NMLS 4

A property with a value of $412,000 has a first mortgage along with a HELOC. The LTV of the first mortgage is 70%. The TLTV is 90% and the HELOC has an outstanding balance of $32,500. How much available credit is left on the HELOC? a) $49,900 b) $379,500 c) $255,900 d) $82,400

ASK Answer: a) If the TLTV is 90% and the first mortgage's LTV is 70%, the HELOC's LTV is 20%. If the property value is $412,000, 20% of that is $82,400. If $32,500 is already outstanding against the $82,400 line amount, the remaining available credit amounts to $49,900.

Which of the following would be prohibited by ECOA? a) Refusing to lend based on a customer having exercised his rights under the Consumer Credit Protection Act b) Refusing to originate a mortgage to a 17-year-old c) Stopping an application when fraud is discovered d) Refusing to settle a reverse mortgage for a 60-year-old

Answer: a) A consumer may not be penalized for having exercised his or her rights under the Consumer Credit Protection Act.

Prior to closing on a HOEPA loan, the borrower must: a) Secure homeownership counseling from a HUD-approved counseling agency b) Be informed about their right to receive homeownership counseling along with a list of counseling agencies from their lender no later than three business days prior to closing c) Be advised of their right to seek the advice of legal counsel d) Be offered a different loan that does not exceed HOEPA thresholds

Answer: a) Customers seeking to close on a loan that exceeds one or more of the established HOEPA thresholds must complete homeownership counseling from a HUD-approved counseling agency. Within three business days of receiving an application for a HOEPA loan, lenders must provide the applicant with a list of 10 homeownership counseling agencies that are closest to the zip code of the applicant's current address.

The maximum LTV permitted through an FHA cash-out refinance is: a) 80% b) 96.5% c) Cash-out refinances are not permitted through FHA financing d) 75%

Answer: a) FHA allows cash-out refinancing to a maximum LTV of 80%.

Mishandling a borrower's funds is a violation of: a) RESPA b) GLBA c) FCRA d) FACTA

Answer: a) RESPA prohibits any type of funds mismanagement such as co-mingling business funds with escrow accounts.

All of the following loans must contain a right to rescind except: a) A primary residential refinance of a state bond loan through a state agency b) A home equity loan (not as a part of a piggyback purchase scenario) c) A home equity line of credit (not as a part of a piggyback purchase scenario) d) The refinance of a three-unit dwelling in which the borrower resides in one of the units

Answer: a) Residential mortgage loans that do not require a right of rescission consist of: purchase transactions, refinances of non-primary residential properties, original mortgages refinanced through their original lenders, and refinances through state agencies.

The Safeguards Rule is a component of what federal regulation? a) The Gramm-Leach-Bliley Act b) The FTC Red Flags Rule c) The U.S.A. Patriot Act d) RESPA

Answer: a) The Gramm-Leach-Bliley Act, among other things, requires all financial institutions to implement a program to protect the sanctity of customers' and consumers' non-public, personal information. This program must be assigned an individual overseer, must be periodically updated, and must be regularly tested

An option loan affords all but which of the following four payment options: a) Interest only b) 20-year c) 30-year d) Minimum payment

Answer: b) Option loans typically afford their borrowers four monthly payment options from which they may choose: minimum payment which could lead to negative amortization and payment shock, interest only which could lead to payment shock, a 15-year payment equivalency, and a 30-year payment equivalency.

Which of the following is not a valid reason for changing fees once a Loan Estimate has been issued? a) The loan originator originally miscalculated the transfer tax quoted on the Loan Estimate b) A valid change of circumstance occurs c) The customer requests to increase the loan amount for which she is applying d) The customer chooses a different property in a county where the recordation tax is higher than that of the original property

Answer: a) All fees must be disclosed in good faith. In the event that a fee is ultimately higher than what was initially quoted, the lender may not charge an amount above what was originally disclosed unless the fee change was caused by a valid change of circumstance or, at the very least, a valid reason. In the absence of a valid change of circumstance, but in the presence of a valid reason, fee increase limit caps must be honored.

Which of the following may be an indication of fraud? a) An appraisal dated before the sales contract b) A sales contract dates before the appraisal c) An applicant who recently changed their name d) An employer who recently went out of business

Answer: a) Appraisals should always be dated after the sales contract.

