Test 3

12. Of these, who is responsible for the accurate accounting of all monies due to and from the parties in a real estate sale on the Closing Disclosure? (a) The residential loan originator (b) The settlement or escrow agent (c) The real estate agent (d) The Creditor

(d) The Creditor

33. The SAFE Act requires continuing education for state-licensed loan originators. In order to meet the annual continuing educational requirement, the loan originator must complete: (a) 15 hours of CE (b) 9 hours of CE (c) 8 hours of CE (d) 20 hours of CE

8 Hours of CE

69. Which government agency backs FHA loans? (a) United States Department of Housing and Urban Development (b) Federal Housing Finance Agency (c) Consumer Financial Protection Bureau (d) Federal Housing and Community Development Agency Correct answer: a

Correct answer: a The Department of Housing and Urban Development insures the lender that, in the event a HUD-backed loan forecloses, the lender will be reimbursed.

98. Nancy meets with a Loan officer at 1st Mortgage Company to inquire about loan program options. Her name is on the National Do Not Call Registry. The loan officer: (a) can call Nancy anytime because they met in person. (b) can call Nancy for up to 3 months for the inquiry meeting date. (c) can call Nancy for up to 18 months because they have an established business relationship. (d) cannot call Nancy because she is on the National Do Not Call List.

Correct answer: b An originator may call a person whose number is on the do-not-call registry if the originator has an established business relationship (EBR) with the person. An EBR exists with someone who was:• Party to a transaction with the mortgage loan originator's company in the last 18 months or• With someone who made an inquiry with the originator's company within the last three months.

78. Which of the following combinations is optional for the borrower on the FNMA 1003? (a) Sex and date of birth (b) Sex and race (c) Marital status and date of birth (d) Marital status and race

Correct answer: b The final section on the 1003, "Information for Government Monitoring Purposes," is related togovernment statistics. The section is referred to as the Home Mortgage Disclosure Act (HMDA)Section. It requests information regarding race, sex and ethnicity. The application includes a paragraph explaining that none of this information can be used to discriminate against the loan applicant, stating that the applicant can opt not to complete this section. If the applicant decides not to furnish this information, it will be up to the loan originator to make an "educated guess" concerning the demographic information to report to the government (only in regard to face-to-face applications; not internet, mail, or telephone).The 1003 allows the MLO to ask about marital status and date of birth.

65. Jill has a property that appraises for $189,000. Her first mortgage rate is 4.75% and her second mortgage rate is 15%. She has decided that she wants to leave her $53,000 first mortgage alone and just refinance the second. She qualifies for an 85% CLTV. Her second mortgage is for $25,000 but she wants cash to finish her basement. She has $81,150 available as cash. What is her new second mortgage loan amount if the closing costs are $1,500? (a) $136,000 (b) $160,650 (c) $107,650 (d) $106,150

Correct answer: c First, find the maximum loan amount if the LTV is 85%: $189,000 x 85% = $160,650. Then, subtract the amount of her first mortgage to maintain that 85% LTV: $160,650 - $53,000 = $107,650.

111. The fluctuating economic indicator that is used as the basis for most adjustable rate mortgages is called the: (a) Cap (b) Margin (c) Index (d) Hybrid

Correct answer: c The index is what the lender uses as an instrument for measuring fluctuations in interest rates. It is thelender's barometer of change in interest rates. One of the major protections offered to borrowerswho accept an ARM loan is that any change in the rate of interest must be tied to the change in theindex. In other words, as the index rate moves up, so does the interest rate charged by the lender tothe consumer resulting in higher monthly payments to the borrower.

13. A lender, under ECOA, has how many days to notify the borrower of an underwriting decision? (a) 3 (b) 10 (c) 30 (d) 60

Correct answer: c 30

55. Regulation Z provides a presumption of compliance with the ability-to-repay requirement for creditors making: (a) A Higher-Priced Mortgage (b) A Conforming Mortgage (c) A Suitable Mortgage (d) A Qualified Mortgage

Correct answer: d The Ability to Repay (ATR)/ Qualified Mortgage (QM) rule provides a legal presumption that creditors originating QMs have complied with ATR requirements. This presumption gives lenders more certainty about potential legal liability if a borrower claims in court the lender failed to meet the ATR requirements in making the loan.

17. Name the national association of executives and employees of the various states who are charged with the responsibility for administration and regulation of residential mortgage lending, servicing, and brokering. (a) National Conference of State Mortgage Supervisors. (b) United States Department of Mortgage Administration. (c) National Association Residential Lending and Servicing Regulators. (d) American Association of Residential Mortgage Regulators.

Correct answer: d The American Association of Residential Mortgage Regulators (AARMR) is a professional tradeassociation that promotes communication between state officials who are responsible for the administration and regulation of residential mortgage lending, servicing and brokering. AARMR promotes the exchange of information to ensure the ability of state mortgage regulators to provide effective mortgage supervision for a safe and sound industry meeting the needs of the local financial markets and to protect the rights of consumers. Educational activities include organizing and sponsoring lectures, seminars, and training programs, and by providing a forum for the exchange of information.

97. The Nationwide Mortgage Licensing System and Registry responsibilities include all of the following except: (a) develop a qualified written test and approve test providers. (b) develop a mortgage call report. (c) provide public access to licensing information. (d) grant or deny license authority.

Correct answer: d The NMLSR is the system of record for the licensing or registration of MLO's in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam. In these jurisdictions, NMLSR is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS by 63 state or territorial governmental agencies. NMLSR itself does not grant or deny license authority.The NMLS&R responsibilities include following:• Establish protocols for the issuance of unique identifiers.• Receive and process fingerprints for national and state criminal history background checks for all loan originators.• Review and approve, using reasonable standards, pre-licensure and continuing education courses.• Develop a qualified written test and approve test providers.• Develop a mortgage call report.• Provide public access to licensing information.

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

Correct answer: d 30 Year Mixed Rate Mortgages

37. A straw borrower is someone who: (a) allows their name and information to be used to obtain a mortgage, but does not intend to live in the house. (b) applies for loans from multiple lenders for the same property. (c) defaults on a mortgage and then abandons the property. (d) uses fraudulent income data on a loan application in order to get a larger loan.

Correct answer: a

41. Which of the following is not considered a seller concession and therefore not subject to VA's 4% seller concession rule? (a) Paying the buyer's loan-related closing costs (b) Payment of the buyer's VA funding fee (c) Prepayment of the buyer's property taxes and insurance (d) Gifts such as a television set or microwave oven

Correct answer: a A seller concession is anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide.Seller concessions include, but are not limited to, the following:• payment of the buyer's VA funding fee• prepayment of the buyer's property taxes and insurance• gifts such as a television set or microwave oven• payment of extra points to provide permanent interest rate buydowns• provision of escrowed funds to provide temporary interest rate buydowns,• payoff of credit balances or judgments on behalf of the buyer.Seller concessions do not include payment of the buyer's closing costs, or payment of points as appropriate to the market.

40. Which of the following telemarketing cold calls must comply with the requirements of the National Do-Not-Call rules? (a) A call to someone who made an inquiry with the originator's company within the last eighteen months (b) Surveys or political polls (c) Business to Business calls (d) Companies with which a consumer has an existing business relationship

Correct answer: a An Exempt Organization if it is not required to access the National Do Not Call Registry becauseeither: 1. it is a nonprofit organization; or 2. an organization that only makes telephone calls that are in one or more of the categories described below.• Informational messages: The Rule does not apply to calls to deliver purely informational messages that are not delivered to induce purchases.• Surveys or political polls: If calls are being made for the sole purpose of conducting a survey or poll, they are exempt.• Promoting a political party or candidate: If calls are being made solely for a political purpose and are not part of a plan, program or campaign to induce purchases of goods or services, the calls are exempt.• Business-to-Business Calls: Most phone calls to a business made with the intent to solicit sales from that business are exempt from the Do Not Call provisions.• Solicitations for charitable contributions: Calls that solicit a contribution, donation or gift of money or other thing of value are exempt from the National Do Not Call Registry requirements even if the calls are made by a for-profit organization.An originator may call a person whose number is on the do-not-call registry if the originator has an established business relationship (EBR) with the person. An EBR exists with someone who was party to a transaction with the mortgage loan originator's company in the last 18 months or with someone who made an inquiry with the originator's company within the last three months(16 CFR 310.2(q)).

