Test 2

65. A borrower is applying for a loan to purchase a home. Under the terms of Regulation Z, how long will he have to rescind the loan after he signs off on it (assuming it is not a high-cost loan)? (a) 0 days; there is no right of rescission (b) 24 hours (c) 3 business days (d) 30 business days

(a) 0 days; there is no right of rescission

69. Which is NOT a protected class according to the federal Fair Housing Act? (a) Age (b) Disability (c) Familial status (d) National origin

(a) Age

58. The definition of "business day" for providing a Closing Disclosure in the TRID regulations is: (a) All calendar days except Sundays and the legal public holidays. (b) A day on which the creditor's offices are open to the public for carrying out substantially all of its business functions. (c) Monday thru Friday 8:00am - 5:00pm. (d) All calendar days.

(a)All calendar days except Sundays and the legal public holidays. - For purposes of providing the Closing Disclosure Estimate, a business day means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. (See § 1026.2(a) (6); Comment 2(a)(6)-2; Comment 19(f)(1)(ii)-1)

7. When taking an application for a mortgage loan, what are creditors not permitted to ask? (a) Are you required to pay child support? (b) Do you receive child support? (c) What is your home address? (d) Who is your employer?

(b) Do you receive child support?

62. The term "qualified mortgage" was first used within the text of the: (a) Real Estate Settlement Procedures Act. (b) Dodd-Frank Wall Street Reform and Consumer Protection Act. (c) Home Ownership and Equity Protection Act. (d) Truth in Lending Act.

(b) Dodd-Frank Wall Street Reform and Consumer Protection Act. The term 'qualified mortgage' was first used within the text of the Dodd-Frank Act. The Act offers a general definition of the qualified mortgage and tasks the CFPB with finalizing that definition. Dodd-Frank (§ 1412(b)(2)(A)) defines qualified mortgage as any residential mortgage loan: 1. Where regular periodic payments do not result in increase in principal and, except for balloon loans under specified circumstances, does not allow borrower to defer principal; 2. Except for balloon loans under specified circumstances, does not include balloon payment that is twice as large as average of earlier scheduled payments; 3. For which income and financial resources of consumer are verified and documented; 4. For fixed rate loan, underwriting based on payment schedule fully amortizing loan over loan term and taking into account all applicable taxes, insurance, and assessments; 5. For adjustable rate loan, underwriting based on maximum rate permitted under loan during the first 5 years, payment schedule that fully amortizes loan over loan term and takes into account all applicable taxes, insurance, and assessments; 6. Complies with guidelines or regulations established by CFPB relating to ratios of total monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment of total monthly debt, taking into account income of borrower and such other factors CFPB determines relevant and consistent with purposes; 7. For which total points and fees payable in connection with loan do not exceed 3 percent of total loan amount; 8. For which loan term does not exceed 30 years, except as such term may be extended by CFPB such as in high-cost areas.

72. Which federal legislation requires that the borrower have the right to receive a copy of his or her credit report, without charge, annually? (a) ECOA (b) FACTA (c) HMDA (d) RESPA

(b) FACTA

105. What fact about a borrower may an underwriter take into consideration when approving a mortgage loan application? (a) National Origin (b) Likelihood of continued income (c) Marital status (d) Receipt of public assistance

(b) Likelihood of continued income

70. The mortgagor is known as the: (a) broker. (b) borrower. (c) one that holds a mortgage. (d) lender.

(b) borrower. The mortgagor is the owner of real estate who pledges the property as security for the repayment of a debt; the borrower.

73. Under the SAFE Act, an individual may take the SAFE MLO test three consecutive times, with each retest occurring at least: (a) 1 day after the preceding test. (b) 10 days after the preceding test. (c) 30 days after the preceding test. (d) 60 days after the preceding test.

(c) 30 days after the preceding test. As prescribed by the S.A.F.E. Mortgage Licensing Act, a waiting period is required prior to the candidate being allowed to retake a failed test component. The candidate is subject to a waiting period of thirty (30) calendar days from the previous test date prior to retaking the test. After every third failed test, the candidate is subject to a waiting period of one hundred eighty (180) calendar days before he or she is able to retake the test

91. While it is unlawful to consider race when underwriting a loan, what federal legislation requires that this information be included on the loan application? (a) Equal Credit Opportunity Act (b) Fair Credit Reporting Act (c) Home Mortgage Disclosure Act (d) Truth in Lending Act

(c) Home Mortgage Disclosure Act

61. Which is not a part of the Gramm-Leach-Bliley Act (GLBA)? (a) Financial Privacy Rule (b) Pretexting Provisions (c) Red Flags Rules (d) Safeguards Rule

(c) Red Flags Rules

68. FNMA biweekly mortgages require drafting the borrower's bank account: (a) Once a month (b) Twice a month (c) Every 14 business days (d) Every 14 calendar days

(d) Every 14 calendar days A Biweekly Mortgage is a loan payment plan where borrowers make payments to principal and interest every 14 calendar days rather than once monthly. The Biweekly payment is half of the amount a monthly payment would be. The savings a Biweekly Mortgage payment plan can create are often substantial. A thirty-year loan of $200,000 at 6.5% will have a monthly payment of $1,264.14.When this loan is converted to a Biweekly loan payment plan, the payment will be $632.07 paid every 14 calendar days. Paying the loan this way will result in the loan being paid off almost six years earlier & it will result in a total savings of $58,747.11.

123. Any seller concession or combination of concessions which exceeds 4 percent of the established reasonable value of the property is considered excessive, and unacceptable for: (a) FHA insured loans (b) Fannie Mae Freddie Mac purchased loans (c) Refinance transactions (d) VA guaranteed loans

(d) VA guaranteed loans

28. An applicant for a mortgage has recurring monthly debt of $425 and a gross monthly income of $3,850. For a conforming loan, what is the maximum house payment—including principal, interest, taxes, and insurance—for which she qualifies? (a) $961.00 (b) $1,078.00 (c) $1,193.50 (d) $1,233.00

Correct answer: a $3,850 X 36% = $1,386 $1,386 - $425 = $961 maximum house payment

64. What is the name of the document issued by the Veterans Administration that establishes the maximum value of the property? (a) Certificate of Reasonable Value (b) Master Certificate of Value (c) Certificate of Eligibility (d) Uniform Residential Appraisal Report

Correct answer: a A Certificate of Reasonable Value is a document issued by the Department of Veterans Affairs as a prerequisite for a VA loan; it is based on an approved appraisal. It establishes the maximum value of the property for VA purposes and, as a result, the maximum size of the VA loan.

86. Mortgage originators must provide the borrower with a copy of the Special Information Booklet (Your Home Loan Tool Kit) either at the time of application is or no later than: (a) Three business days after the application is received. (b) Three business days prior to settlement closing. (c) Three business days after a borrower's request. (d) At the time of application.

