AUP Exam 2
Construction Process:
The process of building and financing a home is more complex than financing the purchase of an existing home.
Consider:
A homebuyer choosing an existing property need only find the home, negotiate a price, sign the purchase and sales agreement, and obtain a mortgage. The whole process can be completed in as little as two to three weeks.
In comparison, the time required for the construction of a new home extends the mortgage approval process and prolongs closing of the permanent financing
Permanent Financing
A mortgage loan that goes into place upon completion of construction.
for several months.
Understanding each step involved in the construction process prepares the lender to make a sound underwriting decision. Just as the homebuilding process requires a buyer to be aware of more details and choices, new construction financing requires the lender to provide more loan product and underwriting details.
Acquire a lot to build on.
Execute a construction contract.
Work with a builder and/or sub-contractors
Obtain permits and engineering inspections.
Select materials.
Obtain a certificate of occupancy
A Fannie Mae single–closing transaction occurs when the mortgage includes both of the following: Interim construction loan and permanent financing
Select two that apply. Fannie Mae transaction types for two-closing construction-to-permanent financing may be which of the following?: cashout and limited cashout refinance
Fannie Mae allows the lender to add borrowers to the permanent financing when structuring a construction-to-permanent refinance transaction.: False
For a construction-to-permanent loan structured as a single-closing purchase transaction, what should be entered in 3. Real Estate Owned?: Nothing – this section should be reviewed to ensure there is NO entry for the lot
For a construction-to-permanent loan structured as a single-closing purchase transaction, where do you enter the lot price if the lot price and construction costs are on separate contracts?: Original Cost of Lot field on the the L1. Property and Loan Information screen; then on L4. Qualifying the Borrower - Minimum Required Funds or Cash Back screen, C. Land Value, select Original Cost of Lot from the drop-down menu.
For a construction-to-permanent loan structured as a single-closing refinance transaction, what button do you click on the 3. Real Estate Owned screen to create a record for the lot associated with the subject property?: Add Property
Select three that apply. For a construction-to-permanent loan structured as either a single-closing or two-closing refinance, which of the following steps do you complete on the Property Information screen?: Ensure the subject property indicator is checked. + Enter the estimated property value of the completed property in the Estimated Property Value field. + Select Retained from the drop-down list in the Status field.
Select three that apply. For a construction-to-permanent loan structured as a two-closing refinance transaction, which fields should NOT have amounts because they should not be used for that transaction structure?: A. Sales Contract Price + Improvements, Renovations, and Repairs + Land Value
For a construction-to-permanent loan structured as a single- or two-closing refinance transaction, the Original Cost of Lot and Appraised Value of Lot fields should NOT be used because:If an amount is entered in either of these fields it will be included in the required funds.
Which of the following resources provides specific steps for entering data for Fannie Mae construction loans?: DU Job Aids: Construction-To-Permanent Transactions
A Freddie Mac construction conversion mortgage: Can be treated as either a purchase or refinance
When escrow holdbacks are permitting on a Freddie Mac construction to permanent loan, within how many days of the note date must improvements be satisfactorily completed? : 180
When entering a construction conversion mortgage to LPA, the Mortgage Type should be entered as: conventional
Acquisition cost is the sum of the documented costs of the construction excluding the sales price of the lot.: False
Select all that apply. Steps in establishing total acquisition costs for construction-to-permanent loans include the following:
Review each change order to ensure no non-qualifying items are included.
Correct!
Review the original contract details to ensure no non-qualifying items are included.
Correct Response
Calculate the final construction contract price and review all change orders/addenda.
Correct!
Add the cost of qualifying items paid by the borrower out of pocket.
Change orders can result when a purchaser decides to _______ a contract of sale.
Add an item to
Delete an item from
Upgrade an item on
All of the above
Select two that apply. Interim construction financing provides short-term funds for which of the following?
Building a new site-built home
Purchasing and permanently affixing a new manufactured home
Which of the following property types is INELIGIBLE For Fannie Mae construction-to-permanent transactions?: attached condo unit
Fannie Mae construction-to-permanent financing allows an escrow holdback agreement for completion if all work is completed within ________ days of the mortgage note. 180
The underwriter uses the total acquisition cost for a construction-to-permanent loan primarily to determine: LTV ratio
For Freddie Mac construction-to-permanent loans, underwriting: May occur before or after the closing of the interim construction financing
Which of the following situations might result in a change order to the sales contract? All of the above
The final construction draw is released at what point in the construction process? Upon home completion
Which of the following expenses would be included in the acquisition cost?
All of the above
When entering a single-closing purchase construction-to-permanent loan into DU, which of the following is the first step?:Navigate to the Real Estate Owned section to ensure there is no entry for the lot.
Items purchased by the borrower out of pocket cannot be included in total acquisition cost calculations for construction-to-permanent loans. False
If the borrower is not the owner of record of the land prior to the closing of the interim construction financing, the Purpose of Loan field in LPA should be ______________. Purchase
Which of the statements below is true about change orders?:
They should be reviewed in chronological order.
For Freddie Mac's construction conversion and renovation mortgages, within how many days of the effective date of permanent financing must verifications of employment and income be made? 120
Select two that apply. Freddie Mac offers two types of construction-to-permanent financing. They are:
Construction to conversion
Renovation
When calculating acquisition costs, which of the following would NOT meet the criteria for a “qualifying item” to be used in a construction-to-permanent loan?
Area rug for living room
Select all that apply. Private investors may require lenders to submit a jumbo loan to an agency AUS in order to:
Possibly obtain documentation relief
Obtain a credit risk evaluation
Select all that apply: Jumbo investors may require a second appraisal or an appraisal completed or reviewed by/from an:
Designated appraiser
Specific list of qualified appraisers
More seasoned appraiser
A jumbo or non-conforming program may allow for flexibilities, including all of the following, EXCEPT:
Waiving the collateral review
Select all that apply. A jumbo investor may accept the AUS recommendation from DU or LPA with:
A minimum fico score
Additional documentation requirements
Select all that apply. Which of the following are common characteristics of a rural market?
Wide variations in housing and site improvements
Absence of public utilities and services such as health and sanitation
Shared school districts
When appraising a two-to four-unit property, the strongest indicator of value is the:
Income approach
Both fannie mae and freddie mac support affordable homeownership in declining markets by requiring which of the following actions?
Minimum down payment requirements
Data entry and submission steps for submitting jumbo loans to Loan Product Advisor are no different than those used for a conforming loan submission.
True
Select all that apply. Which of the following principles always apply when underwriting jumbo loans?
Analyze reliable asset and income data
Provide a thorough collateral review
Determine ability to manage credit
Select all that apply. Which of the following circumstances can affect property values?
Local economy
Current market conditions
Neighborhood
The subject property is located on twenty acres of land, so the appraiser evaluates five acres of a parcel. This evaluation is eligible for sale to Fannie Mae and Freddie Mac.
False
Select all that apply. According to agency expectations of both parties in the mortgage and valuation process, what is the lender responsible for?
Ensure the inclusion of listings and contract sales by the appraiser in addition to the most recent closed sales to accurately portray market conditions.
Review the appraisal report for compliance with standards of property analysis and evaluation of subject as marketable collateral for the mortgage loan.
Follow established quality controls to safeguard against improper actions or conduct by employees, agents or third-party originators that may "compromise the accuracy of the appraisal report."
Almost identical homes sit in close proximity to one another. Property A includes a large barn that cost $25,000 to build. Property B does not include a barn. Property A sold for $250,000 while Property B sold for $240,000. According to the contributory value approach, what is the correct sales comparison adjustment?
$10,000
Select all that apply. What factors are the focus when examining borrower risk for a jumbo loan?
Ability to Repay
Willingness to repay
A jumbo loan is a home loan that is ineligible for purchase by Fannie Mae and Freddie Mac because it is too large.
True
Your appraiser derives the average gross rent multiplier from six nearby comparables as 123.5. Projected gross rents for the subject property of the mortgage loan you are underwriting is $9,600 per annum. What is the estimated market value for this property according to the income approach?
$98,800
Jumbo lenders often establish a single ratio analysis rather than using:
Housing debt-to-income
Select all that apply. Jumbo investors may offer flexibilities and restrictions that may include:
Lender-funded mortgage insurance
Single-ratio or residual income qualifying
Varying reserves
Select all that apply. What two pieces of financial information are required to calculate the gross rent multiplier for a property?
The total gross rent possible
The sales price
Select all that apply. Some private sector investors have developed their own proprietary automated underwriting systems. Which of the following are true about the use of these systems?
They have been successful in assessing risk for the mortgage loans purchased by their respective companies
They have not achieved the same market acceptance from other private sector jumbo investors that has been accorded to Fannie Mae and Freddie Mac
Select two. A credit score is a numeral value or a categorization derived from a/the:
Modeling System
Statistical tool
Credit scoring was first developed in the_______.
1950s
Select two. Only a person or business with________may gain access to another person’s credit report.
Written instruction of the consumer
Permissible purposes
Select three. Advantages of credit scores include:
They are an accurate and reliable tool for predicting mortgage delinquencies
They facilitate faster credit decisions
They remove human bias in risk assessment
Select two. Which of the following do GSEs Fannie Mae and Freddie Mac require for both automated and manually underwritten mortgage loans?
FICO credit scores for each borrowers
One report from each of the three major credit repositories
Consumer Reporting Agency (CRA) model:
Analyzes information in a borrower’s consumer credit file
Behavior scoring model:
Examines internal data from a serviver’s billing file on existing loans
Application model:
Usually calculated directly by a lender and is based on information in the lender’s file
Select three. What factors are not considered in a credit score?
Alimony payments
Income
Age
Fico factors ranked from most to least important
How well the consumer has paid back in the past (most)
How much the consumer currently owes on debts
What kinds of credit the consumer has
How long the consumer has had credit (least)
Compared to a consumer that uses 75% of total available credit, a consumer that uses 25% of total available credit represents:
Less risk
At least how many reason codes must be listed with each FICO credit score?
Four
A FICO score from one nationwide credit reporting company is equivalent to the same numerical score from another because:
The scores are normalized so that they will be consistent
Select two. The FICO Expansion Score was introduced for consumers that have:
No traditional credit
Thin Credit
Which credit risk model examines borrower and loan characteristics?
Mortgage Score
There are three basic steps for assessing comprehensive risk. Put the three steps in the order in which they are performed
Evaluate primary risk
Evaluate contributory risk
Determine comprehensive risk
Select three. Which of the following are influential contributory risk factors on mortgage default?
Presence of co-borrower
Mortgage term
Previous mortgage payment history
Select three. Which of the following typically generates a loan-level price adjustment on a loan?
Credit Score
Type of property
LTV
Transactor
Low-risk category; defined a someone that pays their credit card in full every month
Partial payer
Moderate to low-risk category; defined as someone that actively pays down their balances monthly
Revolver
High-risk; defined as someone that carries a balance and typically makes only minimum payment on their credit card
Sally pays off her credit card balance monthly; Chris makes only the minimum payment due most every month. Which statement is true?
Sally will be considered a lower risk than Chris
A borrower has been car shopping over an extended time due to their work schedule resulting in credit reports being pulled roughly twice a month. This would most likely result in:
Poor Credit Score
Select three. An extenuating circumstance is:
Beyond the borrower’s control
An isolated occurrence
An event that creates a large decrease in income or increase in expenses
Which of the following statements is true of consumer reporting agencies?
CRAs collect financial information about consumers from collection agencies, creditors, and public records
Which of the following three categories of borrowers represent the highest risk to a lender based on their trended credit history?
Revolver
Select three. Which of the following groups of consumers are less likely than the general population to have a credit score?
Consumers who distrust the credit/banking system
Immigrants to the united states
New credit users
A credit score does not factor in the ________ that the borrower went into default. For this reason, lenders may take extenuating circumstances into account.
Reason
Select two. Newer versions of credit scoring models that could be used consistently among the three CRAs over time without the need for major alterations was achieved through:
A consistent design blueprint
Periodic redevelopments
Select three. Credit scores are used in mortgage lending to do which of the following?
Provide a composite view of a borrower at a specific point in time.
Assess a borrower's credit behavior patterns, past and present.
Predict future credit performance and how likely a potential borrower is to repay future debts
Select three. Credit scores are used in which of the following areas of mortgage lending?
Portfolio management
Loan administration
Loan production
Select two. Credit score reason codes:
Are listed in order of their impact on the score
Describe the most influential reasons why higher credit scores were not granted
Low
Select three. Credit scores benefit mortgage lenders by:
Providing faster credit decisions
Removing human bias
Instilling confidence to extend credit
Which of the following Congressional acts requires mortgage lenders to provide borrowers with their credit scores and the factors affecting the score?
Fair credit reporting act
When is it necessary for a CRA to list five reason codes on a consumer’s credit report?
When “inquiries” is the fifth reason that influenced the credit score
What do predictive variables analyze?
Both positive and negative data
Select two. All credit scores are calculated by computerized statistical models. These statistical models are complicated formulas that analyze consumer information and produce a numerical score. The formulas are based on factors that have been proven to predict credit behavior and are:
Considered trade secrets
Proprietary to each agency
Keeping revolving balances below 50% of the high credit limit
Paying bills on time
Not opening unnecessary accounts
In addition to the credit or FICO score, there are other risk models, such as those that produce bankruptcy scores. Bankruptcy scores measure:
Risk of consumer bankruptcy
Select three. Credit files change:
As credit data changes
With any key activity
As balances change
Select three. Which of the following circumstances contribute to inaccurate scores?
An account belonging to a “Jr” reported on his father’s credit report
Identity theft
Paying an account in full prior to the date reported
Select two. Which of the following factors are considered in most scoring systems?
Length of credit history
How the consumer handled credit in the past
Lenders who use credit scores have _____ confidence and will typically offer credit to _____ people
More; more
What problem is addressed by the use of scorecard segmentation?
Different types of consumers have varying characteristics that are predictive of risk
As the LTV/CLTV reaches 95%, how must the credit score range be rated to maintain acceptable risk for most investors?
Upper range
Select two. Under US law, which of the following factors may NOT be considered in ANY credit scoring model?
Whether the consumer receives welfare
Consumer’s marital status
How does each CRA use scorecard segmentation to determine a borrower's credit score?
Consumer credit information is run through the one scorecard that best fits that consumer's profile. The resulting score is the consumer's credit score
Select three. Which of the following are options for qualifying a borrower who has no credit score when underwriting a loan?
Using expansion scoring
Using a nontraditional credit report
Documenting a nontraditional credit history
Select three. CRAs collect information about consumers from:
Public records
Collections agencies
Creditors
By _____, both the conventional and governmental mortgage sectors acknowledged risk–based scoring as a valuable and fair credit scoring model.
2000
The housing finance crisis of the late 200s triggered a new wave of legislation regulation the mortgage industry.
True
The SAFE Act is intended to provide consumers with which of the following protections?
Increased accountability and tracking of mortgage loan originators, with education, licensing, and registration requirements
Homeowners Protection Act (HPA)
The goal of this act is to help consumers cancel private mortgage insurance (PMI). It includes requirements concerning disclosures, automatic cancellation at certain thresholds, and return of unearned premiums
Truth in Lending Act (TILA)
The goal of this act is to promote the informed use of consumer credit by requiring disclosures about credit terms and costs. It includes requirements for full disclosure of all direct and indirect costs of credit and repayment terms within specific time frames, among other disclosures, and also provide consumers a right of rescission in certain transactions
TILA-RESPA Integrated Disclosures Rule (TRID)
The goal of this rule is to make the TILA and RESPA required disclosures provided at application and closing more clear and helpful to consumers trying to understand the costs and terms of mortgage loans during the application and settlement process. It reconciled various requirements under RESPA and TILA and consolidated the previously required four forms into two (Loan Estimate and Closing Disclosure) for most mortgage loans
Real Estate Settlement Procedures Act (RESPA)
The goal of this act is to provide consumers with pertinent and timely disclosures regarding the nature and costs involved in the real estate settlement process. It also prohibits kickbacks and places certain restrictions and requirements on the use of escrow accounts
The Truth in Lending Act (TILA) was enacted to promote the informed use of consumer credit by requiring disclosures about:
Terms and costs of credit
Which act set the stage for future fair lending laws by prohibiting discrimination in housing on the basis of race?
Civil Rights Act
Gramm-Leach Bliley Act (GLBA)
The purpose of this act is to protect consumers from individuals and companies that obtain consumers’ personal finance information under false, unauthorized, or fraudulent pretenses. Its provisions include the Financial Privacy Rule and the Safeguards Rule
Fair and Accurate Credit Transactions Act (FACTA)
This act seeks to curb identity theft and to allow consumers easier access to their credit reports. It is associated with the Red Flags Rule, and it allows consumers to request a free copy of their credit report once every 12 months, among other provisions
Fair Credit Reporting Act (FCRA)
This law is designed to ensure that consumer reporting agencies exercise fairness, confidentiality and accuracy in preparing and disclosing credit information. It places obligations on providers of consumer credit reports and allows consumers to obtain and dispute credit information, among other provisions
Under FACTA, a consumer can request a free copy of his or her credit report every three months.
False
What is the Average Prime Offer Rate (APOR)
The annual percentage rate that is based on average interest rates, fees, and other terms on mortgage offered to highly qualified borrowers
Select three that apply. If a loan is a higher-priced mortgage loan, which of the following requirements would apply?
A full interior appraisal
Free second appraisal from the lender, if the subject property is considered “flipped”
Escrow account (in many cases)
For loans subject to the Home Ownership and Equity Protection Act, when must borrowers be sent additional disclosures?
At least three business days prior to closing
Select two that apply. Which of the following titles of the Dodd-Frank Act have the most obvious and direct impact on mortgage lending regulation?
X
XIV
The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Act in:
2010
The SAFE Act establishes minimum standard for:
Licensing and registration of mortgage loan originators
Select two that apply. Which of the following are included in SAFE Act’s definition of a mortgage loan originator?
An individual who offers or negotiates terms for compensation or gain
An individual who takes a residential mortgage loan application
Underwriters and processors as well as mortgage loan originators must be registered with NMLS.
False
State-Licensed Loan Originator
Hakeem is mortgage loan originator working for an independent mortgage banker in illinois
Registered Loan Originator
Luisa is mortgage loan originator working in the call center of a large national bank that is FDIC insured
Loan Originator with Temporary Authority
Molly has been a registered mortgage loan originator with a credit union in Connecticut for three years. She’s planning to move to New Jersey and begging working for an independent mortgage banker there; she has begun the process of obtaining her NMLS state license in New Jersey
A mortgage loan originator applying for NMLS registration or state licensing may NOT:
All of above
Per the SAFE Act, each state has the right to prohibit additional practices in that state, in addition to those identified in the State Model Language
True
Which agency is responsible for enforcement of the SAFE Act at the federal level?
Consumer Financial Protection Bureau
Annual Percentage Rate (APR)
The cost of the mortgage loan expressed as a yearly rate. The calculation includes not only the interest rate but also the points, mortgage broker fees, and other charges associated with the loan
Finance Charge
The cost of consumer credit as a dollar amount; it represents the total amount of interest and loan charges the borrower would pay over the entire life of the mortgage loan. It includes any charge payable directly or indirectly by the borrower and any charge that the lender imposes directly or indirectly in connection with the extension of credit.
