Understanding Mortgage Loans and Fair Housing Rights, Exams of Real Estate Management

Download Understanding Mortgage Loans and Fair Housing Rights and more Exams Real Estate Management in PDF only on Docsity! HUD CERTIFICATION EXAM LATEST EXAM 2024 | ALL QUESTIONS AND CORRECT ANSWERS | ALREADY GRADED A+ | LATEST VERSION A client earns a salary of $45,000 at a job held for three years. The client has credit card bills, student loans, and a car loan totaling $500 per month. The client has already saved $3,500 for a down payment and is using an FHA Energy Efficient Mortgage (EEM). If the client wants to make the minimum down payment for a home priced at $150,000, how much more does the client need to save? -$1,750 -$2,250 -$4,500 -$5,250 ------CORRECT ANSWER---------------$1,750 Under which condition would most down payment assistance programs approve a waiver of the home-ownership education requirement? -Most will not waive the home-ownership education requirement -When the home-buyer has successfully passed a home-ownership exam -When the home-buyer has a verifiable disability or handicap -When the home-buyer has completed four years of college ------ CORRECT ANSWER---------------Most will not waive the home-ownership education requirement Which type of assistance administered by a public housing authority allows for location flexibility? -USDA -FHA -Project-based vouchers -Tenant-based vouchers ------CORRECT ANSWER---------------Tenant- based vouchers A client's payment history affects which factor of creditworthiness? -Collateral -Capacity -Character -Capital ------CORRECT ANSWER---------------Character Which action may a lender take to determine a borrower's character? -Calculate housing ratios to see debt obligations. -Examine pay stubs to determine amount of income. -Review the appraisal. -Call an employer to verify employment. ------CORRECT ANSWER----------- ----Call an employer to verify employment. A client is in the process of purchasing a home with a sales price of $162,000. The client has a net worth of $50,000, a credit score of 680, and a debt-to-income ratio of 36%. The home has appraised for $155,000. Which factor of creditworthiness will most likely be an obstacle to purchasing the home? -Character -Capital -Collateral -Capacity ------CORRECT ANSWER---------------Collateral Retirement plan statement List of assets Current lease ------CORRECT ANSWER---------------Pay stub A client would like purchase a home within one year. The client is motivated to increase household income as a way to save for a down payment and qualify for a loan. Which is the best solution for the client to reach this goal? Find a second job Borrow from retirement fund Sell major assets Find a temporary job through a staffing service ------CORRECT ANSWER-- -------------Find a second job A credit report may contain which information? The number of accounts in collection status A history of payments on an electric bill Income history Criminal record ------CORRECT ANSWER---------------The number of accounts in collection status A credit report contains inaccurate information. Which action item should the counselor include in the Client Action Plan? -Attach a letter to mortgage applications explaining the inaccuracies. -Investigate the reasons why the inaccuracies occurred to determine the responsible party. -Include a personal consumer statement on the credit report. -File a dispute with the appropriate credit reporting agency. ------CORRECT ANSWER---------------File a dispute with the appropriate credit reporting agency. Six months ago a client left a job as a reporter to start a business in the retail industry. To prepare to buy a house, the client closed credit card accounts and has been using savings to pay down credit card debt and collections. The client has not been able to save much for a down payment with all the debt payments but knows about an affordable home-ownership program that only requires a 1% down payment with an FHA loan. What might result from the client closing the credit card accounts? -It decreases credit utilization, causing a negative impact on the credit score. -It increases credit utilization, causing a negative impact on the credit score. -It increases credit utilization, causing a positive impact on the credit score. -It decreases credit utilization, causing a positive impact on the credit score. ------CORRECT ANSWER---------------It decreases credit utilization, causing a positive impact on the credit score. Which action would a client take to improve a credit score? -Request to expunge public records -Apply for new credit cards to increase credit -Cancel all credit cards -Pay delinquent accounts ------CORRECT ANSWER---------------Pay delinquent accounts A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? -Fair Credit Billing Act -Fair Credit Reporting Act -Fair Housing Act -Fair and Accurate Credit Transactions Act ------CORRECT ANSWER------- --------Fair Credit Billing Act A client shopping for a mortgage loan presents a housing counselor with an offer from a local mortgage lender. The interest rate on the offer is 7.5% for a 30-year fixed rate mortgage with a 20% down payment required. The counselor reviews the client file and determines the client's credit score is 725 and the client's total debt-to-income ratio is 20%. The client asks the housing counselor if the offer is a case of illegal predatory lending. How should the housing counselor respond? -"You have been a victim of predatory lending and should file a report with the Consumer Finance Protection Bureau (CFPB)." -"The loan seems reasonable. You might do better, but I cannot steer you to any particular loan originator." -"I am unable to determine whether the loan is predatory, but I suggest you shop around with other lending sources." -"I cannot offer legal advice, but I would not proceed with the loan." ------ CORRECT ANSWER---------------"I am unable to determine whether the loan is predatory, but I suggest you shop around with other lending sources." Which action should a counselor recommend a client take first after discovering identity theft? -File for a name change. -Apply for a new Social Security number. -File an identity theft report. -Purchase identity theft protection. ------CORRECT ANSWER--------------- File an identity theft report. In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? -When considering closing costs Which loan type would provide the highest monthly payment, assuming interest rates and other factors are equal? Conventional/piggyback FHA loan Conventional loan Traditional conventional loan ------CORRECT ANSWER--------------- A client, who is the surviving spouse of a military service member, is interested in buying a home. The client now works at a local nonprofit agency, making $36,000 per year. The client has $4,000 in savings and a credit score of 624. If a client has just received a commitment from a lender to provide a loan for a fixed loan amount based on a review of the complete loan application package by an underwriter, in what stage of the lending process is the client? Loan committee review Pre-approval Pre-qualification Loan application ------CORRECT ANSWER--------------- What are key differences between PMI and MIP? Conventional loans may require MIP, removed at 78% LTV. FHA loans require PMI, removed upon fulfillment of loan terms. Conventional loans may require PMI, removed at 78% LTV. FHA loans require MIP, removed upon fulfillment of loan terms. Conventional loans may