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GA MLO practice questions

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Question 1Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), a state-licensed MLO's registration with the Nationwide Multistate Licensing System must be renewed annually. Which statement best describes the continuing education requirement tied to license renewal?

  1. The MLO must complete at least 8 hours of NMLS-approved continuing education each year, including specified federal law and ethics hours. Correct answer.
  2. The MLO must complete 12 hours of continuing education only in years when their license lapses.
  3. The MLO must complete at least 20 hours of continuing education every two years with no mandated subject matter.
  4. The MLO is exempt from continuing education once they have held a license for five consecutive years.

Explanation

The SAFE Act requires state-licensed MLOs to complete at least 8 hours of NMLS-approved continuing education annually, including at least 3 hours of federal law and regulation, 2 hours of ethics, and 2 hours of non-traditional mortgage lending, with the balance in electives. This requirement must be satisfied before annual license renewal.

Question 2Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage loan originator takes a residential mortgage application and, during the same transaction, offers to sell the applicant a homeowners insurance policy through an affiliated agency. Under the Real Estate Settlement Procedures Act, which statement is correct?

  1. The arrangement is permitted only if the MLO receives no compensation of any kind from the affiliate.
  2. The arrangement requires prior written approval from the Consumer Financial Protection Bureau for each transaction.
  3. The arrangement is prohibited outright because a settlement service provider may never refer business to an affiliate.
  4. The affiliated business arrangement is permitted if the MLO discloses the affiliation and the consumer is not required to use the affiliate. Correct answer.

Explanation

RESPA permits affiliated business arrangements when the provider discloses the affiliation, the consumer is not required to use the affiliate, and the only thing of value received is a return on ownership interest. Requiring the consumer to use the affiliate or receiving referral fees would violate Section 8.

Question 3Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO is completing the initial pre-licensure education required by the SAFE Act. What is the minimum number of hours of NMLS-approved pre-licensure education, and how many of those hours must cover federal law and regulation?

  1. 40 total hours, of which at least 8 must be federal law and regulation
  2. 15 total hours, of which at least 5 must be federal law and regulation
  3. 30 total hours, of which at least 4 must be federal law and regulation
  4. 20 total hours, of which at least 3 must be federal law and regulation Correct answer.

Explanation

The SAFE Act sets a minimum of 20 hours of pre-licensure education, including at least 3 hours of federal law and regulation, 3 hours of ethics, and 2 hours of non-traditional mortgage lending. The remaining hours are electives approved through NMLS.

Question 4Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A consumer applies for a closed-end mortgage secured by their principal dwelling. Under Regulation Z, within how many days after receiving the application must the creditor deliver or place in the mail the Loan Estimate?

  1. Ten business days
  2. Seven business days
  3. Five business days
  4. Three business days Correct answer.

Explanation

Regulation Z requires the creditor to provide the Loan Estimate no later than three business days after receipt of the application and no later than seven business days before consummation. The three-business-day clock is the operative deadline at application.

Question 5Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A creditor must provide a revised Loan Estimate when a valid changed circumstance occurs. Under Regulation Z, generally how many business days after receiving information sufficient to establish the changed circumstance must the revised Loan Estimate be delivered or placed in the mail?

  1. Six business days
  2. Three business days
  3. Four business days Correct answer.
  4. Ten business days

Explanation

When a valid changed circumstance permits revised disclosures, the creditor generally must provide the revised Loan Estimate within three business days of receiving the information, but the regulation also caps delivery at four business days after the changed circumstance. The four-business-day limit is the outer boundary that exam questions often target.

Question 6Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Equal Credit Opportunity Act, which characteristic is a prohibited basis for discrimination in a credit transaction?

  1. The applicant's receipt of public assistance income Correct answer.
  2. The applicant's credit score
  3. The applicant's existing debt-to-income ratio
  4. The applicant's employment history

Explanation

ECOA prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, and because an applicant receives income from a public assistance program or has exercised rights under the Consumer Credit Protection Act. Credit score, employment history, and debt ratio are legitimate underwriting factors.

Question 7Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An applicant tells an MLO that she is separated from her spouse. Under Regulation B, how should the MLO treat the applicant's marital status in the credit decision?

  1. The MLO may deny the application solely because the applicant is separated.
  2. The MLO must treat the applicant as single and disregard any alimony or child support she receives.
  3. The MLO may not discriminate based on marital status, but may consider the applicant's separate income and obligations. Correct answer.
  4. The MLO may require the spouse's signature because the applicant is married.

Explanation

Regulation B prohibits discrimination based on marital status, including separation. Creditors may consider income and obligations that legitimately affect the applicant's ability to repay, but may not require a spouse's signature when the applicant qualifies on her own.

Question 8Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage broker collects a loan application and forwards it to a lender without making a credit decision. Under the Home Mortgage Disclosure Act, how is the broker generally treated?

  1. As an exempt entity with no HMDA obligations of any kind
  2. As a financial institution required to file its own HMDA loan/application register
  3. As a third-party service provider whose activity is reported by the lender Correct answer.
  4. As a creditor because it took the application

Explanation

Under HMDA, entities that do not make credit decisions are generally not reportable financial institutions. A broker that only takes applications and forwards them is treated as a third party, and the lender making the credit decision reports the covered loan.

Question 9Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Home Mortgage Disclosure Act, which loan purpose is reportable as a covered loan?

  1. A home improvement loan that is not secured by a dwelling
  2. An open-end line of credit used primarily for business purposes
  3. A purchase loan secured by a dwelling Correct answer.
  4. A business-purpose loan to a corporation secured by a dwelling

Explanation

HMDA covers closed-end mortgage loans secured by a dwelling, including purchase loans. Unsecured home improvement loans, business-purpose loans, and business-purpose open-end lines are generally excluded from reporting.

Question 10Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO is reviewing a borrower's file for flood compliance. The property is in a Special Flood Hazard Area, and the lender is making a federally related loan. Under the National Flood Insurance Act, which statement is correct?

  1. Flood insurance is required for the life of the loan if the property remains in a Special Flood Hazard Area. Correct answer.
  2. Flood insurance is optional if the borrower declines it in writing.
  3. Flood insurance is required only until the first loan anniversary.
  4. Flood insurance is required only if the loan is government-insured.

Explanation

The National Flood Insurance Act requires flood insurance for the life of a federally related loan secured by improved real property in a Special Flood Hazard Area. The requirement continues as long as the loan remains outstanding and the property stays in the hazard area.

Question 11Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Biggert-Waters and subsequent Homeowner Flood Insurance Affordability Act provisions, when a lender determines that a borrower's flood insurance coverage is insufficient, what must the lender generally do?

  1. Reduce the loan balance to reflect the coverage gap
  2. Report the borrower to the credit bureaus
  3. Notify the borrower and, if necessary, force-place coverage after providing required notices Correct answer.
  4. Cancel the loan immediately without notice

Explanation

When flood insurance coverage is inadequate, the lender must notify the borrower of the deficiency and may purchase coverage on the borrower's behalf, known as force placement, after providing the required notices and a waiting period. Immediate cancellation or credit reporting is not the prescribed remedy.

Question 12Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A servicer receives a borrower's complete loss mitigation application more than 37 days before a foreclosure sale. Under Regulation X, which protection applies?

  1. The servicer may proceed with foreclosure while evaluating the application.
  2. The servicer is excused from responding because the application was late.
  3. The servicer must immediately approve the borrower for a loan modification.
  4. The servicer must evaluate the borrower for all available loss mitigation options and may not conduct a foreclosure sale until certain conditions are met. Correct answer.

Explanation

When a complete loss mitigation application is received more than 37 days before a foreclosure sale, Regulation X requires the servicer to evaluate the borrower for all available options and imposes a dual-tracking prohibition on foreclosure sales until the evaluation is complete and applicable appeal periods expire. Approval is not automatic.

