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25 Cards in this Set
- Front
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Considering the definitions provided by the S.A.F.E. Act, which of the following mortgage industry professionals may legally communicate with a consumer to obtain the information necessary to process a loan application? |
A state-licensed loan originator An unlicensed loan processor An unlicensed underwriter Any of these The answer is any of these. An unlicensed loan processor or underwriter may obtain and analyze information (such as verifications of income, employment, and deposits) needed in processing and underwriting a residential mortgage loan, and communicate with consumers in order to obtain that information. However, loan processors or underwriters may not take applications or offer, negotiate, or counsel the consumer about residential loan rates or terms; only licensed loan originators are permitted to do so. |
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A person wanting a loan to build a house would apply for what type of loan? |
Take out Adjustable Construction Reverse mortgage The answer is construction. A construction loan or construction financing is high-interest interim (or temporary) financing that serves to finance the cost of labor and materials used during construction. It extends from the start to the completion of the work, when it is paid off, often with the proceeds of a more permanent form of financing (a take-out loan). |
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A mortgage or deed of trust generally includes a clause that provides for release of the lien when the borrower pays off the debt, called a(n): |
Alienation clause Defeasance clause Due-on-sale clause Completion clause The answer is defeasance clause. A defeasance clause provides for release of the lien when the borrower pays off the debt and is generally included in a mortgage or deed of trust. |
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ECOA requires that: |
An incomplete loan application be discarded An applicant be informed whether an application was accepted or rejected within 60 days of filing a complete application Every applicant be granted some type of loan An applicant be given notification of the status of his/her loan application within 30 days The answer is an applicant be given notification of the status of his/her loan application within 30 days. An applicant has the right to receive, within 30 days of the creditor’s receipt of an incomplete application, notice of incompleteness with a reasonable time to respond, and within 30 days after receipt of a completed credit application, notice of action taken (i.e., acceptance or adverse action). |
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Fannie Mae can best be described as: |
A government-sponsored, government-owned enterprise, formed to facilitate home ownership A government-sponsored, private, publicly-held corporation, formed to facilitate home ownership A government agency A public corporation with absolutely no ties to the government The answer is a government-sponsored, private, publicly-held corporation, formed to facilitate home ownership. 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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It is unethical and illegal to use yield spread premiums for any reason other than: |
To earn an additional commission on a loan origination To enable a creditor to earn more on a mortgage transaction To enable a loan originator to meet a monthly sales quota To help a borrower pay for settlement costs The answer is to help a borrower pay for settlement costs. Yield spread premiums (YSPs) are points credited for an interest rate above its par rate. The Loan Originator Compensation Rule, included in Regulation Z, prohibits using YSPs as a form of loan originator compensation. “No closing cost” loans result from applying the YSP to pay the borrower’s closing costs so that they need not be paid upfront. While such loans are not illegal, some states prohibit the use of terms such as “No Cost” or similar claims in mortgage loan advertising, as they are misleading and deceptive. |
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A lender may charge a borrower for an appraisal fee once the borrower has received the Loan Estimate and: |
The Closing Disclosure Indicated an intent to proceed with the loan Paid a credit report fee Met with a financial counselor The answer is indicated an intent to proceed with the loan. 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 an intent 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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A borrower wishes to refinance their home, which appraises for $450,000. If their loan amount is $375,000, what is the LTV? |
75% 83.3% 80% 73.3% The answer is 83.3%. To get the loan-to-value (LTV) ratio, divide the loan amount by the property value: $375,000 / $450,000 = 0.833 = 83.3% |
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A scenario in which a person forces the sale of a home at a much lower value than its true worth, then resells the home at its true value, is known as: |
Property flipping A short sale An air loan Property flopping The answer is property flopping. Property flopping is associated with short sales, and it typically occurs when a short sale is approved based on a misrepresentation of the value of the property. The fraud is usually perpetrated by the buyer purchasing the property from the short sale seller. In some cases, the seller's real estate agent is the buyer. The buyer presents a low offer to purchase the property to the lender along with an artificially low valuation of the property, in order to convince the lender that the property is worth less than it really is. Any higher offers from bona fide buyers are withheld from the lender, who would most likely reject the low offer if it knew that higher offers were on the table. Once the lender approves the short sale at the artificially-low price, the fraudster contacts the bona fide buyer or markets the property at its true market value. |
