NMLS SAFE EXAM NEW COMPLETE SOLUTION UPDATE 2022
Primary Mortgage Market - Where credit institutions originate loans
C. The maximum the rate can increase over the life of the loan - When an ARM has rate caps of
5/2/6, the 6 refers to what?
A. The maximum rate increase at the initial adjustment
B. The start rate for the loan
C. The maximum the rate can increase over the life of the loan
D. The rate maximum the rate can decrease over the life of the loan
B. The borrower qualified at the buydown rate - When utilizing a temporary buydown to lower
the interest rate on a FHA loan, which of the following are correct
A. The borrower qualified at the note rate
B. The borrower qualified at the buydown rate
C. The rate cannot be more than 2% below the note rate
D. Seller or builder can pay the discount points to buydown the rate
A. Age - All of the following are violations of the Fair Housing Act EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion
Encrumbrance - Claim against property held by one who is not the legal owner
Trigger Term - Advertised term that requires additional disclosures
Advertising Disclosure - An advertisement must be presented "clearly and conspicuously" to
keep from being deceptive, unfair, or otherwise violate a Commission rule
Waving Right of Rescission - Extenuating circumstances such as "bona fide personal financial
emergency
Right of Rescission - Right that borrowers have to cancel a loan or line of credit with a lender
within three days of closing
Business Day - When creditors office is open to the public, a calendar working day except
Sunday or a federal holiday
Application - Financial information used for purposes of obtaining an extension of credit
Disclosure - The act of making new information known
FTC
Federal Trade Commission - Mission is to promote consumer protection and eliminate and
prevent anticompetitive business practices
,CFPB
Consumer Financial Protection Bureau - Regulatory agency charged with overseeing financial
products and services offered to consumers
TILA
Truth in Lending Act - Enacted 1968 promotes the informed use of consumer credit by
requiring disclosures about terms and costs and standardizes the manner in which costs with
borrowing are calculated and disclosed
Per Diem Interest - Interest charged on a loan for one or more days
Annual Interest Rate Formula - Principal (X) Interest Rate = Annual Interest Rate
Interest Only Mortgage - Mortgage where the mortgagor is only required to pay off the
interest that arises from the principal that is borrowed for a set period
Permanent Buydown - Borrower chooses to pay additional "discount points" to buy down the
interest rate for the life of the mortgage note
2/1 Buydown - Used on fixed rate loans over two years
Set of two initial temporary-start interest rates that increase in stair-step fashion until a
permanent interest rate is reached
Discount Point - A form of pre-paid interest which effectively increases the yield on the loan
above the amount of the stated interest rate
CLTV
Combined Loan to Value - An amount in addition to the Loan to Value, which simply
represents the first position mortgage or loan as a percentage of the property's value
LTV
Loan to Value - Ratio of a loan to the value of an asset purchased
PITI - Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment
DIF - Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
Forbearance - Agreement between the lender and the borrower to delay foreclosure
Loan Modification - A permanent restructuring of the mortgage where one or more of the
terms of a borrower's loan are changed to provide a more affordable payment
Foreclosure - Legal process to collect debt on mortgaged property
,Satisfaction of Mortgage Letter - Document generated and signed by a mortgage lender,
acknowledging that the borrower has paid off the mortgage loan in full and the mortgage is not
a lien on the property
Subordination Agreement - When two mortgages are on a property, this specifies which
mortgage takes precedence
Payoff Statement - Provides homeowner proof the mortgage is paid off
Constructive Note - Legal presumption that anything recorded in a public record can be known
by anyone
Actual Note - Direct knowledge that one has of the property
Inquiry Note - Information that should compel a reasonable person to make further inquiries
about some aspect of the property
Title Record - Serves as a central repository of information about a parcel of land
SRP
Service Release Premiums - Payment received by lender after selling a loan Based on market
value
GNMA
Government National Mortgage Association - Created in 1968, goal to expand affordable
housing under HUD
FNMA
Federal National Mortgage Association - Created 1968 works with Fannie Mae to increase
