure that he receives the fees for the refinance. What would this be considered? Redlining Churning Steering Chunking
Churning - Refinancing a loan over and over again solely for the purpose of obtaining the fees from the loan would be considered churning.
Arnold is a licensed mortgage loan originator and is looking to renew his license. By what date does Arnold have to renew his license before it would expire? January 1 November 1 December 25 December 31
December 31
The document that conveys ownership of real property from one person to another is known as the: Promissory Note Mortgage Title Deed
Deed
What is the name of the automatic underwriting system used by Fannie Mae? Loan Prospector Desktop Underwriter Direct Endorser Loan Underwriter
Desktop Underwriter is the automatic underwriting system (AUS) used to underwrite Fannie Mae loans.
Which of the following is not considered a protected class under Reg. B? Disability Sex National Origin Age
Disability - ECOA or Reg. B prohibits discrimination based on Age, Sex, National Origin, Religion, Marital Status or Race. The Fair Housing Act specifically prohibits discrimination based upon Disability
A lender has a policy that they never lend less than $70,000 because they can't make any money off of loans lower than $70,000. What would this be considered: Disparate Treatment Discrimination Blockbusting Disparate Impact
Disparate Impact - Disparate Impact is generally when a lender has a policy that inadvertently affects a specific group. In this situation, the lender never lends less than $70,000 because they can't make a profit but it is inadvertently discriminating against anyone with a loan amount less than $70,000.
A lender has a policy that only individuals between the age of 25-45 can receive home loans of over $200,000. What would this be considered: Disparate Impact Discrimination Blockbusting Disparate Treatment
Disparate Treatment - Disparate Treatment is occurring when a lenders policy specifically discriminates against a specific group of people. In this situation, this policy only allows someone between the age of 25-45 to receive a loan over $200,000 which means that they will be denying anyone younger than 25 or older than 45 from receiving a loan over $200,000 even if they qualify for it.
What federal law created the idea of a qualified mortgage? RESPA Dodd-Frank ECOA TILA
Dodd - Frank - The Qualified Mortgage Rule falls under TILA, but the idea and the reason that the QM Rule was created was because of Dodd-Frank and its goal of weeding out unfair lending practices and expanding consumer protections.
Genevieve wants to buy a home, but her credit score took a tank after her divorce. Her brother, Donald has a great credit profile, though, and she asks him to apply for a loan for her. Genevieve promises Donald that she will pay the mortgage. What would Donald be considered? A mortgage relief service provider An investor A good brother A straw buyer
Donald would be considered a straw buyer because Genevieve is using his credit profile and his identity for the purpose of obtaining a loan
Which federal law prohibits someone from inquiring about childbearing? HMDA ECOA Fair Housing Act RESPA
ECOA or Regulation B, specifically deals with discrimination in credit transactions. ECOA prohibits discrimination based upon 7 protected classes, but it also prohibits inquiring about a person's childbearing, child rearing, or spouse. It also prohibits a lender from requiring a person receiving alimony, child support or separate maintenance from being disclosed.
All of the following are true about the FTC Red Flags Rule except: It is enforced by the CFPB Protect sensitive personal data Require the implementations of a written plan to detect and prevent industry theft The penalty for noncompliance is $3,500
Enforced by the CFPB. - The FTC Red Flags Rule is enforced by the Federal Trade Commission. The FTC Red Flags Rule was specifically put into place to help with the prevention and detection of identity theft and falls under FACTA. It requires lenders to implement a written plan to detect and prevent identity theft, and if a lender fails to comply with this, they can be penalized $3,500
Which law prohibits discrimination based upon disability? ECOA Reg. C Fair Housing Act RESPA
Fair Housing Act - ECOA and the Fair Housing Act are similar in that they both deal specifically with discrimination and preventing discriminatory practices in lending. The main difference between the two is that the Fair Housing Act specifically adds disability, as a protected class while ECOA does not include disability as a protected class. The protected classes outlined in ECOA are race, color, religion, national origin, sex, marital status and age but exclude disability.
