Exam Simulator B
Terms in this set (125)
Which of the following settlement services would not be covered by RESPA?
Office supply provider
An originator uses a contracted processor who charges $500 per file. The fee disclosed to the borrower for processing is $800, a difference of $300 which the originator keeps for himself. This is:
A unilateral markup, which is legal, but may be a violation of RESPA's prohibition against unearned fees
Under ECOA, a broker is defined as:
A person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made
ECOA applies to the extension of credit for:
Residential, business, commercial, and agricultural loans
Under the Truth-in-Lending Act, a creditor is defined as:
A natural person, business, or financial organization that regularly extends credit to consumers
What was the first act created specifically to combat predatory lending?
According to the HPML Rule, which of the following transactions would require a second appraisal?
The purchase price is 20% higher than the seller's acquisition price 150 days ago
Which of the following is not a prohibited practice regarding loan originator compensation?
A loan originator receives compensation for referring a consumer to a creditor
Tim Tomas sold his home on 1012 Main Street and used the proceeds to purchase a fishing boat. He had owned the home for eight years and was able to make a $125,000 gain because of his fortunate timing. He intends to start a business chartering fishing tours for corporate clients. While speaking with an attorney to incorporate, he mentioned that he sold his home and was now living in a condo. His lawyer pointed out to him that he may still be able to rescind the mortgage loan on his house altogether because of many common lender violations. That way, he could pull in more than just $125,000 on the sale. If there were violations, how long does Tim have to rescind?
He can no longer rescind
Jenny has applied for a loan to purchase a home and learns that she is unable to qualify for any loan other than a high-cost mortgage. Her lender, MortgageMax, tells her that she must complete pre-loan counseling to obtain the loan. MortgageMax also tells her that it will pay for the counseling if she uses a counselor from its affiliate company, MortgageMax Counseling, and obtains her certification from this company. Which statement is the most accurate assessment of this arrangement?
MortgageMax may pay the counseling fees, but is prohibited from steering Mary towards a particular counselor or allowing her to complete counseling from one of its affiliates
Which of the following would not be required for an adjustable-rate home equity plan?
Loan Estimate and Closing Disclosure
What action must a creditor take if it is discovered that the APR is outside of the range of tolerance?
Provide disclosure of the corrected discrepancy and wait three business days before closing
Under HMDA, financial institutions must report whether a home loan is subject to which of the following federal laws?
The Home Ownership and Equity Protection Act
Originators who mislead borrowers about the contents of their credit histories and/or their credit scores in an effort to steer them into disadvantageous loans are in violation of:
Failing to give borrowers accurate information about their credit in an effort to steer them into a loan they may be overqualified for is an ethical and legal violation of the Fair Credit Reporting Act.
Which of the following is true regarding the FTC Red Flags Rule?
Was promulgated under the Fair and Accurate Credit Transactions Act
Which of the following is not prohibited under the Telemarketing Sales Rule?
Transmitting a telephone number so that it can be read by a call recipient's Caller ID
This term describes financial transactions that are used to distance illegally-obtained funds from their original criminal source.
The FTC Red Flags Rule is intended for what reason?
Prevent the release of personal financial information
Which of the following was enacted to require financial institutions to oversee third-party service providers and protect consumer information?
The Safeguards Rule
"E-Sign Act" is short for:
The Electronic Signatures in Global and National Commerce Act
What legislation was enacted to strengthen money laundering laws to prevent the financing of terrorist activities?
Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than ____, or a lender may collect PMI until ____ loan-to-value is reached.
The Homeowners Protection Act is applicable to all but which of the following?
The intention of the Safeguards Rule is to:
Ensure the protection of personal information through an effective security program
Which of the following entities, created in 2010, became the new enforcement and regulatory authority for a number of federal acts?
If an individual believes that he/she has been a victim of illegal discrimination in housing, with what agency should he/she file a complaint?
All of the following are true concerning mortgage fraud, except:
the FTC conducts investigations and refers to the Department of Justice
Which of the following best describes the types of conventional mortgages that are available?
