Mortgage Loan Officer

For a property purchased for $225,000 with a first mortgage loan amount of $150,000, and a HELOC for 25,000 the LTV and CLTV are? LTV 77% / CLTV 77% LTV 66% / CLTV 77% LTV 77% / CLTV 66% LTV 150% / CLTV 128%

$150,000/$225,000 = 66% (LTV), $175,000/$225,000 = 77% (CLTV)

Andrew has been paying interest-only payments on his mortgage of $500 a month for the past 10 years, the interest rate on the loan was 4%. At year 15, he will be required to pay a balloon payment (assuming that the balloon payment is what remains of the balance). The principal balance at the time the loan closed was $172,000. What will be the balloon payment? $103,200 $68,800 $172,000 $170,000

$172,000 would be the correct answer because Andrew hasn't paid anything but interest on the loan since he started. If the balloon payment is the remaining balance and the balance hasn't changed - it's $172,000.

Dodd-Frank Act

(2010) congressional act that sought to bring about financial stability by bringing about sweeping changes to the financial regulatory system in response to the 2008 financial crisis

Affiliated Business Arrangement

(ABA or AfBA) Settlement service providers are allowed to refer business to one another as long as the referral is not made in exchange for a fee or other things of value. When referring an affiliated business as a lender this disclosure is required at referral or within 3 business days.

Consumer Financial Protection Bureau

(CFPB) A U.S. government agency that helps protect consumers by regulating financial products and services, especially mortgages, credit cards, and student loans

Interest Rate Ceiling

(Cap) For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Fair and Accurate Credit Transactions Act

(FACT 2003) Amendment to the Fair Credit Reporting Act. Takes affirmative actions to control and prosecute identity theft

Federal Housing Administration

(FHA) An agency of the federal government that insures private mortgage loans for financing of new and existing homes and home repairs.

Federal National Mortgage Association

(FNMA) "Fannie Mae" a quasipublic agency converted into a private corporation whose primary function is to buy and sell FHA and VA mortgages in the secondary market.

Loan to Value Ratio

(LTV) The amount of money borrowed compared to the value (or price) of the property.

Planned Unit Development

(PUD) A term sometimes used to describe a planned development. A planning and zoning term describing land not subject to conventional zoning to permit clustering of residences or other characteristics of the project which differ from normal zoning.

Which of the following is not a requirement under HOEPA? -Housing counseling on high-cost home loans -Full appraisals on high-cost home loans -Escrows for at least the first 5 years on high-cost home loans -The APR must be disclosed on all advertisements

-APR. HOEPA requires additional and specific disclosure requirements, restricts terms on transactions, restricts fees and practices, adds additional ability to repay requirements. HOEPA requires pre-loan counseling for all high-cost home loans, full appraisals and escrows for the first five (5) years.

According to the Qualified Mortgage Rule, what is the maximum percentage limit on the total obligation debt to income ratio for a general qualified mortgage? 41% 36% 28% 43%

To be considered a general QM, the back-end DTI cannot exceed 43%.

Which of the following is true about General QMs? -They can be longer than 30 years -They must be fully amortizing -They can include interest only payments -They can negatively amortize

To be considered a general QM, the loan must be underwritten based on a fully-amortizing schedule. QM loans cannot include negative amortization or interest-only payments and cannot be longer than 30 years.

Which ratio is described as the loan amount divided by the property value? -Debt to Income ratio -Loan-to-value ratio -PITI -Housing expense ratio

To determine a borrower's loan to value, the MLO or underwriter is going to take a loan amount and divide it by the borrower's purchase price or the properties appraised value (whichever is lower).

What would the lender use to compute the adjustment on an ARM loan? -Periodic annual and lifetime caps -Margin, Index, and APR -Index and APR -Margin, Index and Lifetime caps

To determine an ARM's adjustment we would need to know the margin and index at the time of the adjustment and the lifetime cap on the ARM.

For an interest-only loan of $210,000 with an interest rate of 3%, what would the monthly interest payment be? $525 $630 $360 $750

To determine monthly income you first need to find out the amount of interest required yearly, so 3% of $210,000 is $6,300 a year. To find the monthly interest, divide $6,300 by 12. The answer is $525 in interest a month.

A person was purchasing an income property which was scheduled to close and fund on June 25th. Rent of $1800 was paid for the month of June on the 1st. What was the buyer's proration amount? $300 $210 $296 $360

To determine prorated rent you take the amount of rent divide it by the number of days in the month and multiple by the days the rent is prorated. In this case, $1800 divided by 30 (June has 30 days) multiple by 6 days = $360.

With an ARM, what happens to a borrower's payments if the index increases? There will be a larger balance due and payable Payments go down Payments go up Payments remain the same

To determine the borrower's payments at adjustment, the lender adds the index and the margin. If the index goes up, then the interest rate will go up.

Amortization

To die slowly. Gradually extinguishing a debt

TLTV

Total Loan to Value

Gross Monthly Income

Total amount of earnings made over a month before any deductions

All of the following would be considered a trigger term except: -Low down payment for qualified borrowers -$500 a month mortgage payments -3% interest rate -$1,000 down

Trigger terms always include a specific number. In this situation, low down payment for qualified borrowers do not include a specific number so it would not be considered a trigger term.

TIL

Truth in Lending

HUD

U.S. Department of Housing and Urban Development

Which form is used most frequently for residential appraisals? HVCC URAR USPAP 1025

URAR stands for Uniform Residential Appraisal Report (Form 1004).

1003

URLA - uniform residential loan application. Fannie Mae loan application for 1-4 unit residential real estate.

Sonya lives in a small rural community and is looking to purchase a new home. Her MLO has recommended a USDA loan. The purchase price of her new home is $167,000. How much does Sony have to put down to qualify for the USDA loan? $5,010 $5,845 $0 $16,700

USDA loans allow for 100% financing, so Sony does not need to put down any money on this new loan.

The Equal Credit Opportunity Act is a law that requires the lender to provide the borrower a reason for denial within how many days of loan application? 3 10 30 45

Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on the applicant's request for credit, whether favorable or adverse, within thirty (30) days of receiving the completed application.

Under ECOA, the lender is required to provide the borrower a reason for denial. How long does the lender have to provide that reason? 60 days 90 days 30 days 120 days

Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on the applicant's request for credit, whether favorable or adverse, within thirty (30) days of receiving the completed application.

If a creditor denies a loan, what document must be sent to the client to inform him of the denial? -Adverse Action Notice -GFE -TIL Statement -Nothing is required to be sent if the information is verbally relayed to the client

Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on the applicant's request for credit, whether favorable or adverse, within thirty (30) days of receiving the completed application. FCRA requires an adverse action disclosure be provided to the borrower if their credit is the reasoning for all or part of the decision to deny the loan application, FCRA requires that the disclosure be given within 30 days of a credit decision.

A borrower's name is on the National Do Not Call list. At what point after the loan closes and is sold to another company must the MLO stop contacting the borrower to solicit new business? Immediately After three months One year 18 months

Under the Do Not Call Provision, an MLO can contact a previous client from an established business relationship for up to 18 months after the last transaction, even if the consumer is on the Do Not Call Registry.

The application for a mortgage loan originator would be denied for all of the following reasons except: -The applicant had a mortgage loan originator license revoked -The applicant was convicted of a felony 5 years ago -The applicant has a foreclosure on their credit report from 4 years ago -The applicant has had seriously delinquent accounts in the past 3 years

Under the SAFE Act, MLOs must be financially responsible at application and at renewal. They also have to have clean criminal backgrounds. A foreclosure would disqualify an applicant if it was in the past 3 years.

UST

Uniform State Test

Predatory Lending

Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender.

UFMIP

Up Front Mortgage Insurance Premium

Index

Usually expressed in %, commonly used in ARM s, High Cost and High-Priced loans.

Department of Veterans Affairs

VA - previously known as Veterans Administration a federal agency that administers benefits provided by law for veterans of the armed forces

What kind of loan uses residual income as part of the qualifying process? -FHA -Conventional -Jumbo -VA

VA loans do not look at debt-to-income ratios, instead the underwriter looks at residual income.

What would be the minimum down payment on a VA loan of $150,000? $4,500 $5,250 $7,500 $0

VA loans do not require a down payment, so the minimum down payment is $0.

When considering a VA loan, what additional type of income must be considered? -Residual Income -Social Security Income -Child Support Income -Investment Income

VA requires a residual income calculation. Maximum residual income is 41%.

Verification of Deposit

VOD - an official document verifying or confirming the status or balance of a financial account

Verification of Employment

VOE - a statement from an employer confirming a prospective borrower's position and salary

Verification of Mortgage

VOM - A form sent to a Borrower's current and past mortgage holder to confirm payment history.

VOD

Verification of Deposit

VOE

Verification of Employment

VOM

Verification of Mortgage

VOR

Verification of Rent

Gift Letter

Verification that a gift to a borrower for a down payment is not an undisclosed a loan.

Certificate of Veteran Status

Verifies 90 days continuous active duty (including training time), enables veterans to obtain lower down payments on VA loans

A lender has sold Martha's loan to a new servicer. The lender is required to send Martha a Goodbye Letter, how long does the lender have? 15 days from the effective date of transfer 30 days from the effective date of transfer 60 days from the effective date of transfer 90 days from the effective date of transfer

When a mortgage loan is assigned, sold or transferred, the former servicer must provide a disclosure at least fifteen (15) days before the effective date of the transfer. This letter is referred to as the Goodbye Letter. A letter from the new servicer must also be sent within fifteen (15) days after the effective date of the transfer. This letter is generally known as the Hello Letter.

Which of the following questions is not prohibited while taking a loan application? -Asking about childbearing intentions -Asking the borrower to add a spouse to the application -Asking questions to discouraging a borrower from applying -Asking the borrower his/her marital status

When an applicant applies for individual credit, an MLO cannot ask the applicant's marital status, except when the credit transaction is to be secured. The lender can ask the applicant's marital status and if the applicant either resides in a community property state.

YSP

Yield Spread Premium

Margin

Yield an investor wants to earn over the life of the loan. It is also the lowest rate can go on an ARM loan.

What type of appraisal takes the cost of rebuilding the property, plus the cost of the land the property is on and subtracts any depreciation to determine a value of the property? -Income Approach -Sales Comparison Approach -Cost Approach -Investment Approach

When using the cost approach, the appraiser determines the value of the property by adding the estimated value of the land to the current cost of constructing a reproduction or replacement and then subtracting any amount of depreciation.

According to the Fair and Accurate Credit Transactions Act, when is a borrower entitled to get a copy of their credit score? -Four times a year -When the borrower has applied for a loan and had his/her credit reviewed -When the borrower is on public assistance -A borrower has no right to a free copy of their credit score.

-When the borrower has applied for a loan and had his/her credit reviewed

FHA Mortgage Insurance

1.75% of loan. Renewal premium varies by product, generally, .85 x mortgage / 12 = monthly premium added to the monthly payment

How many days in advance of transferring a loan to another lender must the current mortgage servicer inform that customer of the transfer to another lender who will subsequently be servicing the loan?

15

How many days prior to a loan transfer does the current mortgage servicer have to inform the customer?

15

What is required to become a licensed MLO?

20 hour pre-licensing course Pass the National Test with 75% Background Check App for license Be covered by bond Be sponsored

Fannie/Freddie Loan Limit

2020 - $510,400 50% higher in AK, HI, Guam and USVI

What is the 3/7/3 Rule?

3 business days from application - borrow must receive disclosures 7 days - must wait after signed intent to proceed before closing 3 business day delay after borrower receives redisclosures before loan can close

A borrower wants a Cash Out refinance for 80% LTV on a house that appraises for $250,000. The borrower has a first mortgage of $87,000 and a second for $25,000. Closing costs will equal $3,000. How much cash is available for the borrower to receive? $30,000 $85,000 $115,000 $200,000

80% of $250,000 is $200,000. $200,000 minus the first, second and closing costs = $85,000. The borrower has $85,000 in cash available.

A Section 203K loan is a: FHA program A reverse mortgage A VA program A Fannie Mae program

A 203K loan is a rehabilitation loan offered by FHA.

A HECM is what type of loan: Reverse mortgage Bridge loan Graduated payment mortgage Line of credit

A Home Equity Conversion Mortgage is FHA's version of a reverse mortgage. They are the most popular type of reverse mortgage on the market but some lenders have their own proprietary reverse mortgages as well.

What occurs when an QM loan is presumed to comply with ATR requirements? A safe harbor A rebuttable presumption A high-cost home loan A higher priced mortgage

A QM loan that is not higher-priced has a safe harbor. If the loan has a safe harbor, then they are conclusively presumed to comply with the ATR requirements. Under a safe harbor, if a court finds that a mortgage a lender originated was a QM, then that finding conclusively establishes that the lender complied with the ATR requirements when they originated the mortgage.

George has a loan that is amortizing over 30 years, but he will be required to pay the remaining principal in 15 years. What is this called? -A balloon payment mortgage -An adjustable rate mortgage -An interest-only mortgage -A reverse mortgage

A balloon mortgage is a mortgage that requires a larger than usual one-time payment at the end of the term.

What is an amortized loan that has a final payment due earlier than the term to fully pay off the loan called? Balloon loan Construction loan Reverse mortgage Adjustable Rate Mortgage

A balloon payment is more than two times the loan's average monthly payment and can often be thousands to tens of thousands of dollars. Most balloon loans require one large payment that pays off your remaining balance at the end of the loan. Examples of how these mortgages look are 5/25 or 7/23.

Covenant

A binding agreement

Trevor just received a promotion at work that is going to require him to move across the country. What type of loan might Trevor use to help him between selling his previous home and buying his new home? A bridge mortgage A graduated payment mortgage A reverse mortgage An adjustable rate mortgage

A bridge loan is a short-term loan secured by the borrower's current home (which is usually for sale) that allows the borrower to use their equity for building or down payment on a purchase of a new home before the current home sells.

Which of the following best describes a lien? -Stops all fees from incurring on the property -A claim on the property -Forfeits the property -Allows the lender to sell the property

A claim on the property. A lien gives the right to keep possession of property belonging to another person until a debt owed by that person is discharged. A mortgage is a type of voluntary lien.

Due on Sale Clause

A clause, included in many mortgages, permitting the lender to require the borrower to repay the outstanding balance when the property is sold. Prevents loan assumption.

Which of the following would describe a non-conforming loan? -Non-conforming loans do not follow FHA guidelines -Non-conforming loans do not follow Fannie Mae and Freddie Mac guidelines -Non-conforming loans follow Fannie Mae and Freddie Mac guidelines -Non-conforming loans are subprime loans

A conforming mortgage is a mortgage that conforms with Fannie Mae and Freddie Mac guidelines. A non-conforming loan is any loan that does not conform to Fannie Mae and Freddie Mac guidelines.

Revolving Debt

A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due. HELOC is an example

Deed in Lieu of Foreclosure

A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a way for the mortgagor to avoid foreclosure.

The document that conveys ownership of real property from one person to another is known as the: Mortgage Deed Title Promissory Note

A deed is an instrument that conveys a grantor's interest, if any, in real property. The deed is a document that is used by the owner of a real property to transfer all or part of his interest in the property to another. The deed serves as evidence of title.

Quitclaim Deed

A deed to relinquish any interest in property which the grantor may have, without any warranty of title or interest.

Cloud on Title

A defect on a deed that is frequently cured by a quitclaim deed.

Earnest Money Deposit

A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Closing Statement

A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

ARM disclosure

A disclosure required to be presented to the applicant within three days of application on any ARM loan. This disclosure provides the applicant with information about the specific ARM product for which they are applying, such as a historical index value

Keogh Plan

A federally-approved, tax-deferred savings program for self-employed people, allowing them to set money aside for their retirement.

Flood Certification Fee

A fee charged to the borrower for determining whether property was in a flood zone. Included in closing costs.

Borrowers come to you for a mortgage loan. Which of the following would be appropriate to tell them about a fixed-rate mortgage? Some have up-front fixed fees, but not all. The rate is fixed for a time, and then may adjust. The up-front fees are fixed. The interest rate never changes.

A fixed-rate mortgage has an interest rate that never changes.

Which of the following is a government sponsored entity? Fannie Mae Ginnie Mae FHA The USDA

A government-sponsored enterprise is a type of financial services corporation created by the United States Congress. Both Fannie Mae and Freddie Mac are GSEs.

A mortgage loan that features lower payments in the beginning and increases during the life of the loan is also known as which of the following? -Bridge mortgage -Graduated payment mortgage -Construction to permanent loan -Fixed interest rate mortgage

A graduated-payment mortgage (GPM) is a mortgage that has a low initial monthly payment that gradually increases over a specified time frame designated at the time of origination.

Rebecca just recently passed the bar exam and became a licensed attorney. She is looking to purchase a new home, and her mortgage loan originator suggested that they look into a loan that has lower payments at the beginning and the payments then increase during the life of the loan. What type of loan is this? A bridge mortgage A graduated payment mortgage A reverse mortgage An adjustable rate mortgage

A graduated-payment mortgage (GPM) is a mortgage that has a low initial monthly payment that gradually increases over a specified time frame designated at the time of origination. A GPM uses negative amortization to allow the borrower to have an initially discounted monthly payment.

Chain of Title

A history of the ownership affecting title to a parcel of land.

Abstract of Title

A history of the ownership of a parcel of land which lists transfers of title, rights, and liabilities.

Joanna is looking to purchase a property for $750,000. What type of loan would Joanna need to receive? A Reverse Mortgage A bridge loan A jumbo loan A line of credit

A jumbo loan is a single-family loan that exceeds Fannie Mae and Freddie Mac's loan limits (remember the loan limits change yearly). Jumbo loans are conventional, but non-conforming loans.

Tax Lien

A legal claim by a government entity to take an individual's property or income when their taxes are not paid in full

Bankruptcy

A legal process to get out of debt when you can no longer make all your required payments. On record: Chapter 13 - 7 years. Chapter 7 - 10 years.

Equitable Mortgage

A lien that is placed on real property to secure the payment of money based on the clear intent of the parties but that lacks the essential features of a legal mortgage

Rehabilitation Mortgage

A loan that covers the cost of repairing or improving a property.

Non-Conforming Loan

A loan unable to be sold to Fannie Mae or Freddie Mac - for example a sub-prime loan

Economic Obsolescence

A loss in value due to factors outside the subject property, such as changes in competition or surrounding land use. Also referred to as external obsolescence.

Alternative Documentation

A method of documenting a loan file that relies on information that the borrower is likely to be able to provide instead of waiting on verification sent to third parties for confirmation of statements made in the application. E.g. - W-2 forms, tax returns and bank stubs

Fixed Rate Mortgage

A mortgage in which the interest rate does not change during the entire term of the loan.

Guarantee Mortgage

A mortgage that is guaranteed by a third party.

FHA Mortgage

A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.

Blanket Mortgage

A mortgage which covers more than one piece of real estate. Often used by a developer in the financing of undeveloped lots. Contains a partial release clause.

Guaranty

A promise to pay the debts or settle the wrongdoings of another if he or she does not make settlement personally

Conversion Clause

A provision in an ARM allowing the loan to be converted to a fixed rate at some point during its term.

Non Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Closing Agent

A third party who prepares the paperwork and conducts the closing or settlement

The only loan considered a traditional loan in America today is: -A 30-year fixed rate -Any fixed rate loan -A 30 or 15 year fixed rate loan -Any loan that is not an ARM

A traditional mortgage is a 30-year fixed rate mortgage, anything else is considered non-traditional.

Which of the following would NOT be considered a non-traditional mortgage product? -A Conventional 5/1 ARM -A Conventional 30-year mortgage -An FHA 15-year mortgage -A VA 25-year mortgage

A traditional mortgage is a 30-year mortgage, anything that's not a 30 year mortgage is a non-traditional mortgage.

Fixed Period ARM

ARM with an initial fixed interest rate period.

What is a feature of an ARM? -A loan amount that never increases -A monthly payment is regular -A loan which can adjust at any time -A loan that has an adjustable rate

ARMs have adjustment rates.

ATR

Ability to repay

Hannah is choosing to escrow her taxes and insurance on her new home. She paid some towards her escrow account at closing. She is wondering when she will get information from her servicer on her escrow account. RESPA requires that servicers provide an initial escrow account statement within: 45 calendar days of closing 30 calendar days of closing 60 calendar days of closing 90 calendar days of closing

According to RESPA, a servicer is required to disclose an initial escrow account statement within forty-five (45) calendar days of settlement for escrow accounts that are established as a condition of the loan.

In an advertisement along with an interest rate what must also be disclosed? -The annual percentage rate -The finance charge -The total of payments -The amount financed

According to TILA, if an interest rate is present then the APR must also be disclosed.

According to the Disposal Rule, which of these could be considered a failure to secure private information? -Burning old files in a steel drum behind the office once a month -Hiring a document destruction company to remove all old files -Shredding documents and throwing them in the trash -Disposing of documents into the trash bins for the janitorial service to empty nightly

According to the Disposal Rule, any person who maintains or otherwise possesses consumer information for a business purpose must properly dispose of such information by taking reasonable measures to protect against unauthorized access to or use of the information. Throwing things in a trash bin for janitorial services to empty would not be protecting the borrower's information and would allow unauthorized access by the janitorial staff to the borrower's personal information.

Hugo is looking to refinance his current property. He currently pays $1200 a month on his home. He also pays $500 a month in child support, $200 for his cell phone, $300 for his student loans, $150 for his credit cards and $200 for his car insurance. Hugo makes $4000 a month gross. What is Hugo's total debt ratio? 50% 43% 53% 51%

Adding up Hugo's debts, he owes $2,150 in debt. (We wouldn't count the cell phone or insurance as those are utilities). Divide that by his gross monthly income of $4,000, his back-end DTI would be 53%.

ARM

Adjustable Rate Mortgage

ARM

Adjustable Rate Mortgage - lender can periodically adjust the mortgage interest rate in accordance with fluctuations in an external market index

AFBA

Affiliated Business Arrangement

Civil Rights Act

Affirmed that all citizens are equally protected by the law. Enacted April 9, 1866

Which of the following would be considered a mortgage loan originator? -Alexia is discussing a rate lock with a borrower -Henry is determining whether a borrower can repay the proposed loan -Jane is requesting a verification of employment from a borrowers employer -Jackson is discussing with a borrower the need for additional documentation for their

Alexia is discussing rates and terms with the borrower; she would need to be a licensed MLO to do so. The remaining individuals are only doing clerical or support duties.

HMDA reports are due to the regulator by which of the following dates? January 1st March 1st June 1st December 31st

All HMDA reports are due May 1st.

Assuming there has been no fraud or adverse action, a borrower is entitled to a free copy of his/her credit report: Every 6 months Every year Every 3 years Every 3 years

All consumers have the right to have one (1) free credit report each year (they can get more if they pay for it).

Hank just received an appraisal fee from his borrower. What type of account should Hank put this appraisal fee until it is paid to the appraiser? -In an investment account -In an interest bearing savings account -In an escrow account -In the lenders general operating account

All fees collected from a borrower before closing are either paid directly to the third party rendering the service or are kept in an escrow account until closing.

Which of the following would be considered in determining gross living expense? A basement A finished attic space An attached garage A backyard shed

All gross living space must be above grade and finished space. A basement will never be considered in square footage as it is below grade, a garage is an unfinished space so can't be counted and a shed again is an unfinished space. The finished attic is both above grade and finished.

Upon the recovery of any claim on the surety bond, the licensee is required to file a new bond: Within 3 months Within 14 days Within 5 days Immediately

All licensees are required to have a surety bond, if for some reason the surety bond is acted upon or not longer at the full amount the licensee must immediately file a new bond, or their license would be in danger.

Arnold is a licensed mortgage loan originator and is looking to renew his license. By what date does Arnold have to renew his license before it would expire? December 31 January 1 November 1 December 25

All licensees expire December 31st.

Debt-to-Income ratio

All monthly debt / gross monthly income

An MLO must be be licensed if: -He/She called a borrower to gather missing information needed to complete an application. -He/She counseled a borrower about loan terms and interest rates. -He/She explained the GFE sent to a borrower. -He/She reviewed the borrower.

All mortgage loan originators must be licensed (unless they are exempt). If a person is taking applications or talking about terms and rates then they are acting as an MLO and must be licensed.

When an MLO accepts any third-party fee from a borrower, the funds should be placed: -In an investment account -In an escrow account -Mixed with the general funds of the company -On the loan

All third-party fees collected before closing should be put into an escrow account until they are disbursed.

Step Rate Mortgage

Allows for gradual interest rate increase during the first few years of the loan

AARMR

American Association of Residential Mortgage Regulators - Responsible for creation of the NMLS

Alexandra is a licensed mortgage loan originator, and she works for a licensed mortgage lender. Alexandra also works part time as a mortgage loan originator at her friend's brokerage. Is Alexandra doing anything wrong? -Yes, Alexandra is working simultaneously for two companies, which is prohibited -No, Alexandra is properly licensed -Yes, Alexandra is not properly licensed -No, Alexandra can work for more than 1 company at a time

An MLO cannot work for more than one company at a time, this is a prohibited practice.

Who of the following is in violation of the Section 8 provisions of RESPA? An attorney who also earns fees for performing multiple settlement servicesAn employer who pays her employees for referralsA real estate broker who pays a cooperating real estate broker for a referralAn MLO who leases office space in a real estate office at an above market amount

An MLO who leases office space in a real estate office at an above market amount

Which of the following is true about an adjustable rate mortgage? -Adjustable rate mortgages payments never change -Adjustable rate mortgages interest rates are fixed -Adjustable rate mortgages interest rates are not fixed -Adjustable rate mortgage always includes interest-only periods

An adjustable-rate mortgage or ARM, also sometimes referred to as a variable rate mortgage, is a mortgage loan where the interest rate periodically adjusts. The index, margin, and adjustment caps on the ARM determine the amount of each adjustment.

