NMLS Mortgage Loan Originator
UPDATED Exam Questions and
CORRECT Answers
ECOA - CORRECT ANSWER-✔✔ Equal Credit Opportunity Act (Reg B)
HMDA - CORRECT ANSWER-✔✔ Home mortgage disclosure act (reg c)
TILA - CORRECT ANSWER-✔✔ Truth-In-Lending Act, Regulation Z
FCRA - CORRECT ANSWER-✔✔ Fair Credit Reporting Act - Regulation V
FACT Act - CORRECT ANSWER-✔✔ Identity Theft
NMLS - CORRECT ANSWER-✔✔ Nationwide Mortgage Licensing System
Mortgage - CORRECT ANSWER-✔✔ Written instrument using real property to secure
repayment of a debt
Primary Market - CORRECT ANSWER-✔✔ Where borrowers. and lenders come together to
negotiate terms for a mortgage
Adjustable Rate Mortgage (ARM) - CORRECT ANSWER-✔✔ a type of mortgage
instrument in which interest rate periodically adjusts up or down according to a specific index
and predetermined margin. ARM transactions require the creditor to provide borrowers with
special ARM Disclosure, as well as a CHARM Booklet.
Adjustment Period - CORRECT ANSWER-✔✔ The amount of time during which a new
interest rate will be in effect for an adjustable-rate mortgage. New adjustment periods might
occur after several months, every year or every few years
,Adverse Action - CORRECT ANSWER-✔✔ An unfavorable credit decision rendered against
a consumer made on the basis of information contained on the credit application. If a lender
takes adverse action against an applicant, the lender must notify the applicant in writing. If
the adverse action is taken as a result of information contained on the credit report, the notice
must also provide the name, address and toll-free phone number of the credit bureau that
supplied the information
Affiliated Business Arrangement Disclosure (AfBA) - CORRECT ANSWER-✔✔ A
document that informs mortgage applicants of any service providers that may be used in the
loan transaction that are affiliated with the lender. It must be provided to the borrower no later
than the time the referral to the affiliated business is made and is required when there is
greater than a 1% common ownership in the affiliated settlement service business. If the
lender requires the use of an affiliated provider (such as for a flood certification), then the
disclosure must be given at application
Alienation Clause - CORRECT ANSWER-✔✔ A portion of a lending agreement that
prohibits the borrower from transferring title to the mortgaged property without the consent
of the lender.
Alt-A Loans - CORRECT ANSWER-✔✔ Loans in which the borrower represents too much
risk to meet underwriting standards for a conforming loan but is not risky enough to be
considered "subprime"
American Association of Residential Mortgage Regulations (AARMR) - CORRECT
ANSWER-✔✔ A national association of individuals who are charged with administering and
regulating various aspects of residential mortgage lending. It played a major role in the
formation of the NMLS-R and in the drafting of the model licensing law
Annual Percentage Rate (APR) - CORRECT ANSWER-✔✔ A measurement of the total cost
of the credit, expressed an an annual rate (Percentage). The APR includes specific costs of
financing, both those paid at the time of closing and those paid over the term of the loan. It
includes all items that are part of the finance charge, such as interest, discount points,
mortgage insurance premiums and administrative fees.
Application - CORRECT ANSWER-✔✔ A request for a residential mortgage loan and
includes the borrower-related information that lenders commonly use when considering the
request. Someone who takes an application from a consumer is generally considered to be
acting as a loan originator.
,ARM Disclosure - CORRECT ANSWER-✔✔ A disclosure required to be presented to the
applicant within three days of application on any ARM loan. This disclosure provides the
applicant with information about the specific ARM product for which they are applying, such
as a historical index value
(Kept for Two Years)
Loan Estimate (3 Years)
Closing Disclosure (5 Years)
Assumable - CORRECT ANSWER-✔✔ A term used to describe a loan in which a new
borrower can take over the payments of an existing borrower.
Balloon Mortgage - CORRECT ANSWER-✔✔ A type of fixed-rate mortgage loan with
monthly payments based on a 30-year amortization schedule, setting a maturity date for a
shorter period of time - usually 5, 7, 10 or 15 years. This allows the borrower to make lower
monthly payments for that shorter period of time, with a large payment of the full remaining
principal balance and interest due at the maturity date.
Bank Secrecy Act (BSA) - CORRECT ANSWER-✔✔ A federal law requiring that financial
institutions take steps to prevent and report cases of money laundering
Bridge Loan - CORRECT ANSWER-✔✔ A short-term balloon loan that is paid back either
through the sale of the current property or through a subsequent mortgage loan. It is
commonly used when borrowers are buying a new home but still haven't sold their current
residence.
Business Day - CORRECT ANSWER-✔✔ Depending on the law in question, either any date
on which the creditor is open to the public or carrying on substantially all of the creditor's
business functions.
*When providing the initial Loan Estimate (LE) and any disclosures required under RESPA*
OR
, Any day except Sunday and Federal Holidays
*When providing the Closing Disclosure (CD) and other disclosures required under TILA
EXCEPT the Loan Estimate*
Capacity - CORRECT ANSWER-✔✔ In mortgage lending the borrower's ability to repay the
loan (and service other debts & obligations) based upon sufficient income
Capital - CORRECT ANSWER-✔✔ In mortgage lending the borrower's ability to make a
down payment, pay for closing costs and fund any escrows or reserves required at closing
Certificate of Reasonable Value (CRV) - CORRECT ANSWER-✔✔ A Document issued by
the VA that establishes the value of a property to be secured with a VA guaranteed loan
Changed Circumstance - CORRECT ANSWER-✔✔ A material event or piece of information
that is discovered after the issuance of a Loan Estimate (LE) and has an impact on either the
borrower's settlement costs or the borrower's eligibility for a loan. A changed circumstance
allows a loan originator to reissue the Loan Estimate (LE) to reset applicable tolerances.
Chapter 7 Bankruptcy - CORRECT ANSWER-✔✔ A common kind of bankruptcy in which a
borrower might need to liquidate assets in order to satisfy creditors.
Chapter 13 Bankruptcy - CORRECT ANSWER-✔✔ A common kind of bankruptcy in which
a borrower might need to enter a repayment plan with his or her creditors.
Character - CORRECT ANSWER-✔✔ In mortgage terms, the borrower's "willingness" to
repay a debt
Consumer Handbook on Adjustable Rate Mortgages (CHARM) - CORRECT ANSWER-✔✔
A booklet about adjustable-rate mortgages that is issued by the Federal Reserve. It must be
provided within 3 Business Days of application if the loan is an adjustable-rate mortgage
(ARM).
Closing Costs - CORRECT ANSWER-✔✔ Also called "settlement costs", all of the costs
related to closing except the prepaid or escrow items.
UPDATED Exam Questions and
CORRECT Answers
ECOA - CORRECT ANSWER-✔✔ Equal Credit Opportunity Act (Reg B)
HMDA - CORRECT ANSWER-✔✔ Home mortgage disclosure act (reg c)
TILA - CORRECT ANSWER-✔✔ Truth-In-Lending Act, Regulation Z
FCRA - CORRECT ANSWER-✔✔ Fair Credit Reporting Act - Regulation V
FACT Act - CORRECT ANSWER-✔✔ Identity Theft
NMLS - CORRECT ANSWER-✔✔ Nationwide Mortgage Licensing System
Mortgage - CORRECT ANSWER-✔✔ Written instrument using real property to secure
repayment of a debt
Primary Market - CORRECT ANSWER-✔✔ Where borrowers. and lenders come together to
negotiate terms for a mortgage
Adjustable Rate Mortgage (ARM) - CORRECT ANSWER-✔✔ a type of mortgage
instrument in which interest rate periodically adjusts up or down according to a specific index
and predetermined margin. ARM transactions require the creditor to provide borrowers with
special ARM Disclosure, as well as a CHARM Booklet.
Adjustment Period - CORRECT ANSWER-✔✔ The amount of time during which a new
interest rate will be in effect for an adjustable-rate mortgage. New adjustment periods might
occur after several months, every year or every few years
,Adverse Action - CORRECT ANSWER-✔✔ An unfavorable credit decision rendered against
a consumer made on the basis of information contained on the credit application. If a lender
takes adverse action against an applicant, the lender must notify the applicant in writing. If
the adverse action is taken as a result of information contained on the credit report, the notice
must also provide the name, address and toll-free phone number of the credit bureau that
supplied the information
Affiliated Business Arrangement Disclosure (AfBA) - CORRECT ANSWER-✔✔ A
document that informs mortgage applicants of any service providers that may be used in the
loan transaction that are affiliated with the lender. It must be provided to the borrower no later
than the time the referral to the affiliated business is made and is required when there is
greater than a 1% common ownership in the affiliated settlement service business. If the
lender requires the use of an affiliated provider (such as for a flood certification), then the
disclosure must be given at application
Alienation Clause - CORRECT ANSWER-✔✔ A portion of a lending agreement that
prohibits the borrower from transferring title to the mortgaged property without the consent
of the lender.
Alt-A Loans - CORRECT ANSWER-✔✔ Loans in which the borrower represents too much
risk to meet underwriting standards for a conforming loan but is not risky enough to be
considered "subprime"
American Association of Residential Mortgage Regulations (AARMR) - CORRECT
ANSWER-✔✔ A national association of individuals who are charged with administering and
regulating various aspects of residential mortgage lending. It played a major role in the
formation of the NMLS-R and in the drafting of the model licensing law
Annual Percentage Rate (APR) - CORRECT ANSWER-✔✔ A measurement of the total cost
of the credit, expressed an an annual rate (Percentage). The APR includes specific costs of
financing, both those paid at the time of closing and those paid over the term of the loan. It
includes all items that are part of the finance charge, such as interest, discount points,
mortgage insurance premiums and administrative fees.
Application - CORRECT ANSWER-✔✔ A request for a residential mortgage loan and
includes the borrower-related information that lenders commonly use when considering the
request. Someone who takes an application from a consumer is generally considered to be
acting as a loan originator.
,ARM Disclosure - CORRECT ANSWER-✔✔ A disclosure required to be presented to the
applicant within three days of application on any ARM loan. This disclosure provides the
applicant with information about the specific ARM product for which they are applying, such
as a historical index value
(Kept for Two Years)
Loan Estimate (3 Years)
Closing Disclosure (5 Years)
Assumable - CORRECT ANSWER-✔✔ A term used to describe a loan in which a new
borrower can take over the payments of an existing borrower.
Balloon Mortgage - CORRECT ANSWER-✔✔ A type of fixed-rate mortgage loan with
monthly payments based on a 30-year amortization schedule, setting a maturity date for a
shorter period of time - usually 5, 7, 10 or 15 years. This allows the borrower to make lower
monthly payments for that shorter period of time, with a large payment of the full remaining
principal balance and interest due at the maturity date.
Bank Secrecy Act (BSA) - CORRECT ANSWER-✔✔ A federal law requiring that financial
institutions take steps to prevent and report cases of money laundering
Bridge Loan - CORRECT ANSWER-✔✔ A short-term balloon loan that is paid back either
through the sale of the current property or through a subsequent mortgage loan. It is
commonly used when borrowers are buying a new home but still haven't sold their current
residence.
Business Day - CORRECT ANSWER-✔✔ Depending on the law in question, either any date
on which the creditor is open to the public or carrying on substantially all of the creditor's
business functions.
*When providing the initial Loan Estimate (LE) and any disclosures required under RESPA*
OR
, Any day except Sunday and Federal Holidays
*When providing the Closing Disclosure (CD) and other disclosures required under TILA
EXCEPT the Loan Estimate*
Capacity - CORRECT ANSWER-✔✔ In mortgage lending the borrower's ability to repay the
loan (and service other debts & obligations) based upon sufficient income
Capital - CORRECT ANSWER-✔✔ In mortgage lending the borrower's ability to make a
down payment, pay for closing costs and fund any escrows or reserves required at closing
Certificate of Reasonable Value (CRV) - CORRECT ANSWER-✔✔ A Document issued by
the VA that establishes the value of a property to be secured with a VA guaranteed loan
Changed Circumstance - CORRECT ANSWER-✔✔ A material event or piece of information
that is discovered after the issuance of a Loan Estimate (LE) and has an impact on either the
borrower's settlement costs or the borrower's eligibility for a loan. A changed circumstance
allows a loan originator to reissue the Loan Estimate (LE) to reset applicable tolerances.
Chapter 7 Bankruptcy - CORRECT ANSWER-✔✔ A common kind of bankruptcy in which a
borrower might need to liquidate assets in order to satisfy creditors.
Chapter 13 Bankruptcy - CORRECT ANSWER-✔✔ A common kind of bankruptcy in which
a borrower might need to enter a repayment plan with his or her creditors.
Character - CORRECT ANSWER-✔✔ In mortgage terms, the borrower's "willingness" to
repay a debt
Consumer Handbook on Adjustable Rate Mortgages (CHARM) - CORRECT ANSWER-✔✔
A booklet about adjustable-rate mortgages that is issued by the Federal Reserve. It must be
provided within 3 Business Days of application if the loan is an adjustable-rate mortgage
(ARM).
Closing Costs - CORRECT ANSWER-✔✔ Also called "settlement costs", all of the costs
related to closing except the prepaid or escrow items.