require MIP, removed at fulfillment of loan terms. FHA loans require PMI, removed at 78% LTV. Conventional loans may require PMI, removed upon fulfillment of loan terms. FHA loans require MIP, removed at 78% LTV. ------CORRECT ANSWER--------------- A client seeking to purchase is trying to decide between an FHA-insured mortgage and another mortgage insured by private mortgage insurance. Which is a distinguishing difference between these two types of mortgage insurance? -FHA-insured mortgages generally require payment of mortgage insurance premiums, which are generally twice as expensive as private mortgage insurance premiums for the same loan amount. -Private mortgage insurance programs generally require payment of mortgage insurance premiums for the life of the loan. FHA-insured mortgages may allow for the removal of this insurance after paying down the loan to below a 78% loan-to-value level. -Private mortgage insurance programs generally require payment of mortgage insurance premiums, which are generally twice as expensive as FHA mortgage insurance premiums for the same loan amount. -FHA-insured mortgages generally require payment of mortgage insurance prem ------CORRECT ANSWER--------------- Which borrower information is contained in the Uniform Residential Loan Application (URLA)? Credit score Tax information Asset information Education ------CORRECT ANSWER--------------- In order to comply with the Know Before You Owe rule, which disclosures were replaced with new versions that more clearly outline mortgage terms to borrowers? -Loan Estimate and HUD-1 Settlement Statement -Good Faith Estimate (GFE) and Closing Disclosure -Loan Estimate and Closing Disclosure -Good Faith Estimate (GFE) and HUD-1 Settlement Statement ------ CORRECT ANSWER---------------Loan Estimate and Closing Disclosure Which government regulation prohibits a lender from discriminating against a borrower who uses public assistance to qualify for a mortgage loan? Truth in Lending Act (TILA) Home Ownership and Equity Protections Act (HOEPA) Equal Credit Opportunity Act (ECOA) Real Estate Settlement Procedures Act (RESPA) ------CORRECT ANSWER---------------Equal Credit Opportunity Act (ECOA) Which item would affect the cost of earthquake insurance? Groundwater flow patterns Age of borrower Structural material Residential zoning type ------CORRECT ANSWER--------------- For a client whose most recent rental history is unfavorable, which initial strategy should a housing counselor recommend to increase a potential landlord's willingness to rent to the client? -Complete a tenant responsibilities and obligations course conducted by a housing counselor. -Inform the landlord that to refuse a tenant access to housing is a violation of the Fair Housing Act. -Write a letter explaining the various issues the client experienced under the last landlord. -Propose a higher monthly rental rate to the landlord to make up for the increased risk of an unfavorable rental history. ------CORRECT ANSWER--- ------------ Delinquency on which type of payment can cause a lien to be placed on a client's property? Home warranty payments Mortgage insurance payments Homeowners association dues Homeowners insurance payments ------CORRECT ANSWER--------------- Homeowners association dues Which is a possible outcome for member residents if a homeowners association (HOA) imposes a community assessment? -Residents would be required to complete a community survey assessing community-wide activities and programs. -Residents would be requested to complete a community assessment survey about property management performance. -Residents would be provided the HOA's annual report, including an evaluation of the community. -Residents would be required to pay a share of expenses related to capital improvements to the common areas. ------CORRECT ANSWER--------------- A homeowner has decided to remodel the basement over the next 12 months. The project should cost just under $24,000, and the hope is to borrow the money at a very low interest rate that can be paid off over a longer period of time. Which home financing option would work best? -FHA 203k loan -Energy Eficient Mortgage (EEM) -HELOC -Home equity loan ------CORRECT ANSWER--------------- A potential home-buyer with minimal savings for a down payment and a low credit score is most likely to qualify for which mortgage? -Freddie Mac -USDA -Fannie Mae -FHA ------CORRECT ANSWER--------------- Which is the most significant benefit of using a real estate agent? Paying the sales commission Marketing the home online Obtaining a home inspection Negotiating the sale ------CORRECT ANSWER---------------Negotiating the sale Which item is critical to consider when working with a client to prepare a household system maintenance plan? Local tax codes Cost of original item Target replacement date Finance rate ------CORRECT ANSWER--------------- Which strategy most effectively increases a home's energy efficiency? -Install an automatic garage door opener. -Increase attic insulation. -Use ground fault indicator outlets. -Cover windows with permanent storm shutters. ------CORRECT ANSWER- --------------Increase attic insulation. Which best describes the ENERGY STAR program? A voluntary program that helps businesses and individuals save money and protect the climate through superior energy efficiency. A voluntary program that helps individuals save money and protect the climate through superior energy efficiency. A mandatory program that helps individuals save money and protect the climate through superior energy efficiency. A mandatory program that helps businesses and individuals save money and protect the climate through superior energy efficiency. ------CORRECT ANSWER--------------- Which action would most likely increase the energy efficiency of a home? -Repair caulking on windows. -Repair cracks in driveways and walkways. -Clean chimneys. -Keep electrical cords in good condition and positioned appropriately. ------ CORRECT ANSWER---------------Repair caulking on windows. Which should a housing counselor recommend that a client include in a household maintenance plan? -Limits of homeowners insurance coverage -Ratings for energy efficiency resources -Strategies for financing a home improvement loan -Coverages for home warranty ------CORRECT ANSWER--------------- Which item should be included in an emergency preparedness plan? -Identify a meeting location outside the immediate area. -Store 30 days' worth of food. -Obtain identification bracelets for all family members. -Purchase a safety deposit box at a bank. ------CORRECT ANSWER--------- ------ A client is delinquent on the mortgage and at risk of default. The client is considering signing the deed over to a real estate investor to avoid foreclosure. What should the housing counselor recommend? -Recommend a reputable real estate agent to handle signing the deed over to a real estate investor. -Advise the client to take advantage of the offer to sign over the deed. -Recommend that the client file bankruptcy instead of signing over the deed. -Advise against signing over the deed to a real estate investor as a solution to avoid foreclosure. ------CORRECT ANSWER--------------- Which option would be most likely to require that the mortgage is current for eligibility? -Principal reduction -Unemployment forbearance -Loan modification -Refinance ------CORRECT ANSWER--------------- A family suffers a loss of income due to unemployment and is now facing a pending foreclosure. After reviewing the family's budget, the housing counselor learns that the family has a negative cash flow of almost $300. The housing counselor recommends adjusting expenses, which results in a positive cash flow of $400 per month. The family would like to pursue an FHA retention option. They are seven months behind on the mortgage and their debt-to-income ratio is 29%. Which option is best for this situation? -FHA-HAMP Loan Modification -Informal/Formal Forbearance -Special Forbearance -FHA Preforeclosure Sale ------CORRECT ANSWER--------------- Which aspect of a loan may a client be able to modify when seeking a loan modification due to a financial hardship because of a divorce? -Property tax rate -Loan term -Mortgage insurance -Amortization schedule ------CORRECT ANSWER--------------- What information is needed to counsel every client through the loss mitigation process? -Credit report -Type of mortgage -Appraisal -Profit and loss statement ------CORRECT ANSWER--------------- Why is it important to include a 4506-T form when submitting a loss mitigation package? -Because it validates the borrower's current income -Because it authorizes the servicer to obtain the client's tax returns -Because it provides information regarding the borrower's past addresses -Because it documents the borrower's self-employment income ------ CORRECT ANSWER---------------Because it authorizes the servicer to obtain the client's tax returns Which retention option would most likely offer a principal reduction? -Reinstatement -Refinance -Forbearance plan -Loan modification ------CORRECT ANSWER--------------- A client who is not behind on the mortgage was recently informed of a reduction of income for two months by the client's employer. The client has an FHA loan and would like to take action as soon as possible to avoid a mortgage delinquency. Which FHA Loss Mitigation option is likely best for this client? -Informal/Formal Forbearance -FHA Partial Claim -FHA-HAMP Loan Modification -Special Forbearance ------CORRECT ANSWER--------------- What loss mitigation option may allow a borrower an FHA Partial Claim? -Informal/Formal Forbearance -FHA-HAMP Loan Modification -FHA Repayment Plan -Special Forbearance ------CORRECT ANSWER--------------- Which type of organization making an unsolicited offer to avoid foreclosure could indicate a scam? -A HUD-approved housing counseling agency -A company that offers "government-approved" loan modifications -A company that does not guarantee results -A company that does not charge for services ------CORRECT ANSWER---- ----------- How should a homeowner interpret a letter from a lawyer offering to stop foreclosure proceedings for an upfront fee? A counselor is working with a client who has recently been evicted. What would be the most appropriate housing referral? -Affordable housing resource -Local emergency shelter -Transitional shelter -Housing Choice Voucher program ------CORRECT ANSWER--------------- A tenant has a Housing Choice Voucher for a two-bedroom apartment, but lives in a three-bedroom apartment and pays the difference in rent. Due to a recent job change, the tenant is behind on rent but wishes to keep the voucher. What should the counselor encourage the client to do? -Wait for eviction in order to retain the voucher -Move into a two-bedroom unit to reduce costs and negotiate a repayment plan -Work with the local fair housing organization to prevent eviction -Wait for the Cure or Quit Notice to initiate negotiations with the landlord ---- --CORRECT ANSWER--------------- Which practice is a legal exception to the Fair Housing Act? -Limiting rental information to individuals based on gender when the owner lives in a facility with fifteen rental units -Failing to accept an offer because of the buyer's gender when the housing was promoted by a real estate agent -Refusing to rent housing to a member of a religious organization when the owner is a private entity that owns six single-family houses -Making housing operated by a religious organization unavailable to those who are not members of the organization ------CORRECT ANSWER---------- ----- Which practice remained legal after the passage of the Civil Rights Act of 1964? -Segregating public school programs, based on race -Using different provisions in leases for federally funded public housing, based on race -Assigning renters to specific floors in a privately owned apartment complex, based on race -Providing different housing to military personnel, based on race ------ CORRECT ANSWER--------------- Which are protected characteristics under the federal Fair Housing Act? -Race, sexual orientation, disability -Gender identity, color, national origin -Source of income, race, sex -Race, religion, disability ------CORRECT ANSWER--------------- Which is a potential violation of the Fair Housing Act? -A landlord refuses to rent to a Muslim family based on negative credit history. -A homeowner renting a spare bedroom refuses to rent to a female tenant. -An apartment owner only rents ground-level apartments to tenants of Asian ethnicity. -A religious organization denies a prospective tenant of a different religion from renting one of its apartments. ------CORRECT ANSWER--------------- A single, gay, African-American parent with four kids is turned away from a property because the landlord does not want the kids to destroy the property. Which protected characteristic of discrimination most likely fits this case? -Color -Race -Familial status -Sexual orientation ------CORRECT ANSWER--------------- Which HUD program provides funding to nonprofits that assist people who may have been victims of housing discrimination? -Section 8 -Section 3 -Fair Housing Initiatives Program (FHIP) -Fair Housing Assistance Program (FHAP) ------CORRECT ANSWER-------- ------- When filing a fair housing complaint, why is it important to provide the date of the alleged violation? -Because complaints are only valid if they are filed within a given period of time -Because complaints made in the same time frame by other aggrieved parties are taken into account -Because complaints are only valid after a given waiting period -Because HUD is required to rule on a complaint within a given period of time ------CORRECT ANSWER--------------- While meeting with a housing counselor, a client describes a possible housing discrimination situation. Which is the best way to handle the violation? -File a complaint online with HUD -Write out a lengthy description of the situation -Go the state's civil rights division -Go to the local fair housing center ------CORRECT ANSWER--------------- The opportunity to increase awareness of the plans and actions of housing industry members, private organizations and foundations, public housing agencies, neighborhood groups, regional organizations, and others to further fair housing objectives. ------CORRECT ANSWER--------------- Networking Event The section of the credit report that contains employer details. ------ CORRECT ANSWER---------------Personal Information The section of a credit report that contains information about a student loan. ------CORRECT ANSWER---------------Account Information The section of the credit report that contains court information such as a bankruptcy. ------CORRECT ANSWER---------------Public Records The section of the credit report that will show recent attempts to open a credit card. ------CORRECT ANSWER---------------Inquiries The section of the credit report that contains information about how to correct inaccuracies. ------CORRECT ANSWER---------------Consumer Rights Credit: Payment history of accounts, including late payments, delinquencies, judgments, and liens. ------CORRECT ANSWER--------------- Account History Credit: Ratio of total credit extended to the amount of credit owed. ------ CORRECT ANSWER---------------Amounts Owed Credit: Overall length of credit history in the report as well as the average age of accounts. ------CORRECT ANSWER---------------Length of Credit History Credit: Variety of accounts (e.g. credit card, auto loan, mortgage) ------ CORRECT ANSWER---------------Types of Credit Credit: Number of recent credit inquiries, as well as new credit accounts. --- ---CORRECT ANSWER---------------New Credit Where does a client go to get a free credit report? ------CORRECT ANSWER---------------AnnualCreditReport.com You have the right to dispute information in your credit file that is incomplete, inaccurate, or unverifiable. ------CORRECT ANSWER------------- --Fair Credit Reporting Act (FCRA) You have the right to a free annual credit report. ------CORRECT ANSWER---------------Fair and Accurate Credit Transactions Act (FACTA) You have the right to place a fraud alert on your credit file. ------CORRECT ANSWER---------------Fair and Accurate Credit Transactions Act (FACTA) You have the right to know what is in your credit file. ------CORRECT ANSWER---------------Fair Credit Reporting Act (FCRA) Which federal law protects a consumer's right to dispute a billing error associated with his/her credit card account. ------CORRECT ANSWER------- --------Fair Credit Billing Act (FCBA) What act limits employers access to persons credit report. ------CORRECT ANSWER---------------Fair Credit Reporting Act (FCRA) Fee charged when a client sends a payment to another account electronically through electronic funds transfer (EFT) ------CORRECT ANSWER---------------Wire Transfer Fee Fee charged when an account doesn't have money to cover a purchase and the financial institution loans money to complete the payment. ------ CORRECT ANSWER---------------Overdraft Fee Fee charged to invalidate a check before it is cashed. ------CORRECT ANSWER---------------Stop Payment Fee Fee charged if there is not enough money in an account to cover a check payment of other purchase. ------CORRECT ANSWER---------------NSF Fee An arrangement in which the owner of a dwelling or structure does not own the land on which the structure resides. ------CORRECT ANSWER------------ ---Ground Rent Charged by community or Homeowners Association to pay for repairs, upkeep, landscaping, improvements and property management. ------ CORRECT ANSWER---------------Association Dues Gross income minus adjustments, or reductions, that one is eligible for, such as deductions for unreimbursed business expenses, tuition and fees, and contributions to certain retirement accounts. ------CORRECT ANSWER---------------Adjusted Gross Income A summary of revenue, costs, and expenses incurred during a defined period, such as a fiscal year. ------CORRECT ANSWER---------------Profit and Loss Statments A rate that calculates a borrower's total monthly debt, including housing and other debt obligations, as a percentage of gross monthly income. ------ CORRECT ANSWER---------------Back-End Ratio Credit history, employment history, and housing stability to determine the likeliness that the borrower will repay their debts ------CORRECT ANSWER---------------Character Lender considers consistency of employment and income, adequacy of income to repay debt, recurring debts and frequency and type of wages ---- --CORRECT ANSWER---------------Capacity Lenders inquire about how much money a borrower has saved to pay a deposit or down payment for the home intended to purchase. ------ CORRECT ANSWER---------------Capital Lenders often request a borrower to pledge specific property or assets as collateral to secure repayment of loan. ------CORRECT ANSWER------------- --Collateral 28% ------CORRECT ANSWER---------------Front-end ratio for obtaining a conventional loan 31% ------CORRECT ANSWER---------------Front-end ratio for obtaining an FHA loan 30% ------CORRECT ANSWER---------------Affordable front-end ratio for renters 25% ------CORRECT ANSWER---------------Per FHA, you are considered self-employed if you have ___% or greater ownership interest in a business. A type of mortgage with less stringent lending and underwriting terms and conditions, usually offered to borrowers with blemished or limited credit histories. ------CORRECT ANSWER---------------Subprime Mortgage Loans FHA Mortgage ------CORRECT ANSWER---------------Type of mortgage that is a good fit for those that have limited funds for a down payment and closing costs Subprime Mortgage Loan ------CORRECT ANSWER---------------Type of loan that may be a good fit for those that have a poor credit history and/or are ineligible for other loans VA Loan ------CORRECT ANSWER---------------Type of mortgage may be a good fit for eligible veterans, suitable credit and sufficient income and have a certificate of eligibility. USDA Loan ------CORRECT ANSWER---------------Type of mortgage may be a good fit for those who want to live in eligible rural areas, make less than 115% AMI, need flexible credit guidelines, may not have funds for a DP Area Median Income ------CORRECT ANSWER---------------The midpoint in the family income range for a metropolitan statistical area of for the non- metropolitan parts of a state Typically paid off in 30 years, has an interest rate that doesn't fluctuate. ---- --CORRECT ANSWER---------------Fixed Rate Mortgage When a lender commits to lend a fixed loan amount based on review of completed loan application, credit reports, debt, savings and a review by an underwriter. ------CORRECT ANSWER---------------Pre-Approval An oversize payment due at the end of a mortgage ------CORRECT ANSWER---------------Balloon Payments A provision in some loans that charges a fee to a borrower who makes mortgage payments ahead of schedule. ------CORRECT ANSWER----------- ----Pre-Payment Penalty Requires lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income form public assistance programs ------CORRECT ANSWER---------------Equal Credit Opportunity Act (ECOA) Prohibits certain abusive practices that increase the cost of settlement services. Requires mortgage transaction disclosures that describe closing costs, lender servicing and escrow account practices, and business relationships ------CORRECT ANSWER---------------Real Estate Settlement Procedures Act (RESPA) Requires lenders disclose important information to protect consumers against inaccurate and unfair loan billing and credit card practices, it requires lenders to provide consumers with loan cost information so that they can comparison shop. --- ---CORRECT ANSWER---------------Truth in Lending Act (TILA) requires easier to use mortgage disclosure forms that clearly outline the terms of the mortgage to the borrower and provide detailed explanations about how form should be completed and used. ------CORRECT ANSWER- --------------Know Before you Owe (TRID) Loan Estimate ------CORRECT ANSWER---------------The Know Before you Owe rule combined the Good Faith Estimate and the Truth in Lending disclosure and became what document? Closing Disclosure ------CORRECT ANSWER---------------The Know Before you Owe rule combined the HUD-1 and the final TIL disclosure became what document? Designed to help consumers understand the key features, costs, and risks of the mortgage loan for which they are applying, must be provided to consumers no later than three business days after they submit a loan application ------CORRECT ANSWER---------------Loan Estimate Designed to help consumers understand all of the costs of the transaction, must be provided to consumers at least three business days before closing. ------CORRECT ANSWER---------------Closing Disclosure Federal law enforcing special disclosure requirements and restrictions on terms for loans that meet high-cost mortgage tests. ------CORRECT ANSWER---------------Home Ownership and Equity Protections Act (HOEPA) Location of your home ------CORRECT ANSWER---------------What is the biggest factor in determining the cost of your insurance? Target Replacement Date ------CORRECT ANSWER---------------What item is critical to consider when working with a client to prepare a household system maintenance plan? A location outside of the neighborhood, preferably a place where your family can live temporarily. ------CORRECT ANSWER---------------When preparing a emergency preparedness plan, where is the best location for meeting point? Provides a lump sum of money for home improvements - often referred to as a second mortgage ------CORRECT ANSWER---------------Home Equity Loan A line of credit from which you can borrow at any time during the draw period, up to your credit limit. ------CORRECT ANSWER---------------Home Equity Line of Credit (HELOC) A loan insured by FHA to provide you with an initial loan for purchasing a home as well as funding for home improvement. ------CORRECT ANSWER---------------FHA 203k Loan Permits homebuyers and homeowners to finance up to $35K into their mortgage to repair, improve, or upgrade their home. ------CORRECT ANSWER---------------Streamline 203k Loan To enable 18 states and the District of Columbia to develop locally tailored programs to assist struggling homeowners in their community ------ CORRECT ANSWER---------------Hardest hit Fund To create a federal agency charged with addressing failures of consumer protections ------CORRECT ANSWER---------------CFPB To help homeowners avoid foreclosure, stabilize the housing market, and improve the economy ------CORRECT ANSWER---------------Making Home Affordable To penalize five financial institutions for deceptive lending and foreclosure practices ------CORRECT ANSWER---------------National Mortgage Settlement What is the upfront mortgage insurance premium (UFMIP) for FHA mortgage? ------CORRECT ANSWER---------------1.75% for FHA mortgages What is the calculation for front end ratio? ------CORRECT ANSWER--------- ------Front end ratio for product being used, multiplied by gross monthly income What is the calculation for back end ratio? ------CORRECT ANSWER-------- -------Back end ratio for product being used, multiplied by gross monthly income. How do you calculate max. monthly housing payment? ------CORRECT ANSWER---------------Front end ratio of loan product being used, times gross monthly income. What is the down payment required for a FHA Loan? ------CORRECT ANSWER---------------3%-4% What is the down payment required for a Conventional Loan? ------ CORRECT ANSWER---------------20% What is the down payment required for a VA Loan? ------CORRECT ANSWER---------------100% financing, no down payment required What is the down payment required for a USDA Loan? ------CORRECT ANSWER---------------100% financing, no down payment required What is the front end ration and back end ratio for Conventional loan? ------ CORRECT ANSWER---------------Front end 28%, Back end 36% What is the front end ration and back end ratio for FHA Loan ------ CORRECT ANSWER---------------Front end 31%, Back end 43% What is the front end ration and back end ratio for FHA EEM? ------ CORRECT ANSWER---------------Front end 33%, Back end 45% What is the front end ratio and back end ratio for USDA Loan? ------ CORRECT ANSWER---------------Front end 29%, Back end 41% What is the front end ration and back end ratio for VA Loan? ------ CORRECT ANSWER---------------no front end ratio, uses DTI 41% What is the front end ration and back end ratio for Renter? ------CORRECT ANSWER---------------Front end ratio 30%, back end ratio 36% How do you calculate max. mortgage payment? ------CORRECT ANSWER- --------------Gross monthly income multiplied by front end ratio for product being used. What is the minimum percentage of down payment required to avoid having to pay mortgage insurance with a conventional mortgage? ------ CORRECT ANSWER---------------20%, this means Loan to Value ratio needs to be 80% or less. What factors a client having to pay mortgage insurance versus mortgage insurance premium? ------CORRECT ANSWER---------------Type of Loan. FHA loans are associated with mortgage insurance premium and private mortgage insurance relates to conventional loans. What state agencies are typically where you can look for state foreclosure processes? ------CORRECT ANSWER---------------Attorney General's Office and State Housing Finance Agency What form is the 4506-T used for? ------CORRECT ANSWER--------------- Gives servicer permission to look at your most recent tax returns. Informal/Formal Forbearance Plan ------CORRECT ANSWER---------------- Assist borrowers who are temporarily struggling for period of reduced / suspended payments + may provide specific terms for repayments. Must consider this step before proceeding w/other options -Borrower must demonstrate financial hardship -Only available for delinquent mortgagors without verifiable losses of income or increases in living expenses. Special Forbearance - Unemployment Agreement ------CORRECT ANSWER---------------To assist unemployed borrowers. Suspends or reduces the current monthly mortgage payment. FHA-HAMP Loan Modification ------CORRECT ANSWER---------------To assist borrowers who are struggling to make mortgage payments because they are no longer affordable and do not qualify for other FHA options Surplus Income Percentage ------CORRECT ANSWER---------------Surplus Income/Net Income=Surplus Income Percentage Foreclosure ------CORRECT ANSWER---------------A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the note. Short Sale/Preforeclosure Sale ------CORRECT ANSWER---------------Also called a preforeclosure sale, a short sale is a procedure in which a borrower sells a property for an amount less than the outstanding mortgage balance to avoid a foreclosure. Deed-in-Lieu ------CORRECT ANSWER---------------A process that allows a homeowner to avoid foreclosure, providing a deed "in lieu" of foreclosure to the lender. Except in certain states or by agreement between homeowner and servicer, the sale does not necessarily satisfy the borrower's debt and may result in a deficiency judgment. Though it helps avoid foreclosure, the process does not allow the homeowner to stay in the home. Cost and consequences of Foreclosure ------CORRECT ANSWER------------ ----Remains on credit for up to 7 years -May limit how much time there is to vacate the property -May lead to a deficiency judgment if sale doesn't cover the full amount owed Eligibility requirements for downpayment assistance programs usually include which factors? A. Homebuyer education and/or counseling, employment status, family size B. Homebuyer age, employment status, purchase price C. Family size, income, homebuyer age D. Income, homebuyer education and/or counseling, purchase price ------ CORRECT ANSWER---------------D. Income, homebuyer education and/or counseling, purchase price The client