Practice NMLS
Caroline Gerardo Barbeau
Christmas gift
.
Creditors are obligated to maintain copies of all
Closing Disclosures provided by third party settlement agents for how long?
1
year
5
yearsYou correctly checked this.
36
months
12
years
Creditors are obligated to obtain and retain a copy
of completed Closing Disclosures provided by third party settlement agents for
5 years.
Which of the following does RESPA require to be given
to the borrower?
Home
Loan ToolkitYou correctly checked this.
APR
Lead
Based Paint Disclosure
Right
of Rescission
RESPA requires the Home Loan Toolkit to be issued to
an applicant within three business days of a purchase application. Truth in
Lending requires notice of the right of rescission as well as disclosure of the
APR. The Lead Based Paint disclosures do not fall under RESPA.
According to Freddie Mac and Fannie Mae guidelines,
how long must a Chapter 7 bankruptcy be discharged before a borrower may get a
loan?
1
year
2
years
10
years
4
yearsYou correctly checked this.
Freddie Mac and Fannie Mae require a minimum of four
years since the discharge of a Chapter 7 bankruptcy. If there are extenuating
circumstances regarding the bankruptcy, an exception may be granted and
financing may be given 2 years after discharge. A bankruptcy stays on the
credit report for 10 years.
The Cost approach of an appraisal is used for all of
the following EXCEPT:
Remodel
Insurance
To
determine cost of income, on a rental propertyYou correctly checked this.
New
Construction
To determine the income on a rental property, the
income approach using an operating income statement (OIS) would be the best
appraisal approach.
.
If a borrower is denied financing based on credit,
which of the following must occur?
Notify
borrower in person within 15 days
Send
a written 'adverse action' notice within 30 daysYou correctly checked this.
Send
a written 'adverse action' notice within 15 days
Notify
borrower by telephone within 30 days
According to Regulation B (ECOA), when a borrower is
denied financing based on credit, an 'adverse action' must be sent within 30
days. They must be notified in writing as to the basis of their loan denial.
Considering the legislation of the Secure and Fair
Enforcement for Mortgage Licensing Act (SAFE), originating a loan for a family
member or other blood relation is considered:
Legal
and ethicalYou should have checked this.
Illegal
but ethical.
Illegal
and unethical
Legal
but unethical
The relationship, however, must be disclosed and
documented.
A licensed mortgage loan originator who fails to
maintain a valid license for at least how long must re-take the national exam:
One
year
Two
years
Seven
years
Five
yearsYou correctly checked this.
A licensed mortgage loan originator who fails to
maintain a valid license for a period of 5 years or longer shall retake the
test, not taking into account any time during which such individual is a
registered mortgage loan originator.
ECOA is also known as Reg ___ ?
X
C
BYou correctly checked this.
Z
Reg B is ECOA, Reg X is RESPA, Reg Z is TILA, and Reg
C is HMDA.
Which of the following is true about the index value
used in an ARM?
LIBOR
is always the best index
The
index value can change on the loan after consummationYou correctly checked this.
You
can only change indices once during the life of the loan
The
index may only be a US Treasury Bill
The index can change after consummation. No one index
is always better than the others, and LIBOR, COFI and T-Bills are just three
examples of many indices which can be used.
Which of the following properties would require
commercial financing?
A
five-unit dwellingYou correctly checked this.
A
single family investment property.
A
four unit dwelling with one unit being a store front that consumes less than
25% of the gross square footage
A
three unit investment property
Residential financing finances dwellings up to four
units (primary and investment). Anything beyond four units requires commercial
financing. FHA will finance mixed-use properties (combined residential and
commercial) assuming that the commercial aspect does not exceed 25% of the
property's gross square footage.
.
When a loan created in the primary market is
immediately sold into the secondary market, the responsibility of 'funding'
belongs to the:
Borrower
Seller
Primary
lenderYou correctly checked this.
Secondary
lender
The primary lender funds the loan. The borrower
receives the funds. The seller would only fund if utilizing seller financing.
The secondary market buys the loan from the primary market.
When permanent financing replaces a construction
loan, and the value is either the appraised value or the cost of construction
plus the appraised value of the lot, title to the property could be conveyed
only if:
The
borrower owned the lot prior to construction and only one disbursement paid off
the construction loanYou correctly checked this.
The
contractor deeded the land to the borrower one day prior to the refinance
General
contractor had the construction loan, then deeded the title to the property at
least one day prior to funding
The
construction loan was taken out at least six months before the refinancing loan
FNMA/FHLMC requires the buyer to purchase the lot
prior to obtaining the construction loan. The construction loan must be in the
buyer's name, and the long-term financing pays off the construction loan and
the builder. The contractor deeding the property one day prior to consummation
doesn't meet the requirement, and the timing of the construction loan in
relation to refinancing is not an issue.
Which of the following is not required to be
disclosed in an advertisement placed by a mortgage originator?
Years
of experienceYou correctly checked this.
Unique
identifier
The
word broker , if it applies
Business
name
The law is very clear that objective identifying
information must be present, specifically the NMLS ID, the business name, and
the type of license. Years of experience is subjective and irrelevant to
identifying an MLO.
.
Which of the following is the best comparable to use
for a loan?
Three
similar homes currently listed on the same street
A
similar home that is currently under contract
An
almost identical home, recently sold in foreclosure
A
recently sold home in the neighborhood of and similar to the subject propertyYou correctly checked this.
The comparables should be in the same area, recently
sold, and similar to the subject property. Listed homes are not acceptable.
Properties sold under duress would not be good comparables unless they were the
only homes available. The similar home under contract might be a good choice
but it's not the best choice.
You have just delivered the Closing Disclosure for
your new borrower, Glenn Miller. However, Glenn negotiates a credit for closing
costs which is within loan program guidelines. Today is Tuesday. Is there a new
3-day waiting period? What day can you consummate Glenn's loan?
Yes;
the loan can consummate Thursday
No;
the loan can consummate WednesdayYou should have checked this.
Yes;
the loan can consummate Saturday
Yes;
the loan can consummate Friday
Because the change bettered the loan for Glenn, there
is no new 3-day waiting period. You can issue a revised Closing Disclosure
today and close tomorrow, Wednesday.
.
How long must a loan originator wait to request
reinstatement of a revoked license?
A
revoked license will never be reinstatedYou should have checked this.
Five
years
Six
months
One
year
Once revoked for cause, a state-issued originator's
license will never be reinstated.
.
According to Fannie Mae/Freddie Mac guidelines, how
long is a credit report good for?
30
days
90
days
60
days
120
daysYou correctly checked this.
Although most underwriters will require a credit
report to be as current as possible, Fannie Mae/Freddie Mac guidelines allow it
to be up to 120 days old. The underwriter may take a more conservative
approach.
When purchasing an investment property, what is
generally the minimum down payment?
20%
25%You should have checked this.
15%
10%
Effective February, 2010 the maximum investment
property LTV became 75% through conventional conforming financing.
.
Question 19 .
Interest rates for an FHA loan are set by:
HUD
FHFA
Market
forces and/or negotiation between lender and borrowerYou correctly checked this.
Federal
Reserve Bank
The interest rate is freely negotiable between the
borrower and the lender and is generally determined by market forces.
