Mortgage Loan Originator MLO 4 — Questions and Answers
Question 1: An MLO receives a $50 gift card from a real estate agent as a thank-you for referring clients. Under RESPA Section 8, this is:
- Prohibited, as RESPA forbids any thing of value exchanged for referrals of settlement service business (Correct answer)
- Permitted because the amount is under $100
- Permitted as long as it is reported on the HUD-1
- Prohibited only if the gift card is from a federally chartered bank
Correct answer: Prohibited, as RESPA forbids any thing of value exchanged for referrals of settlement service business
RESPA Section 8 prohibits giving or receiving any thing of value—regardless of dollar amount—in exchange for referrals of settlement service business; there is no de minimis exception.
Question 2: The SAFE Act requires state-licensed MLOs to complete how many hours of continuing education annually to maintain their license?
- 8 hours (Correct answer)
- 10 hours
- 12 hours
- 20 hours
Correct answer: 8 hours
The SAFE Act mandates a minimum of 8 hours of annual continuing education for state-licensed MLOs, covering federal law, ethics, nontraditional mortgage products, and electives.
Question 3: A lender charges a borrower a 4% origination fee on a $300,000 loan. Under the ATR/QM rule, which type of QM is most likely affected by this fee level?
- General QM (Safe Harbor), as points and fees cannot exceed 3% of the total loan amount for loans of $100,000 or more (Correct answer)
- Small Creditor QM, which has no points-and-fees limit
- Seasoned QM, which allows up to 5% in points and fees
- Higher-Priced Covered Transaction QM
Correct answer: General QM (Safe Harbor), as points and fees cannot exceed 3% of the total loan amount for loans of $100,000 or more
For General QM loans of $100,000 or more, total points and fees cannot exceed 3% of the total loan amount; a 4% origination fee alone would disqualify the loan as a General QM.
Question 4: Under Regulation Z's HOEPA rules, a closed-end consumer credit transaction secured by a consumer's principal dwelling is a high-cost mortgage if its APR exceeds the APOR by more than how many percentage points for a first-lien loan?
- 6.5 percentage points (Correct answer)
- 5 percentage points
- 8 percentage points
- 3 percentage points
Correct answer: 6.5 percentage points
A first-lien loan is a HOEPA high-cost mortgage if its APR exceeds the Average Prime Offer Rate (APOR) by more than 6.5 percentage points.
Question 5: Which of the following correctly describes the difference between pre-qualification and pre-approval in the mortgage process?
- Pre-qualification is an informal assessment based on unverified information; pre-approval involves verification of income, assets, and credit (Correct answer)
- Pre-qualification requires a full appraisal; pre-approval does not
- Pre-approval is only available for FHA loans; pre-qualification applies to all loan types
- Pre-qualification and pre-approval are legally interchangeable terms under TRID
Correct answer: Pre-qualification is an informal assessment based on unverified information; pre-approval involves verification of income, assets, and credit
Pre-qualification is a preliminary estimate based on self-reported data, while pre-approval involves a formal review of verified documents including credit report, income verification, and asset statements.
Question 6: A borrower is 60 days delinquent and the servicer has not yet provided loss mitigation options. Under CFPB mortgage servicing rules (Regulation X), the servicer must make a good faith effort to establish live contact with the borrower within how many days of delinquency?
- 36 days (Correct answer)
- 30 days
- 45 days
- 60 days
Correct answer: 36 days
Regulation X requires servicers to make good faith efforts to establish live contact with delinquent borrowers no later than the 36th day of delinquency.
Question 7: Which of the following BEST describes a 'buydown' mortgage structure?
- A temporary or permanent reduction in the interest rate achieved by paying discount points at closing (Correct answer)
- A loan where the borrower buys down the principal balance each month
- A government program that reduces the purchase price for first-time buyers
- A lender concession that eliminates prepayment penalties
Correct answer: A temporary or permanent reduction in the interest rate achieved by paying discount points at closing
A buydown involves paying discount points upfront to reduce the interest rate either permanently (permanent buydown) or for an initial period (temporary buydown, e.g., 2-1 buydown).
Mortgage Loan Originator MLO 4
An MLO receives a $50 gift card from a real estate agent as a thank-you for referring clients.
Under RESPA Section 8, this is: