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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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Honest Abe Lending retains secret shoppers to pose as customers to check on whether its loan originators remain compliant throughout the lending process. Honest Abe Lending is conducting:
Answer: c) Self-testing is the process through which loan originators are “tested” by their companies to ensure that they are acting compliantly. Companies that self-report their violations and wrongdoing are less likely to attract a federal audit than companies that do not. Furthermore, companies that self-report their violations are generally sanctioned less severely than those whose violations are discovered through audit.
Answer: c) Self-testing is the process through which loan originators are “tested” by their companies to ensure that they are acting compliantly. Companies that self-report their violations and wrongdoing are less likely to attract a federal audit than companies that do not. Furthermore, companies that self-report their violations are generally sanctioned less severely than those whose violations are discovered through audit.
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Penny Producer receives two voicemails. The first is from an individual inquiring about a $35,000 mortgage. The second caller requests information about a $350,000 loan. Penny calls the callers back in the order in which the calls were received. A week later Penny’s manager is notified by a representative from the Federal Trade Commission that Penny passed a compliance check. The process by which federal regulators check on the behavior of mortgage loan originators is referred to as:
Answer: a) Testing is the process through which federal examiners “test” mortgage professionals to determine whether or not they act compliantly. In this case, had Penny returned the call from the $350,000 loan customer first, even though the caller inquiring about the $35,000 loan called first, Penny could have been accused of committing “disparate treatment.” This is because the caller inquiring about the lower loan amount may not have been able to afford a more expensive home and she could have been seen as giving the more profitable caller preferential treatment. Testing that catches violations are sanctioned far more severely than are violations that are self-identified and self-reported.
Answer: a) Testing is the process through which federal examiners “test” mortgage professionals to determine whether or not they act compliantly. In this case, had Penny returned the call from the $350,000 loan customer first, even though the caller inquiring about the $35,000 loan called first, Penny could have been accused of committing “disparate treatment.” This is because the caller inquiring about the lower loan amount may not have been able to afford a more expensive home and she could have been seen as giving the more profitable caller preferential treatment. Testing that catches violations are sanctioned far more severely than are violations that are self-identified and self-reported.
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Shady Deals decides to decline a mortgage application because the applicant, who happens to earn her income through public assistance, cannot demonstrate that she is going to continue receiving the income for at least 36 more months. The adverse action notice that Shady Deals sends to the applicant simply states that the reason for declining her application was, “Receipt of public assistance.” Which regulation, if any, did Shady Deals violate?
Answer: c) Not qualifying due to the amount of income earned or for the inability to demonstrate appropriate income continuance is a legitimate reason for declining a mortgage application. Declining an application solely due to the applicant earning income from public assistance, however, directly violates the ECOA. Shady Deals erred by stating that the reason for declining the application was the receipt of public assistance. Instead, it should have said that the reason for declination was the inability to substantiate adequate income continuance.
Answer: c) Not qualifying due to the amount of income earned or for the inability to demonstrate appropriate income continuance is a legitimate reason for declining a mortgage application. Declining an application solely due to the applicant earning income from public assistance, however, directly violates the ECOA. Shady Deals erred by stating that the reason for declining the application was the receipt of public assistance. Instead, it should have said that the reason for declination was the inability to substantiate adequate income continuance.
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In January, 2018, Wanda Whiner unsuccessfully lodged a CFPB complaint against Marvelous Mortgage alleging that they declined her mortgage application without appropriate cause. In March, 2019, Wanda called Marvelous Mortgage to reapply. Having heard all about the issue that occurred back in January, 2018, Marvelous Mortgage’s MLO Lenny Loanoriginator, desiring to avoid any potential issues, refused to work with Wanda referring her elsewhere. This time, Wanda’s complaint to the CFPB had merit. What regulation, if any, did Lenny violate by refusing to work with Wanda?
Answer: c) ECOA specifically prohibits any creditor from holding an individual’s exercising their rights under the Consumer Credit Protection Act against them.
Answer: c) ECOA specifically prohibits any creditor from holding an individual’s exercising their rights under the Consumer Credit Protection Act against them.
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Of which of the following third-party service providers would a lender be prohibited from insisting on the specific use?
Answer: b) There are six specific settlement service providers that a lender may dictate the use of: flood certification provider, mortgage insurance company, tax search provider, appraiser, credit repository, and lender legal representation when it is customary for the lender to retain its own legal representation. Otherwise, RESPA affords all applicants the right to choose their own settlement service providers.
Answer: b) There are six specific settlement service providers that a lender may dictate the use of: flood certification provider, mortgage insurance company, tax search provider, appraiser, credit repository, and lender legal representation when it is customary for the lender to retain its own legal representation. Otherwise, RESPA affords all applicants the right to choose their own settlement service providers.
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The APR on the Closing Disclosure is reflected as 5.75%. The final APR is ultimately 6.0%. According to TILA, what must happen?
Answer: d) TRID requires the re-disclosure of the Closing Disclosure along with a three-day delay in closing any time when the final APR is higher than the APR disclosed on the original Closing Disclosure by more than 0.125% or when the final finance charge is higher than the finance charge disclosed on the original Closing Disclosure by more than $100.
Answer: d) TRID requires the re-disclosure of the Closing Disclosure along with a three-day delay in closing any time when the final APR is higher than the APR disclosed on the original Closing Disclosure by more than 0.125% or when the final finance charge is higher than the finance charge disclosed on the original Closing Disclosure by more than $100.
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Which of the following is not an event that triggers an automatic reissuance of the Closing Disclosure?
Answer: d) Once the Closing Disclosure has been issued, a revised Closing Disclosure disclosing the specific causes must be issued when the loan’s final APR deviates from the APR disclosed on the Closing Disclosure by more than 0.125% for a regular transaction or by 0.25% for an irregular transaction, the loan product changes, or a pre-payment penalty is added into the loan.
Answer: d) Once the Closing Disclosure has been issued, a revised Closing Disclosure disclosing the specific causes must be issued when the loan’s final APR deviates from the APR disclosed on the Closing Disclosure by more than 0.125% for a regular transaction or by 0.25% for an irregular transaction, the loan product changes, or a pre-payment penalty is added into the loan.
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Which of the following constitutes a valid change of circumstance under TRID?
Answer: a) TRID defines a change of circumstances to be: an extraordinary event beyond anyone’s control, when information that the lender initially relied upon 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, or when the title insurance company intended for use terminates operations during the transaction.
Answer: a) TRID defines a change of circumstances to be: an extraordinary event beyond anyone’s control, when information that the lender initially relied upon 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, or when the title insurance company intended for use terminates operations during the transaction.
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Fumbling Finance originates the purchase of a three-family primary residential property. Prior to closing, they issue one Closing Disclosure to the primary borrower. What regulation, if any, did Fumbling Finance violate?
Answer: d) TRID requires that all parties to the transaction be issued a Closing Disclosure on a rescindable loan. Since a purchase transaction is not rescindable, Fumbling Finance did not fumble this one.
Answer: d) TRID requires that all parties to the transaction be issued a Closing Disclosure on a rescindable loan. Since a purchase transaction is not rescindable, Fumbling Finance did not fumble this one.
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Your mortgage applicant presents a picture ID at the time of application that does not closely resemble him. What action, if any, must you take?
Answer: b) Under FACTA’s Red Flags Rule, all companies must have a formal policy in place to prevent identity theft. Since the picture on the ID did not resemble the person standing in front of you, you must comply with your company’s Identity Theft Prevention Program.
Answer: b) Under FACTA’s Red Flags Rule, all companies must have a formal policy in place to prevent identity theft. Since the picture on the ID did not resemble the person standing in front of you, you must comply with your company’s Identity Theft Prevention Program.
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Which of the following would not constitute a red flag??
Answer: d) Red flags do not automatically evidence wrongdoing. Red flags do require additional scrutiny and, usually, an explanation. Although an applicant changing jobs during a mortgage application may cause additional work, the need for further explanation, and could possibly render them un-creditworthy, that, in and of itself, would not be a red flag.
Answer: d) Red flags do not automatically evidence wrongdoing. Red flags do require additional scrutiny and, usually, an explanation. Although an applicant changing jobs during a mortgage application may cause additional work, the need for further explanation, and could possibly render them un-creditworthy, that, in and of itself, would not be a red flag.
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What constitutes a “covered account” as referenced under the FTC’s Red Flags Rule?
Answer: c) In accordance with the FTC’s Red Flags Rule, a covered account includes any account that is offered or maintained by a financial institution or creditor, is intended for personal, family, or household purposes, and is designed to permit multiple payments or transactions.
Answer: c) In accordance with the FTC’s Red Flags Rule, a covered account includes any account that is offered or maintained by a financial institution or creditor, is intended for personal, family, or household purposes, and is designed to permit multiple payments or transactions.
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Under FACTA, what must a financial institution do?
Answer: b) Financial institutions must provide an individual claiming to have been victimized by identity theft with a copy of anything and everything in its records pertaining to the alleged claim. The financial institution may not charge the requester for the documentation. Disclosing the Loan Estimate within three days of application is a RESPA requirement, and offering customers the option of opting out of information sharing falls under the GLBA.
Answer: b) Financial institutions must provide an individual claiming to have been victimized by identity theft with a copy of anything and everything in its records pertaining to the alleged claim. The financial institution may not charge the requester for the documentation. Disclosing the Loan Estimate within three days of application is a RESPA requirement, and offering customers the option of opting out of information sharing falls under the GLBA.
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What is an “active duty” alert?
Answer: c) Active military personnel may not be able to adequately monitor their credit. As such, active duty alerts may be placed on their credit profiles alerting potential creditors that their subject is actively serving in the military. A potential creditor must strongly scrutinize any applicant’s identification in the presence of an active duty alert.
Answer: c) Active military personnel may not be able to adequately monitor their credit. As such, active duty alerts may be placed on their credit profiles alerting potential creditors that their subject is actively serving in the military. A potential creditor must strongly scrutinize any applicant’s identification in the presence of an active duty alert.
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Which of the following documents must be issued in accordance with FACTA?
Answer: d) FACTA requires lenders to inform applicants of their representative credit score through a separate disclosure issued at the time of application. The notice of right to rescind is a requirement of TILA and the authorization to release information is signed by the borrower at the time of application in order to authorize third parties to release documentation necessary for the lender to complete its underwriting analysis. There is no disclosure known as the identity theft disclosure notice.
Answer: d) FACTA requires lenders to inform applicants of their representative credit score through a separate disclosure issued at the time of application. The notice of right to rescind is a requirement of TILA and the authorization to release information is signed by the borrower at the time of application in order to authorize third parties to release documentation necessary for the lender to complete its underwriting analysis. There is no disclosure known as the identity theft disclosure notice.
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A mortgage processor realizes that an applicant has provided duplicate copies of his paystub. Not needing them, she disposes of the duplicates in her standard trash receptacle. What regulation did she violate?
Answer: a) FACTA’s FTC Disposal Rule requires all non-public, personal information to be disposed of only in one of three ways: shredding, burning, or pulverizing. By simply disposing of the paystub copies in a standard trash receptacle, the processor fell out of compliance.
Answer: a) FACTA’s FTC Disposal Rule requires all non-public, personal information to be disposed of only in one of three ways: shredding, burning, or pulverizing. By simply disposing of the paystub copies in a standard trash receptacle, the processor fell out of compliance.
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Under FACTA, which of the following is not a CRA obligation?
Answer: b) Requiring permission to obtain an individual’s credit report is a CRA obligation under FCRA not FACTA.
Answer: b) Requiring permission to obtain an individual’s credit report is a CRA obligation under FCRA not FACTA.
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When must a Victim’s Notice of Rights be issued to a consumer?
Answer: a) FACTA requires a Notice of Victim’s Rights to be issued by the CRA to any individual reporting identity theft. It describes protections afforded to anyone who becomes a victim of identity theft as well as guides them as to what they can do to attempt to resolve the issue.
Answer: a) FACTA requires a Notice of Victim’s Rights to be issued by the CRA to any individual reporting identity theft. It describes protections afforded to anyone who becomes a victim of identity theft as well as guides them as to what they can do to attempt to resolve the issue.
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Upon receipt of a legitimate consumer request for a fraud alert, a CRA must:
Answer: c) FACTA requires CRAs to share fraud alert requests received with the other CRAs in addition to placing the alert on the consumer’s credit profile. If, for example, a consumer submits a fraud alert to Trans Union, in addition to Trans Union immediately adding the alert to the consumer’s credit profile, it must forward that fraud alert to Equifax and Experian. If a creditor sees a fraud alert on a credit profile, it must verify the identity of the applicant by contacting them at a telephone number listed as a part of the alert or by other vigilant means.
Answer: c) FACTA requires CRAs to share fraud alert requests received with the other CRAs in addition to placing the alert on the consumer’s credit profile. If, for example, a consumer submits a fraud alert to Trans Union, in addition to Trans Union immediately adding the alert to the consumer’s credit profile, it must forward that fraud alert to Equifax and Experian. If a creditor sees a fraud alert on a credit profile, it must verify the identity of the applicant by contacting them at a telephone number listed as a part of the alert or by other vigilant means.
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How long does an individual’s telephone number remain on the Do Not Call Registry?
Answer: d) Although the Do Not Call Rule previously limited the timeframe that a telephone number remained on the Do Not Call registry to five years, that was eventually extended to until the individual requests its removal.
Answer: d) Although the Do Not Call Rule previously limited the timeframe that a telephone number remained on the Do Not Call registry to five years, that was eventually extended to until the individual requests its removal.
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Making a false statement to a financial institution is a federal crime that could include:
Answer: a) 18 USC Section 1014 states that, “…it is a crime to knowingly make false statements or to overvalue land or property in order to influence the decision of a lending institution.”
Answer: a) 18 USC Section 1014 states that, “…it is a crime to knowingly make false statements or to overvalue land or property in order to influence the decision of a lending institution.”
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The penalty for violating certain federal statutes includes:
Answer: d) Penalties are steep. Violate a federal statute and you could face up to 30 years in federal prison and/or a fine of up to one million dollars.
Answer: d) Penalties are steep. Violate a federal statute and you could face up to 30 years in federal prison and/or a fine of up to one million dollars.
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An individual prepares a form to mail out to residents of the community soliciting credit card information to provide them with a discounted credit report review. In actuality, he is only seeking credit card information to steal peoples’ identities. If caught, this individual could be prosecuted for:
Answer: c) Mail fraud does not require a person to actually mail anything. A person can be convicted of mail fraud if their scheme to defraud involves even the potential use of the U.S. mail or another commercial delivery service.
Answer: c) Mail fraud does not require a person to actually mail anything. A person can be convicted of mail fraud if their scheme to defraud involves even the potential use of the U.S. mail or another commercial delivery service.
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Funds acquired through the illegal sale of narcotics are used to purchase a vehicle in cash. The vehicle is then sold and the money placed into a deposit account. The funds are then used as a down payment to buy a condo. All of this is an example of:
Answer: d) Transacting funds secured through illegal activity in order to distance them from their illegal source constitutes money laundering. It is important to source any funds not readily identified. If a credit on an asset statement does not correspond to the applicant’s pay schedule, the underwriter may require an explanation of the money to ensure that it is not borrowed or that the applicant is not laundering funds.
Answer: d) Transacting funds secured through illegal activity in order to distance them from their illegal source constitutes money laundering. It is important to source any funds not readily identified. If a credit on an asset statement does not correspond to the applicant’s pay schedule, the underwriter may require an explanation of the money to ensure that it is not borrowed or that the applicant is not laundering funds.
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A telemarketer calls a potential customer to attempt a sale. Which of the following behaviors violated the Telemarketing Sales Rule?
Answer: a) Because the telemarketer called at 6:45 p.m. P.S.T., his call was received by the New York consumer at 9:45 p.m. E.S.T. The Telemarketing Sales Rule prohibits placing calls to consumers outside of the hours of 8:00 a.m. – 9:00 p.m. call recipient time.
Answer: a) Because the telemarketer called at 6:45 p.m. P.S.T., his call was received by the New York consumer at 9:45 p.m. E.S.T. The Telemarketing Sales Rule prohibits placing calls to consumers outside of the hours of 8:00 a.m. – 9:00 p.m. call recipient time.
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What is the primary purpose of the Gramm-Leach-Bliley Act?
Answer: c) The Gramm-Leach-Bliley Act was enacted as a result of a former U.S. Senator receiving solicitations from a company with which he did not normally conduct business at a private address only provided to a financial institution at which he recently opened an account.
Answer: c) The Gramm-Leach-Bliley Act was enacted as a result of a former U.S. Senator receiving solicitations from a company with which he did not normally conduct business at a private address only provided to a financial institution at which he recently opened an account.
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Of the following businesses, which is not subject to the U.S.A. PATRIOT Act?
