Prep EXAM Flashcards
1
Q
Affiliated Business Arrangement
A
- Due immediately or prior to doc signing
- If they have 1% ownership
2
Q
Escrow Account is for:
A
Taxes and Insurance
AKA: Impound account or reserve account
3
Q
The CFPB was created by:
A
Dodd Frank Act and the Consumer Finance Protection Act
4
Q
RESPA was meant to:
A
Help consumers become better shoppers for settlement services
5
Q
RESPA covers:
A
1-4 unit Residential Property (owner occupied)
6
Q
RESPA does not cover:
A
All cash sales, rental property of more than 4 units, commercial property, and agricultural (25 acres or more)
7
Q
4 important Sections of RESPA:
A
- Section 6 deals with Mortgage Servicers
- Section 8 prohibits kickbacks, fee splitting, and unearned fees
- Section 9 deals with Title Insurance
- Section 10 deals with Escrow Accounts
8
Q
RESPA Escrow accounts require:
A
- Borrowers to pay into the escrow account of no more than 1/12th of annual disbursement
- At closing - allows cushion of two months (1/6th)
- If there is any overcharge - return excess over $50 and must be returned within 30 days
9
Q
Initial Escrow Statement due:
A
at settlement or within 45 days of closing
10
Q
Servicing Transfer Statement due:
A
15 days prior to transfer, and no penalty for 1st 60 days “grace period”
11
Q
Availability of terms on Loan Estimate are good for:
A
10 business days
12
Q
New Closing Disclosure required in changes of the APR by:
A
- 1/8% (.125) for a regular transaction (30 year traditional)
- 1/4% (.25) for an irregular transaction (not a 30 year, nontraditional)
13
Q
New Closing Disclosure is required when:
A
- Change in the loan product
- The addition of a prepayment penalty
14
Q
TILA established 3 day right of rescission for:
A
HELOC/REFI
15
Q
How many copies must a borrow receive for a right to rescind?
A
Two copies
16
Q
Loan Estimate must me kept on file for:
A
3 years
17
Q
Closing Disclosure must be kept on file for:
A
5 years
18
Q
How many days ahead must there be a notice regarding rate adjustments?
A
60 days
19
Q
Another word used for APR is:
A
Effective Rate
20
Q
Another word used for Interest Rate:
A
Note Rate or Nominal Rate
21
Q
If an ad contains only APR, how many disclosures are required?
A
No additional disclosures are required
22
Q
If a lender issues a QM, what does it receive?
A
“safe harbor” (legal protection) if the borrower later goes into foreclosure
23
Q
According to ECOA, the only way to ask about marital status is by asking if you are:
A
Married, unmarried, or separated
24
Q
Fair Housing Act (FHA) prohibits:
A
Discrimination against PROTECTED CLASSES in the sale or lease of residential property
25
A borrower has how long to sue under FHA?
One year
26
What are the two additional classes protected by FHA?
- Disability
| - Familial Status
27
What are the three additional classes protected by ECOA?
- Age
- Marital Status
- Receipt of Public Assistance
28
Regulation C:
- HMDA - SEE where possible discriminatory lending patterns takes place
- Found on Section X (10)
29
Regulation Z:
- TILA the GodZilla
| - Credit, APR, and advertising of loans
30
FACTA (FACT Act)
Fair and Accurate Credit Transactions
- Identity theft
31
Civil Rights Act is regards to:
Race
32
Regulation V:
FCRA - Fair Credit Reporting Act
- Deals with credit reports and credit reporting agencies (CRAs)
33
Conventional Loans are for:
PMI
- PMI protects the lender
- Putting down less than 20% down
34
SAFE means:
Secure and Fair Enforcement Act
35
Who created the SAFE Act?
HERA - Housing and Economic Recovery Act
36
Regulation B:
ECOA - Be equal
| - Credit application
37
Regulation X:
RESPA - Real Estate Settlement Procedures Act
38
Regulation C requires lenders to:
File reports regarding ethnicity, race, and sex of all applicants
- These reports are calls LARs (Loan Application Register)
39
Denial of an application must:
Provide consumer with name, address, and phone number of the agency that provided the info
40
Negative credit information:
7 years
41
Unpaid tax liens on record for?
Forever
42
Paid tax liens are on record for?
7 years
43
FACTA:
Intended to help consumers fight identity theft
- FTC Red Flags Rules (Section 114 Rules) -identity theft
44
GLB Act:
Girls Like Boys who protect a person's information/privacy
- Also known as Financial Services Modernization Act
- Safeguards Rule
- Pretexting Provisions
- Financial Privacy Rule
45
Do Not Call List (DNC):
- Costumers to file complaints with FTC
- Must check list every 31 days
- Records must be maintained for 24 months
- Violators fined $42,530 per call
- 18 months consumers last transaction
- 3 months after consumer makes inquiry
46
Bank Secrecy Act/Anti-Money Laundering Act
- Requires financial institutions to keep records of cash transactions exceeding $10,000
- MLO's required to report suspicious activity exceeding $5,000
47
Conforming Mortgage meet:
- Standards set by Fannie Mae and Freddie Mac
| - May be sold in the secondary market
48
Non-Conforming Mortgage:
- Also called jumbo loan
| - Cannot be sold on the secondary market
49
Acceleration Clause is:
It gives lender right to declare entire loan balance due immediately because of borrower default or breach of contract
50
Alienation Clause is:
Provision in a mortgage enabling a lender to demand full repayment if the borrower transfers the loan (AKA due-on-sale clause)
(Aliens demand entire DUE if the borrower transfers the loan)
51
Index + Margin =
Fully Indexed Rate (adjustable rate mortgage)
52
A Reverse Mortgage is due when:
The last surviving borrower dies, sells home, nonpayment of taxes and insurance, ceases to live in home for 12 consecutive months
53
Hybrid Arm is:
An adjustable rate mortgage with an initial fixed rate period greater than one year (3/1, 5/1, 7/1, or 10/1 ARMs)
54
What is the Standard Loan Application?
Uniform Residential Loan Application (URLA)
- Also called the 1003
- Form 65 is a similar form created by Freddie Mac
55
What is the underwriting system called?
- Automated Underwriting System (AUS)
56
What is Fannie Mae's underwriting system?
Desktop Underwriter
57
What is Freddie Mac's underwriting system?
Loan Product Advisor
| - Formerly known as Loan Prospector
58
Conventional loans are not:
Insured or guaranteed by a government entity
59
Qualifying Ratios for Conventional loans:
Housing Expense Ratio - 28%
| Total Debt to Income Ratio - 36%
60
FHA Qualifying Ratios:
Housing Expense Ratio - 31%
| Total Debt to Income Ratio - 43%
61
FHA requires a:
- 3.5% down payment
- MIP required regardless of downpayment
- UFMIP also required
- Late fee - 4% of the P&I only
62
VA Qualifying Ratios:
- Does not use front end ratio
| - Total Debt to Income Ratio - 41%
63
VA has a:
- Non-refundable variable funding fee (waived for disabled vets and surviving spouses)
- No down payment required
- No prepayment penalty fee
- Lenders can charge flat fee of 1% to cover lender cost
64
VA required documentation:
- DD214 discharge papers
| - COE (Certificate of Eligibility)
65
USDA loans:
- Section 502 Loans
- "Rural" can include small towns up to 35,000 people
- Administered by the Department of Agriculture
- 100% financing
- Provides financial support to low income homebuyers in rural or farm communities
66
Cost Approach/Replacement Cost Approach:
Best for new construction, vacant land, and unusual or special purpose properties that do not produce income
67
Sales Comparison Approach/Market Approach:
Compares property with other similar properties sold recently in the same market area
- A minimum of three comparables
68
Income approach (Capitalization Approach):
Best for commercial or investment properties
69
Self Employed borrowers need:
Personal and corporate tax returns for a minimum of 2 years
70
Tax free/Public Assistance:
The income may be "grossed up" by 25%
71
Rental Income is calculated:
At 75% to allow for vacancy loss of 25%
72
Fraud for Property:
Consumer fraud - misrepresenting info on loan application to qualify like income, expenses, and down payment
73
Fraud for Profit:
Involves real estate agents, appraisers, lenders, closing agents, and attorneys. Some examples include flipping, straw buyers, bogus sales, inflated appraisals, and air loans
74
Straw Buyer:
A person who makes a purchase on behalf of another person
75
Loan Flipping:
Involves refinancing over and over again with to no net tangible benefit to the borrower
76
HERA - Housing and Economic Recover Act is:
- Parent to the SAFE Act
77
What is the CSBS and the AARMR?
CSBS - Conference of State Bank Supervisors
AARMR - Association of Residential Mortgage Regulators
- They work with HUD to create the NMLS system
78
Loan Originator does not include:
- Extending credit on timeshare plans
- Individuals who negotiate a mortgage loan for themselves or immediate family members
- Attorneys who negotiate loan terms as an ancillary service and who aren't compensated by a loan originator or lender
79
Registered Loan Originator is:
An employee of a depository institution (a bank)
80
State Licensed Loan Originator is:
Licensed by his state, registered with NMLSR, and isn't employed by a depository institution
81
Violating SAFE act:
$28,474
82
Two places you will see the index:
- Loan Estimate
| - Promissory Note
83
What are the three main interest caps?
The initial cap, the periodic adjustment caps, and the lifetime caps
84
Maximum rate is reached by:
Adding the start rate and the lifetime cap
85
NMLS stands for:
Nationwide Mortgage Licensing System & Registry (NMLS OR NMLSR)
86
Which regulation can you not ask if any income is derived from alimony or child support unless the application wishes?
ECOA
87
Zero tolerance if:
Consumer was not allowed to shop for settlement services providers
88
10% tolerance if:
Consumer was allowed to shop off of creditors list of providers
89
Revised Loan Estimate is due:
4 days before consummation
90
A borrower may communicate intent to proceed:
- Orally over the phone
- In person
- In writing via email or printed form
91
Closing Disclosure is due:
3 days before consummation
92
What 6 pieces of info are required on an application?
- Name
- Monthly Income
- Social Security #
- Estimate of the value of property
- Loan amount sought
- Address of property
93
Pre-licensing education:
- 3 hours of federal law
- 3 hours of ethics
- 2 hours of nontraditional products
94
Continuing education:
- 3 hours of federal law
- 2 hours of ethics
- 2 hours of nontraditional
95
What law was passed in 2008 regarding response to the mortgage lending crisis?
SAFE Act
96
What enforces BSA?
FinCEN
97
No calls can be made outside of:
8am and 9pm
98
TENURE Method:
Used in a Reverse Mortgage that allows the homeowners to receive a monthly check while living in the property
99
Redlining is apart of which regulation/law?
Fair Housing Act (FHA)
- ECOA
100
Refusing to make loans in a certain neighborhood for discriminatory reasons is called?
Redlining
101
PITI divided by gross monthly income is referred to as what?
Housing Ratio or Front End DTI
102
PITI stands for:
Principal, interest, taxes, and insurance
103
PITI + monthly debt divided by gross monthly income is referred to as what?
Total Obligation Ratio - Back End Ratio
104
How long must TILA Disclosures be kept?
2 years ( Expect LE - 3 years and CD - 5 years)
105
A balloon loan is defined as:
A loan that has a specific amortization period but matures prior to the time it fully amortizes
106
VA funding fee, for first time user is:
2.30%
107
What entity was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government?
Fannie Mae
Fannie Mae separated and went public with it
108
The acronym LIBOR represents a:
Possible ARM index
109
Warranty deed:
Conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate
110
Government-owned entity which facilitates home ownership in the United States?
Ginnie Mae
Ginnie Mae has a government-owned entity that facilitates home ownership
111
Total monthly debt would include:
Simultaneous loans, debt obligations, alimony, and child support
112
According to conventional underwriting guidelines, when analyzing income from a borrower who is self-employed, an underwriter should:
Average the income shown on the 1040s for the past two years
113
What term would apply when calculating the maximum loan amount available to a VA borrower?
Entitlement
114
Which of the following types of mortgages typically carries two different types of mortgage insurance?
FHA
- UFMIP
- MIP
115
What does "FHA" stand for, when referring to the agency which oversees the FHA loan program?
Federal Housing Administration
116
With respect to FHA loans, the FHA:
Insures the loans, thereby protecting the lender
117
If an escrow account analysis discloses a shortage of less than one month's escrow account payment:
- Require the borrower to repay the shortage amount within 30 days,
or
-Require the borrower to repay the shortage amount in 2 or more equal monthly payments
118
Must make live contact within:
36 days of borrower missed mortgage payment
& 45 days for giving them options on repaying back
119
GFE and HUD will continue to be provided for:
HELOCS, reverse mortgages and loans securing mobile homes where the owner will not also own the land which the mobile home resides.
120
NO tolerance limit for:
Fees for services that the owners choose for themselves, such as hazard insurance, title insurance
121
Zero tolerance:
Real estate transfer taxes, loan origination
| fees and interest rate
122
According to TILA – there is “No Right of Rescission” on a:
Purchase, 2nd home or a investment property
123
If money was collected and a borrower rescinds:
Escrow has 20 days to return any money collected to the borrower.
124
High Cost (Section 32) loan if its APR exceeds the APOR by more than:
- 6.5% for a first lien of $50,000 or higher
- 8.5% on a first lien less than $50,000
- 8.5% for a subordination lien,
125
```
High Priced (Section 35) loan if its APR exceeds the
APOR by more than:
```
- 1.5%
- 2.5% for jumbo first-lien loans
- 3.5% for subordinate liens.
126
Regulation N
MAPS - Mortgage Acts and Practices
- Issued by the CFPB in order to prohibit false or
misleading advertising of mortgage products
127
VA and USDA guaranteed loans do NOT:
Require a downpayment
128
Government loans (FHA, VA, USDA) have a late fee for:
4% late fee (4% of the P&I amount only)
129
Two common indices:
U.S. Treasury Securities rate and the London Inter-Bank Offered Rate (LIBOR)
130
How to determine equity in a home?
Appraised value — loan balance = borrower's equity
131
Under federal law, prepayment penalties are now:
Restricted solely to fixed-rate qualified mortgages and may not be charged after the first three years of the loan term
132
Reconveyance deed:
A method used to TRANSFER title for a property following FULL repayment of a loan
133
Defeasance clause:
Requires the lender to send a Satisfaction of Mortgage notice to the borrower within sixty days of paying off the loan
134
Assignor:
Party transferring contractual rights to another
135
Mortgagee:
Lender
136
Lot and Block Method:
Is most common
137
Metes and Bounds Method:
Is most accurate
138
Warehouse funding:
When a lender obtains funds for closing from a line of credit extended by a commercial bank
139
What is not on a deed of trust?
Housing costs, including principal, interest, taxes, and insurance
140
The Uniform Residential Appraisal Report (URAR) is commonly known as the:
1004
| - Freddie Mac Form 70
141
An interest-only loan is considered a:
Traditional loan under the S.A.F.E. Act definition if it has a fixed rate and a 30-year term
142
Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, what federal law created specific requirements for the verification and documentation of a borrower’s repayment ability?
HOEPA (Home Ownership and Equity Protection Act)
143
Applicants for FHA loans must meet a back end ratio of:
43%
144
What loan will not require mortgage insurance?
VA (since there is a nonrefundable upfront funding fee that can be financed)
145
A defeasance clause provides for:
LIEN RELEASE when the borrower pays off the debt and is generally included in a mortgage or deed of trust
146
A due-on-sale (alienation) clause:
Allows the lender to declare the entire balance of the loan due when the property is sold or transferred
ALIENS DEMAND THE ENTIRE DUE WHEN PROPERTY IS SOLD OR TRANSFERRED
147
FHA and VA loans are generally:
Assumable
148
The residual income method applies to:
VA loans
149
What is the specific distinction between state-licensed and registered loan originators?
Unlike state-licensed loan originators, registered loan originators are exempt from licensing requirements
150
NMLS (unique identifier) will appear on the:
- Mortgage
- Loan Application
- Promissory Note
- Trust deeds
151
UST means:
Uniform State Test
152
Individual application after you take the UST is called:
MU4
153
Renewal Period for licensing is between:
November 1st - December 31st
154
If an application for credit is denied based on the appraiser, under ECOA says borrower has:
90 days to request a copy/Lender has 30 days to deliver
155
HPA stands for:
PMI (Homeowners Protection Act)
| - Conventional loans
156
HERA stands for:
Housing and Economic Recovery Act
157
Escrow account at closing:
2 months cushion (1/6th of the annual amount)
158
Rescission starts the day:
After docs have been signed
159
TILA disclosures include:
- Loan Estimate
- Closing Disclosure
- CHARM Booklet (Consumer Handbook on Adjustable Rate Mortgages)
- When Your Home is on the Line Booklet (HELOC/REFI)
160
General TILA disclosures must be kept on file for:
2 years
161
Business day is:
All calendar days expect Sundays and legal Holidays
- Exception to this rule is the Loan Estimate (any day in which the creditors office is open for business)
162
ARMs to be underwritten to the maximum interest rate during the:
The first 5 years of the loan term
163
Redlining is:
Refusal to make loans on property located in a particular neighborhood for discriminatory reasons
164
The CSBS and the AARMR work with HUD and created:
The NMLS
165
Steering, blockblusting, and redlining is under what law?
Fair Housing Act
166
Consumers have the following 5 rights under FCRA:
- The right to an Adverse Action Notice
- Free copy of Credit Report
- Request Credit Score (although score is not free)
- The right to Dispute Inaccurate or Incomplete Information
- The right to Limit Prescreened Offers
167
MARS (Mortgage Assistance Relief Services Rule) addresses:
- FTC rule to address loan modification, short sale, and foreclosure relief scams
- Bans collecting fees until homeowners have acceptable written offer from lender
- Prohibits advising consumers to discontinue communication with lenders
168
Interest Only Note is also called a:
Straight Note
169
Partially Amortizing is also called:
Balloon Payment
170
Fully Amortizing is also called:
Self Liquidating Loan
171
The Index goes:
"Adjusts" up or down
172
Home Equity Loan:
Is usually a one-time loan for a specific amount of money and is a closed-end loan
173
Package Mortgage:
A mortgage that includes personal property like appliances that is financed together in one contract
174
FHA:
Insures loans
175
VA:
Guarantees loans
176
Minimum downpayment for each different loans:
- Conventional loans - as little as 3%, but generally 5% for first time home-buyers
- FHA - 3.5%
- VA/USDA - no downpayment required
177
Seller Concessions:
- Conventional loan - 3%
- FHA - 6%
- VA loan - 4%
