Random Study

Question 1

What type of loan requires an upfront mortgage insurance fee (MIP) which must happen within 10
Calendar days of closing

Answer 1

FHA

Question 2

Discrimination by lenders is prohibited by which law?

Answer 2

ECOA

Question 3

Adverse action letter must be submitted within how many days

Answer 3

30 days

Question 4

What does term escalation mean in terms of loan

Answer 4

Buyer can increase offer in predetermined amounts whenever someone outbids initial buyer

Question 5

What is the defensence clause in mortgage

Answer 5

The defeasance clause in a mortgage is a provision that ensures the transfer of the title to the borrower once the mortgage loan has been fully paid off. Essentially, this clause states that the lender’s interest in the property is void once the borrower meets all the payment obligations under the mortgage agreement. Here are the key points:

1.	Title Transfer: When the borrower pays off the mortgage in full, the defeasance clause triggers the release of the lender’s claim on the property, transferring full ownership to the borrower.
2.	Satisfaction of Debt: It acts as a legal assurance that once the debt is satisfied, the borrower will gain clear title to the property, free of the mortgage lien.
3.	Recording the Release: To formalize the process, the lender typically records a satisfaction of mortgage or a deed of reconveyance in the public records, documenting that the borrower has fulfilled their obligations.

This clause provides security to the borrower, knowing that they will gain full ownership of their property upon repayment.

Question 6

After buyer has finished paying off the house, how long until the lender must send a satisfaction letter

Answer 6

60 days

Question 7

Who issued the certificate of reasonable value?

Answer 7

VA. Only issued after the house has been inspected by a VA appraiser.

Question 8

The federal national mortgage Association is also known as

Answer 8

The Federal National Mortgage Association, commonly known as Fannie Mae, is a government-sponsored enterprise (GSE) in the United States. It was established in 1938 as part of the New Deal to expand the secondary mortgage market and increase the availability of affordable home loans. Here are some key points about Fannie Mae:

1. Purpose: Fannie Mae’s primary role is to provide liquidity, stability, and affordability to the mortgage market by purchasing and guaranteeing mortgages from lenders. This allows lenders to reinvest their assets into more lending, thereby increasing the availability of mortgage credit to borrowers.
2. Secondary Mortgage Market: Fannie Mae does not originate or provide mortgages directly to borrowers. Instead, it buys mortgages from banks and other financial institutions, packages them into mortgage-backed securities (MBS), and sells them to investors. This process helps free up capital for lenders to offer more loans.
3. Impact on Homebuyers: By buying mortgages and creating MBS, Fannie Mae helps to lower the interest rates on home loans and makes it easier for more people to qualify for a mortgage, thereby promoting homeownership.
4. Government Sponsorship: Although Fannie Mae operates as a privately-owned corporation, it is sponsored by the federal government, which provides certain benefits and oversight. During the 2008 financial crisis, Fannie Mae was placed into conservatorship under the Federal Housing Finance Agency (FHFA) to ensure its financial stability.

Fannie Mae plays a critical role in the U.S. housing finance system by supporting the flow of credit to home buyers and fostering a stable and liquid mortgage market.

Question 9

Loans for purchasing properties and rule areas are issued by

Answer 9

USDA

Question 10

The income capitalization approach uses what to determine the market value of the property

Answer 10

Income generated approach, which looks at what the property generate for income to determine its market value often use for apartment buildings, shopping centers, and commercial 

Question 11

HMDA- home mortgage disclosing act is also known as regulation?

Answer 11

C

Question 12

The USDA loan requires a minimum credit score of?

Answer 12

640

Question 13

What does the term exculpatory mean in real estate?

Answer 13

We’re one party limits the liability of another party

In real estate, an exculpatory clause is a provision in a contract that limits or eliminates the liability of one party for certain actions or events. This clause is often included in leases, loan agreements, or purchase contracts to protect one party from being held responsible for specific issues. Here are some key points about exculpatory clauses in real estate:

1. Limitation of Liability: Exculpatory clauses can protect a property owner, landlord, or lender from liability for damages, losses, or injuries that occur on the property, often by requiring the other party to waive their right to seek compensation.
2. Common Uses: In a lease agreement, an exculpatory clause might limit a landlord’s liability for injuries to tenants or their guests due to certain conditions on the property. In mortgage agreements, it might limit the borrower’s liability to the value of the property in case of default, meaning the lender can only claim the property itself and not pursue the borrower for any remaining debt.
3. Enforceability: The enforceability of exculpatory clauses varies by jurisdiction. Courts may scrutinize these clauses closely, particularly if they appear to be overly broad or if the party seeking to enforce the clause had significantly more bargaining power than the other party.
4. Fairness and Public Policy: Courts generally evaluate whether the clause was entered into knowingly and voluntarily and whether enforcing it would violate public policy. If a clause is deemed unconscionable or if it tries to waive liability for gross negligence or intentional harm, it may be unenforceable.

Exculpatory clauses are intended to manage risk and liability in real estate transactions, but they must be carefully drafted to ensure they are fair, reasonable, and enforceable.

Question 14

How does forbearance apply to your mortgage?

Answer 14

For parents allows the borrower to pause or skip a payment for a short period of time 

Forbearance in the context of a mortgage refers to a temporary agreement between a lender and a borrower that allows the borrower to reduce or suspend mortgage payments for a specific period. This arrangement is typically used to help borrowers who are experiencing temporary financial hardship avoid foreclosure. Here’s how mortgage forbearance works:

1. Temporary Relief: Forbearance provides short-term relief to borrowers by allowing them to either pause their mortgage payments or make reduced payments for a set period, often three to six months or longer, depending on the agreement.
2. Eligibility: Borrowers usually need to demonstrate financial hardship, such as a loss of income, medical emergency, or natural disaster, to qualify for forbearance. Each lender may have different requirements and processes for applying for forbearance.
3. Repayment Options: At the end of the forbearance period, borrowers must repay the missed or reduced payments. Lenders may offer several options for repayment, such as:
   
   • Lump Sum Payment: Paying the total missed amount at once.
   • Repayment Plan: Spreading the missed payments over several months by adding extra amounts to regular payments.
   • Loan Modification: Modifying the loan terms to include the missed payments and potentially extending the loan term or adjusting the interest rate.
4. Impact on Credit: While forbearance itself does not directly impact a borrower’s credit score, it is important for borrowers to stay in contact with their lender and adhere to the agreed terms. Lenders typically report the account as current during forbearance if the borrower complies with the agreement.
5. Avoiding Foreclosure: Forbearance is a tool used to help borrowers avoid foreclosure by giving them time to recover financially and resume regular payments once their financial situation stabilizes.

Forbearance can be an essential option for homeowners facing temporary financial difficulties, providing them with time to regain stability without the immediate threat of losing their homes. It is crucial for borrowers to understand the terms and implications of the forbearance agreement and to work closely with their lender to find a suitable resolution.

Question 15

Minimum score for Fannie Mae

Answer 15

620

Question 16

What does a loan prospector evaluate?

Answer 16

To assess the credit worthiness of the buyer

Question 17

Which of the following is not typical of an amortized loan?

Answer 17

Credit card

Question 18

What is a reverse mortgage?

Answer 18

It’s a long though allows a Bahr to obtain money from home equity 

Question 19

HMDA is know as regulation ?

Answer 19

C

Question 20

How much down payment is necessary for a USDA loan

Answer 20

Does not require any down payment

Still need minimum credit score of 580

Question 21

What percent of fee will you incur for a late payment with a HUD loan?

Answer 21

4%

Question 22

The most comprehensive ownership of real property known as?

Answer 22

Fee simple absolute
. it’s the ultimate form of holding a title in real estate this is one absolute and unconditional ownership of the property

Question 23

Which type of tenancy is best for married people?

Answer 23

Tenants by the entirety , hear both Wife and the husband are considered one individual

Question 24

What protection does a gram leach bill act give to consumers

Answer 24

Wasn’t acted to enhance the privacy of consumer finances

Question 25

CFPB handles fraud true or false?

Answer 25

True

Question 26

Morris can receive the Home tool kit because of what law

Answer 26

Respa

Question 27

 what is the minimum credit score for Fannie Mae?

Answer 27

620

Question 28

What’s the purpose of a home prospector

Answer 28

To determine the credit worthiness

Question 29

 the home mortgage disclosure act is also known as as regulation

Answer 29

B

Question 30

If you’re gonna buy a home with a USDA loan, how much down payment do you need?