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

Correct answer: a Exempt residential mortgage transactions. Any transaction to construct or purchase a principal dwelling, whether considered real or personal property, is exempt. (See the commentary to § 1026.23(a).) For example, a credit transaction to purchase a mobile home or houseboat to be used as the consumer's principal dwelling would not be rescindable.

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

Correct answer: a Gross Monthly Income $3,850 x .36 (Total Debt to Income Ratio) = $1,386$1,386 - $425 (recurring monthly debt) = $961.00 maximum house payment.

14. A borrower has been approved for a loan with a 95% loan-to-value. What is the maximum Interested Party Contribution allowed based on Fannie Mae/Freddie Mac lender guidelines? (a) 3% (b) 6% (c) 5% (d) 1%

Correct answer: a Interested party contributions (IPCs) are costs that are normally the responsibility of the propertypurchaser that are paid directly or indirectly by someone else who has a financial interest in, or caninfluence the terms and the sale or transfer of, the subject property. The maximum contribution on a FNMA/FHLMC 95% LTV loan is 3%.

28. When taking an application for a mortgage loan, what are creditors not permitted to ask? (a) Have you ever been divorced? (b) Are you obligated to pay alimony, child support, or separate maintenance? (c) Are you a U.S. citizen? (d) Are there any outstanding judgments against you?

Correct answer: a Section VIII. (Declarations) of the FNMA 1003 requires the borrower(s) to answer questions about any legal problems or other issues (past or present) that may affect their financial standing. For example:• Are you presently delinquent or in default on any Federal debt or any other loan, mortgage, financial obligation, bond, or loan guarantee?• Are you obligated to pay alimony, child support, or separate maintenance?• Is any part of the down payment borrowed?• Are you a co-maker or endorser on a note?The declarations also require the loan applicant to disclose his/her status as a U.S. citizen or as a permanent resident alien.Whenever a request for credit is joint (made by two or more individuals who will be primarily liable) the mortgage loan originator may always ask the applicant's marital status regardless of whether the credit is to be secured or unsecured. In instances in which the mortgage loan originator is permitted to inquire about marital status, Regulation B, 12 CFR §1002.5(d), permits only the terms "married""unmarried" and "separated" may be used. This applies to oral as well as written requests for marital status information. "Unmarried" may be defined to include divorced, widowed, or never married, but the application must not be structured in such a way as to encourage the applicant to distinguish among these.

47. What disclosure contains the "Total Interest Percentage" (TIP) calculation? (a) The Loan Estimate (b) The Good Faith Estimate (c) The HUD-1 (d) The Adjustable Rate Mortgage Disclosure

Correct answer: a The Total Interest Percentage (TIP) is a disclosure that tells the consumer how much interest they will pay over the life of the mortgage loan. The TIP represents the total interest paid over the life of the loan as a percentage of the loan amount. For example, if the consumer borrowed $100,000 and then paid $82,000 interest over the next 30 years, the TIP would be 82%.The TIP is disclosed on page 3 of the Loan Estimate or page 5 of the Closing Disclosure. The TIP is most useful as a comparison point between different Loan Estimates.

35. Mr. & Mrs. Smith are closing on a home on January 10, 2019. The sales price of the home is $450,250 and the lender has approved them for a 90% LTV. The Smith's, 15-year fixed rate mortgage loan has an interest rate of 5.00%. How much pre-paid interest must the Smith's pay at closing assuming a 360-day calendar year? (a) $1,221.23 (b) $1,238.19 (c) $1,375.76 (d) $1,181.25

Correct answer: b $450,250 (sales price) x 90% LTV = $405,225 (loan amount) $405,225 x .050 (5.00%) =$20,261.25 (interest per year) $20,261.26 / 360 days = $56.28 (interest per day) $56.28 x 22 days left in month = $1,238.19 pre-paid interest

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

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

83. Which of the following loan types is best described as a loan which does not fully amortize over the term of the note, thus leaving a balance due at maturity? (a) A reverse mortgage (b) A loan with a balloon payment provision (c) An interest-only adjustable mortgage loan (d) A payment-option loan

Correct answer: b A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of its large size.A $100,000 loan may be amortized for 30 years, but due and payable in five years. This means the buyer will make amortized payments, based on a 30-year payment plan, but the loan balance will be due in five years instead of 30, resulting in a balloon payment.

113. A conforming loan is a loan that: (a) exceeds the maximum loan amount established by Fannie Mae/ Freddie Mac. (b) follows the secondary market criteria set by Fannie Mae/ Freddie Mac. (c) is 2.5% above the APOR issued by the CFPB. (d) is offered to borrowers who do not meet the qualifications for Fannie Mae/Freddie Mac.

Correct answer: b A conforming loan is a conventional loan that conforms to the regulations and secondary market criteria created by the Federal National Mortgage Association (FNMA, Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac). To "conform" is to act in accordance with established rules, patterns or guidelines. In the case of a conforming mortgage loan, the rules and guidelines are established by Fannie Mae and Freddie Mac.

23. Creditors must provide a copy of the special information booklet to consumers who apply for a consumer credit in all of the following transactions except: (a) Purchase money transaction. (b) A refinance transaction. (c) An investment property transaction. (d) 1 to 4 family transactions.

Correct answer: b A loan originator is required to provide the borrower with a copy of HUD's Special InformationBooklet entitled: "Your home loan toolkit: A step-by-step guide".The toolkit is designed to be used in connection with the Good Faith Estimate/Loan Estimate and HUD-1/Closing Disclosure forms as a part of the application process.The booklet does not need to be provided for:• Refinancing transactions.• Closed-end subordinate lien mortgage loans.• Reverse mortgage transactions.• For any other federally related mortgage loan not intended for the purchase of a one-to-four family residential property.

34. The succession of conveyances of the title to real property is known as the: (a) cloud on title (b) chain of title (c) encumbrance of title (d) reconveyance deed of title

Correct answer: b Chain of title refers to the history of passing of title ownership to real property from the presentowner back to the original owner. A record of title documents may be maintained by a registry office or civil law notary. Chains of title include notations of deeds, judgments of distribution from estates, certificates of death of a joint tenant, foreclosures, judgments of quiet title, and other recorded transfers of title to real property. Before purchasing property, the purchaser will usually hire a title companies or abstractors to search out the chain of title and provide a report so that a purchaser will be assured the title is clear of any claims.The term cloud on title refers to any irregularity in the chain of title of property that would give areasonable person pause before accepting a conveyance of title.Encumbrances refer to any charge or claim against a property. This legal term is commonly used with regards to real estate. The person or entity that issues the encumbrance acquires a legal right to the property.A reconveyance deed is an official document from a mortgage holder releasing the debtor from the mortgage.

110. Requirements of the Home Ownership and Equity Protection Act (section 32 loans) might apply to which transaction? (a) Reverse mortgage (b) Closed-end home equity loans (c) Mortgages secured by vacation or second homes (d) Rural Development Section 502 Direct Loan Program

Correct answer: b Consumer credit transactions that are secured by a consumer's principal dwelling are subject to HOEPA. Mortgage transactions subject to HOEPA are:• Purchase-money mortgages.• Refinances.• Closed-end home equity loans.• Open-end credit plans (HELOCs).The HOEPA exempts the following types of transactions from HOEPA coverage:• Reverse mortgages.• Construction loans.• Loans originated and directly financed by a Housing Finance Agency.• Loans originated under the U.S. Department of Agriculture's Rural Development Section 502 Direct Loan Program.• Mortgages secured by vacation or second homes

62. What is the name of the IRS form creditors use to authorize underwriting access to borrower tax documents? (a) Form 1008-T (b) Form 4506-T (c) Form 2600-T (d) Form 1099-T

Correct answer: b Form 4506-T is an Internal Revenue Service (IRS) document that is used to retrieve past tax transcripts that are on file with the IRS. The document must be signed and dated by the taxpayer, thus giving a third-party permission to retrieve the taxpayer's data. Fannie Mae requires lenders to have each borrower (regardless of income source) complete and sign a separate IRS Form 4506-T at or before closing.

