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MLO Practice Test: Questions and Verified Answers, Exams of Advanced Education

City University of New York (CUNY) - New York City College of TechnologyAdvanced Education

A series of practice questions and verified answers related to the mortgage loan originator (mlo) exam. It covers various aspects of mortgage lending, including loan approval processes, fair lending laws, interest rates, mortgage types, respa regulations, and more. The document aims to help individuals preparing for the mlo exam by providing insights into common exam topics and potential questions.

Typology: Exams

2024/2025

Available from 01/13/2025

TheAcademicAce
TheAcademicAce 🇺🇸

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MLO Practice Test (100 OUT OF 100)
Questions and Verified Answers (Latest
Update)
An Approve/Eligible determination:
1. Is an indication that a property appraised for its sales price
2. Authorization to release funds in a refinance transaction
3. An automated loan approval from the Fannie Mae Du system
4. A recommendation that is received by the Freddie Mac loan prospector automated underwriting
system.
3. An automated loan approval from the Fannie Mae Du system.. this means that the borrower meets
the credit requirements and all other loan factors are acceptable. The LP recommendations are mostly
one word answers and the equivalent recommendation under LP would be Accept.
If a lender agrees to subordinate a loan, what has occurred?
1. The borrower has a first and second and has refinanced the first.
2. The loan has been denied
3. The second has been paid off
4. The borrower is in foreclosure
1. The borrower has a first and second and has refinanced the first...when the borrowed refinanced a
first and there is an existing second the second becomes the first when the old loan is paid off. To avoid
this from happening the second position lender will subordinate and remain in second position.
Which of the following are you permitted to ask loan applicants under the fair lending laws?
1. Their race
2. Their religion
3. If they plan to have additional children
4. Will they continue to work after they have children
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Download MLO Practice Test: Questions and Verified Answers and more Exams Advanced Education in PDF only on Docsity!

MLO Practice Test (100 OUT OF 100)

Questions and Verified Answers (Latest

Update)

An Approve/Eligible determination:

  1. Is an indication that a property appraised for its sales price
  2. Authorization to release funds in a refinance transaction
  3. An automated loan approval from the Fannie Mae Du system
  4. A recommendation that is received by the Freddie Mac loan prospector automated underwriting system.
  5. An automated loan approval from the Fannie Mae Du system.. this means that the borrower meets the credit requirements and all other loan factors are acceptable. The LP recommendations are mostly one word answers and the equivalent recommendation under LP would be Accept. If a lender agrees to subordinate a loan, what has occurred?
  6. The borrower has a first and second and has refinanced the first.
  7. The loan has been denied
  8. The second has been paid off
  9. The borrower is in foreclosure
  10. The borrower has a first and second and has refinanced the first...when the borrowed refinanced a first and there is an existing second the second becomes the first when the old loan is paid off. To avoid this from happening the second position lender will subordinate and remain in second position. Which of the following are you permitted to ask loan applicants under the fair lending laws?
  11. Their race
  12. Their religion
  13. If they plan to have additional children
  14. Will they continue to work after they have children
  1. Their race, a HMDA requirement. The National Credit Score Disclosure Form provides the following:
  2. Statement that the credit score determines loan approval
  3. Four reason codes for the credit score
  4. A reason for the loan approval status
  5. The reason for the loan denial
  6. Four reason codes for the credit score. The income approach used in valuing property during an appraisal considers the following:
  7. The replacement cost of the property
  8. The average meridian income levwels of the community
  9. The fair market rental earnings of similar homes
  10. The qualifying income potential borrowers
  11. The fair market rental earnings of similar homes A mortgage broker decides to solicit business from a previous customer who closed on a home purchase. Which action could result in a $16,000 fine?
  12. Contacting the customer 17 months after the purchase transaction closed
  13. Verifying that the customer is not in the no-call-registry before making a sales call 2 years after the purchase transaction closed
  14. The client is listed on the company no-call list and the loan originator calls the customer just shy of 18 months after the purchase transaction closed.
  15. The customer is on the no-call-register and the loan originator calls 14 months later
  16. The client is listed on the company no-call list and the loan originator calls the customer just shy of 18 months after the purchase transaction closed. If the customer has requested not to be called then it is a violation to call the customer.

Who much receive a Notice of Right to Cancel in a refinance transaction?