You have been working with a client for the previous
six months who has been approved by a lender, has locked in an interest rate by
signing a rate lock agreement, and is ready to close. Two days before closing,
however, interest rates drop and your client wishes to secure a lower rate. You
reiterate that, as you originally explained at rate lock, if rates go higher
your customer is protected but, if rates drop, there's nothing you will be able
to do about that to which your customer acknowledged and consented. Your client
still insists on a lower rate and you once again explain that you are unable to
go with a different lender at a lower rate because of the standing commitment
to the current lender. You also inform your client that breaking a rate lock with
a lender is damaging to the broker-lender relationship. After explaining the
situation, your client still chooses to back out of the loan and go with a
different loan company. Your client's action in this situation is:
Illegal
but ethical
Illegal
and unethical
Legal
but unethicalYou should have checked this.
Legal
and ethical
Although it is perfectly legal for a customer to decide
on what loans term he will settle, once a commitment is made and a customer
signs an interest rate lock-in agreement, the customer agrees to accept the
loan terms as is while knowing that they may change. If the customer withdraws
his application later, although that may be unethical, it is certainly legal.
Many lenders implement a policy prohibiting anyone from re-applying for 60-120
days after withdrawing an application.
.
Aside from reverse mortgages, most residential
mortgages begin through the:
Uniform
Residential Loan ApplicationYou correctly checked this.
Short
Form Residential Loan Application
GNMA
Residential Loan Application
Federal
Reserve Residential Loan Application
The formal name for this document is the Uniform
Residential Loan Application. It is FLHMC's form 65 and FNMA's form 1003.
A loan originator is:
An
individual who takes a residential mortgage loan application and offers or
negotiates terms of a residential mortgage loan for compensation or gainYou correctly checked this.
A
person who only performs real estate brokerage activities and is not
compensated by a lender, a mortgage broker, or other loan originator
A
person who services a loan but does so with knowledge of the terms of the
transaction and possesses sensitive customer information
A
person or entity solely involved in extensions of credit relating to timeshare
plans
The SAFE Act defines a loan originator as a person
who (a) takes a residential mortgage loan application and (b) offers or
negotiates terms of a residential mortgage loan for compensation or gain.
When the borrowers pay an upfront cost to initially
reduce the interest rate knowing that the rate will increase back to the note
rate after a specific period of time, the borrower has paid:
Discount
points
A
Temporary buydown feeYou correctly checked this.
For
an adjustable rate
An
origination fee
A temporary buydown reduces the interest rate for a
specific period of time after which the rate increases back to the original
note rate for the remainder of the loan. Discount points permanently reduce the
interest rate. The origination fee is profit to the lender, and the adjustable
rate is the interest rate on a loan which could increase or decrease over the
life of the loan.
The term non-traditional mortgage product means:
Any
loan product other than a 30-year fixed rate mortgageYou correctly checked this.
Any
option arm loan product
Any
loan product containing negative amortization
Any
loan product outside of the guidelines of Fannie Mae
According to the SAFE Act, the term non-traditional
mortgage product means any mortgage product other than a 30-year fixed rate
mortgage.
Two people obtain a loan to buy a home, and take
ownership as joint tenants. Which of the following would NOT be true:
Each
owns 100%
Both
must sign on the loan
Each
owns 50%You correctly checked this.
Neither
could sell without the other's permission
Joint tenancy implies that each party owns 100% of
the property. If each person owned just 50%, they would own the property as
tenants in common.
According to Reg. Z, the borrower's automatic right
to rescind the loan within three business days does not apply to:
Loans
secured by second trust deeds
Equity
lines of creditYou shouldn't have checked this.
Loans
used to purchase or build the borrower's residenceYou should have checked this.
Loans
used to refinance the borrower's home
The three-business-day right to rescind only applies
to loans where the borrower's existing property is used as security for a loan,
as in a refinance, a second trust deed, or an equity line of credit. It does
not apply to loans used to originally purchase or build a residence.
.
The purpose of assigning a unique identifier to each
licensed or registered individual is to facilitate:
The
electronic tracking and uniform identification of publicly adjudicated disciplinary
actions against loan originatorsYou correctly checked this.
Employers
in tracking the actions of the licensed loan originators under their
supervision
The
public access to the originators licensing activity and exam scores
Tracking
the dollar volume of loans generated by each originator
The CFPB shall coordinate with the NMLS to establish
protocols for assigning a unique identifier to each registered loan originator
that will facilitate electronic tracking and uniform identification of and
public access to the employment history of and publicly adjudicated
disciplinary and enforcement actions against loan originators.
.
When a borrower is using income from rental
properties to qualify for a loan, how is that income assessed from the tax
returns?
Net
income plus depreciationYou correctly checked this.
Net
income minus depreciation
Gross
income minus depreciation
Gross
income plus depreciation
Income from rental properties is taken from the tax
returns by taking net income plus the depreciation found on Schedule C.
Depreciation is a taxable expense, but it is not actually a loss of cash flow
therefore it can be added when qualifying for a loan. Gross income from a
rental property is not used for qualification.
You have been working with Joe and Mary on their
first home purchase. As their trusted MLO, you quoted them a great rate and
program from your company. When Joe and Mary arrived to consummate their loan,
you informed them that you were unable to lock the rate you quoted and their
interest rate will be .25% higher than they expected. They also have an
additional fee on the Closing Disclosure for $2500. What recourse do Joe and
Mary have, if any?
Close
the loan on the new terms; there is no recourse.
As
their MLO, you may have acted unethically but did not violate any regulation
Not
close the loan and file a complaint with the CFPBYou correctly checked this.
Bring
a civil suit against you for the $2500 plus 1M per day per violation for
knowingly violating the TRID riles
Joe and Mary can file a complaint with the CFPB. The
CFPB has enforcement jurisdiction for both TILA and RESPA, including the
imposing of penalties. If the CFPB finds you culpable, you could be penalized
$5,000 per day for a single violation, $25,000 per day for reckless violations,
and $1 million per day for knowingly violating the law.
Who of the following would be an appropriate person
to consult with about a borrower's credit?
Borrower's
family member
Real
Estate Agent
Seller
UnderwriterYou correctly checked this.
Credit information can not be discussed with 3rd
parties. An underwriter is part of the transaction and is a 'user' of the
credit information. Therefore, it would be appropriate to discuss credit
information with an underwriter.
.
An underwriter does all of the following EXCEPT:
Determine
the credit worthiness of the borrower
Determine
the acceptability of collateral
Determine
if the loan is in compliance with investor criteria
Determine
that the seller has the legal right to sell the propertyYou
correctly checked this.
It is not the responsibility of the underwriter to
verify the seller other than to review the title summary. However, underwriters
do look for compliance with investor criteria, credit worthiness of the
borrower, and the acceptability of the collateral.
A person was purchasing an income property which was
scheduled to close and fund on June 25th. Rent of $1800 was paid for the month
of June on the 1st. What was the buyer's prorated amount?
$180
$300.
$210
$360You should have checked this.
The monthly rent of $1800 is divided by 30 days
resulting in a $60 daily rent. The new owner would be entitled to the rent for
6 days or 6 X $60 = $360 (25th, 26th, 27th, 28th, 29th, and 30th).
..
