NMLS Compliance and Oversight 2 — Questions and Answers
Question 1: Under the SAFE Act, which federal agency has the authority to establish minimum standards for state licensing of mortgage loan originators?
- CFPB (Correct answer)
- FFIEC
- HUD
- OCC
Correct answer: CFPB
The Consumer Financial Protection Bureau (CFPB) has authority under the SAFE Act to establish minimum standards for state MLO licensing programs.
Question 2: What is the maximum civil money penalty per day that the CFPB can impose for knowing violations of federal consumer financial law under Tier 3 penalties?
- $5,000
- $25,000
- $1,000,000 (Correct answer)
- $500,000
Correct answer: $1,000,000
Tier 3 (knowing) violations under the Dodd-Frank Act can result in civil money penalties of up to $1,000,000 per day.
Question 3: Which of the following triggers a Suspicious Activity Report (SAR) filing requirement for a mortgage company?
- A borrower with a credit score below 620
- A transaction involving $5,000 or more that involves known or suspected money laundering (Correct answer)
- A loan application with a debt-to-income ratio above 43%
- A refinance transaction with cash-out exceeding $10,000
Correct answer: A transaction involving $5,000 or more that involves known or suspected money laundering
A SAR must be filed for transactions of $5,000 or more where the institution knows, suspects, or has reason to suspect money laundering or other criminal activity.
Question 4: Under Regulation Z, what is the tolerance threshold for most closing cost disclosures on the Loan Estimate before a lender must issue a revised disclosure?
- 0% — no tolerance allowed
- 10% aggregate tolerance (Correct answer)
- No tolerance limit applies
- Fixed dollar tolerance of $100
Correct answer: 10% aggregate tolerance
Most charges fall under a 10% aggregate tolerance, meaning the total of those fees cannot increase by more than 10% from the Loan Estimate to the Closing Disclosure.
Question 5: What does the Home Mortgage Disclosure Act (HMDA) primarily require lenders to do?
- Verify borrower income through IRS transcripts
- Collect and report data on mortgage loan applications to detect discriminatory lending patterns (Correct answer)
- Disclose all fees within three business days of application
- Obtain flood insurance for properties in FEMA zones
Correct answer: Collect and report data on mortgage loan applications to detect discriminatory lending patterns
HMDA requires covered lenders to collect, record, and report data about mortgage loan applications and originations to help identify discriminatory lending practices.
Question 6: A state-licensed MLO who wants to temporarily conduct business in another state while their new state license application is pending may do so under which provision?
- Reciprocity clause
- Temporary authority to operate under SAFE Act (Correct answer)
- Interstate commerce exemption
- Federal preemption doctrine
Correct answer: Temporary authority to operate under SAFE Act
The 2018 SAFE Act amendment created a temporary authority provision allowing MLOs to operate in a new state while their license application is pending.
Question 7: Which examination type conducted by state regulators involves reviewing a sample of loan files to assess compliance with lending laws?
- Net worth audit
- File review examination (Correct answer)
- Mystery shopper audit
- Capital adequacy test
Correct answer: File review examination
File review examinations involve regulators sampling actual loan files to verify that the lender's practices comply with applicable laws and regulations.
NMLS Compliance and Oversight 2
Under the SAFE Act, which federal agency has the authority to establish minimum standards for state licensing of mortgage loan originators?