Loan Origination Activities Quiz 4

Calculate the borrower's maximum housing payment if the qualifying ratios are 28/36, the husband's income is $48,000 per year, and the wife makes $2,500 per month? a) $2,044 b) $1,820 c) $2,628 d) $2,340

$1,820 $48,000 divided by 12 equals $4,000. $4,000 plus $2,500 is $6,500 a month. 28% of $6,500 is $1,820.

For an interest only loan of $180,000 with a 5% interest rate, how much is the dollar amount of interest for 7 months? a) $5,500 b) $6,500 c) $9,000 d) $5,250

$5,250 First find out the interest for the year, $180,000 x .05% = $9000. Divide $9,000 by 12 to get the monthly interest, that is $750. Multiple $750 by 7 months to get $5,250 in interest over 7 months.

The borrower is putting 10% down on a $180,000 sales price. She is paying 2.5 discount points and a 1% origination fee. What is the total of the origination fee and discount points she is paying? a) $5,670 b) $6,300 c) $1,800 d) $6,120

$5,670 First, determine the loan amount. 10% of $180,000 is $18,000. $180,000 - $18,000 =$162,000. The origination fee is 1% of $162,000 which is $1,620. The discount points are 2.5% of the loan amount which is $4,050. $4,050 + $1,620 = $5,670.

A borrower purchases a home for $120,500 and is putting 10% down. If he has already paid $2,500 in earnest money, what is the rest of the down payment at closing? a) $8,345 b) $8,550 c) $9,550 d) $10,500

$9,550 First find out what the entire down payment is, 10% of $120,500 is $12,050. Subtract the earnest money from the total down payment, $12,050 - $2,500 = $9,550.

If the borrower's monthly gross income was $6,000 and the monthly housing expense was: first mortgage payment, $900; monthly property tax $110; monthly hazard insurance $28; and monthly mortgage insurance $60, what is the housing ratio or front-end ratio? a) 15.00% b) 16.00% c) 18.30% d) 17.30%

18.30% First step is adding up the monthly housing expense, $900 plus $110 plus $28 plus $60 = $1,098. Second step is determining the housing ratio by dividing the monthly housing expense by the gross monthly income, $1,098 divided by $6,000 =18.30%.

What is the housing ratio for a borrower who makes $24,000 a year with a payment amount of $560? a) 25% b) 28% c) 23% d) 31%

28% To determine the front-end DTI, you need to take the amount the borrower will be paying and divide it by their gross monthly income. In this situation, $560 divided by $2,000 equals 28%.

At closing, the borrower should receive a notice of the right to rescind. If two copies are not provided to the borrower at closing, the right to rescind extends from 3 days to: a) 1 year b) 3 years c) 30 days d) 10 years

3 years If the required rescission notice is not provided to the borrower, or if there are errors on the disclosures, the borrower's right to rescind expires three (3) years after the closing, transfer of the interest in the property, or sale of the property, whichever occurs first.

What is the note rate for a $150,000 loan with a 2/1 buy down when the borrowers start with a payment rate of 4% for 12 months; then 5% for another 12 months; then 6% for the rest of the payment term? a) The note includes all three interest rates. b) 4% c) 5% d) 6%

6% The note rate is the interest rate after the buydown which in this situation is 6%.

On an FHA annually adjusting ARM, assume that the starting rate was 5%; the margin is 2.5%; the index in 6 months is 3%; the index in 12 months is 3.5%; the index in 18 months is 3.25%. What is the borrower's interest rate in 18 months? a) 5.00% b) 6.00% c) 5.50% d) 5.75%

6.00% The margin plus the index as 12 months is 6%. There is additional superfluous information in this question. The loan adjusts annually so you only need the index at 12 months.

If an MLO has a borrower who has had a foreclosure in the past and is looking to obtain a conventional mortgage, how long does that foreclosure have to be seasoned on the credit report before the borrower can qualify? a) 7 years b) 4 years c) 2 years d) 3 years

7 years

What is the HCLTV (HTLTV) assuming a $200,000 value, a $100,000 first mortgage loan, and a $50,000 Home Equity Line of Credit second mortgage with a drawn amount of $30,000? a) 50% b) 65% c) 75% d) 100%

75% $100,000 plus $50,000 = $150,000. $150,000 divided by $200,000 = 75%. In this situation you only care about the total amount of the HELOC.

How is rental income calculated when the borrower owns rental properties other than the subject property? a) 100% of the income less the PITI. If the net is positive, include as income; if the net is negative, include as a monthly debt b) Only when the borrower has a two year history of managing rental properties c) 75% of the income less the PITI. If the net is positive, include as income; if the net is negative, include as a monthly debt d) Only when the borrower has a two year history of managing rental properties and the borrower has rent loss insurance

75% of the income less the PITI. If the net is positive, include as income; if the net is negative, include as a monthly debt

Which of the following sources of income would NOT be allowed on a conforming conventional loan? a) Salary income when the borrower has worked for only 6 months b) Social Security income c) Income from a rental property that has been owned only 2 years d) Child support received for a 16-year-old child

Child support received for a 16-year-old child In order to use child support received as income for a loan, the child support must continue for at least 3 years. Most child support agreements expire when the child is 18 years old, which in this situation would only be 2 years in the future, so it cannot be used as it cannot be confirmed it will continue.

If there are two borrowers on the loan but the two borrowers are unmarried, they would be considered what: a) Co-mortgagors b) Co-borrowers c) Community property holders d) Title sharers

Co-mortgagors

When you order an Insurance binder on a borrower's loan file, the one-page sheet that summarizes all the insurance information is known as the: a) binder summary page. b) Declaration page. c) 1008. d) binder reference page.

Declaration page.

The lender is requiring repairs on the home to be completed. Those repairs can be done after the loan closes by including them in a(n): a) Escrow Holdback. b) Earnest Money Deposit. c) Lender Retainer. d) Repairs Completion Account (RCA).

Escrow Holdback.

Under what circumstances would it be possible to consider capital gains as income for a Fannie Mae or Freddie Mac loan? a) If the borrowers can get written verification from their mortgage loan servicer that the income will continue b) If the borrowers can verify a minimum of two years income on their tax returns and still own the asset c) If the borrowers can verify one year income on their tax returns and get a CPA letter d) If the borrowers are using the asset/income as part of their down payment

If the borrowers can verify a minimum of two years income on their tax returns and still own the asset

The lender discloses the prepayment penalty on which of the following documents? a) The 1003 b) Loan Estimate c) ECOA disclosure d) The trust deed and the trust deed note

Loan Estimate

What fee is not included in the Loan Estimate? a) Appraisal fee b) Credit reporting fee c) Mortgage broker fee d) Real estate broker fee

Real estate broker fee

If a borrower is going to be denied financing based on an incomplete application, which of the following can be done? a) Send a letter explaining that they do not meet internal credit standards 30 days after the date of the credit report b) Notify borrower by telephone within the next couple of days. c) Send a written notice of incompleteness within 30 days of the last action taken or of the incompleteness d) Notify the borrower in person within the next 15 days

Send a written notice of incompleteness within 30 days of the last action taken or of the incompleteness

What are two of the most important documents that the borrower signs at settlement? a) Error and Omissions and the Loan Note b) The Loan Note and First Payment Letter c) The Mortgage and Right of Rescission d) The Promissory Note and the Deed of Trust or mortgage

The Promissory Note and the Deed of Trust or mortgage A note or promissory note is a written, legally binding promise to repay a debt. The note creates the debt, and the mortgage secures the payment. When the property is foreclosed on, the lender is foreclosing on the note. The mortgage or deed of trust is the security instrument that the borrower gives to the lender that protects the lender's interest in the property. When the borrower signs the mortgage or deed of trust, they are giving the lender the right to take the property by foreclosure if they fail to pay their mortgage properly.

Which of the following is true concerning Service Release Premium (SRP)? a) Loan term is a factor of the SRP b) Type of loan does not affect the SRP c) The interest rate is a factor of the SRP d) There is no such thing as SRP

The interest rate is a factor of the SRP The amount of SRP is generally based on the market value of the mortgage note, influenced by several key variables, such as interest rate, loan type, margin (for ARM loans). Also considered are factors such as the loan's LTV (loan to value), the borrower's credit score, the presence of private mortgage insurance (PMI), pre-payment risk of the borrower and other factors.

A borrower has an Interest Only mortgage loan and wishes to make the minimum monthly payments required. If the homeowner decides to payoff the loan at the end of the loan term, what will the homeowner be required to pay? a) The original loan amount b) A balance greater than the original loan amount c) A balance less than the original loan amount d) The entire purchase price of the property

The original loan amount If the borrower continually makes the minimum monthly payment which on an interest-only loan is the interest accrued monthly at the end of the loan, the original loan amount will remain.

Private Mortgage Insurance is required on conforming 1st mortgage loans when the Loan-To-Value is: a) above 80%. b) 70% - 79.99%. c) above 80% except if the loan has a 15-year term. d) 80% - 89.99%.

above 80%

Your customer owns several rental properties, one-third of which have a Negative Net Lease. Therefore, you can conclude that: a) two of the rentals are owned outright. b) the rents are equal to or less than the mortgage amount due each month. c) more rent is collected than your borrowers owe in payments each month. d) one out of the three rental properties is vacant

the rents are equal to or less than the mortgage amount due each month.