Exam

An interest-only loan is a loan product sometimes used by borrowers who do not have a sufficient understanding of the product to truly use it appropriately. Which of the following terms is often used to describe the process an originator should use to determine if their borrower's circumstances are appropriate for an interest-only product? Qualification ratio Loan suitability test Stringent repayment analysis Tangible net benefit

"Loan suitability" is a term that refers to the diligent matching of loan programs with the current financial circumstances of each customer

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

20-year

If a borrower were to remit a mortgage payment containing an "unearned" PMI premium, within what timeframe must the mortgage servicer refund the PMI premium? 30 days 45 days 60 days 75 days

45

A loan's final CD reflects a finance charge of $110,150. At or above what amount would the finance charge ultimately have to be in order to trigger a CD re-disclosure and additional three-day waiting period before closing? $110,251 $110,249 $110,050 $110,250

A. If the finance charge at closing is more than $100 above or below the finance charge appearing on the final CD, the lender must re-disclose the CD and wait an additional three days before closing.

The cost of the credit is represented as both an _______ and a/an _______. APR // Cash to Close Interest Rate // Finance Charge APR // Interest Rate APR // Finance Charge

APR // Finance Charge

All but which of the following is achieved by remitting principal pre-payments against a fixed-rate mortgage? Interest savings Lower payment amount Reduction in term Faster equity growth

B. Lower Payment Amount.When allocating principal pre-payments against a fixed rate loan, the periodic payment amount due on the loan never changes. Since the balance is lower than it otherwise would be after the application of a payment directly to principal and considering that the same periodic payment amount is continually remitted, the loan pays off sooner than it would otherwise thereby saving the borrower time on the loan and interest spent while causing them to gain equity more rapidly.

What was the primary consideration for prohibiting loan originators from earning YSP as compensation? The concept of caveat emptor The concept of bait & switch The concept of fiduciary responsibility The concept of supply and demand

C.Fiduciary responsibility deems the mortgage professional responsible for looking out for the customer's best interests. If a loan originator is able to charge a higher interest rate in order to receive a higher commission, he might not be incentivized to get the customer the best possible pricing.

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

Certification of permissible purpose

FCRA establishes a consumer's right to place a/an ________________ on his or her credit profile. Fraud alert Identity theft alert Active duty alert Fraud and/or active duty alert

Fraud and/or active duty alert

Which form of mortgage fraud results in much greater losses to the mortgage industry? Agency fraud Broker fraud Fraud for housing Fraud for profit

Fraud for profit often involves some conspiracy among several industry insiders. Together they often scheme to defraud lenders therefore leading to much greater losses than fraud for housing. Fraud for housing occurs commonly when a borrower misrepresents his or her qualifications to improve their chances of loan approval.

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

Funding

All but which of the following is not achieved by remitting principal pre-payments against an adjustable-rate mortgage? Interest savings Lower payment amount Reduction in term Faster equity growth

Lower payment amount.Unlike its fixed-rate counterpart, when principal pre-payments are allocated against an adjustable-rate mortgage balance, the term is never affected, the future payment amount is. Whenever an interest rate adjustment occurs, the mortgage servicer recalculates the next periodic payment based on the current balance, applicable interest rate, and remaining term.

A mortgage lender spends $12.50 on a credit report for which it charges the applicant $25.00. To what does this refer and what regulation, if any, does it violate? It refers to standard capitalistic practices compliant with any regulation Marking up and TILA Bait & switch and RESPA Marking up and RESPA

Marking up and RESPA.

A fully-operational lender that conducts business seven days a week takes a mortgage application on Wednesday. By the close of what day must the LE be issued? Monday of the following week Saturday Sunday Friday

Saturday

All but which are examples of public-personal information? Tax returns Bankruptcy records Foreclosure records Marriage certificates

Tax returns

One of the more common methods for assessing property taxes is based on a percentage of the value of the property, also known as: Ad Valorem taxes Market value taxes Assessed value taxes Proportionate contribution taxes

Taxes that are calculated as a percentage of the appraised value of a property are called ad valorem taxes, meaning according to value.

A mortgage company based in Tennessee has implemented a telemarketing campaign to increase its refinance business. Its first two weeks of calls are made to local residents, some of which are actually prior customers. If there is a violation of the Do-Not-Call Implementation Act, which federal agency would enforce any action? The FTC The FCC The SEC FinCEN

The Do-Not-Call Implementation Act gives authority to the FCC to cover calls made to and from points within the same state. The FTC oversees calls made from state to state.

All but which of the following circumstances permit a loan originator to refuse to take a mortgage application: The applicant is unemployed and has no income source The applicant is likely committing fraud The applicant is 17 years old but emancipated The applicant is clearly mentally incompetent

The only three instances when a loan originator would be permitted to refuse completing a mortgage application would be when the applicant is committing fraud, when the applicant is under the age of 18 and prohibited from legally signing a legal document such as the URLA, or when the applicant is mentally incompetent rendering him or her unable to enter into a legally-binding contract.

Regulation H refers to: Individual states having to participate in the NMLS The procedures that the CFPB must take if changes to state legislation render the state out of SAFE Act compliance States having to enforce HMDA guidelines State oversight by the federal government in relation to mortgage licensing

The procedures that the CFPB must take if changes to state legislation render the state out of SAFE Act compliance

Your mortgage applicant presents a picture ID at the time of application that does not closely resemble him. What action, if any, must you take? a) No further action is required since the ID was otherwise valid b) You must follow the protocol established by your company's Identity Theft Prevention Program required under FACTA c) You must ask the customer for another ID containing a picture that better resembles him d) You must refuse to take the application

You must follow the protocol established by your company's Identity Theft Prevention Program required under FACTA

The SAFE Act implements:? a) The ceiling of standards to which mortgage professionals must adhere b) A floor of standards to which individual states may add their own qualifications c) Guidelines to which mortgage professionals are encouraged to adhere d) Guidelines to which individual states may choose to enforce

b) A floor of standards to which individual states may add their own qualifications

Which of the following represents a non-conforming loan? An FHA 30-year ARM for $127,500 securing a three-family primary residence with a storefront A 30-year conventional mortgage for $400,000 securing a single-family, primary residence A 15-year conventional loan for $325,000 securing a two-family investment property A 10-year conventional loan for $237,500 securing a single-family vacation home

A

If an advertisement states the amount of any payment, the clear and conspicuous disclosure of which of the following would not be required? The APR The amount of each applicable payment over the term of the loan, including any balloon payment (based on reasonably current index and margin for a variable-rate loan) The period of time during which each payment will apply For credit secured by a first lien on a dwelling, the fact that the payments do not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation will be greater

A. Disclosure of the APR is only required upon advertising a particular interest rate not payment amount.

When a state agency is conducting a background check, which state department is required to provide access to an applicant's criminal history information? The Secretary of State The Attorney General The state police The state archives office

All criminal history information must be provided by the state's Attorney General to the state officials responsible for regulating state-licensed loan originators to the extent criminal history background checks are required under the loan originator licensing laws of the state.

oan suitability refers to: a) A borrower's ability to repay a loan b) The type of product being what the borrower seeks c) The right product to fit the borrower's needs d) The loan products available from which to choose

Answer: a) A loan is deemed suitable for a borrower if her ability to repay is clearly established.

Which of the following is not an ARM component? a) Term b) Index c) CAP d) Frequency of Change

Answer: a) The four ARM components are: frequency of change, index, margin, and CAPS.

Which of the following exemplifies discrimination as considered by ECOA? Declining the application of an Asian applicant who declared bankruptcy two weeks prior Refusing to take an application from a 17-year-old woman Refusing to approve a qualified 95-year-old's 30-year mortgage application because it's unlikely that he would outlive the mortgage Declining a pregnant woman's application because she is currently unemployed

Even if an applicant is not expected to outlive the mortgage term, denying the application on solely that basis is an example of ageism and exemplifies a prohibited characteristic by definition of ECOA.

The requirement to include the credit repository's name and address on the adverse action notice is established through: a) ECOA b) FCRA c) ECOA & FCRA d) FACTA

FCRA

Through which application modality must a loan originator document an applicant as being Samoan? Telephone E-mail Face-to-face where the applicant refuses to self-identify Face to-face where the applicant agrees to self-identify

Face to-face where the applicant agrees to self-identify

The three tools used by the Fed to reduce the supply of money are: Increase the reserve requirement, raise the discount rate, sell securities in the open market Sell securities in the open market, raise lending standards, raise the reserve requirement Increase enforcement of Regulation Z, raise the reserve requirement, buy securities in the open market Increase the reserve requirement, lower the 10-Year Treasury bond rate, raise the discount rate

Increase the reserve requirement, raise the discount rate, sell securities in the open market

The FHA was established in 1934 as a result of the: a) National Housing Act b) Federal Housing Act c) Federal Housing Administration d) Depository Institutions Deregulation and Monetary Control Act

National Housing Act

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

Teaser rate

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

Title binder schedule A

On which of the following documents must the MLO's name and unique identifier appear? a) Note, Mortgage, Closing Disclosure, and URLA b) Mortgage, Loan Estimate, ABAD c) Closing Disclosure, Mortgage, Transfer of Servicing Disclosure, Note, and Loan Estimate d) URLA, Closing Disclosure, Mortgage, Loan Estimate, and Note

URLA, Closing Disclosure, Mortgage, Loan Estimate, and Note

Beyond what percentage of use of available credit will a potential creditor start becoming concerned? a) 50% b) 30% c) 75% d) 33%

30

What is the Model State Law? A form filled in by the CSBS and the AARMR to guide banks in implementing the legislation required by the SAFE Act A document created by the CSBS and the AARMR to guide states in implementing the legislation required by the SAFE Act A model created by the CSBS and the AARMR to guide states in implementing the legislation required by the Mortgage Licensing Act A book created by the CSBS and the AARMR to guide mortgage companies in implementing the legislation required by the SAFE Act

A document created by the CSBS and the AARMR to guide states in implementing the legislation required by the SAFE Act

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

Discount rate

What does the term "title" refer to in real estate? A valuable piece of paper that can be bought and sold A contract that gives a lender the right to foreclose if all the obligations are not met A legal concept that signifies ownership of real property Any publicly-recorded document that signifies one or more of the four property rights

A legal concept that signifies ownership of real property. Title is not a legal document, a piece of paper, or anything tangible. It can be defined as a combination of all the elements that constitute a legal right to own, possess, use, control, enjoy, and dispose of real estate. The rights of ownership recognized and protected by the law.

The basic definition of a loan modification is: A permanent change in the terms of a loan (either term, interest rate or both) in response to a borrower's long-term inability to make payments A simplified refinance procedure that allows a borrower to modify the terms of an existing loan to take advantage of market rates without having to pay required fees A temporary reduction or suspension of loan payments for an agreed upon period of time Transferring the property to a new owner who takes over the outstanding debt

A loan modification is not technically a loan program. It is an alternative to foreclosure by permanently changing some aspect of an existing loan agreement because of a borrower's inability to meet the terms of the original agreement.

A pre-payment penalty generally consists of: A percentage of the monthly payment A percentage of the amount pre-paid A percentage of the remaining loan balance A percentage of the loan amount previously repaid

A percentage of the amount pre-paid

Property flipping is legitimate when: A property is secured for less than its true value and sold shortly thereafter for its true value A property's value is falsely represented by a fraudulent appraisal and then sold shortly thereafter at a higher price A property is legitimately acquired but sold shortly thereafter for its true value Any home is sold less than twelve months after acquiring it

A property is legitimately acquired but sold shortly thereafter for its true value

A deed-in-lieu of foreclosure: Involves a homeowner signing the property's deed over to the lender thereby surrendering the property in order to avoid the process of foreclosure Occurs when a court orders a homeowner to surrender his property to the lender Involves a lender releasing the lien against a property in consideration of the receipt of less than what is owed Is what the lender issues when a homeowner redeems his home from foreclosure

A. In the face of imminent foreclosure, a homeowner may simply elect to surrender his or her home by signing the deed over to the lender thereby avoiding a lengthy and costly foreclosure process.

The term table-funding refers to: A type of wholesale lending arrangement where brokers are permitted to originate, close, and fund a loan using a warehouse line of credit When a loan without a rescission period closes and funds the same day A loan in which funds are returned to the lender because of a borrower refusing to sign at the closing table The funding of pools of loans that creates securitization

A. Mortgage brokers sometimes engage in table-funding which allows them to, in theory, be a lender on a loan and close in their own name. Once the loan closes, it is immediately sold and assigned to another entity.

Which document actually contains the borrower's promise to repay the loan? The Note The Deed The Mortgage The CD

A. Neither the mortgage nor the deed of trust actually contain the borrower's contractual promise to repay the loan. The note, or promissory note, is the borrower's promise to repay the loan.

The TILA defines a creditor as everything but: A lender regularly extending credit that is payable by a written agreement in more than two installments A lender regularly extending credit that is payable by a written agreement in more than four installments A lender extending credit subject to a finance charge A credit card issuer

A. One of the definitions of a creditor is a lender that extends credit payable through a written agreement requiring repayment in more than four installments. Not two installments.

An ARM loan has a 4% start rate and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. Assuming worst-case scenario, what would the new rate be after the first move? 5% 9% 7% Impossible to calculate without knowing the index and the margin

A. Strictly using the worst-case scenario, an ARM with a start rate of 4% and a periodic cap of 1% could move no higher than 5% on its first movement (4 + 1 = 5).

An ARM has a 6% start rate and is locked for three years. Its adjustment caps are set at 2/1/5. Assuming worst-case scenario, in what year would this loan reach its rate ceiling? 7th year 4th year 11th year 6th year

A. he ARM starts at 6% and is locked for three years. In the 4th year, the initial rate cap (of 2%) allows it to move to 8%. In the 5th year, the periodic rate cap (of 1%) allows it to move to 9%. In the 6th year, again the periodic rate cap limits movement to no more than 10%. Finally, in the 7th year, the loan would reach its rate ceiling of 11%.

Whole life insurance policies contain: a) A cash value b) A face value c) A market value d) Both a cash and face value

Answer: d) The cash value is the amount that would be secured through the current surrender of the life insurance policy. The face value is the ultimate value that the policy will achieve upon maturation.

A customer complains that his Realtor rushed him through the home inspection and sidestepped many of his questions. You immediately suspect: a) Realtor fraud b) An air loan c) A falsified sales contract d) A cursory inspection

Answer: d) A cursory inspection involves a rushed or "harried" inspection, often with the intent of hiding something.

What is one of the SAFE Act's main objectives? a) To protect the consumer from unscrupulous mortgage professionals b) To limit the types of available mortgage programs c) To generate revenue for states d) To require lenders to consider applicants' ability to repay

Answer: a) "The purpose of (the SAFE) ... Act is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry is operating without unfair, deceptive, and fraudulent practices on the part of mortgage loan originators."

In a lien theory state: a) The borrower retains both legal and equitable title b) The borrower gives legal title to the lender c) Foreclosures are prohibited d) Foreclosures require the lender to first validate its lien

Answer: a) A property located in a title theory state requires the borrower to issue legal title to the mortgagee. The mortgagee technically owns the property until the debt is paid at which time the deed is transferred to the homeowner. In a lien theory state, the borrower retains equitable title. A property located in a lien theory state requires the lender to place a lien against the property's title that necessitates the initiation of a judicial foreclosure proceeding in the event of default.

Which of the following individuals would be subject to a VA funding fee? a) A decorated war veteran b) A disabled veteran with a 15% service-related disability c) The spouse of a disabled war veteran with a 15% service-related disability d) The surviving spouse of a veteran killed in military action

Answer: a) A veteran who sustains a service-related disability deemed by the Dept. of Veterans Affairs to be 10% or greater along with his or her spouse and/or surviving spouses of veterans who died while in service are exempt from having to pay a VA funding fee when pursuing VA financing.

Sally and Steven live in a home in which both of their names appear on the deed. Only Sally, however, has signed the conventional Promissory Note. When Sally decides to refinance the mortgage, she elects not to involve Steven since the debt is not his and neglects to mention him to the loan originator. What does her mortgage loan originator inform her after reviewing the title binder? a) That Steven will have to prepare a Power of Attorney that is specific to the transaction and approved by the lender allowing her to sign the Mortgage on his behalf at closing b) That Steven will also have to be added as an obligated party c) That they will be unable to approve the loan because Steven is not an obligated owner d) That Steven will have to be removed from the title for the loan to go through

Answer: a) Although removing Steven from the title of the property is always an option, it may not be the easiest or most favorable solution. Because he has an ownership interest, Steven must consent to whatever liens are placed against the title of the property. To remain a non-obligated owner, Steven will either have to attend the closing and sign the Security Instrument (but not the Note) or he will need to sign a Power of Attorney, specific to this transaction and approved by the lender, that affords Sally (or a different third party) the right to sign the Security Instrument on his behalf.

A loan is scheduled to close on October 2nd. Utilizing a/an _____________ will likely reduce the amount of cash that the applicant needs to bring to closing. a) Interest credit b) Right to rescind c) Seller's gift d) Credit card advance

Answer: a) An interest credit is issued when the first payment due date is established as the first day of the month directly following the month in which the loan closed. Since the entire month's worth of interest will be collected through the receipt of the first payment, the interest credit refunds the applicant the per diem interest amount for the days of the month prior to closing when they did not yet owe the money.

A Realtor offers a loan originator $100 for every referral that turns into a sale. Who violated RESPA? a) The Realtor b) The loan originator c) Neither the Realtor nor the loan originator d) Both the Realtor and the loan originator

Answer: a) By offering the incentive, the Realtor violated RESPA. Unless the loan originator accepts the offer, he does not commit a violation.

Which of the following is not excluded from higher priced mortgage considerations? a) A conventional/conforming loan on a two-family property b) A reverse mortgage c) An eight-month bridge loan d) A construction loan used to build a property from scratch

Answer: a) Exclusions from higher priced mortgage loan considerations consist of loans that are used to finance the initial construction of a dwelling, bridge loans with terms of 12 months or less, reverse mortgages, and home equity lines of credit.

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.

A float-down agreement: a) Provides an opportunity for a customer to lower their locked interest rate prior to closing b) Automatically reduces a customer's locked interest rate if rates decline prior to closing c) Is signed when a customer elects to "float" their interest rate instead of locking it in at the time of application d) Allows for an interest rate to be reduced if rates decline after closing

Answer: a) Many lenders offer customers a float down option at the time of interest rate lock allowing for a one-time reduction in rate, at the customer's request, should rates decline prior to closing. There is often a cash deposit collected from the customer in exchange for this privilege.

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.

According to the MAPs rule, all but which of the following would be prohibited? a) Advertising that one is a HUD-endorsed lender in an advertisement for FHA loans b) Advertising that a company's 3/1 ARM is fixed for the first three years c) Using the recipient's current lender's name in a solicitation without specifically indicating that the ad is not coming from that lender d) Advertising the guaranteed ability to eliminate a person's debt through refinance

Answer: a) Similar to TILA, the MAPs Rule serves to promote authenticity and accuracy in advertising. Some of the MAPs Rule's prohibitions surround using the word "fixed" when advertising an adjustable rate mortgage, misrepresenting or implying government endorsement when either the lender is not an endorsed provider or the loan is not a government loan, using an individual's current lender's name in a solicitation without indicating that the source of the advertisement is not the referenced lender, and making misleading claims surrounding debt elimination.

An individual commits fraud which ultimately results in a financial institution electronically transferring funds into his checking account. In addition to the actual fraud, with what other crime could this individual be charged with committing? a) Wire fraud b) Bank fraud c) Mail fraud d) Conspiracy

Answer: a) Since the financial institution electronically transferred the funds into his checking account, charges of wire fraud could also be levied against him.

A borrower accepts a fixed rate, 30-year loan but, at closing, is presented with documents representing a 5/1 ARM. The loan originator explains that the ARM is better because of its lower start rate. This scenario exemplifies: a) Unfair and deceptive trade practices b) Redlining c) Predatory lending d) Reverse redlining

Answer: a) Since the loan originator arranged for one loan and ultimately produced another, his actions constituted unfair and deceptive trade practices. This example may also be referred to as "bait & switch."

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.

Which of the following is a type of ARM cap? a) Life-of-loan b) Credit score c) Interest deductibility d) Frequency of change

Answer: a) The life-of-loan cap establishes an interest rate ceiling beyond which a particular loan's adjustable interest rate may not climb. The four types of ARM caps are: initial adjustment, periodic, life-of-loan, and payment.

A ______ settlement is a settlement whereby funds are issued immediately after closing or, when applicable, immediately after rescission expires. A/an ______ settlement is a settlement whereby funds are issued after the documents have been recorded into public record. a) Wet / dry b) Reclusive / Incorporative c) Dry / wet d) Salient / restricted

Answer: a) Wet settlements issue the funds immediately after settlement or, when the transaction is rescindable, immediately after the rescission period expires. Dry settlements record the documents into public record before issuing the funds. Typically, east coast settlements are wet and west coast settlements are dry.

MLO Monica is refinancing the only mortgage secured by her customer's primary residence. She just realized that the APR of the interest rate that her customer locked exceeds the APOR by 1.625%. Which of the following statements now applies? a) An escrow account is mandatory b) A 2055 drive-by appraisal is sufficient c) MLO Monica must offer a lower rate to her borrower d) The three-day right to rescind is now extended to three years

Answer: a) With only a few exceptions, when a loan meets the criteria that classifies it as a higher-priced mortgage, an escrow account managing the homeowner's insurance and real estate taxes becomes mandatory for the first five years. Additionally, a written appraisal with an interior inspection is required. Higher-priced mortgages are permitted as long as the above-referenced conditions apply. Lastly, there is no change to the standard right of rescission requirements.

Qualified mortgages limit pre-payment penalties to: a) Two percent of the balance during the first year b) Five percent of the balance for the life of the loan c) One percent of the balance up through year four d) QM's prohibit pre-payment penalties

Answer: a) With the implementation of QM's through the Dodd-Frank Act, prepayment penalties are limited to: With the implementation of QM's through the Dodd-Frank Act, pre-payment penalties are limited to 2% of the outstanding balance during the loan's first two years, 1% of the loan's outstanding balance during the third year, and no penalty thereafter.

Assuming the existence of a permissible purpose, which of the following constitutes permission to order someone's credit report? a) Completing a pre-qualification contact request b) Completing a 1003 c) Calling a loan originator to inquire about mortgage rates d) E-mailing a loan originator to inquire about available mortgage products

Answer: b) A loan originator may only access an individual's credit profile with a permissible purpose and permission. Permission may be rendered verbally, in writing, or automatically through the completion of a Uniform Residential Loan Application (FNMA form 1003).

Which of the following is an example of a note receivable? a) The borrower is paying a car loan b) The borrower sold a house and financed the purchaser's mortgage for which she is receiving regular payments c) The borrower has signed a promissory note obligating himself to a mortgage on a different property d) The borrower is owed money for which he has been unsuccessfully collecting

Answer: b) A note receivable is an income stream earned from the repayment of a debt someone owes to the note holder. If the note is produced along with an on-time, 12 consecutive or greater monthly payment history as well as evidence of a minimum three-year continuance, the note receivable may be utilized as qualifying income.

An ARM start rate that is more than 3% below FIAR is known as a ______ rate: a) Discount b) Teaser c) Temporary d) Floating

Answer: b) ARM start rates that are more than 3% below FIAR as of the lock date are referred to as teaser rates. Discount rates are ARM start rates that are within 3% below FIAR.

A "party to the transaction" is: a) Anyone who signs the Note b) Anyone who signs the Mortgage c) A co-signer d) An obligated, non-owner

Answer: b) Anyone who has an ownership interest in a property being financed is considered a "party to the transaction." All "parties to the transaction" must sign the Mortgage or Trust Deed acknowledging and consenting to the lien being attached to the property in which they maintain an ownership interest.

All but which of the following are types of QM's? a) General b) Adjustable c) Balloon-Payment d) Temporary

Answer: b) Effective January 10, 2014, mortgage lenders are required to demonstrate that they have verified their borrowers' abilities to repay. The CFPB implemented the Ability to Repay Rule defining all Qualified Mortgages (QMs) as meeting that criteria. The four types of QMs are: General, Temporary, Small-Creditor, and Balloon-Payment.

Which of the following flood zone types would not require flood insurance? a) A flood zone containing prefix A b) A flood zone containing prefix E c) A flood zone containing prefix VE d) A flood zone containing prefix V

Answer: b) Flood zone prefixes A, V, and VE require the homeowner to maintain flood insurance when a mortgage securitizes the property.

Which of the following is not a consideration of HMDA? a) Race, Income, property usage, and loan amount b) Ethnicity, previous employer, loan disposition, and property location c) Sex, age, property location, and loan disposition d) Intended property usage, ethnicity, loan amount, and income

Answer: b) HMDA considers much more than race, national origin, and sex. Everything listed in these answers is considered through HMDA with the exception of previous employer.

payment while ______________ is the state of one's property value being lower than one's outstanding property debt. a) Negative equity / negative amortization b) Negative amortization / negative equity c) Positive amortization / positive equity d) Positive equity / positive amortization

Answer: b) Negative amortization occurs when a mortgage balance increases after the acceptable periodic payment is credited. Negative equity is the state in which a home's value is lower than the outstanding debt securing it. Both are mutually exclusive of each other.

Which of the following is not a characteristic of a sub-prime borrower as defined by the Statement on Subprime Lending? a) Foreclosure, repossession, or charge off within the previous 23 months b) Possessing more than two mortgages c) Two or more 30-day delinquencies within the previous 12 months d) Bankruptcy within the previous five years

Answer: b) Owing multiple mortgages is not a concern as long as the borrower is qualified and managing the payments as agreed.

A credit bureau failing to maintain a consumer's privacy is a violation of the: a) GLBA b) FCRA c) RESPA d) FACTA

Answer: b) The FCRA requires CRAs to protect consumers' privacy along with the sanctity of their information in credit transactions. It is for these reasons why permission to access credit, along with a permissible purpose, is always required from anyone seeking to access someone's credit data.

Which of the following is another term for the FHA ARM? a) FHA 5/1 b) FHA 251 c) FHA 203(k) d) FHA 203(b)

Answer: b) The FHA 251 refers to the FHA's adjustable rate mortgage offered in 1/1, 3/1, 5/1, 7/1, and 10/1 formats. The 203(k) is the FHA rehabilitation loan and the 203(b) is the standard 30-year FHA fixed-rate loan.

Without the client requesting it, a Realtor only shows properties to his client of Asian ethnicity that are located in neighborhoods primarily populated by Asian individuals. What regulation, if any, did the Realtor violate? a) ECOA b) FHA c) RESPA d) TILA

Answer: b) The Fair Housing Act prohibits any sort of discrimination pertaining to the procurement of housing. Should a mortgage originator treat a customer differently because of his ethnicity, the originator would violate ECOA. FHA pertains to housing whereas ECOA pertains to lending.

According to the SAFE Act, when does the fiduciary responsibility towards the customer begin? a) As soon as the customer signs the application b) As soon as the customer accepts the assistance of the mortgage professional c) As soon as the customer's loan application is approved d) As soon as the right of rescission ends

Answer: b) The SAFE Act defines the moment that a customer accepts the assistance of a mortgage professional as the moment when that mortgage professional has a fiduciary responsibility towards that customer.

The USA Patriot Act is primarily concerned with: a) Identity theft and money laundering b) Money laundering and terrorist financing c) Terrorist financing and fraud d) Both a) and c).

Answer: b) The USA Patriot Act was enacted as a direct result of the terrorist attacks of September 11, 2001. The primary concerns of the Patriot Act are to thoroughly identify each customer in order to ensure that criminals are prevented from receiving loan proceeds (similar to when an individual attempts to purchase an airline ticket and is compared against the no-fly list) along with ensuring that all money utilized in and as a part of any financial transaction are legitimate and have been legally acquired.

Of which of the following third-party service providers would a lender be prohibited from insisting on the specific use? a) Flood certification provider b) Settlement agent c) Lender legal representation d) Credit repository

Answer: b) There are five specific settlement service providers that a lender may dictate the use of: flood certification provider, tax search provider, appraiser, credit repository, and lender legal representation when it is customary for the lender to retain its own legal representation. Otherwise, RESPA affords all applicants the right to choose their own settlement service providers.

Which of the following describes the VA ARM cap structure? a) 5% IAC - 2% PC - 5% LOLC (5/2/5) b) 1% PC - 5% LOLC (1/5) c) 2 % IAC - 6% LOLC (2/6) d) VA ARMs do not allow for interest rate caps

Answer: b) VA loans generally limit the periodic rate change to 1% above or below the previous rate and the life-of-loan cap to no more than 5% above the initial interest rate.

A loan originator, processor, underwriter, appraiser, and closer are all in cahoots to defraud lenders of closing funds for their own personal gain. They fabricate complete files to submit to lenders for funding. This is an example of: a) Straw buying b) Straw selling c) Creating air loans d) Committing affiliate fraud

Answer: c) Air loans are loan files submitted to lenders for funding whereby everything contained within the file is false, fabricated, and fraudulent. Air loans are an extreme example of fraud for profit.

A husband and wife are refinancing their conventional mortgage. Although the wife's father technically has an ownership interest in the property as well, he is not a party to the note. The father, therefore, is referred to as a/an: a) Interested party b) Obligated non-owner c) Non-obligated owner d) Obligated owner

Answer: c) An individual possessing an ownership interest in a property to which s/he is not obligated to the debt is referred to as a non-obligated owner. An obligated owner has both an ownership interest in the property as well as an obligation to the debt. An obligated non-owner is an individual who has no property rights but is fully obligated to the debt.

The law of agency defines whose interests the mortgage professional is required to safeguard. When the law of agency directs the mortgage professional's fiduciary duty towards the lender, the term ___________ applies. a) Respondeat superior b) Carpe diem c) Caveat emptor d) Consumer advocacy

Answer: c) Caveat emptor is roughly translated from Latin to English as, "Let the buyer beware." When the mortgage professional is solely looking out for the lender's best interests, the customer should take extra care to look out for his or her own.

The four elements of mortgage fraud, as defined by Fannie Mae, are: a) Intent, material misrepresentation, neglect, and deceit b) Misrepresentation, reliance, harm, and damages c) Intent, misrepresentation, omission, and neglect d) Misrepresentation, deceit, steering, and neglect

Answer: c) Fannie Mae considers mortgage fraud to contain the elements of an intent to defraud, a misrepresentation to the consumer or lender, the omission of important and relevant information, and neglect of fiduciary responsibility to the customer or lender.

