Understanding Mortgage Loans and Regulations, Exams of Finance

Download Understanding Mortgage Loans and Regulations and more Exams Finance in PDF only on Docsity! NMLS SAFE EXAM Questions with Correct Answers 2024 Graded A+ What does TILA stand for? - ANSWER-Truth-In-Lending Act, Regulation Z What is a HELOC loan? - ANSWER-a secured loan in that you are borrowing against the equity that has been built in your house What is a REFI loan? - ANSWERLTV stands for - ANSWER-Loan to Value Define PMI and state what the acronym stands for. - ANSWER-Private mortgage insurance- on conventional loans Define one time variable funding fee and people in what situations is it waived for? - ANSWER-Disabled veterans and surviving spouses. USDA loans are also called what? - ANSWER-502 loans Define MIP - ANSWER-Can be paid up front or in installments. Mortgage insurance premium used by FHA to protect themselves against higher-risk borrowers who are more likely to default on loans Define APR - ANSWER-annual percentage rate Define APOR - ANSWER-average prime offer rate Define HPML - ANSWER-High price mortgage loans or Section 35 loans. A mortgage with an annual percentage rate (APR) that's higher than the average prime offer rate (APOR) P a g e 1 | 22 When is a loan considered to be a section 35 loan? (High price mortgage loan) - ANSWER-- When the APR exceeds APOR by 1.5% on a first lien, 2.5% on Jumbo first lien or 3.5% on subordinate lien What requirements are placed on section 35 loans? (High price mortgage loans) - ANSWER-APE A- ATR / ability to repay P- no PREPAYMENT penalty unless in the first 2 years E- requires ESCROW of the taxes and hazard insurance for the first 5 years Define ATR - ANSWER-Ability to repay 8 Factors of ATR - ANSWER-MICE DOES M- Monthly mortgage I- Income + assets C- Credit history E- Employment D- Debt to Income Ratio O- Other debts E- Expenses S- Simultaneous mortgage What are section 32 loans? - ANSWER-High cost mortgage loans. Considered to be HCML when APR exceeds APOR by 6.5% on first lien on loan $50,000 or higher, or 8.5% on first lien on a loan that's less than $50,000 or 8.5% on subordinate lien. What requirements are placed on Section 32 loans / HCML / High cost mortgage loans? - ANSWER-BAPS B- no BALLOON payment A- must have P a g e 2 | 22 - Loan Estimate (LE) - Line of Credit (LOC) What documents must you keep for 2 years? - ANSWER-everything thats not 5 or 3 What documents must you keep for 25 months? - ANSWER-ECOA Where can you find the NMLS # - ANSWER-PLAMT - Promissory note - 1003 URLA (Loan application -Advertisements - Mortgages - Trust deeds What are the flood zones? - ANSWER-High risk: A and V Moderate risk: B and X Low risk: C and X RESPA Disclosures include the following: - ANSWER-KAMILAS - Know before you owe handbook - Affiliated business arrangement handbook - Mortgage servicing disclosure statements - Initial escrow - List of HUD approved counselors - Anual escrow - Servicing transfer disclosure -(GFE and HUD used for non purchases) What is the penalty for violating GLB? - ANSWER-Up to 5 years and a fine What is the penalty for violating RESPA? - ANSWER-up to $10,000 and/or 1 year What is the penalty for sending an unauthorized fax? - ANSWER-$500 What is the penalty for violating ECOA? - ANSWER-Up to $10,000 P a g e 5 | 22 What is the penalty for violating TILA? - ANSWER-$5K for single violation $25k for reckless violation $1M per day of knowingly committing a violation What is the penalty for violating SAFE Act? - ANSWER-Up to $30,058 What is the penalty for violating DNC? (Do not call list? - ANSWER-up to $43,280 What is the penalty for violating HMDA? - ANSWER-Based on the penalty matrix What is the penalty for violating FACTA? - ANSWER-$5K and/or 1 year What are the TILA disclosures? - ANSWER-A BRAWL on closed caption TV B- Balloon notice R- Right to rescind A- ARM disclosure W- When you're home is on the line disclosure L- Loan estimate C- Charm booklet C- Closing disclore T- Transfer or mortgage What things have a 0% tolerance. - ANSWER-TRAIL T- Transfer taxes R- Credit Report A- Appraisal I- Interest rate L- Loan origination What things have a 10% tolerance? - ANSWER-- Government reporting fee - Title insurance or any service chosen by the borrower from the lenders recommended list What things have no tolerance requirements? - P a g e 6 | 22 ANSWER-TIP - Termite inspection - Insurance hazard and title - Prepaid interest Finance charges do not include.... - ANSWER-PANS BC - Points paid by the seller - Appraisal fee - Notary fee - Security interest charges, if itemized and disclosed - Bona fide and reasonable fees - Credit report fee Which regulation is TILA? - ANSWER-Regulation Z How long after a completed loan application must a LE be submitted? - ANSWER- 3 days. If there are any changes made to the information, you have 3 days to resend updated loan estimate What is the absolute only thing a borrower can be charged for before receiving their loan estimate? - ANSWER-Credit report There is a ____ day waiting period between receiving the loan estimate and consummation of the loan. - ANSWER-7 day. (Can be waived by borrower in cases of bona fide personal financial emergency which requires the transaction to close quickly; ex. foreclosure) P a g e 7 | 22 - Appraisal fraud (i.e., the use of an inflated appraisal to secure a larger loan or to flip a property ) Mortgage loan fraud is punishable by: - ANSWER--For making a fraudulent or false statement, up to five years in jail and/or a $100,000 fine -For submission of a false mortgage loan application, conspiracy to commit fraud, or bank fraud, up to 30 years in jail and/or a $1 million fine Define The GLB Act - ANSWER-The Gramm-Leach-Bliley Act (Regulation P) enacted to protect the privacy of consumer personal information Define Nonpublic Personal Information (NPI) - ANSWER-any personally-identifiable financial information that a financial institution obtains in connection with providing a financial product or service Define Personally-identifiable financial information - ANSWER-Information provided to a financial institution by a consumer in connection with a credit transaction. - ex. name, address, Social Security Number, or other information on a loan application - Account numbers, payment history, loan balances, deposit balances, or credit card purchases - A credit report Flood insurance must be purchased from who? - ANSWER-NFIP National flood insurance program What is the minimum and maximum amount of flood insurance needed? - ANSWER- Min = 100,000 Max = 250,000 P a g e 10 | 22 What are the 4 elements of a valid contract? - ANSWER-competent parties, mutual agreement, legal object and consideration What're are the front end and back end ratios for conventional loans? - ANSWER-28% front end and back end 36% What is the front and back end for USDA loans? - ANSWER-29% front and back 49% What is the front and back end for VA loans? - ANSWER-41 back end. No front What is the front and back end for FHA loans? - ANSWER- A company that violates the Telemarketing Sales Rule may be fined up to ______ per violation, and each phone call is treated as a separate violation. - ANSWER- $46,517 Gramm-Leach-Bliley Act (GLB Act), as implemented by Regulation ___ for what purpose? - ANSWER-- P - enacted to protect the privacy of consumer personal information Under the Red Flags Rule, all covered financial institutions and creditors must implement what type of plan? - ANSWER-a written identity theft prevention plan, which must be approved by the entity's board of directors or senior-level management. The Red Flags Rule is authorized under what? - ANSWER-Fair and Accurate Credit Transaction Act of 2003 (FACTA) What does SAFE Act stand for and what does it establish? - ANSWER--Secure and Fair Enforcement for Mortgage Licensing Act P a g e 11 | 22 -established minimum standards for licensure, requiring mortgage loan originators be either state-licensed or federally registered Dodd-Frank Act of 2010 - ANSWER-- Establishment of the Consumer Financial Protection Bureau (CFPB) - Authorization of the Qualified Mortgage Rule - Requiring an assessment of the borrower's ability to repay a mortgage (i.e., establishment of the Ability to Repay Rule) - Restricts loan originator compensation (i.e., authorizing the Loan Originator Compensation Rule) - Requires new borrower disclosures to replace GFE and TILA disclosures (i.e., TILA- RESPA Integrated Disclosure Rule) -Limits loan terms such as prepayment penalties, negative amortization, balloons, etc. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are government entities or government sponsored? - ANSWER-Government sponsored (quasi-governmental entities) Government National Mortgage Association (Ginnie Mae) is only involved with what types of loans? - ANSWER-FHA or VA loans (is a a wholly-owned government association) How do you calculate the combined loan-to-value (CLTV) ratio? - ANSWER-the sum of first and second mortgage divided by lower of the appraised value or purchase price The high loan-to-value (HLTV) ratio is the... - ANSWER-first lien plus the maximum amount available on the line of credit or second lien, divided by the property value P a g e 12 | 22 back end 41% What are the front end and back end ratio for VA loans? - ANSWER-Only a back end of 41 % What are the front end and back end ratio for FHA loans? - ANSWER-43% Back end and 31% front end An applicant can request a statement of reason within how man y days of receiving the original adverse notice? - ANSWER-60 days If an application for credit is denied based on the appraisal, the borrower has how m any days to request a copy and a lender has how many days to deliver it? - ANSWERBorrower has 90 days to request a copy and the lender has 30 days to deliver it ECOA deals primarily with what? - ANSWER-with credit applications. BE EQUAL What is NOT included in the APR? - ANSWER-TENACTS - Title insurance - Escrow - Notary fee - Appraisal - Credit report - Termite inspection - Seller credits Who do you give the servicing transfer statement and how many days does the borrower have to give the payment to the right place? - ANSWER-15 days before the transfer. The grace period is 60 days Fannie Mae requires only a ____ year history to be reviewed for all credit and public information - ANSWER-7 P a g e 15 | 22 years What's the minimum downpayment for a FHA loan if the borrower's credit score is 580 or higher? - ANSWER- 3.5% If the borrowers credit score is between 500-579, what's their minimum down payment for an FHA loan? - ANSWER- 10% If the borrowers credit score is below 500, what's their minimum down payment for an FHA loan? - ANSWER-Borrower is not qualified for a loan What's the late fee for a VA loan? - ANSWER-4% What's the late fee for a FHA loan? - ANSWER-4% What's the late fee for a USDA loan? - ANSWER-4% What's the late fee for a conventional loan? - ANSWER-5% How many months of PITI payments must you verify on a loan on a non owner occupied property? - ANSWER-6 months How many months of PITI payments must you verify on a loan on an owner occupied property? - ANSWER-2 months What percentage of ownership do you need to be self employed? - ANSWER-25% If the credit report does not show a required minimum payment amount, the lender should use an amount of what percentage of the outstanding balance? - ANSWER-5% Commission, over time, bonus and part time income must be averaged over how many years? - ANSWER-2 years P a g e 16 | 22 Consumer debt that has less than how many months remaining do not need to be included for the purpose of calculating debt ratios? - ANSWER-10 months What is a 203(B) loan? - ANSWER-Basic FHA fixed rate loan What is a 203K loan? - ANSWER-a rehab loan What is a 203G Loan? - ANSWER-Loan for teachers, firemen and police. Think G for good people What are 2 types of freehold estates? - ANSWER-- Fee simple - Life estates If a consumer requests cancelation of their escrow acc, the lender must deliver an escrow closing notice no later then how many days before the closure of the acc? - ANSWER-3 business days If an escrow acc is closed for any reason other then by consumer request, when must the lender deliver a escrow closing notice? - ANSWER-No later then 30 business days before the acc is closed How long do you keep TILA disclosures? - ANSWER-2 years How long do you have to keep the DNC list? - ANSWER-2 years How long do you have to keep the Mortgage Acts and Practice (MAP) disclosures - ANSWER-2 years How long do you have to keep the Loan Estimate (LE)? - ANSWER-3 YEARS How long do you have to keep the Loan Application Registry Disclosure (LAR)? - ANSWER-3 years How long do you have to keep the Line of Credit (LOC)? - ANSWER-3 years How long do you have to keep the Suspicious Activity Report (SAR)? - P a g e 17 | 22 Advisor What is Fannie Mae's automated underwriting system called? - ANSWER- Desktop Underwriter A borrower obtains a one-year ARM which starts at 4.0% and has a margin of 3.0% and 2/6 caps. At the end of the first year, the index is 5.0%. What is the interest rate after the first adjustment? - ANSWER- 6 When the interest rate adjusts, the new rate is the lower of index + margin (in this case, 5 + 3 = 8) and the current rate + cap (in this case, 4 + 2 = 6). Therefore, after the first adjustment, the interest rate would be 6%. Insurance which guarantees a lender a certain lien position on the title to a property free from undisclosed encumbrances is called - ANSWER-lender's title policy A disclosure advising the borrower of their right to receive a copy of the appraisal must be delivered within how many days - ANSWER-3 FHA mortgages typically carry how many different types of mortgage insurance? What are they? - ANSWER-2 MIP and UFMIP Mortgage insurance premium and upfront Mortgage insurance premium A mortgage broker will originate, process, and close in its own name a loan underwritten and funded by a secondary lender, but will then assign the loan to the funding lender at P a g e 20 | 22 the closing table. What is this called? - ANSWER-table funding What document replaces the HUD-1 Settlement Statement and the final TIL Disclosure? - ANSWER-The Closing Disclosure For an FHA loan, how much may the seller contribute toward the borrower's closing costs? - ANSWER-6% Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: - ANSWER-the lower of the replacement cost or the unpaid loan amount A loan which does not require payments during the life of the loan is most likely what type of loan? - ANSWER-a HECM. The FHA's home equity conversion mortgage A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts? - ANSWER-8%. When the rate adjusts, the new fully- indexed rate is equal to the index plus margin. In this case: 5 + 3 = 8. Loan originator compensation records must be retained for how long? - ANSWER-3 year s the federal limitation on the shortest adjustment period allowed on an ARM? - ANSWER-no limit A mortgage which has a fixed interest rate for the first three to five years, and then a rate that adjusts at intervals based on an index and margin, is known as a(n): - ANSWER-Hybrid P a g e 21 | 22 ARM releasing a lien from the title of a property after a loan has been paid off is called.... - ANSWER- reconveyance What is a promissory note? - ANSWER-a borrower's promise to pay a promise to pay is secured by a... - ANSWER-security instrument, such as a mortgage or trust deed minimal investment is also known as... - ANSWER-minimum down payment approaches to appraisals : Sales comparison approach - ANSWER-- compares 3 similar recently sold properties int the close proximity to the property in order to determine a properties market value approaches to appraisals : Income approach - ANSWER-- utilizes an OIS (operating income statement) to compare rental potential when financing a property approaches to appraisals : Cost approach - ANSWER-- considers cost of labor and materia l - usually for rehab or contruction Schedule ___ would most likely be filed by a self-employed borrower who files taxes as a sole proprietor? - ANSWER-Schedule C P a g e 22 | 22