Missed Questions 7/14
A borrower is purchasing a $200,000 home, using VA eligibility for the first time. What is the minimum down payment required? $4,000 $0 $7,000 $9,600
The answer is $0. VA loans do not require a down payment. However, all veterans - other than those who are disabled - must make a cash contribution to a lending transaction in the form of a funding fee.
The Onyewus are purchasing a home with an agreed-upon sales price of $320,000. They are putting down 20%, and have agreed to pay two points in discount to lower their rate, and two points in origination fees to their lender. What is the total cost of their points? $10,240 $12,800 $5,120 $6,400
The answer is $10,240. Points are paid based on the loan amount. After a 20% down payment, the total loan amount is $256,000. They have agreed to pay two points in discount and two points in origination, for a total of four points. Each point is 1% of the loan amount, so 4% of $256,000 equals $10,240.
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: $300,000 $310,000 $320,000 $330,000
The answer is $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.
Debt ratios for an FHA loan are: 31% / 41% 28% / 36% 28% / 41% 31% / 43%
The answer is 31% / 43%. The general debt ratios for an FHA loan are 31% housing, and 43% total debt.
If a borrower intends to use rental income for qualification, what amount of that income is allowable? The first $750 100% if the home is unencumbered The income is not allowable unless a lease has been in effect for five years or more 75% of the rental income
The answer is 75% of the rental income. Rental income is allowable in calculating qualifying income, but only at 75%.
The Federal Home Loan Mortgage Corporation is also known as: Fannie Mae Ginnie Mae Freddie Mac Freddie Mae
The answer is Freddie Mac. The Federal Home Loan Mortgage Corporation is known more commonly as "Freddie Mac," and also as "FHLMC."
How are FHA loan limits established? The FHFA establishes loan limits for FHA loans The FHA uses loan limits based on CFPB loan limit guidance Loan limits are set by Ginnie Mae HUD establishes loan limits for FHA loans based on county-by-county conforming limits
The answer is HUD establishes loan limits for FHA loans based on county-by-county conforming limits. HUD establishes loan limits for FHA loans based on county-by-county conforming loan limits. FHA loan limits are divided into lower-cost and higher-cost areas.
When Michael wanted to purchase a home in 2006, his mortgage broker told him that his income was insufficient to qualify for the mortgage. When Michael insisted on trying to purchase the home, his mortgage broker suggested that he complete an application for a stated-income loan, and told him the minimum income level that he needed to include on the application in order to qualify for a mortgage. Michael completed the loan application, adding $20,000 to the minimum amount that his broker suggested. The broker reviewed the application and Michael signed it. Which of the following statements most accurately describes the liability that can arise from this scenario? The mortgage broker is solely liable because he encouraged Michael to misrepresent his income Neither Michael nor the mortgage broker is liable since it was common practice in 2006 to exaggerate a loan applicant's income level Michael is solely responsible for misrepresentation since he inflated his income more than was necessary to secure the loan Michael and the mortgage broker are liable for submitting a loan application that contains false information
The answer is Michael and the mortgage broker are liable for submitting a loan application that contains false information. When signing a loan application, loan applicants affirm that all information in the application is true and accurate. Michael has broken the law by submitting false information and misrepresenting that it is true. Mortgage brokers and other originators have an obligation to advise loan applicants that it is a crime to submit false information on a loan application, and those who suggest, encourage, or condone the submission of false information are conspiring with loan applicants to commit fraud.
What legislation was enacted to strengthen money laundering laws to prevent the financing of terrorist activities? Money Laundering Act of 2003 PATRIOT Act HERA FTC Red Flags Rule
The answer is PATRIOT Act. The USA PATRIOT Act is intended to deter and punish terrorist acts in the United States and around the world. One of the many ways this is accomplished is by attempting to prevent the free-flow of financing for these acts through various money laundering schemes.
The Home Ownership and Equity Protection Act, enacted in 1994, amended what legislation? ECOA TILA FACTA CIP
The answer is TILA. In 1994, TILA was amended to provide greater protection to borrowers who chose or were coerced into loans with high costs or high rates. This section of TILA is known as Section 32.
Which of the following is responsible for determining whether to issue a license approval? The NMLS The Governor The Legislature The Commissioner
The answer is The Commissioner. The Commissioner or state regulator for financial institutions determines licensing eligibility.
This federal law was enacted with the intent to make it easier to prosecute mortgage fraud. The Fraud Enforcement and Recovery Act The Dodd-Frank Act The Consumer Financial Protection Act The Mortgage Acts and Practices Act
The answer is The Fraud Enforcement and Recovery Act. The Fraud Enforcement and Recovery Act was enacted with the intent to increase enforcement against those who commit mortgage fraud.
Information that would be protected as nonpublic personal information under the Gramm-Leach-Bliley Act includes which of the following? A consumer's credit report Information in government real estate records Listed telephone numbers provided by consumers Government records of recorded liens
The answer is a consumer's credit report. The GLB Act covers "nonpublic personal information." This does not include information that is readily available to the public through court records, phone books, or land records.
Which of the following statements accurately describes the APR threshold used to identify loans regulated by HOEPA? A first-lien loan with an APR that is 10 percentage points above Treasury securities with a comparable rate A subordinate-lien loan with an APR that is 8 percentage points above the rate for Treasury securities with a comparable rate A subordinate-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions
The answer is a first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions. A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions would meet the APR threshold used to identify loans regulated by HOEPA.
Which of the following loans may include a prepayment penalty? An adjustable-rate qualified mortgage A fixed-rate qualified mortgage that is not a higher-priced mortgage loan An adjustable-rate qualified mortgage that is not a high-cost mortgage A fixed-rate qualified or non-qualified mortgage
The answer is a fixed-rate qualified mortgage that is not a higher-priced mortgage loan. The only loans that may include prepayment penalties are fixed-rate qualified mortgages that are not higher-priced mortgage loans.
A subordinate lien that allows a borrower to pay down principal and continue to make withdrawals is known as: A reverse mortgage An ARM A home equity line of credit A piggyback loan
The answer is a home equity line of credit. Open-ended credit that allows a borrower to make repeated withdrawals and also make monthly payments based on the outstanding balance is known as a home equity line of credit.
Which of the following statements most accurately 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, and requires the prepayment penalties to exceed 2% of the amount prepaid 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 A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 24 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 24 months after consummation, and requires the prepayment penalties to exceed 3% of the amount prepaid
The answer is 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. 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.
Under ECOA, a broker is defined as: A person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made Any person who sells mortgage loans in the secondary market Any person who regularly extends, renews, or continues credit A natural person or entity who regularly extends closed-end or open-end credit
The answer is a person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made. A broker does not technically extend credit. However, ECOA specifically addresses the broker by including persons who "regularly refer applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made."
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 state legislature A state Attorney General A state licensing agency The federal government
The answer is a state licensing agency. In having oversight and supervisory authority over loan originators, a state licensing agency must participate in the NMLS, conduct background checks, and write rules and regulations.
Which of the following is required if a borrower receives an Adverse Action Notice? A suggestion of a loan product for which the consumer may be eligible A referral to a lender who offers subprime products A statement that ECOA prohibits discrimination against credit applicants A statement of the minimum credit score required for loan approval
The answer is a statement that ECOA prohibits discrimination against credit applicants. There must be a statement on the Adverse Action Notice stating that ECOA prohibits discrimination against credit applicants.
In order to contain a prepayment penalty in compliance with federal law, a mortgage loan must include all of the following features, except: A term of no more than 40 years A debt-to-income ratio of no more than 43% Points and fees that do not exceed 3% of the loan amount A fixed interest rate
The answer is a term of no more than 40 years. In order to contain a prepayment penalty in compliance with federal law, a mortgage loan must be a fixed-rate qualified mortgage. This means that the loan must have a debt-to-income ratio of no more than 43%, points and fees that do not exceed 3% of the loan amount, and a fixed interest rate, as well as meeting other qualified mortgage underwriting standards. Qualified mortgages are limited to terms of 30 years or less; any term longer than 30 years is prohibited, and therefore such a loan would not be permitted to include a prepayment penalty.
