Nationwide Mortgage Licensing System and Registry (NMLS) 20 Hour SAFE Act Practice Test

These questions are part of the practice quiz. Start practicing

• ARMs were designed to transfer which type of risk?
• What is the record retention requirement outlined by LE in terms of years?
• When does loan consummation typically occur?
• In which scenario is a loan originator not required to have a license?
• What may be a consequence of exceeding the 10% tolerance threshold on a Closing Disclosure?
• Which item is NOT included in the calculation that determines the annual percentage rate?
• Which loan is less common and typically has fluctuating payments throughout the loan period?
• As of April 1, if a mortgage loan has a balance of $419,275 and a fixed payment of $2,413.68, what would be the loan balance as of May 1?
• What does the MARS rule prohibit mortgage relief companies from doing?
• Under which legislation does a consumer have the right to receive a copy of the appraisal report for a dwelling used as loan collateral?
• If an adjustable-rate mortgage is described as a 5/2/6 loan, what does the first number indicate?
• Which mortgage type typically has lower initial payments but may result in higher payments later?
• What is a straight note?
• According to the Fair Credit Reporting Act, what is the maximum reporting time for information on a credit report except for which of the following?
• Which term describes lenders who primarily make loans through intermediaries?
• What is the total maximum fine that can be incurred for illegally calling a number on the National Do Not Call Registry?
• A primary market is defined as the market where what occurs?
• Who is primarily responsible for oversight of the National Mortgage Licensing System?
• In an FHA loan, what percentage of the purchase price can the seller contribute to the buyer's down payment?
• Who must sign the FHA Informed Consumer Choice Disclosure?
• A loan amortized over 30 years but due and payable in five years is known as what?
• Which feature is NOT included in the Dodd-Frank Act’s definition of a qualified mortgage?
• Which advertisement would trigger the disclosure of all finance charges and the true APR under Regulation Z?
• Which loan type is specifically designed to assist senior citizens with converting home equity into cash?
• What type of loan may include a yield spread premium as part of its structure?
• What does it mean to "recast" an adjustable rate mortgage?
• For how many years prior to the date of appraisal must appraisers report and consider any prior sales of the subject property?
• What is an important feature of an owner's policy of title insurance?
• What must be done if an event post-consummation makes the closing disclosure inaccurate?
• Which type of loan would NOT be classified as a higher-priced loan?
• Which of the following terms refers to a mortgage that combines multiple properties under a single loan?
• What is a key consideration under the Mortgage Loan Originator Compensation Rule?
• Which statement about an FHA reverse mortgage is NOT true?
• Which of the following statements about loan originators is TRUE?
• What is the primary difference between a Graduated Payment Mortgage and a Growth Equity Mortgage?
• What federal law is violated if a loan originator carelessly leaves a customer’s sensitive information unattended?
• Which act requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application?
• Payment plans for Private Mortgage Insurance generally include all of the following, EXCEPT:
• A loan cannot be considered a qualified mortgage if what percentage of points and fees exceeds 3%?
• What does REO stand for in real estate terminology?
• What does the Federal Reserve Loan Originator Compensation Rule prohibit?
• What is the amount of prepaid interest charged at closing for a loan of $255,000 at an interest rate of 5.75% closing on July 7th?
• Which term describes a charge that is a debit in the Closing Disclosure?
• If the Federal Reserve were to buy government securities, what is likely to happen to the money supply?
• What document is primarily used to certify that the information in a loan application is true and complete?
• If an interest rate is at 6.00% and it increases by 5 basis points, what would be the new rate?
• Which agency monitors compliance with the Equal Credit Opportunity Act (ECOA)?
• A mortgage lender that accepts deposits and makes loans would be classified as which type?
• When is an adjustable rate mortgage recalculated?
• Which loan type is often used when the borrower is expected to make no payments until they sell or refinance?
• What can loan origination fees be expressed as?
• What is the full name of Fannie Mae?
• The National Mortgage Licensing System (NMLS) operates under which act?
• Which of the following cannot be required by a creditor when a borrower requests cancellation of private mortgage insurance at 80% LTV?
• What is the primary function of a Real Estate Investment Trust (REIT)?
• What does the Privacy Rule of the Gramm-Leach-Bliley Act require financial institutions to provide to borrowers?
• When is an OPTION ARM typically recast?
• Which data is NOT collected for HMDA monitoring?
