Practice Exam #13
1) The stated purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act is which of the following:
A. Improve accountability and transparency in America's financial system
B. To protect the American taxpayer by ending bailouts
C. To protect consumers from abusive financial services practices
D. All of the above
A. Improve accountability and transparency in America's financial system
B. To protect the American taxpayer by ending bailouts
C. To protect consumers from abusive financial services practices
D. All of the above
answer
Answer: D. Yes, all of these are stated reasons for this legislation, as well as to end "too big to fail" policies, and other reasons.
2) When was the Dodd-Frank Wall Street Reform and Consumer Protection Act passed:
A. August, 2008
B. July, 2010
C. April, 2011
D. Feb, 2009
A. August, 2008
B. July, 2010
C. April, 2011
D. Feb, 2009
answer
Answer: B. This is correct.
3) Which part of the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau:
A. Article 23
B. Title XIV
C. Title X
D. 15 U.S.C. //1691
A. Article 23
B. Title XIV
C. Title X
D. 15 U.S.C. //1691
answer
Answer: C. Yes, Title X created the Consumer Financial Protection Bureau.
4) Where in the federal government does the Consumer Financial Protection Bureau exist:
A. As part of the FDIC
B. As an independent entity of the Federal Reserve
C. As a floating agency of the Dept of Housing and Urban Development (HUD)
D. As an agency of the Federal Trade Commission
A. As part of the FDIC
B. As an independent entity of the Federal Reserve
C. As a floating agency of the Dept of Housing and Urban Development (HUD)
D. As an agency of the Federal Trade Commission
answer
Answer: B. This is correct.
5) What kind of authority does the Consumer Financial Protection Bureau have:
A. None
B. Limited authority subject to the regulators of the Federal Reserve
C. Rule making and enforcement authority over many consumer financial laws
D. Unlimited power over all federally insured financial institutions
A. None
B. Limited authority subject to the regulators of the Federal Reserve
C. Rule making and enforcement authority over many consumer financial laws
D. Unlimited power over all federally insured financial institutions
ANSWER
Answer: C. This is correct—a substantial amount of authority.
6) Which of the following is the Mortgage Reform and Anti-Predatory Lending Act:
A. Title XIV of Dodd-Frank
B. Title X of Dodd-Frank
C. HOEPA
D. HERA of 2008
A. Title XIV of Dodd-Frank
B. Title X of Dodd-Frank
C. HOEPA
D. HERA of 2008
ANSWER
Answer: A. This is correct.
7) The final rule, propagated by the Federal Reserve Board in anticipation of the Dodd-Frank amendments to TILA, took effect on what date:
A. July, 2010
B. January, 2010
C. April, 2011
D. January, 2012
A. July, 2010
B. January, 2010
C. April, 2011
D. January, 2012
ANSWER
Answer: C. This is correct.
8) Effective on which of the following dates did the CFPB receive rulemaking and enforcement authority over many consumer financial laws:
A. April 2011.
B. August 2010.
C. July 2011.
D. January 2012.
A. April 2011.
B. August 2010.
C. July 2011.
D. January 2012.
ANSWER
The correct answer is C.
9) All of the following laws are enforced by the CFPB, except:
A. Equal Credit Opportunity Act (ECOA).
B. National Do Not Call Registry.
C. Real Estate Settlement Procedures Act (RESPA).
D. Home Mortgage Disclosure Act (HMDA).
A. Equal Credit Opportunity Act (ECOA).
B. National Do Not Call Registry.
C. Real Estate Settlement Procedures Act (RESPA).
D. Home Mortgage Disclosure Act (HMDA).
ANSWER
The correct answer is B. The National Do Not Call Registry is enforced by the Federal Trade Commission (FTC).
10) Which of the following laws are enforced by the CFPB:
A. Gramm-Leach Bliley Act.
B. Home Ownership and Equity Protection Act. (HOEPA)
C. Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act).
D. All of the above.
A. Gramm-Leach Bliley Act.
B. Home Ownership and Equity Protection Act. (HOEPA)
C. Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act).
D. All of the above.
ANSWER
The correct answer is D.
