MLO Exam Dumps - NMLS SAFE MLO Questions and Answers

Real estate brokerage activities are not a primary function of a mortgage loan originator (MLO). The MLO’s primary role is to assist consumers in taking an application (A), offering or negotiating credit terms (B), and helping consumers apply for credit (C).

Real estate brokerage activities, such as negotiating real estate transactions, are separate from the loan origination process and require different licensing and qualifications.

References:

SAFE Act, 12 USC §5101

NMLS MLO Licensing Guidelines

Under the Truth in Lending Act (TILA), for mortgage rescission purposes, a business day is defined as every day except Sunday and legal holidays. This definition applies to the three-business-day right of rescission period, during which a borrower can cancel certain refinance or home equity transactions.

The right of rescission allows the borrower three business days after signing the loan documents to cancel the loan without penalty.

References:

Truth in Lending Act (TILA), 12 CFR §1026.2(a)(6)

CFPB Guidelines on rescission rights

The right of rescission is a provision under TILA (Truth in Lending Act) that gives borrowers the right to cancel certain types of loans within three business days after closing. This right applies specifically to refinance transactions on a borrower's primary residence, where they are taking cash out or refinancing their mortgage.

Cash-out refinances on a primary residence (C) are subject to the right of rescission because they involve the homeowner's primary residence.

Purchase loans (A) and loans secured by vacation homes (B) or other investment properties are not subject to this rule.

Even if the same creditor is refinancing the loan (Option D), the right of rescission still applies if it's a refinance of the primary residence.

References:

Truth in Lending Act (TILA) Section 125

Regulation Z, 12 CFR §1026.23 on the right of rescission

The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) requires all state-licensed mortgage loan originators (MLOs) to complete annual continuing education (CE) as part of their licensure requirements. This includes 8 hours of CE, covering topics like federal law, ethics, and nontraditional mortgage products.

The goal of the SAFE Act is to ensure MLOs are knowledgeable about regulations, ethical practices, and current mortgage industry trends. Failing to complete the required education can result in a license being suspended or revoked.

Other Acts:

The Dodd-Frank Act (B) sets broader regulations, such as those related to mortgage loan origination compensation.

TILA (C) governs disclosures and loan terms but does not mandate CE.

ECOA (D) focuses on preventing discrimination in credit but does not require CE.

References:

SAFE Act, 12 USC §5101

NMLS Continuing Education Requirements

The Home Ownership and Equity Protection Act (HOEPA) applies to certain types of high-cost loans, particularly refinance and home equity loans, that meet specific APR and fee thresholds. HOEPA was enacted to protect consumers from predatory lending practices in loans that carry excessive fees, high interest rates, or abusive terms.

HOEPA mainly covers:

Refinance loans

Home equity loans

Closed-end home equity loans

Certain purchase-money mortgages under specific conditions

Loans like construction loans (B), reverse mortgages (C), and USDA Rural Development loans (D) are generally excluded from HOEPA coverage.

References:

Home Ownership and Equity Protection Act (HOEPA), 15 U.S.C. § 1639

CFPB HOEPA Guidelines

A second (subordinate) mortgage loan refers to a mortgage taken out after the primary mortgage and is subordinate to the first in priority of claims on the property in case of default or foreclosure. One of the most common types of subordinate mortgages is a home equity line of credit (HELOC).

HELOC allows homeowners to borrow against the equity in their home, typically after the first mortgage, making it a subordinate loan.

Other options:

Government home purchase loans (A) and conventional home purchase loans (B) are typically first mortgages.

A home equity conversion mortgage (C) is a type of reverse mortgage, which is also typically a primary loan, not a subordinate one.

References:

Fannie Mae Selling Guide on subordinate financing

HELOC regulations under Regulation Z

To prove that an account listed on a credit report has been paid off, the borrower must provide an updated statement showing a zero balance. This is the most direct and verifiable method for a lender to confirm the account has been settled.

Oral confirmation (A) or a letter from the borrower (C) are not acceptable documentation, as they lack third-party verification.

No further documentation would be required if the credit report already reflects the zero balance, but until then, updated documentation is necessary.

References:

Fair Credit Reporting Act (FCRA)

Standard mortgage underwriting documentation guidelines

The Real Estate Settlement Procedures Act (RESPA) requires disclosures intended to prevent lenders and mortgage loan originators (MLOs) from increasing fees during the loan origination process. RESPA mandates the disclosure of estimated fees through the Loan Estimate (LE) and ensures that fees do not change substantially from the Loan Estimate to the final Closing Disclosure (CD) unless specific conditions justify the changes. This protects borrowers from "fee increases" during the settlement process.

While TILA (A) deals with disclosure of loan terms and APR, RESPA (D) focuses specifically on fees and closing costs during origination.

References:

RESPA (Real Estate Settlement Procedures Act), 12 USC §2601

CFPB RESPA Guidelines on fee tolerances

Under the TILA-RESPA Integrated Disclosure (TRID) rule, the borrower must receive the Loan Estimate (LE) at least 7 business days before the closing (also called consummation) of the mortgage loan. This rule ensures that the borrower has sufficient time to review and understand the loan terms and costs.

The 7-day waiting period starts from the day the Loan Estimate is delivered or placed in the mail. This period allows the borrower to ask questions and possibly negotiate terms before finalizing the mortgage.

References:

TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.19(e)

Consumer Financial Protection Bureau (CFPB) Guidelines

Under the USA Patriot Act, if a Suspicious Activity Report (SAR) is filed due to potential illegal activities, the MLO (Mortgage Loan Originator) is prohibited from discussing the filing of the SAR with any parties involved in the transaction, including the buyer’s agent, loan processor, or any other party. This prohibition ensures that the investigation is not compromised and that the confidentiality of the report is maintained.

Discussing the SAR with any party is considered a violation of anti-money laundering (AML) rules.

References:

USA Patriot Act, Anti-Money Laundering Provisions

FinCEN Guidelines on SAR Confidentiality