• Which law focuses on preventing discrimination in mortgage lending?
• What does the ECOA state regarding the content of an adverse action notice?
• Regulation V is also known as what?
• Which mortgage type is structured like a 30-year conventional loan but has regularly increasing payments?
• Which federal law allows borrowers the right to cancel Private Mortgage Insurance premiums?
• What is the significance of the uniform state content section added to the National SAFE MLO Test?
• Which of the following is not a requirement for a loan under Section 32 of HOEPA?
• What is the debt limit on a reverse mortgage?
• In terms of a loan's interest rates, which of the following would not be included in the origination costs?
• For a junior mortgage to be considered a higher-priced loan, what must the APR exceed?
• What information is a mortgage loan originator NOT allowed to ask a borrower who is applying for a home mortgage?
• What is the maximum contribution a seller can make towards a buyer's closing costs on an FHA loan?
• Under the Fair Housing Act, what is illegal for lenders to discriminate against?
• What is the required percentage increase in home value that necessitates a second appraisal within six months?
• Which type of mortgage lender acts as both a retail lender and a depository institution?
• What are lenders required to do under HMDA?
• Which federal act is associated with consumer protection in credit reporting?
• Which law mandates lenders to disclose the terms of a mortgage loan clearly and conspicuously?
• In a fully amortized loan, as each payment is made, what happens to the interest and principal portions?
• When can a mortgage broker charge a borrower for an appraisal?
• In a Closing Disclosure, how is the payoff of the existing loan classified?
• 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?
• Section 32 governs high cost/high interest loans under which federal legislation?
• What aspect of the real estate market is a Real Estate Investment Trust designed to support?
• Which statement is true regarding both home equity loans and home equity lines of credit?
• Which federal act is designed to eliminate discrimination in lending?
• What does RESPA apply to?
• When can a lender collect an origination fee?
• Under HMDA, which category is explicitly considered a prohibited basis for discrimination?
• What is another term for an alienation clause?
• Which of the following charges listed on the Loan Estimate cannot be changed?
• What is a long-term loan used to repay a construction loan called?
• How long does a company have to follow up with a customer who is on the National Do Not Call Registry after an inquiry?
• The Homeownership Equity Protection Act does not require a lender to verify a borrower's ability to repay the loan if the?
• Under RESPA, what is the maximum fine that can be imposed for each instance of a kickback?
• How long must a mortgage loan originator maintain documentation for a revised Loan Estimate?
• What is the maximum civil penalty that can be assessed by the CFPB under the SAFE Act?
• What is the purpose of a "defeasance clause" in a mortgage?
• What is the penalty for failing to comply with loan application disclosure requirements?
• What is a yield spread premium?
• Which of the following is a requirement for the closing disclosure?
• What data is a lender NOT required to record to comply with the Home Mortgage Disclosure Act (HMDA)?
• Which of the following is NOT considered part of the Loan Estimate process?
• What FHA form compares FHA loan costs to conventional loan costs?
• In a mortgage context, what does the term "5 / 2 / 6" refer to?
• How often must a lender perform an escrow account analysis to ensure no excess funds are being kept?
• Which action by the Federal Reserve would NOT likely increase the money supply?
• Which of the following Government Sponsored Entities does NOT buy mortgage loans in the secondary market?
• Which type of loan requires lenders to verify a borrower's income and creditworthiness?
• Which federal law mandates lenders to provide disclosures about private mortgage insurance?
• What is the purpose of the Truth in Lending Act (TILA)?
• In a VA loan, what is the limit on the seller's contribution towards the buyer's non-recurring closing costs?
• What is the purpose of the Home Ownership and Equity Protection Act (HOEPA)?
• What must be factored in when determining the loan amount for a property with a lower appraised value than the purchase price?
• A loan which is secured by more than one parcel of land is known as:
• Which statement about land contracts is true?
• What does the Uniform Commercial Code primarily govern?
• HOEPA does not apply to which of the following loan types?
• What is the maximum gross adjustment to any one comparable sale according to Fannie Mae and Freddie Mac guidelines?
• Which law requires lenders to submit Loan/Application Registers?
• Which of the following is NOT a protected class under the Fair Housing Act?
• What is a higher interest rate charged on a loan in exchange for lower upfront closing costs known as?
• Who is required to sign a mortgage loan application?
• Which act designates marital status as a protected class?
