Federal mortgage law is the second largest section of the NMLS SAFE MLO national exam, at roughly 24 percent of your questions. It is also where most candidates lose the most points, because the rules turn on exact timelines, dollar thresholds and which disclosure applies when. Knowing the name of a law is not enough. The exam wants you to apply it to a specific borrower situation.
The heaviest hitters are the TILA-RESPA Integrated Disclosure rule (TRID), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Equal Credit Opportunity Act (ECOA), the Home Mortgage Disclosure Act (HMDA) and the Fair Housing Act. Expect questions on Loan Estimate and Closing Disclosure delivery timelines, the three day waiting periods, tolerance categories for fee changes, the right of rescission, and prohibited bases for discrimination under ECOA and Fair Housing.
What this section covers
TRID: Loan Estimate and Closing Disclosure timing
RESPA Section 8 (kickbacks and referral fees)
TILA: APR, finance charge, right of rescission
ECOA prohibited bases and adverse action
HMDA reporting and government monitoring data
Fair Housing and fair lending
20 Federal Mortgage Law practice questions
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Q1easy
Under TRID rules, how long must a Loan Estimate be retained after consummation?
Explanation: The Loan Estimate must be retained for 3 years after consummation under Reg Z Section 1026.25. This is commonly confused with the Closing Disclosure, which must be retained for 5 years. The difference: LE = 3 years, CD = 5 years. Why different? The CD contains the final, binding terms of the loan and is referenced longer for servicing and compliance. The LE is an estimate that is superseded by the CD at closing. Exam tip: LE = 3, CD = 5.
Q2easy
Under the Fair Housing Act, a complaint of housing discrimination must be filed within how long after the alleged violation?
Explanation: A complaint under the Fair Housing Act must be filed with HUD within 1 year (365 days) of the alleged discriminatory act. If the person chooses to file a federal civil lawsuit instead, the deadline is 2 years from the date of the violation.
Q3easy
The Gramm-Leach-Bliley Act requires financial institutions that share nonpublic customer information with unaffiliated third parties to notify customers of their privacy policies how often at a minimum?
Explanation: The Gramm-Leach-Bliley Act (GLBA) requires financial institutions that share nonpublic customer information with unaffiliated third parties to provide customers with a written (or electronic) privacy policy notice at least annually. The notice must be clear and conspicuous. Note: The FAST Act of 2015 created an exception allowing institutions that do not share with unaffiliated third parties beyond legally permitted purposes and have not changed their privacy policies to forgo annual notices — but the annual requirement remains the standard tested rule. "At loan closing only" is incorrect — a one-time disclosure at application is insufficient. "At loan application only" is incorrect — a closing disclosure alone does not satisfy the ongoing annual requirement. "Annually" (quarterly) is more frequent than required but is not the mandated minimum.
Q4easy
Under RESPA, how long must the Closing Disclosure and related servicing documents be retained?
Explanation: RESPA and TRID require Closing Disclosures to be retained for 5 years after consummation. This longer period (vs. 3 years for the Loan Estimate) reflects the CD's role as the definitive record of loan terms, costs, and closing details. Servicing documents related to the CD are also subject to 5-year retention. This is one of the most-tested retention periods because students frequently confuse it with the LE's 3-year requirement.
Q5easy
According to TRID, the Closing Disclosure must be received by the borrower at least how many business days before consummation?
Explanation: TRID mandates that the Closing Disclosure be provided to the borrower no later than three business days before consummation. For the Closing Disclosure, 'business day' is defined as all calendar days except Sundays and federal public holidays—a broader definition than used for the Loan Estimate. "Seven business days" (one business day) is insufficient under TRID. "One business day" (five business days) is the mailing presumption added on top of the three-day rule when the CD is mailed, not the base rule itself. "Three business days" (seven business days) refers to the mandatory waiting period after the Loan Estimate is delivered before consummation can occur.
Q6easy
Under Regulation B, how long must a lender retain adverse action notices and application documents?
Explanation: Regulation B requires lenders to retain applications, documents received from applicants, notifications sent to applicants (including adverse action notices), and statements of specific reasons for adverse actions for 25 months after the date of the action. This 25-month retention period also applies to prescreened solicitations. The 12-, 36-, and 48-month figures are not the correct Regulation B retention period.
Q7medium
An MLO who works for a federally chartered bank wants to originate mortgage loans. Under the SAFE Act, what must this MLO do regarding the NMLS?
Explanation: MLOs employed by federally regulated depository institutions (such as national banks chartered by the OCC) are required to register with the NMLS — not obtain a state license. Registration is different from licensing: it does not require pre-licensure education or state testing. State licensure (with the 20-hour PE requirement and testing) applies to MLOs at non-depository institutions. CFPB approval is not a prerequisite for NMLS registration.
Q8medium
A married couple applies jointly for a mortgage. Under Regulation B, with respect to government monitoring information, the lender must:
Explanation: Regulation B requires that when a mortgage involves a primary residence as collateral, the lender must collect government monitoring information (ethnicity, race, sex, marital status, age) for both the applicant and any co-applicant. Limiting collection to only the primary borrower is insufficient. The requirement is triggered by primary residence collateral — not non-primary residences — and in-person presence does not eliminate the collection requirement.
Q9medium
For the 2025 HMDA reporting year, financial institutions with assets at or below what threshold are exempt from HMDA reporting?
Explanation: The 2025 HMDA asset-size exemption threshold is $58 million (based on assets as of December 31, 2024). Institutions at or below this level are exempt from HMDA data collection and reporting. This threshold is adjusted annually for inflation. The exemption provides compliance relief for smaller community banks and credit unions that would be disproportionately burdened by HMDA reporting requirements.
Q10medium
A consumer wants to verify whether the MLO they are working with is properly licensed. Where can the consumer find this information?
Explanation: The NMLS Consumer Access portal is a free, publicly available tool that allows consumers to look up the licensing and registration status of mortgage loan originators and companies. The CFPB's enforcement database lists regulatory actions, not individual MLO licenses. The HUD-approved counselor directory lists housing counselors, not MLOs. Federal Reserve examination reports are not a source for verifying individual MLO licenses.
Q11medium
Under the current General QM rule, a loan with a 50% DTI ratio:
Explanation: The CFPB's revised General QM rule (effective March 2021) replaced the prior 43% DTI cap with an APR-to-APOR comparison. A loan qualifies as a General QM if its Annual Percentage Rate (APR) does not exceed the Average Prime Offer Rate (APOR) by 2.25 percentage points or more for most first-lien loans — regardless of the borrower's DTI ratio. So a 50% DTI loan can absolutely be a General QM if the APR/APOR spread is within the threshold. Lenders must still consider and verify DTI, but there is no fixed DTI ceiling. "Cannot qualify as a QM because DTI exceeds 43%" reflects the outdated pre-2021 rule. "Automatically receives safe harbor protection" is wrong because safe harbor depends on pricing, not DTI. "Requires a manual exception from the CFPB" is fabricated — the CFPB does not issue manual QM exceptions.
Q12medium
A lender intends to keep all loans it originates in its own portfolio and never transfer servicing. Does the lender still need to provide the Servicing Disclosure Statement to borrowers?
Explanation: RESPA Section 3 requires that all lenders originating federally related mortgage loans provide a Servicing Disclosure Statement to every applicant within 3 business days of application, regardless of the lender's actual servicing intent. However, the content of the disclosure may reflect the lender's practices — a lender that does not transfer servicing may state that it does not currently intend to sell or transfer servicing of this loan. The disclosure requirement is universal; no exemption exists for portfolio lenders (B) or based on lender intent alone (A). The $100,000 threshold (D) does not control the servicing disclosure requirement (it is mentioned in other RESPA contexts).
Q13medium
Before the CFPB was established, enforcement of consumer financial protection laws was fragmented across multiple agencies. What was a significant gap in the pre-CFPB regulatory landscape?
Explanation: A major pre-CFPB regulatory gap was that non-bank financial institutions — including payday lenders — largely escaped federal oversight. Banks were supervised by their prudential regulators (OCC, Fed, FDIC), but non-bank lenders had no comparable federal consumer protection supervisor. RESPA and TILA did have prior enforcement mechanisms (through HUD and the Fed respectively), but these were fragmented. The CFPB consolidated authority and extended oversight to non-bank entities.
Q14medium
A borrower is frustrated with confusing, jargon-filled mortgage disclosures that obscure key loan terms. Which CFPB initiative most directly addresses this concern?
Explanation: One of the CFPB's core functions is opposing overly long, jargon-filled, and misleading disclosures and account agreements. The CFPB believes an informed consumer is a protected consumer, and it works to ensure disclosures are clear and understandable. The CFPB does not set interest rate caps, approve or deny individual mortgage applications, or subsidize housing — those are functions of other agencies or market participants.
Q15medium
A lender requires borrowers to use a specific title insurance company as a condition of loan approval. Under TILA, how are the title insurance premiums in this scenario treated?
Explanation: Under TILA, finance charges include amounts paid to third parties if the lender requires that service as a condition of extending credit, even when the third party collects the fee directly. Because the lender mandated the use of a specific title company, those premiums become finance charges regardless of who collects them. The payment flowing to a third party or settlement agent does not exempt it. If the borrower were free to shop for title insurance without restriction, the treatment might differ, but lender-required services are included.
Q16hard
A lender sends an adverse action notice to an applicant who was denied a mortgage. The notice states: 'Your application was denied because your credit profile does not meet our lending standards.' Which of the following best describes the regulatory problem with this notice?
Explanation: Regulation B requires that adverse action notices contain specific reasons for the denial — not vague or generic statements. 'Your credit profile does not meet our lending standards' fails to identify what specific aspect of the applicant's credit profile was deficient (e.g., excessive debt-to-income ratio, derogatory credit history, insufficient employment history). The specificity requirement exists so that applicants understand exactly why they were denied and can take steps to address the issues. "," is incorrect because mentioning 'credit profile' generically does not satisfy the specificity requirement. "The notice is compliant because it references the ap..." is a real requirement under ESIGN, but it does not override the more fundamental problem with vague denial reasons. "The notice violates Regulation B because it does not..." is incorrect — a credit score disclosure supplements but does not substitute for the specific denial reasons required by Regulation B.