decides to purchase a townhouse through a down payment assistance program with a recapture clause. Three years later, the client remarries, and his wife owns a single family home. Which situation might cause an accelerated loan payment? A. Client moves to his wife's home and rents his townhouse to a tenant. B. Client's wife moves into the townhouse and rents her house to a tenant. C. Client's wife moves into the townhouse and sells her house to a qualified buyer. D. Client moves to his wife's home and the townhouse loan is assumed by an eligible buyer. ------CORRECT ANSWER---------------A. Client moves to his wife's home and rents his townhouse to a tenant. Many DPA require owner occupancy, the recapture clause is triggered when the husband rents or sells the townhouse, but the loan can be assumed by an eligible buyer Which factor determines whether a client will have to pay private mortgage insurance versus mortgage insurance premium? A. Credit score B. Size of loan C. Loan-to-value ratio D. Type of loan ------CORRECT ANSWER---------------D. Type of loan. If the client submits a loan application, which document should she receive within three business days? A. Review Later B. Purchase Agreement C. Loan Estimate D. Closing Disclosure E. Uniform Residential Loan Application ------CORRECT ANSWER----------- ----C. Loan Estimate D. Imminent default ------CORRECT ANSWER---------------A. Default Mortgage loans are typically considered in default when a payment have not been made after 60-90 days. In which section of the credit report will the client's late payments be displayed? A. Account information B. Public records C. Personal information D. Consumer rights ------CORRECT ANSWER---------------A. Account Information Where is this client in the foreclosure timeline if she has missed three payments and lives in a non-judicial state? A. The client is in default. B. The client is delinquent. C. The client is within the grace period. D. The client is in foreclosure. ------CORRECT ANSWER---------------A. The client is in default After how many days can foreclosure proceedings begin if the client is not being evaluated for loss mitigation, and has missed payments on an FHA loan? A. 60 days B. 90 days C. 91 days D. 120 days ------CORRECT ANSWER---------------D. 120 days Servicers cannot make a first notice or filing for foreclosure until the borrower is more than 120 days delinquent. The client is also behind on her credit card debt and has only a few job prospects. She is considering filing for bankruptcy but wants to keep her home. Which advice should the housing counselor provide? A. Suggest the client file for a Chapter 7 bankruptcy B. Suggest the client file for a Chapter 13 bankruptcy C. Provide the client with the name of a bankruptcy attorney D. Explore loss mitigation options available ------CORRECT ANSWER------- --------D. Explore loss mitigation options available While counselors can describe bankruptcy options, they cannot make bankruptcy recommendations. If the client decides to leave the home, which option would most likely require the least amount of time? A. Deed-in-lieu B. Short sale C. Pre-foreclosure sale D. Foreclosure ------CORRECT ANSWER---------------A. Deed in-lieu If a servicer cooperates, a deed in-lieu will take the least amount of time. The client decides to sell her home and wants to complete various home repairs before listing the property for sale. Which is the best reason to complete the repairs? A. Helps the seller prepare for the home inspections B. Protects the client from potential lawsuits resulting from disrepair C. Reduces the need for a home inspection, saving the buyer money D. Eliminates the need for property disclosure because repairs are visible -- ----CORRECT ANSWER---------------A. Helps the seller prepare for the home inspection. A few months later, the client finds out her landlord has been granted a writ of possession. Which advice should the housing counselor provide to the client? A. Respond to the court within five days to stop the eviction B. Stay in the unit until client receives a notice to pay or quit C. Appeal to the landlord for an extension D. Prepare to move immediately ------CORRECT ANSWER---------------D. Prepare to move immediately. Seventy-two hours after the landlord is granted a writ of possession, they will have the right to change the locks and have a forcible eviction with the help of law enforcement. Which document must be filed and issued to the tenant before the landlord can forcibly evict or change locks? A. Notice to tenant B. Writ of possession C. Summons D. Unlawful detainer ------CORRECT ANSWER---------------B. Writ of possession A writ of possession is a court ordered that serves as an eviction from a property. The writ outlines the specific time the person has to vacate the building. The clients obtained the mortgage for their first home in 2006 from a broker who told them that they did not need any proof of income, savings, or assets. Which instrument was put into practice after the mortgage crisis in 2008 that changed this for future loans? A. Ability to Repay/Qualified Mortgage Rule The Federal Trade Commission is the regulatory agency for this and similar scams and violations can also be reported to the state Attorney General The client's loan application was recently denied, and her credit report shows an outstanding debt that was discharged in her Chapter 7 bankruptcy filing. Which federal law protects the client in this situation? A. Fair and Accurate Credit Transactions Act (FACTA) B. Equal Credit Opportunity Act (ECOA) C. Fair Credit Billing Act (FCBA) D. Fair Credit Reporting Act (FCRA ------CORRECT ANSWER--------------- D. Fair Credit Reporting Act (FCRA) The Fair Credit Reporting Act allows consumers to dispute inaccurate information on their credit reports. Which aspect of this client's situation requires her to wait six months before she can purchase a home? A. The client's credit score is 620. B. The client's current front-end ratio (or housing ratio) is 36%. C. The client's bankruptcy was discharged 18 months ago. D. The client's child support cannot be counted as income until finalized. --- ---CORRECT ANSWER---------------C. The client's bankruptcy was discharged 18 months ago. In order to qualify for a mortgage, the chapter 7 bankruptcy must have been discharged for at least two years. Which advice should the counselor provide to the client, who faces potential eviction from unpaid rent? A. Pay the back-owed rent and provide a list of emergency rental assistance programs B. Seek legal aid services so her rental payments can be held in escrow until the repairs are made C. Prepare for eviction by packing her things and provide a list of emergency shelters D. Seek legal aid services to counter sue the landlord for not making repairs to the dishwasher ------CORRECT ANSWER---------------A. Pay the back-owed rent and provide a list of emergency rental assistance programs The client announces that she plans to file for bankruptcy. Which is the first recommendation a counselor should make to the client? A. Contact at least three bankruptcy attorneys and choose the one with the lowest fee. B. Wait several years for the bad debt to be removed from the credit report. C. Adjust the budget to find residual income, then negotiate settlements with creditors one at a time. D. Contact at least three debt management companies for assistance with resolving the bad debt. ------CORRECT ANSWER---------------C. Adjust the budget to find