Answer 30

None

Question 31

Respa is regulation

Answer 31

X

Question 32

Encumbrance

Answer 32

Property has claim on it not by the owner

Question 33

examples of encumbrance are

Answer 33

deed restrictions , encroachments, easements , liens

Question 34

what does trigger term mean ?

Answer 34

phrase that legally mandates more disclosure (disclosure during advertising)

Question 35

right of recession ?

Answer 35

right of buyers to cancel line of credit, equity loan within 3 days of closing

Question 36

Primary Goal of federal trade commission (FTC) is to?

Answer 36

deter unfair anti competitive business practices

Question 37

what is the additional 1:12 rule concerning mortgages ?

Answer 37

by making one extra payment can lower mortgage a lot.

Question 38

the components of a monthly mortgage payment are known as ?

Answer 38

PITI (principal interest taxes Insurance )

Question 39

what is the 25% mortgage rule ?

Answer 39

monthly debt should be 25 % or less of your post tax income . If you make 4000 every your debt should not be more that 4000 x25%= 800

Question 40

what is house poor ?

Answer 40

means that there are people buying homes beyond their loans

Question 41

what does subordination letter mean ?

Answer 41

one debt has priority over another debt. This legal document says when one is going to be foreclosed it has priority over another debt

Question 42

When was Truth in lending act was enacted in what year?

Answer 42

1968

Question 43

why is TILA important?

Answer 43

helps protect consumers against unfair and inaccurate billing and cc practices, must provide consumers with loan cost information so they can shop around

Question 44

what is a conforming loan?

Answer 44

loans that conform to Fannie and Freddy. Conforming loans are mortgages that meet the underwriting guidelines and loan limits set by Fannie Mae and Freddie Mac, the two largest government-sponsored enterprises in the U.S. These loans conform to the standards established by these agencies, which makes them eligible for purchase and guarantee by the GSEs Conforming loans must be within the maximum loan limits set by the Federal Housing Finance Agency (FHFA). These limits can vary by location and are subject to annual adjustments. As of 2024, the baseline conforming loan limit for a single-family home is $726,200 in most areas, but it can be higher in high-cost areas.

Question 45

what are non conforming Loans

Answer 45

Non-conforming loans are mortgages that do not meet the criteria set by Fannie Mae and Freddie Mac. These loans cannot be sold to the GSEs and are often referred to as jumbo loans when they exceed conforming loan limits. Key Characteristics: 1. Loan Amounts: * Non-conforming loans often involve amounts greater than the conforming loan limits, known as jumbo loans. 2. Flexible Terms: * These loans may offer more flexibility in terms of loan structure and borrower qualifications. This can include borrowers with lower credit scores or higher debt-to-income ratios. 3. Interest Rates: * Typically, non-conforming loans come with higher interest rates due to the increased risk associated with not being backed by Fannie Mae or Freddie Mac. 4. Types of Non-Conforming Loans: * Jumbo Loans: Loans that exceed the conforming loan limits. * Subprime Loans: Loans offered to borrowers with poor credit history. * Alt-A Loans: Loans that fall between prime and subprime, often due to non-standard documentation. Summary

Question 46

to get conventional loan what credit score is needed?

Answer 46

more than 620 , usually 620-670

Question 47

downside to FHA loan?

Answer 47

requires mortgage insurance (PMI) since they are considered risky

Question 48

what is the min down payment for conventional loan ?

Answer 48

3%

Question 49

for an FHA loan who guarantees the loan ?

Answer 49

FHA

Question 50

FICO scores are used to determine the borrowers?

Answer 50

Credit worthiness of borrower

Question 51

The act of passing the title of loan ?

Answer 51

Conveyance

Question 52

A mortgage pre approval is valid for ? days

Answer 52

90 days

Question 53

what is meant by forced placed insurance ?

Answer 53

lender forced insurance is borrower fails to insure the property

Question 54

false statement of power of sale ?

Answer 54

it may take 4-6 months The lender is legally allowed to sale property the former owner gets none of the profit (answer) the lender doesn't get to keep title

Question 55

the charm booklet provides what information?

Answer 55

general information of ARM's

Question 56

what does a 5 year arm mean?

Answer 56

means that for the first 5 years the interest rate is fixed

Question 57

what was the main goal of Dodd frank act?

Answer 57

prevent fraud and practices among lenders

Question 58

cfpb was established under which act?

Answer 58

Dodd frank act

Question 59

which rule restricts how banks engage in speculative and proprietary trading ?

Answer 59

volker rule

Question 60

volker rule

Answer 60

1. Proprietary Trading Ban: * Prohibits banks from using their own accounts to trade stocks, bonds, derivatives, commodities, or other financial instruments for short-term profit. * The aim is to prevent banks from taking excessive risks that could threaten their stability and, by extension, the broader financial system. 2. Limits on Investment in Hedge Funds and Private Equity: * Restricts banks’ investments in hedge funds and private equity funds to prevent excessive exposure to high-risk assets. * Banks are limited to investing no more than 3% of their Tier 1 capital in such funds. 3. Exemptions: * Certain activities are exempt from the rule, including market making, underwriting, hedging, and trading in government securities. * The rule allows banks to continue these activities as long as they meet specific criteria and do not pose undue risk. 4. Compliance and Oversight: * Requires banks to establish compliance programs to ensure adherence to the rule’s restrictions. * Large banks with significant trading activities are subject to additional oversight and reporting requirements. 5. Impact on Banks: * Banks had to restructure their trading operations, divest certain businesses, and enhance their compliance frameworks to meet the rule’s requirements. Effectiveness: * The Volcker Rule aims to reduce the likelihood of financial institutions taking on excessive risks that could lead to another financial crisis. * It has been subject to debate and revisions, with some arguing it curtails banks’ ability to provide liquidity, while others see it as essential for financial stability.

Question 61

under Dodd frank act the whistle blowers can get what %?

Answer 61

10-30% following settlement

Question 62

home ownership and equity act was an ammednment to what act ? (HOEPA)

Answer 62

Truth in Lending Act

Question 63

what is false about an ARM

Answer 63

its good long term long (answer) it has % rates that change high risk loan has smaller beginning payments

Question 64

how long do fixed rate mortgages last

Answer 64

1-10 years

Question 65

what is the most significant advantage of fixed rate mortgage

Answer 65

monthly payments remain the same

Question 66

the reason why is the LTV (loan to value ratio) importance ?

Answer 66

it allows lender to determine risk of loan

Question 67

what does 70% LTV mean ?

Answer 67

the buyer will put down a 30% deposit

Question 68

the Good faith estimate is required in how many days ?

Answer 68

3 days from application

Question 69

Good faith estimate has been replaced by ?

Answer 69

Loan Estimate

Question 70

during initial stage of application process the buyer can only be charged for ?

Answer 70

credit check

Question 71

what is the usual loan origination fee?

Answer 71

0.5-1%

Question 72

mortgage is required when down payment is less than ?

Answer 72

20%

Question 73

In an adjustable-rate mortgage loan, recast: A.Is the time in the loan term where periodic payments must be of sufficient amount to fully amortize the loan within the remaining term B.Occurs when the terms of a mortgage loan are modified C.Is the time during which interest-only payments may be made on a loan D.Is a provision allowing the borrower to change the amount of principal owing each month

Answer 73

The answer is is the time in the loan term where periodic payments must be of sufficient amount to fully amortize the loan within the remaining term. Recast is the time within a loan’s term at which payments that will fully amortize the loan over its remaining term are required. In other words, recast occurs at the end of the period during which payments on an adjustable-rate mortgage are based on a low introductory rate. Interest-only payments may be made on an interest-only loan, or negatively-amortizing payments may be made on a negative amortization loan.

Question 74

If a loan file contains fraudulent documentation, which of the following is LEAST likely to happen? A.The mortgage loan originator could be required to repurchase the loan B.The borrower's interest rate could be increased C.The mortgage loan originator could be fined up to $1,000,000, imprisoned for up to 30 years, or both D.The mortgage loan originator could be responsible for any financial loss resulting on the loan

Answer 74

The answer is The borrower's interest rate could be increased. It is mortgage fraud to participate in the submission of a fraudulent mortgage loan application. A licensee that participates in such fraud could be subject to 30 years in jail and/or up to $1 million in fines. If set forth in any contract between the lender and the loan originator, the loan originator could also be required to reimburse the lender for any loss it incurs or repurchase the loan. A buyback or repurchase agreement provides that the investor may return the loan to the originating lender if the borrowers default within a specified period of time (e.g., within the first three or six months), there is evidence of loan fraud, or the loan does not comply with regulatory requirements.