Answer: d) The list of financial institutions subject to the U.S.A. PATRIOT Act is long. Some of the types of businesses subject to this regulation consist of: federally-regulated banks, foreign banks located throughout the United States, credit unions, non-federally-regulated private banks, persons involved in real estate closings and settlements, casinos, pawnbrokers, and automobile dealerships.
Answer: d) The list of financial institutions subject to the U.S.A. PATRIOT Act is long. Some of the types of businesses subject to this regulation consist of: federally-regulated banks, foreign banks located throughout the United States, credit unions, non-federally-regulated private banks, persons involved in real estate closings and settlements, casinos, pawnbrokers, and automobile dealerships.
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Who is responsible for primarily identifying the applicant in a face-to-face transaction?
Answer: b) It is the loan originator’s responsibility to positively identify all customers in all face-to-face transactions. Failure to do so could render the loan originator personally liable for any crime committed through the theft of another individual’s identity.
Answer: b) It is the loan originator’s responsibility to positively identify all customers in all face-to-face transactions. Failure to do so could render the loan originator personally liable for any crime committed through the theft of another individual’s identity.
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A______ settlement is a settlement whereby funds are issued immediately after closing or immediately after any applicable right of rescission expires. A/an ______ settlement is a settlement whereby funds are issued after the latter of when the documents have been recorded into public record or when any applicable the right of rescission expires.
Answer: a) Wet settlements issue the funds immediately after settlement or, when the transaction is rescindable, immediately after the rescission period expires. Dry settlements issue the funds at the latter of the lender receiving the documents back from closing, approving them, and recording them into public record or the conclusion of any applicable right of rescission. Typically, east coast settlements are wet and west coast settlements are dry.
Answer: a) Wet settlements issue the funds immediately after settlement or, when the transaction is rescindable, immediately after the rescission period expires. Dry settlements issue the funds at the latter of the lender receiving the documents back from closing, approving them, and recording them into public record or the conclusion of any applicable right of rescission. Typically, east coast settlements are wet and west coast settlements are dry.
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Which of the following flood zone types would not require flood insurance?
Answer: b) Flood zone prefixes A, V, and VE require the homeowner to maintain flood insurance when a mortgage securitizes the property.
Answer: b) Flood zone prefixes A, V, and VE require the homeowner to maintain flood insurance when a mortgage securitizes the property.
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A “party to the transaction” is:
Answer: b) Anyone who has an ownership interest in a property being financed is considered a “party to the transaction.” All “parties to the transaction” must sign the Mortgage or Trust Deed acknowledging and consenting to the lien being attached to the property in which they maintain an ownership interest.
Answer: b) Anyone who has an ownership interest in a property being financed is considered a “party to the transaction.” All “parties to the transaction” must sign the Mortgage or Trust Deed acknowledging and consenting to the lien being attached to the property in which they maintain an ownership interest.
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In a lien theory state:
Answer: a) A property located in a title theory state requires the borrower to issue legal title to the mortgagee. The mortgagee technically owns the property until the debt is paid at which time the deed is transferred to the homeowner. In a lien theory state, the borrower retains equitable title. A property located in a lien theory state requires the lender to place a lien against the property’s title that necessitates the initiation of a judicial foreclosure proceeding in the event of default.
Answer: a) A property located in a title theory state requires the borrower to issue legal title to the mortgagee. The mortgagee technically owns the property until the debt is paid at which time the deed is transferred to the homeowner. In a lien theory state, the borrower retains equitable title. A property located in a lien theory state requires the lender to place a lien against the property’s title that necessitates the initiation of a judicial foreclosure proceeding in the event of default.
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Marty Moneybags wishes to pursue a cash-out refinance of his four-family investment property. He currently has a first mortgage and a home equity line of credit in a secondary lien position that he does not wish to pay off or release. To actualize the refinance, his home equity servicer will be asked to sign a/an:
Answer: d) Any time a first mortgage is refinanced and a secondary lien retained, the servicer of the secondary lien will be asked to sign a subordination agreement through which it agrees to remain in a subordinate lien position. With the exception of servicers servicing liens of less than $50,000 on properties located in the Commonwealth of Virginia, servicers are not required to sign subordination agreements. They may require compliance with specific requirements to do so, and, when they agree to subordinate, they often charge fees.
Answer: d) Any time a first mortgage is refinanced and a secondary lien retained, the servicer of the secondary lien will be asked to sign a subordination agreement through which it agrees to remain in a subordinate lien position. With the exception of servicers servicing liens of less than $50,000 on properties located in the Commonwealth of Virginia, servicers are not required to sign subordination agreements. They may require compliance with specific requirements to do so, and, when they agree to subordinate, they often charge fees.
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A husband and wife are refinancing their conventional mortgage. Although the wife’s father technically has an ownership interest in the property as well, he is not a party to the note. The father, therefore, is referred to as a/an:
Answer: c) An individual possessing an ownership interest in a property to which s/he is not obligated to the debt is referred to as a non-obligated owner. An obligated owner has both an ownership interest in the property as well as an obligation to the debt. An obligated non-owner is an individual who has no property rights but is fully obligated to the debt.
Answer: c) An individual possessing an ownership interest in a property to which s/he is not obligated to the debt is referred to as a non-obligated owner. An obligated owner has both an ownership interest in the property as well as an obligation to the debt. An obligated non-owner is an individual who has no property rights but is fully obligated to the debt.
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Sally and Steven live in a home in which both of their names appear on the deed. Only Sally, however, has signed the conventional Promissory Note. When Sally decides to refinance the mortgage, she elects not to involve Steven since the debt is not his and neglects to mention him to the loan originator. What does her mortgage loan originator inform her after reviewing the title binder?
Answer: a) Although removing Steven from the title of the property is always an option, it may not be the easiest or most favorable solution. Because he has an ownership interest, Steven must consent to whatever liens are placed against the title of the property. To remain a non-obligated owner, Steven will either have to attend the closing and sign the Security Instrument (but not the Note) or he will need to sign a Power of Attorney, specific to this transaction and approved by the lender, that affords Sally (or a different third party) the right to sign the Security Instrument on his behalf.
Answer: a) Although removing Steven from the title of the property is always an option, it may not be the easiest or most favorable solution. Because he has an ownership interest, Steven must consent to whatever liens are placed against the title of the property. To remain a non-obligated owner, Steven will either have to attend the closing and sign the Security Instrument (but not the Note) or he will need to sign a Power of Attorney, specific to this transaction and approved by the lender, that affords Sally (or a different third party) the right to sign the Security Instrument on his behalf.
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Terrible Title conducts the closing of a primary residential, three-family refinance. At closing, the settlement agent hands everyone in attendance one copy of the right to rescind. What, if anything, did the settlement agent do wrong?
Answer: b) The Truth-in-Lending Act requires that each party to the rescindable transaction receives two copies of the right to rescind whenever a loan containing a right to rescind is settled. Since this refinance was of a three-family, primary residence, it included the right to rescind. The settlement agent should have issued each party to the transaction two copies of the right to rescind.
Answer: b) The Truth-in-Lending Act requires that each party to the rescindable transaction receives two copies of the right to rescind whenever a loan containing a right to rescind is settled. Since this refinance was of a three-family, primary residence, it included the right to rescind. The settlement agent should have issued each party to the transaction two copies of the right to rescind.
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Four parties to the transaction are each issued two copies of the right to rescind at their refinance. Who must exercise it for the right of rescission to be affected?
Answer: a) Although all parties to the transaction must receive two copies of the right to rescind document at the closing of a rescindable loan, any one party may exercise it at his or her sole discretion.
Answer: a) Although all parties to the transaction must receive two copies of the right to rescind document at the closing of a rescindable loan, any one party may exercise it at his or her sole discretion.
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A property owner decides to sell her home. She has an FHA loan with a lower-than-market interest rate. She is approached by a potential buyer who offers to take her mortgage and property over, as is, and pay her the difference between her mortgage balance and the property’s value. If she accepts this offer, the buyer will pursue a/an:
Answer: d) FHA loans are generally assumable. A fully-qualifying assumption occurs when a buyer is added to the title of a home as well as to the note while the seller is removed from both. The buyer simply takes over the seller’s loan along with the property ownership rights while the seller is relinquished of both. The buyer must compensate the seller for any difference between the loan amount assumed and the home’s market value.
Answer: d) FHA loans are generally assumable. A fully-qualifying assumption occurs when a buyer is added to the title of a home as well as to the note while the seller is removed from both. The buyer simply takes over the seller’s loan along with the property ownership rights while the seller is relinquished of both. The buyer must compensate the seller for any difference between the loan amount assumed and the home’s market value.
