The document contains a review test with 56 multiple choice questions covering various topics in mortgage lending such as loan applications, appraisals, income and debt calculations, flood insurance requirements, and compliance with laws such as the Truth in Lending Act and Equal Credit Opportunity Act. The questions test knowledge of key terms, ratios, and guidelines used in the origination and underwriting process.
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These PPT slides are for students who are studying to pass the NationalLoan Originator Licensing Exam with Uniform State Component, and are students of Jillayne Schlicke, CE Forward, Inc.
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614-937-4162
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Watch full video on YouTube -
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Credit management is the process of granting credit , setting the term its granted on, recovering this credit when its due and ensuring compliance with company credit policy.
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Thank You For Watching
Subscribe to DevTech Finance
Our Steps to Success Buyer Presentation is about educating your buyer clients right from the beginning. As a Realtor®, you are a trained, knowledgeable, experienced professional. You know the market nationally, regionally and locally. With a strong buyer presentation such as ours, you will get the commitment of buyer prospects to work with you. We all know that working with buyers can be like herding cats. Our Buyer Presentation is a tool designed to help designate you as the real estate professional and establish control of your client.
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Http://www.myohiohouse.com
614-937-4162
First Time Home Buyer Class Sacramento CaliforniaHomeBoom.com
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Watch full video on YouTube -
https://youtu.be/f3VgVOgAUoE
Credit management is the process of granting credit , setting the term its granted on, recovering this credit when its due and ensuring compliance with company credit policy.
The difference in the rate of interest that a bank charges on the amount lent and the rate it pays to the depositors is technically called spread or interest rate spread.
This spread bank has to use to meet all its overheads and interest on deposit but also provide for NPA.
Thank You For Watching
Subscribe to DevTech Finance
Our Steps to Success Buyer Presentation is about educating your buyer clients right from the beginning. As a Realtor®, you are a trained, knowledgeable, experienced professional. You know the market nationally, regionally and locally. With a strong buyer presentation such as ours, you will get the commitment of buyer prospects to work with you. We all know that working with buyers can be like herding cats. Our Buyer Presentation is a tool designed to help designate you as the real estate professional and establish control of your client.
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NMLS Test 6
1. NMLS Review
Test 6
03/21/2013
1. What is another name for the “1003?”
A. Uniform Residential Loan Application
B. Good Faith Estimate
C. HUD-1
D. TIL Disclosure Statement
2. The following instances would require a borrower to obtain flood insurance
A. The borrower feels more secure with the flood insurance coverage
B. The lender policy is all conforming loans require flood insurance
C. The appraiser determines the property is in a flood zone
D There was flooding history with the previous owner
3. The borrower does not want to answer the questions in the government monitoring section. You must:
A. Refuse to take the application
B. Leave that section blank
C. Tell the borrower it is a federal violation of the Truth in Lending Act
D. Complete the section based on your personal observation
4. Which of the following is voluntarily disclosed by the borrower on the application?
A. Race and marital status
B. Marital status and age
C. Race and sex
D. Sex and age
5. The Housing Expense ratio is concerned with the following:
A. Borrower’s level of income in ratio to the loan amount
B. The borrower’s credit worthiness
C. The borrower’s ability to make their monthly mortgage payment
D. The borrower’s ability to meet housing expenses determined by their income
6. Per FNMA underwriting guidelines, the appraiser can use net adjustments up to _____% on a residential
1-4 family residential appraisal?
A. 25%
B. 20%
C. 15%
D. 10%
7. A borrower applies for a refinance loan on their property appraised at $235,000. There is a open HELOC
with a $40,000 credit limit and the borrower owes $25,000. The borrower applies for a first mortgage loan
amount of $166,000. What is the LTV, CLTV and TLTV based on the information given.
A. 70% / 80% / 95%
B. 70% / 83% / 0100%
C. 71% / 81% / 98%
D. 75% / 80% / 91%
8. A borrower refinances their mortgage and is required to obtain PMI on first mortgages with a LTV over
80%. The appraised value is $221,000 and the borrower carries a HELOC balance of $46,000. The
borrower applies for a fixed rate mortgage of $175,000 at 6.5% for 15 years. The following would apply:
A. The LTV is 100%
B. The borrower is required to have PMI
C. The lender will not require the borrower to have PMI on this loan
D. The LTV is 90%
2. 9. At what percentage of ownership would a business owner be required to provide 2 years of personal and
business tax returns to qualify for a conforming conventional loan?
