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25 Cards in this Set
- Front
- Back
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Which of the following is not a common underwriting pitfall? |
Cash-out refinances listed as no cash-out Income calculated incorrectly Borrower delayed in returning initial signed docs Secondary financing not disclosed The answer is borrower delayed in returning initial signed docs. A borrower being delayed in returning docs would suggest that the file has not even gone into underwriting yet, which would not be an underwriting pitfall. |
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Jimmy has been working with ABC Mortgage for 16 years and has built a strong relationship base with most of his settlement service providers. The Smith file has been a big headache for Jimmy, and it looks like the deal will be very tight. Jimmy shoots an email to his appraiser that reads, “The Smiths believe that their home is worth $250,000 and would like for you to feel the same. How much will the appraisal cost?” This communication may lead to: |
An appraisal review All of these are likely to result An inflated appraisal A violation of TILA’s rules pertaining to communication with appraisers The answer is all of these are likely to result. It is likely that in Jimmy’s long-term relationship with his appraiser, the meaning in this kind of email is very clear to the appraiser. In order to please Jimmy and the borrower, the appraiser is likely to do everything he/she can to arrive at as high a value as possible. This may lead to an inflated appraisal, possibly an appraisal review, and a violation of TILA’s rules regarding communication with appraisers |
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An escrow account analysis has been completed on Mary Thompson’s loan. It is discovered that there is a $40 overage in her account. How many days does the servicer have to return the money? |
There is no refund The servicer would not return the money; it would be applied toward the principal amount The servicer has 30 days from completion of the analysis to return the overage Ms. Thompson must be refunded within 90 days The answer is there is no refund. RESPA requires a refund if an escrow analysis uncovers an overage of greater than $50. Smaller overages are applied to the next year’s escrow payments; anything above $50 is then required to be refunded within 30 days. |
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In what area of the Loan Estimate would a borrower be able to see if their loan has a balloon payment? |
The “Projected Payments” table The “Comparisons” table The “Loan Terms” section This is not listed on the Loan Estimate The answer is the “Loan Terms” section. The Loan Terms section on page 1 of the Loan Estimate includes, among other things, an indication of whether the loan includes a prepayment penalty or a balloon payment. |
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Standard income qualification for a salaried borrower applying for a conforming loan typically includes: |
Two weeks of paystubs and W-2s for three years Paystubs for the most recent 30-day period and W-2s for the most recent two years Tax returns for the past two years accompanied by a 4506-T Paystubs and tax returns documenting all commission income The answer is paystubs for the most recent 30-day period and W-2s for the most recent two years. Conforming loan programs meet the guidelines set by Fannie Mae and Freddie Mac. The general guidelines set for salaried income include W-2s from the past two years and paystubs from the past 30 days. |
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If a changed circumstance in a mortgage loan transaction occurs fewer than four business days prior to consummation: |
Closing must be postponed until the borrower consents to reschedule The loan must be re-approved The borrower must sign a waiver consenting to the use of the original Loan Estimate The revised charges may be provided to the consumer on a revised Closing Disclosure The answer is the revised charges may be provided to the consumer on a revised Closing Disclosure. If a changed circumstance occurs fewer than four business days prior to consummation, the revised charges may be provided to the consumer on a revised Closing Disclosure. I |
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In the verification and documentation process of loan application, “VOD” means: |
Void of default Verification of deposit Verification of documentation Verification of disclosure The answer is verification of deposit. “VOD” means verification of deposit. It is the verification of banking or asset information while qualifying a borrower. |
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Which of the following scenarios describes a “straw buyer”? |
Charlie cuts and pastes her income documentation to reflect a higher income Tom’s sister has bad credit and cannot qualify for a loan, so he agrees to let her get the loan using his name and allows his sister to live in the house and cover the mortgage payments Will asks his buddy to be on alert to verify his employment when the lender calls Cindy asks her father to co-sign a loan for her The answer is Tom’s sister has bad credit and cannot qualify for a loan, so he agrees to let her get the loan using his name and allows his sister to live in the house and cover the mortgage payments. A straw buyer is someone who agrees to let someone use his/her name, Social Security Number, and other financial information to qualify for a loan he/she has no intention of paying back or occupying the home. |
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When is it allowable for an originator to provide a real estate agent with a $50 gift card in exchange for a referral? |
If the gift card has no dollar amount listed on it If the real estate agent’s commission was no more than 25% more valuable than the card As long as the originator provides equal gift cards to each service provider on the loan It is a violation of RESPA for the originator to provide the card The answer is it is a violation of RESPA for the originator to provide the card. RESPA prohibits providing a “thing of value” in exchange for a referral. |
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Which of the following statements does not accurately describe a legal obligation that FCRA requires mortgage lenders to meet when using information contained in a credit report? |
Lenders must certify that they are using the information in a credit report for a permissible purpose Lenders must notify the CRA that provided the credit report of any disputes that the loan applicant has with information shown in the report When providing a notification of adverse action, lenders must include a statement that the CRA did not make the decision to deny a loan application When denial is based on information from a lender’s affiliate, the lender must notify the loan applicant of the right to know the nature of this information The answer is lenders must notify the CRA that provided the credit report of any disputes that the loan applicant has with information shown in the report. Lenders do not have a legal obligation to notify CRAs of disputes that loan applicants have with information presented in a credit report. |
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All of the following may be reasons why a lender may call a reverse mortgage due and payable, except: |
The loan balance increases The homeowner dies An act of fraud or misrepresentation occurs The homeowner declares bankruptcy The answer is the loan balance increases. Reverse mortgage interest is charged on the outstanding balance and added to the debt, which means the debt increases with each payment or draw. This is how a reverse mortgage is designed to be implemented. |
