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NC MLO practice questions

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Question 1Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Under the SAFE Act, an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain must generally do which of the following?

  1. Join a national trade association before originating any loans
  2. Obtain and maintain a state license or federally registered status through the NMLS Correct answer.
  3. Post a surety bond equal to the full value of all loans closed annually
  4. Register with the Consumer Financial Protection Bureau as a depository institution

Explanation

The SAFE Act requires mortgage loan originators to be either state-licensed or federally registered, and licensing and registration records are maintained through the Nationwide Multistate Licensing System (NMLS). Registration as a depository institution is a status held by the employing institution, not the individual originator.

Question 2Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which federal agency administers the SAFE Act's requirements for state-licensed mortgage loan originators and maintains the federal registration system for originators employed by depository institutions?

  1. The Federal Housing Administration
  2. The Federal Deposit Insurance Corporation
  3. The Department of Housing and Urban Development's Office of Inspector General
  4. The Consumer Financial Protection Bureau Correct answer.

Explanation

The SAFE Act is implemented through Regulation H, which is issued and enforced by the Consumer Financial Protection Bureau for non-depository and state-licensed participants. The Bureau also operates the federal registration system covering originators employed by insured depository institutions and certain other regulated entities.

Question 3Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An originator has completed the required pre-licensing education and passed the MLO test. Which additional condition must be satisfied before a state license may be issued?

  1. The applicant must complete a second pre-licensing course after passing the test
  2. The applicant must have at least five years of prior mortgage experience
  3. The applicant must obtain a real estate broker license in the same state
  4. The applicant must submit to a criminal history background check through the FBI Correct answer.

Explanation

SAFE Act licensing standards require a criminal history background check performed through the FBI, based on fingerprints submitted by the applicant. Prior mortgage experience and a separate real estate broker license are not federal licensing conditions.

Question 4Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

A state-licensed MLO has an existing license and wants to add a license in a second state. What is the standard process under NMLS?

  1. The originator files a new application through NMLS, pays the applicable fees, and meets that state's specific requirements Correct answer.
  2. The originator automatically receives the second license upon written request to the first state regulator
  3. The originator must wait one full licensing year before applying in another state
  4. The originator must retake the national test component before each additional state license

Explanation

Additional state licenses are obtained by submitting a new application through NMLS, paying required fees, and satisfying any state-specific education, testing, or surety bond requirements. The national test component does not need to be retaken once it has been passed.

Question 5Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO employed by a federally insured bank is registered in the federal registration system rather than state-licensed. What is the primary reason for this distinction?

  1. The SAFE Act applies only to mortgage brokers and never to bank employees
  2. Employees of insured depository institutions are covered by federal registration rather than state licensing Correct answer.
  3. Bank employees are exempt from all SAFE Act education and testing requirements
  4. Bank employees may originate in any state without any registration whatsoever

Explanation

The SAFE Act distinguishes between state-licensed originators and originators employed by insured depository institutions and certain other federally regulated entities, who are federally registered. Registration still requires completion of education and testing and submission of fingerprints through NMLS.

Question 6Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

How many hours of pre-licensing education must a new state-licensed MLO complete under the SAFE Act minimum standards?

  1. 8 hours
  2. 20 hours Correct answer.
  3. 40 hours
  4. 12 hours

Explanation

The SAFE Act sets a minimum of 20 hours of pre-licensing education for state-licensed originators, including specified hours on federal law, ethics, and nontraditional mortgage products. States may impose additional requirements beyond this federal floor.

Question 7Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Within the 20-hour pre-licensing requirement, which subject area is specifically mandated by the SAFE Act?

  1. At least 3 hours on federal law and regulations and 3 hours on ethics Correct answer.
  2. At least 10 hours on state-specific foreclosure procedures
  3. At least 5 hours on title insurance underwriting
  4. Commercial real estate valuation methods

Explanation

The SAFE Act requires that the 20-hour pre-licensing curriculum include at least 3 hours on federal law and regulation, 3 hours on ethics, and 2 hours on nontraditional mortgage products. The remaining hours cover other lending topics such as lending standards and state law.

