The SAFE Mortgage Loan Originator Test, National Component with Uniform State Content, is 120 questions, of which 115 are scored, in 190 minutes, with a passing score of 75 percent. NMLS publishes the content outline: federal mortgage law, general mortgage knowledge, loan origination activities, ethics, and the uniform state content. The questions below are original, written in the shape of the test, and grouped the same way. Work through them without looking, then read the answers. None of them is from the actual test, and a practice set is not a substitute for the 20-hour course.
Federal mortgage law
1. A lender offers a real-estate agent $300 for every buyer the agent sends who closes a loan. Which statement is correct?
A. Lawful if the agent discloses the payment to the buyer. B. Lawful if the payment is called a marketing fee. C. Prohibited by RESPA Section 8 regardless of disclosure or label. D. Lawful if the buyer's loan is not FHA-insured.
Answer: C. Section 8 bars any thing of value for a referral of settlement-service business. Disclosure does not cure it and the label does not matter.
2. Under the TILA-RESPA Integrated Disclosure rule, the Loan Estimate must be delivered or placed in the mail no later than how many business days after the creditor receives an application?
A. One. B. Three. C. Five. D. Seven.
Answer: B. Three business days after receipt of the application, and at least seven business days before consummation.
3. Which six items, once collected, make an "application" under TRID and start the Loan Estimate clock?
A. Name, income, Social Security number, property address, estimated value, and loan amount sought. B. Name, income, credit score, property address, purchase price, and down payment. C. Name, employer, Social Security number, property address, loan amount, and interest rate. D. Name, income, assets, debts, property address, and loan amount.
Answer: A. The six-piece application is the consumer's name, income, Social Security number to obtain a credit report, property address, estimated property value, and the mortgage loan amount sought.
4. The Equal Credit Opportunity Act prohibits discrimination on which of the following bases that the Fair Housing Act does not list?
A. Race. B. Religion. C. Receipt of public assistance income. D. National origin.
Answer: C. ECOA adds age, marital status, and receipt of income from a public assistance program, and the good-faith exercise of rights under the Consumer Credit Protection Act.
5. Under Regulation Z loan originator compensation rules, which of the following may lawfully determine an originator's pay?
A. The interest rate on the loan. B. The loan amount. C. Whether the borrower chose a prepayment penalty. D. The annual percentage rate.
Answer: B. Pay may be a fixed percentage of the loan amount. It may not be based on a term or condition of the loan, such as the rate.
6. A loan originator takes an application by phone. Under the SAFE Act and the state license laws that implement it, the originator's NMLS unique identifier must appear on which documents?
A. Only the closing disclosure. B. The application, the loan documents, and the originator's advertising. C. Only the originator's business card. D. Nothing, since the identifier is for regulators.
Answer: B. The unique identifier goes on loan application forms, solicitations and advertisements, and other documents the state specifies.
7. The Home Mortgage Disclosure Act exists primarily to do what?
A. Set maximum loan fees. B. Require public reporting of mortgage lending data so regulators and the public can see whether lenders serve the housing needs of their communities. C. License loan originators. D. Insure mortgages against default.
Answer: B. HMDA is a reporting statute. The public file is the one the pay explainer on this site reads.
General mortgage knowledge
8. A buyer puts $60,000 down on a $300,000 purchase. What is the loan-to-value ratio?
A. 20 percent. B. 25 percent. C. 80 percent. D. 83 percent.
Answer: C. The loan is $240,000, and $240,000 divided by $300,000 is 80 percent.
9. The back-end debt-to-income ratio compares which two figures?
A. The loan amount and the appraised value. B. The proposed housing expense alone and gross monthly income. C. All recurring monthly debt including the proposed housing expense, and gross monthly income. D. Total closing costs and the loan amount.
Answer: C. The front-end ratio is housing expense over gross income. The back-end ratio adds the other recurring debts to the housing expense before dividing by gross income.
10. Which loan type is backed by a federal guaranty rather than federal insurance?
A. FHA. B. VA. C. Conventional conforming. D. Jumbo.
Answer: B. VA loans carry a partial guaranty from the Department of Veterans Affairs. FHA loans are insured by HUD, and conventional loans are neither.
11. A rate lock protects the borrower from what?
A. An increase in the appraised value. B. A change in the interest rate between the lock and closing, for the lock period. C. Changes to the closing date. D. Changes in property taxes.
Answer: B. A lock holds the rate and points for a stated period. It does not change the appraisal, the closing date or the taxes.
12. Private mortgage insurance on a conventional loan protects whom?
A. The borrower, against job loss. B. The lender, against loss if the borrower defaults. C. The seller, against a failed closing. D. The real-estate agent, against a lost commission.
Answer: B. PMI is paid by the borrower and protects the lender on a loan above 80 percent loan-to-value.
Loan origination activities
13. A borrower tells the originator that a $20,000 deposit came from a gift. What must the file show?
A. Nothing, since gifts are not income. B. A gift letter stating the funds are not a loan, and documentation of the transfer. C. A signed promissory note from the donor. D. The donor's tax return.
Answer: B. Gift funds need a letter stating that no repayment is expected, plus evidence the funds moved from the donor to the borrower or to closing.
14. An originator notices that a borrower's pay stubs show a different employer from the one on the application. What should the originator do?
A. Submit the file and let underwriting sort it out. B. Change the application to match the pay stubs without telling the borrower. C. Ask the borrower, document the explanation, and correct the application with the borrower's knowledge. D. Withdraw the application.
Answer: C. Discrepancies are resolved with the borrower and documented. Changing an application without the borrower's knowledge is a misrepresentation.
15. Which of the following may a loan originator not do when a buyer who is also the originator's real-estate client asks about financing?
A. Explain the loan products the sponsoring company offers. B. Tell the buyer they must use the originator's company to buy the house. C. Disclose in writing that the originator will be paid in both roles. D. Refer the buyer to the state's licensing lookup.
Answer: B. The buyer keeps the right to choose any lender. Requiring the use of a settlement-service provider as a condition of the sale is a RESPA Section 9 problem for title and a steering problem everywhere.
Ethics
16. A borrower's credit score is 20 points short of the program minimum. A colleague suggests adding the borrower's spouse to the application without the spouse's knowledge, since the spouse's score is higher. This is:
A. Acceptable if the spouse is on the title. B. Fraud, because an application cannot be submitted for a person who has not applied. C. Acceptable if the spouse later signs at closing. D. A gray area that underwriting decides.
Answer: B. An applicant must apply. Submitting a person's information without their knowledge is a false statement on a mortgage application.
17. A real-estate agent who is also a licensed originator is paid a real-estate commission by the seller's broker and origination pay by the sponsoring mortgage company on the same purchase, in a state that permits it with disclosure. Which action is required?
A. Keep the two roles separate by not telling the buyer about the mortgage pay. B. Disclose both roles and both forms of compensation to the buyer in writing before acting in the second role, and obtain any consent the state requires. C. Refund the real-estate commission. D. Have the buyer waive the Loan Estimate.
Answer: B. Every state that permits the dual role conditions it on disclosure, and most on consent. No state lets the buyer waive the federal disclosures.
18. Which of these is an example of steering under Regulation Z?
A. Presenting the borrower with loan options from several creditors and letting the borrower choose. B. Directing a borrower to a loan with a higher rate because it pays the originator more. C. Explaining that a shorter term carries a higher payment. D. Declining to quote a product the company does not offer.
Answer: B. Steering a consumer to a transaction because it increases the originator's compensation, when it is not in the consumer's interest, is prohibited.
Uniform state content
19. A state-licensed loan originator moves to a new sponsoring company. Under the uniform state content, what is true of the license?
A. The license transfers automatically on the first day with the new company. B. The originator may not originate until the new sponsorship is recorded and approved in NMLS. C. The old company keeps the license for 30 days. D. A new SAFE test is required.
Answer: B. Sponsorship is a relationship recorded in NMLS. Without an approved sponsor the license is not in a status that permits origination.
20. How many hours of NMLS-approved continuing education must a state-licensed loan originator complete each year, and what must it include?
A. Eight hours, including three hours of federal law, two hours of ethics, two hours of nontraditional mortgage lending, and one elective hour. B. Twenty hours, including three hours of federal law. C. Twelve hours of any approved course. D. Four hours of ethics only.
Answer: A. Eight hours annually, with the three, two, two and one breakdown. Some states add a state-specific hour on top.
21. A licensed originator's state regulator may do which of the following after an examination finds a pattern of unapproved advertising?
A. Nothing, since advertising is federal. B. Suspend or revoke the license, impose a fine, and order the advertising stopped. C. Only send a warning letter. D. Transfer the license to another state.
Answer: B. State regulators hold license discipline authority, including suspension, revocation and civil penalties, under the state's SAFE Act implementation.
22. A loan originator license that has not been renewed by December 31 enters what status on January 1?
A. Approved. B. Approved-inactive. C. Terminated-failed to renew, or the state's equivalent, and the originator may not originate. D. Pending.
Answer: C. An unrenewed license does not permit origination after the renewal deadline. Reinstatement follows the state's rules and a late window where one exists.
How to use these
Take the test when you can answer sets like this one from memory, including the arithmetic. NMLS reports that a majority of first-time takers pass, and that the pass rate falls on each later attempt, with a 30-day wait after a failed attempt. The licensing cost and timeline page sets out the full calendar.