NMLS 7 Exam Review Questions with Verified
Correct Answers
Nontraditional credit includes all of the following except:
Car loans
Payments to a landlord
Electric bills
Telephone bills
Nontraditional credit includes payments for things not traditionally tracked by or reported to
the credit bureaus. This includes things like rent and utility bills. Any time nontraditional credit
is considered, at least one tradeline must be for housing expense and no less than four
nontraditional tradelines must be demonstrated.
A float agreement allows:
The lender to delay a loan closing until terms are advantageous
An applicant to lock a loan at a later time when rates and/or points may be more attractive
A lender to lock into the points that will be paid, but not the rate
The borrower to guarantee the points he or she will pay, but allows the rate to float
A float agreement allows the borrower to choose when he or she wants to lock the loan. This
type of agreement can allow interest rates and points to rise and fall with the market, or it can
lock the rate but let the points paid for that rate rise and fall based on market conditions.
In the practice of warehouse lending, what is used to protect the lender against fraudulent
activity?
Rigorous income analysis
Documentation of repayment ability
Buyback provisions
Line of credit
Warehouse lenders often use buyback provisions in the agreements with brokers to assure
themselves some protection against fraudulent activity during the loan process. If fraud or
faulty underwriting is uncovered, the originating lender could be required to buy the loan back
from the investors.
The ideal housing expense for FHA financing is:
31%
,41%
28%
43%
FHA debt-to-income guidelines are 31/43.
Joe Smith was convicted of felony assault eight years ago. Buddy Grant was convicted of fraud
17 years ago. Both have made application to their state to be licensed as mortgage loan
originators. What effect will their past records have on their license applications?
Both Joe and Buddy will be denied a license because of their felony convictions
Joe may be granted a license. Buddy will not
Buddy may be granted a license. Joe will not
Both Joe and Buddy may be granted a license
Joe may be granted a license. Buddy will not
To have a license application approved, an applicant may not have been convicted of, or pled
guilty, or nolo contendere to a felony during the seven-year period preceding the date of the
application, or at any time if the felony involved an act of fraud, dishonesty, a breach of trust, or
money laundering. Even though Buddy's conviction occurred in excess of the seven-year
window, it was a conviction for fraud, rendering him ineligible for a license.
The term table-funding refers to:
A type of wholesale lending arrangement where brokers are permitted to originate, close, and
fund a loan using a warehouse line of credit
When a loan without a rescission period closes and funds the same day
A loan in which funds are returned to the lender because of a borrower refusing to sign at the
closing table
The funding of pools of loans that creates securitization
Mortgage brokers sometimes engage in table-funding which allows them to, in theory, be a
lender on a loan and close in their own name. Once the loan closes, it is immediately sold and
assigned to another entity.
This is the term for a transaction in which a loan goes to closing with a mortgage broker, the
loan is funded using a warehouse lender, and then immediately sold or assigned
All of the following are true concerning mortgage fraud except:
There are currently no federal laws that specifically define or address mortgage fraud
FTC, HUD, and the IRS conduct investigations and refer to the Department of Justice
Making false statements on a loan application can result in up to 30 years in jail and up to a
, $1 million fine
Mail fraud can be charged even if a violator did not complete the mailing
Mortgage fraud is investigated by the FBI (not the FTC), HUD, and the IRS.
All of the following are responsibilities of the closing agent except:
Verify identity and notarize documents
Coordinate the closing process
Verify that all parties have copies of forms and disclosures required for settlement
Explain the risks and benefits of the ARM product in which the client is closing
The closer is responsible for reviewing the terms of the loan with the borrower but not to
explain any loan terms in too great a detail. Full disclosure and discussion of all fees and the
obligations of the borrower should have already taken place with the loan originator prior to
closing.
If a borrower has a representative credit score of 604 and wants to purchase a home using an
FHA loan, he or she must make a down payment of at least _______.
3.5%
10%
5%
0%
A borrower is required to bring a minimum down payment of 3.5% to an FHA closing. If his or
her credit score is below 580, however, the minimum down payment increases to 10%.
In accordance with Section 8 of the RESPA, a mortgage broker may receive compensation for
which of the following?
Referring a borrower to a real estate agent
Taking information to be used in a loan application and submitting the file to processing
Submitting a loan to a lender
The reasonable value of goods and/or services actually performed or provided
.
