Mortgage Loan Exam
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 (b) $1,990 (c) $1,837 (d) $1,960
What is the minimum number of comps required by most secondary lenders to ensure an accurate estimate of value when performing the sales comparison approach?
(a) 2 (b) 3** (c) 4 (d) 5
A lender has how many days to notify the borrower of an underwriting decision?
(a) 3 (b) 10 (c) 30**** (d) 60
3. After a loan closing, funds are disbursed. When are the funds disbursed for an owner-occupied, residential refinance?
(a) After the three business-day rescission period
A subordination clause in a mortgage:
(a) Allows a debt or claim which has priority to take second position behind another debt, particularly a new loan. This would be found in a second mortgage or a home equity loan. A subordination clause allows a lender to move or take a lower lien position.
An instrument that pledges real property to secure repayment of a debt is known as:
(a) An easement. (b) A mortgage.** (c) A promissory note. (d) A restrictive covenant.
Under Regulation Z, the term used to identify only the interest charged on a loan, and not any other expenses into account is:
(a) Annual Percentage Rate. (b) Nominal Interest Rate.***** (c) Compound Interest Rate. (d) Simple Interest Rate.
Who must receive a Notice of Right to Rescind in a refinance transaction?
(a) Anyone with ownership interest in the property
NMLS&R is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS&R:
(a) By 50 state agencies. (b) By Federal banking agencies only. (c) By State banking agencies only. (d) By 63 state or territorial governmental agencies***. 93. What is the minimum number of comps required by most s
Which item is NOT included in the calculation that determines the annual percentage rate?
(d) The title insurance premium Not included in APR: Title fee, attorney, notary, document prep, home inspection fee, recording fee, transfer fee, credit report, appraisal fee.
A Chapter 7 bankruptcy could show on a credit report for a maximum of
10 yrs
VA loans allow for a maximum LTV of what percent?
100%
A borrower is buying a house for $180,000. He provides a down payment of $40,000. If he pays three discount points, what is the total cost of the points?
180,000 X .03 = 5400 40,000 X .03=1200 =4,200 Discount points lower your interest rate in exchange for paying an upfront fee
Fannie Mae's conforming guidelines permit, for the purposes of qualification, non-taxable income such as social security and disability benefits to be grossed up by:
25%
What is the required down payment on a Rural Development loan?
3.5%
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:
30 year fixed rate mortgages
John has purchased a home for a sales price of $300,000. He has been approved for a mortgage with an 85% LTV and a loan amount of $255,000. What is the maximum amount the real estate agent may contribute toward the borrower's settlement costs per FNMA guidelines?
300,000 X .06% = 18,000
Qualifying income ratio guidelines on an FHA loan are:
31% housing ratio and 43% total debt ratio.
An applicant for a mortgage loan is a salaried employee who is paid $1,350 every two weeks. In addition, she indicates that she receives $500 a month in alimony. What is the gross monthly income you can use to qualify her?
3425
An individual, wishing to re-obtain their MLO license that failed to maintain a valid license for a period of ___ or longer, shall retake the test.
5 yrs
A buyer makes an offer of $156,000 on a house that was appraised for $162,000. If the seller accepts his offer, what is the minimum down payment required from the buyer for an FHA loan?
5460 .965X156,000= 150,540 156,000- 150,540 = 5460
A borrower obtains a 2/1 buy down on a 30-year fixed rate conforming conventional mortgage loan. The note rate is 10.00%. What interest payment rate will the borrower pay in the second year of the mortgage loan?
9%
What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales price is $155,000?
90% $139,000 divided by $155,000 = .90% LA divided by SP or AV whichever is less
What clause gives a lender the right to declare the entire loan balance due immediately because of borrower default or for violation of other contract provisions?
Acceleration clause
Which is NOT a protected class according to the federal Fair Housing Act?
Age is not protected against FHA
The definition of "business day" for providing a Closing Disclosure in the TRID regulations is:
All calendar days except Sundays and legal holidays
What is the name of the independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers?
