As set forth by Regulation X, a servicer must not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless a borrower’s mortgage loan obligation is more than ____ days delinquent, the foreclosure is based on a borrower’s violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a superior or subordinate lienholder.
A servicer must not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless a borrower’s mortgage loan obligation is more than 120 days delinquent, the foreclosure is based on a borrower’s violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a superior or subordinate lienholder.
The rules and regulations of RESPA apply to
The rules and regulations of RESPA apply to conventional loans; FHA, VA, and other government-sponsored loans; purchase loans; reverse mortgages; assumptions; refinances; property improvement loans; and equity lines of credit. The following types of transactions are not covered: All-cash sale; sale where the individual home seller takes back the mortgage; business purpose loans; assumptions not requiring lender approval; loan conversions; temporary construction loans as long as permanent financing of 1-4 family residential property is not anticipated; bridge loans; vacant or unimproved property unless a dwelling will be constructed or moved onto the property within two years; and bona fide transfers of a loan obligation in the secondary market.
The Financial Privacy Rule does NOT require which of the following?
Answer: An entity that services a mortgage loan must provide a quarterly privacy notice to its customers.
As set forth by Regulation P, which implements the Financial Privacy Rule of the GLB Act, a customer relationship with a consumer is established when an entity originates or acquires the servicing rights of a loan for personal, family, or household purposes. As set forth by Regulation P, when an entity and a consumer enter into a continuing relationship, the consumer becomes a customer and must receive the initial Privacy Policy notice and an annual (not quarterly) Privacy Policy notice. A customer must also receive notice of a revised Privacy Policy.
QUARTERLY PRIVACY NOTICE must be given to customers
If a loan includes an escrow account, the lender is allowed to require a cushion of up to two months, according to what law?
Section 10 of the Real Estate Settlement Procedures Act (RESPA) sets limits on the amounts that a lender may require a borrower to put into an escrow account while allowing a cushion of up to two months.
To stay in compliance with the provisions of ECOA, within ___ calendar days of receiving a complete application, lenders must notify applicants of a credit decision.
30 Days
The TILA-RESPA Rule applies to which of these loan types?
The TILA-RESPA (TRID) Rule applies to most closed-end consumer credit transactions secured by real property or a cooperative unit (regardless of whether state law classifies it as real property). Credit extended to certain trusts for tax or estate planning purposes is not exempt from the TILA-RESPA Rule. Specifically, the TILA-RESPA Rule does not apply to HELOCs, reverse mortgages, or mortgages secured by a mobile home or by a dwelling (other than a cooperative unit) that is not attached to real property.
While it is unlawful to consider race when underwriting a loan, what federal legislation requires that this information be included on a mortgage loan application?
The Home Mortgage Disclosure Act (HMDA) requires that specific information, such as sex, race, and ethnicity, be collected and reported to aid in determining if discriminatory practices are being used by mortgage lenders.
Per Regulation B, lenders must notify applicants of their credit status and reasons for action taken within __ calendar days after taking adverse action on an incomplete application unless notice is provided that the application is incomplete.
Per Regulation B, lenders must notify applicants of their credit status and reasons for action taken within 30 days after taking adverse action on an incomplete application unless notice is provided that the application is incomplete.
Which federal regulation limits the length of time that adverse collection information may appear in a consumer’s credit report?
Regulation V, which implements the Fair Credit Reporting Act, sets forth limits on the number of years that negative credit information can appear in a credit report.
As set forth in Section 32 of Regulation Z, which of the following is NOT a trigger that requires a lender to adhere to high-cost mortgage loan requirements?
A loan is considered a high-cost loan if the first lien on the property has an APR that exceeds the value of the APOR Index (as of the loan lock-in date) by more than 6.5 percentage points; or a second mortgage has an APR that exceeds the value of the APOR Index (as of the loan lock-in date) by more than 8.5 percentage points. Additionally, a loan is high-cost if: The total loan amount for a transaction is equal or greater than a set loan amount that is adjusted annually by the CFPB (based on changes in the Consumer Price Index) and the points and fees amount exceeds 5% of the total loan amount; or, the total loan amount for a transaction is less than a set loan amount that is adjusted annually by the CFPB (based on changes in the Consumer Price Index) and the points and fees amount exceeds the lesser of the adjusted points and fees dollar trigger of $1,103 or 8% of the total loan amount.
The estimate for the interest rate shown on a Loan Estimate must be available for at least ___ business days.
While the estimate for most settlement charges must be available for at least 10 business days, there are no restrictions on the amount of time an interest rate must remain available.
With the exception of a(n) ____ fee, an MLO cannot collect any fees until the borrower has received the initial application disclosures, including the Loan Estimate, and the MLO has acknowledged the borrower’s intent to proceed with the mortgage loan.
TRID sets forth that no fee, with the exception of a bona fide and reasonable credit report fee, may be received by an MLO or lender until the borrower has received the initial application disclosures, including the Loan Estimate, and the MLO/lender has acknowledged the borrower’s intent to proceed with the mortgage loan.
CREDIT REPORT FEE
When PMI is required for conforming fixed-rate mortgages, the lender must provide to the borrower at loan consummation a written notice that discloses the borrower’s right to request cancelation of PMI, and, based on the initial amortization schedule, the date the loan balance is scheduled to reach ____ of the original value of the property.
When PMI is required for conforming fixed-rate mortgages, the lender must provide to the borrower at loan consummation a written initial amortization schedule and a written notice that discloses the borrower’s right to request cancelation of PMI, and, based on the initial amortization schedule, the date the loan balance is scheduled to reach 80% of the original value of the property. The written notice must also disclose the borrower’s right to request cancelation on an earlier date if actual payments bring the loan balance to 80% of the original value of the property sooner than the date based on the initial amortization schedule.
80% of the Original Value of Property
At the time that Dan applied for a mortgage with MMM and received an initial Loan Estimate (LE), he did not lock an interest rate. Two weeks later, Dan decides to pay the fee and lock the rate with MMM. While preparing the revised LE to reflect the new rate lock fee, the MMM underwriter notices that received appraisal and title fee invoices are slightly higher than originally disclosed. MMM sends Dan a revised LE that reflects new fees. For good faith calculation purposes, which of the following fees paid at consummation will be compared to the REVISED Loan Estimate?
For good faith calculation purposes, the rate lock extension fee disclosed on the revised Loan Estimate will be compared to actual costs charged at consummation because the change was a valid change circumstance. MMM should disclose the higher title and appraisal fees since it is the best information reasonably available; however, the disclosure of those fees is for informational purposes only and good faith will still be determined based on the fees disclosed in the initial Loan Estimate.
RATE LOCK EXTENSTION FEE
Within three business days after an MLO receives a complete mortgage loan application, the MLO must provide the applicant with a written list of homeownership counseling organizations. This list must include at least how many HUD-approved housing counseling agencies in the applicant’s area?
Lenders comply with this requirement when they provide a list of 10 HUD-approved housing counseling agencies in the applicant’s location. Exemptions to this requirement include reverse mortgages and mortgage loans secured by a timeshare.
When preparing a Loan Estimate, commissions of real estate brokers or agents are listed in what subsection?
Example of items that go in the Other section of the LE include commissions of real estate brokers or agents, additional payments to the seller to purchase personal property pursuant to the contract of sale, homeowner’s association and condominium charges associated with the transfer of ownership, and fees for inspections not required by the creditor but paid by the consumer pursuant to the contract of sale.
OTHER
A mortgage loan that has a fixed rate for a predetermined length of time and adjusts for the remaining term of the loan is known as what type of loan?
A partial release, satisfaction, or conveyance clause in a contract obligates the creditor to release part of the property from the lien and convey title to that part back to the debtor once certain provisions of the note or mortgage have been satisfied.
Partial Release Clause
A mortgage loan that has a fixed rate for a predetermined length of time and adjusts for the remaining term of the loan is known as what type of loan?
A hybrid ARM is represented as a 3/1, 5/1, etc., and is fixed for the term represented by the first number and adjusts annually for the remainder of the loan term.
hybrid ARM
The annual percentage rate (APR) is also referred to as
The APR or effective rate of interest is the total cost of the loan as an annual percentage of the loan amount and includes the loan fees, discount points, and other charges that must be paid by the borrower. Nominal = Note Rate. Effective = APR.
Effective Rate of Interest.
All of these are requirements for a VA-guaranteed loan EXCEPT
VA-guaranteed loans are for primary residences only, so if a veteran wants a vacation home or rental property, the veteran will have to obtain a conventional loan. While there are no upfront or monthly mortgage insurance premiums required for VA loans, borrowers must pay a non-refundable one-time variable funding fee at closing for guaranteeing the loan. The variable funding fee is waived for disabled veterans and surviving spouses of veterans who died in service or from service-connected disabilities. Generally, the total DTI must not exceed 41%.
The Loan Can be Used to Purchase a Vacation Home.
At what point must a creditor automatically terminate private mortgage insurance on a conventional loan?
The Homeowners Protection Act of 1998 requires lenders to automatically cancel PMI when a home has been paid down to 78% of its original value or has attained 22% equity based on the original value, assuming the borrower is not delinquent. Whether through automatic or borrower-requested PMI cancellation, the lender terminates the policy and reduces the monthly mortgage payment by the PMI amount.
when a borrower has paid down to 78% of the original consummated value
What is a widely recognized advantage of a VA-guaranteed loan?
VA-guaranteed loans permit a buyer to purchase with no money down.
A down payment is not required
An FHA-insured loan is an example of
Conventional financing refers to real estate that is paid for or financed with a conventional loan-one that is usually made by a bank or institutional lender and that is not insured or guaranteed by a government entity or agency, such as FHA or VA. Mortgage loans offered through government loan programs, such as FHA, VA, and USDA programs, are conversely referred to as non-conventional loans.
Non-conventional financing.
Marian has an adjustable-rate mortgage loan that has an initial interest rate of 4%. The margin on the loan is 2%. If the index is 5% in the second year, what is the interest rate charged to Marian?
The interest rate adjusts up and down based on the index, but the margin remains the same (2%). If the index is 5% interest rate, add the margin to find the interest rate: 5% + 2% margin = 7% interest charged.
Which scenario best describes a land contract?
A land contract is a real estate installment agreement where the buyer (vendee) makes payments to the seller (vendor) in exchange for the right to occupy, use, and enjoy the land, but no deed or title transfers until all, or a specified portion of, payments have been made.
A buyer makes installment payments to the seller in exchange for the right to occupy the property; no deed transfers until all payments have been made or a specified point in the payment agreement.
For first-time homebuyers, the Fannie Mae HomeReady loan requires a ___ down payment.
3%
Which activity is considered a significant stabilizing influence of the secondary mortgage market?
standardization of loan criteria
For VA-guaranteed loans, which statement is TRUE?
The variable funding fee may be financed and all closing costs may not be financed. Reasonable discount points are allowed. Because VA mortgage loans can be for the full reasonable value of the property, generally, no down payment is required by the VA.
The document issued by the federal government certifying a veteran’s eligibility for a VA-guaranteed mortgage is known as a(n)
Certificate of Eligibility. (COE)
The minimum amount of flood insurance required for first mortgages is the lowest of ___ of the replacement cost of the insurable value of the improvements, the maximum insurance available from the NFIP, or the unpaid principal balance of the mortgage loan.
The minimum amount of flood insurance required for first mortgages is the lowest of 100% of the replacement cost of the insurable value of the improvements, the maximum insurance available from the NFIP, or the unpaid principal balance of the mortgage loan.
Susan is purchasing a house for $200,000. It was appraised for $220,000. In order to avoid paying PMI on this conventional loan, how much should Susan put down on this house?
She needs a down payment of 20% for an LTV of 80% to avoid paying PMI. This is based on the lesser of the appraised value or the purchase price. $200,000 x 20% = $40,000.I
What document would a mortgage lender provide for an adjustable-rate loan that shows a final, detailed accounting of the real estate transaction?
Closing Disclosure
A borrower of a mortgage loan secured by a principal residence may use donated funds from acceptable entities to fund all or part of a mortgage loan. Donated funds from an acceptable entity are referred to as a grant. Which statement is FALSE about these grants?
A grant can be used to fund all or part of the down payment, closing costs, or financial reserves subject to the minimum borrower contribution requirements on most loan programs. Grants are not allowed on a second home or an investment property. Acceptable entities providing a grant include churches, employers, municipalities, nonprofit organizations (excluding credit unions), regional Federal Home Loan Banks under one of their affordable housing programs, federally recognized Native American tribes and their sovereign instrumentalities, and public agencies.
Unacceptable entities providing a grant include churches, employers, municipalities, and, nonprofit organizations.
Collateral for a mortgage loan is typically the property securing the loan. Underwriters use the _____ ratio to determine how much they are willing to loan on a given property based on its value.
loan-to-value
Robby has a house that appraises for $125,000. Robby qualifies for an 85% LTV. He owes $63,000 on his first mortgage and $5,000 on his second mortgage. He would like to refinance his house into one mortgage loan and receive additional cash to pay off other debt. How much cash is available if his closing costs are $4,200 and are financed in the loan?
First, determine the maximum loan amount Robby qualifies for: $125,000 x 85% = $106,250. Now, subtract the current debt and closing costs: $106,250 - $63,000 - $5,000 - $4,200 = $34,050 cash available.
Applicant Renee is permitted to shop for a pest inspection provider and is given a written list of providers by her lender. Renee selects an unaffiliated service provider on the list so the fee actually paid for the pest inspection is subject to what tolerance for change?
The 10% aggregate limited tolerance applies when applicants are permitted to shop for a service, are given a written list of providers, and select an unaffiliated service provider on the list.
10%
The income approach is most often used to appraise the following property type?
The income approach, sometimes called the capitalization approach, estimates the value of real estate by analyzing the revenue or income the property currently generates, or could generate, often comparing it to other similar properties. This approach is most widely used with commercial or investment properties.
If the amounts paid by a borrower at closing exceed the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold, the lender must refund the excess to the borrower and mail corrected disclosures reflecting that refund within how many calendar days after consummation?
If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold, the creditor must refund the excess to the consumer and mail corrected disclosures reflecting that refund no later than 60 calendar days after consummation.
Jake purchases a house, gets a loan from his aunt and a mortgage. His aunt records her loan May 1; the bank records its loan May 10. Jake hires a contractor in June to build a deck. Jake loses his job and never pays the contractor, the bank, his aunt, or his property taxes. When the bank forecloses, in what order will the liens be paid?
tax lien, aunt’s loan, mortgage lien, mechanic’s lien
Property tax liens are senior liens that take precedence over any other liens. The remaining liens are generally paid in the order they are recorded, which is why Jake’s aunt’s loan would be paid second.
A(n) ____ by agreement is expressly created by a written document, such as a deed or other contractual agreement. It is very important to have this agreement in writing when the property is shared.
Easement
An easement by agreement is an easement expressly created by a written document, such as a deed or other contractual agreement. It is very important to have the agreement in writing when the property is shared. Creditors typically must review this document as part of the approval process.
_____ is a prohibited activity that involves homeowners who are encouraged to refinance their property over and over until little or no equity remains.
Loan flipping
Prohibited loan flipping involves refinancing over and over again, usually with no benefit to the borrower in terms of lowering the interest rate or saving fees. The borrower is promised benefits that never materialize and ultimately have little/no equity built up. Each time they refinance, they are charged points and closing costs, along with other fees. And each time, the equity gets smaller.
Who primarily investigates mortgage fraud in the United States?
The FBI investigates matters relating to fraud, theft, and embezzlement occurring within or against the national or international financial community.
What federal legislation requires that all printed advertising include the Equal Housing Opportunity logo?
The Fair Housing Act requires that the Equal Housing Opportunity logo be displayed in all printed material and the term “equal housing lender” must be used when broadcasting over the airwaves.
Mary Ann, a paralegal, is an employee of JW Elliot Processing Corp who works on a part-time basis collecting documents, performing verifications, and verifying information provided by borrowers for mortgage loans. Are Mary Ann’s activities prohibited if she does NOT have an NMLS mortgage loan origination license?
No, she does not need to be licensed to work for a loan processing company and complete these activities.
An employee of a processing company does not need to be licensed; thus Mary Ann is not prohibited from completing the business activities described. An individual who is an independent contractor working as a processor does need to be licensed to legally perform these activities.
Alice has some credit issues and really needs a place to house her three dogs. Alice’s friend, Jim, has a debt ratio and a credit profile that permit him to qualify for a loan on a second home though he has no plans to buy a second home. Alice offers to give Jim the down payment for the home and will move in and make the payments. This BEST describes what type of fraud?
fraud for property
Jim does this to help a friend acquire a place to live, but it is a straw buyer arrangement, which can be done both for property and profit. In this case, it is not to make a profit but to obtain property for Alice to live in.
