SAFE Mortgage Loan Originator (MLO) Test with Complete Solutions

Prequalification - ANSWER-an estimate of the loan amt. for which the buyer can qualify based on his income/credit under the lender’s standards USDA ratio - ANSWER-29/41 FHA ratio - ANSWER-31/43 Asset based loan - ANSWER--loans based on borrowers’ equity -bad when lenders fail to consider ability to repay High Cost Loan - ANSWER-Reg Z - Sec. 1026.32 -APR will exceed by more than 6.5% for first lien loans or by more than 8.5% for subordinate -APOR - average prime offer rate 1. 5% 2. 6.5% 3. 8.5% RESPA - Section 8 - ANSWER-Nothing of value for referrals - No kickbacks Respa - Esign Act - ANSWER-can use electronic signature with permission of borrower Gramm Leach Bliley - ANSWER--borrower notification must state who company shares info with -consumers can opt-out of info sharing (send notice to consumer) -Protects from phishing -Safeguard Rules Safeguard Rules - ANSWER--company and staff need to protect the consumers identity -lock up files -part of GLB act second mortgage - ANSWER--All money upfront -no escrow as long as first mortgage is paying it Subordination Clause - ANSWER-A contract clause that puts a mortgage in the first lien position over an earlier recorded mortgage Denial Of License - ANSWER--any non-financial felony in the past 7 years -financial felony ever -financial misdemeanor (state decides) -License has been revoked in another state -default on a federal student loan Income - ANSWER--Need to years history and 3 more years expected income -do not include sporadic overtime and bonuses -likelihood of continued income TILA - Respa Integrated Disclosure - ANSWER--TRID -LE must be disclosed within 3 business days -cannot require documentation from borrower without "intent to proceed" -Appraisal is considered 0% tolerance Do Not Call - ANSWER--$16,000 fine -Area code report cant be over 30 days old -allowed to call closed, declined and cancelled loans 18 months after the fact -can call 90 days after inquiry or pre-qual -someone says do not call - cant call, email, fax anything -call between 8-9 Fully Indexed Rate - ANSWER-Index rate plus Margin The 1003 - ANSWER-Contains all Borrower Info (form) Months of bank statements needed - ANSWER-2 months Patriot Act - ANSWER-Part of Bank Secrecy Act -Establish policies for identification of borrowers -Check against bad guy list and retention of records Civil Rights Act - ANSWER-Cant discriminate based on race or color (Act) High Priced Loans - ANSWER-Reg Z - 1026.35 -1.5% or more on first lien -3.5% subordinate liens - 0% trigger fee, 1.5% first mortgage, 3.5% second HMDA - ANSWER-Reg C -Collection of borrower data -Any lender that funds loans must report march 1 -Notifies FFIEC of potential discrimination Consumer Financial Protection Bureau - ANSWER-Agency that overseas and implements mortgage consumer laws VA - ANSWER-41 Chapter 7 Bankruptcy - ANSWER-Liquidation of assets to cancel debts -person starts fresh Bank Secrecy Act - ANSWER--Anti-money laundering, companies provide annual training -annual audit to review anti money laundering program -any files suspected of fraud reported to suspicious act report website (SAR) Reg N - ANSWER-illegal to advertise rates, APR and programs that mislead the consumer Form 1040 - ANSWER-Tax return -shows taxable adjustable income Uniform residential loan application - ANSWER-FNMA 1003 and FHLMC 65 -may be used in loans that conform to fannie mae and freddie mac criteria as well as non conforming FHA and VA loans Contract Kiting - ANSWER-Seller agrees to create a second false purchase price in order to influence the appraiser -higher appraisal - higher loan Self Employed - ANSWER-Owns 25% of the business Mortgage disclosure improvement act - ANSWER-MDIA - Reg Z (3/7/3) -initial disclosures within 3 days of app -from receipt of initial disclosures must wait 7 days before closing -COC - must wait 3 days to close Mortgage assistance relief Services - ANSWER-MARS -protect homeowners from mortgage relief scams -program that helps consumers negotiate modification of loans and their payments Property Insurance must equal - ANSWER-The lesser of 100% of the insurable value of the improvements or the unpaid balance of the loan 2 years - ANSWER-Creditor must retain evidence of compliance with Reg Z for how long? FHA Loan - ANSWER-31/43 DTI -Insures mortgage -all loses covered -MIP cant be dropped -96.5% max LTV Equitable Title - ANSWER-Buyer is entitled a deed when contract is paid off Force Placed Insurance - ANSWER-Lender Bought hazard insurance if borrower doesn't purchase it himself -notice must be given 45 days before assessing a fee Conveyance - ANSWER-Transfer of the property and the deed itself Loss Mitigation - ANSWER-Servicer must contact delinquent borrower within 36 days of the delinquency and deliver written notice within 45 days of the delinquency Consumer Reporting Agency - ANSWER-(FCRA) -Can Report negative info up to 7 years -bankruptcy can be reported for 10 years -No time limit on criminal convictions traditional mortgage - ANSWER-30 year fixed rate non-traditional - ANSWER-anything besides 30 year fixed rate ECOA - ANSWER-Equal Credit Opportunity Act - Reg B -Age 18 and over for mortgage -discrimination categories (sex, marital status, race, color, age, natl. origin, public assistance, sexual orientation) -Credit decision within 30 days 4. Copy of appraisal 3 days before closing 5. adverse action sent within 30 days for cancelled files (tell consumer why) Credit Report Adverse Action - ANSWER--If a user of credit info takes adverse action consumer has right to receive copy of report within 60 days -If consumer disputes the credit report CRA must investigate within 30 days Persons Covered by Mars - ANSWER--for profit mortgage assistance relief providers -mortgage brokers that promote loan or refinancing to avoid foreclosure -real estate agents who promote services to help consumers avoid foreclosure DOES NOT cover lenders that offer relief from their own loans. -attorneys are exempt from MARS QM and LO Compliance - ANSWER-Reg Z 1. 43% DTI if agency allows you to go above, called temporary QM 2. 3% limit in fees - includes: origination, discounts, lender, closing and processing fees Finance Charge - ANSWER-Dollar amount charged for Credit -interest, transaction charges, buyers points, loan fees, MI etc. -Included in closing disclosure