NMLS SAFE Exam UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Primary Mortgage Market - CORRECT ANSWER Where credit institutions originate loans
C. The maximum the rate can increase over the life of the loan - CORRECT ANSWER 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
B. The borrower qualified at the buydown rate - CORRECT ANSWER 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
A. Age - CORRECT ANSWER All of the following are violations of the Fair Housing Act
EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion
Encrumbrance - CORRECT ANSWER Claim against property held by one who is not the legal
owner
Trigger Term - CORRECT ANSWER Advertised term that requires additional disclosures
,Advertising Disclosure - CORRECT ANSWER An advertisement must be presented "clearly
and conspicuously" to keep from being deceptive, unfair, or otherwise violate a Commission rule
Waving Right of Rescission - CORRECT ANSWER Extenuating circumstances such as "bona
fide personal financial emergency
Right of Rescission - CORRECT ANSWER Right that borrowers have to cancel a loan or line
of credit with a lender within three days of closing
Business Day - CORRECT ANSWER When creditors office is open to the public, a calendar
working day except Sunday or a federal holiday
Application - CORRECT ANSWER Financial information used for purposes of obtaining an
extension of credit
Disclosure - CORRECT ANSWER The act of making new information known
FTC
Federal Trade Commission - CORRECT ANSWER Mission is to promote consumer protection
and eliminate and prevent anticompetitive business practices
CFPB
Consumer Financial Protection Bureau - CORRECT ANSWER Regulatory agency charged
with overseeing financial products and services offered to consumers
TILA
Truth in Lending Act - CORRECT ANSWER 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
Per Diem Interest - CORRECT ANSWER Interest charged on a loan for one or more days
,Annual Interest Rate Formula - CORRECT ANSWER Principal (X) Interest Rate = Annual
Interest Rate
Interest Only Mortgage - CORRECT ANSWER Mortgage where the mortgagor is only required
to pay off the interest that arises from the principal that is borrowed for a set period
Permanent Buydown - CORRECT ANSWER Borrower chooses to pay additional "discount
points" to buy down the interest rate for the life of the mortgage note
2/1 Buydown - CORRECT ANSWER 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
Discount Point - CORRECT ANSWER A form of pre-paid interest which effectively increases
the yield on the loan above the amount of the stated interest rate
CLTV
Combined Loan to Value - CORRECT ANSWER 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
LTV
Loan to Value - CORRECT ANSWER Ratio of a loan to the value of an asset purchased
PITI - CORRECT ANSWER Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment
DIF - CORRECT ANSWER Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
Forbearance - CORRECT ANSWER Agreement between the lender and the borrower to delay
foreclosure
, Loan Modification - CORRECT ANSWER 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
Foreclosure - CORRECT ANSWER Legal process to collect debt on mortgaged property
Satisfaction of Mortgage Letter - CORRECT ANSWER 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
Subordination Agreement - CORRECT ANSWER When two mortgages are on a property, this
specifies which mortgage takes precedence
Payoff Statement - CORRECT ANSWER Provides homeowner proof the mortgage is paid off
Constructive Note - CORRECT ANSWER Legal presumption that anything recorded in a
public record can be known by anyone
Actual Note - CORRECT ANSWER Direct knowledge that one has of the property
Inquiry Note - CORRECT ANSWER Information that should compel a reasonable person to
make further inquiries about some aspect of the property
Title Record - CORRECT ANSWER Serves as a central repository of information about a
parcel of land
SRP
Service Release Premiums - CORRECT ANSWER Payment received by lender after selling a
loan Based on market value
GNMA
Government National Mortgage Association - CORRECT ANSWER Created in 1968, goal to
expand affordable housing under HUD
QUESTIONS AND CORRECT ANSWERS
Primary Mortgage Market - CORRECT ANSWER Where credit institutions originate loans
C. The maximum the rate can increase over the life of the loan - CORRECT ANSWER 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
B. The borrower qualified at the buydown rate - CORRECT ANSWER 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
A. Age - CORRECT ANSWER All of the following are violations of the Fair Housing Act
EXCEPT
A. Age
B. National Origin
C. Disability
D.Religion
Encrumbrance - CORRECT ANSWER Claim against property held by one who is not the legal
owner
Trigger Term - CORRECT ANSWER Advertised term that requires additional disclosures
,Advertising Disclosure - CORRECT ANSWER An advertisement must be presented "clearly
and conspicuously" to keep from being deceptive, unfair, or otherwise violate a Commission rule
Waving Right of Rescission - CORRECT ANSWER Extenuating circumstances such as "bona
fide personal financial emergency
Right of Rescission - CORRECT ANSWER Right that borrowers have to cancel a loan or line
of credit with a lender within three days of closing
Business Day - CORRECT ANSWER When creditors office is open to the public, a calendar
working day except Sunday or a federal holiday
Application - CORRECT ANSWER Financial information used for purposes of obtaining an
extension of credit
Disclosure - CORRECT ANSWER The act of making new information known
FTC
Federal Trade Commission - CORRECT ANSWER Mission is to promote consumer protection
and eliminate and prevent anticompetitive business practices
CFPB
Consumer Financial Protection Bureau - CORRECT ANSWER Regulatory agency charged
with overseeing financial products and services offered to consumers
TILA
Truth in Lending Act - CORRECT ANSWER 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
Per Diem Interest - CORRECT ANSWER Interest charged on a loan for one or more days
,Annual Interest Rate Formula - CORRECT ANSWER Principal (X) Interest Rate = Annual
Interest Rate
Interest Only Mortgage - CORRECT ANSWER Mortgage where the mortgagor is only required
to pay off the interest that arises from the principal that is borrowed for a set period
Permanent Buydown - CORRECT ANSWER Borrower chooses to pay additional "discount
points" to buy down the interest rate for the life of the mortgage note
2/1 Buydown - CORRECT ANSWER 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
Discount Point - CORRECT ANSWER A form of pre-paid interest which effectively increases
the yield on the loan above the amount of the stated interest rate
CLTV
Combined Loan to Value - CORRECT ANSWER 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
LTV
Loan to Value - CORRECT ANSWER Ratio of a loan to the value of an asset purchased
PITI - CORRECT ANSWER Principal, Interest, Taxes, Insurance
Refers to the components of a mortgage payment
DIF - CORRECT ANSWER Housing to Debt
Ratio that measures an individual's ability to manage monthly payment and repay debts
Forbearance - CORRECT ANSWER Agreement between the lender and the borrower to delay
foreclosure
, Loan Modification - CORRECT ANSWER 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
Foreclosure - CORRECT ANSWER Legal process to collect debt on mortgaged property
Satisfaction of Mortgage Letter - CORRECT ANSWER 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
Subordination Agreement - CORRECT ANSWER When two mortgages are on a property, this
specifies which mortgage takes precedence
Payoff Statement - CORRECT ANSWER Provides homeowner proof the mortgage is paid off
Constructive Note - CORRECT ANSWER Legal presumption that anything recorded in a
public record can be known by anyone
Actual Note - CORRECT ANSWER Direct knowledge that one has of the property
Inquiry Note - CORRECT ANSWER Information that should compel a reasonable person to
make further inquiries about some aspect of the property
Title Record - CORRECT ANSWER Serves as a central repository of information about a
parcel of land
SRP
Service Release Premiums - CORRECT ANSWER Payment received by lender after selling a
loan Based on market value
GNMA
Government National Mortgage Association - CORRECT ANSWER Created in 1968, goal to
expand affordable housing under HUD
