Practice Exam Questions that I missed/not as confident about
What is the minimum down payment for a USDA loan? A) $0 B) 3.5% C) 5% D) 10%
A) $0
The Notice of Right to Cancel PMI is required by the: A) Homeowners Protection Act B) Equal Credit Opportunity Act C) Truth-in-Lending Act D) Real Estate Settlement Procedures Act
A) Homeowners Protection Act
Loans are purchased as investments in the: A) Secondary mortgage market B) Primary mortgage market C) Reverse mortgage market D) Subprime mortgage market
A) Secondary mortgage market
The term "20 basis points" expressed as a percentage is:
0.20%
Section 32 of Regulation Z (TILA) deals with added provisions and protections that are required if a loan meets or exceeds any one (or more) of three thresholds: Loans meeting or exceeding any of these thresholds are subject to the provisions required by the Home Ownership and Equity Protection Act (HOEPA, which is Section 32 of TILA).
1) a points and fees threshold 2) an APR threshold 3) a prepayment penalty threshold.
the lender has how many days to send the Satisfaction of Mortgage letter to the borrower once the loan balance is paid?
60 days
Credit reports are good for how many days after they are pulled for qualifying purposes?
120 days
What is the maximum allowable amount of VA seller concessions?
4%
Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following? A) Regulation C B) Regulation Z C) Regulation D D) Regulation B
D) Regulation B
Describes HOEPA's prepayment penalty threshold for high-cost mortgages
A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid
Kelsey and Matt have just signed a contract to purchase a home for $360,000. Their mortgage loan is an HPML. Their creditor has discovered that the seller purchased the home four months earlier. The creditor will require a second appraisal if the seller's purchase price was: A) $300,000 B) $310,000 C) $320,000 D) $330,000
A) $300,000 For transactions involving an HPML (higher-priced mortgage loan), a second appraisal is required if the seller acquired the home 91 to 180 days prior to the consumer's agreement to purchase it, and the price at which the consumer agreed to purchase the home is 20% more than the price paid by the seller. 20% of $300,000 is $60,000. $300,000 + $60,000 = $360,000.
How much hazard insurance does FNMA require on a property? A) 100% of the lesser of the loan amount or the cost to restore the improvements to the property B) 100% of the appraised value C) 80% of the value of the property D) 100% of the replacement cost
A) 100% of the lesser of the loan amount or the cost to restore the improvements to the property
Which of the following forms is the appraisal form used for investment properties? A) 1007 B) 1073 C) 1004 D) 1005
A) 1007 The 1004 is the Uniform Residential Appraisal Report, or URAR. There are variations for certain properties; the 1007 is used for single-family properties that are investment properties.
When must a borrower receive notification of a servicing transfer? A) 15 days prior to the effective date of the transfer B) Ten days prior to the effective date of the transfer C) Within 30 days of the effective date of the transfer D) With the borrower's next payment coupon
A) 15 days prior to the effective date of the transfer
For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is more or less than: A) 15 years B) 20 years C) 25 years D) 30 years
A) 15 years
If a first-time homebuyer wishes to use his/her VA loan privilege for the first time and is not planning to make a down payment, what is the amount of his/her funding fee? A) 2.15% B) 3.30% C) 1.50% D) 1.25%
A) 2.15%
The general acceptable front-end housing ratio for a USDA loan is: A) 29% B) 28% C) 31% D) Front-end ratios are not considered for USDA loans
A) 29%
Fannie Mae does not require: A) 6 months of bank statements B) Verificable funds C) 2 years of addresses D) Stable 2 year work history
A) 6 months of bank statements
Seller concessions for conforming loans are limited to _____ and _____ on LTVs of over 90% and 90% or less, respectively. A) 6%; 3% B) 3%; 6% C) 10%; 20% D) 3.5%; 10%
A) 6%; 3%
FACTA requires a Fraud Alert to be kept in a consumer's file for what period of time? A) 90 days B) Seven years C) 12 months D) Until removed by the borrower
A) 90 days FACTA requires a Fraud Alert to be kept in a consumer's file for a period of 90 days. An Extended Fraud Alert, meaning there is an actual identity theft report submitted, is required for seven years.
In what scenario would a sales comparison approach be appropriate? A) A condo complex for residents aged 55 and over B) A bio-dome built in the middle of a residential neighborhood C) A commercial office building in an area zoned commercially D) A complex of office units in a business park near a residential neighborhood
A) A condo complex for residents aged 55 and over The sales comparison approach to appraisals is most commonly used for residential properties within an area that has recent sales data to analyze for comparison.
All of the following are examples of nontraditional mortgage products, as defined by the S.A.F.E. Act, except: A) A fixed-rate loan with a term of 30 years B) An interest-only loan with a term of 40 years C) An adjustable-rate mortgage with a term of 30 years D) A fixed-rate loan with a term of 15 years
A) A fixed-rate loan with a term of 30 years The S.A.F.E. Act defines a "nontraditional mortgage product" as any loan other than a 30-year, fixed-rate loan.
The promissory note contains all of the following, except: A) A legal description of the property B) A provision requiring notices be done in writing C) The loan amount D) The loan terms
A) A legal description of the property The promissory note contains the borrower's name, loan amount, interest rate, loan terms, and a provision requiring notices be done in writing. It does not contain a legal description of the property.
A balloon loan is defined as: A) A loan that has a specific amortization period but matures prior to the time it fully amortizes B) A loan that has a specific amortization period but is due at a specific time prior to maturity C) A loan whose final payment is smaller than the previous periodic payments D) A loan which matures on a date after amortization
A) A loan that has a specific amortization period but matures prior to the time it fully amortizes
Concerning ARMs, margin is best defined as: A) A number, expressed as a percentage, that represents a lender's operating costs and profit margin B) The amount of compensation earned by a mortgage professional for originating an ARM C) The range of flexibility an interest rate has between caps on traditional ARMs D) The maximum - up or down - that an interest rate can ever adjust on an ARM
A) A number, expressed as a percentage, that represents a lender's operating costs and profit margin
Under ECOA, a broker is defined as: A) A person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made B) Any person who sells mortgage loans in the secondary market C) Any person who regularly extends, renews, or continues credit D) A natural person or entity who regularly extends closed-end or open-end credit
A) A person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made
In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)? A) A portion of it may be applied to the UFMIP of another FHA-insured mortgage B) It is refundable C) It is pertinent to only a small minority of FHA loans D) It takes the place of the annual mortgage insurance premium
A) A portion of it may be applied to the UFMIP of another FHA-insured mortgage
What type of lien takes priority? A) A tax lien B) The first mortgage C) The second mortgage D) A mechanic's lien
A) A tax lien A tax lien takes priority over all other liens, regardless of chronological order.
What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage? A) A tax lien B) A utility easement C) A second mortgage D) A judgment that was secured by a property lien, but recently paid in full
A) A tax lien Creditors protect their investment in a mortgage by placing a lien on the home used as security. A title search shows whether other liens are in place that will have priority over the creditor's lien. Tax liens can take priority over mortgage liens and are, therefore, likely to prevent the completion of a transaction. When a refinance pays off an existing first mortgage, the second mortgage will have priority, but creditors can use subordination agreements to ensure that the new mortgage has priority over the existing second mortgage.
The right to rescind a loan applies to which one of the following transactions? A) A transaction for a home equity line of credit secured by a principal residence B) A transaction involving a loan to purchase a principal residence C) A refinancing of credit with the same creditor that made the loan being refinanced D) A transaction for the refinance of a loan that is secured by a vacation home
A) A transaction for a home equity line of credit secured by a principal residence
An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is: A) A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees B) A violation of RESPA's prohibition against fee-splitting C) Permitted only as long as receipts are kept from the processor for five years D) A violation of ECOA
A) A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees
Revisions to a Loan Estimate are: A) Allowed when certain changed circumstances arise B) Always allowed C) Never allowed D) Allowed only when the interest rate was not locked and rates have changed
A) Allowed when certain changed circumstances arise
Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the: A) Annual percentage rate B) Broker fees and the amount charged by a third party C) Amount of the payment D) Length of the loan
A) Annual percentage rate A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at the consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct loan charges paid by the borrower that must be included in computing the annual percentage rate.
Which of the following correctly demonstrates how to calculate the periodic rate on a mortgage loan? A) Annual rate / number of payments in a year = periodic rate B) Annual rate × number of payments in a year = periodic rate C) Loan balance / annual rate = periodic rate D) Annual rate × monthly payment = periodic rate
A) Annual rate / number of payments in a year = periodic rate
Under RESPA, in order to provide the escrow analysis statement, a borrower's escrow account must be analyzed: A) Annually B) Monthly C) Quarterly D) Twice a year
A) Annually
What two main aspects of a loan application does an underwriter examine to determine if lender guidelines are being met? A) Applicant and collateral B) Applicant and credit C) Credit and income D) Credit and collateral
A) Applicant and collateral
A mortgage which is amortized for a longer period than the actual term of the loan can best be described as a: A) Balloon mortgage B) Hybrid ARM C) Graduated Payment Mortgage (GPM) D) Fixed period ARM
A) Balloon mortgage
A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage? A) Balloon mortgage B) Hybrid ARM C) Graduated Payment Mortgage (GPM) D) Fixed period ARM
A) Balloon mortgage
An independent contractor is required to: A) Become state-licensed as a loan originator B) Pay a registration fee to the NMLS to be included in the state fund C) Complete six additional hours of education annually D) Originate loans within the limitations of the requisite surety bond
A) Become state-licensed as a loan originator
Two brothers, Tom and Jim, purchase homes on the same block where they grew up. They knew the sellers, having grown up on the block, and both obtain $200,000 loans to purchase their new homes. Jim chose a "traditional" loan - 30-year fixed, while Tom would rather pay his loan off more quickly. He decided on a 15-year mortgage. Which of the two will pay more principal? A) Both Jim and Tom will pay the same amount of principal B) Jim C) Tom D) It depends on their rates
A) Both Jim and Tom will pay the same amount of principal Both brothers will pay the same amount in principal, though Jim will pay much more in interest over the longer term.
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
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
Which of the following is not an example of an FHA loan product? A) Conforming mortgage loan B) Cash-out refinance C) Home equity conversion mortgage D) Streamline refinance
A) Conforming mortgage loan
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
A borrower of a closed-end loan with a three-day right to rescind may exercise this right at any time until midnight on the third business day after: A) Consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later B) Consummation or delivery of the required rescission notice, whichever is earlier C) Delivery of the notice of the right to rescind or delivery of all material truth-in-lending disclosures, whichever is later D) Delivery of the notice of the right to rescind or delivery of all material truth-in-lending disclosures, whichever is earlier
A) Consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later
An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a: A) Conversion option B) Conditional provision C) Conversion rider D) Conversion requirement
A) Conversion option
The borrower does NOT sign which document: A) Deed B) HUD-1/Loan Disclosure C) Mortgage D) Note
A) Deed
Which of the following documents conveys title to real property? A) Deed B) Mortgage C) Note D) Promissory note
A) Deed
The primary reason for adopting special appraisal requirements for HPMLs was to: A) Discourage the use of inflated appraisals to flip properties B) Discourage subprime lending C) Ensure that appraisals include a physical inspection of the interior and exterior of a home securing a loan D) Encourage the use of certified and licensed appraisers
A) Discourage the use of inflated appraisals to flip properties
The purpose of the Truth-in-Lending Act is to do which of the following? A) Ensure meaningful disclosure of credit terms to consumers B) Prevent lenders from charging interest rates that are unfair to consumers C) Protect consumers from abusively high interest rates D) Require consumers be provided with a good faith estimate of closing costs at the time of loan application
A) Ensure meaningful disclosure of credit terms to consumers
Which of the following is not involved in the bundling of mortgages for sale in the secondary market? A) FHA B) FNMA C) Private-label investors D) FHLMC
A) FHA The secondary market includes GSEs, such as Fannie Mae and Freddie Mac (FNMA and FHLMC), as well as private financial institutions, also known as private-label investors.
A Mortgage Insurance Premium is required on: A) FHA loans B) VA loans C) Jumbo loans D) Conventional loans
A) FHA loans
Which of the following loan types is exempt from the HPA? A) FHA loans B) Fixed-rate loans C) Conventional loans D) Non-conforming loans
A) FHA loans The Homeowners Protection Act (HPA) is used to facilitate the cancellation of private mortgage insurance, or PMI. FHA loans require upfront and annual mortgage insurance premiums; they do not rely on private mortgage insurance to protect their investment.
Which form of fraud is most prevalent involving borrowers in the mortgage process? A) Falsified applications B) Foreclosure rescue scams C) Identity theft D) Straw sellers
A) Falsified applications
Which of the following is a trigger term for advertisements for both open-end and closed-end mortgage loans? A) Finance charge B) Amount of down payment C) Period of repayment D) Number of payments
A) Finance charge
All of the following would be common activities in fraud for property, except: A) Flipping B) Asset fraud C) Income and employment fraud D) Silent second
A) Flipping Flipping is usually associated with predatory lending, rather than property fraud.
On an ARM loan, which of the following will not be found on the note? A) Fully-indexed rate after one year B) Margin C) Adjustment parameters D) Identification of index
A) Fully-indexed rate after one year
A lender's title insurance policy would insure against all of the following, except: A) Future tax liens B) Mechanic's liens C) Judgments D) Undisclosed encumbrances
A) Future tax liens Title insurance protects the lender against losses caused by problems that arose prior to the purchase of the property, such as mechanic's liens, judgments, and covenants and restrictions. It would not cover future tax liens.
A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): A) HECM B) HELOC C) Pay-option mortgage D) Equity mortgage
A) HECM
Which of the following is least likely to be held in an escrow or reserve account? A) HOA fees B) Mortgage insurance premium C) Hazard insurance reserve D) Property tax reserve
A) HOA fees
The Fair Housing Act prohibits discrimination based on: A) Handicap, familial status, sex, national origin, religion, color, race B) Race, color, religion, sex, age C) Race, sex, age, color, religion, handicap D) Race, sex, color, religion, age, familial status, handicap
A) Handicap, familial status, sex, national origin, religion, color, race
According to TILA, which of the following fees is EXCLUDED from the calculation of the annual percentage rate? A) Hazard Insurance B) Wire transfer C) Prepaid interest D) Mortgage insurance premiums
A) Hazard insurance
Homeownership counseling is required in transactions for all of the following, except: A) Higher-priced mortgage loan B) High-cost mortgage C) Reverse mortgage D) Negative amortization loan if the loan applicant is a first-time borrower
A) Higher-priced mortgage loan
Equity-based lending is a common predatory lending practice, taking advantage of unsuspecting borrowers by using abusive lending terms for increased profits. Often, borrowers may lose money, home equity, or even their homes. Which federal law was the first to expressly prohibit equity-based lending? A) Home Ownership and Equity Protection Act B) Homeowners Protection Act C) Fair Credit Reporting Act D) Home Mortgage Disclosure Act
A) Home Ownership and Equity Protection Act
Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower's repayment ability? A) Home Ownership and Equity Protection Act B) Real Estate Settlement Procedures Act C) Fair and Accurate Credit Transactions Act D) Equal Credit Opportunity Act
A) Home Ownership and Equity Protection Act
The penal sum of a loan originator's required surety bond must be maintained: A) In an amount that reflects the dollar amount of loans originated B) In a flat-rate amount determined by each state C) In an amount that reflects the number of loans originated D) In an amount that reflects the originator's years of professional experience
A) In an amount that reflects the dollar amount of loans originated
For what length of time can an unpaid tax lien remain on a credit report? A) Indefinitely B) No more than ten years C) No more than seven years D) No longer than three years after it is paid
A) Indefinitely
Which of the following is a limit on the amount that the interest rate can increase or decrease at the first adjustment date for an ARM? A) Initial rate cap B) Periodic rate cap C) Lifetime rate cap D) Payment cap
A) Initial rate cap
A state licensing agency granted Crook Cromwell a license to act as a mortgage loan originator. Subsequent to the granting of the license, the agency received a supplemental criminal history report which indicated that Crook had been convicted of a money laundering charge in another state. What action can the state licensing agency take? A) Issue a temporary cease and desist order B) Refuse to renew Crook's license C) Require a hearing with Crook before any other action can be taken D) Condition issuance of the license against future bad acts
A) Issue a temporary cease and desist order
Overtime income may be considered for an hourly employee if: A) It has been consistent for at least two years and is likely to continue B) It is being paid in the same paycheck C) The earnings have been reported as wages D) It has been consistent for less than two years and is likely to continue
A) It has been consistent for at least two years and is likely to continue
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.
An underwriter might look for all of the following during the review of an appraisal report, except: A) Location of the mailbox in relation to the house B) Visible signs of health or safety hazards C) Photos of the house, including checking for the address D) Effective age of the property
A) Location of the mailbox in relation to the house
Which of the following increases cap rate? A) Lower purchase price B) Increase purchase price C) Decrease cash flow D) Increase interest rate
A) Lower purchase price
When providing services related to a residential mortgage transaction, appraisers have responsibility for all but which of the following? A) Maintaining direct contact with the loan originator that ordered the appraisal B) Refusing to accept assignments in which compensation for services depends on delivering a predetermined value for the property securing the loan C) Performing assignments with impartiality and objectivity D) Complying with Uniform Standards of Professional Appraisal Practice
A) Maintaining direct contact with the loan originator that ordered the appraisal
Mortgage loan originator Janine Jetson has had a complaint filed against her. Upon receiving a request from her state licensing agency, Janine must: A) Make her books and records available to the agency B) Respond to the complaint C) Post an additional bond D) Request a hearing
A) Make her books and records available to the agency
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
All of the following may affect the amount of a VA funding fee, except: A) Marital status B) First-time use of the VA eligibility C) 10% down payment D) Disability
A) Marital status
All of the following are true of a loan origination fee , except: A) May not legally vary according to the type of loan B) May be charged by a mortgage broker or a lender C) Paid at closing D) Covers the administrative costs of making the mortgage
A) May not legally vary according to the type of loan A loan origination fee is a charge by a mortgage broker or lender to cover the administrative costs of making the mortgage. It is paid at closing and varies with the lender and type of loan.
Conrad began his pre-licensing education in one state and ended up moving to another state prior to actually submitting an application for a mortgage loan originator license. What happens to the courses he has completed? A) NMLS-approved courses are accepted towards credit in any state B) He must retake them under the requirements of the state in which he currently resides C) He can petition the state licensing agency for permission to submit those courses towards the requirement D) The courses may or may not be accepted towards pre-licensing credit, depending on the requirements of the new state
A) NMLS-approved courses are accepted towards credit in any state
The law requires that first-time borrowers complete counseling with a HUD-approved counselor before accepting a loan that features: A) Negative amortization B) A fixed interest rate C) An adjustable interest rate D) A 15-year term
A) Negative amortization
Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? A) No limit B) One month C) Three months D) Six months
A) No limit
A homeowner would like to sell his home and offer seller financing. The homeowner has an FHA-assumable loan which contains a due-on-sale clause. Is this allowed under the terms of the loan? A) No, because the loan is assumable B) Yes, because the loan is assumable C) Yes, because the loan is an FHA loan D) No, because seller financing is illegal
A) No, because the loan is assumable
Which of the following is not among the initial disclosures that must currently be provided to a mortgage loan applicant? A) Notice of Right to Cancel B) Mortgage Servicing Disclosure C) Loan Estimate D) Special Information Booklet
A) Notice of Right to Cancel The Notice of Right to Cancel is provided at closing.
The Gramm-Leach-Bliley Act requires that a consumer be given an Initial Privacy Notice: A) Only if nonpublic personal information is intended to be shared with nonaffiliated third parties B) Within three days of application C) Within 30 days of application D) After information has been shared with an affiliated or nonaffiliated party
A) Only if nonpublic personal information is intended to be shared with nonaffiliated third parties
Which of the following is true? A) Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule B) Open-end credit plans, timeshare plans, and closed-end consumer credit loans are exempt from the ATR Rule C) Open-end credit plans are covered by the ATR Rule D) Reverse mortgage loans are covered by the ATR Rule
A) Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule Open-end credit plans, timeshare plans, and reverse mortgage loans are excluded from the ATR Rule. The ATR Rule applies to almost all closed-end consumer credit transactions secured by a dwelling, including attached real property. The ATR/QM rule requires you to make a reasonable, good-faith determination that a member has the ability to repay a covered mortgage loan before or when you consummate the loan.
A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct? A) Payment of the fee is illegal B) The fee is legal as long as the brokers have a pre-existing agreement in place C) The fee is legal as long as the brokers do not have a pre-existing agreement in place for payment of referral fees D) The fee is illegal unless the brokers provide a disclosure to the client
A) Payment of the fee is illegal
Which of the following statements regarding the calculation of finance charges is not true? A) Premiums for optional insurance products are always included B) Premiums for optional insurance products are not included if the creditor discloses that coverage is optional and does not extend through the full loan term C) Reasonable charges for title insurance that do not result in direct or indirect compensation for the creditor are not included D) Charges paid to a title insurer that is not affiliated with the creditor are not included
A) Premiums for optional insurance products are always included
The economic concept which states that a knowledgeable buyer will pay no more for one property than they would pay for an equally desirable comparable property is: A) Principle of Substitution B) Principle of Highest and Best Use C) Principle of Market Use D) Principle of Intelligence Purchases
A) Principle of Substitution
Once a state licensing agency has provided private or confidential information to the NMLS, what is the status of the information? A) Privacy and confidentiality requirements continue to apply B) It becomes a matter of public record C) It remains confidential only if the state requests it D) States do not provide private or confidential information to the NMLS
A) Privacy and confidentiality requirements continue to apply
A scenario in which a person forces the sale of a home at a much lower value than its true worth, then resells the home at its true value, is known as: A) Property flopping B) Property flipping C) Short sale D) Air loan
A) Property flopping
Ginger is a mortgage loan originator. She discussed with her clients, the Salts, the requirement to carry property insurance on their home that was securing the mortgage loan Ginger was originating for them. Her recommendation was that they insure the property for an amount exceeding the replacement value of the improvements on the property. What excess amount is Ginger permitted to recommend? A) Recommending insurance in excess of the replacement value of the improvements is prohibited B) 110% of replacement value C) 120% of replacement value D) 150% of replacement value
A) Recommending insurance in excess of the replacement value of the improvements is prohibited
Which of the following loans requires the collection of HMDA data? A) Refinance of a second home B) Financing of a recreational vehicle C) Student loan D) SBA loan
A) Refinance of a second home HMDA data is required for purchase loans, refinance loans, and home improvement loans, as long as the loans are secured by a dwelling.
The licensing requirements of the S.A.F.E. Act require all but which of the following? A) Registered MLOs must complete 20 hours of pre-licensing education B) Registration with the NMLS C) Successfully pass federal and applicable state components of a test with at least a 75% score D) Use of a unique identifier on all advertising materials
A) Registered MLOs must complete 20 hours of pre-licensing education Pre-licensing education requirements pertain to state-licensed loan originators, not to registered loan originators, who are not subject to licensing requirements.
The implementing regulations for the MAP Rule are known as: A) Regulation N B) Regulation Z C) Regulation C D) Regulation X
A) Regulation N
Advertising an attractive interest rate that a mortgage professional is not at liberty to offer is a major ethical offense and a violation of: A) Regulation Z B) The Equal Credit Opportunity Act C) Regulation X D) The Fair Credit Reporting Act
A) Regulation Z
Under the S.A.F.E. Act, a mortgage loan originator must submit to the NMLS: A) Reports of condition B) Financial reports C) Business organization documentation D) Trust account information
A) Reports of condition
The amount of income left over after debt is subtracted is called: A) Residual income B) Debt ratio C) Discretionary spending D) Debt inverse
A) Residual income
The practice of intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is known as: A) Reverse redlining B) Steering C) Misappropriation D) Redlining
A) Reverse redlining
During a routine examination, a state licensing agency discovered that mortgage loan originator Karen Villmer routinely overcharged borrowers for third-party services and pocketed the difference for herself. In terms of an enforcement action, the state licensing agency may do all of the following, except: A) Seize Karen's bank accounts B) Suspend or revoke Karen's license C) Require restitution be paid to the borrowers D) Impose a civil penalty
A) Seize Karen's bank accounts In order to ensure effective supervision and enforcement of the S.A.F.E. Act, the state licensing agency may deny, suspend, revoke, condition, or decline to renew a license for a violation of the state's S.A.F.E. Act, rules and regulations issued under the Act or any order or directive entered under the Act; order restitution be paid by persons who have violated the state's S.A.F.E. Act; and/or impose a civil penalty on a mortgage loan originator.
Which of the following would not be considered a settlement service? A) Servicing B) Escrow services C) Origination services D) Appraisal services
A) Servicing Settlement services include a variety of services related to the origination, processing, or funding of a loan, including, among others, rendering credit reports and appraisals, and conducting settlement by a settlement agent (e.g., the originating lender, an attorney, or a licensed escrow agent) and any related services. They do not include loan servicing.
When the mortgagor and mortgagee title insurance policies are issued at the same time, this is known as: A) Simultaneous issue B) Concurrent issue C) Subsequent issue D) Dual issue
A) Simultaneous issue
A type of reverse mortgage offered to low-income borrowers for a designated purpose, such as to pay taxes or to complete a home repair, is known as a: A) Single purpose reverse mortgage B) Home equity conversion mortgage C) Proprietary mortgage D) Designated use reverse mortgage
A) Single purpose reverse mortgage
A due-on-sale clause requires: A) That the loan be paid off if the property is sold B) That all moneys be transferred at closing C) That consummation take place within 30 days of the date on which the borrower receives the Loan Estimate D) That the seller address any issues arising from the home inspection prior to closing
A) That the loan be paid off if the property is sold
This federal law was enacted with the intent to make it easier to prosecute mortgage fraud. A) The Fraud Enforcement and Recovery Act B) The Dodd-Frank Act C) The Consumer Financial Protection Act D) The Mortgage Acts and Practices Act
A) The Fraud Enforcement and Recovery Act
Which of the following does not appear in the Loan Estimate? A) The anticipated ARM rates for the first five years B) The loan term C) Whether the subject loan is assumable D) The property purchase price
A) The anticipated ARM rates for the first five years
The URLA is also known as: A) The application B) The appraisal C) The 1004 D) 4506-T
A) The application
A qualified mortgage may only include a balloon payment if all of the following are true, except: A) The consumer has specifically requested a balloon payment B) The loan has a term of at least five years C) The loan is made by a small creditor D) The loan has a fixed interest rate
A) The consumer has specifically requested a balloon payment
"Equity" is defined as: A) The difference between the fair market value of a property and the current balances of any liens B) The difference between the appraised value and the purchase price C) The relationship between the value of the house and a borrower's assets D) The balance of any liens divided by the proposed value of any new loan
A) The difference between the fair market value of a property and the current balances of any liens
The state in which Jim Jungle works requires a mortgage loan originator be covered by a surety bond. The bond must be maintained in an amount that reflects: A) The dollar value of loans Jim originates annually B) The number of loans originated by Jim annually C) The number of loans Jim's employer originates annually D) Jim's experience as a loan originator
A) The dollar value of loans Jim originates annually
A loss payee clause protects whom? A) The lender in the event the property is damaged by fire or other risks B) The borrower from losing all of his/her investment C) The lender in the event the borrower defaults on the loan D) The borrower by using mortgage insurance to offset interest rate adjustment
A) The lender in the event the property is damaged by fire or other risks The loss payee clause in a hazard insurance policy protects the lender's investment in the event that the collateral is damaged by fire or other risks. This means that if there is a fire or other loss, the lender is paid first to cover its investment.
If two appraisals are necessary in order to complete a transaction, these appraisals must meet all but which of the following requirements? A) The loan applicant must pay for both appraisals B) Each appraisal must be performed by a different appraiser C) Both appraisals must include a physical visit of the interior of the dwelling used to secure the loan D) Both appraisals must be performed by a certified or licensed appraiser
A) The loan applicant must pay for both appraisals DON'T MISREAD
All but which of the following prohibitions or requirements apply to HPMLs? A) The loan cannot include prepayment penalties after the first two years of the loan term B) The loan cannot include prepayment penalties C) The borrower must have an escrow account for taxes and insurance D) Consideration of repayment ability must include verification of income using documents such as IRS W-2 forms
A) The loan cannot include prepayment penalties after the first two years of the loan term HPMLs cannot include prepayment penalties at all, so it is false to say that the loan cannot include prepayment penalties after the first two years of the loan when they are prohibited altogether.
Renewal of a loan originator license is the responsibility of: A) The loan originator B) The loan originator and the sponsoring entity C) The sponsoring entity D) The sponsoring entity and the state regulator
A) The loan originator
Which of the following is true of a loan that allows for negative amortization? A) The payments are not sufficient enough to cover the interest due, so the principal balance increases B) The interest rate decreases because payments are not sufficient enough to pay the interest due C) The principal amount increases because the borrower's payments cover more than the interest due D) The payments are less than necessary to cover the interest due, so the principal does not increase
A) The payments are not sufficient enough to cover the interest due, so the principal balance increases
What document would an underwriter rely on for detailed information concerning the collateral for a mortgage loan? A) The property appraisal B) The borrower's asset statements C) The URLA D) The borrower's employment documentation
A) The property appraisal
Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule? A) The state in which the property is located B) The amortization term of the loan C) Whether or not the loan is an ARM or a fixed-rate loan D) The loan program
A) The state in which the property is located A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition.
An escrow account analysis has been completed on Mary Thompson's loan. It is discovered that there is a $40 overage in her account. How many days does the servicer have to return the money? A) There is no refund B) The servicer would not return the money; it would be applied toward the principal amount C) The servicer has 30 days from completion of the analysis to return the overage D) Ms. Thompson must be refunded within 90 days
A) There is no refund RESPA requires a refund if an escrow analysis uncovers an overage of greater than $50. Smaller overages are applied to the next year's escrow payments; anything above $50 is then required to be refunded within 30 days.
Loan originator compensation records must be retained for at least: A) Three years B) Two years C) Four years D) Five years
A) Three years
In regard to title insurance, a standard owner's policy covers: A) Undetected encumbrances B) Mechanic's liens C) Survey issues D) CC&R issues
A) Undetected encumbrances
For a mortgage licensee, paying compensation for referrals is: A) Unethical, and a violation of federal law B) Neither unethical nor illegal C) Unethical, but not illegal D) Unethical, and may be prohibited in some states, but not a violation of federal law
A) Unethical, and a violation of federal law
Which of the following statements offers the most accurate description of the effect of using a "trigger term" in an advertisement for a loan? A) Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence B) Use of a trigger term in an advertisement violates Regulation Z C) Use of a trigger term requires clear and conspicuous disclosure of HUD-approved housing counselors D) Use of a trigger term requires the disclosure of all the lending terms of the mortgage described in the advertisement
A) Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence
Which of the following is true concerning the refundability of a VA funding fee? A) VA funding fees are refundable if the borrower is overcharged B) VA funding fees are refundable if the borrower is active military C) VA funding fees are never refundable D) VA funding fees are refundable if the borrower is a wounded veteran
A) VA funding fees are refundable if the borrower is overcharged
Which of the following inquiries is considered lawful when asked for the purposes of credit approval as governed by ECOA? A) Years on the job B) Race C) Marital status D) Age
A) Years on the job
What is the minimum time period that MIP must be in place for a USDA loan? A) Zero years B) Three years C) Five years D) Depends on LTV
A) Zero years MIP, or mortgage insurance premiums, are only paid on FHA loans. Some other loan types are subject to PMI (private mortgage insurance). USDA loans use a funding fee and an annual premium rather than the traditional forms of MIP or PMI.
A VA appraisal is known as a: A.) CRV B.) Veteran's appraisal report C.) Fannie Mae 1025 D.) AVA
A.) CRV
VA loans are: A.) Partially guaranteed B.) Insured C.) Exempt D.) Entitled
A.) Partially guaranteed
Which law defines the right of rescission? A.) Truth-in-Lending B.) Real Estate Settlement Procedures Act C.) Equal Credit Opportunity Act D.) Patriot Act
A.) Truth-in-Lending
Which of the following can usually be added to a self-employed borrower's net income from the borrower's tax returns when calculating the borrower's income? A) Total from IRS 2106 B) Depreciation C) Total from IRS 4506 D) State taxes paid
B) Depreciation
Where inquiries related to marital status are permitted (e.g., community property states), Regulation B permits the creditor to inquire using any of the following terms, except: A) Unmarried B) Divorced C) Married D) Separated
B) Divorced
After receiving a mortgage application, a creditor must send a notice of decision to the applicant within: A) 10 days B) 20 days C) 30 days D) 90 days
C) 30 days
Which section of the URLA contains questions which, depending on the applicant's answer, could result in immediate rejection of the application? A) Information for Government Monitoring Purposes B) Declarations C) Details of the Transaction D) Acknowledgement and Agreement
B) Declarations The "Declarations" section of the URLA contains questions which, depending on the applicant's answer, could result in immediate rejection of the application.
Which of the following is a description of a permanent buy-down? A) A lender pays a broker 25 bps for delivering a loan at a rate higher than par B) A borrower pays discount points to lower the note rate from 4.875 to 4.50 C) A lender accepts funds paid into escrow in order to offset lower interest payments D) A real estate agent collects a deposit from a borrower to hold a contract
B) A borrower pays discount points to lower the note rate from 4.875 to 4.50 A permanent buy-down is a tool some borrowers use to adjust the price of their loan. It can also be referred to as prepaying interest.
