National And UST Mortgage Practice
Exam 2 Questions And Answers With
Verified Solutions 100% Correct!!!
Under RESPA, the servicer may require a borrower to pay into an escrow account
to cover disbursements that are unanticipated or disbursements made before the
borrower's monthly payments are available in the account, a cushion or reserve that
must be no greater than _____ of the estimated total annual disbursements from the
escrow account. - ANSWER✔✔ The answer is one sixth.
Under RESPA, a lender may require the borrower to establish an escrow account at
closing. The loan servicer may require a borrower to pay into the account to cover
disbursements that are unanticipated or disbursements made before the borrower's
monthly payments are available in the account. This is the escrow cushion or
reserve, which must be no greater than one sixth of the estimated total annual
disbursements from the escrow account.
Stan has been in his house for 15 years and built up $100,000 in equity. He decides
to do some remodeling and pay off some bills, and he wants to use a closed-end
home equity loan to pay for it. He meets with Lending Guys and, because he has a
great credit history, gets loan approval right away. Two weeks later he signs the
documents. Which of the following is true? - ANSWER✔✔ The answer is Stan
may rescind the loan within 3 business days of consummation.
A borrower refinancing a primary dwelling with an open or closed end loan may
cancel (rescind) the loan within 3 business days following closing. This right does
not extend to the entire term. A borrower is NOT required to complete
homeownership counseling unless the loan is a high-cost home loan.
For which of the following reasons would it be permissible to refuse to take an
application from a potential borrower? - ANSWER✔✔ The answer is the applicant
has alluded to the fact that he is submitting false documents in order to qualify for
a larger loan.
,A loan originator should not be an accessory to fraud by taking an application
based on what he knows or strongly suspects to be fraudulent information. In all
other cases, credit decisions should be left to the lender and/or its underwriting
department, and should never be based on discriminatory factors or personal
whims (not "clicking" with the applicant or denying access to credit based on
neighborhood).
Which of the following is true regarding APR tolerance levels? - ANSWER✔✔
The answer is The APR is considered accurate if it is not more than one eighth of
one percentage point (.125%) above or below the APR determined in accordance
with legal requirements.
The APR is considered accurate generally, if it is not more than one eighth of one
percentage point (.125%) above or below the APR determined in accordance with
legal requirements (i.e., in accordance with the actuarial method or the United
States Rule method); and in an irregular transaction, if it is not more than one
quarter of one percentage point (.25%) above or below the annual percentage rate
determined in accordance with legal requirements.
Mortgage insurance insures against losses incurred as a result of: - ANSWER✔✔
The answer is foreclosure.
Private mortgage insurance (PMI) is an insurance policy issued to provide
protection to the mortgage lender in the event of financial loss due to a borrower's
default that results in foreclosure. In the event of a foreclosure, the insurance
company will either purchase the loan or let the lender foreclose and pay the lender
for its losses up to the face amount of the policy.
A "straw buyer" is: - ANSWER✔✔ The answer is a buyer who accepts a fee for
the use of his or her Social Security Number and other personal information on a
mortgage application.
A straw buyer is a person who purchases the property or applies for the loan in his
or her own name for the actual borrower and is typically paid for the use of his or
her personally identifying information.
,Under the Fair Housing Act: - ANSWER✔✔ The answer is charging different fees
based on race is prohibited.
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of
any residential housing based on race, color, religion, national origin, sex, familial
status, or mental or physical handicap, and therefore, prohibits charging different
fees based on race. Residency status is not a protected category under the Fair
Housing Act. Disclosure requirements are not imposed by the Fair Housing Act.
Government reporting requirements are covered under the Home Mortgage
Disclosure Act (HMDA).
This term refers to the practice of adjusting certain types of non-taxable income
during underwriting. - ANSWER✔✔ The answer is grossing up.
Certain types of income may be grossed-up during underwriting. Underwriters may
gross-up Social Security income, child support, and some other forms of income,
subject to limitations based on product type and other guidelines.
Which federal law requires individuals to pass a written exam in order to obtain a
mortgage loan originator license? - ANSWER✔✔ The answer is Secure and Fair
Enforcement for Mortgage Licensing Act.
Under the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE
Act), an applicant for a mortgage loan originator license must pass a written
national test developed by the NMLS and administered by an approved test
provider that covers ethics, federal and state law, and regulations pertaining to
mortgage origination, fraud, consumer protection, the nontraditional mortgage
marketplace, and fair lending issues. To pass, the individual must achieve a test
score of at least 75%.
For an FHA loan that requires MIP, the annual mortgage insurance premium
(payable monthly as part of the mortgage payment), is based on all of the
following, except: - ANSWER✔✔ The answer is state in which the subject
property is located.
, The FHA funds insurance from a mortgage insurance premium (MIP) charged to
the borrower. Most FHA mortgages require payment of an upfront mortgage
insurance premium (UFMIP). The UFMIP is nonrefundable (except to the extent
that a portion may be applied to the UFMIP of another FHA-insured mortgage
within three years). In addition, most FHA loans require payment of an annual
mortgage insurance premium, payable monthly as part of the mortgage payment.
This premium is based on the loan program, the loan term, and the loan-to-value
(LTV) ratio.
Applicants for FHA loans must meet a back end ratio of: - ANSWER✔✔ The
answer is 43%.
In general, applicants for FHA loans must meet a back end ratio limitation of 43%.
Supervisory authority afforded to state agencies over the mortgage industry allows
them to impose all of the following sanctions, except: - ANSWER✔✔ The answer
is assess jail time for fraudulent activities. Under the SAFE Act, the authority of
state agencies allows them to impose sanctions including suspending, revoking, or
refusing to renew a license in response to violations; ordering restitution and
imposing fines; and issuing orders or directives, including ordering or directing
licensees to cease and desist from conducting business, including immediate
temporary orders to cease and desist. The agencies are not authorized to assess jail
time to licensees for any reason.
According to the S.A.F.E. Act, all of the following are nontraditional loan
products, except: - ANSWER✔✔ The answer is interest-only 30-year mortgage
loans.
The S.A.F.E. Act defines a nontraditional loan as any loan product other than a 30-
year fixed mortgage. All ARMs have rates that are adjustable. A reverse mortgage
does not have a 30-year loan term and may have either a fixed rate or adjustable
rate of interest. An interest-only loan is considered a traditional loan under the
S.A.F.E. Act definition if it has a fixed rate and a 30-year term, even though the
period of interest-only payments would be only five, 10, or 15 years. High-risk
loans that might still be considered "traditional" under the S.A.F.E. Act include
