MLO Practice Test with Accurate
Solutions
An Approve/Eligible determination:
1. Is an indication that a property appraised for its sales price
2. Authorization to release funds in a refinance transaction
3. An automated loan approval from the Fannie Mae Du system
4. A recommendation that is received by the Freddie Mac loan prospector automated
underwriting system. - ANS-3. An automated loan approval from the Fannie Mae Du
system.. this means that the borrower meets the credit requirements and all other loan
factors are acceptable. The LP recommendations are mostly one word answers and the
equivalent recommendation under LP would be Accept.
If a lender agrees to subordinate a loan, what has occurred?
1. The borrower has a first and second and has refinanced the first.
2. The loan has been denied
3. The second has been paid off
4. The borrower is in foreclosure - ANS-1. The borrower has a first and second and has
refinanced the first...when the borrowed refinanced a first and there is an existing
second the second becomes the first when the old loan is paid off. To avoid this from
happening the second position lender will subordinate and remain in second position.
Which of the following are you permitted to ask loan applicants under the fair lending
laws?
1. Their race
2. Their religion
3. If they plan to have additional children
4. Will they continue to work after they have children - ANS-1. Their race, a HMDA
requirement.
The National Credit Score Disclosure Form provides the following:
1. Statement that the credit score determines loan approval
2. Four reason codes for the credit score
3. A reason for the loan approval status
4. The reason for the loan denial - ANS-2. Four reason codes for the credit score.
The income approach used in valuing property during an appraisal considers the
following:
1. The replacement cost of the property
2. The average meridian income levwels of the community
3. The fair market rental earnings of similar homes
,4. The qualifying income potential borrowers - ANS-3. The fair market rental earnings of
similar homes
A mortgage broker decides to solicit business from a previous customer who closed on
a home purchase. Which action could result in a $16,000 fine?
1. Contacting the customer 17 months after the purchase transaction closed
2. Verifying that the customer is not in the no-call-registry before making a sales call 2
years after the purchase transaction closed
3. The client is listed on the company no-call list and the loan originator calls the
customer just shy of 18 months after the purchase transaction closed.
4. The customer is on the no-call-register and the loan originator calls 14 months later -
ANS-3. The client is listed on the company no-call list and the loan originator calls the
customer just shy of 18 months after the purchase transaction closed. If the customer
has requested not to be called then it is a violation to call the customer.
Which of the following is not a factor in determining an interest rate?
1. Age
2. Time
3. Points
4. Margin - ANS-1. Age..age is a prohibited basis under ECOA and can't be used to
determine interest rates. Points are discount fees that are charged to lower the rate, the
longer the time generally higher the rate and margin is the lenders profit built into the
rate
Interest-only mortgages can be all of the following EXCEPT:
1. Can be fixed rate mortgages
2. Can be adjustable rate mortgages
3. Can be junior liens
4. Fully amortized loans - ANS-4. Fully amortized loans..means that the amortization will
pay out the loan. With interest only, payments contribute to interest only and the
principal is not reduced.
Which of the following would not be a penalty for violating RESPA section 8 relating to
kickbacks?
1. Three times the value of the referral relating to the kickback and/or unearned fees.
2. The attorneys fees for the affected person
3. The affected person would have the right to rescind the loan transaction
4. A $10,000 fine and/or 1 year in prison for each violation. - ANS-3. The affected
person would have the right to rescind the loan transaction..civil & criminal liability is
provided for violating the prohibition against kickbacks and unearned fees, including:
*Civil liability to the parties affected, equal to three times the amount of the referral fee,
kickback and/or unearned fee*. *The possibility that the costs associated with any court
proceeding and reasonable attorneys fees could be recovered*. *a fine of no more than
$10,000 or imprisonment for no more than 1 year or both, for each violation.
Who much receive a Notice of Right to Cancel in a refinance transaction?
, 1. Anyone with ownership interest in the property
2. Only parties who are on the new loan
3. Only parties with 51% or more ownership in the property
4. Only the primary borrower - ANS-1. Anyone with ownership interest in the
property...all persons that sign the security instrument must receive a notice of the right
to cancel in any transaction where the security interest in the property is being used to
secure new financing
Under the Gramm Leach Bliley Act, which of the following is considered non public
information?
1. Previous owners of a particular party
2. The street address of a property
3. A current loan balance
4. The assessed value of a subject property - ANS-3. A current loan balance..this would
be considered non public information
The following refinance transactions are transactions that are designed to provide cash
back Except:
1. Debt consolidation
2. Rate and term
3. Limited cash-out
4. Cash-out refinance - ANS-2. Rate and term..a rate and term refinance transaction is
designed to either reduce the rate or reduce the term
A borrower is applying for a loan on a single-family residence. His income is $21.50 per
hour and he works 40 hours a week. He is paid semi-monthly. The loan. Originator has
calculated the principal and interest Houston payment at $755 per month and the
monthly escrow payment is $135. The current monthly debts are a car payment for
$289, a credit card for $49, a cell phone bill for $63 and utilities of $102. What is his
Houston expense ratio?