A. 10%
B. 20%
C. 25%
D. More than 50%
10. The HUD-1A is used for the following transaction?
A. Broker originations
B. Refinances
C. FHA Loans
D. VA Assumptions
11. What circumstance might a loan originator request information on a borrower’s former spouse?
A. When the borrower does not include their former spouse’s average income
B. When the borrower is including child support from the former spouse’s income
C. If the former spouse is providing gift funds
D. If the applicant has been divorced less than 2 years
12. In order to meet fair lending guidelines, a credit scoring system must be based on which of the
following tests:
A. Validity test
B. System compliance test
C. Credit test
D. System performance test
13. Why would a borrower agree to pay PMI?
A. To guarantee a subordinate loan
B. To make a lower down payment on a loan purchase
C. To compensate for low income and poor credit
D. To qualify for a lower interest rate
14. When an applicant is using commission income to qualify for a residential loan, conforming
underwriting guidelines, how long must the income have been received in order to qualify?
A. At least 12 months, evidenced by the applicant’s tax returns
B. A minimum a 2 years evidenced by the applicants W-2s
C. At least 6 months evidenced by the last consecutive pay stubs
D. Commission income is not allowed for a conforming loan
15. The following are used to authorize underwriting access to a borrower’s tax returns?
A. Form 4560
B. form 4506-T
C. Form 1040
D. Form 1099
16. A salesperson receives 100% commission income. A Loan Originator would ask for what type of
documentation to prove income to qualify?
A. Last years tax returns, balance sheet and P & L
B. Last 2 year’s tax returns and letter from the employer the income is likely to continue.
C. Previous w-2s from the last 2 years
D. A written Verification of Employment from the employer
17. According to the Red Flag Rules, the following applies:
A. The borrower’s credit report shows accounts opened before they reached legal age
B. The credit report shows 7 years of credit history
C. There are high credit balances
D. There are debts on the credit report and are not on the loan application
3. 18. An applicant’s rental property generates $1200.00 of regular monthly income. What is the dollar
amount the borrower can use to qualify?
A. $1200
B. $900
C. $960
D. $600
19. What percentage of rental income can be used for qualifying?
A. 100%
B. 75%
C. 80%
D. 50%
20. A borrower converts an adjustable-rate mortgage to a fixed-rate mortgage. Which of the following must
occur?
A. Send new GFE, TIL and relevant broker disclosures to the borrower
B. Send new GFE, HUD-1 and CHARM booklets to borrower
C. As long as the initial disclosures are correct, no further are required
D. Mail a written confirmation of the change to the borrower
21. Which of the following is available to the borrower when the property is in a flood zone?
A. County subsidized flood program
B. Home owner’s liability insurance
C. FEMA’s National Flood Insurance program
D. State Flood Insurance Agency
22. When analyzing a borrower’s financial ability to meet the loan repayment, what do lenders review?
A. The size of the loan
B. The term of the loan
C. Value of the property being financed
D. The amount of the borrower’s existing debt load.
23. How does FHA determine the amount of upfront mortgage insurance a borrower will pay?
A. It is based on a sliding scale
B. By using the LTV
C. It is determined by the borrower’s credit score and LTV
D. The asking price of the property
24. When using the sales comparisons approach when completing an appraisal, which of the following is
included?
A. Comparison of value using 3 similar, recently sold properties
B. Comparing the national home average against the subject property
C. Reviewing recently sold properties with in a 3 mile radius
D. An analysis of the cost to rebuild the property
25. Using the cost approach to appraisal a property the following would include:
A. The value comparison against several comparable properties in the area
B. Comparing the national average of similar properties sold in the area.
C. The value of the lot plus the replacement cost of the improvements
D. Analyzing all the income that can be generated by the property
26. Which of the following is not found on a borrower’s credit report?
A. Information in the public records
B. Credit balances relative to credit availability
C. Derogatory credit information
D. Payments made to creditors who do not report to a credit repository
4. 27. How is MIP computed on an FHA loan?
A. Based on LTV
B. Based on a percentage of the sale price
C. Computed on the principal loan amount
D. The borrower’s income
28. Which of the following is not included on the loan application?
A. Taxes and Insurance
B. Interest rate
C. Closing costs
D. Loan purpose
29. Appraisers commonly use which appraisal method when evaluating the value of a property for a
conforming loan?
