NMLS SAFE MLO Practice Test.
Free practice exam — 126 verified questions, instant feedback.

1. 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

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

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

3. 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. The applicant's employer's consent
• C. A court order in every case
• D. Nothing; credit data is public

4. 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

5. 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

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

• A. 75%
• B. 60%
• C. 125%
• D. 80%

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

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

8. 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

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

10. Which scenario describes negative amortization?

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

11. 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%

12. 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 problem only after closing
• C. A formatting preference
• D. Acceptable if the true balance is close

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

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

14. 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. Two lenders compete for one borrower
• C. A buyer purchases at auction
• D. A builder offers upgrades

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

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

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

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

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

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

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

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

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

20. 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

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

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

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

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

23. 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

24. 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

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

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

26. 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

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

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

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

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

29. Which individual generally NEEDS a state MLO license?

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

30. 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

31. 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

32. 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

33. 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. FDIC insurance on the originator
• C. None; the license itself is the guarantee
• D. A personal escrow of $1 million

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

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

35. 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

36. 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

37. 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. A VA funding fee
• C. Private mortgage insurance from an insurer of her choice
• D. No insurance of any kind

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

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

39. 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. $30,000, held in escrow
• B. $3,000, refunded at payoff
• C. $3,000, paid at closing to lower the interest rate
• D. $300, added to the monthly payment

40. 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

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

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

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

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

43. 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. Ratios cannot be computed from this data
• D. 36% front-end and 50% back-end

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

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

45. 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. A letter from a relative
• C. Only a verbal statement of salary
• D. Two years of business profit-and-loss statements

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

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

47. 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

48. 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

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

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

50. 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

51. 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

52. 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

53. 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

54. 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

55. 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. Rate matching
• D. Comparative advertising

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

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

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

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

58. 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

59. 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

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

61. 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.

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

63. At the annual escrow account analysis, a servicer finds the account holds more than the cushion and disbursements require. Under RESPA, what must the servicer do with the surplus?

• A. Refund the surplus to the borrower if it is above the regulatory threshold, or credit it toward future payments.
• B. Transfer the surplus to the lender's general operating account.
• C. Keep the surplus in the account indefinitely as a buffer against future tax increases.
• D. Apply it automatically to reduce the outstanding principal balance.

64. A creditworthy applicant applies for a mortgage in her name alone and does not live in a community-property state. Under ECOA, can the lender require her spouse to also sign the note?

• A. No, unless the applicant is self-employed.
• B. Yes, a spouse's signature is always required regardless of the applicant's individual creditworthiness.
• C. No, a lender may not require a spouse to sign or co-sign based solely on marital status when the applicant independently qualifies.
• D. Yes, but only if the loan amount exceeds the conforming loan limit.

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

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

66. A bank makes a loan secured by a dwelling to a borrower who will rent the home out as an investment property. Is this transaction typically reportable under HMDA?

• A. No, because HMDA only covers owner-occupied purchase loans.
• B. Yes, but only if the lender is a state-chartered bank.
• C. No, because investment properties are commercial loans exempt from HMDA.
• D. Yes, dwelling-secured loans are generally covered regardless of whether the borrower will occupy the property.

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

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

69. An originator wants to collect an origination fee directly from the borrower and also receive a commission from the lender on the same transaction. What does the Loan Originator Compensation rule say?

• A. The rule only restricts compensation from the lender, not the borrower.
• B. The originator generally may not be paid by both the consumer and the lender on the same transaction.
• C. Dual compensation is allowed only on refinance transactions.
• D. This dual compensation is permitted as long as both fees are disclosed.

70. A loan crosses HOEPA's high-cost thresholds. Which of the following features becomes restricted or prohibited on that loan?

• A. The lender's ability to check the borrower's credit report.
• B. A balloon payment structure that would otherwise be permitted on a similar loan below the threshold.
• C. The requirement to disclose an APR at all.
• D. The borrower's right to receive a Closing Disclosure.

71. A landlord-lender refuses to consider an applicant's mortgage application because the applicant has young children who will live in the home. Which law most directly addresses this refusal?

• A. The Gramm-Leach-Bliley Act, because it protects consumer privacy.
• B. The Fair Housing Act, which prohibits discrimination based on familial status.
• C. HMDA, because it tracks loan denials by demographic group.
• D. RESPA, because it governs settlement services.

72. A loan origination company opens a new customer file and, before extending credit, verifies the applicant's identity using a government-issued ID and other identifying information. What compliance program does this satisfy?

• A. The HMDA data collection requirement.
• B. The Ability-to-Repay rule's documentation standard.
• C. The RESPA affiliated business disclosure requirement.
• D. The Customer Identification Program required under the Bank Secrecy Act's anti-money-laundering framework.

73. A loan officer emails the appraiser suggesting that hitting a specific value 'would really help this deal close.' What federal principle does this violate?

• A. Appraisal independence requirements that prohibit coercing or influencing an appraiser's opinion of value.
• B. The Ability-to-Repay rule's documentation standard.
• C. The Loan Originator Compensation rule's ban on steering.
• D. HMDA's data integrity requirement.

