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25 Cards in this Set
- Front
- Back
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All of the following are included within the authority of the Commissioner, except: |
Enter a cease and desist order Order restitution and monetary penalties Subpoena witnesses and documents Issuing an order to a former employer of a loan originator to turn over records The answer is issuing an order to a former employer of a loan originator to turn over records. Commissioner does not have authority to examine records of former employers of a loan originator. |
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Equity-based lending is a common predatory lending practice, taking advantage of unsuspecting borrowers by using abusive lending terms for increased profits. Often, borrowers may lose money, home equity, or even their homes. Which federal law was the first to expressly prohibit equity-based lending? |
Home Ownership and Equity Protection Act Homeowners Protection Act Fair Credit Reporting Act Home Mortgage Disclosure Act The answer is Home Ownership and Equity Protection Act. The Home Ownership and Equity Protection Act (HOEPA) was the first legislation to prohibit equity-based lending by requiring a borrower to provide documentation of his or her ability to repay the loan prior to closing. |
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The Equal Credit Opportunity Act requires a Notice of Incomplete Application be provided to a borrower: |
Within 15 days of application, if the application is missing required information Within 30 days of application, if the application is missing required information If the borrower has provided less than five years’ residence history Within three days of discovery of incomplete application The answer is within 30 days of application, if the application is missing required information. ECOA requires the borrower to know the status of his/her loan within 30 days of application. This includes letting the borrower know, within 30 days, that his/her application needs to be completed in order for any further consideration of the file |
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Oversight for FCRA is shared between the FTC and: |
Federal Reserve HUD TILA CFPB The answer is CFPB. Oversight for FCRA is shared between the FTC and the CFPB. |
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Cindy bought a home and closed on a 6.0% rate for 30 years. The loan includes a payment feature that allows Cindy to make a $1,400/month payment for the first five years, and a $1,800/month payment for the remainder of the loan. What type of loan is this? |
Variable ARM Option ARM Fixed rate The answer is fixed rate. This loan is a fixed-rate loan (at 6% for 30 years). The payment example shows an interest-only feature for the first five years and then a fully-amortized payment for the remainder of the loan. |
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All of the following are included in the calculation of the APR, except: |
Underwriting fees Buy-down fees Origination fees Title insurance fees The answer is title insurance fees. In addition to charges paid over the term of the loan (e.g., interest and mortgage insurance premiums paid over the loan’s term), the calculation of the APR includes many prepaid finance charges, including, among others, underwriting fees, buy-down fees, and origination fees. However, some fees are not included in the prepaid finance charges used in APR calculations, including title insurance fees. |
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Which of the following is considered “reasonably reliable” evidence to verify the repayment ability of a borrower? |
IRS W-2s, tax returns, and payroll receipts IRS W-2s, tax receipts, and bank deposit receipts Previous mortgage statements and canceled checks Tax returns, Comptroller’s certification, and CPA letter The answer is IRS W-2s, tax returns, and payroll receipts. The Ability to Repay Rule requires that a borrower document his/her ability to repay the loan, using “reliable evidence” such as W-2s, tax returns, and payroll receipts. |
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Which of the following is used as a method of identifying and holding licensees accountable, according to the S.A.F.E. Act? |
Loan originator financial and ethical disclosures Records of annual loan originator volume Unique identifier CSBS number The answer is unique identifier. The “unique identifier” is the official description of the NMLS number, which is used to track and hold accountable all licensed entities and individuals in the mortgage lending industry. |
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Which of the following individuals might be involved in appraisal fraud? |
Mortgage broker Borrower All of these answers are correct Appraiser The answer is all of these answers are correct. It is not likely that an appraiser, of his/her own volition, would decide to overinflate a value. Often, inflated appraisals are a result of the conspiratorial efforts of many involved in the process. |
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Giani and Maria are attempting to purchase a house in a new neighborhood. Maria is four months pregnant with their first child, and they are making the move to set themselves up in their dream neighborhood to raise a family. Two weeks after the initial interview, their broker calls to inform them that they have been denied for a loan. The broker continues to say that he mentioned to his underwriter that Maria probably planned to stay at home for a year after having the baby. With that, the underwriter did not allow her income to be used for qualification. This broker is in violation of what law? |
ECOA FCRA HMDA TILA The answer is ECOA. The Equal Credit Opportunity Act strictly prohibits the assumption that a woman will discontinue working once she has had a baby. |
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What is the purpose of the Fair Credit Reporting Act? |
To prevent lenders from using credit to determine creditworthiness in order to mitigate the losses incurred by borrowers who were under-qualified for loans To ensure accuracy, fairness, and the privacy of consumers’ personal information assembled and used by consumer reporting agencies To use special obligations on users and furnishers to limit credit availability To protect the rights of lenders in the event of default The answer is to ensure accuracy, fairness, and the privacy of consumers’ personal information assembled and used by consumer reporting agencies. The FCRA was enacted to protect the consumer in any transaction involving the use of credit reports. It is meant to govern the accuracy, fairness, and privacy of a consumer’s information when it is assembled for the purposes of credit evaluation. |
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An acceleration clause is sometimes added to reverse mortgages. This means that the loan could become due and payable under certain circumstances, which may include all but which of the following? |
