NMLS SAFE MLO — Mortgage Loan Originator — All Questions

Under TRID, who is responsible for ensuring the Loan Estimate is provided to the consumer?

• a.The creditor (though a mortgage broker may provide it)✓
• b.The title company
• c.The real estate agent
• d.Only the mortgage broker

The creditor is ultimately responsible for ensuring the Loan Estimate is provided and is accurate. A mortgage broker may deliver the LE on the creditor's behalf, but that does not shift the creditor's compliance responsibility.TRID

A mortgage broker receives a consumer's application. Which statement is correct about the Loan Estimate?

• a.The broker may provide the LE, but the creditor remains responsible for its accuracy and compliance✓
• b.No LE is required when a broker is involved
• c.The broker must provide the LE and the creditor bears no responsibility
• d.Only the creditor may ever provide the LE

When a broker receives the application, the broker may provide the Loan Estimate, but the creditor remains responsible for ensuring the LE complies with TRID. Only one LE should be provided for the transaction.TRID

Before intent to proceed, the fee a creditor charges to obtain the credit report must be:

• a.Any amount the creditor chooses
• b.Bona fide and reasonable in amount✓
• c.Waived entirely
• d.At least $500

The credit-report fee is the only fee that may be collected before intent to proceed, and it must be bona fide and reasonable in amount. It cannot be inflated as a way to collect other costs early.TRID

A loan officer collects a $600 appraisal fee from the borrower one hour after issuing the LE but before the borrower says they want to move forward. This is:

• a.A TRID violation, because fees (other than the credit-report fee) may not be collected before intent to proceed✓
• b.Permitted for any third-party fee
• c.Permitted if the borrower is buying a second home
• d.Permitted, because the LE was already issued

Issuing the LE is not enough; the consumer must also communicate intent to proceed before any fee other than the credit-report fee may be collected. Collecting the appraisal fee before intent to proceed violates TRID.TRID

When a creditor permits the consumer to shop for a settlement service, the creditor must provide:

• a.A guarantee of the lowest price
• b.A written list identifying at least one available provider for each such service✓
• c.An appraisal waiver
• d.A signed intent to proceed

For services the consumer can shop for, the creditor must give the consumer a written list identifying at least one provider for each such service. This helps the consumer shop while keeping listed providers within the 10 percent tolerance.TRID

If the creditor allows the consumer to shop for a service but fails to provide the required written list of providers, the charge for that service is generally treated under which tolerance?

• a.It is exempt from tolerance rules
• b.10 percent cumulative tolerance✓
• c.Zero tolerance always
• d.No tolerance

If the creditor permits shopping but fails to provide the required written list, the charge is generally subject to the 10 percent cumulative tolerance, as if the consumer had not been given the opportunity to shop freely. This protects the consumer from the omission.TRID

Which of the following qualifies as a 'changed circumstance' that permits a revised Loan Estimate?

• a.The loan officer forgot to include a fee on the original LE
• b.The creditor wants to increase its origination fee for more profit
• c.The consumer decides they want a slightly lower rate
• d.An extraordinary event beyond anyone's control, such as a natural disaster, affecting the transaction✓

A changed circumstance includes an extraordinary event beyond the control of any interested party, such as a natural disaster. A creditor's own error or a desire for more profit is not a valid changed circumstance and does not justify resetting tolerances.TRID

A revised Loan Estimate is also permitted when:

• a.The consumer's credit score stays the same
• b.More than 10 business days have passed for any reason
• c.Information specific to the consumer relied on at application later turns out to be inaccurate, such as income differing from what was stated✓
• d.The creditor simply wants to reset tolerances

A changed circumstance also covers information specific to the consumer that was relied upon at application and later proves inaccurate or changes, such as stated income not matching verified income. This can justify a revised Loan Estimate and reset the tolerance for affected charges.TRID

When a consumer locks an interest rate after the initial Loan Estimate, the creditor must provide a revised Loan Estimate by when?

• a.At consummation
• b.Within 7 business days
• c.It is never required
• d.No later than three business days after the rate is locked✓

A rate lock is a specific event that permits a revised Loan Estimate. When the rate is locked, the creditor must provide the revised LE no later than three business days after the lock so the disclosed rate-dependent charges reflect the locked rate.TRID

The Loan Estimate states that the consumer must indicate intent to proceed within how many business days for the closing cost estimates to remain available (the standard minimum period)?

• a.3 business days
• b.10 business days✓
• c.7 business days
• d.30 business days

The Loan Estimate must state that the estimated closing costs are available through a specified date, and that date must be at least 10 business days after the LE is provided. If the consumer does not indicate intent to proceed within that period, the creditor may revise the estimates.TRID

Under TRID, 'consummation' refers to:

• a.The day the appraisal is ordered
• b.The day the loan funds are disbursed
• c.The time the consumer becomes contractually obligated on the loan✓
• d.The day the consumer receives the keys

Consummation is the time at which the consumer becomes contractually obligated on the loan, as determined by state law. It is a distinct concept from closing or funding, and the CD waiting period is measured against consummation.TILA / Regulation Z

The Closing Disclosure primarily shows:

• a.The consumer's credit score
• b.Only the interest rate
• c.The actual, final terms and closing costs of the mortgage transaction✓
• d.An estimate that may still change substantially

The Closing Disclosure sets out the actual, final terms and costs of the mortgage transaction. It uses a format similar to the Loan Estimate so consumers can compare the final figures against the earlier estimates.TRID

A key reason the CD mirrors the LE's format is to:

• a.Let the consumer easily compare final costs against the original estimates✓
• b.Confuse comparison shopping
• c.Speed up underwriting
• d.Eliminate the need for a promissory note

The Closing Disclosure uses a layout similar to the Loan Estimate so consumers can readily compare the final terms and costs to the estimates they received earlier. This comparability is central to the purpose of TRID disclosures.TRID

A consumer receives the Closing Disclosure in person on Monday. Assuming no intervening federal holidays, the earliest day consummation may occur is:

• a.Wednesday
• b.Tuesday
• c.Thursday✓
• d.The following Monday

The three-business-day waiting period counts Tuesday, Wednesday, and Thursday, but not the Monday of receipt. Because Saturdays generally count as business days under the precise definition (only Sundays and legal public holidays are excluded), and no holiday intervenes here, consummation may occur on Thursday.TRID

A creditor places the Closing Disclosure in the mail. For the three-business-day receipt requirement, the consumer is presumed to receive it:

• a.Only when the consumer physically signs for it
• b.Three business days after mailing, unless the creditor has evidence of earlier receipt✓
• c.On the day of mailing
• d.Seven business days after mailing

When the CD is mailed, the consumer is presumed to receive it three business days after mailing, unless there is evidence of earlier receipt. The three-business-day waiting period before consummation then runs from that presumed receipt date. Delivering the CD in person or electronically with proof of receipt can shorten this timeline.TRID

The consumer may waive the CD three-business-day waiting period only when:

• a.There is a bona fide personal financial emergency, such as imminent foreclosure, documented in a dated written statement✓
• b.The creditor approves a shorter timeline
• c.The consumer simply requests it in writing for convenience
• d.The loan is for an investment property

The three-business-day waiting period may be waived only for a bona fide personal financial emergency, such as the imminent sale of the consumer's home in foreclosure. The consumer must give a dated written statement describing the emergency; convenience alone is not enough.TRID

If a charge exceeds the applicable tolerance at closing, the creditor generally must:

• a.Charge the consumer more
• b.Refund the excess to the consumer, a 'cure', typically within 60 days of consummation✓
• c.Cancel the loan
• d.Ignore it if under $100

When a charge exceeds its tolerance, the creditor must cure the violation by refunding the excess to the consumer, generally within 60 calendar days after consummation. A corrected Closing Disclosure reflecting the refund is also provided.TRID

Charges on the Loan Estimate are deemed made in 'good faith' if:

• a.The loan officer intended to be accurate
• b.The amount actually charged does not exceed the amount disclosed, subject to the applicable tolerances✓
• c.The consumer agrees in writing
• d.The charge is under $1,000

Good faith is generally measured by comparing the amount charged at closing to the amount disclosed on the Loan Estimate. A charge is in good faith if the amount charged does not exceed the disclosed amount, subject to the zero, 10 percent, or no-tolerance categories.TRID

'Services the consumer can shop for' are those for which:

• a.No provider is needed
• b.The creditor permits the consumer to select the provider✓
• c.The fee is always zero
• d.The creditor picks the provider

Services the consumer can shop for are those for which the creditor permits the consumer to choose the provider. The creditor must give the consumer a written list of providers; whether a charge stays in the 10 percent tolerance or moves to no tolerance depends on whether the consumer picks from that list.TRID

For purposes of triggering an application, the 'estimated value of the property' may be based on:

• a.The consumer's own estimate or the purchase price stated in a sales contract✓
• b.Only a completed formal appraisal
• c.Only the tax-assessed value
• d.The creditor's automated valuation only, never the consumer's

The 'estimate of the value of the property' among the six pieces can be based on the consumer's own estimate or the purchase price in the sales contract; a formal appraisal is not required to trigger an application. This is one of the six items that starts the LE clock.TRID

Before the consumer receives the Loan Estimate, if the creditor provides a written estimate of terms or costs, it must:

• a.Clearly state, in a prominent statement, that the terms are not an offer✓
• b.Be provided only orally
• c.Be identical to the final CD
• d.Guarantee those costs

If a creditor provides a written estimate of terms or costs before the consumer receives the LE, it must include a prominent statement that the terms and costs may change and are not an offer. This prevents such worksheets from being mistaken for the official Loan Estimate.TRID

A borrower gives the loan officer their name, monthly income, SSN, the loan amount they want, and an estimate of the home's value, but has not yet identified a specific property address. Under TRID:

• a.An application has NOT yet been triggered, because the property address is still missing✓
• b.The six-piece rule does not apply to purchase loans
• c.An application is triggered because five pieces are enough
• d.The LE must be sent within three days anyway

All six pieces are required for an application, and the property address is one of them. With only five pieces provided, no application has been triggered and the three-business-day LE clock has not yet started.TRID

A creditor may use a revised Loan Estimate to reset a tolerance baseline only when:

• a.A valid reason applies, such as a changed circumstance, a borrower-requested change, or a rate lock✓
• b.The consumer's income is verified as originally stated
• c.The creditor discovers it underpriced its own origination fee
• d.At any time before closing for any reason

A revised LE may reset tolerances only when a specific valid reason applies, such as a changed circumstance affecting settlement charges or eligibility, a borrower-requested change, a rate lock, or expiration of the LE. A creditor's own pricing mistake is not a valid reason to reset tolerances.TRID

The borrower asks to switch from a 30-year to a 15-year loan after the initial LE, changing several costs. The creditor may:

• a.Issue a revised Loan Estimate reflecting the borrower-requested change within three business days✓
• b.Charge whatever fees it wants with no re-disclosure
• c.Only issue a revised CD
• d.Not issue any revised LE

A borrower-requested change to the loan terms is a valid reason to issue a revised Loan Estimate. The creditor must provide the revised LE within three business days of receiving the request, and it may reset tolerances for the affected charges.TRID

A revised Loan Estimate may NOT be provided:

• a.After a rate lock
• b.On or after the date the consumer has received the Closing Disclosure✓
• c.After a changed circumstance
• d.Within three business days of application

A revised Loan Estimate cannot be provided on or after the date the consumer receives the Closing Disclosure. Because the revised LE must be received at least four business days before consummation and the CD at least three, once the CD is out, any further changes are reflected on a revised CD, not a new LE.TRID

Amounts placed into an escrow, impound, or reserve account are subject to which tolerance?

• a.10 percent tolerance
• b.25 percent tolerance
• c.No tolerance✓
• d.Zero tolerance

Amounts placed into an escrow, impound, or reserve account are in the 'no tolerance' category, meaning they may change from the LE to the CD as long as the estimate was made in good faith and based on the best information reasonably available.TRID

Premiums for homeowners (hazard) insurance disclosed on the LE are subject to which tolerance?

