MLO Practice Exam 3
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 construction loan A reverse mortgage A HELOC A bridge loan
A HELOC
If an underwriter needs to verify a borrower's down payment, what might they request the processor order? A VOR A VOM A VOE A VOD
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.
If the borrowers wanted to be sure that the interest rate available at the time of their application would be the same when they closed on their home purchase, they should: Discount points to obtain the rate "Buy down" the interest rate "Lock" their interest rate Pay an YSP/SRP to ensure the rate
"Lock" their interest rate
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? 2 years from the discharge date 5 years from the discharge date 4 years from the discharge date 7 years from the discharge date
4 years from the discharge date
Which of the following is not exempt for licensure under the SAFE Act? A processor Loan closer Escrow Officer An independent contractor underwriter
An independent contractor underwriter
What is the appraiser most interested in when determining the value of an income property? Location Projections of rent and expenses Cash flow Interest rates
Projections of rent and expenses
The purpose of Fannie Mae and Freddie Mac is to: Insure all loans Reinsure or guarantee just FHA and VA loans Make all loans Provide a liquid source of funds to the primary market mortgage lenders
Provide a liquid source of funds to the primary market mortgage lenders
Which of the following situations is not a red flag that illegal flipping may be taking place? An inflated appraisal Purchasing and remodeling a house and selling it for a quick profit A group of sellers and buyers changing ownership of one property among them 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
Regulation X is also known as what law? FHA TILA FCRA RESPA
RESPA
Which law requires a Mortgage Servicing Disclosure Statement? RESPA SAFE Act MDIA TILA
RESPA
Underwriters calculate overtime income for a loan by: Never allowing overtime income. 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.
Taking a two year average of the overtime income.
If two people are married, how do they likely hold title? Tenancy in Common Tenancy by the Entirety Joint Tenancy Ownership in severalty
Tenancy by the Entirety
The NMLS will not charge fees for which of the following? Renewal Fee A processing fee for ACH payments Credit Report Fee Criminal Background Fee
A processing fee for ACH payments
Which of the following is the best comparable to use for a loan? A similar home that is currently under contract A recently sold home, in the neighborhood, similar to the subject property An almost identical home, recently sold in foreclosure Three similar homes currently listed on the same street
A recently sold home, in the neighborhood, similar to the subject property
What is the period between rate changes in an ARM called? Adjustment period Index period Change period Term period
Adjustment period
When are the funds disbursed for an owner-occupied residential refinance? After the loan documents are recorded At the time of the loan closing After the three business-day right of rescission period has expired Within seven days after the application
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 Loan flipping Ponzi scheme Extortion
Bait and switch
One purpose of the Fair and Accurate Credit Transaction Act is to prevent: Loss of borrower Predatory lending Identity theft Discrimination in lending
Identity theft
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: review the credit report with the borrower for inaccuracies. recommend credit counseling to the borrower. 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.
provide the agency contact information required for the consumer to obtain a free copy of the credit report used.
A lender may keep the: yield spread premium and discount points. Origination Fee discount points and appraisal fee. credit report fee and yield spread premium.
Origination Fee
Which of the following is NOT a finance charge in a residential mortgage loan? Owner's Title Insurance Mortgage broker fee Loan origination fee Mortgage insurance premium
Owner's Title Insurance
Discount points would only be used if the interest rate offered to the borrower were which of the following? The prime rate Below par Above par Par or anything above par
Par or anything above par
If a Mortgage Loan Originator (MLO) cannot close a loan, he/she can refer the loan to another MLO who can close the loan. Can the referring MLO receive a referral fee? A referral fee can be paid as long as it is disclosed on the Settlement Statement (HUD-1). Paying a referral fee is allowed if the borrower approves it. A referral fee is earned and should be paid to the first MLO. Paying a referral fee is against RESPA.
Paying a referral fee is against RESPA.
MLOs are required to be covered by a: Performance Bond Payment Bond Surety Bond Statutory Bonds
Surety Bond
On an interest-only loan of $216,000, 30 years, at 7.25% interest, how much interest would be paid in nine months? $12,997.63 $12,933.75 $11,745.00 $11,236.96
$11,745.00
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 $15,000 $43,792 $32,000
$87,584
If the APR on the initially disclose fixed-rate loan CD increases by more than what number, a new 3 business day waiting period before consummation is required. .250 percent .125 percent .500 percent . 375 percent
.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 4 years 7 years 3 years
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? 1 year from the credit discharge date 3 years from the credit discharge date 5 years from the credit discharge date 7 years from the credit discharge date
1 year from the credit discharge date
An affiliated business arrangement must be disclosed beginning with what percent of an ownership interest? 1% ownership over 10% ownership If more than 5% is owned the affiliated company cannot be used a 25% ownership
1% ownership
The borrowers are purchasing a house with a sales price of $300,000 they put 30% as a down payment. If they paid $3,150 in points, how many points does that represent? 1.5 2.25 1.05 2
1.5 To determine discount points we first need to discover the loan amount, 30% of $300,000 is $90,000. $300,000 - $90,000 gives us a loan amount of $210,000. Discount points are generally 1% of the loan amount. 1% of $210,000 is $2,100 would get us 1 point. If the borrower paid $3,150, they paid for 1.5 points.
The estimate of closing costs on the mortgage loan disclosed on the Loan Estimate are good for: 21 days 10 days 7 days 3 days
10 days
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? 60 90 30 15
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 3 hours of ethics training 2 hours of training related to nontraditional mortgage products 3 hours of Federal law and regulations
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? 6 months 2 years 3 years 1 year
2 years
After the crisis of the Great Recession according to VA underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? 5 years from the discharge date 7 years from the discharge date 3 years from the discharge date 2 years from the discharge date
2 years from the discharge date
ECOA requires the appraisal be given to borrowers: 30 days after settlement. Immediately after settlement. 3 days before settlement. 1 day before settlement.
3 days before settlement.
After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a foreclosure? 5 years from the deed transfer date 2 years from the deed transfer date 7 years from the deed transfer date 3 years from the deed transfer date
3 years from the deed transfer date
After the crisis of the Great Recession according to FHA underwriting when can a borrower repurchase again after a short sale? 2 years from the deed transfer date 7 years from the deed transfer date 3 years from the deed transfer date 5 years from the deed transfer date
3 years from the deed transfer date
A lender has how many business days to notify the borrower of an underwriting decision? 60 10 30 3
30
The FACTA allows a consumer to dispute inaccurate credit information. H How many days are allowed for an incorrect item to be investigated? 60 90 30 120
30
When is a Notice of Adverse action required when the borrower applies for a loan? 30 days 90 days 60 days 10 days
30 days
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 4 days consummation or closing 7 days consummation or closing 10 days before consummation or closing
4 days consummation or closing
Allison is being relocated for work and wants to purchase a new home in the area she's moving to, but she still owns her current home and cannot afford to buy a new home while she still owns her old home, what is a good option for Allison? A balloon mortgage A construction loan A bridge loan A GPM
A bridge loan
Which is considered an illegal referral fee? An employee of a lead generating company referring a potential borrower to an MLO MLOs pursuing lead from past borrowers A lead generating company getting a higher fee if the lead closes MLOs buying leads from a legitimate lead generating company
A lead generating company getting a higher fee if the lead closes
When a deed of trust is recorded, which of the following is true? A lien is created Ownership is conveyed It verifies both the lender and borrower signed the document A lien is released
A lien is created
Which of the following needs to be licensed in the mortgage industry? Processors, underwriters, and assistants who are W2'd employees a person or entity solely involved in extensions of credit relating to timeshare plans. An individual who offers or negotiates terms of a residential mortgage loan for compensation or gain An individual working for a mortgage company, not performing origination activity
An individual who offers or negotiates terms of a residential mortgage loan for compensation or gain
A yield spread premium occurs when: An interest rate that is equal to the lender's par rate is charged. An interest rate is charged below the par rate and is a credit to the borrower. The mortgage rate is bought down. An interest rate is charged above the par rate and is a credit to the borrower.
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: Yield spread premium. P.O.C. (paid outside of closing). An origination fee. Discount point(s).
An origination fee.
How often must a lender perform an escrow account analysis to ensure that excess funds are not being kept? Annually Twice a year Once every two years Once a month
Annually
Which of the following is true about asking a borrower questions about divorce? If you suspect a divorce based on visual evidence, questions may be asked. 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. 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.
HMDA is implemented as what Regulation? C Z B X
C
Surrender of an MLO license does not affect the MLO's: Civil or criminal liability for acts committed prior to the surrender. Ability to originate loans as an employee for a licensed lender. Ability of taking loan applications as an independent contractor. Ability to process loans as a contract processor.
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 Land is never given a separate value Market or sales approach Income method
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.
