exam 8
Ideally, which of the following should be priced with the lowest interest rate?
1/1 ARM
What is the minimum FHA down payment for someone whose credit score is less than 580?
10%
How many total hours of ethics are required to satisfy annual continuing education requirements?
2
A purchase price is $456,000. The home appraises for $475,000. The loan amount is $315,000. What is the LTV?
69%, The LTV is based off the loan amount divided by the lesser of the purchase price or appraised value. Since the purchase price is lower than the appraised value, the LTV is calculated by dividing the loan amount by the purchase price.
A customer applies for an ARM loan. Which of the following must be issued to her within three business days?
A CHARM booklet and an Early ARM Disclosure
The 4506-T authorizes a financial institution to secure:
A copy of the applicant's federal tax return transcript
A customer complains that his Realtor rushed him through the home inspection and sidestepped many of his questions. You immediately suspect:
A cursory inspection
Indicate the dispute along with any reporting of the disputed information
A customer's published telephone number
Which of the following individuals would be subject to a VA funding fee?
A decorated war veteran
Which of the following may the CFPB, FTC or State Agency impose as a penalty for violating the GLBA?
A fine of up to $100,000 and up to five years in prison
Which of the following constitutes a registered loan originator?
A loan originator employed by an institution regulated by the FDIC
Which of the following statements is true?
A non-veteran may assume a veteran's VA loan
Which of the following documents must be issued in accordance with FACTA?
A notice of credit score
Which of the following requires a flood certification?
A residential mortgage on a property located in Death Valley, California All residential mortgage applications require a flood certification regardless of the property's location
All but which of the following is an example of a non-conforming mortgage?
A standard, 30-year fixed
The fine for violating certain federal statutes consists of:
Federal imprisonment for up to 30 years along with a fine of up to one million dollars
NMLS-approved courses are accepted:
For credit in any state
A customer falsely representing his income is an example of:
Fraud for housing and making a false statement to a financial institution
A banker opens a checking account for a customer and fails to give her an opt-out notice and the bank's privacy policy. What regulation, if any, did the banker violate?
GLBA
Of the following businesses, which is not subject to the Patriot Act?
Grocery Stores
A mortgage company has a disproportionately high amount of credit denials to African Americans when compared to other companies. Which regulation may have facilitated this discovery?
HMDA
A mortgage originator conducting a telephone application asks his applicant to define his race, national origin, and sex. When the applicant refuses, the originator guesses and completes the applicable section in accordance with his guess. What regulation did the loan originator violate?
HMDA is the Federal Reserve's Regulation C. If an applicant refuses to provide information pertaining to race, national origin, and sex in a non-face-to-face application, the loan originator must indicate to that effect and not list anything.
Some states require loan originators to maintain a minimum net worth. In states that do, what is the minimum net worth requirement?
It varies based on the dollar amount of loans originated
What is the purpose of the FCRA?
It was enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies.
Which of the following is not a requirement for pre-licensing education:
Two hours of criminal law
Which of the following loan types offers only a 30-year term?
USDA
A loan originator may do all but which of the following?
Underwrite and approve a mortgage loan
A borrower accepts a fixed-rate, 30-year loan but, at closing, is presented with documents representing a 5/1 ARM. The loan originator explains that the ARM is better because of its lower start rate. This scenario exemplifies:
Unfair and deceptive trade practices
What might cause an ARM to be non-traditional?
When it contains an interest-only component
When must a Victim's Notice of Rights be issued to a consumer?
Whenever a consumer reports identity theft to a CRA
When is property flipping illegal?
Whenever a property is bought and sold within a short period of time at an artificially inflated property value
If an advertisement advertises financing is available at no cost, what other information, if any, is required?
Where the money to cover the costs comes from
An ARM is at the start rate of 3.75%. The index is currently 1.5% and the margin at 3.5%. The caps are 2/2/6, and the interest rate is at its first adjustment period. To what rate does the interest rate adjust?
With the index at 1.5% and the margin at 3.5%, the FIAR is 5.0%. The 2% periodic rate cap would prevent the rate from increasing more than 2%. Since 5.0% is less than 2% above the current rate, the rate will adjust from 3.75% to 5%.