99. A mortgage advertisement states "Monthly payments of only $600!" What other information should the ad include? (a) Payment schedule and finance charges (b) Annual Percentage Rate, finance charges, and down payment amount (c) Annual Percentage Amount only (d) Interest Rate and down payment

Correct answer: b If any triggering term is used in a closed-end credit advertisement, then the following three disclosures must also be included in that advertisement:1. The amount or percentage of the down payment.2. The terms of repayment.3. The "annual percentage rate", using that term or the abbreviation APR. If the annual percentage rate may be increased after consummation of the credit transaction, that fact must be disclosed.

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

Correct answer: b National Origin, marital status and receipt of income from public assistance are prohibited bases under the Equal Credit Opportunity Act. Underwriters may consider if the income presented is likely to continue for the next three years.

71. A mortgage lending company refuses to make loans for homes in a minority neighborhood. This is an illegal action called : (a) Steering (b) Redlining (c) Block Busting (d) Channeling

Correct answer: b Redlining is a refusal to make loans or issue insurance policies on property located in a particular neighborhood for discriminatory reasons.The concept of redlining involves the illegal practice of providing unequal access to credit, or unequalterms of credit, on the basis of race, color, national origin, or other prohibited characteristics. Thispractice is considered discriminatory and may violate both the ECOA and the FHA. Lenders must manage their fair lending risk so that this type of noncompliance is nonexistent.

77. The Dodd-Frank Wall Street Reform and Consumer Protection Act is a comprehensive and complex law that contains all of the following major areas of mortgage reform except: (a) Requires Lenders Ensure a Borrower's Ability to Repay. (b) Mandated states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators. (c) Expands Consumer Protections for High-Cost Mortgages. (d) Gave the CFPB law oversight over TRID.

Correct answer: b The Dodd-Frank Act's mortgage reforms include:• Require Lenders Ensure a Borrower's Ability to Repay: Establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold. Lenders and mortgage brokers who don't comply with new standards will be held accountable by consumers for as high as three-years of interest payments and damages plus attorney's fees (if any). Protects borrowers against foreclosure for violations of these standards.• Refinance of Hybrid Loans with Current Lender: The Act also sets forth factors to consider in determining a borrower's ability to repay when the creditor considers an application for refinancing of an existing hybrid loan into a standard loan.• Prohibit Unfair Lending Practices: Prohibits the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans, including the bonuses known as "yield spread premiums" that lenders pay to brokers to inflate the cost of loans. Prohibits pre-payment penalties that trapped so many borrowers into unaffordable loans.• Expands Consumer Protections for High-Cost Mortgages: Expands the protections available under federal rules on high-cost loans (HOEPA) lowering the interest rate and the points and fee triggers that define high cost loans.• Law Oversight over TRID: Dodd-Frank Act directed the CFPB to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for a mortgage loan under the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X). The SAFE Act enhances consumer protection and reduces fraud by requiring states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators.

85. According to the Equal Credit Opportunity Act (ECOA), age discrimination by a mortgage lender is acceptable: (a) not under any circumstance. (b) only if the applicant is too young to enter into a legally binding contract. (c) only if life expectancy data indicates an applicant will not be alive at the end of the loan term. (d) only if the applicant is too young or too old to understand the ramifications of defaulting on a legal debt.

Correct answer: b The ECOA makes it unlawful for "any creditor to discriminate against any applicant with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract). A lender would not be in violation of ECOA by not accepting an application from an individual too young to enter into a binding contract.

108. What is the maximum length of time that a Chapter 7 bankruptcy can be reported on a consumers credit report per the Fair Credit Reporting Act (Regulation V)? (a) 7 years from the filing date. (b) 10 years from the filing date. (c) 7 years from the discharge date. (d) 10 years from the discharge date.

Correct answer: b The Fair Credit Reporting Act specifies how long information remains on a credit report. The following is a list of how long the most common items remain on a credit report:• Late payments: 7 years from the date of the missed payment.• Charged off accounts: 7 years from the original delinquency date.• Collection accounts: 7 years from the original delinquency date of the account as reported to them by the original creditor.• Civil claim judgments: 7 years from the filing date.• Chapter 7 bankruptcy: 10 years from the filing date.• Chapter 13 bankruptcy: 7 years from the filing date.• Tax liens: 7 years from the filing date if they are paid, 10 years from filing date if unpaid

95. A mortgage loan officer may refuse to accept a loan application from a prospective borrower for which of the following reasons? (a) The applicant has used several racial insults and you would rather not do business with him (b) The borrower has indicated that she is willing to provide false documents in order to qualify for a larger loan (c) The lender doesn't accept applications from the area where the borrower lives (d) The applicant has poor credit and you don't feel there is any way he will meet lender guidelines

Correct answer: b The applicant's racial prejudices are not a justification for refusing to take the application. Even "Jerks" have a right to apply for a loan. Credit and income may prevent an applicant from obtaining a loan, but they are not permissible reasons to refuse to take an application.A lender who refuses to accept applications from a particular area is violating fair lending laws by engaging in red-lining.Suspected fraud is the only justification for refusing to take an application.

38. Which of the following loans would not be considered a "higher-priced mortgage loan" as defined by Regulation Z? (a) A conforming conventional loan with an APR 1.5% above the Average Prime Offer Rate (b) A conforming loan with lender fees that exceed 5 percent of the total loan amount (c) A non-conforming jumbo loan with an APR 2.5% above the Average Prime Offer Rate (d) A subordinate lien loan with an APR 3.5% above the Average Prime Offer Rate

Correct answer: b The category of "higher-priced mortgage loans" is defined by Regulation Z, 12 CFR §1026.35(a)(1)as a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:• By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac (12 CFR §1026.35(a)(1)(i));• By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac 12 CFR §1026.35(a)(1)(ii)); or• By 3.5 or more percentage points for loans secured by a subordinate lien 12 CFR § 1026.35(a)(1)(iii)).A transaction is a high-cost (HOEPA) mortgage if its points and fees exceed the following thresholds:• 5 percent of the total loan amount for a loan with a loan amount of $21,032 or more• The lesser of 8 percent of the total loan amount or $1,052 for a loan with a loan amountof less than $21,032.

115. Net and gross adjustment theory analyzes each of the dollar figure adjustments made in the entire appraisal and the adjustments made to each of the comparable properties (comp) are examined as well. According to conforming guidelines, an appraiser may made net adjustments to comparables up to ____ in a residential appraisal. (a) 10% (b) 15% (c) 20% (d) 25%

Correct answer: b The net and gross adjustment theory analyzes each of the dollar figure adjustments made in the entire appraisal and the adjustments made to each of the comparable properties (comps) are examinedas well. There are three basic guidelines to follow:1. Value of a single adjustment should not exceed 10% of the comp's sale price2. Total net value of all adjustments should not exceed 15% of comp's sale price3. Total gross (absolute) value of all adjustments should not exceed 25% of the comp's saleprice

68. The intended purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is to: (a) mandate that mortgage loan originators provide required disclosures to borrowers three days after accepting a residential loan application. (b) promote the financial stability of the United States by improving accountability and transparency in the market place. (c) assist with the recovery and revitalization of the nation's residential housing market. (d) integrate the mortgage loan disclosures under TILA and sections 4 and 5 of RESPA.

Correct answer: b This landmark legislation represents a sweeping restructuring of United States financial regulation in response to the worst financial crisis in the United States since the Great Depression. The Act spans over 2,300 pages and affects almost every aspect of the U.S. financial services industry.The Dodd-Frank Wall Street Reform and Consumer Protection Act provide rules and guidelines to enhance the accountability and transparency in the financial system and to end "Too big to Fail" and protect the American taxpayer by ending bailouts.

