Answer: a) Among other things, the Loan Originator Compensation Rule requires that any money resulting from the utilization of above-par pricing gets fully credited to the customer at closing. Prior to this rule, loan originators would often sell higher-than-market interest rates to customers and pocket resulting the “overages.” Because of this rule, that practice that is no longer permitted.

Answer: d) The Truth-in-Lending Act was amended in 1994 when Section 32 was added enacting the Home Ownership and Equity Protection Act (HOEPA). This regulation was enacted to address and stop predatory lending practices in purchases, refinances, open-ended credit plans, and closed-ended home equity loans that abusively charged excessive points, interest rates, and fees.

Answer: a) HOEPA applies to primary-residential purchase-money mortgages, refinances, closed-ended home equity loans, and open-ended credit plans. Loans exempt from HOEPA coverage consist of reverse mortgages, construction loans (initial construction phase only), loans originated and directly financed by a Housing Finance Agency (HFA), loans originated under the U.S. Department of Agriculture’s Rural Development Loan Program, and mortgages secured by vacation or second homes and investment properties.

Answer: c) Section 35 of TILA addresses the requirements surrounding higher-priced mortgage loans.

Answer: c) According to 12 CFR 1026.35 – Requirements for higher-priced mortgage loans, a higher-priced mortgage loan is a loan secured by the consumer’s principal dwelling bearing an annual percentage rate (APR) that exceeds the Average Prime Offer Rate (APOR) by 1.5% or more for loans secured by a first lien with a principal obligation that does not constitute jumbo financing, by 2.5% or more for loans secured by a first lien with a principal obligation that constitutes jumbo financing, or by 3.5% or more for loans secured by subordinate liens.

Answer: d) Closed-ended financing is a “one-time” allocation of funds that is repaid systematically under agreed upon terms involving a regular periodic payment amount and an established amortization term. Open-ended financing can be considered “two-way” money. Money may be borrowed against an established credit line amount, repaid, and then borrowed again under the terms of the credit agreement. Loans are typically closed-ended whereas credit lines are typically open-ended.

Answer: a) With only a few exceptions, when a loan meets the criteria that classifies it as a higher-priced mortgage, an escrow account managing the homeowner’s insurance and real estate taxes becomes mandatory for the first five years. Additionally, a written appraisal with an interior inspection is required. Higher-priced mortgages are permitted as long as the above-referenced conditions apply. Lastly, there is no change to the standard right of rescission requirements.

Answer: b) The three main purposes of TILA consist of disclosing the cost of the credit to the customer, establishing the right of rescission applicable to non-purchase, primary residential transactions, and overseeing advertising. Comparative shopping considerations are addressed through RESPA.

Answer: c) RESPA covers: loans made with funds insured by the federal government, loans made with funds from a lender regulated by the federal government, loans that are intended for sale to Fannie Mae or Freddie Mac, loans made by a creditor regulated under the Truth-in-Lending Act, and loan transactions involving federally related mortgage loans. Loans that are exempt from RESPA coverage consist of loans for 25 acres or more, loans for business, commercial, or agricultural purposes, temporary financing (bridge loans), loans secured by vacant land, loan assumptions that are permissible without lender approval (a simple assumption falls within this category), loans sold on the secondary market, and loan conversions when a new note is not required and the provisions are consistent with those of the original mortgage.

Answer: d) RESPA strictly prohibits markups to protect consumers from unscrupulous mortgage professionals desiring to profit at their expense. RESPA prohibits markups by classifying them as unearned fees. Markups involve charging a customer more than the cost of a third-party settlement fee and pocketing the difference.

Answer: a) Although RESPA requires the issuance of HUD’s Home Loan Toolkit, it is only required for purchase-money transactions. The Loan Estimate and Mortgage Servicing Disclosure Statement are required on all transactions, and the ABAD is only required after a referral to a service provider in which the referring party has an ownership interest of 1% or greater or vice versa.

Answer: b) One of several factors that HUD considers suspect when evaluating an entity for a sham affiliated business arrangement is whether or not that entity conducts business with other members of the lending industry aside from its affiliate. If it does not, that may be an indication of a sham AFBA.

Answer: a) As an exception to accommodate HMDA, ECOA allows mortgage loan originators to ask their customers to self-define their race, national origin, and sex. Inquiring about an individual’s intention to procreate is never acceptable nor is asking an applicant to elaborate about their marital status. Although applicants are required to define themselves as U.S. citizens, permanent resident aliens, or otherwise justify their legitimate presence in the United States, inquiring as to the country of their citizenship is never permitted.

Answer: c) ECOA strictly prohibits denying or hindering access to anyone expressing an interest in applying for credit. Only an underwriter may render the decision as to whether or not to extend credit. Even though it is highly unlikely that a 97-year old will outlive their mortgage commitment, there are processes in place that address when a borrower dies while owing a balance. If the individual is otherwise competent and qualified, they must be given the opportunity to apply and be considered for the credit for which they applied. An indication of a lack of qualification may never preclude someone’s access to applying for credit. A 17-year-old, however, is not of legal age and may not sign legal documents. Although she may very well be 18 at the time of closing, the application is a legal document that must be signed as of the date of completion and, if the applicant is not of legal age, she may not do so.

Answer: a) Only conducting business in English is not disparate treatment in and of itself. What causes it to potentially and adversely affect a particular population subset and be considered disparate treatment is the fact that the company is located in an Asian community. By only offering services in English, while located within an Asian community, the Asian population who may not speak English may be adversely affected. The loan originator who refers a customer who does not speak their language is not committing any type of offense because she does not speak their language. She is going the extra mile by referring that customer to someone with whom they can work. Refusing to work with non-U.S. citizens is an example of discrimination not disparate treatment. Operating up until 5:00 p.m. EST is fine because it affects all potential customers nationwide, not just some.

Answer: a) TILA requires that a Consumer Handbook on Adjustable Rate Mortgages (CHARM) be issued within three days of an application for a closed-ended ARM.

Answer: d) TILA regulates creditors that offer credit to consumers, that make the credit subject to a finance charge or payable under the terms of a written agreement requiring repayment in more than four installments, and that regularly extend credit to consumers.

Answer: d) Financing regulated by TILA involves the extension of credit to individuals for personal, family, or household purposes when the borrower’s dwelling secures the debt. TILA does not regulate loans applicable to business, agricultural, or organizational credit, credit in excess of $25,000 that is not secured by real property or a dwelling, public utility credit, credit extended by a broker registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission, home fuel budget plans, and student loans.

Answer: d) When chartered by former president Lyndon B. Johnson in 1965, HUD was seen as a means to strengthen the federal government’s relationship with states and cities on urban issues. HUD’s mission, as related on its web site, is, “…to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination, and transform the way HUD does business.”

Answer: d) The Dodd-Frank Act consolidated many various regulatory authorities and centralized oversight of the U.S. financial industry under the Consumer Financial Protection Bureau (CFPB).

Answer: d) The Homeowners Protection Act mandates that PMI be automatically removed once a loan reaches 78% LTV as long as the loan is current. Although Lucy is at 78% LTV, she will not be released of her obligation to pay PMI until she either becomes current or reaches her loan’s amortization midpoint.

Answer: c) The U.S.A. Patriot Act requires positive identification of all applicants through the visual inspection of a valid, government-issued, photo identification bearing a picture that closely resembles the person presenting it. By asking to see the husband’s but not the wife’s identification, Sylvia violated the U.S.A. Patriot Act. Loudly discussing their financial affairs would compromise their rights under the Gramm-Leach-Bliley Act. Failing to secure permission before accessing their credit profiles would violate the Fair Credit Reporting Act. Lastly, assuming their financial state without inquiring could be interpreted as steering or violating the Equal Credit Opportunity Act.

Answer: a) The E-Sign Act requires that all consumers be made aware of the technical requirements necessary for the utilization of electronic records prior to making the decision as to whether or not they wish to utilize that modality.

