MLO 20-Hour SAFE Comprehensive Course

If a negotiable instrument is purchased using at least __________ in cash, the Bank Secrecy Act requires the lender to report the transaction. A) $100 B) $1,000 C) $10,000 D) $100,000

C) $10,000 The BSA requires United States financial institutions to keep records of cash purchases of negotiable instruments and file reports of cash purchases of these instruments that were in the amount of more than $10,000.

If Mr. Smith makes $16.25 per hour and he works 40 hours per week, what is his gross monthly income? A) $2,600.00 B) $2,773.33 C) $2,816.67 D) $3,120.00

C) $2,816.67 Remember, hourly rate × hours per week × 52 weeks ÷ 12 months = Gross Monthly Income ($16.25 × 40 × 52) ÷ 1233,800 ÷ 12 = $2,816.6666666 rounded to $2,816.67

What is the loan amount if the interest rate is 7.5% per year and the monthly interest payment is $1,250? A) $150,000 B) $175,000 C) $200,000 D) $225,000

C) $200,000 First convert the amount of monthly interest to an annual interest amount ($1,250 × 12 = $15,000) Then divide that amount by the interest rate expressed as a decimal ($15,000 ÷ .075 = $200,000)

Mr. Johnson gets paid $850 per week before taxes. What is his gross monthly income? A) $3,400.00 B) $3,541.67 C) $3,683.33 D) $3,863.33

C) $3,683.33 Current Earnings × 52 weeks ÷ 12 months = Gross Monthly Income $850 × 52 ÷ 12 = $3,683.3333

The Stimpson family is purchasing a house for $168,000 with a down payment of 3.5% on an FHA mortgage. They will be charged an initial mortgage insurance fee of 1.75%. To pass the points and fees test, what is the maximum allowed points and fees that can be charged? A) $2,837.10 B) $2,940.00 C) $4,948.71 D) $5,880.00

C) $4,948.71 The Stimpsons will be putting 3.5% down ($5,880) on the $168,000 purchase price for a loan amount of $162,120 ($168,000 - $5,880). The mortgage insurance will be calculated based on the loan amount and then added in, which results in a total of $164,957.10 ($162,120 × .0175 = $2,837.10 + $162,120 = $164,957.10). For a loan larger than $109,858, points and fees are maxed at 3% of the total loan amount (2020 rates). The maximum allowed points and fees are $4,948.71 ($164,957.10 × .03).

What is the minimum amount for repair costs under the standard 203(k) loan? A) $250 B) $2,500 C) $5,000 D) $35,000

C) $5,000 At least $5,000 of the loan amount must go towards rehabilitation repairs, but there isn't a set repair cost maximum limit.

The borrower is purchasing a home for $275,500. You are charging 1.875% in discount points. How much is the borrower being charged for points? A) $4,821.25 B) $5,156.25 C) $5,165.63 D) $5,615.63

C) $5,165.63 $275,500 × .01875 = $5,165.625 rounded to $5,165.63

If Bruce's annual tax amount is $2,000 and his homeowner's insurance costs $725 per year, what is his monthly escrow amount? (round to the nearest whole dollar) A) $168 B) $170 C) $225 D) $227

D) $227 Bruce's tax per month is $166.67 ($2,000 ÷ 12 = $166.66666) and his homeowner's insurance is $60.42 per month ($725 ÷ 12 = $60.41666). $166.67 + $60.42 = $227.09

Regarding marriage status, which one of the following statements can a loan originator ask a loan applicant? A) "Are you in favor of gay marriage?" B) "Have you ever been married?" C) "Do you plan to get married?" D) "Are you married?"

D) "Are you married?" Under ECOA a loan originator may only ask an applicant if they are married, unmarried, or separated.

Regarding residency status, which one of the following statements can a loan originator ask a loan applicant? A) "Are you for or against illegal aliens?" B) "How long have you been working in this country?" C) "What country were you born in?" D) "What is your immigration or permanent residence status?"

D) "What is your immigration or permanent residence status?" National origin is a prohibited factor under ECOA, so a loan originator may not ask an applicant what country they are from or how long they have been in this country. They may only ask what is their immigration or permanent residence status, and only to be used for loan qualification purposes.

Duke is applying for a 30-year FHA-insured loan to purchase a $200,000 property with a $30,000 down payment. How much will Duke pay per month for his first year of monthly mortgage insurance (MMI)? A) $67.00 B) $92.12 C) $110.72 D) $113.33

D) $113.33 The loan-to-value of Duke's purchase is 85%. ($200,000 - $30,000) ÷ $200,000 = 0.85 or 85% For loans less than $625,000 with a term longer than 15 years and at less than 95% LTV, the mortgage insurance premium is 0.80% of the loan amount (80 BPS). $200,000 - $30,000 = $170,000 $170,000 × .008 = $1,360 (this is the annual cost for insurance) $1,360 ÷ 12 months per year = $113.333333, truncated to $113.33 MMI is recalculated annually. As Duke repays the loan, the MMI will decrease.

Under the MAP Rule, which of the following advertisement phrases would NOT be considered as a false claim? A) "Tired of renting? Why not buy a house!" B) "You are paying too much." C) "Our company has the lowest rates in the industry." D) "We will close your loan in 7 days, guaranteed!"

A) "Tired of renting? Why not buy a house!" Any advertisements that make false assertions or false claims are prohibited.

On the Loan Estimate, all fees relating to title insurance policies should be in the format of: A) "Title - (item description)" B) "TI Policy - (item description)" C) "Title Insurance: (item description)" D) "[Title] (item description)"

A) "Title - (item description)" All fees relating to title insurance policies should start with the word "Title", followed by a hyphen (" - "), and then a description of the item.

How much can a lender charge an applicant for a copy of the appraisal report if the applicant has already paid for the report as part of the loan application? A) $0 - the copy of the appraisal must be free B) A per-hour rate based on the time required to produce the copy C) The price for the copy is determined by the appraiser D) $19.95 per copy

A) $0 - the copy of the appraisal must be free Section 1474 of the Dodd-Frank Act amended ECOA section 701(e) to require that creditors provide copies of appraisals and valuations to loan applicants at no additional cost and without requiring applicants to affirmatively request such copies.

Mr. Buck is purchasing a $35,700 house. He will be putting 20% down on a conventional mortgage. To pass the points and fees test, what is the maximum allowed to be charged? A) $1,428 B) $1,785 C) $3,000 D) $7,140

A) $1,428

If the interest rate is 12% per year simple interest and the monthly interest payment is $115, what is the amount of the loan? A) $11,500 B) $12,500 C) $15,000 D) None of the above

A) $11,500 $115 × 12 months = $1,380 ÷ .12 = $11,500

For a loan of $185,000, what will your daily accrued interest be at a rate of 5.25% per year? A) $26.61 B) $35.95 C) $39.55 D) $40.18

A) $26.61 $185,000 × 0.0525 = $9,712.50 per year ÷ 365 days per year = $26.6095 rounded to $26.61

Manna is using her VA loan entitlement for the first time to purchase a property for $250,000 with a 12% down payment. How much will the VA funding fee cost her? A) $3,080 B) $3,750 C) $4,730 D) $5,280

A) $3,080 The VA funding fee for a first-time entitlement use with a down payment of 10% or greater is 1.4% of the loan amount. $250,000 × .12 = $30,000 down payment $250,000 - $30,000 = $220,000 loan amount $220,000 × .014 = $3,080 VA funding fee

Stephanie's mortgage payment will be $422.45 per month. The taxes, insurance, and PMI will be $1,400 per year. What is her total monthly housing payment? A) $539.12 B) $559.12 C) $582.45 D) $599.12

A) $539.12 $1,400 ÷ 12 months = $116.67 per month. $422.45 + $116.67 = $539.12

Olive will be receiving a $249,000 mortgage loan with no down payment to pay for her new house. Which one of the following amounts would be an acceptable charge that falls within the qualified mortgage points and fees cap? A) $6,750 B) $8,950 C) $12,500 D) $24,900

A) $6,750 For loans greater than $109,898, the maximum points and fees that can be charged for a qualified mortgage is 3% of the loan amount (2020 rates). For a $249,000 loan, the maximum amount that Olive could be charged would be $7,470. Any amount less than or equal to $7,470 would be acceptable.

Brad and Pat are a married couple. Brad makes $47,500 per year, and Pat makes $52,000 per year. What is their combined monthly gross income? A) $8,291.67 B) $8,292.76 C) $8,991.66 D) $8,992.67

A) $8,291.67 $47,500 + $52,000 = $99,500 ÷ 12 months = $8,291.6666 rounded to $8,291.67

For a loan of $185,000, what will your first monthly interest payment be if your note rate is 5.25% per year? A) $809.38 B) $1,540.31 C) $1,618.75 D) $14,463.75

A) $809.38 $185,000 × 0.0525 = $9,712.50 ÷ 12 months = $809.375 rounded to $809.38

In dollars, what is the highest front-end debt that would qualify for a conventional loan with an income of $3,466.15 per month? A) $970.52 B) $1,109.17 C) $1,143.83 D) $1,490.44

A) $970.52 A conventional mortgage is 28/36, so the most the borrower can pay on the front end is 28% of monthly income. $3,466.15 × .28 = $970.522

A non-institutional lender would be: A) a seller offering a purchase money mortgage to a buyer. B) a mutual savings bank. C) an insurance company. D) a seller of collateralized mortgage obligations.

A) a seller offering a purchase money mortgage to a buyer. A non-institutional lenders would be a seller offering financing to a buyer.

A Consumer Reporting Agency must remove negative information from its database regarding a consumer's bankruptcy after: A) 10 years. B) 12 years. C) 5 years. D) 7 years.

A) 10 years. Negative information cannot be retained by a CRA in its database for an excessive period. The general rules provided by the FCRA allow retention of negative information in the database as follows: Up to 7 years for information relating to late payments or delinquencies Up to 10 years for information relating to a bankruptcy Up to 7 years from the date a tax lien is paid

The Uniform State Test (UST) is the new section of the National Test Component, containing _________ of the 125 exam questions. A) 25 B) 30 C) 35 D) 40

A) 25 The National Test Component with the Uniform State Test content contains a total of 125 questions, of which 115 are scored. The questions attributable to the new UST component are 25, with all 25 questions scored.

How many days does a loan originator have to deliver the Loan Estimate disclosure after accepting a loan application? A) 3 business days B) 2 business days C) 3 calendar days D) 4 calendar days

A) 3 business days The Loan Estimate must be delivered or mailed within three business days after receipt of a written loan application and no later than the seventh business day before the transaction is consummated. Business days are determined by the days of the week the business is open to the public (not necessarily only Monday through Friday).

If a consumer is on the national Do Not Call Registry and requests information directly from you about your products or services, you may continue to contact that consumer for __________ following the date of inquiry or until the consumer requests to be placed on your internal do-not-call list, whichever occurs first. A) 3 months B) 18 months C) 60 months D) 30 months

A) 3 months If a consumer requests information directly from you about your product or service, you may contact that consumer for three months following the inquiry, even if the consumer is on the Do Not Call List.

Nate borrowed $62,000 at 9.4% interest per year. If he owed a total of $910.90 interest when he repaid the loan, how many days did he keep the money for? (use a 365 day calendar year to calculate) A) 57 days B) 54 days C) 52 days D) 55 days

A) 57 days Calculate the annual interest by multiplying the amount of the loan by the annual interest. ($62,000 x .094 = $5,828). Next, divide the total annual interest by the number of days in a year to determine the daily dollar interest charge. ($5,828 / 365 = 15.967%) Then determine the number of days he paid interest by dividing the actual amount of interest paid by the daily interest figure. ($910.90 / 15.967% = 57 days)

Which one of the following properties does NOT qualify for an FHA-insured loan? A) A bed and breakfast house B) A condo unit within an FHA-approved condominium project C) A manufactured home that is fixed to a permanent foundation D) A single-family residential property

A) A bed and breakfast house FHA insures loans for homeowner owner-occupied principal residential purposes. Hotels, motels, bed and breakfasts, fraternity housing, and private clubs are not eligible properties, even if the owner lives on the property.

Under the SAFE Act, which of the following best described an individual, who for compensation or gain or in expectation of compensation or gain, takes a residential mortgage loan application or offer or negotiates terms of a residential mortgage loan? A) A mortgage loan originator B) An appraiser C) A loan processor D) An underwriter

A) A mortgage loan originator The SAFE Act, Section 1503, defines a loan originator as, "an individual who (I) takes a residential mortgage loan application, and (II) offers or negotiates terms of a residential mortgage loan for compensation or gain."

Which situation is exempt from federal fair housing laws? A) A private hunting club that restricts the rental of its mountain cabins to only members of the club. B) A religious organization who owns community housing for its members that prohibits people from Iraq from joining their congregation. C) A landlord living 5 miles away from the 2-unit duplex she owns, and receives a rental application from a blind applicant who owns a guide dog. D) A home owner trying to sell one of her five single-family houses as a For-Sale-By-Owner, and who advertises the house in the local newspaper classified ads, on television, and with signs around the neighborhood

A) A private hunting club that restricts the rental of its mountain cabins to only members of the club. Private clubs that are not open to the public may restrict the rental of its lodging units to members of the club, so long as the lodging units are not operated commercially.

Which one of the following loans types would NOT be a nonconventional loan? A) A-paper loan B) Second mortgage loan C) Home equity line of credit D) Jumbo loan

A) A-paper loan A nonconventional loan is one that is originated outside of Fannie Mae or Freddie Mac guidelines. These include second mortgages, jumbo loans, HELOCs, and hard money loans. An A-Paper loan is also known as a conventional mortgage.

Which one of the following disclosures is NOT required to be given to a borrower within three days of loan application? A) Affiliated Business Arrangement Disclosure Statement B) Servicing Disclosure Statement C) Loan Estimate D) Special Information Booklet

A) Affiliated Business Arrangement Disclosure Statement The AfBA disclosure is given after loan application, but before loan settlement.

If a borrower has a loan-to-value of less than 90% on an FHA-insured loan, when can the borrower cancel the required monthly mortgage insurance? A) After 11 years of making payments on the loan B) When the loan-to-value reaches 78% or less C) The MMI can never be cancelled by the borrower D) Once the upfront mortgage insurance premium has been exhausted

A) After 11 years of making payments on the loan If the borrower's loan is less than or equal to 90% LTV, FHA requires MMI payments for the first 11 years of the mortgage's term or until the mortgage has been paid, whichever occurs first.

__________ is a mortgage with interest rate changes that occur at specific dates during the life of the loan. A) An adjustable rate mortgage B) A fixed rate mortgage C) A reverse equity mortgage D) An open-end mortgage

A) An adjustable rate mortgage An adjustable rate mortgage (ARM) is a mortgage with interest rate changes that occur at specific dates during the life of the loan.

When a trust deed is paid in full by the borrower, the lender will instruct the trustee to cancel the trust deed or issue A) a reconveyance deed. B) naked title. C) a trustee's sale. D) an unsecured lien.

A) a reconveyance deed. If the borrower pays the loan in full, as agreed, the beneficiary will direct the trustee to cancel the trust deed or issue and sign a deed of reconveyance, also known as a reconveyance deed.

Which of the following can bid on the trustor's foreclosed property during a trustee's sale? A) Anyone can bid on the property, except for the trustee. B) Only the beneficiary can bid on the property. C) The trustee D) A trustee's sale is only open to parties not directly involved in the foreclosed property.

A) Anyone can bid on the property, except for the trustee. Anyone, including the defaulting borrower, the lender, or third parties, can bid at the trustee's sale. The only party that cannot bid is the trustee.

Which one of the following is a right that a consumer has with regard to a non-HP Qualified Mortgage? A) Can legally challenge the loan only if they believe the loan did not meet the definition of a QM. B) Can legally challenge the loan under any logical legal theory. C) Can sue the lender to force the lender to not comply with the Ability-to-Repay rules. D) Cannot challenge the loan under any legal theory as the loan enjoys Safe Harbor protection.

A) Can legally challenge the loan only if they believe the loan did not meet the definition of a QM. Consumers can still legally challenge their lenders under the ATR rule if they believe that the Qualified Mortgage loan does not meet the definition of a QM. Higher-priced Qualified Mortgage loans have a rebuttable presumption.

The Dodd-Frank Act granted rule making authority under TILA to the: A) Consumer Financial Protection Bureau (CFPB). B) Conference of Bank State Supervisors. C) Federal Reserve Board. D) Department of Housing and Urban Development (HUD).

A) Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Act granted rule making authority under TILA to the Consumer Financial Protection Bureau (CFPB). Prior to Dodd Frank, TILA was implemented by the Board of Directors of the Federal Reserve System.

Regulation oversight of AMTPA is the responsibility of the: A) Consumer Financial Protection Bureau. B) Office of the Comptroller of the Currency. C) Office of Thrift Supervision. D) National Credit Union Administration.

A) Consumer Financial Protection Bureau. As of July 21, 2011, authority for issuing regulations to implement AMTPA were transferred from the OCC, NCUA, and OTS to the Consumer Financial Protection Bureau.

Which one of the following is NOT one of the columns available on page 2 of the Closing Disclosure, the Closing Costs Details page? A) Did this Change? B) Seller-Paid C) Borrower-Paid D) Paid by Others

A) Did this Change? The three available columns on the Closing Costs Details page are Borrower-Paid (with sub-columns of At Closing and Before Closing), Seller-Paid (with sub-columns of At Closing and Before Closing), and Paid by Others. The "Did this Change?" column belongs to the Calculating Cash to Close table on page 3 of the Closing Disclosure.

Which one of the following is NOT a feature of an adjustable rate mortgage? A) Economic interest rates B) Adjustment periods C) Lifetime caps D) Fully indexed rates

A) Economic interest rates ARMs have adjustment periods where the interest rate changes, caps that limit the maximum interest rate, and fully indexed rates that are made up of the index's rate plus the margin.

Which of the following loan features qualifies a loan as a Qualified Mortgage? A) Equal monthly payments B) Interest-only payments C) No documents required D) Negative amortization

A) Equal monthly payments A QM has regular periodic payments (i.e., substantially equal - no negative amortization).

Which one of the following activities are permitted under the mortgage assistance relief services rule? A) Explaining the differences between a lender's loan relief offer and the loan terms the borrower currently has B) Using federal emblems and logos to promote client trust with their services C) Charging a borrower $500 to accept an application for mortgage relief assistance D) Recommending a borrower to stop making loan payments until the refinance is approved

A) Explaining the differences between a lender's loan relief offer and the loan terms the borrower currently has If an offer for mortgage relief is obtained by the mortgage relief service provider, a written notice must be sent to the client clearly describing all material differences between the terms of the lender or loan servicer offer and the client's current loan terms. A mortgage relief service provider is not allowed to use official government emblems to give the appearance of government endorsement, is not allowed to tell the client to stop making mortgage payment, and is not allowed to collect an upfront fee for services.

Which act prohibits discrimination in housing based on race, color, religion, or national origin? A) Fair Housing Act of 1968 B) Fair Housing Amendments of 1988 C) Civil Rights Act of 1866 D) Section 504 of the Rehabilitation Act of 1973

A) Fair Housing Act of 1968 The Fair Housing Act of 1968 (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in housing based on race, color, religion or national origin.

Federal fair housing laws are administered by __________ . A) HUD B) RESPA C) FHA D) ECOA

A) HUD The Department of Housing and Urban Development (HUD) administers federal fair housing laws. Rules and regulations developed by HUD have further defined and interpreted the provisions of those laws.

What are the categories of loans that must be reported under HMDA? A) Home purchases, Home Improvements, and Refinances B) Home Improvements, Government Contracts, and Subprime Loans C) Home purchases, Refinances, and Construction Loans D) Construction Loans, Subprime Loans, and Government Contracts

A) Home purchases, Home Improvements, and Refinances There are three categories of loans that must be reported under HMDA: Home purchases, Home improvements, and Refinances.

Which of the following is not addressed in The Americans with Disabilities Act of 1990 (ADA)? A) Housing B) Public Accommodations C) Employment D) Commercial facilities

A) Housing The Americans with Disabilities Act of 1990 (the "ADA") is not a housing law. It address discrimination in the areas of employment, public services, public accommodations, commercial facilities, and in telecommunications. The Americans with Disabilities Act does not apply to residential housing, but it still has a major impact on real estate.

__________ occurs when multiple loans for the same property are obtained simultaneously for a total amount greater than the actual property value. A) Shotgunning B) Liability fraud C) Mortgage relief D) Short payoff fraud

A) Shotgunning The multiple simultaneous loans scheme is sometimes referred to as shotgunning, This mortgage fraud scheme occurs when multiple loans for the same home are obtained simultaneously for a total amount greatly in excess of the actual property value.

Which statement is FALSE about federal and state fair housing laws? A) Individual states can pass and enforce fair housing laws that are less restrictive than the federal laws. B) States may enact and enforce fair housing laws that are stricter than federal laws. C) The Department of Housing and Urban Development (HUD) administers federal fair housing laws. D) Unless an exemption applies, no one selling or renting housing can discriminate against anyone in the seven protected classes in the sale and rental of housing.

A) Individual states can pass and enforce fair housing laws that are less restrictive than the federal laws. States, counties, or cities may have standards more stringent than those provided for under the Fair Housing Amendments Act of 1988.

Which one of the following elements is NOT commonly found in a construction loan? A) Interest rates are lower than the rates offered for a traditional loan. B) The loan term is short, often two years or less. C) It is used to fund a construction project. D) Some can be converted to permanent financing after construction has been completed.

A) Interest rates are lower than the rates offered for a traditional loan. Construction loans are used to finance construction projects. There terms are usually no longer than two years, and they have higher interest rates than traditional mortgages. Depending on the terms, construction loans can also be converted to permanent financing with a lower interest rate after the construction project has been completed.

When a lender rejects a mortgage application based upon poor credit, what is the lender required to do? A) Lenders must provide the rejected applicant with specific reasons for the rejection. B) Lenders have no duty to justify rejecting an applicant. C) Lenders must provide a signed statement that they do not discriminate. D) The lender is required to tell the credit bureau to contact the rejected applicant.

A) Lenders must provide the rejected applicant with specific reasons for the rejection. Under the Equal Credit Opportunity Act and its fair lending regulations, if the lender denies a loan application because of poor credit, the lender must notify the applicant in writing within 30 days of the completed application and supply the applicant with a statement of specific reasons why the application for credit was denied.

Which of the following is NOT one of the eight required underwriting factor under ATR rules? A) Loan to value B) Current employment status C) The monthly payment on any simultaneous loan D) The monthly debt-to-income ratio or residual income

A) Loan to value The eight underwriting factors are, 1) current or reasonably expected income or assets; 2) current employment status; 3) the monthly payment on the covered transaction; 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; and 8) credit history

What is the federal regulation that defines the rules relating to prohibited advertising and marketing representations? A) Mortgage Acts and Practices (Regulation N) B) Special Rules of Practice (Regulation L) C) Truth in Lending (Regulation Z) D) Home Mortgage Disclosure (Regulation C)

A) Mortgage Acts and Practices (Regulation N) Mortgage Acts and Practices, Regulation N, Section 1014.3 sets forth the rules and regulations relating to prohibited advertising and marketing representations:

Which one of the following is NOT a party to a trust deed? A) Mortgagor B) Beneficiary C) Grantor D) Trustee

A) Mortgagor The parties to a trust deed are the trustor (also referred to as the grantor), the beneficiary, and the trustee.

Which one of the following is NOT one of the three major credit bureaus? A) NMLS B) TransUnion C) Experian D) Equifax

A) NMLS There are three major credit bureaus: Equifax, Experian®, and TransUnion®.

In the Summaries of Transactions table on the Closing Disclosure, what is the acronym that should be attached to a charge that will not be paid using closing funds? A) P.O.C. B) P.B.S. C) T.B.D. D) A.L.C.

A) P.O.C.

Which one of the following fair housing actions is NOT illegal in all cases? A) Racial tipping B) Blockbusting C) Redlining D) Steering

A) Racial tipping Racial tipping is the permitted practice of supplying truthful and factual information about the racial composition of a neighborhood in response to a buyer's stated desire to live in a neighborhood of a particular racial composition. However, supplying racial information without being prompted to is illegal.

Which one of the following is a line item that will appear in Section H. (Other) on page 2 of the Loan Estimate? A) Real estate broker commissions B) Appraisal fee C) Prepaid homeowner's insurance premiums D) Transfer taxes

A) Real estate broker commissions Items that belong in Section H. (Other) include, but are not limited to, home appliance and system warranties, real estate broker commissions, owner's title insurance, and even debt cancellation coverage. Appraisal fee belongs in Section A. (Origination Charges), transfer taxes belong in Section E. (Taxes and Other Government Fees), and prepaid homeowner's insurance premiums belongs in Section F. (Prepaids).

A mortgage lender denies an application for a mortgage on a property located in a primarily African-American neighborhood because the lender feels that borrowers purchasing property in minority neighborhoods are more likely to default. This is an example of what discriminatory practice? A) Redlining B) Blockbusting C) Mortgage fraud D) Intentional oversight

A) Redlining Redlining is the prohibited practice of refusing to make mortgage loans or issue insurance policies based on racial, ethnic, religious, or national-origin composition of a neighborhood.

When completing the ECOA Information for Monitoring Purposes on the 1003, which one of the following is NOT one of the categories? A) Religion B) Age C) Race or national origin D) Marital status

A) Religion The four categories on the 1003 for ECOA reporting are race/national origin, age, sex/gender, and marital status.

What can you do if there are too many line items to disclose them all on Page 2 (Closing Cost Details) of the Closing Disclosure? A) Separate the Loan Costs table and Other Costs table into their own pages B) Add up the remaining fees to be disclosed onto a "Miscellaneous" line C) Delete some of the line items so the borrower will not have to pay for them D) Use a duplicate copy of Page 2 to fill in the remaining line items

A) Separate the Loan Costs table and Other Costs table into their own pages The two sections, Loan Costs and Other Costs, can be placed on their own separate pages if there are too many line items for the tables to fit on one page (§ 1026.38(t)(5)(iv)(B)). The pages will be labeled as "Page 2a" and "Page 2b."

An appraiser has found a property to compare against the property he is appraising. The comparable property has a detached workshop, whereas the subject property does not. When dealing with the workshop, how will the appraiser calculate the value of the subject property? A) The value of the detached workshop will be subtracted from the comparable property B) The appraiser should find a new comparable, because the two properties are too different C) The workshop needs to be removed from the comparable, as it violates HOA bylaws D) The value of the detached workshop will be added to the subject property

A) The value of the detached workshop will be subtracted from the comparable property No value adjustments are made to the subject property. Value adjustments are made only to comparable properties. The appraiser will subtract the value of the workshop from the comparable property so it is more in-line with the value of the subject property.

In a land sale contract, what are the two parties to the transaction called? A) The vendor and the vendee B) The mortgagor and the mortgagee C) The trustor and the trustee D) The obligor and the obligee

A) The vendor and the vendee There are two parties to the land sale contract. The seller is known as the vendor, and the buyer is known as the vendee.

What is the down payment requirement for a VA-insured loan? A) There is no down payment required on a VA loan B) 25% of the county loan limit for the area C) 20% of the loan amount D) Between 3.5% and 5% of the loan amount

A) There is no down payment required on a VA loan A VA loan does not require a down payment, however, there is a VA funding fee.

What is the purpose for the Telephone Consumer Protection Act? A) To restrict the use of artificial prerecorded voice messages when advertising products. B) It allow the use of prerecorded voices when relaying account information to the borrower. C) It requires lenders to contact the borrower via telephone when an adverse action occurs. D) To prevent the loan servicer from harassing a defaulting borrower via telephone.

A) To restrict the use of artificial prerecorded voice messages when advertising products. The Telephone Consumer Protection Act restricts the use of automatic dialing systems, artificial prerecorded voice message, text messaging, and fax machines when advertising products or services.

Which one of the following transactions does NOT meet the updated definition of an alternative mortgage transaction? A) Transactions with a fixed interest rate where one or more of the regular periodic payments may result in an increase in the principal balance. B) Transactions where the interest rate or finance charge may be increased or decreased after a specified period of time or under specified circumstances. C) Transactions where the interest rate changes in accordance with fluctuations of an index. D) Transactions where the creditor and the consumer agree to share some or all of the appreciation in the value of the property.

A) Transactions with a fixed interest rate where one or more of the regular periodic payments may result in an increase in the principal balance. A transactions with a fixed interest rate where one or more of the regular periodic payments may result in an increase in the principal balance is an example of a negative amortization loan. The Dodd-Frank Act definition of an "alternative mortgage transaction" does not cover neg am loans, so any existing state regulations take priority over federal regulations for this type of transaction. Section 1004.2 of the Dodd-Frank Act defines an "alternative mortgage transaction" to mean a loan, credit sale, or account that meets all of the following criteria: Secured by an interest in a residential structure that contains one to four units, whether or not that structure is attached to real property, including an individual condominium unit, cooperative unit, mobile home, or trailer, if it is used as a residence; Made primarily for personal, family, or household purposes; and The interest rate or finance charge may be adjusted or renegotiated.

Which one of the following is NOT a form of seller-backed financing? A) Trustee's deed B) Land sale contract C) Purchase money mortgage D) Purchase money trust deed

A) Trustee's deed The three common forms of seller financing are purchase money mortgages, purchase money trust deeds, and land sale contracts.

The __________ expanded the application of the Bank Secrecy Act anti-money laundering laws to a wide range of financial institutions. A) USA Patriot Act B) Currency and Foreign Transactions Reporting Act C) FinCEN Rules D) Suspicious Activity Report Act

A) USA Patriot Act The USA Patriot Act expanded the application of the BSA anti-money laundering laws to a wide range of financial institutions.

The term UDAAP means: A) Unfair, Deceptive, or Abusive Acts or Practices. B) Understanding and Detecting Abusive Advertising Practices. C) Unethical Discount, Appraiser, and Accounting Points. D) Unfair, Deceitful, and Abusive Appraisers and Processors.

A) Unfair, Deceptive, or Abusive Acts or Practices. UDAAP is Unfair, Deceptive, or Abusive Acts or Practices.

Which one of the following would NOT be considered a red flag? A) Use of Power of Attorney by servicemembers who are serving overseas B) Sales between family members and business partners. C) Quit-claim deeds in the chain of title. D) Frequent ownership changes in a short period of time (possible flipping).

A) Use of Power of Attorney by servicemembers who are serving overseas A military servicemember who uses a Power of Attorney to handle financial matters because he or she is deployed overseas and cannot be there in-person is not a red flag. Frequent ownership changes, quit-claim deeds, and sales between family members and/or business partners could be potential red flags.

The term combined loan-to-value is used when describing a loan that is: A) a combination of more than one mortgage. B) the higher of the sales price or the appraised value of the property. C) the appraised value plus the borrower's down payment. D) financed 100% by a single mortgage.

A) a combination of more than one mortgage. The term "combined loan-to-value" (CLTV) is used to describe multiple mortgages that when combined, make up the financing of the mortgage loan. A common loan is a mortgage covering 80% of the property's sale price, and a separate loan for the 20% down payment. Combined, 80 + 20 is 100% financing.

A criminal violation of RESPA Section 8's anti-kickback, referral fees, and unearned fees provisions can result in: A) a fine of up to $10,000 and imprisonment of up to one year. B) the illegally earned fee being awarded to the borrower. C) a warning for the first violation, and then a $1,000 fine for each additional violations. D) a prison sentence of 10 years.

A) a fine of up to $10,000 and imprisonment of up to one year. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year.

The Equal Credit Opportunity Act applies to: A) all credit situations. B) only home loan transactions such as a purchase, refinance, and home improvement. C) consumer credit situations only. D) home loan situations including purchase and refinance, but NOT home improvement.

A) all credit situations. The ECOA applies to all credit situations including consumer credit and applications for a mortgage, home refinance, or home improvement loans.

After closing, the escrow company will send the buyer's lender: A) an ALTA extended lender's insurance policy. B) the receipts for any personal property. C) the Truth in Lending Act disclosure. D) a copy of the trust deed for the property.

A) an ALTA extended lender's insurance policy. After recording, the escrow company will deliver the following documentation to the buyer's lender: ALTA Extended Lender's Policy, with any additional required endorsements, the Closing Disclosure, the original Deed of Trust, and a hazard insurance binder.

The clause that allows a lender to call the entire unpaid balance of a loan due upon default is known as: A) an acceleration clause. B) a balloon payment clause. C) a cancellation clause. D) an escalation clause.

A) an acceleration clause. When a borrower defaults, an acceleration clause allows the lender to accelerate payment of the loan by requiring the entire principal balance immediately due and payable.

Under RESPA, loan servicers are required to give a borrower: A) an annual escrow statement summarizing all escrow account deposits and payments. B) a list of providers who can lower the borrower's settlement costs. C) a servicing statement when the loan payments, insurance premiums, or taxes increase. D) a discount on additional mortgages that are also serviced by the loan servicer.

A) an annual escrow statement summarizing all escrow account deposits and payments. Loan servicers must deliver to borrowers an Annual Escrow Statement once a year. The annual account statement summarizes all escrow account deposits and payments during the servicer's 12-month computation year.

The underwriting factor of "mortgage related obligations" for calculating a borrower's ability to repay includes all of the following EXCEPT: A) average monthly utilities. B) property taxes. C) ground rent. D) HOA dues.

A) average monthly utilities. Monthly payments for mortgage related obligations includes such items as insurance premiums if insurance is required by the creditor, obligations to community governance associations such as Homeowners Association (HOA) assessments, property taxes, ground rent, and lease payments.

If a lender has issued revised Loan Estimates covering the same loan transaction, each revision must: A) be uniquely identified by appending a revision number to the loan ID. B) disclose all-new loan values from its previous revision. C) be issued by a different lender and loan originator. D) have a corresponding Closing Disclosure document.

A) be uniquely identified by appending a revision number to the loan ID. If a creditor issues multiple revised Loan Estimates using the same loan identification code, then each revision must have a way of uniquely identifying it from the other revisions by using a hyphen and a revision number (e.g., 234920-01, 234920-02, etc.). The loan identification code and its revision number will then be disclosed on the Closing Disclosure, so the borrower can compare the specific revision of the Loan Estimate to the final Closing Disclosure.

If the number 3 appears under the 90 column on a credit report, it means the account has: A) been 90 days past due three times. B) received three 90-day extensions. C) been overdue by $90 for the past three months. D) had three payments of $90 made to its balance.

A) been 90 days past due three times. The number of times the account has been 90 days overdue will be listed under the 90 column on the credit report.

If the escrow instructions are unilateral, this means: A) both the buyer and the seller have prepared their own escrow instructions. B) the settlement agent has prepared instructions that both the buyer and seller will use. C) the seller has prepared escrow instructions for the buyer. D) the buyer has prepared escrow instructions for the seller.

A) both the buyer and the seller have prepared their own escrow instructions. If the escrow instructions are unilateral, both the buyer and the seller will have prepared their own escrow instructions.

The Closing Disclosure must be given to borrowers at least three business days before loan __________ . A) consummation B) underwriting C) application D) shopping

A) consummation The Closing Disclosure will be given to the consumer at least three business days before loan consummation.

The Truth in Lending Act requires lenders to: A) disclose APR, finance charges, and credit terms to consumers. B) use a simplified form to disclose loan terms to borrowers. C) compare their rates with other lenders' loan terms and conditions. D) restrict kick-backs and other compensation for loan services.

A) disclose APR, finance charges, and credit terms to consumers. The Truth-in-Lending Act (TILA) was enacted in 1968. TILA requires a lender to provide the consumer with informed use of credit information by requiring the disclosure of credit terms. It also requires the cost of credit calculations by setting forth the annual percentage rate and finance charge. It also required the disclosure of a projected payment schedule that would allow a consumer to compare pricing among competing lenders.

A standard title insurance policy does NOT protect against loss resulting from A) encroachments on the property. B) the grantor's lack of capacity. C) forgery in the chain of title. D) failure to deliver an earlier recorded deed.

A) encroachments on the property. The five exceptions (i.e., not covered) by a standard title insurance policy are 1) taxes and assessments that do not appear as a lien, 2) any interests or claims not shown on the public record but could be discovered by a simple visual observation or conversation with the property owner, 3) easements and encumbrances not shown on the public record, 4) other liens, such as workers' compensation or construction liens, that are not on the public record, and 5) discrepancies or boundary line disputes that a land survey would of disclosed.

The single disbursement lump sum payment plan for reverse mortgages will: A) give a single payment at loan closing that is 60% or less of the principal limit. B) allow the borrower to request a loan advance up to the approved credit line. C) provide equal monthly payments for a fixed number of months. D) disburse equal monthly payments as long as the borrower lives in the home.

A) give a single payment at loan closing that is 60% or less of the principal limit. Single Disbursement Lump Sum is available for cases assigned after September 30, 2013. This payment option will give a single payment at loan closing that is 60% or less of the principal limit.

If a loan application is taken in-person by a loan originator, the RESPA Servicing Disclosure Statement must be: A) hand delivered to the applicant at the time of loan application. B) read aloud to the applicant, and then confirmed again at the time of loan servicing. C) filled out and then given to the applicant at the time of loan settlement. D) mailed to the loan applicant within three business days.

A) hand delivered to the applicant at the time of loan application. If the loan application is taken in person, the Servicing Disclosure Statement is to be hand delivered to the applicant at time the application is taken.

A __________ is made by lenders, credit card companies, or other types of creditors for determining a borrower's risk before authorizing a line of credit to the borrower. A) hard inquiry B) soft inquiry C) balance review D) credit report

A) hard inquiry Hard inquiries are made by lenders, credit card companies, or other types of creditors for determining a borrower's risk before authorizing a line of credit to the borrower.

A straight note is paid: A) in full on the date the note becomes due. B) in small installments with a large payment at the end of the term. C) at regular intervals until paid in full. D) by the borrower without accrued interest.

A) in full on the date the note becomes due. The principal is paid in one payment at maturity (when the note becomes due) and is not paid in periodic intervals.

A major difference between title insurance and other insurance products, such as automobile or life, is that title insurance: A) insures against conditions that already exist instead of insuring against future events. B) insures the lender's interest in the borrower's personal property and health. C) will pay to repair any damage to the property because of a standard policy exclusion. D) protects the borrower's property from creditors in case of a mortgage loan default.

A) insures against conditions that already exist instead of insuring against future events. Unlike other types of insurance that insure against future events, title insurance insures against conditions that already exist.

A predatory lending practice is when the: A) lender benefits from the practice and the homeowner does not benefit. B) mortgage loan originator receives compensation even though the loan did not close. C) borrower's ability to repay the loan is reviewed by the lender. D) loan is refinanced and its term and interest rate are adjusted.

A) lender benefits from the practice and the homeowner does not benefit. Any mortgage loan practice in which the homeowner does not benefit and the lender does benefit should be regarded as predatory lending.

A borrower can use the Closing Disclosure to compare it to the Loan Estimate in order to: A) look for settlement cost tolerance violations. B) search for undocumented Affiliated Business Arrangements. C) ensure that the settlement charges on the Loan Estimate are exactly the same as the Closing Disclosure. D) verify that the borrower is purchasing the correct property.

A) look for settlement cost tolerance violations. The borrower should compare the Closing Disclosure with the Loan Estimate to determine if there are any settlement cost tolerances that have been violated. If any discrepancies between the forms are discovered, they should be resolved prior to settlement.

In determining whether a borrower has the ability to repay, the lender must use all of the following underwriting criteria EXCEPT: A) marital status. B) credit history. C) the monthly payment of the subject loan. D) current employment status.

A) marital status. A lender can consider income factors such as employment, debt obligations, and credit history.

The method of appraisal that carries the most weight in the valuation of residential property is known as the: A) market data approach. B) highest and best use approach. C) cost approach. D) income approach.

A) market data approach. The market data or sales comparison approach is the most effective and most weighted approach in the appraisal of residential property.

Before a homeowner can apply for a HECM reverse mortgage, the homeowner must A) meet with a HUD-approved housing counselor. B) have his or her house appraised. C) purchase a secondary residence. D) be able to afford the loan origination and service fees.

A) meet with a HUD-approved housing counselor. The homeowner is required to meet with a HECM counselor before he or she can qualify for the HECM program.

The method by which a criminal attempts to make illegal-gotten gains pass through a series of financial transactions in an effort to make the money appear to be from the proceeds of legal activity is called __________ . A) money laundering B) employment fraud C) mortgage fraud D) loan origination

A) money laundering Money laundering is the process in which a criminal is attempting to make illegal-gotten gains (dirty money) through a series of financial transactions in an effort to make the money appear to be from the proceeds of legal activity

The Home Mortgage Disclosure Act applies to financial institutions and non-depository institutions with assets in excess of $10 million or institutions who originate: A) more than 100 loans per year. B) between 80 and 100 loans per year. C) an average of 10 loans per month. D) less than 100 loans per year.

A) more than 100 loans per year. The Home Mortgage Disclosure Act applies to financial institutions and non-depository institutions with assets in excess of $10 million or who originate more than 100 loans per year.

If a consumer is to receive a high-cost mortgage, the consumer: A) must attend a preloan counseling session. B) should attend preloan counseling with the lender's in-house consumer education department. C) will have to pay for preloan counseling out-of-pocket before the lender will finalize the loan paperwork. D) can attend a preloan counseling session at the consumer's option.

A) must attend a preloan counseling session. Applicants for high-price mortgages or negative-amortization loans must participate in loan counseling session.

Under GLBA, after establishing an ongoing relationship a financial institution must deliver a privacy policy to its customer: A) once per year. B) every four weeks. C) whenever the customer's account is reviewed for privacy violations. D) only when requested by the customer.

A) once per year. GLBA requires a financial institution to give the each customer an annual notice, which is a copy of the full privacy notice. This annual requirement must be complied with for as long as a customer relationship exists.

A loss payable clause will ensure that when the lender is on the borrower's homeowner's policy, and there is a property loss, the insurance company will: A) pay both the borrower and the lender jointly for the loss. B) credit the borrower for the principal paid towards the loan balance, then deduct that amount from the lender's payment. C) split the insurance loss proceeds between the borrower and the lender. D) pay the borrower for loss damages, with the lender receiving the remaining funds.

A) pay both the borrower and the lender jointly for the loss. This clause requires the insurance company to pay the proceeds jointly to the insured (borrower) and lender.

The __________ is the document used by the borrower that states the borrower's commitment to repay the lender for the money loaned to purchase a property. A) promissory note B) mortgage C) loan prequalification D) acceleration clause

A) promissory note When a lender loans money to a borrower to finance real estate, the lender needs written evidence that the borrower did, in fact, borrow the money, along with the borrower's written promise to pay the money back. A promissory note serves as the necessary evidence and promise to repay.

A __________ is a pattern, practice, or specific activity that indicates the possible existence of identity theft and/or other types of fraudulent activity. A) red flag B) suspicious fraud alert C) concentration method D) money-laundering scheme

A) red flag A red flag is a pattern, practice, or specific activity that indicates the possible existence of identity theft and/or other types of fraudulent activity.

The practice of setting and/or adjusting offered or extended credit terms to a consumer that is based upon that consumer's specific nonpayment risk is called: A) risk-based pricing. B) consumer credit score calculation. C) underwriting. D) an adverse action.

A) risk-based pricing. Risk-based pricing is the practice of setting and/or adjusting offered or extended credit terms to a consumer that is based upon that consumer's specific nonpayment risk.

The RESPA Initial Escrow Account Statement will show the borrower an estimation of taxes, insurance premiums and other charges that are expected to be paid from the escrow account during: A) the first 12 months of the loan. B) the entire term of the loan. C) years 5, 10, 15, 20, and 25. D) the initial 45 days of the loan servicing.

A) the first 12 months of the loan. The Initial Escrow Account Statement itemizes the estimated taxes, insurance premiums, and other charges anticipated to be paid from the escrow account during the first 12 months of the loan.

Determining the type of loan an applicant can qualify for can be done by taking his/her gross monthly income and multiplying it by: A) the maximum housing and debt ratios for the loan program. B) PITI, HOA, and GMI. C) the loan payment amount the applicant wants to pay. D) a predetermined tax value based on each lender's qualifications.

A) the maximum housing and debt ratios for the loan program. Pre-qualifying a loan applicant requires MLOs to work backwards, by taking the gross monthly income of the applicant and multiplying by the maximum housing and debt ratios.

With a mortgage, the period in which the defaulting mortgagor has to right to redeem the property after the sheriff's sale is called: A) the period of redemption. B) the period of defeat. C) a deficiency judgment. D) the trustor's right of reinstatement.

A) the period of redemption. The amount of time the defaulting mortgagor has to redeem the property after the date of the sheriff's sale is known as the statutory period of redemption

Creditors are to retain records that evidence compliance with the Ability-to-Repay rules for: A) three years. B) one year. C) five years. D) seven years.

A) three years. The ATR/QM rules require a loan originator to retain evidence of compliance with the ATR/QM rules, including the prepayment penalty limitations, for three years after loan consummation.

If the LTV is 75% and the value is $165,000, what is the loan amount? A) $123,570 B) $123,750 C) $132,570 D) $132,750

B) $123,750 $165,000 × 0.75 = $123,750

I get paid a bi-weekly amount of $949 before taxes. What is my gross monthly income? (round to the nearest whole dollar) A) $1,898 B) $2,056 C) $2,085 D) $2,256.

B) $2,056 Current Earnings × 26 ÷ 12 = Gross Monthly Income $949 × 26 ÷ 12 = $2,056.1666 or $2,056

If Mrs. Jones collects social security income of $1,500 per month and she has had a part-time job for three years averaging 20 hours per week for $8.50 an hour, what is her monthly gross income? A) $2,180.00 B) $2,236.67 C) $2,611.67 D) $2,937.33

B) $2,236.67 Mrs. Jones collects $18,000 per year in social security and $8,840 per year from her part-time job. ($18,000 + $8,840) ÷ 12 = $2,236.6666 rounded to $2,236.67 Tax-exempt status for social security, where you might "gross up" a a portion of a borrower's SS income by 125%, is only applicable to those who *only* receive income from social security during the year and receive no other income. Since Mrs. Jones has a part-time job, she does not qualify for tax-exempt status. Answer $2,611.67 is not correct in this situation.

Duke is applying for a 30-year FHA-insured loan to purchase a $200,000 property with a $30,000 down payment. How much will his upfront mortgage insurance premium be? A) $2,210 B) $2,975 C) $3,000 D) $3,500

B) $2,975 For an FHA-insured loan, the upfront mortgage insurance premium is 1.75% of the loan amount. $200,000 - $30,000 = $170,000$170,000 X .0175 = $2,975

The maximum penalty assessed by a state agency for each SAFE Act violation is __________ . A) $10,000 B) $25,000 C) $50,000 D) $100,000

B) $25,000 For purposes of imposing civil penalties, each violation is considered a separate and distinct violation and the maximum penalty that may be assessed is $25,000 per violation.

For a loan between $65,939 and $109,898 what is the maximum cost for points and fees allowed? A) 3% of the total loan amount B) $3,297 C) 8% of the total loan amount D) $1,099

B) $3,297 For loans between $109,898 and $65,939, the maximum points and fees that may be charged is $3,297 (2020 rates).

What is the maximum funding amount on the Limited 203(k) loan? A) $25,000 B) $35,000 C) There is no maximum funding amount. D) $55,000

B) $35,000 The Limited program sets a maximum of $35,000 for rehabilitation costs, which includes materials, inspector fees, permits, and other costs. It does not have a minimum funding amount. The standard 203(k) has a $5,000 minimum funding amount and no set maximum, as its maximum is based on several factors.

You charge 2 discounts points on a $550,000 loan, which are then financed into the loan amount. What is the total loan amount? A) $516,000 B) $561,000 C) $615,000 D) $651,000

B) $561,000 2 discount points is 2% of the loan amount. $550,000 × .02 = $11,000 $550,000 + $11,000 = $561,000

Georgia has saved $3,500 for a down payment on her first home. If she qualifies for a loan with a 5% down payment, what is the maximum house price she should be shopping for? A) $35,000 B) $70,000 C) $135,000 D) $170,000

B) $70,000 loan amount × 0.05 = $3,500 loan amount = $3,500 ÷ 0.05 loan amount = $70,000

Fred and Wendy are purchasing a rural home. The property is being sold for $12,499 and they will put a 10% down payment on it. Fred and Wendy are being charged a $395 processing fee and a $1,299 origination fee by Hard Rock Mortgage. How much in points and fees is Hard Rock Mortgage overcharging Fred and Wendy for their loan? A) $395.00 B) $794.07 C) Hard Rock Mortgage is not overcharging on points and fees D) $999.92

B) $794.07 For a loan less than $13,737, the points and fees are maxed at 8% of the loan amount (2020 rates). Subtracting the 10% downpayment from the loan amount equals $11,249.10, and 8% of that would be $899.93. Hard Rock Mortgage is going to charge a total of $1,694 for the loan, which is more than the allowed $899.93. The amount Hard Rock Mortgage is overcharging is $794.07 ($1,694 - $899.93).

Gabriel is paid a salary of $33,500 per year. He gets paid semi-monthly on the 1st and the 15th. What is his front-end debt ratio if his housing payment is $559.12? A) 16% B) 20% C) 40% D) 46%

B) 20% Gabriel earns $2,791.67 per month ($33,500 ÷ 12 months = $2,791.66666666). Divide the monthly loan payment by the monthly salary to get the front-end debt ratio ($559.12 ÷ $2,791.66 = .20 or 20%). In this case it doesn't matter how often Gabriel is paid each month.

If a loan applicant says they are paid a semi-monthly salary, then it means that the applicant has __________ pay periods per year. A) 12 B) 24 C) 26 D) 52

B) 24 Semi-monthly means two times per month, and is not the same as every two weeks. A semi-monthly pay period has 24 periods per year (12 months per year x twice per month)

If you have a $215 car payment, a $559.12 housing payment, and get paid $33,500 per year, what is your back-end ratio? A) 24% B) 28% C) 47% D) 55%

B) 28% $215 + $559.12 = $774.12 per month $33,500 ÷ 12 months = $2,791.67 per month $774.12 ÷ $2,791.67 = 0.2772 rounded to .28 or 28%

What is the standard qualification ratio for a conventional mortgage? A) 25/33 B) 28/36 C) 31/43 D) 41/41

B) 28/36 The general ratio is 28/36 for conventional mortgage programs (28% housing ratio, 36% debt ratio)

ECOA requires that a lender must notify an applicant of their right to receive a copy of the appraisal report within A) 5 days before loan closing. B) 3 business days of receiving the loan application. C) 14 days of issuing an adverse action. D) 30 days from the date the appraisal was completed.

B) 3 business days of receiving the loan application. ECOA requires that creditors notify applicants of their right to receive a copy of any appraisal developed in connection with the loan. The notice must be provided within three business days of receiving an application.

As of January 10, 2014, fees charged to consumers for late payments are restricted to __________ of the past-due payment amount. A) 2% B) 4% C) 8% D) 10%

B) 4% Late fees are restricted to 4% of the past due payment, and pyramiding of late fees is prohibited.

Qualifying for a VA loan requires an applicant to have a __________ or less. A) 31 front-end / 43 back-end ratio B) 41 debt ratio C) 36 housing ratio D) 25/33 GMI ratio

B) 41 debt ratio VA is the only one that does not separate the two ratios, and requires a 41% maximum debt ratio.

After failing three consecutive tests, a mortgage loan originator licensee applicant must wait at least __________ before taking the NMLS licensing test again. A) 2 months B) 6 months C) 4 weeks D) 1 year

B) 6 months After failing three consecutive tests, an individual must wait at least six months before taking the test again.

The Homeowners Protection Act requires that a conventional loan's lender-required insurance will be canceled when the loan reaches __________ as long as the borrower is in good standing. A) 80% loan-to-value B) 78% loan-to-value C) the secondary market D) its 11th term year

B) 78% loan-to-value The Homeowners Protection Act requires the lender to automatically cancel the PMI if the LTV reaches 78% of the home as long as the borrower is current and in good standing.

Rob is looking to purchase a property with a sale price of $200,000. He plans on making a $24,000 down payment on the purchase. What would be the loan-to-value for this transaction? A) 90% TLTV B) 88% LTV C) 91% LTV D) 89% CTV

B) 88% LTV $200,000 - $24,000 = $176,000 $176,000 / $200,000 = .88

The term ATR means: A) Advanced transaction review. B) Ability-to-Repay. C) Amount to Repay. D) Additional tax rebate.

B) Ability-to-Repay. ATR means Ability-To-Repay.

ECOA adds which additional protected classes to federal fair housing laws? A) Source of income, age, and sexual orientation. B) Age, source of income, and marital status. C) Religion, national origin, and disability. D) Disability, source of income, and political affiliation.

B) Age, source of income, and marital status. The ECOA adds the classifications of marital status, age, and receipt of public assistance income as additional protected classes with respect to credit applications.

Which one of the following is NOT one of the reasons why the CFPB replaced the old disclosures with the new TILA-RESPA Integrated forms? A) The forms are easier to use for both consumers and loan originators B) Allows for hidden fees to be disclosed after loan closing C) Improve consumer understanding of mortgage loan terms D) Aid the consumer to do comparison shopping between lenders

B) Allows for hidden fees to be disclosed after loan closing The goals of the new rule are to provide easier-to-use mortgage disclosure forms, improve consumer understanding, aid comparison shopping, and prevent surprises at the closing table.

When dealing with appraisers, which one of the following can you ethically do? A) Negotiating with an appraiser to LOWER the value of the property. B) Asking an appraiser to consider the recently updated electrical wiring for the house being appraised. C) Refusing to pay for the appraisal unless it comes in at the same price the property is being purchased at. D) Giving the appraiser a bonus for each property that appraises for more than a certain amount.

B) Asking an appraiser to consider the recently updated electrical wiring for the house being appraised. It is unethical for licensees to influence, through extortion, bribery, or other illegal means, the development, reporting, result, or review of a real estate appraisal.

Which one of the following is NOT one of the four choices for the Purpose line item on page 1 of the Loan Estimate? A) Home Equity Loan B) Assumption C) Purchase D) Refinance

B) Assumption The four choices for the Purpose section are Purchase, Refinance, Construction, or Home Equity Loan.

Which of the following is NOT an eligible improvement on the Limited 203(k) loan? A) Installing new carpet and wood floors. B) Building a new detached garage. C) A bathroom remodel, including demo of an existing bathroom, replacing all fixtures, vanity, toilet, tub, shower, and flooring. D) Replacing drywall damage in all lower floor rooms due to previous flooding.

B) Building a new detached garage. The limited 203(k) does not allow for major remodeling or new construction such as a new detached garage.

To qualify for a VA loan, the applicant must receive a __________ from the Department of Veterans Affairs. A) Service Activity Report B) Certificate of Eligibility C) Document of Entitlement D) Loan Analysis

B) Certificate of Eligibility To qualify, the borrower must receive a Certificate of Eligibility (CoE) from the VA

Which law was the first to prohibit discrimination based on race? A) Fair Housing Act of 1968 B) Civil Rights Act of 1866 C) Housing and Community Development Act of 1974 D) Section 504 of the Rehabilitation Act of 1973

B) Civil Rights Act of 1866

When an application is taken in person and an applicant elects not to provide information regarding their sex, ethnicity, and race, what must the originator do? A) Notes that the applicant refuses to provide the information, and then leaves the fields blank on the application. B) Complete the information based on the originator's visual observation or the applicant's surname. C) Nothing. It is not the responsibility of the originator to complete the information. D) Tell the applicant that they are required to complete the information, and refuse the application until the information is documented.

B) Complete the information based on the originator's visual observation or the applicant's surname. If the applicant chooses not to provide the information for an application taken in person, the originator should note this fact on the form and then note the applicant's ethnicity, race, and sex on the basis of visual observation and surname.

Enforcement authority for the Equal Credit Opportunity Act belongs to the: A) Federal Housing Finance Agency (FHFA). B) Consumer Financial Protection Bureau (CFPB). C) Department of Housing and Urban Development (HUD). D) Federal Trade Commission (FTC).

B) Consumer Financial Protection Bureau (CFPB). The Consumer Financial Protection Bureau (CFPB) has the rulemaking and enforcement authority over ECOA.

A property that a borrower is looking to purchase may be subject to CC&Rs, also referred to as: A) Coverages, Closing, and Regulations. B) Covenants, Conditions, and Restrictions. C) Capital, Covenants, and Rent Control. D) Conditions, Convents, and Restitution.

B) Covenants, Conditions, and Restrictions.

Which of the following situations would NOT be a violation of fair housing law? A) To lower the appraisal value of a house because it is next to a large Muslim mosque. B) Denying a mortgage loan to a single, Hispanic mother of three children because she has a poor credit rating. C) Showing only houses in high-income neighborhoods, regardless of the ethnic makeup of the neighborhood. D) Refusing to rent to a blind person with a seeing-eye dog because of a "no pets" policy.

B) Denying a mortgage loan to a single, Hispanic mother of three children because she has a poor credit rating. In this case, a poor credit rating is the reason for denial of a mortgage, not any other factor.

When is discrimination based on race permitted? A) Both public and private sector housing B) Discrimination based on race is never permitted. C) Private sector housing D) Public sector housing

B) Discrimination based on race is never permitted.

Which of the following is NOT a standard exceptions to title insurance? A) Encroachments or boundary line differentials that a survey would disclose B) Easements shown in the public record that do not appear in the preliminary title report C) Taxes or assessments that are not shown as existing liens by any governmental taxing authority or public records D) Any right or claim of interest that is not shown in the public records but which could be determined by an inspection of the property or by making inquires of persons in possession of the property

B) Easements shown in the public record that do not appear in the preliminary title report There are 5 standard exemptions for title insurance: 1) Taxes or assessments that are not shown as existing liens 2) Any facts, rights, interest, or claims that are not shown by the public records, but which could be ascertained by an inspection of the land or by making inquiry of persons in possession of it. 3) Easements, claims of easement, or encumbrances not shown by public records 4) Any lien not shown by the public records 5) Discrepancies, conflicts in boundary lines or encroachments or other facts that a correct survey would disclose.

Which one of the following would be considered a violation of the SAFE Act? A) Completing the minimum eight hours of required CE each year B) Engaging in a bait-and-switch advertising campaign C) Placing the originator's NMLS number on his or her business card D) A speeding ticket

B) Engaging in a bait-and-switch advertising campaign Make false statements or engage in bait-and-switch (i.e. unethical) advertising is prohibited under the SAFE Act.

Which of the following is a protected class under federal fair housing laws? A) Political affiliation B) Familial status C) Sexual orientation D) Military status

B) Familial status Familial status is the only one of the four which is a protected class.

The Gramm-Leach-Bliley Act (GLBA) is also known as the: A) Glass-Steagal Act. B) Financial Services Modernization Act of 1999. C) NPI Regulation Rule. D) Homeowners Privacy Protection Act.

B) Financial Services Modernization Act of 1999. The Gramm-Leach-Bliley Act (GLBA) is also known as the Financial Services Modernization Act of 1999.

Which act prohibits discrimination in housing based upon sex? A) Fair Housing Amendments of 1988 B) Housing and Community Development Act of 1974 C) Section 504 of the Rehabilitation Act of 1973 D) Fair Housing Act of 1968

B) Housing and Community Development Act of 1974 Housing and Community Development Act of 1974 prohibits discrimination in housing based upon sex.

A type of nontraditional mortgage that allows a borrower to pay only the loan's interest for a specified number of years, after which the borrower must begin to pay the principal plus interest, is a __________ . A) Traditional Payment Option ARM B) Interest-Only (I-O) Payment Plan C) Fully Indexed Rate Loan D) Hybrid ARM

B) Interest-Only (I-O) Payment Plan Interest-only or I-O payment plans allow the borrower to pay only the loan's interest for a specified number of years. After that, the monthly payment will increase even if interest rates stay the same, because the borrower must begin to pay back the principal and the interest each month.

A feature that a Payment-option ARM has that other ARM loan products might not have is: A) a balloon payment due at specific periods of the loan term. B) a built-in payment recalculation period. C) the loan is guaranteed by the FDIC. D) an interest rate that is based on a consumer index.

B) a built-in payment recalculation period. Payment-option ARMs have a built-in recalculation period, usually every five years. At that point, the payment will be recalculated (or recast) based on the remaining term of the loan.

Which one of the following is permitted under the Credit CARD Act amendment to FCRA? A) Double-cycle billing, allowing a credit card issuer to calculate the amount of interest a cardholder owes based on the average daily balance for the past two months B) Payments in excess of the minimum payment must be applied first towards the balance of the account with the highest interest rate and then each successive balance having the next highest interest rate. C) Payment due dates that change periodically are now permitted, known as floating due dates. D) A credit card issuer can increase a consumer's credit limit without considering the consumer's ability to repay.

B) Payments in excess of the minimum payment must be applied first towards the balance of the account with the highest interest rate and then each successive balance having the next highest interest rate. Double-cycle billing and floating due dates are not permitted. Also, any increases in a consumer's credit limit must consider the consumer's ability to repay. A credit card issuer must credit any payment in excess of the minimum payment first towards the balance of the account with the highest interest rate and then each successive balance having the next highest interest rate.

The information an underwriter collects during the loan package review is called __________ . A) a Lender Appraisal Sheet B) Preliminary Underwriting Findings C) an Appraisal Report D) the underwriter's Financial Opinion

B) Preliminary Underwriting Findings To assist the underwriter in assessing the quality of the loan, lender guidelines and computer models are used to analyze the various factors relating to the borrower and the collateral (i.e., the property the loan is for). Once completed, this evaluation provides recommendations regarding the risks involved in offering the loan to the borrower. The underwriter's findings are typically presented in what is referred to as Preliminary Underwriting Findings.

A buyer agent is reviewing properties with a pre-approved Caucasian couple. The couple asks about housing availability in the "Northbrook" neighborhood. The agent replies, "I don't think you want to live in Northbrook. You would definitely be in the minority there." What discriminatory practice did engage in? A) Redlining. B) Steering. C) Racial tipping. D) Racial pointing.

B) Steering. Steering is the prohibited practice of discouraging buyers from considering certain neighborhoods or channeling buyers to particular neighborhoods based upon assumed buyer preferences regarding racial, religious, or national-origin composition of a neighborhood.

Which one of the following RESPA consumer disclosures are required between the time of loan application and the time of loan settlement? A) The Loan Estimate B) The Closing Disclosure C) The Special Information Booklet D) The Annual Escrow Statement

B) The Closing Disclosure The Closing Disclosure is given to the borrower before loan settlement. The Loan Estimate and Special Information Booklet is given at the time of loan application, and the annual escrow statement is given to the borrower after loan settlement.

Which one of the following is NOT part of the standard escrow instructions? A) Details on prorated items such as property taxes B) The amount of interest that will be paid on the buyer's loan C) Fees that will be paid for recording and who will pay them D) A list of documents that will be deposited with escrow

B) The amount of interest that will be paid on the buyer's loan The escrow instructions include a detailing of the money to be deposited into escrow, a detailing of the documents that are to be deposited into escrow, a detailing of the items to be prorated, and a detailing of the fees to be paid by the seller and the buyer.

Which one of the following would NOT require a new Closing Disclosure and three-day waiting period to be issued before loan consummation? A) The APR changes from 2.5% to 4.25% B) The contact telephone number for the lender changes C) The loan changes from an ARM to a fixed-rate mortgage D) A prepayment penalty is added

B) The contact telephone number for the lender changes Changes that require a new three-day waiting period are usually triggered by 1) the disclosed APR becomes inaccurate, however, there is a 10% tolerance allowed before a new waiting period is required, 2) the loan product changes, or 3) a prepayment penalty is added.

When determining the value of an apartment building, which of the approaches to value would an appraiser use? A) The market data approach B) The income capitalization approach C) The sales comparison approach D) The cost approach

B) The income capitalization approach The income capitalization approach arrives at the present value of a property by capitalizing the net income currently derived from the property. This approach is used only when appraising income-producing property such as an apartment building.

Which one of the following is required to be included on all loan originator marketing materials? A) The company's postal address B) The loan originator's NMLS unique identifier number C) A direct phone number D) An expiration date to the product being advertised

B) The loan originator's NMLS unique identifier number The NMLS Unique Identifier assigned to a mortgage loan originator is required to be included on all solicitations or advertisements, including business cards and websites.

What was the main purpose of ECOA? A) To standardize practices within the mortgage industry. B) To counter discriminatory practices in the credit market. C) To build homeownership among minority groups. D) To regulate appraisal standards.

B) To counter discriminatory practices in the credit market. Although ECOA does provide some regulatory standards within the mortgage industry and works to build homeownership among minorities, the primary purpose of ECOA was to counter discriminatory practices in the credit market.

Which one of the following is a characteristic of a subprime borrower? A) A debt-to-income ratio of 31% B) Two or more 30-day delinquencies within the past year C) A credit score of 680 D) A bankruptcy that occurred 10 years ago

B) Two or more 30-day delinquencies within the past year Some of the characteristics of a subprime borrower include a bankruptcy within the past 5 years, a debt-to-income ratio of 51% or higher, a credit score of 660 or lower, and two or more 30-day account delinquencies in the past 12 months.

For states that allow for a redemption period after a judicial foreclosure, the high bidder at a mortgagee's judicial foreclosure sale will receive: A) a Sheriff's Deed. B) a Sheriff's Certificate. C) the deed to the property. D) a general lien.

B) a Sheriff's Certificate. The highest bidder will receive a Sheriff's Certificate or a Certificate of Sale. The bidder will not receive a Sheriff's Deed until after the period of redemption has expired.

Fritz submitted an application for a mortgage loan at Oak Tree Bank. Under the Gramm-Leach-Bliley Act, Fritz is __________ of Oak Tree Bank. A) a customer B) a consumer C) both a customer and a consumer D) neither a customer nor a consumer

B) a consumer Customer relationships are ongoing. Just applying for a mortgage loan is a consumer status, as Fritz and Oak Tree Lenders have not entered into a relationship. If the loan application is approved and proceeds forward, then a relationship exists and Fritz becomes a customer.

A financial institution's privacy policy disclosure must include: A) the exact NPI data that the financial institution wishes to share with nonaffiliated third parties. B) a method for the consumer or customer to opt-out of information sharing. C) a telephone number the individual can call and pay a fee to restrict the sharing of his/her information. D) the names of every nonaffiliated third party that the NPI is shared with.

B) a method for the consumer or customer to opt-out of information sharing. Under Gramm-Leach-Bliley, the privacy policy for both consumers and customers must include a way for the individual to opt-out of their information being given to nonaffiliated third parties.

When a borrower defaults on his/her loan, an acceleration clause allows the lender to A) charge a fee as a penalty for nonpayment or payments not made in a timely manner. B) accelerate payment of the loan by requiring the entire principal balance immediately due. C) require the borrower to continue to make installment payments. D) add the unpaid interest amount to the principal amount of a mortgage loan.

B) accelerate payment of the loan by requiring the entire principal balance immediately due. An acceleration clause allows the lender to accelerate payment of the loan by requiring the entire principal balance immediately due and payable.

A mortgage with an interest rate that is tied to an economic index is called __________ . A) a Conforming Mortgage B) an Adjustable Rate Mortgage C) a Fluctuating Index Mortgage D) an Index Dependent Mortgage

B) an Adjustable Rate Mortgage An adjustable rate mortgage, also called an ARM, is a mortgage with an interest rate that is tied to an economic index. The borrower's interest rate is adjusted as the index changes.

The limit for points and fees will be adjusted __________ and posted in the commentary to Regulation Z. A) every 10 years B) annually C) twice per year D) monthly

B) annually Fee and point amounts will be adjusted annually for inflation and published each year in the commentary to Regulation Z.

A mortgage company is required to have __________ that are in compliance with FinCEN rules. A) policies on employment practices B) anti-money laundering programs C) loan originator compensation plans D) yield spread premiums

B) anti-money laundering programs All mortgages companies are to have anti-money laundering programs.

Deliberately overstating or understating a property's appraised value is known as __________ . A) builder bailout scheme B) appraisal fraud C) lender collateral enhancement D) multiple simultaneous loans

B) appraisal fraud Deliberately overstating or understating a property's appraised value is appraisal fraud.

Loan payments on a note secured by a trust deed are made to the __________ . A) trustor B) beneficiary C) trustee D) mortgagee

B) beneficiary The beneficiary is the lender. The beneficiary is the payee and holder of the promissory note.

Most residential transactions use a __________ format for escrow instructions. A) unilateral B) bilateral C) ambilateral D) lateral

B) bilateral Most residential transactions use a bilateral instruction format. This means that both the seller and the buyer sign the same set of instructions that are prepared by the escrow company on their standard, preprinted company form, after all of the information has been received and the transaction is about to close.

Funds paid into an escrow account for mortgage payments, taxes, and insurance belong to the __________ . A) lender B) borrower (i.e., homeowner) C) loan servicer D) escrow company

B) borrower (i.e., homeowner) Escrow funds belong to the borrower and are held in a non-interest bearing trust account until the taxes and/or insurance premiums become due. The lender cannot use these funds for any other purpose.

For its rural loan program, the USDA can: A) only originate its own loans to borrowers. B) both insure lender loans and originate its own loans. C) only insure loans made by lenders. D) neither insure lender loans nor originate its own loans.

B) both insure lender loans and originate its own loans. The USDA can either insure a lender's loan (the loan guarantee program) or originate its own loans (the direct loan program).

A Hybrid ARM loan is a type of loan that: A) allows the borrower to only pay the loan's interest. B) can be described by using numbers such as 5/1 or 3/1. C) has a lump payment at the end of a set period. D) recalculates itself every 10 years.

B) can be described by using numbers such as 5/1 or 3/1. Hybrid ARMs are described with numbers such as "1/1," "3/1," and "5/1." The first number in each set refers to the initial period of the loan, during which the borrower's interest rate will stay the same for that period of years. The second number is the adjustment period, showing how often adjustments can be made to the rate after the initial period has ended.

The OFAC Specially Designated Nationals list can be used to determine if a customer: A) demonstrates responsibility regarding his/her financial accounts. B) could be a suspected money launderer, terrorist, or involved in other illegal activities. C) previously lived in a country affected by U.S. embargo sanctions. D) has any undocumented primary or secondary liens on his/her property.

B) could be a suspected money launderer, terrorist, or involved in other illegal activities. The Specially Designated Nationals (SDN) list is available for loan or finance companies to use to determine if one of their customers could be a suspected money launderer, terrorist, or involved in other illegal activities.

On the Closing Disclosure, the Deposit will be the: A) number of points paid by the borrower to lock the loan's interest rate. B) earnest money amount already paid to the seller by the property buyer. C) dollar amount set aside for prepaid interest on the loan. D) amount that must be deposited into the escrow account at loan consummation.

B) earnest money amount already paid to the seller by the property buyer. The Deposit is the earnest money deposit amount already paid by the borrower to the seller, which is being held in an escrow or trust account until the time of loan consummation.

Page 1 of the Loan Estimate and page 1 of the Closing Disclosure are in the same format, which allows consumers to: A) report to the CFPB when there is a undocumented out-of-tolerance fee. B) easily compare the final loan terms and costs with the initial estimate. C) select which one of the two documents will be used at closing. D) use the Closing Disclosure as leverage to obtain a better interest rate.

B) easily compare the final loan terms and costs with the initial estimate. Since page 1 of the Loan Estimate and page 1 of the Closing Disclosure form page are in the same format and present the same information, a consumer can easily compare the two forms.

If a community in a flood plain does not join the National Flood Insurance Program, and later the community is declared a federal disaster area due to flood, then: A) the community can immediately join the program, but residents pay a higher insurance premium. B) federal financing would not be available for repairs or building reconstruction. C) lenders can apply to FEMA for reimbursement due to the loss of property value. D) the flooded properties can be sold at a discount to HUD for its first-time buyer program, HUD Homes.

B) federal financing would not be available for repairs or building reconstruction. If the area is federally declared a disaster area due to flooding, and the community is not participating in the NFIP, federal financing would not be available for repairs or building reconstruction.

When working with a federally-related mortgage loan, RESPA prohibits: A) charging a fee for reducing the loan's annual interest rate. B) giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business. C) issuing a revised Loan Estimate if there are change circumstances that invalidate the initial Loan Estimate. D) recommending service providers who will perform quality services for the borrower.

B) giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business. RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan.

Under the Gramm-Leach-Bliley Act, a customer is defined as an individual who: A) used to hold an account at the financial institution, but who is no longer a client. B) has a ongoing relationship with a financial institution. C) obtains financial products from a financial institution for commercial use. D) shares his/her NPI with as many financial institutions as he/she can.

B) has a ongoing relationship with a financial institution. Under GLBA, the term customer is a subclass of a consumer who has a continuing relationship with a financial institution. Because of the continuing relationship, the consumer becomes a customer with privacy rights protected under the GLBA.

Under the Good Neighbor Next Door Programs, revitalization areas are designated by A) the number of FHA-insured foreclosures. B) household incomes, home-ownership rate, and the number of FHA-insured foreclosures. C) household incomes and the number of FHA-insured foreclosures. D) home-ownership rate and the number of FHA-insured foreclosures.

B) household incomes, home-ownership rate, and the number of FHA-insured foreclosures. HUD considers the income of households, the home-ownership rate, and the number of FHA-insured foreclosures in the area when selecting homes for the revitalization areas for the Good Neighbor Next Door.

Determining if an applicant meets income ratio qualifications requires a loan originator to calculate the applicant's: A) projected income for the next five years. B) housing ratio and debt ratio. C) gross-up ratio. D) rental income ratio and investor ratio.

B) housing ratio and debt ratio. A certain percentage of income is allowed to be allotted to housing expense, which is called the borrower's front end ratio, housing ratio, or inside ratio. The percentage that goes towards monthly liabilities that are recurring to include all revolving debt, installment debt, and mortgages is called the borrower's back end ratio, debt ratio, or outside ratio. Qualifying for a loan program requires borrowers to meet specific ratio requirements depending on the loan being applied for.

A state regulatory agency does NOT have the authority to: A) decline to renew a license for making a material misstatement on an application. B) impose prison sentences for any violations of the SAFE Act. C) order restitution against persons subject to the SAFE Act for violations. D) decline to renew a license for a violation of the SAFE Act.

B) impose prison sentences for any violations of the SAFE Act. State and federal regulating authorities do not have the authority to impose a prison sentence or negotiate any violations of the SAFE Act.

A financial institution's GLBA-required privacy policy disclosure can be made available: A) in any format the financial institution prefers to use. B) in both paper and electronic formats. C) only in electronic format. D) only in paper format.

B) in both paper and electronic formats. The privacy policy notice may be presented in a paper format and/or an electronic format. If in electronic format it must be readily available to the consumer or it should be hyperlinked from a page where transactions are conducted.

Under ECOA, a lender who has denied credit must notify the applicant of the denial within 30 days. This notification must be: A) in writing, over the telephone, or by email. B) in writing. C) in writing or over the telephone. D) in person.

B) in writing. A lender who has denied credit must notify the applicant in writing within 30 days.

When calculating points and fees, the lender should: A) calculate and include the amount of total interest paid for the life of the loan. B) include all amounts that are known at or before loan consummation. C) ensure that the total points and fees do not exceed $1,500. D) omit any known fees that are to be paid after the loan has been processed.

B) include all amounts that are known at or before loan consummation. When calculating points and fees, the lender should include all amounts that are known at or before loan consummation, even if the consumer pays them after loan consummation by rolling them into the loan amount.

If the military service member borrower is on active military duty, the VA funding fee will: A) be deferred until the borrower retires. B) not be waived. C) be reduced to 1.25%. D) decrease the required down payment based on years of service.

B) not be waived. If the borrower is on active duty, the VA funding fee cannot be waived even if the service member is disabled.

Zack is applying for a mortgage loan to purchase a beach house. He claims on his application that it will be his primary residence when he actually plans to rent the beach house to vacationing beach goers. This is an example of __________ . A) property fraud B) occupancy fraud C) income fraud D) investment fraud

B) occupancy fraud In occupancy fraud, in an attempt to obtain a lower interest rate on a property they do not intend to occupy, borrowers may state on the loan application that they will occupy the property as a primary residence or as a second home.

Information regarding a Suspicious Activity Report can be disclosed to: A) all other loan originators in the company. B) only company personnel who need to know. C) the loan applicant. D) a court who requests the information to be disclosed.

B) only company personnel who need to know. SARs are confidential. The reports will not be copied or duplicated and will only be shared with company personnel that have a need to know. If the company or any of its employees is subpoenaed or otherwise requested to disclose a SAR or the information contained in a SAR, that request shall be declined and no information regarding that SAR will be disclosed, including even that a SAR has been prepared or filed.

The term PITI represents a loan's: A) principal, interest, trust, and index. B) principal, interest, taxes, and insurance. C) payments, insurance, terminology, and interest. D) property, index, taxes, and insurance.

B) principal, interest, taxes, and insurance. The inclusion of taxes and insurance in the monthly payment is often referred to as PITI or principal, interest, taxes, and insurance.

The mortgage assistance relief services (MARS) rules apply to mortgage brokers who: A) originate more than 100 loans during the previous calendar year. B) promote loan origination or refinancing as a way for homeowners to avoid foreclosure. C) work for nonprofit organizations that provide down payment assistance. D) receive compensation from the refinance of subprime loans.

B) promote loan origination or refinancing as a way for homeowners to avoid foreclosure. The rule applies to mortgage brokers who promote loan origination or refinancing as a way for homeowners to avoid foreclosure.

The purpose of the Fair Credit Reporting Act (FCRA) is to: A) provide consumers with many finance options to choose from. B) protect the public from the reporting of inaccurate information by credit agencies. C) help consumers receive lower interest rates. D) require disclosure of home insurance costs.

B) protect the public from the reporting of inaccurate information by credit agencies. FCRA establishes procedures to ensure accurate consumer credit information and applies when requesting credit information and when providing it to others.

Another term used for a seller-financed mortgage is a __________ mortgage. A) package B) purchase money C) lender-loss D) subprime

B) purchase money A purchase money mortgage is given by a buyer to a seller when the seller is the lender in the transaction.

The Equal Opportunity Act (ECOA) prohibits creditors from discriminating against credit applicants on the basis of: A) race, color, religion, national origin, and family status. B) race, color, religion, national origin, sex, marital status, age, receives public assistance, or the fact they have exercised their right under the consumer protection act. C) race, color, religion, national origin, and sex. D) race, color, religion, national origin, sex, marital status, and age.

B) race, color, religion, national origin, sex, marital status, age, receives public assistance, or the fact they have exercised their right under the consumer protection act. 1) Race, 2) Color, 3) Religion, 4) National Origin, 5) Sex, 6) Marital status, 7) Age, 8) Receipt of public assistance, and 9) The fact that they have exercised their right under consumer protection act

A lender that buys the loan from the primary lender is known as the A) wholesale lender. B) secondary lender. C) loan processor. D) retail lender.

B) secondary lender. When a primary lender sells an originated loan to another lender, the buying lender is known as the secondary lender.

A __________ is an individual whose personal profile is used to serve as a cover for a loan transaction. A) mock signer B) straw borrower C) masked funder D) power of attorney

B) straw borrower A straw borrower is an individual whose personal profile is used to serve as a cover for a transaction. Straw borrowers can be willing participants in the transaction or victims whose identity is being used without the individual's knowledge (identity theft). Straw borrowers can cause loans to be approved that would ordinarily be declined.

The RESPA Servicing Disclosure Statement will explain to an applicant: A) how to set up an escrow or impound account for the payment of PITI. B) that the servicing of the loan may be assigned, sold, or transferred to another party. C) the applicant's right to have the loan serviced. D) the method that the applicant can use to file a servicing complaint with the CFPB.

B) that the servicing of the loan may be assigned, sold, or transferred to another party. The mortgage servicing disclosure statement discloses whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

A creditor who decides to take an adverse action relating to a specific consumer must provide that consumer with an adverse action notice containing: A) the minimum credit score required, and the methods the creditor used to determine the consumer's score. B) the credit score and other information the creditor used in making its decision. C) a copy of the Fair Credit Reporting Act. D) a supplementary application for the consumer to complete and submit.

B) the credit score and other information the creditor used in making its decision. A creditor who decides to take an adverse action relating to a specific consumer must provide that consumer with an adverse action notice containing the credit score and other information the creditor used in making its decision.

Stage one of money laundering is: A) placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. B) the introduction of illegally obtained monies or other valuables into financial or nonfinancial institutions. C) separating the proceeds of criminal activity from their source through the use of layers of complex financial transactions. D) There are no real stages associated with money laundering.

B) the introduction of illegally obtained monies or other valuables into financial or nonfinancial institutions. Money laundering stage one is placement; the introduction of illegally obtained monies or other valuables into financial or non-financial institutions.

One of the features of a reverse equity mortgage is: A) an estate has up to one year to repay the reverse mortgage. B) the loan is to be repaid when the last borrower dies or moves out of the house. C) a lower interest rate than a conforming loan, sometimes as low as 0.5% APR. D) it is available to homeowners age 55 and above.

B) the loan is to be repaid when the last borrower dies or moves out of the house. A reverse mortgage is a loan for homeowners age 62 and older that use a portion of the home's equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away.

John has made an offer on a parcel of real estate and wants to trace the conveyances and encumbrances that relate to the property. To find this information, John will order a A) chain of title. B) title search. C) cloud search. D) recordation of title.

B) title search. The search for existing encumbrances is called a "title search."

For a conventional mortgage, the property seller is allowed to pay __________ towards the buyer's (i.e., the borrower) real estate closing costs. A) $2,500 B) up to 3% C) 20% D) between 2.5% and 5%

B) up to 3% A seller is allowed to pay up to 3% of the buyer's closing costs for a conventional mortgage used to purchase a primary or secondary property,

Aster Corporation decided to develop a downtown office building, and borrowed $6,000,000 repayable in 8 years. The amortized note showed that at the end of the 8 years, Aster Corporation would have paid a total of $11,942,400. What was the amount of yearly simple interest charged on the note? A) 8.25% B) 9.5% C) 12.38% D) 12.7%

C) 12.38% First, determine the amount of interest paid. To do this subtract the principal amount of the loan from the total amount paid at note maturity. This number will represent the amount of interest paid for the entire 8-year period. ($11,942,400 - $6,000,000 = $5,942,400) Next, calculate the amount of interest attributable to one year. ($5,942,400 / 8 years = $742,800) Divide the amount of interest attributable to one year by the total amount of the loan. The result will be the actual interest rate paid on the loan on an annual basis. ($742,800 / $6,000,000 = .1238) Then convert the answer to a whole number by moving the decimal point two places to the right. (12.38%)

After giving an adverse action notice to an applicant, a lender is required to retain the applicant's loan files for __________ . A) 20 weeks B) 14 days C) 25 months D) 5 years

C) 25 months ECOA (Regulation B 1002.12) requires that a creditor must maintain records relating to a loan application after notifying an applicant of an adverse action taken or for application incompleteness for 25 months in the case of a consumer loan or 12 months in the case of a commercial loan

For a qualified mortgage loan greater than or equal to $109,898, what is the maximum cost for points and fees allowed? A) $1,077 B) 5% of the total loan amount C) 3% of the total loan amount D) $3,297

C) 3% of the total loan amount For QM loans greater than or equal to $109,898 the maximum points and fees that may be charged may not exceed 3% of the total loan amount (2020 rates).

If Theodora is paid $1,599.76 every two weeks, has a monthly mortgage payment of $1,109.17, and pays $150 monthly to escrow for taxes and insurance, what will her front end debt ratio be? A) 28% B) 32% C) 36% D) 60%

C) 36% Theodora is paid bi-weekly, so $1,599.76 × 26 pay periods per year ÷ 12 months = $3,466.14. Her housing related debt is $1,109.17 + $150 = $1,259.17 $1,259.17 ÷ $3,466.14 = 0.36327 or 36%

Bob's GMI is $2,000 per month. He currently rents an apartment for $800 per month. Bob has a $199 monthly car lease and an $80 monthly credit card payment. What is Bob's qualifiying ratio? A) 36/38 B) 40/49 C) 40/54 D) 31/43

C) 40/54 Bob's housing ratio is $800 / $2000 = 40%. His debt ratio is ($800 + $199 + $80) / $2000 = 54%. Bob's housing/debt ratio is 40/54.

A General Qualified Mortgage requires that the debt-to-income ration not exceed: A) 36%. B) 40%. C) 43%. D) 48%.

C) 43%. The monthly DTI at consummation for a QM cannot exceed 43%.

The FACT Act requires that credit card issuer must give a least __________ advance notice relating to change in credit card account terms, including interest rate increases. A) 30 days B) 60 days C) 45 days D) 14 days

C) 45 days A credit card issuer must give a least 45 days advance notice relating to change in credit card account terms, including interest rate increases.

If Richard has a $385 car payment, is paid $1,599.76 every two weeks, has a mortgage payment of $1,109.17, and pays $150 monthly to escrow, what would be his back-end debt ratio? A) 23% B) 43% C) 47% D) 57%

C) 47% First calculate Richard's monthly income by using the formula (wages × 26 bi-weekly pay periods per year ÷ 12 months). $1,599.76 × 26 ÷ 12 = $3,466.14 Richard's debt per month is $1,644.17 ($385 + $1,109.17 + $150 = $1,644.17) $1,655.17 ÷ $3,466.14 = .47435 or 47%

A civil lawsuit can be brought against a creditor within __________ of the date of a creditor's ECOA violation. A) 24 months B) 6 months C) 5 years D) 1 year

C) 5 years Civil lawsuits for ECOA violations may be brought within five years of when the alleged violation occurred.

There are __________ disbursement plan choices for a borrower who has a reverse mortgages. A) 4 B) 5 C) 6 D) 7

C) 6 There are six disbursement plans: tenure, term, line of credit, single disbursement lump sum, modified tenure, and modified term.

If the delivery of the Closing Disclosure is by postal mail, then the Closing Disclosure must be placed in the mail __________ before loan consummation. A) 7 days B) 3 business days C) 6 business days D) 72 hours

C) 6 business days If delivery of the Closing Disclosure is by mail, the "mailbox rule" will apply. This rule means you have to add three days to account for mail delivery time to the three days required prior to consummation. The Closing Disclosure would need to be placed in the mail six business days prior to consummation.

A transaction is a high-cost mortgage loan if the transaction's APR measured as of the date the interest rate for the transaction is set exceeds the Average Prime Offer Rate for a comparable transaction on that date by more than __________ for first-lien transactions. A) 2% B) 3.5% C) 6.5% D) $10,000

C) 6.5% The APR cannot exceed 6.5% of the APOR for a comparable transaction as of the date the interest rate is set.

Under RESPA, how long can a borrower continue to make loan payments, without penalty, to the old servicer if the borrower's loan has been transferred to a new loan servicer? A) 45 days B) 4 weeks C) 60 days D) 15 days

C) 60 days As long as the borrower makes a timely payment to the old servicer within 60 days of the loan transfer, the borrower cannot be penalized.

If you owe $168,000 on your mortgage and your most recent appraisal comes on at $275,000, what is your LTV? A) 56% B) 58% C) 61% D) 64%

C) 61% $168,000 ÷ $275,000 = 0.610909090 rounded to 61%

How old does the borrower have to be to qualify for a reverse mortgage? A) 55 years old B) 72 years old or older C) 62 years old or older D) 60 years old or younger

C) 62 years old or older In order to qualify for a reverse mortgage, all named individuals on the home's title must meet the age requirement of 62.

If the purchase price is $275,000 and the loan amount is $225,000, the LTV is: A) 79% B) 80% C) 82% D) 90%

C) 82% $225,000 ÷ $275,000 = 0.8181 rounded to 82%

For a 30-year FHA-insured loan that is less than $625,000 and greater than 95% loan-to-value, what is the monthly mortgage insurance (MMI) rate? A) 55 BPS B) 60 BPS C) 85 BPS D) 100 BPS

C) 85 BPS If the FHA-insured loan is greater than 95% LTV, for a term longer than 15 years, and for values less than or equal to $625,500, the rate is 85 base points.

Which one of the following would fall under the definition of nonpublic personal information (NPI)? A) A borrower's telephone number B) A borrower's mailing address C) A borrower's account payment history D) The name of the lender who originated a borrower's mortgage

C) A borrower's account payment history Telephone number and mailing address can be found through public telephone and address directories. The name of the lender who holds the lien (i.e., mortgage) on the property can be found at the county recorder's office. The borrower's personal account payment history would be NPI.

Which one of the following is NOT an alternative mortgage transaction as defined by Section 1004.2 of the Dodd-Frank Act? A) A loan, credit sale, or account that is secured by an interest in a residential structure that contains one to four units, whether or not that structure is attached to real property, including an individual condominium unit, cooperative unit, mobile home, or trailer, if it is used as a residence. B) A loan, credit sale, or account that is made primarily for personal, family, or household purposes. C) A loan, credit sale, or account in which one or more of the regular periodic payments will result in an increase in the principal balance. D) A loan, credit sale, or account in which the interest rate or finance charge may be adjusted or renegotiated.

C) A loan, credit sale, or account in which one or more of the regular periodic payments will result in an increase in the principal balance. Transactions with a fixed interest rate where one or more of the regular periodic payments may result in an increase in the principal balance do not meet the definition of an alternative mortgage transaction.

Which of the following is NOT one of the four elements necessary for a negotiable instrument? A) A promise to pay by a specific date B) A promise to pay a specific person C) A promise to pay at specific intervals D) A promise to pay a specific sum

C) A promise to pay at specific intervals The four elements are: A promise to pay a specific sum, A promise to pay a specific person or payable to the bearer, A promise to pay by a specific date or on demand, and The signature of the maker.

Which one of the following perils is NOT covered in a hazard insurance policy? A) A house fire B) A hurricane C) An earthquake D) A burglary

C) An earthquake Hazard insurance protects a borrower's property from many factors such as fire, windstorm, snow, freezing temperatures, volcanic eruption, explosions, and smoke damage. It also protects against man-made perils such as vandalism, theft, riots, and damage caused by motor vehicles not owned by the borrower. Note that hazard insurance does not protect against flooding or earthquakes; those are separate insurance policies.

Which of the following transactions would be covered by the Real Estate Settlement Procedures Act (RESPA)? A) 50 acres of land purchased for a proposed subdivision B) A construction loan C) An initial mortgage on a one-to-four family dwelling D) The purchase of an office building

C) An initial mortgage on a one-to-four family dwelling RESPA covers loans made by federally related lenders that are secured with a mortgage placed on a 1-to-4 family residential property. It does not cover construction loans, commercial loans, or land loans.

Which one of the following is exempt from the definition of a creditor as clarified in the Red Flags Program Clarification Act of 2010? A) A creditor who obtains or uses consumer credit reports during the course of business. B) One who advances funds which must be repaid in the future or repayable from specific property pledged by or on behalf of the person. C) Anyone who advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person. D) Any company that provides information to Consumer Reporting Agencies.

C) Anyone who advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person. The 2010 act defines a creditor as one, who in the course of business, regularly obtains or uses consumer credit reports, provides information to consumer credit reporting agencies, or advances funds which must be repaid in the future or repayable from specific property pledged by or on behalf of the person. The Clarification Act excludes from the creditor definition anyone who advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.

Which one of the following would severely impact a borrower's credit score? A) Applying for a new credit card B) Having a $0 balance on a revolving credit account C) Being 60 days past due on a debt D) A soft-inquiry is made on the credit report

C) Being 60 days past due on a debt Being past due on a payment owed to a credit will have a major impact on an individual's credit score.

Which one of the following modifications can a lender do to the RESPA Special Information Booklet? A) Remove Appendix E, F, and G in order to conserve paper when printing B) Combine the booklet with the Servicing Disclosure Statement and Loan Estimate C) Change the cover image to include the lender's corporate logo D) Add the lender's preferred title insurance company contact information to page 29

C) Change the cover image to include the lender's corporate logo RESPA allows a lender to make changes to the cover of the booklet, such as adding artwork or the lender's contact information, but the contents of the booklet must remain unchanged unless a written request is made to the CFPB. The booklet cannot be combined with other disclosures to make a larger document for purposes of complying with RESPA.

Which of the following is one of the eight required underwriting factors under ATR rules? A) Marital status B) Loan-to-value ratio C) Credit history D) Status of the property of the subject loan

C) Credit history The eight underwriting factors are: 1) current or reasonably expected income or assets; 2) current employment status; 3) the monthly payment on the covered transaction; 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; and 8) credit history.

Which one of the following is NOT a common law fiduciary duty owed to a mortgage applicant or a borrower? A) Loyalty B) Accounting C) Discrimination D) Disclosure

C) Discrimination The common law fiduciary duties are care, loyalty, accounting, obedience, and disclosure.

When a lender prepares the loan documents for the borrower to sign, this is often referred to as __________ . A) DU B) Prelim C) Docs D) Escrow

C) Docs "Docs" refers to the preparation of the loan documents that the borrower signs at closing.

Enforcement of the Fair Credit Reporting Act is the responsibility of the: A) Dodd-Frank Act. B) Consumer Reporting Agencies (CRAs) C) Federal Trade Commission (FTC). D) Federal Reserve Board (FRB).

C) Federal Trade Commission (FTC). Enforcement of the FCRA is the responsibility of the U.S. Federal Trade Commission.

The __________ was granted the authority under the USA Patriot Act to adopt rules and enforce the provisions of the act. A) Consumer Financial Protection Bureau B) Mortgage Assistance Relief Services C) Financial Crimes Enforcement Network (FinCEN) D) Federal National Mortgage Association (FNMA)

C) Financial Crimes Enforcement Network (FinCEN) The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, was granted the authority under the USA Patriot Act to adopt rules and enforce its provisions.

On the Projected Payments section of the Loan Estimate, what is the maximum number of Payment Calculation columns allowed? A) Two B) Six C) Four D) There isn't a maximum number of columns

C) Four The maximum number of columns the payment calculations table is four. If a loan has more than four triggering events, then show a range of payments in the fourth column (e.g., years 12-30).

Which one of the following is NOT a primary lender of loans? A) A credit union B) A commercial bank C) Freddie Mac D) A wholesale lender

C) Freddie Mac Freddie Mac is a secondary market for loans originated by thrifts, VA loans, and FHA loans.

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 Under the Home Mortgage Disclosure Act, lenders must provide their supervisory body with information about loans made and purchased, as well as the race, gender, and income of applicants, and the geographic areas where the lenders made loans.

The USDA's rural low-income loan programs are managed by the: A) Farm Service Agency. B) Department of Housing and Urban Development (HUD). C) Housing and Communities Facilities Programs (HCFP). D) Farm Credit System.

C) Housing and Communities Facilities Programs (HCFP). The programs are managed by the USDA's Housing and Communities Facilities Programs (HCFP)

Lenders who originate subprime loans are to follow the: A) AARMR Guide to Nontraditional Mortgages. B) High Risk Borrower Educational Guidelines. C) Interagency Guidance on Nontraditional Mortgage Product Risks. D) HECM-counselor advice and recommendations.

C) Interagency Guidance on Nontraditional Mortgage Product Risks. The guide is called the Interagency Guidance on Nontraditional Mortgage Product Risks (a.k.a., the Interagency Guidance). It applies to all banks and their subsidiaries.

Which one of the following would be considered income fraud? A) Carter included his salary on his loan application, but omitted his seasonal income. B) Delivery driver Rick claimed to be the company president on his loan application. C) Karen added an extra zero at the end of the number in the Wages box on her W2. D) Ellen included her Social Security income on her loan application.

C) Karen added an extra zero at the end of the number in the Wages box on her W2. Karen committed income fraud by modifying her W2. Rick committed employment fraud, and Carter and Ellen are fraud-free. If an applicant can qualify for a loan without including other sources of income (e.g., seasonal, part-time, etc.), then it does not need to be included.

The form used by required institutions for reporting HMDA data is called the: A) Section X. Information for Government Monitoring Purposes. B) HMDA Data Reporting Form. C) Loan / Application Register. D) Regulation C Reporting Sheet.

C) Loan / Application Register. The information must be recorded on a form known as the HMDA Loan/Application Register, also known as the HMDA-LAR, the LAR, or "the register."

Which one of the following disclosures are to be used after October 3, 2015? A) Truth in Lending Disclosure B) HUD-1 Settlement Statement C) Loan Estimate D) Good Faith Estimate

C) Loan Estimate The CFPB Loan Estimate and Closing Disclosure are to be used starting October 3, 2015 (formerly August 1, 2015).

Real Estate __________ issue pass-through securities collateralized with real estate mortgages where only the investor who owns the securities is liable for the tax on the income A) Home Loan Mortgage Corporations B) Participating Lenders C) Mortgage Investment Conduits D) Mortgage Brokers and Bankers

C) Mortgage Investment Conduits Real Estate Mortgage Investment Conduits (REMICS) are another source of secondary market mortgage funds. REMICS were made possible by the Tax Reform Act of 1986. They issue pass-through securities collateralized with real estate mortgages where only the investor who owns the securities is liable for the tax on the income.

With the new integrated TILA-RESPA forms, on which form will compensation paid to the loan originator by a creditor be disclosed? A) Only on the Loan Estimate B) On both the Loan Estimate and the Closing Disclosure C) Only on the Closing Disclosure D) Neither the Loan Estimate or Closing Disclosure contains compensation information

C) Only on the Closing Disclosure Loan originator compensation paid for by a creditor is not disclosed on the Loan Estimate. It is disclosed on the Closing Disclosure. If the loan originator compensation was paid directly by the borrower, then it would appear under the Origination Charges on the Loan Estimate.

Which one of the following does NOT match the definition of money laundering? A) Utilizing a series of transactions, transferring the proceeds to a bank secrecy act country, and later returning those funds to their original source. B) Making financial transactions appear to be from a legal source. C) Placing financial transaction within the reach of the government. D) Conducting financial transactions and/or taking the proceeds from an illegal activity.

C) Placing financial transaction within the reach of the government. Money laundering is the process of conducting financial transactions and/or taking the proceeds from an illegal activity and then making them appear to be from a legal source, or hiding them or placing them beyond the reach of the government, or utilizing a series of transactions, transferring the proceeds to a bank secrecy act country, and later returning those funds to their original source

Which one of the following is NOT a type of real estate contract or security instrument used when financing a property purchase? A) Land sale contract B) Mortgage C) Promissory note D) Trust Deed

C) Promissory note A promissory note serves as the necessary evidence and promise to repay. However, the promissory note is not a security instrument. The promise made in the note is the promise to pay back the loan but this does not guarantee that the borrower will repay it

Which of the following is a protected class of person under federal fair housing laws? A) Personal appearance B) Military status C) Religion D) Those with criminal records

C) Religion Federal Fair Housing Laws protect seven classes of persons: Race, Color, Country of national origin, Religion, Sex, Handicapped individuals (disability), and Familial Status (families with children under 18 and pregnant women).

Which one of the following is NOT one of the four parts to a company's identity theft prevention program as required by the Red Flag Rule? A) Prevent and mitigate identity theft B) Detect red flags C) Retire the program when no longer necessary D) Identify business relevant red flags

C) Retire the program when no longer necessary The four parts of an identity theft prevention program are 1) identify business relevant red flags; 2) detect red flags; 3) prevent and mitigate identity theft; and 4) update company red flags program.

Which one of the following improvements is NOT eligible under the Limited 203(k) program? A) Painting (exterior and interior) B) Plumbing upgrades C) Structural repairs D) Kitchen remodeling

C) Structural repairs Major rehabilitation, major remodeling, structural repairs, landscaping, or repairs expected to take longer than 6 months are not eligible for the Limited 203(k).

According to RESPA, which one of the following is a settlement service? A) Providing automobile insurance B) Sharing the appraisal fee with the lender who ordered the appraisal C) Taking a loan application D) Offering a prize to those who refer business

C) Taking a loan application Settlement services include taking the loan application, loan processing and underwriting, and funding. Auto insurance is not considered a settlement service related to a mortgage loan, and the other two options are prohibited by RESPA.

Who publishes the RESPA-required disclosure, What You Should Know About Home Equity Lines of Credit? A) The local state banking regulation agency B) The Department of Housing and Urban Development C) The Board of Governors of the Federal Reserve System D) The Consumer Financial Protection Bureau

C) The Board of Governors of the Federal Reserve System The brochure titled What You Should Know About Home Equity Lines of Credit is published by the Board of Governors of the Federal Reserve System.

Which one of the following is NOT an amendment to the Fair Credit Reporting Act? A) The Red Flag Program Clarification Act B) The Fair and Accurate Credit Transactions Act C) The Equal Opportunity Credit Act D) The Credit Card Accountability Responsibility and Disclosure Act

C) The Equal Opportunity Credit Act Some of the major amendments to the FCRA are the Fair and Accurate Credit Transactions Act of 2003 (FACTA), the Credit Card Accountability Responsibility and Disclosure Act of 2009, Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Red Flag Program Clarification Act of 2010 enacted on December 18, 2010.

Which one of the following elements is NOT required to be on an Affiliated Business Arrangement disclosure? A) A description of the business arrangement that exists between the two providers B) An estimate of the affiliated provider's charges C) The amount of money the affiliate will receive as compensation for the referral D) A statement that the borrower is free to shop for alternative settlement service providers

C) The amount of money the affiliate will receive as compensation for the referral An AfBA disclosure must disclose all relationships, describe the business arrangement that exists between the two providers, give the borrower an estimate of the second provider's charges, and inform the borrower that he is generally not required to use the affiliate and is free to shop for other providers. Receiving a kickback for referring business is prohibited under Section 8 of RESPA.

When reviewing an applicant's W2 form, what would be the reason why for the amount in Box 3 (Social Security wages) to be less than the amount in Box 1 (Wages, tips, and compensation)? A) The W2 has a missing IRS Form 2106 attachment, Unreimbursed Employee Expenses B) This could be a fraud red flag, as the values are always the same amount on a W2 C) The applicant earned more income than the Social Security tax could be collected on D) Garnishments and payday advances are not added into the amount in Box 3

C) The applicant earned more income than the Social Security tax could be collected on You will sometimes notice on W-2s that box 1 (Wages, tips, other compensation) has a higher amount than box 3 (Social Security wages). This is because Social Security only taxes on the first $118,500 made per calendar year. Use the amount in box 1, as these are the actual earnings.

Which one of the following parties does NOT receive a copy of the Closing Disclosure? A) The property seller B) The lender C) The appraiser D) The borrower

C) The appraiser The buyer, seller, and the lender each receipt a copy Closing Disclosure. Third-party providers are not required to receive a copy. Separate forms may be prepared for the borrower and the seller, with each form only showing their respective side of the transaction.

Which one of the following is NOT reported as part of the Home Mortgage Disclosure Act reporting requirements? A) The loan applicant's gross income B) The reason why the loan application was denied C) The first and last name of the loan applicant D) The type of loan and its amount

C) The first and last name of the loan applicant The applicant's ethnicity, race, and gender/sex is reported for HMDA purposes, but personal information such as the applicant's name is not reported.

