Practice Test - ML
Are questions regarding the borrower's ethnicity, race, and gender allowed on the 1003 application?
Yes, but answering these questions is optional
Under the "Late Payment" heading of a LE, there is a statement that if 10 days pass after a payment is due, a $300 charge will apply. Does this statement conform to federal regulations? Why or why not?
Yes. This statement satisfies all aspects of the relevant regulation
Which of the following factors would be considered a serious derogatory credit reference?
Your client was 60 days late on his mortgage seven months ago
Which of these is an example of a 2-1 buydown?
Your clients to pay their lenders a lump sum so they can lock in a reduced interest rate for the first two years
A borrower's monthly mortgage payment is $1,256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?
$1,129
Using the calendar year method, what is the daily rate for an annual tax bill of $4,662?
$12.77
Tiara violates the law by using bait-and-switch advertising techniques. What is the maximum amount she may be fined?
$34,401 per act
The daily property tax rate is $1.23 and closing is February 1. Assume the buyer owns the property on closing day, and the seller hasn't made any payments. What will the seller owe at closing using the calendar year proration method?
$38.13
Your borrower has a credit score of 620 and has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will be required?
$7,000
A couple applies for an FHA loan in order to buy a $210,000 house. What is the minimum down payment that the couple must be prepared to pay in order to qualify for the loan?
$7350
Assuming a 0.5% PMI rate on a $225,000 loan, how much would the borrower be required to pay monthly?
$93.75
What is the minimum number of counseling agencies that the Homeownership Counseling Disclosure must provide to a consumer?
10
A potential borrower has $385 in monthly non-housing debt obligations, and her anticipated mortgage payment is $1,103. Her gross income is $7,598, and her net income is $5,815. What's her total DTI ratio?
19.58%
The fully indexed rate for an adjustable-rate mortgage is 4.5%. The loan had a start rate of 3.2% and a margin of 2.1%. What was the index value at the time the initial rate adjustment took effect?
2.4% 4.5-2.1 = 2.4
How many days must an applicant wait between failed attempts on the test to retake the test?
30 days
How many days must applicants wait to retest if they fail their MLO exam on their first or second attempt?
30 days
Delia was just turned down for a mortgage loan. The creditor informed Delia orally of the reasons she was turned down. If she requests written confirmation of these reasons, how long does the creditor have to provide this confirmation?
30 days from the date of Delia's request for confirmation
How many identity theft red-flag sources do the identity theft rules identify?
5
A borrower takes out a loan for $90,000. He estimates that he will pay $525 per month toward interest for the first year of the loan. What is the interest rate for the loan?
7%
A consumer is purchasing a home for $400,000. The property appraised at $415,000 and the consumer is financing $300,000. What's the loan-to-value ratio?
75%
What is the minimum score that MLOs must achieve to pass the licensing exam?
75%
What must MLOs have in their state to originate loans?
A license and sponsorship
The day after receiving a Loan Estimate form, a borrower requests to use another service provider that charges a higher fee but is said to do a better job in the long run. What must the lender provide in response to the borrower's request?
A revised LE
Which of the following statements about Loan Estimate tolerances is true?
A zero tolerance fee includes fees over which the lender has control and which can't increase from the issuance of the Loan Estimate to closing
Which of the following statements about loan estimate tolerances is true?
A zero tolerance fee includes fees over which the lender has control and which can't increase from the issuance of the loan estimate to closing
UIs must be displayed on which of the following?
All loan applications and marketing material
Which one of the following is a true statement about FHA mortgage loans?
An FHA is usually more attractive to borrowers who have lower credit scores and lower down payments
Which disclosure summarizes all account payments and deposits during the year, as well as any deficits or surpluses in an escrow account?
Annual escrow account
Which one of the following is an example of a prepaid expense item due at closing?
Annual homeowners insurance premium paid through the transaction year
Items of value that the borrower owns are listed in the ______ section of the loan application.
Assets
When may a loan originator send a revised LE to the borrower?
At any time during the process
Which one of the following statements about title insurance is true?
Borrower owes the title search fees at closing
The loan-to-value ratio is best described as ______.
Calculation that describes the amount being borrowed compared to the value of a property
A borrower is completing a residential loan application. Which of the following would he include in the liabilities section?
Car loan
Who performs closing services according to the Code of Federal Regulations?
Closing Agent
Implying or expressly stating that a communication is from the consumer's current mortgage lender when it's not, is a misrepresentation called ______.
Communication source
Which entity sets the requirements for qualified mortgages?
Consumer Financial Protection Bureau
Which one of the following is NOT an example of a title defect commonly included in coverage with a lender's title insurance policy?
Current owner holds title without mortgage loan
Carson's telemarketing campaign involves reverse mortgages. He contacts consumers who aren't on the Do Not Call Registry. He tells consumers that if they get a reverse mortgage with his offer, they'll eliminate all of their monthly payments. He figures they would know they'd still need to pay homeowners insurance and any taxes. How would the TSR define Carson's conduct?
Deceptive
Private mortgage insurance protects the lender in case the borrower ______.
Defaults on the loan
According to TILA, residences that are located on land that the unit owner is leasing or renting are considered ______.
Dwelling
A home equity line of credit (HELOC) is based on the homeowner's available ______.
Equity
Who is responsible during the escrow process for distributing funds for things like the appraisal and loan fees in Arizona?
Escrow agent
Which one of the following is a true statement regarding licensee examinations and investigations?
Examinations may be conducted of any licensee at any time
What is a loan origination fee due by the borrower at closing?
Fee charged by the lender and loan originator for processing the loan
Under the terms of the USA PATRIOT Act, customers of financial institutions who take out a loan must provide all of the following pieces of information EXCEPT for which one?
Gender
Which one of the following laws focuses on unfair high-rate loan practices?
Home Ownership and Equity Protection Act
What is the name of the disclosure that provides a list of counselor agencies to consumers, providing independent advice as to whether the mortgage loan terms are a good fit for them?
Homeownership Counseling Disclosure
Which one of the following statements regarding HOEPA loans is true?
If a loan meets the HOEPA criteria, the lender must give the borrower several discourses at least three business days before closing on the loan
What does the Red Flags Rule require organizations, such as financial institutions and creditors, to do?
Implement a written identity theft prevention program to detect identity theft risks
Which of the following information is required on a Uniform Residential Loan Application form?
Income
Which of the following types of data is NOT included in public data collected under HMDA?
Information about individuals who have received loans
Which loan document must be given to borrowers in order to provide estimates of tax, insurance premiums, and other loan charges that are expected to be paid from an escrow account within the first 12 months of the loan?
Initial Escrow Statement
What does the Red Flags Rule require organizations, such as financial institutions and creditors, to do?
Investment properties
Why is a nonqualified mortgage riskier than a qualified one?
It can't be sold to Fannie Mae or Freddie Mac
It's been 28 days since consummation of Charley's mortgage loan. Today, the creditor learned that an event occurred relating to the settlement of the transaction that will change the amount Charley will have to pay toward the monthly principal and interest. Which one of the following is a correct description of what the creditor must now do?
It's been fewer than 30 days since consummation, so the creditor has 30 days to deliver or mail corrected disclosures
What does RESPA prohibit to protect borrowers from overcharges in a mortgage loan closing?
Kickbacks
When an examiner is investigating a licensee's books and records, what sort of items are being investigated?
MLO's personal experience and history
What was the main purpose of the amendments to TILA and RESPA?
Make it simpler to understand loan terms
Which of the following statements related to identity theft and mortgage fraud is true?
Mortgage fraud may involve identity theft and fraudulent loan applications
Which of the following is NOT a consumer protection resource for making complaints related to mortgages?
National Association of REALTORS
Telemarketers are legally required to check the ____ every 31 days.
National Do Not Call Registry
An appraiser received a job to appraise a property located in the same city where her personal home is located. Does a conflict of interest exist if she conducts the appraisal?
No, unless she has a personal or business relationship with the seller or buyer of the property, there is no conflict of interest
A CD will contain an itemization of services the borrower did not shop for, as well as services the borrower did shop for. Where would this information be located in relation to the terms of the loan?
On a later page than the terms of the loan
Which one of the following is information that licensees are NOT required to change with the NMLS?
Personal credit change
Which document is used to give a borrower an overview of the title history and information about what is or isn't covered in an insurance policy?
Preliminary Report
Per the GLBA, gaining a customer's financial information under false pretenses is referred to as ______.
Pretexting
Billie responded to an advertisement about refinancing her mortgage loan because she thought it was a special government program, as indicated by the ad. She learned that a private lender, not the government, refinanced her loan. This misrepresentation was related to ______.
Product association
What is the purpose of PMI?
Protect the lender in case of borrower default
Mortgage lenders have used maps to draw boundaries around certain geographical regions deemed a higher default risk and refused to lend to businesses and residents in those areas. What is this practice called?
Redlining
The HUD-1 must be used to when performing transactions for which one of the following?
Refinanced loan
What is the name of the law that says if advertising for available financing includes a trigger term, the ad must include certain disclosures?
Regulation Z
The federal Fair Housing Act prohibits discrimination in which of the following real estate transaction types?
Residential property financing
Which of the following types of loans are covered by TILA and Regulation Z?
Reverse Mortgages
What standards does the Gramm-Leach-Bliley Act require of financial institutions?
Safeguarding consumers nonpublic personal information
What does servicing a mortgage loan involve?
Separating principal from interest and paying taxes or insurance included in those payments
A licensee's contact information changed recently, and now her office address in the NMLS files is incorrect. What is the licensee legally obligated to do in this situation?
She must amend or correct the information on file with the NMLS
The CSBS and AARMR have said that all of these are ways for lenders to mitigate the risks associated with nontraditional mortgage products EXCEPT:
Stop offering nontraditional mortgage products and loan features
An MLO receives an application for a mortgage loan, but the loan applicant doesn't have a checking account. Because of the unusual nature of the application, what should the MLO do?
Submit a SAR via the FINCEN Efiling system
Which of the following is true regarding the Loan Estimate and the Closing Disclosure?
The Loan Estimate is prohibited within three days of receiving an application, and the closing disclosure is provided at least three business days prior to closing
What's daily simple interest?
The amount of interest that accrues every day on a simple interest loan
Which one of the following stated justifications for rejecting a mortgage loan application fails to meet the requirements of Regulation B?
The applicant failed to meet the creditor's internal standards
Which one of the following is a true statement about title insurance fees?
The fees may vary by 10% after the estimate is given
A consumer refuses to provide a financial institution with HMDA data. What's the best course of action for the financial institution in this case?
The financial institution should provide HMDA data based on visual observations and the consumer's surname
According to Regulation Z, MLOs may be compensated based on which loan characteristic?
The loan amount
A seller has a closing date of October 11. He's already paid his annual taxes of $1,825. Assuming the buyer owns the day of closing and assuming a calendar year proration, which of the following statements is true regarding the property tax proration?
The seller will be credited $410 at closing
What does the E-Sign Act say about mortgage loan disclosures and records that have been delivered and signed electronically?
They're valid and enforceable
What is the minimum number of business days prior to closing lenders have to provide borrowers with the Closing Disclosure form?
Three
How many years' worth of records might a loan originator request when verifying alimony?
Three Years
Your borrower is worried that after closing, someone else can claim ownership of the property. What can reassure her?
Title Insurance
Your borrowers are about to close on their first home. What will protect them from financial loss if their ownership later comes into question?
Title Insurance
Why must a lender provide a Closing Disclosure to a mortgage loan borrower?
To help borrowers understand exactly how their funds are used at closing
What is the purpose of the Know Before You Owe special initiative?
To help consumers understand what loan options are available, and avoid large costly surprises at closing
What's the purpose of the Disposal Rule?
To prevent anyone from gaining access to consumers information
What is the primary purpose of the Bank Secrecy Act?
To require financial institutions to monitor transactions and keep records of suspicious activities
Andy ran an advertisement that misrepresented the interest, payments, or other terms with inaccurate usage of "fixed" to describe them. This is misrepresentation of the ______ of the terms.
Variability
When may a company policy that has a disparate impact on various consumers be justifiable?
When there's a legitimate business reason
Which one of the following is NOT an appropriate way for an MLO to address an incomplete TRID disclosure?
Write "N/a" into blank fields as necessary
Gary applied for a home equity line of credit from his federally insured bank so that he could make some renovations to his kitchen. The same bank holds the note on Gary's home mortgage. Will the HELOC be subject to RESPA requirements?
Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including home equity lines of credit