Answer: c) In accordance with the MAP Rule, “A representation omission, or practice is material if it is likely to affect a consumer’s choice of or conduct regarding a product.” Since the loan being advertised was a standard ARM, by omitting any mention of the two-year pre-payment penalty, the consumer was not given all of the material information necessary to render an educated decision.

Answer: b) The SAFE Act defines the moment that a customer accepts the assistance of a mortgage professional as the moment when that mortgage professional has a fiduciary responsibility towards that customer.

Answer: b) Each violation of the Gramm-Leach-Bliley Act may subject the violator to a fine of up to $10,000.

Answer: d) Similar to the U.S.A. Patriot Act, the Bank Secrecy Act/Anti Money Laundering (BSA/AML) is dedicated to preventing money laundering and the financing of terrorism. All cash transactions amounting to $10,000 or more trigger additional reporting requirements.

Answer: d) The licensing of mortgage loan originators is the responsibility of the Nationwide Multistate Licensing System and Registry.

Answer: a) With the implementation of QM’s through the Dodd-Frank Act, pre-payment penalties are limited to 2% of the outstanding balance during the loan’s first two years, 1% of the loan’s outstanding balance during the third year, and no penalty thereafter.

Answer: a) If a borrower remits a down payment of less than 10% on a conventional purchase, the seller may offer up to 3% of the purchase price as seller’s concessions. A down payment of 10% or greater but less than 25% would limit the concessions to 6%. Lastly, for down payments of 25% or greater, the seller may contribute up to 9% of the purchase price. If the subject property is intended for investment purposes, seller’s concessions are limited to 2% regardless of the LTV. FHA seller’s concessions are always capped at 6%.

Answer: b) Seller financing occurs when the seller acts as the mortgage holder, attaches a lien to the property, accepts contractually-obligated payments from the buyer, signs ownership rights over to the buyer, and releases the lien upon satisfaction of the debt.

Answer: a) The National Housing Act, establishing the FHA, was one of the federal government’s responses to improve conditions resulting from the Great Depression.

Answer: c) FHA loan limits vary by geographic location, specifically, the county in which the property is located. FHA loan limits may be ascertained at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Answer: c) In addition to the VA’s DTI requirement, all VA loan applicants must meet residual income requirements to demonstrate that there will be enough money left over after all monthly expenses are paid. The requirements for residual income are determined based on the household’s size and the location of the property.

Answer: b) The VA does not consider a housing expense ratio when analyzing an applicant’s ability to repay. The only ratio guideline applicable for VA financing is the 41% back-end ratio.

Answer: c) The minimum down payment permitted through FHA financing is 3.5%, much lower than its standard conventional counterpart’s of 5%.

Answer: b) The 203(k) is the FHA rehabilitation program allowing for the acquisition of a property along with financing needed renovation. It may be used as both a purchase and refinance option.

Answer: c) The four components of an ARM are: frequency of change, index, margin, and caps.

Answer: a) The NINA stands for “no income/no asset.” It does not conform to FNMA or FHLMC underwriting parameters since the applicant does not have to demonstrate qualification beyond having employment and quality credit.

Answer: d) The NINA is a “no income/no asset” loan. The NINANE is a “no income/no asset/no employment” loan. The SIVA is a “stated income/verified asset” loan. There is no such loan type as the NABA.

Answer: a) The life-of-loan cap establishes an interest rate ceiling beyond which a particular loan’s adjustable interest rate may not climb. The four types of ARM caps are: initial adjustment, periodic, life-of-loan, and payment.

Answer: d) Niche loans offer financing on unique property types or for individuals with unique borrowing needs. They are generally retained in portfolio and not sold into the secondary market.

Answer: c) The secondary market was established in 1938 with the creation of Fannie Mae. The secondary market provides investment firms with the funds that they need in order to purchase mortgage backed securities and participation certificates to sell to individual investors. This provides the money with which lenders fund homebuyers’ loans.

Answer: c) When a lender lends its own money, it makes its own rules and earns the interest itself. Loans such as these are generally held in “portfolio” and may take a lender a while to achieve its return on investment. Portfolio lenders also usually retain all of the risk.

