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MLO Questions and Answers

Question # 6

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 # 7

Which of the following loan types is covered by the Real Estate Settlement Procedures Act (RESPA)?

A.

Auto loan

B.

Student loan

C.

Residential real estate loan

D.

Commercial real estate loan

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Question # 8

Which of the following fees or charges is an allowable closing cost typically found on a Closing Disclosure?

A.

Origination charge

B.

Referral fee

C.

Servicing fee

D.

Yield-to-loan fee

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Question # 9

Which of the following practices is a prudent and reasonable cybersecurity precaution regarding laptop computers?

A.

A laptop should never be taken out of the office.

B.

A laptop should be shared by no more than five people.

C.

Passwords should only be shared with a direct supervisor.

D.

A laptop should automatically shut down and require a new login if not used for a period of time.

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Question # 10

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 # 11

Which of the following duties requires licensure under the SAFE Act?

A.

A licensed and registered real estate broker performing real estate brokerage activities

B.

An individual who performs administrative or clerical tasks on behalf of a mortgage loan originator

C.

An individual who offers or negotiates terms of a residential mortgage loan for compensation or gain

D.

An individual who performs processing and underwriting duties at the direction of and subject to the supervision of a licensed individual

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Question # 12

A borrower who knowingly makes false statements on a federally related mortgage loan to obtain property may be:

A.

imprisoned for 10 to 16 months

B.

fined up to JB10,000 or imprisoned for 6 months.

C.

fined up to $1 million and imprisoned for 30 years.

D.

fined up to the total purchase price of their home.

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Question # 13

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 # 14

A borrower has told the mortgage loan originator that they had recently paid off an account that was listed on their credit report. Which of the following information will they need to provide the lender to prove the account has been paid off?

A.

Oral confirmation from the borrower

B.

An updated statement showing a zero balance

C.

A letter from the borrower explaining that they paid it off

D.

No additional information required

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Question # 15

Which of the following lender payments is prohibited according to Real Estate Settlement Procedures Act (RESPA)?

A.

A payment to an attorney for services actually rendered

B.

A payment to a real estate agent for loan referral activities

C.

A payment to its own employees for lender referral activities

D.

A payment to the lender's duly appointed agent or contractor for services actually performed in the origination, processing or funding of a loan

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Question # 16

A qualified mortgage:

A.

Results in a balloon payment.

B.

Results in an increase of the principal balance.

C.

Allows the consumer to defer repayment of principal.

D.

Provides for regular periodic payments that are substantially equal.

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Question # 17

How often must a nonexempt telemarketing entity check their call list against the National Do Not Call Registry?

A.

Every 7 days

B.

Every 2 weeks

C.

Every 31 days

D.

Annually

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Question # 18

According to the Truth in Lending Act (TILA), the term "finance charge" includes which of the following charges?

A.

Daily or per diem interest paid by borrower

B.

Seller's points offered to reduce the borrower's closing costs

C.

A standard credit application fee charged to all loan applicants

D.

Document preparation fees for items such as mortgages and deeds

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Question # 19

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 # 20

Illegal fee splitting occurs when:

A.

two service providers split a fee.

B.

wages are split by two employees.

C.

fees are split between lender and broker.

D.

three companies split a fee but one did no work.

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Question # 21

The Red Flags Rule under the Fair and Accurate Credit Transactions Act (FACTA) require lenders to:

A.

adopt best practices for property evaluations as stipulated in the Home Valuation Code of Conduct.

B.

adopt a credit score evaluation method utilizing the middle of three repository scores and the lowest of all borrowers' scores.

C.

implement a written program to detect warning signs of identity theft.

D.

implement an internal watch system to prevent the misrepresentation of occupancy status

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Question # 22

A charge payable by the consumer and imposed by the creditor as an incident to or a condition of the extension of credit is the:

A.

Title fee

B.

Attorney fee

C.

Escrow charge

D.

Finance charge

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Question # 23

If a borrower believes that there is incorrect information on their credit report, which of the following actions should they take?

A.

Ask the lender to fix the error

B.

Call the credit bureau to report the error

C.

Make a written notification to the credit bureau to report the error

D.

Ask the company that is reporting the error to the credit bureau to fix the error

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Question # 24

Which of the following fees must remain the same unless a valid changed circumstance occurs?

A.

Total per diem interest

B.

Homeowner's insurance

C.

Owner's title insurance premium

D.

Fees paid to an affiliate of the lender

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Question # 25

Which of the following events will cause a mortgage loan originator's (MLO's) temporary authority to cease in a given state?

A.

The MLO was terminated by his previous employer.

B.

Another state denies the MLO's license application.

C.

The state does not grant temporary authority to transitioning MLOs.