A new owner is added to the title The borrower adds MIP to the loan New debt against the home is taken out All or part of the home is rented out The answer is the borrower adds MIP to the loan. Reverse mortgages may contain acceleration clauses which can cause a loan to become due and payable. Reasons for this may include adding an owner to the title, taking out new debt against the home, or renting out all or part of the home. Some reverse mortgages do include MIP, which helps to guarantee that the borrower will never owe more than the value of the home. |
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The promissory note contains all of the following, except: |
A legal description of the property A provision requiring notices be done in writing The loan amount The loan terms The answer is a legal description of the property. The promissory note contains the borrower’s name, loan amount, interest rate, loan terms, and a provision requiring notices be done in writing. It does not contain a legal description of the property. |
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The Qualified Mortgage Rule establishes a debt-to-income ratio standard of _____ for qualified mortgages |
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78% 80% 43% 60% The answer is 43%. The Qualified Mortgage Rule establishes a debt-to-income ratio standard of 43%. For the first seven years during which the Rule is in effect, this ratio will not be enforced for temporary qualified mortgages. |
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A loan processor or underwriter is exempt from licensure under all of the following circumstances, except: |
He/she is employed with a licensed mortgage broker He/she is employed with an exempt mortgage lender He/she does not represent to the public that he/she can perform any of the activities of a loan originator He/she takes applications on behalf of the loan originator The answer is he/she takes applications on behalf of the loan originator. A processor and/or underwriter may only maintain exempt status from licensure if engaged solely in clerical or support duties while employed with either a licensed or exempt entity. Under no circumstances may a processor or underwriter engage in the activities of a loan originator. |
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Sharing a borrower’s personal financial information for purposes other than what it was provided for is a violation of what act? |
GLB Act S.A.F.E. Act TILA Homeowners Protection Act The answer is GLB Act. The Gramm-Leach-Bliley Act governs the use of non-public personal information and how it can be shared amongst affiliated third parties. |
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Under ECOA, the Attorney General may take action against a creditor who appears to have engaged in: |
A pattern or practice of discrimination Straw selling Redlining A pattern or practice of mortgage fraud The answer is a pattern or practice of discrimination. Under ECOA, the Attorney General may take action against a creditor who appears to have engaged in a pattern or practice of discrimination. |
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Civil monetary penalties resulting from the failure to report data for HMDA are: |
$1,000 per violation, with a maximum of $300,000 in fines annually Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved Calculated based on a percentage of total loan amounts of mortgages in violation $11,000 per violation, but can be increased to $25,000 for willful and knowing violations The answer is calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved. HMDA uses a penalty matrix to determine fines for violations. The matrix includes considerations for good faith, previous violations, and the financial resources of the entity involved. |
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Homeownership counseling is required in transactions for all of the following, except: |
Higher-priced mortgage loan High-cost mortgage Reverse mortgage Negative amortization loan if the loan applicant is a first-time borrower The answer is higher-priced mortgage loan. Transactions for higher-priced mortgage loans do not include counseling requirements. |
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Generally, the first lien recorded has priority, with the possible exception of: |
Mortgage liens Mechanic’s liens Child support liens Consensual liens The answer is mechanic’s liens. The first lien recorded has priority. One possible exception is mechanic’s liens, depending on state law. |
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The Notice of Right to Cancel PMI is required by the |
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Homeowners Protection Act Equal Credit Opportunity Act Truth-in-Lending Act Real Estate Settlement Procedures Act The answer is Homeowners Protection Act. The Notice of Right to Cancel PMI is required by the Homeowners Protection Act. |
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A licensee may attempt a qualified written exam three consecutive times, each occurring at least _____ days after the preceding test. |
30 45 90 180 The answer is 30. A licensee is permitted three total attempts, with at least a 30-day waiting period in between each attempt, after which a 180-day waiting begins before a fourth attempt can be made. |
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Which of the following is an example of the discriminatory practice of steering? |
Refusing to originate loans for borrowers in a particular ZIP code Limiting the scope of business to a 100-mile radius of the office Approving a loan based on the borrower’s equity rather than his or her ability to repay the loan Showing a borrower of a particular race or ethnicity properties in a specific neighborhood regardless of the borrower’s interests or financial capacity The answer is showing a borrower of a particular race or ethnicity properties in a specific neighborhood regardless of the borrower’s interests or financial capacity. Steering is the practice of directing a potential homebuyer in a particular direction based on his or her demographics and without regard to his or her interests or financial capacity. |
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Which of the following fees must be included in the calculation of finance charges? |
Appraisal fees Seller’s points Credit reporting fees Origination fees The answer is origination fees. TILA requires charges for origination fees to be included when calculating the finance charge. |
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The primary purpose of the FTC Red Flags Rule is: |
Preventing the overvaluation of real estate Improving the accuracy of information in consumer credit files Identifying, mitigating, and preventing identity theft Establishing methods for protecting consumer personal information The answer is identifying, mitigating, and preventing identity theft. The FTC Red Flags Rule focuses on methods of detecting a security breach that may lead to identity theft within a financial institution that maintains a covered account on behalf of the customer. |
