NMLS Final Exam Questions with Detailed Verified Answers (100% Correct Answers) /Already Graded A+

NMLS Final Exam Questions with Detailed Verified Answers (100% Correct Answers) /Already Graded A+ "Which of the following is the best example of a conventional loan that exceeds Fannie Mae and Freddie Mac's max loan limits? a. A USDA loan b. A government loan, such as FHA or VA c. A non-conforming loan d. A loan made in the amount of $417,000 - Correct Answer A non-conforming loan" "Which of the following is true of VA loans? a. They require a mortgage insurance premium b. They are assumable c. They require a 5.5% borrower interest d. They are only available for 30-year terms - Correct Answer They are assumable" "The Cost of Funds Index is traditionally associated with interest rate calculations for which of the following? a. Reverse mortgages b. Home equity lines of credit c. 15- and 30-year fixed-rate programs d. ARMS - Correct Answer ARMS" "Construction loans generally come in two forms. These are: a. Forward mortgage and reverse mortgage b. Construction-to-permanent and standalone construction loans c. Home equity lines of credit and construction-to-permanent loans d. Bridge Loans and HPMLs - Correct Answer Construction-to-permanent and standalone construction loans" "Which of the following is an example of open ended credit? a. Adjustable-rate mortgage to finance a home purchase b. HELOC c. Fixed-rate purchase money mortgage d. Qualified mortgage - Correct Answer HELOC" "_____ results from the application of minimum required periodic payments that are not sufficient to cover the interest that is due a. Negative amortization b. Amortizing payments c. Negative equity d. Lower credit scores - Correct Answer Negative amortization" "Concerning ARMs, margin is best defined as: a. The amount of compensation earned by a mortgage professional for originating an ARM b. The range of flexibility an interest rate has between caps on traditional ARMs c. The maximum - up or down - that an interest rate can ever adjust on an ARM d. A number, expressed as a percentage, that represents a lender's operating cost and profit margin - Correct Answer A number, expressed as a percentage, that represents a lender's operating cost and profit margin" Under TILA guidelines, all of the following disclosures are provided for an adjustable-rate loan except: a. The index used to determine rate adjustments b. Statement that the interest rate will be offered for the duration of the loan c. Possibility of changes in the payment amount over time d.Frequency of changes in the annual percentage rate - Correct Answer Statement that the interest rate will be offered for the duration of the loan" "According to federal fair lending laws, which of the following facts cannot be considered when qualifying an applicant for a loan? a. A female applicant is four months pregnant and might not continue working once her baby is born b. A minority applicant does not have sufficient funds for a down payment c. A female applicant's credit report and application shows gaps of several months between jobs over the past two years d. A disabled applicant's credit report shows several instances of 60- and 90-day late credit card payments - Correct Answer A female applicant is four months pregnant and might not continue working once her baby is born" "Which of the following is not a change or correction to the closing disclosure that would cause a new three business day waiting period to begin? a. A change in the annual percentage rate b. A change in the type of loan product c. The addition of a prepayment penalty d. An additional $500 seller credit - Correct Answer An additional $500 seller credit" "For which of the following is the creditor permitted to charge more than it discloses in the loan estimate (i.e., there is no tolerance limitation) and still meet the good faith requirement? a. Brokerage fee b. Transfer taxes c. Recording fees d. Prepaid interest - Correct Answer Prepaid interest" "When must a lender advise loan applicants about the status of their application? a. Within 30 days b. Within 90 days c. Within 3 days d. Within a week - Correct Answer Within 30 days" "XYZ Mortgage Company just mailed a closing disclosure to a consumer. The waiting period prior to closing will begin: a. The third business day after the closing disclosure is mailed b. The day on which the company received a completed, signed loan application c. On the date that the closing disclosure is mailed d. The next business day in which the closing disclosure is mailed - Correct Answer The third business day after the closing disclosure is mailed" "Which of the following is one of the stated reasons for implementing the integrated mortgage disclosure forms? a. To reduce identity theft b. To permit lenders to collect fees earlier c. To lower borrowers' costs d. To use clear language that borrowers can understand - Correct Answer To use clear language that borrowers can understand" "Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission order to void the loan? a. Any one of the five b. A majority of the five c. All five d. At least two of the five - Correct Answer Any one of the five" "It is legal for settlement service provider A to pay settlement service provider B a portion of fees charged to a borrower only when a. Both service providers have a written agreement in place to split fees b. Service provider B has performed bona fide services to earn the fee c. The consumer is aware the service providers are splitting the fees d. The service providers are separate entities and not affiliated in any way - Correct Answer Service provider B has performed bona fide services to earn the fee" "All of the following features are prohibited for a qualified mortgage, except a. 40 year terms b. Negative amortization c. Interest-only payments d.Adjustable interest rates - Correct Answer Adjustable interest rates" "Which of the following is defined as the cost of credit expressed as a dollar amount? a. Loan-to-value b. Finance charge c. APR d. Debt ratios - Correct Answer Finance charge" "The rule that established requirements for ensuring that a borrower can afford to take on a mortgage loan is known as the a. Ability to repay rule b. Qualified borrower rule c. Repayment rule d.RESPA rule - Correct Answer Ability to repay rule" "Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a customer? a. Within 90 days of loan application b. Within three business days of loan application c. Within 30 days of closing d. At the time of notice of action taken - Correct Answer Within three business days of loan application" "A customer with an excellent credit score submits a loan application. When does ECOA require that the applicant be advised of the status of the application? a. Within one week b. Within 90 days c. Within 30 days d. Within three days - Correct Answer Within 30 days" "15. HMDA's implementing regulation is: a. Regulation c b. Regulation a c. Regulation z d. Regulation x - Correct Answer Regulation c" "The Supreme Court has issued an opinion regarding markups, stating that: a. Markups, including