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NMLS FINAL EXAM
ACTUAL ACCURATE EXAM QUESTIONS WITH DETAILED VERIFIED ANSWERS
"Which law restricts the sharing of information given when a consumer applies for a mortgage loan? A. Fair Credit Reporting Act B. FTC Disposal Rules C. Gramm-Leach-Bliley Act
D. Consumer Regulatory Protection Act - CORRECT ANSWER C. Gramm-Leach-Bliley Act"
"The practice of intentionally targeting borrowers in poor or underserved areas with predatory loans is known as: A. Redlining B. Steering C. Misappropriation
D. Reverse redlining - CORRECT ANSWER D. Reverse redlining"
"All of the following are true of FHA fixed-rate loans, except: A. They require upfront MIP on all loans B. They are available in 15- and 30-year terms C. The borrower is only required to carry MIP until the LTV reaches 78%
D. The borrower must make at least a 3.50% investment - CORRECT ANSWER C. The borrower
is only required to carry MIP until the LTV reaches 78%" "Previously used as compensation for mortgage professionals, yield spread premiums must now be used: A.As referral fees paid to the broker by a settlement service provider B. As credits to the borrower to help pay settlement costs C. As commissions paid in addition to mortgage broker compensation
D. As credits off of the interest rate of the loan - CORRECT ANSWER B. As credits to the
borrower to help pay settlement costs" "On which portion of the loan application would one find a street address and legal description of the property? A. Section X B. Section II C. Section XV
D. Section III - CORRECT ANSWER B. Section II"
"Which of the following is permitted as a result of a referral? A. A free monthly pass to the gym with each closing B. A well-written thank you note C. A coffee card for each client
D. The names, phone numbers, and annual incomes of clients who have applied for loans -
CORRECT ANSWER B. A well-written thank you note"
"What is the maximum fee that may be charged for preparation of the Closing Disclosure? A. $ B. .1% of the loan amount C. $
D. 1% of the loan amount - CORRECT ANSWER C) $0"
In this case, his proposed housing expense (PITI) will be $1,500/month. $1,500 / $6,800 = 22%" "Mishandling borrowers' funds or improperly managing their funds is a practice prohibited by: A. TILA B. FNMA C. RESPA
D. GLB - CORRECT ANSWER C. RESPA"
"When a loan is characterized as "conforming," it means the loan: A. Requires no PMI B. Meets guidelines established by Fannie Mae and Freddie Mac C. Meets standards for a government program
D. Is a 30-year fixe - CORRECT ANSWER B. Meets guidelines established by Fannie Mae and
Freddie Mac" "A buyer pays $200,000 for a home and gets a fixed-rate loan from his lender at 5.75%. He puts $40,000 down. What is the LTV on this loan, and does the buyer have to pay PMI? A. 80% and YES B. 90% and YES C. Unknown - need to know the term of the loan to determine
A. Regulation X B. Regulation C C. Regulation B
D. Regulation E - CORRECT ANSWER C. Regulation B"
"The initial Loan Estimate must be delivered at least how many days prior to consummation? A.Seven business days B.There is no timing requirement C.Three business days
D.One business day - CORRECT ANSWER A.Seven business days"
"Under RESPA, the initial escrow account statement: A. Is due no later than the time of settlement B.Is due no later than the time of application C.Is due no later than 45 days after settlement
D. Is due no later than 45 days after application - CORRECT ANSWER C.Is due no later than 45
days after settlement" "Each violation of federal law prohibiting bank fraud may lead to a penalty of up to ________, imprisonment for up to ________, or both. A. $50,000; 40 years B. $100,000; 50 years C. $1 million; 30 years
D. $2 million; 10 years - CORRECT ANSWER C. $1 million; 30 years"
"Which of the following individuals would not be permitted to hold POA for a borrower? A.The borrower's parent B. The borrower's child C. The borrower's mortgage loan originator
D. The borrower's fiancé - CORRECT ANSWER C. The borrower's mortgage loan originator"
"An ARM loan has a 4.00% start rate, and it is time for the first adjustment to be made. It has a periodic cap of 1% and a lifetime cap of 5%. Assuming that the rate is going to increase, what will the rate be after its first adjustment? A. 9.00% B. 4.00% C. 7.00%
