NMLS S.A.F.E. Exam 3

During initial application, loan originators must make disclosure of all of the following, except:

A. Regulatory history
B. Criminal history
C. Civil and administrative records
D. Three-year history of loan production

D. Three-year history of loan production

The process of pooling together similar types of loans to create mortgage-backed securities for sale in the secondary financial markets is called:

A. Diversification
B. Capitalization
C. Securitization
D. Collateralization

C. Securitization

Which of the following features would be permitted for a non-qualified mortgage, but not for a qualified mortgage?

A. A term of 15 years
B. An adjustable interest rate
C. A debt-to-income ratio of 43%
D. An interest-only option

D. An interest-only option

What federal legislation requires loan originators to collect demographic data to ensure that creditors are not engaging in discriminatory lending?

A. ECOA
B. HMDA
C. GLB Act
D. FCRA

B. HMDA

Which of the following is true?

A. Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule
B. Open-end credit plans, timeshare plans, and closed-end consumer credit loans are exempt from the ATR Rule
C. Open-end credit plans are covered by the ATR Rule
D. Reverse mortgage loans are covered by the ATR Rule

A. Open-end credit plans, timeshare plans, and reverse mortgage loans are exempt from the ATR Rule

A first-lien mortgage loan will exceed the HOEPA APR threshold and qualify as a high-cost mortgage if its APR is:

A. 1.5 percentage points above the average prime offer rate for a comparable transaction
B. 6.5 percentage points above the average prime offer rate for a comparable transaction
C. 3 percentage points above the average prime offer rate for a comparable transaction
D. 4.5 percentage points above the average prime offer rate for a comparable transaction

B. 6.5 percentage points above the average prime offer rate for a comparable transaction

Which of the following forms is the appraisal form used for investment properties?

A. 1007
B. 1073
C. 1004
D. 1005

A. 1007

Leslee is a loan processor who is not required to perform her duties at the direction of or subject to the supervision and instruction of an individual who is licensed or exempt. Leslee is a(n):

A. Registered loan originator
B. Mortgage loan originator
C. Independent contractor
D. Licensed loan processor

C. Independent contractor

The Truth in Lending Act protects consumers in the mortgage market by:

A. Using disclosures to ensure that consumers make informed choices for loan products
B. Prohibiting subprime mortgage loan transactions
C. Regulating the interest rates that creditors can charge for conventional mortgage loans
D. Limiting the cost of settlement services by imposing caps on amounts charged

A. Using disclosures to ensure that consumers make informed choices for loan products

By adding together the margin and index, the result is known as the:

A. True index
B. Rate ceiling
C. Start rate
D. Fully indexed rate

D. Fully indexed rate

Bob Bachman is applying for a mortgage with MZ Mortgage. He is referred by MZ Mortgage to a title company in which MZ Mortgage has a 10% ownership interest. At what point must Bob be made aware of the relationship between the two companies?

A. At the time of the referral
B. It is not necessary, because MZ Mortgage owns less than 25% of the title company
C. Within three business days of application
D. Within three business days after the referral

A. At the time of the referral

An interest-only loan might be suitable for any of the following, except:

A. A corporate executive who receives large quarterly bonuses
B. A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time
C. An investor who would prefer to pay as little as possible while holding the property
D. A self-employed borrower whose company is busiest during a six-month period over the holidays

B. A part-time hourly worker who may get overtime in the summer and plans to pay principal at that time

Which of the following is not permitted for a HOEPA loan?

A. Documenting a borrower's ability to repay the loan
B. Requiring a balloon payment after the first five years
C. Refinancing into another HOEPA loan within 12 months if it is in the borrower's best interest
D. Making a loan solely based on the collateral value of the property

D. Making a loan solely based on the collateral value of the property

When completing the Loan Estimate, costs must be presented:

A. In dollars and cents
B. In dollars and cents, except for appraisal costs
C. By rounding them to the next whole number, except for estimated principal and interest payments
D. By rounding them to the next whole number, except for third-party costs

C. By rounding them to the next whole number, except for estimated principal and interest payments

In what scenario would a sales comparison approach be appropriate?

