NMLS SAFE EXAM QUESTIONS AND ANSWERS
Where credit institutions originate loans - Answer -Primary Mortgage Market
When an ARM has rate caps of 5/2/6, the 6 refers to what?
A. The maximum rate increase at the initial adjustment
B. The start rate for the loan
C. The maximum the rate can increase over the life of the loan
D. The rate maximum the rate can decrease over the life of the loan - Answer -C. The
maximum the rate can increase over the life of the loan
When utilizing a temporary buydown to lower the interest rate on a FHA loan, which of
the following are correct
A. The borrower qualified at the note rate
B. The borrower qualified at the buydown rate
C. The rate cannot be more than 2% below the note rate
D. Seller or builder can pay the discount points to buydown the rate - Answer -B. The
borrower qualified at the buydown rate
All of the following are violations of the Fair Housing Act EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion - Answer -A. Age
Claim against property held by one who is not the legal owner - Answer -Encrumbrance
Advertised term that requires additional disclosures - Answer -Trigger Term
An advertisement must be presented "clearly and conspicuously" to keep from being
deceptive, unfair, or otherwise violate a Commission rule - Answer -Advertising
Disclosure
Extenuating circumstances such as "bona fide personal financial emergency - Answer -
Waving Right of Rescission
Right that borrowers have to cancel a loan or line of credit with a lender within three
days of closing - Answer -Right of Rescission
When creditors office is open to the public, a calendar working day except Sunday or a
federal holiday - Answer -Business Day
Financial information used for purposes of obtaining an extension of credit - Answer -
Application
,The act of making new information known - Answer -Disclosure
Mission is to promote consumer protection and eliminate and prevent anticompetitive
business practices - Answer -FTC
Federal Trade Commission
Regulatory agency charged with overseeing financial products and services offered to
consumers - Answer -CFPB
Consumer Financial Protection Bureau
Enacted 1968 promotes the informed use of consumer credit by requiring disclosures
about terms and costs and standardizes the manner in which costs with borrowing are
calculated and disclosed - Answer -TILA
Truth in Lending Act
Interest charged on a loan for one or more days - Answer -Per Diem Interest
Principal (X) Interest Rate = Annual Interest Rate - Answer -Annual Interest Rate
Formula
Mortgage where the mortgagor is only required to pay off the interest that arises from
the principal that is borrowed for a set period - Answer -Interest Only Mortgage
Borrower chooses to pay additional "discount points" to buy down the interest rate for
the life of the mortgage note - Answer -Permanent Buydown
Used on fixed rate loans over two years
Set of two initial temporary-start interest rates that increase in stair-step fashion until a
permanent interest rate is reached - Answer -2/1 Buydown
A form of pre-paid interest which effectively increases the yield on the loan above the
amount of the stated interest rate - Answer -Discount Point
An amount in addition to the Loan to Value, which simply represents the first position
mortgage or loan as a percentage of the property's value - Answer -CLTV
Combined Loan to Value
Ratio of a loan to the value of an asset purchased - Answer -LTV
Loan to Value
Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment - Answer -PITI
Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
- Answer -DIF
,Agreement between the lender and the borrower to delay foreclosure - Answer -
Forbearance
A permanent restructuring of the mortgage where one or more of the terms of a
borrower's loan are changed to provide a more affordable payment - Answer -Loan
Modification
Legal process to collect debt on mortgaged property - Answer -Foreclosure
Document generated and signed by a mortgage lender, acknowledging that the
borrower has paid off the mortgage loan in full and the mortgage is not a lien on the
property - Answer -Satisfaction of Mortgage Letter
When two mortgages are on a property, this specifies which mortgage takes
precedence - Answer -Subordination Agreement
Provides homeowner proof the mortgage is paid off - Answer -Payoff Statement
Legal presumption that anything recorded in a public record can be known by anyone -
Answer -Constructive Note
Direct knowledge that one has of the property - Answer -Actual Note
Information that should compel a reasonable person to make further inquiries about
some aspect of the property - Answer -Inquiry Note
