Exam Questions Prep

Question 1

Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license?

1. Housing and Economic Recovery Act
2. Mortgage Professionalism and Accountability Act
3. Mortgage Disclosure Improvement Act
4. Secure and Fair Enforcement for Mortgage Licensing Act

Answer 1

Secure and Fair Enforcement for Mortgage Licensing Act.

Question 2

Which of the following would not be on a deed of trust?

1. Legal description
2. Loan amount
3. Interest rate
4. Borrower’s name

Answer 2

Interest rate

Question 3

The requirement that borrowers receive the Consumer Handbook on Adjustable-Rate Mortgages is required under which regulation?

1. Regulation X
2. Regulation Z
3. Regulation C
4. Regulation M

Answer 3

Regulation Z

Question 4

Which of the following is true concerning the refundability of a VA funding fee?

1. VA funding fees are refundable if the borrower is overcharged
2. VA funding fees are refundable if the borrower is active military
3. VA funding fees are never refundable
4. VA funding fees are refundable if the borrower is a wounded veteran

Answer 4

VA funding fees are refundable if the borrower is overcharged.

Question 5

According to the S.A.F.E. Act, all of the following are nontraditional loan products, except:

1. Interest-only ARMs
2. Hybrid ARMs
3. Reverse mortgages with fixed rates
4. Interest-only fixed-rate 30-year mortgage loans

Answer 5

Interest-only 30-year mortgage loans

Question 6

Applicants for FHA loans must meet a back end ratio of:

1. 41%
2. 29%
3. 36%
4. 43%

Answer 6

43%

Question 7

Every month, a borrower has a car payment of $350, a credit card payment of $50, HOA dues of $35, a cable bill of $40, and a house payment (including taxes and insurance) of $1,250. The borrower’s annual income is $50,000. What is the borrower’s front-end debt-to-income ratio?

41.4%
30%
40.4%
30.8%

Answer 7

$50,000÷12 = $4,166.66. ($1,250+$35)÷$4,166.66 = 0.308 = 30.8%.

Question 8

Which of the following issues is not addressed in the standard deed of trust and note for an owner-occupied primary residence?

1. Insurance on the property
2. How quickly a borrower must occupy the property
3. Keeping hazardous substances on the property
4. Actual amounts for taxes and insurance

Answer 8

Actual amounts for taxes and insurance

Question 9

Which of the following would not be on a promissory note?

1. Amount owed
2. Rate of interest and whether the loan is fixed or adjustable
3. Borrower’s Social Security Number
4. Loan terms

Answer 9

Borrower’s Social Security Number.

Question 10

What two main aspects of a loan application does an underwriter examine to determine if lender guidelines are being met?

1. Applicant and collateral
2. Applicant and credit
3. Credit and income
4. Credit and collateral

Answer 10

Applicant and collateral

Question 11

A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct?

1. Payment of the fee is illegal
2. The fee is legal as long as the brokers have a pre-existing agreement in place
3. The fee is legal as long as the brokers do not have a pre-existing agreement in place for payment of referral fees
4. The fee is illegal unless the brokers provide a disclosure to the client

Answer 11

Payment of the fee is illegal

Question 12

Each of the following is true about the Department of Housing and Urban Development (HUD), except:

1. The Federal Housing Administration, with its liberal-eligibility FHA loan programs, operates under HUD’s authority
2. It provides or makes referrals related to housing counseling for loan applicants seeking a HECM or high-cost home loan
3. Public housing and multi-family housing fall under its purview
4. It has a major role in overseeing the mortgage industry

Answer 12

It has a major role in overseeing the mortgage industry

Question 13

What is the specific distinction between state-licensed and registered loan originators?

1. Unlike state-licensed loan originators, registered loan originators are exempt from licensing requirements
2. State-licensed loan originators are only allowed to originate in the states in which they hold a license, while registered loan originators may obtain one license and conduct business anywhere
3. Only state-licensed loan originators carry a unique identifier
4. Registered loan originators need only ten hours of pre-licensing education, while state-licensed loan originators need 20 hours

Answer 13

Unlike state-licensed loan originators, registered loan originators are exempt from licensing requirements

Question 14

Jimmie is purchasing a home with a purchase price of $350,000. He has been approved for a loan with an 85% LTV. What is his down payment?

1. $52,500
2. $297,500
3. $50,000
4. $35,000

Answer 14

15% × $350,000 = $52,500

Question 15

Which of the following specifies current disclosure requirements under the TILA-RESPA (TRID) Rule?

1. Regulation Z
2. Regulation C
3. Regulation O
4. Regulation B

Answer 15

Regulation Z

Question 16

Which of the following can usually be added to a self-employed borrower’s net income from the borrower’s tax returns when calculating the borrower’s income?

1. Total from IRS 2106
2. Depreciation
3. Total from IRS 4506
4. State taxes paid

Answer 16

Depreciation

Question 17

With regard to adjustable loans with interest rate caps, it is true that:

1. The cap period is always one year
2. The cap is lower when the adjustment period is longer
3. The loan payments can go up when the index plus the margin is less than the rate the borrower has been paying before the adjustment
4. The new interest rate cannot exceed the rate ceiling established by the caps

Answer 17

The new interest rate cannot exceed the rate ceiling established by the caps

Question 18

The S.A.F.E. Act defines a loan processor as:

1. An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator
2. An individual employed by a state-licensed mortgage broker
3. An individual employed by a depository institution
4. An individual who has applied for licensing as a loan originator but has not yet completed all the licensing requirements

Answer 18

An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator

Question 19

Which of the following is true regarding a borrower’s intent to proceed with a mortgage transaction as required under federal rule?

1. It must be communicated in writing
2. It may be communicated however the borrower chooses
3. It may not be communicated via email
4. It may not be communicated verbally

Answer 19

It may be communicated however the borrower chooses

Question 20

Carrie is obtaining a 90% loan for the purchase of her new home, which she is buying for $225,000. One discount point for her loan would be equal to:

1. $1,000
2. $2,025
3. $2,000
4. $2,250

Answer 20

90% × $225,000 = $202,500. 1% × $202,500 = $2,025.

Question 21

Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to process a loan application?

1. A state-licensed loan originator
2. An unlicensed loan processor
3. An unlicensed underwriter
4. Any of these

Answer 21

Any of these

Question 22

A lender’s title insurance policy would insure against all of the following, except:

1. Future tax liens
2. Mechanic’s liens
3. Judgments
4. Undisclosed encumbrances

Answer 22

Future tax liens

Question 23

A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan?

1. $6,000
2. $12,000
3. $1,600
4. $1,200

Answer 23

6% × $200,000 = $12,000.

Question 24

Which of the following would not need to be included in the notice of servicing transfer?

1. Toll-free number for the old servicer
2. Borrower’s payment amount
3. Toll-free number for the new servicer
4. Effective date of the transfer

Answer 24

Borrower’s payment amount

Question 25

Under TILA's rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer. 1. Two 2. Five 3. Three 4. Seven

Answer 25

Five

Question 26

Richie Rich has been approved for a 90% loan. Richie is under contract to purchase a home for $400,000 and put $5,000 earnest money down with the contract. If Richie's lender is charging 1% origination, 1% discount, and the title company fees total $1,350, how much does Richie need to bring to closing? 1. $49,350 2. $46,850 3. $43,550 4. $48,550

Answer 26

$40,000 − $5,000 + $3,600 + $3,600 + $1,350 = $43,550.

Question 27

Which of the following would not be considered a settlement service? 1. Servicing 2. Escrow services 3. Origination services 4. Appraisal services

Answer 27

Servicing

Question 28

Which of the following can be used by state regulators to determine whether a licensee demonstrates the financial responsibility and general fitness to command the confidence of the community to engage in the mortgage business? 1. Credit report, net worth, payment of federal licensing fees 2. Credit report, net worth, surety bond, payment into a state fund 3. Credit report, surety bond, payment of exemption fees 4. Credit report, payment into a professional fund, $1 million credit line

Answer 28

Credit report, net worth, surety bond, payment into a state fund

Question 29

The residual income method applies to which of the following types of loans? 1. Jumbo 2. Conventional 3. VA 4. FHA

Answer 29

VA

Question 30

Which of the following loans would not have monthly mortgage insurance at closing? 1. All options would have monthly mortgage insurance 2. 30-year FHA loan, 60% LTV 3. 10-year FHA loan, 85% LTV 4. 20-year FHA loan, 80% LTV

Answer 30

All options would have monthly mortgage insurance

Question 31

Which of the following best describes the benefit of mortgage insurance to the borrower? 1. Reduced hazard insurance premiums 2. Lower down payment requirements 3. Mortgage insurance only benefits the lender 4. Relaxed underwriting conditions

Answer 31

Lower down payment requirements

Question 32

The Uniform Residential Appraisal Report is commonly known as the: 1. 1003 2. 1040 3. 1004 4. 4506

Answer 32

1004

Question 33

A mortgage or deed of trust generally includes a clause that provides for release of the lien when the borrower pays off the debt, called a(n): 1. Alienation clause 2. Defeasance clause 3. Due-on-sale clause 4. Completion clause

Answer 33

Defeasance clause

Question 34

For FHA loans, the annual mortgage insurance premium (MIP) will differ based on whether the term of the loan is more or less than: 1. 15 years 2. 20 years 3. 25 years 4. 30 years

Answer 34

15 years

Question 35

A purpose of the Home Mortgage Disclosure Act (HMDA) is to: 1. Identify possible discriminatory lending patterns 2. Ensure that prices of homes are fairly quoted 3. Help lenders decide on mortgage interest rates 4. Provide borrowers with property listings and their prices

Answer 35

Identify possible discriminatory lending pattern

Question 36

Which of the following is NOT required by the BSA? 1. Reporting suspicious activity and transactions 2. Generating requests for information from FinCEN 3. Reporting large currency transactions 4. Implementing an anti-money laundering (AML) program

Answer 36

Generating requests for information from FinCEN

Question 37

The licensing requirements of the S.A.F.E. Act require all but which of the following? 1. Registered MLOs must complete 20 hours of pre-licensing education 2. Registration with the NMLS 3. Successfully pass federal and applicable state components of a test with at least a 75% score 4. Use of a unique identifier on all advertising materials

Answer 37

Registered MLOs must complete 20 hours of pre-licensing education

Question 38

A hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA? 1. The hazard insurance company 2. Both the hazard insurance company and the mortgage broker 3. The mortgage broker 4. Neither the hazard insurance company nor the mortgage broker

Answer 38

Both the hazard insurance company and the mortgage broker

Question 39

A “straw buyer” is: 1. A buyer who is a victim of identity theft 2. A buyer who uses another individual’s identity in order to obtain a mortgage for which he or she is not eligible 3. A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application 4. A buyer who intends to purchase property but does not intend to occupy it

Answer 39

A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application

Question 40

Which of the following fees would NOT be used in calculating the APR? 1. Closing fee 2. Underwriting fee 3. Mortgage insurance 4. Title insurance

Answer 40

Title insurance

Question 41

The S.A.F.E. Act creates several consumer protection provisions. Which of the following is not a provision created through the enactment of the S.A.F.E. Act? 1. Encourages responsible behavior through licensing standards 2. Provides consumers access to information about originators 3. Allows consumers a full refund if the originator is found to have engaged in unethical acts 4. Facilitates collection and distribution of consumer complaints between regulators

