FREE NMLS Practice Test 2025 Official Study Guide [PDF]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

25) 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?

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

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

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

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

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

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

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

33) The SAFE Act is best defined as the:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

55) The Telemarketing Sales Rule primarily sets requirements for:

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

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

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

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

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

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

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

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

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

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

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

67) A discount point is best described as:

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

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

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

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

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

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

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

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

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

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

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

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

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

81) Which law is also known as Regulation B?

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

83) 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?

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

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

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

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

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

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

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

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

92) “Periodic adjustment caps” on an ARM:

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

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

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

96) “HPML” stands for:

97) A balloon mortgage is most advantageous for:

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

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

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

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

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

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

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

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

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

107) A 2/1 buydown means:

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

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

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

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

112) Recording an instrument at the county courthouse provides:

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

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

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

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

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

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

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

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

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

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

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

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

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