Mortgage Loan Originator (MLO) Licensing Practice Test

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Prepare for the Mortgage Loan Originator Licensing Exam. Study with flashcards and multiple choice questions, each question offers hints and explanations. Ace your exam with confidence!

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What characterizes Non-Conventional Qualified Mortgages (QMs)?

Homeownership counseling required
APR exceeding the APOR
3% points fees cap
No specific borrower assessment

The correct answer is: 3% points fees cap

Non-Conventional Qualified Mortgages (QMs) are characterized by certain features that distinguish them from traditional qualified mortgages. One of the key characteristics is the cap on points and fees, which is set at 3% of the total loan amount. This cap is designed to make these loans more accessible and affordable for borrowers, aiming to protect them from excessive fees that could potentially lead to unaffordable debt situations. In contrast, the other options do not accurately depict the defining traits of Non-Conventional QMs. While homeownership counseling might be recommended in some programs, it is not specifically a requirement of Non-Conventional QMs. Similarly, while APR exceeding the Average Prime Offer Rate (APOR) can occur in various contexts, it does not serve as a defining characteristic of Non-Conventional QMs. Lastly, the notion of no specific borrower assessment can lead to significant risks, as most lenders are still required to assess a borrower's ability to repay the loan, even if the assessment criteria might differ from those used for traditional loans. Therefore, the correct identification of the 3% points and fees cap is pivotal in understanding the framework of Non-Conventional Qualified Mortgages.