What type of scheme is usually occurring when there is a nonexistent property? Air Loan Chunking Churning Illegal Property Flipping

An air loan is a loan that has a straw or non-existent buyer, or a non-existent property. Air loans are loans that are based on something entirely made up or "pulled out of thin air."

Appraisal

An estimate of the current value of the property.

Appraiser

An impartial person who estimates the value of something such as real estate

Caroline is purchasing an investment property; she already has a primary residence. What type of appraisal could a lender potentially order for this particular property? -Sales Comparison Approach -Income Approach -Cost Approach -Market Research Approach

An income approach appraisal is most often used with investment properties. This approach is going to use the earning potential of the property to determine the value of the property. The appraiser will determine the value of a property from the potential income that the property could bring the borrower over time.

Appreciation

An increase in an asset's value (often because of inflation)

What two pieces of information is needed to determine what an adjusted interest rate will be on an adjustable rate mortgage? -The margin and the index -The margin and the current interest rate -The index and the current interest rate -The margin, the index, and the current interest rate

An interest rate on an ARM has two parts: the index and the margin (fully indexed rate). The index is a measure of market interest rates and the margin is the profit the lender adds. The index fluctuates with the market. The margin is assigned at the loan origination and always stays the same.

Agreement of Sale

An offer to purchase that has been accepted by the seller and has become a binding contract.

Call Option

An option to buy something at a fixed rate price even if the market rises

Asset

An owned item that has value

Robbie wants to purchase as 4-unit dwelling and rent out 3 of the units. He knows he will need reserves to make the purchase, what would not be an acceptable form of reserves? -Robbie's checking account -Robbie's investment account -An unsecured loan that Robbie gets -Robbie's vested 401K

An unsecured loan cannot be used as a form of reserves. The remaining options are acceptable options for reserves.

APR

Annual percentage rate; the annual rate of interest that is charged for using credit

AML

Anti-Money Laundering

MLOs will be required to provide the following information for disciplinary actions that necessitate a "Yes" response to the MU4R disclosure questions. Which of the following is not required, or does not need further explanation? Action Type (Criminal, Regulatory, Civil Judicial, or Civil Regulatory) Official Documentation related to the Action (e.g., court order or letter from regulatory authority), to be uploaded as a PDF file Mandatory explanation of the disciplinary action written and provided by the MLO Name of Authority that took the Action being disclosed

Any "yes" response to a disclosure question requires an explanation by the MLO.

Junior Mortgage

Any mortgage on a property that is subordinate to the first mortgage in priority. Often HELOCs or 2nd mortgages.

The state regulatory authority may refuse to renew a license for an MLO if there is a finding that the licensee: -Purchased more personal or business real estate than initially disclosed. -Has been unethical in the transaction of mortgage lending. -Purchased another company in the financial services industry. -Has released an employee due to illegal activity by that employee.

Any unethical behavior on a transaction can be grounds for disciplinary action by the state regulatory authority including refusing to renew a license.

AMC

Appraisal Management Company

When performing the sales comparison approach, what does "adjusting properties" involve? -Changing the subject property to make it more like the comparables -Changing the comparables to make them more like the subject property -Always using comparables that are exactly like the subject property -Finding comparables that sold for the same price as the subject property

Appraisers adjust the sales price of the comparable to give them a better-indicated value of the subject property and make the property more similar to the one that they are appraising.

Which of the following is not considered "prohibited conduct"? -Accepting a fee for best efforts -Asking an appraiser to look at additional information -Committing fraud -Acting as an MLO without a license

Asking an appraiser to review additional information is not a prohibited act. An MLO can ask an appraiser to review additional information or fix errors in an appraisal report. It is prohibited to bribe or threaten an appraiser to attempt to sway their judgment.

Guarantee

Assumption of the liability of another's debts in the even of a default

AUS

Automated Underwriting System

APOR

Average Prime Offer Rate

BSA

Bank secrecy Act a law that requires every business that provides financial services to report these transactions

Certificate of Deposit

Bankers certificate acknowledging the receipt of money and promising to repay the depositor

Jordan has a Chapter 7 bankruptcy on her credit report. How long can that bankruptcy continue to stay on her credit report? 10 years 7 years 5 years 2 years

Bankruptcies show on the credit report for seven (7) years for Chapter 11 or 13 and ten (10) years for a Chapter 7.

Commitment

Binding offer by a lender to make a loan under certain terms or conditions to a borrower. Includes mortgage, interest rate and repayment terms.

The practice of getting people to sell their homes at bargain prices by suggesting that certain ethnic groups are going to move into the area is nicknamed:

Blockbusting

Renee is a real estate broker working for a property developer. She has been going door-to-door discussing with homeowners in a certain area the possibility of them selling. She often tells these homeowners that there has been an increase of Latinos moving into the area and that they really should move now before their property values drop because of this influx of lower income individuals. This would be considered: Redlining Reverse Redlining Blockbusting Churning

Blockbusting occurs when real estate agents and building developers attempt to convince white property owners to sell their houses at low prices by promoting fears in those homeowners that racial minorities would soon be moving into the neighborhood.

Which organization helps develop model legislation applicable to the administration and regulation of mortgage lending? MERS USPAP CSBS/AARMR NAR

Both the CSBS and AARMR created the NMLS and helped to develop the Model Law for states to use to implement the SAFE Act.

It is okay to advertise for specific interest rates, points, or terms if: -you have offered those terms in the past. -your competitors offer similar rates, points, or terms. -you currently offer the terms advertised. -You have considered RESPA

You can only advertise terms that you have available to most qualified borrowers.

When the borrowers pay a fee to get a lower interest rate, but the interest rate will not remain at that level for the life of the loan, but over time will raise to the quoted fixed rate. What is this called? -Origination fee -Discount points -Adjustable rate -A buydown

Buydown

Adjustable Rate Mortgage Handbook

CHARM - consumer handbook to ARMs must be presented within 3 days of application

You and the borrower believe an Adjustable Rate Mortgage would be best for the borrower. What is the name of the booklet you are required to give?

CHARM Booklet

Combined Loan to Value

CLTV - Total mortgage / appraised value or sales price (whichever is less). Refinance - first mortgage + HELOC / value

Which of the following is not an index that is typically used for adjustable rate mortgages? COFI HELOC U.S. Treasury Bond SOFR

COFI, SOFR and the US Treasury Bond are the most common types of index.

Community Reinvestment Act

CRA (1977) Required banks to make loans available in low income, minority communities

Certificate of Reasonable Value

CRV - appraisal issued by the VA showing the property's fair market value

COE

Certificate of Eligibility

Change Frequency

Change in the frequency of payment or interest rate of an ARM

According to the Fair Credit Reporting Act, a Chapter 7 bankruptcy could remain on a credit report for how long? 3 years 5 years 7 years 10 years

Chapter 7 bankruptcies remain on credit reports for 10 years. Chapter 11 or 13 bankruptcies only remain on the credit report for 7 years.

A lender charges $500 for an appraisal but the actual appraisal only costs $395, this is an example of what predatory lending practice? -Padding closing costs -Inflated appraisal costs -Unbundling -Churning

Charging above and beyond for an appraisal is considered inflated appraisal costs.

What type of fraud scheme usually includes a "get rich quick" real estate seminar? Chunking Churning Redlining Illegal Property Flipping

Chunking is the sale of properties at artificially inflated prices, pitched as investment opportunities to naïve real estate investors who are promised improbably high returns and loan risks.

Travis is a mortgage loan originator, and he primarily does refinances for borrowers. He has a borrower, Steve, who calls him once a year to refinance and every time Travis refinances his property even though Steve does not need to refinance. Travis does this to make sure that he receives the fees for the refinance. What would this be considered? Steering Churning Chunking Redlining

Churning or repeated refinancing is excessive selling/lending activity to generating fees and commissions. In some cases, the lender steps the rate down through multiple refinances.

Encumbrance

Claim or liability attached to property that may lessen its value such as a lien

Which of the following is responsible for the accurate disbursements of all funds due to and from all parties in a mortgage transaction? -MLO -Appraiser -Real estate agent -Closing Attorney, settlement or escrow agent

Closing Attorney's, Settlement Agents or Escrow Agents are all terms for the person who is responsible for the closing of the loan. This includes the signing of all documents and the disbursing of all funds.

CLTV

Combined Loan to Value

There are two borrowers, one is White and the other is African American. They have very similar credit profiles. The White applicant is approved, and the African American is denied. These loans were approved and denied at the discretion of the lender and an automated underwriting system was not used. This is an example of: -Comparative Evidence -Overt Discrimination -Disparate Impact -Redlining

Comparative Evidence

CFPB

Consumer Financial Protection Bureau

CHARM

Consumer Handbook on Adjustable Rate Mortgages

COFI

Cost of Funds Index

CAIVRS

Credit Alert Verification Reporting System - federal database of people who have delinquencies on federal debt

Consumer Reporting Agency

Credit Bureau - Independent firm that collects, compiles and reports the credit activities on individuals to lenders for a fee.

Home Equity Loan

Credit line offered by mortgage lenders that allows a homeowner to borrow money against the equity in their home.

The UFMIP on a 30-year FHA loan is? 1.00% 1.75% 2.00% 2.25%

Currently the UFMIP is 1.75% of the base loan amount of FHA loans. (2020)

What is the conventional mortgage back end DTI ratio on a manually underwritten loan? 28% 29% 36% 41%

Currently the maximum back-end DTI on a manually underwritten conventional loan is 36%.

Interest Rate Change Date

Date rate of interest is subject to change

DTI

Debt to Income

General Warranty Deed

Deed that offers the most protection in which grantor fully warrants good clear title to the premises.

VA

Department of Veterans Affairs

DU

Desktop Underwriter - Automated underwriting system used by FNMA

Assessment

Determination of the rate or amount of something, such as tax or damages

What is used to buy down a person's interest rate and costs 1% of the loan amount? An origination point A discount point Par rate Prime rate

Discount points are the cost to lower the borrower's interest rate in exchange for an upfront fee.

A discount point is calculated as being 1% of what? -Interest rate -Down payment -Loan amount -Sales price

Discounts points are a fee equal to 1 percent of the loan amount that is prepaid interest on the mortgage loan. The more points, the lower the interest rate. Discount Points can only be used to reduce the interest rate. Borrowers can typically pay from 0-4 points.

A lender has a minimum loan amount of $150,000. The lender serves a large area including a minority neighborhood. The minority neighborhood's home value is usually $125,000 or less. This policy is an example of: -Comparative Evidence -Overt Discrimination -Disparate Impact -Redlining

Disparate Impact occurs when a facially neutral policy or practice is applied equally to all applicants, but the policy or practice disproportionately excludes or burdens certain groups of people on a prohibited basis.

A lender has a policy that they never lend less than $70,000 because they can't make any money off of loans lower than $70,000. What would this be considered: Disparate Treatment Disparate Impact Discrimination Blockbusting

Disparate Impact occurs when a facially neutral policy or practice is applied equally to all applicants, but the policy or practice disproportionately excludes or burdens certain groups of people on a prohibited basis.

A lender has a policy that only individuals between the age of 25-45 can receive home loans of over $200,000. What would this be considered: Disparate Treatment Disparate Impact Discrimination Blockbusting

Disparate Treatment is either overt discrimination, or there is comparative evidence of discrimination.

Which is not part of the original loan application? -Borrowers marital status -ECOA disclosure -Borrower provided ethnicity -Borrower provided birthdate

ECOA disclosure

Which of the following is not considered a protected class under Reg. B? Age Disability Sex National Origin

ECOA does not include disability as a protected class. Disability is a protected class under the Fair Housing Act.

Borrower(s) may decide to disclose income from child support or alimony. What federal law states that a lender cannot refuse to consider alimony or child support as income? -Real Estate Settlement Procedures Act -Equal Credit Opportunity Act -Fair and Accurate Credit Transactions Act -Truth in Lending Act

ECOA states that if the borrower discloses and wants to use child support or alimony as income than the lender cannot refuse to consider that income.

Equal Credit Opportunity Act

ECOA/Regulation B Gives all applicants the same rights. Credit providers may not discriminate based on: Race, color, religion, national origin, age, sex or marital status.

Which is not an application disclosure? -Servicing disclosure -Environmental hazard disclosure -Appraisal disclosure -APR disclosure

Environmental hazard disclosure

ECOA

Equal Credit Opportunity Act

Certificate of Eligibility

Evidence of VA approval of a qualified veteran for a VA loan

Jumbo Mortgage

Exceeds loan limit for Fannie and Freddie

Who receives the YSP? -The Broker -The Lender -The Borrower -The Servicer

YSPs are paid to the broker for giving a borrower a higher interest rate on a loan in exchange for lower up-front costs generally paid in origination fees, broker fees or discount points

According to FACTA, how often is a consumer entitled to a free copy of their credit score? Never Annually Twice a year Once every two years

FACTA allows for the consumer to receive one credit report annually - this does not include their credit scores.

