This is a practice quiz for North Carolina Mortgage Laws and Duties of Care NC State Law Quiz Name:   UI: Name and UI are required. Answer carefully, you will not be able to change your answer. Score visible at bottom. When all answered, click on "Submit" button at the bottom. 1 Question 1909nc The NC Predatory Lending Act (PLA) addresses:     Provisions on first mortgage loans     Provisions on high cost loans     Violations of predatory lending laws and their consequences     All of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" North Carolina’s Predatory Lending Act (a/k/a the PLA) is contained in North Carolina’s General Statutes, Chapter 24. Chapter 24 deals with all of the issues motioned above. It is a key part of North Carolina’s mortgage lending laws. Abacus recommends that you become familiar with this law, particularly with the “high Cost” and “Rate Spread” provisions.   2 Question 1913nc A miscellaneous fee under the PLA can:     only equal .25% of the loan amount or $150 whichever is greater     only equal .50% of the loan amount or $250 whichever is greater     never be charged     none of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "A" The phrase “miscellaneous fees” never occurs in the North Carolina law. However, fees not on the list of permitted fees that are not bona fide third party fees are commonly referred to as “miscellaneous fees.” According to the Predatory Lending Act, these fees can not exceed ¼ of 1% or 25 basis points of the total loan amount. 3 Question 1916nc It is illegal in NC to charge a prepayment penalty on loans ___ or less:     $100,000     $150,000     $250,000     $175,000 The correct answer is "B" The North Carolina PLA clearly establishes that prepayment penalties can not be charged on loans less than $150,000. If a prepayment penalty is included on loan amounts less than, $150,000 the loan becomes a high cost loan regardless of the other loan terms. 4 Question 1917nc Under the PLA, what would be the maximum miscellaneous fee on a mortgage with a total loan amount of $100,000?     $150.00     $200.00     $250.00     $300.00 The correct answer is "C" The phrase “miscellaneous fees” never occurs in the North Carolina law. However, fees not on the list of permitted fees and that are not bona fide third party fees are commonly referred to as “miscellaneous fees”. According to the Predatory Lending Act, these fees cannot exceed ¼ of 1% or 25 basis points of the total loan amount. In the example above, the total loan amount is $100,000. 25 basis points of that figure is $250. Therefore, all of the fees on the loan which are not bona fide third party fees or are not on the list of permissible fees can not total more that $250 for this loan. Keep in mind that this is an aggregate figure, meaning that they cannot total more than $250. 5 Question 1918nc In NC, which of these fees would not be considered a miscellaneous fee?     Processing fees     Underwriting fees     Credit report fees     Administrative fees The correct answer is "C" Credit report fees are bona fide third party fees. Neither North Carolina law nor Federal regulation permit you to mark up these fees. 6 Question 1919nc What is the maximum a broker practicing in NC can charge a borrower:     4 %, a processing fee and a document preparation fee     4 % and an application fee of $500     4 % and a .25% miscellaneous fee     4 % of the total loan amount The correct answer is "D" NOTE WELL: the phrase "Total loan amount" means the amount calculated as set forth in 12 C.F.R. 226.32(a) and under the Official Staff Commentary of the Board of Governors of the Federal Reserve System. This is not the same as the “Amount Financed” on your TILA Disclosure. Generally, the “total loan amount” is deduced by taking the amount financed and subtracting the points and fees from that figure. 7 Question 1922nc A high cost loan under Chapter 24 is triggered by:     the APR exceeding the current yield by more than 8%     a prepayment penalty charged more than 30 months after closing on loans of $150,000 or more     the points and fees exceeding 5% of the total loan amount     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" The North Carolina high cost statute located in North Carolina’s General Statutes chapter 24 enumerates three triggers: (1) the APR, (2) the prepayment penalty provisions, and (3) the points and fees. Abacus strongly recommends that you know these three triggers before taking the North Carolina Mortgage Loan Originator test. 8 Question 1924nc On a NC mortgage with a total loan amount of $30,000, the maximum points and fees that can be charged are:     $500     $1,000     $1,200     $2,000 The correct answer is "C" North Carolina’s General Statutes Chapter 24 says that on loans over $20,000 the maximum points and fees which can be charged are 4% of the total loan amount. NOTE WELL: the phrase "Total loan amount" means the amount calculated as set forth in 12 C.F.R. 226.32(a) and under the Official Staff Commentary of the Board of Governors of the Federal Reserve System. This is not the same as the “Amount Financed” on your TILA Disclosure. Generally, the “total loan amount” is deduced by taking the amount financed and subtracting the points and fees from that figure. 9 Question 1925nc Which of the following statements would not constitute a high cost loan in NC?     