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Question 1Federal Mortgage Laws and Regulations

Under the Truth in Lending Act (Regulation Z), which disclosure must a mortgage lender provide to a borrower within three business days after receiving a complete application?

  1. The Loan Estimate Correct answer.
  2. The Closing Disclosure
  3. The Home Mortgage Disclosure Act notice
  4. The adverse action notice

Explanation

Regulation Z requires creditors to deliver the Loan Estimate within three business days of receiving a complete application and no later than seven business days before consummation. The Closing Disclosure comes later, at least three business days before closing.

Question 2Federal Mortgage Laws and Regulations

For most closed-end residential mortgage loans, how many business days before consummation must the creditor ensure the consumer receives the Closing Disclosure?

  1. Five business days
  2. One business day
  3. Three business days Correct answer.
  4. Seven business days

Explanation

The TILA-RESPA Integrated Disclosure rule requires the Closing Disclosure to be received by the consumer at least three business days before consummation. This waiting period gives the borrower time to review final terms.

Question 3Federal Mortgage Laws and Regulations

A borrower's Loan Estimate shows an origination charge of $1,200 and a 10 percent tolerance applies. At closing the charge increases to $1,500. What is the maximum permitted increase before a tolerance cure is required?

  1. $60
  2. $150
  3. $300
  4. $120 Correct answer.

Explanation

A 10 percent tolerance allows the actual charge to exceed the estimated charge by no more than 10 percent of the original estimate. Ten percent of $1,200 is $120, so any increase beyond that amount requires a refund to the borrower.

Question 4Federal Mortgage Laws and Regulations

Which loan is generally exempt from the Home Mortgage Disclosure Act reporting requirements?

  1. A home purchase loan originated by a covered depository institution
  2. An open-end line of credit secured by a dwelling
  3. A closed-end loan secured by a first lien on a dwelling
  4. A business-purpose loan secured by a multifamily dwelling Correct answer.

Explanation

HMDA reporting covers closed-end loans and open-end lines of credit secured by a dwelling, but loans made primarily for business or commercial purposes are excluded from the definition of covered loan. A business-purpose multifamily loan therefore falls outside HMDA reporting.

Question 5Federal Mortgage Laws and Regulations

Under HMDA, what is the primary purpose of collecting and reporting the race, ethnicity, and sex of mortgage applicants?

  1. To set the interest rate for the loan
  2. To determine the applicant's creditworthiness
  3. To identify possible discriminatory lending patterns Correct answer.
  4. To calculate the loan-to-value ratio

Explanation

HMDA data are used by regulators and the public to detect whether institutions are serving their communities and to identify possible discriminatory lending patterns. The information has no role in underwriting, pricing, or collateral valuation.

Question 6Federal Mortgage Laws and Regulations

A mortgage loan originator's license lapses while she continues to take applications. Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), what is the consequence?

  1. She may pay a late fee and continue working without interruption
  2. She is acting as an unlicensed originator and subject to enforcement penalties Correct answer.
  3. She may continue originating until the next renewal cycle
  4. She may originate only government-insured loans

Explanation

The SAFE Act requires mortgage loan originators to be licensed or registered and to maintain that status while originating. Operating after a license lapses is unlicensed activity that exposes the originator and employer to civil and criminal penalties.

Question 7Federal Mortgage Laws and Regulations

Under the SAFE Act, what unique identifier must a mortgage loan originator provide to a consumer upon request?

  1. The originator's Social Security number
  2. The NMLS unique identifier Correct answer.
  3. The lender's federal tax identification number
  4. The loan's HMDA control number

Explanation

The SAFE Act requires each mortgage loan originator to obtain an NMLS unique identifier and to provide it to consumers upon request. This identifier allows consumers to access the originator's licensing and disciplinary record.

Question 8Federal Mortgage Laws and Regulations

Which law requires lenders to provide a good-faith estimate of settlement costs and a settlement statement itemizing actual charges at closing?

  1. Fair Credit Reporting Act (FCRA)
  2. Real Estate Settlement Procedures Act (RESPA) Correct answer.
  3. Equal Credit Opportunity Act (ECOA)
  4. Fair Housing Act

Explanation

RESPA governs settlement practices and historically required the Good Faith Estimate and HUD-1 settlement statement, now largely replaced by the Loan Estimate and Closing Disclosure. Its core purpose is to give borrowers advance information about settlement charges.

Question 9Federal Mortgage Laws and Regulations

A title company agrees to pay a real estate broker a fee each time the broker refers a homebuyer to it. Under Section 8 of RESPA, this arrangement is:

  1. Prohibited as an illegal kickback for a referral Correct answer.
  2. Permissible only for federally related mortgage loans
  3. Permissible if the fee is reasonable
  4. Permissible if the fee is disclosed on the Closing Disclosure

Explanation

RESPA Section 8 prohibits giving or receiving anything of value in exchange for the referral of settlement service business involving a federally related mortgage loan. Disclosure or reasonableness of the fee does not cure a prohibited referral arrangement.

Question 10Federal Mortgage Laws and Regulations

Which activity is a permissible affiliated business arrangement under RESPA?

  1. Requiring the borrower to use an affiliated lender
  2. Paying a referral fee to an affiliated title agency
  3. Disclosing the affiliation and receiving only a return on ownership in a settlement provider Correct answer.
  4. Steering borrowers to an affiliate without any disclosure

Explanation

An affiliated business arrangement is permissible when the affiliate actually performs settlement services, the relationship is disclosed, and the only thing of value received is a return on ownership. Required use of an affiliate and undisclosed steering are prohibited.

Question 11Federal Mortgage Laws and Regulations

Under the Equal Credit Opportunity Act, which characteristic is a prohibited basis for denying a mortgage application?

  1. The applicant's debt-to-income ratio
  2. The value of the appraised collateral
  3. The applicant's receipt of public assistance income Correct answer.
  4. The applicant's credit score

Explanation

ECOA prohibits discrimination on several bases, including receipt of public assistance income, as long as that income is lawful and reliable. Credit score, debt-to-income ratio, and collateral value are legitimate underwriting factors.

Question 12Federal Mortgage Laws and Regulations

A lender denies a mortgage application. Under ECOA and Regulation B, when must the adverse action notice generally be provided?

  1. Within 90 days after the application date
  2. Within 10 days after the closing date
  3. Only after the borrower requests a reason in writing
  4. Within 30 days after receiving a completed application Correct answer.

Explanation

Regulation B requires creditors to notify applicants of adverse action within 30 days after receiving a completed application. The notice must include the reasons for the decision or a statement of the applicant's right to request them.

Question 13Federal Mortgage Laws and Regulations

Under ECOA, a lender that receives a written request for the specific reasons for a credit denial must respond within what period?

  1. 60 days
  2. 10 days
  3. 30 days Correct answer.
  4. 45 days

Explanation

When an applicant makes a written request for the reasons for adverse action within 60 days of the notice, the creditor must provide the specific reasons within 30 days of receiving the request. This ensures applicants can understand and challenge the decision.

Question 14Federal Mortgage Laws and Regulations

Which statute requires lenders to obtain and review a borrower's credit report and to provide a notice if the loan is priced based on credit information?

  1. Homeowners Protection Act
  2. Flood Disaster Protection Act
  3. Community Reinvestment Act
  4. Fair Credit Reporting Act (FCRA) Correct answer.

Explanation

The Fair Credit Reporting Act governs the use of consumer credit reports and requires a risk-based pricing notice when a lender uses credit information to set less favorable terms. It also gives consumers rights to dispute and access their credit information.

Question 15Federal Mortgage Laws and Regulations

Under the Fair Credit Reporting Act, what must a lender do if a mortgage application is denied based in whole or in part on information in a consumer credit report?

  1. Provide an adverse action notice identifying the credit reporting agency Correct answer.
  2. Provide the applicant with a copy of the credit report
  3. Send the applicant a risk-based pricing notice
  4. Report the denial to the credit bureau

Explanation

FCRA requires an adverse action notice that identifies the consumer reporting agency used and informs the applicant of the right to obtain a free copy and dispute the information. The lender does not furnish the report itself.

Question 16Federal Mortgage Laws and Regulations

Under the Homeowners Protection Act, when must a borrower's private mortgage insurance automatically terminate on a fixed-rate residential mortgage loan, assuming the borrower is current on payments and no statutory exception applies?

