MLO Free Study Guide! with New Update 232 Exam Questions
Get up-to-date Real Exam Questions for MLO UPDATED [2026]
NEW QUESTION # 50
Which of the following fees or charges is an allowable closing cost typically found on a Closing Disclosure?
- A. Servicing fee
- B. Referral fee
- C. Yield-to-loan fee
- D. Origination charge
Answer: D
Explanation:
An origination charge is an allowable closing cost typically found on the Closing Disclosure (CD). This fee is charged by the lender for processing the mortgage application and creating the loan. It may include administrative fees, underwriting fees, and other costs related to loan origination.
* Referral fees (B) are illegal under RESPA.
* Servicing fees (C) are not typically listed as closing costs but are part of ongoing loan maintenance.
* Yield-to-loan fees (D) are not a standard item on a Closing Disclosure.
References:
* TILA-RESPA Integrated Disclosure (TRID) Rule
* RESPA (Real Estate Settlement Procedures Act) Section 8
NEW QUESTION # 51
Which of the following is considered a prohibition under the Real Estate Settlement Procedures Act (RESPA)?
- A. Donating an item of value to a silent auction hosted by a charity
- B. Sponsoring a little league team where the company name is on the uniforms
- C. Hosting an educational seminar at no cost to the participants
- D. Renting office space at lower rates based on the whole or in the amount of business referred
Answer: D
Explanation:
Section 8 of RESPA prohibits giving or accepting anything of value in exchange for referrals of settlement service business related to federally related mortgage loans. Renting office space at lower rates (or free) in exchange for referrals is specifically called out in RESPA guidance as an illegal kickback.
"Section 8(a) of RESPA prohibits giving or accepting any fee, kickback, or thing of value... for the referral of settlement service business. Examples of violations include... renting office space at above or below market rates based on the amount of business referred."
- 12 CFR § 1024.14; CFPB RESPA Section 8 Guidance
Hosting seminars, sponsoring uniforms, or donating to charity are generally permissible if not conditioned on referrals.
References:
CFPB, RESPA Section 8
SAFE MLO National Test Study Guide
NEW QUESTION # 52
Which of the following must be included in advertisements displayed by mortgage loan originators (MLOs) on their social media pages for mortgage services including payment amounts?
- A. The MLO's business address
- B. The MLO's personal website
- C. The APR
- D. The number of days that the rate is available
Answer: C
Explanation:
Under Regulation Z (TILA), when mortgage loan originators (MLOs) advertise mortgage services, including payment amounts, they must disclose the Annual Percentage Rate (APR). The APR reflects the total cost of the loan, including interest and certain fees, and provides a clear picture of the loan's true cost over time.
* Failure to include the APR in an advertisement that mentions payment amounts, interest rates, or other specific loan terms is considered a violation of TILA's advertising requirements.
* Other details (B, C, D), such as the MLO's website or the number of days the rate is available, are not mandatory in all advertisements, but the APR is required.
References:
* Truth in Lending Act (TILA), 12 CFR Part 1026 (Regulation Z)
* CFPB Advertising Rules for Mortgage Services
NEW QUESTION # 53
A borrower who knowingly makes false statements on a federally related mortgage loan to obtain property may be:
- A. fined up to the total purchase price of their home.
- B. fined up to $1 million and imprisoned for 30 years.
- C. imprisoned for 10 to 16 months
- D. fined up to JB10,000 or imprisoned for 6 months.
Answer: B
Explanation:
A borrower who knowingly makes false statements on a federally related mortgage loan to obtain property can face severe penalties under federal law. The penalties can include:
* A fine of up to $1 million.
* Imprisonment for up to 30 years.
These penalties fall under federal statutes such as 18 U.S.C. § 1014, which covers fraud and false statements related to loan applications. This is a serious offense, and the law is designed to deter fraud in federally related mortgage transactions.
References:
* 18 U.S.C. § 1014 - Penalties for False Statements
* Fraud Enforcement and Recovery Act (FERA)
NEW QUESTION # 54
Which of the following activities is a function of the Consumer Financial Protection Bureau (CFPB)?
- A. Deciding what quantity of mortgage-backed securities are purchased by the government
- B. Regulating mortgage lenders on their mortgage origination practices and procedures
- C. Regulating the federal funds rate at which money is lent to banks
- D. Regulating the number of mortgage loan originators in the mortgage industry
Answer: B
Explanation:
The Consumer Financial Protection Bureau (CFPB) is responsible for regulating mortgage lenders and overseeing their origination practices and procedures. The CFPB was created under the Dodd-Frank Act to protect consumers from unfair, deceptive, or abusive practices in financial services, including mortgages. Its functions include:
* Enforcing rules related to mortgage origination, such as TILA, RESPA, and ECOA.