residual income, then negotiate settlements with creditors one at a time. This client tells this story 18 months after it occurred. He was able to find another unit to rent but the experience is still embarrassing to him and he worries that the landlord will do it to someone else. Which is the best advice that a housing counselor can offer? A. Advise the client that he cannot file a fair housing complaint B. Advise the client to contact the landlord and inform him of his mistake C. Advise the client to sue the landlord for discrimination D. Advise the client to file a complaint with a fair housing agency or HUD --- ---CORRECT ANSWER---------------A Advise the client that he cannot file a fair housing complaint Fair housing complaints are only valid if they are filed within a year of the alleged violation. If the client had filed a complaint 10 months after the incident, and HUD concluded that the landlord violated fair housing laws, which is the most likely result of the complaint? A. HUD authorizes civil action for relief on behalf of the victim. B. HUD revokes the landlord's ability to rent units to the public. C. HUD seeks a conciliation agreement with the client and the landlord. D. HUD asks the Attorney General to issue a warrant for the landlord's arrest. ------CORRECT ANSWER---------------C. HUD seeks a conciliation agreement with the client and the landlord. HUD will seek the most reasonable course of action to protect the victim and the public interest in fair housing complaints. What is the maximum number of days after filing a complaint that HUD must conclude an investigation? A. 30 B. 90 C. 100 D. 120 ------CORRECT ANSWER---------------C. 100 days HUD strives to conclude all fair housing investigations no later than 100 days after filing the complaint. What is the maximum percent of area median income allowable for a household to qualify for a Housing Choice Voucher? A. 30% B. 50% C. 80% D. 100% ------CORRECT ANSWER---------------B. 50% A household cannot exceed 50% of Area Media Income to initially qualify. In reviewing a loan estimate, the housing counselor finds fees for services that seem unnecessary. What is the most likely explanation for these fees? A. Regional lending considerations B. Subprime mortgage terms C. Predatory lending practices D. Variation in lending practices ------CORRECT ANSWER---------------C. Predatory lending practices Borrowers should not pay unnecessary fees to obtain a mortgage, so these are considered predatory lending. If a client obtains a mortgage of $100,000, typically, how much should he expect to pay for closing costs? A. $2,000 B. $4,000 C. $10,000 D. $20,000 ------CORRECT ANSWER---------------B. $4,000 Closing costs range between 3% and 4% on average. Which steps should the housing counselor take to assess the client's readiness to purchase a home? (Select all that apply.) A. Determine maximum housing payment B. Assess funds available for upfront costs C. Conduct an appraisal D. Calculate back-end ratio (debt-to-income ratio) E. Contact three to five lenders ------CORRECT ANSWER---------------A. Determine maximum housing payment B. Assess funds available for upfront costs D. Calculate back-end ratio (debt-to-income ratio) Which is the upfront mortgage insurance premium (UFMIP) if a client purchases a home with an FHA loan amount of $116,000? A. $928 B. $1,218 C. $2,030 D. $2,320 ------CORRECT ANSWER---------------C. $2,030 for an FHA Loan is 1.75%. Multiplying 0.0175 by the loan amount of $116,000 equals $2,030 Which is the maximum back-end ratio allowable for an FHA loan? A. 36% B. 41% C. 43% D. 45% ------CORRECT ANSWER---------------C. 43% On which factor is a borrower's annual mortgage insurance premium (MIP) based? A. Credit score B. Original principal balance C. Loan-to-value ratio D. Current principal balance ------CORRECT ANSWER---------------D. Current principal balance Which is an eligibility factor for the Earned Income Tax Credit? A. Receiving wages B. Pursuing post-secondary education C. Having a qualifying child D. Filing as head of household ------CORRECT ANSWER--------------- Which is an eligibility factor for the Earned Income Tax Credit? A. Receiving wages B. Pursuing post-secondary education C. Having a qualifying child D. Filing as head of household ------CORRECT ANSWER---------------A. Receiving wages low to moderate-income individuals and families with earned income may be eligible for the Earned Income Tax Credit Which was instituted by Congress to better protect homebuyers following the most recent housing crisis? A. National Mortgage Settlement B. Truth In Lending Act C. Federal Trade Commission D. Consumer Finance Protection Bureau ------CORRECT ANSWER---------- -----D. Consumer Finance Protection Bureau Established by congress as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to address failures of consumer protections Which is an example of a change enacted by Consumer Finance Protection Bureau (CFPB) that would help a client prepare for the mortgage loan process? A. Protection of military personnel and their dependents in issues related to housing of contact for loss mitigation efforts B. Requirement for servicers to appoint a single point of contact for loss mitigation efforts C. Easier-to-use mortgage disclosure forms that clearly outline the terms of a mortgage to the borrower D. Debt management plan ------CORRECT ANSWER---------------B. Means test A means test is a bankruptcy qualification that considers income and equity in assets to determine if a client has the ability to repay part of the debt. Which is the first step in the loss mitigation submission process? A. Determine if the client wants to remain in the home B. Determine the type of mortgage C. Determine the reason the client is behind on mortgage payments D. Determine client affordability and gather documentation ------CORRECT ANSWER---------------C. Determine the reason the client is behind on mortgage payments Which type of loan product can be used to finance the purchase of a manufactured home on leased land? A. Fannie Mae B. FHA Title I C. Freddie Mac ------CORRECT ANSWER---------------B. FHA Title I The FHA Title I loan insures mortgages made by approved private lenders that finance the purchase or refinance of a manufactured home and/or the lot on which the home is located. Fannie Mae, Freddie Mac, and VA require the home to be taxed and titled as real estate. Financing options for the purchase of a manufactured home depend on which factor? A. Local property ordinances B. Land property interest ------CORRECT ANSWER---------------B. Land property interest Land property interest determines if the home is classified as real property or personal property which determines which financing options are available. Which disposition option typically applies to a manufactured home on leased land when the borrower is in default? A. Eviction B. Replevin C. Foreclosure ------CORRECT ANSWER---------------B. Replevin Manufactured homes on leased land are not typically eligible for a mortgage, so the foreclosure and deed-in-lieu options do not apply to this situation. The replevin process applies to the disposition of personal property. Eviction is the result of non-payment of rent and is not a property disposition option. Which type of assistance administered by a public housing authority allows for location flexibility? A. Tenant-based vouchers B. USDA C. FHA D. Project-based vouchers ------CORRECT ANSWER---------------A. Tenant- based vouchers A client's