NMLS

Question 1

When ordering an appraisal, it is illegal to…

Answer 1

Request that the appraiser return a minimum or specific value. Mortgage professionals are permitted to communicate their own or the borrower’s opinion when ordering an appraisal; however, requesting a specific or minimum value is considered improper influence of an appraiser and is a serious ethical and legal violation.

Question 2

Borrower credit is

Answer 2

An amount paid by the lender to a mortgage loan originator for locking a borrower’s interest rate at a rate higher than the par rate. The borrower credit is then used to help the borrower subsidize closing costs in exchange for taking the higher rate.

Question 3

MAP Rule implementing regulations

Answer 3

Regulation N

Question 4

Equity stripping is

Answer 4

The unethical practice of basing a loan approval on only the appraised value of the property. The practice does not consider repayment ability. Some states have passed regulations aimed at prohibiting the practice.

Question 5

Three conditions that an affiliated business must meet to satisfy referral requirements…

Answer 5

Disclosure of the relationship

No required use of the referred entity

Limitations on the “things of value” resulting from the arrangement

Question 6

Regulation Z prohibits advertising

Answer 6

An attractive interest rate or loan term that is not actually available. TILA and Regulation Z include a number of prohibitions and requirements against deceptive advertising practices.

Question 7

The Safeguards Rule and Disposal Rule are concerned with

Answer 7

Preserving the confidentiality of personal financial information. The FTC’s Disposal Rule and the Gramm-Leach-Bliley Act Safeguards Rule outline the manner in which financial information must be protected while being maintained by an entity and during the process of record disposal.

Question 8

Fiduciary duty” means

Answer 8

One person (agent) is acting in the best interests of another. It requires loyalty, good faith, and an obligation of the agent to consider the interests of the other person before their own.

Question 9

An air loan is

Answer 9

A fraudulent transaction where a fictitious borrower obtains a mortgage and secures it with fictitious property. Air loans may also include fictitious employers, appraisers, and credit agencies in order to obtain verifications necessary to process the loan application.

Question 10

Equity-based lending occurs when

Answer 10

A lending decision is based on the equity available in the borrower’s home rather than creditworthiness and ability to repay

Question 11

Yield spread premiums are now known as

Answer 11

Borrower credits.

Question 12

Alt-A loans are

Answer 12

Used for consumers who do not represent the credit risk of subprime borrowers but who do not meet the underwriting requirements for conforming prime rate loans.

Question 13

Credit reports include

Answer 13

Information available in public records and data reported by creditors (including derogatory information, such as late payments).

Question 14

Property flipping occurs when…

Answer 14

A property is bought and resold within a very short period of time. The resale usually involves the use of an inflated appraisal of the property’s value. The HPML Rule works to curb property flipping by creating second appraisal requirements for certain transaction

Question 15

Service release premiums are

Answer 15

Fees lenders can earn when selling loans in the secondary market. They are often cited in the controversy over yield spread premiums earned by mortgage loan originators before the establishment of borrower credit requirements.

Question 16

Mark-ups are the practice of

Answer 16

Unilaterally increasing the charges of another settlement service provider and retaining the difference. HUD considers mark-ups a form of illegal fee-splitting and a violation of RESPA

Question 17

A straw buyer is

Answer 17

A person who accepts a fee for the use of his/her Social Security Number and other personal information on a mortgage application. Straw buyers are often unaware that they are liable for fraud and for making false statements to the government.

Question 18

The Gramm-Leach-Bliley Act requires

Answer 18

Financial institutions to provide customers with a privacy notice as well as an opt-out notice. This is aimed at protecting their nonpublic personal information.

Question 19

Adverse action occurs when

Answer 19

A creditor makes an unfavorable decision. An example would be a lender rejecting a loan application. ECOA requires notice of adverse action within 30 days of application

Question 20

Legal and ethical ways of providing disclosures include…

Answer 20

In person, via U.S. mail, or via facsimile. Email and secure document handling are also becoming acceptable means. Providing the information verbally or via a public posting are not acceptable methods for most disclosures.

Question 21

Legal and ethical ways of providing disclosures include

Answer 21

In person, via U.S. mail, or via facsimile. Email and secure document handling are also becoming acceptable means. Providing the information verbally or via a public posting are not acceptable methods for most disclosures.

Question 22

With regard to fraud, loan originators are required to

Answer 22

Be on the lookout for and report anything that could indicate fraudulent behavior.

Question 23

A straw seller is

Answer 23

An individual who accepts a fee to falsely claim ownership to a property. Straw sellers are sometimes used in conjunction with straw buyers in elaborate mortgage fraud schemes.

Did you get it right?No Kinda Yes

Question 24

An advertisement saying “Refinance today and wipe debt clean!”…

Answer 24

Violates the Federal Reserve’s Staff Commentary on Regulation Z revisions. This example is considered a misleading claim of debt elimination.

Question 25

Goals of the Fair Housing Act include

Answer 25

Providing fair housing throughout the United States

Prohibiting discrimination in the sale and renting of housing

Prohibiting discrimination in mortgage lending transactions

Question 26

Goals of the Fair Housing Act include…

Answer 26

Providing fair housing throughout the United States

Prohibiting discrimination in the sale and renting of housing

Prohibiting discrimination in mortgage lending transactions

Question 27

The most common type of fraud involving borrowers is

Answer 27

Falsified applications. Generally, they are trying to obtain a loan they do not qualify for, but for the most part do intend to repay the loan.

Question 28

The LO Compensation Rule prohibits

Answer 28

Compensation based on transaction terms

Dual compensation

Steering

Question 29

The MAP Rule prohibits…

Answer 29

Any material misrepresentation, express or implied, in any commercial communication regarding any term of a mortgage credit product.

Question 30

HOEPA prepayment penalty threshold

Answer 30

If a loan features a prepayment penalty in force for more than 36 months or exceeding 2% of the amount prepaid, the loan is subject to HOEPA and the penalty is prohibited.

Question 31

HOEPA applies to

Answer 31

Closed-end loans, open-end loans, and purchase money mortgages secured by the borrower’s principal dwelling.

Question 32

Reverse redlining is

Answer 32

The practice of targeting neighborhoods that are primarily occupied by members of vulnerable and/or protected classes and offering expensive, risky loan products.

Question 33

Ginnie Mae is

Answer 33

Government-owned, not stockholder-owned

Primarily intended to guarantee securities backed by FHA, VA, RHS loans (does not buy loans)

Not involved in guaranteeing or dealing with conventional mortgages

Question 34

A mortgage broker serves as the…

Answer 34

Back of Flashcard

36 of 36

Agent for the borrower and owes them fiduciary duties, including loyalty, good faith, and an obligation to put the borrower’s interests ahead of the broker’s.

Question 37

Transactions reported under HMDA…

Answer 37

Purchases

Refinances

Home improvement loans

Pre-qualifications must also be reported, along with their disposition

Question 38

Acts of mortgage fraud can result in a _________ fine and ____ years in prison?

Answer 38

$1,000,000 fine and 30 years in prison

Question 39

Notice of Right to Receive an Appraisal Report due within ___ business days of loan application…

Answer 39

3

Question 40

Section 8 of RESPA prohibits _______________. .

Answer 40

prohibits referral fees and other forms of kickbacks/fee splitting

Question 41

Section 8 of RESPA Penalties include fines of up to ______________ and up to ___ year in prison.

Answer 41

Section 8 of RESPA prohibits referral fees and other forms of kickbacks/fee splitting. Penalties include fines of up to $10,000 and up to one year in prison.

Question 42

When can a borrower request cancellation of PMI..

Answer 42

When a borrower’s LTV reaches 80%

Question 43

The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an

Answer 43

initial privacy notice “…not later than when you establish a customer relationship…” The initial privacy notice should also be accompanied by the opt-out notice.

Question 44

An initial privacy notice is due…

Answer 44

At the time that a customer relationship is established.

Question 45

Home Mortgage Disclosure Act

Answer 45

A law requiring all institutional mortgage lenders with assets of more than $10 million to make annual reports of all mortgage loans made in a given geographic area where they have at least one office. This law is designed to help the government detect patterns of redlining.

Question 46

Equal Credit Opportunity Act

Answer 46

Federal law that prohibits discrimination in granting credit to people based on sex, age, marital status, race, color, religion, national origin, or receipt of public assistance.

Question 47

Fair and Accurate Credit Transaction Act

Answer 47

Amendment to the federal Fair Credit Reporting Act intended primarily to help consumers fight the growing crime of identity theft; includes provisions for fraud alerts and credit freezes.

Question 48

Federal Housing Administration

Answer 48

Government agency that insures mortgage loans.

Question 49

Government-owned corporation that guarantees payment of principal and interest to investors who buy its mortgage backed securities on the secondary market.

Answer 49

Ginnie Mae

Question 50

Housing and Economic Recovery Act of 2008

Answer 50

Revitalization of the U.S. housing market; includes provisions related to foreclosure prevention and consumer protections, as well as establishing minimum standards for licensing and registration of mortgage loan originators. See the Secure and Fair Enforcement for Mortgage Licensing Act.

Question 51

Home Ownership Equity Protection Act is part of which regulation

Answer 51

Regulation Z Truth in Lending Act

Question 52

Home Ownership Equity Protection Act

Answer 52

Establishing disclosure requirements and prohibiting equity stripping and other abusive practices associat

Question 53

LIBOR

Answer 53

An index used by lenders when making ARM loans; the rate (in Euros) that international banks charge each other for loans.

Question 54

Homeowners Protection Act

Answer 54

Federal law that requires lenders or servicers to provide certain disclosures and notifications concerning private mortgage insurance on residential loan transactions.

Question 55

Real Estate Settlement Procedures Act

Answer 55

Federal law dealing with real estate closings that provides specific procedures and guidelines for the disclosure of settlement costs.

Question 56

Secure and Fair Enforcement for Mortgage Licensing Act

Answer 56

A key element of the Housing and Economic Recovery Act of 2008 (HERA) designed to enhance consumer protection and reduce fraud by requiring states to establish minimum standards for the licensing and registration of mortgage loan originators.

Question 57

An instrument that creates a voluntary lien on real property to secure repayment of a debt. The parties to a mortgage are the mortgagor (borrower) and mortgagee (lender).

Answer 57

Mortgage

Question 58

Promissory Note

Answer 58

An instrument that’s evidence of a promise to pay a specific debt; a written, legally binding promise to repay a debt.

Question 59

Assumable

Answer 59

Any loan for which an assumption may be exercised. Assumption is the conveyance of terms and balance of an existing mortgage to another individual, often requiring the at the assuming party is also qualified. All FHA and VA loans are assumable.

Question 60

Nontraditional Mortgage Product

Answer 60

As defined by the SAFE Act, anything other than a 30-year fixed rate, closed-ended, fully-amortizing loan.

Question 61

Federal Reserve Banks

Answer 61

Banks that provide services to financial institutions, which have one main office in each Federal Reserve district. All nationally chartered commercial banks must join the Federal Reserve and buy stock in its district reserve bank.

Question 62

Call Provision

Answer 62

Clause that lets lenders demand full payment of a loan immediately. Also referred to as call a note.

Question 63

Federal Fair Housing Act

Answer 63

Common name for Title VIII of the Civil Rights Act of 1968.

Question 64

Regulation Z

Answer 64

Federal guidelines under the Truth in Lending Act that require full disclosure of all credit terms for consumer loans.

Question 65

Affiliated Business Arrangement

Answer 65

A situation where a person in a position to refer settlement services-or an associate of that person-has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1% in a provider of settlement services and who then refers business to that provider or in some way influences the selection of that provider.

Question 66

Mechanic’s Lien

Answer 66

A specific lien claimed by someone who performed work on the property (construction, repairs, or improvements) and has not been paid. This term is often used in a general sense, referring to materialman’s liens as well as actual mechanics’ liens.

Question 67

Arm’s Length Transaction

Answer 67

A transaction occurring under typical market conditions with each party acting in his or her own best interests.

Question 68

Gramm-Leach-Bliley Act

Answer 68

Also known as the Financial Modernization Act of 1999, includes provisions in Title V to protect and regulate the disclosure of consumers’ personal financial information.

Question 69

Regulation X

Answer 69

Is the regulation that issues the rules for the Real Estate Settlement Procedures Act.

Question 70

Who issues and enforces regulations for TILA

Answer 70

The CFPB

Question 71

The PATRIOT Act requires

Answer 71

Financial institutions to verify the identity of a person applying for a loan, maintain a record of the information used for verification, and determine whether a potential borrower appears on known terrorist lists

Question 72

He/she is permitted to request cancellation of PMI (private mortgage insurance) when

Answer 72

When a borrower reaches a 20% equity position

Or 80% LTV

Question 73

Credit not covered by TILA

Answer 73

• Business or agricultural credit
• Credit in excess of $25,000, unless it is secured by a dwelling/real property
• Public utility credit
• Student loans
• Home fuel budget plan

Question 74

Regulation B

Answer 74

Is the regulation that issues the rules for the Equal Credit Opportunity Act.

Question 75

“Low monthly payments” is an example of…

Answer 75

An advertising trigger term under Regulation Z. TILA/Regulation Z requires additional information to be provided in an advertisement that contains trigger terms.

Question 76

Most commonly, ____ must be provided if the advertisement includes the note rate.

Answer 76

APR

Question 77

The TRID Rule does not apply to

Answer 77

1. HELOCs
2. Reverse mortgages
3. Mortgages secured by a mobile home or dwelling not attached to real property

Question 78

Use of trigger terms in advertisements requires disclosure of:

Answer 78

• Amount and percentage of the down payment
• Terms of repayment, such as inclusion of a balloon payment
• Annual percentage rate

Question 79

Advertising trigger terms for closed-end loans under TILA include

Answer 79

• Amount or percentage of any down payment
• Number of payments or period of repayment
• Amount of any payment
• Amount of any finance charge

Question 80

The purpose of the Homeowners Protection Act is to

Answer 80

acilitate the cancellation of private mortgage insurance (PMI)

Question 81

Borrowers can request cancellation when their loan reaches _____ loan-to-value, but the law requires automatic termination of PMI at ____ LTV

Answer 81

• 80% loan-to-value (20% equity)
• 78% LTV (22% equity)

Question 82

Although ECOA prohibits inquiries about protected personal characteristics, mortgage professionals are permitted to ask about:

1. ____________________
2. ____________________
3. ____________________

Answer 82

• Race
• ethnicity
• Sex

For the purposes of compliance with government monitoring programs

Question 83

Inquiries about protected characteristics may also be used to determine eligibility for special-purpose credit, such as assistance programs through non-profits.

True or False

Answer 83

True

Question 84

The Closing Disclosure must be provided _____ business days prior to consummation

Answer 84

3

Question 85

The Loan Estimate must be provided:

1. No later than ____ business days after receiving a completed application
2. No later than ____business days prior to consummation

Answer 85

1. 3
2. 7

Question 86

The Gramm-Leach-Bliley Act does not protect

Answer 86

Publicly-available information

Question 87

Publicly-available information Includes

Answer 87

This includes information that can be found in government real estate records, information available from the phonebook, and information included on a public, unrestricted website.

Question 88

When is the Mortgage Servicing Disclosure provided withing _______business days following application.

Answer 88

3

Question 89

If the loan application is completed in a face-to-face interview, the disclosure is due __________.

Answer 89

at the time of application.

Question 90

Regulation Z…

Answer 90

Is the regulation that issues the rules for the Truth-in-Lending Act.

Question 91

Borrower identity verification is required under…

Answer 91

USA PATRIOT Act

Question 92

Requires financial institutions to verify the identity of persons involved in financial transactions, as a counter-terrorism measure.

Answer 92

The USA PATRIOT Act.

Question 93

PMI

Answer 93

Private mortgage insurance

Question 94

Private mortgage insurance

Answer 94

Required by conventional lenders when a borrower makes a down payment of less than 20% (or has less than 20% equity).

Question 95

PMI Is governed by

Answer 95

Homeowners Protection Act

Question 96

Prohibitions under ECOA include:

Answer 96

1. Inquiries about protected characteristics
2. Discouraging applicants from applying for a loan
3. Refusing to consider public assistance, alimony/child support, or pension/retirement benefits as income
4. Assumptions, inquiries, or credit decisions based on childbearing or child-rearing plans

Question 97

TILA covers loans when

Answer 97

• The borrower’s dwelling secures the mortgage debt
• The homeowner uses the proceeds of the loan for personal, family, or household purposes

Question 98

Loan Estimate is due Within ____business days of receiving information prompting the change and at least ____business days prior to consummation.

Answer 98

3 and 4

Question 99

Required under Section 6 of RESPA

Answer 99

Servicing Transfer Statement

Question 100

Servicing Transfer Statement

Answer 100

vises a borrower when their loan has been transferred to another servicer

Question 101

If a loan has been transferred to another servicer; the borrower must be provided the information _______

prior to the transfer.

Answer 101

15

Question 102

The new servicer must provide notice to borrower ____ days after the transfer.

Answer 102

15

Question 103

The new servicer may not assess late fees for a period of _____ days following the transfer

Answer 103

60

Question 104

Home Mortgage Disclosure Act

Answer 104

reporting law that helps the federal government identify discriminatory lending practices

Question 105

Protected characteristics under ECOA include

Answer 105

• Race
• Color
• Religion
• National origin
• Sex
• Marital status
• Age
• Receipt of income from a public assistance program

Question 106

Following initial disclosure of APR, when can the transaction proceed to closing?

Answer 106

The transaction can proceed to closing after seven business days have elapsed from issuance of the initial Loan Estimate.

Question 107

Referral fees are considered

Answer 107

A violation of RESPA/Regulation X

Question 108

ECOA’s

Answer 108

To promote the availability of credit to all creditworthy applicants, regardless of their race, color, religion, national origin, sex, marital status, or age. It also prohibits discrimination against credit applicants based on receipt of public assistance or participation in credit counseling programs (exercise of rights under the Consumer Credit Protection Act).

Question 109

Changes in the Closing Disclosure that require a new three-day waiting period include

Answer 109

• A change in the APR
• A change in the loan product
• Addition of a prepayment penalty

Question 110

LE is due _______ days prior to the Closing

Answer 110

7

Question 111

FACTA

Answer 111

The Fair and Accurate Credit Transactions Act (FACTA) was passed as an amendment to the FCRA. It includes provisions to address identity theft, facilitate consumers’ access to the information retained by CRAs, and improve the accuracy of consumer re

Question 112

After loan servicing is transferred the new servicer cannot assess late fees for a period of ___ days.

Answer 112

60

Question 113

Responsibility for delivering the Closing Disclosure belongs to the

Answer 113

Creditor

Question 114

Phone numbers remain on the Do-Not-Call Registry _______

Answer 114

Indefinitely

Question 116

An Opt-Out Notice is due

Answer 116

when a customer relationship is established

Question 117

The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an _______with a method for customers to opt out of the sharing of their personal information.

Answer 117

Opt out

Question 118

The Fair Credit Reporting Act (FCRA) is aimed at ensuring the accuracy, fairness, and privacy of

Answer 118

consumers’ personal information that is assembled and used by consumer reporting agencies.

Question 119

Red Flags Rule

Answer 119

Creditors to create a policy to identify and mitigate the risks of identity theft. The Red Flags Rule was created by the FTC pursuant to FACTA.

