NMLS TEST PRACTICE ( 20 HOUR ) QUESTIONS &
ANSWERS
An application must be accompanied by fingerprints when applying for
a. Licensed MLO
b. Registered MLO
c. not required
d. required for both licensed and registered MLO - Answer -d
Quarterly mortgage call reports must be filed
a. within 30 days of the end of the calendar quarter
b. within 30 days of the end of the fiscal quarter
c. within 45 days of the end of the calendar quarter
d. within 45 days of the end of the fiscal quarter - Answer -c. within45 days of the end
of the calendar quarter
Which of the following Government Sponsored Entities does NOT buy mortgage loans
in the secondary market?
a. Fannie Mae
b. Ginnie Mae
c. Freddie Mac
d. All of these GSEs buy loans in the secondary market - Answer -B. Ginnie Mae does
not buy or sell loans - it guarantees principal and interest payment for investors who buy
mortgage pools
If the Fed where to buy government securities, the money supply would likely:
a. Decrease
b. Increase
c. Stabilize
d. Appreciate - Answer -B. When the Fed buys US Government securities, the money
supply would increase, since the money would go out into the economy
The primary difference between a mortgage banker and a mortgage broker is:
a. whether it is regulated by the state or federal government
b. whether it is a depository institution
c. whether it participates in the primary or secondary mortgage market
d. whether it makes loans or only acts as intermediary - Answer -D. Mortgage brokers
only act as intermediaries, bringing together borrowers and lenders. Mortgage bankers
will do that as well, but will also loan out their own money
If a State Licensed LO allows his or her license to expire, that person will have to retest
if the license in not renewed within:
a. 5 yrs
b. 3 yrs
,c. 2 yrs
d. 1 yr - Answer -a. 5 years
Smalltown Bank makes a loan to a homebuyer and immediately after closing the loan
Smalltown Bank sells the loan to the larger Bigcity Bank. Smalltown Bank is acting as a:
a. Mortgage Banker
b. Mortgage Broker
c. Wholesale Lender
d. Correspondence Lender - Answer -D. It made the loan to the borrower in its own
name but immediately sold it to a larger lender
Lenders which make loans only through mortgage brokers and mortgage bankers and
do not deal directly with borrowers are called:
a. Correspondent lenders
b. Wholesale lenders
c. LOs
d. Retail lenders - Answer -B
A type of mortgage lender which raises its capital primarily through stock and other
securities offerings and then makes mortgage loans to individuals would be called a:
a. Bank
b. Savings and loan association
c. Mortgage banker
d. Mortgage broker - Answer -C. Mortgage bankers do not raise capital from
depositors. They sell stock and other securities to raise funds, then make mortgage
loans to customers
Each of the following actions by the Federal Reserve Board would be likely to increase
the money supply, EXCEPT:
a. Selling U.S. Government Securities
b. Buying U.S. Government Securities
c. Lowering the discount rate
d. Lowering the reserve requirement - Answer -a. IF the FBR were to sell U.S>
Government securities the money supply would come out of the economy and into the
FRB
Which of the following would be ways that Fannie Mae impacts the primary mortgage
market?
a. it ultimately serves to provide additional funds for the primary market
b. it influences lenders' standards for making mortgage loans
c. both
d. none - Answer -c. Fannie Mae buys mortgages in the secondary mortgage market
which makes more funds available to lenders to make loans in the primary market. It
also sets standards for the qualifying requirements lenders use when they make loans
in the primary market, since they want to be able to sell loans to Fannie Mae
,A person who has failed the national portion of the NMLS examination the third attempt:
a. is prohibited from taking the test again
b. must wait one year to retake the test
c. must wait 180 days to retake the test
d. must wait 30 days to retake the test - Answer -c 180 days
A registered LO must complete how many hours of continuing education courses each
year?
