Practice Exam #3
1) If applicable, and if the settlement service provider is other than the lender, which of the following disclosures is required before settlement but is not required within 3 business days after receipt of a completed application:
A. Mortgage Servicing Disclosure Statement.
B. Affiliated Business Arrangement (AfBA) Disclosure.
C. Initial Escrow Statement.
D. Servicing Transfer Statement.
A. Mortgage Servicing Disclosure Statement.
B. Affiliated Business Arrangement (AfBA) Disclosure.
C. Initial Escrow Statement.
D. Servicing Transfer Statement.
answer
The correct answer is B. In this case, the AfBA must be given at the time of the referral, or before if the borrower requests it.
2) Which of the following disclosures is provided at settlement, or within 45 days of closing:
A. Servicing Transfer Statement.
B. Mortgage Servicing Disclosure Statement.
C. Initial Escrow Statement.
D. Closing Disclosure.
A. Servicing Transfer Statement.
B. Mortgage Servicing Disclosure Statement.
C. Initial Escrow Statement.
D. Closing Disclosure.
answer
The correct answer is C.
3) Which of the following disclosures are provided some time after settlement:
A. Servicing Transfer Statement.
B. Annual Escrow Statement.
C. Mortgage Servicing Disclosure Statement.
D. A & B.
A. Servicing Transfer Statement.
B. Annual Escrow Statement.
C. Mortgage Servicing Disclosure Statement.
D. A & B.
answer
The correct answer is D.
4) Which of the following is considered a valid changed circumstance:
A. The borrower does not initially lock an interest rate but does so after the Loan Estimate is initially delivered.
B. Market price fluctuations by themselves.
C. Any basic information for the loan application that is provided after the initial Loa Estimate is provided.
D. Any information contained in a credit report obtained by the MLO prior to issuing the Loan Estimate.
A. The borrower does not initially lock an interest rate but does so after the Loan Estimate is initially delivered.
B. Market price fluctuations by themselves.
C. Any basic information for the loan application that is provided after the initial Loa Estimate is provided.
D. Any information contained in a credit report obtained by the MLO prior to issuing the Loan Estimate.
answer
The correct answer is A. Under CFPB guidelines, the lender has three (3) business days to issue a new Loan Estimate under these circumstances.
5) A revised Loan Estimate is considered received by the consumer in which of the following time frames:
A. Within five (5) business days.
B. Within ten (10) days.
C. Within four (4) business days.
D. On the day it is provided.
A. Within five (5) business days.
B. Within ten (10) days.
C. Within four (4) business days.
D. On the day it is provided.
ANSWER
The correct answer is D.
6) If a revised Loan Estimate is mailed or delivered electronically, it is deemed to have been received by the consumer in which of the following time frames:
A. Within three (3) business days.
B. Within four (4) business days.
C. Within five (5) business days.
D. Immediately.
A. Within three (3) business days.
B. Within four (4) business days.
C. Within five (5) business days.
D. Immediately.
ANSWER
The correct answer is A. But if the creditor can prove that the consumer received the disclosures sent electronically or by mail earlier then three business days, then the disclosures are deemed to be received on that date.
7) Under the Integrated Disclosures, which of the following is an acceptable definition of business day:
A. Any day the creditor’s offices are open to the public to transact substantially all of the creditor’s business.
B. All calendar days except Sundays and legal public holidays as defined by Reg. Z.
C. Same as calendar days.
D. A & B.
A. Any day the creditor’s offices are open to the public to transact substantially all of the creditor’s business.
B. All calendar days except Sundays and legal public holidays as defined by Reg. Z.
C. Same as calendar days.
D. A & B.
ANSWER
The correct answer is D. When providing the initial Loan Estimate, definition A applies. When providing a revised Loan Estimate due to changed circumstances, definition B applies.
