NMLS SAFE EXAM LATEST UPDATED GRADED A+

Primary Mortgage Market - ANSWER Where credit institutions originate loans C. The maximum the rate can increase over the life of the loan - ANSWER When an ARM has rate caps of 5/2/6, the 6 refers to what? A. The maxi ...

Primary Mortgage Market - ANSWER Where credit institutions originate loans C. The maximum the rate can increase over the life of the loan - ANSWER When an ARM has rate caps of 5/2/6, the 6 refers to what? A. The maximum rate increase at the initial adjustment B. The start rate for the loan C. The maximum the rate can increase over the life of the loan D. The rate maximum the rate can decrease over the life of the loan B. The borrower qualified at the buydown rate - ANSWER When utilizing a temporary buydown to lower the interest rate on a FHA loan, which of the following are correct A. The borrower qualified at the note rate B. The borrower qualified at the buydown rate C. The rate cannot be more than 2% below the note rate D. Seller or builder can pay the discount points to buydown the rate A. Age - ANSWER All of the following are violations of the Fair Housing Act EXCEPT A. Age B. National Origin C. Disability D.Religion Encrumbrance - ANSWER Claim against property held by one who is not the legal owner Trigger Term - ANSWER Advertised term that requires additional disclosures Advertising Disclosure - ANSWER An advertisement must be presented "clearly and conspicuously" to keep from being deceptive, unfair, or otherwise violate a Commission rule Waving Right of Rescission - ANSWER Extenuating circumstances such as "bona fide personal financial emergency Right of Rescission - ANSWER Right that borrowers have to cancel a loan or line of credit with a lender within three days of closing Business Day - ANSWER When creditors office is open to the public, a calendar working day except Sunday or a federal holiday Application - ANSWER Financial information used for purposes of obtaining an extension of credit Disclosure - ANSWER The act of making new information known FTC Federal Trade Commission - ANSWER Mission is to promote consumer protection and eliminate and prevent anticompetitive business practices CFPB Consumer Financial Protection Bureau - ANSWER Regulatory agency charged with overseeing financial products and services offered to consumers TILA Truth in Lending Act - ANSWER Enacted 1968 promotes the informed use of consumer credit by requiring disclosures about terms and costs and standardizes the manner in which costs with borrowing are calculated and disclosed Per Diem Interest - ANSWER Interest charged on a loan for one or more days Annual Interest Rate Formula - ANSWER Principal (X) Interest Rate = Annual Interest Rate Interest Only Mortgage - ANSWER Mortgage where the mortgagor is only required to pay off the interest that arises from the principal that is borrowed for a set period Permanent Buydown - ANSWER Borrower chooses to pay additional "discount points" to buy down the interest rate for the life of the mortgage note 2/1 Buydown - ANSWER Used on fixed rate loans over two years Set of two initial temporary-start interest rates that increase in stair-step fashion until a permanent interest rate is reached Discount Point - ANSWER A form of pre-paid interest which effectively increases the yield on the loan above the amount of the stated interest rate CLTV Combined Loan to Value - ANSWER An amount in addition to the Loan to Value, which simply represents the first position mortgage or loan as a percentage of the property's value LTV Loan to Value - ANSWER Ratio of a loan to the value of an asset purchased PITI - ANSWER Principal, Interest, Taxes, Insurance Refers to the components of a mortgage payment DIF - ANSWER Housing to Debt Ratio that measures an individual's ability to manage monthly payment and repay debts Forbearance - ANSWER Agreement between the lender and the borrower to delay foreclosure Loan Modification - ANSWER A permanent restructuring of the mortgage where one or more of the terms of a borrower's loan are changed to provide a more affordable payment Foreclosure - ANSWER Legal process to collect debt on mortgaged property Satisfaction of Mortgage Letter - ANSWER Document generated and signed by a mortgage lender, acknowledging that the borrower has paid off the mortgage loan in full and the mortgage is not a lien on the property Subordination Agreement - ANSWER When two mortgages are on a property, this specifies which mortgage takes precedence Payoff Statement - ANSWER Provides homeowner proof the mortgage is paid off Constructive Note - ANSWER Legal presumption that anything recorded in a public record can be known by anyone Actual Note - ANSWER Direct knowledge that one has of the property Inquiry Note - ANSWER Information that should compel a reasonable person to make further inquiries about some aspect of the property Title Record - ANSWER Serves as a central repository of information about a parcel of land SRP Service Release Premiums - ANSWER Payment received by lender after selling a loan Based on market value GNMA Government National Mortgage Association - ANSWER Created in 1968, goal to expand affordable housing under HUD FNMA Federal National Mortgage Association - ANSWER Created 1968 works with Fannie Mae to increase affordable lending FHA Federal Housing Administration - ANSWER Insures banks real estate loans and charges borrowers a small premium HELOC Home Equity Line of Credit - ANSWER A loan in which the lender agrees to lend a maximum amount within an agreed period and is also an open-ended mortgage transaction that is secured HECM Home Equity Conversion Mortgage - ANSWER A FHA insured reverse mortgage that allows the conversion of equity in a home to cash Balloon Mortgage - ANSWER A mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period and does not amortize ARM Interest Rate Adjustment - ANSWER Margin + Interset = Rate COFI Cost of Fund Index - ANSWER Regional average of interest expenses incurred by financial institutions which in turn is used as a base for calculating variable rate loans ARM Adjustable Rate Mortgage - ANSWER Loan that is lower than fixed rate in beginning Loan payment changes over time Adjustable caps that vary Used to obtain a higher loan amount Fixed Rate - ANSWER Interest rate that remains the same over the life of the loan Non-Conforming Loan - ANSWER Does not meet Freddie Mac or Fannie Mae guidelines Conforming Loan - ANSWER Conforms to terms and conditions set by government Conventional Loan - ANSWER Not guaranteed or insured by the government but can still follow federal guidelines Acceleration Clause - ANSWER Accelerated loan repayment if property is in default Exculpatory Clause - ANSWER Relieves one party form liability due to actions of another party Defeasance Clause - ANSWER Creditor can obtain title without foreclosure process Late Payement Penalty - ANSWER When fees are attached to late payment Pre-Payment Penalty - ANSWER Fixed sum added to loan if loan is paid off early Contract of Deed - ANSWER Complete financing and sales contract agreed upon by seller and seller with no note attached Note - ANSWER Promise to repay debt Mortgage - ANSWER Pledge of collateral to secure a loan Reconveyance - ANSWER A document issued by a mortgage holder indicating that the borrower is released from the mortgage debt and transfers the property title from the lender Conveyance - ANSWER The act of transferring an ownership interest in real property from one party to another Mortgage Lock-In-Rate - ANSWER A guarantee a lender will deliver a specific combination of interest rate and points if the mortgage closes by a specified date Approval letter - ANSWER A document that states the loan amount a lender is willing to make a borrower Pre-Qualification Letter - ANSWER Estimate of loan amount a borrower can get with limited financial information Commitment Letter - ANSWER Indicates a borrower has passed lenders underwriting guidelines and that they are willing to offer the borrower a home loan Mortgage Approval Letter - ANSWER Letter subject to property specified for a loan and dependent on an appraisal AUS Automated Underwriting System - ANSWER A computer generated loan underwriting decision, using completed loan application information Capacity - ANSWER A borrowers income assets Credit - ANSWER The ability of a borrower to obtain goods or services before payment, based on the trust that payment will be made in the future Collateral - ANSWER Property a borrower can provide as security for a loan Income Verification - ANSWER Provides verification a borrower has the means for repayment of debt Infile Credit Report - ANSWER One national credit bureau report Tri-Credit Report - ANSWER All three credit bureau reports Factual Data Credit Report - ANSWER two or three credit bureau reports Credit Bureau - ANSWER Clearinghouse that exchanges information with credit grantors about a borrowers bill paying habits and history 1004 Market Conditions Addendum - ANSWER Designed to enhance the transparency of the market trends, conditions and conclusions made by the appraiser Appraisal Approaches - ANSWER Sales Comparison/Market Data Cost Income Appraisal - ANSWER Estimate of a properties value FNMA Fannie Mae Loan Application - ANSWER A 1003 document requires originator to provide unique loan originator identifier provided by NMLS phone number, company ID and company address Ways to obtain a Loan Application - ANSWER Face to Face Internet Mail/Fax Telephone Loan Application - ANSWER Basis for entire loan package A legal document FEMA Federal Emergency Management Agency - ANSWER Coordinates the response to a disaster that has occurred in the United States NFIA National Flood Insurance Act - ANSWER In acted 1968 after hurricane Betsy NFIP National Flood Insurance Program - ANSWER Made flood insurance available for first time part of NFIA FDPA - ANSWER In 1973 this made the purchase of flood insurance mandatory for the protection of property located in special flood hazard areas Title Insurance - ANSWER Used to protect agents, two types Owners- insures title is free of defects Lenders-benefit purchaser if loan is sold PMI Private Mortgage Insurance - ANSWER Protects lenders if borrower stops making payments borrower pays until 20% of loan value is paid Forced Place Insurance - ANSWER Insurance policy placed by lender on a home when the property owners own insurance is cancelled New Construction Loan - ANSWER Finances the cost of a new construction Pays while being constructed, then new loan taken out Requires Freddie Mac form 442 Requires Fannie Mae form 1004D Power of Sale - ANSWER Grants lender the ability to secure full legal title to property Trust - ANSWER Right of property to be held for the benefit of another Truster - ANSWER Person who grants the right to trust Trustee - ANSWER Holds the property of a trust Specific Lien - ANSWER Debts tied to single property Highest priority lien holder has first rights to collect First in time, first in line Involuntary Lien - ANSWER Lien imposed upon the owner of real property Voluntary Lien - ANSWER Mortgage owner willingly entered into an agreement of lien against their property Lien - ANSWER An interest or encumbrance held by a creditor in a debtee's real or personal property Secondary Mortgage Market - ANSWER Where originated loans are sold to warehouse lenders Origination fee is charged to warehouse lenders Oral Rate Disclosures - ANSWER When a borrower orally asks about a credit plan lender must state the APR TILA Document Retention 1026.25 - ANSWER Creditor must retain the Escrow Closing Notice and the Partial Payment Disclosure, both of which are new disclosures, for two years TILA Document Retention 1026.25 - ANSWER Requires a creditor to maintain for three years records sufficient to evidence all compensation it pays to a loan originator Regulation Z - ANSWER Most of the specific requirements imposed by TILA are found in CHARM Booklet Consumer Handbook On Adjustable-Rate Mortgages - ANSWER This is an informational booklet containing general information on Adjustable Rate Mortgages (ARM's) that is provided by the lender to the loan applicant at the time of application for certain adjustable mortgage loans Dodd-Frank Act - ANSWER Promotes the financial stability of the United States Passed in 2010 CFPB Consumer Financial Protection Act Title X Bureau - ANSWER Regulates consumer financial products GAO Government Accountability Office - ANSWER An agency of the U.S. government that monitors and audits government spending and operations Title XIV, 14 Dodd-Frank - ANSWER Establishes minimum standards for all mortgage products Requires all originators to be properly qualified, registered and licensed TILA Regulation 129(c) - ANSWER This requires creditors to determine a consumer's ability to repay a "residential mortgage loan" and establishes new rules and prohibitions on prepayment penalties. ATR Ability to Repay Regulation Z 1026.43(c) - ANSWER Determines whether the creditor makes a reasonable and good faith determination at or before. consummation that the consumer will have a reasonable ability to repay the loan according to its terms FTCA Federal Trade Commission Act - ANSWER Outlaws unfair methods of competition and outlaws unfair acts or practices that affect commerce Safe Harbor Presumption - ANSWER A borrower is unable to challenge whether the lender met its "ability to repay" obligations Rebuttable Presumption - ANSWER The borrower has the ability to raise a legal challenge but must overcome the legal presumption that the lender complied with this obligation Average Prime Offer Rate - ANSWER Rate higher than a benchmark rate TILA Appraisal Regulations 129E - ANSWER Prohibits misuse of appraisals, influencing appraiser and withholding payment for an appraisal HOEPA Home Ownership and Equity Protection Act - ANSWER Enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees RESPA Real Estate Settlement Procedures Act - ANSWER This was designed to protect potential homeowners and enable them to become more intelligent consumers. It requires that lenders provide greater amounts of information to prospective borrowers at certain points in the loan settlement process Regulation X - ANSWER The Real Estate Settlement Procedures Act (RESPA), is covered under this regulation 2604 - ANSWER The Home Loan Toolkit is covered under this section of RESPA GFE Good Faith Estimate - ANSWER This document includes the breakdown of approximate payments due upon the closing of a mortgage loan HUD-1 Uniform Settlement Statement Section 2603 - ANSWER A standard form used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate HUD-1 - ANSWER The final disclosure of settlement costs provided to the borrower at closing Mortgage Serving Disclosure Statement - ANSWER Discloses to the borrower whether the lender intends to service the loan or transfer it to another lender Notices of Transfer of Loan Servicing - ANSWER Each transferor servicer and transferee servicer of any mortgage loan shall provide to the borrower a notice of transfer for any assignment, sale, or transfer of the servicing of the mortgage loan 1024.33 - ANSWER Section under RESPA for mortgage servicing transfers Notice of Inquiry - ANSWER If any servicer of a federally related mortgage loan receives a qualified written request from the borrower for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days Kickback - ANSWER An illegal fee or rebate paid to someone in order to gain that person's decision or recommendation for the award of business ABA Affiliated Business Arrangement - ANSWER Under RESPA, an arrangement where a person refers mortgage-related business to a company in which the person "or an associate of such person" has an ownership interest of more than 1 percent in a provider of settlement services. Associate - ANSWER A spouse, parent, or child of such person; A corporation or business entity that controls, is controlled by, or is under common control with such person; An employer, officer, director , partner, franchisor, or franchisee of such person; or Anyone who has an agreement, arrangement, or understanding, with such person, the purpose or substantial effect of which is to enable the person in a position to refer settlement business to benefit financially from the referrals of such business. CBA Controlled Business Arrangement - ANSWER A real estate brokerage office that provides related services through subsidiary companies that operate within the brokerage office Sham Business Arrangement - ANSWER A business arrangement set-up for the purpose of paying illegal kickbacks or referral fees ECOA Equal Credit Opportunity Act - ANSWER Enacted in 1974,makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age HDMA Home Mortgage Disclosure Act Regulation C - ANSWER Federal law enacted in 1975 that requires certain financial institutions to provide mortgage data to the public. Grew out of a concern of credit shortages in urban areas Redlining - ANSWER A discriminatory practice by which banks refuse or limit loans or mortgages within specific geographic areas CRA Community Reinvestment Ac - ANSWER An act enacted in 1977 with the intention of encouraging depository institutions to help meet the credit needs of surrounding communities Regulation C of HMDA - ANSWER Mandates that depository institutions must annually disclose the communities to which they provided residential mortgages. This allows regulatory authorities to evaluate whether the lender is adequately meeting the needs of the prospective borrowers in that community. LAR Loan Application Register - ANSWER Refers to the format that has been prescribed for reporting HMDA data FDIC Federal Deposit Insurance Corporation - ANSWER Created in 1933 this insures deposits against bank failures to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices OCC Office of the Comptroller of the Currency - ANSWER Federal agency that serves to charter, regulate and supervise the national banks and the federal branches and agencies of foreign banks, head is appointed by the President OTS Office of Thrift Supervision - ANSWER Federal agency under the Department of the Treasury that chartered, supervised, and regulated all federally chartered and state-chartered savings banks and savings and loans associations. NCUA National Credit Union Administration - ANSWER Independent federal agency created to regulate, charter, and supervise federal credit unions FCRA Fair Credit Reporting Act Section 1681b - ANSWER Enacted in 1970 that regulates the collection of credit information and access to your credit report to ensure fairness, accuracy and privacy of the personal information contained in the files of the credit reporting agencies. FACTA or FACT ACT Fair and Accurate Credit Transactions Act - ANSWER Enacted in 2003, contains provisions to help reduce identity theft and allows consumers to request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies CRA Credit Reporting Agency - ANSWER Businesses that maintains historical information pertaining to credit experience on individuals or businesses 2/1 ARM Hybrid - ANSWER A loan with a fixed rate for the first two years that has a rate that changes once each year for the remaining life of the loan and is considered a _______ mortgage GLBA Gramm-Leach-Bliley Act - ANSWER Federal law enacted in 1999 to control the ways that financial institutions deal with the private information of individuals Patriot Act Section 352 - ANSWER Requires financial institutions to establish