What is the required pass 75% of 115 questions.

The test has

120 questions with 5 questions that
rate for the NMLS Test and
are ungraded.
how long is it?

What is important to Read the questions twice, slowly, but

remember about taking the test? do not take over 30 seconds per
question the first time through

What is the requirement under All consumers have the right to

Fair Lending, Fair Housing, and apply for a loan unless they are
ECOA? under 18 years of age

Which Law and Regulation is Truth in Lending Act (TILA) and

Home Ownership Equity Protect REG Z
Act (HOEPA) under?

Predatory Lending, Abusive Lending Practices,

Which items are restricted Negative Amortization, Prepayment Penalties,
Balloon Lending, Subprime Lending, Equity
under HOEPA? Stripping, and not meeting Ability to Repay (ATR)
requirements

What is the minimum period A 30-year amortized loan that

for a Balloon is due in 60 months
mortgage?

What is the Average Prime APOR – an index that is published

weekly. It is added to High-Cost
Offered Rate?
and Higher-Priced Triggers.

FFIEC, the Federal Financial

Who publishes the APOR
Institutions Examination Council
Index?
 What is the Regulation for Section 1026.32
High-Cost Loans?

What are the three triggers for 6.5% on a first Mortgage, 8.5% on a
second Mortgage, and a 5% fee trigger
High-Cost Lending?
for loans over $20,000

What are the triggers for 1.5% for first Mortgages, 3.5% for
Higher-Priced lending? 2nd mortgages and no fee trigger

How do you calculate whether a Add the APOR index to 1.5% on a first
mortgage. The Annual Percentage Rate (APR)
loan exceeds the Higher- cannot exceed the two numbers together.
Priced mortgage limits?

Tax and insurance escrows for the first five years of

What are the requirements for the loan, mandatory counseling and possibly two
a High-Cost Loan? appraisals. Cannot use an Appraisal Waiver from
Fannie or Freddie. No Balloons are allowed.

What are the requirements for Tax and insurance escrows for the first five
years of the loan. Cannot use an Appraisal
a Higher-Priced Loan? Waiver from Fannie or Freddie.

Prepayment Penalties are not Fannie Mae, Freddie Mac,

allowed by which agencies? USDA, FHA, and VA

Property that is used as security

What is collateral?
against a debt
 What is Net Monthly Income? Take-home pay after taxes and
payroll deductions

What is a non-liquid A type of asset that is not easily

asset? turned into cash. Real estate is
considered non-liquid.

What are the five parts of Age, Discrimination, Underwriting,

ECOA? Appraisal, and Adverse Action

What is the minimum age under 18 years or older

ECOA to obtain a mortgage loan?

ECOA has discriminatory items. You cannot use them to make

What can’t you do with them? or decline a loan

What are the discriminatory Sex, Marital Status, Race, Color, Age,
Religion, National Origin, Public
items under ECOA?
Assistance, and Sexual Orientation

What can you ask on Marital Married, unmarried, or

Status? separated

Which four areas should you Race, Color, Religion, and

never ask about? Nationality
 What is the requirement for It must be considered, even
Public Assistance? though you may not be able to
use it for qualifying

How long, after a complete underwriting 30 days, but this may be

package is delivered to the underwriter,
does a decision have to be made? extended if the package is not
complete

How many days before closing must Three business days before, unless there is an
appraisal waiver issued, then the borrower must be
the appraisal be delivered to the informed that an appraisal will not be done unless
borrower? they request it

How long after a loan is declined or 30 days from the decision,

cancelled must an Adverse Action
explaining the reason
notice be sent?

Under the Fair Housing Act, what are Disability, Familial Status, and
three protected bases that are different
from those covered by ECOA?
Age

Why is Disability considered You cannot discriminate against a

discriminatory under Fair Housing borrower because they are
Act? physically or mentally disabled

Why is Familial Status considered You cannot discriminate because

under Fair Housing Act? of the size of family or if a woman
is pregnant

Why is age not considered Reverse mortgages require a borrower to be 62

years of age or older, and a 55 and over
discriminatory under Fair Housing subdivision requires the borrower or purchaser
Act? of property to be 55 and over
What is the Reg Letter for Fair REG V
Credit Reporting Act?

How many free credit reports

At least one
does every consumer have the
right to get each year?

Three credit scores are issued on each credit

Which credit score do you use
report for each borrower: High, Middle, and
when considering a borrower? Low. You will use the Middle unless the
program states differently.

Which credit score do you use if the Lowest of the Middle score for all the borrowers.
Example: Borrower 1 has a score of 780, borrower 2
loan is declined because of credit and has a credit score of 720, and borrower 3 has credit
there are three borrowers? score of 660. You would use 660.

What additional information is Listing of all three national credit agencies, with
contact information, so the borrower can contact
required on the Credit Score them in case of an error or dispute. Agencies are
Experian, TransUnion, and Equifax
Disclosure?

What are the three national Experian, TransUnion, and

Credit Agencies? Equifax

Which law did the Fact Act

Fair Credit Report Act (FCRA)
amend?

An alert put on the credit report, indicating the

What is a fraud alert? borrower may have had their identity stolen or
credit card or bank accounts compromised
 What happens with a Credit No one will be able to access the borrower’s
credit without them unfreezing their account.
Freeze? Credit issuers will be able to report credit
payments.

What is the cost for a fraud Zero cost and should be applied to
alert or credit freeze? all three credit agencies

When credit card, debit card, or bank deposit

What is Truncation? receipts are given, they cannot show more than
the last four digits of the account numbers

(1) Before the request for change of personal information, the

What are the two parts of Red company must send a letter or email asking if the person
requested the change. (2) All employees are to be trained on
Flag Rules? how to identify a breach of security and what the company’s
requirement is once the breach has been determined.

Which agency regulates Red Federal Trade Commission

Flags? (FTC)

What is a Homeowner’s A warranty and insurance program

that insures a new home for ten years
Warranty? against major structural defects

It must be reported to Compliance Officer or Senior Officer

If a breach is determined, what and, 30 days from that point, the company must send a
notice to all people in their database notifying them of the
is the requirement? breach and what the company has done to protect them

What does GLB stand for?

Gramm-Leach-Bliley
 What is the REG for Gramm- REG P
Leach-Bliley?

What is the main emphasis of Privacy of consumers’ personal

Gramm-Leach-Bliley? information

Non-Public Personal
What does NPPI stand for?
Information

The consumer has the right to opt-out of a

What is “Opt-Out” under GLB?
company sharing, selling, or giving their NPPI
to anyone. The Opt-out stays on as long as
their name is in the company’s data base.

What is Phishing or Pre- Obtaining personal information by

illegal process, like a text, claiming
Texting? to be from the IRS, asking for your SSN

Whenever you are not using your files, they are

What is required under Safe-
to be locked up in a desk drawer or filing
Guard Rules? cabinet. If your files are on a computer, there
must be a lock out after a few minutes.

What regulates Safe-Guard FTC – Federal Trade

Rules? Commission

What is the required retention Three years for all loan files
of Loan Information? and five years for the CD
 Can the hard files be Once the files are digitized, they
can be destroyed, but that does not
destroyed?
mean throwing them away

All companies that underwrite or fund

Who is required to file a HMDA
loans must file a HMDA report annually. This
report? includes banks, credit unions, and mortgage
bankers.

