SAFE MLO PRACTICE EXAM QUESTIONS
WITH CORRECT ANSWERS
While verifying identity, there are several consistent indicators that suggest identity
theft. Which of the following is not an example?
-Co-borrowers call each other by nicknames that do not relate to the names on the
application
-Credit history is inconsistent with the borrower's age
-Social Security Number given on the application is consistent with that found on the
credit report, W-2s, and paystubs
-Income documents appear to have poor printer alignment - Answer- Social Security
Number given on the application is consistent with that found on the credit report, W-2s,
and paystubs
HOEPA is federal legislation enacted by Congress through amendments to: - Answer-
TILA
LL Mortgage Company is advertising "120% LTV Home Equity Loans!" In order to
ensure compliance with Regulation Z, which of the following statements is also
required?
-Shop for options with lower loan-to-value ratios
-Interest on high loan-to-value ratios is not deductible
-Interest on the portion of credit exceeding market value is deductible at 50% of the
normal value
-Consult a tax adviser regarding deductibility of interest - Answer- Consult a tax adviser
regarding deductibility of interest
According to the HPML Rule, which of the following transactions would require a second
appraisal?
-A higher-priced mortgage loan that also meets qualified mortgage standards
-The purchase price is 10% higher than the seller's acquisition price 100 days ago
-All higher-priced mortgage loans are required to have two appraisals
-The purchase price is 20% higher than the seller's acquisition price 150 days ago -
Answer- The purchase price is 20% higher than the seller's acquisition price 150 days
ago
,One advantage of VA loans that is not commonly available in transactions for
conventional mortgages is that they are: - Answer- Assumable
Sandra is purchasing a home with a loan amount of $484,350, which is the conforming
loan limit for the area where she lives at the time that she secures approval for the loan.
Her interest rate is not a prime rate, and in order to determine if it triggers the threshold
for higher-priced mortgage loans, her creditor must determine if the APR for the loan
exceeds the average prime offer rate by: - Answer- 1.5 Percentage Points
This entity is responsible for implementing and enforcing consumer protection laws,
establishing consumer education programs, and responding to consumer inquiries and
complaints. - Answer- The Consumer Financial Protection Bureau
Which of the following statements most accurately describes the HPML transactions
that are subject to the requirement to establish an escrow account?
-Escrow accounts are required for all HPMLs secured by the borrower's principal
dwelling
-Escrow accounts are required for all HPMLs secured by a dwelling
-Escrow accounts are required for all first-lien HPMLs secured by the borrower's
principal dwelling
-Escrow accounts are required for all HPMLs, including reverse mortgages - Answer-
Escrow accounts are required for all first-lien HPMLs secured by the borrower's
principle dwelling
When a consumer is preapproved for a line of credit and can use this line freely, making
repeat transactions, and can pay it off at any time without closing the line, this is an
example of: - Answer- Revolving Debt
Direct RHS loans may have terms of _____ years. - Answer- 33 or 38
Loan originator Zena Mendez is preparing an advertisement in which more than one
simple interest rate will apply over the term of the loan. In order to be in compliance with
Regulation Z, Zena must clearly and conspicuously disclose all of the following, except:
-Each applicable simple annual rate
-The period of time each simple annual rate applies
-The frequency with which the rate will change
-The annual percentage rate for the loan - Answer- The frequency with which the rate
will change
As a result of the Housing and Economic Recovery Act of 2008, Congress created the
_____ for oversight of the GSEs. - Answer- Federal Housing Finance Agency (FHFA)
Which of the following might raise a red flag during the underwriter's review of the
appraisal?
, -Photos that appear to show the address of the property on the mailbox
-Dated prior to the sales contract
-Effective age of the property aligns with that of comparables
-Completion notice is dated after the original appraisal - Answer- Dated prior to the
sales contract
A borrower receives a bi-weekly paycheck in the amount of $2,300. The co-borrower
earns a semi-monthly paycheck in the amount of $2,500. What is the monthly qualifying
income of this couple - Answer- $9,983.33
((2,300x26)+(2500x24))/12=$9,983.33
An investigator spends three weeks researching Steve Sample, who is applying for a
job. He meets Steve's neighbors, current co-workers, and former teachers and mentors.
After interviewing upwards of 30 individuals, the investigator submits his report to the
company considering Steve for a position. This is an example of: - Answer- Investigative
Consumer Report
Recording of the deed happens where? - Answer- At the local courthouse
Marketing campaigns for the solicitation of credit are covered by the provisions of: -
Answer- TILA
Which of the following inquiries is considered lawful when asked for the purposes of
credit approval as governed by ECOA?
Years on the job
Race
Marital status
Age - Answer- Years on the job
The first step in the closing process is: - Answer- Funding
An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a:
- Answer- Conversion Option
Title searches and title insurance: - Answer- Are covered under the provisions of
RESPA and are considered settlement services
The Nationwide Multistate Licensing System and Registry was developed and is
maintained by: - Answer- CSBS and AARMR
An independent contractor is required to: - Answer- Become state-licensed as a loan
originator
WITH CORRECT ANSWERS
While verifying identity, there are several consistent indicators that suggest identity
theft. Which of the following is not an example?
