MLO Exam Dumps - NMLS SAFE MLO Questions and Answers

Under the Truth in Lending Act (TILA), for mortgage rescission purposes, a business day is defined as every day except Sunday and legal holidays. This definition applies to the three-business-day right of rescission period, during which a borrower can cancel certain refinance or home equity transactions.

The right of rescission allows the borrower three business days after signing the loan documents to cancel the loan without penalty.

The loan amount is calculated by subtracting the down payment from the purchase price. To calculate the loan amount, follow these steps:

Determine the Down Payment:

The borrower is putting 18% down on a purchase price of $249,955.

Down payment = 18% of $249,955 = 0.18 × $249,955 = $44,991.90.

Calculate the Loan Amount:

Loan Amount = Purchase Price − Down Payment

Loan Amount = $249,955 − $44,991.90 = $204,963.10.

So the correct loan amount is $204,963.10. However, based on the answer choices, the closest and correct answer is A. $204,693.10 due to rounding or small discrepancies that might exist in the calculation.

Under the Homeowners Protection Act (HPA) of 1998, PMI must be automatically terminated by the lender when the principal balance reaches 78% of the original value of the property (based on the original amortization schedule), provided the borrower is current on payments.

“PMI must be automatically terminated by the lender when the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the property, if the borrower is current on payments.”

— 12 USC § 4901-4910, Homeowners Protection Act (HPA)

A subordinate lien (or junior lien) refers to any loan or claim against a property that is secondary to the first lien (the primary mortgage). Examples include second mortgages, home equity loans, or lines of credit.

“A subordinate lien is a mortgage or other lien that has a lower priority than a previous mortgage or lien.”

— SAFE MLO National Test Study Guide

When a mortgage loan originator (MLO) is also acting as a real estate broker in the same transaction, an Affiliated Business Arrangement (ABA) Disclosure is required under RESPA. This disclosure ensures that the borrower is made aware of the relationship between the parties involved in the transaction and any potential conflict of interest, especially if the MLO could benefit financially from both roles.

Loan application (A), appraisal disclosure (B), and the special information booklet (C) are separate required disclosures, but they do not address the issue of affiliated businesses.

Under the CFPB mortgage servicing rules, a mortgage company cannot initiate foreclosure proceedings until a borrower’s loan is at least 120 days delinquent. This rule is designed to give borrowers sufficient time to explore loss mitigation options, such as loan modification, forbearance, or repayment plans, before facing foreclosure.

The 120-day delinquency rule applies to all residential mortgage loans, providing a mandatory grace period before foreclosure filing.

This requirement is part of the Dodd-Frank Act and is enforced under Regulation X.

The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) requires all mortgage loan originators (MLOs) to obtain a unique identifier through the Nationwide Multistate Licensing System (NMLS) before engaging in the business of residential mortgage loan origination. This identifier is used to track MLOs across state lines and ensure accountability and transparency in the mortgage industry.

A compliance plan (B) or other qualifications like a high school diploma (C) or counseling certificate (D) are not specific SAFE Act requirements for engaging in mortgage origination.

Lenders may consider whether alimony, child support, or separate maintenance payments are likely to be consistently made, as this affects the borrower's ability to repay. Consideration of family status, phone listings, or age (except as required for legal capacity) is prohibited by the Equal Credit Opportunity Act (ECOA).

“A creditor must consider alimony, child support, or separate maintenance income to the extent that it is likely to be consistently received.”

— 12 CFR § 1002.6(b)(5), Regulation B (ECOA)

The Home Ownership and Equity Protection Act (HOEPA) applies to certain types of high-cost loans, particularly refinance and home equity loans, that meet specific APR and fee thresholds. HOEPA was enacted to protect consumers from predatory lending practices in loans that carry excessive fees, high interest rates, or abusive terms.

HOEPA mainly covers:

Refinance loans

Home equity loans

Closed-end home equity loans

Certain purchase-money mortgages under specific conditions

Loans like construction loans (B), reverse mortgages (C), and USDA Rural Development loans (D) are generally excluded from HOEPA coverage.

Under TRID/Regulation Z, if a borrower requests a change in loan product, this is considered a changed circumstance, and a new Loan Estimate must be provided reflecting the revised terms within three business days.

“A revised Loan Estimate must be provided if a changed circumstance affects the consumer’s eligibility for a specific loan product or terms.”

— 12 CFR § 1026.19(e)(3)(iv)