Which federal law was put into place to improve consumer's access to credit information? -FCRA -FACTA -Gramm-Leach-Bliley -Red Flags Rule

FACTA, an amendment of FACTA, was put into place to improve the consumer's access to credit information. FCRA deals specifically with the use of credit reports and accuracy of the credit report. The Red Flags rule deals with identifying identity theft. It is a part of FACTA. GLBA deals with the disclosure of non-public personal information.

Fair Credit Reporting Act

FCRA/Regulation V (1970) Act that protects privacy of background information and ensures that information supplied is accurate.

Fair Housing Act

FHA - The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin

Under FHA loan rules, effective June 2013, loans beginning at 90% LTV or more will pay an annual mortgage insurance premium (MIP): -For at least 11 years -For the life of the loan -Until the LTV reaches 78% -Until the LTV reaches 80%

FHA loans over 90% LTV requires MIP for the life of the loan.

What type of loan requires that you have MMI? FHA loans Fannie Mae Freddie Mae Non-conforming loan

FHA loans require Monthly Mortgage Insurance Premiums. Conventional loans can require Private Mortgage Insurance (PMI) on loans with LTVs over 80%.

What type of mortgage requires a funding fee? VA USDA Conventional FHA

FHA requires UFMIP and MMI on their loans. Conventional loans only require PMI on loans with LTV's over 80%. USDA requires a guarantee fee and VA requires a funding fee.

What type of mortgage requires upfront mortgage insurance and monthly mortgage insurance? VA USDA Conventional FHA

FHA requires UFMIP and MMI on their loans. Conventional loans only require PMI on loans with LTV's over 80%. USDA requires a guarantee fee and VA requires a funding fee.

Federal Home Loan Mortgage Corporation

FHLMC, Freddie Mac: An organization in the secondary mortgage market that primarily buys conventional loans from savings & loans

Federal Reserve System

FRS - The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

FCRA

Fair Credit Reporting Act

FICO

Fair Isaac Corporation

FACTA

Fair and Accurate Credit Transactions Act

What are Fannie Mae and Freddie Mac also known as? -Congress owned enterprises -Government supervised but privately owned entities -Government sponsored enterprises -Privately owned entities

Fannie Mae and Freddie Mac are both government sponsored entities or GSEs.

FDIC

Federal Deposit Insurance Corporation

FFIEC

Federal Financial Institutions Examination Council

FHLMC

Federal Home Loan Mortgage Corporation - Freddie Mac

FHA

Federal Housing Administration

FNMA

Federal National Mortgage Association - Fannie Mae

FTC

Federal Trade Commission

Origination Fee

Fee charged by lender for preparing and processing loan.

Commission

Fee paid to an agent for transaction - usually a percentage of the money received from the transaction.

Closing Costs

Fees involved in arranging for a mortgage or in transferring ownership of property. May include - taxes, title ins., and attorney's fees etc.

If a loan originator is in a face-to-face loan interview with the applicant, and the applicant does not wish to answer questions in Section 10 on the 1003, the loan officer must:

Fill out the information based on visual observation

Closing/Settlement

Final exchange in the sale and purchase of real estate where the title is transferred, financing documents, title insurance policies are exchanged, and costs are paid. Some of the final documents are then delivered to the county recorder to be recorded.

FinCEN

Financial Crimes Enforcement Network

Which of the following is not required as part of the application process for a mortgage loan originator? -Fingerprints -Background Check -Interview of Professional References -Credit Check

Fingerprints, Background Check and Credit Check are required parts of the application process.

Which of the following is not included in background checks for MLO candidates? -Submitting fingerprints for a criminal history check -Submitting personal history and experience -Authorizing the NMLS or regulator to obtain a credit report -Questioning of friends, coworkers, or family members regarding personal character

Fingerprints, credit reports and personal history and experience are all part of the licensing process for MLOs.

Agatha wants to purchase two discount points, and there are two origination points on her loan. The sales price of the property is $150,000, and she is putting 10% down on the property. How much are the discount points and origination points going to cost her? $5,400 $6,000 $1,500 $1,350

First we need to determine the loan amount, 10% of $150,000 is $15,000. $150,000 - $15,000 is $135,000. Our loan amount is $135,000. Both origination points and discount points are 1% of the loan amount. 1% of $135,000 is $1350. $1350 x 4 is $5400.

Conventional Mortgage

Fixed periodic payment and interest throughout mortgage term.

Hybrid Loan

Fixed rate for initial period and turns to ARM. 3,5,7, or 10 year terms.

Lifetime Payment Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Lifetime Rate Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.

Interest Rate Floor

For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Which of the following circumstances would disqualify the use of income generated from a basement apartment in qualifying for a Freddie/Fannie loan? -Property was appraised as a single-family dwelling -The property is zoned for 2-4 units -LTV is calculated as a 2-unit property -The apartment was vacant for 4 months

For income to be considered from a basement apartment, the property would need to be appraised as a multi-unit dwelling.

Kay is behind on her mortgage payments and is concerned that she will soon be going into the foreclosure process. Kay receives a phone call from a company stating that they can help her avoid foreclosure if she pays them $3,000 upfront to discuss options with her servicer. What type of scheme is likely occurring in this situation? -Loan Flipping -Foreclosure Rescue Scheme -Illegal Property Flipping -Equity Skimming

Foreclosure rescue schemes take advantage of borrowers who are in the process of foreclosure or about to go into foreclosure. The fraudster promises to help the borrower avoid foreclosure, and the borrower often pays for the services that he or she never receives and ultimately loses their home.

Javier is looking to purchase a home, but he does not make enough money to obtain the loan that he wants. Javier, instead of looking for a less expensive property, changes his W-2 to reflect that he is making an additional $1,000 a month. What type of fraud is this? -Fraud for property -Fraud for profit -Fraud for criminal enterprise -Negligent fraud

Fraud for housing/property is committed when a borrower materially misrepresents information on a mortgage loan application such as employment, income, or assets to obtain a mortgage. The borrower is motivated to acquire ownership of a house.

Housing Ratio

Front End DTI Monthly house payment or rent/ gross monthly income

What event occurs when the 3-day right of rescission has passed? Closing Funding Post-Closing Underwriting

Funding is the process at closing by which the funds are dispersed to their proper owners. In the situation of a purchase transaction, funds are transferred to the seller from the buyer, and the buyer also transfers funds to the lender. Funding happens after the right of rescission expires on owner-occupied refinance transactions.

Growing Equity Mortgage

GEM - A loan where payments increase each year, thereby allowing the loan to be paid off many years sooner and a substantial amount of interest dollars to be saved.

Good Faith Estimate

GFE - A RESPA required estimate of all settlement charges to be assessed against the borrower at closing. The lender must provide this estimate at the time of loan application or within three business days.

Gramm-Leach-Bliley Act

GLB/Regulation P (1999) requires financial institutions to ensure the security and confidentiality of customer data

What federal legislation prohibits the exchange of information between consumer creditors unless certain disclosures are made to the consumer? -Equal Credit Opportunity Act -Fair Credit Reporting Act -Gramm-Leach-Bliley Act -Truth in Lending Act

GLBA protects NPI and if a financial institution shares (or sells) NPI with a third party for uses other than the original intention, the financial institution is required to provide a detailed privacy policy disclosure to the application with the option to opt-out.

What law was created to protect a borrower's NPI? The US Patriot Act The Gramm-Leach-Bliley Act The HPA BSA/AML

GLBA restricts the disclosure of non-public personal information (NPI).

Government National Mortgage Association

GNMA/Ginnie Mae Government-owned corporation that guarantees payment of principal and interest to investors who buy its mortgage backed securities on the secondary market.

GFE

Good Faith Estimate

GNMA

Government National Mortgage Association - Ginnie Mae

GSE

Government Sponsored Enterprise

Recorder

Government official who keeps the public records affecting real property, such as deeds, liens, and judgements.

GLBA

Gramm-Leach-Bliley Act

Capacity

Gross Income x DTI = the maximum mortgage and debt payments the borrower can afford

What gross percentage of variance on an appraisal report is tolerable when evaluating comparables? 25 15 20 10

Gross adjustments cannot exceed 25% on appraisals or 15% net of the comparable. The maximum line item adjustment is 10%.

Which of the following transactions is not governed by the new TRID Rules? A reverse mortgage A closed-end second mortgage A refinance transaction A purchase money transaction

HELOCs and Reverse Mortgages are not required to follow TRID requirements, they continue to use the Good Faith Estimate and TIL Disclosures.

Section X or the Demographic Information Addendum on the 1003 is where information regarding what federal law goes? HMDA ECOA QM ATR

HMDA requires that financial institutions collect and report specific data. The data is collected and analyzed to prevent and detect discriminatory lending practices and to determine whether a financial institution is lending fairly in all areas they serve. This information is collected on Section X or the Demographic Information Addendum of the 1003.

Home Mortgage Disclosure Act

HMDA/Regulation C (1975) This requires banks to record/report data on home lending in order to ID possible discriminatory patterns.

Home Ownership and Equity Protection Act

HOEPA (1994) An amendment to the Truth in Lending Act created to prevent predatory lending practices.

Housing and Urban Development

HUD (1965) An Executive Cabinet Department created to improve living conditions of America's poor

HPML

Higher Priced Mortgage Loan

HECM

Home Equity Conversion Mortgage

HELOC

Home Equity Line of Credit

HMDA

Home Mortgage Disclosure Act

HOEPA

Home Ownership and Equity Protection Act

HARP

Home affordable Refinance Program

HOA

Homeowners Association

HPA

Homeowners Protection Act

Individual Retirement Account

IRA - A qualified retirement plan that provides most individuals with a deferred federal income tax benefit.

4506-T

IRS form used to retrieve past tax returns

When would a subordination agreement be appropriate? -A first mortgage is being refinanced and doesn't want to lose priority to an existing 2nd mortgage. -A first mortgage is being paid off, and the holder of the second mortgage wants to ensure they will have first priority. -A second mortgage is obtained, and the lender wants to ensure that it will be second in priority. -Subordination clauses are never used in the creation of loans, since they create confusion as relates to priority.

If a borrower has a second mortgage and wishes to refinance their first mortgage without losing or combining their second mortgage, the second mortgage holder would have to agree to subordinate. This would mean that the second mortgage would stay in second lien position allowing the new first mortgage to be in first position.

When the interest rate floats, it means which of the following? -That the interest rate cannot go up but can go down -That the interest rate can continue to go up or down until it is locked -That the interest rate cannot go down but can go up -That the interest rate cannot go down or up

If an interest rate is floating it means that it is not locked. If an interest rate is not locked, then it can continue to go up and down until it is locked.

Which of the following is not a type of appraisal? Income Approach Sales Comparison Approach Investment Approach Cost Approach

Income approach, sales comparison approach and cost approach are the three types of appraisals.

Carlisle currently has an ARM and his ARM is going to adjust for the first time. The margin on his ARM is 2.25 and his ARM is tied to the LIBOR, and it's currently sitting at 1.25. What would be his interest rate if it adjusted today? 2.25% 1.25% 4.50% 3.50%

Index plus Margin. 2.25 plus 1.25 = 3.50%.

Certificate of Title

Indicates ownership of real or personal property - also identifies liens or encumbrances

Insolvency

Individual can no longer meet its financial obligations with the lender and debt becomes due

Hazard Insurance

Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.

IO

Interest Only

IRRRL

Interest Rate Reduction Refinance Loan

Accrued Interest

Interest earned but not yet paid.

Qualifying Rate

Interest rate used in calculating the initial mortgage payment in qualifying a borrower

IP

Investment Property

Government Mortgage

Issued by government entity - FHA, VA, RHS-USDA

All of the following are examples of prohibited conduct, except: -Issuing a Satisfaction of Mortgage -Failing to account for or disburse funds properly -Paying compensation to an unlicensed individual -Charging high rates or fees exceeding Predatory laws

It is 100% legal and expected for a lender to issue a satisfaction of a mortgage when the borrower pays it in full. It is illegal to refuse to issue a satisfaction of a mortgage when the borrower pays it in full.

When is it acceptable to discourage a borrower from making a formal loan application due to the fact that the borrower receives income from public assistance? -When the credit score is below normal loan parameters -It is never correct to discourage a borrower from applying for a mortgage loan -When the income is below the government disclosed poverty line -When the loan size makes it a non-conforming loan

It is a violation of ECOA to discourage a borrower from applying for a mortgage loan, it is never acceptable.

John intentionally tells the mortgage loan originator that he is working for that he only pays $1500 in child support when he pays $2000 in child support. This would be considered: Material misstatement Omission Collusion Inflation

John is purposefully misstating what he pays in child support - this is material misstatement.

Jumbo Loans are considered what type of loan: -Investment. -Non-Conforming. -Vacation -Sub-Prime

Jumbo loans are non-conforming; they do not conform with Fannie and Freddie Mac Guidelines as they are over the conventional loan limit.

London Interbank Offered Rate

LIBOR - Interest rate that international banks charge one another for overnight Eurodollar loans.

TRID requires a borrower to: -Indicate their intent to proceed -Provide their verifying documentation before an LE can be sent out -Pay an upfront fee before an LE is sent -Provide a downpayment at the time of application

Lenders are not allowed to impose any fee to the borrower for a mortgage transaction until the borrower has received the LE, and they have indicated an intent to proceed with the transaction. The only exception to the rule is for a bona-fide and reasonable fee for obtaining a consumer's credit report.

Lender's are required to file Suspicious Activity Reports under BSA/AML. How long after the date of initial detection are lenders required to file the SAR? 60 days 90 days 30 days 120 days

Lenders are required to file SARs no later than thirty (30) calendar days after the date of the initial detection of the issue. Lenders must maintain a copy of any SAR filed and all supporting documentation for five (5) years from the date of the filing.

Disqualifications for MLO licensure

License revocation in another state Lack of financial responsibility Felony in past 7 years Failure to complete requirements

Credit Life Insurance

Life insurance coverage offered by a lender (creditor) when you take a loan out - usually very overpriced

Which of the following must have an MLO license? -June, who is working as an attorney and negotiating terms on a loan for her client as part of her job as an attorney -William, who extends credit solely on timeshare plans -Jackson who is negotiating the terms of a loan on his primary residence -Lola, who is working as an independent contractor underwriter and is underwriting loans

Loan Processors and underwriters generally do not have to be licensed. The exception is when they are independent contractors and not supervised by a licensed entity. The other individuals in this question are exempt from licensure under the SAFE Act.

LP

Loan Prospector

Construction Mortgage

Loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property.

LTV

Loan to Value

Luke is a mortgage loan originator, and he is working with a new borrower. Luke needs to determine how much the home is worth versus the loan amount that the new borrower is requesting. What is Luke attempting to determine? -The borrower's debt-to-income ratio -The borrower's loan amount -The borrower's appraised value -The borrower's loan to value ratio

Loan to Value is a calculation made to determine whether a borrower qualifies for a property or not. Programs require that borrowers put a specific amount down or have a specific amount of equity in their property to obtain a loan. To determine a borrower's loan to value, the MLO or underwriter is going to take a loan amount and divide it by the borrower's purchase price or the properties appraised value (whichever is lower).

What is the loan-to-value ratio if the loan amount is $93,750, the appraised value is $125,000 and the sales price is $130,000? 75% 78% 80% 100%

Loan to Value is the Loan amount divided by the lessor of the appraised value or purchase price. In this case, $93,750 divided by $125,000.

Mortgage Disclosure Improvement Act

MDIA (2008) A regulation that requires the disclosure of certain estimated settlement costs. A lender cannot require an application fee or appraisal fee from a customer until these disclosures are made.

According to MDIA, what is the waiting period once initial disclosures are provided to the borrower before the loan can close? 10 business days 7 business days 5 business days 3 business days

MDIA implanted the 3/7/3 Rule. The 3/7/3 Rule requires a seven-business day waiting period once the initial disclosures are provided before a loan closes.

Mortgage Insurance Premium

MIP - An insurance required of FHA borrowers that protects a lender against a loss in the event of a foreclosure and deficiency.

The borrower applies for a loan and asks about the impact the loan could have on their taxes. Which of the following should be told to the borrower by the MLO? -Origination fees are tax deductible. -Get tax advice from a trusted friend. -Speak with a tax advisor for tax deductibility. -Mortgage interest is tax deductible.

MLO's are not tax professionals and cannot give tax advice. If a borrower asks a tax related question, then the MLO should refer them to a tax professional.

Which of the following would not be a prohibited practice regarding an appraisal? -Threatening non-payment to manipulate the appraiser into raising the value of the property -Bribing the appraiser for a higher appraised value -Requesting that the appraiser reviews additional comparables -Refusing to use an appraiser again if they do not change the value on an appraisal

MLOs are allowed to ask for an appraiser to review their appraisal again or fix mistakes or look at additional information like additional comparables. An MLO cannot interact with an appraiser in a negative way or try to sway their judgment. This is illegal.

Which of the following borrowers would be a good fit for a reverse mortgage? -Janet, who is 50 years old and owns her house, outright -Howard who is 66 years old and just purchased his home 3 years ago -Margaret who is 63 years old and owes only $10,000 on her current mortgage -Saul who is 62 years old and owes $100,000 on his home

Margaret is over 62 years of age and owes very little on her home, she would be the perfect candidate for a reverse mortgage. Janet is not old enough to qualify for a reverse mortgage and Howard and Saul likely have too little equity in their homes for a reverse mortgage to be a viable option for them.

For the purpose of complying with HMDA rules, a mortgage loan originator must ask all of the following questions except? -The borrower's race -The borrower's ethnicity -The borrower's marital status -The borrower's sex

Marital status is not a question that has to be asked for the HMDA demographic information.

MSA

Marketing Service Agreements

Change Orders

Modification of the original construction plans ordered by the property owner or general contractor

MMI

Monthly Mortgage Insurance.

MARS

Mortgage Assistance Relief Services Rule

MBS

Mortgage Backed Securities

MDIA

Mortgage Disclosure Improvement Act

MERS

Mortgage Electronic Registration System

MLO

Mortgage Loan Originator

Which of the following requires the lender to disclose to borrowers the possibility that their loan will be sold, assigned or transferred to another? -Affiliated Business Arrangement Disclosure -GFE -Mortgage Servicing Disclosure -Service Providers List

Mortgage Servicing Disclosure. RESPA requires that a mortgage lender that anticipates that they may sell the servicing rights of a loan is required to let the borrower know. The lender must notify the borrower that that may occur within three (3) days after the receipt of the application.

NMLS

Nationwide Mortgage Licensing System and Registry

A reverse mortgage has which of the following features? A prepayment penalty Negative amortization Graduated payments Two closings

Negative amortization occurs when a person's monthly payments do not cover the amount of interest accrued during that month. The amount of interest not covered is added onto the principal balance of the loan. This is the case on reverse mortgages as no payments of principal and interest are required.

Can mortgage brokers underwrite or fund loans?

No

NINA

No Income No Assets Loan

NIV

No Income Verification Loan

NOO

Non Owner Occupied

After meeting with the borrowers to complete a loan application, you return to your office and order a Tri-merged credit report. Now that you have a credit report, what Loan Disclosure must you now prepare and mail (or give) to them?

Notice to Home Loan Applicant

Logan wants to buy an investment property but knows that he will get better terms on the loan if he tells the lender that this is his primary residence. What type of fraud would Logan be committing? Occupancy Fraud Identity Theft Asset Fraud Income Fraud

Occupancy fraud occurs when someone misrepresents their intention to live in a property. This happens a lot on second home or investment properties because loans on those types of properties are less advantageous than on primary residences.

Negative Amortization

Occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the original balance, causing the loan amount to increase.

OCC

Office of the Comptroller and Currency

Floor

On ARM the margin is the floor and the lowest the interest rate can go over the life of the loan.

Adjustment Interval

On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years depending on the index.

Payment Cap

On an adjustable-rate mortgage, the limit on the monthly payment increase that may result from a rate adjustment.

Discount Point

One percent of the loan that is prepaid interest, tax deductible and results in increased yield for the lender

Which of the following is not included in the debt-to-income qualifying ratio? Installment loans Rent on current housing Housing payment Monthly revolving payments

Only housing payments, installment payments and monthly revolving payments are considered in debt-to-income ratios. The current rent would not be considered because it is being replaced with the new housing payment.

O/O

Owner Occupied

Graduated Payment Mortgage

Payments rise over a period of years, and then usually level off for the remaining term of the loan. Often causes negative amortization.

`Through the life of a loan, the servicer is allowed to cushion a borrower's escrow account. What is true about that cushion? -It cannot exceed 1/6 of the estimated total annual payment from the account -It cannot exceed 1/12 of the estimated total annual payment from the account -RESPA actually does not allow a cushion -It can be up to a years' worth of escrow payments

Per RESPA, throughout the life of the escrow account, the servicer may charge the borrower a monthly sum equal to 1/12 of the total annual escrow payments for taxes and insurance that the servicer reasonably anticipates paying from the account. Also, the servicer can add an amount to maintain a cushion of no greater than 1/6 of the estimated total annual payment from the account.

Trevor provided all six pieces of an application to his MLO on Monday, by what day does the MLO have to provide the LE? Thursday Friday Wednesday Saturday

Per TRID, the lender is required to provide the LE within three (3) business days following the receipt of the borrower's loan application.

PUD

Planned Urban Development

As part of a mortgage loan originator applicants pre-licensing education, how many hours must be focused on federal law? 2 hours 3 hours 4 hours 10 hours

Pre-Licensing Education must be a total of 20 hours and at least 3 of those hours must be focused on federal law.

Loan Discount Points

Prepaid interest on the mortgage loan. More points paid, the lower the interest rate.

PPP

Prepayment Penalty

If an MLO or real estate agent suggests to a client that he move to a particular area to reside in a community that he will fit into, what would that mortgage loan originator or real estate agent be guilty of? -Blockbusting -Flipping -Redlining -Steering

Pressuring a borrower to do something is steering.

P&I

Principal and Interest

PITI

Principal, Interest, Taxes, Insurance

PMI

Private Mortgage Insurance

Comparables

Properties similar to the property under consideration. Same size, location and amenities and have been recently sold. Within one mile and no more than 6 months old.

Service Members Civil Relief Act

Protection for service persons against eviction, foreclosures, excessive interest rates, etc.

Mortgage Insurance

Protects the lender in the case of borrowers default.

Which of these actions would indicate that a mortgage loan originator is not committed to privacy and safeguard compliance? -Requiring all computers be password protected and passwords changed periodically -Shredding paper documents and erasing electronic records -Contracting a document disposal company for weekly pick up of locked shredding containers -Putting files in unlocked file cabinets

Putting files in unlocked file cabinets risks the borrower's nonpublic personal information and could lead to the theft of a borrower's identity.

Gregory's loan is $125,000. For it to be considered a qualified mortgage, the points and fees cannot exceed what amount? $3,750 $6,250 $5,000 $10,000

QM limits the points and fees on a QM loan to 3%. So to discover the correct answer, you need to know 3% of $125,000 which is $3,750.

A loan greater than $100,000 is not considered a qualified mortgage (QM) if the points and fees paid by the consumer exceed what percent (%) of the total loan amount? 2% 3% 5% 6.5%

QM restricts points and fees to 3%.

QM

Qualified Mortgage

Reverse Annuity Mortgage

RAM - Allows borrowers (62 years or older) to borrow against their equity. Loan is due upon the sale of property or death of owner.

What is the federal regulation that implements the Real Estate Settlement Procedures Act? Regulation C Regulation X Regulation Z Regulation B

RESPA is also known as Regulation X.

Which disclosure that is required to be sent three days after application, indicates to the borrower whether or not the servicing of their loan may be sold or transferred? -The Mortgage Servicing Disclosure -The Service Providers List -The Home Loan Toolkit -The Affiliated Business Arrangement Disclosure

RESPA requires that a mortgage lender that anticipates that they may sell the servicing rights of a loan is required to let the borrower know. The lender must notify the borrower that that may occur within three (3) days after the receipt of the application. The disclosure statement must advise that the servicing of the loan may be assigned, sold, or transferred to any other person at any time.

Which of the following is a purpose for the Mortgage Servicing Disclosure Statement? -To disclose the percentages of loans this lender has serviced in the last 3 years -To inform the borrowers that they have certain rights under the law -To inform the borrower that the servicing of the mortgage may be or has been transferred -To inform the borrower the percentages of servicing that has been sold, assigned or transferred

RESPA requires that a mortgage lender that anticipates that they may sell the servicing rights of a loan is required to let the borrower know. The lender must notify the borrower that that may occur within three (3) days after the receipt of the application. The disclosure statement must advise that the servicing of the loan may be assigned, sold, or transferred to any other person at any time.

Real Estate Settlement Procedures Act

RESPA/Reg X Federal statute that requires lenders to provide home buyers with information about known or estimated settlement costs.

Rural Housing Service

RHS - A federal agency that makes and guarantees loans to low or moderate-income borrowers to purchase, build, or rehabilitate homes in rural areas.

A lender services a large metropolitan area but refuses to lend in one specific area because the people in that area are low-income. This would be considered: Reverse redlining Redlining Blockbusting Steering

Redlining is an unethical practice where a financial institution makes it extremely difficult or impossible for residents of a particular neighborhood to borrow money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. Redlining typically occurs in poor inner-city neighborhoods. In the case of redlining, an individual's qualifications and creditworthiness are not considered.

