NMLS SAFE Act Exam Study Guide - Complete Test Prep For Mortgage Loan Originators: With 200+ Official Style Questions & Answers To Ensure You Pass With Ease

NMLS: SAFE ACT Exam Study Guide – Complete Test Prep For Mortgage

Loan Originators

With 200 Official Style Questions & Answers

to Ensure You Pass With Ease

KNG Education

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Table of Contents

Introduction

Chapter One: General Mortgage Knowledge

Chapter Two: Federal mortgage And Related Laws

The Real Estate Settlement Procedure Act [RESPA]

Equal Credit Opportunity Act (ECOA)

Truth In Lending Act (TILA)

(FACTA) Fair & Accurate Credit Transactions Act & (FCRA) Fair Credit Reporting Act

Bank Secrecy Act (BSA)

Chapter Three: Mortgage Loan Originators Activities

Chapter Four: Uniform State Content

The Loan Originator's Rule

License Laws and Regulations

Compliance

Chapter Five: Basic Financial Calculations

Periodic Interest

Payments

Down Payment

Ratios of Loan-to-Value

Debt-to-Income Ratios

Interest Rate Buy-Downs: Discount Point

Prepaid Items and Closing Costs

Adjustable Rate Mortgages (ARMs)

Chapter Six: Ethics/Fraud

Violations of Law

Fairness in Lending

Fraud Detection

Advertising

Ethical Practices in the Loan Origination Process

Financial Responsibility

Closing Disclosure

Handling Borrower Complaints

Mortgage Company

Relationships with Consumers

Truth in Marketing and Advertising

Borrower Education

General Business Ethics

Chapter Seven: How to Overcome Test Anxiety

Common Causes of Anxiety

Reasons why individuals fail tests

Your Study Strategy

Chapter Eight: Practice Tests

Math Practice Test (19 Questions)

Math Practice Test - Answers

Practice Test Three

Practice Test Three - Answers

Conclusion

Introduction

What is the NMLS?

The Nationwide Mortgage Licensing System (NMLS) is an online database used by agencies that regulate mortgage and finance to maintain licensing requirements.

An NMLS license proves that the Mortgage Loan Officer you are working with is qualified to provide you with loan advice in at least one state. They are also called loan originators. These licenses are renewed periodically.

Obtaining a mortgage is a complicated and arduous process since it involves heavy financing, so you must ensure the person guiding you knows what they are doing. One of the easiest ways of doing this, is to simply look up their NMLS number in the NMLS database.

For these officers to be qualified, they are expected to spend 20 hours completing educational courses before they are licensed, pass the national mortgage test, allow the NMLS to get their credit score, and provide fingerprints so that the FBI can conduct a background check. Even after licensing, they still have to spend 8 hours of continuing education every year and make sure their state licenses are always updated in the system.

Purpose of the NMLS

· It allows people to look up their loan officers and make sure they are authentic; that way, they avoid being cheated by fraudsters. You can check their licenses and the state they are authorized to operate.

· The system ensures that users find all the information they need in one place instead of having to look across states for the same thing.

· Officers need the database to send applications, upload their documentation and maintain their licenses in the system.

· The lenders who employ these officers use it to make sure they employ the right people and to make sure they keep their information updated as well.

The NMLS Exam

It is also called the National Test or the SAFE Mortgage Loan Originator Test. It is used to test people who want licenses to be Mortgage Loan Originators (MLO's).

To take the test, you need to follow these steps;

· Create an NMLS account so you can get a username and password. You will receive an email from the website telling you the next steps.

· Enroll for the test and pay the application fee. Usually around $110. There are other processing fees involved further in the process.

· Schedule an appointment for when and where you will take the test. The process differs depending on whether you take your exam at a test center or online.

· Complete the 20 hours of the comprehensive courses to prepare for the test. These hours are compulsory, and you must complete them.

How does the Exam work?

According to the CSBS (the Conference of State Bank Supervisors) report of July 2021, the pass rate for this exam currently sits at 53%. This is considered a high failure rate, meaning many people consider this test fairly difficult to pass.

The candidate taking the exam is expected to master a lot of information before taking the test. They must know everything a mortgage loan originator needs to know in order to effectively and compliantly serve their customers. Unless the candidate (you) are willing to dedicate the right amount of time to study, you may easily join the 47% that have to retake the exam. There is usually a 30-day waiting period before you can take the test again. If you fail it three consecutive times, then you have to wait six months before you can do it again.

The biggest problem with this test is that there is usually just not enough time to deliver all the necessary information. The knowledge required to effectively take this test should take around 150 hours, but is squeezed into 20 hours in 14 days. Where do people take the 20 hours, is it online or physical? As a result, the professionals taking you through the course are forced to skim through the coursework. This means that a lot is left for the candidates to figure out by themselves. This is why the candidates need to be dedicated to doing the extra work, otherwise it will all have been for nothing, and that is where this audiobook is designed to help you.

The majority of the people that have passed this test recommend that on top of the 20 hours you spend on the official coursework, you spend an extra 20 hours studying on your own. The more time you spend becoming familiar with the material, the higher your chances of passing once you get to the testing center. You will be required to have a high level of self-discipline to crack this, otherwise, you will think you have time to study and keep postponing until you wake up one day and there is no time left.

Unlike the tests we took in school, you will not have to wait for too long to know your score. Once you take this NMLS test, you will only need to wait 72 hours to get your test results. If you fail, you prepare to retake, but you can apply for your license in the NMLS database if you have passed.

Where to take the exam?

You can schedule your exam with the Prometric testing centers, which are scattered all over the country. Every state has these physical centers, so just choose the one closest to where you live. You can also choose to do it online through the Prometric ProProctor System. You will need to download the Proproctor app from the website for this.

Prior to the exam, you will need to provide identification documents and they have to be original. You will need a valid government-issued identification that has your photograph.

As with every exam, there are rules that must be adhered to, and the following apply when taking the NMLS exam;

You cannot take the test for someone else.

You cannot take any personal belongings into the exam room. If you are at a center, a locker is provided to leave your stuff inside of. If online, no one can enter the room while you take the test.

You cannot give or receive any assistance, even on bathroom breaks.

You cannot share the contents of the test with anyone.

Anyone found breaking any of the rules risks being denied a license or having their license revoked at any time.

Passing your Examination

To pass the MLO exam, you must score 75% and above - otherwise you will have to retake it.

Since the failure rate is fairly high, here are a few tips that will keep you from adding to it;

· Take Your Live Classes – These classes are made a requirement for a reason. You will have access to skilled professionals who have extensive knowledge of the field. Furthermore, you will also be able to ask questions while getting immediate feedback. This one-on-one interaction is the best way to make sure you get the best out of the sessions. Even though the time allocated for these lessons is not realistically enough, what you get in that limited time will help you out a great deal.

· Rest – A lot of us underestimate the power of a goodnight's sleep. You may be inclined to pulling an all-nighter the day before your exam, but I highly advise against it. You will end up exhausting yourself, and you will barely have any energy for the next day which will increase your anxiety once you start the exam. Being clear-minded when you take the exam will serve you well. So make sure you study well throughout the study period so you can rest when it matters.

· Plan your exam time well – You may have heard someone brag about how they only used an hour to complete the exam, but that is not the competition you should be worried about. You might be able to finish in that same hour too, but make sure you don't rush through the test. You are allotted 3 hours to complete this exam so take your time to understand the questions and give the answers to the best of your knowledge.

· Look out for the 'negatives' – No test is ever straightforward, and there will be traps meant to throw you off, so be careful. You might encounter words like 'everything but', 'except for', and many others, so make sure you understand what the question is asking. Read it more than once if you need to. Missing one of these could cost you.

· Answer every question – When you leave a question blank, it is automatically wrong. So even if you do not know what to answer, just guess anything. You might just get lucky and select the right answer. Trust your gut - it might just know what you do not.

· Always choose the best answer – Sometimes, questions have more than one answer, and since you cannot choose them all, find the best one and choose it.

· Try to confirm your answers immediately – In this exam, you can either confirm, or confirm and review. When you confirm, it goes directly into the system as your final answer, but when you confirm and review, it is not counted until reviewed at the end. It's best to confirm all the questions you are absolutely sure about so you do not run out of time at the end, and all you have to go back through are the ones you did not confirm - as opposed to all of the questions.

· Simplify information provided – Sometimes, questions have too much information meant to confuse you, so instead of panicking, take a breath and break it down slowly until you get what you need to apply.

· Use Elimination – You will not know the answer to every question, but you may have an idea, so when you encounter a question like that, eliminate the answers starting with the least likely, and the one you remain with might just be the right one.

· Study on Your own – I cannot stress this enough. Use those 14 days to study your ass off. It is worth sacrificing those parties and movies just to squeeze in extra hours of study?

A bonus tip most people give is that you should avoid doing the exam immediately after you finish your coursework. There are some things that you can only comprehend after engaging in the field, so find someone to train you as if you are already working, or you could just observe them. Equally, you shouldn't wait too long either so that you don't forget what you already know.

