Mortgage Loan Originator Mortgage Loan Originator 2 — Questions and Answers
Question 1: Under RESPA, a Kickback occurs when an MLO receives a fee for referring a borrower to a settlement service provider without providing additional services. What is the penalty for a RESPA Section 8 violation?
- Warning letter and mandatory training
- Fine up to $10,000 and/or up to 1 year imprisonment (Correct answer)
- License suspension for 30 days
- Repayment of the referral fee only
Correct answer: Fine up to $10,000 and/or up to 1 year imprisonment
RESPA Section 8 violations can result in fines up to $10,000 and/or imprisonment of up to one year per violation.
Question 2: A borrower's debt-to-income (DTI) ratio is calculated using gross monthly income. If a borrower earns $6,000/month gross and has total monthly debt obligations of $2,100, what is their DTI ratio?
- 28%
- 30%
- 35% (Correct answer)
- 40%
Correct answer: 35%
DTI = $2,100 / $6,000 = 0.35, or 35%.
Question 3: Which act requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a complete loan application?
- RESPA
- TILA
- TRID (TILA-RESPA Integrated Disclosure) (Correct answer)
- HMDA
Correct answer: TRID (TILA-RESPA Integrated Disclosure)
TRID, effective October 2015, requires the Loan Estimate to be delivered within three business days of application.
Question 4: An MLO is offering a borrower a slightly higher interest rate in exchange for lender-paid closing costs. This arrangement is known as:
- Premium pricing
- Par pricing
- Discount pricing
- Yield spread premium (Correct answer)
Correct answer: Yield spread premium
A yield spread premium is compensation paid by a lender to a broker when the borrower accepts an above-par interest rate.
Question 5: Under the Homeowners Protection Act (HPA), a borrower with a conventional loan can request cancellation of PMI when the loan balance reaches what percentage of the original property value?
- 75%
- 78%
- 80% (Correct answer)
- 85%
Correct answer: 80%
Under the HPA, borrowers can request PMI cancellation when the LTV ratio reaches 80% of the original purchase price.
Question 6: A borrower applies for a loan and the lender denies the application. Under the Equal Credit Opportunity Act (ECOA), within how many days must the lender provide an adverse action notice?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
ECOA requires creditors to notify applicants of adverse action within 30 days of receiving a completed application.
Question 7: Which type of mortgage index is considered the most stable because it is based on a moving average of Treasury yields over a longer period?
- Prime Rate
- SOFR
- 11th District Cost of Funds Index (COFI) (Correct answer)
- 1-Year Constant Maturity Treasury (CMT)
Correct answer: 11th District Cost of Funds Index (COFI)
The COFI is calculated as a weighted average of interest expenses for the 11th Federal Home Loan Bank District and changes slowly, making it the most stable common ARM index.
Mortgage Loan Originator Mortgage Loan Originator 2
Under RESPA, a Kickback occurs when an MLO receives a fee for referring a borrower to a settlement service provider without providing additional services.
What is the penalty for a RESPA Section 8 violation?