NMLS 2023 Exam Review with Complete Solutions

What is a Mortgage? - ANSWER-Is an agreement between a borrower and a lender in which the borrower conveys an interest in a property to the lender as security for a loan. Mortgage Bankers - ANSWER-They are financial intermediaries that serve parties on opposite ends of the mortgage lending transaction by moving capital or money. Originating - ANSWER-Developing marking plans, Educating clients about loan programs, Taking applications, Providing disclosures and Preparing the loan file. Processing - ANSWER-Reviewing loan files and requesting needed documents. Verifies everything that is on the file. Underwriting - ANSWER-Analyzing credit worthiness and willingness to pay. Reviewing compensating factors and making the final decision to approve or deny the loan. Do processors and underwriters need a license? - ANSWER-No, unless they are a contractor or work for multiple lenders. Closing - ANSWER-Preparing, assembling and reviewing all closing documents. Verifying that all closing conditions are met and that all fees, cost and premiums have been collected. Why does an MLO have to be licensed? - ANSWER-They are the ones who are talking and communicating with the consumer. They have the most exposure to the consumer. What ACT deals with the licensing of an MLO? - ANSWER-SAFE ACT What year was the SAFE ACT passed? - ANSWER-2008 How would someone be exempt from taking the NMLS test? - ANSWER-If they were federally supervised and exempt from licensure. How many hours of education must be fulfilled for Pre-licensing? - ANSWER-20 Hours What is a kickback? - ANSWER-A receipt of anything of value in exchange for referring business. Which ACT deals with kickbacks? - ANSWER-RESPA - Regulation X Which ACT deals with advertising? - ANSWER-TILA What regulation letter is TILA? - ANSWER-Regulation - Z What are the 2 qualifying standards for Debt-to-Income ratios? - ANSWER-Total Debt-to-Income Ratio and Housing Expense Ratio. With Housing Expense Ratio, what does PITI stand for? - ANSWER-Principal, Interest, Taxes and Insurance. What is the Housing Expense Ratio? - ANSWER-Total of housing payment divided by gross monthly income. What is the debt-to-income ratio? - ANSWER-Total of all debts divided by gross monthly income. A borrower earns $4,500 per month in gross income. If their housing ratio is 28%, what is the maximum housing payment they can qualify for? - ANSWER-$1,260 The total housing payment should not exceed what percentage of their gross monthly income? - ANSWER-28% The total monthly debt obligations should not exceed what percentage of their gross monthly income? - ANSWER-36% What is an accrued expense? - ANSWER-An expense that is owed but not yet paid. What is a prepaid expense? - ANSWER-An expense that has been paid but is not yet due. What is Per Diem Interest? - ANSWER-Interest that counts the days from the day of closing to the end of the month. What examples of debt would not count toward the Debt-to-Income ratio? - ANSWER-Life Insurance premiums, Utilities and Cell Phones. Are conventional loans guaranteed/insured by federal government? - ANSWER-No, they are financed solely by a bank or institutional lender. What are examples on Non-Conventional loans? - ANSWER-FHA, VA and USDA. PMI will remain until the loan is paid down to what percentage? - ANSWER-78% What is a Fully Amortizing Loan? - ANSWER-A loan that includes payments which fully pay down the entire loan balance over the life of the loan. The standards for evaluation of an application for an FHA loan include the following (4 C's)? - ANSWER-Credit history, Capacity to repay the loan, Cash assets and Collateral. In a VA loan, what percentage must the consumer pay back to the bank in case of a default? - ANSWER-25% How old must you be to qualify for a reverse mortgage? - ANSWER-62 years old. What is a NOTE? - ANSWER-Contains borrower's promise to pay. What does a Deed do? - ANSWER-It transfers ownership interests in property. What is a limited warranty deed? - ANSWER-A deed which warrants some rights, but not all. What is a Quitclaim deed? - ANSWER-A person conveys any rights he or she has, known and unknown, without warranting any right at all. What is a Fiduciary or (Judicial deed)? - ANSWER-A deed by operation of a court order which may or may not warrant any rights. What are the two different ways a property can be transferred without a deed? - ANSWER-Descent (gives it to the next legal heir), if there is no will or by Devise which is the transfer by operation of a legal, valid will. Which type of lien come first before all other liens? - ANSWER-A Government lien. What does encroachment mean? - ANSWER-When someone on one lot builds something that encroaches onto a neighboring lot. Who is the MORTGAGOR? - ANSWER-The Borrower Who is the MORTGAGEE? - ANSWER-The Lender What is a Interest Only Note? - ANSWER-Borrower pays only interest in installment payments. Principal remains outstanding. What is an Installment Note? - ANSWER-Are payment installments that are typically equal or change according to schedule. What is a Fully Amortizing Installment Note? - ANSWER-Regular periodic payments include a principal amount. At the end of the loan term, the principal is fully repaid. What is a Purchase Money Mortgage? - ANSWER-Any mortgage used to purchase a property, not just one for seller-financing. ECOA is what letter regulation? - ANSWER-Regulation B