Falsely representing a low property value to a lender is an example of: a) Flipping b) Appraisal fraud c) Flopping d) Chunking

Answer: c) Flopping occurs when an unscrupulous individual convinces a lender to release the lien on a property for less than owed based on an artificially deflated value which that individual then pays to the lender to secure ownership of the property. Once the lien is released, the fraudster then sells the property for its higher, true value and pockets the difference.

What constitutes a "covered account" as referenced under the FTC's Red Flags Rule? a) An account maintained by a creditor, intended for commercial use, and designed to permit multiple payments b) An account maintained by a private individual, intended for personal use, and designed to permit multiple payments c) An account maintained by a financial institution, intended for family use, and designed to permit multiple payments d) An account maintained by a creditor, intended for household purposes, and designed to be repaid through a one lump-sum payment

Answer: c) In accordance with the FTC's Red Flags Rule, a covered account includes any account that is offered or maintained by a financial institution or creditor, is intended for personal, family, or household purposes, and is designed to permit multiple payments or transactions.

Residual income requirements for VA financing are based on: a) Family size and credit score b) Household income and property location c) Property location and family size d) Applicant income and property location

Answer: c) In addition to the VA's DTI requirement, all VA loan applicants must meet residual income requirements to demonstrate that there will be enough money left over after all monthly expenses are paid. The requirements for residual income are determined based on the household's size and the location of the property.

In the presence of non-traditional income, which of the following is not needed? a) Sourcing b) Seasoning c) Monitoring d) Establishing continuance

Answer: c) In the presence of non-traditional income, a lender must ensure that the recipient is legally entitled to receive the income, has been consistently receiving it for the previous year (six months for obligated child support), and is expected to receive it for at least three more years.

An individual prepares a form to mail out to residents of the community soliciting credit card information to provide them with a discounted credit report review. In actuality, he is only seeking credit card information to steal peoples' identities. If caught, this individual could be prosecuted for: a) Bank fraud b) Money laundering c) Mail fraud d) Conspiracy

Answer: c) Mail fraud does not require a person to actually mail anything. A person can be convicted of mail fraud if their scheme to defraud involves even the potential use of the U.S. mail or another commercial delivery service.

A 21-year old applicant presents a 401(k) statement reflecting an available balance of $75,000. During the application, he discloses a $15,000 loan against the 401(k) that he finalized after the presented statement's issuance. At what value do you reflect the 401(k)? a) $75,000 b) $60,000 c) $45,000 d) $37,500

Answer: d) As long as the total available balance was available for liquidation, the value of the account would be considered at the available balance minus the outstanding loan.

What does CRA stand for? a) Consumer Records Association b) Consumer Reporting Association c) Credit Reporting Agency d) Consumer Reporting Agency

Answer: d) CRA stands for Consumer Reporting Agency

All but which of the following are not covered by RESPA? a) Simple assumptions b) The sale of loans on the secondary market c) Loans intended for sale to Freddie Mac d) Bridge loans

Answer: c) RESPA covers: loans made with funds insured by the federal government, loans made with funds from a lender regulated by the federal government, loans that are intended for sale to Fannie Mae or Freddie Mac, loans made by a creditor regulated under the Truth-in-Lending Act, and loan transactions involving federally related mortgage loans. Loans that are exempt from RESPA coverage consist of loans for 25 acres or more, loans for business, commercial, or agricultural purposes, temporary financing (bridge loans), loans secured by vacant land, loan assumptions that are permissible without lender approval (a simple assumption falls within this category), loans sold on the secondary market, and loan conversions when a new note is not required and the provisions are consistent with those of the original mortgage

A title binder schedule B: a) Provides the property's legal description b) Describes the estate type c) Describes any outstanding encumbrances d) Defines the terms of the insurance

Answer: c) Schedule B is the section of the title insurance binder on which any and all outstanding liens and encumbrances appear.

A prospective loan originator receives a call from a potential customer inquiring about available interest rates. After collecting some preliminary identifying information along with income and asset data, the loan originator accesses the caller's credit report to review the quality of her credit. Which regulation, if any did the loan originator violate? a) The loan originator was completely compliant b) RESPA c) FCRA d) FACTA

Answer: c) The Fair Credit Reporting Act (FCRA) mandates that, in order to access an individual's credit, one must always have permission and a permissible purpose. In the aforementioned scenario, the loan originator was never given permission to access the caller's credit report.

Which of the following would not be considered public, personal information addressed through the Gramm-Leach-Bliley Act? a) Published telephone number b) Marriage certificate c) Unpublished telephone number d) Birth certificate

Answer: c) The Gramm-Leach-Bliley Act protects the sanctity of individuals' non-public, personal information. Non-public, personal information is information that cannot be secured through a general records search or a Freedom of Information/Privacy Act request. Public personal information is information that may be secured through those means.

Regulatory violations processed by individual state Commissioners must also be reported to the: a) FBI b) CFPB c) NMLS&R d) U.S. Department of the Treasury

Answer: c) The NMLS&R must be informed of any action taken against a licensee.

The annual escrow account review that a mortgage servicer performs is referred to as an: a) Escrow roundup b) Escrow analysis c) Aggregate escrow analysis d) Annual accounting

Answer: c) The aggregate escrow analysis analyzes the money in escrow to ensure that the servicer has enough funds to disburse the anticipated disbursements. The borrower's payment amount is adjusted accordingly to account for increases or decreases in whatever is paid through the escrow account. If the escrow account contains more money than is needed, the servicer generally must refund or credit that amount back to the borrower.

A 7/1 adjustable rate mortgage is originated with a margin of 2%, an index of 3.5%, and a lifetime CAP of 5% applicable to the start rate of 2.75%. The initial CAP is 5 and the periodic CAP is 1. In year three, the index rises to 4.75%. What is the year-three rate considering the 4.75% index? a) 6.75% b) 7% c) 2.75% d) 9.75%

Answer: c) The applicable interest rate of a 7/1 ARM in year three is still the initial start rate.

The primary concern of loan originators being able to retain YSP as compensation surrounds the concept of: a) Caveat emptor b) Law of agency c) Fiduciary duty d) Illegal compensation

Answer: c) The concept of fiduciary duty establishes the loan originator's responsibility to look out for the customer's best interests. If the loan originator is able to earn a higher income by charging a higher interest rate, the loan originator receives an incentive to do what is in his or her own best interests versus the customer's.

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 loan types is not an example of government financing: a) USDA b) HECM c) Bridge d) VA

Answer: c) The three types of government loans are FHA, VA, and USDA. A HECM, one type of Reverse mortgage, is an FHA product known as the FHA 255.

______________ is the utilization one's own funds to lend to borrowers. Through this type of lending, the lender earns all of the interest and underwrites based on its own rules. a) Seller financing b) Secondary market lending c) Portfolio lending d) Portfolio leasing

Answer: c) When a lender lends its own money, it makes its own rules and earns the interest itself. Loans such as these are generally held in "portfolio" and may take a lender a while to achieve its return on investment. Portfolio lenders also usually retain all of the risk.

What is one of the outcomes resulting from the Great Depression? a) Falling home prices b) Rising mortgage interest rates c) The establishment of the secondary market d) The establishment of the primary market

Answer: c) With the 1938 creation of FNMA, the U.S. housing market was introduced to the secondary market. FNMA purchased mortgages originated and underwritten to its standards by saving and loan companies thereby channeling money into the housing market and allowing saving and loans to resume residential lending with mitigated risk.