• What is an essential component of the loan origination process under the SAFE Act?
• Which of the following statements is FALSE regarding interest-only ARMs?
• What is the minimum credit score required to qualify for an FHA loan?
• What is a key characteristic of a Growth Equity Mortgage?
• What is the primary intent of the Fair Housing Act?
• What does the abbreviation REO indicate regarding a property?
• What is the waiting period for a person who has failed the national portion of the NMLS examination three times?
• How long must settlement charges detailed in a Loan Estimate be available?
• Which law ensures that some borrowers have the right of rescission for three business days after a loan contract is signed?
• According to CFPB guidelines, what happens if a borrower does not agree with the Loan Estimate terms?
• A partially amortized loan will typically include what type of payment structure?
• In which market does a borrower apply for a loan?
• What agency is responsible for managing the disposition of bankrupt Savings and Loans?
• What does the term "underwriting" refer to in the context of mortgage lending?
• If a veteran has sold a property and repaid a VA loan, what is the funding fee for a new VA loan application?
• What is required for a loan originator to provide a revised Loan Estimate?
• Which mortgage document obligates the borrower to repay the loan?
• The maximum length of time for negative bankruptcy reporting is set by which act?
• What is a land contract?
• Interest-only ARMs are particularly susceptible to payment shock due to which factor?
• Under Fannie Mae and Freddie Mac guidelines, what is the maximum gross adjustment allowed for any one comparable sale?
• Which of the following is a concern related to large deposits in a mortgage application?
• A loan originator must complete which of the following classes to stay compliant?
• Which law ensures lenders use an annual percentage rate (APR) so that borrowers have the information they need to make informed comparisons?
• What is the purpose of the FHA Informed Consumer Choice Disclosure?
• An applicant is likely required to provide tax returns for the past two years if income is reported from?
• According to the CFPB ruling, how long must a lender maintain an escrow account for property taxes and insurance?
• What is the minimum down payment required for obtaining Private Mortgage Insurance (PMI) on a loan?
• Which act requires lenders to disclose the cost of credit to consumers?
• To become a state licensed loan originator, how many hours of pre-licensure education are required?
• Which regulation emphasizes protecting the borrowers’ loan processing timelines?
• What does the SAFE Act aim to enhance?
• If the initial interest rate on an ARM is 4% below its fully-indexed rate, how is this rate best described?
• What is the implication of a loan being considered as high-cost under Section 32?
• What is the typical maximum tax-deductible limit on interest paid for a home equity loan?
• What type of ARM typically includes a provision that requires requalification if sold in the secondary market?
• Under which law was the Mortgage Loan Originator Compensation Rule first drafted?
• Title V of the Housing and Economic Recovery Act of 2008 is commonly known as what?
• Which of the following would be entered as a negative number on the Loan Estimate?
• What is the Secure and Fair Enforcement for Mortgage Licensing Act primarily designed to do?
• Under what law is negative amortization illegal when related to high-cost loans?
• If a borrower exercises a conversion right on an adjustable-rate mortgage (ARM), when are they most likely required to requalify for the loan?
• What is the maximum housing ratio and DTI, respectively, to qualify for a VA loan?
• For how many days must the settlement charges on a Loan Estimate be available to consumers?
• What is the 10% tolerance rule in relation to the Closing Disclosure?
• What financial arrangement is exempt from the Real Estate Settlement Procedures Act?
• What components are included in the initial monthly payment shown in the Summary of Your Loan section?
• What is FHA an acronym for in mortgage lending?
• Which act requires lenders to provide borrowers with a Good Faith Estimate?
• What concerns were Adjustable Rate Mortgages designed to address?
• In the context of mortgage lending, what does it mean for a loan to go into default?
• What type of lenders only make loans through mortgage brokers and don't deal directly with consumers?
• Which type of loan is primarily dependent on the borrower's creditworthiness and typically has higher interest rates?
• What is the significance of a yield spread premium in the context of closing costs?
• Which act was a key element in enhancing consumer protection in the mortgage industry following the 2008 financial crisis?
• What is the actual interest rate charged during the third year of a "2/2/6" ARM with a margin of 2.5%?
• What does the Loan Estimate provide to borrowers?
• Which of the following is related to appraiser evaluation processes?
• In which situation must a husband and wife both sign under the introductory paragraph of the Form 1003?
