MLO Practice Test 2

14) The Rate-Checker Owning a Home Tool is available where? A. CFPB Website. B. NMLS Resource Center. C. HUD Website. D. U.S. Government Printing Office.

A

4) All of the following are true of Section 10 of RESPA, except:​ A. Section 10 requires lenders to impose an escrow account on all loans with an LTV over 80%. B. According to Section 10, a mortgage loan that includes mortgage insurance must have an escrow account. C. A higher priced loan must have an escrow account for at least twelve months. D. Section 10 of RESPA deals with escrow accounts, which in California usually refers to impound accounts.​

A

41) Settlement charges that are regulated by the 10% cumulative tolerance rule include which of the following: A. Third party charges and recording fees. B. Charges the borrower can shop for. C. Any charge paid directly to the creditor. D. Transfer taxes.​

A

5) According to the new standards of TILA-RESPA, a complete loan application is defined as which of the following: ​A. The initial six items of information that the MLO receives and nothing further. B. The initial six items of information that the MLO receives plus the borrower's credit report. C. The initial six items of information that the MLO receives plus the credit report and income verification. D. The initial six items of information that the MLO receives plus letters of referral for verification of credit and integrity.

A

49) If a revised Loan Estimate is required, when must it be provided? A. The creditor must deliver or place it in the mail no later than 3 business days after receiving sufficient information to make a credit decision. B. Anytime after the Closing Disclosure has been provided to the borrower. C. So long as it's within 3 days prior to consummation of the loan. D. As soon as possible, so long as it's delivered electronically.​

A All other answers are not true.

18) Which of the following is additional information provided on the new Loan Estimate form and not on prior disclosure forms: A. Comparison of payments made and principal reduction in the first five years of the loan. B. Points for a specific interest rate chosen. C. Origination charge. D. Transfer taxes.​

A Provides good information for a first time buyer or one with little experience.

28) If the MLO is preparing the Loan Estimate form but does not know the wholesale lender's name, how must this be handled? A. Leave the space on the form blank. B. Mark the space N/A. C. Mark the space to be determined. D. The MLO must hold onto the form and apply for an extension of the 3 business day disclosure requirement.​

A This is the way federal regulations require this situation to be handled.

24) MLO Gretchen gave borrower Don an itemized closing cost statement for a proposed mortgage loan. What else must the MLO do? A. The top of the first page must contain the statement, "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan." B. Guarantee the return of all fees paid if the borrower changes his mind. C. Initially collect only for credit, appraisal, and termite inspection fees. D. The MLO must also provide a list of HUD approved Housing Counselors.​

A When the borrower has submitted a complete application, the MLO will issue all required disclosures within 3 business days.

25) According to federal regulations, the new Loan Estimate form does not apply to which of the following: A. FHA loans. B. HELOCs. C. VA loans. D. Conventional purchase money loans.​

B Home equity lines of credit are exempt from the Loan Estimate form.

1) The document which combines the Truth in Lending Statement required by TILA and the Good Faith Estimate required by RESPA is which of the following: A. The Home Loan Toolkit. B. The Loan Estimate. C. The Mortgage Servicing Disclosure Statement. D. The Closing Disclosure.​

B

17) Which of the following is additional information provided for the borrower on the new Loan Estimate form: A. Escrow account information. B. Total payment while mortgage insurance is in place compared to when it is no longer in place. C. Estimate of settlement charges. D. Total APR.​

B Again, more complete information for the consumer.

43) A local survey is ordered and the creditor discloses a charge of $400. The survey is waived by the borrower and never obtained. Since the charge falls into the category of 10% cumulative tolerance, how should this be handled? A. Remove the $400 charge, but charge the borrower a $100 penalty for the change. B. Remove the charge from the aggregate calculation prior to analyzing the amount for a 10% variance. C. Follow the complex formula to deduct the 10% cumulative tolerance charge after all totals have been included. D. Charge $40 for the 10% tolerance factor.​

B Extract the survey charge prior to analyzing the aggregate calculation.

47) When the Loan Estimate is mailed to the borrower, when can the MLO collect other fees?​ A. Immediately, whether or not the borrower has indicated the intent to proceed. B. Within 3 business days if the borrower has indicated the intent to proceed. C. The next day. D. The day after tomorrow.​

B If faxed or emailed, other fees could be collected the next day if proof of receipt is faxed or email back. For effective test preparation, know all situations pertaining to transmitting the LE.

