Chapter 1 Flashcards
Becoming an MLO
Actions the Commissioner can take
- Denying or revoking licenses
- imposing fines or penalties
- Investigating consumer complains
Alll states require at least ____ hours of cotinuin g education each year in order to renew an MLO license.
Eight hours
MLO License renewal with NMLS open each year on:
November 1st
How many soced questions are on the UST test?
115 questions
All of the following are true of a mortgage underwriter or processor, except:
- They perform clerical or support duties
- They take a residential mortgage loan application
- They are supervised and instructed by a licensee
- They cannot discuss loan rates and terms with a borrower
They take a residential mortgage loan application
What is the name of the act that created the NMLS?
SAFE Act
Which of the following laws created the Consumer Financial Protection Bureau (CFPB)?
a. The Dodd-Frank Wall Street Reform Act
b. The Community Reinstatement Act
c. The Federal Home Loan Bank Act
d. The National Housing
a. The Dodd-Frank Wall Street Reform Act
Name two things that define a mortgage loan originator.
- Takes a residential mortgage loan application
- Offers or negotiates terms of a residential mortgage loan.
What are two things that are not included in the definition of an MLO?
- Loan Processors
- Real Estate Agents
What is the difference between an MLO and a registered MLO?
A registered MLO works for a depository institution and is not licensed.
TRUE OR FALSE. The NMLS’s job is to approve or deny license applications.
FALSE
(Answer: States are the only one who approves or denies license applications)
Fannie Mae (FNMA) was privatized and became a
government-sponsored enterprise
(GSE).
The creation of the Federal National Mortgage Association (FNMA or Fannie Mae), in 1938,
increased the _____ in the market and allowed more money to become available for
lenders.
liquidity
The _______ is a number that will identify which MLO is originating a loan by appearing on the residential loan application.
unique identifier
Name three examples of “clerical or support duties.”
- Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan
- Receiving an appraisal
- Collecting a VOE
TRUE OR FALSE. Generally, an independent contractor receives a 1099 at tax time instead
of a W-2.
TRUE
A mortgage broker
is a company or firm (generally a firm) that brings borrowers and
lenders together for loan origination.
A mortgage lender
is an entity that provides funds for a mortgage. Lenders also manage credit and financial information reviews.
A mortgage servicer
is a 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.
Mortgage-backed securities
are a type of asset-backed security that is secured by a mortgage or collection of mortgages.
Name three big players on the secondary market:
- The Federal National Mortgage Association (FNMA, Fannie Mae)
- The Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
- The Government National Mortgage Association (GNMA, Ginnie Mae)
A regulatory authority
is an entity that has the power to regulate the mortgage industry.
Regulatory authorities have the power to investigate, impose penalties, provide
supervision, or a combination of all three.
Name two levels of regulatory authority that MLOs are subject to:
- State Regulatory Authority
- Federal Regulatory Authority
Name two federal banking agencies.
- Federal Reserve
- NCUA
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
is the fundamental federal law that regulates the licensing process and responsibilities of mortgage loan originators.
TRUE OR FALSE. The SAFE Act requires a minimum of 20 hours of education. All prelicensing education courses are reviewed and approved by the NMLS.
TRUE
How many hours of federal law are required to be included in your pre-licensing
education?
3 hours
Generally, pre-licensing education expires within _____ years from the date of taking the
20 hours if the individuals fail to acquire a license or registration.
Three
Name three topics covered in the National Test Component with Uniform State Content.
- Ethics
- Federal law
- Fraud
TRUE OR FALSE. To pass the National Test with the UST, an applicant must receive a score
of 70% or higher.
FASLE (Correct Answer: 75%)
If an MLO leaves the business
for more than _____ years, they
must retake the exam.
five
TRUE OR FALSE. The retake
requirement does not apply to
MLOs who switch from being a
licensed MLO to a registered
MLO.
TRUE
TRUE OR FALSE. The NMLS uses a generic application, known as the MU7, which is the
application for any state; it includes information all states require for their license.
FALSE (Correct Answer: MU4)
Each application includes necessary information about the applicant. The applicant needs
to provide _____ years of residential and employment history.
10
Along with the application, the applicant must permit the NMLS to do a _____
background check
and pull a credit report.
TRUE OR FALSE. A surety bond is like malpractice insurance for a doctor. If a doctor does
something negligent or harmful to a patient and that patient sues the doctor and wins, the
doctor’s malpractice insurance typically covers the judgment.
TRUE
The net worth
is liquid assets. The sponsor of the MLO covers net worth requirements.
some states require that an MLO and an entity contribute to ____.
a state fund
Name three reasons that a license application can be denied:
- License revoked in another state
- Felony in the past 7 years
- Lack of financial responsibility
Name three things that call into question an application financial responsibility.
- Current outstanding tax liens
- Foreclosure in the past three years
- A pattern of seriously delinquent accounts in the past three years
TRUE OR FALSE. Temporary authority can also be used by a registered MLO to transition
to a licensed MLO or to move from a financial institution to a non-financial company
without having to wait for their license application to be approved
TRUE
Which of the following is an eligibility factor for temporary authority?
a. Be employed by a mortgage company licensed in that state
b. Be licensed in another state for the past 30 days
c. Have passed the National Exam with a 80% or higher
d. Both a and b
BOTH
a. Be employed by a mortgage company licensed in that state
b. Be licensed in another state for the past 30 days
Name the three requirements for renewal
- Continue to meet minimum standards for licensure
- Satisfy all continuing education requirements
- Pay all required fees
By what date must you renew your license?
December 31st
TRUE OR FALSE. To meet the annual continuing education requirements, MLOs must
complete at least ten hours of continuing education.
FALSE (Correct Answer: 8 hours)
Name the two rules associated with continuing education.
- Continuing education only counts in the year when it was taken.
- An MLO cannot take the same continuing education course in successive
years. This is called the successive year rule.
TRUE OR FALSE. NMLS allows state licensees to submit certain changes to their NMLS
record in advance of a desired effective date
TRUE
TRUE OR FALSE. In most states, if you fail to renew on time there is no other option but to
apply for a new license.
FALSE (Correct Answer: Most states allow for reinstatement, but you have to
check with your individual state)
Name five things that are generally considered prohibited conduct.
- Commit Fraud
- Unfair or Deceptive Practices
- Collecting a fee for best efforts
- Unlicensed Activity
- Failing to make required disclosures
TRUE OR FALSE. Every state has its own requirements related to disciplinary action.
TRUE
Define the term examination.
An examination is generally a yearly review of licensed entities’ files and business
practices to ensure that they are compliant with the law. Sometimes, after one of
these examinations, the licensee will be fined or required to fix problems discovered
during the examination. An investigation usually arises from a complaint or suspicion
that an entity or individual is breaking the law
Name three penalties that the Commission can levy for a violation.
- Impose fines
- Deny A license
- Revoke a license
TRUE OR FALSE. The maximum amount of penalty for each act or omission is $5,000. Each
violation or failure to comply with any directive or order of the Commissioner is a separate
and distinct violation or failure.
FALSE (Correct Answer: $25,000)
