Mortgage Loan Originator Mortgage Loan Originator MCQ 2 — Questions and Answers
Question 1: Under RESPA, a lender must provide the Loan Estimate to a borrower within how many business days of receiving a loan application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
RESPA requires the Loan Estimate to be delivered or mailed within 3 business days of receiving a completed loan application.
Question 2: Which federal law prohibits discrimination in residential real estate transactions based on race, color, national origin, religion, sex, familial status, or disability?
- Equal Credit Opportunity Act
- Fair Housing Act (Correct answer)
- Community Reinvestment Act
- Home Mortgage Disclosure Act
Correct answer: Fair Housing Act
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on the seven protected classes.
Question 3: A borrower's front-end debt-to-income (DTI) ratio compares monthly housing expenses to which figure?
- Net monthly income
- Gross monthly income (Correct answer)
- Annual salary
- Disposable income
Correct answer: Gross monthly income
The front-end DTI ratio divides total monthly housing expenses by the borrower's gross monthly income.
Question 4: What is the primary purpose of Private Mortgage Insurance (PMI)?
- To protect the borrower if home values fall
- To protect the lender if the borrower defaults (Correct answer)
- To insure the home against physical damage
- To guarantee the seller receives full payment
Correct answer: To protect the lender if the borrower defaults
PMI protects the lender, not the borrower, in the event the borrower defaults on the mortgage.
Question 5: Which index is most commonly used for adjustable-rate mortgages (ARMs) tied to the Secured Overnight Financing Rate?
- LIBOR
- SOFR (Correct answer)
- Prime Rate
- Treasury Constant Maturity
Correct answer: SOFR
SOFR (Secured Overnight Financing Rate) replaced LIBOR as the primary benchmark index for most new ARM products.
Question 6: Under the SAFE Act, MLO licenses must be renewed:
- Every 6 months
- Annually (Correct answer)
- Every 2 years
- Every 5 years
Correct answer: Annually
The SAFE Act requires MLO licenses to be renewed annually, typically by December 31 each year.
Question 7: A 'rate lock' in mortgage lending refers to:
- A penalty for paying off the loan early
- A guarantee that the interest rate will not change for a specified period (Correct answer)
- A fee charged for changing the loan program
- A minimum balance requirement on the borrower's account
Correct answer: A guarantee that the interest rate will not change for a specified period
A rate lock is a lender's commitment to hold a specific interest rate for a set period while the loan is being processed.
Mortgage Loan Originator Mortgage Loan Originator MCQ 2
Under RESPA, a lender must provide the Loan Estimate to a borrower within how many business days of receiving a loan application?