When a closed-ended ARM is obtained, additional
disclosures to the borrower include all the following EXCEPT:
The
balance in the lender's trust accountYou correctly checked this.
A
booklet explaining adjustable rate mortgages
A
loan program disclosure
A
hypothetical example of a $10,000 loan
The balance in the lender's trust account is not a
required disclosure when a lender makes an ARM loan. Each of the other answers
are disclosures required by Truth in Lending.
.
The aggregate escrow analysis allows for the lender
to require that the borrower have which of the following?
$0
in their escrow account or no more than one month's impound in reserves at one
time during the calendar year
$100
and no impound reserves
$0
in their escrow account or no more than two month's impound in reserves at one
time during the calendar yearYou correctly checked this.
No
more than 1% of the principal balance of the loan maximum in the impound
account
RESPA allows for a cushion of up to 1/6 of the annual
anticipated escrow disbursements to be maintained in escrow accounts. This
helps to absorb unanticipated increases to the cost of items paid through
escrow. In other words, if a lender is expecting to pay a $4,000 tax bill but
the tax bill is ultimately $4,500, the cushion will help the lender avoid
having to advance the difference from its own funds.
You initially disclose a rate of 5% to the customer
but are floating the rate. Over the next few days, rates improve and you have
the option to lock the customer in at a rate of 4.75%. You choose to lock the
rate at the initially disclosed figure. This behavior would be considered:
Illegal
and unethical
Legal
and ethical
Illegal
but ethical
Legal
but unethicalYou correctly checked this.
The lender may offer a customer any rate and pricing.
The customer retains the right to accept or refuse. Therefore, if lower rates
are available but the loan originator only offers a higher rate, this may not
be acting in the customer's best interests. It is certainly legal since the
customer is not forced to accept the terms. If any above-par pricing is earned
through locking in a higher rate, however, it must be credited to the borrower.
The loan originator is not allowed to accept above-par pricing as compensation.
The Nationwide Mortgage Licensing System and Registry
is developed and maintained by which of the following:
The
Conference of State Bank Supervisors and the American Associate of Residential
Mortgage RegulatorsYou correctly checked this.
The
American Association of Residential Mortgage Regulators and the OCC
HUD
The
Conference of State Bank Supervisors and NMLS State Affiliates
To aid and facilitate states' compliance with the
requirements of the SAFE Act, the SAFE Act directs the establishment of a
centralized nationwide mortgage licensing system by the Conference of State
Bank Supervisors (CSBS) and the American Association of Residential Mortgage
Regulators (AARMR).
The buyers closed on a mortgage of $240,000 after
having put 20% down. Assuming that they were the same, what was the purchase
price and appraised value?
$240,000
$340,000
$300,000You correctly checked this.
$400,000
If the loan amount of $240,000 is 80% of the purchase
price/appraised value, divide the loan amount by 80% to arrive at the desired
number.
.
For income from alimony and/or child support to be
recognized as income, the remaining term of such income must exceed:
Five
years
Seven
years
Three
yearsYou correctly checked this.
One
year
In order to be used for qualifying purposes, the
lender must receive verification that the borrower will continue earning
alimony and/or child support for at least three years from the note date.
.
Which of the following would prevent a potential
mortgage originator from being granted an originator's license?
A
felony conviction in the nine years preceding the date of the license
application
A
pardoned conviction for fraud within the two years preceding the license
application
A
felony conviction of money laundering at any time preceding the license
applicationYou correctly checked this.
A
misdemeanor involving financial transactions in the three years preceding the
date of the license application
The applicant has not been convicted of, or pled
guilty or nolo contendere to, a felony in a domestic, foreign, or military
court (a) During the seven-year period preceding the date of the application
for licensing and registration; (b) At any time preceding such date of
application, if such felony involved an act of fraud, dishonesty, or a breach
of trust, or money laundering; (c) Provided that any pardon of a conviction
shall not be a conviction for purposes of this subsection.
Score:
100% • Weight in test: 100% × 0.8 = 0.80%
Question 40 (weight: 0.8%)Failed
Which of the following persons would be exempt from
licensing requirements?
A
loan originator working for a mortgage lender
A
loan originator working on a contract basis for a mortgage broker
An
attorney who is arranging a mortgage for a client and will be compensated by a
mortgage broker.
A
person lending money on a timeshare in FloridaYou should have checked this.
An individual lending money on a timeshare is exempt
from licensing requirements.
.
In all forms of advertising a credit, the only number
that can be used without additional conditions is the:
Annual
Percentage RateYou correctly checked this.
Finance
charge
Total
number of payments
Amount
financed
The Annual Percentage Rate (APR) can be stated by
itself in all forms of advertising without the requirement to disclose more
financial information. Any time the total number of payments, finance charge,
or amount financed is mentioned, their use "triggers" the complete
disclosure of all loan terms in the advertisement.
The penalties assessed by the state regulatory
authority would be considered what type of penalties?
Criminal.
Restricted
CivilYou should have checked this.
Felonies
The Commissioner may impose a civil penalty on a
mortgage loan originator or person subject to this Act, if the Commissioner
finds, on the record after notice and opportunity for hearing, that such
mortgage loan originator or person subject to this Act has violated or failed
to comply with any requirement of this Act or any regulation prescribed by the
Commissioner under this Act or order issued under authority of this Act. Such
designations would be considered civil and not criminal.
.
Which of the following fits one of the added classes
from the 1988 Fair Housing Amendments Act?
A
paraplegicYou correctly checked this.
A
person 62 years old
A
Catholic
An
African American
The amendment of 1988 added two protected classes:
Handicapped, which would include a paraplegic and familial status, protecting
families with children under 18.
Regulation Z is another name for:
Truth
in LendingYou correctly checked this.
Equal
Credit Opportunity Act
Fiduciary
Duty
Americans
With Disabilities Act
Regulation Z and Truth in Lending are two names for
The Federal Consumer Credit Protection Act. The duty of trust owed by an agent
to his or her principal is a fiduciary duty. The Equal Credit Opportunity Act
(ECOA) prohibits discrimination and is known as Regulation B. The Americans
With Disabilities Act deals with accessibility of goods and services to
disabled individuals.
Which of the following statements best describes Form
1008?
FHA
loan application
FNMA/FHLMC
loan application
Transmittal
summaryYou correctly checked this.
Underwriter
request for more information
Form 1008 is the transmittal summary and summarizes
the details, terms, and specifics of the loan transaction.
Negative amortization is when the:
Payment
is less than the required interest and the loan balance increasesYou correctly checked this.
Payment
is interest only, and the principal of the loan is not being reduced
Borrower
is not making payments on the loan
The
mortgagee makes payments to the mortgagor
Negative amortization is created when a loan payment
is less than the interest due. Thus, as per the agreement, the unpaid interest
is added to the principal. Negative amortization is usually a feature of
graduated payment loans, option loans, and ARMs containing payment caps.
.
A borrower applies for a Reverse Mortgage. The Real
Estate Settlement and Procedures Act requires the borrower to receive a
Mortgage Servicing Disclosure Statement:
Anytime
prior to loan consummation
Prior
to making application for a loan
Within
14 days of the loan application
Within
three days of the loan applicationYou correctly checked this.