A warning on anyone's credit report requiring extra steps to confirm the applicant's identity is known as a/an: a) Fraud alert b) Active duty alert c) Identity theft alert d) Red flag

Answer: a) Fraud alerts are alerts that consumers may add to their credit profile warning prospective creditors that they must take extra steps to confirm the applicant's identity.

Which of the following is an example of non-traditional credit? a) A 12-month apartment rental history b) A deferred student loan c) A three-month gym membership d) An auto loan with less than 10 months remaining

Answer: a) Non-traditional credit is credit that would not typically appear on a credit report. An underwriter may be able to utilize a non-traditional credit report to underwrite certain types of loans when the applicant has little-to-no established credit. A non-traditional credit report must contain a minimum of four tradelines with one being residential. All tradelines used must also contain a minimum 12-month history.

Which of the following is not an example of a prepaid? a) An application fee paid outside of closing b) Per diem interest c) Six months' worth of real estate taxes d) Two months' worth of PMI

Answer: a) Prepaids refer to the funds that are needed when initially establishing an escrow account to account for the money that won't be collected through the remittance of periodic payments. If the annual taxes, for example, are due to be paid through escrow within four months post-closing, there will not be enough money collected through those four payments to pay an annual tax bill. Eight months' worth of "prepaid" tax payments would need to be collected at the closing table.

Mary Mortgageoriginator has always worked for a federally-insured depository institution and now wishes to become a licensed mortgage broker. She inquires to the NMLS as to what she needs to do. What does the NMLS tell her? a) That, since states issue their own licenses, she must ultimately use the NMLS portal to apply for her licenses directly through each state in which she desires to originate loans b) That the NMLS requires only the passing of one national exam in order to secure a license from all states and U.S. possessions c) That if she secures a license in one state, all other states will honor that license d) That loan originators who previously worked for depository institutions are not permitted to secure mortgage licenses

Answer: a) Since each state issues its own license and since Mary must be licensed in each state in which she desires to originate loans, the NMLS advises her of their process which includes applying through their portal to any and all states in which she ultimately seeks to become licensed.

When must a Loan Estimate be issued to an applicant in accordance with TRID? a) Within three general business days from the day of application b) Within three precise business days from the day of application c) Within three precise business days of closing d) Within three general business days of closing

Answer: a) TRID requires that a Loan Estimate be issued to an applicant within three general business days from the date of application. A general business day is defined as any day of the week, aside from Sundays and federal holidays, on which the entity fully operates and conducts business.

A rehabilitation loan through which a homeowner rehabilitates and renovates a property in which they live is known as: a) A 203(k) b) A construction loan c) A construction-to-permanent loan d) An IRRRL

Answer: a) The 203(k) loan is the FHA rehabilitation mortgage. Construction and construction-to-permanent loans are generally used to build a home from scratch. An IRRRL is the VA streamline refinance.

Which of the following fees is not considered when calculating the APR? a) The application fee b) The credit report fee c) The underwriting fee d) The MERS fee

Answer: a) The APR represents the cost of originating a loan expressed as an interest rate. Settlement fees that are excluded when calculating the APR consist of fees that would be paid in a comparable cash transaction, fees that all applicants pay regardless of whether or not they close on a loan, fees charged by third-party settlement providers when use of the particular settlement service provider is required by the lender, and the portion of settlement service provider fees that are in excess of the cost of the settlement services provided and that are retained by the lender.

In what year was the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted? a) 2010 b) 2008 c) 2009 d) 2006

Answer: a) The Dodd-Frank Act was signed into law by former president Barack Obama in 2010.

What does the FBI Mortgage Fraud Warning Notice caution? a) That it is illegal for a person to attempt to influence the decision of a lending institution by making a false statement regarding income, assets, debt, and personal identification on a loan application b) That regulatory examiners are posing as customers to catch loan originators who violate regulations c) That all mortgage professionals must complete anti-money laundering training d) That failure to comply with fair lending laws may cost an individual his or her license

Answer: a) The FBI Mortgage Fraud Warning Notice makes it clear that illegally influencing or attempting to illegally influence a lending institution is a crime that is subject to severe punishment. This notice appears on the URLA.

90. A mortgage originator receives a call from a friend who wishes to rent a house to a potential renter. The friend does not wish to purchase a credit report but has authorization to access the applicant's credit. To avoid having to pay for a report, the friend asks the loan originator to order the potential tenant's credit report on his behalf. The loan originator agrees to and does so. Consequently, the loan originator: a) Violated the FCRA b) Complied with the law since the applicant gave permission c) Complied with the law but should bill his friend for the cost of the credit report d) Violated the FACTA

Answer: a) The FCRA requires anyone accessing another individual's credit to have both permission as well as a permissible purpose. Although both individuals technically had permission, accessing the credit report did not satisfy a permissible purpose since the subject of the credit report was not in pursuit of that originator's mortgage financing.

The form on which a financial institution reports its HMDA data is known as a: a) LAR b) LAT c) Form 1008 d) Form 1036

Answer: a) The Loan Application Register (LAR) is the form on which financial institutions report their HMDA data to the federal government.

The reconveyance clause: a) Transfers property ownership to the borrower upon satisfaction of the debt b) Obligates the borrower to the debt c) Establishes the terms of repayment d) Securitizes the property as collateral

Answer: a) The reconveyance clause forces the conveyance of full property rights to the homeowner upon satisfaction of the debt.

Which of the following is not a type of reverse mortgage? a) Renovation reverse b) Single purpose reverse c) Proprietary reverse d) HECM

Answer: a) The single purpose reverse is a loan to fund a particular purpose such as home improvement or the payment of overdue taxes. A proprietary reverse mortgage is a private reverse loan. The home equity conversion mortgage (HECM) is the standard reverse mortgage.

Which of the following is a consequence of exercising one's right to rescind? a) All money that the applicants paid into the transaction must be refunded to them b) All money that the applicants paid into the transaction that the lender did not spend on third-party settlement services must be refunded to them c) All money paid into the transaction must be refunded to the applicants within 45 days of them exercising their right to rescind d) The applicant may never reapply with that lender

Answer: a) When a right to rescind is exercised, the new loan does not fund, the loan which it may have originally intended to refinance does not pay in full, and any money that the applicants paid into the transaction must be fully refunded to them within 20 calendar days.

What is a possible consequence of a short sale? a) A deficiency judgment b) The original lien subordinates to the new owner's first mortgage c) The borrower is prohibited from receiving future mortgage approval d) The new homeowner must pay the difference between the sales price and the amount that the previous homeowners owed

Answer: a) When permitted by state law, a lender will often pursue a deficiency judgment from the seller to recover the balance that was "forgiven" through a short sale.

A right to rescind may be waived in the presence of: a) A request from all parties b) A bona fide financial emergency c) The need to close before a lock expiration d) The need to close before the end of the month

Answer: b) A lender may elect to waive the right to rescind on an otherwise rescindable loan in the presence of a bona fide financial emergency. All parties to the transaction must request the waiver in writing and the lender renders the final decision.

What is the minimum amount of time an individual may be self-employed in order for his self-employed income to be considered? a) Two years b) One year c) It's case specific d) A year and a half

Answer: b) Although a self-employed individual must typically be self-employed for a minimum of two years, if an applicant has been self-employed for at least one year and can demonstrate previous experience in the same field for at least the previous year, an exception may be made to allow for the consideration of the self-employed income. The applicant should be able to show an increasing level of experience and responsibility in the field in which he is now self-employed, and the field itself should be stable or growing.

Anthony applies for a loan that exceeds the thresholds defining it as a HOEPA loan. What must his lender do in addition to everything else? a) Offer Anthony a different type of loan b) Provide Anthony with a special HOEPA-related disclosure no later than three business days prior to closing c) Provide Anthony with a special HOEPA-related disclosure no later than three business days from the date of application d) Nothing else must be done

Answer: b) HOEPA requires that anyone closing on a loan exceeding the conditions that define the loan as a HOEPA loan must receive a special HOEPA disclosure no later than three business days prior to closing that: informs them that the loan will not be effective until consummation or until the account is opened, explains the consequences of default, discloses the loan terms such as APR, amount borrowed, and the monthly payment, and, if the loan is an ARM, explains the maximum monthly payment that may be required.

POC stands for: a) Paid on conversion b) Paid outside of closing c) Paid on condition d) Placed on contingence

Answer: b) If an applicant pays for any settlement fee or other costs prior to closing, the cost is listed on the Loan Estimate as POC'd (paid outside of closing).

A property is valued at $395,000. There is a first and a second mortgage with a 60% CLTV. The second mortgage has a 12% LTV. What is the balance of the first mortgage? a) $237,000 b) $189,600 c) $47,400 d) $158,000 9,600.

