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NMLS Safe Exam Pt 5
Licensing, Servicing, Special Loans & Exam Tips
| Question | Answer |
|---|---|
| What law requires MLOs to be licensed or registered? | The SAFE Act. |
| What is the NMLS? | Nationwide Multistate Licensing System & Registry — tracks and manages MLO licensing. |
| Who needs to be licensed as an MLO? | Anyone who takes applications and offers/negotiates loan terms for compensation (non-bank lenders). |
| Who is exempt from MLO licensing? | Registered MLOs at depository institutions like banks or credit unions. |
| What is the difference between a state-licensed MLO and a registered MLO? | State-licensed MLOs work for non-depository institutions and must meet state requirements; registered MLOs work for depository institutions and are only registered in NMLS. |
| What are the education requirements for new MLOs? | 20-hour pre-licensure course (SAFE Comprehensive). |
| What are the annual continuing education (CE) requirements for MLOs? | 8 hours of CE: 3 hours federal law, 2 hours ethics, 2 hours nontraditional lending, 1 hour elective. |
| What is the renewal deadline for MLO licenses? | December 31st each year. |
| How often must an MLO submit a background check? | Upon initial application and possibly during renewal. |
| What is required to maintain an active license? | Continuing education, background checks, credit review, and license renewal. |
| What is temporary authority? | Allows MLOs moving from a bank to a non-bank, or from one state to another, to originate loans while completing licensure. |
| How long does temporary authority last? | Up to 120 days or until the state denies the application. |
| What is the benefit of using NMLS? | Centralized system for tracking license status, education, disciplinary history, and more. |
| What is loan servicing? | Collecting mortgage payments and managing escrow accounts after closing. |
| Who are mortgage servicers? | Companies that manage day-to-day loan administration post-closing. |
| What must servicers provide annually? | Escrow analysis and annual escrow account statements. |
| What is an escrow shortage? | When there is not enough money in escrow to cover tax and insurance payments. |
| What is an escrow surplus? | When there is more than needed in the escrow account. |
| What must happen if the escrow surplus is $50 or more? | It must be refunded to the borrower within 30 days. |
| What is an Initial Escrow Disclosure? | A statement showing expected escrow payments and disbursements. |
| When is the Initial Escrow Disclosure due? | At closing or within 45 calendar days after. |
| What is the Annual Escrow Statement? | A yearly report showing actual payments into and disbursements from the escrow account. |
| What is a payoff statement? | A document showing the amount needed to pay off a mortgage in full. |
| What is a demand letter? | A formal request for payment issued when a loan is in default. |
| What is the purpose of mortgage servicing rules under RESPA Section 6? | To protect borrowers from servicing abuses and ensure timely information. |
| What government agency oversees FHA loans? | HUD (U.S. Department of Housing and Urban Development). |
| What is the minimum down payment for an FHA loan? | 3.5% with a credit score of 580 or higher. |
| What type of insurance does FHA require? | Upfront Mortgage Insurance Premium (UFMIP) and Annual MIP. |
| How long must MIP be paid on FHA loans with less than 10% down? | For the life of the loan. |
| What is the FHA loan limit based on? | County median home prices (varies by location). |
| What is the purpose of an FHA 203(b) loan? | Basic home purchase loan for 1–4 unit owner-occupied properties. |
| What is the purpose of an FHA 203(k) loan? | For purchasing and rehabilitating a property. |
| Who guarantees VA loans? | The U.S. Department of Veterans Affairs. |
| What is the maximum LTV on a VA loan? | 100% (no down payment required). |
| What is the VA funding fee? | A one-time fee to help sustain the VA program, varies by type of borrower and down payment. |
| Who is exempt from paying the VA funding fee? | Veterans with service-connected disabilities and surviving spouses. |
| What is residual income in VA loans? | The amount of net income left over after all debts and expenses — used to qualify borrowers. |
| What is the Certificate of Eligibility (COE)? | Document proving a veteran’s eligibility for VA loan benefits. |
| What type of mortgage insurance is required on VA loans? | None. |
| What is the max DTI for VA loans? | There is no official cap, but 41% is the benchmark used by most lenders. |
| Who guarantees USDA loans? | The U.S. Department of Agriculture (Rural Housing Service). |
| What is the max LTV on a USDA loan? | 100% (no down payment required). |
| What are the two main types of USDA loans? | USDA Guaranteed Loan and USDA Direct Loan. |
| What is the USDA Guarantee Fee? | A one-time and annual fee required for the guaranteed loan program. |
| What is the primary eligibility requirement for a USDA loan? | The property must be in a rural area and borrower income must be under area limits. |
| What is the Energy Efficient Mortgage (EEM)? | A program allowing borrowers to finance energy-saving improvements into the loan. |
| What is a Reverse Mortgage? | A loan for seniors 62+ that converts home equity into cash and is repaid when they move out, sell, or die. |
| What is the most common reverse mortgage program? | FHA HECM (Home Equity Conversion Mortgage). |
| What is the purpose of the SAFE Exam UST component? | To assess knowledge of state and federal laws that apply nationwide. |
| What is the best strategy for answering long SAFE exam questions? | Eliminate clearly wrong answers, identify keywords, and choose the most compliant answer. |
| What is a Nontraditional Mortgage? | Any mortgage other than a 30-year fixed-rate mortgage. |
| What is the purpose of nontraditional mortgage training in SAFE CE? | To ensure MLOs understand the risks and complexities of products like ARMs, interest-only, etc. |
| What is the 1003? | The Uniform Residential Loan Application. |
| Who created the 1003 application? | Fannie Mae. |
| What is included in the 1003? | Borrower information, income, assets, liabilities, property info, loan terms, declarations, and demographic data. |
| What is the 4506-C form used for? | Authorizes lenders to obtain tax return transcripts from the IRS. |
| What is the purpose of the LE (Loan Estimate)? | To help borrowers compare loan offers by showing terms and closing costs early. |
| What is the purpose of the CD (Closing Disclosure)? | To confirm final loan details and closing costs. |
| What is the purpose of the ECOA notice on the 1003? | Informs borrower of their rights and how discrimination is prohibited in lending. |
| What does Regulation B implement? | The Equal Credit Opportunity Act (ECOA). |
| What is the purpose of the Patriot Act in mortgage lending? | To prevent money laundering and verify borrower identity. |
| What is a CIP? | Customer Identification Program — required under the Patriot Act. |
| What is a Suspicious Activity Report (SAR)? | A report filed with FinCEN for potential money laundering or fraud. |
| When must a SAR be filed? | Within 30 days of detecting suspicious activity. |
| What does FACTA regulate? | Consumer rights around credit reporting and identity theft (Fair and Accurate Credit Transactions Act). |
| What is the purpose of the Red Flags Rule? | To help detect and prevent identity theft. |
| What is the Gramm-Leach-Bliley Act (GLBA)? | Law requiring protection of consumer personal financial information. |
| What is the Safeguards Rule? | Requires companies to develop a written information security plan to protect consumer data. |
| What is a “trigger term” in advertising? | Loan terms (e.g., payment amount, interest rate) that require additional TILA disclosures. |
| What must be included if a trigger term is used? | APR, amount or percentage of down payment, terms of repayment. |
| What is the purpose of the MAP Rule? | To prevent deceptive mortgage advertising. |
| What is considered deceptive under MAP Rule? | Misleading statements about rates, terms, payments, or approval likelihood. |
| How long must advertising records be kept under MAP Rule? | 2 years. |
| What is the E-Sign Act? | Allows for the legal use of electronic records and signatures in transactions. |
| What must be obtained before using electronic disclosures? | Borrower consent and proof they can access the disclosures. |
| What is the purpose of the Homeownership Counseling Disclosure? | To inform borrowers of the availability and benefits of homeownership counseling. |
| When must the Homeownership Counseling Disclosure be provided? | Within 3 business days of application (unless reverse mortgage or timeshare). |
| What is the Initial Servicing Disclosure Statement? | Notifies the borrower whether loan servicing may be transferred. |
| When is the Initial Servicing Disclosure required? | Within 3 business days of receiving an application. |
| What is the HUD-1 Settlement Statement? | A detailed breakdown of costs for certain mortgage types (used before TRID, still used for reverse mortgages). |
| Which loans still use the HUD-1 and not the CD? | Reverse mortgages, HELOCs, and manufactured home loans not under TRID. |
| What must be included in an Adverse Action Notice under ECOA? | Reason for denial, lender contact info, and ECOA notice of rights. |
| When must an Adverse Action Notice be issued? | Within 30 days of completed application if denied. |
| What is a Credit Score Disclosure Notice? | A notice required by FCRA/FACTA when a credit score is used in a decision. |
| When must the Credit Score Disclosure be issued? | As soon as a credit score influences a credit decision. |
| What is a Notice of Right to Receive Appraisal? | Disclosure that borrower is entitled to receive a copy of appraisal report. |
| When must appraisal be provided? | Promptly upon completion or no later than 3 business days before consummation. |
| What is a Bona Fide Offer? | A legitimate offer of credit that complies with applicable lending rules. |
| What is a Lock-in Agreement? | A written agreement between lender and borrower guaranteeing an interest rate for a certain period. |
| What is a float option? | Allows rate to fluctuate with the market until it is locked. |
| How long is a LE good for without intent to proceed? | 10 business days. |
| What happens if a borrower does not respond to a LE in 10 days? | The lender is no longer bound by the estimate. |
| What are the three categories of TRID tolerances? | Zero tolerance, 10% cumulative tolerance, and no tolerance limit. |
| What is a changed circumstance? | A situation that allows for redisclosure of the LE (e.g., borrower request, new info, etc.). |
| Can an LE be revised after CD is issued? | No, changes must be made with a revised CD. |
| What is the definition of “business day” for CD delivery? | All calendar days except Sundays and federal holidays. |
| What is consummation? | The point at which the borrower becomes legally obligated to the loan. |
| What is the final step in the loan process? | Closing (or settlement). |
| What is a rescission period? | A 3-day window to cancel a refinance on a primary residence. |
| Which transactions require rescission? | Refinances of a primary residence (not purchases or investment properties). |
| What is a common test-taking tip for SAFE? | Eliminate obviously wrong answers, flag tricky ones, and answer all questions before time expires. |
Created by:
jenniferhudson
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