560 NMLS Terms and Exam Questions
Review and Answers
RESPA >>>Real Estate Settlement Procedures Act
Regulation X
Which of the following circumstances is least likely to lead to a determination that two
entities are operating a sham affiliated business arrangement under RESPA?
A. Th...
560 NMLS Terms and Exam Questions
Review and Answers
RESPA >>>Real Estate Settlement Procedures Act
Regulation X
Which of the following circumstances is least likely to lead to a determination that two
entities are operating a sham affiliated business arrangement under RESPA?
A. The same person owns both entities
B. One entity shares office space with the other entity
C. One entity's business comes exclusively from referrals from another entity
D. Both entities share the same employees >>>A. The same person owns both entities
An affiliated business arrangement is an arrangement in which a person or his or her
associate is in a position to refer real estate settlement service business for a federally-
related mortgage loan and has either an affiliate relationship with, or ownership interest
of more than 1% in, a provider of settlement services and refers business to or
influences the selection of that provider. As ownership in an affiliated business is part of
the definition of an affiliated business relationship, such ownership does not necessarily
point to a sham operation.
Which of the following statements about the Loan Estimate is NOT true?
A. The lender is solely responsible for providing the Loan Estimate to the prospective
borrower
B. The Loan Estimate need not be provided if the borrower is seeking a refinance of an
existing loan
C. The Loan Estimate is not a loan guarantee
D. The Loan Estimate must be provided to the applicant no more than three business
days after submission of the application >>>B. The Loan Estimate need not be provided
if the borrower is seeking a refinance of an existing loan
The Loan Estimate must be provided to a prospective borrower applying for any
federally-regulated mortgage loan, including a refinance. It must be provided no more
than three business days after the licensee receives an application. Although it need not
,be provided directly by the lender, it is the lender that is ultimately responsible for
ensuring that the borrower has received the required disclosure.
Which of the following is not considered one of the six essential pieces of information
constituting an application under RESPA?
A. Borrower Social Security Number
B. Loan program
C. Borrower monthly income
D. Loan amount >>>B. Loan program
The 6 Essential Pieces of a Loan Application Are:
1. Borrower's Name
2. SSN
3. Monthly Income
4. Address of the Property
5. Estimated Value of Property
6. Loan Amount
A lender may not charge for the preparation of any documents required in a federally-
regulated mortgage loan transaction, based on provisions of the:
A. Truth-in-Lending Act
B. Home Ownership and Equity Protection Act
C. Real Estate Settlement Procedures Act
D. Fair Lending Act >>>C. Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act provides that no fee can be charged by a
lender for the preparation and distribution of documents required in connection with the
making of a federally-related mortgage loan. These documents include, but are not
limited to, the Closing Disclosure, escrow account statements or statements required by
the Truth-in-Lending Act.
A borrower receives a document which contains a list of all closing costs, a disclosure of
the borrower credits received on the transaction, an estimate of the cash the borrower
needs to bring in to closing, and the sales price. Which of the following best identifies
this document?
A. Loan Closure
B. Closing Disclosure
C. Itemization of Amount Financed
D. Loan Estimate >>>D. Loan Estimate
The Loan Estimate provides an "estimate" only of closing costs. The Closing Disclosure
sets forth the" actual" costs of the subject mortgage lending transaction in a clear and
understandable manner.
,Which of the following would not be considered a settlement service as defined by
RESPA?
A. Real estate brokerage services
B. Title insurance services
C. Appraisal services
D. Loan modification services >>>D. Loan modification services
Settlement service fees are charges incurred in the mortgage loan origination process.
They include:
Real estate brokerage services,
Title fees, appraisal costs,
Credit report fees, and costs related to the settlement, or closing, of the loan.
Which of the following would most likely not be considered a federally-related mortgage
loan as defined by RESPA?
A. Hard money, privately-placed loan
B. Subprime loan
C. FHA loan
D. Conventional loan >>>A. Hard money, privately-placed loan
The answer is hard money, privately-placed loan. Federally-related mortgage loans
include FHA, VA, or other government-sponsored loans and most conventional loans,
purchase loans, assumptions, refinances, and reverse mortgages, and subordinate lien
loans. A private mortgage loan would not be considered a federally-related mortgage
loan.
Which of the following is NOT true about an Affiliated Business Arrangement Disclosure
Statement?
A. It must be provided to the prospective borrower at or before the time a third-party
service provider referral is made
B. It must specify the nature of any relationship between a settlement service provider
and the referring licensee
C. The disclosure may be provided instead of the list of third-party service providers
from which the borrower can shop for services
D. A person that has a 2% interest in a settlement service provider to which the person
is referring a borrower has an affiliated business arrangement with the referred-to entity
>>>C. The disclosure may be provided instead of the list of third-party service providers
from which the borrower can shop for services
, An affiliated business arrangement is an arrangement in which a person is in a position
to refer real estate settlement service business for a federally-related mortgage loan
and has either an affiliate relationship with, or a direct or beneficial ownership interest of
more than 1% in, a provider of settlement services and refers business to, or influences
the selection of, that provider.
According to RESPA, when would fee splitting be allowed?
A. Never
B. If all parties are licensed
C. If all parties render a service
D. If all parties are employed by different companies >>>C. If all parties render a service
A settlement service provider may charge a borrower a fee only for work performed.
RESPA and Regulation X prohibit fee-splitting and receiving unearned fees for services
not actually performed.
The rule dealing with the accurate disclosure of the cost and terms of credit is:
A. Regulation X
B. Regulation Z
C. Regulation C
D. Regulation Y >>>B. Regulation Z
The answer is Regulation Z. Regulation Z implements the Truth-in-Lending Act and
provides rules requiring the disclosure of material information related to the terms and
costs of a specific mortgage loan.
Qualified and Non-Qualified Mortgage Programs >>>Section 2
Which of the following refers to the amount that the government will guarantee to repay
a lender of a VA loan in the case of borrower default?
A. Guarantee amount
B. Entitlement
C. Insured amount
D. Funding fee limit >>>B. Entitlement
While the VA does not have a maximum loan amount, it does limit the amount that it
can guarantee to repay a lender in the event of borrower default. The amount that the
government will guarantee to a lender is known as a veteran's entitlement.
In general, the government will guarantee to the lender the lesser of 25% of the loan
balance or 25% of the Freddie Mac limit.
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