MLO Domain 4: Mortgage Loan Organization Activities Welcome to your MLO Domain 4: Mortgage Loan Organization Activities 1. MLO: Mortgage Loan Organization Activities A borrower has a monthly income of $5,000 and monthly debt obligations of $2,000. If the lender's front-end ratio limit is 28% and the back-end ratio limit is 36%, what is the maximum monthly mortgage payment the borrower qualifies for? A. $1,400 B. $1,800 C. $1,000 D. $800 None 2. MLO: Mortgage Loan Organization Activities When assessing a loan application, a Mortgage Loan Officer notices that the property is in a flood zone. What action is required next to proceed with the application process? A. Require the borrower to purchase earthquake insurance. B. Recommend the borrower to apply for a different property. C. Require the borrower to purchase flood insurance. D. Increase the interest rate on the loan to mitigate risk. None 3. MLO: Mortgage Loan Organization Activities Which legislation requires lenders to disclose to borrowers the total cost of borrowing, including interest rates and finance charges? A. Equal Credit Opportunity Act 'ECOA' B. Truth in Lending Act 'TILA' C. Real Estate Settlement Procedures Act 'RESPA' D. Fair Credit Reporting Act 'FCRA' None 4. MLO: Mortgage Loan Organization Activities If a borrower has a fixed-rate mortgage and the Federal Reserve raises interest rates, what immediate effect does this have on the borrower's monthly mortgage payment? A. The monthly payment increases. B. The monthly payment decreases. C. There is no immediate effect on the monthly payment. D. The loan term shortens. None 5. MLO: Mortgage Loan Organization Activities A Mortgage Loan Officer is calculating the Loan-to-Value (LTV) ratio for a property with an appraised value of $250,000 and a loan amount of $200,000. What is the LTV ratio? A. 80% B. 75% C. 85% D. 90% None 6. MLO: Mortgage Loan Organization Activities Which of the following best describes the primary purpose of an escrow account in a mortgage loan? A. To reduce the loan's interest rate B. To accumulate funds for future loan payments C. To collect and pay property taxes and insurance premiums on behalf of the borrower D. To cover closing costs at the end of the loan term None 7. MLO: Mortgage Loan Organization Activities When a borrower wants to refinance their mortgage to take advantage of lower interest rates, which of the following fees might they encounter? A. Early redemption penalty B. Pre-application fee C. Fixed-rate lock fee D. Mortgage transfer fee None 8. MLO: Mortgage Loan Organization Activities What is the primary reason for a Mortgage Loan Officer to consider a borrower's Debt-to-Income (DTI) ratio during the loan approval process? A. To ensure the borrower has a good credit score B. To determine the borrower's eligibility for government subsidies C. To assess the borrower's ability to repay the mortgage loan D. To calculate the interest rate on the loan None 9. MLO: Mortgage Loan Organization Activities A borrower is applying for a mortgage loan on a second home. Which of the following factors could lead to stricter loan approval criteria compared to a primary residence loan? A. Higher Loan-to-Value (LTV) ratio requirements B. Lower interest rates C. More lenient credit score requirements D. Decreased scrutiny of employment history None 10. MLO: Mortgage Loan Organization Activities In the context of mortgage loan processing, what is the significance of receiving a 'Clear to Close' 'CTC' status? A. The borrower's credit score has improved. B. The property has passed inspection with no issues. C. All loan conditions have been met, and the loan is ready to close. D. The interest rate on the loan has been locked in. None 11. MLO: Mortgage Loan Organization Activities What impact does a higher interest rate have on the affordability of a mortgage loan for the borrower? A. Increases the total interest paid over the life of the loan, reducing affordability B. Decreases the monthly payment, increasing affordability C. Reduces the total cost of the loan, improving affordability D. Has no impact on the affordability of the loan None 12. MLO: Mortgage Loan Organization Activities For an adjustable-rate mortgage (ARM), what does the initial rate period signify? A. The period during which the interest rate can fluctuate daily B. The length of time before the loan can be refinanced C. The duration for which the initial interest rate is fixed D. The timeframe in which the borrower can request a fixed rate None 13. MLO: Mortgage Loan Organization Activities Which document must a Mortgage Loan Officer provide to a borrower within three business days of loan application, detailing the estimated costs associated with the mortgage? A. Closing Disclosure B. Loan Estimate C. Mortgage Note D. Final Settlement Statement None 14. MLO: Mortgage Loan Organization Activities A borrower is applying for a jumbo loan. What does this imply about the loan amount in comparison to conforming loan limits? A. It is equal to the conforming loan limit. B. It is below the conforming loan limit. C. It is above the conforming loan limit. D. It is half the conforming loan limit. None 15. MLO: Mortgage Loan Organization Activities When a Mortgage Loan Officer is evaluating a loan application, what does the term "points" refer to? A. The number of credit inquiries on the borrower's credit report B. Percentage points added to the interest rate for calculating penalties C. Fees paid by the borrower at closing to reduce the interest rate D. Penalties charged for late payments None 16. MLO: Mortgage Loan Organization Activities In the context of mortgage underwriting, what is a "PITI" payment? A. Principal, Interest, Taxes, Insurance B. Principal, Interest, Title, Inspection C. Prepayment, Interest, Taxes, Insurance D. Penalty, Interest, Title, Insurance None 17. MLO: Mortgage Loan Organization Activities What regulatory requirement must a Mortgage Loan Officer adhere to when advertising loan products to ensure transparency and avoid misleading consumers? A. The Dodd-Frank Wall Street Reform and Consumer Protection Act B. The Truth in Lending Act 'TILA' C. The Real Estate Settlement Procedures Act 'RESPA' D. The Fair Housing Act None 18. MLO: Mortgage Loan Organization Activities How does a balloon mortgage differ from a traditional 30-year fixed-rate mortgage? A. It offers a lower interest rate throughout the loan term. B. It requires full repayment of the loan balance at a specified time before the 30-year term ends. C. It allows borrowers to only pay interest for the first 10 years. D. It automatically converts to an adjustable-rate mortgage after 5 years. None 19. MLO: Mortgage Loan Organization Activities For a loan application, what is the significance of the debt service coverage ratio (DSCR) in commercial mortgage underwriting? A. It measures the borrower's personal credit score. B. It assesses the property's value compared to its purchase price. C. It evaluates the commercial property's ability to generate enough income to cover the mortgage payments. D. It calculates the percentage of down payment required for loan approval. None 20. MLO: Mortgage Loan Organization Activities Which clause in a mortgage allows the lender to demand the full loan balance if the borrower sells the property? A. Acceleration clause B. Alienation clause C. Prepayment penalty clause D. Escalation clause None 1 out of 20 Time is Up! Time's up
