National and UST Mortgage Practice Exam 5

An originator's unique identifier must be shown on all but which of the following documents? A. Business signage B. Mortgage loan applications C. Advertisements D. Business cards

A. Business signage The NMLS (Nationwide Multistate Licensing System and Registry) does not require an individual's unique identifier to be placed on company materials, including business signage.

If a borrower selects a mortgage loan covered by HOEPA, he or she: A. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver B. Cannot waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan C. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan with the creditor's approval D. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after signing a preprinted lender-provided form which states that the credit is needed to meet a bona fide personal emergency

A. Can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver If a borrower selects a mortgage loan covered by HOEPA (Home Ownership and Equity Protection Act), he/she can waive the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan after submitting a written request that is signed by the parties entitled to the waiting period and which describes the emergency and consent to the waiver.

Qualifying ratios consist of which two separate calculations? A. Housing expense ratio and total debt ratio B. Loan-to-value ratio and qualifying income ratio C. Loan-to-value ratio and housing expense ratio D. Total debt ratio and qualifying income ratio

A. Housing expense ratio and total debt ratio Qualifying ratios consist of the housing expense ratio and the total debt ratio.

Underwriting guidelines for conforming loans are created by: A. Fannie Mae and Freddie Mac B. HUD C. FHA D. Freddie Mac and Ginnie Mae

A. Fannie Mae and Freddie Mac Conforming loans are subject to loan limits, down payment requirements, income requirements, debt-to-income ratios, and other underwriting guidelines established by Fannie Mae and Freddie Mac.

Jesse James was convicted of felony assault eight years ago. Billy Kidd was convicted of fraud 17 years ago. Both have made application to their state to be licensed as mortgage loan originators. What effect will their past records have on their license applications? A. Jesse may be granted a license; Billy will not B. Both Jesse and Billy will be denied a license because of their felony convictions C. Billy may be granted a license; Jesse will not D. Both Jesse and Billy may be granted a license

A. Jesse may be granted a license; Billy will not To have a license application approved, an applicant may not have been convicted of, or pled guilty, or nolo contendere to, a felony during the seven-year period preceding the date of the application, or at any time if the felony involved an act of fraud, dishonesty, a breach of trust, or money laundering. Even though Billy's conviction occurred long before the seven-year window, it was a conviction for fraud, making him ineligible for a license.

In order to comply with the advertising rules found in Regulation Z, creditors that advertise rates and payments for mortgages must: A. Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments B. Use model forms C. Follow the rules for formatting advertisements that the CFPB prescribes D. Disclose all of the terms for the mortgage loan that the creditor is advertising

A. Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments In order to comply with the advertising rules found in Regulation Z, creditors that advertise rates and payments for mortgages must make the required disclosures with equal prominence and in close proximity to the advertised rates or payments.

This is defined as the intentional perversion of the truth for the purpose of inducing another person or entity to rely on it in order to part with something or surrender a legal right. A. Mortgage fraud B. Industry insider fraud C. Identity theft D. Predatory lending

A. Mortgage fraud Mortgage fraud is defined as the intentional perversion of the truth for the purpose of inducing another person or entity to rely on it in order to part with something or surrender a legal right.

The Phillips family has a joint gross monthly income of $11,300. The $499 lease payment for their car expires in four months. A student loan that has been deferred will kick in at the end of the year, and payments will be $210 monthly. Joe Phillips pays child support for his children with his first wife in the amount of $2,200 per month, but $600 of that will drop off in four months when his oldest son turns 18. They are buying a new home with a loan that carries a $2,700 a month payment. What is their housing ratio? A. 29% B. 24% C. 38% D. 41%

B. 24% Housing ratio is only concerning the ratio between housing expenses and gross monthly income. In this case, their housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%.

Which of the following prefixes indicates the purchase of flood insurance is mandatory? A. A and D B. A and V C. V and D D. B, C, and D

B. A and V The "A" and the "V" prefixes indicate the zones in which flood insurance is mandatory. In zone "D", flood insurance is available if a homeowner chooses it, but no other zones require flood insurance.

Nontraditional credit includes all of the following, except: A. Payments to a landlord B. Car loans C. Electric bills D. Telephone bills

B. Car loans Nontraditional credit includes payments for things not traditionally tracked by or reported to the credit bureaus. This includes things like rent and utility bills.

Underwriting of non-qualified mortgages must compute periodic payments that: A. Include consideration of periodic rate caps B. Do not take periodic rate caps into consideration C. Do not take lifetime rate caps into consideration D. Include consideration of the value of the dwelling as a borrower asset

B. Do not take periodic rate caps into consideration Underwriting of non-qualified mortgage must compute periodic payments that do not take periodic rate caps into consideration.

The first step in the closing process is: A. Rescission B. Funding C. Application D. Steering

B. Funding The first step in the closing process is funding. This occurs when the lender wires funds to the title company or closing attorney. Once the closing has occurred, the title company is authorized to release funds to the parties (disbursement). Depending on state law and the type of transaction, disbursement could occur at closing or several days later.

Before accepting a loan that is a high-cost mortgage, borrowers must complete counseling with a counselor approved by: A. CFPB B. HUD C. FTC D. HOEPA

B. HUD Before accepting a loan that is a high-cost mortgage, borrowers must complete counseling with a counselor approved by HUD (U.S. Department of Housing and Urban Development).

The Telemarketing Sales Rule prohibits calls: A. Made to a customer after 8:00 a.m. or before 9:00 p.m. B. Made to consumers who have specifically asked a mortgage professional not to contact them B. To consumers not listed on the Do-Not-Call Registry C. To customers who established a business relationship within the last 12 months

B. Made to consumers who have specifically asked a mortgage professional not to contact them The Telemarketing Sales Rule prohibits calls made to consumers before 8:00am or after 9:00pm. Also, mortgage professionals may not make calls to consumers listed on the Do-Not-Call List or if an established business relationship is over 18 months old. Finally, mortgage professionals must repsect a consumer's specific request to be removed from a contact list.

Second appraisal requirements for higher-priced mortgage loans were put in place in an attempt to curb the practice of: A. Reverse redlining B. Property flipping C. Equity stripping D. Steering

B. Property flipping Second appraisal requirements were put in place under the HPML (Higher-Priced Mortgage Loan) Rule for certain higher-priced mortgage loan transactions in an attempt to curb the practice of property flipping.

Servicers are required to respond to a _____ from a borrower within five days. A. Loan application B. Qualified written request C. Request for servicing transfer D. Notice of rescission

B. Qualified written request Servicers are required to respond to a qualified written request from a borrower within five days.

The Nationwide Multistate Licensing System and Registry was developed and is maintained by: A. The FHFA and CFPB B. The CSBS and AARMR C. The CFPB and CSBS D. The AARMR and CFPB

B. The CSBS and AARMR The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) are two organizations responsible for creating and implementing the NMLS (Nationwide Multistate Licensing System and Registry).

For ARMS characterized by figures like "3/1," "5/1," "7/1," or "10/1," the first number represents _____, and the second number represents _____. A. The start rate; the periodic cap B. The locked term; the adjustment frequency C. The initial cap; the periodic cap D. The locked term; the adjustment cap

B. The locked term; the adjustment frequency ARMs (Adjustable Rate Mortgage) are often names for their features. In other words, a 3/1 ARM is locked for three years, and then adjusts annually each year thereafter. The first number represents the locked term and the second number represents the adjustment frequency.

Which of the following entities or individuals is responsible for determining financial responsibility requirements for state-licensed originators, lenders, or brokers? A. The NMLS B. The state regulator C. The governor D. The legislature

B. The state regulator The NMLS (Nationwide Multistate Licensing System and Registry) consolidates and makes licensing records available to state regulators to use for licensing decisions.

Sam Slezee was found to be providing mortgage loan origination services without a state license. A temporary order to cease and desist engaging in such activities was issued against Sam. While under the order, Sam completed three transactions. What is the maximum fine a state licensing agency may impose on him? A. $25,000 B. $50,000 C. $75,000 D. $100,000

C. $75,000 The maximum amount of penalty for each act or omission is $25,000. Each violation or failure to comply with any directive or order of the state licensing authority is a separate and distinct violation.