A balloon rider, a prepayment penalty rider and a second-home rider may all be part of: A) A title insurance policy B) A deed of trust C) A note D) A power-of-attorney agreement
B) A deed of trust
Which of the following loans may include a prepayment penalty? A) An adjustable-rate qualified mortgage B) A fixed-rate qualified mortgage that is not a higher-priced mortgage loan C) An adjustable-rate qualified mortgage that is not a high-cost mortgage D) A fixed-rate qualified or non-qualified mortgage
B) A fixed-rate qualified mortgage that is not a higher-priced mortgage loan
A mortgage or deed of trust generally includes a clause that provides for release of the lien when the borrower pays off the debt, called a(n): A) Alienation clause B) Defeasance clause C) Due-on-sale clause D) Completion clause
B) Defeasance clause
Under the Fair Housing Act: A) Lending decisions cannot be made based on residency status B) Charging different fees based on race is prohibited C) Lenders must provide clear, plain-language disclosures D) Lenders are required to report demographic information to the federal government
B) Charging different fees based on race is prohibited
Per diem interest is used by a lender in order to: A) Allow for a lower payment with a temporary buy-down B) Collect interest that accrues between the closing date and the end of the month C) Pay the previous lender's costs for selling the loan D) Build a borrower's escrow account
B) Collect interest that accrues between the closing date and the end of the month
In addition to any authority allowed under state law, a state licensing agency must have the authority to: A) Approve licensing courses B) Conduct examinations and investigations C) Collect licensing and renewal fees D) Request enforcement action from the NMLS
B) Conduct examinations and investigations
What term describes the transfer of ownership of real estate from one owner to another? A) Reconveyance B) Conveyance C) Assignment D) Transmittal
B) Conveyance
Which of the following fees may a creditor charge before offering disclosures to a loan applicant? A) Application fee B) Credit reporting fee C) Appraisal fee D) Broker fee
B) Credit reporting fee A credit report fee is the only fee that a creditor may charge before offering disclosures to a loan applicant.
A mortgage and a lien are both examples of A) deeds of trust. B) concepts which are legal in some states but not in others. C) easements. D) encumbrances.
D) encumbrances. An encumbrance is a claim or liability on the title to a property, such as a lien or a mortgage.
Which of the following might raise a red flag during the underwriter's review of the appraisal? A) Photos that appear to show the address of the property on the mailbox B) Dated prior to the sales contract C) Effective age of the property aligns with that of comparables D) Completion notice is dated after the original appraisal
B) Dated prior to the sales contract An appraisal dated prior to the sales contract is a red flag.
The federal agency that implements and enforces rules related to the origination of FHA loans is the: A) Consumer Financial Protection Bureau (CFPB) B) Department of Housing and Urban Development (HUD) C) Federal Trade Commission (FTC) D) National Credit Union Administration (NCUA)
B) Department of Housing and Urban Development (HUD)
In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table? A) "Has this information been verified?" B) "Can this amount increase after closing?" C) "Is this payment subject to a late fee?" D) "Has this information changed from the Loan Estimate?"
B) "Can this amount increase after closing?"
A borrower is purchasing a $200,000 home, using VA eligibility for the first time. What is the minimum down payment required? A) $4,000 B) $0 C) $7,000 D) $9,600
B) $0
Wella and Kip are applying for a $510,250 loan. They would like to hold onto as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings? A) $47,900 B) $25,900 C) $95,800 D) $54,900
B) $25,900 The down payment in this scenario will be $25,900. This is just enough to keep them at the $484,350 conforming loan limit, but no more, because they want to hold onto as much of their savings as possible.
Sandra is purchasing a home with a loan amount of $484,350, which is the conforming loan limit for the area where she lives at the time that she secures approval for the loan. Her interest rate is not a prime rate, and in order to determine if it triggers the threshold for higher-priced mortgage loans, her creditor must determine if the APR for the loan exceeds the average prime offer rate by: A) 2.5 percentage points B) 1.5 percentage points C) 3.5 percentage points D) 6.5 percentage points
B) 1.5 percentage points
What minimum percentage of ownership in a related service requires a conflict of interest disclosure? A) 5% B) 10% C) 25% D) 50%
B) 10%
Credit reports on new construction are good for how many days? A) 90 days B) 120 days C) 180 days D) 225 days
B) 120 days
The Derringers have rescinded their loan transaction, informing their lender of their decision by mail. They are entitled to a full refund within: A) 10 days B) 20 days C) 30 days D) 60 days
B) 20 days
On an FHA loan, a borrower is required to make a down payment of at least: A) 5% B) 3.50% C) 0% D) 1.50%
B) 3.50%
A 7 / 1 ARM has a start rate of 4%, an initial cap of 3%, and a periodic cap of 1%. The lifetime cap is 8%. The margin is set at 4%, and the current index value has risen in the last month to 9.25%. The loan closed four years ago. What is the current rate? A) 7% B) 4% C) 8% D) 12%
B) 4%
VA fixed-rate loans may be made for any of the following terms, except: A) 20 years B) 40 years C) 25 years D) 30 years
B) 40 years
If a lender wants to obtain copies of a borrower's tax returns, the borrower is asked to sign what? A) A waiver of financial information B) 4506-T C) 1003 D) IRS-1040
B) 4506-T
For an FHA loan, how much may the seller contribute toward the borrower's closing costs? A) Nothing B) 6% of the sales price C) 3% of the sales price D) 3% of the loan amount
B) 6% of the sales price
A first-lien mortgage loan will exceed the HOEPA APR threshold and qualify as a high-cost mortgage if its APR is: A) 1.5 percentage points above the average prime offer rate for a comparable transaction B) 6.5 percentage points above the average prime offer rate for a comparable transaction C) 3 percentage points above the average prime offer rate for a comparable transaction D) 4.5 percentage points above the average prime offer rate for a comparable transaction
B) 6.5 percentage points above the average prime offer rate for a comparable transaction
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.
"5/25" and "7/23" are commonly used to designate loans including which of the following? A) A hybrid adjustable rate feature B) A balloon payment C) A subordinate lien D) A temporary interest rate buy-down
B) A balloon payment
Under which of the following circumstances could a borrower be charged a fee for the preparation of a settlement statement? A) The borrower requests a copy of the settlement statement 24 hours prior to closing B) A borrower may not be charged a fee for the preparation of a settlement statement C) The borrower requests a copy of the settlement statement 48 hours prior to closing D) The borrower requests the lender prepare the settlement statement rather than the escrow agent
B) A borrower may not be charged a fee for the preparation of a settlement statement
Which of the following is not a prohibited practice regarding loan originator compensation? A) A loan originator receives .5% more compensation if a loan contains a prepayment penalty B) A loan originator receives compensation for closing over $1 million in volume per month C) A loan originator receives 10% more compensation if he/she closes more than ten transactions in a month with an interest rate of 6.5% or more D) A loan originator receives compensation from a consumer and from the creditor
B) A loan originator receives compensation for closing over $1 million in volume per month A loan originator is prohibited from receiving compensation based on the terms of a loan, such as prepayment penalties or interest rates, and is prohibited from receiving dual compensation (i.e., from both the consumer and the creditor).
An interest-only loan might be suitable for any of the following, except: A) A corporate executive who receives large quarterly bonuses B) A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time C) An investor who would prefer to pay as little as possible while holding the property D) A self-employed borrower whose company is busiest during a six-month period over the holidays
B) A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time An interest-only loan is suitable when a borrower is savvy enough to manage it properly. A part-time, hourly worker who "may" get overtime in the summer likely would not be the best candidate for an interest-only loan.
In which of the following transactions must "Your Home Loan Toolkit" be provided? A) A reverse mortgage origination B) A purchase transaction C) A refinance transaction D) When a borrower applies for subordinate financing
B) A purchase transaction
When would a license be suspended without a hearing? A) A licensee fails to renew B) A request for a hearing is never made with the state regulator C) A licensee has failed to complete pre-licensing requirements D) The licensee has already executed a right to a hearing for a previous violation
B) A request for a hearing is never made with the state regulator
Which of the following does NOT appear in a lock-in agreement? A) Expiration date B) APR C) Lock-in fee D) Interest rate
B) APR
The system that an underwriter uses to help streamline the underwriting process is called: A) YSP B) AUS C) MBS D) ABA
B) AUS automated underwriting system
The Loan Estimate is required for: A) All mortgage loans B) All closed-end federally related mortgage loans C) All nontraditional mortgage loans D) All open-end mortgage loans
B) All closed-end federally related mortgage loans
The _____ is responsible for determining if a property is in a flood zone, and the _____ is responsible for verifying that proper flood insurance is in place. A) Underwriter; appraiser B) Appraiser; underwriter C) Appraiser; title insurer D) Underwriter; title insurer
B) Appraiser; underwriter
What is a method of transferring property to a new owner who takes over an outstanding mortgage debt, along with the liability of repayment, without incurring a change in terms? A) Conveyance B) Assumption C) Reconveyance D) Seller carry-back
B) Assumption
All of the following are considered immediate family members, and therefore a mortgage loan originator may negotiate a mortgage loan on their behalf without needing to be licensed, EXCEPT a(n): A) Stepparent B) Aunt C) Adopted sibling D) Grandparent
B) Aunt
According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should: A) Average the last six months' worth of pay stubs from the borrower B) Average the income shown on the 1040s for the past two years C) Use the income shown on the borrower's most recent two pay stubs D) Average the income showing on the W-2s for the past two years
B) Average the income shown on the 1040s for the past two years
All of the following are part of the underwriter's review of collateral, except: A) Sales contract B) Bank statements C) Appraisal D) Flood zone verification
B) Bank statements Bank statement review is part of an underwriter's assessment of the borrower, not the collateral.
Mary is purchasing her first home with an HPML. When her loan officer is reviewing the transaction with her, he tells her that she must establish an escrow account: A) Three business days after consummation of the loan B) Before consummation of the loan C) Before the first periodic payment is due D) At the time of consummation
B) Before consummation of the loan Mary must establish an escrow account prior to the consummation of the loan.
Which of the following loans are covered by RESPA? A) First liens B) Both first and subordinate liens C) Subordinate liens D) Neither first nor subordinate liens
B) Both first and subordinate liens
The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of: A) NMLS B) CFPB C) FHA D) HUD
B) CFPB
Oversight and enforcement of FCRA is left to what government agency? A) FNMA B) CFPB C) FHFA D) HUD
B) CFPB The CFPB has primary oversight and enforcement authority for the Fair Credit Reporting Act. However, it shares some of its enforcement authority with the FTC.
Which government agency is responsible for policing and enforcing misleading advertisement for credit? A) HUD B) CFPB C) TILA D) Federal Reserve
B) CFPB The CFPB now has primary enforcement responsibility over TILA. The FTC does still retain some authority.
Civil monetary penalties resulting from the failure to report data for HMDA are: A) $1,000 per violation, with a maximum of $300,000 in fines annually B) Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved C) Calculated based on a percentage of total loan amounts of mortgages in violation D) $11,000 per violation, but can be increased to $25,000 for willful and knowing violations
B) Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved
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
Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called: A) Down payment B) Earnest money C) Escrow funds D) Service release premium
B) Earnest money Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called earnest money.
Which clause in a mortgage allows a lender to increase the interest rate? A) Defeasance B) Escalation C) Acceleration D) Exculpatory
B) Escalation
Costs anticipated to be charged in a loan transaction, such as origination fees, processing fees, appraisal fees, title fees, and recording fees are called: A) Total costs B) Estimated closing costs C) Purchase price D) Pre-paids
B) Estimated closing costs
All of the following are responsibilities of the closing agent, except: A) Verify identity and notarize documents B) Explain the risks and benefits of the ARM product on which the client is closing C) Coordinate the closing process D) Verify that all parties have copies of forms and disclosures required for settlement
B) Explain the risks and benefits of the ARM product on which the client is closing In broad terms, it is the closer's job to "review" the terms of the loan with the borrower; it is not their job to "re-sell" the loan to the borrower. Full disclosure and discussion of all fees are the obligations of the borrower and should take place prior to closing.
A consumer report is defined under which of the following federal laws? A) FACTA B) FCRA C) ECOA D) HMDA
B) FCRA FCRA defines a consumer report as any information from a consumer reporting agency that relates to a consumer's creditworthiness, credit standing, credit capacity, character, personal characteristics, or mode of living, used or expected to be used, in order to determine eligibility for credit or insurance, or to evaluate a consumer for employment.
Who is responsible for maintaining the national flood maps? A) HUD B) FEMA C) FHA D) VA
B) FEMA
Which of the following factors does not directly affect interest rates? A) Foreclosure rates B) Federal Reserve activities C) Loan fraud D) Loan payoff rates
B) Federal Reserve activities
The most comprehensive form of ownership is: A) Real Estate Investment Trust B) Fee Simple absolute C) Tenants in Common D) Joint Tenancy
B) Fee Simple absolute
Virtually every residential transaction involves an estate that is held in _____, the desired form of holding ownership to property because it has the fewest restrictions. A) Foreclosure B) Fee simple C) Short sale D) Deed-in-lieu
B) Fee simple
Under the Gramm-Leach-Bliley Act, the Safeguards Rule and Financial Privacy Rule apply to which of the following? A) All commercial institutions B) Financial institutions C) Educational institutions D) Mortgage lenders only
B) Financial institutions
Under TILA's rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer. A) Two B) Five C) Three D) Seven
B) Five
Which behavior involves conspiratorial involvement of individuals using the mortgage market to benefit financially from criminal behavior? A) Flipping B) Fraud for profit C) Money laundering D) Identity theft
B) Fraud for profit
The first step in the closing process is: A) Rescission B) Funding C) Application D) Steering
B) Funding
Which of the following is true regarding ATR standards for consideration of borrower repayment ability? A) General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 60% B) General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income C) General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 40% D) General ATR standards require a consideration of DTI ratio and residual income; residual income must equal at least the monthly loan payment amount, plus 5%
B) General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income
Which parties sign the deed? A.) Grantor, grantee and two witnesses B.) Grantor and two witnesses C.) Grantee and two witnesses D.) Grantee only
B) Grantor and two witnesses
What federal legislation requires loan originators to collect demographic data to ensure that creditors are not engaging in discriminatory lending? A) ECOA B) HMDA C) GLB Act D) FCRA
B) HMDA The Home Mortgage Disclosure Act is a reporting law that helps the federal government, among other things, identify discriminatory lending practices.
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
Special second appraisal requirements apply for a loan that is a(n): A) VA loan B) Higher-priced mortgage loan C) Adjustable-rate mortgage D) Refinance
B) Higher-priced mortgage loan
The front-end ratio is also known as the: A) Back-end ratio B) Housing ratio C) Principal ratio D) Total debt ratio
B) Housing ratio
When would business tax returns be required as documentation of income for a borrower? A) If the borrower owns 15% of a company B) If the borrower owns more than 25% of a company C) If the borrower receives a K-1 from a company D) If the borrower is an officer of a company
B) If the borrower owns more than 25% of a company
Which of the following is most true concerning a VA funding fee? A) It is always refundable B) It is nonrefundable C) It is not charged to veterans D) It is not charged to active members of the military
B) It is nonrefundable
Which of the following is true regarding a borrower's intent to proceed with a mortgage transaction as required under federal rule? A )It must be communicated in writing B) It may be communicated however the borrower chooses C) It may not be communicated via email D) It may not be communicated verbally
B) It may be communicated however the borrower chooses
Which of the following is not a requirement for the servicing notice given in the event of a transfer of servicing? A) It must include contact information for the current lender B) It must be given within 30 days of the transfer C) It must include contact information for the new lender D) It must inform the borrowers they may make payments to either lender for 60 days
B) It must be given within 30 days of the transfer When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer.
A mortgage broker structures a loan priced with two points in borrower credit. He suggests that, based on the limited amount of cash the borrower has on hand to close, it may be best to take a slightly higher rate and use the premium generated to subsidize the closing costs. After consideration, the borrower agrees and moves forward. This is: A) Legal and unethical B) Legal and ethical C) Illegal and ethical D) Illegal and unethical
B) Legal and ethical
Safe harbor qualified mortgages offer a "safe harbor" from: A) Liability for TRID Rule violations B) Liability for ATR Rule violations C) Liability for ECOA violations D) Liability for HOEPA violations
B) Liability for ATR Rule violations
Which of the following best describes the benefit of mortgage insurance to the borrower? A) Reduced hazard insurance premiums B) Lower down payment requirements C) Mortgage insurance only benefits the lender D) Relaxed underwriting conditions
B) Lower down payment requirements
In order to qualify for an adjustable-rate mortgage, a consumer must be able to show that he or she can: A) Make regularly scheduled payments that are calculated using the loan's introductory rate B) Make amortizing payments that are calculated using the fully indexed rate for the ARM C) Make amortizing payments that are calculated using the loan's rate after the first interest rate adjustment occurs D) Make regularly scheduled payments that are calculated using the fixed interest rate for which the consumer would be eligible
B) Make amortizing payments that are calculated using the fully indexed rate for the ARM
The primary purpose of ECOA is to: A) Make credit available to borrowers who are less than qualified B) Make sure credit is available to all creditworthy applicants C) Make sure credit is not denied because of a lack of income stability D) Prevent denial of credit due to a potential borrower's past credit history
B) Make sure credit is available to all creditworthy applicants
Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except: A) Not knowingly withholding, removing, or destroying any books or records B) Making all of the licensee's records available to borrowers upon demand C) Permitting interviews of principals, loan originators, and independent contractors by state regulators D) Making records and books available to the state regulator
B) Making all of the licensee's records available to borrowers upon demand
Unilateral increases in the cost of settlement services made by another provider with the intention of retaining the additional fees are referred to as: A) YSP B) Markups C) SRP D) Unearned fees
B) Markups
Generally, the first lien recorded has priority, with the possible exception of: A) Mortgage liens B) Mechanic's liens C) Child support liens D) Consensual liens
B) Mechanic's liens The first lien recorded has priority. One possible exception is mechanic's liens, depending on state law.
Slim Tipton, a recent widower, has just refinanced his home, which he has been renting to his son ever since he moved into a beachfront condo two years prior. The purpose of this cash out refinance is to help his son, Tiny, start a printing business.. In this scenario, who receives copies of the Notice of the Right to Cancel? A) Only Slim, since his wife is no longer alive B) Neither Slim nor Tiny receives a Notice of the Right to Cancel C) Slim and his son Tiny, since Tiny is living in the home securing the refinance D) Slim is the only one to receive a Notice of the Right to Cancel
B) Neither Slim nor Tiny receives a Notice of the Right to Cancel TILA allows for a rescission period on the refinance of a borrower's principal dwelling. Since Slim has been living in a condo as his primary residence for two years, the refinance of his previous home would be considered non-owner-occupied, which is not subject to the right of rescission.
A state-licensed loan originator is: A) Licensed by the NMLS B) Not an employee of a depository institution C) Identified by the unique identifier of his/her employer D) An employee of a subsidiary which is owned or controlled by a depository institution
B) Not an employee of a depository institution A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state.
All of the following are TILA-required disclosures, except: A) CHARM Booklet B) Notice of Adverse Action C) Right to Rescind D) Loan Estimate
B) Notice of Adverse Action The Notice of Adverse Action is a disclosure required by ECOA, not TILA.
Negative amortization: A) Describes the result of a default B) Occurs when the mortgage payment is not sufficient to pay the interest currently due C) Occurs when a borrower pays only interest due each month D) Defers principal
B) Occurs when the mortgage payment is not sufficient to pay the interest currently due
Which of the following is a limit on the amount that the payment can change on any adjustment date from the current or previous payment amount on an ARM? A) Initial rate cap B) Payment cap C) Periodic rate cap D) Lifetime rate cap
B) Payment cap NOT TO BE CONFUSED WITH PERIODIC RATE CAP, which is a limit on the amount that the interest rate can change, up or down, on any adjustment date
Which of the following is a limit on the amount that the interest rate can change, up or down, on any adjustment date? A) Initial rate cap B) Periodic rate cap C) Lifetime rate cap D) Payment cap
B) Periodic rate cap
ACME Home Loans is a private lender with a strict policy of limiting originations to conventional qualified mortgages with minimum loan amounts of $300,000. To ensure compliance with this policy, loan originators are instructed to refuse to accept applications from consumers who want loan amounts of less than $300,000, or who have debt-to-income ratios of 44% or more. This policy is: A) Not a violation of any federal fair lending law B) Potentially unlawful under the disparate impact theory C) An example of disparate treatment of consumers D) Legal if there is no discriminatory intent
B) Potentially unlawful under the disparate impact theory
The legal document that authorizes one person to act on behalf of another is called: A) Legal prerogative B) Power of attorney C) Fiduciary authorization D) Proxy agreement
B) Power of attorney
Foreclosure is the sale of a property after a borrower's default on payments. The exact procedure the lender follows in order to foreclose is dependent on the absence or presence of a: A) Power of attorney B) Power of sale clause C) Deed in lieu of foreclosure D) Mortgagee clause
B) Power of sale clause The foreclosure process is determined by the presence or absence of a power of sale clause in the mortgage or deed of trust. If there is no power of sale clause, the lender must go to court to foreclose (called a judicial foreclosure). If a power of sale clause is included in the mortgage or deed of trust, then the lender can begin foreclosure without court involvement (nonjudicial foreclosure).
The Jepsons have brought mortgage loan originator Stanley Rothke a check to pay for loan origination fees, the private mortgage insurance premium, and the commitment fee. These charges are: A) Paid-outside-of-closing charges B) Prepaid finance charges C) Third-party charges D) Mortgage loan transaction fees
B) Prepaid finance charges
This is the term for a charge paid by the borrower when repaying loan principal earlier than required by the amortization schedule. A) Acceleration B) Prepayment penalty C) Early termination fee D) Payoff penalty
B) Prepayment penalty
The lending document that contains the contractual terms for repaying a home loan is the: A) Mortgage B) Promissory note C) Deed of trust D) Closing Disclosure
B) Promissory note
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
Under which of the following circumstances would flood insurance be required? A) Property is within 100 yards of a body of water B) Property is in flood zone "X" C) Property is in flood zone "A" D) Property is at or below sea level
B) Property is in flood zone "A" Flood insurance is required for property improvements located in an SFHA Zone A (an area subject to inundation by a 1%-annual-chance flood event) or a Zone V (an area along the coast subject to inundation by a 1%-annual-chance flood event with additional hazards associated with storm-induced waves).
Which of the following may be considered an appraisal red flag? A) An appraiser's resume shows substantial experience in the area B) Property owner and seller are not the same C) Appraisal is dated after the sales contract D) Comparables are located within one mile of the subject
B) Property owner and seller are not the same
The Nationwide Multistate Licensing System and Registry seeks to accomplish all of the following objectives, except: A) Provide uniform license applications and reporting requirements for state-licensed originators B) Provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace C) Provide increased accountability and tracking of loan originators D) Facilitate the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators
B) Provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace The NMLS is a measure aimed at increasing responsible behavior and accountability and protecting consumers, not expanding the subprime marketplace.
In accordance with TILA, all of the following are eligible for a three-day right to rescind, except: A) Home equity line of credit B) Purchase money mortgage C) Home improvement loan D) Refinance of a property that is owner-occupied
B) Purchase money mortgage No right to rescind exists for a first mortgage to purchase a home.
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
Which legislation sets the disclosure requirements for the Affiliated Business Arrangement Disclosure? A) TILA B) RESPA C) ECOA D) HOEPA
B) RESPA RESPA determined that the Affiliated Business Arrangement Disclosure should be provided to the borrower at the time of referral to the affiliated third party.
The requirement that borrowers receive the Consumer Handbook on Adjustable-Rate Mortgages is required under which regulation? A) Regulation X B) Regulation Z C) Regulation C D) Regulation M
B) Regulation Z
ECOA applies to the extension of credit for: A) Loans secured by a first or subordinate lien on residential property B) Residential, business, commercial, and agricultural loans C) Business, commercial, and agricultural loans D) All credit other than government loans
B) Residential, business, commercial, and agricultural loans
The VA has stated that loans made in compliance with VA standards and guaranteed or insured by the VA are: A) Small creditor qualified mortgages B) Safe harbor qualified mortgages C) Non-qualified mortgages D) Exempt from qualified mortgage standards
B) Safe harbor qualified mortgages
The provisions of the GLB Act specifically require compliance with the: A) MARS Rule B) Safeguards Rule C) PATRIOT Act D) Truth-in-Lending Act
B) Safeguards Rule
When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as: A) For sale by owner (FSBO) B) Seller carry-back C) Seller concessions D) Seller self-financed
B) Seller carry-back In a purchase transaction involving an assumable mortgage, when the party selling the property provides all or part of the financing, it is referred to as a seller carry-back.
XYZ Mortgage is transferring servicing rights for all of its mortgages to a new servicer. RESPA requires what disclosure to be sent to the borrowers affected? A) Affiliated Business Disclosure B) Servicing Transfer Statement C) Escrow Servicing Notice D) FTC Service Disposal Notice
B) Servicing Transfer Statement RESPA requires that a client be provided a Servicing Transfer Statement at least 15 days prior to the transfer of the loan to a new servicer.
For an FHA loan that requires MIP, the annual mortgage insurance premium (payable monthly as part of the mortgage payment), is based on all of the following, except: A) Loan term B) State in which the subject property is located C) LTV D) Loan program
B) State in which the subject property is located
Under TILA guidelines, all of the following disclosures are provided for an adjustable-rate loan, except: A) Frequency of changes in the annual percentage rate B) Statement that the interest rate will be offered for the duration of the loan C) Possibility of changes in the payment amount over time D) The index used to determine rate adjustments
B) Statement that the interest rate will be offered for the duration of the loan
Sue Ellen has been a real estate agent for nine years and knows her hometown very well. She meets with a couple who have moved to her town from Spain. Without discussing it, Sue Ellen begins showing the couple a neighborhood on the south side of town with a highly Hispanic population. Sue Ellen is engaging in: A) Streamlining B) Steering C) Redlining D) Discouragement
B) Steering Not to be confused with redlining! Steering is an illegal practice of trying to induce members of a specific race to purchase property in neighborhoods that are composed primarily of their same race. Redlining is refusal (a loan or insurance) to someone because they live in an area deemed to be a poor financial risk.
A _____ is an individual who, in exchange for a fee, allows his or her qualifying information to be used on an application for a loan he or she has no intention of repaying. A) Straw seller B) Straw buyer C) Air loan D) Identity thief
B) Straw buyer A straw buyer is an individual who, in exchange for a fee, allows his or her qualifying information to be used on an application for a loan he or she has no intention of repaying. Straw buyer (i.e., a person who purchases the property or applies for the loan in his or her own name for the actual borrower
The Home Ownership and Equity Protection Act, enacted in 1994, amended what legislation? A) ECOA B) TILA C) FACTA D) CIP
B) TILA
A revised Loan Estimate may be provided if an applicant waits more than _____ after the creditor provides a Loan Estimate before indicating an intent to proceed. A) Three business days B) Ten business days C) Five days D) 24 hours
B) Ten business days
Disclosures for high-risk loans required by the Homeowners Protection Act inform the borrower that: A) The loan is considered a high-cost loan because it trips thresholds related to title insurance fees B) Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments C) There may be a loan more suited for the borrower that is much less expensive D) Payment amounts may change based on interest rate changes
B) Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments
Government monitoring information regarding applicant demographics is found where? A) The HUD-1 B) The 1003 C) The broker agreement D) The 4506-T
B) The 1003 Government monitoring information (or HMDA info) is found on the application, or 1003.
Which of the following entities, created in 2010, became the new enforcement and regulatory authority for a number of federal laws and regulations? A) The FTC B) The CFPB C) The GNMA D) The FNMA
B) The CFPB
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
"E-Sign Act" is short for: A) The Electronic Signatures Legitimization Act B) The Electronic Signatures in Global and National Commerce Act C) The Electronic Safety of Giving Net Authorization Act D) The Electronic Safety in Global and National Transactions Act
B) The Electronic Signatures in Global and National Commerce Act
HUD is still responsible for implementation of: A) RESPA B) The Fair Housing Act C) TILA D) The Equal Credit Opportunity Act
B) The Fair Housing Act
The act of guiding homebuyers in a particular direction based on demographics is prohibited by: A) ECOA and RESPA B) The Fair Housing Act and ECOA C) TILA and RESPA D) RESPA and the Fair Housing Act
B) The Fair Housing Act and ECOA
Which law allows consumers a free copy of their credit report every year? A) Homeowner's Protection Act B) The Fair and Accurate Credit Transaction Act C) Truth-in-Lending D) The Equal Credit Opportunity Act
B) The Fair and Accurate Credit Transaction Act
The Comparisons table on the Loan Estimate provides all of the following information, except: A) The amount of loan costs paid in the first five years of the loan term B) The amount paid for private mortgage insurance before the LTV ratio reaches 78% C) The amount of principal paid in the first five years of the loan term D) The amount of total interest paid over the loan term
B) The amount paid for private mortgage insurance before the LTV ratio reaches 78%
An acceleration clause is sometimes added to reverse mortgages. This means that the loan could become due and payable under certain circumstances, which may include all but which of the following? A) A new owner is added to the title B) The borrower adds MIP to the loan C) New debt against the home is taken out D) All or part of the home is rented out
B) The borrower adds MIP to the loan Reverse mortgages may contain acceleration clauses which can cause a loan to become due and payable. Reasons for this may include adding an owner to the title, taking out new debt against the home, or renting out all or part of the home. Some reverse mortgages do include MIP, which helps to guarantee that the borrower will never owe more than the value of the home.
Who is responsible for completing the HUD-1/Loan Disclosure? A) The borrower B) The closing agent C) The loan originator D) The grantor
B) The closing agent
In an ARM, margin is determined by: A) The lender and represents the amount of commission paid to the broker B) The lender and represents the lender's operating costs and profit margin C) The broker and is the amount of profit split between the broker and lender D) The underwriter and represents the percentage of error allowable for debt-to-income ratio
B) The lender and represents the lender's operating costs and profit margin The margin is a fixed number set by the lender and is not subject to change. It represents the lender's operating costs and profit margin, and varies from lender to lender.
If a borrower's reserve account for taxes and insurance is found to be short or deficient by an amount in excess of one month's worth of deposits, which of the following is true? A) The escrow account will be cancelled B) The lender can require the borrower to make up the shortage over the next 12 months C) The lender can require the borrower to make up the shortage over the next six months D) The borrower must remit the shortage to the lender within 90 days of notice of the shortage
B) The lender can require the borrower to make up the shortage over the next 12 months
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
Which of the following statements most accurately describes the term "predominant value"? A) The final value an appraiser reports on an appraisal B) The most common sales price for the neighborhood C) The highest sales price in the neighborhood D) The average sales price for the neighborhood
B) The most common sales price for the neighborhood
Which document actually contains the borrower's promise to repay the loan? A) The deed B) The note C) The mortgage D) The TIL
B) The note Neither the mortgage nor the deed of trust actually contain the borrower's contractual promise to repay the loan. The note, or promissory note, is the borrower's promise to repay the loan.
Which of the following statements accurately describes the scope of HOEPA? A) The provisions of HOEPA apply to first-lien loans where the home securing the loan is located in a neighborhood targeted by subprime lenders B) The provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower's principal residence C) The provisions of HOEPA apply to subordinate-lien loans when the home securing the loan is either owner occupied or non-owner occupied D) The provisions of HOEPA apply only to first-lien loans that are secured by a borrower's principal residence
B) The provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower's principal residence
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 consolidates and makes licensing records available to state regulators to use for licensing decisions.
A creditor that is making an HPML must provide the loan applicant with a disclosure regarding his or her right to a copy of the appraisal no later than ____ after the creditor receives the loan application. A) Three days B) The third business day C) Five days D) The fifth business day
B) The third business day
VA loans require a funding fee under all of the following conditions, except: A) The veteran makes a 10% down payment B) The veteran is disabled C) The veteran is using his/her eligibility for a second time D) The veteran is using his/her eligibility for the first time
B) The veteran is disabled
Which of the following would be considered a credit report red flag? A) Names on credit report match names on application B) There is a DBA or an AKA C) The debts the applicant disclosed are accurately reflected on the credit report D) Paystubs, W-2s, or other income docs are handwritten
B) There is a DBA or an AKA The presence of a DBA (doing business as) or AKA (also known as) would be a credit report red flag.
In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for: A) Twelve months B) Three years C) Two years D) Five years
B) Three years
The examination of county and municipal records to determine the legal status of a property is called: A) Title insurance B) Title search C) Title binder D) Title commitment
B) Title search The title search is the first step in the title process. It involves an abstractor or an attorney searching county or municipal records to determine the status of a property.
What is the purpose of the Fair Credit Reporting Act? A) To prevent lenders from using credit to determine creditworthiness in order to mitigate the losses incurred by borrowers who were under-qualified for loans B) To ensure accuracy, fairness, and the privacy of consumers' personal information assembled and used by consumer reporting agencies C) To use special obligations on users and furnishers to limit credit availability D) To protect the rights of lenders in the event of default
B) To ensure accuracy, fairness, and the privacy of consumers' personal information assembled and used by consumer reporting agencies
Mortgage loan originator Edna is planning an advertisement that indicates the number of payments required to pay off a specific loan. This statement is a: A) Prohibited statement B) Trigger term C) Permissible representation if it is accurate D) Hypothetical only
B) Trigger term
Which of the following statements describes the legal relationship between a loan applicant and a mortgage broker? A) Under federal law, a mortgage broker has a fiduciary relationship with a loan applicant B) Under federal law, a mortgage broker does not have a fiduciary relationship with a loan applicant C) Under all state laws, a mortgage broker has a fiduciary relationship with a loan applicant D) Under state and federal law, a mortgage broker has a fiduciary relationship with a loan applicant
B) Under federal law, a mortgage broker does not have a fiduciary relationship with a loan applicant Federal law does not require a mortgage broker to serve a loan applicant as a fiduciary. Only a few state laws impose this requirement on mortgage brokers and loan originators.
When a credit report shows only a balance on a revolving debt, rather than a payment, an originator should: A) Eliminate the debt if it is below $300 B) Use 5% of the debt as the payment C) Only use 50% of the debt against the DTI D) Divide the total debt by 12 to get monthly payments
B) Use 5% of the debt as the payment
A funding fee is required for a: A) FHA loan B) VA loan C) Jumbo loan D) Conventional loan
B) VA loan
Which of the following would convey a property? A) Deed rider B) Warranty deed C) Note D) Deed of trust
B) Warranty deed
Which of the following occurs when the parties to a loan transaction meet to execute documents, and afterwards, funds are disbursed? A) Dry settlement B) Wet settlement C) Table funding D) Rescission
B) Wet settlement Wet settlement occurs when the parties to a loan transaction meet to execute documents, and afterwards, funds are disbursed. In contrast, at a dry settlement, parties meet to execute documents but funds are not disbursed until certain specified conditions are met.
The Equal Credit Opportunity Act requires a Notice of Incomplete Application be provided to a borrower: A) Within 15 days of application, if the application is missing required information B) Within 30 days of application, if the application is missing required information C) If the borrower has provided less than five years' residence history D) Within three days of discovery of incomplete application
B) Within 30 days of application, if the application is missing required information
Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer? A) Within 90 days of loan application B) Within three business days of loan application C) Within 30 days closing D) At the time of Notice of Action Taken
B) Within three business days of loan application
In a transaction for a fixed-rate mortgage to finance a home purchase, the loan applicant should receive: A) The CHARM Booklet B) Your Home Loan Toolkit: A Step-by-Step Guide C) What You Should Know about Home Equity Lines of Credit D) The Consumer Handbook on Fixed-Rate Mortgages
B) Your Home Loan Toolkit: A Step-by-Step Guide In a transaction for a fixed-rate mortgage to finance a home purchase, the loan applicant should receive Your Home Loan Toolkit: A Step-by-Step Guide.
What is the FHA minimum down payment? A.) $0 B.) 3.5% C.) 5% D.) 10%
B.) 3.5%
A loan on personal property only known as: A.) Package mortgage B.) Chattel mortgage C.) Furnishing mortgage D.) Exotic mortgage
B.) Chattel mortgage
The enforcement of a lien is known as: A.) Closing B.) Foreclosure C.) Warranty inspection D.) Police Action
B.) Foreclosure
When title is transferred and the buyer assumes no liability for the note, this type of transference is known as: A.) Free and clear B.) Subject to the mortgage C.) Assumption D.) Novation
B.) Subject to the mortgage
Which type of co-ownership permits the property to pass an heir? A.) Collaboration B.) Tenants in common C.) Joint tenancy D.) Subordination
B.) Tenants in common
Ricky and Lucy are buying a house and have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession? A) $6,210 B) $6,900 C) $13,800 D) $12,420
C) $13,800 The seller concession allowed on a conforming loan with a 90% (or less) LTV is 6%. This number is taken from the sales price, not the loan amount. $230,000 × 6% = $13,800.
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.
The Uniform Residential Appraisal Report is commonly known as the: A) 1003 B) 1040 C) 1004 D) 4506
C) 1004 NOT TO BE CONFUSED WITH the 1003, or the Uniform Residential Loan Application.
The FHA offers _____ fixed-rate mortgages to qualifying borrowers. A) Only 15-year B) Only 30-year C) 15- and 30-year D) Special 20-year
C) 15- and 30-year
An ARM is beginning its adjustment period and has a margin of 3.00% set at the start of the loan. The current index value is 2.50%. The caps on this ARM are set to 2% and 5% for periodic and lifetime, respectively. What is the highest value the margin can reach during this initial adjustment? A) 5% B) 5.25% C) 3% D) 8%
C) 3% DON'T MISREAD
Under which of the following scenarios could a borrower cancel a transaction after closing has already occurred? A) A borrower closes on a refinance transaction for a primary residence on Monday and changes his mind the following Monday. The week contained no holidays and all disclosures were proper. B) A borrower closes on a refinance transaction for an owner-occupied vacation home on Monday and changes his mind two days later. C) A borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later. D) A borrower closes on a purchase transaction for a primary residence, but changes his mind within three days of closing.
C) A borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later.
Which of the following may be an indication of predatory lending? A) A borrower with a 720 credit score uses borrower credits to offset closing costs B) A borrower with a 610 credit score is offered a subprime loan C) A borrower with a 580 credit score is offered a loan with credit life premiums included D) A borrower with a 560 credit score is given a rate that is 2% above a "standard" rate
C) A borrower with a 580 credit score is offered a loan with credit life premiums included Tacking on unnecessary insurance premiums such as "credit life" is a practice that predatory lenders often use to increase profits.
A "straw buyer" is: A) A buyer who is a victim of identity theft B) A buyer who uses another individual's identity in order to obtain a mortgage for which he or she is not eligible C) A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application D) A buyer who intends to purchase property but does not intend to occupy it
C) A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application
Which of the following would not be considered an established business relationship under the Do-Not-Call rules? A) A consumer purchases a service from a seller B) A financial transaction between a consumer and a seller C) A consumer inquiry into the purchase of an item six months ago D) A consumer purchases an item from a seller
C) A consumer inquiry into the purchase of an item six months ago
When a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called: A) A lock-in B) A variable rate C) A float D) An adjustable rate
C) A float
All of the following loans are covered by the requirements of the Home Mortgage Disclosure Act, except: A) A loan to purchase a property in an urban area B) A home improvement loan C) A loan for an RV which the borrower uses as his/her primary housing six months a year D) Refinance of a property owned by an elderly couple who are both over the age of 62
C) A loan for an RV which the borrower uses as his/her primary housing six months a year HMDA reporting is not required for loans for personal property; loans to purchase RVs are personal loans and therefore not subject to mortgage lending laws.
Examples of loans that are typically secured by a subordinate lien include all but which of the following? A)A home equity line of credit B) A home equity loan C) A purchase money mortgage D) A piggyback loan
C) A purchase money mortgage
The S.A.F.E. Act requires which of the following to fulfill responsibilities including participating in the NMLS, conducting background checks, and writing rules and regulations? A) A state legislature B) A state Attorney General C) A state licensing agency D) The federal government
C) A state licensing agency
An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is: A) A violation of RESPA's prohibition against fee-splitting B) Permitted only as long as receipts are kept from the processor for five years C) A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees D) A violation of ECOA
C) A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees
Which of the following terms is allowed in a high-cost mortgage? A) Terms that permit a payment schedule resulting in negative amortization B) An advanced payment C) A variable interest rate D) A prepayment penalty
C) A variable interest rate High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed.
Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections? A) A broker agreement B) A TIL disclosure C) A verification of employment D) The promissory note
C) A verification of employment
What clause in a mortgage allows the lender to call the entire loan balance due? A) Defeasance B) Escalation C) Acceleration D) Exculpatory
C) Acceleration
The responsibilities of a loan servicer include: A) Disbursing escrow funds, managing trust accounts, and adjudicating foreclosure proceedings B) Sending closing documents, collecting escrow funds, and obtaining loan funds for clients C) Accepting payments, disbursing escrow funds, maintaining records, and managing delinquent accounts D) Accepting applications, disbursing interest and principal, and maintaining origination records
C) Accepting payments, disbursing escrow funds, maintaining records, and managing delinquent accounts
All of the following types of income are not taxed and therefore can be "grossed-up," except: A) Social Security B) Public assistance C) Alimony D) Disability
C) Alimony
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
The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act? A) Encourages responsible behavior through licensing standards B) Provides consumers access to information about originators C) Allows consumers a full refund if the originator is found to have engaged in unethical acts D) Facilitates collection and distribution of consumer complaints between regulators
C) Allows consumers a full refund if the originator is found to have engaged in unethical acts
Once the Closing Disclosure is delivered, which of the following would require a new Closing Disclosure to be delivered to the borrower and a new waiting period before closing? A) An increase of more than 1% in cash required to close B) A change in the loan amount C) An increase in the APR by more than .125% D) The addition of any costs to the borrower
C) An increase in the APR by more than .125%
For the purposes of providing a Loan Estimate, a "business day" is: A) Any day except for Sundays B) Any day except for Sundays and legal public holidays C) Any day on which the creditor's offices are open to the public for carrying out substantially all business functions D) Any day of the week
C) Any day on which the creditor's offices are open to the public for carrying out substantially all business functions
Title searches and title insurance: A) Are covered under the provisions of RESPA, but are not considered settlement services B) Are not covered under the provisions of RESPA but are considered settlement services C) Are covered under the provisions of RESPA and are considered settlement services D) Are not covered under the provisions of RESPA and are not considered settlement services
C) Are covered under the provisions of RESPA and are considered settlement services
One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are: A) Interest free B) Available to loan applicants regardless of DTI ratios C) Assumable D) Not funded by private lenders
C) Assumable
Recording of the deed happens where? A) At closing B) At the borrower's house C) At the local courthouse D) Within the office of the Supervisor of Banks
C) At the local courthouse
A mortgagor's title insurance policy is: A) Transferable B) Required C) Based on purchase price D) Never used
C) Based on purchase price
Lucy closes a refinance on Betty's primary residence. However, Lucy forgets to provide Betty with the proper notice of rescission rights. Which of the following is true? A) The transaction is rescindable at any time during the life of the loan B) The transaction is void and should be cancelled C) Betty can rescind for three years from recording D) Betty cannot rescind for three days following recording
C) Betty can rescind for three years from recording
Which of the following is not a common underwriting pitfall? A) Cash-out refinances listed as no cash-out B) Income calculated incorrectly C) Borrower delayed in returning initial signed docs D) Secondary financing not disclosed
C) Borrower delayed in returning initial signed docs A borrower being delayed in returning docs would suggest that the file has not even gone into underwriting yet, which would not be an underwriting pitfall.
In the practice of table funding, what is used to protect the lender against fraudulent activity? A) Rigorous income analysis B) Documentation of repayment ability C) Buy-back provisions D) Line of credit
C) Buy-back provisions A warehouse lender often uses buy-back provisions in the agreements with brokers to assure themselves some protection against fraudulent activity during the loan process.
When completing the Loan Estimate, costs must be presented: A) In dollars and cents B) In dollars and cents, except for appraisal costs C) By rounding them to the next whole number, except for estimated principal and interest payments D) By rounding them to the next whole number, except for third-party costs
C) By rounding them to the next whole number, except for estimated principal and interest payments
Which of the following federal agencies is responsible for the enforcement of Regulation X? A) FTC B) FDIC C) CFPB D) NCUA
C) CFPB
Which of the following correctly describes entities that have obligations under the Fair Credit Reporting Act? A) CRAs, Experian, and FHA B) FHFA, CRAs, and furnishers of information to CRAs C) CRAs, furnishers of information to CRAs, and users of consumer reports D) Users of consumer reports and lenders regulated by RESPA and TILA
C) CRAs, furnishers of information to CRAs, and users of consumer reports
The administrative authority of the Commissioner includes all but which of the following? A) Promulgate rules or regulations implementing the S.A.F.E. Act B) Administer, interpret, and enforce the S.A.F.E. Act C) Carry out the intentions of the Legislature D) Sentencing violators of the S.A.F.E. Act to appropriate prison terms
C) Carry out the intentions of the Legislature
The risk of a balloon mortgage may be minimized by including a: A) Mandatory arbitration clause B) Acceleration clause C) Conditional refinance provision D) Home equity conversion provision
C) Conditional refinance provision
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 loan limits and standards, and nonconforming loans, which do not meet GSE loan limits and standards (for example, "jumbo" loans).
When a creditor takes steps legally to force the sale of a property in an effort to collect on a loan in default, it is known as: A) Repossession B) Foreclosure C) Default D) Acceleration
C) Default
Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower? A) UFMIP B) Insured amount C) Entitlement D) Guarantee fee
C) Entitlement
Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account? A) Escrow accounts are required for all HPMLs secured by the borrower's principal dwelling B) Escrow accounts are required for all HPMLs secured by a dwelling C) Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling D) Escrow accounts are required for all HPMLs, including reverse mortgages
C) Escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling
Which of the following types of loans is not a conventional mortgage? A) Nonconforming loan B) Non-qualified mortgage C) FHA loan D) Subprime loan
C) FHA loan Conventional loans include a wide range of loan types except for government-insured and guaranteed loans such as FHA loans, USDA loans, and VA loans.
An originator advertises via the Internet and direct mail a "3.5% fixed payment loan" that was not actually available to any loan applicant. Which federal agency would bring the lawsuit against this originator and his company? A) HUD or the FTC B) FHFA C) FTC or the CFPB D) FDIC
C) FTC or the CFPB
Kelsey is a registered loan originator who is employed by the Your Home Town Bank, a depository institution regulated by a federal banking agency. Each of the following is a federal banking agency, except the: A) Board of Governors of the Federal Reserve System B) Comptroller of the Currency C) Federal Home Loan Mortgage Corporation D) National Credit Union Administration
C) Federal Home Loan Mortgage Corporation
Which of the following does not control the discount that may be charged on permanent buydowns? A) Financial markets B) Lenders C) Federal Reserve D) Mortgage companies
C) Federal Reserve
RESPA applies to: A) Reverse mortgages B) Construction loans C) Federally-related mortgage loans D) For business, commercial, or agricultural purposes
C) Federally-related mortgage loans
The factors involved in determining the movement on an ARM loan include: A) Frequency of change, caps, index, rate B) Rate, caps, index, margin C) Frequency of change, caps, index, margin D) Rate, index, margin, lifetime cap
C) Frequency of change, caps, index, margin
Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under: A) TILA B) Homeowners Protection Act C) HOEPA D) RESPA
C) HOEPA
What was the first law that Congress enacted to combat predatory lending? A) TILA B) Fair Housing Act C) HOEPA D) RESPA
C) HOEPA The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 and was the first legislation specifically created to combat the practice of predatory lending.
Housing counselors must generally be approved by: A) The CFPB B) The Office of Financial Education C) HUD D) The NMLS
C) HUD
Before engaging in a refinance transaction, consumers and mortgage professionals should consider whether the transaction: A) Is for a qualified mortgage B) Has a tangible net benefit to the loan originator C) Has a tangible net benefit to the borrower D) Will reach closing in time for the borrower to use the funds as he or she wishes
C) Has a tangible net benefit to the borrower
If a borrower sells personal property in order to raise money for down payment, and the underwriter questions whether the value of the items sold is realistic, the underwriter may: A) Deny the loan until another source of down payment can be identified B) Take the item in trade for cash value C) Have an appraisal done on the item, or ask for further documentation D) Add the value in question to the loan amount if further documentation cannot be provided
C) Have an appraisal done on the item, or ask for further documentation
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.
Leslee is a loan processor who is not required to perform her duties at the direction of or subject to the supervision and instruction of an individual who is licensed or exempt. Leslee is a(n): A) Registered loan originator B) Mortgage loan originator C) Independent contractor D) Licensed loan processor
C) Independent contractor An independent contractor is an individual who performs his/her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed and registered as required under the SAFE Act or is exempt from licensing. An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless he/she has a mortgage loan originator license.
Appraisers are often pressured by homeowners, originators, or real estate agents to: A) Provide appraisals in as short a time period as possible B) Include the borrower's name on the appraisal C) Inflate the value in order to make the deal work D Provide the names and numbers of former customers
C) Inflate the value in order to make the deal work
A VA loan referred to as an "IRRRL" is an: A) Interest Rate Refinance Return Loan B) Interest Reduction and Refinance Loan C) Interest Rate Reduction Refinance Loan D) Interim Rate Refinance Reduction Loan
C) Interest Rate Reduction Refinance Loan
Which of the following would not be on a deed of trust? A) Legal description B) Loan amount C) Interest rate D) Borrower's name
C) Interest rate
A VA loan that is an IRRRL: A) Is a qualified mortgage, but does not have a conclusive presumption of compliance B) Is a qualified mortgage, and always has a conclusive presumption of compliance C) Is a qualified mortgage, and may have a conclusive presumption of compliance D) Is not a qualified mortgage
C) Is a qualified mortgage, and may have a conclusive presumption of compliance
Information held by the NMLS relating to the employment history or disciplinary actions taken against a mortgage loan originator: A) Is not confidential, but is not available for public access B) Is confidential and is not available for public access C) Is not confidential and is available for public access D) Is confidential, but is available for public access
C) Is not confidential and is available for public access
When a lender on a loan in default is forced to go to court and request an order of foreclosure, this is called: A) Comeuppance B) Equity call C) Judicial foreclosure D) Nonjudicial foreclosure
C) Judicial foreclosure
When a borrower is delinquent, RESPA servicing rules require loan servicers to meet all of the following requirements, except: A) Make live contact with the borrower within 36 days of the delinquency B) Make written contact with the borrower within 45 days of the delinquency C) Make live contact with the borrower within 15 days of the delinquency D) Include information on loss mitigation options in written correspondence regarding the delinquency
C) Make live contact with the borrower within 15 days of the delinquency Delinquency requires live contact within 36 days, and written contact within 45 days that describes loss mitigation options.
After an escrow account is established for an HPML, it: A) May not be canceled B) Will cancel automatically in five years after consummation unless the borrower is in default C) May be cancelled at the borrower's request five years after consummation if the borrower is not currently delinquent or in default and the loan balance is less than 80% of the original value of the home securing the loan D) Will cancel automatically in five years after consummation if the unpaid principal balance is less than 80% of the original value of the home securing the loan
C) May be cancelled at the borrower's request five years after consummation if the borrower is not currently delinquent or in default and the loan balance is less than 80% of the original value of the home securing the loan
Income derived from a rental property would be entered in which section of the URLA? A) Employment Information B) Assets and Liabilities C) Monthly Income and Combined Housing Expense Information D) Borrower Information
C) Monthly Income and Combined Housing Expense Information
If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by: A) $35 B) $10 C) More than $35 D) More than $100
C) More than $35
Which of the following documents connects the promissory note to the collateral? A) Note B) Commitment letter C) Mortgage D) Broker agreement
C) Mortgage A mortgage connects the promissory note (the borrower's promise to pay) with the collateral.