Conforming loans and nonconforming loans
For a conventional, conforming loan, the borrower is making a down payment of 12%. The seller wishes to contribute to closing costs for the transaction. What is the most that the seller can contribute?
Seller concessions of 6%
A qualified mortgage may only include a balloon payment if all of the following are true, except:
The consumer has specifically requested a balloon payment
All of the following are true regarding the origination of non-qualified mortgages, except:
Analysis of borrower repayment ability is not required
The Qualified Mortgage Rule establishes a debt-to-income ratio standard of _____ for qualified mortgages.
If a first-time homebuyer wishes to use his/her VA loan privilege for the first time and is not planning to make a down payment, what is the amount of his/her funding fee?
What type of loan is a jumbo loan?
All of the following are characteristic of a subprime borrower, except:
Credit scores above the national average
Nontraditional ARMs, as described in the "Guidances," include all of the following, except:
What type of loan would be most appropriate for a borrower looking to borrow $650,000?
Loans that do not meet the guidelines set by Fannie Mae and Freddie Mac are considered to be:
A VA loan referred to as an "IRRRL" is an:
Interest Rate Reduction Refinance Loan
What are the debt ratios for a USDA loan?
The Federal Housing Administration does not make loans; it insures loans. What does the FHA insure against?
"FHA" stands for:
Federal Housing Administration
"UFMIP" stands for:
Upfront Mortgage Insurance Premium
A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this?
A balloon mortgage has a:
30-year amortization but is due within a much shorter period of time
There is/are _____ type(s) of reverse mortgage loans.
A subordinate lien that allows a borrower to pay down principal and continue to make withdrawals is known as:
A home equity line of credit
A loan with a term of less than one year that is related to the purchase or construction of a home is known as:
A bridge loan
Two types of loans used to finance the construction of a property are:
Construction-to-permanent and construction
An interest-only loan might be suitable for any of the following, except:
A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time
The term "adjustment interval" refers to:
The time period between adjustments for an ARM
How is the margin determined?
The lender sets the margin based on its costs and sought-after profit margin
The term "adjustment frequency" or "adjustment interval" is associated with:
The adjustments of an ARM loan
A wholesale lending arrangement that permits a mortgage broker to originate, close, and fund a loan using a warehouse line of credit is called:
A transaction in which the seller provides all or most of the financing is best known as:
The basic definition of a loan modification is:
A permanent change in the terms of a loan (either term, interest rate, or both) in response to a borrower's long-term inability to make payments
Government monitoring information is found where?
On which portion of the loan application would one find a street address and legal description of the property?
The acronym "CHARM" stands for:
Consumer Handbook on Adjustable-Rate Mortgages
Which of the following is required for ARMs and is intended to provide borrowers with information to prepare them for interest rate adjustments that will result in changes in payment amounts?
Initial Rate Change Disclosure
For what length of time can an unpaid tax lien remain on a credit report?
Which of the following can self-employed borrowers add back into their income for qualification purposes?
Depreciation on capital expenditures
How long must flood insurance be in place?
Until the loan balance is completely paid off
How much hazard insurance does FNMA require on a property?
100% of the lesser of the loan amount or the cost to restore the improvements to the property
An appraiser uses any one of three appraisal approaches to determine the value of a property. They are:
Sales comparison (or market), cost, and income
All of the following are part of the underwriter's review of collateral, except:
Which of the following would not be considered in the loan application process?
A bankruptcy from 15 years ago
In which of the following scenarios would it be appropriate to conduct an appraisal using a cost approach?
An appraisal is done on a new home being built for a first-time homebuyer
Which of the following is considered "reasonably reliable" evidence to verify the repayment ability of a borrower?
IRS W-2s, tax returns, and payroll receipts
Before engaging in a refinance transaction, consumers and mortgage professionals should consider whether the transaction:
Has a tangible net benefit to the borrower
The diligent matching of loan programs with the current financial circumstances of each customer is known as:
A loss payee clause protects whom?
