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MLO first > Mortgage Flash Cards > Flashcards

Mortgage Flash Cards

1
Q

What is the required pass
rate for the NMLS Test and
how long is it?

A

75% of 115 questions. The test has
120 questions with 5 questions that
are ungraded.

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2
Q

What is important to remember about taking the test?

A

Read the questions twice, slowly, but do not take over 30 seconds per question the first time through

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3
Q

What is the requirement under Fair Lending, Fair Housing, and ECOA?

A

All consumers have the right to apply for a loan unless they are under 18 years of age

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4
Q

Which Law and Regulation is Home Ownership Equity Protect Act (HOEPA) under?

A

Truth in Lending Act (TILA) and REG Z

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5
Q

Which items are restricted under HOEPA?

A

Predatory Lending, Abusive Lending Practices, Negative Amortization, PrepaymentPenalties, Balloon Lending, Subprime Lending, EquityStripping, and not meeting Ability to Repay (ATR) requirements

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6
Q

What is the minimum period for a Balloon mortgage?

A

A 30-year amortized loan that is due in 60 months

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7
Q

What is the Average Prime Offered Rate?

A

APOR – an index that is published weekly. It is added to High-Cost and Higher-Priced Triggers.

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8
Q

Who publishes the APOR Index?

A

FFIEC, the Federal Financial Institutions Examination Council

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9
Q

What is the Regulation for High-Cost Loans?

A

Section 1026.32

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10
Q

What are the three triggers for High-Cost Lending?

A

6.5% on a first Mortgage, 8.5% on a second Mortgage, and a 5% fee trigger for loans over $20,000

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11
Q

What are the triggers for Higher-Priced lending?

A

1.5% for first Mortgages, 3.5% for 2nd mortgages and no fee trigger

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12
Q

How do you calculate whether a loan exceeds the HigherPriced mortgage limits?

A

Add the APOR index to 1.5% on a first mortgage. The Annual Percentage Rate (APR) cannot exceed the two numbers together.

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13
Q

What are the requirements for a High-Cost Loan?

A

Tax and insurance escrows for the first five years of the loan, mandatory counseling and possibly two appraisals. Cannot use an Appraisal Waiver from Fannie or Freddie. No Balloons are allowed.

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14
Q

What are the requirements for a Higher-Priced Loan?

A

Tax and insurance escrows for the first five
years of the loan. Cannot use an Appraisal Waiver from Fannie or Freddie.

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15
Q

Prepayment Penalties are not allowed by which agencies?

A

Fannie Mae, Freddie Mac, USDA, FHA, and VA

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16
Q

What is collateral?

A

Property that is used as security against a debt

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17
Q

What is Net Monthly Income?

A

Take-home pay after taxes and payroll deductions

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18
Q

What is a non-liquid asset?

A

A type of asset that is not easily turned into cash. Real estate is considered non-liquid.

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19
Q

What are the five parts of ECOA?

A

Age, Discrimination, Underwriting, Appraisal, and Adverse Action

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20
Q

What is the minimum age under ECOA to obtain a mortgage loan?

A

18 years or older

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21
Q

ECOA has discriminatory items. What can’t you do with them?

A

You cannot use them to make or decline a loan

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22
Q

What are the discriminatory items under ECOA?

A

Sex, Marital Status, Race, Color, Age, Religion, National Origin, Public Assistance, and Sexual Orientation

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23
Q

What can you ask on Marital Status?

A

Married, unmarried, or separated

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24
Q

Which four areas should you never ask about?

A

Race, Color, Religion, and Nationality

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25
Q

What is the requirement for Public Assistance?

A

It must be considered, even though you may not be able to use it for qualifying

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26
Q

How long, after a complete underwriting
package is delivered to the underwriter,
does a decision have to be made?

A

30 days, but this may be
extended if the package is not
complete

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27
Q

How many days before closing must
the appraisal be delivered to the
borrower?

A

Three business days before, unless there is an
appraisal waiver issued, then the borrower must be
informed that an appraisal will not be done unless
they request it

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28
Q

How long after a loan is declined or
cancelled must an Adverse Action
notice be sent?

A

30 days from the decision,
explaining the reason

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29
Q

Under the Fair Housing Act, what are
three protected bases that are different
from those covered by ECOA?

A

Disability, Familial Status, and
Age

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30
Q

Why is Disability considered
discriminatory under Fair Housing
Act?

A

You cannot discriminate against a
borrower because they are
physically or mentally disabled

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31
Q

Why is Familial Status considered
under Fair Housing Act?

A

You cannot discriminate because
of the size of family or if a woman
is pregnant

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32
Q

Why is age not considered
discriminatory under Fair Housing
Act?

A

Reverse mortgages require a borrower to be 62
years of age or older, and a 55 and over
subdivision requires the borrower or purchaser
of property to be 55 and over

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33
Q

What is the Reg Letter for Fair
Credit Reporting Act?

A

REG V

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34
Q

How many free credit reports
does every consumer have the
right to get each year?

A

At least one

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35
Q

Which credit score do you use
when considering a borrower?

A

Three credit scores are issued on each credit
report for each borrower: High, Middle, and
Low. You will use the Middle unless the
program states differently

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36
Q

Which credit score do you use if the
loan is declined because of credit and
there are three borrowers?

A

Lowest of the Middle score for all the borrowers.
Example: Borrower 1 has a score of 780, borrower 2
has a credit score of 720, and borrower 3 has credit
score of 660. You would use 660.

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37
Q

What additional information is
required on the Credit Score
Disclosure?

A

Listing of all three national credit agencies, with
contact information, so the borrower can contact
them in case of an error or dispute. Agencies are
Experian, TransUnion, and Equifax

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38
Q

What are the three national
Credit Agencies?

A

Experian, TransUnion, and
Equifax

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39
Q

Which law did the Fact Act
amend?

A

Fair Credit Report Act (FCRA)

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40
Q

What is a fraud alert?

A

An alert put on the credit report, indicating the
borrower may have had their identity stolen or
credit card or bank accounts compromised

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41
Q

What happens with a Credit
Freeze?

A

No one will be able to access the borrower’s
credit without them unfreezing their account.
Credit issuers will be able to report credit
payments.

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42
Q

What is the cost for a fraud
alert or credit freeze?

A

Zero cost and should be applied to
all three credit agencies

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43
Q

What is Truncation?

A

When credit card, debit card, or bank deposit
receipts are given, they cannot show more than
the last four digits of the account numbers

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44
Q

What are the two parts of Red
Flag Rules?

A

(1) Before the request for change of personal information, the
company must send a letter or email asking if the person
requested the change. (2) All employees are to be trained on
how to identify a breach of security and what the company’s
requirement is once the breach has been determined.

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45
Q

Which agency regulates Red
Flags?

A

Federal Trade Commission
(FTC)

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46
Q

What is a Homeowner’s
Warranty?

A

A warranty and insurance program
that insures a new home for ten years
against major structural defects

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47
Q

If a breach is determined, what
is the requirement?

A

It must be reported to Compliance Officer or Senior Officer
and, 30 days from that point, the company must send a
notice to all people in their database notifying them of the
breach and what the company has done to protect them

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48
Q

What does GLB stand for?

A

Gramm-Leach-Bliley

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49
Q

What is the REG for GrammLeach-Bliley?

A

REG P

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50
Q

What is the main emphasis of
Gramm-Leach-Bliley?

A

Privacy of consumers’ personal
information

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51
Q

What does NPPI stand for?

A

Non-Public Personal
Information

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52
Q

What is “Opt-Out” under GLB?

A

The consumer has the right to opt-out of a
company sharing, selling, or giving their NPPI
to anyone. The Opt-out stays on as long as
their name is in the company’s data base.

