National and UST Mortgage Practice
Exam 2 Questions and Answers Graded
A+
Under RESPA, the servicer may require a borrower to pay into an escrow account
to cover disbursements that are unanticipated or disbursements made before the
borrower's monthly payments are available in the account, a cushion or reserve that
must be no greater than _____ of the estimated total annual disbursements from the
escrow account. - Correct answer-The answer is one sixth.
Under RESPA, a lender may require the borrower to establish an escrow account at
closing. The loan servicer may require a borrower to pay into the account to cover
disbursements that are unanticipated or disbursements made before the borrower's
monthly payments are available in the account. This is the escrow cushion or
reserve, which must be no greater than one sixth of the estimated total annual
disbursements from the escrow account.
Stan has been in his house for 15 years and built up $100,000 in equity. He decides
to do some remodeling and pay off some bills, and he wants to use a closed-end
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,home equity loan to pay for it. He meets with Lending Guys and, because he has a
great credit history, gets loan approval right away. Two weeks later he signs the
documents. Which of the following is true? - Correct answer-The answer is Stan
may rescind the loan within 3 business days of consummation.
A borrower refinancing a primary dwelling with an open or closed end loan may
cancel (rescind) the loan within 3 business days following closing. This right does
not extend to the entire term. A borrower is NOT required to complete
homeownership counseling unless the loan is a high-cost home loan.
For which of the following reasons would it be permissible to refuse to take an
application from a potential borrower? - Correct answer-The answer is the
applicant has alluded to the fact that he is submitting false documents in order to
qualify for a larger loan.
A loan originator should not be an accessory to fraud by taking an application
based on what he knows or strongly suspects to be fraudulent information. In all
other cases, credit decisions should be left to the lender and/or its underwriting
department, and should never be based on discriminatory factors or personal
whims (not "clicking" with the applicant or denying access to credit based on
neighborhood).
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which of the following is true regarding APR tolerance levels? - Correct answer-
The answer is The APR is considered accurate if it is not more than one eighth of
one percentage point (.125%) above or below the APR determined in accordance
with legal requirements.
The APR is considered accurate generally, if it is not more than one eighth of one
percentage point (.125%) above or below the APR determined in accordance with
legal requirements (i.e., in accordance with the actuarial method or the United
States Rule method); and in an irregular transaction, if it is not more than one
quarter of one percentage point (.25%) above or below the annual percentage rate
determined in accordance with legal requirements.
Mortgage insurance insures against losses incurred as a result of: - Correct answer-
The answer is foreclosure.
Private mortgage insurance (PMI) is an insurance policy issued to provide
protection to the mortgage lender in the event of financial loss due to a borrower's
default that results in foreclosure. In the event of a foreclosure, the insurance
company will either purchase the loan or let the lender foreclose and pay the lender
for its losses up to the face amount of the policy.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, A "straw buyer" is: - Correct answer-The answer is a buyer who accepts a fee for
the use of his or her Social Security Number and other personal information on a
mortgage application.
A straw buyer is a person who purchases the property or applies for the loan in his
or her own name for the actual borrower and is typically paid for the use of his or
her personally identifying information.
Under the Fair Housing Act: - Correct answer-The answer is charging different
fees based on race is prohibited.
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of
any residential housing based on race, color, religion, national origin, sex, familial
status, or mental or physical handicap, and therefore, prohibits charging different
fees based on race. Residency status is not a protected category under the Fair
Housing Act. Disclosure requirements are not imposed by the Fair Housing Act.
Government reporting requirements are covered under the Home Mortgage
Disclosure Act (HMDA).
This term refers to the practice of adjusting certain types of non-taxable income
during underwriting. - Correct answer-The answer is grossing up.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Exam 2 Questions and Answers Graded
A+
Under RESPA, the servicer may require a borrower to pay into an escrow account
to cover disbursements that are unanticipated or disbursements made before the
borrower's monthly payments are available in the account, a cushion or reserve that
must be no greater than _____ of the estimated total annual disbursements from the
escrow account. - Correct answer-The answer is one sixth.
Under RESPA, a lender may require the borrower to establish an escrow account at
closing. The loan servicer may require a borrower to pay into the account to cover
disbursements that are unanticipated or disbursements made before the borrower's
monthly payments are available in the account. This is the escrow cushion or
reserve, which must be no greater than one sixth of the estimated total annual
disbursements from the escrow account.
Stan has been in his house for 15 years and built up $100,000 in equity. He decides
to do some remodeling and pay off some bills, and he wants to use a closed-end
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,home equity loan to pay for it. He meets with Lending Guys and, because he has a
great credit history, gets loan approval right away. Two weeks later he signs the
documents. Which of the following is true? - Correct answer-The answer is Stan
may rescind the loan within 3 business days of consummation.
A borrower refinancing a primary dwelling with an open or closed end loan may
cancel (rescind) the loan within 3 business days following closing. This right does
not extend to the entire term. A borrower is NOT required to complete
homeownership counseling unless the loan is a high-cost home loan.
For which of the following reasons would it be permissible to refuse to take an
application from a potential borrower? - Correct answer-The answer is the
applicant has alluded to the fact that he is submitting false documents in order to
qualify for a larger loan.
A loan originator should not be an accessory to fraud by taking an application
based on what he knows or strongly suspects to be fraudulent information. In all
other cases, credit decisions should be left to the lender and/or its underwriting
department, and should never be based on discriminatory factors or personal
whims (not "clicking" with the applicant or denying access to credit based on
neighborhood).
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which of the following is true regarding APR tolerance levels? - Correct answer-
The answer is The APR is considered accurate if it is not more than one eighth of
one percentage point (.125%) above or below the APR determined in accordance
with legal requirements.
The APR is considered accurate generally, if it is not more than one eighth of one
percentage point (.125%) above or below the APR determined in accordance with
legal requirements (i.e., in accordance with the actuarial method or the United
States Rule method); and in an irregular transaction, if it is not more than one
quarter of one percentage point (.25%) above or below the annual percentage rate
determined in accordance with legal requirements.
Mortgage insurance insures against losses incurred as a result of: - Correct answer-
The answer is foreclosure.
Private mortgage insurance (PMI) is an insurance policy issued to provide
protection to the mortgage lender in the event of financial loss due to a borrower's
default that results in foreclosure. In the event of a foreclosure, the insurance
company will either purchase the loan or let the lender foreclose and pay the lender
for its losses up to the face amount of the policy.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, A "straw buyer" is: - Correct answer-The answer is a buyer who accepts a fee for
the use of his or her Social Security Number and other personal information on a
mortgage application.
A straw buyer is a person who purchases the property or applies for the loan in his
or her own name for the actual borrower and is typically paid for the use of his or
her personally identifying information.
Under the Fair Housing Act: - Correct answer-The answer is charging different
fees based on race is prohibited.
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of
any residential housing based on race, color, religion, national origin, sex, familial
status, or mental or physical handicap, and therefore, prohibits charging different
fees based on race. Residency status is not a protected category under the Fair
Housing Act. Disclosure requirements are not imposed by the Fair Housing Act.
Government reporting requirements are covered under the Home Mortgage
Disclosure Act (HMDA).
This term refers to the practice of adjusting certain types of non-taxable income
during underwriting. - Correct answer-The answer is grossing up.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
