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47 Cards in this Set
- Front
- Back
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The preferred debt-to-income ratio for applicants for VA loans is |
35% 43% 50% 41% The answer is 41%. The preferred DTI ratio for VA loans is 41%. However, if a veteran cannot meet this limit, creditors may use a residual income analysis |
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When would a license be suspended without a hearing? |
If a licensee fails to renew If a licensee fails to request a hearing with the state regulator If a licensee has failed to complete pre-licensing requirements If a licensee has already executed a right to a hearing for a previous violation The answer is if a licensee fails to request a hearing with the state regulator. The NMLS does not require a hearing. Under most circumstances, the licensee has the right to request a hearing with the state banking department. If one is not requested, a hearing is not conducted. |
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After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after: |
Five years have passed The home is sold to a new owner The original VA loan is satisfied The original VA loan is moved from his or her name into the name of the assuming borrower The answer is the original VA loan is satisfied. A VA loan is assumable; however, the veteran’s VA eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan. |
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During initial application, loan originators must make disclosure of all of the following, except: |
Regulatory history Criminal history Civil and administrative records Three-year history of loan production The answer is three-year history of loan production. A loan originator is not required to document prior experience or production history as a condition of licensure |
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During initial application, loan originators must make disclosure of all of the following, except: |
Regulatory history Criminal history Civil and administrative records Three-year history of loan production The answer is three-year history of loan production. A loan originator is not required to document prior experience or production history as a condition of licensure |
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In order to qualify for an adjustable-rate mortgage, a consumer must be able to show that he or she can: |
Make regularly scheduled payments that are calculated using the loan’s introductory rate Make amortizing payments that are calculated using the fully indexed rate for the ARM Make amortizing payments that are calculated using the loan’s rate after the first interest rate adjustment occurs Make regularly scheduled payments that are calculated using the fixed interest rate for which the consumer would be eligible The answer is make amortizing payments that are calculated using the fully indexed rate for the ARM. Qualifying for an ARM requires a consumer to demonstrate an ability to make amortizing payments that are calculated at the loan’s fully indexed rate. |
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During initial application, loan originators must make disclosure of all of the following, except: |
Regulatory history Criminal history Civil and administrative records Three-year history of loan production The answer is three-year history of loan production. A loan originator is not required to document prior experience or production history as a condition of licensure |
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In order to qualify for an adjustable-rate mortgage, a consumer must be able to show that he or she can: |
Make regularly scheduled payments that are calculated using the loan’s introductory rate Make amortizing payments that are calculated using the fully indexed rate for the ARM Make amortizing payments that are calculated using the loan’s rate after the first interest rate adjustment occurs Make regularly scheduled payments that are calculated using the fixed interest rate for which the consumer would be eligible The answer is make amortizing payments that are calculated using the fully indexed rate for the ARM. Qualifying for an ARM requires a consumer to demonstrate an ability to make amortizing payments that are calculated at the loan’s fully indexed rate. |
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Wilbur Green is applying for a loan originator license. His credit report indicates that he has a number of judgments filed against him, all related to a serious medical condition his wife suffered four years prior. Will Wilbur be denied a license because of the judgments? |
Yes, current outstanding judgments show a lack of financial responsibility Yes, because they indicate a pattern of seriously delinquent accounts within the past three years No, because the judgments are a result of medical expenses, they will not be held against him The judgments will not be held against him because they were entered more than three years ago The answer is no, because the judgments are a result of medical expenses, they will not be held against him. Evidence that an individual has not shown financial responsibility may include current outstanding judgments, except those solely as a result of medical expenses. |
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The most commonly used type of reverse mortgage is known as a: |
Proprietary loan Home equity conversion mortgage Single-purpose conforming mortgage Interest-only loan The answer is home equity conversion mortgage. The home equity conversion mortgage (HECM) is the most commonly used of the three forms of reverse mortgages |
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Which of the following would NOT be required if a mortgage company wishes to utilize electronic signatures on required disclosures? |
Borrowers must be given the option to receive the disclosures in paper form Borrowers must be able to withdraw their consent to receive the disclosures electronically The company must record the IP address from which the documents were accessed The company must disclose hardware and software requirements to borrowers The answer is the company must record the IP address from which the documents were accessed. Under the Electronic Signatures in Global and National Commerce Act (the E-SIGN Act), before obtaining a consumer’s consent, a financial institution must provide a clear and conspicuous statement to consumers, informing them of their right or option to have the record provided or made available on paper or in a non-electronic form. The statement must also explain the consumer’s right to withdraw consent, including applicable conditions, consequences, and fees. Consumers must also be provided with information about the hardware and software required to allow them to access and retain the electronic records |
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A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is: |
