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MLO Mortgage Loan Origination (SAFE MLO) Exam Question and Answers

Question # 4

Which of the following entities has the primary enforcement authority under the Red Flags Rule?

A.

IRS

B.

Federal Trade Commission

C.

HUD

D.

Conference of State Bank Supervisors

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Question # 5

Which of the following responses describes servicing transfers?

A.

The transfer of an appraisal from one lender to another

B.

The transfer of a HUD case number from one lender to another

C.

The transfer of the responsibility to collect payments on the loan from one lender to another

D.

The transfer of the processing of a loan to an independent service provider such as a contract processing provider

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Question # 6

Which of the following facets of a loan could be considered predatory lending or steering?

A.

Cash-out

B.

Fixed interest rate

C.

Prepayment penalty

D.

Lowered interest rate

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Question # 7

When a mortgage loan originator (MLO) receives information from a borrower that indicates potential employment fraud, the MLO should:

A.

Take no additional action because it is not confirmed.

B.

Take no additional action unless the borrower admits that they submitted false employment information.

C.

Report the information to another MLO for their opinion.

D.

Report the information to the company's compliance officer.

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Question # 8

According to the TILA-RESPA Integrated Disclosure rule (TRID), changed circumstances that may result in a revised Loan Estimate include which of the following situations?

A.

Market fluctuations on a locked loan

B.

The borrower receiving a salary increase

C.

A natural disaster in the area where the loan will close

D.

Changes that the MLO should have known at the time the Loan Estimate was provided

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Question # 9

A real estate broker overhears her buyer discussing what she believes to be illegal activities while on a phone conversation. The real estate broker notifies the buyer's mortgage loan originator (MLO) that the borrower may be using illegally acquired funds as down payment for this property. The MLO decides to report some suspicious cash deposit transactions found in the borrower's bank records. Under the Patriot Act, the MLO may discuss the filing of this report with which of the following parties, if any?

A.

The buyer's agent

B.

All parties involved in the transaction

C.

His loan processor

D.

The report Is not permitted to be discussed with any parties involved in the transaction.

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Question # 10

A mortgage company is permitted to verify which of the following information?

A.

Sex

B.

Religion

C.

Employment status

D.

Childbearing intentions

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Question # 11

An individual who is a loan processor or underwriter must maintain a state originator license if they:

A.

perform clerical duties for a mortgage lender as a supervised employee

B.

are not in communication with the consumer to obtain mortgage loan information.

C.

are an independent contractor and collect, receive or distribute information in connection with making a credit decision.

D.

are an employee of a loan processing or underwriting company that supports a mortgage broker/lender and only perform supervised clerical duties.

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Question # 12

According to Regulation Z, which of the following is a prohibited act?

A.

Including undocumented child support payments made by the borrower

B.

Issuing disclosures to applicants

C.

Redisclosing a Loan Estimate immediately after locking the rate

D.

Advertising rates not currently available to applicants

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Question # 13

Which of the following acts requires mortgage loan originators to complete annual continuing education to satisfy the requirement for licensure?

A.

The SAFE Act

B.

The Dodd-Frank Act

C.

The Truth in Lending Act (TILA)

D.

The Equal Credit Opportunity Act

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Question # 14

In a federally related mortgage loan transaction, a charge for a settlement service by a person for which no services or nominal services are performed is prohibited:

A.

regardless of the sources of payment.

B.

only if it is paid by the borrower's real estate agent.

C.

unless it is paid by the seller or the seller's real estate agent.

D.

unless it is paid by the mortgage loan originator on the borrower's behalf.

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Question # 15

Which of the following documents must be provided to the borrower when they request a change in loan product?

A.

Loan Estimate

B.

Service provider list

C.

Home counseling list

D.

Amortization schedule

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Question # 16

Which of the following statements defines the term "business day" in a mortgage rescission under the Truth in Lending Act (TILA)?

A.

Every day from 9 a.m. to 5 p.m.

B.

Every day except Sunday and legal holidays

C.

Any days except Saturdays and Sundays

D.

Any days that employees may access the office to work

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Question # 17

A borrower works at Company XYZ and was recently approved for a cash-out refinance of her primary residence. The closing is scheduled for Friday. On Monday of closing week, the mortgage loan originator (MLO) sees on the local news that XYZ is closing and the employees have been let go. Which of the following actions, if any, should the MLO take?

