Originator Activities
How many months does a FICO Score consider a credit inquiry in the calculation?
12 months
A borrower is buying a house with a sales price of $200,000 and an LTV of 75%. If he paid $3,000 in points, how many points does that represent?
2 points
How many years of employment are required to be disclosed on a borrower's mortgage loan application?
2 years
Steven would like to refinance his second mortgage and obtain an additional $5,000 to replace his roof. His house appraises for $90,000. His first mortgage is $37,000 and his second is currently $7,200. What combined loan-to-value (CLTV) does Steven need in order to reach his goals if the closing costs are $2,200?
57% CLTV.
A title search typically starts with a _______ search to ensure the person or company claiming to own the property does legally have full ownership of the property.
Chain of title
The document that presents a final, detailed list of the fees and financial accounting of the mortgage loan is known as the:
Closing Disclosure
When comparing the Closing Disclosure to the Loan Estimate, which item is placed in the category of fees that are subject to zero tolerance for change?
Fees paid to a mortgage broker are placed in the category of fees that have a zero tolerance for change. Items on the Loan Estimate that have an unlimited tolerance for change include prepaid private mortgage insurance, property taxes, and property insurance premiums.
For a self-employed person applying for a mortgage loan, what document identifies net worth by itemizing assets and liabilities?
Financial statements show assets and liabilities for an individual or an entity, such as a company, for a specific period or point in time. Underwriters are likely to require the financial statements be included in the loan files for self-employed borrowers.
To determine net worth, subtract ________ from ________.
Net worth is determined by subtracting liabilities from total assets.
A borrower owns several rental properties free and clear of any mortgage payment and does not claim the income from these properties on her tax returns. She doesn't want to list them on her application, as she doesn't have a payment. Is this permissible?
No, because the expenses associated with the properties must be included as a liability.
A homeowner is refinancing his home loan. What might cause the loan balance shown on the credit report to be different from his payoff?
Prepayment penalties are not reflected in the balance showing on the credit report. The lender must issue a formal payoff statement to obtain the actual payoff amount.
Generally, a lender will not consider installment loan debt with less than ____ payments remaining, except for leases, which always count regardless of how few payments remain.
less than 10 payments remaining,
Joe has a property that appraises for $189,000. His first mortgage rate is 4.75% and his second mortgage rate is 15%. He has decided that he wants to leave his $53,000 first mortgage alone and only refinance the second. He qualifies for an 85% CLTV. His second mortgage is for $25,000 but he wants cash to finish his basement. How much cash is available if his closing costs are $1,500?
$81,150
Regulation Z offers two different definitions for the term "business day"; often referred to as the "Business Day Rule" and the "More Precise Business Day Rule".
A day on which the creditor's offices are open to the public for carrying on substantially all of its business functions.
A borrower of a mortgage loan secured by a principal residence may use donated funds from acceptable entities to fund all or part of a mortgage loan. Donated funds from an acceptable entity are referred to as a grant
A grant can be used to fund all or part of the down payment, closing costs, or financial reserves subject to the minimum borrower contribution requirements on most loan programs. Grants are not allowed on a second home or an investment property. Acceptable entities providing a grant include churches, employers, municipalities, nonprofit organizations (excluding credit unions), regional Federal Home Loan Banks under one of their affordable housing programs, federally recognized Native American tribes and their sovereign instrumentalities, and public agencies.
Real estate licensee Hugh has been asked by his client what changes to the Closing Disclosure require a new three-day waiting period. Which of the following is NOT a reason Hugh would give his client?
A later time or date for the closing meeting does not require a new three-day waiting period. If the Closing Disclosure has changed because of the loan's APR, product change, or if a pre-payment penalty has been added, the borrower must receive a new Closing Disclosure and be given a new three-day waiting period prior to loan consummation.
In an explanation of mortgages and lien position,
A second mortgage is a junior mortgage to a first mortgage, but a second mortgage is a senior mortgage to a third mortgage. A HELOC is a type of second mortgage thus it is usually in a lower position to a mortgage in a higher lien position.
What is the second largest component of a credit score?
An individual's credit score is influenced by five categories. The largest component is payment history which is 35% of a FICO score and the second largest is amounts owed at 30%. The other categories are: Length of credit history (15%); new credit (10%); and credit mix (10%).
When underwriters evaluate assets, they are specifically interested in identifying if there are sufficient liquid assets to make the cash down payment and pay the closing costs and other expenses incidental to the purchase of the property. Typically the source of a borrower's down payment can NOT be:
Borrowed funds Savings, the previous sale of a home, or gifts are all acceptable sources of down payment, but the buyer is usually not allowed to use borrowed funds.
Section 5a in the Declaration section of the URLA is where the borrower answers questions about the subject property and finances for the loan. What information is to be included in Section 5a?
Borrower identifies if the property securing the loan is subject to a lien that could take priority over the first mortgage lien, records if the plan is or is not occupy the property as the primary residence, and if this is a purchase transaction, is a family relationship or business affiliation with the seller of the property.
What document does the Veterans Administration use to determine the property value for a mortgage loan?
CRV
Assets are typically classified as liquid or not liquid. Which of the following is a liquid asset?
Cash deposits on the sales contract (earnest money), proceeds from the future sale of a non-real estate asset, proceeds from a property being sold on or before closing of the subject property, sweat equity, employer assistance, rent credit, secured borrowed funds, trade equity, and unsecured borrowed funds. Cash value of life insurance is a form of liquid asset.
Which statement is FALSE as it relates to a revised Loan Estimate (LE)?
Lenders are not prohibited from providing revised disclosures, as a courtesy, for informational purposes at any time to keep the consumer updated on any changes in fees. However, such a practice may lead to confusion of both the borrower and the lender if it is not made clear that such disclosures do not impact good faith analysis. All the other statements are TRUE.
Which of the following represents the formula for calculating the loan-to-value ratio?
Loan Amount / Lesser of Sale Price or Appraised Value = LTV.
When an MLO receives an inquiry related to mortgage loan interest rates, a corresponding annual percentage rate (APR) must be provided to the inquiring consumer at the same time a rate quote is delivered. What document can be used as a tool for explaining the APR to an applicant?
Loan Estimate
As part of the loan application process, there are specific activities that are defined as "offering and negotiating the terms of a loan" that do require a person to have an MLO license. Which of the following activity IS a loan negotiating activity that requires to have an MLO license?
Presenting a revised interest rate or lower points to a consumer is considered negotiation of loan terms. A person is not "offering or negotiating terms of a loan" if she is sharing different methods for submitting a loan application; arranging the loan closing or other aspects of the loan process; or making an underwriting decision about whether the consumer qualifies for a loan.
Mortgage loan applicant Wyatt can use a real estate _________to provide an accurate property address to complete his mortgage loan application.
Purchase Agreement
On Form 1003, what section is a lender to record information about the mortgage loan that she believes most suitable based on the application information provided by the prospective borrower?
Section L3: Mortgage
In order to complete an appraisal for a construction loan, what specific information does the appraiser need from the builder?
The appraiser completes a "subject to" appraisal based on the building plans and specs provided
If Wanda is appraising the value of unusual or special purpose properties that have few or no comparables, what appraisal approach should she use?
The cost approach
A borrower receives a corrected Closing Disclosure due to a change in the loan product on Wednesday, December 24th. What is the earliest date the borrower can possibly close the mortgage loan?
The day on which an event occurs is always day 0. Wednesday 24th = 0; Thursday 25th = Christmas, not business day; Friday 26th = 1 Saturday 27th = 2; Sunday 28th = not business day; Monday 29th = Closing.
The income approach used in obtaining an appraisal may determine value based on
The income approach, sometimes called the capitalization approach, estimates the value of real estate by analyzing the revenue or income the property currently generates or could generate, often comparing it to other similar properties in the area.
A Schedule C is the form used to determine the sole proprietor's income for underwriting purposes. Income for self-employment should be averaged over the last ____ year(s).
The last two years of income is averaged together to determine the applicant's income.
Which of the following BEST describes how income is to be evaluated when considering it as a condition to approve or deny a mortgage loan?
The lender cannot deny a loan because of the source of income, but can deny a loan because the income is not likely to continue
During the loan application process, the initial application may be inaccurate or incomplete. Once accurate information has been obtained, the original application is to be maintained:
The original application should always be maintained in the file since it contains original dates and signatures. Do NOT have the borrower sign a back-dated revised application.
Clint needs to add his wife to the loan application so he can use her income to qualify for the loan. Which of the following is a TRUE statement as it relates to the lender providing a revised Loan Estimate (LE)?
This is a changed circumstance in borrower eligibility that allows for a revised LE that can be used for good faith analysis. A creditor may provide and use a revised LE if a changed circumstance affects the consumer's creditworthiness or the value of the security for the loan and results in the consumer being ineligible for an estimated loan term previously disclosed.
For the purposes of a VA-guaranteed loan, what is not subtracted to determine residual income?
W2 Income
When evaluating assets, underwriters prefer to see seasoned funds that can be counted as a source for a down payment or reserves, meaning
the funds have been in an account for at least Documentation of assets includes two months of bank statements (all pages) to verify available funds.
Reserves are cash on deposit or other highly liquid assets a borrower will have available after the loan funds. Though not always required, underwriters prefer borrowers have reserves that cover ____ months of a PITI mortgage payment after the borrower makes the down payment and pays all closing costs.
two months of a PITI mortgage payment after the borrower makes the down payment and pays all closing costs
A revised Loan Estimate must be sent within three business days of notice of the changed circumstance and at least _____ business days prior to consummation.
within three business days of notice of the changed circumstance and at least four business days prior to consummation.
Generally, if the settlement service provider is the lender or an affiliate of the lender, good faith is determined using a(n) _____ tolerance for a change in the cost of the service.
zero tolerance.
An item claimed on a self-employed applicant's tax returns ________ may be disallowed as income and deducted from total income.
for a one-time event may be disallowed as income and deducted from total income.
Which is the correct formula to use an hourly wage/rate when determining the borrower's gross monthly income?
hourly rate x number of hours worked weekly = $ per week;$ per week x 52 weeks in a year = annual $; annual $ / 12 months = gross monthly income.
If the applicant chooses not to identify his ethnicity, race, or sex on an application taken in person, the lender is to
identify the applicant's ethnicity, race, and sex on the basis of visual observation or surname on the URLA. The lender must also report that the applicant's ethnicity, race, and/or sex were collected on the basis of visual observation or surname in the Demographic section of the URLA.
The Loan Estimate disclosure requirement does not apply to all real estate loans. For example, ___ are exempt from the Loan Estimate disclosure requirement.
include home equity lines of credit, reverse mortgages, loans to secure a fractional interest in real estate (timeshares), loans for mobile homes or dwellings not affixed to real property, loans made by a person or entity that makes five or fewer mortgages in a calendar year, and loans made to a non-natural person (business entity.)
If the amounts paid by borrower Kyle at closing exceed the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold, lender Lisa must refund the excess and mail corrected disclosures reflecting that refund to Kyle within ___ calendar days after consummation.
no later than 60 calendar days after consummation.
How many additional days must the borrower wait to close on a fixed-rate loan if the annual percentage rate increases more than .125% from the original Closing Disclosure?
no more than 1/8% (.125) for a regular transaction or 1/4% (.25) for an irregular transaction from the initial disclosure on the Loan Estimate, the borrower must be given a corrected disclosure and an additional three-day rescission period to review the new disclosure.
