MLO Exam Dumps - Mortgage Loan Origination (SAFE MLO) Exam

Under TILA-RESPA Integrated Disclosure (TRID) rules, if a lender overcharges the borrower by more than the allowable 10% aggregate tolerance on certain closing costs, the lender must refund the excess amount to the borrower within 60 days of loan consummation. The 10% tolerance applies to certain fees like title insurance and government recording fees, ensuring that the lender provides accurate estimates on the Loan Estimate (LE) and does not exceed allowable variances at closing.

When a licensed mortgage loan originator (MLO) shares their commission with another licensed MLO at the same company for actual services performed on a loan, it is referred to as fee splitting.

Fee splitting is legal and permissible under certain conditions, such as when both MLOs are licensed and have contributed to the loan's origination, processing, or closing in a meaningful way. This is different from illegal kickbacks, which are prohibited under RESPA.

Fee splitting must comply with all applicable state laws and company policies to ensure transparency and that all compensation is based on legitimate work performed.

Under the Truth in Lending Act (TILA), for mortgage rescission purposes, a business day is defined as every day except Sunday and legal holidays. This definition applies to the three-business-day right of rescission period, during which a borrower can cancel certain refinance or home equity transactions.

The right of rescission allows the borrower three business days after signing the loan documents to cancel the loan without penalty.

According to the SAFE Act, state-licensed MLOs must complete at least eight hours of approved continuing education annually, including three hours of federal law and regulations, two hours of ethics (which includes instruction on fraud, consumer protection, and fair lending), and two hours of training on nontraditional mortgage products.

“The annual continuing education requirement must include at least—(A) 3 hours of Federal law and regulations; (B) 2 hours of ethics, including instruction on fraud, consumer protection, and fair lending issues; (C) 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.”

— SAFE Act, 12 U.S.C. § 5105(b)(2)(A)-(C)

The only ethical and legal option for an MLO is to ask the borrowers if they have any additional, previously undisclosed assets that can be documented. All assets used for closing must be sourced and verified.

Editing documents to show false contributions or facilitating undisclosed loans/fake deposits constitutes fraud.

“All assets used for closing must be verified and properly documented… Any undisclosed assets must be evaluated and properly sourced.”

— Fannie Mae Selling Guide B3-4.2-01; SAFE MLO National Test Study Guide

In this situation, the most compliant action is to provide timely initial disclosures to the borrower within the required timeframe, even if the figures may be adjusted later when additional information is obtained. This is in accordance with TILA-RESPA Integrated Disclosure (TRID) rules, which mandate that the Loan Estimate (LE) must be provided within three business days after receiving an application, even if all details are not yet finalized.

Holding off on processing (Option A) or waiting until additional information is obtained (Option D) is non-compliant, as this could violate the timely disclosure requirements.

While documenting attempts to gather information (Option B) is good practice, it does not fulfill the regulatory obligation to provide disclosures promptly.

By issuing initial disclosures, even if the numbers are subject to change, the creditor remains compliant with the Consumer Financial Protection Bureau (CFPB) guidelines. Corrections can be made in subsequent disclosures.

The main purpose of the secondary market is to fund additional loans by allowing lenders to sell existing mortgages to investors. This process replenishes the lender’s capital, enabling them to originate more loans. The secondary market is where mortgage-backed securities (MBS) are bought and sold, providing liquidity to the mortgage market.

Other options such as funding second mortgages or second home loans are specific transactions that do not capture the overall purpose of the secondary market.

The Uniform Residential Loan Application (URLA, Form 1003) requires a comprehensive listing of the applicant’s assets and liabilities. This helps the lender determine the applicant’s net worth and capacity to repay the loan.

“The application must contain a complete and accurate accounting of all borrower assets and liabilities.”

— Fannie Mae Form 1003, Uniform Residential Loan Application Instructions