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25 Cards in this Set
- Front
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Under RESPA, the servicer may require a borrower to pay into an escrow account to cover disbursements that are unanticipated or disbursements made before the borrower’s monthly payments are available in the account, a cushion or reserve that must be no greater than _____ of the estimated total annual disbursements from the escrow account. |
One half One third One sixth One twelfth The answer is one sixth. Under RESPA, a lender may require the borrower to establish an escrow account at closing. The loan servicer may require a borrower to pay into the account to cover disbursements that are unanticipated or disbursements made before the borrower’s monthly payments are available in the account. This is the escrow cushion or reserve, which must be no greater than one sixth of the estimated total annual disbursements from the escrow account. |
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Stan has been in his house for 15 years and built up $100,000 in equity. He decides to do some remodeling and pay off some bills, and he wants to use a closed-end home equity loan to pay for it. He meets with Lending Guys and, because he has a great credit history, gets loan approval right away. Two weeks later he signs the documents. Which of the following is true? |
Stan may rescind the loan at any time during the term of the loan Stan’s loan is not subject to provisions of the Real Estate Settlement Procedures Act Stan may rescind the loan within 3 business days of consummation Stan was required to provide Lending Guys with a Certificate of Completion prior to signing his final documents, indicating that he has completed homeownership counseling with a HUD-approved provider The answer is Stan may rescind the loan within 3 business days of consummation. A borrower refinancing a primary dwelling with an open or closed end loan may cancel (rescind) the loan within 3 business days following closing. This right does not extend to the entire term. A borrower is NOT required to complete homeownership counseling unless the loan is a high-cost home loan. |
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For which of the following reasons would it be permissible to refuse to take an application from a potential borrower? |
The applicant has poor credit and you do not feel there is any way that he will meet lender guidelines You do not "click" with the applicant and would rather not do business with him The lender does not accept applications from the neighborhood where the applicant lives The applicant has alluded to the fact that he is submitting false documents in order to qualify for a larger loan The answer is the applicant has alluded to the fact that he is submitting false documents in order to qualify for a larger loan. A loan originator should not be an accessory to fraud by taking an application based on what he knows or strongly suspects to be fraudulent information. In all other cases, credit decisions should be left to the lender and/or its underwriting department, and should never be based on discriminatory factors or personal whims (not “clicking” with the applicant or denying access to credit based on |
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Which of the following is true regarding APR tolerance levels? |
The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements APR tolerance levels are not a feature of federal law The APR is considered accurate generally, if it is not more than one half of one percentage point (.5%) above or below the APR determined in accordance with legal requirements Any change in the APR requires re-disclosure The answer is The APR is considered accurate if it is not more than one eighth of one percentage point (.125%) above or below the APR determined in accordance with legal requirements. The APR is considered accurate generally, if it is not more than one eighth of one percentage point (.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); and in an irregular transaction, if it is not more than one quarter of one percentage point (.25%) above or below the annual percentage rate determined in accordance with legal requirements |
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Mortgage insurance insures against losses incurred as a result of: |
A borrower's late payment Fire Foreclosure Natural disaster The answer is foreclosure. Private mortgage insurance (PMI) is an insurance policy issued to provide protection to the mortgage lender in the event of financial loss due to a borrower's default that results in foreclosure. In the event of a foreclosure, the insurance company will either purchase the loan or let the lender foreclose and pay the lender for its losses up to the face amount of the policy |
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A “straw buyer” is: |
MA buyer who is a victim of identity theft A buyer who uses another individual’s identity in order to obtain a mortgage for which he or she is not eligible A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application A buyer who intends to purchase property but does not intend to occupy it The answer is a buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application. A straw buyer is a person who purchases the property or applies for the loan in his or her own name for the actual borrower and is typically paid for the use of his or her personally identifying information. |
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Under the Fair Housing Act: |
Lending decisions cannot be made based on residency status Charging different fees based on race is prohibited Lenders must provide clear, plain-language disclosures Lenders are required to report demographic information to the federal government The answer is charging different fees based on race is prohibited. The Fair Housing Act prohibits discrimination in the sale, rental, and financing of any residential housing based on race, color, religion, national origin, sex, familial status, or mental or physical handicap, and therefore, prohibits charging different fees based on race. Residency status is not a protected category under the Fair Housing Act. Disclosure requirements are not imposed by the Fair Housing Act. Government reporting requirements are covered under the Home Mortgage Disclosure Act (HMDA). |
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This term refers to the practice of adjusting certain types of non-taxable income during underwriting. |
Flopping Inflating Ballparking Grossing up The answer is grossing up. Certain types of income may be grossed-up during underwriting. Underwriters may gross-up Social Security income, child support, and some other forms of income, subject to limitations based on product type and other guidelines. |
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Which federal law requires individuals to pass a written exam in order to obtain a mortgage loan originator license? |
Housing and Economic Recovery Act Mortgage Professionalism and Accountability Act Mortgage Disclosure Improvement Act Secure and Fair Enforcement for Mortgage Licensing Act The answer is Secure and Fair Enforcement for Mortgage Licensing Act. Under the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act), an applicant for a mortgage loan originator license must pass a written national test developed by the NMLS and administered by an approved test provider that covers ethics, federal and state law, and regulations pertaining to mortgage origination, fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues. To pass, the individual must achieve a test score of at least 75%. |
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For an FHA loan that requires MIP, the annual mortgage insurance premium (payable monthly as part of the mortgage payment), is based on all of the following, except: |
Loan term State in which the subject property is located LTV Loan program The answer is state in which the subject property is located. The FHA funds insurance from a mortgage insurance premium (MIP) charged to the borrower. Most FHA mortgages 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). 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 loan-to-value (LTV) ratio |
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Applicants for FHA loans must meet a back end ratio of: |
41% 29% 36% 43% The answer is 43%. In general, applicants for FHA loans must meet a back end ratio limitation of 43%. |
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Supervisory authority afforded to state agencies over the mortgage industry allows them to impose all of the following sanctions, except: |
Order the removal and ban of individuals from employment as loan originators Suspend, terminate, or refuse renewal of a loan originator license for a violation of state or federal law Assess jail time for fraudulent activities Impose civil money penalties for individuals acting as loan originators without a valid license or registration The answer is assess jail time for fraudulent activities. Under the SAFE Act, the authority of state agencies allows them to impose sanctions including suspending, revoking, or refusing to renew a license in response to violations; ordering restitution and imposing fines; and issuing orders or directives, including ordering or directing licensees to cease and desist from conducting business, including immediate temporary orders to cease and desist. The agencies are not authorized to assess jail time to licensees for any reason |
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According to the S.A.F.E. Act, all of the following are nontraditional loan products, except: |
Interest-only ARMs Hybrid ARMs Reverse mortgages with fixed rates Interest-only fixed-rate 30-year mortgage loans The answer is interest-only 30-year mortgage loans. The S.A.F.E. Act defines a nontraditional loan as any loan product other than a 30-year fixed mortgage. All ARMs have rates that are adjustable. A reverse mortgage does not have a 30-year loan term and may have either a fixed rate or adjustable rate of interest. An interest-only loan is considered a traditional loan under the S.A.F.E. Act definition if it has a fixed rate and a 30-year term, even though the period of interest-only payments would be only five, 10, or 15 years. High-risk loans that might still be considered “traditional” under the S.A.F.E. Act include interest-only fixed-rate, no-money-down, subprime, and alternative-documentation (Alt-A) loans. |
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A husband and wife own their home as joint tenants. When the husband dies, what happens to his share in the property? |
Transfers according to the probate code Transfers to the husband's heirs Transfers to the wife Transfers intestate The answer is transfers to the wife. Joint tenants share equal ownership of the property and have equal, undivided right to keep or dispose of the property. Joint tenancy creates a right of survivorship; if any of the joint tenants die, the remainder of the property is transferred to the survivors. In this case, when the husband dies, his interest in the property would transfer to his wife |
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When must loan applicants receive an adverse action notice if they cannot qualify for a loan? |
Within 15 days of loan application Within 60 days of loan application Within 30 days of loan application Within 90 days of loan application The answer is within 30 days of loan application. 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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Which of the following would not need to be included in the notice of servicing transfer? |
Toll-free number for the old servicer Borrower's payment amount Toll-free number for the new servicer Effective date of the transfer The answer is borrower's payment amount. When a loan servicer sells or assigns loan servicing rights to another loan servicer, the borrower must be sent a servicing transfer statement at least 15 days before the effective date of the servicing transfer. This statement must show the name, address, and toll-free telephone numbers of both the old servicer and the new servicer, as well as the date the new servicer will begin accepting payments. |
