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30 Cards in this Set
- Front
- Back
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A loan which does not require payments during the life of the loan is most likely: |
Illegal A modified mortgage A pay-option mortgage A HECM
The answer is a HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables individuals aged 62 or older to convert some of the equity in their primary residence to cash to pay living expenses, or to purchase a primary residence if they have the cash to pay the down payment and closing costs. It requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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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 The answer is aunt. Despite the broad definition of a mortgage loan originator in the SAFE Act, there are some limited circumstances in which offering or negotiating residential mortgage loan terms would not make an individual a mortgage loan originator. These include an individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member, including a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships. |
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A disclosure advising the borrower of their right to receive a copy of the appraisal must be delivered: |
At the time of application Within three business days of the application Any time during the processing of the loan Only if the loan is declined The answer is within three business days of the application. Under the ECOA Valuations Rule, no later than the third business day after receipt of an application for credit to be secured by a first lien on a dwelling, the creditor must mail or provide a notice of the applicant’s right to receive a copy of all written appraisals developed in connection with the application. |
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A loan which does not require payments during the life of the loan is most likely: |
Illegal A modified mortgage A pay-option mortgage A HECM
The answer is a HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables individuals aged 62 or older to convert some of the equity in their primary residence to cash to pay living expenses, or to purchase a primary residence if they have the cash to pay the down payment and closing costs. It requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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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 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. |
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Which of the following best describes a note (i.e., a promissory note)? |
It is given by the lender to the buyer It is both a promise to repay the money borrowed with interest and evidence of the debt It is identical to a mortgage It replaces the security instrument The answer is it is both a promise to repay the money borrowed with interest and evidence of the debt. In the typical real estate sales transaction, the seller gives the buyer a deed at closing and the buyer gives the lender a promissory note and a security instrument (i.e., a mortgage or trust deed) that creates a lien on the property. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. |
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Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower? |
UFMIP Insured amount Entitlement Guarantee fee 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. |
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All of the following are examples of prohibited misleading advertising, EXCEPT |
A mailed flyer with a mortgage loan refinancing offer in an envelope stating "Preapproved!" although, in fact, there is no preapproval in place for the consumer An ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates A commercial communication that claims to originate from the consumer's current mortgage lender, although it is actually from a different lender A mailer that attempts to create a visual impression that it is sent from a government agency, though it is in fact generated by a commercial mortgage lender The answer is an ad that refers a consumer to a consumer protection website which is not operated by the lender in order to compare average mortgage loan rates. Under the Mortgage Acts and Practices Rule (MAP Rule or Regulation N), it is a violation of the advertising regulations for any person to make a material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product, including misrepresenting loan terms (claiming a loan product is preapproved when it is not) and misrepresenting the source of a loan offer (claiming it originates from the consumer’s current mortgage lender or from a government agency when this is not the case). Referring a consumer to a consumer protection website which is not operated by the lender is not misleading nor is it a violation of the law. |
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When must a borrower receive notification of a servicing transfer? |
15 days prior to the effective date of the transfer Ten days prior to the effective date of the transfer Within 30 days of the effective date of the transfer With the borrower's next payment coupon The answer is 15 days prior to the effective date of the transfer. Under RESPA, when a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement (showing the new servicer’s name, address, and toll-free telephone numbers and showing the date the new servicer will begin accepting payments) at least 15 days before the effective date of the servicing transfer. |
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When must a borrower receive notification of a servicing transfer? |
15 days prior to the effective date of the transfer Ten days prior to the effective date of the transfer Within 30 days of the effective date of the transfer With the borrower's next payment coupon The answer is 15 days prior to the effective date of the transfer. Under RESPA, when a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement (showing the new servicer’s name, address, and toll-free telephone numbers and showing the date the new servicer will begin accepting payments) at least 15 days before the effective date of the servicing transfer. |
