Download NMLS Practice Questions with Correct Answers: Mortgage Lending Fundamentals and more Exams Forensics in PDF only on Docsity!
NMLS PRACTICE QUESTIONS WITH CORRECT ANSWERS
"at closing a borrower may deposit funds to establish reserves for which of the following? -
CORRECT ANSWER TAXES AND INSURANCE"
"in a qualification of an applicant who receives child support and alimony - CORRECT ANSWER
CHILD SUPPORT INCOME CAN BE GROSSED UP"
"a homeowner had a home worth 200k. he has an outstanding loan of 165k and a HELOC with a
limit of 30k which he has drawn 12k. Which of the following is not true? - CORRECT ANSWER
His TLTV is 94% you must calculate LTV, CLTV, and TLTV TLTV is higher than CLTV and LTV" "test mortgage transferred servicing rights of some of its mortgage loans to answer mortgage, Lender must send a servicing transfer statement to the affected borrowers how many days
before the effective date of transfer? - CORRECT ANSWER 15 days before the effective date of
transfer a Lender must send the servicing transfer statement to the affected borrowers"
"The lowest payment option for an option ARM is - CORRECT ANSWER minumum payment"
"Fannie Mae requires occupancy with in - CORRECT ANSWER 60 days"
"The purpose of a Market Conditions Addendum is to - CORRECT ANSWER Provide the Lender
with a clear understanding of the market trends and conditions in a subject neighborhood"
"The ECOA prevents discvrimination against which of the following? - CORRECT ANSWER
DISABILITIES"
"a copy of the appraisal is provided - CORRECT ANSWER at close of escrow"
"the risk that an agent may not have his clients best interest at heart is called - CORRECT
ANSWER Principal-Agent risk"
"the federal regulation that implements the Real Estate Settlement Procedures Act (RESPA) is -
CORRECT ANSWER Regulation X"
"a loan applicnats employment is usually verified by a - CORRECT ANSWER VEO
(VERIFICATION OF EMPLOYMENT)"
"The UNIFORM RESIDENTIAL LOAN APPLICATION (1003) includes a section reqiesting information
for government monitoring. applicants must complete this section - CORRECT ANSWER ONLY
IF THEY WISH"
"interest onlu has what feature? - CORRECT ANSWER can be paid off faster than fully
amortized"
"Right to Rescind is not valid on which of the following - CORRECT ANSWER Commercial
Purchase"
"the HUD-1 Settlement Statement includes all of the following Except - CORRECT ANSWER
housing expense ratio"
"what is the best description for a 360/180 loan? - CORRECT ANSWER Ballon loan"
"an applicant for a real estate loan can not be asked about his - CORRECT ANSWER RELIGION"
"RESPA does not require lender disclosures of closing costs and procedures for which of the
following loans? - CORRECT ANSWER CONSTRUSCTION LOANS"
"A lender is obligated to provide a borrower with a HUD-1 Settlement Statement how many days
prior to closing? - CORRECT ANSWER 1day"
"which of the following is true regarding prepayment penalties in todays mortgage market? -
CORRECT ANSWER the are almost always used in predatory loans"
"when is the appraisal disclosure required to be delivered - CORRECT ANSWER when
complete application is taken"
"service release premium represents - CORRECT ANSWER the profits a bank makes when
selling the servicing rights to a loan"
"which of the following need not to be given to a consumer who applies for an ARM loan? -
CORRECT ANSWER the interest rate upon the first adjustment"
"SSPL should be prepared based on?
(SSPL= SETTLEMENT SERVICE PROVIDER LIST) - CORRECT ANSWER Final itemized costs"
"Who is the entity that administers RESPA? - CORRECT ANSWER Department of Housing"
"what is Fannie Mae (before market changes and government intervention) - CORRECT
ANSWER Government supervised but privately owned"
"the type pf loan that does not require ant verification of assets or income or periodic repayment
is a - CORRECT ANSWER Reverse Mortgage"
"which of the following statements regarding title insurance is true? - CORRECT ANSWER a
borrower is required be the lender to pay fro the lenders title insurance"
"If a lender discovers that fire policy is not in effect, what can happen? - CORRECT ANSWER
forced place insurance"
"an appraisal is - CORRECT ANSWER an opinion of value"
"which of the following is true of the COFI - CORRECT ANSWER it is the slow moving COST OF
FUNDS INDEX"
"a credit report will always display which of the following? - CORRECT ANSWER name and
social security number"
"what is a convertible ARM? it allows the borrower to do what? - CORRECT ANSWER change
from an adjustable rate to a fixed rate mortgage" "how can one calculate the number of years it will take to recover the costs of refinancing a loan?
- CORRECT ANSWER total costs/ monthly savings bc of refinance/ 12"
"the truth in lending form provides - CORRECT ANSWER borrowers with an idea of the total
closing costs and finance charges" "R si a licensed mortgage broker, He wants to call former clients for referrals. He can contact
them even if on the federal do not call list for up to - CORRECT ANSWER 18 months"
"Inclusion of the premium for single-premium credit life insurance in the principal loan amount
with out the borrowers informed consent is one example of - CORRECT ANSWER Packing"
"when a federally related or insured lender learns that a property is in a flood zone, it mist -
CORRECT ANSWER INFORM THE BORROWER"
"A consumer had the right to inspect his HUD-1 Settlement Statemtn how many days prior to
closing? - CORRECT ANSWER 1 day"
"Purpose of RESPA is - CORRECT ANSWER Regulate closing process"
"if the loan amounts, maturity dates and interrst reats are the same for loans A and B, but loan A
is a straight (interest only) loan and loan B is fully amortized - CORRECT ANSWER Loan B will
have higher periodic payments"
"borrower right to receive appraisal with in - CORRECT ANSWER 30 DAYS"
"what methods are not allowed to deliver the privacy policy? - CORRECT ANSWER Poster in
odd location"
"who orders table funding "when closing in their own name" - CORRECT ANSWER brokers/
third parties"
"what agency is TILA regulated by? - CORRECT ANSWER HUD"
"PMI AND MIP are intended to cover whose risks - CORRECT ANSWER the Lenders"
"RESPA is adminstered by - CORRECT ANSWER HUD"
"which of the following will ne requiered one all FHA loans? - CORRECT ANSWER MIP"
"the risk of an originating entity being unable to sell a closed loan in the secondary market and
having to retain it in their portfolio is caleld - CORRECT ANSWER liquidity"
"you are ineligible for a motgage loan originator license if you have been convicted of any felonies
with in the past - CORRECT ANSWER 7 years"
"form 92564-CN is required on all FHA loans and must be provided to the borrower - CORRECT
ANSWER at frist contact with theapplicant"
"when do you NOT need to be licensed as a MLO? - CORRECT ANSWER when you negotiate
loans for immiediate family" "According to the Dood-Frank Act how much risk (expressed as a % of the principal balance) must be retained by the securitiser for a loan that is not federally insured or guaranteed and does not
meet QRM guidelines? - CORRECT ANSWER 5%"
"all identity theft crimes will fall into two categories what are they? - CORRECT ANSWER
account takeover and application fraud"
"federal or state banks: - CORRECT ANSWER can make mortgage loans with out licenses"
"which of the following doesn not apply to a borrower who is paid 1700$ on a bi-weekly basis? -
CORRECT ANSWER They will be paid 24 times per year"
"independent contractors who act as loan processors or underwriters - CORRECT ANSWER
must be licensed as MLO" "which of the folowing would one least commonly expect to find in conjunction with fraud for
property? - CORRECT ANSWER An inflated Appraisal"
"the practice of denying real estate loan applications in certain neighborhoods/ geographic areas
is called - CORRECT ANSWER redlining"
"at what equity position will PMI automatically terminate for a company loan assuming the
borrower has made all payments in a timely manner? - CORRECT ANSWER 22%"
"all of the following are secondary market participants Except - CORRECT ANSWER penny
Mac"
"what is the maximum late charge on an FHA insured loan? - CORRECT ANSWER 4% of the
principal and interest overdue"
"what is discount points? - CORRECT ANSWER a discount point is in the US one time fee paid
by the homebuyer ( 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.)"
"which is not the name of a major credit reporting agency? - CORRECT ANSWER Lexis"
"a mortgage company makes a number of loans to be asssmebled into one package and sold to permanent investors. this process is an example of interim financing to the motgage company
and is called: - CORRECT ANSWER Warehousing
referst to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market"
"the recording of an instrument gives - CORRECT ANSWER constructive notice
(attatches once a document is recorded, once recorder subsequent buyers will be deemed to have received constructive notice regarding the document and its effect on the property)"
"the primary purpose of the Truth in Lending is to - CORRECT ANSWER disclose the true costs
of obtaining credit TIL or REG Z is intended to do away with deceptive financing tactics especially those involving hidden costs." "the risk of a mortgaged property failing to offer sufficient value in the event of borrower default
is known as - CORRECT ANSWER Collateral Risk"
"a registered loan originator who acts on behalf of a depositing institution - CORRECT
ANSWER does not need a mortgage loan originator license"
"FHA's minimum loan limits - CORRECT ANSWER DOES NOT EXISTS"
"which of the transactions listed below would not be covered by the 3 day right to rescission
under TILA? - CORRECT ANSWER a purchase of a primary residence with a 5/1 hybrid ARM"
"a owner refuses to sell be clarence is "too old" which federal law has the seller violated? -
CORRECT ANSWER Equal Credit Opportunity Act (ECOA)"
"george is buying a house and the seller has agrred to pay 3% of the closing costs he would liek to use title xyz to provide his title insurance. the seller insists he use abc title or they will not close
the transaction. this is a violation of - CORRECT ANSWER Section 9 of the REAL ESTATE
SETTLEMENT PROCEDURES ACT"
"a loan originator asks a borrower"you're not planning on having any more children are you? "
which federal law prohibits discrimination has the LO just violated? - CORRECT ANSWER
ECOA"
"a borrower has completed an application and has been provided with their initial disclosures
including a Loan estimate. How long is the LO bound after providing the LE to the borrower? -
CORRECT ANSWER 10 business days"
"which of the characteristics below would not be considered a nontraditional loan? - CORRECT
ANSWER 30 year fixed rate"
"which statement is true regarding the effect a buydown plan can have on a borrowers
payments? - CORRECT ANSWER the borrower starts out with a lower interest rate and
payment during the first few years." "according to TILA, if the APR varies by more than what tolerance must it be redisclosed to the
borrower - CORRECT ANSWER 1/8 of 1% or 0.125%"
"MNOP Mort has ownership interest in QRS title and WXY Real Estate. in order to be provided with Safe Harbor protection, which disclosure would they need to provide to the borrower if they
refer to either of these? - CORRECT ANSWER AFFILIATED BUSINESS ARRANGEMENT
DISCLOSURE"
"how long after closing on the purchase of a home does the borrower have to move in and occupy
the home when they use an FHA mort to finance the purchase - CORRECT ANSWER 60 days"
"which of the following mortgages do not require the borrower to make monthly payments after
closing? - CORRECT ANSWER A Home Equity Conversion Mortgage"
"In the processing of a loan application a lenders credit scoring system helps to evaluate -
CORRECT ANSWER the applicants credit worthiness"
"all of the following are included in an ECOA adverse action notice Except - CORRECT ANSWER
names/ contact # for consume credit counceling"
"In individual lawsuit , a violator of ECOA is subject to a punitive damages of up to - CORRECT
ANSWER 10,000$"
"the agency that drafts and interprets the regulations implementing ECOA is - CORRECT
ANSWER THE CONSUMER FINANCIAL PROTECTION BUREAU"
"the Fair Credit Reporting Act provides all of the following courses of action fro an identity theft
victim who has submitted a valid police report to a consumer reporting agency Except -
CORRECT ANSWER requiring the consumer reportign agency to assist in locating the thief"
"in order to prevent identity theft, a consumer is entitle to a free credit report - CORRECT
ANSWER every 12 months/ annually"
"the Fair Credit Reporting Act defines companies that gather and evaluate consumer credit
records as - CORRECT ANSWER Consumer Reporting Agencies"
"the purpose of the Fair Credit Reporting Act is to - CORRECT ANSWER ensure the accuracy of
information in consumer reports" "who is responsible for ensuring that reporting of a consumers credit standing and reputation
protects his rights to privacy? - CORRECT ANSWER consumer reporting agency"
"ECOA requires that a creditor retain a loan application from for how many months? - CORRECT
ANSWER 25 months"
"before origination a lolan, a MLO must make a reasonable inquiry concernung all of the folowing
aspects related to the borrower Except - CORRECT ANSWER Marital and familial status"
"before attempting to take a complete loan application the mort broker has a responsibility to do
all of the following Except - CORRECT ANSWER an investigation"
"the number one ethical problem cited in surveys of professionals and managers is - CORRECT
ANSWER flase or misleading representation of products or services in marketing, advertising or
sales."
"a LO primary consideration in regard to refinancing a loan for a borrower should be - CORRECT
ANSWER a calculation of the cost effectiveness of the refinancing for the borrower"
"in respect to money laundering techniques " Layering" is - CORRECT ANSWER the process of
separating the criminal proceeds from their criminal origina using financial transactions in one or more accounts"
""Placement" is - CORRECT ANSWER the process of introducing unlawful proceeds into the
financial system"
"which of the following is required to be reported by the BSA - CORRECT ANSWER
transactions exceeding 10,000$"
""Integration" is - CORRECT ANSWER depositing cahs and then using that cahs to purchase
real estate folowed by using that real estate as collateral on a loan which is paid back with large cash payments"
"when must a Currency Transaction Report be filed? - CORRECT ANSWER 15 days folowing the
day on which the reportable transaction occured" "financial insittutions are prohibite from establishing maintaining administering or managing a
correspondent account in the United States for or on behalf of - CORRECT ANSWER Foreign
Shell Banks"
"Under the Bank Secrecy Act, a financial institution must file a suspicious activity report (SAR)
upon the detection of criminal violations that involve insider abuse - CORRECT ANSWER in any
amount" "What is required when a bank suspects that a 7000$ transaction is not typical for a particular
customer? - CORRECT ANSWER SAR"
"Mike B invents borrowers and properties establish fake accounts fro payments and maintain custodial accounts for escrow. He has even set upi an office with bank of telephnes to represent the employer, the appraiser, and credit agency. the loans Mike is getting to go on vacation are
called - CORRECT ANSWER Air loans"
"a person who purchases property on behalf of someone else under their name is - CORRECT
ANSWER a straw buyer"
"broker facilitated loans - CORRECT ANSWER are loans that the broker helps create and falsify
information for" "Sue Jones is a mort broker assiting a past client dealing with the clients lender on a short saletransaction, she has asked her client to pay an advance fee of 550$ to cover her time and
costs in providing these mort relief resvices - CORRECT ANSWER It is prohibited for SUe to
collevt any advance fee"
"What does MARS stand fro? - CORRECT ANSWER Mortgage Assistance Relief Services"
"the advance fee ban mean that a mort assistance relief services provider may not charge a fee
until - CORRECT ANSWER the consumer receives and accepts a written offer from his lender"
"all mort assistance relief services companies are required to provide consumers with certain
disclosures among those is a disclosure - CORRECT ANSWER that the lender may not agree to
any modification of the consumer loan"
"The MARS Rule was issued in 2010 by - CORRECT ANSWER THe Federal Trade Commission"
"THe MARS rule applies to mort assistance relief services providers when they - CORRECT
ANSWER promote services that will help homeowners avoid foreclosure"
"If an ARM has a 1% annual rate cap, the borrowers interest rate - CORRECT ANSWER can not
increase by more than 1% per year" "H has an adjustable rate loan with a payment cap that allows him to pay less than the amount
needed to pay al of the interest being charged on the loan. The term to describe this is -
CORRECT ANSWER Negative Amortization"
"The interest rate for an ARM will change periodically based on - CORRECT ANSWER ITs INdex
Rate is tied to" "the term "margin" is used frequently when describing terms for an adjustable rate loan the
margin is - CORRECT ANSWER the amount the lender adds to a selected index rate"
"the typical pattern of payments on an interest only payment plan is - CORRECT ANSWER
smaller payments, then larger oayments"
"An FHA 5/1 ARM loan is - CORRECT ANSWER a nontraditional loan"
"a low introductory rate on an adjustable rate mort is called - CORRECT ANSWER a Leaser
Rate" "If the initial rate for an ARM is 5%, the index rate is 4% and the margin is 2% which of the
folowing is true? - CORRECT ANSWER the fully indexed rate is 6% the Fully indexed rate on an
ARM is determined by adding the index rate and the margin"
"providers may claim that interest rates or payment obligations for nontraditional products are -
CORRECT ANSWER subject to changes that may result in a decrease or increase"
"producers should alert consumers to the risks of nontraditional mort products - CORRECT
ANSWER before the consumer pays a nonrefundable fee at the time an application is provided"
"the guidelines on nontraditional mort Product Risks advise that consimers be made aware of all
of the following with regard to risks relating to nontraditional products Except - CORRECT
ANSWER Subordination guidances advice payment shock prepayment penalties and
responsibility fro taxes and insurances"
"when advertising nontraditional mortgages on the radio, tv, or billboards - CORRECT
ANSWER providers should include clear and balanced information about the risks of these
products" "the Federal Financial Institution Regulatory Agencies issued a Statement on Subprime Mortgage
Lending out of concern that - CORRECT ANSWER Many borrowers failed to understand the
risks of such loans" "The quality control function of a provider offering nontraditional bans shouold regularly review
CORRECT ANSWER a representative true sample of underwriters to confrim that policies are
being followed a sample of nontraditional mort loans from all origination channels"
"a type of loan documentation that owuld provide the lowest interest rates to a consumer is -
CORRECT ANSWER full documentation"
"in designing control systems for monitoring practices in regard to nontraditional loan products,
providers need to address all of the following factors Except - CORRECT ANSWER Short-term
profit"
"the CSBS-AARMR guidance on nontraditional mortgage products risks does not apply to -
CORRECT ANSWER reverse mortgage"
"the Federal FInancial Institution Regulatory Agencies include all of the following Except -
CORRECT ANSWER the American Association of Residential Mortgage Regulators"
"Under the provisions of the Dodd-Frank Act - CORRECT ANSWER a borrower must be
qualified for a mortgage loan based on the substantially equal monthly payments, calculated at the fully indexed rate of the loan, which fully amortized the loan by the end of its term"
"Under SAFE Act a LO is - CORRECT ANSWER an individual who takes residential mortgage
loan applications"
"SAFE ACT requirements apply to loans to purchase - CORRECT ANSWER mobile homes to be
used as residences, even if they are not attatched to the land- SAFE Act applies to Mortgage Residentials" "with in the 20 hours of prelicensing ed required for a LO license or registration are a minimum of
- CORRECT ANSWER 3 hours of federal law"
"a Loan oroginator creates a marketing plan to make between 2-4k per loan. He agrees to do the
300k loan for his cousin for a 0.75% commission and 400$ processing fee. this transaction is -
CORRECT ANSWER legal and Ethical because he is with in his marketing plan"
"it is ok to discriminate on age when? - CORRECT ANSWER NEVER"
"Truth in Lending provides for a right to rescind certain loans secured by a principal residence.
The rescission period is - CORRECT ANSWER 3 business days"
"a mortgage broker refers a loan to another broker, CAN the referring broker receive anf
compensation? - CORRECT ANSWER It is Ok to get referral fee if the fee comes from the
borrowers cahs to close and is presented on the HUD" "what percentage variance on a Fannie Mae appraisal report is tolerable when dealing with
comps? - CORRECT ANSWER 20%"
"the 3 day right to rescission provided by TIl and regulation Z applies to a loan - CORRECT
ANSWER to refinance a loan from the same institution that fails to cover the unpaid balance of
the prior loan plus closing costs" "a creditor must advise a mortgage loan applicant of the status of his application with in how
many days of receipt? - CORRECT ANSWER 30 days"
"when a telemarketer calls a person on the "do not call" registry in violation of the no not call
regulations he is subject to a fine of - CORRECT ANSWER 16,000$"
"a 2/1 buydown - CORRECT ANSWER reduces the interest rate by 2% the first year and 1% the
second year, until it reaches its original principal interest for example 1st year=4.5% 2nd =5.5% 3rd= 6.5% 4th= 6.5% and so on"
"RESPA requires that a borrrower be given which document at closing? - CORRECT ANSWER
HUD-1 Settlement Statement"
"All of the following are considered dwellings under the Home Mortgage Disclosure Act EXCEPT -
CORRECT ANSWER A recreational travel trailer"
"a home is appraised at 100k the borrower currently has a loan of 50k and an open end line of
credit with a limit of 25k and a current balance of 15.5k what is his LTV - CORRECT ANSWER
"A woman may be denied credit on the basis of any of the following EXCEPT - CORRECT
ANSWER Her current pregnancy is an indication that she may stop working"
"the Homeowners Protection Act (HPA) of 98 provides that a borrower with a good payment history has the right to request in writing the cancellation of private mortgage insurance when he
pays down his mortgage to the point that - CORRECT ANSWER it equals 80% of the original
purchase price or the appraised value of the home" "Included in the servicing of a mortgage loan are the collection and or remittance of payments
that include interest, principal and escrow items fro the - CORRECT ANSWER mortgagee,
mortgagor, and lender"
"a 3/1 ARM is? - CORRECT ANSWER a fixed period adjustable mortgage rate loan in which the
rate is fixed for the frist 3 years and then adjusted every year consequently to those."
"which of the following is true of an FHA borrower? - CORRECT ANSWER unless net rental
income can be verified from tax returns, 75% nof gross rental income is counted as qualifying income" "under the Gramm-Leach-Bliley Act a person is considered a consumer of a financial institution
when the person - CORRECT ANSWER obtains credit from the financial institution for personal
reasons" "how to find penamty in dollar amount from a 125k house and a loan of 100k, when loan balance
is at 75k with a 1.5% penalty - CORRECT ANSWER original loan amount * penalty percentage
charge= dollar amount of penalty charge" "over which of the following laws does the Consumer Financial Protection Bureau have no
enforcement and rulemaking authority? - CORRECT ANSWER Fair HOusing Act"
"when evaluating an applicant or a MLO license, how will the state licensing body judge the
persons ability to be fair, honest, and efficient? - CORRECT ANSWER By looking to the person
as a whole and how the person has been financially responsible throughout time" "the requirement for finacial institutions to provide a written privacy policy is found in which
federal law? - CORRECT ANSWER Gramm-Leach Bliley Act"
"a borrower is purchasing a home with a first motgage loan in the amount of 123,675 at 75% LTV
what was the purchase price in this transaction? - CORRECT ANSWER 164,900 123,900/x=
"the borrower is in the 47th month of a 5/1 conforming ARM loan with a margin of 2.5% an index
value of 4.25% rate cap 5/2/5 and a start rate of 4.5% What interest rate is in effect? - CORRECT
ANSWER 4.50% because it is in the 47th month of a 60 month conforming ARM so it is still in the
start rate"
