Page 1-13 Missed Test Questions
Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the: A. Annual percentage rate B. Broker fees and the amount charged by a third party C. Amount of the payment D. Length of the loan
A. The answer is annual percentage rate. A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at the consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct loan charges paid by the borrower that must be included in computing the annual percentage rate.
According to the SAFE Act, which of the following is defined as a nontraditional mortgage product? A. Any mortgage product other than a 30-year fixed-rate mortgage B. A 30-year fixed rate mortgage C. An ARM loan with a 5-year fixed-rate period D. A 15-year fixed rate mortgage
A. The answer is any mortgage product other than a 30-year fixed-rate mortgage. The SAFE Act defines a "nontraditional mortgage product" as any product other than a 30-year fixed-rate mortgage.
A mortgage which is amortized for a longer period than the actual term of the loan can best be described as a: A. Balloon mortgage B. Hybrid ARM C. Graduated Payment Mortgage (GPM) D. Fixed period ARM
A. The answer is balloon mortgage. A partially-amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance.
According to the Interagency Guidance on Nontraditional Mortgage Product Risks, relying on an individual's capacity to repay the loan as structured from resources other than monthly income is: A. Considered unsafe and unsound B. A strong mitigating factor C. Acceptable only with property securitization D. Acceptable only with proper disclosure
A. The answer is considered unsafe and unsound. The Interagency Guidance on Nontraditional Mortgage Product Risks emphasizes the importance of establishing a borrower's ability to repay a loan based on the borrower's existing resources, primarily monthly income, rather than the value of the collateral pledged. Loans to borrowers who do not demonstrate the capacity to repay the loan from sources other than the collateral pledged are generally considered unsafe and unsound.
All of the following would be common activities in fraud for property, except: A. Flipping B. Asset fraud C. Income and employment fraud D. Silent second
A. The answer is flipping. Asset fraud, income and employment fraud, and silent second (in which a borrower secretly borrows needed funds from the seller secured by an undisclosed and unrecorded second mortgage) are all associated with fraud for property. In contrast, flipping is usually associated with predatory lending, rather than property fraud.
For what length of time can an unpaid tax lien remain on a credit report? A. Indefinitely B. No more than ten years C. No more than seven years D. No longer than three years after it is paid
A. The answer is indefinitely. The FCRA requires that outdated negative financial information remain on a consumer's credit report no longer than seven years, and for bankruptcies, ten years. However, unpaid liens, particularly tax liens, can remain for an indefinite period of time.
Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? A. No limit B. One month C. Three months D. Six months
A. The answer is no limit. Federal law does not place general restrictions on the adjustment period allowed on an ARM.
"Equity" is defined as: A. The difference between the fair market value of a property and the current balances of any liens B. The difference between the appraised value and the purchase price C. The relationship between the value of the house and a borrower's assets D. The balance of any liens divided by the proposed value of any new loan
A. The answer is the difference between the fair market value of a property and the current balances of any liens. The equity in a borrower's home is the difference between the fair market value of a property and the current balance of any liens.
Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule? A. The state in which the property is located B. The amortization term of the loan C. Whether or not the loan is an ARM or a fixed-rate loan D. The loan program
A. The answer is the state in which the property is located. If a loan originator's compensation is based in whole or in part on a factor that is not an actual loan term but acts as a proxy for a term of transaction (such as the term and/or rate of the loan determining whether it is held in the lender's portfolio or sold), the originator's compensation is based on a term of the transaction and is prohibited. A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition.
Loan originator compensation records must be retained for at least: A. Three years B. Two years C. Four years D. Five years
A. The answer is three years. A creditor must maintain, for three years after the date of payment, sufficient records to evidence all compensation it pays to a loan originator, and the compensation agreement that governs those payments.
Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan? A. Yes, a dwelling includes a structure whether or not that structure is attached to real property B. No, dwellings must be permanently attached to real property C. No, mobile homes are classified as personal property, not real property D. Yes, as long as the real property upon which the mobile home will be located is in the borrower's name, the loan may be a residential mortgage loan
A. The answer is yes, a dwelling includes a structure whether or not that structure is attached to real property. A residential mortgage loan is any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or will be constructed a dwelling. A dwelling is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home and trailer, if it is used as a residence.