Permissible, as the interest on any loan secured by real estate is tax deductible Permissible, as the interest on any home equity loan is tax deductible Not permissible, as the advice is wrong Not permissible, as the loan originator is not qualified to provide tax advice The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters |
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A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is: |
Permissible, as the interest on any loan secured by real estate is tax deductible Permissible, as the interest on any home equity loan is tax deductible Not permissible, as the advice is wrong Not permissible, as the loan originator is not qualified to provide tax advice The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters |
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A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): |
HECM HELOC Pay-option mortgage Equity mortgage The answer is HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables an individual aged 62 or older to convert some of the equity in his/her primary residence to cash to pay living expenses, or to purchase a primary residence if he/she has the cash for a down payment and closing costs. The HECM requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is: |
Permissible, as the interest on any loan secured by real estate is tax deductible Permissible, as the interest on any home equity loan is tax deductible Not permissible, as the advice is wrong Not permissible, as the loan originator is not qualified to provide tax advice The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters |
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A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): |
HECM HELOC Pay-option mortgage Equity mortgage The answer is HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables an individual aged 62 or older to convert some of the equity in his/her primary residence to cash to pay living expenses, or to purchase a primary residence if he/she has the cash for a down payment and closing costs. The HECM requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except: |
Not knowingly withholding, removing, or destroying any books or records Making all of the licensee's records available to borrowers upon demand Permitting interviews of principals, loan originators, and independent contractors by state regulators Making records and books available to the state regulator The answer is making all of the licensee's records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand. |
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A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is: |
Permissible, as the interest on any loan secured by real estate is tax deductible Permissible, as the interest on any home equity loan is tax deductible Not permissible, as the advice is wrong Not permissible, as the loan originator is not qualified to provide tax advice The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters |
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A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): |
HECM HELOC Pay-option mortgage Equity mortgage The answer is HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables an individual aged 62 or older to convert some of the equity in his/her primary residence to cash to pay living expenses, or to purchase a primary residence if he/she has the cash for a down payment and closing costs. The HECM requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except: |
Not knowingly withholding, removing, or destroying any books or records Making all of the licensee's records available to borrowers upon demand Permitting interviews of principals, loan originators, and independent contractors by state regulators Making records and books available to the state regulator The answer is making all of the licensee's records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand. |
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Which of the following pieces of information is NOT found on the 1003? |
Appraised property value Underwriter's name Borrower's Social Security Number Subject property address The answer is underwriter's name. Categories of information required on the Uniform Residential Loan Application, or Form 1003, include mortgage type and loan terms, property information and loan purpose, and borrower information. It includes information about the subject property and the borrower (such as Social Security Number and appraised property values), but the underwriter's name is not a required part of the application and is unlikely to appear. |
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A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is: |
Permissible, as the interest on any loan secured by real estate is tax deductible Permissible, as the interest on any home equity loan is tax deductible Not permissible, as the advice is wrong Not permissible, as the loan originator is not qualified to provide tax advice The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters |
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A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n): |
HECM HELOC Pay-option mortgage Equity mortgage The answer is HECM. The FHA's home equity conversion mortgage (HECM) is a reverse mortgage that enables an individual aged 62 or older to convert some of the equity in his/her primary residence to cash to pay living expenses, or to purchase a primary residence if he/she has the cash for a down payment and closing costs. The HECM requires no repayment until either the property is sold or the owner dies, permanently moves, fails to live in the house for 12 consecutive months, or fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the property (i.e., perform necessary repairs). |
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Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except: |
Not knowingly withholding, removing, or destroying any books or records Making all of the licensee's records available to borrowers upon demand Permitting interviews of principals, loan originators, and independent contractors by state regulators Making records and books available to the state regulator The answer is making all of the licensee's records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand. |
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Which of the following pieces of information is NOT found on the 1003? |
Appraised property value Underwriter's name Borrower's Social Security Number Subject property address The answer is underwriter's name. Categories of information required on the Uniform Residential Loan Application, or Form 1003, include mortgage type and loan terms, property information and loan purpose, and borrower information. It includes information about the subject property and the borrower (such as Social Security Number and appraised property values), but the underwriter's name is not a required part of the application and is unlikely to appear. |
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Which of the following federal regulations prohibits discrimination based on race, color, religion, sex, marital status, or national origin in a credit transaction? |