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53
Q

What is Phishing or PreTexting?

A

Obtaining personal information by
illegal process, like a text, claiming
to be from the IRS, asking for your SSN

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54
Q

What is required under SafeGuard Rules?

A

Whenever you are not using your files, they are
to be locked up in a desk drawer or filing
cabinet. If your files are on a computer, there
must be a lock out after a few minutes.

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55
Q

What regulates Safe-Guard
Rules?

A

FTC – Federal Trade
Commission

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56
Q

What is the required retention
of Loan Information?

A

Three years for all loan files
and five years for the CD

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57
Q

Can the hard files be
destroyed?

A

Once the files are digitized, they
can be destroyed, but that does not
mean throwing them away

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58
Q

Who is required to file a HMDA
report?

A

All companies that underwrite or fund
loans must file a HMDA report annually. This
includes banks, credit unions, and mortgage
bankers.

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59
Q

What does HMDA stand for?

A

Home Mortgage Disclosure Act

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60
Q

What is the REG letter for
HMDA?

A

Reg C

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61
Q

Which agency is responsible
for overseeing HMDA data?

A

FFIEC - Federal Financial
Institutions Examination Council

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62
Q

What does CRA stand for?

A

Community Reinvestment
Act

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63
Q

What does CRA require?

A

To encourage depository institutions
to help meet the credit needs of the
communities in which they operate

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64
Q

Do Mortgage Brokers have to
report HMDA data?

A

No, because brokers do
not underwrite or fund
loans

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65
Q

When does the HMDA data
have to be reported?

A

In 2019, by March 1st of
each year. In 2020, it is
quarterly.

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66
Q

What does PENCIL stand for?

A

P= Property address, E=Estimated
value, N= Name, C = Credit or Social Security
number, I = Income, L = Loan amount

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67
Q

When is an application
considered a loan?

A

When you have collected all
the items in PENCIL

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68
Q

What agency regulates and
enforces Do-Not-Call?

A

FTC – Federal Trade
Commission

69
Q

How often do you have to pull new data
from the Do-Not-Call website if you are
using the data to solicit consumers?

A

The data cannot exceed 31 days. The data
incudes phone numbers for any person that
registers their phone number with DNC.

70
Q

How long are you to retain
your solicitation records?

A

Two years from the date of
solicitation

71
Q

What times can you solicit?

A

8:00am – 9:00pm, depending on
where the person being solicited
is located

72
Q

What are the two exemptions for
solicitations under Do-Not-Call?

A

18 months for someone with whom you
have an existing business relationship and
90 days for a Pre-qualification

73
Q

What is an in-house Do-Not-Call
List?

A

If a consumer sends a letter or an email to the company
indicating they want no solicitations, the company must put
that person on an internal do-not-call list, so not one
contacts that person. This overrides the 18 month and 90-
day exemption.

74
Q

What are the eight items
covered under TILA?

A

1) MDIA – Mortgage Disclosure Improvement Act 2)
Advertising 3) HOEPA 4) Loan Estimate (LE) 5)
Annual Percentage Rate (APR) 6) Qualified
Mortgage (QM) 7) Loan Officer Compensation 8)
CHARM Booklet

75
Q

What Does MDIA stand for?

A

Mortgage Disclosure
Improvement Act

76
Q

What does Mortgage Disclosure
Improvement Act (MDIA) cover?

A

MDIA is a part of Reg Z and covers timing and delivery
requirements for initial disclosures, LE, intent to proceed, and
changes to the mortgage loan program, prepayment penalty, or
APR calculations. MDIA also addresses when the CD needs to be
Issued, as well as the waiting period involved.

77
Q

What is a Changed
Circumstance?

A

Any borrower-requested change due to an
extraordinary event beyond anyone’s control. A
new LE must be received by the borrower
within three business days from the change.

78
Q

What are the requirements for
advertising under TILA?

