Free Mortgage Loan Originator MCQ Questions and Answers — Questions and Answers
Question 1: The SAFE Act stipulates that a mortgage loan originator must be designated as an MLO to carry out all of the following tasks, with the exception of:
- Perform work related to extensions of credit for timeshare plans (Correct answer)
- Negotiate terms of a residential mortgage loan
- Advise a consumer on rates, fees, and other costs
- Take a residential mortgage loan application
Correct answer: Perform work related to extensions of credit for timeshare plans
To carry out tasks associated with timeshare plan credit extensions, one would not need the MLO certification.
Question 2: Except for, all of the following MLOs must possess a state license:
- An MLO working as a Consumer Finance Lender (CFL)
- An MLO working for a federally insured depository institution (Correct answer)
- An MLO working as a mortgage banker through the DBO
- An MLO working under the authority of the Bureau of Real Estate
Correct answer: An MLO working for a federally insured depository institution
This would comprise banks, credit unions, and affiliates that are owned, controlled, and governed by a depository institution and are subject to federal banking agency regulation.
Question 3: Which of the following is not required to have a unique identifying number in order to act as an MLO under the SAFE Act:
- An MLO working under the authority of the DRE
- An MLO working under the authority of the DBO
- An employee of an insured depository institution
- None of the above (Correct answer)
Correct answer: None of the above
The employee of an insured depository institution is registered with the NMLS, not licensed, although all MLOs require a unique identifier number.
Question 4: Which of the following sums up evaluation the best:
- Same as cost
- An estimate of market value (Correct answer)
- Same as price
- An estimate of value
Correct answer: An estimate of market value
Although ""An estimate of value"" is a perfectly acceptable response, ""An estimate of market value"" is the best response and will increase your score when it comes to residential mortgages.
Question 5: All of the following are listed as not requiring an MLO designation under the SAFE Act's definition of administrative and clerical work, with the exception of:
- Collecting information on behalf of the consumer with regard to a residential mortgage loan (Correct answer)
- The distribution of information common for the processing or underwriting of a residential mortgage loan
- Communication with a consumer to obtain information necessary for the processing and underwriting of a residential mortgage loan
- The receipt and collection of information common for the processing or underwriting of a residential mortgage loan
Correct answer: Collecting information on behalf of the consumer with regard to a residential mortgage loan
The right response includes gathering customer information from numerous industry sources. An MLO designation is necessary because this falls within MLO activities. The other options entail interacting with the customer to receive, gather, distribute, and communicate information from the customer for the aim of assembling the loan application package. This is administrative in nature.
Question 6: Every one of the following, with the exception of:
- Director of the Office of Thrift Supervision
- Department of Housing and Urban Development (Correct answer)
- Federal Deposit Insurance Corporation
- Comptroller of the Currency
Correct answer: Department of Housing and Urban Development
The National Credit Union Administration and the Board of Governors of the Federal Reserve System are two other federal banking agencies. A federal banking agency is not what the Department of Housing and Urban Development (HUD) is.
Question 7: Which of the following individuals working in the home mortgage sector would not be required to have the MLO designation in order to lawfully carry out their duties:
- A contract processor serving more than one MLO.
- A mortgage loan originator working for Wells Fargo Bank.
- A mortgage loan originator working for a credit union
- A loan processor performing clerical duties under the direction of a state licensed MLO. (Correct answer)
Correct answer: A loan processor performing clerical duties under the direction of a state licensed MLO.
This type of processor performs clerical and support duties for a single employer and is typically compensated with a W-2 form; they are exempt from the MLO designation requirement.
Question 8: Which of the following describes the Rate-Checker?
- A CFPB Owning a Home Tool that helps consumers explore interest rate options available to them. (Correct answer)
- A device which discriminates against borrowers who don’t have Internet access.
- A booklet available from any lender or MLO showing the PITI monthly payment based on a specified interest rate.
- Essentially a handbook of amortization tables showing monthly payments.
Correct answer: A CFPB Owning a Home Tool that helps consumers explore interest rate options available to them.