Answer: c) With the 1938 creation of FNMA, the U.S. housing market was introduced to the secondary market. FNMA purchased mortgages originated and underwritten to its standards by saving and loan companies thereby channeling money into the housing market and allowing saving and loans to resume residential lending with mitigated risk.

Answer: b) Owing multiple mortgages is not a concern as long as the borrower is qualified and managing the payments as agreed.

Answer: d) Mortgage terms typically run between 10 and 30 years in increments of five. If a mortgagor chooses an “odd-year term,” that term is usually priced to the next highest five-year increment.

Answer: a) Lenders and mortgage servicers generally charge a one-time and/or periodic service fee to transform a borrower’s loan to and maintain it on a bi-weekly payment schedule. The borrower can achieve the same results, without any added expense, by remitting one extra monthly payment directly against the principal balance each calendar year.

Answer: d) The COFI is the Cost of Funds Index. The LIBOR is the London Interbank Offered Rate. The COSI is the Cost of Savings Index. The TIPI is fictional.

Answer: b) VA loans generally limit the periodic rate change to 1% above or below the previous rate and the life-of-loan cap to no more than 5% above the initial interest rate.

Answer: b) A balloon loan offers a typically low interest rate with a 30-year amortization in exchange for the balance becoming due and payable in full at an established point prior to the loan’s complete amortization. Balloon loans may or may not include a conditional right to modify.

Answer: b) Home equity loans are often originated along with or after the origination of a first mortgage. As such, they take a subordinate lien position against the property’s title and are therefore typically referred to as subordinate liens. Any lien, whether a home equity loan, line of credit, or otherwise occupying a secondary or lower lien position may be referred to as a subordinate lien. A HELOC is a home equity line of credit.

Answer: d) When a purchaser has less than 20% to spend as a down payment, PMI is typically required. To avoid paying PMI, a borrower may opt for a first mortgage at 80% LTV with a second (piggyback) constituting the difference between the 80% first mortgage and their less-than-20% down payment.

Answer: c) Since purchase prices and property values may differ, the LTV is established by dividing the loan amount by the lesser of the purchase price or appraised property value. The borrower may tap into equity established by a property value higher than the purchase price by selling the home as soon as immediately after purchasing it or by waiting one full year and refinancing or securing a home equity product.

Answer: a) Although a reverse mortgage will become due and payable upon the death of a borrower, if one borrower dies but leaves a surviving borrower, the loan stays in effect. The loan would become due and payable upon the passing of all obligated borrowers and their spouses. Vacating the property for more than one year, allowing real estate taxes to become delinquent, and the exercising of eminent domain would all trigger the repayment of a reverse mortgage.

Answer: c) A home equity loan (HEQ) is a closed-ended, fixed-rate financial vehicle whereas a home equity line of credit (HELOC) is an open-ended, adjustable-rate financial vehicle.

Answer: c) Cash on hand is never permitted unless its legitimate source can be clearly identified and the money deposited into a deposit account.

Answer: b) A court order or other legal obligation must be established in order for an individual to have child support considered as qualifying income. The most recent six months’ worth of receipt must be documented along with evidence of continuance for a minimum of 36 additional months.

Answer: b) To be approved for mortgage financing, an applicant should be able to clearly demonstrate that s/he is able to repay the loan through a thorough review of his or her income, assets, employment, and credit.

Answer: b) To account for vacancy potential, applicants are credited with 75% of gross rental income earned.

Answer: a) A loan is deemed suitable for a borrower if her ability to repay is clearly established.

Answer: c) Although an inquiry will immediately appear on an individual’s credit profile, an application in process won’t appear on an individual’s credit report until it becomes an actual tradeline.

Answer: b) A tri-merge credit report merges data from all three credit repositories so that a complete credit review may be utilized. Some creditors only report to one or two credit repositories. Failure to review data from all three repositories may result in a lender missing valuable information.

Answer: a) Standard mortgage pricing is the pricing associated with the highest credit scores. Lower scores result in higher pricing to offset risk.

Answer: b) A consumer who accesses their credit capacity beyond 30% causes a potential creditor to question whether or not that individual is living beyond his or her means and utilizing credit responsibly.

Answer: c) Schedule B is the section of the title insurance binder on which any and all outstanding liens and encumbrances appear.

Answer: c) Although it is never required, owner’s title insurance is always recommended since it protects the homeowner’s ownership interests in the property.

Answer: b) Full replacement coverage protects the lender’s interests and covers the replacement cost of the property in the event of a loss.

Answer: c) The Federal Housing Finance Agency (FHFA) establishes annual loan limits beyond which jumbo financing would be required. The current conventional/conforming loan limit for single-family properties is $510,400.

Answer: a) Demonstrating constant insurance coverage is a requirement of all mortgages. The investor needs to be assured that its investment is continuously insured against loss. In the event that a borrower fails to maintain continuous insurance coverage or provide continuous evidence of such, the mortgage servicer will purchase a non-underwritten, force-placed insurance policy to protect its interests.

Answer: c) The aggregate escrow analysis analyzes the money in escrow to ensure that the servicer has enough funds to disburse the anticipated disbursements. The borrower’s payment amount is adjusted accordingly to account for increases or decreases in whatever is paid through the escrow account. If the escrow account contains more money than is needed, the servicer generally must refund or credit that amount back to the borrower.

Answer: a) RESPA requires mortgage servicers to refund escrow overages amounting to $50.00 or more in the form of a credit to the next periodic mortgage payment or via check to the borrower. Although the servicer may opt to refund the $35.00 overage, it isn’t compelled to do anything since overages of less than $50.00 may stay in escrow to be absorbed by future shortages or added to future overages.

Answer: a) To ensure that borrowers are not being pressured into unnecessarily refinancing for the sole benefit of the lender and/or loan originator, all refinances must demonstrate a net tangible benefit to the borrower. Underwriters must complete a tangible net benefit worksheet for all refinance applications underwritten.

Answer: c) Although the borrower may use the proceeds of his loan for anything he wishes, including to pay for a vacation, refinancing to secure money for a vacation, in and of itself, is not a net tangible benefit. The underwriter would have to see something else of benefit to the borrower in order to approve the loan.

Answer: b) If the start rate is 3.5%, the 5/2/5 caps would prevent the rate from ever increasing beyond 8.5%. If the index is 3.5% at the first change point, the customer’s interest rate will increase from 3.5% to 7.5% because the margin is 4% and index + margin = FIAR (3.5 + 4 = 7.5).

Answer: b) An annual income of $75,000 translates to a monthly equivalency of $6,250. The housing expense of $2,100 divided by the monthly income of $6,250 results in a housing expense ratio of 34%.

Answer: a) LTV consists of the loan amount divided by the lesser of the purchase price or appraised value. Since the purchase price is lower than the appraised value, the 83% LTV Is determined by dividing the loan amount of $100,000 by the purchase price of $120,000.

Answer: c) If a borrower makes a 25% down payment, his loan amount would be 75% of the purchase price. $350,000 x 75% = $262,500.

Answer: a) All expenses consume 45% of the borrower’s gross monthly income. If the income is $12,500, 45% of that equates to $5,625. If the housing expense consumes $1,575 of the $5,625, the remaining $4,050 is the amount constituting her remaining expense.

Answer: d) With a mortgage balance of $179,000 and an appraised value of $224,000, the LTV is 79%. Since PMI would only be required if the LTV was higher than 80%, PMI is not required.

Answer: b) The hourly rate of $25 is multiplied by 35 to calculate the weekly rate of $875. The weekly rate of $875 is multiplied by 52 to calculate the annual rate of $45,500. The annual rate of $45,500 is divided by 26 to calculate the bi-weekly rate of $1,750.

Answer: d) The semi-monthly income may either be multiplied by 24 to calculate the annual income and then divided by 12 to secure the monthly equivalency or simply multiplied by two.