a. 20
b. 12
c. 0
d. 8 - Answer -c
In order to become a state licensed LO, the applicant must complete how many hours of
prelicense education courses
within 30 days of the end of the fiscal quarter
a. 45
b. 30
c. 25
d. 20 - Answer -d
A lender which will make mortgage loans to customers, but will immediately sell each of
their loans to a larger lender (under a contract relationship) is called a:
a. Wholesale lender
b. Retail lender
c. Correspondent lender
d. Mortgage broker - Answer -C. Correspondent lender, since it immediately sells its
loans to a larger (often wholesale) lender
A borrower would apply for a loan n the
a. Primary Market
b. Secondary mortgage market
c. Conventional mortgage market
d. Private mortgage market - Answer -A. Loans are applied for and made in the primary
market
A type of mortgage lender which would be BOTH a retail lender and a depository
institution would be a:
a. Savings and loan association
b. Mortgage banker
c. Mortgage broker
d. Wholesale lender - Answer -A. Savings and loan associations take deposits from
customers (checking and savings accounts) and make mortgage loans directly to
consumers, which makes them also retail lenders
, Fannie Mae and Freddie Mac can require a mortgage lender to buy back a loan if the
loan goes into default within how many months of its origination>
a. 12 months
b. 18 months
c. 9 months
d. 6 months - Answer -
The National Mortgage Licensing System (NMLS) operates under the authority of:
a. The Real Estate Settlement Procedure Act
b. The Truth -in-Lending Act
c. The SAFE Mortgage Licensing Act
d. The Gramm-Leach Bliley Act - Answer -C.
When is an adjustable rate mortgage recalculated (recast):
a. When the underlying index rate is adjusted
b. when the negative amortization cap is reached
c. when the initial cap is reached
d. when the lifetime cap is reached - Answer -B. The loan is recast when the negative
amortization cap is reached. The monthly payment would be recomputed based on the
higher loan amount over the remaining term of the loan
Loan origination fees can be expressed as:
a. Discount points
b. Loan points
c. Either discount points or loan points
d. Neither discount points or loan points - Answer -B. Any point is 1 percent of the loan
amount. Discount points are used only to buydown the interest rates, so origination fees
could be expressed as loan points but not discount points
The FHA's Home Equity Conversion Mortgage (HECM) is a type of
a. Home equity line of credit
b. Reverse Mortgage
c. Home equity loan
d. closed-end mortgage - Answer -b. Reverse mortgage
When is an OPTION ARM recast
a. At regular intervals, typically every fiver years
b. At each adjustment period
c. After each payment
d. At the expiration of the teaser rate - Answer -A. Option ARMs are typically recast
every 5 years. When the loan is recast, the monthly payments are recomputed based
on the current loan balance and the remaining term of the loan
If an adjustable-rate mortgage is described as a 5/2/6 loan, the firsts number would
indicate the maximum:
a. Initial interest rate adjustment
ANSWERS
An application must be accompanied by fingerprints when applying for
a. Licensed MLO
b. Registered MLO
c. not required
d. required for both licensed and registered MLO - Answer -d
Quarterly mortgage call reports must be filed
a. within 30 days of the end of the calendar quarter
b. within 30 days of the end of the fiscal quarter
c. within 45 days of the end of the calendar quarter
d. within 45 days of the end of the fiscal quarter - Answer -c. within45 days of the end
of the calendar quarter
Which of the following Government Sponsored Entities does NOT buy mortgage loans
in the secondary market?
a. Fannie Mae
b. Ginnie Mae
c. Freddie Mac
d. All of these GSEs buy loans in the secondary market - Answer -B. Ginnie Mae does
not buy or sell loans - it guarantees principal and interest payment for investors who buy
mortgage pools
If the Fed where to buy government securities, the money supply would likely:
a. Decrease
b. Increase
c. Stabilize
d. Appreciate - Answer -B. When the Fed buys US Government securities, the money
supply would increase, since the money would go out into the economy
The primary difference between a mortgage banker and a mortgage broker is:
a. whether it is regulated by the state or federal government
b. whether it is a depository institution
c. whether it participates in the primary or secondary mortgage market
d. whether it makes loans or only acts as intermediary - Answer -D. Mortgage brokers
only act as intermediaries, bringing together borrowers and lenders. Mortgage bankers
will do that as well, but will also loan out their own money
If a State Licensed LO allows his or her license to expire, that person will have to retest
if the license in not renewed within:
a. 5 yrs
b. 3 yrs
,c. 2 yrs
d. 1 yr - Answer -a. 5 years
Smalltown Bank makes a loan to a homebuyer and immediately after closing the loan
Smalltown Bank sells the loan to the larger Bigcity Bank. Smalltown Bank is acting as a:
a. Mortgage Banker
b. Mortgage Broker
c. Wholesale Lender
d. Correspondence Lender - Answer -D. It made the loan to the borrower in its own
name but immediately sold it to a larger lender
Lenders which make loans only through mortgage brokers and mortgage bankers and
do not deal directly with borrowers are called:
a. Correspondent lenders
b. Wholesale lenders
c. LOs
d. Retail lenders - Answer -B
A type of mortgage lender which raises its capital primarily through stock and other
securities offerings and then makes mortgage loans to individuals would be called a:
a. Bank
b. Savings and loan association
c. Mortgage banker
d. Mortgage broker - Answer -C. Mortgage bankers do not raise capital from
depositors. They sell stock and other securities to raise funds, then make mortgage
loans to customers
Each of the following actions by the Federal Reserve Board would be likely to increase
the money supply, EXCEPT:
a. Selling U.S. Government Securities
b. Buying U.S. Government Securities
c. Lowering the discount rate
d. Lowering the reserve requirement - Answer -a. IF the FBR were to sell U.S>
Government securities the money supply would come out of the economy and into the
FRB
Which of the following would be ways that Fannie Mae impacts the primary mortgage
market?