anti-money laundering programs, which at a minimum must include: the development of internal policies, procedures and controls; designation of a compliance officer; an ongoing employee training program; and an independent audit function to test programs Patriot Act Section 326 - ANSWER Prescribes regulations establishing minimum standards for financial institutions and their customers regarding the identity of a customer that shall apply with the opening of an account at the financial institution Patriot Act Section 314 - ANSWER Helps law enforcement identify, disrupt, and prevent terrorist acts and money laundering activities by encouraging further cooperation among law enforcement, regulators, and financial institutions to share information regarding those suspected of being involved in terrorism or money laundering Customer - ANSWER Person who obtains or has obtained a finical product NPI Nonpublic Personal Information - ANSWER Any "personally identifiable financial information" that a financial institution collects about an individual in connection with providing a financial product or service that is not public FTC 16 CFR Part 314: - ANSWER Standards for safeguarding customer information AML Anti-Money Laundry Program - ANSWER Refers to a set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions Patriot Act Disclosure - ANSWER Patriot Act Information Form Patriot Act Identification Form Patriot Act Identification Form for Entities or Organizations CIP Customer Identification Program - ANSWER Requirement, where financial institutions need to verify the identity of individuals wishing to conduct financial transactions with them and is a provision of the USA Patriot Act 5 years - ANSWER How long do records have to be kept for Patriot Act FACTA Disposal Rule 2003 - ANSWER Requires appropriate measures to dispose of sensitive information derived from consumer reports TCPA Telephone Consumer Protection Act - ANSWER Rule prohibiting telephone solicitation calls to a residence before 8:00 am or after 9:00 pm, regulates telemarketing calls. It also is the authority to create the National Do-Not-Call List 18 months with established relationship such as purchase 90 days after an inquiry is made - ANSWER Time periods under TCPA, Telephone Consumer Protection Act that a person can be contacted MARS Mortgage Assistance Relief Services - ANSWER Enacted 2010, directed at companies that offer loan modification services to consumers for a fee; it requires certain disclosures and prohibits upfront fees. Non-Traditional Mortgages - ANSWER Mortgages include interest-only mortgages, adjustable rate mortgages (ARMs) and subprime mortgages Amortization - ANSWER A term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time. Negative Amortization - ANSWER An increase in the principal balance of a loan caused by making payments that fail to cover the interest due LTV Loan to Value Ratio - ANSWER Ratio used by lenders to express the ratio of a loan to the value of an asset purchased DTI Debt to Income Ratio - ANSWER Ratio lenders use to measure an individual's ability to manage monthly payment and repay debts CMT Constant Maturity Treasury Rate - ANSWER An adjustment for equivalent maturity, used by the Federal Reserve Board to compute an index based on the average yield of various Treasury securities maturing at different periods LIBOR IntercontinentalExchange London Interbank Offered Rate - ANSWER A benchmark rate that some of the world's leading banks charge each other for short-term loans COFI Cost of Funds Index - ANSWER A regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans CMT Constant Maturity Treasury - ANSWER The 12-month moving average used as an index for adjustable rate mortgages Predatory Lending FTCA Section 5 - ANSWER Lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn't need, doesn't want or can't afford Hard Money Loan - ANSWER A specific type of asset-based loan financing through which a borrower receives funds secured by real property which the LTV is 65-70% Risk Layering - ANSWER Relaxing more than one traditional underwriting standards which increases the risk of defalt Piggyback Loan - ANSWER When a borrower takes out two loans simultaneously which lowers equity and increases credit risk Introductory Rate - ANSWER Interest rate charged to a customer during the initial stages of a loan Temporary Buydown - ANSWER A mortgage loan option through which a home buyer gets his or her interest payments temporarily reduced for the first few years of the loan Interest Only Mortgage - ANSWER A type of mortgage in which the mortgagor is only required to pay off the interest that arises from the principal that is borrowed ARM Adjustment Rate Mortgage - ANSWER Mortgage which allows the borrower to choose between several monthly payment options: a 30 or 40-year fully amortizing payment, a 15-year fully amortizing