Mortgage Practice Test
If a borrower had an outstanding loan balance as of April 1 of $549,287, with monthly loan payments of $4,020, at an interest rate of 5.75%, what would the outstanding loan balance be as of May 1?
$547,899
What is the Fannie Mae hazard insurance coverage minimum?
100% of the replacement cost or loan balance
When a telemarketer calls a person on the do not call list in violation of the do not call regulations, he is subject to a fine of
16000
What percentage variance on an fannie mae appraisal report is tolerable when deaLing with comps?
20
A home is appraised at $100,000. The borrower currently has a loan of $50,000, an open end line of credit with a limit of $25,000 and a current balance of $17,500. What is his LTV?
50
Scenario: 300k loan @ 5% interest rate, how much is the interest for 7 months?
8750
Unit rents for 1280/mo how much rental income can be counted on fannie loan??
960
Which of the following CANNOT be used to help pay the down payment for a buyer wanting an FHA loan?
A gift from the seller
An appraisal is
an opinion of value.
What is a red flag in an owner occupied refinance loan?
borrower resides in a home in the same neighborhood as subject property.
When a mortgage broker accepts a legitimate application and documents from a buyer and submits them to two lenders to have them each fully fund the loan, this is called
double selling.
When a federally related or insured lender learns that a property is in a flood zone, it must
inform the borrower.
Under the Gramm-Leach-Bliley Act, a person is considered a consumer of a financial institution when the person
is a consumer of another financial institution receiving services from this financial institution.
A conventional loan is a loan that
is not issued, insured or guaranteed by a government entity.
A basis point is
one-one hundredth of 1%.
ECOA serves to
prevent discrimination in the mortgage lending industry.
The risk that an agent may not have his client's best interest at heart is called
principal-agent risk.
What is the primary purpose of title insurance?
provide a guarantee against liens
A 2/1 buydown
reduces the interest rate by 2% the first year and 1% the second year.
The type of loan that does not require any verification of assets or income or periodic repayment is a
reverse mortgage.
Following Section IX (Acknowledgments) in the 1003 loan application, the form is to be signed to signify that
the applicant represents that all information contained in the form is truthfully represented.
Fannie Mae requires that a borrower maintain property insurance equal to
the lesser of the insurable value of the improvements or the loan balance
The HMDA provides that financial institutions supervised by the Federal Reserve or FDIC may, at their option, report
the reason a loan application was denied.
What is the purpose of FHA?
to provide government method for insuring mortgages
In a construction mortgage the funds loaned are normally disbursed to the builder in
two equal sums, one at the outset of construction and the other at completion of the job.
Regulation X requires that the estimate of the charges and terms must be available for at least what period of time after the GFE is provided?
10 business days
The Truth in Lending Act is most closely related to
RESPA
In the sales comparison appraisal approach, the appraiser uses which of the following as comparable sales?
Recent sales in the area
Bank of Doe receives a change of address request from consumer Jane. What requires the bank to follow up with Jane to verify the validity of the request?
Red Flag Rules
The charges shown in the GFE
are binding for 10 business days.
When interest rates are rising rapidly, a loan applicant should be made aware that the effect on an ARM loan would be
greater risk to the borrower.
It is unethical for a mortgage broker to provide in loan documentation the
identity of a prior customer to obtain loan for a customer unable to qualify on their own.
The Uniform Residential Loan Application includes a section requesting information for government monitoring. Applicants must complete this section
if they are applying for a FHA/VA loan or a federally sponsored loan program.
If the loan amounts, maturity dates and interest rates are the same for loans A and B, but loan A is a straight (interest-only) loan and loan B is fully amortized,
loan B will have higher periodic payments.
Hal has an adjustable rate loan with a payment cap that allows him to pay less than the amount needed to pay all of the interest being charged on the loan. The term to describe this is
negative amortization.
When mortgage payments are not large enough to pay all of the interest due on the loan, the result is
negative amortization.
The HUD-1A settlement statement is designed for use when
no seller is involved in the transaction.
As the deadline approaches for the closing date established in the buyer's sales agreement, the buyer's loan application has not yet been approved but appears to be headed for approval. The loan originator should
notify the real estate broker to try to get an extension of the closing deadline.
The purpose of a Market Conditions Addendum is to
provide the lender with a clear understanding of the market trends and conditions in the subject neighborhood
Truth in Lending provides for a right to rescind certain loans secured by a principal residence. The rescission period is
three business days.
The three-day right of rescission provided by Truth in Lending and Regulation Z applies to a loan
to refinance a loan from the same institution that fails to cover the unpaid balance of the prior loan plus closing costs.
Which of the following statements regarding title insurance is true?
A borrower is required by the lender to pay for lender's title insurance.
What does HUD define as a "referral"?
A lead generation company worker providing information on a broker to a customer
Which of the following is NOT a RESPA violation?
An employer pays its own employee for referrals.
Which is not part of total prepaid finance charge (PFC fees)?
Appraisal Fee
Which term is used to describe knowingly advertising or offering one set of terms which are very appealing but are not readily available and then pressuring a person into signing a contract with other, more expensive terms?
Bait and switch
What is the best description for a 360/180 loan
Balloon Loan
The TIL is not required on any business/commercial credit lines being used for any:
Business Transaction
What is a convertible ARM? It allows the borrower to do what?
Change from a adjustable rate to a fixed rate mortgage
Right to rescind is not valid on which of the following?
Commercial Purchase
A COFI index is defined as?
Cost of funds index
Who is the entity that administers RESPA?
Dept. of housing
The ECOA prevents discrimination against which of the following?
Disabilities
In a flyer, someone advertises a $400k loan with a payment of $2200. Its not compliant because its missing:
Down payment, APR, and loan term
Which of the following is a COST of having an impound account?
Escrow Waiver Fee
Explain what Investors with non-recourse loans mean?
Explain what Investors with non-recourse loans mean?
A 3/1 ARM is?
Fixed period ARM
Government agency that regulates RESPA
HUD
Which of the following is the best way to determine defects in a home?
Home inspection
The borrower had a payment of 2200 and now its 2500 - what probably happened?
Interest rate increased
A loan officer creates a marketing plan to make between 2k to 4k per loan. His cousin calls, he agrees to do the 300k loan for .75% commission and $400 processing fee. this type of transaction is:
Legal and ethical because he is within his marketing plan
What is a characteristic of a Jumbo Non-conforming loan?
Loan amount over $729,750
A prepaid finance charge DOES NOT consists of
Loan origination fee [Escrow] Processing fee Escrow Waiver Fee
Which of the following would be included in an escrow or impound account?
Mortgage insurance premiums
A credit report will always display which of the following?
Name and Social Security number
Which type of loan processing would include only an appraisal and a credit score?
No documentation
Which of the following need not be given to a consumer who applies for an ARM loan?
The interest rate upon the first adjustment
What is IO Fully Indexed Accrual Rate?
The sum of the index plus the margin
A 240/60, $20,000 loan is made with interest at 9% per year. Which of the following is true of this loan?
This is a balloon loan with a loan term of five years.
Which of the following would result in the combined loan-to-value ratio?
Total of all loans / property value
Which law requires distribution of the CHARM booklet to certain mortgage loan applicants?
Truth In Lending Act (TILA).
What disclosure would show if a loan has a balloon payment or not?
Truth in Lending
The best tools for a borrower to shop and rate compare are?
Truth in lending form
When is an ALTA policy not needed
When the transaction has no lender involved
What part of the application process is the GFE required?
Within 3 days of a complete application
A 15-year mortgage of $225,000 has a fixed rate of 4%. If the origination fee is 1%, what is the amount financed?
$222,750
If a lender discovers the fire policy is not in effect they can effect what can happen?
Forced place insurance
What agency is TILA regulated by ?
HUD
A homeowner has a home worth $220,000. He has an outstanding loan of $165,000, and a HELOC with a limit of $30,000, on which he has drawn $12,000. Which of the following is NOT true?
His TLTV is 94%
The Gramm-Leach-Bliley Act requires that financial institutions give consumers what period of time to opt out of allowing the sharing of their nonpublic personal information?
No specified time, but a reasonable opportunity
The cost of an appraisal, paid outside of closing, would appear on the HUD-1 settlement as
POC
What methods are not allowed to deliver the privacy policy?
Poster in big letters in odd location
The federal regulation that implements the Real Estate Settlement Procedures Act is
Regulation X
In qualifying the income of a sole proprietor borrower, the originator should consider which of the following to be most important?
Schedule C net income plus non-cash expenses and depreciation
At closing a borrower may deposit funds to establish reserves for which of the following?
Taxes and Insurance
After a loan is sold in the secondary market, the originating lender may be required to repurchase the loan due to
a buyback agreement.
ECOA allows a creditor to deny a loan to an applicant for any of the following reasons EXCEPT
failure to meet minimum requirements based on the creditor's standards
The Truth in Lending Disclosure Statement shows
finance charges.
The best way to reduce the cash needed at closing is to
finance the closing costs.
The income used in the calculating housing and debt-to-income ratios is
stable income.
FHA requires a borrower to maintain hazard insurance of at least the lesser of
the loan balance or the replacement cost of the improvements.