Mortgage Loan Originator Mortgage Loan Originator 4 — Questions and Answers
Question 1: A borrower receives a gift of $15,000 from a parent to use toward a down payment on a conventional loan. What document is required to verify this is not a loan?
- A promissory note from the parent
- A gift letter signed by the donor (Correct answer)
- A notarized affidavit from the borrower
- A bank statement showing the transfer
Correct answer: A gift letter signed by the donor
A gift letter signed by the donor stating the funds are a gift with no repayment expectation is required by lenders for down payment gifts.
Question 2: The Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good-faith determination that a borrower can repay a loan. Which loan category is presumed to comply with the ATR rule?
- Interest-only loans
- Negative amortization loans
- Qualified Mortgage (QM) (Correct answer)
- Balloon payment loans
Correct answer: Qualified Mortgage (QM)
Qualified Mortgages receive a safe harbor or rebuttable presumption of compliance with the ATR rule under CFPB regulations.
Question 3: Which federal law prohibits lenders from using race, color, national origin, religion, sex, familial status, or disability as factors in residential real estate transactions?
- Equal Credit Opportunity Act (ECOA)
- Fair Housing Act (FHA) (Correct answer)
- Community Reinvestment Act (CRA)
- Truth in Lending Act (TILA)
Correct answer: Fair Housing Act (FHA)
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on the seven protected classes.
Question 4: An MLO fails to renew their state license before it expires and continues originating loans. Under the SAFE Act, this individual is:
- Subject to a grace period of 60 days before penalties apply
- Operating illegally and subject to fines and potential criminal prosecution (Correct answer)
- Permitted to originate under a temporary license automatically issued by NMLS
- Only required to pay a late renewal fee with no other consequences
Correct answer: Operating illegally and subject to fines and potential criminal prosecution
Originating loans without a valid license is a violation of the SAFE Act, exposing the individual to fines and potential criminal penalties.
Question 5: In mortgage lending, what is the purpose of a title search?
- To determine the market value of the property
- To verify the property's structural integrity
- To identify any liens, encumbrances, or ownership defects on the property (Correct answer)
- To calculate the annual property tax assessment
Correct answer: To identify any liens, encumbrances, or ownership defects on the property
A title search examines public records to uncover any claims, liens, or defects that could affect the lender's or buyer's ownership rights.
Question 6: A USDA Rural Development Guaranteed loan requires no down payment but does include which of the following fees?
- Mortgage Insurance Premium (MIP) and annual premium
- Upfront Guarantee Fee and annual fee (Correct answer)
- Funding Fee paid to the VA
- Private Mortgage Insurance (PMI) only
Correct answer: Upfront Guarantee Fee and annual fee
USDA loans charge an upfront guarantee fee (typically 1% of the loan amount) and an annual fee (typically 0.35%) instead of traditional PMI.
Question 7: Under TRID, the Closing Disclosure must be provided to the borrower at least how many business days before consummation?
- 1 business day
- 2 business days
- 3 business days (Correct answer)
- 5 business days
Correct answer: 3 business days
TRID requires lenders to deliver the Closing Disclosure at least three business days before loan consummation.
Mortgage Loan Originator Mortgage Loan Originator 4
A borrower receives a gift of $15,000 from a parent to use toward a down payment on a conventional loan.
What document is required to verify this is not a loan?