California State NMLS Practice Test Questions with Answers 2024, Exams of Law

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California State NMLS Practice Test

Questions with Answers 2024

"Federal banking agencies" include: Answers A. The Director of the Office of Thrift Supervision, the Board of Governors of the Federal Reserve System, and FDIC B. Fannie Mae and Freddie Mac C. The Comptroller of the Currency and the National Credit Union Administration D. A and C ✔ D. A borrower approaches a lender to refinance their existing negative amortization loan, which was originated by that same lender. Which of the following statements is incorrect? A. The lender must make due regard for the borrower's ability to repay the new loan. B. The new loan cannot be a stated income pay option arm. C. The lender can collect a prepayment penalty, as long as it does not exceed 1.75% of the principal balance. D. If their existing mortgage is a reverse mortgage, it is not considered a negative amortization loan. ✔ C. A borrower cannot be required to pay interest on the principal balance of a loan secured by a mortgage on real property more than how many days prior the date that loan proceeds are disbursed from escrow? Answers A. One (1) day B. Three (3) days C. Five (5) days D. Seven (7) days

✔ A.

A borrower's file requires a VOD, however currently, the borrower has no money but is expecting an inheritance check. What can the MLO do? Answers A. The MLO may request the VOD takes place after the funds are deposited B. Request the borrower to take out a pay day advance loan, put it in his account, and repay it once the verification is done C. The MLO may loan the borrower money and take it back after the VOD is complete ✔ A. A foreclosure consultant may not charge a fee in which exceeds ___ percent per annum of a loan which the consultant makes to the owner. Answers A. 10% B. 20% C. 3% D. 5% ✔ A. A late charge may be imposed for late payment of an installment due on a mortgage loan or deed of trust but cannot exceed greater than $5 or ___ percent of the installment due. Answers A. One (1) percent B. Three (3) percent C. Five (5) percent D. Ten (10) percent ✔ C. A mortgage broker's fiduciary duty to a client involves which of the following? Answers A. A duty of exclusivity

B. Full disclosure to the client, even at the expense of another client C. Putting the client's economic interest ahead of the broker's own D. Securing the best loan which the client could hope to find ✔ C. A mortgage company advertises for loans in both Spanish and English. Which of the following statements is true? Answers A. The mortgage company must provide the key disclosures such as the TIL and Good Faith Estimate in Spanish to their Spanish speaking clients. B. At least 40% of the employees of the company must be bilingual. C. The company must have at least one native Spanish speaker available during regular business hours. D. The actual loan documents (note, mortgage, deed, etc.) must be provided in Spanish. ✔ A. A mortgage loan originator must pass the licensing test in order to obtain a new license if he has failed to maintain a license over how many years? Answers A. Five (5) years B. Seven (7) years C. Ten (10) years D. MLOs do not ever have to retake the licensing test ✔ A. A mortgagee must execute a certificate of the discharge of a mortgage and record it in the county in which the mortgage is recorded within how many days after the mortgage has been satisfied? Answers A. Thirty (30) days B. Sixty (60) days

C. Ninety (90) days D. One hundred twenty (120) days ✔ A. A mortgagee must furnish the mortgagor a written statement showing the amount of moneys received for interest, repayment of the principal of the loan, and late charges within how many days of the end of the calendar year? Answers A. Fifteen (15) days B. Thirty (30) days C. Sixty (60) days D. Ninety (90) days ✔ B. A person cannot serve as an officer, director, or other key employee or control person of a residential mortgage lender if he has been held liable in a civil or administrative action within how many years? Answers A. Three (3) years B. Five (5) years C. Seven (7) years D. Ten (10) years ✔ B. A person receiving monthly principal and interest payment is which of the following? Answers A. Lender / Servicer B. Broker C. Mortgage Banker D. Escrow Company ✔ A.

A prepayment charge can be imposed on any amount prepaid in any twelve (12) month period which exceeds __ percent of the original principal amount of the loan. Answers A. 10% B. 15% C. 20% D. 25% ✔ C. A "Registered Mortgage Loan Originator": Answers A. Is registered with NMLS but has not completed all the prerequisites for licensing B. Works as a mortgage loan originator and is employed by a depository institution C. Works for a Federal Banking agency as a loss mitigation specialist D. Has met additional registration requirements with The Farm Credit Administration and Federal Banking Agencies ✔ B. A "unique identifier" is described as: Answers A. A unique combination of the scrambling of your driver's license number and social security number that must be provided to each applicant you meet. B. Your personal social security number that must be posted in your licensed mortgage production branch office. C. Your identification number with the IRS that must be on each mortgage document in the loans you originate. D. The number assigned to you when you become a registered loan originator with the NMLS. ✔ D. According to the legal definition, a mortgage:

Answers A. Does not include an estate for years in real property B. Involved a hypothecation which necessitates a change in possession C. Can be created or renews orally or in writing D. Can be created on property held adversely to the mortgagor ✔ D. Advertisements that make a representation of a specific installment in repayment of a loan must also make an equally prominent disclosure of the following information about the loan, except: Answers A. Down payment amount B. Simple annual interest rate and annual percentage rate C. Number, amount and period of payments scheduled to the date of maturity D. Balance due at maturity (balloon payment) if not fully amortized ✔ A. After a disciplinary order is made final, a licensee has how many days to ask the court to restrain enforcement of the order? Answers A. Five (5) days B. Fifteen (15) days C. Thirty (30) days D. Sixty (60) days ✔ B All licenses for mortgage loan originators will now expire __________, and continuing education for renewal should be completed __________ each year, to be effective the following year. Answers A. One year from the date of issuance/one month before expiration

B. On December 31/before December 1 C. On January 1/before December 1 D. December 31/before October 31 ✔ D. All of the following are true regarding a disciplinary action against a California mortgage loan originator licensee, except: Answers A. Licensees may petition in writing for a monetary penalty at any time after filing of an accusation and before the effective date of a decision B. No specific form of petition is required C. Petitioners must automatically cease and desist all origination activities until a decision has been rendered D. Upon receipt of a the petition, the Commissioner may grant a stay of the effective date of the decision up to 30 days for the purpose of determining whether the public interest will served if the petition is granted ✔ C. An applicant for a mortgage loan provides a lender with funds to cover bona fide third party expenses in connection with the applied for loan. Which of the following statements is not true? Answers A. The funds must be placed in a separate account. B. The lender must keep and provide accurate accounting, and receipts, for all funds collected. C. The lender cannot collect 3rd party fees and must direct the applicant to pay the 3rd parties directly. D. The lender cannot retain any portion of the 3rd party fees. ✔ C.

An applicant for a residential mortgage lender or servicer license must agree to keep and maintain business records and other information required by law for how many months from the date of final entry of any mortgage loan? Answers A. Six (6) months B. Twelve (12) months C. Twenty four (24) months D. Thirty Six (36) months ✔ D An application for a loan originator license may be denied for all the following reasons EXCEPT if the applicant: Answers A. Pled guilty to a felony involving personal conduct nine (9) years ago B. Has not completed pre-licensing education requirements C. Had a loan originator licensed revoked in TN three (3) years ago D. Has failed to demonstrate the required financial responsibility ✔ A An attorney is helping a client handle their estate, and the attorney is handling a variety of real estate issues. Which of the following would be in violation of the attorney's mortgage originator exemption? Answers A. The attorney suggests that the client's real estate holdings be placed into a trust. B. The attorney reviews the client's loan closing documents for accuracy. C. The attorney reviews the good faith estimate and truth in lending disclosures with the client, and explains the client's legal obligations in regards to the documents. D. The attorney suggests that the client refinance

their loan to a lower interest rate, and the lender pays the attorney a monthly fee for his services. ✔ D. An individual engaging in mortgage loan modification or forbearance activities for a fee who takes a power of attorney from a borrower: Answers A. Is guilty of prohibited conduct and may be imprisoned for up to one (1) year in jail. B. Is guilty of prohibited conduct and may be fined for up to $5,000 per offense. C. Is guilty of prohibited conduct and may be imprisoned and/or fined for up to $10,000 and one (1) year in jail D. Is guilty of prohibited conduct and may be imprisoned for up to two (2) years in jail. Incorrec ✔ A An individual may retake a test three (3) consecutive times, provided that each retake occurs at least thirty (30) days after the preceding test. After failing three (3) consecutive tests, an individual shall wait at least _______ months before taking the test again. Answers A. Six (6) B. Three (3) C. Two (2) D. One (1) ✔ A. As a broker, you only have to put your NMLS number on what type of materials? Answers A. Loan applications B. Advertising materials C. On the branch business door