Question 8Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which component is included in the SAFE Act MLO test requirement?

  1. An oral interview conducted by the state regulator in place of a written test
  2. A single national test that replaces all state-specific testing
  3. A test administered only by the employing lender rather than an approved test provider
  4. A national component with uniform content and a state component covering state-specific law Correct answer.

Explanation

The SAFE Act requires passage of a test that includes both a national component with uniform content and a state component addressing state-specific law. The test must be administered by an approved test provider, and a passing score on the national component is retained for subsequent state applications.

Question 9Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO passed the national test component three years ago and has not been licensed since. Under the SAFE Act, what generally happens to that passing score?

  1. The score lapses and the test must be retaken if the originator was not licensed within the preceding five years Correct answer.
  2. The score converts automatically into continuing education credit
  3. The score remains valid indefinitely regardless of licensing status
  4. The score is valid only if the originator was continuously licensed during the interim

Explanation

A passing test score remains valid only while the originator maintains a license or registration, or if the person becomes licensed within five years of the test date. If neither condition is met, the test must be retaken.

Question 10Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

How many hours of annual continuing education must a state-licensed MLO complete?

  1. 8 hours Correct answer.
  2. 4 hours
  3. 16 hours
  4. 6 hours

Explanation

The SAFE Act requires at least 8 hours of continuing education each year, including at least 3 hours on federal law and regulation, 2 hours on ethics, and 2 hours on nontraditional mortgage products. The remaining hour may cover other approved topics.

Question 11Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Within the annual 8-hour continuing education requirement, which allocation is required by the SAFE Act?

  1. 1 hour on federal law and 7 hours on elective topics
  2. 4 hours on ethics and 4 hours on marketing practices
  3. 8 hours entirely on state lending law
  4. 3 hours on federal law, 2 hours on ethics, and 2 hours on nontraditional mortgage products Correct answer.

Explanation

The annual continuing education curriculum must include at least 3 hours on federal law and regulation, 2 hours on ethics, and 2 hours on nontraditional mortgage products. The eighth hour may be used for other approved instruction.

Question 12Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO completed continuing education for the prior year but failed to renew the license before the expiration date. What is the most likely consequence under typical state and NMLS rules?

  1. The originator may continue originating while the renewal is pending without restriction
  2. The originator automatically becomes federally registered instead
  3. The license remains active indefinitely as long as continuing education was completed
  4. The license lapses, and the originator must generally apply for reinstatement or a new license and may face late fees or additional requirements Correct answer.

Explanation

A license that is not renewed by its expiration date lapses, and the originator generally must pursue reinstatement or a new application, often with late fees and possible additional education or testing requirements. Completing continuing education alone does not keep an expired license active.

Question 13Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO's employing lender terminates the originator's employment. What is the sponsor's obligation regarding the NMLS record?

  1. The sponsor must revoke the originator's national test score
  2. The sponsor may leave the NMLS record unchanged until the next annual renewal
  3. The sponsor must notify the appropriate regulator and update the NMLS record to reflect the termination Correct answer.
  4. The sponsor must transfer the originator's license to another company automatically

Explanation

Sponsoring entities are responsible for timely reporting of employment changes, including terminations, to the regulator and for updating the originator's NMLS record. Failure to report can expose the sponsor to regulatory action.

Question 14Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which of the following best describes a unique identifier under the SAFE Act?

  1. A temporary code issued each time a new loan application is taken
  2. The originator's Social Security number used on all loan documents
  3. A number permanently assigned to an MLO through NMLS that must appear on specified loan documents Correct answer.
  4. A number assigned by the employer's internal loan origination system

Explanation

The SAFE Act requires a unique identifier to be permanently assigned to each registered or licensed originator through NMLS. The identifier must appear on specified residential mortgage loan documents so consumers can look up the originator's record.

Question 15Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

A consumer wants to verify whether a particular MLO is licensed and whether any regulatory actions have been taken. Where is this information primarily available?

  1. The state's department of motor vehicles records
  2. The local county recorder's office
  3. The NMLS Consumer Access website Correct answer.
  4. The originator's employer's marketing brochure

Explanation

NMLS Consumer Access is a public database that lets consumers confirm an originator's licensing or registration status and review publicly reported regulatory and disciplinary actions. Employers' marketing materials and county recorder offices do not serve this function.

Question 16Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which practice would most likely constitute a violation of the SAFE Act's prohibition on unlicensed activity?

  1. A licensed MLO taking an application while employed by a licensed lender
  2. A licensed MLO completing continuing education courses online
  3. An unlicensed clerical employee quoting rates and negotiating loan terms with borrowers for compensation Correct answer.
  4. A licensed MLO discussing loan options with a real estate agent

Explanation

The SAFE Act prohibits unlicensed or unregistered persons from taking applications or offering or negotiating loan terms for compensation. Clerical staff may perform administrative tasks but cannot engage in origination activity that requires licensure.

Question 17Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO moves from a state-licensed nonbank lender to a federally insured bank and will originate residential loans there. What is the correct licensing status going forward?

  1. The originator is exempt from any licensing or registration because banks are federally chartered
  2. The originator keeps the state license and does not need any federal record
  3. The originator must hold both a state license and federal registration simultaneously for all loans
  4. The originator becomes federally registered through NMLS and the state license is generally terminated or made inactive Correct answer.

Explanation

Originators employed by insured depository institutions are covered by federal registration rather than state licensing, and the transition is reflected in NMLS. Holding both simultaneously for the same employment is not the standard arrangement.

Question 18Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which statement accurately describes the relationship between the SAFE Act and state licensing standards?

  1. States may not require any testing beyond the national component
  2. States may set standards lower than the federal minimums if they choose
  3. The SAFE Act fully preempts state licensing authority over MLOs
  4. The SAFE Act sets minimum standards, and states may impose additional or stricter requirements Correct answer.

Explanation

The SAFE Act establishes a federal floor of minimum licensing standards, and states retain authority to adopt additional or stricter requirements within their jurisdictions. This is why originators must satisfy state-specific components in addition to the national requirements.

Question 19Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

Which of the following individuals would generally be excluded from the SAFE Act's definition of a mortgage loan originator?

  1. A loan officer employed by a mortgage banker who advertises loan products to the public
  2. A sole proprietor mortgage broker who closes loans for compensation
  3. An employee of a nonbank lender who takes applications and negotiates rates for compensation
  4. An employee of a nonprofit organization who originates residential loans only for that organization's borrowers and receives no compensation tied to loan volume Correct answer.

Explanation

The SAFE Act definition excludes certain bona fide nonprofit employees who originate loans only for the organization's own borrowers and whose compensation is not based on loan volume or terms. The other listed individuals engage in compensated origination activity that triggers licensing or registration.

Question 20Federal mortgage loan originator licensing and registration (SAFE Act, NMLS)

An MLO is applying for a state license and has a prior felony conviction involving financial fraud. How is this generally treated under SAFE Act licensing standards?

  1. The conviction is disregarded if the applicant completes pre-licensing education
  2. A felony conviction automatically and permanently bars licensure in every state
  3. The conviction is irrelevant and may not be considered by the regulator
  4. The regulator reviews the criminal history and may deny the license based on the nature of the offense and other factors Correct answer.

Explanation

The SAFE Act requires a criminal history background check, and state regulators evaluate the results, including the nature and timing of any offense, when deciding whether to grant a license. A conviction is not an automatic permanent bar, nor is it ignored.

Question 21Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Under RESPA, when must a lender provide a Loan Estimate to a mortgage loan applicant?

  1. Only after the borrower signs the promissory note
  2. Within three business days after receiving the application Correct answer.
  3. Within thirty calendar days of the application
  4. At the closing table on the settlement date

Explanation

Regulation X requires the creditor to deliver or place in the mail a Loan Estimate no later than the third business day after receipt of the loan application. The disclosure must reflect the terms currently known to the creditor and cannot wait until closing.

Question 22Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor receives a complete mortgage application on Monday. Under Regulation B, what is the general deadline for notifying the applicant of action taken?

