Illinois Test

Front 1

What benefits does the secondary market provide to the primary market in the mortgage industry?

Back 1

Source of funding and lending guidelines

Front 2

Illinois property taxes are paid:

Back 2

In arrears

Front 3

Which city in Illinois has an anti-predatory lending ordinance?

Back 3

Chicago

Front 4

A document that ensures a debtor will make payment on a loan is called:

Back 4

A note

Front 5

Which of the following best defines APR?

Back 5

Total of payments plus finance charges

Front 6

What is the up-front mortgage insurance premium on an FHA loan?

Back 6

1.5%

Front 7

What statute is promulgated by Regulation X?

Back 7

RESPA

Front 8

TILA is also known as:

Back 8

Regulation Z

Front 9

Which of the following federal statutes creates requirements for servicing statements?

Back 9

RESPA

Front 10

Section 8 of RESPA permits a mortgage originator to pay a referral fee in what amount to a real estate agent who referred business?

Back 10

Zero

Front 11

A property is valued at $295,000. There is a first and second mortgage with a 77% CLTV. The second mortgage has a 10% LTV. What is the approximate amount of the first mortgage?

Back 11

$197,650

Front 12

Calculate the P&I payment for a $178,000 loan, amortized at 20 years, with an interest rate of 7 5/8 %

Back 12

$1,447.59

Front 13

Find the interest rate for a $366,000 loan, amortized at 30 years, with a monthly P&I payment of $2,497.

Back 13

7.25%

Front 14

A loan includes terms for a 3% prepayment penalty in the 1st year, a 2% penalty in the 2nd year and a 1% penalty in the third year. The total loan amount is $250,000. How much of a penalty would the borrower pay if they refinance after 20 months of payments?

Back 14

$5,000

Front 15

A first time home buyer cannot afford the payments for the loan he has been approved on. His father agrees to place a large lump sum payment in escrow at closing. What is this called?

Back 15

Temporary buy down

Front 16

An applicant has blemished credit, poor employment history and little liquid cash reserves. The LO finds two financing scenarios – Option 1 is for a conforming loan and the lender has strict guidelines which the borrower may or may not meet. Option 2 is for a subprime loan at a much higher interest rate. What should the LO do?

Back 16

Allow the borrower to decide which loan to apply for

Front 17

On a high risk home loan in Illinois, prepayment penalties cannot exceed:

Back 17

3% in the first year

Front 18

According to the Illinois High Risk Home Loan Act, a loan is defined as a “high risk loan” if it:

Back 18

Is a first mortgage and fees exceed 5% of the loan, or $850

Front 19

Who pays the yield spread premium to the originator of a mortgage loan?

Back 19

Lender

Front 20

What is the government’s role in FHA loans?

Back 20

A lender provides the funds and the government insures the loan

Front 21

What are DU and LP?

Back 21

Automated underwriting systems

Front 22

Investors require PMI for what reason?

Back 22

To protect the note holder in case of borrower default

Front 23

A couple purchases a home. The couple is considered:

Back 23

Mortgagor

Front 24

What type of investments does the secondary market provide?

Back 24

Mortgage backed securities

Front 25

Loan flipping is prohibited by which of the following?

Back 25

Illinois High Risk Home Loan Act

Front 26

A real estate agent who frequently makes referrals has been discouraging potential home buyers from obtaining inspections on older properties. What should an LO do?

Back 26

Find another referral source, advise the homebuyers to get inspections, report the agent to the state regulator

Front 27

Who is in charge of ensuring compliance with the Residential Mortgage License Act of 1987?

Back 27

Department of Financial and Professional Regulation

Front 28

What purpose does a flood elevation certificate serve?

Back 28

It indicates whether a property is in a flood area

Front 29

What is the best definition of HMDA’s purpose?

Back 29

It ensures that lenders are serving the community by lending fairly

Front 30

What do wholesale lenders primarily do?

Back 30

Underwrite, service, sell

Front 31

Which of the following explanations for credit deficiencies would be the least worrisome for an underwriter?

Back 31

Serious illness or medical emergency

Front 32

Which of the following signifies the beginning and end of a loan cycle, prior to the loan being paid off?

Back 32

Origination and servicing

Front 33

Which of the following best describes the ratio of interest and principal in a monthly mortgage payment, according to standard amortization?

Back 33

The interest decreases and the principal increases

Front 34

According to the Illinois Residential Mortgage License Act, it is not permissible for a loan originator to collect which of the following at the time of application?

Back 34

Non-refundable commitment fee

Front 35

Which of the following would be the strongest compensating factor for underwriting a loan with a high LTV?

Back 35

Large liquid reserves

Front 36

A borrower is told they will pay one point directly to the mortgage broker. What is this payment called?

Back 36

Broker fee

Front 37

Which of the following is NOT true, concerning a broker agreement?

Back 37

In a claim arising from the agreement, the borrower can be refunded fees including those paid to a third party

Front 38

What is the best way for a borrower to avoid predatory lending schemes?

Back 38

Participate in homeowner counseling programs

Front 39

According to the Illinois High Risk Home Loan Act, an applicant may complete home buyer counseling at the suggestion of:

Back 39

The lender

Front 40

What process is used to determine the final value of the subject collateral?

Back 40

Appraisal

Front 41

What is the time limit for a consumer to file a claim under the Illinois High Risk Home Loan Act?

Back 41

Five years

Front 42

Which of the following statutes prohibit discrimination based on gender, race, and familial status in a mortgage lending transaction?

Back 42

Fair Housing Act

Front 43

A borrower is denied a loan because he is handicapped. The lender has violated which of the following federal statutes?

Back 43

Fair Housing Act

Front 44

Calculate the per diem interest for the following loan components, assuming a 365 day year.
Loan Amount - $150,000
Interest Rate – 7 1/8 %

Back 44

$29.28

Front 45

A borrower wants to know how long it will take to recover the costs of a permanent buy down that reduces their interest rate from 7.125% to 6.375%. Their loan amount is $345,000 and the term is 30 years. The buy down fee is three points. How many months would it take the borrower to break even?

Back 45

Less than 61 months

Front 46

Which of the following is a fee charged to a borrower for elimination of their debt under a mortgage note, prior to the lender’s intended term?

Back 46

Prepayment penalty

Front 47

Why does a lender charge more for a longer rate lock?

Back 47

They are allowing the borrower the privilege of taking advantage of today’s interest rate (which may be lower) at a later date

Front 48

Aside from interest rate reduction and cash out, what is another benefit of a refinance transaction?

Back 48

Eliminating PMI

Front 49

Which of the following could be used in lieu of bank statements for documentation?

Back 49

VOD

Front 50

Borrowers have a contract on a new home, contingent upon the sale of their current home. During processing, the loan originator discovers they have taken their current home off the market and intend to rent their new purchase instead of maintaining it as their primary residence. What should the LO do?

Back 50

Inform the underwriter of the turn of events and advise the borrowers that they may face higher interest rates and fees due to the change