Answer 41

Allows consumers a full refund if the originator is found to have engaged in unethical acts

Question 42

Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower’s repayment ability? 1. Home Ownership and Equity Protection Act 2. Real Estate Settlement Procedures Act 3. Fair and Accurate Credit Transactions Act 4. Equal Credit Opportunity Act

Answer 42

Home Ownership and Equity Protection Act

Question 43

A homeowner with an FHA loan would like to sell his home and allow the buyer to assume the existing mortgage. However, he is concerned about violating a due-on-sale clause. Is a due-on-sale clause allowed under the terms of the loan? 1. No, because the loan is assumable 2. Yes, because the loan is assumable 3. Yes, because the loan is an FHA loan 4. No, because seller financing is illegal

Answer 43

No, because the loan is assumable

Question 44

Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license? 1. Housing and Economic Recovery Act 2. Mortgage Professionalism and Accountability Act 3. Mortgage Disclosure Improvement Act 4. Secure and Fair Enforcement for Mortgage Licensing Act

Answer 44

Secure and Fair Enforcement for Mortgage Licensing Act

Question 45

Which of the following in an ad for residential mortgage financing would trigger additional disclosures? 1. "VA financing available" 2. "Affordable payments" 3. "5.75% APR" 4. "5% down payment"

Answer 45

"5% down payment"

Question 46

Which of the following does not appear in the Loan Estimate? 1. The anticipated ARM rates for the first five years 2. The loan term 3. Whether the subject loan is assumable 4. The property purchase price

Answer 46

The anticipated ARM rates for the first five years

Question 47

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: 1. Property flipping 2. A short sale 3. An air loan 4. Property flopping

Answer 47

Property flopping

Question 48

Fannie Mae can best be described as: 1. A government-sponsored, government-owned enterprise, formed to facilitate home ownership 2. A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership 3. A government agency 4. A public corporation with absolutely no ties to the government

Answer 48

A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership

Question 49

When must a borrower receive notice of whether loan servicing can be assigned, sold, or transferred? 1. Never - this disclosure is not required 2. Within 30 days of the transfer of servicing 3. Within 15 days of the transfer of servicing 4. Either at the time of application or within three business days of application

Answer 49

Either at the time of application or within three business days of application

Question 50

Finance charges that are withheld from the proceeds of the loan are considered to be: 1. P.O.C. charges 2. Third-party fees 3. Prepaid finance charges 4. Periodic interest charge

Answer 50

Prepaid finance charges

Question 51

When would it be ethical for a mortgage broker to offer a loan with a rate higher than the best rate available to the borrower? 1. Never 2. Only when the borrower is unaware and will likely not know 3. If the lender agrees to subsidize the broker fee 4. If the borrower chooses the rate and plans to use the additional premium to offset closing costs

Answer 51

If the borrower chooses the rate and plans to use the additional premium to offset closing costs

Question 52

Which of the following is least likely to be held in an escrow or reserve account? 1. HOA fees 2. Mortgage insurance premium 3. Hazard insurance reserve 4. Property tax reserve

Answer 52

HOA fees

Question 53

A borrower receives $2,500 per month in rental income. How much of the income may be used to qualify the borrower for a loan? 1. $2,500 2. $2,000 3. $1,800 4. $1,875

Answer 53

75% × $2,500 = $1,875.

Question 54

A borrower wishes to refinance their home, which appraises for $450,000. If their loan amount is $375,000, what is the LTV? 1. 75% 2. 83.3% 3. 80% 4. 73.3%

Answer 54

$375,000 / $450,000 = 0.833 = 83.3%

Question 55

Which of the following is true when a mortgage product contains a balloon payment? 1. A loan that has monthly payments that are equal and regular in nature will never have a balloon payment owing at the end of its term 2. A high-cost bridge loan may include provision for a balloon payment 3. Under the Dodd-Frank Act, balloon payment loans are no longer permitted 4. A qualified mortgage may provide for a balloon payment as long as its term is no less than 40 years

Answer 55

A high-cost bridge loan may include provision for a balloon payment

Question 56

A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property. 1. Straw buyer 2. Air buyer 3. Straw seller 4. Air seller

Answer 56

Straw seller

Question 57

Under which of the following circumstances would flood insurance be required? 1. Property is within 100 yards of a body of water 2. Property is in flood zone "X" 3. Property is in flood zone "A" 4. Property is at or below sea level

Answer 57

Property is in flood zone "A"

Question 58

When the term "jumbo loan" is used to describe a loan, the loan: 1. Is subprime 2. Is nonconforming 3. Always has a high interest rate 4. Has a high loan-to-value ratio

Answer 58

Is noncomforming

Question 59

It is unethical and illegal to use yield spread premiums for any reason other than: 1. To earn an additional commission on a loan origination 2. To enable a creditor to earn more on a mortgage transaction 3. To enable a loan originator to meet a monthly sales quota 4. To help a borrower pay for settlement costs

Answer 59

To help a borrower pay for settlement costs

Question 60

All of the following individuals are exempt from requirements to obtain a mortgage loan originator license, except for a person who: 1. Extends credit only for timeshare plans 2. Negotiates a residential mortgage loan secured by a dwelling that is the individual’s residence 3. Negotiates the terms of a residential mortgage on behalf of a cousin 4. Is an employee of a local government agency and who acts as a loan originator in their official duty as an employee

Answer 60

Negotiates the terms of a residential mortgage on behalf of a cousin

Question 61

A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days? 1. 30 days 2. 90 days 3. 45 days 4. 60 days

Answer 61

60 days

Question 62

In an FHA loan, which of the following is true regarding the upfront mortgage insurance premium (UFMIP)? 1. A portion of it may be applied to the UFMIP of another FHA-insured mortgage 2. It is refundable 3. It is pertinent to only a small minority of FHA loans 4. It takes the place of the annual mortgage insurance premium

Answer 62

A portion of it may be applied to the UFMIP of another FHA-insured mortgage

Question 63

Which of the following is not a requirement for the servicing notice given in the event of a transfer of servicing? 1. It must include contact information for the current lender 2. It must be given within 30 days of the transfer 3. It must include contact information for the new lender 4. It must inform the borrowers they may make payments to either lender for 60 days

Answer 63

It must be given within 30 days of the transfer

Question 64

Which of the following loans will not require mortgage insurance? 1. FHA loan at 96.5% LTV 2. Conventional loan at 85% LTV 3. VA loan at 100% LTV 4. Conventional loan at 95% LTV

Answer 64

VA loan at 100% LTV

Question 65

A borrower receives $1,000 per month in rental income. How much of the income may be used to qualify the borrower for a loan? 1. $1,000 2. $800 3. $750 4. $1,250

Answer 65

$750

Question 66

Under which of the following circumstances would the lender on a conventional loan be required to drop the mortgage insurance? 1. The appraised value has increased, giving the borrower 20% equity, and the borrower has made their first 12 consecutive payments 2. The appraised value has increased, giving the borrower 10% equity, and the borrower has made their first 24 consecutive payments 3. The loan reaches 78% LTV based on the original purchase price 4. The loan reaches 70% LTV based on a new appraisal, and the borrower requests cancellation

Answer 66

The loan reaches 78% LTV based on the original purchase price

Question 67

What is Freddie Mac's automated underwriting system called? 1. Desktop Originator 2. Underwriter Assistant 3. Loan Product Advisor 4. AUS

Answer 67

Loan Product Advisor

Question 68

Which of the following contains only items which should be used in calculating a borrower's debt-to-income ratio? 1. Monthly rent expense on current home, credit card payment, car insurance 2. Car payment, boat payment, child support obligations 3. Property tax payment, utility payment, cable bill 4. Mortgage insurance payment, average grocery costs, electric bill

Answer 68

Car payment, boat payment, child support obligations

Question 69

Which of the following would NOT be required if a mortgage company wishes to utilize electronic signatures on required disclosures? 1. Borrowers must be given the option to receive the disclosures in paper form 2. Borrowers must be able to withdraw their consent to receive the disclosures electronically 3. The company must record the IP address from which the documents were accessed 4. The company must disclose hardware and software requirements to borrowers

Answer 69

The company must record the IP address from which the documents were accessed

Question 70

A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): 1. HECM 2. HELOC 3. Pay-option mortgage 4. Equity mortgage

Answer 70

HECM

Question 71

Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except: 1. Not knowingly withholding, removing, or destroying any books or records 2. Making all of the licensee's records available to borrowers upon demand 3. Permitting interviews of principals, loan originators, and independent contractors by state regulators 4. Making records and books available to the state regulator

Answer 71

Making all of the licensee's records available to borrowers upon demand

Question 72

Which of the following pieces of information is NOT found on the 1003? 1. Appraised property value 2. Underwriter's name 3. Borrower's Social Security Number 4. Subject property address

Answer 72

Underwriter's name

Question 73

In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a Loan Estimate must be delivered or mailed within three business days after receipt of a written application and no later than: 1. Three business days before the transaction is consummated 2. The fifth business day before the transaction is consummated 3. The seventh business day before the transaction is consummated 4. The date the transaction is consummated

Answer 73

The seventh business day before the transaction is consummated

Question 74

Which of the following would convey a property? 1. Deed rider 2. Warranty deed 3. Note 4. Deed of trust

Answer 74

Warranty deed

Question 75

If a borrower's reserve account for taxes and insurance is found to be short or deficient by an amount in excess of one month's worth of deposits, which of the following is true? 1. The escrow account will be cancelled 2. The lender can require the borrower to make up the shortage over the next 12 months 3. The lender can require the borrower to make up the shortage over the next six months 4. The borrower must remit the shortage to the lender within 90 days of notice of the shortage

Answer 75

The lender can require the borrower to make up the shortage over the next 12 months

Question 76

A licensed mortgage loan originator: 1. Performs clerical and support duties for his/her sponsoring broker 2. Advises loan applicants on current rates and loan terms 3. May take responsibility for servicing a loan after it has been consummated 4. Negotiates the sale and purchase of residential real estate

Answer 76

Advises loan applicants on current rates and loan terms

Question 77

Combining stated income with a nontraditional mortgage product is an example of: 1. Risk optimization 2. Risk premium 3. Risk layering 4. Risk enhancement

Answer 77

Risk layering

Question 78

Ethics: 1. Is a branch of philosophy dealing with legal behavior 2. Provides a guideline for answering questions when a choice of actions is available 3. Defines how a person must act 4. Is set out in law

Answer 78

Provides a guideline for answering questions when a choice of actions is available

Question 79

Which of the following types of mortgages typically carries two different types of mortgage insurance? 1. VA 2. Conventional 3. Subprime 4. FHA

Answer 79

FHA

Question 80

The acronym LIBOR represents a: 1. Federal agency 2. Possible ARM index 3. Federal law 4. State law

Answer 80

Possible ARM index

Question 81

According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should: 1. Average the last six months' worth of pay stubs from the borrower 2. Average the income shown on the 1040s for the past two years 3. Use the income shown on the borrower's most recent two pay stubs 4. Average the income showing on the W-2s for the past two years

Answer 81

Average the income shown on the 1040s for the past two years

Question 82

Which of the following is not a required element of a company's safeguard policy, as required by the GLB Act? 1. Designate one or more employees to coordinate safeguards 2. Evaluate and adjust procedures in light of relevant circumstances 3. Select appropriate service providers and contract with them to implement safeguards 4. Contract with a federally-insured company to destroy documents

Answer 82

Contract with a federally-insured company to destroy documents

Question 83

The 1003 is also known as the: 1. Uniform Residential Loan Application 2. Appraisal 3. Mortgage Credit Analysis Worksheet 4. Uniform Underwriting and Transmittal Summary

Answer 83

Uniform Residential Loan Application

Question 84

Insurance which guarantees a lender a certain lien position on the title to a property free from undisclosed encumbrances is called: 1. Guarantee against encumbrances 2. Lender's title policy 3. Owner's policy 4. Forced policy

Answer 84

Lender's title policy

Question 85

A loan which does not require payments during the life of the loan is most likely: 1. Illegal 2. A modified mortgage 3. A pay-option mortgage 4. A HECM

Answer 85

HECM

Question 86

All of the following are considered immediate family members, and therefore a mortgage loan originator may negotiate a mortgage loan on their behalf without needing to be licensed, EXCEPT a(n): 1. Stepparent 2. Aunt 3. Adopted sibling 4. Grandparent

Answer 86

Aunt

Question 87

The purpose of the Truth-in-Lending Act is to do which of the following? 1. Ensure meaningful disclosure of credit terms to consumers 2. Prevent lenders from charging interest rates that are unfair to consumers 3. Protect consumers from abusively high interest rates 4. Require consumers be provided with a good faith estimate of closing costs at the time of loan application

Answer 87

Ensure meaningful disclosure of credit terms to consumers

Question 88

Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower? 1. UFMIP 2. Insured amount 3. Entitlement 4. Guarantee fee

Answer 88

Entitlement

Question 89

Co-borrower information must be provided on the 1003 when the co-borrower: 1. Is a minor 2. Has income being used for loan qualification 3. Is the borrower's spouse 4. Has a credit score that is below average

Answer 89

Has income being used for loan qualification

Question 90

Loan originator compensation records must be retained for at least: a) Three years b) Two years c) Four years d) Five years

Answer 90

Three years

Question 91

A borrower owes $200,000 on a first mortgage, and $50,000 on a line of credit with a maximum amount of $100,000. If the property appraises for $500,000, what is the CLTV? 1. 50% 2. 60% 3. 70% 4. 40%

Answer 91

$200,000 + $50,000 / $500,000 = 50%.

Question 92

According to the Interagency Guidance on Nontraditional Mortgage Product Risks, relying on an individual's capacity to repay the loan as structured from resources other than monthly income is: 1. Considered unsafe and unsound 2. A strong mitigating factor 3. Acceptable only with property securitization 4. Acceptable only with proper disclosure

Answer 92

Considered unsafe and unsound

Question 93

Which of the following entities was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government? 1. Ginnie Mae 2. Vinnie Mac 3. Fannie Mae 4. Federal Housing Administration

Answer 93

Fannie Mae

Question 94

When would business tax returns be required as documentation of income for a borrower? 1. If the borrower owns 15% of a company 2. If the borrower owns more than 25% of a company 3. If the borrower receives a K-1 from a company 4. If the borrower is an officer of a company

Answer 94

If the borrower owns more than 25% of a company

Question 95

Mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities in the: 1. Secondary mortgage market 2. Capital market 3. Primary mortgage market 4. Federal reserve market

Answer 95

Secondary mortgage market

Question 96

Which of the following is a government-owned entity which facilitates home ownership in the United States? 1. Georgie Mac 2. Ginnie Mae 3. Freddie Mac 4. Fannie Mae

Answer 96

Ginnie Mae

Question 97

According to ECOA, when could a lender ask a borrower about their race? 1. If they ask for monitoring purposes 2. Never 3. If the borrower's race is not evident 4. If the loan is not federally-regulated

Answer 97

If they ask for monitoring purposes

Question 98

Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? 1. No limit 2. One month 3. Three months 4. Six months

Answer 98

No limit

Question 99

A mortgage broker originates and closes a mortgage loan, but it is funded by the lender who is purchasing the loan from the originating broker. This is an example of: 1. Warehouse lending 2. Mortgage brokering 3. Table funding 4. Wholesale lending

Answer 99

Table funding

Question 100

Which of the following borrowers would be considered self-employed for underwriting purposes? 1. A borrower who is a vice president for a company, of which she is a 20% owner 2. A borrower who receives only commission reported on a W-2 3. A borrower who files Form 2106 with her tax returns 4. A borrower who is a salesperson for a company, of which she is a 30% owner

Answer 100

A borrower who is a salesperson for a company, of which she is a 30% owner

Question 101

Which of the following is least likely to be considered nonpublic personal information? 1. Borrower's home phone number 2. Employer's phone number 3. Borrower's job title 4. Borrower's income

Answer 101

Employer's phone number

Question 102

A 180 / 360 loan is considered a(n) ___________________ mortgage. 1. Adjustable-rate 2. Pay-option 3. Hybrid 4. Balloon

Answer 102

Balloon

Question 103

For an FHA loan, how much may the seller contribute toward the borrower’s closing costs? 1. Nothing 2. 6% of the sales price 3. 3% of the sales price 4. 3% of the loan amount

Answer 103

6% of the sales price

Question 104

A disclosure that allows a consumer to more easily compare loan options is required under which regulation? 1. Regulation B 2. Regulation Z 3. Regulation V 4. Regulation H

Answer 104

Regulation Z

Question 105

Which of the following is most true concerning a VA funding fee? 1. It is always refundable 2. It is nonrefundable 3. It is not charged to veterans 4. It is not charged to active members of the military

Answer 105

It is nonrefundable

Question 106

Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT: 1. The loan satisfies the requirements of a balloon payment qualified mortgage 2. A nine-month bridge loan is obtained for the construction of the borrower's primary dwelling 3. The borrower's income is seasonal 4. The borrower signs a waiver consenting to the balloon payment

Answer 106

The borrower signs a waiver consenting to the balloon payment

Question 107

On the Loan Estimate, fees related to third-party service providers chosen from the provider list and not affiliated with the creditor are grouped with the recording fees and subject to a: 1. No tolerance limitation 2. 10% tolerance 3. 15% tolerance 4. Zero tolerance

Answer 107

10% tolerance

Question 108

Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule? 1. The state in which the property is located 2. The amortization term of the loan 3. Whether or not the loan is an ARM or a fixed-rate loan 4. The loan program

Answer 108

The state in which the property is located

Question 109

A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts? a) 8% b) 7% c) 6% d) 9%

Answer 109

8%

Question 110

What does "FHA" stand for, when referring to the agency which oversees the FHA loan program? 1. Federal Housing Authority 2. Federal Housing Agency 3. Federal Housing Association 4. Federal Housing Administration

Answer 110

Federal Housing Administration

Question 111

A borrower makes $60,000 per year. The borrower's spouse makes $3,000 per month. The borrowers' monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple's back-end DTI? a) 30.6% b) 31.25% c) 32.5% d) 29.38%

Answer 111

60,000/12 = 5,000 3,000 + 5,000 = 8,000 2,350/8000 = 29.38%

Question 112

Which of the following terms describes the fee charged to the borrower to insure an FHA loan? 1. Upfront mortgage insurance premium 2. Guaranty fee 3. Insuring fee 4. Funding fee

Answer 112

Upfront mortgage insurance premium

Question 113

If a borrower has an $80,000 first mortgage, a $20,000 second HELOC on which they have $5,000 in remaining credit, and the property appraises for $100,000, what is the CLTV? a) 100% b) 80% c) 75% d) 95%

Answer 113

$80,000 + ($20,000 - $5,000)/$100,000 = 95%.

Question 114

Which of the following would not be considered an established business relationship under the Do-Not-Call rules? 1. A consumer purchases a service from a seller 2. A financial transaction between a consumer and a seller 3. A consumer inquiry into the purchase of an item six months ago 4. A consumer purchases an item from a seller

Answer 114

A consumer inquiry into the purchase of an item six months ago

Question 115

On an ARM loan, which of the following will not be found on the note? 1. Fully-indexed rate after one year 2. Margin 3. Adjustment parameters 4. Identification of index

Answer 115

Fully-indexed rate after one year

Question 116

The NMLS was established by: 1. HUD 2. The Federal Reserve 3. Each state regulator 4. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators

Answer 116

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators

Question 117

Which of the following statements most accurately describes the term "predominant value"? 1. The final value an appraiser reports on an appraisal 2. The most common sales price for the neighborhood 3. The highest sales price in the neighborhood 4. The average sales price for the neighborhood

Answer 117

The most common sales price for the neighborhood

Question 118

Redlining is addressed in which federal law? 1. RESPA 2. HOEPA 3. FCRA 4. ECOA

Answer 118

ECOA

Question 119

A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage? 1. Balloon mortgage 2. Hybrid ARM 3. Graduated Payment Mortgage (GPM) 4. Fixed period ARM

Answer 119

Balloon mortgage

Question 120

In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table? 1. “Has this information been verified?” 2. “Can this amount increase after closing?” 3. “Is this payment subject to a late fee?” 4. “Has this information changed from the Loan Estimate?”

Answer 120

“Can this amount increase after closing?”

Question 121

Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following? 1. Regulation C 2. Regulation Z 3. Regulation D 4. Regulation B

Answer 121

Regulation B

Question 122

Which of the following best describes the order in which payments will be applied according to the standard deed of trust? 1. Interest, escrow, principal 2. Principal, escrow, interest 3. Late fees, principal, interest 4. Interest, principal, escrow

Answer 122

Interest, principal, escrow

Question 123

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 is known as a: 1. Straw buyer 2. Identity thief 3. Flipper 4. Flapper

Answer 123

Straw buyer

Question 124

The penal sum of a loan originator's required surety bond must be maintained: 1. In an amount that reflects the dollar amount of loans originated 2. In a flat-rate amount determined by each state 3. In an amount that reflects the number of loans originated 4. In an amount that reflects the originator's years of professional experience

Answer 124

In an amount that reflects the dollar amount of loans originated

Question 125

A borrower makes $20 per hour and works 35 hours per week. If their loan program allows a front-end debt ratio of 31%, what is the maximum housing payment for which they can qualify? a) $940.33 b) $868.33 c) $1,074.67 d) $956.34

Answer 125

$3,033.33 × 31%.(.31) = $940.33.

