NMLS Mortgage Loan Origination Activities Questions and Answers — Questions and Answers
Question 1: A mortgage loan originator receives a call from a potential borrower who provides their name, social security number, the address of the property they want to purchase, an estimated value for the property, and their annual income. According to the TILA-RESPA Integrated Disclosure (TRID) Rule, what additional piece of information is required before the MLO is obligated to provide a Loan Estimate?
- The borrower's requested loan amount (Correct answer)
- The borrower's consent to a credit check
- The type of loan product desired
- A fully executed purchase contract
Correct answer: The borrower's requested loan amount
Under the TRID Rule, a complete application, which triggers the requirement to provide a Loan Estimate within three business days, consists of six specific pieces of information: the consumer's name, income, Social Security number, the property address, an estimate of the value of the property, and the mortgage loan amount sought.
Question 2: A borrower is purchasing a home with a sales price of $400,000 and an appraised value of $410,000. They are obtaining a first mortgage of $320,000 and have a Home Equity Line of Credit (HELOC) for $40,000 that will be used for home improvements immediately after closing. What is the Combined Loan-to-Value (CLTV) ratio for this transaction?
- 80%
- 87.8%
- 90% (Correct answer)
- 88%
Correct answer: 90%
The Combined Loan-to-Value (CLTV) is calculated by adding the principal balance of the first mortgage and the amount of any subordinate liens (like the HELOC) and dividing by the property's value (using the lesser of the sales price or appraised value for a purchase). In this case: ($320,000 + $40,000) / $400,000 = $360,000 / $400,000 = 0.90 or 90%.
Question 3: Under the Equal Credit Opportunity Act (ECOA) and its Valuations Rule, a creditor must provide a copy of the appraisal report to the applicant for a first-lien mortgage:
- Only if the loan application is approved and proceeds to closing.
- Within 30 days after the loan has been consummated.
- Upon receiving a written request from the borrower after closing.
- Promptly upon completion, or no later than 3 business days before consummation. (Correct answer)
Correct answer: Promptly upon completion, or no later than 3 business days before consummation.
The ECOA Valuations Rule requires creditors to provide an applicant with a free copy of all appraisals and other written valuations. This copy must be delivered promptly upon completion or at least three business days before the loan closes (consummation), whichever is earlier. This requirement applies even if the loan is denied or the application is withdrawn.
Question 4: Which of the following fees, when listed on a Loan Estimate, is subject to a zero tolerance for variance, meaning it cannot increase on the final Closing Disclosure?
- Prepaid interest
- Fees for a title services provider chosen by the borrower from the lender's list
- The creditor's origination charge (Correct answer)
- Recording fees
Correct answer: The creditor's origination charge
Under TRID, fees paid to the creditor, mortgage broker, or an affiliate of either, including the origination charge, are subject to a zero-tolerance standard. This means the amount charged at closing cannot exceed the amount disclosed on the Loan Estimate. Recording fees and fees for third-party services where the consumer shops from a lender's list fall into the 10% cumulative tolerance category, while prepaid interest has no tolerance limit.
Question 5: A mortgage loan originator's compensation plan includes a bonus structure where the MLO receives a higher commission percentage for originating loans with an interest rate above the company's par rate. This compensation practice is a violation of which regulation?
- Real Estate Settlement Procedures Act (RESPA)
- Truth in Lending Act (TILA) (Correct answer)
- Fair Housing Act (FHA)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Truth in Lending Act (TILA)
The Truth in Lending Act (TILA), specifically Regulation Z, contains the Loan Originator Compensation Rule. This rule prohibits paying an MLO based on the terms of a transaction, such as the interest rate, loan program, or the sale of ancillary products. This is to prevent steering consumers into less favorable loan terms to increase originator compensation.
Question 6: An MLO has received all six required pieces of information to constitute a complete mortgage loan application on Monday. According to the TRID rule, what is the latest day the MLO's company must mail or deliver the Loan Estimate to the applicant?
- Tuesday
- Wednesday
- Thursday (Correct answer)
- Friday
Correct answer: Thursday
The TILA-RESPA Integrated Disclosure (TRID) rule requires the creditor to deliver or place the Loan Estimate in the mail no later than three business days after receiving the consumer's completed application. If the application is received on Monday, the third business day is Thursday.
NMLS Mortgage Loan Origination Activities Questions and Answers
A mortgage loan originator receives a call from a potential borrower who provides their name, social security number, the address of the property they want to purchase, an estimated value for the property, and their annual income.
According to the TILA-RESPA Integrated Disclosure (TRID) Rule, what additional piece of information is required before the MLO is obligated to provide a Loan Estimate?