In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table? A. "Has this information been verified?" B. "Can this amount increase after closing?" C. "Is this payment subject to a late fee?" D. "Has this information changed from the Loan Estimate?"
B. The answer is "Can this amount increase after closing?" The first table on page 1 of the Closing Disclosure is the Loan Terms table, which lists the same information given in the Loan Estimate's Loan Terms table (i.e., loan amount, interest rate, the monthly principal and interest, and space to indicate whether the product has a prepayment penalty or balloon payment). This information is updated to reflect the terms that will be in place at consummation, and the loan originator must answer the question "Can this amount increase after closing?" for each item.
All of the following are TILA-required disclosures, except: A. CHARM Booklet B. Notice of Adverse Action C. Right to Rescind D. Loan Estimate
B. The answer is Notice of Adverse Action. The Notice of Adverse Action is a disclosure required by ECOA, not TILA.
Under which of the following circumstances could a borrower be charged a fee for the preparation of a settlement statement? A. The borrower requests a copy of the settlement statement 24 hours prior to closing B. A borrower may not be charged a fee for the preparation of a settlement statement C. The borrower requests a copy of the settlement statement 48 hours prior to closing D. The borrower requests the lender prepare the settlement statement rather than the escrow agent
B. The answer is a borrower may not be charged a fee for the preparation of a settlement statement. Section 12 of RESPA provides that no fee can be charged by a lender for the preparation and distribution of documents required in connection with the making of a federally-related mortgage loan.
A balloon rider, a prepayment penalty rider and a second-home rider may all be part of: A. A title insurance policy B. A deed of trust C. A note D. A power of attorney agreement
B. The answer is a deed of trust. A deed of trust is used to secure a note. A deed can carry a rider, or an addendum, which may include a balloon rider, a prepayment penalty rider and a second-home rider, among others.
All of the following are examples of prohibited misleading advertising, EXCEPT: A. A mailed flyer with a mortgage loan refinancing offer in an envelope stating "Preapproved!" although, in fact, there is no preapproval in place for the consumer B. An ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates C. A commercial communication that claims to originate from the consumer's current mortgage lender, although it is actually from a different lender D. A mailer that attempts to create a visual impression that it is sent from a government agency, though it is in fact generated by a commercial mortgage lender
B. The answer is an ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates. Under the Mortgage Acts and Practices Rule (MAP Rule or Regulation N), it is a violation of the advertising regulations for any person to make a material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product, including misrepresenting loan terms (claiming a loan product is preapproved when it is not) and misrepresenting the source of a loan offer (claiming it originates from the consumer's current mortgage lender or from a government agency when this is not the case). Referring a consumer to a consumer protection website which is not operated by the lender is not misleading nor is it a violation of the law.
A state-licensed loan originator is: A. Licensed by the NMLS B. An employee of a non-depository institution C. Identified by the unique identifier of his/her employer D. An employee of a subsidiary which is owned or controlled by a depository institution
B. The answer is an employee of a non-depository institution. A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state. An originator employed by a depository or the Farm Credit Administration would be registered.
According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should: A. Average the last six months' worth of pay stubs from the borrower B. Average the income shown on the 1040s for the past two years C. Use the income shown on the borrower's most recent two pay stubs D. Average the income showing on the W-2s for the past two years
B. The answer is average the income shown on the 1040s for the past two years. When analyzing a borrower's income for loan qualification, self-employed or commissioned income is averaged over a two-year period, using tax forms such as Form 1040, U.S. Individual Income Tax Return. When commission income is at least 25% of the borrower's income, the most recent two years' personal tax returns may be required.
Which of the following contains only items which should be used in calculating a borrower's debt-to-income ratio? A. Monthly rent expense on current home, credit card payment, car insurance B. Car payment, boat payment, child support obligations C. Property tax payment, utility payment, cable bill D. Mortgage insurance payment, average grocery costs, electric bill
B. The answer is car payment, boat payment, child support obligations. A debt-to-income ratio compares an applicant's total monthly debt to his or her total monthly income. Total monthly debt would include simultaneous loans, debt obligations, alimony, and child support. Typical living expenses (e.g., utilities, health and disability insurance, food, phone or cable bills, etc.) are not included when calculating DTI.
Which of the following might raise a red flag during the underwriter's review of the appraisal? A. Photos that appear to show the address of the property on the mailbox B. Dated prior to the sales contract C. Effective age of the property aligns with that of comparables D. Completion notice is dated after the original appraisal
B. The answer is dated prior to the sales contract. An appraisal dated prior to the sales contract is a red flag
Under the Gramm-Leach-Bliley Act, the Safeguards Rule and Financial Privacy Rule apply to which of the following? A. All commercial institutions B. Financial institutions C. Educational institutions D. Mortgage lenders only
B. The answer is financial institutions. The Gramm-Leach-Bliley Act's Safeguards Rule requires all financial institutions to design, implement, and maintain safeguards to ensure the security and confidentiality of customer information and protect customer information against unauthorized access. Financial institutions covered by the rule include lenders and other traditional institutions, as well as payday lenders, check-cashing businesses, professional tax preparers, auto dealers engaged in financing or leasing, electronic funds transfer networks, mortgage brokers, credit counselors, real estate settlement companies, and retailers that issue credit cards to consumers. The Financial Privacy Rule of the GLB Act governs the collection and disclosure of customers' personal financial information by financial institutions.
Which of the approaches to appraisal compares the subject property to similar properties in order to arrive at a value? A. Income approach B. Market approach C. Cost approach D. Regression approach
B. The answer is market approach. The market or market data approach, also called the sales comparison approach, bases the value of a property on the prices paid for similar, or comparable, properties in the area that have sold recently. It is the most reliable method for appraising single-family homes and land.
Germaine Hopper has not maintained a state loan originator license for five years. However, during the last three years of that five-year period, she was employed as a registered loan originator with Anywhere Bank. Is Germaine required to retake the licensing test when she decides to apply for a new state license? A. Yes, she must retake the test because she had not maintained a license for over five years B. No, her time as a registered loan originator is not counted as part of the time her license has not been maintained C. No, once passed, an applicant does not have to take the test again D. Yes, test results are only valid in the year they are taken
B. The answer is no, her time as a registered loan originator is not counted as part of the time her license has not been maintained. A state-licensed loan originator who fails to maintain a valid license for a period of five years or longer must retake the licensing test. However, any time during that five-year period in which the individual was acting as a registered loan originator is not included when determining whether or not the licensing test must be retaken. Because Germaine worked as a registered mortgage loan originator for three out of the five years she was inactive, she is only considered to have been without a license for two years, meaning she does not have to retake the licensing exam.
The Pois have just closed on their mortgage loan at a formal settlement meeting. What is mortgage loan originator Leilani Luau's responsibility after loan closing? A. She must provide any required re-disclosures B. None; Leilani's tasks are complete C. She must provide another set of disclosures, showing final costs and expenses D. She must record the transaction with the county recorder
B. The answer is none; Leilani's tasks are complete. After loan settlement, there are some cases in which additional disclosures are due, however, these would be provided by the creditor rather than the loan originator.
Ethics: A. Is a branch of philosophy dealing with legal behavior B. Provides a guideline for answering questions when a choice of actions is available C. Defines how a person must act D. Is set out in law
B. The answer is provides a guideline for answering questions when a choice of actions is available. Ethics goes beyond what is required under the law, so ethical rules extend beyond the minimum legal standards in providing guidance for one's actions. Ethics goes into the realm of what should be done, providing guidelines for answering questions when a choice of actions is available. As a result, ethical rules are often not as clear-cut as the legal rules.
ECOA applies to the extension of credit for: A. Loans secured by a first or subordinate lien on residential property B. Residential, business, commercial and agricultural loans C. Business, commercial, and agricultural loans D. All credit other than government loans
B. The answer is residential, business, commercial, and agricultural loans. ECOA has a wider range than RESPA and TILA, beyond just loans related to residential properties. The law also covers loans for businesses, commercial, and agricultural loans.
When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as: A. For sale by owner (FSBO) B. Seller carry-back C. Seller concessions D. Seller self-financed
B. The answer is seller carry-back. In a purchase transaction involving an assumable mortgage, when the party selling the property provides all or part of the financing, it is referred to as a seller carry-back.
In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for: A. Twelve months B. Three years C. Two years D. Five years
B. The answer is three years. In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for three years.
A consumer with a loan for closed-end credit may exercise his or her right to rescind: A. If he or she collects the signatures of all other parties with an ownership interest in the property B. Until midnight on the third business day after signing the lending agreement C. Until midnight on the first business day after signing the lending agreement D. Only if he or she has a loan contract that explicitly provides for the right to rescind
B. The answer is until midnight on the third business day after signing the lending agreement. A consumer with a loan for closed-end credit may exercise his or her right to rescind at any time before midnight on the third business day after signing the lending agreement.
Which of the following would convey a property? A. Deed rider B. Warranty deed C. Note D. Deed of trust
B. The answer is warranty deed. A warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. In addition to conveying property ownership, a warranty deed contains the promise of clear title, meaning the property is free of encumbrances.
Loan originator Zena Mendez is preparing an advertisement in which more than one simple interest rate will apply over the term of the loan. In order to be in compliance with Regulation Z, Zena must clearly and conspicuously disclose all of the following, except: A. Each applicable simple interest rate B. The period of time each simple annual rate applies C. The frequency with which the rate will change D. The annual percentage rate for the loan
B. The frequency with which the rate will change If an ad states a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the loan, the ad must clearly and conspicuously disclose each applicable simple annual interest rate, the period of time during which each rate will apply, and the annual percentage rate for the loan.
A borrower receives $1,000 per month in rental income. How much of the income may be used to qualify the borrower for a loan? A. $1,000 B. $800 C. $750 D. $1,250
C. The answer is $750. Generally, 75% of rental income may be used to qualify a borrower for a loan. This formula is based on an industry standard that taxes, insurance, and maintenance costs will equal about 25% of the income that a property generates. In this case, 75% × $1,000 = $750.
Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under: A. TILA B. Homeowners Protection Act C. HOEPA D. RESPA
C. The answer is HOEPA. HOEPA prohibits the intentional targeting of poor or underserved areas with expensive high-cost loans, which is a practice known as reverse redlining.
What is Freddie Mac's automated underwriting system called? A. Desktop Originator B. Underwriter Assistant C. Loan Product Advisor D. AUS
C. The answer is Loan Product Advisor. Freddie Mac's automated underwriting system is called Loan Product Advisor (formerly known as Loan Prospector), while Fannie Mae's is called Desktop Underwriter.
The generally-accepted appraisal standards in the United States are known as: A. ASB B. USASB C. USPAP D. FinCEN
C. The answer is USPAP. The Uniform Standards of Professional Appraisal Practice (USPAP) are the recognized standards for appraisals in the United States.
Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and calls the originator that day to let them know it was received and they would like to move forward, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal? A. Saturday B. Thursday C. Wednesday D. Friday
C. The answer is Wednesday. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating that he or she wishes to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee.
When a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called: A. A lock-in B. A variable rate C. A float D. An adjustable rate
C. The answer is a float. If a borrower chooses to float the interest rate, the rate will not be set until closing unless the borrower obtains a lock-in (also called a rate lock or rate commitment).
All of the following types of income are not taxed and therefore can be "grossed-up", except[PL1] : A. Social Security B. Public assistance C. Alimony D. Disability
C. The answer is alimony. Alimony is not "nontaxed income" and therefore is not grossed-up.
An assumption clause: A. allows the seller to reassume the mortgage if the buyer falls behind in his payments. B. assumes the buyer has the ability to repay the loan based on his credit score. C. allows a buyer to assume the seller's mortgage. D. allows the buyer to sell the mortgage without requiring the seller's authorization.
C. The answer is allows a buyer to assume the seller's mortgage. An assumption clause is a provision in the terms of a loan that allows a buyer to assume the seller's mortgage.
One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are: A. Interest Free B. Available to loan applicants regardless of DTI ratios C. Assumable D. Not funded by private lenders
C. The answer is assumable. VA loans are assumable, which means that a purchaser of a home that secures a VA loan may assume the mortgage payments of that loan. Except for direct VA loans, most VA loans are funded by private lenders and are subject to underwriting requirements that include DTI ratios.
When completing the Loan Estimate, costs must be presented: A. In dollars and cents B. In dollars and cents, except for appraisal costs C. By rounding them to the next whole number, except for estimated principal and interest payments D. By rounding them to the next whole number, except for third-party costs
C. The answer is by rounding them to the next whole number, except for estimated principal and interest payments. Except for estimated principal and interest payments, costs on the Loan Estimate are rounded to the next whole number. Except for estimated principal and interest payments, costs on the Loan Estimate are rounded to the next whole number.
Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account? A. Escrow accounts are required for all HPMLs secured by the borrower's principal dwelling B. Escrow accounts are required for all HPMLs secured by a dwelling C. Escrow accounts are required for all first lien HPMLs secured by the borrower's principal dwelling D. Escrow accounts are required for all HPMLs, including reverse mortgages
C. The answer is escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling. Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling.
The "Confirm Receipt" box on the Loan Estimate informs the consumer that[PL1] : A. He or she is now obligated to proceed with the loan transaction B. He or she has agreed to all costs and terms stated in the disclosure C. He or she is not obligated to accept a loan simply because he or she has signed or received the disclosure D. He or she may face legal action for failure to pay fees due at the time of receiving the Loan Estimate
C. The answer is he or she is not obligated to accept a loan simply because he or she has signed or received the disclosure. The "Confirm Receipt" box on the Loan Estimate informs the consumer that he or she is not obligated to accept a loan simply because he or she has signed or received the disclosure.
Which of the following best describes the LTV ratio? A. It is the ratio of the borrower's total debt to monthly income B. It is the ratio of the borrower's principal loan balance to the appraised value of the property C. It is the ratio of the borrower's monthly loan payment to the principal loan balance D. It is the ratio of the borrower's monthly housing expense to monthly income
C. The answer is it is the ratio of the borrower's principal loan balance to the appraised value of the property. The LTV ratio is the ratio of the borrower's principal loan balance to the appraised value of the property.
Mortgage loan originator Janine is assisting the Barstows in obtaining a residential mortgage loan. Her assistance may include all of the following except: A. Providing advice on loan terms B. Preparing loan packages C. Making a loan commitment D. Collecting information on behalf of the consumer
C. The answer is making a loan commitment. A mortgage loan originator assisting a consumer in obtaining or applying to obtain a residential mortgage loan may provide advice on loan terms, including rates, fees, and other costs; prepare loan packages; or collect information on behalf of the consumer with regard to a residential mortgage loan. A loan commitment is made by a lender.
If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by: A. $35 B. $10 C. More than $35 D. More than $100
C. The answer is more than $35. If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by more than $35.
Which of the following may be considered an appraisal red flag ? A. An appraiser's resume shows substantial experience in the area B. Property owner and seller are not the same C. Appraisal is dated after the sales contract D. Comparables are located within one mile of the subject
C. The answer is property owner and seller are not the same. If the property owner and property seller are not the same, it is likely more questions should be asked about the deal.
When a consumer is preapproved for a line of credit and can use this line freely, making repeat transactions, and can pay it off at any time without closing the line, this is an example of: A. Subordinate lien B. Reverse mortgage C. Revolving debt D. Mortgage
C. The answer is revolving debt. Revolving debt allows a borrower to draw from and pay down a credit line at his/her own discretion, as long as the borrower makes timely payments for the interest due.
Which of the following might raise a red flag and suggest that further investigation is necessary to ensure that there is no fraud in an application? A. The applicant uses a co-borrower with a different last name B. Information in corporate-produced W-2s matches that given in the application C. The borrower's employment is not consistent with education level D. Savings patterns and accumulated assets make sense considering the borrower's level of income
C. The answer is the borrower's employment is not consistent with education level. In the end, sometimes the "Common Sense Rule" catches incidents of fraud. A borrower who claims to have finished only 12 years of school is unlikely to be a doctor or a lawyer. A comparison of employment and education level can often help detect fraud.
Which of the following is true regarding preparation and delivery of the Closing Disclosure? A. The borrower is ultimately responsible for ensuring he receives the Closing Disclosure. B. Creditors may not use settlement agents to provide the Closing Disclosure on their behalf. C. The creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure. D. The settlement agent is ultimately responsible for ensuring that the borrower receives the Closing Disclosure.