Question 13Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A borrower submits a qualified written request to a mortgage servicer. Under RESPA, within how many business days must the servicer provide a written acknowledgment of receipt?

  1. Three business days
  2. Thirty business days
  3. Five business days Correct answer.
  4. Ten business days

Explanation

RESPA requires a servicer to acknowledge receipt of a qualified written request within five business days. The substantive response or correction of the account generally must follow within 30 business days, subject to a limited extension.

Question 14Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Fair Credit Reporting Act, a mortgage lender takes adverse action based in whole or in part on information in a consumer report. What must the lender provide to the consumer?

  1. A copy of the consumer report and the credit score only
  2. Notice of the adverse action, including the name and contact information of the consumer reporting agency and notice of the right to dispute Correct answer.
  3. Nothing, because adverse action notices are required only for credit card applications
  4. A verbal explanation of the credit decision within 24 hours

Explanation

FCRA requires an adverse action notice that identifies the consumer reporting agency used, states that the agency did not make the decision, and informs the consumer of the right to obtain a free copy of the report and to dispute its accuracy. The notice must also include the credit score disclosure when a score was used.

Question 15Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO is subject to the Gramm-Leach-Bliley Act privacy rules. Which statement best describes the notice obligation regarding sharing nonpublic personal information with nonaffiliated third parties?

  1. The MLO is exempt from privacy notice requirements if it has fewer than 50 employees.
  2. The MLO may share any customer information without notice as long as the sharing is for marketing purposes.
  3. The MLO must obtain written consent from every customer before sharing information with its own affiliates.
  4. The MLO must provide a clear and conspicuous privacy notice and, where required, an opt-out opportunity before sharing certain nonpublic personal information. Correct answer.

Explanation

GLBA and Regulation P require financial institutions to provide privacy notices describing information-sharing practices and to give consumers an opt-out before disclosing nonpublic personal information to nonaffiliated third parties for certain purposes. Exceptions exist for servicing and processing activities.

Question 16Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Fair and Accurate Credit Transactions Act, which practice is required of a mortgage lender to help prevent identity theft?

  1. Providing every applicant with a free credit score each month
  2. Maintaining a written identity theft prevention program with red flags and responses Correct answer.
  3. Requiring applicants to appear in person to sign all documents
  4. Reporting all applicants to the credit bureaus within 24 hours

Explanation

FACTA's Red Flags Rule requires financial institutions and creditors with covered accounts to maintain a written identity theft prevention program designed to detect, prevent, and mitigate identity theft. The program must be appropriate to the institution's size and risk profile.

Question 17Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO is subject to the Secure and Fair Enforcement for Mortgage Licensing Act's requirements for criminal background checks. Which statement is correct?

  1. Background checks are performed only at the MLO's initial licensing and never again.
  2. Fingerprints must be submitted to the FBI through NMLS for a national criminal history background check. Correct answer.
  3. A state may waive the background check for MLOs with more than ten years of experience.
  4. Background checks are required only for MLOs who handle government-insured loans.

Explanation

The SAFE Act requires MLOs to submit fingerprints for a national criminal history background check through the FBI, processed via NMLS. The check supports the fitness determination required for licensing and renewal.

Question 18Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the SAFE Act, a state-licensed MLO must be registered in NMLS and maintain a unique identifier. Which statement best describes how the unique identifier must be used?

  1. It may be used only internally and never disclosed to consumers.
  2. It must appear on all mortgage loan documents, including the note and security instrument.
  3. It must be provided to the consumer in a manner that allows the consumer to identify the MLO, such as on solicitations and applications. Correct answer.
  4. It must be the same as the MLO's Social Security number.

Explanation

The SAFE Act requires MLOs to disclose their unique identifier and to have it reflected in NMLS records so consumers can identify the originator. The identifier must appear on certain documents and be available to consumers, but it is not required on every loan document.

