Session9 E X A M I N A T I O N P R E P NMLS - Mortgage

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MORTGAGE LOAN ORIGINATOR

EXAM PREPARATION

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MORTGAGE LOAN ORIGINATOR

EXAM PREPARATION

PRESENTED BY

MITCHEL MEDIGOVICH, CMC

INSTITUTE OF MORTGAGE AND REAL ESTATE EDUCATION, INC.


OVER VIEW OF GROUP STUDY

Discussion of the exam process Weighting of exams Strategies National Exam Topics State Exam Topics Practice Questions


THE EXAM PROCESS


THE EXAM PROCESS

Register on line with NMLS Pay for two exams, national and Arizona Total Cost $161

Make two appointments National exam Arizona exam


THE EXAM PROCESS

Do not take – Purse Wallet Money Pens Keys Computer or calculator PDA


THE EXAM PROCESS

Take with you Government issued picture ID Your registration confirmation

Relax


QUESTIONS AND TIMING

National component 150 minutes

100 questions 90 are used for scoring

Arizona 90 minutes

50-60 questions 50 used for scoring


SUBJECT MATTER WEIGHTING OF EXAMS


THE NATIONAL EXAM

WEIGHTING

1. Federal Mortgage Related Laws 35%

2. General Mortgage Knowledge 25%

3. Mortgage Loan Origination Activities 25%

4. Ethics 15%


THE STATE EXAMWEIGHTING

1. Dept. of Financial Institutions 5%

2. State Law & Regulation Definitions 10%

3. License Law & Regulations20%

4. Compliance50%

5. Disciplinary Action 10%

6. Arizona Unique State Test Areas 5%


STRATEGIES


Strategies

For multiple choice exams 1 out of 4 potential answers

Typically 2 answers are possible

Eliminate that which you know is incorrect

Do not “over think” the question

Do not “read between the lines”


Strategies

Stick with your first choice Changing answers is often wrong

Take your time to read the entire question

Read every answer


Study Tips

What is the purpose of a law

Whom does it cover

What is a covered transaction

What is an uncovered transaction

What is required of a lender


NATIONAL EXAM TOPICS


Truth in Lending Act

The Truth In Lending Act regulates which of the

following loan transactions:

A. All owner occupied properties

B. All rental properties of four or more units

C. Only those consumer related transactions above

the Average Prime Offered Rate

D. Loans on any dwelling


A. Amount of payments, interest rate, and loan amount only

B. Amount of interest, late charges and recording fees only

C. Annual percentage rate, total of payments amount financed and finance charges

D. Sale price of a property, down payment, and terms of the loan

Truth In Lending is intended to provide borrower’s what information


A. The total interest the borrower will pay over the note rate

B. The total cost of borrowing money including pre paid finance charges the borrower will pay, expressed as a percentage rate

C. Only the pre paid finance charges the borrower will pay, expressed as an interest rate

D. Pre paid finance charges and non prepaid finance charges the borrower will pay over the life of the loan

The term Annual Percentage Rate most nearly means:


A. Origination fees

B. Processing fees

C. Flood certification fees

D. Administration fees

Prepaid finance charges are all of the following except


Equal Credit Opportunity Act

Requires lenders to treat all borrowers equally

Prohibits asking about:

Child bearing plans or practices Whether borrower is widowed or divorced


The Equal Credit Opportunity Act permits a lender to:

A. Ask the borrowers age

B. Deny credit if a borrower is on public assistance

C. Require a borrower to use their married name

D. Deny a borrower the right to know why a loan

was denied


The Equal Credit Opportunity Act permits a lender to:

A. Ask the borrowers age

B. Deny credit if a borrower is on public assistance

C. Require a borrower to use their married name


was denied


The Equal Credit Opportunity Act prohibits a lender from:

A. Allowing co-borrowers or guarantors on a loan

B. Allowing a co-borrower that is not a spouse

C. Requiring a borrower to use their married name


was denied


Real Estate Settlement Procedures Act

Provides uniform disclosure of costs

Provides uniform settlement statements

Prohibits Kickbacks


A. Land title record keeping

B. Disclosures for land transactions

greater than 25 acres

C. Subdivision reports

D. Water rights on vacant land

RESPA regulates disclosures for loan costs and


A. The agentB. The mortgage brokerC. The borrower D. The loan originator

Effective January 1, 2010 according to RESPA if the interest rate on the loan is sufficient to create a premium who may receive the premium?


