SAFE Act and CSBS/AARMR Model State Law

An applicant for a loan originator license who fails the license exam may retake it a second time: A. After a wait of 30 days B. Immediately C. After a wait of 24 hours D. After a wait of six months

A. After a wait of 30 days A license applicant may take the licensing exam up to three times. If he or she fails a test, he or she must wait at least 30 days after the date of the preceding test to retake it. If he or she fails three consecutive tests, at least six months must pass before taking the test again.

The purpose of adopting minimum uniform standards for the licensing and registration of mortgage loan originators under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 was to: A. Enhance consumer protection and reduce fraud B. Create a single federal registry of all mortgage loan originators C. Prohibit lending activity involving mortgage loan originators D. Abolish the existing database tracking mortgage-related violations

A. Enhance consumer protection and reduce fraud The S.A.F.E. Act was enacted because of abuses and events occurring in the mortgage lending business throughout the country. This led Congress to believe there was a need to increase uniformity in licensing and registration requirements among the states, reduce the regulatory burden of states, enhance consumer protection, and reduce fraud.

As part of the licensing and registration process, Jack Horner must furnish the NMLS with information concerning his identity, including: A. Fingerprints B. A copy of his driver's license C. A copy of his birth certificate D. College transcripts

A. Fingerprints An applicant for a mortgage loan originator license must provide information to the NMLS concerning his or her identity, including fingerprints so a criminal history background check can be performed, and personal history and experience, including authorization for the NMLS to obtain independent credit report information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

Under the S.A.F.E. Act, a loan originator: A. Is an individual who takes residential mortgage loan applications for compensation B. Is any individual who takes loan applications secured by real property for compensation C. Is any person who takes loan applications secured by real property D. Can be an individual or a business entity

A. Is an individual who takes residential mortgage loan applications for compensation The S.A.F.E. Act defines a mortgage loan originator as an individual who takes a residential mortgage loan application and offers or negotiates the terms of a residential mortgage loan for compensation or gain.

To qualify for licensing or registration as a state-licensed loan originator, an applicant must meet certain minimum standards. Among these is a requirement to: A. Meet a net worth or surety bond requirement B. Pay an amount equaling 2% of the dollar value of loans originated as a first-time application fee C. Have completed high school D. Be at least 21 years of age

A. Meet a net worth or surety bond requirement To qualify for licensing or registration as a state-licensed mortgage loan originator, an applicant must meet certain minimum standards. These include education and testing standards and minimum financial responsibility requirements. Such requirements may include a minimum net worth, surety bond acquisition requirements, or establishment of a recovery fund paid into by mortgage loan originators.

Franny is completing the 20 hours of pre-licensing courses required to make application for her mortgage loan originator license. She has taken three hours of federal law and regulations and two hours of training related to lending standards of the nontraditional mortgage product marketplace. What other required coursework must she take? A. Three hours of ethics B. Three hours on real estate appraisal C. Three hours of financing options D. Three hours of state law and regulations

A. Three hours of ethics The S.A.F.E. Act specifies that a license applicant must complete pre-licensing education of at least three hours of federal law and regulations, three hours of ethics, including instruction on fraud, consumer protection, and fair lending issues, and two hours of training related to lending standards for the nontraditional mortgage product marketplace.

Within the 20 hours of pre-licensing education required for a loan originator license are a minimum of: A. Three hours of federal laws B. Two hours of ethics C. Four hours of nontraditional mortgage products D. Two hours of consumer protection law

A. Three hours of federal laws The S.A.F.E. Act specifies that pre-licensing education must include at least three hours of federal law and regulations, three hours of ethics, including instruction on fraud, consumer protection and fair lending issues, and two hours of training related to lending standards for the nontraditional mortgage product (i.e., any mortgage product other than a 30-year fixed-rate mortgage) marketplace.

Edna Eager is planning an ad campaign to draw more business to her company. In order to avoid trouble with her advertising, Edna must comply with the advertising requirements of the: A. Truth-in-Lending Act and Regulation Z B. Real Estate Settlement Procedures Act and Regulation X C. Equal Opportunity Credit Act D. Federal Trade Act

A. Truth-in-Lending Act and Regulation Z A licensee advertising mortgage products and services must comply with the advertising laws and rules as set forth in the Truth-in-Lending Act and Regulation Z. Additional advertising rules for mortgage credit products are found in Regulation N (12 C.F.R. 1014).

Under the S.A.F.E. Act, states are required to do background checks as part of their effective supervision. A background check includes all of the following, except: A. Criminal history B. Education history C. Credit history D. Civil or administrative records

B. Education history An applicant for a mortgage loan originator license must provide information to the NMLS concerning his or her identity, including fingerprints so a criminal history background check can be performed, and personal history and experience, including authorization for the NMLS to obtain independent credit report information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

In order to protect consumers, states must provide for financial compensation in the event of a violation of state or federal law by a licensee. To fulfill that requirement, a mortgage loan originator is NOT required to: A. Provide a surety bond B. Provide a fidelity bond C. Maintain a minimum net worth D. Participate in a state fund

B. Provide a fidelity bond In order to protect consumers in the event of a licensee's violation of mortgage law, the S.A.F.E. Act requires a mortgage loan originator to maintain a surety bond, a minimum net worth, or pay into a state fund. The loan originator is not required to maintain a fidelity bond. A fidelity bond provides protection to employers for the bad acts of its employees.

An applicant for a loan originator license cannot have been convicted of any felony within what period of time prior to applying for the license? A. Two years B. Seven years C. Three years D. Five years

B. Seven years An individual may not be granted a loan originator license if he or she has been convicted of or pled guilty or nolo contendere to any felony within the preceding seven years, or been convicted of a felony involving an act of fraud, dishonesty, a breach of trust, or money laundering at any time prior to application.

Geraldine is not an employee of a depository institution, a subsidiary owned and controlled by a depository institution, or an institution regulated by the Farm Credit Administration. However, she works as a loan originator using a license. Geraldine is a: A. Registered loan originator B. State-licensed loan originator C. Loan processor or underwriter D. FNMA loan originator

B. State-licensed loan originator The S.A.F.E. Act requires that all mortgage loan originators be either state licensed or federally registered. A mortgage loan originator must be registered if he or she is employed by a federally-insured depository institution, any credit union, or an owned and controlled subsidiary that is federally supervised. All other mortgage loan originators must be state licensed. Geraldine is a state-licensed loan originator.

Which of the following is NOT true about the Consumer Financial Protection Bureau (CFPB)? A. The CFPB was authorized under the Dodd-Frank Act B. The CFPB provides approval for loan originator education content C. The CFPB promotes education about financial issues for consumers D. The CFPB is the federal agency that takes complaints from consumers who feel they have been harmed by a mortgage licensee

B. The CFPB provides approval for loan originator education content The Consumer Financial Protection Bureau (CFPB) was authorized under the federal Dodd-Frank Act. The mission of the CFPB is to make markets for consumer financial products and services safe for Americans. The CFPB is charged with overseeing federal consumer financial laws by, among other things, writing rules and enforcing federal consumer financial protection laws, restricting unfair, deceptive, or abusive acts or practices, taking consumer complaints, promoting financial education, and monitoring financial markets for new risks to consumers. The NMLS provides the approval for education content and licensing examinations.

The NMLS was established by: A. HUD B. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators C. The Federal Reserve D. Each state regulator

B. The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators The NMLS is a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensing and registering loan originators.

In order to meet the federal S.A.F.E. Act requirements, a state licensing agency must provide for all of the following, except: A. Participation in the NMLS B. The creation of a separate agency C. Setting renewal or reporting dates D. Conducting background checks

B. The creation of a separate agency The states are required to have in place a system of licensing residential mortgage loan originators through the NMLS that meets national definitions and minimum standards. A separate agency for that purpose is not required. The system must include, among other things, standards for criminal history and credit background checks, pre-licensing education and testing, continuing education, and a minimum net worth or surety bond amount or an option for participation in a recovery fund.

The advertisement of mortgage products that Edna is planning to use indicates the number of payments required to pay off a specific loan. This statement is a: A. Prohibited statement B. Trigger term C. Permissible representation if it is accurate D. Hypothetical only

B. Trigger term If a trigger term is used in an advertisement, additional disclosures must be made to the potential borrower. A trigger term may be any of the following if specified in the ad: the amount or percentage of any down payment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge.

