Answer: c) With the exception of an educational interaction, RESPA dictates that nothing of value (aside from basic promotional items) may be offered to or exchanged between any actual or potential referral source.

Answer: b) The SAFE Act prohibits an individual from obtaining a mortgage loan originator’s license if he or she has had any felony conviction within the previous seven years, has had a felony conviction at any time involving fraud, money laundering, dishonesty, breach of trust or moral turpitude, or has had a license revoked by any other state or jurisdiction. Please note that some states may apply stricter standards.

Answer: d) A general business day is any day of the week, except for Sundays and federal holidays, on which a business fully conducts its operations. A precise business day is simply any day of the week aside from Sundays and federal holidays. Each have their own implications pertaining to right of rescission, document issuance, and days prior to closing.

Answer: a) Similar to TILA, the MAPs Rule serves to promote authenticity and accuracy in advertising. Some of the MAPs Rule’s prohibitions surround using the word “fixed” when advertising an adjustable rate mortgage, misrepresenting or implying government endorsement when either the lender is not an endorsed provider or the loan is not a government loan, using an individual’s current lender’s name in a solicitation without indicating that the source of the advertisement is not the referenced lender, and making misleading claims surrounding debt elimination.

Answer: d) Marital status is one of the Equal Credit Opportunity Act’s prohibited characteristics. A mortgage professional may never ask or solicit information pertaining to a prohibited characteristic. Although the application asks the applicant to define whether he or she is married, separated, or unmarried, asking anything beyond those descriptions would violate the applicant’s rights under ECOA.

Answer: a) The Gramm-Leach-Bliley Act was implemented to protect the sanctity of individuals’ non-public, personal information. As such, it requires all financial institutions to protect customers’ and consumers’ information by implementing safeguards contained in the act’s Safeguards Rule. It also requires companies to afford their customers “a reasonable opportunity” to opt out of information sharing. Affording applicants access to credit applications is the role of the Equal Credit Opportunity Act.

Answer: d) Any type of predatory lending Is unethical. Redlining consists of avoiding doing business in certain geographic areas due to discriminatory preferences or because the area is potentially deemed to be less profitable. Flopping is a fraudulent activity associated with short sales. Reverse redlining is taking advantage of the people residing in specific, often socio-economically-disadvantaged areas, by offering them products and services at higher costs and with less benefits than other, less profitable options for which they may otherwise qualify.

Answer: d) The Telemarketing Sales Rule requires the telephone numbers of all potential outbound sales call recipients to be scrubbed through the Do Not Call list every 31 days. Exceptions to this requirement consist of current customers, individuals who are not current customers but who were customers within the previous 18 months, and individuals who were never customers but who initiated an inquiry on their own within the previous 90 days. Furthermore, all outbound sales calls may only be placed between 8:00 a.m. – 9:00 p.m. of the call recipient’s time.

Answer: c) At the conclusion of the application, the loan originator must provide the applicant with the opportunity to define his or her race, national origin, and sex. If the application is conducted face-to-face and the applicant refuses to provide this information, under HMDA, the originator must document race, national origin, and sex. If the application is conducted face-to-face and the applicant refuses to provide this information, under HMDA, the originator must document race, national origin, and sex on the basis of visual observation or surname. If the application is taken in a non-face-to-face capacity, the loan originator must honor an applicant’s refusal to define their race, national origin, and sex. Age, or specifically date of birth, along with marital status, is requested on the application but not under HMDA. It is never acceptable to inquire about an individual’s intention to alter the size of their family nor is it ever acceptable to ask the applicant to disclose of what country he or she is a citizen.

Answer: d) The GLBA’s Safeguards Rule requires anyone with access to any individual’s non-public, personal information to secure the information any time when he or she is not in direct, physical control of the information. By leaving a file on her desk and walking away, the loan processor compromised the customer’s security because anyone unauthorized to see the information contained within the file could have accessed it. The only individuals permitted access to a customer’s non-public, personal information are individuals with a business purpose to review it. Therefore, by showing the appraisal to her colleague for nothing other than aesthetics, the loan originator violated the customer’s rights.