affordable lending
FHA
Federal Housing Administration - Insures banks real estate loans and charges borrowers a
small premium
HELOC
Home Equity Line of Credit - A loan in which the lender agrees to lend a maximum amount
within an agreed period
and is also an open-ended mortgage transaction that is secured
HECM
Home Equity Conversion Mortgage - A FHA insured reverse mortgage that allows the
conversion of equity in a home to cash
Balloon Mortgage - A mortgage in which a large portion of the borrowed principal is repaid in
a single payment at the end of the loan period and does not amortize
ARM Interest Rate Adjustment - Margin + Interset = Rate
, COFI
Cost of Fund Index - Regional average of interest expenses incurred by financial institutions
which in turn is used as a base for calculating variable rate loans
ARM
Adjustable Rate Mortgage - Loan that is lower than fixed rate in beginning
Loan payment changes over time
Adjustable caps that vary
Used to obtain a higher loan amount
Fixed Rate - Interest rate that remains the same over the life of the loan
Non-Conforming Loan - Does not meet Freddie Mac or Fannie Mae guidelines
Conforming Loan - Conforms to terms and conditions set by government
Conventional Loan - Not guaranteed or insured by the government but can still follow federal
guidelines
Acceleration Clause - Accelerated loan repayment if property is in default
Exculpatory Clause - Relieves one party form liability due to actions of another party
Defeasance Clause - Creditor can obtain title without foreclosure process
Late Payement Penalty - When fees are attached to late payment
Pre-Payment Penalty - Fixed sum added to loan if loan is paid off early
Contract of Deed - Complete financing and sales contract agreed upon by seller and seller with
no note attached
Note - Promise to repay debt
Mortgage - Pledge of collateral to secure a loan
Reconveyance - A document issued by a mortgage holder indicating that the borrower is
released from the mortgage debt and transfers the property title from the lender
Conveyance - The act of transferring an ownership interest in real property from one party to
another
Mortgage Lock-In-Rate - A guarantee a lender will deliver a specific combination of interest
rate and points if the mortgage closes by a specified date
Approval letter - A document that states the loan amount a lender is willing to make a
borrower
Primary Mortgage Market - Where credit institutions originate loans
C. The maximum the rate can increase over the life of the loan - When an ARM has rate caps of
5/2/6, the 6 refers to what?
A. The maximum rate increase at the initial adjustment
B. The start rate for the loan
C. The maximum the rate can increase over the life of the loan
D. The rate maximum the rate can decrease over the life of the loan
B. The borrower qualified at the buydown rate - When utilizing a temporary buydown to lower
the interest rate on a FHA loan, which of the following are correct
A. The borrower qualified at the note rate
B. The borrower qualified at the buydown rate
C. The rate cannot be more than 2% below the note rate
D. Seller or builder can pay the discount points to buydown the rate
A. Age - All of the following are violations of the Fair Housing Act EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion
Encrumbrance - Claim against property held by one who is not the legal owner
Trigger Term - Advertised term that requires additional disclosures
Advertising Disclosure - An advertisement must be presented "clearly and conspicuously" to
keep from being deceptive, unfair, or otherwise violate a Commission rule
Waving Right of Rescission - Extenuating circumstances such as "bona fide personal financial
emergency
Right of Rescission - Right that borrowers have to cancel a loan or line of credit with a lender
within three days of closing
Business Day - When creditors office is open to the public, a calendar working day except
Sunday or a federal holiday
Application - Financial information used for purposes of obtaining an extension of credit
Disclosure - The act of making new information known
FTC
Federal Trade Commission - Mission is to promote consumer protection and eliminate and
prevent anticompetitive business practices
,CFPB
Consumer Financial Protection Bureau - Regulatory agency charged with overseeing financial
products and services offered to consumers
TILA
Truth in Lending Act - Enacted 1968 promotes the informed use of consumer credit by
requiring disclosures about terms and costs and standardizes the manner in which costs with
borrowing are calculated and disclosed
Per Diem Interest - Interest charged on a loan for one or more days
Annual Interest Rate Formula - Principal (X) Interest Rate = Annual Interest Rate
