Understanding Predatory Lending and Mortgage Loans, Exams of Law

Download Understanding Predatory Lending and Mortgage Loans and more Exams Law in PDF only on Docsity! NMLS PRACTICE QUESTIONS with Answers 2024 which federal agency administers Regulation B implementing ECOA, Rgulation C implementig HMDA and Regulation Z implementing TILA? ✔ FEDERAL RESERVE SYSTEM the clause in a mortgage that allows the lender to foreclose if the borrower defaults is the ✔ Acceleration Clause at closing a borrower may deposit funds to establish reserves for which of the following? ✔ TAXES AND INSURANCE in a qualification of an applicant who receives child support and alimony ✔ CHILD SUPPORT INCOME CAN BE GROSSED UP a homeowner had a home worth 200k. he has an outstanding loan of 165k and a HELOC with a limit of 30k which he has drawn 12k. Which of the following is not true? ✔ His TLTV is 94% you must calculate LTV, CLTV, and TLTV TLTV is higher than CLTV and LTV test mortgage transferred servicing rights of some of its mortgage loans to answer mortgage, Lender must send a servicing transfer statement to the affected borrowers how many days before the effective date of transfer? ✔ 15 days before the effective date of transfer a Lender must send the servicing transfer statement to the affected borrowers following section IX (acknowledgements) in the 1003 loan application, the form is to be signed to signify that ✔ the applicant represents that all information contained in the form is truthfully represented As the deadline approaches for the closing date established in the buyer's sale agreement, the buyer's loan application has not yet been approved but seems to be headed for approval. the loan originator should... ✔ Notify the real estate broker to try to get an extension of closing deadline The lowest payment option for an option ARM is ✔ minumum payment Fannie Mae requires occupancy with in ✔ 60 days The purpose of a Market Conditions Addendum is to ✔ Provide the Lender with a clear understanding of the market trends and conditions in a subject neighborhood The ECOA prevents discvrimination against which of the following? ✔ DISABILITIES a 240/60, 20k loan is made with interest at 9% per year. Which is true? ✔ this is a ballon loan with a loan term of five years 240/12= number of years in loan 60/12= number of years until fully amortized and needs to be paid off or refinance the acronym PFC stands for ✔ PREPAID FINANCE CHARGES the rules relating to the Federal Trade Commission's "no call" registry allows calls to persons on the "no call" list ✔ for up to 18 months after business transaction has been completed with them and up to 3 months after they inquiry a copy of the appraisal is provided ✔ at close of escrow the risk that an agent may not have his clients best interest at heart is called ✔ Principal-Agent risk the federal regulation that implements the Real Estate Settlement Procedures Act (RESPA) is ✔ Regulation X a loan applicnats employment is usually verified by a ✔ VEO (VERIFICATION OF EMPLOYMENT) The UNIFORM RESIDENTIAL LOAN APPLICATION (1003) includes a section reqiesting information for government monitoring. applicants must complete this section ✔ ONLY IF THEY WISH interest onlu has what feature? ✔ can be paid off faster than fully amortized Right to Rescind is not valid on which of the following ✔ Commercial Purchase the HUD-1 Settlement Statement includes all of the following Except ✔ housing expense ratio a borrower with less than perfect credit or othere risk factors may qualify most easily for what type of loan? ✔ Subprime loan which is not part of total Prepaid Finance Charge (PFC FEE) ✔ APPRAISAL what disclosure would show if a loan has a balloon payment or not? ✔ TIL which of the following need not to be given to a consumer who applies for an ARM loan? ✔ the interest rate upon the first adjustment SSPL should be prepared based on? (SSPL= SETTLEMENT SERVICE PROVIDER LIST) ✔ Final itemized costs Who is the entity that administers RESPA? ✔ Department of Housing what is Fannie Mae (before market changes and government intervention) ✔ Government supervised but privately owned the type pf loan that does not require ant verification of assets or income or periodic repayment is a ✔ Reverse Mortgage the 3 day right to rescission provided by TIl and regulation Z applies to a loan ✔ to refinance a loan from the same institution that fails to cover the unpaid balance of the prior loan plus closing costs a creditor must advise a mortgage loan applicant of the status of his application with in how many days of receipt? ✔ 30 days when a telemarketer calls a person on the "do not call" registry in violation of the no not call regulations he is subject to a fine of ✔ 16,000$ which of the following statements regarding title insurance is true? ✔ a borrower is required be the lender to pay fro the lenders title insurance a 2/1 buydown ✔ reduces the interest rate by 2% the first year and 1% the second year, until it reaches its original principal interest for example 1st year=4.5% 2nd =5.5% 3rd= 6.5% 4th= 6.5% and so on If a lender discovers that fire policy is not in effect, what can happen? ✔ forced place insurance an appraisal is ✔ an opinion of value which of the following is true of the COFI ✔ it is the slow moving COST OF FUNDS INDEX a credit report will always display which of the following? ✔ name and social security number what is a convertible ARM? it allows the borrower to do what? ✔ change from an adjustable rate to a fixed rate mortgage how can one calculate the number of years it will take to recover the costs of refinancing a loan? ✔ total costs/ monthly savings bc of refinance/ 12 the truth in lending form provides ✔ borrowers with an idea of the total closing costs and finance charges R si a licensed mortgage broker, He wants to call former clients for referrals. He can contact them even if on the federal do not call list for up to ✔ 18 months Inclusion of the premium for single-premium credit life insurance in the principal loan amount with out the borrowers informed consent is one example of ✔ Packing RESPA requires that a borrrower be given which document at closing ? ✔ HUD-1 Settlement Statement All of the following are considered dwellings under the Home Mortgage Disclosure Act EXCEPT ✔ A recreational travel trailer when a federally related or insured lender learns that a property is in a flood zone, it mist ✔ INFORM THE BORROWER A consumer had the right to inspect his HUD-1 Settlement Statemtn how many days prior to closing? ✔ 1 day Purpose of RESPA is ✔ Regulate closing process if the loan amounts, maturity dates and interrst reats are the same for loans A and B, but loan A is a straight (interest only) loan and loan B is fully amortized ✔ Loan B will have higher periodic payments borrower right to receive appraisal with in ✔ 30 DAYS what methods are not allowed to deliver the privacy policy? ✔ Poster in odd location who orders table funding "when closing in their own name" ✔ brokers/ third parties what agency is TILA regulated by? ✔ HUD a home is appraised at 100k the borrower currently has a loan of 50k and an open end line of credit with a limit of 25k and a current balance of 15.5k what is his LTV ✔ 50% A woman may be denied credit on the basis of any of the following EXCEPT ✔ Her current pregnancy is an indication that she may stop working PMI AND MIP are intended to cover whose risks ✔ the Lenders RESPA is adminstered by ✔ HUD the HUD-1A Settlement Statement is designed for whenn ✔ NO SELLER IS INVOLVED / REFINANCE an analysis opinion or conlcusion as to the nature quality and value of a specific piece of real estate is an ✔ Appraisal the Homeowners Protection Act (HPA) of 98 provides that a borrower with a good payment history has the right to request in writing the cancellation of private mortgage insurance when he pays down his mortgage to the point that when evaluating an applicant or a MLO license, how will the state licensing body judge the persons ability to be fair, honest, and efficient? ✔ By looking to the person as a whole and how the person has been financially responsible throughout time the requirement for finacial institutions to provide a written privacy policy is found in which federal law? ✔ Gramm-Leach Bliley Act a borrower is purchasing a home with a first motgage loan in the amount of 123,675 at 75% LTV what was the purchase price in this transaction? ✔ 164,900 123,900/x= 75% independent contractors who act as loan processors or underwriters ✔ must be licensed as MLO which of the folowing would one least commonly expect to find in conjunction with fraud for property? ✔ An inflated Appraisal the practice of denying real estate loan applications in certain neighborhoods/ geographic areas is called ✔ redlining at what equity position will PMI automatically terminate for a company loan assuming the borrower has made all payments in a timely manner? ✔ 22% all of the following are secondary market participants Except ✔ penny Mac what is the maximum late charge on an FHA insured loan? ✔ 4% of the principal and interest overdue the borrower is in the 47th month of a 5/1 conforming ARM loan with a margin of 2.5% an index value of 4.25% rate cap 5/2/5 and a start rate of 4.5% What interest rate is in effect? ✔ 4.50% because it is in the 47th month of a 60 month conforming ARM so it is still in the start rate federal or state banks ✔ can make mortgage loans with out being residential mortgage licensees according to Regulation C what must a mortgage banking firm do? ✔ furnish a report