A.

Tell the borrower not to say anything at closing

B.

Nothing, as the loan has already been approved

C.

Recommend that the borrower attend homeownership counseling

D.

Notify the underwriter regarding possible change of borrower's employment status

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Question # 18

A mortgage loan originator (MLO) cannot be approved for licensure if the applicant has:

A.

been convicted of a felony within the past seven years.

B.

had an MLO license suspended in any governmental jurisdiction.

C.

taken and failed the SAFE MLO National Test three times within the last year.

D.

never been licensed or registered as an MLO in any governmental jurisdiction.

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Question # 19

A mortgage loan originator (MLO) closes a high-cost mortgage for a borrower. Seven months later, the borrower returns to the MLO to apply for a cash-out refinance as the borrower intends to use the cash to purchase a collector car. The MLO determines that the only loan the borrower qualifies for is a high-cost mortgage at a higher interest rate. In which of the following ways should the MLO proceed?

A.

Deny the loan, unless it is in the best interest of the borrower

B.

Close the loan as normal with no further action required

C.

Close the loan as normal and take the vehicle as additional collateral

D.

Close the loan as normal, as the borrower can refinance a high-cost mortgage after six months

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Question # 20

An advertisement only reads: "Looking for low rates on a new mortgage loan? I can get you a $1,100 monthly payment on a $200,000 loan." This statement is a violation of which of the following rules?

A.

Truth in Lending Act (TILA)

B.

Equal Credit Opportunity Act (ECOA)

C.

Real Estate Settlement Procedures Act (RESPA)

D.

Unfair Deceptive or Abusive Acts or Practices

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Question # 21

Non-qualified mortgages offer more options for borrowers who:

A.

are unemployed.

B.

are self-employed.

C.

have no down payment.

D.

are currently living with their parents.

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Question # 22

Which of the following is an origination fee?

A.

Appraisal fee

B.

Underwriting fee

C.

Title insurance fee

D.

Prepaid interest fee

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Question # 23

When preparing a corrected Closing Disclosure, under which of the following conditions is a three-day waiting period required before a loan consummation?

A.

The addition of an escrow account

B.

The addition of a prepayment penalty

C.

If the APR changes within the acceptable tolerance

D.

If a revision is needed to the consumer's contact Information

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Question # 24

What is the minimum amount of flood insurance a lender must require on a residential building located in a special flood hazard area?

A.

$50,000 for residential property structures

B.

$150,000 for residential property structures

C.

$250,000 for residential property structures

D.

$350,000 for residential property structures

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Question # 25

A woman and her son meet with a mortgage loan originator (MLO) about refinancing the mother's home. During the meeting, the MLO senses that the mother is against the transaction and may be being unfairly coerced into the procedure. In which of the following ways should the MLO proceed?

A.

Ask to speak to the mother privately to inquire whether she Is a willing participant in the transaction

B.

[Consider the issue to be a private family matter and proceed with the next steps in the application process

C.

Suggest that the son be listed as a co-borrower on the mortgage to ensure he assumes part of the risk of the loan

D.

Tell the mother that she needs to sign a power of attorney so that her son may complete the transaction on her behalf

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Question # 26

Loan applications must include all of the following information with respect to mortgage loan originators (MLOs) except the:

A.

Employer's NMLS unique identifier.

B.

Return fax number.

C.

MLO's NMLS unique identifier.

D.

MLO's name.

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Question # 27

Under which of the following programs is a creditor required to provide disclosures to the consumer that fully describe each of the creditor's variable-rate loan programs in which the consumer expresses an interest?

A.

ARM

B.

FHA

C.

Fixed

D.

Construction

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Question # 28

Which of the following activities is an example of redlining in mortgage lending?

A.

Ensuring that all creditworthy borrowers are afforded equal treatment when applying for a mortgage loan

B.

The mortgage loan originator convincing the underwriter to move their loan file to the front of the line or "redline" it

C.

The act of the mortgage lender putting a "red line" under the borrower's name in a file to indicate they are a substandard applicant

D.

The systematic denial of various services to residents of specific, often racially associated, neighborhoods or communities, either explicitly or through the selective raising of prices

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Question # 29

Maximum available flood insurance structure coverage for a residential property from the National Flood Insurance Program is what amount?

A.

£250,000

B.

£500,000

C.

$750,000

D.

$1,000,000

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Question # 30

The SAFE Act mandates that state regulatory authorities must have legal mechanisms to impose civil money penalties for which of the following activities?

A.

Paying or receiving referral fees

B.

Charging fees in excess of allowable tolerances

C.

Discriminating against applicants based on their race

D.

Acting as a mortgage loan originator without a valid license or registration

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Question # 31

A sign that an appraisal report may be overvaluing a property is that the:

A.

Comparable properties are consistent with the subject property.

B.

Subject property and comparable properties were built by the same construction company.

C.

Subject property is in the same neighborhood as the comparable properties.

D.

Subject property address does not match the house number photographed by the appraiser.

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Question # 32

Which of the following activities is a function of the Consumer Financial Protection Bureau (CFPB)?

A.

Regulating the federal funds rate at which money is lent to banks

B.

Regulating the number of mortgage loan originators in the mortgage industry

C.

Regulating mortgage lenders on their mortgage origination practices and procedures

D.

Deciding what quantity of mortgage-backed securities are purchased by the government

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Question # 33

Mortgage loan originators planning to renew their licenses are required by the SAFE Act to complete which of the following education topics as part of their mandatory annual continuing education?

A.

Credit score modeling standards

B.

Mortgage loan loss mitigation standards

C.

Nontraditional mortgage lending standards

D.

30-year conventional mortgage lending standards

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Question # 34

A consumer with HIV/AIDS is protected from lending discrimination by the:

A.

Dodd-Frank

B.

Equality Act

C.

Fair Housing Act

D.

Employment Non-Discrimination Act

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Question # 35

When providing documents to a state regulator regarding a consumer complaint that was submitted to the state regulator, a licensed company should:

A.

Send the documents by U.S. mail rather than electronically for privacy reasons.

B.

Contact the consumer to get their authorization to provide documents to the regulator.

C.

Provide the documents along with the company's explanation of what caused the complaint.

D.

Redact any names and personal information before providing the documents for privacy reasons.

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Question # 36

Which of the following components of an ARM adjusts periodically?

A.

Index and margin only

B.

Index and interest rate only

C.

Margin and interest rate only

D.

Margin, index and interest rate

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Question # 37

How long does Regulation Z of the Truth in Lending Act (TILA) require a mortgage company to retain the Closing Disclosure for a closed mortgage loan?

A.

2 years

B.

3 years

C.

4 years

D.

5 years

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Question # 38

How many days before consummation must a borrower receive a revised Loan Estimate?

A.

4 business days

B.

5 business days

C.

7 business days

D.

10 business days

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Question # 39

A mortgage loan originator paying compensation to a real estate agent for client referrals is:

A.

Prohibited unless the client is notified and consents to the payment.

B.

Considered an illegal kickback prohibited by the Real Estate Settlement Procedures Act (RESPA).

C.

Permissible if the compensation is limited to meals or other noncash gifts.

D.

Permissible if the compensation is limited to payment for the real estate agent's related business expenses.

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Question # 40

According to the Truth in Lending Act (TILA), a dwelling includes which of the following?

A.

An unimproved lot

B.

A six-unit apartment complex

C.

An individual condominium unit

D.

A timeshare

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Question # 41

A lender is permitted to accept the employment information provided by the borrower on the initial loan application without asking for a letter of explanation in which of the following circumstances?

A.

The borrower lacks a history in an industry that requires specific skills.

B.

A recent college graduate holds a high-level position in the organization.

C.

The residence is more than 120 miles from the work location on a refinance.

D.

The borrower has been employed by the same company for three years.

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Question # 42

Which of the following occupancy types are listed on the Uniform Residential Loan Application?

A.

Primary residence, duplex residence, business

B.

Primary residence, multiunit residence, commercial

C.

Primary residence, secondary residence, investment

D.

Primary residence, vacation residence, multifamily residence

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Question # 43

How many business days after issuance is an unlocked Loan Estimate considered expired?

A.

3 days

B.

5 days

C.

7 days

D.

10 days

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Question # 44

Which of the following loans is subject to right of rescission?