Question 75

When may a mortgage loan originator give preferential treatment to a borrower? A.Any time B.Never C.Never, unless the borrower is a member of a minority race D.At any time, as long as it is not based on a class covered by the Equal Credit Opportunity Act

Answer 75

The answer is At any time, as long as it is not based on a class covered by the Equal Credit Opportunity Act. The Equal Credit Opportunity Act (ECOA) was enacted in 1974 with the goal of ensuring that all persons, consumers, and businesses are given an equal chance to obtain credit. A creditor cannot discriminate against, or give preferential treatment to, an applicant in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age, because all or part of income derives from a public assistance program, or because he or she has in good faith exercised any right under the Consumer Credit Protection Act.

Question 76

Why would a lender have a problem with double contracts? A.Relevant information is being kept from the lender B.Appraisals are difficult with two contracts C.It is unclear which purchase price should be used when calculating the LTV D.Lenders do not allow seller financing

Answer 76

Why would a lender have a problem with double contracts? A.Relevant information is being kept from the lender B.Appraisals are difficult with two contracts C.It is unclear which purchase price should be used when calculating the LTV D.Lenders do not allow seller financing

Question 77

Why would a lender have a problem with double contracts? A.Relevant information is being kept from the lender B.Appraisals are difficult with two contracts C.It is unclear which purchase price should be used when calculating the LTV D.Lenders do not allow seller financing

Answer 77

The answer is Relevant information is being kept from the lender. Mortgage fraud using double contracts is also called "contract kiting." In this type of fraud, a seller agrees to create a second, falsified sales agreement with an inflated purchase price in order to obtain a larger loan from a lender. This would result in the buyer obtaining all the funds necessary to pay off the seller’s lower actual selling price from the loan proceeds and the lender being undersecured and subject to greater loss in the event of default.

Question 78

Ethical Behavior Related to Loan Origination Activities Question To pay an appraiser based on whether a mortgage loan closes is: A.A normal business practice B.Permissible if the appraiser's fee is based on a percentage of the loan C.Prohibited unless the appraiser agrees to the arrangement prior to beginning work D.Coercive conduct

Answer 78

The answer is coercive conduct. In connection with an appraisal, it is prohibited for a person to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate a person, appraiser, appraisal management company, firm, or other entity conducting or involved in the appraisal in order to influence the appraiser’s independent judgment. Additionally, a creditor may not mischaracterize the appraised value of the property, seek to influence an appraiser or otherwise to encourage a targeted value to facilitate making or pricing the transaction, or withhold or threaten to withhold payment for either an appraisal report or appraisal services.

Question 79

A mortgage loan originator discovers that her borrowers created, edited, and printed their own W-2s on their home computer in order to show enough income to qualify for the requested loan. If the mortgage loan originator does not disclose this information to the lender, what could happen to the mortgage loan originator? A.The mortgage loan originator could be fined up to $10,000, serve up to one year in prison, or both B.Either the mortgage loan originator could be fined up to $10,000 or serve up to one year in prison, but not both C.The mortgage loan originator could be fined up to $1,000,000, serve up to 30 years in prison, or both D.Nothing; the responsibility of accurate income disclosure lies on the person giving the information - the borrower could be in trouble, but the mortgage loan originator should be fine

Answer 79

The answer is The mortgage loan originator could be fined up to $1,000,000, serve up to 30 years in prison, or both. If a loan originator knows that his or her prospective borrower has submitted false information on the loan application, he or she is guilty of mortgage fraud. If a loan originator is found to have made or participated in the making of a false mortgage loan application and/or engaged in a conspiracy to commit fraud, fraud/swindles, or bank fraud, he or she is subject to 30 years in jail and/or the imposition of $1 million in fines.