• a.No tolerance✓
• b.10 percent tolerance
• c.Zero tolerance
• d.They cannot appear on the LE

Homeowners (hazard) insurance premiums are in the 'no tolerance' category because the amount depends on the policy the consumer selects and can vary. The estimate must still be based on the best information reasonably available and made in good faith.TRID

A charge for a service the consumer cannot shop for, provided by an affiliate of the creditor, is subject to which tolerance?

• a.No tolerance
• b.10 percent tolerance
• c.15 percent tolerance
• d.Zero tolerance✓

Charges for services the consumer cannot shop for that are provided by the creditor or an affiliate of the creditor are subject to zero tolerance. Because the creditor controls the provider, it is expected to disclose those amounts accurately.TRID

Which pairing correctly matches the charge to its tolerance category?

• a.Recording fees — 10 percent tolerance; transfer taxes — zero tolerance✓
• b.Both — no tolerance
• c.Both — zero tolerance
• d.Recording fees — zero tolerance; transfer taxes — 10 percent tolerance

Recording fees fall under the 10 percent cumulative tolerance, while transfer taxes are subject to zero tolerance. Distinguishing these two government-related charges is a common exam point.TRID

At closing, which of these is most likely permitted to be higher than the Loan Estimate without a tolerance cure?

• a.The credit report fee charged by the creditor's affiliate
• b.A transfer tax
• c.The creditor's origination fee
• d.Per-diem prepaid interest that increased because closing occurred later in the month than assumed✓

Per-diem prepaid interest is in the 'no tolerance' category, so it can be higher at closing than on the LE, for example when closing occurs later in the month, without triggering a cure. The creditor's origination fee and transfer taxes are zero tolerance, and an affiliate charge for a service the consumer cannot shop for is also zero tolerance.TRID

During processing, an underwriter needs to verify a salaried borrower's income. Which document set most directly supports qualifying income for a W-2 wage earner?

• a.The purchase contract and the seller's disclosure statement
• b.Recent pay stubs, prior-year W-2 forms, and a verification of employment✓
• c.A signed gift letter and the donor's bank statement
• d.Two years of Schedule C business tax returns and a profit-and-loss statement

For a W-2 wage earner, income is documented with recent pay stubs, prior-year W-2s, and often a verification of employment (VOE). Schedule C and P&L statements apply to self-employed borrowers, and gift letters or contracts document other loan facts, not wage income.

An automated underwriting system returns a recommendation on a conventional loan submitted to Fannie Mae. Which system produced the finding?

• a.The Closing Disclosure engine
• b.Loan Prospector (LP/LPA)
• c.Desktop Underwriter (DU)✓
• d.Total Scorecard alone

Desktop Underwriter (DU) is Fannie Mae's automated underwriting system, while Loan Product Advisor (LPA, formerly Loan Prospector) is Freddie Mac's. TOTAL Scorecard is used with FHA loans, and the Closing Disclosure is a settlement document, not an underwriting engine.

A property appraisal comes in $15,000 below the agreed purchase price on a home the buyer is financing at 95% LTV. If nothing else changes, what is the most likely consequence?

• a.The appraisal has no effect because loans are based only on price
• b.The lender bases the loan on the lower appraised value, so the buyer must bring more cash or renegotiate✓
• c.The purchase contract is automatically voided by federal law
• d.The lender must automatically raise the loan amount to cover the gap

Lenders base the loan-to-value ratio on the lower of the purchase price or appraised value. A low appraisal reduces the maximum loan, so the buyer typically must bring additional cash, renegotiate the price, or dispute the appraisal. Federal law does not automatically void the contract.

A borrower requests a rate lock on Tuesday and the loan officer confirms a 45-day lock in writing. What does this lock agreement primarily guarantee?

• a.That closing costs will not increase for any reason
• b.That the loan will be approved by underwriting
• c.That the appraisal will support the purchase price
• d.That the quoted interest rate and points are held for a set period if the loan closes within that window✓

A rate lock guarantees the interest rate and points for a specified period, provided the loan closes within that window and terms do not change. It does not guarantee underwriting approval, appraised value, or that all closing costs remain fixed.TILA-RESPA Integrated Disclosure (TRID)

A flood determination shows the subject property sits in a Special Flood Hazard Area (SFHA), and the loan is federally related. What must the lender require?

• a.The property be re-appraised at a higher value
• b.Flood insurance be maintained on the improvements for the life of the loan✓
• c.The borrower waive any right to flood coverage in writing
• d.The loan be denied automatically

Under the Flood Disaster Protection Act, when a federally related loan secures a building in an SFHA, the lender must require flood insurance covering the improvements for the term of the loan. Being in an SFHA does not by itself require denial or re-appraisal.Flood Disaster Protection Act

A title search reveals an unreleased mechanic's lien from a prior contractor. Before closing, what is the appropriate resolution?

• a.Order a second appraisal
• b.Ignore it because the buyer is not responsible for the seller's contractors
• c.Increase the loan amount to match the lien
• d.Clear the lien so title can transfer free of that encumbrance, typically via payoff or release at settlement✓

An unreleased lien is a cloud on title that must be cleared before the property can transfer with clear, insurable title. This is typically resolved by paying off and recording a release of the lien at settlement. It is not remedied by a second appraisal or ignoring it.

An underwriter issues a conditional approval. What best describes a loan condition?

• a.A federal disclosure required only at application
• b.A promise that the interest rate will drop before closing
• c.A specific item the borrower must satisfy before the loan can be cleared to close✓
• d.A final denial that cannot be reversed

A conditional approval means the loan is approved subject to specific conditions, such as additional documentation or explanations, that must be satisfied before a clear-to-close is issued. It is not a denial, a rate promise, or a disclosure.

At closing, the lender sets up an escrow (impound) account for a borrower. What is the primary purpose of this account?

• a.To hold the borrower's down payment until the deed records
• b.To fund future discount points
• c.To pay the loan originator's commission over time
• d.To collect and pay property taxes and hazard insurance premiums as they come due✓

An escrow/impound account collects a portion of the borrower's monthly payment to pay property taxes and hazard (and sometimes flood) insurance when due. RESPA limits the cushion a lender may require. It is not for down payments, commissions, or points.Real Estate Settlement Procedures Act (RESPA)

A self-employed borrower applies for a mortgage. Which documentation most directly establishes qualifying income?

• a.Two years of personal and business tax returns with a year-to-date profit-and-loss statement✓
• b.The borrower's verbal estimate of monthly earnings
• c.A single recent pay stub
• d.A copy of the borrower's business license only

Self-employed income is typically documented with two years of personal and business tax returns plus a current year-to-date profit-and-loss statement to establish stable, ongoing income. A single pay stub, a verbal estimate, or a license alone is insufficient.

A verification of deposit (VOD) shows a $20,000 deposit two weeks before application that the borrower cannot explain. Why does this concern an underwriter?

• a.Deposits have no bearing on loan approval
• b.Unsourced large deposits may represent undisclosed debt or funds that are not the borrower's own✓
• c.Bank statements are never reviewed in underwriting
• d.Large deposits always disqualify the borrower

Underwriters must verify that funds used for down payment and reserves are the borrower's own and properly sourced. A large, unexplained deposit may be a hidden loan or borrowed funds, which affects the true debt picture, so documentation of the source is required.

In qualifying a borrower, the front-end (housing) ratio is calculated as:

• a.Total monthly debts divided by gross monthly income
• b.Monthly housing expense (PITI) divided by gross monthly income✓
• c.Net monthly income divided by total assets
• d.Loan amount divided by property value

The front-end or housing ratio compares the total monthly housing expense (principal, interest, taxes, and insurance, or PITI) to gross monthly income. The back-end ratio adds all other monthly debts. Loan-to-value is a separate measure of the loan against property value.

A borrower's rate lock expires two days before the scheduled closing due to processing delays. What is the most common consequence?

• a.The lender must pay the borrower a penalty
• b.The loan is automatically canceled
• c.The lender may extend the lock (sometimes for a fee) or re-lock at current market rates✓
• d.The borrower keeps the original rate indefinitely with no action

When a lock expires before closing, the lender typically offers a lock extension, sometimes for a fee, or re-locks at prevailing market rates, which may be higher or lower. The loan is not automatically canceled, and there is generally no automatic penalty paid to the borrower.

Under the appraisal rules of ECOA/Regulation B, when must a lender provide the applicant a copy of the appraisal on a first-lien dwelling loan?

• a.Only if the borrower pays an extra fee
• b.Promptly upon completion, or at least three business days before closing, whichever is earlier✓
• c.Only after the loan closes
• d.Never; appraisals are confidential to the lender

Under ECOA/Regulation B, a lender must provide a copy of appraisals and other written valuations promptly upon completion, or at least three business days before consummation, whichever is earlier. The applicant may waive the timing but still receives a copy.Equal Credit Opportunity Act (ECOA)

During underwriting, a DU finding lists 'Approve/Eligible' but includes verification messages. What do these messages require?

• a.That the borrower re-apply from scratch
• b.That the listed documentation and conditions be obtained and verified to support the finding✓
• c.That the loan be denied because messages appeared
• d.That the interest rate be increased

An 'Approve/Eligible' DU finding still lists verification messages and conditions that the file must document, such as income, assets, and credit items. Satisfying these supports the recommendation. Messages do not mean denial or require re-application.

A survey ordered during closing reveals that the neighbor's fence extends three feet onto the subject property. This is an example of:

• a.A prepayment penalty
• b.An escrow shortage
• c.A rate lock extension
• d.An encroachment that may need to be resolved before closing✓

When a structure or improvement crosses a boundary line onto another parcel, it is an encroachment. It can cloud title or affect value and may need resolution, such as an agreement or title exception, before closing proceeds. It is unrelated to prepayment penalties or rate locks.

At funding, the settlement agent disburses loan proceeds. In a typical purchase, funds are primarily disbursed to:

• a.The seller and to pay off existing liens, taxes, and settlement charges per the settlement statement✓
• b.The loan originator as commission only
• c.The appraiser and inspector before all others
• d.The borrower directly in cash

At funding and disbursement, the settlement agent pays the seller, pays off existing liens and prorated taxes, and covers settlement charges as itemized on the settlement statement/Closing Disclosure. Proceeds are not paid solely as commission or handed to the borrower in cash on a purchase.

A borrower earns a $3,000 monthly bonus that has been consistent for three years and is likely to continue. How may an underwriter treat this bonus income?

• a.It can never be used because bonuses are variable
• b.It doubles the borrower's qualifying income automatically
• c.It may be counted as qualifying income if documented as stable and likely to continue✓
• d.It only counts toward assets, not income

Variable income such as bonuses, overtime, or commissions can be counted as qualifying income when it is documented over an adequate history (commonly about two years) and shown to be stable and likely to continue. It is not automatically excluded or double-counted.

An appraiser uses the sales comparison approach on a single-family home. This approach primarily estimates value by:

• a.Comparing the subject to recent sales of similar nearby properties with adjustments✓
• b.Using only the original purchase price of the home
• c.Dividing net operating income by a capitalization rate
• d.Calculating the cost to rebuild the home new, less depreciation

The sales comparison approach estimates value by comparing the subject property to recent sales of similar homes, adjusting for differences in features, size, and condition. The cost approach rebuilds less depreciation, and the income approach capitalizes income, both used more in other property types.

A loan is 'cleared to close.' What does this status indicate?

• a.The borrower has made the first mortgage payment
• b.All underwriting conditions have been satisfied and the loan can proceed to closing✓
• c.The appraisal has just been ordered
• d.The interest rate has been locked for the first time

'Cleared to close' means underwriting has reviewed and approved all conditions, so the loan can move to the closing/settlement stage. It does not refer to ordering the appraisal, locking the rate, or making a payment.

Under RESPA Section 8, a title company offers a loan originator a cash payment for each referral of settlement business. This arrangement is:

• a.Permitted if under $500
• b.Permitted if disclosed orally
• c.Permitted if the borrower consents
• d.A prohibited kickback for referrals of settlement service business✓

RESPA Section 8 prohibits giving or receiving any fee, kickback, or thing of value for the referral of settlement service business on federally related mortgage loans. Such payments are illegal regardless of amount, disclosure, or borrower consent.Real Estate Settlement Procedures Act (RESPA)