Answer: a) If the clerk earns $45,000 annually, this translates to $865.38 weekly (45,000 / 52). The weekly rate of $865.38 is then divided by 37.5 (since each day includes a 1/2-hour unpaid lunch break) to calculate his hourly rate of $23.07.

Answer: b) The CLTV constitutes all outstanding debt in relation to the subject property’s appraised value. Since the line of credit does not have an outstanding balance, the LTV of 45% is the same as the CLTV (215,000 + 0 = 215,000 / 475,000).

Answer: c) The sum total of the monthly housing expense is $1,387.66 (1,101 + 183.33 + 48.33 + 55). The sum total of the other monthly debt is $845 (110 + 325 + 410). The monthly equivalency of his annual income is $6,833.33 (82,000 / 12). The housing expense of $1,387.66 divided by his monthly income of $6,833.33 renders a housing expense ratio of 20%. The total expense of $2,232.66 (1387.66 + 845) divided by his monthly income of $6,833.33 renders a total expense ratio of 32%.

Answer: d) If the two mortgages equate to a 93% CLTV of the $475,000 value and the first mortgage constitutes 56% of that, it stands to reason that the second mortgage constitutes 37% (93 – 56). Multiplying the $475,000 value by 37% concludes the second mortgage balance as $175,750.

Answer: a) The sum of all encumbrances equates to 71% of the property value. The mortgage balance of $180,000 plus the line amount of $33,000 totals $213,000. The total encumbrance of $213,000 divided by 71% concludes a property value of $300,000.

Answer: c) Since the overtime has been increasing and is likely to continue, you may count it as part of the police officer’s annual income. The two years’ gross earnings are averaged together to derive an annual average income of $61,500, the monthly equivalency of which is $5,125. The base salary is $3,900 monthly (1,800 x 26 / 12) and the average monthly overtime is $1,225 (5,125 – 3,900). The base monthly income of $3,900 plus the monthly overtime of $1,225 equates to her gross monthly income of $5,125.

Answer: c) The concept of fiduciary duty establishes the loan originator’s responsibility to look out for the customer’s best interests. If the loan originator is able to earn a higher income by charging a higher interest rate, the loan originator receives an incentive to do what is in his or her own best interests versus the customer’s.

Answer: b) The GLBA requires financial companies to provide opt out opportunities to their customers along with a reasonable amount of time to opt out before they share their customers’ information.

Answer: b) The truth-in-Lending Act prohibits advertising and promotion that falsely implies that the government has endorsed a particular program, product, or service.

Answer: c) A common misconception is that gifts of $25.00 or less between actual or potential referral sources are acceptable. RESPA dictates, however, that nothing of any value whatsoever may be offered to or received from any actual or potential referral source unless the interaction involves education without self-promotion or the item is promotional in nature.

Answer: c) Product steering constitutes guiding a customer towards a product that is more profitable but does not necessarily serve the customer’s best interests. This is a direct violation of a Federal Reserve final rule that went into effect on April 1, 2011.

Answer: d) Disclosing an interest rate in an advertisement is a trigger term requiring the clear and conspicuous disclosure of the APR, whether the rate is fixed or adjustable and, if adjustable, after what duration of time, and whether or not the rate contains a balloon component.

Answer: c) The clear and conspicuous disclosure of lending terms resulting from the use of triggering terms must be in the same language in which the main content of the ad appears.

Answer: d) The GLBA requires financial institutions to automatically provide their customers with their privacy policies upon opening an account as well as annually. In some cases, the creditor may be allowed to post its privacy policy on its website in lieu of annual notifications.

Answer: b) FCRA requires that financial institutions provide their applicants with the name and address of the credit repository from which they secured the applicant’s credit report so that the applicant may request a free copy of their credit report from the credit repository whenever they are denied credit due to credit-related reasons.

Answer: d) Although ordering another appraisal in response to a low value is permitted, significant value discrepancies between the two appraisals will likely cause intense scrutiny.

Answer: c) Fraud for profit is when some or all of the professional players orchestrating a fraudulent transaction benefit from the fraud. Although artificially-inflated values are often a component to illegal property flipping, that is not the best possible answer since the question did not indicate how long ago the property was initially acquired.

