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25 Cards in this Set
- Front
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Which of the following is least likely to be considered nonpublic personal information? |
Borrower's home phone number Employer's phone number Borrower's job title Borrower's income The answer is employer's phone number. Nonpublic personal information (NPI) is any personally identifiable financial information that a financial institution collects about an individual in connection with providing a financial product or service. NPI does not include information where there is reasonable basis to believe it is lawfully made publicly available, such as an employer’s phone number. |
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Which term is used to describe knowingly advertising or offering one set of terms that is very appealing but is not readily available and then pressuring a person into signing a contract with other, more expensive terms? |
Bait and switch Cut and run Steering Nonconforming The answer is bait and switch. Bait and switch advertising involves advertising a loan at very attractive terms and then informing potential customers that, while the advertised loan is not available, a substitute, usually more expensive or involving less appealing terms, is. |
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A 180 / 360 loan is considered a(n) ___________________ mortgage. |
Adjustable-rate Pay-option Hybrid Balloon 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. 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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Arabella Ash works for and is supervised by loan originator Jerry Jenkins, collecting and analyzing data related to residential mortgage loans. She communicates with borrowers, but does not offer or negotiate loan rates or terms or advise consumers about residential mortgage loan rates or terms. Under S.A.F.E. Act definitions, Arabella is: |
A loan originator A real estate broker A loan processor Required to be licensed The answer is a loan processor. A loan processor or underwriter is an individual who 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. Clerical or support duties include the receipt, collection, distribution, and analysis of information common for the processing and underwriting of a residential mortgage loan. These duties also include communicating with a consumer to obtain the information necessary for processing and underwriting a loan as long as such communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms. A person working solely as a loan processor or underwriter is not required to be licensed under the S.A.F.E. Act. |
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For an FHA loan, how much may the seller contribute toward the borrower’s closing costs? |
Nothing 6% of the sales price 3% of the sales price 3% of the loan amount The answer is 6% of the sales price. The FHA allows the seller to contribute up to 6% of the purchase price toward the buyer's actual closing costs, prepaid taxes and insurance, discount points, buydown fees, mortgage insurance premiums, and other financing concessions, but nothing toward the down payment. |
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A disclosure that allows a consumer to more easily compare loan options is required under which regulation? |
Regulation B Regulation Z Regulation V Regulation H The answer is Regulation Z. The TILA-RESPA Rule, included in Regulation Z, outlines the requirements for use of the Loan Estimate and the Closing Disclosure, intended to facilitate the ability of consumers to determine whether they can afford a particular loan, and/or compare specific loan products, including their costs over the life of the loan. |
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Which of the following is most true concerning a VA funding fee? |
It is always refundable It is nonrefundable It is not charged to veterans It is not charged to active members of the military The answer is it is nonrefundable. VA loans are made by approved lenders and guaranteed by the U.S. Department of Veterans Affairs. The guarantee is similar to mortgage insurance in that it limits the lender's exposure to loss in the event of a borrower's default that results in foreclosure. However, the veteran borrower is charged a nonrefundable upfront funding fee that can be financed, instead of a mortgage insurance premium for the guarantee. A veteran receiving VA compensation for a service-connected disability is exempt from the fee requirement |
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Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT: |
The loan satisfies the requirements of a balloon payment qualified mortgage A nine-month bridge loan is obtained for the construction of the borrower's primary dwelling The borrower's income is seasonal The borrower signs a waiver consenting to the balloon payment The answer is the borrower signs a waiver consenting to the balloon payment. A high-cost loan may not provide for a payment schedule with regular periodic payments that result in a balloon payment, unless the payment schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken in connection with the acquisition or construction of a dwelling that will be the borrower’s principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage. |
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The number one ethical problem cited in surveys of professionals and managers is: |
False or misleading representation of products or services in marketing, advertising, or sales Lack of sufficient disclosures Inaccuracies and lack of documentation in handling client/customer funds Deliberate attempts at fraud and misrepresentation in face-to-face meetings The answer is false or misleading representation of products or services in marketing, advertising, or sales. The number one ethical problem cited in surveys of professionals and managers is false or misleading representation of products or services in marketing, advertising, or sales efforts, usually involving various aspects of loan terms. This includes use of false or misleading advertising, use of truthful advertising in a deceptive or misleading manner, and concealing the limitations of the programs or terms being promoted. |
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When would ARM disclosures be required? |
If the initial term on an ARM is more than one year If the initial term on an ARM is less than five years For all ARMs If the initial term on an ARM is less than one year The answer is for all ARMs. For an ARM, the interest rate will change periodically, based on an index to which the rate is tied and the margin added to cover the creditor’s expenses and profit. Therefore, the borrower must be given information about the index, the margin, and the frequency of rate adjustments, in addition to other pertinent facts about the loan. For an ARM secured by a borrower’s principal residence with a term exceeding one year, additional disclosures must be provided either at the time an application form is provided or before the consumer pays a nonrefundable fee, whichever is earlier. |
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In order to meet the annual continuing education requirement, a state-licensed loan originator must complete at least _____ hours of NMLS-reviewed and -approved coursework. |
Six Eight Ten Twelve The answer is eight. A state-licensed mortgage loan originator must renew his/her license annually and must satisfy the continuing education requirement of at least eight hours of courses that have been reviewed and approved by the NMLS |
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On the Loan Estimate, fees related to third-party service providers chosen from the provider list and not affiliated with the creditor are grouped with the recording fees and subject to a: |
No tolerance limitation 10% tolerance 15% tolerance Zero tolerance The answer is 10% tolerance. In regard to tolerances related to settlement costs, fees related to third-party service providers and recording fees are grouped together and subject to a 10% tolerance. The creditor may charge more for a particular service or recording fee than initially disclosed as long as the total for all such charges, when added together, does not exceed 10% of the amount disclosed. |
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Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule? |
The state in which the property is located The amortization term of the loan Whether or not the loan is an ARM or a fixed-rate loan The loan program The answer is the state in which the property is located. If a loan originator’s compensation is based in whole or in part on a factor that is not an actual loan term but acts as a proxy for a term of transaction (such as the term and/or rate of the loan determining whether it is held in the lender’s portfolio or sold), the originator’s compensation is based on a term of the transaction and is prohibited. A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition |
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A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts? |
8% 7% 6% 9% The answer is 8%. When the rate adjusts, the new fully-indexed rate is equal to the index plus margin. In this case: 5 + 3 = 8. |
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What does "FHA" stand for, when referring to the agency which oversees the FHA loan program? |
Federal Housing Authority Federal Housing Agency Federal Housing Association Federal Housing Administration The answer is Federal Housing Administration. "FHA" stands for Federal Housing Administration. |
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Mike B. Leeve is a dreamer. He loves to invent borrowers and properties, establish fake accounts for payments, and maintain custodial accounts for escrows. He has even set up an office with a bank of telephones, with one phone representing the employer, another the appraiser, another the credit agency, etc., so he can take money from lenders and then go on a long international vacation. The loans Mike is getting are called: |
Cash-outs No cash-outs Subprime Air loans The answer is air loans. Air loans are loans secured by nonexistent property which leave the lender without collateral. The schemer invents borrowers and properties, establishes fake accounts for payments, and maintains custodial accounts for escrows. He may even set up an office with a bank of telephones for verification purposes, with each phone representing the employer, appraiser, credit agency, etc. |
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Which of these replaces the HUD-1 Settlement Statement and the final TIL Disclosure? |
The Loan Estimate The Closing Disclosure The Affiliated Business Arrangement Disclosure Statement The Mortgage Servicing Disclosure Statement The answer is The Closing Disclosure. The Closing Disclosure replaces the HUD-1 Settlement Statement and the final TIL Disclosure. It sets forth the actual costs of the subject mortgage lending transaction in a clear and understandable manner |
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Which of the following is NOT true about the financial responsibility of a mortgage loan originator? |
The penal sum of a surety bond must reflect the dollar amount of loans originated A sponsored mortgage loan originator may be covered under the sponsoring licensee’s surety bond If a mortgage loan originator pays into a state fund established to pay claims of consumers, he or she is not required to maintain a surety bond A mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year The answer is a mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year. 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. If the loan originator’s licensing state has developed and administers a fund specifically to provide protection to consumers by making funds available for claims resulting from violations of state or federal laws and regulations, in lieu of a surety bond or net worth requirement, the state may instead require the loan originator to pay a certain amount into the state fund. |
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A borrower makes $60,000 per year. The borrower's spouse makes $3,000 per month. The borrowers' monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple's back-end DTI? |
30.6% 31.25% 32.5% 29.38% The answer is 29.38%. Monthly Housing Costs + Monthly Liabilities / Gross Monthly Income = Debt-to-Income Ratio. Borrower 1's annual income is $60,000, divided by 12 = $5,000. The spouse's gross monthly income of $3,000 is added to $5,000, for a total monthly income of $8,000. The monthly housing expense ($1,500) is added to the car payment ($500) and the boat payment ($350), totaling $2,350. This figure, divided by $8,000, equals 29.38%. Typical living expenses, such as a phone bill or car insurance, are not included when calculating DTI. |
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Which of the following terms describes the fee charged to the borrower to insure an FHA loan? |
Upfront mortgage insurance premium Guaranty fee Insuring fee Funding fee The answer is upfront mortgage insurance premium. The FHA funds the insurance from a mortgage insurance premium (MIP) charged to the borrower. FHA loans require payment of an upfront mortgage insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent that a portion may be applied to the UFMIP of another FHA-insured mortgage within three years |
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Under which of the following circumstances could a borrower be charged a fee for the preparation of a settlement statement? |
The borrower requests a copy of the settlement statement 24 hours prior to closing A borrower may not be charged a fee for the preparation of a settlement statement The borrower requests a copy of the settlement statement 48 hours prior to closing The borrower requests the lender prepare the settlement statement rather than the escrow agent The answer is a borrower may not be charged a fee for the preparation of a settlement statement. Section 12 of RESPA provides that no fee can be charged by a lender for the preparation and distribution of documents required in connection with the making of a federally-related mortgage loan. |
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If a borrower has an $80,000 first mortgage, a $20,000 second HELOC on which they have $5,000 in remaining credit, and the property appraises for $100,000, what is the CLTV? |
100% 80% 75% 95% The answer is 95%. CLTV stands for combined loan-to-value, which is a ratio used when there are multiple loans secured by the same property. This is calculated by combining the amounts of the loans secured by the property, then dividing by the property value or sales price (whichever is less). In this case, $80,000 + ($20,000 - $5,000)/$100,000 = 95% |
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Once the Closing Disclosure is delivered, which of the following would require a new Closing Disclosure to be delivered to the borrower and a new waiting period before closing? |
An increase of more than 1% in cash required to close A change in the loan amount An increase in the APR by more than .125% The addition of any costs to the borrower The answer is an increase in the APR by more than .125%. A new three-business-day waiting period applies to a corrected disclosure if there are changes or corrections that relate to the annual percentage rate, the loan product, or the addition of a prepayment penalty. For other types of changes, the corrected disclosure may be provided at or before consummation. The APR is generally considered to be accurate if it is not more than one eighth of one percentage point (0.125%) above or below the APR determined in accordance with legal requirements (i.e., in accordance with the actuarial method or the United States Rule method); or in an irregular transaction, if it is not more than one quarter of one percentage point above or below the annual percentage rate determined in accordance with legal requirements. |
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Which of the following would not be considered an established business relationship under the Do-Not-Call rules? |
A consumer purchases a service from a seller A financial transaction between a consumer and a seller A consumer inquiry into the purchase of an item six months ago A consumer purchases an item from a seller The answer is consumer inquiry into the purchase of an item six months ago. Under the Telemarketing Sales Rule, a company engaging in telemarketing is prohibited from making interstate or intrastate calls to anyone whose number is listed on the Registry, unless an “established business relationship” exists. An established business relationship means a relationship between the company and a consumer based on the consumer’s purchase, rental, or lease of the seller’s goods or services, or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call, or the consumer's inquiry or application regarding an offered product or service within the three months immediately preceding the date of a telemarketing call. However, if such a consumer asks not to be contacted, the company must enter him or her on their own do-not-call list of such consumers. |
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On an ARM loan, which of the following will not be found on the note? |
Fully-indexed rate after one year Margin Adjustment parameters Identification of index The answer is fully-indexed rate after one year. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. For an ARM loan, it will typically identify the index, specify the margin, and list adjustment parameters, but will not specify the fully-indexed rate after one year. |
