NMLS Safe Exam Questions with Correct and Verified Answers

NMLS Safe Exam Questions with Correct and Verified Answers "What are section 32 loans? - Correct Answer High cost mortgage loans. Considered to be HCML when APR exceeds APOR by 6.5% on first lien on loan $50,000 or higher, or 8.5% on first lien on a loan that's less than $50,000 or 8.5% on subordinate lien." "What requirements are placed on Section 32 loans / HCML / High cost mortgage loans? - Correct Answer BAPS B- no BALLOON payment A- must have ATR P- no PREPAYMENT PENALTY S- must SPEAK to a HUD counselor" "What makes a complete application? - Correct Answer ALIENS A- Address L- Loan amount I- Income E- Estimated value N- Name S- Social security number" What does TILA stand for? - Correct Answer Truth-In-Lending Act, Regulation Z" "What is a HELOC loan? - Correct Answer a secured loan in that you are borrowing against the equity that has been built in your house" "What is a REFI loan? - Correct Answer " "LTV stands for - Correct Answer Loan to Value" "Define PMI and state what the acronym stands for. - Correct Answer Private mortgage insurance- on conventional loans" "Define one time variable funding fee and people in what situations is it waived for? - Correct Answer Disabled veterans and surviving spouses." "USDA loans are also called what? - Correct Answer 502 loans" "Define MIP - Correct Answer Can be paid up front or in installments. Mortgage insurance premium used by FHA to protect themselves against higher-risk borrowers who are more likely to default on loans" "Define APR - Correct Answer annual percentage rate" "Define APOR - Correct Answer average prime offer rate" "Define HPML - Correct Answer High price mortgage loans or Section 35 loans. A mortgage with an annual percentage rate (APR) that's higher than the average prime offer rate (APOR)" "When is a loan considered to be a section 35 loan? (High price mortgage loan) - Correct Answer - When the APR exceeds APOR by 1.5% on a first lien, 2.5% on Jumbo first lien or 3.5% on subordinate lien" "What requirements are placed on section 35 loans? (High price mortgage loans) - Correct Answer APE A- ATR / ability to repay P- no PREPAYMENT penalty unless in the first 2 years E- requires ESCROW of the taxes and hazard insurance for the first 5 years" "Define ATR - Correct Answer Ability to repay" "8 Factors of ATR - Correct Answer MICE DOES M- Monthly mortgage I- Income + assets C- Credit history E- Employment D- Debt to Income Ratio O- Other debts E- Expenses S- Simultaneous mortgage" "What is a 1003 and a 1004 form? - Correct Answer URLA - Uniform Residential Loan Application and URAR - Uniform Residential Appraisal Report" "What is a 1005 and 1006 form? - Correct Answer VOE - Verification of employment and VOD - Verification of deposits (bank balance)" "What is a 1008 form? - Correct Answer Transmittal summary. Top sheet! SUMMARY" "What are the protected classes under ECOA AND Fair Housing Act? - Correct Answer - Sex - Color - National origin - Race Religion" "What are the protected classes that are under ECOA but NOT Fair Housing Act? - Correct Answer - Maritial status - Age - Public assistance" "What are the protected classes that are under Fair Housing Act but NOT ECOA? - Correct Answer - Familial status - Disability" "What things are NOT included in the APR? - Correct Answer - Title insurance - Escrow - Notary fee - Appraisal - Credit report fee - Termite inspection fee - Seller credits" "What makes a mortgage a qualified mortgage? (Rules of 3s) - Correct Answer - The point and fees of the mortgage cannot exceed 3% - The back end ratio cannot exceed 43% - The prepayment penalty is limited to the first 3 year - No terms over 30 years allowed - No toxic features: no balloon payments, no interest only terms, no negative amortization - Qualified mortgages has ATR" "What documents must you keep for 5 years? - Correct Answer Suspicious Activity Report (SAR) and Closing disclosure (CD)" "What documents must you keep for 3 years? - Correct Answer - Loan Application Register (LAR) - Loan Estimate (LE) - Line of Credit (LOC)" "What documents must you keep for 2 years? - Correct Answer everything thats not 5 or 3" "What documents must you keep for 25 months? - Correct Answer ECOA" "Where can you find the NMLS # - Correct Answer PLAMT - Promissory note - 1003 URLA (Loan application -Advertisements - Mortgages - Trust deeds" "What are the flood zones? - Correct Answer High risk: A and V Moderate risk: B and X Low risk: C and X" "RESPA Disclosures include the following: - Correct Answer KAMILAS - Know before you owe handbook - Affiliated business arrangement handbook - Mortgage