Answer: c) An applicant’s race is the best possible answer out of the provided choices. An applicant’s race may never be a part of any decision-making process and, aside from asking the questions through HMDA allowances, race may never be inquired about or discussed. Although a mortgage professional is prohibited from probing into the specifics of an applicant’s marital status, the applicant may be asked whether s/he is married, separated, or unmarried. Although age may never be used as a factor in determining credit worthiness, the applicant may be asked for his or her date of birth to determine that s/he is of the age of majority and legally able to apply. The application’s declaration section asks the applicant to attest to whether or not s/he is a U.S. citizen or a Permanent Resident Alien. If s/he is neither, additional documentation may be required to demonstrate the applicant’s legal ability to reside or be in the U.S.

Answer: b) The only time you may refuse to accept an application based on age is when the applicant is under the age of 18. The Uniform Residential Loan Application is a legal document. In order to be able to sign a legal document, the signer must be at or older than the age of majority. An elderly applicant who may not outlive the mortgage lien would still be issued credit as long as s/he is otherwise qualified. Competency has nothing to do with age; a young person may be mentally incompetent. As long as the applicant is 18 years of age or older, competent, and qualified, age makes no difference. The only other exception when age may be considered is when originating a reverse mortgage. Lastly, unless it is clear that a traditional income source will end within the next three years, future income potential may not be considered as long as the applicant is qualified at the time of closing.

Answer: d) Servicing transfers are addressed through RESPA.

Answer: b) A trigger term is a term often used in advertising which automatically “triggers” the clear and conspicuous disclosure of additionally-relevant details. Under TILA, advertising an interest rate automatically triggers the requirement to disclose an annual percentage rate (APR).

Answer: a) The Home Ownership and Equity Protection Act was enacted to prevent individuals who might not fully understand the financing programs they were considering from being taken advantage of through elevated pricing and onerous loan terms. HOEPA requires additional safeguards whenever an interest rate, fees, or the implementation of a pre-payment penalty escalates beyond annually-established thresholds.

Answer: a) Section 35 of the Truth-in-Lending Act addresses Higher Priced Mortgage Law.

Answer: b) Although previously permitted, loan originators and lenders may no longer utilize above-par pricing to increase their own personal compensation (formerly known as collecting an overage). By allowing loan originators to offer higher interest rates in order to increase their own personal commissions, the customers were often denied access to the lowest available pricing. Although above-par pricing is still allowed, when utilized, 100% of any “overage” must be fully credited to the customer to offset their settlement expenses. Any above-par pricing generated through a mortgage must be fully disclosed to the applicant.

Answer: d) Under TRID, the Initial TIL and the GFE were combined to create the Loan Estimate and the Final TIL and HUD were combined to create the Closing Disclosure.

Answer: c) TRID applies to all types of mortgage financing with the exception of home equity lines of credit, reverse mortgages, mortgages not secured by real property, loans made by persons not considered creditors, certain no-interest second mortgage loans used for down-payment assistance, property rehabilitation, energy efficiency, and foreclosure avoidance.

Answer: d) Issuing a Loan Estimate to the customer, in and of itself, is not enough to accept most fees. With one exception, no money may be accepted from a customer until s/he has both received a Loan Estimate and expressed his or her intention to proceed with the transaction.

Answer: c) TRID allows for the collection of only a credit report fee prior to issuing a Loan Estimate. A credit report is often secured at the time of application and prior to the issuance of any documents. Lenders are permitted to collect an upfront credit report fee to offset this expense.

Answer: a) HMDA, also known as the Home Mortgage Disclosure Act, was enacted in 1975 and operates under Regulation C.

Answer: d) Whereas HMDA is primarily concerned with identifying and preventing discrimination committed by organizations, ECOA is charged with the responsibility of preventing discrimination by individuals.

Answer: c) The Fair Credit Reporting Act (FCRA) mandates that, in order to access an individual’s credit, one must always have permission and a permissible purpose. In the aforementioned scenario, the loan originator was never given permission to access the caller’s credit report.

Answer: b) FACTA resulted from an amendment to FCRA to address growing trends in identity theft. Among other considerations, FACTA requires all financial institutions to implement and maintain an identity theft prevention program.

Answer: c) Under RESPA, mortgage servicers may retain up to two months’ worth of escrow reserves to minimize the impact of remitting higher-than-anticipated escrow disbursements.

Answer: d) The SAFE Act prohibits any loan originator working for a licensed entity to conduct origination activities on properties located in states and jurisdictions where the loan originator is not licensed. Even though the original loan professional did not work on the transaction aside from taking the initial application, by taking that application, that loan originator violated the SAFE Act. RESPA prohibits anyone from receiving compensation that is not legitimately earned. Additionally, RESPA requires any compensation earned to be commensurate with the amount of work performed. By equally splitting the commission, the loan originators violated RESPA because 1.) the commission was not legitimately earned by the original loan originator and 2.) by splitting the commission 50/50, the original loan originator was paid more than the amount of work performed.

Answer: c) A RESPA violation can result in a prison sentence of up to one year along with a fine of up to $10,000. These penalties apply per occurrence.

Answer: d) According to the Code of Federal Regulations (CFR) 12 CFR 1026.36(g)(2), the licensed MLO’s name and unique identifier must appear on the obligatory and security instruments along with the credit application and disclosures required by CFR § 1026.19 (e) and (f).

Answer: c) The Uniform Residential Loan Application, also referred to as FNMA form 1003, FHLMC form 65, and the URLA, is the credit application used for taking residential loan applications.

Answer: d) A conventional loan is a loan that is purchased, “backed,” or securitized through a non-purely governmental entity. All conforming loans must “conform” to both Fannie Mae or Freddie Mac underwriting parameters and Federal Housing Finance Agency (FHFA)-established annual loan limits. Fannie Mae and Freddie Mac will only purchase or securitize loans that are both conventional and conforming. Fannie Mae and Freddie Mac are “quasi-governmental” agencies because they are both share-holder owned.

Answer: a) Although the “&R” is not an official part of the abbreviation, NMLS refers to the Nationwide Multistate Licensing System & Registry.

Answer: b) The SAFE Act defines a traditional mortgage as a 30-year, fixed-rate loan.

Answer: c) Although super conforming loans are occasionally used to apply conforming underwriting guidelines and parameters to loan amounts exceeding FHFA-established annual loan limits, any loan exceeding these limits is technically referred to as a jumbo loan.

Answer: c) The three types of government loans are FHA, VA, and USDA. A HECM, one type of Reverse mortgage, is an FHA product known as the FHA 255.

Answer: a) The FHA prohibits pre-payment penalties on all FHA loan products.

Answer: b) FHLMC stands for the Federal Home Loan Mortgage Corporation and is referred to as Freddie Mac.

Answer: a) Congress annually allocates funds to the USDA to afford people a relatively easy opportunity to secure financing for homes in rural areas. The home must be in a USDA-approved area to be eligible for USDA financing.

Answer: d) VA purchase loans afford borrowers the opportunity for no down payment, regardless of the purchase price.

Answer: d) All eligible VA borrowers must demonstrate their eligibility by producing a Certificate of Eligibility (COE). To be considered for full entitlement, the COE must reflect an entitlement amount of $36,000.

Answer: d) The FHA allows for slightly higher DTI ratios than its conventional counterpart. FHA guidelines utilize 31/43 as ideal DTI ratios.

Answer: a) The four ARM components are: frequency of change, index, margin, and CAPS.

Answer: a) The index is the ARM component responsible for the interest rate fluctuations.

Answer: c) The applicable interest rate of a 7/1 ARM in year three is still the initial start rate.

