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25 Cards in this Set
- Front
- Back
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The NMLS was established by: |
HUD The Federal Reserve Each state regulator The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators The answer is the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The Nationwide Multistate Licensing System and Registry (NMLS) is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators |
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Which of the following statements most accurately describes the term "predominant value"? |
The final value an appraiser reports on an appraisal The most common sales price for the neighborhood The highest sales price in the neighborhood The average sales price for the neighborhood The answer is the most common sales price for the neighborhood. In the context of an appraisal, the term “predominant value” refers to the price or price range appearing most frequently in the market area defined by the appraiser in the report, based on comparable sales |
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Which of the following is true regarding a creditor’s duty to give a copy of an appraisal to a borrower? |
The lender is always required to provide a copy of the appraisal promptly upon completion The lender is only required to give a copy of the appraisal for closed-end credit The lender is never required to give a copy of the appraisal to the borrower The lender is required to provide a copy of the appraisal promptly upon completion or three business days prior to consummation for closed-end credit, whichever is earlier The answer is The lender is always required to provide a copy of the appraisal promptly upon completion or three days prior to consummation for closed-end credit, whichever is earlier. A creditor is required to provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal or other written valuation must be provided the earlier of promptly upon completion, or three business days prior to consummation of the transaction for closed-end credit or account opening for open-end credit |
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A change in the value of a comparable property, made when comparing the features of the comparable property to the subject property, is known as a(n): |
Adjustment Inflation Concession Inspection The answer is adjustment. Adjustments are made when comparable properties are compared to the subject property in a mortgage loan transaction. Adjustments assign positive or negative values to certain property features to help gauge value |
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Redlining is addressed in which federal law? |
RESPA HOEPA FCRA ECOA The answer is ECOA. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in extension of credit based on race, color, religion, national origin, sex, marital status, age, potential to have or raise children, the fact that the applicant receives income from a public assistance program, or the fact that the applicant has exercised his or her rights under the Consumer Credit Protection Act. This includes the discriminatory lending pattern of redlining, in which a lender refuses to provide lending products and services on an equal basis to residents of minority neighborhoods (the term is derived from the practice of drawing red lines around minority areas on a map.) |
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Extension of credit to borrowers who cannot afford it on the terms being offered is considered by most regulators to be: |
A wise business tactic Ethical, but not legal Predatory lending Nontraditional lending The answer is predatory lending. Most regulators consider predatory lending to be the extension of credit to borrowers who cannot afford it on the terms being offered. Predatory loans can be recognized by its use of features designed to “strip away” or reduce a borrower’s equity in the collateral and increase the likelihood of foreclosure. Such conduct is considered unethical, and many of the features it utilizes are illegal |
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A mortgage which is amortized for a longer period than the actual term of the loan can best be described as what type of mortgage? |
Balloon mortgage Hybrid ARM Graduated Payment Mortgage (GPM) Fixed period ARM The answer is balloon mortgage. A partially amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance |
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Information held by the NMLS relating to the employment history or disciplinary actions taken against a mortgage loan originator: |
Is not confidential, but is not available for public access Is confidential and is not available for public access Is not confidential and is available for public access Is confidential, but is available for public access The answer is is not confidential and is available for public access. The requirements under any federal and/or state law regarding the privacy or confidentiality of any information or material provided to the NMLS continue to apply after such information has been disclosed to the NMLS. However, information or material held by the NMLS relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator, is not protected by confidentiality and is available for public access. |
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In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table? |
Has this information been verified?” “Can this amount increase after closing?” “Is this payment subject to a late fee?” “Has this information changed from the Loan Estimate?” The answer is “Can this amount increase after closing?” The first table on page 1 of the Closing Disclosure is the Loan Terms table, which lists the same information given in the Loan Estimate’s Loan Terms table (i.e., loan amount, interest rate, the monthly principal and interest, and space to indicate whether the product has a prepayment penalty or balloon payment). This information is updated to reflect the terms that will be in place at consummation, and the loan originator must answer the question “Can this amount increase after closing?” for each item |
