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Information
The SAFE Mortgage Licensing Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry.
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Answered Questions
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Anthony applies for a loan that exceeds the thresholds defining it as a HOEPA loan. What must his lender do in addition to everything else?
Answer: b) HOEPA requires that anyone closing on a loan exceeding the conditions that define the loan as a HOEPA loan must receive a special HOEPA disclosure no later than three business days prior to closing that: informs them that the loan will not be effective until consummation or until the account is opened, explains the consequences of default, discloses the loan terms such as APR, amount borrowed, and the monthly payment, and, if the loan is an ARM, explains the maximum monthly payment that may be required.
Answer: b) HOEPA requires that anyone closing on a loan exceeding the conditions that define the loan as a HOEPA loan must receive a special HOEPA disclosure no later than three business days prior to closing that: informs them that the loan will not be effective until consummation or until the account is opened, explains the consequences of default, discloses the loan terms such as APR, amount borrowed, and the monthly payment, and, if the loan is an ARM, explains the maximum monthly payment that may be required.
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Prior to closing on a HOEPA loan, the borrower must:
Answer: a) Customers seeking to close on a loan that exceeds one or more of the established HOEPA thresholds must complete homeownership counseling from a HUD-approved counseling agency. Within three business days of receiving an application for a HOEPA loan, lenders must provide the applicant with a list of 10 homeownership counseling agencies that are closest to the zip code of the applicant’s current address.
Answer: a) Customers seeking to close on a loan that exceeds one or more of the established HOEPA thresholds must complete homeownership counseling from a HUD-approved counseling agency. Within three business days of receiving an application for a HOEPA loan, lenders must provide the applicant with a list of 10 homeownership counseling agencies that are closest to the zip code of the applicant’s current address.
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What verbiage must appear on the special HOEPA disclosure issued to the customer no later than three business days prior to closing?
Answer: b) The HOEPA disclosure must inform the borrower that, just because they received disclosures and completed an application, they are not obligated to consummate the transaction. Furthermore, the disclosure must state, “If you obtain the loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligation under the loan.”
Answer: b) The HOEPA disclosure must inform the borrower that, just because they received disclosures and completed an application, they are not obligated to consummate the transaction. Furthermore, the disclosure must state, “If you obtain the loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligation under the loan.”
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When must a Loan Estimate be issued to an applicant in accordance with TRID?
Answer: a) TRID requires that a Loan Estimate be issued to an applicant within three general business days from the date of application. A general business day is defined as any day of the week, aside from Sundays and federal holidays, on which the entity fully operates and conducts business.
Answer: a) TRID requires that a Loan Estimate be issued to an applicant within three general business days from the date of application. A general business day is defined as any day of the week, aside from Sundays and federal holidays, on which the entity fully operates and conducts business.
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A loan may not close for:
Answer: c) TRID requires no less than seven precise business days to elapse from the date that the Loan Estimate is issued before the loan may close. This is to afford the applicant ample time for further consideration during which they may review the costs and details of the loan for which they have applied.
Answer: c) TRID requires no less than seven precise business days to elapse from the date that the Loan Estimate is issued before the loan may close. This is to afford the applicant ample time for further consideration during which they may review the costs and details of the loan for which they have applied.
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Which of the following is not a valid reason for changing fees once a Loan Estimate has been issued?
Answer: a) All fees must be disclosed in good faith. In the event that a fee is ultimately higher than what was initially quoted, the lender may not charge an amount above what was originally disclosed unless the fee change was caused by a valid change of circumstance or, at the very least, a valid reason. In the absence of a valid change of circumstance, but in the presence of a valid reason, fee increase limit caps must be honored.
Answer: a) All fees must be disclosed in good faith. In the event that a fee is ultimately higher than what was initially quoted, the lender may not charge an amount above what was originally disclosed unless the fee change was caused by a valid change of circumstance or, at the very least, a valid reason. In the absence of a valid change of circumstance, but in the presence of a valid reason, fee increase limit caps must be honored.
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By when must a revised Loan Estimate be reissued in the presence of a valid change of circumstance?
Answer: d) In the presence of a valid change of circumstance, a revised Loan Estimate must be issued no later than three general business days from the date of the change of circumstance.
Answer: d) In the presence of a valid change of circumstance, a revised Loan Estimate must be issued no later than three general business days from the date of the change of circumstance.
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Which of the following is considered to be a valid change of circumstance?
Answer: a) A valid change of circumstance is defined as: an extraordinary event beyond anyone’s control, when information upon which the lender originally relied is ultimately deemed to be inaccurate or changes post disclosure, when new and relevant information surfaces post-disclosure, the occurrence of a natural disaster or act of God, and when the title insurance company intended for use terminates operations during the transaction.
Answer: a) A valid change of circumstance is defined as: an extraordinary event beyond anyone’s control, when information upon which the lender originally relied is ultimately deemed to be inaccurate or changes post disclosure, when new and relevant information surfaces post-disclosure, the occurrence of a natural disaster or act of God, and when the title insurance company intended for use terminates operations during the transaction.
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How long will the issuance of a revised Loan Estimate delay the closing?
Answer: b) When a revised Loan Estimate is issued, the closing may not occur for at least four precise business days after the consumer receives it. If the revised Loan Estimate is issued electronically or mailed via standard U.S. mail, the four precise-business-day waiting period is increased to seven to allow for mailing (unless the applicant confirms receipt prior at which time the day of acknowledged receipt begins the four precise-business-day waiting period).
Answer: b) When a revised Loan Estimate is issued, the closing may not occur for at least four precise business days after the consumer receives it. If the revised Loan Estimate is issued electronically or mailed via standard U.S. mail, the four precise-business-day waiting period is increased to seven to allow for mailing (unless the applicant confirms receipt prior at which time the day of acknowledged receipt begins the four precise-business-day waiting period).
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Once a Closing Disclosure is issued:
Answer: c) Once the Closing Disclosure is issued, the lender may not issue a revised Loan Estimate. If a valid change of circumstance occurs between the fourth and third days prior to closing but before the issuance of the Closing Disclosure, the lender may reflect the changes on the Closing Disclosure.
Answer: c) Once the Closing Disclosure is issued, the lender may not issue a revised Loan Estimate. If a valid change of circumstance occurs between the fourth and third days prior to closing but before the issuance of the Closing Disclosure, the lender may reflect the changes on the Closing Disclosure.
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Once the Closing Disclosure is issued, when is the earliest that the loan may close?
Answer: c) Upon issuing the Closing Discloser, the closing may not occur for three precise business days in order to allow the customer time to reflect on into what they are entering. If the Closing Disclosure has been mailed or sent electronically, the three precise-business-day waiting period is increased to six to allow time for delivery. If the applicant acknowledges receipt of the Closing Disclosure prior to six precise business days, the three precise-waiting-day period begins on the date of the applicant’s acknowledgement of receipt.
Answer: c) Upon issuing the Closing Discloser, the closing may not occur for three precise business days in order to allow the customer time to reflect on into what they are entering. If the Closing Disclosure has been mailed or sent electronically, the three precise-business-day waiting period is increased to six to allow time for delivery. If the applicant acknowledges receipt of the Closing Disclosure prior to six precise business days, the three precise-waiting-day period begins on the date of the applicant’s acknowledgement of receipt.
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Once the Closing Disclosure is issued, a revised Closing Disclosure must be issued:
Answer: b) Once the Closing Disclosure is issued, a revised Closing Disclosure must be issued when: the loan’s final APR exceeds the APR disclosed on the initial Closing Disclosure by more than 0.125%, the loan’s final finance charge exceeds the finance charge disclosed on the initial Closing Disclosure by more than $100, the loan product changes, or a pre-payment penalty is incorporated into the loan.
