NMLS MLO STUDY TEST
QUESTIONS AND ANSWERS ALL
CORRECT
A lender charges $500 for an appraisal but the actual appraisal only costs $395, this is
an example of what predatory lending practice? - Answer-Inflated appraisal costs
How many hours of annual continuing education are required by the SAFE Act for state-
licensed mortgage loan originators? - Answer-8 hours
For a property purchased for $225,000 with a first mortgage loan amount of $150,000,
and a HELOC for 25,000 the LTV and CLTV are? - Answer-LTV 66% / CLTV 77%
What is the federal regulation that implements the Real Estate Settlement Procedures
Act? - Answer-Regulation X
Under FHA loan rules, effective June 2013, loans beginning at 90% LTV or more will
pay an annual mortgage insurance premium (MIP): - Answer-For the life of the loan
When the mortgage loan amount is at 78% LTV or less of the purchase price of the
home, private mortgage insurance: - Answer-Will be cancelled automatically by the
lender
What kind of loan uses residual income as part of the qualifying process? - Answer-VA
Which of the following is a purpose for the Mortgage Servicing Disclosure Statement? -
Answer-To inform the borrower that the servicing of the mortgage may be or has been
transferred
A minority borrower is refused a loan because the neighborhood that they have chosen
has a high number of foreclosures. This is an example of what illegal practice? -
Answer-Redlining
Through the life of a loan, the servicer is allowed to cushion a borrower's escrow
account. What is true about that cushion? - Answer-the servicer can add an amount to
maintain a cushion of no greater than 1/6 of the estimated total annual payment from
the account.
,What would the lender use to compute the adjustment on an ARM loan? - Answer-
Margin, Index and Lifetime caps
Under the Fair Housing Act, which of the following is NOT one of the protected classes:
- Answer-Age
According to the SAFE Act a mortgage loan originator employed by a federally insured
depository institution: - Answer-The MLOs that work in bank branches or credit union
branches are not currently required to obtain a license. They are required to be
registered and are not required to take pre-licensing or continuing education, nor are
they required to take the National Test Component with the Uniform State Test.
It is okay to advertise for specific interest rates, points, or terms if: - Answer-you
currently offer the terms advertised.
A loan greater than $100,000 is not considered a qualified mortgage (QM) if the points
and fees paid by the consumer exceed what percent (%) of the total loan amount? -
Answer-QM restricts points and fees to 3%.
When is it acceptable to discourage a borrower from making a formal loan application
due to the fact that the borrower receives income from public assistance? - Answer-It is
never correct to discourage a borrower from applying for a mortgage loan
With an ARM, what happens to a borrower's payments if the index increases? - Answer-
Payments go up
Who of the following is in violation of the Section 8 provisions of RESPA? - Answer-It is
a violation of Section 8 of RESPA. The overpaying of rent could be considered a thing
of value and could be construed as a kickback. Think about it this way ---- if you are a
real estate agent and you have an MLO renting office space for you at way above what
it actually costs to do that are you more likely to refer your borrower's to that MLO?
Probably, yes.
Omar is closing his purchase transaction, he was not provided the right to rescind
information, how long does Omar now have to rescind his loan? - Answer-He does not
have a right to rescind his loan as this is a purchase transaction
Which attribute is NOT considered illegal discrimination in granting credit under the
Equal Credit Opportunity Act? - Answer-Income
When money is not paid out and withheld from the funding at a loan closing, these
monies are usually held as: - Answer-An escrow
An MLO must be be licensed if: - Answer-He/She counseled a borrower about loan
terms and interest rates.
,During the term of a fully amortized loan which of the following is true? - Answer-The
monthly amount going to principle increases
Which of the following are not included in the housing qualifying ratio? - Answer-Utilities
For license renewal, an MLO is required annually to complete a minimum of how many
hours of continuing education on the topic of federal law? - Answer-3 of those hours
being devoted to federal law.
Which of the following is not considered "prohibited conduct"? - Answer-Asking an
appraiser to look at additional information
The borrower applies for a loan and asks about the impact the loan could have on their
taxes. Which of the following should be told to the borrower by the MLO? - Answer-
Speak with a tax advisor for tax deductibility.
When the borrowers pay a fee to get a lower interest rate, but the interest rate will not
remain at that level for the life of the loan, but over time will raise to the quoted fixed
rate. What is this called? - Answer-A buydown
Which of the following would be considered in determining gross living expense? -
Answer-A finished attic space
If a credit card company has a written policy that anyone who is between age 20-30 can
only have a credit line of $1,000 but anyone over 30 gets an automatic line of $5,000,
this is an example of: - Answer-Overt Discrimination
The UFMIP on a 30-year FHA loan is? - Answer-1.75%
The only loan considered a traditional loan in America today is: - Answer-A 30-year
fixed rate
What is an amortized loan that has a final payment due earlier than the term to fully pay
off the loan called? - Answer-Balloon loan
The borrower's gross monthly income is $5,000. The new mortgage loan will reduce his
monthly payment to only $1,000 per month. The borrower will still owe a car payment of
$350 and a student loan payment of $250. The borrower also has a cell phone bill of
$90 per month. What is the borrower's new Housing Ratio? - Answer-The borrower's
housing ratio is $1,000 divided by $5,000 which is 20%. The car payment and student
loan payment would be considered in the back-end DTI but not the front-end/housing
ratio. The cell phone bill would never be counted in either.
Which was the first major legislation to directly affect equal rights to ownership of real
property? - Answer-The Civil Rights Act of 1964 was the nation's premier civil rights
, legislation. The Act outlawed discrimination on the basis of race, color, religion, sex, or
national origin, required equal access to public places and employment, and enforced
desegregation of schools and the right to vote.
A borrower wants a Cash Out refinance for 80% LTV on a house that appraises for
$250,000. The borrower has a first mortgage of $87,000 and a second for $25,000.
Closing costs will equal $3,000. How much cash is available for the borrower to
receive? - Answer-$85,000
Regulation Z - Answer-The 3/7/3 Rule is part of MDIA which is part of TILA (or
Regulation Z).
Which of the following is not included in the debt-to-income qualifying ratio? - Answer-
Rent on current housing
If a mortgage loan originator (MLO) originates a loan while his license is suspended or
revoked, the loan is: - Answer-Valid but the MLO violated the law
What federal legislation prohibits the exchange of information between consumer
creditors unless certain disclosures are made to the consumer? - Answer-Gramm-
Leach-Bliley Act
Which form is used most frequently for residential appraisals? - Answer-URAR stands
for Uniform Residential Appraisal Report (Form 1004).
Lender's are required to file Suspicious Activity Reports under BSA/AML. How long after
the date of initial detection are lenders required to file the SAR? - Answer-30 days
Robbie wants to purchase as 4-unit dwelling and rent out 3 of the units. He knows he
will need reserves to make the purchase, what would not be an acceptable form of
reserves? - Answer-An unsecured loan that Robbie gets
What is the best way to explain APR to borrowers? - Answer-The cost of the loan over
the life of the loan expressed as a rate
What are Fannie Mae and Freddie Mac also known as? - Answer-Government
sponsored enterprises
Which of the following is not an index that is typically used for adjustable rate
mortgages? - Answer-HELOC
A mortgage loan that features lower payments in the beginning and increases during
the life of the loan is also known as which of the following? - Answer-Graduated
payment mortgage
QUESTIONS AND ANSWERS ALL
CORRECT
A lender charges $500 for an appraisal but the actual appraisal only costs $395, this is
an example of what predatory lending practice? - Answer-Inflated appraisal costs
How many hours of annual continuing education are required by the SAFE Act for state-
licensed mortgage loan originators? - Answer-8 hours
For a property purchased for $225,000 with a first mortgage loan amount of $150,000,
and a HELOC for 25,000 the LTV and CLTV are? - Answer-LTV 66% / CLTV 77%
What is the federal regulation that implements the Real Estate Settlement Procedures
Act? - Answer-Regulation X
Under FHA loan rules, effective June 2013, loans beginning at 90% LTV or more will
pay an annual mortgage insurance premium (MIP): - Answer-For the life of the loan
When the mortgage loan amount is at 78% LTV or less of the purchase price of the
home, private mortgage insurance: - Answer-Will be cancelled automatically by the
lender
What kind of loan uses residual income as part of the qualifying process? - Answer-VA
Which of the following is a purpose for the Mortgage Servicing Disclosure Statement? -
Answer-To inform the borrower that the servicing of the mortgage may be or has been
transferred
A minority borrower is refused a loan because the neighborhood that they have chosen
has a high number of foreclosures. This is an example of what illegal practice? -
Answer-Redlining
Through the life of a loan, the servicer is allowed to cushion a borrower's escrow
account. What is true about that cushion? - Answer-the servicer can add an amount to
maintain a cushion of no greater than 1/6 of the estimated total annual payment from
the account.
,What would the lender use to compute the adjustment on an ARM loan? - Answer-
Margin, Index and Lifetime caps
Under the Fair Housing Act, which of the following is NOT one of the protected classes:
- Answer-Age
According to the SAFE Act a mortgage loan originator employed by a federally insured
depository institution: - Answer-The MLOs that work in bank branches or credit union
branches are not currently required to obtain a license. They are required to be
registered and are not required to take pre-licensing or continuing education, nor are
they required to take the National Test Component with the Uniform State Test.
It is okay to advertise for specific interest rates, points, or terms if: - Answer-you
currently offer the terms advertised.
A loan greater than $100,000 is not considered a qualified mortgage (QM) if the points
and fees paid by the consumer exceed what percent (%) of the total loan amount? -
Answer-QM restricts points and fees to 3%.
