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26 Cards in this Set
- Front
- Back
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Appraisers make adjustments to comparables used in an appraisal based on: |
Size, age, and color Location, owners, and age Proximity, date of sale, and physical characteristics Season, size, and age The answer is proximity, date of sale, and physical characteristics. Adjustments are made to comparables after being analyzed for differences and similarities. The appraiser makes adjustments for location, terms, conditions of the sale, and physical characteristics. |
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Originators who mislead borrowers about the contents of their credit histories and/or their credit scores in an effort to steer them into disadvantageous loans are in violation of: |
ECOA FHA HPA FCRA The answer is FCRA. Failing to give borrowers accurate information about their credit in an effort to steer them into a loan they may be overqualified for is an ethical and legal violation of the Fair Credit Reporting Act |
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In accordance with Section 8 of the Real Estate Settlement Procedures Act, a mortgage broker may lawfully receive compensation for which of the following? |
The reasonable value of goods and/or services actually performed or provided Referring a borrower to a real estate agent Taking information to be used in a loan application and submitting the file to processing Submitting a loan to a lender The answer is the reasonable value of goods and/or services actually performed or provided. RESPA prohibits any unearned fees or unreasonable charges even if there were services performed. |
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There is a _____ accuracy tolerance for amounts stated on the Loan Estimate and the actual closing costs if the consumer is allowed to shop for his/her own settlement service provider. |
0% 10% 5% 15% The answer is 10%. Creditors have a 10% tolerance for discrepancies between estimated and actual closing costs if consumers do not have to pay the creditor or one of its affiliates for settlement services and are allowed to shop for their own services. |
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How is the margin determined? |
The broker determines margin based on the commission structure on the loan The lender sets the margin by choosing an index to tie it to The borrower chooses which margin he or she prefers The lender sets the margin based on its costs and sought-after profit margin The answer is the lender sets the margin based on its costs and sought-after profit margin. The lender determines margin, which represents the lender’s cost of doing business and its profit margin. Borrowers do not choose – but may negotiate – the margin. |
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The acronym “CHARM” stands for: |
Cost Handbook for Adjustable-Rate Mortgages Credit History on Adjustable-Rate Mortgages Consumer Handbook on Adjustable-Rate Mortgages Customer Highlights for Adjustable-Rate Mortgages The answer is Consumer Handbook on Adjustable-Rate Mortgages. The acronym “CHARM” stands for “Consumer Handbook on Adjustable-Rate Mortgages.” |
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If a borrower intends to use rental income for qualification, what amount of that income is allowable? |
The first $750 100% if the home is unencumbered The income is not allowable unless a lease has been in effect for five years or more 75% of the rental income The answer is 75% of the rental income. Rental income is allowable in calculating qualifying income, but only at 75%. |
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A mortgage broker is working with a client who is requesting an inspection of the condition of the roof prior to closing the loan. The broker refers a roofing company that is certified to complete these inspections. Which of the following is true of this arrangement? |
It is illegal and unethical for the broker to refer the borrower to this company for inspection It is unethical and illegal for the broker to receive a referral fee It is legal but unethical for the broker to receive a referral fee It is the borrower’s decision as to how a broker is compensated for referrals The answer is it is unethical and illegal for the broker to receive a referral fee. It is both illegal and unethical for the broker to be paid a referral fee in this scenario. |
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Which of the following loans are covered by RESPA? |
First liens Both first and subordinate liens Subordinate liens Neither first nor subordinate liens The answer is both first and subordinate liens. RESPA covers first and second liens on residential property. |
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Which of the following federal agencies is responsible for the enforcement of Regulation B? |
FTC FDIC NCUA CFPB The answer is CFPB. The regulations promulgated under ECOA are known as Regulation B. The federal regulatory agency responsible for ECOA is the CFPB. |
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A 15-year loan allows a borrower to pay his or her loan off in a shorter term than a 20- or 30-year loan and provides significant interest savings. Which of the following is a drawback of a 15-year mortgage? |
The rate is often lower than a 30-year mortgage The down payment can be less The borrower owns the home sooner Because of the shorter amortization period, the payments are often much higher than the 30-year loan The answer is because of the shorter amortization period, the payments are often much higher than the 30-year loan. One of the biggest drawbacks of a 15-year term is the higher monthly payments, due to a shorter amortization period. |
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Which of the following is subject to a 10% tolerance? |
Third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers Fees paid for third-party provider services for which the consumer was not allowed to shop off of the creditor’s list of service providers Amounts required to be placed into escrow accounts Fees paid to the creditor The answer is third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers. Fees and charges which, in total, may differ from the total amount of the specific fees and charges set forth in the Loan Estimate subject to a 10% tolerance limitation include recording fees; and third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers. |
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A credit report includes all of the following information, except: |
Future inquiries Applicant information Public records Current derogatory trade lines The answer is future inquiries. A credit report would not include future inquiries. |
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The Fair Housing Act prohibits discrimination based on: |
Handicap, familial status, sex, national origin, religion, color, race Race, color, religion, sex, age Race, sex, age, color, religion, handicap Race, sex, color, religion, age, familial status, handicap The answer is handicap, familial status, sex, national origin, religion, color, race. The Fair Housing Act prohibits discrimination in a manner similar to that of the Equal Credit Opportunity Act; however, the Fair Housing Act is not limited to an application for credit. The Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and handicap. |
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Which of the following federal agencies is responsible for the enforcement of Regulation X? |
FTC FDIC CFPB NCUA The answer is CFPB. The regulations promulgated under RESPA are known as Regulation X. The federal regulatory agency responsible for RESPA is the CFPB. |
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Which of the following federal agencies is responsible for the enforcement of Regulation X? |
FTC FDIC CFPB NCUA The answer is CFPB. The regulations promulgated under RESPA are known as Regulation X. The federal regulatory agency responsible for RESPA is the CFPB. |
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The FTC Disposal Rule requires a loan originator to use _____ to ensure that unauthorized access to or use of consumer information cannot occur as a result of its disposal. |
Extraordinary measures Third-party certified disposal Locked cabinets Reasonable methods The answer is reasonable methods. FACTA requires the use of “reasonable methods” to make sure a borrower’s personal information cannot be accessed as a result of its disposal. |
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A piggyback loan is most often used: |
As a bridge from one property to the next In the event a borrower is upside down on his/her loan To finance home improvement projects In order to avoid paying PMI The answer is in order to avoid paying PMI. Borrowers with more than 80% LTV are required by conforming lenders to obtain private mortgage insurance. In a piggyback scenario, a borrower takes out a simultaneous second mortgage in order to avoid paying PMI. However, the lender must, based on provisions of the Ability to Repay Rule, determine that the borrower has the ability to repay both the first and second mortgage according to their loan terms. |
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All of the following are responsibilities of the closing agent, except: |
Verify identity and notarize documents Explain the risks and benefits of the ARM product on which the client is closing Coordinate the closing process Verify that all parties have copies of forms and disclosures required for settlement The answer is explain the risks and benefits of the ARM product on which the client is closing. In broad terms, it is the closer’s job to “review” the terms of the loan with the borrower; it is not their job to “re-sell” the loan to the borrower. Full disclosure and discussion of all fees are the obligations of the borrower and should take place prior to closing. |
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An incorrect calculation of income can result in: |
The borrower being denied a loan after it is sent to underwriting All of these answers are correct The borrower needing to put more money down to lower the DTI The loan being delayed because of the inaccurate calculation The answer is All of these answers are correct. All are examples of common underwriting pitfalls that can delay a loan or cause its denial. |
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A mortgage broker advertises a 30-year fixed-rate loan at a 2.00% rate. After the borrower arrives at the office and begins an application, the broker explains that the 2.00% is no longer available, as his office was only able to do a limited number of them. This broker is in violation of what law? |
RESPA FCRA TILA Fair Housing Act The answer is TILA. Common violations of TILA with regard to marketing and sales include the advertisement of mortgage products that are not actually available. |
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Which of the following was enacted primarily because of anecdotal evidence that women were not treated on an equal basis to men when applying for credit? |
RESPA TILA ECOA FHA The answer is ECOA. The Equal Credit Opportunity Act (ECOA) is intended to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion, national origin, sex, marital status, or age. |
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Which of the following loan types is exempt from the HPA? |
FHA loans Fixed-rate loans Conventional loans Non-conforming loans The answer is FHA loans. The Homeowners Protection Act (HPA) is used to facilitate the cancellation of private mortgage insurance, or PMI. FHA loans require upfront and annual mortgage insurance premiums; they do not rely on private mortgage insurance to protect their investment. |
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Caps on ARMs: |
Are mandatory for any lender offering ARM products Prevent a lender from calling a loan due if there is delinquency Limit whether a loan is eligible for prepayment Limit the amount the interest rate or payment may change The answer is limit the amount the interest rate or payment may change. Caps on ARMs limit the amount an interest rate or payment can adjust during any one adjustment period or over the lifetime of the loan. |
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Which of the following describes a state where the lender holds legal title until the debt is paid? |
Lien theory Conveyance theory Due-on-sale clause Title theory The answer is title theory. In a title theory state, the lender holds legal title until the debt is paid, which, in theory, means the lender actually owns the home until the borrower has paid the mortgage. |
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Debt ratios for an FHA loan are: |
31% / 41% 28% / 36% 28% / 41% 31% / 43% The answer is 31% / 43%. The general debt ratios for an FHA loan are 31% housing, and 43% total debt. |