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Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower’s repayment ability? |
Home Ownership and Equity Protection Act Real Estate Settlement Procedures Act Fair and Accurate Credit Transactions Act Equal Credit Opportunity Act The answer is Home Ownership and Equity Protection Act. A lender may not extend credit subject to HOEPA based on the value of the consumer’s collateral without regard to his/her repayment ability as of the date of consummation, including consideration of his/her current and reasonably expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender, and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less. |
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Which of the following is true regarding a borrower's intent to proceed with a mortgage transaction as required under federal rule? |
It must be communicated in writing It may be communicated however the borrower chooses It may not be communicated via email It may not be communicated verbally The answer is it may be communicated however the borrower chooses. A prospective borrower can indicate his/her intent to proceed with a loan in a number of ways, including orally, in person, at the time the Loan Estimate is delivered; by telephone; and in a written communication via e-mail. However, the applicant’s silence (i.e., failure to communicate that he/she will not proceed) may not be used as an indication of intent to proceed |
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A lender charges 6% interest on a $200,000, 30-year fixed-rate loan, for a property purchased for $220,000. What is the annual interest on the loan? |
$6,000 $12,000 $1,600 $1,200 The answer is $12,000. To calculate the annual interest: 6% × $200,000 = $12,000. |
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A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property. |
Straw buyer Air buyer Straw seller Air seller The answer is straw seller. A straw seller is a person who falsely claims to own a property being sold (which may or may not exist) and is typically paid in exchange for doing so. |
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Which of the following is NOT required by the BSA? |
Reporting suspicious activity and transactions Generating requests for information from FinCEN Reporting large currency transactions Implementing an anti-money laundering (AML) program The answer is generating requests for information from FinCEN. Under the BSA, financial institutions are required to establish and maintain procedures designed to ensure their compliance with the law. Federal regulations outline such requirements. Each institution must develop a written anti-money laundering compliance program, which must be approved by the institution’s board of directors. Provisions of the BSA also require a financial institution to report to FinCEN on a CTR any large currency transaction that exceeds $10,000, and to report suspicious activity and transactions to FinCEN using a Suspicious Activity Report (SAR). There is no requirement to generate requests for information from FinCEN |
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According to federal law, which of the following circumstances would require the lender to drop a borrower's private mortgage insurance (PMI) without the borrower's request? |
The current principal balance is 80% of the original purchase price The current principal balance is 78% of the original purchase price The current principal balance is 75% of the current appraised value The current principal balance is 70% of the current appraised value The answer is the current principal balance is 78% of the original purchase price. Federal law requires automatic termination of PMI on the date when the principal balance is scheduled to reach 78% of the original purchase price. For PMI to be cancelled on that date, the borrower needs to be current on payments on the anticipated termination date. |
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Which federal law specifically requires a mortgage loan originator to obtain eight hours of education annually? |
S.A.F.E. Act RESPA Section 10 HERA The answer is S.A.F.E. Act. Under the S.A.F.E. Act, licensees must annually obtain at least eight hours of continuing education courses that have been reviewed and approved by the NMLS. These hours must include three hours of federal law and regulations; two hours of ethics, including instruction on fraud, consumer protection, and fair lending issues; and two hours of training related to lending standards for the nontraditional mortgage product marketplace. States may require more than eight hours and may include requirements for hours of education related to state laws |
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When the term "jumbo loan" is used to describe a loan, the loan: |
Is subprime Is nonconforming Always has a high interest rate Has a high loan-to-value ratio The answer is is nonconforming. Conventional loans that conform to the eligibility guidelines for purchase by Fannie Mae or Freddie Mac are considered conforming loans. Fannie Mae and Freddie Mac have a maximum loan limit for loans they will purchase, which is adjusted annually. Loans to persons with satisfactory credit but that exceed this loan limit are called jumbo loans or nonconforming loans |
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Loan-to-value ratio is best described as: |
The loan amount divided by the lower of the appraised value or purchase price The appraised value divided by the loan amount The down payment divided by the appraised value The purchase price divided by the appraised value The answer is the loan amount divided by the lower of the appraised value or purchase price. The relationship of the loan amount to the value or sales price of the property securing the loan is called a loan-to-value ratio. The loan-to-value ratio (LTV) relates the loan to the lesser of the appraised value or sales price. LTV = loan amount, divided by property value (appraised value) or purchase price, whichever is less. |
