NMLS Federal Mortgage Related Laws: The Core of the NMLS Exam

Passing the NMLS exam is a significant milestone for anyone seeking a successful career in the mortgage originations industry. As an NMLS exam preparation coach, I am regularly asked to pinpoint the most important part of the NMLS exam, presumably so the requester can identify on where he or she should focus the majority of his or her attention when preparing.  The simple truth is that, in order to pass the NMLS exam, the test candidate must be proficient in all five NMLS Test Content Modules: Federal Mortgage Related Laws, The Uniform State Content, General Mortgage Knowledge, Mortgage Loan Origination Activities, and Ethics.  You may access the NMLS Exam Test Content Outline on the Helpful Links & Tools page accessed through www.nmlstraining.com/resources.

Having said this, I will concede that, to pass this exam, the test candidate, undoubtedly, must be proficient with the nineteen Federal Laws and rules constituting the Federal Related Mortgage Laws section even though it technically covers only 24% of the questions appearing on the exam.  Without proficiency in the Federal Laws component, the test taker will not pass.  Mind you, however, that, if the test taker is only strong in the area of Federal Laws and not in the other areas, he or she will also fail.  Therefore, the bottom line is that, in order to pass the NMLS exam, the test taker must be proficient in all areas but especially versed in the federal laws.

NMLS Federal Mortgage Related Laws: Exploring this Critically-Important Exam Component

It’s completely understandable why so much emphasis is placed on the NMLS exam’s Federal Mortgage Related Laws section.  After all, compliance and consumer protection is of the utmost importance.  It stands to reason, therefore, that new mortgage loan originators should be thoroughly versed in and assiduously familiar with the rules and regulations that govern them.

Before itemizing the 19 federal regulations and rules constituting the Federal Mortgage Related Laws section, I feel it’s appropriate to discuss the six federal law study strategies I’ve found to be helpful in mastering these rules.  Please note that not every study strategy, or every part of every strategy, will apply to every regulation.

Effective Federal Mortgage Related Laws Study Strategies

1. Purpose & Origin

Be sure to research and understand each regulation’s purpose and origin.  In other words, what is the point of the regulation?  Why was it created?  What is the letter of the rule under which it operates and when was it enacted?

2. Applications

What are the regulation’s applications?  In other words, to what does the regulation apply?

3. Exemptions

What are the regulation’s exemptions?  In other words, to what does the regulation not apply?

4. Disclosures

Most, if not all, federal mortgage laws and rules contain disclosures that always or, under certain conditions, must be issued to the consumer.  When learning the disclosures, you’re encouraged to approach them from two perspectives:

4. 1. 1. What is the disclosure all about? Obtain a copy of the disclosure.  Review and learn it.  What is its purposes?  What does it disclose?
      2. What is the disclosure’s issuance and, when applicable, its reissuance requirements?

       

5. Definitions

In addition to familiarizing oneself with the specific definitions associated with the various regulations (as defined through the 20-hour course material), NMLS test candidates are urged to research any term or word that they encounter through the normal course of studying with which they are unfamiliar.  Don’t just breeze by it or assume you can decipher it out of context.  Look it up!  Learn it!  Know it!

6. Document Retention

Many of the regulations with which the NMLS exam candidate must be familiar mandate specific timeframes for which documentation associated with the regulation must be retained by the issuer.  Successful NMLS exam takers make it a point to know these document retention requirements.

Expert Insights and Tips for Navigating the NMLS Exam’s Federal Mortgage Related Laws Section

It takes comprehensive knowledge and strategic preparation to navigate the complexity of the NMLS exam’s Federal Mortgage Related Laws section. Here are some expert insights and tips to help you excel in this critical exam component:

1. Stay Updated: The mortgage industry is subject to evolving regulations. Regularly refer to reputable sources such as the CFPB and other key industry players such as the NMLS, Fannie Mae, and Freddie Mac.  In fact, all of these organizations offer free publications and updates, e-mailed directly to your in bin, affording you the opportunity to stay informed regarding industry and regulatory developments.
2. Practice Exams: Be certain to enhance your exam preparation by completing quality practice exams such as those available through https://nmlstraining.com/nmls-test-prep/#practicexams
3. Utilize Study Resources: Leverage study guides, online courses, and resources provided by NMLS Training dot com to strengthen your grasp of the subject matter.
4. Display Poster Boards: One exam prep strategy that practically guarantees federal mortgage related law proficiency is documenting all of your notes pertaining to each regulation on a large poster board or sheet of oak tag.  Dedicate each regulation to one sheet of poster board or oak tag and then, once completed, hang these poster boards or sheets of oak tag on the walls throughout your residence.  By doing so, even when you’re not actively studying, your subconscious is exposed to and engaged in retaining the information written on them.  Wouldn’t a short duration of wall clutter be worth knocking the federal law section out of the park?