11) The amendment to Regulation Z that addresses compensation issues that are consistent with Dodd-Frank applies to which of the following transactions:
A. Closed-end transactions on a consumer's principal dwelling
B. Closed and open-end transactions on a consumer's principal dwelling
C. Open-end transactions on a consumer's principal dwelling
D. Closed-end transactions on all residential real property transactions
A. Closed-end transactions on a consumer's principal dwelling
B. Closed and open-end transactions on a consumer's principal dwelling
C. Open-end transactions on a consumer's principal dwelling
D. Closed-end transactions on all residential real property transactions
ANSWER
Answer: A. This is correct.
12) The amendment to Regulation Z that addresses compensation issues must be followed by which of the following:
A. Mortgage bankers
B. Mortgage brokers and their employees
C. Loan officers employed by insured depository institutions
D. All of the above
A. Mortgage bankers
B. Mortgage brokers and their employees
C. Loan officers employed by insured depository institutions
D. All of the above
ANSWER
Answer: D. Yes, all loan originators must follow this amendment.
13) All of the following would be considered unfair, abusive, and deceptive practices that can arise from mortgage loan originator compensation agreements, except:
A. Changes in compensation
B. Lender-required settlement services that exceed the stated amount on the GFE
C. Changes in fees from the original GFE
D. Any mortgage loan officer compensation changes as a result of the borrower being charged additional discount fees
A. Changes in compensation
B. Lender-required settlement services that exceed the stated amount on the GFE
C. Changes in fees from the original GFE
D. Any mortgage loan officer compensation changes as a result of the borrower being charged additional discount fees
ANSWER
Answer: B. Where the lender selects the service provider for settlement services, the settlement charges may exceed the amount stated on the original GFE, but not by more than 10%.
14) According to the TILA final rule, which of the following is considered a loan originator:
A. A mortgage broker
B. A person who for compensation or gain arranges, negotiates, or otherwise obtains an extension of consumer credit for another person
C. A producing manager
D. All of the above
A. A mortgage broker
B. A person who for compensation or gain arranges, negotiates, or otherwise obtains an extension of consumer credit for another person
C. A producing manager
D. All of the above
answer
Answer: D. Yes, all of these are considered loan originators according to the final rule.
15) Compensation, according to the TILA final rule, include which of the following:
A. Salary
B. Commissions
C. Bonuses
D. All of the above
A. Salary
B. Commissions
C. Bonuses
D. All of the above
answer
Answer: D. Yes, all of these plus awards or prizes.
16) According to the TILA final rule, all of the following would be considered payments made directly by the consumer, except:
A. The consumer writes a check to cover some of their closing costs
B. Payments from loan proceeds
C. Yield spread premiums
D. None of the above
A. The consumer writes a check to cover some of their closing costs
B. Payments from loan proceeds
C. Yield spread premiums
D. None of the above
answer
Answer: C. Yes, yield spread premiums are not considered direct payments from the consumer.
17) Loans covered under the TILA final rule include all of the following, except:
A. All closed-end consumer loans secured by one-to-four-unit residential properties
B. All open-end consumer loans secured by one-to-four-unit residential properties
C. All closed end mortgages
D. All reverse mortgages
A. All closed-end consumer loans secured by one-to-four-unit residential properties
B. All open-end consumer loans secured by one-to-four-unit residential properties
C. All closed end mortgages
D. All reverse mortgages
answer
Answer: B. Open-end loans, where the borrower can add on to the loan balance without rewriting the loan documents (HELOC, for example), are not included in TILA's final rule.
18) Under the TILA final rule, compensation can be based differently in which of the following situations:
A. FHA loan vs. conventional
B. Purchase loan vs. refinance
C. Primary residence vs. second home
D. None of the above
A. FHA loan vs. conventional
B. Purchase loan vs. refinance
C. Primary residence vs. second home
D. None of the above
answer
Answer: D. Yes, none of these situations allow for compensation to be based differently. .
19) Under the TILA final rule, which of the following is an acceptable means of compensation for a loan originator:
A. Bonus for higher APR
B. Premium for lower LTV
C. Percentage of loan amount
D. Compensation based on interest rate of loan
A. Bonus for higher APR
B. Premium for lower LTV
C. Percentage of loan amount
D. Compensation based on interest rate of loan
answer
Answer: C. Yes, this is acceptable.
20) Which of the following is prohibited under the TILA final rule:
A. Compensation for a producing manager
B. Front-end compensation for an MLO as a percentage of the loan amount
C. Bonuses and prizes for an MLO based on production
D. Compensation received directly from the consumer and from any other source on the same loan
A. Compensation for a producing manager
B. Front-end compensation for an MLO as a percentage of the loan amount
C. Bonuses and prizes for an MLO based on production
D. Compensation received directly from the consumer and from any other source on the same loan
answer
Answer: D. Yes, this is prohibited. No longer can an MLO make money at both ends.
21) Compensation for an MLO can be based on any of the following, except:
A. The quality of an MLO's loan files, sometimes known as a "pull-through" rate
B. Whether the customer is a new or existing customer
C. Whether the loan is for a primary residence or vacation home
D. Long-term loan performance
A. The quality of an MLO's loan files, sometimes known as a "pull-through" rate
B. Whether the customer is a new or existing customer
C. Whether the loan is for a primary residence or vacation home
D. Long-term loan performance
answer
Answer: C. Yes, no distinction between primary residence or vacation home can be made to establish compensation.
22) According to the TILA final rule, which of the following areprohibited:
A. Basing compensation on terms of previous transactions
B. Basing compensation on fees and income
C. Penalizing an MLO for GFE violations or misquotes of fees
D. All of the above
A. Basing compensation on terms of previous transactions
B. Basing compensation on fees and income
C. Penalizing an MLO for GFE violations or misquotes of fees
D. All of the above
answer
Answer: D. Yes, all of these are prohibited.
23) According to the TILA final rule, which of the following modes of compensation for an MLO is prohibited:
A. Bonuses
B. Steering the consumer into a transaction so the MLO receives greater compensation
C. Flat fee
D. Overall loan volume
A. Bonuses
B. Steering the consumer into a transaction so the MLO receives greater compensation
C. Flat fee
D. Overall loan volume
answer
Answer: B. This should be obvious.
24) The concept of Safe Harbor includes the consumer being presented with all of the following loan options, except:
A. Lowest interest rate
B. Lowest total for origination and discount
C. Change in fees from the original GFE
D. Lowest interest rate without certain risky features
A. Lowest interest rate
B. Lowest total for origination and discount
C. Change in fees from the original GFE
D. Lowest interest rate without certain risky features
answer
Answer: C. This is strictly prohibited.
25) The MLO is compliant with Safe Harbor in each of the following circumstances, except:
A. The MLO obtains options from creditors the MLO regularly does business with
B. The MLO's compensation changes based on the borrower being charged additional discount points
C. The MLO believes in good faith that the consumer qualifies for options presented
D. The MLO does everything to ensure that the consumer is protected from unfair and deceptive practices that favor additional compensation to the MLO
A. The MLO obtains options from creditors the MLO regularly does business with
B. The MLO's compensation changes based on the borrower being charged additional discount points
C. The MLO believes in good faith that the consumer qualifies for options presented
D. The MLO does everything to ensure that the consumer is protected from unfair and deceptive practices that favor additional compensation to the MLO
answer
Answer: B. This is prohibited under the TILA final rule.
26) Steering, according to the TILA final rule, means which of the following:
A. Directing a real estate buyer into a non-integrated neighborhood
B. Directing a tenant into a non-integrated apartment building
C. Directing a consumer into a loan transaction not in the best interest of the consumer
D. Influencing an owner to sell his/her property quickly because the constitution of the neighborhood is changing
A. Directing a real estate buyer into a non-integrated neighborhood
B. Directing a tenant into a non-integrated apartment building
C. Directing a consumer into a loan transaction not in the best interest of the consumer
D. Influencing an owner to sell his/her property quickly because the constitution of the neighborhood is changing
answer
Answer: C. Yes, with greater compensation for the MLO in mind, rather than the best interest of the borrower.
27) Based on the TILA final rule, which of the following isprohibited regarding compensation to the MLO:
A. Dual compensation
B. "Pull-through" rate for compensation
C. Long-term loan performance
D. Loan volume
A. Dual compensation
B. "Pull-through" rate for compensation
C. Long-term loan performance
D. Loan volume
answer
Answer: A. This means receiving compensation from the borrower and the lender in the same transaction.
28) Which of the following is a legitimate criteria for MLO compensation according to the TILA final rule:
A. Government insured or conventional
B. Primary residence or second home
C. Loan amount or overall loan volume
D. Purchase loan or refinance
A. Government insured or conventional
B. Primary residence or second home
C. Loan amount or overall loan volume
D. Purchase loan or refinance
answer
Answer: C. Yes, compensation can vary with loan amount and/or overall loan volume.
29) According to the TILA final rule, what does BPO stand for:
A. Broker Price Opinion
B. Borrower Paid Origination
C. Bank Property Official
D. Balloon Payment Offer
A. Broker Price Opinion
B. Borrower Paid Origination
C. Bank Property Official
D. Balloon Payment Offer
answer
Answer: B. This is one option for the MLO's source of compensation.
30) According to the TILA final rule, which of the following is considered a broker in a transaction:
A. It has to be a true mortgage broker company
B. Any bank or credit union that does not fund a specific transaction
C. Any financial institution that does not fund a specific transaction
D. Any of the above
A. It has to be a true mortgage broker company
B. Any bank or credit union that does not fund a specific transaction
C. Any financial institution that does not fund a specific transaction
D. Any of the above
answer
Answer: D. This is correct.
31) According to the TILA final rule, which of the following best defines creditor in a transaction:
A. The lender
B. Any financial institution, whether or not they fund the loan
C. A financial institution that funds loans with their own capital or a bona-fide warehouse line of credit
D. The beneficiary
A. The lender
B. Any financial institution, whether or not they fund the loan
C. A financial institution that funds loans with their own capital or a bona-fide warehouse line of credit
D. The beneficiary
answer
Answer: C. This is the most specific and best answer.
32) According to the TILA final rule, what does LPO stand for:
A. Liquidated Points Offering
B. Loan Principal Outtake
C. Lender Paid Origination
D. Listing Property Operation
A. Liquidated Points Offering
B. Loan Principal Outtake
C. Lender Paid Origination
D. Listing Property Operation
answer
Answer: C. Yes, this is a transaction where all originator/broker compensation is paid for by the lender.
33) According to the TILA final rule, which of the following best describes the originator:
A. Must be an individual who originates the loan
B. Refers only to an institution that originates a loan
C. Could be either an individual or a company, depending on the circumstances
D. Not enough information given to answer
A. Must be an individual who originates the loan
B. Refers only to an institution that originates a loan
C. Could be either an individual or a company, depending on the circumstances
D. Not enough information given to answer
answer
Answer: C. According to the TILA final rule, the originator is either an individual loan originator at a "creditor" institution, or an entity not acting as a creditor, such as a company that uses the lender funds to close a loan.
34) According to the TILA final rule, which of the following best describes the yield spread premium:
A. Commonly known as the "back-end" compensation to the MLO in addition to the borrower's fees
B. Overage credited to consumer on transactions funded by creditor
C. Same as discount points
D. The difference between borrower up-front fees and discount points paid by borrower
A. Commonly known as the "back-end" compensation to the MLO in addition to the borrower's fees
B. Overage credited to consumer on transactions funded by creditor
C. Same as discount points
D. The difference between borrower up-front fees and discount points paid by borrower
answer
Answer: B. When the borrower compensates the MLO up front, any YSP is credited to the consumer to help pay closing costs.
35) According to the TILA final rule, which of the following best describes compensation received by a broker:
A. Any money taken in
B. Any money taken in not paid out to a third party
C. All up-front fees paid by the borrower as well as the yield spread premium
D. Origination fees and contract processing fees
A. Any money taken in
B. Any money taken in not paid out to a third party
C. All up-front fees paid by the borrower as well as the yield spread premium
D. Origination fees and contract processing fees
answer
Answer: B. This is a good description of broker compensation. D cannot be correct because contract processing fees are a legitimate third party fee. C cannot be correct because brokers cannot make up-front fees paid by the borrower and back-end fees (yield spread premium). And A cannot be correct because out of money taken in, the broker will have to pay certain fees to third parties.
36) According to the TILA final rule, which of the following best describes compensation received by an MLO employed by a broker or an insured depository institution:
A. The paycheck the MLO receives for originating the loan
B. All origination fees
C. Contract processing fees as well as loan origination fees
D. All up-front fees, but not the yield spread premium
A. The paycheck the MLO receives for originating the loan
B. All origination fees
C. Contract processing fees as well as loan origination fees
D. All up-front fees, but not the yield spread premium
answer
Answer: A. That's it! The broker or institution will separate the MLO's compensation from other fees paid out to non-affiliated third parties.
37) According to the TILA final rule, all of the following are considered non-affiliated third party fees, except:
A. Title
B. Escrow
C. Appraisal
D. In-house processing
A. Title
B. Escrow
C. Appraisal
D. In-house processing
answer
Answer: D. In-house processing fees are part of the broker's compensation.
38) Which of the following statements is false regarding the TILA final rule:
A. Fees paid to non-affiliated third parties are not regulated under this rule
B. Fees paid to non-affiliated third parties are not considered loan originator compensation
C. The TILA final rule regulates all MLO compensation and fees that can raise the cost of a consumer obtaining a loan
D. Affiliated third party fees are considered part of loan originator compensation and are therefore regulated under this rule
A. Fees paid to non-affiliated third parties are not regulated under this rule
B. Fees paid to non-affiliated third parties are not considered loan originator compensation
C. The TILA final rule regulates all MLO compensation and fees that can raise the cost of a consumer obtaining a loan
D. Affiliated third party fees are considered part of loan originator compensation and are therefore regulated under this rule
answer
Answer: C. Yes, this is the false statement. Fees that are not part of MLO compensation are not regulated in any way under this rule.
39) According to the TILA final rule, how are seller paid closing costs classified:
A. As seller funds
B. As a credit to the seller
C. As borrower funds
D. As funds to be used at the discretion of the broker
A. As seller funds
B. As a credit to the seller
C. As borrower funds
D. As funds to be used at the discretion of the broker
answer
Answer: C. This is correct.
40) A buyer is purchasing a house and the seller has agreed in the contract to pay $4000 in closings costs for the borrower. Total loan and closing costs are $3000, excluding origination. The broker has a compensation agreement with the lender which has agreed to pay the broker a 2% origination fee. Can the additional $1000 in seller-paid closing costs be credited to pay toward the origination of the loan; Which is the best answer:
A. Yes, that's what it's for
B. No, because seller paid closing costs are considered borrower funds
C. Yes, because seller paid closing costs are like a gift, and gifts are allowed
D. No, because seller paid closing costs can never be used to compensate the broker
A. Yes, that's what it's for
B. No, because seller paid closing costs are considered borrower funds
C. Yes, because seller paid closing costs are like a gift, and gifts are allowed
D. No, because seller paid closing costs can never be used to compensate the broker
answer
Answer: B. Borrower funds can never be used to pay the broker when the lender is already paying the broker. The broker cannot be paid by the lender and any other source. If the borrower was paying 1% origination out of pocket, and the 1% was paid out of the overage of seller concession funds (borrower funds), that would be acceptable.
41) According to the TILA final rule, compensation agreements must be established in which of the following circumstances:
A. When a creditor employs retail loan officers that it compensates
B. When a creditor is in a transaction with a broker or brokerage company whose compensation is paid by any party other than the borrower
C. When a broker has MLOs attached to their license
D. Any of the above
A. When a creditor employs retail loan officers that it compensates
B. When a creditor is in a transaction with a broker or brokerage company whose compensation is paid by any party other than the borrower
C. When a broker has MLOs attached to their license
D. Any of the above
answer
Answer: D. Yes, any and all of these circumstances require a written compensation agreement.
42) ABC Mortgage is originating a loan of $250,000 with an origination fee of 1%, a floor of $1,000, and caps that ensure the loan complies with all high cost tests. What is the origination fee paid to ABC Mortgage:
A. $1000
B. $2000
C. $2500
D. $3000
A. $1000
B. $2000
C. $2500
D. $3000
answer
Answer: C. 1% of $250,000 is $2500.
43) ABC Mortgage is originating a loan of $75,000 with an origination fee of 1%, a floor of $1,000, and caps that ensure the loan complies with all high cost tests. What is the origination fee paid to ABC Mortgage:
A. $75
B. $750
C. $1,000
D. $7,500
A. $75
B. $750
C. $1,000
D. $7,500