The reasonable value of goods and/or services actually performed or provided
.RESPA prohibits any unearned fees or unreasonable charges even if there were services
performed
All of the following are examples of "Low Doc" or "No Doc" loans, except:
NINA
SISA
Correct Answers
Nontraditional credit includes all of the following except:
Car loans
Payments to a landlord
Electric bills
Telephone bills
Nontraditional credit includes payments for things not traditionally tracked by or reported to
the credit bureaus. This includes things like rent and utility bills. Any time nontraditional credit
is considered, at least one tradeline must be for housing expense and no less than four
nontraditional tradelines must be demonstrated.
A float agreement allows:
The lender to delay a loan closing until terms are advantageous
An applicant to lock a loan at a later time when rates and/or points may be more attractive
A lender to lock into the points that will be paid, but not the rate
The borrower to guarantee the points he or she will pay, but allows the rate to float
A float agreement allows the borrower to choose when he or she wants to lock the loan. This
type of agreement can allow interest rates and points to rise and fall with the market, or it can
lock the rate but let the points paid for that rate rise and fall based on market conditions.
In the practice of warehouse lending, what is used to protect the lender against fraudulent
activity?
Rigorous income analysis
Documentation of repayment ability
Buyback provisions
Line of credit
Warehouse lenders often use buyback provisions in the agreements with brokers to assure
themselves some protection against fraudulent activity during the loan process. If fraud or
faulty underwriting is uncovered, the originating lender could be required to buy the loan back
from the investors.
The ideal housing expense for FHA financing is:
31%
,41%
28%
43%
FHA debt-to-income guidelines are 31/43.
Joe Smith was convicted of felony assault eight years ago. Buddy Grant was convicted of fraud
17 years ago. Both have made application to their state to be licensed as mortgage loan
originators. What effect will their past records have on their license applications?
Both Joe and Buddy will be denied a license because of their felony convictions
Joe may be granted a license. Buddy will not
Buddy may be granted a license. Joe will not
Both Joe and Buddy may be granted a license
Joe may be granted a license. Buddy will not
To have a license application approved, an applicant may not have been convicted of, or pled
guilty, or nolo contendere to a felony during the seven-year period preceding the date of the
application, or at any time if the felony involved an act of fraud, dishonesty, a breach of trust, or
money laundering. Even though Buddy's conviction occurred in excess of the seven-year
window, it was a conviction for fraud, rendering him ineligible for a license.
The term table-funding refers to:
A type of wholesale lending arrangement where brokers are permitted to originate, close, and
fund a loan using a warehouse line of credit
When a loan without a rescission period closes and funds the same day
A loan in which funds are returned to the lender because of a borrower refusing to sign at the
closing table
The funding of pools of loans that creates securitization
Mortgage brokers sometimes engage in table-funding which allows them to, in theory, be a
lender on a loan and close in their own name. Once the loan closes, it is immediately sold and
assigned to another entity.
This is the term for a transaction in which a loan goes to closing with a mortgage broker, the
loan is funded using a warehouse lender, and then immediately sold or assigned
All of the following are true concerning mortgage fraud except:
There are currently no federal laws that specifically define or address mortgage fraud
FTC, HUD, and the IRS conduct investigations and refer to the Department of Justice
Making false statements on a loan application can result in up to 30 years in jail and up to a
, $1 million fine
Mail fraud can be charged even if a violator did not complete the mailing
Mortgage fraud is investigated by the FBI (not the FTC), HUD, and the IRS.
All of the following are responsibilities of the closing agent except:
Verify identity and notarize documents
Coordinate the closing process
Verify that all parties have copies of forms and disclosures required for settlement
Explain the risks and benefits of the ARM product in which the client is closing
The closer is responsible for reviewing the terms of the loan with the borrower but not to
explain any loan terms in too great a detail. Full disclosure and discussion of all fees and the
obligations of the borrower should have already taken place with the loan originator prior to
closing.
If a borrower has a representative credit score of 604 and wants to purchase a home using an
FHA loan, he or she must make a down payment of at least _______.
3.5%
10%
5%
0%
A borrower is required to bring a minimum down payment of 3.5% to an FHA closing. If his or
her credit score is below 580, however, the minimum down payment increases to 10%.
In accordance with Section 8 of the RESPA, a mortgage broker may receive compensation for
which of the following?
Referring a borrower to a real estate agent
Taking information to be used in a loan application and submitting the file to processing
Submitting a loan to a lender
The reasonable value of goods and/or services actually performed or provided
.
The reasonable value of goods and/or services actually performed or provided
.RESPA prohibits any unearned fees or unreasonable charges even if there were services
performed
All of the following are examples of "Low Doc" or "No Doc" loans, except:
NINA
SISA
