Official Sample Questions

Official sample questions provided by the CSBS

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1. According to the Equal Credit Opportunity Act (ECOA), age discrimination by a mortgage lender is acceptable:

A not under any circumstance.
B only if the applicant is too young to enter into a legally binding contract.
C only if the applicant is too young or too old to understand the ramifications of defaulting on a legal debt.
D only if life expectancy data indicates an applicant will not be alive at the end of the loan term.

ECOA prohibits age discrimination except in limited situations: - The main exception is when the person is not legally able to contract, usually under 18. - Life expectancy or capacity to understand a contract are NOT valid reasons to deny credit.

2. The unique identifier of any person originating residential loan must be clearly shown on all of the following documents except:

A Consumer Financial Protection Bureau (CFPB) special information booklet.
B residential mortgage loan application form.
C business cards.
D company websites.

The NMLS unique identifier must appear on: Business cards Company websites Loan application forms However, it is not required on the CFPB special information booklet, which is a standard government document not individualized to the originator.

3. When a client’s property is being appraised, a loan underwriter may take all of the following actions except:

A request a second review of the appraisal.
B ask the appraiser to consider additional property information.
C ask the appraiser to correct an incidental error on the appraisal.
D inform the appraiser that the appraised value is contingent on the client’s retention of the principal dwelling.

TILA and Dodd-Frank prohibit coercion or influence over appraisers. Telling an appraiser to adjust the value based on unrelated factors, like whether a borrower will keep living there, violates appraiser independence. Permissible underwriter actions include: - Requesting a review - Asking for factual corrections - Providing additional property info

4. A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing?

A $25,000
B $27,000
C $32,000
D $30,000

$160,000 (sale price) x .20 (down payment percentage) = $32,000; $32,000 - [$5,000 (earnest money) + $2,000 (option money)] = $25,000

5. Which of the following documents does a mortgage loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?

A A cost-benefit analysis
B A market survey
C An area survey
D An appraisal

An appraisal is the formal document where a licensed appraiser analyzes recent sales of comparable properties, property conditions, location, and market trends to determine a property’s value.

6. According to the Truth-in-Lending Act (TILA), the term “refinance” applies to:

A a reduction in APR.
B a change in a payment schedule.
C the satisfaction of an existing obligation and its replacement by a new obligation.
D the renewal of a single payment obligation with no change in the original terms.

TILA defines refinance as a new transaction that replaces and satisfies an existing loan obligation, even if it's with the same lender. It's more than just changing the terms — it's the creation of a new note.

7. Included in the Loan Estimate, all of the following are part of the finance charge except the

A origination charges.
B appraisal cost.
C VA funding fee.
D per diem interest.

The finance charge includes all charges imposed directly or indirectly by the lender as a condition of the extension of credit. This generally includes: Per diem (prepaid) interest, Origination charges, Points, Mortgage insurance, etc. However, the appraisal fee is typically considered a third-party fee and not a finance charge, because it is for services rendered to determine the value of the property, not for obtaining credit.

8. If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?

A $2,343.47
B $2,379.52
C $2,163.20
D $2,487.68

40 hours per week x $13.52 per hour = $540.80 (weekly income); $540.80 x 52 weeks per year = $28,121.60 (yearly income); $28,121.60 / 12 months = $2343.47 (monthly income)

9. According to the Truth-in-Lending Act (TILA), which of the following fees is excluded from the calculation of the APR?

A Mortgage insurance premiums
B Wire transfer
C Prepaid interest
D Hazard insurance

APR includes most fees required to obtain the loan — but hazard (homeowners) insurance is excluded because it's not considered a finance charge under TILA. It protects the property, not the credit transaction. Included in APR: * Prepaid interest * Mortgage insurance * Origination fees * Discount points

10. The requirement for private mortgage insurance (PMI) is generally discontinued when the loan-to- value ratio falls below:

A 80%
B 90%
C 50%
D 20%

PMI is typically required when the LTV exceeds 80%. Once the LTV drops to 80% or lower, PMI can be requested to be canceled. Lenders must automatically cancel it at 78% LTV, assuming timely payments.

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