NMLS Mortgage Loan Origination Activities Questions and Answers

Question 1

A mortgage loan originator receives a call from a potential borrower who provides their name, social security number, the address of the property they want to purchase, an estimated value for the property, and their annual income. According to the TILA-RESPA Integrated Disclosure (TRID) Rule, what additional piece of information is required before the MLO is obligated to provide a Loan Estimate?

Accepted Answer

The borrower's requested loan amount

Answer

Under the TRID Rule, a complete application, which triggers the requirement to provide a Loan Estimate within three business days, consists of six specific pieces of information: the consumer's name, income, Social Security number, the property address, an estimate of the value of the property, and the mortgage loan amount sought.

Question 2

A borrower is purchasing a home with a sales price of $400,000 and an appraised value of $410,000. They are obtaining a first mortgage of $320,000 and have a Home Equity Line of Credit (HELOC) for $40,000 that will be used for home improvements immediately after closing. What is the Combined Loan-to-Value (CLTV) ratio for this transaction?

Accepted Answer

90%

Answer

The Combined Loan-to-Value (CLTV) is calculated by adding the principal balance of the first mortgage and the amount of any subordinate liens (like the HELOC) and dividing by the property's value (using the lesser of the sales price or appraised value for a purchase). In this case: ($320,000 + $40,000) / $400,000 = $360,000 / $400,000 = 0.90 or 90%.

Question 3

Under the Equal Credit Opportunity Act (ECOA) and its Valuations Rule, a creditor must provide a copy of the appraisal report to the applicant for a first-lien mortgage:

Accepted Answer

Promptly upon completion, or no later than 3 business days before consummation.

Answer

The ECOA Valuations Rule requires creditors to provide an applicant with a free copy of all appraisals and other written valuations. This copy must be delivered promptly upon completion or at least three business days before the loan closes (consummation), whichever is earlier. This requirement applies even if the loan is denied or the application is withdrawn.

Question 4

Which of the following fees, when listed on a Loan Estimate, is subject to a zero tolerance for variance, meaning it cannot increase on the final Closing Disclosure?

Accepted Answer

The creditor's origination charge

Answer

Under TRID, fees paid to the creditor, mortgage broker, or an affiliate of either, including the origination charge, are subject to a zero-tolerance standard. This means the amount charged at closing cannot exceed the amount disclosed on the Loan Estimate. Recording fees and fees for third-party services where the consumer shops from a lender's list fall into the 10% cumulative tolerance category, while prepaid interest has no tolerance limit.

Question 5

A mortgage loan originator's compensation plan includes a bonus structure where the MLO receives a higher commission percentage for originating loans with an interest rate above the company's par rate. This compensation practice is a violation of which regulation?

Accepted Answer

Truth in Lending Act (TILA)

Answer

The Truth in Lending Act (TILA), specifically Regulation Z, contains the Loan Originator Compensation Rule. This rule prohibits paying an MLO based on the terms of a transaction, such as the interest rate, loan program, or the sale of ancillary products. This is to prevent steering consumers into less favorable loan terms to increase originator compensation.

(NMLS) National Mortgage Licensing System Practice Test

(NMLS) National Mortgage Licensing System Practice Test

NMLS Mortgage Loan Origination Activities Questions and Answers