Kay is behind on her mortgage payments and is concerned that she will soon be going into the foreclosure process. Kay receives a phone call from a company stating that they can help her avoid foreclosure if she pays them $3,000 upfront to discuss options with her servicer. What type of scheme is likely occurring in this situation? Illegal Property Flipping Loan Flipping Equity Skimming Foreclosure Rescue Scheme
Foreclosure Rescue Scheme
Javier is looking to purchase a home, but he does not make enough money to obtain the loan that he wants. Javier, instead of looking for a less expensive property, changes his W-2 to reflect that he is making an additional $1,000 a month. What type of fraud is this? Negligent fraud Fraud for property Fraud for criminal enterprise Fraud for profit
Fraud for property - In this situation, Javier is committing fraud specifically to obtain a piece of property and therefore this is fraud for property. If Javier were committing this fraud to obtain the property and then sell it for a profit, then it would be fraud for property and fraud for profit. If Javier were working for a criminal enterprise and purchasing the property for the purpose of laundering money, then the situation would be considered fraud for criminal enterprise.
Under what federal legislation, is a lender required to allow a borrower to opt-out of having their nonpublic personal information disclosed to a third party? The USA Patriot Act FACTA FCRA Gramm-Leach-Bliley
Gramm-Leach_Bliley - The Gramm-Leach-Bliley Act has three parts to it including the Opt-Out Rule that requires a lender to allow the borrower to opt-out of having their information shared with a third party
What law requires the collection of race, ethnicity and sex for the purpose of preventing and detecting discriminatory practices? ECOA RESPA Fair Housing Act HMDA
HMDA - HMDA or the Home Mortgage Disclosure Act (Regulation C), requires lenders to provide information on their loans to help determine whether there are discriminatory lending practices occurring at that lender. HMDA requires the collection of race, ethnicity and sex.
Section X on the 1003 is where information regarding what federal law goes? ECOA QM ATR HMDA
HMDA - Section X of the 1003 is the government monitoring section and is where the HMDA data for race, ethnicity and sex would need to be input.
Which types of loan are governed by HOEPA? High cost loan Subprime loans Higher priced loan Qualified mortgages
High cost loan - The Home Ownership and Equity Protection Act (HOEPA, or Section 32) governs specifically high-cost home loans only. HOEPA falls under TILA and sets out requirements for how to discover whether a loan is a high cost and what steps need to be taken if a loan is determined to be high cost.
Section 35 of TILA governs what type of loan? High Cost Higher priced Open-ended loans Subprime loans
Higher priced - Section 35 of TILA governs higher priced loans, not to be confused with Section 32, which covers high cost loans.
Which federal law allows borrowers to request PMI cancellation when their LTV reaches 80%? Home Ownership and Equity Protection Act Homeowners Protection Act Reg. Z RESPA
Homeowners Protection Act - The Homeowners Protection Act is all about Private Mortgage Insurance (PMI). It specifies that a borrower can request PMI be taken off of their loan at 80% LTV but that it must be removed when the borrower's LTV at 78%
Which of the following is not a penalty that the state regulatory authority can levy against a licensee? Imprisonment License Revocation License Suspension Restitution
Imprisonment - A state regulatory authority is allowed to suspend or revoke a license, they are also allowed to require licensees pay restitution for a violation against a specific individual. The one power they do not have is to imprison or criminally sentence a licensee. The state regulatory authority can report an individual to law enforcement for criminal activities but cannot themselves punish someone with imprisonment.
Which of the following is NOT TRUE about the Dodd-Frank Act: It created the NMLS It prohibits unfair lending practices It created the CFPB It expanded consumer protection on high-cost mortgages
It created the NMLS - The Dodd-Frank Act was responsible for the creation of the Consumer Financial Protection Bureau with a specific aim to deal with unfair lending practices and expand consumer protections.
Which of the following must have an MLO license? William, who extends credit solely on timeshare plans Jackson who is negotiating the terms of a loan on his primary residence Lola, who is working as an independent contractor underwriter and is underwriting loans June, who is working as an attorney and negotiating terms on a loan for her client as part of her job as an attorney
Lola, who is working as an independent contractor underwriter and is underwriting loans. - Lola is working as an independent contract underwriter and therefore must be licensed as a mortgage loan originator. If she were not working as an independent contractor and instead worked as a W-2 employee for a single mortgage lender underwriting loans, then she would not be required to be licensed.
Which of the following would be considered a trigger term except: $1,000 down $500 a month mortgage payments 3% interest rate Low down payment for qualified borrowers
Low down payment for qualified borrowers
John intentionally tells the mortgage loan originator that he is working for that he only pays $1500 in child support when he pays $2000 in child support. This would be considered: Collusion Omission Material misstatement Inflation
Material misstatement - John is materially misstating what he pays in child support to obtain a loan.
A reverse mortgage has which of the following features? Two closings Negative amortization Graduated payments A prepayment penalty
Negative Amortization - A reverse mortgage has negative amortization because there are no payments. Negative amortization occurs when the payments do not cover the interest accrued on a monthly basis on the loan and that interest then is rolled back into the principal loan amount increasing the amount owed instead of decreasing the amount owed.
According to FCRA, how often is a consumer entitled to a free copy of their credit score? Annually Twice a year Never Once every two years
Never - FCRA allows for a borrower to receive a free copy of their credit report, but that does not include the disclosure of a borrower's credit score
Which of the following would describe a non-conforming loan? Non-conforming loans follow Fannie Mae and Freddie Mac guidelines Non-conforming loans are subprime loans Non-conforming loans do not follow Fannie Mae and Freddie Mac guidelines Non-conforming loans do not follow FHA guidelines
Non-conforming loans do not follow Fannie Mae and Freddie Mac guidelines. - A conforming loan is any loan that follows Fannie Mae and Freddie Mac guidelines; if a loan does not follow Fannie or Freddie Mac guidelines then it is considered non-conforming
Which law promotes informed shopping by requiring the disclosure of settlement services to the borrower? RESPA Reg. B Reg. C TILA
RESPA
A lender services a large metropolitan area but refuses to lend in one specific area because the people in that area are low-income. This would be considered: Redlining Blockbusting Steering Reverse redlinig
Redlining - Redlining means specifically targeting a geographical area and refusing to lend it in. An easy way to remember this is thinking about drawing a red line around an area and pointing at it and thinking "I won't lend there".
Which federal law prohibits mortgage relief service providers from requiring an advance fee before the provider has obtained and the borrower has accepted a written offer from the borrower's lender or servicer? Reg. O Reg. Z Reg. X Reg. N
Reg O - The Mortgage Assistance Relief Services Rule (MARS Rule) or Regulation O specifically prohibits a mortgage assistance relief provider from requiring an upfront fee or advance fee. The provider cannot receive compensation from the borrower until the borrower has received and accepted a written offer from their mortgage servicer.
Which of the following would not be a prohibited practice regarding an appraisal? Requesting that the appraiser reviews additional comparables Refusing to use an appraiser again if they do not change the value on an appraisal Threatening non-payment to manipulate the appraiser into raising the value of the property Bribing the appraiser for a higher appraised value
Requesting that the appraiser reviews additional comparables
Which of the following is not a HOEPA trigger test? Points and Fees Test APR Test Prepayment penalty Test Rescission Test
Rescission Test - The three tests that a loan must go through to determine whether it is a high-cost home loan are the APR Test, the Points and Fees Test, and the Prepayment Penalty Test. If a loan fails any of these tests, then it is considered to be high cost.
When considering a VA loan, what additional type of income must be considered? Child Support Income Residual Income Social Security Income Investment Income
Residual Income - VA loans only have one debt to income ratio, but they also take into account residual income when determining whether a veteran can afford their loan. Residual income is the amount of income left over after all the debts have been paid for the month.
There is a lender working in a large metropolitan area, but currently, they are targeting a low-income neighborhood and charging more for their loans because the individuals in the area are mostly African American. This would be considered: Reverse Redlining Churning Chunking Redlining
Reverse Redlining - Reverse Redlining is the opposite of Redlining. It is drawing a red line around an area and then going into the area and taking advantage of those individuals by charging them higher fees for their loans.
Which of the following situations would be considered a prohibited act or practice? Tyler discusses with a borrower particular rates and terms that they qualify for Laurie, an independent contract processor, renews her mortgage loan originator license Riley, working as a processor for a mortgage lender, discusses specific options for locking a borrowers loan Eileen, a mortgage loan originator, provides an additional appraiser comparables with the hopes that the appraiser might change the value on her borrower's appraisal
Riley is not a licensed mortgage loan originator and yet he is acting as a mortgage loan originator by discussing specific options for interest rates with the borrower. Riley is guilty of unlicensed activity and can face repercussions for his actions.
What federal law details the licensing requirements for mortgage loan originators? SAFE Act TILA Loan Originator Compensation Dodd-Frank
SAFE Act - The Secure and Fair Enforcement Mortgage Licensing Act was created to implement specific requirements for the licensure of mortgage loan originators, lender, and brokers, this includes requirements for applications for licensure, education requirements, and surety bond requirements.
What type of appraisal uses compares multiple similar recently sold properties to a borrower's property to determine the value? Sales Comparison Approach Cost Approach Investment Approach Income Approach
Sales Comparison Approach - A sale comparison approach appraisal is an appraisal that compares properties to each other. Specifically, the borrowers property is compared to multiple comparable properties that have recently sold in the area to determine the properties value.
Andrew's borrower wants to refinance his home and Andrew has put together some great options. Of those options, Andrew wants his borrower to chose the ARM option because his company is giving bonuses to everyone who sells an ARM. Andrew pressures his borrower into choosing that options. Andrew is guilty of what? Steering Chunking Flipping Churning
Steering - Andrew is steering this particular borrower into a program specifically because it benefits Andrew more. This is considered steering and is an illegal practice. The Loan Originator Compensation Rule specifically prohibits what is occurring in this situation because Andrew is receiving compensation based upon a term of the loan, in this case, the fact that the loan is an adjustable rate mortgage.
Under what law does the Ability to Repay Rule fall under? RESPA TILA ECOA Dodd-Frank
TILA - Ability to Repay falls under TILA or Regulation Z. Also under TILA is the QM Rule, Loan Originator Compensation Rule, HOEPA and Section 35 loans.
Which law promotes informed use of credit by requiring the disclosure of the APR to the borrower? Reg. C TILA Reg. B RESPA
TILA - TILA requires the disclosure of the borrower's APR and thus promotes informed use of credit. TILA was put into place in 1968, and is also know as Regulation Z, over the course of its lifetime, TILA has been expanded its protection of consumers and its requirements for disclosure of pertinent information regarding a borrower's transaction.
What law allows for e-signatures as long as the borrower gives permission? Gramm-Leach-Bliley Homeowners Protection Act The Electronic Signatures in Global and National Commerce Act The Dodd-Frank Act
The Electronic Signatures in Global and National Commerce Act
What entity was created by CSBS and AARMR for the purpose of licensing and registering mortgage loan originators? The CSBS/AARMR Database The CFPB The FTC The NMLS
The NLMS
The application for a mortgage loan originator would be denied for all of the following reasons except: The applicant has had seriously delinquent accounts in the past 3 years The applicant had a mortgage loan originator license revoked The applicant has a foreclosure on their credit report from 4 years ago The applicant was convicted of a felony 5 years ago
The applicant has a foreclosure on their credit report from 4 years ago - An applicant for a mortgage loan originator license cannot have ever had an MLO license revoked previously, been convicted of a felony in the past 7 years or have had seriously delinquent accounts in the past 3 years. However, mortgage loan originators can have had a foreclosure in past as long as it was at least 3 years in the past.
Which of the following applies to the right of rescission except: If the borrower does not receive the 2 copies of the notice of right to rescind the borrower has 3 years to rescind the loan The borrower has 4 days from choosing to rescind the loan It's only available on owner occupied refinance transactions The lender is required to provide 2 copies of the notice of right to rescind at closing
The borrower has 4 days from choosing to rescind the loan is not true. The right of rescission falls under TILA and applies specifically only to owner-occupied refinance transactions (Remember this!). As part of the right of rescission, the lender is required to provide 2 copies of the Notice of Right to Rescission to each borrower, and if the lender fails to do this, then the borrower has 3 years to rescind the loan
For the purpose of complying with HMDA rules, a mortgage loan originator must ask all of the following questions except? The borrower's sex The borrower's marital status The borrower's race The borrower's ethnicity
The borrower's marital status - A mortgage loan originator is required as part of the application process to ask the borrower's race, ethnicity, and sex. It must be placed on Section X of the 1003 and is required for compliance with HMDA. If a borrower refuses to provide the information the mortgage loan originator can make a guess based on the borrowers visual appearance if the conversation is taking place face to face or by looking at their identification if the conversation is taking place via phone.
What type of appraisal takes the cost of rebuilding the property, plus the cost of the land the property is on and subtracts any depreciation to determine a value of the property? Sales Comparison Approach Income Approach Investment Approach Cost Approach
The cost approach appraisal is the simplest of the three types of appraisals. It is simply the cost of rebuilding the house plus the cost of the land it sits on. If there is any depreciation, then it would need to be subtracted from the value of the property.
Which of the following would NOT be considered a change of circumstance and allow the lender to re-disclose the Loan Estimate? The borrower's appraisal comes in low and to continue with the loan they need to change from a conventional to an FHA loan The initial Loan Estimate indicates that the interest rate will be locked, and the mortgage loan originator forgets to lock the loan, and the interest rate goes up the next day, so the mortgage loan originator re-discloses the Loan Estimate with the new rate The borrower decides to change from an ARM to a fixed rate product An Act of God changes the condition of the property
The initial Loan Estimate indicates that the interest rate will be locked, and the mortgage loan originator forgets to lock the loan, and the interest rate goes up the next day, so the mortgage loan originator re-discloses the Loan Estimate with the new rate. - Error on the part of the mortgage loan originator or the lender is not an acceptable reason to re-issue a Loan Estimate. The mortgage loan originator and the lender would have to remedy this situation for the borrower and could not charge them a new interest rate because of this error
For a loan to be considered a QM loan, it must meet certain requirements. Which of the following is not one of those requirements? The loan cannot have any negative amortization The loan cannot have an interest only payment The loan cannot have a balloon payment The loan cannot have a prepayment penalty
The loan cannot have a prepayment penalty - A mortgage cannot be considered a qualified mortgage if it has negative amortization, interest-only payments or a balloon payment but a mortgage can be considered a qualified mortgage if it has a prepayment penalty.
Daniel is looking to qualify his borrower for a conventional loan. He is attempting to determine the borrower's back-end debt-to-income ratio. What is the maximum back-end DTI ratio that Daniel can use on a conventional loan? 28% 36% 41% 32%
The maximum back-end DTI ratio for a conventional loan is 36%. The maximum front end is 28%.
Which best describes the total debt ratio? The total cost of all debt divided by the borrowers net monthly income The total cost of all the housing expenses divided by the borrower net monthly income The total cost of all housing expenses divided by the borrowers gross monthly income The total cost of all debt divided by the borrowers gross monthly income
The total cost of all debt divided by gross monthly income. - The total debt ratio is simply figuring out how much the borrower pays for their house and all of their other debts and dividing it by their gross monthly income to determine how much of a borrowers income goes to their house and their debt.
The legal link between a person who owns property and the property itself is the: Mortgage Title Deed Promissory Note
Title - Title is the legal link between a person who owns a property and the property itself. The deed is the document that conveys ownership in a property between people.
An agreement to indemnify against loss arising from a defect in title to real property, usually issued to a buyer of the property by the title company that conduct the search is: Title search Title insurance Homeowners insurance Hazard insurance
Title insurance
What law requires identification be provided on a mortgage transaction? Red Flags Rule BSA/AML Gramm-Leach-Bliley USA Patriot Act
USA Patriot Act - The USA Patriot Act added the requirement that identification is provided on a mortgage transaction this was specifically done to help detect the presence of terrorism or terrorists in mortgage transactions.
Alexandra is a licensed mortgage loan originator, and she works for a licensed mortgage lender. Alexandra also works part time as a mortgage loan originator at her friend's brokerage. Is Alexandra doing anything wrong? No, Alexandra can work for more than 1 company at a time No, Alexandra is properly licensed Yes, Alexandra is working simultaneously for two companies, which is prohibited Yes, Alexandra is not properly licensed
Yes, Alexandra is working simultaneously for two companies, which is prohibited. - It is a conflict of interest and prohibited for a mortgage loan originator to work for more than one company at a time.
Travis is disclosing an origination fee of $1200 on the initial Loan Estimate. What is the maximum that origination fee can change between the Loan Estimate and the Closing Disclosure? 10% cumulatively It can go up as much as Travis wants It can go up $100 only There is zero tolerance, and it cannot change at all
Zero tolerance - The origination fee can never change from the time the Loan Estimate is disclosed to the time the Closing Disclosure is issued. It is a 0 tolerance fee.