Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
27 Cards in this Set
- Front
- Back
|
The risk of a balloon mortgage may be minimized by including a: |
Mandatory arbitration clause Acceleration clause Conditional refinance provision Home equity conversion provision The answer is conditional refinance provision. The risk of a balloon mortgage may be minimized by including a conditional refinance provision. |
|
|
The Derringers have rescinded their loan transaction, informing their lender of their decision by mail. They are entitled to a full refund within: |
10 days 20 days 30 days 60 days The answer is 20 days. If a borrower rescinds a transaction, within 20 days of the rescission, he is entitled to a refund of all money or property given to the creditor. |
|
|
All of the following are responsibilities of the underwriter, except: |
Confirming that a potential borrower has sufficient cash assets to close Providing a borrower with a notice of adverse action Ensuring the property is eligible and meets lender guidelines for collateral Examining the overall pattern of credit behavior and isolated occurrences of derogatory credit The answer is providing a borrower with a notice of adverse action. The underwriter is responsible for confirming that a potential borrower has sufficient cash assets to close, ensuring that the property is eligible and meets lender guidelines for collateral, and examining the overall pattern of credit behavior and isolated occurrences of derogatory credit. |
|
|
If a loan originator has not renewed his/her license by December 31st, he/she may: |
Only see through completion of those loans originated prior to license expiration Not continue to conduct any loan originator activities until the license has been renewed Continue to honor existing contracts and be compensated only for those loans already in the pipeline Continue to conduct business as normal as long as a renewal application is submitted prior to the “late renewal” deadline The answer is not continue to conduct any loan originator activities until the license has been renewed. While some state regulators will allow for a “late renewal,” after December 31st the license is expired. Therefore, the originator is technically unlicensed and may not continue to engage in any activities that require a license to conduct business. |
|
|
The ethical reason that loan processors are prohibited from negotiating a mortgage loan for a consumer is: |
To ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals To ensure that only licensed originators receive commissions from creditors To reduce the competition between employees of depository and non-depository institutions To steer consumers towards lending transactions with depository institutions The answer is to ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals. The ethical reason that loan processors are prohibited from negotiating a mortgage loan for a consumer is to ensure that the individuals guiding consumers through lending transactions are educated and qualified individuals. |
|
|
Slim Tipton, a recent widower, has just refinanced his home, which he has been renting to his son ever since he moved into a beachfront condo two years prior. The purpose of this cash out refinance is to help his son, Tiny, start a printing business. In this scenario, who receives copies of the Notice of the Right to Cancel? |
Only Slim, since his wife is no longer alive Neither Slim nor Tiny receives a Notice of the Right to Cancel Slim and his son Tiny, since Tiny is living in the home securing the refinance Slim is the only one to receive a Notice of the Right to Cancel The answer is Neither Slim nor Tiny receives a Notice of the Right to Cancel. TILA allows for a rescission period on the refinance of a borrower’s principal dwelling. Since Slim has been living in a condo as his primary residence for two years, the refinance of his previous home would be considered non-owner-occupied, which is not subject to the right of rescission. |
|
|
HUD is still responsible for implementation of: |
RESPA The Fair Housing Act TILA The Equal Credit Opportunity Act The answer is The Fair Housing Act. HUD is still responsible for implementation of the Fair Housing Act. |
|
|
A borrower obtains an ARM with a start rate of 2.5% and a periodic rate cap of 1%. The loan adjusts four times. After the fourth adjustment, the rate is expected to be 6.5%. However, due to the lifetime cap on the loan, the rate is not permitted to exceed 5%. What is the lifetime rate cap? |
1% 3.50% 5% 2.50% The answer is 2.50%. For this ARM, the lifetime cap is 2.5%. The lifetime cap limits the maximum amount by which the rate on an ARM may increase. Here, the rate is not permitted to exceed 5%. To determine the lifetime rate cap, subtract the start rate (2.5%) from the maximum rate (5%). This results in the lifetime rate cap of 2.5%. |
|
|
The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points? |
$4,000 $3,800 $3,600 $2,000 The answer is $3,600. The down payment of 10% ($20,000) is based on the purchase price of $200,000. The down payment must be deducted from the purchase price to find the loan amount. The discount points in this transaction are then based on the loan amount of $180,000. Each point is 1% of the loan amount, so a total of 2%. $180,000 × 0.02 = $3,600. |
|
|
Mr. Bob Brown earns $12.00 per hour and works 38 hours each week for his job at a retail store. His wife Matilda is paid $680 bi-weekly as a medical technician. What is their combined monthly qualifying income?
