Mortgage Process Questions

  1. What are discount points or points?
    They are a fee paid by the borrower to the lender to reduce the interest rate on the loan
  2. How is a discount point used?
    One discount point is equal to one percent of the principal, and number of discount points charged on the loans varies with the market. Amount paid as discount points is tax deductible, either in installments over the loan period or as a lump sum.
  3. The Rose family owns a home in a semi-rural area, which is about five years old. Recently announced plans for a new regional airport will place their home directly in line with a main runway ending 1 mile before their home. If the airport is constructed, will this diminish the value of the Rose Home?
    Yes, because of economic obsolescence.
  4. Which home buyer would benefit most from a balloon loan?




    C.  

    A balloon loan will often have the advantage of very low interest payments, thus requiring very little capital outlay during the life of the loan. Since most of the repayment is deferred until the end of the payment period, the borrower has substantial flexibility to utilize the available capital during the life of the loan. The major problem with such a loan is that the borrower needs to be self-disciplined in preparing for the large single payment, since interim payments are not being made. Balloon loans are often undertaken when refinancing or when a major cash flow event is anticipated. also called balloon note or bullet loan.
  5. A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called:
    Warehousing refers 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.
  6. 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 - Insurance Companies usually make loans through mortgage companies. These “loan correspondents” negotiate and service their loans.
  7. The primary purpose of Truth in Lending is to:
    Disclose the true costs of obtaining credit.
  8. What are the three credit reporting agencies?
    • Trans Union
    • Experian
    • Equifax
  9. The recording of an instrument gives:
    Constructive notice
  10. Which rule prohibits mortgage relief companies from collecting any advance fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable?
    MARS Rule
  11. A borrower elects to buy down the interest rate on his mortgage loan. This appears on the Loan Estimate as a
    Charge to the borrower
  12. What information is a mortgage loan originator NOT allowed to ask a borrower who is applying for a home mortgage?




    A. receipt of public assistance
  13. Each of these loans would be considered nontraditional EXCEPT a




    B. 30 yr fixed rate loan
  14. At what point can a lender collect a loan origination fee?
    When the loan closes
  15. The Homeownership Equity Protection Act does not require a lender to verify a borrower's ability to repay the loan if the
    The loan is temporary or a bridge loan for 12 months or less.
  16. How soon after a borrower is provided with all required disclosures may a loan close?
    On the 3rd business day after the disclosures were provided.
  17. In order for a junior mortgage on a primary residence to be considered a higher-priced loan, the APR must exceed the applicable average prime offer rate by at least
    3.5%
  18. A loan on a borrower's primary dwelling where the APR exceeds at least 1.5% of the applicable average prime offer rate for a first lien loan is known as a
    Higher Priced Loan
  19. Each of these loans would be excluded under the definition of a higher-priced loan EXCEPT:




    D. a purchase loan
  20. A consumer comes into your office to apply for a loan. The Home Mortgage Disclosure Act requires you to collect information about her race. If she does not wish to provide information for that section of the application, what do you do?
    Have her check the box indicating she does not wish to furnish the information, then answer it according to visual observation when she leaves.
  21. Bob meets with a loan originator at XYZ Mortgage Company to inquire about loan options. His name is on the National Do Not Call Registry. How long can you call Bob after the meeting date?
    3 months
  22. ABC Bank receives a change of address request from consumer Jane. What requires the bank to follow up with Jane to verify the validity of the request?
    Red Flag Rules
  23. After the collection of statistical data, lenders are required to forward that information to the regulator by what date under the Home Mortgage Disclosure Act?
    March 1st
  24. ABC Mortgage transferred servicing rights of some of its mortgage loans to XYZ Mortgage. ABC must send a Servicing Transfer Statement to the affected borrowers ______ days before the effective date of transfer.
    15 days
  25. A telemarketer can be fined how much for calling someone registered on the National Do Not Call Registry?
    $40,000
  26. According to the FCRA, when must a credit agency give a consumer a free copy of his credit report?
    if the loan application is denied because of information in the report
  27. A convertible ARM allows a borrower to change
    from an adjustable rate mortgage to a fixed rate mortgage
  28. A discount point is calculated as 1% of the
    loan amount
  29. A borrower with less than ideal credit or other risk factors such as high debt, low credit scores, and other creditworthiness issues may qualify most easily for what type of loan?
    Subprime
  30. A debtor who is required to pay an extra 3% of the total loan amount if more than 20% of the principal is repaid during the first five years of the term is bound to these terms under a
    prepayment clause.
  31. A final payment at the end of a loan term to pay off the entire remaining principal and interest balance NOT covered by payments during the loan term is
    a balloon
  32. A bridge mortgage is described as a
    mortgage that often occurs between the termination of one mortgage and the beginning of the next, having a term of one year or less
  33. A gift letter for down payment money states what to the lender?
    The gift is not expected to be repaid.
  34. A disadvantage of a 15-year loan versus a 30-year loan is
    monthly payments are usually higher.
  35. A buyer of a house with a sales price of $100,000 is paying a $10,000 down payment as well as 2 discount points and 2 points for loan origination fees. What is the total cost of the points?
    $3600
  36. A borrower who is paid $750 per week has a qualifying monthly income of
    $3250
  37. A buyer of a house with a sales price of $150,000 is paying a $30,000 down payment and three discount points on the $120,000 loan. What is the total cost of the discount points?
    $3600
  38. A borrower buys a house for $125,000 by getting a loan for $100,000. When the loan had a balance of $60,000, he decided to refinance to lower the interest rate by 2%. To do this, he has to pay a prepayment penalty of 1.5% on the remaining principle balance. How much will that prepayment penalty cost him?
    $900
  39. A borrower is buying a house with a sales price of $200,000 and an LTV of 75%. If he paid $3,000 in points, how many points does that represent?
    2
  40. A borrower is buying a house for $150,000. She provides a down payment of 10%. If she pays two discount points, what is the total cost of the points?
    $2700
  41. A borrower's stable monthly income is $3,000. He has three monthly debts: $200, $200, and $50. What is the maximum monthly mortgage payment he would qualify for using the conventional total debt to income ratio of 36%?
    $630
  42. A borrower is buying a house for $100,000. He provides a down payment of $5,000. If he pays two discount points, what is the total cost of the points?
    $1900
  43. A property that is intentionally appraised with a higher-than-market value results in a(n)
    Inflated appraisal
  44. A straw borrower is someone who
    fraudulently allows his name and information to be used to obtain a mortgage, but does not intend to live in the house.
  45. A real estate agent believes that his Hispanic client would probably prefer to live in more diverse neighborhood, and so he only shows her homes where there is a higher concentration of residents from Guatemala. This agent is guilty of
    Steering
  46. According to the Gramm-Leach-Bliley Act, which would not be considered nonpublic personal information and, therefore, is not protected?
    recorded mortgages
  47. ABC Mortgages makes a loan with Bill even though he is unlikely to repay it, anticipating that they'll eventually foreclose on the property and get Bill's equity. This is an example of
    predatory lending.
  48. A mortgage lending company refuses to make loans for homes in a minority neighborhood. This is an illegal action called
    redlining
  49. Which change of information must be communicated by the mortgage loan originator in writing directly to the state regulatory authority rather than entered through the NMLS system?
    Name change
  50. When a licensee ceases to engage in business and files a plan for withdrawal with the state regulatory authority, this is referred to as
    surrender
  51. The state regulatory authority will likely take immediate action to suspend or revoke a license if the licensee
    is indicted for fraud, misrepresentation, or deceit.
  52. The state regulatory authority may suspend or revoke an MLO license for failure to