Which law regulates the amount of funds a lender may collect for the

impound account?

A. RESPA

B. TILA

C. HMDA

D. MIDA


Home Ownership and Equity Protection Act

Known as HOEPA – Section 226.32 of

TILA

Requires additional disclosures in

covered transactions

Measured by “triggers”


A. 150 basis points above the triggerB. 350 basis points above the trigger C. 800 basis points above the triggerD. 10% greater than the trigger

If a Lender makes a first lien HOEPA loan, the APR is most likely more than


A. 150

B. 250

C. 350

D. 450

In 2008, Regulation Z created a new protected class of borrowers. The Higher Priced Mortgage Act (HPM) established a threshold for second liens of how many basis points above the index:


Home Mortgage Disclosure Act

Requires lenders to disclose whom they

make loans to

Allows the public to review lending

practices of a bank, mortgage banker,

savings and loan, credit union


HMDA requires lenders report the following information on loans made

A. Only new home purchases

B. Only new home purchases and refinances

C. New home purchases, refinances and

improvement loans

D. Only refinances and improvement loans



A. Only new home purchases

B. Only new home purchases and refinances

C. New home purchases, refinances and

improvement loans

D. Only refinances and improvement loans



A. Age and race of a borrower

B. Age, race, gender and income of a borrower

C. Sex, age, gender, marital status of a borrower

D. Race, gender, income, loan type, disposition


Depository Institutions Deregulation

and Monetary Control Act

Signed by President Carter in 1980

Lifted regulations for deposit rates

Permitted certain institutions to venture in to other

loan and investment types


A. Community Banks

B. Savings and Loan Associations

C. The Federal Home Loan Bank Board

D. Credit Unions

One of the effects of the Depository Institutions and Deregulation Act was to authorize which institutions to invest up to 20% of their assets in consumer loans, commercial paper and debt securities:


A. The same for Community Banks and Savings and Loan Association

B. Higher for Savings and Loan Associations

C. Controlled by The Federal Home Loan Bank Board

D. Higher for Credit Unions and National Banks

Prior to passage of the Depository Institutions Deregulation Act the interest rate paid to depositor was:


A. The same for Community Banks and Savings and Loan Association

B. Higher for Savings and Loan Associations

C. Controlled by The Federal Home Loan Bank Board

D. Higher for Credit Unions and National Banks

Prior to passage of the Depository Institutions Deregulation Act the interest rate paid to depositors was:


Alternative Mortgage Transaction Parity Act

Lifted regulation on Savings and Loan Industry and

state banks

Permitted state banks to engage in alternate loan

programs ARM

Negative Amortized loans


Prior to the passage of The Alternative Mortgage Transaction Parity Act Savings and Loan Institutions were permitted to engage in only the following:

A. Home and construction loansB. Any loans secured by real estateC. Commercial loans in their immediate

communityD. Variable rate mortgages


Equal Opportunity Credit Act

Prohibits a lender from declining a loan on

the basis of the borrowers:SexNational originReligionMarital statusAge


A lender may deny a borrower a loan on the basis of all of the following except:

A. The borrower is on public assistance

B. The borrower does not have tax returns to support income

C. The borrower has obtained a loan for the down payment

D. The borrower has changed employers more than once in two years


A lender may deny a borrower a loan if :

A. The borrower is subject to the draft

B. The borrower is under 21 yeas of age

C. The borrower is working in a combat zone

D. The borrower is over 62 years of age and is expected to retire within 1 year


A lender may deny a borrower a loan if :

A. The borrower is under 21 yeas of age

B. The borrower is subject to the draft

C. The borrower is working in a combat zone

D. The borrower is over 62 years of age and is expected to retire within 1 year


The Fair Housing Act

Title VIII of the Civil Rights Act of 1968 which prohibits housing discrimination on the basis of

Race Color Religion National origin Sex Handicap Familial Status


The term Red Lining most nearly means?