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In regard to obtaining property, the S.A.F.E. Act states that loan originators: |
May do so in any way they see fit May not do so in the course of their professional duties Must not do so by fraud or misrepresentation Must not do so without using the services of a real estate licensee The answer is must not do so by fraud or misrepresentation. Under the S.A.F.E. Act, it is prohibited for any person, when engaging in mortgage loan origination activity, to obtain property by fraud or misrepresentation. |
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Loan originator compensation records must be retained for at least: |
Three years Two years Four years Five years The answer is three years. A creditor must maintain, for three years after the date of payment, sufficient records to evidence all compensation it pays to a loan originator, and the compensation agreement that governs those payments. |
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A borrower owes $200,000 on a first mortgage, and $50,000 on a line of credit with a maximum amount of $100,000. If the property appraises for $500,000, what is the CLTV? |
50% 60% 70% 40% The answer is 50%. When secondary financing is a line of credit, the loan balance plus any draw amount is used to calculate the combined loan-to-value ratio (CLTV). In this case, the CLTV would be $200,000 + $50,000 / $500,000 = 50%. |
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According to the Interagency Guidance on Nontraditional Mortgage Product Risks, relying on an individual's capacity to repay the loan as structured from resources other than monthly income is: |
Considered unsafe and unsound A strong mitigating factor Acceptable only with property securitization Acceptable only with proper disclosure The answer is considered unsafe and unsound. The Interagency Guidance on Nontraditional Mortgage Product Risks emphasizes the importance of establishing a borrower’s ability to repay a loan based on the borrower’s existing resources, primarily monthly income, rather than the value of the collateral pledged. Loans to borrowers who do not demonstrate the capacity to repay the loan from sources other than the collateral pledged are generally considered unsafe and unsound. |
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ABC Financing grants a loan to a borrower, believing the borrower has invested his own money in the down payment and closing costs. However, the borrower has actually borrowed the needed funds from the seller, secured by an undisclosed and unrecorded second mortgage. One name for this second mortgage is: |
Silent second Double escrow Package money Open-end The answer is silent second. In the fraudulent activity termed “silent second,” a primary lender grants a loan to a borrower who the lender believes has invested his/her own money in the down payment and closing costs. However, the borrower has actually borrowed the needed funds from the seller secured by an undisclosed and unrecorded (i.e., silent) second mortgage. |
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Which of the following entities was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government? |
Ginnie Mae Vinnie Mac Fannie Mae Federal Housing Administration The answer is Fannie Mae. The Federal National Mortgage Association (FNMA), or Fannie Mae, was established in 1938 by amendments to the National Housing Act, in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. It is a government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. |
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Andy Agent likes to refer clients to Larry Lender, because Larry will frequently send Andy a gift certificate for the referrals. Which of the following is most true? |
Larry could be fined up to $1,000,000, imprisoned for up to 30 years, or both for violating RESPA Both Andy and Larry could be fined up to $10,000, imprisoned for up to 1 year, or both for each incidence, because they are both violating RESPA As long as the gift certificate is for $50 or less and is not solicited by Andy, neither party is violating federal law Only Larry is violating RESPA and is subject to the maximum statutory penalty The answer is both Andy and Larry could be fined up to $10,000, imprisoned for up to 1 year, or both for each incidence, because they are both violating RESPA. Under Section 8 of RESPA, it is illegal to give or accept any fee, kickback, or other thing of value under any agreement or understanding, oral or otherwise, that business relating to or part of a settlement service involving a federally-related mortgage loan will be referred to any person. Since a gift certificate is a thing of value, both Larry and Andy are guilty of violating RESPA and may suffer the legal consequences of this violation |
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When would business tax returns be required as documentation of income for a borrower? |
If the borrower owns 15% of a company If the borrower owns more than 25% of a company If the borrower receives a K-1 from a company If the borrower is an officer of a company The answer is if the borrower owns more than 25% of a company. A self-employed borrower (i.e., one who owns 25% or more of a business) may need to verify his/her employment with a copy of a current business license, a year-to-date profit-and-loss statement prepared by an accountant, and balance sheets and personal and/or business tax returns for the past two years. |
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Mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities in the: |
Secondary mortgage market Capital market Primary mortgage market Federal reserve market The answer is secondary mortgage market. The secondary mortgage market is where mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities. It is comprised of investors and lenders that buy and sell real estate mortgages or guarantee loans from primary market lenders. |
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Mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities in the: |
Secondary mortgage market Capital market Primary mortgage market Federal reserve market The answer is secondary mortgage market. The secondary mortgage market is where mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities. It is comprised of investors and lenders that buy and sell real estate mortgages or guarantee loans from primary market lenders. |
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Which of the following is a government-owned entity which facilitates home ownership in the United States? |
Georgie Mac Ginnie Mae Freddie Mac Fannie Mae The answer is Ginnie Mae. The GNMA, also known as Ginnie Mae, is a government corporation within HUD. Its purpose is to facilitate home ownership in the United States and increase the supply of credit available for housing, by directing funds from the securities market into the mortgage market. It does this by guaranteeing mortgage loans made by private lenders and insured by the FHA or guaranteed by the VA or the USDA, which are then placed into mortgage-backed securities and issued by the private party that holds them. |
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According to ECOA, when could a lender ask a borrower about their race? |
If they ask for monitoring purposes Never If the borrower's race is not evident If the loan is not federally-regulated The answer is if they ask for monitoring purposes. Under ECOA and the Home Mortgage Disclosure Act (HMDA), in order for the government to be able to monitor compliance with fair lending laws, it is permissible for a mortgage licensee to ask applicants for information about their marital status, age, ethnicity, race, and sex. |
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Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? |
No limit One month Three months Six months The answer is no limit. Federal law does not place general restrictions on the adjustment period allowed on an ARM. |
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Under the S.A.F.E. Act, mortgage loan originator license applicants must complete how many hours of pre-licensing education? |
20 10 25 30 The answer is 20. In order to obtain a mortgage loan originator license, an individual must complete required pre-licensing education consisting of at least 20 hours of NMLS-approved education. The S.A.F.E. Act specifies that the education must include at least three hours of federal laws and regulations, three hours of ethics, and two hours of training related to lending standards for nontraditional mortgage products. |
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Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? |
No limit One month Three months Six months The answer is no limit. Federal law does not place general restrictions on the adjustment period allowed on an ARM. |
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Under the S.A.F.E. Act, mortgage loan originator license applicants must complete how many hours of pre-licensing education? |
20 10 25 30 The answer is 20. In order to obtain a mortgage loan originator license, an individual must complete required pre-licensing education consisting of at least 20 hours of NMLS-approved education. The S.A.F.E. Act specifies that the education must include at least three hours of federal laws and regulations, three hours of ethics, and two hours of training related to lending standards for nontraditional mortgage products. |
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A mortgage broker originates and closes a mortgage loan, but it is funded by the lender who is purchasing the loan from the originating broker. This is an example of: |
Warehouse lending Mortgage brokering Table funding Wholesale lending The answer is table funding. In table funding arrangements, a mortgage broker will originate, process, and close in its own name a loan underwritten and funded by a secondary lender, but will then assign the loan to the funding lender at the closing table. |
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Which of the following is most likely to be a violation of the Equal Credit Opportunity Act? |
Failing to give a borrower notice of the right to rescind Denying an application based on economic characteristics Requiring a borrower to verify residency or citizenship status Declining a loan due to the borrower's race The answer is declining a loan due to the borrower's race. The Equal Credit Opportunity Act (ECOA) ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract). Declining a loan due to the borrower's race is a violation of ECOA. |
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Which of the following is most likely to be a violation of the Equal Credit Opportunity Act? |
Failing to give a borrower notice of the right to rescind Denying an application based on economic characteristics Requiring a borrower to verify residency or citizenship status Declining a loan due to the borrower's race The answer is declining a loan due to the borrower's race. The Equal Credit Opportunity Act (ECOA) ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract). Declining a loan due to the borrower's race is a violation of ECOA. |
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Which of the following borrowers would be considered self-employed for underwriting purposes? |
A borrower who is a vice president for a company, of which she is a 20% owner A borrower who receives only commission reported on a W-2 A borrower who files Form 2106 with her tax returns A borrower who is a salesperson for a company, of which she is a 30% owner The answer is borrower who is a salesperson for a company, of which she is a 30% owner. A self-employed borrower is one who owns 25% or more of a business. |