Question 120

Affiliated Business Arrangement Disclosure is required by

Answer 120

RESPA

Question 121

What disclosure is due at the time of making a referral

Answer 121

Afiliated Business Arrangement Disclosure

Question 122

Who regulates RESPA

Answer 122

CFPB

Question 123

This Act provides for penalties of up to $______

Answer 123

10,000

Question 124

The Red Flags Rule was created by the _______________. The purpose is to address identity theft by focusing on methods of detecting a security breach

Answer 124

Federal Trade Commission under FACTA.

Question 125

Accepting a referral fee can lead to

Answer 125

Fines of up to $10,000 and one year in prison. Accepting a fee in exchange for a referral is a violation of RESPA/Regulation X.

Question 126

The lender must return any money or property paid by the borrower in connection with the loan within _____ Days of recission. This might include broker fees, application fees, and third-party settlement fees.

Answer 126

20

Question 127

Borrowers who did not receive a notice of the right to rescind or accurate disclosures as required by law have ___ Years to exercise their right.

Answer 127

3

Question 128

Reverse mortgages are only available to borrowers who meet a certain minimum age; generally ___ years of age or older.

Answer 128

62

Question 129

subordinate lien is

Answer 129

Same as:

Second Mortgage

Jr Lien

Question 130

A HECM is

Answer 130

The Home Equity Conversion Mortgage

Question 131

HECM

Answer 131

Reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both.

Question 132

Balloon payment provision

Answer 132

Series of smaller periodic payments with a larger lump sum due at maturity

Question 133

deed

Answer 133

A legal instrument that conveys title to real property.

Question 134

Fannie Mae’s purpose

Answer 134

Provide sources of funds for lenders. This is accomplished in the secondary market through securitization.

Question 135

The Federal Housing Administration

Answer 135

Insures loans. FHA loans are insured by the federal government against borrower default.

Question 136

Option ARMs can result in

Answer 136

Negative amortization. This occurs when the borrower makes payments at an introductory rate which are not sufficient to pay the interest on the loan. The unpaid amount is added to the loan balance resulting in negative amortization.

Question 137

Mortgage-backed securities are products of

Answer 137

he secondary market. Mortgage-backed securities are an investment vehicle used to generate revenue based on an underlying pool of loans. This revenue provides renewable access to funds for lenders.

Question 138

Negative amortization occurs when…

Answer 138

A loan program permits a borrower to pay less than the required amount of interest on the loan. The unpaid interest is added to the loan balance and eventually results in a balance greater than the original loan amount.

Question 139

A funding fee is required on…

Answer 139

VA and USDA loans. The VA and USDA programs require a funding fee for participation in the program. The amount is used to support the guaranty against borrower default.

Question 140

Conventional loans are…

Answer 140

Made by Fannie Mae and Freddie Mac. Unlike FHA or VA loans, they are not insured or guaranteed by a government agency.

Question 141

Qualified mortgages may not have terms exceeding

Answer 141

30 years

Question 143

Seller concessions for conforming loans with an LTV under 90% are Limited to ____

Answer 143

6%

Question 144

“Margin” is defined as

Answer 144

The amount above the index that an interest rate can adjust for an ARM. The margin is set by the lender and is the amount above the index that the interest rate can adjust. Index plus margin is the formula used to determine a new interest rate on an adjustable-rate mortgage.

Question 145

Determine the interest rate change on an ARM.

Answer 145

Index and Margin

Question 146

Index

Answer 146

The index is the basis for future rate changes

Question 147

Margin

Answer 147

The margin is set by the lender and is the amount above the index that the interest rate can adjust at the time of the rate change.

Question 148

___________ are used to adjust the price of a loan.

Answer 148

Discount points

Question 149

One discount point is equal to ____ of the loan amount.

Answer 149

1%

Question 150

The VA loan guaranty is based on a veteran’s

Answer 150

Entitlement. VA guarantees a loan amount four times greater than the eligibility listed on the veteran’s Certificate of Eligibility.

Question 151

USDA loans are made for a term of

Answer 151

term of…

30 years, offered in a fixed rate only. They do not require a down payment, but lenders must use debt ratios to ensure the borrower can repay the loan.

Question 152

Alt-A loans are

Answer 152

Used for consumers who do not represent the credit risk of subprime borrowers but who do not meet the underwriting requirements for conforming prime rate loans.

Question 153

Subprime loans are

Answer 153

Loans with higher interest rates made to borrowers with blemished credit or other qualification issues. The loans do not conform with Fannie Mae and Freddie Mac underwriting requirements.

Question 154

Nontraditional mortgage products are defined as…

Answer 154

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

Question 155

An initial rate cap is…

Answer 155

A limit on the amount that the interest rate can increase during the first adjustment period for an ARM.

Question 156

A periodic rate cap is…

Answer 156

A limit on the amount that an interest rate can change during any adjustment period for an ARM, with exception of the initial adjustment, assuming an initial cap is in place on that particular product.

Question 157

A lifetime rate cap is…

Answer 157

The limit on the amount by which an interest rate can change over the life of an ARM. It is also known as a rate ceiling.

Question 158

Discount points are paid to

Answer 158

To the lender at closing to reduce the note rate of the loan.

Question 159

Securitization

Answer 159

Pool similar types of loans to create mortgage-backed securities for sale on the secondary mortgage market. These securities are used to create a renewable source of funds for lenders.

Question 160

A home equity loan is an example of…

Answer 160

Closed-end credit. A cash-out refinance is an example of a home equity loan.

Question 161

Borrowers owning more than 25% of a business must…

Answer 161

Provide up to two years of tax returns for income qualification.

Question 162

A HELOC is an example of…

Answer 162

Open-end credit. In a HELOC, a borrower pays off the principal and can then continue to make withdrawals. This is similar to a credit card.

Question 163

An 80-10-10 loan is an example of…

Answer 163

A piggyback loan. In a piggyback loan scenario, a borrower takes a simultaneous second mortgage. In an 80-10-10 loan, the first lien is 80% LTV, the second is 10% LTV and the borrower makes a 10% down payment.

Question 164

Borrowers who obtain interest-only loans…

Answer 164

Pay only the monthly interest due on the loan, which keeps monthly payments low. However, at the end of the term, the borrower still owes the principal amount of the loan.

Question 165

Conforming loans meet…

Answer 165

Loan limits and underwriting standards established by Fannie Mae and Freddie Mac.

Question 166

A promissory note includes…

Answer 166

• Identification of the borrower and the lender
• The borrower’s promise to repay the loan
• Amount of the loan
• Interest rate charged on the unpaid principal
• Period of the term for repayment of the loan
• Reference to the real estate used to secure the loan
• Provisions for the imposition of late charges for overdue payments
• Signature(s) of borrower(s)

Question 167

Social Security income can be…

Answer 167

Grossed up by as much as 25% for income qualification purposes. Other non-taxed income, such as disability and public assistance, may be grossed up as well.

Question 168

Closing costs include…

Answer 168

• Origination fees
• Property taxes
• Title insurance
• Escrow costs
• Appraisal fees
• Taxes
• Fees owed to state and local government

Question 169

Borrowers cannot secure an FHA loan without paying

Answer 169

UFMIP (upfront mortgage insurance premiums) and annual MIPs (annual mortgage insurance premiums)

Question 170

Ability to Repay Rule requires ARM qualification based on…

Answer 170

The fully-indexed rate. This requirement applies to all ARM transactions except for open-end home equity loans.

Question 171

Balloon payments are prohibited fo

Answer 171

Qualified mortgages, unless the loan is a balloon payment qualified mortgage from a small creditor. Balloon payments are also generally prohibited for loans covered by HOEPA.

Question 172

Qualified Mortgage Rule creates…

Answer 172

Presumption of compliance with ability-to-repay standards and a safe harbor from liability for loan originators making qualified mortgages.

Question 173

QM Rule creates a conclusive presumption of compliance for…

Answer 173

Prime mortgages, not subprime or higher-priced mortgage loans.

Question 174

QM Rule creates a rebuttable presumption of compliance for…

Answer 174

Higher-priced mortgage loans.

Question 175

Qualified mortgage prerequisites…

Answer 175

• No negative amortization
• No deferment of principal (e.g., no interest-only payments)
• No balloon payment feature (unless a small creditor balloon payment QM)
• Term does not exceed 30 years
• Points and fees do not exceed 3% total loan amount
• DTI does not exceed 43%

Question 176

Balloon payment qualified mortgage requirements…

Answer 176

• No negative amortization
• Term of at least five years; does not exceed 30 years
• Compliance with 3% points and fees cap
• Verification of consumer’s income and assets
• Determination of consumer’s DTI (43% limit does not apply)
• Loan has a fixed rate
• Loan will be held by the creditor for at least three years
• Creditor is a small creditor in a rural/underserved area

Question 177

A non-qualified mortgage may include…

Answer 177

• Interest-only payments
• Negative amortization
• A payment-option feature
• Balloon payments

Question 178

FHA loans use a back-end ratio of…

Answer 178

43%. The back-end ratio (or total debt ratio) is a comparison of all monthly debts (including housing) to the applicant’s monthly income.

Question 179

Conventional/conforming loans generally use a back-end ratio of…

Answer 179

36%. The back-end ratio (or total debt ratio) is a comparison of all monthly debts (including housing) to the applicant’s monthly income. While 36% is generally the standard used, GSE guidelines allow flexibility up to 45%.

Question 180

Credit report red flags may include…

Answer 180

• Recently opened accounts
• Misspellings and errors
• Uncharacteristic use or sudden increase in use of credit
• Large number of recent inquiries
• Credit history that does not match what the originator knows about the applicant

Question 181

The sales comparison approach is…

Answer 181

An appraisal method which compares the subject property to recently-sold comparable properties in close proximity. It is also called the “market approach.”

Question 182

How is annual MIP determined?

Answer 182

Based on loan amount, loan term, and loan-to-value. The mortgage insurance premium required on all FHA loans is collected as an upfront premium (UFMIP) and on a monthly basis (annual MIP, divided into 12 equal parts).

Question 183

Credit scoring was designed by…

Answer 183

The Fair Isaac Company. Credit scores are often known as FICO scores.

Question 184

VA maximum guaranty amount…

Answer 184

Dollar amount equal to 25% of Freddie Mac conforming loan limit

Question 185

FHA seller concessions is limited to

Answer 185

Limited to 6% of sales price

Question 186

Uniform Residential Appraisal Report (URAR) is also known as

Answer 186

1004

Question 187

Section I of the 1003 is called

Answer 187

“Type of Mortgage and Terms of Loan.” It is used to select the type of loan for which the applicant is applying.

Question 188

The cost approach to appraisal…

Answer 188

Considers the replacement value of the property. It is often used for new properties and analyzes what it would cost to build a substitute residence, plus the value of the land.

Question 189

Refinance transactions must have a…

Answer 189

Tangible net benefit.

Question 190

Net adjustments to comparables ay be made up to ____

Answer 190

15%

Question 191

Fannie Mae and Freddie Mac permit net adjustments of ___% and gross adjustments of ___% to comparables in the sales comparison approach to appraisal.

Answer 191

15% and 25%

Question 192

Paystubs for the last ____ day period and W-2s for the last ___-year period.

Answer 192

30 days

2 years

Question 193

An example of a voluntary lien is

Answer 193

A mortgage. A homeowner voluntarily allows the lien to be placed on the property in order to secure a loan from the lender.

Question 194

Non-taxable income may be grossed up by as much as

Answer 194

25%. This type of income typically includes Social Security, public assistance, and disability. Loan applicants must still provide comprehensive documentation for these types of income.

Question 195

FHA loans require a minimum borrower investment of ____

Answer 195

3.5%.

Question 196

What percentage of rental income may be used for qualification?

Answer 196

75%. Investment properties generating rental income are just one type of special income that cannot be used at 100% for qualification purposes.

Question 197

Income calculation for hourly pay…

Answer 197

• {base rate} x {hours} = {weekly income}
• {weekly income} × {weeks worked} = {annual income}
• {annual income} ÷ 12 = {monthly income}

Question 198

Section II of the 1003 is called _____________

It is used to designate information concerning the property address and how the loan proceeds will be used.

Answer 198

Property Information and Purpose of Loan.”

Question 199

Income calculation for bi-weekly pay…

Answer 199

• {bi-weekly salary} × 26 = {annual income}
• {annual income} ÷ 12 = {monthly income}

Question 200

Self-employed and commissioned income is usually averaged over a ___-year period.

Answer 200

2 years

Self-employed income would come from the tax return; commissioned income may be taken from W-2s or tax returns.

Question 201

Bankruptcies stay on a credit report for up to

Answer 201

Ten years

Question 202

Standard credit account information stays on a credit report for ______ years

Answer 202

7

Question 203

The “Big Three” CRAs are

Answer 203

1. Equifax
2. Experian
3. TransUnion

Question 204

Nontraditional credit includes…

Answer 204

Payments for items such as rent and utilities. First-time homebuyers or consumers with little credit history may sometimes use nontraditional credit to establish creditworthiness.

Question 205

Real property is defined as…

Answer 205

Land and anything that is permanently affixed to it. Personal property includes items that can be moved.

Question 206

Liens

Answer 206

Monetary claims that provide a creditor with the right to foreclose. A mortgage is an example of a lien.

Question 207

Involuntary liens may include…

Answer 207

• Tax liens
• Mechanic’s liens
• Judgments
• Attachments

Question 208

Private mortgage insurance is used to…

Answer 208

Provide security to the lender in the event of default. PMI also allows the borrower to make a smaller down payment.

Question 209

Upfront MIP is collected on…

Answer 209

All FHA loans.

Question 210

Fee simple is…

Answer 210

The desired form of holding ownership to property because it has the fewest restrictions. Almost all residential mortgage loan transactions involve an estate held in fee simple.

Question 211

An estate held in fee simple means that…

Answer 211

The owner is entitled to the entire property and has “unconditional power of disposition” during his/her lifetime, and the property will descend to his/her heirs upon death.

Question 212

Counseling is required for…

Answer 212

• Any borrower accepting a high-cost home loan
• First-time borrowers accepting a negative amortization loan
• Any borrower seeking a reverse mortgage loan from the FHA
• Counseling is encouraged for any borrowers choosing an ARM instead of a fixed-rate loan

Question 213

The ATR Rule and QM Rule became effective…

Answer 213

In January 2014

Question 214

The ATR Rule requires verification of income using…

Answer 214

Reasonably-reliable third-party documents, such as tax returns, W-2 forms, payroll statements, bank statements, etc.

Question 215

Loans excluded from the ATR Rule…

Answer 215

• Open-end credit plans
• Timeshare plans
• Reverse mortgage loans
• Temporary/bridge loans with terms of 12 months or less
• Construction phase of 12 months or less in a construction-to-permanent loan
• Designated extensions of credit from certain entities/agencies

Question 216

In title theory states…

Answer 216

The borrower gives legal title to the lender, but retains equitable title. The lender “owns” the property via a deed of trust. The lender has a right to possession of the property in the event of default. Legal title is returned to the borrower upon repayment and satisfaction of the debt.

Question 217

In lien theory states…

Answer 217

The borrower retains legal and equitable title to the property. The mortgage is a lien against the property. In the event of default, the lender must institute a foreclosure proceeding to obtain legal title.

Question 218

“Table funding” is…

Answer 218

A process in which a broker originates and closes a loan in his/her own name, then transfers the loan to a lender at closing. The lender provides funds for disbursement.

Question 219

Dry settlement occurs when…

Answer 219

Parties meet to execute documents, but funds are not disbursed and property is not conveyed until certain specified conditions are met.

Question 220

Wet settlement occurs when…

Answer 220

Parties meet to execute documents and funds are subsequently disbursed. Lenders involved in purchase transactions are required to ensure that the closing agent has adequate funds to close.

Question 221

Loan applicants that make a false statement on the 1003 may face a ____-year jail term

Answer 221

Five year

Question 222

Non-liquid assets include…

Answer 222

• Real estate
• Retirement accounts
• Net worth of businesses
• Automobiles

Question 223

Liquid assets include…

Answer 223

• Deposit or “earnest money” held in escrow
• Cash
• Checking/savings accounts, with account numbers
• Stocks and bonds
• Cash value and face amount of life insurance policies

Question 224

The LO Compensation Rule prohibits…

Answer 224

• Compensation based on transaction terms
• Dual compensation
• Steering

Answer 225

Any material misrepresentation, express or implied, in any commercial communication regarding any term of a mortgage credit product.

Question 226

Identity theft is the practice of…

Answer 226

Using another person’s name, Social Security Number, and other personal information to secure credit or make purchases. It often figures into elaborate mortgage fraud schemes.

Question 227

A sign of fraud on a sales contract is…

Answer 227

The purchase price being higher than the list price. This could be a sign that a legitimate buyer is not involved in the transaction.

Question 228

The most common type of fraud involving borrowers is…

Answer 228

Falsified applications. Generally, they are trying to obtain a loan they do not qualify for, but for the most part do intend to repay the loan.

Question 229

Goals of the Fair Housing Act include…

Answer 229

• Providing fair housing throughout the United States
• Prohibiting discrimination in the sale and renting of housing
• Prohibiting discrimination in mortgage lending transactions

Question 230

An advertisement saying “Refinance today and wipe debt clean! violates the Federal Reserve’s Staff Commentary on _____________revisions. This example is considered a misleading claim of debt elimination.

Answer 230

Regulation Z

Question 231

A straw seller is…

Answer 231

An individual who accepts a fee to falsely claim ownership to a property. Straw sellers are sometimes used in conjunction with straw buyers in elaborate mortgage fraud schemes.

Question 232

The Gramm-Leach-Bliley Act requires…

Answer 232

Financial institutions to provide customers with a privacy notice as well as an opt-out notice. This is aimed at protecting their nonpublic personal information.

Question 233

A straw buyer is…

Answer 233

A person who accepts a fee for the use of his/her Social Security Number and other personal information on a mortgage application. Straw buyers are often unaware that they are liable for fraud and for making false statements to the government.

Question 234

Mark-ups are the practice of…

Answer 234

Unilaterally increasing the charges of another settlement service provider and retaining the difference. HUD considers mark-ups a form of illegal fee-splitting and a violation of RESPA.

Question 235

Service release premiums are…

Answer 235

Fees lenders can earn when selling loans in the secondary market. They are often cited in the controversy over yield spread premiums earned by mortgage loan originators before the establishment of borrower credit requirements.

Question 236

Notice of Right to Receive Appraisal Report is due no later than ___business days after receiving an application for credit secured by a first lien on a dwelling.

Answer 236

3 Days

Question 237

Re-disclosure of APR is required at least ____ business days before closing,

Answer 237

3

Question 238

Any time the APR varies by more than one eighth of ______ it must be redisclosed.

Answer 238

Any time the APR varies by more than one eighth of 1% (0.125%).

Question 239

HOEPA prepayment penalty threshold if loan features a prepayment penalty in force for more than ___ months or exceeding ___%of the amount prepaid, the loan is subject to HOEPA and the penalty is prohibited.

Answer 239

36 months and 2%

Question 240

HOEPA applies to…

Answer 240

Closed-end loans, open-end loans, and purchase money mortgages secured by the borrower’s principal dwelling.