payment history affects which factor of creditworthiness? A. Character B. Capacity C. Capital D. Collateral ------CORRECT ANSWER---------------A. Character Character refers to your credit history, or how you've managed debt in the past. Which action may a lender take to determine a borrower's character? A. Call an employer to verify employment. B. Calculate housing ratios to see debt obligations. C. Review the appraisal. D. Examine pay stubs to determine amount of income. ------CORRECT ANSWER---------------B. Calculate housing ratios to see debt obligation. When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered? A. Capacity B. Collateral C. Character D. Capital ------CORRECT ANSWER---------------D. Capital Which describes a homebuyer who would be ineligible as a first-time homebuyer, as defined by most down payment assistance programs? A. A client who lives in a home owned by the client's parents. B. A client who leases out units in a cousin's rental property. C. A client who sold a home five years ago for a net profit. D. A client who lost a home to foreclosure two years ago. ------CORRECT ANSWER---------------D. A client who lost a home to foreclosure two years ago. To be considered for DPAP you must've not had your name on a title in the last 3 years. D. Department of Community Affairs What can flex modification programs do? ------CORRECT ANSWER---------- -----Flex Modification programs help homeowners experiencing financial hardship to extend their loan term and reduce principal-and-interest payments. The program can reduce payments by up to 20 percent and move past-due payments to your principal balance instead of making it due upfront The Flex Modification program makes your loan current instead of delinquent Many forms of hardship qualify, including unemployment, serious illness, and divorce There are other options to try for temporary financial hardship, including forbearance Written Lease ------CORRECT ANSWER---------------A written document outlining the terms by which a property will be rented. Written leases provide security and can simplify the process of resolving conflicts. Oral Lease ------CORRECT ANSWER---------------An agreement that is discussed verbally, but not put in writing, which outlines the terms by which a property will be rented. Oral leases are recognized and enforced in many states, but they rely simply on the memories of involved parties and thus can lead to arguments. Contractual Tenancy ------CORRECT ANSWER---------------An arrangement in which both a tenant and a landlord sign an official lease, which outlines a fixed term of tenancy, a rent payment process, and other rental conditions. Tenancy at Will ------CORRECT ANSWER---------------an arrangement in which a tenant remains on rented property beyond the end of the lease with the understanding that the tenant may leave, or be asked to leave, at any time Tenancy at Sufferance ------CORRECT ANSWER---------------An arrangement in which a tenant is allowed to reside in a home after a lease has expired as long as they continue to meet the conditions of the original lease. Loss of Use Coverage ------CORRECT ANSWER---------------Pays for the expenses for living away from home while your damaged home is being repaired Contents Coverage aka Personal Possessions Coverage ------CORRECT ANSWER---------------Contents coverage reimburses policyholders for the personal property destroyed by certain perils. Most regular renters insurance will not cover damage caused by earthquakes or flooding Personal Liability Insurance ------CORRECT ANSWER---------------Provides funding for a defense lawyer or legal judgement if a policy holder is sued for negligent act that led to a guests injury. Actual Cash Value ------CORRECT ANSWER---------------replacement cost minus depreciation Replacement Cost ------CORRECT ANSWER---------------The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation. Where can you find information on rental assistance? ------CORRECT ANSWER---------------on the Hud website selecting your state from State Information. Holdover Eviction ------CORRECT ANSWER----------------Cases where the Landlord is evicting someone who breaches terms of the Lease unrelated to payments nonpayment eviction ------CORRECT ANSWER---------------Cases where tenants don't pay their rent. Notice to Tenant ------CORRECT ANSWER---------------The landlord or someone appointed by the landlord delivers a written or oral notice that includes reasons why tenant is being evicted. Notice of Petition ------CORRECT ANSWER---------------A summons or notice of petition is a legal document that provides notice to someone that a court action is pending and tells him or her when and where the court appearance is. Usually a summons will also direct that the person has to appear at that court date and that s/he may face consequences if s/he does not appear. Tenant Based Vouchers vs. Project Based Vouchers ------CORRECT ANSWER---------------While both programs provide "deep subsidy" Civil Rights Act 1968 ------CORRECT ANSWER---------------banned discrimination in housing Fair Housing Act Title 8 Which Practice remained legal after the passage of the Civil Rights Act 1964 ------CORRECT ANSWER---------------Assigning renters to specific floors in a privately owned apartment complex, based on race. 7 protected classes ------CORRECT ANSWER---------------race, color, religion, sex, disability, familial status, national origin Rehabilitation Act of 1973 ------CORRECT ANSWER---------------Federal law prohibiting discrimination by federal contractors on the basis of a handicapping condition. Federal funded housing providers must make and pay for structural changes to facilities. Reasonable Modification ------CORRECT ANSWER---------------A reasonable modification is a structural modification that is made to allow people with disabilities the full enjoyment of dwelling units and related facilities Reasonable accommodation ------CORRECT ANSWER--------------- Reasonable accommodations are changes in rules, policies, practices, or services so that a person with a disability has an equal opportunity to use and enjoy a dwelling unit or common space. Form 903 ------CORRECT ANSWER---------------HUD form 903 Online Complaint Includes Name and contact information Address of housing involved Short description of alleged violation Date of alleged violation Complain Process ------CORRECT ANSWER---------------Within 10 days of complaint submitted, HUD send to respondent, 10 days to respond. HUD assigns complaint for investigation usually a FHAP agency, if no action in 30 days HUD investigates Investigation completed within 100 days Formula Grant ------CORRECT ANSWER---------------Federal categorical grants distributed according to a formula specified in legislation or in administrative regulations. Unsubsidized Housing ------CORRECT ANSWER---------------Privately owned housing purchased with HUD-insured or HUD-held mortgages, which makes it possible to rent the property at an affordable price. Chapter 7 Bankruptcy ------CORRECT ANSWER---------------Chapter 7, which is known as liquidation bankruptcy, involves selling some or all of your property to pay off your debts. This is often the choice if you don't own a home and have a limited income. Chapter 13 Bankruptcy ------CORRECT ANSWER---------------a reorganization form of bankruptcy for individuals that allows the debtors to keep their property and use their income to pay a portion of their debts over three to five years