9. A borrower who is paid $12.25 per hour and who works 37.5 hours per week has monthly qualifying income of: (a) $2,123.00 (b) $1,990.00 (c) $1,837.00 (d) $1,960.00

Correct answer: b To compute the income of an hourly worker, you need to know the base hourly rate of pay, the number of hours worked in a typical week, and the number of weeks worked each year.The formula is as follows: $12.25 per hour X 37.5 Hours per week = $459.38 per week $459.38 X 52 weeks = $23,887.50 per year $23,887.50 / 12 months = $1.990.

21. A Mortgage Servicing Disclosure Statement is required by what law? (a) HOEPA (b) RESPA (c) The SAFE Act (d) TILA

Correct answer: b RESPA

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

Correct answer: b FACTA

30. The Consumer Financial Protection Act of 2010 establishes the Consumer Financial Protection Bureau (CFPB), as an independent entity housed within the: (a) Federal Housing Finance Agency (b) Federal Reserve System (c) Federal National Mortgage Association (d) Federal Trade Commission

Correct answer: b Federal Reserve System

16. 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

Correct answer: c A Financial Institution must report information about ethnicity, race, and sex for applicants who arenatural persons. Appendix B of Home Mortgage Disclosure Act (MDA) requires a Financial Institution:1. To ask an applicant for ethnicity, race, and sex information regardless of whether the Application is taken in person, by mail, by telephone, or on the internet. A Financial Institution cannot require the applicant to provide this information.2. To inform the applicant that:a. Federal law requires the information be collected in order to protect consumers and to monitor compliance with Federal statutes that prohibit discrimination against applicants; andb. if the information is not provided where the Application is taken in person, the Financial Institution is required to note the information on the basis of visual observation or surname.

90. A borrower obtains a 3-2-1 buy down on a 30-year fixed rate loan. The note rate is 9.00%. What interest rate will they pay year three? (a) 6.00% (b) 7.00% (c) 8.00% (d) 9.00%

Correct answer: c A temporary buy down is the type of loan with an initially discounted interest rate, which gradually increases to an agreed-upon fixed rate usually within one to three years. For example:Note Rate of 9.00%First year rate bought down 3% to 6.00%.Second year rate bought down 2% to 7.00%Third year rate bought down 1% to 8.00%Years four through thirty rate is fixed at 9.00%

87. According to the Truth-in-Lending Act (TILA), which of the following fees is excluded from the calculation of the APR? (a) Tax Service fee (b) Prepaid interest (c) Homeowners insurance (d) Mortgage insurance premiums

Correct answer: c APR calculation of finance charges includes any charges or fees payable directly or indirectly by the consumer and imposed directly or indirectly by the financial institution either as an incident to or as a condition of an extension of consumer credit. The APR calculation on a loan always includes any interest charges and often includes other charges such as:• Amortization Schedule Fee• Application Fee• Escrow Waiver Fee• Loan Discount Fee (paid by borrower)• Loan Origination Fee (paid by borrower)• Mortgage Broker Fees• Mortgage Insurance Premiums• Processing / Underwriting Fees• Tax Service Fee• Wire FeesThe APR calculation would not include:• Appraisal Fee• Attorney Fee• Credit Report Fees• Document Preparation Fee• Escrow Fees (hazard, insurance, taxes)• Homeowners Insurance• Point Fees Paid by Seller• Recording Fees• Title Insurance

32. According to TRID how long are creditors required to retain records of the Closing Disclosure? (a) 1 year (b) 2 years (c) 5 years (d) 3 years

Correct answer: c Among other requirements in the TRID rule, creditors must retain copies of the Closing Disclosure for five years, and if the creditor sells, transfers, or otherwise disposes of its interest in a covered mortgage loan and does not service the mortgage loan, the creditor must provide a copy of the Closing Disclosure to the new owner or servicer as a part of the transfer of the loan file.

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

Correct answer: c An interest-only home loan is a type of loan where the borrower's payments only cover the interest on the amount they have borrowed. There is no reduction in the principal.

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

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

53. As defined under TRID, charges for third-party services and recording fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. Which of the following charges is subject to the 10% cumulative tolerance? (a) Amounts placed into an escrow, impound, reserve or similar account. (b) Charges paid to third-party service providers for services not required by the creditor. (c) Charges for third-party services where the charge is not paid to the creditor or the creditor's affiliate. (d) Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a third-party service provider for a settlement service.

Correct answer: c Charges for third-party services and recording fees paid by the consumer are grouped together and subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the LE for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the LE by more than 10%.These charges are:• Recording fees.• Charges for third-party services where:a. The charge is not paid to the creditor or the creditor's affiliate.b. The consumer is permitted by the creditor to shop for the third-party service, and the consumer selects a third-party service provider on the creditor's written list of service providers.

0. According to FNMA/FHLMC conforming guidelines at what level of ownership is an applicant considered self-employed? (a) 10% ownership (b) 20% ownership (c) 25% ownership (d) 50% ownership

Correct answer: c Conventional conforming guidelines break income down into three categories:• Employed income is from a borrower's employment and can include salary, over time, bonus,and commission.• Self-employed income is from a business in which the borrower has an ownership interest of 25% or more.• Non-employed income is from sources other than employment or self-employment and includes retirement income, interest, and dividend income, rent, or royalties.

105. What is the maximum insurable mortgage loan amount on a purchase transaction for a single family dwelling with a FHA-appraised value of $225,000? (a) $225,000 (b) $218,250 (c) $217,125 (d) $213,750

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

61. An applicant has applied for a refinance mortgage with a lender who requires payment of PMI on first liens with loan-to values over 80%. The applicant has an existing HELOC mortgage with a balance of $67,200 and wishes to keep it as a second lien mortgage. The property is valued at $320,000. The borrower has applied for a fixed rate mortgage of $252,800 for 15 years at 6.5%. Which of the following statements is correct? (a) The LTV is 100% (b) The lender will require mortgage insurance (c) The lender will not require mortgage insurance (d) The LTV is 90%.

Correct answer: c In this scenario, the CLTV is 100% but the lender only requires PMI on first liens with LTV over 80%.Therefore, no PMI would be required on this refinance scenario.

6. Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information? (a) Former owners of a particular property (b) The street address of the property a borrower intends to purchase (c) A borrower's current loan balances (d) The assessed value of a subject property

Correct answer: c Information that can be obtained through public sources such as a phone book or courthouse public records is not subject to the GLB Act. Personal financial information such as that which could only be found in account records or on a credit report is subject to the Act's provisions.

24. A lender has offered a borrower a 1 year ARM. The index is the 11th District Cost of Funds Index currently at 2.375%. The margin offered by the lender is 3.000%. The fully indexed rate is 5.375%. The initial payment rate for the ARM is 4.375% with payment caps of 2/6 percent. The interest payment rate will be rounded up to the nearest 1/8 percentage point (.125%) at each adjustment. What is the maximum interest rate this 1 year ARM could adjust to? (a) 6.00% (b) 8.38% (c) 10.38% (d) 11.38%

Correct answer: c Initial or Start Rate = 4.375% 2% Periodic Rate Cap: A limit on the amount that the interest rate can change during any adjustment periods.6% Lifetime Rate Cap: A limit on the amount that an interest rate can change over the life of anARM. aka: Rate Ceiling.Initial Rate 4.375%

52. The All of the following are considered liquid assets on the Uniform Residential Loan Application except: (a) Mutual Funds. (b) Stocks. (c) Automobiles. (d) Bonds.

Correct answer: c Liquid assets are cash on hand or any tangible or intangible item that can be converted quickly and easily into cash, typically without losing much of their value. Liquid assets typically include:• Any cash on hand if sourced.• Funds in a checking account.• Funds in a savings account.• Funds in a money market account.• Certificates of Deposit.• Mutual Funds.• Stocks.• BondsA non-liquid asset is an asset or possession that cannot be converted into cash quickly. Non-liquid assets are the tangible property of a borrower, such as:• Buildings.• Furniture and other Household Goods.• Real estate.• Automobiles.• Office Equipment.• Appliances.• Sporting Equipment

2. An MIP is required for what type of mortgage loan? (a) Any commercial or residential property (b) Any residential property with a LTV greater than 80% (c) An FHA one- to four-family residence (d) A non-conforming loan with a LTV greater than 80%

Correct answer: c Mortgage insurance premium (MIP), is a charge imposed by FHA for mortgage insurance. The FHA assesses either an "upfront" MIP (UFMIP) at the time of closing, or an annual MIP that is calculated every year and paid in 12 installments.