20) Which of the following is handled differently on the new Loan Estimate form from previous disclosure forms: A. Charge for homeowner's insurance. B. Estimated cash to close shows earnest money deposit deducted. C. Daily interest charges. D. Cost of services borrower can shop for.

B Once again, this is to clarify for the borrower the amount of cash due at closing. This helps a first time buyer understand exactly what they need to provide at closing.

36) All of the following are valid changed circumstances according to RESPA, except: A. A natural disaster occurs in the immediate area of the subject property affecting many of the costs of the transaction. B. A creditor provides the required disclosures prior to receiving the property address from the consumer. C. During underwriting, a neighbor of the seller, learning of the impending sale of the property, files a claim contesting the boundary lines of the property to be sold. D. During underwriting, a co-borrower becomes unemployed.

B The MLO cannot simply add the property address and call that a changed circumstance. The significance of having a legitimate changed circumstance is that it becomes a valid reason to issue a revised Loan Estimate to revise settlement costs or add charges.

11) The basic idea of the new TRID requirements is which of the following: A. To impose specific penalties on MLOs who are in violation of the new requirements. B. To provide more information to the consumer so they can make better decisions. C. To allow consumers to escape liability for loan obligations. D. To raise the level of competition among MLOs.​

B These requirements are for the benefit of the consumer.

7) The disclosure required within 3 business days of application that leads to advice for the borrower about whether a particular set of mortgage loan terms is a good fit based on the borrower's objectives and circumstances is which of the following: A. Mortgage Servicing Disclosure Statement. B. List of HUD-Approved Housing Counselors. C. Home Loan Tool Kit. D. Loan Estimate.

B This feature places another set of eyes on the process and ensures the loan is a good fit.

45) If the amount paid by the consumer at closing exceeds the amounts disclosed on the Loan Estimate beyond the acceptable tolerance threshold, the creditor must refund the excess to the consumer within what time frame? A. Within 30 days of closing. B. Within 60 days of consummation. C. Within 75 days of funding. D. Within 45 days of closing.​

B This is a new CFPB rule.

31) The estimate of the charges and terms for all settlement services may remain available longer under which of the following circumstances: A. If the lender authorizes an extension. B. If the MLO extends the period of availability. C. If the Fed hikes the interest rate. D. If the borrower wants to close quickly.​

B This would be done based on the borrower's circumstances and the MLO's anticipation of a timely closing.

29) After a complete loan application has been provided by the borrower, which of the following has the ultimate responsibility for correct and timely delivery of disclosures to the consumer:​ A. The MLO. B. The creditor. C. The trustee. D. The MLO and lender have equal responsibility.

B Though the mortgage broker (MLO) often acts as an extension of the creditor, the law places the responsibility for correct and timely delivery of disclosures on the creditor.

27) The new regulation in expressed in the Loan Estimate applies to all of the following, except: A. Vacant land. B. Loans made to a business entity. C. Construction loans. D. Loans made to certain trusts for tax and estate planning purposes.​

B To be properly prepared for the test, you should be familiar with all situations where the Loan Estimate applies and does not apply.

12) The Rate-Checker is which of the following: A. Essentially a handbook of amortization tables showing monthly payments. B. A booklet available from any lender or MLO showing the PITI monthly payment based on a specified interest rate. C. A CFPB Owning a Home Tool that helps consumers explore interest rate options available to them. D. A device which discriminates against borrowers who don't have Internet access.

C Again, the objective is to have more information to benefit the consumer in the decision-making process.

44) Charges on the Closing Disclosure that must match exactly the charges on the Loan Estimate include all of the following, except: A. Any charge paid to the MLO for the origination of a mortgage loan. B. Any charge paid to a non-affiliate for a settlement service that the borrower is not permitted to shop for. C. Homeowner's insurance. D. Transfer taxes.​

C Homeowner's insurance is a charge that can change by any amount. In this question we are identifying charges that cannot change.

30) The estimate of the charges and terms for all settlement services must be available for which of the following periods of time: A. At least 5 business days. B. At least 10 days. C. At least 10 business days. D. At least 15 business days.​

C Keep in mind this does not apply to the interest rate or charges and terms dependent on the interest rate, like per diem interest, or adjusted origination charges, or the charge or credit for the interest rate chosen

35) The original Loan Estimate is determined to have been made in good faith according to which of the following: A. When the borrower is generally happy with the outcome. B. If the actual costs are greater than the original Loan Estimate. C. By looking at the difference between the initial cost estimate and the final costs charged at loan closing. D. If there are no changed circumstances.​

C Obviously, if actual charges surpass the allowed tolerance thresholds, the assumption is the Loan Estimate was not made in good faith.