A. Making loans only in the highest income areas

B. Making loans only in the lowest income areas

C. Complying with CRA (Community Reinvestment Act)

D. Refusing to make loans in economically depressed areas


SAFE Act

Requires registration of Mortgage Loan Originators

Each MLO will have a national identification number

Requires 20 hours of pre-licensing education


The SAFE Act requires every mortgage loan originator employed by a national bank to attend the following courses:

A. Ethics

B. Underwriting

C. Federal Law

D. None of the above


The SAFE Act requires every mortgage loan originator employed by a national bank to attend the following courses:

A. Ethics

B. Underwriting

C. Federal Law



The SAFE Act requires how many hours of Federal Law

A. 2

B. 4

C. 3

D. 8


The SAFE Act requires how many hours of Federal Law for pre-licensing education

A. 2

B. 3

C. 6

D. 8


Fair Credit Reporting Act

The purpose of the act is to: Require that consumer reporting agencies adopt

procedures for meeting the needs of commerce For consumer credit and insurance, Which is fair and equitable to the consumer and

is Confidential and accurate


Pursuant to the Fair Credit Reporting Act a lender may obtain a credit report if the borrower provides:

A. Written permission only

B. Oral or written permission

C. A lender does not need permission if the borrower completes an application

D. Oral, written or other electronic delivery of permission


A credit report may be used for the following purposes

A. For employment purposes

B. For a loan request

C. By an insurance company

D. All of the above


If a consumer is denied a loan or employment based on information

contained in a credit report

A. The consumer does not have a right to the report held by the lender/employer

B. The consumer may request a free copy from the credit reporting agency within 3 business days

C. The lender must pay for a credit report

D. All of the above


A credit reporting agency must exclude the following information from a consumers report

A. Bankruptcy information greater than 10 years old

B. Civil suits and judgments greater than 10 years old

C. Collections and paid tax liens greater than 7 years old

D. All of the above


Privacy Act (Do Not Call)

Regulated by the Federal Trade Commission

Established a registry for consumers who do not wish to have sales calls

The Privacy Act requires agencies to send a written acknowledgment not later than 10 days after an individual submits a request to …delete a record from the system. See 5 U.S.C. 552a(d)(2)(A)


Fair and Accurate Credit Transaction Act

Establishes three sets of requirements For users of credit reports For all financial institutions that arrange

credit For credit card issuers

Requires financial institutions and creditors to develop and implement written identity theft prevention programs


FHA Loans

Developed after the depression

Created a mortgage insurance program

Protects lenders (and depositors) in the event of mortgage loan default

Establishes loan limits by area


FHA Mortgage Insurance

Up Front Mortgage Insurance (UFMIP) – 1.75%

Monthly mortgage insurance is .55% when loan term is greater then 15 years


FHA Mortgage Insurance

Monthly mortgage insurance is .25% when loan term is 15 years or less

Monthly MI will be paid until the loan reaches 78% with a minimum of 5 years


FHA LOANS - OCCUPANCY

Borrower is required to occupy property as primary residence within 60 days from COE & intend to continuously occupy property for 12 months

Exceptions: Streamline refinances without appraisal 203K (Rehab Loans) HUD Repossessed Homes


Mortgage Insurance for FHA loans requires the borrower to pay how much down payment from their own funds?

A. 1.5% plus closing costs

B. 2.5% and no closing costs

C. 3.5% with or without closing costs

D. 5% with seller contribution


What is the maximum financing concession for an FHA loan?

A. 6% of the Loan Amount

B. 5% of the Base Loan Amount

C. 6% of the Sales Price

D. Depends on the LTV


Appraisals

Appraisers licensed in each state

Uniform Standards of Appraisal Practice (USPAP) required after 1989 when FIRREA was passed

Discussion of the three methods of valuation


A. To protect the public from bad lenders

B. To require that appraisers be competent

C. To establish uniform standards of appraisals

D. To protect federal financial and public interests in real estate transactions

FIRREA – The Financial Institutions Reform, Recovery and Enforcement Act was passed in 1989 for what purpose?


Loan Underwriting

Quantification of borrowers’ ability to repay a debt

Application of risk mitigation measures

Analysis of data collected in the application process


If a borrower has a gross monthly income of $4,755 and $2,960 in revolving debts, what would the debt to income ratio be

A. 62%

B. 52%

C. 42%

D. 64%


If a borrower has a gross monthly income of $4,755 and a house payment of $1600 per month, what could their maximum revolving debt be to keep the DIT at 36%

A. $1,180.00

B. $111.80

C. $1,711.80

D. $3,155.00


Gramm-Leach-Bliley Act

Requires protection of consumer

information

Requires lenders to allow a borrower to

opt-out of sale or transfer of their

information


A. Protect consumers privacy

B. Require all financial institutions to provide consumers an op-out before disclosing consumer information to third parties

C. Provide a disclosure about the a borrowers personal information financial institutions collect and what they do with that information

D. All of the above

The Gramm-Leach-Bliley Act (GLB), passed in 2000 is best described as an act to:


A. Sales of money orders

B. Credit counselors

C. Relocation services that assist

individuals with financing for moving

D. All of the above

Which of the following are examples of businesses that engage in financial activities under GLB?


Consumer Credit Protection Act

Meaningful disclosure of credit terms so that

consumers will be able to compare the

various credit terms available

To assure a meaningful disclosure of the

terms of leases of personal property for

personal, family, or household purposes


Consumer Credit Protection Act

Does not apply to the following:

Credit transactions involving extensions of credit primarily for business, commercial, or agricultural

(2) Transactions in securities or commodities accounts

(3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property to be used as the principal dwelling of the consumer in which the total amount financed exceeds $25,000


Consumer Credit Protection Act disclosures may be waived if the consumer:

A. Has an annual income of more than $200,000

B. Has net assets in excess of $1,000,000

C. Gives a handwritten waiver, signed, and dated before the loan is made

D. All of the above


Red Flag Rules

A Red Flag is a pattern, practice or activity

indicating possible existence of identity theft

including:

1. Alerts, notifications, or other warnings from consumer reporting agencies or service providers such as fraud detection services;

2. Suspicious documents


What’s a Red Flag?

3. Suspicious personal identifying information, such as a suspicious address change;

4. Unusual use of, or other suspicious activity of a covered account


What’s a Red Flag?

5. Notice from customers and/or victims of id

theft, law enforcement, or others regarding

possible identity theft in connection with

covered accounts


A lender should take all of the following actions if it suspects identity theft, except:

A. Ask the client for their mothers maiden name

B. Ask for additional identification

C. Do not open a new account

D. Call the Arizona Department of Financial Institutions


A lender should all of the following actions if it suspects identity theft, except:

A. Ask the client for their mothers maiden name

B. Ask for additional identification

C. Do not open a new account

D. Call the Arizona Department of Financial Institutions


Federal Truth In Advertising


Advertising

1. Advertising “fixed” if the payment or rate will

change at any time.

2. Advertising a product that is not available

3. Advertising “government loans” or “government supported” loans that are not


Advertising

4. Mail advertising that uses the current lenders name prohibited unless:

the letter states the advertisers name and discloses that advertiser is not the same as

current lender.


In Arizona a Mortgage Loan Originator may advertise independently of their company if the MLO:

A. Uses their personal NMLS number

B. Uses their personal and company NMLS numbers

C. Has written permission from the company



Advertising

“Equal prominence and close proximity” required for advertizing loan terms such as

Balloon Payments Must state amount that will be due Must state when balloon will be due


The Patriot Act

USA PATRIOT Act of 2001, requires financial institutions to implement a customer identification program to verify the identities of customers opening new accounts.


The Patriot Act

Bank Secrecy Act regulations requires that financial institutions:

implement a written risk-based customer identification program;

maintain records, including customer information and methods, used to verify customers' identities; and

compare the names of new customers against government lists of known or suspected terrorists or terrorist organizations when such lists are provided by their federal regulator.