Question 126

Which of the following is used to describe a loan amount which exceeds conforming loan limits? 1. Subprime 2. Jumbo 3. Interest-only 4. No documentation

Answer 126

Jumbo

Question 127

A misleading representation, omission, act, or practice is considered deceptive when, among other conditions, it is: 1. Malicious 2. Repeated 3. Intentional 4. Material

Answer 127

Material

Question 128

The APR factors in the effects of all of the following expenses, except: 1. Hazard insurance premium 2. Processing fee 3. Origination fee 4. Mortgage insurance premium

Answer 128

Hazard insurance premium

Question 129

Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: 1. The appraised value 2. The purchase price 3. The lower of the replacement cost or the unpaid loan amount 4. 80% of the replacement cost

Answer 129

The lower of the replacement cost or the unpaid loan amount

Question 130

Mortgage interest rates are influenced by all of the following, except: 1. Foreclosure rates 2. Regional property tax rates 3. Loan fraud 4. Federal Reserve activities

Answer 130

Regional property tax rates

Question 131

The preferred debt-to-income ratio for applicants for VA loans is: 35% 43% 50% 41%

Answer 131

41%

Question 132

Seller concessions for conforming loans are limited to _____ and _____ on LTVs of over 90% and 90% or less, respectively. 6%; 3% 3%; 6% 10%; 20% 3.5%; 10%

Answer 132

3%; 6%

Question 133

A balloon mortgage has a: 1. Short-term payment that can go up or down from month to month throughout the life of the loan 2. Payment that grows with each month as equity decreases 3. Large payment required at the onset of the loan and periodic payments thereafter 4. 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time

Answer 133

30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time

Question 134

Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections? 1. A broker agreement 2. A TIL disclosure 3. A verification of employment 4. The promissory note

Answer 134

A verification of employment

Question 135

In what scenario would a sales comparison approach be appropriate? 1. A condo complex for residents aged 55 and over 2. A bio-dome built in the middle of a residential neighborhood 3. A commercial office building in an area zoned commercially 4. A complex of office units in a business park near a residential neighborhood

Answer 135

A condo complex for residents aged 55 and over

Question 136

Which of the following is not a prohibited practice regarding loan originator compensation? 1. A loan originator receives .5% more compensation if a loan contains a prepayment penalty 2. A loan originator receives compensation for closing over $1 million in volume per month 3. A loan originator receives 10% more compensation if he/she closes more than ten transactions in a month with an interest rate of 6.5% or more 4. A loan originator receives compensation from a consumer and from the creditor

Answer 136

A loan originator receives compensation for closing over $1 million in volume per month

Question 137

An assumption clause 1. allows the seller to reassume the mortgage if the buyer falls behind in his payments. 2. assumes the buyer has the ability to repay the loan based on his credit score. 3. allows a buyer to assume the seller’s mortgage. 4. allows the buyer to sell the mortgage without requiring the seller’s authorization.

Answer 137

allows a buyer to assume the seller’s mortgage.

Question 138

The generally-accepted appraisal standards in the United States are known as: ASB USASB USPAP FinCEN

Answer 138

USPAP

Question 139

Entities that gather and sell information regarding an applicant’s credit in the form of credit reports are known as: Consumer finance associations Consumer reporting agencies Consumer reporting associations Consumer finance agencies

Answer 139

Consumer reporting agencies

Question 140

In order for a home loan to be a qualified mortgage, the debt-to-income ratio may not exceed: 43% 28% 36% 46%

Answer 140

43%

Question 141

Which of the following are considered liens? 1. Judgment, mortgage, flood insurance 2. Mortgage, mechanic’s lien, debentures 3. Chattel, mortgage, attachment 4. Judgment, attachment, mortgage

Answer 141

Judgment, attachment, mortgage

Question 142

The reporting form used to communicate HMDA data is called what? 1073 Loan/Registration Application 1004 Loan/Application Register

Answer 142

Loan/Application Register

Question 143

If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation. 7 10 20 15

Answer 143

15

Question 144

A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this? 1. Adjustable-rate 2. FHA buy-down 3. Option ARM 4. Interest-only option fixed-rate

Answer 144

Interest-only option fixed-rate

Question 145

The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of: NMLS CFPB FHA HUD

Answer 145

CFPB

Question 146

Disclosures for high-risk loans required by the Homeowners Protection Act inform the borrower that: 1. The loan is considered a high-cost loan because it trips thresholds related to title insurance fees 2. Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments 3. There may be a loan more suited for the borrower that is much less expensive 4. Payment amounts may change based on interest rate changes

Answer 146

Termination of PMI is automatic at the midpoint of the amortization schedule as long as a borrower is current on his/her payments

Question 147

The “Confirm Receipt” box on the Loan Estimate informs the consumer that: 1. He or she is now obligated to proceed with the loan transaction 2. He or she has agreed to all costs and terms stated in the disclosure 3. He or she is not obligated to accept a loan simply because he or she has signed or received the disclosure 4. He or she may face legal action for failure to pay fees due at the time of receiving the Loan Estimate

Answer 147

He or she is not obligated to accept a loan simply because he or she has signed or received the disclosure

Question 148

Which of the following is not permitted for a HOEPA loan? 1. Documenting a borrower’s ability to repay the loan 2. Requiring a balloon payment after the first five years 3. Refinancing into another HOEPA loan within 12 months if it is in the borrower’s best interest 4. Making a loan solely based on the collateral value of the property

Answer 148

Making a loan solely based on the collateral value of the property

Question 149

Which of the following is true? 1. Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule 2. Open-end credit plans, timeshare plans, and closed-end consumer credit loans are exempt from the ATR Rule 3. Open-end credit plans are covered by the ATR Rule 4. Reverse mortgage loans are covered by the ATR Rule

Answer 149

Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule

Question 150

A borrower is buying a house with a sales price of $210,000, but the appraisal came in at $200,000. The borrower takes out a loan of $160,000. What is the LTV? 76% 90% 80% 75%

Answer 150

$160,000 is divided by the appraised value of $200,000 to get 80% LTV

Question 151

When a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called: 1. A lock-in 2. A variable rate 3. A float 4. An adjustable rate

Answer 151

A float

Question 152

Which of the following may be considered an appraisal red flag? 1. An appraiser’s resume shows substantial experience in the area 2. Property owner and seller are not the same 3. Appraisal is dated after the sales contract 4. Comparables are located within one mile of the subject

Answer 152

Property owner and seller are not the same

Question 153

Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan? 1. Yes, a dwelling includes a structure whether or not that structure is attached to real property 2. No, dwellings must be permanently attached to real property 3. No, mobile homes are classified as personal property, not real property 4. Yes, as long as the real property upon which the mobile home will be located is in the borrower’s name, the loan may be a residential mortgage loan

Answer 153

Yes, a dwelling includes a structure whether or not that structure is attached to real property

Question 154

Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the: 1. Annual percentage rate 2. Broker fees and the amount charged by a third party 3. Amount of the payment 4. Length of the loan

Answer 154

Annual percentage rate

Question 155

The Foxes are obtaining a mortgage loan of $140,000. They are making a down payment of $35,000, which is 20% of the purchase price. What is the purchase price of the property? $150,000 $200,000 $175,000 $235,000

Answer 155

This can be determined by adding together the amount of the mortgage loan ($140,000) and the amount of the Foxes’ down payment ($35,000) $175,000

Question 156

All but which of the following prohibitions or requirements apply to HPMLs? 1. The loan cannot include prepayment penalties after the first two years of the loan term 2. The loan cannot include prepayment penalties 3. The borrower must have an escrow account for taxes and insurance 4. Consideration of repayment ability must include verification of income using documents such as IRS W-2 forms

Answer 156

The loan cannot include prepayment penalties after the first two years of the loan term

Question 157

What is the minimum time period that MIP must be in place for a USDA loan? Zero years Three years Five years Depends on LTV

Answer 157

Zero years

Question 158

Which of the following settlement services would not be covered by RESPA? 1. Services of a real estate agent 2. Office supply provider 3. Processing services 4. Title abstractor

Answer 158

Office supply provider

Question 159

All of the following are considered involuntary liens, except: 1. Mortgage 2. Mechanic’s lien 3. Tax lien 4. Judgment

Answer 159

Mortgage

Question 160

When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as: 1. For sale by owner (FSBO) 2. Seller carry-back 3. Seller concessions 4. Seller self-financed

Answer 160

Seller carry-back

Question 161

What federal legislation requires loan originators to collect demographic data to ensure that creditors are not engaging in discriminatory lending? ECOA HMDA GLB Act FCRA

Answer 161

HMDA

Question 162

Ricky and Lucy are buying a house using a conforming loan, and they have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession? $6,210 $6,900 $13,800 $12,420

Answer 162

The seller concession allowed on a conforming loan with a 90% (or less) LTV is 6%. This number is taken from the sales price, not the loan amount. $230,000 × 6% = $13,800.

Question 163

Which of the following is the least-expensive type of reverse mortgage? 1. HECM 2. Proprietary mortgage 3. Non-recourse 4. Single purpose

Answer 163

Single purpose

Question 164

Which section of the URLA contains questions which, depending on the applicant’s answer, could result in immediate rejection of the application? 1. Information for Government Monitoring Purposes 2. Declarations 3. Details of the Transaction 4. Acknowledgement and Agreement

Answer 164

Declarations

Question 165

Statements in advertising that may lead a consumer to incorrectly assume that a mortgage product or company is directly endorsed by the federal government are in violation of which law? Regulation A Regulation Z Regulation B Regulation X

Answer 165

Regulation Z

Question 166

A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV? 47% 29% 40% 65%

Answer 166

To calculate CLTV, divide the $78,000 total encumbrance by the value of $165,000. This equals 47%.

Question 167

Which of the following forms is the appraisal form used for investment properties? 1007 1073 1004 1005

Answer 167

The 1007 is used for single-family properties that are investment properties.

Question 168

Mortgage insurance may be cancelled at what LTV percentage on a VA loan? Mortgage insurance is not required 80% 75% After five year

Answer 168

Mortgage insurance is not required

Question 169

Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan? 1. All five 2. A majority of the five 3. At least two of the five 4. Any one of the five

Answer 169

Any one of the five

Question 170

Muny Baggins regularly extends credit that is subject to a finance charge and payable in a written agreement of more than four installments. Under the Truth-in-Lending Act, Muny is a: 1. Mortgage servicer 2. Mortgagee 3. Mortgagor 4. Creditor

Answer 170

Creditor

Question 171

When would a license be suspended without a hearing? 1. If a licensee fails to renew 2. If a licensee fails to request a hearing with the state regulator 3. If a licensee has failed to complete pre-licensing requirements 4. If a licensee has already executed a right to a hearing for a previous violation

Answer 171

If a licensee fails to request a hearing with the state regulator

Question 172

What document would an underwriter rely on for detailed information concerning the collateral for a mortgage loan? 1. The property appraisal 2. The borrower’s asset statements 3. The URLA 4. The borrower’s employment documentation

Answer 172

The property appraisal

Question 173

Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will: 1. Be required because the seller acquired the home 90 days prior to the date that Nicole agreed to purchase the home 2. Be required if there is any evidence that the sale constitutes property flipping 3. Not be required unless Nicole has agreed to purchase it for 20% more than the Marine paid 4. Not be required since purchases from servicemembers are not subject to the requirement for two appraisals

Answer 173

Not be required since purchases from servicemembers are not subject to the requirement for two appraisals

Question 174

Those who disagree with the idea of a fiduciary duty in mortgage loan transactions feel that _____ is ultimately responsible for ensuring that a certain loan product has appropriate terms and conditions. 1. The mortgage broker 2. The lender 3. The consumer 4. The underwriter

