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26 Cards in this Set
- Front
- Back
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The Federal Housing Administration does not make loans; it insures loans. What does the FHA insure against? |
Foreclosure The borrower losing his job Forbearance Down payment The answer is foreclosure. The FHA insures loans against foreclosure |
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A fee that lenders may receive for selling or transferring their right to service a mortgage loan is called: |
Yield spread premium Margin Service release premium Finance charge The answer is service release premium. When a lender gives up its right to service a loan through sale or transfer of that loan, the lender may receive a service release premium in exchange for relinquishing its right. |
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Which of the following caps on an ARM would limit the amount that an interest rate could adjust over the life of the loan? |
Payment cap Lifetime cap Periodic cap Worst-case cap The answer is lifetime cap. The lifetime cap sets the “rate ceiling” on an ARM based off of the start rate. |
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In order to meet the federal S.A.F.E. Act requirements, a state licensing agency must provide for all of the following, except: |
Participation in the NMLS Setting renewal or reporting dates The creation of a separate agency Conducting background checks The answer is the creation of a separate agency. In overseeing mortgage loan originators, a state must provide effective supervision and enforcement. Effective supervision by a state includes participation in the NMLS, the writing of rules and regulations necessary to the licensing of loan originators, conducting background checks, the setting and resetting of renewal or reporting dates, and taking appropriate enforcements actions. |
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Which federal law includes provisions that address misleading and deceptive advertising practices? |
TILA RESPA HMDA ECOA The answer is TILA. TILA includes provisions that address misleading and deceptive advertising practices. |
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Which of the following terms is allowed in a high-cost mortgage? |
Terms that permit a payment schedule resulting in negative amortization An advanced payment A variable interest rate A prepayment penalty The answer is a variable interest rate. High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed. |
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When a loan is characterized as “conforming,” this means the loan: |
Meets standards for a government program Meets guidelines established by Fannie Mae and Freddie Mac Is a 30-year fixed Requires no PMI The answer is meets guidelines established by Fannie Mae and Freddie Mac. Conventional loans are separated into two categories: conforming and non-conforming. A conforming loan meets (or “conforms”) with the lending guidelines set by Fannie Mae and Freddie Mac. |
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Fees charged for an early repayment of a debt are known as: |
Acceleration Prepayment penalty Finance charges Deferred payment loan The answer is prepayment penalty. A prepayment penalty is a fee charged to a borrower for early repayment of a loan. |
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Fees charged for an early repayment of a debt are known as: |
M Acceleration Prepayment penalty Finance charges Deferred payment loan The answer is prepayment penalty. A prepayment penalty is a fee charged to a borrower for early repayment of a loan. |
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A property is encumbered by two mortgages that have a combined loan-to-value of 90%. The LTV of the second mortgage is 12%. If the value of the property is $500,000, what is the approximate amount of the first mortgage, and is it considered a jumbo loan? |
$390,000 and no $450,000 and yes $450,000 and no $405,000 and no The answer is $390,000 and no. The CLTV is 90%, and the second mortgage has an LTV of 12%. This leaves the first mortgage with an LTV of 78%. $500,000 × .78 = $390,000. The value is under the conforming loan limit, so it is not considered jumbo. |
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The state in which Jim Jungle works requires a mortgage loan originator be covered by a surety bond. The bond must be maintained in an amount that reflects |
The dollar value of loans Jim originates annually The number of loans originated by Jim annually The number of loans Jim’s employer originates annually Jim’s experience as a loan originator The answer is the dollar value of loans Jim originates annually. The penal sum of the surety bond must be maintained in an amount that reflects the dollar value of loans originated. |
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_____ are responsible for ensuring that loan applicants meet the requirements established by lenders and investors for loan programs. |
Loan processors Loan originators Investors Underwriters The answer is underwriters. Underwriters are responsible for ensuring that loan applicants meet the requirements established by lenders and investors for loan programs. |
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Mary is purchasing her first home with an HPML. When her loan officer is reviewing the transaction with her, he tells her that she must establish an escrow account: |
Three business days after consummation of the loan Before consummation of the loan Before the first periodic payment is due At the time of consummation The answer is before consummation of the loan. Mary must establish an escrow account prior to the consummation of the loan. |
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All of the following may affect the amount of a VA funding fee, except: |
Marital status First-time use of the VA eligibility 10% down payment Disability The answer is marital status. The funding fee for a VA loan can be affected by a number of factors, which can include previous use of eligibility, any down payment amount, and/or a disability. |
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Which of the following is a description of a permanent buy-down? |
A lender pays a broker 25 bps for delivering a loan at a rate higher than par A borrower pays discount points to lower the note rate from 4.875 to 4.50 A lender accepts funds paid into escrow in order to offset lower interest payments A real estate agent collects a deposit from a borrower to hold a contract The answer is a borrower pays discount points to lower the note rate from 4.875 to 4.50. A permanent buy-down is a tool some borrowers use to adjust the price of their loan. It can also be referred to as prepaying interest. |