Correct answer: a Creditors must provide a copy of the special information booklet (Your Home Loan Tool Kit) to consumers who apply for a consumer credit transaction secured by real property, except in certain circumstances (see below). The special information booklet is required pursuant to Section 5 of RESPA (12 U.S.C. 2604) and is published by the Bureau to help consumers applying for federally related mortgage loans understand real estate transactions. (§ 1026.19(g)(1))• If the consumer is applying for a HELOC subject to § 1026.40, the creditor (or mortgage broker) can provide a copy of the brochure entitled "When Your Home is On the Line: What You Should Know About Home Equity Lines of Credit" instead of the special information booklet. (§ 1026.19(g)(1)(ii)).• The creditor need not provide the special information booklet if the consumer is applying for a real property-secured consumer credit transaction that does not have the purpose of purchasing a one-to-four family residential property, such as a refinancing, a closed-end loan secured by a subordinate lien, or a reverse mortgage. (§ 1026.19(g)(1)(iii).• Creditors must deliver or place in the mail the special information booklet not later than three business days after receiving the consumer's loan application. (§ 1026.19(g)(1)(i)).

87. If a mortgage being delivered to Fannie Mae is secured by an investment property, the borrower may own or be obligated on up to: (a) Ten financed properties including his or her principal residence. (b) Ten properties including his or her principal residence. (c) Four financed properties including his or her principal residence. (d) Ten financed properties excluding his or her principal residence.

Correct answer: a If the mortgage being delivered to Fannie Mae is secured by the borrower's principal residence, there are no limitations on the number of properties that the borrower can currently be financing. If the mortgage is secured by a second home or an investment property, the borrower may own or be obligated on up to ten financed properties (including his or her principal residence).

118. Which of the following documents discloses the Annual Percentage Rate for a loan to a borrower? (a) Loan Estimate (b) Opt-out Notice (c) Adjustable Rate Mortgage Disclosure Statement (d) Promissory note

Correct answer: a TRID requires the APR and finance charges to be disclosed on the Loan Estimate Disclosure Statement. APR is the cost of credit expressed as a percentage and the finance charge is the cost of credit expressed as a dollar amount.

54. What clause gives a lender the right to declare the entire loan balance due immediately because of borrower default or for violation of other contract provisions? (a) Acceleration clause (b) Alienation clause (c) Defeasance clause (d) Prepayment clause

Correct answer: a The Acceleration clause is a contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.

27. Where do the funds for FHA loans come from? (a) Approved lenders (b) Department of Housing and Urban Development (c) Federal Home Loan Mortgage Corporation (d) Federal Housing Administration

Correct answer: a The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes. The FHA is NOT a lender. FHA Insures the loans for lenders.

101. S.A.F.E. Act refers to which Federal Law? (a) Secure and Fair Enforcement for Mortgage Licensing Act (b) Safe and Fair Enforcement for Mortgage Licensing Act (c) State and Federal Enforcement for Mortgage Licensing Act (d) Secure and Fair Enforcement for Mortgage Loan Originators Act

Correct answer: a The Federal Housing and Recovery Act of 2008 is designed to assist with the recovery and revitalization of the nation's residential housing market. The act includes the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE) (Title V of Public Law 110-289) and was passed on July 30, 2008.

82. The Guidance on Nontraditional Mortgage Product Risks defines nontraditional mortgages as alternative or exotic mortgage loans, including which of the following? (a) Interest-Only mortgages and Payment-Option adjustable rate mortgages (b) Mortgages with term over forty years. (c) Any mortgage product other than a thirty-year fixed-rate loan (d) Any loan product not in the best interest of the consumer Correct answer: a

Correct answer: a The Guidance refers to these products as "nontraditional," "alternative," or "exotic" mortgage loans. Nontraditional mortgage products typically allow borrowers to defer payments of principal and, sometimes, interest. Among the more popular nontraditional products are interest-only and payment option adjustable-rate mortgages (ARMs). These products allow borrowers to exchange low monthly payments during a specified deferral period for substantially higher payments when amortization begins. Institutions are increasingly combining these types of products with other higher-risk practices, such as simultaneous second-lien mortgages and the use of reduced documentation in the evaluation of an applicant's creditworthiness. include "interest-only" mortgages and "payment option" adjustable-rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments later.

48. Which is not a requirement of the Safeguard Rule of the Gramm-Leach-Bliley Act (GLBA)? (a) Allow consumers to add their phone numbers to a list that prohibits unauthorized calls (b) Ensure the security and confidentiality of customer records (c) Protect against any anticipated threats or hazards to the security of consumer records (d) Protect against the unauthorized access or use of consumer information in ways that could result in substantial harm or inconvenience to customers

Correct answer: a Phone number on a DNC

100. A borrower who is paid $12.25 per hour and who works 37.5 hours per week has monthly qualifying income of: (a) $2,123 (b) $1,990 (c) $1,837 (d) $1,960

Correct answer: b $12.25 X 37.5 hours per week X 52 weeks / 12 months = $1,990.

102. A veteran is required to provide lenders with two documents to obtain a mortgage loan. One document is the DD-214 and the other is a: (a) Certificate of Reasonable Value (CRV). (b) Certificate of Eligibility (COE). (c) Certificate of Benefit (COB). (d) Certificate of Guarantee Entitlement (COGE).

Correct answer: b A Certificate of Eligibility (COE) is issued by the VA to those who qualify for VA and is required lenders to establish the standing and amount of the veteran's housing benefit under the loan guarantee program. The DD-214 is a statement of service provided by the military. This document identifies the veteran and lists his/her dates of entry on their current active duty period as well as how long they have served in the military.

19. A conforming loan is a loan that: (a) Exceeds the maximum loan amount established by Fannie Mae/Freddie Mac. (b) Follows the secondary market criteria set by Fannie Mae/Freddie Mac. (c) Is for more than $484,350 on a single family home and also called a jumbo loan. (d) Is offered to borrowers who do not meet qualifications for Fannie Mae/Freddie Mac.

Correct answer: b A conforming conventional loan is a standardized conventional loan written on uniform documents that meets the purchase requirements of Fannie Mae (FNMA) and Freddie Mac (FHLMC). Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties

122. What is the name of a mortgage loan that is secured by a pledge of real property, but for which the borrower is not personally liable? (a) Mortgage-Backed Security Loan (b) Non-Recourse Loan (c) Collateralized Loan (d) Non-Guarantee Loan

Correct answer: b A non-recourse mortgage is a type of loan that is secured by real estate as collateral. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan.

83. Under Regulation Z, the term used to identify only the interest charged on a loan, and not any other expenses into account is: (a) Annual Percentage Rate. (b) Nominal Interest Rate. (c) Compound Interest Rate. (d) Simple Interest Rate.

Correct answer: b An interest rate, or a nominal interest rate, refers only to the interest charged on a loan, and it does not take any other expenses into account. In contrast, APR is the combination of the nominal interest rate and any other costs or fees involved in procuring the loan. As a result, an APR tends to behigher than a loan's nominal interest rate. This discrepancy tends to confuse borrowers.