D.

A week has elapsed between when the MLO's federal registration expired and sponsorship by a new employer.

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Question # 26

A borrower is approved for an 80/20 loan. Which of the following describes the lien priority for the 20% loan?

A.

First

B.

Second

C.

First as it will be combined with the 80% loan

D.

Second but combined with any other liens

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Question # 27

A friend contacts a mortgage loan originator (MLO) and asks her to obtain a credit report for him to review before he tries to rent a house. The MLO has access to obtaining credit reports but does not handle any rental applications. Which of the following actions should the MLO take?

A.

Offer to obtain the credit report but only if the friend will pay for the cost of the report

B.

Ask the friend to provide the MLO with a written authorization to obtain his credit report

C.

Explain that the MLO cannot obtain the friend's credit report since he is not looking for a home loan

D.

Start a loan application so that the MLO can obtain the credit report and then show the application as "withdrawn"

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Question # 28

Which of the following actions should a mortgage loan originator (MLO) take if a real estate broker offers the MLO $500 to obtain a purchase-money mortgage for the real estate broker's client?

A.

Decline the money

B.

Apply the $500 towards the downpayment

C.

Receive the $500 fee and include it on the Closinq Disclosure

D.

Accept the money after obtaining the requested loan for the client

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Question # 29

Which of the following responses describes the primary reason to conduct a title search?

A.

To confirm the identity of the applicant

B.

To determine the amount of homeowner's insurance required

C.

To identify any preexisting liens against the collateral property

D.

To determine whether a buyer can purchase the collateral property

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Question # 30

According to Federal Reserve Regulation Z, which of the following fees is a finance charge in a residential mortgage transaction?

A.

Notary

B.

Interest

C.

Credit report

D.

Title Insurance

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Question # 31

Which of the following responses describes the purpose of an appraisal in satisfying requirements for underwriting?

A.

To ensure that the home is not an outlier to its comparables

B.

To ensure that the market value is appropriate for the loan amount

C.

To allow the seller a final opportunity to cancel the transaction

D.

To allow the borrower a final opportunity to negotiate terms of the loan

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Question # 32

Which of the following statements is permissible in an advertisement?

A.

"Current interest rates as low as 3.50% with an APR of 3.99%. Contact us today!"

B.

"Looking for a VA loan? We are endorsed by and affiliated with the VA administration."

C.

"Take out a reverse mortgage loan with us, and you can stay in your home as long as you want and never make a payment."

D.

"Close a mortgage loan with us within the next 60 days and when interest rates drop, we will refinance your loan at a lower rate guaranteed."

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Question # 33

Which of the following documents is required to be issued to a customer when a mortgage loan originator is also a real estate broker on the same transaction?

A.

Loan application

B.

Appraisal disclosure

C.

Special information booklet

D.

Affiliated business arrangement

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Question # 34

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 # 35

A person paying or receiving a portion of a fee that has not been earned in connection with the settlement statement is which of the following practices?

A.

Actual fees

B.

Splitting fees

C.

Average fees

D.

Third-party fees

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Question # 36

Which of the following must be included on all residential mortgage loan application forms?

A.

A mortgage loan originator's unique identifier

B.

A borrower's driver’s license number

C.

The maiden name of the borrower's mother

D.

The borrower's previous five year employment history

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Question # 37

Which of the following characteristics is unique to a home equity line of credit (HELOC)?

A.

A borrower is permitted to receive additional advances.

B.

A borrower is permitted to make interest-only payments for the term of the loan.

C.

A borrower is permitted to borrow more than the property is worth.

D.

A borrower is permitted to sell the property without paying off the loan.

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Question # 38

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 # 39

What is the loan amount on the purchase price of $249,955.00 if the borrower is putting 18% down?

A.

$204,693.10

B.

$204,936.10

C.

$204,963.10

D.

$204,966.10

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Question # 40

Upon becoming employed by a state-licensed mortgage company, an individual who works for a depository institution as a mortgage loan originator (MLO) shall not be deemed to have temporary authority to act as an MLO in an application state if which of the following events has occurred?

A.

The individual has been a witness in a trial at which the defendant was convicted of felony fraud.

B.

The individual has been subject to a court order for payment of child support.

C.

The individual had an application for an MLO license denied or an MLO license revoked or suspended in any Governmental jurisdiction.

D.

The individual has submitted an application to be a state-licensed MLO in the application state and was registered in the NMLS as an MLO by the prior employer.

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Question # 41

Which of the following responses best describes redlining?

A.

The identification of minority census tracts

B.

The identification of low and moderate income census tracts

C.

The identification of locations in which the lender will not lend

D.

The analysis of the points and fees charged on loan transactions

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Question # 42

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 # 43

The Truth in Lending Act (TILA) covers which of the following loans?

A.

Agricultural credit

B.

Home equity loans

C.

Business or commercial credit

D.

An extension of credit to other than a natural person

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Question # 44

A mortgage loan originator (MLO) is in the process of taking an application for a 30-year mortgage, and the borrowers are over 72 years old. Which of the following actions must the MLO take?

A.

The MLO must present them with a reverse mortqaqe.

B.

The MLO must present them with a home equity line of credit (HELOC).

C.

The MLO must complete the application and proceed as normal.

D.

The MLO must inquire about the ability to repay in the event of a borrower's death.

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Question # 45

Which of the following real estate methods allows investors to estimate the value of a property by taking the rent collected and dividing it by the capitalization rate?

A.

Cost approach

B.

Income approach

C.

Residual method approach

D.

Sales comparison approach

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Question # 46

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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Question # 47

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 # 48

A mortgage loan in which a large portion of the borrowed principal is repaid at the end of the loan period is known as a:

A.

FHA mortgage.

B.

balloon mortgage.

C.

qualified mortgage.

D.

deferred-payment mortgage.

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Question # 49

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 # 50

Which of the following factors is considered when determining the interest rate for a subprime mortgage?

A.

The term of the loan

B.

The property location

C.

The sales price of the property

D.

The credit score of the applicants]

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Question # 51

The Equal Credit Opportunity Act (ECOA) defines the term "elderly" as anyone:

A.

60 years of age or older.

B.

62 years of age or older.

C.

65 years of age or older.

D.

70 years of age or older.

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Question # 52

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 # 53

Within how many days must a creditor notify an applicant of action taken on a completed mortgage loan application?

A.

15 days

B.

30 days

C.

45 days

D.

60 days

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Question # 54

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 # 55

The term "primary mortgage market" refers to which of the following responses?

A.

The medium in which mortgages are bought and sold following origination

B.

The role of Fannie Mae, Freddie Mac and Ginnie Mae in the mortgage industry

C.

The process by which mortgages are pooled and converted to marketable securities

D.

The confluence of borrowers and mortgage loan originators to negotiate loan terms and complete mortgage transactions

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Question # 56

When there is no tax return history for a rental property, the Federal Housing Administration (FHA) requires gross rental income to be documented and reduced by what percentage?

A.

10%

B.

15%

C.

20%

D.

25%

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Question # 57

Which of the following statements describes an advantage of a purchase money second mortgage?

A.

The borrower pays two mortgage payments.

B.

The borrower avoids paying into the escrow account.

C.

The borrower avoids paying private mortgage insurance

D.

The borrower's loan closes faster than a regular mortgage.

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Question # 58

The loan-to-value ratio for an FHA loan is calculated by dividing the loan amount by:

A.

the purchase price of the property.

B.

the appraised value of the property.

C.

the lesser of the purchase price or appraised value.

D.

the purchase price, plus the mortgage insurance for FHA loans.

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Question # 59

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 # 60

Which of the following statements best describes the index on an ARM?

A.

Mortgage lenders control the value of the index.

B.

The index rate is fixed for the life of the loan.

C.

Index rates vary as the general level of interest rates change.

D.

The Federal Reserve adjusts the discount rate index.

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Question # 61

Interest-only mortgages are considered high risk compared to traditional mortgage products because:

A.

scheduled payments do not reduce the loan's principal balance.

B.

the borrower's ability to repay is not considered when making the credit decision.

C.

the interest rate exceeds the average prime offer (APOR) rate by 1.5 percentage points.

D.

the interest rate exceeds the APOR by 6.5 percentage points.

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Question # 62

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 # 63

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 # 64

A 7.25% interest-only loan has an initial balance of $239,500.00. The annual homeowner's insurance premium is $551.00, and the annual property taxes are $1,773.00. What is the total monthly payment, including the escrow?

A.

$1,446.98

B.

$1,584.65

C.

$1,640.65

D.

$1,701.29

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Question # 65

Which of the following documents is a real estate conveyance?

A.

Quit claim deed

B.

Promissory note

C.

Mortgage instrument

D.

Occupancy certificate

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Question # 66

Which of the following is not a primary function for compensation undertaken by a mortgage loan originator on an FHA loan?

A.

Taking an application

B.

Offering or negotiating credit terms

C.

Assisting a consumer in applying for credit

D.

Performing real estate brokerage activities

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Question # 67

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 # 68

Which of the following factors does not affect the funding fee on a VA purchase?

A.

Service-connected disability

B.

First-time user

C.

Marital status

D.

Loan-to-value ratio

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Question # 69

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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