Answer: a) Straw sellers falsely claim ownership to a property for a fee and often appear at closings to act as the legitimate seller.

Answer: c) Although a red flag may be something legitimate that simply needs additional explanation, many times red flags are actual attempts to commit fraud. All answers to this question may be easily justified aside from an appraisal listing the property owner as someone other than the seller appearing on the sales contract.

Answer: c) Unscrupulous individuals preying on desperate people often attempt to convince individuals in foreclosure to sign their property rights over under the promise of “rent-to-own” again. Once the deed is transferred, the new owner satisfies the foreclosure and evicts the former owner, essentially stealing their property out from under them.

Answer: a) If a customer instructs a loan originator to lock in their interest rate, the loan originator may share her suspicions about future rate reductions. The customer, however, ultimately decides when to lock and, if the customer instructs the loan originator to lock in their rate, the loan originator must comply.

Answer: b) There are many regulations and state-specific requirements associated with advertising. Loan originators are not necessarily versed on what may and may not be required. Company marketing departments are aware of what is and is not appropriate and required in advertising to maintain compliance.

Answer: c) Fannie Mae considers mortgage fraud to contain the elements of an intent to defraud, a misrepresentation to the consumer or lender, the omission of important and relevant information, and neglect of fiduciary responsibility to the customer or lender.

Answer: a) Buy and bail is the unethical practice of buying a property as a second home with the intention of using it as a primary residence all the while intending to let the original home go into foreclosure once the buyer is in possession of the new property.

Answer: c) Air loans are loan files submitted to lenders for funding whereby everything contained within the file is false, fabricated, and fraudulent. Air loans are an extreme example of fraud for profit.

Answer: a) Asset renting is fraudulently representing ownership of funds to enhance one’s ability to qualify for financing.

Answer: b) Upon learning that a claim has been filed against an individual’s surety bond, the Commissioner will require the filing of a new bond in order for the licensee to continue conducting business.

Answer: c) If a claim is paid out of an individual’s surety bond, the licensee will immediately need to file a new bond.

Answer: c) Any NMLS&R-approved education provider may provide pre-licensing and continuing education as long as the offered course is also NMLS&R-approved.

Answer: b) NMLS&R licensing courses are not offered through the mail in a correspondence format.

Answer: c) The administrator of the test must be an approved test provider and, as such, may administer pre-licensing examinations in either an approved testing center or a company’s office.

Answer: a) Continuing education must be completed within the year for which it is required. Taking multiple continuing education courses to stockpile CE credit for future years is not permitted.

Answer: d) A licensed mortgage originator may satisfy their annual eight-hour CE requirement after instructing four hours of approved CE.

Answer: a) No agreement may be entered into whereby a commission is paid when no loan has been consummated.

Answer: a) State Commissioners may retain attorneys to act as examiners and auditors on their behalf. Criminal matters must be referred to the appropriate law enforcement authorities.

Answer: b) Obtaining personal or professional letters of recommendation is not a pre-requisite to securing a license to originate mortgages.

Answer: d) Mortgage Call Reports are required quarterly of all lenders. The reports transmit details pertaining to the loans originated by that lender during the previous quarter.

Answer: d) Although the Commissioner’s office may ultimately fine an individual guilty of wrongdoing, a legitimately-earned commission may never be negated.

Answer: b) “The maximum amount of penalty for each act or omission … shall be $25,000. Each violation or failure to comply with any directive or order of the Commissioner is a separate and distinct violation or failure.”

Answer: c) The NMLS&R must be informed of any action taken against a licensee.

Answer: b) Any licensee must make its books and records available to the Commissioner for review in response to any formal request for cause.

Answer: c) Since licensees generally need their documents and records to conduct business, licensees are allowed to maintain access to their documents and records during investigations unless the Commissioner feels that allowing the licensee access would jeopardize the investigation.

Answer: c) After failing the exam once, the test taker must wait 30 days before making a second attempt. A second failure requires another 30-day waiting period. Failing it a third time requires a six-month waiting period.