TEST EXAM H

An appraiser who has an ownership interest in a Real Estate company with his wife. Whenever she sells a property and the home will be financed, she tries to get the lender to have him appraise the property. She makes sure the buyer is presented with an Affiliated Business Disclosure stating the ownership interest. This is: -A violation of the Truth in Lending Act -Allowable under the Equal Credit Opportunity Act -Compliant with the Real Estate Settlement Procedures Act -A conflict of interest that while legal should be avoided

*A conflict of interest that while legal should be avoided* Regulation X requires an Affiliated Business Disclosure be presented and signed by the buyer when they are being referred to a settlement service provider when there is more than a 1% ownership in the settlement service provider. This presents a potential conflict of interest and should be avoided.

Jose and Mary wish to purchase a home and want to get pre-approved before they start searching for their property. Jose was a Military Policeman in the Army for 6 years prior to being hired by the Sheriff's Department as a Deputy Sheriff. His gross pay is $1,812.50 every 2 weeks. Mary, his wife, is a Dental Hygienist. She has been employed for 3 years with her current employer and earns $1,463.00 per pay period and gets paid twice a month. They have a new car payment of $328 per month, student loans with payments of $181 per month and credit card payments of $89 per month. They are going to put 20% down. What is the maximum monthly mortgage payment, PITI, they can qualify for? -$2,108.95 -$1,918.86 -$3,061.38 -$1,700.77

*$1,918.86* Jose: $1,812.50 x 26 paychecks = $47,125 per year / 12 months = $3,927.08 per month. Mary: $1,463 x 24 = $35,112 per year / 12 months = 2,926 per month. $3,927.08 + $2,926.00 = $6,853.08 Gross Monthly Qualifying Income. $6,853.08 x .28 (28%) = $1,918.86 PITI

A prospective borrower earns $16.58 per hour and works 40 hours per week. What would their monthly qualifying income be? -$2,587.08 -$2,652.80 -$2,873.86 -$2,783.68

*$2,873.86* $16.58 x 40 hours per week = $663.20 per week x 52 weeks = $34,486.40 / 12 months = $2,873.86 month in qualifying income.

Robert and Shirley are purchasing a home in a flood zone that requires mandatory flood insurance. What is the maximum amount of flood insurance they could insure the property for under FEMA guidelines? -$250,000 -$331,760 -$510,400 -$225,000

*$250,000* The maximum flood insurance policy available through the National Flood Insurance Program is $250,000. If a borrower needs a higher policy limit they must purchase private flood insurance. $331,760 is the FHA Loan Limit for 2020, except in high cost areas and $510,400 is the FNMA/FHLMC loan limit for 2020

When submitting an application to purchase a home, the borrower has made an initial deposit of $7,500. They are applying for a loan of $160,000 on a home with a $200,000 purchase price. How much additional money will they need at the closing for the additional down payment? -$32,500 -$35,000 -$27,500 -$40,000

*$32,500* Sales Price of $200,000 - loan amount of $160,000 = $40,000 down payment - $7,500 initial deposit = $32,500 additional down payment

According to TILA, if the APR varies by more than what tolerance on a fixed rate loan must it be re-disclosed to the borrower? -.125% -.25% -.625% -.750

*.125%* Re-disclosure is required when the Annual Percentage Rate - APR - increases by .125% or more on a fixed rate loan and by .250% on an adjustable rate loan. The most conservative point of re-disclosure is an increase of .125%.

An Registered MLO moves from the bank they were originating for to a Non Depository Lender. Under the 2018 amendment to the SAFE Act, how long is the temporary transitional period for them to comply with the licensing requirements in the state they wish to become licensed in? -120 days -180 days -60 days -90 days

*120 days* The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (S.2155) amended the SAFE Act to allow Registered MLO's moving from a bank to a non bank lender and State Licensed MLO's moving to another state a 120 day transitional period during which they can originate while completing the necessary steps to become licensed.

When applying for a Conforming loan that will be sold to FNMA or FHLMC, which of the following would not be an acceptable down payment amount? -5% -10% -2% -20%

*2%* FNMA/FHLMC do not allow down payments of 2%. The minimum down payment to comply with their core guidelines is 5%

How much must a borrower make as a down payment to not have mortgage insurance and escrow accounts? -20% -10% -5% -15%

*20%* According to FNMA/FHLMC Convention Guidelines, a borrower must make a down payment of 20% to avoid mortgage insurance and have escrow accounts.

Mortgage companies must retain their copies of the Loan Estimates for how long after loan consummation? -5 years -2 years -3 years -7 years

*3 years* According to TRID Guidelines, copies of the Loan Estimate (LE) must be retained for 3 years.

Which of the characteristics listed below would not be considered a nontraditional loan? -Permanent Buydown -30 Year Fixed Rate -20 year fixed rate loan -5/1 Hybrid ARM

*30 Year Fixed Rate* Under the SAFE Act, the only traditional mortgage loan is a 30 year fixed rate loan. All other mortgage loans are nontraditional.

How long after closing on the purchase of a home does the borrower have to move in and occupy the home when they use an FHA mortgage to finance the purchase? -60 days -45 days -15 days -30 days

*60 days* FHA guidelines require the borrower to move in and occupy the home within 60 days of the settlement. The only exception is if the borrower took out a 203K Renovation Loan, they have 6 months t0 complete the repairs and move in.

What is the minimum time frame that a lender can consummate a residential mortgage loan can be in compliance with TILA? -7 Business Days after the borrower has received their initial disclosures -10 Business Day after the borrower receives their Loan Estimate -3 Business Days after receiving conformation their interest rate has been locked -3 Business Days after the borrower has made a Complete Application

*7 Business Days after the borrower has received their initial disclosures* The Mortgage Disclosure Improvement Act (MDIA) amended the Truth in Lending Act (TILA) to require a minimum 7 business day waiting period before a borrower could consummate a covered residential mortgage loan.

According to the Secure and Fair Enforcement (SAFE Act), which of the following is considered a traditional mortgage? -A 1 year adjustable rate loan -A 5/1 Hybrid Adjustable rate loan -A 30 year fixed rate loan -A 15 year fixed rate loan

*A 30 year fixed rate loan* The SAFE Act defines a traditional mortgage as a "30 year fixed rate mortgage". All othe types of mortgage loans are considered Non Traditional.

A home owner is going to payoff their existing first mortgage, a HELOC and some credit cards. Which term best describes this transaction? -A Cash Out Refinance -A moratorium of their payments for six months -A Rate and Term Refinance -A Loan Modification that lowers their interest rate

*A Cash Out Refinance* A rate and term refinance is a new loan that lowers the interest rate or changes the term of their current loan. A loan modification changes the terms of their existing loan. A moratorium allows the borrower to not make payments for a period of time. A cash out refinance is used to pay off existing loans and credit cards.

Which of the following mortgages do not require the borrower make monthly payments after the closing? -A Payment Option ARM -A Shared Appreciation Mortgage -A Home Equity Conversion Mortgage -An Interest Only Home Equity Line of Credit

*A Home Equity Conversion Mortgage* Only the FHA Home Equity Conversion Mortgage (HECM), also known as a Reverse Mortgage, does not require the borrower to pay the interest and or principal on a mortgage loan each month.

A company or individual who, for a fee, that places with wholesale lenders, but does not fund or service such loans is the definition of? -A Portfolio Lender -A Residential Loan Broker -A Mortgage Broker -A Mortgage Banker

*A Mortgage Broker* A Mortgage Broker is company or individual who, for a fee, that places with wholesale lenders, but does not fund or service such loans

According to the Equal Credit Opportunity Act (ECOA) which of the following would not be a protected class? -A borrower who wears glasses -A borrower who is Catholic -A single father with 3 children -A borrower who was born in Cuba

*A borrower who wears glasses* Just because a consumer wears glasses to correct their vision, doesn't make them disabled and even if they were legally blind, discriminating against a consumer with a disability is a violation of the Fair Housing Act.

A prospective loan originator suffered a financial hardship 4 years ago and is concerned that information on their credit report may cause a problem when applying for an MLO license. Which of the following could cause their application to be denied? -A paid collection on a credit card they no longer use -A short sale that occurred on their primary residence 4 years ago -A judgment for unpaid medical expense of $250,000 -A foreclosure on a personally owned property 2 years ago

*A foreclosure on a personally owned property 2 years ago* According to the SAFE Act when considering financial responsibility of the applicant a medical judgement is not considered, a short sale is only a valid reason in the last 3 years. A paid collection account would not cause the application for licensing to be denied. However, the timeline regarding foreclosures on personally owned property is 3 years.

A borrower has approached a lender about refinancing a residential property. According to the Truth In Lending Act (TILA), which of the following information does the lender have to provide to the borrower? -The disclosure for the initial credit will have to be reissued -A new disclosure for the refinancing of credit -No new disclosures are required if a disclosure was provided for the initial credit -A new disclosure for the refinancing credit only if the borrower requests it

*A new disclosure for the refinancing of credit* According to the Truth In Lending Act (TILA) when a borrower makes application to refinance a property they own the lender must provide new disclosures regarding the loan they are applying for.

An MLO tells the account executive from a Title Company that his wife really wants to attend a concert on Valentine's Day with an Internationally acclaimed artist, but he can't afford the tickets. The title rep tells him he just happens to have two tickets for that concert, he just needs to send his next few deals to her for the closings. This would be -A violation of Mortgage Acts and Practices Regulation N -Allowable under Advertising Regulations in TILA -Industry accepted marketing practices -A violation of RESPA regarding kickbacks

*A violation of RESPA regarding kickbacks* Section 8 of RESPA prohibits giving or accepting "a thing of value" in exchange for referrals of settlement service businesses.

All of the following are violations of the Fair Housing Act, EXCEPT? -Disability -Age -National Origin -Religion

*Age* The Fair Housing Act does not allow discrimination based on Race, Color, Religion, National Origin, Sex, Familial Status and Disability. The Equal Credit Opportunity Act bans discrimination based on Age.

Which of the following are typical ways in which mortgage fraud can be committed? -Failing to mention the applicant is taking early retirement in 9 weeks -All are examples of mortgage fraud -Knowingly altering income and asset documentation -The applicant marks Primary Residence on the application but are buying it as an investment

*All are examples of mortgage fraud* These are examples of income, asset and occupancy fraud.

According to the Home Mortgage Disclosure Act (HMDA) which of the terms below must be reported to the Federal Government? -Race of the borrower -All listed answers -Borrower and co-borrowers sex -Co-borrowers ethnicity

*All listed answers* HMDA requires the MLO to make note of these items on the loan application so the Federal Government can ensure mortgage companies are not discriminating against borrowers.

What is the purpose of a Subordination Clause found in a mortgage or deed of trust that is a junior lien? -Does not allow the 1st lien to be assumed by a new buyer -Allows the 2nd lien lender to drop back into a subordinate position if the borrower refinances the senior lien -Provides a mechanism where the current 1st lien cannot be refinanced -Allows Real Estate Taxes to become a junior lien

*Allows the 2nd lien lender to drop back into a subordinate position if the borrower refinances the senior lien* When a borrower wants to refinance a 1st or senior lien (Mortgage or Deed of Trust) and not pay off the 2nd lien, the lender in 2nd position agrees to subordinate and go back into 2nd or junior position,

In order to determine the value of the collateral property, a lender would use which type of estimate of value? -A comparable market analysis -A future value comparison -An appraisal -A brokers price opinion

*An appraisal* An appraisal is done by a licensed, certified experienced appraiser. The other three valuations are usually done by real estate agents

A person who estimates the value of a property, especially a licensed expert qualified to do so by education and experience would best be described as an: -Property Surveyor -Appraiser -Real Property Evaluator -Real Estate Agent

*Appraiser* The term described in the question is the definition of an appraiser.