The lender in the event the property is damaged by fire or other risks
A rent credit is used in a purchase transaction:
When the seller credits a portion of previous rent paid as a source of down payment
Verifies that the applicant and subject property meet lender guidelines
Which of the following would prevent the conveyance of title?
How often must a borrower renew owner's title insurance?
It is not necessary to renew
All of the following are responsibilities of the closing agent, except:
Explain the risks and benefits of the ARM product on which the client is closing
Ted Lange wants to build a tiki bar in his backyard next to the pool. In order to do this, he is going to take out a home equity line of credit. He believes that he will need about $20,000 to do it right. His home's current value is $405,000, and he has a first mortgage with a balance of $130,000. The bank agrees to extend him a line of $50,000, since he has quite a bit of equity in his home. What is Ted's CLTV if he builds his bar the way he planned?
A couple is buying a house with a sale price of $187,500 on a conventional loan, putting 3% down. The seller has agreed to pay the allowable 3% seller concession. How much should the seller expect to pay of the buyer's cost?
The seller would pay 3% of the sales price, not 3% of the borrower's loan amount. 187,500 x 3% = $5,625.
Mary and Larry are purchasing a house for $198,000. They are making a down payment of $20,000. How much should they expect to receive in seller help if the seller agrees to contribute the maximum amount?
The max seller contribution in this scenario is 6% (the down payment is more than 10%). The 6% is taken from the purchase price of $198,000, which is $11,880.
The Phillips family has a joint gross monthly income of $11,300. The $499 lease payment for their car expires in four months. A student loan that has been deferred will kick in at the end of the year, and payments will be $210 monthly. Joe Phillips pays child support for his children with his first wife in the amount of $2,200 per month, but $600 of that will drop off in four months when his oldest son turns 18. They are buying a new home with a loan that carries a $2,700 a month payment. What is their housing ratio?
Housing ratio is only concerning the ratio between housing expenses and gross monthly income. In this case, their housing expenses ($2,700), divided by gross monthly income ($11,300) equals 24%.
A borrower is purchasing a house for $212,000. It appraises prior to settlement for $210,000. The borrower is making a 10% down payment. What is the loan amount? What is the LTV ratio?
he purchase price would be adjusted to $210,000 (the appraisal price). From here, after the borrower's 10% down payment, the loan amount would be $189,000, and the LTV would be 90%. Mortgage Loan
The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points?
Tom and Cindy Lewis are buying a house with a $300,000 sale price and their LTV will be 80%. They paid $3,600 in discount points. How many total points did they pay?
Points are paid off of the loan amount. The loan amount is $240,000 (80% of $300,000). On a $240,000 loan, points costs $2,400. To calculate, divide $3,600 by $2,400, resulting in 1.5 points.
Don is refinancing his home in order to save money. If the loan goes through, his payment will drop from $2,000/month (PITI) to $1,500/month (PITI). Don's gross income each month is $6,800, but he has a $300 car payment, a $150 credit card payment, and monthly alimony payments of $1,300. What is Don's housing ratio on the proposed loan?
In this case, his proposed housing expense (PITI) will be $1,500/month. $1,500 / $6,800 = 22%
An ARM loan has a 4.00% start rate, and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. What is the highest that the interest rate could be after the first adjustment?
Which of the following would be a red flag concerning occupancy?
The borrowers already own and reside in a property in the same neighborhood
Age discrimination is allowable only when:
An originator may never discriminate based on age
Which of the following is least likely to happen if a loan is found to be fraudulent by the servicer?
Interest rate is increased on the loan
Sue Ellen has been a real estate agent for nine years and knows her hometown very well. She meets with a couple who have moved to her town from Spain. Without discussing it, Sue Ellen begins showing the couple a neighborhood on the south side of town with a highly Hispanic population. Sue Ellen is engaging in:
A mortgage broker is working with a client who is requesting an inspection of the condition of the roof prior to closing the loan. The broker refers a roofing company that is certified to complete these inspections. Which of the following is true of this arrangement?
It is unethical and illegal for the broker to receive a referral fee
The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of:
Which of the following forms of compensation is a violation of RESPA?
A fee paid by a title company to an originator for referral of settlement services
This federal law amended TILA and other mortgage-related laws, and mandated the implementation of additional rules to improve consumer protection.
The Dodd-Frank Act
The general purpose of borrower credit is to:
Help the borrower cover or reduce the costs of settlement
If an employee commits violations of state and/or federal law, an employer:
May also be held liable
What is the primary intent of RESPA?
Eliminate unearned fees, such as referral fees, kickbacks, and fee splitting
The MAP Rule is concerned with:
The advertisement of mortgage loan products
What is considered the most fail-safe and secure method to handle the delivery of disclosures?
The Mortgage Acts and Practices Rule was adopted in _____ by _______.
2011; the FTC
A mortgage broker advertises a 30-year fixed-rate loan at a 2.00% rate. After the borrower arrives at the office and begins an application, the broker explains that the 2.00% is no longer available, as his office was only able to do a limited number of them. This broker is in violation of what law?
Which government agency is responsible for policing and enforcing misleading advertisement for credit?
Why is it important to avoid misleading and deceptive business practices?
To avoid legal and ethical liability and to promote community confidence
In the event that a real estate agent is also permitted to serve as the broker on a transaction, the person with the dual role must:
Give the borrower/consumer full disclosure of the relationship
With regard to fiduciary duties in mortgage lending, the borrower is the ______________, and the broker is the _________________.
Which of the following is considered an "acceptable" communication with an appraiser?
Requesting that an appraiser consider additional information about a property or comparable
When a fraudster solicits a homeowner and promises to help a borrower escape from foreclosure for a minimal fee, this is often an example of:
Foreclosure rescue scam
Misleading claims of debt elimination in an advertisement may lead a borrower to inaccurately believe that:
Consumer debt is "disappearing" as a result of the new loan
Which of the following would not be considered behavior that constitutes honest, fair, and nondiscriminatory lending?
Advertising loans that are not actually available
Products that tempted consumers to misrepresent their loan qualifications during the lending boom included all but which of the following loan products?
Which of the following is not within the authority of the state regulators responsible for the effective system of supervision and enforcement of the SAFE Act?
Determine criminal sentences for non-licensed entities under the Act
The purpose for adopting minimum uniform standards for the licensing and registration of mortgage loan originators in the SAFE Act was to:
Enhance consumer protection and reduce fraud
Enhancing protection and reducing fraud by directing states to adopt minimum uniform standards for the licensing and registration of residential mortgage loan originators was the purpose of the federal act known as the:
The Secure and Fair Enforcement for Mortgage Licensing Act provides for the development and implementation of:
A nationwide mortgage licensing system and database
Which of the following is not a part of the definition of a loan originator?
Person or entity that only performs real estate brokerage activities
According to the SAFE Act, which of the following is defined as a nontraditional mortgage product?
Any mortgage product other than a 30-year fixed-rate mortgage
An individual who is an employee of a depository institution or a subsidiary of a depository institution meets the definition of a loan originator, defined as a(n):
Registered mortgage loan originator
A term defined as a natural person, corporation, company, limited liability company, partnership, or association is known as a(n):
A loan processor or underwriter is exempt from licensure under all of the following circumstances, except:
He/she takes applications on behalf of the loan originator
The approval or denial of loan originator license applications is a function of the:
Which of the following entities or individuals is responsible for determining financial responsibility requirements for state-licensed originators, lenders, or brokers?
The state regulator
A licensee subject to an investigation or examination may not engage in any of the following, except:
Providing computer records
In addition to any authority allowed under state law, a state licensing agency must have the authority to:
Conduct examinations and investigations
Loan Estimates must be delivered or placed in the mail no later than ______ prior to consummation.
Seven business days
The regulations for the Loan Estimate and the Closing Disclosure are found under: