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25 Cards in this Set
- Front
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Which of the following individuals performs clerical or support duties as an employee at the direction of a licensed or exempt institution? |
A loan processor A sole proprietor An underwriter acting as an independent contractor An attorney representing a client in an ancillary capacity The answer is a loan processor. A loan processor is an individual who performs clerical or support duties. |
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Which of the following is true? |
Unethical practices in lending transactions do not lead to legal consequences Federal lending laws do not address the issues of ethical lending practices Ethical issues are the basis of both state and federal laws and can have legal consequences Only state laws address the issue of ethical lending practices The answer is ethical issues are the basis of both state and federal laws and can have legal consequences. Ethical issues are the basis of both state and federal laws, and violating these laws can have serious legal consequences. |
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ACME Home Loans is a private lender with a strict policy of limiting originations to conventional qualified mortgages with minimum loan amounts of $300,000. To ensure compliance with this policy, loan originators are instructed to refuse to accept applications from consumers who want loan amounts of less than $300,000, or who have debt-to-income ratios of 44% or more. This policy is: |
Not a violation of any federal fair lending law Potentially unlawful under the disparate impact theory An example of disparate treatment of consumers Legal if there is no discriminatory intent The answer is potentially unlawful under the disparate impact theory. Even when there is no intent to discriminate, lending policies are potentially unlawful if they could adversely impact creditworthy consumers who belong to a protected class. For example, the lending standards described in this question could adversely impact younger applicants, thereby violating ECOA’s prohibition against age-based discrimination. |
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When may a homeowner request that PMI be cancelled? |
When the lender informs him/her that it is terminating PMI As soon as the five-year required minimum is met As soon as his/her equity position reaches at least 22% As soon as his/her equity position is 20% or greater The answer is as soon as his/her equity position is 20% or greater. The Homeowners Protection Act states that a homeowner may request a lender/servicer cancel PMI as soon as the equity position is at 20% or greater (80% LTV or less). The PMI is automatically terminated by the lender/servicer at 78% LTV or when the loan reaches the midpoint in its amortization. |
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A loan with a fixed rate at the start that will adjust regularly after a certain period is commonly referred to as a(n): |
Traditional ARM Nontraditional ARM Hybrid ARM Option ARM The answer is Hybrid ARM. A hybrid ARM is a mortgage loan with a fixed rate during the first few years of the loan. After the initial fixed-rate period expires, the loan becomes an adjustable-rate loan. |
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Which of the following occurs when the parties to a loan transaction meet to execute documents, and immediately afterwards, funds are disbursed? |
Dry settlement Wet settlement Table funding Rescission The answer is wet settlement. Wet settlement occurs when the parties to a loan transaction meet to execute documents, and afterwards, funds are disbursed. In contrast, at a dry settlement, parties meet to execute documents but funds are not disbursed until certain specified conditions are met. |
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The general acceptable front-end housing ratio for a USDA loan is |
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29% 28% 31% Front-end ratios are not considered for USDA loans The answer is 29%. USDA loans use a front-end ratio of 29%. |
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An individual who is an employee of a depository institution or a subsidiary of a depository institution meets the definition of a loan originator, defined as a(n): |
Licensed mortgage loan originator Exempt mortgage loan originator Registered mortgage loan originator Qualified mortgage loan originator The answer is registered mortgage loan originator. A “registered mortgage loan originator” is an individual who is employed by an exempt depository institution and is therefore also exempt from licensure as a loan originator. The registered mortgage loan originator is merely required to be registered with the NMLS. |
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An originator advertises via the Internet and direct mail a “3.5% fixed payment loan” that was not actually available to any loan applicant. Which federal agency would bring the lawsuit against this originator and his company? |
HUD or the FTC FHFA FTC or the CFPB FDIC The answer is FTC or the CFPB. The CFPB is the federal agency responsible for enforcing violations of TILA prohibitions against misleading advertisements, but shares some enforcement authority with the FTC. |
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What characteristic, when used in deciding whether or not to grant credit, is not considered discriminatory? |
Income Race Marital status Religion The answer is income. The provisions of ECOA are meant to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion, national origin, sex, marital status, or age. A lender must consider a person’s income when determining his/her creditworthiness. |
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The intention of the Safeguards Rule is to: |
Require disclosures regarding the use of personal information by third parties Prohibit lenders from sharing account numbers if they share customers’ information Restrict the sharing of nonpublic personal information between nonaffiliated financial institutions Ensure the protection of personal information through an effective security program The answer is ensure the protection of personal information through an effective security program. The Safeguards Rule requires the creation, implementation, and maintenance of an effective security program that ensures the privacy of clients’ personal financial information. The program must include four key elements, including a program coordinator, identification of risks, regular testing, and oversight of third-party service providers. |
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A balloon loan is defined as: |
A loan that has a specific amortization period but matures prior to the time it fully amortizes A loan that has a specific amortization period but is due at a specific time prior to maturity A loan whose final payment is smaller than the previous periodic payments A loan which matures on a date after amortization The answer is a loan that has a specific amortization period but matures prior to the time it fully amortizes. A balloon loan is a loan that has a specific amortization period but matures prior to the time at which it fully amortizes. |
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The process of releasing a lien on a property is called: |
Deliening Title restoration Encumbrance Reconveyance The answer is reconveyance. Reconveyance is the process of releasing a lien on a property. |
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Which of the following is true regarding ATR standards for consideration of borrower repayment ability? |
General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 60% General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income General ATR standards require a consideration of DTI ratio and residual income; the DTI ratio threshold is 40% General ATR standards require a consideration of DTI ratio and residual income; residual income must equal at least the monthly loan payment amount, plus 5% The answer is General ATR standards require a consideration of DTI ratio and residual income; there is no DTI threshold or minimum required residual income. General ATR standards require a consideration of DTI ratio and residual income. However, there is no DTI ratio threshold or minimum required residual income. |
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Loan originators are required to complete _____ hours of pre-licensing education to satisfy the federal requirement under the S.A.F.E. Act |
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20 8 16 24 The answer is 20. The NMLS requires that a minimum of 20 hours of pre-licensing education be completed before an application will be considered. |
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All of the following methods can be used by an originator to detect fraudulent documents, except: |
Verifying that the purchase price is not greater than the average for the area Check paystubs for watermarks or fraud prevention patterns Track chain of custody of all verifications Compare earnings claims to public databases for industry and region The answer is verifying that the purchase price is not greater than the average for the area. A purchase price that is slightly higher than the average area is not, in and of itself, an indicator of a fraudulent transaction. There are a number of reasons for a higher purchase price, such as property features, age, improvements, and more. |
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Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice? |
Information on the credit reporting agency if the adverse action is based on his credit report Reasons for the denial of credit His credit score A referral to another potential creditor The answer is a referral to another potential creditor. An adverse action notice contains a statement of the action taken; a prescribed ECOA Notice regarding the prohibition of discrimination; the name and address of the federal agency that administers compliance with respect to the loan originator; a statement of the specific reasons for the adverse action or a disclosure of the applicant’s right to be given such a statement and the identity of the persons or office from which the statement may be obtained; and, if a credit score is used, FCRA requires that it also include the actual numerical credit score, the range of credit scores possible under the model used, all key factors that adversely affected the credit score, the date of the credit score, and the name of the entity that created the score or the credit file upon which the score was based. |
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The Gramm-Leach-Bliley Act requires that a consumer be given an Initial Privacy Notice: |
Only if nonpublic personal information is intended to be shared with nonaffiliated third parties Within three days of application Within 30 days of application After information has been shared with an affiliated or nonaffiliated party The answer is only if nonpublic personal information is intended to be shared with nonaffiliated third parties. Financial institutions are only required to provide an Initial Privacy Notice to consumers if they intend to share their information. |
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All of the following are common indices used for adjustable rates, except: |
London Interbank Offered Rate Cost of Funds Index Subordinate Rate Index Treasury Bill Index The answer is Subordinate Rate Index. Common indices include the Treasury Bill Index, the 11th District Cost of Funds Indexes (COFI), or the London Interbank Offered Rate (LIBOR). |
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All of the following are true of a loan origination fee, EXCEPT: |
May be adjusted based on terms of the loan May be charged by a mortgage broker or a lender May be paid at closing Covers the administrative costs of making the mortgage The answer is may be adjusted based on terms of the loan. A loan origination fee is a charge by a mortgage broker or lender to cover the administrative costs of making the mortgage. It is paid at closing and varies by lender. The origination fee may NOT be based on loan terms as per the Loan Originator Compensation Rule. |
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Bankruptcy cases may stay on the credit report for up to how many years? |
Five Two Ten Three The answer is ten. Bankruptcy cases may stay on the credit report for up to ten years. |
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The minimum standards for license renewal include all but which of the following? |
Continuing to meet the minimum standards for license issuance A production report for all licensed originators Satisfaction of annual continuing education requirements Payment of renewal fees The answer is a production report for all licensed originators. Production information pertaining to individual originators is not a necessary requirement as a condition of license renewal. |
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Which of the following would not be considered an appraisal red flag? |
Appraisal dated prior to the sales contract Blurry photos or photos that appear to be downloaded Comparables within one mile of the subject property and sold within one year Adjustments that exceed guideline The answer is comparables within one mile of the subject property and sold within one year. Comparables located within one mile of the subject property and sold within one year are not considered an appraisal red flag. |
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The types of high-cost mortgages that may be subject to HOEPA include all of the following, except: |
Refinances Reverse mortgages Home equity lines of credit Loans to purchase a home The answer is reverse mortgages. The Dodd-Frank Act broadened the scope of HOEPA to cover almost all mortgage types, except for reverse mortgages. |
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A lender engaging in telemarketing may be subject to a fine of _____ for violations of federal Do-Not-Call rules. |
$43,280 $45,000 $25,359 $25,693 The answer is $43,280. Violations of the federal Do-Not-Call rules can lead to fines of $43,280 per violation, as of 2020. |
