FREE NMLS General Mortgage Knowledge Questions and Answers

Question 1

A prospective borrower is applying for a loan to purchase a home. The property's appraised value is $350,000 and the purchase price is $360,000. If the borrower makes a down payment of $72,000, what is the loan-to-value (LTV) ratio?

Accepted Answer

80%

Answer

The loan-to-value (LTV) ratio is calculated by dividing the loan amount by the lesser of the appraised value or the purchase price. In this case, the lesser value is the appraised value of $350,000. The loan amount is the purchase price ($360,000) minus the down payment ($72,000), which equals $288,000. However, lenders will base the loan on the $350,000 value. The down payment relative to the appraised value is effectively $350,000 - $280,000 (loan amount) = $70,000 from the lender's perspective. The correct calculation is Loan Amount ($350,000 - $70,000 = $280,000) / Appraised Value ($350,000), which equals 80%.

Question 2

Under the Gramm-Leach-Bliley Act (GLBA), which of the following is a primary requirement of the Safeguards Rule?

Accepted Answer

Developing and implementing a comprehensive written information security program.

Answer

The Safeguards Rule of the Gramm-Leach-Bliley Act specifically requires financial institutions to develop, implement, and maintain a comprehensive written information security program. This program must contain administrative, technical, and physical safeguards to protect customer information. The other options are requirements under other provisions of GLBA (Privacy Rule and pretexting provisions).

Question 3

According to the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act, an individual is required to be licensed as a mortgage loan originator if they perform which of the following activities for compensation or gain?

Accepted Answer

Taking a residential mortgage loan application and offering or negotiating terms.

Answer

The SAFE Act defines a mortgage loan originator as an individual who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan. Individuals performing purely administrative or clerical tasks are exempt, as are those negotiating terms for an immediate family member without compensation. Certain transactions, like those for timeshare plans, may also be exempt.

Question 4

A veteran is using their VA loan benefit for the second time to purchase a home with no down payment. Which of the following statements is TRUE regarding the VA funding fee?

Accepted Answer

The funding fee may be financed into the loan amount.

Answer

The VA funding fee is a one-time charge, and for most veterans, it can be rolled into the total loan amount. The fee for a subsequent use with no down payment is typically higher than for a first-time use. The funding fee is not a monthly payment and replaces the need for monthly mortgage insurance. Certain veterans, such as those receiving VA disability compensation, may be exempt, but not simply for a second use.

Question 5

Under the ECOA Valuations Rule, a creditor must provide a copy of all appraisals and other written valuations to the applicant:

Accepted Answer

Promptly upon completion, or at least three business days prior to consummation, whichever is earlier.

Answer

The ECOA Valuations Rule requires creditors to provide the applicant with a copy of all appraisals and other written valuations promptly upon completion, or no later than three business days prior to consummation for closed-end credit, whichever is earlier. This requirement applies even if the application is denied, withdrawn, or incomplete.

(NMLS) National Mortgage Licensing System Practice Test

(NMLS) National Mortgage Licensing System Practice Test

FREE NMLS General Mortgage Knowledge Questions and Answers