A. A condo complex for residents aged 55 and over
B. A bio-dome built in the middle of a residential neighborhood
C. A commercial office building in an area zoned commercially
D. A complex of office units in a business park near a residential neighborhood

A. A condo complex for residents aged 55 and over

Which of the following settlement services would not be covered by RESPA?

A. Services of a real estate agent
B. Office supply provider
C. Processing services
D. Title abstractor

B. Office supply provider

If a financial institution intends to share consumer information with nonaffiliated third parties, an initial privacy notice is due to a consumer at what point?

A. Within seven business days of a customer providing nonpublic personal information sufficient to pull a credit report
B. Within three business days of initial contact between the consumer and the financial institution
C. No later than three business days prior to settlement
D. No later than the time at which a customer relationship is established

D. No later than the time at which a customer relationship is established

Which of the following is the least-expensive type of reverse mortgage?

A. HECM
B. Proprietary mortgage
C. Non-recourse
D. Single purpose

D. Single purpose

A single-purpose reverse mortgage is a low-cost loan offered to low-income borrowers by state and local agencies or non-profit organizations. They are typically made for purposes such as payment of property taxes or payment for home improvements.

All of the following are part of the underwriter's review of collateral, except:

A. Sales contract
B. Bank statements
C. Appraisal
D. Flood zone verification

B. Bank statements

Bank statement review is part of an underwriter's assessment of the borrower, not the collateral.

Which of the following loans requires the collection of HMDA data?

A. Refinance of a second home
B. Financing of a recreational vehicle
C. Student loan
D. SBA loan

A. Refinance of a second home

The Nationwide Multistate Licensing System and Registry seeks to accomplish all of the following objectives, except:

A. Provide uniform license applications and reporting requirements for state-licensed originators
B. Provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace
C. Provide increased accountability and tracking of loan originators
D. Facilitate the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators

B. Provide comprehensive training and facilitate responsible behavior to expand the subprime mortgage marketplace

Gift funds may be used as a source for down payment:

A. As long as they are accompanied by a letter including the name of the donor and an indication that the funds are not expected to be repaid
B. As long as it is within the 3.5% minimum; anything more than 3.5% must be the borrower's own funds
C. As long as the donor documents the debt and it is payable in more than four installments
D. Only for a first-time homebuyer

A. As long as they are accompanied by a letter including the name of the donor and an indication that the funds are not expected to be repaid

In order for a home loan to be a qualified mortgage, the debt-to-income ratio may not exceed:

A. 43%
B. 28%
C. 36%
D. 46%

A. 43%

Securitization helps lenders to:

A. Make more loans to lesser-qualified customers
B. Increase the menu of products available to their customers
C. Provide funds to the highest bidder on the secondary market
D. Exchange active loans to another entity to generate new funds to make more loans

D. Exchange active loans to another entity to generate new funds to make more loans

The Dodd-Frank Act listed the creation of financial education programs as one of the primary functions of:

A. NMLS
B. CFPB
C. FHA
D. HUD

B. CFPB

Jake Pearson applies for a loan with TNT Mortgage on June 1. TNT is required to inform Jake whether it has approved his loan by:

A. June 4th
B. June 15th
C. July 15th
D. June 30th

D. June 30th

The federal agency that implements and enforces rules related to the origination of FHA loans is the:

A. Consumer Financial Protection Bureau (CFPB)
B. Department of Housing and Urban Development (HUD)
C. Federal Trade Commission (FTC)
D. National Credit Union Administration (NCUA)

B. Department of Housing and Urban Development (HUD)

Which section of the URLA contains questions which, depending on the applicant's answer, could result in immediate rejection of the application?

A. Information for Government Monitoring Purposes
B. Declarations
C. Details of the Transaction
D. Acknowledgement and Agreement

B. Declarations

Which of the following best describes the LTV ratio?

A. It is the ratio of the borrower's total debt to monthly income
B. It is the ratio of the borrower's principal loan balance to the appraised value of the property
C. It is the ratio of the borrower's monthly loan payment to the principal loan balance
D. It is the ratio of the borrower's monthly housing expense to monthly income

B. It is the ratio of the borrower's principal loan balance to the appraised value of the property

Wilbur Green is applying for a loan originator license. His credit report indicates that he has a number of judgments filed against him, all related to a serious medical condition his wife suffered four years prior. Will Wilbur be denied a license because of the judgments?

A. Yes, current outstanding judgments show a lack of financial responsibility
B. Yes, because they indicate a pattern of seriously delinquent accounts within the past three years
C. No, because the judgments are a result of medical expenses, they will not be held against him
C. The judgments will not be held against him because they were entered more than three years ago

C. No, because the judgments are a result of medical expenses, they will not be held against him

A borrower is buying a house with a sales price of $210,000, but the appraisal came in at $200,000. The borrower takes out a loan of $160,000. What is the LTV?

A. 76%
B. 90%
C. 80%
D. 75%

C. 80%

Ricky and Lucy are buying a house using a conforming loan, and they have reached an agreement to receive the max concession from their seller. They have agreed on a $230,000 sales price, and are putting down 10%. What is the amount of the seller concession?

A. $6,210
B. $6,900
C. $13,800
D. $12,420

C. $13,800

What is the minimum time period that MIP must be in place for a USDA loan?

A. Zero years
B. Three years
C. Five years
D. Depends on LTV

A. Zero years

MIP, or mortgage insurance premiums, are only paid on FHA loans. Some other loan types are subject to PMI (private mortgage insurance). USDA loans use a funding fee and an annual premium rather than the traditional forms of MIP or PMI.

Mortgage insurance may be cancelled at what LTV percentage on a VA loan?

A. Mortgage insurance is not required
B. 80%
C. 75%
D. After five years

A. Mortgage insurance is not required

VA loans require a funding fee instead of mortgage insurance

A lending transaction has been rescinded by a consumer with cold feet. What happens as a result?

A. The lender no longer has security interest in the property, and the borrower is refunded any and all charges paid during the loan process
B. The rescission may be challenged by the lender as long as it is within seven business days
C. The lender no longer has security interest in the property, and the borrower is liable for any finance charges and appraisal costs
D. After cancellation, the lender retains any money or property paid by the borrower

A. The lender no longer has security interest in the property, and the borrower is refunded any and all charges paid during the loan process

TILA requires that, in the event of rescission, the lender relinquish security interest in the property and return any and all money or property paid by the borrower. All parties are placed back in the exact position they were in before the transaction took place.

Which of the following may be considered an appraisal red flag?

A. An appraiser's resume shows substantial experience in the area
B. Property owner and seller are not the same
C. Appraisal is dated after the sales contract
D. Comparables are located within one mile of the subject

B. Property owner and seller are not the same

Which of the following are considered liens?

A. Judgment, mortgage, flood insurance
B. Mortgage, mechanic's lien, debentures
C. Chattel, mortgage, attachment
D. Judgment, attachment, mortgage

D. Judgment, attachment, mortgage

Which of the following might raise a red flag and suggest that further investigation is necessary to ensure that there is no fraud in an application?

A. The applicant uses a co-borrower with a different last name
B. Information in corporate-produced W-2s matches that given in the application
C. The borrower's employment is not consistent with education level
D. Savings patterns and accumulated assets make sense considering the borrower's level of income

C. The borrower's employment is not consistent with education level

Which of the following is not a prohibited practice regarding loan originator compensation?

A. A loan originator receives .5% more compensation if a loan contains a prepayment penalty
B. A loan originator receives compensation for closing over $1 million in volume per month
C. A loan originator receives 10% more compensation if he/she closes more than ten transactions in a month with an interest rate of 6.5% or more
D. A loan originator receives compensation from a consumer and from the creditor

B. A loan originator receives compensation for closing over $1 million in volume per month

A loan originator is prohibited from receiving compensation based on the terms of a loan, such as prepayment penalties or interest rates, and is prohibited from receiving dual compensation (i.e., from both the consumer and the creditor).

Muny Baggins regularly extends credit that is subject to a finance charge and payable in a written agreement of more than four installments. Under the Truth-in-Lending Act, Muny is a:

A. Mortgage servicer
B. Mortgagee
C. Mortgagor
D. Creditor

D. Creditor

The Truth-in-Lending Act identifies a creditor as a person, including a lender and a table funding mortgage broker, that regularly extends credit that is subject to a finance charge or is payable by written agreement in more than four installments. A creditor may also be a credit card issuer.

All of the following are considered involuntary liens, except:

A. Mortgage
B. Mechanic's lien
C. Tax lien
D. Judgment

A. Mortgage

The reporting form used to communicate HMDA data is called what?

A. 1073
B. Loan/Registration Application
C. 1004
D. Loan/Application Register

D. Loan/Application Register

How many total hours of ethics are required, at minimum, for pre-licensing education?

A. 20
B. 8
C. 16
D. 3

D. 3

Nicole is obtaining a higher-priced mortgage loan to buy a home from a Marine in South Carolina who has been reassigned to a base on the West Coast. The Marine purchased and moved into his home three months earlier. In this transaction, a second appraisal will:

A. Be required because the seller acquired the home 90 days prior to the date that Nicole agreed to purchase the home
B. Be required if there is any evidence that the sale constitutes property flipping
C. Not be required unless Nicole has agreed to purchase it for 20% more than the Marine paid
D. Not be required since purchases from servicemembers are not subject to the requirement for two appraisals

D. Not be required since purchases from servicemembers are not subject to the requirement for two appraisals

When an ARM contains a limit on the amount that an interest rate can adjust, it is called a(n):

A. Cap
B. Index
C. Margin
D. Frequency

A. Cap

Typical violations of advertising provisions include the use of trigger terms without:

A. Allowing the borrower to choose another alternative
B. Giving the borrower a chance to choose his/her own service provider
C. Explaining to the borrower how the originator is compensated
D. Stating the less advantageous terms of repayment

D. Stating the less advantageous terms of repayment

Tom and Cindy Lewis are buying a house with a $300,000 sale price, and their LTV will be 80%. They paid $3,600 in discount points. How many total points did they pay?

A. 2
B. 4
C. 2.5
D. 1.5

D 1.5

The Pois have just closed on their mortgage loan at a formal settlement meeting. What is mortgage loan originator Leilani's responsibility after loan closing?

A. She must provide any required re-disclosures
B. None; Leilani's tasks are complete
C. She must provide another set of disclosures, showing final costs and expenses
D. She must record the transaction with the county recorder

B. None; Leilani's tasks are complete

Which of the following is NOT an example of "liquid assets"?

A. Earnest money
B. Cash value of life insurance policies
C. Net worth of businesses
D. Savings accounts

C. Net worth of businesses

Liquid assets include things like earnest money, cash, checking or savings accounts, stocks and bonds, and the cash value of life insurance policies. Non-liquid assets include things such as retirement accounts, real estate, and net worth of businesses.

Which of the following mortgage industry documents might the borrower be asked to sign while it still contains blank sections?

A. A broker agreement
B. A TIL disclosure
C. A verification of employment
D. The promissory note

C. A verification of employment

Generally, a verification of employment is signed by the borrower with blank spaces remaining, with the understanding the borrower has signed to give permission for the employer to complete it.

Sue Ellen has been a mortgage loan originator for nine years and knows her hometown very well. She meets with a couple who have moved to her town from Spain. Checking their application, Sue Ellen sees that the neighborhood they are hoping to move to is higher-income and predominantly white. Without discussing it or checking their financial paperwork, Sue Ellen tells the couple they are likely "aiming too high" in their requested loan amount, and she suggests that they keep looking "elsewhere" for "something more appropriate." Sue Ellen is engaging in:

A. Streamlining
B. Discouragement
C. Steering
D. Redlining

B. Discouragement

Discouragement is a form of discrimination in which borrowers belonging to certain protected classes are discouraged from applying for a loan on the basis of their personal characteristics. Here, Sue Ellen has no idea as to the couple's financial qualifications to purchase a property in their desired neighborhood. She bases her discouragement solely on racial characteristics, which is a discriminatory act that is prohibited under federal law.

What information, if found during a title search, is likely to prevent the completion of a transaction to refinance a first mortgage?

A. A deed with conflicting ownership information
B. A utility easement
C. A second mortgage
D. A judgment that was secured by a property lien, but recently paid in full

A. A deed with conflicting ownership information

Creditors protect their investment in a mortgage by placing a lien on the home used as security. A title search shows whether other liens are in place that will have priority over the creditor's lien. When a refinance pays off an existing first mortgage, the second mortgage will have priority, but creditors can use subordination agreements to ensure that the new mortgage has priority over the existing second mortgage. The title search might also uncover problems in the chain of title which could stop a transaction - for instance, a deed with conflicting ownership information (sometimes these are "wild deeds" with names that appear nowhere else on record) will require additional research and might demand legal action or could fully stop the refinance.

A consumer report is defined under which of the following federal laws?

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

B. FCRA

FCRA defines a consumer report as any information from a consumer reporting agency that relates to a consumer's creditworthiness, credit standing, credit capacity, character, personal characteristics, or mode of living, used or expected to be used, in order to determine eligibility for credit or insurance, or to evaluate a consumer for employment.

If a consumer submits a complaint about a mortgage lender to the CFPB, the lender has _____ days to respond before the CFPB publishes the complaint in its public complaint database and pursues a potential investigation.

A. 7
B. 10
C. 20
D. 15

D. 15

An underwriter:

A. Is responsible for approving an originator's license
B. Verifies that the applicant and subject property meet lender guidelines
C. Looks for red flags in marketing
D. Facilitates the Safeguards Rule for the lender

B. Verifies that the applicant and subject property meet lender guidelines

With what type of loan do payments, including principal and interest, remain constant throughout the life of the loan?

A. A balloon loan, as long as the maturity date is beyond ten years
B. An ARM with a conversion option
C. Fixed rate
D. An FHA loan

C. Fixed rate

The Talleys are buying a home for $180,000. What is the minimum possible down payment they could make in order to avoid paying PMI?

A. $36,000
B. $20,000
C. $18,000
D. $32,000

A. $36,000

The LTV for the Talleys must be 80% or less. A down payment of 20% exactly would be $36,000.

The Foxes are obtaining a mortgage loan of $140,000. They are making a down payment of $35,000, which is 20% of the purchase price. What is the purchase price of the property?

A. $150,000
B. $200,000
C. $175,000
D. $235,000

C. $175,000

A state licensing agency is conducting an examination of Willow Wand's loan origination activities. In doing so, it may do all of the following, except:

A. Require her to compile reports related to her mortgage loan transactions
B. Close the business for the period of the examination
C. Subpoena books and records
D. Control access to Willow's books and records

B. Close the business for the period of the examination

In conducting an examination or investigation, a state licensing agency may, among other things, administer oaths and affirmations; subpoena witnesses, as well as books and records; require the production of relevant documents; and control access to any documents and records of the person under investigation. The state licensing agency is not authorized to close the business for any period of time.

The Jepsons have brought mortgage loan originator Stanley Rothke a check to pay for loan origination fees, the private mortgage insurance premium, and the commitment fee. These charges are:

A. Paid-outside-of-closing charges
B. Prepaid finance charges
C. Third-party charges
D. Mortgage loan transaction fees

B. Prepaid finance charges

A prepaid finance charge is any finance charge paid separately, in cash or by check, before or at consummation of a transaction or withheld from the proceeds of the loan at any time. They are direct charges paid by the borrower and include loan origination, discount, and commitment fees; any prepaid private mortgage insurance; underwriting, processing, tax service, and courier fees; buy-down funds; and prepaid interest.

After a borrower allows the assumption of his or her VA loan, he or she may use his or her VA privilege again only after:

A. Five years have passed
B. The home is sold to a new owner
C. The original VA loan is satisfied
D. The original VA loan is moved from his or her name into the name of the assuming borrower

C. The original VA loan is satisfied

A VA loan is assumable; however, the veteran's VA eligibility is no longer available until the original VA loan has been satisfied. This means that it is paid off, either over the remaining amortization time period, sale of the home, or refinancing out of the VA loan.

Which of the following is not a part of the definition of a loan originator?

A. For compensation or gain, takes residential mortgage applications
B. For the expectation of compensation or gain, offers or negotiates terms of a residential mortgage loan
C. Person or entity that only performs real estate brokerage activities
D. For compensation or gain, negotiates residential mortgage loans

C. Person or entity that only performs real estate brokerage activities

If a foreclosure proceeding has been initiated by a creditor, the borrower may exercise his/her three-year right to rescind if the finance charge for the loan was understated by:

A. $35
B. $10
C. More than $35
D. More than $100

C. More than $35

Conrad began his 20 HR pre-licensing education in one state and ended up moving to another state prior to actually submitting an application for a mortgage loan originator license. What happens to the courses he has completed?

A. The NMLS-approved 20 HR pre-licensing courses are accepted towards credit in any state
B. He must retake them under the requirements of the state in which he currently resides
C. He can petition the state licensing agency for permission to submit those courses towards the requirement
D. The courses may or may not be accepted towards pre-licensing credit, depending on the requirements of the new state

A. The NMLS-approved 20 HR pre-licensing courses are accepted towards credit in any state

All of the following requirements are applicable to HECMs, except:

A. The loan must be secured by the borrower's principal residence
B. The applicant must complete a consumer information session on reverse mortgages loans
C. The applicant must not have an existing mortgage on the residence
D. The applicant must be at least 62 years old

C. The applicant must not have an existing mortgage on the residence

Stan is a loan processor who works closely with Heidi, who is a licensed loan originator. Both are employed by a state-licensed mortgage broker. While Heidi was out of the office, one of her clients called to ask whether it would be better to apply for an ARM or a fixed-rate loan. How should Stan respond?

A. He should advise the client that he cannot discuss loan terms, but will have Heidi return the call
B. He should only respond to the client's question if the transaction is for a home purchase and the client needs to expedite loan approval to purchase the home
C. He should refer the client to the Settlement Cost Booklet
D. He should not take the call since the law prohibits him from communicating directly with consumers

A. He should advise the client that he cannot discuss loan terms, but will have Heidi return the call

Under ECOA, it is permissible to do which of the following?

A. Base a credit decision solely on the fact that a borrower was in a consumer credit counseling program
B. Refuse to allow a borrower to use public assistance income to attempt to qualify
C. Make oral or written statements that might discourage a prospective applicant from applying
D. Refuse to consider child support payments that have been made sporadically

D. Refuse to consider child support payments that have been made sporadically

ECOA prohibits discriminatory practices, such as refusing to consider public assistance as income or declining a borrower solely because of his/her involvement in a consumer credit counseling program. Additionally, ECOA does not allow for discouragement meant to keep a borrower from applying at all. Child support must also be considered, as long as payments are made regularly.

A consumer is obtaining a closed-end loan that allows for rescission. The borrower may exercise his or her right to rescind:

A. If he or she collects the signatures of all other parties with an ownership interest in the property
B. Until midnight on the third business day after signing the lending agreement
C. Until midnight on the first business day after signing the lending agreement
D. Only if he or she has a loan contract that explicitly provides for the right to rescind

B. Until midnight on the third business day after signing the lending agreement

hen a borrower chooses to allow their interest rate to rise or fall with the market until the loan is closed, it is called:

A. A lock-in
B. A variable rate
C. A float
D. An adjustable rate

C. A float

If a borrower chooses to float the interest rate, the rate will not be set until closing unless the borrower obtains a lock-in (also called a rate lock or rate commitment).

Lester is calculating prepaid finance charges that will be withheld from the proceeds of the loan. These direct loan charges paid by the borrower must be included in computing the:

A. Annual percentage rate
B. Broker fees and the amount charged by a third party
C. Amount of the payment
D. Length of the loan

A. Annual percentage rate

The size of the government's guarantee on a VA loan depends on:

A. Whether the interest rate is fixed or adjustable
B. Whether this is the first time a veteran uses the guarantee or a subsequent transaction
C. The length of the loan term
D. The size of the loan being obtained

D. The size of the loan being obtained

A fully-documented loan for a salaried borrower should include all of the following, except:

A. Year-to-date profit and loss statements
B. W-2s for the past two years
C. Paystubs for the most recent 30 days
D. Complete employment information for the most recent two years

A. Year-to-date profit and loss statements

A _____ is defined as any mortgage product other than a 30-year fixed-rate mortgage.

A. Piggyback loan
B. Subordinate lien
C. Nontraditional mortgage
D. Nonconventional mortgage

C. Nontraditional mortgage

Statements in advertising that may lead a consumer to incorrectly assume that a mortgage product or company is directly endorsed by the federal government are in violation of which law?

A. Regulation A
B. Regulation Z
C. Regulation B
D. Regulation X

B. Regulation Z

The Loan Estimate is required for:

A. All mortgage loans
B. All closed-end federally related mortgage loans
C. All nontraditional mortgage loans
D. All open-end mortgage loans

B. All closed-end federally related mortgage loans

Which of the following is not prohibited by RESPA?

A. Reasonable fees paid for services actually performed
B. Kickbacks
C. Referral fees
D. Premiums charged on fees for third-party services

A. Reasonable fees paid for services actually performed

"Equity" is defined as:

A. The difference between the fair market value of a property and the current balances of any liens
B. The difference between the appraised value and the purchase price
C. The relationship between the value of the house and a borrower's assets
D. The balance of any liens divided by the proposed value of any new loan

A. The difference between the fair market value of a property and the current balances of any liens

The preferred debt-to-income ratio for applicants for VA loans is:

A. 35%
B. 43%
C. 50%
D. 41%

D. 41%

Your borrower does not wish to complete the demographics questions in the Demographic Information section of the 1003. What should you do?

A. Leave the section blank
B. Tell the borrower his/her loan cannot be funded until the information is obtained
C. Complete the section based on a visual observation of the borrower during a face-to-face application
D. Refuse to take the application

C. Complete the section based on a visual observation of the borrower during a face-to-face application

A loan has a rate of 6% for 30 years with a payment of $1,400 per month for the first five years and a payment of $1,800 per month for the remaining 25 years. What type of loan is this?

A. Adjustable-rate
B. FHA buy-down
C. Option ARM
D. Interest-only option fixed-rate

D. Interest-only option fixed-rate

Which government agency is responsible for policing and enforcing misleading advertisement for credit?

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

B. CFPB

It is ethical for a mortgage broker to offer a loan at a rate higher than the best rate available to the borrower:

A. Never
B. Only when the borrower is unaware and will likely not know
C. If the lender agrees to subsidize the broker fees
D. If the borrower chooses the rate in order to secure a borrower credit for closing costs

D. If the borrower chooses the rate in order to secure a borrower credit for closing costs

In order to qualify for an adjustable-rate mortgage, a consumer must be able to show that he or she can:

A. Make regularly scheduled payments that are calculated using the loan's introductory rate
B. Make amortizing payments that are calculated using the fully indexed rate for the ARM
C. Make amortizing payments that are calculated using the loan's rate after the first interest rate adjustment occurs
D. Make regularly scheduled payments that are calculated using the fixed interest rate for which the consumer would be eligible

B. Make amortizing payments that are calculated using the fully indexed rate for the ARM

A property has a value of $165,000. The first mortgage has a current balance of $48,000, and there is a HELOC with a limit of $60,000. There is $30,000 drawn on it. What is the CLTV?

A. 47%
B. 29%
C. 40%
D. 65%

A. 47%

____ occurs when a loan originator receives direct compensation from a borrower and additional indirect compensation from a creditor in the same mortgage loan transaction.

A. Equity-based lending
B. Steering
C. Dual compensation
D. Yield spread premium

C. Dual compensation

Negative amortization:

A. Describes the result of a default
B. Occurs when the mortgage payment is not sufficient to pay the interest currently due
C. Occurs when a borrower pays only interest due each month
D. Defers principal

B. Occurs when the mortgage payment is not sufficient to pay the interest currently due

According to fair lending laws, age may be considered as a factor in denying a loan application if:

A. The applicant is too young to enter into a contract
B. The applicant is seeking a reverse mortgage and is 62 years old
C. The applicant is too old to survive the term of the loan
D. The applicant is too young to have accumulated savings and requires a gift from his or her parents in order to make a down payment

A. The applicant is too young to enter into a contract

What document would an underwriter rely on for detailed information concerning the collateral for a mortgage loan?

A. The property appraisal
B. The borrower's asset statements
C. The URLA
D. The borrower's employment documentation

A. The property appraisal

An assumption clause

A. allows the seller to reassume the mortgage if the buyer falls behind in his payments.
B. assumes the buyer has the ability to repay the loan based on his credit score.
C. allows a buyer to assume the seller's mortgage.
D. allows the buyer to sell the mortgage without requiring the seller's authorization.

C. allows a buyer to assume the seller's mortgage.

Which of the following would be a red flag concerning occupancy?

A. The borrowers already own and reside in a property in the same neighborhood
B. The subject property is in another state
C. The borrower has not moved in within ten days after closing
D. The property is three hours away and being declared as a second home

A. The borrowers already own and reside in a property in the same neighborhood

A borrower is unlikely to purchase a new primary residence in the same neighborhood as his/her current residence, unless one of the two will be an investment property, or he/she may be planning to let the old home go into foreclosure after purchasing the new home at current market values.

Which of the following is not a characteristic of an HPML?

A. It is secured by the borrower's principal dwelling
B. It has an APR that exceeds the average prime offer rate by 1.5 percentage points for a loan secured by a first lien on the home
C. It has an APR that exceeds the average prime offer rate by 3.5 percentage points for a loan secured by a subordinate lien on the home
D. It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points

D. It has an APR that exceeds the rate for Treasury securities with a comparable rate of maturity by 6.5 percentage points

For what length of time can a bankruptcy remain on a credit report?

A. No more than ten years
B. No more than one year
C. No more than seven years
D. No longer than three years after it is paid

A. No more than ten years

The regulations issued for the implementation of ECOA are known as:

A. Regulation E
B. Regulation B
C. Regulation C
D. Regulation X

B. Regulation B

When a seller provides all or part of the financing for the borrower in order to finance a purchase transaction, it is known as:

A. For sale by owner (FSBO)
B. Seller carry-back
C. Seller concessions
D. Seller self-financed

B. Seller carry-back

A balloon mortgage has a:

A. Short-term payment that can go up or down from month to month throughout the life of the loan
B. Payment that grows with each month as equity decreases
C. Large payment required at the onset of the loan and periodic payments thereafter
D. 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time

D. 30-year amortization period, but a requirement to pay the loan balance within a much shorter period of time

A _____ is an individual who accepts a fee to falsely claim ownership to a property.

A. Straw buyer
B. Air buyer
C. Straw seller
D. Air seller

C. Straw seller

A mortgage and a lien are both examples of

A. deeds of trust.
B. concepts which are legal in some states but not in others.
C. easements.
D. encumbrances.

D. encumbrances.

Mortgage loan originator Trevor Tibbs has accepted a loan application for a dwelling that is a mobile home not permanently affixed to the land. Does this mobile home meet the requirements necessary for it to be considered security for a residential mortgage loan?

A. Yes, a dwelling includes a structure whether or not that structure is attached to real property
B. No, dwellings must be permanently attached to real property
C. No, mobile homes are classified as personal property, not real property
D. Yes, as long as the real property upon which the mobile home will be located is in the borrower's name, the loan may be a residential mortgage loan

A. Yes, a dwelling includes a structure whether or not that structure is attached to real property

Those who disagree with the idea of a fiduciary duty in mortgage loan transactions feel that _____ is ultimately responsible for ensuring that a certain loan product has appropriate terms and conditions.

A. The mortgage broker
B. The lender
C. The consumer
D. The underwriter

C. The consumer

When would a license be suspended without a hearing?

A. If a licensee fails to renew
B. If a licensee fails to request a hearing with the state regulator
C. If a licensee has failed to complete pre-licensing requirements
D. If a licensee has already executed a right to a hearing for a previous violation

B. If a licensee fails to request a hearing with the state regulator