NMLS Practice Test Quiz

MNOP Mortgage has an ownership interest in QRS Title and WXY Real Estate, which means they have a financial connection with these companies. To ensure compliance with regulations and provide transparency to borrowers, MNOP Mortgage should provide an Affiliated Business Arrangement Disclosure. This disclosure informs borrowers about the relationship between MNOP Mortgage and the referred companies, allowing them to make an informed decision. It is a requirement to provide this disclosure to protect both the borrower and the lender and ensure fair business practices.

FEMA, the Federal Emergency Management Agency, is the agency that identifies areas that will require flood insurance. FEMA is responsible for mapping and assessing flood-prone areas in the United States, and they provide flood insurance rate maps (FIRMs) that determine the risk level for flooding in different areas. Based on these maps, FEMA identifies areas that are at high risk for flooding and require homeowners to have flood insurance.

The loan originator's manager indicating that the "red push pins" on the map represent areas where the company doesn't lend is an example of redlining. Redlining is a discriminatory practice where certain neighborhoods or areas are systematically denied access to loans or other financial services based on factors such as race, ethnicity, or income level. By refusing to lend in specific areas, the company is engaging in redlining and perpetuating inequality in access to credit.

The Final Rule on Valuation Independence, which amended Regulation Z, prohibits any actions that could influence or pressure the appraiser to reach a desired value. Asking for a pencil search or telling the appraiser that no more appraisals will be ordered if the value isn't reached would be considered attempts to influence the appraiser's opinion. Ordering the appraisal from the Originator's spouse to guarantee a desired value would also be seen as a conflict of interest. However, providing the most recent sales in the neighborhood to the appraiser is permitted as long as it is done in a neutral and unbiased manner to assist the appraiser in their valuation process.

Under Section 8 of the Real Estate Settlement Procedures Act (RESPA), it is generally prohibited for individuals or entities involved in real estate transactions to give or receive anything of value in exchange for referrals of settlement service business. This is to prevent kickbacks, referral fees, or other forms of payment that could incentivize steering consumers toward specific service providers. In the scenario provided, two loan originators at the same lender splitting a commission on a loan they both worked on does not violate Section 8 of RESPA because it involves individuals who are both employed by the same lender and are simply sharing a commission for their work on a specific loan. This practice is common within the industry and does not involve the payment of referral fees or kickbacks for the referral of business to an outside party. Therefore, it would not be considered a violation of RESPA.

The correct answer is that the mortgage loan originator can refer the borrower to another mortgage company and not receive a referral fee. This is because the mortgage broker she works for does not originate FHA loans, so she cannot originate the loan herself. Instead, she can refer the borrower to another company that does handle FHA loans, without receiving any compensation for the referral.

According to the Truth in Lending Act (TILA) and Regulation Z, if the Annual Percentage Rate (APR) on a mortgage loan varies by more than 0.125% (or 1/8th of a percentage point) from the APR disclosed in the initial Loan Estimate, it generally triggers a requirement for the lender to provide a revised Loan Estimate to the borrower. This is part of the tolerance rules under TILA-RESPA Integrated Disclosure (TRID) regulations.

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending practices based on several factors, including familial status. Asking a borrower about their plans for having more children falls under familial status and is considered discriminatory under ECOA. This law aims to ensure fair lending practices and prevent lenders from making credit decisions based on factors unrelated to creditworthiness.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the borrower must be provided with a copy of their appraisal no later than 3 days prior to the loan's settlement (closing). This requirement is part of the Act's provisions aimed at ensuring transparency and fairness in the lending process, allowing borrowers sufficient time to review their appraisal and understand how the value of the property being financed was determined before completing the transaction. This rule helps protect consumers by ensuring they are informed about key aspects of their loan and the value of their property before they are legally committed to the loan terms.

Section 9 of the Real Estate Settlement Procedures Act prohibits sellers from requiring buyers to use a specific title company as a condition for closing the transaction. This law ensures that buyers have the freedom to choose their own title company and promotes fair competition in the real estate settlement process.

In most cases the FHA borrower has up to 60 days to move into the home and begin using it as the primary residence under the terms of FHA home loan agreements in the occupancy requirements section. Even if you have cleared all the hurdles mentioned above, closing day is not a good idea as moving day.

Based on the SAFE Mortgage Licensing Act of 2008, a conviction for Felony Assault would generally result in a 7-year waiting period before an applicant can be licensed as a mortgage loan originator. This Act imposes certain criminal history standards and disqualifications for individuals seeking licensure in the mortgage industry, and felony assault is one of the disqualifying offenses. Please note that specific requirements and disqualifications may vary by state, so it's essential to check the regulations in the specific state in which the applicant is seeking licensure.

A buydown plan allows the borrower to start with a lower interest rate and payment during the first few years. This means that the borrower will have lower monthly payments initially, which can be beneficial for budgeting purposes. However, it's important to note that the interest rate and payment will gradually increase over time, so the borrower should be prepared for the potential increase in expenses in the future.

A Home Equity Conversion Mortgage (HECM) does not require the borrower to make monthly payments after closing. Instead, the borrower receives payments from the lender, which are typically used to pay off the existing mortgage or cover other expenses. This type of mortgage is commonly used by older homeowners who want to convert their home equity into cash without the burden of making monthly payments. The loan is repaid when the borrower sells the home or no longer uses it as their primary residence.

A fully amortizing installment note requires regular payments of both principal and interest. This means that the borrower will make equal payments over the life of the loan, with each payment covering both the interest accrued and a portion of the principal balance. As a result, the loan will be fully paid off by the end of the term. This is different from other types of notes, such as a straight note or a partially amortizing installment note, where the payments may not fully cover the principal balance.

If the Title Company that the Lender selected increased their Settlement Charge from $450 to $850, it would be acceptable to re-disclose to the borrower. This is because the change in the settlement charge significantly affects the borrower's loan terms and costs, and therefore, the borrower should be informed of this change.

To determine the maximum monthly mortgage payment (PITI) Jose and Mary can qualify for, we need to calculate their combined monthly income and then apply the Debt-to-Income (DTI) ratio of 28%.

First, calculate their combined monthly income:

Jose's income: $3,927.08 per month

Mary's income: $2,926 per month

Combined income: $3,927.08 + $2,926 = $6,853.08 per month

Next, apply the DTI ratio of 28%:

Maximum PITI = Combined monthly income × DTI ratio

Maximum PITI = $6,853.08 × 0.28

Maximum PITI = $1,918.86

Therefore, the maximum monthly mortgage payment (PITI) they can qualify for is $1,918.86.

The 3 Day Right of Rescission under TILA allows borrowers to cancel certain types of loans within three business days of signing the loan agreement. This right does not apply to the purchase of a primary residence with a 5/1 Hybrid ARM. The 3 Day Right of Rescission typically applies to refinancing transactions, such as closing on a Home Equity Loan or a Debt Consolidation Refinance, where the borrower is obtaining a new loan to replace an existing loan. However, when purchasing a primary residence with a 5/1 Hybrid ARM, the borrower is not refinancing an existing loan but rather entering into a new purchase transaction, so the right of rescission does not apply.

A fixed rate loan is not considered a nontraditional loan because it has a consistent interest rate throughout the loan term. Nontraditional loans typically have unique features such as adjustable interest rates or unconventional payment structures. The other options listed - Permanent Buydown, 20 year term, and 5/1 Hybrid ARM - all have elements that deviate from the traditional fixed rate loan structure.

The minimum number of business days before a mortgage loan can be consummated, to remain in compliance with the Truth in Lending Act (TILA), is 7 business days from the delivery of the Loan Estimate to the borrower. TILA requires that borrowers receive a Loan Estimate no later than the third business day after they submit a loan application, and the loan cannot be consummated until at least seven business days have passed from the delivery of the Loan Estimate. Therefore, the correct answer is:

The Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on protected characteristics, including race, color, national origin, religion, sex, familial status, and disability. Since Clarence is being discriminated against due to his age, and age is a protected characteristic under the Fair Housing Act, the seller has violated this federal law.

The Sales Comparison Approach, also known as the Market Data Approach, is considered the most accurate method for appraising residential properties. This approach involves comparing the subject property to similar properties in the market that have recently sold. By analyzing the sales data of these comparable properties, appraisers can determine the fair market value of the subject property. This approach takes into account factors such as location, size, condition, and amenities to provide an accurate valuation. The Income Approach, Cost Approach, and Appreciation Approach are different methods used for appraising properties, but they are not considered as accurate as the Sales Comparison Approach for residential properties.

The RESPA rule allows for up to a 10% variance between the Good Faith Estimate and actual settlement charges for specific third-party services and government recording charges, not for the interest rate credit or charge. TILA mandates a 3-business-day waiting period after the initial Loan Estimate is received and another 3 days after the Closing Disclosure is given, ensuring borrowers have time to review loan details before consummation.

According to FNMA (Fannie Mae) guidelines, the maximum total gross adjustment to the sales price of a comparable property that should not be exceeded for it to be considered a good comparable property is typically 25%. This means that when appraising a property, adjustments to the sales price of a comparable property should generally not exceed 25% in either direction (upward or downward) to maintain its validity as a comparable property. However, it's important to note that specific guidelines may vary, and appraisers should follow the most current FNMA guidelines and local regulations when determining adjustments and comparable property selection.

Under TRID rules, the loan originator is generally bound by the terms disclosed in the Loan Estimate for ten business days after it is provided to the borrower. This means that the loan terms and costs outlined in the Loan Estimate should remain available to the borrower for at least ten business days.