A. Income approach
B. Cost approach
C. Sales comparison approach
D. Defeasance approach
30. Which of the following appraisal approaches considers the replacement value of the subject property?
A. Income approach
B. Sales approach
C. Market approach
D. Cost approach
31. Which best describes the LTV ratio?
A. The ratio of the borrower’s monthly loan payment to the principal loan balance
B. The ratio of the borrower’s principal loan balance to the appraised value of the property
C. The ratio of the borrower’s total debt to monthly income
D. The ratio of the borrower’s monthly housing expense to monthly income
32. Which of the following would be included in a borrower’s back debt-to-income ration?
A. All consumer debt such as credit card payments and auto loan payments
B. The cost of the credit in relationship to the value of the loan
C. Principal and interest payment
D. Total amount of debt carried by the consumer
33. Why is it necessary to analyze a borrower’s capacity to repay a loan?
A. Determine if the borrower is financially capable of repaying the loan
B. Determine the maximum loan the borrower could qualify for
C. Determine the borrower’s liquidity position
D. Determine how much revolving credit the borrower has previously been approved for
34. A loan processor indicates a loan application can not be submitted until the Government Monitoring
section is completed. Which of the following categories would be provided in this section?
A. Race, Gender, and Ethnicity of the borrower
B. Age and number of schooling years of the borrower
C. Type of neighborhood and loan the borrower is applying for
D. Borrowers name and date of birth
35. An applicant applies for a $250,650 residential mortgage loan. There is a broker fee of 2 points. What s
the dollar amount of this fee?
A. $501.30
B. $5013.00
C. $50,130.00
D. None of the above
5. 36. What is the correct definition of a “Point?”
A. It represents 1% of the loan amount
B. It is the incremental increase used to compute the rate for ARM adjustment
C. The mathematical conversion, in percentage points, of a charge to the APR
D. It is the fee earned by a loan originator for locking in a certain interest
rate
37. Why would a borrower pay discount points in a loan transaction?
A. To compensate the loan originator for their services
B. To pay closing costs
C. To lower the interest rate
D. It would increase the monthly payment bur lower the interest owed
38. It is legal for a settlement service provider “A” to pay settlement service provider “B” a portion of any
fees charged to a borrower only when:
A. The provider “B” has actually performed bona fide services in exchange for the fee
B. Both providers have a written agreement in place to split fees
C. The providers are separate entities and are not affiliated with one another
D. The borrower is aware that both providers are sharing the fees
39. A borrower’s loan application has been denied and the loan originator provided them with an Adverse
Action Notice, as required by Regulation B (ECOA Which of the following would not be included in the
Adverse Action Notice?
A. Reason(s) for the denial of credit
B. Information on the credit reporting agency if the denial was a result of the borrower’s credit
report
C. A description of the credit he requested
D. The borrower’s credit score
40. The Federal Fair Lending laws permit a loan originator to ask which of the following?
A. Their religious preference
B. Their race
C. If they will stop working when they have children
D. If they plan on having more than one child
41. When is a loan applicant required to receive an adverse action letter if they are denied the loan?
A. Within 15 days of application
B. Within 30 days of application
C. Within 45 days of application
D. Within 90 days of application
42. According to Regulation B (ECOA), when is a notice concerning the right to receive a copy of the
appraisal due the borrower?
A. Within 15 days of application
B. Within 30 days of application
C. Within 45 days of application
D. Within 90 days of application
43. The penalty for paying or accepting an illegal referral fee is:
A. Fines up to $5,000 and 1 year in prison
B. Fines up to $10,000 and up to one year in prison
C. Fines up to $10,000 and up to 5 years in prison
D. Fines up to $25,000 and up to 5 years in prison
6. 44. Which of the following documents would a borrower review to confirm they have a prepayment
penalty?
A. HUD-1 and GFE
B. TIL Disclosure and promissory note
C. Deed of Trust
D Mortgage Servicing Disclosure
45. For the purpose of rescinding a loan, a business day would include every day of the week except:
A. Saturday and Sunday
B. Federal holidays
C. Sundays
D. Sundays and federal holidays
46. 5 siblings have ownership rights to a property. If their transaction includes a rescission period, how
many of the individuals are required to act to cancel the loan?
A. Any one of the five
B. All five
C. A majority of the five
D. At least two
47. Who must receive the Notice of Right to Cancel in a refinance transaction?
A. Any party with ownership interest in the property
B. Only those signing the note
C. Only Parties with 51% or more ownership in the property
D. Anyone required signing the mortgage
48. A mortgage loan application is taken over the telephone. Which of the following must occur within 3
business days of receiving the application?
A. Submit the application to the lender for underwriting
B. Provide the borrower with confirmation of the receipt of the application
C. Hand deliver or mail the Good Faith Estimate and Affiliated Business
Disclosure
D. Hand deliver or mail the Good Faith Estimate and Truth in Lending disclosures
49. When must a lender notify a borrower of their application status?
A. Usually within a week
B. Within 3 business days
C. Within 30 days
D. Within 90 days
50. If a borrower’s loan application is denied as a result of their credit score not meeting the lender’s
guidelines, what must be provided to the borrower?
A. An Adverse Action Notice
B. Verbal notice over the phone or a fax notice
C. Another loan option and borrower has 30 days to react
D. Copy of their credit scores
51. What type of loan program requires disclosure of the Settlement Cost Booklet (Charm Booklet?)
A. A new home purchase transaction
B. A refinance
C. Reverse mortgage
D. Subordinate financing
7. 52. The Gramm-Leach-Bliley Act requires a consumer be given__________ days to opt out before personal
financial information is disclosed to third parties?
A. 7 Business days
B. 30 days
C. A reasonable opportunity
D. 90 days
53. YSP is disclosed to the borrower on which of the following?
A. Only high cost home loans
B. On the GFE and Settlement Statement
C. On the TIL and promissory note
D. On purchase transactions
54. Aggregate escrow analyses are used to do which of the following?
A. Reduce the work load on the servicer
B. Prevent escrow overages
C. Ensure the loan is properly amortized
D. Prevent escrow shortages
55. An individual submits false information to obtain a federally insured loan. They could face the
following:
A. Up to $1,000,000 in fines and prison
B. License suspension
C. A misdemeanor conviction
D. A written reprimand and fines up to $10,000
56. When does the borrower receive the Servicing Disclosure?
A. At closing
B. 3 business days after application
C. 3 business days prior to closing
D. 5 business days after the servicing is transferred
57. An initial servicing transfer notice must be provided to the borrower _____ days prior to the transfer of
servicing on the loan?
A. 15
B. 30
C. 45
D. 60
58. Which of the following is included when computing finance charges on the borrower’s loan?
A. Seller’s points
B. Mortgage broker fee
C. Notary fees
D. Title insurance fee
59. Which of the following federal laws requires an originator to use their best judgment in determining the
demographic information on a borrower if the borrower does not voluntarily provide the information?
A. CRA
B. HMDA
C. TILA
D. HERA
8. 60. According to the federal fair lending laws, the following cannot be used to when qualifying a borrower?
A. A female borrower is 5 month pregnant and might not continue working after the baby is born.
B. A disabled borrower’s credit report indicates numerous 60 and 90 day late payments on
credit cards
C. A minority borrower lacks sufficient down payment for the loan
D. A female borrower’s application and credit report show several employment gaps over the last
2 years
61. Under the Truth in Lending Act, a loan originator is required to disclose the following to a borrower:
A. Estimated closing costs
B. Appraisal results
C. Terms of the credit transaction
D. Personal financial information provided by the credit reporting agencies
62. According to the federal Fair Credit Reporting Act, who has the responsibility of protecting a
borrower’s privacy when their credit information is being reported?
A. HUD
B. Credit reporting agency
C. The consumer
D. The lender servicing the loan
63. Under the TILA, what is the threshold of error permitted before the APR must be re-disclosed?
A. One-eighth of a percent
B. One-quarter of one percent
C. Three-eights of one percent
D. It is not required to be re-disclosed if the new GFE form is used and the interest rate correctly is
disclosed on the new GFE
64. Which is not true concerning the Settlement Cost Booklet?
A. It can be translated into other languages
B. It can be made part of a larger document
C. I can be stamped with the name of the loan originator
D. It can be reproduced in any form with out HUD’s permission
65. RESPA applies to:
A. Residential loans
B. Residential lot loans less than 5 acres
C. Commercial condominiums and duplexes
D. Commercial loans
66. What federal statute governs the settlement of residential mortgage loans?
A. RESPA
B. TILA
C. HMDA
D. ECOA
67. Which of the following federal agencies creates the regulations for the TILA?
A. FHA
B. Federal Reserve Board
C. HUD
D. FTC
68. What entity insures an FHA loan?
A. Federal Housing Administration
B. Fair Housing Authority
C. Federal First Time Home Buyers Act
D. HUD
9. 69. What does the acronym PFC stand for?