3. Under the Home Ownership Equity Protection Act (HOEPA), which of the following would be defined as a high-cost loan? (a) $100,000 loan with fees of $3,500 (b) $100,000 loan with fees of $4,999 (c) $100,000 loan with fees of $6,700 (d) Loans that are 1.5 percentage points above the average prime offer rate issued by Freddie Mac

Correct answer: c Points-and-Fees Coverage Test (12 CFR §1026.32(a)(1)(ii)) A transaction is a high-cost mortgage if its points and fees exceed the following thresholds:• 5 percent of the total loan amount for a loan with a loan amount of $21,549 or more• The lesser of 8 percent of the total loan amount or $1,077 for a loan with a loan amountof less than $21,549.A $100,000 loan with fees that exceed $5,000 would be a high-cost mortgage

88. The USDA's Section 502 Single Family Guaranteed Rural Housing Loan Program (SFHGLP) is available in: (a) areas where the median income is below $35,000. (b) agricultural communities only. (c) areas rural in character with a population of less than 10,000. (d) areas contained within Metropolitan Statistical Areas and has a population above 10,000 but below 20,000.

Correct answer: c Single Family Guaranteed Rural Housing Loan Program is available to eligible applicants in rural areas. In general, rural areas are defined as:• Open country that is not part of, or associated with, an urban area;• Any town, village, city, or place, including the immediately adjacent densely settled area, which is not part of, or associated with, an urban area, and which:o Is rural in character with a population of less than 10,000; oro Is not contained within an MSA and has a population above 10,000 but below 20,000 and has a serious lack of mortgage credit for lower and moderate-income families.

46. The applicant has obtained a 5-1 ARM. The index is the one-year LIBOR of 2.25%. The margin is 2.500%. The fully indexed rate and start rate are 4.750%. The caps are 3-2-6. After 5 years the index has increased to 10.750%. What will be the borrower's interest rate at the beginning of year 6? (a) 4.75% (b) 6.75% (c) 7.75%

Correct answer: c Start Rate - 4.750% Initial Rate Cap 3.00%: A limit on the amount that the interest rate can increase during the first adjustment period for an ARM.• Periodic Rate Cap 2.00%: A limit on the amount that the interest rate can change during any adjustment periods.• Lifetime Rate Cap 6.00%: A limit on the amount that an interest rate can change over the life of anARM. aka: Rate Ceiling.At the time of first adjustment the index is 10.750% + 2.500% Margin = 13.250% Fully Indexed Rate.The Initial Rate Cap is calculated - 3.000% + 4.750% Start Rate = 7.750% Initial Rate Cap.At the time of the first adjustment the Initial Rate Cap (7.750%) is lower than the Fully Indexed Rate (13.250%). Borrower gets the lower capped rate of 7.750%

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

Correct answer: c The Annual Percentage Rate (APR) is a measure of the cost of credit that must be reported by lenders under Regulation Z. The APR is the annual rate charged for borrowing and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan including certain fees or additional costs associated with the transaction. As loans can vary in terms of interest-ratestructure, transaction fees, late penalties and other factors, a standardized computation such as theAPR provides borrowers with a bottom-line number they can easily compare to rates charged by other lenders.

63. One of the most critical points of the CFPB's, Loan Originator Compensation Rule, is the prohibition of the practice of: (a) money laundering. (b) kickbacks. (c) steering. (d) redlining.

Correct answer: c The CFPB Rule prohibit steering incentives: The rules prohibit compensation that varies with the loan terms. A broker or loan officer cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees. Moreover, the mortgage originator cannot get paid more if, for example, the consumer agrees to buy title insurance from the lender's affiliate. Previously, loan originators could make more money by getting the consumer to buy these services from the lender, broker, or one of their affiliates.

42. Regulation Z allows lenders to provide disclosures in an electronic format if they are made in compliance with the: (a) Federal Electronic Transactions Act. (b) Microelectronic Contracts Act. (c) Electronic Signatures in Global and National Commerce Act. (d) Electronic Records and Signatures in Commerce Act.

Correct answer: c The Electronic Signatures in Global and National Commerce Act (ESIGN) Act is a United States federal law passed by the U.S. Congress to facilitate the use of electronic records and electronic signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically.The ESIGN Act requires that consumers have given consent and received any necessary disclosures as part of the electronic contracting process. The consumer is to be provided with a "clear and conspicuous statement" regarding the option to receive the record in a non-electronic form, if any, and the right to withdraw consent at any time.

117. What is the proper full title of the SAFE Act? (a) Safe and Fair Efficient Licensing Act. (b) Safety for Americans Federal Enforcement Act. (c) Secure and Fair Enforcement for Mortgage Licensing Act. (d) Specifications for the Federal Enrollment of Mortgage Originators.

Correct answer: c The Federal Housing and Recovery Act (HERA) was created to address the subprime mortgage crisis and was designed to assist with the recovery and the revitalization of America's residential housing market. HERA (Title V) includes the Secure and Fair Enforcement for Mortgage LicensingAct (SAFE). The SAFE Act is a key component of HERA.

67. Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to: (a) 2-99 years in federal prison and up to a $10,000 fine. (b) 20-year maximum prison sentence or a maximum $1 million fine, or both. (c) 30-year maximum prison sentence or a maximum $1 million fine, or both. (d) 30-year maximum prison sentence and $1 million fine.

Correct answer: c The Fraud Enforcement and Recovery Act (FERA) was introduced in Congress in February 2009 and signed into law by President Obama on May 20, 2009.FERA strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud. The amendments expand the Department of Justice's authority to prosecutecrimes involving mortgage fraud. Convictions for mortgage fraud can carry a 30-year maximum prison sentence or a maximum $1 million fine, or both. Even more significantly, mortgage fraud cases will now have a 10-year statute of limitations, as opposed to the 5-year statute of limitations.

74. The Mortgage Assistance Relief Services Rule (MARS) stipulates all of the following except; (a) Prohibit providers of such mortgage assistance relief services from making false or misleading claims. (b) Mandate that providers disclose certain information about these services. (c) Allows the collection of advance fees for these services under certain circumstances. (d) Prohibit anyone from providing substantial assistance or support to another they know or consciously avoid knowing is engaged in a violation of the Rule.

Correct answer: c The MARS Rule (Regulation O) stipulates: • Prohibit providers of such mortgage assistance relief services from making false or misleadingclaims (12 CFR §1015.3(b)); • Mandate that providers disclose certain information about these services (12 CFR §1015.4(a) (b); • Bar the collection of advance fees for these services (12 CFR §1015.5); • Prohibit anyone from providing substantial assistance or support to another they know or consciously avoid knowing is engaged in a violation of the Rule (12 CFR §1015.6)One of the most significant consumer protections under the FTC's MARS rule is the advance fee ban.

106. Which of the following loans requires the lender to remit an upfront, non-refundable guarantee fee (1.00%) at loan closing? (a) VA loan (b) FHA loan (c) RHS loan (d) FNMA loan

Correct answer: c The Rural Housing Service (RHS) administers the direct loan and loan guarantee programs offered by the USDA. The lender must remit an upfront, non‐refundable guarantee fee (1.00%) at loan closing. The upfront guarantee fee may be charged to the applicant and/or included in the loan.The Guaranteed Rural Housing Fee may be included in the excess of the appraised value. The guarantee fee is always based on the final full loan amount, including any portion of the fee that may be financed as part of the loan.

104. A veteran using the VA Home Loan Guaranty benefit does not have to pay the Funding Fee if: (a) they have a loan-to-value below 80%. (b) they retired from the military after 20 years of service. (c) they are receiving VA compensation for a service-connected disability. (d) they are veterans still on active duty.

Correct answer: c The veteran does not have to pay the Funding Fee if they are:• Receiving VA compensation for a service-connected disability.• A Veteran who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.• Surviving spouse of a Veteran who died in service or from a service-connected disability.

96. What is the official document from a mortgage holder releasing the debtor from the mortgage? (a) General Warranty Deed (b) Special Warranty Deed (c) Deed of Trust (d) Reconveyance Deed

Correct answer: d A reconveyance deed is an official document from a mortgage holder releasing the debtor from themortgage. It is evidence that the mortgage has been paid in full. The mortgage note is marked paid,the original mortgage is returned and a deed of reconveyance is issued to the homeowner showing the mortgage has been paid off.

93. According to the Truth-in-Lending Act (TILA), the term "refinance" applies to: (a) a reduction in APR. (b) a change in a payment schedule. (c) the renewal of a single payment obligation with no change in the original terms. (d) the satisfaction of an existing obligation and its replacement by a new obligation.

Correct answer: d A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer. A refinancing is a new transaction requiring new disclosures to the consumer. The new finance charge shall include any unearned portion of the old finance charge that is not credited to the existing obligation.

27. What type of mortgage loan would utilize a Certificate of Reasonable Value? (a) Federal Housing Administration (FHA) (b) Rural Housing Service (RHS) (c) Federal Home Loan Mortgage Corporation (FHLMC) (d) U.S. Department of Veterans Affairs (VA)

Correct answer: d Certificate of Reasonable Value (CRV) is a document issued by the Veterans Administration, based on an approved appraisal. It establishes a ceiling on the maximum VA mortgage loan principal. The CRV is an appraisal presented by the Veterans Administration (VA) that shows the current market value of a property.

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

Correct answer: d Deferred interest is the amount of interest added to the principal balance of a loan when the contractual terms of the loan allow for a scheduled payment to be made that is less than the interest due. When a loan's principal balance increases because of deferred interest, it is known as negative amortization.

19. Fannie Mae is the more common name of the: (a) Federal Home Loan Mortgage Corporation. (b) Federal Housing Agency. (c) Federal Housing Finance Agency. (d) Federal National Mortgage Association.

Correct answer: d Fannie Mae, the commonly used nickname for the Federal National Mortgage Association, is a government-sponsored enterprise, or GSE, with the mission of bringing liquidity, stability and affordability to the U.S. housing market. It does this by purchasing mortgages from banks and then selling them, largely through a process called securitizing. Once the mortgages have been purchased, banks are freed up to make more loans.

1. What is the insurance policy placed by a lender, bank or loan servicer on a home when the property owner's own insurance is cancelled, has lapsed or is deemed insufficient and the borrower does not secure a replacement? (a) Hazard insurance (b) Special Flood Hazard Area insurance (c) Mortgagee's insurance (d) Force-Placed insurance force

Correct answer: d Force-Placed insurance is an insurance policy placed by a bank or mortgage servicer on a home whenthe homeowners' own property or flood insurance may have lapsed or where the bank deems thehomeowners' or flood insurance is insufficient. If the policy lapses or is canceled and the borrower does not secure a replacement policy, most mortgages allow the lender to purchase insurance for the home and "force-place" it. These standard provisions allow the lender to protect its financial interest in the property (its collateral) if a disaster occurs.

101. As defined by Regulation Z, these loans are secured by the consumer's principal dwelling with an APR that exceeds the average prime offer rate (APOR) by 1.5 percentage points for a first lien conforming residential mortgage loan. (a) Higher- Cost loans. (b) Section 32 loans. (c) Higher-Rate loans. (d) Higher-Priced loans.

Correct answer: d Higher-Priced Mortgage Loans (HPML) are defined as closed-end residential mortgage loans secured by the consumer's principal dwelling with an APR that exceed the average prime offer rate (APOR) for comparable transactions by the following thresholds:• 1.5 percentage points for a first lien conforming residential mortgage loan (loan amount does not exceed $453,100).• 2.5 percentage points for a first lien jumbo residential mortgage loan (loan amount exceeds $453,100)• 3.5 percentage points for a subordinate lien residential mortgage loan.

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

Correct answer: d If an advertisement contains any one of a list of terms specified in the Act, then that advertisement must also include a number of prescribed disclosures. In other words, the specified terms "trigger" the disclosures.If an advertisement promoting "closed-end credit" contains any of the following triggering terms, three specific disclosures must also be included in the advertisement. The triggering terms are:• The amount of the down payment (expressed either as a percentage or as a dollar amount).Examples: "10% down", "25,000 down", "90% financing"• The amount of any payment (expressed either as a percentage or as a dollar amount). Example: "Monthly payments less than $500"• The number of payments. Example: 60 monthly payments and you're all paid up"• The period of repayment (the total time required to repay). Example: "15 years to pay"• The amount of any finance charge. Example: "Financing costs less than $300"

44. If a loan application is taken over the telephone, the borrower(s) must sign the conducted application: (a) no later than three business days after the day on which the mortgage loan originator completed the borrower's application. (b) no later than the seventh business day before consummation. (c) at the time an application form is conducted or before the borrower pays nonrefundable fee, whichever is earlier. (d) as soon as possible thereafter.

Correct answer: d If the application is taken over the telephone or via the Internet, the borrower(s) must sign the completed application as soon as possible thereafter. However, an electronic signature or facsimile of the borrower's signature is acceptable as indicated in the "Acknowledgment and Agreement" section of the application.

56. A loan applicant does not wish to complete the demographics questions in the Government Monitoring section of the FNMA 1003. Which of the following is the appropriate action to be taken by a RMLO? (a) Decline the application and issue a notification of adverse action (b) Inform the applicant that they must under Federal law disclose the information (c) Honor the applicant's wishes and leave the section blank (d) Complete the section based on a visual observation of the borrower

Correct answer: d In order to monitor compliance with Home Mortgage Disclosure Act covered financial institutions must request and maintain information regarding an applicant's or borrower's:• Ethnicity• Race• Sex.The applicant and joint applicant must be informed that the disclosure of such information is optional and that the information is requested by the federal government for monitoring compliance with federal laws that prohibit discrimination.If the applicant chooses not to supply the requested information during a face to face interview, the mortgage loan originator is required to note, on the HMDA form, the race or national origin and sex of the applicants on the basis of visual observation or surname.

102. A mortgage lender may presume that any residential mortgage loan it makes meets the ability to repay requirement if the loan is a qualified mortgage loan. To be considered a qualified mortgage loan, it must possess all of the following except: (a) it must not permit negative amortization or allow borrower to defer principal. (b) the income and assets relied on to qualify the borrower must be verified and documented. (c) for adjustable rate loan, underwriting based on maximum rate permitted under loan during first 5 years. (d) for which the loan term does not exceed 40 years.

Correct answer: d Lenders can choose to meet this responsibility by originating QMs, which are restricted from havingrisky product features. All three of the CFPB's Qualified Mortgage pathways require meeting basic product feature requirements. Mandatory loan features for a QM include:• Maximum loan term is less than or equal to 30 years.• Must be fully amortizing (i.e., no interest-only or negatively amortizing loans).• Points and fees cannot exceed 3% of the total loan amount (with adjusted thresholds for smaller loans).• Adjustable-rate loans must be underwritten to the maximum rate permitted during the first five years.• Debt-to-Income Ratio limit of 43 percent.

48. Construction loans are typically short term with a maximum of one year and have variable rates that move up and down with the: (a) One Year Constant Maturity Treasury Rate. (b) 11th District Cost of Funds Index. (c) London Interbank Offered Rate. (d) Lender's Prime Rate plus a margin.

Correct answer: d Most construction loans are adjustable rate loans. The interest rate is calculated based on the lender's prime rate plus a margin. For example, if the prime rate is 3.00% and the margin is 1.00%, then the consumer would pay a 4% interest rate (which would adjust as the prime rate changes).

