Practice National Exam 2
Quincey is looking to do home improvements on his home, he does not particularly want to refinance his current mortgage and take cash out and he would like some flexibility on how much cash he gets. What is a good option for Quincey?
A HELOC
Under Regulation Z which of the following advertisements would require full disclosure of the rate term payment and balance?
"Monthly payments could be under $950 per month"
Which of the following is not exempt for licensure under the SAFE Act?
An independent contractor underwriter
Out of the following who does need to be licensed in the mortgage industry?
An individual who offers or negotiates terms of a residential mortgage loan for compensation or gain
According to RESPA, when must an Affiliated Business Arrangement (AfBA) disclosure be provided?
At or prior to the time a referral is made if there is an AfBA
What is the appraiser most interested in when determining the value of an income property?
Projections of expenses and rents
The purpose of a Market Conditions Addendum is to:
Provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.
Which of the following situations is not a red flag that illegal flipping may be taking place?
Purchasing and remodeling a house and selling it for a quick profit
A Mortgage Servicing Disclosure Statement is required by what law?
RESPA
Regulation X is also known as what law?
RESPA
Underwriters calculate overtime income for a loan by:
Taking a two year average of the overtime income.
If two people are married, how do they likely hold title?
Tenancy by the Entirety
The NMLS will not charge fees for which of the following?
A processing fee for ACH payments
What is the period between rate changes in an ARM called?
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.
When are the funds disbursed for an owner-occupied residential refinance?
After the three business-day right of rescission period has expired
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:
Bait and switch
One purpose of the Fair and Accurate Credit Transaction Act is to prevent:
Identity theft
The purpose of Fannie Mae and Freddie Mac is to:
provide a source of funds to the primary market mortgage lenders.
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:
provide the agency contact information required for the consumer to obtain a free copy of the credit report used.
A lender may keep the:
Origination Fee
According to the Truth in Lending Act which loan type includes the right to rescind?
Owner occupied refinance
Discount points would only be used if the interest rate offered to the borrower were which of the following?
Par or anything below par
In order to apply for a loan originator license, the state requires the following.
Pass a background check
Under RESPA what is the dollar fine that can be imposed for each instance of a referral fee kickback or unearned fee?
$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.
On an interest-only loan of $216,000, 30 years, at 7.25% interest, how much interest would be paid in nine months?
$11,745.00 The first step is finding the yearly interest paid on the loan. To determine that take $216,000 x 7.25% =$15,660 paid in a year. Divide that by 12 to determine monthly interest only payment, $1,305. Multiple $1,305 by 9 = $11,745.
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?
$87,584
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
After the crisis of the Great Recession according to VA underwriting when can a borrower repurchase again after a Chapter 13 bankruptcy?
1 year
If a lender transfers the servicing of a mortgage, it must inform the borrower at least how many days in advance of the effective date of transfer?
15
In order to meet the pre-licensing education requirement, a person shall complete at least 20 hours of approved education. Which of the following is NOT included in the minimum educational requirements?
2 hours of training related to predatory lending laws
What is the guideline regarding length of history for a second job to be included as qualifying income?
2 years
After the crisis of the Great Recession according to VA underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy?
2 years from the discharge date
ECOA requires the appraisal be given to borrowers:
3 days before settlement.
After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a foreclosure?
3 years from the credit report date
A lender has how many business days to notify the borrower of an underwriting decision?
30
The FACTA allows a consumer to dispute inaccurate credit information. How many days are allowed for an incorrect item to be investigated?
30
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a short sale?
4 years from the credit report date
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy?
4 years from the discharge date
Which is considered an illegal referral fee?
A lead generating company getting a higher fee if the lead closes
A yield spread premium occurs when:
An interest rate is charged above the par rate and is a credit to the borrower.
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:
An origination fee.
HMDA requires lenders to request what information from applicants in a face to face interview for home mortgage loans?
Applicants race
Which of the following is NOT a finance charge in a residential mortgage loan?
Appraisal fee
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
HMDA is implemented as what Regulation?
C
Surrender of an MLO license does not affect the MLO's:
Civil or criminal liability for acts committed prior to the surrender.
Land is given as a separate value in which of the following appraisal methods?
Cost approach
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
What does the acronym HMDA stand for?
Home Mortgage Disclosure Act
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?
ECOA
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.
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?
Employee of lender
What does the acronym ECOA stand for?
Equal Credit Opportunity Act
How often must a lender perform an escrow account analysis to ensure that excess funds are not being kept?
Every year on the loan
The most commonly used conventional underwriter guidelines are established by:
FNMA and FHLMC.
Relevant financial information about an applicant who applies for an FHA or conventional residential mortgage is entered on:
FNMA form 1003
What does FCRA stand for?
Fair Credit Reporting Act
In the testing of loan originators, you must take a qualified test that measures knowledge and comprehension in which areas?
Federal and State law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues, general mortgage industry knowledge and origination
How can one calculate monthly income for an applicant who is paid an hourly wage?
Hourly wage x 40 x 52/12
Why was Regulation Z enacted?
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:
Give full disclosure to the borrower at or prior to the time the referral is made
Lenders submit Loan/Application Registers in order to comply with what law?
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.
Which of the following is true of an ARM?
Index rate + margin = ARM rate
An applicant who has had a loan originator license revoked previously is eligible for a license as long as:
Is not eligable for a license
A loan's APR must be disclosed to the consumer on the:
Loan Estimate.
Is a referral fee ever allowed?
NO
When a lender learns that a property is in a flood zone, the lender must do which of the following?
Notify the borrower of the flood insurance requirement and have the borrower purchase flood insurance
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
Which of the following would NOT be a purpose of a "cash-out refinance"?
Refinance at a lower loan amount, by providing a significant amount of cash to make up the difference
HOEPA is an addendum of:
Regulation Z. HOEPA (Homeownership and Equity Protection Act) is Section 32 of TILA (Truth in Lending Act, Regulation Z).
Which best describes the 4506-T?
Request for Tax Return Transcript
In qualifying the income of a sole proprietor borrower, the originator should consider which of the following to be most important?
Schedule C net income plus non-cash expenses and depreciation
What is HOEPA also known as?
Section 32
Where, in the TILA, is the explanation for higher-priced loans located?
Section 35
The Loan Estimate must be:
Sent within 3 business days of the application
An alternative documentation loan is a type of:
Subprime loan
MLOs are required to be covered by a:
Surety Bond
Section 32 which covers high cost loans is part of which federal law?
TILA
Trevor is looking to obtain an ARM loan, his MLO is required to disclose what within 3 days of application?
The Consumer Handbook on Adjustable Rate Mortgages
Holly is purchasing her very first home, what disclosure must the MLO ensure goes out within three days of application?
The Home Loan Toolkit
An MLO is working on disclosing a borrower's Loan Estimate, which of the following is true:
The MLO can only collect a credit report fee before disclosing that LE
Which of the following would be considered a red flag in an owner-occupied refinance loan?
The borrower resides in a home in the same neighborhood as subject property
Approval of a reverse mortgage application will be largely based on which of the following?
The borrower's equity
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 must be sent 3 days prior to consummation
Which of the following is not true about HOEPA?
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.
If original loan amounts, ending maturity dates and interest rates are the same for two loans. The first loan is an interest-only loan and the other loan is fully amortized. Knowing that, which of the following is true?
The other loan will have higher monthly payments.
When a self-employed borrower is a 25% owner of his business, which of the following documents is required?
The past two years tax returns
What are the terms of the "cooling off" period if a loan falls under HOEPA?
Three business days prior to closing
Andrea is receiving two payments of child support for her two children, they are 14 and 12. For that income to be used as income, the child support must continue for:
Three years Child support income must be believed to continue for 3 years or more to be used as income. In this situation, Andrea will be able to use her child support as income because most child support stops at age 18 and her children won't be 18 for over 3 years.
Which of the following statements best describes Form 1008?
Transmittal summary
In lieu of your social security number, what number assigned by the NMLS will the state use to identify you as an MLO?
Unique Identifiers
Which of the following would be considered unethical?
Using the identity of a prior borrower to obtain a loan for a borrower unable to qualify on their own
If an underwriter needs to verify a borrower's down payment, what might they request the processor order?
VOD
How much money is required for fire insurance on a refinance at settlement?
Whatever is needed to renew coverage when the insurance expires
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:
covered by RESPA, as the collateral is a mortgage on the borrower.
A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their home's equity is engaging in:
predatory lending.
A loan officer creates a marketing plan to make between 2k and 4k per loan. His cousin calls, he agrees to do the 300k loan for .75% commission. This is:
legal and ethical because he is within his marketing plan
RESPA applies to all:
residential real estate loan.
Regulation Z applies to all:
residential real estate mortgage transactions.
One of the acknowledgments in the signature section of the 1003 loan application, signifies that:
the borrower represents that all information contained in the form is the truth.
