Practice

Every section, shuffled

118 free questions, every section mixed together, in the shape of the real paper. Each one comes back with its explanation. Most carry the provision they rest on, as a link into the law on this site. The others are written from a standard form or a published guide, which is not law and is not reproduced here, so they carry the explanation alone.

All 118 free questions in this run

On which type of property may a Fannie Mae borrower not use gift funds?
- A An investment property Correct
- B A second home A second home is one of the two property types on which gift funds are allowed.
- C A one-unit principal residence A principal residence may be funded with gifts, and a one-unit home needs no minimum contribution from the borrower's own funds.
- D A two-unit principal residence A two-unit principal residence may use gifts, although above 80% loan-to-value the borrower must add 5% from their own funds first.
Gift funds may go toward a home the borrower lives in, whether as a principal residence or as a second home, and Fannie Mae does not permit them on an investment property (Fannie Mae Selling Guide, B3-4.3-04, September 2, 2026 edition). A two-unit principal residence can still take a gift, though above 80% loan-to-value the borrower must first put in 5% from their own funds.
On the Uniform Residential Loan Application, the borrower's employment and income are entered in:
- A Section 1, Borrower Information Correct
- B Section 2, Assets and Liabilities Section 2 collects the borrower's financial assets and liabilities, and the job and pay go elsewhere.
- C Section 4, Loan and Property Section 4 collects the loan purpose and the property being bought or refinanced.
- D Section 5, Declarations Section 5 asks the declarations questions about the property, its financing and the borrower's past.
The borrower's income and employment go in Section 1, Borrower Information, which the instructions for the Uniform Residential Loan Application say gathers personal details along with income and job history. Section 2 holds assets and liabilities, Section 4 the loan and property, and Section 5 the declarations, none of which carries the job or the pay.
What percent of the price is a $27,000 down payment on a $360,000 home purchase?
- A 2.7% 2.7% misplaces the decimal, and $27,000 is a larger share of $360,000 than that.
- B 7.5% Correct
- C 13.3% 13.3% divides the price by the down payment, turning the fraction upside down.
- D 75% 75% is ten times the true share, because the decimal point has moved one place.
A down payment is the amount the buyer pays toward the home themselves, as the Consumer Financial Protection Bureau's home loan toolkit defines it, so as a percentage it is that amount divided by the price. $27,000 divided by $360,000 is 7.5%, and 75% comes from misplacing the decimal point.

Your Home Loan Toolkit, p. 9 Reference document, not law.
Which score does a Fannie Mae lender use for a borrower whose three credit scores are 702, 640 and 688?
- A 640 The lower score is used when only two scores are obtained, and with three the middle one counts.
- B 677 677 is the average of the three scores, and the lender takes the middle score.
- C 688 Correct
- D 702 The highest of three scores is never the one chosen, because the middle score is used.
When three credit scores are obtained for a borrower, the lender must choose the middle score (Fannie Mae Selling Guide, B3-5.1-02). Of 640, 688 and 702 the middle one is 688, and 677 is the average, which the rule does not use.
Two weeks after the Loan Estimate, the appraisal vendor raises its standard fee and the creditor issues a revised estimate. What happens to the tolerance?
- A It is not reset Correct
- B It resets for an unexpected event The event has to be specific to this consumer or this transaction, and a general price list is neither.
- C It resets with any revised estimate Issuing a revised estimate does nothing on its own; a stated ground for the revision has to exist first.
- D It resets once the consumer signs A consumer signature is not what resets a tolerance, and none is called for here.
A changed circumstance means an extraordinary or unexpected event, relied-on information that proved inaccurate, or new information specific to the consumer or transaction. A vendor repricing its standard fee is none of these, and a revised estimate issued on that ground does not reset the tolerance.

Regulation Z, 12 CFR s. 1026.19(e)(3)(iv)(A)
A lender detects facts that may call for a suspicious activity report (SAR) and identifies no suspect. How long may it take to file?
- A Up to 60 calendar days from initial detection Correct
- B Up to 30 calendar days from initial detection That is the ordinary deadline, and it is extended by a further 30 days precisely because no suspect has been identified.
- C Up to 90 calendar days from initial detection No 90-day period appears in the rule; the outer limit is 60 calendar days.
- D Until a suspect is identified, with no outer limit The extension is capped, so a filer cannot wait indefinitely for a suspect to emerge.
A report is due no later than 30 calendar days after initial detection, and where no suspect has been identified the filer may take a further 30 days to find one, but the rule caps the total delay at 60 calendar days from that detection.

31 CFR s. 1029.320(b)(3)
Mortgage loan production normally includes each of these phases EXCEPT:
- A Taking applications Taking applications is origination, the first of the four production phases.
- B Underwriting Underwriting, where the application is approved or denied, is the third phase.
- C Settling the loan Settling the loan is the closing unit's work, the last production phase.
- D Servicing Correct
Mortgage loan production normally runs through four phases: origination, processing, underwriting and closing. Servicing comes after the loan is made, so it is not a production phase. Taking applications belongs to origination and settling the loan to closing, both inside production.

OCC Comptroller's Handbook, Mortgage Banking, p. 33 Reference document, not law.
If the home is transferred without the lender's consent, a due-on-sale clause lets the lender:
- A Raise the interest rate The clause lets the lender call the loan due, not change the interest rate.
- B Add a late charge A late charge applies to a late payment under the note, not to a transfer.
- C Demand the full balance Correct
- D Cancel the hazard insurance The clause's remedy is payment in full, not cancelling the insurance.
A sale or transfer of the property without the lender's prior written consent lets the lender demand immediate payment in full of all sums secured. The clause gives no power to raise the interest rate.

CFPB guide to the closing forms, p. 2 Reference document, not law.
A construction loan is best described as:
- A Short-term interim financing Correct
- B A 30-year permanent loan A 30-year loan is the permanent mortgage; a construction loan is short-term and ends when building is done.
- C A home equity line A home equity line borrows against equity in an existing home, while a construction loan finances the cost of building one.
- D A loan for land only A construction loan pays for the cost of construction, not for buying a lot alone.
A construction loan is a short-term interim loan that pays for the cost of building, because it only has to carry the project until the home is finished. Long-term financing comes afterward, from a separate permanent mortgage or from the loan's conversion.

FHA Handbook 4000.1, p. 498 Reference document, not law.
Of the two mortgage markets, the primary mortgage market is the one where:
- A Loans are traded among investors Loans are bought and sold among lenders and investors in the secondary market.
- B The Federal Reserve sets rates The Federal Reserve's policy is not a market where mortgages are made.
- C Mortgage securities are issued Securities backed by pooled loans are traded in the secondary market.
- D Lenders make loans to borrowers Correct
In the primary market lenders originate mortgages by lending to homeowners and purchasers, and that makes it the place a loan is first made. Trading loans among investors belongs to the secondary market.

OCC Comptroller's Handbook, Mortgage Banking, p. 5 Reference document, not law.
When a lender forecloses, what makes the foreclosure a judicial one?
- A A trustee's sale A trustee's sale under a power of sale is the nonjudicial route.
- B A short sale A short sale is a sale for less than the balance owed, not a court foreclosure.
- C A deed in lieu A deed in lieu is a voluntary transfer of the property and involves no court case.
- D A court action Correct
A foreclosure is judicial when its procedure requires a court action or proceeding, begun by filing a document such as a complaint or petition with a court. A trustee's sale under a power of sale proceeds without one.

Regulation X, 12 CFR Part 1024, Supplement I, comment 41(f)-1.i
Besides size limits and underwriting guidelines, a conforming loan must meet the Fannie Mae and Freddie Mac rules on:
- A FHA mortgage insurance premiums FHA insurance makes a loan a government loan, and a conventional loan is not insured by the U.S. government.
- B VA guaranty fees A VA guaranty is a government guarantee, which a conventional loan by definition does not carry.
- C Terms and amortization periods Correct
- D Sales to private investors Loans that miss the enterprises' standards are the ones sold to private investors; a conforming loan may be sold to Fannie Mae or Freddie Mac.
A conforming loan must comply with the Fannie Mae and Freddie Mac loan size limits, terms, amortization periods and underwriting guidelines, so meeting the size limits and the guidelines is not the whole test. FHA insurance or a VA guaranty would make it a government loan rather than a conventional one.

OCC Comptroller's Handbook, Mortgage Banking, p. 26 Reference document, not law.
On an FHA loan, a borrower is self-employed when she owns at least what share of the business?
- A 10% A 10 percent interest is below the 25 percent ownership line in the Federal Housing Administration (FHA) definition.
- B 25% Correct
- C 50% The FHA definition starts at 25 percent, so an owner need not hold half.
- D 51% Majority ownership is not required; 25 percent or more is enough.
A borrower is self-employed on a Federal Housing Administration (FHA) loan when she holds an ownership interest of 25 percent or more in the business. A 10 percent stake falls under the line, and majority ownership is not required.

FHA Handbook 4000.1, p. 255 Reference document, not law.
The minimum required investment on an FHA purchase must equal at least this share of the Adjusted Value:
- A 3% Three percent is below the FHA floor of 3.5 percent of the Adjusted Value.
- B 3.5% Correct
- C 5% Five percent is more than the handbook requires; the floor is 3.5 percent.
- D 20% FHA sets no 20 percent investment; the minimum is 3.5 percent of the Adjusted Value.
The borrower's minimum required investment, paid in cash or its equivalent under Section 203(b)(9) of the National Housing Act, must be at least 3.5 percent of the Adjusted Value of the property; 3 percent falls short of that floor.

FHA Handbook 4000.1, p. 207 Reference document, not law.
Which mortgage insurance premiums does FHA usually collect on an insured loan?
- A An upfront premium only The upfront premium is only half of it; FHA also collects an annual premium spread over the monthly payments.
- B An annual premium only The annual premium comes with a one-time upfront premium, which may be paid in cash or financed into the loan.
- C Upfront and annual premiums Correct
- D None with 20% down FHA's premium rules carry no waiver for a large down payment; both premiums are collected.
The Federal Housing Administration (FHA) collects two premiums on most of its programs: a one-time upfront premium and an annual premium that is paid in monthly installments. Both apply to the loan, and an answer naming only one of them is incomplete.

FHA Handbook 4000.1, p. 207 Reference document, not law.
A state usury law sets a limit on a loan's:
- A Maximum interest rate Correct
- B Down payment size Usury laws deal with the price of credit, and they say nothing about how much cash a buyer puts down.
- C Loan-to-value ratio The ratio of loan to property value is an underwriting measure set by lenders and programs, and a usury law does not limit it.
- D Closing date When a loan closes is agreed between the parties; a usury law limits the rate charged.
A usury law is a state law that sets the highest interest rate a lender may charge. Where the loan contract carries no lifetime rate cap, that state ceiling is what limits how high the rate can go.

CFPB TRID guide to the Loan Estimate and Closing Disclosure forms, p. 30 Reference document, not law.
Which borrowers is Fannie Mae's HomeReady product built to serve?
- A Veterans and their spouses Loans reserved for veterans are the Department of Veterans Affairs program; HomeReady is a conventional product defined by the buyer's income.
- B Buyers in rural areas only Financing tied to rural areas is the Department of Agriculture's guaranteed program, and the definition of HomeReady names no rural limit.
- C Low- to moderate-income buyers Correct
- D Investors in rental homes HomeReady is aimed at people buying or owning their own homes, and its definition does not describe rental investors.
HomeReady is Fannie Mae's affordable lending product, and income sets who it serves: buyers and owners whose incomes are low to moderate. Military service and a rural address are the marks of other programs, and rental investors are outside its aim.
What does the estimated total monthly payment on an adjustable-rate mortgage include?
- A Principal, interest, taxes and insurance Correct
- B Principal and interest only Principal and interest are only part of the figure, which is why the line is called the total monthly payment.
- C Principal, interest and mortgage insurance Mortgage insurance is in the figure, but so are taxes, homeowners insurance and other escrow items.
- D Principal, interest and property taxes Property taxes are in the figure, but so are mortgage insurance, homeowners insurance and other escrow items.
The payments shown include mortgage insurance, property taxes, homeowners insurance and any additional property assessments or other escrow items, so comparing two offers on principal and interest alone leaves out part of the cost.

Consumer Handbook on Adjustable-Rate Mortgages, p. 7 Reference document, not law.
What do 1.25 discount points cost on a $264,000 loan?
- A $330 That figure is a tenth of the right amount, as if each point were a tenth of a percent instead of a full 1%.
- B $2,640 That is one point only; the extra quarter point adds another $660.
- C $3,300 Correct
- D $33,000 That treats 1.25 points as 12.5% of the loan, ten times too much.
One discount point equals 1% of the loan amount (Regulation Z, section 1026.32), so 1.25 points on a $264,000 loan cost $3,300. Points are figured on the loan amount, never on the price of the home.

Regulation Z, 12 CFR s. 1026.32(b)(3)(i)
When a state agency examines a mortgage licensee, whom may it interview about the business?
- A Staff, contractors, agents and customers Correct
- B Staff, but not customers Customers of the licensee are on the list of people the agency may interview.
- C Staff, but not contractors Independent contractors are named alongside officers, employees and agents.
- D Only those the licensee agrees to produce The authority does not depend on the company agreeing. The same section also bars anyone from withholding or destroying records.
Officers, principals, loan originators, employees, independent contractors, agents and customers can all be interviewed about the business, and the agency may see the licensee's books and records as well. The list goes past the payroll and does not depend on the licensee's consent.

SAFE Act, 12 USC s. 5114(2)
What does a rate lock do, and for how long are rate locks typically offered?
- A Sets the rate, usually 30, 45 or 60 days Correct
- B Sets the rate for the life of the loan A lock holds the rate for a period of time, typically 30, 45 or 60 days, not for the whole loan.
- C Caps the rate, typically for 90 or 120 days A lock fixes the rate rather than capping it, and the usual periods are shorter than these.
- D Sets the closing costs for 30 or 60 days A rate lock sets the interest rate, not the closing costs.
A rate lock sets the interest rate for a period of time, typically 30, 45 or 60 days, so a rate that is floating instead can move up or down until the borrower locks it. Changes to the loan amount, the credit score or the verified income can still move a locked rate.

Your Home Loan Toolkit, p. 14 Reference document, not law.
How soon after signing must at least one FHA borrower move into the home?
- A Within 30 days The move-in deadline is twice that long; the borrower has 60 days from signing.
- B Within 60 days Correct
- C Within 90 days The deadline is shorter; occupancy must begin within 60 days of signing.
- D Within one year One year is the period the borrower must intend to keep living there, and the time allowed to move in is much shorter.
At least one borrower on a Federal Housing Administration (FHA) loan must occupy the home within 60 days of signing the security instrument and must intend to live there for at least one year. The one-year figure is how long the borrower must intend to stay, and the move-in deadline is the 60 days.

FHA Handbook 4000.1, p. 184 Reference document, not law.
When must a registered mortgage loan originator give a consumer his unique identifier?
- A On request, before acting, in first written contact Correct
- B Only on the consumer's written request A request is only one of the three triggers, and the rule does not require it to be in writing.
- C At closing, on the final loan documents The identifier is owed before the originator acts, which is long before the closing papers.
- D Within 30 days after the loan application is taken No thirty-day period appears here. The duty attaches at the earliest of the three triggers.
Three triggers require the identifier: a consumer's request, the point before he acts as a mortgage loan originator, and his first written communication with the consumer. Whichever comes first governs. Waiting for the closing documents is far too late.

Regulation G, 12 CFR s. 1007.105(b)
What marks out redlining from other forms of illegal disparate treatment in lending?
- A Credit turns on who lives in the area Correct
- B Credit turns on the applicant's own credit record A decision on the applicant's own credit record is not about the area, so it is not what this practice names.
- C Credit turns on a low appraised value An appraised value below the price is a property fact, not a characteristic of the people in the area.
- D Credit turns on the type of property offered Declining a property type is a collateral policy. It becomes a fair lending matter only when it works on a prohibited basis.
Redlining is unequal access to credit, or unequal terms, because of a protected characteristic of the residents of the area where the borrower lives or the property sits. The applicant's own credit record has nothing to do with the area.

FFIEC interagency fair lending examination procedures, p. 6 Reference document, not law.
The set time in which a borrower may take advances on a home equity line is the:
- A Repayment period The repayment period follows the draw period, when the borrower pays back what was borrowed instead of taking more.
- B Draw period Correct
- C Rescission period Rescission is the short window to cancel certain home-secured credit after opening it, and it is not the time for taking advances.
- D Lock-in period A lock-in holds an interest rate on a mortgage application and has nothing to do with drawing on a credit line.
A home equity line of credit (HELOC) often sets a fixed period, such as 10 years, in which the borrower may borrow against the line, and that span is the draw period. When it ends, the line may be renewed, or the borrower repays what is owed.

What You Should Know About Home Equity Lines of Credit, p. 6 Reference document, not law.
On a home purchase, what does a lender's title insurance policy protect and what does an owner's policy protect?
- A The amount lent, and the buyer's investment Correct
- B The buyer's equity, and the lender's lien This swaps the two: the lender's policy covers what the lender lent, and the buyer's investment is the owner's policy.
- C The buyer's investment, and the seller's warranty An owner's policy protects the buyer, and it insures nothing for the seller.
- D Both parties at once, under one policy The two policies are separate, and the owner's one is the buyer's own decision where the lender does not require it.
A lender's title insurance policy protects the amount the lender lent, while an owner's policy protects the buyer's own financial investment in the home and is optional unless the lender requires it as a condition of the loan.

Your Home Loan Toolkit, p. 18 Reference document, not law.
Under Regulation H, when is an individual not acting for compensation or gain?
- A When acting as a volunteer expecting nothing of value Correct
- B When paid only after the loan closes Payment does not have to depend on the loan closing for it to be compensation.
- C When paid a salary rather than a commission A salary is a thing of value, so being on salary does not put the individual outside compensation or gain.
- D When the payment comes from the employer, not the borrower Who pays does not matter. Anything of value received for the activity is compensation.
An individual acting as a volunteer, who receives and expects nothing of value for the activity, does not act for compensation or gain. Anything of value received for the activity makes it compensation: a salary, a bonus or a commission, whoever pays and whether or not the loan closes.

Regulation H, 12 CFR Part 1008, Appendix A
A residential mortgage loan advertisement must show whose unique identifier?
- A The person originating the loan Correct
- B The supervising branch manager The identifier belongs to the person who originates the loan, so a supervisor's number is the wrong one to print.
- C The company alone A company number does not replace the identifier of the individual originating the loan.
- D The state regulator issuing the license The regulator issues the license and holds no identifier that goes on an advertisement.
The originator's own unique identifier must appear on application forms, solicitations and advertisements, business cards and websites among them. A supervisor's number or a company number does not stand in for it.
A buyer asks about a neighborhood. The real estate agent replies that the buyer would not be comfortable with the existing residents because of her religion. What is this?
- A Unlawful steering Correct
- B Lawful The remark is on the list of steering practices, and nothing has to be refused for it to be unlawful.
- C Lawful, if the buyer raised the neighborhood Who raised the subject first makes no difference. The rule looks at what was communicated and why.
- D Blockbusting Blockbusting is inducing someone to sell or rent, for profit, by talk of who is moving into the neighborhood; this remark steered a buyer away.
Telling a prospective purchaser she would not be comfortable or compatible with a neighborhood's existing residents because of a protected characteristic is on the list of steering practices. The remark is unlawful by itself; no application has to be refused.

24 CFR s. 100.70(c)(3)
If a borrower pays a mortgage broker directly at closing, when may the lender also pay the broker on that loan?
- A Never Correct
- B If the total stays reasonable The bar is absolute for that transaction and does not soften when the total looks reasonable.
- C If the borrower is told Telling the borrower does not lift the bar, because the rule prohibits the second payment rather than a hidden one.
- D After the loan closes Waiting until after closing does not help, since the ban reaches any payment in connection with the transaction.
Once a loan originator receives compensation directly from the consumer on a dwelling-secured transaction, no one else may pay that originator anything in connection with it, and a person who knows of the consumer-paid compensation may not pay either. Telling the borrower does not lift the bar, since the second payment itself is what is barred.

Regulation Z, 12 CFR s. 1026.36(d)(2)(i)(A)
What distinguishes a balloon payment mortgage from a loan that fully amortizes over its term?
- A The remaining balance falls due in one lump sum Correct
- B The interest rate changes over the life of the loan A rate that adjusts through the loan describes an adjustable-rate mortgage, which can still fully amortize.
- C The payments rise on a set schedule each year A scheduled rise in payments belongs to a graduated or stepped payment structure and says nothing about a lump sum at the end.
- D The lender may call the loan at any time A demand feature is a separate contract term and is not what makes a loan a balloon.
A balloon payment mortgage does not fully amortize: payments run for a period, and the remaining balance falls due in one lump sum. A rate that changes over the life of the loan makes it an adjustable-rate mortgage, which can still fully amortize.

CFPB mortgage origination examination procedures, p. 2 Reference document, not law.
A state supervisory authority must be able to suspend, terminate and refuse renewal of a loan originator license for violations of which law?
- A State or federal law Correct
- B State law only Confining the power to state law would strip out the words that put federal violations inside the same authority.
- C The employer's own policies An employer's policies are not the measure; the standard names violations of state or Federal law.
- D State law and the registry's own rules The registry's own rules are not the measure here, and the standard names state and federal law.
Violations of state law and of federal law both support suspending, terminating or refusing to renew a license, and the state authority must hold that power for each. Limiting it to one kind of law, or to the registry's rules, drops part of what the standard names.

Regulation H, 12 CFR s. 1008.111(b)(5)
A settlement agent hands the borrower the Closing Disclosure. Who is responsible for making sure the disclosure was provided on time?
- A The settlement agent alone The settlement agent may deliver the disclosure, and responsibility for timely delivery still sits with the creditor.
- B The mortgage broker who took the application A broker's delivery duty runs to the Loan Estimate, while this disclosure is the creditor's to ensure.
- C The creditor Correct
- D Whoever the closing instructions name Closing instructions are a private arrangement and cannot move a duty the rule places on the creditor.
A settlement agent may provide the Closing Disclosure, but the creditor must ensure the disclosure is provided in line with every requirement, so the task can be delegated and the responsibility cannot.

Regulation Z, 12 CFR s. 1026.19(f)(1)(v)
A post-closing audit shows the borrower paid more than the zero tolerance rule allowed. What must the creditor do to cure it?
- A Refund the excess within 30 days of closing Sixty days is the cure period here; 30 days belongs to corrected disclosures after a post-consummation event.
- B Send corrected disclosures alone within 60 days A corrected disclosure without the money back leaves the consumer out of pocket, so it is not a cure.
- C Refund and correct the disclosures within 60 days Correct
- D Credit the excess against the first payment The rule pairs the refund with corrected disclosures delivered within 60 days, and this step sends none.
The cure has two halves: the creditor must refund the excess to the consumer and must deliver corrected disclosures reflecting that refund, each no later than 60 days after consummation.

Regulation Z, 12 CFR s. 1026.19(f)(2)(v)
Familial status under the Fair Housing Act protects a household with a child under age:
- A 16 The definition does not stop at 16; it covers anyone who has not reached 18.
- B 18 Correct
- C 21 Twenty-one is not the cutoff; a person who has turned 18 is outside the definition.
- D 25 The definition covers only individuals under 18, so a 25 cutoff overstates it.
Familial status means one or more individuals who have not reached 18 living with a parent, a legal custodian or that person's designee, under 42 USC 3602(k). A household with a child who has turned 18 falls outside the definition, while a pregnant person or one securing custody of a minor is covered.

Fair Housing Act, 42 USC s. 3602(k)
About what share of a credit score rests on paying bills on time?
- A 10% The booklet puts payment history well above this share, and names it as the largest component.
- B 15% This is under the share the booklet gives payment history, which it puts above every other component.
- C 30% The booklet puts about 30 percent on how much debt the borrower owes, which it names second.
- D 35% Correct
About 35 percent of a credit score rests on paying bills on time, which makes payment history the largest part the booklet names. How much debt is owed comes second, at about 30 percent.

Your Home Loan Toolkit, p. 7 Reference document, not law.
A brokerage asks a borrower to sign a contract saying it earns its fee for best efforts even if no loan is obtained. What does the model state law say?
- A The contract is a prohibited practice Correct
- B Lawful, where the fee is disclosed up front Disclosing the term does not make it permitted, since the contract itself is what the rule prohibits.
- C Lawful, where the borrower signs willingly Consent is no answer to a prohibited practice.
- D Lawful, where the fee is refundable later A refund promise does not change the nature of the contract the licensee asked the borrower to sign.
Asking a borrower to sign a contract under which the licensee earns its fee for best efforts, whether or not any loan comes through, is a prohibited act. Her willing signature does not make it lawful, and neither does disclosing the fee.
The Model State Law for the SAFE Act is best described as:
- A Model legislation for states to adopt Correct
- B A federal regulation binding all lenders It is model language for state legislatures, not a federal rule, and it binds no lender until a state adopts it.
- C A compliance manual for bank staff It is written for states to enact as law, not as an internal policy manual for any bank's staff.
- D The registry's own operating rules It governs state licensing of originators; it is not a set of operating rules the registry issues for its users.
Each state legislature is meant to enact this model language so that its own law carries out the licensing requirements of the SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act). Until a state adopts it, it binds nobody, which rules out a federal regulation, a bank manual or registry rules.
For the appraisal copy it must give an applicant, a lender may charge:
- A A reasonable copying fee The rule bars any charge for providing the copy itself.
- B The full appraisal fee again The lender may recover the appraisal's cost once, but may not charge again for the copy.
- C Nothing for the copy Correct
- D Postage only Even postage may not be charged for providing the required copy.
Although a creditor may charge a reasonable fee to cover the cost of the appraisal itself, 12 CFR 1002.14(a)(3) of Regulation B bars any charge to an applicant for providing copies of appraisals and other written valuations. The copy is free, and only the appraisal work may be charged.

Regulation B, 12 CFR s. 1002.14(a)(3)
Which booklet, or a suitable substitute, must a lender give an applicant for an adjustable-rate loan on her principal dwelling?
- A Your Home Loan Toolkit The toolkit is the special information booklet for purchase applications, not the booklet the adjustable-rate rule names.
- B What You Should Know About Home Equity Lines of Credit That brochure goes with home equity lines of credit, not closed-end adjustable-rate loans.
- C Consumer Handbook on Adjustable Rate Mortgages Correct
- D Buying Your Home: Settlement Costs The adjustable-rate rule names only the Consumer Handbook on Adjustable Rate Mortgages or a substitute.
For a loan on the consumer's principal dwelling with a term over one year whose rate may rise, 12 CFR 1026.19(b)(1) of Regulation Z requires the creditor to provide the Consumer Handbook on Adjustable Rate Mortgages or a suitable substitute. It explains how adjustable-rate loans work before the consumer commits.

Regulation Z, 12 CFR s. 1026.19(b)(1)
Who gathers the legal documents, closes the loan and handles the money involved in a home purchase?
- A The closing agent Correct
- B The loan processor The processor assembles the loan file for underwriting and does not run the closing or hold the money.
- C The underwriter The underwriter decides whether the loan is approved, which happens before anyone reaches the closing table.
- D The appraiser The appraiser reports on the value of the property and has no part in the closing itself.
The closing agent does that work, and the title varies by region: in most of the country the person is a settlement agent, and in several western states the same role is called an escrow agent.

Your Home Loan Toolkit, p. 17 Reference document, not law.
Which three things set the principal and interest payment on a mortgage?
- A The loan amount, the interest rate and the term Correct
- B The loan amount, the credit score and the term A credit score helps price the interest rate, and it is not an input to the payment itself.
- C The purchase price, the down payment and the taxes Property taxes are collected alongside the payment rather than forming part of the principal and interest.
- D The interest rate, the credit score and the insurance Homeowner's insurance is a separate cost, and the credit score is not an input to this calculation.
The principal and interest payment depends on the home loan amount, the interest rate, and the number of years it takes to repay the loan, so nothing else enters that part of the payment.

Your Home Loan Toolkit, p. 5 Reference document, not law.
What does private mortgage insurance (PMI) do for a borrower who puts down less than 20 percent?
- A It insures the lender against the borrower's default Correct
- B It pays the borrower's mortgage during a hardship Nothing here pays the borrower's monthly payment; the policy answers to the lender for a loss.
- C It insures the borrower's title to the property Title insurance covers defects in ownership, which is a different policy bought at closing.
- D It covers damage to the home from fire Fire damage is covered by homeowner's insurance, another separate policy on the property.
Private mortgage insurance lets the borrower put less down because it insures the lender against loss if the borrower stops paying. It does nothing to cover the borrower's own payments in a hardship.

Your Home Loan Toolkit, p. 9 Reference document, not law.
On a variable-rate loan, what does Regulation Z mean by the fully-indexed rate?
- A The index plus the margin at consummation Correct
- B The discounted rate the borrower starts on An introductory or discounted rate is what the borrower actually pays at first, which is a different figure.
- C The maximum rate under the lifetime cap The lifetime cap sets the ceiling the rate may ever reach, not the rate the index and margin produce.
- D The rate at the first scheduled adjustment The rate at the first adjustment turns on the index value on that later date, not on the value at consummation.
The fully-indexed rate is the rate worked out from the index value and the margin at consummation, with no introductory discount applied. A lifetime cap only sets a ceiling, which is a different figure.

Regulation Z, 12 CFR s. 1026.18(s)(7)(vi)
Under the loan originator compensation rule, which of these counts as compensation?
- A An award of a trip or merchandise Correct
- B A credit report charge passed straight to the vendor A bona fide and reasonable charge collected and passed on to an unaffiliated third party is not compensation, because the originator keeps nothing.
- C A brokerage's bona fide fee as a title insurance agent Payments for services that are not loan origination activities, such as acting as a title insurance agent, are excluded from compensation.
- D A bona fide dividend on owned stock Bona fide returns or dividends on stock or other equity holdings are not compensation, although an award of stock generally is.
Compensation includes salaries, commissions and any financial or similar incentive the originator receives and retains, which means a periodic bonus and an award of merchandise, services, trips or similar prizes all count.

CFPB Loan Originator Rule small entity compliance guide, p. 28 Reference document, not law.
Under the Red Flags Rule, the initial written identity theft prevention program must be approved by:
- A The Federal Trade Commission The program is the company's own; no agency approves it.
- B A state licensing regulator The rule places approval inside the company, not with a regulator.
- C The company's outside auditor An auditor may review the program but does not approve it under the rule.
- D The board or a board committee Correct
A financial institution or creditor must obtain approval of the initial written program from its board of directors or an appropriate committee of the board. Ongoing oversight may later involve a senior manager, but the first approval sits with the board.

16 CFR s. 681.1(e)(1)
The unique identifier the SAFE Act requires for each loan originator:
- A Stays with the originator permanently Correct
- B Belongs to the originator's employer The identifier belongs to the individual originator, not to whoever employs her, and it identifies her permanently.
- C Changes in each state that licenses the originator One identifier serves in every state; states are told to use it in place of Social Security numbers.
- D Lapses after five years without a license The five-year rule applies to passed test results, not to the identifier, which is permanent.
A unique identifier is a number that permanently identifies a loan originator, which means it stays the same through license changes, moves between employers and work in more than one state. The Secure and Fair Enforcement for Mortgage Licensing Act defines it this way in 12 USC 5102(13)(A)(i). Five years without a license can cost an originator a passed test result, but never the identifier.

SAFE Act, 12 USC s. 5102(13)(A)(i)
For a closed-end loan, what is a bona fide discount point under Regulation Z?
- A 1% of the loan that cuts the rate Correct
- B 1% of the purchase price paid at closing The base is the loan amount and not the purchase price, and the two differ whenever the buyer puts money down.
- C 1% of the loan amount paid as origination An origination point buys no reduction in the interest rate, so it is not bona fide.
- D Any fee the consumer pays to lower the payment A fee that lowers the payment without reducing the interest rate does not meet the definition.
A bona fide discount point means 1 percent of the loan amount, paid by the consumer, that lowers the interest rate by an amount consistent with established industry practice. An origination point that buys no rate cut does not qualify.

Regulation Z, 12 CFR s. 1026.32(b)(3)(i)
If a buyer asks her loan originator to call a rental purchase her primary residence for a lower rate, how should he list it?
- A As primary if she moves in briefly A brief stay does not make a rental her primary residence, so the listing would still misstate the loan purpose.
- B As a second home A rental is not a second home either; listing it that way still misstates what the property is for.
- C As primary with a file note A note in the file does not correct a false occupancy answer the lender relies on to set the rate.
- D As an investment property Correct
Borrowers misstate occupancy to buy investment property at better rates than a lender would give if it knew the home was not a primary residence, which is occupancy fraud. Listing it as primary and noting her plans still puts a false occupancy answer on the application, because the lender prices the loan off that answer.

FinCEN mortgage loan fraud SAR analysis, p. 15 Reference document, not law.
A borrower is offered a 5/1 adjustable-rate mortgage and asks when her rate can first move and how often after that. What do the two numbers tell her?
- A The rate holds five years, then adjusts yearly Correct
- B The rate holds one year, then adjusts every five This reverses the two numbers, and the first is the length of the initial rate period.
- C The rate may adjust five times, once a year The second number is the adjustment period, not a count of how many adjustments the loan allows.
- D The rate is capped at 5% for one year Neither number is a rate or a cap, because both describe timing.
In a 5/1 adjustable-rate mortgage the first number is how long the initial rate lasts and the second is how often it changes afterward: five years fixed, then yearly adjustments. Reading the numbers the other way round gives one year fixed and a change every five.

Consumer Handbook on Adjustable-Rate Mortgages, p. 4 Reference document, not law.
What decides whether points are part of the finance charge under the Truth in Lending Act (TILA)?
- A Who pays them Correct
- B Whether they buy down the rate Buying down the rate does not decide whether points are a finance charge; who pays them does.
- C Whether they exceed 1% No percentage threshold decides this, because the exclusion is written by reference to who pays.
- D Whether the loan is a refinance The type of transaction does not change how points are treated.
Who pays the points decides it: points and loan fees are finance charges, while the list of excluded charges names seller's points. Whether the points buy down the rate does not change the answer.

Regulation Z, 12 CFR s. 1026.4(c)(5)
What makes an account an escrow account under the Real Estate Settlement Procedures Act (RESPA)?
- A The servicer establishes or controls it Correct
- B It is called an impound account Trust account, reserve account and impound account are named as other local words for the same thing, so the label decides nothing.
- C It holds tax and insurance money Holding money for taxes and insurance is not enough where the borrower keeps total control of the account.
- D The borrower funds it each month How the account is funded does not answer who establishes or controls it.
An escrow account means any account the servicer establishes or controls on the borrower's behalf to pay taxes, insurance premiums or other charges, and an account under the borrower's total control is excluded.

Regulation X, 12 CFR s. 1024.17(b)
Under Regulation Z, when does the amount owed on a reverse mortgage become due, apart from default?
- A On death, transfer or move-out Correct
- B When the consumer reaches a stated age Reaching an age is not one of the three events that make the balance due.
- C At the end of a fixed ten-year term The obligation is not written to a fixed maturity date of this kind.
- D When the balance first exceeds the property's value The loan is nonrecourse, so a balance above the property's value does not by itself make it payable.
A reverse mortgage transaction is a nonrecourse obligation on which principal, interest and any shared appreciation fall due, other than on default, only after the consumer dies, the dwelling is transferred, or the consumer stops occupying it as a principal dwelling.

Regulation Z, 12 CFR s. 1026.33(a)(2)
After the underwriting decision, the borrower discloses a home equity line she will take out at the same closing. What must the lender do?
- A Underwrite the mortgage loan again Correct
- B Close, since the ratios still pass The ratios have to be worked again with the new lien in them before anybody can say they still pass.
- C Document the line after closing The disclosure lands before closing, and the requirement is to underwrite again rather than to paper it afterwards.
- D Ignore a line with no draw at closing A line with no draw still carries a credit limit that enters the combined ratio.
New or larger subordinate financing that surfaces once the file has been decided, at any point through to the closing table, sends the loan back through underwriting, because the extra lien changes the combined ratios the decision rested on.
On a purchase below the appraised value, how is combined loan-to-value (CLTV) figured with a partly drawn home equity line?
- A First mortgage plus drawn balance, over price Correct
- B First mortgage plus full line, over price The undrawn part of the line is left out, because only the balance the borrower has actually withdrawn goes in.
- C First mortgage plus drawn balance, over appraisal The divisor is whichever is lower, the appraised value or the sales price, and here that is the sales price.
- D First mortgage alone, over appraisal A combined ratio counts the subordinate financing as well, so the first mortgage alone is not the whole numerator.
Combined loan-to-value adds three amounts: the first mortgage's original loan amount, the part of any home equity line already drawn, and the unpaid balance of other subordinate financing. That sum is divided by whichever is less of the price and the appraised value, here the price. Counting the whole line overstates the ratio, since only the drawn part goes in.
What kind of credit is a home equity line of credit, and what serves as the collateral for it?
- A Revolving credit secured by the consumer's home Correct
- B Closed-end credit secured by the consumer's home A closed-end loan is advanced once and then repaid, while a line lets the borrower draw again during the draw period.
- C Revolving credit secured by the consumer's deposits The home is the collateral for these plans, and a deposit account is not.
- D Closed-end credit advanced in a single unsecured sum A single unsecured advance describes a different product entirely.
A home equity line of credit is revolving credit with the home as collateral, which lets the borrower draw, repay and draw again during the draw period. A closed-end loan, by contrast, is advanced once and then repaid.

What You Should Know About Home Equity Lines of Credit, p. 6 Reference document, not law.
A builder deposits money into an account that is released each month to cut a buyer's payment for the first two years. What is that arrangement?
- A An interest rate buydown plan Correct
- B A permanent rate reduction bought with discount points Discount points paid at closing cut the note rate itself for the life of the loan rather than subsidising early payments from an account.
- C A lender credit toward closing costs A lender credit reduces what the borrower pays at closing and does not fund a monthly payment reduction.
- D A yield spread premium paid to the broker A yield spread premium is compensation paid to an originator, not a fund that lowers the borrower's payment.
A buydown plan gives the borrower lower payments in the first years of the loan, paid out monthly from an account the seller or another party funds. Discount points work differently: they cut the note rate itself for the life of the loan.
Which terms must the Truth in Lending Act (TILA) disclosures show more conspicuously than the other terms of the transaction?
- A Annual percentage rate and finance charge Correct
- B Loan amount and monthly payment The loan amount and the payment are disclosed, but the statute gives neither the extra prominence it demands for two named terms.
- C Total of payments and amount financed The total of payments and the amount financed are ordinary disclosures rather than the two that must stand out.
- D Interest rate and loan term The rate the note carries and the loan term are not the terms the statute singles out; the annual percentage rate is the one that must stand out.
Annual percentage rate and finance charge are the two terms that must be disclosed more conspicuously than any other term, data or information, apart from the creditor's identity. The loan amount and the monthly payment get no such emphasis.

15 USC s. 1632(a)
What is the stated purpose of the Home Mortgage Disclosure Act (HMDA)?
- A To show whether lenders serve housing needs Correct
- B To allocate credit to underserved neighborhoods The same section says the chapter is not intended to encourage unsound lending or the allocation of credit, so it publishes data rather than directing it.
- C To bar discrimination in mortgage lending Barring discrimination is not the purpose this section states.
- D To license the people who originate mortgage loans Licensing originators is not in the purpose clause, which is about information on housing needs.
The purpose is to give citizens and public officials enough information to judge whether depository institutions are serving the housing needs of their communities and to help officials direct public sector investment, and the same section says the law is not meant to encourage the allocation of credit.

12 USC s. 2801(b)
A borrower applies to a bank in March and the loan closes in May with the bank as servicer. Under the Gramm-Leach-Bliley Act (GLBA), when is the initial privacy notice due?
- A At the May closing Correct
- B At the March application At application there is no customer relationship yet, so the paragraph does not bite then.
- C 30 days after closing The paragraph fixes the deadline at establishment of the relationship, not a month after it.
- D With the first annual notice The initial notice is due no later than when the relationship is established, which is the May closing, not a later annual cycle.
An individual who becomes a customer must get a clear and conspicuous initial privacy notice no later than when the customer relationship is established, which on these facts is the May closing rather than the March application.

Regulation P, 12 CFR s. 1016.4(a)(1)
Fraud for property is generally committed by:
- A Buyers of homes to live in Correct
- B Appraisers paid by the home's seller Appraisers are industry insiders, who are linked to fraud for profit rather than fraud for property.
- C Investors reselling homes at a profit Reselling for gain is driven by money, which marks fraud for profit.
- D Settlement agents skimming loan proceeds Settlement agents are insiders tied to fraud for profit, while fraud for property is a buyer seeking a home.
Fraud for property is generally committed by home buyers trying to purchase homes for their personal use, often by misstating facts to win credit they would not otherwise get. Investors reselling homes at a profit fit fraud for profit instead, because money is the motive there.

FinCEN mortgage loan fraud SAR analysis, p. 6 Reference document, not law.
Which aim is NOT one of the purposes Congress stated for the Real Estate Settlement Procedures Act (RESPA)?
- A More effective advance disclosure of settlement costs Advance disclosure of settlement costs to buyers and sellers is the first purpose the statute names.
- B Eliminating kickbacks and referral fees Ending kickbacks and referral fees that raise settlement costs is named as a purpose in the same paragraph.
- C Reducing the amounts placed in escrow accounts Cutting the amounts buyers must place in escrow for taxes and insurance is also a stated purpose.
- D Setting a national licensing standard for originators Correct
Four purposes make up the list: more effective advance disclosure of settlement costs, an end to kickbacks and referral fees that raise costs, a reduction in escrow amounts, and reform of local land title recordkeeping. A national licensing standard for originators is not among them.

12 USC s. 2601(b)
If none of a loan originator's lenders will give the very low rate his ad shows, what should he do?
- A Quote callers the real rate Switching callers to a higher rate leaves the unavailable rate in the ad, which is what draws them in.
- B Add 'rates subject to change' A disclaimer does not make the rate available, and the bar is on advertising a rate that never will be.
- C Pull the ad Correct
- D Keep it for top scores Keeping the ad up for some callers still advertises a rate no lender will give anyone.
An ad may not show a very low annual percentage rate that will not in fact be available at any time, so a rate no lender will give has to come out of the ad. Quoting callers the real rate on the phone is the switch itself, because the ad drew them in with a rate nobody offers.

Regulation Z, 12 CFR Part 1026, Supplement I, comment 24(a)-1
If a borrower asks whether she must buy credit life insurance her lender does not require, what should her loan originator say?
- A That the lender requires it Telling her the insurance is required to get the loan is the predatory tactic the report describes.
- B That the lender decides at closing Leaving the question to closing keeps her believing she may have to buy the product to close.
- C That she can cancel it after closing Adding the product and letting her cancel later still leads her to buy something she was never required to buy.
- D That it is optional Correct
The originator tells her it is optional, because leading a borrower to believe she must buy a product such as credit insurance to close the loan is a deceptive sales tactic of predatory lending. Saying the lender decides at closing leaves her with the same false belief until it is too late to shop.

HUD-Treasury, Curbing Predatory Home Mortgage Lending, p. 26 Reference document, not law.
What does half a point cost on a $340,000 loan?
- A $170 $170 is one twentieth of one percent of the loan, which slips the decimal one place.
- B $1,700 Correct
- C $3,400 $3,400 is a full point, one percent of the loan, and half a point costs half that.
- D $17,000 $17,000 is five percent of the loan, ten times the cost of half a point.
One point is one percent of the loan amount, as the Consumer Financial Protection Bureau's home loan toolkit explains, which means half a point is half of one percent of $340,000, or $1,700. A full point would cost twice that.

Your Home Loan Toolkit, p. 10 Reference document, not law.
The Real Estate Settlement Procedures Act (RESPA) bars giving or accepting a thing of value under an agreement to do what?
- A Refer settlement service business to a person Correct
- B Set a price above the local market rate Pricing above the market is not the conduct barred, which is a thing of value tied to an agreement to refer business.
- C Share an office with a settlement service provider Office sharing on its own is not an agreement that business will be referred.
- D Advertise a settlement service to past clients Advertising to past clients exchanges nothing of value for referrals.
Giving or accepting any fee, kickback or other thing of value under an agreement or understanding that settlement service business will be referred is barred. The agreement need not be written, since an oral one or any other kind counts.

Regulation X, 12 CFR s. 1024.14(b)
Which characteristic is a prohibited basis under the Equal Credit Opportunity Act (ECOA) and Regulation B?
- A Income from a public assistance program Correct
- B Familial status, such as children in the home Familial status is a Fair Housing Act basis and does not appear on the list of prohibited bases in Regulation B.
- C Physical handicap or disability of the applicant Handicap is a Fair Housing Act basis; the list in Regulation B does not carry it.
- D The applicant's occupation and length of employment Occupation and job tenure are ordinary underwriting facts and are not on the list at all.
Income from a public assistance program is a prohibited basis, along with race, color, religion, national origin, sex, marital status, age and the good faith exercise of a right under the Consumer Credit Protection Act. Handicap and familial status are not on this list; they belong to the Fair Housing Act.

Regulation B, 12 CFR s. 1002.2(z)
What is the stated purpose of the Truth in Lending Act (TILA)?
- A Meaningful disclosure so consumers can compare credit terms Correct
- B A ceiling on the interest rate a lender charges The Act regulates disclosure of the rate and says nothing about how high a rate may go.
- C A duty to approve a qualified borrower Nothing in the purpose clause obliges a lender to extend credit to anyone.
- D Standard settlement charges across every closing Standard settlement charges are not in the purpose clause, which is about meaningful disclosure of credit terms.
Meaningful disclosure of credit terms, so a consumer can compare credit terms more readily and avoid the uninformed use of credit, is TILA's stated purpose. It sets no rate ceiling and compels no lender to approve anyone.

15 USC s. 1601(a)
By when must a financial institution submit its annual loan/application register for the calendar year the data cover?
- A By March 1 of the following year Correct
- B By January 31 of the following year January 31 is not the date the paragraph sets.
- C Within 30 days of year end The deadline is a fixed calendar date rather than a count of days after year end.
- D Quarterly, within 60 days of each quarter The paragraph sets an annual register due by March 1, not quarterly filings.
The register goes to the appropriate federal agency by March 1 following the calendar year the data were collected for, and the institution must keep its own copy of that register for at least three years.

Regulation C, 12 CFR s. 1003.5(a)(1)(i)
Under the Truth in Lending Act (TILA), each of these carries a right of rescission EXCEPT:
- A A loan to buy the consumer's principal dwelling Correct
- B A home equity line on the principal dwelling A home equity line on the principal dwelling does not finance its acquisition and is not on the exempt list.
- C A cash-out refinance with a different creditor A refinance with a different creditor is fully rescindable, and only a same-creditor refinance is limited.
- D A second mortgage taken out for home repairs A second mortgage on the principal dwelling does not finance its acquisition, so the purchase-money exemption does not cover it.
A residential mortgage transaction, meaning the loan that finances the acquisition or initial construction of the consumer's principal dwelling, is on the list of transactions the right to rescind does not reach, while a refinance with a new creditor, a home equity line and a second mortgage on that dwelling all carry the right.

Regulation Z, 12 CFR s. 1026.23(f)(1)
How many pages long is the Closing Disclosure?
- A Two Two pages is too short for the form, which runs to five.
- B Three Three is the number of days before closing the form should arrive, and the form itself has five pages.
- C Five Correct
- D Seven The toolkit describes the Closing Disclosure as five pages long, fewer than seven.
The Closing Disclosure is a five-page document that gives the consumer more detail about the loan, its key terms and the fees and other costs of the mortgage and the purchase, as the Consumer Financial Protection Bureau's home loan toolkit describes it. The toolkit says it should arrive at least three days before closing, and three is the day count only.

Your Home Loan Toolkit, p. 20 Reference document, not law.
Regulation B gives a creditor how long to notify an applicant of the action taken on a completed application?
- A 30 days after receiving the completed application Correct
- B 30 days after the first contact with the applicant The period runs from the completed application, so a first phone call or an incomplete file does not start it.
- C 60 days after receiving the completed application Sixty days is not the notification period in this paragraph.
- D 15 days after the credit decision is made The rule measures from receipt of the completed application, not from the day the decision is reached.
Approval, counteroffer or adverse action must be communicated within 30 days after the creditor receives a completed application. The clock starts on completeness, not on the first contact with the applicant.

Regulation B, 12 CFR s. 1002.9(a)(1)(i)
Which prepayment penalty term makes a loan a high-cost mortgage under Regulation Z?
- A One chargeable more than 36 months after consummation Correct
- B One chargeable more than 12 months after consummation The window in the coverage test is three years from consummation, not one.
- C Any prepayment penalty on a first-lien loan A prepayment penalty is not a high-cost trigger by itself; its length or its size is what does it.
- D One capped at 2% of the amount prepaid The size trigger is penalties that can exceed 2 percent of the amount prepaid, and a cap of 2 percent never exceeds it.
A loan is a high-cost mortgage where the contract lets the creditor charge a prepayment penalty more than 36 months after consummation, or penalties that can total more than 2 percent of the amount prepaid, and a loan that becomes high cost on this test may then carry no prepayment penalty at all.

Regulation Z, 12 CFR s. 1026.32(a)(1)(iii)
How long does a creditor have to deliver or mail the Loan Estimate after receiving the consumer's application?
- A No later than the third business day Correct
- B No later than the seventh business day The deadline after application is the third business day, not the seventh.
- C No later than three calendar days The period is counted in business days, not calendar days.
- D No later than the next business day Nothing in the rule demands next-day delivery; the window is three business days.
The creditor must deliver or place in the mail the Loan Estimate not later than the third business day after it receives the consumer's application, and the act that has to happen inside the window is delivery or mailing rather than the consumer's receipt.

Regulation Z, 12 CFR s. 1026.19(e)(1)(iii)(A)
Which item, with the name, income, social security number, property address and loan amount, makes an application under the TILA-RESPA Integrated Disclosure rule (TRID)?
- A The property's estimated value Correct
- B A signed application form A signature is not one of the six items, so waiting for one does not hold the clock.
- C A credit report already pulled The number is given so that a credit report can be obtained; the report itself is not on the list.
- D Verified income documents Income is one of the six items, but verification of it is not.
Six pieces of information define an application for these disclosures: the name, income, social security number, property address, loan amount and an estimate of the property's value. Nothing has to be signed, pulled or verified first.

Regulation Z, 12 CFR s. 1026.2(a)(3)(ii)
By when must the creditor ensure that the consumer receives the Closing Disclosure?
- A No later than three business days before consummation Correct
- B No later than three business days after consummation The disclosure has to be in the consumer's hands before consummation, which is the whole point of the waiting period.
- C No later than seven business days before consummation The Closing Disclosure has to be received three business days before consummation, and seven business days is not that timing.
- D At consummation, with the rest of the package Handing it over at the table gives the consumer none of the three-day period the rule requires.
The creditor must ensure the consumer receives the Closing Disclosure no later than three business days before consummation, and receipt is the standard here, unlike the Loan Estimate, where delivery or mailing is what has to happen in time.

Regulation Z, 12 CFR s. 1026.19(f)(1)(ii)(A)
A borrower disputes a collection item in her credit file directly with the consumer reporting agency. What does the agency owe her?
- A A free reinvestigation within 30 days of receipt Correct
- B A reinvestigation within 30 days of the date she wrote The 30 days run from the agency's receipt of the dispute, not from the day the consumer wrote.
- C A paid reinvestigation within 30 days of receipt The reinvestigation is free of charge, which the statute says in terms.
- D Deletion of the item on request, without investigation Deletion is one possible outcome of the reinvestigation, not an alternative to doing one.
The agency must conduct a reasonable reinvestigation free of charge and either record the current status of the item or delete it, before the end of the 30 day period that begins when it receives the dispute.

15 USC s. 1681i(a)(1)(A)
What makes a home sale a short sale?
- A A sale within 30 days The definition sets no time limit on the sale; what matters is the price against the balance.
- B A sale without an agent Whether an agent is used plays no part in the definition of a short sale.
- C A price below the balance Correct
- D A sale after foreclosure A short sale happens before the servicer forecloses, as an alternative to foreclosure.
A short sale means the servicer lets the borrower sell the home for less than the mortgage balance before it forecloses. The servicer may also agree to forgive the shortfall, but that is its choice and not what makes the sale short.

CFPB mortgage servicing examination procedures, p. 37 Reference document, not law.
A borrower's application says the property will be her primary residence, but the file shows a signed lease with a tenant starting at closing. Which fraud is that?
- A Occupancy fraud Correct
- B Income fraud Nothing here misstates what the borrower earns.
- C Appraisal fraud The value of the property is not what this file misstates.
- D Employment fraud The employer and the job are not in question on these facts.
Occupancy fraud occurs when the borrower fails to occupy the property although the loan application specified it was the borrower's primary residence, and it is commonly done because an owner-occupied loan carries better pricing than an investment loan.

FinCEN mortgage loan fraud SAR analysis, p. 15 Reference document, not law.
Under the Truth in Lending Act (TILA), an advertisement that states the monthly payment must also state:
- A Down payment, repayment terms and annual percentage rate Correct
- B The annual percentage rate and total finance charge The amount of a finance charge is itself a triggering term rather than one of the additions the rule requires.
- C Loan amount, closing costs and license number None of those three appears on the list of additional terms the rule requires.
- D None, if no rate is stated The amount of a payment is a triggering term on its own, so stating no rate does not avoid the additions.
Stating the amount of a payment means the ad must also give the amount or percentage of the down payment, the terms of repayment over the full loan term, and the annual percentage rate, using that term. Leaving the rate out of the ad does not avoid them.

Regulation Z, 12 CFR s. 1026.24(d)
Which factors does the Fair Housing Act bar a lender from using to set a loan's rate or term?
- A Race, color, religion, sex, handicap, familial status, national origin Correct
- B Race, color, religion, age, marital status, national origin Age and marital status come from the Equal Credit Opportunity Act list, and handicap and familial status are missing here.
- C Race, color, income source, sex, age, national origin Source of income and age are not on the list this rule names.
- D Race, color, religion, sex, age, credit score, national origin A credit score is a lawful underwriting factor and not a protected characteristic.
A lender may not set the type of loan, or fix its amount, interest rate, cost, duration or other terms, because of race, color, religion, sex, handicap, familial status or national origin. Age and marital status belong to a different list.

24 CFR s. 100.130(b)(2)
An advertisement for credit states specific credit terms. Which terms may it state?
- A Only terms the creditor is or will be offering Correct
- B Any terms the consumer might qualify for elsewhere What a consumer could get from someone else is not a term this creditor is arranging or offering.
- C Terms the creditor once offered but has discontinued A term that is no longer offered is not one that actually is or will be arranged.
- D Terms the creditor could offer if the market improved A term the creditor might reach under better conditions is not one it actually is or will be offering.
If an advertisement states specific credit terms it may state only those terms that actually are or will be arranged or offered by the creditor, which closes off the rate advertised to draw calls that nobody can get.

Regulation Z, 12 CFR s. 1026.24(a)
A loan is called a jumbo loan when its amount exceeds:
- A FHA's limit for the local area The Federal Housing Administration's limits apply to its insured loans, not to the jumbo test.
- B 80% of the home's value A loan-to-value figure measures equity, not whether the amount is above the purchase limit.
- C Fannie Mae and Freddie Mac's limit Correct
- D The borrower's qualifying income Income decides qualification, not whether a loan is a jumbo.
A jumbo loan is larger than the most the government-sponsored enterprises will purchase, which makes it nonconforming by size. The Federal Housing Administration's limits apply to its own insured loans and play no part in the jumbo line.

OCC Comptroller's Handbook, Mortgage Banking, p. 26 Reference document, not law.
How many hours of approved continuing education must a state-licensed loan originator complete each year?
- A At least 8 hours Correct
- B At least 20 hours Twenty hours is the one-off pre-licensing requirement, not the annual one.
- C At least 12 hours No twelve-hour annual requirement appears in the section.
- D At least 6 hours Six hours is below the federal floor and would not meet the annual requirement.
At least 8 hours of approved continuing education are required each year, made up of at least 3 hours of federal law and regulations, 2 hours of ethics, and 2 hours on nontraditional mortgage product lending standards. Twenty hours is the one-off pre-licensing figure.

SAFE Act, 12 USC s. 5105(b)(1)
What must an applicant for a state loan originator license furnish through the national registry for a background check?
- A Fingerprints for a state and national check Correct
- B Fingerprints for a state criminal history check only The check is both state and national, so limiting it to one state understates what the statute asks for.
- C A notarized affidavit of no criminal record The statute asks for fingerprints, not the applicant's own sworn statement about his record.
- D A clearance letter from his county sheriff A local clearance letter is not what the section requires, and it would not reach a national record.
Fingerprints must go to the Federal Bureau of Investigation for a state and national criminal history background check. A check confined to one state, a sworn statement or a sheriff's letter falls short of that.

SAFE Act, 12 USC s. 5104(a)(1)
Under the Secure and Fair Enforcement for Mortgage Licensing Act, which work is an administrative or clerical task?
- A Gathering file information from the consumer Correct
- B Advising the consumer which rate option suits her Counseling a consumer about which loan rate to take is outside the clerical definition and is originator work.
- C Negotiating the loan terms with the consumer Negotiating terms is the activity the licensing requirement exists for, and the clerical definition does not reach it.
- D Deciding whether the file meets underwriting guidelines The definition covers moving information around, not making the credit decision the information supports.
Receiving, collecting and distributing the information a file needs for processing or underwriting, and contacting the consumer to get it, is the clerical work the definition covers. Advising on a rate, negotiating terms and deciding whether the file qualifies are not.

SAFE Act, 12 USC s. 5102(4)(C)
How many hours of approved pre-licensing education must an applicant for a state loan originator license complete?
- A At least 20 hours Correct
- B At least 8 hours Eight hours is the annual continuing education floor, not the pre-licensing requirement.
- C At least 12 hours The statute names no twelve-hour requirement anywhere in the education provisions.
- D At least 24 hours Twenty-four hours overstates the floor, which the section sets at 20.
At least 20 hours of approved pre-licensing education is the floor the statute sets, including 3 hours on federal law and regulations, 3 hours on ethics, and 2 hours on lending standards for the nontraditional mortgage product marketplace. Eight hours is the annual continuing education figure.

SAFE Act, 12 USC s. 5104(c)(1)
The Secure and Fair Enforcement for Mortgage Licensing Act encouraged the states to set up the national registry through which of these bodies?
- A The Conference of State Bank Supervisors Correct
- B The Department of Housing and Urban Development This department is a federal agency and is not one of the two state regulator associations the section names.
- C The Consumer Financial Protection Bureau The Bureau is not named in this section among the bodies the states were encouraged to work through.
- D The Federal Housing Finance Agency This federal agency is not one of the two associations of state regulators the section names.
Two associations of state regulators, the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, are the bodies the states were encouraged to work through in setting up the registry. Neither one is a federal agency.

SAFE Act, 12 USC s. 5101
When a borrower repays a mortgage, amortization is best described as:
- A A loan balance that rises over time A balance that rises over time is negative amortization, the opposite of paying the debt down.
- B A rate that resets periodically A rate that resets describes an adjustable-rate loan, not how the debt is repaid.
- C A lump sum due at maturity A lump sum due at maturity is a balloon payment, not the gradual payoff amortization describes.
- D Paying down the debt through scheduled payments Correct
Amortization means the gradual paying down of a mortgage through regular payments spread across the loan's term, and the balance drops with each one. A balance that grows instead is negative amortization.
What maximum dollar loan amount does VA prescribe for a guaranteed loan?
- A None is prescribed Correct
- B The county conforming loan limit A conforming limit is a secondary market constraint on the lender rather than a maximum the program prescribes.
- C The nationwide limit set for insured loans The insured programs set their own ceilings, and this program prescribes none of its own.
- D Four times the veteran's available entitlement Entitlement drives the amount of the guaranty, and it is not a multiplier that caps the loan.
No maximum dollar amount is prescribed for a VA-guaranteed loan, unlike the other home loan programs. Any conforming limit a lender applies is a secondary market constraint, not a program ceiling.

VA Lenders Handbook 26-7, p. 96 Reference document, not law.
A borrower seeking a modification gives the lender false pay stubs and a doctored credit report to win better terms. What scheme is this?
- A Modification and refinance fraud Correct
- B A foreclosure rescue scheme A foreclosure rescue scheme promises a distressed homeowner that the home can be saved, usually for up-front fees or a deed transfer.
- C A debt elimination scheme A debt elimination scheme offers to wipe out the debt for an up-front fee using phony legal documents sent to the lender.
- D Equity skimming Equity skimming rests on a fraudulent appraisal that over-values the property to create phantom equity.
Loan modification and refinance fraud is a borrower submitting false income information or false credit reports to persuade a lender to modify or refinance a loan on more favorable terms, which means false pay stubs and a doctored credit report put this squarely under that scheme.

FFIEC mortgage fraud white paper, p. 31 Reference document, not law.
Under the federal identity theft rules, what is a Red Flag?
- A A pattern indicating possible identity theft Correct
- B A confirmed case of identity theft A confirmed theft is what the program exists to prevent and detect, and the flag comes earlier.
- C A credit score below a set figure A low score says something about credit risk and nothing about whether an identity is being misused.
- D A notice from a consumer reporting agency An address discrepancy notice from a consumer reporting agency is handled under a separate rule.
A Red Flag means a pattern, practice or specific activity that indicates the possible existence of identity theft. Confirmed theft comes later; the flag is the warning before it.

16 CFR s. 681.1(b)(9)
The document that evidences the debt and the borrower's promise to repay it is the:
- A Promissory note Correct
- B Deed of trust A deed of trust is a security instrument, which evidences the lien on the property rather than the debt.
- C Warranty deed A warranty deed transfers title to real property from one party to another and creates no debt.
- D Closing Disclosure The Closing Disclosure sets out the final loan terms and costs; it is a disclosure form, not the promise to repay.
A promissory note evidences the debt and the borrower's promise to repay it. A deed of trust only secures that debt with a lien on the home.

CFPB mortgage servicing examination procedures, p. 37 Reference document, not law.
Which item goes into a lender's Home Mortgage Disclosure Act data for an application it denies?
- A The principal reasons for denial Correct
- B The applicant's Social Security number The list of data points does not include the applicant's Social Security number.
- C The loan officer's commission The data points say nothing about what the loan officer is paid.
- D The applicant's employer's name The employer's name is not among the data points the lender records.
For a denied application, the data include the principal reason or reasons the institution denied it. None of the other items is a data point at all, and only a lender with a partial exemption under 12 CFR 1003.3(d) may leave the denial reasons out.

Regulation C, 12 CFR s. 1003.4(a)(16)
On the Uniform Residential Loan Application in use since January 2021, which section does the lender complete to give the borrower the originator's details?
- A Section 1, Borrower Information The first section collects the borrower's own personal, income and employment details.
- B Section 5, Declarations The declarations ask the borrower about the property, the financing and past financial history.
- C Section 8, Demographic Information Demographic information is collected because the law requires the lender to ask, not to identify the originator.
- D Section 9, Loan Originator Information Correct
The application's final section is filled in by the lender rather than the borrower, and it gives the borrower the identifying and contact details of the organization and the individual who originated the loan.
If two co-owners borrow against the home they live in and only one sends a timely rescission notice, what happens?
- A The loan is rescinded for the sender only One consumer's rescission cannot leave the loan standing for the other; the rule makes it effective for everyone with the right.
- B The loan is rescinded for both Correct
- C The loan stays in force for both Only one of the consumers entitled to rescind has to act for the rescission to work.
- D The loan stands until the other agrees The other owner's agreement is not needed to rescind; it is needed only to waive the right.
Where several consumers each hold the right to rescind, 12 CFR 1026.23(a)(4) of Regulation Z lets a rescission by any one of them cancel the loan for everyone. Rescinding takes only one owner, while waiving the right takes the signature of every consumer entitled to rescind.

Regulation Z, 12 CFR s. 1026.23(a)(4)
Which party may a loan originator deceive without breaking the Model State Law's prohibited practices?
- A The home seller The model's bar on deceptive practices reaches every person, and the home seller is one.
- B The listing agent The listing agent is a person too, so deceiving the agent is a prohibited practice under the model.
- C No one Correct
- D A competing lender The bar is not limited to borrowers; a competing lender is a person the loan originator may not deceive.
The Model State Law lists unfair or deceptive dealing with anyone as a prohibited practice for a licensee, which means no party to a deal is outside the bar. A seller, an agent and a rival lender are all people the loan originator must deal with honestly.
What makes up total monthly debt obligations in the debt-to-income (DTI) ratio for ability to repay?
- A The new payment and installment debts Leaving out the taxes and insurance understates the numerator, since mortgage-related obligations belong in it.
- B The new payment alone The new payment is one of four pieces the sum is built from rather than the whole of it.
- C Current debts only, without the new payment The payment on the loan being made is the first item in the sum, so it cannot be dropped.
- D New payment, housing costs and all debts Correct
Total monthly debt obligations is the sum of the payment on the covered transaction, any simultaneous loan, mortgage-related obligations such as property taxes and required insurance, and current debts including alimony and child support, and that sum is measured against total monthly income.

Regulation Z, 12 CFR s. 1026.43(c)(7)(i)(A)
A lender is making a loan secured by a building in a special flood hazard area. How much flood insurance must cover the building?
- A The full replacement cost of the building Replacement cost can run above both figures the statute names and is not the measure it sets.
- B The appraised value of the property Appraised value includes the land and is not one of the two figures compared here.
- C The lesser of balance or maximum coverage Correct
- D The purchase price stated in the contract The purchase price is a contract term rather than either figure the statute uses.
The building must be covered for the term of the loan in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of coverage available under the National Flood Insurance Act, whichever is less.

42 USC s. 4012a(b)(1)(A)
An adjustable-rate qualified mortgage starts at 4 percent and can reach 7 percent in its first five years. What rate must the creditor underwrite to?
- A 4% The start rate can rise well before five years are up, so it is not the rate the definition names.
- B 7% Correct
- C The fully indexed rate The definition names the maximum rate in the first five years, not the fully indexed rate.
- D The first adjusted rate The definition names one rate, the maximum in the first five years, rather than the rate at any single adjustment.
Seven percent is the qualifying rate, because the general qualified mortgage definition makes the creditor underwrite using the maximum interest rate that may apply in the first five years after the first regular periodic payment is due. Underwriting at the 4 percent start rate understates the payment.

Regulation Z, 12 CFR s. 1026.43(e)(2)(iv)(A)
What should a loan originator tell a buyer who gets new wiring instructions by email the day before closing?
- A Wire the funds as instructed Wiring on unverified email instructions is how these schemes succeed, and such transfers are often impossible to recall.
- B Reply to the email to check A reply goes back through the same email thread, which may be the one a criminal has taken over.
- C Confirm them another way first Correct
- D Ask for them in a new email A second email is the same channel, so it cannot confirm that the first one was genuine.
Changed payment instructions sent by email are a common fraud route, and the buyer should confirm them another way before wiring because Financial Crimes Enforcement Network (FinCEN) guidance says suspicious emailed instructions can be verified through other means of communication or with others authorized on the deal. A reply or a fresh email stays inside the channel a criminal may control.

FinCEN Advisory FIN-2019-A005, p. 8 Reference document, not law.
Which objective of the Secure and Fair Enforcement for Mortgage Licensing Act concerns the consumer?
- A Originators act in the consumer's best interests Correct
- B Originators owe borrowers a fiduciary duty The list states an objective for the licensing system and stops short of imposing a fiduciary duty on an originator.
- C Originators offer the lowest available rate Nothing in the objectives ties the system to the rate an originator offers.
- D Originators shop each file to three lenders Shopping a file to a set number of lenders appears nowhere in the objectives.
Acting in the consumer's best interests, as far as possible, is one of the objectives the act sets for the licensing system the states were encouraged to build. It is a goal for the system and stops short of a fiduciary duty, a rate promise or a rule about shopping a file.

SAFE Act, 12 USC s. 5101(8)
An adjustable-rate mortgage begins at 5 percent, each change is capped at 2 percent, and its lifetime cap is 5 percent. At the first change the index is 4.5 percent and the margin 2.75 percent; what is the new rate?
- A 5% The rate does change at the adjustment, so it does not stay at the start rate.
- B 7% Correct
- C 7.25% That ignores the 2 percent cap on the first change.
- D 10% That is the lifetime ceiling, not the rate after one change.
The index plus the margin is 7.25 percent, but the 2 percent cap limits the first change to 7 percent from the 5 percent start. The 7.25 percent option skips the periodic cap.

Regulation Z, 12 CFR s. 1026.37(j)(6)(i)
If a borrower offers a signed waiver to keep a personal loan off her application, what should the loan originator do under the Model State Law?
- A Accept the waiver A borrower's waiver cannot make a false application true, and the bar on false statements has no consent exception.
- B Get the waiver notarized A notarized waiver is still a waiver, and the application would still hide a debt the loan originator knows about.
- C Leave it to the underwriter The loan originator who leaves the known debt off makes the false statement, whatever the underwriter later finds.
- D Refuse Correct
Making a false or deceptive statement in any manner is a prohibited practice under the Model State Law, and an application that hides a debt the loan originator knows about is false whatever the borrower signs. A waiver does not change that, notarized or not, and leaving the debt for the underwriter to find still puts the false statement on the file.
Which measure must a creditor consider in judging a consumer's ability to repay a mortgage under the Truth in Lending Act?
- A Loan-to-value ratio The loan's size against the home's value is not one of the listed ability-to-repay factors.
- B The consumer's age The consumer's age is not among the listed ability-to-repay factors.
- C Debt-to-income or residual income Correct
- D The home's appraised value The rule measures the consumer's income and debts, and it expressly leaves the value of the dwelling out of the income and assets considered.
Among the factors a creditor must consider, the ability-to-repay rule lists the consumer's monthly debt-to-income ratio or residual income. The ability-to-repay test looks at what the consumer earns and owes, not at the value of the home securing the loan.

Regulation Z, 12 CFR s. 1026.43(c)(2)(vii)
What is the debt-to-income ratio for a borrower with $7,200 of monthly income, a $1,800 housing payment and $900 of other monthly debts?
- A 12.5% That counts only the other debts and leaves out the housing payment.
- B 25% That counts only the housing payment and leaves out the other debts.
- C 37.5% Correct
- D 40% That figure is higher than the debts divided by the income.
The debt-to-income ratio sets total monthly debt, housing included, against total monthly income: $1,800 plus $900 over $7,200 is 37.5 percent. The 25 percent option counts the housing payment alone.

Regulation Z, 12 CFR s. 1026.43(c)(7)(ii)(A)
All of the following are among the six pieces of information that make up a mortgage application except:
- A Property address The property address is one of the six items.
- B Employer's name Correct
- C Social security number The social security number, given to obtain a credit report, is one of the six items.
- D Loan amount sought The loan amount sought is one of the six items.
Six items make an application under the Loan Estimate rules: the consumer's name, income, social security number, property address, estimated property value and loan amount sought. The employer's name is not one of them.

Regulation Z, 12 CFR s. 1026.2(a)(3)(ii)
When may a borrower waive the three-day right to rescind under the Truth in Lending Act?
- A When the lender asks to close The waiver is the consumer's decision for the consumer's own emergency; a lender's scheduling request does not qualify.
- B When a rate lock is expiring An expiring rate lock is a pricing matter, not a bona fide personal financial emergency of the consumer.
- C When the seller must move A seller's moving date is someone else's timetable, and the rule allows a waiver only for the consumer's own financial emergency.
- D For a bona fide financial emergency Correct
A consumer may modify or waive the right to rescind only after deciding that the credit is needed to meet a bona fide personal financial emergency (Regulation Z, section 1026.23(e)). A lender's wish to close sooner, an expiring rate lock or a seller's moving date is not the consumer's own financial emergency.

Regulation Z, 12 CFR s. 1026.23(e)
Regulation Z, issued by the Consumer Financial Protection Bureau, implements which federal law?
- A Equal Credit Opportunity Act The Equal Credit Opportunity Act is carried out by Regulation B, not Regulation Z.
- B Truth in Lending Act Correct
- C Home Mortgage Disclosure Act The Home Mortgage Disclosure Act is carried out by Regulation C, not Regulation Z.
- D Fair Credit Reporting Act The Fair Credit Reporting Act is paired with Regulation V, not Regulation Z.
The Truth in Lending Act is the statute behind Regulation Z (12 CFR Part 1026): section 1026.1(a) states that the Consumer Financial Protection Bureau issues the regulation to implement that act. Equal credit, mortgage data reporting and credit reporting each sit under a different regulation.

Regulation Z, 12 CFR s. 1026.1(a)
How many times must a loan originator seeking licenses in three states pass the SAFE MLO test?
- A Once per state The pass is not tied to one state; every state agency accepts the same result toward its own test requirement.
- B Once Correct
- C Twice, national then state No separate state pass is added, because passing the one test meets each state's test requirement.
- D Once, then at each renewal Renewal does not call for a new test; a passed result lapses only after five years without a license or federal registration.
One passing result on the SAFE Mortgage Loan Originator Test satisfies the testing requirement of every state agency, which means an originator seeking three licenses sits it only once. The MLO Testing Handbook gives this answer in its FAQ. The test is not repeated at renewal either, since renewal turns on continuing education and fees.
May a lender cut a loan originator's leads for reporting a coworker's race-based pricing to a state agency, under the Fair Housing Act?
- A Yes Retaliating against a person for reporting a discriminatory housing practice to an authority is unlawful conduct under the Fair Housing Act rules.
- B No Correct
- C Not if she filed a formal complaint The rules protect a report made to a housing provider or other authority, not only a formal complaint or proceeding.
- D Only if leads are at its discretion Discretion over leads does not allow the lender to use them to punish a report; retaliation in any form is barred.
Fair Housing Act rules make it unlawful to retaliate against any person because she reported a discriminatory housing practice to a housing provider or other authority, and cutting her leads is retaliation. The protection applies to the report itself, whether or not she also filed a formal complaint.

24 CFR s. 100.400(c)(6)
How many of a state-licensed loan originator's 8 annual continuing education hours must cover federal law and regulations?
- A 1 hour One hour falls short of the minimum for federal law, which is 3 hours.
- B 2 hours Two hours is the minimum for ethics and for nontraditional lending standards, not for federal law.
- C 3 hours Correct
- D 4 hours Four hours overstates the minimum; the federal law share is at least 3 hours.
At least 3 of the 8 annual hours must cover federal law and regulations, alongside 2 hours of ethics and 2 hours on lending standards for nontraditional mortgage products. Regulation H (12 CFR Part 1008) sets the split in 12 CFR 1008.107(a)(2). Two hours is the figure for ethics, not for federal law.

Regulation H, 12 CFR s. 1008.107(a)(2)(i)
If a creditor open Monday to Friday receives an application on Monday, what is the last day to send the Loan Estimate?
- A Wednesday Wednesday is only the second business day after Monday.
- B Thursday Correct
- C Friday Friday is the fourth business day after Monday, one day late.
- D The next Monday The next Monday is well past the third business day.
The Loan Estimate must go out no later than the third business day after the application, and counting Tuesday, Wednesday and Thursday makes Thursday the deadline. Friday is the fourth business day, one day late.

Regulation Z, 12 CFR s. 1026.19(e)(1)(iii)(A)
On an FHA loan, what should a loan originator paid by commission do about choosing the appraiser?
- A Leave it to the lender Correct
- B Use an appraiser he knows Past good work does not matter; a commissioned originator may not select the appraiser at all.
- C Pick one the borrower approves The borrower's agreement does not lift the bar on a commissioned originator selecting the appraiser.
- D Select from the lender's approved list Choosing from an approved list is still the originator selecting the appraiser, which the rule bars for anyone paid on closed loans.
Because a commissioned originator has a stake in the value, the Federal Housing Administration (FHA) makes the lender, or a third party it authorizes, responsible for selecting and paying the appraiser, and bars anyone paid on closed loans from selecting, retaining, managing or paying one. Picking from the lender's approved list is still the originator making the choice.

FHA Handbook 4000.1, p. 169 Reference document, not law.
What does the Community Reinvestment Act encourage banks and other depository institutions to do?
- A Meet local credit needs Correct
- B Report loan data yearly Annual public disclosure of mortgage application and loan data is the Home Mortgage Disclosure Act's requirement.
- C Disclose loan costs Disclosing lending terms and costs to borrowers is the Truth in Lending Act's job, not the Community Reinvestment Act's.
- D Verify applicant identity The guide's account of the Community Reinvestment Act says nothing about checking an applicant's identity.
Depository institutions are encouraged to help meet the credit needs of their local communities, which is the aim the Community Reinvestment Act sets. Yearly loan data reporting and loan cost disclosure belong to other federal laws.

The Fed Explained, p. 124 Reference document, not law.
If a borrower's rate is floating, what should the loan originator tell her about the rate on her Loan Estimate?
- A It is guaranteed for 30 days A set period applies to a rate that has been locked, and a floating rate has no lock yet.
- B It is guaranteed until closing A floating rate can go up or down until it is locked, so nothing holds it until closing.
- C It is set only when locked Correct
- D It is set when she applies Applying does not fix the rate; a floating rate is set only when it is later locked.
The rate on a Loan Estimate is not a guarantee, and a floating rate is set only at the later time it is locked. Telling the borrower it is fixed for a period, until closing or from the application would misstate a rate that can still move.

Your Home Loan Toolkit, p. 14 Reference document, not law.
The job of the appraiser on a home purchase loan is to give the lender:
- A A list of needed repairs Checking the home's condition and repairs is the home inspector's job, and the inspector works for the buyer.
- B An estimate of market value Correct
- C An opinion on the title Title is researched by a title company, and the appraiser gives no opinion on ownership.
- D The agreed contract price The contract price is what the buyer agreed to pay; the appraisal shows how that price compares with similar sales.
The appraiser works independently and gives the lender an estimate of the home's market value. Checking the home's condition and listing repairs is the home inspector's job, done for the buyer.

Your Home Loan Toolkit, p. 19 Reference document, not law.
Of these closing charges, the one held to the 10 percent aggregate limit is:
- A The recording fee Correct
- B Transfer taxes Transfer taxes are in the group that may not increase at all.
- C Prepaid interest Prepaid interest may change without limit as long as the estimate used the best information available.
- D The lender's origination fee A charge paid to the creditor may not increase at all, so the lender's fee is outside the 10 percent group.
Recording fees are held to the 10 percent limit, which caps their total, with the charges for third-party services, at 10 percent above the Loan Estimate. Transfer taxes and the lender's own fee may not rise at all, and prepaid interest has no set limit.

Regulation Z, 12 CFR s. 1026.19(e)(3)(ii)

These are the same free questions as on the section pages, shuffled into one run. To work one section on its own, start from practice by section.