Appraisal Management Company
The mortgagor is known as the:
Borrower
As the lender looks over the borrower's loan application and is deciding whether or not to make the loan, the lender should not refuse to consider the:
Borrower's receipt of public assistance.
A borrower closed a loan last week with Metropolis Mortgage Company. The consumer's name is on the National Do Not Call Registry and on Metropolis Mortgage Company's internal do not call list. Metropolis Mortgage Company:
Can call her for up to 3 months because they have an established business relationship.
What is the name of the document issued by the Veterans Administration that establishes the maximum value of the property?
Certificate of Reasonable Value -
Benefits of a Section 502 Guaranteed Rural Housing Loan include all of the following characteristics except?
D. The up-front mortgage
Which of the following fees is not considered a prepaid finance charge and is not included in the APR calculation under Regulation Z?
Discount Points Mortgage Insurance Premiums Tax Service Fee Point Fees Paid by Seller****
When taking an application for a mortgage loan, what are creditors not permitted to ask?
Do you receive child support?
The term "qualified mortgage" was first used within the text of the:
Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under which federal legislation does the consumer have the right to receive a copy of the appraisal report on a dwelling that is to be used as collateral for a loan?
ECOA
Which of the following, as defined by the SAFE Act, is a Federal Banking Agency?
FDIC
Where do the funds for FHA loans come from?
Federal Housing Administration Knowns as FHA - Insures mortgages on single family and multifamily homes including manufactured homes.
Under what Federal Law can convictions for mortgage fraud carry a 30-year maximum prison sentence or a maximum $1 million dollar fine, or both?
Fraud Enforcement and Recovery Act
An applicant for a mortgage has recurring monthly debt of $425 and a gross monthly income of $3,850. For a conforming loan, what is the maximum house payment—including principal, interest, taxes, and insurance—for which she qualifies?
GMI 3850 X 36% = 1386 - 425 = $961
Which of the following is NOT included as a protected class by the Equal Credit Opportunity Act?
Gender
A loan originator refers her customer to XYZ Title Company, which is owned by her family. According to RESPA, she must:
Give full disclosure to the customer at or prior to the time of referral
A borrower obtains a 1-year adjustable rate loan with a 2.25% margin, 1% per adjustment cap, and a start rate of 3.5%. The index on the loan at the adjustment is; after the first 12 months the index is 2.00%, after 24 months the index is 3.17% and at 36 months the index is 4.14%. What will be the borrower's interest rate be at 37 months onto the loan?
Guessed
A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter:
Obtains and maintains a license by the NMLS as independent contract processor or underwriter.
The Gramm-Leach-Bliley Act requires financial institutions to provide consumers with a notice of their information sharing policies. Which of the following is not an acceptable means of providing the required privacy notice?
Posting notice in on an office wall.
In the promissory note, what gives the lender the right to charge the borrower a fee for paying off the loan early?
Prepayment penalty
Define Primary and Secondary
Primary: Businesses that lend borrowers money to pay for real estate. They are referred to as originator. Primary market lenders include: commercial banks, savings and loans, life insurance, credit unions. Secondary: Investors do not lend money. They purchase mortgage notes as investments to earn a return.
According to the Fair Credit Reporting Act, if adverse action is taken against a credit applicant because of information on a credit report, the lender who used that report is required to:
Provide to the consumer the name, address, and telephone number of the consumer reporting agency that furnished the report.
Which is true about nonconforming loans?
They generally have a higher interest rate than conforming loans
A HELOC is a type of mortgage:
that allows a borrower to obtain cash against the equity of a home, up to a predetermined amount.
18. Under RESPA, who would be subject to fines and penalties if a kickback is paid?
(d) All parties paying or receiving a kickback
The TRID rule requires creditors provide a corrected Closing Disclosure containing all changed terms and a new 3 business day waiting period before consummation when which of the following occurs?
(a) Changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow (b) Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer*** (c) Any changes made must be re-disclosed three days before consummation (d) Changes related to the APR, loan product, or the addition of a prepayment penalty
What is the most common appraisal approach used in appraising existing single-family housing?
(a) Cost approach (b) Income approach (c) Rental approach (d) Market comparison approach****
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*** Reg C (d) Truth in Lending Act
Which government agency provides section 502 loans to assist low-income households purchase homes in rural areas?
(a) Fannie Mae (b) Federal Housing Administration** (c) United States Department of Agriculture (d) Veterans Administration
Which statement is correct?
(a) Regulation B is also known as the Equal Credit Opportunity Act (b) Regulation V is also known as the Home Mortgage Disclosure Act (c) Regulation X is also known as the Truth in Lending Act (d) Regulation Z is also known as the Real Estate Settlement Procedures Act Answer is A: ⦁ What allows the borrowers to challenge the value? ECOA - Reg B
S.A.F.E. Act refers to which Federal Law?
(a) Secure and Fair Enforcement for Mortgage Licensing Act** (b) Safe and Fair Enforcement for Mortgage Licensing Act (c) State and Federal Enforcement for Mortgage Licensing Act (d) Secure and Fair Enforcement for Mortgage Loan Originators Act
If a mortgage being delivered to Fannie Mae is secured by an investment property, the borrower may own or be obligated on up to:
(a) Ten financed properties including his or her principal residence. (b) Ten properties including his or her principal residence. (c) Four financed properties including his or her principal residence. (d) Ten financed properties excluding his or her principal residence.
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 PITIA must not exceed 28 percent of their gross monthly income and the sum of the PITIA plus long-term debt should not exceed 36% of their gross monthly income.***
Mortgage originators must provide the borrower with a copy of the Special Information Booklet (Your Home Loan Tool Kit) either at the time of application is or no later than:
(a) Three business days after the application is received.** (b) Three business days prior to settlement closing. (c) Three business days after a borrower's request. (d) At the time of application.
Stable income is defined as being the borrower's gross monthly income from all verifiable sources that can reasonably be expected:
(a) To continue for at least the next one year. (b) To continue for at least the next two years. (c) To continue for at least the next three years. (d) To continue for at least the next four years.
The Good Faith Estimate, HUD-1, Initial and Final Truth-in-Lending disclosures are required under RESPA and TILA for which of the following loans?
(b) Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property.
A conforming loan is a loan that:
(b) Follows the secondary market criteria set by Fannie Mae/Freddie Mac.
A loan that results in negative amortization is illegal under what law?
(b) HOEPA
Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case, a person who violates Section 8 may be fined up and imprisoned:
(b) Up to $10,000 and up to 1 year in prison.
For an individual to be eligible for a loan originator license a state must require and find, at a minimum, that an individual:
(b) has never had a loan originator license revoked in any governmental jurisdiction.
The Truth in Lending Act establishes requirements for appraisal independence for consumer credit transactions secured by the consumer's principal dwelling. Which of the following statements would be permissible when communicating with an appraiser?
(c) "Can you explain why this property is valued so low, compared to the current market?"
FNMA biweekly mortgages require drafting the borrower's bank account:
(c) Every 14 calendar days
TRID requires creditors to retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for
(c) Five years after consummation.
Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting equity stripping and other abusive practices in connection with "high-cost" mortgages?
(c) Home Ownership and Equity Protection Act (HOEPA)
Which is not a triggering term according to TILA, requiring additional disclosing in advertising?
(d) "Terms to fit your budget"
A borrower is applying for a loan to purchase a home. Under the terms of Regulation Z, how long will he have to rescind the loan after he signs off on it (assuming it is not a high-cost loan)?
(d) 0 business days
Under the SAFE Act, an individual may take the SAFE MLO test three consecutive times, with each retest occurring at least:
(d) 60 days after the preceding test.
The term "registered loan originator", as defined under the SAFE Act, means any individual who meets the definition of loan originator and is an employee of:
(d) A depository institution regulated by a federal banking agency.
A consumer has an ARM with an initial rate of 6% and a rate cap of 2/6. What's the highest the interest rate could be over the life of the loan?