servicing disclosure statements - Initial escrow - List of HUD approved counselors - Anual escrow - Servicing transfer disclosure -(GFE and HUD used for non purchases)" "What is the penalty for violating GLB? - Correct Answer Up to 5 years and a fine" "What is the penalty for violating RESPA? - Correct Answer up to $10,000 and/or 1 year" "What is the penalty for sending an unauthorized fax? - Correct Answer $500" "What is the penalty for violating ECOA? - Correct Answer Up to $10,000" "What is the penalty for violating TILA? - Correct Answer $5K for single violation $25k for reckless violation $1M per day of knowingly committing a violation" "What is the penalty for violating SAFE Act? - Correct Answer Up to $30,058" "What is the penalty for violating DNC? (Do not call list? - Correct Answer up to $43,280" "What is the penalty for violating HMDA? - Correct Answer Based on the penalty matrix" "What is the penalty for violating FACTA? - Correct Answer $5K and/or 1 year" "What are the TILA disclosures? - Correct Answer A BRAWL on closed caption TV B- Balloon notice R- Right to rescind A- ARM disclosure W- When you're home is on the line disclosure L- Loan estimate C- Charm booklet C- Closing disclore T- Transfer or mortgage" "What things have a 0% tolerance. - Correct Answer TRAIL T- Transfer taxes R- Credit Report A- Appraisal I- Interest rate L- Loan origination" "What things have a 10% tolerance? - Correct Answer - Government reporting fee - Title insurance or any service chosen by the borrower from the lenders recommended list" "What things have no tolerance requirements? - Correct Answer TIP - Termite inspection - Insurance hazard and title - Prepaid interest" "Finance charges do not include.... - Correct Answer PANS BC - Points paid by the seller - Appraisal fee - Notary fee - Security interest charges, if itemized and disclosed - Bona fide and reasonable fees - Credit report fee" "Which regulation is TILA? - Correct Answer Regulation Z" "How long after a completed loan application must a LE be submitted? - Correct Answer 3 days. If there are any changes made to the information, you have 3 days to resend updated loan estimate" "What is the absolute only thing a borrower can be charged for before receiving their loan estimate? - Correct Answer Credit report" "There is a ____ day waiting period between receiving the loan estimate and consummation of the loan. - Correct Answer 7 day. (Can be waived by borrower in cases of bona fide personal financial emergency which requires the transaction to close quickly; ex. foreclosure)" "the following fees may not vary at all from the amount set forth in the Loan Estimate (i.e., there is zero tolerance) - Correct Answer - Fees paid to the creditor, mortgage broker, or an affiliate of either - Fees paid for third-party provider services for which the consumer was NOT allowed to choose the provider - Transfer taxes" "A Loan Estimate is good for how many days? - Correct Answer 10" "The three circumstances under which a revised Closing Disclosure must be issued and the waiting period restarted are as follows: - Correct Answer - The loan's disclosed APR becomes inaccurate - Changes in the terms of the loan product offered - Addition of a prepayment penalty" "A Closing Disclosure must be provided no less than ____ business days prior to consummation. - Correct Answer 3" "ECOA Valuations rule: - Correct Answer Lenders have 3 days from application to notify a borrower of their right to a copy of their appraisal and lenders must provide promptly upon completion or at least 3 days prior to close whichever is earlier. Borrowers can waive the timing requirement and accept the appraisal at closing. (If the loan does not close, and they signed a waiver you have 30 days to provide the applicant with a copy.)" "What HMDA mean? - Correct Answer The Home Mortgage Disclosure Act (Regulation C) - requires lenders to report data regarding its mortgage lending activity" "Dwellings subject to HMDA reporting requirements include: - Correct Answer VIRM - Vacation or second homes. - Individual condominiums or cooperative units - Rental properties - Manufactured homes and mobile homes" "Define FCRA - Correct Answer The Fair Credit Reporting Act (Regulation V) regulates consumer credit reporting agencies" "Define the MAP Rule - Correct Answer Mortgage Acts and Practices Advertising Rule (Regulation N) is a federal rule governing the advertising of mortgage products" "Define E-Sign Act - Correct Answer The Electronic Signatures in Global and National Commerce Act (E-Sign Act) governs the circumstances under which electronic signatures may be accepted on certain disclosures and document" "Define a straw buyer - Correct Answer a person who purchases the property or applies for the loan in his or her own name for the actual borrower" "Define silent seconds - Correct Answer arrangements in which the borrower obtains a second, undisclosed and unrecorded loan directly from the seller and uses this to help cover a down payment and closing costs on the purchase loan from a lender" "Fraud for housing vs Fraud for profit - Correct Answer fraud for property, involves a borrower lying about his or her income and/or assets in order to qualify for a mortgage loan vs may involve a number of individuals (e.g., the seller, the mortgage licensee, an appraiser) - Occupancy fraud (i.e., a representation that the buyer will reside in the property when that is not the case) - Documentation fraud - Appraisal fraud (i.e., the use of an inflated appraisal to secure a larger loan or to flip a property)" "Mortgage loan fraud is punishable by: - Correct Answer -For making a fraudulent or false statement, up to five years in jail and/or a $100,000 fine -For submission of a false mortgage loan application, conspiracy to commit fraud, or bank fraud, up to 30 years in jail and/or a $1 million fine" "Define The GLB Act - Correct Answer The Gramm-Leach-Bliley Act (Regulation P) enacted to protect the privacy of consumer personal information" "Define Nonpublic Personal Information (NPI) - Correct Answer any personally-identifiable financial information that a financial institution obtains in connection with providing a financial product or service" "Define Personally-identifiable financial information - Correct Answer Information provided to a financial institution by a consumer in connection with a credit transaction. - ex. name, address, Social Security Number, or other information on a loan application - Account numbers, payment history, loan balances, deposit balances, or credit card purchases - A credit report" "Flood insurance must be purchased from who? - Correct Answer NFIP National flood insurance program" "What is the minimum and maximum amount of flood insurance needed? - Correct Answer Min = 100,000 Max = 250,000" "What are the 4 elements of a valid contract? - Correct Answer competent parties, mutual agreement, legal object and consideration" "What're are the front end and back end ratios for conventional loans? - Correct Answer 28% front end and back end 36%" "What is the front and back end for USDA loans? - Correct Answer 29% front and back 49%" "What is the front and back end for VA loans? - Correct Answer 41 back end. No front" "What is the front and back end for FHA loans? - Correct Answer " "A company that violates the Telemarketing Sales Rule may be fined up to ______ per violation, and each phone call is treated as a separate violation. - Correct Answer $46,517" "Gramm-Leach-Bliley Act (GLB Act), as implemented by Regulation ___ for what purpose? - Correct Answer - P - enacted to protect the privacy of consumer personal information" "Under the Red Flags Rule, all covered financial institutions and creditors must implement what type of plan? - Correct Answer a written identity theft prevention plan, which must be approved by the entity's board of directors or senior-level management." "The Red Flags Rule is authorized under what? - Correct Answer Fair and Accurate Credit Transaction Act of 2003 (FACTA)" "What does SAFE Act stand for and what does it establish? - Correct Answer -Secure and Fair Enforcement for Mortgage Licensing Act -established minimum standards for licensure, requiring mortgage loan originators be either state-licensed or federally registered" "Dodd-Frank Act of 2010 - Correct Answer - Establishment of the Consumer Financial Protection Bureau (CFPB) - Authorization of the Qualified Mortgage Rule - Requiring an assessment of the borrower's ability to repay a mortgage (i.e., establishment of the Ability to Repay Rule) - Restricts loan originator compensation (i.e., authorizing the Loan Originator Compensation Rule) - Requires new borrower disclosures to replace GFE and TILA disclosures (i.e., TILA-RESPA Integrated Disclosure Rule) -Limits loan terms such as prepayment penalties, negative amortization, balloons, etc." "The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are government entities or government sponsored? - Correct Answer Government sponsored (quasi-governmental entities)" "Government National Mortgage Association (Ginnie Mae) is only involved with what types of loans? - Correct Answer FHA or VA loans (is a a wholly-owned government association)" "How do you calculate the combined loan-to-value (CLTV) ratio? - Correct Answer the sum of first