A 32 month prepayment penalty     An interest rate that is 12.5% over the yield on the Treasury Securities     A $45,000 loan with a $2,400 fee     A prepayment penalty of 1.75% in the aggregate of the amount paid The correct answer is "D" North Carolina law, North Carolina’s General Statutes, Chapter 24, permits prepayment penalties of up to 2 points for no more than 30 months. 10 Question 1927nc The "high cost loan" provision of the PLA affects what type of loan?     Loan on a retail store     Loan on an investment property     Loan on the primary residence     A Jumbo loan The correct answer is "C" The North Carolina PLA only applies to loans on primary residences. Accordingly, loans on second homes or investment properties are not covered by this statute. 11 Question 1928nc When doing a "high cost loan" in NC negative amortization is allowed:     Sometimes     Always     Never     With permission from the borrower The correct answer is "C" Negative amortization is one of the prohibited practices on high cost loans. Accordingly, it is not permitted. Abacus Mortgage Training recommends that you memorize the entire list of prohibited practices on North Carolina high cost loans. See § 24-1.1E. Restrictions and limitations on high cost home loans for more. 12 Question 1930nc According to Chapter 24, the maximum Debt-to-income ratio on high-cost loans is:     40%     45%     50%     55% The correct answer is "C" The Debt to income ratio on high cost loans is limited to 50% by North Carolina’s General Statutes, Chapter 24-1.1E (c) (2) says that there is “No lending without due regard to repayment ability.” It further states, “An obligor shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed under the loan, do not exceed fifty percent (50%) of the obligor's monthly gross income as verified...” 13 Question 1931nc When a borrower refinances a high cost loan with another high cost loan through the same lender, the lender:     Can only charge 2% in points and fees     Can only charge 2% and only on the back end (YSP)     Can only charge 2.5% in points and fees     Cannot charge any points or fees The correct answer is "D" 24-1.1E says, “A lender may not charge a borrower points and fees in connection with a high cost home loan if the proceeds of the high cost home loan are used to refinance an existing high cost home loan held by the same lender as note holder.” 14 Question 1936nc Which of the following people would not be required to have a license in NC:     The processor who issues the rate guarantee agreement to the borrower     The origination assistant who makes the calls to solicit mortgage loans over the phone     The administrator that answers the phone and maintains the loan files     The loan officer who participates in "table funding" The correct answer is "C" In North Carolina, anyone who takes a mortgage application or offers to take a mortgage application for gain or profit must have a license as a Mortgage Loan Originator. North Carolina regulators clearly interpret this to include anyone who quotes rates or issues rate commitments. 15 Question 1937nc Under the MLA, those who need to be licensed are:     anyone applying for a mortgage loan     anyone that works for a mortgage broker     anyone that accepts applications for compensation or gain, or in expectation of compensation or gain     anyone that works for a depository institution The correct answer is "C" In North Carolina, anyone who takes a mortgage application or offers to take a mortgage application for gain or profit must have a license as a Mortgage Loan Originator. North Carolina regulators clearly interpret this to include anyone who quotes rates or issues rate commitments. 16 Question 1941nc The following fees are not on the list of permissible fees under the North Carolina Predatory Lending Act?     processing and underwriting fees     document preparation fees     administrative fees     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" Four fees commonly charged in mortgage lending are not found in the permitted fees list in North Carolina: they are “administrative” or “admin” fees, “document preparation” or “doc prep” fees, “underwriting” fees, and “processing” fees. In the aggregate, all fees which are not bona fide third party fees or are not on the list of permissible fees cannot total more than 25 basis points in the aggregate or $250, whichever is greater. 17 Question 1942nc The miscellaneous fees allowed are limited to _________ of the loan amount.     2.50%     25%     0.25%     $250.00 The correct answer is "C" The phrase “miscellaneous fees” never occurs in the North Carolina law. However, fees not on the list of permitted fees that are not bona fide third party fees are commonly referred to as “miscellaneous fees.” According to the Predatory Lending Act, these fees can not exceed ¼ of 1% or 25 basis points of the total loan amount in the aggregate. 