Interest Only Mortgage - Mortgage where the mortgagor is only required to pay off the
interest that arises from the principal that is borrowed for a set period
Permanent Buydown - Borrower chooses to pay additional "discount points" to buy down the
interest rate for the life of the mortgage note
2/1 Buydown - Used on fixed rate loans over two years
Set of two initial temporary-start interest rates that increase in stair-step fashion until a
permanent interest rate is reached
Discount Point - A form of pre-paid interest which effectively increases the yield on the loan
above the amount of the stated interest rate
CLTV
Combined Loan to Value - An amount in addition to the Loan to Value, which simply
represents the first position mortgage or loan as a percentage of the property's value
LTV
Loan to Value - Ratio of a loan to the value of an asset purchased
PITI - Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment
DIF - Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
Forbearance - Agreement between the lender and the borrower to delay foreclosure
Loan Modification - A permanent restructuring of the mortgage where one or more of the
terms of a borrower's loan are changed to provide a more affordable payment
Foreclosure - Legal process to collect debt on mortgaged property
,Satisfaction of Mortgage Letter - Document generated and signed by a mortgage lender,
acknowledging that the borrower has paid off the mortgage loan in full and the mortgage is not
a lien on the property
Subordination Agreement - When two mortgages are on a property, this specifies which
mortgage takes precedence
Payoff Statement - Provides homeowner proof the mortgage is paid off
Constructive Note - Legal presumption that anything recorded in a public record can be known
by anyone
Actual Note - Direct knowledge that one has of the property
Inquiry Note - Information that should compel a reasonable person to make further inquiries
about some aspect of the property
Title Record - Serves as a central repository of information about a parcel of land
SRP
Service Release Premiums - Payment received by lender after selling a loan Based on market
value
GNMA
Government National Mortgage Association - Created in 1968, goal to expand affordable
housing under HUD
FNMA
Federal National Mortgage Association - Created 1968 works with Fannie Mae to increase
affordable lending
FHA
Federal Housing Administration - Insures banks real estate loans and charges borrowers a
small premium
HELOC
Home Equity Line of Credit - A loan in which the lender agrees to lend a maximum amount
within an agreed period
and is also an open-ended mortgage transaction that is secured
HECM
Home Equity Conversion Mortgage - A FHA insured reverse mortgage that allows the
conversion of equity in a home to cash
Balloon Mortgage - A mortgage in which a large portion of the borrowed principal is repaid in
a single payment at the end of the loan period and does not amortize
ARM Interest Rate Adjustment - Margin + Interset = Rate
, COFI
Cost of Fund Index - Regional average of interest expenses incurred by financial institutions
which in turn is used as a base for calculating variable rate loans
ARM
Adjustable Rate Mortgage - Loan that is lower than fixed rate in beginning
Loan payment changes over time
Adjustable caps that vary
Used to obtain a higher loan amount
Fixed Rate - Interest rate that remains the same over the life of the loan
Non-Conforming Loan - Does not meet Freddie Mac or Fannie Mae guidelines
Conforming Loan - Conforms to terms and conditions set by government
Conventional Loan - Not guaranteed or insured by the government but can still follow federal
guidelines
Acceleration Clause - Accelerated loan repayment if property is in default
Exculpatory Clause - Relieves one party form liability due to actions of another party
Defeasance Clause - Creditor can obtain title without foreclosure process
Late Payement Penalty - When fees are attached to late payment
Pre-Payment Penalty - Fixed sum added to loan if loan is paid off early
Contract of Deed - Complete financing and sales contract agreed upon by seller and seller with
no note attached
Note - Promise to repay debt
Mortgage - Pledge of collateral to secure a loan
Reconveyance - A document issued by a mortgage holder indicating that the borrower is
released from the mortgage debt and transfers the property title from the lender
Conveyance - The act of transferring an ownership interest in real property from one party to
another
Mortgage Lock-In-Rate - A guarantee a lender will deliver a specific combination of interest
rate and points if the mortgage closes by a specified date
Approval letter - A document that states the loan amount a lender is willing to make a
borrower