* Ensuring that lenders provide clear disclosures and follow fair lending practices.
Other functions:
* Regulating the federal funds rate (A) is the role of the Federal Reserve.
* Deciding the quantity of mortgage-backed securities purchased by the government (D) is related to Federal Reserve monetary policy, not the CFPB.
References:
Dodd-Frank Wall Street Reform and Consumer Protection Act
CFPB's Role in Mortgage Origination
NEW QUESTION # 55
Mortgage loan originators planning to renew their licenses are required by the SAFE Act to complete which of the following education topics as part of their mandatory annual continuing education?
- A. Credit score modeling standards
- B. 30-year conventional mortgage lending standards
- C. Nontraditional mortgage lending standards
- D. Mortgage loan loss mitigation standards
Answer: C
Explanation:
Under the SAFE Act, mortgage loan originators (MLOs) must complete 8 hours of continuing education (CE) each year to maintain their licenses. The required CE topics include:
* 3 hours of federal law and regulations.
* 2 hours of ethics, which must include instruction on fraud, consumer protection, and fair lending.
* 2 hours on nontraditional mortgage lending standards, which refers to loan products that do not have fixed interest rates, such as adjustable-rate mortgages (ARMs) and other alternative loan types.
* 1 elective hour, which can vary based on state or company preferences.
The focus on nontraditional mortgage lending helps ensure MLOs understand the complexities and risks of nonstandard loan products.
References:
* SAFE Act Continuing Education Requirements
* NMLS Annual Renewal Guidelines
NEW QUESTION # 56
Which of the following responses describes the main purpose of the secondary market?
- A. To fund additional loans
- B. To service second mortgage loans
- C. To fund second mortgage loans
- D. To fund a second home loan
Answer: A
Explanation:
The main purpose of the secondary market is to fund additional loans by allowing lenders to sell existing mortgages to investors. This process replenishes the lender's capital, enabling them to originate more loans.
The secondary market is where mortgage-backed securities (MBS) are bought and sold, providing liquidity to the mortgage market.
* Other options such as funding second mortgages or second home loans are specific transactions that do not capture the overall purpose of the secondary market.
References:
* Fannie Mae and Freddie Mac Secondary Market Guidelines
* HUD Secondary Mortgage Market Overview
NEW QUESTION # 57
If a mortgage loan includes a prepayment penalty, it must be included on which of the following disclosures?
- A. Uniform Residential Loan Application
- B. Closing Disclosure only
- C. Both the Loan Estimate and Closing Disclosure
- D. Loan Estimate only
Answer: C
Explanation:
If a mortgage loan includes a prepayment penalty, it must be disclosed on both the Loan Estimate (LE) and the Closing Disclosure (CD). These disclosures, mandated under the TILA-RESPA Integrated Disclosure (TRID) rule, ensure that borrowers are aware of any penalties they may face for paying off the loan early. The prepayment penalty must be clearly stated to comply with TILA (Truth in Lending Act) requirements.
* The Loan Estimate provides an early overview of loan terms, and the Closing Disclosure finalizes those terms.
References:
* TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.38
* CFPB Guidelines on prepayment penalties
NEW QUESTION # 58
An interest-only mortgage is a mortgage with scheduled payments that require the consumer to have:
- A. Fixed payments every month, but the interest rate adjusts monthly.
- B. Payments of interest for a specified amount of time.
- C. Adjustable payments every month based on an adjustable interest rate.
- D. Monthly payments for a specified amount of time that then roll over to principal-only payments because the interest has already been paid.
Answer: B
Explanation:
With an interest-only mortgage, the borrower makes payments that cover only the interest for a set period (such as 5 or 10 years). After this period, the borrower begins paying both principal and interest, which causes payments to increase.
"An interest-only mortgage is a loan with scheduled payments that for a period of time require payment of interest only, with no reduction of the principal balance."
- CFPB, Consumer Handbook on Adjustable-Rate Mortgages; SAFE MLO National Test Study Guide References:
CFPB, Interest-Only Mortgages
NEW QUESTION # 59
According to the SAFE Act, which of the following activities requires licensure as a mortgage loan originator?
- A. Providing a consumer with the loan policies of the lender
- B. Communicating the details of an offer for the first time over the phone
- C. Providing a consumer with a Homebuyer's Toolkit
- D. Communicating with a consumer to arrange a loan closing
Answer: B
Explanation:
Under the SAFE Act, any activity that involves offering, negotiating, or discussing loan terms with consumers requires licensure as a mortgage loan originator (MLO). Communicating the details of an offer over the phone would require MLO licensure, as it involves explaining or negotiating loan terms.
* Providing general information or resources like a Homebuyer's Toolkit (A) or loan policies (B) does not require an MLO license, as these are not specific to negotiating loan terms.
References:
* SAFE Act, 12 USC §5101
* NMLS Licensing Requirements
NEW QUESTION # 60
Which of the following entities is the primary regulatory authority for state-licensed, non-depository lenders?
- A. NMLS
- B. The Federal Trade Commission
- C. The Conference of State Bank Supervisors
- D. A state regulator
Answer: D
Explanation:
For state-licensed, non-depository lenders, the primary regulatory authority is the state regulator in the jurisdiction where the lender operates. Each state has its own agency or department responsible for overseeing licensing, compliance, and enforcement of mortgage laws for non-depository institutions.
* The NMLS (A) is the system used to manage licenses but is not a regulatory authority.
* The Federal Trade Commission (B) oversees federal consumer protection laws but is not the primary regulator for state-licensed lenders.
* The Conference of State Bank Supervisors (CSBS) (D) helps coordinate state regulation but does not directly regulate individual lenders.
References:
* SAFE Act, 12 USC §5101
* NMLS and State Regulator Guidelines
NEW QUESTION # 61
Which of the following activities is a function of the Consumer Financial Protection Bureau (CFPB)?
- A. Deciding what quantity of mortgage-backed securities are purchased by the government
- B. Regulating mortgage lenders on their mortgage origination practices and procedures
- C. Regulating the federal funds rate at which money is lent to banks
- D. Regulating the number of mortgage loan originators in the mortgage industry
Answer: B
Explanation:
The Consumer Financial Protection Bureau (CFPB) is responsible for regulating mortgage lenders and overseeing their origination practices and procedures. The CFPB was created under the Dodd-Frank Act to protect consumers from unfair, deceptive, or abusive practices in financial services, including mortgages.
Its functions include:
* Enforcing rules related to mortgage origination, such as TILA, RESPA, and ECOA.
* Ensuring that lenders provide clear disclosures and follow fair lending practices.
Other functions:
* Regulating the federal funds rate (A) is the role of the Federal Reserve.
* Deciding the quantity of mortgage-backed securities purchased by the government (D) is related to Federal Reserve monetary policy, not the CFPB.
References:
* Dodd-Frank Wall Street Reform and Consumer Protection Act
* CFPB's Role in Mortgage Origination
NEW QUESTION # 62
Within how many days must a creditor notify an applicant of action taken on a completed mortgage loan application?
- A. 60 days
- B. 30 days
- C. 45 days
- D. 15 days
Answer: B
Explanation:
Under the Equal Credit Opportunity Act (ECOA), creditors must notify applicants of action taken (approval, denial, or other) within 30 days of receiving a completed application.
"A creditor shall notify an applicant of action taken within 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application."
- 12 CFR § 1002.9(a)(1), Regulation B (ECOA)
References:
CFPB, Notification Requirements
SAFE MLO National Test Study Guide
NEW QUESTION # 63
Which of the following responses best describes redlining?
- A. The identification of minority census tracts
- B. The analysis of the points and fees charged on loan transactions
- C. The identification of locations in which the lender will not lend
- D. The identification of low and moderate income census tracts
Answer: C
Explanation:
Redlining is the illegal practice of refusing to lend or offering less favorable terms to residents of certain geographic areas, often based on the racial or ethnic composition of those areas.
"Redlining is the practice of denying or restricting financial services to certain neighborhoods based on race or ethnicity."
- CFPB, What is redlining?
References:
CFPB, What is redlining?
SAFE MLO National Test Study Guide
NEW QUESTION # 64
Which of the following is an example of a non-fluctuating income source?
- A. Salaried W-2 position
- B. Part-time work with irregular hours
- C. Self-employed income
- D. Commission-based W-2 income
Answer: A
Explanation:
A salaried W-2 position is an example of non-fluctuating income because the borrower receives a consistent, fixed salary each pay period. This type of income is easy to verify and predict, making it ideal for mortgage qualification.
Other types of fluctuating income:
* Self-employed income (B) and commission-based income (C) vary based on the nature of work and can fluctuate month to month.
* Part-time work with irregular hours (D) also fluctuates due to varying work hours, making it inconsistent.
References:
* Fannie Mae Selling Guide for income verification
* Freddie Mac's Loan Product Advisor for employment income documentation
NEW QUESTION # 65
According to Fannie Mae, a loan with a purchase transaction loan amount of $160,000, sales price of
$180,000, and an appraised value of $200,000 has a loan-to-value ratio of what percentage?
- A. 90%
- B. 89%
- C. 80%
- D. 88%
Answer: C
Explanation:
For a purchase transaction, the Loan-to-Value (LTV) ratio is calculated by dividing the loan amount by the lesser of the sales price or the appraised value.
"For purchase transactions, LTV is calculated by dividing the loan amount by the lesser of the property's sales price or appraised value."
- Fannie Mae Selling Guide, B2-1.2-03
Here:
Loan Amount: $160,000
Sales Price: $180,000
Appraised Value: $200,000
Lesser of sales price/appraised value: $180,000
LTV = ($160,000 ÷ $180,000) × 100 = 88.89%
However, the options provided are: 80%, 88%, 89%, 90%. The closest, and by rounding convention for mortgage lending, 89% would be correct. However, sometimes the answer is provided as a rounded figure, in which case 89% (C) would be the correct answer.
Let's verify the math:
$160,000 ÷ $180,000 = 0.8888 = 88.9% (rounded to the nearest whole percent, 89%).
So, the correct answer is: C
References:
Fannie Mae Selling Guide, B2-1.2-03: Purchase Transactions
SAFE MLO National Test Study Guide
NEW QUESTION # 66
If a borrower only receives commission pay for 18 months, which of the following actions should a mortgage loan originator (MLO) take?
- A. Tell the borrower to come back in 6 months when they will have 24 months of commission pay
- B. Tell the borrower they need a steady income and not one that fluctuates
- C. Take the application because positive factors may offset the short income history
- D. Take the application but tell the borrower that they will need a cosigner
Answer: C
Explanation:
Standard guidelines recommend a 2-year history of commission income to count it as qualifying income.
However, lenders may consider a shorter history if there are positive factors to offset the shortfall. MLOs should always take the application and allow underwriting to review the overall credit risk.
"Generally, a minimum history of two years is recommended for commission income, but a shorter period may be considered with compensating factors."
- Fannie Mae Selling Guide, B3-3.1-05: Secondary Employment Income
References:
Fannie Mae, Commission Income Requirements
SAFE MLO National Test Study Guide
NEW QUESTION # 67
How many days must a borrower's mortgage loan be delinquent before the mortgage company is permitted to submit the first notice filing in the foreclosure process?
- A. 60 days
- B. 30 days
- C. 120 days
- D. 90 days
Answer: C
NEW QUESTION # 68
Which of the following responses describes the primary reason to conduct a title search?
- A. To determine whether a buyer can purchase the collateral property
- B. To confirm the identity of the applicant
- C. To determine the amount of homeowner's insurance required
- D. To identify any preexisting liens against the collateral property
Answer: D
Explanation:
A title search is performed during the mortgage process to uncover any preexisting claims, liens, judgments, or encumbrances on the property. This ensures that the lender and buyer are aware of any legal interests other parties may have and helps establish clear ownership.
"A title search is a review of public records to determine and confirm a property's legal ownership, and to find out what claims or liens are on the property."
- CFPB, Buying a House: Settlement Process Overview
Confirming applicant identity, insurance, or purchase ability are not the primary purposes of a title search.
References:
CFPB, What is a title search?
NEW QUESTION # 69
A lender will require private mortgage insurance for first lien loans with loan-to-value over what percentage?
- A. 75%
- B. 80%
- C. 78%
- D. 70%
Answer: B
Explanation:
Private mortgage insurance (PMI) is typically required for conventional first-lien loans when the loan-to- value (LTV) ratio exceeds 80%. That is, when the borrower puts down less than 20% as a down payment.
"PMI is required by lenders on conventional loans with a loan-to-value ratio greater than 80 percent."
- Homeowners Protection Act of 1998; CFPB PMI Guidance
References:
CFPB, When can I remove PMI?
NEW QUESTION # 70
A title insurance policy ensures that:
- A. A condominium is warrantable.
- B. The borrower can repay the loan.
- C. The borrower owns the property.
- D. The title commitment is accurate.
Answer: C
Explanation:
Title insurance protects against losses arising from disputes over property ownership or other defects in title.
It ensures the borrower (and lender) that the property being purchased is rightfully owned by the borrower and is free of undisclosed liens or encumbrances.
"Title insurance protects against losses if there are problems with the ownership of your property after you buy it. It guarantees that you legally own the home."
- CFPB, What is title insurance?
References:
CFPB, What is title insurance?
