MLO Prep Flashcards

Question

What is the name of the law that says if advertising for available financing includes a trigger term, the ad must include certain disclosures?

Answer 1

Regulation Z

Answer 2

Electronically

Answer 3

A reasonable amount of time designated by the creditor

Answer 4

Not telephone or text message. Yes on mail, hand delivered, emailed

Answer 5

36% Different types of loans have different DTI thresholds. Conventional/conforming qualifying loans typically require 28% front-end ratios and 36% back-end ratios. FHA loans require a 31% front-end ratio and 43% back-end ratio. VA loans require no front-end ratio and 41% back-end ratio.

Answer 6

Exchange. Placement, layering, and integration are the main stages in money laundering schemes.

Answer 7

No, he must be registered through the NMLS. Marcus must be registered through the NMLS. Employees of depository institutions, such as trust companies, credit card banks, and industrial loan banks, don’t need to be licensed.

Answer 8

Once the requirements have been satisfied, and the seller has delivered the deed to the borrower. The final title insurance policy on a specific piece of property is issued only after the final settlement on the property has occurred, and specific conditions, as named in the title commitment, have been satisfied.

Answer 9

Unrecorded mechanics liens. Most OEC policies cover the owner's for claims made based on unrecorded liens and encumbrances.

Answer 10

Loans for a new home. Loans that are being used to purchase a primary residence are exempt from the right of recission, which only applies to the refinancing a mortgage, HELOCs, and home equity loans, but not to purchases of new homes. Rescission rights also do not extend to commercial loans or construction loans.

Answer 11

A written adverse action notice. The written notice must be provided within 30 days, and must give the consumer the specific reasons for the lender's action and describe what the consumer's rights are under the ECOA.

Answer 12

A borrower can pick up paying the mortgage where the seller left off, assuming the buyer qualifies for the loan. An assumable mortgage transfers to a qualified homebuyer. This can help the buyer realize considerable savings because it may include no points, no interest rate change, and lower closing costs.

Answer 13

Yes. This statement satisfies all aspects of the relevant regulation.

Answer 14

Having a current criminal conviction on their record

Answer 15

A fee covering the cost of investigating the applicant’s credit. At this point, Hattie may charge the applicant an advance fee that is limited to the cost of a credit r

Answer 16

The act includes requirements for certain home equity loans with high rates or high fees. According to the FTC, HOEPA focuses on predatory practices relating to home equity lending, and includes requirements for certain loans with high rates or high fees.

Answer 17

Loan origination fees can’t legally exceed 3%. When interest rates escalate, loan origination fees can vary greatly among loan service providers.

Answer 18

The act was a legislative response to the financial crisis of 2007 and2008. At the time of its enactment, it was considered one of the most sweeping legislative changes concerning the financial services industry.

Answer 19

The identity theft rules identify five identity theft red-flag sources for an organization to include in its written identity theft prevention program.

Answer 20

ECOA mandates that lenders evaluate mortgage applications regardless of race, color, religion, sex, or national origin.

Answer 21

The prepaids cover what is paid at closing and what time period is included. This gives the borrower a glimpse into what will need to be paid in the near future.

Answer 22

civil penalty of as much as $34,401 per offense may be charged for licensees who violate license law.

Answer 23

The first number in an ARM’s cap structure states by how much the interest rate may increase at the initial rate adjustment. In this case, the loan may increase by as much as 2%, which means the 3.2% (start interest rate) may be increased by 2% (maximum increase), which brings it to 5.2%.

Answer 24

TRID doesn’t apply to all loan transactions. While most closed-end loans secured by real property are subject to TRID rules, some loans are exempt, including reverse mortgages, HELOCs, loans secured by a mobile home or dwelling that is NOT attached to real property, and loans made by an individual or entity that makes five or fewer mortgages in a year and isn’t a creditor.

Answer 25

A loan applicant without a checking account is an example of suspicious activity, which needs to be reported to the government. The MLO should fill out an SAR and submit it via the FinCEN E-Filing System.

Answer 26

The Affidavit and Agreement, sometimes called an affidavit of title, provides assurance from the seller that no new title defects have been introduced and all non-publicly known defects have been revealed.

Answer 27

At any time preceding the date of application, if the felony involved an act of fraud or dishonesty, a breach of trust, or money laundering the applicant will never be eligible for licensure.

Answer 28

HOEPA focuses on unfair high-rate loan practices.

Answer 29

Under the SAFE Act, anyone engaged in making or brokering residential mortgage loans must be licensed or registered, including MLOs, mortgage bankers, and brokers.

Answer 30

The housing ratio doesn’t include debt obligations and is calculated using gross income: $1,828 ÷ $9,869 = 0.1852 or 18.52%

Answer 31

Licensees are required to submit a Mortgage Call Report to the NMLS every quarter. There are two types of MCR filings: expanded and standard. E-MCRs are required for Fannie Mae and Freddie Mac sellers/servicers and Ginnie Mae issuers. All other licensees should complete the Standard Mortgage Call Report (S-MCR)

Answer 32

Retract a first lien mortgage loan after signing

Answer 33

Loan advertisements, loan application forms, solicitations, business cards, websites, and other advertising documents must contain the MLO’s UI as assigned by the NMLS.

