CA MLO - Disciplinary Action

Question 1

1. Under which situation is the Commissioner LEAST LIKELY to suspend or revoke a MLO license?
   a. Albert’s MLO license in another state was revoked.
   b. Betty’s surety bond lapsed.
   c. Charles submitted a loan application and neglected to include his unique identifier.
   d. David was late by 90 days in filing a required report.

Answer 1

c. Charles submitted a loan application and neglected to include his unique identifier.

Question 2

2. What are the consequences for trust fund conversion?
   a. Civil lawsuit
   b. Criminal lawsuit
   c. Real estate license restricted or revoked
   d. All of the above

Answer 2

d. All of the above

Question 3

3. If a licensee misrepresented the information on the initial application certifications, the Commissioner may:
   a. require the person to resubmit new documentation.
   b. revoke the license before it expires.
   c. issue a 6-month provisional license during the investigation.
   d. require the licensee to retest.

Answer 3

b. revoke the license before it expires.

Question 4

. A mortgage lender’s NMLO license could be suspended or revoked for failure to:

a. achieve a projected volume of business.
b. offer nontraditional mortgage products.
c. pay required annual fees.
d. open a branch office location.

Answer 4

c. pay required annual fees.

Question 5

5. The California Financial Code gives the Commissioner the right to levy annual assessment charges. Within how may days from receipt of the charge does the lender have to pay the fee to avoid paying a penalty?
   a. 15
   b. 20
   c. 30
   d. 60

Answer 5

b. 20

Question 6

6. A real estate licensee who violates the Real Estate Law can be subject to:
   a. monetary fines.
   b. license suspension or revocation.
   c. civil injunctions.
   d. all of the above.

Answer 6

d. all of the above.

Question 7

7. Broker Baker applied for a MLO endorsement to his CA real estate. He had a MLO license in Nevada but it was revoked. The DRE denied his application, but broker Baker may petition the Commissioner after:
   a. 45 days.
   b. 90 days.
   c. 1 year.
   d. never.

Answer 7

d. never.

Question 8

8. A mortgage loan originator who violates the rules and regulations of the California Code faces a maximum CIVIL fine of __________ for each violation.
   a. $1,000
   b. $2,500
   c. $25,000
   d. $50,000

Answer 8

c. $25,000

Question 9

9. After appropriate written notice and opportunity for a hearing, the Commissioner may suspend a license for a period up to 12 months:
   a. at any time an examination of the licensee’s records and premises is warranted.
   b. if the licensee was issued a license in another state.
   c. if there is a violation that has caused material damage to the lender or the public.
   d. if there is a material change in the advertising material used by the lender.

Answer 9

c. if there is a violation that has caused material damage to the lender or the public.

Question 10

10. Who has the power to restrict, suspend, or revoke a real estate license?
    a. Commissioner
    b. Commission Board
    c. Courts
    d. Real Estate Advisory Committee

Answer 10

a. Commissioner

Question 11

11. The Commissioner may issue an order suspending the license of a MLO 30 days after the date that the MLO:
    a. closes his or her office.
    b. fails to file a required report with the Commissioner.
    c. requests the Commissioner to put his or her license on inactive status.
    d. switches from one originating lender to another.

Answer 11

b. fails to file a required report with the Commissioner.

Question 12

12. What is the term for having an MLO license permanently withdrawn?
    a. Restriction
    b. Revocation
    c. Suspension
    d. Withdrawal

Answer 12

b. Revocation

Question 13

13. Which act established the legal procedures that must be followed when disciplining licensees?
    a. Administrative Procedure Act
    b. Civil Code
    c. Code of Civil Procedures
    d. Penal Code

Answer 13

a. Administrative Procedure Act

Question 14

14. A licensee who opens a branch location or changes its business location without notifying the Commissioner in writing of the change may be:
    a. fined $100 each day the new location is maintained
    b. fined $500 each day the new location is maintained
    c. reported to the Better Business Bureau.
    d. reported to the Better Business Bureau and fined a $10,000 one time fee.

Answer 14

Correct answer is (a).
a. fined $100 each day the new location is maintained
A licensee who opens a branch location or changes its business location without notifying the Commissioner in writing of the change may be fined $100 each day the new location is maintained without proper notification.

Question 15

15. What is the first step in determining if a licensee has violated the law?
    a. A formal hearing is held
    b. A statement of issues is served upon the licensee
    c. A written complaint against the licensee is reviewed by the Enforcement and Audit Section
    d. An accusation is filed by the Enforcement and Audit Section against the licensee

Answer 15

c. A written complaint against the licensee

Question 16

16. What are the consequences if a mortgage loan originator’s surety bond is terminated?
    a. The NMLS deletes the unique identifier.
    b. The NMLS fines the company employing the MLO.
    c. The MLO must surrender the license to the NMLRS.
    d. The MLO’s license may be immediately suspended by the Commissioner.

Answer 16

d. The MLO’s license may be immediately suspended by the Commissioner.

Question 17

17. Who presides over the formal hearing?
    a. Administrative law judge
    b. Attorney General
    c. District Attorney
    d. Real Estate Commissioner

Answer 17

a. Administrative law judge

Question 18

18. When the Commissioner takes action to suspend or revoke a license by sending a written notice of the impending order, the MLO has ________ days to file a written request for a hearing.
    a. 5
    b. 10
    c. 15
    d. 30

Answer 18

c. 15

Question 19

19. If the Commissioner pays a judgment on behalf of a broker or salesperson from the Recovery Account, the license is automatically suspended. Can the license be reinstated?
    a. No, suspended licenses cannot be reinstated
    b. No, the person must retake the state exam and apply for a new license
    c. Yes, by paying full reimbursement plus interest to the DRE
    d. Yes, by repaying the amount of the original judgment

Answer 19

c. Yes, by paying full reimbursement plus interest to the DRE

Question 20

20. After receiving a complaint from a borrower, the Real Estate Commissioner audited the broker’s trust fund account and found evidence of conversion. An administrative hearing was held and the broker was found guilty of conversion. What action could the Commissioner take against the broker?
    a. Appoint a receiver for the broker’s company
    b. File a civil lawsuit against the broker
    c. File a criminal lawsuit against the broker
    d. Suspend or restrict the broker’s license

Answer 20

d. Suspend or restrict the broker’s license

Question 21

21. Rose is a real estate salesperson with an MLO endorsement. She did not give the borrower proper disclosures when taking an application for a real estate loan. If the party later complains, an Administrative Law Judge will:
    a. order her to pay a fine.
    b. preside over the hearing.
    c. revoke her license.
    d. suspend her license.

Answer 21

b. preside over the hearing.

Question 22

22. A person whose MLO endorsement has been suspended or revoked may petition the Commissioner for reinstatement after:
    a. 45 days.
    b. 90 days.
    c. 1 year.
    d. never.

Answer 22

d. never.

Question 23

23. Once the formal hearing is complete, who makes the official decision and determines the penalty for the licensee?
    a. Administrative law judge
    b. County Clerk
    c. District Attorney
    d. Real Estate Commissioner

Answer 23

d. Real Estate Commissioner

Question 24

24. If a licensee violates the rules and regulations of the California Residential Mortgage Lending Act, the Commissioner may:
    a. deny an application.
    b. fine the licensee, or suspend or revoke the licensee.
    c. notify the licensee’s clients that the business is being closed.
    d. refuse a licensee’s request for a hearing on charges.

Answer 24

b. fine the licensee, or suspend or revoke the licensee.

Question 25

25. What is the Commissioner's likely action toward a licensed lender who continues to take loan applications from an unauthorized location? a. Report the violation to the local zoning board. b. Nothing, because the Commissioner does not approve locations. c. Impose a $500 fine for violating the Finance Code rules and regulations. d. Audit the licensee to determine if there are other violations.

Answer 25

c. Impose a $500 fine for violating the Finance Code rules and regulations.

Question 26

26. When suspending or revoking a license, the Commissioner must provide the licensee with a: a. provisional license to use during the investigation. b. temporary license to use during the investigation. c. written notification of the intent to issue a final order. d. refund of any unused fees paid to the NMLS.

Answer 26

c. written notification of the intent to issue a final order.

Question 27

27. The Commissioner audited a licensee and discovered that the licensee does not have the net worth required for licensure. The Commissioner will likely: a. authorize a credit review. b. issue a 6-month provisional license. c. revoke the license before it expires. d. suspend the license when it expires.

Answer 27

c. revoke the license before it expires.

Question 28

28. A real estate licensee is accused of violating the law. After the hearing, an administrative law judge gave recommendations to the Commissioner for discipline. The Commissioner may: a. accept the penalty. b. reduce the penalty. c. reject the penalty. d. do all of the above.

Answer 28

d. do all of the above.

Question 29

29. Failing to renew a MLO license endorsement by January 1st will result in an existing MLO license endorsement status changed to: a. Approved-Conditional. b. Approved-Failed to Renew. c. Approved-Inactive. d. Terminated-Failed to Renew.

Answer 29

d. Terminated-Failed to Renew. Correct answer is (d). Failing to renew a MLO license endorsement by January 1st will result in an existing MLO license endorsement status changed to "Terminated - Failed to Renew" and requires that the licensee cease performing all activities that require a MLO endorsement.

Question 30

30. Who is responsible for auditing a real estate broker's trust fund records? a. California Attorney General b. California Commissioner of Financial Institutions c. California Insurance Commissioner d. California Real Estate Commissioner

Answer 30

d. California Real Estate Commissioner

Question 31

31. Broker Brad accidentally deposited his commission in the trust fund account instead of his business account. Because it remained in the account for more than 25 days, he is guilty of: a. alienating clients' funds. b. commingling non-trust funds with trust funds. c. conversion of trust funds. d. embezzlement of non-trust funds.

Answer 31

b. commingling non-trust funds with trust funds

Question 32

32. The Commissioner may revoke a license for failure to: a. file an income tax return prior to April 15. b. share fees with other lenders in the area. c. declare insolvency if the financial situation warrants this action. d. cooperate with any examination or investigation ordered by the DOC.

Answer 32

d. cooperate with any examination or investigation ordered by the DOC.

Question 33

33. If a financial institution is ordered to desist publication of an advertisement, but fails to comply, it may be fined up to ________ for each violation. a. $250 b. $500 c. $1,000 d. $2,500

Answer 33

b. $500

Question 34

34. When a salesperson is discharged for a violation of any of the provisions of the Real Estate Law, the employing broker must immediately file a __________ with the Commissioner. a. certified copy of salespersons license b. certified written statement of the facts c. complaint notification d. registered complaint

Answer 34

b. certified written statement of the facts Correct answer is (b). When a salesperson is discharged for a violation of any of the provisions of the Real Estate Law, the employing broker must immediately file a certified written statement of the facts with the Commissioner.

Question 35

35. A broker was found guilty of trust fund conversion by an administrative law judge. Each of the following is an action that the Commissioner could take against the broker, except: a. restrict the broker's license. b. revoke the broker's license. c. sue the broker in criminal court for the injured parties. d. suspend the broker's license.

Answer 35

c. sue the broker in criminal court for the injured parties. Correct answer is (c). The Commissioner could dismiss the charges or revoke, suspend or restrict the broker's license. A lawsuit must be brought by the injured party, not the Commissioner.

Question 36

36. The DOC Commissioner will likely suspend or revoke a person's MLO license, if the licensee: a. adds a new business location without first notifying the Commissioner. b. closes a branch office. c. commits fraud and is indicted for it. d. files annual reports in a timely manner.

Answer 36

c. commits fraud and is indicted for it.

Question 37

37. Under the California Financial Code, what is the maximum administrative fine the Commissioner can impose on an MLO found guilty of violating the law? a. $500 per violation b. $2,500 per violation c. $500 per violation up to $2,500 lifetime d. $10,000 per violation

Answer 37

b. $2,500 per violation Correct answer is (b). Administrative fines may be assessed by the Commissioner for up to $2,500 per violation. Civil fines may be assessed up to $25,000 per violation, which is the maximum.

Question 38

38. A licensee who receives a notice of suspension or revocation from the Commissioner, should: a. hire an attorney. b. send an email explaining the misunderstanding. c. send a written response within 15 days requesting a hearing. d. refuse to accept the certified letter.

Answer 38

c. send a written response within 15 days requesting a hearing.

Question 39

39. What is the penalty for a non-exempt person acting as a mortgage loan originator without having an MLO license? a. Each transaction of unlicensed operation as a separate violation b. Each day of unlicensed operation as a separate violation c. Each week (5-day period) of unlicensed operation as a separate violation d. Every five transactions of unlicensed operation as a separate violation

Answer 39

a. Each transaction of unlicensed operation as a separate violation

Question 40

40. The fraudulent appropriation of property by a person to whom it has been entrusted is called: a. a priori. b. commingling. c. embezzlement. d. rescission.

Answer 40

c. embezzlement.

Question 41

41. The payment of non-collectable court judgments against licensees who committed fraud misrepresentation, deceit, or conversion of trust funds in a transaction, is assured by the: a. Commissioner's Consumer Account. b. National Real Estate Public Fund. c. Real Estate Regulatory Fund. d. Recovery Account.

Answer 41

d. Recovery Account. Correct answer is (d). The Recovery Account assures the payment of otherwise non-collectable court judgments against licensees who have committed fraud, misrepresentation, deceit, or conversion of trust funds in a transaction.

Question 42

42. The Commissioner may suspend or revoke an MLO license for failure to: a. display a unique identifier for each branch office. b. open an additional office in a low-income area. c. provide proper disclosures to borrowers. d. request a copy of the Commissioner's annual report .

Answer 42

c. provide proper disclosures to borrowers.

Question 43

43. For prohibited acts of non-compliance with the California Code of Regulations, a licensee may face administrative penalties of up to _____ per violation and civil penalties of up to _____ per violation. a. $1,000 / $10,000 b. $2,500 / $25,000 c. $5,000 / $50,000 d. $10,000 / $100,000

Answer 43

b. $2,500 / $25,000

Question 44

44. According to Section 506 of the California Penal Code, a broker who fraudulently converts trust funds is guilty of: a. appropriation. b. ejectment. c. embezzlement. d. emblements.

Answer 44

c. embezzlement.

Question 45

45. A broker is being sued for converting over $50,000 in trust funds. The court appointed a(n) __________ to manage and dispose of the broker's business as instructed by the court, preserving the business assets until all litigation is complete. a. accountant b. executor c. receiver d. trustor

Answer 45

c. receiver Correct answer is (c). Following this hearing, the court may appoint a receiver. The receiver's job is to manage and dispose of the business as instructed by the court, preserving the business assets until all litigation is complete.

Question 46

46. A licensee receives a written notice of impending license suspension from the DOC Commissioner based on improper disclosures to borrowers. What should the licensee do? a. Email the Commissioner defending his position within 20 days b. File a written notice requesting a hearing within 15 days. c. Hire an attorney to contest the license suspension. d. Revise the disclosure procedure and forward the documentation to the DOC.

Answer 46

b. File a written notice requesting a hearing within 15 days.

Question 47

47. Who has the authorization to restrict, suspend, or revoke a real estate license? a. Administrative law judge b. District Attorney c. Real Estate Commissioner d. State Attorney General

Answer 47

c. Real Estate Commissioner

Question 48

48. Which statement is incorrect regarding the Real Estate Commissioner's role in enforcing the license law? a. The Commissioner can investigate both licensed and non-licensed persons b. The Commissioner can investigate only licensed persons c. The Commissioner can only discipline licensed persons d. The Commissioner can suspend, revoke, or restrict licenses

Answer 48

b. The Commissioner can investigate only licensed persons

Question 49

50. If the Commissioner suspects that trust funds have been mishandled, an audit is conducted to investigate the alleged misconduct. If the allegations are substantiated in the audit, what does the Commissioner file against the licensee? a. An accusation b. A demurrer c. An error statement d. An order to cease and desist

Answer 49

a. A shortage may occur if the broker disburses funds without proper authorization Correct answer is (a). If the allegations are substantiated in the audit, an accusation is filed against the licensee. An accusation is a written statement of the charges against the licensee, describing the acts or omissions with which the licensee is being charged.

Question 50

49. The law considers both shortages and overages as trust fund discrepancies and therefore violations of the law. Which statement is incorrect? a. A shortage may occur if the broker disburses funds without proper authorization b. A trust fund overage may occur if the trust account balance is greater than the total liability of the account c. A trust fund shortage occurs when the trust account balance is more than the total liability of the fund d. An overage occurs if the broker's own monies have been commingled with the trust fund

Answer 50

c. A trust fund shortage occurs when the trust account balance is more than the total liability of the fund Correct answer is (c). A trust fund shortage occurs when the trust account balance is less than the total liability of the fund. Beneficiary accounts with negative balances cannot be deducted from other accounts when you calculate the aggregate trust fund liability. Similarly, a trust fund overage may occur if the trust account balance is greater than the total liability of the account.