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25 Cards in this Set
- Front
- Back
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Which of the following is a limit on the amount that the payment can change on any adjustment date from the current or previous payment amount on an ARM? |
Initial rate cap Payment cap Periodic rate cap Lifetime rate cap The answer is payment cap. The payment cap is a limit on the amount by which the payment can change on any adjustment date from the current or previous payment amount on an ARM. |
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Ella Ellerby’s lender failed to provide her with the required rescission notice when she refinanced her home. Ella has not transferred or sold her interest in the property, but is beginning to have second thoughts about the refinance. Under these circumstances, Ella can rescind the loan: |
For three years after consummation For two years after consummation For five years after consummation At any time she sees fit The answer is for three years after consummation. If a creditor/lender fails to provide the required disclosures and notice to effectively initiate the three-day period, the borrower’s right to rescind shall automatically expire at the earliest of three years from consummation of the transaction; transfer of the borrower’s interest in property; or sale of the borrower’s interest in property. |
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Which of the following transactions would be most likely to raise concern over tangible net benefit to the borrower? |
The refinance of a mortgage loan that originated ten years ago The origination of a mortgage loan with a fixed interest rate for a borrower with a high salary and low debt The refinance of a high-cost mortgage loan that was originated six months ago The origination of an adjustable-rate mortgage loan The answer is the refinance of a high-cost mortgage loan that was originated six months ago. The refinance of a high-cost mortgage loan that was originated six months ago should be most concerned about the tangible net benefit to the borrower. |
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Renewal of a loan originator license is the responsibility of: |
The loan originator The loan originator and the sponsoring entity The sponsoring entity The sponsoring entity and the state regulator The answer is the loan originator. The loan originator’s individual license is the sole responsibility of the originator. While the sponsoring entity is responsible for the actions of the originator while employed, renewal of an individual license is not the entity’s responsibility. |
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In order to engage in the business of a loan originator, a loan processor who is working for a mortgage broker must: |
Secure a license as a loan originator Request the supervision of a licensed loan originator Secure new employment with a depository institution, such as a bank Learn how to perform a mortgage loan repayment analysis The answer is secure a license as a loan originator. In order to engage in the business of a loan originator, a loan processor who is working for a mortgage
broker must secure a license as a loan originator. |
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A mortgage company starts a marketing campaign in which coupons appearing to be FHA rebate checks are sent to consumers. Advertising in this manner is a prohibition of rules covered by what legislation? |
RESPA FTC TILA HOEPA The answer is TILA. Regulation Z prohibits seven specific advertising practices, including misrepresentations of government endorsement. |
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Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than _____, or a lender may collect PMI until _____ loan-to-value ratio is reached. |
65%; 50% 78%; 62% 80%; 78% 80%; 65% The answer is 80%; 78%. Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than 80%, or a lender may collect PMI until 78% loan-to-value ratio is reached. |
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A borrower obtains an ARM with a start rate of 2%. The ARM has an initial cap of 1%, a periodic cap of 2%, and a lifetime cap of 4%. Assume that the ARM will adjust three times, and that at each adjustment, the rate will increase by the maximum amount possible. What is the maximum amount that the interest rate can reach? |
6% 2% 5% 7% The answer is 6%. At the first adjustment, the ARM rate would increase from 2% to 3%. At the second adjustment, it would increase from 3% to 5%. At the third increase, it would increase from 5% to 7%. However, the lifetime rate cap is 4%, meaning that the rate may never be higher than 6% (2% + 4% = 6%). As a result, the interest rate may never be higher than 6%. |
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A borrower is purchasing a house with a sale price of $212,000. It appraises prior to settlement for $210,000, leading to an adjustment in the purchase price. The borrower is making a 10% down payment. What are the loan amount and LTV ratio? |
$190,800; 91% $200,000; 91% $210,000; 91% $189,000; 90% The answer is $189,000; 90%. The LTV is always based off of the lower of the purchase price or the appraised value. In cases where the appraisal comes back lower than the purchase price, lenders will typically adjust the figures based on the appraisal value. So, in this case, the purchase price would be adjusted to $210,000 (the appraisal price). From here, after the borrower’s 10% down payment, the loan amount would be $189,000, and the LTV would be 90%. |
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Sue Johnson is a receptionist for a construction company. She receives bi-weekly pay in the amount of $1,153.85. What is her monthly qualifying income? |
$2,500 $2,307.70 $1,153.85 $532.55 The answer is $2,500. To determine a monthly income based on salary that is not paid on a monthly basis, multiply a biweekly salary by 26 (number of paychecks in a year), and divide by 12 (number of months in a year). In this case ($1,153.85 × 26)/12=$2,500.00. |
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Which of the following would be considered grounds for license denial? |
Payment of licensing fees Conviction of a felony within the seven years immediately preceding application Compliance with the pre-licensing education requirements Providing records of previous loan files The answer is conviction of a felony within the seven years immediately preceding application. A felony conviction within the seven years immediately preceding application is grounds for denial of an initial application. |
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Which of the following statements offers the most accurate description of the effect of using a “trigger term” in an advertisement for a loan? |