1. 23.87
2. 34.60
3. 37.38
4. 20.25 - ANS-1. 23.87
This entity under a Lien Theory state places a voluntary lien on real estate even though
it does not have legal or equitable title:
1. Mortgagee
2. Mortgagor
3. Buyer
4. Seller - ANS-1. Mortgagee
The Real Estate Settlement Procedures Act (RESPA) was established to:
1. Ensure the seller and buyer each pay half of all closing costs
2. Eliminate kickbacks and excessive fees
3. Set standard closing costs
Solutions
An Approve/Eligible determination:
1. Is an indication that a property appraised for its sales price
2. Authorization to release funds in a refinance transaction
3. An automated loan approval from the Fannie Mae Du system
4. A recommendation that is received by the Freddie Mac loan prospector automated
underwriting system. - ANS-3. An automated loan approval from the Fannie Mae Du
system.. this means that the borrower meets the credit requirements and all other loan
factors are acceptable. The LP recommendations are mostly one word answers and the
equivalent recommendation under LP would be Accept.
If a lender agrees to subordinate a loan, what has occurred?
1. The borrower has a first and second and has refinanced the first.
2. The loan has been denied
3. The second has been paid off
4. The borrower is in foreclosure - ANS-1. The borrower has a first and second and has
refinanced the first...when the borrowed refinanced a first and there is an existing
second the second becomes the first when the old loan is paid off. To avoid this from
happening the second position lender will subordinate and remain in second position.
Which of the following are you permitted to ask loan applicants under the fair lending
laws?
1. Their race
2. Their religion
3. If they plan to have additional children
4. Will they continue to work after they have children - ANS-1. Their race, a HMDA
requirement.
The National Credit Score Disclosure Form provides the following:
1. Statement that the credit score determines loan approval
2. Four reason codes for the credit score
3. A reason for the loan approval status
4. The reason for the loan denial - ANS-2. Four reason codes for the credit score.
The income approach used in valuing property during an appraisal considers the
following:
1. The replacement cost of the property
2. The average meridian income levwels of the community
3. The fair market rental earnings of similar homes
,4. The qualifying income potential borrowers - ANS-3. The fair market rental earnings of
similar homes
A mortgage broker decides to solicit business from a previous customer who closed on
a home purchase. Which action could result in a $16,000 fine?
1. Contacting the customer 17 months after the purchase transaction closed
2. Verifying that the customer is not in the no-call-registry before making a sales call 2
years after the purchase transaction closed
3. The client is listed on the company no-call list and the loan originator calls the
customer just shy of 18 months after the purchase transaction closed.
4. The customer is on the no-call-register and the loan originator calls 14 months later -
ANS-3. The client is listed on the company no-call list and the loan originator calls the
customer just shy of 18 months after the purchase transaction closed. If the customer
has requested not to be called then it is a violation to call the customer.
Which of the following is not a factor in determining an interest rate?
1. Age
2. Time
3. Points
4. Margin - ANS-1. Age..age is a prohibited basis under ECOA and can't be used to
determine interest rates. Points are discount fees that are charged to lower the rate, the
longer the time generally higher the rate and margin is the lenders profit built into the
rate
Interest-only mortgages can be all of the following EXCEPT:
1. Can be fixed rate mortgages
2. Can be adjustable rate mortgages
3. Can be junior liens
4. Fully amortized loans - ANS-4. Fully amortized loans..means that the amortization will
pay out the loan. With interest only, payments contribute to interest only and the
principal is not reduced.
Which of the following would not be a penalty for violating RESPA section 8 relating to
kickbacks?
1. Three times the value of the referral relating to the kickback and/or unearned fees.
2. The attorneys fees for the affected person
3. The affected person would have the right to rescind the loan transaction
4. A $10,000 fine and/or 1 year in prison for each violation. - ANS-3. The affected
person would have the right to rescind the loan transaction..civil & criminal liability is
provided for violating the prohibition against kickbacks and unearned fees, including:
*Civil liability to the parties affected, equal to three times the amount of the referral fee,
kickback and/or unearned fee*. *The possibility that the costs associated with any court
proceeding and reasonable attorneys fees could be recovered*. *a fine of no more than
$10,000 or imprisonment for no more than 1 year or both, for each violation.
Who much receive a Notice of Right to Cancel in a refinance transaction?
, 1. Anyone with ownership interest in the property
2. Only parties who are on the new loan
3. Only parties with 51% or more ownership in the property
4. Only the primary borrower - ANS-1. Anyone with ownership interest in the
property...all persons that sign the security instrument must receive a notice of the right
to cancel in any transaction where the security interest in the property is being used to
secure new financing
Under the Gramm Leach Bliley Act, which of the following is considered non public
information?
1. Previous owners of a particular party
2. The street address of a property
3. A current loan balance
4. The assessed value of a subject property - ANS-3. A current loan balance..this would
be considered non public information
The following refinance transactions are transactions that are designed to provide cash
back Except:
1. Debt consolidation
2. Rate and term
3. Limited cash-out
4. Cash-out refinance - ANS-2. Rate and term..a rate and term refinance transaction is
designed to either reduce the rate or reduce the term
A borrower is applying for a loan on a single-family residence. His income is $21.50 per
hour and he works 40 hours a week. He is paid semi-monthly. The loan. Originator has
calculated the principal and interest Houston payment at $755 per month and the
monthly escrow payment is $135. The current monthly debts are a car payment for
$289, a credit card for $49, a cell phone bill for $63 and utilities of $102. What is his
Houston expense ratio?
1. 23.87
2. 34.60
3. 37.38
4. 20.25 - ANS-1. 23.87
This entity under a Lien Theory state places a voluntary lien on real estate even though
it does not have legal or equitable title:
1. Mortgagee
2. Mortgagor
3. Buyer
4. Seller - ANS-1. Mortgagee
The Real Estate Settlement Procedures Act (RESPA) was established to:
1. Ensure the seller and buyer each pay half of all closing costs
2. Eliminate kickbacks and excessive fees
3. Set standard closing costs
