NMLS Safe Test Mortgage Licensing Practice Exam Q's /A’s
Which federal law requires that the Loan Estimate be provided to the borrower within three business
days of the time of loan application is taken? - Answer - TILA
What type of scam entails homeowners who are encouraged to refinance their property over and over
until little or no equity remains? - Answer - Loan flipping or churning
After a loan closing, funds are disbursed. When are the funds disbursed for an owner-occupied,
residential refinance? - Answer - After 3 business-day rescission period
What is the adjustable number used to compute the interest rate on an ARM called? - Answer - Index
A borrower is buying a house for $180,000. He provides a down payment of $40,000. If he pays three
discount points, what is the total cost of the points? - Answer - $4200
Which day is counted as part of the CD three business day delivery period? - Answer - Monday-Saturday
A Latina applies to a mortgage company for a home loan. She is refused based on the reputation of the
neighborhood for a high number of foreclosures. This is an example of what illegal practice? - Answer -
Redlining
Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting
equity stripping and other abusive practices in connection with "high cost" mortgages? - Answer - Home
Ownership and Equity Protection Act (HOEPA)
The type of mortgage that can provide the borrower with a monthly check instead of the borrower
paying a monthly payments is known as - Answer - Reverse mortgage
According to the Fair Credit Reporting Act, if adverse action is taken against a credit applicant because of
information on a credit report, the lender who used that report is required to - Answer - provide to the
,consumer the name, address, and telephone number of the consumer reporting agency that furnished
the report and the credit score used
At closing, the buyers realizes that the lender changed the terms of the loan, but since he was facing
foreclosure, he felt he had no choice but to go ahead with the refinance or lose the house. This could be
an example of - Answer - Predatory lending
The SAFE Act - Answer - Establishes minimum standards for licensing and registering mortgage loan
originators
In a note, what gives the lender the right to charge the borrower a fee for retiring the loan early? -
Answer - Prepayment penalty
Regulation B implements the Equal Credit Opportunity Act. True or False? - Answer - True
Which item is NOT included in the calculation that determines the annual percentage rate?
a. the broker's origination fee
b. the lender's discount points
c. the mortgage insurance premium
d. the title insurance premium - Answer - The title insurance premium (D)
Under RESPA, who would be subject to fines and penalties if a kickback is paid? - Answer - All parties
paying or receiving a kickback
A conforming loan is a loan that - Answer - Follows the secondary market criteria set by Fannie
Mae/Freddie Mac
MLO Jon from ABC Mortgage is meeting with a potential borrower. What may Jon NEVER ask about
during the loan application process? - Answer - Religion
,The clause in the mortgage that makes the note due in full upon sale or transfer of a property is call a(n)
- Answer - Alienation clause AKA "due at sale clause"
The APR is required to be disclosed in a Truth in Lending statement is the - Answer - Relationship
between the total cost of borrowing and the actual amount borrowed
Which of the following is NOT included as a protected class by the Equal Credit Opportunity Act?
a. martial status
b. receipt of public assistance
c. religion
d.Social security - Answer - D
The rate that is used to amortize the mortgage loan and determining the monthly loan payments is
known as the - Answer - note rate
The loan officer knows that the applicants source of income is public assistance, so he tells the applicant
not to waster his time filling out an application and paying any fees. What federal law has the loan
officer violated? - Answer - ECOA
A subordination clause in a morgage - Answer - Puts the mortgage in first lien position over an earlier
recorded mortgage
Where do the funds for FHA loans come from? - Answer - approved lenders
An applicant for a mortgage has recurring monthly debt of $425 and a gross monthly income of $3,850.
For a conforming loan, what is the maximum house payment- including PITI- for which she qualifies? -
Answer - $961.00
What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales
price is $155,000?