Answer: b) If both mortgages together constitute 60% of the property value with the second mortgage constituting 12%, the first mortgage must constitute 48%. When the $395,000 value is multiplied by 48%, the result is $18

Mortgage backed securities and participation certificates are terms associated with: a) Conventional mortgage origination b) The secondary market c) Government mortgage origination d) The primary market

Answer: b) Mortgage backed securities and participation certificates are the vehicles through which Fannie Mae and Freddie Mac, respectively, package loan files for sale to investors through the secondary market.

Once the Closing Disclosure is issued, a revised Closing Disclosure must be issued: a) When the loan's final APR exceeds the APR disclosed on the Loan Estimate by more than 0.125% b) When the loan's final finance charge exceeds the finance charge disclosed on the Closing Disclosure by more than $100 c) When the loan's final finance charge exceeds the finance charge disclosed on the Loan Estimate by more than $50 d) Once the Closing Disclosure is issued, no further fee changes are permitted

Answer: b) Once the Closing Disclosure is issued, a revised Closing Disclosure must be issued when: the loan's final APR exceeds the APR disclosed on the initial Closing Disclosure by more than 0.125%, the loan's final finance charge exceeds the finance charge disclosed on the initial Closing Disclosure by more than $100, the loan product changes, or a pre-payment penalty is incorporated into the loan.

The Latin doctrine of "Respondeat Superior" refers to: a) A mortgage professional's sole accountability for his or her actions b) An employer being as culpable for its employee's actions as the employee c) An employer being solely responsible for its employees' actions d) An employer not being responsible for the actions of its employees

Answer: b) Respondeat Superior is translated from Latin to mean "Let the Master Answer." This is a legal doctrine holding an employer, along with the employee, culpable for that employee's actions.

One primary purpose of securitization is: a) To divert the risk of mortgage failures from the American taxpayer b) To provide the funds for mortgage financing c) To establish underwriting parameters d) To ensure borrowers' qualifications

Answer: b) Securitization was born in 1938 with the advent of Fannie Mae and the secondary market. Securitization provides a venue for investors to funnel money into the housing market by investing in the securities packaged by Fannie Mae, Freddie Mac, Ginnie Mae, and private investors.

The "Four C's" of underwriting consists of: a) Credit, capacity, commitment, and capital b) Credit, capacity, capital, and collateral c) Consent, capacity, consistency, and collateral d) Consent, credit, capital, and capacity

Answer: b) The "Four C's" of underwriting consists of Credit (the likelihood of repaying the loan), Capacity (the ability to repay the loan), Capital (the amount of savings representing responsible funds management), and Collateral (the lender's security in the event that the loan is not repaid).

Which of the following is not one of the three acceptable means of disposing of an individual's non-public, personal information in accordance with the FTC's Disposal Rule? a) Shredding b) Recycling c) Burning d) Pulverizing

Answer: b) The FTC's Disposal Rule mandates that any non-public, personal information be disposed of only through shredding, burning, or pulverizing. Although recycling paper is always a good idea, the paper on which the information appears must first go through one of those three processes.

What verbiage must appear on the special HOEPA disclosure issued to the customer no later than three business days prior to closing? a) You have the right to consult with an attorney at any time prior to or at closing b) You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application c) Your right to rescind will be extended to three years d) You are receiving a loan with a higher than market interest rate

Answer: b) The HOEPA disclosure must inform the borrower that, just because they received disclosures and completed an application, they are not obligated to consummate the transaction. Furthermore, the disclosure must state, "If you obtain the loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligation under the loan.

Model State Legislation: a) Is the governing doctrine of the mortgage industry b) Represents the minimum licensing standards c) Is the model after which all other legislation is created d) Defines a qualified borrower

Answer: b) The Model State Legislation is the basic foundation constituting the SAFE Act's implementation. States may individually layer on top of this basic model.

Lisa Lucky suddenly learns of an outstanding tax lien that was filed against the title of her property three and a half years prior to her buying it. Lisa remains calm knowing that, at her mortgage closing, she purchased a/an: a) Lender's title insurance policy b) Owner's title insurance policy c) Supplemental catastrophic indemnification rider to her homeowner's insurance policy d) Homeowner's warranty

Answer: b) The owner's title insurance policy that she purchased protects her property interests in the event of a title default. The owner's policy will either pay her for her interest in the property or satisfy the tax lien. Had she had only purchased the lender's title insurance policy, the policy would have paid off the lesser of the tax lien or the mortgage balance.

