Mortgage Loan Originator Federal Regulations and Ethics 1 — Questions and Answers
Question 1: The SAFE Act requires mortgage loan originators to be registered or licensed under which system?
- HMDA
- NMLS (Correct answer)
- CFPB
- FDIC
Correct answer: NMLS
The SAFE Act established the Nationwide Multistate Licensing System (NMLS) as the centralized registry for MLO licensing and registration.
Question 2: Under the SAFE Act, which of the following is a pre-licensure education requirement for a state-licensed MLO?
- 10 hours including 3 hours of federal law
- 20 hours including 3 hours of federal law, 3 hours of ethics, and 2 hours of nontraditional mortgage lending (Correct answer)
- 15 hours with no specific subject requirements
- 25 hours including 5 hours of state law
Correct answer: 20 hours including 3 hours of federal law, 3 hours of ethics, and 2 hours of nontraditional mortgage lending
The SAFE Act requires 20 hours of pre-licensure education covering federal law, ethics, nontraditional mortgage products, and electives before an MLO can obtain a state license.
Question 3: The Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit transactions based on all of the following EXCEPT:
- Race and national origin
- Religion and sex
- Loan amount requested (Correct answer)
- Marital status and age
Correct answer: Loan amount requested
ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, and receipt of public assistance income — not the loan amount itself.
Question 4: What is 'steering' as defined under the Dodd-Frank Act's loan originator compensation rules?
- Directing borrowers to lenders offering the best rates
- Directing borrowers to loan products not in their interest to increase MLO compensation (Correct answer)
- Advising borrowers on which credit bureau to use
- Recommending specific title companies
Correct answer: Directing borrowers to loan products not in their interest to increase MLO compensation
Steering refers to directing consumers toward loan products that are not in their best interest primarily because doing so yields higher compensation for the loan originator.
Question 5: Under the Fair Housing Act, which is an example of 'redlining'?
- Charging higher rates to riskier borrowers
- Denying mortgage credit to applicants in minority neighborhoods regardless of creditworthiness (Correct answer)
- Requiring higher down payments on investment properties
- Offering lower rates to first-time homebuyers
Correct answer: Denying mortgage credit to applicants in minority neighborhoods regardless of creditworthiness
Redlining is the illegal practice of denying services or increasing requirements in minority or low-income neighborhoods, regardless of individual applicants' qualifications.
Question 6: What does HMDA require lenders to do?
- Disclose all lender fees upfront
- Collect and report data on mortgage loan applications and originations to identify discrimination patterns (Correct answer)
- Provide borrowers with a copy of their credit report
- Obtain flood certification for all loans
Correct answer: Collect and report data on mortgage loan applications and originations to identify discrimination patterns
HMDA (Home Mortgage Disclosure Act) requires lenders to collect and publicly report data on loan applications and originations to help identify discriminatory lending practices.
Mortgage Loan Originator Federal Regulations and Ethics 1
The SAFE Act requires mortgage loan originators to be registered or licensed under which system?