C. The answer is the creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure. Creditors are responsible for the preparation and delivery of the Closing Disclosure to the borrower. While they may use settlement agents to provide the Closing Disclosure on their behalf, the creditor is ultimately responsible for ensuring that the borrower receives the document.
After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after: A. Five years have passed B. The home is sold to a new owner C. The original VA loan is satisfied D. The original VA loan is moved from his or her name into the name of the assuming borrower
C. The answer is the original VA loan is satisfied. A VA loan is assumable; however, the veteran's VA eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan.
XYZ Mortgage Company just mailed a Closing Disclosure to a customer. The waiting period prior to closing will begin: A. On the date that the Closing Disclosure is mailed B. The next business day after the Closing Disclosure is mailed C. The third business day after the Closing Disclosure is mailed D. The day on which the company received a completed, signed loan application
C. The answer is the third business day after the Closing Disclosure is mailed. The waiting period prior to closing will begin on the third business day after the Closing Disclosure is mailed.
A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this[PL1] ? A. Adjustable-rate B. FHA buy-down C. Option ARM D. Fixed-rate
D. Fixed Rate The loan has a rate of 6% for 30 years, meaning it has a fixed rate. This loan has an interest-only feature for the first five years
If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation. A. 7 B. 10 C. 20 D. 15
D. The answer is 15. If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has 15 days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.
Which of the following types of mortgages typically carries two different types of mortgage insurance? A. VA B. Conventional C. Subprime D. FHA
D. The answer is FHA. In FHA loans, the FHA insures the issuing lender against loss in the event of default. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years). In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV.
As a result of the Housing and Economic Recovery Act of 2008, Congress created the ______ for oversight of the GSEs. A. FNMA B. FinCEN C. FHLMC D. FHFA
D. The answer is FHFA. HERA created and installed the FHFA (Federal Housing Finance Agency) as the conservator of the GSEs (Fannie Mae and Freddie Mac). The FHFA's powers include the responsibility to set the conforming loan limits from year to year.
What does "FHA" stand for, when referring to the agency which oversees the FHA loan program? A. Federal Housing Authority B. Federal Housing Agency C. Federal Housing Association D. Federal Housing Administration
D. The answer is Federal Housing Administration. "FHA" stands for Federal Housing Administration.
Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following? A. Regulation C B. Regulation Z C. Regulation D D. Regulation B
D. The answer is Regulation B. Under Regulation B, a loan originator may not ask whether an applicant receives alimony, child support, or separate maintenance payments not needed in order to get credit, unless he or she is first told that this information does not have to be provided. If regular alimony, child support, or separate maintenance payments need to be counted as income to qualify for credit, an applicant may be asked to prove that it has been received consistently.
Which of the following is NOT true about the financial responsibility of a mortgage loan originator? A. The penal sum of a surety bond must reflect the dollar amount of loans originated B. A sponsored mortgage loan originator may be covered under the sponsoring licensee's surety bond C. If a mortgage loan originator pays into a state fund established to pay claims of consumers, he or she is not required to maintain a surety bond D. A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year
D. The answer is a mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated. If the loan originator's licensing state has developed and administers a fund specifically to provide protection to consumers by making funds available for claims resulting from violations of state or federal laws and regulations, in lieu of a surety bond or net worth requirement, the state may instead require the loan originator to pay a certain amount into the state fund.
An underwriter examines what two main aspects of a loan application to determine if lender guidelines are being met? A. Applicant and credit B. Credit and income C. Credit and collateral D. Applicant and collateral
D. The answer is applicant and collateral. An underwriter must make a determination as to whether both the applicant and the subject property meet the guidelines of the investor.
Muny Baggins regularly extends credit that is subject to a finance charge and payable in a written agreement of more than four installments. Under the Truth-in-Lending Act, Muny is a: A. Mortgage servicer B. Mortgagee C. Mortgagor D. Creditor
D. The answer is creditor. The Truth-in-Lending Act identifies a creditor as a person, including a lender and a table funding mortgage broker, that regularly extends credit that is subject to a finance charge or is payable by written agreement in more than four installments. A creditor may also be a credit card issuer.
Securitization helps lenders to: A. Make more loans to lesser-qualified customers B. Increase the menu of products available to their customers C. Provide funds to the highest bidder on the secondary market D. Exchange active loans to another entity to generate new funds to make more loans
D. The answer is exchange active loans to another entity to generate new funds to make more loans. The securitization process allows lenders to transfer active loans to another entity in exchange for funds to make more loans.
Which of the following best describes the order in which payments will be applied according to the standard deed of trust? A. Interest, escrow, principal B. Principal, escrow, interest C. Late fees, principal, interest D. Interest, principal, escrow
D. The answer is interest, principal, escrow. In a standard deed of trust, payments are applied to interest first, then to principal, and then to escrow items, such as tax and insurance payments.
An investigator spends three weeks researching Steve Sample, who is applying for a job . He meets Steve's neighbors, current co-workers, and former teachers and mentors. After interviewing upwards of 30 individuals, the investigator submits his report to the company considering Steve for a position. This is an example of: A. FBI mortgage fraud investigation B. CRA disclosure C. Private investigation methodology D. Investigative consumer report
D. The answer is investigative consumer report. A consumer report using information obtained through personal interviews is known as an investigative consumer report and is meant to give insight into a person's character, general reputation, personal characteristics, and mode of living.
Which of the following are considered liens? A. Judgment, mortgage, flood insurance B. Mortgage, mechanic's lien, debentures C. Chattel, mortgage, attachment D. Judgment, attachment, mortgage
D. The answer is judgment, attachment, mortgage. Judgments, attachments, and mortgages are all considered liens.
Which of the following is the least-expensive type of reverse mortgage? A. HECM B. Proprietary mortgage C. Non-recourse D. Single purpose
D. The answer is single purpose. A single-purpose reverse mortgage is a low-cost loan offered to low-income borrowers by state and local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.
Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT: A. The loan satisfies the requirements of a balloon payment qualified mortgage B. A nine-month bridge loan is obtained for the construction of the borrower's primary dwelling C. The borrower's income is seasonal D. The borrower signs a waiver consenting to the balloon payment
D. The answer is the borrower signs a waiver consenting to the balloon payment. A high-cost loan may not provide for a payment schedule with regular periodic payments that result in a balloon payment, unless the payment schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken in connection with the acquisition or construction of a dwelling that will be the borrower's principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage.
A lender originally discloses an APR of 6.08%. When the lender begins to prepare closing documents, they realize the actual APR is 6.135%. Which of the following is true? A. The lender must re-disclose and wait three business days from mailing the disclosures before closing the transaction B. The lender must re-disclose and wait three business days from the borrower's receipt of the disclosures before closing the transaction C. The lender must re-disclose and wait six calendar days from mailing the disclosures before closing the transaction D. The lender has no obligation to re-disclose
D. The answer is the lender has no obligation to re-disclose. The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements, or if it is not more than one quarter of one percentage point (.25%) above or below the APR for an irregular transaction. In this case, the difference between the disclosed APR and the actual APR is within the limits of this tolerance, and does not require re-disclosure.
According to the HPML Rule, which of the following transactions would require a second appraisal? A. A higher-priced mortgage loan that also meets qualified mortgage standards B. The purchase price is 10% higher than the seller's acquisition price 100 days ago C. All higher-priced mortgage loans are required to have two appraisals D. The purchase price is 20% higher than the seller's acquisition price 150 days ago
D. The answer is the purchase price is 20% higher than the seller's acquisition price 150 days ago. According to the HPML Rule, a transaction will require a second appraisal if the purchase involves a possible case of "loan flipping." This is true when the consumer's purchase price is 10% more than the seller's acquisition price (if the seller acquired the property 90 or fewer days ago) or 20% more than the seller's acquisition price (if the seller acquired the property 91 to 180 days ago).
The size of the government's guarantee on a VA loan depends on: A. Whether the interest rate is fixed or adjustable B. Whether this is the first time a veteran uses the guarantee or a subsequent transaction C. The length of the loan term D. The size of the loan being obtained
D. The answer is the size of the loan being obtained. The size of the government's guarantee on a VA loan depends on the size of the loan being obtained.
