Qualification: Underwriting, Appraisal, Title & Insurance: practice questions

An applicant's total monthly debt obligations, including the new mortgage payment, are $2,100, and total monthly income is $6,000. What is the monthly debt-to-income ratio?

1. 30%
2. 35% ✓
3. 40%
4. 65%

Why: 12 CFR 1026.43(c)(7)(ii)(A): the ratio is total monthly debt obligations to total monthly income. $2,100 / $6,000 = 0.35, or 35%. Residual income under (c)(7)(ii)(B) would be $6,000 - $2,100 = $3,900.

Source: 12 CFR 1026.43(c)(7)

Which of these must the notice of special flood hazards to a borrower include?

1. The number of floods recorded at the property over the past ten years or more
2. The lender's own estimate of the annual flood insurance premium for the home
3. A statement that private flood policies are never acceptable
4. Whether federal disaster relief may be available after a declared flood ✓

Why: 12 CFR 339.9(b)(6) requires "A statement whether Federal disaster relief assistance may be available in the event of damage to the building or mobile home caused by flooding in a Federally declared disaster." Under (b)(4) the notice also says private policies may be available. 42 U.S.C. 4104a(a) sets the notice duty.

Source: 12 CFR 339.9(b); 42 U.S.C. 4104a(a)

Under the ability-to-repay rule, which of these may a creditor NOT count as the consumer's income or assets?

1. The value of the home that secures the loan ✓
2. Wages from the consumer's current employment
3. Balances in the consumer's savings accounts
4. Regular benefits paid by a government agency

Why: 12 CFR 1026.43(c)(2)(i) requires the creditor to consider "The consumer's current or reasonably expected income or assets, other than the value of the dwelling, including any real property attached to the dwelling, that secures the loan".

Source: 12 CFR 1026.43(c)(2)(i)

What makes a real estate transaction a "federally related transaction" under FIRREA?

1. The borrower is a federal employee or a member of the armed forces on active duty
2. A federal regulator engages in or regulates it, and it needs an appraiser ✓
3. The property is located on federal land or in a federally declared disaster area
4. The loan amount is above the conforming loan limit set by the FHFA for that year

Why: 12 U.S.C. 3350(4): a federally related transaction is any real estate-related financial transaction which "(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (B) requires the services of an appraiser."

Source: 12 U.S.C. 3350(4)

A fixed-rate loan above the conforming limit was classed as high-risk by the lender at consummation. When must its PMI terminate under the Homeowners Protection Act?

1. When the balance is first scheduled to reach 77 percent of the original value ✓
2. Never; high-risk loans are wholly exempt from the termination provisions
3. When the balance is first scheduled to reach 78 percent of the original value
4. When the borrower asks, and the balance has reached 80 percent of the original value

Why: 12 U.S.C. 4902(g)(1)(B)(i): for a high-risk loan determined by the mortgagee (other than conforming loans under GSE guidelines), termination of a fixed rate mortgage occurs when the balance, based solely on the initial amortization schedule, "is first scheduled to reach 77 percent of the original value". The midpoint rule in 4902(c) also applies under 4902(g)(2).

Source: 12 U.S.C. 4902(g)(1)(B)

Which of these is one of the eight factors a creditor must consider under the ability-to-repay rule?

1. The consumer's age and the number of working years the consumer has left
2. The consumer's current debt obligations, alimony and child support ✓
3. The number of years the consumer has lived at the current address
4. The consumer's marital status and number of dependants at home

Why: 12 CFR 1026.43(c)(2) lists income or assets, employment status, the payment on the loan, simultaneous loans, mortgage-related obligations, "(vi) The consumer's current debt obligations, alimony, and child support", the DTI ratio or residual income, and credit history.

Source: 12 CFR 1026.43(c)(2)

A loan is not higher-priced when the application arrives, but a rate change on Monday makes it a non-exempt higher-priced mortgage loan. By when must the creditor send the HPML appraisal disclosure?

1. By the third business day after it first received the application
2. By the third business day after it determines the loan is higher-priced ✓
3. At least seven business days before consummation, with the Loan Estimate
4. It need not be sent, as the loan was not higher-priced at application

Why: 12 CFR 1026.35(c)(5)(ii): for a loan that becomes a higher-priced mortgage loan subject to (c) after application, "the disclosure shall be delivered or placed in the mail not later than the third business day after the creditor determines that the loan is a higher-priced mortgage loan".

Source: 12 CFR 1026.35(c)(5)(ii)

Under the ability-to-repay rule, which of these is a "mortgage-related obligation"?

1. Homeowners' association dues charged on the home ✓
2. The consumer's monthly electricity and gas bills
3. A car loan payment the consumer already makes
4. The cost of routine repairs to the home each year

Why: 12 CFR 1026.43(b)(8): "Mortgage-related obligations mean property taxes; premiums and similar charges ... that are required by the creditor; fees and special assessments imposed by a condominium, cooperative, or homeowners association; ground rent; and leasehold payments." A car loan is a current debt obligation under (c)(2)(vi).

Source: 12 CFR 1026.43(b)(8)