XYZ Mortgage Company has been notified by their state regulator that they are going to perform an examination of their company. How often may the state regulator review or examine their records? -When the mortgage company files their quarterly Mortgage Call Report -Annually when the company files its Financial Condition Report -When the companies license is up for renewal -As often as necessary in order to carry out the SAFE Act

*As often as necessary in order to carry out the SAFE Act* The SAFE Act grants State Regulatory Authorities the right to review, examine and audit all mortgage companies and MLO's as often as necessary in order to carry out the purposes of the act.

A lender provides a borrower with an initial amortization schedule for Private Mortgage Insurance (PMI) as well as the disclosure's at loan closing for an adjustable-rate mortgage. The lender MUST also provide a written notice stating the: -Lender's right to increase the monthly payment amount for PMI -Borrower's right to cancel PMI -Borrower's right to refuse PMI -Lender's right to extend the time for monthly payments for a PMI

*Borrower's right to cancel PMI* Under the Homeowners Protection Act (HPA) on all loans that have Private Mortgage Insurance (PMI) the borrower must receive a disclosure at closing regarding cancellation of the PMI.

A Property and Casualty Insurance Company sub leases space in their office to a Branch Office of a Mortgage Lender. They charge them a below market rent in exchange for referrals for insurance. Which of the companies has violated RESPA? -Neither the Insurance Company and the Branch Office of the Mortgage Company -Only the Property and Casualty Insurance Company -Both the Insurance Company and the Branch Office of the Mortgage Company -Only the Branch Office of the Mortgage Company

*Both the Insurance Company and the Branch Office of the Mortgage Company* It is a violation of RESPA (Real Estate Settlement and Procedures Act) to offer an inducement for referrals. This would be considered a kickback.

When providing initial disclosures to a borrower, which of the following is not an acceptable method of providing them according to the Real Estate Settlement Procedures Act (RESPA)? -Face to face -Cell phone call -Standard Mail -Electronically

*Cell phone call* Initial Disclosures to a borrower can be delivered 1) Electronically; 2) Face to Face; 3) Standard Mail and 4) Overnight Delivery. They cannot be delivered via a cell phone call.

Which two documents does a Veteran need to provide to the loan originator when applying for a VA loan? Certificate of Occupancy and Discharge Papers (DD-214) Certificate of Eligibility and Discharge Papers (DD-214) Certificate of Eligibility and Notice of Value Discharge Papers (DD-214) and Certificate of Reasonable Value

*Certificate of Eligibility and Discharge Papers (DD-214)* The Notice of Value or Certificate of Reasonable Value are generated by the VA when they review the appraisal. A Certificate of Occupancy is issued by the local Building Department. The Veteran must have their Certificate of Eligibility to show they are eligible for Veterans Benefits and the DD-214, their Discharge papers.

Under the USA Patriot Act, which of the following is NOT obtained by a mortgage broker from a borrower for customer identification purposes? -Passport number -Credit card number -Taxpayer identification number -Alien identification number

*Credit card number* The Patriot Act requires financial institutions to implement Customer Identification Programs (CIPS). A Passport, Permanent Resident Alien Card, Driver's License or Taxpayer identification document are all acceptable forms of documentation that can be used. A Credit Card is not an acceptable form of documentation.

Under the Fair Credit Reporting Act, who is responsible for ensuring that the reporting of consumers' credit standing and reputation protects the consumer's right to privacy? -Consumer credit counseling agencies -Board of Governors of the Federal Reserve System -Credit reporting agencies -Mortgage broker

*Credit reporting agencies* FCRA requires that Credit Reporting Agencies are the parties responsible for the reporting of consumers' credit standing and reputation to protect the consumer's right to privacy.

Which of the following loans include a Residual Income Test to ensure the borrower has cash flow for family support? -Federal Housing Administration (FHA) loans -Federal home Loan Mortgage Corporation (FHLMC) loans -United States Department of Agriculture (USDA) Loans -Department of Veterans Affairs (VA) Loans

*Department of Veterans Affairs (VA) Loans* Only loans guaranteed by the Department of Veterans Affairs require a secondary calculation of Residual Income to ensure the borrower, in this case the veteran, has money to pay their everyday expenses such as fuel and maintenance on their vehicles, groceries, clothes and other items.

In whose name is a loan closed that is "table-funded"? -Mortgage broker licensee -Loan originator -Designated mortgage lender -Independent contractor

*Designated mortgage lender* In a Table Funded transaction the Designated Lender's name is on all the documents, but they have already sold the loan to another lender.

HMDA (Home Mortgage Disclosure Act) data can be used by the public in all of the following ways, EXCEPT? -Determining if enough new construction lending took place -Identifying possible discriminatory lending patterns -Aiding public officials in attracting private investment -Determining if banks are serving their communities

*Determining if enough new construction lending took place* The CFPB collects the demographic information from mortgage lenders to ensure they are not discriminating aganist consumers who apply for residential mortgage loans.

All of the following would be discriminatory violations of the Equal Credit Opportunity Act (ECOA) except: -Receipt of public assistance -Race -Age -Disability

*Disability* Discriminating against a consumer based on a disability is a violation of the Fair Housing Act.

Which of the following duties may not be performed by Joan, an in-house loan processor? -Contacting the co-borrower to ask about verifying their income -Assisting the borrower in providing updated bank statements -Describing the different sections of the loan application -Discussing the advantage of paying a higher interest rate and getting a credit toward closing costs

*Discussing the advantage of paying a higher interest rate and getting a credit toward closing costs* Discussing interest rates and closing costs are duties or origination requiring an MLO license. The other duties are clerical or administrative an do not require a license.

A licensed MLO is taking their initial continuing education course in order to renew their license. They were told they were required to cover certain topics in class. Which of the following topics must be covered? -Nontraditional mortgage products 3 hours -Ethics including fraud and fair lending 2 hours -General Mortgage Knowledge 3 hours -Federal law and regulations 2 hours

*Ethics including fraud and fair lending 2 hours* According to the SAFE Act, all Continuing education classes must cover 3 hours of Federal law and regulations, 2 hours of Ethics including Fraud and fair lending, 2 hours of Nontraditional mortgage products and 1 hour of Electives.

A prospective MLO is taking the pre-licensing course in order to become an MLO. She is told she has to cover certain topics to prepare for the Uniform State Test. Which of the following topics must be covered? -Federal Law and Regulations 2 hours -Ethics, including fraud and fair lending 3 hours -Nontraditional mortgage products 3 hours -Uniform State Test Content 3 hours

*Ethics, including fraud and fair lending 3 hours* According to the SAFE Act, all Pre-Licensing education classes must cover 3 hours of Federal law and regulations, 3 hours of Ethics including fraud and fair lending, 2 hours of Nontraditional mortgage products and 12 hour of Electives.

According to the National Flood Insurance Program, which of the following agencies identifies areas that will require flood insurance? -FEMA -FNMA -FHLMC -FHFA

*FEMA* FEMA - Federal Emergency Management Agency, manages the National Flood Insurance Program (NFIP) and identifies Special Flood Hazard Areas (SHFA) on the Flood Insurance Rate Maps (FIRMS).

Which of the following actions would be prohibited conduct under the SAFE Act? -Advertising a loan program and interest rate that was available -Engaging in fair or and compliant practices -Failing to truthfully account for monies belonging to a 3rd party -To advertise a loan program with the monthly payment and the APR

*Failing to truthfully account for monies belonging to a 3rd party* Failing to truthfully account for monies belonging to a 3rd party such as an appraiser or a credit reporting company would be prohibited conduct.

Which federal agency was created to be the conservator of FNMA and FHLMC as part of the Housing and Recovery Act of 2008? -Federal Home Loan Bank Board -Federal Housing Finance Agency -Federal Deposit Insurance Corporation -Federal Financial Institutions Agency

*Federal Housing Finance Agency* Congress created the Federal Housing finance Agency in 2008 to be the conservator and overseer of FNMA and FHLMC.

A prospective MLO is taking the pre-licensing course in order to become an MLO. He was told he had to cover certain topics to prepare for the Uniform State Test. Which of the following topics must be covered? -Uniform State Test content 3 hours -Ethics including fraud and fair lending 2 hours -Nontraditional mortgage products 3 hours -Federal Law and Regulations 3 hours

*Federal Law and Regulations 3 hours* According to the SAFE Act, all Pre-Licensing education classes must cover 3 hours of Federal law and regulations, 3 hours of Ethics including fraud and fair lending, 2 hours of Nontraditional mortgage products and 12 hour of Electives.

A licensed MLO is taking their initial continuing education course in order to renew their license. They were told they were required to cover certain topics in class. Which of the following topics must be covered? -Ethics, including fraud and fair lending 3 hours -General mortgage knowledge 3 hours -Nontraditional mortgage products 3 hours -Federal law and regulations 3 hours

*Federal law and regulations 3 hours* According to the SAFE Act, all Continuing education classes must cover 3 hours of Federal law and regulations, 2 hours of Ethics including Fraud and fair lending, 2 hours of Nontraditional mortgage products and 1 hour of Electives.

According to the Truth in Lending Act (TILA), which of the following properties would be considered a dwelling? -Apartment Building -Fourplex -Hotel -Mobile Home Park

*Fourplex* The TILA definition of a dwelling is: A residential real property of 1 to 4 units. A fourplex is a 4-unit dwelling.

Under the Fair Credit Reporting Act (FCRA) the term defining what a consumer who suspects they have been a victim of fraud, including identity theft would have placed in their credit report is? -Suspicious Activity Report -Fraud Notification -Credit Freeze -Fraud Alert

*Fraud Alert* Under the FCRA, a consumer would place a Fraud Alert in their credit report when they suspect they have been a victim of fraud, including identity theft

All of the following were concerns of the financial regulatory agencies when they issued their Statement on Subprime Lending, except? -Fully Amortizing Loans -Payment Shock -Responsibility for Taxes and Insurance -Prepayment Penalties

*Fully Amortizing Loans* When the financial regulatory agencies issued their Statement on Subprime Lending they had major concerns that borrowers were not aware of the possible payment shock from increased rates and payments on Subprime Adjustable Rate loans, that almost all of these loans had prepayment penalties and that most of the lenders engaged in Subprime Lending did not escrow funds for the payment of Real Estate Taxes and Insurances.

A mortgage broker runs an advertisement that encourages consumers to contact them to refinance their properties. Which of the following information must he include in his advertisement to be in compliance with the SAFE Act? -His Unique ID number -A Sample loan scenario -The NMLS Consumer Access website information -His email address

*His Unique ID number* In accordance with the SAFE Act, all advertisements must include the MLO's Unique ID number, also called the NMLS number.

Which Act was an amendment to the Truth in Lending Act that for the first time established guidelines for determining whether a loan was a High Cost mortgage loan? -Mortgage Disclosure Improvement Act (MDIA) -Gramm-Leach-Bliley Financial Modernization Act (GLB) -Homeownership and Equity Protection Act (HOEPA) -Homeowners Protection Act

*Homeownership and Equity Protection Act (HOEPA)* The Home Ownership and Equity Protection Act (HOEPA) amended the Truth in Lending Act (TILA) in 1994 and for the first time defined and established guidelines for determining if a residential mortgage loan was High Cost.

If a consumer reporting agency makes an inquiry related to a joint credit account of a borrower and their spouse, which of the following information can be provided under the Equal Credit Opportunity Act (ECOA)? -Information about the borrower and the spouse -Information about the borrower only -Information about the spouse only -Information cannot be provided about the borrower or spouse

*Information about the borrower and the spouse* In accordance with ECOA, when an inquiry is made under joint credit accounts the information can be provided on both the borrower and their spouse.

All of the following are members of the Primary Mortgage Market, EXCEPT? -Mortgage Brokers -Commercial Banks -Insurance Companies -Credit Unions

*Insurance Companies* The primary mortgage market is made up of companies that conduct mortgage origination activities directly with residential mortgage borrowers. Insurance companies primarily originate commercial / non-residential mortgages

All of the following Notes require regular payments of principal and interest except: -Interest Only or Straight Note -Shared Appreciation Note -Partially Amortizing Installment Note -Fully Amortizing Installment Note

*Interest Only or Straight Note* The Interest Only Note, also known as a Straight Note is the only type of loan in the question that does not require the borrower to repay any part of the principal balance each month.

Which of the following statements regarding RESPA (Real Estate Settlement Procedures Act) is correct? -It was implemented to provide the true cost of credit to the borrower -It was implemented to make consumers better shoppers of settlement services -It requires all first time home buyers to receive counseling -It requires the lender to disclose the Annual Percentage Rate to the borrower

*It was implemented to make consumers better shoppers of settlement services* The purpose of RESPA (Real Estate Settlement and Procedures Act was to make borrowers better shoppers of settlement services and to prohibit kickbacks.

Truth in Lending Act (TILA) requires disclosure of: -Credit history of the borrower -Key details of the property on which loan was taken -Key terms of the credit transaction -Number of days to process the loan

*Key terms of the credit transaction* In its most pure form, the Truth in Lending Act requires that the borrower receive disclosures regarding the Key terms of the credit transaction.

When establishing a borrower's ability to repay, which of the following would not be considered as an underwriting factor in a credit decision? -Monthly obligations for utilities -Debts, Alimony or Child support -Current Employment status -Monthly Mortgage Payment

*Monthly obligations for utilities* Under the Dodd-Frank Act, the maximum percentage of the borrowers income that can go toward monthly debt payments is 43%, there is already a factor built in for utilities in the other 57%.

FHA protects lenders from default through which of the following programs? -Down Payment Assistance -Mortgage Guarantee -Private Mortgage Insurance -Mortgage Insurance Premium

*Mortgage Insurance Premium* Mortgage Insurance Premium is the FHA program that protects lenders from a borrowers default. Mortgage guarantees are used by the VA, PMI - Private Mortgage Insurance is used on Conventional loans and Down Payment Assistance Programs assist borrowers with the down payment and closing costs to acquire their home.

A mortgage broker refers clients to a title company providing them with an Affiliated Business Disclosure. The mortgage broker owns 10% of the title company. The title company performs services and pays the mortgage broker a commission. The title company pays the mortgage broker annual dividends based on the amount of business that was referred to the title company. Which of the statements is CORRECT? -Only the title company is in violation of the Real Estate Settlement Procedures Act (RESPA) -Only the mortgage broker is in violation of the Real Estate Settlement Procedures Act (RESPA) -Neither the mortgage broker nor the title company is in violation of the Real Estate Settlement Procedure Act (RESPA) -Both the mortgage broker and the title company are in violation of the Real Estate Procedure Act (RESPA)

*Neither the mortgage broker nor the title company is in violation of the Real Estate Settlement Procedure Act (RESPA)* In compliance with RESPA the borrower was provided an Affiliated Business Disclosure. The Mortgage Broker is an Owner and can legally receive compensation.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, when must the borrower be provided with a copy of their appraisal? -Within 60 days of settlement -Within 90 days of the closing -No later than 3 days prior to settlement -Within 30 days of the closing

*No later than 3 days prior to settlement* The Dodd-Frank Act states that the borrower has a right to receive a copy of the appraisal. This copy must be provided no later than 3 days before closing.

A licensed MLO is taking their annual continuing education course in order to renew their license. They were told they were required to cover certain topics in class. Which of the following topics must be covered? -General mortgage knowledge 3 hours -Nontraditional mortgage products 2 hours -Federal law including fraud and fair lending 2 hours -Ethics including fraud and fair lending 1 hour

*Nontraditional mortgage products 2 hours* According to the SAFE Act, all Continuing education classes must cover 3 hours of Federal law and regulations, 2 hours of Ethics including Fraud and fair lending, 2 hours of Nontraditional mortgage products and 1 hour of Electives.

A prospective MLO is taking the pre-licensing course in order to become licensed. She was told she had to cover certain topics to prepare for the Uniform State Test. Which of the following topics must be covered? -Nontraditional mortgage products 2 hours -Federal Law and Regulations 2 hours -Uniform State Test Content 3 hours -Ethics including fraud and fair lending 4 hours

*Nontraditional mortgage products 2 hours* According to the SAFE Act, all Pre-Licensing education classes must cover 3 hours of Federal law and regulations, 3 hours of Ethics including fraud and fair lending, 2 hours of Nontraditional mortgage products and 12 hour of Electives.

According to the Truth in Lending Act (TILA), which of the following notices by the creditor informs the customers about their rights to cancel a loan? -Good Faith Estimate (GFE) -Affiliated business arrangement disclosure -Servicing disclosure statement -Notice of right to rescind

*Notice of right to rescind* According to the Truth in Lending Act (TILA) the Notice of Right to Rescind is provided to all borrowers when they consummate a loan to refinance their principal residence. If the borrower chooses to rescind the loan they are canceling it.

Which of the following would not be an indicator of predatory lending? -Basing the loan on the value of the property without considering the borrowers income -Offering the borrower enrollment in a bi-weekly payment plan -Charging the borrower fees for non-existent services -Lending the borrower more money than they can repay

*Offering the borrower enrollment in a bi-weekly payment plan* Offering a borrower a bi-weekly repayment plan is a way to pay off their loan faster. The other 3 answers are all examples of Predatory Lending.

A borrower closed a refinance loan on their primary residence on Thursday, July 3rd. Under the rescission provisions of the Truth in Lending Act (TILA), when will the loan fund? -On Monday of the next week, July 7th -On Wednesday of the next week, July 9th -On Tuesday of the next week, July 8th -That day, Thursday July 3rd

*On Wednesday of the next week, July 9th* According to TILA regarding rescission, July 3rd, the day of signing loan documents is day 0. Friday July 4th is a Federal Holiday, Independence Day, so it does not count. Saturday July 5th would be Day 1. You don't count Sunday July 6th, but you do count Monday July 7th as Day 2 and Tuesday July 8th as Day 3. The loan would record and fund on Wednesday July 9th.

While taking a loan application, the MLO says to the borrower "You can lower your interest rate if you pay discount points". How much does a "point" equal" -One percent (1%) of the sales price -One percent (1%) of the tax assessed value -One percent (1%) of the appraised value -One percent (1%) of the loan amount

*One percent (1%) of the loan amount* A discount point is equal to one percent (1%) of the loan amount.

A registered MLO who works for a depository institution must meet all of the following requirements through the NMLS, except? -Undergo a Federal Criminal Background check -Pass the NMLS UST licensing exam -Authorize a credit report to be pulled and uploaded -Submit a set of fingerprints

*Pass the NMLS UST licensing exam* Registered loan originators are not required to pass the NMLS UST licensing exam.

Which one of the following is not a requirement for a loan to be considered a Qualified Mortgage? -No Documentation loans are not eligible -Prepayment penalties are generally prohibited -Debt to Income Ratios are less than or equal to 43% -Points and fees are less than 5% of the total loan amount

*Points and fees are less than 5% of the total loan amount* According to the Dodd-Frank Act, the total points and fees to originate a Qualified Mortgage cannot exceed 3%.

Refusing to make a mortgage loan to a borrower in a neighborhood based on protected classes under Title VIII of the Civil Rights Act of 1968 also known as the Fair Housing Act would be what type of violation? -Steering -Channeling -Blockbusting -Redlining

*Redlining* When a lender determines a geographic area where they will not lend based on the Race, Color, Religion or National Origin of a borrower they have Redlined the area based on protected classes.

Under Regulation B, the Equal Credit Opportunity Act, a lender must consider the adequacy and stability of a borrower's income and is not allowed to consider which of the following? -Reliable income from part time income -Reliable income from Social Security -Reliable cash income not declared -Reliable public assistance income

*Reliable cash income not declared* Cash income not declared that can not be verified cannot be used to qualify the borrower for a loan.

All of the following activities require a Mortgage Loan Originators license except? -Advising a potential borrower on the differences between an FHA or Conventional loan -Offering or negotiating loan terms with a consumer -Reviewing the loan application and issuing a credit approval pending an appraisal of the property -Acting as a contract loan processor with several different companies

*Reviewing the loan application and issuing a credit approval pending an appraisal of the property* Reviewing a loan and issuing a credit approval is an administrative task performed by an underwriter. This does not require an MLO license. The other activities require an MLO license.

An MLO works for XYZ Mortgage Lenders. The company is currently undergoing an audit by the Consumer Financial Protection Bureau based on complaints by consumers. Which of the following penalties can they not assess? -Fine XYZ Mortgage Lenders $25,000 for violating the SAFE Act -Sentence the MLO to prison for violating the SAFE Act -Asses the MLO for his portion of the costs of the examination -Fine XYZ Mortgage for violating the Truth in Lending Act

*Sentence the MLO to prison for violating the SAFE Act* The CFPB can only assess fines and administrative disciplinary measures. They cannot sentence someone to prison.

According to RESPA, which of the following charges can have a cumulative 10% variance between the amount disclosed on the initial Loan Estimate and the amount the borrower pays at settlement? -Services you can shop for -Services you cannot shop for -Origination Charges -The credit or charge for the specific interest rate chosen

*Services you can shop for* Section C of the Loan Estimate is where the Services the borrower can shop for are listed

A mortgage loan originator works for a Mortgage Broker that does not originate FHA loans. She has a borrower who wants an FHA loan. Which of the following is correct? -She can refer the loan to a friend of hers at a Mortgage Lender and receive a referral fee -She can originate the loan and place it with a non-conforming investor. -She can refer the borrower to another mortgage company and not receive a referral fee -She can complete a referral agreement informing all parties that she will receive a fee.

*She can refer the borrower to another mortgage company and not receive a referral fee* The Federal Housing Administration does not allow referral fees to be paid on any FHA Insured loan.

Which of the following is not a requirement to comply with the Fair Housing Act advertising provisions? -Display the Equal Housing Opportunity logo on all oriented material -Display the Equal Housing Opportunity poster in the office where mortgage loans are originated -Submit the advertising materials to the CFPB prior to publication or broadcast -Include the saying 'Equal Housing Lender' in a broadcast advertisement

*Submit the advertising materials to the CFPB prior to publication or broadcast* Mortgage companies and MLO's do not have to submit their advertising materials to the CFPB (Consumer Financial Protection Bureau) for approval. That compliance is performed at the company level.

When advertising for borrowers, ABC Mortgage stated the following in their ad "We have interest rates as low as 2.875%!". What else must be disclosed in the ad? -The Annual Percentage Rate -The Fully Indexed Rate -The Teaser Rate -The Nominal Percentage Rate

*The Annual Percentage Rate* In accordance with the Truth in Lending Act (TILA) when advertising specific terms of a loan, the Annual Percentage Rate (APR) must be disclosed

When advertising for borrowers, ABC Mortgage stated the following in their ad "We have interest rates as low as 2.875%!". What else must be disclosed in the ad? -The Teaser Rate -The Nominal Percentage Rate -The Annual Percentage Rate -The Fully Indexed Rate

*The Annual Percentage Rate.* In accordance with the Truth in Lending Act (TILA) when advertising specific terms of a loan, the Annual Percentage Rate (APR) must be disclosed.

A borrower uses two mortgages that close simultaneously to purchase a home. A Conventional FNMA mortgage for 80% LTV and a HELOC (Home Equity Line of Credit) for 10% LTV to avoid PMI. Which loan receives priority in lien position? -They are both in first lien position -The HELOC is in first lien position -The FNMA loan is in 2nd lien position -The FNMA loan is in first position

*The FNMA loan is in first position* FNMA guidelines require that when a borrower has a 1st and 2nd lien in the same purchase transaction that the FNMA loan must be in 1st lien position.

Which of the following would not be true in regards to an MLO renewing their license? -The state issued MLO license is an annual license -The MLO must supply a current credit report each year when renewing their license -The MLO must get a new set of fingerprints each year when renewing their license -The MLO must undergo a Federal Criminal Background check each year when renewing their license

*The MLO must get a new set of fingerprints each year when renewing their license* To comply with the SAFE Act requirements for renewal on an annual basis MLO's must provide an updated credit report and undergo a Federal Criminal Background Check. They must update their Fingerprints every 3 years because the FBI will not use a set of fingerprints that are more than 3 years old when conducting a Federal Criminal Background Check.

A borrower makes an application with a mortgage broker for a residential mortgage loan. They have provided all the information required except the address of the property. The borrower requests a Loan Estimate. Which of the following is correct in regards to the request? -The Mortgage Broker may provide the Loan Estimate, but does not have to -The Mortgage Broker can charge an Administrative Fee for providing the Loan Estimate -The Mortgage Broker can charge additional discount points for providing the Loan Estimate -The borrower has 7 business days to shop around with other mortgage brokers

*The Mortgage Broker may provide the Loan Estimate, but does not have to* Under the TRID guidelines the Mortgage Broker does not have to provide the Loan Estimate because the borrower did not submit a complete application. If borrower provides the Address, Loan Amount, their Income, Estimated Value of the Property, their Name and Social Security Number, then a Loan Estimate must be provided.

According to the Real Estate Settlement Procedures Act (RESPA), which of the following relationships between a lender and a settlement service provider does NOT require disclosures on the Loan Estimate (LE)? -The lender and the provider are both subsidiaries of the same holding company -The Settlement Service Provider is an affiliate of the lender -The Lender has greater than a 1% ownership interest in the Settlement Service Provider -The Settlement Service Provider has an outstanding loan with the lender

*The Settlement Service Provider has an outstanding loan with the lender* Under RESPA, if Settlement Service Provider has an outstanding loan with the lender, that would not have to be disclosed. The other three answers would trigger the need for a disclosure.

Unfair and deceptive practices, according to the CFPB would include all of the following, EXCEPT? -The act is likely to cause substantial monetary harm to consumers -The injury is not reasonably avoided by consumers -The misleading representation, omission or act is material -The act is not likely to cause substantial injury to the consumer

*The act is not likely to cause substantial injury to the consumer* Any act by a Mortgage Lender, Broker or MLO that would cause substantial injury to the consumer is considered an unfair and deceptive practice.

A mortgage broker has advertised "$1200 down" for a house in a local newspaper. According to the Truth In Lending Act (TILA), which of the following information must be disclosed in the same advertisement? -The annual property taxes -The location of the house -The annual percentage rate -The total area of the house

*The annual percentage rate* To comply with the advertising provisions of the Truth in Lending Act (TILA) when a "Triggering Term" is used, which is a specific term of the loan being advertised, the Annual Percentage Rate (APR) must also be disclosed.

When utilizing a 2-1 Temporary Buydown to lower the interest rate on an FHA mortgage loan, which of the following answers is incorrect? -The borrower is qualified at the note rate -Seller or builder can pay the discount points to buydown the rate -The rate cannot be more than 2% below the note rate -The borrower qualifies at the buydown rate

*The borrower qualifies at the buydown rate* On 2-1 Temporary Buydown mortgage loans the borrower is qualified at the note rate, not the discounted buydown rate.

Which statement is true regarding the effect a Temporary Buydown plan can have on a borrower's payments? -The payment gradually decreases giving the buyer more leverage. -The borrower starts out with a higher interest rate and payment during the first few years -The borrower starts out with a lower interest rate and payment during the first few years -The seller cannot pay for the buydown because they are an interested party.

*The borrower starts out with a lower interest rate and payment during the first few years* A Temporary Buydown gives the borrower a interest rate and payment for the first few years of the loan.

According to the Truth in Lending Act (TILA) the definition of a finance charge is? -Fees charged to to cover the lenders administrative costs -Costs for prepaid interest and insurances paid at closing -The prepayment of interest at the closing to lower the note rate -The cost of consumer credit as a dollar amount.

*The cost of consumer credit as a dollar amount.* The TILA definition of a finance charge is: The cost of consumer credit as a dollar amount.

The Alienation Clause in a mortgage is also known as: -The subordination clause -The occupancy clause -The due on sale clause -The prepayment penalty clause

*The due on sale clause* The Alienation Clause requires the borrower to pay off the mortgage loan when they sell their home. Hence, "Due on Sale".

Which of the following is true regarding an FHA Reverse Mortgage (HECM)? -All borrowers must be at least 64 years of age -The home used as collateral must be a primary residence -The borrower's heirs must repay any deficiency the loan after their death -The proceeds can only be received as a stream of monthly payments

*The home used as collateral must be a primary residence* Any FHA Insured Reverse Mortgage, known as a Home Equity Conversion Mortgage (HECM) on a primary residence, also called an owner occupied home.

A homeowner's equity position reaches 20% of the original value of the property. Which of the following statements is true pertaining to the cancellation of the Private Mortgage Insurance (PMI)? -The PMI gets automatically cancelled after 30 days -The homeowner can request cancellation of the PMI -The PMI gets cancelled 20 days after the request is submitted -The lender must automatically cancel the PMI

*The homeowner can request cancellation of the PMI* According to the Homeowners Protection Act, when the borrowers equity position reaches 20% (80% LTV) of the original value of the home they can request the lender drop the PMI coverage. At 22% equity position (78% LTV) the lender must automatically cancel the PMI.

When a borrower is charged discount points, which answer best describes the benefit to the borrower? -The lender decreases the interest rate over the life of the loan -The lender increases the interest rate and gives the borrower a credit toward their closing costs -This is a way for the mortgage broker to earn more compensation on the loan -The seller is contributing a percentage of the sales price towards the borrowers closing costs

*The lender decreases the interest rate over the life of the loan* The discount points are considered prepaid interest. The advance payment at the closing is why the lender discounts (lowers) the note rate on the loan.

A mortgage lender runs an advertisement that encourages consumers to contact them to refinance their properties. Which of the following information must he include in his advertisement? -The email address and phone number for HUD -The NMLS Consumer Access website Information on how to contact the CFPB -The lenders Unique ID number and contact information -A sample loan scenario

*The lenders Unique ID number and contact information* To comply with the advertising provisions of the SAFE Act, a Mortgage Lender must include their Unique ID number and contact information in all advertisements.

Which of the following is not a feature of a USDA Section 502 loan? -The borrower can earn up to 115% of the Area Median Income -The loans can be made anywhere in the continental United States -Borrower must pay a 1% guarantee fee at closing -Borrowers can receive up to 100% financing with mortgage insurance

*The loans can be made anywhere in the continental United States* USDA loans are available in Rural and Under served areas. The other three answers are features of the USDA Rural Development Program.

When an ARM (Adjustable Rate Mortgage) has rate caps of 5/2/6, the 6 refers to what? -the start rate for the loan -The maximum rate increase at the initial adjustment -The maximum the rate can increase over the life of the loan -The rate maximum the rate can decrease over the life of the loan

*The maximum the rate can increase over the life of the loan* Rate caps protect the borrower from the interest rate increasing too quickly. The first number, 5, refers to the maximum increase at the initial rate change,. The second number, 2, refers to the maximum the rate can increase or decrease at each annual change after the initial rate change. The third number, 6, refers to the maximum the rate can increase over the life of the loan.

Which of the following would not be considered fraud for property by a borrower? -To avoid foreclosure the owners, who are in default of their mortgage, commit arson -The borrowers buy a house across the street, move in and then stop paying the mortgage on their previous residence -In a short sale, the owner sells the property to a relative with a different last name, not informing the lender -The owner does not accept the first cash offer after their lender agrees to a short sale

*The owner does not accept the first cash offer after their lender agrees to a short sale* Arson, Short Sale Fraud and Buy and Bail are all considered various forms of mortgage fraud.

A lender has advertised "7.25% APR" in a newspaper advertisement. Which of the following information must be provided in the same advertising? -No financial information is required -The repayment period for the loan -The finance charge for the loan -Last date for the offer at the same rate

*The repayment period for the loan* To comply with the Truth in Lending Act (TILA) if a lender or mortgage broker advertises an Annual Percentage Rate (APR) they must also disclose the loan term, i.e. "30 year loan".

Which of the following would not be a Red Flag of Mortgage Fraud? -The seller requires the buyer to use their title company and pays the buyer's title insurance -The sale of the home is subject to the seller acquiring title to the property -The seller is paying the buyer $50,000 outside the closing to buy the home -Showing the lender a Loan Estimate with a higher sales price than the buyer is paying

*The seller requires the buyer to use their title company and pays the buyer's title insurance* The use of a specific title company to close a transaction is negotiable between the seller and the buyer. The other answers are examples of potential mortgage fraud.

The Mortgage Disclosure Improvement Act, also known as the 3-7-3 Rule, amended the Truth-in-Lending Act (TILA), to require that any change to the Annual Percentage Rate (APR) outside of acceptable tolerances be disclosed to the borrower no later than: -Three business days prior to consummation -Ten business days after the Loan Estimate is received by the borrower -Three calendar days after locking in the interest rate -Seven business days after the borrower receives their initial disclosures

*Three business days prior to consummation* According to the MDIA, the 3-7-3 rule, initial disclosures must be made within 3 business days of a complete application, loans cannot be consummated earlier than 7 business days after the borrower receives initial disclosures and any change to the APR outside acceptable tolerances must be re-disclosed to the borrower no later than 3 business day prior to the closing.

Which of the following actions would not be prohibited conduct under the Truth in Lending Act? -Advertising a loan program that was not available -Advertise an Adjustable Rate loan as a Fixed Rate loan -To advertise a loan program and include the APR -Engage in unfair or deceptive practices

*To advertise a loan program and include the APR* When you advertise a loan program such as a 30 year loan, you must disclose the APR. All other answers are violations of the Truth in lending Act.

Both Fannie Mae (FNMA) Desktop Underwriter (DU) and Freddie Mac (FHLMC) Loan Product Advisor (LPA) are Automated Underwriting Systems. All of the following are reasons why they were developed, except? -To ensure fewer loans would be approved -To ensure borrowers were not discriminated against -To reduce the cost of analyzing loan applications -To speed up mortgage approvals

*To ensure fewer loans would be approved* The Automated Underwriting Systems, DU and LPA were created to reduce the cost of analyzing applications, prevent discrimination and speed up mortgage approvals

ABC Mortgage Lenders is an approved FNMA/FHLMC Seller Servicer and a GNMA Issuer. How often must they file their Expanded Mortgage Call Reports? -Within 30 days of the end of the calendar quarter -Within 45 days of the end of the calendar year -Within 45 days of the end of their fiscal year -Within 45 days of the end of each calendar quarter

*Within 45 days of the end of each calendar quarter* The SAFE Act requires all mortgage companies to file their required call report within 45 days of the end of the calendar quarter.