National Component Test PRACTICE EXAM #1

Question 1

National Component Test

A discount point is BEST described as a charge the borrower pays to:

Answer 1

A lender to decrease the interest rate on the mortgage loan

Question 2

National Component Test

A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing?

Answer 2

$25,000

Question 3

National Component Test

If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?

Answer 3

$2,343.47

Question 4

National Component Test

The requirement for private mortgage insurance is generally discontinued when the-loan-to-value ratio is falls below:

Answer 4

80%

Question 5

National Component Test

Which of the following documents itemizes all settlement costs including lender charges?

Answer 5

HUD-1 form

Question 6

National Component Test

According to the Truth-in-Lending Act (TILA), the term “refinance” applies to:

Answer 6

The satisfaction of an existing obligation and its replacement by a new obligation

Question 7

National Component Test

What does a loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?

Answer 7

An appraisal

Question 8

National Component Test

Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?

Answer 8

Telephone

Question 9

National Component Test

The term “20 basis points” expressed as a percentage is:

Answer 9

0.20%

Question 10

National Component Test

According to the Truth-in-Lending-Act (TILA), which of the following fees is EXCLUDED from the calculation of the annual percentage rate?

Answer 10

Hazard insurance

Question 11

National Component Test

TILA is overseen by:

Answer 11

FRB - Federal Reserve Board

Question 12

National Component Test

RESPA allows for the borrower to inspect the HUD-1 Settlement how many days prior to the actual settlement?

Answer 12

1 day

Question 13

National Component Test

What three RESPA federally required disclosures must be provided within three days of receipt of the loan application for a purchase money loan?

Answer 13

GFE, Mortgage Disclosure Servicing Statement, a Special Information Booklet, which contains consumer information regarding various real estate settlement services

Question 14

National Component Test

Another name for TILA is:

Answer 14

Regulation Z

Question 15

National Component Test

The Equal Credit Opportunity Act is overseen by which agency:

Answer 15

FTC - Federal Trade Commission for Mortgage Broker and the OCC - The Office of the Comptroller of the Currency for Mortgage Bankers

Question 16

National Component Test

Reg. B Section 202.5 of the Equal Credit Opportunity Act states that you cannot discourage an application for the following reasons:

Answer 16

Information regarding a spouse, Marital status, Income from alimony/child support, Sex of applicant, Dependent information, Race, color, religion, origin

Question 17

National Component Test

The Fair and Accurate Transactions Act of 2003 (“FACT Act”) amended the Fair Credit Report (FCRA). This regulation is overseen by:

Answer 17

FTC - Federal Trade Commission

Question 18

National Component Test

The Entities Regulated by the Fair and Accurate Transactions Act (The FACT Act) are:

Answer 18

Consumer Reporting Agencies (CRAs), users of Consumer Repots, and furnishers of information to Consumer Reporting Agencies (CRAs)

Question 19

National Component Test

The Truth-in-Lending Act (TILA or Reg Z) regulates the following disclosure requirements:

Answer 19

Truth-in-Lending Disclosure Statement, Adjustable-Rate Disclosures, Right of Rescission (Right to Cancel), High-Priced Mortgage (Section 35), High-Fee Mortgages (Section 32)

Question 20

National Component Test

The Truth-in-Lending Act (TILA or Reg Z) requires that disclosures must be:

Answer 20

Clear and Conspicuous, in writing, retainable by the consumer, reflect terms of the legal obligation, use estimates appropriately (and if based on estimates indicate this fact), provide to the applicant within 3 business days after receipt of an application for credit

Question 21

National Component Test

The Home Ownership and Equity Protection Act of 1994 (HOEPA) addresses certain deceptive and unfair practices in home equity lending. It amends the Truth-in-Lending Act (TILA) and establishes requirements for certain loans with high rates and/or high fees. The rules for these loans are contained in what Section of Regulation Z?

Answer 21

Section 32

Question 22

National Component Test

The Home Mortgage Disclosure Act - Regulation C (HMDA) was passed in 1975 and is overseen by what entity?

