SAFE MLO EXAM 3 QUESTIONS & ANSWERS
A seller entering into a contract with a buyer to receive P&I payments in return for
signing the deed over to the buyer and placing a lien on the property until the debt is
repaid is an example of:
a) Seller's concessions
b) Seller financing
c) Seller collateralization
d) Primary lending - Answer -Seller financing
HOEPA is Section ___________ of ____________?
a) 35/TILA
b) 203/RESPA
c) 32/RESPA
d) 32/TILA - Answer -32/TILA
Answer: d) The Truth-in-Lending Act was amended in 1994 when Section 32 was added
enacting the Home Ownership and Equity Protection Act (HOEPA). This regulation was
enacted to address and stop predatory lending practices in purchases, refinances,
open-ended credit plans, and closed-ended home equity loans that abusively charged
excessive points, interest rates, and fees
Which of the following loans would be exempt from HOEPA coverage?
a) A purchase-money mortgage securitizing a vacation property
b) A primary-residential home purchase
c) A primary-residential home equity loan
d) A primary-residential refinance - Answer -A purchase-money mortgage securitizing a
vacation property
Higher-priced mortgage loans are addressed in Section ____________ of
____________?
a) 32/TILA
b) 35/RESPA
c) 35/TILA
d) 32 RESPA - Answer -35/TILA
A higher-priced mortgage loan is a loan through which the APR exceeds the APOR by:
a) 3.5% or more on first-lien instruments
b) 3.25% or more on second-lien instruments
c) 1.5% or more on first-lien instruments
,d) 2.0% or more on second-lien instruments - Answer -c) 1.5% or more on first-lien
instruments
A ______________ is an example of an open-ended instrument while a/an
______________ is an example of a closed-ended instrument.
a) home equity loan/auto loan
b) student loan/home equity line of credit
c) home equity loan/home equity line of credit
d) revolving credit card/boat loan - Answer -revolving credit card/boat loan
RESPA strictly prohibits markups to protect consumers from unscrupulous mortgage
professionals desiring to profit at their expense. RESPA prohibits markups by
classifying them as unearned fees. Markups involve charging a customer more than the
cost of a third-party settlement fee and pocketing the difference
Which of the following disclosures is not required by RESPA for a refinance
transaction?
a) HUD's Home Loan Toolkit
b) Loan Estimate
c) Mortgage Servicing Disclosure Statement
d) ABAD - Answer -HUD's Home Loan Toolkit
Julie suspects that her loan originator may be participating in a sham affiliated business
arrangement (AFBA). Which of the following situations does HUD consider a factor
indicating the possibility of the AFBA being a sham?
a) The title company is located out of state
b) The independent home inspector only performs inspections for this one particular
lender
c) The Realtor only works part time
d) The hazard insurance agent is newly-licensed - Answer -The independent home
inspector only performs inspections for this one particular lender
Which of the following is permissible under the Equal Credit Opportunity Act?
a) Asking an applicant to define her race
b) Asking about a woman's intention to have more children since the expenses
associated with additional children may adversely affect her ability to repay the debt
c) Asking an applicant whether or not he is divorced after he discloses alimony
payments as one of his liabilities
d) Asking the applicant of what country she is a citizen - Answer -Asking an applicant to
define her race
For which of the following individuals would it be permissible to refuse an application?
, a) A 97-year-old woman who wishes to apply for a 30-year loan
b) A man who volunteers that his credit is severely damaged
c) A 17-year-old woman whose birthday is in a week and a half
d) An unemployed artist - Answer -A 17-year-old woman whose birthday is in a week
and a half
Which of the following is an example of disparate treatment?
a) A mortgage company located in an Asian community only conducts business in
English
b) A mortgage originator who only speaks English refers an applicant to a colleague
who speaks the customer's native language
c) A mortgage originator refuses to work with anyone who is not a U.S. citizen
d) An east coast mortgage company does not operate after 5:00 p.m. EST - Answer -A
mortgage company located in an Asian community only conducts business in English
Which regulation governs the issuance of the CHARM?
a) TILA
b) RESPA
c) ECOA
d) HMDA - Answer -TILA
Of the following creditors, which one is not regulated by TILA?
a) A business that offers credit to consumers
b) A creditor that makes its credit subject to a finance charge
c) A creditor that regularly extends credit to consumers
d) A creditor that makes the credit it issues repayable in four installments - Answer -A
creditor that makes the credit it issues repayable in four installments
Which of the following credit types would be governed by TILA?
a) Business, agricultural, or organizational credit
b) A loan secured by the borrower's dwelling with the proceeds to be used for
commercial purposes
c) A home fuel budget plan
d) A loan for which the proceeds are used for personal, family, or household purposes -
Answer -A loan for which the proceeds are used for personal, family, or household
purposes
MLO Monica is refinancing the only mortgage secured by her customer's primary
residence. She just realized that the APR of the interest rate that her customer locked
exceeds the APOR by 1.625%. Which of the following statements now applies?
