Prohibited basis
Race, color, religion, national origin, sex, marital status or age (if able to contract), public assistance income, or a good-faith exercise of consumer credit protection rights.
Flashcards
NMLS SAFE MLO test flashcards
63 free cards across the five exam sections, each one cited to the source it rests on. Reveal the back on any card. A free account keeps your place.
Federal Mortgage-Related Laws · 15 cards / Free set
The Equal Credit Opportunity Act (ECOA) gives a creditor ____ days to notify an applicant of action on a completed application.
30 days after receiving it. The deadline applies to approval, a counteroffer or adverse action.
How long does a lender have to give requested reasons for adverse action?
30 days, if the applicant asks within 60 days of the notice.
When must a new customer get the initial privacy notice?
No later than when the customer relationship is established.
When is the affiliated business arrangement disclosure due?
No later than each referral, on a separate page. If the lender requires that provider, it is due at loan application.
True or false: RESPA never covers a loan secured by vacant land.
False. The Real Estate Settlement Procedures Act (RESPA) covers it if loan proceeds put a building or manufactured home on the land within two years.
How far off may a disclosed APR be and still count as accurate?
One-eighth of 1 percentage point above or below, as a general rule.
A first-lien loan is high-cost when its APR tops the average prime offer rate by more than ____ percentage points.
6.5 percentage points above average prime offer rate. The margin is 8.5 percentage points for a personal-property dwelling loan under $50,000.
Can a loan originator be paid more for a higher interest rate?
No. Loan originator pay must not be based on any term of the transaction.
List the eight ability-to-repay factors a creditor must consider.
Income or assets, employment status, this loan's payment, any simultaneous loan's payment, mortgage-related obligations, current debts, debt-to-income ratio or residual income, credit history.
When a suspect is identified at detection, a loan or finance company must file a suspicious activity report (SAR) within ____ calendar days.
30 calendar days. The count must start at initial detection of facts that may warrant a SAR.
True or false: The Real Estate Settlement Procedures Act (RESPA) referral fee ban reaches only the person who pays.
False. No person may give, and no person may accept, a fee or thing of value for referring settlement business on a federally related mortgage loan.
What is the purpose of the Home Mortgage Disclosure Act (HMDA)?
To show whether depository institutions serve their communities' housing needs. It also helps public officials decide how to distribute public sector investment to improve the private investment environment.
On a fixed-rate loan, private mortgage insurance (PMI) ends when the balance is first scheduled to reach ____ of the original value.
78 percent. The Homeowners Protection Act uses only the initial amortization schedule, not the actual balance.
List the classes the Fair Housing Act protects in residential real estate transactions.
Race, color, religion, sex, handicap, familial status and national origin.
Uniform State Content · 8 cards / Free set
List the four aims the SAFE Act gives for creating the national registry.
Increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud.
Unique identifier
A number or other identifier that permanently identifies a loan originator, assigned by Nationwide Multistate Licensing System (NMLS) and Consumer Financial Protection Bureau (CFPB) protocols.
Loan originator
An individual who takes a residential mortgage application and offers or negotiates its terms for compensation or gain. Both acts are required, so taking applications alone does not meet the definition.
When does a licensed broker doing only real estate brokerage lose the loan originator exclusion?
When a lender, mortgage broker or other loan originator pays them. Payment from an agent of any of those counts too.
A felony conviction in the past ____ years bars a loan originator license.
7 years before the application. For a felony involving fraud, dishonesty, breach of trust or money laundering, the bar applies at any time.
List the required topics in the 20-hour SAFE Act pre-licensing course.
At least 3 hours federal law, 3 hours ethics, 2 hours nontraditional lending. Ethics must cover fraud, consumer protection and fair lending.
What yearly continuing education must a state-licensed loan originator complete?
At least 8 hours: 3 federal law, 2 ethics, 2 nontraditional lending. Ethics must include fraud, consumer protection and fair lending.
True or false: A state licensing agency may examine a loan originator only once a year.
False. It may review, investigate or examine as often as necessary, including anyone required to be licensed.
General Mortgage Knowledge · 14 cards / Free set
Which closing document is the borrower's promise to repay: the note or the mortgage?
The note. It sets out the amount owed, the rate, the payment dates and the repayment term.
CFPB guide to the closing forms, p. 2 Reference document, not law.
Negative amortization
When payments do not cover all the interest due, so the loan balance goes up instead of down.
Consumer Handbook on Adjustable-Rate Mortgages, p. 12 Reference document, not law.
An adjustable-rate mortgage (ARM) interest rate is the index plus the ____.
The margin. The index measures interest rates generally, so it follows trends in the economy.
Consumer Handbook on Adjustable-Rate Mortgages, p. 4 Reference document, not law.
HELOC draw period
The fixed period, such as 10 years, when the borrower can borrow against the line. At its end the line may be renewed.
What You Should Know About Home Equity Lines of Credit, p. 6 Reference document, not law.
How large must a payment be to count as a balloon payment?
More than twice a regular periodic payment.
True or false: Insurance protecting the lender against the borrower's default is a finance charge.
True. So is a charge for a guarantee protecting the creditor against default or other credit loss.
What rate must a general QM be underwritten at?
The maximum rate that may apply in the first five years. Those years run from the first regular payment's due date.
Discount points
A charge the lender makes for the interest rate the borrower picks. When the borrower pays them, they add to the cash needed to close.
FHA Handbook 4000.1, Glossary, p. 13 Reference document, not law.
The standard Federal Housing Administration (FHA) upfront mortgage insurance premium is ____ of the base loan amount.
1.75 percent (2026 figure), so 175 basis points.
FHA Handbook 4000.1, Appendix 1.0, p. 1774 Reference document, not law.
Minimum credit score for maximum Federal Housing Administration (FHA) financing?
580. A score of 500 to 579 is limited to 90 percent loan to value (LTV).
FHA Handbook 4000.1, p. 204 Reference document, not law.
Minimum borrower age for a home equity conversion mortgage (HECM)?
62, for every borrower, by the closing date. There is no maximum age.
FHA Handbook 4000.1, HECM, p. 586 Reference document, not law.
Interest rate cap
A limit on how much an adjustable-rate mortgage (ARM) rate can change. Caps set the most the rate may move each year and over the loan's whole life.
OCC Comptroller's Handbook, Mortgage Banking, p. 27 Reference document, not law.
On the initial amortization schedule, when does a fixed-rate loan reach its PMI cancellation date?
When the balance is scheduled to reach 80 percent of original value. That date holds whatever the actual balance is then.
List three of the groups exempt from the VA funding fee.
Veterans paid service-connected disability compensation; veterans entitled to it but for retirement pay; surviving spouses of veterans who died in service or of a service-connected disability.
VA Lenders Handbook 26-7, p. 303 Reference document, not law.
Mortgage Loan Origination Activities · 16 cards / Free set
Owner's title insurance
Insurance that protects the consumer's financial investment in the home from title issues. The underwriter must also defend the owner's title against certain lawsuits.
CFPB TRID title insurance factsheet, p. 1 Reference document, not law.
What is the purpose of a home appraisal?
To give the lender an estimate of the home's market value. The appraiser does this as an independent professional.
Your Home Loan Toolkit, p. 19 Reference document, not law.
Which loan type might a buyer who plans to sell within a short time consider?
An adjustable-rate mortgage, if the buyer can afford its maximum payment. Its payment often starts lower than a fixed-rate loan's but can rise quickly.
Your Home Loan Toolkit, p. 8 Reference document, not law.
When must the Loan Estimate (LE) go out after the lender receives the application?
By the third business day after receiving it. Placing it in the mail by then is enough.
When is an estimated closing cost on the Loan Estimate in good faith?
When the borrower pays no more than the Loan Estimate (LE) showed. Any other increase must fit one of the stated exceptions.
List the three grounds that count as a changed circumstance.
An extraordinary event beyond any party's control, or an unexpected event specific to the borrower or loan; relied-on information that proved wrong or changed; new information not relied on.
When must the borrower receive the Closing Disclosure (CD)?
No later than three business days before consummation. A loan secured by a timeshare needs it only by consummation.
May a settlement agent deliver the Closing Disclosure to the borrower?
Yes. The lender must still ensure every requirement is met.
List the three Closing Disclosure (CD) changes that restart the three-business-day wait.
The annual percentage rate (APR) becomes inaccurate; the loan product changes; a prepayment penalty is added.
List the six items that make up an application under the TILA-RESPA Integrated Disclosure rule (TRID).
Borrower's name, income and Social Security number, property address, estimated property value, and loan amount sought.
True or false: A borrower can rescind a loan used to buy the home.
False. The right to rescind does not apply to a residential mortgage transaction.
What does the "In 5 Years" figure on the Loan Estimate add up?
Principal, interest, mortgage insurance and loan costs paid through month 60. Month 60 counts from the first payment's due date.
A $1,200 house payment plus $600 in other monthly debts, on $6,000 monthly income, gives a debt to income (DTI) ratio of ____.
30 percent. Total monthly debt must include the new house payment, not only the other debts.
Debt-to-income (DTI) ratio
The borrower's total monthly debt obligations divided by total monthly income.
List the four things a lender must assess when underwriting a Federal Housing Administration (FHA) loan.
Creditworthiness, capacity to repay, available capital, and the property as sufficient collateral.
FHA Handbook 4000.1, p. 202 Reference document, not law.
Loan to value (LTV) on a $237,500 base loan amount and a $250,000 adjusted value: ____.
95 percent. For a Federal Housing Administration (FHA) loan, LTV means the base loan amount divided by the adjusted value.
FHA Handbook 4000.1, Glossary, p. 29 Reference document, not law.
Ethics · 10 cards / Free set
May a lender ask a mortgage applicant about religion?
No, except for a qualifying self-test.
Can a mortgage ad break the law by implying a false loan term?
Yes. A material misrepresentation of any loan term is barred, stated or implied.
True or false: A settlement service provider may work free for a builder in return for the builder's buyer referrals.
False. Services at little or no charge are a thing of value under the Real Estate Settlement Procedures Act (RESPA).
Triggering terms
Credit terms that, once an ad states them or lets them be readily worked out, require the ad to state further credit terms too.
Regulation Z, 12 CFR Part 1026, Supplement I, comment 24(d)-1
Steering
A loan originator directing a borrower to a home loan because it pays the originator more. It is barred unless that loan is in the borrower's interest.
Appraiser independence
A principal dwelling's value must rest only on the appraiser's independent judgment. Coercing, bribing, instructing or colluding with the appraiser to shift it is barred.
Who files the suspicious activity report at a nonbank mortgage company, the company or its loan originator?
The company. An individual it employs is not a loan or finance company, so the filing duty is the firm's.
Redlining
A lender giving unequal credit access or terms because of the race, color, national origin or other prohibited trait of an area's residents. It can violate both the Fair Housing Act and the Equal Credit Opportunity Act.
FFIEC Interagency Fair Lending Examination Procedures, p. 6 Reference document, not law.
May a loan originator leave a debt off the application because the borrower asks?
No. Knowingly understating liabilities on a loan application to an insured institution is a false statement.
FFIEC mortgage fraud white paper, p. 93 Reference document, not law.
What does predatory lending involve?
Deception, fraud, aggressive sales tactics or exploiting borrower confusion about loan terms. These practices often come paired with abusive loan terms.
HUD-Treasury, Curbing Predatory Home Mortgage Lending, p. 3 Reference document, not law.
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