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MLO Test Study Guide Exam Questions and
Answers 100% Pass
Josh, an MLO, is working with Javier. Josh knows that HOEPA requires a specific disclosure on all
federally related transactions, what is not true about that disclosure? - ANS HOEPA requires
that all federally-related loan applicants receive a list of housing counselors. The list of housing
counselors must be sent three (3) business days after receiving the application.
Andrea is receiving two payments of child support for her two children, they are 14 and 12. For
that income to be used as income, the child support must continue for: - ANS Child support
income must be believed to continue for 3 years or more to be used as income. In this situation,
Andrea will be able to use her child support as income because most child support stops at age
18 and her children won't be 18 for over 3 years.
If an underwriter needs to verify a borrower's down payment, what might they request the
processor order? - ANS A VOD is a Verification of Deposit. It is used to verify if X amount of
money is in a borrower's bank account.
Under RESPA what is the dollar fine that can be imposed for each instance of a referral fee
kickback or unearned fee? - ANS If someone violates Section 8 of RESPA, they are looking at
a fine of up to $10,000, up to 1 year in prison or both. They also may be required to make
payment to damaged parties up to 3 times the original fee that violated the section and if more
than one individual is involved, then all parties are liable to the damaged borrower both jointly
and separately.
All fees on the Loan Estimate fall into three (3) categories, these are? - ANS There are three
fee tolerance, zero, 10% cumulative and no-tolerance.
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Is a referral fee ever allowed? - ANS No. Section 8 of RESPA prohibits referral fees.
The estimate of closing costs on the mortgage loan disclosed on the Loan Estimate are good for:
- ANS The initial Loan Estimate expires 10 business days from the date the creditor provided
the LE to the consumer if the consumer does not expressly provide their Intent to Proceed.
Which of the following situations is not a red flag that illegal flipping may be taking place? -
ANS Illegal property flipping occurs when the property is purchased and resold quickly at an
artificially inflated price by utilizing fraudulently inflated appraisals. Illegal property flips
typically have not been improved or renovated since the purchase and are quickly resold at a
much higher price. Sometimes the property is only owned for twenty-four (24) hours before it
is resold.
An applicant who has had a loan originator license revoked previously is eligible for a license as
long as: - ANS Once you've had a license revoked in another state, there is no getting
licensed again anywhere in the United States.
An MLO advertises a low interest rate for qualified applicants. A prospective borrower meeting
the qualifications applies. The MLO moves the borrower into another loan which makes more
profit to the lender. This is an example of: - ANS Bait and switch occurs when a licensee
advertising specific rates and terms to get a borrower in the door and then puts them in an
entirely different product than they advertised. This is prohibited conduct.
Which of the following is NOT a finance charge in a residential mortgage loan? - ANS A
finance charge is a cost of credit. A good way to think about it is, would the borrower
potentially pay this fee if they were paying cash for this home? If the answer is yes, then it's
likely not a finance charge. In this situation - if the borrower is paying cash for the home, they
will likely still have to pay for an appraisal, so an appraisal fee is not a finance charge. The other
fees are all costs of obtaining a loan.
In lieu of your social security number, what number assigned by the NMLS will the state use to
identify you as an MLO? - ANS The NMLS assigns each MLO a unique identifier, the unique
, ©THESTAR 2025 ALL RIGHTS RESERVED
identifier is like the MLO's social security number it is unique to them and no one else will ever
have that number. It is an easy way to identify the individual MLO.
An MLO is working on disclosing a borrower's Loan Estimate, which of the following is true: -
ANS Lenders are not allowed to impose any fee to the borrower for a mortgage transaction
until the borrower has received the LE, and they have indicated an intent to proceed with the
transaction. The only exception to the rule is for a bona-fide and reasonable fee for obtaining a
consumer's credit report.
Trevor is looking to obtain an ARM loan, his MLO is required to disclose what within 3 days of
application? - ANS Per TILA, the Consumer Handbook on Adjustable Rate Mortgages must be
disclosed within 3 business days of a application on all ARM transactions.
On Form 1003 Section X: Information for Government Monitoring Purposes is used in order to
comply with which federal law? - ANS The final section of the 1003 is the information for
government monitoring purposes. This section includes a statement that the borrower should
read, and requests that the borrower furnish information regarding their ethnicity, race, and
sex. MLOs obtain this information to ensure they comply with the Home Mortgage Disclosure
Act (HMDA, Regulation C). If the borrower does not volunteer the information, you have to do
the best you can to determine the information.
When a self-employed borrower is a 25% owner of his business, which of the following
documents is required? - ANS Any borrower is going to have to provide 2 years of tax
returns, that includes self-employed borrowers. The underwriter might also require 2 years of
the business tax returns.
HMDA is implemented as what Regulation? - ANS The Home Mortgage Disclosures Act or
HMDA is implemented by Regulation C.
What can you tell a borrower about a 7/1 ARM? - ANS A 7/1 ARM allows for a fixed rate for 7
years and then an adjustable rate after that 7-year term.
, ©THESTAR 2025 ALL RIGHTS RESERVED
Where, in the TILA, is the explanation for higher-priced loans located? - ANS Section 35 of
TILA deals with higher-priced mortgage loans.
If two people are married, how do they likely hold title? - ANS Tenancy by the Entirety is a
form of co-ownership that involves only owners who are husband and wife, with each having an
equal and undivided share of the property. This form of ownership includes the right to
survivorship with the property automatically going to the surviving spouse.
Land is given as a separate value in which of the following appraisal methods? - ANS The cost
approach is a way to discover the value by determining the value of the land plus how much it
would cost to build this house again.
The FACTA allows a consumer to dispute inaccurate credit information. How many days are
allowed for an incorrect item to be investigated? - ANS The dispute must be resolved within
thirty (30) days after the dispute was received.
A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their
home's equity is engaging in: - ANS Predatory lending is unscrupulous actions carried out by
a lender to entice, induce or assist a borrower in taking a mortgage that carries high fees, a
high-interest rate, strips the borrower of equity, or places the borrower in a lower credit-rated
loan to the benefit of the lender.
Regulation X is also known as what law? - ANS Regulation X is also known as RESPA.
When a lender learns that a property is in a flood zone, the lender must do which of the
following? - ANS When a property is in a flood zone, most lenders are going to require that
that borrower obtain flood insurance. Every loan application is going to be required to have a
flood hazard determination form. This form will notify the borrower if their property is or is not
in a flood zone. If it is in a flood zone, the form will indicate that flood insurance is required.
A lender has how many business days to notify the borrower of an underwriting decision? -
ANS Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on
MLO Test Study Guide Exam Questions and
Answers 100% Pass
Josh, an MLO, is working with Javier. Josh knows that HOEPA requires a specific disclosure on all
federally related transactions, what is not true about that disclosure? - ANS HOEPA requires
that all federally-related loan applicants receive a list of housing counselors. The list of housing
counselors must be sent three (3) business days after receiving the application.
Andrea is receiving two payments of child support for her two children, they are 14 and 12. For
that income to be used as income, the child support must continue for: - ANS Child support
income must be believed to continue for 3 years or more to be used as income. In this situation,
Andrea will be able to use her child support as income because most child support stops at age
18 and her children won't be 18 for over 3 years.
If an underwriter needs to verify a borrower's down payment, what might they request the
processor order? - ANS A VOD is a Verification of Deposit. It is used to verify if X amount of
money is in a borrower's bank account.
Under RESPA what is the dollar fine that can be imposed for each instance of a referral fee
kickback or unearned fee? - ANS If someone violates Section 8 of RESPA, they are looking at
a fine of up to $10,000, up to 1 year in prison or both. They also may be required to make
payment to damaged parties up to 3 times the original fee that violated the section and if more
than one individual is involved, then all parties are liable to the damaged borrower both jointly
and separately.
All fees on the Loan Estimate fall into three (3) categories, these are? - ANS There are three
fee tolerance, zero, 10% cumulative and no-tolerance.
, ©THESTAR 2025 ALL RIGHTS RESERVED
Is a referral fee ever allowed? - ANS No. Section 8 of RESPA prohibits referral fees.
The estimate of closing costs on the mortgage loan disclosed on the Loan Estimate are good for:
- ANS The initial Loan Estimate expires 10 business days from the date the creditor provided
the LE to the consumer if the consumer does not expressly provide their Intent to Proceed.
Which of the following situations is not a red flag that illegal flipping may be taking place? -
ANS Illegal property flipping occurs when the property is purchased and resold quickly at an
artificially inflated price by utilizing fraudulently inflated appraisals. Illegal property flips
typically have not been improved or renovated since the purchase and are quickly resold at a
much higher price. Sometimes the property is only owned for twenty-four (24) hours before it
is resold.
An applicant who has had a loan originator license revoked previously is eligible for a license as
long as: - ANS Once you've had a license revoked in another state, there is no getting
licensed again anywhere in the United States.