  1. Within thirty days after receiving the completed application Correct answer.
  2. Within ninety days of the closing date
  3. Within ten days of receiving the application
  4. No notice is required if the loan is approved

Explanation

Regulation B generally requires a creditor to notify the applicant of action taken within thirty days after receiving a completed application. Notification of incompleteness must occur within thirty days as well.

Question 23Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Which law requires creditors to collect and report data about the race, ethnicity, and sex of mortgage applicants?

  1. Real Estate Settlement Procedures Act
  2. Gramm-Leach-Bliley Act
  3. Home Mortgage Disclosure Act Correct answer.
  4. Servicemembers Civil Relief Act

Explanation

HMDA, implemented by Regulation C, requires covered financial institutions to collect, record, and report applicant demographic data and loan-level information. RESPA, GLBA, and SCRA do not impose that data collection obligation.

Question 24Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage broker steers a borrower toward a higher-cost loan because the broker earns a larger yield spread premium. Which statute most directly addresses this practice?

  1. Fair Credit Reporting Act
  2. RESPA Section 8 Correct answer.
  3. Electronic Signatures Act
  4. Homeowners Protection Act

Explanation

RESPA Section 8 prohibits giving or receiving fees, kickbacks, or things of value for referrals of settlement service business, and unearned fee splitting. Steering tied to a fee for referral implicates that anti-kickback provision.

Question 25Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Under the Fair Housing Act, which of the following is a prohibited practice in residential mortgage lending?

  1. Discouraging an applicant based on the racial composition of the neighborhood Correct answer.
  2. Applying the same credit score cutoff to all applicants
  3. Charging an application fee disclosed to every applicant
  4. Requiring documentation of income from all applicants

Explanation

The Fair Housing Act prohibits discriminatory practices including discouraging a loan applicant because of race, color, religion, sex, disability, familial status, or national origin, including neighborhood racial composition. Neutral, uniformly applied underwriting criteria are permissible.

Question 26Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Under TILA, which disclosure must a creditor provide to a consumer before consummation of a closed-end residential mortgage loan?

  1. The annual escrow statement
  2. The notice of servicing transfer
  3. The Closing Disclosure Correct answer.
  4. The Loan Estimate

Explanation

For closed-end consumer mortgages subject to TRID, the creditor must provide the Closing Disclosure at least three business days before consummation. The Loan Estimate is an earlier disclosure, and escrow and servicing notices follow different rules.

Question 27Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A lender's privacy notice obligations to mortgage customers arise primarily from which federal law?

  1. Gramm-Leach-Bliley Act Correct answer.
  2. National Flood Insurance Act
  3. Fair Credit Billing Act
  4. Home Mortgage Disclosure Act

Explanation

GLBA, through Regulation P, requires financial institutions to provide privacy notices and allow consumers to opt out of certain information sharing with nonaffiliated third parties. The other statutes address reporting, billing disputes, and flood insurance.

Question 28Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Which agency enforces the Fair Housing Act's prohibitions against discrimination in residential mortgage lending?

  1. The Consumer Product Safety Commission
  2. The Federal Communications Commission
  3. The Securities and Exchange Commission
  4. HUD and the Department of Justice, along with banking regulators Correct answer.

Explanation

HUD administers and enforces the Fair Housing Act, and the Department of Justice may bring enforcement actions; federal banking regulators also examine lenders for fair lending compliance. The FCC, SEC, and CPSC have no role in fair lending enforcement.

Question 29Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A borrower applies for a mortgage and the creditor will use an automated underwriting system. Under ECOA and Regulation B, what must the creditor do if the application is denied based in whole or part on the system's output?

  1. Provide only the credit score used by the system
  2. Refer the borrower to the system vendor for an explanation
  3. Withhold the reasons because the system is proprietary
  4. Provide the principal reasons for the adverse action in the notice Correct answer.

Explanation

Regulation B requires a creditor taking adverse action to give the applicant a statement of reasons, and a creditor may not avoid that duty merely because an automated system generated the decision. The notice must identify the specific principal reasons for denial.

Question 30Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor sends a Loan Estimate on day one and later discovers the borrower will pay discount points that were not reflected. When must a revised Loan Estimate be provided?

  1. At any time before the note is signed
  2. Within thirty days after consummation
  3. Only after consummation as a corrected disclosure
  4. No later than four business days before consummation Correct answer.

Explanation

A revised Loan Estimate must be received by the consumer no later than four business days prior to consummation, and the creditor must then ensure the waiting period requirements are met. Revised estimates cannot be delivered after consummation as a substitute.

Question 31Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage servicer receives a qualified written request from a borrower disputing an escrow charge. Under RESPA, within what period must the servicer acknowledge the request?

  1. Two calendar days after receipt
  2. Five business days after receipt Correct answer.
  3. Sixty business days after receipt
  4. Thirty business days after receipt

Explanation

RESPA requires a servicer to provide a written acknowledgment of a qualified written request within five business days of receipt. The substantive response and correction period generally follows within specified longer timeframes.

Question 32Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A lender charges a higher interest rate on a home mortgage loan to an applicant because the applicant receives public assistance income. Which law is most directly violated?

  1. Equal Credit Opportunity Act Correct answer.
  2. Real Estate Settlement Procedures Act
  3. Fair Credit Reporting Act
  4. Home Mortgage Disclosure Act

Explanation

ECOA prohibits discrimination in credit transactions on the basis of receipt of public assistance income, among other protected characteristics. Pricing a loan higher for that reason is unlawful discrimination.

Question 33Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage lender is a covered institution under HMDA and originated 300 closed-end mortgage loans in each of the prior two years. What is the primary consequence?

  1. It must cancel private mortgage insurance at 80 percent loan-to-value
  2. It must collect, record, and report loan-level HMDA data Correct answer.
  3. It must obtain a borrower's written consent to share data with affiliates
  4. It must provide a Loan Estimate to every applicant

Explanation

Institutions meeting HMDA's coverage thresholds, including the closed-end loan volume threshold, must collect and report prescribed loan-level data under Regulation C. The other obligations arise from different statutes.

Question 34Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor denies a mortgage application and the applicant requests the reasons in writing within sixty days. What must the creditor provide?

  1. Nothing further, because the denial notice was already sent
  2. Only a copy of the credit report used
  3. A verbal explanation by telephone
  4. A written statement of the specific principal reasons for the adverse action Correct answer.

Explanation

When an applicant requests the reasons for adverse action within sixty days, Regulation B requires the creditor to provide a written statement of the specific principal reasons. A general denial notice does not discharge this duty once a timely request is made.

Question 35Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Under TRID, which event triggers a new three-business-day waiting period before consummation?

  1. A change that increases the APR beyond the tolerance threshold Correct answer.
  2. Correction of a typographical error in the lender's name
  3. A change in the borrower's mailing address
  4. Delivery of the appraisal report to the borrower

Explanation

If the APR increases beyond the regulatory tolerance after the Closing Disclosure is delivered, the creditor must provide a revised Closing Disclosure and a new three-business-day waiting period applies. Minor clerical corrections and appraisal delivery do not reset the waiting period.

Question 36Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A loan originator accepts a $500 payment from a title company in exchange for referring a borrower to that title company. Under RESPA, this payment is:

  1. Permitted if the borrower consents in writing
  2. Permitted if disclosed on the Closing Disclosure
  3. Prohibited as an unearned referral fee Correct answer.
  4. Permitted because title insurance is a settlement service

Explanation

RESPA Section 8 prohibits fees or things of value given in exchange for referrals of settlement service business, even if disclosed. Disclosure or consumer consent does not cure an unlawful referral fee.

Question 37Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor's policy requires spousal information from married applicants but not from unmarried applicants. Under Regulation B, this policy is:

  1. Permitted if the applicant is informed at application
  2. Permitted because marital status affects repayment ability
  3. Permitted only for loans secured by a first lien
  4. Prohibited unless the spouse is jointly applying or state law requires it Correct answer.

Explanation

Regulation B limits when a creditor may request information about a spouse or former spouse. Marital status may not be used to discriminate, and spousal information generally may be sought only when the spouse is a joint applicant or other limited circumstances apply.

Question 38Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A borrower's mortgage is transferred from one servicer to another. Under RESPA, when must the transferor servicer notify the borrower?

  1. On the effective date of the transfer
  2. Within thirty days after the first payment due to the new servicer
  3. At least fifteen days before the effective date of the transfer Correct answer.
  4. No notice is required if the new servicer sends a coupon book

Explanation

RESPA requires the transferor servicer to provide a notice of transfer not less than fifteen days before the effective date, and the transferee servicer must provide notice within fifteen days after the effective date. Coupon delivery does not replace the required notices.

Question 39Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

Under TILA's ability-to-repay rule, which loan feature generally disqualifies a loan from being a qualified mortgage?

  1. A fixed interest rate for the full term
  2. Negative amortization Correct answer.
  3. A documented debt-to-income ratio
  4. A fully amortizing repayment schedule

Explanation

Qualified mortgage status under Regulation Z excludes loans with negative amortization, interest-only features, or balloon payments, among other criteria. Fixed-rate, fully amortizing loans with documented income can qualify.

Question 40Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A lender provides a Closing Disclosure on Monday for a Thursday consummation. Does this satisfy the TRID timing requirement?

  1. No, because the consumer must receive it at least three business days before consummation Correct answer.
  2. No, because the Closing Disclosure must be delivered at closing
  3. Yes, because any delivery before consummation is sufficient
  4. Yes, because Monday and Thursday are in the same week

Explanation

The consumer must receive the Closing Disclosure no later than three business days before consummation. Counting business days, a Monday delivery for a Thursday closing does not provide the required three-business-day period.

Question 41Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage lender shares a customer's nonpublic personal information with a nonaffiliated third party for marketing purposes. Under GLBA, the customer generally must be given:

  1. A Loan Estimate reflecting the sharing
  2. A clear opt-out notice and a reasonable opportunity to opt out Correct answer.
  3. An adverse action notice
  4. A qualified written request form

Explanation

GLBA and Regulation P require a privacy notice and, before disclosing nonpublic personal information to nonaffiliated third parties for marketing, a clear and conspicuous opt-out notice with a reasonable opportunity to opt out. The other documents serve unrelated purposes.

Question 42Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

An applicant alleges a lender denied her loan because she is pregnant. Which protected basis under ECOA is most directly implicated?

  1. National origin
  2. Receipt of public assistance income
  3. Sex, including pregnancy-related status Correct answer.
  4. Age, because she is under 62

Explanation

ECOA prohibits discrimination on the basis of sex, and Regulation B makes clear that discrimination based on pregnancy, childbirth, or related medical conditions is sex discrimination. The other listed bases address different characteristics.

Question 43Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor's pricing model results in minority borrowers paying higher origination charges than similarly situated white borrowers with the same credit profile. This pattern most likely raises concerns under which legal theory?

  1. A GLBA privacy violation
  2. A HMDA reporting threshold violation
  3. A RESPA Section 8 kickback violation
  4. Disparate impact discrimination under the Fair Housing Act and ECOA Correct answer.

Explanation

When a facially neutral pricing policy produces a disproportionate adverse effect on a protected group without a legitimate business justification, disparate impact analysis under the Fair Housing Act and ECOA applies. RESPA, GLBA, and HMDA address different obligations.

Question 44Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A creditor provides a revised Loan Estimate reflecting a changed circumstance on Tuesday and consummates the loan on Friday of the same week. Which statement is correct under Regulation Z?

  1. The creditor may proceed because the borrower waived the waiting period verbally
  2. The creditor may proceed because changed circumstances eliminate all timing rules
  3. The creditor must wait until the borrower has received the revised Loan Estimate at least four business days before consummation Correct answer.
  4. The revised Loan Estimate may be delivered at consummation because the change was documented

Explanation

When a revised Loan Estimate is issued, the consumer must receive it no later than four business days prior to consummation, and the creditor must then comply with the remaining waiting period requirements. A verbal waiver or documented change does not eliminate the timing rule.