In lien theory states, the _____ holds the title to the home securing a mortgage throughout the loan term. Borrower Lender Title company Loan servicer
The answer is borrower. In lien theory states, the borrower holds the title to the home securing a mortgage, and when the loan is paid in full, the lien on his or her home is released.
Which of the following loans are covered by RESPA? First liens Both first and subordinate liens Subordinate liens Neither first nor subordinate liens
The answer is both first and subordinate liens. RESPA covers first and second liens on residential property.
A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA? Both the hazard insurance company and the mortgage broker The hazard insurance company The mortgage broker Neither the hazard insurance company nor the mortgage broker
The answer is both the hazard insurance company and the mortgage broker. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally related mortgage loan will be referred to any person. The term "thing of value" includes any payment, advance, funds, loan, service or other consideration, such as payments of another person's expenses. The above is an example of an instance in which both parties are in violation of the prohibition against the payment or receipt of a thing of value in exchange for referrals.
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. Foreclosure Fee simple Short sale Deed-in-lieu
The answer is fee simple. Virtually every residential transaction involves an estate that is held in fee simple, the desired form of holding ownership to property because it has the fewest restrictions.
Ella Ellerby's lender failed to provide her with the required rescission notice when she refinanced her home. Ella has not transferred or sold her interest in the property, but is beginning to have second thoughts about the refinance. Under these circumstances, Ella can rescind the loan: For three years after consummation For two years after consummation For five years after consummation At any time she sees fit
The answer is for three years after consummation. If a creditor/lender fails to provide the required disclosures and notice to effectively initiate the three-day period, the borrower's right to rescind shall automatically expire at the earliest of three years from consummation of the transaction; transfer of the borrower's interest in property; or sale of the borrower's interest in property.
When a homeowner allows his/her insurance to lapse, what can the lender do to insure the property? Mortgage insurance State-placed insurance Optional credit life Force-placed insurance
The answer is force-placed insurance. "Force-placed insurance" might be imposed by the lender if a borrower allows his/her homeowner's insurance to lapse.
The Fair Housing Act prohibits discrimination based on: Handicap, familial status, sex, national origin, religion, color, race Race, color, religion, sex, age Race, sex, age, color, religion, handicap Race, sex, color, religion, age, familial status, handicap
The answer is handicap, familial status, sex, national origin, religion, color, race. The Fair Housing Act prohibits discrimination in a manner similar to that of the Equal Credit Opportunity Act; however, the Fair Housing Act is not limited to an application for credit. The Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and handicap.
A piggyback loan is most often used: As a bridge from one property to the next In the event a borrower is upside down on his/her loan To finance home improvement projects In order to avoid paying PMI
The answer is in order to avoid paying PMI. Borrowers with more than 80% LTV are required by conforming lenders to obtain private mortgage insurance. In a piggyback scenario, a borrower takes out a simultaneous second mortgage in order to avoid paying PMI. However, the lender must, based on provisions of the Ability to Repay Rule, determine that the borrower has the ability to repay both the first and second mortgage according to their loan terms.
Which of the following correctly demonstrates how to calculate the annual interest on a mortgage loan? Interest rate / loan balance = annual interest Periodic rate / 365 = annual interest Periodic rate × 365 = annual interest Interest rate × loan balance = annual interest
The answer is interest rate × loan balance = annual interest. Annual interest is calculated by multiplying the interest rate by the loan balance.
The TRID Rule includes a provision stating that a consumer's intent to proceed with a lending transaction: Must be stated in writing Is made when the consumer submits a completed loan application Must be submitted on a form provided by the creditor May be oral or written
The answer is may be oral or written. The TRID Rule allows consumers to indicate their intent to proceed with a transaction orally or in writing.
What type of loan is a jumbo loan? Nonconventional Non-government Nonconforming Conforming
The answer is nonconforming. A jumbo loan falls outside of Fannie Mae and Freddie Mac loan limit guidelines, which makes it "nonconforming."
