Becoming an MLO - Chapter 1

Question 1

What established a federal charter for banks that permitted them to make real estate loans, which established a framework for government involvement in mortgage lending?

Answer 1

The Federal Reserve System

Question 2

What year was the Federal Reserve System created?

Answer 2

1913

Question 3

What year was the Dodd-Frank Wall Street Reform Act passed?

Answer 3

2010

Question 4

What is a mortgage loan originator?

Answer 4

An individual who, for compensation or gain, or in expectation of compensation or gain takes a mortgage loan application or offers or negotiates terms of a residential mortgage loan.

Question 5

Name a few real estate brokerage activities

Answer 5

Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property

bringing together parties interest in sale, purchase, lease, rental, or exchange of real property

negotiating on behalf of any party

engaging in any activity for which a person engaged in the activity is required to be licensed

offering to engage in any activity or act described above.

Question 6

What is a registered MLO?

Answer 6

Someone who is registered with the NMLS and maintains a unique identifier.

Question 7

True/False - NMLS does not approve a license application

Answer 7

TRUE - NMLS is merely a database. it’s job is to assign a unique identifier

Question 8

True/False - processors and underwriters are required to be licensed.

Answer 8

FALSE

Question 9

Loan processors and underwriters who are not licensed are prohibited from doing what?

Answer 9

advertising or presenting to the public that they are MLOS or negotiating rates/terms.

Question 10

What is a mortgage broker?

Answer 10

a company or firm that brings borrowers and lenders together for loan origination.

Question 11

What is a mortgage lender?

Answer 11

the entity that provides funds for a mortgage.

Question 12

What is a mortgage servicer?

Answer 12

the 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 13

Name some big players on the secondary market

Answer 13

Fannie, Freddie, Ginnie

Question 14

What is the SAFE Act?

Answer 14

Secure and Fair Enforcement Act for Mortgage licensing Act of 2008

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

Question 15

How many hours of pre-licensing education must you take?

Answer 15

20 hours

3 hours of federal law
3 hours of ethics
2 hours of training related to lending standards for non-trad mortgage product market place
12 hours of elected

Question 16

To pass the National Test with UST you must receive a score of what?

Answer 16

75%

Question 17

If you fail the MLO exam 3 times, how long must you wait to take it again

Answer 17

6 months

Question 18

True/False - if an MLO leaves the business for more than 2 years, they must retake the exam.

Answer 18

False - if an MLO leaves the business for more than FIVE years they must retake the exam. This does not apply to MLOs who switch from being a licensed MLO to a registered MLO.

Question 19

Name a few factors that go into the decision on whether or not you will get your MLO license.

Answer 19

No license Revocation

no felony conviction in the last 7 years or EVER if the crime involved an act of fraud, dishonesty, breach of trust, or money laundering.

must demonstrate financial responsibility

completed pre-licensing requirements

passes testing

must satisfy net worth, surety bond, or state fund requirement.

Question 20

What are some things that are a marker of not being financially responsible?

Answer 20

non-medical judgements

tax liens

Foreclosure within 3 years

pattern of serious delinquencies within 3 years

some states require child support to be up to date.

Question 21

How often must an MLO renew his/her license?

Answer 21

Every year. License expires on Dec 31st.

Question 22

How many hours of continuing education must an MLO complete?

Answer 22

8 hours

3 hours of federal law
2 hours of ethics
2 hours of training related to the lending standards for nontrad mortgage products
1 hour of electives.

Question 23

True/False - continuing education only counts in the year when it was taken

Answer 23

True

Question 24

True/False - an MLO cannot take the same continuing education course in successive years.

Answer 24

True

Question 25

What is the Model Law?

Answer 25

Most states use the Model law to implement their SAFE Acts. The model law has a list of what should AT LEAST be considered prohibited.

Question 26

prohibited practices in the Model law are?

Answer 26

defraud or mislead unfair or deceptive practices obtaining property by fraud or misrepresentation earning a fee or commission through best efforts soliciting based on financing terms that are not actually available not holding a valid license Failing to make disclosures failing to comply with state/federal law making false or deceptive statements bait and switch false statements making a payment, threat or promise to any person that influences the application process collecting/charging/attempting to collect a prohibited fee mismanagement of monies requiring excessive property insurance

Question 27

What is the difference between an examination and investigation?

Answer 27

Examination is generally a yearly reviewed of files and business practices to ensure they are compliant. An Investigation usually arises from a complaint or suspicion that an entity or individual is breaking the law.

Question 28

How long must licensed lenders retain records related to the loans originated?

Answer 28

Three years

Question 29

How long must the closing disclosure be retained after consummation to be compliant with TRID?

Answer 29

Five years

Question 30

Upon the request of documentation needed for an examination, the licensee must provide the documents within how many days?

Answer 30

Within the prescribed timeframe, but generally no longer than 30 days.

Question 31

What is the maximum penalty for a violation of the SAFE Act?

Answer 31

$25,000 per violation

Question 32

True/False - The LO originator compensation rule (LO comp) DOES NOT prohibits compensation based on terms/fees of a transaction or a proxy of a term of a transaction

Answer 32

FALSE

Question 33

True/False - LO comp rules permits some bonus and retirement and profit sharing plans to be based on the terms of multiple loan originator transactions.

Answer 33

True Funds can be used for: contributions to tax advantaged retirement plans bonuses if the individual LO originated 10 or fewer mortgage transactions bonuses and other types of non-deferred profit based compensation that do not exceed 10% of the individual loan originator's total compensation.

Question 34

True/False - you can receive compensation based on the single term of a transaction

Answer 34

FALSE you cannot receive compensation based on: a single term the terms of multiple transactions by the same MLO the terms of multiple transaction conducted by multiple MLOS

Question 35

What are some safe harbor LO compensation types?

Answer 35

``` Dollar volume long term performance of the loans hourly rate based on number of actual hours worked loans made to new customers fixed payment for every loan originated % of loans that close quality of loans submitted ```

Question 36

When is Steering a problem?

Answer 36

When an MLO steers a borrower into a loan that could harm the borrower

Question 37

How long must lenders/brokers keep information regarding LO compensation?

Answer 37

Three years

Question 38

Who implemented MLO compensation rules, created the CFPB and the MLO contact of appraisers?

Answer 38

Dodd-Frank

Question 39

Who implemented NMLS, registration of all MLOS and the licensing of MLOS working for non-financial companies?

Answer 39

SAFE Act - Secure and Fair Enforcement

Question 40

Every MLO under the Safe Act must have what?

Answer 40

A unique identifier