Amount Financed
The loan amount minus most of the upfront fees the lender charges. It is the principal amount borrowed less the points and other prepaid finance charges. The note, security instrument, and all other legal and closing documents express the amount financed as the same principal amount for which the borrower has applied
Total of payments
The amount of money the borrower will have paid over the life of the mortgage. This includes principal, interest, mortgage insurance (if applicable) and loan costs
Select three that apply. The Truth in Lending Act (TILA) includes requirements and prohibitions for which of the following areas?
Disclosure of costs and terms of the loan
Advertising
Product-specific disclosures
Select four that apply. RESPA requires consumer disclosure regarding which of the following?
Cost of settlement services
Escrow accounts
Servicing transfers
Affiliated business arrangements
In what way does the Closing Disclosure meet RESPA disclosure requirements?
It itemizes the costs of the actual fees associated with the mortgage transaction.
Select two that apply. What information is included in the Comparisons section of the Loan Estimate?
The total amount the consumer will have paid in principal, interest, mortgage insurance, and loan costs in the first five years of the loan
The total amount of interest the borrower will pay over the loan terms expressed as a percentage of the loan amount (TIP)
Regarding the Services You Cannot Shop For section, the CFPB advises borrowers that the indicated costs are representative of the best prices available for those services and there is no need to comparison shop
False
Where would a consumer find the amount paid to the mortgage loan originator on the Loan Estimate?
Closing Costs Details - Loan Costs A Origination Charges
Where can the consumer find information about transfer of servicing on the Loan Estimate?
Other Considerations
What does the CFPB advise the consumer to do if the Costs at Closing shown on the Closing Disclosure do not match the most recent Loan Estimate?
Ask the lender to explain why
How do regulators determine whether or not the Loan Estimate was made in good faith?
By calculating the difference between the estimated charges originally provided in the Loan Estimate and the actual charges paid by or imposed on the consumer in the Closing Disclosure
When must the HOEPA disclosure statement be completed?
At least three business days before closing
Under ECOA, if a financial institution decides to approve credit, the notice of approval must be an express statement of approval provided to the consumer in writing.
False
Which of the following does FCRA NOT require financial institutions to disclose to consumers?
The top seven reasons for adverse action
Select four that apply. For a fixed-rate residential mortgage that is NOT high-risk, what information is required in the initial disclosure?
The borrower’s right to request cancellation of PMI, and based on the initial amortization schedule, the date the loan balance is scheduled to reach 80 percent of the original value of the property
The borrower’s right to request cancellation on an earlier date, if actual payments bring the loan balance to 80 percent of the original value of the property sooner than the date based on the initial amortization schedule
That PMI will automatically terminate when the LTV ratio reaches 78 percent of the original value of the property and the specific date that is projected to occur (based on the initial amortization schedule)
The Act provides for exemptions to the cancellation and automatic termination provisions for high-risk mortgages and whether these exemptions apply to the borrower’s loan
HPA disclosures are the same for fixed-rate mortgage loans, adjustable-rate mortgage loans, and high-risk mortgage loans
False
HPA requires initial and annual disclosures
True
Under HPA, if mortgage insurance is paid by the lender, the borrower must receive a notice explaining:
That LPMI does not automatically terminate
Select five that apply. Which of the following are bases on which is it prohibited to discriminate under both ECOA and the FH Act? (Familial status and marital status, which have = partial overlap, are excluded from the question)
Color
National Origin
Race
Religion
Sex
Which of the following is FALSE about HMDA?
HMDA prohibits discriminatory behaviors such as redlining.
GLBA
This act governs how financial institutions collect, share, and protect consumers non-public personal information. Its privacy provisions include three principle parts: pretexting provisions, the financial privacy rule, and the safeguards rule
FACTA
This act is an important amendment to another critical consumer credit information act. It adds requirements focused on helping consumers fight identity theft and maintain the privacy of their credit information. It includes requirements for providing free annual credit reports, fraud alerts, and notices regarding rights for victims of identity theft, the right to dispute inaccurate information on a credit report, and the use of risk-based pricing
FCRA
The goal of this act is to ensure that consumers have the access to the same credit information about themselves that lenders use to make credit decisions, as well as to promote privacy, accuracy, and fairness in how consumer reporting agencies handle consumer information.
Which act requires consumers to have access to the same information about their credit history as the lenders use to make credit related decisions?
Fair Credit Reporting Act
Higher-Priced Covered Transaction (HPCT)
Requirements are detailed in Section 1026.43. This category concerns whether the loan archives safe harbor status under the ATR/QM Rule.
Higher-Priced Covered Transaction (HPML)
Requirements are detailed in Section 1026.35. These loans have special appraisal, escrow, and certain other ECOA and TILA requirements. They are fairly common,
High-Cost Mortgage (HCM)
Requirements are detailed in section 1026.32. These are loans originally defined by the HOEPA Act and subject to the 2013 HOEPA rule. They have several restrictions, including no balloon payments, no negative amortization, and no prepayment penalties. They are fairly rare due to the many restrictions - most lenders avoid originating them.
For high-cost loans subject to the Home Ownership Equity Protection Act, all of the following loan terms are prohibited EXCEPT:
Adjustable Rates
The Consumer Financial Protection Bureau has the authority to write rules for consumer protections for a variety of financial institutions, including banks and non-banks
True
The Fair and Accurate Credit Transaction Act does all of the following to prevent fraud. EXCEPT:
Prevent identity fraud victims from disputing inaccurate data reported
The HOEPA disclosure statement discloses all of the following EXCEPT:
That credit scoring was used to determine qualification for a mortgage loan
The Equal Credit Opportunity Act (ECOA) makes it illegal to discriminate on the basis of which of the following?
All of the above
The purpose of the Affiliated Business Arrangement Disclosure is to inform borrowers that:
They are not required to use the affiliate that their lender or real estate agent has suggested
The Home Ownership and Equity Protection Act (HOEPA) allows for prepayment penalties only when the borrower has agreed to them in writing.
False
The Safeguards Rule under the Gramm-Leach-Bliley Act requires all financial institutions to:
Protect consumer information while it is in the institution’s control or custody
Although the primary purpose of this law is to promote equal treatment of creditworthy customers in terms of access to credit, it also includes disclosure requirements. Which law is it?
ECOA
Under the Ability-to-Repay and Qualified Mortgage rule, which of the following is NOT among the considerations that must be taken into account in determining a borrower’s ability to repay a mortgage loan?
Borrower’s life expectancy
According to TILA, any advertising regarding a mortgage loan must include the annual percentage rate if certain trigger terms such as the amount of any payment or the amount of anu finance charge are stated.
True
Select three that apply. Which of the following are violations of the SAFE Act?
Engage in any unfair or deceptive practice toward any person
Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers, lenders or any person
Conduct any business covered by the SAFE Act without holding a valid license
All mortgage loan originators must be state-licensed
False
Which of the following is NOT one of the requirements for licensed mortgage loan originators under the SAFE Act?
Recertify annually through reexamination
Reverse redlining occurs when:
Applicants in low to moderate income communities with protected classes of people are targeted for loan products with higher rates and fees
Which of the following is not typically a responsibility of the mortgage loan originator?
Processing a residential mortgage loan
The Dodd-Frank Act created new financial regulatory requirements to address the numerous problems and practices that contributed to the financial crisis of the late 2000s
True
TILA regulates information a creditor must provide regarding the cost and terms of credit at which of the following times.
All of the above
Which of the following is true regarding the evaluation of a loan application under the Equal Credit Opportunity Act?
A creditor CANNOT use child-bearing go speculate whether the applicant’s income could be interrupted
Which federal agency was created by the Dodd-Frank Act in 2010 with the intention of consolidating implementation and enforcement authority for consumer protection laws under one roof?
Consumer Financial Protection Bureau (CFPB)
Under HOEPA, lenders may approve loans based solely on the collateral value of the property.
False
Under FCRA, if credit is extended to a consumer on terms that are materially less favorable than those terms the financial institution has extended to a substantial proportion of consumers, the financial institution usually must:
Disclose the reason for risk-based pricing
The 2013 HOEPA Rule imposes a requirement for homeownership counseling but does not require lenders to provide information about approved counseling organizations.
False
Select three that apply. Which of the following represent a valid “change of circumstance”?
A loan going from float to locked status
Borrower waiting for two weeks after application to provide intent to proceed
Change of loan program to enable approval of a denied loan
The Fair and Accurate Credit Transaction Act of 2003, which amended FRCA, primarily focuses on which of the following?
Helping consumers fight identity theft and maintain the privacy of their credit information
Which important disclosure issued at the time of application lists specific settlement charges that the individual borrower will likely have to pay in association with the closing of a mortgage loan?
Loan Estimate
Which of the following is NOT a requirement for mortgage loan originator state licensing?
4 hours of observed practice
The SAFE Act’s objective is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry is operating without unfair, deceptive, and fraudulent practices by:
Mortgage Loan originators
Which Act created CFPB?
Dodd-Frank Act
The SAFE Act requires states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators
True
Under the Homeowners Protection Act (HPA), at what LTV is PMI automatically terminated if the borrower is not delinquent and the loan is not a high-risk loan?
78%
Final closing costs shown on the Closing Disclosure cannot vary outside of certain tolerances from cost shown on the Loan Estimate. When discussing these tolerance, zero tolerance means the same thing as no tolerance
False
If a mortgage loan originator has his or her NMLS license revoked by a state due to violations of the Safe Act, it has a potential domino effect of the license being revoked in all other states in which the mlo has a license
True
Under this law consumers must be advised and made aware of how information may be used to make financial decisions and extend credit
FCRA
Under the Safe Act a real estate agent or broker would need to be State licensed as a mortgage loan originator if they received compensation from any of the following except which one?
For clerical duties
According to ecoa, the Creditor has the option to exclude the reasons for taking adverse action in the adverse action notification as long as:
The creditor discloses that the consumer has the right to request the reason
The Consumer Financial Protection Bureau is responsible for implementing and enforcing all of the following laws except:
Fair Housing Act (FH Act)
Under HPA when is the servicer required to notify the borrower that refinancing the mortgage loan could eliminate LPMI?
No later than 30 days after the termination date that would apply for BPMI
Which of the following statements is true regarding enforcement of the Safe Act?
Each individual state has specific exam processes and requirements for SAFE Act compliance
Who is responsible for filing a Home Mortgage Disclosure Act (HMDA) report?
Lender who makes the credit decision
Which of the following privacy and consumer identification laws limits the furnishing of credit reports to those authorized to receive them and places disclosure obligations on the users of consumer credit reports?
Fair Credit Reporting Act
Which of the following was NOT a practice of discrimination in the 1960s and 1970s?
Salaries of unmarried men were reduced because lenders assumed they would get married and have to support a family
Select three that apply. Which of the following might be used to refer to the CFPB’s simplification and consolidation of consumer disclosures required by RESPA and TILA?
Know Before You Owe
TILA-RESPA Integrated Disclosure (TRID)
Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)
As required by HPA, for most loans, lenders must provide borrowed with an initial disclosure notifying the borrower that PMI will automatically be canceled after:
The mortgage has been paid down to 78% of the original value
Higher-Priced Mortgage Loan regulations under HOEPA require:
Verification of the borrower’s ability to repay the loan
The perpetrator’s desire to own a home is the motivating factor for committing which tupe of fraud?
Fraud for Property
Select three. Some of the best resources to help combat mortgage fraud are:
Freddie mac
Fannie Mae
Industry-Specific Trade Associations
Select three. Which of the following GSEs, federal agencies, and private companies provide various tools and information to help mortgage lenders detect, track, and prevent fraud?
Fannie Mae
FBI
Lexis Nexis
Select two. The Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law by the President in an effort to:
Crack down on fraud in the mortgage industry
Broaden the Department of Justice’s authority to prosecute fraud
Does collusion always occur between industry insiders?
No
The red flags for straw buyers are similar to those of fraud for property
True
Select three. How are legitimate flip sales different from fraudulent flip sales?
Fraudulent flip involve the transfer of the property in order to increase loan proceeds
In fraudulent flip transactions, the perpetrator has no intention of paying back the loan
Loan files from legitimate flippers generally contain true financial information
Select two. Which of the following are red flags for builder bailouts?
Source of funds in the loan file is questionable
Marketing materials advertise “no money down”
A “buy and bail” fraud can occur when a borrower:
Decides to default on payments because of the value of the home
In most cases, how do foreclosure specialists track down their “targets”?
By reading the “Notice of Defaults” listed in the public records
If a file contains inconsistencies such as a mismatch between the buyer’s age and professional level, an unrealistic commuting distance, or contradictory income/asset information, it ay indicate that:
There is a straw buyer applying for the loan
The sales contract should always be compared to the:
Appraisal
What would an illegal credit cleaning company suggest that a consumer do to improve his or her credit?
Rent a seasoned “trade line” with a strong history to make the report look better
Select two. You have a verification of employment form with an illegible signature and no listed title for the person who signed it. Additionally, the address for the employer is a P.O. box. What are some things you can do to further verify employment?
Perform a verbal verification of employment by using the phone number listed online and asking for the Human Resources department
Check online for a physical address of the employer
What is one red flag on asset documentation that might indicate the borrower is a straw buyer?
Bank statements reflect automatic payroll deposits that are not consistent with employment listed on the loan application
Why is careful review of the appraisal imperative to fraud deference?
Because most fraud for profit schemes rely on fraudulent appraisals
Select two. Lenders should perform background checks on which of the following?
Loan officers
Branch managers
Select two. When a borrower provides information to a loan originator, the loan originator should:
Share all information with your processing and underwriting team, especially if there are concerns about the file
Not accept documentation that cannot be verified as coming directly from the borrower
Select three. Fannie Mae recommends that lenders focus quality control checks on the following common areas of loan defects:
Occupancy status
Income verification
Appraisal/value
Select two. Which of the following websites can help you review a property description?
Zillow
Select three. In an effort to make fraud detection a priority within the organization, lenders should:
Perform background checks on staff, such as originators and branch managers
Provide ongoing training
Audit appraisers
Are straw buyers usually part of a builder bailout scheme?
No
To better identify potential fraud trends, the quality control department should:
Group quality control results by branch, loan originator, etc.
Select three. Which of the below are indicative of fraudulent flipping?
Using a straw buyer to purchase the property
Obtaining an inflated appraisal
Borrowing as much as possible against the property
When a fraud perpetrator targets members of an identifiable group and uses that group as a front, this is known as:
Affinity Fraud
Select three. A bank statement that shows a number of periodic, large deposits over just the last month. This could be a red flag for which of the following issues?
Straw Buyer
Builder Bailout
Down payment coming from an undisclosed debt
Select three. Which of the following can result when a lender does not originate and service quality loans?
Civil and criminal penalties
Repurchase obligations
Administrative and regulatory sanctions
Suspicious Activity REports (SARs) are filled with the:
Financial Crimes Enforcement Network (FinCEN)
Select two. Which of the following statements are true regarding fraud for profit?
It affects both the origination and servicing sides of the industry
It can result in substantial loss to lenders
Select two. An underwriter should cross-check recent comparable sales in the neighborhood when:
There is an excessive distance between comparables and the subject
There are excessive adjustments to the comps, even though properties are selling rapidly
Select three. To defend against fraud, processor and underwriters should:
Conduct independent verification through third-party resources of information provided by borrowers
Screen all third-party originated loans through investor exclusionary lists
Share information regarding suspected fraud with colleagues
A parent buying a house for a child, but stating on the application that the parent will occupy the home, would be considered which type of straw buyer?
Friendly straw buyer
Select three. Which of the following resources are available to the public to assist in fraud prevention?
Directories that enable a reverse phone and address look up and house number verification by zip code
Websites that describe common mortgage fraud schemes targeting consumers and agencies that can help handle and report fraud
Websites to view a property description, estimated values, sales and foreclosures in a specific neighborhood
Appraisal Independence Requirements (AIR)________ contact between the appraiser and parties to the transaction
Prevent
Select three. Which of the following are variations of foreclosure rescue schemes?
Lease Backs
Equity Stripping
Equity Skimming
As part of quality control activities, what types of loans should be reviewed at a higher frequency?
Loans from new or low volume counterparties
Select two. A review of a borrower’s bank statement shows automatic deposits for his monthly salary that do not match the information provided on the verification of employment. What might this indicate?
Straw Buyer
Falsified Income
Elaborate fraud schemes often involve collusion between:
Industry Insiders
Select three. To help create a culture that makes fraud detection a priority and a responsibility for each employee, which of the following third-party resources should be leveraged?
AVM
GSE Exclusionary lists
MERS database
Select two. If the length of time on the credit report is inconsistent with the borrower’s age or employment history, this could indicate:
A straw buyer
Identity theft
Select three. To defend against fraud, processors and underwriters should:
Be familiar with their originators and brokers
Share information with other staff members
Follow comprehensive written procedures
Select three. A Suspicious Activity Report (SAR) is report filed by a financial institution with FinCEN under which of the following conditions?
Insider abuse involving any amount (Fraud by any employee or officer)
Violations aggregating $25,000 or more, regardless of potential suspects
Potential money laundering aggregating $5000 or more
Select three. If the application states that the down payment is other than cash (e.g rent payment, sale of personal property), this could indicate what types of fraud for profit schemes?
Flip Sale
Builder Bailout
Lease/buyback
Select three. What are some red flags on the credit report that might indicate the borrower has obtained additional debt for down payment?
All accounts paid in full recently
Recent inquiries from other mortgage lenders
Credit report shows additional debt on closing date
The Fraud Enforcement adn Recovery Act of 2009 (FERA) broadened the definitions of “financial institutions” and the term “proceeds” with regard to mortgage lending fraud
True
Which of the following best describes “collusion”?
A secret agreement for an illegal or deceitful purposes
Approximately what percentage of fraud reports filed contain some type of fraud or misrepresentation on the loan application?
75%
Select three. Why is it important to use a public records search service website like “searchSystems” when underwriting a loan?
To see who own a business
To resolve any identity questions
To check on public records in case the credit report has been altered
Select three. Which of the following could be a source of straw buyers for a fraud perpetrator?
People in jail
Friends
People who are deceased
Mortgage fraud reporting includes trends in all of the following. EXCEPT:
Tips for how mortgage professional can review appraisal for fraud
An earnest money deposit appears to have been paid by someone other than the borrower. This may indicate:
A straw buyer
When a fraud perpetrator target members of an identifiable group and uses that group as a front, this is known as:
Affinity Fraud
What is the one thing that MUST happen in order for a scam artist to pull off a fraudulent short sale “flip”?
Getting the lender to agree to a below market sales price and payoff amount
Select two. What steps should you take if you suspect the Verification of Employment has been completed by someone other than the employer?
Verify the employer’s address and phone number using a third-party resource
Call the employer and ask for the Human Resources department
Which of the below best describes a forensic loan audit with regard to foreclosure rescue schemes?
A company offers a borrower help in identifying lending violations that occurred when the borrower’s mortgage was created
Wanting to own a home is motivating factor for committing fraud for property
True
Select two What type of economic scenario could prompt a rise in builder bailout fraud?
Overbuilding in the area
Housing slump
What is the name of a popular database containing information submitted from major mortgage lenders, agencies, and insurers regarding fraud and material misrepresentation incidents?
Mortgage Industry Data Exchange (MIDEX)
Select two. Investment clubs target naive investors to promote high return real estate investment and make their profits by:
Charging a large fee to belong to the club
Disguising purchases as refinances to avoid down payment
Construction Process:
The process of building and financing a home is more complex than financing the purchase of an existing home.
Consider:
A homebuyer choosing an existing property need only find the home, negotiate a price, sign the purchase and sales agreement, and obtain a mortgage. The whole process can be completed in as little as two to three weeks.
In comparison, the time required for the construction of a new home extends the mortgage approval process and prolongs closing of the permanent financing
Permanent Financing
A mortgage loan that goes into place upon completion of construction.
for several months.
Understanding each step involved in the construction process prepares the lender to make a sound underwriting decision. Just as the homebuilding process requires a buyer to be aware of more details and choices, new construction financing requires the lender to provide more loan product and underwriting details.
Acquire a lot to build on.
Execute a construction contract.
Work with a builder and/or sub-contractors
Obtain permits and engineering inspections.
Select materials.
Obtain a certificate of occupancy
A Fannie Mae single–closing transaction occurs when the mortgage includes both of the following: Interim construction loan and permanent financing
Select two that apply. Fannie Mae transaction types for two-closing construction-to-permanent financing may be which of the following?: cashout and limited cashout refinance
Fannie Mae allows the lender to add borrowers to the permanent financing when structuring a construction-to-permanent refinance transaction.: False
For a construction-to-permanent loan structured as a single-closing purchase transaction, what should be entered in 3. Real Estate Owned?: Nothing – this section should be reviewed to ensure there is NO entry for the lot
For a construction-to-permanent loan structured as a single-closing purchase transaction, where do you enter the lot price if the lot price and construction costs are on separate contracts?: Original Cost of Lot field on the the L1. Property and Loan Information screen; then on L4. Qualifying the Borrower - Minimum Required Funds or Cash Back screen, C. Land Value, select Original Cost of Lot from the drop-down menu.
For a construction-to-permanent loan structured as a single-closing refinance transaction, what button do you click on the 3. Real Estate Owned screen to create a record for the lot associated with the subject property?: Add Property
Select three that apply. For a construction-to-permanent loan structured as either a single-closing or two-closing refinance, which of the following steps do you complete on the Property Information screen?: Ensure the subject property indicator is checked. + Enter the estimated property value of the completed property in the Estimated Property Value field. + Select Retained from the drop-down list in the Status field.
Select three that apply. For a construction-to-permanent loan structured as a two-closing refinance transaction, which fields should NOT have amounts because they should not be used for that transaction structure?: A. Sales Contract Price + Improvements, Renovations, and Repairs + Land Value
For a construction-to-permanent loan structured as a single- or two-closing refinance transaction, the Original Cost of Lot and Appraised Value of Lot fields should NOT be used because:If an amount is entered in either of these fields it will be included in the required funds.
Which of the following resources provides specific steps for entering data for Fannie Mae construction loans?: DU Job Aids: Construction-To-Permanent Transactions
A Freddie Mac construction conversion mortgage: Can be treated as either a purchase or refinance
When escrow holdbacks are permitting on a Freddie Mac construction to permanent loan, within how many days of the note date must improvements be satisfactorily completed? : 180
When entering a construction conversion mortgage to LPA, the Mortgage Type should be entered as: conventional
Acquisition cost is the sum of the documented costs of the construction excluding the sales price of the lot.: False
Select all that apply. Steps in establishing total acquisition costs for construction-to-permanent loans include the following:
Review each change order to ensure no non-qualifying items are included.
Correct!
Review the original contract details to ensure no non-qualifying items are included.
Correct Response
Calculate the final construction contract price and review all change orders/addenda.
Correct!
Add the cost of qualifying items paid by the borrower out of pocket.
Change orders can result when a purchaser decides to _______ a contract of sale.
Add an item to
Delete an item from
Upgrade an item on
All of the above
Select two that apply. Interim construction financing provides short-term funds for which of the following?
Building a new site-built home
Purchasing and permanently affixing a new manufactured home
Which of the following property types is INELIGIBLE For Fannie Mae construction-to-permanent transactions?: attached condo unit
Fannie Mae construction-to-permanent financing allows an escrow holdback agreement for completion if all work is completed within ________ days of the mortgage note. 180
The underwriter uses the total acquisition cost for a construction-to-permanent loan primarily to determine: LTV ratio
For Freddie Mac construction-to-permanent loans, underwriting: May occur before or after the closing of the interim construction financing
Which of the following situations might result in a change order to the sales contract? All of the above
The final construction draw is released at what point in the construction process? Upon home completion
Which of the following expenses would be included in the acquisition cost?
All of the above
When entering a single-closing purchase construction-to-permanent loan into DU, which of the following is the first step?:Navigate to the Real Estate Owned section to ensure there is no entry for the lot.
Items purchased by the borrower out of pocket cannot be included in total acquisition cost calculations for construction-to-permanent loans. False
If the borrower is not the owner of record of the land prior to the closing of the interim construction financing, the Purpose of Loan field in LPA should be ______________. Purchase
Which of the statements below is true about change orders?:
They should be reviewed in chronological order.
For Freddie Mac's construction conversion and renovation mortgages, within how many days of the effective date of permanent financing must verifications of employment and income be made? 120
Select two that apply. Freddie Mac offers two types of construction-to-permanent financing. They are:
Construction to conversion
Renovation
When calculating acquisition costs, which of the following would NOT meet the criteria for a “qualifying item” to be used in a construction-to-permanent loan?
Area rug for living room
Select all that apply. Private investors may require lenders to submit a jumbo loan to an agency AUS in order to:
Possibly obtain documentation relief
Obtain a credit risk evaluation
Select all that apply: Jumbo investors may require a second appraisal or an appraisal completed or reviewed by/from an:
Designated appraiser
Specific list of qualified appraisers
More seasoned appraiser
A jumbo or non-conforming program may allow for flexibilities, including all of the following, EXCEPT:
Waiving the collateral review
Select all that apply. A jumbo investor may accept the AUS recommendation from DU or LPA with:
A minimum fico score
Additional documentation requirements
Select all that apply. Which of the following are common characteristics of a rural market?
Wide variations in housing and site improvements
Absence of public utilities and services such as health and sanitation
Shared school districts
When appraising a two-to four-unit property, the strongest indicator of value is the:
Income approach
Both fannie mae and freddie mac support affordable homeownership in declining markets by requiring which of the following actions?
Minimum down payment requirements
Data entry and submission steps for submitting jumbo loans to Loan Product Advisor are no different than those used for a conforming loan submission.
True
Select all that apply. Which of the following principles always apply when underwriting jumbo loans?
Analyze reliable asset and income data
Provide a thorough collateral review
Determine ability to manage credit
Select all that apply. Which of the following circumstances can affect property values?
Local economy
Current market conditions
Neighborhood
The subject property is located on twenty acres of land, so the appraiser evaluates five acres of a parcel. This evaluation is eligible for sale to Fannie Mae and Freddie Mac.
False
Select all that apply. According to agency expectations of both parties in the mortgage and valuation process, what is the lender responsible for?
Ensure the inclusion of listings and contract sales by the appraiser in addition to the most recent closed sales to accurately portray market conditions.
Review the appraisal report for compliance with standards of property analysis and evaluation of subject as marketable collateral for the mortgage loan.
Follow established quality controls to safeguard against improper actions or conduct by employees, agents or third-party originators that may "compromise the accuracy of the appraisal report."
Almost identical homes sit in close proximity to one another. Property A includes a large barn that cost $25,000 to build. Property B does not include a barn. Property A sold for $250,000 while Property B sold for $240,000. According to the contributory value approach, what is the correct sales comparison adjustment?
$10,000
Select all that apply. What factors are the focus when examining borrower risk for a jumbo loan?
Ability to Repay
Willingness to repay
A jumbo loan is a home loan that is ineligible for purchase by Fannie Mae and Freddie Mac because it is too large.
True
Your appraiser derives the average gross rent multiplier from six nearby comparables as 123.5. Projected gross rents for the subject property of the mortgage loan you are underwriting is $9,600 per annum. What is the estimated market value for this property according to the income approach?
$98,800
Jumbo lenders often establish a single ratio analysis rather than using:
Housing debt-to-income
Select all that apply. Jumbo investors may offer flexibilities and restrictions that may include:
Lender-funded mortgage insurance
Single-ratio or residual income qualifying
Varying reserves
Select all that apply. What two pieces of financial information are required to calculate the gross rent multiplier for a property?
The total gross rent possible
The sales price
Select all that apply. Some private sector investors have developed their own proprietary automated underwriting systems. Which of the following are true about the use of these systems?
They have been successful in assessing risk for the mortgage loans purchased by their respective companies
They have not achieved the same market acceptance from other private sector jumbo investors that has been accorded to Fannie Mae and Freddie Mac
Select two. A credit score is a numeral value or a categorization derived from a/the:
Modeling System
Statistical tool
Credit scoring was first developed in the_______.
1950s
Select two. Only a person or business with________may gain access to another person’s credit report.
Written instruction of the consumer
Permissible purposes
Select three. Advantages of credit scores include:
They are an accurate and reliable tool for predicting mortgage delinquencies
They facilitate faster credit decisions
They remove human bias in risk assessment
Select two. Which of the following do GSEs Fannie Mae and Freddie Mac require for both automated and manually underwritten mortgage loans?
FICO credit scores for each borrowers
One report from each of the three major credit repositories
Consumer Reporting Agency (CRA) model:
Analyzes information in a borrower’s consumer credit file
Behavior scoring model:
Examines internal data from a serviver’s billing file on existing loans
Application model:
Usually calculated directly by a lender and is based on information in the lender’s file
Select three. What factors are not considered in a credit score?
Alimony payments
Income
Age
Fico factors ranked from most to least important
How well the consumer has paid back in the past (most)
How much the consumer currently owes on debts
What kinds of credit the consumer has
How long the consumer has had credit (least)
Compared to a consumer that uses 75% of total available credit, a consumer that uses 25% of total available credit represents:
Less risk
At least how many reason codes must be listed with each FICO credit score?
Four
A FICO score from one nationwide credit reporting company is equivalent to the same numerical score from another because:
The scores are normalized so that they will be consistent
Select two. The FICO Expansion Score was introduced for consumers that have:
No traditional credit
Thin Credit
Which credit risk model examines borrower and loan characteristics?
Mortgage Score
There are three basic steps for assessing comprehensive risk. Put the three steps in the order in which they are performed
Evaluate primary risk
Evaluate contributory risk
Determine comprehensive risk
Select three. Which of the following are influential contributory risk factors on mortgage default?
Presence of co-borrower
Mortgage term
Previous mortgage payment history
Select three. Which of the following typically generates a loan-level price adjustment on a loan?
Credit Score
Type of property
LTV
Transactor
Low-risk category; defined a someone that pays their credit card in full every month
Partial payer
Moderate to low-risk category; defined as someone that actively pays down their balances monthly
Revolver
High-risk; defined as someone that carries a balance and typically makes only minimum payment on their credit card
Sally pays off her credit card balance monthly; Chris makes only the minimum payment due most every month. Which statement is true?
Sally will be considered a lower risk than Chris
A borrower has been car shopping over an extended time due to their work schedule resulting in credit reports being pulled roughly twice a month. This would most likely result in:
Poor Credit Score
Select three. An extenuating circumstance is:
Beyond the borrower’s control
An isolated occurrence
An event that creates a large decrease in income or increase in expenses
Which of the following statements is true of consumer reporting agencies?
CRAs collect financial information about consumers from collection agencies, creditors, and public records
Which of the following three categories of borrowers represent the highest risk to a lender based on their trended credit history?
Revolver
Select three. Which of the following groups of consumers are less likely than the general population to have a credit score?
Consumers who distrust the credit/banking system
Immigrants to the united states
New credit users
A credit score does not factor in the ________ that the borrower went into default. For this reason, lenders may take extenuating circumstances into account.
Reason
Select two. Newer versions of credit scoring models that could be used consistently among the three CRAs over time without the need for major alterations was achieved through:
A consistent design blueprint
Periodic redevelopments
Select three. Credit scores are used in mortgage lending to do which of the following?
Provide a composite view of a borrower at a specific point in time.
Assess a borrower's credit behavior patterns, past and present.
Predict future credit performance and how likely a potential borrower is to repay future debts
Select three. Credit scores are used in which of the following areas of mortgage lending?
Portfolio management
Loan administration
Loan production
Select two. Credit score reason codes:
Are listed in order of their impact on the score
Describe the most influential reasons why higher credit scores were not granted
Low
Select three. Credit scores benefit mortgage lenders by:
Providing faster credit decisions
Removing human bias
Instilling confidence to extend credit
Which of the following Congressional acts requires mortgage lenders to provide borrowers with their credit scores and the factors affecting the score?
Fair credit reporting act
When is it necessary for a CRA to list five reason codes on a consumer’s credit report?
When “inquiries” is the fifth reason that influenced the credit score
What do predictive variables analyze?
Both positive and negative data
Select two. All credit scores are calculated by computerized statistical models. These statistical models are complicated formulas that analyze consumer information and produce a numerical score. The formulas are based on factors that have been proven to predict credit behavior and are:
Considered trade secrets
Proprietary to each agency
Keeping revolving balances below 50% of the high credit limit
Paying bills on time
Not opening unnecessary accounts
In addition to the credit or FICO score, there are other risk models, such as those that produce bankruptcy scores. Bankruptcy scores measure:
Risk of consumer bankruptcy
Select three. Credit files change:
As credit data changes
With any key activity
As balances change
Select three. Which of the following circumstances contribute to inaccurate scores?
An account belonging to a “Jr” reported on his father’s credit report
Identity theft
Paying an account in full prior to the date reported
Select two. Which of the following factors are considered in most scoring systems?
Length of credit history
How the consumer handled credit in the past
Lenders who use credit scores have _____ confidence and will typically offer credit to _____ people
More; more
What problem is addressed by the use of scorecard segmentation?
Different types of consumers have varying characteristics that are predictive of risk
As the LTV/CLTV reaches 95%, how must the credit score range be rated to maintain acceptable risk for most investors?
Upper range
Select two. Under US law, which of the following factors may NOT be considered in ANY credit scoring model?
Whether the consumer receives welfare
Consumer’s marital status
How does each CRA use scorecard segmentation to determine a borrower's credit score?
Consumer credit information is run through the one scorecard that best fits that consumer's profile. The resulting score is the consumer's credit score
Select three. Which of the following are options for qualifying a borrower who has no credit score when underwriting a loan?
Using expansion scoring
Using a nontraditional credit report
Documenting a nontraditional credit history
Select three. CRAs collect information about consumers from:
Public records
Collections agencies
Creditors
By _____, both the conventional and governmental mortgage sectors acknowledged risk–based scoring as a valuable and fair credit scoring model.
2000
The housing finance crisis of the late 200s triggered a new wave of legislation regulation the mortgage industry.
True
The SAFE Act is intended to provide consumers with which of the following protections?
Increased accountability and tracking of mortgage loan originators, with education, licensing, and registration requirements
Homeowners Protection Act (HPA)
The goal of this act is to help consumers cancel private mortgage insurance (PMI). It includes requirements concerning disclosures, automatic cancellation at certain thresholds, and return of unearned premiums
Truth in Lending Act (TILA)
The goal of this act is to promote the informed use of consumer credit by requiring disclosures about credit terms and costs. It includes requirements for full disclosure of all direct and indirect costs of credit and repayment terms within specific time frames, among other disclosures, and also provide consumers a right of rescission in certain transactions
TILA-RESPA Integrated Disclosures Rule (TRID)
The goal of this rule is to make the TILA and RESPA required disclosures provided at application and closing more clear and helpful to consumers trying to understand the costs and terms of mortgage loans during the application and settlement process. It reconciled various requirements under RESPA and TILA and consolidated the previously required four forms into two (Loan Estimate and Closing Disclosure) for most mortgage loans
Real Estate Settlement Procedures Act (RESPA)
The goal of this act is to provide consumers with pertinent and timely disclosures regarding the nature and costs involved in the real estate settlement process. It also prohibits kickbacks and places certain restrictions and requirements on the use of escrow accounts
The Truth in Lending Act (TILA) was enacted to promote the informed use of consumer credit by requiring disclosures about:
Terms and costs of credit
Which act set the stage for future fair lending laws by prohibiting discrimination in housing on the basis of race?
Civil Rights Act
Gramm-Leach Bliley Act (GLBA)
The purpose of this act is to protect consumers from individuals and companies that obtain consumers’ personal finance information under false, unauthorized, or fraudulent pretenses. Its provisions include the Financial Privacy Rule and the Safeguards Rule
Fair and Accurate Credit Transactions Act (FACTA)
This act seeks to curb identity theft and to allow consumers easier access to their credit reports. It is associated with the Red Flags Rule, and it allows consumers to request a free copy of their credit report once every 12 months, among other provisions
Fair Credit Reporting Act (FCRA)
This law is designed to ensure that consumer reporting agencies exercise fairness, confidentiality and accuracy in preparing and disclosing credit information. It places obligations on providers of consumer credit reports and allows consumers to obtain and dispute credit information, among other provisions
Under FACTA, a consumer can request a free copy of his or her credit report every three months.
False
What is the Average Prime Offer Rate (APOR)
The annual percentage rate that is based on average interest rates, fees, and other terms on mortgage offered to highly qualified borrowers
Select three that apply. If a loan is a higher-priced mortgage loan, which of the following requirements would apply?
A full interior appraisal
Free second appraisal from the lender, if the subject property is considered “flipped”
Escrow account (in many cases)
For loans subject to the Home Ownership and Equity Protection Act, when must borrowers be sent additional disclosures?
At least three business days prior to closing
Select two that apply. Which of the following titles of the Dodd-Frank Act have the most obvious and direct impact on mortgage lending regulation?
X
XIV
The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Act in:
2010
The SAFE Act establishes minimum standard for:
Licensing and registration of mortgage loan originators
Select two that apply. Which of the following are included in SAFE Act’s definition of a mortgage loan originator?
An individual who offers or negotiates terms for compensation or gain
An individual who takes a residential mortgage loan application
Underwriters and processors as well as mortgage loan originators must be registered with NMLS.
False
State-Licensed Loan Originator
Hakeem is mortgage loan originator working for an independent mortgage banker in illinois
Registered Loan Originator
Luisa is mortgage loan originator working in the call center of a large national bank that is FDIC insured
Loan Originator with Temporary Authority
Molly has been a registered mortgage loan originator with a credit union in Connecticut for three years. She’s planning to move to New Jersey and begging working for an independent mortgage banker there; she has begun the process of obtaining her NMLS state license in New Jersey
A mortgage loan originator applying for NMLS registration or state licensing may NOT:
All of above
Per the SAFE Act, each state has the right to prohibit additional practices in that state, in addition to those identified in the State Model Language
True
Which agency is responsible for enforcement of the SAFE Act at the federal level?
Consumer Financial Protection Bureau
Annual Percentage Rate (APR)
The cost of the mortgage loan expressed as a yearly rate. The calculation includes not only the interest rate but also the points, mortgage broker fees, and other charges associated with the loan
Finance Charge
The cost of consumer credit as a dollar amount; it represents the total amount of interest and loan charges the borrower would pay over the entire life of the mortgage loan. It includes any charge payable directly or indirectly by the borrower and any charge that the lender imposes directly or indirectly in connection with the extension of credit.
Amount Financed
The loan amount minus most of the upfront fees the lender charges. It is the principal amount borrowed less the points and other prepaid finance charges. The note, security instrument, and all other legal and closing documents express the amount financed as the same principal amount for which the borrower has applied
Total of payments
The amount of money the borrower will have paid over the life of the mortgage. This includes principal, interest, mortgage insurance (if applicable) and loan costs
Select three that apply. The Truth in Lending Act (TILA) includes requirements and prohibitions for which of the following areas?
Disclosure of costs and terms of the loan
Advertising
Product-specific disclosures
Select four that apply. RESPA requires consumer disclosure regarding which of the following?
Cost of settlement services
Escrow accounts
Servicing transfers
Affiliated business arrangements
In what way does the Closing Disclosure meet RESPA disclosure requirements?
It itemizes the costs of the actual fees associated with the mortgage transaction.
Select two that apply. What information is included in the Comparisons section of the Loan Estimate?
The total amount the consumer will have paid in principal, interest, mortgage insurance, and loan costs in the first five years of the loan
The total amount of interest the borrower will pay over the loan terms expressed as a percentage of the loan amount (TIP)
Regarding the Services You Cannot Shop For section, the CFPB advises borrowers that the indicated costs are representative of the best prices available for those services and there is no need to comparison shop
False
Where would a consumer find the amount paid to the mortgage loan originator on the Loan Estimate?
Closing Costs Details - Loan Costs A Origination Charges
Where can the consumer find information about transfer of servicing on the Loan Estimate?
Other Considerations
What does the CFPB advise the consumer to do if the Costs at Closing shown on the Closing Disclosure do not match the most recent Loan Estimate?
Ask the lender to explain why
How do regulators determine whether or not the Loan Estimate was made in good faith?
By calculating the difference between the estimated charges originally provided in the Loan Estimate and the actual charges paid by or imposed on the consumer in the Closing Disclosure
When must the HOEPA disclosure statement be completed?
At least three business days before closing
Under ECOA, if a financial institution decides to approve credit, the notice of approval must be an express statement of approval provided to the consumer in writing.
False
Which of the following does FCRA NOT require financial institutions to disclose to consumers?
The top seven reasons for adverse action
Select four that apply. For a fixed-rate residential mortgage that is NOT high-risk, what information is required in the initial disclosure?
The borrower’s right to request cancellation of PMI, and based on the initial amortization schedule, the date the loan balance is scheduled to reach 80 percent of the original value of the property
The borrower’s right to request cancellation on an earlier date, if actual payments bring the loan balance to 80 percent of the original value of the property sooner than the date based on the initial amortization schedule
That PMI will automatically terminate when the LTV ratio reaches 78 percent of the original value of the property and the specific date that is projected to occur (based on the initial amortization schedule)
The Act provides for exemptions to the cancellation and automatic termination provisions for high-risk mortgages and whether these exemptions apply to the borrower’s loan
HPA disclosures are the same for fixed-rate mortgage loans, adjustable-rate mortgage loans, and high-risk mortgage loans
False
HPA requires initial and annual disclosures
True
Under HPA, if mortgage insurance is paid by the lender, the borrower must receive a notice explaining:
That LPMI does not automatically terminate
Select five that apply. Which of the following are bases on which is it prohibited to discriminate under both ECOA and the FH Act? (Familial status and marital status, which have = partial overlap, are excluded from the question)
Color
National Origin
Race
Religion
Sex
Which of the following is FALSE about HMDA?
HMDA prohibits discriminatory behaviors such as redlining.
GLBA
This act governs how financial institutions collect, share, and protect consumers non-public personal information. Its privacy provisions include three principle parts: pretexting provisions, the financial privacy rule, and the safeguards rule
FACTA
This act is an important amendment to another critical consumer credit information act. It adds requirements focused on helping consumers fight identity theft and maintain the privacy of their credit information. It includes requirements for providing free annual credit reports, fraud alerts, and notices regarding rights for victims of identity theft, the right to dispute inaccurate information on a credit report, and the use of risk-based pricing
FCRA
The goal of this act is to ensure that consumers have the access to the same credit information about themselves that lenders use to make credit decisions, as well as to promote privacy, accuracy, and fairness in how consumer reporting agencies handle consumer information.
Which act requires consumers to have access to the same information about their credit history as the lenders use to make credit related decisions?
Fair Credit Reporting Act
Higher-Priced Covered Transaction (HPCT)
Requirements are detailed in Section 1026.43. This category concerns whether the loan archives safe harbor status under the ATR/QM Rule.
Higher-Priced Covered Transaction (HPML)
Requirements are detailed in Section 1026.35. These loans have special appraisal, escrow, and certain other ECOA and TILA requirements. They are fairly common,
High-Cost Mortgage (HCM)
Requirements are detailed in section 1026.32. These are loans originally defined by the HOEPA Act and subject to the 2013 HOEPA rule. They have several restrictions, including no balloon payments, no negative amortization, and no prepayment penalties. They are fairly rare due to the many restrictions - most lenders avoid originating them.
For high-cost loans subject to the Home Ownership Equity Protection Act, all of the following loan terms are prohibited EXCEPT:
Adjustable Rates
The Consumer Financial Protection Bureau has the authority to write rules for consumer protections for a variety of financial institutions, including banks and non-banks
True
The Fair and Accurate Credit Transaction Act does all of the following to prevent fraud. EXCEPT:
Prevent identity fraud victims from disputing inaccurate data reported
The HOEPA disclosure statement discloses all of the following EXCEPT:
That credit scoring was used to determine qualification for a mortgage loan
The Equal Credit Opportunity Act (ECOA) makes it illegal to discriminate on the basis of which of the following?
All of the above
The purpose of the Affiliated Business Arrangement Disclosure is to inform borrowers that:
They are not required to use the affiliate that their lender or real estate agent has suggested
The Home Ownership and Equity Protection Act (HOEPA) allows for prepayment penalties only when the borrower has agreed to them in writing.
False
The Safeguards Rule under the Gramm-Leach-Bliley Act requires all financial institutions to:
Protect consumer information while it is in the institution’s control or custody
Although the primary purpose of this law is to promote equal treatment of creditworthy customers in terms of access to credit, it also includes disclosure requirements. Which law is it?
ECOA
Under the Ability-to-Repay and Qualified Mortgage rule, which of the following is NOT among the considerations that must be taken into account in determining a borrower’s ability to repay a mortgage loan?
Borrower’s life expectancy
According to TILA, any advertising regarding a mortgage loan must include the annual percentage rate if certain trigger terms such as the amount of any payment or the amount of anu finance charge are stated.
True
Select three that apply. Which of the following are violations of the SAFE Act?
Engage in any unfair or deceptive practice toward any person
Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers, lenders or any person
Conduct any business covered by the SAFE Act without holding a valid license
All mortgage loan originators must be state-licensed
False
Which of the following is NOT one of the requirements for licensed mortgage loan originators under the SAFE Act?
Recertify annually through reexamination
Reverse redlining occurs when:
Applicants in low to moderate income communities with protected classes of people are targeted for loan products with higher rates and fees
Which of the following is not typically a responsibility of the mortgage loan originator?
Processing a residential mortgage loan
The Dodd-Frank Act created new financial regulatory requirements to address the numerous problems and practices that contributed to the financial crisis of the late 2000s
True
TILA regulates information a creditor must provide regarding the cost and terms of credit at which of the following times.
All of the above
Which of the following is true regarding the evaluation of a loan application under the Equal Credit Opportunity Act?
A creditor CANNOT use child-bearing go speculate whether the applicant’s income could be interrupted
Which federal agency was created by the Dodd-Frank Act in 2010 with the intention of consolidating implementation and enforcement authority for consumer protection laws under one roof?
Consumer Financial Protection Bureau (CFPB)
Under HOEPA, lenders may approve loans based solely on the collateral value of the property.
False
Under FCRA, if credit is extended to a consumer on terms that are materially less favorable than those terms the financial institution has extended to a substantial proportion of consumers, the financial institution usually must:
Disclose the reason for risk-based pricing
The 2013 HOEPA Rule imposes a requirement for homeownership counseling but does not require lenders to provide information about approved counseling organizations.
False
Select three that apply. Which of the following represent a valid “change of circumstance”?
A loan going from float to locked status
Borrower waiting for two weeks after application to provide intent to proceed
Change of loan program to enable approval of a denied loan
The Fair and Accurate Credit Transaction Act of 2003, which amended FRCA, primarily focuses on which of the following?
Helping consumers fight identity theft and maintain the privacy of their credit information
Which important disclosure issued at the time of application lists specific settlement charges that the individual borrower will likely have to pay in association with the closing of a mortgage loan?
Loan Estimate
Which of the following is NOT a requirement for mortgage loan originator state licensing?
4 hours of observed practice
The SAFE Act’s objective is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry is operating without unfair, deceptive, and fraudulent practices by:
Mortgage Loan originators
Which Act created CFPB?
Dodd-Frank Act
The SAFE Act requires states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators
True
Under the Homeowners Protection Act (HPA), at what LTV is PMI automatically terminated if the borrower is not delinquent and the loan is not a high-risk loan?
78%
Final closing costs shown on the Closing Disclosure cannot vary outside of certain tolerances from cost shown on the Loan Estimate. When discussing these tolerance, zero tolerance means the same thing as no tolerance
False
If a mortgage loan originator has his or her NMLS license revoked by a state due to violations of the Safe Act, it has a potential domino effect of the license being revoked in all other states in which the mlo has a license
True
Under this law consumers must be advised and made aware of how information may be used to make financial decisions and extend credit
FCRA
Under the Safe Act a real estate agent or broker would need to be State licensed as a mortgage loan originator if they received compensation from any of the following except which one?
For clerical duties
According to ecoa, the Creditor has the option to exclude the reasons for taking adverse action in the adverse action notification as long as:
The creditor discloses that the consumer has the right to request the reason
The Consumer Financial Protection Bureau is responsible for implementing and enforcing all of the following laws except:
Fair Housing Act (FH Act)
Under HPA when is the servicer required to notify the borrower that refinancing the mortgage loan could eliminate LPMI?
No later than 30 days after the termination date that would apply for BPMI
Which of the following statements is true regarding enforcement of the Safe Act?
Each individual state has specific exam processes and requirements for SAFE Act compliance
Who is responsible for filing a Home Mortgage Disclosure Act (HMDA) report?
Lender who makes the credit decision
Which of the following privacy and consumer identification laws limits the furnishing of credit reports to those authorized to receive them and places disclosure obligations on the users of consumer credit reports?
Fair Credit Reporting Act
Which of the following was NOT a practice of discrimination in the 1960s and 1970s?
Salaries of unmarried men were reduced because lenders assumed they would get married and have to support a family
Select three that apply. Which of the following might be used to refer to the CFPB’s simplification and consolidation of consumer disclosures required by RESPA and TILA?
Know Before You Owe
TILA-RESPA Integrated Disclosure (TRID)
Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)
As required by HPA, for most loans, lenders must provide borrowed with an initial disclosure notifying the borrower that PMI will automatically be canceled after:
The mortgage has been paid down to 78% of the original value
Higher-Priced Mortgage Loan regulations under HOEPA require:
Verification of the borrower’s ability to repay the loan
The perpetrator’s desire to own a home is the motivating factor for committing which tupe of fraud?
Fraud for Property
Select three. Some of the best resources to help combat mortgage fraud are:
Freddie mac
Fannie Mae
Industry-Specific Trade Associations
Select three. Which of the following GSEs, federal agencies, and private companies provide various tools and information to help mortgage lenders detect, track, and prevent fraud?
Fannie Mae
FBI
Lexis Nexis
Select two. The Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law by the President in an effort to:
Crack down on fraud in the mortgage industry
Broaden the Department of Justice’s authority to prosecute fraud
Does collusion always occur between industry insiders?
No
The red flags for straw buyers are similar to those of fraud for property
True
Select three. How are legitimate flip sales different from fraudulent flip sales?
Fraudulent flip involve the transfer of the property in order to increase loan proceeds
In fraudulent flip transactions, the perpetrator has no intention of paying back the loan
Loan files from legitimate flippers generally contain true financial information
Select two. Which of the following are red flags for builder bailouts?
Source of funds in the loan file is questionable
Marketing materials advertise “no money down”
A “buy and bail” fraud can occur when a borrower:
Decides to default on payments because of the value of the home
In most cases, how do foreclosure specialists track down their “targets”?
By reading the “Notice of Defaults” listed in the public records
If a file contains inconsistencies such as a mismatch between the buyer’s age and professional level, an unrealistic commuting distance, or contradictory income/asset information, it ay indicate that:
There is a straw buyer applying for the loan
The sales contract should always be compared to the:
Appraisal
What would an illegal credit cleaning company suggest that a consumer do to improve his or her credit?
Rent a seasoned “trade line” with a strong history to make the report look better
Select two. You have a verification of employment form with an illegible signature and no listed title for the person who signed it. Additionally, the address for the employer is a P.O. box. What are some things you can do to further verify employment?
Perform a verbal verification of employment by using the phone number listed online and asking for the Human Resources department
Check online for a physical address of the employer
What is one red flag on asset documentation that might indicate the borrower is a straw buyer?
Bank statements reflect automatic payroll deposits that are not consistent with employment listed on the loan application
Why is careful review of the appraisal imperative to fraud deference?
Because most fraud for profit schemes rely on fraudulent appraisals
Select two. Lenders should perform background checks on which of the following?
Loan officers
Branch managers
Select two. When a borrower provides information to a loan originator, the loan originator should:
Share all information with your processing and underwriting team, especially if there are concerns about the file
Not accept documentation that cannot be verified as coming directly from the borrower
Select three. Fannie Mae recommends that lenders focus quality control checks on the following common areas of loan defects:
Occupancy status
Income verification
Appraisal/value
Select two. Which of the following websites can help you review a property description?
Zillow
Select three. In an effort to make fraud detection a priority within the organization, lenders should:
Perform background checks on staff, such as originators and branch managers
Provide ongoing training
Audit appraisers
Are straw buyers usually part of a builder bailout scheme?
No
To better identify potential fraud trends, the quality control department should:
Group quality control results by branch, loan originator, etc.
Select three. Which of the below are indicative of fraudulent flipping?
Using a straw buyer to purchase the property
Obtaining an inflated appraisal
Borrowing as much as possible against the property
When a fraud perpetrator targets members of an identifiable group and uses that group as a front, this is known as:
Affinity Fraud
Select three. A bank statement that shows a number of periodic, large deposits over just the last month. This could be a red flag for which of the following issues?
Straw Buyer
Builder Bailout
Down payment coming from an undisclosed debt
Select three. Which of the following can result when a lender does not originate and service quality loans?
Civil and criminal penalties
Repurchase obligations
Administrative and regulatory sanctions
Suspicious Activity REports (SARs) are filled with the:
Financial Crimes Enforcement Network (FinCEN)
Select two. Which of the following statements are true regarding fraud for profit?
It affects both the origination and servicing sides of the industry
It can result in substantial loss to lenders
Select two. An underwriter should cross-check recent comparable sales in the neighborhood when:
There is an excessive distance between comparables and the subject
There are excessive adjustments to the comps, even though properties are selling rapidly
Select three. To defend against fraud, processor and underwriters should:
Conduct independent verification through third-party resources of information provided by borrowers
Screen all third-party originated loans through investor exclusionary lists
Share information regarding suspected fraud with colleagues
A parent buying a house for a child, but stating on the application that the parent will occupy the home, would be considered which type of straw buyer?
Friendly straw buyer
Select three. Which of the following resources are available to the public to assist in fraud prevention?
Directories that enable a reverse phone and address look up and house number verification by zip code
Websites that describe common mortgage fraud schemes targeting consumers and agencies that can help handle and report fraud
Websites to view a property description, estimated values, sales and foreclosures in a specific neighborhood
Appraisal Independence Requirements (AIR)________ contact between the appraiser and parties to the transaction
Prevent
Select three. Which of the following are variations of foreclosure rescue schemes?
Lease Backs
Equity Stripping
Equity Skimming
As part of quality control activities, what types of loans should be reviewed at a higher frequency?
Loans from new or low volume counterparties
Select two. A review of a borrower’s bank statement shows automatic deposits for his monthly salary that do not match the information provided on the verification of employment. What might this indicate?
Straw Buyer
Falsified Income
Elaborate fraud schemes often involve collusion between:
Industry Insiders
Select three. To help create a culture that makes fraud detection a priority and a responsibility for each employee, which of the following third-party resources should be leveraged?
AVM
GSE Exclusionary lists
MERS database
Select two. If the length of time on the credit report is inconsistent with the borrower’s age or employment history, this could indicate:
A straw buyer
Identity theft
Select three. To defend against fraud, processors and underwriters should:
Be familiar with their originators and brokers
Share information with other staff members
Follow comprehensive written procedures
Select three. A Suspicious Activity Report (SAR) is report filed by a financial institution with FinCEN under which of the following conditions?
Insider abuse involving any amount (Fraud by any employee or officer)
Violations aggregating $25,000 or more, regardless of potential suspects
Potential money laundering aggregating $5000 or more
Select three. If the application states that the down payment is other than cash (e.g rent payment, sale of personal property), this could indicate what types of fraud for profit schemes?
Flip Sale
Builder Bailout
Lease/buyback
Select three. What are some red flags on the credit report that might indicate the borrower has obtained additional debt for down payment?
All accounts paid in full recently
Recent inquiries from other mortgage lenders
Credit report shows additional debt on closing date
The Fraud Enforcement adn Recovery Act of 2009 (FERA) broadened the definitions of “financial institutions” and the term “proceeds” with regard to mortgage lending fraud
True
Which of the following best describes “collusion”?
A secret agreement for an illegal or deceitful purposes
Approximately what percentage of fraud reports filed contain some type of fraud or misrepresentation on the loan application?
75%
Select three. Why is it important to use a public records search service website like “searchSystems” when underwriting a loan?
To see who own a business
To resolve any identity questions
To check on public records in case the credit report has been altered
Select three. Which of the following could be a source of straw buyers for a fraud perpetrator?
People in jail
Friends
People who are deceased
Mortgage fraud reporting includes trends in all of the following. EXCEPT:
Tips for how mortgage professional can review appraisal for fraud
An earnest money deposit appears to have been paid by someone other than the borrower. This may indicate:
A straw buyer
When a fraud perpetrator target members of an identifiable group and uses that group as a front, this is known as:
Affinity Fraud
What is the one thing that MUST happen in order for a scam artist to pull off a fraudulent short sale “flip”?
Getting the lender to agree to a below market sales price and payoff amount
Select two. What steps should you take if you suspect the Verification of Employment has been completed by someone other than the employer?
Verify the employer’s address and phone number using a third-party resource
Call the employer and ask for the Human Resources department
Which of the below best describes a forensic loan audit with regard to foreclosure rescue schemes?
A company offers a borrower help in identifying lending violations that occurred when the borrower’s mortgage was created
Wanting to own a home is motivating factor for committing fraud for property
True
Select two What type of economic scenario could prompt a rise in builder bailout fraud?
Overbuilding in the area
Housing slump
What is the name of a popular database containing information submitted from major mortgage lenders, agencies, and insurers regarding fraud and material misrepresentation incidents?
Mortgage Industry Data Exchange (MIDEX)
Select two. Investment clubs target naive investors to promote high return real estate investment and make their profits by:
Charging a large fee to belong to the club
Disguising purchases as refinances to avoid down payment