The goal is to provide the consumer with more information to aid in their decision-making.
Question 9: Which of the following may the Rate-Checker accomplish for a borrower when used properly?
- It incorporates information from the lenders’ external rate sheets.​
- Shows the rates borrowers like them are being offered. (Correct answer)
- Approve or deny their loan.
- Give personal advice as to whether the loan the consumer is getting is good for them.
Correct answer: Shows the rates borrowers like them are being offered.
This tool is designed to help borrowers understand the interest rates that borrowers similar to them are being offered. By providing borrowers with information about rates that are available to borrowers with similar profiles or characteristics, the Rate-Checker aims to help borrowers gauge what interest rates might be realistic or attainable for them based on their financial situation and creditworthiness.
Question 10: Where is the Rate-Checker Owning a Home Tool available?
- HUD Website
- CFPB Website (Correct answer)
- U.S. Government Printing Office
- NMLS Resource Center
Correct answer: CFPB Website
Rate-Checker Owning a Home Tool is available on the Consumer Financial Protection Bureau (CFPB) website. This tool aims to provide borrowers with information about the interest rates that borrowers with similar profiles are being offered. This can be a helpful way for borrowers to understand what interest rates might be available to them based on their financial situation and creditworthiness.
Question 11: In contrast to earlier disclosure forms, the new Loan Estimate form handles which of the following differently:
- Daily interest charges
- Charge for homeowner’s insurance
- Cost of services borrower can shop for
- Estimated cash to close shows earnest money deposit deducted (Correct answer)
Correct answer: Estimated cash to close shows earnest money deposit deducted
This is to make the borrower's understanding of the closing costs more clear. A first-time buyer can better grasp what they must have on hand for the closing thanks to this.
Question 12: The following details are specific to the Loan Estimate form:
- TIP (Correct answer)
- MIP
- LTV
- APR
Correct answer: TIP
TIP, which stands for "Total Interest Percentage," is indeed unique to the Loan Estimate (LE) form under the TILA-RESPA Integrated Disclosure (TRID) rule. The Total Interest Percentage is a disclosure that provides borrowers with a clear understanding of the total amount of interest they will pay over the life of the loan as a percentage of the loan amount.
Question 13: What information is provided to the borrower through the new Loan Estimate form that was not provided to the consumer through earlier disclosure forms?
- A place for borrowers to sign and confirm that they have received the Loan Estimate
- Delivery of the appraisal to the borrower
- The likelihood of future refinance transactions of the subject loan
- All of the above (Correct answer)
Correct answer: All of the above
Further details for first-time buyers. It is thought that greater knowledge enables consumers to make wiser choices.
Question 14: MLO Gretchen presented a proposed mortgage loan's itemized closing cost document to borrower Don. What more is required of the MLO?
- Guarantee the return of all fees paid if the borrower changes his mind.
- Initially collect only for credit, appraisal, and termite inspection fees.
- The MLO must also provide a list of HUD approved Housing Counselors.
- The top of the first page must contain the statement, “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.” (Correct answer)
Correct answer: The top of the first page must contain the statement, “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.”
The MLO will issue each necessary disclosure if the borrower submits a full application within three working days.
Question 15: The revised Loan Estimate form does not apply to the following in accordance with federal regulations:
- Conventional purchase money loans
- FHA loans
- HELOCs (Correct answer)
- VA loans
Correct answer: HELOCs
Home equity credit lines are not included on the Loan Estimate form.
Question 16: According to federal law, the following are not covered by the revised Loan Estimate form:
- Time shares
- Reverse mortgages
- Mobile homes
- All of the above (Correct answer)
Correct answer: All of the above
Additionally, the Loan Estimate does not apply to loans provided to business entities as opposed to natural persons or loans made by individuals or entities that make five or fewer loans annually.
Free Mortgage Loan Originator MCQ Questions and Answers
The SAFE Act stipulates that a mortgage loan originator must be designated as an MLO to carry out all of the following tasks, with the exception of: