NMLS Exam Review: Regulations and Laws in Consumer Loans, Exams of Law

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NMLS TEST-Affinity Questions with Answers 2024 What law deals with credit, APR & Advertising of consumer loans? ✔ TILA Which regulation prohibits kickbacks? ✔ RESPA Which regulations require the lender to cancel PMI when the loan reaches 78% LTV? ✔ HPA-Homeowners Protection Act Which Regulation prohibits fee splitting? ✔ RESPA Regulation X is the letter used to describe which law? ✔ RESPA RESPA is the acronym used to describe which law? ✔ Real Estate Settlement Procedures Act What type of mortgage requires a non-refundable funding fee? ✔ VA Loan What is the provision in a mortgage enabling a lender to demand full repayment if the borrower DEFAULTS on the loan? ✔ Acceleration Clause What is the provision in a mortgage enabling a lender to demand full repayment if the borrower TRANSFERS the loan? ✔ Alienation Clause What does CFPB stand for? ✔ Consumer Financial Protection Bureau What two laws created the CFBP? ✔ Dodd Frank Act and Consumer Finance Protection Act Which regulation is designed to help meet the Credit needs of the Communities in which it operates? ✔ CRA- Community Reinvestment Act Under ECOA rules and regulations, how many days the borrower have to request a copy of an appraisal report? ✔ 90 Under ECOA rules and regulations, how many days does the lender have to provide a copy of an appraisal report, once requested by the borrower? ✔ 30 If a loan application is APPROVED, Under ECOA rules & regulations, when MUST a copy of the appraisal be provided to the borrower? ✔ 3 business days Conforming loans follow guidelines of which regulators? ✔ Fannie Mae and Freddie Mac Which regulation requires the lenders to "BE EQUAL" when extending credit to borrowers? ✔ ECOA How old must a borrower be to qualify for a Reverse Mortgage? ✔ 62 years old Which regulation has the primary function of preventing Identity Theft? ✔ FACT Act Which regulation has Section 114 Rules? ✔ FACT Act Which regulation requires the creditor to verify the VALIDITY of any change of address received? ✔ SECTION 114 of the FACT Act What is the payment method used in a reverse mortgage that allows the homeowners to receive a monthly check while living in the property? ✔ Tenure Method What is the fraud scheme where a borrower uses someone else's name to purchase the property, but the person WILL NOT be living at the property? ✔ Straw Borrower What government lender "insures" mortgages? ✔ FHA What government lender "Guarantees" Mortgages? ✔ VA Loans What government lender loans money to fund purchases in rural areas? ✔ USDA/ Dept. of Agriculture Which regulations states that loan officers secure and dispose of borrowers sensitive credit information? ✔ FACT ACT Which regulation states that if a borrower is denied credit, he can receive a FREE copy of his credit report? ✔ FRCA - Fair Credit Reporting Act Which regulation states that if a borrower is unemployed, he can receive a FREE copy of his credit report? ✔ FRCA - Fair Credit Reporting Act Which regulation states that if a borrower is on SSI or Disability, he can receive a FREE copy of his credit report? ✔ FRCA- Fair Credit Reporting Act Which regulation states that if a borrower has been the victim of fraud,he can receive a FREE copy of his credit report? ✔ FRCA- Fair Credit Reporting Act Which regulation states that a borrower can receive a FREE copy of his credit report once a year? ✔ FACT ACT During the loan process, if you ask a borrower is he/she is single.....What law are you violating? ✔ ECOA Which regulation states that the only correct way to ask a about a borrowers martial status is: are you married, unmarried, or separated? ✔ ECOA Who is responsible for providing the closing disclosure to the borrower? ✔ The Creditor/Lender Who is responsible for providing the closing disclosure to the Seller? ✔ Settlement Agent/ Title Agent Which regulation requires the borrower to receive the Loan Estimate? ✔ TILA Which regulation requires the borrower to receive the Closing Disclosure? ✔ TILA Which regulation requires the borrower to receive the Loan Estimate within 3 business day? ✔ RESPA Which regulation requires the borrower to receive the Closing Disclosure within 3 Business days? ✔ RESPA As it relates to the initial loan estimate-what is the definition of a business day? ✔ Any day that he Creditor's office is open for buisness According to TILA/RESPA Z- what is the definition of a business day? ✔ Any calendar day except for Sunday and Legal Holiday During the loan process, where do you find HMDA government monitoring information? ✔ Section X of the 1003 application Where does HMDA stand for? ✔ Home Mortgage Disclosure Act What appraisal approach is used when appraising property that has been destroyed by a natural disaster? ✔ Cost Approach or replacement cost approach In the sales comparison approach, how many comps are required? ✔ 3 What is another name for the Financial Services Modernization Act of 1999? ✔ Graham Leach Bliley Act How many days does a CREDITOR have to notify a consumer of the status of credit application? ✔ 30 days Which regulation states that a creditor has 30 days to notify a consumer of an application approval or denial? ✔ ECOA How many hours of Ethics is required to be taught in the 20hr Prelicsening course? ✔ 3 How many hours of Ethics is required to be taught in the 8hr Continuing Education course? ✔ 2 How many hours of Federal Law is required to be taught in the 20hr Pre-Licensing course? ✔ 3 How many hours of Federal Law is required to be taught in the 8hr Continuing Education course? ✔ 3 A mortgage that includes more than one parcel of land is called what? ✔ Blanket Mortgage A mortgage that includes appliances such as a stove or refrigerator is called what? ✔ package mortgage Which closing document itemizes the final closing cost and items paid in connection with the loan for the borrower? ✔ Closing Disclosure Which law deals with APR and Advertising of credit terms? ✔ TILA What is the official name for the 3/7/3 rule? ✔ Mortgage Disclosure Improvement Act or MDIA Act What regulations require the lender to perform an escrow analysis? ✔ RESPA Which law states that it is a violation to discriminate against a potential borrower on public assistance? ✔ ECOA What two classes are protected under Fair Housing Act - but NOT under ECOA? ✔ Disability/Handicap & Familial status What three classes are protected under ECOA but NOT under FAIR HOUSING? ✔ Age, Marital Status, and Public Assistance What is another name for a non-conforming loan? ✔ Jumbo Loan What is another name for a Jumbo loan? ✔ Non-conforming Loan The Front Ratio for an FHA Loan is 31%.....what is the back ratio? ✔ 43% How long does a creditor have to make a decision on a credit application? ✔ 30 days According to what regulation does a lender have 30 days to make a decision on a credit application? ✔ ECOA What law requires that the equal housing lender slogan and/or logo be placed on all advertising? ✔ Fair Housing Act How long does a person have to sue for a violation under the Fair Housing Act? ✔ 1 year Which law says that the lender cannot inquire about a person's sexual orientation or gender identity? ✔ HUD Equal Access Rule What is the site where you can receive a free copy of your credit report, according to the FACT Act? ✔ www.annualcreditreport.com Which regulations requires you to shred or burn sensitive credit information when no longer needed? ✔ FACT Act What regulation is designed to protect consumer's non-public information and how it can and cannot be shared? ✔ GLBA Which law requires lenders to verify the date of birth, SS# and ethnicity of a person getting a loan in the United States? ✔ U.S. Patriot Act If you fail the test 3 times, what is the waiting period to retest? ✔ 6 months/180 days Under HMDA, how long must a lender keep the Loan Application Register (LAR)? ✔ 3 years What day does your license expire each year? ✔ December 31st What is the renewal period to keep your license current? ✔ Nov 1st-Dec 31st Which Act includes provisions to protect consumers' personal financial information held by financial institutions? ✔ Graham-Leach-Bliley Which act requires companies to give consumers privacy notices? ✔ Graham-Leach-Bliley Which act was implemented to promote financial stability and to protect consumers from abusive practices? ✔ Dodd Frank Act What is RESPA section 6 responsible for? ✔ Mortgage Servicing What is RESPA section 8 responsible for? ✔ Kickbacks, Fee Splitting, & Unearned fees What is RESPA section 9 responsible for? ✔ Title Insurance What is RESPA section 10 responsible for? ✔ Escrow accounts What is the max mortgage term (length) allowed for a mortgage to be classified as a Qualified Mortgage? ✔ 30 years Until the loan estimate has been delivered, what fee can a MLO charge? ✔ Credit report Estimate of charges and terms for Settlement services must be available for at least business days from the time the Loan Estimate is provided? ✔ 10 If a new Loan Estimate is required because of a changed circumstance, it must be disclosed and received by the borrower days prior to consummation of the loan? ✔ 4 How long are Closing Disclosures kept by the Creditor? ✔ 5 years TILA applies to transactions that are payable by (# of installments)? ✔ more than 4 What does ECOA stand for? ✔ Equal Credit Opportunity Act The loan estimate must be retained for how long? ✔ 3 years What does HMDA stand for? ✔ Home Mortgage Disclosure Act What does NOV stand for? ✔ Notice of Value What does CRV stand for? ✔ Certificate of Reasonable Value What does the "R" stand for in the acronym NMLSR? ✔ Registry What is a Mortgage Call Report (MCR)? ✔ Quarterly Report required by MLO Company Loan originator organizations must keep compensation records for how many years? ✔ 3 years Mortgage companies must submit a residential loan origination activity report to the NMLSR every: ✔ three months What is the process in which a broker originates and closes a loan in his/her own name, then transfers the loan to a lender at closing? ✔ Table funding What law protects homeowners from foreclosure-prevention scams? ✔ Mortgage Assistance Relief Services Rule Individuals must file a report when they transport how much cash out the country? ✔ 10,000 or more What type of federal report is filed when financial institutions detect suspicious activity? ✔ suspicious activity report Which law requires businesses to print only the last five card numbers in a credit card receipt? ✔ FACT Act What happens if the acceptable variance between the Loan Estimate and the closing disclosure is exceeded? The enforcement of a lien is known as a: ✔ Foreclosure What minimum percentage of ownership qualifies an individual as self-employed? ✔ 25% Which law defines the right of rescission? ✔ TILA How long after the application date must social security payments continue to be received in order to count as income? ✔ 3 years Which clause in a mortgage allows a lender to increase the interest rate? ✔ escalation A VA appraisal is known as a: ✔ CRV or NOV Which type of loans are meant for rural areas? ✔ USDA-Section 502 The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point and 1 origination point. What is the cost of the points? ✔ $3,600 What is the maximum allowable amount of VA seller concessions? ✔ 4% The late fee for a VA loan is: ✔ 4% of principal and interest What is the clause in a mortgage that is also known as a "due on sale clause"? ✔ Alienation Alimony payments must continue to be received for how long after the application date if they are to be included as income? ✔ 3 years Credit reports are good for how many days after they are pulled for qualifying purposes? ✔ 120 Which law protects an individual's confidential information? ✔ Gramm-Leach-Bliley Act The Mortgage Servicing Disclosure must be sent to the borrower within how many business days of receiving a loan application? ✔ 3 After an escrow account analysis, money must be refunded if the over-paid amount equals or exceeds: ✔ $50 The maximum escrow cushion that a lender can request is: ✔ Equal to 2 months (1/6) The fluctuating economic indicator used in an ARM is the? ✔ INDEX The Home Mortgage Disclosure Act (HMDA) was implemented by the: ✔ Federal Reserve Board Tax liens can be kept in the credit report for: ✔ 7 years The range of possible credit score is: ✔ 300-850 The Red Flags Rule is concerned with: ✔ Identity Theft For how many years must a lender retain the Loan Estimate? ✔ 3 For how many years must a lender retain the Closing Disclosure? ✔ 5 For how many years must a lender retain the Escrow Cancellation Notice? ✔ 2 For how many years must a lender retain the Partial Payment Policy? ✔ 2 The mortgagor is the: ✔ Borrower Which law (regulations) is designed to create financial stability? ✔ The Dodd Frank Act Mortgages are a(n): ✔ Voluntary lien What establishes the lien position? ✔ date and time of recording What type of mortgage has a fixed interest rate and increasing payments? ✔ Growing equity mortgage A graduated payment mortgage: ✔ Has payments that start low and increase over time If there is no minimum monthly credit card payment, what is the percent of the balance used in the calculation of monthly debt? ✔ 5% The Fannie Mae Total Obligations Ratio is: ✔ 36% A guarantor or co-signer signs the: ✔ Note Company or individual who, for a fee, places loans with lenders, buy doesn't service such loans is called a ? ✔ Mortgage Broker Fannie Mae generally wants how many months of liquid financial reserves after closing? ✔ 2 months Fannie Mae requires a non-qualifying spouse whose income is not used in qualifying to sign the: ✔ Mortgage A co-borrower whose income is used to qualify must sign the: ✔ Mortgage and the note Which form is used to summarize the information in the loan package on a FHA loan? ✔ Fannie Mae 1008-Transmittal Summary An appraisal must be re-certified if it is older than: ✔ 4 months The most probable price which a property should bring in an open market is: ✔ market value The appraisal approach that best applies to vacant land is: ✔ Cost Approach Judgement Attachments What type of lien is a voluntary lien on property? ✔ mortgage What is the definition of "Real Property"? ✔ Land and anything that is permanently affixed to it Suppose the payment is late on a conventional loan and the monthly principal is $1,000, the monthly interest is $500, the monthly taxes are $125 and the monthly insurance is $25.00.... what is the amount of the late payment? ✔ $75 ($1,500 x 5%) *Remember - late charges are not calculated on the taxes and insurance Suppose the payment is late on a FHA loan and the monthly principal is $1,500, the monthly interest is $150, the monthly taxes are $150, the MIP is $210 and the monthly insurance is $33.00.... what is the amount of the late payment? ✔ $66 ($1,500 + $150 x 4%) Monthly PITI payments are $1,400 and the borrower's gross monthly income is $5,000. His other debts are $200 a month. What is the Housing Expense Ratio? ✔ 28% ($1,400 divided by $5,000) What type of property is NOT covered by RESPA? ✔ All cash sales, rental units of more than 4, property 25 acres or more & commercial property A lender/Servicer can contact a borrower how many days after a missed payment? ✔ 36 days A lender/servicer must inform the borrower of the available loss mitigation options after __________days of missed payments? ✔ 36 days Which regulation allows the borrower to sue for "treble" damages? ✔ RESPA Section 9 What law requires the lender to provide an annual summary of the activity associated with the borrower's impound account? ✔ RESPA section 10 The servicing transfer statement must be provided to the borrower ___________prior to transfer. ✔ 15 days What are the 6 items that make a "complete" Application? ✔ Borrower name, Social Security Number, Subject Property address, Borrower's monthly income, estimated value amount, and the loan amount. The "Know Before You Owe" disclosure must be provided within ______days of a complete application? ✔ 3 days The "Know Before You Owe" disclosure must be provided for what type of transactions? ✔ Purchase Only If the application is withdrawn within the first _______days or the lender declines the application within the first ________days, the lender is NOT required to provide the _______to the borrowers. ✔ 3,3, initial disclosure __________ occurs if the lender chooses the hazard insurance company when the borrower allows the policy to lapse. ✔ Forced-placed insurance Which items have a zero tolerance between the Loan Estimate and the Closing Disclosure? ✔ Real estate transfer taxes, loan origination fees, interest rates, appraisal and credit report Which items have a 10% tolerance between the Loan Estimate and the Closing Disclosure? ✔ Government recording fees, title insurance On what document would you find information regarding the "RATE LOCK"? ✔ The LOAN ESTIMATE ONLY What is the penalty for violating RESPA? ✔ $10,000 and 1 year in jail Which regulation is Reg Z? ✔ TILA Which disclosure requires that entities that purchase or acquire mortgage loans to notify the borrower and provide the name, address and telephone number of the owner within 30 days of acquisition? ✔ Transfer of Ownership Disclosure The total "interest" being charged on the loan, expressed as a percentages is known as the _______________? ✔ Total Interest Percentage (TIP) If a borrower was not properly notified of his/her right to rescind, how long can the rescission period be extended? ✔ 3 years How many copies of the "Right of Rescind" must each borrower receive? ✔ two What law requires that the borrower receive the Right of Recession notice? ✔ TILA What does APOR stand for? ✔ Average Prime Offer Rate When is a loan considered a Section 32 (High Cost) Loan? ✔ A loan will be considered a High Cost (section 32) loan if its APR exceeds the APOR by more than 6.5% for a first lien or 8.5% for a subordination lien, or when the total points and fees payable in conjunctions with the loan exceed 5% (8% for loans of $20,000 or less) When is a Loan considered a Section 35 (High Priced) Loan? ✔ A loan will be considered a High Priced (Section 35) loan if its APR exceeds the APOR by more than 1.5%, 2.5% for jumbo first-lien loans and 3.5% for subordination liens. What type of loans "require" an impound account? ✔ Section 35 High Priced Loans When is the CHARM booklet required? ✔ When the consumer received as adjustable rate mortgage What is the regulation/rule that states that a loan originator cant receive Dual Compensation? ✔ Loan Originator compensation rule Which law states t ✔