of their lending activities to the federal government what is discount points? ✔ a discount point is in the US one time fee paid by the homebuyer ( usually at the time a home mortgage loan is advanced to compensate the lender for the difference between the market interest rate and the lower rate applicable to home buyers.) which home buyer would benefit the most from a ballon loan? ✔ a buyer who plans on selling the home before the balloon payment is due. ( a balloon loan is a long term loan, often a mortgage has one large payment due upon maturity. Blloon loans often have very loan payments until mature) insurance companies not willing to deal directly with borrowers, usually pay a loan servicing and preparation fee and make real estate mortgage loans to purchase indirectly through ✔ Mortgage Companies which is not the name of a major credit reporting agency? ✔ Lexis a mortgage company makes a number of loans to be asssmebled into one package and sold to permanent investors. this process is an example of interim financing to the motgage company and is called: ✔ Warehousing referst to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market the recording of an instrument gives ✔ constructive notice (attatches once a document is recorded, once recorder subsequent buyers will be deemed to have received constructive notice regarding the document and its effect on the property) the primary purpose of the Truth in Lending is to ✔ disclose the true costs of obtaining credit TIL or REG Z is intended to do away with deceptive financing tactics especially those involving hidden costs. a family owns a home in a semi rurl area, which is about 5 years old. recently announced plans for a new regional airport that will place their home directly in the line with a main runway ending one mile before their home. if the airport is constructed will this diminish the value of their home? ✔ Yes because of economic obsolescence (occurs when factors unrelated to the property itself and outside of the owners control dinminish its value) a borrowers is in the 8th yeas of a 30yr fixed rate m,ortgage loan at 6% with an existing principal balance of 285,614.93 and a monthly principal and interest payment of 2248.31 find the balance after 1st month minimal payment ✔ 284,794.69 principal balance *interest= total interest of loan Total interes/360(total months in loan)= per diem per diem * 30 days in month= monthly interest monthly principal and interest payment - the monthly interest= minimal payment principal balance - minimal payment= remaining balance the risk of a mortgaged property failing to offer sufficient value in the event of borrower default is known as ✔ Collateral Risk a registered loan originator who acts on behalf of a depositing institution ✔ does not need a mortgage loan originator license FHA's minimum loan limits ✔ DOES NOT EXISTS which of the following does not need to be included on a gift letter? ✔ donors social security according to FNMA condominium owners need to maintain a valid HO-6 policy during the period the loan is in force. this policy must cover (insure) an amount equal to at least ✔ 20% of the appraised value which of the following is true regarding the Nation wide Mortgage Licensing System? ✔ it is intended to facilitated responsible behavior in the subprime mortgage market what is the purpose of the Gramm-Leach Bliley Act? ✔ to protect personal financial information of consumers held by Mortgage Banks which of the following is not a protected class under the Federal Fair Housing Act ✔ Sexual orientation the red flags rule mandates that financial institutions develop and maintain a written plant to detect, prevent, and mitigate identity theft. this is required by which Federal Law? ✔ FAIR AND ACCURATE CREDIT TRANSACTIONS ACT which of the following loans would not be subject to most of the requiremtns of Regulation X ✔ A refinance loan for an owner occupied single family dwelling on a 30 acre lot all of the following Notes require regular payments of principal and interest except ✔ STRAIGHT NOTE it is an interest only note In a face to face application, if the applicant chooses not to provide his race and national origin or sex the licensee must inform the applicant that ✔ note the information on the basis of visual observation and continue to process the application after the borrower checks the box that they did not want to disclose info In the processing of a loan application a lenders credit scoring system helps to evaluate ✔ the applicants credit worthiness all of the following are included in an ECOA adverse action notice Except ✔ names/ contact # for consume credit counceling In individual lawsuit , a violator of ECOA is subject to a punitive damages of up to ✔ 10,000$ the agency that drafts and interprets the regulations implementing ECOA is ✔ THE CONSUMER FINANCIAL PROTECTION BUREAU the Fair Credit Reporting Act provides all of the following courses of action fro an identity theft victim who has submitted a valid police report to a consumer reporting agency Except ✔ requiring the consumer reportign agency to assist in locating the thief in order to prevent identity theft, a consumer is entitle to a free credit report ✔ every 12 months/ annually the Fair Credit Reporting Act defines companies that gather and evaluate consumer credit records as ✔ Consumer Reporting Agencies the purpose of the Fair Credit Reporting Act is to ✔ ensure the accuracy of information in consumer reports who is responsible for ensuring that reporting of a consumers credit standing and reputation protects his rights to privacy? ✔ consumer reporting agency ECOA requires that a creditor retain a loan application from for how many months ? ✔ 25 months the Fair Credit Reporting Act provides which of the followingn with regard to information provided to the consumer reporting agencies? ✔ a person who provides information that is later in dispute has a duty to investigate it all of the following are mort loans subject to coverage under the HOme Mort Disclosure Act Except ✔ A home equity loan used to pay off outstanding medical bills under HMDA what is the term for an application fro a home purchase loan in which the lender after a comprehensive analysis of the applicants creditworthiness issues a written commitment to make a home purchase loan up to a specifued amount, subject to the homes appraisals ✔ Pre approval Request the FTC Red Flags Rule requires that creditors create and monitor policies applying to red flags indicating ✔ Identity theft the Federal Trade Commision Red FLag Rule implements ✔ THE FAIR AND ACCURATE CREDIT TRANSACTION ACT once a perosn registers phone on "do not call" registry ✔ it will stya there until he removes it or phone service is discontinued the FTC telemarketing Sales Rule requires that persons who engage in telemarketing ✔ establish policies and procedures to ensure compliance with the rule for up to how many months can someone call a number resitered in the do not call list after they submitted the application? ✔ 3 months extension of credit to borrowers who can not afford the credit on the terms being offered is considered ✔ predatory lending moral and ethical principles ✔ are often not as clear cut as legal rules unlike other parties to a mort transaction, in general ✔ the mort broker and mortgage loan originator have no long term interest in the pereformance of the loan a loan originator is discussing the features of a home equity consolidation loan with an applicant. in doing so he relates to the applicant that the interest on the loan is tax deductible this is ✔ not permissible as the loan originator is not quialified to provide tax advice is a mortgage broker considered to be an agent of the borrower? ✔ only in some states, while in others this is not the case all of the following are elements of predatory lending Except ✔ Screening Laws and regulations ✔ define the minimum type and level of conduct practiotioners may use with out penalty from society Packing is a predatory lending practice whichs consists of ✔ including in the loan principal amount such costs as points and mort broker fees with out the borrowers informed consent ethics ✔ provides a guideline for answering questions when a choice of action is available a misleading representaion, omission act or practice is considered deceptive when, among other conditions it is ✔ material before origination a lolan, a MLO must make a reasonable inquiry concernung all of the folowing aspects related to the borrower Except ✔ Marital and familial status a mort broker and MLO duties to the lender include all of the following Except ✔ Originating loans only for those applicants which promise most profit for the lender which term is used to describe knowingly advertising or offering one set of terms that are very appealing but are not readily available and then pressuring a persin into signing a contract with other more expensive terms? ✔ Bait and Switch for a mort licensee, payig compensation for referrals is ✔ unethical and a violation of federal law before attempting to take a complete loan application the mort broker has a responsibility to do all of the following Except ✔ an investigation the number one ethical problem cited in surveys of professionals and managers is ✔ flase or misleading representation of products or services in marketing, advertising or sales. a LO primary consideration in regard to refinancing a loan for a borrower should be ✔ a calculation of the cost effectiveness of the refinancing for the borrower in order for an