those that are split, are legal under RESPA b. Markups are legal under TILA c. Markups are not a violation of RESPA as long as the fee is not split d. No markups are legal under TILA - Correct Answer Markups are not a violation of RESPA as long as the fee is not split" "The USA PATRIOT Act is a federal law that Congress adopted in response to: a. The meltdown of the mortgage lending market in 2007 b. The terrorist attacks on September 11, 2001 c. The need to make HAMP loans more available to more Americans d. The need to revitalize the economy in 2008 - Correct Answer The terrorist attacks on September 11, 2001" "John and Jane Brown are co-owners of a property that is their principal residence and are entering into a refinance transaction that is subject to rescission. John provided with one copy of the Notice of Right to Cancel, and Jane receives none. What is their deadline for rescission? a. Three business days after closing b. Midnight on the third day following closing c. 72 hours after closing d. Three years after closing - Correct Answer Three years after closing" "Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than ___, or a lender may collect PMI until __ loan-to-value is reached. a. 80%-78% b. 65-50% c. 78-62% d. 80-65% - Correct Answer 80%-78%" "Closed end loans with rates that exceed the average prime offer rate, but are not high enough to trigger protections under HOEPA, are known as: a. Higher priced mortgage loans b. Subprime mortgage loans c. Qualified high-cost mortgages d. Reverse mortgages - Correct Answer Higher priced mortgage loans" "Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice? a. Reasons for the denial of credit b. A description of credit he requested c. His credit score d. Information on the credit reporting agency if the adverse action is based on his credit report - Correct Answer His credit score" "A borrower has gone to settlement for a cash-out refinance on Tuesday for his principal residence. His rescission period is over at midnight on Friday. According to the provisions specified under federal law, what is the first possible day the loan could fund? a. Monday the following week b. Friday c. Saturday d. Tuesday - Correct Answer Saturday" "Finance charges always include which of the following? a. Document prep fees b. Mortgage broker fee c. Credit report fee d. Title insurance charges - Correct Answer Mortgage broker fee" "What is the primary purpose of the truth-in-lending act? a. To ensure that applicants have equal opportunity to credit from lenders b. To ensure that creditors provide consumers clear disclosure of the terms of credit c. To ensure that creditors do not charge high interest rates on credit d. To ensure that third-party service providers do not charge high fees - Correct Answer To ensure that creditors provide consumers clear disclosure of the terms of credit" "The penalties for paying or accepting an illegal referral fee are: a. Fines up to $10,000 and up to one year in prison b. Fines up to $20,000 and up to one year in prison c. Fines up to $5,000 and up to one year in prison d. Fines up to $10,000 and up to three years in prison - Correct Answer Fines up to $10,000 and up to one year in prison" "The Loan Originator Compensation Rule is intended to discourage which of the following practices? a. Air loans b. Redlining c. Steering d. Property flipping - Correct Answer Steering" "As a result of provisions included in the dodd-frank act, HOEPA was revised to extend it's provisions to: a. Open-end transactions and purchase money mortgages b. Reverse mortgages c. Closed-end transactions d. Bridge loans - Correct Answer Open-end transactions and purchase money mortgages" "Murphy is a mortgage broker who has an ownership interest in a local title insurance company. When his clients apply for loans and request referrals to a title company, Murphy must: a. Explain to the loan applicants that he cannot refer them to a particular company b. Offer a list of title companies that does not include the company in which he has an ownership interest c. Immediately provide an affiliated business arrangement disclosure if he refers them to the title company in which he has an ownership interest d. Offer a list of all local title companies without steering loan applicants towards a particular one - Correct Answer Immediately provide an affiliated business arrangement disclosure if he refers them to the title company in which he has an ownership interest" "The gramm-leach-bliley act specifies that a consumer must be given ___ to opt out before personal financial information is disclosed to a third party. a. A reasonable opportunity b. Seven business days c. 90 days d. 15 days - Correct Answer A reasonable opportunity" "If a mortgage broker decides to use telemarketing to establish leads for a loan origination, which of the following should occur? a. The broker should only call former and current customers to ask for referrals b. The broker should stop calling current customers unless they have given consent c. The broker should obtain access to the do-not-call registry d. The broker should invest in a state-of-the-art predictive dialer - Correct Answer The broker should obtain access to the do-not-call registry" "A real estate agent receives a $50 restaurant gift certificate from a mortgage broker as a token of appreciation for referring a home buyer to the mortgage broker. Which of the following laws was violated as a result of this transaction? a Fair housing act b. ECOA c. RESPA d. FCRA - Correct Answer RESPA" "If a consumer opens an account online, the gramm-leach-bliley act states that what period of time constitutes a "reasonable opportunity" to opt out of info sharing? a. No specific period b. 60 days c. 30 days d. Opt-out must occur immediately - Correct Answer 30 days" "The servicing rules require live contact with a delinquent borrower: a. By the 36th day of delinquency b. Within 45 days of delinquency c. By the 15th day of delinquency d. Within 10 days of delinquency - Correct Answer By the 36th day of delinquency" "When calculating finance charges in compliance with TILA, all of the following are included, except a. Private mortgage insurance premium b. Settlement fees c. Closing agent fees, when the borrower chooses the closing agent d. Broker fees - Correct Answer Closing agent fees, when the borrower chooses the closing agent" "RESPA does not apply to: a. Loans for business, commercial and agricultural purposes b. Federally related mortgage loans c. Subprime mortgage loans d. Loans secured by a lien on a principle dwelling - Correct Answer Loans for business, commercial and agricultural purposes" "Under the Fair Credit Reporting Act, which of the following entities has the burden of protecting a consumer's privacy when his/her credit information is being reported? a. Mortgage broker b. The consumer c. HUD d. Credit reporting agency - Correct Answer Credit reporting agency" "The mandatory waiting period between issuance of disclosures and consummation may be waived: a. If the loan is a qualified mortgage b. Using a pre-printed form from the lender c. If the