NEW QUESTION # 71
A borrower's monthly debt-to-income ratio is calculated by taking the:
- A. eligible total monthly debt obligations for trade lines greater than 12 months multiplied by the borrower's net monthly income.D eligible total monthly debt obligations excluding the monthly housing expense divided by the borrower's net monthly income
- B. borrower's gross monthly housing expense divided by the principal, interest, and appraised value.
- C. eligible total monthly debt obligations, including the monthly housing expense, divided by the borrower's gross monthly income.
Answer: C
Explanation:
The debt-to-income (DTI) ratio is a key metric used by lenders to assess a borrower's ability to manage monthly payments and repay a mortgage. It is calculated by dividing the borrower's total monthly debt obligations, including:
* Monthly housing expenses (principal, interest, taxes, and insurance, also known as PITI).
* Any other recurring debt obligations (car loans, student loans, credit card payments, etc.).
This total is divided by the borrower's gross monthly income (before taxes and deductions). This calculation helps determine whether the borrower meets lending standards, with most lenders preferring a DTI ratio below 43% for qualified mortgages.
References:
Fannie Mae and Freddie Mac guidelines on debt-to-income ratio
CFPB Qualified Mortgage Rules
NEW QUESTION # 72
A mortgage loan originator (MLO) received a salary of 1% per loan plus a bonus of $5,000 for closing the most loans in the office last year. In addition, he received a trip to Hawaii based on closing 100 or more transactions with an interest rate of 5% or higher. Is the MLO's compensation prohibited?
- A. His compensation is not permitted as compensation only includes salary and his salary is based on loan terms.
- B. His compensation is permitted as compensation only includes salary and his salary is not based on loan terms.
- C. His compensation is permitted as compensation only includes salary and bonuses and his salary and bonus is not based on loan terms.
- D. His compensation is not permitted as compensation includes all financial incentives and his trip was awarded based on closing the most loans with certain loan terms.
Answer: D
Explanation:
Under Dodd-Frank Act regulations and Regulation Z (TILA), mortgage loan originators (MLOs) cannot be compensated based on the terms of the loan, such as interest rates, loan amount, or product type. This includes any financial incentives, like bonuses or rewards, tied to loan terms. In this case:
* The trip to Hawaii was awarded based on closing loans with an interest rate of 5% or higher, which directly ties the MLO's compensation to a specific loan term (the interest rate).
* This violates the Loan Originator Compensation Rule, which prohibits compensating MLOs based on the terms or conditions of a loan, in order to protect borrowers from steering into unfavorable loan products.
Therefore, all forms of compensation-including bonuses, trips, or other rewards-are scrutinized if they are tied to loan terms, making the MLO's trip to Hawaii an illegal incentive under current law.
References:
* Dodd-Frank Act - Loan Originator Compensation Rules
* TILA/Regulation Z - Anti-Steering and Loan Terms Compensation Rules
NEW QUESTION # 73
Which of the following reasons is acceptable for denying a loan under the Equal Credit Opportunity Act (ECOA)?
- A. Marital status
- B. Country of birth
- C. Immigration status
- D. Receipt of child support
Answer: C
Explanation:
Under the Equal Credit Opportunity Act (ECOA), lenders can deny a loan based on immigration status, as it directly relates to the borrower's ability to legally reside and work in the country. Lenders must ensure that the borrower has the legal capacity to enter into a binding contract and that they are authorized to work in the U.S. for the loan's duration.
* Receipt of child support (A), marital status (C), and country of birth (D) are protected characteristics under ECOA, meaning a lender cannot deny credit based on these factors.
References:
* Equal Credit Opportunity Act (ECOA), 15 U.S.C. §1691
* CFPB Regulation B
NEW QUESTION # 74
According to Regulation Z, which of the following is a prohibited act?
- A. Redisclosing a Loan Estimate immediately after locking the rate
- B. Including undocumented child support payments made by the borrower
- C. Issuing disclosures to applicants
- D. Advertising rates not currently available to applicants
Answer: D
Explanation:
Under Regulation Z, which implements the Truth in Lending Act (TILA), it is a prohibited act to advertise mortgage rates that are not currently available to applicants. This rule ensures transparency in advertising, preventing lenders from misleading consumers with rates or terms that they cannot actually offer.
* Advertising must reflect current, accurate rates and must not mislead borrowers about the costs or availability of loans.
Other options:
* Including undocumented child support (A) may violate documentation standards but is not prohibited under Regulation Z.
* Issuing disclosures (B) and re-disclosing Loan Estimates (C) are required actions under TILA and TRID.
References:
* Regulation Z (TILA), 12 CFR Part 1026
* CFPB Advertising Rules under TILA
NEW QUESTION # 75
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