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Which of the following is not a consideration of option loans?
Answer: d) Option loans afford borrowers with four monthly payment options from which they may freely choose. By remitting the minimum payment option, the borrower would most likely experience negative amortization. Option loans generally contain a balance cap which, when reached, triggers the servicer to adjust the payment amount to accommodate the existing balance, remaining term, and current interest rate. Since reaching the balance cap is never guaranteed, options loans also include a re-cast point that, when reached, would also cause the servicer to adjust the payment amount in the same manner as if the balance cap was reached.
Answer: d) Option loans afford borrowers with four monthly payment options from which they may freely choose. By remitting the minimum payment option, the borrower would most likely experience negative amortization. Option loans generally contain a balance cap which, when reached, triggers the servicer to adjust the payment amount to accommodate the existing balance, remaining term, and current interest rate. Since reaching the balance cap is never guaranteed, options loans also include a re-cast point that, when reached, would also cause the servicer to adjust the payment amount in the same manner as if the balance cap was reached.
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______________ is when a mortgage balance grows with the remittance of the acceptable periodic payment while ______________ is the state of one’s property value being lower than one’s outstanding property debt.
Answer: b) Negative amortization occurs when a mortgage balance increases after the acceptable periodic payment is credited. Negative equity is the state in which a home’s value is lower than the outstanding debt securing it. Both are mutually exclusive of each other.
Answer: b) Negative amortization occurs when a mortgage balance increases after the acceptable periodic payment is credited. Negative equity is the state in which a home’s value is lower than the outstanding debt securing it. Both are mutually exclusive of each other.
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A loan is scheduled to close on October 2nd. Utilizing a/an _____________ will likely reduce the amount of cash that the applicant needs to bring to closing.
Answer: a) An interest credit is issued when the first payment due date is established as the first day of the month directly following the month in which the loan closed. Since the entire month’s worth of interest will be collected through the receipt of the first payment, the interest credit refunds the applicant the per diem interest amount for the days of the month prior to closing when they did not yet owe the money.
Answer: a) An interest credit is issued when the first payment due date is established as the first day of the month directly following the month in which the loan closed. Since the entire month’s worth of interest will be collected through the receipt of the first payment, the interest credit refunds the applicant the per diem interest amount for the days of the month prior to closing when they did not yet owe the money.
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A loan closes on May 17th. What will the first payment due date likely be?
Answer: a) Typically, the first payment due date is the first day of the month following the month after the month in which the loan closed.
Answer: a) Typically, the first payment due date is the first day of the month following the month after the month in which the loan closed.
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The cost of the interest owed from the day of funding through the end of the month in which the loan funds is referred to as:
Answer: a) Interim interest is the term used for interest owed from the date of a loan’s funding through the end of the month in which the loan funds. Since the first payment due date is usually the first of the month after the month following closing, that payment only covers interest owed for the month which it directly follows. Since interest is owed from the day of funding, and since the first payment does not cover the interest owed from that date through the last day of the month in which the loan funds, the applicant is required to bring this amount to the closing table. This amount is referred to as “interim interest.” For example, a purchase loan closes and funds on May 15th. The first payment due date is July 1st. The July 1st payment only covers interest owed from June 1st through June 30th. The borrower needs to bring interim interest to the closing table to pay for the interest owed from the day of Funding through the last day of May.
Answer: a) Interim interest is the term used for interest owed from the date of a loan’s funding through the end of the month in which the loan funds. Since the first payment due date is usually the first of the month after the month following closing, that payment only covers interest owed for the month which it directly follows. Since interest is owed from the day of funding, and since the first payment does not cover the interest owed from that date through the last day of the month in which the loan funds, the applicant is required to bring this amount to the closing table. This amount is referred to as “interim interest.” For example, a purchase loan closes and funds on May 15th. The first payment due date is July 1st. The July 1st payment only covers interest owed from June 1st through June 30th. The borrower needs to bring interim interest to the closing table to pay for the interest owed from the day of Funding through the last day of May.
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The daily interest amount owed is called:
Answer: d) Per diem interest refers to the daily interest amount owed. The formula for calculating the per diem interest amount is the outstanding balance multiplied by the interest rate divided by 365.
Answer: d) Per diem interest refers to the daily interest amount owed. The formula for calculating the per diem interest amount is the outstanding balance multiplied by the interest rate divided by 365.
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For who were subprime mortgages ideally created?
Answer: c) Subprime mortgages were created to assist those in need of “outside the box” financing along with those who had damaged credit because they did not meet the qualificational requirements of standard mortgage financing.
Answer: c) Subprime mortgages were created to assist those in need of “outside the box” financing along with those who had damaged credit because they did not meet the qualificational requirements of standard mortgage financing.
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Two types of conventional mortgages are:
Answer: d) Conventional financing refers to mortgage loans that are not funded, purchased, or securitized by purely-governmental entities. Conforming describes any loan that “conforms” to Fannie Mae or Freddie Mac underwriting criteria as well as FHFA-established annual loan limits. Conforming and portfolio loans (portfolio meaning loans which are underwritten to an individual lender’s individual parameters) are always conventional. Government loans adhere to government underwriting criteria and defined loan limits.
Answer: d) Conventional financing refers to mortgage loans that are not funded, purchased, or securitized by purely-governmental entities. Conforming describes any loan that “conforms” to Fannie Mae or Freddie Mac underwriting criteria as well as FHFA-established annual loan limits. Conforming and portfolio loans (portfolio meaning loans which are underwritten to an individual lender’s individual parameters) are always conventional. Government loans adhere to government underwriting criteria and defined loan limits.
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Other than Community Lending products, what is the minimum conventional down payment?
Answer: a) Conventional mortgages typically require a minimum down payment of 5%. This money may come from the borrower’s own funds, gift funds, subordinate financing, or a combination thereof.
Answer: a) Conventional mortgages typically require a minimum down payment of 5%. This money may come from the borrower’s own funds, gift funds, subordinate financing, or a combination thereof.
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Which of the following is not an advantage of FHA?
Answer: b) FHA does not offer a no-down payment loan. It’s minimum down payment of 3.5%, however, is significantly less than the minimum 5% down payment of its conventional counterpart.
Answer: b) FHA does not offer a no-down payment loan. It’s minimum down payment of 3.5%, however, is significantly less than the minimum 5% down payment of its conventional counterpart.
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What is the minimum FHA down payment for someone whose credit score is less than 580?
Answer: c) In October, 2010, the minimum FHA down payment was increased from 3.5% to 10% for anyone whose credit score falls below 580.
Answer: c) In October, 2010, the minimum FHA down payment was increased from 3.5% to 10% for anyone whose credit score falls below 580.
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An Energy Efficient Mortgage:
Answer: a) Energy efficient mortgages refinance existing mortgages or may be used on newly-constructed properties to finance the installation of equipment used to render the property as more energy efficient.
Answer: a) Energy efficient mortgages refinance existing mortgages or may be used on newly-constructed properties to finance the installation of equipment used to render the property as more energy efficient.
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What is the primary intention of the FHA 203(g) Good Neighbor Next Door program?
Answer: b) The GNND program offers significant benefits to certain professionals such as firefighters, police officers, and EMTs in exchange for moving into the neighborhood and heightening the professionalism and safety of the people living within the community.
Answer: b) The GNND program offers significant benefits to certain professionals such as firefighters, police officers, and EMTs in exchange for moving into the neighborhood and heightening the professionalism and safety of the people living within the community.
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Which of the following is another term for the FHA ARM?
Answer: b) The FHA 251 refers to the FHA’s adjustable rate mortgage offered in 1/1, 3/1, 5/1, 7/1, and 10/1 formats. The 203(k) is the FHA rehabilitation loan and the 203(b) is the standard 30-year FHA fixed-rate loan.
Answer: b) The FHA 251 refers to the FHA’s adjustable rate mortgage offered in 1/1, 3/1, 5/1, 7/1, and 10/1 formats. The 203(k) is the FHA rehabilitation loan and the 203(b) is the standard 30-year FHA fixed-rate loan.
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Which of the following individuals would be subject to a VA funding fee?
Answer: a) A veteran who sustains a service-related disability deemed by the Dept. of Veterans Affairs to be 10% or greater along with his or her spouse and/or surviving spouses of veterans who died while in service are exempt from having to pay a VA funding fee when pursuing VA financing.
Answer: a) A veteran who sustains a service-related disability deemed by the Dept. of Veterans Affairs to be 10% or greater along with his or her spouse and/or surviving spouses of veterans who died while in service are exempt from having to pay a VA funding fee when pursuing VA financing.
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Which of the following is true of VA loans?
Answer: d) Closing costs must always be paid out of pocket. Any veteran may secure a VA mortgage as long as s/he qualifies and can present a valid certificate of eligibility. The minimum down payment is 0% on VA mortgages, and the maximum origination fee permitted by the VA is 1%.
Answer: d) Closing costs must always be paid out of pocket. Any veteran may secure a VA mortgage as long as s/he qualifies and can present a valid certificate of eligibility. The minimum down payment is 0% on VA mortgages, and the maximum origination fee permitted by the VA is 1%.
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By considering what, may an underwriter approve a VA loan with a back-end DTI that exceeds 41%?
Answer: b) Based on geographic location and family size, if an applicant earns a specific amount of residual income or more, an underwriter may be inclined to approve a VA loan application with a back-end DTI ratio of greater than 41%.
Answer: b) Based on geographic location and family size, if an applicant earns a specific amount of residual income or more, an underwriter may be inclined to approve a VA loan application with a back-end DTI ratio of greater than 41%.
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What might cause an ARM to be risky?
Answer: c) ARMs such as Option ARMs and ARMs containing an interest-only component were the likely causes of many home foreclosures. Typically, homebuyers who chose these products understood neither how they functioned nor their associated risks. All ARMs are underwritten to 30-year terms.
Answer: c) ARMs such as Option ARMs and ARMs containing an interest-only component were the likely causes of many home foreclosures. Typically, homebuyers who chose these products understood neither how they functioned nor their associated risks. All ARMs are underwritten to 30-year terms.
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Two applicants apply for a loan together. One of the applicant’s credit scores are 617, 683, and 612. His co-applicant’s credit scores are 784, 690, and 693. What is the score that the lender uses to underwrite the loan?
Answer: c) A chain is only as strong as its weakest link. Since lenders base their underwrite on the applicant’s middle credit score, when multiple applicants apply for a loan, the lender uses the lowest of all applicants’ middle credit scores.
Answer: c) A chain is only as strong as its weakest link. Since lenders base their underwrite on the applicant’s middle credit score, when multiple applicants apply for a loan, the lender uses the lowest of all applicants’ middle credit scores.
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In the presence of non-traditional income, which of the following is not needed?
Answer: c) In the presence of non-traditional income, a lender must ensure that the recipient is legally entitled to receive the income, has been consistently receiving it for the previous year (six months for obligated child support), and is expected to receive it for at least three more years.
Answer: c) In the presence of non-traditional income, a lender must ensure that the recipient is legally entitled to receive the income, has been consistently receiving it for the previous year (six months for obligated child support), and is expected to receive it for at least three more years.
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The 4506-C authorizes a financial institution to secure:
Answer: c) A signed IRS form 4506-C authorizes the provider to receive a copy of the federal tax return transcript of the individual who signed it. There is no fee for this request.
Answer: c) A signed IRS form 4506-C authorizes the provider to receive a copy of the federal tax return transcript of the individual who signed it. There is no fee for this request.
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Which of the following mortgage types requires the customer to undergo independent, third-party homeownership counseling?
Answer: b) All reverse mortgages require the applicant to produce a certificate evidencing their completion of independent, third-party, homeownership counseling.
Answer: b) All reverse mortgages require the applicant to produce a certificate evidencing their completion of independent, third-party, homeownership counseling.
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A customer applies for a closed-ended ARM. Which of the following must be issued to her within three business days?
Answer: d) TILA requires the issuance of both the CHARM Booklet and an Early ARM Disclosure within three business day of an application for a closed-ended ARM. The CHARM Booklet discusses how ARMs perform while the Early ARM Disclosure describes the terms specific to the ARM for which the applicant applied.
Answer: d) TILA requires the issuance of both the CHARM Booklet and an Early ARM Disclosure within three business day of an application for a closed-ended ARM. The CHARM Booklet discusses how ARMs perform while the Early ARM Disclosure describes the terms specific to the ARM for which the applicant applied.
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All but which of the following documents is an informational disclosure?
Answer: b) The Closing Disclosure is a cost disclosure since it reflects the final accounting of the mortgage transaction.
Answer: b) The Closing Disclosure is a cost disclosure since it reflects the final accounting of the mortgage transaction.
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Another term for the Initial Escrow Statement is the:
Answer: a) The Initial Escrow Statement, also referred to as the Escrow Accrual Sheet, defines the status of the escrow account as of the closing date and further defines who is responsible for issuing any escrow-related disbursement due within 60 days of closing.
Answer: a) The Initial Escrow Statement, also referred to as the Escrow Accrual Sheet, defines the status of the escrow account as of the closing date and further defines who is responsible for issuing any escrow-related disbursement due within 60 days of closing.
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Which of the following would constitute an asset unable to be considered for credit qualification?
Answer: a) The lender will generally review up to three months’ worth of asset statements. All deposits and credits may be subject to verification. Cash deposits that are unable to be “sourced” may be eliminated from consideration. Furthermore, the underwriter may opt to decline an application in the presence of funds unable to be sourced even if those funds are not needed. Cash savings cannot usually be sourced.
Answer: a) The lender will generally review up to three months’ worth of asset statements. All deposits and credits may be subject to verification. Cash deposits that are unable to be “sourced” may be eliminated from consideration. Furthermore, the underwriter may opt to decline an application in the presence of funds unable to be sourced even if those funds are not needed. Cash savings cannot usually be sourced.
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Whole life insurance policies contain:
Answer: d) The cash value is the amount that would be secured through the current surrender of the life insurance policy. The face value is the ultimate value that the policy will achieve upon maturation.
Answer: d) The cash value is the amount that would be secured through the current surrender of the life insurance policy. The face value is the ultimate value that the policy will achieve upon maturation.
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Assuming the existence of a permissible purpose, which of the following constitutes permission to order someone’s credit report?
Answer: b) A loan originator may only access an individual’s credit profile with a permissible purpose and permission. Permission may be rendered verbally, in writing, or automatically through the completion of a Uniform Residential Loan Application (FNMA form 1003).
Answer: b) A loan originator may only access an individual’s credit profile with a permissible purpose and permission. Permission may be rendered verbally, in writing, or automatically through the completion of a Uniform Residential Loan Application (FNMA form 1003).
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DU stands for:
Answer: c) Fannie Mae’s (FNMA’s) Automated Underwriting System (AUS) is referred to as Desktop Underwriter or DU.
Answer: c) Fannie Mae’s (FNMA’s) Automated Underwriting System (AUS) is referred to as Desktop Underwriter or DU.
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LPA stands for:
Answer: b) Freddie Mac’s (FHLMC’s) Automated Underwriting System (AUS) is referred to as Loan Product Advisor or LPA.
Answer: b) Freddie Mac’s (FHLMC’s) Automated Underwriting System (AUS) is referred to as Loan Product Advisor or LPA.
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How many forms constitute the URLA?
Answer: c) The URLA is comprised of: 1.) The Borrower Information Form, 2.) The Additional Borrower Form, 3.) The Unmarried Addendum, 4.) The Lender Loan Information Form, and 5.) The Continuation Sheet. It is important that the test candidate knows for what each of these forms is used as well as what everything appearing on each form means and its purpose.
Answer: c) The URLA is comprised of: 1.) The Borrower Information Form, 2.) The Additional Borrower Form, 3.) The Unmarried Addendum, 4.) The Lender Loan Information Form, and 5.) The Continuation Sheet. It is important that the test candidate knows for what each of these forms is used as well as what everything appearing on each form means and its purpose.
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A mortgage originator must consider loan suitability when developing an application. What is something that she will consider in doing so?
Answer: b) Loan suitability refers to the borrower’s ability to repay the loan. In considering whether or not a particular loan is suitable for a particular borrower, the lender must be confident that the borrower will be able to comfortably manage the payments.
Answer: b) Loan suitability refers to the borrower’s ability to repay the loan. In considering whether or not a particular loan is suitable for a particular borrower, the lender must be confident that the borrower will be able to comfortably manage the payments.
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Which of the following is not a tool with which to calculate an applicant’s income?
Answer: d) State income tax returns are not used to determine an applicant’s income for mortgage underwriting purposes. Bank statements reflecting pay deposits, pay stubs, W-2 forms, 1099 forms, and federal income tax returns are some of the documents used to substantiate a mortgage applicant’s income.
Answer: d) State income tax returns are not used to determine an applicant’s income for mortgage underwriting purposes. Bank statements reflecting pay deposits, pay stubs, W-2 forms, 1099 forms, and federal income tax returns are some of the documents used to substantiate a mortgage applicant’s income.
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Placing a subordinate lien behind a conventional first mortgage to eliminate the need for PMI when the applicant has less than 20% to put down on a home purchase is known as:
Answer: c) Piggyback financing involves an applicant applying for a first mortgage at 80% LTV as well as a secondary loan to account for the difference between the 80% first mortgage and their lower-than-20% down payment. By limiting the first mortgage to 80%, the lender will not require PMI. A common example is an 80/10/10 which involves an 80% first mortgage, a 10% second mortgage, and a 10% down payment.
Answer: c) Piggyback financing involves an applicant applying for a first mortgage at 80% LTV as well as a secondary loan to account for the difference between the 80% first mortgage and their lower-than-20% down payment. By limiting the first mortgage to 80%, the lender will not require PMI. A common example is an 80/10/10 which involves an 80% first mortgage, a 10% second mortgage, and a 10% down payment.
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Which of the following is an example of a note receivable?
Answer: b) A note receivable is an income stream earned from the repayment of a debt someone owes to the note holder. If the note is produced along with an on-time, 12 consecutive or greater monthly payment history as well as evidence of a minimum three-year continuance, the note receivable may be utilized as qualifying income.
Answer: b) A note receivable is an income stream earned from the repayment of a debt someone owes to the note holder. If the note is produced along with an on-time, 12 consecutive or greater monthly payment history as well as evidence of a minimum three-year continuance, the note receivable may be utilized as qualifying income.
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The disclosure of alimony, child support, and separate maintenance income is:
Answer: d) Unless the loan is for an “income sensitive” product such as USDA, a community lending, or a state bond program, the applicant is never required to disclose the earnings of alimony, child support, or separate maintenance. In fact, all applicants, aside from those applying for USDA, community lending, or state bond loans, must be made aware that the disclosure of this income is voluntary. If an applicant is required or opts to disclose it, however, the income must be court ordered, a history of its receipt established, and its duration of continuance demonstrated.
Answer: d) Unless the loan is for an “income sensitive” product such as USDA, a community lending, or a state bond program, the applicant is never required to disclose the earnings of alimony, child support, or separate maintenance. In fact, all applicants, aside from those applying for USDA, community lending, or state bond loans, must be made aware that the disclosure of this income is voluntary. If an applicant is required or opts to disclose it, however, the income must be court ordered, a history of its receipt established, and its duration of continuance demonstrated.
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Which of the following would constitute an underwriting red flag?
Answer: a) Although anything out of the ordinary should be justified, a large number of recent credit inquiries could signal that there are debts owed that do not yet appear on the credit report or that the applicant may be a victim of identity theft.
Answer: a) Although anything out of the ordinary should be justified, a large number of recent credit inquiries could signal that there are debts owed that do not yet appear on the credit report or that the applicant may be a victim of identity theft.
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Which of the following is an example of nontraditional credit?
Answer: c) Non-traditional credit consists of utilities or any monthly obligation that would not typically appear on a traditional credit report. Non-traditional credit is often used when an applicant does not have sufficient credit to warrant an appropriate credit review. A non-traditional credit report requires at least one tradeline to be housing related.
Answer: c) Non-traditional credit consists of utilities or any monthly obligation that would not typically appear on a traditional credit report. Non-traditional credit is often used when an applicant does not have sufficient credit to warrant an appropriate credit review. A non-traditional credit report requires at least one tradeline to be housing related.
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The shorter the lock-in period the _______ the cost.
Answer: a) A lock-in period is the period during which the lender guarantees the applicant a particular interest rate. The shorter the timeframe from interest rate lock to loan funding, the lower the cost because the lender is reserving the money for a shorter period of time.
Answer: a) A lock-in period is the period during which the lender guarantees the applicant a particular interest rate. The shorter the timeframe from interest rate lock to loan funding, the lower the cost because the lender is reserving the money for a shorter period of time.
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A conventional mortgage balance is $155,000 and pays off on the fifth calendar day of the month. Assuming that the current month’s payment was credited on the first and the loan carries a per diem of $19.55, what is the final payoff?
Answer: c) If the balance owed on the first of the month is $155,000 and the loan pays off five days later, five additional days of interest are due. Since $19.55 x 5 = $97.75, $155,000 + $97.75 = $155,097.75.
Answer: c) If the balance owed on the first of the month is $155,000 and the loan pays off five days later, five additional days of interest are due. Since $19.55 x 5 = $97.75, $155,000 + $97.75 = $155,097.75.
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An applicant earns $1,000 per month in social security disability. This income is untaxed. With what amount do you credit her?
Answer: d) If the social security disability income is untaxed, you may increase the amount earned by 25%.
Answer: d) If the social security disability income is untaxed, you may increase the amount earned by 25%.
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An applicant earns $575 bi-weekly. What is her annual income?
Answer: b) Earnings amounting to $575 bi-weekly translate to $14,950 annually (575 x 26).
Answer: b) Earnings amounting to $575 bi-weekly translate to $14,950 annually (575 x 26).
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A barista earns $1,750 per month at a coffee shop. She is paid bi-weekly and works a 40-hour work week. What is her bi-weekly rate of pay?
Answer: a) $1,750 monthly amounts to $21,000 annually (1,750 x 12). $21,000 annually translates to $807.69 bi-weekly (21,000 / 26).
Answer: a) $1,750 monthly amounts to $21,000 annually (1,750 x 12). $21,000 annually translates to $807.69 bi-weekly (21,000 / 26).
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A 21-year old applicant presents a 401(k) statement reflecting an available balance of $75,000. During the application, he discloses a $15,000 loan against the 401(k) that he finalized after the presented statement’s issuance. At what value do you reflect the 401(k)?
Answer: d) As long as the total available balance was available for liquidation, the value of the account would be considered at the available balance minus the outstanding loan.
Answer: d) As long as the total available balance was available for liquidation, the value of the account would be considered at the available balance minus the outstanding loan.
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An ARM is at the start rate of 3.75%. The index is currently 1.5% and the margin is 3.5%. The caps are 2/6 and the interest rate is at its first adjustment period. To what rate does the interest rate adjust?
Answer: b) With the index at 1.5% and the margin at 3.5%, the FIAR is 5.0%. The 2% periodic rate cap would prevent the rate from increasing by more than 2%. Since 5.0% is less than 2% above the current rate of 3.75%, the rate adjusts from 3.75% to 5.0%.
Answer: b) With the index at 1.5% and the margin at 3.5%, the FIAR is 5.0%. The 2% periodic rate cap would prevent the rate from increasing by more than 2%. Since 5.0% is less than 2% above the current rate of 3.75%, the rate adjusts from 3.75% to 5.0%.
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A property’s purchase price is $456,000. The home appraises for $475,000. The loan amount is $315,000. What is the LTV?
Answer: a) The LTV is calculated as 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 LTV is calculated by dividing the loan amount by the lower purchase price.
Answer: a) The LTV is calculated as 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 LTV is calculated by dividing the loan amount by the lower purchase price.
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A home is purchased for the appraised value of $165,000. The customer puts down 10% on his conventional loan. How much more will the customer have to pay in principal for the PMI to be automatically removed assuming the loan remains consistently current?
Answer: d) If the purchase price is $165,000 and the customer puts down 10%, the loan amount equates to $148,500 (165,000 – 16,500). Once the LTV reaches 78% of the original LTV, the PMI will be automatically removed assuming that the loan is current. The 78% LTV will be achieved once the balance reaches $128,700 (165,000 x 78%). If the loan amount starts at $148,500, an additional $19,800 will have to be paid against principal balance to reach the $128,700 balance equating to a 78% LTV.
Answer: d) If the purchase price is $165,000 and the customer puts down 10%, the loan amount equates to $148,500 (165,000 – 16,500). Once the LTV reaches 78% of the original LTV, the PMI will be automatically removed assuming that the loan is current. The 78% LTV will be achieved once the balance reaches $128,700 (165,000 x 78%). If the loan amount starts at $148,500, an additional $19,800 will have to be paid against principal balance to reach the $128,700 balance equating to a 78% LTV.
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A customer applies for a loan amount of $250,000. What would his minimum down payment have to be in order to avoid PMI?
Answer: b) If the loan amount is $250,000 the loan would have to be at an original LTV of 80% to avoid PMI. An 80% LTV on a loan amount of $250,000 equates to a purchase price/appraised value of $312,500 (250,000 / 80%). A 20% down payment on a purchase price/appraised value of $312,500 amounts to $62,500 (312,500 x 20%).
Answer: b) If the loan amount is $250,000 the loan would have to be at an original LTV of 80% to avoid PMI. An 80% LTV on a loan amount of $250,000 equates to a purchase price/appraised value of $312,500 (250,000 / 80%). A 20% down payment on a purchase price/appraised value of $312,500 amounts to $62,500 (312,500 x 20%).
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A firefighter earns $56.00 per hour plus a 7% shift differential. What is her hourly rate of pay?
Answer: b) If the firefighter earns $56.00 per hour plus a 7% shift differential, multiplying her standard hourly rate of $56.00 by 107% establishes her true hourly rate to be $59.92.
Answer: b) If the firefighter earns $56.00 per hour plus a 7% shift differential, multiplying her standard hourly rate of $56.00 by 107% establishes her true hourly rate to be $59.92.
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If a construction worker earns $3,800 monthly, what is his weekly income?
Answer: b) If the construction worker’s monthly income is $3,800, his annual income is $45,600 (3,800 x 12). If his annual income is $45,600, his weekly income is $876.92 (45,600 / 52).
Answer: b) If the construction worker’s monthly income is $3,800, his annual income is $45,600 (3,800 x 12). If his annual income is $45,600, his weekly income is $876.92 (45,600 / 52).
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A customer falsely representing his income is an example of:
Answer: d) Fraud for housing occurs when an individual falsely represents their qualification credentials in pursuit of home financing. Additionally, falsely representing one’s income constitutes making a false statement to a financial institution. Both are federal crimes.
Answer: d) Fraud for housing occurs when an individual falsely represents their qualification credentials in pursuit of home financing. Additionally, falsely representing one’s income constitutes making a false statement to a financial institution. Both are federal crimes.
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An individual commits fraud which ultimately results in a financial institution electronically transferring funds into his checking account. In addition to the actual fraud, with what other crime could this individual be charged with committing?
Answer: a) Since the financial institution electronically transferred the funds into his checking account, charges of wire fraud could also be levied against him.
Answer: a) Since the financial institution electronically transferred the funds into his checking account, charges of wire fraud could also be levied against him.
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An applicant objects to presenting a loan originator with photo identification during a face-to-face mortgage application. After the loan originator explains that positive identification is required, the applicant fumbles through her purse and claims to be unable to find her ID. The loan originator spots a driver’s license in her purse despite the applicant insisting that there is no ID in her purse. What should the loan originator do?
Answer: d) The application should be postponed because the loan applicant cannot guarantee that she is who she claims to be. She should be instructed to return with a valid ID and, since her actions were suspicious, the loan originator should complete and file a suspicious activity report.
Answer: d) The application should be postponed because the loan applicant cannot guarantee that she is who she claims to be. She should be instructed to return with a valid ID and, since her actions were suspicious, the loan originator should complete and file a suspicious activity report.
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A loan originator holds a free seminar for Realtors to educate them about a new mortgage product. At the seminar, lunch is served. The loan originator and Realtors do not promote their own business agendas. Which of the following regulations was violated?
Answer: b) Even though something of value was exchanged between actual or potential referral sources, since the meeting involved an educational component and no personal agendas were promoted, compliance was maintained by all parties.
Answer: b) Even though something of value was exchanged between actual or potential referral sources, since the meeting involved an educational component and no personal agendas were promoted, compliance was maintained by all parties.
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A settlement company hosts a holiday party and invites all of the mortgage originators with whom it worked during the previous year. Drinks are served through a cash bar and food is also sold at cost. Who violated RESPA?
Answer: c) Since nothing of value was exchanged between actual or potential referral sources for free, no violation was committed.
Answer: c) Since nothing of value was exchanged between actual or potential referral sources for free, no violation was committed.
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A home inspection company hosts a dinner for a mortgage bank. In turn, the mortgage bank agrees to refer customers to the home inspection company. Who violated RESPA?
Answer: a) Since the dinner is a “thing of value” and the mortgage bank and home inspection company are potential referral sources, both violated RESPA by their actions.
Answer: a) Since the dinner is a “thing of value” and the mortgage bank and home inspection company are potential referral sources, both violated RESPA by their actions.
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What was the term once used for the loan proceeds mortgage originators sometimes retained as compensation by charging an interest rate higher than par?
Answer: b) Yield spread premium (YSP) described the “monetary change” resulting from securing an interest rate higher than par. Up until 04/01/2011, loan originators and lenders were allowed to retain YSP as income.
Answer: b) Yield spread premium (YSP) described the “monetary change” resulting from securing an interest rate higher than par. Up until 04/01/2011, loan originators and lenders were allowed to retain YSP as income.
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What regulation is compromised when an advertisement promotes a 3/1 ARM as containing a “fixed” interest rate with no clarification that the “fixed” term is only for the first three years?
Answer: c) The Truth-in-Lending Act governs advertising and requires the clear and conspicuous disclosure of relevant information in response to the use of trigger terms in advertisements. TILA operates under Reg Z.
Answer: c) The Truth-in-Lending Act governs advertising and requires the clear and conspicuous disclosure of relevant information in response to the use of trigger terms in advertisements. TILA operates under Reg Z.
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A banker opens a checking account for a customer and fails to give her an opt out notice and the bank’s privacy policy but mails it to her a week later. What regulation, if any, did the banker violate?
Answer: c) The GLBA mandates that all customers receive a privacy policy and opt out information at the time that any financial account is opened.
Answer: c) The GLBA mandates that all customers receive a privacy policy and opt out information at the time that any financial account is opened.
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Without the client requesting it, a Realtor only shows properties to his client of Asian ethnicity that are located in neighborhoods primarily populated by Asian individuals. What regulation, if any, did the Realtor violate?
Answer: b) The Fair Housing Act prohibits any sort of discrimination pertaining to the procurement of housing. Should a mortgage originator treat a customer differently because of his ethnicity, the originator would violate ECOA. FHA pertains to housing whereas ECOA pertains to lending.
Answer: b) The Fair Housing Act prohibits any sort of discrimination pertaining to the procurement of housing. Should a mortgage originator treat a customer differently because of his ethnicity, the originator would violate ECOA. FHA pertains to housing whereas ECOA pertains to lending.
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When is property flipping illegal?
Answer: d) As long as the property is acquired and sold for true market value, it makes no difference as to when it is sold in relation to when it was purchased.
Answer: d) As long as the property is acquired and sold for true market value, it makes no difference as to when it is sold in relation to when it was purchased.
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Co-mingling funds is an ethical violation of:
Answer: a) Co-mingling funds involves mixing funds intended for a particular purpose, such as the payment of customers’ taxes and insurance premiums, with funds intended for other business purposes such as business administration. Co-mingling funds constitutes a RESPA violation.
Answer: a) Co-mingling funds involves mixing funds intended for a particular purpose, such as the payment of customers’ taxes and insurance premiums, with funds intended for other business purposes such as business administration. Co-mingling funds constitutes a RESPA violation.
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A mortgage company charges an applicant a $50 credit report fee for a credit report costing $15 and retains the difference. This is an ethical violation known as:
Answer: b) A markup involves charging a customer a price higher than the actual cost of a third-party settlement fee whereby the charging entity retains the difference. Markups are prohibited under RESPA as they are considered unearned income.
Answer: b) A markup involves charging a customer a price higher than the actual cost of a third-party settlement fee whereby the charging entity retains the difference. Markups are prohibited under RESPA as they are considered unearned income.
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A customer complains that his Realtor rushed him through the home inspection and sidestepped many of his questions. You immediately suspect:
Answer: d) A cursory inspection involves a rushed or “harried” inspection, often with the intent of hiding something.
Answer: d) A cursory inspection involves a rushed or “harried” inspection, often with the intent of hiding something.
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Which of the following would constitute a red flag on an appraisal?
Answer: b) A comp photo taken in July in Dallas, TX. containing snow on the ground would be a definite red flag.
Answer: b) A comp photo taken in July in Dallas, TX. containing snow on the ground would be a definite red flag.
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Which of the following statements to an appraiser would not constitute an ethical breach?
Answer: a) Any statement intended to entice, coerce, or pressure an appraiser into providing a different value is unethical. Asking an appraiser if s/he would be willing to consider different comparables would be acceptable since s/he is free to agree to or refuse the request.
Answer: a) Any statement intended to entice, coerce, or pressure an appraiser into providing a different value is unethical. Asking an appraiser if s/he would be willing to consider different comparables would be acceptable since s/he is free to agree to or refuse the request.
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A credit bureau failing to maintain a consumer’s privacy is a violation of the:
Answer: b) The FCRA requires CRAs to protect consumers’ privacy along with the sanctity of their information in credit transactions. It is for these reasons why permission to access credit, along with a permissible purpose, is always required from anyone seeking to access someone’s credit data.
Answer: b) The FCRA requires CRAs to protect consumers’ privacy along with the sanctity of their information in credit transactions. It is for these reasons why permission to access credit, along with a permissible purpose, is always required from anyone seeking to access someone’s credit data.
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Which of the following is not an example of predatory lending?
Answer: b) Charging higher interest rates to someone with a lower credit score, known as risk-based pricing, offsets risk and is therefore acceptable as long as the higher rate doesn’t violate other regulatory considerations and the borrower is still able to afford the payments.
Answer: b) Charging higher interest rates to someone with a lower credit score, known as risk-based pricing, offsets risk and is therefore acceptable as long as the higher rate doesn’t violate other regulatory considerations and the borrower is still able to afford the payments.
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What should a mortgage originator be certain to discuss with an applicant considering an ARM?
Answer: a) Any time a borrower chooses an ARM, the loan originator should make certain that the borrower is aware of, accepting of, and qualified for worst-case scenario. Even if it’s unlikely to occur, the borrower should be prepared for worst-case scenario or s/he may be wise to consider a different option.
Answer: a) Any time a borrower chooses an ARM, the loan originator should make certain that the borrower is aware of, accepting of, and qualified for worst-case scenario. Even if it’s unlikely to occur, the borrower should be prepared for worst-case scenario or s/he may be wise to consider a different option.
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What terminology requires an advertiser to disclose the fine print?
Answer: b) A triggering term (or trigger term) refers to any term used in an advertisement that triggers the need for clear and conspicuous disclosure of the fine print.
Answer: b) A triggering term (or trigger term) refers to any term used in an advertisement that triggers the need for clear and conspicuous disclosure of the fine print.
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How many total hours of ethics are required to satisfy annual continuing education requirements?
Answer: c) Of the eight hours required by the NMLS for annual continuing education, two hours must address ethics.
Answer: c) Of the eight hours required by the NMLS for annual continuing education, two hours must address ethics.
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After failing the pre-licensing exam for a third time, how much time must the test taker wait before being able to retake the exam?
Answer: b) An individual may fail the test twice and retake it by waiting 30 days between tests. If the individual fails it a third time, s/he must wait six months before being eligible to retake it.
Answer: b) An individual may fail the test twice and retake it by waiting 30 days between tests. If the individual fails it a third time, s/he must wait six months before being eligible to retake it.
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Which of the following derogatory credit events will not be held against a license applicant?
Answer: d) Judgments or derogatory credit resulting from medical expenses will not be counted against license applicants. All other judgments and derogatories will.
Answer: d) Judgments or derogatory credit resulting from medical expenses will not be counted against license applicants. All other judgments and derogatories will.
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If a loan originator fails to renew her license by midnight on December 31st (into January 1st), the originator:
Answer: c) Once a license expires, the loan originator may not conduct any activities for which a license is required until the license is renewed.
Answer: c) Once a license expires, the loan originator may not conduct any activities for which a license is required until the license is renewed.
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A borrower accepts a fixed rate, 30-year loan but, at closing, is presented with documents representing a 5/1 ARM. The loan originator explains that the ARM is better because of its lower start rate. This scenario exemplifies:
Answer: a) Since the loan originator arranged for one loan and ultimately produced another, his actions constituted unfair and deceptive trade practices. This example may also be referred to as “bait & switch.”
Answer: a) Since the loan originator arranged for one loan and ultimately produced another, his actions constituted unfair and deceptive trade practices. This example may also be referred to as “bait & switch.”
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The minimum standards for license renewal consist of:
Answer: a) Even after a license is initially secured, it must be renewed annually for the originator to continue originating. Furthermore, once the licensing candidate passes the NMLS exam, no other exam will be required as long as the loan originator maintains his or her license. There is no minimum production requirement for maintaining one’s license.
Answer: a) Even after a license is initially secured, it must be renewed annually for the originator to continue originating. Furthermore, once the licensing candidate passes the NMLS exam, no other exam will be required as long as the loan originator maintains his or her license. There is no minimum production requirement for maintaining one’s license.
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NMLS-approved courses are accepted:
Answer: b) As long as the NMLS-approved course satisfies the requirements covering federal law, non-traditional mortgages, and ethics, it will be accepted for credit in any state.
Answer: b) As long as the NMLS-approved course satisfies the requirements covering federal law, non-traditional mortgages, and ethics, it will be accepted for credit in any state.
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If an attorney wishes to accept compensation by a mortgage brokerage for loans originated, the attorney:
Answer: b) If an individual is compensated by a licensed entity for mortgage origination activities, that individual must also be licensed as a loan originator.
Answer: b) If an individual is compensated by a licensed entity for mortgage origination activities, that individual must also be licensed as a loan originator.
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If a state licensing authority grants a license to an individual who it later learns committed a crime that would normally disqualify the individual from licensing, the state authority:
Answer: c) If additional information is discovered by a licensing authority after issuing a license that would normally have caused the authority to originally deny the licensee’s application, the authority may order the licensee to refrain from further activity until such time that a permanent decision is rendered.
Answer: c) If additional information is discovered by a licensing authority after issuing a license that would normally have caused the authority to originally deny the licensee’s application, the authority may order the licensee to refrain from further activity until such time that a permanent decision is rendered.
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To what does the CFPB refer?
Answer: c) The Consumer Financial Protection Bureau took its authority through the Dodd Frank Act effective July 21, 2011.
Answer: c) The Consumer Financial Protection Bureau took its authority through the Dodd Frank Act effective July 21, 2011.
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Which of the following constitutes a registered loan originator?
Answer: a) If an individual originates mortgages for an institution regulated by the Farm Credit Administration, s/he does not require a license but must possess an NMLS unique identifier by becoming a registered loan originator.
Answer: a) If an individual originates mortgages for an institution regulated by the Farm Credit Administration, s/he does not require a license but must possess an NMLS unique identifier by becoming a registered loan originator.
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Which of the following is not a federal banking agency?
Answer: b) The USDA does not oversee banking or lending although it does support USDA Section 502 rural housing financing.
Answer: b) The USDA does not oversee banking or lending although it does support USDA Section 502 rural housing financing.
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A state-licensed loan originator:
Answer: a) A state licensed loan originator enjoys the privilege of originating mortgages for any licensed entity on properties located in any state in which s/he is currently licensed.
Answer: a) A state licensed loan originator enjoys the privilege of originating mortgages for any licensed entity on properties located in any state in which s/he is currently licensed.
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A loan originator answers a telephone call from a potential client who requests financing on a property located in a state in which her company is licensed but she is not. What may she do?
Answer: b) As long as she is not licensed in a particular state, a loan originator may not take any information other than general screening information. Only a state-licensed loan originator may work with a client in need of financing on a property within that particular state.
Answer: b) As long as she is not licensed in a particular state, a loan originator may not take any information other than general screening information. Only a state-licensed loan originator may work with a client in need of financing on a property within that particular state.
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A unique identifier:
Answer: c) Once assigned, the unique identifier becomes permanent.
Answer: c) Once assigned, the unique identifier becomes permanent.
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An individual engages in the business of residential loan origination any time that s/he:
Answer: d) The only answer option contained within this question that represents engagement in the act of residential loan origination is the taking of a mortgage loan application.
Answer: d) The only answer option contained within this question that represents engagement in the act of residential loan origination is the taking of a mortgage loan application.
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Which of the following individuals would not be required to possess a unique identifier?
Answer: c) If an individual enters into a mortgage contract with a family member, s/he is exempt from possessing a unique identifier or mortgage license.
Answer: c) If an individual enters into a mortgage contract with a family member, s/he is exempt from possessing a unique identifier or mortgage license.
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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 has been issued, a revised Closing Disclosure disclosing the specific causes must be issued when the loan’s final APR deviates from the APR disclosed on the Closing Disclosure by more than 0.125% for a regular transaction or by 0.25% for an irregular transaction, the loan product changes, or a pre-payment penalty is added into the loan.
Answer: b) Once the Closing Disclosure has been issued, a revised Closing Disclosure disclosing the specific causes must be issued when the loan’s final APR deviates from the APR disclosed on the Closing Disclosure by more than 0.125% for a regular transaction or by 0.25% for an irregular transaction, the loan product changes, or a pre-payment penalty is added 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 th