20 Hour SAFE: Applying Mortgage Knowledge to Exam Preparation

The penalties for paying or accepting an illegal referral fee are:

a. Fines of up to $5,000 and up to one year in prison

b. Fines of up to $10,000 and up to one year in prison

c. Fines of up to $10,000 and up to three years in prison

d. Fines of up to $20,000 and up to one year in prison

B

An annual escrow analysis is used to do which of the following?

a. Report underwriting errors

b. Prevent escrow overages

c. Ensure the loan is properly amortized

d. Reduce burden on the servicer

B

The disclosure requirements of RESPA would apply to which of the following loans?

a. A loan to purchase 75 acres of land

b. A farm loan

c. A loan to purchase a property that includes a gas station and convenience store

d. A loan to purchase a duplex and rehabilitate it into a single-family dwelling

D

A customer with an excellent credit score submits a loan application. When does ECOA require that the applicant be advised of the status of the application?

a. Within one week

b. Within three days

c. Within 30 days

d. Within 90 days

C

Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice?

a. Information on the credit reporting agency if the adverse action is based on his credit report

b. Reasons for the denial of credit

c. A description of credit he requested

d. His credit score

D

According to fair lending laws, which of the following may loan applicants be asked to disclose for HMDA data collection purposes?

a. Their religion

b. Their race

c. If they will stop working once they have children

d. If they plan to have more than one child

B

Finance charges always include which of the following?

a. Mortgage broker fee

b. Title insurance charges

c. Document preparation fees

d. Credit report fee

A

Which of the following is not included in calculating the APR?

a. Discount points

b. Underwriting fees

c. PMI

d. Escrow fees

D

The amount of the down payment, the amount of the finance charge, or the number of payments needed are all examples of _______________ under TILA.

a. Components of the finance charge

b. Components of the APR

c. Trigger terms

d. Prohibited disclosures

C

A borrower has gone to settlement for a cash-out refinance on Tuesday for his principal residence. His rescission period is over at midnight on Friday. According to the provisions specified under federal law, what is the first possible day the loan could fund?

a. Tuesday

b. Friday

c. Saturday

d. Monday, the following week

C

HOEPA was enacted as a part of:

a. HMDA

b. ECOA

c. RESPA

d. TILA

D

Closed-end loans with rates that exceed the average prime offer rate, but are not high enough to trigger protections under HOEPA, are known as:

a. Reverse mortgages

b. Subprime mortgage loans

c. Higher-priced mortgage loans

d. Qualified high-cost mortgages

C

XYZ Mortgage Company just mailed a Closing Disclosure to a consumer. The waiting period prior to closing will begin:

a. On the date that the Closing Disclosure is mailed

b. The next business day after the Closing Disclosure is mailed

c. The third business day after the Closing Disclosure is mailed

d. The day on which the company received a completed, signed loan application

C

The mandatory waiting period between issuance of disclosures and consummation may be waived:

a. Using a pre-printed form from the lender

b. If the consumer requests a waiver due to a bona fide financial emergency

c. If the loan originator waives it for the consumer

d. If the loan is a qualified mortgage

B

There is a ____ accuracy tolerance for amounts stated on the Loan Estimate and the actual closing costs if the consumer is allowed to shop for his/her own settlement service provider.

a. 0%

b. 10%

c. 5%

d. 15%

B

All but which of the following may serve as a legal, non-discriminatory basis for denying a mortgage loan application?

a. The loan applicant has a credit score of 530 and a history of delinquencies on previous loans

b. The loan applicant's debt-to-income ratio is 56%

c. The consumer has no cash for a down payment

d. The consumer is purchasing a home located in a neighborhood primarily occupied by minorities

D

The Loan Originator Compensation Rule is intended to discourage which of the following practices?

a. Steering

b. Redlining

c. Property flipping

d. Air loans

A

The Loan Originator Compensation Rule defines compensation to include all of the following, except:

a. Salaries, bonuses, and commissions

b. Awards, services, trips, and similar benefits

c. Fees charged and retained by a mortgage loan originator

d. Payments collected by a mortgage company for services other than loan origination services

D

HOEPA would not apply to:

a. An adjustable-rate mortgage loan

b. A bridge loan to finance construction

c. A purchase money mortgage loan

d. A closed-end home equity loan

B

If a creditor denies an application for a first lien mortgage, a copy of the appraisal:

a. Is not required to be provided to the consumer

b. Must be included with the notice of adverse action

c. Must be provided within 30 days of the decision to deny

d. Is not required to be provided unless requested in writing

C

Lenders must report detailed information about loan transactions and demographic information concerning borrowers. Which of the following laws creates that reporting requirement?

a. HMDA

b. RESPA

c. TILA

d. Gramm-Leach-Bliley Act

A

Suspicious Activity Reports (SARs) are used to help detect and prevent:

a. Loan flipping

b. Discriminatory lending practices

c. Money laundering

d. Subprime lending

C

Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than ____, or a lender may collect PMI until ____ loan-to-value is reached.

a. 65% / 50%

b. 78% / 62%

c. 80% / 65%

d. 80% / 78%

D

If a mortgage broker decides to use telemarketing to establish leads for loan origination, which of the following should occur?

a. The broker should invest in a state-of-the-art predictive dialer

b. The broker should stop calling current customers unless they have given consent

c. The broker should only call former and current customers to ask for referrals d. The broker should obtain access to the Do-Not-Call Registry

D

If a consumer opens an account online, the Gramm-Leach-Bliley Act states that what period of time constitutes a "reasonable opportunity" to opt out of information sharing?

a. 60 days

b. 30 days

c. No specified period

d. Opt-out must occur immediately

B

If a loan applicant chooses not to disclose his or her race on a loan application, what recourse does a mortgage professional have?

a. Note that the applicant has declined to answer and select a race based on visual observation

b. Inform the applicant of the implications of the FBI Mortgage Fraud Warning Notice

c. Inform the applicant that the lender will reject the loan application since it is incomplete

d. Provide the applicant with an Adverse Action Notice

A

Under the Fair Credit Reporting Act, which of the following entities has the burden of protecting a consumer's privacy when his/her credit information is being reported?

a. Mortgage broker

b. Credit reporting agency

c. HUD

d. The consumer

B

The Do-Not-Call Implementation Act authorized the implementation and enforcement of:

a. The Telemarketing Sales Rule

b. The Telemarketing Consumer Fraud and Abuse Prevention Act

c. The Do-Not-Call Registry

d. The Telemarketing Protection Registry

C

This Rule applies to commercial communications used to market mortgage loan products and services to consumers.

a. MAP Rule

b. Truth in Advertising Rule

c. Safeguards Rule

d. RESPA Rule

A

Under the Gramm-Leach-Bliley Act, which of the following is considered nonpublic information?

a. Former owners of a particular property

b. The street address of the property a borrower intends to purchase

c. A borrower's current loan balances

d. The assessed value of a subject property

C

An application is defined to consist of six pieces of information. These include the borrower's name, income, and desired loan amount, as well as:

a. The borrower's Social Security Number, current address, and address of the property he or she wishes to purchase

b. The borrower's credit score, current address, and current property value

c. The borrower's Social Security Number, the address of the property he or she wishes to purchase, and an estimate of the property value

d. The borrower's credit score, the address of the property he or she wishes to purchase, and the loan product desired

C

When must a lender advise loan applicants about the status of their application?

a. Within one week

b. Within three days

c. Within 30 days

d. Within 90 days

C

What kind of loan transaction requires disclosure of the special information booklet called Your Home Loan Toolkit: A Step-by-Step Guide?

a. A new home purchase

b. A reverse mortgage origination

c. Refinance transaction

d. Subordinate financing for a home equity loan

A

For the purposes of issuing a revised Loan Estimate, "changed circumstances" must involve a change that caused estimated amounts to increase by at least:

a. Any amount

b. 5%

c. 1%

d. 10%

D

The Real Estate Settlement Procedures Act includes all of the following provisions, except:

a. It limits the kind of business affiliations that settlement service providers may create

b. It establishes the maximum origination fee that may be charged on a loan

c. It requires the use of a Special Information Booklet

d. It prohibits receipt of referral fees

B

Which of the following is included when calculating finance charges?

a. Charges payable in a comparable cash transaction

b. Interest

c. Seller's points

d. Appraisal fees paid to an appraiser chosen by the borrower

B

According to federal fair lending laws, which of the following facts cannot be considered when qualifying an applicant for a loan?

a. A female applicant is four months pregnant and might not continue working once her baby is born

b. A female applicant's credit report and application show gaps of several months between jobs over the past two years

c. A disabled applicant's credit report shows several instances of 60- and 90-day late credit card payments

d. A minority applicant does not have sufficient funds for a down payment

A

Which of the following is not a factor that may be used as a basis for determining borrower repayment ability?

a. Existing equity in the home

b. Monthly payments on the loan

c. Existing debt obligations

d. Credit history

A

The rule that established requirements for ensuring that a borrower can afford to take on a mortgage loan is known as the:

a. RESPA Rule

b. Repayment Rule

c. Qualified Borrower Rule

d. Ability to Repay Rule

D

An attorney and a lender entered into an agreement in which the attorney's car loan payments are paid by the lender in return for the names of potential loan applicants. Who has violated RESPA?

a. The attorney

b. The lender

c. Both the attorney and the lender

d. Neither the attorney nor the lender

C

Which of the following payments is a violation of RESPA?

a. A mortgage broker pays a fee to determine if a property is located in a flood zone

b. A mortgage broker charges a loan applicant the average $50 charge for a credit report instead of the $45 that it actually cost

c. A mortgage broker offers real estate agents pencils which include the broker's name

d. A mortgage broker accepts a fee for sending its customers to a title company

D

HMDA's implementing regulation is:

a. Regulation A

b. Regulation X

c. Regulation Z

d. Regulation C

D

Murphy is a mortgage broker who has an ownership interest in a local title insurance company. When his clients apply for loans and request referrals to a title company, Murphy must:

a. Offer a list of title companies that does not include the company in which he has an ownership interest

b. Explain to the loan applicants that he cannot refer them to a particular company

c. Immediately provide an affiliated business arrangement disclosure if he refers them to the title company in which he has an ownership interest

d. Offer a list of all local title companies without steering loan applicants towards a particular one

C

A real estate agent receives a $50 restaurant gift certificate from a mortgage broker as a token of appreciation for referring a home buyer to the mortgage broker. Which of the following laws was violated as a result of this transaction?

a. ECOA

b. RESPA

c. FCRA

d. Fair Housing Act

B

Why did Congress enact the Home Mortgage Disclosure Act?

a. To create a repository of information on real estate values

b. To ensure home values are consistent within geographic areas

c. To assist lenders in setting interest rates for residential loans

d. To help identify patterns of discriminatory lending

D

Which of the following reasons for denying an applicant a loan is a violation of fair lending laws?

a. The applicant's income does not meet the required level for repayment of the loan

b. The applicant's age is below the minimum age for executing a contract

c. The applicant's recent change in marital status may lead to a change in employment

d. The applicant's credit history includes defaults on many credit payments

C

A mortgage broker pays for title services on behalf of a developer. In return, the developer agrees to refer prospective buyers to the mortgage broker. Who has violated RESPA?

a. The mortgage broker

b. The developer E

c. Both the mortgage broker and the developer

d. Neither the broker nor the developer

C

RESPA does not apply to:

a. Federally related mortgage loans

b. Loans for business, commercial, and agricultural purposes

c. Loans secured by a lien on a principal dwelling

d. Subprime mortgage loans

B

If a mortgage professional advertises a loan product at "7.25% APR for the first six months! After first six months, APR is 10.5%, subject to increase based on market conditions," what (if any) additional disclosure does TILA require?

a. The finance charges for the loan

b. The APR in effect after the introductory rate expires

c. The monthly payment for the loan

d. No other information is required

D

All of the following features are prohibited for a qualified mortgage, except:

a. Negative amortization

b. Interest-only payments

c. Adjustable interest rates

d. 40-year terms

C

Which of the following is true of the Home Loan Toolkit booklet?

a. It can be used for HELOC transactions

b. Mortgage professionals can add or remove any information deemed necessary

c. If there are multiple borrowers, it is only required to be given to one of them

d. It must be given at least 24 hours before consummation

C

The Real Estate Settlement Procedures Act applies to:

a. Residential loans

b. Residential vacant lot loans

c. Commercial loans

d. Residential investment properties such as condos and duplexes

A

What federal statute serves to control the settlement costs of residential mortgage loans?

a. HMDA

b. HOEPA

c. RESPA

d. ECOA

C

It is legal for settlement service provider A to pay settlement service provider B a portion of fees charged to a borrower only when:

a. Service provider B has performed bona fide services to earn the fee

b. Both service providers have a written agreement in place to split fees

c. The service providers are separate entities and not affiliated in any way

d. The consumer is aware the service providers are splitting fees

A

When must loan applicants receive an Adverse Action Notice if they do not qualify for a loan?

a. Within 15 days of the adverse action

b. Within 30 days of the adverse action

c. Within 60 days of loan application

d. Within 90 days of loan application

B

Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer?

a. Within three business days of loan application

b. Within 90 days of loan application

c. Within 30 days closing

d. At the time of Notice of Action Taken

A

Jack has applied for a refinance of his mortgage, which is secured by a first lien on his home. He asks if he can see the appraisal report that his lender ordered and learns that:

a. He is entitled to a copy of the appraisal if his loan application is denied

b. He must file a written request for a copy of the appraisal

c. The lender will provide a copy of the appraisal at closing

d. The lender must provide a copy of the appraisal upon completion, or three business days prior to consummation, whichever is earlier

D

Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan?

a. Any one of the five

b. All five

c. A majority of the five

d. At least two of the five

A

A lender is permitted to deny an applicant credit based on which of the following factors?

a. The applicant has public assistance income

b. The applicant has participated in a consumer counseling program

c. The applicant lacks income stability

d. The applicant is divorced

C

If a creditor violates ECOA, how many years does a consumer have in which to take civil action?

a. One

b. Two

c. Five

d. Ten

C

What is the purpose of Regulation B?

a. To require disclosure of settlement costs

b. To regulate referral fees

c. To prohibit misleading advertisements for mortgage loans

d. To prohibit discriminatory treatment of credit applicants

D

An acceptable anti-money laundering program must include all but which of the following elements?

a. A compliance officer

b. Approval by FinCEN prior to its implementation

c. Employee training and testing

d. Procedures for meeting USA PATRIOT Act reporting requirements

B

FCRA defines a _________________ as any person who regularly extends, renews, or continues credit; regularly arranges for the extension, renewal, or continuation of credit; or is an assignee of a person who participates in decisions to extend, renew, or continue credit.

a. Mortgage lender

b. Creditor

c. Consumer reporting agency

d. Mortgage loan originator

B

Which of the following is true of PMI?

a. It is required on all loans

b. It is required for VA and FHA loans

c. It is the same for fixed- and adjustable-rate loans

d. Loan servicers must give borrowers an annual disclosure stating that they may have the right to cancel their PMI

D

Requiring a spouse to serve as a co-signer on a loan is not a discriminatory practice when:

a. The signature is required by law in a community property state

b. The primary borrower is a woman

c. The couple resides in a neighborhood populated by borrowers perceived to be higher credit risks

d. The couple plans to reside together in the home securing the loan

A

In order to waive the right to receive a copy of the appraisal report before consummation, a consumer must:

a. Submit a written waiver at application

b. Submit an oral or written waiver at least three business days prior to consummation

c. Sign a written agreement stating an intent to proceed with the transaction regardless of the appraisal

d. Sign a written agreement to accept a copy of the appraisal at least 30 days after consummation

B

As a result of provisions included in the Dodd-Frank Act, HOEPA was revised to extend its provisions to:

a. Closed-end transactions

b. Bridge loans

c. Reverse mortgages

d. Open-end transactions and purchase money mortgages

D

The Dodd-Frank Act includes provisions that are intended to help struggling homeowners to obtain loan modifications by:

a. Requiring the CFPB to write servicing rules to facilitate loss mitigation efforts

b. Creating the Home Affordable Modification Program

c. Requiring all lenders to offer loan modifications to homeowners who have been in their homes for at least ten years

d. Requiring all lenders to offer loan modifications to homeowners who have suffered job loss or salary reduction

A

Minimum standards for mortgages, which have been established through rulemaking proceedings mandated by the Dodd-Frank Act, include a requirement to:

a. Offer all borrowers fixed-rate loans

b. Establish standards for the evaluation of the repayment ability of borrowers

c. Set minimum down payment requirements for all lending transactions

d. Prohibit the origination of subprime loans

B

The USA PATRIOT Act is a federal law that Congress adopted in response to:

a. The meltdown of the mortgage lending market in 2007

b. The need to revitalize the economy in 2008

c. The terrorist attacks on September 11, 2001

d. The need to make HAMP loans available to more Americans

C

The federal agency that is responsible for implementation and enforcement of the USA PATRIOT Act is:

a. The Treasury Department

b. The Department of Homeland Security

c. The Federal Reserve Board

d. The Department of Housing and Urban Development

A

The investigations that are conducted to identify perpetrators of financial crimes and the rulemaking regarding anti-money laundering provisions of the PATRIOT Act are carried out by the ______ within the _______.

a. Federal Bureau of Investigation; Treasury Department

b. The Financial Crimes Enforcement Network (FinCEN); Treasury Department

c. The Criminal Division; Department of Justice

d. State member banks; Federal Reserve

B

Regulations adopted pursuant to the USA PATRIOT Act are:

a. Not applicable to mortgage loan originators

b. Applicable only to depository institutions and their employees who originate mortgage loans

c. Not applicable to mortgage loan originators, who are temporarily exempt from the legal obligation to comply with the regulations

d. Applicable to residential mortgage loan originators, who became subject to the regulations in February 2012

D

Money laundering is most accurately described as:

a. The use of funds illegally procured as a result of identity theft

b. The use of funds illegally obtained from a fraudulent mortgage lending transaction

c. Filtering money through a series of transactions in order to prevent the tracing of the funds to their original illegal source

d. Paying for financial goods and services with the use of funds deposited in an offshore banking account

C

Which of the following scenarios would violate Section 8 of RESPA and its prohibition against unearned fees?

a. A broker accepts a loan origination fee

b. A broker charges $50 for a obtaining a $50 credit report

c. An attorney accepts payment for performing a title search

d. A title company pays a mortgage broker $100 per client for referral of settlement business

D

The servicing rules require live contact with a delinquent borrower:

a. Within 45 days of delinquency

b. By the 36th day of delinquency

c. By the 15th day of delinquency

d. Within ten days of delinquency

B

RESPA applies to:

a. Construction loans

b. Federally-related mortgage loans

c. The sale of mortgages to investors

d. Commercial mortgage loans

B

The Supreme Court has issued an opinion regarding markups, stating that:

a. Markups are legal under TILA

b. No markups are legal under TILA

c. Markups, including those that are split, are legal under RESPA

d. Markups are not a violation of RESPA as long as the fee is not split

D

An affiliated business arrangement disclosure is due:

a. Within three business days after receiving a completed application

b. At least three business days prior to consummation

c. At the time a referral is made

d. Within ten days of making a referral

D

When calculating finance charges in compliance with TILA, all of the following are included, except:

a. Settlement fees

b. Broker fees

c. Private mortgage insurance premium

d. Closing agent fees, when the borrower chooses the closing agent

D

Which of the following federal agencies has supervisory responsibilities for TILA compliance?

a. HUD

b. CFPB

c. FHA

d. Fannie Mae

B

Which of the following is defined as the cost of credit expressed as a dollar amount?

a. APR

b. Finance charge

c. Loan-to-value

d. Debt ratios

B

What is the primary purpose of the Truth-in-Lending Act?

a. To ensure that creditors do not charge high interest rates on credit

b. To ensure that third-party service providers do not charge high fees

c. To ensure that creditors provide consumers clear disclosure of the terms of credit

d. To ensure that applicants have equal opportunity to credit from lenders

C

Under TILA guidelines, all of the following disclosures are provided for an adjustable-rate loan, except:

a. Frequency of changes in the annual percentage rate

b. Possibility of changes in the payment amount over time

c. The index used to determine rate adjustments

d. Statement that the interest rate will be offered for the duration of the loan

D

John and Jane Brown are co-owners of a property that is their principal residence, and are entering into a refinance transaction that is subject to rescission. John is provided with one copy of the Notice of Right to Cancel, and Jane receives none. What is their deadline for rescission?

a. Midnight on the third day following closing

b. 72 hours after closing

c. Three years after closing

d. Three business days after closing

C

The Gramm-Leach-Bliley Act specifies that a consumer must be given _________ to opt out before personal financial information is disclosed to a third party.

a. Seven business days

b. 15 days

c. A reasonable opportunity

d. 90 days

C

Which of the following is not a duty assigned to the CFPB by the Dodd-Frank Act?

a. Collecting and responding to consumer complaints

b. Monitoring the markets for consumer financial products and services

c. Taking enforcement actions for violations of federal consumer financial laws

d. Granting and denying mortgage loan originator licenses

D

The definition of "nonpublic personal information" includes:

a. Listed phone numbers

b. Information found in government real estate records

c. Account balance and history

d. Unrestricted information found online

C

HUD is still responsible for writing rules and implementing which of the following acts?

a. The Fair Housing Act

b. The Real Estate Settlement Procedures Act

c. The Truth-in-Lending Act

d. The Fair Credit Reporting Act

A

For charges subject to a 10% tolerance, to the extent that the sum of the charges added together exceeds the sum of charges disclosed on the Loan Estimate by more than 10%:

a. A consumer is eligible for a refund of all charges

b. A consumer is not eligible for a refund of any charges

c. A consumer is eligible for a refund of the difference

d. A consumer must notify the lender of the discrepancy and mediation will determine whether the consumer will receive a refund

C

Which of the following is one of the stated reasons for implementing the integrated mortgage disclosure forms?

a. To use clear language that borrowers can understand

b. To lower borrowers' costs

c. To permit lenders to collect fees earlier

d. To reduce identity theft

A

Which of the following transactions is covered by the TRID Rule?

a. Home equity line of credit

b. First mortgage on a single-family dwelling

c. Reverse mortgage

d. Mortgage secured by a mobile home

B

When must the Loan Estimate be provided to the consumer?

a. No more than three calendar days after receipt of a loan application

b. No more than five calendar days after receipt of a loan application

c. No more than three business days after receipt of a loan application

d. No more than five business days after receipt of a loan application

C

For which of the following is the creditor permitted to charge more than it discloses in the Loan Estimate (i.e., there is no tolerance limitation) and still meet the good faith requirement?

a. Prepaid interest

b. Recording fees

c. Transfer taxes

d. Brokerage fees

A

When must the Closing Disclosure be provided to the loan applicant under the TRID Rule?

a. No later than three business days prior to consummation

b. No later than three calendar days prior to consummation

c. No later than three business days after consummation

d. No later than three calendar days after consummation

A

Which is the only fee that the creditor may collect prior to providing the Loan Estimate?

a. Application fee

b. Appraisal fee

c. Underwriting fee

d. Credit report fee

D

Who is ultimately responsible for ensuring that the Loan Estimate is provided?

a. The mortgage broker

b. The borrower

c. The creditor

d. The mortgage loan originator

C

Is the creditor permitted to call the borrower and provide the information contained in the Closing Disclosure over the phone?

a. Yes

b. No, because the Closing Disclosure must be in writing

c. No, because the creditor might make a reading error

d. No, because the information must be exchanged in person

B

What is the maximum fee a creditor may charge a loan applicant for preparation of a Closing Disclosure?

a. $25

b. $50

c. $75

d. $0

D

Which of the following is not a change or correction to the Closing Disclosure that would cause a new three-business-day waiting period to begin?

a. The addition of a prepayment penalty

b. A change in the annual percentage rate

c. A change in the type of loan product

d. An additional $500 seller credit

D