The legal description of the property being financed appears on the: a) Mortgagee Clause b) Title binder schedule A c) Closing Disclosure d) Title binder schedule B

Answer: b) The schedule A of a title insurance binder describes who is listed as the owner or owners of record on a property and also provides the property's legal description.

In a judicial foreclosure: a) A judge must order an eviction b) The mortgage does not contain a power of sale clause c) The foreclosure process is, in essence, the same as a non-judicial foreclosure d) Only a federal court can enforce the foreclosure

Answer: b) When a power of sale clause exists in a mortgage, the lender can take ownership of the property after default. If the mortgage does not include a power of sale clause, the lender has to file a lawsuit and a judicial foreclosure must ensue.

How long will the issuance of a revised Loan Estimate delay the closing? a) There is no restriction on when a loan may close once a revised Loan Estimate is issued b) Seven precise business days if mailed c) Four precise business days if e-mailed d) Three precise business days if personally handed to the applicant

Answer: b) When a revised Loan Estimate is issued, the closing may not occur for at least four precise business days after the consumer receives it. If the revised Loan Estimate is issued electronically or mailed via standard U.S. mail, the four precise-business-day waiting period is increased to seven to allow for mailing (unless the applicant confirms receipt prior at which time the day of acknowledged receipt begins the four precise-business-day waiting period).

If a 5/1 ARM's start rate is 3.375% with a cap structure of 2/6, what would the customer's interest rate become if, at the first change point, the index was 2.875% and the margin was 3%? a) 5.875% b) 5.375% c) 9.375% d) 6.375%

Answer: b) With a 2/6 cap structure and a start rate of 3.375%, the highest to which the rate can adjust at the next adjustment point is 5.375%. Even though the rate should technically be 5.875% (2.875 + 3), the 2% cap restricts it from increasing higher than 5.375%.

Hank Homesintrouble could no longer afford his mortgage payment but his home was worth less than his outstanding balance. He did not qualify for a refinance or loan modification and consequently pursued a short sale. By approving the short sale, to what did Hank's lender agree? a) To refinance his mortgage for him regardless of his lack of qualification b) To foreclose but not report on Hank's credit profile c) To release the lien and accept the sale proceeds as loan payoff d) To defer payments for a period of time until Hank could get better financially situated

Answer: c) A short sale occurs when the lender accepts the sales price at current market value as the payoff and releases the lien for less than the amount owed. A possible downside is that the lender may still demand the difference between the mortgage balance and the amount for which they agreed to release the lien and may ultimately pursue a deficiency judgement against the former homeowner.

Which of the following is an example of a standard ARM? a) 3/1 b) 2/28 c) 1/1 d) 7/1

Answer: c) A standard ARM carries an initial interest rate that is stable for the first year and adjusts annually thereafter. A 1/1 is an example of a standard ARM. A hybrid ARM has an initial start rate that is stable for longer than just the first year.

Which of the following conditions would have to be resolved prior to closing a mortgage? a) Non-lead-based peeling paint b) Outdated carpeting c) Mold stains on the walls and ceiling d) An overgrown lawn

Answer: c) Although non-toxic peeling paint, outdated carpeting, and an overgrown lawn are cosmetic issues and certainly eyesores, they do not pose any health or safety concerns. Evidence of mold, however, poses a health risk and would always have to be remediated prior to closing.

MLO Mary reviews her customer's credit report. She discovers multiple discrepancies, several inconsistencies, and many apparent errors. She advises her client that, to remedy this, she needs to order a: a) Tradeline versification b) Suspicious activity report c) Full factual d) Rapid rescore

Answer: c) Although tradeline verifications may be used to correct errors and issues on a credit report, each tradeline verification only addresses one particular issue. Multiple issues are best addressed through a full factual. A full factual (also referred to as an investigative consumer report) is a real-time verification and accurate report reflecting a consumer's complete credit profile ascertained through interviews with the consumer and his or her creditors.

Taking advantage of a borrower's lack of knowledge by communicating erroneous information on which of the following documents constitutes an ethical violation? a) The 4506-T b) The Mortgage Servicing Disclosure c) The Loan Estimate d) The URLA

Answer: c) Applicants were often tricked into working with unscrupulous loan originators who purposely underquoted estimated closing costs to make it appear as if their costs were lower than those of their competition.