A minority borrower is refused a loan because the neighborhood that they have chosen has a high number of foreclosures. This is an example of what illegal practice? Blockbusting Rating Redlining Steering

Redlining is an unethical practice where a financial institution makes it extremely difficult or impossible for residents of a particular neighborhood to borrower money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. Redlining typically occurs in poor inner-city neighborhoods. In the case of redlining, an individual's qualifications and creditworthiness are not considered.

Requirements to maintain license

Renew yearly by Dec 31st Continuing Education - 8 hrs annually Pay renewal fee Meet initial licensure requirements

Inquiry

Request for credit report

There is a lender working in a large metropolitan area, but currently, they are targeting a low-income neighborhood and charging more for their loans because the individuals in the area are mostly African American. This would be considered: Chunking Churning Reverse Redlining Redlining

Reverse Redlining is the opposite of redlining; it is where a financial institution lends specifically in poor inner-city neighborhoods to charge them more than a comparable white consumer.

Secure and Fair Enforcement Act

SAFE Act (2008) Set minimum standard for licensing and registration of state-licensed mortgage loan originators.

Section 35 of TILA governs what type of loan? High Cost Higher priced Subprime loans Open-ended loans

Section 35 of TILA deals with higher-priced home loans, not be confused with Section 32 which is HOEPA and deals with high-cost home loans.

SRP

Service Release Premium

Bridge Loan

Short-term loan that uses the borrowers equity to make a down payment on new home. Paid upon sale of existing home.

Which of the following situations would be considered a prohibited act or practice? -Tyler discusses with a borrower particular rates and terms that they qualify for -Laurie, an independent contract processor, renews her mortgage loan originator license -Riley, working as a processor for a mortgage lender, discusses specific options for locking a borrowers loan -Eileen, a mortgage loan originator, provides an additional appraiser comparables with the hopes that the appraiser might change the value on her borrower's appraisal

Since Riley is a processor, she is not likely a licensed MLO. Discussing specific options to lock a loan is discussing rates and terms, this would require having an MLO license.

Jamie is looking to refinance his property. He currently owes $55,000 on a first mortgage and pays a 4% interest rate on it. He also owes $5,000 on a HELOC paying 6% interest on it. He wants to obtain some cash-out and is expecting to get at least $30,000. The appraisal came in at $200,000. He also has a tax lien of $1,200 on the property and $4,000 in credit card debt he'd also like to eliminate. He qualifies for an 80% LTV and the closing costs are going to be $3,000 on the new loan. How much cash will Jamie have available? $93,000 $97,000 $91,800 $95,800

So, in debt, Jamie has $65,200 that he needs to pay off (including the HELOC, first mortgage, tax lien and credit card debt). He qualifies for 80% LTV and his house is worth $200,000, 80% of $200,000 is $160,000. $160,000 minus $65,200 is $94,800. His closing costs are $3,000, so he would still have $91,800 available in cash.

Flood Insurance

Sold privately but subsidized by federal government. Max coverage $250,000

Concession

Something given up or agreed to in sale negotiations.

Conforming Loan

Standardized conventional loan that meets Fannie Mae's or Freddie Mac's purchase requirements.

Which of the following is not a penalty that the state regulatory authority can levy against a licensee? Restitution Imprisonment License Suspension License Revocation

State regulatory authorities can do something to a license or levy civil penalties. They can also recommend to the local Attorney General that criminal behavior is occurring but they themselves cannot prosecute a licensee for a crime or impose prison time.

SISA

Stated Income State Asset

Andrew's borrower wants to refinance his home and Andrew has put together some great options. Of those options, Andrew wants his borrower to chose the ARM option because his company is giving bonuses to everyone who sells an ARM. Andrew pressures his borrower into choosing that options. Andrew is guilty of what? Steering Churning Chunking Flipping

Steering in the sense of actions that mortgage loan originators take that is like steering a car. The MLO, who has the upper hand and knowledge of the industry, is going to steer that borrower into the loan they think is best. Steering becomes a problem when an MLO steers a borrower into a loan that could potentially harm them for the sole purpose of obtaining a higher commission.

Genevieve wants to buy a home, but her credit score took a tank after her divorce. Her brother, Donald has a great credit profile, though, and she asks him to apply for a loan for her. Genevieve promises Donald that she will pay the mortgage. What would Donald be considered? -A good brother -A straw buyer -An investor -A mortgage relief service provider

Straw buyers are individuals used by fraudsters to obtain mortgages. The straw buyer's personal information is used to obtain a mortgage loan fraudulently. The fraudster compensates the straw buyer for the use of their information.

The borrower knows that he has derogatory credit. He convinces his brother who has better credit and income to apply. The brother of the borrower is considered a(n): Identity thief Investor Mortgage rescuer Straw buyer

Straw buyers are individuals used by fraudsters to obtain mortgages. The straw buyer's personal information is used to obtain a mortgage loan fraudulently. The fraudster compensates the straw buyer for the use of their information.

Which of the following would be considered in the borrower's back-end DTI? -Student loan payments and car payments -Life insurance premiums and credit card payments -Gym Membership dues and monthly cell phone bill -Utility payments and monthly health insurance payments

Student loan payments and car payments are the only installment or revolving debt. They are the only ones that would be considered in DTI calculations.

Contingency Clause

a clause in a real estate sales contract that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice

Balloon Payment

a final loan payment that is much larger than the regular monthly payments

Judgement Lien

a lien placed on property to settle a judgement from a lawsuit

Some lenders and investors were willing to make subprime loans because: -Borrowers typically had greater income stability than with other real estate loans -Lenders could charge higher rates for the added risk -Lenders experience less risk with subprime loans than with other real estate loans -Borrowers typically had greater net worth than with other real estate loans

Subprime loans generally had higher interest rates and fees and so the lender could make more money on them than on conforming mortgages. The lender took a higher risk for higher payment.

An Alt-A or Alt Doc loan would be considered a type of: -Adjustable rate mortgage -Subprime mortgage -Jumbo loan mortgage -Nontraditional mortgage

Subprime mortgages are also known as Alt-A or Alt-Doc loans.

Buyer's Market

Supply significantly exceeds demand, resulting in lower prices.

SAR

Suspicious Activity Report

The Truth in Lending Act does which of the following? -Requires all loan applications be made in person -Prevents advertising FHA financing to the exclusion of Conventional -Regulates advertising regarding interest rates -Requires a closing cost breakdown on residential loans

TILA (Regulation Z) regulates advertising.

Under what law does the Ability to Repay Rule fall under? TILA RESPA Dodd-Frank ECOA

TILA houses a lot of different rules, including ATR, QM, and LO Comp

TRID

TILA-RESPA Integrated Disclosure

Truth in Lending Act

TILA/Regulation Z An act which requires lenders to inform borrowers of all direct, indirect and true costs of credit.

Under Equal Credit Opportunity Act (ECOA), when looking to qualify a borrower, a lender may not consider which of the following? -The borrower is a senior citizen -The borrower has an average credit score -The borrower has had 10 jobs in the past 2 years -The borrower has a low monthly income

Taking into consideration the borrower's age would be discriminating against the borrower because of Age. Age is a protected class under ECOA. The only time age can be used as a consideration is if the borrower is under 18 years of age, if so, they cannot be legally obligated on a real estate transaction.

TIN

Tax Identification Number

MLOs are prohibited from which of the following? -Asking an appraiser to consider other comparable properties -Obtaining multiple appraisals on a property -Telling an appraiser a minimum value needed to approve the loan -Withholding fees from appraisers for substandard performance

Telling the appraiser the minimum value needed would be considered an attempt to influence the judgment of the appraiser and would be illegal.

How many years of employment is required to be disclosed on the 1003? 2 years 3 years 10 years 7 years

The 1003 requires 2 years of experience be filled in. Most programs require 2 years of employment to qualify

The 3/7/3 Rule is associated with which law or regulation? Regulation B FACT Act SAFE Act Regulation Z

The 3/7/3 Rule is part of MDIA which is part of TILA (or Regulation Z).

RESPA requires disclosure to the consumer of: -Any affiliated business arrangement (AfBA). -The annual percentage rate (APR) -The number of business days before settlement -Use of race, ethnicity, and gender for government reporting purposes

The AfBA disclosure must be delivered to the borrower at the time of the referral. An example of an AfBA is a mortgage lender's CEO has an ownership interest in a title insurance company, if the mortgage lender's MLOs want to refer their borrowers to use that title insurance company then the relationship must be disclosed between the CEO of the mortgage lender and the title insurance company at the time the MLO refers them.

What is the best way to explain APR to borrowers? -Yield spread premium or service release premium plus all closing costs -Yield spread premium or service release premium plus the interest rate -Interest rate plus all closing costs and prepaids -The cost of the loan over the life of the loan expressed as a rate

The Annual Percentage Rate (APR) is the cost of the loan over the life of the loan, expressed as a rate. It is not the interest rate! It is the cost of credit expressed as a rate. In this scenario, the costs of the loan make up 4.274 percent of what the borrower will pay over the loan term.

What law requires that a cash transaction of more than $5,000 be reported? BSA/AML Dodd-Frank FTC Red Flags RESPA

The Bank Secrecy Act/Anti-Money Laundering requires the reporting of transactions over certain amounts in order to combat money laundering.

Which was the first major legislation to directly affect equal rights to ownership of real property? -Emancipation Proclamation -Federal Fair Housing Act -Homeowners Protection Act -Civil Rights Act of 1964

The Civil Rights Act of 1964 was the nation's premier civil rights legislation. The Act outlawed discrimination on the basis of race, color, religion, sex, or national origin, required equal access to public places and employment, and enforced desegregation of schools and the right to vote.

A lender is required to keep a copy of the Closing Disclosure on every transaction for: 2 years 3 years 5 years 7 years

The Closing Disclosure must be kept for 5 years. This differs from proving compliance with TILA which is 2 years.

Which of the following is not true about the Dodd-Frank Act: -It created the CFPB -It prohibits unfair lending practices -It expanded consumer protection on high-cost mortgages -It created the NMLS

The Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) created the NMLS.

Who insures FHA loans? Freddie Mac HUD Fannie Mae Loan Underwriter

The Department of Housing and Urban Development (HUD) is responsible for insuring FHA loans.

What federal law created the idea of a qualified mortgage? Dodd-Frank TILA RESPA ECOA

The Dodd-Frank Wall Street Reform Act mandated specific rules be created including QM, ATR and LO Comp. All three of which are now housed under TILA.

What law allows for e-signatures as long as the borrower gives permission? -The Electronic Signatures in Global and National Commerce Act -The Dodd-Frank Act -Gramm-Leach-Bliley -Homeowners Protection Act

The E-Sign Act allows for e-signatures as long as you get permission from the borrower first!

Which federal law prohibits someone from inquiring about childbearing? HMDA ECOA Fair Housing Act RESPA

The Equal Credit Opportunity Act (ECOA, Regulation B) prohibits discrimination based on sex, part of that includes the ability to bear children. ECOA states that it is discriminatory to ask about a persons childbearing plans or ability.

Which federal law restricts the use of credit reports and requires accuracy on credit report? FCRA FACTA Gramm-Leach-Bliley Red Flags Rule

The Fair Credit Reporting Act (FCRA, Regulation V) deals with the accuracy of credit reports and the use of credit reports. FACTA, an amendment of FACTA, was put into place to improve the consumer's access to credit information. The Red Flags rule deals with identifying identity theft as is a part of the FACTA. GLBA deals with the disclosure of non-public personal information.

Which law prohibits discrimination based upon disability? ECOA Reg. C Fair Housing Act RESPA

The Fair Housing Act adds disability as a protected class. ECOA does not include disability as a protected class. That's a good way to differentiate between the two laws.

Under the Fair Housing Act, which of the following is NOT one of the protected classes: Race Color Age Sex

The Fair Housing Act prohibits discrimination in housing because of race, color, national Origin, religion, sex, familial status & disability. ECOA prevents discrimination against age.

Under what federal legislation, is a lender required to allow a borrower to opt-out of having their nonpublic personal information disclosed to a third party? Gramm-Leach-Bliley The USA Patriot Act FACTA FCRA

The Gramm-Leach-Bliley Act (GLBA) is a law that influences a variety of different areas in the financial industry, but for this course, we are concerned most with the privacy section of GLBA. The privacy sections restrict the disclosure of non-public personal information (NPI). GLBA includes the Opt-Out Rule.

When must the Home Loan Toolkit be provided to the borrower on a purchase transaction? 3 days after application 3 days before closing At the time of application 7 days after application

The Home Loan Toolkit is another disclosure required by TRID. The lender must provide this document to the borrower within three (3) business days of application for all purchases.

What law requires the collection of race, ethnicity and sex for the purpose of preventing and detecting discriminatory practices? -HMDA -ECOA -Fair Housing Act -RESPA

The Home Mortgage Disclosure Act (HMDA, Regulation C) was implemented to collect demographic information to ensure that lenders were not participating in discriminatory lending practices. The demographic information is collected as part of the 1003.