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The agency that focuses its actions directly on consumers, consolidates responsibilities and supervision of financial entities, products, and services, and protects consumers from unfair, deceptive, and abusive acts and practices is the: |
Consumer Protection Agency Consumer Financial Protection Bureau Federal Housing Administration Department of Housing and Urban Development The answer is Consumer Financial Protection Bureau. The mission of the CFPB is to make markets for consumer financial products and services work for Americans. It is focused on one goal: watching out for American consumers in the market for consumer financial products and services. This includes ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families by making sure prices are clear upfront, risks are visible, and nothing is concealed in fine print. A working market allows consumers to make direct comparisons among products and prohibits providers from using unfair, deceptive, or abusive practices. |
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The earliest point at which a borrower could request cancellation of private mortgage insurance is: |
Principal balance reaches 70% of the original purchase price Principal balance reaches 85% of original value Principal balance reaches 75% of the current appraised value Principal balance reaches 80% of original value The answer is principal balance reaches 80% of original value. To obtain a loan with a small down payment, a borrower pays a mortgage insurance premium either as a lump sum at closing covering the life of the loan, or by paying the first year's premium at closing and then paying annual premiums as part of the mortgage payment. The amount of the premium is a percentage of the loan amount, based on the borrower's down payment. The annual premiums and the insurance stop automatically once the loan is paid down to 78%, or may be canceled at the borrower’s request once the loan balance reaches 80% of the value of the property at the time the loan was made. |
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The S.A.F.E. Act defines a loan processor as: |
An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator An individual employed by a state-licensed mortgage broker An individual employed by a depository institution An individual who has applied for licensing as a loan originator but has not yet completed all the licensing requirements The answer is an individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator. Under the S.A.F.E. Act’s definition, a loan processor or underwriter is an individual who, with respect to the origination of a residential mortgage loan, performs clerical or support duties at the direction of and subject to the supervision and instruction of a state-licensed loan originator or a registered loan originator. |
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Which of the following may be a qualified mortgage? |
A 30-year adjustable-rate mortgage loan granted to a borrower with a debt-to-income ratio of 45% A 40-year fixed-rate mortgage A 35-year fixed-rate mortgage with points and fees equaling 3.75% of the loan amount A 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan The answer is a 20-year adjustable-rate mortgage granted to a borrower based on the maximum interest rate that may apply during the first five years of the loan. A qualified mortgage is a covered transaction that provides for substantially-equal, regular periodic payments that do not provide for negative amortization, payment deferral, or (generally) a balloon payment. To be a qualified mortgage, the lender must determine the borrower’s repayment ability based on the monthly payment for mortgage-related obligations, the consumer’s reasonably-expected income and assets, and existing debt obligations. A qualified mortgage may not have a term that exceeds 30 years, provide for points and fees that exceed 3% of the total loan amount, or be granted to a borrower who has a monthly debt-to-income ratio exceeding 43%. |
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A lender's title insurance policy would insure against all of the following, except: |
Future tax liens Mechanic's liens Judgments Undisclosed encumbrances The answer is future tax liens. A lender’s title insurance policy insures the lender or mortgagee against loss caused by a borrower’s invalid title or loss of priority of the mortgage or deed of trust due to legal claims based on undisclosed encumbrances. Title insurance protects the lender against losses caused by problems that arose prior to the purchase of the property, such as mechanic’s liens, judgments, and covenants and restrictions. It would not cover future tax liens. |
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A loan which has an initial fixed-rate period, after which the rate is adjustable for the remainder of the loan term, is called: |
An I-O ARM A hybrid ARM A subprime loan A conversion loan The answer is a hybrid ARM. A hybrid ARM is a mix (hybrid) of a fixed-rate loan and an adjustable-rate loan. It has an initial period during which the rate is fixed; after this expires, the rate is adjustable for the rest of the term. |
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Which of the following would not be on a deed of trust? |
Legal description Loan amount Interest rate Borrower's name The answer is interest rate. 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. The mortgage or trust deed secures repayment of the note. Housing costs, including principal, interest, taxes, and insurance, are not typically specified on the deed of trust. |
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Which of the following is not true concerning ECOA? |
It requires lenders to notify loan applicants of their application status within 30 days Its provisions are implemented by Regulation B It requires lenders to give borrowers a copy of their appraisal and a notice stating they are entitled to a copy of the appraisal It requires the disclosure of the APR on all advertisements which contain an interest rate The answer is it requires the disclosure of the APR on all advertisements which contain an interest rate. Regulation B implements the provisions of ECOA. Under ECOA, 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. 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 no later than three business days after receiving a completed application. ECOA also requires creditors to notify loan applicants within 30 days regarding application status (i.e., incomplete, accepted, denied, etc.). |
