NMLS S.A.F.E. Exam 6

_____ are responsible for ensuring that loan applicants meet the requirements established by lenders and investors for loan programs.

A. Loan processors
B. Loan originators
C. Investors
D. Underwriters

D. Underwriters

Which of the following is considered "reasonably reliable" evidence to verify the repayment ability of a borrower?

A. IRS W-2s, tax returns, and payroll receipts
B. IRS W-2s, tax receipts, and bank deposit receipts
C. Previous mortgage statements and canceled checks
D. Tax returns, Comptroller's certification, and CPA letter

A. IRS W-2s, tax returns, and payroll receipts

Civil monetary penalties resulting from the failure to report data for HMDA are:

A. $1,000 per violation, with a maximum of $300,000 in fines annually
B. Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved
C. Calculated based on a percentage of total loan amounts of mortgages in violation
D. $11,000 per violation, but can be increased to $25,000 for willful and knowing violations

B. Calculated based on a penalty matrix, which considers good faith, previous violations, and financial resources of the entity involved

Sharing a borrower's personal financial information for purposes other than what it was provided for is a violation of what act?

A. GLB Act
B. S.A.F.E. Act
C. TILA
D. Homeowners Protection Act

A. GLB Act

Which document actually contains the borrower's promise to repay the loan?

A. The deed
B. The note
C. The mortgage
D. The TIL

B. The note

Neither the mortgage nor the deed of trust actually contain the borrower's contractual promise to repay the loan. The note, or promissory note, is the borrower's promise to repay the loan.

Which federal law includes provisions that address misleading and deceptive advertising practices?

A. TILA
B. RESPA
C. HMDA
D. ECOA

A. TILA

The act of guiding homebuyers in a particular direction based on demographics is prohibited by:

A. ECOA and RESPA
B. The Fair Housing Act and ECOA
C. TILA and RESPA
D. RESPA and the Fair Housing Act

B. The Fair Housing Act and ECOA

Using misleading language in an advertisement (for example, using language that suggests that an advertised loan is "fixed" when it actually is not) is a practice specifically prohibited under:

A. Regulation B
B. Regulation Z
C. FCRA
D. Regulation C

B. Regulation Z

A loan processor or underwriter is exempt from licensure under all of the following circumstances, except:

A. He/she is employed with a licensed mortgage broker
B. He/she is employed with an exempt mortgage lender
C. He/she does not represent to the public that he/she can perform any of the activities of a loan originator
D. He/she takes applications on behalf of the loan originator

D. He/she takes applications on behalf of the loan originator

The Smiths are buying a house for $200,000. After their 10% down payment, they have also decided to pay two discount points. What is the dollar amount of the discount points?

A. $4,000
B. $3,800
C. $3,600
D. $2,000

C. $3,600

Discount points are calculated based on the loan amount, which is determined by subtracting any down payment (in this case, $20,000) from the purchase price ($200,000). Each discount point is 1% of the loan amount. In this transaction, the Smiths are obtaining a $180,000 loan and buying two discount points, equal to 2% of the loan amount. $180,000 × 0.02 = $3,600.

What is the name of the disclosure required for HELOCs?

A. Financial Advantages of Second Mortgages
B. CHARM Booklet
C. Your Home Loan Toolkit: A Step-by-Step Guide
D. What You Should Know about Home Equity Lines of Credit

D. What You Should Know about Home Equity Lines of Credit

The diligent matching of loan programs with the current financial circumstances of each customer is known as:

A. Tangible net benefit
B. Loan standards
C. Finance corroboration
D. Loan suitability

D. Loan suitability

What is the LTV for a loan in the amount of $525,000 and a property with an appraised value of $750,000?

A. 70%
B. 75%
C. 68%
D. 80%

A. 70%

A state licensing agency may conduct examinations and investigations for all of the following reasons, except:

A. To determine the maximum licensing fees
B. Initial licensing or license renewal
C. License suspension, conditioning, revocation, or termination
D. To determine compliance with state law

A. To determine the maximum licensing fees

On which portion of the redesigned loan application would one find a street address and legal description of the property?

A. Section 1
B. Section 9
C. Section 8
D. Section 4

D. Section 4

Two federal laws that relate to the confidentiality of personal financial information are:

A. Safeguards Rule and RESPA
B. RESPA and FTC Disposal Rule
C. FTC Disposal Rule and FNMA Application Rule
D. Safeguards Rule and FTC Disposal Rule

D. Safeguards Rule and FTC Disposal Rule

For which of the following transaction types would a creditor not be required to provide the consumer with a Loan Estimate?

A. A purchase money mortgage
B. A closed-end home equity loan
C. A home equity line of credit
D. A refinance of an existing mortgage

C. A home equity line of credit

For a conventional, conforming loan, the borrower is making a down payment of 12%. The seller wishes to contribute to closing costs for the transaction. What is the most that the seller can contribute?

A. Seller concessions of 12%
B. Seller concessions of 3%
C. Seller concessions of 6%
D. Seller concessions of 78%

C. Seller concessions of 6%

Determining that an individual licensee has not shown financial responsibility includes all but which of the following?

A. Judgments as a result of medical expenses
B. A pattern of seriously delinquent accounts in the past three years
C. Current outstanding tax liens
D. Foreclosures within the past three years

A. Judgments as a result of medical expenses

A borrower of a closed-end loan with a three-day right to rescind may exercise this right at any time until midnight on the third business day after:

A. Consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later
B. Consummation or delivery of the required rescission notice, whichever is earlier
C. Delivery of the notice of the right to rescind or delivery of all material truth-in-lending disclosures, whichever is later
D. Delivery of the notice of the right to rescind or delivery of all material truth-in-lending disclosures, whichever is earlier

A. Consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures, whichever is later

In an ARM, margin is determined by:
A. The lender and represents the amount of commission paid to the broker
B. The lender and represents the lender's operating costs and profit margin
C. The broker and is the amount of profit split between the broker and lender
D. The underwriter and represents the percentage of error allowable for debt-to-income ratio

B. The lender and represents the lender's operating costs and profit margin

Loans are originated and funded in the:

A. Secondary mortgage market
B. Reverse mortgage market
C. Subprime mortgage market
D. Primary mortgage market

D. Primary mortgage market

A licensee may attempt a qualified written exam three consecutive times, each occurring at least _____ days after the preceding test.

A. 30
B. 45
C. 90
D. 180

A. 30

According to the Telemarketing Sales Rule, which of the following is permitted?

A. Trying several times to return the call of someone responding to an advertisement
B. Not transmitting a telephone number on caller ID
C. Initiating a call to someone on the Do-Not-Call List
D. Calling a consumer who did business with the licensee 24 months ago

A. Trying several times to return the call of someone responding to an advertisement

Ted Lange wants to build a tiki bar in his backyard next to the pool. In order to do this, he is going to take out a home equity line of credit. He believes that he will need about $20,000 to build the bar as envisioned. His home's current value is $405,000, and he has a first mortgage with a balance of $130,000. The bank agrees to extend him a line of credit for $50,000, since he has quite a bit of equity in his home. What is Ted's CLTV if he draws $20,000 as anticipated?

A. 44%
B. 37%
C. 32%
D. 39%

B. 37%

If a lender is comfortable with existing data on a property being used as collateral for a rate and term refinance, what might be permitted?

