NMLS EVALUATION TEST ANSWERS AND
QUESTIONS SET A+
✔✔RESPA GFE changed circumstances: - ✔✔1.Acts of God, war, disaster or
emergency
2.Information particular to the borrower or transaction that was relied upon for the GFE,
like: credit quality of the borrower, amount of the loan, value of the property or other info
that's found to be inaccurate
3.New information particular to borrower or transaction not used for GFE
4.Other circumstances particular to borrower or transaction, such as boundary dispute,
need for flood insurance, or environmental problems
✔✔RESPA GFE changed circumstances do not include: - ✔✔The borrower's name,
monthly income, property address, estimate of the value of the property, loan amount
sought and any info in any credit report obtained by the MLO prior to issuing the GFE,
unless the info is found to be changed or inaccurate after the GFE is issued
✔✔The original GFE expires in: - ✔✔10 Business Days (or longer if specified by MLO) if
the borrower does not intend to continue the application
✔✔GFE overages must be cured by MLO when: - ✔✔At settlement or within 30
calendar days after settlement
✔✔HUD -1 Uniform Settlement Statement - ✔✔A settlement statement, required under
RESPA, that details all costs associated with closing a loan, showing how much was
paid, to what companies or parties, and for what purpose.
✔✔HUD -1A Uniform Settlement Statement - ✔✔Used for loans with no seller, ie.
refinancing and subordinate lien loans
✔✔When is a settlement statement not needed? - ✔✔For open-end home equity plans
subjet to TILA and Regulation Z
,✔✔HUD-1 Page 1 - ✔✔Contains borrower's id. info, property address, lender's loan
number, settlement date and id. info for lender. Also has charges paid outside of closing
(POC)
✔✔HUD-1 Page 2 - ✔✔Itemizes settlement charges paid by borrower and seller
1.Items paid in connection with the loan
2.Items required by the lender to be paid in advance
3.Reserves deposited with the lender
4.Title charges
5.Govermnent recording and transfer fees
6.Any additional settlement charges
✔✔HUD-1 Page 3 - ✔✔Comparison of GFE and HUD-1 including:
1.Charges that can't increase
2.Charges that can't increase more than 10%
3.Charges that can change
4.Loan terms
✔✔TILA (Z) Truth in Lending Act - ✔✔Administered by the Board of Governors of the
Federal Reserve System. Implemented by Regulation Z, from Title 1 of the Consumer
Credit Protection Act
✔✔TILA (Z) Truth in Lending Act purposes: - ✔✔1.Enhance economic stabilization
2.Strengthen competition among financial institutions
3.Assure meaningful disclosure of credit terms to allow consumers to compare
4.Does not set limits on interest rates or finance charges, but regulates the disclosure of
these items
5. Establishes a 3 business day right of rescission in certain transactions
✔✔HOEPA - Home Ownership and Equity Protection Act - ✔✔Amendment to TILA reg
z in 2002
Enforced by FTC and Federal Reserve Board FTB
Mostly covers "High Cost Loans"
Allows consumers to sue lenders who violate HOEPA for recovery of statutory and
actual damages, court costs and attorney's fees
May enable a consumer to rescind the loan for up to 3 years if the lender is in violation.
✔✔HOEPA - Home Ownership and Equity Protection Act is triggered? - ✔✔When the
APR exceeds the rates in Treasury securities of comparable maturity - based on the
15th of the month before the month in which the application is received by:
More than 8 percentage points for a 1st Mortgage
More than 10 percentage points for a 2nd mortgage
or if:
, The total points and fees paid by the consumer exceed the higher of 8% of the loan
amount or $611 in 2012 example fees = 3800 on 50000 loan 3800/(50000-3800) =
8.23%
✔✔HOEPA total finance charges include: - ✔✔All normal costs plus:
Closing costs paid to the lender or an affiliated 3rd party
Any optional credit, life, accident, or loss of income insurance, even if the cost of
insurance may have been disclosed. This may even occur at closing and then triggers
the disclosure and rescission requirements
✔✔Dodd-Frank in 2010 lowered high cost loan definitions to: - ✔✔Total points and fees
exceeding 5% on mortgage loans of at least $20,000 or 8% or a certain dollar amount
for loans below $20,000
APR exceeds average prime offer rate by 6.5% on first lien loans for $50,000 or more or
8.5% on smaller and 2nd lien loans
Prepayment penalty applies for more than 3 yrs after closing or that exceed 2% of the
prepayment
✔✔HOEPA Prohibited practices include: - ✔✔1.Balloon payments on HOEPA loans
with terms less than 5 years. HOEPA loans must have regular payments to pay down
the principal or at least pay interest
2.Negative amortization
3. Default interest rates - higher than pre-default rates
4.A repayment schedule that consolidates more than two periodic payments that are to
paid in advance from the proceeds of the loan
5.Prepayment penalties unless limited to the first 5 years of the loan or the consumers
total monthly debt including the HOEPA loan is more than 50% of gross monthly income
6.Due on demand clauses
✔✔Additional TILA Regulation Z prohibited practices: - ✔✔Creditors may not:
1.Grant loans without regard to the borrower's ability to repay the loan
2.Disburse home improvement loan proceeds to anyone but the borrower, or jointly the
borrower and contractor
3.Refinance a HOEPA loan to another HOEPA loan with in the first 12 months of
origination
4.Wrongfully document a closed-end high cost loan as an open-end loan, ie. home
equity line of credit
✔✔TILA Reg Z applies to: - ✔✔All real estate loans for personal, family or household
purposes, (not business or commercial) if the loan is:
Subject to finance charges
Payable by a written agreement in more than four installments
✔✔TILA Reg Z disclosures are required in 2 general areas: - ✔✔When creditors offer
credit but before the transaction is consummated
When credit terms are advertised to potential customers
QUESTIONS SET A+
✔✔RESPA GFE changed circumstances: - ✔✔1.Acts of God, war, disaster or
emergency
2.Information particular to the borrower or transaction that was relied upon for the GFE,
like: credit quality of the borrower, amount of the loan, value of the property or other info
that's found to be inaccurate
3.New information particular to borrower or transaction not used for GFE
4.Other circumstances particular to borrower or transaction, such as boundary dispute,
need for flood insurance, or environmental problems
✔✔RESPA GFE changed circumstances do not include: - ✔✔The borrower's name,
monthly income, property address, estimate of the value of the property, loan amount
sought and any info in any credit report obtained by the MLO prior to issuing the GFE,
unless the info is found to be changed or inaccurate after the GFE is issued
✔✔The original GFE expires in: - ✔✔10 Business Days (or longer if specified by MLO) if
the borrower does not intend to continue the application
✔✔GFE overages must be cured by MLO when: - ✔✔At settlement or within 30
calendar days after settlement
✔✔HUD -1 Uniform Settlement Statement - ✔✔A settlement statement, required under
RESPA, that details all costs associated with closing a loan, showing how much was
paid, to what companies or parties, and for what purpose.