Answer 174

The consumer

Question 175

All of the following loans are covered by RESPA, except: 1. A loan assumption made without lender approval 2. A 30-year fixed loan made by a federally regulated credit union 3. An FHA loan 4. A conforming loan

Answer 175

A loan assumption made without lender approval

Question 176

All of the following are TILA-required disclosures, except: CHARM Booklet Notice of Adverse Action Right to Rescind Loan Estimate

Answer 176

Notice of Adverse Action

Question 177

The size of the government’s guarantee on a VA loan depends on: 1. Whether the interest rate is fixed or adjustable 2. Whether this is the first time a veteran uses the guarantee or a subsequent transaction 3. The length of the loan term 4. The size of the loan being obtained

Answer 177

The size of the loan being obtained

Question 178

All of the following requirements are applicable to HECMs, except: 1. The loan must be secured by the borrower’s principal residence 2. The applicant must complete a consumer information session on reverse mortgages loans 3. The applicant must not have an existing mortgage on the residence 4. The applicant must be at least 62 years old

Answer 178

The applicant must not have an existing mortgage on the residence

Question 179

How long must flood insurance be in place? 1. The borrower can cancel at 80% of the loan balance 2. Until the loan reaches the halfway point in the amortization table 3. It cannot be canceled as long as the property remains in a mandatory flood zone 4. Until the loan balance is completely paid off

Answer 179

Until the loan balance is completely paid off

Question 180

If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer at what point? 1. Within seven business days of a customer providing nonpublic personal information sufficient to pull a credit report 2. Within three business days of initial contact between the consumer and the financial institution 3. No later than three business days prior to settlement 4. No later than the time at which a customer relationship is established

Answer 180

No later than the time at which a customer relationship is established

Question 181

The Talleys are buying a home for $180,000. What is the minimum possible down payment they could make in order to avoid paying PMI? $36,000 $20,000 $18,000 $32,000

Answer 181

A down payment of 20% exactly would be $36,000.

Question 182

Negative amortization: 1. Describes the result of a default 2. Occurs when the mortgage payment is not sufficient to pay the interest currently due 3. Occurs when a borrower pays only interest due each month 4. Defers principal

Answer 182

Occurs when the mortgage payment is not sufficient to pay the interest currently due

Question 183

“Equity” is defined as: 1. The difference between the fair market value of a property and the current balances of any liens 2. The difference between the appraised value and the purchase price 3. The relationship between the value of the house and a borrower’s assets 4. The balance of any liens divided by the proposed value of any new loan

Answer 183

The difference between the fair market value of a property and the current balances of any liens

Question 184

In January of 2020, Wella and Kip agreed to purchase a home at a purchase price of $546,300. They would like to hold onto as much of their savings as they can, but they have chosen to make a down payment sufficient enough to qualify for a conforming loan. What is the minimum down payment they can make to reach the conforming loan limit but still retain savings? $47,900 $35,900 $95,800 $54,900

Answer 184

546,300-510,400 = 35,900.

Question 185

Leslee is a loan processor who is not required to perform her duties at the direction of or subject to the supervision and instruction of an individual who is licensed or exempt. Leslee is a(n): 1. Registered loan originator 2. Mortgage loan originator 3. Independent contractor 4. Licensed loan processor

Answer 185

Independent contractor

Question 186

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: $35 $10 More than $35 More than $100

Answer 186

More than $35

Question 187

An underwriter: 1. Is responsible for approving an originator’s license 2. Verifies that the applicant and subject property meet lender guidelines 3. Looks for red flags in marketing 4. Facilitates the Safeguards Rule for the lender

Answer 187

Verifies that the applicant and subject property meet lender guidelines

Question 188

Which of the following is not a characteristic of an HPML? 1. It is secured by the borrower’s principal dwelling 2. It has an APR that exceeds the average prime offer rate by 1.5 percentage points for a loan secured by a first lien on the home 3. It has an APR that exceeds the average prime offer rate by 3.5 percentage points for a loan secured by a subordinate lien on the home 4. It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points

Answer 188

It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points

Question 189

What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage? 1. A deed with conflicting ownership information 2. A utility easement 3. A second mortgage 4. A judgment that was secured by a property lien, but recently paid in full

Answer 189

A deed with conflicting ownership information

Question 190

Tom and Cindy Lewis are buying a house with a $300,000 sale price, and their LTV will be 80%. They paid $3,600 in discount points. How many total points did they pay? 2 4 2.5 1.5

Answer 190

The loan amount here is $240,000 (80% of $300,000). On a $240,000 loan, one point would cost $2,400 (1% x $240,000). The Lewises are paying $3,600 in points; to determine how many points this represents, divide $3,600 by $2,400. This comes out to 1.5, meaning that Tom and Cindy paid for 1.5 points.

Question 191

Money paid by a buyer to a seller at the time of entering into a contract to indicate intent and ability to carry out the contract is called: 1. Down payment 2. Earnest money 3. Escrow funds 4. Service release premium

Answer 191

Earnest money

Question 192

Which of the following features would be permitted for a non-qualified mortgage, but not for a qualified mortgage? 1. A term of 15 years 2. An adjustable interest rate 3. A debt-to-income ratio of 43% 4. An interest-only option

Answer 192

An interest-only option

Question 193

The Loan Estimate is required for: 1. All mortgage loans 2. All closed-end federally related mortgage loans 3. All nontraditional mortgage loans 4. All open-end mortgage loans

Answer 193

All closed-end federally related mortgage loans

Question 194

A mortgage and a lien are both examples of 1. deeds of trust. 2. concepts which are legal in some states but not in others. 3. easements. 4. encumbrances.

Answer 194

Encumbrances

Question 195

Which of the following might raise a red flag and suggest that further investigation is necessary to ensure that there is no fraud in an application? 1. The applicant uses a co-borrower with a different last name 2. Information in corporate-produced W-2s matches that given in the application 3. The borrower’s employment is not consistent with education level 4. Savings patterns and accumulated assets make sense considering the borrower’s level of income

Answer 195

The borrower’s employment is not consistent with education level

Question 196

A balloon rider, a prepayment penalty rider and a second-home rider may all be part of: 1. A title insurance policy 2. A deed of trust 3. A note 4. A power-of-attorney agreement

Answer 196

A deed of trust

Question 197

“UFMIP” stands for: 1. Uniform Funded Mortgage Insurance Premium 2. Upfront Mortgage Insurance Premium 3. Uniform Financed Mortgage Insurance Premium 4. Uniform Front-End Mortgage Insurance Premium

Answer 197

Upfront Mortgage Insurance Premium

Question 198

Recording of the deed happens where? 1. At closing 2. At the borrower’s house 3. At the Office of the County Recorder 4. Within the office of the Supervisor of Banks

Answer 198

At the Office of the County Recorder

Question 199

Safe harbor qualified mortgages offer a “safe harbor” from: 1. Liability for TRID Rule violations 2. Liability for ATR Rule violations 3. Liability for ECOA violations 4. Liability for HOEPA violations

Answer 199

Liability for ATR Rule violations

Question 200

Per diem interest is used by a lender in order to: 1. Allow for a lower payment with a temporary buy-down 2. Collect interest that accrues between the closing date and the end of the month 3. Pay the previous lender’s costs for selling the loan 4. Build a borrower’s escrow account

Answer 200

Collect interest that accrues between the closing date and the end of the month

Question 201

A borrower receives a bi-weekly paycheck in the amount of $2,300. The co-borrower earns a semi-monthly paycheck in the amount of $2,500. What is the monthly qualifying income of this couple? $9,983.33 $10,400 $9,600 $10,983.33

Answer 201

The borrower receives bi-weekly pay of $2,300, which must be multiplied by 26, giving an annual salary of $59,800. The co-borrower receives semi-monthly income of $2,500, which must be multiplied by 24, giving an annual salary of $60,000. Combine both, and you have a household salary of $119,800. Divide this by 12, and you arrive at a qualifying income of $9,983.33.

Question 202

Which of the following rules requires mortgage professionals to take reasonable steps to ensure that service providers are able to maintain appropriate protection for the privacy of consumer information? 1. The Qualified Mortgage Rule 2. The ATR Rule 3. The Safeguards Rule 4. Title X of the Dodd-Frank Act

Answer 202

The Safeguards Rule

Question 203

"5/25" and "7/23" are commonly used to designate loans including which of the following? 1. A hybrid adjustable rate feature 2. A balloon payment 3. A subordinate lien 4. A temporary interest rate buy-down

Answer 203

The balloon payment

Question 204

According to the SAFE Act, which of the following is defined as a nontraditional mortgage product? 1. Any mortgage product other than a 30-year fixed-rate mortgage 2. A 30-year fixed-rate mortgage 3. An ARM loan with a 5-year fixed-rate period 4. A 15-year fixed-rate mortgage

Answer 204

Any mortgage product other than a 30-year fixed-rate mortgage

Question 205

ECOA applies to the extension of credit for: 1. Loans secured by a first or subordinate lien on residential property 2. Residential, business, commercial, and agricultural loans 3. Business, commercial, and agricultural loans 4. All credit other than government loans

Answer 205

Residential, business, commercial, and agricultural loans

Question 206

Which of the following is not a threshold that the Home Ownership Equity Protection Act (HOEPA) has established to identify loans as high-cost mortgages? 1. APR threshold 2. Points and fees threshold 3. Subprime interest rate threshold 4. Prepayment penalty threshold

Answer 206

Subprime interest rate threshold

Question 207

This federal law amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection. 1. RESPA 2. ECOA 3. The Consumer Fairness Act 4. The Dodd-Frank Act

Answer 207

The Dodd-Frank Act

Question 208

One advantage of VA loans that is not commonly available in transactions for conventional mortgages is that they are: 1. Interest free 2. Available to loan applicants regardless of DTI ratios 3. Assumable 4. Not funded by private lenders

Answer 208

Assumable

Question 209

Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under: 1. TILA 2. Homeowners Protection Act 3. HOEPA 4. RESPA

Answer 209

HOEPA

Question 210

The front-end ratio is also known as the: 1. Back-end ratio 2. Housing ratio 3. Principal ratio 4. Total debt ratio

Answer 210

Housing ratio

Question 211

What is a method of transferring property to a new owner who takes over an outstanding mortgage debt, along with the liability of repayment, without incurring a change in terms? 1. Conveyance 2. Assumption 3. Reconveyance 4. Seller carry-back

Answer 211

Assumption

Question 212

A lender who refuses to originate loans in a particular neighborhood or ZIP code because of the perceived creditworthiness of consumers living in the area is in violation of: 1. FCRA 2. ECOA 3. HOEPA 4. RESPA

Answer 212

ECOA

Question 213

Which of the following correctly describes entities that have obligations under the Fair Credit Reporting Act? 1. CRAs, Experian, and FHA 2. FHFA, CRAs, and furnishers of information to CRAs 3. CRAs, furnishers of information to CRAs, and users of consumer reports 4. Users of consumer reports and lenders regulated by RESPA and TILA

Answer 213

CRAs, furnishers of information to CRAs, and users of consumer reports

Question 214

HOEPA is federal legislation enacted by Congress through amendments to: 1. FACTA 2. ECOA 3. TILA 4. HMDA