A. A waiver of the rescission period
B. A silent second
C. A property inspection waiver
D. A streamline close

C. A property inspection waiver

The factors involved in determining the movement on an ARM loan include:

A. Frequency of change, caps, index, rate
B. Rate, caps, index, margin
C. Frequency of change, caps, index, margin
D. Rate, index, margin, lifetime cap

C. Frequency of change, caps, index, margin

Agatha was a licensed loan originator when the housing market slowdown left her with little work. She accepted a job outside the mortgage field over three years ago, and her license expired. Now, Agatha wants to apply for a license again. One of the requirements Agatha must meet in order to be re-licensed is:

A. Providing proof that she completed all of the continuing education requirements for the year she last held a license
B. Providing proof that she still meets the qualifications to be a mortgage loan originator
C. Providing information relating to her previous license
D. Filing the appropriate paperwork with the NMLS to reinstate her license

A. Providing proof that she completed all of the continuing education requirements for the year she last held a license

A fee that lenders may receive for selling or transferring their right to service a mortgage loan is called:

A. Yield spread premium
B. Margin
C. Service release premium
D. Finance charge

C. Service release premium

A VA loan that is an IRRRL:

A. Is a qualified mortgage, but does not have a conclusive presumption of compliance
B. Is a qualified mortgage, and always has a conclusive presumption of compliance
C. Is a qualified mortgage, and may have a conclusive presumption of compliance
D. Is not a qualified mortgage

C. Is a qualified mortgage, and may have a conclusive presumption of compliance

A VA loan that is an IRRRL may have a conclusive presumption of compliance if certain underwriting standards are met. IRRRLs do not automatically have a conclusive presumption of compliance.

In which of the following transactions must "Your Home Loan Toolkit" be provided?

A. A reverse mortgage origination
B. A purchase transaction
C. A refinance transaction
D. When a borrower applies for subordinate financing

B. A purchase transaction

A qualified mortgage may only include a balloon payment if all of the following are true, except:

A. The consumer has specifically requested a balloon payment
B. The loan has a term of at least five years
C. The loan is made by a small creditor
D. The loan has a fixed interest rate

A. The consumer has specifically requested a balloon payment

Which of the following statements describes a lending practice that is prohibited by HOEPA and its implementing regulations?

A. Originating a subprime mortgage
B. Redlining and reverse redlining as a standard company policy
C. Offering prime mortgages to borrowers in the subprime mortgage market
D. Making a lending decision based solely on the amount of equity in a loan applicant's home

D. Making a lending decision based solely on the amount of equity in a loan applicant's home

HOEPA prohibits lending decisions based solely on the amount of equity in a loan applicant's home and requires consideration of repayment ability. This prohibition is intended to discourage reverse redlining.

The chain of title shows:

A. History of ownership of a property
B. Any existing liens on the property
C. Reporting format for an abstractor
D. Method of perfecting a lien

A. History of ownership of a property

Which of the following correctly demonstrates how to calculate the periodic rate on a mortgage loan?

A. Annual rate / number of payments in a year = periodic rate
B. Annual rate × number of payments in a year = periodic rate
C. Loan balance / annual rate = periodic rate
D. Annual rate × monthly payment = periodic rate

A. Annual rate / number of payments in a year = periodic rate

The Qualified Mortgage Rule establishes a debt-to-income ratio standard of _____ for qualified mortgages.

A. 78%
B. 80%
C. 43%
D. 60%

C. 43%

Tom, a mortgage loan originator, accepts the Carters' loan application and negotiates the terms of their loan. Mortgages R Us, the lender, prepares all of the required paperwork and arranges for loan closing. Once the documents are signed, Mortgages R Us funds the loan. All of these actions are considered to be part of:

A. A consumer credit transaction
B. Completion of settlement services
C. The origination of a residential mortgage loan
D. A state licensing agency's responsibilities

C. The origination of a residential mortgage loan

A revised Loan Estimate is required when:

A. There is any change in circumstances
B. Interest rates drop
C. Interest rates increase
D. The loan applicant locks his or her interest rate

D. The loan applicant locks his or her interest rate

When a loan is characterized as "conforming," this means the loan:

A. Meets standards for a government program
B. Meets guidelines established by Fannie Mae and Freddie Mac
C. Is a 30-year fixed
D. Requires no PMI

B. Meets guidelines established by Fannie Mae and Freddie Mac

The S.A.F.E. Act defines a loan processor as:

A. An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator
B. An individual employed by a state-licensed mortgage broker
C. An individual employed by a depository institution
D. An individual who has applied for licensing as a loan originator, but who has not yet completed all the licensing requirements

A. An individual who performs clerical duties subject to the supervision of a licensed and/or registered loan originator

All of the following are included in the calculation of the APR, except:

A. Underwriting fees
B. Buy-down fees
C. Origination fees
D. Title insurance fees

D. Title insurance fees

In addition to charges paid over the term of the loan (e.g., interest and mortgage insurance premiums paid over the loan's term), the calculation of the APR includes many prepaid finance charges, including, among others, underwriting fees, buy-down fees, and origination fees. However, some fees are not included in the prepaid finance charges used in APR calculations, including title insurance fees.

Once a loan application is received, a creditor may not require additional information or verification until:

A. The Closing Disclosure is provided
B. The origination fee is paid
C. The loan closes
D. The Loan Estimate is provided

D. The Loan Estimate is provided

The primary purpose of the FTC Red Flags Rule is:

A. Preventing the overvaluation of real estate
B. Improving the accuracy of information in consumer credit files
C. Identifying, mitigating, and preventing identity theft
D. Establishing methods for protecting consumer personal information

C. Identifying, mitigating, and preventing identity theft

Oversight for FCRA is shared between the FTC and:

A. Federal Reserve
B. HUD
C. TILA
D. CFPB

D. CFPB

Cindy Williams applied for a loan with MPT Mortgage. After 20 days, she received an Adverse Action Notice informing her that she had been denied. Three months later, Cindy received a women's clothing catalog in the mail at an address only known to MPT Mortgage as a result of her filling out a loan application. The lender has likely violated which federal law?

A. TILA
B. GLB Act
C. FTC Disposal Rule
D. RESPA

B. GLB Act

This scenario implies that the lender shared non-public personal information with a third party for reasons other than the intent with which it was given to the lender. Selling information given to apply for financial products to a third party who intends to market unrelated products or services to the customer is a violation of the GLB Act.

The acronym "CHARM" stands for:

A. Cost Handbook for Adjustable-Rate Mortgages
B. Credit History on Adjustable-Rate Mortgages
C. Customer Highlights for Adjustable-Rate Mortgages
D. Consumer Handbook on Adjustable-Rate Mortgages

D. Consumer Handbook on Adjustable-Rate Mortgages

A home equity conversion mortgage (HECM) is a type of _____ that is made pursuant to guidelines established by the _____.

A. Reverse mortgage/Federal Trade Commission
B. Home equity loan/CFPB
C. Reverse mortgage/FHA
D. Home equity loan/HUD

C. Reverse mortgage/FHA

The Federal Housing Administration does not make loans; it insures loans. What does the FHA insure against?

A. Foreclosure
B. The borrower losing his job
C. Forbearance
D. Down payment

A. Foreclosure

Which of the following would be subject to the ATR Rule?

A. A purchase money mortgage
B. A reverse mortgage loan
C. A construction loan
D. A purchase money mortgage made by a housing finance agency

A. A purchase money mortgage

The law requires that first-time borrowers complete counseling with a HUD-approved counselor before accepting a loan that features:

A. Negative amortization
B. A fixed interest rate
C. An adjustable interest rate
D. A 15-year term

A. Negative amortization

FACTA requires an initial Fraud Alert to be kept in a consumer's file for what period of time?

A. One year
B. Seven years
C. One month
D. Until removed by the borrower

A. One year

FACTA requires an initial Fraud Alert to be kept in a consumer's file for a period of one year. An Extended Fraud Alert, meaning there is an actual identity theft report submitted, is required for seven years.

An 80-10-10 loan is an example of a:

A. Construction loan
B. Reverse mortgage loan
C. Higher-priced mortgage loan
D. Piggyback loan

D. Piggyback loan

When funds are placed in a separate escrow account to offset the monthly payments required by the terms of a loan, and those funds are used to reduce the payment rate for a period of time, this is known as:

A. Good faith deposit
B. Earnest money deposit
C. Temporary buy-down
D. Seller concessions

C. Temporary buy-down

A temporary buy-down occurs when a borrower deposits funds into escrow that are used to offset a portion of the payment for a period of time at the start of a loan. Once the initial buy-down period expires, the payment is then based off of the note rate, which was set at the time the loan was locked and remains the same, even during the lower payment period.

Which of the following individuals might be involved in appraisal fraud?

A. Mortgage broker
B. Borrower
C. All of these answers are correct
D. Appraiser

C. All of these answers are correct

The Equal Credit Opportunity Act requires a Notice of Incomplete Application be provided to a borrower:

A. Within 15 days of application, if the application is missing required information
B. Within 30 days of application, if the application is missing required information
C. If the borrower has provided less than five years' residence history
D. Within three days of discovery of incomplete application

B. Within 30 days of application, if the application is missing required information

Fees charged for an early repayment of a debt are known as:

A. Acceleration
B. Prepayment penalty
C. Finance charges
D. Deferred payment loan

B. Prepayment penalty

A state licensing agency granted Crook Cromwell a license to act as a mortgage loan originator. Subsequent to the granting of the license, the agency received a supplemental criminal history report which indicated that Crook had been convicted of a money laundering charge in another state. What action can the state licensing agency take?

A. Issue a temporary cease and desist order
B. Refuse to renew Crook's license
C. Require a hearing with Crook before any other action can be taken
D. Condition issuance of the license against future bad acts

A. Issue a temporary cease and desist order

A Loan Program Disclosure must be provided:

A. For each variable-rate mortgage product available at the time
B. Only for the product for which the applicant is most likely to qualify
C. For each variable-rate mortgage product in which the applicant expresses an interest
D. Only for the product which the lender feels is best for the applicant

C. For each variable-rate mortgage product in which the applicant expresses an interest

Which of the following terms is allowed in a high-cost mortgage?

A. Terms that permit a payment schedule resulting in negative amortization
B. An advanced payment
C. A variable interest rate
D. A prepayment penalty

C. A variable interest rate

High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed.

Which of the following would not be considered behavior that constitutes honest, fair, and nondiscriminatory lending?

A. Advertising loans that are not actually available
B. Charging reasonable fees
C. Maintaining the confidentiality of a borrower's personal information
D. Conducting business fairly and honestly

A. Advertising loans that are not actually available

A creditor must provide an Affiliated Business Arrangement Disclosure to a loan applicant:

A. Only if the creditor will receive a referral fee from the provider of settlement services
B. At the same time that it refers a loan applicant to any provider of settlement services
C. Only if the loan applicant was referred to the creditor as a provider of mortgage credit
D. At the same time that it refers a loan applicant to an affiliated provider of settlement services

D. At the same time that it refers a loan applicant to an affiliated provider of settlement services

Kelsey is a registered loan originator who is employed by the Your Home Town Bank, a depository institution regulated by a federal banking agency. Each of the following is a federal banking agency, except the:

A. Board of Governors of the Federal Reserve System
B. Comptroller of the Currency
C. Federal Home Loan Mortgage Corporation
D. National Credit Union Administration

C. Federal Home Loan Mortgage Corporation

An acceleration clause is sometimes added to reverse mortgages. This means that the loan could become due and payable under certain circumstances, which may include all but which of the following?

A. A new owner is added to the title
B. The borrower adds MIP to the loan
C. New debt against the home is taken out
D. All or part of the home is rented out

B. The borrower adds MIP to the loan

Reverse mortgages may contain acceleration clauses which can cause a loan to become due and payable. Reasons for this may include adding an owner to the title, taking out new debt against the home, or renting out all or part of the home. Some reverse mortgages do include MIP, which helps to guarantee that the borrower will never owe more than the value of the home.

For which of the following reasons would a borrower be more likely to choose a 15-year fixed loan over a 30-year fixed?

A. To minimize the monthly payment amount
B. To maximize the tax credit for mortgage interest
C. To minimize closing costs
D. To pay less interest over the life of the loan

D. To pay less interest over the life of the loan

In order to meet the federal S.A.F.E. Act requirements, a state licensing agency must provide for all of the following, except:

A. Participation in the NMLS
B. Setting renewal or reporting dates
C. The creation of a separate agency
D. Conducting background checks

C. The creation of a separate agency

Sally and Ben have lived in their home for ten years and are considering shortening their term. Which of the following appraisal approaches would be best?

A. Income approach
B. Cost approach
C. Market comparison approach
D. Sales comparison approach

D. Sales comparison approach

Under ECOA, the Attorney General may take action against a creditor who appears to have engaged in:

A. A pattern or practice of discrimination
B. Straw selling
C. Redlining
D. A pattern or practice of mortgage fraud

A. A pattern or practice of discrimination

The _____ is ultimately responsible for ensuring that the borrower receives a Closing Disclosure.

A. Settlement agent
B. Creditor
C. Seller
D. Mortgage broker

B. Creditor

In addition to information about disciplinary and enforcement action taken against a mortgage loan originator, the NMLS may also make available for public access:

A. A mortgage loan originator's home address
B. The number of loans originated by a loan originator
C. The mortgage loan originator's employment history
D. Former clients of the mortgage loan originator

C. The mortgage loan originator's employment history

For which of the following does rescission not exist?

A. A refinance of a principal residence
B. Opening a home equity line of credit
C. A refinance in which a husband has requested a rescission waiver without his wife's signature
D. A purchase of a principal residence with a conventional loan

D. A purchase of a principal residence with a conventional loan

Rescission is the ability to cancel a transaction for a refinance or for a home equity loan. The rescission period, when it applies, is generally three business days; a three-year rescission period applies to transactions when the creditor failed to provide notice of the right to rescind. The right to rescind is only available for loans secured by the borrower's principal dwelling.

In which of the following scenarios would it be appropriate to conduct an appraisal using a cost approach?

A. An appraisal is done on a new home being built for a first-time homebuyer
B. A borrower wants to refinance his/her primary residence to lower the cost
C. An investor is having an appraisal done on his/her rental
D. A buyer is determining the value of a home he/she has under contract

A. An appraisal is done on a new home being built for a first-time homebuyer

Generally, the first lien recorded has priority, with the possible exception of:

A. Mortgage liens
B. Mechanic's liens
C. Child support liens
D. Consensual liens

B. Mechanic's liens

For a fee, a real estate licensee offers a mortgage company the names and telephone numbers of all of the people who attended an open house, but the mortgage company does not accept the offer. Who is in violation of RESPA?

A. The mortgage company
B. The real estate licensee
C. Both the mortgage company and the real estate licensee
D. Neither the mortgage company nor the real estate licensee

B. The real estate licensee

What is the difference between MIP and PMI?

A. PMI is applicable to FHA loans; MIP is applicable to conventional mortgages
B. MIP is applicable to FHA loans; PMI is applicable to conventional mortgages
C. There is no difference between MIP and PMI
D. MIP is optional; PMI is not

B. MIP is applicable to FHA loans; PMI is applicable to conventional mortgages

Mortgage insurance premium (MIP) is applicable to FHA loans. Private mortgage insurance (PMI) is applicable to conventional mortgages. While they serve a similar purpose, they are not the same.

Which of the following fees must be included in the calculation of finance charges?

A. Appraisal fees
B. Seller's points
C. Credit reporting fees
D. Origination fees

D. Origination fees

Which of the following loan types considers residual income in qualification?

A. VA
B. HPML
C. FHA
D. USDA

A. VA

The promissory note contains all of the following, except:

A. A legal description of the property
B. A provision requiring notices be done in writing
C. The loan amount
D. The loan terms

A. A legal description of the property

A fee may be charged for preparing or delivering a Closing Disclosure if:

A. The consumer requests a revised copy
B. The consumer requests one or more duplicate copies
C. A fee may not be charged for preparing or delivering a Closing Disclosure
D. The fee does not exceed .5% of the loan amount

C. A fee may not be charged for preparing or delivering a Closing Disclosure

Bill Grunion is required to renew his license for the coming year. In order to have his renewal approved, Bill must meet all the following requirements, except:

A. Continue to meet the minimum standards for license issuance
B. Satisfy the annual continuing education requirement
C. Pay all required fees for renewal of the license
D. Have originated at least 15 loans in the preceding license period

D. Have originated at least 15 loans in the preceding license period

If a mortgage broker agrees to serve a loan applicant as his or her agent, the broker owes _____ to the applicant.

A. A fiduciary duty
B. A fidelity agreement
C. A financial partnership
D. Power of attorney

A. A fiduciary duty

While taking an application, an originator learns that his potential borrower receives income from a public assistance program. Without even running a full pre-qualification, the originator tells the would-be borrower that he cannot help someone who is receiving public assistance. This originator is in violation of the:

A. Equal Credit Opportunity Act
B. Fair Housing Act
C. Equal Housing Act
D. Fair Credit Transaction Act

A. Equal Credit Opportunity Act

The 1004 is the form number for:

A. URLA
B. CSBS
C. FNMA
D. URAR

D. URAR

The 1004 is the form number for the Uniform Residential Appraisal Report (URAR)

Which of the following best describes what is considered in the calculation of a borrower's back-end ratio?

A. Principal and interest payments
B. The cost of credit in relation to the value of the loan
C. The total amount of monthly payments made on long-term debt carried by the consumer
D. Only non-housing consumer debt, such as credit card payments and auto loan payments

C. The total amount of monthly payments made on long-term debt carried by the consumer

Homeownership counseling is required in transactions for all of the following, except:

A. Higher-priced mortgage loan
B. High-cost mortgage
C. Reverse mortgage
D. Negative amortization loan if the loan applicant is a first-time borrower

A. Higher-priced mortgage loan

When a loan originator accepts a referral fee from a real estate agent, both are in violation of what section of RESPA?

A. Section 10
B. Section 12
C. Section 6
D. Section 8

D. Section 8

HUD will not insure single-family home loans that:

A. Meet QM standards
B. Include points and fees in excess of the limit set by the QM Rule
C. Are small creditor qualified mortgages
D. Have a DTI ratio of less than 43%

B. Include points and fees in excess of the limit set by the QM Rule

Which of the following is a description of a permanent buy-down?
A. A lender pays a broker 25 bps for delivering a loan at a rate higher than par
B. A borrower pays discount points to lower the note rate from 4.875 to 4.50
C. A lender accepts funds paid into escrow in order to offset lower interest payments
D. A real estate agent collects a deposit from a borrower to hold a contract

B. A borrower pays discount points to lower the note rate from 4.875 to 4.50

The state in which Jim Jungle works requires a mortgage loan originator be covered by a surety bond. The bond must be maintained in an amount that reflects:

A. The dollar value of loans Jim originates annually
B. The number of loans originated by Jim annually
C. The number of loans Jim's employer originates annually
D. Jim's experience as a loan originator

A. The dollar value of loans Jim originates annually

All of the following may affect the amount of a VA funding fee, except:

A. Marital status
B. First-time use of the VA eligibility
C. 10% down payment
D. Disability

A. Marital status

VA loans require a funding fee under all of the following conditions, except:

A. The veteran makes a 10% down payment
B. The veteran is disabled
C. The veteran is using his/her eligibility for a second time
D. The veteran is using his/her eligibility for the first time

B. The veteran is disabled

Wanda had been procrastinating on taking her continuing education courses. As the end of the year approached, she saw a course she had taken the previous year was available. Since she had already mastered the information, she decided to take it again. Will this course count towards her continuing education hours for the current year?

A. The course will count as long as Wanda receives her certificate of completion
B. The course will count as long as it is an NMLS-approved course
C. No, the course will not count towards her continuing education hours
D. The course will not count only if it is taught by the same instructor

C. No, the course will not count towards her continuing education hours

A state-licensed loan originator may not take the same approved course in the same or successive years to meet the annual continuing education requirement of eight hours of coursework.

Virginia has entered an agreement for a home loan after a contractor came to her door offering home improvement services and a card for a mortgage broker who could help her get a loan. Virginia contacted the mortgage broker and secured the loan. Which of the following arrangements for paying the contractor is not in compliance with HOEPA?

A. Virginia can pay the contractor directly
B. Virginia can place the funds with a third-party escrow agent who can disburse them pursuant to a written agreement
C. Virginia and the contractor can enter an agreement for her to pay him when the work is complete
D. The mortgage broker can pay the contractor directly

D. The mortgage broker can pay the contractor directly

HOEPA prohibits direct payments to home improvement contractors, unless payment is a joint payment to the borrower and the contractor, or is made to a third-party escrow agent pursuant to a written agreement between the lender, borrower, and contractor.

When a credit report shows only a balance on a revolving debt, rather than a payment, an originator should:

A. Eliminate the debt if it is below $300
B. Use 5% of the debt as the payment
C. Only use 50% of the debt against the DTI
D. Divide the total debt by 12 to get monthly payments

B. Use 5% of the debt as the payment

Which of the following is used as a method of identifying and holding licensees accountable, according to the S.A.F.E. Act?

A. Loan originator financial and ethical disclosures
B. Records of annual loan originator volume
C. Unique identifier
D. CSBS number

C. Unique identifier

Which of the following may be an indication of predatory lending?

A. A borrower with a 720 credit score uses borrower credits to offset closing costs
B. A borrower with a 610 credit score is offered a subprime loan
C. A borrower with a 580 credit score is offered a loan with credit life premiums included
D. A borrower with a 560 credit score is given a rate that is 2% above a "standard" rate

C. A borrower with a 580 credit score is offered a loan with credit life premiums included

Tacking on unnecessary insurance premiums such as "credit life" is a practice that predatory lenders often use to increase profits.

Which of the following types of loans is not a conventional mortgage?

A. Nonconforming loan
B. Non-qualified mortgage
C. FHA loan
D. Subprime loan

C. FHA loan

Giani and Maria are attempting to purchase a house in a new neighborhood. Maria is four months pregnant with their first child, and they are making the move to set themselves up in their dream neighborhood to raise a family. Two weeks after the initial interview, their broker calls to inform them that they have been denied for a loan. The broker continues to say that he mentioned to his underwriter that Maria probably planned to stay at home for a year after having the baby. With that, the underwriter did not allow her income to be used for qualification. This broker is in violation of what law?

A. ECOA
B. FCRA
C. HMDA
D. TILA

A. ECOA

What is the purpose of the Fair Credit Reporting Act?

A. To prevent lenders from using credit to determine creditworthiness in order to mitigate the losses incurred by borrowers who were under-qualified for loans
B. To ensure accuracy, fairness, and the privacy of consumers' personal information assembled and used by consumer reporting agencies
C. To use special obligations on users and furnishers to limit credit availability
D. To protect the rights of lenders in the event of default

B. To ensure accuracy, fairness, and the privacy of consumers' personal information assembled and used by consumer reporting agencies

The Notice of Right to Cancel PMI is required by the:

A. Homeowners Protection Act
B. Equal Credit Opportunity Act
C. Truth-in-Lending Act
D. Real Estate Settlement Procedures Act

A. Homeowners Protection Act

The lending document that contains the contractual terms for repaying a home loan is the:

A. Mortgage
B. Promissory note
C. Deed of trust
D. Closing Disclosure

B. Promissory note