loan originator waives it for the customer d. If the consumer requests a waiver due to a bona fide financial emergency - Correct Answer If the consumer requests a waiver due to a bona fide financial emergency" "Which of the following reasons for deny an applicant a loan is a violation of fair lending laws? a. The applicant's income does not meet the required level for repayment of the loan b. The applicant's age is below the minimum age for executing a contract c. The applicant's recent marital status may lead to a change in employment d. The applicant's credit history includes defaults on many credit payments - Correct Answer The applicant's recent marital status may lead to a change in employment" "If a creditor denies an application for a first lien mortgage, a copy of the appraisal: a. Is not required to be provided unless request in writing b. It is not required to be provided to the customer c. Must be included with the notice of adverse action d. Must be provided within 30 days of the decision to deny - Correct Answer Must be provided within 30 days of the decision to deny" "HUD is still responsible for writing rules and implementing which of the following acts? a. The fair housing act b. The truth in lending act c. The fair credit reporting act d. The real estate settlement procedures act - Correct Answer The fair housing act" "Which of the following is not a duty assigned to the CFPB by the Dodd-Frank Act? a. Collecting and responding to consumer complaints b. Granting and denying mortgage loan originator licenses c. Taking enforcement actions for violations of federal consumer financial laws d. Monitoring the markets for consumer financial products and services - Correct Answer Granting and denying mortgage loan originator licenses" "Which of the following transactions is covered by the TRID Rule? a. Reverse mortgage b. First mortgage on a single-family dwelling c. Mortgage secured by a mobile home d. Home equity line of credit - Correct Answer First mortgage on a single-family dwelling" "When must the closing disclosure be provided to the loan applicant under the TRID rule? a. No later than three business days prior to consummation b. No later than three business days after consummation c. No later than three calendar days prior to consummation d. No later than three calendar days after consummation - Correct Answer No later than three business days prior to consummation" "Who is ultimately responsible for ensuring that the Loan Estimate is provided a. The borrower b. The creditor c. The mortgage broker d. The mortgage loan originator - Correct Answer The creditor" "If a mortgage professional advertises a loan product at "7.25% APR for the first six months! After first six months, APR is 10.5% subject to increase based on market conditions," what (if any) additional disclosures does TILA require? a. The monthly payment for the loan b. The APR in effect after the introductory rate expires c. No other information is required d. The finance charges for the loan - Correct Answer No other information is required" "Which is the only fee that the creditor may collect prior to providing the loan estimate? a. Application fee b. Appraisal fee c. Underwriting fee d. Credit report fee - Correct Answer Credit report fee" "What is the purpose of Regulation B? a. To prohibit discriminatory treatment of credit applicants b. To prohibit misleading advertisements for mortgage loans c. To regulate referral fees d. To require disclosure of settlement costs - Correct Answer To prohibit discriminatory treatment of credit applicants" "A lender is permitted to deny an applicant credit based on which of the following factors? a. The applicant has participated in a consumer counseling program b. The applicant has public assistance income c. The applicant lacks income stability d. The applicant is divorced - Correct Answer The applicant lacks income stability" "Which of the following is included when calculating finance charges? a. Charges payable in a comparable cash transaction b. Appraisal fees paid to an appraiser chosen by the borrower c. Seller's points d. Interest - Correct Answer Interest" "What is the maximum fee a creditor may charge a loan applicant for preparation of a closing disclosure? a. $75 b. $50 c. $0 d. $25 - Correct Answer $0" "In an ARM, margin is determined by a. The broker and it is the amount of profit split between the broker and lender b. The lender and it represents the amount of commission paid to the broker c. The underwriter and it represents the percentage of error allowable for debt-to-income ratio d. The lender and it represents the lender's operating costs and profit margin - Correct Answer The lender and it represents the lender's operating costs and profit margin" "The initial loan estimate must be delivered how many days prior to consummation a. There is no timing requirement b. One business day c. Seven business days d. Three business days - Correct Answer Seven business days" "Which of the following is permitted as a result of referral? a. A well-written thank you note b. The names, phone numbers and annual incomes of clients who have applied for loans c. A coffee card for each client d. A free monthly pass to the gym with closing - Correct Answer A well-written thank you note" "Which law restricts the sharing of info given when a consumer applies for a mortgage loan? a. Consumer regulatory protection act b. FTC disposal rules c. Fair Credit Reporting Act d. Gramm-Leach-Bliley Act - Correct Answer Gramm-Leach-Bliley Act" "An FHA loan, insured by the federal government, protects lenders against a. Fraud or misappropriation b. Foreclosure c. Flood or other hazard d. Market fluctuation - Correct Answer Foreclosure" "All of the following are responsibilities of the closing agent, except: a. Verify identity and notarize documents b. Verify that all parties have copies of forms and disclosures required for settlement c. Explain the risks and benefits of the ARM product in which the client is closing d. Coordinate the closing process - Correct Answer Explain the risks and benefits of the ARM product in which the client is closing" "A front end ratio is: a. A comparison of the value of the property and the amount of the loan b. A comparison of the borrower's monthly housing expense and his or her income c. A comparison of the amount of the loan and the borrower's income d. A comparison of the borrower's total monthly obligations and gross monthly income - Correct Answer A comparison of the borrower's monthly housing expense and his or her income" "The Guidance on Nontraditional Mortgage Product Risks examined and made recommendations on the use of what types of loans? a. Interest-only, payment-option ARMs, and reverse mortgages b. Payment-option ARMs, limited documentation loans, and reverse mortgages c. 30-year and 15-year fixed loans made to elderly borrowers d. Interest-only, payment-option ARMs, and other nontraditional adjustable-rate mortgages - Correct Answer Interest-only, payment-option ARMs, and other nontraditional adjustable-rate mortgages" "All the following are true of FHA fixed rate loans, except: a. The borrower is only required to carry MIP until the LTV reaches 78% b. The borrower must make at least a 3.5% investment c. They require upfront MIP on all loans d. They are available in 15- and 30-year terms - Correct Answer The borrower is only required to carry MIP until the LTV reaches 78%" "What agency ensures that GSEs are using sound financial practices and have adequate capital to engage in the mortgage business a. The federal housing finance agency b. The office of federal housing enterprise oversight c. The deportment of housing and urban development d. Office of the comptroller of the treasury - Correct Answer The federal housing finance agency" "Each violation of federal law prohibiting bank fraud may lead to a penalty of up to __, imprisonment for up to ___, or both a. $1 mil - Correct Answer " "30 years b. $2 mil - Correct Answer " "10 years c. $50,000 - Correct Answer " "40 years d. $100,000 - Correct Answer " "50 years - Correct Answer $1 mil" "30 years - Correct Answer " "The telemarketing sales rule prohibits calls made to consumers: a. Not listed on the do-not-call registry b. After 8am or before 9pm c. Who have specifically asked a mortgage professional not to contact them d. Who have established a business relationship within the last 12 months - Correct Answer Who have specifically asked a mortgage professional not to contact them" "When a loan is characterized as "conforming," it means the loan: a. Meets guidelines established by Fannie Mae and Freddie Mac b. Is a 30-year fixed c. Meets standards for a government program d. Requires no PMI - Correct Answer Meets guidelines established by Fannie Mae and Freddie Mac" "In an ARM, this term refers to the maximum amount by which the interest rate may vary during its lifetime a. Payment cap b. Annual cap c. Lifetime cap d. Periodic rate adjustment cap - Correct Answer Lifetime cap" "Smiths are buying a house for $200,000. After their 10% down payment, they've decided to pay two discount points. What is the dollar amount of the discount points? a. $4K b. $3.8K c. $2K d. $3.6K - Correct Answer $3.6K" "Which of the following best describes the legal consequences of providing an inflated description of income on a loan application? a. It is not a violation of criminal laws, and any penalties imposed are civil not criminal b. It is a violation of multiple federal lending laws and constitutes fraud c. It is not an illegal act but may impact the consumers credit score d. It is not illegal if the applicant inflates his or her income to secure approval for the loan but fully intends to repay the obligation - Correct Answer It is a violation of multiple federal lending laws and constitutes fraud" "When may a homeowner request PMI to be cancelled? a. As soon as the five year required minimum is met b. As soon as his/her equity position is 20% or greater c. As soon as his/her equity position reaches at least 22% d. When the lender informs him/her that it is terminating PMI - Correct Answer As soon as his/her equity position is 20% or greater" "The generally accepted appraisal standard sin the US are known as a. USASB b. ASB c. USPAP d. FinCEN - Correct Answer USPAP" "A mortgage broker structures a higher-priced loan with two points in borrower credit because the borrower has limited cash to close, and suggests the borrower use the premium generated to subsidize the closing costs. After consideration, the borrower agrees and moves forward. This is: a. Legal and Unethical b. Illegal and ethical c. Legal and ethical d. Illegal and unethical - Correct Answer Legal and ethical" "Which of the following individuals would not be permitted to hold POA for a borrower? a. The borrower's child b. The borrower's mortgage loan originator c. The borrowers parent d. The borrower's fiancé - Correct Answer The borrower's mortgage loan originator" "Which document actually contains the borrower's promise to repay the loan? a. The deed b. The TIL Disclosure c. The mortgage d. The note - Correct Answer The note" "Don is refinancing his home in order to save money. If the loan goes through, his payment will drop from $2,000 a month (PITI) to $1,500 a month (PITI). Don's gross income each month is $6,800, but he has a $300 car payment, a $150 credit card payment, and a monthly alimony payments of $1,300. What is Don's housing ratio on the proposed loan? a. 22% b. 48% c. 31% d. 29% - Correct Answer 22%" "A one year ARM has a 6% start rate and is locked for 3 years. Its adjustment caps are set at 2/1/5. In what year could this loan reach its rate ceiling? a. 6th year b. 11th year c. 7th year d. 4th year - Correct Answer 7th year" "A VA loan referred to as an "IRRRL" is an: a. Interest reduction and refinance loan b. Interim rate refinance reduction loan c. Interest rate reduction refinance loan d. Interest rate refinance return loan - Correct Answer c. Interest rate reduction refinance loan" "Overtime income may be considered for an hourly employees: a. If it has been consistent for less than two years and is likely to continue b. Only if it is being paid in the same paycheck c. If the earnings have been reported as wages d. If it has been consistent for at least two years and is likely to continue - Correct Answer If it has been consistent for at least two years and is likely to continue" "Consideration of a loan applicant's debt-to-income ratio is: a. Encouraged, but not a legal requirement b. A legal requirement under the Ability to Repay Rule c. A legal requirement for subprime mortgage loans only d. A legal requirement only for loans that are not qualified mortgages - Correct Answer A legal requirement under the Ability to Repay Rule" "Which of the following loan programs does not require repayment as long as the owner lives in the home? a. HELOC b. Option-ARM c. Reverse Mortgage d. Subprime Mortgage - Correct Answer Reverse Mortgage" "Which of the following best represents a loan that fails to meet Fannie Mae and Freddie Mac's underwriting guidelines? a. A subprime loan b. A conforming loan c. A non-conforming loan d. A conventional loan for $150,000 - Correct Answer A non-conforming loan" "VA loans require which of the following? a. Mortgage insurance premium b. VA appraiser premium c. Eligibility Fee d. Funding Fee - Correct Answer Funding Fee" "Balloon payment qualified mortgages: a. May only be made by non-depository lenders, such as state-licensed mortgage bankers b. May be made by all small creditors offering mortgage credit to finance home purchases in urban areas c. May only be made by depository lenders, such as banks d. May be made by small creditors in rural/under served areas - Correct Answer May be made by small creditors in rural/under served areas" "A borrower is a 65-year-old retiree with a fixed income and significant equity in his home. Which of the following would be the best option to supplement his cash flow? a. HECM b. HELOC c. ARM d. SISA - Correct Answer HECM" "Which of the following would detail the principal and interest payments due on a loan? a. The margin b. The amortization schedule c. Provisions for lifetime rate caps d. The index - Correct Answer The Amortization Schedule" "Community Mortgage Bank (CMB) is a small creditor in a rural area. CMB holds the loans it originates in its portfolio until they are paid in full. CMB tries to limit its transactions to those for qualified mortgages. In a balloon payment QM transaction, the transaction must meet all of the following criteria, except: a. The loan must have a fixed interest rate b. The borrower must have a debt-to-income ratio of no more than 43% c. The borrower must have an established ability to repay d. The loan term must be at least five years and no more than 30 years - Correct Answer The borrower must have a debt-to-income ratio of no more than 43%" "Which of the following is another term for a junior lien? a. First mortgage b. Subordinate Lien c. Real property mortgage d. HELOC - Correct Answer Subordinate Lien" "The ability to repay rule applies to a. Mortgages secured by the borrower's principal residence b. Subprime lending transactions c. First-lien mortgages only d. Most lending transactions other than those for reverse mortgages and open-end loans - Correct Answer Most lending transactions other than those for reverse mortgages and open-end loans" "Which of the following best describes a loan used to finance a property in an amount that exceeds Fannie Mae and Freddie Mac's loan limit? a. Jumbo Loan b. FHA loan c. VA loan d. Non-conventional loan - Correct Answer Jumbo Loan" "A creditor may include a prepayment penalty provision in which of the following mortgages? a. An arm with a loan term of 15 years b. An adjustable rate qualified mortgage that is a higher-priced mortgage c. A fixed-rate qualified mortgage that is not a higher priced mortgage d. A high-cost mortgage - Correct Answer A fixed-rate qualified mortgage that is not a higher priced mortgage" "Fannie Mae and Freddie Mac securitize what type of mortgage loans? a. VA loans b. Non-conforming loans c. Conventional/conforming loans d. Subprime loans - Correct Answer Conventional/conforming loans" "The Federal Housing Administration: a. Guarantees loans b. Insures loans c. Securitizes loans d. Makes loans - Correct Answer Insures loans" "Why are FHA loans beneficial to lenders? a. They do not require escrows or other complicated accounting b. They do not require down payment c. They are only made to low-income borrowers d. They are 100% insured by the federal government They are 100% insured by the federal government - Correct Answer " "In order for a small creditor balloon payment mortgage to be a qualified mortgage, the small creditor must hold the loan in its portfolio for: a. Five years b. Twelve months c. Two years d. Three years - Correct Answer Three years" "What is used to determine the interest rate change on an ARM? a. Caps only b. Index and margin c. Yield curve d. Index only - Correct Answer Index and margin" "What does APR mean? a. Annual percentage ratio b. Annual percentage rate c. Appraised property ratio d. Adjusted pricing ratio - Correct Answer Annual percentage rate" "Which of the following types of loans offers backing from the federal government without using taxpayer dollars? a. FHA loans b. Conventional loans c. RHS direct loans d. VA loans - Correct Answer FHA loans" "Which of the following loan types is best described as a loan with a payment schedule made up of a series of small periodic payments and a larger lump sum due upon maturity? a. An adjustable mortgage loan b. A reverse mortgage c. A loan with a balloon payment provision d. A 2/1 buy down - Correct Answer A loan with a balloon payment provision" "PFC stands for a. Paid from closing costs b. Prequalification of financed credit c. Prepayment for a creditor d. Prepaid finance charge - Correct Answer Prepaid finance charge" "A loan-level price adjustment LLPA is best described as: a. Handling fees charged by GSEs when creditors sell loans to them b. An added fee systematically charged by GSEs when purchasing loans made to consumers with credit score below 620 c. GSE charges that result in higher interest rates when consumer eligibility or loan features present a higher risk of default d. Premium pricing paid by GSEs to purchase loans made to highly creditworthy customers - Correct Answer GSE charges that result in higher interest rates when consumer eligibility or loan features present a higher risk of default" "A(n) _____ is a loan with an interest rate that can adjust monthly and also offers a borrower a number of payment choices such as 30- or 15-year P&I, interest-only, or a 1% minimum payment, which may result in negative amortization a. Reverse mortgage b. 3/1 ARM c. Option-ARM d. Adjustable-rate Mortgage - Correct Answer Option-ARM" "USDA loans are primarily for properties located in a. Suburban areas b. Metropolitan areas c. Rural areas d. Urban Areas - Correct Answer Rural areas" "If a veteran's loan goes into foreclosure, the government will: a. Not reimburse the lender b. Reimburse the lender for the costs of originating the loan c. Reimburse the lender for up to the guaranteed amount of the loan d. Reimburse the lender for the outstanding loan balance - Correct Answer Reimburse the lender for up to the guaranteed amount of the loan" "MIP would be used for which of the following? a. A conventional loan with a down payment of less than 20% b. A non-conforming loan c. VA loan with less than a 10% down payment d. An FHA loan - Correct Answer An FHA loan" "After refinancing, a borrower received his first mortgage statement and can choose from payments of 1% of the loan amount, interest only, or 30 year. What type of loan does he have? a. A convertible ARM b. Cost of savings index loan c. Option-ARM d. 80-10-10 - Correct Answer Option-ARM" "Examples of loans that are typically secured by a subordinate lien include all but which of the following? a. A piggyback loan b. A purchase money mortgage c. A home equity loan d. A home equity line of credit - Correct Answer A purchase money mortgage" "Which of the following is available to a borrower when the subject property is located in a flood zone and flood insurance is required? a. State flood insurance agency b. FEMA's nationwide flood initiative program c. FEMA's national flood insurance program d. FEMA's national flood insurance provision - Correct Answer FEMA's national flood insurance program" "Title insurance is required for all loans by the a. Borrower's attorney b. Lender c. Borrower d. Lender's title company - Correct Answer Lender" "What document would an underwriter rely on for detailed information concerning the collateral for a mortgage loan a. The borrowers employment documentation b. The borrower's asset statements c. The URLA d. The property appraisal - Correct Answer The property appraisal" "MIP a. Can be cancelled after 5 years as long as the equity position is less than 20% b. Is paid on all conventional loans with an LTV greater than 80% c. Is paid upfront on all FHA loans d. Is required on all FHA loans until 20% equity position - Correct Answer Is paid upfront on all FHA loans" "In which of the following instances would a borrower be required to obtain flood insurance? a. The