NMLS PRACTICE TEST EXAM PROFIENCY HARD QUESTIONS /
NATIONWIDE MORTGAGE LICENSING SYSTEM PRACTICE TEST
HARD QUESTIONS WITH CORRECT ANSWERS|
Which act is intended to ensure that consumers are provided with information on
the nature and costs of the settlement process? - ANSWER: RESPA
Refers to combining, or layering, high-risk loan features, which might include an
interest-only or other non-conventional loan, reduced documentation, and a
simultaneous second-lien loan. - ANSWER: Risk Layering
A disclosure that allows a consumer to more easily compare loan options is required
under which regulation? - ANSWER: Reg Z.
For an FHA loan, how much may the seller contribute toward the borrower's closing
costs? - ANSWER: 6% of sales price
This document conveys full ownership of land, and is commonly used in purchase
and sales transactions of real estate. - ANSWER: Warranty Deed
According to ECOA, when could a lender ask a borrower about their race? - ANSWER:
If it's for monitoring purposes
A mortgage which is amortized for a longer period than the actual term of the loan
can best be described as what type of mortgage? - ANSWER: Balloon Mortgage
Rule that requires financial institutions (including mortgage lenders) that hold any
consumer account, or other account for which there is a reasonably foreseeable risk
of identity theft, to develop and implement an Identity Theft Prevention Program. -
ANSWER: Red Flags Rule
What does "FHA" stand for, when referring to the agency which oversees the FHA
loan program? - ANSWER: Federal Housing Administration
A VA funding fee is? - ANSWER: Non-Refundable
The NMLS was established by: - ANSWER: The Conference of State Bank Supervisors
and the American Association of Residential Mortgage Regulators
Generally, what percentage of rental income may be used to qualify a borrower for a
loan. - ANSWER: 75%
The 1003 is also known as the... - ANSWER: Uniform Residential Loan Application
,On the Loan Estimate, fees related to third-party service providers chosen from the
provider list and not affiliated with the creditor are grouped with the recording fees
and subject to a tolerance limitation of? - ANSWER: 10% tolerance
Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: -
ANSWER: The lower of the replacement cost or the unpaid loan amount
When must a borrower receive notification of a servicing transfer? - ANSWER: 15
days prior to the effective date of the transfer
A mortgage broker originates and closes a mortgage loan, but it is funded by the
lender who is purchasing the loan from the originating broker. This is an example of:
- ANSWER: Table Funding
Which of the following is true regarding a creditor's duty to give a copy of an
appraisal to a borrower? - ANSWER: promptly upon completion or three business
days prior to consummation for closed-end credit, whichever is earlier
The federal limitation on the shortest adjustment period allowed on an ARM? -
ANSWER: No limit
A mortgage loan originator must always have his or her own surety bond in an
amount that reflects the dollar value of loans originated in the previous - ANSWER:
year.
Insurance which guarantees a lender a certain lien position on the title to a property
free from undisclosed encumbrances is called: - ANSWER: lender's title policy
Inquiring as to whether income is derived from alimony, child support, or separate
maintenance is prohibited by what regulation? - ANSWER: Regulation B
This replaces the Good Faith Estimate (GFE) and the early Truth In Lending (TIL)
Disclosure for most transactions. - ANSWER: Loan Estimate
What term describes the term "predominant value" of a property? - ANSWER: most
common sales price for the neighborhood.
Provides a guideline for answering questions when a choice of actions is available. -
ANSWER: Ethics
What is Freddie Mac's automated underwriting system called? - ANSWER: Loan
Product Advisor
Loan originator compensation records must be retained for at least... - ANSWER:
Three years
When would ARM disclosures be required? - ANSWER: For all ARMs
, What is the tolerance allowed for variances in the APR disclosure required by the
Truth-in-Lending Act in a regular transaction? - ANSWER: .125% (one eighth of one
percent)
Redlining is addressed in which federal law? - ANSWER: ECOA. The Equal Credit
Opportunity Act
Which of the following types of mortgages typically carries two different types of
mortgage insurance? - ANSWER: FHA. (UFMIP, Monthly MIP)
In the Closing Disclosure, what question is the loan originator required to answer
about each of the items in the Loan Terms table? - ANSWER: "Can this amount
increase after closing?"
When would business tax returns be required as documentation of income for a
borrower? - ANSWER: if the borrower owns more than 25% of a company
Under what circumstances would the lender on a conventional loan be required to
drop the mortgage insurance? - ANSWER: the loan reaches 78% LTV based on the
original purchase price
According to the standard deed of trust, how soon must a borrower on an owner-
occupied loan occupy the property? - ANSWER: within 60 days of closing
Which of the following best describes the order in which payments will be applied
according to the standard deed of trust? - ANSWER: interest, principal, escrow
Which of these replaces the HUD-1 Settlement Statement and the final TIL
Disclosure? - ANSWER: The Closing Disclosure
Under Regulation X, the term "loan originator" applies to a: - ANSWER: Mortgage
broker or lender
Which term is used to describe knowingly advertising or offering one set of terms
that is very appealing but is not readily available and then pressuring a person into
signing a contract with other, more expensive terms? - ANSWER: Bait and switch
A self-employed borrower is one who owns... - ANSWER: 25% or more of a business.
Which of the approaches to appraisal compares the subject property to similar
properties in order to arrive at a value? - ANSWER: Market Approach
In a mortgage transaction subject to RESPA that is secured by the consumer's
dwelling, a Loan Estimate must be delivered or mailed within three business days
after receipt of a written application and no later than: - ANSWER: The seventh
business day before the transaction is consummated
NATIONWIDE MORTGAGE LICENSING SYSTEM PRACTICE TEST
HARD QUESTIONS WITH CORRECT ANSWERS|
Which act is intended to ensure that consumers are provided with information on
the nature and costs of the settlement process? - ANSWER: RESPA
Refers to combining, or layering, high-risk loan features, which might include an
interest-only or other non-conventional loan, reduced documentation, and a
simultaneous second-lien loan. - ANSWER: Risk Layering
A disclosure that allows a consumer to more easily compare loan options is required
under which regulation? - ANSWER: Reg Z.
For an FHA loan, how much may the seller contribute toward the borrower's closing
costs? - ANSWER: 6% of sales price
This document conveys full ownership of land, and is commonly used in purchase
and sales transactions of real estate. - ANSWER: Warranty Deed
According to ECOA, when could a lender ask a borrower about their race? - ANSWER:
If it's for monitoring purposes
A mortgage which is amortized for a longer period than the actual term of the loan
can best be described as what type of mortgage? - ANSWER: Balloon Mortgage
Rule that requires financial institutions (including mortgage lenders) that hold any
consumer account, or other account for which there is a reasonably foreseeable risk
of identity theft, to develop and implement an Identity Theft Prevention Program. -
ANSWER: Red Flags Rule
What does "FHA" stand for, when referring to the agency which oversees the FHA
loan program? - ANSWER: Federal Housing Administration
A VA funding fee is? - ANSWER: Non-Refundable
The NMLS was established by: - ANSWER: The Conference of State Bank Supervisors
and the American Association of Residential Mortgage Regulators
Generally, what percentage of rental income may be used to qualify a borrower for a
loan. - ANSWER: 75%
The 1003 is also known as the... - ANSWER: Uniform Residential Loan Application
,On the Loan Estimate, fees related to third-party service providers chosen from the
provider list and not affiliated with the creditor are grouped with the recording fees
and subject to a tolerance limitation of? - ANSWER: 10% tolerance
Under Fannie Mae guidelines, the amount of hazard insurance must be equal to: -
ANSWER: The lower of the replacement cost or the unpaid loan amount
When must a borrower receive notification of a servicing transfer? - ANSWER: 15
days prior to the effective date of the transfer
A mortgage broker originates and closes a mortgage loan, but it is funded by the
lender who is purchasing the loan from the originating broker. This is an example of:
- ANSWER: Table Funding
Which of the following is true regarding a creditor's duty to give a copy of an
appraisal to a borrower? - ANSWER: promptly upon completion or three business
days prior to consummation for closed-end credit, whichever is earlier
The federal limitation on the shortest adjustment period allowed on an ARM? -
ANSWER: No limit
A mortgage loan originator must always have his or her own surety bond in an
amount that reflects the dollar value of loans originated in the previous - ANSWER:
year.
Insurance which guarantees a lender a certain lien position on the title to a property
free from undisclosed encumbrances is called: - ANSWER: lender's title policy
Inquiring as to whether income is derived from alimony, child support, or separate
maintenance is prohibited by what regulation? - ANSWER: Regulation B
This replaces the Good Faith Estimate (GFE) and the early Truth In Lending (TIL)
Disclosure for most transactions. - ANSWER: Loan Estimate
What term describes the term "predominant value" of a property? - ANSWER: most
common sales price for the neighborhood.
Provides a guideline for answering questions when a choice of actions is available. -
ANSWER: Ethics
What is Freddie Mac's automated underwriting system called? - ANSWER: Loan
Product Advisor
Loan originator compensation records must be retained for at least... - ANSWER:
Three years
When would ARM disclosures be required? - ANSWER: For all ARMs
, What is the tolerance allowed for variances in the APR disclosure required by the
Truth-in-Lending Act in a regular transaction? - ANSWER: .125% (one eighth of one
percent)
Redlining is addressed in which federal law? - ANSWER: ECOA. The Equal Credit
Opportunity Act
Which of the following types of mortgages typically carries two different types of
mortgage insurance? - ANSWER: FHA. (UFMIP, Monthly MIP)
In the Closing Disclosure, what question is the loan originator required to answer
about each of the items in the Loan Terms table? - ANSWER: "Can this amount
increase after closing?"
When would business tax returns be required as documentation of income for a
borrower? - ANSWER: if the borrower owns more than 25% of a company
Under what circumstances would the lender on a conventional loan be required to
drop the mortgage insurance? - ANSWER: the loan reaches 78% LTV based on the
original purchase price
According to the standard deed of trust, how soon must a borrower on an owner-
occupied loan occupy the property? - ANSWER: within 60 days of closing
Which of the following best describes the order in which payments will be applied
according to the standard deed of trust? - ANSWER: interest, principal, escrow
Which of these replaces the HUD-1 Settlement Statement and the final TIL
Disclosure? - ANSWER: The Closing Disclosure
Under Regulation X, the term "loan originator" applies to a: - ANSWER: Mortgage
broker or lender
Which term is used to describe knowingly advertising or offering one set of terms
that is very appealing but is not readily available and then pressuring a person into
signing a contract with other, more expensive terms? - ANSWER: Bait and switch
A self-employed borrower is one who owns... - ANSWER: 25% or more of a business.
Which of the approaches to appraisal compares the subject property to similar
properties in order to arrive at a value? - ANSWER: Market Approach
In a mortgage transaction subject to RESPA that is secured by the consumer's
dwelling, a Loan Estimate must be delivered or mailed within three business days
after receipt of a written application and no later than: - ANSWER: The seventh
business day before the transaction is consummated
