Questions and Answers
In addition to the 20-hour course, it is suggested to spend an extra 40-60 hours studying all the content before taking the exam.
True
The Federal Reserve System was created in 1913.
True
Prior to the federal government passing the SAFE Act in 2008, all states required MLOs to be licensed.
False
A person who has worked at a bank giving loans could be considered a mortgage loan originator.
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A loan processor and underwriter must be licensed if they are independent contractors.
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Mortgage brokers usually do not fund their own loans.
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The three secondary market players are FNMA, FHLMC, and HMDA.
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Regulatory authorities have the authority to investigate, impose penalties, provide supervision, or a combination of all three.
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To be a licensed MLO, you must apply for a state and national license.
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Your pre-licensing education requires 3 hours of federal law, 2 hours of ethics, 2 hours of non-traditional mortgage products, and 12 hours of electives.
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The national test component with the uniform state content will test your knowledge on the following five topics: federal laws and regulations, ethics, general mortgage knowledge, math, and customer service essentials.
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If you fail the national test 3 times, you must wait 6 months to retake the test.
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The national test contains 120 questions, and 10 of those are unscored.
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You will pay a non-refundable application fee; the cost of the fee varies by state.
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Having your license revoked in another state is not a reason the state could deny your license.
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Once you have your license, it must be renewed every year by December 31st or sooner.
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If you forget to renew your license, there is a reinstatement period in some states, and you can do late continuing education.
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Filling out your MU4 is a one-time requirement and won't be updated again throughout the course of your career.
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If you want to be licensed in multiple states, it is important to discover each state's initial licensing, fees, pre-licensing education, requirements, renewal fees, continuing education requirements, and one other important thing about initial licensing and continuing licensure in each state.
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If you can't help a borrower find a loan, charging a fee for best efforts isn't considered prohibited conduct.
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Every state has their own requirements related to disciplinary action.
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If you have violated a cease and desist order, the maximum penalty for each act or omission is $25,000.
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How many hours of pre-licensing education is an individual required to take per the SAFE Act?
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What action can the commissioner not take?
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What actions can a commissioner take?
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All states require at least ____ hours of continuing education each year in order to renew an MLO license.
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What situation would an MLO license be required?
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What situation would an MLO license not be required?
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How many scored questions are on the UST test?
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The two most common types of mortgages are fixed rate and adjustable rate mortgages.
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An adjustable rate mortgage (ARM) is one where the interest rate periodically changes over the life of the loan.
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The three types of interest rate caps on ARMs are called the first adjustment, subsequent adjustment, and last adjustment.
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Meaning of an ARM interest rate caps of 3/2/8?
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The first number in an ARM represents the amount the interest rate can increase or decrease over the life of the loan.
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Hybrid ARMs are a blend of fixed rate and adjustable loans.
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What is a periodic interest rate?
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The periodic interest rate is the annual rate divided by the number of compounding periods.
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Construction loans are usually 65% loan to value (LTV), so borrowers will need to have a 35% down payment.
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Bridge loans are also called cross-collateral loans.
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Graduated payment mortgages (GPM) have a high initial payment that gradually lowers over time.
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A conventional loan can only be a conforming loan.
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What is debt to income ratio?
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Debt to income is a calculation to determine whether the borrower can repay the loan they are attempting to receive.
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To determine the borrower's LTV, you take the loan amount and multiply it by either the purchase price or the property's appraised value, whichever is lower.
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As of 2022, what is the conventional loan limit for the contiguous United States? What is the loan limit for high cost areas?
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Borrowers must always have at least a 20% down payment to buy a home.
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Private mortgage insurance (PMI) is insurance for conventional loans that protects the borrower from loss.
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The Department of Housing and Urban Development (HUD) ensures the Federal Housing Administration (FHA) loans.
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FHA guidelines say it is acceptable for borrowers to have defaulted on their student loans and that in this case they are still eligible for an FHA loan.
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FHA loans require two types of insurance: UFMIP and annual mortgage insurance.
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An appraisal may not always be required with a streamline mortgage.
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To qualify for a HECM, a borrower must be 62 years of age or older.
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VA loans are unavailable for the veteran's surviving spouse.
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VA loans can be assumable.
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The funding fee for a VA loan is higher on the first usage than on subsequent uses when a borrower pays less than 5% in a down payment.
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What is a VA IRRRL, or VA Interest Rate Reduction Refinance Loan?
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The funding fees on an IRRRL is 0.50%.
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USDA loans are available in rural areas with less than 35,000 people.
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What is a jumbo loan?
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A jumbo loan is a single-family loan that exceeds Fannie Mae and Freddie Mac's loan limits.
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If a veteran is looking to obtain a mortgage, you only need to show them VA loans.
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An ARM could be a possible choice for a veteran who is having financial difficulties.
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A reverse mortgage might be a good choice for a borrower who has someone who will want to inherit their home.
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A 30-year mortgage is a great option for a borrower who wants lower payments so they have money to save.
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____ is required on all conventional loans when the borrower's down payment or equity is less than 20%.
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If the index is two percent and the margin is two and a half percent, then the fully indexed rate is ____.
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What is the LTV of a home that was appraised at $100,000 if the homeowners took out a mortgage for $80,000?
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How much should a borrower pay for two discount points on a $150,000 mortgage?
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What is untrue about reverse mortgages?
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What is true about reverse mortgages?
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What program requires verification of 41% residual income?
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What program allows assumption and requires UFMIP?
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Study Notes
Course Preparation and Requirements
- Recommended preparation includes 40-60 hours of studying in addition to the mandatory 20-hour course before taking the exam.
- A total of 20 hours of pre-licensing education is required for aspiring Mortgage Loan Originators (MLOs) as per the SAFE Act.
- A non-refundable application fee is necessary, varying by state for MLO licensing.
Licensing Information
- As of 2008, not all states required MLOs to be licensed prior to the SAFE Act implementation.
- Independent contractors acting as loan processors and underwriters must be licensed.
- MLOs must apply for both a state and national license.
- Failing the national test three times necessitates a 6-month waiting period before retaking.
Testing and Exam Details
- The national test consists of 120 questions, with 10 questions not being scored.
- The test assesses knowledge on federal laws, ethics, mortgage knowledge, mathematics, and customer service essentials.
Continuing Education and License Renewal
- All states require MLOs to complete at least 8 hours of continuing education annually for license renewal.
- Licenses must be renewed every year by December 31st, with possibilities for reinstatement in case of lapses.
Ethical Practices and Regulatory Authority
- Regulatory authorities can investigate, impose penalties, and supervise conduct within the mortgage industry.
- It is important for states to establish their own disciplinary action requirements which may differ.
Mortgage Types and Regulations
- The two primary mortgage types are fixed-rate and adjustable-rate mortgages (ARMs), with ARMs having periodically changing interest rates.
- The interest rate caps for ARMs are defined as: the first adjustment, subsequent adjustment, and lifetime adjustment.
Loan Specifications and Requirements
- The Debt-to-Income (DTI) ratio is crucial for determining a borrower's ability to repay a loan.
- For conventional loans, when down payments are less than 20%, Private Mortgage Insurance (PMI) is mandatory.
- Conventional loan limits as of 2022 are $647,200 for contiguous areas and $970,800 for high-cost areas.
FHA and VA Loans
- FHA loans, overseen by HUD, require two types of insurance: Upfront Mortgage Insurance Premium (UFMIP) and annual mortgage insurance.
- VA loans are generally assumable and available to veterans' surviving spouses, with funding fees applicable for low down payment scenarios.
Special Loan Programs
- USDA loans cater to rural areas and have specific income caps and requirements.
- A jumbo loan exceeds conventional loan limits set by Fannie Mae and Freddie Mac.
- Reverse mortgages have specific criteria, including borrower age and maintenance of the property.
Miscellaneous Facts
- If a loan index is 2% and the margin is 2.5%, the fully indexed rate will be 4.5%.
- Borrowers must pay property taxes and maintain the property for reverse mortgages.
- GPMs feature a high initial payment that lowers over time, contrary to the notion that they start low and increase.
These notes provide a comprehensive overview of essential concepts, definitions, and regulations within the mortgage education and compliance framework, suitable for exam preparation.
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Test your knowledge on mortgage education with these flashcards focused on compliance, the SAFE Act, and the Federal Reserve System. Perfect for those preparing for the mortgage licensing exam. Enhance your study session with essential true or false questions.