Answer 22

FRB - Federal Reserve Board

Question 23

National Component Test

Which of the following types of loans are exempt from RESPA?

Answer 23

Loans on property with 25 acres or more

Question 24

National Component Test

The National Flood Insurance Reform Act Regulation H, was passed in 1994 and is overseen by:

Answer 24

FRB - Federal Reserve Board

Question 25

# National Component Test Violations for not determining the flood status, not notifying the borrower of the status and insurance requirements, failing to escrow premium if an escrow account is required for the other payments and/or failing to place insurance when required are:

Answer 25

$360 for each violation with a maximum $100,000 per calendar year

Question 26

# National Component Test When the APR is out of tolerance, the creditor must do what?

Answer 26

Disclose the changes or provide a completely new disclosure statement so it is received at least three (3) business days before consummation.

Question 27

# National Component Test Each early TILA disclosure must include what statement?

Answer 27

"You are not required to compete this agreement merely because you have received these disclosures or signed a loan application."

Question 28

# National Component Test HMDA data allows government agencies to do what?

Answer 28

Evaluate lender compliance with anti-discrimination laws

Question 29

# National Component Test How is the conforming loan set each year?

Answer 29

The Federal Housing Finance Agency (FHFA) uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Agency (FHFA) to adjust the conforming loan limits for the subsequent year.

Question 30

# National Component Test Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to what:

Answer 30

30 years in federal prison or $1,000,000 fine, or both

Question 31

# National Component Test Overvaluation of the fair market value of real estate is an ethical concern that may violate regulations or provisions of all but which of the following federal laws?

Answer 31

The Homeownership and Equity Protection Act | The Truth-in-Lending Act, The Financial Institutions Reform, Recovery and Enforcement Act, The Fair Housing Act

Question 32

# National Component Test Yield spread premium is defined as:

Answer 32

A tool that a borrower uses to accept a higher interest rate in exchange for lower fees

Question 33

# National Component Test Yield spread premium (YSP) must be disclosed on:

Answer 33

The GFE and The HUD-1

Question 34

# National Component Test Amendments to which of the following federal laws created requirements for the verification and documentation of a borrower's repayment ability?

Answer 34

Homeownership and Equity Protection Act

Question 35

# National Component Test The Truth-in-Lending Act was enacted for what reason?

Answer 35

To protect consumers in credit transactions

Question 36

# National Component Test Which of the following practices could cause a mortgage professional to violate RESPA's escrow provisions and may constitute misappropriation?

Answer 36

Commingling funds

Question 37

# National Component Test Advertising an attractive interest rate which a mortgage professional is not at liberty to offer is a major ethical offense and a violation of:

Answer 37

Regulation Z

Question 38

# National Component Test Which of the following constitutes a "thing of value" that would violate RESPA?

Answer 38

A loan originator gives an airline travel voucher to an attorney for introducing a customer

Question 39

# National Component Test Which of the following would address the principal and interest payments due on a loan?

Answer 39

The Amortization schedule

Question 40

# National Component Test A(n)______is a loan with an interest rate that can adjust monthly and that offers a borrower a number of payment choices such as: 30 year fixed P&I / Interest-Only / 1% of the loan resulting in negative amortization.

Answer 40

Option ARM

Question 41

# National Component Test Which of the following is BEST defined as a loan that exceeds Fannie Mae and Freddie Mac's maximum loan limits?

Answer 41

A non-conforming loan

Question 42

# National Component Test USDA loans are primarily for properties located in:

Answer 42

Rural areas

Question 43

# National Component Test What is Fannie Mae's purpose in the secondary market?

Answer 43

To provide a source of funds for lenders

Question 44

# National Component Test Which of the following loan program does not require credit or income documentation and does not require repayment?

Answer 44

Reverse mortgage

Question 45

# National Component Test MIP is mandatory when a loan is:

Answer 45

An FHA loan

Question 46

# National Component Test Increasing loan balances resulting from the application of periodic payments creates which of the following for borrowers:

Answer 46

Negative amortization

Question 47

# National Component Test The Federal Housing Administration:

Answer 47

Insures loans

Question 48

# National Component Test Which of the following terms specifically refers to a loan that is NOT obtained through a program of the federal government?

