FREE NMLS Practice Test 2025 Official Study Guide [PDF]

1) The primary purpose of the Equal Credit Opportunity Act (ECOA) is to ensure that:

2) At what percentage does the loan-to-value ratio have to fall below before the requirements of private mortgage insurance are lifted?

3) The primary purpose of the Dodd-Frank Act is to:

4) How many days prior to closing must a lender provide the HUD-1 Settlement Statement to the borrower?

5) “Periodic adjustment caps” on an ARM:

6) A borrower may deposit funds into an escrow reserve primarily for:

7) Which loan program is specifically designed for borrowers purchasing in rural areas?

8) For any individual originating a residential loan, a unique identifier must be shown on all documents, except:

9) What is the minimum pre-licensing education required for an individual seeking an NMLS MLO license?

10) According to Fannie Mae, a borrower must occupy the property within:

11) Under ECOA, which of the following is not an acceptable method to deliver a required notice of action?

12) Before taking the NMLS licensing exam, an applicant must complete how many hours of pre-licensing education?

13) Under the Truth-in-Lending Act, borrowers have a right to rescind certain loans secured by their principal residence for:

14) Which clause in a mortgage allows the lender to raise the interest rate under specified conditions?

15) A lender typically verifies a loan applicant’s employment by sending a:

16) A 2/1 buydown means:

17) A mortgage broker sometimes refers a loan to a second broker. Under RESPA, may the referring broker receive compensation?

18) Which type of loan is usually the easiest to qualify for when a borrower has imperfect credit and other high-risk factors?

19) Which of the following is not one of the three nationwide consumer credit-reporting agencies?

20) When calculating debt-to-income ratios, an auto loan is counted as debt:

21) Which federal entity is responsible for overseeing and enforcing RESPA?

22) On which document is the cost of a loan expressed as an annual percentage rate (APR)?

23) The extra amount a lender adds to the index to set the ARM interest rate is called the:

24) “HPML” stands for:

25) Age discrimination is acceptable under the Equal Credit Opportunity Act by a lender in which circumstance?

26) One of the most critical points of the Federal Reserve’s Loan Originator Compensation Rule is:

27) Is a conventional mortgage loan insured or guaranteed by any government program?

28) A mortgage without risky features such as negative amortization, interest-only payments, or balloon terms is called a:

29) A balloon mortgage is most advantageous for:

30) Before the 2008 market intervention, Fannie Mae (FNMA) was best described as:

31) The three-day Right of Rescission does not apply to which transaction?

32) In an adjustable-rate mortgage (ARM), the interest rate adjusts periodically based on:

33) The primary purpose of the Truth-in-Lending Act (Reg Z) is to:

34) The chief goal of the Dodd-Frank Act is to:

35) A _________ cap limits the monthly payment increase on an ARM by deferring some interest to the loan balance.

36) In today’s marketplace, prepayment penalties are typically:

37) Which of the following loans is not covered by RESPA disclosure rules?

38) Examples of RESPA violations include all of the following except:

39) Which required disclosure tells a borrower whether a loan includes a balloon payment?

40) Which law is also known as Regulation B?

41) After the lender receives a signed loan application, a Good-Faith Estimate (now Loan Estimate) must be mailed or delivered to the borrower within:

42) When must the appraisal disclosure be delivered to the borrower?

43) In a standard appraisal report, which section analyzes the economic setting and market forces that influence a property’s value?

44) A funding fee is required on which type of mortgage?

45) In mortgage lending, “PFC” stands for:

46) Which federal regulation implements the Real Estate Settlement Procedures Act (RESPA)?

47) On the Closing Disclosure, the final APR may vary from the initial APR by no more than what amount before a new waiting period is triggered?

48) A mortgage-loan advertisement aimed at consumers must comply with which law and regulation?

49) Under federal lending rules, within how many days must a lender deliver an adverse-action notice after denying a credit application?

50) The Homeowners Protection Act (HPA) was enacted in order to:

51) If a mortgage company improperly calls two consumers on the National Do Not Call Registry, what is the maximum total fine it could face?

52) Under RESPA, how many months of cushion may a lender hold in an escrow account for taxes and insurance?

53) Which document itemizes all settlement costs, including lender charges?

54) When a lender strips unsophisticated homeowners of equity through abusive terms, the practice is called:

55) If an MLO discovers that a borrower has committed—or is about to commit—mortgage fraud, which report must be filed promptly?

56) Which loan program offers 100 % financing, is government-guaranteed, and requires entitlement plus a Certificate of Eligibility?

57) The Equal Credit Opportunity Act (ECOA) specifically bars discrimination based on:

58) A __________ cap limits the increase in an ARM’s monthly payment by deferring part of the interest.

59) The Home Mortgage Disclosure Act (HMDA) primarily requires lenders to:

60) When giving required information to an applicant for an adjustable-rate mortgage (ARM), which of the following does not have to be disclosed?

61) The legal process used to enforce an outstanding mortgage lien is called:

62) Insurance companies that do not deal with borrowers directly will usually pay a loan-servicing fee and make real-estate mortgage loans purchasable through:

63) Recording an instrument at the county courthouse provides:

64) A loan’s annual percentage rate (APR) must be disclosed to the consumer on the:

65) Which federal law requires delivery of a Mortgage Servicing Disclosure Statement?

66) When a mortgage loan originator presents only one loan program instead of multiple suitable options, the unethical practice is known as:

67) For which type of loan does RESPA not require lenders to disclose closing costs and procedures?

68) In mortgage terminology, another word for mortgagee is:

69) The Market Conditions Addendum (Form 1004MC) is used to:

70) If an appraisal value comes in above true market value, the report is considered:

71) An Affiliated Business Arrangement (ABA) under RESPA is best described as:

72) After a mortgage loan is paid in full, the lender must send a Satisfaction (or Release) of Mortgage within:

73) Freddie Mac and Fannie Mae allow what maximum variance adjustment percentage on comparable-sales appraisals?

74) Mortgage companies sometimes assemble many loans into one package and sell it to permanent investors. This interim financing process is called:

75) What feature limits how much the interest rate on an ARM may increase or decrease at any single adjustment?

76) A 360/180 loan is best described as:

77) Which federal department decides whether participants in third-party mortgage-fraud schemes will be prosecuted and under which statute?

78) A “240/60, 20-k, 9 %” note is best described as:

79) “Negative __________” occurs when the loan balance rises because scheduled payments do not cover all accrued interest.

80) Industry standards for title-insurance and title-related activities are set by:

81) A discount point is best described as:

82) A typical late fee on a conventional mortgage is:

83) The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) requires:

84) If an applicant has questions about the credit score used in underwriting, they should contact the:

85) The closing date is approaching and the loan is not yet approved, though progress looks positive. The loan originator should:

86) The Telemarketing Sales Rule primarily sets requirements for:

87) The extra amount a lender adds to the index to determine the ARM’s interest rate is called the:

88) Which law forbids lenders from deterring applicants with discouraging statements that a reasonable person would find off-putting?

89) The term refinance, according to the Truth in Lending Act, refers to:

90) Which action is not normally associated with mortgage-fraud schemes?

91) An Affiliated Business Arrangement (ABA) exists when:

92) If a mortgage applicant deliberately lies about income to obtain a loan, the applicant is guilty of:

93) All of the following actions by a loan underwriter are allowed during an appraisal process, except:

94) A Mortgage Insurance Premium (MIP) is required on:

95) Under ECOA, within how many days of receiving a completed application must a creditor notify the applicant of the loan’s status?

96) RESPA (Real Estate Settlement Procedures Act) was enacted chiefly to help consumers:

97) If a borrower defaults on a loan, which clause authorizes the lender to begin foreclosure?

98) The main objective of the Secure and Fair Enforcement Act (SAFE) was to:

99) Expressed as a percentage, “20 basis points” equals:

100) As a mortgage loan originator, you will use which of the following documents to figure out the estimated value of a property based on an analytical comparison of similar properties?

101) On the Uniform Residential Loan Application (URLA), the government-monitoring section is completed:

102) Under RESPA, a mortgage loan originator is considered to have taken an application when:

103) When the loan balance grows because scheduled payments do not cover all accrued interest, the result is called:

104) Which payment option is the absolute minimum required on an adjustable-rate mortgage (ARM)?

105) Under federal fair-lending rules, which topic should never be asked of a real-estate loan applicant?

106) “Discount points,” commonly just called points, are best defined as:

107) In an adjustable-rate mortgage (ARM), the interest rate periodically changes according to:

108) For the overall quality of an appraisal, Fannie Mae ultimately holds which party responsible?

109) HOEPA (Home Ownership and Equity Protection Act) was added to TILA to:

110) Under ECOA, within how many days must a lender notify a borrower of an underwriting decision?

111) While engaged in mortgage-loan origination, an individual is prohibited from:

112) CFPB mortgage-servicing rules provide an added layer of consumer protection specifically related to:

113) Under ECOA-Valuations rules, a copy of the appraisal must be provided to the borrower:

114) Which rule prohibits loan-originator compensation based on loan terms such as interest rate or loan-to-value?

115) Which of the following fees is excluded from the annual percentage rate calculation, according to the Truth in Lending Act?

116) Which of the following items is not listed on a HUD-1 Settlement Statement?

117) To document income for a salaried or hourly borrower, the lender typically requires:

118) The SAFE Act is best defined as the:

119) The phrase that NMLS-approved education credits in one state can satisfy education requirements in another state refers to:

120) The federal right of rescission for certain real-estate loans is granted under which law?

121) The Consumer Financial Protection Bureau (CFPB) was created to:

122) ECOA (Equal Credit Opportunity Act) makes it unlawful to discriminate against an applicant on the basis of:

123) A home’s value is likely to decline if a noisy airport runway is built one mile away because of:

124) Which loan product requires no income or asset verification and no payments until the home is sold or the borrower dies?

125) When an agent might not put a client’s interests first, the situation is called: