Mortgage Study Guide

A homeowner's house appraises for $125,000. He qualifies for an 85% LTV. He owes $63,000 on his first mortgage and $5,000 on his second mortgage. He would like to refinance his house into one mortgage loan and receive additional cash to pay off other debt. How much cash would be available if his closing costs are $4,200 and are financed in the loan? A. $34,050 B. $38,250 C. $43,250 D. $52,800

A. $34,050 $125,000 multiplied by an 85% LTV results in a maximum loan amount of $106,250. Subtracting the $63,000 first mortgage, $5,000 second mortgage and $4,200 in closing costs leave $34,050 available for cash out.

The down payment requirement for a VA loan can be as little as _______. A. 0% B. 3.5% C. 5% D. 10%

A. 0% Eligible veterans do not need a down payment to get a VA loan.

A borrower is refinancing his home and signs the loan papers. How much times does Regulation Z give him to change his mind? A. 3 Business Days B. 30 Days C. 3 years D. He has no right of rescission

A. 3 Business Days When refinancing, Regulation Z gives a borrower three business days to rescind after the contract is signed.

What is NOT considered a protected class under the Fair Housing Act? A. Age B. Race C. Religion D. Sex

A. Age While other federal legislation prohibits discrimination due to age, the Fair Housing Act does not address age.

Provisions in title III of the USA Patriot Act amended which law? A. Bank Secrecy Act/Anti-Money Laundering Act B. Dodd-Frank Act C. Real Estate Settlement Procedures Act D. SAFE Act

A. Bank Secrecy Act/Anti-Money Laundering Act The BSA/AML was originally passed by the Congress of the United States in 1970, and amended several times since then, including provisions in the title III of the USA Patriot Act.

If an MLO or a real estate agent engages in the practice of soliciting homeowners in a particular community to sell their properties because people of other races, religions, or social status have purchased in the area, they would be guilty of _________________. A. Blockbusting B. Fraud C. Redlining D. Steering

A. Blockbusting Blockbusting is soliciting others to sell their properties due to the changes in a neighborhood.

Which act encourages financial institutions to help meet the credit needs of their community including low- and moderate-income neighborhoods, consistent with safe and sound lending practices? A. CRA B. HOEPA C. RESPA D. TILA

A. CRA The Community Reinvestment Act is intended to ensure that all neighborhoods are served by financial institutions.

A borrower wants to get a loan to buy a house. When evaluating his credit obligations, which would NOT be considered as debt. A. Cable service payment B. Car payment C. Child Support payments D. Credit Card Payments

A. Cable service payment His cable service payment is not considered part of his debt for qualifying purposes since cable services can be cancelled.

Which loans are not covered under HMDA? A. Commercial loans B. Home improved loans C. Home purchases for any residential dwelling D. Refinancing a loan previously covered under RESPA.

A. Commercial Loans The purpose of HMDA is to determine discrimination in lending for residential properties. This would not include commercial loans.

The CFPB was created by the: A. Dodd Frank Wall Street Reform and Consumer Protection Act B. Federal Home Loan Bank Act C. Federal Reserve Act D. National Housing Act

A. Dodd Frank Wall Street Reform and Consumer Protection Act

Which federal act required that a "Notification of Action Taken" form be delivered to the applicant within 30 days of application? A. ECOA B. HMDA C. RESPA D. TILA

A. ECOA The Equal Credit Opportunity Act requires the lender to provide the borrower an approval, notice of incomplete application, or a reason for rejection of credit in writing within 30 days of loan application.

RESPA's section 8 prohibits all fees EXCEPT _________. A. earned fees B. giving a referral fee C. receiving a referral fee D. unearned fees

A. Earned Fees RESPA's Section 8 prohibits any kinds of kickback, unearned fee, or referral fee. Earned fees are certainly allowed.

Disclosing income such as child support and alimony is not required of the borrowers. When this type of income is disclosed on the application, what federal act requires that it be considered in the approval process? A. Equal Credit Opportunity Act B. Fair Credit Reporting Act C. Home Mortgage Disclosure Act D. Truth in lending Act

A. Equal Credit Opportunity Act The Equal Credit Opportunity Act requires that, if the borrower wishes to disclose this information on the loan application, it must be used in the underwriting decision.

During the application process, an MLO ask if the borrower is widowed; he is violating which law? A. ECOA B. Fair Housing C. FCRA D. RESPA

A. Equal Credit Opportunity Act (ECOA) ECOA states an MLO can ask if the borrower is married, unmarried, or separated. The MLO may not ask if the borrower is widowed or single.

As of July 2011, all these laws are implemented an enforced by the Consumer Financial Protection Bureau (CFPB) EXCEPT the ____________________. A. Fair Housing Act B. Fair and Accurate Credit Transactions Act C. Fair Credit Reporting Act. D. Secure and Fair Enforcement for Mortgage Licensing Act.

A. Fair Housing Act The CFPB does not enforce the Fair Housing Act.

Conforming loans follow the underwriting guidelines of: A. Fannie Mae and Freddie Mac B. FHA and VA C. Freddie Mac and Ginnie Mae D. Ginnie Mae and HUD

A. Fannie Mae and Freddie Mac Traditionally, a loan is considered to be confirming when it meets Fannie Mae/Freddie Mac standards and can be sold on the secondary market.

While underwriting a loan file, you calculate this formula: PITI divided by gross monthly income. What have you just determined? A. Housing Expense Ratio B. Loan-to-Value Ratio C. Stable monthly income ratio D. Total Debt to income ratio

A. Housing Expense Ratio A borrower's housing expense ratio is the relationship of the borrower's total monthly housing expense to income, expressed as a percentage.

Which question would NOT be considered a violation of the ECOA, even if asked very innocently during the loan interview process? A. You look very young; can you provide proof that you're 18? B. your accent is really interesting, where are you from? C. Your name is unusual, what nationality is that? D. Your necklace is beautiful, is that a crucifix?

A. You look very young; can you provide proof that you're 18? While you could make an argument that each of these questions might violate ECOA guidelines related to discrimination, the question about the applicant's age may be necessary to prove that the applicant is old enough to legally enter into a contract.

Which mortgage clause allows a lender to declare the entire unpaid balance due on a borrower's default? A. acceleration B. escalator C. foreclosure D. forfeiture

A. acceleration The lender's right of acceleration can mean that a buyer who misses one or two payments may have to pay off the entire debt to save the home.

Mortgage brokers: A. act as intermediaries between borrowers and lenders B. originate and service mortgage loans C. provide funding for mortgage loans D. underwrite mortgage loans

A. act as intermediaries between borrowers and lenders Does NOT service, provide funding, or underwrite

A higher priced loan is defined by TILA as one that has ___________________. A. an APR that exceeds the applicable average time offer rate by at least 1.5% on first liens. B. an APR that exceeds the rates on Treasury securities of comparable maturity by more than 8%. C. total points and fees greater than 8% of the loan amount D. total points and fees greater than 10%.

A. an APR that exceeds the applicable average time offer rate by at least 1.5% on first liens 2009 amendments tot he Truth in Lending Act define a higher-priced loan as one with an APR that exceeds the applicable average prime offer rate by at least 1.5% on first lien loans or 3.5% for junior lien loans.

For which transaction must a lender follow the regulations of the Truth in Lending Act (TILA)? A. an application to purchase a duplex where the borrower will live in one unit and rent the other. B. an application to purchase a farm. C. an application to purchase a warehouse D. a corporation's application to purchase a condominium for the use of it's contract employees.

A. an application to purchase a duplex where the borrower will live in one unit and rent the other. TILA does not apply to business, commercial, or agricultural loans, loans payable with four or less installments and without a finance charge, or to loans made to corporations, partnership, associations, and agencies. The lender does have to follow the rules of TILA when the loan is for a residential property.

An opinion of value is also known as ______. A. an appraisal B. a comparable C. market value D. an offer

A. an appraisal The definition of appraisal is "an opinion of value."

The Privacy Rule of the Gramm-Leach Bliley Act requires that financial institutions provide the consumer with a Consumer Privacy Policy ________________. A. before disclosing information to non-affiliated third parties B. each time the servicing is transferred C. three business days prior to closing D. Within three business days of applying for a loan.

A. before disclosing information to non-affiliated third parties According to the Gramm-Leach-Bliley Act, this policy is required to be provided before disclosing information to non-affiliated third parties.

A convertible ARM allows a borrower to change _______. A. from an adjustable rate mortgage to a fixed rate mortgage. B. the index on which the interest rate is based. C. the margin when interest rates rise. D. the rate cap when interest rates fall.

A. from an adjustable rate mortgage to a fixed rate mortgage. A convertible adjustable rate mortgage gives a borrower the right to change from an adjustable rate mortgage to a fixed rate mortgage on time during the loan term, provided certain conditions are met.

Under Regulation Z, which advertisement would require full disclosure of credit terms? A. "Affordable rates available" B. "Assume loan at 8% interest" C. "Low down payment" D. We'll work with you"

B. "Assume loan at 8% interest" Regulation Z requires that once you state any type of credit terms in advertising such as 8% interest, you must disclose all finance charges and total annual percentage rate (APR).

A borrower has a stable monthly income of $4,000 and recurring debts of $600. If he's getting an FHA loan, what's the maximum monthly payment for which he would qualify? A. $1,054 B. $1,120 C. $1,240 D. $1,462

B. $1,120 Using the payment -to-income ratio of 31%, we get $1,240. But using the total debt to income ratio, we find; $4,000 (income) multiplied by 0.43, which equals $1,720. From that, you subtract monthly debts of $600, leaving $1,120.

You are pre-qualifying a borrower for a purchase loan. She has debt equaling $950 each month and gross monthly income totaling $5,200 each month. What is the maximum qualifying house payment, including principal, interest, taxes and insurance on a conventional loan? A. $590 B. $922 C. $1,000 D. $1,456

B. $922 Two calculations need to be done; $5,200 x 28% = $1,456, then $5,200.00 x 36% = $1,872 - $950 = $922. Take the lower of the two. If you did not complete both calculations, you might have allowed Sue to have a payment of $1,456; by the time you added the debt and divided by the $5,200, your back ratio would be too high ($5,200 x 28% = $1,456 + $950 = $2,406 / $5,200 = 46%).

What is a provision in a mortgage enabling the lender to demand full repayment if the borrower sells the mortgaged property or partial interest in a mortgaged property? A. Acceleration Clause B. Alienation Clause C. Partial Lien Release D. Prepayment Penalty Clause

B. Alienation Clause An Alienation clause requires the mortgage or to repay the entire balance of the loan if the property is sold, transferred, or otherwise abandoned.

What terminology is the only correct way to ask a client about his or her marital status? A. Are you married or divorced? B. Are you married, unmarried, or separated? C. Are you single, married, or widowed? D. You cannot ask this question since marital status is a protected class.

B. Are you married, unmarried, or separated? The only way to ask about a client's marital state is, " Are you married, unmarried, or separated." Be sure to include all three of these words in the question.

Which a general definition (essential an outline) of a qualified mortgage (QM) loan? A. Equal Credit Opportunity Act B. Dodd-Frank Act C. Gramm-Leach-Bliley Act D. Truth in Lending Act

B. Dodd-Frank Act The CFPB was given the task of finalizing the Qualified Mortgage (QM) definition which was outlined in the Dodd-Frank Act.

One purpose of the Truth in lending Act is to __________. A. allow lenders to order credit reports, appraisals, etc. B. enable borrowers to compare credit costs and shop for best credit terms C. inform borrower of a lender's privacy policies D. prevent kickbacks by disclosing business interests.

B. Enable borrowers to compare credit costs and shop for best credit terms. The Truth in Lending Act requires Lenders to disclose consumer credit costs in a uniform manner to promote informed use of the consumer credit, enabling them to compare credit costs and shop around for the best credit terms.

The value remaining in property after all liens and debts are considered is its _______. A. Assessment B. Equity C. Surety D. Valuation

B. Equity Equity is the difference between market Value of a property and the sum of the mortgages and liens against it.

Which entity was established in 1932 as a cooperative finance housing in local communities? A. Federal Home Loan Mortgage Corporation B. Federal Home Loan Banks C. Federal Housing Finance Agency D. GNMA

B. Federal Home Loan Banks

Which statement about Ginnie Mae is TRUE? A. Ginnie Mae buys loans from commercial banks and mortgage companies. B. Ginnie Mae guarantees mortgage-backed securities C. Ginnie Mae is a participant in the primary market D. Ginnie Mae is a private corporation.

B. Ginnie Mae guarantees mortgage-backed securities

The financial Services Modernization Act of 1999 is more commonly known as the _______________________. A. Community Reinvestment Act. B. Gramm-Leach-Bliley Act C. Homeowners Protection Act. D. SAFE Act

B. Gramm-Leach-Bliley Act The Financial Modernization Act of 1999 is usually referenced by the names of legislators who sponsored it; Phil Gramm, Jim Leach, and Thomas Bliley

A lender is obligated provided a borrower with what document one business day prior to the loan closing if requested to do so? A. GFE B. HUD-1 C. Mortgage Servicing Statement D. Promissory Note

B. HUD-1 (Also known as the Closing Statement) The borrower has a right to view a HUD-1 Statement one business day before closing.