D. 5.00% - CORRECT ANSWER D. 5.00%"
"This is calculated by dividing PITI by the borrower's monthly gross income: A. Net tangible benefit B. Housing expense ratio C. Total debt ratio
D. Loan suitability - CORRECT ANSWER B. Housing expense ratio"
"Regulations in Section 32 of Regulation Z deal strictly with: A. Licensing standards placed in effect by the Housing and Economic Recovery Act B. The interactions between mortgage professionals and real estate agents C. Consumer protections triggered by high-cost loan scenarios
D. The amount a borrower should expect to be charged as an annual percentage rate - CORRECT
ANSWER C. Consumer protections triggered by high-cost loan scenarios"
"A buyer pays $200,000 for a home and gets a fixed-rate loan from his lender at 5.75%. He puts $40,000 down. What is the LTV on this loan, and does the buyer have to pay PMI? A. 90% and YES B. 80% and YES C. 80% and NO
D. Unknown - need to know the term of the loan to determine - CORRECT ANSWER C. 80%
and NO" "When may a homeowner request PMI to be cancelled? A. When the lender informs him/her that it is terminating PMI B. As soon as his/her equity position reaches at least 22% C. As soon as the five-year required minimum is met
D. As soon as his/her equity position is 20% or greater - CORRECT ANSWER D. As soon as
his/her equity position is 20% or greater" "In an adjustable-rate mortgage, this term refers to the maximum amount by which the interest rate may vary during its lifetime. A. Lifetime cap B. Payment cap C. Periodic rate adjustment cap
D. Annual cap - CORRECT ANSWER A. Lifetime cap"
"An FHA loan is insured by the federal government against: A. Flood or other hazard B. Market fluctuation C. Fraud or misappropriation
2% of 180,000= $3,600" "On what page of the Closing Disclosure would the consumer find information about the cash needed to close, in comparison to information on the Loan Estimate? A. Page three B. Page two C. Page four
D. Page one - CORRECT ANSWER A. Page three"
"How long do consumers have to file a lawsuit over alleged violations of section 6 of RESPA? A. 6 months B. 1 year C. 3 years
D. 7 years - CORRECT ANSWER C. 3 years"
"A home equity installment loan falls under HOEPA when the APR of the original mortgage on the home is at least ____ percentage points above the rates for Treasury securities with comparable maturities. A. 5 B. 8 C. 10
D. 12 - CORRECT ANSWER B. 8"
"Which federal law requires that the Good Faith Estimate be provided to the borrower within three business days of the time a loan application is taken? A. RESPA B. TILA C. HMDA
D. ECOA - CORRECT ANSWER A. RESPA"
"What type of scam entails homeowners who are encouraged to refinance their property over and over until little or no equity remains? A. loan flipping B. reverse equity
C. property skimming
D. extreme lending - CORRECT ANSWER A. loan flipping"
"After a loan closing, funds are disbursed. When are the funds disbursed for an owneroccupied, residential refinance? A. after the three business-day rescission period B. right before the loan closing C. five business days after the closing
D. at the time of the loan closing - CORRECT ANSWER A. after the three business-day
rescission period" "What is the adjustable number used to compute the interest rate on an ARM called? A. index B. prepayment C. margin
D. cap - CORRECT ANSWER A. 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? A. $4, B. $6, C. $5,
D. $4,667 - CORRECT ANSWER A. $4,200"
"Which act establishes disclosure requirements and prohibits equity stripping and other abusive practices in connection with high cost mortgages? A. Home Ownership and Equity Protection Act (HOEPA) B. Homeowners Protection Act (HPA) C. Home Mortgage Disclosure Act (HMDA)
D. Community Reinvestment Act (CRA) - CORRECT ANSWER A. 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 payment is known as
A. The lender must automatically cancel the PMI B. The homeowner can request cancellation of the PMI C. The PMI gets automatically cancelled after 30 days
D. The PMI gets cancelled 20 days after the request is submitted - CORRECT ANSWER B. The
homeowner can request cancellation of the PMI" "The purpose of the Fair Credit Reporting Ace (FCRA) is to: A. Reduce home insurance costs B. Ensure the accuracy of the information in the consumer reports C. Help consumer receive lower interest rates
