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| Section | Objectives |
|---|---|
| Ethics and Professional Conduct | - Consumer Protection Standards - Fraud Prevention - Disclosure Requirements |
| Uniform State Content | - Licensing Requirements and Compliance - State Lending Regulations Overview |
| General Mortgage Knowledge | - Loan Origination Process - Mortgage Types and Products - Underwriting Basics - Loan Closing Procedures |
| Federal Mortgage-Related Laws | - Fair Housing Act - Real Estate Settlement Procedures Act (RESPA) - Equal Credit Opportunity Act (ECOA) - Truth in Lending Act (TILA) / Regulation Z |
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NEW QUESTION # 101
Which of the following loans is subject to right of rescission?
Answer: D
Explanation:
The right of rescission is a provision under TILA (Truth in Lending Act) that gives borrowers the right to cancel certain types of loans within three business days after closing. This right applies specifically to refinance transactions on a borrower's primary residence, where they are taking cash out or refinancing their mortgage.
* Cash-out refinances on a primary residence (C) are subject to the right of rescission because they involve the homeowner's primary residence.
* Purchase loans (A) and loans secured by vacation homes (B) or other investment properties are not subject to this rule.
* Even if the same creditor is refinancing the loan (Option D), the right of rescission still applies if it's a refinance of the primary residence.
References:
* Truth in Lending Act (TILA) Section 125
* Regulation Z, 12 CFR ยง1026.23 on the right of rescission
NEW QUESTION # 102
If a borrower is provided a written estimate of the terms or costs specific to them before they receive the Loan Estimate, the written estimate must clearly and conspicuously provide which of the following statements at the top front of the first page?
Answer: A
Explanation:
Under Regulation Z (TRID rule), if a written estimate of terms or costs is provided before the Loan Estimate, it must state in 12-point font at the top of the first page:
"Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan."
"If a creditor provides a written estimate of terms or costs before providing the Loan Estimate, the creditor must clearly and conspicuously state at the top of the first page in 12-point font: 'Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.'"
- 12 CFR ยง 1026.19(e)(2)(ii)
References:
CFPB, TILA-RESPA Integrated Disclosure Rule Guide
12 CFR ยง 1026.19(e)(2)(ii)
NEW QUESTION # 103
A mortgage company is permitted to verify which of the following information?
Answer: C
Explanation:
Lenders are permitted to verify employment status as part of underwriting and evaluating an applicant's ability to repay. However, lenders are prohibited by ECOA and Fair Housing Act from making inquiries about sex, religion, or childbearing intentions.
"A creditor may request information regarding the applicant's employment status, income, and other credit qualifications, but may not inquire about an applicant's sex, religion, or childbearing intentions."
- 12 CFR ยง 1002.5(b); Regulation B (ECOA)
References:
CFPB, ECOA Inquiries Prohibited
SAFE MLO National Test Study Guide
NEW QUESTION # 104
Which of the following loan types may be considered a qualified loan under ability-to-pay rules
Answer: C
Explanation:
Under the Ability-to-Repay (ATR) Rule and Qualified Mortgage (QM) standards, mortgages with adjustable rates can be considered qualified mortgages if they meet certain criteria, such as having fully amortizing payments and adhering to limits on points and fees. Adjustable-rate mortgages (ARMs) are qualified as long as the borrower's ability to repay is assessed using the maximum rate that could apply in the first five years.
* Loans like interest-only mortgages (A), balloon payment loans (B), and negative amortization loans (C) are not typically considered qualified mortgages because they carry higher risks of default.
References:
* CFPB Ability-to-Repay and Qualified Mortgage Rule
* Dodd-Frank Act standards for Qualified Mortgages
NEW QUESTION # 105
A borrower's monthly debt-to-income ratio is calculated by taking the:
Answer: C
Explanation:
The debt-to-income (DTI) ratio is a key metric used by lenders to assess a borrower's ability to manage monthly payments and repay a mortgage. It is calculated by dividing the borrower's total monthly debt obligations, including:
* Monthly housing expenses (principal, interest, taxes, and insurance, also known as PITI).
* Any other recurring debt obligations (car loans, student loans, credit card payments, etc.).
This total is divided by the borrower's gross monthly income (before taxes and deductions). This calculation helps determine whether the borrower meets lending standards, with most lenders preferring a DTI ratio below 43% for qualified mortgages.
References:
Fannie Mae and Freddie Mac guidelines on debt-to-income ratio
CFPB Qualified Mortgage Rules
NEW QUESTION # 106
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