Which federal law allows borrowers to request PMI cancellation when their LTV reaches 80%? -Homeowners Protection Act -Reg. Z -RESPA -Home Ownership and Equity Protection Act

The Homeowners Protection Act (HPA) deals specifically with the cancellation of PMI on conventional home loans.

The Homeowners Protection Act of 1998 does which of the following? -Gives buyers the right to cancel a contract based on property condition -Requires a buyer to sign a disclosure regarding home inspections -Gives borrowers the right to cancel or terminate PMI -Provides consumers a means of protection through PMI

The Homeowners Protection Act or HPA regulates the cancellation of PMI depending on the borrower's LTV.

When the mortgage loan amount is at 78% LTV or less of the purchase price of the home, private mortgage insurance: -Will be cancelled upon written request of the borrower -Will be cancelled automatically by the title company -Will be cancelled automatically by the lender -Will be required for the life of the loan

The Homeowners Protection Act requires all lenders drop PMI on loans when their LTV drops below 78%.

Which types of loan are governed by HOEPA? Higher priced loan High cost loan Subprime loans Qualified mortgages

The Homeownership and Equity Protection Act (HOEPA, Section 32 of TILA) outlines specific requirements for high-cost home loans.

Which of the following is not one of the new disclosures required under TRID? The Loan Estimate The Closing Disclosure The Home Loan Toolkit The Adverse Action Notice

The LE, CD and Home Loan Toolkit were new disclosures required under TRID. The Adverse Action Notice is required under ECOA.

Which of the following would not be a prohibited under the Loan Originator Compensation Rule? -A mortgage loan originator receives 10% additional for each ARM that they close -A mortgage loan originator receives $1,000 for selling a loan with an interest rate of over 4% -A mortgage loan originator receives a flat fee for each loan that they close -A mortgage loan originator receives a $5,000 bonus for loans over $250,000 that they close

The LO Comp Rules prohibits compensation based on terms of the loan. They can be charged a flat fee for each loan closed or for the volume of loans they close in the month.

What Rule prohibits loan originators from being paid based on terms of a loan? Qualified Mortgage Ability to Repay Loan Originator Compensation Regulation X

The Loan Originator Compensation Rule was created to limit how an MLO can be paid. This includes being paid based on the terms of the loan.

Which rule mandates disclosure to consumers that mortgage relief providers have no connection to any government program or agency? Home Mortgage Disclosure Act Fair and Accurate Credit Transactions Act MARS Rule Safeguards Rule

The MARS Rule makes it illegal for a mortgage assistance relief provider to collect money from a consumer unless they deliver, and the customer agrees to a written offer of mortgage relief from the customer's lender or servicer. It also requires them to disclose they are not associated with the government or the distressed borrower's lender or servicer.

Which federal law prohibits mortgage relief service providers from requiring an advance fee before the provider has obtained and the borrower has accepted a written offer from the borrower's lender or servicer? Reg. N Reg. O Reg. X Reg. Z

The MARs Rule is also known as Regulation O. The Mortgage Assistance Relief Services Rule or the MARs Rule made it illegal to charge upfront fees and requires specific disclosures in ads for mortgage assistance relief providers. These rules protect distressed borrowers from foreclosure rescue schemes.

If a mortgage loan originator (MLO) originates a loan while his license is suspended or revoked, the loan is: -Closed, nothing needs to be done -Fraudulent and will need to be immediately repaid -Valid but the MLO violated the law -Void and will need to be rewritten

The MLO is committing unlicensed activity, the loan is still valid but the MLO broke the law.

According to the SAFE Act a mortgage loan originator employed by a federally insured depository institution: -Is not required to be registered or licensed -Must be both registered and licensed -Must be registered -Must be licensed

The MLOs that work in bank branches or credit union branches are not currently required to obtain a license. They are required to be registered and are not required to take pre-licensing or continuing education, nor are they required to take the National Test Component with the Uniform State Test.

Each loan originator is identified in the NMLS database by: -A license number -A unique identifier -His/her Social Security number -Employing the mortgage loan originator

The NMLS assigns all licensees a unique identifier (NMLS ID#) this is the number that MLOs are identified by.

What entity was created by CSBS and AARMR for the purpose of licensing and registering mortgage loan originators? -The NMLS -The CFPB -The CSBS/AARMR Database -The FTC

The NMLS is a registration system that was developed and maintained by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR). The NMLS stores the information of each licensee.

he Opt-Out Rule under GLBA requires privacy notice, which of the following is not one of those notices? -Initial -Opt-Out -Annual -Quarterly

The Opt-Out Rule requires initial, opt-out, annual and revised privacy notices.

When an individual is collecting documents for the purpose of completing the loan file, what are they considered to be doing to the loan? Processing Underwriting Originating Closing

The Processor is required to collect information for the loan file and make sure that all information is in the loan file for the underwriter to underwrite the loan file. They do what are called "clerical or support duties."

For a loan to be considered a General QM loan, it must meet certain requirements. Which of the following is not one of those requirements? -The loan cannot have any negative amortization -The loan cannot have an interest only payment -The loan cannot have a term longer than 30 years -The borrowers back-end debt-to-income cannot exceed 32%

The QM Rule states that the back-end DTI for a borrower cannot exceed 43% to be considered QM.

Which law promotes informed shopping by requiring the disclosure of settlement services to the borrower? -Reg. C -RESPA -Reg. B -TILA

The Real Estate Settlement Procedures Act (RESPA, Regulation X) deals specifically with settlement services. A good way to remember its purpose is by thinking about the law's name, it includes the word settlement.

The Red Flags Rule is part of what law? FACTA FCRA Gramm-Leach-Bliley Act The MAP Rule

The Red Flags Rule is a part of FACTA. FACTA amended FCRA.

All of the following changes are because of The Dodd-Frank Wall Street Reform and Consumer Protection Act except? -The Consumer Financial Protection Bureau (CFPB) -The Ability to Repay Rule (ATR) -The Red Flag Rule (RFR) -The Qualified Mortgage Rule (QM)

The Red Flags Rule is rule under FACTA and was not mandated by Dodd-Frank.

All of the following are true about the FTC Red Flags Rule except: -Protect sensitive personal data -Require the implementations of a written plan to detect and prevent industry theft -The penalty for noncompliance is $3,500 -It requires lenders to create specific disposal policies to ensure a borrower's information is properly disposed of

The Red Flags Rule is specifically about protecting sensitive personal data from being exploited and involved in identity theft. The Disposal Rule is a separate rule that requires lenders to create specific disposal policies to ensure that a borrower's information is properly disposed of.

Lucy has taken the National Test Component with the Uniform State Test two consecutive times and failed, how long must she wait before she can take it again? 30 days 6 months 60 days 90 days

The SAFE Act allows an applicant to take the test three consecutive times 30 days a part. After a third failure, the applicant has to wait 6 months to challenge the exam again.

What federal law details the licensing requirements for mortgage loan originators? Dodd-Frank SAFE Act TILA Loan Originator Compensation

The SAFE Act created the requirements for MLO licensing.

The SAFE Act: -Prevents MLOs from practicing without a license -Establishes minimum standards for licensing and registering of mortgage loan originators -Prevents abuses in consumer mortgage transactions -Prevents kickbacks referral fees and unearned fees

The SAFE Act established all the licensing requirements for MLOs.

How many hours of annual continuing education are required by the SAFE Act for state-licensed mortgage loan originators? -3 hours -8 hours -11 hours -20 hours

The SAFE Act requires 8 hours of state-specific continuing education yearly.

For license renewal, an MLO is required annually to complete a minimum of how many hours of continuing education on the topic of federal law? 2 hours 3 hours 7 hours 8 hours

The SAFE Act requires a total of 8 hours of continuing education with 3 of those hours being devoted to federal law.

A licensed mortgage lender may not do which of the following in their advertising? -Publish an advertisement that does not include the lenders unique identifier on their advertisement -Publish an advertisement with their exact name as it appears on their license -Publish an advertisement that shows an insignia designating membership in a particular state association -Publish an advertisement that shows the lenders exact address as it appears on their license

The SAFE Act requires all unique identifiers be on all advertisements and applications.

How many hours of continuing education are required for mortgage loan originators? 8 hours 10 hours 12 hours 20 hours

The SAFE act requires a minimum of 8 hours of continuing education yearly. Some states might require more hours of CE than what is required under the SAFE Act.

Which law promotes informed use of credit by requiring the disclosure of the APR to the borrower? Reg. C RESPA Reg. B TILA

The Truth in Lending Act (TILA, Regulation Z), deals specifically with the proper disclosure of APR's on initial disclosures and on advertising.

What law requires identification be provided on a mortgage transaction? Gramm-Leach-Bliley Red Flags Rule USA Patriot Act BSA/AML

The US Patriot Act was created after the attacks on September 11th to combat terrorism. The Act requires that lenders create a consumer identification program and get two forms of identification on all transactions.

Anna is looking to purchase a new home. She lives in a small town of under 20,000 people. What loan program would be a good option for her? A VA loan A USDA loan An FHA loan A conventional loan

The USDA loan or U.S. Department of Agriculture loan is a type of mortgage that is available in rural areas of less than 35,000 people. USDA loans offer many benefits to borrowers, including no down payment, one hundred percent (100%) financing, lower-than-market interest rates, and a lower PMI rate than any other loan program.

When an individual is reviewing a loan file to determine that risk involved for the lender and to determine whether the borrower meets the requirements for the loan they are considered to be doing what to the loan? Processing Underwriting Originating Closing

The Underwriter is in charge of approving or denying a loan application; they do this by assessing the risk that the borrower poses and comparing the borrower's qualifications with the potential loan program.

The Uniform Residential Loan Application is also known as the: 1002 4506T MU-4 1003

The Uniform Residential Loan Application or URLA is also known as the 1003.

An IRRRL is what type of loan? A VA streamline loan An FHA streamline loan A USDA purchase loan A VA cash-out loan

The VA IRRRL or VA Interest Rate Reduction Refinance Loan is similar to the FHA streamline but is offered as a VA to VA no-cash out refinance loan. IRRRL's do require an additional funding fee, and the veteran cannot receive any additional funds out of their property.

Which of the following participants in a mortgage loan transaction would be most likely to overvalue a property? -Appraiser -Attorney -Surveyor -Title Company

The appraiser is the one responsible for determining the value of the property on a real estate transaction.

The borrower's gross monthly income is $5,000. The new mortgage loan will reduce his monthly payment to only $1,000 per month. The borrower will still owe a car payment of $350 and a student loan payment of $250. The borrower also has a cell phone bill of $90 per month. What is the borrower's new Housing Ratio? 20% 27% 32% 33.80%

The borrower's housing ratio is $1,000 divided by $5,000 which is 20%. The car payment and student loan payment would be considered in the back-end DTI but not the front-end/housing ratio. The cell phone bill would never be counted in either.

Daniel is looking to qualify his borrower for a conventional loan. He is attempting to determine the borrower's back-end debt-to-income ratio. What is the maximum back-end DTI ratio that Daniel can use on a conventional loan? 41% 36% 28% 32%

The conventional loan qualifying ratios are 28/36%.

FHA requires an UFMIP. A borrower's loan amount is $175,000. What would the cost of that UFMIP be? $3,062.50 $5,250.00 $2,625.00 $4,375.00

The current FHA UFMIP is 1.75% of the base loan amount. To find the correct answer, you'd need to know 1.75% of $175,000.

What is the funding fee for an IRRRL? It is different for everyone .50 percent for everyone Funding fees are only required on FHA loans 1.00 percent

The current funding fee on an IRRRL is .50% for any and all veterans.

Reginald works a full-time job as a schoolteacher and makes $43,000 a year. He also has been working a part-time job for the last two years working 10 hours a week at $10.50 an hour. His wife, Julia, works as a medical assistant and makes $22.50 an hour and works 45 hours a week. What is their gross monthly income? $3,762 $4,631 $7,207 $8,426

The first step is determining Reginald's income; his full-time job is $43,000 divided by 12 which is $3,583.33. We can use his second job because he has 2 years of verifiable work. 10 x 10.50 =$105 a week x 52 weeks in a year = $5,460 divided by 12 = $455 a month. $455 plus $3,583.33 = $4,038.33. Now for Julia's income, she works 45 hours a week at $22.50 (it does not say she gets overtime for those 5 hours), so $22,50 x 45 = $1,012.50 a week x 52 weeks in a year $52,650 a year/12 = $4387.50. $4387.50 plus $4038.33 = $8425.83 (rounded up to $8,426).

When determining if a loan is a HOEPA loan, there are three tests. The first test: -Determines if the APR exceeds the APOR -Determines if the TIP exceeds the APOR -Determines whether there is a prepayment penalty -Determines whether the points and fees are excessive

The first test for a HOEPA loan is the APR Test. If the APR on the mortgage exceeds the Average Prime Offer Rate (APOR) for a comparable transaction by more than specific percentages then the loan is considered a high-cost home loan.

HMDA was created to help to eliminate what: Redlining Steering Predatory Lending Price Gouging

The government uses HMDA data to prevent redlining and blockbusting.