Committing fraud pertaining to a federally-guaranteed or insured loan may result in a penalty of: a) One year in prison and a $10,000 fine b) One year in prison and a $100,000 fine c) Thirty years in prison and a fine of up to one million dollars d) Ten years in prison and a $10,000 fine

Answer: c) Committing fraud on a federally-guaranteed or insured loan is neither smart nor cheap!

Basing a loan approval on the value of a home and not the qualifications of the applicant is known as: a) Equity stripping b) Predatory lending c) Equity-based lending d) Collateralization

Answer: c) Equity-based lending involves concluding a minimal risk to lend because of a low LTV. In the event that the borrower defaults, a lender lending at a low LTV is almost guaranteed to recover its investment. The borrower's qualifications are not heavily weighted.

Unbeknownst to his neighbor, a loan originator orders his neighbor's credit report to see the quality of his credit. What regulation(s), if any, did the loan originator violate? a) FCRA b) GLBA c) FCRA & GLBA d) The loan originator did not violate any regulation

Answer: c) FCRA requires anyone accessing an individual's credit to have permission as well as a permissible purpose. The loan originator had neither. The GLBA also protects individual's non-public, personal information from being accessed without a legitimate reason.

According to the Fair Credit Reporting Act, which of the following is not an obligation of furnishers? a) Notification of corrections b) Notice of dispute c) Certification of permissible purpose d) Notice regarding delinquencies

Answer: c) FCRA requires furnishers to notify CRAs when previously-reported information warrants correction, when a customer disputes the accuracy or completeness of previously-provided information, when customers become delinquent, and with the results of the investigation it must conduct along with whatever corrective action it is taking, if applicable, within 30 days of receipt of notification from a CRA informing it of a customer dispute. It is the user's responsibility to certify permissible purpose to the CRA from which it ascertains consumer credit information.

Which of the following does not constitute a required standard of state licensing laws? a) a. Loan originator licensing requirements b) b. Requirements for supervising those who are licensed c) c. Requirements for establishing licensing fees d) d. A program for enforcing the law

Answer: c) Fees are defined individually by each state.

Under 12 USC § 5114(2), (4), licensed loan originators: a) Must permit interviews of their relatives b) Must make their records available only in response to a court order c) Must permit interviews of their customers d) May knowingly withhold records that they feel are not necessary for investigative purposes

Answer: c) If a state regulator deems that an investigation warrants the interview of existing and previous customers, the licensed loan originator must accommodate that.

An ARM start rate that is less than three percent below FIAR is a/an: a) Teaser rate b) Incentive rate c) Discount rate d) Fully-indexed rate

Answer: c) If an ARM start rate is within three percent below FIAR, it is referred to as a discount rate.

Which of the following options would present the best possible solution for a borrower with minimal assets, whose home is worth less than his outstanding balance, and who's concerned about making his payments? a) Short sale b) Deed in lieu of foreclosure c) Loan modification d) Ignore the problem and hope for the best lution.

Answer: c) If the borrower is "upside down" with minimal assets, he may not be able to sell the home unless his lender approves a short sale. A short sale could also result in a deficiency judgment being placed against him for the difference between the loan balance and the amount for which the lender released the lien. A deed in lieu of foreclosure would significantly damage his credit. Ignoring the problem would not alleviate it. A modification to more manageable terms would likely be the best so

______________ is when the lender provides the settlement agent with the loan proceeds. a) Closing b) Rescission c) Funding d) Reverberation

Answer: c) Providing the proceeds to "fund" the loan is known as funding.

A loan may not close for: a) Three precise business days from the date that the Loan Estimate is issued b) Seven general business days from the date that the Loan Estimate is issued c) Seven precise business days from the date that the Loan Estimate is issued d) There is no restriction on when a loan may close after the issuance of a Loan Estimate

Answer: c) TRID requires no less than seven precise business days to elapse from the date that the Loan Estimate is issued before the loan may close. This is to afford the applicant ample time for further consideration during which they may review the costs and details of the loan for which they have applied.

Which of the following is not one of the three standard appraisal approaches? a) Cost approach b) Income approach c) Market approach d) Sales comparison approach

Answer: c) The cost approach considers the cost of labor and material. It is commonly used when appraising homes for construction or rehabilitation. The income approach utilizes an Operating Income Statement (OIS) to compare rental potential when financing a property intended for investment purposes. The sales comparison approach compares three similar and recently-sold properties in close proximity to the subject property in order to determine the subject property's market value by comparative analysis.

