Tips To Passing The NMLS National Pre-Licensing Exam The Third in a Four-Part Series

This week, I am pleased to present tips nine through twelve geared towards effectively preparing you for the Nationwide Mortgage Licensing System’s MLO National Licensing Examination.  As discussed in my previous two articles, the NMLS exam, for all intents and purposes, is relatively standard.  The exam consists of one hundred and twenty, computer-generated, multiple-choice questions, each offering four answer options.  The test must be completed within a window of slightly longer than three hours.  Each multiple-choice question’s answer options typically consist of:

1) The best possible or, in other words, the correct answer option;
2) An answer option that is “close, but no cigar”;
3) A trick answer option; and
4) An answer option that has nothing to do with the question being asked

The test taker’s goal is to select the correct answer option enough times to score a passing grade of 75% or higher.

The following four tips will help swing the odds of passing the NMLS exam in your favor:

1. If It’s Not There, Don’t Add It!

The human mind tends to fill in details when details appear to be missing.  Doing so helps us feel more comfortable by fostering easier understanding.  One of the largest contributors to NMLS exam failure, however, is convoluting the question by adding details that are not there and developing phantom circumstances that are not established through the question.  The best approach is a simple one.  If the question doesn’t declare it, don’t infer it!

No matter how tempting it might be, avoid adding extraneous information to the question.  For example, if the question describes two referral sources interacting where one of them offers the other something of value, in asking who violated RESPA, don’t add more to this scenario than what the question has already established.  If the question did not specifically state that the party to whom the thing of value was being offered accepted it, then don’t infer that he or she did!  If you inferred that the offeree accepted the thing of value, you might likely answer that both parties violated RESPA.  And, in doing so, you would be wrong since there was no indication that the intended recipient accepted it.  Therefore, only the offeror violated RESPA.

2. If the Question Appears Incomplete, It’s Not!

If you encounter a question that appears to be incomplete, don’t panic!  Imagine encountering a question that asks,

“Which of the following otherwise prohibited characteristics would a mortgage loan originator be compelled to document if an applicant refused to answer?”

  • Race
  • Religion
  • Gender Identity
  • Intention to Bear Offspring

Although the Home Mortgage Disclosure Act (HMDA), affords mortgage applicants the right to refuse to answer government monitoring questions if the application occurs in any modality other than face-to-face, this question neglects to stipulate that the interview was occurring face-to-face.  Just because the question neglected to mention the face-to-face interaction, however, doesn’t prevent you from identifying the correct answer.

Answer options “B,” “C,” and “D” are never applicable to the questions asked through the Uniform Residential Loan Application’s (URLA’s) Government Monitoring section.  Therefore, even though the question may have neglected to establish the modality in which the URLA was occurring, you can still correctly conclude that the answer is, “A!”

The takeaway here is that you should be able to adequately answer any question appearing on the NMLS exam, regardless of what is or is not contained within the question’s wording.  Use your best judgment to work with the information you’ve been given.

3. Choose the Best Possible Answer!

You may encounter a question with, what appear to be, multiple correct answers.  What do you do?  Summon the proctor?  Nope!  He or she is not going to be able to answer any content-related questions.  If you find yourself cross-eyed over what appears to be a question containing multiple correct answers, the answer’s pretty simple.  One answer option has to be better than the others.  

Making questions appear to have multiple correct answers is one of the NMLS exam’s tricks.  When, not if, but when this happens, go back into the question.  Go back into the answer options.  Try to identify something, possibly subtle, that, once identified, helps you to conclude which of the apparently-correct answer options is the actual correct answer option.  Maybe it’s something as subtle as a “but,” an “un,” an “anything but” an “except for,” or an “other than.”  Whatever it may happen to be, there should be something in the wording that offers a clue as to which answer option is the best possible and therefore the correct answer option.

If this tip isn’t effective and you still find yourself struggling over multiple answer options all appearing to be correct, another strategy for identifying the best-possible answer option is to try to identify a common theme running throughout three out of the four answer options.  If you do identify such a theme, the answer option that is not a part of that theme is typically the correct answer.

4. Know Your Federal Regulations!

Although you’ll be tested on Mortgage Loan Origination Activities, General Mortgage Knowledge, Ethics, and the Uniform State Content, 24% of your exam questions will test your knowledge of Federal Mortgage-Related Laws.  Even though the Federal Law section only constitutes slightly less than a quarter of your exam, passing this exam would prove difficult without performing well on the Federal Law section.  And that’s even if you scored relatively well in the other four areas.  The NMLS exam’s Federal Law section is the exam’s anchor.

For each of the 19 regulations and rules with which you must be familiar, the recommended study strategy is as follows.  Approach each regulation from the perspective of:

    1. What is the regulation’s purpose?  In other words, what does the regulation do?  What is it about?  Why do we have it?  What is its corresponding letter (when applicable), and when was it enacted?
    2. To what does the regulation apply?
    3. To what does the regulation not apply?
    4. What are the disclosures associated with the regulation?  And, when studying the various regulatory disclosures, I would encourage you to approach them from two sub-strategies:
    5. What is the disclosure all about?
    6. What are its issuance and, when applicable, its reissuance requirements?
    7. What are the definitions associated with the regulation?
    8. What are the document retention requirements associated with the regulation?

I encourage you to create poster boards for each regulation containing the specifics associated with each of the aforementioned study strategies.  Place these poster boards all throughout your house so that, as you go about your daily activities, you’re also in constant study mode, at least subconsciously.  Trust me!  This works and it absolutely makes a difference!

Be certain to visit again next week for Part IV in this four-part series aimed to give you the tools and edge needed to pass the NMLS exam on your first attempt.

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