    provide proper disclosures to a borrower.
  53. Conrad, a mortgage license originator, has resigned his position with Levenfeld Lenders, his sponsoring employer, to accept a new position as a mortgage loan originator with Joe Franklin, a licensed lender, who is the owner of Franklin Mortgage Company. Which person is required to notify the state regulatory authority through the NMLS system of Conrad's termination of employment with Levenfeld Lenders?
    BOTH the mortgage loan originator and the sponsoring entity must notify the state regulatory authority of the termination.
  54. The state regulatory authority may suspend a loan originator license if the licensee has
    failed to remit his renewal fee by the annual deadline.
  55. The state regulatory authority may refuse to renew a license for an MLO, broker, or lender if there is a finding that the licensee has
    demonstrated unfairness in the transaction of business.
  56. The Homeownership Equity Protection Act does not require a lender to verify a borrower's ability to repay the loan if the
    The loan is a temporary loan or a bridge loan for 12 months or less.
  57. Certain loan programs are exempt from ability to repay requirements, including bridge loans, time-share plans, reverse mortgages and open end credit plans.
  58. Which of the following is an acceptable condition on which to base a mortgage loan originator's compensation?
    A fixed percentage of the loan amount - The Loan Originator Compensation Rule prohibits a MLO from being paid based on any loan terms other than the loan amount. Thus, the only 'term of a loan' that can differ, and thereby cause a change in the MLO's compensation is the loan amount
  59. A mortgage broker hands the borrower a Loan Estimate in his office the day after the application was completed. When can the broker charge the Buyer for an appraisal?
    That day - The mortgage broker may charge additional fees once the applicant has received the Loan Estimate.
  60. In order for a junior mortgage on a primary residence to be considered a higher-priced loan, the APR must exceed the applicable average prime offer rate by at least
    3.5% - The Mortgage Disclosure Improvement Act defines a higher-priced junior mortgage loan as one that exceeds the applicable average prime offer rate by at least 3.5%.
  61. A mortgage broker rents office space from a title company at a discount in exchange for referring customers for settlement services. Which federal law does this arrangement violate?
    RESPA - This would be considered a kickback or thing of value, and it is prohibited under Section 8 of RESPA.
  62. The addition of a uniform state content section to the National SAFE MLO Test component means that
    One test can meet both the national and state testing requirements for some states that have adopted the uniform state test. Twenty-five new questions are added; there are still 100 questions on the national test.
  63. The Privacy Rule of the Gramm-Leach-Bliley Act requires financial institutions to provide the borrower with a Consumer Privacy policy
    before disclosing information to non-affiliated 3rd parties - The Privacy Rule of the GLB Act requires that financial institutions provide the borrower with a Consumer Privacy policy before disclosing information to a non-affiliated third party.
  64. A loan on a borrower's primary dwelling where the APR exceeds at least 1.5% of the applicable average prime offer rate for a first lien loan is known as a
    This is a higher-priced loan as defined by the Mortgage Disclosure Improvement Act.
  65. A borrower elects to buy down the interest rate on his mortgage loan. This appears on the Loan Estimate as a
    charge to the borrower - A buydown such as this is money out of the borrower's pocket at closing, so it appears on the Loan Estimate as a charge
  66. Which federal act created the Consumer Financial Protection Bureau? Dodd-Frank Act Bank Secrecy Act/Anti-Money Laundering Act Fair Credit Reporting Act Gramm-Leach-Bliley Act
    Dodd-Frank Act - Title X of the Dodd-Frank Act creates the Consumer Financial Protection Bureau (CFPB) as an independent entity with rule-making and enforcement authority over many consumer financial laws.
  67. How long does a lender have to cure a tolerance violation?
    within 60 days - RESPA allows lenders to cure the tolerance violation by reimbursing to the borrower the amount by which the tolerance was exceeded, at settlement or within 60 calendar days after settlement.
  68. The Consumer Financial Protection Bureau on October 3, 2015, implemented the newly combined disclosure that meets the disclosure requirements of TILA and
    RESPA - The combined disclosure is intended to meet the requirements set forth in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The integrated disclosure forms replaced the Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) forms.
  69. Each of these loans would be excluded under the definition of a higher-priced loan EXCEPT
    a purchase loan - A purchase loan, if it meets the mandated triggers, could qualify as a higher-priced loan under the Mortgage Disclosure Improvement Act.
  70. At what point can a lender collect a loan origination fee?
    When the loan closes - An application fee couldn't be collected until a Loan Estimate is received and a borrower acknowledges their Intent To Proceed. An origination fee however requires that a loan be closed to collect.
  71. What information is a mortgage loan originator NOT allowed to ask a borrower who is applying for a home mortgage?
    receipt of public assistance - A mortgage loan originator may not ask a borrower if the source of income is public assistance. The other issues may be asked in order to comply with the Home Mortgage Disclosure Act.
  72. Each of these loans would be considered nontraditional EXCEPT:




    C. - A nontraditional mortgage loan is defined as anything other than a 30-year or less fixed rate loan.
  73. A mortgage loan originator who supplies a revised Loan Estimate to a borrower must maintain the related documentation for at least how many years?
    3 - RESPA requires loan originators to document the reason for the revised Loan Estimate and then retain that documentation for no less than three years after settlement.
  74. Which rule requires all financial institutions to design, implement, and maintain safeguards to protect customer information while it is in the custody and control of the institution and its agents?
    Safeguards Rule - The Safeguards Rule (15 U.S.C. 6801- 6809), which is part of Title V protections included in the Gramm-Leach-Bliley Act, requires all financial institutions and institutions that receive consumer's financial information to design, implement, and maintain safeguards to protect customer information while it is in the custody and control of the institution and its agents.
  75. How soon after a borrower is provided with all required disclosures may a loan close?
    The amended Truth in Lending Act requires a 3-business day waiting period before a loan can close.
  76. FHA's Annual Mortgage Insurance Premium (MIP)
    Will remain in place for the life of the loan - As of 6/3/13, you may no longer remove the MIP throughout the life of the loan if the beginning loan balance is higher than 90% of its appraised value even when the balance falls below 78% of LTV.
  77. When did the Dodd-Frank Act officially become a law?
    The Dodd-Frank Act officially became law in July 2010
  78. Some of the main provisions found in the Dodd-Frank Act include:
    • 1. Banks are required to come up with plans for a quick shutdown if they approach bankruptcy or run out of money.
    • 2. Financial institutions must increase the amount of money they hold in reserve to account for potential future slumps.
    • 3. Every bank with more than $50 billion of assets must take an annual “stress test,” given by the Federal Reserve, which can help determine if the institution could survive a financial crisis.
    • 4. The Financial Stability Oversight Council (FSOC) identifies risks that affect the financial industry and keeps large banks in check.
    • 5. The Consumer Financial Protection Bureau (CFPB) protects consumers from the corrupt business practices of banks. This agency works with bank regulators to stop risky lending and other practices that could hurt American consumers. It also oversees credit and debit agencies as well as certain payday and consumer loans.
    • 6. The Office of Credit Ratings ensures that agencies provide reliable credit ratings to those they evaluate.
    • 7. A whistle-blowing provision in the law encourages anyone with information about violations to report it to the government for a financial reward.
  79. What is the Volcker Rule?
    The Volcker Rule forbids banks from making certain investments with their own accounts. For example, banks can’t invest, own or sponsor any proprietary trading operations or hedge funds for their own profit, with some exceptions.
  80. The Dodd-Frank Act definition of a qualified mortgage includes all of these features except:




    B.  Interest-only loans are prohibited by the qualified mortgage (QM) rule.
  81. Which circumstance would disqualify an applicant for a loan originator license? 




    C.  The SAFE Act disqualifies an applicant who has had a license revoked, but having another career would not be a disqualification
  82. Which law ensures that some borrowers have the right of rescission for three business days after a loan contract is signed?
    Regulation Z or the Truth in Lending Act ensures that some borrowers have the right of rescission for three business days.
  83. Your applicant receives child support for her seven-year-old son. Can you gross up the child support payments she receives?
    Yes, you can gross up all non-taxable income if it is verified and likely to continue for three years. - If the income is verified to be non-taxable, and the income and its tax-exempt status are likely to continue, the lender may develop an "adjusted gross income" for the borrower by adding an amount equivalent to 25% of the non-taxable income to the borrower's income.
  84. Who does NOT share responsibility for enforcing the provisions of the National Do Not Call Registry?
    The Federal Reserve Board has no enforcement authority over the National Do Not Call Registry.
Author
sparent
ID
352190
Card Set
Mortgage Process Questions
Description
Rules and Regulations for loan processing
Updated