Download MLO SAFE NMLS Safe Test Practice Questions | 100% Correct Answers | Verified | Latest 2024 and more Exams Business Administration in PDF only on Docsity!
MLO SAFE NMLS Safe Test Practice Questions | 100%
Correct Answers | Verified | Latest 2024 Version
Taking advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower and other prohibited acts is called __________________________. - ✔✔Predatory Lending. RESPA-Real Estate Settlement Procedures Act - ✔✔The Federal Statute that deals with the settlement of residential mortgage loans. RESPA's section 9 Prohibits - ✔✔Home sellers from requiring home buyers to purchase title insurance from a particular company providing title services. The Dodd-Frank Act modifies ECOA to require a creditor to furnish a copy of an appraisal developed in connection with a first mortgage_____________________ and absolutely not later than ________ business days prior to closing. - ✔✔upon completion and 3 business days TIL (Truth In Lending Disclosure) & GFE (Good Faith Estimate) - ✔✔Per the Dodd Frank Act, a single disclosure form combines these 2 statements. Per the Dodd-Frank Acvt, to be a "qualified mortgage" total points and fees may not exceed ________% of the total loan amount. - ✔✔3% (three percent) Per a provision of the Dodd-Frank Act mortgage lenders are to determine that a borrower has a reasonable ability to repay a loan. Does this provision apply to all loans or just owner occupied loans? - ✔✔All loans, whether owner occupied or not. A loan subject to HOEPA allows prepayment penalties for the first ______ years of the loan. - ✔✔2 (two) years Per the Dodd-Frank Act an abusive act would include which of the following:
- One that materially interferes with the consumers ability to understand the product or service.
- One that take unreasonable advantage of a consumers' lack of understanding.
- One that takes unreasonable advantage of the consumer's reasonable reliance on the MLO. - ✔✔All three would be considered abusive acts. Per the Dodd-Frank Act if an MLO receives compensation directly from a consumer, up to how much additional compensation may be received from a lender in the same transaction? - ✔✔$0.00, dual compensation is not allowed. Compensation must be borrower paid or lender paid. What kinds of reasons are necessary for a lender to take adverse action with regard to a borrower? - ✔✔Specific reasons. Adverse action means ______________________. - ✔✔A denial or revocation of credit. Also, a change in the terms of an existing credit arrangement or a refusal to grant credit in substantially the amount or terms requested. Per Regulation B, Lenders should retain certain records for _____________ months. - ✔✔25 Months Because of the impact of the Dodd-Frank Act on a second mortgage, an APR that exceeds the ________ by more than _____% is the trigger that defines a high cost loan. - ✔✔APOR ( Average Prime Offer Rate), 8.5% Regulation C is known as ________________________. - ✔✔HMDA, The Home Mortgage Disclosure Act. What is the purpose of HMDA? - ✔✔The HMDA determines whether financial institutions are serving the housing needs of their communities. It also identifies patterns of discriminatory lending. Under what circumstances can a lender with an Affiliated Business Arrangement require a borrower to use a specific third party service provider? - ✔✔If there are no kickback or referral fees and the service provider is an attorney, credit reporting agency or appraiser the lender can require that the borrower uses the provider If a transfer of servicing occurs, the _______________ must provide a servicing transfer statement not less than ________ days before the transfer occurs. - ✔✔Servicer, 15 (fifteen) days.
The Civil Rights Act of 1866, prohibited public and private racial discrimination in any property transaction and was expanded in 1968 in which act? - ✔✔The Civil Rights Act of 1968, also known as Title VIII of the Civil Rights Act , Also known as Title VIII, Also Known as The Fair Housing Act Of the following, which is not required to be disclosed on the TIL statement? The (1) APR, (2) Note Rate, (3) Finance Charge, (4) Amount Financed or (5) Total of Payments - ✔✔The note rate is NOT required. Which act of 1968 provides guidelines and restrictions regarding the financing, selling and renting of real property? - ✔✔The Civil Rights Act of 1968. AKA, The Civil Rights Act, AKA Title VIII, AKA The Fair Housing Act Which act prohibits asking questions regarding child bearing intentions or birth control practices? - ✔✔ECOA/Regulation B, the Equal Credit Opportunity Act Based on objective criteria regarding the condition and value of the property or area, may a lender deny loans in neighborhoods where property values are declining? - ✔✔YES, loans can be denied in a geographic area, but not for discriminatory reasons relative to the population of the area. A teaser rate occurs in an ARM when the starting rate is less than the _____________. - ✔✔Fully indexed rate. Per ECOA, is it true that while a lender must consider reliable alimony, child support or separate maintenance payments as income, the applicant is not required to disclose such income? - ✔✔Yes, it is true. Only income intended to be used for qualifying has to be disclosed and verified. Of the following, who make a flood zone determination?
