1700+ MCQs 3of4 Flashcards

Question

In most cases, a mortgage loan requires monthly payments. All of the following loan types require monthly payments, except: 1. HECMs 2. ARMs 3. Fixed-rate loans 4. HELOCs

Answer 1

The answer is **HECMs**. The home equity conversion mortgage (HECM) does not require repayment as long as the borrower continues to live in the home.

Answer 2

The answer is **help the borrower cover or reduce the costs of settlement**. The general purpose of borrower credit is to help the borrower by subsidizing closing costs by choosing to lock a loan at a slightly higher rate than par.

Answer 3

The answer is **high-cost mortgage**. Section 32 of the Truth-in-Lending Act contains information and provisions with regard to high-cost mortgage loans. These loans are identified by APR, points and fees, and/or prepayment penalties that meet or exceed thresholds set to a level deemed excessive.

Answer 4

The answer is **higher-priced mortgage loan**. Special second appraisal requirements apply for a loan that is a higher-priced mortgage loan.

Answer 5

The answer is **HMDA**. The Home Mortgage Disclosure Act is a reporting law that helps the federal government, among other things, identify discriminatory lending practices.

Answer 6

The answer is **HOA fees**. In addition to principal and interest, a borrower’s monthly mortgage payment may also include a reserve payment (also known as an escrow or impound payment) that represents approximately 1/12 of the estimated annual hazard and flood insurance premiums, mortgage insurance premiums, and property taxes. While some escrow accounts may include assessments for special improvements, homeowners’ association fees, and other recurring charges, these are not a standard component of the escrow account.

Answer 7

The answer is **HOEPA**. HOEPA prohibits the intentional targeting of poor or underserved areas with expensive high-cost loans, which is a practice known as reverse redlining.

Answer 8

The answer is **HOEPA**. The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 and was the first legislation specifically created to combat the practice of predatory lending.

Answer 9

The answer is **home equity conversion mortgage**. The home equity conversion mortgage (HECM) is the most commonly used of the three forms of reverse mortgages.

Answer 10

The answer is **Home Ownership and Equity Protection Act**. A lender may not extend credit subject to HOEPA based on the value of the consumer’s collateral without regard to his/her repayment ability as of the date of consummation, including consideration of his/her current and reasonably expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender, and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less.

Answer 11

The answer is **housing expense ratio and total debt ratio**. Qualifying ratios consist of the housing expense ratio and the total debt ratio.

Answer 12

The answer is **housing ratio**. The front-end ratio is also known as the housing ratio.

Answer 13

The answer is **HUD**. Before accepting a loan that is a high-cost mortgage, borrowers must complete counseling with a counselor approved by HUD.

Answer 14

The answer is **hybrid ARM**. A hybrid ARM has a rate that does not adjust during the first three to five years of the loan term, but is thereafter adjusted periodically (often annually) based on a specific index and margin.

Answer 15

The answer is **Hybrid ARM**. The term “nontraditional” primarily refers to payment structure or qualification documentation. In other words, traditional loans will include a payment structure that regularly decreases the principal balance and will require a borrower to prove that he/she can pay off the loan to qualify.

Answer 16

The answer is **identify discriminatory lending practices and determine if financial institutions are meeting the borrowing needs of their communities**. Regulation C pertains to the Home Mortgage Disclosure Act (HMDA). Through the collection of information about loan applications and settlements, HMDA attempts to identify if companies are using discriminatory lending practices and to determine if they are meeting the mortgage lending needs of their communities.

Answer 17

The answer is **identify possible discriminatory lending patterns**. The HMDA was enacted because of credit shortages in certain urban neighborhoods and the failure of some financial institutions to provide adequate home financing to qualified applicants on reasonable terms and conditions. Its main purpose is to provide the public with information about how well financial institutions are meeting the credit needs of the people in the neighborhoods and communities they serve; aid public officials in targeting public investments so as to attract investments from the private sector; and allow for the public to determine possible discriminatory lending patterns and to assist in enforcing laws against discrimination.

Answer 18

The answer is **if a licensee fails to request a hearing with the state regulator**. The NMLS does not require a hearing. Under most circumstances, the licensee has the right to request a hearing with the state banking department. If one is not requested, a hearing is not conducted.

Answer 19

The answer is **if the borrower chooses the rate and plans to use the additional premium to offset closing costs**. While a licensee is ethically obligated to offer borrowers the best rates available to them, the concept of suitability emphasizes that the licensee must make a conscientious effort to ascertain and understand all relevant circumstances surrounding the client, and take these circumstances into account. This may include suggesting loan products that might not initially seem to be the best option, but effectively serve a particular borrower’s circumstances.

Answer 20

The answer is **if the borrower chooses the rate in order to secure a borrower credit for closing costs**. If the borrower is fully aware of and received all information about the costs of the loan, including borrower credit, and chooses to select a closing cost option that allows for a subsidy using the borrower credit to offset closing costs, then borrower credit has been handled ethically.

Answer 21

The answer is **if the borrower owns more than 25% of a company**. A self-employed borrower (i.e., one who owns 25% or more of a business) may need to verify his/her employment with a copy of a current business license, a year-to-date profit-and-loss statement prepared by an accountant, and balance sheets and personal and/or business tax returns for the past two years.

Answer 22

The answer is **if the borrowers are equally qualified, fees should be comparable**. Ethically speaking, if borrowers are equally qualified and choosing the same products, fees should be comparable.

Answer 23

The answer is **if the borrowers are equally qualified, fees should be comparable**. Ethically speaking, origination fees should reflect objective factors pertaining to loan terms and borrower qualification, rather than non-pertinent factors, including a relationship with the originating licensee.

Answer 24

The answer is **if the consumer requests a waiver due to a bona fide financial emergency**. The mandatory waiting period between issuance of disclosures and consummation may be waived if the consumer requests a waiver due to a bona fide financial emergency.

Answer 25

The answer is **if they ask for monitoring purposes**. Under ECOA and the Home Mortgage Disclosure Act (HMDA), in order for the government to be able to monitor compliance with fair lending laws, it is permissible for a mortgage licensee to ask applicants for information about their marital status, age, ethnicity, race, and sex.

Answer 26

The answer is **immediately provide an affiliated business arrangement disclosure if he refers them to the title company in which he has an ownership interest**. Many service providers have a business relationship and an ownership interest in other settlement service providers. For example, a mortgage company may have an ownership interest in a title company. Profit-sharing by these affiliated companies is permissible under RESPA. This relationship must be disclosed to a borrower through an "affiliated business arrangement disclosure."

Answer 27

The answer is **in an amount that reflects the dollar amount of loans originated**. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated.

Answer 28

The answer is **in full at the time of closing**. UFMIP is paid in full at the time of closing, or may be financed.

Answer 29

The answer is **independent contractor**. An independent contractor is an individual who performs his/her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed and registered as required under the SAFE Act or is exempt from licensing. An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless he/she has a mortgage loan originator license.

Answer 30

The answer is **indicated an intent to proceed with the loan**. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating an intent to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee.

Answer 31

The answer is **individual states may determine whether experienced MLOs can have education hours waived**. Licensing requirements under the S.A.F.E. Act include both a comprehensive background check and 20 hours of NMLS-approved pre-licensing education, which include three hours of federal law and regulations, three hours of ethics, and two hours of training related to lending standards for the nontraditional mortgage product. The Nationwide Multistate Licensing System and Registry (NMLS or NMLSR) allows consumers to research information on licensees, including a loan originator’s disciplinary actions. The authority granted to individual states does not include waiving education hours, which are among the minimum licensing requirements pertaining to all loan originator licensees.

Answer 32

The answer is **insures the loans, thereby protecting the lender**. FHA loans are loans that meet FHA program criteria and are made by approved lenders. For these loans, the FHA insures the issuing lender against loss in the event of default. Under the FHA program, the lender can charge whatever points and interest a borrower is willing to pay, as the cost of the loan is negotiable. The advantage to the borrower is that the lender will make the loan with a very high loan-to-value ratio because it is insured.

Answer 33

The answer is **Interest Rate Reduction Refinance Loan**. In terms of VA loans, IRRRL stands for Interest Rate Reduction Refinance Loan, often referred to as “streamline” or a “VA to VA.”

Answer 34

The answer is **interest rate**. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. The mortgage or trust deed secures repayment of the note. Housing costs, including principal, interest, taxes, and insurance, are not typically specified on the deed of trust.

Answer 35

The answer is **interest, principal, escrow**. In a standard deed of trust, payments are applied to interest first, then to principal, and then to escrow items, such as tax and insurance payments.

Answer 36

The answer is **interest-only fixed-rate 30-year mortgage loans**. The S.A.F.E. Act defines a nontraditional loan as any loan product other than a 30-year fixed mortgage. All ARMs have rates that are adjustable. A reverse mortgage does not have a 30-year loan term and may have either a fixed rate or adjustable rate of interest. An interest-only loan is considered a traditional loan under the S.A.F.E. Act definition if it has a fixed rate and a 30-year term, even though the period of interest-only payments would be only five, 10, or 15 years. High-risk loans that might still be considered “traditional” under the S.A.F.E. Act include interest-only fixed-rate, no-money-down, subprime, and alternative-documentation (Alt-A) loans.

Answer 37

The answer is **interest-only option** **fixed-rate**. The loan has a rate of 6% for 30 years, meaning it has a fixed rate. This loan has an interest-only feature for the first five years.

Answer 38

The answer is **investigative consumer report**. A consumer report using information obtained through personal interviews is known as an investigative consumer report and is meant to give insight into a person’s character, general reputation, personal characteristics, and mode of living.

Answer 39

The answer is **is an individual who takes residential mortgage loan applications**. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes residential mortgage loan applications, or offers or negotiates terms of residential mortgage loans for compensation or gain.

Answer 40

The answer is **is based on verifying income, assets, and current obligations**. A lender extending mortgage credit subject to HOEPA in an open-end high-cost mortgage may not extend credit based on the value of the consumer’s collateral without regard to repayment ability as of the date of consummation, including consideration of current and reasonably-expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender, and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less.

Answer 41

The answer is **is nonconforming**. Conventional loans that conform to the eligibility guidelines for purchase by Fannie Mae or Freddie Mac are considered conforming loans. Fannie Mae and Freddie Mac have a maximum loan limit for loans they will purchase, which is adjusted annually. Loans to persons with satisfactory credit but that exceed this loan limit are called jumbo loans or nonconforming loans.

Answer 42

The answer is **is not confidential and is available for public access**. The requirements under any federal and/or state law regarding the privacy or confidentiality of any information or material provided to the NMLS continue to apply after such information has been disclosed to the NMLS. However, information or material held by the NMLS relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator, is not protected by confidentiality and is available for public access.

Answer 43

The answer is **it has a major role in overseeing the mortgage industry**. Although the federal Department of Housing and Urban Development (HUD) no longer oversees the mortgage industry (that job has been taken over by the Consumer Financial Protection Bureau, or CFPB), it continues to operate in a number of important areas relating to housing. These areas include programs related to community planning and development, public housing and multi-family housing, and providing counseling for those seeking to purchase a home. The Federal Housing Administration (FHA) also operates under HUD; the FHA sponsors loan programs with relatively liberal qualification requirements, insuring financial institutions that offer loans to individuals who might not qualify for a prime loan.

Answer 44

The answer is **it has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points**. Having an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points is not a characteristic of an HPML.

Answer 45

The answer is **it has been consistent for at least two years and is likely to continue**. Overtime income is only considered if it has been consistent for at least two years, and the employer verifies that it is likely to continue.

Answer 46

The answer is **it is 1% of the loan amount; points are paid to reduce the rate**. A point is 1% of the loan amount. Points are paid to reduce the rate.

Answer 47

The answer is **it is both a promise to repay the money borrowed with interest and evidence of the debt**. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt.

Answer 48

The answer is **it is nonrefundable**. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender's exposure to loss in the event of a borrower's default that results in foreclosure. However, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed, instead of a mortgage insurance premium for the guarantee. A veteran receiving VA compensation for a service-connected disability is exempt from the fee requirement.

Answer 49

The answer is **it is not necessary to renew**. Owner’s title insurance is good for the period of time that a borrower owns the home, meaning it must only be purchased once and does not require renewal.

Answer 50

The answer is **it is the ratio of the borrower’s principal loan balance to the appraised value of the property**. The LTV ratio is the ratio of the borrower’s principal loan balance to the appraised value of the property.

Answer 51

The answer is **it may be communicated however the borrower chooses**. A prospective borrower can indicate his/her intent to proceed with a loan in a number of ways, including orally, in person, at the time the Loan Estimate is delivered; by telephone; and in a written communication via e-mail. However, the applicant’s silence (i.e., failure to communicate that he/she will not proceed) may not be used as an indication of intent to proceed.

Answer 52

The answer is **it may engage in both nonprofit and for-profit activities**. The S.A.F.E. Act provides an exemption for the licensing of loan originators that are employees of a bona fide nonprofit organization. This exemption would not apply to any for-profit activities.

Answer 53

The answer is **it must be given within 30 days of the transfer**. When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer. This statement must show the name, address, and toll-free telephone numbers of both the old servicer and the new servicer, as well as the date on which the new servicer will begin accepting payments. The statement also informs the borrower that he or she cannot be penalized for making a timely payment to the prior servicer within 60 days of the servicing transfer.

Answer 54

The answer is **it replaces the GFE and the early TIL Disclosure** **for most transactions**. The Loan Estimate replaces RESPA’s GFE and the early TIL Disclosure for most transactions. It combines the information provided by these two disclosures and is designed to help the consumer understand the key features, costs, and risks of the loan for which they are applying. It is not identical to the Closing Disclosure, which sets forth the actual costs of the subject mortgage lending transaction, rather than estimates.

Answer 55

The answer is **it requires the disclosure of the APR on all advertisements which contain an interest rate**. Regulation B implements the provisions of ECOA. Under ECOA, a creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit. The creditor must mail or provide a notice of the applicant’s right to receive a copy of all written appraisals developed in connection with the application no later than three business days after receiving a completed application. ECOA also requires creditors to notify loan applicants within 30 days regarding application status (i.e., incomplete, accepted, denied, etc.).

Answer 56

The answer is **Jesse may be granted a license; Billy will not**. To have a license application approved, an applicant may not have been convicted of, or pled guilty, or nolo contendere to, a felony during the seven-year period preceding the date of the application, or at any time if the felony involved an act of fraud, dishonesty, a breach of trust, or money laundering. Even though Billy’s conviction occurred long before the seven-year window, it was a conviction for fraud, making him ineligible for a license.

Answer 57

The answer is **judgment, attachment, mortgage**. Judgments, attachments, and mortgages are all considered liens.

Answer 58

The answer is **judicial foreclosure**. If a mortgage or deed of trust does not include a power of sale clause, a lender must request a court order for foreclosure. This is known as a judicial foreclosure.

Answer 59

The answer is **jumbo**. Conventional loans that conform to the eligibility guidelines for purchase by Fannie Mae or Freddie Mac are considered conforming loans. Fannie Mae and Freddie Mac have a maximum loan limit for loans they will purchase, which is adjusted annually. Loans to persons with satisfactory credit but that exceed this loan limit are called jumbo loans or nonconforming loans. Because these loans cannot be sold to Fannie Mae or Freddie Mac, they often have a higher interest rate than conforming loans.

Answer 60

The answer is **Jumbo**. Conventional loans that conform to the eligibility guidelines for purchase by Fannie Mae or Freddie Mac are considered conforming loans. Fannie Mae and Freddie Mac have a maximum loan limit for loans they will purchase, which is adjusted annually. Loans to persons with satisfactory credit but that exceed this loan limit are called jumbo loans or nonconforming loans. Because these loans cannot be sold to Fannie Mae or Freddie Mac, they often have a higher interest rate than conforming loans

Answer 61

The answer is **June 30th**. The Equal Credit Opportunity Act requires lenders to inform applicants of the status of their loan within 30 days of application.

Answer 62

The answer is **legal and ethical**. The primary argument against YSP, prior to changes made in 2011, was that borrowers often had no idea that it was being charged. In scenarios like the one described here, the borrower has the option as to how he/she would like to structure his/her own loan, and the originator abides by the borrower’s decision. This is a legal and ethical use of what is now known as borrower credit.

Answer 63

The answer is **lender's title policy**. A lender’s title insurance policy insures the lender or mortgagee against loss caused by a borrower’s invalid title or loss of priority of the mortgage or deed of trust, due to legal claims based on undisclosed encumbrances.

Answer 64

The answer is **less expensive than that charged for FHA loans and for private mortgage insurance**. USDA/RHS guaranteed loans require payment of upfront and annual mortgage insurance, but the premiums are less than those for other types of mortgage insurance. For USDA/RHS loans, the insurance charge is referred to as the "guarantee fee."

Answer 65

The answer is **liability for ATR Rule violations**. The Qualified Mortgage Rule extends a safe harbor from liability for ATR Rule violations. The safe harbor is for loans that meet qualified mortgage standards.

Answer 66

The answer is **liability**. Alimony and child support must be included in a borrower’s liabilities if they are required to pay.

Answer 67

The answer is **Loan Product Advisor**. Freddie Mac's automated underwriting system is called Loan Product Advisor (formerly known as Loan Prospector), while Fannie Mae's is called Desktop Underwriter.

Answer 68

The answer is **Loan/Application Register**. The form used for reporting HMDA data is called the Loan/Application Register (LAR).

Answer 69

The answer is **loans secured by non-owner-occupied homes**. The Qualified Mortgage Rule applies to a broad range of loans including those secured by second homes or investment properties, but does not apply to open-end home equity loans, bridge loans of 12 months or less, reverse mortgages, or mortgages for timeshares.

Answer 70

The answer is **location of the mailbox in relation to the house**. While the underwriter may indeed look at the mailbox in pictures to verify the address of the home (or on the house itself), it is unlikely that the location of the mailbox is of any concern to the underwriter.

Answer 71

The answer is **lower down payment requirements**. So that he/she may get a loan with a small down payment, a borrower pays a mortgage insurance premium either as a lump sum at closing covering the life of the loan, or by paying the first year's premium at closing and then paying annual premiums as part of the mortgage payment. The amount of the premium is a percentage of the loan amount based on the borrower's down payment.

Answer 72

The answer is **made to consumers who have specifically asked a mortgage professional not to contact them**. The Telemarketing Sales Rule prohibits calls made to consumers before 8:00am or after 9:00pm. Also, mortgage professionals may not make calls to consumers listed on the Do-Not-Call List or if an established business relationship is over 18 months old. Finally, mortgage professionals must respect a consumer’s specific request to be removed from a contact list.

Answer 73

The answer is **maintaining direct contact with the loan originator that ordered the appraisal**. When providing services related to a residential mortgage transaction, appraisers are not required to maintain direct contact with the loan originator.

Answer 74

The answer is **make amortizing payments that are calculated using the fully indexed rate for the ARM**. Qualifying for an ARM requires a consumer to demonstrate an ability to make amortizing payments that are calculated at the loan’s fully indexed rate.

Answer 75

The answer is **make her books and records available to the agency**. Each loan originator must make available, upon request by the state licensing agency, the books and records relating to the operations of the originator.

Answer 76

The answer is **make sure credit is available to all creditworthy applicants**. The primary purpose of ECOA is to promote the availability of credit for all creditworthy applicants.

Answer 77

The answer is **make the required disclosures with equal prominence and in close proximity to the advertised rates or payments**. In order to comply with the advertising rules found in Regulation Z, creditors that advertise rates and payments for mortgages must make the required disclosures with equal prominence and in close proximity to the advertised rates or payments.

Answer 78

The answer is **making a loan commitment**. A mortgage loan originator assisting a consumer in obtaining or applying to obtain a residential mortgage loan may provide advice on loan terms, including rates, fees, and other costs; prepare loan packages; or collect information on behalf of the consumer with regard to a residential mortgage loan. A loan commitment is made by a lender.

Answer 79

The answer is **making a loan solely based on the collateral value of the property**. Under HOEPA, you may not make a loan solely based on the value of the borrower’s collateral without considering his/her ability to repay the loan.

Answer 80

The answer is **making all of the licensee's records available to borrowers upon demand**. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand.

Answer 81

The answer is **MAP Rule**. The Mortgage Acts and Practices Rule (MAP Rule or Regulation N) deals specifically with prohibited material misrepresentations in any commercial communication, including advertising, regarding the terms of mortgage credit products.

Answer 82

The answer is **market approach**. The market or market data approach, also called the sales comparison approach, bases the value of a property on the prices paid for similar, or comparable, properties in the area that have sold recently. It is the most reliable method for appraising single-family homes and land.

Answer 83

The answer is **material**. A representation, omission, act, or practice is deceptive when it misleads or is likely to mislead the consumer; the consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and the misleading representation, omission, act, or practice is material.

Answer 84

The answer is **may be cancelled at the borrower’s request five years after consummation if the borrower is not currently delinquent or in default and the loan balance is less than 80% of the original value of the home securing the loan**. After an escrow account is established for an HPML, it may be cancelled at the borrower’s request five years after consummation if the borrower is not currently delinquent or in default and the loan balance is less than 80% of the original value of the home securing the loan.

Answer 85

The answer is **midnight on Saturday**. A consumer for a closed-end loan may exercise the right to rescind at any time up until midnight of the third business day after signing the lending agreement. For the purposes of calculating time limitations for rescission, Saturdays are considered to be business days – meaning that if the consumer signed an agreement on Wednesday, the latest he or she may wait before exercising the right to rescind would be midnight on Saturday.

Answer 86

The answer is **more than $35**. If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by more than $35.

Answer 87

The answer is **mortgage broker or lender**. Regulation X defines a loan originator to include a lender or mortgage broker.

Answer 88

The answer is **mortgage fraud**. Making written false statements, using fictitious, forged, or altered documents, or concealing material facts relating to any aspect that would influence the approval of the loan are all aspects of mortgage fraud - specifically, loan documentation fraud. Mortgage fraud is a violation of federal law resulting in severe disciplinary measures, including up to five years in jail and/or a $100,000 fine for fraud and false statements, and up to 30 years in jail and/or a $1 million fine for a false mortgage loan application, conspiracy to commit fraud, fraud/swindles, or bank fraud.

Answer 89

The answer is **mortgage fraud**. Mortgage fraud is defined as the intentional perversion of the truth for the purpose of inducing another person or entity to rely on it in order to part with something or surrender a legal right.

Answer 90

The answer is **mortgage fraud**. The intentional misrepresentation of material information needed for underwriting approval is considered mortgage fraud.

Answer 91

The answer is **mortgage insurance is not required**. VA loans require a funding fee instead of mortgage insurance

Answer 92

The answer is **mortgage insurance premium**. Mortgage insurance premium is used for FHA loans and is required both upfront and annually (for most FHA loans).

Answer 93

The answer is **mortgage**. A mortgage connects the promissory note (the borrower’s promise to pay) with the collateral.

Answer 94

The answer is **mortgage**. An involuntary lien is “imposed” on a borrower. In the case of a mortgage, a borrower would “consent” to having a lien on his/her home.

Answer 95

The answer is **mortgage-backed securities**. In the secondary mortgage market, mortgage-backed securities are an investment vehicle in which expected payment streams from mortgage loans make up the profit paid out to investors. MBSs are a product of the secondary market.

Answer 96

The answer is **must not do so by fraud or misrepresentation**. Under the S.A.F.E. Act, it is prohibited for any person, when engaging in mortgage loan origination activity, to obtain property by fraud or misrepresentation.

Answer 97

The answer is **must note the applicant's sex, race, and ethnicity, based on the lender's visual observation or the applicant's surname if the applicant refuses to provide the information**. The section titled “Information for Government Monitoring Purposes” is required by the Home Mortgage Disclosure Act to aid the federal government in monitoring compliance with federal fair lending laws. The applicant should be informed that providing this information is strictly voluntary. If the applicant chooses not to provide this information, an originator taking the application on a face-to-face basis must note the applicant’s sex, race, and ethnicity on the form based on visual observation and/or the applicant’s surname.

Answer 98

The answer is **name, address, Social Security number, income, estimated property value, loan amount**. The six factors that constitute the definition of an application are name, address, Social Security number, income, estimated property value, and loan amount. If any one of the six factors is missing, the information does not technically constitute an application.

Answer 99

The answer is **negative amortization**. Increasing loan balances resulting from the application of periodic payments that are not sufficient to cover the interest that is due create negative amortization.

Answer 100

The answer is **negotiates the terms of a residential mortgage on behalf of a cousin**. S.A.F.E. Act exemptions include individuals solely involved in extensions of credit referring to timeshare plans; an individual who is an employee of a federal, state, or local government agency or housing finance agency, acting as a loan originator only pursuant to his or her official duties; and an individual who offers or negotiates terms of a residential mortgage loan secured by his own dwelling, or only with or on behalf of an immediate family member. However, a cousin is not considered an immediate family member under the legal definition, which includes a spouse, child, sibling, parent, grandparent, or grandchild, including stepparents, stepchildren, stepsiblings, and adoptive relationships.

Answer 101

The answer is **net worth of businesses**. Liquid assets include things like earnest money, cash, checking or savings accounts, stocks and bonds, and the cash value of life insurance policies. Non-liquid assets include things such as retirement accounts, real estate, and net worth of businesses.

Answer 102

The answer is **NMLS-approved courses are accepted towards credit in any state**. Any pre-licensing education course in federal law and regulations, ethics, or lending standards for the nontraditional mortgage product approved by the NMLS for any state may be accepted as credit towards completion of pre-licensing education requirements in the licensing state.

Answer 103

The answer is **no later than four business days prior to consummation**. When a creditor revises a Loan Estimate, the revised version must be received by the consumer no later than four business days prior to consummation.

Answer 104

The answer is **no later than the time at which a customer relationship is established**. If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer no later than the time at which a customer relationship is established.

Answer 105

The answer is **no limit**. Federal law does not place general restrictions on the adjustment period allowed on an ARM.

Answer 106

The answer is **no more than ten years**. The FCRA requires that outdated negative financial information remain on a consumer’s credit report no longer than seven years, and for bankruptcies, ten years.

Answer 107

The answer is **no, because the judgments are a result of medical expenses, they will not be held against him**. Evidence that an individual has not shown financial responsibility may include current outstanding judgments, except those solely as a result of medical expenses.

Answer 108

The answer is **No, because the loan is assumable**. A due-on-sale (alienation) clause allows the lender to declare the entire balance of the loan due when the property is sold or transferred. This means that the loan may NOT be assumed. Since FHA and VA loans are generally assumable, a due-on-sale clause would not be included in the security instrument.

Answer 109

The answer is **no, he is exempt from the requirement to be licensed**. A state is not required to license an individual who is an employee of a federal, state, or local government agency or housing finance agency who acts as a loan originator in the course of his/her employment.