One of the objectives of the Patriot Act is

A. To prevent the acquisition of US assets by foreign persons

B. To prevent money laundering

C. To promote Buy American Policies

D. All of the above


Flood Disaster Protection Act

Requires lenders that make loans on

federally related transactions to have

flood insurance

Establishes minimum requirements for

flood insurance


A. Less than the replacement value of the property and personal property

B. Expired in less than 5 years after the life of the loan

C. Less than the replacement cost of the structures less the estimated land cost

D. Less than the appraised land value

Where flood insurance is a requirement of a mortgage loan, the amount of insurance must not be


Fraud

Misleading or false statements

Deception

Diversion of money or other assets

Conspiracy to deceive


In Arizona, a person may be complicit in fraud if a person:

A. Knowingly records any document in connection with a fraudulent loan

B. Is aware that information used when obtaining a loan was false or misleading

C. Accepted money from a fraudulent loan

D. All of the above


Predatory Lending

Identification of abusive lending practices

Identify federal and state laws that

address predatory lending


In response to increased consumer complaints about predatory practices the following Acts were passed:

A. Home Ownership Equity Protection Act

B. Higher Priced Mortgage Act

C. Mortgage Disclosure Improvement Act

D. All of the above


Ethical Behavior

Subjective scenarios where participants

must decided which are right or wrong


A mortgage loan originator charges two points on every loan. However if a borrower fails to provide timely information the MLO will increase the processing fee by $250.00. Is this ethical?

A. Yes, a lender may be compensated for additional

work

B. No, this action is a violation of the Equal

Opportunity Credit Act and demonstrates

inconsistent practices


VETERANS ADMINISTRATION LOANS

Serviceman’s Readjustment Act of 1944

Helped stimulate growth after WWII

VA is authorized to guarantee loans to purchase or construct homes for eligible veterans.


The following are considered benefits of VA loans except:

A. 100% Financing

B. Low monthly mortgage insurance premiums

C. Assumable mortgage

D. Right to prepay without penalty


To be eligible for a VA loan the applicant

may be one of the following except:

A. Active duty veterans

B. Widows of veterans who have not remarried

C. MIAs or POWs

D. Reserve National Guard personnel


The maximum DTI for a VA loan is

A. An overall debt ratio of 41%

B. An overall debt ratio of 45%

C. A housing debt ratio of 36%

D. A housing debt ratio of 28%


Adjustable Rate Mortgages

Typically identified by period that rate is

fixed and term adjustable there after

Tied to an index

Usually has a margin

Sometimes ARM loans have Caps


At close of escrow the interest rate on a 3/1 ARM is 5.75%. The loan has a life cap of 5 and an semi- annual cap of 1. In year 2 of the loan, if the index was 4.5% and the margin is 2.75% what is the interest rate for this loan?

A. 7.25

B. 8.5

C. 6.275

D. 5.75


A. ARM loans

B. VRM loans

C. Negative amortization loans

D. Pay option loans

Alternative mortgages under the Garn-St. Germain Act were consider to be all of the following except:


Title Insurance and Escrow

Types of title insurance Standard

Alta

Mortgagee’s insurance

Mortgagor’s insurance

Deeds and conveyance documents


A. Notarized

B. Recorded

C. Delivered

D. Whichever occurs first

Title to property passes when the deed is:


A. An easement by prescription B. Adverse possession C. Assemblage D. Eminent domain

If you watch your neighbor cross a corner of your property every day and you do not give permission for the neighbor to cross, you may be at risk of


Real Estate Sales Contracts

Participants must

Have command of real estate terminology

Understand Arizona real estate and

subdivision law

Know the difference with alternate types of

financing agreements


A. A granteeB. A grantorC. Words of conveyanceD. Consideration

The ceremonial passing of a clod of earth in early English land transfers has been replaced by


