Mortgage Loan Originator Regulations, Exams of Law

Download Mortgage Loan Originator Regulations and more Exams Law in PDF only on Docsity! California State NMLS Practice Test Questions with Answers 2024 "Federal banking agencies" include: Answers A. The Director of the Office of Thrift Supervision, the Board of Governors of the Federal Reserve System, and FDIC B. Fannie Mae and Freddie Mac C. The Comptroller of the Currency and the National Credit Union Administration D. A and C ✔ D. A borrower approaches a lender to refinance their existing negative amortization loan, which was originated by that same lender. Which of the following statements is incorrect? A. The lender must make due regard for the borrower's ability to repay the new loan. B. The new loan cannot be a stated income pay option arm. C. The lender can collect a prepayment penalty, as long as it does not exceed 1.75% of the principal balance. D. If their existing mortgage is a reverse mortgage, it is not considered a negative amortization loan. ✔ C. A borrower cannot be required to pay interest on the principal balance of a loan secured by a mortgage on real property more than how many days prior the date that loan proceeds are disbursed from escrow? Answers A. One (1) day B. Three (3) days C. Five (5) days D. Seven (7) days ✔ A. A borrower's file requires a VOD, however currently, the borrower has no money but is expecting an inheritance check. What can the MLO do? Answers A. The MLO may request the VOD takes place after the funds are deposited B. Request the borrower to take out a pay day advance loan, put it in his account, and repay it once the verification is done C. The MLO may loan the borrower money and take it back after the VOD is complete ✔ A. A foreclosure consultant may not charge a fee in which exceeds ___ percent per annum of a loan which the consultant makes to the owner. Answers A. 10% B. 20% C. 3% D. 5% ✔ A. A late charge may be imposed for late payment of an installment due on a mortgage loan or deed of trust but cannot exceed greater than $5 or ___ percent of the installment due. Answers A. One (1) percent B. Three (3) percent C. Five (5) percent D. Ten (10) percent ✔ C. A mortgage broker's fiduciary duty to a client involves which of the following? Answers A. A duty of exclusivity A prepayment charge can be imposed on any amount prepaid in any twelve (12) month period which exceeds __ percent of the original principal amount of the loan. Answers A. 10% B. 15% C. 20% D. 25% ✔ C. A "Registered Mortgage Loan Originator": Answers A. Is registered with NMLS but has not completed all the prerequisites for licensing B. Works as a mortgage loan originator and is employed by a depository institution C. Works for a Federal Banking agency as a loss mitigation specialist D. Has met additional registration requirements with The Farm Credit Administration and Federal Banking Agencies ✔ B. A "unique identifier" is described as: Answers A. A unique combination of the scrambling of your driver's license number and social security number that must be provided to each applicant you meet. B. Your personal social security number that must be posted in your licensed mortgage production branch office. C. Your identification number with the IRS that must be on each mortgage document in the loans you originate. D. The number assigned to you when you become a registered loan originator with the NMLS. ✔ D. According to the legal definition, a mortgage: Answers A. Does not include an estate for years in real property B. Involved a hypothecation which necessitates a change in possession C. Can be created or renews orally or in writing D. Can be created on property held adversely to the mortgagor ✔ D. Advertisements that make a representation of a specific installment in repayment of a loan must also make an equally prominent disclosure of the following information about the loan, except: Answers A. Down payment amount B. Simple annual interest rate and annual percentage rate C. Number, amount and period of payments scheduled to the date of maturity D. Balance due at maturity (balloon payment) if not fully amortized ✔ A. After a disciplinary order is made final, a licensee has how many days to ask the court to restrain enforcement of the order? Answers A. Five (5) days B. Fifteen (15) days C. Thirty (30) days D. Sixty (60) days ✔ B All licenses for mortgage loan originators will now expire __________, and continuing education for renewal should be completed __________ each year, to be effective the following year. Answers A. One year from the date of issuance/one month before expiration B. On December 31/before December 1 C. On January 1/before December 1 D. December 31/before October 31 ✔ D. All of the following are true regarding a disciplinary action against a California mortgage loan originator licensee, except: Answers A. Licensees may petition in writing for a monetary penalty at any time after filing of an accusation and before the effective date of a decision B. No specific form of petition is required C. Petitioners must automatically cease and desist all origination activities until a decision has been rendered D. Upon receipt of a the petition, the Commissioner may grant a stay of the effective date of the decision up to 30 days for the purpose of determining whether the public interest will served if the petition is granted ✔ C. An applicant for a mortgage loan provides a lender with funds to cover bona fide third party expenses in connection with the applied for loan. Which of the following statements is not true? Answers A. The funds must be placed in a separate account. B. The lender must keep and provide accurate accounting, and receipts, for all funds collected. C. The lender cannot collect 3rd party fees and must direct the applicant to pay the 3rd parties directly. D. The lender cannot retain any portion of the 3rd party fees. ✔ C. D. Closing statements ✔ B Assuming a residential mortgage lender or servicer licensee's fiscal year ends December 31st, he must prepare and file with the commissioner a report giving the information necessary to make the annual assessment calculation by: Answers A. January 31st B. February 15th C. March 1st D. April 30th ✔ A. At least two (2) days prior to closing, a mortgage loan company shall provide to the borrower(s) the following federal disclosures specific to the mortgage loan the borrower(s) is receiving: Answers A. Good Faith Estimate B. Truth in Lending Statement C. HUD Statement D. A and B ✔ D. At the end of the year, one of the following occurs: a mortgage loan originator does not apply to renew their license, the director declines to renew the mortgage loan originator's license, or the loan originator does not otherwise maintain eligibility under the requirements. What is the best term to describe the status of their license at that point? Answers A. Expired B. Suspended C. Revoked D. Surrendered ✔ A. 32.) California mortgage loan originators or required to register with __________. Answers A. The Bureau of Loans B. The Secretary of State C. The Nationwide Mortgage Licensing System (NMLS) D. The California Department of Banking ✔ C. Chuck, the owner of a mortgage lender, hires his good friend Eric as a loan originator. Chuck trusts Eric to do his job and does not interfere or interrupt Eric in any way when Eric is originating. Later, it is brought to the attention of the director that Eric has committed a pattern of misrepresentations and deceitful practices. Which of the following statements is not true about this situation? Answers A. Chuck may have to pay restitution to the injured parties. B. Only Eric will face fines or other penalties C. Chuck could have his license suspended or revoked D. Eric could have his license suspended or revoked ✔ B. Continuing education courses are good until what date? Answers A. December 31st of each year B. October 31st of each year C. January 1st of each year D. December 31st, every odd numbered year ✔ A. Control of a licensee is presumed to exist if a person or entity owns, controls, or holds ____ percent or more of the voting power of the licensee. Answers A. 3% B. 5% C. 7% D. 10% ✔ D Courtney is a processor for a conventional lender and is exempted from licensure laws. Which of the following actions would be a violation of her exemption? Answers A. The originator is out of the office, and Courtney contacts everyone in the pipeline to let them know the current rates, so that the borrower can decide whether or not to lock their loan. B. Courtney contacts a borrower and informs her that the loan cannot close until the borrower provides their most recent pay stub. C. Courtney reviews the loan file and puts her concerns about whether or not the loan should fund in the file for the underwriter to review. D. Courtney reviews the Uniform Residential Loan Application (1003) for accuracy and informs the originator of the results of her review. ✔ A. How long do you have to notify the Department of Real Estate or the DRE if you change the address of the location? Answers A. Immediately (no later than the next business day) B. Thirty (30) days C. Ninety (90) days D. Seven (7) business days ✔ A Answers A. A lock in agreement from that date with the particular rate locked in B. A previous advertisement C. Funded loan from another company ✔ A If your license is denied, how long do you have to file an appeal? Answers A. Three (3) business days B. Five (5) days C. Fifteen (15) days D. Thirty (30) days ✔ C In 2009, the California legislatures passed Senate Bill 36 and Assembly Bill 34 to comply with the SAFE Act of 2008 and participate in the NMLS. These bills changed state regulations to do all of the following except: Answers A. Increase funding to investigate fraud in the mortgage lending industry B. Bring California State law into compliance with the federal Housing and Economic Recovery Act of 2008 (HERA) and its Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) C. Participate in NMLS D. Change licensing, education, examination, and qualification requirements to meet those now mandated by federal law ✔ A. In performing an analysis to determine whether an applicant will have the ability to repay an offered loan, a licensee shall consider, verify and document: Answers A. The income of the applicant. B. The fixed expenses of the applicant C. The loan to value D. A and B ✔ D. Individuals applying for licensure as a mortgage loan originator in California must submit or complete the following prior to approval: Answers A. A criminal background check free of felonies B. Fingerprints for submission to the FBI C. 20 hours of NMLS approved continuing education D. A satisfactory credit report with a score of 620 or higher ✔ B. It is a(n) __________ to solicit or enter into a contract with a borrower that allows a mortgage loan originator to earn a fee or commission through "best efforts" to obtain a loan, even though no loan is actually obtained for the borrower. Answers A. Prohibited practice B. Best practice C. Acceptable practice. D. Good idea ✔ A. It is considered a prohibited practice to __________ misrepresent or conceal a material fact, term, or condition related to an application for a mortgage loan or a borrower. Answers A. Accidentally B. Repeatedly C. Maliciously D. Intentionally ✔ D. May a lender require a borrower to use a trust account for the payment of taxes and property insurance premiums as condition for granting a loan secured by a mortgage on a single-family, owner-occupied dwelling? Answers A. Yes, if the loan amount is 90% LTV or greater of the appraised value of the property B. Yes, if the loan amount is 80% LTV or greater of the appraised value of the property C. Yes, if the loan amount is 75% LTV or greater of the appraised value of the property D. No ✔ A. Mike is reviewing his criminal background. Which of the following convictions would most likely preclude him from ever obtaining a license to originate mortgage loans? Answers A. Mike was convicted of shoplifting a "Barry Manilow's Greatest Hits" CD in 1995. B. Mike was convicted of felony DUI after being pulled over on his way home from a Groundhog's Day party. C. Mike was convicted for illegally obtaining insurance funds when he filed a claim for his stolen minivan, and it was discovered that the car was actually in his garage. D. Mike has numerous unpaid parking tickets. No, this is incorrect. ✔ C. Mortgage loan originators are required to __________ and make reasonable efforts to procure a mortgage loan on behalf of the borrower. Answers A. Collect a fee. B. Sign a contract C. Use due diligence B. Only NMLS approved courses will count towards the required hours. C. An applicant must complete the education during the year prior to renewal. D. NMLS approved education completed in another state will not count towards the required hours. ✔ D. Regarding continuing education requirements, a loan originator licensee must complete how many hours annually? Answers A. Six (6) hours B. Eight (8) hours C. Twelve (12) hours D. Twenty (20) hours ✔ B The application fee for a mortgage loan originator, a CFLL branch licensee and a CRMLA branch licensee are__________, __________, and __________, respectively. Answers A. $100, $300, $1,000 B. $169, $320, $20 C. $100, $300, $300 D. $300, $1,000, $1,000 ✔ B. The bond requirement for all types of California mortgage loan originators (CFLL, CRMLA and DRE) is: Answers A. $0 B. $50,000 C. $100,000 D. $250,000 ✔ A. The contract between a foreclosure consultant and a homeowner must contact a statement informing he client that he may cancel the transaction any time prior to midnight of the ___ business day after the date of the transaction. Answers A. Second (2nd) business day B. Third (3rd) business day C. Fifth (5th) business day D. Seventh (7th) business day ✔ C. The Department of Real Estate requires all licensees who arrange for or service loans to complete the online report Form RE 866 - Mortgage Loan Activity Notification. Penalty fees apply for failure to submit this required notification. Penalties are __________ per day for the first 30 days the report is not filed and __________ per day for every day thereafter, not to exceed a maximum of __________. Answers A. $100, $200, $5,000. B. $50, $100, $5,000. C. $50, $100, $10,000 D. $100, $500, $10,000. ✔ C. The net worth requirements for California Residential Mortgage Lending Act (CRMLA) licensees are which of the following? Answers A. $250,000 B. $50,000. C. $1000,000 D. $150,000. ✔ A. The state governmental agencies overseeing licensure of California mortgage loan originators are the __________ and __________. Answers A. Department of Banking/Bureau of Loans B. Department of Corporations/Department of Real Estate C. Secretary of State/Attorney General D. Secretary of State/Department of Financial Institutions. ✔ B. What happens if you fail to complete your continuing education? Answers A. Your license gets revoked B. Your license expires C. Your license gets suspended D. Nothing. Continuing education is not required for California ✔ B What has to be on advertisements of a MLO? Answers A. Website B. Branch fax number C. The MLO's employment ID number D. The MLO's unique identifier ✔ D What is the maximum penalty for a licensee in the state of California if he does not submit for RE 866 Mortgage Loan Activity Notification? Answers B. When the broker's surety bond covers the MLO C. When the broker and the MLO work in the same office building ✔ A When performing the income verification, a licensee is only required to verify the income that the applicant _________ to rely upon to repay the offered loan. Answers A. Chooses B. Needs C. Has D. Doesn't ✔ A. Which of the following are NOT grounds for denying a license? Answers A. Felony within 7 years B. First time CA misdemeanor DUI conviction C. Personal or business bankruptcy ✔ B Which of the following is an example of a covered loan? Answers A. An ARM B. A loan with acceleration to the rate upon default C. Negative amortization D. A loan in which the original principal balance does not exceed the most current conforming loan limit ✔ D Which of the following is considered grounds to deny a California mortgage loan originator's license? Answers A. A credit score under 620. B. A 10 year-old felony conviction for assault C. A previous revocation of a mortgage broker's license in another state D. A bankruptcy in the previous 7 years ✔ C. Which of the following is not a prohibited practice? Answers A. To collect any mortgage broker fees after a conditional commitment is obtained from the lender by the mortgage broker B. To delay closing of a mortgage loan for the purpose of increasing interest rate, costs, fees, or other charges payable by the borrower C. To fail to disburse funds in accordance with a written commitment to make a mortgage loan D. All of the above ✔ A. Which of the following is not a requirement for initial licensure? Answers A. The applicant must complete 20 hours of NMLS approved prelicensing education. B. The applicant must have an associates degree or equivalent post secondary education. C. The applicant must pass a qualified federal test with a score of at least 75%. D. The applicant must show financial responsibility. ✔ C. Which of the following is not considered an instance of mortgage fraud? Answers A. Redlining an underserved, urban area B. Filing documents with a public office that you know are incorrect C. Knowingly using incorrect information with the specific intention that it be relied on by any party to the mortgage lending process D. Intentionally falsifying a borrower's income ✔ A. Which of the following is not considered to be a "non-traditional mortgage product"? Answers A. ARM B. 15-year fixed rate. C. 30-year fixed rate D. B and C ✔ C. Which of the following is subject to mortgage lender or servicer licensing requirements? Answers A. A mortgage loan originator employed by an exempt person B. A person engaged solely in agricultural mortgage lending C. A credit union organized under Oregon law and authorized to do business in California D. A person acting in fiduciary capacity under court order ✔ A Which of the following loans is NOT considered a "non-traditional" mortgage? Answers A. USDA Section 502 loan B. A pay option arm