Which of the following documents establishes the debt? a) The mortgage b) The deed c) The promissory note d) The closing disclosure

Answer: c) The note is the obligatory instrument describing the terms of the loan and which, by signing, the borrower obligates himself to the debt.

Which of the following information is publicly available through the NMLS? a) Names and addresses of licensees b) Names and addresses of licensees' customers c) Information or material relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator d) Information pertaining to a licensees' previous, non-mortgage related employment

Answer: c) The public dissemination of disciplinary and enforcement action is one of the main deterrents to loan originator wrongdoing.

If a buyer wishes to buy a home for $260,000, put 15% down, and avoid PMI, for what amount would the secondary loan amount be? a) $39,000 b) $52,000 c) $13,000 d) $208,000

Answer: c) To avoid PMI on a $260,000 purchase price, the first mortgage could be no higher than $208,000 (80% LTV). If the borrower has 15% to put down ($39,000), an additional $13,000 would be needed to bridge the gap.

Once the Closing Disclosure is issued, when is the earliest that the loan may close? a) After six precise business days if handed in person b) After three precise business days if mailed c) After six precise business days if mailed d) After two precise business days if e-mailed

Answer: c) Upon issuing the Closing Discloser, the closing may not occur for three precise business days in order to allow the customer time to reflect on into what they are entering. If the Closing Disclosure has been mailed or sent electronically, the three precise-business-day waiting period is increased to six to allow time for delivery. If the applicant acknowledges receipt of the Closing Disclosure prior to six precise business days, the three precise-waiting-day period begins on the date of the applicant's acknowledgement of receipt.

Answered Questions 99 / 125 Larry Landlordtobe wants to purchase a three-family property in which he would live while renting out the other two units. Which appraisal form will the appraiser use to appraise this dwelling? a) 1004 b) URAR c) 1007 d) 1025

Answer: d) FNMA form 1025 is used to appraise multi-family properties intended for use, in whole or in part, as investment properties. Had the property been a single-family dwelling to be used for investment purposes, the appraiser would have used form 1007. Form 1004 is synonymous to the URAR (Uniform Residential Appraisal Report), the standard appraisal form used to appraise single-family, primary residences.

What were the primary overseers of mortgage industry reform? a) The CSBS, HUD, and the FTC b) The CSBS, FTC, and the AARMR c) The CSBS, NMLS, and HUD d) The CSBS, HUD, and the AARMR

Answer: d) HERA's enactment led to significant changes within the mortgage industry. The primary overseers of this change and the entities that were ultimately responsible for creating the NMLS and the CFPB were the Conference of State Bank Supervisors, the Department of Housing and Urban Development, and the American Association of Residential Mortgage Regulators.

A carpenter earns a weekly salary of $1,700 along with a monthly untaxed social security stipend of $1,025. What is his monthly income? a) $2,725.00 b) $8,391.67 c) $2,981.25 d) $8.647.92

Answer: d) If the carpenter earns $1,700 weekly, that translates to $88,400 annually (1,700 x 52). His annual income of $88,400 translates to a monthly equivalency of $7,366.67. Since his monthly social security income of $1,025.00 is untaxed, this can be increased by 25% to $1,281.25 which, when added to his monthly salary of $7,366.67, results in a monthly income of $8,647.92 (for underwriting purposes).

By when must a revised Loan Estimate be reissued in the presence of a valid change of circumstance? a) As long as it is reissued prior to closing, there is no specific timeframe mandating when a revised Loan Estimate must be issued b) Revised Loan Estimates are never issued because the Closing Disclosure ultimately discloses the true costs c) Within three general business days from the closing date d) Within three general business days from the date of the valid change of circumstance

Answer: d) In the presence of a valid change of circumstance, a revised Loan Estimate must be issued no later than three general business days from the date of the change of circumstance.

What document conveys property ownership? a) The mortgage b) The promissory note c) The closing disclosure d) The deed

Answer: d) Once properly signed and executed, the deed defines the ownership of a property.

A loan originator is playing golf with a client and suggests that the client use a colleague's title services. Although there is no affiliate relationship between the title company and the mortgage company, two days later, the loan originator mails his client an ABAD. Which of the following statements is true? a) The loan originator violated RESPA for not issuing the ABAD the same day due to the face-to-face referral b) The loan originator complied with RESPA for issuing the ABAD within three business days of the referral c) The loan originator violated RESPA for socializing with his client d) The Loan originator was not compelled to issue an ABAD at all because the company to which he referred his client did not share any ownership interest with his own

Answer: d) RESPA only requires an ABAD to be issued when a referral is made between entities sharing an ownership interest of 1% or greater.