Federal law requires that a borrower receive a
Mortgage Servicing Disclosure Statement within three business days of making an
application for a Reverse Mortgage only. Mortgage Servicing Disclosures are not
required for any other loan type.
Which of the following is NOT an acceptable method to
verify income for a mortgage loan?
W-2's
Cash
receipts with a notarized affidavit from borrowerYou correctly checked this.
Verbal
VOE
Pay
stubs
Cash receipts are not acceptable forms of
verification of income because there is no way of verifying from where the cash
came. W-2's are an acceptable method of documenting income. A verbal VOE may be
an acceptable method if the processor gets the information from the employer,
and pay stubs are a very good source because they will show income for a
specified period of time.
When purchasing a non-owner occupied property, the
housing ratio is calculated with the:
Applicant's
current housing expenseYou should have checked this.
Expense
of the property being purchased
Combined
housing expenses of all properties owned
Current
housing expense and the expense of the new property
The top ratio (housing expense) is calculated based
on the borrower's current primary housing expense. The bottom ratio takes into
account all debts that a borrower may have.
.
In order to meet pre-licensing education requirement,
a person shall complete at least 20 hours of education which shall include at
least:
Four
hours of federal law and three hours of ethics
Two
hours of federal law and two hours of ethics
Three
hours of federal law and three hours of ethicsYou should have checked this.
Three
hours of federal law and two hours of ethics
The minimum educational requirements established to
meet the pre-licensing education for licensure dictate that a person shall
complete at least 20 hours of education, including at least: three hours of
federal law and regulations, three hours of ethics, which shall include
instruction on fraud, consumer protection, and fair lending issues, and two
hours of training related to lending standards for the non-traditional mortgage
product marketplace.
.
A loan originator who applies for license
reinstatement after lapse must complete the continuing education requirements
for which year?
All
years after the initial license lapsed
The
same year as re-licensing
One
year prior to re-licensing
Most
recent year the license was heldYou should have checked this.
Lapse in License-A licensed mortgage loan originator
who subsequently becomes unlicensed must complete the continuing education
requirements for the last year in which the license was held prior to issuance
of a new or renewed license. If the lapse extends beyond the last day of
February, the candidate must begin the entire pre-licensing process over.
.
A borrower applies for a loan and asks about tax
impacts. Which of the following replies should the loan originator offer?
They
should consult their tax advisorYou correctly checked this.
Origination
fees are tax deductible
Get
advice from a trusted friend
Interest
from the loan is tax deductible
Being a licensed loan officer does not qualify one to
give tax advice. If decisions are made based on incorrect tax information given
by a loan officer, there may be some legal consequences. Origination fees and
interest from a loan may be tax deductible, consult a tax advisor for tax
deductibility.
What is the name of Fannie Mae's automated
underwriting system?
Desktop
Utilization
Desktop
UnderwriterYou correctly checked this.
Fannie
Underwrites
Desktop
Utility
Fannie Mae's automated underwriting system is known
as Desktop Underwriter or D.U..
.
Which of the following is NOT calculated into the
APR?
Real
estate commissionYou correctly checked this.
Discount
points
Fixed
interest rate
Lender's
origination fee
The calculation for APR, or Annual Percentage Rate,
takes into account the interest rate plus any other costs associated with
obtaining the loan. The origination fee and discount points obviously are costs
of getting a loan. The real estate commission is independent of the loan.
According to the TRID rules, a business day is
defined as:
All
calendar days except legal public holidays
A
day on which the creditor's offices are open to the public to carry on
substantially all functionsYou correctly checked this.
All
calendar days except Sunday
All
days on which the creditor's Main Office is open
When providing the TRID documents to the consumer, a
business day is defined as a day on which the creditor's offices are open to
the public to carry on substantially all functions.
What happens if an MLO fails to meet the requirements
for license renewal in a given year?
Their
license goes into referral status
Their
license will be revoked
Their
license becomes inactive and will require a new application.
Their
license will expireYou should have checked this.
The license of a mortgage loan originator failing to
satisfy the minimum standards for license renewal shall expire. The
Commissioner may adopt procedures for the reinstatement of expired licenses
consistent with the standards established by the NMLS.
You closed a loan for a customer and scheduled a
dinner with them to celebrate their new home. The day before the dinner you
realize that paying for your clients' meals may be considered a violation of
RESPA. You should:
Call
your clients to make sure they understand that they will have to pay for their
own mealsYou shouldn't have checked this.
None
of the answers are correct
Ask
your clients to pay for your meal
Proceed
as if nothing is wrong and pay for their mealsYou should have checked this.
RESPA prohibits the exchange of anything of value
between actual or potential referral sources. Although customers often refer
others to their loan originator, previous customers are not considered
traditional referral sources and, therefore, you are permitted to give a
borrower a reasonable gift.
.
According to Freddie Mac and Fannie Mae guidelines,
how long must a Chapter 13 bankruptcy be discharged before a borrower may be
approved for a loan?
4
years
1
year
2
yearsYou should have checked this.
10
years
Freddie Mac and Fannie Mae guidelines require chapter
13 bankruptcies be discharged for a minimum of two years before a loan may be
approved. In the case of a chapter 13 dismissal, the waiting period is four
years.
.
A mortgage originator is required to display his or
her unique identifier on all of the following except:
Internal
emailsYou correctly checked this.
Business
cards
Loan
application forms
Advertisements
The unique identifier of any person originating a
residential mortgage loan shall be clearly shown on all residential mortgage
loan application forms, solicitations or advertisements, including business cards
or websites, and any other documents as established by rule, regulation or
order of the Commissioner.
TRID rules define "Consummation" as:
The
day the consumer signs
The
day the consumer becomes contractually obligated on a credit transactionYou correctly checked this.
The
day the loan closes
It
depends on the State
"Consummation" is not the same as
"Settlement" or "Closing", but is defined as "the time
that a consumer becomes contractually obligated on a credit transaction."
.
A borrower applies for a loan. After accessing the
borrower's credit, the loan is denied. Which of the following must occur?
A
loan denial letter (Adverse Action Notice) must be sent to the borrower within
30 daysYou correctly checked this.
The
borrower may not get a loan at another Mortgage Company
A
loan denial letter must be sent to the real estate agent
The
borrower must wait 1 year before applying for an FHA loan
According to ECOA (Equal Credit Opportunity Act),
when credit is denied for any reason, a denial letter with an explanation must
be sent to the borrower no later than 30 days after the application. The
borrower may still be able to get a loan with a different lender. There is no
time period through which the borrower must wait to get an FHA loan. Sending
the loan denial letter to the real estate agent would violate privacy laws.
Which of the following would NOT be an acceptable
trust deed rider?
A
condo rider
A
mortgage insurance riderYou correctly checked this.
A
PUD rider
An
ARM rider
There is no rider for mortgage insurance.
The TRID rules apply to:
Single-family
residences, HELOCs, and Reverse Mortgages
Commercial
loans, HELOCs, and Reverse Mortgages
Single-family
residences, Loans secured by vacant land, and Reverse Mortgages
Single-family
residences, Loans secured by vacant land, and Construction-only loansYou should have checked this.
The final TRID rule applies to all closed-end
consumer mortgage loans secured by real property purchased primarily for
personal, family, or household purposes including construction-only loans,
loans secured by vacant land or by 25 or more acres, and single family
residences. The final TRID rule does not apply to HELOCs, Reverse Mortgages, or
commercial loans.
.
The two parts of license maintenance are:
Continuing
Education and originating a dollar volume at or above state set minimum
requirements for mortgage loan production
Continuing
Education and continuing to meet minimum standards to be granted a licenseYou correctly checked this.
Completing
continuing education with a final exam grade of 80% or better and advertising
with your picture on your business card.
Continuing
education and originating a fee income volume at or above state set minimum
requirements
In order to renew a license, all state-licensed
mortgage loan originators must continue to meet the state's licensing standards
and complete eight hours of continuing education annually.
On an interest-only loan of $216,000, 30 years, at
7.25% interest, what is the daily per diem?
$49.20
$42.09
$42.90You should have checked this.
$1,305.00
$216,000 X 7.25% = $15,660 (one year's interest).
Divide that by 365 = $42.90 (one day's interest).
.
If the Annual Percentage Rate of a loan changes by
more than 1/8th of 1% from the original disclosure, which of the following
would be applicable?
The
borrower can 'lock-in' the loan to avoid further interest increases
The
lender must pay for the borrower's credit report
The
lender is in violation of the law
The
borrower must be given a revised cost disclosure at least three days before the
loan is closed (if the new disclosure is given in person)You correctly checked this.
A borrower is entitled to know of changes in the APR
of more than 1/8th of 1%. A 'lock-in' of interest rates and the cost of the
credit report is not a concern of Regulation Z. No law is violated when there
is a change in the APR, as long as it is appropriately disclosed no less than
three days prior to consummation.
The way to compute loan to value for a refinance
would be?
Multiply
the loan amount by the property value
Divide
the property value by the loan amount
Divide
the loan amount by the property valueYou correctly checked this.
Multiply
the property value by the loan amount
To calculate the LTV for a refinance transaction,
divide the loan amount by the property value.
That the SAFE Act set the floor for states to create
their licensing laws means:
The
states are free to use the SAFE Act as a starting point, but must create their
own laws using the SAFE Act's minimum standardsYou correctly checked this.
The
states will bear all the regulatory and compliance burden
The
states are free to make their own laws, as long as they are not more restrictive
than what the SAFE Act has defined
The
states must strictly follow the SAFE Act as written, with no variations
The SAFE Act sets the minimum standards; states can
create their own laws using the SAFE Act as a foundation.
The Lender takes a loan application from borrower.
The Truth in Lending Act states that the borrower is entitled to the disclosure
of the costs of a mortgage loan in writing from the lender:
Prior
to making application for a loan
Anytime
prior to loan consummation
Within
14 days of the loan application
Within
three business days of the loan applicationYou correctly checked this.
Federal law requires that a borrower receive a
written summary of the estimated loan costs within three business days of
making an application. Fourteen days is too long and violates the law. It would
be difficult to give a good estimate of costs prior to reviewing a completed
application.
A person purchasing an income property was scheduled
to close and fund on June 10th. The daily interest per diem is $56.00. How much
was the per diem interest amount that they had to bring to closing?
$1,680
$1,120Y.
$560
$1,176You should have checked this.
If the loan consummates and funds on June 10th, the
first monthly payment will be due August 1st. Since interest accrues in
arrears, the August payment will cover interest owed from July 1st through July
31st. Since the borrower was lent the money on June 10th, 21 days of interim
interest @ $56.00 per day will be due at closing. Multiplying 21 days x $56.00
= $1,176.00
.
Which of the following is true concerning Service
Release Premium (SRP)?
The
type of loan does not affect the SRP
Loan
term is a factor of the SRP
There
is no such thing as SRP
The
interest rate is a factor of the SRPYou correctly checked this.
The interest rate is a factor of the SRP since the
SRP increases as the rate increases.
An example of a non-conforming loan is:
A
loan to fund an investment property
FHA
JumboYou correctly checked this.
VA
Loans that exceed the FHFA-established annual loan
limits for 1-4 family dwellings are considered jumbo loans. Jumbo loans are one
example non-conforming loans which exceed FHFA-established annual loan limits
and/or FNMA/FHLMC standard underwriting parameters. VA loans are government
loans that are guaranteed through the VA. FHA loans are government loans that
are insured through HUD.
When would a subordination agreement be appropriate?
When
a first mortgage is paid off and the holder of the second mortgage wants to
ensure they will have first priority.
Subordination
clauses are never used in the creation of loans since they create confusion
regarding lien priority.
When
a second mortgage is obtained and the lender wants to ensure that it will be
second in priority.
When
a first mortgage is refinanced and the lender doesn't want to lose priority to
an existing second mortgage.You correctly checked this.
To subordinate is to be in a junior lien position in
relation to chronological order of recordation. When a second lien is created,
the original lien takes the first lien position. In order for the a new
mortgage intended for first line position to achieve first lien position, the
second lienholder would be requested to sign a subordination agreement agreeing
to remain in the second lien position.
For each mortgage loan originator, a surety bond
shall be maintained in an amount:
Prescribed
by the dollar amount of loans originated as determined by the commissionerYou should have checked this.
Of
no less than $150,000
Of
no less than $50,000You shouldn't have checked this.
Prescribed
by the fee income generated by loans originated as determined by the
commissioner
Each mortgage loan originator must be covered by a
surety bond. In the event that the mortgage loan originator is an employee or
exclusive agent of a person subject to the SAFE Act, the surety bond of such
person subject to this Act can be used in lieu of the mortgage loan
originator's surety bond requirement. The surety bond shall provide coverage
for each mortgage loan originator in an amount that reflects the dollar amount
of loans originated as determined by the Commissioner.
.
On any loan, an adjustable rate disclosure has to be
issued if:
There
are any periodic rate changes during the term of the loanYou correctly checked this.
A
Treasury Bill is used as the index
The
rate increases more than 0.5% per year
The
rate decreases by 0.5% per year
If the interest rate can change at any time during
the term of the loan, the adjustable rate disclosure must be given along with
the other disclosures within three business days of application. How much the
rate may increase or decrease is not material, and neither is the index used
for the loan.
.
A borrower who qualifies for B, C, D paper or less
favorable terms and interest rates is referred to as a:
Non-Conforming
Borrower
Conforming
Borrower
Secondary
Borrower
Subprime
BorrowerYou correctly checked this.
Non-Conforming includes jumbo loans. Conforming
considers conventional loans and the term, "secondary borrower"
refers to a co-borrower. Subprime is the correct answer but at this time there
are relatively few subprime loan options.
Inducements to buy, as relates to the mortgage
business, are:
Offers
by sellers to contribute to the closing costs of the buyerYou should have checked this.
Illegal
forms of advertising by real estate agents and companies.
Special
gadgets built into the property to make it more appealing
Offers
by sellers to pay the buyers' down payment
Inducements to buy are agreements for the seller to
contribute to the buyers' closing costs. Since the question had to do
exclusively with the mortgage business, they would then have nothing to do with
the real estate agent or the contractor. The sellers are not allowed to pay the
down payment for the buyers under any loan program.
.
A fee charged to the borrower to cover such costs as
preparation of documents and other services provided by the primary lender and
that is computed as a percentage of the loan is known as:
P.O.C.
(paid outside of closing)
Yield
spread premium
An
origination feeYou correctly checked this.
Discount
point(s)
The origination fee is charged by lenders to cover
their costs and provide some profit since the loan will be sold, and no income
earned from the interest. Discount points are paid to reduce the interest rate
blow par; p.o.c. are items paid outside of closing such as the cost of the
appraisal and credit report, and the yield spread premium (YSP) is a fee paid
by the lender to a mortgage broker.
RESPA regulations require that an annual escrow
statement be provided to the borrower within what time frame?
Annually
Within
15 days after acceptance of the application
Within
10 days of the end of the computation year
Within
30 days before the end of the computation yearYou correctly checked this.
For each escrow account, a servicer shall submit an
annual escrow account statement to the borrower within 30 days of the
completion of the escrow account computation year.
You interview a customer and collect all of the
necessary information to complete the 1003 and access his credit. Before
ordering the credit report, however, you specifically ask the client if it is
okay to do so and they consent. You should now:
Have
the customer sign a Borrower's Authorization form and then pull creditYou should have checked this.
All
are acceptable except, "Hang up the phone and run their credit"
Hang
up the phone and run their credit.
Ask
the borrower to repeat their verbal consent, record it, and then pull credit
Although a verbal approval to access someone's credit
is technically acceptable, unless it is recorded, it should always accompany a
signed authorization. If an inquiry is contested, the entity and individual who
accessed the contesting individual's credit report will have to demonstrate
having had permission. Simply explaining that one had verbal permission will
not protect that entity from sanctions for illegally accessing another
individual's credit. The Fair Credit Reporting Act mandates that, in order to
access someone's credit, one must have permission and a permissible purpose.
.
When verifying income for a loan, the borrower's
pay-stubs must NOT:
Be
handwritten by an HR employeeYou correctly checked this.
Identify
the time period
Clearly
identify the borrower as employee
Show
Year-To-Date earnings
Pay-stubs may not be handwritten by anyone. They must
clearly identify the borrower as the employee, identify a time period, and show
year-to-date earnings. If this is not possible, additional verification may be
required.
If the borrower's monthly gross income is $6,000 and
the monthly housing expense is: mortgage P&I payment - $900; monthly
property tax - $110; monthly hazard insurance - $28; and monthly mortgage
insurance - $60, what is the front end debt-to-income ratio?
17.30%
18.30%You correctly checked this.
15%
16%
Divide the total of the monthly housing expense ($900
+ $110 + $28 + $60 = $1,098) by the borrower's gross monthly income ($6,000) =
18.3%
When an underwriter is manually underwriting a
Freddie Mac/Fannie Mae loan without compensating factors, what is the maximum
housing ratio allowed?
41%
28%You should have checked this.
36%.
38%
28% is the maximum housing ratio allowed when
manually underwriting a loan without other compensating factors. Compensating
factors such as a large down payment, payment history, and high credit scores
may allow an underwriter to justify a higher debt ratio.
.
Which of the following are NOT required in connection
with an application to a state for licensing as a mortgage loan originator?
Fingerprints
for FBI investigation
Submission
of the previous two year's tax returnsYou correctly checked this.
Authorization
for the system to obtain an individual credit report
A
list containing personal history and experience
Fingerprints, personal history and experience along
with a credit report are all required as part of one's application to a state
for a mortgage originator license. Tax return information is never required.
Licensees may not advertise, solicit, or enter into a
contract for specific interest rates, points, or other financing terms unless:
The
borrower signs a disclosure that they understand that the terms may not be
available
The
terms are actually availableYou correctly checked this.
The
originator agrees to put forth a best effort to secure the rates, points, or
financing terms
Licensees
must never obligate themselves to financing terms in any situation
It is a violation of this Act for a person or
individual subject to this Act to: solicit, advertise, or enter into a contract
for specific interest rates, points, or other financing terms unless the terms
are actually available at the time of soliciting, advertising, or contracting.
Who provides the Closing Disclosure?
Creditor
or Settlement AgentYou should have checked this.
Broker.
Creditor
Settlement
Agent
Creditors must provide a final disclosure reflecting
the actual terms of the transaction called the Closing Disclosure. The Creditor
can prepare and deliver the CD, Settlement Agents can prepare and deliver it on
the Creditor's behalf, or a Creditor and Settlement Agent can divide the
responsibility. Either the Settlement Agent or the Creditor can provide the CD.
An adjustable rate mortgage has two components to it,
the index and the margin. After consummation, which of these can change?
Margin
only
Index
onlyYou correctly checked this.
Both
index and margin
Neither
because the loan is 'closed'
After the loan is closed the change that can occur on
an ARM loan is to the index.
The interest rate given by banks to their customers
is called the:
Overnight
floating rate
FDIC
discount rate
Par
interest rate
Prime
rateYou correctly checked this.
The prime rate is a retail rate given by banks to
their standard customers. The FDIC discount rate is the rate charged by the
Federal Deposit Insurance Corporation to banks, and the par rate is a term used
by lenders to indicate an interest rate without cost or yield spread premium
paid. The float rate is what the Fed pays banks who deposit with the Federal
Reserve overnight.
Sam and his brother John want to purchase a property
they intend to rent. They apply for a purchase money mortgage with a fixed rate
loan and Sam emails you the Purchase Contract with a 30-day close of escrow.
Today is Monday. Assuming they have given you all the information you need to
proceed, including intent, what is the last date on which you must deliver the
Loan Estimate?
Tuesday
ThursdayYou correctly checked this.
Wednesday
Monday,
today, because you took the application face-to-face
If today is Monday, and you have 3 business days to
deliver the Loan Estimate, then Sam and John must receive the LE by Thursday at
the latest.
When an underwriter manually underwrites a Freddie
Mac/Fannie Mae loan without compensating factors, what is the maximum debt
ratio allowed?
34%
38%
41%
36%You correctly checked this.
36% is the maximum debt ratio allowed when manually
underwriting a loan without other compensating factors. Compensating factors
such as a large down payment, payment history, and high credit scores may allow
an underwriter to justify a higher debt ratio.
When a file is being manually underwritten, the
Fannie/Freddie maximum qualifying ratios are:
28/36You correctly checked this.
28/45
29/41
25/39
The ratios used for manually handwritten
Fannie/Freddie loans are 28/36. 29/41 are the ratios for an FHA loan, and 28/45
and 25/39 are not used as underwriting guidelines.
Under RESPA, the aggregate escrow limits at
consummation are:
Zero
dollars or one month's taxes and insurance
Zero
dollars up to two month's taxes and insuranceYou correctly checked this.
$100
and three months taxes and insurance are the minimum amount allowed
1%
of the entire principal balance can be maintained in the account
RESPA states that a lender can require up to 1/6th of
the total annual payments in escrow to act as a cushion in anticipation of tax
and insurance increases.
When there is a clause in a mortgage that requires
the borrower to pay an extra fee if the loan is paid off early, it is known as
a:
Early
payoff charge
Post
payment rate
Prepayment
privilege
Prepayment
penaltyYou correctly checked this.
This is clearly the definition of a prepayment
penalty. The prepayment privilege grants the borrower the right to pay off the
loan early without penalty. The other two are simply made up distracters.
On an interest-only loan of $216,000, 30 years, at
7.25% interest, how much interest would be paid in nine months?
$11,236.96
$12,933.75
$12,997.63
$11,745.00You correctly checked this.
$216,000 X 7.25% = $15,660 (one year's interest).
Divide that by 12 = $1,305 (one month's interest). Multiply that by 9 =
$11,745.
According to ECOA, how long after a loan application
must the loan be decisioned?
30
daysYou correctly checked this.
60
days
120
days
90
days
ECOA defines a application as live from the moment
that he lender has all necessary information to render a loan decision. Within
30 days of an application becoming live, a lender must issue either a Notice of
Action Taken informing the applicant that their loan application has been
approved or an Adverse Action Notice informing them that their loan application
has been declined.
If the borrower's monthly gross income is $6,000 and
the monthly housing expense is: mortgage P&I payment - $900; monthly
property tax - $110; monthly hazard insurance - $28; monthly mortgage insurance
- $60, and the borrower's consumer expense - $545, what is the
borrower's total debt ratio?
18.30%
27.38%You should have checked this.
13.80%
24.70%
Divide the total of all expenses - housing ($900 +
$110 + $28 + $60 = $1,098) plus consumer debt ($545) by the borrower's gross
monthly income ($6,000) [$1,643/$6,000] = 27.38%
All of the following are examples of prohibited
conduct EXCEPT:
Omission
of a material fact from a license application
Advising
a customer with a 575 credit score that you do not have a loan program to offer
herYou correctly checked this.
Knowingly
making an untrue statement in a license application
Performing
in a negligent manner
Although ECOA prohibits discouraging anyone from
submitting an application, if a lender had an across-the-board policy that it
would not lend to anyone under certain, legitimate circumstances, it could
advise a prospective applicant that there were no programs available based on
that individual's defining characteristic.
Which of the following is NOT true concerning SRP?
Brokers
may receive an SRPYou should have checked this.
Lenders
get the SRP when the loan is sold
The
Lender that services the loan does not receive the SRP
Brokers
do not get the SRP
SRP (servicing release premium) is obtained through
the sale of the servicing rights of a loan. Because brokers do not own the
servicing rights, they do not receive an SRP. Lenders who sell their servicing
rights may receive an SRP.
The APR is the interest rate plus the finance charges
computed and expressed as:
A
dollar amount
An
annual payment
The
amount financed
A
percentageYou correctly checked this.
The APR or Annual Percentage Rate is expressed as a
percentage, not as a dollar amount. It is reported on the Closing Disclosure
along with the amount financed. An annual payment is the total amount paid in a
calendar year or a single annual payment.
The Creditor must provide the Closing Disclosure to
the consumer:
No
later than 3 business days before consummationYou correctly checked this.
At
least 24 hours before consummation
No
later than 4 business days before consummation
No
later than 48 hours after consummation
A Closing Disclosure must be provided to the consumer
at least 3 business days prior to consummation. Prior to consummation, an
additional 3-business-day waiting period applies when there are changes to the
CD that result in an increase to the APR that becomes inaccurate, the addition
of a prepayment penalty, or the change of a loan product. For other changes
prior to consummation, provide the updated information in a revised CD no later
than consummation to the consumer. Upon the consumer's request, by the business
day before consummation, a creditor must permit the consumer to inspect the CD.
The APR includes all fees that are associated with
residential financing. Not included are costs which would occur with a:
First
time homebuyer
Construction
loans
Home
refinance loan
Cash
buyerYou should have checked this.
A cash buyer pays fees to obtain a new loan, but,
since there is no cost of financing, there is no APR (Annual Percentage Rate)
nor need for Truth in Lending Disclosure. First time homebuyers, those
borrowing money to construct a home, and those refinancing a home, normally
have loan fees and costs associated with obtaining the new loan.
One of the main purposes for establishing a mortgage
licensing system and registry was to:
Reduce
regulation, manage surety bonds and state funds, and disburse licensing fees
Increase
uniformity, reduce regulatory burdens, and enhance consumer protectionsYou should have checked this.
Increase
consumer protections, enforce the SAFE Act, and provide background checks
Create
Unique Identifiers, license MLOs, and provide sample regulation.
The NMLS was not created to license MLOs as that is
the states' responsibility. The NMLS is neither an enforcement body nor a
financial organization. Fees are collected on behalf of some states, but
managing a state fund is beyond the purview of the NMLS.
The term loan processor or underwriter means an
individual who performs clerical or support duties at the direction of and
subject to the supervision and instruction of:
A
state-licensed or registered lenderYou correctly checked this.
The
Department of Banking in the state in which the employee resides
The
Department of Banking in the state in which the employee works
A
clerical employee needs no supervision as they are required to be licensed
In general, the term loan processor or underwriter
means an individual who performs clerical or support duties as an employee at
the direction of and subject to the supervision and instruction of a person
licensed, or exempt from licensing under state law.
Which of the following documents would contain the
details about the loan (e.g. loan amount, payment, when due, late penalty,
interest rate, etc.):
Loan
package
Mortgage
Trust
Deed
Promissory
noteYou correctly checked this.
The promissory note is the primary evidence of a
loan. It may or may not require collateral. A signature loan has no collateral.
A trust deed and a mortgage are two types of security documents using the real
property as collateral. The loan package is the completed loan application.
A borrower wants to purchase a secondary 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 secondary
residence. However, if the property is classified as an investment property,
the borrower is unlikely to qualify. What should you do?
Deny
the borrower because it is neither legal to rent out a secondary residence or
reside in a rental property for any length of time
Classify
the property as a secondary residence because it is not legal for the borrower
to personally reside in a property classified as a rental for any length of
time
You
should classify the property as a rental property even though the borrower
intends to reside there part of the yearYou correctly checked this.
Classify
the property as a secondary residence since the borrower intends to use the
property for part of the year
Once a loan originator has knowledge, he or she may
never ignore said knowledge in pursuit of easier or more lucrative financing.
Since the borrower disclosed their intent to rent out the property, the loan
originator must consider the application as an application to secure an
investment property even though they may also intend to use it themselves for a
part of the year. The lender must always take the most conservative approach.
Buyers purchased a home for $175,900. They put 10%
down, and were charged an origination fee of 1% and discount points of 2.5%.
How much money did the buyers have to bring to cover the origination fee and
discount points?
$5,540.85You correctly checked this.
$18,350
$24,130.25
$6,156.50
$175,900 purchase price minus 10% ($17,590) down =
$158,310 loan. The loan amount multiplied by 3.5% for the origination fee and discount
points combined = $5,540.85.
Each licensee shall make books and records available
to the inspection of the commissioner:
Only
with proper legal subpoena
Within
30 days notice
Upon
requestYou correctly checked this.
Within
14 days notice
For purposes of initial licensing, license renewal,
license suspension, license conditioning, license revocation or termination, or
general or specific inquiry or investigation to determine compliance with this
Act, the Commissioner shall have the authority to access, receive, and use any
books, accounts, records, files, documents, information or evidence including
but not limited to: (a) Criminal, civil and administrative history information,
including non conviction data; (b) Personal history and experience information
including independent credit reports obtained from a consumer reporting agency
described in the Fair Credit Reporting Act and (c) Any other documents,
information, or evidence the Commissioner deems relevant to the inquiry or
investigation regardless of the location, possession, control, or custody of
such documents, information, or evidence.
Score:
100% • Weight in test: 100% × 0.8 = 0.80%
Question 108 .
On a fixed-rate loan, the Truth in Lending Act
protects the borrower through:
Establishing
usury laws
Annual
caps on rate adjustments
Disclosure
of costs of the loanYou correctly checked this.
Low
interest rate guarantees
According to Reg. Z, borrowers are entitled to the
disclosure of total loan costs. Annual caps on rate adjustments and loan
comparison charts apply to adjustable rate mortgages (ARMs). Low interest rate
guarantees are a marketing tool of lenders. Usury laws limit how high an
interest rate a lender can charge.
According to ECOA when must you provide a copy of the
appraisal to your borrower?
Within
three business days of consummation
Promptly,
upon completion.You should have checked this.
At
consummation
Within
one business day prior to consummation
Promptly means promptly upon completion, or at least
three business days before consummation
The APR includes all fees that are required in order
to get the loan. Not included are costs which would occur with a:
Cash
buyerYou correctly checked this.
First
time homebuyer
Construction
loans
Home
refinance loan
The APR measures the cost of credit. A cash buyer
does NOT obtain financing, or credit. Therefore, there is no APR nor any need
for other disclosures. First time homebuyers, those borrowing money to
construct a home, and those refinancing a home, normally have loan fees and
costs associated with obtaining the loan.
In the mortgage business, to what does the word
'term' refer?
The
time it takes from application to settlement
The
length of time of the loanYou correctly checked this.
The
various terms of the promissory note
The
amount of time your mortgage license has left until it expires
The word "term" is used to indicate the
length of time the loan will be in effect. In any contract, including a
promissory note, the 'terms' are the various points of agreement. The other two
answers are irrelevant in relation to mortgage lending and the word
"term."
Considering a conventional loan, what source of down
payment is NOT acceptable?
Cash
on hand which is not verifiableYou correctly checked this.
A
secured loan
Bonus
from an employer that does not have to be repaid
The
sale of an asset
Unverifiable cash is money that has not been sourced
and seasoned. A bonus from an employer that is verified as a gift, not a loan,
is acceptable. A loan would have to be included in the debt ratios, and selling
an asset is acceptable.
A par interest rate would be:
The
interest rate before any fees
The
rate charged by banks to their standard customers
An
interest rate with no YSP or SRPYou should have checked this.
The
rate quoted in radio ads to induce clients to call but which will require
discount points
A par interest rate is one that requires no discount
points to obtain the loan. Loan rates quoted in radio ads frequently are below
par and require discount points. The rate banks charge their standard customers
is the prime rate.
When performing an appraisal, the appraiser, unless
specifically instructed otherwise, will consider the financial part of the
transaction to be:
Cash
or cash equivalentYou correctly checked this.
The
appraiser is not concerned with the financial part of the transaction
A
loan with a reasonable down payment
A
high down payment of at least 20%
Appraisers almost always approach an appraisal as
though the purchase of the property would be on the basis of a cash or cash
equivalent. Down payments do not influence the decisions of appraisers.
When a loan exceeds the FHFA's annual loan limits,
the loan is considered to be:
Subprime
Suspended
JumboYou correctly checked this.
Conforming
Jumbo is the correct answer. Conforming loans are
within the loan limits; subprime relates to the qualifications of the borrowers
being less than what's typically required, and suspended is not applicable to
this question.
As it relates to a loan, the right of redemption is
the right of:
The
lender to sell the property during the redemptive period
The
lender to foreclose on a property
The
borrower to renegotiate the terms of the loan
The
borrower to redeem their property during the redemption periodYou correctly checked this.
The right of redemption is exercised during the period
of redemption which may fall before or after foreclosure takes place depending
on state law. During a period of redemption, the mortgagor, trustor, and
borrower has the right to pay off the mortgage, or in some cases, to catch up
with back payments and penalties and have the loan reinstated. The lender may
not sell the property during the redemption period.
Up to what back-end DTI may be acceptable with
compensating factors?
49%You should have checked this.
36%
50%
40%
Any back-end DTI of 50% or higher is deemed
ineligible for approval. Approving a back-end DTI of 49%, however, would
require considerable compensating factors.
SRP stands for:
Servicing
Release Product
Service
Release PremiumYou correctly checked this.
Standard
Rate Product
Standard
Rate Premium
SRP stand for Service Release Premium. The SRP is the
premium a lender gets when the servicing rights of a loan are sold.
In accordance with RESPA, which of the following,
could NOT provide settlement services for the purchase of an owner occupied
property?
The
lender originating the loan
A
licensed escrow officer
Someone
who holds power of attorneyYou correctly checked this.
A
licensed attorney
Power of attorney only authorizes someone to sign
documents for another person who's absent. All of the other mentioned
professionals can close a transaction.
According to Regulation B, which of the following is
not recommended?
Asking
if the applicant is married
Asking
if a borrower intends to have more childrenYou correctly checked this.
Including
income from alimony or child support if it is to be computed into the income
Asking
about the number of children in the family
Inquiring about or rendering a decision to lend based
upon the reproductive intentions of a borrower is strictly prohibited by ECOA.
The minimum passing score on the SAFE Act national
exam is:
70%
80%
90%
75%You correctly checked this.
Mortgage Loan Originators have to pass a required
national and state exam. Though the number of test questions are not stipulated
in the SAFE Act, current guidelines are that the national exam will have 100
questions and that states will have, 45, 50 or 55 questions. The national test
details include the following: (a) It is a Pass or Fail exam; (b) A score of
75% or more is needed to pass.
A family friend and his spouse have been struggling
financially. In an effort to make ends meet, they have come to you to lower
their monthly house payment by refinancing. You typically charge your clients a
1% origination fee. However, under these circumstances, you would like to only
charge your friend a 0.25% origination charge to help them out. This action
would be considered:
Legal
but unethicalYou correctly checked this.
Illegal
and unethical
Legal
and ethical
Illegal
but ethical
You can decide what kind of compensation you wish to
earn and adjust your origination fee accordingly. However, since you are doing
this because the customers are your friends and not simply because they are in
need breaches ethical considerations.
After failing three consecutive licensing exams, an
individual shall wait at least how long before being eligible to take the test
again?
Three
months
One
month
Six
monthsYou correctly checked this.
One
year
After failing three consecutive tests, an individual
shall wait at least six months before taking the test again.
The term APR refers to:
Annual
Percentage RateYou correctly checked this.
Annual
Payment Requirements
All
Purpose Refinance
Annuity
Plans for Retirement
APR stands for Annual Percentage Rate, sometimes
referred to as the effective rate. The remaining answers do not reference
anything in particular.
The entity that services a loan, basically takes on
the duties of the:
Mortgagor
MortgageeYou should have checked this.
Obligor
Trustor
The servicing entity fulfills the duties of the
lender or mortgagee. The mortgagor, trustor, and obligor are all other names
for the borrower.
BORROWER
think BORROWOR OBLIGOR TRUSTOR MORTGAGEOR
