Chapter 1

Question 1

Actions the Commissioner can take

Answer 1

• Denying or revoking licenses
• imposing fines or penalties
• Investigating consumer complains

Question 2

Alll states require at least ____ hours of cotinuin g education each year in order to renew an MLO license.

Answer 2

Eight hours

Question 3

MLO License renewal with NMLS open each year on:

Answer 3

November 1st

Question 4

How many soced questions are on the UST test?

Answer 4

115 questions

Question 5

All of the following are true of a mortgage underwriter or processor, except:

• They perform clerical or support duties
• They take a residential mortgage loan application
• They are supervised and instructed by a licensee
• They cannot discuss loan rates and terms with a borrower

Answer 5

They take a residential mortgage loan application

Question 6

What is the name of the act that created the NMLS?

Answer 6

SAFE Act

Question 7

Which of the following laws created the Consumer Financial Protection Bureau (CFPB)?
a. The Dodd-Frank Wall Street Reform Act
b. The Community Reinstatement Act
c. The Federal Home Loan Bank Act
d. The National Housing

Answer 7

a. The Dodd-Frank Wall Street Reform Act

Question 8

Name two things that define a mortgage loan originator.

Answer 8

• Takes a residential mortgage loan application
• Offers or negotiates terms of a residential mortgage loan.

Question 9

What are two things that are not included in the definition of an MLO?

Answer 9

• Loan Processors
• Real Estate Agents

Question 10

What is the difference between an MLO and a registered MLO?

Answer 10

A registered MLO works for a depository institution and is not licensed.

Question 11

TRUE OR FALSE. The NMLS’s job is to approve or deny license applications.

Answer 11

FALSE
(Answer: States are the only one who approves or denies license applications)

Question 12

Fannie Mae (FNMA) was privatized and became a

Answer 12

government-sponsored enterprise
(GSE).

Question 13

The creation of the Federal National Mortgage Association (FNMA or Fannie Mae), in 1938,
increased the _____ in the market and allowed more money to become available for
lenders.

Answer 13

liquidity

Question 14

The _______ is a number that will identify which MLO is originating a loan by appearing on the residential loan application.

Answer 14

unique identifier

Question 15

Name three examples of “clerical or support duties.”

Answer 15

• Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan
• Receiving an appraisal
• Collecting a VOE

Question 16

TRUE OR FALSE. Generally, an independent contractor receives a 1099 at tax time instead
of a W-2.

Answer 16

TRUE

Question 17

A mortgage broker

Answer 17

is a company or firm (generally a firm) that brings borrowers and
lenders together for loan origination.

Question 18

A mortgage lender

Answer 18

is an entity that provides funds for a mortgage. Lenders also manage credit and financial information reviews.

Question 19

A mortgage servicer

Answer 19

is a firm that performs servicing functions, including collecting mortgage payments, paying the investor, collecting, and paying the borrower’s taxes and insurance, and generally managing borrower escrow accounts.

Question 20

Mortgage-backed securities

Answer 20

are a type of asset-backed security that is secured by a mortgage or collection of mortgages.

Question 21

Name three big players on the secondary market:

Answer 21

• The Federal National Mortgage Association (FNMA, Fannie Mae)
• The Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
• The Government National Mortgage Association (GNMA, Ginnie Mae)

Question 22

A regulatory authority

Answer 22

is an entity that has the power to regulate the mortgage industry.
Regulatory authorities have the power to investigate, impose penalties, provide
supervision, or a combination of all three.

Question 23

Name two levels of regulatory authority that MLOs are subject to:

Answer 23

• State Regulatory Authority
• Federal Regulatory Authority

Question 24

Name two federal banking agencies.

Answer 24

• Federal Reserve
• NCUA

Question 25

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)

Answer 25

is the fundamental federal law that regulates the licensing process and responsibilities of mortgage loan originators.

Question 26

TRUE OR FALSE. The SAFE Act requires a minimum of 20 hours of education. All prelicensing education courses are reviewed and approved by the NMLS.

Answer 26

TRUE

Question 27

How many hours of federal law are required to be included in your pre-licensing education?

Answer 27

3 hours

Question 28

Generally, pre-licensing education expires within _____ years from the date of taking the 20 hours if the individuals fail to acquire a license or registration.

Answer 28

Three

Question 29

Name three topics covered in the National Test Component with Uniform State Content.

Answer 29

* Ethics * Federal law * Fraud

Question 30

TRUE OR FALSE. To pass the National Test with the UST, an applicant must receive a score of 70% or higher.

Answer 30

FASLE (Correct Answer: 75%)

Question 31

If an MLO leaves the business for more than _____ years, they must retake the exam.

Answer 31

five

Question 32

TRUE OR FALSE. The retake requirement does not apply to MLOs who switch from being a licensed MLO to a registered MLO.

Answer 32

TRUE

Question 33

TRUE OR FALSE. The NMLS uses a generic application, known as the MU7, which is the application for any state; it includes information all states require for their license.

Answer 33

FALSE (Correct Answer: MU4)

Question 34

Each application includes necessary information about the applicant. The applicant needs to provide _____ years of residential and employment history.

Answer 34

10

Question 35

Along with the application, the applicant must permit the NMLS to do a _____

Answer 35

background check and pull a credit report.

Question 36

TRUE OR FALSE. A surety bond is like malpractice insurance for a doctor. If a doctor does something negligent or harmful to a patient and that patient sues the doctor and wins, the doctor’s malpractice insurance typically covers the judgment.

Answer 36

TRUE

Question 37

The net worth

Answer 37

is liquid assets. The sponsor of the MLO covers net worth requirements.

Question 38

some states require that an MLO and an entity contribute to ____.

Answer 38

a state fund

Question 39

Name three reasons that a license application can be denied:

Answer 39

* License revoked in another state * Felony in the past 7 years * Lack of financial responsibility

Question 40

Name three things that call into question an application financial responsibility.

Answer 40

* Current outstanding tax liens * Foreclosure in the past three years * A pattern of seriously delinquent accounts in the past three years

Question 41

TRUE OR FALSE. Temporary authority can also be used by a registered MLO to transition to a licensed MLO or to move from a financial institution to a non-financial company without having to wait for their license application to be approved

Answer 41

TRUE

Question 42

Which of the following is an eligibility factor for temporary authority? a. Be employed by a mortgage company licensed in that state b. Be licensed in another state for the past 30 days c. Have passed the National Exam with a 80% or higher d. Both a and b

Answer 42

BOTH a. Be employed by a mortgage company licensed in that state b. Be licensed in another state for the past 30 days

Question 43

Name the three requirements for renewal

Answer 43

* Continue to meet minimum standards for licensure * Satisfy all continuing education requirements * Pay all required fees

Question 44

By what date must you renew your license?

Answer 44

December 31st

Question 45

TRUE OR FALSE. To meet the annual continuing education requirements, MLOs must complete at least ten hours of continuing education.

Answer 45

FALSE (Correct Answer: 8 hours)

Question 46

Name the two rules associated with continuing education.

Answer 46

* Continuing education only counts in the year when it was taken. * An MLO cannot take the same continuing education course in successive years. This is called the successive year rule.

Question 47

TRUE OR FALSE. NMLS allows state licensees to submit certain changes to their NMLS record in advance of a desired effective date

Answer 47

TRUE

Question 47

TRUE OR FALSE. In most states, if you fail to renew on time there is no other option but to apply for a new license.

Answer 47

FALSE (Correct Answer: Most states allow for reinstatement, but you have to check with your individual state)

Question 48

Name five things that are generally considered prohibited conduct.

Answer 48

* Commit Fraud * Unfair or Deceptive Practices * Collecting a fee for best efforts * Unlicensed Activity * Failing to make required disclosures

Question 49

TRUE OR FALSE. Every state has its own requirements related to disciplinary action.

Answer 49

TRUE

Question 49

Define the term examination.

Answer 49

An examination is generally a yearly review of licensed entities’ files and business practices to ensure that they are compliant with the law. Sometimes, after one of these examinations, the licensee will be fined or required to fix problems discovered during the examination. An investigation usually arises from a complaint or suspicion that an entity or individual is breaking the law

Question 50

Name three penalties that the Commission can levy for a violation.

Answer 50

* Impose fines * Deny A license * Revoke a license

Question 51

TRUE OR FALSE. The maximum amount of penalty for each act or omission is $5,000. Each violation or failure to comply with any directive or order of the Commissioner is a separate and distinct violation or failure.

Answer 51

FALSE (Correct Answer: $25,000)