Mortgage Loan Originator Assessment 5

Question 1

Under the Homeowners Protection Act (HPA), when must a lender automatically cancel PMI on a conventional loan?

Accepted Answer

When LTV reaches 78% based on original amortization schedule

Answer

The HPA requires automatic PMI cancellation when the loan balance reaches 78% of the original value based on the scheduled amortization, regardless of borrower request.

Question 2

A lender requires a borrower to use a specific title insurance company as a condition of the loan. Under RESPA, this is:

Accepted Answer

Prohibited as an illegal tied arrangement

Answer

RESPA Section 9 prohibits sellers and lenders from requiring buyers to use a specific title insurance company as a condition of the sale or loan.

Question 3

What minimum credit score does FHA typically require for a borrower to qualify for the maximum 96.5% LTV (3.5% down payment)?

Accepted Answer

580

Answer

FHA guidelines allow a 3.5% down payment for borrowers with a minimum credit score of 580; scores between 500-579 require 10% down.

Question 4

A borrower refinances their primary residence. Under the Right of Rescission, how many business days do they have to cancel?

Accepted Answer

3 business days

Answer

Regulation Z grants borrowers a three-business-day right of rescission on refinances of their primary residence with a new lender.

Question 5

Which type of income is generally NOT acceptable for qualifying purposes without a two-year history?

Accepted Answer

Overtime and bonus income

Answer

Variable income such as overtime, bonuses, and commissions generally requires a two-year history to be used for qualifying purposes under agency guidelines.

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Assessment 5