Mortgage insurance premiums are required for: A. All conventional loans with an LTV greater than 80% B. The first five years of the loan term as long as equity position is less than 20% C. All FHA loans D. All FHA loans until 20% equity position is attained

C. All FHA loans Mortgage insurance premium are required for all FHA loans.

Which of the following best describes the types of conventional mortgages that are available? A. Forward mortgages and reverse mortgages B. Prime loans and subprime loans C. Conforming loans and nonconforming loans D. Traditional mortgages and nontraditional mortgages

C. Conforming loans and nonconforming loans There are two types of conventional mortgage loans: conforming loans, which meet GSE (Government-Sponsored Enterprise) loan limits and standards (for example, "jumbo" loans).

According to the federal guidances on nontraditional lending, all of the following loan programs are considered to be nontraditional, except: A. Interest-only B. Payment-option ARM C. Hybrid ARM D. Stated income

C. Hybrid ARM The term "nontraditional" primarily refers to payment structure or qualification documentation. In other words, traditional loans will include a payment structure that regularly decreases the principal balance and will require a borrower to prove that he/she can pay off the loan to qualify.

When a creditor revises a Loan Estimate, it must deliver the revised disclosure to the loan applicant: A. No later than seven business days prior to consummation B. On the same date that it delivers a Closing Disclosure C. No later than four business days prior to consummation D. At the same time that the revisions are made

C. No later than four business days prior to consummation When a creditor revises a Loan Estimate, it must deliver the revised disclosure to the applicant no later than four business days prior to consummation.

The implementing regulations for the Home Mortgage Disclosure Act are known as: A. Regulation X B. HDA C. Regulation C D. Section 32

C. Regulation C The regulations promulgated under HMDA (Home Mortgage Disclosure Act) are known as Regulation C.

A balloon mortgage that includes a conditional refinance provision allows the borrower to: A. Request that the loan be refinanced and converted to a 30-year fixed-rate loan B. Rescind the transaction if the loan becomes too expensive C. Request modification of the terms of the loan when it reaches maturity D. Refinance the loan if he or she is in default

C. Request modification of the terms of the loan when it reaches maturity A balloon mortgage that includes a conditional refinance provision allows the borrower to request modification of the terms of the loan when it reach maturity.

A property is valued at $295,000. The property is subject to a first mortgage and a second mortgage, with a CLTV of 77%. The current balance on the second mortgage is $29,500. What is the approximate amount of the first mortgage? A. $256,650 B. $227,150 C. $204,435 D. $197,650

D. $197,650 The approximate amount of the first mortgage is $197,650. This can be calculated using the information given here, according to the following formula: [first mortgage + second mortgage]/ appraised value = CLTV (77%); the amount of the first mortgage (x) must be determined. Using this formula would result in the following equation: [x + $29,500]/ $295,000 = 77. First, multiply $295,000 by .77 ($227,150). This figure is equal to the first mortgage (x) plus the second mortgage ($29,500). Subtract $29,500 from $227,150 to find the amount of the first mortgage ($197,650).

The Peterson family is buying a new home and their new P&I payment totals $1,800 per month. Their annual tax bill is $3,000, and their annual homeowner's insurance premium is $720. The family's annual income totals $98,520. What is their housing (i.e., front-end) ratio? A. 22% B. 32% C. 36% D. 26%

D. 26% The Petersons' housing ratio - also known as the front-end ration - is 26%. This is calculated by comparing monthly housing expenses, such as flood insurance, homeowners insurance, and other mnthly housing costs, to gross monthly income. In this case, add together the $1,800 mortgage payment with the @250-per-month tax payment and $60-per-month homeowner's insurance payment. Divide that total ($2,110) by the total monthly income of $8,210 (annual income of $98,520, divided by 12), equaling 26%.

Conforming loan guidelines generally include DTI ratios of: A. 26% / 38% B. 31% / 43% C. 28% / 41% D. 28% / 36%

D. 28% / 36% The standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).

A lender is trying to lure customers with advertisements for "Minimum Monthly Payments to Meet Any Budget!" This advertisement must also include an equally prominent statement in close proximity which alerts consumers that: A. The loan may not be paid off by the end of the loan term B. The loan is only advised for borrowers with a short-term interest in the dwelling used to secure the loan C. The borrower should seek homeownership counseling prior to applying for the loan D. A balloon payment may result from minimum periodic payments

D. A balloon payment may result from minimum periodic payments The advertisement must include a statement that a balloon payment may result from minimum periodic payments.

The FCRA places all of the following limitations on the inclusion of negative information in credit reports, except: A. A limit on bankruptcies that are more than ten years old B. A limit on accounts placed for collection that are more than seven years old C. A limit on tax liens that are more than seven years old D. A limit on bankruptcies that are more than seven years old

D. A limit on bankruptcies that are more than seven years old Most negative information that is more than seven years old is not included in a credit report; however, bankruptcies may be reported for up to ten years.

Annual mortgage insurance for USDA/RHS guaranteed loans are: A. More expensive than those for private mortgage insurance B. Equal to those charged for mortgage insurance for FHA loans C. More expensive than the premiums for FHA loans D. Less expensive than those charged for FHA loans and for private mortgage insurance

D. Less expensive than those charged for FHA loans and for private mortgage insurance USDA (Rural Development Guaranteed Housing Loan Program)/RHS (Department of Agriculture Rural Housing Service) guaranteed loans require payment of upfront and annual mortgage insurance, but premiums are less than those for other types of mortgage insurance.

The Qualified Mortgage Rule applies to which of the following? A. Bridge loans of 12 months or less B. Open-end home equity loans C. Reverse mortgages D. Loans secured by non-owner-occupied homes

D. Loans secured by non-owner-occupied homes The Qualified Mortgage Rule applies to a broad range of loans including those secured by second homes or investment properties, but does not apply to open-end home equity loans, bridge loans of 12 months or less, reverse mortgages, or mortgages for timeshares.

"MBS" stands for: A. Mortgage borrowing standards B. Mortgage balance subordination C. Mortgage beneficiary securitization D. Mortgage-backed securities

D. Mortgage-backed securities In the secondary mortgage market, mortgage-backed securities are an investment vehicle in which expected payment streams from mortgage loans make up the profit paid out to investors. MBSs are a product of the secondary market.

The GLB Act gives loan applicants the ability to opt out of the sharing of their nonpublic personal information with: A. Third-party settlement service providers B. Affiliates of the creditor C. Affiliates and nonaffiliates of the creditor D. Nonaffiliates of the creditor

D. Nonaffiliates of the creditor Loan applicants may opt out of the sharing of their nonpublic personal information with nonaffiliates.

Annual PMI is determined by multiplying: A. The loan amount and the interest rate B. The mortgage insurance rate and the number of months in a year C. The interest rate and the number of months in a year D. The loan amount and the mortgage insurance rate

D. The loan amount and the mortgage insurance rate Annual PMI (Private Mortgage Insurance) is determined by multiplying the loan amount and the mortgage insurance rate.

An underwriter would expect to see _____ in order to document the income of a commissioned borrower. A. Two years' tax returns if the borrower's commissions represent 20% of his/her income B. 1099s from the previous year C. Profit and loss statement and two years' tax returns D. Two years' tax returns and all schedules if the commission income is more than 25% of income

D. Two years' tax returns and all schedules if the commission income is more than 25% of income Commissioned borrowers must show two year's tax returns if their commission income is more than 25% of their total income.

Which of the following is true with regard to VA loans and qualified mortgages? A. VA loans are not qualified mortgages B. VA loans are temporary qualified mortgages C. VA loans have a rebuttable presumption of compliance under the QM Rule D. VA loans are safe harbor qualified mortgages

D. VA loans are safe harbor qualified mortgages VA-guaranteed loans that are made in compliance with VA standards are safe harbor qualified mortgages.