Exam MLO Cram Review - Latest Study MLO Questions
Exam MLO Cram Review - Latest Study MLO Questions
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NMLS Mortgage Loan Origination (SAFE MLO) Exam Sample Questions (Q47-Q52):
NEW QUESTION # 47
If a mortgage loan includes a prepayment penalty, it must be included on which of the following disclosures?
- A. Loan Estimate only
- B. Closing Disclosure only
- C. Uniform Residential Loan Application
- D. Both the Loan Estimate and Closing Disclosure
Answer: D
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 # 48
An easement:
- A. is a mortgage modification.
- B. allows a borrower to make less than the required payments without going through a full mortgage modification.
- C. is a right to cross or otherwise use someone else's land for a specified purpose.
- D. allows a loan applicant to close on a loan even if all the stipulations have not been met.
Answer: C
Explanation:
An easement is a legal right granted to one party to cross or use another party's land for a specific purpose, such as for utility lines, access roads, or water drainage. Easements are commonly granted in property transactions and are recorded in the public records.
* Easements are unrelated to mortgage modifications (A) or payment reductions (D).
References:
* Real Estate Law on property easements
* HUD Guidelines on easements in property transactions
NEW QUESTION # 49
For an FHA loan, which of the following payments must a borrower make to protect a lender in case of a foreclosure?
- A. Homeowners association dues
- B. Mortgage insurance premium
- C. Hazard insurance premium
- D. Down payment
Answer: B
Explanation:
For FHA loans, borrowers are required to pay a Mortgage Insurance Premium (MIP). This insurance protects the lender in case of default or foreclosure. FHA loans are backed by the Federal Housing Administration, and MIP is mandatory for borrowers due to the lower down payment requirements and increased risk to lenders.
* Mortgage Insurance Premium (MIP): FHA loans require an upfront MIP at closing (usually 1.75% of the loan amount) and annual MIP, which is divided into monthly installments and added to the mortgage payment.
* The MIP protects lenders by providing insurance coverage in the event the borrower defaults, reducing the lender's loss.
Other options:
* Down payment (A) is required but does not protect the lender.
* Hazard insurance premium (B) protects the property, not the lender in foreclosure.
* Homeowners association dues (D) are unrelated to lender protection.
References:
* FHA Single-Family Housing Policy Handbook
* U.S. Department of Housing and Urban Development (HUD) guidelines
NEW QUESTION # 50
Non-qualified mortgages offer more options for borrowers who:
- A. have no down payment.
- B. are currently living with their parents.
- C. are unemployed.
- D. are self-employed.
Answer: D
Explanation:
Non-qualified mortgages (Non-QM) are designed to help borrowers who do not meet the standard documentation or income verification requirements of traditional qualified mortgages (QM). Non-QM loans provide more flexibility in underwriting guidelines and are often used by borrowers such as:
* Self-employed individuals who may have inconsistent or difficult-to-verify income streams. These borrowers may use bank statements or asset-based verification instead of W-2 forms or tax returns to qualify for a loan.
Non-QMs cater to borrowers who have unique financial situations but still demonstrate the ability to repay.
Non-QM loans are not necessarily high-risk but offer alternatives for those who don't meet the stringent Qualified Mortgage rules.
Other options:
* Unemployed individuals (A) typically cannot qualify unless they have alternative forms of income.
* No down payment (C): Non-QM loans usually still require a down payment, though the amount may vary.
* Living with parents (D) is not a relevant factor in Non-QM lending.
References:
* Dodd-Frank Act and Ability-to-Repay (ATR) rule
* CFPB guidelines on Qualified vs. Non-Qualified Mortgages
NEW QUESTION # 51
According to Federal Reserve Regulation Z, which of the following fees is a finance charge in a residential mortgage transaction?
- A. Notary
- B. Credit report
- C. Title Insurance
- D. Interest
Answer: D
Explanation:
Under Federal Reserve Regulation Z, which implements the Truth in Lending Act (TILA), interest is classified as a finance charge because it represents the cost of borrowing the funds over the life of the loan.
Finance charges include any fee that a borrower pays as a condition of obtaining the loan, such as interest, points, and certain fees.
* Notary fees (A), credit report fees (C), and title insurance (D) are not considered finance charges because they are third-party fees not directly related to the cost of borrowing.
References:
* Truth in Lending Act (TILA), 12 CFR §1026.4
* CFPB Regulation Z Guidelines
NEW QUESTION # 52
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