NMLS MLO Practice Questions with 100%
Correct Answers
What is illegal when ordering an appraisal?
Requesting that the appraiser return a minimum or specific value.
What is borrower credit?
An amount paid by the lender to borrower for locking an interest rate at a rate higher than the
par rate.
What implements the MAP Rule?
Regulation N.
What is equity stripping?
The unethical practice of basing a loan approval on only the appraised value of the property.
What are the three conditions an affiliated business must meet to satisfy referral
requirements?
Disclosure of the relationship, no required use of the referred entity, limitations on the 'things
of value' resulting from the arrangement.
What does Regulation Z prohibit in advertising?
An attractive interest rate or loan term that is not actually available.
What do the Safeguards Rule and Disposal Rule concern?
Preserving the confidentiality of personal financial information.
What does 'fiduciary duty' mean?
One person (agent) is acting in the best interests of another.
,What is an air loan?
A fraudulent transaction where a fictitious borrower obtains a mortgage secured with
fictitious property.
When does equity-based lending occur?
When a lending decision is based on the equity available in the borrower's home rather than
creditworthiness.
What are yield spread premiums now known as?
Borrower credits.
What are the penalties for violation of RESPA/Section 8?
Fines of up to $10,000 and up to one year in prison.
What disclosures are due within three business days of loan application?
Loan Estimate, Your Home Loan Toolkit, CHARM Booklet, variable-rate program
disclosures, home equity plan disclosures, notice of right to receive an appraisal report.
What can result in a $1,000,000 fine and 30 years in prison?
Acts of mortgage fraud.
What is the definition of the term 'creditor'?
A person who regularly extends, renews, or continues credit.
What transactions are reported under HMDA?
Purchases, refinances, home improvement loans, and pre-qualifications.
What happens when a borrower's LTV reaches 80%?
,They are permitted to request cancellation of PMI.
When is an initial privacy notice due?
At the time that a customer relationship is established.
What does HMDA require loan originators to request?
Information on an applicant's race, ethnicity, and sex.
What is required when obtaining a credit report?
A permissible purpose certification.
What does the Gramm-Leach-Bliley Act not protect?
Publicly-available information.
When must the Loan Estimate be provided?
No later than three business days after receiving a completed application.
When must the Closing Disclosure be provided?
At least three business days prior to consummation.
What are exceptions to ECOA prohibited inquiries?
Mortgage professionals can ask about race, ethnicity, and sex for compliance with
government monitoring programs.
What is the purpose of the Homeowners Protection Act?
To facilitate the cancellation of private mortgage insurance (PMI).
What are advertising trigger terms for closed-end loans under TILA?
, Amount or percentage of any down payment, number of payments or period of repayment,
amount of any payment, amount of any finance charge.
What does the use of trigger terms in advertisements require?
Disclosure of the amount and percentage of the down payment, terms of repayment, and
annual percentage rate.
What does the TRID Rule not apply to?
HELOCs, reverse mortgages, mortgages secured by a mobile home or dwelling not attached
to real property.
When is fee splitting illegal?
When one or both settlement service providers fail to perform enough work to earn the fee.
What is an example of an advertising trigger term under Regulation Z?
'Low monthly payments.'
What does Regulation B address?
It issues the rules for the Equal Credit Opportunity Act.
What types of credit are not covered by TILA?
Business or agricultural credit, credit in excess of $25,000 unless secured by a dwelling,
public utility credit, student loans, home fuel budget plans.
What can a borrower request when they reach a 20% equity position?
Cancellation of PMI (private mortgage insurance).
What does the PATRIOT Act require from financial institutions?
To verify the identity of loan applicants and maintain records of verification.
Correct Answers
What is illegal when ordering an appraisal?
Requesting that the appraiser return a minimum or specific value.
What is borrower credit?
An amount paid by the lender to borrower for locking an interest rate at a rate higher than the
par rate.
What implements the MAP Rule?
Regulation N.
What is equity stripping?
The unethical practice of basing a loan approval on only the appraised value of the property.
What are the three conditions an affiliated business must meet to satisfy referral
requirements?
Disclosure of the relationship, no required use of the referred entity, limitations on the 'things
of value' resulting from the arrangement.
What does Regulation Z prohibit in advertising?
An attractive interest rate or loan term that is not actually available.
What do the Safeguards Rule and Disposal Rule concern?
Preserving the confidentiality of personal financial information.
What does 'fiduciary duty' mean?
One person (agent) is acting in the best interests of another.
,What is an air loan?
A fraudulent transaction where a fictitious borrower obtains a mortgage secured with
fictitious property.
When does equity-based lending occur?
When a lending decision is based on the equity available in the borrower's home rather than
creditworthiness.
What are yield spread premiums now known as?
Borrower credits.
What are the penalties for violation of RESPA/Section 8?
Fines of up to $10,000 and up to one year in prison.
What disclosures are due within three business days of loan application?
Loan Estimate, Your Home Loan Toolkit, CHARM Booklet, variable-rate program
disclosures, home equity plan disclosures, notice of right to receive an appraisal report.
What can result in a $1,000,000 fine and 30 years in prison?
Acts of mortgage fraud.
What is the definition of the term 'creditor'?
A person who regularly extends, renews, or continues credit.
What transactions are reported under HMDA?
Purchases, refinances, home improvement loans, and pre-qualifications.
What happens when a borrower's LTV reaches 80%?
,They are permitted to request cancellation of PMI.
When is an initial privacy notice due?
At the time that a customer relationship is established.
What does HMDA require loan originators to request?
Information on an applicant's race, ethnicity, and sex.
What is required when obtaining a credit report?
A permissible purpose certification.
What does the Gramm-Leach-Bliley Act not protect?
Publicly-available information.
When must the Loan Estimate be provided?
No later than three business days after receiving a completed application.
When must the Closing Disclosure be provided?
At least three business days prior to consummation.
What are exceptions to ECOA prohibited inquiries?
Mortgage professionals can ask about race, ethnicity, and sex for compliance with
government monitoring programs.
What is the purpose of the Homeowners Protection Act?
To facilitate the cancellation of private mortgage insurance (PMI).
What are advertising trigger terms for closed-end loans under TILA?
, Amount or percentage of any down payment, number of payments or period of repayment,
amount of any payment, amount of any finance charge.
What does the use of trigger terms in advertisements require?
Disclosure of the amount and percentage of the down payment, terms of repayment, and
annual percentage rate.
What does the TRID Rule not apply to?
HELOCs, reverse mortgages, mortgages secured by a mobile home or dwelling not attached
to real property.
When is fee splitting illegal?
When one or both settlement service providers fail to perform enough work to earn the fee.
What is an example of an advertising trigger term under Regulation Z?
'Low monthly payments.'
What does Regulation B address?
It issues the rules for the Equal Credit Opportunity Act.
What types of credit are not covered by TILA?
Business or agricultural credit, credit in excess of $25,000 unless secured by a dwelling,
public utility credit, student loans, home fuel budget plans.
What can a borrower request when they reach a 20% equity position?
Cancellation of PMI (private mortgage insurance).
What does the PATRIOT Act require from financial institutions?
To verify the identity of loan applicants and maintain records of verification.
