NATIONAL AND UST MORTGAGE
PRACTICE EXAM 2: MULTIPLE
CHOICE QUESTIONS AND CORRECT
ANSWERS
WhichA2ofA2theA2followingA2feesA2wouldA2NOTA2beA2usedA2inA2calculatingA2theA2APR?
ClosingA2fee
UnderwritingA2fee
MortgageA2insurance
TitleA2insuranceA2-A2Ans--
TheA2answerA2isA2titleA2insurance.A2TheA2annualA2percentageA2rateA2(APR)A2representsA2t
heA2relationshipA2ofA2theA2totalA2financeA2chargeA2toA2theA2totalA2amountA2financed,A2asA2
aA2yearlyA2rate.A2ItA2isA2notA2theA2sameA2asA2theA2nominalA2rateA2(i.e.,A2theA2interestA2rateA
2shownA2inA2theA2note),A2asA2itA2includesA2allA2financeA2charges,A2notA2justA2interest.A2Am
ongA2otherA2charges,A2financeA2chargesA2includeA2points,A2loanA2fees,A2andA2mortgageA2i
nsuranceA2premiums,A2butA2notA2titleA2insuranceA2premiums.
RichieA2RichA2hasA2beenA2approvedA2forA2aA290%A2loan.A2RichieA2isA2underA2contractA2toA
2purchaseA2aA2homeA2forA2$400,000A2andA2putA2$5,000A2earnestA2moneyA2downA2withA2th
eA2contract.A2IfA2Richie'sA2lenderA2isA2chargingA21%A2origination,A21%A2discount,A2andA2th
eA2titleA2companyA2feesA2totalA2$1,350,A2howA2muchA2doesA2RichieA2needA2toA2bringA2toA2
closing?
$49,350
$46,850
$43,550
$48,550A2-A2Ans--
TheA2answerA2isA2$43,550.A290%A2LTVA2meansA2RichieA2willA2needA2toA2bringA210%A2ofA2t
heA2purchaseA2price,A2orA2$40,000,A2toA2closing,A2minusA2theA2$5,000A2heA2alreadyA2paid
A2asA2earnestA2money.A2ToA2thisA2heA2mustA2addA21%A2ofA2theA2$360,000A2loanA2amount,
A2orA2$3,600,A2forA2theA21%A2originationA2fee,A2andA2anA2additionalA21%A2ofA2theA2loanA2a
mountA2($3,600)A2forA2theA2discount.A2Finally,A2heA2mustA2addA2theA2$1,350A2titleA2charge
:A2$40,000A2−A2$5,000A2+A2$3,600A2+A2$3,600A2+A2$1,350A2=A2$43,550.
A(n)A2_____A2isA2anA2individualA2whoA2acceptsA2aA2feeA2toA2falselyA2claimA2ownershipA2toA
2aA2property.
StrawA2buyer
AirA2buyer
StrawA2seller
AirA2sellerA2-A2Ans--
TheA2answerA2isA2strawA2seller.A2AA2strawA2sellerA2isA2aA2personA2whoA2falselyA2claimsA2to
A2ownA2aA2propertyA2beingA2soldA2(whichA2mayA2orA2mayA2notA2exist)A2andA2isA2typicallyA2p
aidA2inA2exchangeA2forA2doingA2so.
, AA2borrowerA2wishesA2toA2refinanceA2theirA2home,A2whichA2appraisesA2forA2$450,000.A2IfA2
theirA2loanA2amountA2isA2$375,000,A2whatA2isA2theA2LTV?
75%
83.3%
80%
73.3%A2-A2Ans--TheA2answerA2isA283.3%.A2ToA2getA2theA2loan-to-
valueA2(LTV)A2ratio,A2divideA2theA2loanA2amountA2byA2theA2propertyA2value:A2$375,000A2/
A2$450,000A2=A20.833A2=A283.3%
WhichA2ofA2theA2followingA2canA2beA2usedA2byA2stateA2regulatorsA2toA2determineA2whether
A2aA2licenseeA2demonstratesA2theA2financialA2responsibilityA2andA2generalA2fitnessA2toA2co
mmandA2theA2confidenceA2ofA2theA2communityA2toA2engageA2inA2theA2mortgageA2business
?
CreditA2report,A2netA2worth,A2paymentA2ofA2federalA2licensingA2fees
CreditA2report,A2netA2worth,A2suretyA2bond,A2paymentA2intoA2aA2stateA2fund
CreditA2report,A2suretyA2bond,A2paymentA2ofA2exemptionA2fees
CreditA2report,A2paymentA2intoA2aA2professionalA2fund,A2$1A2millionA2creditA2lineA2-A2Ans--
TheA2answerA2isA2creditA2report,A2netA2worth,A2suretyA2bond,A2paymentA2intoA2aA2stateA2fu
nd.A2TheA2S.A.F.E.A2ActA2mandatesA2thatA2statesA2includeA2aA2minimumA2netA2worthA2req
uirementA2orA2suretyA2bondA2requirementA2forA2applicantsA2orA2requireA2theA2applicantA2to
A2payA2intoA2aA2stateA2recoveryA2fund.A2LicensingA2requirementsA2alsoA2includeA2criminalA
2historyA2andA2creditA2backgroundA2checks,A2includingA2aA2creditA2report.A2TheseA2areA2all
A2factorsA2usedA2toA2establishA2aA2licensee'sA2financialA2responsibilityA2andA2generalA2fitn
ess.
CarrieA2isA2obtainingA2aA290%A2loanA2forA2theA2purchaseA2ofA2herA2newA2home,A2whichA2s
heA2isA2buyingA2forA2$225,000.A2OneA2discountA2pointA2forA2herA2loanA2wouldA2beA2equalA2
to:
$1,000
$2,025
$2,000
$2,250A2-A2Ans--
TheA2answerA2isA2$2,025.A2OneA2discountA2pointA2isA2equalA2toA21%A2ofA2theA2loanA2amou
nt.A2InA2thisA2case,A290%A2×A2$225,000A2=A2$202,500.A21%A2×A2$202,500A2=A2$2,025.
AccordingA2toA2federalA2law,A2whichA2ofA2theA2followingA2circumstancesA2wouldA2requireA2
theA2lenderA2toA2dropA2aA2borrower'sA2privateA2mortgageA2insuranceA2(PMI)A2withoutA2the
A2borrower'sA2request?
TheA2currentA2principalA2balanceA2isA280%A2ofA2theA2originalA2purchaseA2price
TheA2currentA2principalA2balanceA2isA278%A2ofA2theA2originalA2purchaseA2price
TheA2currentA2principalA2balanceA2isA275%A2ofA2theA2currentA2appraisedA2value
TheA2currentA2principalA2balanceA2isA270%A2ofA2theA2currentA2appraisedA2valueA2-A2Ans--
TheA2answerA2isA2theA2currentA2principalA2balanceA2isA278%A2ofA2theA2originalA2purchaseA2
price.A2FederalA2lawA2requiresA2automaticA2terminationA2ofA2PMIA2onA2theA2dateA2whenA2t
heA2principalA2balanceA2isA2scheduledA2toA2reachA278%A2ofA2theA2originalA2purchaseA2pric
PRACTICE EXAM 2: MULTIPLE
CHOICE QUESTIONS AND CORRECT
ANSWERS
WhichA2ofA2theA2followingA2feesA2wouldA2NOTA2beA2usedA2inA2calculatingA2theA2APR?
ClosingA2fee
UnderwritingA2fee
MortgageA2insurance
TitleA2insuranceA2-A2Ans--
TheA2answerA2isA2titleA2insurance.A2TheA2annualA2percentageA2rateA2(APR)A2representsA2t
heA2relationshipA2ofA2theA2totalA2financeA2chargeA2toA2theA2totalA2amountA2financed,A2asA2
aA2yearlyA2rate.A2ItA2isA2notA2theA2sameA2asA2theA2nominalA2rateA2(i.e.,A2theA2interestA2rateA
2shownA2inA2theA2note),A2asA2itA2includesA2allA2financeA2charges,A2notA2justA2interest.A2Am
ongA2otherA2charges,A2financeA2chargesA2includeA2points,A2loanA2fees,A2andA2mortgageA2i
nsuranceA2premiums,A2butA2notA2titleA2insuranceA2premiums.
RichieA2RichA2hasA2beenA2approvedA2forA2aA290%A2loan.A2RichieA2isA2underA2contractA2toA
2purchaseA2aA2homeA2forA2$400,000A2andA2putA2$5,000A2earnestA2moneyA2downA2withA2th
eA2contract.A2IfA2Richie'sA2lenderA2isA2chargingA21%A2origination,A21%A2discount,A2andA2th
eA2titleA2companyA2feesA2totalA2$1,350,A2howA2muchA2doesA2RichieA2needA2toA2bringA2toA2
closing?
$49,350
$46,850
$43,550
$48,550A2-A2Ans--
TheA2answerA2isA2$43,550.A290%A2LTVA2meansA2RichieA2willA2needA2toA2bringA210%A2ofA2t
heA2purchaseA2price,A2orA2$40,000,A2toA2closing,A2minusA2theA2$5,000A2heA2alreadyA2paid
A2asA2earnestA2money.A2ToA2thisA2heA2mustA2addA21%A2ofA2theA2$360,000A2loanA2amount,
A2orA2$3,600,A2forA2theA21%A2originationA2fee,A2andA2anA2additionalA21%A2ofA2theA2loanA2a
mountA2($3,600)A2forA2theA2discount.A2Finally,A2heA2mustA2addA2theA2$1,350A2titleA2charge
:A2$40,000A2−A2$5,000A2+A2$3,600A2+A2$3,600A2+A2$1,350A2=A2$43,550.
A(n)A2_____A2isA2anA2individualA2whoA2acceptsA2aA2feeA2toA2falselyA2claimA2ownershipA2toA
2aA2property.
StrawA2buyer
AirA2buyer
StrawA2seller
AirA2sellerA2-A2Ans--
TheA2answerA2isA2strawA2seller.A2AA2strawA2sellerA2isA2aA2personA2whoA2falselyA2claimsA2to
A2ownA2aA2propertyA2beingA2soldA2(whichA2mayA2orA2mayA2notA2exist)A2andA2isA2typicallyA2p
aidA2inA2exchangeA2forA2doingA2so.
, AA2borrowerA2wishesA2toA2refinanceA2theirA2home,A2whichA2appraisesA2forA2$450,000.A2IfA2
theirA2loanA2amountA2isA2$375,000,A2whatA2isA2theA2LTV?
75%
83.3%
80%
73.3%A2-A2Ans--TheA2answerA2isA283.3%.A2ToA2getA2theA2loan-to-
valueA2(LTV)A2ratio,A2divideA2theA2loanA2amountA2byA2theA2propertyA2value:A2$375,000A2/
A2$450,000A2=A20.833A2=A283.3%
WhichA2ofA2theA2followingA2canA2beA2usedA2byA2stateA2regulatorsA2toA2determineA2whether
A2aA2licenseeA2demonstratesA2theA2financialA2responsibilityA2andA2generalA2fitnessA2toA2co
mmandA2theA2confidenceA2ofA2theA2communityA2toA2engageA2inA2theA2mortgageA2business
?
CreditA2report,A2netA2worth,A2paymentA2ofA2federalA2licensingA2fees
CreditA2report,A2netA2worth,A2suretyA2bond,A2paymentA2intoA2aA2stateA2fund
CreditA2report,A2suretyA2bond,A2paymentA2ofA2exemptionA2fees
CreditA2report,A2paymentA2intoA2aA2professionalA2fund,A2$1A2millionA2creditA2lineA2-A2Ans--
TheA2answerA2isA2creditA2report,A2netA2worth,A2suretyA2bond,A2paymentA2intoA2aA2stateA2fu
nd.A2TheA2S.A.F.E.A2ActA2mandatesA2thatA2statesA2includeA2aA2minimumA2netA2worthA2req
uirementA2orA2suretyA2bondA2requirementA2forA2applicantsA2orA2requireA2theA2applicantA2to
A2payA2intoA2aA2stateA2recoveryA2fund.A2LicensingA2requirementsA2alsoA2includeA2criminalA
2historyA2andA2creditA2backgroundA2checks,A2includingA2aA2creditA2report.A2TheseA2areA2all
A2factorsA2usedA2toA2establishA2aA2licensee'sA2financialA2responsibilityA2andA2generalA2fitn
ess.
CarrieA2isA2obtainingA2aA290%A2loanA2forA2theA2purchaseA2ofA2herA2newA2home,A2whichA2s
heA2isA2buyingA2forA2$225,000.A2OneA2discountA2pointA2forA2herA2loanA2wouldA2beA2equalA2
to:
$1,000
$2,025
$2,000
$2,250A2-A2Ans--
TheA2answerA2isA2$2,025.A2OneA2discountA2pointA2isA2equalA2toA21%A2ofA2theA2loanA2amou
nt.A2InA2thisA2case,A290%A2×A2$225,000A2=A2$202,500.A21%A2×A2$202,500A2=A2$2,025.
AccordingA2toA2federalA2law,A2whichA2ofA2theA2followingA2circumstancesA2wouldA2requireA2
theA2lenderA2toA2dropA2aA2borrower'sA2privateA2mortgageA2insuranceA2(PMI)A2withoutA2the
A2borrower'sA2request?
TheA2currentA2principalA2balanceA2isA280%A2ofA2theA2originalA2purchaseA2price
TheA2currentA2principalA2balanceA2isA278%A2ofA2theA2originalA2purchaseA2price
TheA2currentA2principalA2balanceA2isA275%A2ofA2theA2currentA2appraisedA2value
TheA2currentA2principalA2balanceA2isA270%A2ofA2theA2currentA2appraisedA2valueA2-A2Ans--
TheA2answerA2isA2theA2currentA2principalA2balanceA2isA278%A2ofA2theA2originalA2purchaseA2
price.A2FederalA2lawA2requiresA2automaticA2terminationA2ofA2PMIA2onA2theA2dateA2whenA2t
heA2principalA2balanceA2isA2scheduledA2toA2reachA278%A2ofA2theA2originalA2purchaseA2pric
