NMLS Exam Review 2023/2024 Study Guide Questions and Answers
Federal Home Loan Bank (FHLB) system: - correct answer A system of GSEs owned by over 8,000 community financial institutions. It provides advances to financial institutions in order for those institutions to make residential mortgage...
NMLS Exam Review 2023/2024 Study Guide
Questions and Answers
Federal Home Loan Bank (FHLB) system: - correct answer A
system of GSEs owned by over 8,000 community financial
institutions. It provides advances to financial institutions in order
for those institutions to make residential mortgage loans.
Fiduciary relationship: - correct answer a relationship
founded on trust and confidence
Financing contingency date: - correct answer In real estate
transactions, the contractually determined date by which the
buyer's financing must be in place
Fraud for profit: - correct answer Inside job where the loan
originator, real estate agents or appraisers do it for their benefit
of making profit
Fraud for property: - correct answer Also called "fraud for
housing," this is a willful misrepresentation of material facts on a
loan application with the intent of gaining property. This type of
fraud is more likely to be perpetuated by borrowers and result in
less damage to the creditor(s) involved because the loan is
typically paid in a timely manner.
Freddie Mac: - correct answer "Federal Home Loan
Mortgage Corporation," which is a government-sponsored
enterprise that was intended to provide a secondary market for
,mortgages originated by savings and loan associations and
create competition to Fannie Mae. Like Fannie Mae, Freddie Mac
also issues mortgage-backed securities (MBS).
Ginnie Mae: - correct answer Government National
Mortgage Association; pools mortgages for investors
Government-sponsored enterprise (GSE): - correct answer A
quasi-governmental agency. Fannie Mae and Freddie Mac are
examples of GSEs.
Hedging: - correct answer In mortgage lending, the attempt
to minimize interest-rate risk by purchasing a Treasury security
or MBS to offset large movements in the rate markets.
High-cost mortgage loan: - correct answer A mortgage loan
with an annual percentage rate exceeding the Average Prime
Offer Rate (APOR) by more than 6.5% for a first-lien transaction
or 8.5% for a second-lien transaction, OR a mortgage loan with
total points and fees exceeding 5% of the loan amount. ALL high-
cost loans must be compliant with the Home Ownership and
Equity Protection Act (HOEPA).
Home Mortgage Disclosure Act (HMDA): - correct answer A
federal law that requires lenders to annually disclose the number
of loan applications and loans in certain areas, thus eliminating
the practice of "redlining."
Home Ownership and Equity Protection Act (HOEPA): - correct
answer A federal law that sets rules for high-cost loans. A loan
, that is subject to HOEPA cannot feature a balloon payment,
negative amortization or a prepayment penalty and cannot be
refinanced within one year by the original creditor (other
creditors may refinance the loan) unless doing so is "clearly in
the best interests of the borrower."
Identity theft prevention program: - correct answer A
written program designed to detect the warning signs of identity
theft in day-to-day operations. Businesses defined as "financial
institutions" under the Fair and Accurate Credit Transactions
Act's Red Flags Rule are required to implement this kind of
program. Because of the broadness of the definition, all
mortgage brokerages and mortgage banks are covered by it.
Immediate family member: - correct answer A spouse, child,
sibling, parent, grandparent or grandchild. An individual who
only originates loans with or on behalf of an immediate family
member doesn't need a loan originator license.
Interest-only loan: - correct answer A fixed-rate mortgage
that allows the borrower to pay only the interest due on the
mortgage for a period of years, after which the loan becomes
fully amortizing.
Judicial foreclosure: - correct answer A method of
foreclosure that requires court action in order to complete the
process. Typically found in states that use the mortgage
document as the security instrument.
Legitimate business need: - correct answer One
circumstance under which a lender can receive a consumer's
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