When making a credit decision, which one of the following factors can a lender NOT consider? A) The age of an applicant to favor those who are over the age of 62. B) The age of the applicant to verify that they are old enough to enter into a contract. C) The religion of the applicant. D) Income from pension and/or other retirement benefits.

C) The religion of the applicant. Religion is a protected factor under ECOA and may not be considered in the loan qualification.

How many pages are in the Loan Estimate disclosure? A) Four pages B) Two pages C) Three pages D) Five pages

C) Three pages The Loan Estimate Disclosure is a three-page form to replace the initial Truth in Lending disclosure and the RESPA Good Faith Estimate (GFE).

Why does HMDA require lenders to report race, ethnicity, sex, income, and disposition of applicants? A) To determine fines for fair lending for non-compliant lenders. B) To find out how much money certain groups earn. C) To determine fair lending practices with lenders. D) To find out the time frame for loan approval from lenders.

C) To determine fair lending practices with lenders. HMDA requires reporting for Fair Lending practices and includes 1) race, ethnicity and sex of applicants, 2) Borrower income, and 3) Disposition of applications (approval, denial, etc.).

Which one of the following documents is NOT part of a typical loan package? A) Real estate purchase and sale agreement B) Payroll stubs C) Utility bills D) Rent payment history

C) Utility bills Along with the application, there are supporting documents that are included in the loan package. These include credit reports, W-2s and payroll stubs, VoEs, gift letters verifying gift funds, rent payment or mortgage payment history, and the real estate sales contract for purchase loans.

On a credit report, the owner of the credit account will be disclosed under the __________ column. A) CREDITOR B) STATUS C) WHOSE D) SOURCE

C) WHOSE The owner of a credit account will be disclosed under the WHOSE column. Code "B" indicates the applicant/borrower owns the account, code "C" indicates an account that the applicant/borrower is a co-owner with, and code "J" indicates a joint account owned by the applicant/borrower and another co-borrower.

The unethical practice of loan flipping occurs when: A) insurance and other unnecessary products are added to the loan amount. B) the loan's interest rate is "flipped," and the loan becomes subject to negative amortization. C) a lender convinces a borrower to refinance his/her loan, even though the borrower gains nothing from the refinance. D) the borrower's house is quickly remodeled, then placed for sale on the real estate market.

C) a lender convinces a borrower to refinance his/her loan, even though the borrower gains nothing from the refinance. Loan filling occurs when one engaged in predatory lending conduct finds a homeowner whom they can convince or coerce into refinancing even though the homeowner gains nothing from the refinance transaction.

A notice to the world that there is a lawsuit pending that may affect the title or possession of property is known as: A) a judgment. B) an easement. C) a lis pendens. D) a specific performance declaration.

C) a lis pendens. A lis pendens is a notice to the entire world that there is a lawsuit pending regarding the title or possession of a specific property. It is a warning to all potential buyers that there is ongoing litigation regarding the property, and that all parties, such as potential buyers and lenders, will be bound by the outcome of the pending litigation.

The term packing is defined as: A) using a lender's influence to force a borrower to refinance his/her loan. B) requiring all financial conflicts to be settled by mandatory arbitration. C) adding fees to the loan amount without the borrower's informed consent. D) putting the borrower's interests above the interests of the loan originator.

C) adding fees to the loan amount without the borrower's informed consent. Including such items as points, mortgage broker fees, prepayment penalties on a prior loan, and charges for additional related products (such as a single-premium credit life insurance premium) into the loan principal amount without the borrower's informed consent is known as packing.

A HECM reverse mortgage borrower is required to pay A) monthly escrow maintenance fees. B) a $7,000 origination fee. C) an annual mortgage insurance premium. D) a fee of 2.5% of the property's appraisal value.

C) an annual mortgage insurance premium. HECM borrowers are charged annual MIP.

The right of an individual or entity to use a portion of another's land for a special purpose is called: A) deed restrictions. B) a plat map. C) an easement. D) eminent domain.

C) an easement. An easement is the right of an individual or entity to use a portion of another's land for a special purpose

When loaning funds for commercial purposes, __________ allows the lender to receive a percentage of the profit in exchange for a lower interest rate. A) a package mortgage B) a wrap around encumbrance C) an equity participation loan D) a construction loan

C) an equity participation loan An equity participation loan or a shared appreciation mortgage. With this type of loan, the lender reduces the interest rate in exchange for a percentage of the profit when the property is sold.

An appraisal by a certified appraiser is best defined as: A) the legal value according to the compilation of data. B) a scientifically calculated value. C) an opinion of value as of a specific date. D) the genuine market value of a property.

C) an opinion of value as of a specific date. An appraisal is an opinion of value as of a specified date.

An FHA-insured mortgage loan requires: A) all occupants of the property to be co-borrowers. B) the borrower to live within an FHA-approved areas. C) an upfront mortgage insurance premium. D) a HUD-approved counseling session.

C) an upfront mortgage insurance premium. The FHA UFMIP is a lump sum paid by the borrower, either in cash at closing or financed into the loan.

Those who follow the telephone marketing solicitation rules are prohibited from calling a consumer A) between 8 a.m. and 9 p.m. B) if the consumer has young children. C) before 8 a.m. or after 9 p.m. D) on Saturdays or Sundays.

C) before 8 a.m. or after 9 p.m. Telephone solicitations are prohibited before 8 a.m. and after 9 p.m.

Borrowers with higher credit scores will receive: A) kick-backs on residential loan leads and referrals. B) discounts on loan originator compensation rates. C) better terms and interest rates on their loans. D) a default forgiveness feature on their loans.

C) better terms and interest rates on their loans. Borrowers with higher credit scores will receive better terms and interest rates on their loans.

To purchase a new property, borrowers can use a __________ that allows them to borrow against the equity of their existing property towards the purchase. A) soft money loan B) construction loan C) bridge loan D) home-to-home loan

C) bridge loan A bridge loan is used by borrowers who need to borrow against the equity of an owned property in order to purchase another property.

An act or practice will be considered unfair by the CFPB when it: A) minimizes the risk of omitting material information that might mislead consumers. B) results in increased revenue for the lender subject to CFPB oversight. C) causes or is likely to cause substantial injury to consumers. D) educates the consumer on the risks associated with a mortgage loan default.

C) causes or is likely to cause substantial injury to consumers. An act or practice is unfair when it causes or is likely to cause substantial injury to consumers, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by countervailing benefits to consumers or to competition.

A conventional mortgage loan can also be referred to as a: A) homeowner protection loan. B) nonconforming mortgage loan C) conforming mortgage loan. D) subprime loan.

C) conforming mortgage loan. Conventional loans, also known as conforming mortgages, are those that are eligible for purchase through the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Loans are subject to HOEPA rules if they are consumer loans secured by the: A) consumer's vacation home. B) initial construction of a new dwelling. C) consumer's principal dwelling. D) dwelling being used as collateral for the reverse mortgage.

C) consumer's principal dwelling. Loans that are subject to HOEPA coverage under the 2013 HOEPA Rules are in general consumer loans that are secured by a consumer's principal dwelling.

Replacement cost is best described as the A) cost of building an exact replica of the subject property. B) original cost of the property, adjusted for inflation. C) cost of building a property of equivalent utility with the same or similar materials. D) cost of purchasing an equally desirable property constructed of the same or similar materials.

C) cost of building a property of equivalent utility with the same or similar materials. The "replacement cost" is what it would cost in today's dollars using today's construction methods, materials, and standards to build an improvement that would offer the same amenities and utility as the subject property.

Institutional lenders include: A) Real Estate Mortgage Investment Conduits. B) Ginnie Mae and Maggie Mae. C) credit unions and commercial banks. D) loan servicing companies.

C) credit unions and commercial banks. Institutional lenders include savings and loan associations, commercial banks, insurance companies, credit unions, mortgage bankers and brokers, and government lenders.

A __________ clause allows for the release of the lien when a borrower pays the promissory note in full. A) foreclosure B) due-on-sale C) defeasance D) loan assumption

C) defeasance A defeasance clause provides for release of the lien when a borrower pays the promissory note in full.

Tom bought a four-plex and is going to live in one of the units with his family. Tom will screen potential tenants for the other three units carefully to try to find the most desirable and safest neighbors for his family. Tom is: A) subject to both state and federal fair housing laws when screening prospective tenants. B) not obliged to follow either state or federal fair housing laws because screening his tenants allows him to protect his family. C) exempt under federal fair housing law, but must check state fair housing law to see what his legal position is under local state law. D) exempt from state fair housing laws because he has an exemption under federal fair housing law.

C) exempt under federal fair housing law, but must check state fair housing law to see what his legal position is under local state law. Housing that is not covered under the federal fair housing act includes rental housing of four or fewer apartments in which the landlord is living. States and local jurisdictions may pass fair housing law that are more restrictive than the federal law and the more restrictive will prevail.

The Equal Credit Opportunity Act applies to any creditor who regularly A) participates in community service projects. B) legally discriminates against foreign applicants. C) extends, renews, or continues credit. D) has assets of over 5 million dollars.

C) extends, renews, or continues credit. ECOA applies to any creditor who regularly extends, renews, or continues credit.

A term of 082$470 disclosed on a credit report would indicate a loan: A) with an 8.2% interest rate and a principal balance of $470. B) that opened on August 2nd with a monthly payment of $470. C) for 82 months with a payment of $470 per month. D) with an $82 per month payment for 470 months.

C) for 82 months with a payment of $470 per month. A term of 082$470 is a loan that has 82 months for $470 per month.

When determining value for income property, an appraiser will use the __________ approach method. A) rental B) replacement C) income D) ROI

C) income The income approach is the recognized appraisal method for determining the value of properties purchased for their income, such as apartment buildings, plexes and the like.

A mortgage broker or MLO is prohibited from making a direct or indirect payment to the property appraiser in order to: A) pay the appraiser for his or her appraisal services. B) schedule an appraisal for a property. C) influence the appraiser's judgment as to the value of the property. D) correct a numerical error on the final appraisal report.

C) influence the appraiser's judgment as to the value of the property. It is prohibited to make any direct or indirect payment to the appraiser of a property in order to influence the appraiser's judgment as to the value of the property.

An open-ended mortgage allows a borrower to keep borrowing the repaid debt, up to the maximum loan limit, whereas a close-ended mortgage: A) will be refinanced when the borrower pays off the principal balance at specific intervals. B) can be converted to permanent financing if the borrower needs a larger open-ended loan. C) is a fixed amount of money that is repayable over a fixed term. D) only allows the borrower to reborrow the repaid debt if the principal is less than 50%.

C) is a fixed amount of money that is repayable over a fixed term. Closed-end financing is any financing, whether primary or subordinate, that provides a fixed amount of money repayable over a fixed period.

"Whites only" A) is allowed in an advertisement for rental property by a licensed property manager. B) is allowed in an advertisement for the sale of government housing when the property is not represented by a licensee. C) is always prohibited in advertising. D) is allowed in an advertisement for private housing by a non licensed property owner.

C) is always prohibited in advertising. Unless an exemption applies, no one may take action that will discriminate against anyone in the seven protected classes of race, color, national origin, religion, sex, handicap, or familial status in the sale and rental of housing. Exemptions may never apply to race, nor can they apply when a real estate agent is involved in a transaction.

Regarding the RESPA-required disclosures, if a lender denies a borrower's loan application within three business days of receiving it, the lender: A) must mail the disclosures to the address listed on the application. B) can report the application denial to HUD for government monitoring purposes. C) is not required to provide the disclosure documents. D) only has to deliver the Special Information Booklet to the borrower.

C) is not required to provide the disclosure documents. If the lender or mortgage loan originator denies the application within three business days, it is not required to provide the required RESPA disclosure documents.

The mortgagee sues the mortgagor to obtain a judgment and court order to sell the property. This is known as: A) strict foreclosure. B) voluntary foreclosure. C) judicial foreclosure. D) nonjudicial foreclosure.

C) judicial foreclosure. When the mortgagor (i.e., borrower) is in default, the mortgagee (i.e., lender) will file a court action called a judicial foreclosure or statutory foreclosure.

The Bank Secrecy Act requires U.S. financial institutions to: A) establish rules for managing correspondent and payable-through accounts. B) prosecute money launders who are associated with terrorists. C) keep records of cash purchases of negotiable instruments. D) report the sex and ethnicity of its loan applicant.

C) keep records of cash purchases of negotiable instruments. The Bank Secrecy Act required United States financial institutions to keep records of cash purchases of negotiable instruments and file reports of cash purchases of these instruments that were in the amount of more than $10,000.

All of the following are characteristics of a Qualified Mortgage (QM) EXCEPT: A) regular periodic payments must be substantially equal in amount. B) total points cannot exceed 3%. C) loan term must be at least 45 years. D) current debt obligations for alimony and child support are considered.

C) loan term must be at least 45 years. A Qualified Mortgage has regular periodic payments, a loan term not over 30 years, considers current debt obligations, and total points and fees do not exceed 3%.

When dealing with property appraisers, a licensee cannot: A) ask an appraiser to correct an error on an appraisal report. B) provide additional supportive information about the basis for the evaluation. C) make a payment to an appraiser with the intent of influencing the appraiser's independent judgment. D) request the appraiser to consider additional information about the subject property.

C) make a payment to an appraiser with the intent of influencing the appraiser's independent judgment. A licensee cannot make any payment, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property.

Prior to the enactment of the Alternative Mortgage Transaction Parity Act in 1982, most states prohibited state housing creditors from making any loan that was: A) over the states' specific usury caps. B) beyond the supervision of the OCC. C) not a conventional fixed-rate and amortizing mortgage. D) beyond the supervision of the CFPB.

C) not a conventional fixed-rate and amortizing mortgage. Prior to the enactment of AMTPA, most states prohibited state housing creditors from making any loan that was not a conventional fixed-rate and amortizing mortgage.

The most accurate way to calculate an applicant's hourly wages is by: A) estimating how much income will be earned by the applicant during the year. B) multiplying the applicant's hourly wage by 40 hours per week. C) obtaining a Verification of Employment (VOE). D) using last year's W2 for the amount of the applicant's income.

C) obtaining a Verification of Employment (VOE). To calculate hourly income accurately, obtain a Verification of Employment (VOE).

How many bona fide discount points may be excluded from the calculated finance charges when the transaction's interest rate before applying the discount points does not exceed APOR by more than two percentage points? A) two bona fide discount points B) 0 bone fide discount points C) one bona fide discount point D) Discount points must always be included when calculating points and fees.

C) one bona fide discount point Up to one bona fide discount point may be excluded from the points and fees calculation if the interest rate before the discount does not exceed the Average Prime Over Rate (APOR) for a comparable transaction by more than two percentage points. If the interest rate before applying the discount points is more than one percentage points, then two bona fide discount points may be excluded.

The reporting requirements of the Home Mortgage Disclosure Act apply to: A) temporary construction loans. B) vacant land purchases. C) one-to-four unit residential purchases. D) loan servicing rights.

C) one-to-four unit residential purchases. HMDA applies to applications for one- to four-family residential loans, including home purchase, home improvement, refinances, and subordinate financing.

A borrower can refinance into a VA-insured loan only if the: A) borrower receives authorization from his/her commanding officer. B) original loan was a conventional loan. C) original loan was also a VA-insured loan. D) borrower receives a service-related disability and is honorably discharged.

C) original loan was also a VA-insured loan. An IRRRL is allowed if the original loan is also a VA loan; a borrower cannot refinance a conventional mortgage into a VA mortgage.

When a property purchase includes both real and personal property as collateral, such as a farm land and its farm equipment, the type of loan that would be used is a: A) growing equity mortgage. B) take-over loan. C) package mortgage. D) wrap around encumbrance.

C) package mortgage. A package mortgage is a loan secured by both real and personal property. Package mortgages are used in situations where personal property is a part of the real estate transaction. Examples would be the purchase of farmland and farm equipment.

To hypothecate a property means to: A) exchange lien priority position with a junior lien holder. B) reduce the mortgage lender's interest rate risk by passing some of that risk on to the borrower. C) pledge the property as a security for the payment of a debt without giving up use of the property. D) pay the full loan balance before the end of the loan term.

C) pledge the property as a security for the payment of a debt without giving up use of the property. To hypothecate a property means to pledge the property as a security for the payment of a debt without giving up use of the property. A borrower who obtains a mortgage from a lender will hypothecate the property (i.e., use it to secure the loan funds) and then reside in the property that was paid for with the loan proceeds.

A lending institution that is subject to HMDA reporting regulations must: A) reject loan applications based on the most efficient way of meeting the community's lending needs. B) notify the CFPB when a large number of loans are issued to a minority group. C) post a general notice about the availability of HMDA data in the lobby of its home office. D) report its HMDA data every 4 weeks to the lender's governing agency.

C) post a general notice about the availability of HMDA data in the lobby of its home office. HMDA, Regulation C, requires a lending institution to post a general notice about the availability of HMDA data in the lobby of its home office and each of its branch offices located in a metropolitan area.

The type of insurance used to protect a conventional-mortgage lender from losses if its borrower defaults on their mortgage loan is called: A) upfront mortgage insurance. B) monthly mortgage insurance. C) private mortgage insurance. D) homeowners insurance.

C) private mortgage insurance. Private Mortgage Insurance (PMI) is insurance to protect the lender of conventional loans.

A lender, mortgage loan originator, or mortgage broker must issue a Loan Estimate disclosure after receiving a loan application or after: A) an applicant withdraws his/her loan application. B) pulling an applicant's credit report to determine risk to the lender. C) receiving enough information to complete an application. D) the application has been approved by the loan processor.

C) receiving enough information to complete an application. The LE applies when a mortgage loan originator, mortgage broker, or mortgage lender receives an application or enough information to complete an application.

The purpose of the Gramm-Leach-Bliley Act as it pertains to mortgage lending is to: A) give consumers notice of the lender contact information. B) make consumers accept marketing from mortgage originators. C) require the lender to disclose its privacy policies and information sharing practices. D) make lenders follow state-specific guidelines in advertising interest rates.

C) require the lender to disclose its privacy policies and information sharing practices. Created to protect consumers' personal financial information, the GLBA applies to any organization that stores consumer data.

When applying the market data or sales comparison approach to value, an appraiser would most likely use: A) the current listed properties for sale. B) properties that have sold for considerably less than the listed price. C) sold properties in the same geographic area. D) properties that were built in the same year.

C) sold properties in the same geographic area. An appraiser looks for similar properties sold within the prior six months that are located near the property being appraised.

The CFPB's Mortgage Advertising Practices Rule is designed to: A) establish fines for abusive practices in advertising. B) impose new state approval requirements for advertising. C) stop deceptive trade practices in advertising. D) set the maximum percentage rate that can be advertised.

C) stop deceptive trade practices in advertising. The CFPB rule is designed to stop deceptive trade practices. Unlike the Dodd-Frank Act, the Mortgage Advertising Practices Rule does not go as far as stopping abusive practices. Instead, the rule provides for a base by which the courts and agencies will be able to apply a consumer standard.

When a borrower applies for an adjustable rate mortgage, the loan originator is required to give the borrower: A) a choice of consumer indexes to base the index rate on. B) a copy of the Interagency Guidance. C) the Consumer Handbook on Adjustable Rate Mortgages. D) the HELOC Booklet.

C) the Consumer Handbook on Adjustable Rate Mortgages. When a borrower applies for an ARM loan, the loan originator is required to give the borrower the Consumer Handbook on Adjustable Rate Mortgages (the CHARM booklet) within three business days of application.

A residential loan transaction is said to be closed when: A) the seller and buyer receive their copies of the Closing Disclosure from the lender. B) the borrower agrees by written confirmation to the terms of the residential mortgage loan. C) the deed is recorded in the name of the buyer and the funds are made available to the seller. D) the borrower becomes contractually obligated to the creditor to repay the debt.

C) the deed is recorded in the name of the buyer and the funds are made available to the seller. The transaction is said to be "closed" when the deed is recorded in the name of the buyer and the funds are made available to the seller.

A married couple both work 40 hours per week. One of them makes $10.50 and hour, and the other makes $9.75 per hour. What is their monthly gross income? A) $2,800 B) $3,150 C) $3,500 D) $3,510

D) $3,510 Person 1 makes $21,840 per year (40 × $10.50 × 52 weeks = $21,840)Person 2 makes $20,280 per year (40 × $9.75 × 52 weeks = $20,280) $21,840 + $20,280 = $42,120 ÷ 12 months = $3,510

If a borrower is paid $1,659.25 every two weeks, what is the borrower's monthly gross income? A) $3,318.50 B) $3,381.50 C) $3,559.04 D) $3,595.04

D) $3,595.04 $1,659.25 × 26 pay periods per year ÷ 12 months = $3,595.0416 or rounded to $3,595.04

A reverse mortgage loan has its loan origination fee capped at __________ if the loan is for more than $125,000. A) $200 B) 0.5% of the loan amount C) $2,500 D) $6,000

D) $6,000 The HECM loan origination fee is capped at $6,000 for properties worth more than $125,000.

