Mortgage Loan Origination Activities (25%)

Question 1

The Principle of __________ states that a knowledgeable consumer will pay no more for a property than the cost of acquiring an equally desirable alternative property.

Answer 1

Substitution

Question 2

Mortgages have __________ foreclosure and require court action to foreclose on a property.

Answer 2

judicial foreclosure

Question 3

Discount points (buydowns) are paid upfront to the \_\_\_\_\_\_ for lowering the interest
rate, and origination points are paid to the  \_\_\_\_\_\_\_\_ as a fee for service.

Answer 3

Lender / loan originator

Question 4

If a property is in a flood zone, the lender will require __________ for the life of the loan.

Answer 4

flood insurance

Question 5

Assessing an individual’s risk (underwriting) may be done manually or by the __________.

Answer 5

automatic underwriting system (AUS)

Question 6

Commission, Overtime, Bonus, Part-time, Interest and Dividend income must be averaged over __ years.

Answer 6

Averaged over 2 years

Question 7

Trust Deeds are __________ and do not require a court action to foreclose on a property.

Answer 7

Non-judicial

Question 8

The note (promissory note) is the legal evidence of the _____ and is not recorded.

Answer 8

debt

Question 9

Hazard insurance does not cover damages due to perils of ________.

Answer 9

flood

Question 10

HCLTV stands for __________.

Answer 10

Home equity line of credit (HELOC) Combined Loan-To-Value ratio

Question 11

If unemployment is a part of an applicants natural annual work cycle, then it can be included in their qualifying income if it has shown for the past ___ years on the borrowers tax return.

Answer 11

2

Question 12

Late fees are due after the ____ of the month.

Answer 12

15th

Question 13

If a borrower uses unemployment as qualifying income then the the average unemployment income from the past __ years is used.

Answer 13

2 years

Question 14

Applications can be taken which 4 ways?

Answer 14

Face-to-face, over the phone, through the mail or over the Internet

Question 15

The _____________________ prevents a mortgage broker from choosing the appraiser for loans that are sold to Fannie Mae. The Dodd-Frank Act extended the law to include all mortgages.

Answer 15

Home Valuation Code of Conduct (HVCC)

Question 16

The one promising to pay the money is called the ______.

Answer 16

maker

Question 17

A mortgage is a _________ lien; special assessments and mechanic’s liens are ______________ liens.

Answer 17

voluntary lien / involuntary liens

Question 18

Fannie Mae requires a maximum Housing Expense Ratio of __%.

Answer 18

28%

Question 19

The three approaches to estimating property value are the:

Answer 19

1. Sales Comparison Approach (residential and vacant land)
2. Cost Approach (new construction and special-use properties)
3. Income Capitalization Approach (income producing properties)

Question 20

The two types of documents associated with a loan are the _______ and the __________.

Answer 20

mortgage / promissory note

Question 21

Buy down points (temporary points) shown as FHA 2-1, allow a purchaser to reduce the interest rate on a mortgage by __% for the first year, __% for the next year, and __% every year thereafter.

Answer 21

2% / 1% / 0%

Question 22

The appraiser must be paid a ______, and not a fee based on the appraisal value.

Answer 22

flat fee

Question 23

The income approach is most useful for __________ and __________ property.

Answer 23

income-producing commercial / investment

Question 24

The Housing Expense Ratio =

Answer 24

PITI ÷ Gross Monthly Income

Question 25

In the Sales Comparison Approach, the appraiser researches a minimum of __ closed sales that are similar in characteristics to the subject property.

Answer 25

3 closed sales

Question 26

A borrower's payment history on previous mortgages or rent must be verified for ___ months.

Answer 26

12 months

Question 27

The underwriter is responsible for evaluating both the risk of the ________ and the ________.

Answer 27

borrower / property

Question 28

The lender always makes the final decision to _______ a loan. The lender issues the ____________.

Answer 28

Final decision to fund a loan / Clear-to-Close

Question 29

Monthly interest rate is calculated by

Answer 29

loan amount x interest rate ÷ 12

Question 30

Fixed discount points gives a borrower a ______ for the life of the loan.

Answer 30

lower interest rate

Question 31

Loan consummation is the point and time that the Consumer becomes ______________ on a credit transaction. Often referred to as “doc signing” or “closing” on the exam.

Answer 31

contractually obligated

Question 32

The Income Approach Appraisal analyzes _________ or ________ the property does or could generate. Sometimes called capitalization approach.

Answer 32

revenue / income

Question 33

Origination fees are charged on _____ that close and cover ___________.

Answer 33

Loans that close / administrative costs to close/service loan

Question 34

Prorated mortgage interest paid by the borrower at closing is calculated by:

Answer 34

(loan amount x interest rate)/365 days) x number of days left in month including closing day

Question 35

Retirement and pension income must continue for __ years beyond the application date in order to be included as income.

Answer 35

3 years

Question 36

The borrower is called the ______.

Answer 36

Trustor

Question 37

FHA requires a maximum Housing Expense Ratio of ____.

Answer 37

31%

Question 38

Public Assistance Income can be considered any of the following:

Answer 38

Child support, alimony, social security income, retirement income, pension, etc.

Question 39

__________ is the most probable price a property will bring in a fair and open market.

Answer 39

Market value

Question 40

The _______ is the beneficiary who retains note and deed of trust.

Answer 40

Lender

Question 41

An appraisal is valid for __ months. It must be re-certified if the appraisal will be __ months or ___ days old or more at closing.

Answer 41

6 months / 4 months (120 days)

Question 42

Combined Loan-to-Value Ratio (CLTV) =

Answer 42

1st Mortgage + 2nd Mortgage ÷ the sales price or appraised value (whichever is lower).

Question 43

Employment income must be verifiable for the past __ tax years. Any source of income which is not verifiable is _______ to the lender.

Answer 43

2 / Not acceptable

Question 44

Annual interest rate is calculated

Answer 44

loan amount x interest rate

Question 45

Yield spread premium (or lender credits) is a tool MLOs can use to reduce a borrowers ____________.

Answer 45

settlement costs

Question 46

The Cost Approach Appraisal calculates the __________, _________ and ____________.

Answer 46

cost of land, site improvement, and construction of structure

Question 47

Daily interest rate is calculated

Answer 47

loan amount x interest rate ÷ 365

Question 48

Each discount point and loan origination point costs __% of the loan amount.

Answer 48

1% of the loan amount

Question 49

Loan-to-Value Ratio (LTV) =

Answer 49

The loan amount ÷ appraisal value or purchase price, whichever is less

Question 50

Public Assistance income is “grossed up” by _________ during underwriting because it's non-taxable.

Answer 50

1.25 (increased by 25%)

Question 51

The VA ___________ the housing expense ratio

Answer 51

Does not consider

Question 52

AUS stands for _____________.

Answer 52

Automatic Underwriting Systems

Question 53

The one that will receive the money promised is called the ______.

Answer 53

payee

Question 54

The Fannie Mae appraisal form is called the _____________________.

Answer 54

Uniform Residential Appraisal Report (URAR) – form 1004

Question 55

To determine the highest and best use of a property, the use must be _________, ________ and __________.

Answer 55

legally permissible, physically possible and financially feasible

Question 56

When a married applicant qualifies for a mortgage based on his or her own financial capacity (without any assets or income of his or her spouse being taken into consideration), the spouse _______ need to sign the note.

Answer 56

does not

Question 57

A borrower may charge ____ for an appraisal and up to __% of the loan amount to his/her credit card to pay for lock-in fees.

Answer 57

$500 / 1%

Question 58

Points are used to lower_______ and each point will ______________ .

Answer 58

interest rates / lower the rate by 0.25%

Question 59

The Total Debt to Income Ratio =

Answer 59

PITI + other monthly debt ÷ Gross Monthly Income

Question 60

As it relates to rental income – the underwriter will only consider ___% of rental income collected.

Answer 60

75% - The other 25% is considered vacancy factor.

Question 61

Property appraisers must be licensed and adhere to the ________________.

Answer 61

Uniform Standards of | Professional Appraisal Practice (USPAP)

Question 62

The cost approach is most useful for _________ or _____________ producing property.

Answer 62

unusual or non-income producing property.

Question 63

Receipt of alimony or child support payments must continue for ___ years beyond the application date in order to be included as income.

Answer 63

3 years

Question 64

The ______ and _____ of ________ establish the lien position of the mortgage.

Answer 64

date and time of recording

Question 65

The Uniform Residential Loan Application (URLA) is also called the _____.

Answer 65

1003 or Form 1003

Question 66

Mortgage Fraud is investigated by the ____.

Answer 66

FBI

Question 67

Mortgage fraud is punishable by up to ___ years in prison and/or a fine of up to $__________.

Answer 67

30 years/$1,000,000

Question 68

The core of a loan originator's job is to obtain a complete and accurate ____ supported by ___________ from the borrower.

Answer 68

1003/documentation

Question 69

The ___________ evaluates the documentation, borrower information, and various risk factors to make a decision.

Answer 69

Underwriter

Question 70

The ____________ orders the appraisal.

Answer 70

Loan Processor

Question 71

The ____________ will verify the information collected by the loan originator, such a s check stubs W-2 forms, copies of bank statements and other documents.

Answer 71

Loan Processor

Question 72

A _________________, also known as the ____ is the standard appraisal form used to appraise single-family homes.

Answer 72

Uniform Residential Appraisal Report / 1004

Question 73

An appraisal is valid for ___ months but must be rectified if it will be __ months old or more at closing.

Answer 73

12 months / 4 months

Question 74

After the borrower makes the down payment lenders would like to see at least enough to cover __ months' mortgage payments of principal, interest, taxes and insurance

Answer 74

2 months