NMLS PRACTICE EXAM 2026/2027
QUESTIONS AND ANSWERS
1. Under RESPA Section 8, what is the maximum criminal penalty for a person who gives or
accepts a kickback or unearned fee?
A. $5,000 fine and up to 6 months in prison
B. $50,000 fine and up to 5 years in prison
C. $25,000 fine and up to 2 years in prison
D. $10,000 fine and up to 1 year in prison
Answer: D
Conceptual Explanation: RESPA Section 8 prohibits kickbacks and referral fees. Violations
are subject to criminal penalties including fines up to $10,000 and imprisonment for up to
one year.
2. Which of the following business days is NOT counted for the three-business-day right of
rescission period under TILA?
A. Saturday
B. Monday
C. Friday
,D. Sunday
Answer: D
Conceptual Explanation: For the purpose of the right of rescission, TILA defines a
business day as all calendar days except Sundays and federal public holidays.
3. An MLO completes an application and the lender issues a denial 10 days later. Under ECOA,
how long does the lender have to notify the applicant of the action taken?
A. 15 days
B. 90 days
C. 60 days
D. 30 days
Answer: D
Conceptual Explanation: ECOA (Regulation B) requires creditors to notify applicants of
action taken within 30 days after receiving a completed application.
4. Which federal law was enacted to protect consumers from identity theft by requiring the
creation of a ‘Red Flags’ program?
A. FCRA
B. GLB Act
C. TILA
D. FACTA
, Answer: D
Conceptual Explanation: The Fair and Accurate Credit Transactions Act (FACTA)
amended FCRA and includes the Red Flags Rule, which requires financial institutions to
implement an identity theft prevention program.
5. The Homeowners Protection Act (HPA) requires that PMI be automatically terminated
when the LTV reaches what percentage of the original value?
A. 80%
B. 75%
C. 78%
D. 20%
Answer: C
Conceptual Explanation: Under the HPA, PMI must be automatically terminated when the
LTV reaches 78% of the original purchase price or appraised value, provided the borrower
is current.
6. A ‘Higher-Priced Mortgage Loan’ (HPML) is defined under TILA Section 35 as a loan with an
APR that exceeds the Average Prime Offer Rate (APOR) by what margin for a first-lien jumbo
loan?
A. 1.5 percentage points
B. 6.5 percentage points
QUESTIONS AND ANSWERS
1. Under RESPA Section 8, what is the maximum criminal penalty for a person who gives or
accepts a kickback or unearned fee?
A. $5,000 fine and up to 6 months in prison
B. $50,000 fine and up to 5 years in prison
C. $25,000 fine and up to 2 years in prison
D. $10,000 fine and up to 1 year in prison
Answer: D
Conceptual Explanation: RESPA Section 8 prohibits kickbacks and referral fees. Violations
are subject to criminal penalties including fines up to $10,000 and imprisonment for up to
one year.
2. Which of the following business days is NOT counted for the three-business-day right of
rescission period under TILA?
A. Saturday
B. Monday
C. Friday
,D. Sunday
Answer: D
Conceptual Explanation: For the purpose of the right of rescission, TILA defines a
business day as all calendar days except Sundays and federal public holidays.
3. An MLO completes an application and the lender issues a denial 10 days later. Under ECOA,
how long does the lender have to notify the applicant of the action taken?
A. 15 days
B. 90 days
C. 60 days
D. 30 days
Answer: D
Conceptual Explanation: ECOA (Regulation B) requires creditors to notify applicants of
action taken within 30 days after receiving a completed application.
4. Which federal law was enacted to protect consumers from identity theft by requiring the
creation of a ‘Red Flags’ program?
A. FCRA
B. GLB Act
C. TILA
D. FACTA
, Answer: D
Conceptual Explanation: The Fair and Accurate Credit Transactions Act (FACTA)
amended FCRA and includes the Red Flags Rule, which requires financial institutions to
implement an identity theft prevention program.
5. The Homeowners Protection Act (HPA) requires that PMI be automatically terminated
when the LTV reaches what percentage of the original value?
A. 80%
B. 75%
C. 78%
D. 20%
Answer: C
Conceptual Explanation: Under the HPA, PMI must be automatically terminated when the
LTV reaches 78% of the original purchase price or appraised value, provided the borrower
is current.
6. A ‘Higher-Priced Mortgage Loan’ (HPML) is defined under TILA Section 35 as a loan with an
APR that exceeds the Average Prime Offer Rate (APOR) by what margin for a first-lien jumbo
loan?
A. 1.5 percentage points
B. 6.5 percentage points
