Mortgage Exam Review – Key Concepts Missed Flashcards
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186 Terms
What is the main purpose of RESPA and Regulation X?
To help consumers be better shoppers for settlement services by disclosing the nature and cost of the closing process and by prohibiting kickbacks and referral fees.
When a borrower earns $1,000 in monthly rental income, how much can typically be used to qualify for a loan?
$750 (75% of rental income).
What is Freddie Mac’s automated underwriting system called?
Loan Product Advisor (formerly Loan Prospector).
Which regulation prohibits discrimination in credit based on race, color, religion, sex, marital status, or national origin?
Regulation B, implementing the Equal Credit Opportunity Act (ECOA).
Which federal rule addresses deceptive mortgage advertising practices?
The MAP Rule (Mortgage Acts and Practices Rule / Regulation N).
Which activity is NOT usually considered fraud for housing?
Property flipping.
Which instrument actually conveys ownership of real property?
A warranty deed.
If an escrow analysis finds the account short by more than one month’s deposit, what may the lender require?
Repayment of the shortage over at least 12 months.
On a 1-year ARM with 2/6 caps, 4% start rate, 5% index, and 3% margin, what is the new rate after the first adjustment?
6% (limited by the 2% periodic cap).
Combining stated-income documentation with a nontraditional mortgage is called what?
Risk layering.
Which mortgage type typically charges both upfront and annual mortgage insurance?
FHA loans (UFMIP plus annual MIP).
SOFR is used in mortgages as what?
A possible ARM index (Secured Overnight Financing Rate).
Under Regulation X, the term “loan originator” includes whom?
A mortgage broker or a mortgage lender.
What protects a lender’s lien priority against undisclosed title defects?
A lender’s title insurance policy.
Within how many business days of application must the ECOA appraisal notice be delivered?
Three business days.
Under ECOA/HMDA, when may a lender ask about an applicant’s race?
For government-monitoring purposes (voluntary for the applicant).
What is “table funding”?
A broker closes the loan in its own name but immediately assigns it to the funding lender at the closing table.
Declining a loan solely because of the applicant’s race violates which law?
The Equal Credit Opportunity Act (ECOA).
For an FHA purchase, what is the maximum seller contribution toward closing costs?
Up to 6% of the sales price.
Which regulation created the Loan Estimate and Closing Disclosure for easier loan comparison?
Regulation Z under the TILA-RESPA Integrated Disclosure (TRID) Rule.
Is the VA funding fee usually refundable?
No; it is non-refundable except in limited situations (e.g., overcharge or certain disability exemptions).
Under HOEPA, a high-cost loan may include a balloon payment only under which circumstance?
If the loan meets balloon-QM rules, is a bridge loan ≤12 months, or accommodates seasonal income—not simply by borrower waiver.
Must every individual MLO maintain a personal surety bond?
No; they may be covered under the sponsoring licensee’s bond or a state recovery fund.
How is combined loan-to-value (CLTV) calculated?
Total of all loan balances divided by the property’s value (including unused HELOC credit if required).
In appraisal terminology, what is the “predominant value”?
The most common sales price range in the neighborhood.
A mortgage amortized longer than its term, leaving a large final payment, is what type?
A balloon mortgage.
Is employment history and disciplinary data in NMLS public?
Yes; it is not confidential and is available for public access.
On the Closing Disclosure, what question must be answered for each Loan Terms item?
“Can this amount increase after closing?”
Regulation B restricts asking about receipt of alimony or child support unless what?
Unless the applicant is told the information is optional and only needed if they wish it considered for repayment.
If an applicant refuses to give demographic data on the URLA, what must the lender do?
Record sex, race, and ethnicity based on visual observation and/or surname.
For deception to exist, a misrepresentation must be _ to the consumer’s decision.
Material.
Fannie Mae requires hazard insurance equal to what amount?
The lower of 100% of insurable value or the unpaid loan balance (but at least 80% of insurable value).
When may a lender charge an appraisal fee after mailing the Loan Estimate?
As soon as the consumer indicates an intent to proceed (no additional wait).
Define a “straw buyer.”
Someone paid to use their personal information to obtain a loan for the actual borrower.
Standard FHA back-end DTI limit is what?
43%.
Can state regulators sentence licensees to jail under the SAFE Act?
No; they can impose civil penalties but not jail time.
Annual interest on a $200,000 loan at 6% is how much?
$12,000.
For ARMs, what do rate caps guarantee?
The new rate cannot exceed the ceiling dictated by periodic or lifetime caps.
Giving a loan originator a $25 gift for referrals violates which law?
Section 8 of RESPA (kickbacks).
Does the Loan Estimate show future yearly ARM rates?
No; it shows cost comparisons, not projected future rates.
Is FHA’s upfront MIP refundable?
Only partially, if applied to another FHA loan within three years.
Is loan servicing a “settlement service” under RESPA?
No; it occurs after settlement.
Primary borrower benefit of mortgage insurance is what?
Ability to make a lower down payment.
Underwriting focuses on which two broad areas?
The applicant (ability/willingness to repay) and the collateral (property value).
Which appraisal method compares recent sales of similar homes?
Sales comparison (market data) approach.
What clause requires immediate payoff if property is sold?
A due-on-sale (alienation) clause.
Which item is NOT normally found in a deed of trust?
The note’s interest rate (that is in the promissory note).
Mortgage fraud involving multiple parties conspiring for profit is called what?
Fraud for profit.
How long must creditors wait between delivering a Loan Estimate and consummation?
Seven business days.
Do all FHA loans require monthly MIP at closing?
Yes, virtually all FHA loans include annual MIP paid monthly.
Which loan type never requires monthly MI, even at 100% LTV?
VA loans (instead they charge a funding fee).
Which regulation houses the current TRID disclosure rules?
Regulation Z (TILA).
When refinancing only the first mortgage, what must the second-lien holder do?
Agree to subordination to maintain lien priority.
What non-cash expense can be added back to self-employed income?
Depreciation.
Do registered (bank) MLOs need 20 hours of pre-licensing education?
No; that requirement applies to state-licensed MLOs.
Residual income analysis is unique to which loan program?
VA loans.
Is negotiating a mortgage for a cousin exempt from licensing?
No; a cousin is not an immediate family member under the SAFE Act.
Which federal agency now enforces most mortgage-related consumer laws once handled by HUD?
The Consumer Financial Protection Bureau (CFPB).
Are FHA and VA loans generally assumable?
Yes; therefore they do not contain due-on-sale clauses.
Who currently has overall authority for SAFE Act compliance?
The CFPB.
Most deeds of trust require owner-occupants to move in within how many days of closing?
Within 60 days.
Does the ad phrase “Buy for less than rent” trigger additional Reg Z disclosures?
No; it contains no specific credit terms.
If an applicant waives early receipt of an appraisal, by when must they still get it?
On or before consummation.
Is title insurance included in the APR calculation?
No; title insurance premiums are excluded.
When is the income approach typically used in appraisal?
When the buyer will use the property as a rental/income property.
When can a VA funding fee be refunded?
If the veteran was overcharged (or exempt) and the overcharge is discovered.
Who sets a lender’s prime rate?
The lender itself.
Does a deed of trust list exact tax and insurance amounts?
No; it includes covenants for paying them but not the actual amounts.
FHA annual MIP rates differ based on whether the term is greater than or less than/equal to what?
15 years.
Preferred DTI ratio for VA loans is what?
41%.
Money paid up-front to show intent to complete a purchase contract is called what?
Earnest money.
Does a mobile home qualify as a dwelling even if not permanently affixed?
Yes, if used as a residence.
Typical balloon mortgage structure involves what?
30-year amortization with the unpaid balance due in a much shorter period (e.g., 5–7 years).
Which URLA section can trigger immediate rejection based on answers?
Declarations section.
Negative amortization occurs when what happens?
Payments are insufficient to cover interest due, causing the principal balance to increase.
What is the least-expensive type of reverse mortgage?
A single-purpose reverse mortgage (offered by nonprofits/government).
Which loan feature is allowed in a non-qualified mortgage but not a qualified mortgage?
Interest-only payment option.
The size of the VA guarantee is based primarily on what?
The loan amount being obtained.
Why do lenders securitize loans?
To sell existing loans and generate funds to make new loans.
Define a “nontraditional mortgage.”
Any mortgage product other than a 30-year fixed-rate loan.
Why is an interest-only loan usually unsuitable for a part-time hourly worker?
Income uncertainty makes it risky to rely on future principal payments.
Which agency enforces misleading credit advertisements?
The CFPB (also the FTC for some entities).
Which HECM requirement is often misunderstood?
Borrowers may have an existing mortgage; they just must pay it off with HECM proceeds.
On the Loan Estimate, most costs are rounded to whole dollars except which?
Estimated principal and interest payments.
If foreclosure has begun, a borrower’s 3-year rescission right is triggered when the finance charge is understated by more than how much?
More than $35.
Who is ultimately responsible for ensuring the Closing Disclosure reaches the borrower?
The creditor (lender).
Give three examples of liens.
Judgment, attachment, and mortgage liens.
Which benchmark does NOT define an HPML?
APR exceeds comparable-maturity Treasury rate by 6.5 percentage points (that defines high-cost loans, not HPMLs).
Bankruptcy can stay on a credit report for how long?
Up to 10 years.
Opponents of mortgage fiduciary duty argue who is responsible for loan suitability?
The consumer.
Which asset is NOT liquid for mortgage qualifying?
Net worth of businesses.
A 30-year fixed loan with five years of interest-only payments is what type?
Interest-only option fixed-rate mortgage.
After rescission, what must the lender do?
Release its security interest and refund all fees paid by the borrower.
Are two appraisals required on HPML purchases from servicemembers?
No; that exemption applies.
For which property is the sales comparison approach most appropriate?
A condominium in a 55-and-over residential complex.
Maximum seller concession on a conforming loan at 90% LTV or less is what?
6% of the sales price.
Which appraisal form is used for single-family investment properties?
Form 1007 (Single-Family Investment Property Appraisal).
When may consumers waive the right to rescind?
In writing, due to a bona fide personal financial emergency.
What income documents are normally NOT required for a salaried borrower?
Year-to-date profit-and-loss statements.
HMDA data must be collected for which of these: refinancing a second home or student loan?
Refinancing a second home (secured by a dwelling).
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