74. A loan is classified as a Higher-Priced Mortgage Loan because its rate exceeds the applicable benchmark by a set margin. What does federal law generally require of the lender as a result?

• A. The lender must establish an escrow account for taxes and insurance for a minimum period.
• B. The lender must obtain a second independent underwriting review before funding.
• C. The lender must waive all closing costs.
• D. The lender must reduce the interest rate to the benchmark.

75. 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. 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.
• C. The applicant's full Social Security number for verification purposes.
• D. The identity of every other lender who pulled the applicant's credit that year.

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

77. A borrower enters active military service after already having a mortgage in place. Under the Servicemembers Civil Relief Act, what protection may apply to that pre-service debt?

• A. A requirement that the servicer refinance the loan at a fixed rate.
• B. An automatic extension of the loan term by one year.
• C. A cap on the interest rate charged during the period of active duty, under the statute's terms.
• D. Automatic forgiveness of the remaining loan balance.

78. 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. Only her CE credits are affected, not her ability to originate.
• C. The license expires or lapses, and she may not originate loans until it is reinstated or reissued.
• D. The state automatically upgrades her to a permanent license.

79. 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.

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

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

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

82. 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.

83. 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. The applicant's financial responsibility as part of the character and fitness standard for licensure.
• C. The applicant's tax filing status.
• D. Whether the applicant qualifies for continuing education credit.

84. 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.

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

86. 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. 70%, since $280,000 divided by $350,000 equals 0.70.
• C. 88%, since $280,000 divided by $350,000 equals 0.88.
• D. 125%, since $350,000 divided by $280,000 equals 1.25.

87. 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. An interest-only balloon loan due in one year.
• 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. A 30-year fixed-rate mortgage, since fixed payments are always the cheapest option short-term.

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

• A. 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.
• B. Discount points are a government fee, while the origination charge is a lender fee.
• C. They are two names for the exact same charge and always equal the same dollar amount.
• D. Origination charges are paid only by the seller, while discount points are paid only by the buyer.

89. An appraiser values a typical single-family home primarily by comparing it to similar homes that recently sold in the area, adjusting for differences in features. What appraisal method is this?

• A. The replacement approach.
• B. The cost approach.
• C. The sales comparison approach, the method most commonly used for typical owner-occupied homes.
• D. The income approach.

90. 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.

91. A homeowner is comparing a home equity line of credit to a traditional home equity loan for a renovation project. What is the core structural difference?

• A. There is no meaningful difference; the terms are interchangeable in every respect.
• B. A HELOC always has a fixed rate, while a home equity loan is always adjustable.
• C. A home equity loan cannot be secured by the home, while a HELOC must be.
• D. A HELOC provides a revolving line the borrower can draw against as needed, while a home equity loan disburses a lump sum repaid on a fixed schedule.

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

93. A borrower needs a loan amount well above the limit that Fannie Mae and Freddie Mac will purchase in her area, and the loan doesn't meet standard agency underwriting guidelines. What category does this loan fall into?

• A. A conforming conventional loan.
• B. An FHA-insured loan.
• C. A jumbo, non-conforming loan that exceeds agency loan limits and guidelines.
• D. A subprime loan by definition.

94. 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 streamline refinance, since no new underwriting occurs.
• C. A rate-and-term refinance, since it only changes the interest rate.
• D. A subordination, since a second lien remains in place.

95. 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.

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

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

97. A homeowner with an existing home equity loan wants to refinance her first mortgage. What must typically happen to the home equity loan's lien position for the refinance to proceed smoothly?

• A. Nothing; lien position is irrelevant to mortgage refinancing.
• B. The home equity lender must agree to subordinate its lien so the new first mortgage remains in first position.
• C. The home equity loan must be paid off entirely before any refinance can occur.
• D. The home equity lender must convert its loan into an unsecured line of credit.

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

• A. PMI and FHA's mortgage insurance premium are identical products issued by the same private insurers.
• B. FHA loans never carry any mortgage insurance at all.
• C. PMI is paid entirely by the lender, never the borrower.
• D. 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.

99. A prospective buyer asks her loan officer for a written commitment she can show a seller, based on verified documentation, rather than just a rough estimate of what she might qualify for. What has she requested?

• A. A Loan Estimate, which is a cost disclosure rather than a qualification opinion.
• B. A commitment letter issued only after the appraisal and title work are complete.
• C. A pre-approval, which is based on verified documentation and carries more weight with a seller than a pre-qualification.
• D. A pre-qualification, which relies only on unverified borrower-provided information.

100. 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.

101. An underwriter's approval letter lists two categories of conditions: some that must be satisfied before loan documents are drawn, and others that must be satisfied before funds are disbursed. What does this distinction reflect?

• A. The first category applies only to FHA loans.
• B. Conditions are sequenced by when in the process they must be resolved, with some needed before docs are drawn and others allowed to be cleared closer to funding.
• C. Only conditions in the second category are ever actually required.
• D. There is no real difference; both categories must be met at the same moment.

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

103. A borrower's down payment funds include $10,000 given to her by a parent with no expectation of repayment. What must the file typically include to document this properly?

• A. A signed gift letter confirming the funds are a genuine gift with no repayment obligation, often along with evidence of the transfer.
• B. A promissory note establishing repayment terms between the borrower and her parent.
• C. Nothing; gift funds never require documentation as long as they're deposited before application.
• D. Proof that the parent also applied for a mortgage on the same property.

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

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

105. After the Loan Estimate is issued, the borrower decides to switch from a purchase to a cash-out refinance loan program, which changes several loan terms. What must the lender typically do?

• A. Cancel the application entirely and require the borrower to reapply from scratch.
• B. Nothing; the original Loan Estimate remains valid for any program the borrower later chooses.
• C. Wait until the Closing Disclosure to reflect the new terms for the first time.
• D. Issue a revised Loan Estimate reflecting the new terms, since this qualifies as a valid changed circumstance.

106. 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.

107. 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.

108. After the closing documents are signed, what typically still needs to happen before the loan transaction is fully complete?

• A. Nothing further; signing the documents completes the transaction.
• B. The lender must fund the loan and the deed or security instrument must be recorded with the appropriate county office.
• C. The appraisal must be redone using the final sale price.
• D. The borrower must reapply for the same loan a second time.

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

• A. It never depends on the closing date at all.
• B. It is set to whatever date the borrower personally prefers, without regard to the closing date.
• C. It is always due the next day, regardless of the closing date.
• 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.

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

111. An underwriter reviews a file and issues a decision that isn't a flat approval or denial, but instead lists specific items that must be resolved before the loan can move forward. What is this decision type generally called?

• A. A rescission of the application.
• B. An approval with conditions (or a suspense decision), requiring specified items before the loan can proceed.
• C. An unconditional approval, since conditions don't actually affect the outcome.
• D. A final denial with no path forward.

112. 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.

113. 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.

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

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

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

117. A loan officer's employer has an ownership stake in the title company handling the closing, and both companies are used on nearly every transaction the loan officer originates. What must happen for this arrangement to be handled properly?

• A. The arrangement is automatically illegal regardless of disclosure.
• B. The affiliated business relationship must be disclosed to the borrower, who must also be free to choose a different provider.
• C. The relationship can remain entirely undisclosed as long as the fees are competitive.
• D. The borrower must be required to use the affiliated title company with no alternative offered.

118. A loan officer shares a borrower's income and Social Security number with a friend outside the company, unrelated to processing the loan, simply because the friend asked. What has the loan officer done wrong?

• A. Nothing, since the information wasn't shared with a competitor.
• B. Violated only an internal company policy with no broader compliance implication.
• C. Improperly disclosed the borrower's nonpublic personal information without authorization or a legitimate business purpose.
• D. Nothing, since verbal sharing doesn't count as a disclosure.

119. 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.

120. 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.

121. A processor, under deadline pressure, signs a borrower's name on a disclosure the borrower hadn't yet returned, intending to have the borrower 're-sign it later.' What has occurred?

• A. Forgery, an unauthorized signature that misrepresents the borrower's actual execution of the document.
• B. A permissible practice as long as the document is corrected before closing.
• C. A minor issue only if the borrower objects afterward.
• D. A harmless administrative shortcut, since the borrower would have signed anyway.

122. A loan officer regularly receives client referrals from a real estate agent and, in turn, quietly recommends only that agent's listings to her own borrowers, without ever mentioning the relationship to either side. What is the ethical problem?

• A. An undisclosed reciprocal referral relationship creates a conflict of interest that should be disclosed to the parties it affects.
• B. There is no issue, since referral relationships between real estate agents and loan officers are always improper regardless of disclosure.
• C. The issue only exists if the borrower ends up with a worse loan as a result.
• D. The issue only exists if money changes hands directly between them.

123. A borrower's debt-to-income ratio is too high to qualify, so the originator suggests simply leaving a car loan off the application since 'it's almost paid off anyway.' What is wrong with this suggestion?

• A. Nothing, since near-paid-off debts don't need to be disclosed.
• B. It is only a problem if the lender later discovers the omission through an audit.
• C. It is acceptable as long as the borrower eventually pays off the car loan before closing.
• D. It is application fraud, since omitting a known debt to manipulate the qualifying ratios misrepresents the borrower's true financial obligations.

124. A borrower's actual employer won't verify a stable enough income, so the originator arranges for a friend to pose as the borrower's supervisor and confirm a fabricated position and salary. What has the originator done?

• A. Participated in falsifying employment verification, a form of mortgage fraud that misrepresents the borrower's true income and job status.
• B. Complied with standard verification procedures for self-employed borrowers.
• C. Used an acceptable alternative income documentation method.
• D. Nothing improper, since the friend confirmed the information verbally.

125. 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. The concern only exists if the vacation is used during business hours.
• B. The concern only applies if the loan officer discloses the gift publicly.
• C. There is no concern, since gifts between business partners are always appropriate.
• 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.

126. 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.