Question 241

Reverse redlining is…

Answer 241

The practice of targeting neighborhoods that are primarily occupied by members of vulnerable and/or protected classes and offering expensive, risky loan products.

Question 242

Ginnie Mae is…

Answer 242

• Government-owned, not stockholder-owned
• Primarily intended to guarantee securities backed by FHA, VA, RHS loans (does not buy loans)
• Not involved in guaranteeing or dealing with conventional mortgages

Question 243

Implementing regulations for the S.A.F.E. Act…

Answer 243

Regulations G and H

Question 244

Purposes of the S.A.F.E. Act include…

Answer 244

• Increase uniformity
• Reduce regulatory burden
• Enhance consumer protection
• Reduce fraud

Question 245

Effective supervision by a state regulator includes…

Answer 245

• Participating in the NMLS
• Writing rules and regulations or adopting procedures
• Conducting background checks
• Setting and accepting licensing fees
• Setting or resetting renewal or reporting dates
• Approving or denying loan originator applications and renewals
• Implementing laws for amending or surrendering licenses
• Bringing enforcement actions

Question 246

Regulatory agencies have authority to examine…

Answer 246

• Any licensed loan originator
• Any individual required to have a loan originator license

Question 247

Regulatory agencies may conduct examinations for…

Answer 247

• Initial licensing or license renewal
• License suspension, conditioning, revocation, or termination
• Determining compliance with the law

Question 248

During period of control of records, no person may..

Answer 248

Remove the records without a court order or the regulatory agency’s consent

Question 249

During period of control of records, owner of records may…

Answer 249

Access them in order to conduct regular business affairs

Question 250

Regarding examinations, regulatory agencies may also…

Answer 250

• Retain attorneys, accountants, or other professionals to assist with examination
• Enter into agreements with other government officials to reduce regulatory burden
• Use, hire, contract, or employ analytical systems, methods, or software
• Accept or rely on reports from other government officials or audit reports by independent CPA

Answer 251

Shared with other state and federal officials involved with mortgage industry oversight without the loss of privilege and confidentiality protections provided by law

Question 252

A “dwelling” is a residential structure that…

Answer 252

Contains one to four units, whether or not the structure is attached to real property

Question 253

Definition of “residential mortgage loan” …

Answer 253

Any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling

Question 254

NMLS stands for…

Answer 254

Nationwide Multistate Licensing System

Question 255

Information not protected by confidentiality…

Answer 255

• Employment history
• Disciplinary and enforcement actions

Question 256

Information provided to NMLS is not subject to…

Answer 256

• Disclosure under federal or state law allowing for disclosure to the public of information held by a government officer or agency
• Subpoena, discovery, or admission into evidence in civil action or administrative process

Question 257

A “state-licensed loan originator” is any individual who is…

Answer 257

• A loan originator
• Not an employee of a depository institution, a subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration
• Licensed by a state or by the CFPB and maintains a unique identifier

Question 258

A “unique identifier” is a number that…

Answer 258

• Permanently identifies a loan originator
• Is assigned by the NMLS to track and identify loan originators

Question 259

Immediate family member” includes…

Answer 259

• Spouse
• Child
• Sibling
• Parent
• Grandparent and grandchild
• Stepparent, stepchild, and stepsibling
• Adoptive relationship

Question 260

Minimum pre-licensing education requirement…

Answer 260

20 hours

Question 261

20 hours of pre-licensing education must include…

Answer 261

• Three hours of federal law and regulation
• Three hours of ethics
• Two hours of nontraditional mortgage products

Question 262

Written test measures knowledge of…

Answer 262

• Ethics
• Federal and state law and regulation relating to mortgage origination
• Fraud, consumer protection, nontraditional mortgages, and fair lending

Question 263

If an applicant fails initial test attempt…

Answer 263

He/she may retake twice with at least 30 days between each attempt

Question 264

After failing an exam three times, an individual must.

Answer 264

Wait at least six months before re-testing

Question 265

Each loan originator must be covered by…

Answer 265

A surety bond

Question 266

0

Regulation H establishes a procedure for…

Answer 266

The CFPB to follow if it determines that a state has not adopted laws satisfying the S.A.F.E. Act’s licensing requirements

Question 267

Maximum civil penalty for each violation…

Answer 267

$25,000

Question 268

To enforce the S.A.F.E. Act, regulatory agency may.

Answer 268

• Deny, suspend, revoke, condition, or decline to renew a license
• Order a restitution
• Impose fines
• Issue orders or directives

Question 269

The S.A.F.E. Act addresses compliance by establishing…

Answer 269

• Requirements for individuals to obtain a license before engaging in loan origination activities
• Authority for the CFPB to determine whether a state licensing program for loan originators meets the standards established in the S.A.F.E. Act

Question 270

Failure to satisfy renewal requirements will result in..

Answer 270

An expired license

Question 271

License renewal requirements…

Answer 271

• Continue to meet minimum standards for initial licensure
• Satisfy annual continuing education requirement
• Pay required fees

Question 272

Instructor may receive CE credit at the rate of…

Answer 272

Two hours for every one hour taught

Question 273

Regarding continuing education, loan originator may…

Answer 273

• Only receive credit for a course in the year which the course was taken
• Not take the same approved course in the same or successive years

Question 274

Eight hours of continuing education must include…

Answer 274

• Three hours of federal law and regulation
• Two hours of ethics
• Two hours of nontraditional mortgage products

Question 275

Minimum continuing education requirement…

Answer 275

Eight hours

Question 276

Minimum licensing requirements…

Answer 276

• No prior license revocation
• No felony conviction or guilty/nolo contendere plea during the seven-year period preceding application date, or at any time if the felony involved fraud, dishonesty, a breach of trust, or money laundering
• Completion of pre-licensing education
• Passage of the written test
• Satisfaction of the surety bond/net worth/state fund requirements
• Demonstration of financial responsibility, character, and general fitness

Question 277

A state fund makes funds available for…

Answer 277

Claims resulting from violations of state or federal laws and regulations

Question 278

Surety bond amount must reflect…

Answer 278

The dollar amount of loans originated

Question 279

Finance charges do not include…

Answer 279

• Points paid by the seller
• Security interest charges, if itemized and disclosed
• Bona fide and reasonable fees

Question 280

A prepaid finance charge is…

Answer 280

Any finance charge paid separately before or at consummation, or withheld from the proceeds of the loan at any time

Question 281

Finance charges do not include…

Answer 281

• Points paid by the seller
• Security interest charges, if itemized and disclosed
• Bona fide and reasonable fees

Question 282

The finance charge is the total of…

Answer 282

• Prepaid finances charges
• Charges paid over the term of the loan

Question 283

Disclosed APR may not vary by more than…

Answer 283

One eighth of 1% in a regular transaction

One quarter of 1% in an irregular transaction

Question 284

The APR represents the relationship of…

Answer 284

The total finance charge to the total amount financed, as a yearly rate

Question 285

The Closing Disclosure must be provided…

Answer 285

No later than three business days prior to consummation

Question 286

The Loan Estimate must be provided…

Answer 286

• No later than three business days after receiving a completed application
• No later than seven business days prior to consummation

Question 287

Ad cannot use the word “fixed” to refer to…

Answer 287

• A variable-rate transaction
• A transaction in which the payment will increase
• A transaction including both a variable rate and a non-variable rate

Question 288

Ad that states a payment amount must include…

Answer 288

• The amount of each applicable payment over the term of the loan
• The period of time during which each payment will apply
• The fact that the payments don’t include amounts for taxes and insurance premiums and that the actual payment will be greater (for credit secured by a first lien on a dwelling)

Question 289

Trigger terms include…

Answer 289

• The amount or percentage of a down payment
• The number of payments or period of repayment
• The amount of any payment
• The amount of any finance charge

Question 290

Advertisements must be in compliance with…

Answer 290

The Truth-in-Lending Act - Regulation Z

Question 291

If requested by the CFPB, a state must submit…

Answer 291

• Evidence of compliance with the S.A.F.E. Act
• Citations to relevant state laws and regulations
• Information on the regulator’s supervisory processes
• Data on the regulator’s investigations and enforcement actions

Question 292

Any time a state enacts legislation, it must…

Answer 292

Notify the CFPB

Question 293

The amount financed is…

Answer 293

The actual amount of credit the borrower will receive from the creditor

Question 294

For an ARM, the interest rate will change based on…

Answer 294

An index to which the rate is tied and the margin added to cover the creditor’s expenses and profit

Question 295

Disclosures required for an ARM…

Answer 295

CHARM booklet

Question 296

BSA

Answer 296

Bank Secrecy Act

Question 297

CFR

Answer 297

Code of Federal Regulations

Question 298

CHARM

Answer 298

Consumer Handbook on Adjustable Rate Mortgages

Question 299

COFI

Answer 299

Cost of Funds Index

Question 300

COSI

Answer 300

Cost of Savings Index

Question 301

CRV

Answer 301

Certificates of Reasonable Value

Question 302

CSBS

Answer 302

Conference of State Bank Supervisors

Question 303

GSE

Answer 303

Government-Sponsored Enterprise

Question 304

GNMA

Answer 304

Government National Mortgage Association

Question 305

GPM

Answer 305

Graduated Payment Mortgage

Question 306

FInCEN

Answer 306

Financial Crimes Enforcement Network

Question 307

FACTA

Answer 307

Fair and Accurate Credit Transaction Act of 2003

Question 308

QRM

Answer 308

Qualified Residential Mortgage

Question 309

QM

Answer 309

Qualified Mortgage

Question 310

NMLS

Answer 310

Nationwide Multistate Licensing System

Question 311

MTA

Answer 311

Monthly Treasury Average

Question 312

Balloon Payment

Answer 312

The final lump sum payment due at the end of a balloon mortgage.

