Download NMLS EXAM 2021---------------NMLS EXAM 2021 and more Exams Advanced Education in PDF only on Docsity!
NMLS EXAM 2021
Fraud for money Laundering - correct answer -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 - correct answer 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): - correct answer 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): - correct answer 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 - correct answer A request for a residential mortgage loan and includes the borrower-related information that lenders commonly use when considering the request. Someone who takes an application 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: - correct answer 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: - correct answer 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): - correct answer A federal law requiring that financial institutions take steps to prevent and report cases of money laundering. Bridge loan: - correct answer 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: - correct answer 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): - correct answer A form indicating the appraised value of a property being financed with a VA loan. Changed circumstance: - correct answer 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.
Consumer Financial Protection Bureau (CFPB): - correct answer 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 - correct answer 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: - correct answer 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: - correct answer A nonprofit financial institution that is owned by its members and organized for their benefit. Deed of trust: - correct answer 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: - correct answer 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: - correct answer occurs when an employer creates a seemingly fair employment practice that has a negative impact on members of a protected class. Disparate treatment: - correct answer 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: - correct answer 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: - correct answer 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: - correct answer 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: - correct answer 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: - correct answer 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: - correct answer 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: - correct answer 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.
Hedging: - correct answer 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: - correct answer 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): - correct answer 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): - correct answer A federal law that sets rules for high-cost 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: - correct answer 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 banks are covered by it. Immediate family member: - correct answer A spouse, child, sibling, parent, grandparent or grandchild. An individual who only originates loans with or on behalf of an immediate family member doesn't need a loan originator license. Interest-only loan: - correct answer A fixed-rate mortgage that allows the borrower to pay only the interest due on the mortgage for a period of years, after which the loan becomes fully amortizing. Judicial foreclosure: - correct answer A method of foreclosure that requires court action in order to complete the process. Typically found in states that use the mortgage document as the security instrument.
Legitimate business need: - correct answer One circumstance under which a lender can receive a consumer's credit information from a credit bureau. The disclosure must relate to a business transaction that was initiated by the consumer or must be intended to help a creditor review an account in order to determine whether a consumer continues to meet the terms of that account Lender-paid compensation (LPC): - correct answer Compensation paid by a lender to a mortgage broker for originating a loan funded by that lender. This compensation is different from the old yield-spread premium (YSP) in that it does not vary based on the terms or conditions of a loan. Typically, LPC is paid as a percentage of the loan amount and does not vary from transaction to transaction in a given lender/broker relationship Loan Application Register (LAR): - correct answer The form that is used for reporting data required to be collected under the Home Mortgage Disclosure Act. Must be reported once per year. Loan flipping: - correct answer An abusive practice in which a loan is refinanced without any tangible net benefit for the borrower. A form of equity stripping. Mortgage: - correct answer A document that creates a lien upon the subject property for the security of payment of the debt Mortgage-backed securities (MBS): - correct answer Pooled mortgages that have been converted into bonds and sold to the public. Nationwide Mortgage Licensing System and Registry (NMLS-R): - correct answer A licensing system and registry that was established in connection with the SAFE Act. Non-conforming loans: - correct answer Loans that do not satisfy requirements of Fannie Mae and Freddie Mac and cannot be sold to those GSEs Non-judicial foreclosure: - correct answer A form of foreclosure that only requires administrative actions rather than the involvement of a court. Typically found in states that use the trust deed as the security instrument.