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Which of the following best describes what is considered in the calculation of a borrower’s back-end ratio? |
Principal and interest payments The cost of credit in relation to the value of the loan The total amount of monthly payments made on long-term debt carried by the consumer Only non-housing consumer debt, such as credit card payments and auto loan payments The answer is the total amount of monthly payments made on long-term debt carried by the consumer. The back-end ratio is the total amount of monthly payments made on long-term debt carried by the consumer, such as car loans, student loans, and other debt in addition to housing expenses. |
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A state licensing agency granted Crook Cromwell a license to act as a mortgage loan originator. Subsequent to the granting of the license, the agency received a supplemental criminal history report which indicated that Crook had been convicted of a money laundering charge in another state. What action can the state licensing agency take? |
Issue a temporary cease and desist order Refuse to renew Crook’s license Require a hearing with Crook before any other action can be taken Condition issuance of the license against future bad acts The answer is issue a temporary cease and desist order. The state licensing agency may enter a temporary order requiring a person to cease doing business under a license if it determines that the license was erroneously issued. |
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If a mortgage broker agrees to serve a loan applicant as his or her agent, the broker owes _____ to the applicant. |
A fiduciary duty A fidelity agreement A financial partnership Power of attorney The answer is a fiduciary duty. If a mortgage broker agrees to serve a loan applicant as his or her agent, the broker owes a fiduciary duty to the applicant. |
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Virginia has entered an agreement for a home loan after a contractor came to her door offering home improvement services and a card for a mortgage broker who could help her get a loan. Virginia contacted the mortgage broker and secured the loan. Which of the following arrangements for paying the contractor is not in compliance with HOEPA? |
Virginia can pay the contractor directly Virginia can place the funds with a third-party escrow agent who can disburse them pursuant to a written agreement Virginia and the contractor can enter an agreement for her to pay him when the work is complete The mortgage broker can pay the contractor directly The answer is the mortgage broker can pay the contractor directly. HOEPA prohibits direct payments to home improvement contractors, unless payment is a joint payment to the borrower and the contractor, or is made to a third-party escrow agent pursuant to a written agreement between the lender, borrower, and contractor. |
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Which of the following loan types considers residual income in qualification? |
VA HPML FHA USDA The answer is VA. The VA loan considers residual income as part of qualification. |
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When funds are placed in a separate escrow account to offset the monthly payments required by the terms of a loan, and those funds are used to reduce the payment rate for a period of time, this is known as: |
Good faith deposit Earnest money deposit Temporary buy-down Seller concessions The answer is temporary buy-down. A temporary buy-down occurs when a borrower deposits funds into escrow that are used to offset a portion of the payment for a period of time at the start of a loan. Once the initial buy-down period expires, the payment is then based off of the note rate, which was set at the time the loan was locked and remains the same, even during the lower payment period. |
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Which of the following correctly demonstrates how to calculate the periodic rate on a mortgage loan? |
Annual rate / number of payments in a year = periodic rate Annual rate × number of payments in a year = periodic rate Loan balance / annual rate = periodic rate Annual rate × monthly payment = periodic rate The answer is annual rate / number of payments in a year = periodic rate. The periodic rate is calculated by dividing the annual rate by the number of payments in a year. |
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Kelsey is a registered loan originator who is employed by the Your Home Town Bank, a depository institution regulated by a federal banking agency. Each of the following is a federal banking agency, except the: |
Board of Governors of the Federal Reserve System Comptroller of the Currency Federal Home Loan Mortgage Corporation National Credit Union Administration The answer is Federal Home Loan Mortgage Corporation. The federal banking agencies include the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation. |
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It is unethical and illegal to use yield spread premiums for any reason other than: |
To earn an additional commission on a loan origination To enable a creditor to earn more on a mortgage transaction To help a borrower pay for settlement costs To enable a loan originator to meet a monthly sales quota The answer is to help a borrower pay for settlement costs. It is unethical and illegal to use yield spread premiums for any reason other than to help a borrower pay for settlement costs. Yield spread premiums are now known as "borrower credit." |
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A creditor must provide an Affiliated Business Arrangement Disclosure to a loan applicant: |
Only if the creditor will receive a referral fee from the provider of settlement services At the same time that it refers a loan applicant to any provider of settlement services Only if the loan applicant was referred to the creditor as a provider of mortgage credit At the same time that it refers a loan applicant to an affiliated provider of settlement services The answer is at the same time that it refers a loan applicant to an affiliated provider of settlement services. Creditors are required to offer an Affiliated Business Arrangement Disclosure at the same time that they refer a consumer to an affiliated provider of settlement services. |
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A qualified mortgage may only include a balloon payment if all of the following are true, except: |
The consumer has specifically requested a balloon payment The loan has a term of at least five years The loan is made by a small creditor The loan has a fixed interest rate The answer is the consumer has specifically requested a balloon payment. A qualified mortgage may only include a balloon payment if the loan has a term of at least five years, has a fixed interest rate, and is made by a small creditor. |