Question 313

Balloon Mortgage

Answer 313

A mortgage that provides for partial amortization over its term, resulting in a balance remaining due at maturity; at maturity, property may be sold or balance due refinanced.

Question 314

Bridge Loan

Question 315

Broker

Answer 315

A licensed individual or firm that charges a fee to serve as a “middle man” between two or more parties. A mortgage broker is an individual or person in the business of negotiating and arranging mortgage loans; a real estate broker assists a buyer or seller in the sale or purchase of a home.

Question 316

Assumable Mortgage

Answer 316

A mortgage that may be transferred from the mortgagor to the new buyer. A credit check of the new borrower and assumption fee is generally required; may help to attract buyers.

Answer 317

A provision in the terms of a loan that allows a buyer to assume the seller’s mortgage.

Question 318

Assessment

Answer 318

The method of placing value on an asset for taxation purposes.

Question 319

Convertible ARM

Answer 319

An ARM that provides the borrower the ability to convert to a fixed-rate loan within a specified time.

Question 320

Conversion Clause

Question 321

Conventional Loan

Answer 321

A private sector loan not guaranteed or insured by the U.S. government.

Question 322

Conforming loan

Answer 322

A loan that does not exceed Fannie Mae’s and Freddie Mac’s loan limits.

Question 323

Comparative Market Analysis

Answer 323

An estimate of property value, usually performed by real estate licensees, based on a comparison of similar properties sold within the last year.

Question 324

Eminent Domain

Answer 324

A process under which the government may take possession and ownership of private property for public use; owner receives payment for property’s fair market value.

Question 325

Due-on-Sale Clause

Answer 325

A loan provision allowing the lender to demand full repayment of the loan if the property is sold.

Question 326

Escape Clause

Answer 326

A provision in a purchase contract that allows either party to cancel some or all of the contract if the other does not respond to changes to the sale within a set period; most common use is when purchase offer is made contingent on the sale of another property.

Question 327

Equal Credit Opportunity Act

Answer 327

A federal law prohibiting discrimination in lending based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Question 328

Forbearance

Answer 328

The act of refraining from enforcing a debt or obligation if borrower is delinquent; may occur in connection with a mutual plan to bring overdue mortgage payments up to date.

Question 329

Fannie Mae

Answer 329

Federal National Mortgage Association; federally-chartered enterprise owned by private stockholders. Purchases residential mortgages and converts them into securities for sale to investors; supplies funds that lenders may loan to potential homebuyers; also known as a government-sponsored enterprise (GSE).

Question 330

Fair Housing Act

Answer 330

A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Question 331

Fair Credit Reporting Act

Answer 331

Federal act regulating consumer reporting agencies (i.e., credit bureaus) and to ensure fair and accurate content in individual’s reports; amended in 2003 by the Fair and Accurate Credit Transactions Act.

Question 332

Home Equity Loan

Answer 332

A loan backed by the borrower’s equity in his or her home.

Question 333

Home Equity Line of Credit

Answer 333

Mortgage loan allowing a borrower to obtain cash against the equity of his or her home, up to a predetermined amount; usually a second mortgage; also known as a HELOC.

Question 334

HELP

Answer 334

Homebuyer Education Learning Program; FHA educational program that provides homeownership counseling; covers topics like budgeting, finding a home, getting a loan, and home maintenance; completion may entitle the homebuyer to reduced FHA mortgage insurance premium (reduction from 2.25% to 1.75% of the home purchase price).

Question 335

Guaranty Fee

Answer 335

Payment to Fannie Mae from a lender for providing guarantee of the payment of principal and interest on MBSs.

Question 336

HECM

Answer 336

An FHA reverse mortgage in which a senior homeowner, age 62 and older, can convert the equity in his or her home into a monthly stream of income and/or a line of credit to be repaid when certain conditions occur.

Question 337

Grantor

Answer 337

The person conveying an interest in real property.

Question 338

Grantee

Answer 338

The person to whom an interest in real property is conveyed.

Question 339

Graduated Payment Mortgage

Answer 339

A mortgage under which the monthly payments start low and slowly get larger over a period of years before finally reaching a fixed level for the remaining term of the loan.

Question 340

Ginnie Mae

Answer 340

Government National Mortgage Association; a government-owned corporation overseen by the U.S. Department of Housing and Urban Development; pools FHA-insured and VA-guaranteed loans to back securities for private investment; provides funding for lenders to make loans to eligible borrowers.

Question 341

Jumbo Loan

Answer 341

A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits; also known as a nonconforming loan.

Question 342

Intermediate-Term Mortgage

Answer 342

A mortgage loan with a term of 20 years or less.

Question 343

Index Rate

Answer 343

A measure of interest rates based on an index, which is a published rate or yield; rate on an ARM based on the index rate plus the margin.

Question 344

Indemnification

Answer 344

The provision in an agreement requiring a party to the agreement to bear the monetary cost of any loss caused to the other party; the promise of one party to cover the loss to another, incurred as a result of the act(s) of the indemnifier.

Question 345

Housing Counseling Agency

Answer 345

Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

Question 346

Margin

Answer 346

The number of percentage points the lender adds to the index rate to calculate the ARM interest rate; sometimes call the spread; the margin does not change during the term of the loan.

Question 347

Loan Acceleration

Answer 347

A clause in a mortgage loan that gives the lender the right to demand payment of the entire outstanding balance if the borrower defaults.

Question 348

Lifetime Rate Cap

Answer 348

A limit on the total amount by which the interest rate can increase or decrease over the life of an ARM.

Question 349

Mortgage Qualifying Ratio

Answer 349

Used to calculate the maximum amount of a loan an individual may be granted; typical mortgage qualifying ratio is 28: 36.

Question 350

Mortgage Modification

Answer 350

Loss mitigation option that allows a borrower to modify and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Question 351

Mortgage Insurance

Answer 351

A policy that protects lenders against loss when a borrower defaults on a mortgage loan; required primarily for borrowers with a down payment of less than 20% of the home’s purchase price; cost usually added to the monthly payment; under Homeowners Protection Act, insurance maintained until the outstanding loan balance is less than 80% of the value of the house at time of purchase, mortgage paid down to 78% of original amount or at midpoint of loan term.

Question 352

Mortgage Broker

Answer 352

A firm or individual that originates and processes loans for a number of lenders.

Question 353

Mortgage Banker

Answer 353

A company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac; may also be known as a mortgage lender.

Question 354

Mortgage-Backed Security

Answer 354

A security that represents an undivided interest in a group of mortgages; principal and interest payments from the individual mortgage loans are grouped and paid out to MBS holders.

Question 355

Mortgage Acceleration Clause

Answer 355

The clause in a mortgage allowing a lender to demand repayment of a loan in a lump sum prior to the maturity date; may be triggered if the home is sold, title to the property is changed, the loan is refinanced, or the borrower defaults.

Question 356

Mitigation

Answer 356

In terms of the mortgage industry, loss mitigation occurs when the lender works with a delinquent borrower to modify the terms of the mortgage loan.

Question 357

Modification

Answer 357

An agreement between the lender and borrower to modify the terms of a mortgage; not a loan refinance.

Question 358

Nonconforming Loan

Answer 358

Loan that exceeds Fannie Mae and Freddie Mac loan limits.

Question 359

Negative Amortization

Answer 359

The result of a payment schedule under which the monthly payments do not cover all of the interest due; unpaid interest is added to principal outstanding; can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.

Question 360

Private Mortgage Insurance

Answer 360

Used to offer protection to the lender in the case of default when a borrower has a down payment of less than 20% of the purchase price.

Question 361

Payment Cap

Answer 361

Limit on how much an ARM’s payment may increase, regardless of how much the interest rate increases.

Question 362

Predatory Lending

Answer 362

Abusive lending practices (e.g., granting a mortgage loan to someone without regard to ability to repay or based on the collateral’s foreclosure value, repeated refinancing of a loan, charging high interest and fees each time).

Question 363

Prepayment

Answer 363

Any amount paid to reduce the principal balance of a loan before the due date; can occur with the sale of the property, paying down or paying off the loan ahead of schedule or with a foreclosure; full payment occurs before the loan has fully amortized.

Question 364

Real Estate Settlement Procedures Act

Answer 364

Federal law protecting consumers from abuses during the real estate settlement process; helps consumers become better shoppers for settlement services; eliminates kickbacks and referral fees that can increase costs of settlement services to consumers; requires lenders to disclose all settlement costs, practices, and relationships.

Question 365

Private Mortgage Insurance

Answer 365

Mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price; offered through private insurance carriers.

Question 366

Prime Rate

Answer 366

The interest rate that banks charge to preferred customers; publicized in the business media; may be used as the basis for ARM rates or home equity lines of credit; also affects interest rates being offered on fixed mortgages but does not affect the interest on a fixed-rate mortgage already taken.

Question 367

Prepayment Penalty

Answer 367

A fee charged to a borrower who pays off a loan before it is due; prohibited under the HOEPA and limited for higher-priced mortgage loans.

Question 368

Secured Loan

Answer 368

A loan backed by collateral (e.g., real property, personal property).

Question 369

Secondary Mortgage Market

Answer 369

Market where mortgage loans and servicing rights are bought and sold; investor purchase of residential mortgages originated by lenders provides lenders with capital for additional lending.

Question 370

Risk-Based Pricing

Answer 370

Fee structure used by creditors based on risks of granting credit to a borrower with a poor credit history.

Question 371

Risk Scoring

Answer 371

Automated way to analyze a credit report versus a manual review; takes into account late payments, outstanding debt, credit experience, and number of inquiries in an unbiased manner.

Question 372

Right of First Refusal

Answer 372

A contract provision that requires the owner of a property to give one party an opportunity to purchase or lease a property before it is offered for sale or lease to others.