8) At the beginning of the loan process, the MLO must provide certain disclosures to the borrower upon the happening of which event? A. Submission by the borrower of a Letter of Intent to the MLO. B. Payment of application fee by the borrower. C. When a consumer provides information sufficient to complete the loan application. D. Receipt of the appraisal.​

C Receipt of this information begins the flow of information to the borrower within three business days of application.

21) Which of the following is information unique to the Loan Estimate form: A. APR. B. LTV. C. TIP. D. MIP.

C TIP is the total interest percentage, the total amount of interest the borrower will pay over the loan term as a percentage of the loan amount.

13) Used properly, the Rate-Checker can accomplish for a borrower which of the following: A. Approve or deny their loan. B. Give personal advice as to whether the loan the consumer is getting is good for them. C. Shows the rates borrowers like them are being offered. D. It incorporates information from the lenders' external rate sheets.​

C The Rate-Checker provides useful information for the consumer to incorporate into the decision making process.

9) The Real Estate Settlement Procedures Act (RESPA) is also known as which of the following: A. Regulation B. B. Regulation C. C. Regulation X. D. Regulation Z.​

C This is a statement of fact. It is helpful to verbally call it REXPA.

16) An addition to information provided in the GFE and the Truth in Lending Statement, found in the new Loan Estimate form is which of the following: A. The finance charge as a dollar amount is disclosed. B. The APR is disclosed. C. An interest rate lock is disclosed. D. Whether or not the loan has a balloon payment.

C This is found on the first page of the Loan Estimate.

37) All of the following are valid changed circumstances according to RESPA, except: A. A creditor provides an estimate of title insurance costs but the title insurer goes out of business during the underwriting. B. A borrower requests a cash out loan at a higher loan-to-value ratio because of a higher than expected appraised value. C. Receipt of any items of information that are part of the complete application after the Loan Estimate has been provided. D. The borrower does not initially lock an interest rate but does so after the Loan Estimate is delivered.​

C This is just adding information that should have already been received and is not regarded as a legitimate changed circumstance.

2) Until the Loan Estimate disclosure and other required disclosures are delivered to the borrower, an MLO may charge the borrower which of the following fees: A. Appraisal fee. B. Termite inspection fee. C. Credit report fee. D. Survey fee.

C This is the only fee that can be collected prior to delivery of required disclosures at this stage of the loan origination process.

46) When the Loan Estimate is hand-delivered to the borrower, when can the MLO collect other fees? A. The next day. B. Tuesday. C. That day. D. Within 3 business days.​

C This is true so long as the borrower has indicated intent to proceed.

19) All of the following are on the original GFE, except: A. List of charges that can change at settlement. B. Initial deposit for escrow (impound) account. C. Estimated closing costs minus lender's credits. D. Charge for title service and lender's title services.

C This to clarify the amount the buyer will have to provide to close.

39) TILA-regulated tolerance limits on settlement service provider charges that can change by any amount include all of the following, except: A. Services the borrower is allowed to shop for. B. Prepaid interest. C. Transfer taxes. D. Flood insurance.​

C Transfer taxes are charges that are stipulated based on the selling price of the property and cannot change by any amount.

6) TRID is an acronym which stands for which of the following: A. Technical Reversal of Insurance Directive. B. Tolerance-Restricted Insurance Decision. C. TILA-RESPA Integrated Disclosure. D. Tentative Retroactive Identification Development.

C With these revisions, the process of originating a mortgage loan has significantly changed.

3) The Loan Estimate is required for use on all mortgage loans originated after which of the following dates: A. April 1, 2011. B. January 1, 2014. C. July 1, 2010. D. October 3, 2015.

D

40) The TILA-regulated 10% cumulative tolerance on settlement service provider charges is best described as which of the following: A. The creditor may charge the consumer more than the amount disclosed on the Loan Estimate. B. The total sum of the applicable charges added together cannot exceed the sum of those charges disclosed on the Loan Estimate by more than 10%. C. The creditor may never charge the borrower more than the amount listed on the Loan Estimate. D. A & B.​

D

22) Which of the following is information made available to the borrower through the new Loan Estimate form that was not made available to the consumer through previous disclosure forms: A. Delivery of the appraisal to the borrower. B. The likelihood of future refinance transactions of the subject loan. C. A place for borrowers to sign and confirm that they have received the Loan Estimate. D. All of the above.​

D Again, more information for the first time buyer. It is believed that more information leads to better decisions on the part of the consumer.

