MLO Practice Test Welcome to your MLO Practice Test 1. MLO: Federal Mortgage Related Laws Under the Equal Credit Opportunity Act 'ECOA', which action is considered illegal for a mortgage loan officer to take? A. Asking about a borrower's employment history B. Requesting a credit report from a prospective borrower C. Refusing to consider public assistance income as a source of income D. Inquiring about a borrower's current address None 2. MLO: Federal Mortgage Related Laws Which law requires lenders to disclose the Annual Percentage Rate (APR) to borrowers for mortgage loans? A. Fair Credit Reporting Act 'FCRA' B. Real Estate Settlement Procedures Act 'RESPA' C. Truth in Lending Act 'TILA' D. Home Mortgage Disclosure Act 'HMDA' None 3. MLO: Federal Mortgage Related Laws Under the Home Mortgage Disclosure Act 'HMDA', which of the following information must be reported by lenders? A. The borrower's name and social security number B. The racial demographics and income level of loan applicants C. The number of bedrooms in the mortgaged property D. The interest rate of the Federal Reserve None 4. MLO: Federal Mortgage Related Laws Which regulation prohibits kickbacks and unearned fees in the mortgage industry? A. Regulation Z B. Regulation X C. The Dodd-Frank Wall Street Reform and Consumer Protection Act D. The Real Estate Settlement Procedures Act 'RESPA' None 5. MLO: Federal Mortgage Related Laws The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires mortgage loan originators to: A. Disclose their NMLS (Nationwide Multistate Licensing System & Registry) ID number to consumers B. Offer the lowest possible interest rate to first-time homebuyers C. Provide a Good Faith Estimate (GFE) within three days of loan application D. Report all transactions to the Consumer Financial Protection Bureau 'CFPB' monthly None 6. MLO: Federal Mortgage Related Laws Which act expanded the enforcement of anti-predatory lending laws and established minimum standards for mortgages? A. The Fair Housing Act B. The Home Ownership and Equity Protection Act 'HOEPA' C. The Dodd-Frank Wall Street Reform and Consumer Protection Act D. The Equal Credit Opportunity Act 'ECOA' None 7. MLO: Federal Mortgage Related Laws Under the Fair Credit Reporting Act 'FCRA', a consumer has the right to: A. Obtain a free credit report annually from each of the three major credit bureaus B. Request a loan without providing any credit history C. Automatically remove negative information after two years D. Receive compensation for any credit denial None 8. MLO: Federal Mortgage Related Laws What does the Loan Estimate form, required by the TILA-RESPA Integrated Disclosure 'TRID' rule, provide to borrowers? A. A final accounting of a borrower's loan costs B. An initial detailed accounting of estimated loan costs C. The borrower's credit score and explanation of its impact on loan terms D. A binding agreement of the mortgage rate lock None 9. MLO: Federal Mortgage Related Laws The ability-to-repay (ATR) rules established by the Dodd-Frank Act require lenders to make a reasonable, good faith determination of a borrower's ability to repay a mortgage based on factors including: A. The borrower's social media profiles B. The borrower's current employment status and income C. The neighborhood's crime rate D. The property's color scheme None 10. MLO: Federal Mortgage Related Laws The "Know Before You Owe" initiative is primarily associated with: A. Simplifying loan disclosure forms for students B. Improving transparency in the payday lending industry C. Enhancing consumer understanding of mortgage terms and costs D. Reducing fees associated with checking accounts None 11. MLO: Federal Mortgage Related Laws Under the Real Estate Settlement Procedures Act 'RESPA', which practice is prohibited regarding the transfer of servicing rights for a loan? A. Notifying the borrower 15 days before the transfer occurs B. Charging a fee for the transfer of servicing C. Transferring servicing rights without the borrower's consent D. Providing a written notice to the borrower after the transfer has occurred None 12. MLO: Federal Mortgage Related Laws The Maximum Finance Charge Disclosure is required by: A. The Equal Credit Opportunity Act 'ECOA' B. The Fair Credit Reporting Act 'FCRA' C. The Truth in Lending Act 'TILA' D. The Home Mortgage Disclosure Act 'HMDA' None 13. MLO: Federal Mortgage Related Laws Which act requires financial institutions to explain their information-sharing practices to their customers and to safeguard sensitive data? A. The Gramm-Leach-Bliley Act 'GLBA' B. The Fair and Accurate Credit Transactions Act 'FACTA' C. The Electronic Fund Transfer Act 'EFTA' D. The Credit CARD (Card Accountability Responsibility and Disclosure) Act None 14. MLO: Federal Mortgage Related Laws The Mortgage Servicing Rules under the Real Estate Settlement Procedures Act 'RESPA' require servicers to provide a billing statement for each billing cycle. Which of the following is NOT a required piece of information on the billing statement? A. The amount of the next payment B. The due date of the next payment C. The interest rate swap agreements associated with the loan D. The transaction history for the billing period None 15. MLO: Federal Mortgage Related Laws Under which circumstances can a lender require a borrower to purchase flood insurance? A. If the property is located in a FEMA-designated flood hazard area B. If the property has more than two late payments in a year C. If the loan amount exceeds the conforming loan limits D. If the property is located in a state with high rainfall None 16. MLO: Federal Mortgage Related Laws What does Regulation B, implementing the Equal Credit Opportunity Act 'ECOA', require lenders to do when an applicant's credit application is denied? A. Offer a lower loan amount as an alternative B. Provide the applicant with a Notice of Adverse Action C. Automatically enroll the applicant in credit counseling D. Share the applicant's information with other lenders None 17. MLO: Federal Mortgage Related Laws The Adjustable-Rate Mortgage (ARM) Disclosure is specifically required by which legislation? A. The Homeowners Protection Act 'HPA' B. The Truth in Lending Act 'TILA' C. The Real Estate Settlement Procedures Act 'RESPA' D. The Dodd-Frank Wall Street Reform and Consumer Protection Act None 18. MLO: Federal Mortgage Related Laws Which federal law specifically targets predatory lending practices by setting high-cost loan thresholds and requiring additional disclosures for high-cost mortgages? A. The Home Ownership and Equity Protection Act 'HOEPA' B. The Fair Housing Act C. The Home Mortgage Disclosure Act 'HMDA' D. The Community Reinvestment Act 'CRA' None 19. MLO: Federal Mortgage Related Laws Under the Home Affordable Modification Program (HAMP), which is NOT a criterion for eligibility? A. The mortgage being in default or at imminent risk of default B. The property being the borrower's primary residence C. The mortgage originated before January 1, 2009 D. The borrower's credit score being above 680 None 20. MLO: Federal Mortgage Related Laws What provision does the Fair Housing Act 'FHA' include to prevent discrimination in housing-related activities? A. Prohibiting discrimination based on the borrower's membership in online communities B. Mandating equal housing opportunities regardless of race, color, national origin, religion, sex, familial status, or disability C. Requiring all real estate agents to complete annual anti-discrimination training D. Ensuring all borrowers receive the same interest rate offers regardless of loan amount None 21. MLO: Federal Mortgage Related Laws Under the Dodd-Frank Act, which entity is primarily responsible for enforcing compliance with consumer financial protection laws? A. Federal Reserve System B. Department of Housing and Urban Development 'HUD' C. Consumer Financial Protection Bureau 'CFPB' D. Federal Deposit Insurance Corporation 'FDIC' None 22. MLO: Federal Mortgage Related Laws Which law introduced Loan Originator Compensation rules to prevent steering and conflicts of interest in the mortgage industry? A. The SAFE Mortgage Licensing Act B. The Truth in Lending Act 'TILA' C. The Dodd-Frank Wall Street Reform and Consumer Protection Act D. The Equal Credit Opportunity Act 'ECOA' None 23. MLO: Federal Mortgage Related Laws What does the requirement for an appraisal independence safeguard under the Truth in Lending Act 'TILA' aim to prevent? A. Borrowers from choosing their own appraiser B. Undue influence on the appraiser by any party with an interest in the transaction C. Appraisers from accessing property tax records D. Lenders from sharing appraisal reports with borrowers None 24. MLO: Uniform State Content Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which of the following is a requirement for state compliance? A. Implementing a state-specific examination for all MLOs B. Establishing a minimum loan amount for licensure applicability C. Requiring all MLOs to pass a national exam with a uniform state component D. Mandating a physical office presence within the state for all licensed MLOs None 25. MLO: Uniform State Content Which of the following entities is responsible for overseeing the compliance of mortgage lending institutions with state and federal laws regarding consumer protection and safety and soundness? A. The Federal Housing Administration 'FHA' B. The Consumer Financial Protection Bureau 'CFPB' C. The Federal Reserve System D. The Office of the Comptroller of the Currency 'OCC' None 26. MLO: Uniform State Content When does a Mortgage Loan Officer (MLO) need to obtain a unique identifier through the Nationwide Multistate Licensing System and Registry (NMLS)? A. Before completing pre-licensing education B. After closing their first loan C. Before engaging in the business of loan origination D. After passing the state licensing exam None 27. MLO: Uniform State Content What is the maximum allowable finance charge for high-cost mortgages under the Home Ownership and Equity Protection Act 'HOEPA'? A. 5% of the total loan amount B. 8% of the total loan amount C. 10% of the total loan amount D. There is no specific cap, but it must be reasonable and customary None 28. MLO: Uniform State Content In the context of the Uniform State Test (UST) component of the MLO licensing exam, what primary area does the UST assess? A. The MLO's understanding of general mortgage knowledge B. Knowledge specific to mortgage laws in the applicant's home state C. The applicant's ethical considerations in mortgage lending D. Understanding of federal mortgage-related laws and the basics of state law and regulation None 29. MLO: Uniform State Content What action must a Mortgage Loan Originator take if there is a significant change to their criminal history after initial registration? A. Notify the NMLS within 30 days B. Only disclose at the time of license renewal C. Report directly to the state regulatory authority within 10 days D. No action required if the MLO believes it does not affect their licensure None 30. MLO: Uniform State Content A Mortgage Loan Originator is required to renew their license through the NMLS annually by what date? A. 31-Dec B. 30-Nov C. 31-Jan D. 31-Oct None 31. MLO: Uniform State Content Under the Equal Credit Opportunity Act 'ECOA', a lender must notify an applicant of action taken on their mortgage application within how many days after receiving the completed application? A. 30 days B. 60 days C. 90 days D. 120 days None 32. MLO: Uniform State Content Which federal act requires Mortgage Loan Originators to obtain and maintain an NMLS unique identifier? A. The Truth in Lending Act 'TILA' B. The Real Estate Settlement Procedures Act 'RESPA' C. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) D. The Fair Credit Reporting Act 'FCRA' None 33. MLO: Uniform State Content Which regulation implements the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) at the federal level? A. Regulation Z B. Regulation X C. Regulation G D. Regulation N None 34. MLO: Uniform State Content What is the maximum allowable finance charge for high-cost mortgages under the Home Ownership and Equity Protection Act 'HOEPA'? A. 5% of the total loan amount B. 8% of the total loan amount C. 10% of the total loan amount D. There is no specific cap, but it must be reasonable and customary None 35. MLO: General Mortgage Knowledge What is the impact of a higher loan-to-value (LTV) ratio on mortgage insurance? A. Decreases the need for mortgage insurance B. Increases the cost of mortgage insurance C. Has no effect on mortgage insurance D. Eliminates the requirement for mortgage insurance None 36. MLO: General Mortgage Knowledge In the context of mortgages, what does PITI stand for? A. Principal, Interest, Tax, Insurance B. Payment, Income, Terms, Interest C. Principal, Income, Tax, Insurance D. Payment, Interest, Terms, Insurance None 37. MLO: General Mortgage Knowledge Which document legally binds the borrower to repay the loan according to the terms of the mortgage? A. Promissory Note B. Mortgage Deed C. Truth in Lending Disclosure D. Closing Disclosure None 38. MLO: General Mortgage Knowledge Which of the following best describes a 'jumbo loan'? A. A loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency B. A government-insured loan C. A loan with an adjustable interest rate D. A loan that is smaller than the typical mortgage None 39. MLO: General Mortgage Knowledge The Annual Percentage Rate (APR) on a mortgage is designed to reflect: A. The base interest rate of the loan B. The true cost of borrowing, including interest and other charges C. The cost of mortgage insurance only D. The monthly principal and interest payment None 40. MLO: General Mortgage Knowledge A 'deed of trust' is used in place of a mortgage in some states. What key difference does this document introduce? A. It eliminates the need for a promissory note B. It allows the borrower to act as the trustee C. It involves a third-party trustee who holds the legal title until the loan is paid off D. It reduces the amount of closing costs None 41. MLO: General Mortgage Knowledge What is the significance of the loan estimate in the mortgage process? A. It finalizes the interest rate of the loan. B. It provides the borrower with detailed costs of the loan. C. It is the final agreement between the lender and the borrower. D. It serves as the appraisal document for the property. None 42. MLO: General Mortgage Knowledge In mortgage underwriting, what is 'front-end ratio' primarily concerned with? A. The borrower's total monthly debt payments divided by monthly income. B. The portion of monthly income spent on housing expenses. C. The ratio of the loan amount to the appraised property value. D. The comparison of the borrower's income to the median income in the area. None 43. MLO: General Mortgage Knowledge Which of the following best defines a 'balloon payment' in the context of a mortgage? A. An extra payment made to reduce the principal balance. B. A large, lump-sum payment due at the end of a loan term. C. A payment that fluctuates based on interest rate changes. D. A refund issued to the borrower for overpayment. None 44. MLO: General Mortgage Knowledge What does 'negative amortization' mean in the context of a mortgage loan? A. The loan balance decreases over time. B. The monthly payments are less than the interest accruing, causing the loan balance to increase. C. The interest rate on the loan decreases over time. D. The loan is paid off more quickly than scheduled. None 45. MLO: General Mortgage Knowledge The Right of Rescission primarily applies to which of the following types of mortgage transactions? A. Purchase of a primary residence B. Refinance of a primary residence by a different lender C. Refinance of a primary residence by the same lender with no cash-out D. Home equity line of credit 'HELOC' on a primary residence None 46. MLO: General Mortgage Knowledge What role does the Federal Reserve play in the mortgage industry? A. It directly sets mortgage interest rates. B. It insures mortgage loans against default. C. It influences mortgage rates through monetary policy. D. It provides loans to mortgage borrowers. None 47. MLO: General Mortgage Knowledge Points' paid at closing to reduce the interest rate on a mortgage are known as: A. Origination points. B. Discount points. C. Broker points. D. Settlement points. None 48. MLO: General Mortgage Knowledge What factor is MOST critical when a lender evaluates the 'capacity' component of the 3 Cs of credit in mortgage underwriting? A. The borrower's credit score. B. The borrower's employment history. C. The borrower's current income level. D. The borrower's debt-to-income (DTI) ratio. None 49. MLO: General Mortgage Knowledge A mortgage loan that does not comply with the standards of Fannie Mae or Freddie Mac is known as: A. A prime mortgage. B. A conforming mortgage. C. A non-conforming mortgage. D. A government-insured mortgage. None 50. MLO: General Mortgage Knowledge In a mortgage application, what does the term 'underwriting' refer to? A. The process of evaluating a property's value. B. The process of assessing the risk of lending to a borrower. C. The act of finalizing the loan terms with the borrower. D. The procedure for recording the mortgage deed. None 51. MLO: General Mortgage Knowledge The Home Mortgage Disclosure Act 'HMDA' requires lenders to report: A. The racial demographics of all applicants. B. The outcome of all mortgage applications. C. Only the interest rates offered to borrowers. D. The credit scores of all mortgage applicants. None 52. MLO: General Mortgage Knowledge The 'adjustment period' in an Adjustable-Rate Mortgage (ARM) refers to: A. The time between changes in the interest rate or monthly payment. B. The initial period when the interest rate remains fixed. C. The duration it takes to pay off the mortgage. D. The time allowed for loan modification negotiations. None 53. MLO: General Mortgage Knowledge When a borrower is said to be 'upside down' on their mortgage, it means that: A. They have paid off more than 50% of the loan balance. B. The mortgage interest rate has decreased since origination. C. The amount owed on the mortgage is less than the home's value. D. The amount owed on the mortgage is greater than the home's value. None 54. MLO: General Mortgage Knowledge A 'prepayment penalty' clause in a mortgage agreement serves to: A. Reward borrowers for early repayment of the loan. B. Penalize borrowers for paying off the loan early within a certain period. C. Adjust the loan's interest rate for early repayment. D. Decrease the loan's principal balance more rapidly. None 55. MLO: Mortgage Loan Organization Activities A borrower has a monthly income of $5,000 and monthly debt obligations of $2,000. If the lender's front-end ratio limit is 28% and the back-end ratio limit is 36%, what is the maximum monthly mortgage payment the borrower qualifies for? A. $1,400 B. $1,800 C. $1,000 D. $800 None 56. MLO: Mortgage Loan Organization Activities When assessing a loan application, a Mortgage Loan Officer notices that the property is in a flood zone. What action is required next to proceed with the application process? A. Require the borrower to purchase earthquake insurance. B. Recommend the borrower to apply for a different property. C. Require the borrower to purchase flood insurance. D. Increase the interest rate on the loan to mitigate risk. None 57. MLO: Mortgage Loan Organization Activities Which legislation requires lenders to disclose to borrowers the total cost of borrowing, including interest rates and finance charges? A. Equal Credit Opportunity Act 'ECOA' B. Truth in Lending Act 'TILA' C. Real Estate Settlement Procedures Act 'RESPA' D. Fair Credit Reporting Act 'FCRA' None 58. MLO: Mortgage Loan Organization Activities If a borrower has a fixed-rate mortgage and the Federal Reserve raises interest rates, what immediate effect does this have on the borrower's monthly mortgage payment? A. The monthly payment increases. B. The monthly payment decreases. C. There is no immediate effect on the monthly payment. D. The loan term shortens. None 59. MLO: Mortgage Loan Organization Activities A Mortgage Loan Officer is calculating the Loan-to-Value (LTV) ratio for a property with an appraised value of $250,000 and a loan amount of $200,000. What is the LTV ratio? A. 80% B. 75% C. 85% D. 90% None 60. MLO: Mortgage Loan Organization Activities Which of the following best describes the primary purpose of an escrow account in a mortgage loan? A. To reduce the loan's interest rate B. To accumulate funds for future loan payments C. To collect and pay property taxes and insurance premiums on behalf of the borrower D. To cover closing costs at the end of the loan term None 61. MLO: Mortgage Loan Organization Activities When a borrower wants to refinance their mortgage to take advantage of lower interest rates, which of the following fees might they encounter? A. Early redemption penalty B. Pre-application fee C. Fixed-rate lock fee D. Mortgage transfer fee None 62. MLO: Mortgage Loan Organization Activities What is the primary reason for a Mortgage Loan Officer to consider a borrower's Debt-to-Income (DTI) ratio during the loan approval process? A. To ensure the borrower has a good credit score B. To determine the borrower's eligibility for government subsidies C. To assess the borrower's ability to repay the mortgage loan D. To calculate the interest rate on the loan None 63. MLO: Mortgage Loan Organization Activities A borrower is applying for a mortgage loan on a second home. Which of the following factors could lead to stricter loan approval criteria compared to a primary residence loan? A. Higher Loan-to-Value (LTV) ratio requirements B. Lower interest rates C. More lenient credit score requirements D. Decreased scrutiny of employment history None 64. MLO: Mortgage Loan Organization Activities In the context of mortgage loan processing, what is the significance of receiving a 'Clear to Close' 'CTC' status? A. The borrower's credit score has improved. B. The property has passed inspection with no issues. C. All loan conditions have been met, and the loan is ready to close. D. The interest rate on the loan has been locked in. None 65. MLO: Mortgage Loan Organization Activities What impact does a higher interest rate have on the affordability of a mortgage loan for the borrower? A. Increases the total interest paid over the life of the loan, reducing affordability B. Decreases the monthly payment, increasing affordability C. Reduces the total cost of the loan, improving affordability D. Has no impact on the affordability of the loan None 66. MLO: Mortgage Loan Organization Activities For an adjustable-rate mortgage (ARM), what does the initial rate period signify? A. The period during which the interest rate can fluctuate daily B. The length of time before the loan can be refinanced C. The duration for which the initial interest rate is fixed D. The timeframe in which the borrower can request a fixed rate None 67. MLO: Mortgage Loan Organization Activities Which document must a Mortgage Loan Officer provide to a borrower within three business days of loan application, detailing the estimated costs