What does HMDA stand for? Home Mortgage Disclosure Act

What is the REG letter for Reg C

HMDA?

Which agency is responsible FFIEC - Federal Financial

for overseeing HMDA data? Institutions Examination Council

Community Reinvestment
What does CRA stand for?
Act

To encourage depository institutions

What does CRA require? to help meet the credit needs of the
communities in which they operate

Do Mortgage Brokers have to No, because brokers do

report HMDA data? not underwrite or fund
loans
 When does the HMDA data In 2019, by March 1st of
have to be reported? each year. In 2020, it is
quarterly.
P= Property address, E=Estimated
What does PENCIL stand for? value, N= Name, C = Credit or Social Security
number, I = Income, L = Loan amount

When is an application When you have collected all

considered a loan? the items in PENCIL

What agency regulates and FTC – Federal Trade

enforces Do-Not-Call? Commission

How often do you have to pull new data The data cannot exceed 31 days. The data
from the Do-Not-Call website if you are incudes phone numbers for any person that
using the data to solicit consumers? registers their phone number with DNC.

How long are you to retain Two years from the date of
your solicitation records? solicitation

8:00am – 9:00pm, depending on

What times can you solicit?
where the person being solicited
is located

What are the two exemptions for 18 months for someone with whom you
have an existing business relationship and
solicitations under Do-Not-Call?
90 days for a Pre-qualification
 If a consumer sends a letter or an email to the company
What is an in-house Do-Not-Call indicating they want no solicitations, the company must put
List? that person on an internal do-not-call list, so not one
contacts that person. This overrides the 18 month and 90-
day exemption.

1) MDIA – Mortgage Disclosure Improvement Act 2)

What are the eight items Advertising 3) HOEPA 4) Loan Estimate (LE) 5)
Annual Percentage Rate (APR) 6) Qualified
covered under TILA? Mortgage (QM) 7) Loan Officer Compensation 8)
CHARM Booklet

Mortgage Disclosure
What Does MDIA stand for?
Improvement Act

MDIA is a part of Reg Z and covers timing and delivery

What does Mortgage Disclosure requirements for initial disclosures, LE, intent to proceed, and
changes to the mortgage loan program, prepayment penalty, or
Improvement Act (MDIA) cover? APR calculations. MDIA also addresses when the CD needs to be
Issued, as well as the waiting period involved.

Any borrower-requested change due to an

What is a Changed
extraordinary event beyond anyone’s control. A
Circumstance? new LE must be received by the borrower
within three business days from the change.

All marketing materials must have the company name,

What are the requirements for company NMLS number, phone number, address, equal
advertising under TILA? housing logo, and an APR. All advertising must be kept
for two years from the last date used.

APR is expressed as a percentage that

What is the definition of
represents the total costs paid over the term of
Annual Percentage Rate (APR)? a loan. This includes any fees or mortgage
insurance associated with the transaction.

What does APR stand for? Annual Percentage Rate – the cost
of the loan over the life of the
loan, quoted as a percentage rate
What is a CHARM booklet? A booklet that is required for all ARM
loans. It is issued at least three days
from the signed application

A disclosure of all terms and costs of the loan,

What is the Loan Estimate
to be issued when you have all the items under
(LE)? PENCIL, and within three business days of the
signed application

Qualified Mortgage – all conforming

What does QM stand for? conventional loans must meet the
standards

What are the two ways a Option #1: 43% maximum DTI and maximum
3% in fees. Option #2: Approved eligible from
conventional conforming loan Fannie or Freddie and meet the Higher-
can meet QM Standards? Priced Lending triggers

If you meet either of the two options under QM

What is Safe Harbor? that showed you proved Ability to Repay
requirement, you are protected from a lawsuit

What is the punishment if you Up to three years interest, all loan

do not meet QM Standards? costs, and legal costs for both
sides

If an MLO is paid commissions, Basis points under your Loan Originator

Agreement, times the loan amount. No terms
what can the commissions based or costs of the loan can be counted.
on?

What does UDAAP stand for? Unfair, Deceptive, or

Abusive Acts or Practices
What Does Unfair, Deceptive, or It is unlawful for any provider of
consumer financial products or services or a
Abusive Acts or Practices state? service provider to engage in any unfair,
deceptive, or abusive act or practice

If a company pays a bonus or Number of loans, dollar amount

originated for a specific time, and/or the closing
retirement donation, what are the
rate on your applications. Bonuses are limited
criteria for determining the amount? to 10% of the last 12 months’ compensation.

What does Reg N Cover? Mortgage Acts and Practices

If you don’t have a program or rate, do not

What does Mortgage Acts and advertise it, and do not use Bait and Switch tactics,
Practices require? or language or terms that would indicate to a
borrower you do not want them to apply

Advertising a lower rate or a program

What is Bait and Switch? that may not exist to entice consumers, and
then when they call, you offer them another
less-attractive program.

Faxing or e-mail. Docu-sign or E-sign are

What is not included in Digital
acceptable where the person can be verified,
Delivery? and the documents are time stamped as they
are sent back and forth.

The borrower must give you written approval,

What are the requirements for
have the right to go back to hard copy, and you
Digital Delivery? must determine, to the best of your ability, if the
borrower is technically able to do the process

What does CFPB stand for? Consumer Financial Protection

Bureau
What are duties of the Consumer They have the power to write, implement
Financial Protection Bureau? regulations, investigate, and issues fines
or other penalties as needed

Who does the CFPB answer to? The President

Someone who obtains a financial product or

What is a Consumer?
service from a financial institution that is to be
used primarily for personal, family, or household
purposes, like applying for a loan (whether they
accept the loan or not).

How many days do you have to 30 days, mailed or verbal

send an adverse action notice?

Balance, term, APR (rate),

TILA Trigger terms
payment

Flood Insurance Stays until the loan is paid off

How many months reserves are 6 months

needed for non-owner-
occupied properties?

What is excessive value? An appraisal term to express a

value higher than the highest in
the neighborhood
 What is the flood Enough to cover the loan
insurance amount
requirement?

What is the hazard insurance Enough to cover the loan

requirement? amount

What are the payment options 15 years, 30 years,

for ARMs? Negative/Minimum

Servicing loan estimates need to 3 days

be given within what time frame?

What are the manufactured Home must be on a permanent foundation and

the land must be titled as real
home financing property. The HUD Data Plate
requirements? must be on the home

41%, including housing,

What is the VA back-end ratio?
utilities, and all other debts

How much hazard insurance

100% of the loan amount
is required on a reverse
mortgage?
What is the minimum down FHA: 3.5%
payment?
Conventional: 3%

What does the cost Depreciation, Square Footage,

approach and Replacement Cost
include?

Net adjustments of 15%

With the Sales Comparison
Approach, what adjustments are and gross adjustments of
allowed? 25% to comparables

PUD, ARM, Balloon Payment,

What do riders include?
Prepayment Penalty

A loan that performs like a fixed and adjustable-rate

What is a loan. It has a fixed rate for an
Hybrid Loan? initial period before turning into
an ARM.