  1. When the property is sold
  2. When the borrower requests cancellation at 90 percent loan-to-value
  3. When the loan balance is first scheduled to reach 78 percent of the original value, based on the original amortization schedule Correct answer.
  4. When the loan is refinanced

Explanation

For a covered fixed-rate loan with the borrower current, PMI automatically terminates when the principal balance is first scheduled to reach 78 percent of the home's original value under the original amortization schedule. The 80 percent threshold concerns borrower-requested cancellation, which has additional conditions.

Question 17Federal Mortgage Laws and Regulations

A borrower with a $200,000 original loan balance wants PMI cancelled based on the original value. At what principal balance does the borrower generally qualify to request cancellation under the Homeowners Protection Act?

  1. $156,000
  2. $180,000
  3. $160,000 Correct answer.
  4. $170,000

Explanation

The Homeowners Protection Act allows a borrower to request PMI cancellation when the principal balance reaches 80 percent of the original value, assuming a good payment history and other conditions. Eighty percent of $200,000 is $160,000.

Question 18Federal Mortgage Laws and Regulations

Under the Flood Disaster Protection Act, what must a lender do before making a loan secured by a building in a Special Flood Hazard Area?

  1. Waive flood insurance for loans under $100,000
  2. Require the borrower to obtain flood insurance in an amount at least equal to the lesser of the loan balance or the maximum coverage available Correct answer.
  3. Rely on the seller's existing flood policy without review
  4. Require flood insurance only if the borrower requests it

Explanation

The Flood Disaster Protection Act requires flood insurance for loans secured by improved real property in a Special Flood Hazard Area in a participating community. Coverage must be at least the lesser of the outstanding loan balance or the maximum amount available under the program.

Question 19Federal Mortgage Laws and Regulations

A lender discovers after closing that a covered loan on a property in a Special Flood Hazard Area lacked required flood insurance. What is the lender's obligation?

  1. Cancel the loan immediately
  2. Take no action because the loan has closed
  3. Report the borrower to the credit bureaus
  4. Force-place flood insurance and notify the borrower Correct answer.

Explanation

When required flood insurance lapses or was never obtained, the lender must notify the borrower and may force-place coverage to protect the collateral. Force-placed insurance is a recognized remedy under the flood insurance rules.

Question 20Federal Mortgage Laws and Regulations

Under the Community Reinvestment Act, what is the primary obligation of regulated depository institutions?

  1. To originate only government-backed loans
  2. To cap interest rates for all borrowers
  3. To report all loan denials to Congress
  4. To meet the credit needs of their entire community, including low- and moderate-income neighborhoods Correct answer.

Explanation

The Community Reinvestment Act requires regulated depository institutions to help meet the credit needs of the communities they serve, including low- and moderate-income areas, consistent with safe and sound operations. Performance is evaluated by regulators.

Question 21Federal Mortgage Laws and Regulations

Which federal law prohibits discrimination in the sale, rental, and financing of housing based on race, color, religion, sex, disability, familial status, or national origin?

  1. Secure and Fair Enforcement for Mortgage Licensing Act
  2. Equal Credit Opportunity Act
  3. Real Estate Settlement Procedures Act
  4. Fair Housing Act Correct answer.

Explanation

The Fair Housing Act prohibits discrimination in housing transactions, including the financing of dwellings, on the listed protected bases. ECOA covers credit decisions more broadly but the Fair Housing Act specifically addresses housing sale, rental, and financing.

Question 22Federal Mortgage Laws and Regulations

A loan servicer receives a qualified written request from a borrower disputing an escrow charge. Under RESPA, the servicer must acknowledge receipt within what period?

  1. 5 business days Correct answer.
  2. 10 business days
  3. 30 business days
  4. 20 business days

Explanation

RESPA requires a servicer to acknowledge a qualified written request within five business days of receipt. A substantive response or correction is generally required within 30 business days, with a possible 15-day extension.

Question 23Federal Mortgage Laws and Regulations

Under RESPA's escrow accounting rules, how must a servicer handle a borrower's escrow account surplus of $50 or more?

  1. Retain it for future disbursements
  2. Transfer it to the lender's reserve account
  3. Refund it to the borrower within 30 days of the annual escrow analysis Correct answer.
  4. Apply it to the principal balance automatically

Explanation

RESPA requires the servicer to refund any escrow surplus of $50 or more to the borrower within 30 days after the annual escrow account analysis. Surpluses below that threshold may be credited instead.

Question 24Federal Mortgage Laws and Regulations

Under the Home Mortgage Disclosure Act, which loan data must a covered institution report for each application?

  1. The borrower's employment history and references
  2. The applicant's credit score and income tax return
  3. The appraiser's license number and comparable sales
  4. The loan amount, loan type, property location, and action taken Correct answer.

Explanation

HMDA requires reporting of loan-level data such as the loan amount, loan type, property location, action taken, and demographic information. Credit scores, tax returns, and appraiser details are not HMDA data fields.

Question 25Federal Mortgage Laws and Regulations

A mortgage lender advertises a loan with a very low teaser rate but does not disclose the actual annual percentage rate. Under Regulation Z, this advertisement is:

  1. Permissible if the rate appears for at least 30 days
  2. Deceptive and noncompliant because triggering terms require the APR to be disclosed clearly and conspicuously Correct answer.
  3. Permissible if the lender verbally discloses the APR at application
  4. Permissible because advertised rates are not regulated

Explanation

Regulation Z requires that when an advertisement states a triggering term such as a rate or payment, the annual percentage rate must also be disclosed clearly and conspicuously. Omitting the APR while promoting a teaser rate is deceptive and violates the advertising rules.

Question 26Federal Mortgage Laws and Regulations

Under the Truth in Lending Act and Regulation Z, which finance charge disclosure must appear in a residential mortgage advertisement that states a specific down payment amount?

  1. The lender's internal underwriting margin
  2. The total of payments over the full loan term
  3. The annual percentage rate, stated with equal prominence Correct answer.
  4. The appraised value of the collateral property

Explanation

Regulation Z requires that when an advertisement states a triggering term such as a down payment, the annual percentage rate must also be disclosed clearly and conspicuously. The APR must be presented with at least equal prominence to the triggering term so consumers can compare credit costs. Total of payments and collateral value are not required advertising disclosures for this trigger.

Question 27Federal Mortgage Laws and Regulations

A mortgage broker pays a $500 fee to a loan originator for each loan the originator closes. Under the Real Estate Settlement Procedures Act, how should this payment be characterized?

  1. An allowable charge when the borrower consents in writing
  2. A prohibited fee for the referral of settlement service business Correct answer.
  3. A permissible payment if disclosed on the closing disclosure
  4. A lawful marketing expense if documented in writing

Explanation

RESPA Section 8 prohibits giving or accepting any fee, kickback, or thing of value pursuant to an agreement to refer settlement service business involving a federally related mortgage loan. A per-loan payment to an originator for closed loans is compensation for referrals, not for goods or facilities actually furnished. Written documentation, disclosure, or borrower consent does not cure the prohibition.

Question 28Federal Mortgage Laws and Regulations

Under the Home Mortgage Disclosure Act and Regulation C, which item is a required reported data field for a covered mortgage application?

  1. The borrower's credit score
  2. The property's census tract Correct answer.
  3. The loan originator's license number
  4. The loan's annual percentage rate

Explanation

Regulation C requires covered institutions to report the census tract of the property securing the loan, along with other application, borrower, and loan characteristics. Credit scores, the APR, and originator license numbers are not HMDA data fields. The census tract supports analysis of lending patterns by geography.

Question 29Federal Mortgage Laws and Regulations

A servicer holds a borrower's escrow account and, at the annual computation, finds a surplus of $75. Under RESPA's escrow rules, what must the servicer do?

  1. Apply the surplus to the next principal payment
  2. Refund the surplus to the borrower within 30 days Correct answer.
  3. Credit the surplus to the following year's tax disbursement
  4. Retain the surplus to offset future escrow shortages

Explanation

When an escrow analysis shows a surplus of $50 or more, the servicer must refund the amount to the borrower within 30 days of the analysis. Smaller surpluses may be credited to the next escrow computation. The servicer may not keep the surplus or redirect it to principal.

Question 30Federal Mortgage Laws and Regulations

Under the Fair Housing Act, which transaction is covered by the prohibition on discriminatory practices?

  1. A bank deciding whether to approve a mortgage application
  2. All of the above residential sale, rental, and financing transactions Correct answer.
  3. A landlord renting a single-family home without advertising
  4. A homeowner selling a residence without a real estate agent

Explanation

The Fair Housing Act reaches the sale, rental, and financing of dwellings, including private sales by owners, rentals without advertising, and mortgage lending decisions. Discrimination based on protected characteristics is prohibited across all these transactions. Coverage does not depend on the use of an agent or on advertising.

Question 31Federal Mortgage Laws and Regulations

A lender subject to the Community Reinvestment Act wants to demonstrate compliance. Which activity best supports its CRA record?

  1. Reducing branch hours in low-income census tracts to cut operating costs
  2. Providing loans and services that meet credit needs in its assessment areas, including low- and moderate-income neighborhoods Correct answer.
  3. Selling all originated loans into the secondary market
  4. Purchasing mortgage-backed securities issued by other institutions

Explanation

The CRA obligates regulated depository institutions to help meet the credit needs of the communities in which they operate, consistent with safe and sound operation, with emphasis on low- and moderate-income areas. Examiners evaluate lending, investment, and service activities within the institution's assessment areas. Purchasing securities or withdrawing services does not affirmatively meet community credit needs.

Question 32Federal Mortgage Laws and Regulations

A mortgage servicer receives a borrower's qualified written request disputing an escrow charge. Under RESPA, what must the servicer do?

  1. Forward the request to the investor and take no further action
  2. Acknowledge receipt within five business days and respond substantively within 30 business days, subject to a permissible extension Correct answer.
  3. Ignore the request unless it is notarized
  4. Respond only after the next escrow analysis cycle

Explanation

RESPA requires a servicer to acknowledge a qualified written request within five business days and to provide a substantive response within 30 business days, with a possible 15-business-day extension if the servicer notifies the borrower. The servicer must also refrain from reporting adverse information during the response period. Forwarding, ignoring, or delaying the request violates these timelines.

Question 33Federal Mortgage Laws and Regulations

A lender denies a mortgage application based partly on a credit report from a consumer reporting agency. Under the Fair Credit Reporting Act, what must the lender provide?

  1. Nothing, because the applicant can obtain the report directly
  2. A copy of the full credit report
  3. The credit score model used, with no other information
  4. A notice of adverse action identifying the reporting agency and stating that the agency did not make the decision Correct answer.

Explanation

When credit is denied or the terms are unfavorable based in whole or in part on information from a consumer reporting agency, the FCRA requires a notice identifying the agency, stating that the agency did not make the credit decision, and informing the applicant of the right to obtain a free copy and dispute accuracy. The lender need not provide the full report.

Question 34Federal Mortgage Laws and Regulations

Under the Homeowners Protection Act, when does private mortgage insurance automatically terminate on a residential mortgage loan with an original principal balance of $200,000, secured by a single-family home?

  1. When the principal balance reaches 80 percent of the original value, based on the original amortization schedule
  2. When the borrower requests cancellation after one year
  3. When the loan becomes 30 days delinquent
  4. When the principal balance reaches 78 percent of the original value, based on the original amortization schedule Correct answer.

Explanation

The Homeowners Protection Act requires automatic termination of PMI when the principal balance reaches 78 percent of the original value of the property, based on the original amortization schedule, provided the borrower is current. Cancellation at 80 percent must be requested by the borrower and is subject to conditions. Delinquency does not trigger termination.

Question 35Federal Mortgage Laws and Regulations

Under the Flood Disaster Protection Act, what must a lender do before making a loan secured by a building located in a Special Flood Hazard Area in a participating community?

  1. Require flood insurance only if the loan exceeds the conforming loan limit
  2. Verify that the borrower has obtained flood insurance in at least the required amount before closing Correct answer.
  3. Rely on the borrower's verbal assurance that coverage exists
  4. Obtain flood insurance only when the property has been previously flooded

Explanation

The Flood Disaster Protection Act requires regulated lenders to determine whether the building is in a Special Flood Hazard Area and, if so, to ensure flood insurance is in place in at least the lesser of the outstanding principal balance or the maximum coverage available under the program. Coverage must be confirmed before closing, and verbal assurance is insufficient.