Question 19Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage loan originator employed by a state-licensed lender wants to work for a different licensed lender. Under SAFE Act state licensing rules, what is generally required?

  1. The MLO may begin originating for the new employer immediately without any filing.
  2. The MLO must apply for a completely new license in every state where they previously worked.
  3. The MLO must amend their NMLS record and obtain approval through the sponsoring employer change process before originating for the new lender. Correct answer.
  4. The MLO must surrender their license and wait two years before reapplying.

Explanation

A change of employer requires the MLO to amend the NMLS record and complete the sponsorship change, with state approval where required, before originating for the new employer. Operating before the change is approved can constitute unlicensed activity.

Question 20Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Truth in Lending Act, which statement correctly describes the right of rescission for a closed-end loan secured by the borrower's principal dwelling?

  1. The right of rescission lasts for one year in all circumstances.
  2. The right of rescission applies to purchase-money mortgages as well as refinances.
  3. The borrower has seven business days to rescind with no possibility of extension.
  4. The borrower has three business days to rescind, and the rescission period may be extended if required disclosures are not delivered. Correct answer.

Explanation

TILA gives the consumer three business days to rescind a covered closed-end loan secured by the principal dwelling. If required disclosures or notice of the right to rescind are not provided, the rescission period can extend, up to three years in certain cases.

Question 21Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A creditor is evaluating whether a loan is a high-cost mortgage under Regulation Z's points-and-fees test. Which statement best describes how points and fees are compared to the threshold?

  1. Points and fees are never included in the high-cost mortgage test.
  2. Points and fees are compared only to the down payment.
  3. Points and fees are compared to the borrower's annual income.
  4. Points and fees are compared to the total loan amount, and the applicable threshold varies with the loan amount. Correct answer.

Explanation

The high-cost mortgage points-and-fees test compares total points and fees to the total loan amount, using thresholds that adjust based on loan size. Loans exceeding the applicable threshold are subject to high-cost mortgage requirements.

Question 22Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under Regulation Z's ability-to-repay rule, which loan feature is generally prohibited for most closed-end consumer mortgages?

  1. A no-documentation or low-documentation underwriting approach that does not verify income and assets Correct answer.
  2. A loan with a co-borrower
  3. A loan with an escrow account for taxes and insurance
  4. A fully amortizing fixed-rate structure

Explanation

The ability-to-repay rule generally prohibits no-doc and low-doc underwriting for most closed-end consumer mortgages; creditors must consider and verify income, assets, employment, and other factors. Fully amortizing fixed-rate loans, co-borrowers, and escrow accounts are permissible features.

Question 23Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A servicer must provide an annual escrow account statement to a borrower with an escrow account. Under RESPA, within how many days after the end of the computation year must the statement be delivered?

  1. Thirty days Correct answer.
  2. Ninety days
  3. Ten days
  4. Forty-five days

Explanation

RESPA requires the servicer to deliver the annual escrow account statement within 30 days after the end of the escrow computation year. The statement must show the account activity and any surplus, shortage, or deficiency.

Question 24Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO is reviewing a loan file for compliance with the Servicemembers Civil Relief Act. Which statement best describes the SCRA interest-rate protection for a mortgage obligation incurred before military service?

  1. The interest rate may be increased to reflect the risk of deployment.
  2. The interest rate protection applies only to credit cards, not mortgages.
  3. The interest rate must be reduced to 0 percent for the entire loan term.
  4. The interest rate must be reduced to 6 percent per year, including certain fees, upon written request and proof of military service. Correct answer.

Explanation

The SCRA caps the interest rate at 6 percent per year, including certain fees, on obligations incurred before military service, upon written request with proof of service and a copy of the orders. The reduction applies during the period of military service.

Question 25Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the SAFE Act, which entity is responsible for maintaining the Nationwide Multistate Licensing System and Registry?

  1. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators through a jointly owned entity Correct answer.
  2. The Department of Housing and Urban Development
  3. The Consumer Financial Protection Bureau alone
  4. The Federal Deposit Insurance Corporation

Explanation

NMLS is operated by the State Regulatory Registry LLC, which is owned by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The CFPB has a role in developing and maintaining the system but does not operate it alone.

Question 26Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the SAFE Act, which federal agency is authorized to develop and maintain the Nationwide Mortgage Licensing System and Registry's federal registration system for MLOs employed by federally insured depository institutions?

  1. The U.S. Department of Housing and Urban Development, Office of Housing Counseling
  2. The Federal Financial Institutions Examination Council, acting on behalf of member agencies
  3. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators Correct answer.
  4. The Consumer Financial Protection Bureau, acting through the NMLS operator it designates

Explanation

The SAFE Act directs the Bureau to develop and maintain the federal registration system, and the Bureau has in practice relied on the NMLS operated by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. That same system supports state licensing of non-depository MLOs. HUD and the FFIEC have no role in operating the registry.

Question 27Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

An MLO employed by a non-depository lender moves to a different non-depository lender in the same state. Under the SAFE Act, which action must the MLO take to remain authorized to originate loans?

  1. Notify the previous employer in writing within 30 days of the change
  2. Obtain a new state license or amend the existing license through the NMLS before originating Correct answer.
  3. Complete a new 20-hour pre-licensing course and pass the national test again
  4. File a new registration with the federal registry and pay the federal fee

Explanation

State-licensed MLOs are licensed through the NMLS, and a change of sponsoring employer requires the license record to be updated, typically through a license amendment or new application in NMLS, with the new employer's sponsorship. Pre-licensing education and testing are not repeated for each move once the license is obtained. Federal registration is available only to MLOs of insured depository institutions and their affiliates.

Question 28Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A state-licensed MLO is convicted of a misdemeanor involving financial services fraud. Under the SAFE Act's background check provisions, what is the most accurate description of the consequence?

  1. The MLO automatically loses the license for life with no possibility of reinstatement
  2. The MLO's license may be denied, suspended, or revoked based on the conviction, subject to state law and the NMLS record Correct answer.
  3. The conviction has no effect unless it is a felony, because the SAFE Act addresses only felony convictions
  4. The MLO may continue originating but must disclose the conviction to each borrower at application

Explanation

The SAFE Act requires fingerprint-based FBI background checks and authorizes states to deny, suspend, or revoke licenses for convictions involving fraud, dishonesty, or breach of trust, whether felony or misdemeanor, as defined under state law. The NMLS record reflects the disposition and any state action. There is no automatic lifetime ban, and borrower-by-borrower disclosure is not the statutory mechanism.

Question 29Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage loan originator's unique identifier must appear on which of the following under the SAFE Act?

  1. The appraisal report and the flood determination form
  2. The MLO's business cards and any residential mortgage loan application the MLO takes Correct answer.
  3. The borrower's promissory note only
  4. The closing disclosure and the title insurance commitment

Explanation

The SAFE Act requires that the MLO's unique identifier be shown on business cards and on residential mortgage loan applications, and it must be provided to the borrower upon request or at the time of the loan. It is not required on the note, closing disclosure, title commitment, appraisal, or flood form.

Question 30Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Home Ownership and Equity Protection Act, a loan is a high-cost mortgage if the points and fees exceed which threshold for a loan of $100,000?

  1. 8 percent of the total loan amount
  2. 3 percent of the total loan amount Correct answer.
  3. 5 percent of the total loan amount
  4. 10 percent of the total loan amount

Explanation

HOEPA, as implemented in Regulation Z, treats a closed-end loan as high-cost when total points and fees exceed 5 percent of the total loan amount for loans of $20,000 or more, with a 3 percent figure applying only to loans below $20,000. Because the loan in the question is $100,000, the applicable threshold is 5 percent. The 8 percent and 10 percent figures are not HOEPA thresholds.

Question 31Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A creditor is determining whether a loan secured by a dwelling is a high-cost mortgage under HOEPA. Which loan is automatically covered because of its terms, regardless of the points-and-fees calculation?

  1. A loan with a balloon payment due in seven years
  2. A loan with a prepayment penalty that may be charged more than 36 months after consummation Correct answer.
  3. A loan that finances a single-premium credit insurance product
  4. A loan with a due-on-demand clause

Explanation

HOEPA has three independent triggers: the points-and-fees test, the APR test, and a prepayment penalty test. A loan is high-cost if the prepayment penalty may be charged more than 36 months after consummation or exceeds 2 percent of the amount prepaid. Due-on-demand clauses and single-premium credit insurance are separately prohibited practices in high-cost loans but are not the statutory triggers themselves.

Question 32Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Real Estate Settlement Procedures Act, which activity is prohibited when a lender refers a borrower to a title company?

  1. Paying a fee to the title company for services actually performed at fair market value
  2. Providing the borrower a written affiliated business arrangement disclosure
  3. Sharing a portion of the settlement charges with the borrower at closing
  4. Receiving a thing of value from the title company in exchange for the referral Correct answer.

Explanation

Section 8 of RESPA prohibits giving or receiving any thing of value in exchange for the referral of settlement service business. Payments for services actually performed at fair market value, affiliated business arrangement disclosures, and refunds to the borrower are not kickbacks. The prohibition targets unearned referral compensation, not legitimate compensation.

Question 33Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage lender is subject to the Home Mortgage Disclosure Act. Which loan is reportable as a covered loan?

  1. A short-term bridge loan used to acquire a dwelling
  2. A consumer-purpose home improvement loan secured by a dwelling Correct answer.
  3. A business-purpose loan secured by a multifamily building
  4. A loan for the purchase of a non-owner-occupied rental property

Explanation

HMDA covers closed-end and open-end loans for consumer purposes secured by a dwelling, including home improvement loans and refinancings, as well as certain business-purpose loans. Bridge loans of short duration and loans for non-owner-occupied rental properties are generally excluded, and business-purpose multifamily loans fall outside the standard consumer coverage.

Question 34Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Fair Credit Reporting Act, when a lender takes adverse action based on information from a consumer reporting agency, what must the lender provide to the applicant?

  1. The name of the individual who made the credit decision and that person's contact information
  2. A statement that the action was based on information from a consumer reporting agency, the agency's contact information, and notice of the right to dispute Correct answer.
  3. A copy of the consumer report and a statement that the applicant may obtain a free report from the agency
  4. A promise to reconsider the application if the applicant provides a written explanation of the disputed items

Explanation

FCRA adverse action notices must disclose that the action was based in whole or in part on information from a consumer reporting agency, identify the agency and provide its contact information, and state that the consumer may obtain a copy of the report and dispute its accuracy. Providing the actual report is not required by FCRA, and the individual decision-maker's identity is not required.

Question 35Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A mortgage lender is adopting a written identity theft prevention program under the Red Flags Rule. Which element is required?

  1. A requirement that all applicants submit a police report before closing
  2. An annual third-party audit of every loan file by an outside accounting firm
  3. Procedures to identify relevant red flags, detect them, respond to them, and periodically update the program Correct answer.
  4. A policy of denying credit to every applicant with any address discrepancy

Explanation

The Red Flags Rule requires a written program with four elements: identify relevant red flags, detect them, respond appropriately, and periodically update the program, with oversight by the board or a designated senior manager. It does not mandate blanket denial for address discrepancies, outside audits of every file, or police reports from all applicants.

Question 36Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A servicer receives a borrower's complete loss mitigation application 40 days before a scheduled foreclosure sale. Under Regulation X, what must the servicer do?

  1. Require the borrower to reinstate the loan before any evaluation
  2. Transfer the application to the investor without evaluating it
  3. Proceed with the sale because the application was not received within the 37-day window
  4. Evaluate the borrower for all loss mitigation options and give the borrower time to respond before any sale Correct answer.