  1. Anyone with ownership interest in the property
  2. Only parties who are on the new loan
  3. Only parties with 51% or more ownership in the property
  4. Only the primary borrower
  5. Anyone with ownership interest in the property...all persons that sign the security instrument must receive a notice of the right to cancel in any transaction where the security interest in the property is being used to secure new financing Under the Gramm Leach Bliley Act, which of the following is considered non public information?
  6. Previous owners of a particular party
  7. The street address of a property
  8. A current loan balance
  9. The assessed value of a subject property
  10. A current loan balance..this would be considered non public information The following refinance transactions are transactions that are designed to provide cash back Except:
  11. Debt consolidation
  12. Rate and term
  13. Limited cash-out
  14. Cash-out refinance
  15. Rate and term..a rate and term refinance transaction is designed to either reduce the rate or reduce the term

A borrower is applying for a loan on a single-family residence. His income is $21.50 per hour and he works 40 hours a week. He is paid semi-monthly. The loan. Originator has calculated the principal and interest Houston payment at $755 per month and the monthly escrow payment is $135. The current monthly debts are a car payment for $289, a credit card for $49, a cell phone bill for $63 and utilities of $102. What is his Houston expense ratio?

This entity under a Lien Theory state places a voluntary lien on real estate even though it does not have legal or equitable title:

  1. Mortgagee
  2. Mortgagor
  3. Buyer
  4. Seller
  5. Mortgagee The Real Estate Settlement Procedures Act (RESPA) was established to:
  6. Ensure the seller and buyer each pay half of all closing costs
  7. Eliminate kickbacks and excessive fees
  8. Set standard closing costs
  9. Set a minimum cost for all closing items
  10. Eliminate kickbacks and excessive fees..RESPA does not establish the costs of settlement services it provides a vehicle for disclosing the cost of settlement services. It does prohibit kickbacks and excessive fees in any aspect of a federally related mortgage loan.
  1. Rural Housing Service (RHS)
  2. Veteran Administration (VA)
  3. Federal Housing Administration (FHA)
  4. Fannie Mae
  5. Federal Housing Administration (FHA)..FHA guarantees that the lender will be covered 100% GoT their loss in the event of a borrower defaulting on a FHA loan, VA is 25% The Freddie Mac automated underwriting system is:
  6. DU
  7. LP
  8. FP
  9. DO
  10. LP Under Section 8 RESPA, a payment is considered:
  11. Equal to receiving or giving a thing of value
  12. Only cash or check
  13. A bona fide fee which is comprised of cash or a liquid cash equivalent
  14. Money given or received by the referring party to a transaction under a federally related mortgage loan
  15. Equal to receiving or giving a thing of value..it does not have to be money. A lender has an affiliated business arrangement with a third party service provider. Under what circumstances can the lender require a borrower to use the services in a loan transaction?
  16. If there is no kickback or referral fees & the service provider is an attorney, credit reporting agency or appraiser
  17. Always as long as there is no kickback or referral fee
  1. If the lender has an ownership interest if 1% or more in the third party service provider
  2. Under no circumstances. It would be a violation of RESPA.
  3. If there is no kickback or referral fees and the service provider is an attorney, credit reporting agency or appraiser. Is there a difference between a Notice of Action taken and a Adverse Action notice?
  4. No, just different names for the same thing
  5. No, high notices are only required when there has been a denial based on information in the credit report
  6. Yes, one notice is part of ECOA and one notice is part of FCRA
  7. Yes, one is a denial notice and the other is an approval notice only Notice of Action taken is part of ECOA and is due 30 days after receiving a loan application
  8. Yes, one notice is part of ECOA and one notice is part of FCRA...Adverse Action Notice is associated with FCRA and requires lenders and brokers to provide a notice to the consumer anytime credit is denied as a result of information contained in a credit report. The process where the trustee holds title via a deed of trust is known as:
  9. Lien theory
  10. Title theory
  11. Deed theory
  12. Binder theory
  13. Title theory..in a lien theory state the borrower holds both equitable and legal title to the property and the lender puts a lien on the property. In a lien theory state:
  14. A mortgage on real estate is a conveyance of title to the lender
  15. The borrower retains both equitable and legal title
  1. Standards for conforming loans are set by Fannie Mae and Freddie Mac
  2. Standards for conforming loans are set by Fannie Mae and Freddie Mac The Good Faith Estimate will provide the following information EXCEPT:
  3. Points made by the borrower
  4. An estimate of title insurance fees
  5. An estimate of the cost for an appraisal
  6. The total finance charge
  7. The total finance charge..it is disclosed on the TILA disclosure. A mortgage broker is unable to assist a client and refers him to another mortgage broker for origination services. The second broker pays the referring broker a fee for providing the lead. Which of the following is correct?
  8. Payment of the fee is illegal
  9. The fee is legal because they are mortgage brokers and work under a brokerage referral arrangement like real estate agents
  10. The fee is legal as long as the fees do not exceed 25% of the collected amount
  11. The fee is legal as long as there is a written agreement in place
  12. Payment of the fee is illegal. The fee is a referral fee and is a violation of RESPA A mortgage broker enters into a rental agreement with a Real estate agent where the rent for the office space is at the prevailing market price. Who has violated RESPA?
  13. Neither the real estate agent or the mortgage broker
  14. The real estate agent
  15. The mortgage broker
  16. Both the real estate agent & the mortgage broker
  17. Neither the real estate agent or the mortgage broker

If funds are sent to a settlement agent prior to the borrower signing all closing documents, this is an example of:

  1. Dry settlement
  2. Escrow settlement
  3. Cash disbursement
  4. Wet settlement
  5. Wet settlement... in a dry settlement state the funds are sent after all funding conditions have been cleared. Which federal law specifically prohibits housing discrimination in residential real estate transactions?
  6. ECOA
  7. GLBA
  8. HMDA
  9. FHA
  10. FHA. The Fair Housing Act. Remember not to get confused. The Federal Housing Administration is also FHA What type of appraisal uses another house to determine what it would cost to rebuild the subject property?
  11. Cost approach
  12. Sales approach
  13. Income approach
  14. Market Value approach
  15. Cost approach..the cost to rebuild. The market value approach is the same as the sales approach which used recent sales of similar properties to determine a value for the subject property
  1. Protect the borrower in the event of a default
  2. Protect the lender financing a conventional mortgage
  3. Protect the lender financing a FHA loan
  4. Protect the lender financing a conventional mortgage What is a fully amortizing loan?
  5. A loan that becomes due before the amortizing schedule is completed
  6. A loan where the regular principal and interest payments pay the loan balance on schedule
  7. An interest only loan
  8. A negative amortizing loan
  9. A loan where the regular principle and interest payments pay the loan balance on schedule The SAFE Act minimum education requirement include the following EXCEPT:
  10. Complete 20 hours of approved NMLS education courses by an approved NMLS education provider
  11. Complete 3 hours of federal law and regulations, 3 hours of ethics, including fraud, a consumer protection and fair lending, and 2 hours of non traditional lending
  12. Pass a national and state written test with a passing grade of 75%
  13. 8 hours of continuing education annually including 3 hours of ethics, 3 hours of federal law and 2 hours of training in non traditional mortgage products
  14. Continuing education does not require 3 hours of ethics. The SAFE Act requires 8 hours of annual continuing education including 3 hours of federal law, 2 hours of ethics and 2 hours of non traditional product training. The extra hour is an elective to be determined by each state or the approved school The FCRA was extended in 2003 by the following:
  15. The ECOA
  16. FACTA
  17. GLBA

4. FTC

2. FACTA

An applicant owns a consulting business designing websites for his clients. For the last 3 years he has earned $21,000 and $22,000 and $24,000 this year as a sole proprietor. I'm addition to his consulting practice, he has a full-time job with a marketing firm. He earns $60,000 a year paid in a weekly basis. Calculate the income a loan Officer will use to quality him for a mortgage.

  1. $1,916.
  2. $5,
  3. $7,
  4. $6,916.
  5. $6,916.66.. average the consoling self employment over the most recent 2 years and add the regular salary income. Concert the income into gross monthly income. A mortgage advertisement states "Monthly payments of only $800. What other information should the ad include?
  6. APR, finance charges, down payment amount
  7. APR only
  8. Payment schedule and finance charges
  9. Interest rate and down payment
  10. APR, finance charges, down payment amount A mortgage broker pays for title services on behalf of a developer. In return, the developer agrees to refer prospective buyers to the mortgage broker. Who has violated RESPA?
  11. Both the mortgage broker and the developer
  12. The developer only
  13. The mortgage broker only
  14. Neither the mortgage broker nor the developer

While interviewing a prospective borrower, a loan officer uncovers the applicant has a child support payment that does not show in any documents. The mlo decides not to include the debt on the 1003 because it would cause the qualifying ratios to be out of approval range. How would you describe this failure to disclose?

  1. Ethical, only debts on the credit report should be included in the qualifying ratios
  2. Unethical, it is not a nice thing to fail to disclose debts
  3. Illegal
  4. A good business move. It means the borrower will qualify and probably get the loan and the mlo will get paid
  5. Illegal.. it's a violation of federal law to intentionally fail to disclose information that if known would cause the lender to render a less favorable decision if the information was disclosed. Both the mlo and the borrower are responsible for the failure to disclose. With this category of mortgages, the interest rate and monthly principal and interest payment cannot change over the life of the loan:
  6. Adjustable rate mortgage
  7. Fixed-rate Mortgage
  8. Pay option arm
  9. Temporary buy down
  10. Fixed-rate mortgage A husband and wife are co-owners of their primary residence. They are entering into a refinance transaction. The husband receives one copy of the notice of the right to rescind, however, the wife receives no disclosures. What is the deadline for rescission?
  11. 3 years
  12. 3 days
  13. 3 business days
  14. By midnight of the third business day
  15. 3 years..when all owners do not receive the disclosures informing them of their right to rescind. The rescission period extends to 3 years

The following would be an acceptable form of funds at settlement for a FHA loan:

  1. Cash
  2. Gift from a relative
  3. Gift from a neighbor
  4. A loan on a credit card
  5. Gift from a relative. FHA allowed 100% of the funds needed at closing to be a gift. The gift can be from a relative. Gifts from neighbors, cash and credit card loans are unacceptable sources of funds at closings The Alternative Mortgage Transaction Parity Act (AMPTA) preempted state laws by allowing all of the following EXCEPT:
  6. Balloon payments
  7. Adjustable rate products
  8. Limiting loans to fixed rate products only
  9. No limit on prepayment penalties
  10. Limiting loans to fixed rate products only An appraisal cannot he more than how many days old before an update will be required?
  11. 180 days
  12. 120 days
  13. 90 days
  14. 12 months or less
  15. 120 days...the Fannie Mae requirement is 12p days, however many lenders are choosing to update after 90 days
  1. Processing fee
  2. Administration fee
  3. Title examination fee
  4. Title examination fee..underwriting, processing, & admin fees go to the lender and are not considered third party fees. They all would be included in the my origination charge. The title exam fee is a legitimate third party fee and is not included in the my origination charge An applicant receive a gift in the form of a personal check from a relative to cover his down payment. He has deposited those funds in his bank account. Where does a loan Officer list these assets on the 1003?
  5. Bank information
  6. Stocks
  7. Cash deposit
  8. Other assets
  9. Bank information...if the funds are in the bank. Then they must be correctly disclosed as such on the

On a 95% Fannie Mae conventional loan the maximum seller contribution on a loan for an owner occupied purchase is:

  1. 2%
  2. 3%
  3. 5%
  4. 6%
  5. 3%...Fannie Mae limits seller contribution to 3% of the lesser of the appraised value or the sales price when the LTV is 90% or higher What is the cost a lender expects a borrower to pay for the benefit of borrowing money?
  6. Yield spread
  7. Lock
  1. Interest
  2. Annual percentage rate
  3. Interest Which of the following statements is incorrect relating to a fully indexed rate?
  4. A fully indexed rate is the real interest rate of an adjustable rate mortgage (ARM)
  5. The introductory rate for the first 6 months of a 3/1 ARM
  6. The rate that is a result of adding the index and the margin
  7. The real interest rate
  8. The introductory rate for the first 6 months of a 3/1 ARM.. ARMS often have introductory, teaser, or temporary discounted rates. The fully indexed rate is the result of adding the index and the margin The national representative credit score range is:
  9. 400- 750
  10. 300- 850
  11. 375- 775
  12. 350- 800
  13. 300- 850 Which of the following would NOT be included in the Truth-In-Lending disclosure:
  14. APR
  15. Finance charge
  16. Escrow amount
  17. Amount financed
  18. Escrow amount...the escrow amount is a RESPA related item and would be included in the RESPA disclosures not TILA disclosures