Answer: c) Conventional financing guidelines currently limit seller’s concessions to 3% of the purchase price when the borrower’s down payment is less than 10%, to 6% of the purchase price when the borrower’s down payment is equal to or greater than 10% but less than 25%, and to 9% when the borrower’s down payment is equal to or greater than 25%. Conventional seller’s concessions are always limited to 2% of the purchase price when the intended use of the home being purchased is for investment purposes.

Answer: b) FHA financing finances the purchase of one-to-four-unit properties intended for use as primary residences. As long as the borrower lives in one of the three units described in answer option c, the property would still be considered a primary residence. Under certain circumstances, FHA will provide financing for mixed-use properties. The only option for utilizing FHA financing for an investment property is through an FHA streamline refinance.

Answer: d) Conventional financing finances one-to-four-family, residential, real property intended for primary, secondary, or investment purposes. The four-family property utilizing 55% commercial space would not qualify for conventional financing. The single-wide travel trailer would be ineligible because it is not considered real property. The five-unit property is ineligible due to the number of units. Even though the borrower will not be residing in the four-unit property all year, it can still be considered a primary residence if s/he intends to live there for six months or more each year. Otherwise it could also be financed as an investment property or, if in a resort or vacation area, a second home.

Answer: d) The document establishing separation from the U.S. military is the DD214.

Answer: c) At present, the FHFA defines the conventional conforming loan limit for single-family properties not located in higher-cost areas to be $548,250. Higher limits for multi-family properties and those located in higher-cost areas apply.

Answer: a) Although home prices in some areas of Colorado may be high, the higher cost areas, as defined by the FHFA, are Alaska, Hawaii, Guam, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

Answer: b) Even though her DTI ratios are slightly high, DTI ratios are only guidelines. Although the FHA may tolerate her DTI ratios easier than would conventional financing, conventional financing should be her first choice since the underwriter might conclude that her high credit score, significant down payment, and the amount of her reserves offset her higher DTI ratios. Furthermore, she will be able to remove MI sooner with conventional financing than she would be able to through FHA. If the underwriter was unable to approve the loan conventionally, s/he would most likely counteroffer with an FHA option. Non-traditional financing refers to any loan other than the 30-year fixed. A shorter term or potentially higher interest rate may not bode well with higher DTI ratios. A bridge loan is used as temporary financing and does not apply to this scenario.

Answer: a) Alt-A loans often refer to loans with minimal-to-no documentation. The NINA is a no-income, no-asset Alt-A loan.

Answer: a) Compensating factors refer to underwriting considerations that exceed standard underwriting parameters. The more compensating factors a loan application has, the easier it may be to overlook a weaker area. For example, although a representative credit score may be lower than ideal, if the applicant has low DTI ratios, a sizable down payment, and significant reserves, the underwriter might be able to overlook the lower credit score.

Answer: b) The representative credit score considered for underwriting is the lowest middle score of all of the applicants. Since the borrower’s middle score is 619 and the co-borrower’s middle score is 801, the lower of the two is used. A chain is only as strong as its weakest link.

Answer: b) FHA allows for a minimum down payment of 3.5% of the purchase price. Since Betty Borrower’s $7,000 down payment is exactly 3.5% of the $200,000 purchase price, FHA might present as the perfect option.

Answer: d) FHA requires a minimum down payment of 10% for any loan with a representative credit score lower than 580.

Answer: b) Regardless of whether an individual is paid through W-2 wages or otherwise, if s/he has a 25% or greater ownership interest in the business for which s/he works, s/he is to be considered self-employed.

Answer: b) If an individual earns overtime, bonus, or commission income equal to or greater than 25% of his or her annual base salary, two years’ most recent federal income tax returns must be reviewed to substantiate that income.

Answer: b) Although the underwriter always retains discretion, if installment debt has ten or fewer months remaining, it may be ignored. Common sense must always prevail. Just because you are allowed to ignore a debt, if, with that debt, the debt-to-income ratios are extremely high, the home could be in foreclosure by the time that the installment debt has been completely satisfied.

Answer: d) Assets are cash or things of value one owns. Liabilities are debts and financial obligations. A mutual fund is an investment account containing assets and is therefore not a liability.

Answer: a) Although principal, interest, taxes, homeowner’s insurance and condo dues are all housing expenses, the most complete answer is any mandatory cost associated with owning a home.

Answer: d) The complete housing expense plus minimum payments on credit cards, loans, and leases, and all long-term debt divided by the applicants’ gross monthly income(s) results in their total debt ratio. Long term debt refers to any debt obligation of the applicant’s that does not appear on their credit profile.

Answer: b) Although it certainly is the applicant’s prerogative to wait until s/he has accumulated the necessary funds, it is possible that above-par pricing could generate a closing credit sufficient enough to supplement the applicant’s current assets. Of course, the applicant must be thoroughly informed that, by doing this, s/he is choosing a higher-than-market interest rate. S/he should also be made aware of the additional overall interest expense in which the higher rate will result as compared to the amount of the closing cost credit received. Lastly, the borrower must qualify at the higher rate.

Answer: b) Funds for the down payment may not be borrowed or advanced through a credit card. Although, in some cases, a minimum borrower contribution may be required, employer assistance, gift funds, and subordinate financing may all contribute towards the down payment.

Answer: a) TILA mandates that, any time an interest rate is quoted, the APR must also be provided.

Answer: c) An escrow waiver fee would appear on the Loan Estimate and Closing Disclosure as a cost that the lender charges to waive the escrow account requirement. It couldn’t be an escrow charge because, by charging it, there would not be an escrow account. Although a premium for credit life insurance may never be financed into the loan amount, a monthly premium for this optional insurance is often collected through the escrow portion of the mortgage payment. PMI and flood insurance premiums would always be collected through the escrow portion of the mortgage payment.

Answer: d) Non-traditional debt is systematic debt that does not typically appear on a credit report. Student loan debt, whether in deferment or otherwise, would appear on an individual’s credit report.

Answer: a) Many lenders offer customers a float down option at the time of interest rate lock allowing for a one-time reduction in rate, at the customer’s request, should rates decline prior to closing. There is often a cash deposit collected from the customer in exchange for this privilege.

Answer: b) When an offer to buy is accepted and a purchase contract signed, the buyer often pays the seller an earnest funds deposit as a measure of good faith. This deposit gives the seller incentive to remove the home from active MLS sales listings knowing that, if the buyer backs out without cause, the seller may retain the deposit. This deposit is ultimately credited back to the buyer at closing as a settlement fee credit.

Answer: a) The Fannie Mae form 1004 (Freddie Mac form 70) is the primary appraisal type used for residential financing. It is also referred to as the Uniform Residential Appraisal Report (URAR).

Answer: c) Both mortgages together constitute a CLTV of 85% ($361,250). If the second mortgage’s LTV is 22%, the first mortgage’s LTV has to be 63% (85 – 22 = 63). When you multiply 425,000 by 63%, the result is 267,750.

Answer: b) To avoid PMI, the first mortgage must be no greater than 80% LTV (240,000). If the borrower has $30,000 (10%) to spend as a down payment, another 10% will be needed to bridge the gap between the first mortgage, the down payment, and the purchase amount.

Answer: d) The hourly rate of $44.00 is multiplied by the hours worked per week (35) to achieve the weekly rate ($1,540). The weekly rate is then multiplied by 52 to achieve the annual income since each year contains 52 weeks ($80,080). The annual income is then divided by 12 to achieve the monthly income.

Answer: a) The established debt ratio of 35% translates to $4,200 meaning that the P&I plus all other monthly debt totals $4,200. If his other monthly debt amounts to $1,500, the difference of $2,700 is what is left to cover the P&I (4,200 – 1,500 = 2,700).

Answer: a) When the balance of the second mortgage (36,760) is divided by the property value (310,000), the resulting LTV equals 12%.

Answer: b) Both mortgages together constitute a CLTV of 78% ($401,700). If the second mortgage accounts for $56,500 of that 78% the first mortgage accounts for $345,200.

Answer: d) Monthly earnings amount to $6,000. All qualifying debt can consume no more than 36% (2,160). If his monthly debt amounts to $1,100, the balance of allowable expense is $1,060.

Answer: d) The real estate taxes and homeowner’s insurance are annual amounts. Adding them together and dividing the sum by 12 results in a monthly equivalency of $370.83 (3,600 + 850 = 4,450 / 12 = 370.83). To that, the monthly P&I of $1,190 and the monthly PMI of $75.00 are added resulting in a monthly PITI payment of $1,636.

Answer: b) Bi-weekly pay periods amount to 26 payments in a calendar year. $1,700 x 26 = an annual income of $44,200. An annual income of $44,200 amounts to a monthly income of $3,683 (44,200 / 12).

Answer: c) The first mortgage (175,000) in relation to the property value (415,000) results in a 42% LTV. All outstanding debt (175,000 + 35,000) in relation to the property value results in a 51% CLTV. All outstanding encumbrances (175,000 + 85,000) in relation to the property value results in a TLTV of 63%.

Answer: a) By averaging the previous two years’ gross earnings (65,600 + 63,200 / 2), the average annual gross earnings amount to $64,400. By subtracting his base salary of $56,500 from his annual average gross earnings, the annual average overtime earned is $7,900 with a corresponding monthly equivalence of $658.

Answer: c) Without a cap, the borrower’s rate would increase from 3.5% to 9% (index + margin = fully indexed accrual rate [FIAR]). Since the loan contains a 5-point initial adjustment cap, however, the highest that the borrower’s rate could increase would be to 8.5%.

Answer: b) Years 1 – 3 the rate would be the start rate. Year 4 the rate could increase by 2%. Year 5 the rate could increase by 2%. In year 6 the rate could increase by 1% to its maximum rate.

Answer: d) The applicant’s age is ascertained when s/he is asked for his or her date of birth. The declaration section asks about citizen status as well as their intent for using the property as a primary residence (the latter is also defined through the property use section). Length of intended ownership is not an issue addressed through the URLA.

Answer: c) With the exception of relocation and VA loans, both the borrower and co-borrower are analyzed equally with regards to creditworthiness. Therefore, unless it is a relocation or a VA loan, it makes no difference as to who appears as the primary borrower and who appears as the additional borrower. In a relocation loan scenario, the person whose job is relocating them should appear on the left as the borrower. In a VA loan scenario, the borrower with the COE should be considered the primary borrower.

Answer: d) Although not as common as in the past, a leasehold estate exists through which the homeowner owns only the improvements (real property) situated on top of the land. A third party owns the actual land and allows the dwelling to exist on it through virtue of a lease. Often the homeowner will pay the landowner a periodic ground rent. There are cases, however, when a one-time ground rent, paid at the time of lease signing, may be applicable to all future homeowners owning real property situated on the land throughout the term of the lease.

Answer: d) Similar to a VOE (verification of employment) through which an employer verifies income and/or employment status, a VOD (verification of deposit) may be requested of the financial institution holding the applicant’s assets in order to substantiate the value of the disclosed asset accounts as well as the account activity.

Answer: c) Fannie Mae Form 1009 is the Residential Loan Application used for Reverse Mortgages.

Answer: d) Although RESPA specifically prohibits the offering or exchange of anything of value between actual or potential referral sources, an exception exists when the interaction includes an educational component and there is no self-promotion. Because the purpose of the lunch was to educate the Realtor regarding a new mortgage program, either party was permitted to pay for the other’s lunch. Do you know the second exception?

Answer: b) RESPA Section 8 is violated any time an actual or potential referral source gives or extends an offer of something of value to an actual or potential referral source. The recipient only violates RESPA Section 8 upon accepting the offer. Because food and drinks are things of value, the moment that the title company offered the food and drink to the invited loan originators at the party, it violated RESPA. And the moment that the loan originators consumed the free food and drink, they violated RESPA.

Answer: c) By leading the customer towards a more profitable loan product that is not necessarily in that customer’s best interests, the lender is guilty of steering. Steering occurs any time a customer is encouraged to pursue a product or pricing structure that is advantageous to the lender but is not in the customer’s best interests.

Answer: c) The Patriot Act and FACTA require that all mortgage customers be positively identified in order to prevent identity theft, money laundering, and the financing of terrorism. Even though it may be awkward to refuse an ID bearing a picture that does not resemble the bearer, the compliant loan originator must do just that.

Answer: a) Reverse redlining occurs when unscrupulous mortgage professionals pray on the residents of specific geographic areas through predatory lending programs and services.

Answer: b) Conducting a double sale is selling one property to two different and unsuspecting fraud victims. The seller collects money from both and usually absconds shortly thereafter. This is usually not discovered until one of the buyers attempts to file ownership documents into public record only to discover that the other buyer’s ownership documents had already been filed.

Answer: c) Requiring that third-party foreclosure negotiators only collect their fee once the negotiation has been successfully completed has reduced the occurrence of foreclosure-related fraud.

Answer: d) The Home Ownership and Equity Protection Act, (Section 32 of TILA) prohibits home contractors and builders from directly receiving loan proceeds when the purpose of the financing is for home improvement and the loan meets or exceeds the thresholds for classification as a HOEPA loan. In cases such as this and to prevent unscrupulous contractors from taking the money and not completing the appropriate work, the proceeds must be made payable to the contractor and the homeowner, be issued directly to the homeowner, or be managed by an independent third party agreed to by both the homeowner and the contractor.

Answer: a) Even though a policy might not intentionally injure a particular class of persons, if this policy manages to injure a particular class of persons, it may be referred to as disparate impact. For example, imagine that, as a cost-minimizing measure, a mortgage company chooses to only communicate with its customers through e-mail. This might negatively impact a group of actual or potential customers who might not have access to e-mail due to the expenses associated with owning computer equipment and accessing the internet.

Answer: a) ECOA classifies marital status as a prohibited characteristic which cannot be asked about or considered when originating a mortgage. The application requires that the loan originator determine whether the applicant is married, separated, or unmarried. But, unless the applicant volunteers more details about his or her marital status, probing beyond that constitutes an ECOA violation.

Answer: b) Simply calling to inquire about rates does not constitute formal permission to access an individual’s credit profile. Even though their credit quality may ultimately affect the rate which they are offered, specific permission along with a permissible purpose must exist any time credit is accessed.

Answer: c) The Federal Trade Commission’s Red Flag Rule requires all mortgage professionals to address any type of red flag identified at any point throughout the mortgage process. Failure to do so may result in the mortgage professional being held accountable, along with the fraudsters, as an accomplice to the commission of any actual fraud.

Answer: a) Bait and switch occurs when customers are lured through the promotion of products, rates, and fees that seem too good to be true. When they inquire, they’re often informed that the program is no longer available. While the loan originators still have their attention, they are offered other programs which may not be as beneficial. Bait and switch also occurs at closings when documents are provided that do not describe the mortgage for which the applicant originally applied.

Answer: c) Caveat emptor is roughly translated from Latin to English as, “Let the buyer beware.” When the mortgage professional is solely looking out for the lender’s best interests, the customer should take extra care to look out for his or her own.

Answer: d) All mortgage professionals working on a transaction are expected to identify and address any and all instances of fraud that they are reasonably capable of identifying. Failure to do so could hold the mortgage professionals accountable as accessories in addition to the individual committing the fraud.

Answer: d) Any time above-par pricing results in a cash credit, 100% of the cash credit must be provided to the customer. Loan originators may no longer take cash credits generated through above-par pricing as compensation.

Answer: c) RESPA Section 8 prohibits the offer or exchange of anything of value between actual or potential referral sources. Even though no money had changed hands, the offer itself constituted a RESPA violation. Since the originator refused the offer, she did not violate RESPA.

