Test Prep Questions
Hanson is a borrower purchasing a new home, the underwriter has asked Hanson to show proof of 6 months of reserves. The PI payment for his new home is $443, the insurance is $100 and the taxes are $135, how much does Hanson have to show to meet that requirement? a) $4,068 b) $2,304 c) $2,658 d) $1,392
a) $4,068
If an MLO consistently understates the APR, they are in violation of TILA and could face a penalty of: a) $5,000 b) $10,000 c) $25,000 d) $40,000
a) $5,000
NMLS licensing requires how many years past residence history with no gap without explanation. a) 10 b) 2 c) 5 d) 7
a) 10
A borrower takes out an FHA mortgage for 15 years. Their loan amount is $560,000. Their LTV will be 90%. How long will they have MIP? a) 11 years b) The loan term c) 5 years d) Until they reach 78% LTV
a) 11 years
The SAFE Act federal law requires a new mortgage loan originator applicant complete how many hours of prelicensing education. a) 20 hours b) 24 hours c) 21 hours d) 8 hours
a) 20 hours
The FACTA allows a consumer to dispute inaccurate credit information. How many days are allowed for an incorrect item to be investigated? a) 30 b) 60 c) 90 d) 120
a) 30
You have a felony conviction for a gun violation. How long must you wait to obtain a MLO license? a) 7 years b) 5 years c) 6 years d) 8 years
a) 7 years
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a short sale? a) 7 years from the credit report date b) 5 years from the credit report date c) 3 years from the credit report date d) 4 years from the credit report date
a) 7 years from the credit report date
According to RESPA, a servicer is allowed to keep a cushion of no greater than: a) 1/12 of the estimated total annual payment from the account b) 1/6 of the estimated total annual payment from the account c) 1/3 of the estimated total annual payment from the account d) ½ of the estimated total annual payment from the account
b) 1/6 of the estimated total annual payment from the account
A creditor is required to keep all records of compliance with Regulation Z for how long? a) 3 years b) 2 years c) 1 year d) 5 years
b) 2 years
What FHA program is used to allow borrowers to remodel their homes? a) 203(b) b) 203(k) c) Streamline d) HECM
b) 203(k)
On a first lien transaction of more than $50,000, the loan is considered to have failed the HOEPA APR test if it exceeds what percentage of the APOR? a) 8.5% b) 6.5% c) 4.5% d) 5%
b) 6.5%
MLO Jones is working with borrower Natasha. MLO Jones provided a counteroffer to Natasha because the original loan Natasha requested, she did not qualify for. How long does MLO Jones have to notify Natasha of an adverse action if she does not accept the counteroffer? a) 30 calendar days b) 90 calendar days c) 60 calendar days d) 15 calendar days
b) 90 calendar days
A lender will obtain a what to insure proper lien position a) Attorney's opinion b) A lenders title insurance policy c) Title endorsement d) Title insurance guarantee
b) A lenders title insurance policy
After the crisis of the Great Recession according to FHA Standard underwriting when can a borrower repurchase again after a Chapter 13 bankruptcy? a) 7 years from the credit discharge date b) 5 years from the credit discharge date c) 1 year from the credit discharge date d) 3 years from the credit discharge date
c) 1 year from the credit discharge date
After the crisis of the Great Recession according to VA underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? a) 7 years from the discharge date b) 5 years from the discharge date c) 2 years from the discharge date d) 3 years from the discharge date
c) 2 years from the discharge date
A mortgage loan originator must scrub their telemarketing list every: a) 60 days b) 90 days c) 31 days d) 62 days
c) 31 days
HOEPA applies to all of the following except: a) A purchase transaction b) A refinance transaction c) A construction loan d) A HELOC
c) A construction loan
Which of the following would not be subject to Regulation X? a) A property on 20 acres b) A duplex c) A vacant lot d) A condominium
c) A vacant lot
AARMR stands for: a) American Association of Residential Mortgage Restrictions b) Association of American Residential Mortgage Regulators c) American Association of Residential Mortgage Regulators d) None of the Above
c) American Association of Residential Mortgage Regulators
What federal law requires yearly training on it of all employees for a lender to be compliant? a) TILA b) RESPA c) BSA/AML d) GLBA
c) BSA/AML
Which is NOT one of the legislations enacted to promote ethical behavior? a) Fair and Accurate Credit Transaction Act b) Gramm-Leach-Bliley Act c) Ethical Behavior Enforcement Act d) Equal Credit Opportunity Act
c) Ethical Behavior Enforcement Act
