NMLS weights mortgage loan origination activities at 27% of the 115 scored questions. NMLS does not publish weights below that level, so our exam-length mix gives this module 3 of the 115, in proportion to its share of the outline topics in that area (outline section 4.D).
The full bank holds 35 questions for this module, each with a written explanation that cites its source. Below are the 5 free questions for this module, with answers.
The law and guidance the questions in this module cite most often.
A borrower has a $150,000 first mortgage and applies for a $50,000 home equity loan. The home is worth $250,000. What will the combined LTV be?
Why: Combined LTV is all mortgage balances on the property divided by its value (HUD Handbook 4000.1 Glossary, Combined Loan-to-Value). ($150,000 + $50,000) / $250,000 = 80%.
Source: HUD Handbook 4000.1, Glossary (Combined Loan-to-Value)
An ARM uses an index that currently stands at 2.75% and a margin of 2.25%. What is the fully indexed rate?
Why: The CFPB's Consumer Handbook on Adjustable-Rate Mortgages (CHARM) states "Interest rate = index + margin": the margin is an extra percentage the lender adds to the index. 2.75% + 2.25% = 5%.
Source: CFPB Consumer Handbook on Adjustable-Rate Mortgages (CHARM), p. 4
The correct APR on a regular fixed-rate mortgage is 6.000% and the finance charge is disclosed correctly. Which disclosed APR would NOT be considered accurate?
Why: As a general rule, 12 CFR 1026.22(a)(2) treats the APR as accurate if it is not more than 1/8 of one percentage point (0.125) above or below the correct rate, so 5.875% to 6.125% is within tolerance. 6.250% is 0.25 above. (The extra mortgage tolerances in 1026.22(a)(4)-(5) apply only where an APR error flows from a finance charge error, which the stem rules out.)
Source: 12 CFR 1026.22(a)(2)
A lender caps a conventional loan at 80% LTV. The property's adjusted value is $425,000. What is the largest loan it will make?
Why: LTV is loan / value (HUD Handbook 4000.1 Glossary), so the maximum loan is value x LTV: $425,000 x 0.80 = $340,000.
Source: HUD Handbook 4000.1, Glossary (Loan-to-Value)
A borrower buys a house for $310,000 that appraises at $300,000, with no inducements. She borrows $270,000. What is the loan-to-value ratio under HUD's definition?
Why: HUD Handbook 4000.1 Glossary: LTV is "the Base Loan Amount divided by the Adjusted Value", and for a purchase the Adjusted Value is the lesser of the purchase price less inducements or the Property Value. The lesser is $300,000, so $270,000 / $300,000 = 90%.
Source: HUD Handbook 4000.1, Glossary (Loan-to-Value; Adjusted Value)
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