NMLS SAFE MLO Practice Test

1. What does the Home Mortgage Disclosure Act (HMDA) require of covered lenders?

• A. Collecting and reporting mortgage application data to reveal lending patterns
• B. Capping interest rates on home loans
• C. Insuring deposits at mortgage lenders
• D. Licensing loan originators

2. When mortgage servicing is transferred, RESPA requires the borrower be told. What is the core notice requirement?

• A. A servicing transfer statement with a 60-day protection period against late fees paid to the wrong servicer
• B. No notice — servicing may move silently
• C. Borrower consent before any transfer
• D. A new appraisal of the property

3. A borrower must receive the Closing Disclosure how long before consummation of the loan?

• A. At least three business days before
• B. At the closing table is sufficient
• C. Ten calendar days before
• D. Only if the borrower requests it

4. Which regulation implements RESPA, and which implements TILA?

• A. Regulation X implements RESPA; Regulation Z implements TILA
• B. Regulation Z implements RESPA; Regulation X implements TILA
• C. Regulation B implements both
• D. Regulation C implements both

5. An MLO wants to review an applicant's credit history. Under FCRA, what makes accessing that file lawful?

• A. A permissible purpose — such as the applicant's application for credit
• B. A court order in every case
• C. Nothing; credit data is public
• D. The applicant's employer's consent

6. Under the Ability-to-Repay rule, what must a lender verify before making most mortgage loans?

• A. The borrower's reasonable ability to repay, using verified income, assets and obligations
• B. The borrower's stated income, no documentation needed
• C. That the borrower has owned a home before
• D. Only that the collateral appraises high enough

7. A borrower refinances her primary residence and changes her mind the next morning. What does the Truth in Lending Act give her?

• A. A right to rescind within three business days of closing
• B. No remedy once documents are signed
• C. Thirty days to cancel any mortgage
• D. A right that applies only to purchases

8. Under ECOA, which of these questions may a loan originator NOT use in deciding whether to lend?

• A. Whether the applicant receives public assistance income
• B. The applicant's credit history
• C. The applicant's income and employment
• D. The applicant's existing debts

9. HOEPA identifies certain 'high-cost mortgages.' What happens when a loan crosses HOEPA's thresholds?

• A. Nothing; HOEPA was repealed
• B. Extra disclosures and restrictions apply, including counseling and limits on features
• C. The loan is automatically void
• D. The loan converts to a fixed rate

10. A lender denies a mortgage application. Under ECOA, when must the applicant receive notice of the decision or an adverse-action notice?

• A. Within 30 days of the completed application
• B. Within 3 days
• C. Within 90 days
• D. No notice is required for denials

11. The Gramm-Leach-Bliley Act's privacy provisions require a lender to do what with customer information?

• A. Publish customer data annually
• B. Share data freely once the loan closes
• C. Destroy all records at closing
• D. Give privacy notices and let customers opt out of sharing with nonaffiliated third parties

12. Under TRID, how many business days after receiving a complete application does the lender have to deliver or mail the Loan Estimate?

• A. There is no deadline
• B. Three business days
• C. One business day
• D. Seven business days

13. A loan officer's compensation plan pays more when borrowers accept a higher interest rate. What does the Loan Originator Compensation rule say?

• A. Prohibited — compensation may not be based on loan terms like the rate
• B. Allowed if the borrower signs a waiver
• C. Allowed for loans over $500,000
• D. Only banks are covered by the rule

14. A title company pays a loan originator $500 for each closed loan she refers. What does RESPA Section 8 say?

• A. It is an illegal kickback — fees for referrals of settlement service business are prohibited
• B. It is legal if disclosed to the borrower
• C. It is legal up to $1,000 per loan
• D. RESPA does not cover title companies

15. An advertisement reads: 'Only 3% down!' Under Regulation Z's trigger-term rules, what must the ad now include?

• A. Additional disclosures such as terms of repayment and the APR
• B. Nothing further — down payments are not trigger terms
• C. Only the lender's NMLS number
• D. A list of competing lenders' rates

16. On a purchase loan, the lender's own origination fee increases by $150 between the Loan Estimate and the Closing Disclosure with no valid changed circumstance. Under TRID's tolerance rules, what happens?