Form 1003 Section 8: Information for Government Monitoring Purposes is used in order to comply with which federal law? Fair Credit Reporting Act Home Mortgage Disclosure Act Truth in Lending Act Community Reinvestment Act
Home Mortgage Disclosure Act
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 10 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 30 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
Disclose to the applicant that they can request the reasons for the denial within 60 days of receiving the lenders notification
Regulation B is also known as: HMDA ECOA TILA RESPA
ECOA
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 TILA RESPA HMDA
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: The borrower's race. Psychological state of the borrower. Economic health of the borrower. Physical state of the borrower.
Economic health of the borrower.
What does the acronym ECOA stand for? Equal Credit Opportunity Act Equal Credit Originations Act Economic Concern in Outlying Areas Equality of Credit Obligations Act
Equal Credit Opportunity Act
The most commonly used conventional underwriter guidelines are established by: VA/FHA. GNMA and FNMA. Federal Reserve. FNMA and FHLMC.
FNMA and FHLMC.
Relevant financial information about an applicant who applies for an FHA or conventional residential mortgage is entered on: FNMA form 1008. FNMA form 1003. FHLMC form 95. FNMA form 1005.
FNMA form 1003.
In the testing of loan originators, you must take a qualified test that measures knowledge and comprehension in which areas? Ethics and Federal Laws Federal law, mortgage origination, and ethics Federal and State law and regulation pertaining to mortgage origination 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
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
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 AfBA disclosure to the borrower at or prior to the time the referral is made Disclose the relationship only if the borrower asks. Also provide a list of alternative real estate companies to the borrower. Not make the referral. Referrals are prohibited by RESPA.
Give full AfBA disclosure to the borrower at or prior to the time the referral is made
Which of the following is true of an ARM? ARM rate + margin = index rate Initial rate + margin = ARM rate Margin + cap = ARM rate Index rate + margin = Fully Indexed rate
Index rate + margin = Fully Indexed rate
If borrower Jill has a loan with an LTV of 95% how would her PMI change if she put an extra 5% down to bring her LTV to 90%? It would depend solely on the loan amount It would stay the same It would be lower It would be higher
It would be lower PMI is determined based on credit score, property type, loan type and the loan to value
A loan's APR must be disclosed to the consumer on the: Loan Estimate. Servicing Disclosure Statement. Loan Application Register (LAR). GFE.
Loan Estimate.
Is a referral fee ever allowed? Only to a lawyer that refers a loan Only to a disclosed provider No No, unless disclosed on the HUD and paid for by borrower
No
An alternative documentation loan is a type of: Reverse mortgage Seller financing NonConforming Adjustable rate loan
NonConforming
What information does HMDA require lenders to request from applicants in a face to face interview for home mortgage loans? Religion of the applicant Source and seasoning of the down payment Number of children the applicant has Race, Sex and Ethnicity
Race, Sex and Ethnicity
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: Withdraw the initial application and start over Redisclose because of a changed circumstance Redisclose because of a change of program Suspend the initial application for 30 days
Redisclose because of a changed circumstance
Which best describes the 4506-C? Permission for appraisal waiver Transmittal Summary Request for Tax Return Transcripts Permission for E-signatures
Request for Tax Return Transcripts
Regulation Z is also known as which of the following? RESPA ECOA TILA FHA
TILA
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 Schedule C net income Form 1040 adjusted gross income Expenses reported on Form 2106
Schedule C net income plus non-cash expenses and depreciation
Where, in the TILA, is the explanation for higher-priced loans located? Section 42 Section 32 Section 23 Section 35
Section 35
What is HOEPA also known as? Sections 30 & 32 Sections 33 & 35 Sections 34 & 36 Sections 32 & 35
Sections 32 & 35
S.A.F.E. Act is the acronym for: Safe And Federal Enforcement Act. Secure and Fair Enforcement for Mortgage Licensing Act. Secondary Amortizing Federal Efficiency Act. Safe And Sound Financial Emergency Act.
Secure and Fair Enforcement for Mortgage Licensing Act.
