Mortgage Practice Questions 501-550

Which of the following situations is not a red flag that illegal flipping may be taking place? -A group of sellers and buyers changing ownership of one property among them -An inflated appraisal -Purchasing and remodeling a house and selling it for a quick profit -A series of sales within a short period of time such as multiple sales within the last 12 months

Purchasing and remodeling a house and selling it for a quick profit

An MLO advertises a low interest rate for qualified applicants. A prospective borrower meeting the qualifications applies. The MLO moves the borrower into another loan which makes more profit to the lender. This is an example of: -Ponzi scheme -Bait and switch -Extortion -Loan flipping

Bait and swtich

How can one calculate monthly income for an applicant who is paid an hourly wage? -Weekly income x 52/12 -Weekly income x 12/52 -Hourly wage x 40 x 52/12 -Weekly income x 4

Hourly wage x 40 x 52/12

When the interest rate floats, it means which of the following? -That the interest rate cannot go up but can go down -That the interest rate can continue to go up or down until it is locked -That the interest rate cannot go down but can go up -That the interest rate cannot go down or up

That the interest rate can continue to go up or down until it is locked

Each loan originator is identified in the NMLS database by: -a license number. -a unique identifier. -his/her Social Security number. -employing the mortgage loan originator.

a unique identifier

A requirement in the Dodd-Frank Act requires qualified mortgages (QM) to have/to be: -a Balloon payment. -fully amortizing. -interest only payments. -negative amortization.

fully amortizing

The purpose of Fannie Mae and Freddie Mac is to: -make all loans. -insure all loans. -reinsure or guarantee just FHA and VA loans. -provide a source of funds to the primary market mortgage lenders.

provide a source of funds to the primary market mortgage lenders

The purpose of a Market Conditions Addendum is to: -replace the need for a full appraisal. -reveal prior marketing efforts by any realtor. -provide the lender with an understanding of the market trends and conditions in the subject property. -provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.

provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood.

Loan documentation fraud may include any of the following except: -the MLO. -the lender. -the borrower. -the realtor.

the lender

RESPA pertains to: -appraisal companies. -title companies. -the loan process. -the mortgage insurance process.

the loan process

During the term of a fully amortized loan which of the following is true? -the monthly amount going to principle increases -the monthly amount going to interest increases -the monthly payment amount going to principal decreases -the principal balance increases

the monthly amount going to principle increases

When a self-employed borrower is a 25% owner of his business, which of the following documents is required? -The past two years balance sheets -The past two years tax returns -The past two years profit and loss statements -Articles of incorporation

the past two years tax returns

The purpose of the Equal Credit Opportunity Act is: -to ensure that all low-income borrowers are given favorable treatment when applying for a loan. -to ensure that all creditors have an equal opportunity to make loans. -to ensure that every borrower will get a loan. -to ensure that all borrowers are given an equal opportunity to get a loan.

to ensure that all borrowers are given an equal opportunity to get a loan

When the mortgage loan amount is at 78% LTV or less of the purchase price of the home, private mortgage insurance: -will be cancelled upon written request of the borrower. -will be cancelled automatically by the title company. -will be cancelled automatically by the lender. -will be required for the life of the loan.

will be cancelled automatically by the lender

When an FHA mortgage loan amount is at 95% LTV and has a term longer than 15 years the mortgage insurance premium: -will be required for the life of the loan. -can be cancelled upon written request of the borrower. -may be cancelled automatically by the title company. -may be cancelled automatically by the lender.

will be required for the life of the loan

If a Mortgage Loan Originator (MLO) cannot close a loan, he/she can refers the loan to another MLO who can close the loan. Can the referring MLO receive a referral fee? -A referral fee is earned and should be paid to the first MLO. -A referral fee can be paid as long as it is disclosed on the Settlement Statement (HUD-1). -Paying a referral fee is against RESPA. -Paying a referral fee is allowed if the borrower approves it.

Paying a referral fee is against RESPA

When a lender learns that a property is in a flood zone, the lender must do which of the following? -Place flood insurance on the property at a cost to the borrower -Must immediately call the entire unpaid principle balance due and payable -Begin foreclosure in order to protect its financial interest -Notify the borrower of the flood insurance requirement and have the borrower purchase flood insurance

Place flood insurance on the property at a cost to the borrower

When a telemarketer calls a person on the do-not-call list the telemarketer is subject to a fine of: -$16,000.00 -$12,000.00 -$7,500.00 -$5,000.00

$16,000.00

The borrowers are purchasing a house with a sales price of $300,000 they put 30% as a down payment. If they paid $3,150 in points, how many points does that represent? -1.05 -2 -2.25 -1.5

1.5

What gross percentage of variance on an appraisal report is tolerable when evaluating comparables? -25 -15 -20 -10

25

When is a Notice of Adverse action required when the borrower applies for a loan? -10 days -30 days -60 days -90 days

30 days

Which of the following fraud situations does not involve a straw buyer? -A borrower using a relative -A borrower manipulating a pay stub to qualify for a loan -A borrower agreeing to a loan under his name even though he never intends to live in the house or to make the payments. -Two friends scheme to save a home from foreclosure, one friend taking out a loan as owner occupied and the other living in the home

A borrower manipulating a pat stub to qualify for a loan

Which is considered an illegal referral fee? -A lead generating company getting a higher fee if the lead closes -MLOs buying leads from a legitimate lead generating company -MLOs pursuing lead from past borrowers -An employee of a lead generating company referring a potential borrower to an MLO

A lead generating company getting a higher fee if the lead closes

What is a feature of an ARM? -A loan amount that never increases -A monthly payment is regular -A loan which can adjust at any time -A loan that has an adjustable feature

A loan that has an adjustable feature

Which of the following is NOT a finance charge in a residential mortgage loan? -Loan origination fee -Appraisal fee -Mortgage insurance premium -Mortgage broker fee

Appraisal fee

What part about short sale flipping has temporarily been suspended? -Immediately selling for a profit after disclosing the dollar amount of all repairs -The requirement of full disclosure to both seller and buyer regarding purchase price -Buying the property and re-selling within 90 days -The need for approval by an underwriter for financing

Buying the property and re-selling within 90 days

533.The borrower uses his home's equity for a mortgage loan for business purposes. The borrower will use $80,000 to buy restaurant equipment. This loan will be: -exempt from RESPA because it is a business purpose loan. -exempt from RESPA because it is a business purpose loan. -covered by RESPA, as the collateral is a mortgage on the borrower. -covered by RESPA because it is to an individual no matter the purpose of the loan. -exempt from RESPA because restaurant equipment loans are not federally related.

Exempt from RESPA, as the collateral is a mortgage on the borrower

What are Fannie Mae and Freddie Mac also known as? -Congress owned enterprises -Government supervised but privately owned entities -Government sponsored enterprises -Privately owned entities

Government supervised but privately owned entities

which of the following is true of an ARM? -Index rate + margin = ARM rate -Initial rate + margin = ARM rate -ARM rate + margin = index rate -Margin + cap = ARM rate

Index rate + margin = ARM rate

For a property purchased for $225,000 with a first mortgage loan amount of $150,000, and a HELOC for 25,000 the LTV and CLTV are? -LTV 77% / CLTV 77% -LTV 66% / CLTV 77% -LTV 77% / CLTV 66% -LTV 150% / CLTV 128%

LTV 66% / CLTB 77%

What is the name of Freddie Mac's automated underwriting software program? -Loan Processor -Loan Prospector -Loan Underwriter -Loan Originator

Loan Prospector

Is a referral fee ever allowed? -No, unless disclosed on the HUD and paid for by borrower -No -Only to a disclosed provider -Only to a lawyer that refers a loan

No

What is the federal regulation that implements the Real Estate Settlement Procedures Act? -Regulation C -Regulation X -Regulation Z -Regulation B

Regulation X

Which two regulations require timely disclosures be provided to the borrower within three business days of a 1003? -Regulation B and Regulation C -Regulation H and Regulation Z -Regulation G and Regulation X -Regulation X and Regulation Z

Regulation X and Regulation Z

In qualifying the income of a sole proprietor borrower, the originator should consider which of the following to be most important? -Form 1040 adjusted gross income -Schedule C net income -Expenses reported on Form 2106 -Schedule C net income plus non-cash expenses and depreciation

Schedule C net income plus non-cash expenses and depreciation

One of the acknowledgments in the signature section of the 1003 loan application, signifies that: -both the MLO and the borrower acknowledge that the borrower has received all appropriate disclosures. -the borrower commits to the repayment of the loan if granted. -the borrower represents that all information contained in the form is the truth. -the MLO has properly explained all blanks on the 1003 loan application.

The borrower represents that all information contained in the form is the truth

Which of the following would be considered a red flag in an owner occupied refinance loan? -The borrower owns a second home further than 50 miles away. -The borrower lives with his/her parents in the subject property. -The borrower owns another home in the same neighborhood. -The borrower resides in a home in the same neighborhood as subject property

The borrower resides in a home in the same neighborhood as subject property

What is the period between rate changes in an ARM called? -change period -index period -term period -adjustment period

adjustment period

Which form is used most frequently for residential appraisals? -HVCC -URAR -USPAP -1025

URAR

What are the Fannie Mae and Freddie Mac guidelines regarding an investment property? -Rents must be greater than the mortgage payment -Borrower must put 20% down -Borrower must have 6 months reserves -Maximum Debt to income ratio is 45%.

borrower must have 6 month reserves

Surrender of an MLO license does not affect the MLO's: -ability to originate loans as an employee for a licensed lender. -civil or criminal liability for acts committed prior to the surrender. -ability to process loans as a contract processor. -ability of taking loan applications as an independent contractor.

civil or criminal liability for acts committed prior to surrender

How does rate charged for PMI for a 90% loan compare to that for a 95% loan? -It depends solely on the loan amount -It is lower -It is higher -It is the same

it is lower

A loan officer creates a marketing plan to make between 2k and 4k per loan. His cousin calls, he agrees to do the 300k loan for .75% commission. This is: -legal and unethical but okay because he is family. -illegal and ethical. -illegal and unethical. -legal and ethical because he is within his marketing plan.

legal and ethical because he is within his marketing plan

A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their home's equity is engaging in: -home equity lending. -predatory lending. -negative amortization lending. -equity lending.

predatory lending

An alternative documentation loan is a type of: -subprime loan. -reverse mortgage. -adjustable rate loan. -seller financing.

subprime loan

The relationship between the loan amount and the total amount financed, represented as a percentage, is known as: -an ARM. -the APR. -a discount point. -the note rate.

the APR

It is allowed to discriminate under ECOA if: -the borrower is too young to enter into legally binding documents. -the borrower is too old to understand. -the borrower doesn't speak the same language; you cannot communicate. -Never

the borrower is too young to enter into legally binding documents

Approval of a reverse mortgage application will be largely based on which of the following? -The borrower's income -The borrower's credit report -The borrower's equity -The current loan interest rate

the borrower's equity

If original loan amounts, ending maturity dates and interest rates are the same for two loans. The first loan is an interest-only loan and the other loan is fully amortized. Knowing that, which of the following is true? -The first loan will have a lower interest cost. -The other loan will have a balloon payment. -The other loan will have higher monthly payments. -The first loan will be paid off quicker because it is interest only payments.

the first loan will be paid off quicker because it is interest only payments