NV MLO common mistakes
NV MLO · Understand the traps and how to avoid them.
Sorts a fee into the wrong TRID tolerance category - calls transfer taxes a 10% cumulative item, calls recording fees zero tolerance, or drops a shoppable title service into the zero-tolerance bucket.
Candidates memorize the '0% / 10% / unlimited' labels as a slogan and skip the two tests that actually decide the answer: who is paid (creditor, affiliate, or unaffiliated third party) and whether the consumer is permitted to shop.
What to do instead
Run a sorting drill on 25 real fee lines using a decision tree: transfer taxes, fees paid to the creditor or its affiliate, and fees for services the consumer cannot shop for = zero tolerance; recording fees and shoppable services where the consumer picks from the written provider list = 10% cumulative; prepaid interest, escrow deposits, hazard insurance premiums, and shoppable services where the consumer picks an off-list provider = unlimited. Re-sort the same 25 items until the drill is 100% correct twice in a row.
Counts calendar days when applying Loan Estimate and Closing Disclosure deadlines, or starts the 3-business-day clock at first contact or prequalification instead of at receipt of the six-piece application.
TRID uses two different 'business day' definitions and two different anchors, and candidates flatten them into a single '3 days' rule absorbed from marketing material.
What to do instead
Write a one-page timeline and memorize it: LE delivered or placed in the mail no later than 3 business days (general definition - a day the creditor's offices are open to the public for substantially all business) after receipt of the application, and no later than 7 business days (specific definition - all calendar days except Sundays and federal holidays, Saturdays count) before consummation; CD no later than 3 specific business days before consummation. Then work 10 date-math problems with a weekend and a federal holiday inside the window.
Treats APR as a synonym for the note rate, or omits origination points, mortgage broker fees, and mortgage insurance premiums from the finance charge when asked which figure reflects the true cost of credit.
The note rate is the number discussed every day in the business, so it feels like 'the rate'; the Reg Z finance charge is a list to be applied, not intuited.
What to do instead
Drill a one-page finance-charge checklist (interest, points, origination, broker fees, MI premiums, and fees for services the creditor requires) and reason about direction rather than precision: adding finance charges raises APR, discount fees lower it, longer terms lower it. Answer every APR item by asking 'is this item on the finance charge list?' instead of recalling the note rate.
Applies the conventional HPA cancellation rule (automatic termination at 78% LTV) to an FHA loan, or assumes all borrower-paid mortgage insurance terminates the same way across programs.
The Homeowners Protection Act is taught as the general 'PMI cancellation' rule and candidates never learn that it excludes FHA and VA, which have their own duration rules keyed to case number, LTV, and term.
What to do instead
Build a three-column grid - conventional, FHA, VA - with rows for upfront premium or funding fee, monthly/annual premium, cancellation or termination trigger, and refund availability. State explicitly in the grid that HPA's borrower-request at 80% LTV and automatic termination at 78% apply to conventional residential mortgages, not FHA, and that FHA annual MIP duration depends on the case number date, maximum LTV at origination, and loan term.
Issues a Loan Estimate - or refuses to issue one - based on a phone prequalification, because the candidate treats 'I gave my income and a price range' as an application.
The trigger is defined by a six-item list, but candidates remember only '3 days from application' and never learn what legally counts as an application.
What to do instead
Memorize the six pieces - consumer's name, income, Social Security number, property address, estimated property value, and loan amount - then drill five scenarios (rate-shopping call, prequalification letter, online lead form, complete 1003, application missing only the property address) and state for each whether an application exists and the exact date the clock starts.
Collects the appraisal fee or other cost deposits at the first contact, before the Loan Estimate is delivered and before the consumer has indicated an intent to proceed.
Pipeline pressure - the candidate wants to order the appraisal and 'hold' the borrower, and assumes any fee taken at application is automatically permitted.
What to do instead
Memorize the sequencing rule: only a bona fide and reasonable credit report fee may be collected before the LE is delivered; no other fee may be collected until the consumer has received the LE and indicated an intent to proceed, and that intent must be documented. Write the permitted order on a card (application → LE delivered → documented intent to proceed → other fees → appraisal ordered) and test every scenario against that order.
Chooses the answer that gets the borrower approved or keeps the referral partner happy - leaving out a second job's income the file 'doesn't need', backdating a document, or not mentioning that a rate lock is expiring - because it feels like good client service.
Ethics items are written as ordinary servicing dilemmas, and the candidate optimizes for the customer's immediate goal (closing) instead of disclosure, accuracy, and informed consent.
What to do instead
Apply a fixed priority ladder in order: law and regulation, then honesty/good faith and accurate records, then the client's preference, then the referral relationship. Any option that solves a problem by concealing, backdating, or leaving something out of the file is wrong regardless of the outcome; the correct answer almost always involves disclosing, documenting, and escalating.
Misses a RESPA Section 8 problem in a co-marketing arrangement - free office space, free marketing staff, or a per-loan payment from a title company, realtor, or builder - or assumes that disclosing the arrangement makes it lawful.
No cash visibly changes hands, and the candidate confuses the disclosure requirements for an affiliated business arrangement with the general prohibition on paying for referrals.
What to do instead
Apply the thing-of-value test to every scenario: was anything of value given, and was it given in exchange for the referral of settlement service business or under an agreement to refer? If yes, it violates Section 8 regardless of disclosure. Only a properly disclosed AfBA charging fair market value for actual services survives, so check for (a) timely written disclosure of the affiliation, (b) no requirement that the consumer use the affiliate, and (c) charges that do not exceed market value.
Defaults to the federal rule when the state rule is stricter - applies a federal disclosure timeline where the state requires a longer advance period, or follows federal notice timing where the state adds an extra notice.
Candidates study federal law in depth and treat the state component as light review, so they assume federal law displaces state law.
What to do instead
Memorize the default: state law applies alongside federal law unless the two actually conflict, and where the state standard is more protective, comply with the stricter standard. Before answering, ask 'which rule is stricter?' instead of 'which rule is federal?', and treat any state-specific disclosure, timing, or record-retention requirement as an additional layer rather than an alternative.
Treats one SAFE Act registration as authority to originate anywhere - assumes a federally registered MLO can originate for an independent mortgage company, or that a license held in one state covers applications for property located in another state.
The NMLS ID and 'federal registration' sound like a universal credential, and the candidate never separates state licensure from depository-institution registration.
What to do instead
Learn the two-track rule: employees of insured depository institutions and credit unions are federally registered (institution-specific, no state license), while everyone else must hold a state license in each state where they take applications for property in that state. For any scenario, first identify the employer type, then the state where the property is located, and verify against the NMLS record instead of assuming the credential is portable.