Answer 214

TILA

Question 215

Which of the following is true of a loan that allows for negative amortization? 1. The payments are not sufficient enough to cover the interest due, so the principal balance increases 2. The interest rate decreases because payments are not sufficient enough to pay the interest due 3. The principal amount increases because the borrower’s payments cover more than the interest due 4. The payments are less than necessary to cover the interest due, so the principal does not increase

Answer 215

The payments are not sufficient enough to cover the interest due, so the principal balance increases

Question 216

An “encumbrance” is: 1. Transfer of title from one owner to another 2. Transfer of ownership without any guarantees or warranties 3. Cancellation of a contract 4. A claim against a property that can affect the ability to transfer title

Answer 216

A claim against a property that can affect the ability to transfer title

Question 217

When providing services related to a residential mortgage transaction, appraisers have responsibility for all but which of the following? 1. Maintaining direct contact with the loan originator that ordered the appraisal 2. Refusing to accept assignments in which compensation for services depends on delivering a predetermined value for the property securing the loan 3. Performing assignments with impartiality and objectivity 4. Complying with Uniform Standards of Professional Appraisal Practice

Answer 217

Maintaining direct contact with the loan originator that ordered the appraisal

Question 218

A state-licensed loan originator is: 1. Licensed by the NMLS 2. An employee of a non-depository institution 3. Identified by the unique identifier of his/her employer 4. An employee of a subsidiary which is owned or controlled by a depository institution

Answer 218

An employee of a non-depository institution

Question 219

Sandra is purchasing a home with a loan amount of $510,400, which is the conforming loan limit for the area where she lives at the time that she secures approval for the loan. Her interest rate is not a prime rate, and in order to determine if it triggers the threshold for higher-priced mortgage loans, her creditor must determine if the APR for the loan exceeds the average prime offer rate by: 2. 5 percentage points 1. 5 percentage points 3. 5 percentage points 6. 5 percentage points

Answer 219

1.5 percentage points

Question 220

Which of the following would prevent the conveyance of title? 1. Paid lien 2. Owner dies and leaves a legal will 3. Encumbrance 4. Father passing title to his son while still living

Answer 220

Encumbrance

Question 221

Oversight and enforcement of FCRA is left to what government agency? FNMA CFPB FHFA HUD

Answer 221

CFPB The CFPB has primary oversight and enforcement authority for the Fair Credit Reporting Act. However, it shares some of its enforcement authority with the FTC.

Question 222

According to the HPML Rule, which of the following transactions would require a second appraisal? 1. A higher-priced mortgage loan that also meets qualified mortgage standards 2. The purchase price is 10% higher than the seller’s acquisition price 100 days ago 3. All higher-priced mortgage loans are required to have two appraisals 4. The purchase price is 20% higher than the seller’s acquisition price 150 days ago

Answer 222

The purchase price is 20% higher than the seller’s acquisition price 150 days ago

Question 223

Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account? 1. Escrow accounts are required for all HPMLs secured by the borrower’s principal dwelling 2. Escrow accounts are required for all HPMLs secured by a dwelling 3. Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling 4. Escrow accounts are required for all HPMLs, including reverse mortgages

Answer 223

Escrow accounts are required for all first-lien HPMLs secured by the borrower’s principal dwelling

Question 224

HMDA data is collected and aggregated to determine: 1. The success rate of nontraditional mortgage loans 2. Whether the success of lending terms varies in different geographic areas 3. The extent of creditor compliance with privacy protection laws 4. Whether different credit terms are offered to members of protected classes

Answer 224

Whether different credit terms are offered to members of protected classes

Question 225

As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs. 1. FNMA 2. FinCEN 3. FHLMC 4. FHFA

Answer 225

FHFA

Question 226

Tina Louise works as a clerk at a law firm and is paid bi-weekly in the amount of $1,700. Each quarter, she also receives a bonus of exactly $3,200 for her share of a program specifically designed to reward the excellent work by the firm’s support staff. This bonus has been consistent for three years. What is Tina’s qualifying monthly income? $3,683 $4,466 $4,750 $3,400

Answer 226

To calculate qualifying income, first, annual salary is calculated, including the bonus (in effect for three years), and then divided by 12 months. $1,700 × 26 = $44,200. Then the bonus: $3,200 × 4 = $12,800. Add the two, $44,200 + $12,800 = $57,000. Divide $57,000 by 12 = $4,750.

Question 227

An ARM was locked for three years and began adjusting two years ago. It is about to adjust for the third time. What limits the amount the interest rate will increase on this movement? 1. Payment cap 2. Starter cap 3. Initial cap 4. Periodic cap

Answer 227

Periodic cap

Question 228

If a lender wants to obtain copies of a borrower’s tax returns, the borrower is asked to sign what? A waiver of financial information 4506-T 1003 IRS-1040

Answer 228

The IRS form 4506-T is used to allow a lender to pull a transcript of the borrower’s tax returns.

Question 229

An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is: 1. A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees 2. A violation of RESPA’s prohibition against fee-splitting 3. Permitted only as long as receipts are kept from the processor for five years 4. A violation of ECOA

Answer 229

A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees

Question 230

What action must a creditor take if it is discovered that the APR is outside of the range of tolerance? 1. Provide disclosure of the corrected discrepancy and wait three business days before closing 2. Keep records of the discrepancy for three years 3. Adjust the APR and close the loan as scheduled 4. Restart the seven-business-day waiting period after the new disclosure has been made

Answer 230

Provide disclosure of the corrected discrepancy and wait three business days before closing

Question 231

The term “adjustment frequency” or “adjustment interval” is associated with: 1. The spread between a lender’s margin and its cost 2. The 60-day period after a transfer of servicing that a customer has to send his or her first payment 3. The adjustments of an ARM loan 4. The percentage amount an ARM can increase from its start rate to its rate ceiling

Answer 231

The adjustments of an ARM loan

Question 232

How many total hours of ethics are required, at minimum, for continuing education? Three Eight Two Eleven

Answer 232

Two

Question 233

An Affiliated Business Arrangement Disclosure is: 1. Required by TILA to be given to a borrower at the time of referral 2. Only required if the referred party is owned by or has an affiliate relationship with the referring party 3. Used to disclose whether the loan will be serviced, transferred, or sold 4. Required to be disclosed within three business days of application

Answer 233

Only required if the referred party is owned by or has an affiliate relationship with the referring party

Question 234

The system that an underwriter uses to help streamline the underwriting process is called: 1. YSP 2. AUS 3. MBS 4. ABA

Answer 234

AUS | Automated Underwriting System

Question 235

A type of reverse mortgage offered to low-income borrowers for a designated purpose, such as to pay taxes or to complete a home repair, is known as a: 1. Single purpose reverse mortgage 2. Home equity conversion mortgage 3. Proprietary mortgage 4. Designated use reverse mortgage

Answer 235

Single purpose reverse mortgage

Question 236

Liabilities may include which of the following? 1. Real estate 2. Net worth of businesses 3. Student loans 4. Stocks and bonds

Answer 236

Student loans

Question 237

Loan originator Zena Mendez is preparing an advertisement in which more than one simple interest rate will apply over the term of the loan. In order to be in compliance with Regulation Z, Zena must clearly and conspicuously disclose all of the following, except: 1. Each applicable simple annual rate 2. The period of time each simple annual rate applies 3. The frequency with which the rate will change 4. The annual percentage rate for the loan

Answer 237

The frequency with which the rate will change

Question 238

Direct RHS loans may have terms of _____ years. 15 and 30 21 or 29 30 and 40 33 or 38

Answer 238

33 or 38

Question 239

Mortgage loan originator Janine is assisting the Barstows in obtaining a residential mortgage loan. Her assistance may include all of the following, except: 1. Providing advice on loan terms 2. Preparing loan packages 3. Making a loan commitment 4. Collecting information on behalf of the consumer

Answer 239

Making a loan commitment

Question 240

Don is refinancing his home in order to save money. If the loan goes through, his payment will drop from $2,000/month (PITI) to $1,500/month (PITI). Don’s gross income each month is $6,800, but he has a $300 car payment, a $150 credit card payment, and monthly alimony payments of $1,300. What is Don’s housing ratio on the proposed loan? 29% 48% 22% 31%

Answer 240

“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%.

Question 241

John and Tina are purchasing a home using an FHA loan. They are excited because, while the price they agreed to pay is $215,000, they just got word that the appraised value came in at $225,000. What is the minimum down payment that John and Tina must make on this loan? $7,875 $7,255 $7,525 $3,500

Answer 241

The answer is $7,525. FHA loans require a minimum borrower investment of 3.5% That amount is calculated by the lesser of the purchase price or the appraised value.

Question 242

The FHA offers _____ fixed-rate mortgages to qualifying borrowers. 1. Only 15-year 2. Only 30-year 3. 15- and 30-year 4. Special 20-year

Answer 242

The FHA offers 15- and 30-year fixed-rate mortgages to qualifying borrowers.

Question 243

If a broker is preparing to publish an ad to bring in new clients, with which law should he/she be familiar? TILA FNMA FCRA FACTA

Answer 243

TILA

Question 244

Nontraditional credit includes all of the following, except: 1. Payments to a landlord 2. Car loans 3. Electric bills 4. Telephone bills

Answer 244

Car loans

Question 245

An ARM loan has a 4.00% start rate, and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. What is the highest that the interest rate could be after the first adjustment? 9% 7% 5% Impossible to answer without the margin and index known

Answer 245

5%

Question 246

Which of the following is a limit on the amount that the interest rate can change, up or down, on any adjustment date? Initial rate cap Periodic rate cap Lifetime rate cap Payment cap

Answer 246

Periodic rate cap

Question 247

A property is valued at $295,000. The property is subject to a first mortgage and a second mortgage, with a CLTV of 77%. The current balance on the second mortgage is $29,500. What is the approximate amount of the first mortgage? $256,650 $227,150 $204,435 $197,650

Answer 247

First, multiply $295,000 by .77 ($227,150). This figure is equal to the first mortgage, plus the second mortgage ($29,500). Subtract $29,500 from $227,150 to find the amount of the first mortgage ($197,650).

Question 248

The Nationwide Multistate Licensing System and Registry was developed and is maintained by: 1. The FHFA and CFPB 2. The CSBS and AARMR 3. The CFPB and CSBS 4. The AARMR and CFPB

Answer 248

The CSBS and AARMR. The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR)

Question 249

The Phillips family has a joint gross monthly income of $11,300. The $499 lease payment for their car expires in four months. A student loan that has been deferred will kick in at the end of the year, and payments will be $210 monthly. Joe Phillips pays child support for his children with his first wife in the amount of $2,200 per month, but $600 of that will drop off in four months when his oldest son turns 18. They are buying a new home with a loan that carries a $2,700 a month payment. What is their housing ratio? 29% 24% 38% 41%

Answer 249

Housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%

Question 250

A loss payee clause protects whom? 1. The lender in the event the property is damaged by fire or other risks 2. The borrower from losing all of his/her investment 3. The lender in the event the borrower defaults on the loan 4. The borrower by using mortgage insurance to offset interest rate adjustment

Answer 250

The lender in the event the property is damaged by fire or other risks

Question 251

Mortgage insurance premiums are required for: 1. All conventional loans with an LTV greater than 80% 2. The first five years of the loan term as long as equity position is less than 20% 3. All FHA loans 4. All FHA loans until 20% equity position is attained

Answer 251

All FHA loans

Question 252

The Qualified Mortgage Rule applies to which of the following? 1. Bridge loans of 12 months or less 2. Open-end home equity loans 3. Reverse mortgages 4. Loans secured by non-owner-occupied homes

Answer 252

Loans secured by non-owner-occupied homes

Question 253

The priority of liens is based on: 1. The order of recordation 2. The newest debt paid first 3. Lien holders must file for payment after a default 4. The order of recordation, unless a tax lien or subordination agreement changes the order

Answer 253

The order of recordation, unless a tax lien or subordination agreement changes the order

Question 254

Under the GLB Act, a customer relationship is established: 1. As soon as a borrower inquires about a loan 2. When the borrower’s loan is funded 3. Once the loan servicing begins 4. Upon application

Answer 254

Upon application

Question 255

According to the federal guidances on nontraditional lending, all of the following loan programs are considered to be nontraditional, except: 1. Interest-only 2. Payment-option ARM 3. Hybrid ARM 4. Stated income

Answer 255

Hybrid ARM

Question 256

Servicers are required to respond to a _____ from a borrower within five days. 1. Loan application 2. Qualified written request 3. Request for servicing transfer 4. Notice of rescission

Answer 256

Qualified written request

Question 257

Before engaging in a refinance transaction, consumers and mortgage professionals should consider whether the transaction: 1. Is for a qualified mortgage 2. Has a tangible net benefit to the loan originator 3. Has a tangible net benefit to the borrower 4. Will reach closing in time for the borrower to use the funds as he or she wishes

Answer 257

Has a tangible net benefit to the borrower

Question 258

Underwriting of non-qualified mortgages must compute periodic payments that: 1. Include consideration of periodic rate caps 2. Do not take periodic rate caps into consideration 3. Do not take lifetime rate caps into consideration 4. Include consideration of the value of the dwelling as a borrower asset

Answer 258

Do not take periodic rate caps into consideration

Question 259

Conforming loan guidelines generally include DTI ratios of: 26% / 38% 31% / 43% 28% / 41% 28% / 36%

Answer 259

28% / 36% The standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).

Question 260

An underwriter would expect to see _____ in order to document the income of a commissioned borrower. 1. Two years’ tax returns if the borrower’s commissions represent 20% of his/her income 2. 1099s from the previous year 3. Profit and loss statement and two years’ tax returns 4. Two years’ tax returns and all schedules if the commission income is more than 25% of income

Answer 260

Two years’ tax returns and all schedules if the commission income is more than 25% of income

Question 261

For ARMS characterized by figures like "3/1," "5/1," "7/1," or "10/1," the first number represents _____, and the second number represents _____. 1. The start rate; the periodic cap 2. The locked term; the adjustment frequency 3. The initial cap; the periodic cap 4. The locked term; the adjustment cap

Answer 261

The locked term; the adjustment frequency

Question 262

Annual insurance for USDA/RHS guaranteed loans is: 1. More expensive than those for private mortgage insurance 2. Equal to that charged for mortgage insurance for FHA loans 3. More expensive than the premiums for FHA loans 4. Less expensive than that charged for FHA loans and for private mortgage insurance

Answer 262

Less expensive than that charged for FHA loans and for private mortgage insurance

Question 263

In order to comply with the advertising rules found in Regulation Z, creditors that advertise rates and payments for mortgages must: 1. Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments 2. Use model forms 3. Follow the rules for formatting advertisements that the CFPB prescribes 4. Disclose all of the terms for the mortgage loan that the creditor is advertising

Answer 263

Make the required disclosures with equal prominence and in close proximity to the advertised rates or payments

Question 264

When a mortgage or deed of trust contains a power of sale clause: 1. The lender can sell the home at its discretion 2. A judge must enter an order of foreclosure before the home can be sold 3. The lender may foreclose without first obtaining a court order 4. The lender is made whole for losses by MIP

Answer 264

The lender may foreclose without first obtaining a court order

Question 265

The Loan Estimate must be provided at least how many days prior to consummation? Seven days Three days Seven business days Three business days

Answer 265

Seven days

Question 266

What is the name of the rule that increases requirements for the consideration of a borrower’s ability to repay? 1. The HOEPA Rule 2. The Valuations Rule 3. ATR/QM Rule 4. The HPML Appraisal Rule

Answer 266

ATR/QM Rule

Question 267

Which of the following documents connects the promissory note to the collateral? 1. Note 2. Commitment letter 3. Mortgage 4. Broker agreement

Answer 267

Mortgage

Question 268

The Peterson family is buying a new home and their new P&I payment totals $1,800 per month. Their annual tax bill is $3,000, and their annual homeowner’s insurance premium is $720. The family’s annual income totals $98,520. What is their housing (i.e., front-end) ratio? 22% 32% 36% 26%

Answer 268

Add together the $1,800 mortgage payment with the $250-per-month tax payment and $60-per-month homeowner's insurance payment. Divide that total ($2,110) by the total monthly income of $8,210 (annual income of $98,520, divided by 12), equaling 26%.

Question 269

The practice of intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is known as: 1. Reverse redlining 2. Steering 3. Misappropriation 4. Redlining

Answer 269

Reverse redlining

Question 270

What was the first law that Congress enacted to combat predatory lending? TILA Fair Housing Act HOEPA RESPA

Answer 270

HOEPA

Question 271

Which legislation sets the disclosure requirements for the Affiliated Business Arrangement Disclosure? TILA RESPA ECOA HOEPA

Answer 271

RESPA

Question 272

An upfront mortgage insurance premium is required for _____ loans, and borrowers can pay this amount directly or finance the cost. VA USDA FHA Conventional

Answer 272

FHA

Question 273

A due-on-sale clause requires: 1. That the loan be paid off if the property is sold 2. That all moneys be transferred at closing 3. That consummation take place within 30 days of the date on which the borrower receives the Loan Estimate 4. That the seller address any issues arising from the home inspection prior to closing

Answer 273

That the loan be paid off if the property is sold

Question 274

The URLA is also known as: 1. The application 2. The appraisal 3. The 1004 4. 4506-T

Answer 274

The application

Question 275

A covered loan under HOEPA is commonly known as a: 1. Non-prime 2. Non-conventional 3. Low-cost, high-fee 4. High-cost mortgage

Answer 275

High-cost mortgage

Question 276

When a creditor revises a Loan Estimate, it must deliver the revised disclosure to the loan applicant: 1. No later than seven business days prior to consummation 2. On the same date that it delivers a Closing Disclosure 3. No later than four business days prior to consummation 4. At the same time that the revisions are made

Answer 276

No later than four business days prior to consummation

Question 277

A conditional refinance provision might be a feature of what type of loan? 1. Option ARM 2. 15-year fixed 3. Interest-only ARM 4. Balloon

Answer 277

Balloon

Question 278

The provisions of the GLB Act specifically require compliance with the: 1. MARS Rule 2. Safeguards Rule 3. PATRIOT Act 4. Truth-in-Lending Act

Answer 278

Safeguards Rule

Question 279

Marketing campaigns for the solicitation of credit are covered by the provisions of: 1. GLB 2. TILA 3. RESPA 4. ECOA

Answer 279

TILA

Question 280

The implementing regulations for the Home Mortgage Disclosure Act are known as: 1. Regulation X 2. HDA 3. Regulation C 4. Section 32

Answer 280

Regulation C

Question 281

Annual PMI is determined by multiplying: 1. The loan amount and the interest rate 2. The mortgage insurance rate and the number of months in a year 3. The interest rate and the number of months in a year 4. The loan amount and the mortgage insurance rate

Answer 281

The loan amount and the mortgage insurance rate

Question 282

In a transaction for a fixed-rate mortgage to finance a home purchase, the loan applicant should receive: 1. The CHARM Booklet 2. Your Home Loan Toolkit: A Step-by-Step Guide 3. What You Should Know about Home Equity Lines of Credit 4. The Consumer Handbook on Fixed-Rate Mortgages

Answer 282

Your Home Loan Toolkit: A Step-by-Step Guide

Question 283

Which of the following is offered on conventional mortgages? 1. UFMIP 2. Guarantee fee 3. COE 4. PMI

Answer 283

PMI

Question 284

Before accepting a loan that is a high-cost mortgage, borrowers must complete counseling with a counselor approved by: 1. CFPB 2. HUD 3. FTC 4. HOEPA

Answer 284

HUD

Question 285

Once a state licensing agency has provided private or confidential information to the NMLS, what is the status of the information? 1. Privacy and confidentiality requirements continue to apply 2. It becomes a matter of public record 3. It remains confidential only if the state requests it 4. States do not provide private or confidential information to the NMLS

Answer 285

Privacy and confidentiality requirements continue to apply

Question 286

If a lender is comfortable with existing data on a property being used as collateral for a rate and term refinance, what might be permitted? 1. A waiver of the rescission period 2. A silent second 3. A property inspection waiver 4. A streamline close

Answer 286

A property inspection waiver

Question 287

A VA loan that is an IRRRL: 1. Is a qualified mortgage, but does not have a conclusive presumption of compliance 2. Is a qualified mortgage, and always has a conclusive presumption of compliance 3. Is a qualified mortgage, and may have a conclusive presumption of compliance 4. Is not a qualified mortgage

Answer 287

Is a qualified mortgage, and may have a conclusive presumption of compliance

Question 288

The act of guiding homebuyers in a particular direction based on demographics is prohibited by: ECOA and RESPA The Fair Housing Act and ECOA TILA and RESPA RESPA and the Fair Housing Act

Answer 288

The Fair Housing Act and ECOA

Question 289

A state licensing agency may conduct examinations and investigations for all of the following reasons, except: 1. To determine the maximum licensing fees 2. Initial licensing or license renewal 3. License suspension, conditioning, revocation, or termination 4. To determine compliance with state law

Answer 289

To determine the maximum licensing fees

Question 290

The Equal Credit Opportunity Act requires a Notice of Incomplete Application be provided to a borrower: 1. Within 15 days of application, if the application is missing required information 2. Within 30 days of application, if the application is missing required information 3. If the borrower has provided less than five years’ residence history 4. Within three days of discovery of incomplete application

Answer 290

Within 30 days of application, if the application is missing required information

Question 291

An 80-10-10 loan is an example of a: 1. Construction loan 2. Reverse mortgage loan 3. Higher-priced mortgage loan 4. Piggyback loan

Answer 291

Piggyback loan

Question 292

Which of the following terms is allowed in a high-cost mortgage? 1. Terms that permit a payment schedule resulting in negative amortization 2. An advanced payment 3. A variable interest rate 4. A prepayment penalty

Answer 292

A variable interest rate

Question 293

Equity-based lending is a common predatory lending practice, taking advantage of unsuspecting borrowers by using abusive lending terms for increased profits. Often, borrowers may lose money, home equity, or even their homes. Which federal law was the first to expressly prohibit equity-based lending? 1. Home Ownership and Equity Protection Act 2. Homeowners Protection Act 3. Fair Credit Reporting Act 4. Home Mortgage Disclosure Act