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The Special Information Booklet must be delivered to the borrower within how many business days of the creditor’s receipt of an application? |
Three Five Seven Ten The answer is Three. A special information booklet, titled “Your Home Loan Toolkit: A Step-by-Step Guide,” must be provided within three business days of the creditor’s receipt of the application for a home purchase loan. |
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Which behavior involves conspiratorial involvement of individuals using the mortgage market to benefit financially from criminal behavior? |
Flipping Fraud for profit Money laundering Identity theft The answer is fraud for profit. Fraud for profit may involve a number of persons, such as sellers, mortgage loan originators (including mortgage brokers and lenders and their individual mortgage loan originators), real estate brokers, appraisers, builders, and developers, who conspire to inflate property values and therefore loan amounts. |
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Assume that the Loan Estimate is mailed on Tuesday. The office is open six days a week and closed on Sundays. What is the earliest day on which the transaction could close? |
The following Wednesday The following Friday The following Monday The following Tuesday The answer is the following Wednesday. A creditor must provide the Loan Estimate either in person, via overnight delivery, or by placing it in the mail or delivering it no more than three business days after receipt of the consumer’s application AND no later than seven business days prior to consummation. For the purposes of determining the waiting period that must elapse between providing a Loan Estimate and consummation, a "business day" is defined to mean all calendar days except Sundays and legal public holidays. Here, the Loan Estimate is mailed on Tuesday. Seven business days from Tuesday would be the following Wednesday (Wednesday, Thursday, Friday, Saturday, Monday, Tuesday, Wednesday).
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Which of the following pieces of personal information is a borrower asked to provide voluntarily on the loan application? |
Race, ethnicity, and sex Race, age, and marital status Sex and childbearing plans Marital status and age The answer is race, ethnicity, and sex. The section titled “Information for Government Monitoring Purposes,” which asks a borrower to specify sex, race, and ethnicity, is required by the Home Mortgage Disclosure Act to aid the federal government in monitoring compliance with fair lending regulations. Supplying this information is strictly voluntary, and an applicant who does not wish to do so should check the box provided to indicate that decision. When an applicant does not 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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In the appraisal process, it is unethical and unlawful to: |
Request an appraiser to consider additional information on the subject property or comparables Threaten or pressure an appraiser to promise a specific value Forward information to an appraiser about recent sales in the area Refuse payment of an appraiser due to breach of contract The answer is threaten or pressure an appraiser to promise a specific value. Under Regulation Z, no person may, in connection with an appraisal, compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate an appraiser in order to cause the appraised value to be based on any factor other than the appraiser’s independent judgment and the pertinent facts. This does not prohibit a licensee from asking an appraiser to consider additional appropriate property information, provide further detail, or correct errors in the appraisal report. |
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Under TILA's rules in regard to higher-priced loans, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or _____ years after the loan was consummated, at the request of the consumer. |
Two Five Three Seven The answer is five. In regard to higher-priced mortgage loans, under TILA and Regulation Z, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or five years after the loan was consummated, at the request of the consumer. |
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Which of the following loans would not have monthly mortgage insurance at closing? |
All options would have monthly mortgage insurance 30-year FHA loan, 60% LTV 10-year FHA loan, 85% LTV 20-year FHA loan, 80% LTV The answer is all options would have monthly mortgage insurance. Most FHA mortgages require payment of an upfront mortgage insurance premium (UFMIP). In addition, most FHA loans require payment of an annual mortgage insurance premium, payable monthly as part of the mortgage payment. This premium is based on the loan program, the loan term, and the LTV. For all mortgages involving an original principal obligation (excluding financed UFMIP) less than or equal to 90% LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first. For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90%, the FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first. |
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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 State-licensed loan originators are only allowed to originate in the states in which they hold a license, while registered loan originators may obtain one license and conduct business anywhere Only state-licensed loan originators carry a unique identifier Registered loan originators need only ten hours of pre-licensing education, while state-licensed loan originators need 20 hours The answer is unlike state-licensed originators, registered originators are exempt from licensing requirements. A registered mortgage loan originator is an individual who meets the requirements of a mortgage loan originator, is an employee of a covered financial institution, is registered with the NMLS, and maintains an NMLS unique identifier. Unlike state-licensed originators, registered originators are exempt from licensing requirements. |