A loan that is purchased by or securitized through Fannie Mae is generally referred to as: a) Conforming b) Conventional c) Government d) Conventional/Conforming

Answer: d) A conventional loan is a loan that is purchased, "backed," or securitized through a non-purely governmental entity. All conforming loans must "conform" to both Fannie Mae or Freddie Mac underwriting parameters and Federal Housing Finance Agency (FHFA)-established annual loan limits. Fannie Mae and Freddie Mac will only purchase or securitize loans that are both conventional and conforming. Fannie Mae and Freddie Mac are "quasi-governmental" agencies because they are both share-holder owned.

wo types of conventional mortgages are: a) Conforming and FHA b) FHA and VA c) Conforming and traditional d) Conforming and portfolio

Answer: d) Conventional financing refers to mortgage loans that are not funded, purchased, or securitized by purely-governmental entities. Conforming describes any loan that "conforms" to Fannie Mae or Freddie Mac underwriting criteria as well as FHFA-established annual loan limits. Conforming and portfolio loans (portfolio meaning loans which are underwritten to an individual lender's individual parameters) are always conventional. Government loans adhere to government underwriting criteria and defined loan limits.

Which of the following documents must be issued in accordance with FACTA? a) An identity theft disclosure notice b) A notice of right to rescind c) An authorization to release information d) A notice of credit score

Answer: d) FACTA requires lenders to inform applicants of their representative credit score through a separate disclosure issued at the time of application. The notice of right to rescind is a requirement of TILA and the authorization to release information is signed by the borrower at the time of application in order to authorize third parties to release documentation necessary for the lender to complete its underwriting analysis. There is no disclosure known as the identity theft disclosure notice.

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.

A customer falsely representing his income is an example of: a) Fraud for profit b) Fraud for housing c) Fraud for profit and making a false statement to a financial institution d) Fraud for housing and making a false statement to a financial institution

Answer: d) Fraud for housing occurs when an individual falsely represents their qualification credentials in pursuit of home financing. Additionally, falsely representing one's income constitutes making a false statement to a financial institution. Both are federal crimes.

A loan originator asks her applicant if she is divorced. Which regulation, if any, did the originator violate? a) FCRA b) HMDA c) RESPA d) ECOA

Answer: d) Marital status is one of the Equal Credit Opportunity Act's prohibited characteristics. A mortgage professional may never ask or solicit information pertaining to a prohibited characteristic. Although the application asks the applicant to define whether he or she is married, separated, or unmarried, asking anything beyond those descriptions would violate the applicant's rights under ECOA.

A loan collateralizing a geodesic dome would be considered: a) A unique property loan b) A rehabilitation loan c) A construction loan d) A niche loan

Answer: d) Niche loans offer financing on unique property types or for individuals with unique borrowing needs. They are generally retained in portfolio and not sold into the secondary market.

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.

Sam originates a mortgage for Stella. Sam lists the cost of the credit report as $50.00 on the loan estimate even though the credit report only cost him $25.00. Sam intends to keep the difference. By doing this is Sam violating RESPA and, if so, of what is this an example? a) Yes, and bait and switch b) Yes, and chunking c) Yes, and markup d) Sam is not in violation of RESPA, and markup

Answer: d) RESPA strictly prohibits markups to protect consumers from unscrupulous mortgage professionals desiring to profit at their expense. RESPA prohibits markups by classifying them as unearned fees. Markups involve charging a customer more than the cost of a third-party settlement fee and pocketing the difference.

Under the Bank Secrecy Act/Anti Money Laundering (BSA/AML), what is the cash transaction amount at or above which additional documentation is required? a) $3,000 b) $25,000 c) $100,000 d) $10,000

Answer: d) Similar to the U.S.A. Patriot Act, the Bank Secrecy Act/Anti Money Laundering (BSA/AML) is dedicated to preventing money laundering and the financing of terrorism. All cash transactions amounting to $10,000 or more trigger additional reporting requirements.

A customer applies for a closed-ended ARM. Which of the following must be issued to her within three business days? a) A CHARM Booklet b) An Early ARM Disclosure c) A CHARM booklet and an ABAD d) A CHARM Booklet and an Early ARM Disclosure

Answer: d) TILA requires the issuance of both the CHARM Booklet and an Early ARM Disclosure within three business day of an application for a closed-ended ARM. The CHARM Booklet discusses how ARMs perform while the Early ARM Disclosure describes the terms specific to the ARM for which the applicant applied.

Fumbling Finance originates the purchase of a three-family primary residential property. Prior to closing, they issue one Closing Disclosure to the primary borrower. What regulation, if any, did Fumbling Finance violate? a) TRID b) RESPA c) TILA d) Fumbling Finance did not violate any regulation

Answer: d) TRID requires that all parties to the transaction be issued a Closing Disclosure on a rescindable loan. Since a purchase transaction is not rescindable, Fumbling Finance did not fumble this one.

Which of the following is not an example of an ALT-A loan? a) NINA b) NINANE c) SIVA d) NABA

Answer: d) The NINA is a "no income/no asset" loan. The NINANE is a "no income/no asset/no employment" loan. The SIVA is a "stated income/verified asset" loan. There is no such loan type as the NABA.

Joan applies for a mortgage on Tuesday. By the end of what day must the Transfer of Servicing disclosure be issued? a) Friday b) Saturday c) Thursday d) None of the above

Answer: d) The Transfer of Servicing disclosure must be issued by the releasing entity no later than 15 days prior to a servicing release and by the receiving entity no later than 15 days after the receipt of servicing. The Servicing Disclosure Statement is the disclosure that must be issued within three precise business days of the receipt of an application.

Funds acquired through the illegal sale of narcotics are used to purchase a vehicle in cash. The vehicle is then sold and the money placed into a deposit account. The funds are then used as a down payment to buy a condo. All of this is an example of: a) Bait & switch b) Mail fraud c) Bank fraud d) Money laundering

Answer: d) Transacting funds secured through illegal activity in order to distance them from their illegal source constitutes money laundering. It is important to source any funds not readily identified. If a credit on an asset statement does not correspond to the applicant's pay schedule, the underwriter may require an explanation of the money to ensure that it is not borrowed or that the applicant is not laundering funds.

The disclosure of alimony, child support, and separate maintenance income is: a) Mandatory as long as the income has been court ordered b) Not mandatory unless the income has been court ordered c) Mandatory regardless of whether or not a court order is in effect d) Not mandatory regardless of whether or not a court order is in effect

Answer: d) Unless the loan is for an "income sensitive" product such as USDA, a community lending, or a state bond program, the applicant is never required to disclose the earnings of alimony, child support, or separate maintenance. In fact, all applicants, aside from those applying for USDA, community lending, or state bond loans, must be made aware that the disclosure of this income is voluntary. If an applicant is required or opts to disclose it, however, the income must be court ordered, a history of its receipt established, and its duration of continuance demonstrated

Harry Homebuyer has 7% to put down. He wishes to avoid PMI by pursuing piggyback financing. The scenario for which he decided is: a) 80/10/10 b) 13/7/80 c) 7/13/80 d) 70/23/7

Answer: d) When structuring a piggyback loan scenario, the first number always represents the LTV of the primary mortgage. Since the primary goal is to avoid paying PMI, that loan must be at or below 80% LTV. The second number represents the LTV of the second mortgage and the third number represents the borrower's down payment. All three numbers must add up to 100% since LTVs + equity must always equal 100%.

Advertising a mortgage product or program that does not actually exist in order to entice potential customers into calling is a major ethical offense and an example of: Bait and switch False advertising Subversive conduct A trigger term

Anything about which an advertiser advertises must be available at the time of advertisement. Advertising a product or service that does not exist in order to lure callers is referred to as bait and switch.

Under HMDA, which of the following is permissible for a loan originator to ask? a) Applicant's age, sex, and race b) Applicant's marital status, reproduction intentions, and ethnicity c) Applicant's race, sex, and national origin d) Applicant's race, sex, and country of citizenship

Applicant's race, sex, and national origin

What essential element of a deed can be stated in terms known as valuable or good? Habendum Consideration The granting clause Witnesses and a notary

B. All deeds must reference some consideration - something of value that induces a party to join in a contract. Consideration can be expressed in valuable or good terms.

On what document would a pre-payment penalty not be disclosed or discussed? The LE The Mortgage The Note The CD

B. The Mortgage does not reference any indication of a pre-payment penalty as it is simply the document that establishes the lien. The LE, CD, and Promissory Note would all reference any pre-payment penalty applicable to the loan being originated.

The Tax Reform Act of 1986: Allowed for the deductibility of credit card interest from income Eliminated the deductibility of credit card interest from income Established the deductibility of mortgage interest from income Prohibited the deductibility of mortgage interest from income

B. The Tax Reform Act of 1986 eliminated the tax deductibility of interest paid through non-secured debt. As such, it stimulated home financing by causing people to refinance their unsecured debt into their mortgages thereby re-establishing interest deductibility.

Which of the following statements violates ECOA? Since your credit score is 610, I do not have a product to offer you I think you should close out some of those dormant accounts before you apply What is your race, sex, and national origin? Since you're 17 years old, you'll need to wait until your 18th birthday to apply

B.Discouraging someone from applying due to the quality of their credit and not their score based on an across-the-board policy, however, is a violation of ECOA.

All of the following are true concerning mortgage fraud except: There are currently no federal laws that specifically define or address mortgage fraud FTC, HUD, and the IRS conduct investigations and refer to the Department of Justice Making false statements on a loan application can result in up to 30 years in jail and up to a $1 million fine Mail fraud can be charged even if a violator did not complete the mailing

B.Mortgage fraud is investigated by the FBI (not the FTC), HUD, and the IRS.

Which of the following conditions might warrant the waiver of a right to rescind? Right of rescissions may not be waived The sheriff sale is scheduled for Tuesday but the loan to satisfy the default will not fund until Thursday The borrowers do not wish to incur additional interest expense on the loan being paid off The borrowers simply wish for it to be waived

B.TILA permits the waiver of a right to rescind in the presence of a bona fide financial emergency as long as all parties to the transaction request the waiver in writing and clearly demonstrate the bona fide financial emergency. Needing a loan to fund prior to the expiration of the rescission period in order to avoid a sheriff sale could easily constitute a bona fide financial emergency.

A homeowner whose primary residence is worth less than the debt securing it applies for a loan to purchase a second home. Once the purchase transaction is complete, the borrower stops paying the mortgage on the first home allowing it to go through foreclosure. The process just described is referred to as: Churning Property switching Buy and bail Equity stripping

Buy and bail involves pretending to purchase a second home while all the while intending to let the mortgage on the current home go into foreclosure once the new home has been secured.

Under the Fair Credit Reporting Act, a "furnisher" is defined as: An individual whose credit information is furnished to a CRA Home furnishings sold along with the property An entity that furnishes credit information to a CRA A creditor who furnishes credit to a qualified applicant

C. Furnishers are entities, such as creditors, that furnish credit-related information about their credit customers to a CRA.

FCRA prohibits: Decisioning a loan application is excess of 30 days Securing a credit report without the subject's expressed written consent A furnisher from knowingly providing inaccurate information to a credit repository A creditor from amending a previously-reported item

C. Loan decisioning timeframes are established by ECOA not FCRA. Verbal or written permission is acceptable in order to secure a credit report. The completion of a URLA constitutes written permission. Creditors are required to amend previously-reported information when a correction or removal is warranted. Knowingly reporting inaccurate information is a violation of FCRA.

A loan originator discourages a prospective borrower from applying before fixing two derogatory items that appear on his credit report. This is an example of: Objective steering Credit counseling Unlawful statement Product steering

C. Making unlawful statements is a violation of ECOA and includes making oral or written statements that discourage prospective credit applicants from applying for a loan. Although the loan originator could have explained to the customer why fixing the derogatory credit concerns prior to applying might benefit him, he should never have discouraged him from applying.

Which of the following factors deemed customers to be a higher credit risk according to the Statement on Subprime Lending? Bankruptcy within the previous seven years Debt-to-income ratios of higher than 36% Two or more 30-day delinquencies within the previous 12 months Foreclosure within the previous 36 months

C. The Statement on Subprime Lending defines an individual as a credit risk if their credit history reflects two or more 30-day delinquencies within the prior 12-month period, one or more 60-day delinquencies within the prior 24 months, foreclosure, repossession, or charge-off within the prior 24 months, bankruptcy within the previous five years, having a credit score representing a high risk of default, or a debt-to-income ratio of 50% or higher.

Payment shock is defined as: The reaction to learning the payment amount of the loan one is considering The difference between the proposed loan's P&I and PITI payments The difference between the borrower's current housing expense and the proposed housing expense through the loan they're considering The difference between the borrower's current back-end ratio and the back-end ratio they'd endure if they pursued the loan they're considering

C.Payment shock concerns itself with the borrower's current housing expense and their proposed housing expense. If an individual's housing expense increases significantly beyond what they're currently paying, they might ultimately experience difficulty making their payments.

For an organization to be considered a bona fide nonprofit organization, a state supervisory must determine all but which regarding the organization? Has the status of a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986? Does the organization compensate its employees in a manner that does not incentivize employees to act other than in the best interests of its clients? Does the organization earn profits of no more than 25% of its operating expenses? Does the organization meet other standards that the state deems appropriate?

C.There is no acceptable percentage of profitability afforded to non-profit entities.

In the practice of warehouse lending, what is used to protect the lender against fraudulent activity? Rigorous income analysis Documentation of repayment ability Buyback provisions Line of credit

C.Warehouse lenders often use buyback provisions in the agreements with brokers to assure themselves some protection against fraudulent activity during the loan process. If fraud or faulty underwriting is uncovered, the originating lender could be required to buy the loan back from the investors.

Mixing escrow funds with settlement funds is a major ethical violation known as: Embezzlement Extortion Commingling Misappropriation

Commingling

A loan to finance the creation of a property that is ultimately paid off in cash after the home is built is referred to as a: a) Construction loan b) Construction-to-permanent loan c) Rehab loan d) Bridge loan

Construction loan

The disclosure of alimony, child support, and separate maintenance income is: Mandatory as long as the income has been court ordered Not mandatory unless the income has been court ordered Mandatory regardless of whether or not a court order is in effect Not mandatory regardless of whether or not a court order is in effect

D

What does a title commitment do? Clears the title company to record the deed in the public records Is not issued until two to three weeks after the closing States the final documentation and conditions the borrower must meet in order to close the loan Is a legal promise to issue title insurance under the stated terms and conditions

D. A title commitment is a legal promise to issue a title policy; it is a statement of the terms and conditions that the insurance company agrees to uphold. The title commitment describes the condition of the property at that time.

What must appear on an Adverse Action Notice in accordance with FCRA? The reason for declination A description of the credit The credit score The name and address of the credit repository from which the lender secured the applicant's credit report

D.FCRA allows anyone denied credit, due to credit-related reasons, the right to receive a free copy of their credit report. Consequently, if an application is denied due to credit issues, the creditor must provide the applicant with the name and address of the applicable credit repository. The reason for declination and a description of the credit are requirements of ECOA and disclosure of the credit score is required through FACTA.

The Guidance on Nontraditional Mortgage Product Risks recommended all but which of the following aspects of good customer communication? Discussing any potential for negative amortization The inclusion of pre-payment penalties Payment shock through ARM adjustments and amortization after interest only The overall interest expense through a standard 30-year fixed-rate mortgage

D.Nontraditional mortgages are defined as any loan other than a standard 30-year fixed-rate mortgage. As such, the Guidance would not have discussed considerations of a standard 30-year fixed-rate mortgage.