8) All of the following are true according to Reg. Z regarding revised disclosures, except:
A. Revised disclosures may not be delivered on the same day as the Closing Disclosure.
B. If a changed circumstance occurs prior to loan consummation, a creditor must provide a revised Loan Estimate within four (4) business days of loan consummation.
C. If a changed circumstance occurs too close to loan closing, the valid changed circumstance and it’s applicable revision may be noted on the Closing Disclosure.
D. Upon redisclosure of a corrected Loan Estimate, the borrower receives a new three (3) business day period to review the disclosures prior to consummation.
A. Revised disclosures may not be delivered on the same day as the Closing Disclosure.
B. If a changed circumstance occurs prior to loan consummation, a creditor must provide a revised Loan Estimate within four (4) business days of loan consummation.
C. If a changed circumstance occurs too close to loan closing, the valid changed circumstance and it’s applicable revision may be noted on the Closing Disclosure.
D. Upon redisclosure of a corrected Loan Estimate, the borrower receives a new three (3) business day period to review the disclosures prior to consummation.
ANSWER
The correct answer is B. Under these circumstances, a creditor may not provide a revised Loan Estimate within four (4) business days of loan consummation. Closing would have to be extended.
9) Which of the following represents a beneficial ownership interest in a business that provides settlement services:
A. A 1% ownership interest.
B. More than 1% ownership interest.
C. An affiliate relationship with or a direct or beneficial interest of more than 1% ownership interest.
D. 51% ownership interest.
A. A 1% ownership interest.
B. More than 1% ownership interest.
C. An affiliate relationship with or a direct or beneficial interest of more than 1% ownership interest.
D. 51% ownership interest.
ANSWER
The correct answer is C. This is the most complete and best answer.
10) Within the scope of an affiliated business relationship, which of the following could fulfill the definition of a person:
A. An individual.
B. A corporation.
C. A trust.
D. Any of the above.
A. An individual.
B. A corporation.
C. A trust.
D. Any of the above.
ANSWER
The correct answer is D. A person could also be referred to by a partnership or association.
11) The basic idea of an affiliated business relationship is which of the following:
A. A person in a position to refer a settlement services provider to a borrower can do so and receive a modest referral fee.
B. A person in a position to refer a settlement services provider to a borrower can do so and receive a referral fee of not more than 10% of the cost of services rendered.
C. A person in a position to refer a settlement services provider to a borrower can do so and be compensated only through legitimate compensation channels as a result of having an interest in the business.
D. Under certain circumstances, the referring party can require the borrower to use a particular provider.
A. A person in a position to refer a settlement services provider to a borrower can do so and receive a modest referral fee.
B. A person in a position to refer a settlement services provider to a borrower can do so and receive a referral fee of not more than 10% of the cost of services rendered.
C. A person in a position to refer a settlement services provider to a borrower can do so and be compensated only through legitimate compensation channels as a result of having an interest in the business.
D. Under certain circumstances, the referring party can require the borrower to use a particular provider.
ANSWER
The correct answer is C. The referring party may not require the consumer to use the particular provider being referred.
12) Within the scope of an affiliated business relationship, which of the following could fulfill the definition of an associate:
A. A spouse.
B. An employer.
C. A franchisor or franchisee.
D. Any of the above.
A. A spouse.
B. An employer.
C. A franchisor or franchisee.
D. Any of the above.
ANSWER
The correct answer is D. An associate could also be a parent or child of that person, a corporation or business entity or anyone with an arrangement with the person to benefit from referral business.
13) All of the following would be acceptable means for one to receive compensation for a referral for settlement services, except:
A. Legitimate fees or wages for services actually performed.
B. Bona fide compensation from the ownership interest.
C. Dividends, equity distributions, advances, business loans and capital or equity contributions.
D. A referral fee of not more than 10% of the cost of services rendered.
A. Legitimate fees or wages for services actually performed.
B. Bona fide compensation from the ownership interest.
C. Dividends, equity distributions, advances, business loans and capital or equity contributions.
D. A referral fee of not more than 10% of the cost of services rendered.
ANSWER
The correct answer is D. The compensation cannot be a fee for the referral itself, or an unearned fee.