associated with the mortgage? A. Closing Disclosure B. Loan Estimate C. Mortgage Note D. Final Settlement Statement None 68. MLO: Mortgage Loan Organization Activities A borrower is applying for a jumbo loan. What does this imply about the loan amount in comparison to conforming loan limits? A. It is equal to the conforming loan limit. B. It is below the conforming loan limit. C. It is above the conforming loan limit. D. It is half the conforming loan limit. None 69. MLO: Mortgage Loan Organization Activities When a Mortgage Loan Officer is evaluating a loan application, what does the term "points" refer to? A. The number of credit inquiries on the borrower's credit report B. Percentage points added to the interest rate for calculating penalties C. Fees paid by the borrower at closing to reduce the interest rate D. Penalties charged for late payments None 70. MLO: Mortgage Loan Organization Activities In the context of mortgage underwriting, what is a "PITI" payment? A. Principal, Interest, Taxes, Insurance B. Principal, Interest, Title, Inspection C. Prepayment, Interest, Taxes, Insurance D. Penalty, Interest, Title, Insurance None 71. MLO: Mortgage Loan Organization Activities What regulatory requirement must a Mortgage Loan Officer adhere to when advertising loan products to ensure transparency and avoid misleading consumers? A. The Dodd-Frank Wall Street Reform and Consumer Protection Act B. The Truth in Lending Act 'TILA' C. The Real Estate Settlement Procedures Act 'RESPA' D. The Fair Housing Act None 72. MLO: Ethics A Mortgage Loan Officer (MLO) discovers that a loan applicant has not disclosed a significant debt on their application. What should the MLO do? A. Proceed with the application as it is not the MLO's responsibility to investigate. B. Report the discrepancy to their supervisor for further review. C. Advise the applicant to omit the debt to increase the chances of loan approval. D. Offer the applicant a higher interest rate to compensate for the risk. None 73. MLO: Ethics If an MLO receives a gift from a real estate agent for referring clients, what is the most ethical action to take? A. Accept the gift as long as it's not cash. B. Decline the gift and report the offer to their supervisor. C. Accept the gift and disclose it to the clients referred. D. Negotiate for a higher value gift for future referrals. None 74. MLO: Ethics An MLO realizes that they accidentally provided misleading information about loan terms to a borrower. What is the next step? A. Correct the mistake and inform the borrower of the accurate terms. B. Ignore the mistake as correcting it might lose the client. C. Wait to see if the borrower notices the discrepancy. D. Advise the borrower to read the fine print carefully. None 75. MLO: Ethics When is it appropriate for an MLO to refuse to serve a client? A. When the client has a poor credit history. B. When serving the client would violate fair lending laws. C. If the client belongs to a certain race or ethnicity. D. If the client's loan amount is not high enough to be profitable. None 76. MLO: Ethics What should an MLO do if they suspect a co-worker is involved in fraudulent activities? A. Confront the co-worker directly and demand an explanation. B. Ignore it as it is not their responsibility. C. Report the suspicion to their supervisor or compliance department. D. Advise the co-worker on how to avoid getting caught in the future. None 77. MLO: Ethics An MLO is offered confidential information about a competitor's client list for a fee. What is the ethical response? A. Decline the offer and report it to their supervisor. B. Accept the information but do not pay the fee. C. Pay the fee and use the information discreetly. D. Negotiate the fee down before accepting the information. None 78. MLO: Ethics When processing a loan application, an MLO notices inconsistencies that suggest the applicant may be inflating their income. What is the most ethical action? A. Approve the loan to avoid confrontation with the applicant. B. Reject the loan application without further investigation. C. Investigate the inconsistencies and request clarification from the applicant. D. Suggest the applicant apply for a smaller loan amount. None 79. MLO: Ethics A loan applicant discloses they intend to use the loan for illegal activities. What should the MLO do? A. Proceed with the application as the MLO's role is not to enforce the law. B. Reject the application and report the conversation to their supervisor and possibly to legal authorities. C. Advise the applicant to not disclose this information in the future. D. Ignore the applicant's intentions as long as the loan meets