Use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence Use of a trigger term in an advertisement violates Regulation Z Use of a trigger term requires clear and conspicuous disclosure of HUD-approved housing counselors Use of a trigger term requires the disclosure of all the lending terms of the mortgage described in the advertisement The answer is use of a trigger term requires the clear and conspicuous disclosure of other relevant terms with equal prominence. |
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A borrower is purchasing a $200,000 home, using VA eligibility for the first time. What is the minimum down payment required? |
$4,000 $0 $7,000 $9,600 The answer is $0. VA loans do not require a down payment. However, all veterans – other than those who are disabled – must make a cash contribution to a lending transaction in the form of a funding fee. |
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The Home Ownership and Equity Protection Act, enacted in 1994, amended what legislation? |
ECOA TILA FACTA CIP The answer is TILA. In 1994, TILA was amended to provide greater protection to borrowers who chose or were coerced into loans with high costs or high rates. This section of TILA is known as Section 32. |
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A transaction in which the seller provides all or most of the financing is best known as |
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Self-financing Owner buy-back Seller carry-back Rent credit The answer is seller carry-back. A seller carry-back loan is a transaction in which the seller provides most or all of the financing. Typically, this type of transaction involves an assumable mortgage. |
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A borrower pays $200,000 for a home and gets a fixed-rate loan from his lender at 5.75%. He puts $40,000 down. What is the LTV on this loan, and does the buyer have to pay PMI? |
80% and yes 90% and yes 80% and no Need to know the term The answer is 80% and no. This borrower put 20% down on the purchase. Therefore, with an 80% LTV, the borrower does not need PMI. |
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Safina Marigold, a mortgage loan originator, has received a request for an offer of residential mortgage loan terms together with information about the prospective borrower that will be necessary for her to make a decision on whether or not to offer a loan. Safina has received a(n): |
Credit report Application Appraisal Solicitation The answer is application. An application is a request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms and the information about the borrower or prospective borrower that is customary or necessary in order to make a decision on whether to offer a residential mortgage loan. |
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This federal law was enacted with the intent to make it easier to prosecute mortgage fraud. |
The Fraud Enforcement and Recovery Act The Dodd-Frank Act The Consumer Financial Protection Act The Mortgage Acts and Practices Act The answer is The Fraud Enforcement and Recovery Act. The Fraud Enforcement and Recovery Act was enacted with the intent to increase enforcement against those who commit mortgage fraud. |
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Which of the following regulates advertising for credit? |
HPI or Regulation C TILA or Regulation Z FCRA or Regulation B FACTA or Regulation H The answer is TILA or Regulation Z. TILA and Regulation Z impose regulations for advertising practices in the mortgage industry. |
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How are FHA loan limits established? |
The FHFA establishes loan limits for FHA loans The FHA uses loan limits based on CFPB loan limit guidance Loan limits are set by Ginnie Mae HUD establishes loan limits for FHA loans based on county-by-county conforming limits The answer is HUD establishes loan limits for FHA loans based on county-by-county conforming limits. HUD establishes loan limits for FHA loans based on county-by-county conforming loan limits. FHA loan limits are divided into lower-cost and higher-cost areas. |
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Foreclosure is the sale of a property after a borrower’s default on payments. The exact procedure the lender follows in order to foreclose is dependent on the absence or presence of a: |
Power of attorney Power of sale clause Deed in lieu of foreclosure Mortgagee clause The answer is power of sale clause. The foreclosure process is determined by the presence or absence of a power of sale clause in the mortgage or deed of trust. If there is no power of sale clause, the lender must go to court to foreclose (called a judicial foreclosure). If a power of sale clause is included in the mortgage or deed of trust, then the lender can begin foreclosure without court involvement (nonjudicial foreclosure). |
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The ratio of the total balance of all mortgage liens against a property to the total property value is called: |
TLTV HLTV LTV CLTV The answer is CLTV. The CLTV is the ratio of all mortgages on the property divided by the total value of the property. |
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Edna Eager is planning an ad campaign to draw more business to her company. In order to avoid trouble with her advertising, Edna must comply with the advertising requirements of the: |
Truth-in-Lending Act and Regulation Z Real Estate Settlement Procedures Act and Regulation X Equal Credit Opportunity Act Federal Trade Act The answer is Truth-in-Lending Act and Regulation Z. A mortgage loan originator placing an advertisement (e.g., flyer, billboard, window display, direct mail literature, telephone solicitation) for consumer credit must comply with the advertising requirements of the Truth-in-Lending Act and Regulation Z. |
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Which of the following would be a red flag of attempted mortgage fraud? |
The consumer is fairly young but makes a substantial salary, as stated on the loan application and W-2s The consumer’s Social Security Number begins with zero The applicant runs a small business from home and only lists a home phone number The property owner and the property seller are two different individuals The answer is the property owner and the property seller are two different individuals. A transaction in which the property owner and the property seller are two different individuals may be a red flag of attempted mortgage fraud. |
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Which of the following statements accurately describes the APR threshold used to identify loans regulated by HOEPA? |
A first-lien loan with an APR that is 10 percentage points above Treasury securities with a comparable rate A subordinate-lien loan with an APR that is 8 percentage points above the rate for Treasury securities with a comparable rate A subordinate-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions The answer is a first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions. A first-lien loan with an APR that is 6.5 percentage points above the average prime offer rate for comparable transactions would meet the APR threshold used to identify loans regulated by HOEPA. |