lender determines it will require flood insurance on all conforming loans b. The previous owner had a history of the property flooding c. The appraiser indicates that the property is in a flood zone d. The borrower feels more secure having the additional coverage - Correct Answer The appraiser indicates that the property is in a flood zone" "Appraisals that use the sales comparison approach include which of the following? a. Comparison of value for three similar, recently sold properties b. An analysis of what it would cost to rebuild the property c. Review of recently-listed real estate prices within a specific geographic area d. Comparison of the national average home value against the subject property - Correct Answer Comparison of value for three similar, recently sold properties" "The ratio of the total balance of all mortgage liens against a property to the value is called a. CLTV b. LTV c. HLTV d. TLTV - Correct Answer CLTV Why would a borrower pay discount points in conjunction with his/her loan transaction? a. To increase monthly payments but decrease the amount of interest owed b. To lower their note rate c. To compensate the mortgage broker for its services d. To pay closing costs+ to lower their note rate" "Which of the following best describes the LTV ratio? a. It is the ratio of the borrower's principal loan balance to the appraised value of the property b. It is the ratio of the borrowers monthly housing expense to monthly income c. Ratio of the borrower's total debt to monthly income d. Ratio of the borrower's monthly loan payment to the principal loan balance - Correct Answer It is the ratio of the borrower's principal loan balance to the appraised value of the property" "A borrower asks for the definition of a "discount point" which of the following best describes what a point is in a mortgage transaction? a. Mathematical conversion of a finance charge to APR b. Incentive earned by LO's for locking a certain interest rate c. 1% of the loan amount: points are paid to reduce the rate d. Incremental measurement used for ARM adjustments - Correct Answer 1% of the loan amount: points are paid to reduce the rate" "On which approach do appraiser place the most weight in reaching a value conclusion for conforming loans? a. Sales comp approach b. Income approach c. Cost approach d. Assemblage - Correct Answer Sales Comp Approach" "The loan processor indicates that a 1003 cannot be submitted until the government monitoring section is completed. Which of the following would be provided in this section of the 1003? a. Borrower's name b. Borrower's race, gender and ethnicity c. Age and years of schooling of the borrower d. Type of mortgage and its term - Correct Answer Borrower's race, gender and ethnicity" "The cost approach to appraisal includes which of the following a. Value comp with several comparable properties b. Value of the lot plus the replacement cost of the improvements c. Analysis of revenue generated by the property d. A national comparison of homes of the same stature - Correct Answer Value of the lot plus the replacement cost of the improvements" "PMI is used to serve what purpose? a. To finance a funding fee for a borrower who does not wish to pay upfront b. To cover the cost of settlement services c. To cover the risk of lending to a consumer without a sufficient down payment d. To lower the interest rate for the period during which PMI is paid - Correct Answer To cover the risk of lending to a consumer without a sufficient down payment" "VA loans require a funding fee under all of the following conditions, except: a. The veteran is disabled b. Veteran makes a 10% down payment c. Veteran is using his eligibility for the first time d. Veteran is using his eligibility for the second time - Correct Answer The veteran is disabled" "Which of the following mortgage broker policies would violate fair lending laws? a. Refusing to originate loans in an earthquake zone b. Refusing to originate loans in ZIP codes known to be economically depressed c. Doing business with only customers who are seeking loans for residential properties d. Originating loans only for customers who live within 100 miles of the broker's location - Correct Answer Refusing to originate loans in ZIP codes known to be economically depressed" "The Government National Mortgage Association is also known as ____ or _____ a. Greta Mae: GNA b. Ginger May: GNAM c. Ginnie Mae: GNMA d. Georgia Mac: GNMC - Correct Answer Ginnie Mae: GNMA" "Cindy is a LO who specializes in refinances. A local appraiser calls her and promises to deliver any appraisal that she needs for her refinances, telling Cindy "all you have to do is let me know the valuations that you need!" What are Cindy's obligations to do under the appraisal rules? a. Her company must order a new appraisal for any valuation performed by that appraiser b. She must call the appraiser and ask that he refer the assignment to another appraiser who does not have a conflict of interest c. She must report the actions of the appraiser to the state appraiser and licensing authorities and submit a request for a new appraisal d. She has no particular obligations - Correct Answer She must report the actions of the appraiser to the state appraiser and licensing authorities and submit a request for a new appraisal" "A straw buyer is a. A buyer who is a victim of identity theft b. A buyer who intends to purchase property but does not intend to occupy it c. A buyer who accepts a fee for the use of his or her social security number and other personal information on a mortgage application d. A buyer who uses another individual's identity in order to obtain a mortgage for which he or she is not eligible - Correct Answer A buyer who accepts a fee for the use of his or her social security number and other personal information on a mortgage application" "Advertising an attractive interest rate that a mortgage professional is not at liberty to offer is a major ethical offense and a violation of: a. The equal credit opportunity act b. Regulation x c. Regulation z d. The fair credit reporting act - Correct Answer Regulation Z" "For a fee, a real estate licensee offers a mortgage company the names and telephone numbers of all the people who attended an open house, but the mortgage company does not accept the offer. Who is in violation of RESPA? a. The real estate licensee b. The mortgage company c. Both the mortgage company and the real estate licensee d. Neither the mortgage company nor the real estate licensee - Correct Answer The real estate licensee" "A title insurance company provides a computer to a mortgage broker. The computer is used to transmit electronic documents from the mortgage broker's office to the title insurance company. Who is in violation of RESPA? a. The title insurance company b. Neither the title insurance co nor the mortgage broker c. The mortgage broker d. Both the title insurance company and the mortgage broker - Correct Answer Both the title insurance company and the mortgage broker" "Which of the following describes an air loan? a. A loan that is repeatedly refinanced with no benefit to the borrower b. A fictitious borrower obtains a mortgage and secures it with fictitious property c. A loan is obtained with inflated property values d. A loan that is presented to the borrower with hidden fees - Correct Answer A fictitious borrower obtains a mortgage and secures it with fictitious property" "According to fair lending laws, age may be considered as a factor in denying a loan applicant if: a. The applicant is too young or too old to understand the terms of the contract b. The applicant is too young to have accumulated savings and requires a gift from his or her parents in order to make a down payment c. The applicant is too old to survive the term of the loan d. The applicant is too young to enter into a contract - Correct Answer The applicant is too young to enter into a contract" "For which of the following reasons would it be permissible to refuse to take an application from a potential borrower? a. Borrower has alluded that he/she is submitting false documents b. Lender does not accept applications from the residential area where the borrower lives c. The LO does not click with the applicant and would rather not do business with him d. The applicant has poor credit and the LO does not feel there is any way he will meet lender guidelines - Correct Answer Borrower has alluded that he/she is submitting false documents" "A title company advertises in a real estate company's publication by paying the required fees. Who is in violation of RESPA? a. Neither parties b. Title company c. Both parties d. Real estate company - Correct Answer Neither parties" "Which of the following transactions would be exempt from the ATR rule? a. An open-end HELOC b. A refi transaction c. A first lien on a home d. Mortgage secured by a vacation home - Correct Answer An open-end HELOC" "A Hazard insurance company hosts a dinner for the employees of a mortgage broker. The designated broker encourages the employees to send clients to the insurance company. Who has violated RESPA? a. Neither parties b. Mortgage broker c. Both parties d. Hazard insurance company - Correct Answer Both parties" "Mike Maxwell is a small business owner who is applying for a refi on his home. During the loan application interview, he asks how much income he needs to show in order to qualify for the loan. What is the most ethical response? a. "as much as possible - what do you claim on your tax returns?" b. You should not show less than $4,500 a month c. Let's review your tax returns and bank statements to determine your income d. Let me ask the underwriter what you need to qualify - Correct Answer Let's review your tax returns and bank statements to determine your income" "Which of the following statements offers the most accurate description of the effect using a "trigger term" in an advertisement for a loan? a. Use of a trigger term requires clear and conspicuous disclosure of HUD-approved housing counselors b. Requires the disclosure of all the lending terms of the mortgage described in the advertisement c. Violates Regulation Z d. Requires the clear and conspicuous disclosure of other relevant terms with equal prominence - Correct Answer Requires the clear and conspicuous disclosure of other relevant terms with equal prominence" "A mortgage broker has 49% ownership in a title company. The mortgage broker refers business to the title company and also provides written disclosures to the borrower detailing the business relationship. The written disclosure also makes it clear that the borrower is not required to use the services of the title company. Who is in violation of RESPA? a. The title company b. The mortgage broker c. Neither the title co nor the mortgage broker d. Both the title insurance company and the mortgage broker - Correct Answer Neither the title co nor the mortgage broker" "This involves conspiratorial involvement of individuals using the mortgage market to benefit financially from criminal behavior. a. Fraud for housing b. Identity theft c. Money laundering d. Fraud for profit - Correct Answer Fraud for profit" "A mortgage broker is required to provide an opt-out notice in which of the following cases? a. The mortgage broker only shares non-public info with affiliates b. Only allows its LO's and the employee supervising the company's security program to access non-public personal info c. The mortgage broker only shares nonpublic personal info with third parties who perform settlement services for the customer d. The mortgage broker shares nonpublic personal information with non-affiliated third parties - Correct Answer The mortgage broker shares nonpublic personal information with non-affiliated third parties" "The obligation for mortgage brokers to serve as the agent or the fiduciary of the borrowers is: a. Imposed by the S.A.F.E. Mortgage Licensing Act b. Imposed by state licensing laws in every state c. Imposed by the Dodd-Frank Act d. Imposed by state licensing laws in some states - Correct Answer Imposed by state licensing laws in some states" "A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct? a. The fee is legal, as long as the brokers have a pre-existing agreement in place b. The fee is legal, as long as the brokers do not have a pre-existing agreement in place for payment of referral fees c. The fee is illegal, unless the brokers provide a disclosure to the client d. The fee is illegal - Correct Answer The fee is illegal" "This occurs when income or other qualifying information is falsified in order to ensure that a consumer qualifies for a mortgage loan he or she may not actually be able to afford a. Fraud for profit b. Fiduciary fraud c. Fraud for housing d. Air lending - Correct Answer Fraud for housing" "An advertisement that states, "Refinance and we can save you up to $300 per month!" is: a. A TILA violation only if the loans are not available b. A TILA violation bc it targets struggling homeowners c. Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true d. A violation of TILA - Correct Answer Not a violation of TILA if it provides information on APRs and payments with equal prominence, as long as the statement is true" "Basing a loan approval on only the appraised value of a borrower's collateral and failing to consider repayment ability constitutes which of the following ethical violations? a. Discrimination b. Redlining c. Appraisal fraud d. Equity-based lending - Correct Answer Equity-based lending" "Property flipping occurs when: a. Someone accepts a fee to falsely claim ownership to a property b. The title of a property is passed to a family member c. A property is bought and resold within a very short period of time d. Someone secures a loan with fictitious property - Correct Answer A property is bought and resold within a very short period of time" "A mortgage broker enters into a rental agreement with a real estate agent where the rent for the office space is at the prevailing market price. Who has violated RESPA? a. The mortgage broker b. The real estate agent c. Both parties d. Neither parties - Correct Answer Neither parties" "Which of the following compensation practices is allowed under the LO Compensation Rule? a. Allowing a mortgage broker to accept an origination fee from a borrower and a commission from the lender that funds the loan b. Implementing a policy that encourages loan originators to originate refi's without prepayment penalties c. Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan d. Paying originators a commission for originating a loan at a higher rate than the rate for which the loan applicant qualified - Correct Answer Paying all originators a 3% commission for every loan originated, regardless of the loan amount or the terms and conditions of the loan" "It is unethical and illegal to use yield spread premiums for any reason other than: a. To earn an additional commission on a loan origination b. To enable a creditor to earn more on a mortgage transaction c. To help a borrower pay for settlement costs d. To enable a loan originator to meet a monthly sales quota - Correct Answer To help a borrower pay for settlement costs" "In which of the following cases would it be permissible for a mortgage professional to withhold compensation to an appraiser? a. The appraiser has provided valuations that used inappropriate comparables, included errors and were generally inaccurate b. The appraiser has provided extensive paperwork to substantiate valuation results c. The appraiser has failed to change information in a valuation at the request of the mortgage professional, bc he or she says it would make the report inaccurate d. The appraiser has consistently provided valuations that were not as high as the mortgage professional hoped they would be - Correct Answer The appraiser has provided valuations that used inappropriate comparables, included errors and were generally inaccurate" "If a mortgage broker were to take on the role of a borrower's agent, the mortgage professional is said to have a. A financial partnership b. A fiduciary duty c. A fidelity agreement d. Power of attorney - Correct Answer A fiduciary duty" "Which of the following requires mortgage professionals to implement and maintain security protocols to ensure the confidentiality of consumer information? a. The MAP Rule b. The Safeguards Rule c. The ATR rule d. The Confidentiality Rule - Correct Answer The Safeguards Rule" "The GLB Act protects the privacy of nonpublic personal info using all of the following methods, except: a. Requiring financial institutions, including mortgage companies to obtain permission for the use and sharing of consumer's non-public personal information b. Advising consumers of the financial institution's policies regarding the use and exchange of personal information c. Offering consumers, the right to opt out of the sharing of nonpublic personal information d. Requiring a security program for the protection of nonpublic personal info - Correct Answer Requiring financial institutions, including mortgage companies to obtain permission for the use and sharing of consumer's non-public personal information" "Prior to recent regulatory changes, "yield spread premium" was traditionally defined as: a. A fee split between service providers for sharing settlement responsibilities b. A fee paid by borrowers to lenders for lowering the note rate on their loan transaction c. An amount paid by a lender to a LO for closing a loan at a rate higher than the rate for which the borrower qualifies d. Income available to a settlement service provider who has entered into a legitimate affiliated business arrangement - Correct Answer An amount paid by a lender to a LO for closing a loan at a rate higher than the rate for which the borrower qualifies" "A real estate company accepted flyers from a mortgage company and made them available to prospective buyers during an open house. Who has violated RESPA? a. Both parties b. Neither parties c. The mortgage company d. The real estate company - Correct Answer Neither parties" "This 2009 federal law was put in place to establish increased enforcement of anti-mortgage fraud laws. a. The mortgage fraud prevention act b. The fraud enforcement and recovery act c. The home ownership and equity protection act d. The fair lending assurance act - Correct Answer The fraud enforcement and recovery act" "Which of the following statements would be permissible when communicating with an appraiser? a. "your last appraisal did not meet the minimum value we expected. We are going to have to wait on paying your invoice until we obtain a second opinion" b. " I need this property to value at a minimum of $200,000" c. "can you explain why this property is valued so low, compared to the current market?" d. "your appraisals have been coming in lower than expected lately. We are going to start using another appraiser." - Correct Answer "can you explain why this property is valued so low, compared to the current market?"" "According to federal fair lending laws, which of the following cannot be considered when qualifying an applicant for a loan? a. A disables applicant's credit shows several instances of 60-90 day late payments b. Female applicant is pregnant and may not continue working once baby is born c. A female applicant's credit report and application show gaps of several months between jobs over the past two years d. A minority applicant who does not have sufficient funds for a down payment - Correct Answer Female applicant is pregnant and may not continue working once baby is born" "Advertising an attractive interest rate that a mortgage professional is not at liberty to offer is a major ethical offense and a violation of: a. The equal credit opportunity act b. The fair credit reporting act c. Regulation x d. Regulation z - Correct Answer Regulation z" "Which of the following constitutes a "thing of value" that would violate RESPA? a. A mortgage broker gives a paid vacation to all its employees as a holiday bonus b. Mortgage broker pays an insurance company for mortgage insurance c. A LO gives an airline travel voucher to an attorney for introducing a customer d. A LO pays a title company for title search services - Correct Answer A LO gives an airline travel voucher to an attorney for introducing a customer" "In states with an agency requirement, which of the following practices could violate a mortgage broker's duty to serve as a borrower's fiduciary? a. Failing to secure more than one appraisal for a refi b. Failing to pay third-party service providers within 30 days from their date of service c. Failing to submit an FHA loan application at the borrower's request d. Advising a borrower who wants an FHA loan that he or she should apply for a conventional/conforming loan - Correct Answer Failing to submit an FHA loan application at the borrower's request" "It is permissible for loan processors to a. Contact loan applicants in order to obtain info needed to process a loan b. Provide counseling to loan applicants in order to help them choose the best product c. Discuss the advantages and disadvantages of various loan products with a loan applicant d. Negotiate loan rates and terms with a loan applicant - Correct Answer Contact loan applicants in order to obtain info needed to process a loan"