Answer: b) Once the Closing Disclosure is issued, a revised Closing Disclosure must be issued when: the loan’s final APR exceeds the APR disclosed on the initial Closing Disclosure by more than 0.125%, the loan’s final finance charge exceeds the finance charge disclosed on the initial Closing Disclosure by more than $100, the loan product changes, or a pre-payment penalty is incorporated into the loan.
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How would the reissuance of a Closing Disclosure affect the loan closing?
Answer: b) When a revised Closing Disclosure is issued, three additional precise business days must elapse before the customer may consummate the transaction in order to provide the customer with ample time to consider the changes and into what they’re entering.
Answer: b) When a revised Closing Disclosure is issued, three additional precise business days must elapse before the customer may consummate the transaction in order to provide the customer with ample time to consider the changes and into what they’re entering.
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Which of the following regulations requires all financial companies and some creditors to implement an identity theft prevention program?
Answer: d) The FTC’s Red Flags Rule, among other things, requires that all financial institutions and some creditors implement and administer an identity theft prevention program that identifies the red flags of identity theft, designs a method of detecting the red flags identified, spells out the appropriate actions that anyone detecting a red flag must take, and details how the institution will keep its identity theft prevention program current to react to new threats.
Answer: d) The FTC’s Red Flags Rule, among other things, requires that all financial institutions and some creditors implement and administer an identity theft prevention program that identifies the red flags of identity theft, designs a method of detecting the red flags identified, spells out the appropriate actions that anyone detecting a red flag must take, and details how the institution will keep its identity theft prevention program current to react to new threats.
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The Safeguards Rule is a component of what federal regulation?
Answer: a) The Gramm-Leach-Bliley Act, among other things, requires all financial institutions to implement a program to protect the sanctity of customers’ and consumers’ non-public, personal information. This program must be assigned an individual overseer, must be periodically updated, and must be regularly tested.
Answer: a) The Gramm-Leach-Bliley Act, among other things, requires all financial institutions to implement a program to protect the sanctity of customers’ and consumers’ non-public, personal information. This program must be assigned an individual overseer, must be periodically updated, and must be regularly tested.
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Which of the following is not one of the three acceptable means of disposing of an individual’s non-public, personal information in accordance with the FTC’s Disposal Rule?
Answer: b) The FTC’s Disposal Rule mandates that any non-public, personal information be disposed of only through shredding, burning, or pulverizing. Although recycling paper is always a good idea, the paper on which the information appears must first go through one of those three processes.
Answer: b) The FTC’s Disposal Rule mandates that any non-public, personal information be disposed of only through shredding, burning, or pulverizing. Although recycling paper is always a good idea, the paper on which the information appears must first go through one of those three processes.
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Terrible Title of Tullahoma, Tennessee conducts the refinance settlement through which borrowers are refinancing their single-family rental property. The settlement agent provides only one copy of the right to rescind to the borrower and no copy to the co-borrower. As a result:
Answer: d) The right or rescission is only extended to primary residential, non-purchase transactions. The settlement agent should never have provided a right to rescind document to a borrower refinancing an investment property.
Answer: d) The right or rescission is only extended to primary residential, non-purchase transactions. The settlement agent should never have provided a right to rescind document to a borrower refinancing an investment property.
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Mishandling a borrower’s funds is a violation of:
Answer: a) RESPA prohibits any type of funds mismanagement such as co-mingling business funds with escrow accounts.
Answer: a) RESPA prohibits any type of funds mismanagement such as co-mingling business funds with escrow accounts.
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According to the Fair Credit Reporting Act, which of the following is not an obligation of furnishers?
Answer: c) FCRA requires furnishers to notify CRAs when previously-reported information warrants correction, when a customer disputes the accuracy or completeness of previously-provided information, when customers become delinquent, and with the results of the investigation it must conduct along with whatever corrective action it is taking, if applicable, within 30 days of receipt of notification from a CRA informing it of a customer dispute. It is the user’s responsibility to certify permissible purpose to the CRA from which it ascertains consumer credit information.
Answer: c) FCRA requires furnishers to notify CRAs when previously-reported information warrants correction, when a customer disputes the accuracy or completeness of previously-provided information, when customers become delinquent, and with the results of the investigation it must conduct along with whatever corrective action it is taking, if applicable, within 30 days of receipt of notification from a CRA informing it of a customer dispute. It is the user’s responsibility to certify permissible purpose to the CRA from which it ascertains consumer credit information.
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Mary Mortgageoriginator has always worked for a federally-insured depository institution and now wishes to become a licensed mortgage broker. She inquires to the NMLS as to what she needs to do. What does the NMLS tell her?
Answer: a) Since each state issues its own license and since Mary must be licensed in each state in which she desires to originate loans, the NMLS advises her of their process which includes applying through their portal to any and all states in which she ultimately seeks to become licensed.
Answer: a) Since each state issues its own license and since Mary must be licensed in each state in which she desires to originate loans, the NMLS advises her of their process which includes applying through their portal to any and all states in which she ultimately seeks to become licensed.
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The form on which a financial institution reports its HMDA data is known as a:
Answer: a) The Loan Application Register (LAR) is the form on which financial institutions report their HMDA data to the federal government.
Answer: a) The Loan Application Register (LAR) is the form on which financial institutions report their HMDA data to the federal government.
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A lender must absolutely remove PMI from any standard conventional loan:
Answer: d) The Homeowner’s Protection Act allows for borrowers paying PMI on conventional loans to petition their mortgage servicer for PMI removal at 80% LTV. Upon receipt of that petition, servicers are required to remove PMI once their borrowers demonstrate a 20% or greater equity position, a good payment history, that there are no subordinate liens attached to the property’s title, and that their loan is current. At 78% LTV, PMI must be automatically removed on a standard conventional loan as long as the loan is current. At amortization midpoint, PMI must be automatically removed as long as the standard conventional loan is current.
Answer: d) The Homeowner’s Protection Act allows for borrowers paying PMI on conventional loans to petition their mortgage servicer for PMI removal at 80% LTV. Upon receipt of that petition, servicers are required to remove PMI once their borrowers demonstrate a 20% or greater equity position, a good payment history, that there are no subordinate liens attached to the property’s title, and that their loan is current. At 78% LTV, PMI must be automatically removed on a standard conventional loan as long as the loan is current. At amortization midpoint, PMI must be automatically removed as long as the standard conventional loan is current.
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All of the following loans must contain a right to rescind except:
Answer: a) Residential mortgage loans that do not require a right of rescission consist of: purchase transactions, refinances of non-primary residential properties, original mortgages refinanced through their original lenders, and refinances through state agencies.
Answer: a) Residential mortgage loans that do not require a right of rescission consist of: purchase transactions, refinances of non-primary residential properties, original mortgages refinanced through their original lenders, and refinances through state agencies.
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Which of the following is a consequence of exercising one’s right to rescind?
Answer: a) When a right to rescind is exercised, the new loan does not fund, the loan which it may have originally intended to refinance does not pay in full, and any money that the applicants paid into the transaction must be fully refunded to them within 20 calendar days.
Answer: a) When a right to rescind is exercised, the new loan does not fund, the loan which it may have originally intended to refinance does not pay in full, and any money that the applicants paid into the transaction must be fully refunded to them within 20 calendar days.
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A right to rescind may be waived in the presence of:
Answer: b) A lender may elect to waive the right to rescind on an otherwise rescindable loan in the presence of a bona fide financial emergency. All parties to the transaction must request the waiver in writing and the lender renders the final decision.
Answer: b) A lender may elect to waive the right to rescind on an otherwise rescindable loan in the presence of a bona fide financial emergency. All parties to the transaction must request the waiver in writing and the lender renders the final decision.
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Which of the following fees is not considered when calculating the APR?