✔✔HUD -1A Uniform Settlement Statement - ✔✔Used for loans with no seller, ie.
refinancing and subordinate lien loans
✔✔When is a settlement statement not needed? - ✔✔For open-end home equity plans
subjet to TILA and Regulation Z
,✔✔HUD-1 Page 1 - ✔✔Contains borrower's id. info, property address, lender's loan
number, settlement date and id. info for lender. Also has charges paid outside of closing
(POC)
✔✔HUD-1 Page 2 - ✔✔Itemizes settlement charges paid by borrower and seller
1.Items paid in connection with the loan
2.Items required by the lender to be paid in advance
3.Reserves deposited with the lender
4.Title charges
5.Govermnent recording and transfer fees
6.Any additional settlement charges
✔✔HUD-1 Page 3 - ✔✔Comparison of GFE and HUD-1 including:
1.Charges that can't increase
2.Charges that can't increase more than 10%
3.Charges that can change
4.Loan terms
✔✔TILA (Z) Truth in Lending Act - ✔✔Administered by the Board of Governors of the
Federal Reserve System. Implemented by Regulation Z, from Title 1 of the Consumer
Credit Protection Act
✔✔TILA (Z) Truth in Lending Act purposes: - ✔✔1.Enhance economic stabilization
2.Strengthen competition among financial institutions
3.Assure meaningful disclosure of credit terms to allow consumers to compare
4.Does not set limits on interest rates or finance charges, but regulates the disclosure of
these items
5. Establishes a 3 business day right of rescission in certain transactions
✔✔HOEPA - Home Ownership and Equity Protection Act - ✔✔Amendment to TILA reg
z in 2002
Enforced by FTC and Federal Reserve Board FTB
Mostly covers "High Cost Loans"
Allows consumers to sue lenders who violate HOEPA for recovery of statutory and
actual damages, court costs and attorney's fees
May enable a consumer to rescind the loan for up to 3 years if the lender is in violation.
✔✔HOEPA - Home Ownership and Equity Protection Act is triggered? - ✔✔When the
APR exceeds the rates in Treasury securities of comparable maturity - based on the
15th of the month before the month in which the application is received by:
More than 8 percentage points for a 1st Mortgage
More than 10 percentage points for a 2nd mortgage
or if:
, The total points and fees paid by the consumer exceed the higher of 8% of the loan
amount or $611 in 2012 example fees = 3800 on 50000 loan 3800/(50000-3800) =
8.23%
✔✔HOEPA total finance charges include: - ✔✔All normal costs plus:
Closing costs paid to the lender or an affiliated 3rd party
Any optional credit, life, accident, or loss of income insurance, even if the cost of
insurance may have been disclosed. This may even occur at closing and then triggers
the disclosure and rescission requirements
✔✔Dodd-Frank in 2010 lowered high cost loan definitions to: - ✔✔Total points and fees
exceeding 5% on mortgage loans of at least $20,000 or 8% or a certain dollar amount
for loans below $20,000
APR exceeds average prime offer rate by 6.5% on first lien loans for $50,000 or more or
8.5% on smaller and 2nd lien loans
Prepayment penalty applies for more than 3 yrs after closing or that exceed 2% of the
prepayment
✔✔HOEPA Prohibited practices include: - ✔✔1.Balloon payments on HOEPA loans
with terms less than 5 years. HOEPA loans must have regular payments to pay down
the principal or at least pay interest
2.Negative amortization
3. Default interest rates - higher than pre-default rates
4.A repayment schedule that consolidates more than two periodic payments that are to
paid in advance from the proceeds of the loan
5.Prepayment penalties unless limited to the first 5 years of the loan or the consumers
total monthly debt including the HOEPA loan is more than 50% of gross monthly income
6.Due on demand clauses
✔✔Additional TILA Regulation Z prohibited practices: - ✔✔Creditors may not:
1.Grant loans without regard to the borrower's ability to repay the loan
2.Disburse home improvement loan proceeds to anyone but the borrower, or jointly the
borrower and contractor
3.Refinance a HOEPA loan to another HOEPA loan with in the first 12 months of
origination
4.Wrongfully document a closed-end high cost loan as an open-end loan, ie. home
equity line of credit
✔✔TILA Reg Z applies to: - ✔✔All real estate loans for personal, family or household
purposes, (not business or commercial) if the loan is:
Subject to finance charges
Payable by a written agreement in more than four installments
✔✔TILA Reg Z disclosures are required in 2 general areas: - ✔✔When creditors offer
credit but before the transaction is consummated
When credit terms are advertised to potential customers