Answer 293

Home Ownership and Equity Protection Act

Question 294

Regulations in Section 32 of TILA deal strictly with: 1. The interactions between mortgage professionals and real estate agents 2. Consumer protections triggered by high-cost loans covered under HOEPA 3. The amount a borrower should expect to be charged as an annual percentage rate 4. Licensing standards placed in effect by the Housing and Economic Recovery Act

Answer 294

Consumer protections triggered by high-cost loans covered under HOEPA

Question 295

A Loan Program Disclosure must be provided: 1. For each variable-rate mortgage product available at the time 2. Only for the product for which the applicant is most likely to qualify 3. For each variable-rate mortgage product in which the applicant expresses an interest 4. Only for the product which the lender feels is best for the applicant

Answer 295

For each variable-rate mortgage product in which the applicant expresses an interest

Question 296

The chain of title shows: 1. History of ownership of a property 2. Any existing liens on the property 3. Reporting format for an abstractor 4. Method of perfecting a lien

Answer 296

History of ownership of a property

Question 297

Which of the following would be considered a credit report red flag? 1. Names on credit report match names on application 2. There is a DBA or an AKA 3. The debts the applicant disclosed are accurately reflected on the credit report 4. Paystubs, W-2s, or other income docs are handwritten

Answer 297

There is a DBA or an AKA

Question 298

Which of the following statements describes a lending practice that is prohibited by HOEPA and its implementing regulations? 1. Originating a subprime mortgage 2. Redlining and reverse redlining as a standard company policy 3. Offering prime mortgages to borrowers in the subprime mortgage market 4. Making a lending decision based solely on the amount of equity in a loan applicant’s home

Answer 298

Making a lending decision based solely on the amount of equity in a loan applicant’s home

Question 299

When a borrower is delinquent, RESPA servicing rules require loan servicers to meet all of the following requirements, except: 1. Make live contact with the borrower within 36 days of the delinquency 2. Make written contact with the borrower within 45 days of the delinquency 3. Make live contact with the borrower within 15 days of the delinquency 4. Include information on loss mitigation options in written correspondence regarding the delinquency

Answer 299

Make live contact with the borrower within 15 days of the delinquency

Question 300

“E-Sign Act” is short for: 1. The Electronic Signatures Legitimization Act 2. The Electronic Signatures in Global and National Commerce Act 3. The Electronic Safety of Giving Net Authorization Act 4. The Electronic Safety in Global and National Transactions Act

Answer 300

The Electronic Signatures in Global and National Commerce Act

Question 301

Which of the following would be subject to the ATR Rule? 1. A purchase money mortgage 2. A reverse mortgage loan 3. A construction loan 4. A purchase money mortgage made by a housing finance agency

Answer 301

A purchase money mortgage

Question 302

The factors involved in determining the movement on an ARM loan include: 1. Frequency of change, caps, index, rate 2. Rate, caps, index, margin 3. Frequency of change, caps, index, margin 4. Rate, index, margin, lifetime cap

Answer 302

Frequency of change, caps, index, margin

Question 303

Civil monetary penalties resulting from the failure to report data for HMDA are: 1. $1,000 per violation, with a maximum of $300,000 in fines annually 2. Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved 3. Calculated based on a percentage of total loan amounts of mortgages in violation 4. $11,000 per violation, but can be increased to $25,000 for willful and knowing violations

Answer 303

Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved

Question 304

The Federal Housing Administration does not make loans; it insures loans. What does the FHA insure against? 1. Foreclosure 2. The borrower losing his job 3. Forbearance 4. Down payment

Answer 304

Foreclosure

Question 305

On which portion of the loan application would one find a street address and legal description of the property? Section X Section XV Section III Section II

Answer 305

Section II

Question 306

Sally and Ben have lived in their home for ten years and are considering shortening their term. Which of the following appraisal approaches would be best? Income approach Cost approach Market comparison approach Sales comparison approach

Answer 306

Sales comparison approach

Question 307

A rent credit is used in a purchase transaction: 1. If the seller is “renting back” after closing until he/she is ready to move into the new home 2. If the buyer has to rent a place to live until the purchase is settled 3. When the seller credits a portion of previous rent paid as a source of down payment 4. When there is a delay in settling, and the builder is forced to put the buyer up in a hotel

Answer 307

When the seller credits a portion of previous rent paid as a source of down payment

Question 308

Generally, the first lien recorded has priority, with the possible exception of: Mortgage liens Mechanic’s liens Child support liens Consensual liens

Answer 308

Mechanic’s liens

Question 309

In addition to information about disciplinary and enforcement action taken against a mortgage loan originator, the NMLS may also make available for public access: 1. A mortgage loan originator’s home address 2. The number of loans originated by a loan originator 3. The mortgage loan originator’s employment history 4. Former clients of the mortgage loan originator

Answer 309

The mortgage loan originator’s employment history

Question 310

Which of the following types of loans is not a conventional mortgage? Nonconforming loan Non-qualified mortgage FHA loan Subprime loan

Answer 310

FHA loan

Question 311

The lending document that contains the contractual terms for repaying a home loan is the: Mortgage Promissory note Deed of trust Closing Disclosure

Answer 311

Promissory note

Question 312

HUD will not insure single-family home loans that: 1. Meet QM standards 2. Include points and fees in excess of the limit set by the QM Rule 3. Are small creditor qualified mortgages 4. Have a DTI ratio of less than 43%

Answer 312

Include points and fees in excess of the limit set by the QM Rule

Question 313

FACTA requires an initial Fraud Alert to be kept in a consumer’s file for what period of time? One year Seven years One month Until removed by the borrower

Answer 313

One year

Question 314

Mary is purchasing her first home with an HPML. When her loan officer is reviewing the transaction with her, he tells her that she must establish an escrow account: 1. Three business days after consummation of the loan 2. Before consummation of the loan 3. Before the first periodic payment is due 4. At the time of consummation

Answer 314

Before consummation of the loan

Question 315

The promissory note contains all of the following, except: 1. A legal description of the property 2. A provision requiring notices be done in writing 3. The loan amount 4. The loan terms

Answer 315

A legal description of the property

Question 316

What is the difference between MIP and PMI? 1. PMI is applicable to FHA loans; MIP is applicable to conventional mortgages 2. MIP is applicable to FHA loans; PMI is applicable to conventional mortgages 3. There is no difference between MIP and PMI 4. MIP is optional; PMI is not

Answer 316

MIP is applicable to FHA loans; PMI is applicable to conventional mortgages

Question 317

Which document actually contains the borrower’s promise to repay the loan? The deed The note The mortgage The TIL

Answer 317

The note

Question 318

Homeownership counseling is required in transactions for all of the following, except: 1. Higher-priced mortgage loan 2. High-cost mortgage 3. Reverse mortgage 4. Negative amortization loan if the loan applicant is a first-time borrower

Answer 318

Higher-priced mortgage loan

Question 319

Which of the following correctly demonstrates how to calculate the periodic rate on a mortgage loan? 1. Annual rate / number of payments in a year = periodic rate 2. Annual rate × number of payments in a year = periodic rate 3. Loan balance / annual rate = periodic rate 4. Annual rate × monthly payment = periodic rate

Answer 319

Annual rate / number of payments in a year = periodic rate

Question 320

Which of the following is a limit on the amount that the interest rate can increase or decrease at the first adjustment date for an ARM? Initial rate cap Periodic rate cap Lifetime rate cap Payment cap

Answer 320

Initial rate cap

Question 321

Which of the following fees must be included in the calculation of finance charges? Appraisal fees Seller’s points Credit reporting fees Origination fees

Answer 321

Origination fees

Question 322

The 1004 is the form number for: URLA CSBS FNMA URAR

Answer 322

URAR

Question 323

Using misleading language in an advertisement (for example, using language that suggests that an advertised loan is “fixed” when it actually is not) is a practice specifically prohibited under: Regulation B Regulation Z FCRA Regulation C

Answer 323

Regulation Z

Question 324

What legislation regulates the proper management of escrow accounts? FHA Homeowners Protection Act Regulation X HMDA

Answer 324

Regulation X

Question 325

The Notice of Right to Cancel PMI is required by the: Homeowners Protection Act Equal Credit Opportunity Act Truth-in-Lending Act Real Estate Settlement Procedures Act

Answer 325

Homeowners Protection Act

Question 326

Which federal law includes provisions that address misleading and deceptive advertising practices? TILA RESPA HMDA ECOA

Answer 326

TILA

Question 327

When a loan originator accepts a referral fee from a real estate agent, both are in violation of what section of RESPA? Section 10 Section 12 Section 6 Section 8

Answer 327

Section 8

Question 328

A property is encumbered by two mortgages that have a combined loan-to-value of 90%. The LTV of the second mortgage is 12%. If the value of the property is $500,000, what is the approximate amount of the first mortgage, and is it considered a jumbo loan? $390,000 and no $450,000 and yes $450,000 and no $405,000 and no

Answer 328

The CLTV is 90%, and the second mortgage has an LTV of 12%. This leaves the first mortgage with an LTV of 78%. $500,000 × .78 = $390,000. The value is under the conforming loan limit, so it is not considered jumbo.

Question 329

When a credit report shows only a balance on a revolving debt, rather than a payment, an originator should: 1. Eliminate the debt if it is below $300 2. Use 5% of the debt as the payment 3. Only use 50% of the debt against the DTI 4. Divide the total debt by 12 to get monthly payments

Answer 329

Use 5% of the debt as the payment

Question 330

Oversight for FCRA is shared between the FTC and: Federal Reserve HUD TILA CFPB

Answer 330

CFPB

Question 331

All of the following are included in the calculation of the APR, except: Underwriting fees Buy-down fees Origination fees Title insurance fees

Answer 331

Title insurance fees

Question 332

Which of the following best describes what is considered in the calculation of a borrower’s back-end ratio? 1. Principal and interest payments 2. The cost of credit in relation to the value of the loan 3. The total amount of monthly payments made on long-term debt carried by the consumer 4. Only non-housing consumer debt, such as credit card payments and auto loan payments

Answer 332

The total amount of monthly payments made on long-term debt carried by the consumer

Question 333

For which of the following does rescission not exist? 1. A refinance of a principal residence 2. Opening a home equity line of credit 3. A refinance in which a husband has requested a rescission waiver without his wife’s signature 4. A purchase of a principal residence with a conventional loan

Answer 333

A purchase of a principal residence with a conventional loan

Question 334

The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points? $4,000 $3,800 $3,600 $2,000

Answer 334

$180,000 × 0.02 = $3,600.

Question 335

The term “grossing up” means a borrower’s non-taxed income is allowed to be increased by as much as: 125% 15% 28% 25%

Answer 335

25%

Question 336

In which of the following scenarios would it be appropriate to conduct an appraisal using a cost approach? 1. An appraisal is done on a new home being built for a first-time homebuyer 2. A borrower wants to refinance his/her primary residence to lower the cost 3. An investor is having an appraisal done on his/her rental 4. A buyer is determining the value of a home he/she has under contract

Answer 336

An appraisal is done on a new home being built for a first-time homebuyer