18 Question 1943nc A loan is considered high cost if it exceeds any of the following "thresholds":     point and fees     APR     pre-payment penalties     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" The North Carolina high cost statute located in North Carolina’s General Statutes, Chapter 24 enumerates three triggers: (1) the APR, (2) the prepayment penalty provisions, and (3) the points and fees. Abacus strongly recommends that you know these three triggers before taking the North Carolina Mortgage Loan Originator test. 19 Question 1946nc The loan officer need not be concerned with:     movement of the bond market     the local real estate market     Secretary of States Regulation B     interest rates The correct answer is "C" There is no Secretary of State’s Regulation B which controls mortgage law in North Carolina. 20 Question 1947nc A loan officer can work for more than one broker when     their primary broker doesn't have the right loan     doing a "piggy back" 1st mortgage and a 2nd mortgage     leaving one broker and being mad at another     never The correct answer is "D" North Carolina’s General Statutes 53-243.100 says, “A mortgage loan originator shall not be employed simultaneously by more than one mortgage lender, mortgage broker, or mortgage servicer...” 21 Question 1948nc The three high cost thresholds of PLA are     third party fees, allowable fees, points     points and fees, APR, third party fees     misc fees, points and fees, third party fees     APR, points and fees, pre-payment penalty restrictions The correct answer is "D" The North Carolina high cost statute located in North Carolina’s General Statutes, Chapter 24 enumerates three triggers: (1) the APR, (2) the prepayment penalty provisions, and (3) the points and fees. Abacus strongly recommends that you know these three triggers before taking the North Carolina Mortgage Loan Originator test. 22 Question 1949nc When loan officers change companies, they must notify the Banking Commissioner within:     one month     1 week     15 days     24 hours The correct answer is "C" Form MU-4 which all licensees must complete says, “Licensees are required to keep all material information on file with the OCOB current. If the information contained in the application or on file with the OCOB changes in any material respect, the licensee must notify the OCOB of the change in writing within 15 days.” 23 Question 1953nc When a loan is deemed "high cost" in NC, the items that cannot be financed into the loan are     Appraisal and pest inspection     prepayment penalties if the refinancing lender is the current not holder     Points and Fees     All of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" North Carolina’s General Statutes, Chapter 24-1.1E (c)(3) says, “No financing of fees or charges. In making a high-cost home loan, a lender may not directly or indirectly finance: a. Any prepayment fees or penalties payable by the borrower in a refinancing transaction if the lender or an affiliate of the lender is the note holder of the note being refinanced; b. Any points and fees; or c. Any other charges payable to third parties.” 24 Question 1954nc On a $288,652.47 loan, would a miscellaneous fee of $721.70 be allowed under the PLA?     yes     no. the maximum is .25%     no. the maximum is .20%     only if disclosed on special form The correct answer is "B" This charge exceeds the limit on miscellaneous fees, which makes this loan in violation of North Carolina’s usury statutes. In an article published in the August 2009 Newsletter for non-depository Lending Institutions, the Office of the Commissioner of Banks states about violations of the "miscellaneous fees" provision, "In addition to refunding all of the fees collected by the lender and/or broker, violations of the usury statutes (Chapter 24) may subject the company to the usury penalty set forth under NCGS § 24-2, requiring the forfeiture of all future interest and the return of twice the interest paid to date" See the North Carolina Commissioner of Banks’ Regulatory Division’s Non-Depository Regulatory Newsletter Volume I, Issue 2. 25 Question 1955nc The PLA limits points and fees on loans less than $20,000 to     5%     6%     7%     8% The correct answer is "D" Chapter 24 of the North Carolina’s General Statutes says, “(ii) the lesser of eight percent (8%) of the total loan amount or one thousand dollars ($1,000), if the total loan amount is less than twenty thousand dollars ($20,000)” 26 Question 1956nc The MLA prohibits the loan officer from originating a loan with a pre-payment penalty if the loan amount is ____ or less:     $300,000     $300,700     $150,000     $417,000 The correct answer is "C" North Carolina’s General Statutes 24-1.1A says, (1) No prepayment fees or penalties shall be contracted by the borrower and lender with respect to any home loan in which: (i) the principal amount borrowed is one hundred fifty thousand dollars ($150,000) or less, (ii) the borrower is a natural person, (iii) the debt is incurred by the borrower primarily for personal, family, or household purposes, and (iv) the loan is secured by a first mortgage or first deed of trust on real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling.” NOTE WELL: North Carolina’s General Statutes, Chapter 24-1.1F (b) forbids a prepayment penalties on any “Rate Spread” home loan. The North Carolina rate spread loan is the same as the 226.35 “Higher Priced” loan or Section 35 loan. Charging prepayment penalties is not a good idea in North Carolina. 27 Question 1957nc Under the NC Predatory Lending Act, at application or within 3 business days of application, you must provide which disclosure?     Examples of Amortization     Notice of Points and Fees Disclosure     Notice of Costs and Terms of Re-payment Disclosure     All of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "A" North Carolina’s General Statutes, Chapter 24 says, “Not later than the date of the home loan closing or three business days after the lender receives an application for a home loan, whichever is earlier, the lender shall deliver or mail to the applicant information and examples of amortization of home loans reflecting various terms in a form made available by the Commissioner of Banks. The Commissioner of Banks shall develop and make available to home loan lenders materials necessary to satisfy the provisions of this subsection.” 28 Question 1958nc A branch office in North Carolina:     is an office of a mortgage broker or mortgage lender that is separate and distinct from the principal office     shall not be located at an individual's home or residence     shall provide adequate access to public restrooms     both a & b             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" See North Carolina’s General Statutes, Chapter 53 which says, (4)  ‘Branch office’ means an office of a mortgage broker or mortgage lender that is separate and distinct from the mortgage broker's or lender's principal office and from which its employees engage in the mortgage business. A branch office shall not be located at an individual's home or residence.” 29 Question 1960nc "Control" means the power, directly or indirectly:     to vote 10% or more of a class of voting security     to vote at least 20% or more shares of stock     in the case of a partnership, has the right to receive upon dissolution 10% or more of the capital     both a & c             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" See North Carolina’s General Statutes 53-243.030 (7). ‘ Control’ means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. Any person that (i) is a director, general partner, or executive officer; (ii) directly or indirectly has the right to vote ten percent (10%) or more of a class of voting security or has the power to sell or direct the sale of ten percent (10%) or more of a class of voting securities; (iii) in the case of a limited liability company, is a managing member; or (iv) in the case of a partnership, has the right to receive upon dissolution, or has contributed, ten percent (10%) or more of the capital, is presumed to control the company.” 30 Question 1961nc In NC a "Depository Institution" has the same meaning as in Section 3 of the Federal Deposit Insurance Act and includes:     any mortgage servicing company     savings and loan, servicer or finance company     any credit union     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "C" Depository Institutions are banks, savings and loans and credit unions. Even though credit unions do not have their deposits insured by the FDIC and even though North Carolina borrows the definition of Depository Institution from the Federal Deposit Insurance Act, North Carolina law includes credit unions in the definition. See North Carolina’s General Statutes 53-243.030 (8) 31 Question 1964nc What chapter of the North Carolina General Statutes defines as “High Cost” the interest rate charged to the borrower?     Chapter 24     Chapter 14     Chapter 53     Chapter 19B The correct answer is "A" Chapter 24 of the North Carolina’s General Statutes is North Carolina’s usury law. It contains the restrictions on the amounts lenders can charge borrowers and under what conditions. 32 Question 1966nc The General Statute that sets $300,000.00 as the ceiling on high cost loans in North Carolina.     Chapter 24     Chapter 53     G.S. 226     Chapter 19B The correct answer is "A" See North Carolina’s General Statutes, Chapter 24 33 Question 1967nc If a loan processor or underwriter negotiates rates, terms or counsels consumers about mortgage rates or terms they must     properly disclose to consumers they are acting on behalf to the MLO or sponsoring entity     have the locked in rates or terms signed off upon by the managing principal     obtain a license as a MLO     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "C" Even though North Carolina exempts processors, underwriters and other clerical support staff from licensure, it very clearly says that those exempted duties are not those performed by and Mortgage Loan Originator. 53-243.030 (21) says that a Mortgage Loan Originator is, “An individual, who for compensation or gain or in the expectation of compensation or gain, whether through contact by telephone, by electronic means, by mail, or in person with prospective borrowers, either: 1. Takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan, 2. Accepts or offers to accept applications for mortgage loans, 3. Solicits or offers to solicit a mortgage loan, 4. Negotiates the terms or conditions of a mortgage loan, or 5. Issues mortgage loan commitments or interest rate guarantee agreements to prospective borrowers.” Many attorneys believe that if processors or underwriters involve themselves in any of these activities, they should be licensed as Mortgage Loan Originators. 34 Question 1968nc An employee of a mortgage servicer that works with the borrower to collect data and make decisions necessary to modify loan terms is called a     default modification specialist     loss mitigation specialist     loss prevention service specialist     modification specialist The correct answer is "B" HUD has commented that loss mitigation personnel must be licensed as Mortgage Loan Originators but no official letter or ruling has yet been issued. North Carolina does not make that determination in its state laws and regulations. But North Carolina law does say, “The term includes an individual acting solely as a loss mitigation specialist if the United States Department of Housing and Urban Development issues a guideline, rule, regulation, or interpretative letter that such individuals are loan originators as the term is defined by § 1503 of Title V of the Housing and Economic Recovery Act of 2008, Public Law 110289, and only to the extent of such an issuance or determination.” See North Carolina’s General Statutes, Chapter 53-243.030 (17). 35 Question 1969nc The bill that protects persons who report fraud     HB 1817, Fraud Act     HB 817, Mortgage Fraud Act     HB 2623 Fraud Prevention Act     HB 718, the Mortgage Fraud Act The correct answer is "B" HB 817 amended North Carolina’s General Statutes, Chapter 14 by adding Section 20A, the Residential Mortgage Fraud Act. A part of this legislation protects persons who report fraud from liability. North Carolina’s General Statutes, Chapter 14-118.17 says, “In the absence of fraud, bad faith, or malice, a person shall not be subject to an action for civil liability for filing reports or furnishing other information regarding suspected residential mortgage fraud to a regulatory or law enforcement agency.” 36 Question 1971nc A loan processor or underwriter can collect information and communicate directly with the borrower, without a MLO license as long as:     the person is a third-party contractor and directly negotiates terms and rates     they do not negotiate rates or counsel borrowers about loan rates or terms     they do not represent to the public, through advertising or promotion that the individual can perform the activities of an originator     both b & c             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" All of the functions of a Mortgage Loan Originator are enumerated in North Carolina’s General Statutes 53-244.030 (21). And 53-244.030 (16) adds this warning for processors and underwriters who involve themselves in the functions of an originator, “Any person who represents to the public, through advertising or other means of communication, or provides information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator shall not be deemed to be a loan processor or underwriter under this definition.” 37 Question 1974nc A manufactured housing retail sales person can, without a license, pull credit and transmit or handle a mortgage loan application as long as they do not:     negotiate or quote rates to borrowers     personally take or advise borrowers regarding an application     complete applications and provide disclosures to borrowers     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" In the definition of “Mortgage Loan Originator”, North Carolina exempts real estate agents and manufactured housing sales agents, but if and only if they do not involve themselves in the process of originating loans. North Carolina’s General Statutes, Chapter 53-244.030 (21) c 5 says, “An individual who is a salesperson for a licensed manufactured housing retailer that performs the purely administrative and clerical tasks of physically handling or transmitting to a licensed mortgage loan originator on behalf of a prospective borrower an application and other forms completed by the prospective borrower. Nothing in this subpart prohibits a salesperson, upon the written request of a mortgage loan originator and after a prospective borrower completes an application, from pulling and transmitting a credit report with the application.” 38 Question 1975nc The "Principal Office" means a principal place of business that shall consist of at least one enclosed room of stationary construction, in which negotiations of loan transactions may be conducted in privacy and where records and files are stored. The Principal Office shall:     not be located in an office park     consist of bricks and mortar     not be located in a home or residence     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "C" North Carolina’s General Statutes 53-244030 (26) says, ‘Principal office’ means a principal place of business that shall consist of at least one enclosed room or building of stationary construction in which negotiations of mortgage loan transactions may be conducted and carried on in privacy and in which all of the books, records, and files pertaining to mortgage loan transactions relating to borrowers in this State are maintained. A principal office shall not be located at an individual's home or residence. 39 Question 1977nc The Act stating that when the loan is a high cost loan, points and fees cannot be financed into the loan.     Predatory Lending Act     High Cost Lending Act     Mortgage Lending Act     Truth in Lending Act The correct answer is "A" North Carolina’s General Statutes, Chapter 24 contains the text of North Carolina’s Predatory Lending Act. This Act forbids the financing of all points and fees into the loan amount of a high cost loan. See North Carolina’s General Statutes 24-1.1E (c) (3) which says, No financing of fees or charges. In making a high-cost home loan, a lender may not directly or indirectly finance: a.  Any prepayment fees or penalties payable by the borrower in a refinancing transaction if the lender or an affiliate of the lender is the noteholder of the note being refinanced; b. Any points and fees; or c. Any other charges payable to third parties. 40 Question 1978nc When a mortgage lender or broker changes the person serving as a branch manager they have ____days to notify the Commissioner of such change:     10     15     20     30 The correct answer is "B" North Carolina’s General Statutes 53-244.040 (f) says, “...Each mortgage broker or mortgage lender licensed under this Article shall notify the Commissioner within 15 days of the change of any branch manager.” 41 Question 1979nc If an applicant will be serving as the entity's "qualifying individual" or as a branch manager they must have at least ___ years of experience in residential mortgage lending:     1     2     3     5 The correct answer is "C" North Carolina’s General Statutes 53-244.050 (b) (2) c. says, “If the applicant will be a qualifying individual or branch manager, the applicant shall have at least three years of experience in residential mortgage lending or other experience or meet competency requirements as the Commissioner may impose.” 42 Question 1980nc The Act that defined three high cost thresholds on loans $300,000 or less.     The Mortgage Lending Act     Consumer Protection Act     High Cost Lending Act     Predatory Lending Act The correct answer is "D" North Carolina’s General Statutes 24-1.1E (6) identifies three thresholds or triggers, any one of which can cause a loan to be classified as a high cost loan in North Carolina. Those triggers are (1) APR, (2) Points and Fees, and (3) Prepayment Penalties. A working knowledge this section of the North Carolina law is vitally important to Mortgage Loan Originators who will be originating loans in North Carolina. It is prime testing material and should be mastered before taking the exam. See North Carolina’s General Statutes 53-244.103 (b) (1). 43 Question 1981nc A NC licensed mortgage lender and loan servicer must obtain and maintain a minimum surety bond of $150,000 and a licensed mortgage broker must obtain, depending on loan volume, a minimum surety bond of ____:     $25,000     $50,000     $75,000     $100,000 The correct answer is "C" North Carolina’s General Statutes, Chapter 53 states, “A mortgage broker shall post a minimum surety bond of seventy-five thousand dollars ($75,000). Provided, however, if a mortgage broker has originated mortgage loans in North Carolina in a 12-month period ending December 31 in excess of ten million dollars ($10,000,000) but less than fifty million dollars ($50,000,000), then the mortgage broker's minimum bond amount shall be one hundred twenty-five thousand dollars ($125,000), and if a mortgage broker has originated mortgage loans in North Carolina in a 12-month period ending December 31 of fifty million dollars ($50,000,000) or more, the mortgage broker's minimum bond shall be two hundred fifty thousand dollars ($250,000).” North Carolina’s General Statutes 53-244.03 (b) (1). 44 Question 1983nc In connection with an application for licensing as an originator, mortgage lender, broker or servicer shall furnish to the NMLS information concerning the applicant's identity, including:     fingerprints for state, national and international criminal background checks     personal history and experience necessary to obtain a credit report and information related to any civil, administrative or criminal findings     an authorization for the Commissioner to obtain your personal history or fingerprint information anytime     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" The North Carolina the Secure and Fair Enforcement for Mortgage Licensing Act requires all of these things. See 53-244.050 (c) 45 Question 1985nc General Statute that establishes a 4% cap on points and fees.     Chapter 24     Chapter 53     Chapter 75     Chapter 49 The correct answer is "A" North Carolina’s General Statutes, Chapter 24 in North Carolina’s usury law and establishes the amounts that North Carolina homeowners may be charged in mortgage transactions. The North Carolina General Assembly has determined that points and fees totaling more than 4% of the “Total Loan Amount” as determined by USC 226.32 is usurious and that such loans are “High Cost Loans.” North Carolina High Cost Loans have certain limitations and restrictions. Abacus recommends that you know the entire high cost provision of North Carolina law prior to taking your test. See North Carolina’s General Statutes, Chapter 24-1.1E. 46 Question 1986nc Table-funding is defined in what act?     the PLA     the NC SAFE MLA     the TFA     the CRA The correct answer is "B" North Carolina’s General Statutes, Chapter 53-244.030 (33) says, ‘Tablefunding’ means a transaction in which a person closes a residential mortgage loan in its own name but with funds provided by another and in which the loan is assigned to the mortgage lender actually providing the funds within one business day of the funding of the loan. 47 Question 1988nc Prohibits MLOs from originating loans when not employed by a licensed broker/banker.     