Answer 34

Title insurance is required when financing is being obtained. The owner’s policy protects the buyer from defects in the title, regardless of who made the purchase

Answer 35

Two appraisals are required in this case because Zenobia bought the property fewer than 90 days before Anne agreed to buy it and the price to be paid by Anne is more than 10% greater than what Zenobia originally paid for it

Answer 36

Proximity, placement, presented, prominent

Answer 37

A borrower may see a change in fees by as much as 10%.

Answer 38

Origination fees are at a zero tolerance threshold, which allows no increases between the LE and CD. Recording fees, title services, and the lender’s title insurance are at a 10% tolerance.

Answer 39

The title insurance representative is responsible for the title search and for providing the buyer with proof of title. Most title representatives will also help prepare the parties, but that responsibility rests with the agents representing them.

Answer 40

A mortgage guarantee fee, also knows as a g-fee, is changed by Fannie Mae and Freddie Mac to guarantee a mortgage loan and cover administrative costs, losses in the event of borrower default, and a return on capital. Lenders indirectly pass these fees on to borrowers through higher interest rates.

Answer 41

Gabriela may not charge additional fees until the loan applicant has both received the GFE and indicated his intention of proceeding with the loan described in the GFE

Answer 42

The Real Estate Settlement and Procedures Act (RESPA) is a consumer protection law that protects borrowers from overcharges by requiring disclosure and prohibiting kickbacks.

Answer 43

The BSA requires financial institutions and money services business to monitor transactions and keep records of any suspicious activities for any potential money laundering or fraud.

Answer 44

Federal regulations state that the “Late Payment” section of the LE must include both the amount of the late payment and the number of days that must pass before a late charge is imposed.

Answer 45

Federal loans open the door to homeownership to many people who can't get conventional loans, because federal mortgages require a lower down payment. They also tolerate buyers with lower credit scores than conventional mortgages do.

Answer 46

Moneys deposited in a financial institution must be in the borrower’s name and have been deposited for 60 days or more to be used.

Answer 47

The title insurance fees are due at closing.

Answer 48

Late payments are covered in the Other Considerations section on page three.

Answer 49

To accept a cash gift from a donor and use it toward a down payment, borrowers will need to supply a written gift letter stating the amount and that it does not need to be paid back, as well as evidence of the fund transfer.

Answer 50

A percentage showing the annual cost of a loan to the borrower, including interest

Answer 51

That the lender is extending a counter-offer

Answer 52

The Privacy Rule. Financial institutions are required under the GLBA to provide all customers with written notice of privacy policies and practices, regardless of whether the financial institution shares customer NPI with other third parties. If the financial institution does share NPI with third parties, privacy notices must also be provided to consumers who are not customers.

Answer 53

Fees paid to a third party selected by the borrower. Fees that may not increase from the LE include fees paid to the creditor, the mortgage broker, an affiliate of the creditor or mortgage broker, transfer taxes, and fees paid to a third party if the creditor didn’t allow the borrower to shop for a provider.

Answer 54

Determine the loan(s) for which the borrower qualifies. Determining which loan for which a borrower qualifies is the first step in deciding loan suitability. Ultimately, if they are eligible for multiple loans, you must determine which loan will give them the most significant net benefit.

Answer 55

10% tolerance threshold. A 10% tolerance threshold includes fees related to third-party service providers and recording fees.

Answer 56

Title insurance. Lenders require that borrowers obtain title insurance to protect them from financial loss due to title defects.

Answer 57

The disclosures are required by law and must be provided within three business days from the date the application is signed. Certain federal laws require additional specific disclosures to be provided to the borrowers within three business days from the date the application is signed, such as the CHARM booklet.

Answer 58

Three. The Gramm-Leach-Bliley Act has three primary rules related to financial institutions and consumer information privacy: the Safeguards Rule, the Privacy Rule, and the Pretexting Rule

Answer 59

She’s not yet employed by the state-licensed mortgage company where she applied. In this scenario, we don’t know if Susan has been a registered MLO one year preceding the application submission or for 30 days preceding the application date. We know that the state-licensed mortgage company does not yet employ her, therefore Susan can’t ask for temporary authority.

Answer 60

It allows the lender to verify the cash deposits listed on the applicant’s loan application. The institution provides an average balance for the previous two months. The form allows the lender to verify cash deposits. Privacy acts prohibit the depository institution from releasing this information without the account holder’s authorization.

Answer 61

Loan Estimate and Closing Disclosure. TRID rules require the LE and CD to be used for all residential closings.

Answer 62

Annually Loan limits are reviewed annually and may be adjusted at each review.

Answer 63

A form of identification issued by a U.S. state. Because lenders want confirmation that borrowers of this kind will stay in the United States long enough to pay off their loans, they might also ask to see a work contract lasting up to three years, along with a positive credit history, bank statements, and tax returns for the previous two years.

Answer 64

An adjustable-rate home mortgage equity plan. An adjustable-rate home mortgage equity plan is exempt from the TRID rule requirements.

