SAFE MLO-NMLS practice questions and answerers latest updated

Taking advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower and other prohibited acts is called __________________________. - ANSWER-Predatory Lending. RESPA-Real Estate Settlement Procedures Act - ANSWER-The Federal Statute that deals with the settlement of residential mortgage loans. RESPA's section 9 Prohibits - ANSWER-Home sellers from requiring home buyers to purchase title insurance from a particular company providing title services. The Dodd-Frank Act modifies ECOA to require a creditor to furnish a copy of an appraisal developed in connection with a first mortgage_____________________ and absolutely not later than ________ business days prior to closing. - ANSWER-upon completion and 3 business days TIL (Truth In Lending Disclosure) & GFE (Good Faith Estimate) - ANSWER-Per the Dodd Frank Act, a single disclosure form combines these 2 statements. Per the Dodd-Frank Acvt, to be a "qualified mortgage" total points and fees may not exceed ________% of the total loan amount. - ANSWER-3% (three percent) Per a provision of the Dodd-Frank Act mortgage lenders are to determine that a borrower has a reasonable ability to repay a loan. Does this provision apply to all loans or just owner occupied loans? - ANSWER-All loans, whether owner occupied or not. A loan subject to HOEPA allows prepayment penalties for the first ______ years of the loan. - ANSWER-2 (two) years Per the Dodd-Frank Act an abusive act would include which of the following: 1. One that materially interferes with the consumers ability to understand the product or service. 2. One that take unreasonable advantage of a consumers' lack of understanding. 3. One that takes unreasonable advantage of the consumer's reasonable reliance on the MLO. - ANSWER-All three would be considered abusive acts. Per the Dodd-Frank Act if an MLO receives compensation directly from a consumer, up to how much additional compensation may be received from a lender in the same transaction? - ANSWER-$0.00, dual compensation is not allowed. Compensation must be borrower paid or lender paid. What kinds of reasons are necessary for a lender to take adverse action with regard to a borrower? - ANSWER-Specific reasons. Adverse action means ______________________. - ANSWER-A denial or revocation of credit. Also, a change in the terms of an existing credit arrangement or a refusal to grant credit in substantially the amount or terms requested. Per Regulation B, Lenders should retain certain records for _____________ months. - ANSWER-25 Months Because of the impact of the Dodd-Frank Act on a second mortgage, an APR that exceeds the ________ by more than _____% is the trigger that defines a high cost loan. - ANSWER-APOR ( Average Prime Offer Rate), 8.5% Regulation C is known as ________________________. - ANSWER-HMDA, The Home Mortgage Disclosure Act. What is the purpose of HMDA? - ANSWER-The HMDA determines whether financial institutions are serving the housing needs of their communities. It also identifies patterns of discriminatory lending. Under what circumstances can a lender with an Affiliated Business Arrangement require a borrower to use a specific third party service provider? - ANSWER-If there are no kickback or referral fees and the service provider is an attorney, credit reporting agency or appraiser the lender can require that the borrower uses the provider If a transfer of servicing occurs, the _______________ must provide a servicing transfer statement not less than ________ days before the transfer occurs. - ANSWER-Servicer, 15 (fifteen) days. An individual who fails the MLO written exam 3 times must wait _________ months to retake the exam. - ANSWER-6 (Six) Months Per RESPA, an annual escrow statement is required to ______________. - ANSWER-determine shortages and surpluses in the escrow account. When must the Servicing Disclosure Statement be provided to the borrower? - ANSWER-Within 3 (three) Business Days of the Application. Any party involved in a federally covered loan that submits fraudulent information is subject to a fine of up to $___________ and up to __________years in prison. - ANSWER-$1,000,000 (one million dollars), 30 years in prison Per RESPA, an escrow cushion is limited to a maximum of _________ of the annual payments and surpluses over $_____must be refunded within ________ days. - ANSWER-1/6th (2 months), $50 (fifty dollars), 30 (thirty) days. A seller takes back a $100,000 PMM @ 5.5% interest. This straight note will balloon after 10 years of payments. How much is the balloon payment? - ANSWER-$100,000 + interest for the last month. A straight note (term mortgage) is a non-amortizing interest only mortgage. The balloon would include the entire principal plus the last month's interest, as interest is paid in arrears. FNMA conforming debt ratios equal ______/________. - ANSWER-28%, maximum housing expense/36% maximum total obligations HOEPA stands for ___________________________. - ANSWER-Home Ownership and Equity Protection Act. RESPA applies to what type of properties? - ANSWER-1-4 Unit Residential Properties On a conventional mortgage loan, who makes the final decision regarding approval, denial or counter offer? - ANSWER-The Underwriter The Civil Rights Act of 1866, prohibited public and private racial discrimination in any property transaction and was expanded in 1968 in which act? - ANSWER-The Civil Rights Act of 1968, also known as Title VIII of the Civil Rights Act , Also known as Title VIII, Also Known as The Fair Housing Act Of the following, which is not required to be disclosed on the TIL statement? The (1) APR, (2) Note