Other requirements for a Mortgage Originator License

Passing the NMLS exam is definitely the main requirement, but it is not the only one. You will also need;

· A background check – The FBI will conduct a criminal background check on every candidate. You will be required to pay $36.25 for a live scan and $46.25 for the paper card capture. This check is conducted to make sure the applicant is fit for the job. Applicants get the results within 3-5 business days, but this is subject to change depending on the FBI processing time at that time. According to this check, you can be disqualified if;

- You are found to have been convicted of crimes such as fraud, money laundering, or any other that shows dishonesty.

- You have been convicted of any felony within the seven years you are filing your application.

- You have ever had your license revoked.

Anyone with these issues is advised to seek legal counsel before starting the process.

· Provide fingerprints – Unless you have already submitted fingerprints to the NMLS in the last three years, you will be required to have them taken. Apart from them accurately confirming that you are who you say you are, they are used by the FBI in your background check. The fee is included in what you pay for the background check.

The fingerprints will reveal everything about you; your date of birth, address, employment, and every basic thing about your life. To schedule your appointment, you must create a field print account. One set of your fingerprints will be collected and later deleted for data protection once submitted to the NMLS.

· Permit a credit report – Every candidate has to go through this authorization process, and the fee is $15 - which can be paid by either you or your employer. This report is meant to determine if the MLO is financially responsible. This, however, does not mean that you cannot become an MLO if you have bad credit. There is no official minimum credit requirement for the job.

· Processing fees – You are required to pay the NMLS $30 as setup fees once you start the process, as well as $30 as an annual processing fee.

· Legal Age – You must be an adult of at least 18 years and above.

How much does the exam cost?

The exam currently costs $110. That excludes the processing fees (previously mentioned) charged by the NMLS. The exam has 125 questions. 115 of them will count to your score, while the other 10 are just sample questions which will not count. Remember that you need to score at least 75% to pass, so you must get at least 87 questions correct, of the 115 being counted.

Differences between the varying states of America

The NMLS is nationwide, meaning it is legal in the entire US territory. This also means that as long as an MLO can meet all the requirements of a state and pass the NMLS exam, they can get as many licenses to practice in as many states as they want.

Being licensed in more than one state comes with benefits such as;

Access to a larger pool of clients

You can move with your clients

You add to your credibility.

You can compete with interstate banks.

To acquire a license in any state, you must meet the educational requirements. However, several states have specific elective requirements, so make sure you check beforehand.

Examples of different state electives include;

Nebraska – 2-hour state PE

Texas – 3-hour state PE

Arizona – 4-hour state PE

Utah – 15-hour state PE

Pennsylvania – 3-hour state PE

Louisiana – No state Elective required.

These electives are in addition to the 20-hour national requirement of coursework. You also have to remember that you have to maintain your license in all these states which are renewed annually. These processing fees may also vary from state to state. Apart from these, all the other rules are pretty much the same; they all follow the NMLS guidelines.

Reasons for not getting a License?

Several factors may cause you to be denied an MLO license, such as;

· Education Requirements

As mentioned earlier, applicants are required to complete 20 hours of official coursework and 8 hours of continuing education every year. Also, remember that some states require additional hours, so you must keep up with the requirements or you risk having your license denied or revoked.

· The Exam

Like we said earlier, the only way to get through the door is to pass your NMLS exam by getting 75% and above. Other requirements do not matter until you have this one done. Otherwise, you will not get your license.

· Your Background Check

The financial world is sensitive, so if your employer even imagines that you cannot be trusted, then you will not be employed. That is why anyone convicted of crimes like fraud and money laundering is denied a license. If you are convicted of any other crime, you must wait seven years to apply for a license.

· Credit Assessment

While there is no agreed-upon minimum credit score required to get this job, different states handle this aspect differently;

- Some keep a copy of the report but do not use it

- Some are declining applications of applicants with low credit scores

- Other states are asking applicants with a score less than 580 to write a letter explaining how they plan to fix their credit.

What does a Mortgage Loan Originator do?

A Mortgage Loan Originator (MLO) is also known as a mortgage broker. They are responsible for walking clients through the process of acquiring a loan through rating and pricing their mortgage.

These officials usually work for big banks, credit unions, and other lending institutions, but this does not limit many others to be self-employed officials and work independently. A lot of people tend to think a mortgage originator and a mortgage banker are the same person, yet they are not. A mortgage originator will