D. Closing statements ✔ B Assuming a residential mortgage lender or servicer licensee's fiscal year ends December 31st, he must prepare and file with the commissioner a report giving the information necessary to make the annual assessment calculation by: Answers A. January 31st B. February 15th C. March 1st D. April 30th ✔ A. At least two (2) days prior to closing, a mortgage loan company shall provide to the borrower(s) the following federal disclosures specific to the mortgage loan the borrower(s) is receiving: Answers A. Good Faith Estimate B. Truth in Lending Statement C. HUD Statement D. A and B ✔ D. At the end of the year, one of the following occurs: a mortgage loan originator does not apply to renew their license, the director declines to renew the mortgage loan originator's license, or the loan originator does not otherwise maintain eligibility under the requirements. What is the best term to describe the status of their license at that point? Answers A. Expired B. Suspended C. Revoked D. Surrendered ✔ A.

32.) California mortgage loan originators or required to register with __________. Answers A. The Bureau of Loans B. The Secretary of State C. The Nationwide Mortgage Licensing System (NMLS) D. The California Department of Banking ✔ C. Chuck, the owner of a mortgage lender, hires his good friend Eric as a loan originator. Chuck trusts Eric to do his job and does not interfere or interrupt Eric in any way when Eric is originating. Later, it is brought to the attention of the director that Eric has committed a pattern of misrepresentations and deceitful practices. Which of the following statements is not true about this situation? Answers A. Chuck may have to pay restitution to the injured parties. B. Only Eric will face fines or other penalties C. Chuck could have his license suspended or revoked D. Eric could have his license suspended or revoked ✔ B. Continuing education courses are good until what date? Answers A. December 31st of each year B. October 31st of each year C. January 1st of each year D. December 31st, every odd numbered year ✔ A. Control of a licensee is presumed to exist if a person or entity owns, controls, or holds ____ percent or more of the voting power of the licensee.

Answers A. 3% B. 5% C. 7% D. 10% ✔ D Courtney is a processor for a conventional lender and is exempted from licensure laws. Which of the following actions would be a violation of her exemption? Answers A. The originator is out of the office, and Courtney contacts everyone in the pipeline to let them know the current rates, so that the borrower can decide whether or not to lock their loan. B. Courtney contacts a borrower and informs her that the loan cannot close until the borrower provides their most recent pay stub. C. Courtney reviews the loan file and puts her concerns about whether or not the loan should fund in the file for the underwriter to review. D. Courtney reviews the Uniform Residential Loan Application (1003) for accuracy and informs the originator of the results of her review. ✔ A. How long do you have to notify the Department of Real Estate or the DRE if you change the address of the location? Answers A. Immediately (no later than the next business day) B. Thirty (30) days C. Ninety (90) days D. Seven (7) business days ✔ A

How long must you keep your records of advertising? Answers A. Twelve (12) months B. Twenty-five (25) months C. 2 years D. 3 years ✔ D If a borrower is charged an amount other than or in excess of fees allowed under RMLA, a penalty for such a violation may include interest on the amount of the charge and the excess amount at the rate of ___ per annum. Answers A. 3% B. 5% C. 8% D. 10% ✔ C. If a broker advertises that all credit accepted, and a borrower with a 420 FICO and a BK within the last year applies and is denied, what is the broker guilty of? Answers A. Redlining B. Participating in a flipping scheme C. False advertising D. Steering ✔ C If a licensee makes a loan to a borrower without first determining the borrower's ability to repay the loan, the Director may do all of the following except: Answers A. Suspend a license B. Deny a license

C. Revoke a license D. Approve a license ✔ D. If there is something that triggers re-disclosure, how long must you wait to sign loan documents? Answers A. One (1) business day B. Three (3) days C. Fifteen (15) days D. Thirty (30) days ✔ B If you fail to appear for a hearing regarding fraudulent acts you have committed, what is the end result? Answers A. Suspension of your license B. Revocation of your license C. Your license becomes expired D. Nothing. Your license stays active and clear. ✔ A If you have your license revoked, when can you re-apply? Answers A. Thirty (30) days B. Six (6) months C. One (1) year D. Never ✔ D If you put a rate in an advertisement, what is sufficient proof that the advertisement is accurate?

Answers A. A lock in agreement from that date with the particular rate locked in B. A previous advertisement C. Funded loan from another company ✔ A If your license is denied, how long do you have to file an appeal? Answers A. Three (3) business days B. Five (5) days C. Fifteen (15) days D. Thirty (30) days ✔ C In 2009, the California legislatures passed Senate Bill 36 and Assembly Bill 34 to comply with the SAFE Act of 2008 and participate in the NMLS. These bills changed state regulations to do all of the following except: Answers A. Increase funding to investigate fraud in the mortgage lending industry B. Bring California State law into compliance with the federal Housing and Economic Recovery Act of 2008 (HERA) and its Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) C. Participate in NMLS D. Change licensing, education, examination, and qualification requirements to meet those now mandated by federal law ✔ A. In performing an analysis to determine whether an applicant will have the ability to repay an offered loan, a licensee shall consider, verify and document: Answers A. The income of the applicant.

B. The fixed expenses of the applicant C. The loan to value D. A and B ✔ D. Individuals applying for licensure as a mortgage loan originator in California must submit or complete the following prior to approval: Answers A. A criminal background check free of felonies B. Fingerprints for submission to the FBI C. 20 hours of NMLS approved continuing education D. A satisfactory credit report with a score of 620 or higher ✔ B. It is a(n) __________ to solicit or enter into a contract with a borrower that allows a mortgage loan originator to earn a fee or commission through "best efforts" to obtain a loan, even though no loan is actually obtained for the borrower. Answers A. Prohibited practice B. Best practice C. Acceptable practice. D. Good idea ✔ A. It is considered a prohibited practice to __________ misrepresent or conceal a material fact, term, or condition related to an application for a mortgage loan or a borrower. Answers A. Accidentally B. Repeatedly C. Maliciously D. Intentionally ✔ D.

May a lender require a borrower to use a trust account for the payment of taxes and property insurance premiums as condition for granting a loan secured by a mortgage on a single-family, owner-occupied dwelling? Answers A. Yes, if the loan amount is 90% LTV or greater of the appraised value of the property B. Yes, if the loan amount is 80% LTV or greater of the appraised value of the property C. Yes, if the loan amount is 75% LTV or greater of the appraised value of the property D. No ✔ A. Mike is reviewing his criminal background. Which of the following convictions would most likely preclude him from ever obtaining a license to originate mortgage loans? Answers A. Mike was convicted of shoplifting a "Barry Manilow's Greatest Hits" CD in 1995. B. Mike was convicted of felony DUI after being pulled over on his way home from a Groundhog's Day party. C. Mike was convicted for illegally obtaining insurance funds when he filed a claim for his stolen minivan, and it was discovered that the car was actually in his garage. D. Mike has numerous unpaid parking tickets. No, this is incorrect. ✔ C. Mortgage loan originators are required to __________ and make reasonable efforts to procure a mortgage loan on behalf of the borrower. Answers A. Collect a fee. B. Sign a contract C. Use due diligence

D. Send a disclosure ✔ C. Mortgage loan originators in the State of California are licensed by the following: Answers A. The Department of Banking, Bureau of Loans B. The Office of the Secretary of State C. The California Board of Professional Standards D. Department of Corporations and Department of Real Estate ✔ D. Mortgage loan originators may not collect __________ mortgage broker fees before a conditional commitment is obtained from the lender by the mortgage broker. Answers A. Any B. More than 10% of the. C. More than 50% of the D. The balance of the ✔ A. On July 30, 2008, Congress enacted comprehensive legislation designed to facilitate the recovery and revitalization of the United States' failing residential housing market. This legislation is called __________. Answers A. The Housing and Economic Recovery Act (HERA) B. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). C. Real Estate Settlement Procedures Act (RESPA). D. Equal Credit Opportunity Act (ECOA) ✔ A.

Oversight of the real estate brokers who perform mortgage loan activities under the real estate law is carried out by which of the following? Answers A. The comptroller B. Department of Financial and Regulatory Institutions C. Department of Real Estate D. Mortgage Broker Association ✔ C Prelicensing "approved" educational courses are defined as: Answers A. Courses you can take at any community college as long as they are about mortgage lending B. Courses that must be taken online from the NMLS. C. Courses that have been approved by the National Mortgage Broker's Association D. Courses that have been reviewed and approved by the NMLS ✔ D. Refinancing one home loan with another home loan without a reasonable, tangible net benefit to the borrower is considered: Answers A. High cost B. Nontraditional. C. Flipping D. Packing ✔ C. Regarding continuing education for mortgage license renewal, which of the following statements is incorrect? Answers A. A student cannot repeat the same course each licensing cycle.