60. Which is true about nonconforming loans? (a) They require LTVs of 80% or less (b) They generally have a higher interest rate than conforming loans (c) They meet Fannie Mae/Freddie Mac standards (d) All states prohibit them for being predatory

Correct answer: b Conventional home mortgages not eligible for sale and delivery to either Fannie or Freddie Mac because of various reasons, including loan amount, loan characteristics or underwriting guidelines.Non-conforming loans must remain in a lender's portfolio, or be sold to other companies who purchase non-conforming loans, or be securitized, with the securities being sold to investors seeking non-conforming mortgage-backed securities. Non-conforming loans usually incur a rate and origination fee premium.

45. Mortgage Call Reports must be submitted to the NMLS: (a) Monthly. (b) Quarterly. (c) Semi-annually. (d) Annually.

Correct answer: b Each [mortgage licensee] shall submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in such form and shall contain such information as the Nationwide Mortgage Licensing System and Registry may require. The Mortgage Call Reports are due quarterly, within 45 days of the end of every calendar quarter: • Q1 data (January 1 - March 31) is due May 15 • Q2 data (April 1 - June 30) is due August 14 • Q3 data (July 1 - September 30) is due November 14 • Q4 data (October 1 - December 31) is due February 14

103. Which law gives a consumer who has had her credit card used by an identify thief has the ability to place a freeze on her credit report? (a) ECOA (b) FACTA (c) Gramm-Leach-Bliley Act (d) SAFE Act

Correct answer: b FACTA creates a national system of fraud detection to make identity thieves more likely to be caught. Previously, victims would have to make phone calls to all of their credit card companies and three major credit rating agencies to alert them to the crime. Now, consumers will only need to make one call to receive advice, set off a nationwide fraud alert, and protect their credit standing.

114. Per FNMA guidelines what percentage of rental income may be included by a borrower who has investment properties for the purposes of loan qualification? (a) 100% (b) 75% (c) 70% (d) 50%

Correct answer: b FNMA conforming loan guidelines permit the use of up to 75% of the rental income for the purposes of loan qualification. FNMA calculates net rental income as 75% of the gross rent; the remaining 25% of the gross rent is absorbed by vacancy losses and ongoing maintenance expenses.

36. For an individual to be eligible for a loan originator license a state must require and find, at a minimum, that an individual: (a) has graduated from an accredited High School. (b) has never had a loan originator license revoked in any governmental jurisdiction. (c) is a citizen of the United States. (d) resides in the State they wish to originate mortgage loans.

Correct answer: b For an individual to be eligible for a loan originator license a state must require and find, at a minimum, that an individual:• Has never had a loan originator license revoked in any governmental jurisdiction, except that a formally vacated revocation shall not be deemed a revocation;• Has never been convicted of, or plead guilty or nolo contendere to, a felony in a domestic, foreign, or military court:o During the 7-year period preceding the date of the application for licensing and registration; or• At any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering.

112. Which of the following forms are required by FNMA to authorize underwriting access to a borrower's tax documents? (a) Form 2055-E (b) Form 4506-T (c) Form 1099-T (d) Form 2106-E

Correct answer: b Form 4506-T authorizes release of a copy or transcript of tax returns. FNMA uses the form for "Quality Control", to verify income of the "self-employed" and to detect fraud. FNMA requires all borrowers, regardless of income source, must complete and sign Form 4506-T at both application and closing. Because form 4506-T (Request for Transcript of Tax Return) is valid for only 60 days after completion (including signature), by the borrower, completion of the 4506-T at both application and closing will allow lenders to perform both prefunding and post-closing reviews as necessary.

79. A consumer has an ARM with an initial rate of 6% and a rate cap of 2/6. What's the highest the interest rate could be over the life of the loan? (a) 8% (b) 12% (c) 18% (d) It depends on the index.

Correct answer: b Initial Rate (6%) + Life Cap (6%) = Highest rate over life of the loan (12%).

66. A borrower obtains a 1-year adjustable rate loan with a 2.25% margin, 1% per adjustment cap, and a start rate of 3.5%. The index on the loan at the adjustment is; after the first 12 months the index is 2.00%, after 24 months the index is 3.17% and at 36 months the index is 4.14%. What will be the borrower's interest rate be at 37 months onto the loan? (a) 6.38% (b) 6.25% (c) 6.13% (d) 6.50%

Correct answer: b Start Rate 3.5% 1 % cap12 mths - Index 2.00 + 2.25 margin = 4.25% Start rate 3.50% + 1.0% Cap = 4.5% - buyer gets 4.25%24 mths Index 3.17 + 2.25 = 5.42% - Current rate 4.25% + 1.0% Cap = 5.25% - Buyer gets 5.2536 mths Index 4.14 + 2.25 = 6.39% - Current rate 5.25% + 1.00% Cap = 6.25% - Buyer gets 6.25%

53. A loan that results in negative amortization is illegal under what law? (a) FACTA (b) HOEPA (c) RESPA (d) ECOA

Correct answer: b The Home Ownership and Equity Protection Act Amendments (HOEPA), implemented by Regulation Z in Sections 32 and 34 prohibit loans having any kind of interest or payment adjustment that could result in negative amortization. Adding costs to the principal, resulting in negative amortization, is strictly prohibited for HOEPA loans. This means that any interest rate changes and payment schedule caps must be coordinated to avoid negative amortization.

74. The Good Faith Estimate, HUD-1, Initial and Final Truth-in-Lending disclosures are required under RESPA and TILA for which of the following loans? (a) All FHA and VA loans secured by real property. (b) Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property. (c) Qualified mortgage loans. (d) Loans secured by vacant land or by 25 or more acres.

Correct answer: b The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to:• HELOCs. • Reverse mortgages. • Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to: • HELOCs. • Reverse mortgages. • Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). Creditors originating reverse mortgages, HELOCs, chattel-dwelling loans, or other transactions not covered by the TRID rule must continue to use, as applicable, the GFE, HUD-1, and Truth-in- Lending disclosures required under current law.Consistent with the current rules under TILA, the rule also does not apply to loans made by a person or entity that is not considered a creditor. (§ 1026.2(a)(17))There is also a partial exemption for certain transactions associated with housing assistance loan programs for low- and moderate-income consumers. (§ 1026.3(h))However, certain types of loans that are currently subject to TILA but not RESPA are subject to the TILA-RESPA rule's integrated disclosure requirements, including:• Construction-only loans.• Loans secured by vacant land or by 25 or more acres.

34. A buyer makes an offer of $156,000 on a house that was appraised for $162,000. If the seller accepts his offer, what is the minimum down payment required from the buyer for an FHA loan? (a) $0 (b) $5,460 (c) $5,670 (d) $7,800

Correct answer: b The maximum mortgage loan on a FHA purchase transaction is calculated by applying 96.5 percent to the lesser of either the appraiser's estimate of value or the contract price for the property. $156,000(Sales Price) X 96.5% LTV = $150,540 loan amount $156,000 (Sales Price) - $150,540 (Loan Amount) = $5,460

78. Which of the following, as defined by the SAFE Act, is a Federal Banking Agency? (a) Conference of State Bank Supervisors (CSBS) (b) Federal Deposit Insurance Corporation (FDIC) (c) American Association of Residential Mortgage Regulators (AARMR) (d) Federal Bank Registry Agency (FBRA)

Correct answer: b The term "Federal banking agency" means:• Board of Governors of the Federal Reserve System.• Office of the Comptroller of the Currency.• National Credit Union Administration.• Federal Deposit Insurance Corporation.