Under Regulation X, the term "loan originator" applies to a: A) Loan processor B) Mortgage broker only C) Mortgage broker or lender D) Mortgage lender only
C) Mortgage broker or lender
Misrepresenting information or intentionally not disclosing material facts necessary for an originator to consider for loan approval is: A) Negligence B) Legal and unethical C) Mortgage fraud D) Redlining
C) Mortgage fraud
The six factors that constitute the definition of an application are: A) Name, address, estimated property value, Social Security number, loan amount, loan type B) Name, Social Security number, address, loan amount, loan type, income C) Name, address, Social Security number, income, estimated property value, loan amount D) Name, Social Security number, income, estimated property value, loan purpose, loan amount
C) Name, address, Social Security number, income, estimated property value, loan amount
All of the following individuals are exempt from requirements to obtain a mortgage loan originator license, except for a person who: A) Extends credit only for timeshare plans B) Negotiates a residential mortgage loan secured by a dwelling that is the individual's residence C) Negotiates the terms of a residential mortgage on behalf of a cousin D) Is an employee of a local government agency and who acts as a loan originator in their official duty as an employee
C) Negotiates the terms of a residential mortgage on behalf of a cousin
Advantages of VA loans include all of the following, except: A) 100% financing B) More lenient underwriting requirements C) No closing costs D) No prepayment penalties
C) No closing costs
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
Wanda had been procrastinating on taking her continuing education courses. As the end of the year approached, she saw a course she had taken the previous year was available. Since she had already mastered the information, she decided to take it again. Will this course count towards her continuing education hours for the current year? A) The course will count as long as Wanda receives her certificate of completion B) The course will count as long as it is an NMLS-approved course C) No, the course will not count towards her continuing education hours D) The course will not count only if it is taught by the same instructor
C) No, the course will not count towards her continuing education hours A state-licensed loan originator may not take the same approved course in the same or successive years to meet the annual continuing education requirement of eight hours of coursework.
Jared is struggling to make payments on a high-cost mortgage. He returns to the mortgage lender that made the loan and applies for a loan modification. If the mortgage lender agrees to modify the loan, it may: A) Charge Jared the same fees that it would charge for a refinance B) Charge a loan origination fee C) Not charge any fees for the loan modification D) Not charge any fees for the loan modification if Jared is in default
C) Not charge any fees for the loan modification HOEPA prohibits creditors, assignees, and agents of these parties from charging any fee to modify, renew, extend, or amend a high-cost home loan, and from charging a fee for payment deferrals.
A mortgagee title insurance policy is NOT A) Based on loan amount B) Transferable C) Optional D) Required by the lender
C) Optional
Which of the following compensation practices is allowed under the Loan Originator Compensation Rule? A) Paying originators a commission for originating a loan at a higher rate than the rate for which the loan applicant qualified B) Allowing a mortgage broker to accept an origination fee from a borrower and a commission from the lender that funds the loan C) Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan D) Implementing a policy that encourages loan originators to originate refinances with prepayment penalties
C) Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan
Property that is transitory and can be moved is known as: A) Real property B) Diminishing property C) Personal property D) Depreciated property
C) Personal property
Finance charges that are withheld from the proceeds of the loan are considered to be: A) P.O.C. charges B) Third-party fees C) Prepaid finance charges D) Periodic interest charges
C) Prepaid finance charges
The FTC Disposal Rule requires a loan originator to use _____ to ensure that unauthorized access to or use of consumer information cannot occur as a result of its disposal. A) Extraordinary measures B) Third-party certified disposal C) Locked cabinets D) Reasonable methods
D) Reasonable methods
The conclusive presumption of compliance applies to: A) Subprime loans that meet the qualified mortgage standards B) Prime and subprime loans that meet the qualified mortgage standards C) Prime loans that meet the qualified mortgage standards D) Fixed-rate prime loans that do not meet the qualified mortgage standards
C) Prime loans that meet the qualified mortgage standards
An individual who is an employee of a depository institution or a subsidiary of a depository institution meets the definition of a loan originator, defined as a(n): A) Licensed mortgage loan originator B) Exempt mortgage loan originator C) Registered mortgage loan originator D) Qualified mortgage loan originator
C) Registered mortgage loan originator
What legislation regulates the proper management of escrow accounts? A) FHA B) Homeowners Protection Act C) Regulation X D) HMDA
C) Regulation X
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 home equity conversion mortgage (HECM) is a type of _____ that is made pursuant to guidelines established by the _____. A) Reverse mortgage/Federal Trade Commission B) Home equity loan/CFPB C) Reverse mortgage/FHA D) Home equity loan/HUD
C) Reverse mortgage/FHA HECMs are reverse mortgages that are offered in compliance with program guidelines set by the FHA and HUD.
When a consumer is preapproved for a line of credit and can use this line freely, making repeat transactions, and can pay it off at any time without closing the line, this is an example of: A) Subordinate lien B) Reverse mortgage C) Revolving debt D) Mortgage
C) Revolving debt
Which of the following is NOT a characteristic of a Tenants in Common form of ownership: A) Equal shares B) Buy at different times C) Right of survivorship D) Ability to will share
C) Right of survivorship
The assignee of a mortgage and note is participating in the: A) Primary lending market B) Capital market C) Secondary mortgage market D) Options market
C) Secondary mortgage market
The process of pooling together similar types of loans to create mortgage-backed securities for sale in the secondary financial markets is called: A) Diversification B) Capitalization C) Securitization D) Collateralization
C) Securitization Securitization is the process of pooling together similar types of loans to create mortgage-backed securities.
A transaction in which the seller provides all or most of the financing is best known as: A) Self-financing B) Owner buy-back C) Seller carry-back D) Rent credit
C) Seller carry-back
A fee that lenders may receive for selling or transferring their right to service a mortgage loan is called: A) Yield spread premium B) Margin C) Service release premium D) Finance charge
C) Service release premium When a lender gives up its right to service a loan through sale or transfer of that loan, the lender may receive a service release premium in exchange for relinquishing its right.
Paid tax liens remain on a credit report for how many years? A) Two B) Five C) Seven D) Ten
C) Seven
The Pois have just closed on their mortgage loan at a formal settlement meeting. What is mortgage loan originator Leilani Luau's responsibility after loan closing? A) She must provide any required re-disclosures B) None; Leilani's tasks are complete C) She must provide another set of disclosures, showing final costs and expenses D) She must record the transaction with the county recorder
C) She must provide another set of disclosures, showing final costs and expenses After loan settlement, there are some cases in which additional disclosures are due, however, these would be provided by the creditor rather than the loan originator.
A _____ is an individual who accepts a fee to falsely claim ownership to a property. A) Straw buyer B) Air buyer C) Straw seller D) Air seller
C) Straw sellerStraw Seller. A person that is hired to take title to and sell a house in name only in order to conceal the identity of the actual seller.
All of the following are common indices used for adjustable rates, except: A) London Interbank Offered Rate B) Cost of Funds Index C) Subordinate Rate Index D) Treasury Bill Index
C) Subordinate Rate Index Common indices include the Treasury Bill Index, the 11th District Cost of Funds Indexes (COFI), or the London Interbank Offered Rate (LIBOR).
Investigations conducted by state licensing authorities may include all of the following, except: A) Interviews with employees of an entity B) Examination of mortgage applications C) Suspension of a license without notice of a right to a hearing D) Scheduling a review of advertising examples used by the licensee
C) Suspension of a license without notice of a right to a hearing As a result of an investigation, state licensing authorities may not suspend a license without making the licensee aware of why an action may be taken and that the licensee may request a hearing.
HOEPA is federal legislation enacted by Congress through amendments to: A) FACTA B) ECOA C) TILA D) HMDA
C) TILA
A mortgage broker originates and closes a mortgage loan, but it is funded by the lender who is purchasing the loan from the originating broker. This is an example of: A) Warehouse lending B) Mortgage brokering C) Table funding D) Wholesale lending
C) Table funding
A wholesale lending arrangement that permits a mortgage broker to originate, close, and fund a loan using a warehouse line of credit is called: A) Warehouse lending B) Table lending C) Table funding D) Warehouse servicing
C) Table funding Table funding essentially allows a broker to act as the lender on the transaction, prior to transferring the loan immediately after closing to the lender that extended the credit line. The credit line used for funding is then replenished.
Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)? A) Email B) Mailed letter C) Telephone D) Faxed letter
C) Telephone
In what area of the Loan Estimate would a borrower be able to see if their loan has a balloon payment? A) The "Projected Payments" table B) The "Comparisons" table C) The "Loan Terms" section D) This is not listed on the Loan Estimate
C) The "Loan Terms" section The Loan Terms section on page 1 of the Loan Estimate includes, among other things, an indication of whether the loan includes a prepayment penalty or a balloon payment.
Which of the following rules requires mortgage professionals to take reasonable steps to ensure that service providers are able to maintain appropriate protection for the privacy of consumer information? A) The Qualified Mortgage Rule B) The ATR Rule C) The Safeguards Rule D) Title X of the Dodd-Frank Act
C) The Safeguards Rule
The term "adjustment frequency" or "adjustment interval" is associated with: A) The spread between a lender's margin and its cost B) The 60-day period after a transfer of servicing that a customer has to send his or her first payment C) The adjustments of an ARM loan D) The percentage amount an ARM can increase from its start rate to its rate ceiling
C) The adjustments of an ARM loan
All of the following requirements are applicable to HECMs, except: A) The loan must be secured by the borrower's principal residence B) The applicant must complete a consumer information session on reverse mortgages loans C) The applicant must not have an existing mortgage on the residence D) The applicant must be at least 62 years old
C) The applicant must not have an existing mortgage on the residence
Under Regulation Z, an advertisement for a home equity line of credit that exceeds the fair market value of a home must include which of the following statements? A) Interest on the portion of the credit that exceeds market value is deductible at 50% of its normal value B) Only a portion of interest that is charged in excess of $10,000 annually is deductible from income taxes C) The borrower should consult a tax advisor regarding deductibility of interest D) The borrower may no longer deduct interest on a home equity line of credit
C) The borrower should consult a tax advisor regarding deductibility of interest
Which of the following would NOT be required if a mortgage company wishes to utilize electronic signatures on required disclosures? A) Borrowers must be given the option to receive the disclosures in paper form B) Borrowers must be able to withdraw their consent to receive the disclosures electronically C) The company must record the IP address from which the documents were accessed D) The company must disclose hardware and software requirements to borrowers
C) The company must record the IP address from which the documents were accessed
Which of the following is true regarding preparation and delivery of the Closing Disclosure? A) The borrower is ultimately responsible for ensuring he receives the Closing Disclosure. B) Creditors may not use settlement agents to provide the Closing Disclosure on their behalf. C) The creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure. D) The settlement agent is ultimately responsible for ensuring that the borrower receives the Closing Disclosure.
C) The creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure.
Loan originator Zena Mendez is preparing an advertisement in which more than one simple interest rate will apply over the term of the loan. In order to be in compliance with Regulation Z, Zena must clearly and conspicuously disclose all of the following, except: A) Each applicable simple annual rate B) The period of time each simple annual rate applies C) The frequency with which the rate will change D) The annual percentage rate for the loan
C) The frequency with which the rate will change
In the absence of caps, adjustments on an ARM loan would be determined solely by: A) The index B) The margin C) The fully-indexed rate D) The lifetime rate
C) The fully-indexed rate
Payments for non-qualified mortgages must be based on: A) The maximum interest rate that will apply over the life of the loan B) The maximum interest rate that will apply during the first five years after the date of the first payment C) The fully-indexed rate D) The introductory rate
C) The fully-indexed rate
When a mortgage or deed of trust contains a power of sale clause: A) The lender can sell the home at its discretion B) A judge must enter an order of foreclosure before the home can be sold C) The lender may foreclose without first obtaining a court order D) The lender is made whole for losses by MIP
C) The lender may foreclose without first obtaining a court order
In addition to information about disciplinary and enforcement action taken against a mortgage loan originator, the NMLS may also make available for public access: A) A mortgage loan originator's home address B) The number of loans originated by a loan originator C) The mortgage loan originator's employment history D) Former clients of the mortgage loan originator
C) The mortgage loan originator's employment history
After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after: A) Five years have passed B) The home is sold to a new owner C) The original VA loan is satisfied D) The original VA loan is moved from his or her name into the name of the assuming borrower
C) The original VA loan is satisfied
Tom, a mortgage loan originator, accepts the Carters' loan application and negotiates the terms of their loan. Mortgages R Us, the lender, prepares all of the required paperwork and arranges for loan closing. Once the documents are signed, Mortgages R Us funds the loan. All of these actions are considered to be part of: A) A consumer credit transaction B) Completion of settlement services C) The origination of a residential mortgage loan D) A state licensing agency's responsibilities
C) The origination of a residential mortgage loan
Which of the following best describes what is considered in the calculation of a borrower's back-end ratio? A) Principal and interest payments B) The cost of credit in relation to the value of the loan C) The total amount of monthly payments made on long-term debt carried by the consumer D) Only non-housing consumer debt, such as credit card payments and auto loan payments
C) The total amount of monthly payments made on long-term debt carried by the consumer The back-end ratio is the total amount of monthly payments made on long-term debt carried by the consumer, such as car loans, student loans, and other debt in addition to housing expenses.
The process of releasing a lien on a property is called: A) Deliening B) Title restoration C) Encumbrance D) Reconveyance
D) Reconveyance
The back-end ratio compares: A) Monthly mortgage payments to monthly gross income B) Total monthly housing expenses (including principal, interest, taxes, and insurance) to monthly gross income C) Total monthly debts (including housing expenses plus other debts) to monthly gross income D) Total monthly debts unrelated to housing expenses to monthly gross income
C) Total monthly debts (including housing expenses plus other debts) to monthly gross income
How many total hours of ethics are required, at minimum, for continuing education? A) Three B) Eight C) Two D) Eleven
C) Two
What is the maximum cushion that servicers can hold in a borrower's reserve account? A) Two months' taxes, one month insurance B) One month taxes, one month insurance C) Two months' taxes, two months' insurance D) Whatever the lender deems as "reasonable under the circumstances"
C) Two months' taxes, two months' insurance
The generally-accepted appraisal standards in the United States are known as: A) ASB B) USASB C) USPAP D) FinCEN
C) USPAP The Uniform Standards of Professional Appraisal Practice (USPAP) are the recognized standards for appraisals in the United States.
The term "maximum guaranty amount" applies to _____ loans, and it refers to _____. A) FHA; the lending limit B) Fixed-rate; the maximum amount that a bank can lend to a particular consumer C) VA; the maximum amount that the VA will pay to a lender if the borrower defaults on a loan D) VA; the maximum amount that a lender can loan to a veteran in a transaction for a home purchase
C) VA; the maximum amount that the VA will pay to a lender if the borrower defaults on a loan
The right to rescind is one that consumers may: A) Not waive B) Waive if they notify the creditor at the time of the loan application that they wish to do so C) Waive if they do so in writing in order to meet a bona fide financial emergency D) Waive if they complete a printed form
C) Waive if they do so in writing in order to meet a bona fide financial emergency
Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and calls the originator that day to let them know it was received and they would like to move forward, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal? A) Saturday B) Thursday C) Wednesday D) Friday
C) Wednesday
A rent credit is used in a purchase transaction: A) If the seller is "renting back" after closing until he/she is ready to move into the new home B) If the buyer has to rent a place to live until the purchase is settled C) When the seller credits a portion of previous rent paid as a source of down payment D) When there is a delay in settling, and the builder is forced to put the buyer up in a hotel
C) When the seller credits a portion of previous rent paid as a source of down payment
According to the standard deed of trust, how soon must a borrower on an owner-occupied loan occupy the property? A) Within 30 days of closing B) Within 90 days of closing C) Within 60 days of closing D) Within 15 days of closing
C) Within 60 days of closing
An assumption clause A) allows the seller to reassume the mortgage if the buyer falls behind in his payments. B) assumes the buyer has the ability to repay the loan based on his credit score. C) allows a buyer to assume the seller's mortgage. D) allows the buyer to sell the mortgage without requiring the seller's authorization.
C) allows a buyer to assume the seller's mortgage.
UFMIP is paid: A) in full when the loan reaches maturity. B) at the end of each year of the loan term. C) in full at the time of closing. D) at the end of each month.
C) in full at the time of closing. UFMIP is paid in full at the time of closing, or may be financed.
A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this? A) Adjustable-rate B) FHA buy-down C) Option ARM D) Fixed-rate
D) Fixed-rate The loan has a rate of 6% for 30 years, meaning it has a fixed rate. This loan has an interest-only feature for the first five years.
When a homeowner allows his/her insurance to lapse, what can the lender do to insure the property? A) Mortgage insurance B) State-placed insurance C) Optional credit life D) Force-placed insurance
D) Force-placed insurance
For the purposes of issuing a revised Loan Estimate, "changed circumstances" that affect estimated settlement charges must result in a change to those charges of more than: A) 5% B) 1% C) Any amount D) 10%
D) 10%
If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation. A) 7 B) 10 C) 20 D) 15
D) 15
How are FHA loan limits established? A) The FHFA establishes loan limits for FHA loans B) The FHA uses loan limits based on CFPB loan limit guidance C) Loan limits are set by Ginnie Mae D) HUD establishes loan limits for FHA loans based on county-by-county conforming limits
D) HUD establishes loan limits for FHA loans based on county-by-county conforming limits
A borrower obtains an ARM with a start rate of 2.5% and a periodic rate cap of 1%. The loan adjusts four times. After the fourth adjustment, the rate is expected to be 6.5%. However, due to the lifetime cap on the loan, the rate is not permitted to exceed 5%. What is the lifetime rate cap? A) 1% B) 3.50% C) 5% D) 2.50%
D) 2.50% The lifetime cap limits the maximum amount by which the rate on an ARM may increase. Here, the rate is not permitted to exceed 5%. To determine the lifetime rate cap, subtract the start rate (2.5%) from the maximum rate (5%). This results in the lifetime rate cap of 2.5%.
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 borrower makes $60,000 per year. The borrower's spouse makes $3,000 per month. The borrowers' monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple's back-end DTI? A) 30.6% B) 31.25% C) 32.5% D) 29.38%
D) 29.38%
A balloon mortgage has a: A) Short-term payment that can go up or down from month to month throughout the life of the loan B) Payment that grows with each month as equity decreases C) Large payment required at the onset of the loan and periodic payments thereafter D) 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time
D) 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time A balloon mortgage requires the borrower to make one large payment at the end of a loan term. This payment may also be referred to as a "call," a "demand," or a "bullet." It often has a 30-year amortization, but is typically due in 5, 7, 10, or 15 years.
A borrower has a car payment of $350, a credit card payment of $50, HOA dues of $35, a monthly cable bill of $40, and a house payment (including taxes and insurance) of $1,250. The borrower's annual income is $50,000. What is the borrower's front-end debt-to-income ratio? A) 41.4% B) 30% C) 40.4% D) 30.8%
D) 30.8% Remember, Non-housing-related expenses (car payments, credit cards, etc.) are not included in the housing ratio.
Debt ratios for an FHA loan are: A) 31% / 41% B) 28% / 36% C) 28% / 41% D) 31% / 43%
D) 31% / 43% The general debt ratios for an FHA loan are 31% housing, and 43% total debt.
Direct RHS loans may have terms of _____ years. A) 15 and 30 B) 21 or 29 C) 30 and 40 D) 33 or 38
D) 33 or 38
The preferred debt-to-income ratio for applicants for VA loans is: A) 35% B) 43% C) 50% D) 41%
D) 41% The preferred DTI ratio for VA loans is 41%. However, if a veteran cannot meet this limit, creditors may use a residual income analysis.
A conventional deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days? A) 30 days B) 90 days C) 45 days D) 60 days
D) 60 days
Which of the following may be a qualified mortgage? A) A 30-year adjustable-rate mortgage loan granted to a borrower with a debt-to-income ratio of 45% B) A 40-year fixed-rate mortgage C) A 35-year fixed-rate mortgage with points and fees equaling 3.75% of the loan amount D) A 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan
D) A 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan
Which of the following borrowers is best suited for an HECM? A) A borrower who needs money for several home improvement projects B) A 62-year old borrower who just cashed in a 401k for a down payment C) A borrower who was disabled during service for the military D) A 65-year-old borrower without a mortgage who would like to supplement his income
D) A 65-year-old borrower without a mortgage who would like to supplement his income
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
Which of the following statements accurately describes the APR threshold used to identify loans regulated by HOEPA? A) A first-lien loan with an APR that is 10 percentage points above Treasury securities with a comparable rate B) A subordinate-lien loan with an APR that is 8 percentage points above the rate for Treasury securities with a comparable rate C) A subordinate-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions D) A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions
D) A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions
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
Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information? A) Former owners of a particular property B) The street address of the property a borrower intends to purchase C) The assessed value of a subject property D) A loan applicant's current loan balances
D) A loan applicant's current loan balances
A conditional refinance provision might be a feature of what type of loan? A) Option ARM B) 15-year fixed C) Interest-only ARM D) Balloon
D) Balloon A balloon loan may be eligible for refinance if it carries a conditional refinance provision. This means the loan may qualify for refinance if certain conditions are met, including: borrower must live in the house; no second liens in place; must be current and not have been late in 12 months; new rate cannot exceed 5% over the note; docs must be signed and fees paid.
Which of the following is NOT true about the financial responsibility of a mortgage loan originator? A) The penal sum of a surety bond must reflect the dollar amount of loans originated B) A sponsored mortgage loan originator may be covered under the sponsoring licensee's surety bond C) If a mortgage loan originator pays into a state fund established to pay claims of consumers, he or she is not required to maintain a surety bond D) A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year
D) A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year
For which of the following does rescission not exist? A) A refinance of a principal residence B) Opening a home equity line of credit C) A refinance in which a husband has requested a rescission waiver without his wife's signature D) A purchase of a principal residence with a conventional loan
D) A purchase of a principal residence with a conventional loan Rescission does not exist for a purchase of a principal residence with a conventional loan.
Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice? A) Information on the credit reporting agency if the adverse action is based on his credit report B) Reasons for the denial of credit C) His credit score D) A referral to another potential creditor
D) A referral to another potential creditor
What is the best definition of an Initial Escrow Statement? A) A statement of the amount of escrow the borrower must bring to the closing table B) A disclosure that explains escrow to the borrower C) A statement provided to the borrower following the first payment of any charges from the escrow fund D) A statement of the estimated taxes, insurance premiums, and other charges the borrower will pay from the escrow fund during the first 12 months of the loan
D) A statement of the estimated taxes, insurance premiums, and other charges the borrower will pay from the escrow fund during the first 12 months of the loan
The term "table funding" refers to: A) A situation in which a loan without a rescission period closes and funds the same day B) A situation in which a loan funds and is returned to the lender because of a borrower refusing to sign at the table C) The funding of pools of loans that create securitization D) A type of lending arrangement where brokers are permitted to originate, close, and fund loans using the lender's warehouse line of credit
D) A type of lending arrangement where brokers are permitted to originate, close, and fund loans using the lender's warehouse line of credit
Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence? A) Insurance on the property B) How quickly a borrower must occupy the property C) Keeping hazardous substances on the property D) Actual amounts for taxes and insurance
D) Actual amounts for taxes and insurance The mortgage or trust deed secures repayment of the note. Its covenants address topics that include occupancy, insurance, and hazardous materials, but it does not typically specify actual amounts for taxes and insurance.
An advertisement placed by Buster Posey contains a trigger term. As required, Buster has also provided the required additional disclosures. These include all of the following, except the: A) Amount or percentage of the down payment B) Terms of repayment C) Annual percentage rate D) Amount of the finance charge
D) Amount of the finance charge Additional disclosures required in an ad containing a trigger term include the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. The amount of the finance charge is a trigger term, not a required additional disclosure.
Which of the following features would be permitted for a non-qualified mortgage, but not for a qualified mortgage? A) A term of 15 years B) An adjustable interest rate C) A debt-to-income ratio of 43% D) An interest-only option
D) An interest-only option
It is a violation of TILA for a loan originator to collect _____ before providing a loan applicant with _____. A) A fee for a credit report/a Loan Estimate B) An origination fee/a Closing Disclosure C) Information on income and assets/a Good Faith Estimate D) An origination fee/a Loan Estimate
D) An origination fee/a Loan Estimate
All of the following are true regarding the origination of non-qualified mortgages, except: A) Non-QMs may include features such as balloon payments or negative amortization B) Borrowers are not held to the 43% debt-to-income ratio limitation C) Non-QMs may include features such as interest-only payments or payment-option provisions D) Analysis of borrower repayment ability is not required
D) Analysis of borrower repayment ability is not required
Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to complete a loan application? A) A state-licensed loan originator B) An unlicensed loan processor C) An unlicensed underwriter D) Any of these
D) Any of these However, loan processors or underwriters may not take applications or offer, negotiate, or counsel the consumer about residential loan rates or terms; only licensed loan originators are permitted to do so.
Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan? A) All five B) A majority of the five C) At least two of the five D) Any one of the five
D) Any one of the five Any one of the five siblings would be able to rescind the loan on their own, as each has an ownership interest in the property and therefore has the right to rescind.
If a loan originator license needs amending due to a change of address, the Commissioner would be made aware: A) Through submission of documents by the sponsoring employer B) At the next renewal date C) Only if the address affects the business, not the residence of the loan originator D) As soon as is determined in accordance with state regulator notification requirements
D) As soon as is determined in accordance with state regulator notification requirements A change which renders the initial application inaccurate must be made known to the NMLS and the Commissioner through an updated Individual Form.
A 180 / 360 loan is considered a(n) ___________________ mortgage. A) Adjustable-rate B) Pay-option C) Hybrid D) Balloon
D) Balloon
Lisa and Ryan are moving out of state and have sold their home. Unfortunately, the closing on their old home is not for another two months, and they need funds to begin making payments on their new home, which they have closed on and plan to move into immediately. Their lender is likely to suggest that they secure: A) A construction-to-permanent loan B) A subprime loan C) An interest-only loan D) Bridge financing
D) Bridge financing Bridge financing is used to help homeowners who are selling one home and buying another to make payments on their new home loan while waiting for the closing date on their old home to arrive.
Oversight for FCRA is shared between the FTC and: A) Federal Reserve B) HUD C) TILA D) CFPB
D) CFPB
Which of the following federal agencies is responsible for the enforcement of Regulation B? A) FTC B) FDIC C) NCUA D) CFPB
D) CFPB
What is required of a veteran to obtain a VA loan? A) Approval for mortgage insurance premium B) 3.5% down payment C) Eligibility fee D) Certificate of Eligibility
D) Certificate of Eligibility
Loan Prospector can NOT be used for which type of loans? A) Conventional B) VA C) FHA D) Commercial
D) Commercial
An underwriter examines title documents for issues that may cloud the title or affect marketability. All of the following are items that may affect title, except: A) Easements B) Land locks C) Leaseholds D) Completion notice
D) Completion notice
Two types of loans used to finance the construction of a property are: A) Pre-construction and full construction B) Fully-amortized and interest-only C) Interim and permanent construction D) Construction-to-permanent and stand-alone construction
D) Construction-to-permanent and stand-alone construction
LL Mortgage Company is advertising "120% LTV Home Equity Loans!" In order to ensure compliance with Regulation Z, which of the following statements is also required? A) Shop for options with lower loan-to-value ratios B) Interest on high loan-to-value ratios is not deductible C) Interest on the portion of credit exceeding market value is deductible at 50% of the normal value D) Consult a tax adviser regarding deductibility of interest
D) Consult a tax adviser regarding deductibility of interest
Which of the following is not a required element of a company's safeguard policy, as required by the GLB Act? A) Designate one or more employees to coordinate safeguards B) Evaluate and adjust procedures in light of relevant circumstances C) Select appropriate service providers and contract with them to implement safeguards D) Contract with a federally-insured company to destroy documents
D) Contract with a federally-insured company to destroy documents
n a title theory state, title to residential real estate is granted with a _____, naming the lender as the beneficiary of the trust, the borrower as the trustor, and the third party that holds the deed until the loan is fully paid as the _____. A) Mortgage / assignee B) Deed of trust / assignor C) Mortgage / trustor D) Deed of trust / trustee
D) Deed of trust / trustee
Oskar is being licensed in a state that requires each loan originator to be covered by a surety bond. Upon approval of his license application, he will be employed by the Half Nelson Mortgage Brokerage. Who is required to provide Oskar's surety bond? A) Oskar B) Half Nelson Mortgage Brokerage C) Both Oskar and Half Nelson D) Either Oskar or Half Nelson
D) Either Oskar or Half Nelson
When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred? A) Never - this disclosure is not required B) Within 30 days of the transfer of servicing C) Within 15 days of the transfer of servicing D) Either at the time of application or within three business days of application
D) Either at the time of application or within three business days of application
April Byrd's work in the mortgage industry requires her to work at a specific location and be present at specific hours in exchange for a salary. April is a(n): A) Independent contractor loan processor B) Loan processor consultant C) Exclusive agent D) Employee
D) Employee
Securitization helps lenders to: A) Make more loans to lesser-qualified customers B) Increase the menu of products available to their customers C) Provide funds to the highest bidder on the secondary market D) Exchange active loans to another entity for new funds for more loans
D) Exchange active loans to another entity for new funds for more loans
What clause in the mortgage prevents the lender from recovering additional assets from the mortgagor if there is a shortfall in the foreclosure proceeds? A) Forbearance B) Escalation C) Acceleration D) Exculpatory
D) Exculpatory
Originators who mislead borrowers about the contents of their credit histories and/or their credit scores in an effort to steer them into disadvantageous loans are in violation of: A) ECOA B) FHA C) HPA D) FCRA
D) FCRA Failing to give borrowers accurate information about their credit in an effort to steer them into a loan they may be overqualified for is an ethical and legal violation of the Fair Credit Reporting Act
Which of the following fees is not included in the calculation of the finance charge for a mortgage? A) Origination fees charged by the creditor B) Charges for title work by an affiliate of the creditor C) Use of a closing attorney required by the creditor D) Fees charged by an unaffiliated appraiser
D) Fees charged by an unaffiliated appraiser
The TRID Rule's zero tolerance for variances between estimated and actual charges applies to which of the following fees? A) Fees paid to non-affiliated third-party settlement service providers chosen by the borrower and not included on the creditor's recommended list of providers B) Fees paid for prepaid interest C) Fees paid to third-party providers of optional insurance products, such as credit life and credit disability insurance D) Fees paid to a creditor
D) Fees paid to a creditor
Which of the following is not a consideration when determining the financial responsibility of a licensee? A) Net worth B) Surety bond or state fund C) Credit score D) Felony convictions of company officers
D) Felony convictions of company officers While felony convictions are certainly a consideration in determining license eligibility, it is not considered in determining financial responsibility.
Which of the following is offered on conventional mortgages? A) UFMIP B) Guarantee fee C) COE D) PMI
D) PMI
A loan processor or underwriter is exempt from licensure under all of the following circumstances, except: A) He/she is employed with a licensed mortgage broker B) He/she is employed with an exempt mortgage lender C) He/she does not represent to the public that he/she can perform any of the activities of a loan originator D) He/she takes applications on behalf of the loan originator
D) He/she takes applications on behalf of the loan originator A processor and/or underwriter may only maintain exempt status from licensure if engaged solely in clerical or support duties while employed with either a licensed or exempt entity. Under no circumstances may a processor or underwriter engage in the activities of a loan originator.
The general purpose of borrower credit is to: A) Allow a broker to spread closing costs evenly between borrower and lender B) Allow the lender to minimize the fees they charge C) Provide the broker with an additional source of income D) Help the borrower cover or reduce the costs of settlement
D) Help the borrower cover or reduce the costs of settlement
A covered loan under HOEPA is commonly known as a: A) Non-prime B) Non-conventional C) Low-cost, high-fee D) High-cost mortgage
D) High-cost mortgage Section 32 of the Truth-in-Lending Act contains information and provisions with regard to high-cost mortgage loans. These loans are identified by APR, points and fees, and/or prepayment penalties that meet or exceed thresholds set to a level deemed excessive.