Rate, (3) Finance Charge, (4) Amount Financed or (5) Total of Payments - ANSWER-The note rate is NOT required. Which act of 1968 provides guidelines and restrictions regarding the financing, selling and renting of real property? - ANSWER-The Civil Rights Act of 1968. AKA, The Civil Rights Act, AKA Title VIII, AKA The Fair Housing Act Which act prohibits asking questions regarding child bearing intentions or birth control practices? - ANSWER-ECOA/Regulation B, the Equal Credit Opportunity Act Based on objective criteria regarding the condition and value of the property or area, may a lender deny loans in neighborhoods where property values are declining? - ANSWER-YES, loans can be denied in a geographic area, but not for discriminatory reasons relative to the population of the area. A teaser rate occurs in an ARM when the starting rate is less than the _____________. - ANSWER-Fully indexed rate. Per ECOA, is it true that while a lender must consider reliable alimony, child support or separate maintenance payments as income, the applicant is not required to disclose such income? - ANSWER-Yes, it is true. Only income intended to be used for qualifying has to be disclosed and verified. Of the following, who make a flood zone determination? 1. The Lender 2. The Appraiser 3. The Surveyor 4. The Underwriter - ANSWER-2. The Appraiser makes the flood zone determination. Force-placed insurance protects the _________________. a. Lender b. borrower c. both - ANSWER-a. lender FHA requires mortgage insurance on all loans for a period of ______________ years. - ANSWER-5 (five) years. A property sells for $300,000 and requires a 20% down payment. The origination fee will be two points. How much is the origination fee? - ANSWER-$4,800, $300,000 X 20% = $60,000 down payment $300,000 X 80% LTV = $240,000, $240,000 X 2% = $4,800 HOEPA prohibits ____________________ amortization. - ANSWER-Negative. Increasing the principal balance, usually because of not paying sufficient interest which then is added to the principal balance of the loa. How often does the external Do Not Call list get updated? - ANSWER-Every 3 months or 90 days. What does VA stand for? - ANSWER-The Department of Veteran's Affairs The three functions of a direct endorser include ______________ , __________________ and ________________. - ANSWER-Originate, underwrite and close loans. What is the down payment requirement on a VA guaranteed loan? - ANSWER-0, Zero. There is no down payment required. The APR is also know at the _____________ rate. - ANSWER-Effective rate. The term of a loan effects the APR. The longer the term the ______________ the APR. - ANSWER-Lower. Business days exclude ________________ and _________________. - ANSWER-Sundays and Federal Holidays. Per the TILA the three business days Right of Rescission applies to the _____________________ of a ______________________ dwelling. - ANSWER-The refinance of a primary residence. GLBA stand for the ________________. - ANSWER-GRAMM-LEACH-BLILEY ACT A "qualified" mortgage is one with points and fees not exceeding ______________% of the loan amount, do not have terms that exceed __________________ year and do not result in _________________ amortization. - ANSWER-3%, 30 years and negative amortization On qualified mortgages, prepayment penalties are prohibited except for some _____________ loans. - ANSWER-Fixed rate With regard to a credit score, the Dodd-Frank Act amended the FCRA to require creditors to provide the score to a consumer at $ ______________ cost. - ANSWER-$0, no charge From a banks perspective, the term that describes depositors withdrawing their funds is _______________________. - ANSWER-Disintermediation What is a 360/180 loan? - ANSWER-This loan would require payments as if amortized over 30 years but will become due or balloon in 15 years. In a fully amortizing loan the principle portion of the payment ____________________ and the interest portion _________________. - ANSWER-Principle portion increases and interest portion decreases. The name of the loan used to complete construction is a ______________________. - ANSWER-Gap Loan (sometimes bridge loan). An interest only loan is also called a ________________ mortgage or ____________________ note. - ANSWER-Term mortgage or a straight note The term that describes a banks gathering of funds from depositors for the sake of investing the combined funds is ________________. - ANSWER-Intermediation Regulation B is also known as __________________________. - ANSWER-ECOA, The Equal Credit Opportunity Act. Refusing to make a loan in a specific area to exclude a specific class of people is called _________________________. - ANSWER-Redlining When inquiring about the marital status, what are the only three acceptable categories? - ANSWER-Married, unmarried or separted If an individual place a phone number on a Do-Not-Call list, how frequently does their entry have to be renewed to stay active? - ANSWER-Never, per the Do-Not-Call Improvement Act of 2007 which amended the original Telemarketing Sales Rule According to FACTA, any person who regularly extends, renews or continues credit is a ______________________. - ANSWER-Creditor A _________________ is someone who allows his/her name and personal details to be used to obtain a mortgage loan for a property he/she has no intention of inhabiting. - ANSWER-Straw Buyer The Red Flag Rules were created by the FTC pursuant to FACTA. They are primarily concerned with ______________________. - ANSWER-Identity Theft The Federal Fair Housing Act of 1968 prohibits discrimination in residential credit but ____________________ is not protected. - ANSWER-Age The