- The Lender
- The Appraiser
- The Surveyor
- The Underwriter - ✔✔2. The Appraiser makes the flood zone determination.
Force-placed insurance protects the _________________. a. Lender b. borrower c. both - ✔✔a. lender FHA requires mortgage insurance on all loans for a period of ______________ years. - ✔✔5 (five) years. A property sells for $300,000 and requires a 20% down payment. The origination fee will be two points. How much is the origination fee? - ✔✔$4,800, $300,000 X 20% = $60,000 down payment $300,000 X 80% LTV = $240,000, $240,000 X 2% = $4, HOEPA prohibits ____________________ amortization. - ✔✔Negative. Increasing the principal balance, usually because of not paying sufficient interest which then is added to the principal balance of the loa. How often does the external Do Not Call list get updated? - ✔✔Every 3 months or 90 days. What does VA stand for? - ✔✔The Department of Veteran's Affairs The three functions of a direct endorser include ______________ , __________________ and ________________. - ✔✔Originate, underwrite and close loans. What is the down payment requirement on a VA guaranteed loan? - ✔✔0, Zero. There is no down payment required. The APR is also know at the _____________ rate. - ✔✔Effective rate. The term of a loan effects the APR. The longer the term the ______________ the APR. - ✔✔Lower.
The term that describes a banks gathering of funds from depositors for the sake of investing the combined funds is ________________. - ✔✔Intermediation Regulation B is also known as __________________________. - ✔✔ECOA, The Equal Credit Opportunity Act. Refusing to make a loan in a specific area to exclude a specific class of people is called _________________________. - ✔✔Redlining When inquiring about the marital status, what are the only three acceptable categories? - ✔✔Married, unmarried or separted If an individual place a phone number on a Do-Not-Call list, how frequently does their entry have to be renewed to stay active? - ✔✔Never, per the Do-Not-Call Improvement Act of 2007 which amended the original Telemarketing Sales Rule According to FACTA, any person who regularly extends, renews or continues credit is a ______________________. - ✔✔Creditor A _________________ is someone who allows his/her name and personal details to be used to obtain a mortgage loan for a property he/she has no intention of inhabiting. - ✔✔Straw Buyer The Red Flag Rules were created by the FTC pursuant to FACTA. They are primarily concerned with ______________________. - ✔✔Identity Theft The Federal Fair Housing Act of 1968 prohibits discrimination in residential credit but ____________________ is not protected. - ✔✔Age The HMDA enacted by Congress in 1975 is also known as Regulation ______________. - ✔✔C, The Home Mortgage Disclosure Act, Regulation C
The HMDA deals with institutions with over $________________ in assets. - ✔✔$10,000,000; Ten Million Dollars A __________________ disclosure is required to be provided to the borrower when the referring provider has greater than 1% ownership interest in the business being referred. - ✔✔AfBA, Affiliated Business Arrangement Disclsoure An annual escrow analysis is required by which Federal Law? - ✔✔RESPA governs all settlement costs including the collection and disbursement of escrows. The loan product that utilizes an interest rate that remains the same for the life of the loan is called ___________________. - ✔✔A fixed rate mortgage What is the name of the Act that entitles a consumer to a free copy of their credit report if credit is denied based on information from their report? - ✔✔FCRA, The Fair Credit Reporting Act What type of loan would commonly use an extended rate lock? - ✔✔A new construction loan. While banks remain the largest source of investment funds their increased participation in long term home mortgage lending is possible because of a change in federal banking regulations. What is that change? - ✔✔Reserve requirements have been reduced and first lien home mortgages at less than 80% LTV are in the lowest risk category. The banks increased participation in these loans still leave funds available for other loans and investments. The adjustable component use to compute the note rate on an ARM is called the _____________________. - ✔✔Index According to USDA Rural Development Programs a small town can include up to ________________ people. - ✔✔20,000 people What kind of buy down would reduce the note rate? - ✔✔A permanent buy down.
Per the Dodd-Frank Act does a "qualified mortgage" provide a "safe harbor" regarding compliance with the ability-to-repay requirement? - ✔✔Yes Relative to the Do-Not-Call registry a company may call a consumer for up to __________________________ months after the consumer makes an inquiry or submits an application to the company. - ✔✔3 Months There are three (3) groups of laws under the CFPB includig 1. financial disclosure, 2. privacy, protection and consumer identification and 3. __________________________. - ✔✔3. Prohibition of Predatory Lending The 3/7/3 Rule is a provision of the _______________ Act related to required disclosures and waiting periods. - ✔✔TILA, Truth in Lending Act The illegal practice of inducing owners to sell their homes by suggesting that the ethnic or racial composition of the neighborhood is changing is called _____________________________. - ✔✔Blockbusting The borrower's ability to pay a loan is referred to as _________________________. - ✔✔Capacity The Fair Housing Act of 1968 protects against discrimination based on race, color, religion, sex, national origin, disability and __________________________. - ✔✔Familial Status Which law requires that all mortgage loan originators pass a national licensing exam? - ✔✔The SAFE Act, The Secure and Fair Enforcement for the mortgage licensing act of 2008. Two sources of funds that may be used for a down payment on an FHA insured loan include ___________ and _______________. - ✔✔(1) A gift from a family member and (2) down payment assistance grant
The documents issues by the VA which state the value of the subject property based on an approved appraisal is called the _______________________. - ✔✔CRV, Certificate of Reasonable Value or NOV, Notice of Value Instead of notifying a borrower with the actual details of adverse action taken within 30 days of the loan application, the lender notified the borrower that he has the right to request the actual details. Is that acceptable per ECOA's guidelines? - ✔✔Yes, When adverse action is taken, actual details or the right to those details has to be disclosed within 30 days of application. The borrower can request specific reasons within 60 days. Broker A has a client and Broker B has access to a loan product that will satisfy the clients needs. A and B Brokers decide to share the brokerage fee. Accordingly, B pays A a referral fee. Has either Broker violated any law? If so, which law and who committed the violation? - ✔✔Both Brokers A and B have violated Section 8 of RESPA. Per the Real Estate Settlement Procedures Act one cannot give or receive a thing of value in exchange for a referral. Why is it not acceptable to post privacy policies in a prominent location in an office? - ✔✔Federally mandated disclosures must be made directly to the consumer so that the consumer has a copy of the notice. All federal laws were enforced by the FTC and now the CFPB and possibly other agencies. The maximum penalty that can be imposed is incarceration for __________________ year(s) and a maximum fine of $___________________. - ✔✔1 year and a $10,000 fine Per ECOA, what section of the 1003 must an originator complete, with or without the help of the borrower? - ✔✔Section X of the 1003 (section 10 of the 1003 loan application) What class is protected under Regulation B (ECOA) but, not under Regulation V (Fair Housing Act)? - ✔✔Age Monies paid by a lender to lower the cash out-of-pocket expenses for a borrower at closing, by raising the interest rate on the loan are called _________________. - ✔✔YSP, borrower credits What specific lender activities does HMDA prohibit? - ✔✔HMDA, the Home Mortgage Disclosure Act is a disclosure law and does not prohibit any specific lender activities.
How should you respond to a borrower who suggests they will be submitting false documents in order to qualify for a loan? - ✔✔Refuse to take the loan application. (suspected fraud makes the refusal justifiable) For a fee, a Real Estate Broker offers a Mortgage Company the contact information of the people attending an Open House. Has anyone violated RESPA and if so, who? - ✔✔Only the Real Estate Broker by offering referrals in exchange for something of value is a RESPA violation. However, had the Mortgage Company accepted that would also be in violation of RESPA. The SAFE act is title V of _________________________. - ✔✔HERA, The Housing and Economic Recovery Act. Providing that payments are made on time, the HPA requires that PMI is automatically terminated at __________% loan to value. - ✔✔78% MIP is required on all _________________ loans. - ✔✔FHA insured The mortgage clause that facilitates a change in lien position, generally from superior to inferior is called a(n) ______________________ clause. - ✔✔Subordination Which regulation prohibits discrimination in a credit transaction? - ✔✔Regulation B of ECOA The interest rate charged by the Federal Reserve to its member banks is called the _____________ rate. - ✔✔Discount Rate The FNMA automated underwriting system is called __________. - ✔✔DU, Desktop Underwriter The FHLMC automated underwriting system is called ___________________. - ✔✔Loan Advisor The most commonly and frequently used approach to appraising residential property is the ____________ approach. - ✔✔Comparable Approach also known as the Market Data Approach.
What is market price? - ✔✔The dollar amount that is actually paid for a property. When a primary residence, the ratio that results from dividing the subject property PITI by the borrowers stable gross monthly income is called ______________________. - ✔✔The primary housing expense or the front end ratio. The USDA loan program that either guarantees loans made by approved private lenders or makes direct loans is known as the section ____________________ loan program. - ✔✔ 502 Chapter 7 bankruptcy will continue to be reported on the borrower's credit for a period of _____________ years. - ✔✔10 years. A loan with a 2/1 buydown will cost the borrower 2.625 points at closing. The loan amount is $157,000. Compute the cost of the points. - ✔✔$4,121.00. $157,000 X 2.625% = $4,121. A high cost loan under the Dodd-Frank Act exceeds the APOR by 6.5% for a 1st mortgage. A high priced loan in a first lien priority exceeds the APOR by ______________? - ✔✔1.5% What is the name of the Act that allows the consumer to "freeze" their credit to prevent information from showing on their credit report? - ✔✔FACTA, The Fair Credit Reporting Act of 2003 What does the GLBA restrict? - ✔✔The (GLBA) Gram-Leach-Bliley Act restricts the selling or sharing personal information with non-affiliated third parties. What must an institution do as dictated by the Red Flag Rule? - ✔✔The institution must create a written identity theft protection program. The VA debt ratio is _______________%. - ✔✔41%, VA only considers a total obligations ratio The income that a Rural Development Loan considers is the ___________________________. - ✔✔AMI, the area median income
The conservator of FNMA and FHLMC is ____________________. - ✔✔The FHFA, Federal Housing Finance Agency Does the Fair Housing Act provide protection if a single family home is sold or rented by a private owner without the use of a broker? - ✔✔No, there is no protection by virtue of the fair housing act if there is no broker. Per FNMA a borrower who owns _____________ of the business that's paying him/her is considered self employed. - ✔✔25% Under what circumstances may a mortgage broker ask questions regarding a former spouse who is a non-applicant? - ✔✔When the applicant is including child support from the former spouses income. Lenders can collect in escrow a _______________cushion for advance tax payments and insurance premiums. - ✔✔Two Months Escrow, 1/6th of a twelve month year. If a Mortgage Broker violates provision of the GLB Act, the CFPB may bring action and impose penalties against the Broker up to $__________________. - ✔✔$10, Per the Dodd-Frank Act, the borrower's ability to repay a loan does not apply to 4 types of financing. The 4 exceptions include _____________, _____________, _____________ and __________. - ✔✔Open End credit loans, timeshare plans, reverse mortgage and a temporary loan. Which Federal Law allows the borrower to challenge the value stated on an appraisal? - ✔✔ECOA Per the Federal Fair Housing Act, the phrase that must be included in a broadcast advertisement is _________________________. - ✔✔Equal Housing Lender Per RESPA, a loan application must include ____________________. a. a property address b. an estimate of value c. Both a and b
d. Neither a or b - ✔✔b. Both A and B While generally prohibited, a higher priced loan can include prepayment penalties for up to __________ years. - ✔✔2 Years A borrower earns $10,000 per month and has installment debt and revolving charge payments of $1, per month. Per FHA guidelines this borrowers maximum allowable housing expense is _______________. - ✔✔$2,900. $10,000 X 43% = $4,300 - $1,400 = $2, FHA ratios 31/ Use the lesser of the front/back end Front=$10,000 X 31%=$3, The amount of money that the VA will guarantee is called the _______________________. - ✔✔Entitlement Sheryl and Marty jointly own their primary residence which they are refinancing. Marty is given the only copy of the notice of the right to rescind. How long do they have to rescind the transaction? - ✔✔ 3 Years. All co-owners should receive a rescission notice. Per TILA (the truth in lending act) the rescission period is expanded to three years if there has not been complete or proper disclosure of the right to rescind. Per the Federal Fair Housing Act what must be displayed in every branch where mortgage loans are made? - ✔✔The "Equal Housing Opportunity" poster. Who are the three largest lenders/investors in the secondary market? - ✔✔FNMA, GNMA, and FHLMC. Fannie Mae, Ginnie Mae and Freddie Mac The Real Estate Settlement Procedures Act (RESPA) is also known as Regulation _______________. - ✔✔Regulation X The ________________ is the purchase price of the property plus the allowable buyer paid closing costs.
The Financial Modernization Act of 1999 is more commonly known as the __________________. - ✔✔GLBA, Gram-Leach-Bliley Act You have established a business relationship with a consumer who has a phone number listed on the do not call registry. Can you call this consumer? For how long can you call this consumer? - ✔✔Yes you can call, for 18 months from the date of the last transaction. Per ECOS, how long must records such as the application, adverse action notice, credit documents and any violations be kept by the lender? - ✔✔25 Months Per ECOA redlining is acceptable for non-discriminatory reasons. Redlining is OK for ______________ reasons. - ✔✔Geographical Is a license required in order to explain the contents of an application and/or describe the loan application process to a borrower? - ✔✔No, a license is not required for the described activities. The Act that requires businesses to responsibly secure and dispose of sensitive personal information that is found in a consumer's credit report is the __________________. - ✔✔FACTA, Fair and Accurate Credit Transaction Act of 2003 The ratio that divides the loan amount by the lesser of the selling price or appraised value is called _______________. - ✔✔LTV, loan to value. An option that allows a borrower to change from an adjustable rate loan to a fixed rate loan is called a _________________ option. - ✔✔Conversion Per ECOA, at closing a borrower is entitled to a copy of their appraisal or notification of their right to an appraisal. If notified, how long does the borrower have to request the appraisal? - ✔✔90 days, Per ECOA the borrower has 90 days from their notification at closing to request an appraisal copy What Act and Section set limits on the amount that a lender may require a borrower to pay into an escrow account towards taxes and insurance? - ✔✔RESPA Section 10
What is the name of the rule that exempts an AfBA from RESPA's section 8? - ✔✔The Safe Harbor Rule Per TILA a lender/broker may collect a fee for (the) ______________ before issuing disclosures. - ✔✔Credit Report Who enforces the Red Flag Rule? - ✔✔FTC, Federal Trade Commission A _________________ fee is required to implement the guarantee on a VA loan. - ✔✔Funding Fee An unintentional breach of a legal duty is ___________________. - ✔✔Negligence A ______________________market entity would usually buy a loan from a ___________________ market entity. - ✔✔Secondary/Primary A loan subject to HOEPA may provide for negative amortization for how long? - ✔✔Negative Amortization is a prohibited loan term in a loan subject to the Home Ownership and Equity Protection Act. Because of the Dodd-Frank Act, total points and fees exceeding ___________% on a mortgage loan of at least $20,000 is the trigger that defines a high cost loan. - ✔✔5% A telemarketer who calls a consumer in violation of the Do Not Call registry listing could be fined $_______________ per incident. - ✔✔$16, The buyer in a land contract is known as the ____________. - ✔✔Vendee Who enforces the "Do Not Call" registry? - ✔✔FTC, Federal Trade Commission, FCC Federal Communication Commission, State Law Enforcement Officials. A ______________ buyer is a person who gets paid for the use of their name and credit history in (a) loan transaction(s) usually for fraudulent persons. - ✔✔Straw Buyer