a) An escrow account is mandatory
b) A 2055 drive-by appraisal is sufficient
c) MLO Monica must offer a lower rate to her borrower
A seller entering into a contract with a buyer to receive P&I payments in return for
signing the deed over to the buyer and placing a lien on the property until the debt is
repaid is an example of:
a) Seller's concessions
b) Seller financing
c) Seller collateralization
d) Primary lending - Answer -Seller financing
HOEPA is Section ___________ of ____________?
a) 35/TILA
b) 203/RESPA
c) 32/RESPA
d) 32/TILA - Answer -32/TILA
Answer: d) The Truth-in-Lending Act was amended in 1994 when Section 32 was added
enacting the Home Ownership and Equity Protection Act (HOEPA). This regulation was
enacted to address and stop predatory lending practices in purchases, refinances,
open-ended credit plans, and closed-ended home equity loans that abusively charged
excessive points, interest rates, and fees
Which of the following loans would be exempt from HOEPA coverage?
a) A purchase-money mortgage securitizing a vacation property
b) A primary-residential home purchase
c) A primary-residential home equity loan
d) A primary-residential refinance - Answer -A purchase-money mortgage securitizing a
vacation property
Higher-priced mortgage loans are addressed in Section ____________ of
____________?
a) 32/TILA
b) 35/RESPA
c) 35/TILA
d) 32 RESPA - Answer -35/TILA
A higher-priced mortgage loan is a loan through which the APR exceeds the APOR by:
a) 3.5% or more on first-lien instruments
b) 3.25% or more on second-lien instruments
c) 1.5% or more on first-lien instruments
,d) 2.0% or more on second-lien instruments - Answer -c) 1.5% or more on first-lien
instruments
A ______________ is an example of an open-ended instrument while a/an
______________ is an example of a closed-ended instrument.
a) home equity loan/auto loan
b) student loan/home equity line of credit
c) home equity loan/home equity line of credit
d) revolving credit card/boat loan - Answer -revolving credit card/boat loan
RESPA strictly prohibits markups to protect consumers from unscrupulous mortgage
professionals desiring to profit at their expense. RESPA prohibits markups by
classifying them as unearned fees. Markups involve charging a customer more than the
cost of a third-party settlement fee and pocketing the difference
Which of the following disclosures is not required by RESPA for a refinance
transaction?
a) HUD's Home Loan Toolkit
b) Loan Estimate
c) Mortgage Servicing Disclosure Statement
d) ABAD - Answer -HUD's Home Loan Toolkit
Julie suspects that her loan originator may be participating in a sham affiliated business
arrangement (AFBA). Which of the following situations does HUD consider a factor
indicating the possibility of the AFBA being a sham?
a) The title company is located out of state
b) The independent home inspector only performs inspections for this one particular
lender
c) The Realtor only works part time
d) The hazard insurance agent is newly-licensed - Answer -The independent home
inspector only performs inspections for this one particular lender
Which of the following is permissible under the Equal Credit Opportunity Act?
a) Asking an applicant to define her race
b) Asking about a woman's intention to have more children since the expenses
associated with additional children may adversely affect her ability to repay the debt
c) Asking an applicant whether or not he is divorced after he discloses alimony
payments as one of his liabilities
d) Asking the applicant of what country she is a citizen - Answer -Asking an applicant to
define her race
For which of the following individuals would it be permissible to refuse an application?
, a) A 97-year-old woman who wishes to apply for a 30-year loan
b) A man who volunteers that his credit is severely damaged
c) A 17-year-old woman whose birthday is in a week and a half
d) An unemployed artist - Answer -A 17-year-old woman whose birthday is in a week
and a half
Which of the following is an example of disparate treatment?
a) A mortgage company located in an Asian community only conducts business in
English
b) A mortgage originator who only speaks English refers an applicant to a colleague
who speaks the customer's native language
c) A mortgage originator refuses to work with anyone who is not a U.S. citizen
d) An east coast mortgage company does not operate after 5:00 p.m. EST - Answer -A
mortgage company located in an Asian community only conducts business in English
Which regulation governs the issuance of the CHARM?
a) TILA
b) RESPA
c) ECOA
d) HMDA - Answer -TILA
Of the following creditors, which one is not regulated by TILA?
a) A business that offers credit to consumers
b) A creditor that makes its credit subject to a finance charge
c) A creditor that regularly extends credit to consumers
d) A creditor that makes the credit it issues repayable in four installments - Answer -A
creditor that makes the credit it issues repayable in four installments
Which of the following credit types would be governed by TILA?
a) Business, agricultural, or organizational credit
b) A loan secured by the borrower's dwelling with the proceeds to be used for
commercial purposes
c) A home fuel budget plan
d) A loan for which the proceeds are used for personal, family, or household purposes -
Answer -A loan for which the proceeds are used for personal, family, or household
purposes
MLO Monica is refinancing the only mortgage secured by her customer's primary
residence. She just realized that the APR of the interest rate that her customer locked
exceeds the APOR by 1.625%. Which of the following statements now applies?
a) An escrow account is mandatory
b) A 2055 drive-by appraisal is sufficient
c) MLO Monica must offer a lower rate to her borrower