14. Lenders that generate mortgage loans may receive some degree of legal protection against borrower Ability to Repay lawsuits. The level of protection they receive will depend on the type of loan they make. What type of mortgage loan gives the lender the greatest level of protection against borrower lawsuits? (a) Rebuttable Presumption Qualified Mortgage Loan (b) Safe Harbor Qualified Mortgage Loan (c) SAFE Act Certified Mortgage Loan (d) Un-restricted Ability-to-Repay loa

Correct answer: b When a loan gains status as a Qualified Mortgage, it carries with it a legal presumption of complying with the Ability to Repay requirements. The CFPB's final rule creates two different kinds oflegal presumption: a safe harbor and a rebuttable presumption.• Under a Safe Harbor, a borrower is unable to challenge whether the lender met its ability to repay obligations.• Under a Rebuttable Presumption, the borrower has the ability to raise a legal challenge but must overcome the legal presumption that the lender complied with this obligation.Safe Harbor under 12 CFR § 1026.43(e) gives lenders the highest level of legal protection. These are lower-priced loans with interest rates closer to the prime rate. They are typically granted to consumers with good credit histories (less risk). If the borrower ends up in default / foreclosure down the road, the lender would be considered to have legally satisfied the Ability-to-Repay rule. Thus, it would be harder for the borrower to sue the lender in court.

35. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter: (a) is registered by the NMLS as an independent contractor processor or underwriter. (b) Maintains a surety bond of $100,000. (c) Obtains and maintains a license by the NMLS as independent contractor processor or underwriter. (d) Does so at the direction of and subject to the supervision and instruction of an individual who is licensed and registered by the NMLS.

Correct answer: c A state must prohibit an individual who is an independent contractor from engaging in residential mortgage loan origination activities as a loan processor or underwriter with respect to any dwelling or residential real estate in the state, unless the individual first: Registers as a loan originator through and obtains a unique identifier from the NMLSR, and Obtains and maintains a valid loan originator license from the state. An individual "engage[s] in residential mortgage loan origination activities as a loan processor or underwriter" if, with respect to a residential mortgage loan application, the individual performs clerical or support duties.`

63. A borrower obtains a 2/1 buy down on a 30-year fixed rate conforming conventional mortgage loan. The note rate is 10.00%. What interest payment rate will the borrower pay in the second year of the mortgage loan? (a) 7.00% (b) 8.00% (c) 9.00% (d) 10.00%

Correct answer: c A temporary buy down is the type of loan with an initially discounted interest rate, which gradually increases to an agreed-upon fixed rate. A 2/1 buy down provides temporary interest rate buy downs on fixed rate loans. The buy down cannot reduce the rate more than 2% in the first year; 1% in the second year; 0% in years 3-30. The borrower must qualify based on the note rate. Funds are deposited in an escrow account to offset the lower interest payments in the first two years of the loan.

30. What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales price is $155,000? (a) 80% (b) 85% (c) 90% (d) 95%

Correct answer: c Always compute LTV on the appraised value or sales price whichever is lower.139,500 / $155,000 = 90%

40. What is the name of the independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers? (a) Appraisal Standards Board (b) Appraisal Institute of America (c) Appraisal Management Company (d) Collateral Management Corporation

Correct answer: c An Appraisal Management Company, or AMC, is an independent entity through which mortgagelenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers. AMCs fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. Individual appraisers who work for AMCs provide the actual property valuation services.

104. A borrower gets a 15-year interest only loan for $85,000 at 6%. At the end of the loan term, how much will the borrower owe the lender? (a) $0 (b) $79,900 (c) $85,000 (d) $90,100

Correct answer: c An interest-only (I-O) ARM payment plan allows a borrower to pay only the interest for a specified number of years. This allows a borrower to have smaller monthly payments for a period of time. After that, the monthly payment will increase, even if interest rates stay the same, because the borrower must start paying back the principal as well as the interest each month.

77. A borrower closed a loan last week with Metropolis Mortgage Company. The consumer's name is on the National Do Not Call Registry and on Metropolis Mortgage Company's internal do not call list. Metropolis Mortgage Company: (a) Can call her for up to 3 months because they have an established business relationship. (b) Can call her for up to 18 months from the transaction date. (c) Cannot call her because she is on Metropolis Mortgage Company's internal list. (d) Cannot call her because she is on the National Do Not Call Registry.

Correct answer: c An originator may call a person whose number is on the do-not-call registry if the originator has an established business relationship (EBR) with the person. An EBR exists with someone who was party to a transaction with the mortgage loan originator's company in the last 18 months or with someone who made an inquiry with the originator's company within the last three months. Additionally, mortgage loan originators may call if a consumer grants prior written permission. The "Do Not Call rules require that a company that permits originators to make cold calls must also maintain an internal do-not-call list. Requests to be placed in the internal list must be honored indefinitely. The internal list applies to all mortgage loan originators in the company. The company should maintain a central list into which each mortgage loan originator may input names and check before making calls. If a name is on the internal list, the mortgage loan originator may not call that number even if the number is not on the national do-not-call registry.

99. Per RESPA a servicer may require a borrower to put into an escrow account funds for purposes of paying taxes, hazard insurance and other charges related to the property. In addition, the lender may require a cushion, not to exceed an amount equal to: (a) 1/12 of the total disbursements for the year. (b) 1/8 of the total disbursements for the year. (c) 1/6 of the total disbursements for the year. (d) 1/5 of the total disbursements for the year.

Correct answer: c During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account. Each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.

59. An individual, wishing to re-obtain their MLO license that failed to maintain a valid license for a period of ___ or longer, shall retake the test. (a) 1 year (b) 3 years (c) 5 years (d) 7 years

Correct answer: c If a formerly state-licensed loan originator fails to maintain a valid license for 5 years or longer, not taking into account any time during which such individual is a registered loan originator, the individual must retake the test and achieve a test score of not less than 75 percent correct answers.

119. A complex fraud that involves the purchase and subsequent resale of property at greatly inflated prices is called: (a) Property Flicking. (b) Estate Flipping. (c) Property Flipping. (d) Homeland Tossing.

Correct answer: c Illegal property flips involve a scheme where recently purchased properties are quickly resold to obtain an illegal profit based on an inflated appraisal report. Illegal property flips typically involve a conspiracy between the fraud organizer, real estate appraiser, loan originator, and the closing agent.

121. For purchase money transactions, the maximum insurable FHA LTV is: (a) 97.5 % LTV the reciprocal of the 2.25% down payment. (b) 97.0 % LTV the reciprocal of the 3.00% down payment. (c) 96.5 % LTV the reciprocal of the 3.50% down payment. (d) 95.0 % LTV the reciprocal of the 5.00% down payment

Correct answer: c In order for FHA to insure this maximum loan amount, the borrower must make a required investmentof at least 3.5% of the lesser of the appraised value of the property or the sales price. For purchase money mortgages, the maximum LTV is 96.5 percent, i.e., the reciprocal of the 3.5 percent down payment requirement.

110. A borrower is obtaining a refinance through a lender who requires a payment of PMI on first liens with LTV's over 80%. The property is valued at $330,000 and the borrower has a second lien HELOC with a balance of $80,000. The borrower has applied for an Adjustable Rate Mortgage of $250,000 for 30 years with an initial rate of 3.0%. Which of the following statements is correct? (a) The LTV is 100% (b) The lender will require mortgage insurance (c) The lender will not require mortgage insurance (d) The lender will require the HELOC to be paid off for loan approval

Correct answer: c In this scenario, the CLTV is 100% but the lender only requires PMI for first lien with loan-to-values above 80%. Consequently, no PMI is required by the lender on this refinance transaction.

38. Market value can best be defined as a property's: (a) Appraised value for property tax purposes. (b) Listing price. (c) Highest price likely to be paid for a property. (d) Most recent selling price.

Correct answer: c Market value is the highest price likely to be paid for a property, assuming that the property was available to all potential buyers at a realistic price or a reasonable length of time, and that neither buyer nor seller was prevented from learning all of the facts about the property and its place in the market.

117. Under the CFPB's Final Rule general ability-to-repay standard, mortgage lenders must consider and verify, using reasonably reliable third-party records, all of the following underwriting factors except: (a) Current or reasonably expected income or assets. (b) The monthly payment on the loan. (c) A minimum credit score of 600. (d) The monthly payment on any simultaneous loan.

Correct answer: c On January 10, 2013, the CFPB issued final rules (the Ability-to-Repay Rules) amending Regulation Z under the Truth in Lending Act to implement the ability-to-repay requirement for residentialmortgage loans and protections from liability for qualified mortgages and certain other consumer protections as required by Sections 1411, 1412 and 1414 of the Dodd-Frank Act.Under the general ability-to-repay standard ( §1026.43(c)(2)), mortgage lenders must consider andverify, using reasonably reliable third-party records, the following eight underwriting factors:1. Current or reasonably expected income or assets;2. Current employment status;3. The monthly payment on the loan;4. The monthly payment on any simultaneous loan;5. The monthly payment for mortgage-related obligations;6. Current debt obligations, alimony, and child support;7. The monthly debt-to-income ratio, or residual income; and8. Credit history

8. A Latina applies to a mortgage company for a home loan. She is refused based on the reputation of the neighborhood for a high number of foreclosures. This is an example of what illegal practice? (a) Blockbusting (b) Puffing (c) Redlining (d) Steering

Correct answer: c Redlining is against the law. It is a discriminatory practice, involving lenders which refuse to lend money or extend credit to borrowers in certain "struggling" areas of town. It is against the law to discriminate against borrowers based on race or income level, among other factors such as foreclosure rates. Redlining became known as such because lenders would draw a red line around a neighborhood on a map, often targeting areas with a high concentration of minorities, and then refusing to lend in those areas because they considered the risk too high.

22. The annual percentage rate (APR) as required to be disclosed under the Truth in Lending Act is the: (a) Actual interest rate on the note's face. (b) Ratio between interest rate charged and amount borrowed. (c) Cost of a borrower's credit calculated as an annual rate. (d) Sum of all costs required to obtain credit.

Correct answer: c The APR is the cost of a borrower's credit calculated as an annual rate. APR is defined by the federal Truth in Lending Act, as including finance charges, the contractual interest rate, and the required private mortgage insurance paid during the term if the loan and the amount of prepaid finance charges paid at or before the loan closing. The APR shown on the Loan Estimate and the Closing Disclosure often exceeds the interest rate quoted on the note and mortgage.

49. As the lender looks over the borrower's loan application and is deciding whether or not to make the loan, the lender should not refuse to consider the: (a) Borrower's employment history. (b) Borrower's history of making payments on past obligations. (c) Borrower's receipt of public assistance. (d) Economic health of the borrower's field of employment.

Correct answer: c The Equal Credit Opportunity Act, and the Federal Reserve Board's implementing Regulation B, prohibits discrimination in any aspect of a credit transaction on the basis of a consumer's receipt of income from a public assistance program. Public assistance programs include but are not limited to, Aid to Families with Dependent Children (AFDC), food stamps, rent and mortgage supplement or assistance programs, Social Security and Supplemental Security Income (SSI), and unemployment compensation.

109. A MIP is required for what type of mortgage loan? (a) Any commercial or residential property (b) Any residential property with a LTV greater than 80% (c) An FHA One- to Four-Family Residence (d) A non-conforming loan with a LTV greater than 80%

Correct answer: c The FHA Mortgage Insurance Premiums, mostly commonly referred to as MIP, are charged by HUD to protect investors against default. Using these premiums paid into a fund, HUD Guarantees the performance of every FHA loan and protects a percentage of the lender's investment.

13. According to the Fair Credit Reporting Act, if adverse action is taken against a credit applicant because of information on a credit report, the lender who used that report is required to: (a) Inform the applicant that the reporting agency was the decision maker, and to dispute the decision in writing at the address provided. (b) Provide a copy of the credit report to the consumer. (c) Provide to the consumer the name, address, and telephone number of the consumer reporting agency that furnished the report. (d) Revise the inaccuracy in the report.

Correct answer: c The Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every "consumer reporting agency" (CRA). The FCRA requires that consumers must be told if information in their file has been used against them. Creditors who use information from a CRA to take an adverse action against borrower; such as denying an application for credit, must give the borrower the name, address, and phone number of the CRA that provided the report.

10. Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting equity stripping and other abusive practices in connection with "high-cost" mortgages? (a) Community Reinvestment Act (CRA) (b) Home Mortgage Disclosure Act (HMDA) (c) Home Ownership and Equity Protection Act (HOEPA) (d) Homeowners Protection Act (HPA)

Correct answer: c The Home Ownership and Equity Protection Act of 1994 (HOEPA) was enacted to provide protection against predatory lending. The law addresses certain deceptive practices used by mortgage lenders in home equity refinance transactions. HOEPA amends the TILA and establishes requirements for certain loans with high rates and/or high fees. The rules for these loans are contained in 12 CFR § 1026.32 of Regulation Z, which implements the TILA. These loans are often called "Section 32 Loans".

7. Which is NOT a purpose for the Mortgage Servicing Disclosure Statement? (a) That the consumer will be given advanced notice before a transfer occurs (b) To inform the consumer that they are applying for a mortgage loan covered by RESPA (c) To inform the consumer the likelihood that the mortgage could be sold (d) To inform the consumer the likelihood that the servicing of the mortgage will be sold, transferred or assigned

Correct answer: c The Mortgage Servicing Disclosure Statement discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution. This disclosure does not inform the consumer that the mortgage has been sold in the secondary market to an investor

98. The sales contract in the borrower's file states the agreed purchase price is $162,000. The closing costs are $3,700. The seller is paying $1,200 in closing costs on a $153,900 loan amount. What is the acquisition cost? (a) $156,400 (b) $159,500 (c) $164,500 (d) $165,700

Correct answer: c The acquisition cost accounting amount is always calculated at the amount after all seller concessions closing costs, transfer costs, and other adjustments are made.$162,000 Sales Price + $3,700 Closing Costs - $1,200 Seller Concessions = $164,500 Total Acquisition Cost.