What is a non-warrantable FNMA will not do the loan

condo? Condo-conversion= non warrantable

HOA, 51% owner occupied

FHA loans are only for Owner-Occupied

what types of properties? Properties

What is a grace A period of extra time allowed for

period? making a payment without incurring
a late penalty
 What does Title VII include? Discrimination, Sexual
Harassment, Hostile Workplace

What is the FHA loan Divorce decree and 3 months

verification of child support? of cancelled checks

What are the types of title Final, Termite, Engineer

policies? Certification of Foundation

What must happen in order to Request must come from

transfer an FHA case number? borrower

What is the UFMIP %? 1.75%

How is monthly MIP On base loan amount before

calculation done? UFMIP

What is the active-duty vet 1st

2.30%
time funding fee at 100%?

What is the FHA loan minimum 91 days from consummation

living time before resale? with second appraisal
 How is a GLBA notice Mailed, given personally, or
delivery given out? faxed

How do tenants in common Each owner has their own share of

mortgages work? the property that they can pass on
in their will

Non-public information, including any

What information is covered in
information an individual gives you to get a
the privacy rule of GLBA? financial product or service; i.e., credit reports,
banking info, unlisted home telephone numbers

What is on the deed of trust Metes and bounds, legal

agreement? description, attached riders, name
of borrower

What is an ongoing business

Customer
relationship?

How long is the FIRREA statute

10 years
of limitations loan fraud?

How often must the aggregate Every 12 months, cushion up

accounting escrow be reviewed? to 2 months

What is a Chain of Title? The ownership history of a piece of land,

from its first owner to the present one
 Which types of loans are VA, FHA if stated in the deed
Assumable?

How much is title insurance

150% of original loan amount
coverage on reverse?

What is AQB? National appraiser group

What is settlement service per Title insurance, appraisal, relator

commission, credit report, title report,
RESPA?
termite certificate

Up to 50% of a loan up to $45,000. Between

What percentage of a VA 45,000 and $144,000, the minimum is
loan is guaranteed? $22,500 and the max of up to 40% of the
loan up to $36,000.

Includes toll free number of new and

What is a notice of transfer? old servicer and effective date, 15
days before transfer

When are LE requirements not They are not required on commercial

loans, loans denied within three days,
required?
or bridge/swing loans

A clause in a loan or promissory note that

What is a “due on sale”
stipulates that the full balance of the loan may be
clause? called due (repaid in full) upon sale or transfer of
ownership of the property used to secure the note
 How often do telemarketers 31 days
update the DNC?

After someone requests you to put 30 days

them on your DNC list, how many days
do you have to do so?

How long does a conventional

1 year
loan owner agree to occupy the
property?

What are the guidelines for USPAP

appraisers?

Where is the Prepayment Rider to trust deed LE/CD

penalty disclosed?

Which loan requires a large final

Balloon
loan payment, as it does not fully
amortize?

What is included in typical Verification that required repairs

have been made, termite, well,
property inspections?
septic, and roof

Joint Tenants Ownership automatically

transferred on death to other
owners, cannot be a corporation
 What is a Bridge loan? A loan which occurs between
the termination of one
mortgage and the
beginning of the next.

What affects mortgage Unemployment report,

interest rates? consumer price index, federal
reserve board

What affects PMI? LTV, ARM, Term, FICO

With a real estate indemnity agreement, one

What is an indemnity
party is pledging to protect another from any
agreement? kind of financial loss or from a lawsuit of some
kind

What is the required

Enough to cover the loan
fire/hazard insurance amount? amount

London Inter Bank Offered

What is LIBOR?
Rate

Down: S. P.
What is the max seller paid Conv: <10% 3%
10-25% 6%
closing costs for Conventional, 25+ % 9%
FAA/USD: 6%
FHA/USD, and VA loans? VA: 4%

A right, set forth by TILA, of a borrower to cancel a home

What is the right of rescission? equity or line of credit with a new lender, or to cancel a
refinance transaction done with another lender other
than the current mortgagee, within three days of closing
Which form states that the borrower FNMA FHLML Form 3072
must occupy the property as primary
residence within 60 days?

Cost: Cost to replace; usually newer construction

What are the different Income: Income producing properties

appraisal types? Sales Comparison (Market): Compare to other

similar properties

When was the Dodd-Frank 2010

Act created?

What are Mortgage- A type of asset-backed security

Backed Securities? that is secured by a mortgage
or collection of mortgages

Lower-cost MI with loan level Borrower with high credit scores.

The borrower can have lower MI but
price adjustment FNMA will pay less for the loan

Protects the buyer:

What does plain language title 1. Rights of claims of 3rd parties
2. Easements or claims of it not in the public record
insurance do? 3. Forced removal of existing structure
4. Mechanics lien coverage (unrecorded)

What is the appraiser trainee

12 months
period?

Who are the big players

FNMA, FHLMC, and
on the Secondary
GNMA
Market?
Someone on the DNC list contacts 3 months
you. How long can you continue to
call?
.
APR:
What are the high-cost 6.5 on 1st or 8.5% on 1st less than 501c or 2nd
Points Fees:
limits with APR and point 5% + on $20,000+ loan or
fees? 8% on less than 20,000

Where can acceptable down Selling an asset

An employer
payments come from? Family
A fiancé

Which financial and non-financial Banks, Credit Unions, Mortgage

companies are covered by the Bankers, and Mortgage
Bank Secrecy Act? Brokers

Who is required to take the

All staff and management
AML and Fraud Training?

How often does the AML and

Once a year
fraud training have to be done?

Does fraud or money laundering

Only detected
have to be proven or just
detected?

If AML or fraud is detected, Compliance officer or Senior

who do you report it to? Officer
 What is the name of the report SAR – Suspicious Activity
that is to be filed if fraud or AML is Report
detected?

Which government agency is FinCEN - Financial Crimes

responsible for the Bank Secrecy Enforcement Network
Act?

If a SAR is reported, how long

does the file have to be kept in a
Five years
secure place?

Can the borrower be told a SAR No – information on SARs is to

has been reported on them? be kept confidential for a five-
year period

Who is allowed to see the file Police Authority or anyone

once it has been reported as a approved by FinCEN to see the
SAR? information

Who is the person responsible for Compliance Officer or Senior

SAR files and releasing Officer
information?

What is the penalty for A person convicted of money

laundering can face up to 20 years in
violating the Bank Secrecy Act?
prison and a fine of up to $500,000

What is required under the All borrowers are required to show

personal identification: either a
U.S. Patriot Act?
driver’s license or passport
 What does OFAC stand for? Office of Foreign Asset Control

What is required if a borrower The lender must call OFAC and

is on the OFAC watch list? report the person and ask what is
to be done with the loan

What does HPA stand for? Homeowners Protection Act

What is required under the All loans about 80% LTV must have
Mortgage Insurance if they are
Homeowners Protection Act?
Conventional Conforming Loans

To provide security to the lender in case of

What is the purpose of default. Also allows borrower to
Private Mortgage Insurance? make a smaller down payment.

Mortgage Insurance Premium

What does MIP stand for?
for FHA Loans

Under the Homeowners The borrower can request that the

Protection Act, what is available PMI be dropped but it is at the
to the borrower at 80% LTV? option of the lender

When is PMI required to be

dropped under the
78% Loan to Value (LTV)
Homeowners Protection
Act?
 What does QM stand for? Qualified Mortgage

What is one of the options for Approved eligible from Fannie

a loan to meet QM standards? Mae or Freddie Mac and higher-
priced lending standards are met

What is the penalty if you close a Up to three years interest, all loan
Conventional Conforming loan costs, and legal costs for both
without QM approval? sides of the lawsuit

The lender has proven the

What does Safe Harbor mean?
borrower has the Ability to Repay
(ATR)

What does LO Comp stand for? Loan Officer Compensation

What law is LO Comp covered

TILA – Truth in Lending Act
under?