A. Prepaid Finance Charge
B. Paid From Closing
C. Payment For a Creditor
D. Prequalification Finance Credit
70. What make FHA loans favorable to borrowers?
A. They do not require a down payment
B. They are insured by the federal government
C. They are made to only low income borrowers
D. They do not require escrows
71. The Cost of Funds Index traditionally is used to determine interest rates on what types of loans?
A. Home equity lines of credit
B. 15- and 30- year fixed rate mortgages
C. Reverse mortgages
D. Rate adjustments on adjustable rate mortgages
72. A loan adjustment based on LIBOR is affected by the:
A. Lifetime Insured Broker’s Origination Rate
B. Loan Index Banking Offered Rate
C. Lender’s Index of Broker Originations Rate
D. London Interbank Offered Rate
73. Which of the following statements would be permissible when communicating with an appraiser?
A. I need this property to be valued at $200,000
B. Your last appraisal did not meet the minimum value we expected. We are going to have to wait
on paying your invoice until we receive a 2nd opinion.
C. Can you please explain why this property is valued so low, compared to the current market?
D. Your appraisals have been coming in much lower than expected lately. We are going to have
to start using other appraisers.
74. Which of the following reasons would be permissible to refuse to take an application from a borrower?
A. You cannot relate to or with the borrower and would rather not do business with them
B. The borrower has alluded to the fact they are submitting false documents in order to qualify for
a larger loan
C. The lender does not accept applications from the neighborhood where they are buying or
refinancing
D. The applicant has poor credit and you do not see any way to get them approved
75. The realtor, for a fee, is offering to a mortgage company the names and telephone numbers of everyone
who attended a recent open house. Who is in violation of RESPA?
A. The realtor
B. The mortgage company
C. Both the realtor and mortgage company
D. Neither is in violation as both companies are offering a service to the buyer
76. A real estate broker owns 50% of a mortgage company. The realtor refers business to the mortgage
originator who provides written disclosures to the borrower of the business relationship. The written
disclosure also makes it apparent the borrower is not required to use the services of the broker. Who is in
violation of RESPA?
A. The real estate broker
B. The mortgage originator
C. Both the realtor and the originator
D. Neither the realtor or the originator
10. 77. A title insurance company provides a computer to a mortgage broker This computer is used to transmit
documents from the broker’s office to the title company. Who is in violation of RESPA?
A. The title company
B. The mortgage broker
C. Both the title company and the broker
D. Neither the Title Company nor the broker
78. Settlement fees and other associated charges are reflected on the HUD-1 Settlement Statement. The fees
and charges are listed as:
A. Actual percentages of the purchase price
B. Estimated dollar amounts of the loan
C. Actual dollar amounts
D. Estimated percentages of the loan amount
79. Regarding PMI disclosure, which of the following is true?
A. Fixed rate and adjustable rate costs are the same
B. It is required for all conventional loans
C. It is required for all types of loan programs
D. It is different for each type of loan
80. What section of the HUD-1 are flood insurance costs found?
A. Reserves deposited with the lender
B. Title charges
C. Items paid in connection with the loan
D. Additional settlement charges
81. A loan originator has taken an application from a borrower. When should the borrower be advised about
the status of the application?
A. Within one week
B. No longer than 90 months
C. 30 days
D. The borrower is not required to be notified until the underwriter has approved or denied the
loan.
82. A borrower uses a loan originator to originate the loan. Who has the final responsibility for providing
the GFE?
A. The lender
B. The originator
C. The title company
D. The settlement agent
83. A mortgage lender has an affiliated business arrangement with a third party service provider. Under
what conditions can the lender require the borrower to use the third party provider?
A. If no kickback or referral fee is paid
B. Only if the lender has a ownership interest of more than 10%
C. If there is no kickback or referral fee and the service provider is an attorney, credit reporting
agency or appraiser.
