NMLS EXAM 2021 QUESTIONS AND ANSWERS 100% CORRECT. Rated A

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NMLS EXAM 2021 QUESTIONS AND ANSWERS 100% CORRECT Fraud for money Laundering ✔✔-Criminal uses scheme known as value tampering -Criminal offers to buy house at reduced rate -Seller must sell at... appraised value on paper, but after closing, seller give the criminal the difference in cash. Adverse Action ✔✔An unfavorable credit decision rendered against a consumer made on the basis of information contained on the credit application. If a lender takes adverse action against an applicant, the lender must notify the applicant in writing. If the adverse action is taken as a result of information contained on the credit report, the notice must also provide the name, address and toll-free phone number of the credit bureau that supplied the information. American Association of Residential Mortgage Regulators (AARMR): ✔✔A national association of individuals who are charged with administering and regulating various aspects of residential mortgage lending. It played a major role in the formation of the NMLS-R and in the drafting of the model licensing law. Annual percentage rate (APR): ✔✔Does NOT include...TEN ACT- (Title,Escrow,Notary,Appraisal,Credit Report,Termite)A measurement of the total cost of the credit, expressed as an annual rate. The APR includes those paid at the time of closing and those paid over the term of the loan. It includes all items that are part of the finance charge, such as interest, discount points, mortgage insurance premiums and administrative fees. Application ✔✔A request for a residential mortgage loan and includes the borrower-related information that lenders commonly use when considering the request. Someone who takes anapplication from a consumer is generally considered to be acting as a loan originator, even when gathering application information over the phone or Internet ARM Disclosure: ✔✔A disclosure required to be presented to the applicant within three days of application on any ARM loan. This disclosure provides the applicant with information about the specific ARM product for which they are applying, such as a historical index value Balloon mortgage: ✔✔A type of fixed-rate mortgage loan with monthly payments based on a 30- year amortization schedule, setting a maturity date for a shorter period of time - usually five, seven, 10 or 15 years. This allows the borrower to make lower monthly payments for that shorter period of time, with a large payment of the full remaining principal balance and interest due at the maturity date Bank Secrecy Act (BSA): ✔✔A federal law requiring that financial institutions take steps to prevent and report cases of money laundering. Bridge loan: ✔✔A bridge loan is a loan for a short duration of time and can be used when one is purchasing one property but is dependent on the equity from another property that has not yet been sold. Once the property is sold then the bridge loan is repaid. Business day: ✔✔Monday through Saturday except holidays.For the LE, when creditor is open to the public for carrying on substantially all of the creditor's business functions Certificate of Reasonable Value (CRV): ✔✔A form indicating the appraised value of a property being financed with a VA loan. Changed circumstance: ✔✔A material event or piece of information that is discovered after the issuance of a Loan Estimate and has an impact on either the borrower's settlement costs or the borrower's eligibility for a loan. A changed circumstance allows a loan originator to reissue the Loan Estimate to reset applicable tolerances.Chapter 7 bankruptcy: ✔✔A common kind of bankruptcy in which a borrower might need to liquidate assets in order to satisfy creditors Chapter 13 bankruptcy: ✔✔a reorganization form of bankruptcy for individuals that allows the debtors to keep their property and use their income to pay a portion of their debts over three to five years Character ✔✔In mortgage lending, the borrower's willingness to repay the debt. Closing costs: ✔✔All of the costs related to closing except the prepaid or escrow items. Examples of closing costs are the origination fee, discount points, real estate sales commission, attorney fees, survey charges, title insurance premiums, agency closing fees, appraisal fees, credit report fees, termite report fees, recording fees, mortgage insurance premiums, loan transfer or assumption fees, etc. Commercial bank: ✔✔A financial institution organized to accumulate funds primarily through time and demand deposits and to make these funds available to finance the nation's commerce and industry. Conference of State Bank Supervisors (CSBS): ✔✔A national organization of state bank supervisors who are charged with ensuring that state banking institutions adhere to certain standards. The organization played a major role in the formation of the NMLS-R and in the drafting of the model licensing law. Conforming loans: ✔✔Loans that can be sold to Fannie Mae and Freddie Mac. Consumer Financial Protection Bureau (CFPB): ✔✔A federal regulator created under authority of the Dodd-Frank Act. This agency is housed under and funded directly by the Federal Reserve, and has been tasked with rule-making for and enforcement of the majority of U.S. mortgage laws.Contingent liability ✔✔A liability that may be incurred as the result of a future action. A good example of this in a mortgage transaction is the debt that is produced when a person has co-signed for another person's debt (like a student loan) but the actual payments are being made by the other person (known as the "primary obligor"). Such liabilities do NOT have to be taken into consideration when calculating the borrower's debt ratio if the payments have been made on-time for the previous 12-month period by the primary obligor. Cost approach: ✔✔A method of appraisal in which the appraiser estimates the value of the property by calculating the cost of construction minus any depreciation, plus the value of the site (land). Credit union: ✔✔A nonprofit financial institution that is owned by its members and organized for their benefit. Deed of trust: ✔✔A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two. The third party holds naked title for the benefit of the lender. Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party) Defeasance clause: ✔✔A portion of a lending agreement that requires the lender to execute a release of lien or satisfaction of mortgage document upon full payment of the debt. Disparate impact: ✔✔occurs when an employer creates a seemingly fair employment practice that has a negative impact on members of a protected class. Disparate treatment: ✔✔intentional discrimination that occurs when people are purposely not given the same hiring, promotion, or membership opportunities because of their race, color, sex, age, ethnic group, national origin, or religious beliefs. Example, offering coffee to one visitor to your office but not to another; should those people be of different races, genders, ethnicities, etc., disparate treatment may have occurred.Dodd-Frank Act: ✔✔legislation passed in 2010 aimed at reforming the banking industry and offering consumers greater protection.A federal law that addresses several aspects of mortgage lending and other financial regulatory matters. It created the Consumer Financial Protection Bureau (CFPB) and amended many other mortgage-related laws. Dual compensation: ✔✔A prohibited act under the CFPB's Loan Originator Compensation Rule, this refers to a broker receiving compensation from multiple parties (such as the lender AND the borrower) on the same transaction. Easement: ✔✔Formal right to traverse or use real property without ownership or possession. Often granted to utility companies so that they may maintain infrastructure located on a property. Recorded with the county in which the property is located, easements will appear on the title report and, in certain limited circumstances, may raise questions from an underwriter or attorney. Encroachment: ✔✔A fixture, such as a fence, that crosses the boundary line of one property onto another. It can create adverse possession issues and a cloud on the property's title. Equitable right of redemption: ✔✔The right of a defaulted property owner to recover the property prior to, or at the time of its sale by paying the appropriate fees and charges. Equity stripping: ✔✔A practice whereby the applicant's equity is taken away by a mortgage lender. Equity stripping can come in many forms, but in all cases, is viewed as predatory lending and must be avoided. Fair Credit Reporting Act: ✔✔A federal law regulating the users and use of consumer credit information. Parts of the law are now implemented and enforced by the Consumer Financial Protection Bureau, but parts of it remain with the Federal Trade Commission.Fannie Mae: ✔✔The common name for the "Federal National Mortgage Association," which is a government-sponsored enterprise that acts as a quasi-governmental agency for the purpose of creating a secondary market for mortgages. It purchases loans on the secondary market and turns groups of loans into mortgage-backed securities (MBS) through the securitization process. Federal Home Loan Bank (FHLB) system: ✔✔A system of GSEs owned by over 8,000 community financial institutions. It provides advances to financial institutions in order for those institutions to make residential mortgage loans. Fiduciary relationship: ✔✔a relationship founded on trust and confidence Financing contingency date: ✔✔In real estate transactions, the contractually determined date by which the buyer's financing must be in place Fraud for profit: ✔✔Inside job where the loan originator, real estate agents or appraisers do it for their benefit of making profit Fraud for property: ✔✔Also called "fraud for housing," this is a willful misrepresentation of material facts on a loan application with the intent of gaining property. This type of fraud is more likely to be perpetuated by borrowers and result in less damage to the creditor(s) involved because the loan is typically paid in a timely manner. Freddie Mac: ✔✔"Federal Home Loan Mortgage Corporation," which is a government-sponsored enterprise that was intended to provide a secondary market for mortgages originated by savings and loan associations and create competition to Fannie Mae. Like Fannie Mae, Freddie Mac also issues mortgage-backed securities (MBS). Ginnie Mae: ✔✔Government National Mortgage Association; pools mortgages for investorsGovernment-sponsored enterprise (GSE): ✔✔A quasi-governmental agency. Fannie Mae and Freddie Mac are examples of GSEs. Hedging: ✔✔In mortgage lending, the attempt to minimize interest-rate risk by purchasing a Treasury security or MBS to offset large movements in the rate markets. High-cost mortgage loan: ✔✔A mortgage loan with an annual percentage rate exceeding the Average Prime Offer Rate (APOR) by more than 6.5% for a first-lien transaction or 8.5% for a second-lien transaction, OR a mortgage loan with total points and fees exceeding 5% of the loan amount. ALL high-cost loans must be compliant with the Home Ownership and Equity Protection Act (HOEPA). Home Mortgage Disclosure Act (HMDA): ✔✔A federal law that requires lenders to annually disclose the number of loan applications and loans in certain areas, thus eliminating the practice of "redlining." Home Ownership and Equity Protection Act (HOEPA): ✔✔A federal law that sets rules for highcost loans. A loan that is subject to HOEPA cannot feature a balloon payment, negative amortization or a prepayment penalty and cannot be refinanced within one year by the original creditor (other creditors may refinance the loan) unless doing so is "clearly in the best interests of the borrower." Identity theft prevention program: ✔✔A written program designed to detect the warning signs of identity theft in day-to-day operations. Businesses defined as "financial institutions" under the Fair and Accurate Credit Transactions Act's Red Flags Rule are required to implement this kind of program. Because of the broadness of the definition, all mortgage brokerages and mortgage b [Show More]

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