Serves as a central repository of information about a parcel of land - Answer -Title
Record
Payment received by lender after selling a loan Based on market value - Answer -SRP
Service Release Premiums
Created in 1968, goal to expand affordable housing under HUD - Answer -GNMA
Government National Mortgage Association
Created 1968 works with Fannie Mae to increase affordable lending - Answer -FNMA
Federal National Mortgage Association
Insures banks real estate loans and charges borrowers a small premium - Answer -
FHA
Federal Housing Administration
A loan in which the lender agrees to lend a maximum amount within an agreed period
and is also an open-ended mortgage transaction that is secured - Answer -HELOC
Home Equity Line of Credit
, A FHA insured reverse mortgage that allows the conversion of equity in a home to cash
- Answer -HECM
Home Equity Conversion Mortgage
A mortgage in which a large portion of the borrowed principal is repaid in a single
payment at the end of the loan period and does not amortize - Answer -Balloon
Mortgage
Margin + Interset = Rate - Answer -ARM Interest Rate Adjustment
Regional average of interest expenses incurred by financial institutions which in turn is
used as a base for calculating variable rate loans - Answer -COFI
Cost of Fund Index
Loan that is lower than fixed rate in beginning
Loan payment changes over time
Adjustable caps that vary
Used to obtain a higher loan amount - Answer -ARM
Adjustable Rate Mortgage
Interest rate that remains the same over the life of the loan - Answer -Fixed Rate
Does not meet Freddie Mac or Fannie Mae guidelines - Answer -Non-Conforming Loan
Conforms to terms and conditions set by government - Answer -Conforming Loan
Not guaranteed or insured by the government but can still follow federal guidelines -
Answer -Conventional Loan
Accelerated loan repayment if property is in default - Answer -Acceleration Clause
Relieves one party form liability due to actions of another party - Answer -Exculpatory
Clause
Creditor can obtain title without foreclosure process - Answer -Defeasance Clause
When fees are attached to late payment - Answer -Late Payement Penalty
Fixed sum added to loan if loan is paid off early - Answer -Pre-Payment Penalty
Complete financing and sales contract agreed upon by seller and seller with no note
attached - Answer -Contract of Deed
Promise to repay debt - Answer -Note
Where credit institutions originate loans - Answer -Primary Mortgage Market
When an ARM has rate caps of 5/2/6, the 6 refers to what?
A. The maximum rate increase at the initial adjustment
B. The start rate for the loan
C. The maximum the rate can increase over the life of the loan
D. The rate maximum the rate can decrease over the life of the loan - Answer -C. The
maximum the rate can increase over the life of the loan
When utilizing a temporary buydown to lower the interest rate on a FHA loan, which of
the following are correct
A. The borrower qualified at the note rate
B. The borrower qualified at the buydown rate
C. The rate cannot be more than 2% below the note rate
D. Seller or builder can pay the discount points to buydown the rate - Answer -B. The
borrower qualified at the buydown rate
All of the following are violations of the Fair Housing Act EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion - Answer -A. Age
Claim against property held by one who is not the legal owner - Answer -Encrumbrance
Advertised term that requires additional disclosures - Answer -Trigger Term
An advertisement must be presented "clearly and conspicuously" to keep from being
deceptive, unfair, or otherwise violate a Commission rule - Answer -Advertising
Disclosure
Extenuating circumstances such as "bona fide personal financial emergency - Answer -
Waving Right of Rescission
Right that borrowers have to cancel a loan or line of credit with a lender within three
days of closing - Answer -Right of Rescission
When creditors office is open to the public, a calendar working day except Sunday or a
federal holiday - Answer -Business Day
Financial information used for purposes of obtaining an extension of credit - Answer -
Application
,The act of making new information known - Answer -Disclosure
Mission is to promote consumer protection and eliminate and prevent anticompetitive
business practices - Answer -FTC
Federal Trade Commission
Regulatory agency charged with overseeing financial products and services offered to
consumers - Answer -CFPB
Consumer Financial Protection Bureau
Enacted 1968 promotes the informed use of consumer credit by requiring disclosures
about terms and costs and standardizes the manner in which costs with borrowing are
calculated and disclosed - Answer -TILA
Truth in Lending Act
Interest charged on a loan for one or more days - Answer -Per Diem Interest
Principal (X) Interest Rate = Annual Interest Rate - Answer -Annual Interest Rate
Formula
Mortgage where the mortgagor is only required to pay off the interest that arises from
the principal that is borrowed for a set period - Answer -Interest Only Mortgage
Borrower chooses to pay additional "discount points" to buy down the interest rate for
the life of the mortgage note - Answer -Permanent Buydown
Used on fixed rate loans over two years
Set of two initial temporary-start interest rates that increase in stair-step fashion until a
permanent interest rate is reached - Answer -2/1 Buydown
A form of pre-paid interest which effectively increases the yield on the loan above the
amount of the stated interest rate - Answer -Discount Point
An amount in addition to the Loan to Value, which simply represents the first position
mortgage or loan as a percentage of the property's value - Answer -CLTV
Combined Loan to Value
Ratio of a loan to the value of an asset purchased - Answer -LTV
Loan to Value
Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment - Answer -PITI
Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
- Answer -DIF
,Agreement between the lender and the borrower to delay foreclosure - Answer -
Forbearance
A permanent restructuring of the mortgage where one or more of the terms of a
borrower's loan are changed to provide a more affordable payment - Answer -Loan
Modification
Legal process to collect debt on mortgaged property - Answer -Foreclosure
Document generated and signed by a mortgage lender, acknowledging that the
borrower has paid off the mortgage loan in full and the mortgage is not a lien on the
property - Answer -Satisfaction of Mortgage Letter
When two mortgages are on a property, this specifies which mortgage takes
precedence - Answer -Subordination Agreement
Provides homeowner proof the mortgage is paid off - Answer -Payoff Statement
Legal presumption that anything recorded in a public record can be known by anyone -
Answer -Constructive Note
Direct knowledge that one has of the property - Answer -Actual Note
Information that should compel a reasonable person to make further inquiries about
some aspect of the property - Answer -Inquiry Note
Serves as a central repository of information about a parcel of land - Answer -Title
Record
Payment received by lender after selling a loan Based on market value - Answer -SRP
Service Release Premiums
Created in 1968, goal to expand affordable housing under HUD - Answer -GNMA
Government National Mortgage Association
Created 1968 works with Fannie Mae to increase affordable lending - Answer -FNMA
Federal National Mortgage Association
Insures banks real estate loans and charges borrowers a small premium - Answer -
FHA
Federal Housing Administration
A loan in which the lender agrees to lend a maximum amount within an agreed period
and is also an open-ended mortgage transaction that is secured - Answer -HELOC
Home Equity Line of Credit
, A FHA insured reverse mortgage that allows the conversion of equity in a home to cash
- Answer -HECM
Home Equity Conversion Mortgage
A mortgage in which a large portion of the borrowed principal is repaid in a single
payment at the end of the loan period and does not amortize - Answer -Balloon
Mortgage
Margin + Interset = Rate - Answer -ARM Interest Rate Adjustment
Regional average of interest expenses incurred by financial institutions which in turn is
used as a base for calculating variable rate loans - Answer -COFI
Cost of Fund Index
Loan that is lower than fixed rate in beginning
Loan payment changes over time
Adjustable caps that vary
Used to obtain a higher loan amount - Answer -ARM
Adjustable Rate Mortgage
Interest rate that remains the same over the life of the loan - Answer -Fixed Rate
Does not meet Freddie Mac or Fannie Mae guidelines - Answer -Non-Conforming Loan
Conforms to terms and conditions set by government - Answer -Conforming Loan
Not guaranteed or insured by the government but can still follow federal guidelines -
Answer -Conventional Loan
Accelerated loan repayment if property is in default - Answer -Acceleration Clause
Relieves one party form liability due to actions of another party - Answer -Exculpatory
Clause
Creditor can obtain title without foreclosure process - Answer -Defeasance Clause
When fees are attached to late payment - Answer -Late Payement Penalty
Fixed sum added to loan if loan is paid off early - Answer -Pre-Payment Penalty
Complete financing and sales contract agreed upon by seller and seller with no note
attached - Answer -Contract of Deed
Promise to repay debt - Answer -Note