Answer: b) Any term used in advertising that “triggers” the need for additional disclosure is known as a “triggering term” or a “trigger term.” By advertising “low interest rate,” the advertiser needs to specifically define what it means by “low.”

Answer: b) The Gramm-Leach-Bliley Act requires a financial institution to give each new customer “a reasonable opportunity” to opt out of information sharing once an account has been established.

Answer: a) If the appraiser commits a legitimate error in producing the appraisal, asking for an error correction is completely reasonable. The other three options would violate Appraiser Independence Requirements.

Answer: a) The SAFE act requires that all loan originators register and secure a unique identifier, also referred to as an NMLS number, in order to originate mortgages.

Answer: c) The SAFE act defines an immediate family member to be a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

Answer: a) Processors and loan originators have defined responsibilities. Processors may never originate loans, discuss pricing, evaluate qualification, or structure a loan. Among other things, processors are often responsible for the collection and organization of the documents that comprise the mortgage file.

Answer: c) In accordance with the SAFE Act, the term “person” means a natural person, corporation, company, limited liability company, partnership, or association.

Answer: c) Mortgage licensing in each state is overseen by a Commissioner. The Commissioner has the authority to establish rules, regulations, and other procedures applicable to loan origination in his or her state.

Answer: d) Registered loan originators are loan originators who work for a depository institution regulated by a federal banking authority or the Farm Credit Administration. Registered loan originators do not need to be licensed. Attorneys who negotiate residential mortgage loans on behalf of clients as an ancillary matter to their representation also need not be licensed. Additionally, anyone who negotiates financing for a home in which they live is exempt. But, if an individual works for a licensed entity, the number of loans originated each year does not influence licensing requirements.

Answer: b) As Big Money Bank, NA is a depository institution regulated by a federal banking authority, licensing and pre-licensing education are not required of its loan originators. Joel would, however, have to register through the NMLS and secure a unique identifier.

Answer: d) Candidates seeking to become licensed must consent to a criminal background investigation, a credit report review, and submit fingerprints.

Answer: c) Candidates for mortgage licensure may not have any felony convictions within the previous seven years or ever if the felony conviction involved an act of fraud, dishonesty, breach of trust, or money laundering.

Answer: a) The SAFE Act prohibits the issuance of a mortgage originator license to any individual whose license was revoked in any other jurisdiction. Furthermore, loss of one’s license in one state will automatically cause the revocation of all licenses issued by other states.

Answer: a) Medical judgments appearing on one’s credit profile will not preclude that individual from securing a mortgage originator license. All other current judgments will.

Answer: b) Although pre-licensing education requires 20 hours of material, of those 20 hours, three hours must surround federal law and regulations, three hours must surround ethics, and two hours must focus on lending standards for the non-traditional mortgage product marketplace. The rest is at the discretion of the approved course provider.

Answer: c) Candidates who fail the exam must wait 30 days between each subsequent attempt. After failing the exam a third time, the waiting period increases to six months.

Answer: c) In order to renew one’s originators license, one must complete eight hours of continuing education annually (plus any additional state-specific CE that may be required by the individual state), pay the applicable fees, and renew on or by December 31st to avoid a lapse.

Answer: c) Although he would certainly receive the benefits of learning, any CE taken above and beyond the eight hours would not count towards any CE needed in any future year.

Answer: d) Although the State Commissioner has significant powers and authority, issuing arrest warrants is not one of them. S/he can, however, work with law enforcement authorities as part of an investigation into criminal activity.

Answer: d) All licensed loan originators must purchase a surety bond for each state in which they are actively licensed. The surety bond is usually purchased and paid for by the employer on the employee’s behalf. The surety bond provides an insurance policy against which an individual injured by the loan originator’s neglect, incompetence, or wrongdoing may file a claim and seek restitution. If a claim is ever filed or paid against a surety bond, the loan originator would not be permitted to originate again until a replacement surety bond was secured.