SAFE-NMLS-MLO-CA Exam Study (FULL SET)
The most common indices, or indexes, are the...
Constant Maturity Treasury (CMT), the 11th District Cost of Funds Index (COFI), the London Inter Bank Offering Rates (LIBOR), Certificate of Deposit Index (CODI), and the Bank Prime Loan (Prime Rate).
The SAFE Act is regulated by the _________ and implemented by __________
Consumer Financial Protection Bureau Regulations G and H
In 2010, what made sweeping changes to financial regulatory agencies that affected almost every aspect of the nation's financial services industry?
Dodd-Frank Wall Street Reform and Consumer Protection Act
The National Housing Act of 1934 created the...
Federal Housing Administration (FHA), Federal Savings and Loan Insurance Corporation (FSLIC) and the United States Housing Authority
The Panic of 1907 led to the passage of the...
Federal Reserve Act of 1913 that established the Federal Reserve System.
The two anti-trust laws in 1914 were the...
Federal Trade Commission Act and the Clayton Act.
The Gramm-Leach-Bliley Act (GLBA) repealed part of the...
Glass-Steagall Act prohibiting banks from affiliating with securities firms.
Straight Loans are also called...
Interest-Only Loans
The Housing and Economic Recovery Act (HERA), known as the Housing Stimulus Bill accomplished what?
It authorized temporary measures to stimulate the housing market—homebuyer tax credits, additional property tax deductions, seller-funded down payment assistance programs and neighborhood revitalization funds for communities to purchase foreclosed homes.
A ________________ is defined as an individual who "takes a residential mortgage loan application and also offers or negotiates terms of a residential mortgage loan for compensation or gain".
Loan Originator
Avoiding to lend in high-risk communities and neighborhoods is called...
Redlining
Requires financial institutions to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients' nonpublic personal information:
Safeguards Rule
What was passed to make housing and home mortgages more affordable?
The National Housing Act of 1934
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) can be found where?
Title V of the Housing and Economic Recovery Act.
What are principles that lenders use to evaluate the risk of making real estate loans.
Underwriting guidelines (The guidelines are just that—guidelines. They are flexible and vary according to loan program. If a borrower makes a small down payment or has marginal credit, the guidelines are more rigid.)
Loan originators registered in the national database are provided with a...
Unique Identifier number.
Loan originators must verify...
a borrower's income for residential mortgages.
During the early amortization period...
a large percentage of the monthly payment is used to pay interest.
The SAFE Act's definition of "residential mortgage loan" includes...
a loan secured by a consensual security interest on a dwelling as defined by the Truth in Lending Act.
Consumers must be given...
a notice to "opt-out" of sharing of non-public personal information with nonaffiliated third parties.
Cash-out refinancing is not the same as a home equity loan. Cash-out refinancing replaces an existing loan with a new one. A home equity loan is ...
a second loan against the equity in your home.
For most ARMs, the interest rate and monthly payment change every month, quarter, year, 3 years, or 5 years. The period between rate changes is the...
adjustment period .
The SAFE Act required...
all states to have a loan originator licensing and registration system in place by August 1, 2010.
In 2000, Fannie Mae was required by the Department of Housing and Urban Development (HUD) to...
allocate 50% of its business to low- and moderate-income families, with a goal of financing over $500 billion in Community Reinvestment Act related business by 2010.
Lenders classify loans by the type of...
amortization—fixed-rate, ARM, or GPM.
Amortization type is the...
basis for how a loan will be repaid.
The Right to Financial Privacy Act specifies that...
before any information is released to the federal government, certain procedures, exemptions, limitations, and requirements concerning the release of customer financial records must be met.
Leading index loans, like those tied to the CMT, are...
best during periods of declining rates.
Generally, a loan tied to a lagging index, such as the COFI, is better for...
borrowers when interest rates are rising.
ARM loans help avoid payment shock with built-in protections called...
caps
The "Privacy Rule" requires...
clear disclosure by all financial institutions of their privacy policy regarding the sharing of non-public personal information with both affiliates and third parties.
The amount of the margin may differ from one lender to another, but it is...
constant over the life of the loan.
In general, a mortgage originator may not receive any origination fee, except from the...
consumer
The 2008 - Emergency Economic Stabilization Act did what?
creating a $700 billion Troubled Assets Relief Program (TARP). TARP was established to stabilize the United States financial system and prevent a systemic collapse.
A maturity date is the...
date on which a debt becomes due for payment.
A 40-year fixed-rate loan has the lowest monthly payments of fixed-rate loans but has a...
dramatically higher amount of interest costs.
A straight loan is not amortized. The borrower only makes periodic interest payments during the term of the loan. The entire principal balance is...
due in one lump sum upon maturity.
Passed by congress in 1977, the Community Reinvestment Act (CRA)...
encourages regulated financial institutions to serve their immediate community's needs.
When a loan is fully amortized, the payments the borrower makes are...
equal over the duration of the loan.
Many large banks choose to set their prime rates based on the...
federal funds rate
The 'Pretexting Protection' requires...
financial institutions to have a plan in place to prevent unauthorized people from accessing non-public personal information based on some pretex t.
A fixed-rate loan has two distinct features—
fixed interest for the life of the loan and level payments.
The most common amortization types include...
fixed-rate loans, adjustable-rate mortgages (ARM), and graduated payment mortgages (GPM).
HUD considers the Loan Originator to encompass any individual who...
for compensation or gain, offers or negotiates pursuant to a request from and based on the information provided by the borrower. (A person who performs only administrative or clerical tasks in connection with loan origination is not considered a loan originator.)
A fully amortizing loan is ...
fully repaid at maturity by periodic reduction of the principal.
Any loan used to take cash out of a property is a...
hard money loan
Hard money loans draw on the equity in property. This type of loan includes...
home equity loans, home equity lines-of-credit, and swing loans.
An Appraisal Report includes the...
identity of the client and any intended users (by name or type), the intended use of the appraisal, the real estate involved, the real property interest appraised, the purpose of the appraisal, and dates of the appraisal and of the report.
The ________ is a measure of interest rates and the ________ is an extra amount that the lender adds.
index margin
For a limited period of time, every ARM has an...
initial interest rate and payment.
An adjustable-rate mortgage ( ARM ) is a loan with an...
interest rate that adjusts in accordance with a movable economic index.
Many adjustable-rate loans (ARMs) have a low...
introductory rate or start rate , sometimes as much as 5.0% below the current market rate of a fixed-rate loan. This start rate is usually good for 1 month to as long as 10 years.
Amortization is the ...
liquidation of a financial obligation on an installment basis.
A person may refinance to reduce the interest rate, lower monthly payments, or change from an adjustable-rate to a fixed-rate loan. The _______________remains the same, but the _________ change.
loan amount terms
The United States Housing Authority's intent is to...
make low-interest, long term loans to local public agencies for slum clearance and construction of low- income dwellings.
The lender's goal is to...
match the buyer's financial situation to the appropriate loan product.
Mortgage originators are prohibited from ____________ a consumer's credit history or the appraised value of the property securing the loan
mischaracterizing
The CMT, COFI, and LIBOR indexes are the...
most frequently used.
Fraud for profit is a complex scheme involving...
multiple parties, including mortgage lending professionals, in a financially motivated attempt to defraud the lender of large sums of money.
Subtitle B of the Reform Act establishes... national underwriting standards
national underwriting standards for residential loans.
Any mortgage product other than a 30-year, fixed-rate mortgage is called a...
nontraditional mortgage
Any mortgage other than a 30-year, fully amortizing, fixed-rate mortgage is a...
nontraditional mortgage.
A partially amortizing loan has a repayment schedule that is...
not sufficient to pay off the loan over its term.
Straight Loans are not commonly offered by institutional lenders but may be...
offered by a seller or a private lender to a buyer.
Refinancing replaces the...
old loan with a new one.
For loans underwritten through Desktop Underwriter (DU) the maximum allowable DTI ratio is based on the... .
overall risk assessment of the loan casefile
Mortgage originators are prohibited from steering a consumer to obtain a loan that has...
predatory characteristics (such as equity stripping, excessive fees, or abusive terms)
The ________________ refers to the interest rate that individual banks charge their most creditworthy customers for short-term loans.
prime rate
If a lender sells, transfers, or otherwise disposes of its interest in a mortgage and does not service the mortgage, the lender shall...
provide a copy of the Closing Disclosure to the new owner or servicer of the mortgage as a part of the transfer of the loan file.
A loan that is used to purchase property is called a...
purchase money loan .
One of the most obvious ways to classify loans is by their...
purpose—purchase, refinance, or cash out.
Mortgage originators are prohibited from steering a consumer from a "_______________" loan for which the consumer is qualified to a loan that is not a qualified mortgage;
qualified mortgage
Cash-out refinancing involves...
refinancing the loan for a larger amount than the current loan.
Under GLBA, protections were put in place to...
safeguard consumers' non-public personal information—the Financial Privacy Rule, the Safeguards Rule, and Pretexting Protection.
The stated purpose of each new law revolves around...
safety, sound practices, stability, confidence, etc. in the financial system being regulated.
the Consumer Financial Protection Bureau regulates...
sections 502 through 509, of the Gramm-Leach-Bliley Act.
Mortgage originators are prohibited from discouraging a consumer from...
seeking a loan from another mortgage originator.
In 1933, the Banking Act of 1933 (Glass-Steagall Act) was passed that...
separated commercial banking from investment banking.
Interest-only fixed-rate loans are...
short-term fixed-rate loans that have fixed monthly payments usually based on a 30-year fully amortizing schedule and a lump sum payment at the end of its term.
In most circumstances, if the index rate moves up...
so does the interest rate.
Mortgage originators are prohibited from ____________ a consumer to obtain a loan that the consumer lacks a reasonable ability to repay
steering
A balloon payment is...
substantially larger than any other payment and repays the debt in full.
Loan products differ based on the...
terms of the loan, which include the amount borrowed, interest rate, length of the loan, and amortization type.
A closed-end loan is one in which...
the borrower receives all loan proceeds in one lump sum at the time of closing. The borrower may not draw additional funds against the loan at a later date.
The interest rate on the ARM only changes if...
the chosen index changes.
Under the Home Equity Loan Consumer Protection Act of 1988, if the disclosed terms change...
the consumer can refuse to open the plan and is entitled to a refund of fees paid in connection with the application.
Loan originators must make a reasonable effort based on verified and documented information that "at the time the loan is consummated...
the consumer has a reasonable ability to repay the loan, according to the terms, and all applicable taxes, insurance (including mortgage guarantee insurance), and other assessments."
Under the U.S. Housing Act of 1937 (Wagner-Steagall Act or the Low-Rent Housing Act)...
the federal government, through the Department of Housing and Urban Development (HUD), provides subsidies to local public housing agencies (PHAs) that rent housing to low-income families.
The interest rate is made up of two parts:
the index and the margin.
The longer the loan term...
the smaller the payment and the more interest is paid over the term of the loan.
What does the SAFE Act provide?
uniform national licensing standards, including minimum licensing and education. Additionally, it created a comprehensive national licensing database to enable government and consumers to track loan originators and help prevent fraud.
The index is a publicly published number that is...
used as the basis for adjusting the interest rates of adjustable-rate mortgages.
The Reform Act bans the payment of...
yield spread premiums (YSPs) or other originator compensation that is based on the interest rate or other terms of the loans.
The Federal Trade Commission (FTC) was created in 1914 in an attempt to...
"bust up" trusts and break apart monopolies that discouraged competition from smaller and less powerful businesses.
Mortgage originators are prohibited from participating in abusive or unfair lending practices that promote ...
"disparities" among equally creditworthy consumers based on race, ethnicity, gender, or age
The purpose of the Banking Act of 1935 was...
"to provide for the sound, effective, and uninterrupted operation of the banking system."
When a lending institution is recognized by the Federal Reserve, what are the three basic requirements that must be met?
(1) the institution must draw a map that defines the community in which it does business and post it visibly within its facilities. (2) The institution must list the types of credit it offers and make this list of loans available to the public. (3) the lender must post notice within its facilities that federal regulators are evaluating the institution. This notice must provide a forum for public comment on the institution's performance.
A dwelling is "a residential structure that contains...
1 to 4 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."
A typical 30-year, fixed-rate loan takes...
22.5 years of level payments to pay half of the original loan amount.
When a PMI policy is cancelled, the borrower is entitled to a refund of the unearned portion of the mortgage insurance premium paid. The refund must be transferred to the borrower by the lender within...
45 days of cancellation.