William is licensed in a state that does not provide a time period in which to make up continuing education deficiencies. Since William did not complete his required eight hours, what will happen to his license? A) He will be issued a conditional license B) He may apply for an interim license C) His license will be revoked D) His license will expire
D) His license will expire
When would it be ethical for a mortgage broker to offer a loan with a rate higher than the best rate available to the borrower? A) Never B) Only when the borrower is unaware and will likely not know C) If the lender agrees to subsidize the broker fee D) If the borrower chooses the rate and plans to use the additional premium to offset closing costs
D) If the borrower chooses the rate and plans to use the additional premium to offset closing costs
It is ethical for a mortgage broker to offer a loan at a rate higher than the best rate available to the borrower: A) Never B) Only when the borrower is unaware and will likely not know C) If the lender agrees to subsidize the broker fees D) If the borrower chooses the rate in order to secure a borrower credit for closing costs
D) If the borrower chooses the rate in order to secure a borrower credit for closing costs
With respect to FHA loans, the FHA: A) Guarantees the loans, thereby protecting the lender B) Acts as the lender C) Issues private mortgage insurance D) Insures the loans, thereby protecting the lender
D) Insures the loans, thereby protecting the lender
Which of the following best describes the order in which payments will be applied according to the standard deed of trust? A) Interest, escrow, principal B) Principal, escrow, interest C) Late fees, principal, interest D) Interest, principal, escrow
D) Interest, principal, escrow
An investigator spends three weeks researching Steve Sample, who is applying for a job. He meets Steve's neighbors, current co-workers, and former teachers and mentors. After interviewing upwards of 30 individuals, the investigator submits his report to the company considering Steve for a position. This is an example of: A) FBI mortgage fraud investigation B) CRA disclosure C) Private investigation methodology D) Investigative consumer report
D) Investigative consumer report
All of the following are included within the authority of the Commissioner, except: A) Enter a cease and desist order B) Order restitution and monetary penalties C) Subpoena witnesses and documents D) Issuing an order to a former employer of a loan originator to turn over records
D) Issuing an order to a former employer of a loan originator to turn over records
Each of the following is true about the Department of Housing and Urban Development (HUD), except: A) The Federal Housing Administration, with its liberal-eligibility FHA loan programs, operates under HUD's authority B) It provides or makes referrals related to housing counseling for loan applicants seeking a HECM or high-cost home loan C) Public housing and multi-family housing fall under its purview D) It has a major role in overseeing the mortgage industry
D) It has a major role in overseeing the mortgage industry No longer oversees the mortgage industry, has been taken over by the Consumer Financial Protection Bureau, or CFPB
Which of the following is not a characteristic of an HPML? A) It is secured by the borrower's principal dwelling B) It has an APR that exceeds the average prime offer rate by 1.5 percentage points for a loan secured by a first lien on the home C) It has an APR that exceeds the average prime offer rate by 3.5 percentage points for a loan secured by a subordinate lien on the home D) It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points
D) It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points
How often must a borrower renew owner's title insurance? A) With each refinance B) When the house is sold to the next owner C) Owner's title insurance expires every seven years D) It is not necessary to renew
D) It is not necessary to renew Owner's title insurance is good for the period of time that a borrower owns the home, meaning it must only be purchased once and does not require renewal.
Which of the following is not true concerning ECOA? A) It requires lenders to notify loan applicants of their application status within 30 days B) Its provisions are implemented by Regulation B C) It requires lenders to give borrowers a copy of their appraisal and a notice stating they are entitled to a copy of the appraisal D) It requires the disclosure of the APR on all advertisements which contain an interest rate
D) It requires the disclosure of the APR on all advertisements which contain an interest rate
The Truth-in-Lending Act is intended to help consumers by: A) Regulating creditors and the rates they can provide B) Investigating predatory lending C) Limiting the closing costs a broker can charge D) Providing the consumer with information on the cost of credit
D) Providing the consumer with information on the cost of credit
Which of the following are considered liens? A) Judgment, mortgage, flood insurance B) Mortgage, mechanic's lien, debentures C) Chattel, mortgage, attachment D) Judgment, attachment, mortgage
D) Judgment, attachment, mortgage A chattel mortgage is a loan arrangement in which an item of movable personal property acts as security for a loan. The movable property, or chattel, guarantees the loan, and the lender holds an interest in it. This differs from a conventional mortgage in which the loan is secured by a lien on real stationary property. Vehicles, airplanes, boats, farm equipment, and manufactured homes are all good examples of assets that are often financed using chattel mortgages.
Jake Pearson applies for a loan with TNT Mortgage on June 1. TNT is required to inform Jake whether it has approved his loan by: A) June 4th B) June 15th C) July 15th D) June 30th
D) June 30th The Equal Credit Opportunity Act requires lenders to inform applicants of the status of their loan within 30 days of application.
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
Which of the following would not be required for an adjustable-rate home equity plan? A) What You Should Know about Home Equity Lines of Credit B) Disclosure of APR, fees, and transaction requirements C) Disclosure of frequency of APR changes and a description of how the APR will be determined D) Loan Estimate and Closing Disclosure
D) Loan Estimate and Closing Disclosure A Loan Estimate and Closing Disclosure would not be required for an adjustable-rate home equity plan, because this type of loan is exempt from the requirements of the TRID Rule.
The diligent matching of loan programs with the current financial circumstances of each customer is known as: A) Tangible net benefit B) Loan standards C) Finance corroboration D) Loan suitability
D) Loan suitability
The reporting form used to communicate HMDA data is called what? A) 1073 B) Loan/Registration Application C) 1004 D) Loan/Application Register
D) Loan/Application Register
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
Which of the following statements describes a lending practice that is prohibited by HOEPA and its implementing regulations? A) Originating a subprime mortgage B) Redlining and reverse redlining as a standard company policy C) Offering prime mortgages to borrowers in the subprime mortgage market D) Making a lending decision based solely on the amount of equity in a loan applicant's home
D) Making a lending decision based solely on the amount of equity in a loan applicant's home
Which of the following is not permitted for a HOEPA loan? A) Documenting a borrower's ability to repay the loan B) Requiring a balloon payment after the first five years C) Refinancing into another HOEPA loan within 12 months if it is in the borrower's best interest D) Making a loan solely based on the collateral value of the property
D) Making a loan solely based on the collateral value of the property Under HOEPA, you may not make a loan solely based on the value of the borrower's collateral without considering his/her ability to repay the loan.
A misleading representation, omission, act, or practice is considered deceptive when, among other conditions, it is: A) Malicious B) Repeated C) Intentional D) Material
D) Material
"MBS" stands for: A) Mortgage borrowing standards B) Mortgage balance subordination C) Mortgage beneficiary securitization D) Mortgage-backed securities
D) Mortgage-backed securities
Frank Stein is a loan originator for a county housing finance agency whose function is to help meet the affordable housing needs of the residents of the state. Is Frank required to be licensed under the S.A.F.E. Act? A) He is not required to be licensed if he is registered B) Yes, all loan originators must be licensed C) He must be licensed only if he represents he can and will perform the services of a mortgage loan originator D) No, he is exempt from the requirement to be licensed
D) No, he is exempt from the requirement to be licensed A state is not required to license an individual who is an employee of a federal, state, or local government agency or housing finance agency who acts as a loan originator in the course of his/her employment.
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
Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will: A) Be required because the seller acquired the home 90 days prior to the date that Nicole agreed to purchase the home B) Be required if there is any evidence that the sale constitutes property flipping C) Not be required unless Nicole has agreed to purchase it for 20% more than the Marine paid D) Not be required since purchases from servicemembers are not subject to the requirement for two appraisals
D) Not be required since purchases from servicemembers are not subject to the requirement for two appraisals
A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relates to the applicant that the interest on the loan is tax deductible. This is: A) Permissible, as the interest on any loan secured by real estate is tax deductible B) Permissible, as the interest on any home equity loan is tax deductible C) Not permissible, as the advice is wrong D) Not permissible, as the loan originator is not qualified to provide tax advice
D) Not permissible, as the loan originator is not qualified to provide tax advice
Which of the following fees must be included in the calculation of finance charges? A) Appraisal fees B) Seller's points C) Credit reporting fees D) Origination fees
D) Origination fees TILA requires charges for origination fees to be included when calculating the finance charge.
Which of the following is NOT true with regard to TILA disclosures? A) Disclosure rules differ depending on whether the credit being offered is open-end or closed-end B) Everyone with ownership interest receives rescission notices C) Special disclosures are required for adjustable-rate mortgages D) Rules for disclosure are the same whether credit is open-end or closed-end
D) Rules for disclosure are the same whether credit is open-end or closed-end
Two federal laws that relate to the confidentiality of personal financial information are: A) Safeguards Rule and RESPA B) RESPA and FTC Disposal Rule C) FTC Disposal Rule and FNMA Application Rule D) Safeguards Rule and FTC Disposal Rule
D) Safeguards Rule and FTC Disposal Rule
Sally and Ben have lived in their home for ten years and are considering shortening their term. Which of the following appraisal approaches would be best? A) Income approach B) Cost approach C) Market comparison approach D) Sales comparison approach
D) Sales comparison approach
When a loan originator accepts a referral fee from a real estate agent, both are in violation of what section of RESPA? A) Section 10 B) Section 12 C) Section 6 D) Section 8
D) Section 8 Section 8 of RESPA deals with the prohibition against giving or receiving anything of value pursuant to an agreement or understanding.
On which portion of the loan application would one find a street address and legal description of the property? A) Section X B) Section XV C) Section III D) Section II
D) Section II
Which of the following is the least-expensive type of reverse mortgage? A) HECM B) Proprietary mortgage C) Non-recourse D) Single purpose
D) Single purpose A single-purpose reverse mortgage is a low-cost loan offered to low-income borrowers by state and local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.
Typical violations of advertising provisions include the use of trigger terms without: A) Allowing the borrower to choose another alternative B) Giving the borrower a chance to choose his/her own service provider C) Explaining to the borrower how the originator is compensated D) Stating the less advantageous terms of repayment
D) Stating the less advantageous terms of repayment The use of a trigger term in advertising requires the additional disclosure of the less advantageous terms of the agreement, like balloon payments, negative amortization, or interest only payments.
Under the S.A.F.E. Act, states and their regulatory agencies have the duty and the authority to enact licensing standards that meet the requirements of the Act, while overall responsibility for interpretation, implementation, and compliance currently lies with: A) The NMLS B) The Federal Reserve C) HUD D) The CFPB
D) The CFPB
Which of the following is responsible for determining whether to issue a license approval? A) The NMLS B) The Governor C) The Legislature D) The Commissioner
D) The Commissioner
Which law entitles an applicant to a copy of his property appraisal report? A) Homeowner's Protection Act B) The Fair and Accurate Credit Transaction Act C) Truth-in-Lending D) The Equal Credit Opportunity Act
D) The Equal Credit Opportunity Act
Which law requires the interviewer to complete the Government Monitoring section on the 1003? A) Homeowner's Protection Act D) The Equal Credit Opportunity ActB) The Fair and Accurate Credit Transaction Act C) Truth-in-Lending D) The Equal Credit Opportunity Act
D) The Equal Credit Opportunity Act
Once a loan application is received, a creditor may not require additional information or verification until: A) The Closing Disclosure is provided B) The origination fee is paid C) The loan closes D) The Loan Estimate is provided
D) The Loan Estimate is provided Once an application is received, a creditor must issue the Loan Estimate to a loan applicant and may not require additional information or verification until that document is provided.
For which of the following reasons may a state deny an application for licensure? A) The applicant had an insurance license in another state that wasn't renewed two years prior to application B) The applicant has current outstanding judgments as a result of medical expenses C) The applicant was convicted of vandalism eight years prior to application D) The applicant had a property foreclosed two years prior to application
D) The applicant had a property foreclosed two years prior to application In order for a state to approve a license application, the applicant must show that he/she has not been convicted of, or pled guilty or nolo contendere to, any felony in any court during the seven-year period preceding the date of the application; or at any time if the felony involved an act of fraud, dishonesty, or a breach of trust or money laundering. Indications of financial irresponsibility include bankruptcy or pattern of bankruptcies, a foreclosure within the past three years, any unpaid judgments (other than those relating to medical expenses), tax or other government liens, or a pattern of paying creditors late.
For which of the following reasons would it be permissible to refuse to take an application from a potential borrower? A) The applicant has poor credit and you do not feel there is any way that he will meet lender guidelines B) You do not "click" with the applicant and would rather not do business with him C) The lender does not accept applications from the neighborhood where the applicant lives D) The applicant has alluded to the fact that he is submitting false documents in order to qualify for a larger loan
D) The applicant has alluded to the fact that he is submitting false documents in order to qualify for a larger loan
Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT: A) The loan satisfies the requirements of a balloon payment qualified mortgage B) A nine-month bridge loan is obtained for the construction of the borrower's primary dwelling C) The borrower's income is seasonal D) The borrower signs a waiver consenting to the balloon payment
D) The borrower signs a waiver consenting to the balloon payment
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
A lender originally discloses an APR of 6.08%. When the lender begins to prepare closing documents, they realize the actual APR is 6.135%. Which of the following is true? A) The lender must re-disclose and wait three business days from mailing the disclosures before closing the transaction B) The lender must re-disclose and wait three business days from the borrower's receipt of the disclosures before closing the transaction C) The lender must re-disclose and wait six calendar days from mailing the disclosures before closing the transaction D) The lender has no obligation to re-disclose
D) The lender has no obligation to re-disclose The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements
How is the margin determined? A) The broker determines margin based on the commission structure on the loan B) The lender sets the margin by choosing an index to tie it to C) The borrower chooses which margin he or she prefers D) The lender sets the margin based on its costs and sought-after profit margin
D) The lender sets the margin based on its costs and sought-after profit margin
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
A revised Loan Estimate is required when: A) There is any change in circumstances B) Interest rates drop C) Interest rates increase D) The loan applicant locks his or her interest rate
D) The loan applicant locks his or her interest rate
Payments for qualified mortgages must be based on: A) The maximum interest rate that will apply over the life of the loan B) The fully-indexed rate C) The introductory rate D) The maximum interest rate that will apply during the first five years after the date of the first payment
D) The maximum interest rate that will apply during the first five years after the date of the first payment
According to the HPML Rule, which of the following transactions would require a second appraisal? A) A higher-priced mortgage loan that also meets qualified mortgage standards B) The purchase price is 10% higher than the seller's acquisition price 100 days ago C) All higher-priced mortgage loans are required to have two appraisals D) The purchase price is 20% higher than the seller's acquisition price 150 days ago
D) The purchase price is 20% higher than the seller's acquisition price 150 days ago According to the HPML Rule, a transaction will require a second appraisal if the purchase involves a possible case of "loan flipping." This is true when the consumer's purchase price is 10% more than the seller's acquisition price (if the seller acquired the property 90 or fewer days ago) or 20% more than the seller's acquisition price (if the seller acquired the property 91 to 180 days ago).
The size of the government's guarantee on a VA loan depends on: A) Whether the interest rate is fixed or adjustable B) Whether this is the first time a veteran uses the guarantee or a subsequent transaction C) The length of the loan term D) The size of the loan being obtained
D) The size of the loan being obtained
If a borrower waives the right to receive a copy of an appraisal: A) They must receive a copy within 30 days of closing B) The lender is never required to give the borrower a copy of the appraisal C) They must receive a copy seven days before closing D) They must receive a copy at or before consummation
D) They must receive a copy at or before consummation
If a consumer contacts a mortgage company, for how long does the established business relationship exemption exist? A) Nine months B) Six months C) 24 months D) Three months
D) Three months
Which of the following fees would NOT be used in calculating the APR? A) Closing fee B) Underwriting fee C) Mortgage insurance D) Title insurance
D) Title insurance
All of the following are included in the calculation of the APR, except: A) Underwriting fees B) Buy-down fees C) Origination fees D) Title insurance fees
D) Title insurance fees In addition to charges paid over the term of the loan (e.g., interest and mortgage insurance premiums paid over the loan's term), the calculation of the APR includes many prepaid finance charges, including, among others, underwriting fees, buy-down fees, and origination fees. However, some fees are not included in the prepaid finance charges used in APR calculations, including title insurance fees.
Which of the following describes a state where the lender holds legal title until the debt is paid? A) Lien theory B) Conveyance theory C) Due-on-sale clause D) Title theory
D) Title theory In a title theory state, the lender holds legal title until the debt is paid, which, in theory, means the lender actually owns the home until the borrower has paid the mortgage.
Why might a borrower take a piggyback loan? A) To avoid MIP B) To get a lower rate on his or her first mortgage C) To shorten the term of his or her first mortgage D) To limit the cash necessary to bring to the table
D) To limit the cash necessary to bring to the table A borrower may take on a piggyback loan to avoid mortgage insurance, but not "MIP," because that is required for FHA loans.
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
How long must flood insurance be in place? A) The borrower can cancel at 80% of the loan balance B) Until the loan reaches the halfway point in the amortization table C) It cannot be canceled as long as the property remains in a mandatory flood zone D) Until the loan balance is completely paid off
D) Until the loan balance is completely paid off Flood insurance must stay in place at least until the loan balance is paid off and the lender no longer needs to be protected from the hazard.
Under the GLB Act, a customer relationship is established: A) As soon as a borrower inquires about a loan B) When the borrower's loan is funded C) Once the loan servicing begins D) Upon application
D) Upon application
A shrubbery hedge is one example of an: A.) Encumbrance B.) Easement C.) Entitlement D.) Acceptable title impediment
D.) Acceptable title impediment
As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs. A) FNMA B) FinCEN C) FHLMC D) FHFA
HERA created and installed the FHFA (Federal Housing Finance Agency) as the conservator of the GSEs (Fannie Mae and Freddie Mac). The FHFA's powers include the responsibility to set the conforming loan limits from year to year.
Which of the following is not a threshold that the Home Ownership Equity Protection Act (HOEPA) has established to identify loans as high-cost mortgages? A) APR threshold B) Points and fees threshold C) Subprime interest rate threshold D) Prepayment penalty threshold
HOEPA uses APR, points and fees, and prepayment penalty thresholds to identify high-cost mortgages.
Which of the following correctly demonstrates how to calculate the annual interest on a mortgage loan? A) Interest rate / loan balance = annual interest B) Periodic rate / 365 = annual interest C) Periodic rate × 365 = annual interest D) Interest rate × loan balance = annual interest
Interest rate × loan balance = annual interest
Which document is usually NOT recorded?
Note
Discount, origination, and basis points difference
One discount point = 1% of the loan amount One origination point = 1% of the loan amount One basis point is one one-hundredth of a percent, or 0.01 percent. Therefore one hundred basis points is one percent.