Which of the following are NOT specifically listed as courses required for continuing education? a) 3 hours of federal laws training b) 2 hours of ethics c) 2 hours of nontraditional mortgage product training d) 1 hours of NMLSR history training
d) 1 hours of NMLSR history training
Which of the following does not make a loan Non-QM? a) loan with excessive fees b) loan with interest only or adjustable rate feature c) total debt to income ratio more than 48% d) total debt to income ratio less than 38%
d) total debt to income ratio less than 38%
What is the funding fee on an IRRRL? a) 3.3% b) 1.5% c) .5% d) 1.75%
c) .5%
In this refinance transaction, the borrower has a first lien loan of $225,000, and standard amortization 2nd mortgage of $25,000 balance. The property value is estimated at $300,000. The borrower is going to refinance the first mortgage only to lower their monthly payment and have the second subordinate their lien position with the new first mortgage. What is their existing TLTV and LTV of the new first mortgage? a) 83.3%/75% b) 75%/85% c) 83.3%/76.5% d) 74.3%/82.5%
a) 83.3%/75%
What is it called when a QM loan is a higher-priced mortgage? a) A rebuttable presumption occurs b) Safe harbor occurs c) Nothing d) A QM loan can never be higher priced
a) A rebuttable presumption occurs
Which of the following is true about asking a borrower questions about divorce? a) Asking questions about divorce is permissible if there is any documentation in the loan file that suggests a divorce. b) Questions about divorce are always allowed. c) If you suspect a divorce based on visual evidence, questions may be asked. d) Questions about divorce are never allowed.
a) Asking questions about divorce is permissible if there is any documentation in the loan file that suggests a divorce.
A borrower wants to purchase a second home and tells you that they intend to rent the property out when they are not living in it. You have reviewed their financial information and realize that the borrower would qualify for financing if the property is classified as a second residence. However, if the property is classified as an investment property, the borrower is unlikely to qualify. What should you do? a) Classify the property as a rental property even though the borrower intends to reside there part of the year b) Classify the property as a 2nd residence, since the borrower intends to use the property for part of the year, this is acceptable c) Classify the property as a 2nd residence because it is not legal for the borrower to personally reside in a property classified as a rental for any length of time d) Deny the borrower because it is neither legal to rent out a 2nd residence or reside in a rental property for any length of time
a) Classify the property as a rental property even though the borrower intends to reside there part of the year
Co-ownership is also known as: a) Concurrent ownership b) Tenancy in common c) Joint tenancy d) Ownership in severalty
a) Concurrent ownership
What law requires risk-based pricing notices to applications that were denied or who are going to receive less favorable offers of credit? a) FCRA b) GLBA c) ECOA d) TILA
a) FCRA
When must an Opt-Out Notice be sent? a) It is sent to consumers or customers before sharing non-public personal information b) It is sent at the time of establishing the relationship c) It is sent when the creditor changes their policies d) There is no such thing as an opt-out notice
a) It is sent to consumers or customers before sharing non-public personal information
Which federal law has a provision which defines and prohibits deceptive calls lying about any terms the lender is offering? a) Telemarketing and Consumer Fraud and Abuse Prevention Act b) Consumer Financial Protection Bureau Act c) Gramm-Leach-Bliley Act d) Fair Housing Act
a) Telemarketing and Consumer Fraud and Abuse Prevention Act
If two people are married, how do they likely hold title? a) Tenancy by the Entirety b) Joint Tenancy c) Tenancy in Common d) Ownership in severalty
a) Tenancy by the Entirety
What rule prohibits the use of forged, counterfeit, lost, or stolen documents to obtain customer information from a financial institution? a) The Pretexting Rule b) The Disposal Rule c) The Financial Privacy Rule d) The Red Flags Rule
a) The Pretexting Rule
What are the terms of the "cooling off" period if a loan falls under HOEPA? a) Three business days prior to closing b) Three business days after closing c) Seven business days prior to closing d) 30 business days after closing
a) Three business days prior to closing
ABC Mortgage Corporation generally transfer their closed loans servicing rights within 6 months of the loan closing, when do they have to disclose to their borrowers that their servicing might be sold? a) Within 3 days of application b) Within 3 days of closing c) Within 30 days of closing d) At closing
