Mortgage Loan Originator Mortgage Loan Originator 3 — Questions and Answers
Question 1: Under the SAFE Act, how many hours of continuing education must a licensed MLO complete annually to maintain their license?
- 4 hours
- 6 hours
- 8 hours (Correct answer)
- 10 hours
Correct answer: 8 hours
The SAFE Act requires licensed MLOs to complete at least 8 hours of NMLS-approved continuing education annually.
Question 2: A property appraises for $280,000 and the borrower makes a $42,000 down payment. What is the loan-to-value (LTV) ratio?
- 82%
- 83%
- 85% (Correct answer)
- 87%
Correct answer: 85%
LTV = ($280,000 - $42,000) / $280,000 = $238,000 / $280,000 = 85%.
Question 3: What is the primary purpose of the Home Mortgage Disclosure Act (HMDA)?
- To set maximum interest rates on home loans
- To require lenders to disclose settlement costs to borrowers
- To provide public data to identify potential discriminatory lending patterns (Correct answer)
- To establish minimum credit score requirements for FHA loans
Correct answer: To provide public data to identify potential discriminatory lending patterns
HMDA requires financial institutions to collect and report loan data to help regulators identify discriminatory lending practices.
Question 4: In a purchase transaction, a seller agrees to pay 3% of the purchase price toward the buyer's closing costs. This arrangement is called:
- A gift letter contribution
- A seller concession
- A lender credit
- An interested party contribution (Correct answer)
Correct answer: An interested party contribution
When a seller or other interested party contributes toward the buyer's costs, it is formally called an interested party contribution (IPC), subject to agency limits.
Question 5: An adjustable-rate mortgage has a 5/1 structure with a 2/2/5 cap. If the start rate is 4%, what is the maximum rate the loan can reach over its lifetime?
- 6%
- 8%
- 9% (Correct answer)
- 11%
Correct answer: 9%
The lifetime cap of 5% over the start rate means 4% + 5% = 9% maximum.
Question 6: Which loan program allows a veteran to purchase a home with no down payment and no private mortgage insurance requirement?
- FHA 203(b)
- USDA Rural Development loan
- VA loan (Correct answer)
- Conventional 97 loan
Correct answer: VA loan
VA loans are guaranteed by the Department of Veterans Affairs, allowing eligible veterans to buy with zero down payment and no PMI.
Question 7: Under Regulation Z, when must a lender provide a borrower with the right to rescind on a refinance of their primary residence?
- Only when the new loan amount is higher than the original
- Within 3 business days after consummation, delivery of the notice, or delivery of all material disclosures (Correct answer)
- Only if the interest rate increases
- Within 1 business day after application
Correct answer: Within 3 business days after consummation, delivery of the notice, or delivery of all material disclosures
The right of rescission on refinances of primary residences expires three business days after the latest of consummation, delivery of the rescission notice, or delivery of all required disclosures.
Mortgage Loan Originator Mortgage Loan Originator 3
Under the SAFE Act, how many hours of continuing education must a licensed MLO complete annually to maintain their license?