and second mortgage divided by lower of the appraised value or purchase price" "The high loan-to-value (HLTV) ratio is the... - Correct Answer first lien plus the maximum amount available on the line of credit or second lien, divided by the property value" "According to the Homeowner's Protection Act (HPA), a lender must cancel PMI: - Correct Answer - When a borrower pays the mortgage down to 78% of the original value, if current on payments and in good standing, or - When the mortgage loan reaches its midpoint (e.g., if a 30-year loan, after 180 payments)" "According to the Homeowner's Protection Act (HPA), a borrower may submit a written request for the cancellation of the PMI: - Correct Answer - When the borrower pays the loan amount down to 80% LTV, or - If the borrower has not made a payment that was more than 30 days late in the past year or 60 days late in the past two years" "TRUE OR FALSE To avoid mortgage insurance, a lender may offer programs that include a first mortgage at 80% combined with a second mortgage to provide the required 20% down payment. If the borrower is able to qualify for both loans (simultaneous loans) under the Ability to Repay Rule, mortgage insurance may be avoided. - Correct Answer TRUE" "How do you calculate the Primary/front-end debt ratio? - Correct Answer - monthly housing expense (e.g., principal, interest, taxes, insurance, and mortgage insurance) divided by gross monthly income" "How do you calculate the Secondary/back-end debt ratio? - Correct Answer - monthly debt divided by gross monthly income. Includes anything showing on the credit report, as well as obligations such as alimony and child support. P.S. Does not include utility payments (though utility payments are included when calculating ratios for a VA loan), car insurance payments, phone bills, cable TV bills, etc." "What are Jumbo Loans? - Correct Answer Any loan with a loan amount in excess of Freddie Mac or Fannie Mae loan limits is considered a "jumbo" loan." "TRUE OR FALSE: If the borrower declines to self-report, indicate the borrower's race based on visual observation - Correct Answer TRUE HMDA REGULATION C" "the Mortgage Acts and Practices Rule (MAP Rule) is Regulation ____. - Correct Answer Regulation N" "The Mortgage Acts and Practices Rule (MAP Rule or Regulation N) sets forth what types of regulations? - Correct Answer regulations under which it is prohibited for any person to make a material misrepresentation in any commercial communication regarding any term of any mortgage credit product" "The Disposal Rule, a part of the Fair and Accurate Credit Transactions Act (FACTA), seeks to protect what? - Correct Answer the privacy of consumer information and reduce the risk of fraud and identity theft" "Under the PATRIOT Act, covered entities must have a CIP, which stands for: - Correct Answer Customer Identification Program" "The term "nontraditional mortgage product" refers to.... - Correct Answer a closed-end residential mortgage loan that allows a borrower to defer payment of principal and sometimes interest." "The acronym COFI can best be described as.... - Correct Answer "Cost of Funds Index," a popular index used when setting the interest rate on some adjustable-rate mortgages." "What's the penalty for violating FACRA? - Correct Answer $1,000" "What's the penalty for violating the SAFE Act? - Correct Answer $30,058" "What are the front end and back end ratio for conventional loans? - Correct Answer Front end 28% back end 36%" "What are the front end and back end ratio for USDA loans? - Correct Answer Front end 29% back end 41%" "What are the front end and back end ratio for VA loans? - Correct Answer Only a back end of 41%" "What are the front end and back end ratio for FHA loans? - Correct Answer 43% Back end and 31% front end" "An applicant can request a statement of reason within how man y days of receiving the original adverse notice? - Correct Answer 60 days" "If an application for credit is denied based on the appraisal, the borrower has how m any days to request a copy and a lender has how many days to deliver it? - Correct Answer Borrower has 90 days to request a copy and the lender has 30 days to deliver it" "ECOA deals primarily with what? - Correct Answer with credit applications. BE EQUAL" "What is NOT included in the APR? - Correct Answer TENACTS - Title insurance - Escrow - Notary fee - Appraisal - Credit report - Termite inspection - Seller credits" "Who do you give the servicing transfer statement and how many days does the borrower have to give the payment to the right place? - Correct Answer 15 days before the transfer. The grace period is 60 days" "Fannie