14) When must the disclosure form for an affiliated business relationship be given to a borrower?
A. If the provider of the settlement service is an affiliate of the lender, the AfBA disclosure must be given within three (3) business days of receiving the completed application.
B. If the provider of the settlement service is an entity other than the lender, the AfBA disclosure must be provided at the time of the referral, or before, if the borrower so requests.
C. Four (4) business days before loan consummation.
D. A & B.
A. If the provider of the settlement service is an affiliate of the lender, the AfBA disclosure must be given within three (3) business days of receiving the completed application.
B. If the provider of the settlement service is an entity other than the lender, the AfBA disclosure must be provided at the time of the referral, or before, if the borrower so requests.
C. Four (4) business days before loan consummation.
D. A & B.
answer
The correct answer is D.
15) The new Closing Disclosure combines which of the following:
A. The Good Faith Estimate and the HUD-1 Settlement Statement.
B. The Good Faith Estimate and the Federal Truth in Lending Statement.
C. The HUD-1 Settlement Statement and the Final Truth in Lending Statement.
D. The Loan Estimate and the HUD-1 Settlement Statement.
A. The Good Faith Estimate and the HUD-1 Settlement Statement.
B. The Good Faith Estimate and the Federal Truth in Lending Statement.
C. The HUD-1 Settlement Statement and the Final Truth in Lending Statement.
D. The Loan Estimate and the HUD-1 Settlement Statement.
answer
The correct answer is C.
16) The new Closing Disclosure form must be delivered to the borrower in which of the following time frames:
A. Three (3) business days prior to loan consummation.
B. Four (4) business days prior to closing.
C. At closing, as the name of the form suggests.
D. Three (3) days before closing.
A. Three (3) business days prior to loan consummation.
B. Four (4) business days prior to closing.
C. At closing, as the name of the form suggests.
D. Three (3) days before closing.
answer
The correct answer is A. This gives the borrower time to review the settlement charges.
17) Which of the following information must be provided on the Closing Disclosure:
A. Actual terms and costs of the transaction.
B. Estimates of transaction costs.
C. Estimates of the loan terms.
D. A projected range of costs at settlement.
A. Actual terms and costs of the transaction.
B. Estimates of transaction costs.
C. Estimates of the loan terms.
D. A projected range of costs at settlement.
answer
The correct answer is A. Estimates are acceptable when an actual cost is not available, but creditors must act in good faith have actual terms and costs by consummation.
18) The Closing Disclosure is intended to be compared to which of the following:
A. The Initial Escrow Statement.
B. The Mortgage Servicing Disclosure Statement.
C. The Loan Estimate.
D. The Servicing Transfer Disclosure Statement.
A. The Initial Escrow Statement.
B. The Mortgage Servicing Disclosure Statement.
C. The Loan Estimate.
D. The Servicing Transfer Disclosure Statement.
answer
The correct answer is C. The borrower compares the two forms. This will tell if the loan costs were provided in good faith.
19) What happens if a revised Closing Disclosure is delivered to the borrower?
A. The borrower is given a new three (3) business day waiting period prior to loan consummation.
B. At this point in the process, costs are locked in and are not subject to change.
C. The loan still must close on the scheduled date.
D. The borrower and lender must honor the original closing disclosure that was provided.
A. The borrower is given a new three (3) business day waiting period prior to loan consummation.
B. At this point in the process, costs are locked in and are not subject to change.
C. The loan still must close on the scheduled date.
D. The borrower and lender must honor the original closing disclosure that was provided.
answer
The correct answer is A. Valid changed costs must be changed on the new form.
20) Which of the following best describes what consummation means:
A. Loan closing.
B. The date when the borrower becomes contractually obligated to the lender.
C. Settlement of the transaction.
D. Funding of the loan.
A. Loan closing.
B. The date when the borrower becomes contractually obligated to the lender.
C. Settlement of the transaction.
D. Funding of the loan.
answer
The correct answer is B. In California, this means signing the loan documents.
21) Which of the following is responsible for ensuring that the content, delivery, and timing requirements of the Closing Disclosure set by the CFPB are met:
A. Settlement agent.
B. MLO.
C. Mortgage broker.
D. Creditor.
A. Settlement agent.
B. MLO.
C. Mortgage broker.
D. Creditor.
answer
The correct answer is D. While all of these may cooperate in the closing of the loan, the law holds the creditor ultimately responsible for the content, delivery, and timing of the Closing Disclosure.
22) The Truth in Lending Act is administered by the Consumer Financial Protection Bureau and is implemented by which of the following regulations:
A. Regulation B.
B. Regulation C.
C. Regulation X.
D. Regulation Z.
A. Regulation B.
B. Regulation C.
C. Regulation X.
D. Regulation Z.
answer
The correct answer is D. Regulation Z is contained in Title I of the Consumer Credit Protection Act.
23) Which of the following statements is true regarding the Truth in Lending Act:
A. It requires disclosure of the nominal interest rate on a loan.
B. It sets limits on interest rates and other finance charges set by lenders.
C. It applies to all real estate loans for business or commercial purposes.
D. It was enacted to prevent abuses in consumer credit cost disclosures.
A. It requires disclosure of the nominal interest rate on a loan.
B. It sets limits on interest rates and other finance charges set by lenders.
C. It applies to all real estate loans for business or commercial purposes.
D. It was enacted to prevent abuses in consumer credit cost disclosures.
answer
The correct answer is D. The law applies to residential loans to consumers.
24) On an owner-occupied refinance, the three (3) day right of rescission must be signed by which of the following:
A. Just one borrower.
B. All borrowers must be in agreement.
C. Escrow.
D. The mortgage broker.
A. Just one borrower.
B. All borrowers must be in agreement.
C. Escrow.
D. The mortgage broker.
answer
The correct answer is A. The exercise of the right by one consumer is effective for all consumers who have the right to rescind on that loan.
25) A borrower can use the yield spread premium from the loan in which of the following ways:
A. Closing costs.
B. Down payment.
C. Points.
D. Kickback.
A. Closing costs.
B. Down payment.
C. Points.
D. Kickback.
answer
The correct answer is A. Closing costs are a way the borrower can use the yield spread premium from the loan. The YSP can no longer be paid to the MLO as compensation as a secondary source of income in the transaction.
26) Which party regulates the margin in an adjustable rate mortgage:
A. Feds.
B. Lender.
C. Investor.
D. Commissioner.
A. Feds.
B. Lender.
C. Investor.
D. Commissioner.
answer
The correct answer is B. From a mortgage broker’s standpoint, this is the answer.
27) When a loan is issued, an MLO must check the borrower’s assets according to which of the following:
A. Whatever the buyer shows on the 1003.
B. All assets.
C. Tax returns only.
D. Separate Schedule C.
A. Whatever the buyer shows on the 1003.
B. All assets.
C. Tax returns only.
D. Separate Schedule C.
answer
The correct answer is B. The MLO will also check the credit report and title to see if the borrower owns any other assets.
28) The buyer has a 3/27 loan. After three years, it changes every year and includes principal and interest. By the end of the term, the buyer pays off the loan amount. This loan is best described as which of the following:
A. Fixed.
B. Adjustable.
C. Graduated payment.
D. Balloon payment.
A. Fixed.
B. Adjustable.
C. Graduated payment.
D. Balloon payment.
answer
The correct answer is B. This loan is not fixed nor balloon. A graduated payment loan is by definition a graduated payment starting with year one. This is an adjustable loan.
29) According to the Gramm-Leach-Bliley Act, all of the following would be acceptable ways of transmitting a borrower’s credit information, except:
A. E-mail.
B. Fax.
C. Certified mail.
D. Regular first class mail.
A. E-mail.
B. Fax.
C. Certified mail.
D. Regular first class mail.
answer
The correct answer is B. This law has to do with keeping people’s credit information confidential and secure. The answer choice involving the least security is “B” because anyone can walk up to a fax machine and observe what has been sent.
30) A loan described as 360/180 is most likely which of the following:
A. Balloon payment.
B. ARM.
C. Fully amortized.
D. Negative amortization.
A. Balloon payment.
B. ARM.
C. Fully amortized.
D. Negative amortization.
answer
The correct answer is A. This amortized 360 months (30 years) but due in 180 months (15 years), requiring a balloon payment.
31) Fannie Mae guidelines for net adjustments to comps on a residential appraisal are which of the following:
A. 10%.
B. 15%.
C. 20%.
D. 25%.
A. 10%.
B. 15%.
C. 20%.
D. 25%.
answer
The correct answer is B. As an example, on a $100,000 sale, as the plus and minus adjustments cancel each other out, the adjusted sales price should not exceed $115,000. Just a guideline, but a good idea.
32) Fannie Mae guidelines for gross adjustments to comps on a residential appraisal are which of the following:
A. 10%.
B. 15%.
C. 20%.
D. 25%.
A. 10%.
B. 15%.
C. 20%.
D. 25%.
answer
The correct answer is D. As an example, on a $100,000 sale, as the plus and minus signs are erased and the absolute value of the adjustments are added together, the adjusted sales price should not exceed $125,000.
33) How will be the MLO be notified if the subject property will need flood insurance?
A. Title report.
B. Appraisal.
C. Flood zone report.
D. Seller’s disclosures.
A. Title report.
B. Appraisal.
C. Flood zone report.
D. Seller’s disclosures.
answer
The correct answer is B. This is a statement of fact.
34) All of the following statements about APR are true, except:
A. APR states the total cost of financing a loan in percentage terms.
B. APR states the relationship of the total finance charges to the total amount financed.
C. APR is equal to the nominal rate.
D. APR includes finance charges spread out over the life of the loan.
A. APR states the total cost of financing a loan in percentage terms.
B. APR states the relationship of the total finance charges to the total amount financed.
C. APR is equal to the nominal rate.
D. APR includes finance charges spread out over the life of the loan.
answer
The correct answer is C. The nominal rate is the rate on the note, the rate that is used to determine the monthly payment, but does not include points, costs, and fees of getting the financing.
35) All of the following statements are true about APR, except:
A. With an ARM, the loan still has one APR.
B. TILA requires that the APR be disclosed to a consumer when they call for an interest rate quote.
C. TILA does not require that the APR be disclosed on an Internet inquiry for a rate.
D. The APR will be a bit more than the interest rate on the note.
A. With an ARM, the loan still has one APR.
B. TILA requires that the APR be disclosed to a consumer when they call for an interest rate quote.
C. TILA does not require that the APR be disclosed on an Internet inquiry for a rate.
D. The APR will be a bit more than the interest rate on the note.
answer
The correct answer is C. TILA does require that the APR be disclosed on an Internet inquiry for a rate.
36) According to TILA, the final APR is considered accurate if it does not vary above or below the APR initially disclosed on the Loan Estimate by which of the following:
A. 1/8 of 1% for an irregular transaction.
B. ¼ of 1% for a regular transaction.
C. ½ of 1% for a regular transaction.
D. ¼ of 1% for an irregular transaction.
A. 1/8 of 1% for an irregular transaction.
B. ¼ of 1% for a regular transaction.
C. ½ of 1% for a regular transaction.
D. ¼ of 1% for an irregular transaction.
answer
The correct answer is D. For information about an irregular transaction, move to the next question.
37) TILA defines an irregular transaction as any of the following, except:
A. One large advance equaling at least three (3) installment payments.
B. Multiple advances.
C. Irregular payment periods.
D. Irregular payment amounts.
A. One large advance equaling at least three (3) installment payments.
B. Multiple advances.
C. Irregular payment periods.
D. Irregular payment amounts.
answer
The correct answer is A. This is not one of the characteristics of an irregular transaction.
38) If a change renders the APR inaccurate prior to closing, the Mortgage Disclosure Improvement Act (MDIA, 2009) requires which of the following:
A. That the borrower be given a corrected disclosure of the monthly payments.
B. That the borrower be given a corrected disclosure of the APR only.
C. That the borrower be given a corrected disclosure of all terms.
D. That the borrower be given a corrected disclosure of the total finance charge.
A. That the borrower be given a corrected disclosure of the monthly payments.
B. That the borrower be given a corrected disclosure of the APR only.
C. That the borrower be given a corrected disclosure of all terms.
D. That the borrower be given a corrected disclosure of the total finance charge.
answer
The correct answer is C. This in the interest of consumer protection and having all of the material facts in hand.
39) Redisclosure of the APR triggers an additional waiting period of which of the following:
A. Three (3) days.
B. Three (3) business days.
C. Seven (7) days.
D. Seven (7) business days.
A. Three (3) days.
B. Three (3) business days.
C. Seven (7) days.
D. Seven (7) business days.
answer
The correct answer is B. This is a statement of fact, according to Reg. Z of TILA.
40) Which of the following statements are true regarding federally mandated waiting periods prior to closing a loan:
A. They are federal mandates and there are no exceptions.
B. There are exceptions for holidays when spending money is needed.
C. There are exceptions such as a bona fide personal financial emergency, like imminent foreclosure.
D. Only state guidelines permit exception.
A. They are federal mandates and there are no exceptions.
B. There are exceptions for holidays when spending money is needed.
C. There are exceptions such as a bona fide personal financial emergency, like imminent foreclosure.
D. Only state guidelines permit exception.
answer
The correct answer is C. This is a statement of fact.
41) Which of the following best describes the 3-7-3 rule:
A. Three on, seven off, three on.
B. Initial disclosure given three days after receipt of application, closing seven days after that, and an additional three day wait if corrected disclosures have to be issued.
C. Three day wait for application, seven day wait for approval, three day wait to close.
D. Initial disclosures given three business days after receipt of application, closing permitted seven business days after that,, and an additional three business day wait if corrected disclosures have to be issued.
A. Three on, seven off, three on.
B. Initial disclosure given three days after receipt of application, closing seven days after that, and an additional three day wait if corrected disclosures have to be issued.
C. Three day wait for application, seven day wait for approval, three day wait to close.
D. Initial disclosures given three business days after receipt of application, closing permitted seven business days after that,, and an additional three business day wait if corrected disclosures have to be issued.
answer
The correct answer is D. This is accurate according to TILA.
42) According to TILA, a three (3) business-day right of rescission is available for consumers for all of the following situations, except:
A. A purchase-money loan on a personal residence.
B. A refinance on a personal residence.
C. Home improvement loans.
D. Home equity loans.
A. A purchase-money loan on a personal residence.
B. A refinance on a personal residence.
C. Home improvement loans.
D. Home equity loans.
answer
The correct answer is A. No right of rescission is available for a purchase-money loan on a personal residence, or for construction loans, commercial loans, or loans on vacation homes or second homes.
43) Regarding the right to rescind under TILA, consumers may exercise the right to rescind under any of the following circumstances, except:
A. Until midnight of the third business day following loan consummation.
B. Until midnight of the third business day following delivery of the required rescission notice.
C. Until midnight of the third business day following delivery of all material disclosures.
D. Until midnight of the third business day following the final inspection of the property.
A. Until midnight of the third business day following loan consummation.
B. Until midnight of the third business day following delivery of the required rescission notice.
C. Until midnight of the third business day following delivery of all material disclosures.
D. Until midnight of the third business day following the final inspection of the property.