B. Only NMLS approved courses will count towards the required hours. C. An applicant must complete the education during the year prior to renewal. D. NMLS approved education completed in another state will not count towards the required hours. ✔ D. Regarding continuing education requirements, a loan originator licensee must complete how many hours annually? Answers A. Six (6) hours B. Eight (8) hours C. Twelve (12) hours D. Twenty (20) hours ✔ B The application fee for a mortgage loan originator, a CFLL branch licensee and a CRMLA branch licensee are__________, __________, and __________, respectively. Answers A. $100, $300, $1, B. $169, $320, $ C. $100, $300, $ D. $300, $1,000, $1, ✔ B. The bond requirement for all types of California mortgage loan originators (CFLL, CRMLA and DRE) is: Answers A. $ B. $50, C. $100,

D. $250,000

✔ A.

The contract between a foreclosure consultant and a homeowner must contact a statement informing he client that he may cancel the transaction any time prior to midnight of the ___ business day after the date of the transaction. Answers A. Second (2nd) business day B. Third (3rd) business day C. Fifth (5th) business day D. Seventh (7th) business day ✔ C. The Department of Real Estate requires all licensees who arrange for or service loans to complete the online report Form RE 866 - Mortgage Loan Activity Notification. Penalty fees apply for failure to submit this required notification. Penalties are __________ per day for the first 30 days the report is not filed and __________ per day for every day thereafter, not to exceed a maximum of __________. Answers A. $100, $200, $5,000. B. $50, $100, $5,000. C. $50, $100, $10,000 D. $100, $500, $10,000. ✔ C. The net worth requirements for California Residential Mortgage Lending Act (CRMLA) licensees are which of the following? Answers A. $250,000 B. $50,000. C. $1000,000 D. $150,000.

✔ A.

The state governmental agencies overseeing licensure of California mortgage loan originators are the __________ and __________. Answers A. Department of Banking/Bureau of Loans B. Department of Corporations/Department of Real Estate C. Secretary of State/Attorney General D. Secretary of State/Department of Financial Institutions. ✔ B. What happens if you fail to complete your continuing education? Answers A. Your license gets revoked B. Your license expires C. Your license gets suspended D. Nothing. Continuing education is not required for California ✔ B What has to be on advertisements of a MLO? Answers A. Website B. Branch fax number C. The MLO's employment ID number D. The MLO's unique identifier ✔ D What is the maximum penalty for a licensee in the state of California if he does not submit for RE 866 Mortgage Loan Activity Notification? Answers

A. $1,000

B. $10,000

C. $100,000

D. $5,000

✔ B

What is the maximum YSP on reverse mortgages? Answers A. 10% of the total mortgage cost B. $125.00 C. 3% D. There is no maximum YSP on reverse mortgages ✔ D What may you do regarding documents? Answers A. You may shred all original documents. Incorrect B. You must keep hard paper copies, electronic copies, and microfilm copies of all documents. C. You may destroy original documents as long as electronic copies are maintained. D. You may only destroy applications since they are not needed after a loan has closed. All other documents must be kept electronically. ✔ C What subject must be taken every year as part of continuing education in California? Answers A. Ethics B. Mortgage math C. Business marketing and advertising

D. General mortgage knowledge and terminology ✔ A What type of loan would best be described as a mortgage loan that is structured in such a way that a borrower in any period may make a scheduled loan payment that is insufficient to pay accruing interest? Answers A. Fixed rate buydown B. Negative amortization loan C. Home equity conversion mortgage No, this is incorrect. D. HELOC ✔ B. When do licenses expire? Answers A. January 31st, annually B. December 31st, annually C. October 31st, annually D. December 15th, annually ✔ B When does the CE period end? Answers A. April 15th, annually B. December 1st, annually C. January 31st, annually D. October 31st, annually ✔ D When is a broker responsible for a violation of an act by an MLO? Answers A. When the broker sponsors the MLO

B. When the broker's surety bond covers the MLO C. When the broker and the MLO work in the same office building ✔ A When performing the income verification, a licensee is only required to verify the income that the applicant _________ to rely upon to repay the offered loan. Answers A. Chooses B. Needs C. Has D. Doesn't ✔ A. Which of the following are NOT grounds for denying a license? Answers A. Felony within 7 years B. First time CA misdemeanor DUI conviction C. Personal or business bankruptcy ✔ B Which of the following is an example of a covered loan? Answers A. An ARM B. A loan with acceleration to the rate upon default C. Negative amortization D. A loan in which the original principal balance does not exceed the most current conforming loan limit ✔ D Which of the following is considered grounds to deny a California mortgage loan originator's license?