Regulation C Regulation B Regulation Z Regulation G The answer is Regulation B. Regulation B implements the provisions of the Equal Credit Opportunity Act (ECOA), which ensures that all persons, consumers, and businesses are given an equal chance to obtain credit by prohibiting discrimination based on criteria including race, color, religion, national origin, sex, marital status, and age (provided the individual is of age to enter into a contract). |
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According to the standard deed of trust, how soon must a borrower on an owner-occupied loan occupy the property? |
Within 30 days of closing Within 90 days of closing Within 60 days of closing Within 15 days of closing The answer is within 60 days of closing. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his/her residence must move in within 60 days after closing. |
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Which of the following deals most specifically with representations made in mortgage advertising? |
Regulation X HMDA MAP Rule E-SIGN Act The answer is MAP Rule. The Mortgage Acts and Practices Rule (MAP Rule or Regulation N) deals specifically with prohibited material misrepresentations in any commercial communication, including advertising, regarding the terms of mortgage credit products. |
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Which of the following deals most specifically with representations made in mortgage advertising? |
Regulation X HMDA MAP Rule E-SIGN Act The answer is MAP Rule. The Mortgage Acts and Practices Rule (MAP Rule or Regulation N) deals specifically with prohibited material misrepresentations in any commercial communication, including advertising, regarding the terms of mortgage credit products. |
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All of the following would be common activities in fraud for housing, except: |
Flipping Asset fraud Income and employment fraud Silent second The answer is flipping. Asset fraud, income and employment fraud, and silent seconds (in which a borrower secretly borrows needed funds from the seller secured by an undisclosed and unrecorded second mortgage) are all associated with fraud for housing. In contrast, flipping is usually associated with predatory lending, rather than property fraud |
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Which of the following deals most specifically with representations made in mortgage advertising? |
Regulation X HMDA MAP Rule E-SIGN Act The answer is MAP Rule. The Mortgage Acts and Practices Rule (MAP Rule or Regulation N) deals specifically with prohibited material misrepresentations in any commercial communication, including advertising, regarding the terms of mortgage credit products. |
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All of the following would be common activities in fraud for housing, except: |
Flipping Asset fraud Income and employment fraud Silent second The answer is flipping. Asset fraud, income and employment fraud, and silent seconds (in which a borrower secretly borrows needed funds from the seller secured by an undisclosed and unrecorded second mortgage) are all associated with fraud for housing. In contrast, flipping is usually associated with predatory lending, rather than property fraud |
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A mortgage in which a large, one-time payment is made at the end of a loan term is known as a: |
Fixed-rate loan Hybrid ARM Fully-amortized loan Balloon mortgage The answer is balloon mortgage. In a balloon mortgage, a large portion of the borrowed principal is repaid in a single payment at the end of the loan period |
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A loan originator license applicant must pass the NMLS-required examination with a score of at least __ percent. |
70 80 85 75 The answer is 75. Mortgage loan originator license applicants must pass an exam developed by NMLS and administered by an approved test provider with a score of at least 75%. |
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In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a Loan Estimate must be delivered or mailed within three business days after receipt of a written application and no later than: |
Three business days before the transaction is consummated The fifth business day before the transaction is consummated The seventh business day before the transaction is consummated The date the transaction is consummated The answer is the seventh business day before the transaction is consummated. A creditor must provide the Loan Estimate no later than three business days after receipt of the consumer’s application AND at least seven business days prior to consummation. |
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In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a Loan Estimate must be delivered or mailed within three business days after receipt of a written application and no later than: |
Three business days before the transaction is consummated The fifth business day before the transaction is consummated The seventh business day before the transaction is consummated The date the transaction is consummated The answer is the seventh business day before the transaction is consummated. A creditor must provide the Loan Estimate no later than three business days after receipt of the consumer’s application AND at least seven business days prior to consummation. |
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What is the tolerance allowed for variances in the APR disclosure required by the Truth-in-Lending Act in a regular transaction? |
1% 0.125% .25% $200 The answer is .125% (one eighth of one percent). The APR is considered accurate if it is not more than one eighth of one percentage point 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 if it is not more than .25% (one quarter of one percentage point) above or below the APR for an irregular transaction. |
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In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a Loan Estimate must be delivered or mailed within three business days after receipt of a written application and no later than: |
Three business days before the transaction is consummated The fifth business day before the transaction is consummated The seventh business day before the transaction is consummated The date the transaction is consummated The answer is the seventh business day before the transaction is consummated. A creditor must provide the Loan Estimate no later than three business days after receipt of the consumer’s application AND at least seven business days prior to consummation. |
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What is the tolerance allowed for variances in the APR disclosure required by the Truth-in-Lending Act in a regular transaction? |
1% 0.125% .25% $200 The answer is .125% (one eighth of one percent). The APR is considered accurate if it is not more than one eighth of one percentage point 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 if it is not more than .25% (one quarter of one percentage point) above or below the APR for an irregular transaction. |