39. What is the name of a closed-end, first lien, consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate by 1.5 or more percentage points? (a) Home Ownership Equity Protection loan (b) High-Cost loan (c) Higher-Priced loan (d) Non-Conforming loan

Correct answer: c The category of "higher-priced mortgage loans" is defined by Regulation Z, 12 CFR § 1026.35(a)(1)as a closed-end consumer credit transaction secured by the consumer's principal dwelling with anannual percentage rate that exceeds the average prime offer rate for a comparable transaction as ofthe date the interest rate is set:• By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac (12 CFR § 1026.35(a)(1)(i));• By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac 12 CFR § 1026.35(a)(1)(ii)); or• By 3.5 or more percentage points for loans secured by a subordinate lien 12 CFR § 1026.35(a)(1)(iii)).

21. TRID requires creditors to retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for: (a) Two years after consummation. (b) Two years after delivery of the Closing Disclosure. (c) Five years after consummation. (d) Five years after delivery of the Closing Disclosure.

Correct answer: c The creditor must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for five years after consummation (§ 1026.25).The creditor, or servicer if applicable, must retain the Post-Consummation Escrow Cancellation Notice (Escrow Closing Notice) and the Post-Consummation Partial Payment Policy disclosure for two years. For additional information, see section 15 below. For all other evidence of compliance with the Integrated Disclosure provisions of Regulation Z (including the Loan Estimate) creditors must maintain records for three years after consummation of the transaction.

80. The TILA requires lenders to make certain "Material Disclosures" on loans that are subject to the RESPA. The disclosure is required to be in a specific format and include the following information except: (a) Finance charge. (b) Prepayment policy. (c) Total monthly payment. (d) Amount financed.

Correct answer: c There are 18 specific TIL disclosures required under the TILA:1. Name and address of creditor2. Amount financed3. Itemization of amount financed (optional, if Good Faith Estimate is provided)4. Finance charge5. Annual percentage rate (APR)6. Variable rate information7. Payment schedule8. Total of payments9. Demand feature10. Total sale price11. Prepayment policy12. Late payment policy13. Security interest14. Insurance requirements15. Certain security interest charges16. Contract reference17. Assumption policy18. Required deposit informationTotal monthly payment is not required.

113. How many days before consummation must a final revised Loan Estimate be provided to the consumer? (a) No later than one business day prior to consummation (b) No later than three business days prior to consummation (c) No later than four business days prior to consummation (d) No later than the day of consummation

Correct answer: c There are restrictions on how many days before consummation a revised Loan Estimate may be provided. (§ 1026.19(e)(4))• The creditor may not provide a revised Loan Estimate on or after the date it provides the Closing Disclosure. • The creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to consummation. If the creditor is mailing the revised Loan Estimate and relying upon the 3 business day mailbox rule, the creditor would need to place in the mail the Loan Estimate no later than seven business days before consummation of the transaction to allow 3 business days for receipt. (§ 1026.19(e)4 ; Comment 19(e)(4)(i)-2)• When a revised Loan Estimate is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received it three business days after it is delivered or placed in the mail. (§ 1026.19(e)(1)(iv) and commentary).• However, if the creditor has evidence that the consumer received the revised Loan Estimate earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date. (Comments 19(e)(1)(iv)-1 and -2)

57. Qualifying income ratio guidelines on an FHA loan are: (a) 28% housing ratio and 36% total debt ratio. (b) 29% housing ratio and 41% total debt ratio. (c) 31% housing ratio and 43% total debt ratio. (d) 36% housing ratio and 41% total d

Correct answer: c (c) 31% housing ratio and 43% total debt ratio.

17. Which item is NOT included in the calculation that determines the annual percentage rate? (a) The broker's origination fee (b) The lender's discount points (c) The mortgage insurance premium (d) The title insurance premium

Correct answer: d A basic rule of thumb as to what is not included in the APR is whether or not that specific item is a lender expense and just like interest, are charged solely as a premium for the privilege of borrowing the money.Items Included in APR:• Origination Points • Discount Points •Mortgage Insurance (PMI) • Broker and Processing Fees • Underwriting Fees • Doc Prep Fees Third party expenses that reimburse for services performed by parties other than employees of the lender are generally not part of the APR Calculation.Not Included in APR: • Appraisal Fee• Title Fees (Title Insurance, Escrow fees, Doc Prep Fees) • Attorney Fees (In Attorney states only) • Notary fee• Home Inspection fees• Recording fee• Transfer taxes• Credit Report Fee

4. Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case, a person who violates Section 8 may be fined up and imprisoned: (a) Up to $5,000 and up to 1 year in prison. (b) Up to $10,000 and up to 1 year in prison. (c) Up to $10,000 and up to 2-99 years in prison. (d) Up to $1,000,000 and up to 30 years in prison.

Correct answer: d A higher-priced mortgage loan may have a prepayment penalty during the first three years after the loan is consummated. After three years, a prepayment penalty is not allowed.The prepayment penalty must not exceed the following percentages of the amount of the outstandingloan balance prepaid:• 2 % if incurred during the first two years following consummation• 1 % if incurred during the third year following consummation

5. Which of the following allows a prepayment penalty during the first three years after the loan is consummated? (a) Safe Harbor Qualified Mortgage Loan (b) FHA Mortgage Loan (c) Home Ownership and Equity Protection Act Loan (d) Higher-Priced Mortgage Loan

Correct answer: d A higher-priced mortgage loan may have a prepayment penalty during the first three years after the loan is consummated. After three years, a prepayment penalty is not allowed.The prepayment penalty must not exceed the following percentages of the amount of the outstandingloan balance prepaid:• 2 % if incurred during the first two years following consummation• 1 % if incurred during the third year following consummation

15. In the promissory note, what gives the lender the right to charge the borrower a fee for paying off the loan early? (a) Acceleration clause (b) Alienation clause (c) Due-on-sale clause (d) Prepayment penalty

Correct answer: d A prepayment penalty is a clause in a promissory note that says if the loan is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of month's worth of interest. A prepayment penalty that applies to both the sale of a home and a refinancing transaction is called a "hard" prepayment penalty. A prepayment penalty that applies to refinancing only is called a "soft" prepayment penalty.

120. Under the Home Ownership Equity Protection Act (HOEPA), which of the following would be defined as a high-cost loan? (a) $145,000 loan with fees of $1,029 (b) $145,000 loan with fees of $4,350 (c) $145,000 loan with fees of $5,800 (d) $145,000 loan with fees of $7,975

Correct answer: d A transaction is a high-cost mortgage if its points and fees exceed the following thresholds:• 5 percent of the total loan amount for a loan amount greater than or equal to $50,000.• 8 percent of the total loan amount or $1,029 (whichever is less) for a loan amount less than $50,000.