Mae requires only a ____ year history to be reviewed for all credit and public information - Correct Answer 7 years" "What's the minimum downpayment for a FHA loan if the borrower's credit score is 580 or higher? - Correct Answer 3.5%" "If the borrowers credit score is between 500-579, what's their minimum down payment for an FHA loan? - Correct Answer 10%" "If the borrowers credit score is below 500, what's their minimum down payment for an FHA loan? - Correct Answer Borrower is not qualified for a loan" "What's the late fee for a VA loan? - Correct Answer 4%" "What's the late fee for a FHA loan? - Correct Answer 4%" "What's the late fee for a USDA loan? - Correct Answer 4%" "What's the late fee for a conventional loan? - Correct Answer 5%" "How many months of PITI payments must you verify on a loan on a non owner occupied property? - Correct Answer 6 months" "How many months of PITI payments must you verify on a loan on an owner occupied property? - Correct Answer 2 months" "What percentage of ownership do you need to be self employed? - Correct Answer 25%" "If the credit report does not show a required minimum payment amount, the lender should use an amount of what percentage of the outstanding balance? - Correct Answer 5%" "Commission, over time, bonus and part time income must be averaged over how many years? - Correct Answer 2 years" "Consumer debt that has less than how many months remaining do not need to be included for the purpose of calculating debt ratios? - Correct Answer 10 months" "What is a 203(B) loan? - Correct Answer Basic FHA fixed rate loan" "What is a 203K loan? - Correct Answer a rehab loan" "What is a 203G Loan? - Correct Answer Loan for teachers, firemen and police. Think G for good people" "What are 2 types of freehold estates? - Correct Answer - Fee simple - Life estates" "If a consumer requests cancelation of their escrow acc, the lender must deliver an escrow closing notice no later then how many days before the closure of the acc? - Correct Answer 3 business days" "If an escrow acc is closed for any reason other then by consumer request, when must the lender deliver a escrow closing notice? - Correct Answer No later then 30 business days before the acc is closed" "A mortgage which has a fixed interest rate for the first three to five years, and then a rate that adjusts at intervals based on an index and margin, is known as a(n): - Correct Answer Hybrid ARM" "releasing a lien from the title of a property after a loan has been paid off is called.... - Correct Answer reconveyance" "What is a promissory note? - Correct Answer a borrower's promise to pay" "a promise to pay is secured by a... - Correct Answer security instrument, such as a mortgage or trust deed" "minimal investment is also known as... - Correct Answer minimum down payment" "approaches to appraisals : Sales comparison approach - Correct Answer - compares 3 similar recently sold properties int the close proximity to the property in order to determine a properties market value" "approaches to appraisals : Income approach - Correct Answer - utilizes an OIS (operating income statement) to compare rental potential when financing a property" "approaches to appraisals : Cost approach - Correct Answer - considers cost of labor and material - usually for rehab or contruction" "Schedule ___ would most likely be filed by a self-employed borrower who files taxes as a sole proprietor? - Correct Answer Schedule C" "How long do you keep TILA disclosures? - Correct Answer 2 years" "How long do you have to keep the DNC list? - Correct Answer 2 years" "How long do you have to keep the Mortgage Acts and Practice (MAP) disclosures - Correct Answer 2 years" "How long do you have to keep the Loan Estimate (LE)? - Correct Answer 3 YEARS" "How long do you have to keep the Loan Application Registry Disclosure (LAR)? - Correct Answer 3 years" "How long do you have to keep the Line of Credit (LOC)? - Correct Answer 3 years" "How long do you have to keep the Suspicious Activity Report (SAR)? - Correct Answer 5 years" "How long do you have to keep the ECOA disclosure? - Correct Answer 25 months" "Who maintains flood maps? - Correct Answer FEMA" "What form would allow a lender to receive a copy of a borrower's tax returns from the IRS? - Correct Answer 4506" "The simultaneous origination of multiple loans on the same collateral is - Correct Answer piggyback lending" "Describe COFI - Correct Answer a popular index used for adjustable-rate mortgages" "How many hours of ethics is required? - Correct Answer 3" "When would a lender be required to cancel private mortgage insurance? - Correct Answer once the borrower pays their