An MLO advertises a low interest rate for qualified applicants. A prospective borrower meeting
the qualifications applies. The MLO moves the borrower into another loan which makes more
profit to the lender. This is an example of: - ANS Bait and switch occurs when a licensee
advertising specific rates and terms to get a borrower in the door and then puts them in an
entirely different product than they advertised. This is prohibited conduct.
Which of the following is NOT a finance charge in a residential mortgage loan? - ANS A
finance charge is a cost of credit. A good way to think about it is, would the borrower
potentially pay this fee if they were paying cash for this home? If the answer is yes, then it's
likely not a finance charge. In this situation - if the borrower is paying cash for the home, they
will likely still have to pay for an appraisal, so an appraisal fee is not a finance charge. The other
fees are all costs of obtaining a loan.
In lieu of your social security number, what number assigned by the NMLS will the state use to
identify you as an MLO? - ANS The NMLS assigns each MLO a unique identifier, the unique
, ©THESTAR 2025 ALL RIGHTS RESERVED
identifier is like the MLO's social security number it is unique to them and no one else will ever
have that number. It is an easy way to identify the individual MLO.
An MLO is working on disclosing a borrower's Loan Estimate, which of the following is true: -
ANS Lenders are not allowed to impose any fee to the borrower for a mortgage transaction
until the borrower has received the LE, and they have indicated an intent to proceed with the
transaction. The only exception to the rule is for a bona-fide and reasonable fee for obtaining a
consumer's credit report.
Trevor is looking to obtain an ARM loan, his MLO is required to disclose what within 3 days of
application? - ANS Per TILA, the Consumer Handbook on Adjustable Rate Mortgages must be
disclosed within 3 business days of a application on all ARM transactions.
On Form 1003 Section X: Information for Government Monitoring Purposes is used in order to
comply with which federal law? - ANS The final section of the 1003 is the information for
government monitoring purposes. This section includes a statement that the borrower should
read, and requests that the borrower furnish information regarding their ethnicity, race, and
sex. MLOs obtain this information to ensure they comply with the Home Mortgage Disclosure
Act (HMDA, Regulation C). If the borrower does not volunteer the information, you have to do
the best you can to determine the information.
When a self-employed borrower is a 25% owner of his business, which of the following
documents is required? - ANS Any borrower is going to have to provide 2 years of tax
returns, that includes self-employed borrowers. The underwriter might also require 2 years of
the business tax returns.
HMDA is implemented as what Regulation? - ANS The Home Mortgage Disclosures Act or
HMDA is implemented by Regulation C.
What can you tell a borrower about a 7/1 ARM? - ANS A 7/1 ARM allows for a fixed rate for 7
years and then an adjustable rate after that 7-year term.
, ©THESTAR 2025 ALL RIGHTS RESERVED
Where, in the TILA, is the explanation for higher-priced loans located? - ANS Section 35 of
TILA deals with higher-priced mortgage loans.
If two people are married, how do they likely hold title? - ANS Tenancy by the Entirety is a
form of co-ownership that involves only owners who are husband and wife, with each having an
equal and undivided share of the property. This form of ownership includes the right to
survivorship with the property automatically going to the surviving spouse.
Land is given as a separate value in which of the following appraisal methods? - ANS The cost
approach is a way to discover the value by determining the value of the land plus how much it
would cost to build this house again.
The FACTA allows a consumer to dispute inaccurate credit information. How many days are
allowed for an incorrect item to be investigated? - ANS The dispute must be resolved within
thirty (30) days after the dispute was received.
A lender who preys upon minority, elderly or recent immigrant borrowers in order to take their
home's equity is engaging in: - ANS Predatory lending is unscrupulous actions carried out by
a lender to entice, induce or assist a borrower in taking a mortgage that carries high fees, a
high-interest rate, strips the borrower of equity, or places the borrower in a lower credit-rated
loan to the benefit of the lender.
Regulation X is also known as what law? - ANS Regulation X is also known as RESPA.
When a lender learns that a property is in a flood zone, the lender must do which of the
following? - ANS When a property is in a flood zone, most lenders are going to require that
that borrower obtain flood insurance. Every loan application is going to be required to have a
flood hazard determination form. This form will notify the borrower if their property is or is not
in a flood zone. If it is in a flood zone, the form will indicate that flood insurance is required.
A lender has how many business days to notify the borrower of an underwriting decision? -
ANS Under ECOA, it is the lender's responsibility to notify an applicant of any action taken on