Answer: a) The APR represents the cost of originating a loan expressed as an interest rate. Settlement fees that are excluded when calculating the APR consist of fees that would be paid in a comparable cash transaction, fees that all applicants pay regardless of whether or not they close on a loan (such as the application fee), fees charged by third-party settlement providers when use of the particular settlement service provider is required by the lender, the portion of settlement service provider fees that are in excess of the cost of the settlement services provided and that are retained by the lender, and any fee paid by someone other than the borrower.
Answer: a) The APR represents the cost of originating a loan expressed as an interest rate. Settlement fees that are excluded when calculating the APR consist of fees that would be paid in a comparable cash transaction, fees that all applicants pay regardless of whether or not they close on a loan (such as the application fee), fees charged by third-party settlement providers when use of the particular settlement service provider is required by the lender, the portion of settlement service provider fees that are in excess of the cost of the settlement services provided and that are retained by the lender, and any fee paid by someone other than the borrower.
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According to RESPA Section 8, which is an acceptable reason for compensation?
Answer: c) RESPA mandates that any compensation be legitimately earned at a legitimate rate. No one may take an application unless they are licensed to do so in the state in which the property is located (unless they are an originator with a depository institution regulated by a federal banking regulator).
Answer: c) RESPA mandates that any compensation be legitimately earned at a legitimate rate. No one may take an application unless they are licensed to do so in the state in which the property is located (unless they are an originator with a depository institution regulated by a federal banking regulator).
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Which of the following would be prohibited by ECOA?
Answer: a) A consumer may not be penalized for having exercised his or her rights under the Consumer Credit Protection Act.
Answer: a) A consumer may not be penalized for having exercised his or her rights under the Consumer Credit Protection Act.
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One type of rehabilitation loan through which a homeowner rehabilitates and renovates a property in which they live is known as:
Answer: a) The 203(k) loan is the FHA rehabilitation mortgage. Construction and construction-to-permanent loans are generally used to build a home from scratch. An IRRRL is the VA streamline refinance.
Answer: a) The 203(k) loan is the FHA rehabilitation mortgage. Construction and construction-to-permanent loans are generally used to build a home from scratch. An IRRRL is the VA streamline refinance.
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A loan to finance the creation of a property that is ultimately paid off in cash after the home is built is referred to as a:
Answer: a) Construction loans finance the construction of a property and are satisfied immediately upon completion of the construction. Construction-to-permanent loans morph into “end loans” once the construction is complete. A rehab loan is typically a type of loan used to finance the rehabilitation and renovation of an already-existing dwelling, and a bridge loan is a form of temporary financing.
Answer: a) Construction loans finance the construction of a property and are satisfied immediately upon completion of the construction. Construction-to-permanent loans morph into “end loans” once the construction is complete. A rehab loan is typically a type of loan used to finance the rehabilitation and renovation of an already-existing dwelling, and a bridge loan is a form of temporary financing.
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Marvin Moneyjuggler needs to settle on the purchase of his new home before he will be able to settle on the sale of his current primary residence. His current primary residence was listed through the MLS and has been under contract for the past three weeks. He is securing the funds to settle on his new home from the proceeds of the sale of his current home. What might the solution to Marvin’s dilemma be?
Answer: c) Marvin would be best served by securing a bridge loan, also referred to as temporary financing. The bridge loan would create a lien against his current property which would be satisfied when the home sells. A home equity product would not be a viable option because few to no lenders would lend on a property that has recently appeared on MLS listings.
Answer: c) Marvin would be best served by securing a bridge loan, also referred to as temporary financing. The bridge loan would create a lien against his current property which would be satisfied when the home sells. A home equity product would not be a viable option because few to no lenders would lend on a property that has recently appeared on MLS listings.
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A loan modification is:
Answer: d) Modifying a loan involves changing the terms of an existing loan, often to make the loan more affordable. A loan modification is a common way to avoid foreclosure but is completely at the discretion of the mortgage servicer and investor.
Answer: d) Modifying a loan involves changing the terms of an existing loan, often to make the loan more affordable. A loan modification is a common way to avoid foreclosure but is completely at the discretion of the mortgage servicer and investor.
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Mortgage backed securities and participation certificates are terms associated with:
Answer: b) Mortgage backed securities and participation certificates are the vehicles through which Fannie Mae and Freddie Mac, respectively, package loan files for sale to investors through the secondary market.
Answer: b) Mortgage backed securities and participation certificates are the vehicles through which Fannie Mae and Freddie Mac, respectively, package loan files for sale to investors through the secondary market.
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The “Four C’s” of underwriting consist of:
Answer: b) The “Four C’s” of underwriting consist of Credit (the likelihood of repaying the loan), Capacity (the ability to repay the loan), Capital (the amount of savings representing responsible funds management), and Collateral (the lender’s security in the event that the loan is not repaid).
Answer: b) The “Four C’s” of underwriting consist of Credit (the likelihood of repaying the loan), Capacity (the ability to repay the loan), Capital (the amount of savings representing responsible funds management), and Collateral (the lender’s security in the event that the loan is not repaid).
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A borrower will need to present the most recent two years’ federal tax returns when:
Answer: c) When using overtime, bonus, or commission income to qualify for mortgage financing, standard investor criteria requires applicants to present their most recent two years’ federal tax returns whenever this monthly income equates to or exceeds 25% of their gross monthly base income. This is to demonstrate consistent receipt of this type of income as well as the likelihood of its continuance.
Answer: c) When using overtime, bonus, or commission income to qualify for mortgage financing, standard investor criteria requires applicants to present their most recent two years’ federal tax returns whenever this monthly income equates to or exceeds 25% of their gross monthly base income. This is to demonstrate consistent receipt of this type of income as well as the likelihood of its continuance.
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Which of the following options would present the best possible solution for a borrower with minimal assets, whose home is worth less than his outstanding balance, and who’s concerned about making his payments?
Answer: c) If the borrower is “upside down” with minimal assets, he may not be able to sell the home unless his lender approves a short sale. A short sale could also result in a deficiency judgment being placed against him for the difference between the loan balance and the amount for which the lender released the lien. A deed in lieu of foreclosure would significantly damage his credit. Ignoring the problem would not alleviate it. A modification to more manageable terms would likely be the best solution.
Answer: c) If the borrower is “upside down” with minimal assets, he may not be able to sell the home unless his lender approves a short sale. A short sale could also result in a deficiency judgment being placed against him for the difference between the loan balance and the amount for which the lender released the lien. A deed in lieu of foreclosure would significantly damage his credit. Ignoring the problem would not alleviate it. A modification to more manageable terms would likely be the best solution.
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Hank Homesintrouble could no longer afford his mortgage payment but his home was worth less than his outstanding balance. He did not qualify for a refinance or loan modification and consequently pursued a short sale. By approving the short sale, to what did Hank’s lender agree?
Answer: c) A short sale occurs when the lender accepts the sales price at current market value as the payoff and releases the lien for less than the amount owed. A possible downside is that the lender may still demand the difference between the mortgage balance and the amount for which they agreed to release the lien and may ultimately pursue a deficiency judgement against the former homeowner.
Answer: c) A short sale occurs when the lender accepts the sales price at current market value as the payoff and releases the lien for less than the amount owed. A possible downside is that the lender may still demand the difference between the mortgage balance and the amount for which they agreed to release the lien and may ultimately pursue a deficiency judgement against the former homeowner.
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What is a possible consequence of a short sale?
Answer: a) When permitted by state law, a lender will often pursue a deficiency judgment from the seller to recover the balance that was “forgiven” through a short sale.
Answer: a) When permitted by state law, a lender will often pursue a deficiency judgment from the seller to recover the balance that was “forgiven” through a short sale.
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Which of the following documents establishes the debt?
Answer: c) The note is the obligatory instrument describing the terms of the loan and which, by signing, the borrower obligates himself to the debt.
Answer: c) The note is the obligatory instrument describing the terms of the loan and which, by signing, the borrower obligates himself to the debt.
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What document conveys property ownership?
Answer: d) Once properly signed and executed, the deed defines the ownership of a property.
Answer: d) Once properly signed and executed, the deed defines the ownership of a property.
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What is the primary benefit of a balloon mortgage?
Answer: c) A balloon loan typically offers a much lower start rate than a traditional 30-year mortgage.
Answer: c) A balloon loan typically offers a much lower start rate than a traditional 30-year mortgage.
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An ARM start rate that is less than three percent below FIAR is a/an:
Answer: c) If an ARM start rate is within three percent below FIAR, it is referred to as a discount rate.
Answer: c) If an ARM start rate is within three percent below FIAR, it is referred to as a discount rate.
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Nathan Neuhaus wishes to own a newly-built home. He needs to secure financing along with a builder to build it. His best option would be to pursue a/an:
Answer: c) There are two types of construction loans: standard construction and construction-to-permanent. A standard construction loan requires that the loan be satisfied once the construction is complete. A construction-to-permanent loan turns the construction debt into an “end loan” at the completion of the construction.
Answer: c) There are two types of construction loans: standard construction and construction-to-permanent. A standard construction loan requires that the loan be satisfied once the construction is complete. A construction-to-permanent loan turns the construction debt into an “end loan” at the completion of the construction.
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Sally Sprystep is a 63-year-old widow with significant equity in her home. She needs to finance some minor home repairs and supplement her social security to pay her bills. What type of loan might be her best option?
Answer: c) A reverse mortgage will allow Sally to secure the financing that she needs as long as she can demonstrate that she can pay her taxes, homeowner’s insurance, and any other mandatory cost associated with owning the property. Additionally, Sally would not be required to make any payments during the life of the loan.
Answer: c) A reverse mortgage will allow Sally to secure the financing that she needs as long as she can demonstrate that she can pay her taxes, homeowner’s insurance, and any other mandatory cost associated with owning the property. Additionally, Sally would not be required to make any payments during the life of the loan.
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The maximum LTV permitted through an FHA cash-out refinance is:
Answer: a) FHA allows cash-out refinancing to a maximum LTV of 80%.
Answer: a) FHA allows cash-out refinancing to a maximum LTV of 80%.
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The maximum LTV through FHA purchase financing is:
Answer: d) The minimum down payment allowed through FHA is 3.5%. Consequently, the maximum LTV achieved through using the minimum down payment is 96.5%.
Answer: d) The minimum down payment allowed through FHA is 3.5%. Consequently, the maximum LTV achieved through using the minimum down payment is 96.5%.
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Which of the following is not a type of reverse mortgage?
Answer: a) The single purpose reverse is a loan to fund a particular purpose such as home improvement or the payment of overdue taxes. A proprietary reverse mortgage is a private reverse loan. The home equity conversion mortgage (HECM) is the standard reverse mortgage.
Answer: a) The single purpose reverse is a loan to fund a particular purpose such as home improvement or the payment of overdue taxes. A proprietary reverse mortgage is a private reverse loan. The home equity conversion mortgage (HECM) is the standard reverse mortgage.
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Your customer inquires about applying for a reverse mortgage. During the interview you learn that, although he is 64 years old, his girlfriend, who is also listed on the deed, is 26. What do you advise?
Answer: d) Since a reverse mortgage is an FHA loan, anyone on the title of the home must be on the mortgage. The only reverse mortgage exception is if the individual under the age of 62 is the borrower’s spouse. Since his girlfriend is younger than 62 and not his spouse, she may not apply for the reverse mortgage. Since she is also on the title, she would have to relinquish her ownership interest in the home in order for him to apply in his own name. If she was his wife, however, she could remain on the title while he applies for and settles on the reverse mortgage in his own name. Nothing like this should be actualized, however, without first seeking the guidance and advice of a competent legal and/or income tax professional.
Answer: d) Since a reverse mortgage is an FHA loan, anyone on the title of the home must be on the mortgage. The only reverse mortgage exception is if the individual under the age of 62 is the borrower’s spouse. Since his girlfriend is younger than 62 and not his spouse, she may not apply for the reverse mortgage. Since she is also on the title, she would have to relinquish her ownership interest in the home in order for him to apply in his own name. If she was his wife, however, she could remain on the title while he applies for and settles on the reverse mortgage in his own name. Nothing like this should be actualized, however, without first seeking the guidance and advice of a competent legal and/or income tax professional.
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An interest-only loan:
Answer: a) When the interest-only period ends, assuming that the borrower has only remitted interest-only payments, the original balance would become fully amortizing and at a shorter term. This could significantly increase the payment.
Answer: a) When the interest-only period ends, assuming that the borrower has only remitted interest-only payments, the original balance would become fully amortizing and at a shorter term. This could significantly increase the payment.
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An option loan affords all but which of the following four payment options:
Answer: b) Option loans typically afford their borrowers four monthly payment options from which they may choose: minimum payment which could lead to negative amortization and payment shock, interest only which could lead to payment shock, a 15-year payment equivalency, and a 30-year payment equivalency.
Answer: b) Option loans typically afford their borrowers four monthly payment options from which they may choose: minimum payment which could lead to negative amortization and payment shock, interest only which could lead to payment shock, a 15-year payment equivalency, and a 30-year payment equivalency.
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Which of the following would not be paid through a borrower’s escrow account?
Answer: c) Condo dues, when owed, are paid to the condominium association directly by the homeowner.
Answer: c) Condo dues, when owed, are paid to the condominium association directly by the homeowner.
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POC stands for:
Answer: b) If an applicant pays for any settlement fee or other costs prior to closing, the cost is listed on the Loan Estimate as POC’d (paid outside of closing).
Answer: b) If an applicant pays for any settlement fee or other costs prior to closing, the cost is listed on the Loan Estimate as POC’d (paid outside of closing).
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Which of the following is an example of a standard ARM?
Answer: c) A standard ARM carries an initial interest rate that is stable for the first year and adjusts annually thereafter. A 1/1 is an example of a standard ARM. A hybrid ARM has an initial start rate that is stable for longer than just the first year.
Answer: c) A standard ARM carries an initial interest rate that is stable for the first year and adjusts annually thereafter. A 1/1 is an example of a standard ARM. A hybrid ARM has an initial start rate that is stable for longer than just the first year.
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In a judicial foreclosure:
Answer: b) When a power of sale clause exists in a mortgage, the lender can take ownership of the property after default. If the mortgage does not include a power of sale clause, the lender has to file a lawsuit and a judicial foreclosure must ensue.
Answer: b) When a power of sale clause exists in a mortgage, the lender can take ownership of the property after default. If the mortgage does not include a power of sale clause, the lender has to file a lawsuit and a judicial foreclosure must ensue.
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The reconveyance clause:
Answer: a) The reconveyance clause forces the conveyance of full property rights to the homeowner upon satisfaction of the debt.
Answer: a) The reconveyance clause forces the conveyance of full property rights to the homeowner upon satisfaction of the debt.
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One primary purpose of securitization is:
Answer: b) Securitization was born in 1938 with the advent of Fannie Mae and the secondary market. Securitization provides a venue for investors to funnel money into the housing market by investing in the securities packaged by Fannie Mae, Freddie Mac, Ginnie Mae, and private investors.
Answer: b) Securitization was born in 1938 with the advent of Fannie Mae and the secondary market. Securitization provides a venue for investors to funnel money into the housing market by investing in the securities packaged by Fannie Mae, Freddie Mac, Ginnie Mae, and private investors.
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MLO Mary reviews her customer’s credit report. She discovers multiple discrepancies, several inconsistencies, and many apparent errors. She advises her client that, to remedy this, she needs to order a:
Answer: c) Although tradeline verifications may be used to correct errors and issues on a credit report, each tradeline verification only addresses one particular issue. Multiple issues are best addressed through a full factual. A full factual (also referred to as an investigative consumer report) is a real-time verification and accurate report reflecting a consumer’s complete credit profile ascertained through interviews with the consumer and his or her creditors.
Answer: c) Although tradeline verifications may be used to correct errors and issues on a credit report, each tradeline verification only addresses one particular issue. Multiple issues are best addressed through a full factual. A full factual (also referred to as an investigative consumer report) is a real-time verification and accurate report reflecting a consumer’s complete credit profile ascertained through interviews with the consumer and his or her creditors.
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The legal description of the property being financed appears on the:
Answer: b) The schedule A of a title insurance binder describes who is listed as the owner or owners of record on a property and also provides the property’s legal description.
Answer: b) The schedule A of a title insurance binder describes who is listed as the owner or owners of record on a property and also provides the property’s legal description.
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Which of the following is an example of non-traditional credit?
Answer: a) Non-traditional credit is credit that would not typically appear on a credit report. An underwriter may be able to utilize a non-traditional credit report to underwrite certain types of loans when the applicant has little-to-no established credit. A non-traditional credit report must contain a minimum of four tradelines with one being residential. All tradelines used must also contain a minimum 12-month history.
Answer: a) Non-traditional credit is credit that would not typically appear on a credit report. An underwriter may be able to utilize a non-traditional credit report to underwrite certain types of loans when the applicant has little-to-no established credit. A non-traditional credit report must contain a minimum of four tradelines with one being residential. All tradelines used must also contain a minimum 12-month history.
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A lock-in agreement:
Answer: b) The lock-in agreement guarantees the customer a particular interest rate for a particular timeframe. The loan must close and fund within this timeframe in order for the lock-in agreement to be honored.
Answer: b) The lock-in agreement guarantees the customer a particular interest rate for a particular timeframe. The loan must close and fund within this timeframe in order for the lock-in agreement to be honored.
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The longer the lock-in period the:
Answer: a) The longer the loan funds are reserved but not earning the investor interest because the loan has not yet closed, the higher the cost to the lender. Consequently, the longer the lock-in period, the higher the cost passed on to the applicant.
Answer: a) The longer the loan funds are reserved but not earning the investor interest because the loan has not yet closed, the higher the cost to the lender. Consequently, the longer the lock-in period, the higher the cost passed on to the applicant.
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Who is the party responsible for decisioning a mortgage application?
Answer: b) The underwriter is trained to apply investor guidelines and product parameters to determine an applicant’s creditworthiness. The underwriter ultimately renders the decision as to whether or not to lend.
Answer: b) The underwriter is trained to apply investor guidelines and product parameters to determine an applicant’s creditworthiness. The underwriter ultimately renders the decision as to whether or not to lend.
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In addition to income, which of the following is an employment consideration?
Answer: c) Length of time with an employer connotes stability. The employment of someone who has recently began working for a particular employer is seen as less stable than that of someone who has been working for an employer for a considerable length of time.
Answer: c) Length of time with an employer connotes stability. The employment of someone who has recently began working for a particular employer is seen as less stable than that of someone who has been working for an employer for a considerable length of time.
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What is the minimum amount of time an individual may be self-employed in order for his self-employed income to be considered?
Answer: b) Although a self-employed individual must typically be self-employed for a minimum of two years, if an applicant has been self-employed for at least one year and can demonstrate previous experience in the same field for at least the previous year, an exception may be made to allow for the consideration of the self-employed income. The applicant should be able to show an increasing level of experience and responsibility in the field in which he is now self-employed, and the field itself should be stable or growing.
Answer: b) Although a self-employed individual must typically be self-employed for a minimum of two years, if an applicant has been self-employed for at least one year and can demonstrate previous experience in the same field for at least the previous year, an exception may be made to allow for the consideration of the self-employed income. The applicant should be able to show an increasing level of experience and responsibility in the field in which he is now self-employed, and the field itself should be stable or growing.
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The document used to secure a copy of an individual’s IRS federal tax return transcript is the:
Answer: d) The 4506-T is used to secure a copy of an individual’s federal tax return transcript from the IRS. There is currently no charge for utilizing this service. The 4506 requests the entire return. Form 1098 reports mortgage interest paid during the last calendar year, and the W-9 certifies an individual’s social security number for employment or income-earning purposes.
Answer: d) The 4506-T is used to secure a copy of an individual’s federal tax return transcript from the IRS. There is currently no charge for utilizing this service. The 4506 requests the entire return. Form 1098 reports mortgage interest paid during the last calendar year, and the W-9 certifies an individual’s social security number for employment or income-earning purposes.
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Which of the following conditions would have to be resolved prior to closing a mortgage?
Answer: c) Although non-toxic peeling paint, outdated carpeting, and an overgrown lawn are cosmetic issues and certainly eyesores, they do not pose any health or safety concerns. Evidence of mold, however, poses a health risk and would always have to be remediated prior to closing.
Answer: c) Although non-toxic peeling paint, outdated carpeting, and an overgrown lawn are cosmetic issues and certainly eyesores, they do not pose any health or safety concerns. Evidence of mold, however, poses a health risk and would always have to be remediated prior to closing.
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Which of the following is not one of the three standard appraisal approaches?
Answer: c) The cost approach considers the cost of labor and material. It is commonly used when appraising homes for construction or rehabilitation. The income approach utilizes an Operating Income Statement (OIS) to compare rental potential when financing a property intended for investment purposes. The sales comparison approach compares three similar and recently-sold properties in close proximity to the subject property in order to determine the subject property’s market value by comparative analysis.
Answer: c) The cost approach considers the cost of labor and material. It is commonly used when appraising homes for construction or rehabilitation. The income approach utilizes an Operating Income Statement (OIS) to compare rental potential when financing a property intended for investment purposes. The sales comparison approach compares three similar and recently-sold properties in close proximity to the subject property in order to determine the subject property’s market value by comparative analysis.
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Larry Landlordtobe wants to purchase a three-family property in which he would live while renting out the other two units. Which appraisal form will the appraiser use to appraise this dwelling?
Answer: d) FNMA form 1025 is used to appraise multi-family properties intended for use, in whole or in part, as investment properties. Had the property been a single-family dwelling to be used for investment purposes, the appraiser would have used form 1007. Form 1004 is synonymous to the URAR (Uniform Residential Appraisal Report), the standard appraisal form used to appraise single-family, primary residences.
Answer: d) FNMA form 1025 is used to appraise multi-family properties intended for use, in whole or in part, as investment properties. Had the property been a single-family dwelling to be used for investment purposes, the appraiser would have used form 1007. Form 1004 is synonymous to the URAR (Uniform Residential Appraisal Report), the standard appraisal form used to appraise single-family, primary residences.
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Lisa Lucky suddenly learns of an outstanding tax lien that was filed against the title of her property three and a half years prior to her buying it. Lisa remains calm knowing that, at her mortgage closing, she purchased a/an:
Answer: b) The owner’s title insurance policy that she purchased protects her property interests in the event of a title default. The owner’s policy will either pay her for her interest in the property or satisfy the tax lien. Had she had only purchased the lender’s title insurance policy, the policy would have paid off the lesser of the tax lien or the mortgage balance.
Answer: b) The owner’s title insurance policy that she purchased protects her property interests in the event of a title default. The owner’s policy will either pay her for her interest in the property or satisfy the tax lien. Had she had only purchased the lender’s title insurance policy, the policy would have paid off the lesser of the tax lien or the mortgage balance.
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______________ is when the lender provides the settlement agent with the loan proceeds.
Answer: c) Providing the proceeds to “fund” the loan is known as funding.
Answer: c) Providing the proceeds to “fund” the loan is known as funding.
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Which of the following is not an example of a prepaid?
Answer: a) Prepaids refer to the funds that are needed when initially establishing an escrow account to account for the money that won’t be collected through the remittance of periodic payments. If the annual taxes, for example, are due to be paid through escrow within four months post-closing, there will not be enough money collected through those four payments to pay an annual tax bill. Eight months’ worth of “prepaid” tax payments would need to be collected at the closing table.