a) Within 3 days of application
When mortgage loan originators review a borrower's bank statements, they are looking for: a) account ownership and large deposits b) account ownership and beginning balance c) large deposits and large withdrawals d) large transaction and deposit pattern
a) account ownership and large deposits
What is the main purpose of the Fair and Accurate Credit Transaction Act that amended the Fair Credit Reporting Act? a) curb identity theft fraud b) protect the borrowers' public information c) to give the consumer proper credit reporting of their trade lines d) to give consumers a procedure to dispute inaccurate information
a) curb identity theft fraud
According to Home Mortgage Disclosure Act, when a lender treats applicants differently based one or more of the ECOA prohibited factors, it's called... a) disparate treatment b) disparate impact c) prohibited treatment d) overt discrimination
a) disparate treatment
Which is NOT considered a TILA Section 32 High Cost loan trigger? a) first mortgage transaction's APR exceeds 3.5% more than APOR on first lien transactions that are more than $100,000 b) second mortgage transaction's APR exceeds the APOR by more than 8.5% on junior lien or first lien transactions that are less than $50,000 c) transaction's points and fees exceed 5% of loan amounts greater than $21,980 d) first mortgage transaction's APR exceeds 6.5% more than the APOR on first lien transactions that are $50,000 or more
a) first mortgage transaction's APR exceeds 3.5% more than APOR on first lien transactions that are more than $100,000
A person making a mortgage loan to their sibling is required to have which type of license? a) no license required to make a loan to immediate family member b) mortgage broker c) mortgage contract worker d) mortgage lender
a) no license required to make a loan to immediate family member
Which of the following is not a correct statement in regards to continuing education for a state- licensed loan originator. a) Three hours of Federal law and regulations are required b) A state-licensed loan originator may take the same approved course in the same or successive years to meet the annual requirements for continuing education. c) MLOs must complete 8 hours of NMLS approved education d) Two hours of ethics including instruction on fraud, consumer protection and fair lending issues are required.
b) A state-licensed loan originator may take the same approved course in the same or successive years to meet the annual requirements for continuing education.
Which of the following things is not considered when a credit score is calculated? a) Payment history b) Amounts owed c) Credit Mix d) Your monthly payment on all credit lines
b) Amounts owed
Which of the following is NOT a finance charge in a residential mortgage loan? a) Loan origination fee b) Appraisal fee c) Mortgage insurance premium d) Mortgage broker fee
b) Appraisal fee
What type of fraud generally begins when a fraudster pitches an investment opportunity to naive real estate investors? a) Appraisal fraud b) Chunking c) Churning d) Illegal property funding
b) Chunking
MLO Joan is working with Borrower Yolanda. Yolanda is very obviously pregnant. Joan asks Yolanda how many kids she's planning on having, this would be a violation of: a) FHA b) ECOA c) HMDA d) FCRA
b) ECOA
What laws requirements can be satisfied by disclosing the Notice to Home Loan Applicant to borrowers? a) FCRA b) FACTA c) GLBA d) Regulation
b) FACTA
If an MLO fails to renew their mortgage loan originator license by December 31, reinstatement must be completed by what date? a) January 31 b) February 28 c) March 1 d) March 31
b) February 28
If an MLO fails to renew their license, some states allow until when to renew with late fee. a) January 31st b) February 28th c) March 31st d) March 15th
b) February 28th
According to the Fair Housing Act, which response is NOT considered discrimination if used to make a credit decision? a) National origin b) Income source c) Handicap d) Familial status
b) Income source
Which disclosure informs the consumer if the funding lender will retain their loan for servicing? a) Privacy Policy disclosure b) Loan Estimate c) Notice to Home Loan Applicant d) RESPA Informed Consumer disclosure
b) Loan Estimate
What federal law was created to prohibit misrepresentation in commercial communications? a) Gramm-Leach-Bliley Act b) Mortgage Acts and Practices c) Real Estate Settlement Procedures Act d) Bank Secrecy Act
b) Mortgage Acts and Practices
A Mortgage Servicing Disclosure Statement is required by what law? a) MDIA b) RESPA c) SAFE Act d) TILA
b) RESPA
Which federal law requires a borrower's demographic information? a) Regulation B b) Regulation C c) TILA d) SAFE Act
b) Regulation C
Dodd-Frank Wall Street Reform and Consumer Protection Act included what type of provision to clarify the steering/LO Compensation provisions of the legislation. a) Reform Guide b) Safe Harbor Provision c) legislative interpreter d) fraud handbook
b) Safe Harbor Provision
HOEPA loans require homeownership counseling; a list of housing counselors must be sent to the borrower. What is the timeline for sending that disclosure to the borrower? a) The disclosure must be provided within 7 days of application b) The disclosure must be provided within 3 business days of application c) The disclosure must be provided at least 10 days prior to closing. d) The disclosure must be provided at least 7 days prior to closing.
b) The disclosure must be provided within 3 business days of application
According to Regulation Z, the borrower has the right to rescind, at closing the Notice of the Right to Rescind must be provided to the borrower. Which of the following is true about the Notice of the Right to Rescind? a) You must provide 2 copies of the Notice of the Right to Rescind b) You must provide 2 copies of the Notice of the Right to Rescind to all owners on the property. c) You must provide 2 copies of the Notice of the Right to Rescind to all of the borrowers on the loan. d) None of the above are true about the Notice of the Right to Rescind
b) You must provide 2 copies of the Notice of the Right to Rescind to all owners on the property.
Which is NOT one of the 6 key pieces of information that triggers a loan application? a) loan amount requested b) assets to close c) property address d) social security number
b) assets to close
A state licensed mortgage loan originator's sponsor is their... a) mortgage servicer b) employer c) government agency d) wholesale lender
b) employer
Which of the following fees may a borrower pay prior to loan closing? a) third party fees, application fee, rate lock fee b) third party fees, application fee, rate lock fee or commitment fee c) no fees maybe paid prior to closing d) any fees required by the lender to fund the loan
b) third party fees, application fee, rate lock fee or commitment fee
What is the intent of aggregate accounting used on the closing disclosure? a) make sure the figures balance b) to limit excessive reserves for taxes and insurance c) notifies the IRS of the property transfer d) to ensure everyone is involved in the transaction is not funding terrorism
b) to limit excessive reserves for taxes and insurance
Which of the following would NOT be a purpose of a "cash-out refinance"? a) Increase the amount of the existing first mortgage and provide cash to the borrower b) Refinance at a lower interest rate, reducing the monthly payments; and increase the balance to provide immediate cash c) Refinance at a lower loan amount, by providing a significant amount of cash to make up the difference d) Pay off a second mortgage with the cash
c) Refinance at a lower loan amount, by providing a significant amount of cash to make up the difference
___________ allows for an MLO licensed in another state, to operate in a new state while the license application is processed. a) Temporary Licensure b) Probationary Licensure c) Temporary Authority d) Temporary Permission
c) Temporary Authority
TRID requires which of the following disclosures? a) The HUD-1 b) The Good Faith Estimate c) The Loan Estimate d) The Adverse Action Notice
c) The Loan Estimate
MLO Arnold is meeting with a potential borrower. What may Arnold never ask about during the loan application process? a) The borrower's sex b) The borrower's national origin c) The borrower's religion d) The borrower's marital status
c) The borrower's religion
Josh, an MLO, is working with Javier. Josh knows that HOEPA requires a specific disclosure on all federally related transactions, what is not true about that disclosure? a) The disclosure is a list of housing counselors b) The disclosure must be sent within 3 business days of application c) The disclosure must be sent 3 days prior to consummation d) The disclosure must include 10 housing counselors
c) The disclosure must be sent 3 days prior to consummation
If original loan amounts, ending maturity dates and interest rates are the same for two loans. The first loan is an interest-only loan and the other loan is fully amortized. Knowing that, which of the following is true? a) The first loan will have a lower interest cost. b) The other loan will have a balloon payment. c) The other loan will have higher monthly payments. d) The first loan will be paid off quicker because it is interest only payments.