• A. The lender must absorb the entire increase and cure it, since lender-controlled fees fall in the zero-tolerance category.
• B. The increase is fine as long as the total finance charge stays within 10%.
• C. The borrower must sign a new Loan Estimate acknowledging the higher fee.
• D. The increase is permitted once, but a second increase before closing would trigger a violation.

17. An originator is researching which federal regulation implements the Equal Credit Opportunity Act's requirements for creditors. Which regulation is it?

• A. Regulation Z.
• B. Regulation B.
• C. Regulation X.
• D. Regulation C.

18. A mortgage advertisement states 'rates as low as 4.99% APR' but includes no other credit terms like payment amount or down payment. Under Regulation Z, is this ad compliant?

• A. No, stating any rate at all always requires the full Schedule of Realistic Rates.
• B. No, because advertised rates must always match the applicant's final note rate exactly.
• C. Yes, but only if the ad also lists the lender's NMLS number.
• D. Generally yes, because APR itself is not a triggering term that requires the additional disclosures required for other specific credit terms.

19. A lender's privacy notice states it may share a customer's financial information with unaffiliated marketing companies. What must the Gramm-Leach-Bliley Act give the customer regarding that sharing?

• A. A right to demand the lender pay a fee for the shared data.
• B. A reasonable opportunity to opt out of that sharing before it happens.
• C. A right to have the information deleted from the lender's records entirely.
• D. No rights, since GLBA only restricts sharing with government agencies.

20. A homeowner opens a home equity line of credit secured by her primary residence to fund a kitchen remodel. What right does Regulation Z give her regarding this transaction?

• A. No rescission right, because the funds are for home improvement rather than cash-out.
• B. A three-business-day right to rescind the transaction without penalty.
• C. A thirty-day right to convert the HELOC to a fixed-rate loan at no cost.
• D. A right to cancel any time within the draw period without notice.

21. A lender originates a loan that meets the requirements of a Qualified Mortgage under the Ability-to-Repay rule. What is the practical benefit for the lender?

• A. The loan becomes automatically eligible for government insurance.
• B. The lender is excused from verifying the borrower's income altogether.
• C. The lender gains a legal presumption of compliance with the ability-to-repay requirement, reducing litigation exposure.
• D. The borrower loses the right to dispute the loan terms in court.

22. A lender denies an application partly because of information in the applicant's credit report. Beyond stating the reasons for denial, what must the adverse action notice also tell the applicant under FCRA?

• A. The exact credit score model used by every creditor in the industry.
• B. The applicant's full Social Security number for verification purposes.
• C. That the applicant has the right to obtain a free copy of the credit report used and to dispute inaccurate information with the reporting agency.
• D. The identity of every other lender who pulled the applicant's credit that year.

23. Refinancing a borrower repeatedly with no tangible benefit, harvesting fees each time, is called what?

• A. Loan flipping — a predatory practice
• B. Rate-and-term optimization
• C. Portfolio churning of securities
• D. A streamline refinance

24. In a 'straw buyer' scheme, what is happening?

• A. Someone with good credit applies for the true buyer, concealing who will really own and pay
• B. A builder offers upgrades
• C. Two lenders compete for one borrower
• D. A buyer purchases at auction

25. A seller quietly lends the buyer the down payment through an unrecorded second loan the lender never sees. What is this red flag called?

• A. A silent second
• B. A piggyback HELOC
• C. Seller concessions
• D. A wraparound refinance

26. A borrower asks whether she can just pay the appraiser extra for a 'friendlier' number, since she's paying for the appraisal anyway. The MLO should explain what?

• A. The appraisal is an independent opinion of value — paying for a target number is prohibited for everyone involved
• B. It is allowed since she is the client
• C. It works if routed through the agent
• D. Appraisers set values by negotiation

27. Who bears ultimate responsibility for the accuracy of a loan application the MLO takes over the phone and types up?

• A. Only the borrower, since it is her loan
• B. The MLO must record the borrower's answers faithfully — inventing or 'improving' entries is on the MLO
• C. The underwriter who approves it
• D. No one, for phone applications

28. A buyer with no intention of living in the property claims owner-occupancy to get a better rate. What is this scheme called?

• A. Occupancy fraud
• B. Rate shopping
• C. Loss mitigation
• D. A permissible strategy

29. An MLO wants to close a marginal file before month-end and considers 'adjusting' the borrower's job title on the URLA to satisfy an underwriting condition. What is the professional obligation?

• A. Adjust it if the change is small
• B. Let the processor decide
• C. Adjust it if the borrower verbally approves
• D. Refuse — accuracy on the application outranks any deadline or commission

30. An MLO routes minority applicants toward higher-cost products despite their qualifying for better terms. What practice is this?

• A. Steering — a fair-lending violation
• B. Permissible salesmanship
• C. Portfolio diversification
• D. Risk-based pricing

31. An originator hints the deal 'needs to appraise at 350' before the appraiser inspects. Which rule does this violate?

• A. The appraiser's own preference
• B. Appraisal independence — attempting to influence a valuation is prohibited
• C. Only a rule if made in writing
• D. None; sharing targets is helpful context

32. A processor notices the borrower's bank statement was edited to inflate the balance. What category of problem is this?

• A. Mortgage fraud — document falsification that must stop the loan
• B. A formatting preference
• C. Acceptable if the true balance is close
• D. A problem only after closing

33. A closing agent asks the MLO to backdate a document 'to keep the lock from expiring.' The correct response is what?

• A. Decline — backdating documents is falsification, whatever the motive
• B. Agree, since rate locks matter to the borrower
• C. Agree if the date change is under a week
• D. Ask the borrower to do it instead

34. A borrower mentions her disability income. The MLO tells her not to include it because 'it complicates things.' What is wrong here?

• A. Discouraging or discounting protected income sources violates fair lending — public assistance and disability income count
• B. Nothing; less income simplifies files
• C. Only the underwriter may discuss income
• D. The advice helps her qualify

35. Advertising a 3.99% rate that no applicant can actually obtain, to generate calls for costlier offers, is known as what?

• A. Bait and switch advertising
• B. A teaser rate disclosure
• C. Comparative advertising
• D. Rate matching

36. An originator steers a qualified borrower toward a loan with a prepayment penalty and a higher rate than a comparable product she also qualifies for, because that product pays the originator a larger commission. What is the core problem?

• A. The problem only exists if the borrower later tries to refinance and pays the penalty.
• B. There is no problem, since the borrower still technically qualifies for the loan she received.
• C. The originator placed her own compensation ahead of the borrower's interest in a suitable, cost-effective loan, which is the essence of improper steering.
• D. The problem only exists if the loan is a jumbo loan.

37. An originator submits a loan file for a borrower and property that don't actually exist, fabricating the entire transaction to collect fees. What is this scheme known as?

• A. A legitimate table-funded loan.
• B. An 'air loan,' a completely fabricated transaction with no real borrower or property behind it.
• C. A streamline refinance.
• D. A wholesale broker transaction.

38. A scammer promises a homeowner facing foreclosure that she'll 'save her home' if the homeowner signs over the deed and continues paying rent to the scammer, who then keeps the payments without ever addressing the underlying mortgage default. What is this scheme called?

• A. A legitimate loan modification.
• B. A rate-and-term refinance.
• C. A short sale.
• D. An equity-skimming foreclosure rescue scam, where the perpetrator extracts payments or equity while doing nothing to cure the default.

39. An applicant submits a mortgage application using another person's name, Social Security number, and financial history without that person's knowledge. What has occurred?

• A. A permissible co-borrower arrangement.
• B. A standard gift-fund transaction.
• C. Identity theft used to fraudulently obtain a mortgage loan.
• D. A legitimate assumption of an existing mortgage.

40. A settlement service provider who regularly receives referrals from a loan officer gives that loan officer an expensive vacation package as a personal 'thank you.' What is the concern with accepting this gift?

• A. There is no concern, since gifts between business partners are always appropriate.
• B. The concern only applies if the loan officer discloses the gift publicly.
• C. The concern only exists if the vacation is used during business hours.
• D. A gift well beyond nominal value from a referral source can function as an improper inducement tied to the referral relationship, similar to a disguised kickback.

41. While reviewing a closed file, an originator notices clear signs that a colleague fabricated income documents for a borrower. What is the originator's professional obligation?

• A. Report the suspected fraud through appropriate internal or regulatory channels rather than ignore or conceal it.
• B. Alter the file further to make the fabricated documents less noticeable.
• C. Say nothing, since the loan already closed and cannot be undone.
• D. Confront the colleague privately and let the matter drop once he apologizes.

42. To keep a hesitant borrower moving toward closing, an originator tells her 'your rate is locked' even though no lock has actually been placed with the lender. What is the problem with this statement?

• A. It is a material misrepresentation, since the borrower is being told a false fact about her loan to influence her decision to proceed.
• B. It is permissible as a sales technique as long as the loan eventually closes at a fair rate.
• C. It only matters if the rate happens to move against the borrower before closing.
• D. There is no problem, since rates typically don't move much day to day.

43. A group buys a distressed property, makes minimal cosmetic repairs, and works with a cooperating appraiser to obtain an inflated valuation to resell it quickly at an artificially high price to an unsuspecting buyer. What is this scheme called?

• A. Fraudulent property flipping, which pairs a fast resale with an inflated, unsupportable appraisal to mislead the new buyer's lender.
• B. A standard fix-and-flip investment strategy.
• C. A legitimate short sale.
• D. A rate-and-term refinance.

44. On a $200,000 loan at 6% annual interest, what is the first month's interest charge?

• A. $600
• B. $12,000
• C. $100
• D. $1,000

45. Under TRID, submission of which six pieces of information constitutes an 'application' that starts the Loan Estimate clock?

• A. Name, income, Social Security number, property address, estimated value, and loan amount sought
• B. Name, employer, two years of tax returns, bank statements, credit report, and appraisal
• C. Any single phone inquiry about rates
• D. A signed purchase contract only

46. Which income documentation pairing is standard for a salaried W-2 borrower?

• A. Recent pay stubs plus W-2s, with a verification of employment
• B. Only a verbal statement of salary
• C. Two years of business profit-and-loss statements
• D. A letter from a relative

47. Property taxes and homeowner's insurance are collected monthly with the payment. Where does that money sit and why?

• A. In the originator's personal account
• B. It reduces principal each month
• C. In the borrower's checking account
• D. In an escrow (impound) account, so the servicer can pay the bills when due

48. What is the standardized application form used for nearly all residential mortgage originations?

• A. The Uniform Residential Loan Application (Form 1003)
• B. Form W-2
• C. The HUD-1
• D. Schedule C

49. A borrower earns $8,000 gross monthly. The proposed housing payment (PITI) is $2,240 and total monthly debts with the mortgage are $3,360. What are the ratios?

• A. 28% front-end and 42% back-end
• B. 22% front-end and 34% back-end
• C. 36% front-end and 50% back-end
• D. Ratios cannot be computed from this data

50. What does a rate lock actually promise the borrower?

• A. A set rate and points for a defined period, if the loan closes within it
• B. Loan approval regardless of underwriting
• C. The lowest rate in the market
• D. A permanent rate that survives an expired lock

51. A self-employed borrower's income is typically documented how?

• A. Two years of personal (and often business) tax returns
• B. One recent pay stub
• C. A W-2 from her own company only
• D. A screenshot of a bank balance

52. At closing the borrower must bring 'cash to close.' Which items typically compose it?

• A. Down payment plus closing costs and prepaids, minus credits and deposits already made
• B. The full loan amount
• C. Only the first monthly payment
• D. The appraiser's fee alone

53. Why can a loan's APR be higher than its note rate?

• A. It cannot be; they are identical by law
• B. APR folds certain finance charges and points into the cost of credit
• C. APR includes the property taxes
• D. APR is always the note rate plus exactly 1%

54. Money for the down payment appears in the borrower's account two weeks before closing with no history. What does underwriting require?