A

All marketing materials must have the company name,
company NMLS number, phone number, address, equal
housing logo, and an APR. All advertising must be kept
for two years from the last date used.

79
Q

What is the definition of
Annual Percentage Rate (APR)?

A

APR is expressed as a percentage that
represents the total costs paid over the term of
a loan. This includes any fees or mortgage
insurance associated with the transaction.

80
Q

What does APR stand for?

A

Annual Percentage Rate – the cost
of the loan over the life of the
loan, quoted as a percentage rate

81
Q

What is a CHARM booklet?

A

A booklet that is required for all ARM
loans. It is issued at least three days
from the signed application

82
Q

What is the Loan Estimate
(LE)?

A

A disclosure of all terms and costs of the loan,
to be issued when you have all the items under
PENCIL, and within three business days of the
signed application

83
Q

What does QM stand for?

A

Qualified Mortgage – all conforming
conventional loans must meet the
standards

84
Q

What are the two ways a
conventional conforming loan
can meet QM Standards?

A

Option #1: 43% maximum DTI and maximum
3% in fees. Option #2: Approved eligible from
Fannie or Freddie and meet the HigherPriced Lending triggers

85
Q

What is Safe Harbor?

A

If you meet either of the two options under QM
that showed you proved Ability to Repay
requirement, you are protected from a lawsuit

86
Q

What is the punishment if you
do not meet QM Standards?

A

Up to three years interest, all loan
costs, and legal costs for both
sides

87
Q

If an MLO is paid commissions,
what can the commissions based
on?

A

Basis points under your Loan Originator
Agreement, times the loan amount. No terms
or costs of the loan can be counted.

88
Q

What does UDAAP stand for?

A

Unfair, Deceptive, or
Abusive Acts or Practices

89
Q

What Does Unfair, Deceptive, or
Abusive Acts or Practices state?

A

It is unlawful for any provider of
consumer financial products or services or a
service provider to engage in any unfair,
deceptive, or abusive act or practice

90
Q

If a company pays a bonus or
retirement donation, what are the
criteria for determining the amount?

A

Number of loans, dollar amount
originated for a specific time, and/or the closing
rate on your applications. Bonuses are limited
to 10% of the last 12 months’ compensation.

91
Q

What does Reg N Cover?

A

Mortgage Acts and Practices

92
Q

What does Mortgage Acts and
Practices require?

A

If you don’t have a program or rate, do not
advertise it, and do not use Bait and Switch tactics,
or language or terms that would indicate to a
borrower you do not want them to apply

93
Q

What is Bait and Switch?

A

Advertising a lower rate or a program
that may not exist to entice consumers, and
then when they call, you offer them another
less-attractive program.

94
Q

What is not included in Digital
Delivery?

A

Faxing or e-mail. Docu-sign or E-sign are
acceptable where the person can be verified,
and the documents are time stamped as they
are sent back and forth.

95
Q

What are the requirements for
Digital Delivery?

A

The borrower must give you written approval,
have the right to go back to hard copy, and you
must determine, to the best of your ability, if the
borrower is technically able to do the process

96
Q

What does CFPB stand for?

A

Consumer Financial Protection
Bureau

97
Q

What are duties of the Consumer
Financial Protection Bureau?

A

They have the power to write, implement
regulations, investigate, and issues fines
or other penalties as needed

98
Q

Who does the CFPB answer to?

A

The President

99
Q

What is a Consumer?

A

*** Someone who obtains a financial product or
service from a financial institution that is to be
used primarily for personal, family, or household
purposes, like applying for a loan (whether they
accept the loan or not).

100
Q

How many days do you have to
send an adverse action notice?

A

30 days, mailed or verbal

101
Q

TILA Trigger terms

A

Balance, term, APR (rate),
payment

102
Q

Flood Insurance

A

Stays until the loan is paid off

103
Q

How many months reserves are
needed for non-owneroccupied properties?