c) The other loan will have higher monthly payments.
Which of the following statements best describes Form 1008? a) FHA loan application b) FNMA/FHLMC loan application c) Transmittal summary d) Underwriter request for more information
c) Transmittal summary
The GSEs developed a dataset to improve the quality and consistency of loan application data collection. What is this dataset called? a) Uniform Loan Information Dataset b) Unified Mortgage Dataset c) Uniform Loan Application Dataset d) Mortgage Uniform Information Dataset
c) Uniform Loan Application Dataset
Zoey receives social security income of $1290 a month, which of the following is false? a) Zoey's income can be grossed up b) Zoey's income is non-taxable c) Zoey's income cannot be used to qualify her loan d) Zoey's income must be proven for 2 years
c) Zoey's income cannot be used to qualify her loan
Zoey receives social security income of $1290 a month, which of the following is false? a) Zoey's income can be grossed up b) Zoey's income is non-taxable c) Zoey's income cannot be used to qualify her loan d) Zoey's income must be proven for 2 years
c) Zoey's income cannot be used to qualify her loan
Mortgage lending reviews a borrower's 4 C's to make a credit decision. Included in the Four C's is Credit which includes... a) debt ratios b) property marketability c) credit histories d) type of employment or industry
c) credit histories
Which of the following is NOT exempt from state mortgage licensing requirements? a) savings bank b) trust company c) mortgage broker d) nonprofit to promote homeownership
c) mortgage broker
If there is a change of circumstance due to the interest rate being locked after initial Loan Estimate provided, the lender is required to... a) provide a closing disclosure within 3 business days of the change b) provide a loan estimate within 7 days of the change c) provide a loan estimate within 3 business days of the change d) provide a closing disclosure 24 hours before the lock expires
c) provide a loan estimate within 3 business days of the change
Which of the following fees are NOT part of the zero tolerance TRID threshold? a) loan origination fee b) hazard insurance c) title insurance the borrower shopped for d) recording fee
c) title insurance the borrower shopped for
When you have a lead you prequalified and the borrower is on the do not call registry, you have established a consumer relationship allowing you to solicit for: a) up to 18 months b) up to 12 months c) up to 3 months d) not more than 36 months
c) up to 3 months
Calculate the borrower's debt-to-income for housing DTI and total DTI. Full time employee paid bi-weekly = $2355.00; proposed house payment = $1425.00; Total additional monthly debts = $514.00 a) 27.93% front end DTI, and 41.17% back end DTI b) 29.50% front end DTI, and 39.75% back end DTI c) 60.51% front end DTI, and 82.33% back end DTI d) 27.93% front end DTI, and 38.00% back end DTI
d) 27.93% front end DTI, and 38.00% back end DTI
How many days prior to consummation or closing is the final Loan Estimate required to be provided to the borrower? a) 21 days before consummation or closing b) 10 days before consummation or closing c) 7 days consummation or closing d) 4 days consummation or closing
d) 4 days consummation or closing
After the crisis of the Great Recession according to Conventional underwriting when can a borrower repurchase again after a Chapter 7 bankruptcy? a) 7 years from the discharge date b) 5 years from the discharge date c) 2 years from the discharge date d) 4 years from the discharge date
d) 4 years from the discharge date
Which of the following is not a type of QM? a) General QM b) Temporary QM c) Small Creditor d) Adjustable QM
d) Adjustable QM
Ginnie Mae is another name for _____. a) GNMA b) Government National Mortgage Association c) Government Nationwide Mortgage Association d) Both a and b
d) Both a and b
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? a) HMDA b) RESPA c) TILA d) ECOA
d) ECOA
The MLO must take steps to ensure the borrower is who they say they are. What federal law requires MLO to comply with identity theft deterrence company procedures? a) Truth-in-Lending Act b) Fair Housing Act c) False Identification Crime Control Act d) FACT Act