|
$3,553.33 $3,449.33 $3,940.00 $3,336.00 The answer is $3,449.33. Mr. Brown’s monthly income can be calculated by multiplying his hourly base pay rate wage ($12.00) by the average number of hours worked per week (38), yielding a weekly income of $456.00. To determine his monthly income, weekly income ($456.00) is multiplied by the average number of weeks worked per year (52) and then divided by 12. ($456.00 × 52)/12 = $1,976.00. Mrs. Brown’s income can be determined by multiplying her biweekly salary ($680) by 26 and then dividing by 12. ($680 × 26) / 12 = $1,473.33. Adding the two incomes together ($1,976.00 + $1,473.33), yields a combined monthly income of $3,449.33. |
|
|
If a loan originator license needs amending due to a change of address, the Commissioner would be made aware: |
Through submission of documents by the sponsoring employer At the next renewal date Only if the address affects the business, not the residence of the loan originator As soon as is determined in accordance with state regulator notification requirements The answer is as soon as is determined in accordance with state regulator notification requirements. A change which renders the initial application inaccurate must be made known to the NMLS and the Commissioner through an updated Individual Form. |
|
|
An advertisement that states “Refinance with 30 year fixed rates as low as 4.25%!” is |
:
A violation of TILA A TILA violation only if the loans are not available A TILA violation because it targets struggling homeowners Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true The answer is not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true. An advertisement that states “Refinance with 30 year fixed rates as low as 4.25!” is not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true. |
|
|
The Truth-in-Lending Act: |
Regulates the time a borrower is required to pay private mortgage insurance Requires that the borrower be informed of estimated closing costs within three business days of application Regulates language and terms used in advertising for credit Prohibits unlicensed brokers from offering government loan products The answer is regulates language and terms used in advertising for credit. TILA and Regulation Z prohibit the advertisement of lending terms that a lender or creditor is not actually prepared to offer. The law and regulations also seek to prevent publication of advertisements that are deceptive and misleading. |
|
|
A couple is buying a house with a sale price of $187,500 on a conventional loan, putting 3% down. The seller has agreed to pay the allowable 3% seller concession. How much should the seller expect to pay of the buyer’s cost? |
$5,456 $5,625 $10,912 $4,325 The answer is $5,625. The seller would pay 3% of the sales price, not 3% of the borrower’s loan amount. 187,500 × 3% = $5,625. |
|
|
When a lender is forced to go before a judge to enter an order of foreclosure, it is referred to as: |
Non-judicial foreclosure Judicial foreclosure Power of sale Acceleration The answer is judicial foreclosure. A mortgage or deed of trust that does not contain a power of sale clause requires the lender to go before a judge to have an order of foreclosure entered. This process is called a “judicial foreclosure.” |
|
|
Dividing the PITI by the amount of a borrower’s monthly gross income determines the: |
Total debt ratio Loan suitability Net tangible benefit Housing expense ratio The answer is housing expense ratio. PITI divided by gross monthly income calculates the housing expense ratio. |
|
|
Tom Terrific has negotiated a contract for the sale of the Flynns’ home to the Ryders. However, the contract does not involve any financing for the transaction to be completed. Tom has engaged in: |
Real estate brokerage activities Loan origination activities Loan processing activities Loan closing activities The answer is real estate brokerage activities. Real estate brokerage activity is any activity that relates to the offering of or providing real estate brokerage services to the public, including negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental or exchange of real property, other than in connection with providing financing for the transaction. |
|
|
Which of the following is least likely to be a sign of mortgage fraud? |
Signatures on documents provided by the applicant do not match one another The applicant appears to be quite young but makes a high salary Identification documents provided are blurry, hard to read, and appear to be photocopies or faxed documents Information on W-2s does not match the income of the applicant The answer is the applicant appears to be quite young but makes a high salary. An applicant who appears to be young but has a high salary would not necessarily be a sign of mortgage fraud. |
|
|
The Truth-in-Lending Act is intended to help consumers by: |
Regulating creditors and the rates they can provide Investigating predatory lending Limiting the closing costs a broker can charge Providing the consumer with information on the cost of credit The answer is providing the consumer with information on the cost of credit. The main purpose of TILA is to provide the consumer protection by requiring disclosure of the cost of credit. |
|
|
What is not required for a VA loan? |
Certificate of Eligibility Mortgage insurance premium Primary residence Total debt ratio The answer is mortgage insurance premium. A VA loan does not require mortgage insurance premium. VA loans use a funding fee |
|
|
What is not required for a VA loan? |
Certificate of Eligibility Mortgage insurance premium Primary residence Total debt ratio The answer is mortgage insurance premium. A VA loan does not require mortgage insurance premium. VA loans use a funding fee |
|
|
When a creditor takes steps legally to force the sale of a property in an effort to collect on a loan in default, it is known as: |
Repossession Foreclosure Default Acceleration The answer is foreclosure. Foreclosure is the sale of property to satisfy unpaid debt after a borrower’s default on payments. |
|
|
If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, how many adjustments will occur by the end of year seven? |
Two Five One Impossible to determine The answer is two. If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, two adjustments will have occurred by the end of year seven (once at the start of year six and once at the start of year seven). |
|
|
If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, how many adjustments will occur by the end of year seven? |
Two Five One Impossible to determine The answer is two. If an ARM loan starts at 3%, is locked for five years, and then adjusts annually, two adjustments will have occurred by the end of year seven (once at the start of year six and once at the start of year seven). |
|
|
Mortgage loan originator Edna is planning an advertisement that indicates the number of payments required to pay off a specific loan. This statement is a: |
Prohibited statement Trigger term Permissible representation if it is accurate Hypothetical only The answer is trigger term. A trigger term is any of the following specific credit terms: the amount or percentage of any down payment, except when the amount of the down payment is zero; the number of payments or period of repayment; the amount of any payment; and the amount of any finance charge. |
|
|
The implementing regulations for the MAP Rule are known as |
:
Regulation N Regulation Z Regulation C Regulation X The answer is Regulation N. The implementing regulations for the MAP Rule are known as Regulation N.
|
|
|
Which of the following statements accurately describes the scope of HOEPA? |
The provisions of HOEPA apply to first-lien loans where the home securing the loan is located in a neighborhood targeted by subprime lenders The provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower’s principal residence The provisions of HOEPA apply to subordinate-lien loans when the home securing the loan is either owner occupied or non-owner occupied The provisions of HOEPA apply only to first-lien loans that are secured by a borrower’s principal residence The answer is the provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower’s principal residence. HOEPA applies to first- and subordinate-lien transactions that are secured by the borrower’s principal residence. |