Answer 65

A lock-in agreement. Before closing a mortgage loan, the lender must provide a lock-in agreement to the borrower. This serves as the lender’s commitment to fulfill the loan terms.

Answer 66

Anne, who has very little money to put down, but expects her salary to increase soon. Anne is the most likely to benefit from lender credits, because they help borrowers who can handle a higher interest rate in exchange for receiving help with down payments or closing costs

Answer 67

Variability. “Variability” refers to the interest, payments, or other terms, and the loose usage of “fixed” to describe them. Variable terms must be clearly represented in an ad so that a consumer doesn’t misunderstand and believe the terms are fixed for the life of the loan.

Answer 68

Until August 31, or 30 days later. A creditor must notify an applicant taken with 30 days after receiving a completed application concerning the creditor’s adverse action on the application

Answer 69

It regulates how lenders may use consumers’ credit report data.

Answer 70

A standardized measure for interest rates and other costs of the loan. Regulation Z requires lenders to use a standardized measure for interest rates, which is the APR.

Answer 71

Lender's title insurance policy. The lender's title insurance policy is issued to mortgage lenders. The lender's policy provides coverage only to the mortgage lender. The primary purpose for a lender's policy is to protect current and future lenders from losses.

Answer 72

Standard FC. The RMLA must be filed quarterly for both expanded and standard filers. For standard filers, the FC must be filed annually, but no later than 90 days after the end of the fiscal year. For expanded filers, the FC must be filed every quarter.

Answer 73

Junior mortgage. Second mortgages are generally placed in junior position (subordinate to the first mortgage).

Answer 74

It regulates how compensation is paid to a loan originator in most closed-end mortgage transactions. The CFPB’s loan originator rule regulates how loan originators receive compensation in closed-end mortgage transactions.

Answer 75

Eight. To keep their license active, MLOs must complete at least eight hours of continuing education, broken down into three hours on federal laws and regulations, two hours on ethics, and two hours on nontraditional mortgage products. States may require additional CE hours.

Answer 76

Applicant A has a misdemeanor for fraud on her record from eight years ago. An applicant guilty of any misdemeanor of fraud, breach of trust, dishonesty, or any felony relating to such does not qualify for an MLO license or registration.

Answer 77

The Bank Secrecy Act

Answer 78

An agreement by a title insurer to issue the final title insurance policy on the property

Answer 79

The title commitment comes before closing; the title insurance policy is issued after closing. The commitment says that a title company is willing to issue title insurance under certain conditions. The policy provides coverage for the property.

Answer 80

Yes. However, proof of employment and a Social Security number are required. People who are here on a work visa can buy property, and they can even take out FHA loans. However, to secure the loan, they must provide proof of employment and a Social Security number.

Answer 81

The federal Fair Housing Act includes seven protected classes (race, color, religion, national origin, sex, familial status, and disability) and applies to the sale, rental, or financing of residential property.

Answer 82

Any loan for which the lender charges points and fees that exceed certain established limits

Answer 83

The lender must provide an Informed Consumer Choice Disclosure Notice to the applicant within three business days of receiving the loan application.

Answer 84

Turn in suspected terrorists

Answer 85

Settlement service providers

Answer 86

A company relationship with the individual must be established.

Answer 87

While 15- and 30-year loans are frequently seen, conventional loans may be for terms as long as 40 years.

Answer 88

Sending regular reports to borrower for escrow status. The servicer may charge fees for the initial escrow account establishment, annual account management, and for the borrower choosing to pay property fees without an escrow account.

Answer 89

Yes, if she has a personal or financial relationship with anyone involved in the transaction. Appraisers must avoid conflicts of interest, including those arising from personal or financial relationships with buyers, sellers, or anyone involved in the transaction. Even working in the same area as the appraiser doesn't automatically create a conflict unless there's a direct connection to the transaction.

Answer 90

Placing a client's escrow funds into a non-escrow fund account. Commingling is combining trust funds with non-trust funds, and it's illegal.

Answer 91

The borrower must be extremely low income to qualify for a USDA direct loan. The direct loan is only available to very low-income families (50 to 80% of the median income for the area) who must be without safe and sanitary housing conditions and unable to obtain a loan elsewhere. Payment subsidies are available.

Answer 92

The LE. The CFPB guidance on prepaids in the CD connects this section to the requirements for the corresponding section in the LE.

Answer 93

Offers to issue a title insurance policy. A preliminary title report is only an offer to issue a policy of title insurance. It also provides an overview of the title’s condition.

Answer 94

The disclosure rule replaced four forms with only two disclosure forms: the LE and CD. The Know Before You Owe special initiative disclosure rule replaced four forms with only two forms, the LE and CD, which are easier to understand and use.

Answer 95

Yes. The creditor can ask the applicant orally to complete the application. A creditor who has received an incomplete loan application has the option of informing the applicant verbally that more information will be needed to complete the application.

Answer 96

Consumer disclosures relating to financing costs. RESPA focuses on the prevention of kickbacks or referral fees and on proper disclosures to consumers related to the cost of a mortgage loan.