38) A creditor may issue a revised Loan Estimate in which of the following circumstances: A. When a borrower receives a Loan Estimate from an MLO and does not provide an intent to proceed, and the borrower re-engages in the transaction after the expiration date of the Loan Estimate. B. When the transaction involves the financing of new construction and the creditor reasonably expects that settlement will occur more than 60 calendar days after the original Loan Estimate has been provided. C. Any time a valid changed circumstance has occurred that has altered the material facts of the transaction. D. All of the above.​

D All of these are legitimate reasons to issue a revised Loan Estimate.

48) In which of the following ways can the Loan Estimate be properly conveyed to the borrower: A. Faxed. B. Emailed. C. Mailed at U. S. Post Office. D. All of the above.​

D And of course, the LE can be placed in the hand of the borrower.

33) The 10-business day provision for the estimate of charges and terms for all settlement services does not apply to which of the following: A. The interest rate .B. Charges and terms dependent on the interest rate. C. The charge or credit for the interest rate chosen, the adjusted origination charges, and per diem interest. D. All of the above.

D Because the 10-business day provision does not lock the interest rate, many borrowers in cooperation with the MLOs like to lock the interest rate to avoid disappointment.

32) The expiration period for the availability of charges and terms is located where on the Loan Estimate? A. Page 2 of the Loan Estimate in the Loan Costs section. B. Page 1 of the Loan Estimate in the Loan Terms section. C. Page 3 of the Loan Estimate in the Other Considerations section. D. Page 1 of the Loan Estimate in the Rate Lock section.​

D For good test preparation, it is recommended that the student get very familiar with the new forms—what's on the forms, where different items are located, what the various provisions mean and what their purpose is. Look for what benefit there is to the consumer.

10) The MLO does not have to provide the RESPA-required disclosures at the beginning of the loan process under which of the following circumstances: A. If the borrower withdraws the application before the end of the 3 business day period. B. If the lender turns down the loan before the end of the 3 business day period. C. If the MLO sincerely feels that the borrower is not likely to successfully resolve the debt incurred with this loan. D. A & B.

D In these circumstances, the MLO does not have to issue the disclosures.

50) Under all of the following circumstances a revised Loan Estimate may not be provided to a borrower, except: A. If it cannot be received by the borrower four days prior to consummation of the loan. B. When there will be no changes to the original Loan Estimate. C. When the Closing Disclosure has already been provided to the borrower. D. When valid changed circumstances exist.​

D Of this list of answers, this is the only under which a revised Loan Estimate may be provided.

23) Under the Loan Estimate, the MLO may not obtain a credit/debit card number to pay for miscellaneous fees until which of the following occurs: A. Required disclosures have been delivered to the borrower. B. Borrowers acknowledge their intent to proceed with the mortgage loan. C. Borrowers give their permission for the MLO to collect for the fees. D. A & B.

D Once the required disclosures have been delivered to the borrowers and they have indicated their intent to proceed with the loan, the MLO can collect for additional fees.

26) The new Loan Estimate form does not apply to which of the following, according to federal regulation: A. Mobile homes. B. Time shares. C. Reverse mortgages. D. All of the above.​

D The Loan Estimate also does not apply to loans made by a person or entity that makes five or fewer loans per year, and a loan made to a business entity rather than a natural person.

15) The Home Loan Toolkit is best described as which of the following: A. The Toolkit is a booklet designed to replace the HUD Special Information Booklet. B. The Toolkit comes in an electronic version. C. The online Toolkit is interactive and progressive. D. All of the above.​

D The Toolkit is versatile so that it can benefit all consumers at their level.

34) Borrowers and lenders often agree to a rate lock for a predetermined period of time for which of the following reasons: A. Because the 10-business day provision does not lock the interest rate. B. Because the 10-business day provision does not apply to the charge or credit for the interest rate chosen. C. Because the 10-day provision does not apply to the adjusted origination charges and per diem interest. D. All of the above.​

D The rate lock will stabilize all of these charges.

42) Which of the following best describes third party charges: ​A. Fees paid to any party other than the creditor. B. Fees paid to any party other than affiliates of the creditor. C. Fees for services the borrower Is not allowed to choose. D. All of the above.​

D Third party charges include the appraisal fee, credit report fee, flood certification, private mortgage insurance, termite inspection report, recording fees, surveys, and other fees.