Answer 110

The answer is **no, her time as a registered loan originator is not counted as part of the time her license has not been maintained**. A state-licensed loan originator who fails to maintain a valid license for a period of five years or longer must retake the licensing test. However, any time during that five-year period in which the individual was acting as a registered loan originator is not included when determining whether or not the licensing test must be retaken. Because Germaine worked as a registered mortgage loan originator for three out of the five years she was inactive, she is only considered to have been without a license for two years, meaning she does not have to retake the licensing exam.

Answer 111

The answer is **no, it is a prohibited act to earn a fee through best efforts if no loan is obtained**. It is prohibited for any person, when engaging in mortgage loan origination activity, to solicit or enter into a contract with a borrower that provides that the person or individual may earn a fee or commission through “best efforts” to obtain a loan even though no loan is actually obtained for the borrower.

Answer 112

The answer is **non-affiliates of the creditor**. Loan applicants may opt out of the sharing of their nonpublic personal information with non-affiliates.

Answer 113

The answer is **none of the choices**. Under Regulation Z, an ad must disclose a number of additional credit terms if it contains a trigger (or triggering) term, which is any of a number of credit terms specifically cited in an ad. Since in this case the ad does not cite any specific credit terms, no further disclosures are required.

Answer 114

The answer is **none; Leilani's tasks are complete**. After loan settlement, there are some cases in which additional disclosures are due, however, these would be provided by the creditor rather than the loan originator.

Answer 115

The answer is **nontraditional mortgage**. A nontraditional mortgage is defined as any mortgage product other than a 30-year fixed-rate mortgage.

Answer 116

The answer is **not be required since purchases from servicemembers are not subject to the requirement for two appraisals**. Purchases from servicemembers are not subject to the requirement for two appraisals.

Answer 117

The answer is **not permissible, as the loan originator is not qualified to provide tax advice**. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters.

Answer 118

The answer is **Notice of Adverse Action**. The Notice of Adverse Action is a disclosure required by ECOA, not TILA.

Answer 119

The answer is **Notice of Right to Cancel**. While the Loan Estimate, Mortgage Servicing Disclosure, and Special Information Booklet are all among the initial disclosures that must be delivered to a mortgage loan applicant, the Notice of Right to Cancel is provided at closing.

Answer 120

The answer is **occurs when the mortgage payment is not sufficient to pay the interest currently due**. Negative amortization occurs when a mortgage payment is not sufficient to pay the interest currently due.

Answer 121

The answer is **office supply provider**. A company that delivers office supplies is not generally covered by RESPA.

Answer 122

The answer is **one sixth**. Under RESPA, a lender may require the borrower to establish an escrow account at closing. The loan servicer may require a borrower to pay into the account to cover disbursements that are unanticipated or disbursements made before the borrower’s monthly payments are available in the account. This is the escrow cushion or reserve, which must be no greater than one sixth of the estimated total annual disbursements from the escrow account.

Answer 123

The answer is **only required if the referred party is owned by or has an affiliate relationship with the referring party**. An Affiliated Business Arrangement Disclosure is required only if the company being referred has some affiliated relationship with the referring party.

Answer 124

The answer is **open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule**. Open-end credit plans, timeshare plans, and reverse mortgage loans are excluded from the ATR Rule. The ATR Rule applies to almost all closed-end consumer credit transactions secured by a dwelling, including attached real property.

Answer 125

The answer is **originating loans only for those applicants which promise most profit for the lender**. Mortgage brokers and mortgage loan originators must diligently perform the services expected by the lender, including processing applications based on the lender’s underwriting guidelines, following up to ensure conditions contained in commitment letters are satisfied in a timely manner, expediting processing so the loan can close within the period of any rate-lock, carrying out any cancellation procedures competently and professionally, and guarding against mortgage loan fraud and other practices that may harm the lender or investor purchasing the loan.

Answer 126

The answer is **Pamela has failed the test and must wait at least 30 days before retaking it**. An applicant for a loan originator license must pass the examination with a score of at least 75%. If the applicant fails the test, he/she may take it two additional times, if necessary, with at least 30 days between each attempt. After failing three consecutive tests, however, the applicant must wait at least six months before taking the test again.

Answer 127

The answer is **payment of the fee is illegal**. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, verbal or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. A business entity may not pay any other business entity, or the employees of any other business entity, for the referral of real estate settlement service business.

Answer 128

The answer is **periodic cap**. The periodic cap is used to limit rate adjustments for ARMs after the initial adjustment.

Answer 129

The answer is **periodic rate cap**. The periodic rate cap is a limit on the amount by which the interest rate can change, up or down, on any adjustment date.

Answer 130

The answer is **person or entity that only performs real estate brokerage activities**. Real estate brokerage activities are not considered within the definition of a loan originator.

Answer 131

The answer is **PMI**. Private mortgage insurance (PMI) is required on conventional mortgages where the LTV is more than 80%. PMI is not used for government loans. MIP is used for FHA loans.

Answer 132

The answer is **predatory lending**. Most regulators consider predatory lending to be the extension of credit to borrowers who cannot afford it on the terms being offered. Predatory loans can be recognized by its use of features designed to “strip away” or reduce a borrower’s equity in the collateral and increase the likelihood of foreclosure. Such conduct is considered unethical, and many of the features it utilizes are illegal.

Answer 133

The answer is **predatory lending**. The practice of encouraging a consumer to purchase a home based on an inflated appraisal, or steering consumers toward high-cost products with unfavorable terms, is known as predatory lending.

Answer 134

The answer is **Prepaid finance charges**. A prepaid finance charge (PFC) is any finance charge paid separately, in cash or by check, before or at consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct loan charges paid by the borrower (not a third party) that must be included in computing the annual percentage rate.

Answer 135

The answer is **prepaid finance charges**. A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct charges paid by the borrower and include loan origination, discount, and commitment fees; any prepaid private mortgage insurance; underwriting, processing, tax service, and courier fees; buy-down funds; and prepaid interest.

Answer 136

The answer is **prepayment penalty**. A prepayment penalty is a charge paid by the borrower when repaying loan principal earlier than required by the amortization schedule.

Answer 137

The answer is **principal balance reaches 80% of original value**. To obtain a loan with a small down payment, a borrower pays a mortgage insurance premium either as a lump sum at closing covering the life of the loan, or by paying the first year's premium at closing and then paying annual premiums as part of the mortgage payment. The amount of the premium is a percentage of the loan amount, based on the borrower's down payment. The annual premiums and the insurance stop automatically once the loan is paid down to 78%, or may be canceled at the borrower’s request once the loan balance reaches 80% of the value of the property at the time the loan was made.

Answer 138

The answer is **principal, interest, taxes, and insurance**. “PITI” stands for principal, interest, taxes, and insurance, and is the basis for calculation of the front-end debt-to-income ratio (though other monthly housing payments may need to be included).

Answer 139

The answer is **privacy and confidentiality requirements continue to apply**. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to the NMLS continue to apply after such information has been disclosed to the NMLS.

Answer 140

The answer is **property flipping**. Second appraisal requirements were put in place under the HPML Rule for certain higher-priced mortgage loan transactions in an attempt to curb the practice of property flipping.

Answer 141

The answer is **property flopping**. A scenario in which a person forces the sale of a home at a much lower value than its true worth, then resells the home at its true value, is known as property flopping.

Answer 142

The answer is **property flopping**. Property flopping is associated with short sales, and it typically occurs when a short sale is approved based on a misrepresentation of the value of the property. The fraud is usually perpetrated by the buyer purchasing the property from the short sale seller. In some cases, the seller's real estate agent is the buyer. The buyer presents a low offer to purchase the property to the lender along with an artificially low valuation of the property, in order to convince the lender that the property is worth less than it really is. Any higher offers from bona fide buyers are withheld from the lender, who would most likely reject the low offer if it knew that higher offers were on the table. Once the lender approves the short sale at the artificially-low price, the fraudster contacts the bona fide buyer or markets the property at its true market value.

Answer 143

The answer is **property is in flood zone "A"**. Flood insurance is required for property improvements located in an SFHA Zone A (an area subject to inundation by a 1%-annual-chance flood event) or a Zone V (an area along the coast subject to inundation by a 1%-annual-chance flood event with additional hazards associated with storm-induced waves).

Answer 144

The answer is **property owner and seller are not the same**. If the property owner and property seller are not the same, it is likely more questions should be asked about the deal.

Answer 145

The answer is **protect consumers by ensuring that the mortgage lending industry operates without unfair and deceptive practices**.

Answer 146

The answer is **provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace**. The NMLS is a measure aimed at increasing responsible behavior and accountability and protecting consumers, not expanding the subprime marketplace.

Answer 147

The answer is **provide disclosure of the corrected discrepancy and wait three business days before closing**. When the APR listed on the Closing Disclosure is inaccurate, the APR must be re-disclosed to the borrower, and the loan cannot close for at least three business days from the re-disclosure date.

Answer 148

The answer is **provides a guideline for answering questions when a choice of actions is available**. Ethics goes beyond what is required under the law, so ethical rules extend beyond the minimum legal standards in providing guidance for one’s actions. Ethics goes into the realm of what should be done, providing guidelines for answering questions when a choice of actions is available. As a result, ethical rules are often not as clear-cut as the legal rules.

Answer 149

The answer is **providing computer records**. Providing records electronically is an acceptable method of keeping records available for examination.

Answer 150

The answer is **qualified written request**. Servicers are required to respond to a qualified written request from a borrower within five days.

Answer 151

The answer is **race, ethnicity, and sex**. Section 8, Demographic Information, of the 1003 requests information regarding the applicant’s sex, race and ethnicity.

Answer 152

The answer is **race, ethnicity, and sex**. The section titled “Information for Government Monitoring Purposes,” which asks a borrower to specify sex, race, and ethnicity, is required by the Home Mortgage Disclosure Act to aid the federal government in monitoring compliance with fair lending regulations. Supplying this information is strictly voluntary, and an applicant who does not wish to do so should check the box provided to indicate that decision. When an applicant does not provide this information, an originator taking the application on a face-to-face basis must note the applicant’s sex, race, and ethnicity on the form based on visual observation and/or the applicant’s surname.

Answer 153

The answer is **reasonable commuting mileage**. If mileage for commuting purposes is realistic, no red flags would be drawn. For example, if the borrower lives relatively close to the workplace, it is acceptable.

Answer 154

The answer is **reasonable fees paid for services actually performed**. RESPA does not prohibit the charging of reasonable fees paid for services actually performed.

Answer 155

The answer is **reasonable, good faith determination**. Creditors must make a reasonable, good faith determination of a borrower’s ability to repay a loan.

Answer 156

The answer is **recommending insurance in excess of the replacement value of the improvements is prohibited**. It is prohibited for any person, when engaging in loan origination activity, to cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement value of the improvements as established by the property insurer.

Answer 157

The answer is **redlining**. Redlining is the practice of refusing to originate loans in particular neighborhoods due to discriminatory reasoning.

Answer 158

The answer is **refinance of a second home**. HMDA data is required for purchase loans, refinance loans, and home improvement loans, as long as the loans are secured by a dwelling.

Answer 159

The answer is **refuse to consider child support payments that have been made sporadically**. ECOA prohibits discriminatory practices, such as refusing to consider public assistance as income or declining a borrower solely because of his/her involvement in a consumer credit counseling program. Additionally, ECOA does not allow for discouragement meant to keep a borrower from applying at all. Child support must also be considered, as long as payments are made regularly.

Answer 160

The answer is **refusing to originate loans in ZIP codes known to be economically depressed**. Refusing to originate loans in ZIP codes known to be economically depressed would violate fair lending laws.

Answer 161

The answer is **regional property tax rates**. Interest rates on long-term debt instruments, such as residential mortgages, are influenced by changes in such economic indicators as the gross domestic product (GDP), which measures the amount of goods and services produced in the United States, and the Consumer Price Index (CPI), which measures the average change in prices of consumer goods and services. Features of the economic climate, such as loan fraud, loan payoff rates, and foreclosure rates, will all have an impact on interest rates. Rates are also affected by actions taken by the Federal Reserve (the Fed), which controls the country's monetary policy, though the Fed does not itself directly set the interest rates that individual lenders will charge borrowers. Each lender will set its own prime rates (i.e., the lowest rates it charges for its best customers), as well as rates for loans to other customers based on its costs and desired profit margin. Regional property tax rates will impact monthly payments, but they do not have a direct relationship with the interest rates set for mortgage loans.

Answer 162

The answer is **registered MLOs must complete 20 hours of pre-licensing education**. The S.A.F.E. Act includes requirements for registration with the NMLS, pre-licensing education and federal and state testing, and obtaining and displaying a unique identifier on documents, including advertising materials. Pre-licensing education requirements pertain to state-licensed loan originators, not to registered loan originators, who are not subject to licensing requirements.

Answer 163

The answer is **Regulation B**. Regulation B implements the provisions of the Equal Credit Opportunity Act (ECOA), which ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract).

Answer 164

The answer is **Regulation B**. The regulations issued for the implementation of ECOA are known as Regulation B.

Answer 165

The answer is **Regulation B**. Under Regulation B, a loan originator may not ask whether an applicant receives alimony, child support, or separate maintenance payments not needed in order to get credit, unless he or she is first told that this information does not have to be provided. If regular alimony, child support, or separate maintenance payments need to be counted as income to qualify for credit, an applicant may be asked to prove that it has been received consistently.

Answer 166

The answer is **Regulation C**. The regulations promulgated under HMDA are known as Regulation C.