Trevor is looking to obtain an ARM loan, his MLO is required to disclose what within 3 days of application? The Goodbye Letter The Closing Disclosures The Consumer Handbook on Adjustable Rate Mortgages The Home Loan Toolkit
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 Consumer Handbook on Adjustable Rate Mortgages The Goodbye Letter The Home Loan Toolkit The Closing Disclosures
The Home Loan Toolkit
An MLO is working on disclosing a borrower's Loan Estimate, which of the following is true: The MLO cannot collect any fee before disclosing the 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 can collect an application fee before disclosing that LE
The MLO can only collect a credit report fee before disclosing that LE
Which of the following is NOT a minimum standard for licensing as a state-licensed loan originator? The applicant has never had a loan originator license revoked. The applicant has completed pre-licensing education and has passed an approved test. The applicant has not been convicted/guilty of a felony in the 7-years preceding the date of application for licensing. The applicant has demonstrated financial responsibility through maintaining a credit score above 600 points.
The applicant has demonstrated financial responsibility through maintaining a credit score above 600 points.
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
Approval of a reverse mortgage application will be largely based on which of the following? The borrower's income The borrower's credit report The borrower's equity The current loan interest rate
The borrower's equity
MLO Josh is working with Javier. Josh knows that HOEPA requires a specific counseling disclosure on all federally related high-cost transactions. What is not true about that disclosure? The disclosure must be sent 3 days prior to consummation The disclosure must include 10 housing counselors The disclosure is a list of housing counselors The disclosure must be sent within 3 business days of application
The disclosure must include 10 housing counselors
There are two loans; one is interest-only and the other is fully amortized. The original loan amounts, ending maturity dates, and interest rates are the same for two loans. Knowing that, which of the following is true? The fully amortized loan will have higher monthly payments The first loan will have a lower interest cost. The other loan will have a balloon payment. The first loan will be paid off quicker because it is interest only payments.
The fully amortized loan will have higher monthly payments
What can you tell a borrower about a 7/1 ARM? The interest rate may only go up 7% over the life of the loan starting the 1st year. The interest rate is locked for the first year and may only go up 7% over the life of the loan. The interest rate may go up only 1% each year for 7 years. The interest rate is fixed for the first 7 years then is a variable interest rate.
The interest rate is fixed for the first 7 years then is a variable interest rate.
Which of the following is not true about HOEPA? The late fee on a high-cost home loan cannot exceed 3% It makes recommending default on a high-cost transaction illegal It prohibits negative amortization on high-cost home loans It makes charging fees for a payoff statement prohibited
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.
When a self-employed borrower is a 25% owner of his business, which of the following documents is required? Articles of incorporation The past two years balance sheets The past two years' business tax returns The past two years profit and loss statements
The past two years' business tax returns
How many business days after a mortgage loan application does a mortgage loan originator have to mail the Loan Estimate to the borrower? One Four Two Three
Three
The length of the rescission period for a refinanced owner occupied mortgage loan is: Three business days including Saturday and Sunday excluding holidays. Five business days, excluding legal public holidays Five business days including Saturday and excluding Sunday and holidays. Three business days including Saturday and excluding Sunday and holidays.
Three business days including Saturday and excluding Sunday and holidays.
What are the terms of the "cooling off" period if a loan falls under HOEPA? Three business days prior to closing Seven business days prior to closing 30 business days after closing Three business days after closing
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 One year Seven years Five years
Three years
Why was Regulation Z enacted? Enable banks to sell mortgages more easily Prevent discrimination based on race ethnicity or gender Require lenders to protect borrower's non-public information To give borrowers disclosures regarding the APR to compare lender offers
To give borrowers disclosures regarding the APR to compare lender offers
Which of the following statements best describes Form 1008? Underwriter request for more information Transmittal summary FHA loan application FNMA/FHLMC loan application
Transmittal summary
How much money is required for fire insurance on a refinance at settlement? Whatever is needed to renew coverage when the insurance expires 1 year 14 months 2 months
Whatever is needed to renew coverage when the insurance expires
What are the three categories of fee tolerances on the Loan Estimate? Zero, 10% and Unlimited tolerance 10%, 10% and Zero tolerances Zero, 3% and 10% tolerance Zero, 10% Cumulative and No Tolerance
Zero, 10% Cumulative and No Tolerance
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 purchase transaction
cancel a refinance transaction.
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 unethical but okay because he is family. illegal and ethical. illegal and unethical. legal and ethical because he is within his marketing plan.
legal and ethical because he is within his marketing plan.
The purpose of a Market Conditions Addendum is to: provide the lender with an understanding of the market trends and conditions in the subject property. replace the need for a full appraisal. reveal prior marketing efforts by any realtor. 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.
Regulation Z applies to all: agricultural purchase transactions. residential real estate mortgage transactions. business loans with collateral. commercial real estate loans.
residential real estate mortgage transactions.