attorney engaged in mortgage assistance relief services to the exempt from the prohibition against collecting an advance fee he must ✔ place any fees received in a client trust account JJ purchased an investment property through a foreclosure sale. the property currently has tenants occupying it. in taking the title JJ ✔ must honor the unexpired lease An ARM had an initial rate of 3-5/8% It has a 2/6 cap and a margin of 2.5% If the current Treasury bill rate of 3-3/8% is its index rate what would the new ARM rate be when it is adjusted ✔ 5-5/8% An ARM rate adjustment will take into account which of the following? ✔ Index rate, margin, and cap All of the following are tuer relating to the index rate for an adjustable rate mortgage loan Except ✔ The Index rate is always lower than the initial rate a 100k loan has a 7.5% payment cap and a current monthly payment of 1k At the next adjustment payment could not be increased more than ✔ 1075% bc the 7.5% cap is on the payment not the mortgage Assuming annual adjustment, when an ARM has a 2/6 cap this means ✔ the rate can not increase more than 2% in any year or more than 6% over the term of the loan the ARM monthly payment may be affected by which of the following ✔ a payment cap that can limit the required minimum payment to less than the interest being charged If an ARM has a 1% annual rate cap, the borrowers interest rate ✔ can not increase by more than 1% per year H has an adjustable rate loan with a payment cap that allows him to pay less than the amount needed to pay al of the interest being charged on the loan. The term to describe this is ✔ Negative Amortization The interest rate for an ARM will change periodically based on ✔ ITs INdex Rate is tied to the term "margin" is used frequently when describing terms for an adjustable rate loan the margin is ✔ the amount the lender adds to a selected index rate the typical pattern of payments on an interest only payment plan is ✔ smaller payments, then larger oayments An FHA 5/1 ARM loan is ✔ a nontraditional loan a low introductory rate on an adjustable rate mort is called ✔ a Leaser Rate If the initial rate for an ARM is 5%, the index rate is 4% and the margin is 2% which of the folowing is true? ✔ the fully indexed rate is 6% the Fully indexed rate on an ARM is determined by adding the index rate and the margin providers may claim that interest rates or payment obligations for nontraditional products are ✔ subject to changes that may result in a decrease or increase producers should alert consumers to the risks of nontraditional mort products ✔ before the consumer pays a nonrefundable fee at the time an application is provided the guidelines on nontraditional mort Product Risks advise that consimers be made aware of all of the following with regard to risks relating to nontraditional products Except ✔ Subordination guidances advice payment shock prepayment penalties and responsibility fro taxes and insurances when advertising nontraditional mortgages on the radio, tv, or billboards ✔ providers should include clear and balanced information about the risks of these products the Federal Financial Institution Regulatory Agencies issued a Statement on Subprime Mortgage Lending out of concern that ✔ Many borrowers failed to understand the risks of such loans The quality control function of a provider offering nontraditional bans shouold regularly review ✔ a representative true sample of underwriters to confrim that policies are being followed a sample of nontraditional mort loans from all origination channels a type of loan documentation that owuld provide the lowest interest rates to a consumer is ✔ full documentation in designing control systems for monitoring practices in regard to nontraditional loan products, providers need to address all of the following factors Except ✔ Short-term profit the CSBS-AARMR guidance on nontraditional mortgage products risks does not apply to ✔ reverse mortgage the Federal FInancial Institution Regulatory Agencies include all of the following Except ✔ the American Association of Residential Mortgage Regulators Under the provisions of the Dodd-Frank Act ✔ a borrower must be qualified for a mortgage loan based on the substantially equal monthly payments, calculated at the fully indexed rate of the loan, which fully amortized the loan by the end of its term Under SAFE Act a LO is ✔ an individual who takes residential mortgage loan applications SAFE ACT requirements apply to loans to purchase ✔ mobile homes to be used as residences, even if they are not attatched to the land- SAFE Act applies to Mortgage Residentials with in the 20 hours of prelicensing ed required for a LO license or registration are a minimum of ✔ 3 hours of federal law a Lo must keep a file for 3 years after ✔ CLOSING