Right to Work Law     The Mortgage Bankers Act     The Mortgage Employment Act     The NC SAFE MLA The correct answer is "D" North Carolina’s General Statutes, Chapter 53-100 (b) says, The license of a mortgage loan originator is not effective during any period when that person is not employed by a mortgage lender, mortgage broker, or mortgage servicer licensed under this Article. When a mortgage loan originator ceases to be employed by a mortgage lender, mortgage broker, or mortgage servicer licensed under this Article, the mortgage loan originator, and the mortgage lender, mortgage broker, or mortgage servicer licensed under this Article by whom that person is employed shall promptly notify the Commissioner in writing. The mortgage lender, mortgage broker, or mortgage servicer shall include a statement of the specific reason for the termination of the mortgage loan originator's employment. A mortgage loan originator shall not be employed simultaneously by more than one mortgage lender, mortgage broker, or mortgage servicer licensed under this Article. 48 Question 1989nc An application for licensure will be denied if the controlling person has been convicted or plead guilty or     nolo contendere to any misdemeanor within the past 5 years, involving moral turpitude, any fraud, misstatement or omission     theft, wrongful taking of property, bribery, perjury, forgery, counterfeiting or extortion     felony involving any financial service-related business     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" The bases for denying or issuing a license to an applicant is found in North Carolina’s General Statutes 53-244.060. This statute lists nine distinct reasons why an application may be denied by the Commissioner, including those listed in this question. 49 Question 1990nc An individual will be denied licensure when they have demonstrated a lack of financial responsibility, character or general fitness in their own affairs. Evidence that a person has not shown financial responsibility includes:     outstanding judgments, other than for medical expense     current outstanding tax or government liens or foreclosure within 3 years     a pattern of serious delinquent accounts within the past 3 years     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" See North Carolina’s General Statutes, Chapter 53 -244.060 (4). Financial responsibility is a requirement which is taken seriously in North Carolina. The North Carolina regulators are known to be firm but fair in their insistence that licensees in North Carolina demonstrate “financial responsibility.” 50 Question 1995nc Reasons for a denial of an application for licensure include:     the MLO applicant has failed to complete their 24 hours of pre-license education and passed their required tests     the lender, broker or servicer applicant has failed to meet the surety bond requirements     the lender, broker or servicer applicant does not meet the net worth requirements     all of the above             *LEARNING QUESTION! {See 'tips' for explanation} The correct answer is "D" The bases for denying or issuing a license to an applicant is found in North Carolina’s General Statutes 53-244.060. This statute lists nine distinct reasons why an application may be denied by the Commissioner, including those listed in this question. 51 Question 1996nc How many hours of NMLS approved pre-licensing education must a MLO complete for NC licensure?     20 hours     16 hours     24 hours     28 hours The correct answer is "C" North Carolina’s General Statutes, Chapter 53-244.070 lists the hours required to obtain a license in North Carolina. Twenty four hours are required, which must include, (1) three hours of federal law and regulations; (2) Three hours of ethics, including instruction on fraud, consumer protection, and fair lending issues; (3) Two hours of training related to lending standards for nontraditional mortgage products; and (4) Four hours of North Carolina laws and regulations. 52 Question 1998nc Every MLO applicant for NC licensure must pass a 90 question national test and a 55 question NC law test and pass both tests with a minimum passing score of:     65%     70%     75%     80% The correct answer is "C" A passing score of 75% on the national exam is determined by the Federal Secure and Fair Enforcement for Mortgage Licensing Act. North Carolina’s General Statutes, Chapter 53-244.080 says, (d) An applicant shall be considered to have passed a qualified written test provided the applicant achieves a test score of at least seventy-five percent (75%) correct answers to questions. In addition, an applicant shall not be considered to have passed a qualified written test if the individual did not achieve a test score of at least seventy-five percent (75%) correct answers to questions related to North Carolina law and regulation. 53 Question 1999nc The Act that requires disclosure of "Samples of Amortization."     The Consumer Disclosure Act     The Mortgage Lending Act     The Early Disclosure Act     The Predatory Lending Act The correct answer is "D" North Carolina’s General Statutes, Chapter 24-1.1A requires that examples of amortization be sent to the consumer within three days of application or at closing. This same law requires that borrowers be given an exact amortization schedule within three days of closing. 54 Question 2001nc The Statute that limits charges on 2nd liens less than $25,000 to 2%.     G.S. Chapter 53     G.S. Chapter 49     G.S. Chapter 24     G.S. Chapter 75 The correct answer is "C" See North Carolina’s General Statutes, Chapter 24-10 (g).which establishes a 2% limit on fees for junior liens. 55 Question 2002nc An applicant for licensure that fails to pass any test must wait 30 days before retaking the test. If the applicant fails a test 4 times they must wait ____months before retaking it:     3 months     6 months     9 months     cannot retake it The correct answer is "B" North Carolina’s General Statutes, Chapter 53-244.080 sets the standards for testing in North Carolina. As written, the law says if the applicant fails “three consecutive tests” that there has to be a waiting period of six months before he or she can take the next test. However, this specification was included in North Carolina law though the interpretation of a poorly worded section on the Federal the Secure and Fair Enforcement for Mortgage Licensing Act test. The correct number of attempts an applicant can have before the six month waiting period begins is four. This is how North Carolina enforces this provision. An amendment to Chapter 53 to correct the misstatement is planned for 2010-2011. 56 Question 2004nc All licenses expire December 31st of each year, with the renewal window starting November 1st. If a licensed lender, broker or servicer fails to renew, they will have a late renewal grace period until the last day of February to renew and pay a late fee of $250. If a MLO renews in this late period, they must pay a late fee of:     $100     $125     $150     $200 The correct answer is "A" North Carolina’s General Statutes, Chapter 53-244.101 (d) says, “If a mortgage lender, mortgage broker, or mortgage servicer's license is not renewed prior to the expiration date, then the licensee shall pay two hundred fifty dollars ($250.00) as a nonrefundable late fee in addition to the renewal fee set forth in subsection (b) of this section. If a mortgage loan originator's license is not renewed prior to the expiration date, then the licensee shall pay a nonrefundable late fee of one hundred dollars ($100.00) in addition to the renewal fee set forth in subsection (b) of this section. In the event a licensee fails to obtain a reinstatement of the license prior to March 1, the Commissioner shall require the licensee to comply with the requirements for the initial issuance of a license under the provisions of this Article.” 57 Question 2006nc Allowable fees are defined     MLA – Chapter 53     CLA – Chapter 75     CRL – Chapter 57     PLA – Chapter 24 The correct answer is "D" The Predatory Lending Act is contained in North Carolina’s General Statutes, Chapter 24. It is North Carolina’s usury law. It determines what fees are allowed I North Carolina and how much can be charged to North Carolina borrowers without classifying the loan as “High Cost.” 58 Question 2008nc Act that requires a separate trust account for the handling of borrower's funds.     the PLA     the CRL     the PBJ     the MLA The correct answer is "D" North Carolina’s General Statutes, Chapter 53-244.105 says: A licensee shall maintain in a segregated escrow fund or trust account any funds which come into the licensee's possession but which are not the licensee's property and which the licensee is not entitled to retain under the circumstances. The escrow fund or trust account shall be held on deposit in a federally insured financial institution. Individual loan applicants' or borrowers' accounts may be aggregated into a common trust fund so long as (i) interests in the common fund can be individually tracked and accounted for and (ii) the common fund is kept separate from and is not commingled with the licensee's own funds. 59 Question 2010nc The usury law.     Chapter 24     Chapter 53     Article 19B     Chapter 47 The correct answer is "A" North Carolina’s General Statutes, Chapter 24 is North Carolina’s usury law. The term, “usury,” is used to define charges, fees, or interest which are considered to be above the acceptable. Many states have laws that establish rates of interest and fees that are considered to be usurious. 60 Question 2011nc Although mortgage loan originators have no minimum net worth requirements, mortgage lenders and servicers must demonstrate a net worth of $100,000 and mortgage brokers must prove net worth of:     $15,000     $25,000     $40,000     $50,000 The correct answer is "B" North Carolina’s General Statutes, Chapter 53-104 (a) (3) says that mortgage brokers, “...shall maintain a net worth of at least twenty-five thousand dollars ($25,000), including evidence of liquidity of ten thousand dollars ($10,000), as certified by the licensee in a certified statement of financial condition. NOTE WELL: 53-104.(b) gives the Commissioner to revise this net worth requirement by issuing rules. This is a broad authority which does not take legislative approval.

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OLOR="999999"> © Copyright 2010 by Paul Donohue Presents (doing business as Abacus Mortgage Training & Education).
All rights reserved. Printed in the United States of America.
No part of this web site, its contents, texts, or graphics may be used or reproduced in
any manner whatever without the express written consent of Paul Donohue.