12%
What is the maximum interested third-party contribution seller and/or third party may contribute in an FHA transaction?
6%
The SAFE Act requires all MLOs seeking state-licensure to pass the NMLS-developed Mortgage Loan Originator Test with a score of
75% or better
Which of the following allows a prepayment penalty during the first three years after the loan is consummated?
High Priced Mortgage Loan HPML may have a prepayment penalty during the first 3 years after the loan consummated. After 3 years a payment penalty is not allowed. The penalty must not exceed the following percentages of the amount of the outstanding balance pre-paid. 2% if incurred during the first two years following consummation. 1% if incurred during the 3rd year following consummation.
What is the name of a closed-end, first lien, consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate by 1.5 or more percentage points?
Higher-Priced loan
Market value can best be defined as a property's:
Highest price likely to be paid for a property.
To comply with the FACTA, a Residential mortgage loan originator should:
Implement a written identity theft prevention program
The Guidance on Nontraditional Mortgage Product Risks defines nontraditional mortgages as alternative or exotic mortgage loans, including which of the following?
Interest only mortgages and payment option adjustable rate mortgages.
What results when a loan balance grows due to deferred interest?
Negative Amort.
Mortgage Call Reports must be submitted to the NMLS:
Quarterly
Big Money Bank receives a change of address request from a consumer. Which of the following requires the bank to follow up with the consumer to verify the validity of the request?
Red Flag Rules
61. Which is not a part of the Gramm-Leach-Bliley Act (GLBA)?
Red Flags Rules
A Latina applies to a mortgage company for a home loan. She is refused based on the reputation of the neighborhood for a high number of foreclosures. This is an example of what illegal practice?
Redlining - Violates ECOA and FHA
According to the Home Mortgage Disclosure Act, what may never be asked about during the loan application process?
Religion*** Ethnicity, Marital status, Race, Sex and Gross Annual Income.
The type of mortgage that provides an elderly borrower with a monthly check instead of the borrower paying a monthly payment is known as a(n):
Reverse
Under what circumstances is a creditor permitted to provide a consumer with an updated Loan Estimate?
Revisions to the credit terms or the settlement are requested by the consumer
Lenders that generate mortgage loans may receive some degree of legal protection against borrower Ability to Repay lawsuits. The level of protection they receive will depend on the type of loan they make. What type of mortgage loan gives the lender the greatest level of protection against borrower lawsuits?
Safe Harbor Qualified Mortgage Loan
What is the name of the Home Equity Conversion Mortgage payment plan where the consumer receives equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence?
Tenure payment plan
The annual percentage rate (APR) as required to be disclosed under the Truth in Lending Act is the:
The APR is the cost of borrowers credit calculated as an annual rate. The APR shown on the LE and the closing disclosure often exceeds the interest rate quoted on the note and mortgage.
Which is not a requirement of the Safeguard Rule of the Gramm-Leach-Bliley Act (GLBA)?
The National - DO NOT CALL registry allows consumers to add their phone #'s to a list that prohibits unauthorized calls.
The sales contract in the borrower's file states the agreed purchase price is $162,000. The closing costs are $3,700. The seller is paying $1,200 in closing costs on a $153,900 loan amount. What is the acquisition cost?
The acquisition costs accounting amount is always calculated as the amount after all seller concessions closing costs, transfer costs and other adjustments are made. $162,000 Sales Price + $3,700 Closing costs - $1,200 Seller Concessions = $164,000 Total Acquisition Cost.
When does the creditor have to provide the Closing Disclosure to the consumer?
The creditor must ensure that the consumer receives the Closing Disclosure no later than three days before consummation.
Which is NOT a purpose for the Mortgage Servicing Disclosure Statement?
To inform the consumer the likelihood that the mortgage could be sold
The TILA requires lenders to make certain "Material Disclosures" on loans that are subject to the RESPA. The disclosure is required to be in a specific format and include the following information except:
Total monthly payment.