A

6 months

104
Q

What is excessive value?

A

An appraisal term to express a
value higher than the highest in
the neighborhood

105
Q

What is the flood
insurance
requirement?

A

Enough to cover the loan
amount

106
Q

What is the hazard insurance
requirement?

A

Enough to cover the loan
amount

107
Q

What are the payment options
for ARMs?

A

15 years, 30 years,
Negative/Minimum

108
Q

Servicing loan estimates need to
be given within what time frame?

A

3 days

109
Q

What are the manufactured
home financing
requirements?

A

*** Home must be on a permanent foundation and
the land must be titled as real
property. The HUD Data Plate
must be on the home

110
Q

What is the VA back-end ratio?

A

41%, including housing,
utilities, and all other debts

111
Q

How much hazard insurance
is required on a reverse
mortgage?

A

100% of the loan amount

112
Q

What is the minimum down
payment?

A

FHA: 3.5%
Conventional: 3%

113
Q

What does the cost
approach
include?

A

Depreciation, Square Footage,
and Replacement Cost

114
Q

With the Sales Comparison
Approach, what adjustments are
allowed?

A

Net adjustments of 15%
and gross adjustments of
25% to comparables

115
Q

What do riders include?

A

PUD, ARM, Balloon Payment,
Prepayment Penalty

116
Q

What is a
Hybrid Loan?

A

A loan that performs like a fixed and adjustable-rate
loan. It has a fixed rate for an
initial period before turning into
an ARM.

117
Q

What is a non-warrantable
condo?

A

FNMA will not do the loan
Condo-conversion= non warrantable
HOA, 51% owner occupied

118
Q

FHA loans are only for
what types of properties?

A

Owner-Occupied
Properties

119
Q

What is a grace
period?

A

A period of extra time allowed for
making a payment without incurring
a late penalty

120
Q

What does Title VII include?

A

Discrimination, Sexual
Harassment, Hostile Workplace

121
Q

What is the FHA loan
verification of child support?

A

Divorce decree and 3 months
of cancelled checks

122
Q

What are the types of title
policies?

A

Final, Termite, Engineer
Certification of Foundation

123
Q

What must happen in order to
transfer an FHA case number?

A

Request must come from
borrower

124
Q

What is the UFMIP %?

A

1.75%

125
Q

How is monthly MIP
calculation done?

A

On base loan amount before
UFMIP

126
Q

What is the active-duty vet 1st
time funding fee at 100%?

A

2.30%

127
Q

What is the FHA loan minimum
living time before resale?

A

91 days from consummation
with second appraisal

128
Q

How is a GLBA notice
delivery given out?

A

Mailed, given personally, or
faxed

129
Q

How do tenants in common
mortgages work?

A

Each owner has their own share of
the property that they can pass on
in their will

130
Q

What information is covered in
the privacy rule of GLBA?

A

Non-public information, including any
information an individual gives you to get a
financial product or service; i.e., credit reports,
banking info, unlisted home telephone numbers

131
Q

What is on the deed of trust
agreement?

A

Metes and bounds, legal
description, attached riders, name
of borrower

132
Q

What is an ongoing business
relationship?

A

Customer

133
Q

How long is the FIRREA statute
of limitations loan fraud?

A

10 years

134
Q

How often must the aggregate
accounting escrow be reviewed?

A

Every 12 months, cushion up
to 2 months

135
Q

What is a Chain of Title?

A

*** The ownership history of a piece of land,
from its first owner to the present one

136
Q

Which types of loans are
Assumable?

A

*** VA, FHA if stated in the deed

137
Q

How much is title insurance
coverage on reverse?

A

150% of original loan amount

138
Q

What is settlement service per
RESPA?

A

Title insurance, appraisal, relator
commission, credit report, title report,
termite certificate

138
Q

What is AQB?

A

National appraiser group

139
Q

What percentage of a VA
loan is guaranteed?

A

*** Up to 50% of a loan up to $45,000. Between
45,000 and $144,000, the minimum is
$22,500 and the max of up to 40% of the
loan up to $36,000.

140
Q

What is a notice of transfer?

A

Includes toll free number of new and
old servicer and effective date, 15
days before transfer

141
Q

When are LE requirements not
required?

A

They are not required on commercial
loans, loans denied within three days,
or bridge/swing loans

142
Q

What is a “due on sale”
clause?

A

A clause in a loan or promissory note that
stipulates that the full balance of the loan may be
called due (repaid in full) upon sale or transfer of
ownership of the property used to secure the note

143
Q

How often do telemarketers
update the DNC?

A

31 days

144
Q

After someone requests you to put
them on your DNC list, how many days
do you have to do so?

A

30 days

145
Q

How long does a conventional
loan owner agree to occupy the
property?

A

1 year

146
Q

What are the guidelines for
appraisers?

A

USPAP

147
Q

Where is the Prepayment
penalty disclosed?

A

*** Rider to trust deed LE/CD

148
Q

Which loan requires a large final
loan payment, as it does not fully
amortize?

A

Balloon

149
Q

What is included in typical
property inspections?

A

Verification that required repairs
have been made, termite, well,
septic, and roof

150
Q

Joint Tenants

A

Ownership automatically
transferred on death to other
owners, cannot be a corporation

151
Q

What is a Bridge loan?

A

A loan which occurs between
the termination of one
mortgage and the
beginning of the next

152
Q

What affects mortgage
interest rates?

A

Unemployment report,
consumer price index, federal
reserve board

153
Q

What affects PMI?

A

LTV, ARM, Term, FICO

154
Q

What is an indemnity
agreement?

A

With a real estate indemnity agreement, one
party is pledging to protect another from any
kind of financial loss or from a lawsuit of some
kind

155
Q

What is the required
fire/hazard insurance amount?

A

*** Enough to cover the loan
amount

156
Q

What is LIBOR?

A

London Inter Bank Offered
Rate

157
Q

What is the max seller paid
closing costs for Conventional,
FHA/USD, and VA loans?

A

Down: | S. P.
Conv: <10% | 3%
10-25% | 6%
25+ % | 9%

FAA/USD: 6%
VA: 4%

158
Q

What is the right of rescission?

A

A right, set forth by TILA, of a borrower to cancel a home
equity or line of credit with a new lender, or to cancel a
refinance transaction done with another lender other
than the current mortgagee, within three days of closing

159
Q

Which form states that the borrower
must occupy the property as primary
residence within 60 days?

A

FNMA FHLML Form 3072

160
Q

What are the different
appraisal types?

A

*** Cost: Cost to replace; usually newer construction
Income: Income producing properties
Sales Comparison (Market): Compare to other
similar properties

161
Q

When was the Dodd-Frank
Act created?

A

2010

162
Q

What are MortgageBacked Securities?

A

A type of asset-backed security
that is secured by a mortgage
or collection of mortgages

163
Q

Lower-cost MI with loan level
price adjustment

A

Borrower with high credit scores.
The borrower can have lower MI but
FNMA will pay less for the loan

164
Q

What does plain language title
insurance do?

A

Protects the buyer:
1. Rights of claims of 3rd parties
2. Easements or claims of it not in the public record
3. Forced removal of existing structure
4. Mechanics lien coverage (unrecorded)

165
Q

What is the appraiser trainee
period?

A

12 months

166
Q

Who are the big players
on the Secondary
Market?

A

FNMA, FHLMC, and
GNMA

167
Q

Someone on the DNC list contacts
you. How long can you continue to
call?

A

3 months

168
Q

What are the high-cost
limits with APR and point
fees?

A

APR:
6.5 on 1st or 8.5% on 1st less than 501c or 2nd

Points Fees:
5% + on $20,000+ loan or 8% on less than 20,000

MLO first (5 decks)

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