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Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice? Information on the credit reporting agency if the adverse action is based on his credit report Reasons for the denial of credit His credit score A referral to another potential creditor
The answer is a referral to another potential creditor. An adverse action notice contains a statement of the action taken; a prescribed ECOA Notice regarding the prohibition of discrimination; the name and address of the federal agency that administers compliance with respect to the loan originator; a statement of the specific reasons for the adverse action or a disclosure of the applicant's right to be given such a statement and the identity of the persons or office from which the statement may be obtained; and, if a credit score is used, the actual numerical credit score, the range of credit scores possible under the model used, all key factors that adversely affected the credit score, the date of the credit score, and the name of the entity that created the score or the credit file upon which the score was based.
The right to rescind a loan applies to which one of the following transactions? A transaction for a home equity line of credit secured by a principal residence A transaction involving a loan to purchase a principal residence A refinancing of credit with the same creditor that made the loan being refinanced A transaction for the refinance of a loan that is secured by a vacation home
The answer is a transaction for a home equity line of credit secured by a principal residence. The right to rescind a loan applies to a transaction for a home equity line of credit secured by a principal residence.
When a fixed-rate qualified mortgage includes a prepayment penalty, that penalty may not be charged: Until after the first three years of the loan term have passed After the first three years of the loan term Until there are three years left in the loan term Prepayment penalties may not be charged on fixed-rate qualified mortgages
The answer is after the first three years of the loan term. When a fixed-rate qualified mortgage includes a prepayment penalty, the penalty may not be charged after the first three years of the loan term.
An advertisement placed by Buster Posey contains a trigger term. As required, Buster has also provided the required additional disclosures. These include all of the following, except the: Amount or percentage of the down payment Terms of repayment Annual percentage rate Amount of the finance charge
The answer is amount of the finance charge. Additional disclosures required in an ad containing a trigger term include the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. The amount of the finance charge is a trigger term, not a required additional disclosure.
Which of the following is not an example of an FHA loan product? Conforming mortgage loan Cash-out refinance Home equity conversion mortgage Streamline refinance
The answer is conforming mortgage loan. Cash-out refinances, home equity conversion mortgages, and streamline refinances are all examples of FHA loan products.
Title insurance is required for all loans by the: Borrower's attorney Lender Lender's title company Borrower
The answer is lender. Title insurance provides coverage for undisclosed liens or other title defects that may not turn up on a title search and is required by the lender. Lender's insurance is mandatory for loan approval, but owner's insurance is voluntary.
All of the following are true of a loan origination fee, EXCEPT: May be adjusted based on terms of the loan May be charged by a mortgage broker or a lender May be paid at closing Covers the administrative costs of making the mortgage
The answer is may be adjusted based on terms of the loan. A loan origination fee is a charge by a mortgage broker or lender to cover the administrative costs of making the mortgage. It is paid at closing and varies by lender. The origination fee may NOT be based on loan terms as per the Loan Originator Compensation Rule.
Advantages of VA loans include all of the following, except: 100% financing More lenient underwriting requirements No closing costs No prepayment penalties
The answer is no closing costs. Advantages of VA loans include 100% financing, more lenient underwriting requirements, and no prepayment penalties.
The Gramm-Leach-Bliley Act requires that a consumer be given an Initial Privacy Notice: Only if nonpublic personal information is intended to be shared with nonaffiliated third parties Within three days of application Within 30 days of application After information has been shared with an affiliated or nonaffiliated party
The answer is only if nonpublic personal information is intended to be shared with nonaffiliated third parties. Financial institutions are only required to provide an Initial Privacy Notice to consumers if they intend to share their information.
Which of the following statements regarding the calculation of finance charges is not true? Premiums for optional insurance products are always included Premiums for optional insurance products are not included if the creditor discloses that coverage is optional and does not extend through the full loan term Reasonable charges for title insurance that do not result in direct or indirect compensation for the creditor are not included Charges paid to a title insurer that is not affiliated with the creditor are not included
The answer is premiums for optional insurance products are always included. Charges that result in compensation for creditors and affiliates are included in finance charges, but when required disclosures are provided, charges for optional insurance products are not.
The conclusive presumption of compliance applies to: Subprime loans that meet the qualified mortgage standards Prime and subprime loans that meet the qualified mortgage standards Prime loans that meet the qualified mortgage standards Fixed-rate prime loans that do not meet the qualified mortgage standards
The answer is prime loans that meet the qualified mortgage standards. The conclusive presumption of compliance applies to prime loans that meet the qualified mortgage standards.
The types of high-cost mortgages that may be subject to HOEPA include all of the following, except: Refinances Reverse mortgages Home equity lines of credit Loans to purchase a home
The answer is reverse mortgages. The Dodd-Frank Act broadened the scope of HOEPA to cover almost all mortgage types, except for reverse mortgages.
In what area of the Loan Estimate would a borrower be able to see if their loan has a balloon payment? The "Projected Payments" table The "Comparisons" table The "Loan Terms" section This is not listed on the Loan Estimate
The answer is the "Loan Terms" section. The Loan Terms section on page 1 of the Loan Estimate includes, among other things, an indication of whether the loan includes a prepayment penalty or a balloon payment.
Payments for non-qualified mortgages must be based on: The maximum interest rate that will apply over the life of the loan The maximum interest rate that will apply during the first five years after the date of the first payment The fully-indexed rate The introductory rate
The answer is the fully-indexed rate. Payments for non-qualified mortgages must be based on the fully-indexed rate.
An escrow account analysis has been completed on Mary Thompson's loan. It is discovered that there is a $40 overage in her account. How many days does the servicer have to return the money? There is no refund The servicer would not return the money; it would be applied toward the principal amount The servicer has 30 days from completion of the analysis to return the overage Ms. Thompson must be refunded within 90 days
The answer is there is no refund. RESPA requires a refund if an escrow analysis uncovers an overage of greater than $50. Smaller overages are applied to the next year's escrow payments; anything above $50 is then required to be refunded within 30 days.
Why might a borrower take a piggyback loan? To avoid MIP To get a lower rate on his or her first mortgage To shorten the term of his or her first mortgage To limit the cash necessary to bring to the table
The answer is to limit the cash necessary to bring to the table. A borrower may take on a piggyback loan to avoid mortgage insurance, but not "MIP," because that is required for FHA loans. Of the answers given, the best is to limit the cash necessary to bring to the table.
All of the following methods can be used by an originator to detect fraudulent documents, except: Verifying that the purchase price is not greater than the average for the area Check paystubs for watermarks or fraud prevention patterns Track chain of custody of all verifications Compare earnings claims to public databases for industry and region
The answer is verifying that the purchase price is not greater than the average for the area. A purchase price that is slightly higher than the average area is not, in and of itself, an indicator of a fraudulent transaction. There are a number of reasons for a higher purchase price, such as property features, age, improvements, and more.
The general acceptable front-end housing ratio for a USDA loan is: 29% 28% 31% Front-end ratios are not considered for USDA loans
The answer is 29%. USDA loans use a front-end ratio of 29%.
A 7 / 1 ARM has a start rate of 4%, an initial cap of 3%, and a periodic cap of 1%. The lifetime cap is 8%. The margin is set at 4%, and the current index value has risen in the last month to 9.25%. The loan closed four years ago. What is the current rate? 7% 4% 8% 12%
The answer is 4%. This ARM has a start rate of 4.00%, and is locked for the first seven years. The question specifies that the loan is entering into its fifth year. The rate would still be 4.00% until at least the start of the eighth year.
Two brothers, Tom and Jim, purchase homes on the same block where they grew up. They knew the sellers, having grown up on the block, and both obtain $200,000 loans to purchase their new homes. Jim chose a "traditional" loan - 30-year fixed, while Tom would rather pay his loan off more quickly. He decided on a 15-year mortgage. Which of the two will pay more principal? Both Jim and Tom will pay the same amount of principal Jim Tom It depends on their rates
The answer is Both Jim and Tom will pay the same amount of principal. Both brothers will pay the same amount in principal, though Jim will pay much more in interest over the longer term.
Which of the following is not involved in the bundling of mortgages for sale in the secondary market? FHA FNMA Private-label investors FHLMC
The answer is FHA. The secondary market includes GSEs, such as Fannie Mae and Freddie Mac (FNMA and FHLMC), as well as private financial institutions, also known as private-label investors.
Which of the following is true regarding ATR standards for consideration of borrower repayment ability? General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 60% General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 40% General ATR standards require a consideration of DTI ratio and residual income; residual income must equal at least the monthly loan payment amount, plus 5%
The answer is General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income. General ATR standards require a consideration of DTI ratio and residual income. However, there is no DTI ratio threshold or minimum required residual income.
Housing counselors must generally be approved by: The CFPB The Office of Financial Education HUD The NMLS
The answer is HUD. Housing counselors must generally be approved by HUD.
Income derived from a rental property would be entered in which section of the URLA? Employment Information Assets and Liabilities Monthly Income and Combined Housing Expense Information Borrower Information
The answer is Monthly Income and Combined Housing Expense Information. Income derived from a rental property would be entered into the "Monthly Income and Combined Housing Expense Information" section of the URLA.
The CHARM Booklet is an educational disclosure required by which piece of federal legislation? RESPA Regulation B TILA FACTA
The answer is TILA. The Consumer Handbook on Adjustable Rate Mortgages (CHARM) is one of a number of disclosures required by the Truth in Lending Act (TILA) to be provided to any consumer interested in an ARM product.
