FREE NMLS Practice Test 2025 Official Study Guide [PDF]

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

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

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

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

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

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

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

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

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

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

11) A 2/1 buydown means:

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

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

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

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

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

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

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

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

20) The Telemarketing Sales Rule primarily sets requirements for:

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

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

23) “HPML” stands for:

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

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

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

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

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

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

30) A discount point is best described as:

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

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

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

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

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

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

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

38) Recording an instrument at the county courthouse provides:

39) A balloon mortgage is most advantageous for:

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

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

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

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

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

45) 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?

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

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

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

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

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

51) The SAFE Act is best defined as the:

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

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

54) Which law is also known as Regulation B?

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

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

57) “Periodic adjustment caps” on an ARM:

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

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

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

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

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

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

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

65) 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?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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