New 2026 Realistic Free NMLS MLO Exam Dump Questions and Answer
MLO Practice Test Engine: Try These 232 Exam Questions
NEW QUESTION # 107
Which of the following situations requires further documentation when reviewing bank statements for documentation of assets for down payment and closing costs?
- A. When the bank statement shows very little activity on the account
- B. When there is a large deposit that is not a payroll deposit
- C. When there are two borrowers on a loan and only one of the borrowers' names is shown on a bank statement
- D. When the bank statement comes from an institution that does not have a local presence
Answer: B
Explanation:
When underwriting a loan, large or unusual deposits that are not readily identifiable (such as payroll deposits) must be sourced and documented. This is to ensure the funds are not borrowed or from an unacceptable source.
"If a bank statement reveals a large deposit that is not payroll-related, the lender must document the source of funds."
- Fannie Mae Selling Guide, B3-4.2-02: Depository Accounts
References:
Fannie Mae, Verifying Assets
SAFE MLO National Test Study Guide
NEW QUESTION # 108
Which of the following scenarios is permissible according to the SAFE Act?
- A. An underwriter who is functioning as an independent contractor conducts administrative and clerical duties while working under the supervision of a licensed MLO.
- B. A third-party underwriter conducts administrative and clerical duties while working under the supervision of a licensed MLO with their organization.
- C. An unlicensed assistant to a mortgage loan originator (MLO) conducts MLO activities under the authority of the MLO's unique identifier and licenses.
- D. An MLO who is not licensed in a subject property's state still originates the loan under the authority of the company's license in that particular state.
Answer: B
Explanation:
Under the SAFE Act, administrative and clerical duties may be performed by an individual (including a third- party underwriter) if performed at the direction and supervision of a licensed MLO. Origination activities must be done only by licensed MLOs, and company or MLO licensing is state-specific.
"Administrative or clerical tasks performed at the direction and subject to the supervision and instruction of a licensed mortgage loan originator do not require licensure."
- SAFE Act, 12 U.S.C. § 5102(4)(C)
References:
SAFE Act, 12 U.S.C. § 5102(4)(C)
NMLS Uniform State Test Content Outline
NEW QUESTION # 109
During the closing the borrower notices that the interest rate increased from 3.250% to 3.875%. The lender must:
- A. close the loan, then re-disclose after the loan funds.
- B. postpone the closing, re-disclose and wait three days.
- C. postpone the closing, re-disclose and wait three business days.
- D. tell the borrower to close the loan.
Answer: C
Explanation:
Under the TILA-RESPA Integrated Disclosure (TRID) rules, any significant change to the Annual Percentage Rate (APR) beyond the allowed tolerance before closing requires the lender to provide a revised Closing Disclosure (CD). If the APR increases by more than 0.125% for fixed-rate loans, the lender must re- disclose the CD and provide the borrower with at least three business days to review the updated terms before consummation (closing).
* In this case, the interest rate increase from 3.250% to 3.875% is a significant change that impacts the APR, triggering the need for re-disclosure and the mandatory three-business-day waiting period.
* The lender must postpone the closing until the new three-day waiting period passes to ensure compliance with TRID regulations.
References:
* TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.19(f)
* CFPB TRID Guidelines
NEW QUESTION # 110
Which of the following data should not be included in a borrower's personal data collected under the Home Mortgage Disclosure Act (HMDA)?
- A. Religion
- B. Race
- C. Sex
- D. Ethnicity
Answer: A
Explanation:
Under HMDA (Regulation C), lenders must collect and report applicant data including race, ethnicity, and sex, but not religion. Collecting data on an applicant's religion would be prohibited by the Equal Credit Opportunity Act (ECOA).
"The data reported under HMDA includes the applicant's ethnicity, race, sex, and income... religion is not collected or reported."
- 12 CFR § 1003.4(a); Regulation C
References:
CFPB, HMDA Data Collection
12 CFR § 1003.4(a)
NEW QUESTION # 111
Under the SAFE Act, which of the following individuals is not a "mortgage loan originator"?
- A. An individual who quotes interest rates to a consumer for compensation
- B. An individual who takes a loan application for compensation
- C. An individual who negotiates credit terms on behalf of a consumer for compensation
- D. An individual who handles the collection of a mortgage payment from a consumer for compensation
Answer: D
Explanation:
The SAFE Act defines a mortgage loan originator (MLO) as someone who takes a residential mortgage loan application and offers or negotiates terms for compensation or gain. An individual who only handles the collection of mortgage payments is not acting as an MLO under the Act.
"Mortgage loan originator means an individual who (i) takes a residential mortgage loan application; and (ii) offers or negotiates terms of a residential mortgage loan for compensation or gain. The term does not include an individual who only performs administrative or clerical tasks or who only collects mortgage payments."
- SAFE Act, 12 U.S.C. § 5102(4); NMLS Uniform State Content Outline
References:
SAFE Act, 12 U.S.C. § 5102(4)
NEW QUESTION # 112
Which of the following statements defines the term "business day" in a mortgage rescission under the Truth in Lending Act (TILA)?
- A. Any days except Saturdays and Sundays
- B. Every day from 9 a.m. to 5 p.m.
- C. Any days that employees may access the office to work
- D. Every day except Sunday and legal holidays
Answer: D
Explanation:
Under the Truth in Lending Act (TILA), for mortgage rescission purposes, a business day is defined as every day except Sunday and legal holidays. This definition applies to the three-business-day right of rescission period, during which a borrower can cancel certain refinance or home equity transactions.
* The right of rescission allows the borrower three business days after signing the loan documents to cancel the loan without penalty.
References:
* Truth in Lending Act (TILA), 12 CFR §1026.2(a)(6)
* CFPB Guidelines on rescission rights
NEW QUESTION # 113
Which of the following federal laws requires disclosures intended to prevent lenders or mortgage loan originators (MLOs) from increasing fees during the origination process?
- A. Equal Credit Opportunity Act (ECOA)
- B. Truth in Lending Act (TILA)
- C. Home Mortgage Disclosure Act (HMDA)
- D. Real Estate Settlement Procedures Act (RESPA1)
Answer: D
Explanation:
The Real Estate Settlement Procedures Act (RESPA) requires disclosures intended to prevent lenders and mortgage loan originators (MLOs) from increasing fees during the loan origination process. RESPA mandates the disclosure of estimated fees through the Loan Estimate (LE) and ensures that fees do not change substantially from the Loan Estimate to the final Closing Disclosure (CD) unless specific conditions justify the changes. This protects borrowers from "fee increases" during the settlement process.
* While TILA (A) deals with disclosure of loan terms and APR, RESPA (D) focuses specifically on fees and closing costs during origination.
References:
* RESPA (Real Estate Settlement Procedures Act), 12 USC §2601
* CFPB RESPA Guidelines on fee tolerances
NEW QUESTION # 114
A mortgage loan originator (MLO) closes a high-cost mortgage for a borrower. Seven months later, the borrower returns to the MLO to apply for a cash-out refinance as the borrower intends to use the cash to purchase a collector car. The MLO determines that the only loan the borrower qualifies for is a high-cost mortgage at a higher interest rate. In which of the following ways should the MLO proceed?
- A. Close the loan as normal with no further action required
- B. Close the loan as normal, as the borrower can refinance a high-cost mortgage after six months
- C. Close the loan as normal and take the vehicle as additional collateral
- D. Deny the loan, unless it is in the best interest of the borrower
Answer: D
Explanation:
Under HOEPA (Home Ownership and Equity Protection Act) rules for high-cost mortgages, a creditor may not refinance a high-cost mortgage into another high-cost mortgage within 12 months of the previous transaction unless the new loan is in the borrower's best interest. This is to prevent loan flipping and predatory lending.
"A creditor may not refinance a high-cost mortgage into another high-cost mortgage within one year unless the new loan is in the borrower's best interest."
- 12 CFR § 1026.34(a)(3)
Since the purpose here is a cash-out for a collector car (not generally a "best interest" purpose), the MLO should deny the loan unless a strong case can be made that it is in the borrower's best interest.
References:
CFPB, High-Cost Mortgages (HOEPA)
12 CFR § 1026.34(a)(3)
NEW QUESTION # 115
Which of the following property value approaches does an appraiser use on a rental property?
- A. Sales comparison approach
- B. Annual approach
- C. Cost approach
B Income approach
Answer: B
Explanation:
For rental properties, an appraiser will typically use the Income Approach to estimate the property's value.
This method is based on the income-generating potential of the property, which is most relevant for investment properties, including rentals.
* The Income Approach assesses the property's ability to generate future cash flow by evaluating the income that can be derived from renting it. The formula often involves determining the net operating income (NOI) and applying a capitalization rate (cap rate) to estimate value.
* This method is most appropriate for rental properties because their value is inherently tied to their profitability.
Other methods:
* Cost approach: More suited for unique properties or new construction.
* Sales comparison approach: Often used for owner-occupied properties, comparing recent sales of similar properties.
References:
* Uniform Standards of Professional Appraisal Practice (USPAP)
* Fannie Mae's Appraisal Guidelines for Rental Properties
NEW QUESTION # 116
Which of the following loan types is covered by the Real Estate Settlement Procedures Act (RESPA)?
- A. Residential real estate loan
- B. Commercial real estate loan
- C. Auto loan
- D. Student loan
Answer: A
Explanation:
The Real Estate Settlement Procedures Act (RESPA, Regulation X) applies specifically to loans secured by a
1-4 family residential property (owner-occupied or investment) made by lenders, brokers, or others involved in real estate settlement services. RESPA does not cover auto loans, student loans, or commercial real estate loans.
"RESPA covers loans secured with a mortgage placed on a one-to-four family residential property, including most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit."
- Consumer Financial Protection Bureau (CFPB): Real Estate Settlement Procedures Act (Regulation X) Thus, of the choices provided, only residential real estate loans are covered by RESPA.
References:
CFPB, "Real Estate Settlement Procedures Act (Regulation X)"
SAFE MLO National Test Study Guide
HUD, "RESPA FAQs"
NEW QUESTION # 117
A consumer with HIV/AIDS is protected from lending discrimination by the:
- A. Equality Act
- B. Fair Housing Act
- C. Employment Non-Discrimination Act
- D. Dodd-Frank
Answer: B
Explanation:
The Fair Housing Act prohibits discrimination in housing based on disability. Federal courts and HUD have consistently ruled that HIV/AIDS qualifies as a disability under the Act.
"The Fair Housing Act prohibits discrimination in housing based on disability, including HIV/AIDS."
- U.S. Department of Justice; HUD Fair Housing Act Overview
References:
HUD, Housing Discrimination and Persons with HIV/AIDS
DOJ, The Fair Housing Act
NEW QUESTION # 118
Under which of the following conditions, if any, is a mortgage lender permitted to charge a fee for the preparation of a Closing Disclosure?
- A. The lender has an affiliated business arrangement with the escrow agent.
- B. The borrower requests that the Closing Disclosure be prepared before the scheduled closing.
- C. The borrower requests additional copies of the Closing Disclosure after the closing.
- D. The lender is not allowed to charge a fee for the preparation of the Closing Disclosure.
Answer: D
Explanation:
According to Regulation Z (TILA-RESPA Integrated Disclosure Rule, or TRID), lenders and settlement agents are not allowed to charge a fee for the preparation or delivery of the Closing Disclosure. This applies regardless of when or how many times the Closing Disclosure is provided.
"A creditor or other person may not charge any fee for the preparation or delivery of the disclosures required under this section (Closing Disclosure)."
- 12 CFR § 1026.19(f)(5)(i)
References:
CFPB, TILA-RESPA Integrated Disclosure Rule Small Entity Compliance Guide
12 CFR § 1026.19(f)(5)(i)
NEW QUESTION # 119
Mortgage loan originators planning to renew their licenses are required by the SAFE Act to complete which of the following education topics as part of their mandatory annual continuing education?
- A. Mortgage loan loss mitigation standards
- B. Nontraditional mortgage lending standards
- C. Credit score modeling standards
- D. 30-year conventional mortgage lending standards
Answer: B
Explanation:
Under the SAFE Act, mortgage loan originators (MLOs) must complete 8 hours of continuing education (CE) each year to maintain their licenses. The required CE topics include:
* 3 hours of federal law and regulations.
* 2 hours of ethics, which must include instruction on fraud, consumer protection, and fair lending.
* 2 hours on nontraditional mortgage lending standards, which refers to loan products that do not have fixed interest rates, such as adjustable-rate mortgages (ARMs) and other alternative loan types.
* 1 elective hour, which can vary based on state or company preferences.
The focus on nontraditional mortgage lending helps ensure MLOs understand the complexities and risks of nonstandard loan products.
References:
* SAFE Act Continuing Education Requirements
* NMLS Annual Renewal Guidelines
NEW QUESTION # 120
Which of the following is an origination fee?
- A. Prepaid Interest fee
- B. Title insurance fee
- C. Appraisal fee
- D. Underwriting fee
Answer: D
Explanation:
An underwriting fee is considered an origination fee because it is a charge for the lender's services in processing and evaluating the mortgage application. Origination fees include any fees associated with creating and underwriting the loan.
* Appraisal fees (A), title insurance fees (C), and prepaid interest fees (D) are not considered origination fees; they are separate charges related to third-party services or pre-paid interest.
References:
* TILA-RESPA Integrated Disclosure Rule (TRID)
* CFPB Mortgage Origination Fee Guidelines
NEW QUESTION # 121
Which of the following is an origination fee?
- A. Title insurance fee
- B. Appraisal fee
- C. Underwriting fee
- D. Prepaid interest fee
Answer: C
Explanation:
An origination fee is a charge by the lender for processing a new loan application, which typically includes the costs of underwriting and originating the loan. The underwriting fee is a common component of the lender's origination charges. Appraisal, title insurance, and prepaid interest are separate, non-origination costs.
"Origination charges include fees for underwriting, processing, and originating the loan."
- CFPB, Loan Estimate Explainer; TRID Rule Guide
References:
CFPB, What is a loan origination fee?
SAFE MLO National Test Study Guide
NEW QUESTION # 122
Which of the following property value approaches does an appraiser use on a rental property?
- A. Sales comparison approach
- B. Cost approachB Income approach
- C. Annual approach
Answer: C
Explanation:
For rental properties, an appraiser will typically use the Income Approach to estimate the property's value.
This method is based on the income-generating potential of the property, which is most relevant for investment properties, including rentals.
* The Income Approach assesses the property's ability to generate future cash flow by evaluating the income that can be derived from renting it. The formula often involves determining the net operating income (NOI) and applying a capitalization rate (cap rate) to estimate value.
* This method is most appropriate for rental properties because their value is inherently tied to their profitability.
Other methods:
* Cost approach: More suited for unique properties or new construction.
* Sales comparison approach: Often used for owner-occupied properties, comparing recent sales of similar properties.
References:
Uniform Standards of Professional Appraisal Practice (USPAP)
Fannie Mae's Appraisal Guidelines for Rental Properties
NEW QUESTION # 123
Interest-only mortgages are considered high risk compared to traditional mortgage products because:
- A. the borrower's ability to repay is not considered when making the credit decision.
- B. the interest rate exceeds the average prime offer (APOR) rate by 1.5 percentage points.
- C. scheduled payments do not reduce the loan's principal balance.
- D. the interest rate exceeds the APOR by 6.5 percentage points.
Answer: C
Explanation:
Interest-only mortgages are considered higher risk compared to traditional mortgages because the borrower' s scheduled payments only cover the interest on the loan, and none of the principal balance is reduced during the interest-only period. As a result, the loan balance remains unchanged, which increases the risk for both the borrower and lender if the value of the home decreases or if the borrower cannot make larger payments when the principal becomes due.
* Other risks, such as exceeding the APOR (Average Prime Offer Rate) by a certain margin (C, D), apply to high-cost mortgages, not specifically interest-only loans.
References:
* CFPB Qualified Mortgage and Ability-to-Repay Rule
* Fannie Mae Guidelines on interest-only mortgages
NEW QUESTION # 124
When a mortgage loan originator notices multiple Social Security number discrepancies within the same loan file, it is considered a red flag of:
- A. fair lending.
- B. mortgage fraud.
- C. pricing discrepancies.
- D. a forgetful borrower.
Answer: B
Explanation:
When multiple discrepancies in a borrower's Social Security number (SSN) are found within the same loan file, it raises concerns of mortgage fraud. The Social Security number is a critical identifier used to verify a borrower's identity, credit history, and employment. Inconsistent or altered SSNs may suggest attempts to hide the true identity of the borrower, which can be an indicator of fraudulent activity.
* Mortgage fraud involves deliberate misrepresentation of information on loan applications, documents, or other parts of the mortgage process. SSN discrepancies can point to identity theft or attempts to use multiple identities to obtain a loan fraudulently.
* This is a serious concern under the Fair Credit Reporting Act (FCRA) and can lead to legal action if discovered during underwriting or later in the loan process.
Mortgage loan originators (MLOs) must report such discrepancies as they may violate federal laws like RESPA and TILA and lead to further investigation.
References:
* Federal Trade Commission (FTC) guidelines on identity theft
* Mortgage Acts and Practices (MAP) Rule
NEW QUESTION # 125
What is the minimum amount of flood insurance a lender must require on a residential building located in a special flood hazard area?
- A. $350,000 for residential property structures
- B. $50,000 for residential property structures
- C. $150,000 for residential property structures
- D. $250,000 for residential property structures
Answer: D
Explanation:
The minimum amount of flood insurance required by lenders for a residential building located in a Special Flood Hazard Area (SFHA) is the lesser of:
* 100% of the replacement cost of the structure, or
* The maximum available under the National Flood Insurance Program (NFIP), which is $250,000 for residential property structures.
This requirement ensures that the property is adequately covered in case of flood damage.
References:
* National Flood Insurance Program (NFIP) Guidelines
* Flood Disaster Protection Act (FDPA)
NEW QUESTION # 126
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