• A. Moving the funds to the lender's vault
• B. Sourcing the large deposit — for example, a gift letter if it came from family
• C. Automatic denial of the loan
• D. Nothing; money is money

55. Underwriters talk about the 'four Cs' of mortgage credit. Which list is it?

• A. Capacity, capital, credit, and collateral
• B. Commission, closing, contract, and cost
• C. Cash, cars, children, and career
• D. Compliance, courtesy, clarity, and control

56. The appraisal on a purchase comes in at $290,000 against a $300,000 contract price. Which number does the lender lend against?

• A. The average of the two figures
• B. Whichever the borrower prefers
• C. The contract price, always
• D. The lower of the two — $290,000 — so LTV is measured against it

57. A loan closes on the 20th of the month. How is the borrower's first regular monthly payment date typically determined?

• A. It is always due the next day, regardless of the closing date.
• B. It is set to whatever date the borrower personally prefers, without regard to the closing date.
• C. It never depends on the closing date at all.
• D. It is generally set to allow a full month of interest to accrue first, so the first payment falls on the first of a month sufficiently after closing.

58. Shortly before closing, the buyer walks through the property one more time before signing. What is the primary purpose of this final walk-through?

• A. To perform the official appraisal.
• B. To confirm the property's condition hasn't changed and any agreed-upon repairs were completed since the last inspection.
• C. To allow the lender to re-underwrite the loan.
• D. To satisfy the title company's recording requirement.

59. A lender's process calls for confirming the borrower is still employed shortly before the loan documents are signed, rather than relying solely on the verification done weeks earlier. What is this step called?

• A. A verbal verification of employment (VVOE), performed close to closing to confirm the borrower's job status hasn't changed.
• B. A credit refresh, which checks only the credit report, not employment.
• C. An appraisal update.
• D. A title search.

60. A closing is delayed past the original rate lock expiration due to a title issue outside the borrower's control. What typically happens to the locked rate?

• A. The lender may offer a lock extension, often for a fee, to preserve the rate through the new closing date.
• B. The rate automatically stays locked forever with no extension needed.
• C. The loan must be entirely re-underwritten at a new, unrelated interest rate with no connection to the original lock.
• D. The borrower forfeits the ability to close the loan at all.

61. Years after a loan closes, a regulator asks the originating company to produce the loan file for review. What obligation supports the company's ability to do this?

• A. Loan origination records are generally subject to a retention requirement, keeping files available for examination for a defined period.
• B. Only the borrower is responsible for keeping copies of the file.
• C. There is no obligation to retain closed loan files once the loan funds.
• D. Loan files may be discarded immediately after closing to protect borrower privacy.

62. Before closing, the title company issues a commitment describing what it will insure and what liens or defects currently affect the property. Why does the lender review this document closely?

• A. It reveals any existing liens, judgments, or title defects that must be cleared before the new loan can close in the required position.
• B. It replaces the need for a credit report.
• C. It sets the final interest rate.
• D. It substitutes for a proper Loan Estimate.

63. A loan officer wants an appraisal ordered on a purchase transaction. Under appraisal independence practices, how should this typically happen?

• A. The loan officer selects an appraiser she has worked with successfully in the past.
• B. The loan officer contacts the appraiser directly to schedule the inspection.
• C. The order is routed through an independent process, such as an appraisal management company, that walls off loan production staff from appraiser selection.
• D. The borrower selects the appraiser directly and pays them in cash to avoid a paper trail.

64. After a borrower submits her application, a loan processor gathers pay stubs, bank statements, and tax returns before the file moves forward. What role does this step play in the origination process?