d) FACT Act
What law requires the term equal housing lender to be used in any advertisement that is broadcast over the airwaves? a) ECOA b) HMDA c) FCRA d) FHA
d) FHA
Lenders submit Loan/Application Registers in order to comply with what law? a) CRA b) FACT Act c) FCRA d) HMDA
d) HMDA
What is not included in the APR calculations? a) Mortgage insurance premium b) Origination fee c) Processing fee d) Hazard/Fire insurance premium
d) Hazard/Fire insurance premium
One purpose of the Fair and Accurate Credit Transaction Act is to prevent: a) Predatory lending b) Discrimination in lending c) Loss of borrower d) Identity theft
d) Identity theft
The CFPB has provided guidance on which of the following agreements related to RESPA Section 8: a) Co-marketing b) Co-branding c) Social media d) Marketing Service Agreements
d) Marketing Service Agreements
Which of the following fees can NOT change at all at settlement? a) Homeowner's insurance cost b) Title services when consumer chooses c) Daily interest charges d) Origination charges
d) Origination charges
Discount points would only be used if the interest rate offered to the borrower were which of the following? a) Above par b) The prime rate c) Below par d) Par or anything above par
d) Par or anything above par
What federal law governs how an MLO asks questions while taking a mortgage credit application? a) SAFE Act b) Regulation C c) TILA d) Regulation B
d) Regulation B
What can a licensed MLO do to help mitigate fraud in mortgage loan files? a) Hire a quality control person to review all their applications. b) Provide documentation to the underwriter prior to packaging the file for underwriting c) Have the borrower certify all documents provided are true and exact copies of the original d) Review all documentation received from the borrower looking for red flags
d) Review all documentation received from the borrower looking for red flags
An MLO is concerned an appraisal will not come in at the value needed. The MLO calls the appraiser and requests as a favor the appraiser come in at value needed. What law does this violate? a) TILA b) RESPA c) ECOA d) The SAFE Act
d) The SAFE Act
Which of the following would be considered a red flag in an owneroccupied refinance loan? a) The borrower owns a second home further than 50 miles away. b) The borrower lives with his/her parents in the subject property. c) The borrower owns another home in the same neighborhood. d) The borrower resides in a home in the same neighborhood as subject property
d) The borrower resides in a home in the same neighborhood as subject property
The Fair and Accurate Credit Transaction Act requires the borrower be given a disclosure. What does the disclosure inform the consumer of? a) Their rights to shop for the best loan program for the transaction b) The fees involved to close their transaction c) The lender's rights to ask for their identity proof d) The borrower's credit scores and explains the use and importance of credit scores
d) The borrower's credit scores and explains the use and importance of credit scores
When is it legal for the loan originator to provide the consumer with a copy of his/her credit report? a) Never b) When the customer pays for it c) When the customer requests it d) When the MLO's contract with the credit reporting agency does not prohibit it
d) When the MLO's contract with the credit reporting agency does not prohibit it
Which is NOT a document needed when the borrower identifies they own a rental property? a) 2018 -1040 tax returns b) copy of current lease c) most recent two years 1040 tax returns d) copy of initial rental deposit check
d) copy of initial rental deposit check
What section of the 1003 application discloses the estimated amount the borrower will need for closing? a) estate will be held in section b) source of down payment section c) purpose of refinance section d) details of transaction section
d) details of transaction section
Which of the following is NOT a cost or expense to the borrower to close a mortgage transaction? a) down payment b) closing costs c) prepaid expenses d) title fees
d) title fees