Which includes the provision that mortgage relief companies may NOT collect any fees until they have provided consumers with a written offer from their lender or servicer that is acceptable? A. Financial Privacy Rule B. MARS Rule C. Red Flags Rule D. Safeguards Rule

B. MARS Rule This provision in the MARS Rule is known as the Advance Fee Ban.

When qualifying for a conventional mortgage loan. which would be LEAST LIKELY to count as allowable income? A. annual bonuses B. Occasional overtime C. Retirement Income D. Salary

B. Occasional Overtime Occasional overtime would probably not be considered durable income.

TILA requires creditors to maintain records that they complied with the disclosure requirements for how many years? A. One B. Two C. Three D. Four

B. Two TILA law requires creditors to maintain records for two years after the disclosures were required to be made.

Which would NOT be considered a RESPA violation? A. You pay for all the advertising for your favorite real estate agent to keep the referrals coming in. B. You refer your borrower client to a title company that you own. C. You rent space in a title company office below market value for the convenience of letting them handle your loans. D. Your primary lender takes you on a weekend golf trip, all expenses paid, if you close 10 loans in a month with them.

B. You refer your borrower client to a title company that you own Assuming you provide the required disclosure, this is an example of an affiliated business arrangements could be considered violations of RESPA. To violate RESPA, the thing of value does not have to be money.

According to definition provided by the Consumer Financial Protection Bureau, which is a feature that a qualified mortgage (QM) CANNOT have? A. amortization B. balloon payment C. interest rates rising D. loss in property value serving as collateral

B. balloon payment A balloon payment is prohibited as it is considered a toxic loan feature under the qualified mortgage definition provided by the CFPB.

The interim final rule on Valuation Independence does NOT prohibit an appraiser from _________________. A. being instructed to it a specific property value so that the consumer can get a loan he wants. B. being paid a fee by a creditor based on what's customary for that area. C. materially misrepresenting the value of the consumer's principal dwelling. D. offering an opinion of value on a property for which he or she has only an indirect conflict of interest.

B. being paid a fee by a creditor based on what's customary for that area The interim final rule on Valuation Independence requires creditors and their agents to provide customary and reasonable compensation to fee appraisers. The other situations are prohibited.

According to FCRA, a credit agency must give a consumer a free copy of his credit report ___________. A. at the time of a loan application B. if the loan application is denied because of information in the report C. never D. whenever he requests it

B. if the loan application is denied because of information in the report FCRA provisions entitle consumers to a free copy of their credit report if credit is denied based on what's in the report.

Which is NOT a primary lender for residential properties? A. commercial banks B. insurance companies C. mortgage companies D. savings and loan associations

B. insurance companies

What risk is PMI intended to cover? A. death of the borrowers B. loss by foreclosure C. interest rates rising D. loss in property value serving as collateral

B. loss by foreclosure Private Mortgage Insurance (PMI) is offered by private companies to insure a lender against loss by foreclosure on a loan by a borrower.

The right of rescission is in effect for what type of loan closing? A. owner-occupied purchase B. owner-occupied refinance C. non-owner-occupied purchase D. non-owner-occupied refinance

B. owner-occupied refinance The right of rescission is only in effect for refinances, not purchases. It applies to owner occupied refinances only, because a default on the loan results in the homeowner losing his or her house.

The relationship between the cost of borrowing and the total amount financed, represented as a percentage, is known as __________. A. an ARM. B. the APR. C. a Discount point. D. the note rate.

B. the APR. The APR - Annual percentage rate- takes into consideration the cot of borrowing and the total amount financed. It is represented as percentage and is the true cost of lending.

An 80/20 combo loan with the sales price of $175,000, a rate of 6% for the 80% first mortgage, and a rate of 8.5% for the 20% second mortgage would have a first mortgage loan amount of what? A. $35,000 B. $105,000 C. $140,000 D. $175,000

C. $140,000 The first mortgage is 80% of the sale price: 175,000 x 80% = $140,000

If Mary pays $695.20 for principal and interest every month for 30 years on her $110,000 loan, how much interest will she pay over the life of the loan? A. $20,856 B. $110,000 C. $140,272 D. $250,272

C. $140,272 She will pay $140,272 in interest for that 30 year loan (695.2 x 12 months x 30 years = $250,272 total payment - $110,000 principal = $140,272 interest).

A borrower is buying a house with a sales price of $200,000 and an LTV of 75%. If he pays two discount points, what is the total cost of the points? A. $1,500 B. $2,000 C. $3,000 D. $4,000

C. $3,000 With an LTV of 75%, the loan for this purchase is $150,000. On a $150,000 loan, a point costs $1,500 (150,000 x .01), so the borrower is paying $3,000.

A borrower reports income of $40,000 from rental properties. How much of that should be considered when applying for a mortgage loan? A. $40,000 B. $32,000 C. $30,000 D. $20,000

C. $30,000 Income from rental properties should be counted only at 75%; this allows for vacancy losses.

You are refinancing a $200,000 with a prepayment penalty of six months of interest at 6.5%. How much is the prepayment penalty? A. $1,083 B. $2,500 C. $6,500 D. $13,000

C. $6,500 Simply multiply the original loan amount by the interest rate for the annual interest, then divide by 2 to get six months' interest. In this case, $200,000 x 6.5% (0.065) = $13,000; $13,000 / 2 = $6,500

A minimum of how many hours of approved pre-licensing education are required by the SAFE Act for state-licensed mortgage loan originators? A. 8 B. 12 C. 20 D. 24

C. 20 The SAFE Act requires at least 20 hours of prelicensing education for state-licensed MLOs. Individual states may impose additional educational requirements.

What is the maximum length of time that collection information can be reported on a credit report according to the Fair Credit Reporting Act? A. indefinitely B. 10 years C. 7 years D. 3 years

C. 7 years Seven years if the maximum length of time such information can be reported on a credit report according to the Fair Credit Reporting Act, except for criminal convictions, which can be reported indefinitely.

Borrower A has a $100,000 30-year loan at 5%. Borrower B has a $100,000 15-year loan at 5.5%. At the end of their respective loan terms, who will have paid more principal? A. Borrower A B. Borrower B C. Both borrowers would pay the same amount of principal D. It's impossible to tell since either could pay off the loan sooner.

C. Both borrowers would pay the same amount of principal The principal for the two loans is the same $100,000 although Borrower B will potentially pay less interest, depending on how quickly he actually pays off the loan.

Which law allows a consumer who has had credit card used by an identify thief to a place a freeze on her credit report? A. CRA B. ECOA C. FACTA D. SAFE Act

C. FACTA FACTA has provisions that allow consumers to freeze their credit under certain under certain circumstances, which as when they have experienced identity theft.

Conforming loans follow loan-to-value and income expense guidelines that are set by secondary market agencies such as: A. CFPB B. FFIEC C. FNMA D. PMI companies

C. FNMA

Mortgage bankers fund mortgage loans with all of the following EXCEPT: A. cash B. corporate capital C. hedge funds D. warehouse lines of credit

C. Hedge funds

HMDA A. Applies only to new purchase loans. B. Establishes a quota for mortgage loans within a certain geographic area. C. Identifies possible discriminatory lending patterns D. Prohibits lenders from considering an applicant's religion.

C. Identifies possible discriminatory lending patterns The Home Mortgage Disclosure Act is a disclosure law that determines whether financial institutions are serving the housing needs of their communities.

Which statement about loan origination fees on a GFE is FALSE? A. The fee cannot change unless there is a changed circumstance. B. The fee includes services performed by or on behalf of the loan originator. C. Lender and mortgage broker fees for the same transaction must be itemized. D. Origination fees must be expressed as lump sum.

C. Lender and mortgage broker for the same transaction must be itemized. These fees should be shown as a lump sum, not itemized.

ECOA is a law that ensures: A. Borrowers are shown how much they will pay for credit in dollars and percentages. B. Financial Institutions provide funding for low-income and moderate-income housing. C. Lenders make credit available with fairness and without discrimination. D. Settlement procedures are regulated so buyers can compare the cost of services.

C. Lenders make credit available with fairness and without discrimination. The Equal Credit Opportunity Act ensures all lenders must make credit available with fairness and without discrimination.

Who is most generally responsible for completing the accurate final HUD-1 once a closing date has been scheduled? A. broker B. lender C. mortgage loan originator D. settlement agent

C. Mortgage loan originator The settlement agent is responsible for tabulating all figures frmo the lender, broker, and government agencies, as well as any items being paid out to creditors.

Which situation is NOT a red flag that illegal flipping may be taking place? A. A group of sellers and buyers changing ownership of one property among them B. An inflated appraisal C. Purchasing and remodeling a house and selling it for quick profit D. A series of sales and quick resales

C. Purchasing and remodeling a house and selling it for quick profit Purchasing and remodeling a house and then selling it for a quick profit is the good side of flipping which is perfectly legal. The illegal side of flipping is when colluding parties profit from the sale of property with an inflated appraisal that supports a loan. It may involve a series of sales and quick resales, with one property and a group of sellers and buyers changing ownership among them.

Which law requires notification to a borrower before the servicing of a loan is transferred to someone else? A. ECOA B. HOEPA C. RESPA D. TILA

C. RESPA RESPA requires a Servicing Transfer Statement to be sent to the consumer if the loan servicer sells or assigns the servicing rights of the loan to another service provider.

The act of redlining may be defined as _________. A. Channeling buyers to certain neighborhoods based on their race or ethnic background. B. Charging a greater rate of interest on a mortgage loan than the law allows C. Refusing to make loans, limiting loans, or making loans with less favorable terms on property in certain neighborhoods for discriminatory reasons. D. using voluntary re-conveyance or friendly friendly forfeiture to avoid judicial foreclosure.

C. Refusing to make loans, limiting loans, or making loans with less favorable terms on property in certain neighborhoods for discriminatory reasons. Redlining is the refusal to make loans on property in certain neighborhoods for discriminatory reasons and is an illegal discriminatory act under federal, state, and local fair housing laws.

The Real Estate Settlement Procedures Act (RESPA) is implemented under_______ A. Regulation B B. Regulation C C. Regulation X D. Regulation Z

C. Regulation X RESPA is also known as Regulation X

The regulation that prevents a seller from requiring the use of a particular title company is ______________. A. Regulation B - Equal Credit Opportunity Act (ECOA) B. Regulation C - Home Mortgage Disclosure Act (HMDA) C. Regulation X - Real Estate Settlement Procedure Act (RESPA) D. Regulation Z - Truth in Lending Act (TILA)

C. Regulation X - Real Estate Settlement Procedure Act (RESPA) Section 9 of RESPA Prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.

A 65-year-old homeowner does not currently have a mortgage on his home but is in need of funds to make some substantial repairs and is living on a small fixed income. Which mortgage option would best address his need? A. Blanket Mortgage B. Equity Participation Mortgage C. Reverse Mortgage D. Wraparound Mortgage

C. Reverse Mortgage A reverse mortgage allows qualified homeowners at least years of age to convert equity in their home into a monthly income stream or line of credit.

During the loan process, you find HMDA government monitoring information on ____________. A. a custom form created by your company. B. the Good Faith Estimate. C. Section 10 of the Residential Loan Application D. the Truth in Lending statement.

C. Section 10 of the Residential Loan Application Under HMDA guidelines, Section 10 of the standard Residential Loan Application must be filled out even if the borrower does not wish to furnish the information. However, in the case of a face-to-face interview, the loan officer can still mark the "I do not wish to furnish this information" box, but must fill in the application according to a visual observation or the borrower's surname.

Which is NOT a function of the secondary market? A. moderate effects of local real estate cycles B. provide lenders with money to make more loans C. serve as a depository for consumer assets D. standardize underwriting guidelines

C. Serve as a depository for consumer assets

A borrower with less than perfect credit or other risk factors may qualify most easily for what type of loan? A. confirming B. FHA C. subprime D. VA

C. Subprime Subprime loans fill a need for those with less than perfect credit who want to own a home. Some lenders and investors are willing to make these riskier loans because they can get much higher interest rates and fees than they can with other real estate loans.

When borrowers and mlo's come together to negotiate terms and close mortgage loan transactions, this is referred to as: A. hypothecation B. mortgage brokered loans C. the primary market D. the secondary mortgage market

C. The primary market.

A TIL Statement must be provided to the applicant within how many business days of a completed application? A. one B. two C. three D. four

C. Three This disclosure, as required by the Truth in Lending Act, must be provided to a borrower within three business days of a completed loan application.

The purpose of using PITI to structure payments in a mortgage is to ___________________. A. allows the borrower to obtain actual cash from the equity built up in the property. B. allow the lender to participate in any earnings, income, or profits generated. C. ensure that enough funds are collected to cover taxes and insurance premiums. D. include the financing of personal property such as appliances or furnishings.

C. ensure that enough funds are collected to cover taxes and insurance premiums. The lender (mortgagee) provides this service to a mortgagor by adding one-twelfth of the insurance premiums and taxes to the monthly mortgage payment amount.

With an ARM, the margin is added to the _______ to determine the ___________. A. APR / cost of funds index B. home value / amount borrowed C. index / interest rate charged D. qualifying ratio / maximum monthly mortgage payment

C. index / interest rate charged A margin, which is also sometimes referred to as a spread, is added to the selected index to determine the interest rate charged on an ARM.

A borrower who is paid $750 per week has a qualifying monthly income of _________________. A. $2,999 B. $3,000 C. $3,248 D. $3,250

D. $3,250 To find monthly income, take weekly pay, multiply by 52 weeks, and then divide by 12 months ($750 x 52 = $39,000 / 12 = $3,250).

What is the maximum LTV on a Rural Development Loan? A. 75% B. 80% C. 90% D. 100%

D. 100% Borrowers who meet the income limits in designated rural areas do not need a down payment to get a Rural Development loan.

According to the Fair Credit Reporting Act, which of these would NOT have a valid need to information from a consumer credit reporting agency? A. a "buy here, pay here" car lot. B. an employer looking to hire a sales agent. C. a landlord thinking of renting a home to someone D. a man who wants to know his brother's credit score before starting a business with him.

D. A man who wants to know his brother's credit score before starting a business with him. FCRA protects access to consumer credit files and allows a consumer reporting agency to provide information about a consumer only to people with a valid need. This man would have purpose to obtain his brother's credit information.

A borrower closes a loan with ABC Mortgage. His name is NOT on the National Do Not Call Registry nor on ABC's internal do not call list. ABC Mortgage can call the borrower to soilict new business __________. A. for up to 3 months from the transaction date. B. for up to 12 months from the transaction date. C. for up to 18 months from the transaction date. D. indefinitely

D. Indefinitely A consumer who does not place his name on either the National Do Not Call Registry or a company's internal do not call list has no protection from phone calls.

A situation where loan balance grows because of deferred due interest is known as ______________amortization. A. adjustable B. ballooning C. deducting D. negative

D. Negative Negative amortization occurs when loan balances increase rather than decrease because the borrower is paying less than the minimum interest.

A residential lender is EXEMPT from the policies of the federal Civil Rights Act __________________. A. at all times; federal civil rights laws apply only to agents who sell property, not to lenders. B. When the loan is for less than $50,000 C. When the loan is for vacant land. D. Never; a lender is not exempt from civil rights law affecting property.

D. Never, a lender is not exempt from civil rights law affecting property. The Civil Rights Act of 1866 applies to anyone involved in any property transactions; there are no exceptions.

With a fixed rate loan, __________________________. A. a balloon payment is due at the end of the loan term for any unpaid interest. B. a lender may increase the interest rate if a borrower misses two payments in a year. C. PMI is required if the LTV exceeds 20%. D. principal and interest payment must remain constant.

D. Principal and interest payment must remain constant Fixed rate loans have interest rates that remain constant for the duration of the loan.

Funds for FHA loans are provided by ____________. A. the Federal Reserve. B. the FHA C. HUD D. qualified lending instituions

D. Qualified Lending Institutions FHA insures loans made and funded by approved lenders.

Which two federal acts have the most pertinent disclosure requirements related to loan terms? A. CRA and FCRA B. ECOA and FACT Act C. ECOA and RESPA D. RESPA and TILA

D. RESPA and TILA RESPA and TILA require disclosure of loan terms. TILA requires the disclosure of the total finance charges and loan terms in the Truth in Lending Statement; RESPA requires lenders to provide a Good Faith Estimate of closing costs and a HUD-1 Settlement Statement.

Which regulation requires lenders to make full disclosure about APR to borrower in real estate financial transactions? A. Regulation C B. Regulation V C. Regulation X D. Regulation Z

D. Regulation Z Lenders offering residential financing, including ARMs, must comply with federal guidelines under Regulation Z of the Truth in Lending Act requiring certain disclosures be made to borrowers, including the annual percentage rate.

Under the FCRA, consumers do NOT have the right to ______________. A. Dispute inaccurate information in writing and demand the information be removed from the credit report. B. Inspect information on their credit reports. C. Receive a free copy of their credit report even if they have no applied for credit D. Require bankruptcies be removed from their credit report after 5 years, if credit has been reestablished.

D. Require bankruptcies be removed from their credit report after 5 years, if credit has been reestablished All consumers have the right to review their credit reports for accuracies, challenge inaccurate information, and receive a free copy of their credit report annually. They do NOT have the right to have bankruptcies removed after five years. That timeline is seven to ten years.

Which household does NOT qualify as a protected class under the familial status clause of the Fair Housing Act? A. family with a single parent and children B. grandparents raising their grandchildren C. pregnant woman D. retired couple

D. Retired people Familial status refers to households that include individuals under the age of 18 who either live with parents or legal custodians. This protection also extends to pregnant women or any person in the process of obtaining legal custody of a child under the age of 18.

Which requires that all financial institutions ensure the security and confidentiality of customer records? A. Bank Secrecy Act B. Dodd-Frank Wall Street Reform and Consumer Protection Act C. MARS Rile D. Safeguard Rule

D. Safeguard Rule The Safeguards Rule is a principal part of the Gramm-Leach-Bliley Title V privacy requirements.

The borrower knows that his credit is bad, but he really wants to buy a house. He convinces his cousin to apply for a loan, knowing she will be able to get better terms. He promises her that he will pay the full mortgage amount every month. She could be considered a(n) ______. A. Identity Theft B. Investor C. Mortgage Rescuer D. Straw Buyer

D. Straw Buyer A buyer who has no intention of living in the property he or she fraudulently mortgages could be considered a straw buyer. While this situation may seem okay, since it's just one relative helping out another, it's still misrepresentation and, therefore, fraud.

HOEPA amends what law _______. A. ECOA B. FCRA C. RESPA D. TILA

D. TILA HOEPA is an addendum to the Truth in Lending Act (TILA) HOEPA limits the amount of points that can be charged on loans without additional disclosures.

What is the most common appraisal approach used in appraising single-family housing? A. cost approach B. highest and best use approach C. income approach D. sales comparison approach

D. The sales comparison approach is most common, since it compares the property to recent comparable property sales. There is no appraisal approach called the highest and best use approach.

When evaluating a Good Faith Estimate, each of these are subject to a 10% tolerance EXCEPT: A. Government Recording Charges B. Owner's title Insurance C. Services the borrower can shop for D. Transfer taxes

D. Transfer taxes A zero tolerance applied to the sum of all state and local government transfer fees on mortgages and home sales.

An FHA borrower may: A. be eligible only if qualified as low-income. B. buy a six-unit dwelling. C. purchase a home with nothing down. D. Use a gift for the entire down payment.

D. Use a gift for the entire down payment. FHA loans are not just for low-income borrowers. They can be used to purchase a one-to four-family residence. FHA loans do require a down payment but allow borrowers to use a gift to cover that.

What type of loan requires a non-refundable fee? A. Conventional Loan B. FHA loan C. Subprime Loan D. VA Loan

D. VA Loan The VA requires a non-refundable funding fee that varies based on the number of times the veteran has used a VA loan.

Ralph and Alice are thinking about getting an HECM reverse mortgage. If they choose the tenure payment option, they will receive their money as ______________. A. a lump sum B. a line of credit to borrow against as needed C. Equal monthly payments for a fixed number of months D. equal monthly payments for as long as they stay in the home.

D. equal monthly payments for as long as they stay in the home. Tenure refers to the homeowners' stay in the house

Which of these actions would indicate that a mortgage loan originator is NOT committed to FACTA compliance? A. erasing electronic records B. hiring a document disposal company for weekly pick up C. placing locked shredding boxes throughout the office D. putting files in an unlocked drawer at the end of each work day.

D. putting files in an unlocked drawer at the end of each work day. FACTA addresses the problem of identity theft, and an office whose employees puts files in an unlocked drawer would not be in compliance. If someone does not personally secure his files, the confidential information could be accessed for identity theft after work hours by any unscrupulous office worker with keys access codes to the building.

Which loan characteristic may be used to determine the fee that a mortgage loan originator is paid? A. annual percentage rate charged B. interest rate charged C. loan-to-value ratio D. total loan amount

D. total loan amount Any compensation that is based on loan terms or conditions such as interest rate, annual percentage rate (APR), loan-to-value (LTV), etc., is prohibited.

A customer asks his mortgage broker for the name of a good title company. The broker has a list of several companies with whom she has done business in the past. At what point, according to RESPA, must she give the customer an AfBA disclosure? A. at least three days prior to closing. B. at the closing table C. at the same time that she gives the customer the list of title companies D. She is not required to give the customer an AfBA disclosure if she has no ownership or the other interest in any of the title companies on the list.

D.She is not required to give the customer an AfBA disclosure if she has no ownership or the other interest in any of the title companies on the list. If the referring party does not have an ownership or other beneficial interest an Affiliated Business arrangement (AfBA) disclosure us required by RESPA.

The _______________ was created in 1933 to insure consumer deposits.

FDIC