• According to the Equal Credit Opportunity Act, how many business days must a lender notify the borrower of an underwriting decision?
• In addition to the loan origination fee on the Loan Estimate, which of the following may a lender charge?
• What fundamental consumer protection is provided under federal banking laws?
• What is the record retention requirement for creditors to show compliance with the Mortgage Loan Originator Compensation Rule?
• Which item is NOT included in the computation of the Housing Ratio?
• What is a common characteristic of a reverse mortgage?
• What federal law includes Red Flag Rules?
• What rule governs advance fee collection for mortgage modification services?
• How many days does the Equal Credit Opportunity Act allow lenders to provide a reason for denial of credit?
• Which of the following is the most common type of FHA loan?
• HMDA is implemented as which regulation?
• What is the main purpose of the NMLS?
• What are the maximum Housing Ratio and Debt-to-Income Ratio for FHA loans?
• What financial document must be obtained by lenders for verification of income from certain sources?
• Why might borrowers choose an Alt-A loan over a traditional mortgage?
• When must quarterly mortgage call reports be filed?
• Which federal act established the Consumer Financial Protection Bureau (CFPB)?
• What does the phrase "cost of acquiring an equally desirable substitute property" refer to in appraisals?
• Which entity primarily ensures that lenders comply with national mortgage laws?
• Which federal regulation limits how long adverse collection information can appear in a consumer's credit report?
• What does requalifying for a loan typically involve for a borrower?
• What is the maximum allowable Housing Ratio to qualify for an FHA loan?
• In a residential appraisal, when is the highest and best use as improved likely to differ from the highest and best use as if vacant?
• What is the primary function of Ginnie Mae?
• Private mortgage insurance (PMI) is usually required on loans with loan-to-value ratios greater than what percentage?
• What is a characteristic feature of a graduated payment mortgage?
• What does MLO stand for?
• Which statement regarding jumbo loans is NOT correct?
• Which fee can a mortgage loan originator collect prior to providing the Loan Estimate and Closing Disclosure?
• What is the additional waiting period if the closing disclosure changes the APR or adds a prepayment penalty?
• A buyer makes an offer for $235,000 on a home valued at $230,000 with a 90% LTV loan. What will be the required down payment?
• A recent large deposit to an applicant's bank account raises which concern for a lender?
• How long must records be kept to comply with disclosures in general?
• What does HMDA stand for?
• Settlement services include all of the following EXCEPT:
• Which document makes the property collateral for a mortgage loan?
• A settlement agent who is not an attorney does NOT perform which of the following functions?
• What does a blanket mortgage cover?
• What act requires a Transfer of Service Disclosure?
• Which mortgage loan type is designed to experience negative amortization in the early years?
• What impact does Fannie Mae have on the primary mortgage market?
• What role does Smalltown Bank assume when it makes a loan to a homebuyer and then sells it to Bigcity Bank?
• A partial release clause is typically associated with which type of mortgage?
• What is the maximum fine for an individual who violates the SAFE Act?
• What feature is regarded as toxic under the qualified mortgage (QM) rule?
• What is required to be disclosed to the borrower under the Federal Reserve Loan Originator Compensation Rule?
• Which of the following does NOT apply to the Homeowners Protection Act?
• What term describes a deposit held by the seller's real estate broker, where commissions are deducted before forwarding the remainder?
• How long does a lender have to cure a tolerance violation?
• Which type of loan generally has higher interest rates due to a lack of documentation requirements?
• Which term describes the body that provides insurance for deposits in member banks?
• If a State Licensed LO allows their license to expire, how long do they have to renew it before retesting is required?
• HOEPA is also known as which section?
• What is the primary distinction between a mortgage banker and a mortgage broker?
• What is the interest rate called when it is 2.5% below the fully-indexed rate?
• What percentage of the total loan amount can points and fees not exceed for a qualified mortgage over $100,000?
• An application must be accompanied by which of the following when applying for a mortgage loan originator?
• What is the date issued on the closing disclosure form?
• What is the purpose of Section X on Form 1003?
• Which appraisal approach is typically most appropriate for special purpose properties?
• To comply with the FACT Act, what should a mortgage loan originator do with loan applications and documents?
• According to the Dodd-Frank Act, which type of loan is prohibited under the qualified mortgage (QM) rule?
• What is required if a second appraisal is ordered based on a claimed value increase?