11. Which of the following fees is not considered a prepaid finance charge and is not included in the APR calculation under Regulation Z? (a) Discount Points (b) Mortgage Insurance Premiums (c) Tax Service Fee (d) Point Fees Paid by Seller

Correct answer: d APR generally includes the following prepaid finance charges (PFC)Amortization Schedule Fee Mortgage Broker FeesApplication Fee Mortgage Insurance PremiumsAssignment Fee Per Diem InterestAssumption Fee Processing Fees / UnderwritingAdministration Fee Tax Life of CertificationCommitment Fee Tax Service FeeEscrow Waiver Fee Title Endorsement FeesFlood Certification w/life of Loan Fee Verification Fee (cost to verify info)Funding Fee Loan Discount Fee (borrower pd)Inspections for Construction Loan Origination Fee (borrower pd)Interest Wire FeesAPR would not include closing fees such as:Appraisal Fee Home Owners InsuranceAttorney Fee Notary FeesCredit Life Insurance (exclude if optional) Pest InspectionsCredit Report Fees Point Fees Paid by SellerDocument Preparation Fees Recording FeesEscrowed Fees (hazard, taxes, etc.) Settlement / Closing Fees / EscrowFinal Inspection Fee Title InsuranceWell and Septic Inspection Fees

47. Which is not a triggering term according to TILA, requiring additional disclosing in advertising? (a) "360 easy payments" (b) "$3,000 down" (c) "Pay only $800 per month" (d) "Terms to fit your budget"

Correct answer: d According to the TILA even though advertising the period of repayment or the amount of the down payment will trigger disclosure, statements such as "take years to pay" or "Terms to fit your budget" do not trigger further disclosure because they do not specifically state or imply the period of repayment or down payment cost. However, the statement "$3,000 down," does trigger full disclosure. Similarly, "360 easy payments" limits the period of repayment and thus trigger disclosure. In general, the more specific a particular statement, the more likely it is to trigger disclosure.

115. All licenses issued shall be valid for a term of not more than one year from the date of issuance and shall expire on: (a) the anniversary date the license was issued. (b) February 28th each year. (c) November 1st of the year issued. (d) December 31st of the year issued.

Correct answer: d All licenses issued shall be valid for a term of not more than one year from the date of issuance and shall expire on December 31st of the year issued.

81. What results when a loan balance grows due to deferred interest? (a) Disintermediation (b) Hypothecation (c) Amortization (d) Negative amortization

Correct answer: d Deferred interest is the amount of interest that is added to the principal balance of a loan when the contractual terms of that loan allow for a scheduled payment to be made that is less than the interest due. When a loan's principal balance increases because of deferred interest, it is known as negative amortization. Negative amortization occurs if a payment is insufficient to cover accrued interest; it is added to the outstanding principal balance. This causes the principal to increase rather than decrease.

46. A HELOC is a type of mortgage: (a) that features lower payments in the beginning that increase during the life of the loan. (b) that requires a balloon payment at the end of the loan term. (c) that uses more than one property as collateral. (d) that allows a borrower to obtain cash against the equity of a home, up to a predetermined amount.

Correct answer: d HELOC is an abbreviation of Home Equity Line of Credit. This refers to a loan in which the lender agrees to lend a maximum amount within an agreed period. This differs from a conventional home equity loan in that the borrower is not advanced the entire sum up front, but uses the line of credit to borrow sums that total no more than the approved maximum amount.

84. What is the name of the Home Equity Conversion Mortgage payment plan where the consumer receives equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence? (a) Line of Credit payment plan (b) Term payment plan (c) Freehold payment plan (d) Tenure payment plan

Correct answer: d Home Equity Conversion Mortgages (HECM) allow seniors to convert the equity in their home to cash. The amount that may be borrowed is based on the appraised value of the home (subject to FHA limits), and the age of the borrower (borrowers must be at least 62 years old). Money is advanced against the value of the home. Interest accrues on the outstanding loan balance, but no payments must be made until the home is sold or the borrower(s) die, at which point the mortgage must be repaid entirely.Available HECM payment plans are:• Tenure - Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.• Term - Equal monthly payments for a fixed period of months selected.• Line of Credit - Unscheduled payments or in installments, at times and in an amount of the borrower's choosing until the line of credit is exhausted.• Modified Tenure - Combination of line of credit and scheduled monthly payments for as long as the borrower remains in the home.• Modified Term - Combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.Borrowers can change their payment plan option for a fee of $20.

94. The TRID rule requires creditors provide a corrected Closing Disclosure containing all changed terms and a new 3 business day waiting period before consummation when which of the following occurs? (a) Changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow (b) Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer (c) Any changes made must be re-disclosed three days before consummation (d) Changes related to the APR, loan product, or the addition of a prepayment penalty

Correct answer: d If one of the following occurs after delivery of the Closing Disclosure and before consummation, the creditor must provide a corrected Closing Disclosure containing all changed terms and ensure that the consumer receives it no later than three business days before consummation. (§ 1026.19(f)(2)(ii); Comment 19(f)(2)(ii)-1)• The disclosed APR becomes inaccurate. If the annual percentage rate (APR) previously disclosed becomes inaccurate, the creditor must provide a corrected Closing Disclosure with the corrected APR disclosure and all other terms that have changed. The APR's accuracy is determined according to § 1026.22. (§ 1026.19(f)(2)(ii)(A)).• The loan product changes. If the loan product previously disclosed becomes inaccurate, the creditor must provide a corrected Closing Disclosure with the corrected loan product and all other terms that have changed. (§ 1026.19(f)(2)(ii)(B)).• A prepayment penalty is added. If a prepayment penalty is added to the transaction, the creditor must provide a corrected Closing Disclosure with the prepayment penalty provision disclosed and all other terms that have changed. (§ 1026.19(f)(2)(ii)(C)).For any other changes before consummation that do not fall under the three categories above (i.e., related to the APR, loan product, or the addition of a prepayment penalty), the creditor still must provide a corrected Closing Disclosure with any terms or costs that have changed and ensure that the consumer receives it.

116. As required under the SAFE Act, the pre-licensing education completed by the individual must include at least: (a) 7 hours of Federal law and regulations. (b) 2 hours of ethics, which must include instruction on fraud, consumer protection, and fair lending issues. (c) 2 hours of training on lending standards for the nontraditional mortgage product marketplace. (d) 20 hours of training on NMLSR undefined instruction on mortgage origination.

Correct answer: d Individuals must complete at least 20 hours of pre-licensing education that has been reviewed and approved by the Nationwide Mortgage Licensing System and Registry. The pre-licensing education completed by the individual must include at least:• 3 hours of Federal law and regulations.• 3 hours of ethics,which must include instruction on fraud, consumer protection, and fair lending issues.• 2 hours of training on lending standards for the nontraditional mortgage product marketplace.• 12 hours of training on NMLSR undefined instruction on mortgage origination.

37. John has purchased a home for a sales price of $300,000. He has been approved for a mortgage with an 85% LTV and a loan amount of $255,000. What is the maximum amount the real estate agent may contribute toward the borrower's settlement costs per FNMA guidelines? (a) $0 (b) $7,650 (c) $15,300 (d) $18,000

Correct answer: d Interested party contributions (IPCs) are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property. Interested parties to a transaction include, but are not limited to:• the property seller,• the builder/developer,• the real estate agent or broker.The maximum interested party contributions for a 85% LTV is 6% the lesser of the sales price or appraised value of the subject property. $300,000 sales price X 6% = $18,000.

92. NMLS&R is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS&R: (a) By 50 state agencies. (b) By Federal banking agencies only. (c) By State banking agencies only. (d) By 63 state or territorial governmental agencies.

Correct answer: d NMLS is the system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam. In these jurisdictions, NMLS is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS by 63 state or territorial governmental agencies. NMLS itself does not grant or deny license authority

18. Under RESPA, who would be subject to fines and penalties if a kickback is paid? (a) The person who paid the kickback only (b) The person who received the kickback only (c) The person who initiated the kickback arrangement (d) All parties paying or receiving a kickback

Correct answer: d Per RESPA any person or persons who violate the provisions of Section 8 shall be fined not more than $10,000 or imprisoned for not more than one year, or both. Any person and all persons who violate the prohibitions or limitations of this Section 8 shall be jointly and severally liable to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service.

43. A Chapter 7 bankruptcy could show on a credit report for a maximum of: (a) 5 years. (b) 7 years. (c) 8 years. (d) 10 years.

Correct answer: d The Fair Credit Reporting Act Except as authorized under subsection (b), no consumer reporting agency may make any consumer report containing any information cases under title 11 of the United States Code or under the Bankruptcy Act that, from the date of filing of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.

20. According to the Home Mortgage Disclosure Act, what may never be asked about during the loan application process? (a) Marital status (b) Ethnicity (c) Race (d) Religion

Correct answer: d The Home Mortgage Disclosure Act (Regulation C) requires the collection and disclosure of data about applicant and borrower characteristics to assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. Regulation C requires institutions report the following data for applications and on originated loans — the applicant's or borrower's ethnicity, marital status, race, sex, and gross annual income.

106. A lender who does not cancel PMI when the LTV reaches 78% is in violation of which federal law? (a) ECOA (b) Fair Housing Act (c) Home Ownership and Equity Protection Act (d) Homeowners Protection Act

Correct answer: d The Homeowner's Protection Act (HPA), also known as the "PMI Cancellation Act," was passed in 1998, addressing the difficulties homeowners have experienced in canceling private mortgage insurance (PMI). It established provisions for the cancellation and termination of PMI, established disclosure and notification requirements, and required the return of unearned premiums. Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once the consumer pays down the mortgage to 78 percent of the value if they are current on the loan.

107. What rule prohibits any material misrepresentation, whether made expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product? (a) The MARS Rule (b) The Red Flag Rule (c) The ATR Rule (d) The MAP Rule

Correct answer: d The Mortgage Acts and Practices Advertising Rule (MAP Rule) prohibits any material misrepresentation, whether made expressly or by implication in any commercial communication, regarding any term of any mortgage credit product. The rule was created in an effort to protect consumers and level the advertising playing field so legitimate, forthright businesses can compete.

71. Benefits of a Section 502 Guaranteed Rural Housing Loan include all of the following characteristics except? (a) Ability to finance 100% of the home's value (b) Not limited to first-time homebuyers (c) Standard DTI maximum of 29/41% DTI can be exceeded with an approved ratio waiver (d) The up-front mortgage insurance fee may be added to the borrower's loan amount

Correct answer: d The Section 502 Guaranteed Rural Housing Loan Program is designed to serve rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing. The Rural Housing Loan Program offers:• Ability to finance 100% of the home's value.• Not limited to first time homebuyers.• Standard DTI maximum of 29/41% DTIRHS does not make a loan directly to an eligible borrower, but guarantees a loan made by a commercial lender. Borrowers pay an Up-Front Guarantee Fee. FHA loans have an Up-Front Mortgage insurance fee.

97. If the ratios required to qualify a borrower were expressed as 28/36, this would indicate: (a) The borrower's total debt is 28% below their gross monthly income but above 36% of their net monthly income. (b) The income ratio must fall between 28 and 36 percent of their gross monthly take home pay. (c) The housing expense to income ratio must fall between 28 and 36 percent of their gross monthly income. (d) The borrower's monthly PITIA must not exceed 28 percent of their gross monthly income and the sum of the PITIA plus long-term debt should not exceed 36% of their gross monthly income.

Correct answer: d The expression 28/36 refers to the two calculations that lenders calculate to see if applicants qualify for a home loan. The first number (28%) is the proposed monthly housing expense compared to the gross monthly income (before any tax deductions). This proposed monthly housing expense would include the principal and interest payment on the home loan plus the estimated real estate taxes, fire insurance premium, and any mortgage insurance or homeowner dues. The second number (36%) calculates the borrower's total monthly obligations (expenses) as compared to gross monthly income. All obligations include the estimated housing expense (PITIA) and the monthly amount owed by the borrower on any installment debt (car loans or student loans, etc.) with more than ten payments remaining and a minimum monthly amount on any credit card debt owed.

29. The term "registered loan originator", as defined under the SAFE Act, means any individual who meets the definition of loan originator and is an employee of: (a) A non-depository institution regulated by a Federal agency. (b) Only depository institutions with more than $10 billion in assets. (c) A non-depository institution not regulated by a Federal banking agency. (d) A depository institution regulated by a federal banking agency.

Correct answer: d The term "registered loan originator" means any individual who meets the definition of loan originator and is an employee of: I. A depository institution II. A subsidiary that is i. Owned and controlled by a depository institution; and Regulated by a Federal banking agency; or ii. An institution regulated by the Farm Credit Administration. III. Is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry.

9. As defined by the S.A.F.E. Mortgage Licensing Act of 2008, all of the following mortgage products are considered as a non-traditional mortgage product except: (a) Balloon Mortgages. (b) Adjustable Rate Mortgages. (c) FHA Mortgages. (d) 30-year Fixed Rate Mortgages.

Correct answer: d The term ''nontraditional mortgage product'' means any mortgage product other than a 30-year fixed rate mortgage. Residential mortgage products that allow borrowers to defer payment of principal or interest, such as interest-only mortgages, payment-option mortgages, and negative amortization mortgages are considered nontraditional. A mortgage or loan that is insured (FHA) or guaranteed (VA) by the United States or any agency thereof, or otherwise is backed by the full faith and credit of the United States, are considered by the NMLS as acceptable course topics intended to satisfy the education requirements related to standards for non-traditional mortgage products.

23. Which of the following is NOT included as a protected class by the Equal Credit Opportunity Act? (a) marital status (b) receipt of public assistance (c) religion (d) gender

Correct answer: d Gender