43. Which of the following properties is ineligible for FHA mortgage insurance? (a) Manufactured Housing (b) Row Houses (c) Detached or Semi-Detached Dwellings (d) Vacation Homes.

Correct answer: d PROPERTIES ELIGIBLE FOR FHA PURCHASE TRANSACTIONSFHA's Single-Family programs are limited to one-to four-family Properties that are owner-occupied Principal Residences. FHA insures Mortgages on Real Property secured by:• Detached or Semi-Detached Dwellings• Manufactured Housing• Townhouses or Row Houses• Individual Units within FHA-Approved Condominium ProjectsFHA will not insure Single Family Mortgages secured by:• Commercial Enterprises• Boarding Houses• Hotels, Motels and Condotels• Tourist Houses• Private Clubs• Bed and Breakfast Establishments• Vacation Homes• Fraternity and Sorority houses

10. If the ratios required to qualify a borrower were expressed as 28/36, this would indicate: (a) The borrower's total debt is 28% below their gross monthly income but above 36% of their net monthly income. (b) The income ratio must fall between 28 and 36 percent of their gross monthly take home pay. (c) The housing expense to income ratio must fall between 28 and 36 percent of their gross monthly income. (d) The borrower's monthly PITI must not exceed 28 percent of their gross monthly income (1st ratio) and the sum of the PITI plus long-term debt should not exceed 36% of their gross monthly income (2nd ratio).

Correct answer: d Qualification ratios refer to the percentage of a borrower's income that is taken up by debt obligations. Ratios are used to determine the borrower's capacity to repay the mortgage and, thus, the risk to the lender.Qualification ratios are requirements set by a lender stating what the maximum allowable housingexpense (PITIA) to income ratio (1st ratio 28%), and housing expense plus other long term debt (total debt to income - DTI -)to income ratio ( 2nd ratio 36%) can be in order to qualify for a loan.

103. Which of the following is considered a "federally related mortgage loan" under Regulation X? (a) A one-to-four family structure is located on 50 acres of land (b) A farm loan (c) A loan to purchase a property that includes a gas station and convenience store (d) A loan to purchase a duplex and rehabilitate it into a single-family dwelling

Correct answer: d RESPA is applicable to all federally related mortgage loans. Federally related mortgage loans are defined as loans (other than temporary loans), including refinancings that satisfy the following criteria:First, the loan is secured by a first or subordinate lien on residential real property, located within a state, on which either:• a one-to-four family structure is located or is to be constructed using proceeds of the loan (including individual units of condominiums and cooperatives); or• a manufactured home is located or is to be placed using proceeds of the loan.Second, the loan falls within one of the following categories:• Loans made by a lender, creditor, or dealer;• Loans made with collateral insured by an agency of the federal government; e.g. FloodInsurance.• Loans made in connection with a housing or urban development program administered by an agency of the federal government; e.g. FHA.• Loans made and intended to be sold by the originating lender or creditor to Federal NationalMortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae), or Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) (or its successor); or• Loans that are the subject of a Home-Equity Conversion Mortgage (HECM) or reverse mortgage issued by a lender or creditor subject to the regulation.Transactions exempt from RESPA include loans, which are:• Secured by Parcels of 25 acres or more, whether or not the property is improved.• Used primarily for business, commercial, or agricultural.

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

Correct answer: d Regulation H § 1008.23, defines a "nontraditional mortgage product" as: "...any mortgage product other than a 30-year fixed-rate mortgage". The definition as it appears in the Guidance on Nontraditional Mortgage Product Risks is not as broad. The Guidance offers a more narrow definition of "nontraditional mortgage product" which includes loans that have "interest-only" and "payment option" terms described as "...adjustable-rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative amortization." All FHA loans are considered "nontraditional mortgage product".

94. Your loan applicant does not wish to complete the demographics questions in the Government Monitoring section of the 1003. What should you do? (a) Refuse to take the application. (b) Tell the borrower his/her loan cannot be funded until the information is obtained. (c) Leave the section blank. (d) Complete the section based on a visual observation of the borrower.

Correct answer: d Section X of the loan application, the Information for Government Monitoring, requests demographic information on the loan applicant. The information is voluntary, and the applicant may choose to check a box declining to provide the information. If the applicant chooses not to provide information, the interviewer (typically the originator) must make a best guess in order to provide the information necessary for the lender to be compliant with HMDA.

72. Three weeks into the processing of the loan, the loan originator uncovers that a borrower has under reported her current debt obligations and should refuse to process the loan based on the: (a) TILA RESPA Integrated Disclosures Rule (b) Abusive Acts or Practices Rule (c) Safeguard Rule (d) Ability to Pay Rule

Correct answer: d The Ability-to-Repay Rule, Regulation Z, (12 CFR §1026.43), requires that a creditor make a "reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms."

114. Under the Dodd-Frank Act's suitability standard, if a mortgage applicant is willing to sign up for mortgage loan that is clearly beyond their financial capabilities or knowledge, the RMLO: (a) must provide the applicant clear and conspicuous disclosure of product terms. (b) must provide clear and conspicuous disclosure of mortgage product terms. (c) should steer less-sophisticated borrowers to non-traditional mortgage products. (d) should act in the best interests of the consumer and not offer the product to the borrower.

Correct answer: d The Dodd-Frank Act requires that a lender determine whether each individual borrower is suitablefor a product, even if there is clear and conspicuous disclosure of product terms, and even if the lender concludes that the customer understands the product. Suitability refers to the appropriateness of a mortgage loan's terms for the borrower's specific situation.A suitability standard also prohibit RMLOs from steering less sophisticated borrowers to higher costmortgages than those for which they could otherwise qualify, such as pushing them into risky and complicated subprime loans when they could qualify for prime rates and simpler programs.RMLOs must document that the loan they're putting somebody into really makes sense ... not just that it makes money for the lender or broker.

66. How is the conforming loan limit set each year? (a) The US Treasury Department uses the current housing trend to determine the current values and then adjusts the conforming loan amount for the subsequent year. (b) The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD) and administers various mortgage loan programs, determines which loans cannot exceed the statutory limit and adjusts the loan limits accordingly. (c) Fannie Mae and Freddie Mac determine the loan limits each year from the data collected in HMDA reports from the previous year. (d) The Federal Housing Finance Agency (FHFA) uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Agency (FHFA) to adjust the conforming loan limits for the subsequent year.

Correct answer: d The FHFA, which sets the conforming loan limit on an annual basis, has regulatory oversight to ensure that Fannie Mae and Freddie Mac fulfill their charters and missions of promoting homeownership for lower income and middle-class Americans. FHFA uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey (MIRS) to adjust the conforming loan limits for the subsequent year. To conduct this survey, FHFA asks a sample of mortgage lenders to report the terms and conditions on all single-family, fully amortized, purchase-money, nonfarm loans that they close during the last five business days of the month. The survey provides monthly information on interest rates, loan terms, and house prices by property type, by loan type (fixed- or adjustable-rate), and by lender type, as well as information on 15-year and 30-year fixed-rate loans.

54. A telemarketer can be fined how much for calling an individual who is registered on the National Do Not Call Registry? (a) $11,000 (b) $16,000 (c) $25,000 (d) $41,484

Correct answer: d The Federal Trade Commission fines telemarketing companies up to $41,484 for each call to a member of the do not call list.

116. If a residential mortgage loan originator commits an act of fraud against a federally chartered bank, what is the statute of limitations for federal prosecution? (a) Two years (b) Five years (c) Seven years (d) Ten years

Correct answer: d The Fraud Enforcement and Recovery Act (FERA) was introduced in Congress in February 2009 and signed into law by President Obama on May 20, 2009.FERA strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud. The amendments expand the Department of Justice's authority to prosecute crimes involving mortgage fraud. Convictions for mortgage fraud can carry a 30-year maximum prison sentence or a maximum $1 million fine, or both. Even more significantly, mortgage fraud caseswill now have a 10-year statute of limitations, as opposed to the 5-year statute of limitations.