Q17hard
A borrower in a community property state applies individually for a mortgage. The borrower has excellent credit and sufficient income to qualify. However, the borrower's spouse has $45,000 in unpaid credit card debt that is a community obligation under state law. The lender includes the spouse's community debt in the borrower's DTI calculation, which causes the DTI to exceed the lender's maximum threshold. The lender denies the loan. Under ECOA, this denial is:
Explanation: In community property states, debts incurred by one spouse may legally be the obligation of both spouses under state law. Regulation B explicitly permits lenders to consider a non-applicant spouse's financial obligations in community property states when evaluating an individual application, because these obligations are legally tied to the applicant's creditworthiness. The denial is based on DTI — a legitimate creditworthiness factor — not on the fact that the applicant is married. This is distinct from discriminating based on marital status. "," is incorrect because community property exceptions exist. "s debts effectively discriminates on that basis" confuses a creditworthiness-based decision with prohibited discrimination. "A violation, because the spouse's debt cannot be con..." adds an incorrect additional condition.
Q18hard
A large bank holding company owns three subsidiaries: (1) a nationally chartered bank, (2) a state-chartered bank that is a Fed member, and (3) a state-licensed mortgage company. Which regulatory framework correctly identifies the primary federal supervisor for each entity?
Explanation: This question tests understanding of the split federal banking regulatory structure. The OCC supervises nationally chartered banks. The Federal Reserve supervises the bank holding company itself AND state-chartered banks that are Fed members. The state-licensed mortgage company is subject to state licensing requirements and CFPB consumer protection oversight. The FDIC's supervisory role applies to state non-member banks — it is not the primary supervisor of Fed-member state banks or national banks simply by virtue of providing deposit insurance.
Q19hard
At closing, a borrower's final Closing Disclosure reflects the following fee increases over the original Loan Estimate: transfer taxes increased by $180 (from $400 to $580), the lender's origination charge increased by $250 (from $1,000 to $1,250), the appraisal fee for a lender-selected appraiser increased by $75 (from $500 to $575), and the homeowner's insurance premium increased by $120 (from $900 to $1,020). The lender discovers the tolerance violations 45 days after consummation. Which of the following MOST accurately identifies the fees subject to a cure, and what is the total refund amount owed to the borrower?
Explanation: Under TRID (Reg Z / 12 CFR 1026.19), fees are sorted into three tolerance buckets. The 0% tolerance bucket includes lender origination charges and fees for required third-party services when the borrower was NOT permitted to shop (lender-selected providers). The unlimited tolerance bucket includes transfer taxes, prepaid interest, property insurance premiums, and amounts placed in escrow. The 10% tolerance bucket includes recording fees and required third-party services when the borrower WAS permitted to shop and used the lender's list. Here, the origination charge ($250 overage) is 0% tolerance — any increase is a violation. The appraisal fee for a lender-selected appraiser is also 0% tolerance — because the borrower could not shop for this provider, the $75 overage is also a violation, making the total cure $250 + $75 = $325. Transfer taxes fall in the unlimited tolerance bucket, so the $180 increase requires NO cure. Homeowner's insurance (a prepaid/escrow item) is also unlimited tolerance, so the $120 increase requires NO cure. Because the cure is discovered at 45 days post-consummation — within the 60-day cure window — the lender may issue a refund by the 60th day to correct the tolerance violations. Answer A incorrectly places transfer taxes in the 0% bucket; transfer taxes are explicitly unlimited tolerance under TRID. Answer C correctly identifies the origination charge as 0% but misclassifies the lender-selected appraisal fee as 10% tolerance; because the lender chose the appraiser and the borrower had no shopping rights, it belongs in the 0% bucket. Answer D is wrong because TRID explicitly permits certain fee increases — not all increases are violations; the bucket framework exists precisely to classify which increases are permissible. Exam tip: Remember 'LENDER picks = 0%, BORROWER shops from list = 10%, TAXES and INSURANCE = unlimited.'
Q20hard
A non-bank mortgage company originates 4,000 mortgage loans annually and has $2.5 billion in assets. It operates in 12 states. Under the Dodd-Frank Act, which regulatory body has supervisory and examination authority over this company's compliance with federal consumer financial protection laws?
Explanation: The Dodd-Frank Act granted the CFPB supervisory and examination authority over non-bank financial companies, including mortgage companies, that are 'larger participants' in the mortgage market. Non-bank mortgage originators that meet volume or other thresholds fall under CFPB supervision regardless of whether they have a bank charter. "," is incorrect — while states regulate non-banks, Dodd-Frank explicitly extended federal supervisory authority to large non-bank mortgage companies. "," is incorrect — the Dodd-Frank Act transferred most consumer protection rulemaking and supervisory authority from the Fed to the CFPB. "s banking department, since non-bank entities are ex..." is incorrect — the OCC charters national banks, not non-bank mortgage companies.
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