underwriting criteria. None 80. MLO: Ethics If an MLO becomes aware that a client has been misled about loan terms by another officer within the same company, what is the ethical course of action? A. Correct the misinformation and inform the client about the accurate loan terms. B. Leave the situation as is to avoid internal conflict. C. Encourage the client to close the deal quickly before noticing the discrepancy. D. Blame the previous officer and promise better service to retain the client. None 81. MLO: Ethics An MLO receives a lucrative job offer from a competitor but is aware of confidential information about their current employer's clients. What is the ethical action regarding this information? A. Share the information with the new employer to secure the job. B. Keep the information confidential and not disclose it to the new employer. C. Use the information as leverage for a higher salary with the new employer. D. Delete the information to avoid ethical dilemmas. None 82. MLO: Ethics What should an MLO do if they find proprietary software from a competitor on their company's network? A. Use the software to gain a competitive advantage. B. Ignore the software as long as it benefits their company. C. Report the existence of the software to their supervisor. D. Copy the software for personal use before reporting it. None 83. MLO: Ethics An MLO is reviewing a loan application from a close friend. The friend does not qualify for the preferred loan terms and asks the MLO to alter the application. What should the MLO do? A. Alter the application as requested to help the friend. B. Refuse to alter the application and explain the ethical obligations involved. C. Transfer the application to another MLO to avoid a conflict of interest. D. Approve the loan under the preferred terms without alterations. None 84. MLO: Ethics An MLO discovers that a colleague has accepted a bribe to approve a loan that does not meet the institution's lending criteria. What is the most ethical course of action? A. Confront the colleague and demand they return the bribe. B. Ignore the situation since the loan has already been approved. C. Report the colleague's actions to the appropriate internal compliance or ethics department. D. Advise the colleague on how to avoid detection in the future. None 85. MLO: Ethics A borrower asks an MLO to omit their spouse's poor credit history to secure a better loan rate. What should the MLO do? A. Omit the spouse's credit history as requested to ensure customer satisfaction. B. Refuse to alter or omit any information and explain the importance of transparency. C. Suggest applying for the loan under a single name to bypass the issue. D. Inform the borrower that a higher rate could be negotiated instead. None 86. MLO: Ethics An MLO finds a loophole in the lending regulations that could potentially be exploited for profit. What is the most ethical action? A. Exploit the loophole for as long as it remains open. B. Report the loophole to regulatory authorities to help close it. C. Share the loophole with colleagues to maximize its benefit. D. Document the loophole but take no further action. None 87. MLO: Ethics During an audit, an MLO is asked to provide misleading information to the auditors. What is the ethical response? A. Provide the information requested to protect the company's interests. B. Refuse to provide misleading information and report the request to a higher authority. C. Suggest ways to present the information that could be technically true but misleading. D. Avoid direct answers to the auditors' questions to avoid lying. None 88. MLO: Ethics If an MLO is aware of another MLO engaging in discriminatory lending practices, what should they do? A. Ignore it as addressing it could create workplace tension. B. Report the behavior to ensure adherence to fair lending laws. C. Advise the offending MLO on how to hide their discriminatory practices. D. Confront the MLO privately and suggest they stop such practices. None 89. MLO: Ethics An MLO is offered insider information about a future regulatory change that will affect loan approvals. What is the most ethical action? A. Use the information to gain a competitive edge. B. Share the information with close clients to help them secure loans under current regulations. C. Report the offer of insider information to their supervisor or compliance department. D. Keep the information to themselves but use it to guide their loan approval decisions. None 90. MLO: Ethics An MLO is asked by their employer to endorse a particular loan product to clients, despite it not being in the best interest of most clients. What is the ethical action? A. Endorse the product to maintain job security and meet company goals. B. Refuse to endorse the product and explain the ethical dilemma to their employer. C. Endorse the product but subtly suggest alternatives to clients. D. Quit the job immediately to avoid ethical conflicts. None 91. MLO: Ethics During a loan application review, an MLO notices a small error that could lead to a lower interest rate for the borrower. What should the MLO do? A. Correct the error and notify the borrower of the change. B. Leave the error uncorrected to avoid additional paperwork. C. Correct the error but do not inform the borrower to avoid confusion. D. Use the error as leverage to encourage the borrower to take additional services. None 92. MLO: Ethics An MLO receives confidential information from a client about an impending bankruptcy. What should the MLO do with this information? A. Use the information to decline any loan applications. B. Keep the information confidential and proceed with the loan application based on current financial data. C. Advise the client on how to hide the bankruptcy from the loan application. D. Share the information with colleagues to prevent them from approving loans for the client. None 93. MLO: Ethics An MLO discovers that a client has been victim of identity theft and is applying for a mortgage with compromised financial information. What is the most ethical course of action? A. Proceed with the application as verifying identity is not the MLO's responsibility. B. Report the identity theft to the proper authorities and assist the client in taking protective measures. C. Advise the client to apply for the loan before the theft is discovered. D. Deny the loan application based on the risk of fraud. None 94. MLO: Ethics If an MLO learns that a loan product has been systematically denying applicants from a particular demographic, what is the ethical response? A. Ignore the pattern since addressing it could jeopardize their job. B. Investigate and report the pattern to ensure compliance with anti-discrimination laws. C. Justify the denials as coincidental and not based on discriminatory practices. D. Advise applicants from that demographic to seek loans elsewhere. None 95. MLO: Ethics An MLO is offered a significant bonus to increase the number of approved loans, potentially compromising lending standards. What is the ethical action? A. Accept the bonus and strive to approve more loans, regardless of standards. B. Decline the bonus and maintain adherence to established lending criteria. C. Accept the bonus but selectively approve loans that marginally meet standards. D. Negotiate the terms of the bonus to align better with ethical lending practices. None 96. MLO: Mortgage Loan Organization Activities Which clause in a mortgage allows the lender to demand the full loan balance if the borrower sells the property? A. Acceleration clause B. Alienation clause C. Prepayment penalty clause D. Escalation clause None 97. MLO: Mortgage Loan Organization Activities For a loan application, what is the significance of the debt service coverage ratio (DSCR) in commercial mortgage underwriting? A. It measures the borrower's personal credit score. B. It assesses the property's value compared to its purchase price. C. It evaluates the commercial property's ability to generate enough income to cover the mortgage payments. D. It calculates the percentage of down payment required for loan approval. None 98. MLO: Mortgage Loan Organization Activities How does a balloon mortgage differ from a traditional 30-year fixed-rate mortgage? A. It offers a lower interest rate throughout the loan term. B. It requires full repayment of the loan balance at a specified time before the 30-year term ends. C. It allows borrowers to only pay interest for the first 10 years. D. It automatically converts to an adjustable-rate mortgage after 5 years. None 99. MLO: Mortgage Loan Organization Activities What regulatory requirement must a Mortgage Loan Officer adhere to when advertising loan products to ensure transparency and avoid misleading consumers? A. The Dodd-Frank Wall Street Reform and Consumer Protection Act B. The Truth in Lending Act 'TILA' C. The Real Estate Settlement Procedures Act 'RESPA' D. The Fair Housing Act None 100. MLO: Federal Mortgage Related Laws What does the "Right to Rescind" under the Truth in Lending Act 'TILA' allow a borrower to do? A. Dispute inaccuracies on their credit report B. Cancel a loan transaction on a primary residence within three business days C. Automatically qualify for a loan modification D. Waive escrow requirements for a mortgage loan None 1 out of 100 Time is Up! Time's up