, **remember to use lower number of either appraised value or sales price** - Answer - 90%
To comply with the Safeguard Rules of Gramm, Leach, Bliley, a loan officer should - Answer - place all
loan applications and documentation in a secure place when not working on them
VA loans allow for a maximum LTV of what percent? - Answer - 100%
Byuyer with a credit score of 703 makes an offer of $156,000 on a house that was appraised for
$162,000. If the seller accepts his offer, how much will he have to pay down on a FHA loan? - Answer -
$5,460
Private mortgage insurance (PMI) is NOT required when - Answer - the loan has been paid down to less
than 78% of the property's current value
The federal Truth in Lending Act - Answer - regulates advertising with references to mortgage interest
rates
When qualifying a borrower, an installment debt down not need to be included in the debt ration on
conventional loans when the balance of the term of repayment is less than how many months? - Answer
- 10
Market value can best be defined as a property's - Answer - most probable selling price
How many business days from the day of application does the creditor have to deliver the Loan
Estimate? - Answer - 3
What document does the VA use to determine the amount of a veteran's entitlement? - Answer - COE
An applicant for a mortgage loan is a salaried employee who is paid $1,350 every two weeks. In addition,
she indicates that she receives $500 a month in alimony. what is the gross monthly income you can use
to qualify her? - Answer - $3,425
Which federal law requires that the Loan Estimate be provided to the borrower within three business
days of the time of loan application is taken? - Answer - TILA
What type of scam entails homeowners who are encouraged to refinance their property over and over
until little or no equity remains? - Answer - Loan flipping or churning
After a loan closing, funds are disbursed. When are the funds disbursed for an owner-occupied,
residential refinance? - Answer - After 3 business-day rescission period
What is the adjustable number used to compute the interest rate on an ARM called? - Answer - Index
A borrower is buying a house for $180,000. He provides a down payment of $40,000. If he pays three
discount points, what is the total cost of the points? - Answer - $4200
Which day is counted as part of the CD three business day delivery period? - Answer - Monday-Saturday
A Latina applies to a mortgage company for a home loan. She is refused based on the reputation of the
neighborhood for a high number of foreclosures. This is an example of what illegal practice? - Answer -
Redlining
Which Act amended the Truth in Lending Act, establishing disclosure requirements and prohibiting
equity stripping and other abusive practices in connection with "high cost" mortgages? - Answer - Home
Ownership and Equity Protection Act (HOEPA)
The type of mortgage that can provide the borrower with a monthly check instead of the borrower
paying a monthly payments is known as - Answer - Reverse mortgage
According to the Fair Credit Reporting Act, if adverse action is taken against a credit applicant because of
information on a credit report, the lender who used that report is required to - Answer - provide to the
,consumer the name, address, and telephone number of the consumer reporting agency that furnished
the report and the credit score used
At closing, the buyers realizes that the lender changed the terms of the loan, but since he was facing
foreclosure, he felt he had no choice but to go ahead with the refinance or lose the house. This could be
an example of - Answer - Predatory lending
The SAFE Act - Answer - Establishes minimum standards for licensing and registering mortgage loan
originators
In a note, what gives the lender the right to charge the borrower a fee for retiring the loan early? -
Answer - Prepayment penalty
Regulation B implements the Equal Credit Opportunity Act. True or False? - Answer - True
Which item is NOT included in the calculation that determines the annual percentage rate?
a. the broker's origination fee
b. the lender's discount points
c. the mortgage insurance premium
d. the title insurance premium - Answer - The title insurance premium (D)
Under RESPA, who would be subject to fines and penalties if a kickback is paid? - Answer - All parties
paying or receiving a kickback
A conforming loan is a loan that - Answer - Follows the secondary market criteria set by Fannie
Mae/Freddie Mac
MLO Jon from ABC Mortgage is meeting with a potential borrower. What may Jon NEVER ask about
during the loan application process? - Answer - Religion
,The clause in the mortgage that makes the note due in full upon sale or transfer of a property is call a(n)
- Answer - Alienation clause AKA "due at sale clause"
The APR is required to be disclosed in a Truth in Lending statement is the - Answer - Relationship
between the total cost of borrowing and the actual amount borrowed
Which of the following is NOT included as a protected class by the Equal Credit Opportunity Act?
a. martial status
b. receipt of public assistance
c. religion
d.Social security - Answer - D
The rate that is used to amortize the mortgage loan and determining the monthly loan payments is
known as the - Answer - note rate
The loan officer knows that the applicants source of income is public assistance, so he tells the applicant
not to waster his time filling out an application and paying any fees. What federal law has the loan
officer violated? - Answer - ECOA
A subordination clause in a morgage - Answer - Puts the mortgage in first lien position over an earlier
recorded mortgage
Where do the funds for FHA loans come from? - Answer - approved lenders
An applicant for a mortgage has recurring monthly debt of $425 and a gross monthly income of $3,850.
For a conforming loan, what is the maximum house payment- including PITI- for which she qualifies? -
Answer - $961.00
What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales
price is $155,000?
, **remember to use lower number of either appraised value or sales price** - Answer - 90%
To comply with the Safeguard Rules of Gramm, Leach, Bliley, a loan officer should - Answer - place all
loan applications and documentation in a secure place when not working on them
VA loans allow for a maximum LTV of what percent? - Answer - 100%
Byuyer with a credit score of 703 makes an offer of $156,000 on a house that was appraised for
$162,000. If the seller accepts his offer, how much will he have to pay down on a FHA loan? - Answer -
$5,460
Private mortgage insurance (PMI) is NOT required when - Answer - the loan has been paid down to less
than 78% of the property's current value
The federal Truth in Lending Act - Answer - regulates advertising with references to mortgage interest
rates
When qualifying a borrower, an installment debt down not need to be included in the debt ration on
conventional loans when the balance of the term of repayment is less than how many months? - Answer
- 10
Market value can best be defined as a property's - Answer - most probable selling price
How many business days from the day of application does the creditor have to deliver the Loan
Estimate? - Answer - 3
What document does the VA use to determine the amount of a veteran's entitlement? - Answer - COE
An applicant for a mortgage loan is a salaried employee who is paid $1,350 every two weeks. In addition,
she indicates that she receives $500 a month in alimony. what is the gross monthly income you can use
to qualify her? - Answer - $3,425