Fee Simple

The highest interest in real estate recognized by the law; the holder is entitled to all rights to the property.

Which of the following are not included in the housing qualifying ratio? -Hazard insurance -Property taxes -Utilities -Homeowners Association Dues

The housing ratio only takes into consideration the housing expense, that would include the principal, interest, taxes and insurance as well as HOA dues.

Reverse mortgages create: Negative amortizationHypothecationDemand featuresAmortization

The lack of principal and interest payments on reverse mortgages cause negative amortization on the loan.

There are two exceptions when dealing with an adverse action notice, what happens if the lender provides a counteroffer and the applicant does not accept it? -The lender has 90 days to provide the adverse action notice -The lender does not have notify the applicant of the adverse action notice -The lender has 60 days to provide the adverse action notice -The lender is required to provide a second counteroffer

The lender must notify an applicant of adverse action within ninety (90) days after making a counteroffer, unless the applicant accepts or uses the credit during that time. The lender may not have to notify the applicant of adverse action if the application was incomplete, and the lender sent the applicant notice that the application was incomplete.

Which of the following is NOT a minimum standard for licensing as a state-licensed loan originator? The applicant has never had a loan originator license revoked. The applicant has not been convicted/guilty of a felony in the 7-years preceding the date of application for licensing. The applicant has demonstrated financial responsibility through maintaining a credit score above 600 points. The applicant has completed pre-licensing education and has passed an approved test.

The licensing process does include a review of the applicant's credit report but it does not include a review of the applicant's credit scores.

Annie is purchasing a new home and the seller is willing to do some concessions. Annie is getting an FHA loan; how much can the seller concede? 4% 6% 3% 2%

The maximum amount of seller concessions on an FHA loan is 6%.

Allie is looking to purchase a new property. She currently makes $3,200 a month gross. What would be the maximum payment she could have on her new property assuming a conventional mortgage? $1,376 $2,208 $2,308 $896

The maximum front end DTI on a conventional loan is 28%. 28% of $3,200 is $896.

FHA allows seller concessions. What is the maximum amount of seller concessions allowed on an FHA loan? 10% 4% 6% 8%

The maximum seller concessions on an FHA loan is 6%. Conventional loans only allow 3% seller concessions.

What would be the minimum down payment on a FHA loan of $200,00? $7,000 $6,000 $20,000 $40,000

The minimum down payment on an FHA loan is 3.5%. 3.5% of $200,000 is $7,000.

Liza is purchasing a new home. The purchase price of the home is $200,000. She has put down $2,000 in earnest money. If she is receiving FHA financing and only putting the minimum down, how much more will she need for her down payment? $7,000 $5,000 $4,000 $18,000

The minimum down payment on an FHA loan is 3.5%. 3.5% of $200,000 is $7,000. She has already put $2,000 down so she would owe another $5,000.

When is the funding on a residential construction loan made? -At the time the loan documents are signed -Periodically, as the home is being built -When the home is complete and an occupancy permit issued -When the filing period for all mechanics liens has expired

The money borrowed through a construction loan is provided in a series of advances as the construction progresses.

Fixed installment

The monthly payment due on a mortgage loan including payment of both principal and interest.

In a typical mortgage loan, what are the mortgage note and the property called? -Financing instrument/deed -Hypothecation/security -Lien/appraised value -Security instrument/collateral

The mortgage or deed of trust is the security instrument that the borrower gives to the lender that protects the lender's interest in the property. When the borrower signs the mortgage or deed of trust, they are giving the lender the right to take the property by foreclosure if they fail to pay their mortgage properly. The property is considered collateral for that security instrument.

Section 203 loan

The most widely used FHA program, covering single-family home mortgages insured by the FHA under Title II, section 203 of the National Housing Act.

Adjustment Period

The number of initial years in which an ARM remains fixed before the interest rate is allowed to be adjusted.

Acquisition Cost

The original cost of an asset

Which attribute is NOT considered illegal discrimination in granting credit under the Equal Credit Opportunity Act? Color Income Race Sex

The protected classes under ECOA do not include income. They do include color, race and sex.

All of the following applies to the right of rescission except: -It's only available on owner occupied refinance transactions -The lender is required to provide 2 copies of the notice of right to rescind at closing -The borrower has 4 days from choosing to rescind the loan -If the borrower does not receive the 2 copies of the notice of right to rescind the borrower has 3 years to rescind the loan

The right of rescission allows the borrower 3 days to rescind the loan.

Omar is closing his purchase transaction, he was not provided the right to rescind information, how long does Omar now have to rescind his loan? -He does not have a right to rescind his loan as this is a purchase transaction -Thirty days -One year -Three years

The right of rescission under TILA only applies to owner-occupied refinance transactions. If on an owner-occupied refinance transaction the right of rescission notices and disclosures are not provided or not handled correctly the borrower has three years to rescind their loan.

Easement

The right to use the land of another for a particular purpose.

Which of the following documents could not be used to verify a borrower's ATR? A W-2 A Tax Return A Payroll Statement A Letter of Explanation from the Borrower

The rule requires that lenders consider at least these eight (8) factors. The eight (8) underwriting factors must also be verified using reasonably reliable third-party records. A letter of explanation from the borrower would not be coming from a reasonably reliable third party.

The best appraisal method to be used for a single-family residence would be: -Sales Comparison Approach -Income approach -Cost approach -Gross rent multiplier approach

The sales comparison approach is the most common type of appraisal and will be the one an MLO will see most frequently. The appraiser will determine the value in a sales comparison approach by comparing the subject property (the borrower's house) to similar properties (known as comparable sales, comps, or comparables).

What type of appraisal uses compares multiple similar recently sold properties to a borrower's property to determine the value? -Income Approach -Sales Comparison Approach -Cost Approach -Investment Approach

The sales comparison approach is the most common type of appraisal and will be the one an MLO will see most frequently. The appraiser will determine the value in a sales comparison approach by comparing the subject property (the borrower's house) to similar properties (known as comparable sales, comps, or comparables).

Foreclosure

The seizure of property from borrowers who are unable to repay their loans

Indexed Rate

The sum of the published index plus the margin. For example if the index were 7% and the margin 2.75%, the indexed rate would be 9.75%

ASSUMPTION OF MORTGAGE OR DEED OF TRUST

The taking of title to property by a grantee in which he or she assumes liability for payment of existing note secured by a mortgage or deed of trust against the property. Not allowed by Fannie, Freddie or USDA. FHA and VA allow in certain situations.

Which of the following is not one of the three rules outlined within the Gramm-Leach-Bliley Act? Safeguards Rule Pretexting Rule Ability to Repay Rule Opt-Out Rule

The three arms of GLBA are the Safeguards Rule, Opt-Out Rule and Pretexting Rule.

Assignment

The transfer of rights or property

Who reviews all the loan documents, verifications, and gives final approval or disapproval to a loan? -Director of Loans -Loan officer -Loan processor -Underwriter

The underwriter is the one who gives final approval or disapproval on a loan.

Assessed Value

The value of an asset as determined by an appraiser for tax purposes

Which of the following would NOT be considered a change of circumstance and allow the lender to re-disclose the Loan Estimate? -An Act of God changes the condition of the property -The borrower decides to change from an ARM to a fixed rate product -The borrower's appraisal comes in low and to continue with the loan they need to change from a conventional to an FHA loan -The initial Loan Estimate indicates that the interest rate will be locked, and the mortgage loan originator forgets to lock the loan, and the interest rate goes up the next day, so the mortgage loan originator re-discloses the Loan Estimate with the new rate

There are only three things that can cause a change of circumstance the first is an Act of God (like a hurricane or tornado), a change made by the borrower or a change made by an extenuating circumstance (like a low appraisal that changes the LTV). An MLO making a mistake or forgetting to do something is not an acceptable change of circumstance.

Which of the following is not a HOEPA trigger test? -APR Test -Points and Fees Test -Prepayment penalty Test -Rescission Test

There are three tests when determining whether a loan is high-cost or not, those three tests are the APR test, the points and fees test and the prepayment penalty test.

Travis is disclosing an origination fee of $1200 on the initial Loan Estimate. What is the maximum that origination fee can change between the Loan Estimate and the Closing Disclosure? -10% cumulatively -It can go up as much as Travis wants -There is zero tolerance, and it cannot change at all -It can go up $100 only

This fee cannot go up at all. An origination charge falls into the zero-tolerance bucket.

If a credit card company has a written policy that anyone who is between age 20-30 can only have a credit line of $1,000 but anyone over 30 gets an automatic line of $5,000, this is an example of: -Comparative Evidence -Overt Discrimination -Disparate Impact -Redlining

This is a policy that overtly discriminates against people of a certain age.

Michael does not have enough money to put 20% down on his conventional loan to avoid PMI but really can't afford the payment with the additional cost. Instead of looking for the additional money to put down in cash, Michael contacts a second lender who lends him the additional money he needs to put the 20% down. That second lender and the loan Michael receives is never disclosed to the 1st lender. What would that second loan be considered? -A silent second -A second lien loan -A payday loan -A home equity line of credit

This is a silent second because Michael does not disclose that he has a second mortgage or is using a second mortgage.

A lender refusing to report timely payments to the credit reporting agencies is an example of: -Fraud -Predatory Lending -Price Gouging -Negligence

This is an example of predatory lending. Some creditors do not report timely payments to the credit reporting agencies. A borrower's payment history will not reflect correctly in this situation. Predatory lenders will not report to try to maintain the borrower for them.

Which best describes the housing ratio? -The total cost of all debt divided by the borrower's gross monthly income -The total cost of all housing expenses divided by the borrowers gross monthly income -The total cost of all the housing expenses divided by the borrower net monthly income -The total cost of all debt divided by the borrower's net monthly income

This ratio simply takes the amount that the borrower will be paying for their mortgage and divides it by their gross monthly income.

Which best describes the total debt ratio? -The total cost of all debt divided by the borrowers net monthly income -The total cost of all debt divided by the borrower's gross monthly income -The total cost of all housing expenses divided by the borrower's gross monthly income -The total cost of all debt divided by the borrower's net monthly income

This ratio takes all of the borrower's monthly liabilities and divides it by their gross monthly income.

Lola is working on a loan for her sister, Joan. She knows Joan is currently receiving child support, and Joan has authorized Lola to use that income to qualify her. Lola also knows that her nephew is 17 years old, and once he turns 18, Joan's child support payment will drop dramatically. Lola decides to indicate on the 1003 that Joan's oldest child is 14 instead of 17 to help Joan qualify for the loan. This would be considered: Negligence Actual Fraud Misrepresentation A good deed

This would be straight up fraud for housing. Fraud for housing is committed when a borrower materially misrepresents information on a mortgage loan application such as employment, income, or assets to obtain a mortgage. The borrower is motivated to acquire ownership of a house.

During the term of a fully amortized loan which of the following is true? -The monthly amount going to principle increases -The monthly amount going to interest increases -The monthly payment amount going to principal decreases -The principal balance increases

Through the course of amortization, the amount of a borrower's payment that goes to principal increases while the amount that goes to interest decreases.

An agreement to indemnify against loss arising from a defect in title to real property, usually issued to a buyer of the property by the title company that conduct the search is: Homeowners insurance Title insurance Title search Hazard insurance

Title insurance protects against the possibility of future loss should the borrower's legal rights to their property be challenged.

The legal link between a person who owns property and the property itself is the: -Title -Deed -Mortgage -Promissory Note

Title is a collective term for all a borrower's legal rights to own, use, and dispose of land. Title includes all previous ownership, uses, and transfers.

Adjusted Basis

cost plus improvements, minus depreciation

GPM

graduated payment mortgage

The Federal National Mortgage Association is also known as which of the following? -Fannie Mae -Freddie Mac -Ginnie Mae -Sallie Mae

he Federal National Mortgage Association or FNMA is also known as Fannie Mae. The Federal Home Loan Mortgage Corporation is Freddie Mac or FHLMC while The Government National Mortgage Association is also known as GNMA or Ginnie Mae.

Certificate of Occupancy

inspector's approval for human habitation

Assignment of mortgage

mortgage lender or borrower transfers the mortgage to a third party

Basis Point

one-hundredth of a percentage point. Used in computing the interest rate in real estate transactions.

Annuity

payment received every year

Effective Interest Rate

rate established when bonds are issued that maintains a constant value for interest expense as a percentage of bond carrying value in each interest period

Balloon Mortgage

requires periodic payments for a specified time and a lump-sum payment of outstanding balance at maturity. Minimum term under HOEPA is 5 years.

Arbitration

settling a dispute by agreeing to accept the decision of an impartial outsider

Balance Sheet

statement of financial position disclosing the value of assets, liabilities and equity

Usury

the practice of lending money at exorbitant rates

Housing Code

the rules established by a township, city, or state to establish minimum standards for an apartment

Forfeiture

the seizure of personal property by the state as a civil or criminal penalty

Rescission

the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made

Net Worth

total assets - total liabilities