MLO SAFE NMLS SAFE TEST PRACTICE EXAM QUESTIONS AND ANSWERS
Taking advantage of ill-informed consumers through excessively high fees, misrepresented loan terms,
frequent refinancing that does not benefit the borrower and other prohibited acts is called
__________________________. - CORRECT ANSWER✅✅Predatory Lending.
RESPA-Real Estate Settlement Procedures Act - CORRECT ANSWER✅✅The Federal Statute that deals
with the settlement of residential mortgage loans.
RESPA's section 9 Prohibits - CORRECT ANSWER✅✅Home sellers from requiring home buyers to
purchase title insurance from a particular company providing title services.
The Dodd-Frank Act modifies ECOA to require a creditor to furnish a copy of an appraisal developed in
connection with a first mortgage_____________________ and absolutely not later than ________
business days prior to closing. - CORRECT ANSWER✅✅upon completion and 3 business days
TIL (Truth In Lending Disclosure) & GFE (Good Faith Estimate) - CORRECT ANSWER✅✅Per the Dodd
Frank Act, a single disclosure form combines these 2 statements.
Per the Dodd-Frank Acvt, to be a "qualified mortgage" total points and fees may not exceed ________%
of the total loan amount. - CORRECT ANSWER✅✅3% (three percent)
Per a provision of the Dodd-Frank Act mortgage lenders are to determine that a borrower has a
reasonable ability to repay a loan. Does this provision apply to all loans or just owner occupied loans? -
CORRECT ANSWER✅✅All loans, whether owner occupied or not.
A loan subject to HOEPA allows prepayment penalties for the first ______ years of the loan. - CORRECT
ANSWER✅✅2 (two) years
Per the Dodd-Frank Act an abusive act would include which of the following:
1. One that materially interferes with the consumers ability to understand the product or service.
2. One that take unreasonable advantage of a consumers' lack of understanding.
,3. One that takes unreasonable advantage of the consumer's reasonable reliance on the MLO. -
CORRECT ANSWER✅✅All three would be considered abusive acts.
Per the Dodd-Frank Act if an MLO receives compensation directly from a consumer, up to how much
additional compensation may be received from a lender in the same transaction? - CORRECT
ANSWER✅✅$0.00, dual compensation is not allowed. Compensation must be borrower paid or lender
paid.
What kinds of reasons are necessary for a lender to take adverse action with regard to a borrower? -
CORRECT ANSWER✅✅Specific reasons.
Adverse action means ______________________. - CORRECT ANSWER✅✅A denial or revocation of
credit. Also, a change in the terms of an existing credit arrangement or a refusal to grant credit in
substantially the amount or terms requested.
Per Regulation B, Lenders should retain certain records for _____________ months. - CORRECT
ANSWER✅✅25 Months
Because of the impact of the Dodd-Frank Act on a second mortgage, an APR that exceeds the ________
by more than _____% is the trigger that defines a high cost loan. - CORRECT ANSWER✅✅APOR (
Average Prime Offer Rate), 8.5%
Regulation C is known as ________________________. - CORRECT ANSWER✅✅HMDA, The Home
Mortgage Disclosure Act.
What is the purpose of HMDA? - CORRECT ANSWER✅✅The HMDA determines whether financial
institutions are serving the housing needs of their communities. It also identifies patterns of
discriminatory lending.
Under what circumstances can a lender with an Affiliated Business Arrangement require a borrower to
use a specific third party service provider? - CORRECT ANSWER✅✅If there are no kickback or referral
fees and the service provider is an attorney, credit reporting agency or appraiser the lender can require
that the borrower uses the provider
,If a transfer of servicing occurs, the _______________ must provide a servicing transfer statement not
less than ________ days before the transfer occurs. - CORRECT ANSWER✅✅Servicer, 15 (fifteen) days.
An individual who fails the MLO written exam 3 times must wait _________ months to retake the exam.
- CORRECT ANSWER✅✅6 (Six) Months
Per RESPA, an annual escrow statement is required to ______________. - CORRECT
ANSWER✅✅determine shortages and surpluses in the escrow account.
When must the Servicing Disclosure Statement be provided to the borrower? - CORRECT
ANSWER✅✅Within 3 (three) Business Days of the Application.
Any party involved in a federally covered loan that submits fraudulent information is subject to a fine of
up to $___________ and up to __________years in prison. - CORRECT ANSWER✅✅$1,000,000 (one
million dollars), 30 years in prison
Per RESPA, an escrow cushion is limited to a maximum of _________ of the annual payments and
surpluses over $_____must be refunded within ________ days. - CORRECT ANSWER✅✅1/6th (2
months), $50 (fifty dollars), 30 (thirty) days.
A seller takes back a $100,000 PMM @ 5.5% interest. This straight note will balloon after 10 years of
payments. How much is the balloon payment? - CORRECT ANSWER✅✅$100,000 + interest for the last
month. A straight note (term mortgage) is a non-amortizing interest only mortgage. The balloon would
include the entire principal plus the last month's interest, as interest is paid in arrears.
FNMA conforming debt ratios equal ______/________. - CORRECT ANSWER✅✅28%, maximum housing
expense/36% maximum total obligations
HOEPA stands for ___________________________. - CORRECT ANSWER✅✅Home Ownership and
Equity Protection Act.
RESPA applies to what type of properties? - CORRECT ANSWER✅✅1-4 Unit Residential Properties
, On a conventional mortgage loan, who makes the final decision regarding approval, denial or counter
offer? - CORRECT ANSWER✅✅The Underwriter
The Civil Rights Act of 1866, prohibited public and private racial discrimination in any property
transaction and was expanded in 1968 in which act? - CORRECT ANSWER✅✅The Civil Rights Act of
1968, also known as Title VIII of the Civil Rights Act , Also known as Title VIII, Also Known as The Fair
Housing Act
Of the following, which is not required to be disclosed on the TIL statement? The (1) APR, (2) Note Rate,
(3) Finance Charge, (4) Amount Financed or (5) Total of Payments - CORRECT ANSWER✅✅The note rate
is NOT required.
Which act of 1968 provides guidelines and restrictions regarding the financing, selling and renting of real
property? - CORRECT ANSWER✅✅The Civil Rights Act of 1968. AKA, The Civil Rights Act, AKA Title VIII,
AKA The Fair Housing Act
Which act prohibits asking questions regarding child bearing intentions or birth control practices? -
CORRECT ANSWER✅✅ECOA/Regulation B, the Equal Credit Opportunity Act
Based on objective criteria regarding the condition and value of the property or area, may a lender deny
loans in neighborhoods where property values are declining? - CORRECT ANSWER✅✅YES, loans can be
denied in a geographic area, but not for discriminatory reasons relative to the population of the area.
A teaser rate occurs in an ARM when the starting rate is less than the _____________. - CORRECT
ANSWER✅✅Fully indexed rate.
Per ECOA, is it true that while a lender must consider reliable alimony, child support or separate
maintenance payments as income, the applicant is not required to disclose such income? - CORRECT
ANSWER✅✅Yes, it is true. Only income intended to be used for qualifying has to be disclosed and
verified.
Of the following, who make a flood zone determination?
1. The Lender
2. The Appraiser
Taking advantage of ill-informed consumers through excessively high fees, misrepresented loan terms,
frequent refinancing that does not benefit the borrower and other prohibited acts is called
__________________________. - CORRECT ANSWER✅✅Predatory Lending.
RESPA-Real Estate Settlement Procedures Act - CORRECT ANSWER✅✅The Federal Statute that deals
with the settlement of residential mortgage loans.
RESPA's section 9 Prohibits - CORRECT ANSWER✅✅Home sellers from requiring home buyers to
purchase title insurance from a particular company providing title services.
The Dodd-Frank Act modifies ECOA to require a creditor to furnish a copy of an appraisal developed in
connection with a first mortgage_____________________ and absolutely not later than ________
business days prior to closing. - CORRECT ANSWER✅✅upon completion and 3 business days
TIL (Truth In Lending Disclosure) & GFE (Good Faith Estimate) - CORRECT ANSWER✅✅Per the Dodd
Frank Act, a single disclosure form combines these 2 statements.
Per the Dodd-Frank Acvt, to be a "qualified mortgage" total points and fees may not exceed ________%
of the total loan amount. - CORRECT ANSWER✅✅3% (three percent)
Per a provision of the Dodd-Frank Act mortgage lenders are to determine that a borrower has a
reasonable ability to repay a loan. Does this provision apply to all loans or just owner occupied loans? -
CORRECT ANSWER✅✅All loans, whether owner occupied or not.
A loan subject to HOEPA allows prepayment penalties for the first ______ years of the loan. - CORRECT
ANSWER✅✅2 (two) years
Per the Dodd-Frank Act an abusive act would include which of the following:
1. One that materially interferes with the consumers ability to understand the product or service.
2. One that take unreasonable advantage of a consumers' lack of understanding.
,3. One that takes unreasonable advantage of the consumer's reasonable reliance on the MLO. -
CORRECT ANSWER✅✅All three would be considered abusive acts.
Per the Dodd-Frank Act if an MLO receives compensation directly from a consumer, up to how much
additional compensation may be received from a lender in the same transaction? - CORRECT
ANSWER✅✅$0.00, dual compensation is not allowed. Compensation must be borrower paid or lender
paid.
What kinds of reasons are necessary for a lender to take adverse action with regard to a borrower? -
CORRECT ANSWER✅✅Specific reasons.
Adverse action means ______________________. - CORRECT ANSWER✅✅A denial or revocation of
credit. Also, a change in the terms of an existing credit arrangement or a refusal to grant credit in
substantially the amount or terms requested.
Per Regulation B, Lenders should retain certain records for _____________ months. - CORRECT
ANSWER✅✅25 Months
Because of the impact of the Dodd-Frank Act on a second mortgage, an APR that exceeds the ________
by more than _____% is the trigger that defines a high cost loan. - CORRECT ANSWER✅✅APOR (
Average Prime Offer Rate), 8.5%
Regulation C is known as ________________________. - CORRECT ANSWER✅✅HMDA, The Home
Mortgage Disclosure Act.
What is the purpose of HMDA? - CORRECT ANSWER✅✅The HMDA determines whether financial
institutions are serving the housing needs of their communities. It also identifies patterns of
discriminatory lending.
Under what circumstances can a lender with an Affiliated Business Arrangement require a borrower to
use a specific third party service provider? - CORRECT ANSWER✅✅If there are no kickback or referral
fees and the service provider is an attorney, credit reporting agency or appraiser the lender can require
that the borrower uses the provider
,If a transfer of servicing occurs, the _______________ must provide a servicing transfer statement not
less than ________ days before the transfer occurs. - CORRECT ANSWER✅✅Servicer, 15 (fifteen) days.
An individual who fails the MLO written exam 3 times must wait _________ months to retake the exam.
- CORRECT ANSWER✅✅6 (Six) Months
Per RESPA, an annual escrow statement is required to ______________. - CORRECT
ANSWER✅✅determine shortages and surpluses in the escrow account.
When must the Servicing Disclosure Statement be provided to the borrower? - CORRECT
ANSWER✅✅Within 3 (three) Business Days of the Application.
Any party involved in a federally covered loan that submits fraudulent information is subject to a fine of
up to $___________ and up to __________years in prison. - CORRECT ANSWER✅✅$1,000,000 (one
million dollars), 30 years in prison
Per RESPA, an escrow cushion is limited to a maximum of _________ of the annual payments and
surpluses over $_____must be refunded within ________ days. - CORRECT ANSWER✅✅1/6th (2
months), $50 (fifty dollars), 30 (thirty) days.
A seller takes back a $100,000 PMM @ 5.5% interest. This straight note will balloon after 10 years of
payments. How much is the balloon payment? - CORRECT ANSWER✅✅$100,000 + interest for the last
month. A straight note (term mortgage) is a non-amortizing interest only mortgage. The balloon would
include the entire principal plus the last month's interest, as interest is paid in arrears.
FNMA conforming debt ratios equal ______/________. - CORRECT ANSWER✅✅28%, maximum housing
expense/36% maximum total obligations
HOEPA stands for ___________________________. - CORRECT ANSWER✅✅Home Ownership and
Equity Protection Act.
RESPA applies to what type of properties? - CORRECT ANSWER✅✅1-4 Unit Residential Properties
, On a conventional mortgage loan, who makes the final decision regarding approval, denial or counter
offer? - CORRECT ANSWER✅✅The Underwriter
The Civil Rights Act of 1866, prohibited public and private racial discrimination in any property
transaction and was expanded in 1968 in which act? - CORRECT ANSWER✅✅The Civil Rights Act of
1968, also known as Title VIII of the Civil Rights Act , Also known as Title VIII, Also Known as The Fair
Housing Act
Of the following, which is not required to be disclosed on the TIL statement? The (1) APR, (2) Note Rate,
(3) Finance Charge, (4) Amount Financed or (5) Total of Payments - CORRECT ANSWER✅✅The note rate
is NOT required.
Which act of 1968 provides guidelines and restrictions regarding the financing, selling and renting of real
property? - CORRECT ANSWER✅✅The Civil Rights Act of 1968. AKA, The Civil Rights Act, AKA Title VIII,
AKA The Fair Housing Act
Which act prohibits asking questions regarding child bearing intentions or birth control practices? -
CORRECT ANSWER✅✅ECOA/Regulation B, the Equal Credit Opportunity Act
Based on objective criteria regarding the condition and value of the property or area, may a lender deny
loans in neighborhoods where property values are declining? - CORRECT ANSWER✅✅YES, loans can be
denied in a geographic area, but not for discriminatory reasons relative to the population of the area.
A teaser rate occurs in an ARM when the starting rate is less than the _____________. - CORRECT
ANSWER✅✅Fully indexed rate.
Per ECOA, is it true that while a lender must consider reliable alimony, child support or separate
maintenance payments as income, the applicant is not required to disclose such income? - CORRECT
ANSWER✅✅Yes, it is true. Only income intended to be used for qualifying has to be disclosed and
verified.
Of the following, who make a flood zone determination?
1. The Lender
2. The Appraiser
