Prepxl Practice test 4 questions and answers graded A+

f a borrower is required to pay alimony or child support, it must be included as a(n): - Asset - Liability - Qualifier - Mitigating circumstance - Answer-Liability. Alimony and child support must be included in a borrower's liabilities if they are required to pay. A lender who refuses to originate loans in a particular neighborhood or ZIP code because of the perceived creditworthiness of consumers living in the area is in violation of: - FCRA - ECOA - HOEPA - RESPA - Answer-ECOA. Refusing to originate loans in a particular neighborhood or ZIP code because of perceived creditworthiness is a practice known as "redlining" and is a violation of ECOA. ECOA applies to the extension of credit for: - Loans secured by a first or subordinate lien on residential property - Residential, business, commercial, and agricultural loans - Business, commercial, and agricultural loans - All credit other than government loans - Answer-Residential, business, commercial, and agricultural loans.ECOA has a wider range than RESPA and TILA, beyond just loans related to residential properties. The law also covers loans for businesses, commercial, and agricultural loans. Which of the following would prevent the conveyance of title? - Paid lien - Owner dies and leaves a legal will - Encumbrance - Father passing title to his son while still living - Answer-Encumbrance. An encumbrance would prevent the conveyance of title, meaning there is a debt or lien against the property and title may not change hands until the debt or lien is satisfied. A state-licensed loan originator is: - Licensed by the NMLS - An employee of a non-depository institution - Identified by the unique identifier of his/her employer - An employee of a subsidiary which is owned or controlled by a depository institution - Answer-An employee of a non-depository institution. A state-licensed loan originator is an employee of a non-depository institution and is licensed by the state. An originator employed by a depository or the Farm Credit Administration would be registered. 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 - The borrower's new loan will lower the overall monthly outlay - The borrower is extending what may have been a short-term debt out over a longer period- The borrower may gain some tax benefit by rolling consumer debt into the new mortgage loan - Answer-Consumer debt is "disappearing" as a result of the new loan. "Debt elimination" is a regular claim of some mortgage professionals that specialize in consolidation loans, and it is often very misleading. Some borrowers will not understand that by "rolling in" the debt to a new mortgage, they are just extending the term and often paying more in interest. An ARM was locked for three years and began adjusting two years ago. It is about to adjust for the third time. What limits the amount the interest rate will increase on this movement? - Payment cap - Starter cap - Initial cap - Periodic cap - Answer-Periodic cap. The periodic cap is used to limit rate adjustments for ARMs after the initial adjustment. A balloon rider, a prepayment penalty rider and a second-home rider may all be part of: - A title insurance policy - A deed of trust - A note - A power-of-attorney agreement - Answer-A deed of trust. A deed of trust is used to secure a note. A deed can carry a rider, or an addendum, which may include a balloon rider, a prepayment penalty rider and a second-home rider, among others. Liabilities may include which of the following? - Real estate- Net worth of businesses - Student loans - Stocks and bonds - Answer-Student loans. Liabilities may include student loans. How many total hours of ethics are required, at minimum, for continuing education? - Three - Eight - Two - Eleven - Answer-Two. The NMLS requires, as a federal minimum, at least two hours of ethics training within the total eight hours of education required for continuing education. Concerning ARMs, margin is best defined as: - A number, expressed as a percentage, that represents a lender's operating costs and profit margin - The amount of compensation earned by a mortgage professional for originating an ARM - The range of flexibility an interest rate has between caps on traditional ARMs - The maximum - up or down - that an interest rate can ever adjust on an ARM - Answer-A number, expressed as a percentage, that represents a lender's operating costs and profit margin. Concerning ARMs, "margin" is best defined as a number, expressed as a percentage, that represents a lender's operating costs and profit margin. HOEPA is federal legislation enacted by Congress through amendments to: - FACTA- ECOA - TILA - HMDA - Answer-TILA. The Home Ownership and Equity Protection Act is part of TILA. Created in 1994, it was the first legislation specifically created to combat predatory lending. Its regulations are found in Section 32 of Regulation Z. Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information? - Former owners of a particular property - The street address of the property a borrower intends to purchase - The assessed value of a subject property - A loan applicant's current loan balances - Answer-A loan applicant's current loan balances. Under the Gramm-Leach-Bliley Act, a loan applicant's current loan balances would be considered nonpublic information. "5/25" and "7/23" are commonly used to designate loans including which of the following? - A hybrid adjustable rate feature - A balloon payment - A subordinate lien - A temporary interest rate buy-down - Answer-A balloon payment. "5/25" and "7/23" are commonly used to designate loans that include a balloon payment. Special second appraisal requirements apply for a loan that is a(n): - VA loan- Higher-priced mortgage loan - Adjustable-rate mortgage - Refinance - Answer-Higher-priced mortgage loan. Special second appraisal requirements apply for a loan that is a higher-priced mortgage loan. On an FHA loan, a borrower is required to make a down payment of at least: - 5% - 3.50% - 0% - 1.50% - Answer-3.50%. On an FHA loan, a borrower is required to bring a minimum down payment of 3.5%. An "encumbrance" is: - Transfer of title from one owner to another - Transfer of ownership without any guarantees or warranties - Cancellation of a contract - A claim against a property that can affect the ability to transfer title - Answer-A claim against a property that can affect the ability to transfer title. An encumbrance is a claim against a property that can affect the ability to transfer title. Mortgage loan originator Janine Jetson has had a complaint filed against her. Upon receiving a request from her state licensing agency, Janine must: - Make her books and records available to the agency- Respond to the complaint - Post an additional bond - Request a hearing - Answer-Make her books and records available to the agency.