State - correct answer In regard to the SAFE Act, any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands State-licensed loan originator: - correct answer A loan originator who is licensed by his or her state, registered with the NMLS-R and isn't employed by entities mentioned in the definition of "registered loan originator." If you are reading this study guide, you are likely planning on becoming (or have already become) a state- licensed loan originator State Regulatory Registry, LLC: - correct answer A wholly owned subsidiary of CSBS that runs the NMLS-R Statutory right of redemption: - correct answer The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges.The ability to cure a foreclosure even after a judicial sale has occurred Suspicious activity reports (SARs): - correct answer Reports that must be filed with the Treasury Department whenever a person engages in suspicious aggregate transactions of $5,000 or more. These reports are required by the Bank Secrecy Act. Subprime loan: - correct answer A loan in which the borrower represents too high of a risk for it to be sold to Fannie Mae or Freddie Mac Thrift: - correct answer Sometimes known as a "savings and loan," a mutual or stock association chartered and regulated by the Office of the Comptroller of the Currency. Traditionally, deposits are invested in residential mortgage loans. Title insurance: - correct answer A policy that protects the insured against loss or damage due to defects in title. Title report: - correct answer A report issued after a title search by a title insurance company, listing all defects and encumbrances of record
Total interest percentage (TIP): - correct answer The total amount of interest paid over the life of the loan expressed as a percentage of the loan amount. It appears on both the Loan Estimate and Closing Disclosure. Trigger terms: - correct answer Items in an advertisement that automatically require the disclosure of other items in the same advertisement. Trigger terms are the amount or percentage of down payment, the number of payments or period of repayment, the amount of any payment and the amount of any finance charge. Undisclosed concessions: - correct answer Monies related to a purchase transaction passing between buyer and seller that are not disclosed on the Closing Disclosure or HUD-1 settlement statement (for loans not using the CD). ALL credits and concessions must be listed on the settlement statement. VA funding fee: - correct answer An amount paid by a veteran in order to help defray the costs of the VA loan program. The size of the fee will depend on several factors, including the loan-to-value ratio, the purpose of the loan, the veteran's status and the number of times the veteran has obtained a VA loan. Warehouse line of credit: - correct answer A revolving line of credit used by mortgage brokers in order to fund loans Wholesale lenders: - correct answer Entities that purchase and sell loans that have been originated by third parties. Wholesale lenders may purchase loans with the intent to package the loans for sale to secondary market investors; or they may purchase loans in order to service the loans themselves 5 rights under FACRA - correct answer 1. Right to adverse action notice 2. Free copy of credit report 3. Request credit score 4. The right to dispute incomplete or inaccurate information 5. Limit prescreened offers What is a Qualified mortgage - correct answer No terms longer than 30 years, No risky features, DTI 43% (back end), fees costs and points 3% or less, Income and verify ability to repay TILA penalitites - correct answer $5,000/day single violation, $25, 000/day reckless violation, 1 million/day knowingly violation TRID
*Authorization to get credit report *maintain LO record with NMLS *Pass National and State tests *20 hours pre-licensing (3-hours federal, 3-hours ethics, Consumer protection, Fair lending, Instruction on Fraud, 2-hours non-traditional lending, 12 hours mortgage elective) What is required for the 8 hours continuing education? - correct answer 3 hours federal, 2 hours ethics, 2 hours non-traditional, 1 hour undefined. Who developed and maintains NMLS - correct answer Conference of State Bank Supervisors & The American Association of Residential Mortgage Regulators What is NMLS? - correct answer Nationwide Mortgage Licensing System and Registry Who created NMLS? - correct answer Congress as part of the SAFE Act. A registered LO means any individual who is an employee of ... - correct answer *a depository institution *A subsidiary that is- *owned and controlled by a depository institution and *regulated by a Federal Banking agency;or *An institution regulated by the Farm Credit Administration *And is registered and maintains a unique identifier What did the Sherman Antitrust Act do? - correct answer outlawed the formation of trusts that interfered with free trade Unfair Deceptive and Abusive Acts or Practices rules - correct answer Dodd Frank gives authority to CFPB and UDAAP to prohibit acts that can cause significant financial inury to consumers, erode consumer confidence and undermine the financial marketplace
Standard for unfairness is 1. It causes or is likely to cause substantial financial injury to consumer and 2. The injury is not avoidable by concumers How long does the LE allow the borrower to shop for a new rate - correct answer 10 days What are the FTSs "four Ps test." - correct answer 1.Is the statement prominent enough for the consumer to notice? 2.Is the information easy-to-understand, doesn't contradict with other information, and at a time when the consumer's attention is not distracted? 3.Is the placement of information in a location where consumer can be expected to look or hear? 4.Is the information close to what it claims? What does BSA stand for and also known as? - correct answer Bank Secrecy Act..aka as the "anti-money laundering act" The BSA requires financial institutions to to keep records of cash purchases, file reports of cash transactions exceeding how much? - correct answer $10,000 (daily aggregate amount) The Bank Secrecy Act says you must report suspicious activity that might signify money laundering, tax evasion or other criminal activities to who? - correct answer The Financial Crimes Enforcement Network, FinCEN Who says that Financial institutions are required to file a SAR report no later than 30 calendar days after the date of initial detection of facts (delayed filing no more than 60 days) - correct answer Financial Crimes Enforcement Network under the Bank Secrecy Act Under non-bank activates, RMLOs are required for transactions that involve aggregates funds or other assets of at least how much, to make a SARs report? - correct answer $ Types of Mortgage Fraud - correct answer *Submission of inaccurate information
Chattels Personal - correct answer A movable article of personal property other than land, buildings, and other things annexed to land. What does COFI stand for? - correct answer Cost of Funds Index What do closing costs include? - correct answer Title insurance fees, Lender fees (underwriting, processing, doc prep, flood cert., tax service, wire transfer, courier), Escrow, attorney or closing agent fees, recording fees, Inspection and appraisal fees, real estate commission, pre-paid interest, property tax if due, hazard insurance, PMI When must the unique identifier be shown? - correct answer The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations or advertisements, including business cards or websites, and any other documents as established by rule, regulation or order of the Commissioner.
