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NMLS Safe Test Mortgage Licensing Practice
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2024 Version
Which federal law requires that the Loan Estimate be provided to the borrower within three business days of the time of loan application is taken? - ✔✔TILA What type of scam entails homeowners who are encouraged to refinance their property over and over until little or no equity remains? - ✔✔Loan flipping or churning After a loan closing, funds are disbursed. When are the funds disbursed for an owner-occupied, residential refinance? - ✔✔After 3 business-day rescission period What is the adjustable number used to compute the interest rate on an ARM called? - ✔✔Index A borrower is buying a house for $180,000. He provides a down payment of $40,000. If he pays three discount points, what is the total cost of the points? - ✔✔$ Which day is counted as part of the CD three business day delivery period? - ✔✔Monday-Saturday A Latina applies to a mortgage company for a home loan. She is refused based on the reputation of the neighborhood for a high number of foreclosures. This is an example of what illegal practice? - ✔✔Redlining Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting equity stripping and other abusive practices in connection with "high cost" mortgages? - ✔✔Home Ownership and Equity Protection Act (HOEPA) The type of mortgage that can provide the borrower with a monthly check instead of the borrower paying a monthly payments is known as - ✔✔Reverse mortgage
According to the Fair Credit Reporting Act, if adverse action is taken against a credit applicant because of information on a credit report, the lender who used that report is required to - ✔✔provide to the consumer the name, address, and telephone number of the consumer reporting agency that furnished the report and the credit score used At closing, the buyers realizes that the lender changed the terms of the loan, but since he was facing foreclosure, he felt he had no choice but to go ahead with the refinance or lose the house. This could be an example of - ✔✔Predatory lending The SAFE Act - ✔✔Establishes minimum standards for licensing and registering mortgage loan originators In a note, what gives the lender the right to charge the borrower a fee for retiring the loan early? - ✔✔Prepayment penalty Regulation B implements the Equal Credit Opportunity Act. True or False? - ✔✔True Which item is NOT included in the calculation that determines the annual percentage rate? a. the broker's origination fee b. the lender's discount points c. the mortgage insurance premium d. the title insurance premium - ✔✔The title insurance premium (D) Under RESPA, who would be subject to fines and penalties if a kickback is paid? - ✔✔All parties paying or receiving a kickback A conforming loan is a loan that - ✔✔Follows the secondary market criteria set by Fannie Mae/Freddie Mac MLO Jon from ABC Mortgage is meeting with a potential borrower. What may Jon NEVER ask about during the loan application process? - ✔✔Religion
What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales price is $155,000? remember to use lower number of either appraised value or sales price - ✔✔90% To comply with the Safeguard Rules of Gramm, Leach, Bliley, a loan officer should - ✔✔place all loan applications and documentation in a secure place when not working on them VA loans allow for a maximum LTV of what percent? - ✔✔100% Byuyer with a credit score of 703 makes an offer of $156,000 on a house that was appraised for $162,000. If the seller accepts his offer, how much will he have to pay down on a FHA loan? - ✔✔$5, Private mortgage insurance (PMI) is NOT required when - ✔✔the loan has been paid down to less than 78% of the property's current value The federal Truth in Lending Act - ✔✔regulates advertising with references to mortgage interest rates When qualifying a borrower, an installment debt down not need to be included in the debt ration on conventional loans when the balance of the term of repayment is less than how many months? - ✔✔ 10 Market value can best be defined as a property's - ✔✔most probable selling price How many business days from the day of application does the creditor have to deliver the Loan Estimate? - ✔✔ 3 What document does the VA use to determine the amount of a veteran's entitlement? - ✔✔COE An applicant for a mortgage loan is a salaried employee who is paid $1,350 every two weeks. In addition, she indicates that she receives $500 a month in alimony. what is the gross monthly income you can use to qualify her? - ✔✔$3,
Which is a disclosure that RESPA requires creditors to give to customers at the time of the mortgage loan closing? - ✔✔Closing Disclosure A Chapter 7 bankruptcy could show on a credit report for a maximum of - ✔✔10 years How many days does a borrower have to occupy a home with an FHA loan? - ✔✔60 days A HELOC is a type of mortgage - ✔✔where the balance fluctuates as the borrower accesses funds Which is NOT a triggering term requiring additional disclosing in advertising? a. "360 easy payments" b. $3,000 down" c. "Pay only $800/month" d. "Terms to fit your budget" - ✔✔D Which is NOT a requirement of the Safeguards Rule of the Gramm-Leach-Bliley Act? a. allow consumers to add their numbers to a list that prohibits unauthorized calls b. ensures teh security and confidentiality of customer records c. protect against any anticipated threats of hazards to the security of consumer records d. protect against the unauthorized access or use of consumer information in ways that could result in substantial harm - ✔✔A As the lender looks over the borrower's loan application and is deciding whether or not to make the loan, the lender should NOT refuse to consider the - ✔✔borrower's receipt of public assistance Under which federal legislation does the consumer have the right to receive a copy of the appraisal report on a dwelling that is to be used as collateral for a loan? - ✔✔ECOA
C. Red Flags Rules D. Safeguards Rule - ✔✔C. Red Flags Rules Which of these disclosures are mandated by the Real Estate Settlement Procedures Acts, at closing? a. Loan Estimate b. Initial Escrow Statement C. Closing Disclosure D. when You Home is on the Line booklet - ✔✔C. Closing Disclosure In the event of default an acceleration clause in a mortgage instrument allows a lender to - ✔✔declare the balance due Which law prohibits discrimination based on sex, race, age, national origin, marital status, and source of income? - ✔✔Equal Credit Opportunity Act A straw borrower is someone who - ✔✔allows his name and information to be used to obtain a mortgage but does not intend to live in the house A borrower is applying for a loan to purchase a home. Under the terms of Reg Z, how long will he have to rescind the loan after he signs it - ✔✔0 business days; there is no right of rescission What percentage isthe fee threshold that triggers a HOEPA High Cost disclosure for a first mortgage? - ✔✔ 5 When taking an application for a mortgage loan, what are creditors NOT permitted to ask? a. are you required to pay child support b. do you receive child support c. what is your address
d. who is your employer - ✔✔B. Do you receive child support The loan amount (principal) is $50,000 and the anual interest paid is $5,500. What is the annual interest rate? - ✔✔11% Which is NOT a protected class according to the federal Fair Housing Act? a. age b. disability c. familial status d. national origin - ✔✔A. Age What two documents are required of the borrower when applying for VA loan? - ✔✔DD-214 and COE Which federal legislation requires that the borrower have the right to receive a copy of his or her credit report, without charge, annually? - ✔✔FCRA ABC Bank receives a change of address request from a consumer. what requires the bank to follow up with him to verify the validity of the request? - ✔✔Red Flag rules A borrower closed a loan last week with ABC Mortgage Company. Her name is on the National Do Not Call Registry and on ABC's internal do not call list. ABC - ✔✔Cannot call her because she is on ABC's internal list A consumer has an ARM with an initial rate of 6% and a rate cap of 2/6. What's the highest her interest rate could be over the life of the loan? - ✔✔12% TILA requires all of the following to be reflected on the Loan Estimate, EXCEPT the a. costs