Answer 167

The answer is **Regulation Z**. Regulation Z cites a series of required disclosures, including the Consumer Handbook on Adjustable-Rate Mortgages (the CHARM Booklet), published by the Federal Reserve Board and the Federal Home Loan Bank Board, or a similar booklet.

Answer 168

The answer is **Regulation Z**. The TILA-RESPA Rule, included in Regulation Z, outlines the requirements for use of the Loan Estimate and the Closing Disclosure, intended to facilitate the ability of consumers to determine whether they can afford a particular loan, and/or compare specific loan products, including their costs over the life of the loan.

Answer 169

The answer is **Regulation Z**. The TILA-RESPA Rule, or TRID Rule, sets forth disclosure requirements and model forms for the two consolidated disclosures, the Loan Estimate and Closing Disclosure, and provides guidance to ensure compliance by licensees and exempt persons required to follow its provisions. The Rule’s provisions amended Section 19 of Subpart C of Regulation Z (12 C.F.R. §1026.19) and added two sections to Subpart E.

Answer 170

The answer is **Regulation Z**. The Truth-in-Lending Act (Regulation Z) covers seven specific prohibitions in advertising for credit, which includes the misrepresentation of government endorsement.

Answer 171

The answer is **Regulation Z**. Under the requirements of Regulation Z, an ad may state specific credit terms only if those terms actually are or will be arranged or offered to the consumer. Bait-and-switch credit promotions are not allowed. These involve advertising a loan at very attractive terms and then informing potential customers that, while the advertised loan is not available, a substitute is.

Answer 172

The answer is **reliable third-party records such as paystubs and tax returns**. In verifying a loan applicant’s income and/or assets, a creditor must rely upon reliable third-party records such as paystubs, tax returns, employment information, and records from financial institutions.

Answer 173

The answer is **request modification of the terms of the loan when it reaches maturity**. A balloon mortgage that includes a conditional refinance provision allows the borrower to request modification of the terms of the loan when it reaches maturity.

Answer 174

The answer is **residential mortgage loan**. The phrase “primarily for personal, family, or household use” is legal terminology commonly used to identify a residential mortgage loan.

Answer 175

The answer is **residential, business, commercial, and agricultural loans**. ECOA has a wider range than RESPA and TILA, beyond just loans related to residential properties. The law also covers loans for businesses, commercial, and agricultural loans.

Answer 176

The answer is **residual income**. Residual income is money left over after debt is subtracted.

Answer 177

The answer is **RESPA**. RESPA determined that the Affiliated Business Arrangement Disclosure should be provided to the borrower at the time of referral to the affiliated third party.

Answer 178

The answer is **RESPA**. The purpose of RESPA and Regulation X is to help consumers become better shoppers for settlement (closing) services by providing them with information on the nature and costs of the settlement process. RESPA and Regulation X are also intended to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.

Answer 179

The answer is **reverse redlining**. HOEPA prohibits the intentional targeting of poor or underserved areas with expensive high-cost loans, which is a practice known as reverse redlining.

Answer 180

The answer is **revolving debt**. Revolving debt allows a borrower to draw from and pay down a credit line at his/her own discretion, as long as the borrower makes timely payments for the interest due.

Answer 181

The answer is **risk layering**. Risk layering refers to combining, or layering, high-risk loan features, which might include an interest-only or other non-conventional loan, reduced documentation, and a simultaneous second-lien loan.

Answer 182

The answer is **rules for disclosure are the same whether credit is open-end or closed-end**. This is NOT true because the rules for TILA disclosures differ whether the loan is open-end or closed-end, including rules about disclosing APR and finance charges.

Answer 183

The answer is **S.A.F.E. Act**. Under the S.A.F.E. Act, licensees must annually obtain at least eight hours of continuing education courses that have been reviewed and approved by the NMLS. These hours must include three hours of federal law and regulations; two hours of ethics, including instruction on fraud, consumer protection, and fair lending issues; and two hours of training related to lending standards for the nontraditional mortgage product marketplace. States may require more than eight hours and may include requirements for hours of education related to state laws.

Answer 184

The answer is **safe harbor qualified mortgages**. The VA has stated that loans made in compliance with VA standards and guaranteed or insured by the VA are safe harbor qualified mortgages.

Answer 185

The answer is **secondary mortgage market**. The secondary mortgage market is where mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities. It is comprised of investors and lenders that buy and sell real estate mortgages or guarantee loans from primary market lenders.

Answer 186

The answer is **Secure and Fair Enforcement for Mortgage Licensing Act**. Under the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act), an applicant for a mortgage loan originator license must pass a written national test developed by the NMLS and administered by an approved test provider that covers ethics, federal and state law, and regulations pertaining to mortgage origination, fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues. To pass, the individual must achieve a test score of at least 75%.

Answer 187

The answer is **securitization**. Securitization is the process of pooling together similar types of loans to create mortgage-backed securities.

Answer 188

The answer is **Seize Karen’s bank accounts**. In order to ensure effective supervision and enforcement of the S.A.F.E. Act, the state licensing agency may deny, suspend, revoke, condition, or decline to renew a license for a violation of the state’s S.A.F.E. Act, rules and regulations issued under the Act or any order or directive entered under the Act; order restitution be paid by persons who have violated the state’s S.A.F.E. Act; and/or impose a civil penalty on a mortgage loan originator.

Answer 189

The answer is **seller carry-back**. In a purchase transaction involving an assumable mortgage, when the party selling the property provides all or part of the financing, it is referred to as a seller carry-back.

Answer 190

The answer is **seller concessions of 6%**. Fannie Mae and Freddie Mac permit seller concessions in conforming loan transactions to help defray the costs of closing. When the borrower makes a down payment of between 10% and 24.9%, seller concessions of up to 6% are permitted.

Answer 191

The answer is **sentencing violators of the S.A.F.E. Act to appropriate prison terms**. State regulators, such as a Commissioner, are not responsible for determining criminal sentences for violators of the S.A.F.E. Act.

Answer 192

The answer is **Servicing Transfer Statement**. RESPA requires that a client be provided a Servicing Transfer Statement at least 15 days prior to the transfer of the loan to a new servicer.

Answer 193

The answer is **servicing**. Settlement services include a variety of services related to the origination, processing, or funding of a loan, including, among others, rendering credit reports and appraisals, and conducting settlement by a settlement agent (e.g., the originating lender, an attorney, or a licensed escrow agent) and any related services. They do not include loan servicing.

Answer 194

The answer is **seven business days**. The Loan Estimate must be provided at least seven business days prior to consummation.

Answer 195

The answer is **silent second**. In the fraudulent activity termed “silent second,” a primary lender grants a loan to a borrower who the lender believes has invested his/her own money in the down payment and closing costs. However, the borrower has actually borrowed the needed funds from the seller secured by an undisclosed and unrecorded (i.e., silent) second mortgage.

Answer 196

The answer is **single purpose reverse mortgage**. Low-income borrowers may be eligible for single purpose mortgages that they can use to meet expenses such as taxes and home repairs.

Answer 197

The answer is **single purpose**. A single-purpose reverse mortgage is a low-cost loan offered to low-income borrowers by state and local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.

Answer 198

The answer is **Social Security Number given on the application is consistent with that found on the credit report, W-2s, and paystubs**. Mortgage fraud can sometimes be difficult to detect; however, checking names on an application against names on credit reports and supporting documentation as well as the borrower’s age is important. Additionally, if the supporting documents appear to be altered or tampered with, further investigation should occur.

Answer 199

The answer is **Stan may rescind the loan within 3 business days of consummation**. A borrower refinancing a primary dwelling with an open or closed end loan may cancel (rescind) the loan within 3 business days following closing. This right does not extend to the entire term. A borrower is NOT required to complete homeownership counseling unless the loan is a high-cost home loan.

Answer 200

The answer is **state in which the subject property is located**. The FHA funds insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years). In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the loan-to-value (LTV) ratio.

Answer 201

The answer is **stating that a borrower can take advantage of an opportunity to refinance an ARM with a fixed-rate loan**. Regulation Z and the Map Rule prohibit misleading practices. These prohibitions do not include advertising the availability of refinances from adjustable- to fixed-rate products, unless the ad includes misleading or inaccurate information in the benefits of a refinance.

Answer 202

The answer is **stating the less advantageous terms of repayment**. The use of a trigger term in advertising requires the additional disclosure of the less advantageous terms of the agreement, like balloon payments, negative amortization, or interest only payments.

Answer 203

The answer is **straw buyer**. A straw buyer is a person who allows the use of their personal identifying information (usually in exchange for a fee) by another individual to take out a loan.

Answer 204

The answer is **straw buyer**. A straw buyer is an individual who, in exchange for a fee, allows his or her qualifying information to be used on an application for a loan he or she has no intention of repaying.

Answer 205

The answer is **straw seller**. A straw seller is a person who falsely claims to own a property being sold (which may or may not exist) and is typically paid in exchange for doing so.

Answer 206

The answer is **straw seller**. A straw seller is an individual who accepts a fee to falsely claim ownership to a property.

Answer 207

The answer is **student loans**. Liabilities may include student loans.

Answer 208

The answer is **subordination agreement**. A subordination agreement changes the order in which creditors are paid in the event of foreclosure.

Answer 209

The answer is **subprime interest rate threshold**. HOEPA uses APR, points and fees, and prepayment penalty thresholds to identify high-cost mortgages.

Answer 210

The answer is **Sunday**. TILA gives consumers a right of rescission, allowing them to cancel the loan contract within a specified period of time for any reason in some loan transactions. In order to rescind, the consumer must forward a completed rescission form to the creditor no later than midnight of the third business day after the last of certain events occur, including consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind. For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays.

Answer 211

The answer is **suspension of a license without notice of a right to a hearing**. As a result of an investigation, state licensing authorities may not suspend a license without making the licensee aware of why an action may be taken and that the licensee may request a hearing.

Answer 212

The answer is **table funding**. In table funding arrangements, a mortgage broker will originate, process, and close in its own name a loan underwritten and funded by a secondary lender, but will then assign the loan to the funding lender at the closing table.

Answer 213

The answer is **table funding**. Table funding essentially allows a broker to act as the lender on the transaction, prior to transferring the loan immediately after closing to the lender that extended the credit line. The credit line used for funding is then replenished.

Answer 214

The answer is **ten business days**. A revised Loan Estimate may be provided if an applicant waits more than ten business days after the creditor provides a Loan Estimate before indicating an intent to proceed.

Answer 215

The answer is **termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments**. The term “high-risk loans” pertains specifically in this case to legislation related to the HPA which facilitates the cancellation of private mortgage insurance. The HPA requires PMI on high-risk loans to be terminated automatically at the midpoint of the amortization schedule, when the borrower is current.

Answer 216

The answer is **that the loan be paid off if the property is sold**. A due-on-sale clause requires that the loan be paid off if the property is sold. If the loan is assumable, the new borrowers must qualify with the lender.

Answer 217

The answer is **the 1003**. Demographic information collected for government monitoring purposes (HMDA info) is found on the application, or 1003.

Answer 218

The answer is **the adjustments of an ARM loan**. An ARM loan, whether fixed at the start or fully-adjustable from the start, carries with it a specific “adjustment frequency,” also sometimes referred to as an “adjustment interval.” Both of these define the amount of time either before an ARM begins to adjust, or between adjustments.

Answer 219

The answer is **the amount paid for private mortgage insurance before the LTV ratio reaches 78%**. The comparisons table does not show the amount paid for PMI before the LTV ratios reaches 78%.

Answer 220

The answer is **the anticipated ARM rates for the first five years**. In the heading of the Loan Estimate, the licensee must indicate the property address and its sale price, as well as the loan’s term. The Other Considerations table provides the applicant with information on appraisals, the homeowner's insurance requirement, the lender’s late payment policy, loan servicing information, and whether the loan may be assumed or refinanced. Anticipated ARM rates for the first five years of the loan are not disclosed, although the total the applicant will have paid in principal, interest, mortgage insurance, and loan costs for that time period is, in the Comparisons table.

Answer 221

The answer is **the applicant appears to be quite young but makes a high salary**. Red flags for mortgage fraud include the presentation of suspicious documents (blurry, hard to read, and/or appear to be photocopies or faxed) and discrepancies between documents (signatures which do not match, discrepancies in statements of income, assets, etc.). There is no global correlation between age and income, and a young applicant with a high salary is not a red flag indicating mortgage fraud.

Answer 222

The answer is **the applicant had a property foreclosed two years prior to application**. In order for a state to approve a license application, the applicant must show that he/she has not been convicted of, or pled guilty or nolo contendere to, any felony in any court during the seven-year period preceding the date of the application; or at any time if the felony involved an act of fraud, dishonesty, or a breach of trust or money laundering. Indications of financial irresponsibility include bankruptcy or pattern of bankruptcies, a foreclosure within the past three years, any unpaid judgments (other than those relating to medical expenses), tax or other government liens, or a pattern of paying creditors late.

Answer 223

The answer is **the applicant has alluded to the fact that he is submitting false documents in order to qualify for a larger loan**. A loan originator should not be an accessory to fraud by taking an application based on what he knows or strongly suspects to be fraudulent information. In all other cases, credit decisions should be left to the lender and/or its underwriting department, and should never be based on discriminatory factors or personal whims (not “clicking” with the applicant or denying access to credit based on neighborhood).

Answer 224

The answer is **the applicant is too young to enter into a contract**. According to fair lending laws, age may be considered as a factor in denying a loan application if the applicant is too young to enter into a contract.

Answer 225

The answer is **the applicant may take the test up to two additional times, with at least 30 days between each attempt**. An individual may take the licensing test three times, but to retake the exam, he or she must wait at least 30 days after the date of the preceding test. If he or she fails three consecutive tests, he or she must wait at least six months before taking the test again.

Answer 226

The answer is **the applicant must not have an existing mortgage on the residence**. HECMs include several requirements, including that the applicant must be at least 62 years old; the applicant must complete a consumer information session on reverse mortgage loans; and the loan must be secured by the borrower’s principal residence.

Answer 227

The answer is **the applicant’s recent marital status may lead to a change in employment**. It is a violation of fair lending laws to deny an applicant because his or her recent marital status may lead to a change in employment.

Answer 228

The answer is **the application**. The URLA stands for “Uniform Residential Loan Application.”

Answer 229

The answer is **The APR is considered accurate if it is not more than** **one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements**. The APR is considered accurate generally, if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method); and in an irregular transaction, if it is not more than one quarter of one percentage point (.25%) above or below the annual percentage rate determined in accordance with legal requirements.

Answer 230

The answer is **the borrower has alluded to the fact that she is submitting false documents in order to qualify for a larger loan**. It would be permissible to refuse to take an application from a potential borrower if the borrower has alluded to the fact that she is submitting false documents in order to qualify for a larger loan.

Answer 231

The answer is **the borrower is 65 years old**. According to ECOA, a lender may not consider a borrower’s age for the purposes of credit qualification.

Answer 232

The answer is **the borrower is buying an investment property**. The Red Flags Rule requires financial institutions (including mortgage lenders) that hold any consumer account, or other account for which there is a reasonably foreseeable risk of identity theft, to develop and implement an Identity Theft Prevention Program. Signs indicating possible identity theft include presentation of suspicious documents and personal identifying information (e.g., an address that does not match any address in the consumer report). Buying an investment property is not, in itself, a red flag.

Answer 233

The answer is **the borrower is too young to have legal authority to enter a binding contract**. A creditor may consider the personal characteristics of the applicant if the applicant is not of legal age to enter a binding contract.

Answer 234

The answer is **the borrower signs a waiver consenting to the balloon payment**. A high-cost loan may not provide for a payment schedule with regular periodic payments that result in a balloon payment, unless the payment schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken in connection with the acquisition or construction of a dwelling that will be the borrower’s principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage.

Answer 235

The answer is **the borrower’s claimed income is not consistent with their employment**. In the end, sometimes the “Common Sense Rule” catches incidents of fraud. A borrower who claims to be making hundreds of thousands of dollars a year but whose records show employment as a teacher probably has some explaining to do. Close consideration and comparison of the information available can help detect fraud.

Answer 236

The answer is **the borrowers already own and reside in a property in the same neighborhood**. A borrower is unlikely to purchase a new primary residence in the same neighborhood as his/her current residence, unless one of the two will be an investment property, or he/she may be planning to let the old home go into foreclosure after purchasing the new home at current market values.

Answer 237

The answer is **The broker should obtain access to the Do-Not-Call Registry**. The national Do-Not-Call Registry enables consumers to register their phone numbers as numbers not to be called by telemarketers. A company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an established business relationship exists. However, if such a consumer asks not to be contacted, the company must enter that person on their own do-not-call list of such consumers.

Answer 238

The answer is **The CFPB**. The CFPB, created in 2010, has become the enforcement and regulatory authority for a number of federal laws and regulations, though it still shares some authority with the FTC and other entities in certain instances.

Answer 239

The answer is **the CFPB**. Under the S.A.F.E. Act, states and their regulatory agencies have the duty and the authority to enact licensing standards that meet S.A.F.E. Act requirements. Overall responsibility for interpretation, implementation, and compliance with the S.A.F.E. Act was originally delegated to the U.S. Department of Housing and Urban Development (HUD). However, effective July 21, 2011, all of HUD’s authorities and duties were delegated to the Consumer Financial Protection Bureau (CFPB).

Answer 240

The answer is **The Closing Disclosure**. The Closing Disclosure replaces the HUD-1 Settlement Statement and the final TIL Disclosure. It sets forth the actual costs of the subject mortgage lending transaction in a clear and understandable manner.

Answer 241

The answer is **the company must record the IP address from which the documents were accessed**. Under the Electronic Signatures in Global and National Commerce Act (the E-SIGN Act), before obtaining a consumer’s consent, a financial institution must provide a clear and conspicuous statement to consumers, informing them of their right or option to have the record provided or made available on paper or in a non-electronic form. The statement must also explain the consumer’s right to withdraw consent, including applicable conditions, consequences, and fees. Consumers must also be provided with information about the hardware and software required to allow them to access and retain the electronic records.

Answer 242

The answer is **the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators**. The Nationwide Multistate Licensing System and Registry (NMLS) is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators.

Answer 243

The answer is **The Consumer Financial Protection Bureau**. The Consumer Financial Protection Bureau is responsible for implementing and enforcing consumer protection laws, establishing consumer education programs, and responding to consumer inquiries and complaints

Answer 244

The answer is **the consumer**. Those who disagree with the idea of a fiduciary duty in mortgage loan transactions feel that the consumer is ultimately responsible for ensuring that a certain loan product has appropriate terms and conditions.

Answer 245

The answer is **the creditor is ultimately responsible for ensuring that the borrower receives the Closing Disclosure**. Creditors are responsible for the preparation and delivery of the Closing Disclosure to the borrower. While they may use settlement agents to provide the Closing Disclosure on their behalf, the creditor is ultimately responsible for ensuring that the borrower receives the document.

Answer 246

The answer is **The CSBS and AARMR**. The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) are the two organizations responsible for creating and implementing the NMLS.

Answer 247

The answer is **the current principal balance is 78% of the original purchase price**. Federal law requires automatic termination of PMI on the date when the principal balance is scheduled to reach 78% of the original purchase price. For PMI to be cancelled on that date, the borrower needs to be current on payments on the anticipated termination date.

Answer 248

The answer is **the difference between the fair market value of a property and the current balances of any liens**. The equity in a borrower’s home is the difference between the fair market value of a property and the current balance of any liens.

Answer 249

The answer is **The Dodd-Frank Act**. The Dodd-Frank Act amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection.

Answer 250

The answer is **the frequency with which the rate will change**. If an ad states a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the loan, the ad must clearly and conspicuously disclose each applicable simple annual interest rate, the period of time during which each rate will apply, and the annual percentage rate for the loan.

Answer 251

The answer is **the fully-indexed rate**. If there were no caps involved, an ARM would adjust based on the movement of the fully-indexed rate (margin + index). It would not be adjusted based on index alone or margin alone. While the margin does not change over time, it must be combined with the fluctuating index to find the new rate. It is not sufficient to apply only the index or only the margin to the adjustment - they must be combined into the fully-indexed rate.

Answer 252

The answer is **The Gramm-Leach-Bliley Act and Regulation V**. The Gramm-Leach-Bliley Act is implemented by Regulation P.

Answer 253

The answer is **the lender can require the borrower to make up the shortage over the next 12 months**. If the escrow account is short by more than 1 month, the lender can choose to do nothing or require repayment of the shortage over a minimum of 12 months. If an escrow account analysis discloses a shortage of **less than one month's escrow account payment**, the lender or servicer may allow the shortage to exist and do nothing to change it, require the borrower to repay the shortage amount within 30 days, or require the borrower to repay the shortage amount in 2 or more equal monthly payments.

Answer 254

The answer is **the lender has no obligation to re-disclose**. The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements, or if it is not more than one quarter of one percentage point (.25%) above or below the APR for an irregular transaction. In this case, the difference between the disclosed APR and the actual APR is within the limits of this tolerance, and does not require re-disclosure.

Answer 255

The answer is **the lender in the event the property is damaged by fire or other risks**. The loss payee clause in a hazard insurance policy protects the lender’s investment in the event that the collateral is damaged by fire or other risks. This means that if there is a fire or other loss, the lender is paid first to cover its investment.

Answer 256

The answer is **The lender is always required to provide a copy of the appraisal promptly upon completion or three days prior to consummation for closed-end credit, whichever is earlier**. A creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion, or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit.

Answer 257

The answer is **the lender is not required to issue a Loan Estimate**. A lender must provide the Loan Estimate either in person or by placing it in the mail no more than three business days after receipt of the consumer’s application AND no later than seven business days prior to consummation. If a loan application has not been submitted, a lender is not required to issue a Loan Estimate.

Answer 258

The answer is **the lender itself**. While interest rates are affected by actions taken by the Federal Reserve (the Fed), the Federal Reserve does not directly influence the interest rates that lenders charge borrowers. Each lender will set its own prime rates (i.e., the lowest rates it charges for its best customers), as well as rates for loans to other customers based on its costs and desired profit margin.

Answer 259

The answer is **the lender may foreclose without first obtaining a court order**. When a mortgage or deed of trust contains a power of sale clause, the lender is authorized to sell the property through foreclosure steps without having to obtain a court order first. This is known as a non-judicial foreclosure.

Answer 260

The answer is **the lender no longer has security interest in the property, and the borrower is refunded any and all charges paid during the loan process**. TILA requires that, in the event of rescission, the lender relinquish security interest in the property and return any and all money or property paid by the borrower. All parties are placed back in the exact position they were in before the transaction took place.

Answer 261

The answer is **the loan amount and the mortgage insurance rate**. Annual PMI is determined by multiplying the loan amount and the mortgage insurance rate.

Answer 262

The answer is **the loan amount divided by the lower of the appraised value or purchase price**. The relationship of the loan amount to the value or sales price of the property securing the loan is called a loan-to-value ratio. The loan-to-value ratio (LTV) relates the loan to the lesser of the appraised value or sales price. LTV = loan amount, divided by property value (appraised value) or purchase price, whichever is less.

Answer 263

The answer is **the loan cannot include prepayment penalties after the first two years of the loan term**. HPMLs cannot include prepayment penalties at all, so it is false to say that the loan cannot include prepayment penalties after the first two years of the loan when they are prohibited altogether.

Answer 264

The answer is **the loan reaches 78% LTV based on the original purchase price**. Generally, a conventional loan of up to 80% of the property's value will be made without private mortgage insurance. The annual premiums and the insurance stop automatically once the loan is paid down to 78%, or may be canceled at the borrower’s request once the loan balance reaches 80% of the value of the property at the time the loan was made.

Answer 265

The answer is **the locked term; the adjustment frequency**. ARMS are often named for their features. In other words, a 3/1 ARM is locked for three years, and then adjusts annually each year thereafter. The first number represents the locked term and the second number represents the adjustment frequency.

Answer 266

The answer is **the lower of the replacement cost or the unpaid loan amount**. Fannie Mae requires that for any first-lien mortgage (excluding a reverse mortgage), the minimum hazard insurance coverage required is the lesser of 100% of the insurable value of the improvements, as established by the property insurer, or the unpaid principal balance of the mortgage, as long as it equals the minimum amount (80% of the insurable value of the improvements) required to compensate for damage or loss on a replacement cost basis. If it does not, then the coverage that does provide the minimum required amount must be obtained.

Answer 267

The answer is **The LTV describes the relationship between the primary mortgage and the property value; the CLTV describes the relationship between all liens and the property value**. The LTV describes the relationship between the primary mortgage and the property value; the CLTV describes the relationship between all liens and the property value.

Answer 268

The answer is **the margin to the index**. The fully-indexed rate determines the movement of an ARM (absent the caps). In order to arrive at the fully-indexed rate, you simply add the margin and index together.

Answer 269

The answer is **the mortgage broker and mortgage loan originator**. Because brokers and loan originators are compensated for originating a loan as long as the lender accepts it, and may not be penalized if they do not actually commit any misrepresentation and the borrower defaults later in the term of the loan, they might be less concerned with the suitability and long-term performance of the loan for the borrower. A relative lack of consequences for a lender’s agent subjects the mortgage delivery system to what economists and political scientists call the principal-agent problem.

Answer 270

The answer is **the most common sales price for the neighborhood**. In the context of an appraisal, the term “predominant value” refers to the price or price range appearing most frequently in the market area defined by the appraiser in the report, based on comparable sales.

Answer 271

The answer is **the new buyer is going to use the property as a rental property**. The income (or capitalization) approach is used to appraise properties that produce rental income (e.g., apartments, office buildings, and rental units). It bases the value of the property on the net income the owner will receive and a rate of return (capitalization rate) the owner should find acceptable. The estimated net income is calculated by subtracting an allowance for vacancies and bad debts from scheduled gross income to arrive at effective gross income, and then subtracting fixed expenses, operating expenses, and reserves to replace items that will wear out.

Answer 272

The answer is **The new interest rate cannot exceed the rate ceiling established by the caps**. When the rate is reset, the index plus the margin cannot exceed the maximum allowable rate which is determined by adding the periodic cap to the current rate. The cap period is identical to the adjustment period, and does not always equal one year. The cap would be higher when the adjustment period is longer, as the lender cannot make changes as frequently.

Answer 273

The answer is **the order of recordation, unless a tax lien or subordination agreement changes the order**. Liens are paid in order based on the recording date, oldest first. However, tax liens take priority, and a subordination agreement can change the order between creditors.

Answer 274

The answer is **the original VA loan is satisfied**. A VA loan is assumable; however, the veteran’s VA eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan.

Answer 275

The answer is **the payments are not sufficient enough to cover the interest due, so the principal balance increases**. A loan that allows for negative amortization has a principal balance that goes up because the payments are not sufficient enough to cover interest due.

Answer 276

The answer is **the property appraisal**. An underwriter would rely on the property appraisal for detailed information concerning the collateral for a mortgage loan.

Answer 277

The answer is **the purchase price is 20% higher than the seller’s acquisition price 150 days ago**. According to the HPML Rule, a transaction will require a second appraisal if the purchase involves a possible case of “loan flipping.” This is true when the consumer’s purchase price is 10% more than the seller’s acquisition price (if the seller acquired the property 90 or fewer days ago) or 20% more than the seller’s acquisition price (if the seller acquired the property 91 to 180 days ago).

Answer 278

The answer is **The Safeguards Rule**. The Safeguards Rule requires mortgage professionals to take reasonable steps to ensure that service providers are able to maintain appropriate protection for the privacy of consumer information.

Answer 279

The answer is **the second mortgage holder will need to agree to a subordination**. A mortgage is a second mortgage when it is recorded after another mortgage that is still outstanding on the same property; or when it has a subordination clause specifying that it has lower priority (i.e., is subordinate) even though it may have had priority based on its date of recording, or will remain subordinate in the event that the first mortgage is refinanced. In order to preserve lien priority under the circumstances described, the second mortgage holder will need to agree to a subordination clause.

Answer 280

The answer is **the seventh business day before the transaction is consummated**. A creditor must provide the Loan Estimate no later than three business days after receipt of the consumer’s application AND at least seven business days prior to consummation.

Answer 281

The answer is **the size of the loan being obtained**. The size of the government’s guarantee on a VA loan depends on the size of the loan being obtained.

Answer 282

The answer is **the state in which the property is located**. If a loan originator’s compensation is based in whole or in part on a factor that is not an actual loan term but acts as a proxy for a term of transaction (such as the term and/or rate of the loan determining whether it is held in the lender’s portfolio or sold), the originator’s compensation is based on a term of the transaction and is prohibited. A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition.

Answer 283

The answer is **the state regulator**. The NMLS consolidates and makes licensing records available to state regulators to use for licensing decisions.

Answer 284

The answer is **the third business day after the Closing Disclosure is mailed**. The waiting period prior to closing will begin on the third business day after the Closing Disclosure is mailed.

Answer 285

The answer is **the third business day**. A creditor that is making an HPML must provide the loan applicant with a disclosure regarding his or her right to a copy of the appraisal no later than the third business day after the creditor receives the loan application

Answer 286

The answer is **they must receive a copy at or before consummation**. Under ECOA, a creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit. An applicant may waive the timing requirement and agree to receive a copy at or before consummation or account opening.

Answer 287

The answer is **third**. Borrowers have the right to rescind a transaction in which a security interest is given in their primary residence until the later of midnight on the third business day following the consummation of the transaction or delivery of the required disclosures and rescission forms.

Answer 288

The answer is **this is allowed as long as the borrower has received the Loan Estimate and expressed an intent to proceed**. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating an intent to proceed with the loan.

Answer 289

The answer is **threaten or pressure an appraiser to promise a specific value**. It is unlawful to threaten or pressure an appraiser to promise a specific value for an appraisal.

Answer 290

The answer is **threaten or pressure an appraiser to promise a specific value**. Under Regulation Z, no person may, in connection with an appraisal, compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate an appraiser in order to cause the appraised value to be based on any factor other than the appraiser’s independent judgment and the pertinent facts. This does not prohibit a licensee from asking an appraiser to consider additional appropriate property information, provide further detail, or correct errors in the appraisal report.

Answer 291

The answer is **three months**. Under the Do-Not-Call-Act, a company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an “established business relationship” exists. An established business relationship means a relationship between the company and a consumer based on the consumer’s purchase, rental, or lease of the seller’s goods or services or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call. This may also include an inquiry or application regarding an offered product or service, within the three months (90 days) immediately preceding the date of a telemarketing call.

Answer 292

The answer is **three years**. A creditor must maintain, for three years after the date of payment, sufficient records to evidence all compensation it pays to a loan originator, and the compensation agreement that governs those payments.

Answer 293

The answer is **three years**. In order for a small creditor to originate a balloon payment qualified mortgage, the small creditor must hold the loan in its portfolio for three years.

Answer 294

The answer is **Three**. A special information booklet, titled “Your Home Loan Toolkit: A Step-by-Step Guide,” must be provided within three business days of the creditor’s receipt of the application for a home purchase loan.

Answer 295

The answer is **three-year history of loan production**. A loan originator is not required to document prior experience or production history as a condition of licensure.

Answer 296

The answer is **TILA**. General marketing and advertising for credit is covered by TILA.

Answer 297

The answer is **TILA**. The Home Ownership and Equity Protection Act is part of TILA. Created in 1994, it was the first legislation specifically created to combat predatory lending. Its regulations are found in Section 32 of Regulation Z.

Answer 298

The answer is **TILA**. The Truth-in-Lending Act governs advertising for credit. Ads for mortgages fall under this legislation.

Answer 299

The answer is **title insurance**. The annual percentage rate (APR) represents the relationship of the total finance charge to the total amount financed, as a yearly rate. It is not the same as the nominal rate (i.e., the interest rate shown in the note), as it includes all finance charges, not just interest. Among other charges, finance charges include points, loan fees, and mortgage insurance premiums, but not title insurance premiums.

Answer 300

The answer is **title search**. The title search is the first step in the title process. It involves an abstractor or an attorney searching county or municipal records to determine the status of a property.

Answer 301

The answer is **to help a borrower pay for settlement costs**. Yield spread premiums (YSPs) are points credited for an interest rate above its par rate. The Loan Originator Compensation Rule, included in Regulation Z, prohibits using YSPs as a form of loan originator compensation. “No closing cost” loans result from applying the YSP to pay the borrower’s closing costs so that they need not be paid upfront. While such loans are not illegal, some states prohibit the use of terms such as “No Cost” or similar claims in mortgage loan advertising, as they are misleading and deceptive.

Answer 302

The answer is **transfers to the wife**. Joint tenants share equal ownership of the property and have equal, undivided right to keep or dispose of the property. Joint tenancy creates a right of survivorship; if any of the joint tenants die, the remainder of the property is transferred to the survivors. In this case, when the husband dies, his interest in the property would transfer to his wife.

Answer 303

The answer is **Transmitting a telephone number so that the recipient can identify it through Caller ID**. It is not prohibited under the TSR to call a consumer and have the number able to be read on the Caller ID. In fact, it is required.

Answer 304

The answer is **two months' taxes, two months' insurance**. A borrower’s monthly mortgage payment may include a reserve payment (also known as an escrow or impound payment) that represents approximately 1/12 of the estimated annual hazard and flood insurance premiums and property taxes. When there is need of an account, the borrower may be required to make an initial deposit into the reserve account at settlement to ensure that the regular monthly deposits will accumulate enough to pay the property taxes, insurance premiums, or other charges when they are due. The maximum amount that a lender can collect for this deposit cannot exceed the sum of an amount sufficient to pay taxes, insurance premiums, or other charges up to the due date of the new loan’s first full monthly mortgage installment payment, plus an additional amount sufficient to pay future estimated taxes, insurance premiums, and other charges, not in excess of two months’ worth, which is 1/6 of the estimated charges for the following 12 months.

Answer 305

The answer is **two years’ tax returns and all schedules if the commission income is more than 25% of income**. Commissioned borrowers must show two years’ tax returns if their commission income is more than 25% of their total income.

Answer 306

The answer is **two**. The NMLS requires, as a federal minimum, at least two hours of ethics training within the total eight hours of education required for continuing education.

Answer 307

The answer is **underwriter's name**. Categories of information required on the Uniform Residential Loan Application, or Form 1003, include mortgage type and loan terms, property information and loan purpose, and borrower information. It includes information about the subject property and the borrower (such as Social Security Number and appraised property values), but the underwriter's name is not a required part of the application and is unlikely to appear.

Answer 308

The answer is **unethical, and a violation of federal law**. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person.

Answer 309

The answer is **Uniform Residential Loan Application**. A Uniform Residential Loan Application, also called Form 1003, is used when the loan is to be sold to Freddie Mac or Fannie Mae, insured by the Federal Housing Administration (FHA), or guaranteed by the Department of Veterans Affairs (VA).

Answer 310

The answer is **unique identifier**. The unique identifier is a number that permanently identifies a loan originator, assigned by the NMLS to facilitate electronic tracking of loan originators.

Answer 311

The answer is **unlike state-licensed originators, registered originators are exempt from licensing requirements**. A registered mortgage loan originator is an individual who meets the requirements of a mortgage loan originator, is an employee of a covered financial institution, is registered with the NMLS, and maintains an NMLS unique identifier. Unlike state-licensed originators, registered originators are exempt from licensing requirements.

Answer 312

The answer is **until midnight on the third business day after signing the lending agreement**. A consumer with a loan for closed-end credit may exercise his or her right to rescind at any time before midnight on the third business day after signing the lending agreement.

Answer 313

The answer is **until the loan balance is completely paid off**. Flood insurance must stay in place at least until the loan balance is paid off and the lender no longer needs to be protected from the hazard.

Answer 314

The answer is **Upfront Mortgage Insurance Premium**. “UFMIP” stands for “Upfront Mortgage Insurance Premium.”

Answer 315

The answer is **upfront mortgage insurance premium**. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. FHA loans require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years).

Answer 316

The answer is **upon application**. Under the Gramm-Leach-Bliley Act, a customer relationship begins as soon as a borrower provides non-public personal information. For the purposes of mortgage lending, this happens at application.

Answer 317

The answer is **using disclosures to ensure that consumers make informed choices for loan products**. The Truth in Lending Act protects consumers in the mortgage market by using disclosures to ensure that consumers make informed choices for loan products and are given opportunities to understand the fees and charges that accompany mortgage loans.

Answer 318

The answer is **USPAP**. The Uniform Standards of Professional Appraisal Practice (USPAP) are the recognized standards for appraisals in the United States.

Answer 319

The answer is **VA funding fees are refundable if the borrower is overcharged**. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender's exposure to loss in the event of a borrower's default that results in foreclosure. However, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed, instead of a mortgage insurance premium. The funding fee is only refundable if the borrower was overcharged. There are some exceptions to the imposition of a funding fee, including for veterans with disabilities. A veteran receiving VA compensation for a service-connected disability is exempt from the fee requirement.

Answer 320

The answer is **VA loan at 100% LTV**. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender's exposure to loss in the event of a borrower's default that results in foreclosure. However, rather than being charged a mortgage insurance premium for the guarantee, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed.

Answer 321

The answer is **VA loans are safe harbor qualified mortgages**. VA-guaranteed loans that are made in compliance with VA standards are safe harbor qualified mortgages.

Answer 322

The answer is **VA**. The VA uses two methods for qualifying its borrowers: a 41% debt-to-income ratio (including housing and fixed debt), and the residual income method, which determines whether the veteran has enough income after paying fixed debts to cover daily living expenses. This method can qualify a borrower whose ratio might exceed the 41% limit.

Answer 323

The answer is **verifies that the applicant and subject property meet lender guidelines**. The underwriter’s responsibility is to make sure that both the applicant and the property meet lender guidelines before approval for the investor.

Answer 324

The answer is **visa or immigration status**. ECOA does not allow for the denial of credit to creditworthy applicants. Basing a decision on someone’s sexual orientation or marital status would be considered discriminatory. However, someone’s visa or immigration status can certainly be questioned, as it may help to determine if additional items are needed to document a borrower’s qualifications.

Answer 325

The answer is **waive if they do so in writing in order to meet a bona fide financial emergency**. The right to rescind is one that consumers may waive if they do so in writing in order to meet a bona fide financial emergency.

Answer 326

The answer is **warranty deed**. A warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. In addition to conveying property ownership, a warranty deed contains the promise of clear title, meaning the property is free of encumbrances.

Answer 327

The answer is **Wednesday of the following week**. A creditor must provide the Loan Estimate either in person, via overnight delivery, or by placing it in the mail or delivering it no more than three business days after receipt of the consumer’s application AND no later than seven business days prior to consummation. For the purposes of determining the waiting period that must elapse between providing a Loan Estimate and consummation, a "business day" is defined to mean all calendar days except Sundays and legal public holidays. Here, the Loan Estimate is mailed on Tuesday. Seven business days from Tuesday would be the following Wednesday (Wednesday, Thursday, Friday, Saturday, Monday, Tuesday, Wednesday).

Answer 328

The answer is **Wednesday**. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating that he or she wishes to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee.

Answer 329

The answer is **whether different credit terms are offered to members of protected classes**. HMDA data is collected and aggregated to determine whether different credit terms are offered to members of different protected classes.

Answer 330

The answer is **within 30 days of loan application**. An applicant has the right to receive, within 30 days of the creditor’s receipt of an incomplete application, notice of incompleteness with a reasonable time to respond, and within 30 days after receipt of a completed credit application, notice of action taken (i.e., acceptance or adverse action).

Answer 331

The answer is **within 60 days of closing**. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his/her residence must move in within 60 days after closing.

Answer 332

The answer is **within three business days of loan application**. Under ECOA, a notice concerning the applicant’s right to obtain a copy of the appraisal is due within three business days of receiving a loan application.

Answer 333

The answer is **within three business days of the application**. Under the ECOA Valuations Rule, no later than the third business day after receipt of an application for credit to be secured by a first lien on a dwelling, the creditor must mail or provide a notice of the applicant’s right to receive a copy of all written appraisals developed in connection with the application.

Answer 334

The answer is **years on the job**. ECOA protects against discrimination in credit transactions. Asking how many years someone has been at their job is not considered discriminatory. It is a gauge of income stability.

Answer 335

The answer is **year-to-date profit and loss statements**. A salaried borrower would generally be asked to provide a lender with documentation of his/her past two years’ employment, W-2s for those years, and paystubs for the most recent 30 days.

Answer 336

The answer is **yes, a dwelling includes a structure whether or not that structure is attached to real property**. A residential mortgage loan is any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or will be constructed a dwelling. A dwelling is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home and trailer, if it is used as a residence.

Answer 337

The answer is **Your Home Loan Toolkit: A Step-by-Step Guide**. In a transaction for a fixed-rate mortgage to finance a home purchase, the loan applicant should receive Your Home Loan Toolkit: A Step-by-Step Guide.

Answer 338

The answer is **zero tolerance**. Fees in the zero-tolerance category, for which the actual charges at settlement may not exceed the amounts included on the Loan Estimate unless there is a change in circumstance, include fees paid to an unaffiliated third-party service provider if the creditor did not permit the consumer to shop for the third-party service provider.

Answer 339

The answer is **zero years**. MIP, or mortgage insurance premiums, are only paid on FHA loans. Some other loan types are subject to PMI (private mortgage insurance). USDA loans use a funding fee and an annual premium rather than the traditional forms of MIP or PMI.

Answer 340

The answer is **zero**. Continuing education hours are valid only for the year they are taken, and may not be carried over from year to year.

Answer 341

The answer is .**125% (one eighth of one percent)**. The APR is considered accurate if it is not more than one eighth of one percentage point above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method), or if it is not more than .25% (one quarter of one percentage point) above or below the APR for an irregular transaction.

Answer 342

The answer is 1.5. Points are paid off of the loan amount. The loan amount is $240,000 (80% of $300,000). On a $240,000 loan, points costs $2,400. To calculate, divide $3,600 by $2,400, resulting in 1.5 points.

Answer 343

The answer is 10%. Creditors have a 10% tolerance for discrepancies between estimated and actual closing costs if consumers do not have to pay the creditor or one of its affiliates for settlement services, are allowed to shop for their own services, and choose one from the provided settlement service provider list.

Answer 344

The answer is 100% of the lesser of the loan amount or the cost to restore the improvements to the property. Fannie Mae requires hazard insurance in place of at least 100% of the lesser of the loan amount, or the cost to restore the improvements to the property.

Answer 345

The answer is 12. 12 days of per diem interest would be collected to place this loan on schedule for a first payment date of March 1. Remember, per diem interest needs to count the day of closing. There are 31 days in January - so, per diem interest must be paid for 12 days (January 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31).

Answer 346

The answer is 2.30%. The funding fee for a first-time user who is regular military, purchasing a home using a VA loan, is 2.30%.

Answer 347

The answer is 2.50%. For this ARM, the lifetime cap is 2.5%. The lifetime cap limits the maximum amount by which the rate on an ARM may increase. Here, the rate is not permitted to exceed 5%. To determine the lifetime rate cap, subtract the start rate (2.5%) from the maximum rate (5%). This results in the lifetime rate cap of 2.5%.

Answer 348

The answer is 20 days. If a borrower rescinds a transaction, within 20 days of the rescission, he is entitled to a refund of all money or property given to the creditor.

Answer 349

The answer is 20%. The Walkers are making a down payment equal to 20% of their loan amount.

Answer 350

The answer is 20. The NMLS requires that a minimum of 20 hours of pre-licensing education be completed before an application will be considered.

Answer 351

The answer is 22%. “Housing ratio” refers to the cost of Don’s housing expenses monthly divided by his gross monthly income. In this case, his proposed housing expense (PITI) will be $1,500/month. $1,500 / $6,800 = 22%.

Answer 352

The answer is 24%. Housing ratio is only concerning the ratio between housing expenses and gross monthly income. In this case, their housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%.

Answer 353

The answer is 25%. Borrowers with non-taxed income are allowed to increase their earnings by 25% for qualification purposes. This means they would multiply by 125% - not increase income by 125%.

Answer 354

The answer is 29%. USDA loans use a front-end ratio of 29%.

Answer 355

The answer is 3%. A margin value will never change once set on a loan. Therefore, this margin is set at 3.00% and will remain at 3.00% during each and every adjustment.

Answer 356

The answer is 30. A licensee is permitted three total attempts, with at least a 30-day waiting period in between each attempt, after which a 180-day waiting begins before a fourth attempt can be made.

Answer 357

The answer is 31% / 43%. The general debt ratios for an FHA loan are 31% housing, and 43% total debt.

Answer 358

The answer is 37%. Ted’s plan was to build a $20,000 tiki bar. Adding the $20,000 draw to his current $130,000 first mortgage balance leaves a $150,000 total encumbrance. Dividing that by the value of the home ($405,000) brings a combined-loan-to-value of 37%.

Answer 359

The answer is 4%. This ARM has a start rate of 4.00%, and is locked for the first seven years. The question specifies that the loan is entering into its fifth year. The rate would still be 4.00% until at least the start of the eighth year.

Answer 360

The answer is 43%. The Qualified Mortgage Rule establishes a debt-to-income ratio standard of 43%. For the first seven years during which the Rule is in effect, this ratio will not be enforced for temporary qualified mortgages.

Answer 361

The answer is 43%. The Qualified Mortgage Rule establishes a debt-to-income ratio standard of 43%. For the first seven years during which the Rule is in effect, this ratio will not be enforced for temporary qualified mortgages.

Answer 362

The answer is 6%. At the first adjustment, the ARM rate would increase from 2% to 3%. At the second adjustment, it would increase from 3% to 5%. At the third increase, it would increase from 5% to 7%. However, the lifetime rate cap is 4%, meaning that the rate may never be higher than 6% (2% + 4% = 6%). As a result, the interest rate may never be higher than 6%.

Answer 363

The answer is 70%. To determine LTV, simply divide the loan amount by the value of the property. $525,000 / $750,000 = 70%

Answer 364

The answer is 75% of the rental income. Rental income is allowable in calculating qualifying income, but only at 75%.

Answer 365

The answer is 80% and no. This borrower put 20% down on the purchase. Therefore, with an 80% LTV, the borrower does not need PMI.

Answer 366

The answer is 80%; 78%. Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than 80%, or a lender may collect PMI until 78% loan-to-value ratio is reached.

Answer 367

The answer is a **borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. The borrower changes his mind and wants to cancel 18 months later**. TILA gives a consumer a right of rescission, allowing him or her to cancel the loan contract within a specified period of time for any reason if the loan is secured by the borrower’s principal residence and is a refinance transaction for a first or subordinate mortgage. The right of rescission does not apply to a residential mortgage transaction for a purchase or initial construction of a dwelling. In order to rescind, the consumer must forward a completed rescission form to the creditor no later than midnight of the third business day after the last of certain events occur, including consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind. If the creditor failed to provide the required disclosures and notice of the right of rescission, the rescission period may be extended up to the date of the first of the following: three years after the consummation of the transaction, the transfer of all of the consumer’s interest in the property, or the sale of the property.

Answer 368

The answer is a 30-year loan term. A 30-year loan term is not prohibited for a qualified mortgage.

Answer 369

The answer is a borrower pays discount points to lower the note rate from 4.875 to 4.50. A permanent buy-down is a tool some borrowers use to adjust the price of their loan. It can also be referred to as prepaying interest.

Answer 370

The answer is a borrower who contacted the lender three months ago to ask about interest rates for refinances. The Telemarketing Sales Rule allows telemarketers to contact consumers with whom they share an established business relationship. An established business relationship exists if a consumer secured a loan from a lender within the past 18 months or contacted it within the past three months to inquire about loan products.

Answer 371

The answer is a borrower with a 580 credit score is offered a loan with credit life premiums included. Tacking on unnecessary insurance premiums such as “credit life” is a practice that predatory lenders often use to increase profits.

Answer 372

The answer is a consumer’s credit report. The GLB Act covers “nonpublic personal information.” This does not include information that is readily available to the public through court records, phone books, or land records.

Answer 373

The answer is a deed of trust. **A deed of trust** is used to secure a note. A deed can carry a rider, or an addendum, which may include a balloon rider, a prepayment penalty rider and a second-home rider, among others.

Answer 374

The answer is a fee may not be charged for preparing or delivering a Closing Disclosure. A fee may not be charged for preparing or delivering a Closing Disclosure.

Answer 375

The answer is a fictitious borrower obtains a mortgage and secures it with fictitious property. An air loan is an instance in which a fictitious borrower obtains a mortgage and secures it with fictitious property.

Answer 376

The answer is a fiduciary duty. If a mortgage broker agrees to serve a loan applicant as his or her agent, the broker owes a fiduciary duty to the applicant.

Answer 377

The answer is a first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions. A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions would meet the APR threshold used to identify loans regulated by HOEPA.

Answer 378

The answer is a fixed-rate loan with a term of 30 years. The S.A.F.E. Act defines a “nontraditional mortgage product” as any loan other than a 30-year, fixed-rate loan.

Answer 379

The answer is a fixed-rate qualified mortgage that is not a higher-priced mortgage loan. The only loans that may include prepayment penalties are fixed-rate qualified mortgages that are not higher-priced mortgage loans.

Answer 380

The answer is a home equity line of credit. A Loan Estimate would not be required in a transaction for a home equity line of credit.

Answer 381

The answer is a home equity line of credit. Open-ended credit that allows a borrower to make repeated withdrawals and also make monthly payments based on the outstanding balance is known as a home equity line of credit.

Answer 382

The answer is a legal description of the property. The promissory note contains the borrower’s name, loan amount, interest rate, loan terms, and a provision requiring notices be done in writing. It does not contain a legal description of the property.

Answer 383

The answer is a letter of recommendation from a former employer. A letter of recommendation is not required from a former employer as a condition of licensure within the NMLS system.

Answer 384

The answer is A Loan Estimate. For most mortgage loan transactions (unless exempt), a Loan Estimate must be provided no later than three business days after receiving a completed loan application and at least seven business days prior to consummation.

Answer 385

The answer is a loan for an RV which the borrower uses as his/her primary housing six months a year. HMDA reporting is not required for loans for personal property; loans to purchase RVs are personal loans and therefore not subject to mortgage lending laws.

Answer 386

The answer is a loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid. A loan is a high-cost mortgage if it includes a prepayment penalty provision that is in effect for more than 36 months after consummation, or one that allows the prepayment penalties to exceed 2% of the amount prepaid.

Answer 387

The answer is a loan processor. A loan processor is an individual who performs clerical or support duties.

Answer 388

The answer is a loan that has a specific amortization period but matures prior to the time it fully amortizes. A balloon loan is a loan that has a specific amortization period but matures prior to the time at which it fully amortizes.

Answer 389

The answer is a mortgage with a 40-year loan term. VA and FHA loans are qualified mortgages, as are loans with DTI ratios that do not exceed 43%. Qualified mortgages may not have loan terms that exceed 30 years.

Answer 390

The answer is a notepad imprinted with the title company’s information. RESPA prohibits the exchange of “things of value” which can include money, discounts, special rates or terms, stock, tickets to sporting or theater events, or trips at another’s expense. An imprinted notepad is not considered something of value.

Answer 391

The answer is a pattern or practice of discrimination. Under ECOA, the Attorney General may take action against a creditor who appears to have engaged in a pattern or practice of discrimination.

Answer 392

The answer is a person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made. A broker does not technically extend credit. However, ECOA specifically addresses the broker by including persons who “regularly refer applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made.”

Answer 393

The answer is a production report for all licensed originators. Production information pertaining to individual originators is not a necessary requirement as a condition of license renewal.

Answer 394

The answer is a property inspection waiver. A property inspection waiver may be allowed if the lender is comfortable with existing data on a property used as collateral for a rate/term refinance.

Answer 395

The answer is a purchase money mortgage. A purchase money mortgage would be subject to the ATR Rule.

Answer 396

The answer is a purchase money mortgage. Loans that are typically secured by a subordinate lien may include a home equity line of credit, a home equity loan, or a piggyback loan.

Answer 397

The answer is a purchase of a principal residence with a conventional loan. Rescission does not exist for a purchase of a principal residence with a conventional loan.

Answer 398

The answer is a purchase transaction. The “Your Home Loan Toolkit” disclosure is required for a purchase transaction.

Answer 399

The answer is a referral to another potential creditor. An adverse action notice contains a statement of the action taken; a prescribed ECOA Notice regarding the prohibition of discrimination; the name and address of the federal agency that administers compliance with respect to the loan originator; a statement of the specific reasons for the adverse action or a disclosure of the applicant’s right to be given such a statement and the identity of the persons or office from which the statement may be obtained; and, if a credit score is used, FCRA requires that it also include the actual numerical credit score, the range of credit scores possible under the model used, all key factors that adversely affected the credit score, the date of the credit score, and the name of the entity that created the score or the credit file upon which the score was based.

Answer 400

The answer is a revised Loan Estimate may be issued. In general, a creditor may not make a material change to a Loan Estimate once it is provided to the loan applicant. However, under certain specific “changed circumstances,” a revised Loan Estimate may be provided. These include an extraordinary event beyond the control of any party which specifically affects the transaction, such as a tornado damaging the subject property.

Answer 401

The answer is a state licensing agency. In having oversight and supervisory authority over loan originators, a state licensing agency must participate in the NMLS, conduct background checks, and write rules and regulations.

Answer 402

The answer is a statement that ECOA prohibits discrimination against credit applicants. There must be a statement on the Adverse Action Notice stating that ECOA prohibits discrimination against credit applicants.

Answer 403

The answer is a tax lien. A tax lien takes priority over all other liens, regardless of chronological order.

Answer 404

The answer is a term of no more than 40 years. In order to contain a prepayment penalty in compliance with federal law, a mortgage loan must be a fixed-rate qualified mortgage. This means that the loan must have a debt-to-income ratio of no more than 43%, points and fees that do not exceed 3% of the loan amount, and a fixed interest rate, as well as meeting other qualified mortgage underwriting standards. Qualified mortgages are limited to terms of 30 years or less; any term longer than 30 years is prohibited, and therefore such a loan would not be permitted to include a prepayment penalty.

Answer 405

The answer is a transaction for a home equity line of credit secured by a principal residence. The right to rescind a loan applies to a transaction for a home equity line of credit secured by a principal residence.

Answer 406

The answer is a unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees. RESPA requires compensation for settlement services to be earned. Any compensation not in direct correlation with an actual service is likely a violation. However, according to a 2012 case, the act of unilaterally marking up a fee and retaining the additional earnings is not illegal, as long as fee-splitting is not involved.

Answer 407

The answer is a variable interest rate. High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed.

Answer 408

The answer is advertising loans that are not actually available. Advertising loans that are not actually available is behavior that would not be considered ethical, honest, and fair.

Answer 409

The answer is after the first three years of the loan term. When a fixed-rate qualified mortgage includes a prepayment penalty, the penalty may not be charged after the first three years of the loan term.

Answer 410

The answer is All of these answers are correct. All are examples of common underwriting pitfalls that can delay a loan or cause its denial.

Answer 411

The answer is all of these answers are correct. It is not likely that an appraiser, of his/her own volition, would decide to overinflate a value. Often, inflated appraisals are a result of the conspiratorial efforts of many involved in the process.

Answer 412

The answer is all of these are likely to result. It is likely that in Jimmy’s long-term relationship with his appraiser, the meaning in this kind of email is very clear to the appraiser. In order to please Jimmy and the borrower, the appraiser is likely to do everything he/she can to arrive at as high a value as possible. This may lead to an inflated appraisal, possibly an appraisal review, and a violation of TILA’s rules regarding communication with appraisers

Answer 413

The answer is allowed when certain changed circumstances arise. Revisions to a Loan Estimate are allowed when certain changed circumstances arise.

Answer 414

The answer is amount of the finance charge. Additional disclosures required in an ad containing a trigger term include the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. The amount of the finance charge is a trigger term, not a required additional disclosure.

Answer 415

The answer is an appraisal is done on a new home being built for a first-time homebuyer. The cost approach is generally used on new home construction (among other reasons). This approach arrives at a value by estimating the value of the land, as if vacant, and adding the cost to build the house.

Answer 416

The answer is an individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator. The S.A.F.E. Act defines a loan processor as an individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator.

Answer 417

The answer is an open-end HELOC. An open-end HELOC would be exempt from the ATR Rule.

Answer 418

The answer is annual rate / number of payments in a year = periodic rate. The periodic rate is calculated by dividing the annual rate by the number of payments in a year.

Answer 419

The answer is application. An application is a request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms and the information about the borrower or prospective borrower that is customary or necessary in order to make a decision on whether to offer a residential mortgage loan.

Answer 420

The answer is appraisers. The HPA applies to residential mortgages used for primary residences and is applicable to lenders, loan servicers, and insurers.

Answer 421

The answer is as soon as his/her equity position is 20% or greater. The Homeowners Protection Act states that a homeowner may request a lender/servicer cancel PMI as soon as the equity position is at 20% or greater (80% LTV or less). The PMI is automatically terminated by the lender/servicer at 78% LTV or when the loan reaches the midpoint in its amortization.

Answer 422

The answer is as soon as is determined in accordance with state regulator notification requirements. A change which renders the initial application inaccurate must be made known to the NMLS and the Commissioner through an updated Individual Form.

Answer 423

The answer is at the same time that it refers a loan applicant to an affiliated provider of settlement services. Creditors are required to offer an Affiliated Business Arrangement Disclosure at the same time that they refer a consumer to an affiliated provider of settlement services.

Answer 424

The answer is bait-and-switch advertising. Bait-and-switch advertising is advertising a loan at very attractive terms and then informing the potential customer that that loan is not available but that a different loan with different terms is.

Answer 425

The answer is because of the shorter amortization period, the payments are often much higher than the 30-year loan. One of the biggest drawbacks of a 15-year term is the higher monthly payments, due to a shorter amortization period.

Answer 426

The answer is before consummation of the loan. Mary must establish an escrow account prior to the consummation of the loan.

Answer 427

The answer is borrower delayed in returning initial signed docs. A borrower being delayed in returning docs would suggest that the file has not even gone into underwriting yet, which would not be an underwriting pitfall.

Answer 428

The answer is borrower. In lien theory states, the borrower holds the title to the home securing a mortgage, and when the loan is paid in full, the lien on his or her home is released.

Answer 429

The answer is borrowers are only required to carry MIP until the LTV reaches 78%. A borrower with an FHA loan is required to pay both upfront and annual MIP. After June 3, 2013, FHA loans with an LTV less than or equal to 90% will require MIP until the end of the loan term or the first 11 years, whichever comes first. For FHA loans with an LTV greater than 90%, MIP will be required until the end of the loan term or the first 30 years, whichever comes first.

Answer 430

The answer is both first and subordinate liens. RESPA covers first and second liens on residential property.

Answer 431

The answer is Both Jim and Tom will pay the same amount of principal. Both brothers will pay the same amount in principal, though Jim will pay much more in interest over the longer term.

Answer 432

The answer is both the hazard insurance company and the mortgage broker. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally related mortgage loan will be referred to any person. The term "thing of value" includes any payment, advance, funds, loan, service or other consideration, such as payments of another person’s expenses. The above is an example of an instance in which both parties are in violation of the prohibition against the payment or receipt of a thing of value in exchange for referrals.

Answer 433

The answer is buy-back provisions. A warehouse lender often uses buy-back provisions in the agreements with brokers to assure themselves some protection against fraudulent activity during the loan process.

Answer 434

The answer is calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved. HMDA uses a penalty matrix to determine fines for violations. The matrix includes considerations for good faith, previous violations, and the financial resources of the entity involved.

Answer 435

The answer is CFPB. Oversight for FCRA is shared between the FTC and the CFPB.

Answer 436

The answer is CFPB. The regulations promulgated under ECOA are known as Regulation B. The federal regulatory agency responsible for ECOA is the CFPB.

Answer 437

The answer is CFPB. The regulations promulgated under RESPA are known as Regulation X. The federal regulatory agency responsible for RESPA is the CFPB.

Answer 438

The answer is CHARM. The CHARM Booklet is an educational disclosure that is mandatory under TILA.

Answer 439

The answer is CLTV. The CLTV is the ratio of all mortgages on the property divided by the total value of the property.

Answer 440

The answer is comparables within one mile of the subject property and sold within one year. Comparables located within one mile of the subject property and sold within one year are not considered an appraisal red flag.

Answer 441

The answer is conditional refinance provision. The risk of a balloon mortgage may be minimized by including a conditional refinance provision.

Answer 442

The answer is conduct examinations and investigations. Under the S.A.F.E. Act, a state licensing agency must have the authority to conduct investigations and examinations of licensed loan originators and individuals required to have a loan originator license.

Answer 443

The answer is conforming mortgage loan. Cash-out refinances, home equity conversion mortgages, and streamline refinances are all examples of FHA loan products.

Answer 444

The answer is Consumer Handbook on Adjustable-Rate Mortgages. The acronym “CHARM” stands for “Consumer Handbook on Adjustable-Rate Mortgages.”

Answer 445

The answer is Consumer Handbook on Adjustable-Rate Mortgages. The acronym “CHARM” stands for “Consumer Handbook on Adjustable-Rate Mortgages.”

Answer 446

The answer is consumer protections triggered by high-cost loans covered under HOEPA. Section 32 of Regulation Z (TILA) deals with added provisions and protections that are required if a loan meets or exceeds any one (or more) of three thresholds: either a points and fees threshold, an APR threshold, or a prepayment penalty threshold. Loans meeting or exceeding any of these thresholds are subject to the provisions required by the Home Ownership and Equity Protection Act (HOEPA, which is Section 32 of TILA).

Answer 447

The answer is consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later. In a closed-end loan transaction that offers the right to rescind, rescission may be exercised at any time until midnight on the third business day after consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later.

Answer 448

The answer is conveyance. A conveyance is the transfer of ownership of real estate from one owner to another.

Answer 449

The answer is conviction of a felony within the seven years immediately preceding application. A felony conviction within the seven years immediately preceding application is grounds for denial of an initial application.

Answer 450

The answer is cost. The cost approach uses the value of the land and the reproduction cost of any improvements.

Answer 451

The answer is creating a zero-cost borrower credit. A broker under the Law of Agency has a fiduciary duty to represent the borrower with loyalty, good faith, and should always put the borrower’s best interest ahead of his/her own.

Answer 452

The answer is creditor. The creditor is ultimately responsible for ensuring that the borrower receives a Closing Disclosure.

Answer 453

The answer is Declarations. The Declarations Section (Section 5) asks the borrower for information regarding any judgments, citizenship, default status, occupancy status, and other questions that may affect underwriting.

Answer 454

The answer is divorced. Regulation B provides that, when inquiries related to marital status are permitted, the terms that may be used are “married,” “unmarried,” and “separated.”

Answer 455

The answer is ECOA. The Equal Credit Opportunity Act (ECOA) is intended to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion, national origin, sex, marital status, or age.

Answer 456

The answer is ECOA. The Equal Credit Opportunity Act strictly prohibits the assumption that a woman will discontinue working once she has had a baby.

Answer 457

The answer is eliminate unearned fees, such as referral fees, kickbacks, and fee splitting. RESPA’s provisions prohibit the payment of any fee that was not earned.

Answer 458

The answer is ensure the protection of personal information through an effective security program. The Safeguards Rule requires the creation, implementation, and maintenance of an effective security program that ensures the privacy of clients’ personal financial information. The program must include four key elements, including a program coordinator, identification of risks, regular testing, and oversight of third-party service providers.

Answer 459

The answer is Equal Credit Opportunity Act. Under ECOA, originators may not base a decision to extend credit on the fact that an applicant receives income from a public assistance program.

Answer 460

The answer is estimated closing costs. Costs anticipated to be charged in a loan transaction, such as origination fees, processing fees, appraisal fees, title fees, and recording fees are called estimated closing costs.

Answer 461

The answer is ethical issues are the basis of both state and federal laws and can have legal consequences. Ethical issues are the basis of both state and federal laws, and violating these laws can have serious legal consequences.

Answer 462

The answer is examines whether the collateral and applicant meet lender guidelines. Underwriting is the process of evaluating both the borrower and collateral to ensure that lender guidelines are met.

Answer 463

The answer is explain the risks and benefits of the ARM product on which the client is closing. In broad terms, it is the closer’s job to “review” the terms of the loan with the borrower; it is not their job to “re-sell” the loan to the borrower. Full disclosure and discussion of all fees are the obligations of the borrower and should take place prior to closing.

Answer 464

The answer is FCRA. Failing to give borrowers accurate information about their credit in an effort to steer them into a loan they may be overqualified for is an ethical and legal violation of the Fair Credit Reporting Act

Answer 465

The answer is Federal Home Loan Mortgage Corporation. The federal banking agencies include the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

Answer 466

The answer is fee simple. Virtually every residential transaction involves an estate that is held in fee simple, the desired form of holding ownership to property because it has the fewest restrictions.

Answer 467

The answer is fees charged by an unaffiliated appraiser. Finance charges always include fees charged by the creditor, charges by an affiliate of the creditor, and fees charged by a third-party provider required by the creditor. Fees charged for real estate-related services, such as appraisal, are not included in the finance charge if they are reasonable, are not charged by affiliates, and the creditor does not receive a direct or indirect fee for those services.

Answer 468

The answer is fees paid to a creditor. Fees that are subject to a zero tolerance for variances between estimated and actual fees include those for creditors, mortgage brokers, and their affiliates.

Answer 469

The answer is FHA loan. Conventional loans include a wide range of loan types except for government-insured and guaranteed loans such as FHA loans, USDA loans, and VA loans.

Answer 470

The answer is FHA loans. The Homeowners Protection Act (HPA) is used to facilitate the cancellation of private mortgage insurance, or PMI. FHA loans require upfront and annual mortgage insurance premiums; they do not rely on private mortgage insurance to protect their investment.

Answer 471

The answer is FHA. The secondary market includes GSEs, such as Fannie Mae and Freddie Mac (FNMA and FHLMC), as well as private financial institutions, also known as private-label investors.

Answer 472

The answer is finance charge. The finance charge is a trigger term in advertising for both open- and closed-end loans.

Answer 473

The answer is Financial Information - Real Estate. Income derived from a rental property would be entered into the "Financial Information - Real Estate" section of the URLA, under a heading called “Property You Own." If the applicant owns multiple properties from which they earn rental income, there are additional content boxes in this section to accommodate that information.

Answer 474

The answer is five. The NMLS requires a licensee who fails to maintain a license for five years or longer to retake the exam.

Answer 475

The answer is fixed rate. This loan is a fixed-rate loan (at 6% for 30 years). The payment example shows an interest-only feature for the first five years and then a fully-amortized payment for the remainder of the loan.

Answer 476

The answer is for each variable-rate mortgage product in which the applicant expresses an interest. A Loan Program Disclosure must be provided for each variable-rate mortgage product in which the applicant expresses an interest.

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