-Co-borrowers call each other by nicknames that do not relate to the names on the
application
-Credit history is inconsistent with the borrower's age
-Social Security Number given on the application is consistent with that found on the
credit report, W-2s, and paystubs
-Income documents appear to have poor printer alignment - Answer- Social Security
Number given on the application is consistent with that found on the credit report, W-2s,
and paystubs
HOEPA is federal legislation enacted by Congress through amendments to: - Answer-
TILA
LL Mortgage Company is advertising "120% LTV Home Equity Loans!" In order to
ensure compliance with Regulation Z, which of the following statements is also
required?
-Shop for options with lower loan-to-value ratios
-Interest on high loan-to-value ratios is not deductible
-Interest on the portion of credit exceeding market value is deductible at 50% of the
normal value
-Consult a tax adviser regarding deductibility of interest - Answer- Consult a tax adviser
regarding deductibility of interest
According to the HPML Rule, which of the following transactions would require a second
appraisal?
-A higher-priced mortgage loan that also meets qualified mortgage standards
-The purchase price is 10% higher than the seller's acquisition price 100 days ago
-All higher-priced mortgage loans are required to have two appraisals
-The purchase price is 20% higher than the seller's acquisition price 150 days ago -
Answer- The purchase price is 20% higher than the seller's acquisition price 150 days
ago
,One advantage of VA loans that is not commonly available in transactions for
conventional mortgages is that they are: - Answer- Assumable
Sandra is purchasing a home with a loan amount of $484,350, which is the conforming
loan limit for the area where she lives at the time that she secures approval for the loan.
Her interest rate is not a prime rate, and in order to determine if it triggers the threshold
for higher-priced mortgage loans, her creditor must determine if the APR for the loan
exceeds the average prime offer rate by: - Answer- 1.5 Percentage Points
This entity is responsible for implementing and enforcing consumer protection laws,
establishing consumer education programs, and responding to consumer inquiries and
complaints. - Answer- The Consumer Financial Protection Bureau
Which of the following statements most accurately describes the HPML transactions
that are subject to the requirement to establish an escrow account?
-Escrow accounts are required for all HPMLs secured by the borrower's principal
dwelling
-Escrow accounts are required for all HPMLs secured by a dwelling
-Escrow accounts are required for all first-lien HPMLs secured by the borrower's
principal dwelling
-Escrow accounts are required for all HPMLs, including reverse mortgages - Answer-
Escrow accounts are required for all first-lien HPMLs secured by the borrower's
principle dwelling
When a consumer is preapproved for a line of credit and can use this line freely, making
repeat transactions, and can pay it off at any time without closing the line, this is an
example of: - Answer- Revolving Debt
Direct RHS loans may have terms of _____ years. - Answer- 33 or 38
Loan originator Zena Mendez is preparing an advertisement in which more than one
simple interest rate will apply over the term of the loan. In order to be in compliance with
Regulation Z, Zena must clearly and conspicuously disclose all of the following, except:
-Each applicable simple annual rate
-The period of time each simple annual rate applies
-The frequency with which the rate will change
-The annual percentage rate for the loan - Answer- The frequency with which the rate
will change
As a result of the Housing and Economic Recovery Act of 2008, Congress created the
_____ for oversight of the GSEs. - Answer- Federal Housing Finance Agency (FHFA)
Which of the following might raise a red flag during the underwriter's review of the
appraisal?
, -Photos that appear to show the address of the property on the mailbox
-Dated prior to the sales contract
-Effective age of the property aligns with that of comparables
-Completion notice is dated after the original appraisal - Answer- Dated prior to the
sales contract
A borrower receives a bi-weekly paycheck in the amount of $2,300. The co-borrower
earns a semi-monthly paycheck in the amount of $2,500. What is the monthly qualifying
income of this couple - Answer- $9,983.33
((2,300x26)+(2500x24))/12=$9,983.33
An investigator spends three weeks researching Steve Sample, who is applying for a
job. He meets Steve's neighbors, current co-workers, and former teachers and mentors.
After interviewing upwards of 30 individuals, the investigator submits his report to the
company considering Steve for a position. This is an example of: - Answer- Investigative
Consumer Report
Recording of the deed happens where? - Answer- At the local courthouse
Marketing campaigns for the solicitation of credit are covered by the provisions of: -
Answer- TILA
Which of the following inquiries is considered lawful when asked for the purposes of
credit approval as governed by ECOA?
Years on the job
Race
Marital status
Age - Answer- Years on the job
The first step in the closing process is: - Answer- Funding
An ARM that allows a borrower the opportunity to convert the loan to a fixed rate has a:
- Answer- Conversion Option
Title searches and title insurance: - Answer- Are covered under the provisions of
RESPA and are considered settlement services
The Nationwide Multistate Licensing System and Registry was developed and is
maintained by: - Answer- CSBS and AARMR
An independent contractor is required to: - Answer- Become state-licensed as a loan
originator