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The Barrows applied for a loan to buy a small duplex in a suburb of Springfield. However, shortly after they received the Loan Estimate from their lender, a tornado swept through Springfield and severely damaged the home they are purchasing, requiring construction and repairs. Under these circumstances: |
The previous Loan Estimate still applies The transaction is void The Barrows must reapply A revised Loan Estimate may be issued The answer is a revised Loan Estimate may be issued. In general, a creditor may not make a material change to a Loan Estimate once it is provided to the loan applicant. However, under certain specific “changed circumstances,” a revised Loan Estimate may be provided. These include an extraordinary event beyond the control of any party which specifically affects the transaction, such as a tornado damaging the subject property. |
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A borrower is considered to be self-employed if he or she: |
Has not earned W-2 income in the previous two years Owns more than 1% of a business Owns more than 25% of a business Has ownership of at least 51% of a business The answer is owns more than 25% of a business. A borrower is considered self-employed if he or she owns more than 25% of a business. |
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In the practice of table funding, what is used to protect the lender against fraudulent activity? |
Rigorous income analysis Documentation of repayment ability Buy-back provisions Line of credit The answer is buy-back provisions. A warehouse lender often uses buy-back provisions in the agreements with brokers to assure themselves some protection against fraudulent activity during the loan process. |
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An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is: |
A violation of RESPA’s prohibition against fee-splitting Permitted only as long as receipts are kept from the processor for five years A unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees A violation of ECOA The answer is a unilateral markup, which is legal, but may be a violation of RESPA’s prohibition against unearned fees. RESPA requires compensation for settlement services to be earned. Any compensation not in direct correlation with an actual service is likely a violation. However, according to a 2012 case, the act of unilaterally marking up a fee and retaining the additional earnings is not illegal, as long as fee-splitting is not involved. |
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All of the following loans are covered by the requirements of the Home Mortgage Disclosure Act, except: |
A loan to purchase a property in an urban area A home improvement loan A loan for an RV which the borrower uses as his/her primary housing six months a year Refinance of a property owned by an elderly couple who are both over the age of 62 The answer is a loan for an RV which the borrower uses as his/her primary housing six months a year. HMDA reporting is not required for loans for personal property; loans to purchase RVs are personal loans and therefore not subject to mortgage lending laws. |
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Lifetime rate caps are used in transactions for adjustable-rate mortgages to limit: |
The number of rate adjustments that can occur during a loan’s term The amount by which periodic payments can change over the loan term The amount by which an interest rate can change over the loan term The amount of interest that a borrower can pay during a loan’s term The answer is the amount by which an interest rate can change over the loan term. Lifetime rate caps limit the amount by which a rate can change during a loan term. |
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Title insurance is required for all loans by the: |
Borrower’s attorney Lender Lender’s title company Borrower The answer is lender. Title insurance provides coverage for undisclosed liens or other title defects that may not turn up on a title search and is required by the lender. Lender’s insurance is mandatory for loan approval, but owner’s insurance is voluntary. |
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Assessment of borrower repayment ability is not required for: |
Closed-end home loans Adjustable-rate home loans HOEPA loans Reverse mortgages The answer is reverse mortgages. TILA expressly requires an assessment of repayment ability for virtually all transactions other than those for reverse mortgages |
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Specific prohibitions in advertising for mortgages include all but which of the following? |
Misleading advertisement of a “fixed” rate Claims of debt “elimination” Use of the advertiser’s name Misrepresentation of government endorsement The answer is use of the advertiser’s name. An advertiser using its own name in an advertisement is actually a requirement, not a prohibition. |
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Where inquiries related to marital status are permitted (e.g., community property states), Regulation B permits the creditor to inquire using any of the following terms, except: |
Unmarried Divorced Married Separated The answer is divorced. Regulation B provides that, when inquiries related to marital status are permitted, the terms that may be used are “married,” “unmarried,” and “separated.” |
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A mortgage lender that is conducting telemarketing to generate business will not violate the Telemarketing Sales Rule by calling which of the following individuals? |
A borrower who used the broker’s services to secure financing for a home purchase two years earlier A borrower who used the broker’s services to secure a home equity loan three years earlier A borrower who accepted but rescinded a home equity loan 24 months earlier A borrower who contacted the lender three months ago to ask about interest rates for refinances The answer is a borrower who contacted the lender three months ago to ask about interest rates for refinances. The Telemarketing Sales Rule allows telemarketers to contact consumers with whom they share an established business relationship. An established business relationship exists if a consumer secured a loan from a lender within the past 18 months or contacted it within the past three months to inquire about loan products. |
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Two brothers, Tom and Jim, purchase homes on the same block where they grew up. They knew the sellers, having grown up on the block, and both obtain $200,000 loans to purchase their new homes. Jim chose a “traditional” loan – 30-year fixed, while Tom would rather pay his loan off more quickly. He decided on a 15-year mortgage. Which of the two will pay more principal? |
Both Jim and Tom will pay the same amount of principal Jim Tom It depends on their rates The answer is Both Jim and Tom will pay the same amount of principal. Both brothers will pay the same amount in principal, though Jim will pay much more in interest over the longer term. |
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What type of lien takes priority? |
A tax lien The first mortgage The second mortgage A mechanic’s lien The answer is a tax lien. A tax lien takes priority over all other liens, regardless of chronological order. |
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If an appraiser considers the value of the land and the cost of improvements as a means to arrive at an estimate of value for a property, he/she is using the _____ approach. |
Sales comparison Income Cost Investment The answer is cost. The cost approach uses the value of the land and the reproduction cost of any improvements. |