Question 45Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A lender uses a consumer report in connection with a mortgage application and takes adverse action based on it. Under the FCRA and Regulation B, the adverse action notice must include:

  1. A notice that the consumer may obtain a free copy of the report and dispute its accuracy Correct answer.
  2. The borrower's HMDA demographic data
  3. The name of the appraiser
  4. A copy of the Loan Estimate

Explanation

When adverse action is based on a consumer report, the creditor must disclose the reporting agency's name and address, state that the agency did not make the decision, and inform the consumer of the right to obtain a free copy and dispute accuracy. The other items are unrelated to this notice.

Question 46Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage lender is subject to Regulation Z because it regularly extends consumer credit. Under TILA, which disclosure must the lender provide to a borrower at least three business days before consummation of a closed-end, higher-priced mortgage loan?

  1. The annual percentage rate and finance charge on the promissory note
  2. The Loan Estimate
  3. A statement of the borrower's right to rescind the transaction
  4. The appraiser's written appraisal report Correct answer.

Explanation

For higher-priced mortgage loans, Regulation Z requires creditors to provide the borrower a copy of each written appraisal or valuation at least three business days before consummation. The APR and finance charge appear on the Closing Disclosure, which is provided before consummation but not necessarily three days earlier, and the right to rescind applies only to certain refinances and home-equity loans, not purchase-money mortgages.

Question 47Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage broker is compensated by the borrower through a lender-paid credit that is offset by a higher interest rate. Under Regulation Z, how must the broker's compensation be disclosed?

  1. As a borrower-paid origination charge
  2. As a payment by the creditor to the broker Correct answer.
  3. As a finance charge on the Closing Disclosure
  4. As a lender credit on the Loan Estimate

Explanation

Regulation Z requires disclosure of mortgage broker compensation paid by the creditor as a separate item on the Loan Estimate and Closing Disclosure. A lender-paid credit that is offset by a higher rate is creditor-paid compensation to the broker, not a borrower-paid charge or a finance charge.

Question 48Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage servicer receives a borrower's request for information under RESPA. The servicer does not consider the request a qualified written request because it was sent by email. How must the servicer respond?

  1. Ignore the email because RESPA requires a written request
  2. Return the email and require the borrower to send a written request by mail
  3. Treat it as a qualified written request and respond within the RESPA timeframes Correct answer.
  4. Respond within 30 days with a written acknowledgment only

Explanation

RESPA and Regulation X define a qualified written request to include written correspondence, and a request for information may be delivered by email or other electronic means if the servicer has designated an address for receiving such requests. A servicer may not reject a request solely because it was sent electronically when the servicer has established an email address for that purpose.

Question 49Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A lender's loan originator tells a borrower that the lender does not offer FHA loans because the borrower's neighborhood is predominantly minority. Under the Fair Housing Act, which theory of discrimination does this statement most directly illustrate?

  1. Overt discrimination
  2. Disparate impact
  3. Redlining Correct answer.
  4. Steering

Explanation

Redlining is the practice of denying or limiting mortgage services in specific geographic areas, often based on the racial or ethnic composition of those areas. The loan originator's statement that the lender does not offer FHA loans because of the neighborhood's demographics is a direct example of redlining under the Fair Housing Act.

Question 50Federal laws and regulations governing mortgage lending (RESPA, TILA/TRID, ECOA, HMDA, Fair Housing, GLBA, etc.)

A mortgage lender is a financial institution subject to the Gramm-Leach-Bliley Act. The lender wants to share a customer's nonpublic personal information with a nonaffiliated insurance company to offer mortgage insurance. What must the lender do before sharing the information?

  1. Provide a privacy notice and a reasonable opportunity to opt out Correct answer.
  2. Obtain the customer's oral consent
  3. Obtain the customer's written authorization
  4. Provide an initial privacy notice only

Explanation

Under the GLBA and Regulation P, a financial institution must provide a clear and conspicuous privacy notice and a reasonable opportunity for the customer to opt out before disclosing nonpublic personal information to a nonaffiliated third party, unless an exception applies. Sharing for marketing mortgage insurance generally requires the opt-out opportunity.