Mortgage Finance Quiz

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Questions and Answers

How many days does a consumer have to dispute inaccurate credit information under the FACTA?

120

30 (correct)

When are the funds disbursed for an owner-occupied residential loan?

Within seven days after the application

After the three business day right of rescission period has expired (correct)

After the loan documents are recorded

At the time of the loan closing

What is not true about the HOEPA required counseling disclosure for federally related high-cost transactions?

The disclosure must be sent 3 days prior to consummation

The disclosure must include 10 housing counselors (correct)

The disclosure is a list of housing counselors

The disclosure must be sent within 3 business days of application

When is it legal for a loan originator to provide a consumer with a copy of their credit report?

When the customer requests it (B) Signup and view all the answers

What is the maximum allowable back-end DTI on a manually underwritten conventional loan?

43% (D) Signup and view all the answers

Angela has a 1/1 ARM with caps of 2/2/8. The initial interest rate is 4% and adjusts annually. The SOFR is currently at 2% and the margin is 1.25%. What would be the interest rate at 6 months?

4% (A) Signup and view all the answers

Which of the following things is not considered when a credit score is calculated?

Your monthly payment on all credit lines (A) Signup and view all the answers

Broker Juan advertises low interest rates and includes the accurate APR. However, when qualified applicants come in, he tells them that the smarter loan for them would be one with a slightly higher rate and more fees. Did Juan do anything wrong?

Yes, this is steering and is a violation of RESPA (D) Signup and view all the answers

What is the industry standard gross percentage adjustment on a residential property appraisal?

20 (C) Signup and view all the answers

What is the conventional mortgage back-end DTI ratio on a manually underwritten loan?

36% (D) Signup and view all the answers

What is it called when borrowers pay a fee to get a lower interest rate to start, but the interest rate will raise to the quoted fixed rate over time?

A buydown (B) Signup and view all the answers

What is the buyer's proration amount if the rent of $1800 was paid for the month of June on the 1st?

$300 (B) Signup and view all the answers

HMDA was created to help eliminate which of the following practices?

Redlining (A) Signup and view all the answers

TRID requires a borrower to:

Provide verifying documentation before an LE can be sent out (B) Signup and view all the answers

Which of the following is NOT a requirement under HOEPA, the Home Ownership and Equity Protection Act?

The APR must be disclosed on all advertisements (A) Signup and view all the answers

With an ARM, what happens to a borrower's payments if the index increases?

Payments go up (C) Signup and view all the answers

A creditor did not make a reasonable and good faith determination of repayment ability when originating a mortgage. What rule would be violated in this instance?

ATR Rule (C) Signup and view all the answers

What does a QM designation provide the lender with?

Safe Harbor (A) Signup and view all the answers

Which of the following information MUST be disclosed on an advertisement containing a trigger term?

The origination fee on the loan (C) Signup and view all the answers

If an advertisement lists a finance charge, what other must be disclosed on the advertisement?

Both the APR and the interest rate. (C) Signup and view all the answers

How many copies of Notice of the Right to Rescind are required to be provided to borrowers?

2 copies to all borrowers of the loan (A) Signup and view all the answers

According to RESPA, how long does a servicer have to disclose an initial escrow account statement?

30 calendar days from settlement (C) Signup and view all the answers

Which scenario would require a person to be licensed as an MLO?

A mortgage broker negotiates the terms of a mortgage loan with a lending institution. (C) Signup and view all the answers

A mortgage advertisement contains a trigger term but fails to disclose the APR. What could be the consequence for the lender?

The advertisement may be deemed misleading, potentially subjecting the lender to legal ramifications. (A) Signup and view all the answers

Which of the following activities, according to ECOA, would be considered a prohibited act?

Responding to a borrower's inquiry about a prequalified offer, gathering detailed identifying information or loan application information on behalf of a lender (B) Signup and view all the answers

Under ECOA, when must a borrower be provided with a copy of the appraisal?

At settlement (B) Signup and view all the answers

When reviewing a borrower's credit report, how far back do underwriters typically look at credit inquiries?

12 months (C) Signup and view all the answers

Which of the following costs is NOT exempt from the Zero and 10% Tolerance disclosure requirements under TRID?

Discount Points (B) Signup and view all the answers

Which statement about the VOE (Verification of Employment) is NOT true?

It can be sent electronically to the borrower to be presented to the lender. (C) Signup and view all the answers

Which of the following is NOT a permissible action by a State Regulatory Authority?

Requiring community service (A) Signup and view all the answers

Business income derived from a sole proprietorship is calculated using which tax form?

Schedule C (A) Signup and view all the answers

Which of the following questions is considered prohibited by the CFPB during a loan application?

Asking a woman her capability to bear children (A), Asking about birth control practices (D) Signup and view all the answers

Which of the following is NOT a Federal Banking Agency?

The Director of the Office of Credit Compliance (C) Signup and view all the answers

Which rule specifically pertains to the prevention of using forged or stolen documents to obtain customer information from a financial institution?

The Pretexting Rule (B) Signup and view all the answers

Which federal law requires lenders to provide housing counseling disclosures to borrowers?

Real Estate Settlement Procedures Act (C) Signup and view all the answers

What is the primary role of government-sponsored enterprises (GSEs) in mortgage lending?

Standardizing and structuring conforming guidelines to increase mortgage investor cash flow to the market (D) Signup and view all the answers

What is the percentage of APR tolerance allowed by TILA for a regular transaction?

0.25% (D) Signup and view all the answers

A misleading act or practice is considered _______ when it cannot be reasonably avoided by consumers.

Abusive (C) Signup and view all the answers

What does the Negative Option ARM recast feature do?

Caps the adjustments to reduce payment shock (A) Signup and view all the answers

What entity is responsible for handling mortgage loan collections and foreclosure issues?

Servicer (A) Signup and view all the answers

How long does MLO Jones have to notify Natasha of an adverse action if she does not accept the counteroffer?

60 calendar days (D) Signup and view all the answers

What is Safe Harbor called when a QM loan is not considered a higher-priced mortgage?

Presumption of Compliance (A) Signup and view all the answers

The daily interest for the borrower’s loan is $17.44. They close on the 15th of the month, and there are 15 days before the 1st of the next month. How much prepaid interest do they have to pay?

$279.04 (D) Signup and view all the answers

What source of down payment is NOT acceptable for Federal Housing Administration (FHA) financing?

Unsourced funds (B) Signup and view all the answers

Which is considered a change of circumstance that allows a revised Loan Estimate?

Addition of flood insurance that does not cause a program or product change (C) Signup and view all the answers

When a veteran does not have sufficient tradelines on his credit report, what can be used to establish credit history?

Alternative credit references (C) Signup and view all the answers

Which is NOT a key point when a mortgage lender reviews the borrower's source of funds to close?

Is the financial institution federally insured? (B) Signup and view all the answers

According to the Home Mortgage Disclosure Act, when a lender treats applicants differently based on one or more of the ECOA prohibited factors, it's called...

Disparate treatment (D) Signup and view all the answers

Study Notes

Test 1

According to the Qualified Mortgage Rule, the maximum percentage limit on the total obligation DTI ratio for a general qualified mortgage is 28%.
Under ECOA, lenders are required to provide a reason for denial within 30 days.
A fraud scheme that includes a "get rich quick" real estate seminar is often called illegal property flipping.
Mortgage loan originator applications may be denied due to revoked licenses, felony convictions (5 years prior), foreclosure on credit reports (4 years prior), or seriously delinquent accounts (3 years prior).
The federal Fair Credit Reporting Act (FCRA) aims to improve consumer access to credit information.
Consumers are entitled to a free copy of their credit score annually, according to FACTA.
The right of rescission is available on owner-occupied refinance transactions. Borrowers have 4 days to rescind after receiving two copies of the notice.
A lender's policy that only allows certain age ranges to take loans larger than $400,000 could be considered disparate impact.

Test 2

An attorney who also provides multiple settlement services violates RESPA. Similarly, an employee earning referral fees for employment. A real estate broker is exempt, however.
An MLO leasing office space in a real estate office at a price above market rate is in violation.
A buyer who paid June rent on June 1st, with a closing date on June 25th, requires a proration calculation for June rent. The amount is $210.
HMDA was created to help eliminate redlining.
Disciplinary actions requiring "Yes" responses to MU4R disclosure questions require detailed explanations of the disciplinary action type, documentation, and the authority that took the disciplinary action.

Test 3

The industry standard for gross percentage adjustment on residential property appraisals is 10%.
A buydown is when borrowers pay a fee to get a low interest rate initially then the interest will raise in time to the quoted fixed rate.
Omar doesn't have a right to rescind a purchase loan transaction.
A borrower experiencing a Chapter 13 bankruptcy can repurchase a property 5 years after the credit discharge date.
A cooling-off period for a HOEPA loan is three business days prior to closing.
The FACTA allows a consumer to dispute inaccurate credit information within 60 days,
Questions about childbearing intentions are prohibited when obtaining a loan.
The person who receives the year-end summary of income from the business is called the servicer.
The most important factor when qualifying income for a sole proprietor borrower is Schedule C net income.
According to FHA underwriting procedures, after the Great Recession, a borrower can repurchase a home after a foreclosure in 3 years from the deed transfer date.

Test 4

A divorce can be viewed as a factor to question based on visual evidence in a loan application.
If a borrower with a 95% LTV increases their down payment to 90%, the PMI will decrease.
The cooling off period for a HOEPA loan is three business days after the closing.
A borrower with a Chapter 13 bankruptcy needs a 5-year waiting period before repurchasing a home.
MLO Josh is required to disclose housing counseling services within 3 business days of a federally related, high-cost transaction application.
The back-end DTI on a manually underwritten conventional loan cannot exceed 43%.
The interest rate for a 1/1 ARM with caps of 2/2/8 with a 1.25% margin, and current SOFR at 2%, is 6%.
Credit score calculation factors include payment history, amounts owed, credit mix, and your monthly payments; not daily payments to all entities.

Test 5

A lender can legally provide a copy of the borrower's credit report when requested by the borrower.
The back-end DTI on a manually underwritten conventional loan cannot exceed 45%.
The consumer's date of ownership is the date the deed of trust is recorded.
Asking borrower questions about divorce is permissible if there is divorce documentation in the loan file.
The process to disclose an initial escrow account statement needs to happen 15 calendar days from settlement.
An MLO is required to assist a family member who is explaining the application by providing information on where to provide the particular borrower information.
A copy of the appraisal needs to be provided to the borrower within 3 business days prior to the settlement.
In cases involving creditor credit inquiries, the information is reported within 12 months.
A TRID violation includes disclosing Zero and 10% Tolerance costs on the LE, except for escrows, realtors fees, and discount points.

Test 6

A cease and desist order is a possible acceptable action by the State Regulatory Authority.
Business income and expenses are calculated using Schedule C for sole proprietorships.
The Dodd-Frank Act includes a Reform Guide to clarify steering and compensation issues that occur in the mortgage loan process.
A FHA transaction for a new purchase, that requires appraisal, has a funding fee of 1.5%.
The closing costs, as calculated in this example, are $180,200.
A misleading act or practice is considered an unfair act when the consumer's interpretation of the representation is considered reasonable.
The fair and accurate credit transaction act requires mandatory disclosure of negative information from a consumer to the consumer within 60 days..

Test 7

Victor cannot ask Jennifer if she's married if she doesn't mention a spouse.
An acceptable source of funds to cover mortgage reserves would be vested cash or cash value life insurance.
MLOs have 60 calendar days to notify borrowers of an adverse action when the borrower does not accept a counteroffer.
The daily prepaid interest for a borrower is $17.44 when a borrower closes Friday the 15th and the next month start on Monday the 15th.
Funds that are used for a down payment on an FHA loan must be from an acceptable source, like a gift, cash, or sweat equity.
A change in a borrower's credit report or monthly income would not be an acceptable reason for the Loan Estimate to be revised when a borrower adds a co-borrower or addition to the loan application.
A mortgage lender may consider the borrower's past residence if it meets the requirements.
A lender who fails to disclose a material aspect of a loan is liable for an alleged unfair or unreasonable practice.

Test 8

A new mortgage loan originator needs 10 hours of pre-licensing education.
The Home Mortgage Disclosure Act term for treating applicants differently based on prohibited factors is 'disparate treatment'.
Federal law requires annual (yearly) training on the Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) for all lender employees.
Under TILA, a lender is considered to have made a regular offer if it regularly extends credit in the preceding calendar year (at least 25 times).
The Dodd-Frank Act includes clarifying provisions for steering and originator compensation practices.
The Unique Identifier disclosure is not required for test enrollment.
If false information is present on the borrower credit application, the underwriter is the one responsible for the decision.
The NMLS licensing requires past employment history with no gap for a period of 5 years.
NMLS licensing requires 7 consecutive years past employment history to ensure gap-free employment.

General

A pre-licensing education is required to obtain a mortgage loan originator license.
The Home Mortgage Disclosure Act (HMDA) identifies discriminatory practices when a lender provides different treatment for borrowers based on prohibited factors.
Federal law requiring yearly training on the Bank Secrecy Act/Anti-Money Laundering Act for lender employees.
A lender is seen as regularly offering credit under TILA if it extends more than 15 loans in the preceding 12 months.
The Dodd-Frank Wall Street Reform and Consumer Protection Act.

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Description

Test your knowledge on key concepts in mortgage finance including consumer rights under FACTA, loan origination, credit scoring, and the specifics of loan products. This quiz will challenge your understanding of important regulations and practices in the industry.