Your customer inquires about applying for a reverse mortgage. During the interview you learn that, although he is 64 years old, his girlfriend, who is also listed on the deed, is 26. What do you advise? a) No special advice - as long as at least one borrower is 62 years old, they can both apply b) That you can take the loan application in his name only c) That she will need to sign a consent allowing him to apply in his own name d) That, since his girlfriend is also an owner, she would have to remove her name from the title in order for him to apply for the reverse mortgage in his own name

Answer: d) Since a reverse mortgage is an FHA loan, anyone on the title of the home must be on the mortgage. Since his girlfriend is younger than 62, she may not apply for the reverse mortgage. Since she is also on the title, she would have to relinquish her ownership interest in the home in order for him to apply in his own name. If she was his wife, however, she could remain on the title while he applies for and settles on the reverse mortgage in his own name. Nothing like this should be actualized, however, without first seeking the guidance and advice of a competent legal and/or income tax professional.

In conducting an examination or investigation, a state licensing agency may not: a) Administer oaths or affirmations b) Require the production of relevant documents c) Subpoena witnesses d) Demand a monetary sum placed in escrow until resolution

Answer: d) State licensing agencies may not require a monetary sum to be placed into an escrow account pending an investigation's resolution. They may, among other things, administer oaths and affirmations, require the production of relevant documents, and subpoena witnesses.

The document used to secure a copy of an individual's IRS federal tax return transcript is the: a) IRS form 4506 b) IRS form 1098 c) IRS form W-9 d) IRS form 4506-T

Answer: d) The 4506-T is used to secure a copy of an individual's federal tax return transcript from the IRS. There is currently no charge for utilizing this service. The 4506 requests the entire return. Form 1098 reports mortgage interest paid during the last calendar year, and the W-9 certifies an individual's social security number for employment or income-earning purposes.

Which of the following regulations requires all financial companies and some creditors to implement an identity theft prevention program? a) The U.S.A. Patriot Act b) The Gramm-Leach-Bliley Act c) The Privacy Protection/Do Not Call Rule d) The FTC's Red Flags Rule

Answer: d) The FTC's Red Flags Rule, among other things, requires that all financial institutions and some creditors implement and administer an identity theft prevention program that identifies the red flags of identity theft, designs a method of detecting the red flags identified, spells out the appropriate actions that anyone detecting a red flag must take, and details how the institution will keep its identity theft prevention program current to react to new threats.

A lender must absolutely remove PMI from any standard conventional loan: a) At 80% LTV b) At 22% equity c) At 20% equity d) At amortization midpoint assuming the loan is current

Answer: d) The Homeowner's Protection Act allows for borrowers paying PMI on conventional loans to petition their mortgage servicer for PMI removal at 80% LTV. Upon receipt of that petition, servicers are required to remove PMI once their borrowers demonstrate a 20% or greater equity position, a good payment history, that there are no subordinate liens attached to the property's title, and that their loan is current. At 78% LTV, PMI must be automatically removed on a standard conventional loan as long as the loan is current. At amortization midpoint, PMI must be automatically removed as long as the standard conventional loan is current.

The maximum LTV through FHA purchase financing is: a) 97.5% b) 97.75% c) 98% d) 96.5%

Answer: d) The minimum down payment allowed through FHA is 3.5%. Consequently, the maximum LTV achieved through using the minimum down payment is 96.5%.

Terrible Title of Tullahoma, Tennessee conducts the refinance settlement through which borrowers are refinancing their single-family rental property. The settlement agent provides only one copy of the right to rescind to the borrower and no copy to the co-borrower. As a result: a) The right to rescind automatically extends to three years b) The right to rescind is revoked c) The lender does not have an enforceable lien d) Everyone questions the title company's competence

Answer: d) The right or rescission is only extended to primary residential, non-purchase transactions. The settlement agent should never have provided a right to rescind document to a borrower refinancing an investment property.

If a property is worth $415,000 and two mortgages consume 45% of the value, what is the balance of the first mortgage if the second mortgage's LTV is 6%? a) $186,750 b) $228,250 c) $24,900 d) $161,850

Answer: d) Together, the two mortgages consume 45% of the property's value. If the second mortgage consumes 6% of that, the first mortgage must consume 39% (45-6). If the value is $415,000, 39% equates to $161,850.