• What type of mortgage is suitable for a borrower finishing graduate school with expected significant income growth?
• What type of interest is computed only on the principal balance and not on unpaid interest?
• What does HMDA stand for?
• In regards to mortgage lending, what does 'probability of income continuation' generally assess?
• What does the SAFE Act specifically define?
• Which of the following laws aims primarily to protect consumers in lending practices?
• How soon must a borrower move into a property when applying for a VA loan?
• After closing a loan, when must ABC Mortgage stop contacting Laura to solicit new business?
• When must the borrower sign the Loan Estimate according to the Real Estate Settlement Procedures Act?
• Which factor is NOT considered when determining "average charge" calculations for settlement services?
• HOEPA serves as an addendum to which regulation?
• What type of loan does Section 32 refer to?
• What change regarding FHA's Annual Mortgage Insurance Premium (MIP) occurred after June 3, 2013?
• What type of funding does a buyer with a loan originating from a conventional lending institution typically rely on?
• Which type of mortgage lender primarily raises capital through stock and securities offerings?
• Which of the following is considered the best practice for MLO compensation?
• Norma put down a 5% deposit on a $400,000 house and obtained an 80% LTV mortgage. How much must she bring to closing after considering the seller's contribution and her closing costs?
• What requirement must be fulfilled by an MLO if a borrower’s first loan is categorized as high-cost under Section 32?
• The ability to cancel Private Mortgage Insurance is conditioned upon what criteria?
• How many hours of continuing education courses must a registered loan originator complete each year?
• What is the maximum amount insured by the Federal Deposit Insurance Corporation for each depositor?
• Fannie Mae and Freddie Mac can require a mortgage lender to buy back a loan if it defaults within how many months?
• According to the FCRA, how many days do information furnishers typically have to respond to a consumer dispute?
• What legislative act requires a lender to establish additional protections for consumers facing default?
• One purpose of the Fair and Accurate Credit Transactions Act is to prevent what issue?
• How long do lenders who do not follow underwriting standards face repercussions?
• An owner's policy of title insurance would most likely be included in which type of transaction?
• Which appraisal principle is described by the phrase regarding the value of a substitute property?
• The SAFE Act is part of which broader legislation?
• What type of loan is referred to as an interim loan?
• Which type of loan is appropriate for borrowers who cannot document some or all of their income?
• If the servicing of a mortgage is transferred, how many days in advance must a lender inform the borrower?
• What is the purpose of the Mortgage Assistance Relief Services (MARS) Rule?
• Regarding the confirm receipt table on the loan estimate, which statement is true?
• What are the terms of the "cooling off" period if a loan falls under the Home Ownership and Equity Protection Act (HOEPA)?
• What is required under the Real Estate Settlement Procedures Act (RESPA)?
• What document does the applicant sign to authorize the release of credit and employment information?
• Regulation Z applies to which type of transactions?
• What do the mortgage servicing rules provided by the CFPB focus on?
• What is the maximum time frame a mortgage lender can wait after loan origination before it has to buy back a defaulted loan?
• What does the durability of income refer to in mortgage lending?
• What happens if an applicant for a mortgage license has a felony conviction?
• What is a lender called that makes mortgage loans and sells them immediately to a larger lender under a contract relationship?
• What is the primary purpose of the Gramm-Leach-Bliley Act?
• Which of the following terms pertains to a body of law governing negotiable instruments?
• Which mortgage type allows homeowners to access their equity without monthly payments?
• Which body is chiefly responsible for the U.S. monetary policy?
• Which federal legislation requires that, in cases where the borrower does NOT wish to provide information as to race or national origin, the loan originator must make a visual determination or use a surname as the basis for this determination?
• For how many years prior to the date of appraisal must appraisers report prior sales of comparable properties?
• What does 'YSP' refer to in the context of MLO compensation?
• Which fee is allowed in a loan that meets the requirements of Section 32 or 35 of the Truth-In-Lending Act?
• What is the only authorized website by the FTC from which consumers can obtain their free credit report each year?
• Which of the following acts does NOT pertain to the regulation of mortgage lending?
• What does an option ARM offer in terms of payment structure?
• Which loan type is typically subject to lower regulatory scrutiny?
• What type of mortgage is FHA's Home Equity Conversion Mortgage (HECM)?
• What type of property ownership is specifically for husbands and wives?
• The right of use and possession of a property is best described as which type of title?