Mixed Deck — All Mortgage Loan Originator Topics Flashcards
100 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 20 Mixed Deck — All Mortgage Loan Originator Topics flashcards as text
In contrast to earlier disclosure forms, the new Loan Estimate form handles which of the following differently:
Answer: Estimated cash to close shows earnest money deposit deducted
This is to make the borrower's understanding of the closing costs more clear. A first-time buyer can better grasp what they must have on hand for the closing thanks to this.
Under RESPA, a 'controlled business arrangement' (now called an 'affiliated business arrangement') requires the lender to provide the borrower with a disclosure at or before the time of referral. What must this disclosure include?
Answer: The nature of the relationship between the providers and an estimate of the second provider's charges
RESPA requires affiliated business arrangement disclosures to describe the relationship between providers and give an estimate of charges so borrowers can make informed decisions.
Which of the following is considered a 'trigger term' under TILA that requires full disclosure of other credit terms in an advertisement?
Answer: The amount of any down payment
Under TILA, advertising a specific down payment amount is a trigger term that requires disclosure of the APR, loan term, total of payments, and other specific credit terms.
Which of the following measures addressed redlining and was approved by Congress in 1977:
Answer: Community Reinvestment Act (CRA)
The Community Reinvestment Act (CRA) was enacted by Congress in 1977 specifically to combat redlining. Redlining is a discriminatory practice where financial institutions deny services, such as mortgage loans, to residents of specific geographic areas, often based on the racial or economic characteristics of those neighborhoods. The CRA encourages banks to meet the credit needs of all segments of their communities, including low- and moderate-income areas.
According to TILA, revealing which of the following will typically inform customers of the true cost of borrowing money:
Answer: APR
The Annual Percentage Rate (APR) is the standardized measure under TILA that represents the true annual cost of borrowing money. It includes not only the nominal interest rate but also other fees and charges associated with the loan, converted into a single annual percentage. This comprehensive figure allows consumers to easily compare the total cost of different credit offers.
A borrower asks an MLO about a 5/1 ARM. Which statement best describes how this product works?
Answer: The rate is fixed for 5 years, then adjusts annually based on an index plus a margin
A 5/1 ARM has a fixed interest rate for the first 5 years and then adjusts once per year based on a specified index plus a margin, subject to periodic and lifetime caps.
A property appraises for $280,000 and the borrower makes a $42,000 down payment. What is the loan-to-value (LTV) ratio?
Answer: 85%
LTV = ($280,000 - $42,000) / $280,000 = $238,000 / $280,000 = 85%.
Which of the following is NOT a valid trigger term under Regulation Z that requires full APR disclosure in an advertisement?
Answer: Annual Percentage Rate
APR itself is not a trigger term; it is what must be disclosed when a trigger term (like monthly payment, down payment, or number of payments) appears in an ad.
A self-employed borrower shows net Schedule C income of $60,000 in Year 1 and $72,000 in Year 2. What is the qualifying monthly income?
Answer: $5,500
Average of two years: ($60,000 + $72,000) ÷ 2 = $66,000; $66,000 ÷ 12 = $5,500 monthly qualifying income.
What is the purpose of 'gift funds' documentation requirements in mortgage underwriting?
Answer: To confirm the funds are a true gift and not a loan that would affect DTI
Gift fund documentation (gift letter + donor bank statements) ensures down payment funds are truly gifted and not a loan that would increase the borrower's debt obligations.
Which of the following loans would have likely been provided in the past to someone looking to purchase a home but with less-than-perfect credit?
Answer: Easy qualifier loan
In the past, 'easy qualifier loans' were offered to individuals with less-than-perfect credit or those who couldn't meet traditional underwriting standards. These loans, often associated with the subprime market, featured relaxed documentation requirements and were designed to make homeownership accessible to a broader range of borrowers before stricter lending regulations were implemented after the 2008 financial crisis.
An MLO's NMLS license requires how many hours of continuing education annually?
Answer: 8 hours
State-licensed MLOs must complete 8 hours of NMLS-approved continuing education annually, including specific required topics.
Which occurrence triggers the MLO's obligation to make specific disclosures to the borrower at the start of the loan process?
Answer: When a consumer provides information sufficient to complete the loan application
In the mortgage loan process, certain disclosures are required to be provided to the borrower once the borrower has provided sufficient information to complete the loan application. This point is commonly referred to as the "trigger" for providing these disclosures.
An open-end loan is which of the following?
Answer: A home equity line of credit
An open-end loan allows the borrower to draw funds, repay them, and then draw again up to a maximum credit limit over a specified period. A Home Equity Line of Credit (HELOC) functions exactly this way, providing flexibility similar to a credit card but secured by the borrower's home equity. This distinguishes it from other loan types that typically provide a single lump sum.
A variable balance mortgage's interest rate fluctuates (VBM). What remains constant?
Answer: Payment amount
A Variable Balance Mortgage (VBM) is designed so that the interest rate fluctuates, but the borrower's monthly payment amount remains constant. To achieve this, the loan's principal balance adjusts, either increasing (negative amortization) or decreasing more slowly when rates rise, or decreasing more quickly when rates fall. This structure provides predictable payments despite interest rate changes.
A VA loan's funding fee can be financed into the loan. Which borrower group is exempt from paying the VA funding fee?
Answer: Veterans receiving VA compensation for a service-connected disability
Veterans who receive VA disability compensation for a service-connected disability are exempt from the VA funding fee.
Which of the following best describes a non-traditional mortgage product, as defined by the SAFE Act:
Answer: Any mortgage other than 30-year fixed
According to the SAFE Act, this qualifies as a factual statement.
Except for, all of the following MLOs must possess a state license:
Answer: An MLO working for a federally insured depository institution
This would comprise banks, credit unions, and affiliates that are owned, controlled, and governed by a depository institution and are subject to federal banking agency regulation.
Under RESPA, a 'controlled business arrangement' is now referred to as:
Answer: Affiliated business arrangement
RESPA amendments renamed 'controlled business arrangements' to 'affiliated business arrangements' (AfBA), which require specific disclosure when referrals occur.
A property appraises for $275,000. The maximum LTV for a conventional loan is 80%. What is the maximum loan amount?
Answer: $220,000
$275,000 × 0.80 = $220,000 maximum loan amount at 80% LTV.