An ARM payment cap: Restricts the interest rate at all adjustment points Restricts the interest rate at the initial adjustment point Restricts the interest rate for the life of the loan Restricts the payment amount regardless of the interest rate adjustment

D.Payment caps prevent the mortgage servicer from demanding a payment amount beyond the established payment cap regardless of the true payment due. It can often lead to negative amortization.

What is another term for military discharge papers and separation documents? a) Certificate of completion b) DD241 c) Certification of eligibility d) DD214

DD214

What is the "burden of proof" used to determine whether a company must take corrective action after conducting self-testing to monitor its own compliance levels? Beyond a reasonable doubt A preponderance of the evidence It is more likely than not to have occurred More than three incidents in any 12-month period

ECOA requires action from a creditor if a self-test shows "it is more likely than not" that a violation has occurred. Taking corrective action is not an admission of guilt.

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

Everyone questions the title company's competence

or a borrower's loan to be considered as having a "good payment history" for PMI removal purposes, the borrower may have: No more than two sixty-day late payments within the previous 24 months No 60-day late payments within the previous 36 months No 30 days late payments within the previous 12 months No more than one 30-day late payment within the previous 12 months

For a borrower to successfully petition their mortgage servicer for the removal of PMI once their loan reaches an 80% LTV, among other considerations, they must be able to demonstrate that they have a good payment history. A good payment history involves a 24-month review of the borrower's mortgage payments during which there may be no 60-day late payments and no 30-day late payments within the most recent 12 months.

As a result of the Housing and Economic Recovery Act of 2008, the regulation of the conventional GSEs was turned over to a new agency that was given broader controls to ensure responsible day-to-day oversight. Which agency was created and now oversees the activities of the conventional GSEs? FNMA FinCEN FHLMC FHFA

HERA created and installed the FHFA (Federal Housing Finance Agency) as the new "conservator" of the troubled GSEs (Fannie Mae and Freddie Mac). The FHFA's powers include the responsibility to set the conforming loan limits from year to year.

Which of the following is a mortgage applicant asked to disclose voluntarily? Her age Her marital status Her sex Her years of education

In accordance with HMDA, a mortgage applicant may choose or refuse to disclose his or her sex. In the event that he or she refuses to do so and the application has been conducted in a face-to-face capacity, the loan originator would have to document the applicant's sex based on visual observation or surname.

A loan originator legitimately completes an application for a borrower who she initially meets that day. Immediately after completing the application, she turns the transaction over to a colleague to complete. The colleague legitimately completes and closes the transaction and the two split the commission 50/50. Does this violate RESPA and, if so, why No violation occurred RESPA was violated because two parties may never split a commission RESPA was violated because the commission split was 50/50 even though the parties did not complete an equal amount of work RESPA was violated because the originator who starts an application must finish it

RESPA strictly prohibits fee splitting unless the parties splitting the fee have performed enough work to earn the fee. Income earned must be commensurate with the amount of work performed. Since the first loan originator did not perform 50% of the work, she was not entitled to 50% of the commission.

The Federal Housing Finance Agency was formed in 2008 through the enactment of the Housing and Economic Recovery Act and is now: Responsible for overseeing FNMA and HUD Responsible for setting annual conforming loan limits nationwide The entity that sets limits on loan pricing adjustments The overseer of FNMA, FHLMC, HUD, and the FTC

The FHFA is now the government entity responsible for overseeing the daily operations of both Fannie Mae and Freddie Mac. Additionally, the FHFA sets the current conforming loan limits annually and determines areas across the country that are designated as "high-cost areas."

What agency ensures that the GSEs are using sound financial practices and have adequate capital to operate in the mortgage business? The Department of Housing and Urban Development The Federal Housing Finance Agency The Office of the Comptroller of the Treasury The CFPB

The Federal Housing Finance Agency (FHFA) was installed after a legislative merger between HUD and the OFHEO as the "conservator" of Fannie and Freddie. This means the FHFA is responsible for the daily operations of both GSEs.

At what LTV is a mortgage servicer required to remove PMI on a "high-risk" loan, assuming the borrower's loan is current? 22% 80% 78% 77%

The HPA requires mortgage servicers to automatically remove PMI on any loan designated as "high-risk" once the loan's LTV reaches 77% and assuming that the loan is current.

What document was developed by the CSBS and AARMR, and what was it for? The NMLS State Guidelines, to assist states in complying with the SAFE Act The CFPB Audit Rules, to ensure compliance with Model State Law The MSL, to assist states in complying with the SAFE Act The SAFE Act, to provide for the licensing and registration of mortgage loan originators

The MSL, to assist states in complying with the SAFE Act

All of the following are true about residential appraisals except: Since a borrower's available cash for closing is generally limited and the lending guidelines are rigid, the mortgage loan originator should carefully review the appraisal for any errors A lender will generally limit the loan to a maximum percentage of the appraised value of the property The appraiser's final estimated market value readily allows for an increase in settlement costs up to 10% before the closing A successful closing can be highly dependent on the appraiser's opinion of value

The appraiser's final estimated market value readily allows for an increase in settlement costs up to 10% before the closing

What is one of the functions of the CFPB? The backup regulatory agency that enforces the SAFE Act for buyers The backup regulatory agency that enforces the SAFE Act for mortgage companies The backup regulatory agency that enforces the SAFE Act for sellers The backup regulatory agency that enforces the SAFE Act for loan originators

The backup regulatory agency that enforces the SAFE Act for loan originators

Which of the following is an example of a note receivable? The borrower is paying a car loan The borrower sold a house and self-financed the mortgage for which she is receiving payments The borrower has signed a promissory note obligating himself to a mortgage on a different property The borrower is owed money for which he has been unsuccessfully collecting

The borrower sold a house and self-financed the mortgage for which she is receiving payments

The HPA requires a borrower paying PMI on a fixed-rate loan to receive all of the following except: A CD no later than three days prior to closing An amortization schedule at closing An annual PMI removal reminder A written notice at closing advising the terms through which PMI may be removed

The issuance of a CD no later than three days prior to closing is a requirement of the TRID not the HPA.

What was one purpose of implementing a centralized system of mortgage licensing? a) To reduce the number of industry regulators b) To implement a centralized system for tracking mortgage professionals c) To generate revenue for the federal government d) To reduce and limit the number of loan originators

To implement a centralized system for tracking mortgage professionals

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

To provide the funds for mortgage financing

If a borrower were to remit a mortgage payment containing an "unearned" PMI premium, within what timeframe must the mortgage servicer refund the PMI premium? 30 days 45 days 60 days 75 days

Under the HPA, a mortgage servicer must refund any "unearned" PMI premium within 45 days of its receipt.

What does the SAFE Act mandate? Uniform federal-licensing application and reporting, comprehensive database tracking, and mortgage licensing that meets company requirements Uniform state and federal-licensing application and reporting, comprehensive time tracking, and mortgage licensing that meets company requirements Uniform state-licensing application and reporting, comprehensive database tracking, and mortgage licensing that meets legal requirements Uniform state-licensing application and reporting, comprehensive database tracking, and mortgage fees that meet legal requirements

Uniform state-licensing application and reporting, comprehensive database tracking, and mortgage licensing that meets legal requirements

The primary purpose of HOEPA is to: a) Prevent predatory lending b) Prevent discrimination c) Prevent redlining d) Prevent lenders from offering toxic mortgage products

a) Prevent predatory lending

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

a) Secure homeownership counseling from a HUD-approved counseling agency

The ECOA identifies which of the following as a prohibited characteristic? a) An applicant's marital status b) An applicant's age c) An applicant's race d) An applicant's citizenship status

c) An applicant's race is the best possible anser

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

he secondary market