a. it ultimately serves to provide additional funds for the primary market
b. it influences lenders' standards for making mortgage loans
c. both
d. none - Answer -c. Fannie Mae buys mortgages in the secondary mortgage market
which makes more funds available to lenders to make loans in the primary market. It
also sets standards for the qualifying requirements lenders use when they make loans
in the primary market, since they want to be able to sell loans to Fannie Mae
,A person who has failed the national portion of the NMLS examination the third attempt:
a. is prohibited from taking the test again
b. must wait one year to retake the test
c. must wait 180 days to retake the test
d. must wait 30 days to retake the test - Answer -c 180 days
A registered LO must complete how many hours of continuing education courses each
year?
a. 20
b. 12
c. 0
d. 8 - Answer -c
In order to become a state licensed LO, the applicant must complete how many hours of
prelicense education courses
within 30 days of the end of the fiscal quarter
a. 45
b. 30
c. 25
d. 20 - Answer -d
A lender which will make mortgage loans to customers, but will immediately sell each of
their loans to a larger lender (under a contract relationship) is called a:
a. Wholesale lender
b. Retail lender
c. Correspondent lender
d. Mortgage broker - Answer -C. Correspondent lender, since it immediately sells its
loans to a larger (often wholesale) lender
A borrower would apply for a loan n the
a. Primary Market
b. Secondary mortgage market
c. Conventional mortgage market
d. Private mortgage market - Answer -A. Loans are applied for and made in the primary
market
A type of mortgage lender which would be BOTH a retail lender and a depository
institution would be a:
a. Savings and loan association
b. Mortgage banker
c. Mortgage broker
d. Wholesale lender - Answer -A. Savings and loan associations take deposits from
customers (checking and savings accounts) and make mortgage loans directly to
consumers, which makes them also retail lenders
, Fannie Mae and Freddie Mac can require a mortgage lender to buy back a loan if the
loan goes into default within how many months of its origination>
a. 12 months
b. 18 months
c. 9 months
d. 6 months - Answer -
The National Mortgage Licensing System (NMLS) operates under the authority of:
a. The Real Estate Settlement Procedure Act
b. The Truth -in-Lending Act
c. The SAFE Mortgage Licensing Act
d. The Gramm-Leach Bliley Act - Answer -C.
When is an adjustable rate mortgage recalculated (recast):
a. When the underlying index rate is adjusted
b. when the negative amortization cap is reached
c. when the initial cap is reached
d. when the lifetime cap is reached - Answer -B. The loan is recast when the negative
amortization cap is reached. The monthly payment would be recomputed based on the
higher loan amount over the remaining term of the loan
Loan origination fees can be expressed as:
a. Discount points
b. Loan points
c. Either discount points or loan points
d. Neither discount points or loan points - Answer -B. Any point is 1 percent of the loan
amount. Discount points are used only to buydown the interest rates, so origination fees
could be expressed as loan points but not discount points
The FHA's Home Equity Conversion Mortgage (HECM) is a type of
a. Home equity line of credit
b. Reverse Mortgage
c. Home equity loan
d. closed-end mortgage - Answer -b. Reverse mortgage
When is an OPTION ARM recast
a. At regular intervals, typically every fiver years
b. At each adjustment period
c. After each payment
d. At the expiration of the teaser rate - Answer -A. Option ARMs are typically recast
every 5 years. When the loan is recast, the monthly payments are recomputed based
on the current loan balance and the remaining term of the loan
If an adjustable-rate mortgage is described as a 5/2/6 loan, the firsts number would
indicate the maximum:
a. Initial interest rate adjustment