What can commissions be paid Basis points of the loan amount.

on? 80 basis point loan officer X a
$200,000 = $1,600 commission

What items can LO

Loan amount only
Compensation be paid on?
What is the limit of bonus money 10% of the last twelve months
that can be paid to MLO? compensation

What are the two ways that By the customer or the mortgage
compensation can be paid? company, but not both

TILA, RESPA Integrated

What does TRID stand for?
Disclosure

What are the two booklets Loan Tool Kit for all purchases and
required within three business CHARM booklet for all ARM
days of the signed application? Products

What is the requirement for When the borrower brings the signed Intent
to Proceed to the company, the borrower
the Intent to Proceed? indicates they are obligated to the loan

When can an appraisal be When the borrower signs and

ordered? delivers the Intent to Proceed

How many days from the signed

application are the initial disclosures, Three business days
including the LE, to be delivered?

How many days does the borrower have to

wait to close after the signed Intent to Seven business days
Proceed is delivered to the lender?
 What is a Regulatory Authority? An entity that has the power
to regulate the
mortgage industry

What are the four ways the initial Electronic signature, in person,
disclosures can be delivered to the mail, or overnight
borrower?

What is required to use Borrower’s written authorization, ability to

go back to hard copy if they wish, and
electronic signatures? determining whether they are able to do
electronic signatures

What is a Changed Any change requested by the borrower

(loan amount, locking the loan,
Circumstance?
program, etc.) or a natural disaster

How many days does a new Loan

Three business days
Estimate (LE) have to be delivered
after a Changed Circumstance?

How many business days before closing is

the Final Loan Estimate (LE) required to No less than four
be received by the borrower? business days

How many business days before the

closing does the borrower have to Three business days
receive the Initial Closing Disclosure?

What are the three things that would One of the following: Mortgage program
require a new CD and a three- changes, prepayment penalty is added, or
business day delay in the closing? the APR tolerances are exceeded (1/8% on a
fixed or 1/4% on an ARM)
 What is the definition of When the borrower becomes
Consummation? obligated to the loan

What is a business day for the Any day the business is open, not
closing? including Sunday or federal
holidays

What are the three stages of a Borrowers consideration, the

mortgage loan life cycle? primary market, and the
secondary market

What items are considered Appraisal, origination fee,

ZERO tolerance items? lender fee, and transfer
taxes

What are the three categories Zero tolerance, 10% tolerance,

for fees on the LE? and no tolerance

What is covered under 10% Title policy or lender required

tolerance? inspection or recording fees

When you quote title or lender required inspection

What does 10% tolerance or recording fees, and the amount is higher than
mean? quoted, the borrower is liable for 10% and you are
responsible for the balance

When is an MLO or company not When the borrower selects their

liable under the 10% tolerance? own title or inspection company
 What does no tolerance No liability for the MLO and
mean? company because the borrower
selects the items

What items are included in the Attorney’s fees, realtor fees,

no tolerance items on the LE? Homeowners insurance, escrows,
per diem interest

How do you calculate per diem Principal balance times interest rate (note
rate) divided by 360 days on conventional
interest? loans, or 365 on a government loan—gives
interest per day

The chronological order in which liens are

What is the Lien Priority? filed against a property.
Lenders want first priority.

Housing and Urban

What does HUD stand for?
Development

What are the responsibilities Manage Federal Housing Administration

(FHA) and monitor companies and MLOs
of HUD? for Fair Lending, Fair Housing, and
complying with ECOA

What does ECOA Stand for? Equal Credit Opportunity Act

What is the Reg letter for

Reg B
ECOA?
What is the Reg Letter for Fair Reg V
Credit Reporting Act?

What is the Reg Letter for

Reg X
RESPA?

Real Estate Settlement

What does RESPA stand for?
Procedures Act

Which three laws does the Red Flags, Safeguard Rules,

Federal Trade Commission (FTC) and Do-Not-Call
regulate?

On the Loan Estimate (LE), can the Only decimal format (i.e.
Interest Rate be quoted as a 3.875%)
fraction? (i.e. 3 7/8%)

On the Loan Estimate, if “Yes” is shown for The loan is an Adjustable-

Loan Amount, Interest Rate and P&I
payment, what does that mean? Rate Mortgage (ARM)

If you attempt to pay the loan off

What is a Prepayment Penalty?
in the first two or three years,
there could be a penalty

Who is required to complete the

Loan ID on the Loan Estimate?
The company funding the loan
 What items may be included in Real Estate taxes, Homeowners
the escrow portion of your Insurance, Flood Insurance, or HOA
monthly mortgage payment? fees if the property is a condo

On the loan estimate, what is All the costs and fees that will be
included in the estimated closing paid by the borrower at closing
costs?

When a borrower locks their The interest rate and fees are
loan, what does that mean? locked, as long as the loan is
funded by the expiration date

What are the different lock 15, 30, 45, or 60 days. The lock
options for loans? period will cost more as the lock
gets longer.

Can a mortgage broker issue No, only a lender that funds loans
an extended lock agreement? can issue an extended lock
agreement

A lock of interest rates and fees

What is an extended lock?
for a period longer than 60 days

What four items must be on an Program, interest rate, cost of the

extended lock agreement? lock, and the expiration date

How many days from the issue date of the

loan estimate does the borrower have to Ten business days
bring the signed Intent to Proceed to the
lender to protect their costs?
What happens if the borrower does not The costs of the loan are subject to
return the signed Intent to Proceed to change and the LE continues to be
the lender within 10 days of the issue active
date of the LE?

What must be put on the top- The lender that is funding the
left side of page 3 of the Loan loan
Estimate?

What must be put on the top- If the loan is originated by a

right side of page 3 of the Loan Mortgage Broker, their contact
Estimate? information is to be listed

What three comparisons are Total cost for the first five years,
required on page 3 of the Loan Annual Percentage Rate (APR), and
Total Interest Percentage (TIP)
Estimate?

What is Annual Percentage The cost of the loan, including

Rate (APR)? interest rate and all costs over the
life of the loan

What does TIP stand for? Total Interest Percentage

The total interest paid over

What does TIP tell you?
the life of the loan

How is Total Interest P&I payment, times the number of payments

on the loan, then subtract the principal balance
Percentage calculated? (total interest paid over the life of the loan),
divided by the principal = TIP
 When is the appraisal to be No less than three business
delivered to the borrower? days before the closing

Can a borrower appeal an Yes, with information that shows the

reason; they cannot just say they
appraisal? feel the property is worth more

What is the rule on how much The lower of the value of the
Homeowners Insurance is property or the mortgage
required? amount.

When must a Late Payment be After the 15th of the month, a fee of
5% of the P&I payment can be
applied?
added to the amount due for the
month

What items are required to Value of the property, credit,

refinance a loan? and income

The collection of monthly payments, paying the

What does Servicing mean? investor, and setting aside the escrow money into
separate accounts other than operating accounts
for the servicer. Paying taxes and insurances as they
come due.

Do the signatures on Loan No, the signatures only indicate the

borrower received a copy of the LE. The
Estimate obligate the signed Intent to Proceed is the document
borrower to the loan? that obligates the borrower.

What is a Mortgage Broker? A company that originates a loan but

cannot underwrite or fund a loan. A MB
cannot claim they are a mortgage
lender.
 What type of properties are 1-4 family residences. Any residential is
not correct. Units more than 4 units may
covered under the laws of TILA, be residential but are not covered under
RESPA, ECOA, and HMDA? the laws.

Any company that provides a service for

What is a third-party provider? the origination of a mortgage loan,
like appraisals, title insurance, or
credit reports

Can a mortgage be called a Yes, they could be called a

TPO? third-party originator

When can the foreclosure When the loan is 120 days

process begin? delinquent

What is covered under the How the escrows are collected

Initial Escrow Disclosure? and the servicer’s
responsibilities

What circumstances can result Credit, insufficient assets, the borrower

does not have sufficient income, or the
in a declination? appraisal is not high enough to make the
loan

What is required to be in the The reason for the cancellation

Adverse Action notice? or declination

What is Comparative evidence When similar applicants receive different

treatment that cannot be explained by
of Disparate Treatment? non-discriminatory factors
What is evidence of Disparate When a policy or practice
negatively impacts
Impact? individuals on a prohibited
basis

They are as responsible as the borrowers

What is the responsibility of a when the loan becomes delinquent or goes
Cosigner? into foreclosure. The cosigner’s credit will
be affected the same as the borrower’s
credit

What are the types on income Any income that can be verified and
has a two-year history and the
eligible to be used in potential of lasting for three years in
underwriting? the future

If the borrower refuses to You cannot require the borrowers to provide

the information, but you are required to
volunteer their ethnicity, what are complete the information based on your
observation of the borrowers
you to do as an MLO?

What are the core items of the MDIA, Advertising, APR, LE,
Truth in Lending Act (TILA)? HOEPA, CHARM Booklet,
QM, and LO Compensation

What are the limitations for 3% on a conventional conforming

loan over 90%, and 6% on loans
seller/lender concessions? between 75% and 90%

What are permissible fees and Any fees that the borrower is charged
to obtain the loan and are disclosed on
charges?
the LE

Which loans require a Right of Owner occupied primary

Rescission? residences
 How many copies of the Right of Two copies to each person
Rescission are to be given to the
borrowers and owners of the property?

How many of the people that were

given the Right of Rescission are One person
required to rescind the loan?

When does the Right of Three complete business days

Rescission start? after the closing

What are the two fee 3% on Qualified Mortgage and

thresholds? 5% on a High Cost Loan

Where does the origination fee

Under Loan Costs
go on page 2 of the LE?

What is required to be on the How much the borrower has paid in and
how much was paid on their behalf for
Annual Escrow Analysis report? taxes and insurances and if there is an
overage or shortage

What is required if there is an If the amount is over $50.00, the

overage on the escrow analysis? overage must be paid to the
borrower within 30 days

What is required if there is a The borrower must pay it in one lump

sum within 30 days or spread it over the
shortage on the escrow next 12 months
analysis?
 What is the Acceleration If the borrower is delinquent and it
reaches 120 days, the lender has the
Clause?
right to call the balance due

If the borrower sells their house and does

What is the Alienation Clause? not notify the lender or allow the new buyer
to take over the mortgage, the lender has
the right to start foreclosure

Which loan products will not Conventional conforming or

allow assumptions? USDA loans

Which loan products will allow FHA and VA, if the new buyer is
approved by the lender. If it is a VA
assumptions? loan, the new buyer must be a
veteran.

The new buyer can take over the original

What is an assumption? borrower’s loan and continue to make
the payments, but only on FHA and VA
loans

What is required to be All loans that meet the definition

reported on your HMDA of a legal loan whether declined,
report? approved, or cancelled

What is a Tri-Merge credit A credit report that has

report? information from Experian,
TransUnion and Equifax

What is a Deed? A written instrument

by which land is
conveyed
When a credit report is reviewed, Social Security number, residency history,
what are the items that should be employment history, payment history,
and debts that are on the application
checked against the application?

When are you allowed to pull When the borrower authorizes you in
writing or on a pre-qual, if the borrower
credit? discloses their SSN and you document it
in your records

What is the definition of a Any company or business that

creditor? advances credit to a consumer

How long does a Chapter 11 or Seven years

13 bankruptcy show on the
credit report?

How long does a Chapter 7

Ten years
bankruptcy show on the credit
report?

What is the fine for Red Flag $3,500, plus $2,500 for FTC
violations? violations

What is the penalty for Section $10,000, plus up to one year

8 RESPA anti-kickback rules? in jail

What are the penalties if you

violate Dodd-Frank Tier One, $5,639 per violation per day
Federal Consumer Financial laws?
 What are the penalties if you $28,139 per day for each
violate Dodd-Frank Tier two, violation
Federal Consumer Financial laws?

What are the penalties if you $1,127,779 maximum per

violate Dodd-Frank Tier three, violation
Federal Consumer Financial laws?

What are the requirements for All loans over 80% must have
Conventional Conforming loans escrows and PMI mortgage
over 80% LTV? insurance

What is the definition of a 97%

Conventional Conforming Loan?

What are the debt-to-income 28% for Housing (up-front) and

ratios on a Conventional 36% for overall debt (back-end)
Conforming Loan?

Do Fannie Mae and Freddie Yes, at lesser loan-to-value and

Mac allow non-owner- may have increased rates and
occupied loans? fees

What is the Underwriting

DU – Desktop Underwriter
system for Fannie Mae?

What does approve eligible A loan that has been run through the Fannie or
Freddie underwriting systems that says they
mean? will be accept the loan if the documents match
what was put into the system
What is allowed for down payment on Verified liquid assets, a gift from a blood relative,
employer or close friend with no repayment
Conventional Conforming, FHA, USDA, required, or down payment assistance from
and VA loans? agencies helping first-time homebuyers

United States Department of

What does USDA stand for?
Agriculture

What are the underwriting 29% for housing and 41% for
ratios for a USDA loan? overall debt

What are the restrictions on The home must be in areas of less than
35,000 people, income limitations, and all
USDA loans? loans must be underwritten and funded by
USDA

What does FHA stand for? Federal Housing Agency

Does FHA insure or guarantee Yes, they insure and will

loans? pay a claim after the
lender forecloses

What is the maximum Loan-

96.5%
to-Value on FHA loans?

What is the maximum loan It is set by the government at the end

of each year and set for areas in each
amount allowed? state
 What are the debt-to- 31% for housing and 43% for overall
debt. (overall means mortgage payment
income ratios on FHA and all other debt payments)
loans?

A database that shows liens, defaults, and

What is CAIVRS? debt owed to federal agencies, including
government insured student loans. This
needs to be checked for FHA loans

What is the upfront premium 1.75%; this may be added

for FHA loans? into the loan amount

What is the renewal premium .85% of the loan amount divided

on FHA loans? by 12 = the amount added to the
monthly payment

What is the maximum 100% if the veteran has 100%

loan-to-value on VA benefits
loans?

The document that tells you the

What is a DD214? veteran has benefits, but does not
say how much

Certificate of Eligibility, which provides proof of a

What is the COE? veteran’s service and tells the lender that an
applicant has met the minimum service
requirement. This will determine the amount of
down payment required, if any.

Does VA insure or guaranty Guaranty loans (up to a

loans? maximum of $144,000)
 What is the debt-to- 41% overall; they don’t have a
income ratio for VA housing ratio
loans?

What are non-conforming Any loan that cannot be sold

loans? to Fannie Mae or Freddie Mac

Who sets the underwriting The companies buying the

rules, programs, and pricing loans
for non-Conforming loans?

A borrower who is renting for $900 a month and

What is “payment shock”? now buying a home with a payment of $1,300 a
month with no reserves to show where the extra
$400 a month is coming from

Any loan that is not 30-

What is a non-traditional loan?
year fixed

Is a 40-year amortized loan Non-conforming – any loan above

considered conforming or non- 30 year fixed cannot be sold to
conforming? Fannie or Freddie

What is a Purchase A second mortgage that is used to eliminate

Mortgage Insurance. Terms like 80/10/10
Money Second? mean an 80% first mortgage, a 10% second,
and a 10% down payment.

Can the interest rate change No- it is fixed for the life of the
on a fixed-rate mortgage? loan
 What are the five parts of an Program, caps, margin,
ARM loan? index, and fully-indexed
rate

Initial interest rate fixed for 5

What program is a 5/1 ARM?
years and then an annual
adjustment

The 2 is the adjustment cap, meaning the interest rate cannot

go up or go down any more than 2%. The 5 is the life cap,
What does a 2/5 cap mean? which requires you to add the starting rate to the life cap of 5
which equals the highest the interest rate can go over the life
of the loan

What is the margin on an ARM The only number on an ARM loan that does
not change over the life of the loan and it is
loan? the floor, meaning the interest rate cannot
go below the margin.

What is the most common LIBOR – London Interbank

index today? Offered Rate

What two numbers do you add

Margin and index
together to obtain the Fully-
Indexed Rate?

How long before the interest Seven months before the

adjustment is the first ARM disclosure
to be sent to the borrower? adjustment is required

What three items are required Remaining balance, interest

to calculate the mortgage rate, and remaining term
payment?
 Which law covers Balloon HOEPA – Home Owners Equity
Loans and what is the Protection Act. The minimum
minimum balloon? balloon is five years.

What does 360/180 mean? 15- year balloon

What are the five parts of a Negative amortization, borrower pays their
own taxes and insurance, must be 62 or
Reverse Mortgage? older, mandatory counseling, a non-
recourse mortgage

What does a non-recourse At the end of the mortgage, if the

balance is higher than the value, and
mortgage mean on a Reverse the borrowers have passed, the
Mortgage? government absorbs the deficiency

What is the minimum age to 62 years of age. If the spouse is

obtain a Reverse Mortgage? only 60, the spouse cannot be
on the loan.

What does HELOC stand for? Home Equity Line of Credit

Is interest charged if you do No, only after you draw money; you will
then pay interest from the day of the draw
not draw any proceeds? till the end of the month, and pay interest
on the balance at the end of each month

Are principal payments They are at the option of the

required on borrower whether to pay
HELOCs? principal each month
 Is the interest rate fixed or The interest rate floats,
floating on usually based on the Prime
HELOCs? Rate

What is the difference between a On a 2nd, all the proceeds are paid out
at closing, while on a HELOC, the
2nd mortgage and a HELOC? borrower chooses when to draw
principal

What are the two types of Construction with a Permanent

Construction Loans? take out and Construction
Permanent

How many loans are on a One loan and one set of

Construction Permanent? closing costs

In an Interest Only Loan, what is Only interest is paid, but the borrower
the amount you pay each month? must qualify for the full principal &
interest payment

What would the balance be on an $100,000. The principal balance

Interest Only loan if the loan were stays the same because you are
$100,000 and it is 5 years later? only required to pay interest.

Any loan that the originating

What is Table Funding?
company is having the lender
fund, predominately for Brokers

What are the APR Tolerances? 1/8 on a fixed rate loan, ¼% on an ARM
Loan. If you exceed either, a new LE or CD
must be issued within three business
days.
 What is Yield Spread Premium The amount a company receives
(YSP) and Servicing Released from the lender that funds the
Premium (SRP)? loan

Which loans are considered Conventional conforming, FHA,

Federal Loans? VA, USDA

The amount above PAR that can be used to

What is Premium Pricing? pay the borrower’s closing costs. Not
discount points, just costs and fees.

If your payment is due on May 1st, you are

What is Accrued Interest? paying interest for April. Accrued interest is
the interest you pay on the mortgage each
month.

Transfer of ownership via a

What is a Conveyance?
Deed

What is a 2-1 Temporary Buydown? If Usually for two years. A buydown account is
established by the seller or the borrower. The first
the interest/note rate is 5%, what are year the payment rate is 2% below the note rate
the payment rates? and the second year it would 1% below the interest
rate. The borrower is qualified at the note rate.

Secure and Fair Enforcement – the licensing

What does SAFE stand for? law that covers all originating companies
and Mortgage Loan Originators

Who must be registered with All MLOs employed by banks, credit

unions, mortgage bankers, and
NMLS?
mortgage brokers
 What does NMLS stand for? Nationwide Multistate
Licensing System and Registry

All mortgage bankers, mortgage brokers and

Who must be licensed? all mortgage loan originators that work for
either company

Can you work or be licensed Your license only allows you to

with more than one originating originate for one financial or non-
company? financial company

MU1 is the application for a

What is an MU1? mortgage company.

Do you receive a state license State license only; there is no such thing as a
federal or national license. You must be
or federal license? licensed in each state where you want to
originate

Can you be licensed in a state No, you can apply for a license in any state
where your company is licensed. Banks and
where your company is not Credit Unions are exempt from licensing and
licensed? can originate in any state.

Approve all education providers and courses.

What are the duties of the Prepare and maintain a national test. Provide a
service for the MLOs and owners of companies to
NMLS? obtain a background check.

What makes up the 20 hours 3 hours of law, 3 hours of ethics, 2

of the pre-licensing course? hours of non-traditional and 12
hours of mortgage topics
What makes up the 8-hour CE course 3 hours of Law, 2 hours of ethics, 2
that is required each hours of non-traditional lending, and
year? one hour of another mortgage topic

What are the requirements for gift Gift funds can come from the borrower’s
funds for FHA loans? family members, employer, close friend, or
a charitable organization

What is the term of your One calendar year: January

license? 1st through December
31st

When do you have to pay your Between November 1st

licensing renewal fees? and December 31st

Your license lapses and you must take a Late CE

What happens if you do not class and pay a renewal fee and penalties by March
1st. Until your license is reinstated, you cannot
renew by December 31st? originate loans. If you do not complete your
renewal by March 1st, your license is suspended.

Once you are licensed, your information will be on

What is the consumer access the consumer access website so the consumer can
check who you are working for and if you have any
website? complaints or violations

What are the two groups that CSBS – Conference of State Bank
Supervisors and AARMR – American
oversee NMLS? Association of Residential Mortgage
Regulators

What does USC stand for and Uniform State Content - allows MLOs that
pass the National Test to apply for a license
what does it do? in any state where your company is
approved
What does the SAFE Act allow License mortgage bankers and mortgage
brokers and complete audits and
each state to do? examinations of the companies if they
suspect the consumer is at risk

What does sponsorship The company you will be employed by

needs to request that your NMLS number
require you to do? be moved under their company NMLS
number

When a company or MLO receives They must supply all documents in response
to the complaint or violation within 30 days
a notice of violation or complaint, or they are assumed to be guilty and the
what is the requirement? state will assess the fines as they see fit

If an applicant for a license has a non- Seven years from the date of
financial felony, what is the soonest
they could apply for a license? conviction

If an applicant for a license has a They cannot, as they are

financial felony, what is the soonest banned
they could apply for a license?
for life

If an applicant for a license has had a They cannot, as they are

license revoked, what is the soonest
banned
they could apply for a license?
for life

Uniform Residential Loan Application:

What is the 1003? The document where you collect the
data to assist in underwriting

When verifying assets for closing,

Down payment and closing costs
what items are included?
Can long term/retirement assets Yes, and they don’t have to be
be used for the two months’ cashed; they just have to show
reserve for escrows? they are available

What are the requirements for gift Gift funds can only come from a relative: Spouse,
child, other dependent, or anyone related by
funds for conventional
blood, marriage, adoption, or legal guardianship;
loans? and there can be no expectation of repayment

What are Concessions? Voluntarily yielding to a demand for the

sake of a settlement in a real-estate
transaction, such as closing costs

What are the three questions Religion, nationality, and

you cannot ask on an whether they receive child
application? support or alimony

How may MLOs accept loan Face to Face, on the phone,

applications? computer, or by mail

Who is allowed to offer and Only those who are licensed as an

negotiate terms of a loan? MLO working for a Mortgage Broker
or Mortgage Banker

What is the “AUTHORIZATION TO A form which, when signed by the borrower(s),

authorizes a third party to receive information
RELEASE MORTGAGE about them and their mortgage, for things like
INFORMATION”? verification of employment, deposits, etc

What methods are used to Two months bank statements,

verify assets? investment statements, and/or
a Verification of Deposit
What methods are used to verify W-2, 1099, Tax returns with
employment? 4506T, and/or Verification of
Employment

What are the mandatory items on Terms of the product, all costs and
the Loan Estimate (LE)? fees, comparisons, and mortgage
process explanations

What information is required on Which type of program, caps (adjustment

and life), margin, index, fully-indexed
the Adjustable-Rate Mortgage
rate, and how the adjustments are
(ARM) disclosure? calculated

What does AML stand for? Anti-Money Laundering

Consumer Handbook on
What does CHARM stand for?
Adjustable Rate Mortgages

Negative Amortization, taxes and insurance to be paid

For a Reverse Mortgage, what by the borrower, must be 62 or older to apply for the
must the disclosure tell the mortgage, mandatory counseling, and the borrower
could lose their home if they do not comply with all of
borrowers? the requirements of the loan

What are the five items included Appraisal, origination fee,

in the “Zero Tolerance” items on discounts, lender fee, and
the LE? transfer taxes

What items are included in the Title, recording fees, lender required
“10% Tolerance” items? inspection. The borrower selects these
and you no longer have any liability.
 Which items are included in Realtor fees, Attorney fees,
“No Tolerance”? Escrows, Homeowners Insurance,
Flood Insurance, Prepaid Interest

When do the early disclosures No more than three business days from signed
application. If they are mailed, you must show
after application have to be proof that they were mailed within the three-
day requirement.
delivered?

When does the early Closing No less than three business days
Disclosure have to be delivered to before closing
the borrowers?

When do the fees and charges 10 business days, if the signed

expire from the issue date of the Intent to Proceed has not been
Loan Estimate (LE)? delivered to the lender

When would you not have to give When you do not have all the items under
PENCIL (Property address, estimated value,
an LE? name, credit, income, or loan amount)

Who created Credit Scoring? The Fair Isaac Company. Credit

scores are also knowns
as FICO scores.

What law requires the appraisal to ECOA – Equal Credit Opportunity

be delivered three business days Act
before closing?

How many days after a “Changed

Circumstance” has been determined Three business days
must the new LE be issued?
 When does the Preferred Within three business days from
Providers list (REG H) have to be when a conflict of interest has
delivered to the borrower? been determined

What are the valid delivery Person to Person, Digital Delivery with written
borrower approval, Mail, and Overnight, as long
methods in delivering a Loan as you have proof that it was done in the three-
business day requirement
Estimate or Closing Disclosure?

How many business days before the

closing is the Closing Disclosure to be Three business days
delivered to the borrower?

Once the borrower is obligated on

What does Consummation mean?
the loan (funding date)

What items will require a new Closing Program change, prepayment penalty added
to the mortgage or the APR tolerances are
Disclosure to be issued and a three-
exceeded (1/8% on a fixed or 1/4% on an
business day for the closing? ARM loan)

The application for MLO licensing used by

What is an MU4?
the NMLS

How many counselors are

10, and they must be in the
required to be listed on the
borrower’s area
Homeownership Counseling?
Disclosure?
Is counseling required on the Counseling is not required, but it
Homeownership Counseling is recommended, and it is at the
Disclosure? cost of the borrower
 What are the classifications of Assets for down payment and closing costs must
be liquid. Long term assets can be used for
assets? reserves. They don’t need to have the cash; they
just need to show as available

What are you not able to do in It must be done digitally via e-mail
regards to Verifications? or mail; it cannot be done in
person

What liabilities are to be listed on Any debt listed on the Credit

the application? Report or volunteered by the
borrower

Bank loans, student loans, car loans, credit

What are the types of debts? cards, mortgages, leased cars, IRS tax liens,
judgments, alimony, and child support

How many payments would remain for a Any loan that has less than 10 payments
debt not to be counted in the Debt-to- remaining, except car leases; no matter
Income (DTI) ratio? how many payments are left, they must be
counted in the DTI

How do you calculate the payment on For Fannie Mae and FHA loans, you use 1%
a student loan if there isn’t a loan of the balance. For Freddie Mac and USDA,
you use ½% of the balance.
payment on the credit report?

What is the required Two years of Tax Returns. If the borrower

owns 25% or more of the company, they
documentation for a self- must provide two years of business tax
employed borrower? returns, plus a year-to-date operating
statement.

If a self-employed borrower owns If the borrower owns 25% or more of the

25% or more of their company, company, they must provide two years of
business tax returns plus a year to date
what is required for income
operating statement
verification?
 What is a surety bond? A promise to be liable for the default of
another. It is like malpractice insurance for
a doctor.

Can a borrower use Capital Gains Yes, if they show two years’ history of
income from capital gains and they can
for qualifying for a loan? show that the income will continue for
an additional three years

What type of income can be Any income that can be verified and has
at least two to three years continuation.
used for loan Cash income cannot be used.
qualification?

Only if it is claimed on the

Can rental income be used?
borrower’s income
taxes

What percentage of income can 75%. A 25% vacancy must be

be used on rental property? deducted from the gross rental
income.

When would a debt payment be If the rental income minus the

required on a rental property? 25% vacancy is less than the
mortgage payment

What are the rules for counting Two years history and assurance
overtime income? the income will continue for two
to three years in the future

How do you calculate bonus You use last year’s bonus amount and
income if the bonus income provide assurance that the bonus
income will continue in the future
reduced in the last two years?
How do you calculate bonus income if You average the last two years to determine
the bonus income increased over the the income and provide assurance that the
bonus income will continue in the future
last two years?

If the monthly amount paid has taxes taken out

How do you calculate social before being paid to the borrower, the amount
security or disability income? received by the borrower can be grossed up by
25% (Ex. $1000 received can be counted as
$1,250 for qualification purposes)

What is the calculation for Hourly wage X the number of hours

determining the monthly income per week X 52 weeks / by 12 months
for an hourly waged borrower? = monthly income

What is the calculation for Bi-weekly income X 26 pay periods

determining income for someone / by 12 months = monthly income
who is paid every other week?

What is the calculation for determining Income paid on the 15th and the
income for someone is paid on the 15th
and 30th of the month?
30th X 24 pay periods / by 12
months

What is the Fannie Mae self-

Fannie Mae form 1084
employed document to calculate
income?

What is the Freddie Mac self-

Freddie Mac Form 91
employed document to calculate
income?

What information is on the credit Legal name, employment history, residency

history, Social Security number, credit
report? history, credit inquiries
Which credit score do you use to You will always use the middle
qualify the borrower? score for each borrower

No one is sure of the formula, but payment history and

How is the Credit Score credit utilization are two factors that are used. Credit
utilization means the amount of credit that is available
established? to you and how much of it you are using (The more you
use, the lower the credit score)

If you are using 43% overall ratio, multiply the

How do you calculate “capacity”? gross income by 43% and the answer will be the
maximum allowed for the mortgage payment and
all monthly debt (ex. $5000 X .43 = $2,150)

How do you determine Debt- Gross verified income divided into

to-Income Ratio (DTI)? total monthly debt payments =
Debt-to-Income Ratio

What do LTV, CLTV, and TLTV LTV = Loan-to-Value; CLTV =

mean? Combined Loan-to-Value; TLTV
= Total Loan-to-Value

How do you calculate Loan- Value or Purchase Price, whichever is

lowest, divided into the Loan Amount = LTV
to-Value (LTV)? (i.e., $500,000 value divided into $250,000
loan amount = 50%)

How do you calculate Combined Loan-to- Value is divided into the Loan Amount + the
Value (CLTV), assuming the borrower has a drawn HELOC=CLTV (ex. $500,000 value
first mortgage and a $100,000 HELOC of divided into $250,000 first mortgage
which they have drawn $50,000? +$50,000 drawn HELOC = 60%)

How do you calculate Total Loan-to-Value Value is divided into the Loan Amount + the
(TLTV), assuming the borrower has a first HELOC amount =TLTV (ex. $500,000 value
mortgage and a $100,000 HELOC of which divided into $250,000 first mortgage
they have drawn $50,000? +$100,000 HELOC = 70%)
 If a borrower wants a conventional 28% housing and 36% overall
conforming loan, has $5,000 monthly income
and $500 in monthly debt payments, which
payment income ratios would you use?

If a borrower wants a conventional conforming $5,000 X28% = $1,400 housing limit. $5,000 X 36%
loan, has $5,000 monthly income and $500 in = $1,800 overall limit (includes housing and debt
monthly debt payments, what is the PITI that the payments). You subtract the $500 debt payments
borrower would qualify for? from $1,800 = $1,300 for housing. You take the
lower of $1,400 or $1,300 for PITI

What is another name for Housing Ratio – program ratio for

Front-End Ratio? housing X verified income

What is another name for Overall Ratio – program ratio for

Back-End Ratio? overall debt X verified income

What is the maximum overall

43% of gross verified income
debt if you are calculating the
Qualified Mortgage limit?

What factors should be used to Meeting QM standards is essential, so the MLO is

required to find out and document a borrower’s
determine if a borrower has the income, assets, employment, credit history, and
monthly expenses
Ability to Repay?

MLOs cannot refinance without determining if the loan will

What is the definition of Tangible benefit the borrower, by giving them benefits like a reduced
interest rate, loan term, and/or monthly payment; debt
Net Benefit? consolidation; cash-out benefits, etc.

What are the three occupancy

Primary, 2nd home, Non-owner
types?
 Which of the occupancy types Primary residence only
(primary, 2nd home or Non-owner
require Right of Rescission?

What would raise a red flag with a If the average balance on the
Verification of Deposit? verification is different than the
average on the bank statements

What is the purpose of an It is an opinion of value that is

appraisal? determined by the market
approach

What is the Sales An appraisal method that compares one

property to comparables or other recently
Comparison Approach in sold properties in the area with similar
establishing the value? characteristics

When does the appraisal have to No less than three business days
be delivered to the borrower? before closing

What are the three Flood Zones

ZONE “A”, “V”, or “D”
that require Flood Insurance?

What is Fair Market The price that a seller is willing to

accept and a buyer is willing to pay on
Value?
the open market

On the appraisal, if it says, “As Is,” The property does not require any
what does that mean? repairs and is eligible to close
 How is monthly interest Principal balance X note or interest rate /
12= Interest for the month. Should match
calculated? up with the interest due on the payment
slip.

How is the new P&I payment On an ARM loan at adjustment time,

remaining principal balance X the new
calculated on each adjustment? interest rate divided by remaining term =
New P&I payment

How is Per Diem interest Principal balance X the note or interest rate
/d by 360 days on conventional loans, or
calculated? 365 days on government loans

How would you calculate the Remaining balance divided into interest
paid in the last twelve months = note
interest rate on a loan if you don’t rate. This is a very rough calculation.
know the interest rate?

What is a Discount Point? 1% of the loan amount for each discount

point to be used for interest rate reduction
only. They can be paid by the seller,
borrower, or their employer.

What is not included in the APR Prepaids = Appraisal, credit

and 3% fee limit on QM report, title and prepaid interest
calculations?

What fees and costs are shown on ALL COSTS DISCLOSED ON THE
the Closing Disclosure? LOAN ESTIMATE AND NO MORE
THAN A 10% TOLERANCE

For an ARM, a limit on the amount that Lifetime Payment Cap

payments can increase or decrease over
the life of the mortgage
 Qualified Mortgage allows a maximum 43% of the verified gross income =
Debt-to-Income (DTI) to meet maximum debt-to-income, including
requirements. What is that percentage? mortgage payment + monthly debt
payments

Based on the information submitted by the

What does an Approved Eligible mortgage company into Fannie Or Freddie
mean to meet QM requirements? underwriting systems, it the information meets
their requirements, the Approved Eligible means
they will buy the loan

The appraiser who can sign the

What is a Certified Appraiser?
appraisal attesting the final value

Who owns the property and what liens

What does a Title Report tell you? and encumbrances are against the
property, including unpaid real estate
taxes

The lender and the borrower, that from the date

Who is protected by the Title of funding, there are no liens or encumbrances,
Insurance policy? thus ensuring that the lender and borrower are in
the first position with their recorded mortgage

What are the balloon limits? $250,000 on the property and

$100,000 in person property

What portion of the property has Any portion of the house that is
to be in the flood plain as occupied. Garages and outside
determined by FEMA? buildings not included.

Federal Emergency Management

What does FEMA stand for?
Agency
What are some examples of Tax liens, mechanics liens,
Involuntary Liens? judgments, and attachments

Federal Housing Agency –

What does FHA stand for? oversees and publishes guidelines
for all FHA insured loans

Federal Housing Act – governs

What does FHAct stand for?
discriminatory practices

Private Mortgage insurance –

What does PMI stand for?
insurance for conventional loans
over 80%

Mortgage Insurance Premium –

What does MIP stand for? FHA loan premium for mortgage
insurance on all FHA loans

*end*