D. Under no circumstances; this strictly violates HMDA guidelines
84. The primary function of the TILA is:
A. To ensure 3rd party service providers do not charge excessive fees
B. To ensure creditors do not charge high interest rates
C. To ensure creditors provide borrowers clear disclosure of the terms of credit
D. To ensure borrowers have equal opportunity to credit from lenders
11. 85. The following documents show the cost of a loan stated as an annual percentage rate:
A. GFE
B. HUD-1
C. Consumer Rate Protection Disclosure
D. TIL Disclosure
86. A lender is allowed to deny a borrower credit based on which of the following:
A. The borrower has participated in consumer credit counseling
B. The borrower receives public assistance
C The borrower lacks stable income
D. The borrower is divorced
87. The Homeowner protection Act of 1998 requires the service to do which of the following:
A. Automatically cancel PMI insurance when the LTV reaches 78% of the original value as
long as the payments and escrows are current
B. Cancel PMI when the equity in the property reaches 75%
C. Continue PMI until t he borrower requests it cancelled
D. Automatically cancel PMI when the LTV reaches 80% and the payments are current
88. According to the Consumer Credit Protection Act, when the consumer is provided with comprehensive
information on the cost of the credit for which they are applying, it results in:
A. Originating fewer loans
B. The informed use of credit by the consumer
C. The origination of more loans
D. Allows a higher credit limit for consumers
89. A potential borrower contacts an originator to apply for new home financing. Until they identify a
property they wish to purchase, the originator is not required to:
A. Pre-Qualify them
B. Conduct an application interview
C. Provide a GFE
D. Allow the borrower to provide any personal or credit information
90. Two borrowers jointly apply for a loan to purchase a residential property. Which following statement is
correct?
A. A special information booklet must be sent to each borrower
B. A special information booklet may be combined or merged with other disclosures which is
signed by both borrowers at closing
C. A special information booklet can be sent to either borrower
D. A special information booklet must be disclosed to each borrower at least 3 business days
prior to closing
91. Which of the following is included in section 800 of both the GFE and HUD-1?
A. Private mortgage insurance premium
B. Property taxes
C. Title Search fee
D. Appraisal fee
92. The Patriot Act mandates lenders and the broker agents do all of the following except:
A. Transmit details of loan transactions to the federal government
B. Determine if a potential borrower appears on a known terrorist lists maintained by the federal
government
C. Maintain a record of the information used to verify a borrower’s identity
D. Verify the identify of a person applying for the loan
12. 93. The following is required by RESPA at the time of application for a residential mortgage loan:
A. Rescission notice
B. HUD-1A
C. Escrow Statement
D.GFE
94. When is the affiliate business arrangement disclosure required?
A. At closing
B. When a referral is made
C. At application
D. When a fee payable to one of the service providers is charged
95. A borrower is concerned about the amount of money they must bring to settlement. They ask to review
the HUD-1 prior to closing. By law, when must their request be satisfied?
A. 1 business day prior to closing
B. 3 Days prior to closing
C. Within a reasonable time after being requested by the borrower
D. 5 days prior to closing
96. If an originator commits an act of fraud against a federally chartered bank, what is the statute of
limitations for federal prosecution?
A. 1 year
B. 5 years
C. 7 years
D. 10 years
97. If an originator violates the privacy provisions of the Gramm, Leach, Bliley Act, the FTC can bring
action against the originator and impose penalties of up to___________?
A. $1,000
B. $2,500
C. $5,000
D. $10,000
98. The funding fee on a VA loan:
A. Is refundable if the loan is paid off in the first 3 years
B. Is not refundable if there is a loan balance after 5 years
C. Is refundable if the loan is paid off in 10 years
D. Is refundable only if the veteran was overcharged
99. The Guidance on Non-Traditional Mortgage Product Risks identifies nontraditional as which of the
following”
A. Loans based on a borrower’s equity in the home and not on credit or income analysis
B. Loan products having a higher than normal chance of foreclosure
C. Loans other than conforming and government loans
D. Loan products allowing for borrowers to exchange lower initial loan payments for higher
payments once the loan has amortized
100. Why would a borrower seek to obtain an interest only loan?
A. To qualify for a larger loan amount
B. It includes negative amortization
C. It allows the borrower to set up a subsidy account for the principal balance
D. It reduces the borrower’s initial interest rate