A revised Loan Estimate is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically (email, fax, etc.), the consumer is considered to have received it ____ after the disclosure is mailed or transmitted.
on the day it is provided in person. If it is mailed or delivered electronically (email, fax, etc.), the consumer is considered to have received it three business days after the disclosure is mailed or transmitted.
When a changed circumstance has occurred to the loan product after the Closing Disclosure has been delivered to her borrower, MLO Rachel must
receive a new Closing Disclosure and be given a new three-day waiting period prior to loan consummation.
Consumer credit reporting agencies generally keep Chapter 13 bankruptcies on a person's credit report for ____ years from the date the bankruptcy was filed
seven years from the date the bankruptcy was filed
A buydown paid to reduce the borrower's payments early in the loan is called a(n)?
temporary buydown
Which statement BEST describes the cost appraisal approach?
the appraiser, using plans and specs, evaluates the cost to rebuild (just like a contractor), then adds the land value and subtracts depreciation. Subtracting the depreciation allows a new house to be compared to an older house.
The acquisition cost of a property is $220,000 (sale price is $215,000 and the closing costs are $5,000) and the loan amount is $200,000. The seller is paying $2,000 of the closing costs. What is the total amount the borrower will need to bring to closing if the earnest money is $1,000 and is being credited on the Closing Disclosure at closing?
$17,000
Larry has been on his job for one year. He currently makes $12.00 an hour at his retail job. Prior to this, he worked at a shopper's club, making $11.00 an hour. He currently works five hours of OT a week, making time and a half for all overtime. His current pay stub dated 4/15 has a YTD gross of $8,645. What is the monthly income an MLO can use to qualify Larry?
$2,080 a month.
Cory has been on his job for just under one year. He typically works 42 hours a week making $16 an hour and time and a half for overtime. What is the gross monthly income used to qualify Cory?
$2,773.33 gross monthly pay.
Sally earns $17.20 per hour and typically works 40 hours per week. What is her gross monthly income?
$2,981.33.
If a buyer buys a $100,000 home and gets an $80,000 mortgage loan at an interest rate of 8%, how much is 4 points?
$3200
A borrower is buying a house for $150,000 at 6.5%. He provides a down payment of $15,000. How much would he have to pay for three discount points?
$4050
Sara has been on her job for 10 years. She has a pay stub dated 9/30 with year-to-date income totaling $46,637.50. She received a raise on June 30th, and she always works 40 hours a week. The bi-weekly gross pay on her current pay stub was $2,625.00. What is the monthly income derived from the most aggressive approach that the underwriter may accept?
$5,687.50.
A loan program that has a single ratio of 45% would allow a borrower with $65,000 in annual income and $490 in monthly consumer debt payments to qualify for what principal and interest payment on a home with escrow requirements of $360 monthly?
$1587
A borrower who is paid $250 gross per week will have a qualifying monthly income of how much?
$1,083.33.
Two different definitions for the term "business day" are set forth in Regulation Z; 1 The "Business Day Rule" 2 The "Precise Business Day Rule"
1. defines business day as all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a). 2. applies to all of the following EXCEPT for the required number of business days Regulation Z offers two different definitions for the term "business day
TILA states that if the final annual percentage rate shown on the Closing Disclosure varies by more than ___ for a regular transaction from the initial disclosure on the Loan Estimate, the borrower must be given a corrected Closing Disclosure and an additional three-day rescission period to review the new disclosure.
1/8% (.125) for a regular transaction or 1/4% (.25) for an irregular transaction from the initial disclosure on the Loan Estimate, the borrower must be given a corrected disclosure and an additional three-day rescission period to review the new disclosure.
MLO Katie must provide an applicant with a list of ____ HUD-approved housing counseling agencies that he can choose from with three business days of receiving a complete application.
10 HUD-approved housing counseling agencies that provide relevant counseling services in the loan applicant's location.
Mortgage applicant Ellen has received a Loan Estimate from lender XYZ. Ellen has ____ days from when the Loan Estimate was provided to respond; otherwise, lender XYZ is no longer bound by the terms.
10 days
Recording fees fall into the bucket that allows for a _____ tolerance for change between the Loan Estimate and Closing Disclosure.
10% aggregate
When given the option to shop for a settlement service provider from a provided written list and the borrower selects an unaffiliated provider on the list, the fee for this particular settlement service provider is placed in the bucket that allows for a ____ tolerance for change.
10% aggregate
What is the form number of the Uniform Residential Loan Application?
1003
In a month with 30 days and a purchase closing on the 15th day of the month, how many days of interest would the title agent be required to collect?
16 days
Which of the following is a type of liability that is NOT considered to be a reoccurring debt or expense?
A car payment, a student loan payment (even in deferment), and court-ordered child support fall into the category of recurring debt to be listed on the URLA and considered in a debt-to-income calculation. A utility payment, such as a monthly cable payment, is not a reoccurring debt or expense because it can be canceled.
Lender Max must deliver or place a Loan Estimate in the mail within how many business days of receipt of a prospective client's complete application?
3 As set forth by Regulation Z,
Within _____ business days of a complete application, an MLO must provide an applicant with the following disclosures:
3 Home Loan Toolkit, Loan Estimate, List of HUD-Approved Counseling Agencies, and the Affiliated Business Arrangement (AfBA) Disclosure, if applicable. An Initial Escrow Statement is usually given at settlement; however, the lender has 45 days from settlement to deliver it.
Although the Initial Escrow Statement is usually given at settlement, the lender has ____ calendar days from settlement to deliver it.
45 calendar days from settlement to deliver it.
Donna's application for a mortgage loan was denied. In the Adverse Action Statement, the lender must inform Donna that she can request a specific reason for the denial if she does so within ____ days of notification.
60 days from receipt of the Adverse Action Notice to request a copy of her credit report if the denial was due to information contained in the report.
What type of form can be used by an MLO to verify down payment funds that an applicant has listed on the URLA?
A Verification of Deposit Form
A(n) ______ is used by a lender for conventional first mortgage applications to verify an applicant's place of employment and earnings?
A Verification of Employment Form (Fannie Mae Form 1005)
Consummation may occur on or after the ____ business day (using the precise definition of business day) after the delivery or mailing of the initial Loan Estimate.
As set forth by Regulation Z, the initial Loan Estimate must be given no later than three business days (using the general definition of business day) after the creditor receives the consumer's completed application.
Potential borrower Lily will have submitted a complete mortgage loan application that requires an MLO to provide application disclosures required by federal laws once it includes her:
As set forth by TILA, a complete application that triggers federal disclosures requires the applicant's name, Social Security number, income, the loan amount sought, estimate of property value, and property address.
A licensed MLO can take and accept a borrower's application in a variety of ways. Which of the following activity is considered a method of taking or accepting a loan application that requires an individual to have an MLO license?
Asking questions to enter information into an online application or other automated system on behalf of the consumer is considered taking a loan application.
_____ are items of value that the borrower must have to qualify for a mortgage loan.
Assets
Underwriter Stan sends the loan package back to MLO Joe because it is missing ______. This form is needed to obtain transcripts of the borrower's IRS.
Form 4506-T gives the lender permission to get transcripts of the borrower's income tax returns.
What source of income CANNOT be used when qualifying a borrower for a loan?
Future income can never be considered. Disability and alimony can be used if additional documentation to prove the likelihood that it will continue is provided. Social Security payments are considered income if the borrower receives permanent Social Security benefits. If Social Security is permanent income for a buyer who has reached retirement age, it will count.
Chad is applying for a mortgage loan. If applicable, what disclosure can he expect to receive within three business days of submitting his complete application?
Home Loan Toolkit, Loan Estimate, and List of HUD-Approved Counseling Agencies.