Which of the following compensation practices is allowed under the Loan Originator Compensation Rule? Paying originators a commission for originating a loan at a higher rate than the rate for which the loan applicant qualified Allowing a mortgage broker to accept an origination fee from a borrower and a commission from the lender that funds the loan Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan Implementing a policy that encourages loan originators to originate refinances with prepayment penalties
The answer is paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan. Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan, is allowed under the Loan Originator Compensation Rule.
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? Initial rate cap Payment cap Periodic rate cap Lifetime rate cap
The answer is payment cap. The payment cap is a limit on the amount by which the payment can change on any adjustment date from the current or previous payment amount on an ARM.
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: Power of attorney Power of sale clause Deed in lieu of foreclosure Mortgagee clause
The answer is 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).
In accordance with TILA, all of the following are eligible for a three-day right to rescind, except: Home equity line of credit Purchase money mortgage Home improvement loan Refinance of a property that is owner-occupied
The answer is purchase money mortgage. No right to rescind exists for a first mortgage to purchase a home.
Under the S.A.F.E. Act, a mortgage loan originator must submit to the NMLS: Reports of condition Financial reports Business organization documentation Trust account information
The answer is reports of condition. Each mortgage licensee must submit to the NMLS reports of condition in the form and containing the information as may be required by the NMLS.
After a cursory examination by the state, it is determined that Quick Dollar Mortgage Co., in all probability, is engaging in prohibited activities. To ensure that Quick Dollar's files and records are not tampered with during the investigation, state examiners may do which of the following? Place all records in a separate location undisclosed to the licensee until the investigation is over Require that all records be transferred to the NMLS for review and safekeeping Take complete physical control of all records and prohibit the licensee from any access during the investigation Take possession of records or designate a specific person to control access
The answer is take possession of records or designate a specific person to control access. During the course of an examination or investigation, the state licensing agency may take possession of the documents and records of the person being examined or place a person in exclusive charge of the documents and records in the place where they are usually kept. Licensees generally must still be given access to records for the purposes of conducting normal business, but licensees and their employees are prohibited from any attempt to destroy, conceal, secrete, remove, or otherwise tamper with records and files during investigation or at any time.
Renewal of a loan originator license is the responsibility of: The loan originator The loan originator and the sponsoring entity The sponsoring entity The sponsoring entity and the state regulator
The answer is the loan originator. The loan originator's individual license is the sole responsibility of the originator. While the sponsoring entity is responsible for the actions of the originator while employed, renewal of an individual license is not the entity's responsibility.
Payments for qualified mortgages must be based on: The maximum interest rate that will apply over the life of the loan The fully-indexed rate The introductory rate The maximum interest rate that will apply during the first five years after the date of the first payment
The answer is the maximum interest rate that will apply during the first five years after the date of the first payment. Payments for qualified mortgages must be based on the maximum interest rate that will apply during the first five years after the date of the first payment.
Which of the following would be a red flag of attempted mortgage fraud? The consumer is fairly young but makes a substantial salary, as stated on the loan application and W-2s The consumer's Social Security Number begins with zero The applicant runs a small business from home and only lists a home phone number The property owner and the property seller are two different individuals
The answer is the property owner and the property seller are two different individuals. A transaction in which the property owner and the property seller are two different individuals may be a red flag of attempted mortgage fraud.
Which of the following transactions should be most concerned about the tangible net benefit to the borrower? The refinance of a mortgage loan that originated ten years ago The origination of a mortgage loan with a fixed interest rate for a borrower with a high salary and low debt The refinance of a high-cost mortgage loan that was originated six months ago The origination of an adjustable-rate mortgage loan
The answer is the refinance of a high-cost mortgage loan that was originated six months ago. The refinance of a high-cost mortgage loan that was originated six months ago should be most concerned about the tangible net benefit to the borrower.
Which of the following describes a state where the lender holds legal title until the debt is paid? Lien theory Conveyance theory Due-on-sale clause Title theory
The answer is 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.
In regard to title insurance, a standard owner's policy covers: Undetected encumbrances Mechanic's liens Survey issues Foreclosure
The answer is undetected encumbrances. The owner's policy protects the owner of the property against ownership disputes or undetected liens or encumbrances on the property. The standard owner's policy does not cover survey issues, mechanics liens, or protection against foreclosure.
