NMLS study guide: five areas of the only outline published
Source: the NMLS MLO Testing Handbook · Verified Nov 6, 2026
NMLS publishes one study aid for its mortgage test, the content outline, and this NMLS study guide follows it area by area. Origination work and federal law weigh most, at 27% and 24%; each section below says what gets asked, where candidates drop points, and the check questions sit at the end.
Two areas, origination activities and federal law, account for roughly half the scored items, and they overlap: TRID is a federal rule, but it is tested through the steps of taking and closing a loan. Learn the disclosure clocks once and they pay off in both. Ethics is larger than many expect at 18%, and it is tested through borrower scenarios more than definitions.
Answers follow current law, not the law in force when a prep book was printed, so a rule amended last year is tested in its amended form.
How the scored items divide among the five areas, per the 2021 outline.
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Study guide
Federal Mortgage-Related LawsRESPA and Regulation X, ECOA and Regulation B…
This area carries 24% of the test and reads like a list of acronyms, but the questions ask what each law makes you do, and when.
RESPA and Regulation X. Section 8 bans kickbacks and unearned fee splits for referring settlement business; Section 9 stops a seller from requiring a particular title insurer. Escrow questions cover the initial escrow statement and the annual analysis.
TILA and Regulation Z. Know which charges sit in the finance charge and therefore move the APR, when the right of rescission applies, and the separate tests for high-cost (HOEPA) and higher-priced loans, both of which compare the APR with the average prime offer rate.
Loan originator pay. Under Regulation Z an originator may not be paid on a loan term such as the rate, or on a proxy for one, and may not be paid by both the borrower and the lender on the same loan. A fixed percentage of the loan amount is allowed, because the amount is not treated as a term.
ECOA and Regulation B. The prohibited bases, the 30-day clock for an adverse action notice on a completed application, and the rule that the borrower gets a copy of each appraisal no later than three business days ahead of closing.
The rest: HMDA reporting, FCRA and FACTA credit rules, Bank Secrecy Act reporting, GLBA privacy notices and the Homeowners Protection Act on private mortgage insurance.
Two kinds of business day
TRID uses two definitions. For delivering the Loan Estimate, a business day is a day the lender's offices are open for substantially all functions. For the Closing Disclosure waiting period and for rescission, it is every calendar day except Sundays and federal public holidays. Mixing them up costs timing items.
Uniform State Content
At 11%, this is the smallest area: the SAFE Act minimums every state MLO law has to meet, and the model state law that sets them out. Expect who-needs-a-license questions, licensing standards and prohibited acts.
Who must be licensed: anyone who, for pay, takes a residential mortgage application and offers or negotiates loan terms. Employees of depository institutions register federally instead.
Standards for a license: no MLO license revoked anywhere, no felony conviction in the past seven years, and no felony ever that involved fraud, dishonesty, breach of trust or money laundering. A pardoned conviction does not count. Add pre-licensing education, the test, and a showing of financial responsibility and character.
The unique identifier: your registry ID has to appear on applications, solicitations and advertising.
Temporary authority lets an originator who moves from a bank to a licensed company, or into a new state, keep working for a limited period while the state application is pending.
State regulators can examine, investigate, fine and suspend; the prohibited acts include misrepresenting rates or other loan terms and charging fees the law does not permit.
Seven years, or forever
The felony bar has two parts. Any felony within seven years before the application blocks a license. A felony tied to fraud, dishonesty, breach of trust or money laundering blocks it with no time limit. An option that treats all felonies alike is wrong either way.
General Mortgage Knowledge
With 20% of the questions, this area checks that you can tell loan types and products apart.
Qualified mortgages. A QM cannot have negative amortization, interest-only payments or a term over 30 years, and balloon payments are allowed only under small-creditor exceptions. Points and fees are capped, at 3% of the loan amount for larger loans.
Conventional and government loans. Conforming loans fit the Fannie Mae and Freddie Mac limits; jumbo loans exceed them. FHA loans carry an upfront and an annual mortgage insurance premium, VA loans a funding fee and no monthly insurance, and USDA loans income and location limits.
Adjustable rates. The fully indexed rate is the index plus the margin. A cap structure such as 2/2/5 reads initial adjustment, each later adjustment, and lifetime ceiling over the start rate.
Pricing terms. One discount point costs 1% of the amount borrowed; the purchase price does not enter into it. In a 2-1 buydown the rate is two percentage points below the note rate in year one and one below in year two.
Index and margin
The margin is fixed for the life of the loan and the index moves. An answer that says the margin resets at adjustment, or that the rate cap limits the margin, has the roles reversed.
Mortgage Loan Origination Activities
The largest area, 27%, follows a file from application to closing, and most of the loan math lives here.
Application and the Loan Estimate. Once the lender holds the six pieces of information that define an application, the Loan Estimate is due within three business days. The lender cannot delay it while waiting for pay stubs or a signed form.
Closing Disclosure. It has to reach the borrower three or more business days ahead of consummation. A new waiting period starts only if the APR moves beyond tolerance, the loan product changes, or a prepayment penalty is added.
Underwriting. Income stability, assets and reserves, credit history and the two ratios: loan-to-value and debt-to-income. The ability-to-repay rule lists the factors a lender must weigh.
Appraisal. The sales comparison, cost and income approaches; the lender orders the appraisal and nobody on the loan side may influence the value.
Loan math. Periodic interest is the annual rate divided by the number of periods, times the balance. Loan-to-value uses the lower of the price and the appraised value. Earnest money already paid counts toward the down payment, so subtract it from what the buyer brings to closing.
Three tolerance buckets
Zero tolerance: the lender's and broker's own fees, affiliate charges, services the borrower may not shop for, and transfer taxes. A 10% cumulative limit: recording fees and services the borrower picks from the lender's written list. No limit: prepaid interest, insurance premiums, escrow deposits and services the borrower shops for off that list. An overcharge is cured by refunding the excess within 60 days after consummation.
Ethics
This area is 18% of the test, and many items here are scenarios rather than definitions.
Fair lending. Redlining (refusing or pricing loans by neighborhood), steering, and treating applicants differently on a prohibited basis.
Fraud. Occupancy fraud, straw buyers, a gift that is really a loan, income or employment that does not match the documents, and a property resold quickly at a jump in value.
Appraiser independence. You may ask the appraiser to consider more comparables or to correct a factual error. You may not suggest a target value, or withhold payment or future work over the number.
Advertising. Under TILA, quoting a trigger term such as the down payment or the number of payments requires the down payment, the terms of repayment and the APR in the same ad, and every ad must be truthful.
Unfair, deceptive or abusive acts, privacy of borrower data, and handling a complaint in writing.
Two lawful answers
Scenario items often offer two options that are both legal. The expected answer discloses to the borrower, documents the decision, or refers the question to someone authorized; the wrong one is legal but leaves the borrower uninformed.
Check yourself: 15 items across the outline
15 questions in this set · 0 answeredRunning tally: 0 of 0 correct
Question 1 of 15 · Federal law · 24%
A creditor will close a purchase loan only through a settlement company it designates. Which charge is included in the finance charge and therefore the APR?
The fee for conducting the closing
When the creditor requires the closing service of a particular third party, Regulation Z counts that closing fee as a finance charge, so it enters the APR.
The government recording charges
Fees paid to public officials for recording are excluded from the finance charge, whoever runs the closing.
The owner's title insurance premium
An owner's policy protects the buyer, and title insurance is a real-estate fee Regulation Z excludes from the finance charge.
The property appraisal fee
A bona fide appraisal fee on a real-estate loan is specifically excluded from the finance charge.
Select an answer to record it. The card then marks the key and opens the reasoning under every choice.
Question 2 of 15 · Federal law · 24%
A title company pays its own full-time marketing employee a bonus for each closed file the employee brings in. Under RESPA Section 8, how is this bonus treated?
Permitted only if disclosed to consumers
Disclosure is not the condition; Regulation X exempts an employer's payments to its own bona fide staff without any consumer notice.
Permitted only if paid as a flat salary
The employee exemption covers bonuses for referral activity too; a salary-only limit is an invented condition.
Permitted as in-house staff pay
Regulation X lets an employer pay its own bona fide employees for referral activity, so a per-file bonus to the company's marketing staff is not a Section 8 kickback.
A prohibited referral fee
It would be a prohibited referral fee if the bonus went to an outside party such as a real estate agent; payments to the company's own employee are exempt.
Question 3 of 15 · Federal law · 24%
A borrower applies for an $850,000 jumbo first-lien mortgage. The APR is 6.80% and the APOR is 4.50%. How do the Higher-Priced Mortgage Loan rules classify it?
HPML; spread is greater than 2.0%
No 2.0% HPML trigger exists, so 'greater than 2.0' is an invented line; first-lien thresholds are 1.5 points (conforming) and 2.5 points (jumbo).
High-cost; spread exceeds 6.5%
The spread is 2.30 points, not above 6.5, and the 6.5-point figure is the HOEPA high-cost trigger, a different rule.
HPML; spread exceeds the 1.5% threshold
Applying 1.5 points is the common slip: that trigger is for first liens within the conforming limit, while a jumbo first lien uses 2.5 points.
Not HPML; spread is under 2.5%
6.80% − 4.50% = 2.30 points, and a first lien above the conforming limit becomes higher-priced only at 2.5 points over APOR.
Question 4 of 15 · State content · 11%
Under the SAFE Act, a loan processor who works as an independent contractor for several mortgage companies must:
Be licensed only for consumer contact
Consumer contact is not the test; independent-contractor status alone removes the processor from the clerical exemption.
Work under a licensed MLO, unlicensed
Working unlicensed under a licensed MLO's supervision is the exemption for employees, and an independent contractor cannot use it.
Hold a state MLO license
The SAFE Act and the model state law require an independent-contractor processor or underwriter to hold a state MLO license.
Only register in the NMLS
Registering in the NMLS without a license is the route for employees of depository institutions, not for independent contractors.
Question 5 of 15 · State content · 11%
An unlicensed loan processor calls a borrower for missing documents. The borrower asks, 'Should I choose the 5/1 ARM or the 30-year fixed?' What should the processor do?
Compare the two loans' terms for the borrower
Comparing the ARM and the fixed loan's terms for the borrower is offering terms, which is licensed activity.
Refer the question to a licensed MLO
Choosing between products is loan advice; an unlicensed processor handles documents and clerical follow-up and passes such questions to a licensed originator.
Advise based on the planned time in the home
Advising based on the planned time in the home is still a recommendation on loan terms, however sensible the reasoning sounds.
Recommend the option with the lower payment
Recommending the option with the lower payment is negotiating terms, and it also ignores the ARM's later rate changes.
Question 6 of 15 · State content · 11%
Under the SAFE Act model state law, what is the main purpose of the surety bond an MLO or employer must maintain?
To cover the MLO's errors and omissions
Errors-and-omissions coverage is insurance for the licensee; the surety bond protects the public.
To protect the MLO from bankruptcy
A bond does not protect the MLO from bankruptcy or any other loss; the surety pays claimants and then seeks repayment from the licensee.
To pay consumers harmed by violations
The model law's bond gives consumers, and the state, a source of recovery when a licensee breaks the law, with the amount scaled to loan volume.
To fund the NMLS registry's costs
NMLS runs on filing and processing fees, not on surety bonds.
Question 7 of 15 · Mortgage knowledge · 20%
Which condominium project characteristic is most likely to make a unit ineligible for conventional financing?
Monthly association dues of $300
Dues of $300 a month are ordinary and simply enter the borrower's housing payment.
An on-site swimming pool and fitness center
A pool and fitness center are common amenities in condominium projects and do not affect eligibility.
Major pending litigation against the HOA
Significant litigation against the association, especially over structural defects, is a classic reason a project fails conventional review.
Tenant occupancy in 15% of the units
A 15% rental share is modest; investor concentration becomes a concern only at much higher levels.
Question 8 of 15 · Mortgage knowledge · 20%
A HECM borrower dies owing more than the home is worth. To keep the home, the heirs may pay the lesser of the loan balance or what percentage of the appraised value?
95%
HECM heirs keep the home by paying the lesser of the loan balance or 95% of its current appraised value, and FHA insurance absorbs the shortfall.
80%
80% is the familiar conventional LTV figure, not the HECM rule for heirs.
100%
100% of appraised value is more than HUD requires; heirs pay the lesser of the balance or 95% of value.
90%
90% understates what heirs must pay; HUD sets the payoff at 95% of appraised value when the balance exceeds it.
Question 9 of 15 · Mortgage knowledge · 20%
A fixed-rate qualified mortgage that is not higher-priced may impose a prepayment penalty for at most how long after consummation?
3 years
A qualified mortgage that is fixed-rate and not higher-priced may carry a prepayment penalty only during the first 3 years, capped at 2%, 2% and 1%.
2 years
Two years mixes up the 2% cap for years one and two with the length of the window, which runs through year three.
6 months
Six months has no basis in the QM rule; the permitted window is three years.
1 year
One year is too short; the penalty can still apply, at a lower 1% cap, in year three.
Question 10 of 15 · Origination · 27%
An hourly employee earns $22.00 an hour and works a steady 40 hours a week. What is the monthly qualifying income?
$4,400.00
$4,400.00 treats every month as five full weeks ($880 × 5), which overstates income.
$3,813.33
Annualize, then divide by 12: $22 × 40 × 52 = $45,760, and $45,760 ÷ 12 = $3,813.33.
$3,520.00
$3,520.00 multiplies weekly pay by 4, which drops about four weeks of pay a year.
$3,666.67
$3,666.67 assumes a 2,000-hour year (50 weeks), but a steady 40-hour schedule is 2,080 hours.
Question 11 of 15 · Origination · 27%
Which of the following is NOT one of the six pieces of information that make up an application under TRID?
The estimated value of the property
The estimated property value is one of the six items, so it is part of a TRID application.
The signed purchase contract
The signed purchase contract is not one of the six items (name, income, SSN, property address, estimated value, loan amount), and a creditor cannot hold the LE until it arrives.
The property address
The property address is one of the six items; a pre-approval without an address is not yet an application.
The loan amount sought
The loan amount sought is one of the six items that start the three-business-day LE clock.
Question 12 of 15 · Origination · 27%
A salaried borrower changed employers twice in the past 24 months, with no gaps, and stayed in the same line of work. How should the employment history be treated?
Unacceptable, since any change in 12 months disqualifies
No rule says any job change in 12 months disqualifies; a move within the same field with no gap is ordinary.
Acceptable only if each new job paid a higher salary
A higher salary at each new job is not a condition; underwriters look for continuity and stable income, not raises.
Unacceptable without two years at the same employer
The two-year standard is for the line of work, not for staying with the same employer, so this rule does not exist.
Acceptable, since two years in the same field are documented
A continuous two-year history in the same line of work satisfies the standard even across several employers, provided there are no gaps.
Question 13 of 15 · Ethics · 18%
A compliance officer finds a single typo in the borrower's middle name on two documents in an otherwise consistent file. What is the appropriate response?
Require the borrower to reapply
Making the borrower reapply does nothing to explain one typo and needlessly delays an otherwise consistent file.
Clarify it and look for a pattern
One explainable discrepancy calls for clarification and a check for other red flags; fraud shows up as patterns or material misstatements.
Correct the name without telling anyone
Correcting the name silently, without telling anyone, alters a borrower's documents and can itself look like falsification.
Reject the loan and report it as fraud
Treating a single typo as fraud overreacts; nothing here is material or part of a pattern.
Question 14 of 15 · Ethics · 18%
An applicant has excellent credit but few assets. The real estate agent handles all communication and documents, while the applicant seems unaware of the transaction details. This pattern most indicates:
A straw buyer
A straw buyer lends name and credit to a deal someone else controls, and an applicant who knows little while a third party runs everything is the telltale sign.
An air loan
An air loan uses an invented borrower or property; here a real applicant with real credit takes part.
Identity theft
Identity theft uses a person's identity without their participation, yet this applicant is present and signing.
Property flopping
Property flopping is a short sale at an understated price followed by a quick resale, a property-value scheme rather than a borrower stand-in.
Question 15 of 15 · Ethics · 18%
Which of the following is a red flag for identity fraud on a mortgage application?
The pay stubs show the applicant is paid biweekly
Biweekly pay is a common payroll schedule and simply sets how income is calculated.
The applicant rents and has no mortgage history
Renting with no mortgage history describes many first-time buyers; underwriting evaluates it rather than suspecting fraud.
The report shows a recent car dealer inquiry
A recent auto inquiry points to a possible new debt to verify and says nothing about whether the identity is genuine.
The SSN was issued before the applicant was born
A Social Security number issued before the date of birth points to a stolen or synthetic identity and needs escalation.
The content outline, which NMLS calls its only study material, plus a few sample questions in the testing handbook. Answers follow current law, so check any prep book against amended rules.
Is the pre-licensing course enough preparation for the test?
It covers the required topics, but it is built to meet the licensing hours, not to drill test items. Use it for the law and add timed question practice, weighted by the outline, before you book.
Which federal rules does the outline lean on most?
TRID timing and tolerances, RESPA Section 8, the right of rescission and the loan originator pay rules. They are spread across the federal law and origination areas, which together weigh 24% and 27%.