So What Are Those Regulations?

The federal regulations, laws, and rules in which NMLS exam candidates must be proficient consist of:

• The Real Estate Settlement Procedures Act (RESPA);
• The Equal Credit Opportunity Act (ECOA);
• The Truth-in-Lending Act (TILA);
• The TILA-RESPA Integrated Disclosure Rule (TRID);
• The Home Mortgage Disclosure Act (HMDA);
• The Fair Credit Reporting Act (FCRA);
• The Fair and Accurate Credit Transactions Act (FACTA);
• The FTC Red Flags Rule;
• The Bank Secrecy Act/Anti-Money Laundering Rule (BSA/AML);
• The Gramm-Leach-Bliley Act (GLBA);
• The Telemarketing Sales/Do Not Call Rule (TSR/DNC);
• The Mortgage Acts and Practices Rule (MAPs);
• The Electronic Signatures in Global and National Commerce Act (E-Sign);
• The USA PATRIOT ACT;
• The Homeowners Protection Act (HPA);
• The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank);
• The Fair Housing Act (FHA);
• The Community Reinvestment Act (CRA); and
• The Mortgage Assistance Relief Services Rule (MARS).

Although you absolutely must be familiar with all of the aforementioned regulations, laws, and rules, the regulations on which the test candidate can expect to be most heavily tested are:

• RESPA;
• ECOA;
• TILA; and
• TRID

Knowing this, however, should not incline the test candidate to study only these four regulations.  Knowledge of and familiarity with the others is absolutely essential.

The NMLS exam’s Federal Mortgage Related Laws section requires the test taker to be familiar with the Consumer Financial Protection Bureau (CFPB) and know, among other things, its mission statement and six core functions.  Lastly, the test taker should also be familiar with the purpose and functions of the U.S. Department of Housing and Urban Development (HUD).

Conclusion

Those seeking to pass the NMLS exam must master the Federal Mortgage Related Laws section of the NMLS Test Content Outline.  Requiring this furthers the Conference of State Bank Supervisors’ (CSBS) and the American Association of Residential Mortgage Regulators’ (AARMR) agendas to protect consumers by effectively preparing the mortgage loan originators who will ultimately serve them.

FAQs

Q: How can I effectively prepare for the NMLS exam’s Federal Mortgage-Related Laws section?

A: To prepare effectively, take advantage of the tips and strategies offered through this article and turn to NMLS Training dot com for all of your NMLS exam prep needs.

Q: What is the significance of the Home Mortgage Disclosure Act (HMDA) in the mortgage industry?

A: HMDA ensures transparency in mortgage lending practices by requiring financial institutions to report data related to their lending activities. This helps identify potential discriminatory practices and promotes fair lending.

Q: How do Anti-Money Laundering (AML) rules impact the mortgage sector?

A: AML rules aim to prevent money laundering and terrorist financing within the financial services industries. Mortgage professionals are required to report suspicious activities to authorities through Suspicious Activity Reports (SARs).

Q: Are any specific qualifications required for mortgage loan originators under the SAFE Act?

A: Yes. The SAFE Act establishes requirements for the registration and licensing of mortgage loan originators. These requirements include pre-licensing education, passing an exam, and undergoing background checks.

Q: How do the Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) contribute to ethical lending practices?

A: The FHA and ECOA prohibit discriminatory lending and housing practices, ensuring that borrowers are not denied loans and people seeking housing are not denied access based on factors including, among other things, race, color, religion, or gender. These laws promote fairness and equal access to credit and housing.

Q: What role does the Consumer Financial Protection Bureau (CFPB) play in mortgage regulation?

A: The CFPB enforces regulations that promote transparency and fairness in consumer financial products and services, including mortgages. It oversees laws such as the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), just to name two.