ethics
A loan originator is discussing the features of a home equity consolidation loan with an applicant. In doing so, he relays to the applicant that the interest on the loan is tax deductible. This is:
D.
The answer is not permissible, as the loan originator is not qualified to provide tax advice. From an ethical and legal standpoint, loan originators must take care not to provide borrowers advice on topics for which they lack the required qualifications, such as tax advice and other legal matters.
According to the standard deed of trust, how soon must a borrower on an owner-occupied loan occupy the property?
c.
The answer is within 60 days of closing. Under most deeds of trust, including most FHA and VA loans, a borrower who intends to occupy the property as his/her residence must move in within 60 days after closing.
Which of the following situations would be acceptable under RESPA?
C.
The answer is a mortgage loan originator refers all borrowers to use the title company which is located in the same building as the mortgage loan originator, but with which the mortgage loan originator or the mortgage loan originator's company has no other relationship. An affiliate relationship exists when one company controls, is controlled by, or is under common control of another company. Under RESPA, when a settlement service provider refers a borrower to one or more affiliates with whom it has an ownership or other beneficial interest, an Affiliated Business Arrangement (AfBA) Disclosure Statement must be given on a separate piece of paper to the borrower. Among other things, the AfBA Disclosure informs the borrower that he/she is generally not required to use the affiliate and is free to shop for other providers. Kickbacks and referral fees are also prohibited under RESPA.
Under the S.A.F.E. Act, a licensed loan originator's responsibilities with regard to recordkeeping include all of the following, except:
B.
The answer is making all of the licensee's records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand.
Mortgage interest rates are influenced by all of the following, except:
B.
The answer is regional property tax rates. Interest rates on long-term debt instruments, such as residential mortgages, are influenced by changes in such economic indicators as the gross domestic product (GDP), which measures the amount of goods and services produced in the United States, and the Consumer Price Index (CPI), which measures the average change in prices of consumer goods and services. Features of the economic climate, such as loan fraud, loan payoff rates, and foreclosure rates, will all have an impact on interest rates. Rates are also affected by actions taken by the Federal Reserve (the Fed), which controls the country's monetary policy, though the Fed does not itself directly set the interest rates that individual lenders will charge borrowers. Each lender will set its own prime rates (i.e., the lowest rates it charges for its best customers), as well as rates for loans to other customers based on its costs and desired profit margin. Regional property tax rates will impact monthly payments, but they do not have a direct relationship with the interest rates set for mortgage loans.
All of the following would be common activities in fraud for housing, except:
A.
The answer is flipping. Asset fraud, income and employment fraud, and silent seconds (in which a borrower secretly borrows needed funds from the seller secured by an undisclosed and unrecorded second mortgage) are all associated with fraud for housing. In contrast, flipping is usually associated with predatory lending, rather than property fraud.
Which of the following would convey a property?
B.
The answer is warranty deed. A warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. In addition to conveying property ownership, a warranty deed contains the promise of clear title, meaning the property is free of encumbrances.
Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and calls the originator that day to let them know it was received and they would like to move forward, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal?
C.
The answer is Wednesday. A consumer may not be charged any fee in connection with a mortgage loan application, except a reasonable and bona fide credit report fee, before receipt of the Loan Estimate and prior to indicating that he or she wishes to proceed with the loan. Once this occurs, there is no additional waiting period before the lender may charge a fee, such as an appraisal fee.
The answer is making all of the licensee's records available to borrowers upon demand. Licensed loan originators and those required to be licensed must make records and books available to their state regulator and permit interviews of officers, principals, employees, independent contractors, agents, and customers. They may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, or other information during an investigation or examination. Loan originators are not required to make all of their records available to borrowers upon demand.
B
The answer is aunt. Despite the broad definition of a mortgage loan originator in the SAFE Act, there are some limited circumstances in which offering or negotiating residential mortgage loan terms would not make an individual a mortgage loan originator. These include an individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member, including a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.
What is Freddie Mac's automated underwriting system called?
C.
The answer is Loan Product Advisor. Freddie Mac's automated underwriting system is called Loan Product Advisor (formerly known as Loan Prospector), while Fannie Mae's is called Desktop Underwriter.
Which of the following is not a required element of a company's safeguard policy, as required by the GLB Act?
D.
The answer is contract with a federally-insured company to destroy documents. Under the GLB Act, a financial institution must have a written information security program that is appropriate to its size and complexity, to the nature and scope of its activities, and to the sensitivity of the customer information it handles. As part of its program, the financial institution must assign one or more employees to oversee the program; conduct a risk assessment; put safeguards in place to control the risks identified in the assessment and regularly test and monitor them; require service providers, by written contract, to protect customers’ personal information; and periodically update its security program. There is no requirement to contract with any external company to handle information security issues of any kind.
For an FHA loan, how much may the seller contribute toward the borrower’s closing costs?
B.
The answer is 6% of the sales price. The FHA allows the seller to contribute up to 6% of the purchase price toward the buyer's actual closing costs, prepaid taxes and insurance, discount points, buydown fees, mortgage insurance premiums, and other financing concessions, but nothing toward the down payment.
Loan originator compensation records must be retained for at least:
A.
The answer is three years. A creditor must maintain, for three years after the date of payment, sufficient records to evidence all compensation it pays to a loan originator, and the compensation agreement that governs those payments.
hich of the following is NOT true about the financial responsibility of a mortgage loan originator?
D.
The answer is a mortgage loan originator must always have his or her own surety bond in an amount that reflects the dollar value of loans originated in the previous year. Each mortgage loan originator must be covered by a surety bond. If he or she is an employee or exclusive agent of a mortgage licensee, the surety bond of the employing licensee may be used to satisfy the loan originator surety bond requirement. The penal sum of the surety bond must reflect the dollar amount of loans originated. If the loan originator’s licensing state has developed and administers a fund specifically to provide protection to consumers by making funds available for claims resulting from violations of state or federal laws and regulations, in lieu of a surety bond or net worth requirement, the state may instead require the loan originator to pay a certain amount into the state fund.
If a borrower's reserve account for taxes and insurance is found to be short or deficient by an amount in excess of one month's worth of deposits, which of the following is true?
B.
The answer is the lender can require the borrower to make up the shortage over the next 12 months. If the escrow account is short by more than 1 month, the lender can choose to do nothing or require repayment of the shortage over a minimum of 12 months.
If an escrow account analysis discloses a shortage of less than one month's escrow account payment, the lender or servicer may allow the shortage to exist and do nothing to change it, require the borrower to repay the shortage amount within 30 days, or require the borrower to repay the shortage amount in 2 or more equal monthly payments.
A misleading representation, omission, act, or practice is considered deceptive when, among other conditions, it is:
D.
The answer is material. A representation, omission, act, or practice is deceptive when it misleads or is likely to mislead the consumer; the consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and the misleading representation, omission, act, or practice is material.
A borrower makes $60,000 per year. The borrower's spouse makes $3,000 per month. The borrowers' monthly housing expense is $1,500. They have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the couple's back-end DTI?
D.
The answer is 29.38%. Monthly Housing Costs + Monthly Liabilities / Gross Monthly Income = Debt-to-Income Ratio. Borrower 1's annual income is $60,000, divided by 12 = $5,000. The spouse's gross monthly income of $3,000 is added to $5,000, for a total monthly income of $8,000. The monthly housing expense ($1,500) is added to the car payment ($500) and the boat payment ($350), totaling $2,350. This figure, divided by $8,000, equals 29.38%. Typical living expenses, such as a phone bill or car insurance, are not included when calculating DTI.
Which of the following is least likely to be considered a proxy for a loan term or condition under the Loan Originator Compensation Rule?
B.
The answer is the state in which the property is located. If a loan originator’s compensation is based in whole or in part on a factor that is not an actual loan term but acts as a proxy for a term of transaction (such as the term and/or rate of the loan determining whether it is held in the lender’s portfolio or sold), the originator’s compensation is based on a term of the transaction and is prohibited. A factor is a proxy if the loan originator has the ability to add, drop or change it when originating the loan. Since the loan originator cannot change the state in which the property is located, it is not likely to be considered a proxy for a loan term or condition.
Homes for All considers itself a nonprofit organization. In order for its employees to be exempt from the licensing requirements of the S.A.F.E. Act, each of the following must be true about Homes, except:
D.
The answer is it may engage in both nonprofit and for-profit activities. The S.A.F.E. Act provides an exemption for the licensing of loan originators that are employees of a bona fide nonprofit organization. This exemption would not apply to any for-profit activities.
On an ARM loan, which of the following will not be found on the note?
A.
The answer is fully-indexed rate after one year. The promissory note is both a promise to repay the money borrowed with interest and evidence of the debt. For an ARM loan, it will typically identify the index, specify the margin, and list adjustment parameters, but will not specify the fully-indexed rate after one year.
Ethics:
B.
The answer is provides a guideline for answering questions when a choice of actions is available. Ethics goes beyond what is required under the law, so ethical rules extend beyond the minimum legal standards in providing guidance for one’s actions. Ethics goes into the realm of what should be done, providing guidelines for answering questions when a choice of actions is available. As a result, ethical rules are often not as clear-cut as the legal rules.
In the Closing Disclosure, which of the following questions is the loan originator required to answer about each of the items in the Loan Terms table?
B.
The answer is “Can this amount increase after closing?” The first table on page 1 of the Closing Disclosure is the Loan Terms table, which lists the same information given in the Loan Estimate’s Loan Terms table (i.e., loan amount, interest rate, the monthly principal and interest, and space to indicate whether the product has a prepayment penalty or balloon payment). This information is updated to reflect the terms that will be in place at consummation, and the loan originator must answer the question “Can this amount increase after closing?” for each item.
Under HOEPA, a high-cost loan may have a balloon payment under all of the following circumstances, EXCEPT:
D.
The answer is the borrower signs a waiver consenting to the balloon payment. A high-cost loan may not provide for a payment schedule with regular periodic payments that result in a balloon payment, unless the payment schedule is adjusted for the irregular or seasonal income of the borrower; the loan is a bridge loan with a term of 12 months or less, taken in connection with the acquisition or construction of a dwelling that will be the borrower’s principal residence; or the loan satisfies the requirements of a balloon payment qualified mortgage.
Question
Information held by the NMLS relating to the employment history or disciplinary actions taken against a mortgage loan originator:
C.
The answer is is not confidential and is available for public access. The requirements under any federal and/or state law regarding the privacy or confidentiality of any information or material provided to the NMLS continue to apply after such information has been disclosed to the NMLS. However, information or material held by the NMLS relating to the employment history and/or disciplinary and enforcement actions taken against a mortgage loan originator, is not protected by confidentiality and is available for public access.
Which of the following statements most accurately describes the term "predominant value"?
B.
The answer is the most common sales price for the neighborhood. In the context of an appraisal, the term “predominant value” refers to the price or price range appearing most frequently in the market area defined by the appraiser in the report, based on comparable sales.