82. The unique identifier of any person originating residential loan must be clearly shown on all of the following documents except: (a) business cards. (b) company websites. (c) residential mortgage loan application form. (d) Consumer Financial Protection Bureau (CFPB) special information booklet.

Correct answer: d The SAFE Act mandated the establishment of a unique identifier, and the majority of state mortgage licensing laws require mortgage loan originators to include their unique identifier on various documents, including business card, websites and all advertisements.For federally regulated institutions, the loan originator and loan origination company identifiers are required for loan applications on or after July 29, 2011.A loan originator is required to provide the borrower with a copy of HUD's Special Information Booklet entitled: "Your home loan toolkit: A step-by-step guide". However, the loan originator's unique identifier is not required to be on the booklet.

100. The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. The rule does not apply to: (a) Construction-only loans. (b) Loans secured by vacant land. (c) Loan with 25 or more acres. (d) Home-Equity Lines of Credit.

Correct answer: d The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. The rule does not apply to:• Home-Equity Lines of Credit.• Reverse Mortgages.• Mortgages secured by a mobile home or by a dwelling that is not attached to real property.• Loans made by a creditor who makes five or fewer mortgages in a year.• Certain no-interest loans secured by subordinate liens made for the purpose of down payment or similar home buyer assistance, property rehabilitation, energy efficiency, or foreclosure avoidance or prevention.Certain types of loans that are currently subject to TILA but not RESPA are subject to the TILA-RESPA rule's integrated disclosure requirements, including:• Construction-only loans.• Loans secured by vacant land.• Loan with 25 or more acres.

59. Assume a refinance closing is set for Thursday and that all material disclosures and notices are provided to the parties at that time. What is the first day this refinance loan could fund? (a) Friday (b) Saturday (c) Monday (d) Tuesday

Correct answer: d The consumer may exercise the right to rescind until midnight of the 3rd business day: • Following consummation of the transaction, • Delivery of the notice of right to rescind, or • Delivery of all material disclosures, whichever occurs last. Business days are defined by Regulation Z to include all calendar days except Sundays and Federal holidays. Saturday is considered a business day for rescission purposes, regardless of whether the mortgage loan originator's office is open. For Example, if a loan closes on Thursday - (Friday, Saturday and Monday) proceeds of loan disbursed on Tuesday.

92. Regulation Z requires an initial ARM interest rate adjustment notice must be provided to consumers: (a) between 15 and 45 days before the first payment at the adjusted level is due. (b) between 30 and 60 days before the first payment at the adjusted level is due. (c) between 180 and 210 days before the first payment at the adjusted level is due. (d) between 210 and 240 days before the first payment at the adjusted level is due.

Correct answer: d The disclosures required by Regulation Z shall be provided as a separate document from other documents provided by the creditor or servicer. The disclosures shall be provided to consumers at least 210, but no more than 240, days before the first payment at the adjusted level is due. If the first payment at the adjusted level is due within the first 210 days after consummation, the disclosures shall be provided at consummation.

86. When a client's property is being appraised, a loan underwriter may take all of the following actions except: (a) request a second review of the appraisal. (b) ask the appraiser to consider additional property information. (c) ask the appraiser to correct an incidental error on the appraisal. (d) conditioning appraiser compensation on a specific property value or consummation of a loan.

Correct answer: d The following are examples of actions that are considered methods of improperly influencing appraisers:• Communicating to an appraiser that a minimum value for a property is necessary for loan approval.• Indicating to an appraiser that current or future use of his/her services depends on returning a specific property value.• Refusing to use an appraiser's services because he/she has returned property values that do not meet or exceed an expected threshold.• Conditioning appraiser compensation on a specific property value or consummation of a loan.• Withholding compensation from an appraiser for not returning a minimum property value.The requirements of Appraisal Independence shall not be construed as prohibiting a mortgage lender, from asking an appraiser to undertake one or more of the following:• Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support and appraisal.• Provide further detail, substantiation, or explanation for the appraiser's value conclusion.• Correct errors in the appraisal report.• • Obtaining more than one appraisal for a property, provided that there is a policy of selecting the most reliable appraisal versus the one which states the highest value.• Withholding appraiser compensation based on breach of contract or performance of services that are substandard.

91. The CSBS/AARMR Guidance on Nontraditional Mortgage Product Risks defines nontraditional mortgages as which of the following? (a) All Adjustable Rate Mortgage loans (b) Loans products that offer 100% loan-to-value ratios (c) Loans other than conforming and government loans (d) Loan products which allow borrowers to exchange lower initial loan payments for higher payments once the loan has amortized

Correct answer: d The guidance is applicable to non-traditional, alternative or exotic mortgage loans, including:• Interest-only mortgages and• Payment-option adjustable rate mortgages.These products allow borrowers to exchange lower payments during an initial period for higher payments during a later amortization period.

39. You are the loan officer on residential real estate purchase transaction of $345,000. An appraisal on the property supports a value of $360,000. The listing agent on the transaction calls you and asked, "What did the property appraise for?" The loan officer tells the listing agent the property's appraised value is $360,000. Did the loan officer act: (a) Legally/Ethically (b) Illegally/Ethically (c) Legally/Unethically (d) Illegally/Unethically

Correct answer: d The loan officer acted illegally/ unethically. Protecting the privacy of consumer information held by financial institutions is at the heart of the financial privacy provisions of the Gramm-Leach-Bliley Financial Modernization Act of 1999 (GLB Act). The Financial Privacy Rule requires financial institutions to give their consumer or customers privacy notices that explain the financial institution's information collection and sharing practices. The notice applies to the "nonpublic personal information" the lender gathers and discloses about its consumers and customers; in practice, that may be most, or all, of the information a lender has about them. For example, nonpublic personal information could be information that a consumer or customer puts on an application; information about the individual from another source, such as a credit bureau or appraisal report. Giving the appraisal value to the listing agent violates the GLB Act's financial privacy rule.Privacy is a major area of concern when dealing with real estate professionals. Real estate licensees clearly establish an agency relationship with their customers. During the purchase or sale of a property, the real estate licensee is understandably concerned with the status of his/her customer's interest in the transaction. However, it is a violation of the customer's privacy to share personal protected information with the real estate agent. Such information may only be discussed with the borrower directly.If you violate the law, then you have acted unethically as well.

80. What is the most common appraisal approach used in appraising existing single-family housing? (a) Cost approach. (b) Income approach. (c) Fair market value approach. (d) Sales comparison approach.

Correct answer: d The sales comparison approach is a standard part of all appraisal reports and is generally considered the most reliable approach because it is based on verifiable market events. The sales comparison approach is used as the best indicator of value for existing properties.

64. An advantage that brokers do NOT have over lenders when qualifying borrowers is that: (a) in the event of adverse action from one lender, brokers can submit the file to another lender. (b) brokers can offer borrowers "wholesale" rates. (c) brokers can qualify borrowers based on the guidelines of every lender. (d) brokers make money servicing the loans they originate.

Correct answer: d make money servicing loans they originate

31. The regulations implementing the Truth in Lending Act, are known as: (a) Regulation Z (b) Regulation X (c) Regulation C (d) Regulation B

Reg Z

58. Which of the following best describes Annual Percentage Rate? (a) A measure of the cost of consumer credit represented in dollars and cents (b) A percentage expressing the nominal interest rate plus finance charges (c) A percentage of the total interest paid over the life of the loan (d) A dollar figure expressing the loan principal and total interest paid over the life of the loan

orrect answer: b An interest rate, or a nominal interest rate, refers only to the interest charged on a loan, and it does not take any other expenses into account. In contrast, APR is the combination of the nominal interest rate and any other costs or fees involved in procuring the loan. As a result, an APR tends to be higher than a loan's nominal interest rate. This discrepancy tends to confuse borrowers. The following fees are considered finance charges: • Interest. • Points, loan fees, assumption fees, and similar charges. Assumption fees are finance charges only when the assumption occurs and the fee is imposed on the new buyer. The assumption fee is a finance charge in the new buyer's transaction. • Premiums or other charges for any guarantee or insurance protecting the creditor against the consumer's default or other credit loss.