HMDA enacted by Congress in 1975 is also known as Regulation ______________. - ANSWER-C, The Home Mortgage Disclosure Act, Regulation C The HMDA deals with institutions with over $________________ in assets. - ANSWER-$10,000,000; Ten Million Dollars A __________________ disclosure is required to be provided to the borrower when the referring provider has greater than 1% ownership interest in the business being referred. - ANSWER-AfBA, Affiliated Business Arrangement Disclsoure An annual escrow analysis is required by which Federal Law? - ANSWER-RESPA governs all settlement costs including the collection and disbursement of escrows. The loan product that utilizes an interest rate that remains the same for the life of the loan is called ___________________. - ANSWER-A fixed rate mortgage What is the name of the Act that entitles a consumer to a free copy of their credit report if credit is denied based on information from their report? - ANSWER-FCRA, The Fair Credit Reporting Act What type of loan would commonly use an extended rate lock? - ANSWER-A new construction loan. While banks remain the largest source of investment funds their increased participation in long term home mortgage lending is possible because of a change in federal banking regulations. What is that change? - ANSWER-Reserve requirements have been reduced and first lien home mortgages at less than 80% LTV are in the lowest risk category. The banks increased participation in these loans still leave funds available for other loans and investments. The adjustable component use to compute the note rate on an ARM is called the _____________________. - ANSWER-Index According to USDA Rural Development Programs a small town can include up to ________________ people. - ANSWER-20,000 people What kind of buy down would reduce the note rate? - ANSWER-A permanent buy down. The SAFE act is a key element of (the) _______________________. - ANSWER-HERA, Housing and Economic Recovery Act of 2008 A Real Estate Company accepted and distributed flyers from a Mortgage Company to Prospective Clients. Which Law(s) if any have been violated and by who? - ANSWER-No laws have been violated by any party. (per RESPA, there was no agreement to provide referrals or something of value) The FHA debt ratios are _____________/__________________. - ANSWER-31/43. 31% Primary Housing Expense (Front End Ratio) and 43% Total Obligations (Back End Ratio) The SAFE Act uses unique identifiers instead of _______________. - ANSWER-Social Security Numbers Lenders report detailed loan information and demographic information because of which of the following acts? 1. GLBA 2.HMDA 3.RESPA 4.TIlA - ANSWER-HMDA, The Home Mortgage Disclosure Act Three people own a primary residence as joint owners with rights of survivorship. At the closing of their refinance, each was given a notice of the right to rescind. How of the three must exercise that right to cancel the funding? - ANSWER-One, any one of the three can rescind and cancel the refinance transaction Section 8 of RESPA prohibits _____________________. - ANSWER-Kickbacks for referrals. A refinance of the borrower's residence that closes on Monday will fund on _________________________. - ANSWER-Friday (three business day right of rescission period ends after midnight on Thursday) Per RESPA the maximum origination fee that may be charged on a loan is ____________________. - ANSWER-Unknown, RESPA requires disclosure of origination fees but does not set the maximum fee that can be charged. Per the Dodd-Frank Act does a "qualified mortgage" provide a "safe harbor" regarding compliance with the ability-to-repay requirement? - ANSWER-Yes Relative to the Do-Not-Call registry a company may call a consumer for up to __________________________ months after the consumer makes an inquiry or submits an application to the company. - ANSWER-3 Months There are three (3) groups of laws under the CFPB includig 1. financial disclosure, 2. privacy, protection and consumer identification and 3. __________________________. - ANSWER-3. Prohibition of Predatory Lending The 3/7/3 Rule is a provision of the _______________ Act related to required disclosures and waiting periods. - ANSWER-TILA, Truth in Lending Act The illegal practice of inducing owners to sell their homes by suggesting that the ethnic or racial composition of the neighborhood is changing is called _____________________________. - ANSWER-Blockbusting The borrower's ability to pay a loan is referred to as _________________________. - ANSWER-Capacity The Fair Housing Act of 1968 protects against discrimination based on race, color, religion, sex, national origin, disability and __________________________. - ANSWER-Familial Status Which law requires that all mortgage loan originators pass a national licensing exam? - ANSWER-The SAFE Act, The Secure and Fair Enforcement for the mortgage licensing act of 2008. Two sources of funds that may be used for a down payment on an FHA insured loan include ___________ and _______________. - ANSWER-(1) A gift from a family member and (2) down payment assistance grant The documents issues by the VA which state the value of the subject property based on an approved appraisal is called the _______________________. - ANSWER-CRV, Certificate of Reasonable Value or NOV, Notice of Value Instead of notifying a borrower with the actual details of adverse action taken within 30 days of the loan application, the lender notified the borrower that he has the right to request the actual details. Is that acceptable per ECOA's guidelines? - ANSWER-Yes, When adverse action is taken, actual details or the right to those details has to be