Answer 48

Conventional loan

Question 49

# National Component Test Which of the following terms is defined as the method in which a lien is removed from property following full payment of a loan on the property?

Answer 49

Reconveyance

Question 50

# National Component Test The cost of Funds Index is traditionally used to determine interest rates on what type of loans?

Answer 50

Rate adjustments on adjustable rate programs

Question 51

# National Component Test Fannie Mae and Freddie Mac securitize what type of mortgage loans?

Answer 51

Conventional loans

Question 52

# National Component Test What is used to determine the interest rate change on an ARM?

Answer 52

Index and margin

Question 53

# National Component Test A borrower obtains and FHA loan. What entity insures this loan?

Answer 53

Federal Housing Administration

Question 54

# National Component Test Which of the following would not be included on the loan application?

Answer 54

Closing costs

Question 55

# National Component Test Which of the following provisions is available to a borrower when the subject property is located in a flood zone and flood insurance is required?

Answer 55

FEMA/s National Flood Insurance Program

Question 56

# National Component Test Which of the following best describes the LTV ratio?

Answer 56

It is the ratio of the borrower's principal loan balance to the appraised value of the property

Question 57

# National Component Test How is the mortgage insurance premium on an FHA loan determined?

Answer 57

It is based o the principal loan amount

Question 58

# National Component Test A couple ahs qualified for a $245,600 loan. The are told that the broker fee will cost two points. What is the dollar amount of the broker fee?

Answer 58

$4,912

Question 59

# National Component Test Why would a borrower pay discount points in conjunction with his/her loan transaction?

Answer 59

They would change the note rate

Question 60

# National Component Test Which of the following real estate appraisal approaches consider the replacement value of the property?

Answer 60

Cost approach

Question 61

# National Component Test Which of the following pieces of personal information is a borrower asked to provide voluntarily on the loan application?

Answer 61

Race and sex

Question 62

# National Component Test "1003" is another title for which of the following mortgage industry documents?

Answer 62

Uniform Residential Loan Application

Question 63

# National Component Test A property is valued at $342,000. There is a first and second mortgage with an 85% CLTV. The second mortgage has an 8% LTV. What is the approximate amount of the first mortgage?

Answer 63

$263,340

Question 64

# National Component Test Which type of disclosure must have a statement "loan terms can change"?

Answer 64

Adjustable Rate Mortgage Disclosure

Question 65

# National Component Test Tom Brown is a nurse at the local hospital. He has worked the night shift for three years and plans to continue this schedule. His base pay is $29.50 per hour with a 5% shift differential. He averages 35 hours per week. What is his qualifying income?

Answer 65

$4,698.63

Question 66

# National Component Test The Fair Credit Reporting Act is enforced by:

Answer 66

Federal Trade Commission

Question 67

# National Component Test The regulation with the prime purpose of prevention of discrimination?

Answer 67

ECOA

Question 68

# National Component Test Loans covered under HOEPA are called:

Answer 68

Section 32 loans

Question 69

# National Component Test A lender has how many days to notify the borrower of an underwriting decision?

Answer 69

30

Question 70

# National Component Test According to HMDA, a first mortgage will be considered a sub-prime loan when the difference between the annual percentage rate and the rate spread is greater than:

Answer 70

8%

Question 71

# National Component Test The record retention requirement outlined by TILA is how many years?

Answer 71

Two

Question 72

# National Component Test The SAFE Act:

Answer 72

Establishes minimum standards for licensing and registering mortgage loan originators

Question 73

# National Component Test RESPA requires the use of the HUD-1 for:

Answer 73

One-to-four-family residences

Question 74

# National Component Test A Mortgage Servicing Disclosure Statement is required by what law?

Answer 74

RESPA

Question 75

# National Component Test Which act requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application?

Answer 75

Equal Credit Opportunity Act

Question 76

# National Component Test What percentage is the fee threshold that triggers HOEPA disclosures?

Answer 76

8%

Question 77

# National Component Test Seven years is the maximum length of time information can be reported on a credit report according to the Fair Credit Reporting Act, EXCEPT for:

Answer 77

Criminal convictions

Question 78

# National Component Test Which law requires new loan originators to take approved pre-licensing education?

Answer 78

SAFE Act

Question 79

# National Component Test HMD is also known as Regulation

Answer 79

C

Question 80

# National Component Test Which law ensures lenders use an annual percentage rate (APR) so that the borrowers have the information they need to make informed comparisons?

Answer 80

Regulation Z

Question 81

# National Component Test An applicant submitted a home loan application and the loan was approved on the same day. According to the Real Estate Settlement Procedures Act (RESPA), within how many business days of the application must the Good Faith Estimate (GFE) document be sent?

Answer 81

3

Question 82

# National Component Test A mortgage broker discloses third-party charges in a Good Faith Estimate (GFE) using the typical charges of the third-party provider. Which of the following must the mortgage broker provide in the GFE?

Answer 82

Estimated charges of the provider

Question 83

# National Component Test How many days prior to closing may a borrower request a copy of the HUD-1 settlement statement?

Answer 83

One business day

Question 84

# National Component Test RESPA is administered by:

Answer 84

HUD

Question 85

# National Component Test The special Information Booklet must be provided by a lender to a borrower, as required by the:

Answer 85

Real Estate Settlement Procedures Act (RESPA)

Question 86

# National Component Test The HUD-1 is a uniform settlement disclosure created following the requirements of:

Answer 86

RESPA

Question 87

# National Component Test Which of the following practices by mortgage brokers is a prohibited practice?

Answer 87

Referring a real estate agent to a customer for a fee

Question 88

# National Component Test On the GFE, the limit for negative amortization is expressed as:

Answer 88

A dollar amount

Question 89

# National Component Test According to the Truth-in-Lending Act (TILA), which of the following fees is included in the calculation of the annual percentage rate?

Answer 89

Closing agent charges

Question 90

# National Component Test For which of the following types of loans does the Truth-in-Lending Act (TILA) apply?

Answer 90

Residential

Question 91

# National Component Test The maximum amount guaranteed for a VA loan:

Answer 91

Varies by the amount of entitlement of the veteran

Question 92

# National Component Test All of the following are considered finance charges EXCEPT:

Answer 92

EXCEPT: Home inspection fee paid by the borrower These are considered finance charges: Loan origination fee Initial mortgage insurance premium Discount points

Question 93

# National Component Test In a loan transaction in which there are four co-owners of the property, what is the minimum number of co-owners who must request rescission, for the request to be valid, under TILA?

Answer 93

One

Question 94

# National Component Test Under the rules for the Do-Not-Call Registry, a mortgage broker may make an unsolicited call to a client or customer with whom he has established a business relationship, for up to ______ months after his last transaction.

Answer 94

18

Question 95

# National Component Test If an applicant chooses not to disclose his or her national origin in a residential credit application, what action must the creditor take in order to comply with the HMDA and ECOA?

Answer 95

Note that the applicant does not wish to disclose national origin and write down the national origin based on visual observation

Question 96

# National Component Test The place on the Truth-in-Lending Disclosure where the required disclosures are grouped together and shown separately from any other information is called:

Answer 96

The Federal Box

Question 97

# National Component Test According to the Truth-in-Lending Act (TILA), what change from the annual percentage rate is generally considered as accurate during disclosures?

Answer 97

1/8 percent

Question 98

# National Component Test Which of the following is true about the right of rescission granted under the Truth-in-Lending Act (TILA)?

Answer 98

It only applies to a loan secured by the borrower's principal residence

Question 99

# National Component Test What regulation forbids the seller to require the use of a particular title company as a condition of sale?

Answer 99

Regulation X

Question 100

# National Component Test A mortgage broker has advertised "$1,200 down" for a house in a local newspaper. According to the Truth-in-Lending Act (TILA), which of the following information must be disclosed in the same advertisement?

Answer 100

The annual percentage rate