D. Provide consumers with many finance options to choose from - CORRECT ANSWER B.
Ensure the accuracy of the information in the consumer reports" "How does Freddie Mac benefit the consumer? A. Consumers can take more than one mortgage B.Freddie Mac does not ask for PMI C. If a consumer is unable to pay the installments, they can approach Freddie Mac for time
D. By making mortgage products available to consumers - CORRECT ANSWER D. By making
mortgage products available to consumers" "A mortgage broker licensee charges a fee that exceeds the fee initially disclosed to the borrower. What MUST the mortgage broker provide the borrow provide the borrower three days prior to the signing of the closing documents? A. A copy of the borrower's rights under the Consumer Loan Act B. A redisclosure of the fee including a clear written explanation for the increase C. The details of the mortgage broker's trust account including subaccounts
D. The details of the mortgage broker;s surety bond company and the amount of the bond -
CORRECT ANSWER B. A redisclosure of the fee including a clear written explanation for the
increase" "A mortgage company displays its sign at a real estate licensee's office. Who is in violation of RESPA? A. Only the mortgage company is B. Only the real estate licensee C. Both
D. Neither - CORRECT ANSWER D. Neither"
"In whose name is a loan closed that is "table-funded" A. Loan originator B. Independent contractor C. Mortgage broker licensee
D. Designated mortgage lender - CORRECT ANSWER D. Designated mortgage lender"
"Under the Fair Credit Reporting Act, who is responsible for ensuring that the reporting of consumer's credit standing and reputation protects the consumer's rights and privacy? A. Mortgage broker B. Consumer credit counseling agencies C. Credit reporting agencies
D. Board of Governors of the Federal Reserve Systems - CORRECT ANSWER C. Credit reporting
agencies" "TILA is designed to protect consumers in: A. property offers B. credit card transactions C. real estate practices
D. property evaluations - CORRECT ANSWER B. credit card transactions"
"What is the purpose of a Subordination Clause found in a mortgage of deed of trust that is a junior lien? A. Provides a mechanism where the current 1st lien can be refinanced B. Allows real estate taxes to become a junior lien C. Does not allow the 1st lien to be assumed by a new buyer D. Allows the 2nd lien lender to drop back into a subordinate position if the borrower refinances
the senior lien - CORRECT ANSWER D. Allows the 2nd lien lender to drop back into a
subordinate position if the borrower refinances the senior lien" "What is the minimum amount of a home's appraised value required as a down payment to avoid taking PMI?
A. The reaction to learning the payment amount of the loan one is considering B. The difference between the proposed loan's P&I and PITI payments C. The difference between the borrower's current housing expense and the proposed housing expense through the loan they;re considering D. The difference between the borrower's current back-end-ratio and the back-end-ratio they'd
endure if they pursued the loan they're considering - CORRECT ANSWER C. The difference
between the borrower's current housing expense and the proposed housing expense through the loan they;re considering Payment shock concerns itself with the borrower's current housing expense and their proposed housing expense. If an individual's housing expense increases significantly beyond what they're currently paying, they might ultimately experience difficulty making their payments." "Which of the following was one purpose of the HERA? a. Pursuing and prosecuting terrorists B. Establishing the NMLSR C. Improving the stock market
D. Giving Wall Street greater autonomy - CORRECT ANSWER B. Establishing the NMLSR
Title Five of the Housing and Economic Recovery Act establishes the SAFE Act. One of the components of SAFE is to establish the Nationwide Mortgage Licensing System and Registry (NMLSR), a national system for regulating and monitoring mortgage professionals." "All of the following are true of FHA fixed-rate loans except: A. They're available in 15- and 30- year terms B. They require upfront MIP on all loans C. Borrower must make at least a 3.5% investment
D. The borrower is only required to carry MIP until the load's LTV reaches 78% - CORRECT
ANSWER D. The borrower is only required to carry MIP until the load's LTV reaches 78%"
"A state licensing agency is conducting an examination of a company's loan origination activities. In doing so, it may do all of the following, except: A. Require the company to compile reports related to their mortgage loan transactions B. Subponea books and records C. Close the company down for the period of the examinationn
D. Control access to the company's books and records - CORRECT ANSWER "
"At what LTV is a mortgage servicer required to remove PMI on a "high-risk" loan, assuming the borrower's loan is current? A. 22% B. 80% C. 78%
D. 77% - CORRECT ANSWER D. 77%
The HPA requires mortgage servicers to automatically remove PMI on any loan designated as "high-risk" once the loan's LTV reaches 77% and assuming that the borrower's loan is current." "What are discount points or points? A. They are a fee paid by the bank to the government for guaranteeing the loan against default. B. They are a fee paid by the lender to the seller to help reduce closing costs. C. They are a fee paid by the borrower to the lender to reduce the interest rate on the loan
D. They are a fee paid by the seller to the borrower to cover the down payment on the home. -
CORRECT ANSWER C. They are a fee paid by the borrower to the lender to reduce the interest
rate on the loan A discount point is in the US, one-time fee paid by a home buyer (usually at the time a home mortgage loan is advanced) to compensate the lender for the difference between the market interest rate and the lower rate applicable to home buyers. One discount point is equal to one percent of the principal, and number of discount points charged on the loans varies with the market. Amount paid as discount points is tax deductible, either in installments over the loan period or as a lump sum." "The recording of an instrument gives: A. Documented notice B. Constructive notice C. Legal notice
D. Actual notice - CORRECT ANSWER B. Constructive notice
Constructive Notice attaches once a document is recorded. Once recorded, subsequent buyers will be deemed to have received "Constructive Notice" regarding the document and its effect on the property in question. This could also be taken by taken possession. Actual Notice is when an individual has first-hand knowledge of something. [For example, if a buyer has knowledge that someone has taken possession of the property that is for sale.]"
C. leasehold estates
D. life estates - CORRECT ANSWER D. life estates
The distinctive characteristic of the freehold estate is that they endure for an interminable duration." "When must the Servicing Disclosure Statement be provided to the borrower? A. Within 3 days of the application B. Within 3 days after signing C. Within 7 days after signing
D. At time of closing - CORRECT ANSWER A. Within 3 days of the application"
"What law deals with credit, APR, and advertising of consumer loans? - CORRECT ANSWER
TILA"
"What regulation prohibits kickback? - CORRECT ANSWER RESPA"
"Which regulations requires the lender to cancel PMI when the loan reaches 78% LTV? -
CORRECT ANSWER Homeowners Protection Act"
"Which regulation prohibits fee splitting? - CORRECT ANSWER RESPA"
"What is the provision in a mortgage enabling a lending to demand full repayment if the borrower
DEFAULTS on the loan? - CORRECT ANSWER acceleration clause"
"What is the provision in a mortgage enabling a lending to demand full repayment if the borrower
transfer on the loan? - CORRECT ANSWER alienation clause"
"What law gives you the right to dispute information on your credit report? - CORRECT
ANSWER FCRA
fair credit reporting act REGULATION V"
"What are the 3 credit reporting agencies? - CORRECT ANSWER Equifax, Experian,
TransUnion"
"What are the 3 laws under the Gramm Leach Bliley Act? - CORRECT ANSWER 1) Safeguarding-
policy stating how credit card institution must keep our credit card info safe
- Pretexting- policy to keep others from getting access to our information under false pretenses i.e: security questions
- Financial Privacy- policy that governs the collection of nonpublic information and how its shared with affiliates" "A borrower who is paid $14.50 per hour and works 30 hours per week, received _________ per month? A. $2, B. $1, C. $1,
D. $2,550 - CORRECT ANSWER B. $1,
($14,50 x 30 x 52)/ 12= 1885" "A borrower who receives a biweekly fixed salary of $1000 received a monthly income amount of ___________? A. $ B. $ C. $
