General Mortgage Knowledge Flashcards

A borrower is seeking a mortgage and has a gross monthly income of $6,000. Their proposed monthly housing expense (PITI) is $1,800. They also have a $450 monthly car payment and a $250 monthly student loan payment. What is the borrower's back-end debt-to-income (DTI) ratio?

Answer: 41.7%

The back-end DTI ratio includes all of the borrower's monthly debt obligations, including the proposed housing payment. To calculate it, sum all monthly debts ($1,800 PITI + $450 car payment + $250 student loan = $2,500) and divide by the gross monthly income ($6,000). $2,500 / $6,000 = 0.4166, which rounds to 41.7%.

Under the SAFE Act, what is the minimum number of continuing education hours a state-licensed mortgage loan originator must complete annually to renew their license?

Answer: 3 hours of Federal Law, 2 hours of Ethics, 2 hours of Non-Traditional Mortgages, and 1 hour of electives.

The SAFE Act mandates a minimum of 8 hours of annual continuing education for state-licensed MLOs. This must include 3 hours on federal laws and regulations, 2 hours on ethics (including fraud, consumer protection, and fair lending), and 2 hours on non-traditional mortgage products. The remaining 1 hour is an elective, which may sometimes be a state-specific requirement.

A borrower receives a Qualified Written Request (QWR) response from their mortgage servicer regarding a dispute. The borrower is unsatisfied with the servicer's explanation. Under which section of RESPA would the servicer's obligations regarding this QWR be detailed?

Answer: Section 6

Section 6 of the Real Estate Settlement Procedures Act (RESPA) deals with mortgage servicing and borrower protections. It outlines the procedures servicers must follow when they receive a Qualified Written Request (QWR) from a borrower, including acknowledgment and response timelines.

A mortgage loan originator is paid a commission that is a percentage of the loan amount. The MLO realizes they can increase their commission on a particular loan by steering the borrower into a product with a higher interest rate and less favorable terms for the consumer. This action is a direct violation of the principles outlined in which regulation?

Answer: Regulation Z (TILA)

Regulation Z, which implements the Truth in Lending Act (TILA), contains the Loan Originator Compensation Rule. This rule explicitly prohibits MLOs from being compensated based on the terms of a loan (other than the loan amount) and prohibits the practice of steering a consumer to a loan that is not in their interest to receive greater compensation.

Which of the following best describes a 'mortgage rate lock'?

Answer: A lender's guarantee to hold a specific interest rate for a defined period while the loan is processed.

A mortgage rate lock is an agreement between a lender and a borrower that guarantees a specific interest rate for a set period, typically 30, 45, or 60 days. This protects the borrower from interest rate increases that may occur between the application and closing.

An individual performs only administrative and clerical tasks for a licensed mortgage loan originator, such as gathering documents and confirming appointment times. This individual does not take applications or negotiate loan terms. According to the SAFE Act, this individual is:

Answer: Not required to be a licensed mortgage loan originator.

The SAFE Act defines a Mortgage Loan Originator as an individual who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms. Individuals who perform purely administrative or clerical tasks under the supervision of a licensed MLO are exempt from licensure requirements.