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Which of the following statements is permissible in an advertisement?
A. Current interest rates as low as 3.50% with an APR of 3.99%. Contact us today!
B. Looking for a VA loan? We are endorsed by and affiliated with the VA administration.
C. Take out a reverse mortgage loan with us, and you can stay in your home as long as you want and never make a payment.
D. Close a mortgage loan with us within the next 60 days and when interest rates drop, we will refinance your loan at a lower rate guaranteed.
Explanation:
The statement "Current interest rates as low as 3.50% with an APR of 3.99%. Contact us today!" is permissible under TILA and Regulation Z, provided it accurately reflects the current rates and corresponding Annual Percentage Rate (APR).
Regulation Z requires that if an advertisement states an interest rate, it must also disclose the APR to ensure consumers understand the true cost of the loan, including fees and other finance charges.
The other statements are prohibited due to potential misrepresentation:
B (affiliation with the VA) could be misleading unless it is an actual endorsement, which is rare.
C (no payments with a reverse mortgage) could mislead consumers about the conditions of a reverse mortgage.
D (guaranteed refinancing) could be misleading as future refinancing depends on market conditions and the borrower's qualifications.
References:
Truth in Lending Act (TILA)
Regulation Z Advertising Rules
When a mortgage loan originator notices multiple Social Security number discrepancies within the same loan file, it is considered a red flag of:
A. Fair lending.
B. Mortgage fraud.
C. A forgetful borrower.
D. Pricing discrepancies.
Explanation:
When multiple discrepancies in a borrower’s Social Security number (SSN) are found within the same loan file, it raises concerns of mortgage fraud. The Social Security number is a critical identifier used to verify a borrower's identity, credit history, and employment. Inconsistent or altered SSNs may suggest attempts to hide the true identity of the borrower, which can be an indicator of fraudulent activity.
Mortgage fraud involves deliberate misrepresentation of information on loan applications, documents, or other parts of the mortgage process. SSN discrepancies can point to identity theft or attempts to use multiple identities to obtain a loan fraudulently.
This is a serious concern under the Fair Credit Reporting Act (FCRA) and can lead to legal action if discovered during underwriting or later in the loan process.
Mortgage loan originators (MLOs) must report such discrepancies as they may violate federal laws like RESPA and TILA and lead to further investigation.
References:
Federal Trade Commission (FTC) guidelines on identity theft
Mortgage Acts and Practices (MAP) Rule
Upon becoming employed by a state-licensed mortgage company, an individual who works for a depository institution as a mortgage loan originator (MLO) shall not be deemed to have temporary authority to act as an MLO in an application state if which of the following events has occurred?
A. The individual has been a witness in a trial at which the defendant was convicted of felony fraud.
B. The individual has been subject to a court order for payment of child support.
C. The individual had an application for an MLO license denied or an MLO license revoked or suspended in any Governmental jurisdiction.
D. The individual has submitted an application to be a state-licensed MLO in the application state and was registered in the NMLS as an MLO by the prior employer.
Explanation:
An individual who had their MLO license application denied, or had a license revoked or suspended in any governmental jurisdiction, is not eligible for temporary authority to act as a mortgage loan originator (MLO) under the SAFE Act. Temporary authority allows registered MLOs who move to a state-licensed mortgage company to act as MLOs while their application for a state license is being processed. However, individuals with disqualifying events, such as prior license denial or revocation, lose this privilege.
Other options:
Court orders for child support (B) and being a witness in a trial (A) do not disqualify individuals from obtaining temporary authority.
References:
SAFE Act, 12 USC §5101
NMLS Temporary Authority to Operate Guidelines
When a mortgage loan originator notices multiple Social Security number discrepancies within the same loan file, it is considered a red flag of:
A. Fair lending.
B. Mortgage fraud.
C. A forgetful borrower.
D. Pricing discrepancies.
Explanation:
When multiple discrepancies in a borrower’s Social Security number (SSN) are found within the same loan file, it raises concerns of mortgage fraud. The Social Security number is a critical identifier used to verify a borrower's identity, credit history, and employment. Inconsistent or altered SSNs may suggest attempts to hide the true identity of the borrower, which can be an indicator of fraudulent activity.
Mortgage fraud involves deliberate misrepresentation of information on loan applications, documents, or other parts of the mortgage process. SSN discrepancies can point to identity theft or attempts to use multiple identities to obtain a loan fraudulently.
This is a serious concern under the Fair Credit Reporting Act (FCRA) and can lead to legal action if discovered during underwriting or later in the loan process.
Mortgage loan originators (MLOs) must report such discrepancies as they may violate federal laws like RESPA and TILA and lead to further investigation.
References:
Federal Trade Commission (FTC) guidelines on identity theft
Mortgage Acts and Practices (MAP) Rule
The characteristics of a fixed-rate mortgage include a:
A. fixed margin.
B. fixed interest rate. <br>
C. mandatory 30-year term. <br>
D. minimum balloon payment. <br>
Explanation:
A fixed-rate mortgage is characterized by a fixed interest rate that remains constant throughout the life of the loan, ensuring that the borrower’s monthly principal and interest payments remain the same over time. This is the defining feature of a fixed-rate mortgage.
Other options:
A fixed margin (A) applies to adjustable-rate mortgages (ARMs).
Mandatory 30-year terms (C) and balloon payments (D) are not characteristics of a fixed-rate mortgage, as fixed-rate loans can have varying term lengths (15, 20, or 30 years) without balloon payments.
References:
Fannie Mae Selling Guide on fixed-rate mortgages
Freddie Mac Mortgage Products
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