Explanation

When a complete loss mitigation application is received more than 37 days before a foreclosure sale, the servicer must evaluate the borrower for all available loss mitigation options and, if the borrower submits the application within the applicable period, must not conduct a foreclosure sale until the borrower has had a chance to respond to any denial. The 37-day line is the threshold for these protections.

Question 37Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A borrower submits a qualified written request to a servicer regarding the servicing of the loan. Under RESPA, within how many business days must the servicer acknowledge receipt?

  1. 20 business days
  2. 30 business days
  3. 10 business days
  4. 5 business days Correct answer.

Explanation

RESPA requires a servicer to acknowledge a qualified written request within 5 business days of receipt, unless the servicer corrects the account and notifies the borrower within that period. The substantive response and correction must generally occur within 30 business days, with a possible 15-day extension. The 10- and 20-day figures are not the acknowledgment deadline.

Question 38Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A servicemember on active duty obtains a mortgage before entering military service. Under the Servicemembers Civil Relief Act, which protection applies to that pre-service mortgage obligation?

  1. Foreclosure is automatically barred for the entire period of military service plus one year
  2. The interest rate is capped at 6 percent per year on the pre-service balance during military service, with excess interest forgiven Correct answer.
  3. The servicemember may rescind the loan at any time during active duty
  4. The entire mortgage balance is forgiven after one year of active duty

Explanation

The SCRA caps interest at 6 percent per year on obligations, including mortgages, incurred before military service, and the excess above that rate must be forgiven rather than deferred. The servicemember must provide written notice and a copy of the military orders to invoke the cap. The SCRA does not forgive principal, does not impose an automatic one-year foreclosure bar, and does not create a rescission right.

Question 39Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under the Truth in Lending Act, a borrower refinances a principal dwelling with a closed-end loan. Which statement correctly describes the right of rescission?

  1. The right must be exercised within one year in all circumstances, with no exceptions
  2. The right applies only to purchase-money loans and expires at closing
  3. The right gives the borrower three business days to rescind, and the rescission period may be extended if required disclosures are not delivered Correct answer.
  4. The right applies to investment properties but not to principal dwellings

Explanation

TILA gives the borrower three business days to rescind a closed-end consumer credit transaction secured by the principal dwelling, typically a refinance or home equity loan. The period can be extended, up to three years in some cases, if the required notice of the right to rescind or material disclosures are not delivered. Purchase-money loans and non-principal-dwelling investment properties are not subject to the right.

Question 40Federal mortgage-related laws and regulations (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A creditor is testing whether a loan is a high-cost mortgage under Regulation Z's points-and-fees test. Which item is included in the calculation?

  1. Charges paid to an unaffiliated third party for a required appraisal
  2. Charges paid by the borrower to an affiliate of the creditor for a title examination Correct answer.
  3. Charges paid to an unaffiliated third party for flood certification
  4. Charges paid to an unaffiliated third party for a credit report

Explanation

The points-and-fees calculation includes finance charges, mortgage broker fees, and charges paid to affiliates of the creditor, even for services such as title examination. Charges paid to unaffiliated third parties for bona fide services like appraisals, flood certifications, and credit reports are excluded. The affiliate relationship is the key distinction.

Question 41General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Under Regulation Z, a mortgage loan originator must provide the borrower with the Loan Estimate within how many business days after receiving the loan application?

  1. Seven business days
  2. Five business days
  3. Three business days Correct answer.
  4. Ten business days

Explanation

Regulation Z requires the creditor to deliver or place the Loan Estimate in the mail no later than three business days after receiving the consumer's application. The three-business-day clock also governs the timing of the revised disclosures before consummation.

Question 42General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A borrower's monthly gross income is $6,000 and total monthly housing payment is $1,680. What is the housing expense ratio?

  1. 36%
  2. 32%
  3. 24%
  4. 28% Correct answer.

Explanation

The housing expense ratio divides the proposed monthly housing payment by monthly gross income. Here $1,680 divided by $6,000 equals 0.28, or 28 percent, which is the front-end ratio used in conventional underwriting analysis.

Question 43General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Which federal law requires mortgage loan originators and their employing institutions to obtain a unique identifier and have it appear on loan documents?

  1. Secure and Fair Enforcement for Mortgage Licensing Act Correct answer.
  2. Fair Credit Reporting Act
  3. Home Mortgage Disclosure Act
  4. Real Estate Settlement Procedures Act

Explanation

The SAFE Act created the Nationwide Mortgage Licensing System and requires each MLO to obtain a unique identifier that appears on loan documents. RESPA, HMDA, and the FCRA address disclosure, data reporting, and consumer credit reporting respectively.

Question 44General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A property is appraised at $400,000 and the borrower wants a loan of $320,000. What is the loan-to-value ratio?

  1. 70%
  2. 75%
  3. 85%
  4. 80% Correct answer.

Explanation

Loan-to-value is calculated by dividing the loan amount by the lesser of the appraised value or sales price. Here $320,000 divided by $400,000 equals 0.80, or 80 percent LTV.

Question 45General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

What is the primary purpose of an escrow account in a mortgage transaction?

  1. To guarantee the lender against borrower default
  2. To cover the cost of a title search and survey
  3. To pay the loan originator's commission at closing
  4. To hold funds for property taxes and hazard insurance premiums Correct answer.

Explanation

An escrow or impound account collects a portion of property taxes and hazard insurance each month and disburses those payments when due. This protects the lender's collateral by ensuring tax and insurance obligations are paid.

Question 46General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Which type of mortgage insurance is typically required when the down payment on a conventional loan is less than 20 percent?

  1. Private mortgage insurance Correct answer.
  2. Department of Agriculture guarantee fee
  3. Veterans Affairs funding fee
  4. FHA mortgage insurance premium

Explanation

Conventional loans with a down payment below 20 percent generally require private mortgage insurance, which protects the lender against loss. FHA, VA, and USDA programs each use their own government-backed insurance or guarantee structures.

Question 47General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A borrower signed a promissory note obligating repayment of the debt. Which party is the borrower in that instrument?

  1. The grantee
  2. The mortgagee
  3. The obligor Correct answer.
  4. The servicer

Explanation

On a promissory note the borrower is the obligor, the party who promises to repay the debt, while the lender is the obligee. The mortgage or deed of trust is the separate security instrument that pledges the property.

Question 48General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Which document transfers title to real property from a seller to a buyer?

  1. The deed Correct answer.
  2. The deed of trust
  3. The promissory note
  4. The mortgage

Explanation

A deed is the instrument that conveys legal title to real property from the grantor to the grantee. The note evidences the debt, while the mortgage or deed of trust pledges the property as security.

Question 49General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

A lender is reviewing a borrower's credit report and finds a collection account. Under the Fair Credit Reporting Act, what is the general maximum period for reporting most adverse items such as collections?

  1. Three years
  2. Ten years
  3. Seven years Correct answer.
  4. Five years

Explanation

The FCRA generally limits reporting of most adverse credit information, including collections and charge-offs, to seven years. Bankruptcies may be reported for ten years, and certain other items have their own rules.

Question 50General mortgage knowledge (SAFE MLO National Test component, per the National Test with Uniform State Test Content Outline)

Which loan program is insured by the Federal Housing Administration and is known for allowing lower down payments and more flexible credit standards?

  1. VA-guaranteed loan
  2. USDA-guaranteed loan
  3. FHA-insured loan Correct answer.
  4. Conventional conforming loan

Explanation

FHA-insured loans are backed by the federal government, allowing lower down payments and more flexible underwriting for credit-challenged borrowers. The borrower pays a mortgage insurance premium for that protection.