FREE NMLS Practice Test 2025 Official Study Guide [PDF]

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

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

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

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

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

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

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

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

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

10) A 2/1 buydown means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

27) The SAFE Act is best defined as the:

28) A balloon mortgage is most advantageous for:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

48) 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?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

63) Recording an instrument at the county courthouse provides:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

83) The Telemarketing Sales Rule primarily sets requirements for:

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

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

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

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

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

89) A discount point is best described as:

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

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

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

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

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

95) “HPML” stands for:

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

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

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

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

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

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

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

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

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

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

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

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

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

109) 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?

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

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

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

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

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

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

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

117) Which law is also known as Regulation B?

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

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

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

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

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

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

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

125) “Periodic adjustment caps” on an ARM: