CHAMPION'S MLO STUDY GUIDE

Question 1

Mortgage loan originators who make cold calls must comply with the requirements of the Na-
tional Do-Not-Call registry and the Do-Not-Call rules. The loan originator needs to update any
download of the registry at least every:

Answer 1

31 days

Question 2

The appraisal approach that is used as the best indicator of value for existing properties is:

Answer 2

Sales Comparison Approach

Question 3

The Equal Credit Opportunity Act is implemented by the CFPB’s

Answer 3

Regulation B

Question 4

The SAFE Act requires all MLOs seeking state-licensure to pass the NMLS-developed Mort-
gage Loan Originator Test with a score of:

Answer 4

75% or better.

Question 5

The Consumer Financial Protection Act of 2010 establishes the Consumer Financial Protection
Bureau (CFPB), as an independent entity housed within the:

Answer 5

Federal Reserve System

Question 5

The Equal Credit Opportunity Act prohibits discrimination in any aspect of a credit transaction
on the basis of all of the following except:

Answer 5

Immigration status

Question 5

The VA’s debt-to-income ratio is a ratio of total monthly debt payments (housing expense, in-
stallment debt, etc.) to gross income. It is a guide and, as an underwriting factor, it is secondary
to the:

Answer 5

Residual income calculation

Question 6

The SAFE Act requires mortgage loan originators to pass a qualified test to obtain a license.
An individual may retake the test 2 consecutive times, with each consecutive taking occurring
at least:

Answer 6

30 days after the preceding test

Question 7

Which of the following loans is excluded from the Ability-to-Repay Rule requirements?

Answer 7

Home Equity Line of Credit Loans

Question 8

Fannie Mae is the nickname for the:

Answer 8

Federal National Mortgage Association.

Question 9

The Home Mortgage Disclosure Act requires lenders to ask applicants and borrowers for in-
formation regarding their ethnicity, race, and sex even when applications are made entirely by
telephone, mail, or the Internet. If an applicant submitting his or her application in person fails
to provide the information, the lender must note the information from applicants:

Answer 9

Appearance and surname

Question 10

Protecting the privacy of consumer information held by financial institutions is the heart of the
financial privacy provisions of the:

Answer 10

Gramm-Leach-Bliley Financial Modernization Act of 1999

Question 11

Excessive lending activity for the purpose of generating fees and commissions is called:

Answer 11

Churning

Question 12

What law requires mortgage loan originators to implement a written identity theft prevention
program to detect the warning signs or “red flags” of identity theft?

Answer 12

Fair and Accurate Credit Transaction Act of 2003

Question 13

Whenever a mortgage loan originator discusses an ARM product, the Truth in Lending Act
requires they provide to the borrower the CFPB booklet:

Answer 13

Consumer Handbook on Adjustable Rate Mortgages
(CHARM)

Question 14

A person used to buy a property in order to conceal the actual owner is called:

Answer 14

Straw Buyer

Question 15

The term “qualified mortgage” was first used within the text of the:

Answer 15

Dodd-Frank Wall Street Reform and Consumer Protection Act

Question 16

The law requires that the VA be paid a funding fee on guaranteed loans. The only exceptions are
loans made to all of the following except:

Answer 16

Veterans who provide more than 20 % down payment toward the purchase of the
property

Question 17

As defined in Regulation Z, these loans are secured by the consumer’s principal dwelling with
an APR that exceeds the average prime offer rate (APOR) for comparable transactions by 1.5
percentage points for a first lien conforming residential mortgage loan.

Answer 17

Higher-Priced loans

Question 18

The regulations implementing the Truth in Lending Act are known as:

Answer 18

Regulation Z

Question 19

The SAFE Act requires continuing education for state-licensed loan originators. In order to
meet the annual continuing education requirement, the loan originator must complete:

Answer 19

8 hours of CE

Question 20

What is the name of a type of mortgage loan whose interest remains fixed for a certain period
then changes over time based upon a market index?

Answer 20

Hybrid ARM

Question 21

Mr. and Mrs. Smith are closing on a home on January 10, 2011. The sales price of the home
is $450,250, and the lender has approved them for a 90% LTV. The Smith’s 15-year fixed-rate
mortgage loan has an interest rate of 5.00%. How much pre-paid interest must the Smith’s pay
at closing, assuming a 360-day calendar year?

Answer 21

$1,238.19

Question 22

A mortgage loan originator must notify an applicant of action taken on the applicant’s request
for a mortgage loan, whether favorable or adverse:

Answer 22

Within 30 days of receiving a completed application

Question 23

The type of mortgage that provides an elderly borrower with a monthly check instead of the borrower paying a monthly payment is known as:

Answer 23

Reverse mortgage.

Question 24

What is the name of FHLMC’s automated underwriting system?

Answer 24

Loan Product Adviser

Question 25

Section 8 of RESPA prohibits any person who, pursuant to any agreement or understanding, gives or receives a fee or thing of value (including payments, commissions, fees, gifts, or special privileges) for:

Answer 25

The referral of settlement business

Question 26

According to the Truth in Lending Act, the early disclosures are required to be delivered or placed in the mail not later than three business days after the lender receives the loan application, and

Answer 26

At least 7 days before consummation of the transaction

Question 27

Under the TILA, the three-day right of rescission period begins once the material disclosure and notice have been given and last three full business days. Rescission business days are defined as:

Answer 27

All calendar days except Sunday and federal holidays

Question 28

For purchase money transactions, the maximum insurable FHA LTV is:

Answer 28

96.5 % LTV the reciprocal of the 3.50% down payment

Question 29

Any seller concession or combination of concessions that exceeds 4 percent of the established reasonable value of the property is considered excessive and unacceptable for:

Answer 29

VA guaranteed loans

Question 30

RESPA places restrictions on the lender’s requirements for tax and insurance escrow accounts. In addition, the servicer may add an amount to maintain a cushion no greater than:

Answer 30

1/6 of the estimated total annual payments from the account

Question 31

Mortgage originators must provide the borrower with a copy of the Special Information Book- let, “Your Home Loan Toolkit: A Step by Step Guide,” either at the time a written application is submitted or no later than:

Answer 31

Three business days after the application is received

Question 32

The Fraud Enforcement and Recovery Act (FERA) was introduced in Congress in February 2009 and signed into law by President Obama on May 20, 2009. Convictions for mortgage fraud can carry a:

Answer 32

30-year maximum prison sentence or a maximum $1 million fine, or both.

Question 33

As defined in the SAFE Act, the term “nontraditional mortgage product” means any mortgage product other than:

Answer 33

30 year Fixed Rate Loan

Question 33

Which of the following is considered in a borrower’s housing expense to income ratio (Front End Ratio)?

Answer 33

Homeowner’s Insurance

Question 34

Per FHA underwriting guidelines, gift funds are acceptable and may be used for the entire down payment. Gift funds may be provided by:

Answer 34

The borrower’s family member.

Question 35

TILA requires mortgage loan originators to make certain material disclosures on loans subject to the RESPA within __________ after receipt of a written application.

Answer 35

3 Business Days

Question 36

The category of _____ mortgage loans is defined as a consumer credit transaction that for, first-lien loans, are 1.5 percentage points above the average prime offer rate issued by Freddie Mac.

Answer 36

Higher-Priced

Question 37

An essential requirement under TILA is that no loan originator shall receive, directly or in- directly, ______ for a consumer-purpose loan secured by a dwelling that is based on terms of a transaction.

Answer 37

Compensation

Question 38

The Truth in Lending Act permits a borrower to assert a defense to foreclosure against a creditor when there is a violation of the ____ and the ability to repay provisions.

Answer 38

Anti-Steering

Question 39

The Loan Estimate must be delivered or placed in the mail no later than the seventh busi- ness day before ______.

Answer 39

Consummation

Question 40

In order to receive a residential mortgage loan originator license, an applicant may not have been convicted of, or plead guilty or nolo contendere, to any felony in a domestic, foreign, or military court during the ____ preceding the date of application for an MLO license.

Answer 40

7 Years

Question 41

An originator may call a person whose number is on the National Do Not Call Registry if the originator has an ____ with the person.

Answer 41

Established Business Relationship

Question 42

The Dodd-Frank Act establishes the Consumer Financial Protection Bureau as an inde- pendent entity housed within the _____.

Answer 42

Federal Reserve System

Question 43

A ____ quote requires no discount points.

Answer 43

Par

Question 44

FHA allows sellers to provide concessions up to _________ percent of the sales price.

Answer 44

6%

Question 45

The Department of Veterans Affairs allows sellers to provide concessions up to _____ percent of the sales price.

Answer 45

4%

Question 46

If the initial rate on an ARM is less than the fully indexed rate, it is called a __________.

Answer 46

Teaser Rate

Question 47

The _____ approach is used as the best indicator of value for existing properties.

Answer 47

Sales Comparison

Question 48

_______ refers to the loss in the desirability of the style, layout, or function of an element of a property over time.

Answer 48

Functional Obsolescence

Question 49

Under FERA, convictions for _____ can carry a 30-year maximum prison sentence or a maximum 1 million dollar fine, or both.

Answer 49

Mortgage Fraud

Question 50

RESPA prohibits abusive practices such as undisclosed referral fees and ____

Answer 50

Kickbacks