Loan Originator Practice Exam 5 Questions and Correct Answers Latest Update 2025 Rated A+
The purpose of the S.A.F.E. Act is to: - Answers The answer is protect consumers by ensuring that the
mortgage lending industry operates without unfair and deceptive practices.
"In most cases, a mortgage loan requires monthly payments. All of the following loan types require
monthly payments, except:
HECMs
ARMs
Fixed-rate loans
HELOCs" - Answers The answer is HECMs. The home equity conversion mortgage (HECM) does not
require repayment as long as the borrower continues to live in the home.
An underwriter would expect to see _____ in order to document the income of a commissioned
borrower. - Answers The answer is two years' tax returns and all schedules if the commission income is
more than 25% of income. Commissioned borrowers must show two years' tax returns if their
commission income is more than 25% of their total income.
An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a: - Answers The
answer is conversion option. The option on an ARM that gives a borrower the opportunity to convert
his/her loan to a fixed rate is called a conversion option.
Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer?
- Answers The answer is within three business days of loan application. Under ECOA, a notice concerning
the applicant's right to obtain a copy of the appraisal is due within three business days of receiving a
loan application.
"All of the following are prohibited practices under the FCRA, except:
Allowing the FBI access to a borrower's file for an investigation
An auto finance company knowingly reporting a borrower late when the payment was accepted on time
A CRA releasing a credit report containing disputed information without marking it as such
Releasing a credit report without written permission" - Answers The answer is allowing the FBI access to
a borrower's file for an investigation. Exceptions to the FCRA allow for FBI access to a consumer report
for the purposes of investigations.
, Creditors must make a(n) _____ of a borrower's ability to repay a loan. - Answers The answer is
reasonable, good faith determination. Creditors must make a reasonable, good faith determination of a
borrower's ability to repay a loan.
What was the first law that Congress enacted to combat predatory lending? - Answers The answer is
HOEPA. The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 and was the first
legislation specifically created to combat the practice of predatory lending.
Second appraisal requirements for higher-priced mortgage loans were put in place in an attempt to curb
the practice of: - Answers The answer is property flipping. Second appraisal requirements were put in
place under the HPML Rule for certain higher-priced mortgage loan transactions in an attempt to curb
the practice of property flipping.
Mortgage insurance premiums are required for: - Answers The answer is All FHA loans. Mortgage
insurance premiums are required for all FHA loans.
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? - Answers The answer is 5%. An ARM with a start rate of 4.00% and a periodic cap of 1%
(no initial cap) could move no higher than 5% on its first movement.
Conforming loan guidelines generally include DTI ratios of: - Answers The answer is 28% / 36%. The
standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).
This is defined as the intentional perversion of the truth for the purpose of inducing another person or
entity to rely on it in order to part with something or surrender a legal right. - Answers The answer is
mortgage fraud. Mortgage fraud is defined as the intentional perversion of the truth for the purpose of
inducing another person or entity to rely on it in order to part with something or surrender a legal right.
A lender is trying to lure customers with advertisements for "Minimum Monthly Payments to Meet Any
Budget!" This advertisement must also include an equally prominent statement in close proximity which
alerts consumers that: - Answers The answer is a balloon payment may result from minimum periodic
payments. The advertisement must include a statement that a balloon payment may result from
minimum periodic payments.
If a borrower selects a mortgage loan covered by HOEPA, he or she: - Answers The answer is Can waive
the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan
after submitting a written request that is signed by the parties entitled to the waiting period and which
describes the emergency and consent to the waiver. If a borrower selects a mortgage loan covered by
HOEPA, he/she can waive the three-day waiting period between the receipt of HOEPA disclosures and
consummation of the loan after submitting a written request that is signed by the parties entitled to the
waiting period and which describes the emergency and consent to the waiver.
In a title theory state, title to residential real estate is granted with a _____, naming the lender as the
beneficiary of the trust, the borrower as the trustor, and the third party that holds the deed until the
The purpose of the S.A.F.E. Act is to: - Answers The answer is protect consumers by ensuring that the
mortgage lending industry operates without unfair and deceptive practices.
"In most cases, a mortgage loan requires monthly payments. All of the following loan types require
monthly payments, except:
HECMs
ARMs
Fixed-rate loans
HELOCs" - Answers The answer is HECMs. The home equity conversion mortgage (HECM) does not
require repayment as long as the borrower continues to live in the home.
An underwriter would expect to see _____ in order to document the income of a commissioned
borrower. - Answers The answer is two years' tax returns and all schedules if the commission income is
more than 25% of income. Commissioned borrowers must show two years' tax returns if their
commission income is more than 25% of their total income.
An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a: - Answers The
answer is conversion option. The option on an ARM that gives a borrower the opportunity to convert
his/her loan to a fixed rate is called a conversion option.
Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer?
- Answers The answer is within three business days of loan application. Under ECOA, a notice concerning
the applicant's right to obtain a copy of the appraisal is due within three business days of receiving a
loan application.
"All of the following are prohibited practices under the FCRA, except:
Allowing the FBI access to a borrower's file for an investigation
An auto finance company knowingly reporting a borrower late when the payment was accepted on time
A CRA releasing a credit report containing disputed information without marking it as such
Releasing a credit report without written permission" - Answers The answer is allowing the FBI access to
a borrower's file for an investigation. Exceptions to the FCRA allow for FBI access to a consumer report
for the purposes of investigations.
, Creditors must make a(n) _____ of a borrower's ability to repay a loan. - Answers The answer is
reasonable, good faith determination. Creditors must make a reasonable, good faith determination of a
borrower's ability to repay a loan.
What was the first law that Congress enacted to combat predatory lending? - Answers The answer is
HOEPA. The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 and was the first
legislation specifically created to combat the practice of predatory lending.
Second appraisal requirements for higher-priced mortgage loans were put in place in an attempt to curb
the practice of: - Answers The answer is property flipping. Second appraisal requirements were put in
place under the HPML Rule for certain higher-priced mortgage loan transactions in an attempt to curb
the practice of property flipping.
Mortgage insurance premiums are required for: - Answers The answer is All FHA loans. Mortgage
insurance premiums are required for all FHA loans.
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? - Answers The answer is 5%. An ARM with a start rate of 4.00% and a periodic cap of 1%
(no initial cap) could move no higher than 5% on its first movement.
Conforming loan guidelines generally include DTI ratios of: - Answers The answer is 28% / 36%. The
standard conforming DTI ratios for Fannie Mae and Freddie Mac are 28% (housing) and 36% (total debt).
This is defined as the intentional perversion of the truth for the purpose of inducing another person or
entity to rely on it in order to part with something or surrender a legal right. - Answers The answer is
mortgage fraud. Mortgage fraud is defined as the intentional perversion of the truth for the purpose of
inducing another person or entity to rely on it in order to part with something or surrender a legal right.
A lender is trying to lure customers with advertisements for "Minimum Monthly Payments to Meet Any
Budget!" This advertisement must also include an equally prominent statement in close proximity which
alerts consumers that: - Answers The answer is a balloon payment may result from minimum periodic
payments. The advertisement must include a statement that a balloon payment may result from
minimum periodic payments.
If a borrower selects a mortgage loan covered by HOEPA, he or she: - Answers The answer is Can waive
the three-day waiting period between the receipt of HOEPA disclosures and consummation of the loan
after submitting a written request that is signed by the parties entitled to the waiting period and which
describes the emergency and consent to the waiver. If a borrower selects a mortgage loan covered by
HOEPA, he/she can waive the three-day waiting period between the receipt of HOEPA disclosures and
consummation of the loan after submitting a written request that is signed by the parties entitled to the
waiting period and which describes the emergency and consent to the waiver.
In a title theory state, title to residential real estate is granted with a _____, naming the lender as the
beneficiary of the trust, the borrower as the trustor, and the third party that holds the deed until the