Answer 97

Financial responsibility

Answer 98

Notification describing the adverse action taken, but use of the term “adverse action” is not required. Either a statement of specific reasons for the adverse action must be included in the notification, or a disclosure of the applicant's right to such a statement must be provided to the applicant. Either way, lenders must notify the applicant of adverse action, but the term "adverse action" doesn't need to be used.

Answer 99

Bank activity. In this scenario, the red flag involves the applicant’s bank activity. The $8,000 deposit stands out because it’s unusual, it’s larger than typical deposits in the account, and there’s no documentation to support it. The MLO should ask for additional documentation.

Answer 100

Requiring financial customer verification programs. When the Dodd-Frank Act was first passed, it placed a lot of restrictions on smaller institutions, including community banks, by implementing the Qualified Mortgage Rule. Dodd-Frank also led to the creation of the CFPB and revisions to existing loan disclosures (which resulted in the TILA-RESPA Integrated Disclosure, or TRID).

Answer 101

Special Information Booklet. The Special Information Booklet is a document published by the CFPB to help consumers who apply for mortgage loans understand real estate transactions. It must be provided to consumers within three business days of a loan application being submitted, just like the Loan Estimate.

Answer 102

Form I-94, or an official employment authorization document and residency verification. Once refugees or asylum grantees have obtained a Form I-94, or an official employment authorization document and residency verification, they may apply for a mortgage.

Answer 103

At least four business days before closing.

Answer 104

MLOs who do not renew by December 31, will have a status of “Terminated – Failed to Renew”. MLOs who do not renew or reinstate their license will be required to reapply for licensure.

Answer 105

A mortgage servicer has 20 business days to disburse any balance from the escrow account.

Answer 106

The Homeownership Counseling Disclosure

Answer 107

5 Years Creditors must retain completed CD forms for at least five years from the date of completion. Should a creditor sell or transfer a mortgage loan to another party, the creditor must provide the new owner with a copy of the disclosures.

Answer 108

Only when the consumer provides written consent

Answer 109

Investment properties Gift funds may be used for part of the down payment, closing costs, or financial reserves. Gifts are not allowed to be used on an investment property.

Answer 110

Upon loan application submission or within three business days

Answer 111

A servicer is permitted to use an escrow account to hold funds due at closing and all future property expenses agreed upon by both parties. The permitted fees include 1/12 of the annual costs paid from escrow and one-sixth of the fees due as a cushion. The escrow account is used for current and future property expenses for the life of the loan. The law has allowances to permit fees for services rendered for account management.

Answer 112

The consumer may be called for up to 90 days. If a consumer who made only an inquiry about a loan or submitted a loan application is listed on the national registry but didn’t make a purchase, an MLO may contact the consumer for up to three months after the inquiry.

Answer 113

Lenders use the lesser of the sales price or appraised value. This results in an LTV ratio of 75% ($300,000 ÷ $400,000).

Answer 114

Title fees are due at closing; the buyer is not required to prepay the title company prior to services rendered.

Answer 115

Requirements that must met before a title policy will be issued Schedule B-1 lists items the title insurance company requires to be addressed before they’ll issue the title insurance policy. This may include resolving liens or paying taxes that are due, among other items. Note that other title commitment forms may use a different schedule name.

Answer 116

The NMLS period for renewing licenses begins on November 1 and ends on December 31 of each year. Licenses of MLOs who don’t renew by December 31 will have a status of “Terminated – Failed to Renew”.

Answer 117

The loan is based on the builder’s plans for improvement and an appraisal. The lender needs construction plans and an appraisal before approving a construction loan.

Answer 118

A verbal lease agreement Martha has with her neighbor who leases Martha's garage The title policy doesn't exclude property taxes (assuming they're properly recorded), though the taxes must be paid before the policy is issued. The verbal lease agreement is excluded since it's not shown in public records.

Answer 119

Title search fee While there may be fees associated with a title search, it isn’t part of the loan origination fees.

Answer 120

A fee charged by Fannie Mae and Freddie Mac to guarantee a mortgage loan A mortgage guarantee fee, also knows as a g-fee, is charged by Fannie Mae and Freddie Mac to guarantee a mortgage loan and cover administrative costs, losses in the event of borrower default, and a return on capital. Lenders indirectly pass these fees on to borrowers through higher interest rates.

Answer 121

30 days from the date of Delia’s request for confirmation

Answer 122

Red zoning

Answer 123

Reverse mortgages

Answer 124

This is more than the 10% tolerance threshold.

Answer 125

The cash needed by closing to complete the refinance While all of these are considerations, she may not have the funds to even process the refinance even if she’s approved.

Answer 126

An attorney If the first box in the Liability After Foreclosure section is checked, the consumer is advised that protection from liability may not apply if the consumer refinances or takes on additional debt with reference to the property. It is suggested that the consumer consult a lawyer for additional information.

Answer 127

Yes. The final title insurance policy is issued only after the final settlement on the property has occurred, and the specific conditions named in the preliminary title report have been satisfied.

Answer 128

Annual homeowners insurance premium paid through the transaction year

Answer 129

Office of Fair Housing and Equal Opportunity

Answer 130

The applicant failed to meet the creditor’s internal standards. Regulation B requires that the stated justification for an adverse action must indicate the principal reason or reasons why the action was taken. The explanation provided to the applicant must be clear. Therefore, it is not sufficient to state that the adverse action was taken because the applicant failed to meet the creditor’s internal standards or policies.

Answer 131

Funding fee These are factors that determine the VA’s funding fee structure. Veterans may also be exempt from the funding fee altogether if they receive benefits for a service-related disability.

Answer 132

The loan changed from adjustable-rate to a fixed-rate loan. A change to the basic loan product would prompt a new three-day waiting period and delay closing, as would a prepayment penalty addition (not removal), and an annual percentage rate increase of more than a 1/8 of a percent for a fixed-rate or 1/4 of a percent for an adjustable-rate mortgage.

Answer 133

It can't be sold to Fannie Mae or Freddie Mac.

Answer 134

Identifying information about individuals who have received loans Identifying information about individuals who have received loans

Answer 135

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including home equity lines of credit. RESPA regulations apply to loans on one- to four-family residential properties, including assumptions, refinances, home improvement loans, and home equity lines of credit.

Answer 136

No, depository institutions such as credit card banks don’t need to be licensed. Under the SAFE Act, depository institutions and credit card banks don’t need to be licensed.

Answer 137

Schedule B-2 Schedule B-2 identifies standard exceptions or flaws that are not insured in the policy. These exceptions typically include items such as current year taxes, easements of record, and restrictions shown on a plat map. Schedule B-2 exceptions do not need to be cleared before the property closes.

Answer 138

The fully indexed rate equals the margin plus the index value. So, to find the index value, subtract the margin from the fully indexed rate: 4.5% – 2.1% = 2.4%.

Answer 139

Nothing more TILA’s Regulation Z requires advertisements that contain financing-related trigger terms, such as specific down payment or monthly payment amounts, to include additional disclosures. In this ad, no trigger terms were used, so nothing more is required related to financing terms.

Answer 140

The USDA charges 0.35% of the loan balance on an annual basis.

Answer 141

The new policies have a disparate impact on members of a protected class. Even if the new policies are applied evenly and don’t intentionally discriminate against anyone, they could still violate the law if they have a disparate impact on people who are members of a class that’s protected under fair housing laws.

Answer 142

Until August 14, or 30 days after the inaccuracy was detected Once the creditor learns about the event that resulted in the inaccuracy, there’s a 30-day deadline to furnish corrected disclosures.

Answer 143

Regulation Z

Answer 144

GOV-insured qualified mortgage The three main categories of qualified mortgages are general qualified mortgage, small creditor qualified mortgage, and GSE-eligible qualified mortgage.

Answer 145

Any applicant who may qualify for an FHA-insured or another loan product

Answer 146

Disparate treatment

Answer 147

At any time during the process Assuming it will be received at least four days before closing, a loan originator may send a revised LE to the borrower at any time during the process.

Answer 148

Property tax is a no or unlimited tolerance threshold.

Answer 149

A verbal lease agreement Martha has with her neighbor who leases Martha's garage The title policy doesn't exclude property taxes (assuming they're properly recorded), though the taxes must be paid before the policy is issued. The verbal lease agreement is excluded since it's not shown in public records.

Answer 150

It protects the borrower against loss resulting from previously unreported title defects.

Answer 151

No or unlimited tolerance Escrow accounts have a no-tolerance threshold. Creditors may charge more than is disclosed in the LE as long as the original was based on the best information available at the time.

Answer 152

A commission a lender paid to a mortgage broker in exchange for a higher interest rate The yield spread premium (YSP) was a fee (commission) a lender paid to a mortgage broker in exchange for a higher interest rate. The Dodd-Frank Act banned them.

Answer 153

The borrower may be reimbursed for closing agent service fees in circumstances where the lender chooses the closing agent

Answer 154

A loan offered by a lender or the seller that borrowers often use to avoid paying mortgage insurance Borrowers often use purchase money second mortgages to help them cover their down payments and to avoid the need for mortgage insurance.

Answer 155

Offers to issue a title insurance policy. A preliminary title report is only an offer to issue a policy of title insurance. It also provides an overview of the title’s condition.

Answer 156

The lender determines if an escrow account must be established and maintained. While there are some loan types that allow the borrower to forego an escrow account, it is ultimately the lender's decision to allow the borrower that choice or to firmly require that an account be maintained as long as the loan-to-value ratio is 80% or lower.

Answer 157

Late charges on VA loans are capped at 4%.

Answer 158

Government mortgages require lower down payments than do conventional loans.

Answer 159

Yes, the denial was based on two protected classes. The loan denial was based on two protected classes: national origin and marital status. This is an extreme example of a fair lending violation. However, MLOs must be careful that they’re not making subconscious assumptions about applicants based on protected class characteristics. All loan applicants must be treated fairly, which means being subject to the same loan underwriting guidelines.

Answer 160

43% or less

Answer 161

One spouse will join the workforce next year, significantly improving the buyers' financial status. An adjustable-rate mortgage flexes its interest rate to keep pace with current market rates. It usually starts at a significantly lower rate than conventional financing. However, proceed with caution because the flexing of its interest rate can make an ARM risky.

Answer 162

The buyer owes money for 10 days of the July HOA fee. First divide the monthly fee by 30 (since the statutory year assumes 30 days in every month) to get the daily rate: $60 ÷ 30 days = $2 daily rate. Then multiply the daily rate by the number of days the buyer is responsible, based on that 30-day month. In other words, the buyer is responsible for July 22–30 (nine days): $2 × 9 days = $18.

Answer 163

The buyer The premium for the lender's policy is usually paid by the borrower.

Answer 164

The lender may ask questions about Raoul to assess his creditworthiness. Lenders cannot require a loan applicant to have a co-signer. If only one individual applies for credit, the lender may only ask if the applicant is married, unmarried, or separated. However, lenders may also ask about an applicant’s spouse if the applicant is relying on the spouse’s income for repayment of the loan.

Answer 165

Disparate impact and disparate treatment This could be considered disparate impact because it tacitly discourages people who don’t have families from seeking a loan. It could also be considered disparate treatment because it implies that families are treated differently. (In this case, it appears they’re treated better than non-family applicants.)

Answer 166

It requires financial institutions to report demographic information about loan applicants. HMDA does not prohibit any activity. Instead, HMDA's goal is—in its simplest form—to make information available. HMDA requires financial institutions to report the geographic location, race or national origin, sex, and income of each applicant.

Answer 167

An MLO who has an already established business relationship with a consumer may reach out to the consumer to solicit additional business for up to 18 months after the consumer’s most recent purchase or payment. This also applies when the consumer is on the national Do Not Call Registry.

Answer 168

When there’s a legitimate business reason While the intention may not be discriminatory on its face, certain policies may harm applicants who are members of a protected class. In such cases, the evidence must support that a disparate impact exists. The company’s policy must have a justifiable business reason to back having such a policy. Otherwise, it's discriminatory.

Answer 169

Title insurance Lenders require that borrowers obtain title insurance to protect the lender from financial loss due to title defects.

Answer 170

A qualified mortgage meets stringent CFPB guidelines that are designed to curb lending practices that led to the late-2000s financial crisis.

Answer 171

First, find the annual interest payment by multiplying the monthly interest payment by 12: 12 × $525 = $6,300. Then find the interest rate by dividing total interest paid by the loan balance: $6,300 ÷ $90,000 = 0.07 or 7%.

Answer 172

A $40,000 loan that has an APR that is 8.5 percentage points higher than the average prime offer rate and is secured by an RV. A high-cost loan has an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for comparable transactions on that date by more than: 6.5 percentage points for a first-lien transaction, 8.5 percentage points for a first-lien that is for less than $50,000 and is secured by personal property (i.e., houseboat, RV), or 8.5 percentage points for junior-lien transactions.

Answer 173

Ginnie Mae

Answer 174

No, he must be registered through the NMLS Marcus must be registered through the NMLS. Employees of depository institutions, such as trust companies, credit card banks, and industrial loan banks, don’t need to be licensed

Answer 175

Home Ownership and Equity Protection Act HOEPA focuses on unfair high-rate loan practices.

Answer 176

The act includes requirements for certain home equity loans with high rates or high fees. According to the FTC, HOEPA focuses on predatory practices relating to home equity lending, and includes requirements for certain loans with high rates or high fees.

Answer 177

There are two types of MCR filings: standard and expanded. Licensees are required to submit a Mortgage Call Report to the NMLS every quarter. There are two types of MCR filings: expanded and standard. E-MCRs are required for Fannie Mae and Freddie Mac sellers/servicers and Ginnie Mae issuers. All other licensees should complete the Standard Mortgage Call Report (S-MCR).

Answer 178

Title insurance protects the lender against any future default in the buyer's payments. Title insurance protects against title-related defects. It doesn't protect the lender from borrower default in the future.

Answer 179

Upon loan application submission or within three business days

Answer 180

A statute of limitations on when a creditor can seek redress State law might only offer protection in the form of a statute of limitations that prevents a creditor from seeking redress after a certain amount of time has passed. If state law offers any protection beyond this, then the box should be checked beside the statement that state law might offer protection from liability for the unpaid balance.

Answer 181

It’s been fewer than 30 days since consummation, so the creditor has 30 days to deliver or mail corrected disclosures.

Answer 182

To require all MLOs to obtain and maintain licensure.

Answer 183

30 days from the date of Delia’s request for confirmation The creditor can provide the reasons for an adverse action orally, but only if a disclosure is made of the applicant’s right to have the reasons confirmed in writing within 30 days of the creditor receiving the applicant’s written request for confirmation.

Answer 184

The borrower may be reimbursed for closing agent service fees in circumstances where the lender chooses the closing agent. If a closing company uses pricing based on geographical averages, the average prices are assessed semi-annually.

Answer 185

60 days When a consumer pays more at closing than what was listed in the LE, and the amount exceeds the allowable tolerance threshold, the creditor must refund the miscalculation to the consumer within 60 days

Answer 186

In general, USDA, VA, and FHA loans are assumable. Conventional loans are not.

Answer 187

Form I-94, or an official employment authorization document and residency verification

Answer 188

A written adverse action notice The written notice must be provided within 30 days, and must give the consumer the specific reasons for the lender's action and describe what the consumer's rights are under the ECOA.

Answer 189

Nothing else TILA’s Regulation Z requires advertisements that contain financing-related trigger terms, such as specific down payment or monthly payment amounts, to include additional disclosures. In this ad, no trigger terms were used, so nothing more is required related to financing terms.

Answer 190

Determine the loan(s) for which the borrower qualifies. Determining which loan for which a borrower qualifies is the first step in deciding loan suitability. Ultimately, if they are eligible for multiple loans, you must determine which loan will give them the most significant net benefit.

Answer 191

The applicant must attest in writing that the lender provided a statement advising the applicant to get independent information and counseling.

Answer 192

The seller will be responsible for property taxes on the property for the month of January, which has 31 days. Multiply the daily rate by the number of days that the seller owned the property to find what the seller with owe at closing: $1.23 × 31 = $38.13.

Answer 193

Once the requirements have been satisfied, and the seller has delivered the deed to the borrower

Answer 194

The fully indexed rate equals the margin plus the index value. So, to find the index value, subtract the margin from the fully indexed rate: 4.5% – 2.1% = 2.4%.

Answer 195

Conventional USDA, VA, and FHA loans are assumable. Conventional loans are not.

Answer 196

By eliminating illegal kickbacks and referral fees among settlement service providers and requiring lender disclosures as part of a residential real estate transaction involving credit

Answer 197

On the license application submission date Assuming there is no disqualifying event, temporary authority begins for him on the date he submits his application.

Answer 198

Upon loan application submission or within three business days

Answer 199

December 31

Answer 200

Either insured or guaranteed by the government The term “government loan” rarely means a loan made by the government. It refers to loans either insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs.

Answer 201

Requirements that must met before a title policy will be issued Schedule B-1 lists items the title insurance company requires to be addressed before they’ll issue the title insurance policy. This may include resolving liens or paying taxes that are due, among other items. Note that other title commitment forms may use a different schedule name.

Answer 202

Exchange Placement, layering, and integration are the main stages in money laundering schemes.

Answer 203

Requiring financial customer verification programs When the Dodd-Frank Act was first passed, it placed a lot of restrictions on smaller institutions, including community banks, by implementing the Qualified Mortgage Rule. Dodd-Frank also led to the creation of the CFPB and revisions to existing loan disclosures (which resulted in the TILA-RESPA Integrated Disclosure, or TRID).

Answer 204

Consumer Financial Protection Bureau Even though HMDA was passed decades before the establishment of the Consumer Financial Protection Bureau, that agency is now responsible for collecting and analyzing data collected under HMDA

Answer 205

Implement a written identity theft prevention program to detect identity theft risks. The Red Flags Rule imposes duties on organizations to detect, prevent, and mitigate identity theft. Organizations must protect any covered accounts they offer or manage by implementing a written identity theft prevention program to detect theft risks.

Answer 206

A written adverse action notice The written notice must be provided within 30 days, and must give the consumer the specific reasons for the lender's action and describe what the consumer's rights are under the ECOA.

Answer 207

Review the bank activity and ask follow-up questions. An MLO doesn’t need evidence of fraud to ask more questions and thoroughly review the applicant’s bank records. An applicant who’s 19 may be able to afford the property based on current income, investments, an inheritance, and so on. However, if it raises questions for the MLO, the MLO is within guidelines to ask for documentation to support the borrower’s ability to repay.

Answer 208

Retract the second or restructured mortgage signed for at closing Rescission is a definitive end to the borrower’s financial commitment to pay the loan.

Answer 209

Until August 14, or 30 days after the inaccuracy was detected Once the creditor learns about the event that resulted in the inaccuracy, there’s a 30-day deadline to furnish corrected disclosures.

Answer 210

The act includes requirements for certain home equity loans with high rates or high fees. According to the FTC, HOEPA focuses on predatory practices relating to home equity lending, and includes requirements for certain loans with high rates or high fees.

Answer 211

Bank activity In this scenario, the red flag involves the applicant’s bank activity. The $8,000 deposit stands out because it’s unusual, it’s larger than typical deposits in the account, and there’s no documentation to support it. The MLO should ask for additional documentation.

Answer 212

36% Different types of loans have different DTI thresholds. Conventional/conforming qualifying loans typically require 28% front-end ratios and 36% back-end ratios. FHA loans require a 31% front-end ratio and 43% back-end ratio. VA loans require no front-end ratio and 41% back-end ratio.

Answer 213

It allows the lender to verify the cash deposits listed on the applicant’s loan application. The institution provides an average balance for the previous two months. The form allows the lender to verify cash deposits. Privacy acts prohibit the depository institution from releasing this information without the account holder’s authorization.

Answer 214

Unrecorded mechanic's liens Most OEC policies cover the owner's for claims made based on unrecorded liens and encumbrances.

Answer 215

She will get the CD after she signs the loan contract. Lenders must provide the CD form to borrowers a minimum of three business days before loan consummation, which may or may not be the same as the closing date. TRID defines loan consummation as when a consumer becomes contractually obligated to the lender for the loan term. This form provides disclosures about the actual (not estimated) costs of the transaction, and includes columns for borrower-paid and seller-paid closing costs.

Answer 216

The applicable time period The prepaids cover what is paid at closing and what time period is included. This gives the borrower a glimpse into what will need to be paid in the near future.

Answer 217

Clear title

Answer 218

A form of identification issued by a U.S. state Because lenders want confirmation that borrowers of this kind will stay in the United States long enough to pay off their loans, they might also ask to see a work contract lasting up to three years, along with a positive credit history, bank statements, and tax returns for the previous two years.

Answer 219

Late payments are covered in the Other Considerations section on page three.

Answer 220

The buyer owes money for 10 days of the July HOA fee. First divide the monthly fee by 30 (since the statutory year assumes 30 days in every month) to get the daily rate: $60 ÷ 30 days = $2 daily rate. Then multiply the daily rate by the number of days the buyer is responsible, based on that 30-day month. In other words, the buyer is responsible for July 22–30 (nine days): $2 × 9 days = $18.

Answer 221

Proximity, placement, presented, prominent

Answer 222

Personal correspondence All financial records—including loan advertisements, loan application forms, solicitations, business cards, websites, and other advertising documents—must contain the MLO’s NMLS UI.

Answer 223

Identifying information about individuals who have received loans HDMA public data don’t include direct identifying information about individual borrowers, such as names or Social Security numbers. However, the data do include demographic information about borrowers as a safeguard against discrimination. Information about properties is organized by census tract, which is granular enough to be useful while still allowing for the protection of individual privacy.

Answer 224

Three years

Answer 225

Communication source Consumers shouldn’t be misled to believe that a commercial communication is from their lender if it’s not. This is deceptive because it’s piggybacking on an established and likely trusted relationship.

Answer 226

Information about the borrower, the loan amount sought, and the property to be purchased According to Regulation X, a loan application must contain specific pieces of information in order to be considered “complete,” including the borrower’s name, monthly income, and Social Security number (to obtain a credit report), the property’s address, an estimate of the property’s value, and the mortgage loan amount sought.

Answer 227

Earl Title insurance is required when financing is being obtained. The owner’s policy protects the buyer from defects in the title, regardless of who made the purchase.

Answer 228

To find the fully indexed rate, add the margin and the index value together: 1.9% + 2.9% = 4.8%, so 4.8% is the fully indexed rate.

Answer 229

Discrimination against protected classes When a loan applicant is given a notification that adverse action has been taken on an application, the notification must also contain a statement of the provisions of Section 701(a) of the ECOA, which concerns discrimination.

Answer 230

Regulation Z

Answer 231

Yes. The final title insurance policy is issued only after the final settlement on the property has occurred, and the specific conditions named in the preliminary title report have been satisfied. The final title insurance policy is issued only after the final settlement on the property has occurred, and specific conditions, as named in the preliminary title report, have been satisfied.

Answer 232

A statute of limitations on when a creditor can seek redress State law might only offer protection in the form of a statute of limitations that prevents a creditor from seeking redress after a certain amount of time has passed. If state law offers any protection beyond this, then the box should be checked beside the statement that state law might offer protection from liability for the unpaid balance.

Answer 233

Yes. Zenobia bought the house fewer than 90 days ago and the price Anne is paying is more than 10% greater than what Zenobia paid.

Answer 234

Truth in Lending Act’s Regulation Z

Answer 235

Three years

Answer 236

Submit fingerprints through the NMLS to be submitted to the FBI for a background check.

Answer 237

The applicant must attest in writing that the lender provided a statement advising the applicant to get independent information and counseling.

Answer 238

The words the MLO uses must reflect a true and clear representation of the loan product, its terms, and the property type. Consumers rely on lenders to accurately describe transaction-related items, which may impact loan costs for the consumer. Therefore, MLOs must use proper designations for loans.

Answer 239

Whether they were paid at or before closing

Answer 240

Inspection services Fees subject to the zero-tolerance category threshold include fees paid to the creditor, the mortgage broker, or any origination fees, such as origination charges, credit charges, adjusted origination charges, and transfer taxes. Inspection services are subject to a no or unlimited tolerance.

Answer 241

Unrecorded mechanic's liens

Answer 242

The seller’s existing mortgage Most property transactions include an existing mortgage that creates a title defect, but the defect will be cleared at closing when the seller’s proceeds are used to pay off the loan.

Answer 243

It requires financial institutions to report demographic information about loan applicants. HMDA does not prohibit any activity. Instead, HMDA's goal is—in its simplest form—to make information available. HMDA requires financial institutions to report the geographic location, race or national origin, sex, and income of each applicant.

MLO Prep Flashcards

(278 cards)