Question 36Federal Mortgage Laws and Regulations

A lender discovers after closing that a covered loan on a property in a Special Flood Hazard Area lacked required flood insurance. Under the Flood Disaster Protection Act, what must the lender do?

  1. Notify the borrower and purchase flood insurance on the borrower's behalf if the borrower does not obtain it, then charge the borrower for the cost Correct answer.
  2. Cancel the loan immediately and demand full repayment
  3. Take no action because the loan has already closed
  4. Report the deficiency only at the next regulatory examination

Explanation

When a lender finds that required flood insurance was not obtained, it must notify the borrower and, if the borrower fails to obtain coverage, purchase insurance on the borrower's behalf and may charge the borrower for the premiums. Allowing the loan to remain uninsured violates the Act. Cancelling the loan is not the prescribed remedy.

Question 37Federal Mortgage Laws and Regulations

Under the Equal Credit Opportunity Act and Regulation B, which practice is permissible when evaluating a mortgage applicant?

  1. Requiring a female applicant to provide additional documentation of income stability
  2. Considering the applicant's receipt of public assistance income in the same manner as other income Correct answer.
  3. Discounting income derived from part-time employment without any analysis
  4. Refusing to count retirement income because of the applicant's age

Explanation

Regulation B prohibits discrimination on prohibited bases and requires creditors to consider public assistance income in the same manner as other income. Income may not be discounted or documentation requirements varied because of sex, age, or marital status. Refusing retirement income because of age is also prohibited.

Question 38Federal Mortgage Laws and Regulations

A mortgage loan originator's license lapses while she continues to take applications. Under the Secure and Fair Enforcement for Mortgage Licensing Act, which consequence applies?

  1. The originator is subject to civil and criminal penalties for unlicensed activity Correct answer.
  2. The originator may continue working if supervised by a licensed originator
  3. The applications remain valid if the lender later reinstates the license
  4. The originator may operate under the lender's license

Explanation

The SAFE Act requires mortgage loan originators to be licensed or registered and authorizes penalties for individuals who engage in residential mortgage loan origination without a valid license. Acting while unlicensed exposes the originator to civil and criminal liability. A lender's license does not cover an individual originator.

Question 39Federal Mortgage Laws and Regulations

Under the Truth in Lending Act's higher-priced mortgage loan provisions, which loan characteristic generally triggers additional protections?

  1. An annual percentage rate that exceeds the average prime offer rate for a comparable transaction by at least the applicable regulatory threshold Correct answer.
  2. A loan with no prepayment penalty
  3. A loan with a 20 percent down payment
  4. A fixed interest rate for the full loan term

Explanation

A higher-priced mortgage loan is generally identified by an annual percentage rate that exceeds the average prime offer rate by a specified margin. An introductory rate below the fully indexed rate does not, by itself, establish that spread. Higher-priced status can trigger additional protections, subject to applicable coverage rules and exemptions.

Question 40Federal Mortgage Laws and Regulations

A mortgage lender advertises a loan with a very low teaser rate but omits the actual annual percentage rate. Under Regulation Z, how is this advertisement treated?

  1. It is permissible if the advertisement appears only online
  2. It is deceptive and violates the clear and conspicuous disclosure requirement Correct answer.
  3. It is permissible because the teaser rate is disclosed
  4. It is permissible if the rate is labeled introductory

Explanation

Regulation Z requires that mortgage advertisements be accurate and not misleading, and that triggering terms be accompanied by clear and conspicuous required disclosures, including the annual percentage rate. Advertising a low teaser rate while omitting the APR misrepresents the credit terms. Labeling the rate introductory or publishing online does not cure the omission.

Question 41General Mortgage Knowledge

Under RESPA, which document must a mortgage lender provide to a borrower within three business days of receiving a loan application?

  1. The promissory note
  2. The deed of trust
  3. The Loan Estimate Correct answer.
  4. The Closing Disclosure

Explanation

RESPA and Regulation Z require creditors to deliver the Loan Estimate within three business days after receiving an application, disclosing the estimated terms and costs. The Closing Disclosure comes near consummation, while the note and deed of trust are closing documents, not early disclosures.

Question 42General Mortgage Knowledge

A lender advertises a 30-year fixed mortgage at 6.25% with 2 discount points. What is the borrower paying up front for those points on a $300,000 loan?

  1. $1,875
  2. $6,000 Correct answer.
  3. $3,000
  4. $18,750

Explanation

One discount point equals one percent of the loan amount, so two points on $300,000 is 2% of $300,000, or $6,000. Points are prepaid interest that buys a lower note rate.

Question 43General Mortgage Knowledge

Which fee is typically paid by the borrower to obtain a lender's written commitment to guarantee a loan, often associated with government-backed programs?

  1. Recording fee
  2. Funding fee Correct answer.
  3. Appraisal fee
  4. Title insurance premium

Explanation

A funding fee is charged on certain government-backed loans, such as VA loans, to offset the cost of the guarantee to the government. Appraisal, title, and recording fees pay for separate services and are not guarantee charges.

Question 44General Mortgage Knowledge

A borrower's gross monthly income is $6,000 and total monthly housing payment is $1,680. What is the front-end housing ratio?

  1. 24%
  2. 28% Correct answer.
  3. 32%
  4. 36%

Explanation

The front-end ratio divides the housing payment by gross monthly income: $1,680 divided by $6,000 equals 0.28, or 28%. This ratio measures housing expense only, before other debts are added.

Question 45General Mortgage Knowledge

Which entity typically sets the minimum property standards that a lender applies when evaluating a home for FHA financing?

  1. The Consumer Financial Protection Bureau
  2. The Department of Housing and Urban Development Correct answer.
  3. The Federal Reserve Board
  4. The Federal Deposit Insurance Corporation

Explanation

HUD publishes the minimum property requirements that appraisers and lenders use for FHA-insured loans. The Federal Reserve, CFPB, and FDIC regulate other aspects of banking and consumer finance rather than FHA property standards.

Question 46General Mortgage Knowledge

In a deed of trust transaction, which party holds legal title to the property until the loan is repaid?

  1. The servicer
  2. The beneficiary
  3. The trustor
  4. The trustee Correct answer.

Explanation

In a deed of trust, the borrower is the trustor, the lender is the beneficiary, and a neutral trustee holds legal title on the lender's behalf. The trustee may foreclose if the borrower defaults, while the borrower retains equitable title and possession.

Question 47General Mortgage Knowledge

Which law requires mortgage loan originators to register with the Nationwide Multistate Licensing System and Registry?

  1. The Fair Credit Reporting Act
  2. The Real Estate Settlement Procedures Act
  3. The Secure and Fair Enforcement for Mortgage Licensing Act Correct answer.
  4. The Home Mortgage Disclosure Act

Explanation

The SAFE Act created a national registration and licensing framework for mortgage loan originators, administered through NMLS. HMDA, RESPA, and FCRA address data reporting, settlement disclosures, and credit reporting respectively.

Question 48General Mortgage Knowledge

A mortgage payment that covers principal, interest, property taxes, and hazard insurance is commonly described by which term?

  1. PITI Correct answer.
  2. APR
  3. PMI
  4. LTV

Explanation

PITI stands for principal, interest, taxes, and insurance, the four components of a fully escrowed monthly housing payment. Lenders use PITI when calculating housing ratios.

Question 49General Mortgage Knowledge

A borrower refinances a first mortgage that has a $210,000 balance and obtains a new loan of $252,000. What is the loan-to-value ratio if the home appraises at $280,000?

  1. 90% Correct answer.
  2. 75%
  3. 83%
  4. 120%

Explanation

LTV equals the loan amount divided by the property value: $252,000 divided by $280,000 equals 0.90, or 90%. The old balance is irrelevant once the new loan amount is known.

Question 50General Mortgage Knowledge

Which statement correctly describes the difference between a mortgage and a deed of trust?

  1. A mortgage is a lien held by the lender, while a deed of trust conveys title to a trustee Correct answer.
  2. A mortgage involves three parties, while a deed of trust involves two
  3. A mortgage must be recorded, while a deed of trust never is
  4. A mortgage always carries a lower interest rate than a deed of trust

Explanation

A mortgage is a two-party instrument between borrower and lender that creates a lien, whereas a deed of trust adds a trustee who holds legal title until repayment. Both instruments are recorded, and neither format dictates the interest rate.