• A. It replaces the need for underwriting entirely.
• B. It is performed only after the loan has already closed.
• C. It is optional and can be skipped if the borrower has a high credit score.
• D. It assembles and organizes the documentation the underwriter will need to evaluate the loan.

65. A borrower puts 3.5% down on an FHA loan. What insurance structure comes with it?

• A. An upfront mortgage insurance premium plus annual MIP
• B. No insurance of any kind
• C. Private mortgage insurance from an insurer of her choice
• D. A VA funding fee

66. A lender offers to trim the note rate in exchange for 1% of the balance paid up front. On a $300,000 mortgage, what is that charge and its effect?

• A. $3,000, paid at closing to lower the interest rate
• B. $300, added to the monthly payment
• C. $30,000, held in escrow
• D. $3,000, refunded at payoff

67. In lien-theory terms, what separates the promissory note from the mortgage (or deed of trust)?

• A. The mortgage is the promise; the note conveys title
• B. Only the note is ever recorded
• C. They are two copies of one document
• D. The note is the promise to repay; the mortgage pledges the property as security

68. What distinguishes a HECM reverse mortgage from a traditional forward mortgage?

• A. Borrowers 62+ draw on home equity and repay when they leave the home, with no required monthly principal-and-interest payments
• B. It amortizes twice as fast
• C. It is available to any borrower over 18
• D. It requires the highest monthly payments

69. Which government-backed loan program requires NO down payment and is limited to eligible veterans and service members?

• A. The FHA 203(b) program
• B. The VA loan program
• C. Jumbo loans
• D. Conventional conforming loans

70. Which scenario describes negative amortization?

• A. Minimum payments below accruing interest make the balance grow over time
• B. Extra payments shorten the loan term
• C. The rate falls at each adjustment
• D. Escrow shortages raise the payment

71. A borrower wants predictable payments for a planned 30-year stay and hates rate risk. Which product aligns?

• A. A 30-year fixed-rate mortgage
• B. A 5/1 ARM
• C. An interest-only balloon note
• D. A HELOC as the first lien

72. An ARM is quoted as 'SOFR + 2.75%, caps 2/2/5.' What does the 2.75% figure represent?

• A. The first-adjustment cap
• B. The starting interest rate
• C. The margin — the constant added to the index at each adjustment
• D. The maximum lifetime increase

73. A loan's payments cover interest only for ten years, then the entire principal comes due at once. What is that final payment called?

• A. A balloon payment
• B. A margin call
• C. Negative amortization
• D. A rate cap

74. Under the Homeowners Protection Act, when must the servicer automatically terminate borrower-paid PMI on a conventional loan in good standing?

• A. Only when the borrower asks
• B. When the balance reaches 90% of the original value
• C. Never; PMI runs for the loan's life
• D. When the balance reaches 78% of the original value

75. What makes a conventional loan 'conforming'?

• A. It carries a fixed rate
• B. It closes in under 30 days
• C. It is insured by the FHA
• D. It meets the purchase standards of Fannie Mae and Freddie Mac, including the loan limit

76. A borrower owes $240,000 on a home appraised at $300,000. What is the loan-to-value ratio?

• A. 80%
• B. 75%
• C. 125%
• D. 60%

77. A borrower looks at her amortization schedule in the early years of a 30-year fixed-rate loan. What does she notice about how her payment is applied?

• A. Nearly all of each payment goes to principal from the very first payment.
• B. Principal and interest are always split exactly 50/50 regardless of the loan year.
• C. A larger share of each payment goes toward interest early on, with the principal share growing over time as the balance shrinks.
• D. Interest is charged only in the final year of the loan term.

78. A loan estimate lists both 'discount points' and an 'origination charge' as separate line items. What distinguishes the two?

• A. They are two names for the exact same charge and always equal the same dollar amount.
• B. Origination charges are paid only by the seller, while discount points are paid only by the buyer.
• C. Discount points are optional fees paid to reduce the interest rate, while the origination charge compensates the lender for making the loan regardless of rate.
• D. Discount points are a government fee, while the origination charge is a lender fee.

79. A homeowner refinances her mortgage for a larger amount than her current payoff and takes the difference in cash at closing to pay off credit card debt. What is this transaction called?

• A. A cash-out refinance, since new money is disbursed to the borrower beyond the payoff of the existing lien.
• B. A rate-and-term refinance, since it only changes the interest rate.
• C. A streamline refinance, since no new underwriting occurs.
• D. A subordination, since a second lien remains in place.

80. A borrower compares mortgage insurance on a conventional loan against an FHA loan. What is a key difference between the two?

• A. Conventional PMI can typically be cancelled once sufficient equity is reached, while FHA's mortgage insurance premium follows different, program-specific rules that may keep it in place longer.
• B. PMI and FHA's mortgage insurance premium are identical products issued by the same private insurers.
• C. FHA loans never carry any mortgage insurance at all.
• D. PMI is paid entirely by the lender, never the borrower.

81. A borrower plans to sell the home and relocate for work in about three years and is focused on minimizing her rate for that window rather than long-term rate certainty. Which product structure best fits her plan?

• A. A 30-year fixed-rate mortgage, since fixed payments are always the cheapest option short-term.
• B. An adjustable-rate mortgage with an initial fixed period covering roughly her expected ownership window, often priced lower than a comparable fixed-rate loan.
• C. A reverse mortgage, since she won't be making payments.
• D. An interest-only balloon loan due in one year.

82. At closing, a buyer purchases an owner's title insurance policy in addition to the lender requiring its own policy. What is the key difference between the two?

• A. The lender's policy protects the buyer, while the owner's policy protects the title company.
• B. They are identical policies simply issued under two different names.
• C. The owner's policy covers only fire damage, while the lender's policy covers title defects.
• D. The owner's policy protects the buyer's equity in the property, while the lender's policy protects only the lender's interest up to the loan balance.

83. Two borrowers apply for similar loan amounts, but one has a substantially higher credit score than the other. How does this typically affect their pricing?

• A. Credit score has no effect on pricing under standard risk-based pricing models.
• B. The borrower with the higher score typically qualifies for a lower rate, reflecting risk-based pricing that ties cost to credit risk.
• C. Both borrowers must receive the identical rate regardless of score, by law.
• D. The lower score always disqualifies the borrower entirely, with no path to approval.

84. A loan officer explains a borrower's total monthly housing payment using the acronym PITI. What does this figure include?

• A. Principal, interest, title, and insurance.
• B. Payment, interest, tax, and impound.
• C. Principal, interest, taxes, and insurance, the standard components of a monthly housing payment.
• D. Principal, income, tax, and interest.

85. A borrower is purchasing a home for $350,000 with a $280,000 loan, and her total monthly debts including the proposed mortgage payment come to $2,450 against $7,000 in gross monthly income. What is the loan-to-value ratio?

• A. 80%, since $280,000 divided by $350,000 equals 0.80.
• B. 88%, since $280,000 divided by $350,000 equals 0.88.
• C. 70%, since $280,000 divided by $350,000 equals 0.70.
• D. 125%, since $350,000 divided by $280,000 equals 1.25.

86. Which individual generally NEEDS a state MLO license?

• A. Someone who, for compensation, takes residential mortgage applications or negotiates loan terms
• B. A receptionist who forwards calls to loan officers
• C. A processor who assembles files under an originator's direction
• D. An appraiser valuing the property

87. A licensed MLO changes employers. What must happen in NMLS before she originates for the new company?

• A. The new employer establishes sponsorship of her license in NMLS
• B. Nothing; licenses follow the person automatically
• C. She must retake the SAFE MLO Test
• D. She surrenders the license and reapplies from zero

88. What financial responsibility mechanism does a state typically require behind each licensed MLO?

• A. Coverage through a surety bond, recovery fund, or net-worth requirement
• B. A personal escrow of $1 million
• C. FDIC insurance on the originator
• D. None; the license itself is the guarantee

89. An applicant for an MLO license had a felony fraud conviction four years ago. How does the SAFE Act treat this?

• A. Disqualifying — fraud and dishonesty felonies bar licensure permanently
• B. Irrelevant after two years
• C. Waivable by the employing lender
• D. Only misdemeanors are checked

90. How many hours of NMLS-approved pre-licensure education does the SAFE Act require at the federal baseline, and what is inside it?

• A. 8 hours of general instruction
• B. 20 hours, including 3 of federal law, 3 of ethics, and 2 of nontraditional products
• C. None; the test replaces education
• D. 40 hours, all on state law

91. To keep a license active, a state-licensed MLO must complete how much continuing education each year?

• A. None after the first year
• B. 80 hours every five years
• C. 20 hours annually
• D. 8 hours, including federal law, ethics, and nontraditional product instruction

92. Under the SAFE Act framework, what must a state-licensed MLO display or provide on application documents and advertisements?

• A. Their compensation schedule
• B. Their Social Security number
• C. Their unique NMLS identifier
• D. Their personal home address

93. A state regulator discovers that a licensed MLO submitted a falsified employment history on her license application. What action can the state take?

• A. Revoke or suspend her license for the material misrepresentation on the application.
• B. Nothing, since the falsification only matters if discovered before licensure.
• C. Only refer the matter to the IRS.
• D. Automatically transfer her license to another state.

94. A state mortgage regulator opens an inquiry into a licensed company's loan files after receiving multiple consumer complaints. What authority supports this action?

• A. The regulator's statutory authority to examine and investigate licensees to ensure compliance with licensing law.
• B. Only a court order can authorize such a review.
• C. The regulator may only act after the federal CFPB has already investigated.
• D. No such authority exists at the state level; only NMLS itself can review files.

95. An individual who does not hold a required state MLO license nonetheless negotiates mortgage loan terms with consumers for compensation. What exposure does this create?

• A. None, as long as a licensed MLO reviews the file before closing.
• B. None, because negotiating terms doesn't require a license, only signing documents does.
• C. Only civil liability to the borrower, with no regulatory consequence.
• D. Exposure to state enforcement action, including penalties, for engaging in licensed activity without a license.

96. As part of the state licensing process, an applicant must submit fingerprints for a background check. What is the primary purpose of this requirement?

• A. To allow regulators to review the applicant's criminal history as part of assessing character and fitness for licensure.
• B. To verify the applicant's mortgage math skills.
• C. To register the applicant with a national credit bureau.
• D. To satisfy a federal tax reporting obligation.

97. An experienced loan originator moves from one state to another and wants to begin originating loans while her new state license application is still pending. What SAFE Act mechanism may allow this?

• A. Temporary authority to operate, which lets a qualifying MLO originate in the new state while the application is pending, subject to conditions.
• B. She must stop originating entirely until the new license is fully approved, with no exceptions.
• C. She may originate under her prior state's license indefinitely.
• D. She may originate only federally chartered loans during the gap.

98. A state licensing application also requires a credit report pull on the applicant. What is this review meant to assess?

• A. The applicant's eligibility for a mortgage of her own.
• B. Whether the applicant qualifies for continuing education credit.
• C. The applicant's financial responsibility as part of the character and fitness standard for licensure.
• D. The applicant's tax filing status.

99. A state-licensed MLO fails to complete her license renewal requirements by the state's deadline. What is the typical consequence under state licensing law?

• A. Nothing changes; the license remains active indefinitely regardless of renewal.
• B. The license expires or lapses, and she may not originate loans until it is reinstated or reissued.
• C. The state automatically upgrades her to a permanent license.
• D. Only her CE credits are affected, not her ability to originate.

100. Regulators in multiple states rely on a single system to track an MLO's licensing history, employment record, and disciplinary actions across state lines. What is this system?

• A. The Federal Reserve's loan registry.
• B. A private credit bureau's licensing division.
• C. Each state's individually maintained, unconnected database.
• D. The Nationwide Multistate Licensing System (NMLS), the shared system of record used by state regulators.