Mixed Deck — All Mortgage Topics Flashcards

In the context of Uniform State Content, what does the term 'high-cost mortgage' threshold refer to?

Answer: A state-defined APR or points-and-fees limit that triggers additional disclosure requirements

States define high-cost mortgage thresholds based on APR or points-and-fees levels, which trigger additional Uniform State Content disclosure obligations.

What is the meaning of 'clear to close' (CTC) in the mortgage origination process?

Answer: The underwriter has satisfied all conditions and the loan is approved for closing

CTC means all underwriting conditions have been satisfied and the lender authorizes the closing agent to proceed with the loan closing.

Which document is used to verify a borrower's income from self-employment during underwriting?

Answer: Tax returns with Schedule C or K-1

Self-employed borrowers typically provide two years of personal tax returns including Schedule C or K-1 to document business income.

Which act requires federally chartered depository institutions to meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods?

Answer: Community Reinvestment Act (CRA)

The CRA of 1977 requires banks to serve the credit needs of entire communities, including LMI areas, and regulators examine and rate CRA performance.

A prepayment penalty on a Qualified Mortgage (QM) is prohibited after how long from loan consummation?

Answer: 3 years

QM rules prohibit prepayment penalties on loans after the first three years, and even during years 1-3 the penalty amounts are strictly capped.

A borrower's annual percentage rate (APR) exceeds the stated interest rate on a fixed-rate mortgage primarily because the APR includes:

Answer: Certain fees and costs in addition to the interest rate

APR, as disclosed under TILA, incorporates the interest rate plus certain fees and costs, giving a broader measure of borrowing cost.

A 'chunking' scheme in real estate involves an investor convincing lenders to finance multiple properties simultaneously by:

Answer: Hiding the multiple simultaneous loan applications from each lender

In chunking, an investor hides simultaneous loan applications from each lender to avoid debt-to-income ratio disqualification, constituting fraud.

A lender issues a 'revised Loan Estimate' to a borrower. Which of the following is a valid changed circumstance that allows this revision?

Answer: An Act of God causes the property to be damaged before closing

A natural disaster that damages the property is a valid changed circumstance allowing the lender to issue a revised Loan Estimate.

What was the 'National Mortgage Settlement' of 2012?

Answer: A $25 billion agreement between 49 states and the five largest mortgage servicers over foreclosure abuses

The 2012 National Mortgage Settlement required Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial to provide $25 billion in homeowner relief over robo-signing and foreclosure fraud.

Under TILA, the Annual Percentage Rate (APR) must be disclosed to within how many basis points for a regular mortgage transaction?

Answer: 1/8 of 1% (12.5 bps)

For regular mortgage transactions, TILA requires the APR to be accurate within 1/8 of 1 percentage point (0.125%).

Which of the following is a mandatory disclosure an MLO must make to borrowers under the SAFE Act?

Answer: Their NMLS Unique Identifier

MLOs are required to provide their NMLS Unique Identifier on all loan documents, initial disclosures, and marketing materials.

The Homeowners Protection Act (HPA) of 1998 primarily addresses which borrower concern?

Answer: Automatic termination of private mortgage insurance (PMI)

The HPA establishes rules for automatic termination and borrower-requested cancellation of PMI on residential mortgages, protecting homeowners from paying unnecessary insurance premiums.

A borrower wants to use gift funds for their entire down payment on a conventional loan. Which statement is correct?

Answer: Gift funds are permitted if accompanied by a gift letter and the donor is an acceptable source

Fannie Mae and Freddie Mac guidelines allow gift funds from acceptable donors (family members, employers, etc.) provided a gift letter is obtained and no repayment is expected.

Which loan program allows a borrower to obtain a mortgage with as little as 3.5% down payment and is insured by a federal agency?

Answer: FHA loan

FHA loans, insured by the Federal Housing Administration, allow borrowers with credit scores as low as 580 to put down just 3.5% of the purchase price. The government insurance reduces lender risk, making these loans accessible to buyers who may not qualify for conventional financing.

An individual works for a state-licensed mortgage lender. Their primary duties involve collecting and packaging loan application documents for the MLO and communicating with the borrower to request follow-up items like pay stubs and bank statements. They do not offer or negotiate loan rates or terms. According to the SAFE Act, which of the following is true?

Answer: This individual is acting as a loan processor and is not required to be a state-licensed MLO.

The SAFE Act defines a mortgage loan originator as someone who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms. An individual who performs purely administrative or clerical tasks, such as collecting documentation and communicating to obtain necessary information at the direction of an MLO, is considered a loan processor or underwriter and is not required to be licensed, provided they are not an independent contractor.

What was the 'originate-to-distribute' model that contributed to the subprime crisis?

Answer: Lenders originate loans intending to sell them, removing incentive to ensure loan quality

The originate-to-distribute model meant lenders earned fees at closing and immediately sold loans, eliminating any long-term stake in whether borrowers could repay.

An MLO who fails the SAFE MLO Test must wait how long before retaking it after a third failed attempt?

Answer: 180 days

After failing the SAFE MLO Test three or more times, a candidate must wait 180 days before retaking the exam.

Under ECOA, when a creditor makes a counteroffer and the applicant does not accept it, the creditor must send an adverse action notice within:

Answer: 90 days of the counteroffer

If an applicant does not accept a counteroffer, ECOA requires the creditor to send an adverse action notice within 90 days of notifying the applicant of the counteroffer.

Under Regulation Z, a refinance on a primary residence gives the borrower a right of rescission period of:

Answer: 3 business days

Borrowers have three business days after closing, delivery of the Notice of Right to Rescind, or delivery of the required disclosures — whichever is latest — to rescind a non-purchase mortgage on their primary home.

A homeowner facing foreclosure is approached by a company promising to save their home if they temporarily sign the deed over to the company. This is an example of:

Answer: Foreclosure rescue fraud / deed theft

Foreclosure rescue fraud involves convincing distressed homeowners to sign over their deed under false pretenses, often resulting in permanent loss of the home.