Question 373

Reverse Mortgage

Answer 373

Mortgage transaction in which a senior homeowner, age 62 and older, can convert the equity in his or her home into a monthly stream of income and/or a line of credit to be repaid when certain conditions occur; (e.g., the borrower no longer occupy the home or passes away).

Question 374

Rehabilitation Mortgage

Answer 374

A mortgage that covers the costs of rehabilitating (i.e., repairing or improving) a property (e.g., FHA 203(k)); some allow borrower to roll the costs of rehabilitation and home purchase into one loan.

Question 375

Title Insurance

Answer 375

Insurance that protects the insured against any claims that arise from defects to a property’s title; available for both the lender and homebuyer; policy that protects buyer known as an owner’s policy or homeowner’s policy; policy that protects lender known as lender’s policy, loan policy, or mortgagee’s policy.

Question 376

Title 1

Answer 376

An FHA-insured loan that allows a borrower to make renovations or repairs to their home; available for up to $25,000; not based on home equity; loans of less than $7,500 do not require a property lien.

Question 377

Sweat Equity

Answer 377

The crediting of labor to build or improve a property as part of the down payment.

Question 378

Subprime Loan

Answer 378

A loan made to a credit-impaired borrower; industry term used to describe loans with less stringent lending and underwriting terms; due to the higher risk, subprime loans have higher interest and higher fees.

Question 379

Special Forbearance

Answer 379

Loss mitigation option under which lender agrees to a revised repayment plan that may include a temporary reduction or suspension of monthly loan payments.

Question 380

Which of these federal regulations specifically prohibits discrimination in lending?

• FCRA
• HOEPA
• RESPA
• ECOA

Answer 380

ECOA

Question 381

Who investigates mortgage fraud in the United States?

• Mortgage Bankers Association
• local officials
• FBI
• HUD

Answer 381

FBI

Question 382

Which is least likely to be an example of illegal flipping?

• an inflated appraisal
• a series of sales and quick resales
• a group of sellers and buyers changing ownership of one property among them
• purchasing and remodeling a house and selling it for quick profit

Answer 382

purchasing and remodeling a house and selling it for quick profit

Question 383

What type of mortgage allows the lender a share of the earnings, income, or profits generated by the mortgaged real estate?

• purchase money mortgage
• reverse equity mortgage
• like-kind exchange
• equity participation mortgage

Answer 383

equity participation mortgage

Question 384

An HECM reverse mortgage and an adjustable rate mortgage are both examples of

• nonconforming loans.
• government agency loans.
• nontraditional loans.
• conventional loans.

Answer 384

• nontraditional loans.

Question 385

Which can be found in a note?

• property’s legal description
• appraised property value
• terms and repayment provisions
• purchase details

Answer 385

• terms and repayment provisions

Question 386

Which is NOT a type of mortgage?

• bi-weekly
• bi-monthly
• construction
• reverse

Answer 386

bi-monthly

Question 387

With a $50,000 loan at 8% interest, which would NOT include a balloon payment due at the end of the term?

• with interest only payments, due in 10 years
• amortized over 20 years
• amortized over 30 years, due in 10 years
• (variable) plus CMT index, due in 10 years

Answer 387

• amortized over 20 years

Question 388

Which type of mortgage is structured so that borrowers make smaller payments in the early years and larger payments later in the term?

• bridge mortgage
• refinance mortgage
• wraparound mortgage
• graduated payment mortgage

Answer 388

graduated payment mortgage

Question 389

The portion of principal and interest due on a loan that is written off when deemed to be uncollectible is known as

• charge-off.
• setback.
• loss leader.
• deficit funds.

Answer 389

• charge-off.

Question 390

Where do the funds for FHA loans come from?

• Federal Home Loan Mortgage Corporation
• Department of Housing and Urban Development
• approved lenders
• Federal Housing Administration

Answer 390

approved lenders

Question 391

Why are documents recorded with the county government?

• to determine who holds the mortgage on a piece of property
• for development purposes
• for taxation purposes
• to provide notice of who holds an interest in a piece of property

Answer 391

to provide notice of who holds an interest in a piece of property

Question 392

Which government agency backs VA loans?

• Federal Reserve Board
• Housing and Urban Development
• Department of Veterans Affairs (VA)
• Federal Housing Administration

Answer 392

• Department of Veterans Affairs (VA)

Question 393

With what type of mortgage does the lender make regular monthly payments to the borrower based on the equity the homeowner has invested in the property?

• purchase money mortgage
• equity participation mortgage
• shared appreciation mortgage
• reverse mortgage

Answer 393

reverse mortgage

Question 394

Which is TRUE about nonconforming loans?

• All states prohibit them for being predatory.
• They can be sold to FHLMC but not FNMA.
• They generally cost a homeowner more in fees.
• They meet Fannie Mae/Freddie Mac standards.

Answer 394

• They generally cost a homeowner more in fees.

Question 395

Which is an example of a document that can be used to pledge real estate as collateral to secure a promise to repay a debt?

• mortgage
• constructive notice of title
• deed
• note

Answer 395

mortgage

Question 396

Which element of an ARM is a statistical report that is a generally reliable indicator of the approximate change in the cost of money and may be used to adjust interest rates?

• prime rate
• index
• discount
• margin

Answer 396

index

Question 397

Under Regulation Z, which advertisement would require full disclosure of credit terms?

• “Affordable rates available”
• “Assume loan at 8% interest”
• “Low down payment”
• “VA financing”

Answer 397

• “Assume loan at 8% interest”

Question 398

What type of loans is involved in the air loan scheme?

• VA
• FHA
• conventional
• non-existent

Answer 398

non-existent

Question 399

Which is an example of steering?

• Mortgage banker Brad refuses to make loans for a particular inner city neighborhood.
• Property manager Amy suggests Jake would be happier in a more diverse building.
• Agent Tom tells homeowners that their property values will drop when a Puerto Rican family moves in.
• Seller Oscar tells his listing agent to find only Caucasian buyer prospects.

Answer 399

• Property manager Amy suggests Jake would be happier in a more diverse building.

Question 400

What information would be exempt from the privacy requirement of the Gramm-Leach-Bliley Act?

• a consumer’s credit score a loan originator gets from the credit bureau
• the loan amount that appears on a recorded mortgage
• a bank customer’s account balance
• income information a consumer includes in a credit application

Answer 400

• the loan amount that appears on a recorded mortgage

Question 401

When an appraiser “gives a mortgage loan originator what’s needed” on the appraisalreport, the consumer usually ends up

• not being able to sell the property.
• paying more discount points at closing.
• borrowing too much on the property.
• refinancing the property.

Answer 401

• borrowing too much on the property.

Question 402

What is not a protected class recognized by the Fair Housing Act?

• receipt of income from a public source
• national origin
• familial status
• disability

Answer 402

• receipt of income from a public source

Question 403

What does Fannie Mae call the process of purchasing existing properties with the intention of immediately reselling the property for a profit?

• straw buying
• flipping
• refinancing
• assuming a mortgage

Answer 403

• flipping

Question 404

What does not fall under the jurisdiction of Title VIII of the Civil Rights Act?

• rental housing
• new construction
• installment loan for a vehicle
• purchase of existing housing

Answer 404

• installment loan for a vehicle

Question 405

What law prohibits discrimination in the sale and rental of a residential property on the basis of race, color, religion, handicap, sex, familial status or national origin?

• Home Owners Equity Protection Act
• Fair Housing Act
• Community Reinvestment Act
• Equal Credit Opportunity Act

Answer 405

• Fair Housing Act

Question 406

The Privacy Rule requires that financial institutions provide the consumer with a Consumer Privacy Policy disclosure

• each time the servicing of the loan is transferred.
• at closing only.
• each time the Consumer Privacy Policy is revised.
• annually as long as the relationship continues or before sharing non-public personal inform

Answer 406

annually as long as the relationship continues or before sharing non-public personal inform

Question 407

What federal legislation requires that all printed advertising include the Equal Housing Opportunity logo?

• Truth in Lending Act
• Fair Credit Reporting Act
• Equal Credit Opportunity Act
• Fair Housing Act

Answer 407

Fair Housing Act

Question 408

What type of scam entails homeowners who are encouraged to refinance their property over and over until little or no equity remains?

• reverse equity
• property skimming
• loan flipping
• extreme lending

Answer 408

• loan flipping

Question 409

What word best describes a group of participants working together to commit single acts of mortgage fraud?

• omission
• collusion
• representation
• discernment

Answer 409

• collusion

Question 410

What is another name for blockbusting, an illegal activity, according to the Fair Housing Act?

• panic selling
• redlining
• steering
• discrimination

Answer 410

• panic selling

Question 411

Real estate agent Ike tells mortgage broker Tina that he will send her all of his clients if she’ll give him $100 for each loan she closes. Although Tina turns him down, she does decide to send Ike tickets to a football game to thank him for referring his clients any way and he accepted them. According to Section 8 of RESPA,

• only Ike is in violation since he initiated a kickback scheme.
• neither are in violation.
• only Tina is in violation because she sent a gift.
• both are in violation since any gratuity could be considered a kickback.

Answer 411

both are in violation since any gratuity could be considered a kickback.

Question 412

Which federal legislation prohibits kickbacks and referral fees?

• RESPA
• TILA
• ECOA
• FCRA

Answer 412

• RESPA

Question 413

What federal legislation specifically addresses the sharing of non-public information between financial institutions?

• Truth in Lending Act
• Equal Credit Opportunity Act
• Gramm-Leach-Bliley Act
• Fair Credit Reporting Act

Answer 413

• Gramm-Leach-Bliley Act

Question 414

A perpetrator sends an official-looking letter to a borrower saying that the borrower’s loan has been sold and the unsuspecting borrower then sends the mortgage payment to the address indicated on the letter and the thief makes off with the money. Which fraud scam is this?

• disappearing second
• air loan
• deed scam
• mail fraud

Answer 414

mail fraud

Question 415

What federal legislation requires the term “equal housing lender” to be used in any advertisement that is broadcast over the airwaves?

• Fair Housing Act
• Truth in Lending Act
• Fair Credit Reporting Act
• Equal Credit Opportunity Act

Answer 415

• Fair Housing Act

Question 416

To address the problem of property flipping, appraisers must analyze the transfer history of a property for the previous

• three years for the subject property; one year for the comparable properties.
• three months.
• one year.
• eighteen months.

Answer 416

• three years for the subject property; one year for the comparable properties.

Question 417

The SAFE Act

• requires lenders to order appraisals through an appraisal management company.
• requires lenders to disclose the timing under which PMI can be cancelled.
• mandates the disclosures required at the time that a loan closes.
• requires state-licensed loan originators to have at least 20 hours of prelicensing education.

Answer 417

requires state-licensed loan originators to have at least 20 hours of prelicensing education.

Question 418

Which statement about loan origination fees on a Loan Estimate is false?

• The fee includes services performed by or on behalf of the loan originator.
• Origination fees must be expressed as lump sum.
• The fee cannot change unless there is a changed circumstance.
• Lender and mortgage broker fees for the same transaction must be itemized.

Answer 418

Lender and mortgage broker fees for the same transaction must be itemized.

Question 419

Which law ensures that some borrowers have the right of rescission for three business days after a loan contract is signed?

• Regulation Z
• Title VIII
• Equal Credit Opportunity Act
• Regulation X

Answer 419

• Regulation Z

Question 420

Which law requires state-licensed mortgage loan originators to take approved prelicensing education?

• SAFE Act
• FACT Act
• Patriot Act
• CRA

Answer 420

• SAFE Act

Question 421

Which fee can be collected prior to delivery of a Loan Estimate and Closing Disclosure?

• credit report fee
• Any legitimate fee can be collected prior to delivery of these disclosures.
• application fee
• No fees can be collected prior to delivery of these disclosures.

Answer 421

• credit report fee

Question 422

Which rule prohibits mortgage relief companies from collecting any advance fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable?

• Safeguards Rule
• MARS Rule
• FHA Rule
• Loan Originator Compensation Rule

Answer 422

• MARS Rule

Question 423

Which legislation does NOT allow a lender, when qualifying income, to consider the possibility of a borrower having additional children?

• ECOA
• TILA
• FCRA
• RESPA

Answer 423

• ECOA

Question 424

Which law prohibits discrimination based on sex, race, age, national origin, marital status, and source of income?

• RESPA
• Fair Housing Act
• Truth in Lending
• Equal Credit Opportunity Act

Answer 424

Equal Credit Opportunity Act

Question 425

Who does NOT share responsibility for enforcing the provisions of the National Do Not Call Registry?

• State law enforcement
• Federal Reserve Board
• Federal Communication Commission
• Federal Trade Commission

Answer 425

• Federal Reserve Board

Question 426

Which rule allows consumers to opt out of having their private information shared?

• Financial Privacy Rule
• Federal Reserve Loan Originator Compensation Rule
• MARS Rule
• Red Flags Rule

Answer 426

• Financial Privacy Rule

Question 427

The rule that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable is the

• 3/7/3 Rule.
• Safeguards Rule.
• MARS Rule.
• Loan Originator Compensation Rule.

Answer 427

• MARS Rule.

Question 428

Mortgage Assistance Relief Services

Answer 428

Mortgage Assistance Relief Services

The Federal Trade Commission (FTC) published the Mortgage Assistance Relief Services (MARS) final rule on Dec. 1, 2010 directed at companies that offer loan modification services to consumers for a fee; it requires certain disclosures and prohibits upfront fees.

Question 429

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

• Equal Credit Opportunity Act
• Regulation X
• Fair Housing Act
• Regulation Z

Answer 429

Regulation Z

Question 430

A mortgage loan originator is not required to provide a Loan Estimate if the borrower

• withdraws the application before the end of the three business-day period.
• is unlikely to be approved for a loan.
• refuses to provide the government monitoring data required in the application.
• applies for loans from multiple lenders.

Answer 430

• withdraws the application before the end of the three business-day period.

Question 431

Which act provides a specific definition of a nontraditional loan?

• Homeownership Equity Protection Act
• Truth in Lending Act
• Secure and Fair Enforcement Mortgage Licensing Act
• Mortgage Disclosure Improvement Act

Answer 431

• Secure and Fair Enforcement Mortgage Licensing Act

Question 432

Which would be considered a toxic loan feature under the qualified mortgage (QM) rule?

negative amortization

partial amortization

full amortization

acceleration clause

Answer 432

negative amortization

Question 433

While it is unlawful to consider race when underwriting a loan, what federal legislation requires that this information be included on the loan application?

• Home Mortgage Disclosure Act
• Fair Credit Reporting Act
• Equal Credit Opportunity Act
• Truth in Lending Act

Answer 433

• Home Mortgage Disclosure Act

Question 434

The Dodd-Frank Act definition of a qualified mortgage includes all of these features except

• no excessive upfront points and fees.
• interest-only loan offerings.
• no terms beyond 30 years.
• limits on debt-to-income ratios.

Answer 434

• interest-only loan offerings.

Question 435

Which item is NOT included in the calculation that determines the annual percentage rate?

• mortgage insurance premium
• broker’s origination fee
• lender’s discount points
• title insurance premium

Answer 435

title insurance premium

Question 436

Which of the following best describes a loan with a principal balance exceeding Fannie Mae or Freddie Mac guidelines?

• Subprime
• Jumbo
• Illegal
• Balloon

Answer 436

Jumbo

Question 437

____% of rental income may be used to qualify a borrower for a loan.

Answer 437

75

Question 438

The S.A.F.E. Act’s definition of “residential mortgage loan” includes a loan secured by a consensual security interest on a dwelling and cross-references the definition of the term “dwelling” in the Truth-in-Lending Act (TILA). Regulation Z, which implements TILA, defines a dwelling as a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.

Question 439

Under the Electronic Signatures in Global and National Commerce Act (the E-SIGN Act), before obtaining a consumer’s consent, a financial institution must provide a clear and conspicuous statement to consumers, informing them of their right or option to have the record provided or made available on paper or in a non-electronic form. The statement must also explain the consumer’s right to withdraw consent, including applicable conditions, consequences, and fees. Consumers must also be provided with information about the hardware and software required to allow them to access and retain the electronic records.

Question 440

According to the standard deed of trust, how soon must a borrower on an owner-occupied loan occupy the property?

• Within 30 days of closing
• Within 90 days of closing
• Within 60 days of closing
• Within 15 days of closing

Answer 440

• Within 60 days of closing

Question 441

Which of the following deals most specifically with representations made in mortgage advertising?

Regulation X

HMDA

MAP Rule

E-SIGN Act

Answer 441

The answer is MAP Rule

Question 442

A creditor must provide the Loan Estimate no later than ____business days after receipt of the consumer’s application AND at least ____business days prior to consummation.

Answer 442

3 and 7

Question 443

What is the tolerance allowed for variances in the APR disclosure required by the Truth-in-Lending Act in a regular transaction?

1%

0.125%

.25%

$200

Answer 443

The answer is .125% (one eighth of one percent). The APR is considered accurate if it is not more than one eighth of one percentage point above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method), or if it is not more than .25% (one quarter of one percentage point) above or below the APR for an irregular transaction.

Question 444

Which of the following is not a required element of a company’s safeguard policy, as required by the GLB Act?

• Designate one or more employees to coordinate safeguards
• Evaluate and adjust procedures in light of relevant circumstances
• Select appropriate service providers and contract with them to implement safeguards
• Contract with a federally-insured company to destroy documents

Answer 444

The answer is contract with a federally-insured company to destroy documents.

Under the GLB Act, a financial institution must have a written information security program that is appropriate to its size and complexity, to the nature and scope of its activities, and to the sensitivity of the customer information it handles. As part of its program, the financial institution must assign one or more employees to oversee the program; conduct a risk assessment; put safeguards in place to control the risks identified in the assessment and regularly test and monitor them; require service providers, by written contract, to protect customers’ personal information; and periodically update its security program. There is no requirement to contract with any external company to handle information security issues of any kind.

Question 445

A mortgage which is amortized for a longer period than the actual term of the loan can best be described as a:

• Balloon mortgage
• Hybrid ARM
• Graduated Payment Mortgage (GPM)
• Fixed period ARM

Answer 445

balloon

Question 446

All of the following are considered immediate family members, and therefore a mortgage loan originator may negotiate a mortgage loan on their behalf without needing to be licensed, EXCEPT a(n):

• Stepparent
• Aunt
• Adopted sibling
• Grandparent

Answer 446

aunt

Question 447

The purpose of the Truth-in-Lending Act is to do which of the following?

• Ensure meaningful disclosure of credit terms to consumers
• Prevent lenders from charging interest rates that are unfair to consumers
• Protect consumers from abusively high interest rates
• Require consumers be provided with a good faith estimate of closing costs at the time of loan application

Answer 447

The answer is ensure meaningful disclosure of credit terms to consumers. The purposes of TILA include assuring a meaningful disclosure of credit terms so that the consumer will be able to more readily compare the various credit terms available to him or her and avoid uninformed use of credit.

Question 448

Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower?

UFMIP

Insured amount

Entitlement

Guarantee fee

Answer 448

The answer is entitlement. The VA limits the amount that it can guarantee to repay a lender in the event of a default on the loan. The amount that the government will guarantee to a lender is known as a veteran’s entitlement.