In compliance with the "Know Before You Owe" mortgage disclosure rule, the applicant must receive specific disclosures within three business days of a complete application. Of the disclosures listed, the _____ does NOT need to be a disclosure provided to an applicant within three business days of a complete application.
Initial Escrow Statement
Which of the following type of income must NOT be used to qualify for a mortgage loan?
Interest and dividends from investments that are received consistently for the prior two years may be used as qualifying income.
What is the loan-to-value if the loan amount is $118,000, the appraised value is $131,000 and the sales price is $135,000?
LTV of 90%.
Not later than _____ business days after a lender receives a complete application, he must provide the loan applicant with a clear and conspicuous written list of homeownership counseling organizations that provide relevant counseling services in the loan applicant's location that the applicant can shop for.
Not later than three business days after a lender, mortgage broker, or dealer receives an application, or information sufficient to complete an application, the lender must provide the loan applicant with a clear and conspicuous written list of homeownership counseling organizations that provide relevant counseling services in the loan applicant's location.If mailed, the three business day requirement for a borrower to receive a Closing Disclosure begins three business days after it is placed in the mail.
Burt Reynolds applies for a mortgage loan with Seneca Mortgage for the purchase of his first home. On his initial application submitted to Seneca, Burt forgot to include his Social Security number. Seneca must send Burt a Notice of Incomplete Application within ___ days after receiving his application.
Per Regulation B, within 30 days after receiving an application
After receiving a complete mortgage loan application from borrower Hank, lenders must notify him of the lender's approval of, counteroffer to, or adverse action on his application within how many days?
Per Regulation B, within 30 days of receiving a complete application
When points are paid to a lender to reduce the interest rate and loan payments for the entire life of the loan, it is called a(n):
Permanent buy-down
Which statement is TRUE about the mortgage loan pre-approval process that can be conducted by a lender in response to a prospective borrower's inquiry about the potential to be approved for a mortgage loan?
Pre-approval can improve a buyer's negotiating position.
When a consumer calls an MLO with an inquiry about mortgage loan products and terms, what is the name of the process that the MLO can complete that is non-binding on the part of the MLO but allows the MLO to collect basic information to let the consumer know if it looks favorable that she will be approved?
Pre-qualification
All of this financial information may be included in a borrower's income analysis EXCEPT
Stable monthly income is the monthly income that can reasonably be expected to continue in the future. Sporadic overtime and bonuses would not be allowable - the key word being "sporadic."
What type of appraisal has a value based upon what the property value would be when the listed repairs are finished?
Subject to appraisal Most lenders will not accept a "subject to" appraisal. The repairs need to be finished before an acceptable appraisal is made.
John wants to get a loan to buy a house. Which source of income is LEAST LIKELY to be considered durable?
Temporary unemployment benefits
When evaluating rental income that is not reported on current tax returns, the lender will use a portion of the gross rental income.
The amount of the portion that can be used is When evaluating rental income that is not reported on current tax returns, the lender will use 75%. The other 25% is not used to allow for maintenance and vacancies.
When the application is by phone, Internet, or through a mortgage broker, the ARM disclosures, including the CHARM Booklet, must be delivered or placed in the mail not later than how many business days following receipt of a complete application?
When the application is by phone, Internet, or through a mortgage broker, the ARM disclosures must be delivered or placed in the mail not later than three business days following receipt of a complete application.
MLO Josh must provide a(n) _____ when quoting an interest rate and terms to a consumer who has inquired about mortgage loan interest rates.
a corresponding annual percentage rate (APR) must be provided to the inquiring consumer at the same time a rate quote is delivered.
Per the Fannie Mae Selling Guide, a gift can be provided by any of the following:
a(n) A gift can be provided by a relative, defined as the borrower's spouse, child, or other dependent; by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or a fiance, fiancee, or domestic partner. The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction.
As evidence that the seller's lender is paid and the lien released, the seller's lender will issue a:
discharge or mortgage