Which of the following requires a public sale if the borrower defaults

A. Breaking strict performance

B. Forcible entry and possession

C. Deed in lieu of foreclosure

D. Exercising power of sale


Mortgage Disclosure Improvement Act

Effective July 30, 2009

No collection of fees, except credit report, prior to disclosures

Early Disclosures – 3 business days from application


Pursuant to MDIA, the tolerance of the Annual Percentage Rate may be greater

than

A. .5%

B. .0125%

C. 1.25%

D. .125%


A. Reaffirming the requirement of providing disclosures three days after application for a loan

B. Requiring a minimum of seven (7) days waiting time after acceptance of an application before loan closing

C. Requiring adherence to tolerance of the APR of .125%

D. Elimination of payment of loan discount fees to mortgage brokers

In 2009 Congress passed the Mortgage Disclosure Improvement Act for all of the following purposes except:


If a TIL disclosure is out of tolerance the loan originator must

A. Provide a new written disclosure and give the borrower a new 3 day cooling off period

B. Redisclose at close of escrow

C. Give the borrower a 7 day right of rescission

D. Give the borrower a new disclosure 60 days after close of escrow


STATE EXAM TOPICS


How DFI Regulates

Empowerment of the Superintendant What statutes govern

Mortgage bankers Mortgage brokers

Record keeping Accounting Prohibited Acts


Superintendent’s Powers

Require appropriate records, documents, information and reports from any financial institution or enterprise

Examine or cause to be examined the business and affairs of any enterprise … at the superintendent's discretion … least once in a five year period


The license for a mortgage broker, mortgage banker or mortgage loan originator is valid:

A. For a one year period

B. If each completes the required continuing education units during the preceding year

C. If not suspended for any reason

D. All of the above


Mortgage Bankers and broker must keep corporate records for

A. 2 years

B. 5 years

C. 2 years from origination

D. Indefinitely


The license number of a mortgage broker or banker must be on all of the following except:

A. Promotional items

B. Use of the company name at charity events

C. Business cards



If properly licensed the following may be paid a fee related to a loan except:

A. Other mortgage lenders

B. Lead generators

C. Processing companies

D. Legal entities as front for loan officers


Every mortgage loan file must contain

the following except

A. The borrowers tax returns

B. A written agreement for fees and documents

C. Documents relative to the disposition of the loan

D. All correspondence with the borrower


PROHIBITED ACTS

Mortgage Bankers may not make a loan of $10,000 or less that is not secured by a mortgage lien

Mortgage Brokers may not make a loan of $5,000 or less that is not secured by a mortgage lien


PROHIBITED ACTS6-947 N-O

Licensees may not record a Deed of Trust if the money is not available to disburse unless

Mortgage banker/broker informs borrower in writing Provides a definite date that the funds will be

available Obtains written permission from borrower for delay


A. An estoppel certificate.

B. An affidavit of value so the taxes can be equitably billed to the property

C. A Release of Lien and Reconveyance of title

D. A Defeasance lien

In Arizona, when a deed of trust is satisfied, an instrument is recorded. This instrument is:


A. Usury

B. High rate financing

C. Violation of Section 8

D. Predatory lending

If a lender is accused of charging more than the legal rate of interest, the lender is accused of?


When a mortgage is used, the lender is known as the:

A. Mortgagee

B. Mortgagor

C. Trustor

D. Trustee


In Arizona, mortgage bankers and brokers are permitted to make unsecured loans

True False


A responsible party for a mortgage banker or brokers license must be;

A. a natural person

B. a U.S. Citizen

C. experienced in real estate

D. an officer of the corporation


A responsible party for a mortgage banker and brokers license must be;

A. a natural person

B. a U.S. Citizen

C. experienced in real estate

D. an officer of the corporation


In Arizona, an exclusive agreement to arrange a loan is permitted when the loan is:

A. Above $200,000

B. Below $200,000

C. Net proceeds are above $150,000

D. Net proceeds are below $150,000


Identify the financing agreement that conveys equitable title but not legal title

A. Deed of Trust

B. Deed of Conveyance

C. Contract for Deed

D. Deed of Release


QUESTIONS AND ANSWERS

Please raise your virtual hand if there are others talking. If no one is talking, you

may ask any question.

Session9 E X A M I N A T I O N P R E P NMLS - Mortgage

Education

Transcript of Session9 E X A M I N A T I O N P R E P NMLS - Mortgage