Answer: a) Prepaids refer to the funds that are needed when initially establishing an escrow account to account for the money that won’t be collected through the remittance of periodic payments. If the annual taxes, for example, are due to be paid through escrow within four months post-closing, there will not be enough money collected through those four payments to pay an annual tax bill. Eight months’ worth of “prepaid” tax payments would need to be collected at the closing table.
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The total payment amount is referred to as:
Answer: a) PITI stands for principal, interest, taxes, and insurance.
Answer: a) PITI stands for principal, interest, taxes, and insurance.
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Ideally, comparable properties should be located within _______ miles of the subject property and have closed within the previous ______ months.
Answer: b) Ideal comparables are homes that are similar to and located within one-to-three miles of the subject property and that sold within the previous six months.
Answer: b) Ideal comparables are homes that are similar to and located within one-to-three miles of the subject property and that sold within the previous six months.
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A _____________ may be used in lieu of pay stubs and tax returns.
Answer: d) Instead of securing evidence of pay, W-2 employers may complete a written verification of employment (VOE) describing the employee’s income, position, and likelihood of continuation. A VOD is a verification of deposit.
Answer: d) Instead of securing evidence of pay, W-2 employers may complete a written verification of employment (VOE) describing the employee’s income, position, and likelihood of continuation. A VOD is a verification of deposit.
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A property is valued at $395,000. There is a first and a second mortgage with a 60% CLTV. The second mortgage has a 12% LTV. What is the balance of the first mortgage?
Answer: b) If both mortgages together constitute 60% of the property value with the second mortgage constituting 12%, the first mortgage must constitute 48%. When the $395,000 value is multiplied by 48%, the result is $189,600.
Answer: b) If both mortgages together constitute 60% of the property value with the second mortgage constituting 12%, the first mortgage must constitute 48%. When the $395,000 value is multiplied by 48%, the result is $189,600.
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Deputy Dennis works the night shift at the local police department for which he earns an hourly rate of $42.50 plus a 10% shift differential. Assuming that he works and is paid for a standard 40-hour work week, what is his monthly income?
Answer: b) If Dennis’ hourly rate is $42.50 plus a 10% shift differential, his hourly rate becomes $46.75 (42.50 x 110%). Through a standard 40-hour work week, he earns $1,870 (46.75 x 40). In a year, he earns $97,240 (1,870 x 52). His monthly income, therefore, amounts to $8,103.33 (97,240 / 12).
Answer: b) If Dennis’ hourly rate is $42.50 plus a 10% shift differential, his hourly rate becomes $46.75 (42.50 x 110%). Through a standard 40-hour work week, he earns $1,870 (46.75 x 40). In a year, he earns $97,240 (1,870 x 52). His monthly income, therefore, amounts to $8,103.33 (97,240 / 12).
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If Polly Pastashredder shreds pasta for a bi-weekly salary of $1,753, how much does she earn monthly?
Answer: d) If Pollty earns her salary bi-weekly, she earns an annual income of $45,578.00 (1,753 x 26). Her annual salary of $45,578 translates to a monthly equivalency of $3,798.16 (45,578 / 12).
Answer: d) If Pollty earns her salary bi-weekly, she earns an annual income of $45,578.00 (1,753 x 26). Her annual salary of $45,578 translates to a monthly equivalency of $3,798.16 (45,578 / 12).
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A property with a value of $410,000 has a first mortgage along with a HELOC. The LTV of the first mortgage is 65%, the HELOC has a $22,500 outstanding balance, and the TLTV is 88%. What is the line amount of the HELOC?
Answer: c) Since the TLTV is 88% and the first mortgage’s LTV is 65%, the HELOC’s line amount must be at a 23% LTV. If the property value is $410,000, 23% of that amounts to $94,300.
Answer: c) Since the TLTV is 88% and the first mortgage’s LTV is 65%, the HELOC’s line amount must be at a 23% LTV. If the property value is $410,000, 23% of that amounts to $94,300.
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A property with a value of $412,000 has a first mortgage along with a HELOC. The LTV of the first mortgage is 70%. The TLTV is 90% and the HELOC has an outstanding balance of $32,500. How much available credit is left on the HELOC?
Answer: a) If the TLTV is 90% and the first mortgage’s LTV is 70%, the HELOC’s LTV is 20%. If the property value is $412,000, 20% of that is $82,400. If $32,500 is already outstanding against the $82,400 line amount, the remaining available credit amounts to $49,900.
Answer: a) If the TLTV is 90% and the first mortgage’s LTV is 70%, the HELOC’s LTV is 20%. If the property value is $412,000, 20% of that is $82,400. If $32,500 is already outstanding against the $82,400 line amount, the remaining available credit amounts to $49,900.
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An accountant earns an annual salary of $78,500. His mortgage payment includes a $778 bi-weekly P&I, annual real estate taxes of $1,100, and annual homeowner’s insurance premium amounting to $610. What is his housing ratio?
Answer: d) The accountant’s annual salary of $78,500 carries a monthly equivalency of $6,541.67 (78,500 / 12). His $778 bi-weekly P&I carries an annual equivalency of $20,228.00 (778 x 26). To this the annual homeowner’s insurance premium and real estate taxes are added to total $21,938 (20,228 + 1,100 + 610). The sum total is then translated to a monthly housing expense equivalency of $1,828.17 (21,938 / 12). When the monthly housing expense is divided by the monthly income, the result becomes 28% (1828.17 / 6541.67).
Answer: d) The accountant’s annual salary of $78,500 carries a monthly equivalency of $6,541.67 (78,500 / 12). His $778 bi-weekly P&I carries an annual equivalency of $20,228.00 (778 x 26). To this the annual homeowner’s insurance premium and real estate taxes are added to total $21,938 (20,228 + 1,100 + 610). The sum total is then translated to a monthly housing expense equivalency of $1,828.17 (21,938 / 12). When the monthly housing expense is divided by the monthly income, the result becomes 28% (1828.17 / 6541.67).
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If a 5/1 ARM’s start rate is 3.375% with a cap structure of 2/6, what would the customer’s interest rate become if, at the first change point, the index was 2.875% and the margin was 3%?
Answer: b) With a 2/6 cap structure and a start rate of 3.375%, the highest to which the rate can adjust at the next adjustment point is 5.375%. Even though the rate should technically be 5.875% (2.875 + 3), the 2% cap restricts it from increasing higher than 5.375%.
Answer: b) With a 2/6 cap structure and a start rate of 3.375%, the highest to which the rate can adjust at the next adjustment point is 5.375%. Even though the rate should technically be 5.875% (2.875 + 3), the 2% cap restricts it from increasing higher than 5.375%.
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A home buyer is considering buying a home and applying for a $275,000 mortgage at a 78% LTV. Assuming that the appraised value is identical to the purchase price, at what value did the home appraise?
Answer: a) If the $275,000 loan amount equals 78% of the purchase price/appraised value, dividing the loan amount by 78% will calculate the purchase price/appraised value.
Answer: a) If the $275,000 loan amount equals 78% of the purchase price/appraised value, dividing the loan amount by 78% will calculate the purchase price/appraised value.
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If a buyer wishes to buy a home for $260,000, put 15% down, and avoid PMI, for what amount would the secondary loan amount be?
Answer: c) To avoid PMI on a $260,000 purchase price, the first mortgage could be no higher than $208,000 (80% LTV). If the borrower has 15% to put down ($39,000), an additional $13,000 would be needed to bridge the gap.
Answer: c) To avoid PMI on a $260,000 purchase price, the first mortgage could be no higher than $208,000 (80% LTV). If the borrower has 15% to put down ($39,000), an additional $13,000 would be needed to bridge the gap.
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A loan amount is $175,000 with a purchase price of $240,000. The property appraises at $229,000. What is the LTV?
Answer: a) The LTV consists of the loan amount divided by the lesser of the purchase price or appraised value.
Answer: a) The LTV consists of the loan amount divided by the lesser of the purchase price or appraised value.
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A truck driver earns $0.53 per mile and drives an average of 4,800 miles per month. What is his monthly income?
Answer: d) The total miles driven (4,800) multiplied by the rate per mile (0.53) equates to the monthly income earned.
Answer: d) The total miles driven (4,800) multiplied by the rate per mile (0.53) equates to the monthly income earned.
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A carpenter earns a weekly salary of $1,700 along with a monthly untaxed social security stipend of $1,025. What is his monthly income?
Answer: d) If the carpenter earns $1,700 weekly, that translates to $88,400 annually (1,700 x 52). His annual income of $88,400 translates to a monthly equivalency of $7,366.67. Since his monthly social security income of $1,025.00 is untaxed, this can be increased by 25% to $1,281.25 which, when added to his monthly salary of $7,366.67, results in a monthly income of $8,647.92 (for underwriting purposes).
Answer: d) If the carpenter earns $1,700 weekly, that translates to $88,400 annually (1,700 x 52). His annual income of $88,400 translates to a monthly equivalency of $7,366.67. Since his monthly social security income of $1,025.00 is untaxed, this can be increased by 25% to $1,281.25 which, when added to his monthly salary of $7,366.67, results in a monthly income of $8,647.92 (for underwriting purposes).
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A bricklayer earns an annual salary of $56,500 working a 37.5-hour work week. What is her hourly rate of pay?
Answer: a) $56,500 annually translates to $1,086.54 weekly (56,500 / 52). This weekly rate translates to an hourly rate of $28.97 based on a 37.5-hour work week (1,086.54 / 37.5).
Answer: a) $56,500 annually translates to $1,086.54 weekly (56,500 / 52). This weekly rate translates to an hourly rate of $28.97 based on a 37.5-hour work week (1,086.54 / 37.5).
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If a property is worth $415,000 and two mortgages consume 45% of the value, what is the balance of the first mortgage if the second mortgage’s LTV is 6%?
Answer: d) Together, the two mortgages consume 45% of the property’s value. If the second mortgage consumes 6% of that, the first mortgage must consume 39% (45-6). If the value is $415,000, 39% equates to $161,850.
Answer: d) Together, the two mortgages consume 45% of the property’s value. If the second mortgage consumes 6% of that, the first mortgage must consume 39% (45-6). If the value is $415,000, 39% equates to $161,850.
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Unbeknownst to his neighbor, a loan originator orders his neighbor’s credit report to see the quality of his credit. What regulation(s), if any, did the loan originator violate?
Answer: c) FCRA requires anyone accessing an individual’s credit to have permission as well as a permissible purpose. The loan originator had neither. The GLBA also protects individual’s non-public, personal information from being accessed without a legitimate reason.
Answer: c) FCRA requires anyone accessing an individual’s credit to have permission as well as a permissible purpose. The loan originator had neither. The GLBA also protects individual’s non-public, personal information from being accessed without a legitimate reason.
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A mortgage originator receives a call from a friend who wishes to rent a house to a potential renter. The friend does not wish to purchase a credit report but has authorization to access the applicant’s credit. To avoid having to pay for a report, the friend asks the loan originator to order the potential tenant’s credit report on his behalf. The loan originator agrees to and does so. Consequently, the loan originator:
Answer: a) The FCRA requires anyone accessing another individual’s credit to have both permission as well as a permissible purpose. Although both individuals technically had permission, accessing the credit report did not satisfy a permissible purpose since the subject of the credit report was not in pursuit of that originator’s mortgage financing.
Answer: a) The FCRA requires anyone accessing another individual’s credit to have both permission as well as a permissible purpose. Although both individuals technically had permission, accessing the credit report did not satisfy a permissible purpose since the subject of the credit report was not in pursuit of that originator’s mortgage financing.
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A loan originator is playing golf with a client and suggests that the client use a colleague’s title services. Although there is no affiliate relationship between the title company and the mortgage company, two days later, the loan originator mails his client an ABAD. Which of the following statements is true?
Answer: d) RESPA only requires an ABAD to be issued when a referral is made between entities sharing an ownership interest of 1% or greater.
Answer: d) RESPA only requires an ABAD to be issued when a referral is made between entities sharing an ownership interest of 1% or greater.
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A mortgage originator attends an open house held by a Realtor and brings bagels. How does the mortgage professional maintain regulatory compliance?
Answer: b) RESPA prohibits the exchange of anything of value between actual or potential referral sources. As long as the Realtor does not partake of the bagels, the potential homebuyers may enjoy them and no regulatory violation would be committed.
Answer: b) RESPA prohibits the exchange of anything of value between actual or potential referral sources. As long as the Realtor does not partake of the bagels, the potential homebuyers may enjoy them and no regulatory violation would be committed.
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Which of the following practices would constitute redlining?
Answer: c) Avoiding demographic areas due to a perceived inability to qualify constitutes a major ethical offense known as redlining.
Answer: c) Avoiding demographic areas due to a perceived inability to qualify constitutes a major ethical offense known as redlining.
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The Latin doctrine of “Respondeat Superior” refers to:
Answer: b) Respondeat Superior is translated from Latin to mean “Let the Master Answer.” This is a legal doctrine holding an employer, along with the employee, culpable for that employee’s actions.
Answer: b) Respondeat Superior is translated from Latin to mean “Let the Master Answer.” This is a legal doctrine holding an employer, along with the employee, culpable for that employee’s actions.
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Basing a loan approval on the value of a home and not the qualifications of the applicant is known as:
Answer: c) Equity-based lending involves concluding a minimal risk to lend because of a low LTV. In the event that the borrower defaults, a lender lending at a low LTV is almost guaranteed to recover its investment. The borrower’s qualifications are not heavily weighted.
Answer: c) Equity-based lending involves concluding a minimal risk to lend because of a low LTV. In the event that the borrower defaults, a lender lending at a low LTV is almost guaranteed to recover its investment. The borrower’s qualifications are not heavily weighted.
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Failing to issue a right of rescission at the closing of a rescindable loan is a violation of:
Answer: b) TILA establishes the right of rescission. TILA operates under Regulation Z.
Answer: b) TILA establishes the right of rescission. TILA operates under Regulation Z.
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Taking advantage of a borrower’s lack of knowledge by communicating erroneous information on which of the following documents constitutes an ethical violation?
Answer: c) Applicants were often tricked into working with unscrupulous loan originators who purposely underquoted estimated closing costs to make it appear as if their costs were lower than those of their competition.
Answer: c) Applicants were often tricked into working with unscrupulous loan originators who purposely underquoted estimated closing costs to make it appear as if their costs were lower than those of their competition.
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All financial companies are required to have a hard copy of which of the following documents on their premises at all times?
Answer: d) If the FTC were to request to see a copy of the Guideline on Identity Theft Detection, Prevention, and Mitigation during a financial institution’s audit and that financial institution could not produce one, it could be heavily fined.
Answer: d) If the FTC were to request to see a copy of the Guideline on Identity Theft Detection, Prevention, and Mitigation during a financial institution’s audit and that financial institution could not produce one, it could be heavily fined.
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What does the FBI Mortgage Fraud Warning Notice caution?
Answer: a) The FBI Mortgage Fraud Warning Notice makes it clear that illegally influencing or attempting to illegally influence a lending institution is a crime that is subject to severe punishment. This notice appears on the URLA.
Answer: a) The FBI Mortgage Fraud Warning Notice makes it clear that illegally influencing or attempting to illegally influence a lending institution is a crime that is subject to severe punishment. This notice appears on the URLA.
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A Realtor offers a loan originator $100 for every referral that turns into a sale. Who violated RESPA?
Answer: a) By offering the incentive, the Realtor violated RESPA. Unless the loan originator accepts the offer, he does not commit a violation.
Answer: a) By offering the incentive, the Realtor violated RESPA. Unless the loan originator accepts the offer, he does not commit a violation.
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Which of the following may not be considered when evaluating an applicant for loan approval?
Answer: a) A lender may never consider an individual’s reproductive intentions or abilities when considering their loan application.
Answer: a) A lender may never consider an individual’s reproductive intentions or abilities when considering their loan application.
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An individual who appears at a closing pretending to purchase the home for primary residential use may be considered:
Answer: b) A straw buyer falsely represents their intention for buying a home in return for a fee.
Answer: b) A straw buyer falsely represents their intention for buying a home in return for a fee.
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An individual who falsely represents his authority to sell a home is known as:
Answer: a) A straw seller falsely represents their authority to sell a home, which they often do not own, in return for a fee.
Answer: a) A straw seller falsely represents their authority to sell a home, which they often do not own, in return for a fee.
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Committing fraud pertaining to a federally-guaranteed or insured loan may result in a penalty of:
Answer: c) Committing fraud on a federally-guaranteed or insured loan is neither smart nor cheap!
Answer: c) Committing fraud on a federally-guaranteed or insured loan is neither smart nor cheap!
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Which of the following may be an indication of fraud?
Answer: a) Appraisals should always be dated after the sales contract.
Answer: a) Appraisals should always be dated after the sales contract.
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One of the best ways to avoid mortgage fraud is by applying:
Answer: d) People should always trust their gut instincts. If an individual is feeling as if something is not right, s/he should, at the very least, consult with their manager.
Answer: d) People should always trust their gut instincts. If an individual is feeling as if something is not right, s/he should, at the very least, consult with their manager.
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A warning on anyone’s credit report requiring extra steps to confirm the applicant’s identity is known as a/an:
Answer: a) Fraud alerts are alerts that consumers may add to their credit profile warning prospective creditors that they must take extra steps to confirm the applicant’s identity.
Answer: a) Fraud alerts are alerts that consumers may add to their credit profile warning prospective creditors that they must take extra steps to confirm the applicant’s identity.
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An active duty alert:
Answer: c) Active duty alerts afford extra protection to actively-deployed military personnel who are unable to regularly monitor their credit profiles.
Answer: c) Active duty alerts afford extra protection to actively-deployed military personnel who are unable to regularly monitor their credit profiles.
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What was one of the primary difficulties plaguing the mortgage industry prior to the establishment of the NMLS?
Answer: b) Without a centralized system, different states issued different requirements often making it quite cumbersome and complicated to conduct business throughout several states.
Answer: b) Without a centralized system, different states issued different requirements often making it quite cumbersome and complicated to conduct business throughout several states.
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What were the primary overseers of mortgage industry reform?
Answer: d) HERA’s enactment led to significant changes within the mortgage industry. The primary overseers of this change and the entities that were ultimately responsible for creating the NMLS and the CFPB were the Conference of State Bank Supervisors, the Department of Housing and Urban Development, and the American Association of Residential Mortgage Regulators.
Answer: d) HERA’s enactment led to significant changes within the mortgage industry. The primary overseers of this change and the entities that were ultimately responsible for creating the NMLS and the CFPB were the Conference of State Bank Supervisors, the Department of Housing and Urban Development, and the American Association of Residential Mortgage Regulators.
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Model State Legislation:
Answer: b) The Model State Legislation is the basic foundation constituting the SAFE Act’s implementation. States may individually layer on top of this basic model.
Answer: b) The Model State Legislation is the basic foundation constituting the SAFE Act’s implementation. States may individually layer on top of this basic model.
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In what year was the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted?
Answer: a) The Dodd-Frank Act was signed into law by former president Barack Obama in 2010.
Answer: a) The Dodd-Frank Act was signed into law by former president Barack Obama in 2010.
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Mortgage licenses are issued by:
Answer: c) Individual states are responsible for issuing mortgage originator licenses. The NMLS is the oversight system through which the states operate.
Answer: c) Individual states are responsible for issuing mortgage originator licenses. The NMLS is the oversight system through which the states operate.
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Which of the following does not constitute a required standard of state licensing laws?
Answer: c) Fees are defined individually by each state.
Answer: c) Fees are defined individually by each state.
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Through which of the following is a state able to conduct background checks on mortgage license applicants?
Answer: b) Part of the background check required for mortgage licensing is a review of the license applicant’s credit profile to determine financial responsibility. Wiretaps, personal interviews, and requiring security clearances are not a part of the mortgage licensing process.
Answer: b) Part of the background check required for mortgage licensing is a review of the license applicant’s credit profile to determine financial responsibility. Wiretaps, personal interviews, and requiring security clearances are not a part of the mortgage licensing process.
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Which of the following is not a part of state supervisory authority?
Answer: d) Interest rate caps are not something with which state regulatory authorities become involved.
Answer: d) Interest rate caps are not something with which state regulatory authorities become involved.
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Under 12 USC § 5114, which of the following is any state licensing authority permitted to investigate and examine?
Answer: b) State licensing authorities may investigate any licensed loan originator or any individual required to possess a loan originator license.
Answer: b) State licensing authorities may investigate any licensed loan originator or any individual required to possess a loan originator license.
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Under 12 USC § 5114(2), (4), licensed loan originators:
Answer: c) If a state regulator deems that an investigation warrants the interview of existing and previous customers, the licensed loan originator must accommodate that.
Answer: c) If a state regulator deems that an investigation warrants the interview of existing and previous customers, the licensed loan originator must accommodate that.
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In conducting an examination or investigation, a state licensing agency may not:
Answer: d) State licensing agencies may not require a monetary sum to be placed into an escrow account pending an investigation’s resolution. They may, among other things, administer oaths and affirmations, require the production of relevant documents, and subpoena witnesses.
Answer: d) State licensing agencies may not require a monetary sum to be placed into an escrow account pending an investigation’s resolution. They may, among other things, administer oaths and affirmations, require the production of relevant documents, and subpoena witnesses.
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Under confidentiality considerations, to whom may the NMLS share licensee information with which it was provided?
Answer: a) Under 12 USC § 5111; 12 CFR §1008.3; MSL.150, information provided to the NMLS “(m)ay be shared with other state and federal officials involved with mortgage industry oversight without the loss of privilege and confidentiality protections provided by law.”
Answer: a) Under 12 USC § 5111; 12 CFR §1008.3; MSL.150, information provided to the NMLS “(m)ay be shared with other state and federal officials involved with mortgage industry oversight without the loss of privilege and confidentiality protections provided by law.”
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Which of the following information is publicly available through the NMLS?
Answer: c) The public dissemination of disciplinary and enforcement action is one of the main deterrents to loan originator wrongdoing.
Answer: c) The public dissemination of disciplinary and enforcement action is one of the main deterrents to loan originator wrongdoing.
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To what does the term “state” refer?
Answer: d) Any location where a license is needed to originate residential mortgages is referred to as a state. Any actual state or United States territory fits this definition.
Answer: d) Any location where a license is needed to originate residential mortgages is referred to as a state. Any actual state or United States territory fits this definition.
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To what does the term “person” refer?
Answer: d) To the mortgage industry, the term “person” means more than just a human being.
Answer: d) To the mortgage industry, the term “person” means more than just a human being.
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Which of the following is not included in the definition of a Mortgage Loan Originator?
Answer: b) Processors and underwriters do not fall under the definition of Mortgage Loan Originator.
Answer: b) Processors and underwriters do not fall under the definition of Mortgage Loan Originator.
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Which of the following is not a component of a residential mortgage loan?
Answer: c) A residential mortgage loan is “any loan primarily intended for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.”
Answer: c) A residential mortgage loan is “any loan primarily intended for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.”
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