A.

A purchase loan secured by a rental home

B.

A refinance loan secured by a vacation home

C.

A cash-out refinance loan on a primary residence

D.

A rate and term refinance loan through the same creditor

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Question # 45

The practice of denying a creditworthy applicant a loan for housing because of the location of the property is sometimes referred to as:

A.

steering.

B.

redlining.

C.

appraising.

D.

low balling.

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Question # 46

Which of the following responses describes the main purpose of the secondary market?

A.

To fund additional loans

B.

To fund a second home loan

C.

To fund second mortgage loans

D.

To service second mortgage loans

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Question # 47

Which of the following is an acceptable reason for denying a forward mortgage under the Equal Credit Opportunity Act (ECOA)?

A.

Receipt of child support

B.

Immigration status

C.

Marital status

D.

Retirement age

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Question # 48

A borrower obtains a 2-1 buydown mortgage loan with a 30-year term and a 6% note rate. The borrower's payments will be calculated based upon which of the following?

A.

4% interest in year 1 and 6% interest in years 2 through 30

B.

4% interest in years 1 and 2 and 6% interest in years 3 through 30

C.

4% interest in year 1, 5% interest in year 2 and 6% interest in years 3 through 30

D.

5% interest in years 1 and 2 and 6% interest in years 3 through 30

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Question # 49

Which of the following fees is a finance charge?

A.

Appraisal fees

B.

Title insurance

C.

Discount points

D.

Pest inspection fees

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Question # 50

A borrower may rescind their mortgage loan until midnight of the third:

A.

Calendar day or delivery of all material disclosures, whichever occurs first.

B.

Calendar day following consummation or delivery of all material disclosures, whichever occurs last.

C.

Business day following consummation or delivery of all material disclosures, whichever occurs last.

D.

Business day following consummation or delivery of all material disclosures, whichever occurs first.

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Question # 51

During the closing the borrower notices that the interest rate increased from 3.250% to 3.875%. The lender must:

A.

tell the borrower to close the loan.

B.

close the loan, then re-disclose after the loan funds.

C.

postpone the closing, re-disclose and wait three days.

D.

postpone the closing, re-disclose and wait three business days.

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Question # 52

Which of the following is a requirement for a mortgage loan originator (MLO) license?

A.

Completed at least 10 hours of pre-licensing education

B.

Have not had an MLO license revoked in the last five years

C.

Have never been convicted of a felony in a domestic, foreign or military court

D.

Are covered by either a net worth or surety bond or pay into a state fund as required by the state loan originator's supervisory authority

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Question # 53

Which of the following scenarios is permissible according to the SAFE Act?

A.

An unlicensed assistant to a mortgage loan originator (MLO) conducts MLO activities under the authority of the MLO's unique identifier and licenses.

B.

An MLO who is not licensed in a subject property's state still originates the loan under the authority of the company's license in that particular state.

C.

A third-party underwriter conducts administrative and clerical duties while working under the supervision of a licensed MLO with their organization.

D.

An underwriter who is functioning as an independent contractor conducts administrative and clerical duties while working under the supervision of a licensed MLO.

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Question # 54

A borrower visits a mortgage loan originator (MLO) for Mortgage ABC to discuss getting a home equity line of credit (HELOC) loan from Bank LMN. The MLO encourages the borrower to apply with Bank XYZ instead because ABC does not provide HELOC loans. When the borrower submits an application directly to XYZ, XYZ pays the MLO $100 from the 1% origination fee that it collected from the borrower. Is this fee permissible?

A.

The fee is permitted if the fee is disclosed on the final settlement statement.

B.

The fee is permitted as the MLO performed origination services for the borrower.

C.

The fee is not permitted as the MLO did not perform any actual origination services for the borrower.

D.

The fee is not permitted as the MLO did not perform any actual origination services for the borrower, unless the fee was paid directly by the borrower.

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Question # 55

In a federally related mortgage loan on a principal dwelling, which of the following parties has the right to rescind the transaction?

A.

Only the borrower who makes the most income

B.

Only the borrower with the majority interest in the transaction

C.

Only the person who will actually occupy the property

D.

Any person who has an ownership interest in the property

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Question # 56

The characteristics of a fixed-rate mortgage include a:

A.

fixed margin.

B.

fixed interest rate.

C.

mandatory 30-year term.

D.

minimum balloon payment.

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Question # 57

A customer wants an estimate of closing costs for the purchase of a $300,000 property with a 20% down payment. Although she has provided the other five pieces of information, a loan application, per Regulation X, has not been triggered because she has not yet found a property to purchase. Which of the following responses best describes what should be done, if anything, according to Regulation Z when a written cost estimate is given prior to a Loan Estimate?

A.

Use a fictitious address in order to trigger a loan application so that a Loan Estimate can be provided

B.

Regulation Z does not allow a creditor to provide any estimate of costs until a complete loan application has been made by the borrower.

C.

Provide an estimate with the following in 12-point font: "This is not an Official Consumer Financial Protection Board (CFPB) Loan Estimate."

D.

Provide an estimate with the words: "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan."

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Question # 58

Within three business days of receiving an application, which of the following information is a creditor required to provide to an applicant?

A.

The applicant's right to receive a copy of the appraisal report

B.

The applicant's right to select the appraiser

C.

A copy of the appraisal report

D.

Timeline of the appraisal process

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Question # 59

Which of the following reasons is acceptable for denying a loan under the Equal Credit Opportunity Act (ECOA)?

A.

Receipt of child support

B.

Immigration status

C.

Marital status

D.

Country of birth

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Question # 60

Which of the following property types is eligible for FHA financing?

A.

Vacation home

B.

Bed and breakfast

C.

Manufactured home

D.

Commercial real estate loan

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Question # 61

Which of the following settlement costs is considered a prepaid item?

A.

Closing fee

B.

Recording fee

C.

Title insurance

D.

Real estate taxes

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Question # 62

Which of the following advertising statements is permissible?

A.

"5% 30-year fixed with no closing costs"

B.

"5% for 10 years, then one balloon payment"

C.

"30-year variable rate mortgages starting at ____"

D.

"30-year fixed mortgage for a 5% APR with approved credit"

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Question # 63

Which of the following federal laws requires mortgage lenders to adopt and follow anti-money laundering (AML) rules and regulations?

A.

The National Bank Act

B.

The National Currency Act

C.

The Bank Secrecy Act

D.

The Real Estate Settlement Procedures Act

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Question # 64

What is the maximum civil penalty that is permitted to be imposed for each violation or failure to comply with the SAFE Act?

A.

$2,500 for each act or omission

B.

000 for each act or omission

C.

$2,500 for each act or omission; $25,000 maximum

D.

$25, 000 for each act or omission: $250,000 maximum

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Question # 65

How many days must a borrower's mortgage loan be delinquent before the mortgage company is permitted to submit the first notice filing in the foreclosure process?

A.

30 days

B.

60 days

C.

90 days

D.

120 days

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Question # 66

Which of the following loans is subject to the Real Estate Settlement Procedures Act (RESPA)?

A.

Federally related mortgage loan

B.

Standard county related mortgage loan

C.

State registration related mortgage loan

D.

Unified commerce related mortgage loan

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Question # 67

Which of the following actions by a mortgage loan originator is prohibited regarding credit secured by a dwelling?

A.

Receiving compensation from both the borrower and the lender

B.

Presenting program options that best qualify and satisfy the consumer

C.

Providing disclosures within three days of an application

D.

Providing a copy of the credit application to the primary borrower

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Question # 68

Which of the following is an origination fee?

A.

Appraisal fee

B.

Underwriting fee

C.

Title insurance fee

D.

Prepaid Interest fee

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Question # 69

A creditor receives an application with all the required pieces of information but wants to have additional information to determine a borrower's qualifications for a loan. Which of the following actions is most compliant with industry regulations?

A.

Consider the application incomplete and put initial processing on hold until the additional information is received

B.

Carefully document attempts to obtain the necessary additional information from the consumer to show why the decision to hold further processing was made

C.

Provide timely initial disclosures to the consumer even though the requested information when received may reflect that the initially disclosed figures are outdated

D.

Provide a fees worksheet, a Falr Lending Disclosure and an Equal Credit Opportunity Act (ECOA) form to the consumer, waiting until the additional necessary information is obtained to Issue the balance of required disclosures

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