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Which of the following would convey a property? |
Deed rider Warranty deed Note Deed of trust The answer is warranty deed. A warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. In addition to conveying property ownership, a warranty deed contains the promise of clear title, meaning the property is free of encumbrances. |
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With respect to FHA loans, the FHA |
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Guarantees the loans, thereby protecting the lender Acts as the lender Issues private mortgage insurance Insures the loans, thereby protecting the lender The answer is insures the loans, thereby protecting the lender. FHA loans are loans that meet FHA program criteria and are made by approved lenders. For these loans, the FHA insures the issuing lender against loss in the event of default. Under the FHA program, the lender can charge whatever points and interest a borrower is willing to pay, as the cost of the loan is negotiable. The advantage to the borrower is that the lender will make the loan with a very high loan-to-value ratio because it is insured |
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With respect to FHA loans, the FHA |
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Guarantees the loans, thereby protecting the lender Acts as the lender Issues private mortgage insurance Insures the loans, thereby protecting the lender The answer is insures the loans, thereby protecting the lender. FHA loans are loans that meet FHA program criteria and are made by approved lenders. For these loans, the FHA insures the issuing lender against loss in the event of default. Under the FHA program, the lender can charge whatever points and interest a borrower is willing to pay, as the cost of the loan is negotiable. The advantage to the borrower is that the lender will make the loan with a very high loan-to-value ratio because it is insured |
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A mortgage broker and mortgage loan originator's duties to the lender include all of the following, except |
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Expediting processing so the loan can close within the period of any rate-lock Processing applications based on the lender's underwriting guidelines Originating loans only for those applicants which promise most profit for the lender Guarding against mortgage loan fraud and other practices that may harm the lender The answer is originating loans only for those applicants which promise most profit for the lender. Mortgage brokers and mortgage loan originators must diligently perform the services expected by the lender, including processing applications based on the lender’s underwriting guidelines, following up to ensure conditions contained in commitment letters are satisfied in a timely manner, expediting processing so the loan can close within the period of any rate-lock, carrying out any cancellation procedures competently and professionally, and guarding against mortgage loan fraud and other practices that may harm the lender or investor purchasing the loan. |
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With respect to FHA loans, the FHA |
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Guarantees the loans, thereby protecting the lender Acts as the lender Issues private mortgage insurance Insures the loans, thereby protecting the lender The answer is insures the loans, thereby protecting the lender. FHA loans are loans that meet FHA program criteria and are made by approved lenders. For these loans, the FHA insures the issuing lender against loss in the event of default. Under the FHA program, the lender can charge whatever points and interest a borrower is willing to pay, as the cost of the loan is negotiable. The advantage to the borrower is that the lender will make the loan with a very high loan-to-value ratio because it is insured |
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A mortgage broker and mortgage loan originator's duties to the lender include all of the following, except |
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Expediting processing so the loan can close within the period of any rate-lock Processing applications based on the lender's underwriting guidelines Originating loans only for those applicants which promise most profit for the lender Guarding against mortgage loan fraud and other practices that may harm the lender The answer is originating loans only for those applicants which promise most profit for the lender. Mortgage brokers and mortgage loan originators must diligently perform the services expected by the lender, including processing applications based on the lender’s underwriting guidelines, following up to ensure conditions contained in commitment letters are satisfied in a timely manner, expediting processing so the loan can close within the period of any rate-lock, carrying out any cancellation procedures competently and professionally, and guarding against mortgage loan fraud and other practices that may harm the lender or investor purchasing the loan. |
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If a borrower's reserve account for taxes and insurance is found to be short or deficient by an amount in excess of one month's worth of deposits, which of the following is true? |
The escrow account will be cancelled The lender can require the borrower to make up the shortage over the next 12 months The lender can require the borrower to make up the shortage over the next six months The borrower must remit the shortage to the lender within 90 days of notice of the shortage The answer is the lender can require the borrower to make up the shortage over the next 12 months. If the escrow account is short by more than 1 month, the lender can choose to do nothing or require repayment of the shortage over a minimum of 12 months.
If an escrow account analysis discloses a shortage of less than one month's escrow account payment, the lender or servicer may allow the shortage to exist and do nothing to change it, require the borrower to repay the shortage amount within 30 days, or require the borrower to repay the shortage amount in 2 or more equal monthly payments |
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A licensed mortgage loan originator: |
Performs clerical and support duties for his/her sponsoring broker Advises loan applicants on current rates and loan terms May take responsibility for servicing a loan after it has been consummated Negotiates the sale and purchase of residential real estate The answer is advises loan applicants on current rates and loan terms. The S.A.F.E. Act defines a mortgage loan originator as an individual who takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan for compensation or gain. The S.A.F.E. Act provides that an individual assists a consumer in obtaining or applying to obtain a residential mortgage loan by, among other things, advising on loan terms, including rates, fees, and other costs; preparing loan packages; or collecting information on behalf of the consumer with regard to a residential mortgage loan. |