Which of the following would be considered material information when soliciting or originating a residential mortgage loan? A. The length of time the loan originator has been licensed B. Whether the loan product provides for a prepayment penalty C. The number of lenders with which a loan originator works D. An explanation of how title will be held

B. Whether the loan product provides for a prepayment penalty A representation, omission, act, or practice is material if it is likely to affect a consumer's choice of or conduct regarding the product or service. Information about a loan product's terms, including whether the loan provides for a prepayment penalty, would be considered material information.

If mortgage loan originator Edna Eager produces an ad, which of the following would NOT require additional disclosures? A. A "5% down payment" promotion B. A loan with a payment of $500 C. A loan with 100% financing D. A loan with "low finance charges"

C. A loan with 100% financing Trigger terms used in advertisement for mortgage products require additional disclosures regarding the promotion. Trigger terms in closed end loans include the number of payments, payment amount, down payment and finance charges. Since a loan with 100% financing would require no down payment, there is nothing further to disclose.

All of the following have to be licensed as mortgage loan originators, except: A. An employee of a mortgage lender taking mortgage loan applications B. An individual negotiating loans on behalf of friends in exchange for a fee C. An employee of a banking institution taking mortgage applications D. An individual taking mortgage applications for a mortgage broker

C. An employee of a banking institution taking mortgage applications An individual who takes a residential mortgage loan application for compensation must be licensed as a mortgage loan originator, unless the individual is employed by an exempt financial institution or is exempt him or herself. A bank employee would be exempt, as would an individual engaged solely in administrative and/or clerical tasks. An individual who offers or negotiates the terms of a residential mortgage loan with or on behalf of a member of his or her immediate family or for a transaction involving the financing of his or her own property would also be exempt from the requirement to be licensed.

Gertrude Hopper has not maintained a state loan originator license for just over five years. However, during the last three years of that five-year period, she was employed as a registered loan originator with the Anywhere Bank. Is Gertrude required to retake the licensing test when she decides to apply for a new state license? A. Yes. She must retake the test because she had not maintained a license for over five years B. No; once passed, an applicant does not have to take the test again C. No; her time as a registered loan originator is not counted as part of the time her license has not been maintained D. Yes; test results are only valid in the year they are taken

C. No; her time as a registered loan originator is not counted as part of the time her license has not been maintained If a mortgage loan originator was formerly licensed in a state and fails to maintain a valid license for five years or longer, the individual must retake the test and achieve a test score of not less than 75% in order to be licensed again as a mortgage loan originator. However, when determining whether a mortgage loan originator has not held a valid license for five years, any period during which the individual is a registered mortgage loan originator is not taken into account. In Gertrude's case, it is noted that she has not maintained her license for a total of five years; for three of those five years, however, she was employed as a registered loan originator. Thus, for purposes of determining whether she must retake the test, Gertrude was only unlicensed for two years. This means that she is not required to retake the exam.

Steve Scofflaw has entered into a contract that allows him to earn a fee for locating a suitable loan for the Misers. However, despite his best efforts, he was unable to locate a loan that suited their financial situation. Do the Misers owe Steve a fee? A. Yes, they owe him a fee for his best efforts B. The Misers do not owe Steve a fee for the loan, but must pay an application withdrawal fee to compensate for his time C. No; it is prohibited for a mortgage loan originator to earn a fee for best efforts when no loan is obtained D. Yes, because they entered into a contract with Steve

C. No; it is prohibited for a mortgage loan originator to earn a fee for best efforts when no loan is obtained It is prohibited for a mortgage loan originator to earn a fee simply for best efforts to obtain a loan on behalf of a consumer.

A state licensing agency may do each of the following, except: A. Refer a licensee for criminal prosecution B. Examine the books and records of a licensee C. Waive the pre-licensing education requirement for an applicant D. License individuals as mortgage loan originators

C. Waive the pre-licensing education requirement for an applicant A state licensing agency is charged with licensing individuals in its state and ensuring that its licensing provisions are in compliance with the federal S.A.F.E. Act. It may examine the books and records of licensees to ensure they are in compliance with both state and federal mortgage law and, if a criminal violation is discovered, refer the matter for criminal prosecution.

Ralph Nerdle has attempted three times to pass the NMLS mortgage loan originator licensing test. After failing his third test, Ralph must wait how long before testing again? A. 30 days B. 60 days C. 90 days D. 180 days

D. 180 days An individual may take the loan originator licensing test three times. If he fails, he must wait at least 30 days after the date of the preceding test to retake it. If he fails three consecutive tests, he must wait at least 180 days (six months) before taking the test again.

Safina Marigold, a mortgage loan originator, has received a request for an offer of residential mortgage loan terms together with information about the prospective borrower that will be necessary for her to make a decision on whether or not to offer a loan. Safina has received a(n): A. Credit report B. Appraisal C. Solicitation D. Application

D. Application An application is any request from a borrower, however communicated, for an offer of residential mortgage loan terms, a response to a solicitation of an offer of residential mortgage loan terms, or the information from a borrower that is typically required in order to make an offer of residential mortgage loan terms.

To renew his or her license, a mortgage loan originator must: A. Complete no less than ten hours of continuing education coursework B. Submit a written application to the state licensing agency C. Submit the renewal application no later than December 1st D. Continue to meet the minimum standards for licensure

D. Continue to meet the minimum standards for licensure A licensed mortgage loan originator must renew the license each year between November 1 and December 31 through the NMLS. He or she must continue to meet the minimum standards for licensure and satisfy the continuing education requirement by completing at least eight hours of coursework approved by the NMLS.

Bill Grunion is required to renew his license for the coming year. In order to have his renewal approved, Bill must meet all the following requirements, except: A. Continue to meet the minimum standards for license issuance B. Satisfy the annual continuing education requirement C. Pay all required fees for renewal of the license D. Have originated at least 15 loans in the preceding license period

D. Have originated at least 15 loans in the preceding license period To renew a license, a mortgage loan originator must continue to meet the minimum standards for initial licensure, complete the required continuing education, and pay all fees. There is no requirement that a licensee originate a specific number of loans in the preceding year.

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 requires that each state: A. Establish its own loan originator registration system B. License or register residential and commercial loan originators C. Deny a license to any person who has a misdemeanor conviction D. Impose a standard of at least 20 hours of pre-licensing education, plus testing for loan originator licensing

D. Impose a standard of at least 20 hours of pre-licensing education, plus testing for loan originator licensing Pursuant to the S.A.F.E. Act, each state must establish licensing standards, including pre-licensing education and testing requirements, and participate in the NMLS. The pre-licensing standard must include a requirement of at least 20 of pre-licensing education plus the creation of a licensing exam that is administered by the NMLS.

State supervisory authority includes all of the following, except: A. Conducting annual examinations of mortgage loan originators B. Issuing licenses in a form approved by the NMLS C. Reporting violations of state law related to origination activities to the NMLS D. Maintaining individual databases

D. Maintaining individual databases Under the S.A.F.E. Act, a state agency has a duty to enact licensing standards that meet S.A.F.E. Act requirements, including pre-licensing education courses, conducting pre-license testing, and issuing licenses. While the state agency must report violations of mortgage law to the NMLS, it is not required to maintain other individual databases related to mortgage professionals outside of the NMLS.

S.A.F.E. Act requirements apply to loans to purchase: A. Dwellings as rental properties B. Apartment buildings C. Dwellings if secured by mortgages, but not if secured by trust deeds D. Mobile homes to be used as residences, even if they are not attached to the land

D. Mobile homes to be used as residences, even if they are not attached to the land The S.A.F.E. Act applies to residential mortgage loans. Residential mortgage loans include those loans secured for the purpose of purchasing a dwelling as defined in the Truth-in-Lending Act. A dwelling is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.

What is the federal rule or regulation that provides parameters for advertising residential mortgage loan products? A. Regulation X B. The MARS Rule C. The ATR Rule D. The MAP Rule

D. The MAP Rule Under the Mortgage Acts and Practices Rule (MAP Rule, or Regulation N), it is a violation of the advertising regulations for any person to make a material misrepresentation in any commercial communication regarding any term of any mortgage credit product.

What is used to permanently identify a loan originator? A. Social Security Number B. License number C. Mortgage processor identification number D. Unique identifier

D. Unique identifier A unique identifier is a number that permanently identifies each mortgage loan originator, whether he or she is licensed or merely registered. It is assigned by the NMLS to make it easier to track mortgage loan originators electronically and to see the employment history and records of any disciplinary and enforcement actions.