NMLS Updated MLO Exam Questions and Answers by tate

Real estate brokerage activities are not a primary function of a mortgage loan originator (MLO). The MLO’s primary role is to assist consumers in taking an application (A), offering or negotiating credit terms (B), and helping consumers apply for credit (C).

Real estate brokerage activities, such as negotiating real estate transactions, are separate from the loan origination process and require different licensing and qualifications.

References:

SAFE Act, 12 USC §5101

NMLS MLO Licensing Guidelines

The Consumer Financial Protection Bureau (CFPB) is responsible for regulating mortgage lenders and overseeing their origination practices and procedures. The CFPB was created under the Dodd-Frank Act to protect consumers from unfair, deceptive, or abusive practices in financial services, including mortgages. Its functions include:

Enforcing rules related to mortgage origination, such as TILA, RESPA, and ECOA.

Ensuring that lenders provide clear disclosures and follow fair lending practices.

Other functions:

Regulating the federal funds rate (A) is the role of the Federal Reserve.

Deciding the quantity of mortgage-backed securities purchased by the government (D) is related to Federal Reserve monetary policy, not the CFPB.

References:

Dodd-Frank Wall Street Reform and Consumer Protection Act

CFPB’s Role in Mortgage Origination

An individual who is an independent contractor and performs loan processing or underwriting activities must maintain a state originator license if they collect, receive, or distribute information in connection with making a credit decision. This is because independent contractors are not considered supervised employees, and their work directly impacts the loan approval process.

In contrast, employees of a mortgage lender who perform clerical duties (A) under supervision do not need a state license, nor do those who do not interact with consumers (B).

References:

SAFE Act, 12 USC §5101

NMLS Licensing Guidelines for loan processors and underwriters

Consumer complaints and their analysis are critical for identifying weaknesses in a company's compliance management system (CMS) and internal controls. The CFPB (Consumer Financial Protection Bureau) emphasizes that analyzing complaints helps companies spot patterns of non-compliance, risks, or failures in managing regulatory requirements. By reviewing consumer feedback, businesses can identify gaps in their compliance practices, including weaknesses in training programs and internal systems, that may lead to violations of laws like RESPA, TILA, and ECOA.

Complaints may reveal issues with loan disclosures, error resolution, unfair lending practices, or lack of training in regulatory updates.

Regular analysis helps reinforce internal controls and improve compliance processes.

References:

CFPB Compliance Management Review Guidelines

TILA and RESPA regulations on consumer protection