mortgage down to 78% of the original value or when the loan reaches the midpoint of its amortization period (e.g., after 180 payments of a 30-year loan)." "A borrower requesting maximum FHA financing must have a credit score of at least - Correct Answer 580" "Entitlement in VA loans means what? - Correct Answer the amount that the government will guarantee to repay a lender of a VA loan in the case of borrower default?" "A veteran with full eligibility and who is seeking a loan greater than $144,000 would be able to obtain a maximum guaranty of - Correct Answer 25% of the loan amount" "What is the maximum prepayment penalty which may be charged in the first year of the loan if the loan is considered a qualified mortgage? - Correct Answer 2% of the outstanding balance" "What does "FHA" stand for, when referring to the agency which oversees the FHA loan program? - Correct Answer Federal Housing Administration" "Assume a borrower completes an online loan application, including all six required elements, but never hits "submit." Is the lender required to issue a Loan Estimate? - Correct Answer no" "describe the term "predominant value" - Correct Answer the most COMMON sales price for the neighborhood" "A borrower makes $20 per hour and works 35 hours per week. If their loan program allows a front-end debt ratio of 31%, what is the maximum housing payment for which they can qualify? - Correct Answer $940.33. P.S. To calculate the borrower's monthly income, earnings per hour ($20) are multiplied by hours per week (35) and weeks per year worked (52). This is divided by 12, totaling $3,033.33. To calculate the maximum housing payment (PITI), multiply monthly income by the allowable front-end ratio: $3,033.33 × 31%.(.31) = $940.33." "Is a VA funding fee refundable? - Correct Answer No" "A warranty deed conveys... - Correct Answer full ownership of land and the promise of clear title (meaning the property is free of encumbrances)" "__________ provides a guideline for answering questions when a choice of actions is available - Correct Answer Ethics" "A loan which allows the borrower to take a lump sum distribution without any monthly repayment requirements is a(n) - Correct Answer HECM" "What is Freddie Mac's automated underwriting system called? - Correct Answer Loan Product Advisor" "What is Fannie Mae's automated underwriting system called? - Correct Answer Desktop Underwriter" "A borrower obtains a one-year ARM which starts at 4.0% and has a margin of 3.0% and 2/6 caps. At the end of the first year, the index is 5.0%. What is the interest rate after the first adjustment? - Correct Answer 6 When the interest rate adjusts, the new rate is the lower of index + margin (in this case, 5 + 3 = 8) and the current rate + cap (in this case, 4 + 2 = 6). Therefore, after the first adjustment, the interest rate would be 6%." "Insurance which guarantees a lender a certain lien position on the title to a property free from undisclosed encumbrances is called - Correct Answer lender's title policy" "A disclosure advising the borrower of their right to receive a copy of the appraisal must be delivered within how many days - Correct Answer 3" "FHA mortgages typically carry how many different types of mortgage insurance? What are they? - Correct Answer 2 MIP and UFMIP Mortgage insurance premium and upfront Mortgage insurance premium" "A mortgage broker will originate, process, and close in its own name a loan underwritten and funded by a secondary lender, but will then assign the loan to the funding lender at the closing table. What is this called? - Correct Answer table funding" "What document replaces the HUD-1 Settlement Statement and the final TIL Disclosure? - Correct Answer The Closing Disclosure" "For an FHA loan, how much may the seller contribute toward the borrower's closing costs? - Correct Answer 6%" "Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: - Correct Answer the lower of the replacement cost or the unpaid loan amount" "A loan which does not require payments during the life of the loan is most likely what type of loan? - Correct Answer a HECM. The FHA's home equity conversion mortgage" "A borrower obtains a one-year ARM, which starts at 4.0% and has a margin of 3.0%. At the end of the first year, the index is 5.0%. What is the fully-indexed rate when the loan adjusts? - Correct Answer 8%. When the rate adjusts, the new fully-indexed rate is equal to the index plus margin. In this case: 5 + 3 = 8." "Loan originator compensation records must be retained for how long? - Correct Answer 3 years" "the federal limitation on the shortest adjustment period allowed on an ARM? - Correct Answer no limit"