D. $2166.67 - CORRECT ANSWER D. $2166.
"Conventional loan front and back end ratio????? - CORRECT ANSWER Top: 28%
Bottom: 36%"
"FHA loan front an back end ratio????? - CORRECT ANSWER Top: 31%
Bottom: 43%"
"VA loan front and back end ratio????? - CORRECT ANSWER Top: N/A
Bottom: 41%"
"USDA loan front and back end ratio???? - CORRECT ANSWER Top: 29%
"What is the specific distinction between state-licensed and registered loan originators? -
CORRECT ANSWER Unlike state-licensed loan originators, registered loan originators are
exempt from licensing requirements" "For an FHA loan that requires MIP, the annual mortgage insurance premium (payable monthly as
part of the mortgage payment), is based on all of the following, except: - CORRECT ANSWER
State in which the subject property is located" "Which of the following issues is not addressed in the standard deed of trust and note for an
owner-occupied primary resideno - CORRECT ANSWER D. Actual amounts for taxes and
insurance" "In an FHA loan, which of the following is true regarding the upfront mortgage insurance
premium (UFMIP)? - CORRECT ANSWER A portion of it may be applied to the UFMIP of
another FHA-insured mortgage" "Which of the following does not control the discount that may be charged on permanent
buydowns? - CORRECT ANSWER Federal Reserve"
"30 days 90 days 45 days 60 days - CORRECT ANSWER 60 days"
"All of the following types of income are not taxed and therefore can be "grossed-up," except: -
CORRECT ANSWER Alimony"
"A licensee subject to an investigation or examination may not engage in any of the following,
except: - CORRECT ANSWER Providing computer records"
"How many total hours of ethics are required, at minimum, for continuing education? -
CORRECT ANSWER Two"
"What action must a creditor take if it is discovered that the APR is outside of the range of
tolerance? - CORRECT ANSWER Provide disclosure of the corrected discrepancy and wait
three business days before closing"
"Direct RHS loans may have terms of years. - CORRECT ANSWER 33 or 38"
"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? - CORRECT
ANSWER Consult a tax adviser regarding deductibility of interest"
""UFMIP" stands for: - CORRECT ANSWER Upfront Mortgage Insurance Premium"
"Which of the following correctly describes entities that have obligations under the Fair Credit
Reporting Act? - CORRECT ANSWER CRAS, furnishers of information to CRAS, and users of
consumer reports" "What is a method of transferring property to a new owner who takes over an outstanding
mortgage debt, along with the liability of repayment, without incurring a change in terms? -
CORRECT ANSWER Assumption"
"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 an time without closing the line, this is an example of: -
CORRECT ANSWER Revolving debt"
"Which of the following is true of a loan that allows for negative amortization? - CORRECT
ANSWER The payments are not sufficient enough to cover the interest due, so the principal
balance increases" "Upon meeting all the requirements and being approved by her state for licensing as a mortgage loan originator, Kelly Greene was assigned a number that permanently identifies her as a loan
originator. This number is her: - CORRECT ANSWER Unique identifier"
"Semi monthly payments is how many weeks in a year - CORRECT ANSWER 24"
"Bi weekly payments is how many weeks in a year - CORRECT ANSWER 26"
"HOEPA is federal legislation enacted by Congress through amendments to: - CORRECT
ANSWER TILA"
"Which law restricts the sharing of nonpublic personal information given when a consumer
applies for a mortgage loan? - CORRECT ANSWER Gramm-Leach-Bliley Act"