What is the most common appraisal approach used in appraising single-family housing? - ✔✔sales comparison approach While it is unlawful to consider race when underwriting a loan, what federal legislation requires that this information be included on the loan application? - ✔✔Home Mortgage Disclosure Act What is the minimum number of comps required by most secondary lenders to ensure an accurate estimate of value when performing the sale comparison approach? - ✔✔ 3 A borrower has an additional three-business day waiting period if the true APR on a fixed rate loan deviates from the TIL by more than how many percent? - ✔✔1/8% who is responsible for the accurate accounting of all monies due to and from the parties in a real estate sale? - ✔✔Settlement or escrow agent A lender has how many days to notify the borrower of an underwriting decision - ✔✔ 30 All may be included in a borrower's income analysis EXCEPT: a. pensions, interest, and dividends b. regular earnings and overtime c. revealed alimony and child support d. sporadic overtime and bonuses - ✔✔D. Sporadic overtime and bonuses What is the name of the database lenders check when making an FHA loan to see if the borrower is delinquent on any federal debt? - ✔✔CAIVRS The sales contract in the borrower's file states the agreed purchase price is $162,000. The closing costs are $3,700. The seller is paying $1,200 in closing costs on a $153,900 loan amount. What is the acquisition cost? - ✔✔$164,
How does TILA define an 'Application'? - ✔✔-consumers name
- income
- Social
- property address
- estimate of the value of property
- mortgage loan amount sought Which federal law requires a lender to verify that the customer is able to repay the loan? - ✔✔Home Ownership and Equity Protection Act The lender usually does not al the source of a borrower's down payment to be - ✔✔borrowed funds Which law gives a consumer who has had her credit card used by an identify thief the ability to place a freeze on her credit report? - ✔✔The FACT Act A borrower gets a 15-yr interest only loan for $85,000 at 6%. At the end of the loan term, how much will the borrower owe the lender? - ✔✔$85, What face about a borrower may an underwriter take into consideration when approving a mortgage loan application? a. ancestry b. likelihood of continued income c. marital status d. receipt of public assistance - ✔✔B. Likelihood of continued income A lender who oes not cancel PMI when the LTV reaches 78% is in violation of which federal law? - ✔✔Homeowners Protection Act Which participant in the loan process would be most likely to overvalue a property? - ✔✔Appraiser
Which of the following might be considered unethical performance as a mortgage originator? a. describing the mortgage program to make sure the customer understands the loan b. having the consumer sign blank forms, so they don't have to come to your office c. counseling the consumer d. having the loan application package prepared in advance - ✔✔B A Property is purchased, a fraudulently higher value appraisal is created, and the it's quickly sold. Which of the following is the type of fraud being described? a. quit claim b. silent seconds c. property flipping d. incentive fraud - ✔✔C. Property Flipping Which type of scam by the homeowner, who attempts to refinance their property over and over until little to no equity remains? - ✔✔Churning NMLS requires all state licensed originators to participate in all but one of the following: a. Take a 20 hr pre-licensing course b. fingerprints c. take a 10 hr CE class annually d. register for an NMLS number - ✔✔C. Take a 10 hr CE class annually What is the main component of an interest only loan? - ✔✔Only pay the interest due on the loan every month
An ARM with a present rate of 5% will adjust next month. The loan has a 2/5 cap. The margin is 2%. The index is .25%. What will the next adjusted rate be? - ✔✔3.0% What is the lifetime cap on an adjustable rate loan? - ✔✔The maximum the interest rate can increase over the life of the loan What best describes negative amortization? a. payments that are insufficient to pay interest, the difference is added to the principal b. increase in payments c. interest rate maximum increase d. borrowing more than you can afford - ✔✔A Which of the following is no a non-traditional loan? a. 30 yr fixed rate b. interest only c. pay option ARM d. negative amortization loan - ✔✔A What is the name of the booklet required with an ARM loan? - ✔✔CHARMS Booklet What does TIP stand for? - ✔✔Total Interest Percentage/Principle LIBOR as an index is actually called the - ✔✔London Interbank Offered Rate What is the name of the FNMA form that can help determine cash flow when attempting to qualify a self-employed borrower? - ✔✔Form 1084
Which Federal Law regulates credit reporting agencies like Experian, Equifax, and Trans Union that might deny credit to a borrower to provide a free credit report to a buyer within 30 days of denial - ✔✔FCRA (Reg V) Regulation B includes all the following except: a. right to get a copy of the appraisal b. Equal Credit Opportunity Act c. Fair Housing d. Right to get a response to your application - ✔✔C. Fair Housing Under TILA if the APR tolerance is exceeded, it must be re-disclosed again how many days before consummation? - ✔✔3 business days In regards to escrow, for example taxes and insurance, the cushion may not exceed what percentage of total disbursements for the year? - ✔✔1/ All of the following are reasons for re-disclosure of a Closing Disclosure, excepts: a. Total Interest Percentage (TIP) exceeds 90% b. APR Tolerances are exceeded c. Prepayment Penalty added d. Program changed - ✔✔A The purpose of reporting by HMDA is to - ✔✔determine if there is discrimination in lending Which law requires that all consumers are given an equal chance to obtain credit? - ✔✔Equal Credit Opportunity Act How many copies of the right of rescission must be given to each borrower? - ✔✔ 2
A loan originator not working for a Federally Insured institution must obtain: - ✔✔a licensed issued by the state of jurisdiction What do the initials NMLS stand for? - ✔✔Nationwide Mortgage Licensing System and Registry The CFPB initials stand for - ✔✔Consumer Financial Protection Bureau Which of the following loans are exempt from RESPA? a. condos b. residential with mixed use c. loans on properties with more than 10 acres d. four unit buildings - ✔✔C According to RESPA, which documents are to be given at closing? - ✔✔Closing Disclosure If a consumer does execute their right of rescission, how long does the lender have to refund the fees? - ✔✔20 days Which of the following is to insure that various financial institutions and other firms engaged in granting credit, exercise their responsibility to make credit available without discrimination based on the basis of sex or marital status? a. ECOA b. RESPA c. FACTA d. HMDA - ✔✔A The new test is based on the following language - ✔✔State Model Language for Implementation of S.A.F.E. Mortgage Licensing Act
a. paid judgements, except judgments solely as a result of medical expenses b. current outstanding tax liens or other government liens and filings c. foreclosures within the past 3 years d. a pattern of seriously delinquent accounts within the past three years - ✔✔A Unique Identifier refers to - ✔✔NMLS&R Number Mortgage Call Reports, which of the following is true: a. MLO's required to submit Mortgage Call Reports at the end of each quarter b. Call report includes all sales calls and contacts a loan officer made in the last quarter c. Report includes only loans that are non-traditional d. Mortgage companies are required to submit Mortgage Call Reports at the end of each quarter - ✔✔D One of the following is not true in regard to Prohibited Acts: a. directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person b. only allow licensed loan officers solicit loans c. solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting d. engage in any unfair or deceptive practice toward any person - ✔✔B The Director via this Act, has the power to do all of the following to license, suspend and investigate a loan officer except: a. collect criminal, civil, and administrative history info b. personal histrory and experience info c. prosecute violations and violators
d. collect any other documents, info or evidence the Commission deems relevant to the inquiry - ✔✔C Would any of these convictions stop a loan officer from obtaining their license forever? a. Drug Possession eight years ago b. Indecent Exposure two years ago c. Felony Domestic Violence six years go d. Health Care fraud sixteen years ago - ✔✔D John Doe Mortgage Lending company refuses to make loans in a minority neighborhood. This is illegal and is called what? - ✔✔redlining In the loan application process which of the following documents refers to a shopping chart? a. GFE b. TIL c. HUD- 1 d. HUD-1a - ✔✔GFE Which of these is true of Annual Percentage Rates?, It - ✔✔s a disclosure of all upfront costs and interest rate together. TILA allows consumers _____ to back out of a loan transaction through a right of rescission. - ✔✔ 3 Business days' Fixed-Rate Conventional Mortgages are often referred to as? - ✔✔ 15 - yr or 30-yr mortgage loans' What is a disadvantage of a Fixed-Rate Mortgage loan? - ✔✔interest rates are usually slightly higher than ARMs and other special mortgages'