When is it acceptable to discourage a borrower from making a formal loan application
due to the fact that the borrower receives income from public assistance? - Answer-It is
never correct to discourage a borrower from applying for a mortgage loan
With an ARM, what happens to a borrower's payments if the index increases? - Answer-
Payments go up
Who of the following is in violation of the Section 8 provisions of RESPA? - Answer-It is
a violation of Section 8 of RESPA. The overpaying of rent could be considered a thing
of value and could be construed as a kickback. Think about it this way ---- if you are a
real estate agent and you have an MLO renting office space for you at way above what
it actually costs to do that are you more likely to refer your borrower's to that MLO?
Probably, yes.
Omar is closing his purchase transaction, he was not provided the right to rescind
information, how long does Omar now have to rescind his loan? - Answer-He does not
have a right to rescind his loan as this is a purchase transaction
Which attribute is NOT considered illegal discrimination in granting credit under the
Equal Credit Opportunity Act? - Answer-Income
When money is not paid out and withheld from the funding at a loan closing, these
monies are usually held as: - Answer-An escrow
An MLO must be be licensed if: - Answer-He/She counseled a borrower about loan
terms and interest rates.
,During the term of a fully amortized loan which of the following is true? - Answer-The
monthly amount going to principle increases
Which of the following are not included in the housing qualifying ratio? - Answer-Utilities
For license renewal, an MLO is required annually to complete a minimum of how many
hours of continuing education on the topic of federal law? - Answer-3 of those hours
being devoted to federal law.
Which of the following is not considered "prohibited conduct"? - Answer-Asking an
appraiser to look at additional information
The borrower applies for a loan and asks about the impact the loan could have on their
taxes. Which of the following should be told to the borrower by the MLO? - Answer-
Speak with a tax advisor for tax deductibility.
When the borrowers pay a fee to get a lower interest rate, but the interest rate will not
remain at that level for the life of the loan, but over time will raise to the quoted fixed
rate. What is this called? - Answer-A buydown
Which of the following would be considered in determining gross living expense? -
Answer-A finished attic space
If a credit card company has a written policy that anyone who is between age 20-30 can
only have a credit line of $1,000 but anyone over 30 gets an automatic line of $5,000,
this is an example of: - Answer-Overt Discrimination
The UFMIP on a 30-year FHA loan is? - Answer-1.75%
The only loan considered a traditional loan in America today is: - Answer-A 30-year
fixed rate
What is an amortized loan that has a final payment due earlier than the term to fully pay
off the loan called? - Answer-Balloon loan
The borrower's gross monthly income is $5,000. The new mortgage loan will reduce his
monthly payment to only $1,000 per month. The borrower will still owe a car payment of
$350 and a student loan payment of $250. The borrower also has a cell phone bill of
$90 per month. What is the borrower's new Housing Ratio? - Answer-The borrower's
housing ratio is $1,000 divided by $5,000 which is 20%. The car payment and student
loan payment would be considered in the back-end DTI but not the front-end/housing
ratio. The cell phone bill would never be counted in either.
Which was the first major legislation to directly affect equal rights to ownership of real
property? - Answer-The Civil Rights Act of 1964 was the nation's premier civil rights
, legislation. The Act outlawed discrimination on the basis of race, color, religion, sex, or
national origin, required equal access to public places and employment, and enforced
desegregation of schools and the right to vote.
A borrower wants a Cash Out refinance for 80% LTV on a house that appraises for
$250,000. The borrower has a first mortgage of $87,000 and a second for $25,000.
Closing costs will equal $3,000. How much cash is available for the borrower to
receive? - Answer-$85,000
Regulation Z - Answer-The 3/7/3 Rule is part of MDIA which is part of TILA (or
Regulation Z).
Which of the following is not included in the debt-to-income qualifying ratio? - Answer-
Rent on current housing
If a mortgage loan originator (MLO) originates a loan while his license is suspended or
revoked, the loan is: - Answer-Valid but the MLO violated the law
What federal legislation prohibits the exchange of information between consumer
creditors unless certain disclosures are made to the consumer? - Answer-Gramm-
Leach-Bliley Act
Which form is used most frequently for residential appraisals? - Answer-URAR stands
for Uniform Residential Appraisal Report (Form 1004).
Lender's are required to file Suspicious Activity Reports under BSA/AML. How long after
the date of initial detection are lenders required to file the SAR? - Answer-30 days
Robbie wants to purchase as 4-unit dwelling and rent out 3 of the units. He knows he
will need reserves to make the purchase, what would not be an acceptable form of
reserves? - Answer-An unsecured loan that Robbie gets
What is the best way to explain APR to borrowers? - Answer-The cost of the loan over
the life of the loan expressed as a rate
What are Fannie Mae and Freddie Mac also known as? - Answer-Government
sponsored enterprises
Which of the following is not an index that is typically used for adjustable rate
mortgages? - Answer-HELOC
A mortgage loan that features lower payments in the beginning and increases during
the life of the loan is also known as which of the following? - Answer-Graduated
payment mortgage