Question 80

Ethical Behavior Related to Loan Origination Activities Question Paul is applying for a 30-year mortgage loan. He is 64 years old and plans to retire at age 65. The lender: A.May not consider Paul’s age in determining whether to grant him the loan B.May steer Paul to a high-cost home loan C.May consider Paul’s age in determining whether to grant him the loan D.May use the value of the collateral as a determining factor to offset Paul’s age and retirement plans

Answer 80

The answer is may not consider Paul’s age in determining whether to grant him the loan. The Equal Credit Opportunity Act prohibits discrimination on the basis of age against a loan applicant as long as the applicant is of age to enter into contracts. Regardless of age, if Paul is able to prove continuance of stable, steady, and sufficient income to afford the loan he is seeking, his application may move forward.

Question 81

A person who acts as a borrower on a loan because the actual buyer is unable to qualify is referred to as: A.A straw buyer B.A substitute buyer C.A proxy buyer D.A flip buyer

Question 82

The simultaneous origination of multiple loans on the same collateral is: A.Subordinate loan packaging B.Prohibited under the Truth-in-Lending Act C.Piggyback lending D.A common practice in new home construction

Answer 82

The answer is piggyback lending. Piggyback lending (also known as making a simultaneous loan) is an additional covered transaction or an open-end home equity line of credit that will be secured by the same dwelling and is made to the same consumer at the same time or before the closing on the covered transaction, or made after closing to cover the closing costs of the first transaction. Pursuant to the Ability to Repay Rule, a lender must make a determination that the borrower can pay both the first mortgage on the property and the simultaneous loan according to the terms of each loan.

Question 83

A buyer wishes to purchase a property but is unable to qualify. He pays his sister to apply for the loan and state that she will occupy the property. This is an example of the use of: A.Flipping B.Appraisal inflation C.Equity skimming D.A straw buyer

Answer 83

The answer is a straw buyer. A straw buyer is a person who allows the use of their personal information by another individual to apply for or obtain a loan. This often occurs when the actual borrower is unable to qualify for the loan based on his or her own credit history. Use of a straw buyer is mortgage fraud, and the straw buyer is often paid for the use of his or her personally-identifying information.

Question 84

The interest rate that is calculated using the loan’s index or formula that will apply after the loan is recast and the maximum margin that may apply at any time during the term of the loan is the: A.Nominal rate B.Annual percentage rate C.Qualified interest rate D.Fully-indexed rate

Answer 84

The answer is fully-indexed rate. The fully-indexed rate is the interest rate that is calculated using the subject loan’s index or formula that will apply after recast and the maximum margin that may apply at any time during the term of the loan. A loan product’s low introductory rate may not be included in the calculation of the fully-indexed rate.

Question 85

A licensee is in compliance with the Ability to Repay Rule. Which of the following is not true? A.The prospective borrower’s ability to repay the loan according to its terms has been determined B.The licensee is making a stated-income loan C.The licensee requires two years’ worth of tax returns for a self-employed loan applicant D.The licensee is making a subprime loan

Answer 85

The answer is The licensee is making a stated-income loan. The Ability to Repay Rule requires a creditor make a good faith determination that the borrower is able to repay the loan according to its terms. It must make that determination based upon a monthly payment amount calculated to fully amortize the loan at the fully-indexed rate. It also requires third-party verification of the borrower’s ability to repay in the form of documentation of income, assets, and liabilities. With a stated-income loan, both assets and employment are verified, but income is not.

Question 86

An ability-to-repay assessment includes: A.A determination as to whether the loan applicant can make a monthly payment based on a payment schedule that fully amortizes the loan over its term B.A history of the loan applicant's employment for the five years prior to application to determine expected income C.A review of the loan applicant's income and liabilities only D.A real property appraisal

Answer 86

The answer is a determination as to whether the loan applicant can make a monthly payment based on a payment schedule that fully amortizes the loan over its term. An ability-to-repay assessment includes a determination as to whether the loan applicant can make a monthly payment based on a payment schedule that fully amortizes the loan over its term. The following would be utilized in that determination: the consumer's current or reasonably-expected income or assets, other than the value of the dwelling; the consumer's current employment status; the consumer's monthly payment on the loan, calculated pursuant to the Rule, and any simultaneous loan; the consumer's monthly payment for mortgage-related obligations and any current debt obligations, alimony, and child support; the consumer's monthly debt-to-income ratio; and the consumer's credit history.

Question 87

A mortgage loan originator decides to give their neighbor a discount. This would be: A.A violation of ECOA B.A violation of RESPA C.Acceptable D.A violation of the Fair Housing Act

Answer 87

The answer is acceptable. Under Section 8 of the Real Estate Settlement Procedures Act, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, verbal or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. So long as the discount was not given with the expectation that the neighbor would refer business to the loan originator, it is not prohibited.

Question 88

A married couple applying for a loan knowingly fail to disclose an unsecured loan with an outstanding balance of $14,000 and a student loan in one spouse's name. This is: A.Permitted, as long as the applicants have a loan-to-value ratio of less than 80% B.Fraud for assets C.Fraud for housing D.Broker-facilitated fraud

Answer 88

The answer is fraud for housing. Fraud for housing involves a borrower lying about income or assets. Among the most common activities involving fraud for housing are altering the applicant’s credit history, concealment of liabilities (i.e., the loan applicant fails to fully disclose debts), and use of a straw buyer.

Question 89

A person who acts as a borrower on a loan because the actual buyer is unable to qualify is referred to as: A.A straw buyer B.A substitute buyer C.A proxy buyer D.A flip buyer

Answer 89

The answer is a straw buyer. A straw buyer is a person who uses their personal information to apply for or obtain a loan on behalf of the actual borrower, without intending to live in the home or repay the loan. This often occurs when the actual borrower is unable to qualify for the loan based on his or her own credit history. Use of a straw buyer is mortgage fraud, and the straw buyer is often paid for the use of his or her personally-identifying information.

Question 90

When advertising nontraditional mortgages on the radio, television, or billboards: A.Providers must provide clear and balanced information about the risks of these products B.Providers do not need to adhere to laws such as TILA and Section 5 of the FTC Act C.Providers may emphasize the advantages of these products over their risks D.Providers are required to indicate the initial interest rate and length of time between each adjustment period

Answer 90

The answer is providers must provide clear and balanced information about the risks of these products. When advertising a nontraditional mortgage product, the loan originator must ensure that its ads are clear and contain no false or misleading information. If a trigger term is used in the ad, additional disclosures must be made. For example, ads that tout low monthly payments or low interest rates must include adequate disclosure of other terms, such as the fact that the stated rate will apply only during a loan’s initial period, that payments will increase, and that a final balloon payment may be required.

Question 91

Which of the following would not be considered a valid changed circumstance for the issuance of a revised Loan Estimate? A.Inaccurate information B.Technical error on the disclosure C.Natural disaster D.New information

Answer 91

The answer is technical error on the disclosure. A revised Loan Estimate may be issued if a valid “changed circumstance” occurs or information previously provided and upon which the loan originator offered the original Loan Estimate changes or was inaccurate and causes a change in a settlement charge. Changed circumstances that may affect settlement costs and provide an acceptable reason to issue a revised Loan Estimate include a natural disaster, the title insurer whose fees for title insurance are disclosed goes out of business, or new information arises that reveals a pending property boundary dispute.

Question 92

Blank information on an application: A.Violates RESPA B.Must be completed by the mortgage loan originator C.Is acceptable as long as the borrower verbally provides the information D.May be a red flag for identity theft

Answer 92

The answer is may be a red flag for identity theft. Blank information on a loan application may be a sign of identity theft.

Question 93

Alma Tree is buying her first house and has saved enough money so that she can put 25% down. She works part time as a barista and earns the rest of her income as an independent contractor, writing a blog on personal finances for the single woman. Alma is working with mortgage broker Ima Furr. Alma has completed the loan application, and Ima has now requested back-up documentation. Which of the following statements is true? A.Ima must verify Alma's income from her barista job with copies of her paystubs B.Alma's handwritten records of her independent contracting income are sufficient proof of income C.Alma's blog is online, and its presence is sufficient proof of employment D.Because Alma is providing a large down payment and her mortgage payment will be relatively low, documentation of her current monthly obligations is not necessary

Answer 93

The answer is Ima must verify Alma's income from her barista job with copies of her paystubs. Under the Ability to Repay Rule, a creditor must make a good faith determination that a borrower will be able to repay the loan according to its terms. The creditor must obtain third-party verification of income, assets, and liabilities to make that determination. If a borrower is self-employed, he or she may be required to provide tax returns for a two-year period to evidence self-employment income. In this case, Alma must provide paystubs for her barista job and would likely be required to provide tax returns and other back-up documentation of income received from her blogging job.