NMLS SAFE MLO Test practice questions with answers

Answer: A) No, not as a co-borrower

• ACorrect. A spouse cannot be required to sign the note if the applicant qualifies individually (other documents may be needed to create a valid lien).
• BIncorrect. Regulation B limits spouse signature requirements.
• CIncorrect. The spouse's credit does not change the rule.
• DIncorrect. The rule is not program-specific.

Answer: B) Exempt from familial status protections, if requirements are met

• AIncorrect. Only familial status is exempted.
• BCorrect. Other protections still apply.
• CIncorrect. It's permitted with requirements.
• DIncorrect. It's exempt from familial status rules.

Answer: C) $400,000, though an evaluation may be needed

• AIncorrect. The threshold was raised to $400,000.
• BIncorrect. The residential threshold is $400,000.
• CCorrect. GSE and FHA rules may still require appraisals.
• DIncorrect. A threshold applies.

Answer: D) 3 hours

• AIncorrect. More hours are required.
• BIncorrect. Twelve hours are electives.
• CIncorrect. Eight hours is the annual CE requirement.
• DCorrect. The 20 hours include 3 of federal law, 3 of ethics and 2 on nontraditional mortgage lending.

Answer: B) Violations of state law, enforcement actions, and other relevant information

Regulation H (12 CFR 1008.111(d)) requires state law to make the loan originator supervisory authority regularly report violations, enforcement actions, and other relevant information to NMLSR. This supports information sharing among regulators.

• AIncorrect. Regulation H does not require regulators to report licensees' pricing to NMLSR. NMLSR is a licensing and supervisory database, not a rate-reporting system.
• BCorrect. 12 CFR 1008.111(d) requires that the supervisory authority be required under state law to regularly report violations of that law, as well as enforcement actions and other relevant information, to NMLSR. This lets regulators share supervisory information across states.
• CIncorrect. Regulators do not report borrowers' credit or income data to NMLSR. The reporting duty covers violations, enforcement actions, and other relevant regulatory information.
• DIncorrect. Regulation H does not require state regulators to set or report interest rate caps through NMLSR. The required reporting concerns violations and enforcement actions.

Answer: C) Owned lots plus common areas run by an association

• AIncorrect. That's a co-op.
• BIncorrect. Lots are individually owned.
• CCorrect. HOA dues often apply.
• DIncorrect. Common areas are typical.

Answer: A) Servicing moves to the buyer

• ACorrect. The buyer of the loan also takes over the servicing rights.
• BIncorrect. That is servicing retained.
• CIncorrect. The loan continues.
• DIncorrect. Borrowers do not service their own loans.

Answer: A) The borrower can no longer take advances and begins repaying the outstanding balance

A typical HELOC has a draw period, when the borrower can take advances, followed by a repayment period, when no more advances are allowed and the balance is paid down. Some plans instead require a balloon payment of the full balance when the draw period ends.

• ACorrect. The CFPB explains that once the draw period ends, the borrower can no longer borrow and enters the repayment period. The balance is then repaid on a schedule, often over 10 to 20 years, and payments are often much higher.
• BIncorrect. A HELOC does not renew automatically. When the draw period ends, the ability to borrow stops and repayment begins.
• CIncorrect. Interest-only payments, where allowed, are a feature of the draw period. After the draw period, no new advances are allowed and payments usually include principal.
• DIncorrect. The HELOC remains the same credit plan and enters its repayment period. Turning the balance into a new first mortgage would require a separate refinance.

Answer: A) Uniform Residential Appraisal Report

Fannie Mae Form 1004 / Freddie Mac Form 70 is the Uniform Residential Appraisal Report for one-unit properties. The loan application is Form 1003. The GSEs are combining their appraisal forms into one redesigned report.

• ACorrect. Fannie Mae Form 1004 (Freddie Mac Form 70) is the Uniform Residential Appraisal Report. Appraisers use it to report their opinion of value on one-unit residential properties. The GSEs are now moving their separate appraisal forms into a single redesigned appraisal report.
• BIncorrect. The Uniform Residential Loan Application is Fannie Mae Form 1003 (Freddie Mac Form 65). The borrower fills it out to apply for the loan. It does not report the property's value.
• CIncorrect. The Closing Disclosure is the TILA-RESPA integrated disclosure the borrower receives before consummation. It is a CFPB-model form, not a Fannie Mae numbered form, and it summarizes final loan terms and costs rather than property value.
• DIncorrect. A Verification of Employment confirms the borrower's job and income. It is a separate GSE form (Fannie Mae Form 1005), not the appraisal report.

Answer: C) Economic (external) obsolescence

• AIncorrect. That's wear and tear.
• BIncorrect. That's a design issue.
• CCorrect. It comes from outside the property.
• DIncorrect. It's external obsolescence.

Answer: C) Documented by a decree or agreement and likely to continue for at least three years

Alimony can count as income when it is documented (decree, agreement or court order), has a history of receipt, and is likely to continue for about the first three years of the mortgage.

• AIncorrect. Underwriters look at whether the payments will continue into the loan, usually for the first three years. A long past history alone does not qualify the income if it is about to end.
• BIncorrect. The obligation must be documented, for example with a final divorce decree, separation agreement or court order, along with evidence of receipt.
• CCorrect. The obligation must be documented and the payments must be likely to continue for about the first three years of the mortgage. A history of receipt, such as cancelled checks, deposit slips or tax returns, is typically also required (12 months under the former Appendix Q standard).
• DIncorrect. One year of continuance is too short. The common standard is that payments are likely to continue for about the first three years of the mortgage.

Answer: B) $16,000

• AIncorrect. This is ten times too low.
• BCorrect. $320,000 × 0.05 = $16,000.
• CIncorrect. That would be 10% down.
• DIncorrect. That is the loan amount.

Answer: C) Discriminatory steering

• AIncorrect. This is unrelated.
• BIncorrect. The borrowers qualified for better terms.
• CCorrect. Steering borrowers to worse products on a prohibited basis violates fair lending laws.
• DIncorrect. There is no such rule.

Answer: D) It may not be secure and can expose borrower data

• AIncorrect. GLBA requires safeguards.
• BIncorrect. Security is the concern.
• CIncorrect. Security is the concern.
• DCorrect. Use the company's secure systems.

Answer: A) A straw buyer scheme

• ACorrect. A straw buyer hides the real borrower's identity, which is mortgage fraud.
• BIncorrect. Co-signers are disclosed on the application.
• CIncorrect. This is unrelated.
• DIncorrect. A gift of equity is a disclosed seller gift.