For a home worth $70,000 with a 5% down payment, what would the loan amount be? A) $57,000 B) $65,000 C) $66,000 D) $66,500

D) $66,500 $70,000 × 0.05 = $3,500 down payment $70,000 - $3,500 = $66,500

When applying the points and fees coverage test, how many bona fide discount points may be excluded from the calculation when the transaction's interest rate before applying the discount points does not exceed APOR by more than 2 percentage points? A) Discount points must always be included when determining HOEPA status with the points and fees coverage test. B) 2 bona fide discount points C) 0 bone fide discount points D) 1 bona fide discount point

D) 1 bona fide discount point Up to 1 bona fide discount point may be excluded from the points and fees calculation if the interest rate before the discount does not exceed the Average Prime Over Rate (APOR) for a comparable transaction by more than 2 percentage points.

The Petersons have a monthly gross income of $7,650 per month. They have a PITI payment of $1,875 and other debt obligations totaling $1,265 per month. What are their front and back end debt ratios? A) 42/24 B) 24.5/42 C) 41/24.5 D) 24.5/41

D) 24.5/41 Their front-end ratio is 24.5% ($1,875 ÷ $7,650 = 0.2450). Their back-end ratio is 41% ([$1,875 + $1,265] ÷ $7,650 = 0.4104)

A consumer will receive a Closing Disclosure no later than __________ before loan consummation. A) 48 hours B) 1 week C) 72 hours D) 3 business days

D) 3 business days A "business day" is a day on which the creditor's or originator's office is open to the public for carrying out substantially all of its business functions.

A creditor must give the consumer of a high-cost mortgage a disclosure at least __________ before consummation of the loan or the opening of the account. A) 1 week B) 2 business days C) 24 hours D) 3 business days

D) 3 business days The 2013 HOEPA Rule requires a creditor to provide to a consumer at least three business days prior to loan consummation or account opening of a high-cost mortgage certain disclosures relating to the loan transaction.

For applicants who have monthly pensions, the pension may be included in the income amount if the applicant can prove that he/she will receive it for at least __________ or longer. A) 15 years B) 30 years C) 5 years D) 3 years

D) 3 years You may give your borrower credit for their monthly pension/annuity amount, provided the borrower can prove it will continue for at least three more years. Pensions and annuities are sometimes lump-sum distributions. If this is the case, it is not considered to be ongoing and can't be used for loan qualification.

For a Qualified Mortgage, points and fees may not exceed __________ of the total loan amount, but higher thresholds are provided for loans below $109,898. A) 1% B) 1.5% C) 2% D) 3%

D) 3% For loans great than or equal to $109,898, the maximum points and fees that may be charged may not exceed 3% of the total loan amount (2020 rates).

What is the down payment requirement for an FHA-insured loan? A) FHA does not require a down payment (0%) B) A minimum of 5% to ensure the 95% LTV restriction is met C) At least 20% down payment D) 3.5% or more of the sale price or appraised value

D) 3.5% or more of the sale price or appraised value At least 3.5% down payment is required for FHA-insured loans, which may include closing cost.

A loan will be defined as a high-cost mortgage under the prepayment coverage test if the lender charges a prepayment penalty more than __________ after opening the account or charges a penalty that's more than 2% of the amount prepaid. A) 60 months B) 12 months C) 24 months D) 36 months

D) 36 months A loan will be a high-cost mortgage if the creditor charges a prepayment penalty more than 36 months (3 years) after consummation of the loan or opening of the account, or if the lender charges a penalty in an amount more than 2% of the amount prepaid.

On page 3 of the Loan Estimate, the Comparisons table will document the total amount the borrower will have paid towards the loan principal at the end of __________ . A) 30 months B) 10 years C) 24 months D) 5 years

D) 5 years The comparisons table sets forth basic information relating to the loan in five years. This information may be used by the consumer as a way to compare various loan products.

After loan closing, if a fee amount documented on the Closing Disclosure is greater than what was originally stated on the Loan Estimate and in excess of the allowed tolerance threshold for that applicable fee, the creditor is required to refund the excess funds within __________ of loan consummation. A) 30 days B) 80 days C) 45 days D) 60 days

D) 60 days If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the permissible applicable tolerance threshold after closing, the creditor is required to refund the excess to the consumer no later than 60 days after consummation.

What is the highest FICO credit score that an individual can have? A) 620 B) 750 C) 803 D) 850

D) 850 An individual's FICO credit score will be calculated from the minimum 350 to a maximum of 850

Of the following statements, which one most accurately states why a Qualified Mortgage is important to a lender? A) A Qualified Mortgage provides for "fast track" loan processing. B) Qualified Mortgage rules are easy to apply to a borrower's loan application processing. C) A Qualified Mortgage will result in a higher rate of compensation to the lender. D) A Qualified Mortgage provides a Safe Harbor for the lender.

D) A Qualified Mortgage provides a Safe Harbor for the lender. A safe harbor means that if the lender follows the ATR requirements, then the loan a consumer receives is a Qualifying Mortgage that is not subject to legal action against the lender by the consumer.

Which of the following would NOT be considered a red flag with regard to customer activity? A) A customer provides an individual tax identification number after having previously used a Social Security number. B) A customer uses different tax identification numbers with variations of his or her name. C) A customer uses unusual or suspicious identification documents that cannot be readily verified. D) A customer makes frequent or large loan payments and has complete records of all of them.

D) A customer makes frequent or large loan payments and has complete records of all of them. If a customer makes large loan payments yet has no record of employment, this could be a red flag. A customer who makes large payments and has the background record to support it would not be a red flag.

Which one of the following would NOT cause an ECOA compliance violation? A) A lender asks Hispanic borrowers to provide information about their residency status, but does not ask other borrowers for the same information. B) A mortgage loan originator tells a female applicant to return the following week to complete a loan application, but allows a male applicant to complete the application on the spot. C) A lender requires a spouse to co-sign on a loan even though the borrower qualifies for the loan on their own. D) A lender sends an applicant a written adverse action notice 10 days after receiving a complete application.

D) A lender sends an applicant a written adverse action notice 10 days after receiving a complete application. Under ECOA a creditor must provide adverse action within 30 days from receiving a complete application.

Which one of the following types of loan transactions is applicable to the disclosure rules of the Truth in Lending Act? A) A loan to purchase 20 acres of agriculture land B) A loan to purchase a commercial fleet of vehicles for deliveries C) A loan to purchase a business franchise D) A loan to purchase a primary residence

D) A loan to purchase a primary residence TILA is applicable to loans being used for personal, family, or household use such as a loan to purchase a residence. It is not applicable to loans for agriculture, commercial, or business use.

Which of the following is a common law fiduciary duty owed to a borrower? A) Care B) Accounting C) Obedience D) All of the above

D) All of the above

Which of the following individuals would be considered a valid exemption to the SAFE Act's definition of a mortgage loan originator? A) A person or entity solely involved in extensions of credit relating to timeshare plans B) A person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with state law C) An individual engaged solely as a loan processor or underwriter and supervised by a licensed mortgage loan originator D) All of the above

D) All of the above Those engaging in loan processing or underwriting activities do not have to be licensed if they are operating under the supervision of a mortgage loan originator. A person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law is not a mortgage loan originator. A mortgage loan originator is also not a person or entity solely involved in extensions of credit relating to timeshare plans.

To determine SAFE Act compliance, a state regulatory agency can access a mortgage loan originator's: A) documents that the state regulatory agency deems relevant to the inquiry. B) personal history and experience information, including credit reports. C) criminal, civil, and administrative historical information. D) All of the above

D) All of the above To determine SAFE Act compliance, the state has the power to access the following relating to a specific loan originator: the criminal, civil, and administrative historical information; personal history and experience information, including credit reports; and any other documents that may be deemed relevant to the inquiry.

Which of the following may be considered when evaluating an application? A) Income from public assistance (if offered by applicant and needed) B) Immigration status C) Income from alimony (if offered by applicant and needed) D) All of the above

D) All of the above Under ECOA, you may consider income from alimony and/or public assistance if needed for credit qualification. You may also consider immigration status in qualifying for the loan.

Which one of the following can be rounded to the nearest whole dollar when disclosed on the Loan Estimate? A) A Loan Amount of $250,000.35 B) A monthly Principal & Interest of $1,031.29 C) Homeowner's Insurance of $175.75 per month for 1 month D) An Estimated Total Monthly Payment of $1,673.41

D) An Estimated Total Monthly Payment of $1,673.41 When disclosing values on the Loan Estimate, many of its fields can be rounded to the nearest whole dollar. The fields that CANNOT be rounded are the Loan Amount (unless it is already a whole number, then the .00 can be truncated), the Principal & Interest, and four of the per-month line items (Prepaid Interest, Homeowner's Insurance, Property Taxes, and Mortgage Insurance). The Estimated Total Monthly Payment will be rounded to the nearest whole dollar, even though its sum includes the Principal & Interest value that will be disclosed as an exact amount (i.e., not rounded).

When a group of mortgages is sold on the secondary market, the package is sold as a security called a: A) portfolio loan package. B) FHFA-backed security. C) Fannie Mae mortgage package. D) Collateralized Mortgage Obligation.

D) Collateralized Mortgage Obligation. The groups or packages of mortgages are sold as securities known as Collateralized Mortgage Obligations (CMOs), or more commonly known as Mortgage Backed Securities.

Which one of the following is not a charge that can be included in real estate related points and fees? A) Notary fees B) Title examination costs C) Fees for preparing deeds D) Commission paid to the real estate agent

D) Commission paid to the real estate agent The amount of commission paid to the real estate agent is not to be included in the limitations of points and fees.

The RESPA-required Special Information Booklet, Your Home Loan Toolkit, is published by the: A) Department of Veterans Affairs. B) Department of Housing and Urban Development. C) local state banking regulatory agency. D) Consumer Financial Protection Bureau.

D) Consumer Financial Protection Bureau. The Special Information Booklet, Your Home Loan Toolkit, is produced and published by the CFPB. It used to be published by HUD.

Calculating the replacement cost for a building, minus depreciation, then adding the value of the land is used by an appraiser in what approach to value? A) Capitalization approach B) Income approach C) Market value approach D) Cost approach

D) Cost approach The cost approach is also known as the reproduction approach or replacement approach. In this approach, the replacement cost of a structure is calculated and adjusted for depreciation, and then the value of the land is added.

Which of the following factors can a lender consider when making a credit decision? A) Race B) Recipient of public assistance income C) National origin D) Credit score

D) Credit score Under the Equal Credit Opportunity Act, a lender cannot base a credit decision on race, color, religion, national origin, age, receipt of public assistance, or the good faith exercise of rights under the Consumer Protection Act. A lender can use an applicant's credit score.

Fannie Mae's automatic underwriting program is called __________ . A) WebLGY B) Loan Prospector C) FHA Approvalator D) Desktop Underwriter

D) Desktop Underwriter Fannie Mae's automatic underwriting program is called Desktop Underwriter (DU).

The legislation that was signed into law which corrected some of the original abuses with the Alternative Mortgage Transaction Parity Act is the: A) Truth in Lending Act. B) Depository Institutions Deregulation and Monetary Control Act. C) Mortgage Reform and Lending Law. D) Dodd-Frank Wall Street Reform and Consumer Protection Act.

D) Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act built upon some of the concepts addressed in the Mortgage Reform and Anti-Predatory Lending Act of 2007. In so doing, it began to correct some of the problems created by AMTPA.

Which act prohibited discrimination in mortgage lending? A) Fair Housing Act of 1968 B) Fair Housing Amendments of 1988 C) Housing and Community Development Act of 1974 D) Equal Credit Opportunity Act of 1974

D) Equal Credit Opportunity Act of 1974 The Equal Credit Opportunity Act of 1974 prohibits discrimination in lending based upon race, color, religion, national origin, sex, age, marital status, and because a person is depending on public assistance income. Note that ECOA only applies to mortgage lending and not to other aspects of housing.

Which act was the first to provide protection against discrimination in familial status? A) Section 504 of the Rehabilitation Act of 1973 B) Housing and Community Development Act of 1974 C) Fair Housing Act of 1968 D) Fair Housing Amendments Act of 1988

D) Fair Housing Amendments Act of 1988 The Fair Housing Amendments Act of 1988 amends the Fair Housing Act of 1968 by prohibiting discrimination in housing based upon disability or familial status (i.e., presence of child under 18, and pregnant women).

What should a loan originator do if the applicant refuses to complete the ECOA Information for Monitoring Purposes section of the loan application? A) Increase the interest rate for the loan by 0.125% due to the extra costs for processing the loan. B) Leave the fields blank as requested by the applicant. C) Refuse to accept the application until the required fields are complete by the applicant. D) Fill in the ethnicity, race, and sex fields based on visual observations of the applicant.

D) Fill in the ethnicity, race, and sex fields based on visual observations of the applicant. If the applicant chooses not to provide the information, the lender is required to note the ethnicity, race, and sex on the basis of visual observation.

How many pages are in the CFPB standard Closing Disclosure? A) Six pages B) Three pages C) Four pages D) Five pages

D) Five pages The Closing Disclosure is five pages long.

Which one of the following is NOT regulated by the Truth in Lending Act? A) Disclosure of credit terms to consumers B) Appraisal requirements for higher-priced mortgage loans (HPMLs) C) Loan originator compensation D) Interest rate limits

D) Interest rate limits TILA does not limit the rate of interest that may be charged a consumer. Limits on interest rates are the subject matter of state usury laws.

Freddie Mac's automatic underwriting program is called __________ . A) Instant Underwriting B) HCFP C) Desktop Underwriter D) Loan Prospector

D) Loan Prospector Freddie Mac's automatic underwriting program is called Loan Prospector (LP).

Which one of the following is NOT an alternative term used to refer to a savings and loan institution? A) Thrift institution B) Savings and loan association C) Mutual savings bank D) Mortgage banker

D) Mortgage banker Savings and loan institutions are also referred to as mutual savings banks, savings and loan associations, or thrift institutions.

Which one of the following features is prohibited on a high-cost mortgage? A) Requiring preloan counseling B) Scheduling a balloon payment on a short-term bridge loan C) Receiving compensation for originating the high-cost mortgage D) Negative amortization

D) Negative amortization Negative amortization is prohibited on all HOEPA classified mortgages.

What clause on a loan instrument makes the property the sole source of repayment if the borrower defaults? A) Exclusive clause B) Executed clause C) Future advance clause D) Non recourse clause

D) Non recourse clause A non recourse or exculpatory clause makes the property the sole source of repayment if the borrower defaults. This effectively blocks the ability of the lender to look to other assets for any deficiency.

A loan that has a term of 45 years is most accurately described as a: A) Qualified Mortgage. B) Temporary Qualified Mortgage (TQM). C) Higher Priced Mortgage Loan (HPML). D) Non-qualifying Mortgage.

D) Non-qualifying Mortgage. HPMLs and TQMs must meet basic Qualified Mortgage requirements.

For determining points and fee caps, which one of the following can be excluded when calculating finance charges? A) Servicing charges B) Appraisal fees C) Debt cancellation premiums D) Private mortgage insurance premiums

D) Private mortgage insurance premiums Private mortgage insurance (PMI) premiums may be excluded. Up-Front PMI premiums may also be excluded if the premium is refundable on a prorated basis and a refund is automatically issued upon loan satisfaction. However, even if the premium can be excluded, the creditor must include any portion that exceeds the up-front MIP for FHA loans. Debt cancellation premiums, appraisal fees, and servicing fees are all examples of charges that must be included in the total points and fees calculation.

The regulations that implement the AMTPA can be found in: A) Regulation Q. B) Regulation X. C) Regulation Z. D) Regulation D.

D) Regulation D. The CFPB regulations to implement the act are found in Regulation D.

The Truth in Lending Act is implemented by: A) The Federal Home Loan Bank System. B) HUD. C) Congress. D) Regulation Z.

D) Regulation Z. The Federal Reserve Board's Regulation Z implements the Truth in Lending Act.

Which act was the first to prohibit discrimination against persons with disabilities in programs that receive federal financial assistance? A) Fair Housing Amendments of 1988 B) Fair Housing Act of 1968 C) Title II of the Americans with Disabilities Act of 1990 (ADA) D) Section 504 of the Rehabilitation Act of 1973

D) Section 504 of the Rehabilitation Act of 1973 Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against persons with disabilities in any program or activity receiving Federal financial assistance.

Which of the following is NOT one of the duties of an escrow officer? A) Order a preliminary title report B) Secure payoff letters from existing lien holders C) Issue receipts for the deposit of documents and funds D) Settle disputes between parties which arise at closing

D) Settle disputes between parties which arise at closing Some of the duties of an escrow agent include ordering a preliminary title report, securing payoff letters from existing lenders, and issuing receipts for the deposit of documents and funds. Escrow officers do NOT offer legal advice regarding a transaction or settle disputes between parties to a transaction.

Which one of the following disclosures must be given to the borrower at the time of loan settlement? A) A copy of the borrower's loan application B) The Loan Estimate C) The Servicing Transfer Statement D) The Initial Escrow Statement

D) The Initial Escrow Statement The Initial Escrow Statement is given to the borrower at the time of loan closing.

There are three tests that can be used to determine if a loan is a high-cost mortgage. Which one of the following is NOT one of the tests? A) The prepayment penalty coverage test B) The points and fees coverage test C) The annual percentage rate coverage test D) The ability-to-repay coverage test

D) The ability-to-repay coverage test The three test are the APR coverage test, the points and fees coverage test, and the prepayment penalty coverage test.

Which one of the following is NOT one of the four points that a title examiner will discover during a title search? A) The estate interest in the property B) Any existing liens or encumbrances C) The exact description of the property D) The current title insurance policy

D) The current title insurance policy A title examiner will be looking to discover the exact description of the property, the estate interest in the property, the vesting of the estate interest, and any exceptions affecting the vested interest such as liens, encumbrances, and miscellaneous defects.

If a rate lock is documented as YES on the Loan Estimate, what else must be included along with the confirmation? A) The fee necessary to continue the rate lock if it expires B) Instructions to the applicant on what to do once the rate lock expires C) The number of hours remaining until the rate lock will expire D) The date and time (in the applicable time zone) when the rate lock expires

D) The date and time (in the applicable time zone) when the rate lock expires For the Rate Lock line item, the date and time (in the applicable time zone) when the rate lock expires must be indicated.

Which one of the following is NOT a change in circumstances that would permit a revised Loan Estimate? A) The property that is subject to the Loan Estimate is damaged by a fire B) The applicant decides to move forward with the loan transaction two weeks after the LE was issued C) The applicant requests to add a co-borrower, including the co-borrower's income, to the loan application D) The loan originator documented the Underwriting Fee as $79.50 instead of the correct $795.00

D) The loan originator documented the Underwriting Fee as $79.50 instead of the correct $795.00 A change in circumstance is 1) an extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction, 2) information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate and that was inaccurate or changed after the Loan Estimate disclosure was initially provided, or 3) new information specific to the consumer or transaction that the creditor did not rely on when providing the loan estimate. A revised Loan Estimate can also be issued if the applicant decides to move forward with the transaction at least 10 days after the initial Loan Estimate was issued. A MLO's typo does not qualify as a change in circumstances.

Which one of the following is NOT required as part of a company's AML program? A) Ongoing training of personnel about their due diligence B) Policies and procedures based upon the company's money laundering risk assessment C) The designation of a compliance officer D) The reporting of SARs to the Consumer Financial Protection Bureau

D) The reporting of SARs to the Consumer Financial Protection Bureau A company's anti-money laundering program needs to include, at a minimum, a company compliance officer, policies and procedures, ongoing employee training, and independent testing to ensure the program is adequate.

Settlement Agent Tom was reviewing a Closing Disclosure for a transaction he was involved in last week, and realized that he didn't notice a misspelling of the buyer's name on one of the pages of the disclosure. What should Tom do? A) The name is spelled correctly on the other pages, so no action is required B) The escrow process must be voided and restarted with a more competent settlement agent C) Tom can use correction tape to cover the error and leave the field blank on the disclosure D) Tom must correct the clerical error and issue a revised Closing Disclosure within 30 days

D) Tom must correct the clerical error and issue a revised Closing Disclosure within 30 days Any post-consummation revisions, such as clerical errors, will generate an updated CD no later than 30 days after receiving enough information to warrant a change to the disclosure.

Which one of the following would NOT be included in an applicant's debt ratio? A) Child support B) Car lease payments C) Credit card payments D) Weekly grocery bills

D) Weekly grocery bills The debt ratio calculation adds monthly liabilities to the housing expense to calculate the total monthly indebtedness of the applicant. This includes payments for car leases, revolving debt payments, child support, alimony, and student loan payments. The weekly grocery bill, while reoccurring, is not part of an applicant's debt ratio calculation.

Within how many days after a loan or finance company becomes aware of a suspicious transaction must the business report the transaction to FinCEN? A) Immediately B) Within 15 days C) Within 90 days D) Within 30 days

D) Within 30 days Within 30 days after a loan or finance company becomes aware of a suspicious transaction, the business must report the transaction, by completing a SAR and filing it with FinCEN.

The publication title for the current RESPA Special Information Booklet is: A) What You Should Know About Home Equity Lines of Credit. B) Consumer Handbook on Adjustable Rate Mortgages. C) Regulation X List of Service Providers. D) Your Home Loan Toolkit: A Step-by-step Guide.

D) Your Home Loan Toolkit: A Step-by-step Guide. The CFPB's booklet is titled Your Home Loan Toolkit: A Step-by-step Guide

A type of promissory note that requires one or more lump sum payments at specified dates during the loan term is called: A) a note with endorsement. B) an on-demand promissory note. C) an amortized note. D) a balloon payment note.

D) a balloon payment note. A balloon payment note is a type of promissory note that requires one or more lump sum payments. Most balloon notes are amortized over an agreed upon term, but require payment of an additional amount or the entire remaining amount before the end of that term. The payment date for the balloon payment is agreed upon when the note is made.

The Good Neighbor Next Door program helps a qualified borrower purchase a home in a HUD-revitalization area by offering qualified purchasers __________ . A) preferred status when making an offer B) the lowest mortgage rate C) a one-time grant D) a discount on the list price

D) a discount on the list price The Good Neighbor Next Door program may help a qualified borrower purchase a home in a HUD-revitalization area by offering qualified purchasers a 50% discount off the list price of homes available from HUD's inventory.

In a trust deed, the trustee is: A) the borrower. B) the borrower's lender. C) both the lender and the party who holds the trust deed. D) a neutral third party who holds the trust deed for the beneficiary.

D) a neutral third party who holds the trust deed for the beneficiary. The trustee is a disinterested third party given the authority to hold the trust deed until instructed to do something by the beneficiary.

The instrument of record to show that a mortgage has been paid in full is called: A) an estoppel certificate. B) a deed release statement. C) a retirement of mortgage. D) a satisfaction of mortgage.

D) a satisfaction of mortgage. In order to provide public notice that the note is paid in full, the lender will record either a satisfaction or release to clear a mortgage lien.

A preliminary title report is a combination of: A) an abstract of title and an insurance policy. B) a title plant and a title search. C) a chain of title and a tax record. D) a title search and an abstract of title.

D) a title search and an abstract of title. Abstract of title is a detailed history of property ownership. Title search is a detailed listing of encumbrances. The abstract and search are compiled into and become the preliminary title report.

The phrase chain of title refers to A) a term relating to a survey of the property. B) the list of the heirs named in a will who inherit the property. C) a certificate of title. D) all of the recorded documents affecting the history of title transfers to a property.

D) all of the recorded documents affecting the history of title transfers to a property. The title examiner issues the report based on findings that trace the chain of title back through every record available for the property. This search of the chain of title will determine if the person who is selling the property actually has legal ownership.

A settlement agent may also be referred to as: A) an underwriter. B) a lender. C) a trust fund manager. D) an escrow officer.

D) an escrow officer. A settlement agent, also commonly referred to as an escrow agent or escrow officer, typically conducts the closing.

An escrow account can also be known as: A) a savings account. B) a chattel account. C) a soft money account. D) an impound account.

D) an impound account. Escrow account is also known as an impound account or a reserve account.

A loan originator is: A) a person who is applying for financing to purchase a 1-to-4 unit dwelling. B) anyone who determines risk associated with lending money. C) the creditor named in the debt obligation note that creates a mortgage. D) an individual representing a borrower in originating a loan transaction.

D) an individual representing a borrower in originating a loan transaction. A loan originator refers to an individual representing a borrower in originating a loan transaction. The individual may be either a lender or a mortgage broker.

Ginnie Mae insures loans sold on the secondary market that: A) are solely for agriculture or ranching borrowers. B) will be prepared and sold to investors. C) guaranteed and insured by mutual savings banks. D) are originated by federal government agencies.

D) are originated by federal government agencies. Ginnie Mae insures loans, thereby enhancing the operation of secondary markets by making purchases in those markets safer and more attractive for the loans it guarantees. These loans are often low interest and subsidized loan programs from the federal government. FHA, USDA, and VA loans are examples of loan programs covered by Ginnie Mae.

A mortgage with periodic payments and a large final payment at the end of the term is called a: A) budget mortgage. B) graduated payment mortgage. C) jumbo mortgage. D) balloon mortgage.

D) balloon mortgage. A balloon mortgage is a loan with periodic payments and a large final payment at the end of the term.

An applicant's gross monthly income (GMI) is the applicant's income amount: A) after retirement fund and taxes are deducted. B) that is specifically set aside for housing expenses. C) minus existing mortgage payments and HOA dues. D) before taxes and other deductions are calculated.

D) before taxes and other deductions are calculated. In calculating mortgage ratios, we use the gross monthly income, or GMI, which represents the income before all deductions. Make sure your borrower understands the GMI is before any taxes, allotments, or payroll deductions are taken out. It is the gross monthly income that serves as the denominator for the calculation of all mortgage ratio calculations.

A jumbo loan or nonconforming loan is a loan that: A) can be sold to Fannie Mae. B) cannot be kept in the lender's loan portfolio. C) has a loan amount less than the conforming loan limit. D) can be sold to alternative, secondary markets.

D) can be sold to alternative, secondary markets. A jumbo or non-conforming loan is a loan made for an amount exceeding conforming loan limits, often for a higher interest rate, and must be sold to alternative, secondary markets (i.e., markets other than Fannie Mae or Freddie Mac) or kept in the lender's portfolio.

Failure to comply with HMDA regulations may result in: A) a warning letter from the CFPB. B) revocation of the issued loan. C) jail time for the non-compliant originator. D) civil penalties and fines.

D) civil penalties and fines. Failure to comply with HMDA regulations may result in civil penalties and fines issued by the regulatory agency responsible for the financial institution.

If an appraiser uses more than one approach to value, the process of analysis and weighing of the differing values to determine an opinion of value is known as: A) hypothecating. B) appraisal. C) averaging. D) correlation or reconciliation of values.

D) correlation or reconciliation of values. Correlation or reconciliation is the final step in the appraisal process, whereby the appraiser assembles and interprets the gathered data to arrive at a final estimate of value.

The burden to investigate and correct information supplied to a consumer reporting agency (CRA) by a creditor that is disputed by a consumer is on the: A) employer. B) consumer. C) Consumer Financial Protection Bureau (CFPB). D) creditor.

D) creditor. The burden to investigate and correct information disputed by a consumer is on the creditor. The creditor, within 30 days of a notice of consumer dispute, must either correct the reported information or state why the information is correct as reported.

The final rules relating to ability-to-repay encourage: A) creditors to refinance standard mortgages and convert them to non-standard mortgages. B) the use of non-standard mortgages. C) the use of both non-standard and standard mortgages. D) creditors to refinance non-standard mortgages and convert them to standard mortgages.

D) creditors to refinance non-standard mortgages and convert them to standard mortgages. In order to minimize the chance of borrower default, the final rules relating to the ability-to-repay also encourages creditors to refinance "non-standard mortgages."

On page 3 of the Closing Disclosure, the Summaries of Transactions table is used to: A) list costs incurred by the borrower that were not required to be disclosed on the Loan Estimate. B) indicate whether a loan assumption by a subsequent purchaser of the property is permitted. C) document whether the loan uses an adjustable rate, step rate, or fixed interest rate. D) disclose the amounts associated with the real estate purchase transaction between the buyer and seller.

D) disclose the amounts associated with the real estate purchase transaction between the buyer and seller. The Summaries of Transactions table is used to disclose the amounts associated with the real estate purchase transaction between the buyer and seller.

A USDA rural loan: A) will have its down payment calculated based on the area's median income. B) requires a minimum 5% down payment. C) can have its down payment subsidized by the FCS. D) does not require a down payment.

D) does not require a down payment. For both the loan guarantee program and the direct loan program, the USDA does not require a down payment.

The purpose of loan underwriting is to: A) ensure that the mortgage loan originator will be paid an appropriate commission. B) identify any additional loan products the applicant may qualify for. C) determine if the collateral property's value matches the average property value for the neighborhood. D) evaluate the financial risk to the lender if the lender funded the applicant's mortgage loan.

D) evaluate the financial risk to the lender if the lender funded the applicant's mortgage loan. Underwriting is the process of evaluating a loan application to determine the risk to the lender if the lender granted the loan to the borrower.

The process used by a lender to collect payment from a delinquent borrower is called: A) the right of redemption. B) deficiency. C) a land sale contract. D) foreclosure.

D) foreclosure. If the borrower defaults on the loan, the lender can sell the real estate by auction to the highest bidder and use the funds to repay the loan. This process is known as foreclosure.

The ALTA extended title insurance policy would not cover A) unrecorded homestead rights. B) unrecorded easements. C) unrecorded deeds. D) government regulations relating to zoning.

D) government regulations relating to zoning.

For loans $20,000 or more, the transaction will be designated as a high-cost mortgage loan if the total points and fees are: A) $20,000 or less. B) 3% or less. C) more than $5,000. D) greater than 5% of the loan amount.

D) greater than 5% of the loan amount. A transaction is a high-cost mortgage if the points and fees exceed 5% of the total loan amount for a loan amount greater than or equal to $20,000.

A mortgage that has a fixed-interest rate and yet still increases the principal payment, with the intention of paying off the loan early, is called a: A) balloon equity mortgage. B) home equity line of credit. C) reverse equity mortgage. D) growing equity mortgage.

D) growing equity mortgage. A growing equity mortgage (GEM) is a mortgage with a fixed interest rate, but provides for rapid payoff by increasing principal payments, thereby growing the equity.

A loan in which cash is transferred from a lender to a borrower to finance a transaction is also known as a A) refinance loan. B) reverse equity mortgage. C) junior loan. D) hard money loan.

D) hard money loan. Hard money loan is a loan in which cash is transferred from a lender to a borrower to finance a transaction. A soft money loan is a loan in which no cash is involved, as is the case when a seller finances the buyer's purchase of the seller's property.

On the Closing Disclosure, by signing the last page of the document the applicant has confirmed that he or she: A) will waive his or her rights under any applicable law. B) agrees to the terms of the mortgage loan. C) approves of all changes when compared to the Loan Estimate. D) has received the Closing Disclosure.

D) has received the Closing Disclosure. If the creditor includes a signature line, by signing the Closing Disclosure document the consumer is only signifying that he or she has received the Closing Disclosure. The disclosure is not a confirmation of loan acceptance.

A portfolio loan is a loan that is: A) grouped together with other loans and sold as mortgage-backed securities. B) originated by a credit union with a lower than market interest rate. C) reviewed by a federally employed underwriter. D) held by the lender and not sold on the secondary mortgage market.

D) held by the lender and not sold on the secondary mortgage market. If the lender holds the loan in its own portfolio and does not sell the loan, it is called a portfolio loan.

An index clause permits the lender to change the interest rate charged to the borrower based upon the fluctuations in the listed index. The difference between the rate charged to the borrower and the index rate is called the __________ . A) modification B) reduction C) privilege D) margin

D) margin An index clause permits the lender to change the interest rate charged to the borrower at predetermined time intervals based upon the fluctuations in the listed index. The actual interest charged the borrower is normally higher or lower than the index rate. This difference is known as the margin.

When compared to traditional conforming loans, FHA-insured loans have lower interest rates and lower: A) property eligibility standards. B) income ratios. C) bankruptcy forgiveness requirements. D) monthly mortgage insurance.

D) monthly mortgage insurance. A distinct advantage of an FHA insured loan, as compared to a conforming loan, is great interest rates and lower monthly mortgage insurance (MMI). They also have higher income ratios.

An account type of MTG listed on a credit report means the account is a __________ . A) multiple transaction grant B) money to go creditor C) management account D) mortgage loan

D) mortgage loan The code MTG on an account type indicates that the account is a mortgage loan.

The lender in a mortgage is the __________ . A) trustor B) mortgagor C) trustee D) mortgagee

D) mortgagee The mortgagee is the lender on the mortgaged property and the party who receives the mortgage.

Corona's Construction Company is applying for a line of credit at Oak Tree Bank. Under the Gramm-Leach-Bliley Act, Corona's Construction Company is __________ of Oak Tree Bank. A) a consumer B) a customer C) both a customer and a consumer D) neither a customer nor a consumer

D) neither a customer nor a consumer Consumers and customers are individuals for GLB purposes. A commercial business or sole proprietor are neither consumers nor customers.

When a financial institution's employee detects a red flag, the employee should: A) reject the loan application and contact FinCEN for instructions. B) make a note on the application before sending it to the underwriter. C) flag the loan application as suspicious and contact the applicant. D) notify the institution's AML compliance officer.

D) notify the institution's AML compliance officer. When an employee of the company detects any red flag, he or she must notify the company's AML Compliance Officer.

If bonus income is being used for income qualification, then loan originators should: A) verify that the applicant's job position is one that should expect bonus compensation. B) deduct the amount of the bonus from the applicant's annual salary. C) request the employer to stop paying bonuses until the loan has been funded. D) obtain a VOE that shows bonus history, and credit will be given for future bonus continuation.

D) obtain a VOE that shows bonus history, and credit will be given for future bonus continuation. If the bonus or compensation is to be used for loan qualifying, you'll need a VOE showing a two-year history and likelihood that the bonus or compensation will continue. Once you have the completed VOE, you will give your borrower credit for their monthly base plus a 24-month average of the bonus or commission income.

An Affiliated Business Arrangement (ABA) exists when A) the Special Information Booklet is modified to include company-specific information. B) a company provides a borrower with a recommended service providers list. C) a borrower is charged for an appraisal as a condition for receiving a Loan Estimate. D) one company controls, is controlled by, or is under common control of another company.

D) one company controls, is controlled by, or is under common control of another company. An Affiliated Business Arrangement exists when one company controls, is controlled by, or is under common control of another company.

As of July 2011, Dodd-Frank amended the AMTPA so that the act no longer operates to: A) prevent the origination of higher-cost mortgage loans. B) define the difference between a "lender" and a "creditor." C) set the maximum interest rate for conventional mortgages. D) preempt certain general state restrictions on mortgage transactions.

D) preempt certain general state restrictions on mortgage transactions. AMTPA will no longer operate to preempt certain general state restrictions on mortgage transactions. Examples of permissible state restrictions that AMTPA will not preempt are restrictions on late charges and prepayment penalties.

When a title insurance company receives a request for title insurance it will prepare a: A) recordable trust deed. B) marketable title. C) plat map. D) preliminary title report.

D) preliminary title report. When a title insurance company receives a request for title insurance it will prepare a preliminary title report.

Section 9 of RESPA prohibits a seller from: A) paying more than 4% towards the buyer's closing costs. B) having the property appraised to ensure the loan amount is accurate. C) accepting a fee from the lender for locating a willing buyer for the property. D) requiring a buyer to use a specific title insurance company as a condition of sale.

D) requiring a buyer to use a specific title insurance company as a condition of sale. Unless the seller pays all title insurance charges, RESPA Section 9 prohibits a seller from requiring a buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.

A Servicing Transfer Statement is required if the loan servicer: A) has to notify the borrower 20 days before the effective date of the loan servicing. B) is the one who will be servicing the loan. C) transfers the borrower's application to the loan underwriter. D) sells or assigns the servicing rights to a borrower's loan to another loan servicer.

D) sells or assigns the servicing rights to a borrower's loan to another loan servicer. A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer.

The first document in the loan package that was prepared by the loan originator will be the: A) preliminary underwriting findings. B) uniform residential loan application. C) cover letter. D) submission sheet.

D) submission sheet. The submission sheet is the first document provided by the loan originator to the underwriter. Its purpose is to set forth the documentation of the loan package along with any special information or circumstances not provided in other documentation submitted as a part of the loan package that would be helpful to the loan underwriting in evaluating the applicant's loan package.

Mortgages that are recorded after a first or senior mortgage are called: A) late mortgages. B) subprime mortgages. C) lesser mortgages. D) subordinate or junior mortgages.

D) subordinate or junior mortgages. Mortgages recorded after the first mortgage are known as subordinate or junior mortgages or by their rank in filing (a second or third mortgage, for example).

When determining the ability to repay with respect to ARMS, monthly payments for underwriting purposes must be calculated by using: A) the fully indexed rate or an introductory rate, whichever is less. B) the introductory rate only. C) the average rate over the life of the loan. D) the fully indexed rate or introductory rate, whichever is higher.

D) the fully indexed rate or introductory rate, whichever is higher. For underwriting purposes the monthly payment for adjustable-rate mortgages must be calculated using the fully indexed rate or an introductory rate, whichever is higher.

Redlining refers to A) discouraging buyers from considering certain neighborhoods because of its ethnic composition. B) encouraging a home owner to sell because of a particular ethnic group moving into a neighborhood. C) providing an Asian buyer factual information about the racial composition of a neighborhood based upon the couple's desire to live in a neighborhood where there are other Asians. D) the refusal of a lender to make loans in certain geographical areas for reasons other than the qualification of the applicants and the value of the pledged collateral.

D) the refusal of a lender to make loans in certain geographical areas for reasons other than the qualification of the applicants and the value of the pledged collateral. Refusing to make mortgage loans or issue insurance policies in specific geographical areas for reasons other than the qualification of the applicant or the value of the pledged security is known as "redlining." This practice, which is based on racial, ethnic, religious, or national origin composition of a specific neighborhood or geographic area, has the effect of contributing to the deterioration of older neighborhoods and limiting the housing options available to qualified buyers.

Lenders will review a mortgage loan applicant's credit score to help them determine: A) the loan amount and prepayment penalty for the borrower's loan. B) if the borrower can afford to pay a higher loan commission. C) which consumer index to use when calculating the loan's interest rate. D) the risk that the borrower will default on his/her mortgage loan.

D) the risk that the borrower will default on his/her mortgage loan. The borrower's score will meet within a range that determines his or her credit risk. The higher the score, the less risk that the borrower will default, as a higher score reflects that the borrower is historically responsible with his/her finances and credit

A land sale contract differs from other forms of seller financing because: A) the buyer can subdivide the property without approval from the seller. B) the seller will instruct a neutral third party to sell the property if the buyer defaults. C) a special land lien is placed on the property by the seller. D) the seller keeps title to the property until the buyer pays the purchase price in full.

D) the seller keeps title to the property until the buyer pays the purchase price in full. The vendor (seller) retains title to the property until the vendee (buyer) has fulfilled all obligations under the contract; there is no lien against title.

Under the Gramm-Leach-Bliley Act privacy rules, financial institutions are required to give a privacy policy disclosure: A) to affiliates and commercial clients. B) only to consumers. C) only to customers. D) to both customers and consumers.

D) to both customers and consumers. Financial institutions must give their customers and their consumers a privacy notice describing their privacy policies and practices. The consumer notice is on a shorter form than the customer notice.

Quiz: Escrow and Insurance

Segment 10: Closing

Quiz: The Closing Disclosure

Segment 10: Closing

Bonus Study: Math Sample Calculations

Segment 11: Financial Calculations

Quiz: Financial Calculations

Segment 11: Financial Calculations

Quiz: Specific Loan Programs

Segment 12: Specific Loan Programs

Quiz: The Mortgage Lending Industry

Segment 1: The Mortgage Lending Industry

Quiz: Basic Loan Finance Documents

Segment 2: Basic Loan Finance Documents

Quiz: Loan Types and Terminology

Segment 3: Financing Terminology

Quiz: The SAFE Act

Segment 4

Quiz: Fair Credit Reporting Act (FCRA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Fair Housing

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Gramm-Leach-Bliley Financial Modernization Act (GLBA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Home Mortgage Disclosure Act (HMDA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Home Ownership and Equity Protection Act (HOEPA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Points and Fees Caps

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Real Estate Settlement Procedures Act (RESPA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: The Ability-to-Repay and Qualified Mortgages

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: The Alternative Mortgage Transaction Parity Act (AMTPA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: The Equal Credit Opportunity Act (ECOA)

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: The Truth in Lending Act

Segment 5: Federal Laws Governing Mortgage Practice

Quiz: Ethics and Consumer Protection

Segment 6: Ethics and Consumer Protection

Quiz: Fraud and Money Laundering

Segment 7: Fraud and Money Laundering

Quiz: Credit Reports and Credit Scores

Segment 8: The Mortgage Loan Application

Quiz: The Loan Estimate

Segment 8: The Mortgage Loan Application

Quiz: Appraisals

Segment 9: Processing and Underwriting

Quiz: Underwriting

Segment 9: Processing and Underwriting