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Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which of the following? |
Regulation C Regulation Z Regulation D Regulation B The answer is Regulation B. Under Regulation B, a loan originator may not ask whether an applicant receives alimony, child support, or separate maintenance payments not needed in order to get credit, unless he or she is first told that this information does not have to be provided. If regular alimony, child support, or separate maintenance payments need to be counted as income to qualify for credit, an applicant may be asked to prove that it has been received consistently. |
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Which of the following best describes the order in which payments will be applied according to the standard deed of trust? |
Interest, escrow, principal Principal, escrow, interest Late fees, principal, interest Interest, principal, escrow The answer is interest, principal, escrow. In a standard deed of trust, payments are applied to interest first, then to principal, and then to escrow items, such as tax and insurance payments |
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Under the Bank Secrecy Act, each institution must develop a written _____ compliance program, which must be approved by the institution's board of directors. |
Anti-money laundering Anti-trust account fraud Anti-terrorist financing Anti-discrimination The answer is anti-money laundering. Under the Bank Secrecy Act, financial institutions are required to develop a written anti-money laundering compliance program, which must be approved by the institution’s board of directors. Minimum requirements for the program include internal controls and metrics to ensure compliance; independent auditing of compliance; the designation of individuals responsible for managing compliance; and staff training for compliance |
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A person who allows the use of their personal identifying information (usually in exchange for a fee) by another individual to take out a loan is known as a: |
Straw buyer Identity thief Flipper Flapper The answer is straw buyer. A straw buyer is a person who allows the use of their personal identifying information (usually in exchange for a fee) by another individual to take out a loan |
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Which of the following labels is most likely for a balloon loan? |
180/360 1-Mar 5/2/2005 1-May The answer is 180/360. A partially amortized or balloon mortgage provides for some, but not total, amortization during the mortgage term. It has payments that are equal and regular in nature. However, the loan term is shorter than the time needed to repay the full loan balance by making those payments. Therefore, at the end of the loan term, a large balloon payment is needed to pay off the remaining balance. The loan would be labeled by indicating the loan term in months (in this case, 180) and the amortization period in months (in this case, 360 |
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The penal sum of a loan originator's required surety bond must be maintained: |
In an amount that reflects the dollar amount of loans originated In a flat-rate amount determined by each state In an amount that reflects the number of loans originated In an amount that reflects the originator's years of professional experience The answer is in an amount that reflects the dollar amount of loans originated. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated. |
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The section of the Uniform Residential Loan Application titled "Information for Government Monitoring Purposes": |
Must note the applicant's sex, race, and ethnicity, based on the lender's visual observation or the applicant's surname if the applicant refuses to provide the information Is included to aid the federal government in monitoring compliance with the Mortgage Acts and Practices Rule Is mandatory by the applicant, to ensure compliance with federal laws Is required to be completed only if the applicant is in a protected class The answer is must note the applicant's sex, race, and ethnicity, based on the lender's visual observation or the applicant's surname if the applicant refuses to provide the information. The section titled “Information for Government Monitoring Purposes” is required by the Home Mortgage Disclosure Act to aid the federal government in monitoring compliance with federal fair lending laws. The applicant should be informed that providing this information is strictly voluntary. If the applicant chooses not to provide this information, an originator taking the application on a face-to-face basis must note the applicant’s sex, race, and ethnicity on the form based on visual observation and/or the applicant’s surname. |
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Which of the following would not count as a business day for the purposes of rescission under TILA? |
Monday Saturday Sunday Day after closing The answer is Sunday. TILA gives consumers a right of rescission, allowing them to cancel the loan contract within a specified period of time for any reason in some loan transactions. In order to rescind, the consumer must forward a completed rescission form to the creditor no later than midnight of the third business day after the last of certain events occur, including consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind. For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays. |
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A borrower makes $20 per hour and works 35 hours per week. If their loan program allows a front-end debt ratio of 31%, what is the maximum housing payment for which they can qualify? |
$940.33 $868.33 $1,074.67 $956.34 The answer is $940.33. To calculate the borrower’s monthly income, earnings per hour ($20) are multiplied by hours per week (35) and weeks per year worked (52). This is divided by 12, totaling $3,033.33. To calculate the maximum housing payment (PITI), multiply monthly income by the allowable front-end ratio: $3,033.33 × 31%.(.31) = $940.33 |
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Which of the following is used to describe a loan amount which exceeds conforming loan limits? |
Subprime Jumbo Interest-only No documentation The answer is Jumbo. Conventional loans that conform to the eligibility guidelines for purchase by Fannie Mae or Freddie Mac are considered conforming loans. Fannie Mae and Freddie Mac have a maximum loan limit for loans they will purchase, which is adjusted annually. Loans to persons with satisfactory credit but that exceed this loan limit are called jumbo loans or nonconforming loans. Because these loans cannot be sold to Fannie Mae or Freddie Mac, they often have a higher interest rate than conforming loans |
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A misleading representation, omission, act, or practice is considered deceptive when, among other conditions, it is: |
Malicious Repeated Intentional Material The answer is material. A representation, omission, act, or practice is deceptive when it misleads or is likely to mislead the consumer; the consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and the misleading representation, omission, act, or practice is material |
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The APR factors in the effects of all of the following expenses, except: |
Hazard insurance premium Processing fee Origination fee Mortgage insurance premium The answer is hazard insurance premium. The annual percentage rate (APR) represents the relationship of the total finance charge to the total amount financed, as a yearly rate. It is not the same as the nominal rate (i.e., the interest rate shown in the note), as it includes all finance charges, not just interest. Among other charges, finance charges include points, loan fees, and mortgage insurance premiums, but not hazard insurance premiums |
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Homes for All considers itself a nonprofit organization. In order for its employees to be exempt from the licensing requirements of the S.A.F.E. Act, each of the following must be true about Homes, except: and |
It has tax-exempt status under the Internal Revenue Code Its employee compensation package does not encourage an employee to act in his or her own interests over that of his or her clients It promotes affordable housing It may engage in both nonprofit and for-profit activities The answer is it may engage in both nonprofit and for-profit activities. The S.A.F.E. Act provides an exemption for the licensing of loan originators that are employees of a bona fide nonprofit organization. This exemption would not apply to any for-profit activities. |
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Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: |
The appraised value The purchase price The lower of the replacement cost or the unpaid loan amount 80% of the replacement cost The answer is the lower of the replacement cost or the unpaid loan amount. Fannie Mae requires that for any first-lien mortgage (excluding a reverse mortgage), the minimum hazard insurance coverage required is the lesser of 100% of the insurable value of the improvements, as established by the property insurer, or the unpaid principal balance of the mortgage, as long as it equals the minimum amount (80% of the insurable value of the improvements) required to compensate for damage or loss on a replacement cost basis. If it does not, then the coverage that does provide the minimum required amount must be obtained |
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Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and calls the originator that day to let them know it was received and they would like to move forward, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal? |
Saturday Thursday Wednesday Friday The answer is Wednesday. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating that he or she wishes to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee. |
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Mortgage interest rates are influenced by all of the following, except: |
Foreclosure rates Regional property tax rates Loan fraud Federal Reserve activities The answer is regional property tax rates. Interest rates on long-term debt instruments, such as residential mortgages, are influenced by changes in such economic indicators as the gross domestic product (GDP), which measures the amount of goods and services produced in the United States, and the Consumer Price Index (CPI), which measures the average change in prices of consumer goods and services. Features of the economic climate, such as loan fraud, loan payoff rates, and foreclosure rates, will all have an impact on interest rates. Rates are also affected by actions taken by the Federal Reserve (the Fed), which controls the country's monetary policy, though the Fed does not itself directly set the interest rates that individual lenders will charge borrowers. Each lender will set its own prime rates (i.e., the lowest rates it charges for its best customers), as well as rates for loans to other customers based on its costs and desired profit margin. Regional property tax rates will impact monthly payments, but they do not have a direct relationship with the interest rates set for mortgage loans |