Which of the following would constitute an asset unable to be considered for credit qualification?
Years worth of accumulated cash savings that was deposited into a savings account a week prior
Your mortgage applicant presents a picture ID at the time of application that does not closely resemble him. What action, if any, must you take?
You must follow the protocol established by your company's Identity Theft Prevention Program required under FACTA
In response to a violation, a state agency may:
Levy fines
LP stands for:
Loan Prospector
An individual prepares a form to mail out to residents of the community soliciting credit card information to provide them with a discounted credit report review. In actuality, he is only seeking credit card information to steal peoples' identities. If caught, this individual could be prosecuted for:
Mail fraud
The minimum standards for license renewal consist of:
Maintaining the minimum standards for qualifying
A mortgage company charges an applicant a $50 credit report fee for a credit report costing $15 and retains the difference. This is an ethical violation known as:
Marking up
A loan processor:
May collect data from applicants
If a loan originator fails to renew her license by midnight on December 31st (into January 1st), the originator:
May no longer originate in any capacity
A state-licensed loan originator:
May work for a licensed mortgage brokerage
Funds acquired through the illegal sale of narcotics are used to purchase a vehicle in cash. The vehicle is then sold, and the money is placed into a deposit account. The funds are then used as a down payment to buy a condo. This is an example of:
Money laundering
If an attorney wishes to accept compensation by a mortgage brokerage for loans originated, the attorney:
Must be licensed
A state fund may be set up and used in lieu of:
Net worth requirement
The term "nolo contendere" means:
No contest
Which of the following is not an advantage of FHA?
No down payment required
According to the Statement on Subprime Lending, what constitutes a risky ARM?
No interest rate caps
A loan originator holds a free seminar for Realtors to educate them about a new mortgage product. At the seminar, lunch is served. The loan originator and Realtors do not promote their own business agendas. Which of the following regulations was violated?
No violation occurred
Which of the following affects the VA funding fee?
Number of VA mortgages the applicant has utilized
Which of the following does not constitute a violation of the GLBA?
On its own initiative, a mortgage company provides a customer's personal information to a local bank because the customer needs to open a deposit account for automatic deduction
How often must an individual renew their registration on the Do Not Call Registry?
Once registered, the individual will remain on the list indefinitely unless he or she requests removal
Making a false statement to a financial institution is a federal crime that could include:
Overstating a property value in pursuit of a larger loan amount
An applicant objects to presenting a loan originator with photo identification during a face-to-face mortgage application. After the loan originator explains that positive identification is required, the applicant fumbles through her purse and claims to be unable to find her ID. The loan originator spots a drivers license in her purse despite the applicant insisting that there is no ID in her purse. What should the loan originator do?
Postpone the application, ask the applicant to return with a valid, government-issued photo ID, and complete a SAR
FACTA requires financial institutions to provide:
Provide any and all information in its records at no charge to an individual claiming to be a victim of identity theft
Co-mingling funds is an ethical violation of:
RESPA
Which of the following is an applicant asked to disclose voluntarily?
Race, national origin, and sex
Under FACTA, which of the following is not a CRA obligation?
Requiring permission to obtain an individual's credit report
For which of the following services would a lender be prohibited from insisting on a specific settlement service provider?
Settlement agent
A loan originator answers a telephone call from a client requesting mortgage financing in a state in which she is not licensed. What may she do?
She may refer the caller to a loan originator licensed in the state in which he seeks financing
Which of the following would constitute a red flag on an appraisal?
Snow on the ground in a comp photo dated July 5th
What was the original purpose of FHA loan limits?
So that those who could qualify for conventional mortgages would be guided away from FHA
Which of the following individuals would not be required to possess a unique identifier or carry a state-issued license?
Someone negotiating mortgage terms with a family member
SAR stands for:
Suspicious Activity Report
An individual engages in the business of residential loan origination any time that he or she:
Takes a residential loan application
Which of the following conditions constitutes an exception to privacy protections afforded through the FCRA?
The FBI requests an individual's information pursuant to a current criminal investigation
What is a drawback to assuming someone's mortgage?
The assumer must come up with the difference between the mortgage balance and the sales price
An initial APR is reflected as 6.375%. The final APR is 6.0%. According to TILA, what must happen?
The lender must re-disclose the cost disclosure and refrain from closing the loan for three additional business days
Who is responsible for primarily identifying the applicant in a face-to-face transaction:
The loan originator meeting with the client
Which of the following is true of VA loans?
The maximum origination fee allowed by the VA is 1%
Which of the following would be optional to discuss with a customer considering a non-traditional mortgage loan?
The overall percentage of default associated with that particular loan
A telemarketer calls to attempt a sale. Which of the following behaviors violated the Telemarketing Sales Rule?
The telemarketer is located in California and places the call to an individual in New York at 6:45 p.m., PST.
If an accountant is self-employed and nets $175,000 two years prior and $185,000 last year, with what monthly income do you credit him, assuming that he had no expenses to add back or remove from his net income reported?
The two years net income get averaged together to result in a two-year annual average of $180,000. $180,000 divided by 12 equates to a $15,000 monthly income.
Subprime mortgages were ideally created for:
Those with damaged credit or in need of "outside the box financing"
What is the primary intention of the FHA 203(g) Good Neighbor Next Door program?
To encourage professionals such as police officers, teachers, and firefighters/EMTs to move into neighborhoods
What is the primary purpose of the Gramm-Leach-Bliley Act?
To ensure financial institutions protect consumers' non-public, personal information
Why might a mortgage contain a pre-payment penalty?
To offset the risk of offering a lower interest rate in exchange for a specific period of interest earned
Which of the following would not constitute a red flag?
Your applicant changed jobs during the loan application
What regulation is challenged when an advertisement promotes a 3/1 ARM as containing a "fixed" interest rate with no clarification that the "fixed" term is only the first three years?
Z
A home inspection company hosts a dinner for a mortgage bank. In turn, the mortgage bank agrees to refer customers to the home inspection company. Who violated RESPA?
both
A Realtor only shows a client of Asian ethnicity properties located in neighborhoods primarily populated by other Asians. What regulation, if any, did the Realtor violate?
fair housing act
Which of the following judgments will not be held against a license applicant?
medical collections
A settlement company hosts a holiday party and invites all settlement service providers from their area as well as the mortgage originators with whom it worked the previous year. Drinks were served through a cash bar, and food was also sold at cost. Who violated RESPA?
neither
Which of the following mortgage types requires the customer to undergo independent, third-party, homeownership counseling?
reverse
Which of the following is not a federal banking agency?
the USDA
An individual commits fraud, which ultimately results in a financial institution transferring funds into his checking account. In addition to the actual fraud, what other law could this individual be charged with committing?
wire fraud
The two types of conventional mortgages are:
Conforming and non-conforming
To what does the CFPB refer?
Consumer Financial Protection Bureau
CIP stands for:
Customer Identification Program
A barista earns $1,750 per month at a coffee shop. She is paid bi-weekly and works a 40-hour work week. What is her bi-weekly rate of pay?
$1,750 monthly amounts to $21,000 annually (1,750 x 12). $21,000 annually translates to $807.69 bi-weekly (21,000 / 26).
A barista earns $1,750 per month at a coffee shop. She is paid bi-weekly and works a 40 hour work week. What is her hourly rate of pay?
$1,750 monthly amounts to $21,000 annually (1,750 x 12). $21,000 annually translates to $807.69 bi-weekly (21,000 / 26). $807.69 bi-weekly translates to $10.10 per hour, considering a 40 hour work week (807.69 / 80).
A surprise FTC inspection uncovers the following issues: customer files piled against the wall of an unlocked conference room, three vacant desks belonging to loan originators on which customer documentation is observed, a pile of federal tax returns on a filing cabinet in a general work environment. What fine, if any, could the company receive?
$100,000 per violation, with fines for officers and directors of up to $10,000 per violation
At what value would you credit a 70-year-old retiree presenting an IRA with a face value of $150,000?
$105,000, Retirement funds are credited at 70% of face value when the account owner is older than 59 1/2. This accounts for taxes that may be owed upon liquidation. For anyone 59 1/2 or younger, 60% is used because, in addition to taxes, there may also be penalties assessed for early withdrawal.
An applicant earns $1,000 per month in Social Security Disability. This income is untaxed. With what amount do you credit her?
$1250, If the Social Security Disability Income is untaxed, you may increase the amount by 25%.
An underwriter may approve a VA loan with a back-end DTI exceeding 41% by considering:
Adequate residual income
The increased principal allocation, along with the reduced interest allocation occurring with each progressive fixed-rate loan payment, is known as:
Amortization
What constitutes a "covered account" as referenced under the FTC's Red Flags Rule?
An account maintained by a financial institution, intended for family use, and designed to permit multiple payments
What is an "active duty" alert?
An alert appearing on a service member's credit report alerting anyone accessing their report that the subject is active military
An assumption occurs when:
An individual takes over both another individual's property ownership interest along with their mortgage debt
Whole life insurance policies contain:
Both a cash value and a face value
A mortgage processor realizes that an applicant has provided duplicate copies of the same paystub. Not needing them, she disposes of the duplicates in her standard trash receptacle. What did she violate?
FACTA's Red Flags Disposal Rule
Which of the following is another term for the FHA ARM loan?
FHA 251
If a state licensing authority grants a license to an individual who it later learns committed a crime that would normally disqualify the individual from licensing, the state authority:
Can prohibit the licensee from conducting further business
Assuming the existence of a permissible purpose, which of the following constitutes permission to order someone's credit report?
Completing a 1003
A securities broker was convicted of felony embezzlement ten years ago. She is now applying for a mortgage license. Her license application will be:
Denied since the felony conviction involved dishonesty
DU stands for:
Desktop Underwriter
An applicant earns $575 bi-weekly. What is their annual income?
Earnings amounting to $575 bi-weekly translate to $14,950 annually (575 x 26).
Which of the following would characterize responsible ARM origination?
Ensuring that the applicant is aware of and prepared for the loan's worst-case scenario
Another term for the Initial Escrow Statement is the:
Escrow Accrual Sheet
In accordance with the Patriot Act, mortgage lenders are required to:
Establish an anti-money laundering plan
If a construction worker earns $3,800 monthly, what is his weekly income?
If the construction worker's monthly income is $3,800, his annual income is $45,600 (3,800 x 12). If his annual income is $45,600, his weekly income is $876.92 (45,600 / 52).
Denied since the felony conviction involved dishonesty
If the firefighter earns $56.00 per hour plus a 7% shift differential, by multiplying her standard hourly rate of $56.00 by 107%, her true hourly rate is determined to be $59.92.
A customer applies for a loan amount of $250,000. What would his down payment have to be in order to avoid PMI?
If the loan amount is $250,000 the loan would have to be at an original LTV of 80% to avoid PMI. An 80% LTV on a loan amount of $250,000 equates to a purchase price/appraised value of $312,500. A 20% down payment on a purchase price/appraised value of $312,500 amounts to $62,500.
Two loans together constitute a 75% CLTV. The first mortgage constitutes a 60% LTV. What is the balance of the second mortgage, assuming the property value is $245,000?
If the property value is $245,000 and both outstanding loans constitute 75% of that with the first mortgage constituting 60%, the second mortgage would have to constitute 15%. 15% of a $245,000 property value equates to $36,750.
A home is purchased for the appraised value of $165,000. The customer puts down 10% on his conventional loan. How much more will the customer have to pay in principal for the PMI to be automatically removed, assuming a good payment history?
If the purchase price is $165,000 and the customer puts down 10%, the loan amount equates to $148,500. Once the LTV reaches 78%, the PMI will be automatically removed, assuming a good payment history. The 78% LTV will be achieved once the balance reaches $128,700. If the loan amount starts at $148,500, an additional $19,800 will have to be paid against principal to reach the $128,700 balance, equating a 78% LTV.
Upon receipt of a consumer request for a fraud alert, a CRA must:
Immediately add a fraud alert to the consumer's credit profile, and share the fraud alert request with the other CRAs
If a consumer disputes a delinquency to a creditor, that creditor must:
Indicate the dispute along with any reporting of the disputed information
A unique identifier:
Is a permanent assignment
