MLO Flashcards
7 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 MLO flashcards as text
Under the FHA loan program, the maximum seller concession (seller-paid closing costs) is limited to what percentage of the lesser of the appraised value or sales price?
Answer: 6%
FHA allows sellers to contribute up to 6% of the lesser of the appraised value or sales price toward the buyer's closing costs and prepaid items.
An MLO discovers mid-process that a borrower has misrepresented their employment on the application. What is the MLO's proper course of action?
Answer: Report the discrepancy to the underwriter and document it in the file; do not assist in covering it up
MLOs have a duty to report material misrepresentations to underwriting regardless of whether the borrower still qualifies; covering up fraud exposes the MLO to criminal liability.
The Loan Estimate (LE) must be delivered or placed in the mail to the borrower no later than how many business days after receipt of a complete application under TRID?
Answer: 3 business days
Under TRID (TILA-RESPA Integrated Disclosure), lenders must deliver or place the Loan Estimate in the mail within 3 business days of receiving a complete application.
Which of the following is considered a 'trigger term' under TILA that requires full disclosure of other credit terms in an advertisement?
Answer: The amount of any down payment
Under TILA, advertising a specific down payment amount is a trigger term that requires disclosure of the APR, loan term, total of payments, and other specific credit terms.
A borrower defaults on a mortgage and the lender sells the collateral at foreclosure for less than the outstanding loan balance. If the lender pursues the borrower for the remaining balance, this is known as:
Answer: A deficiency judgment
A deficiency judgment is a court order requiring the borrower to pay the lender the difference between the foreclosure sale proceeds and the remaining loan balance.
Under Fannie Mae guidelines, what is the standard maximum DTI ratio allowed for manually underwritten conventional loans?
Answer: 36% with up to 45% permitted with compensating factors
Fannie Mae's standard DTI limit for manually underwritten loans is 36%, with exceptions up to 45% when borrowers have strong compensating factors such as significant reserves or high credit scores.
Which of the following scenarios would constitute illegal redlining under the Fair Housing Act?
Answer: A lender systematically refusing to make loans in minority-concentrated neighborhoods regardless of borrower creditworthiness
Redlining is the illegal practice of denying credit or services to residents of certain areas based on the racial or ethnic composition of those neighborhoods, violating the Fair Housing Act.