NMLS SAFE Practice Test

NMLS SAFE TILA & Regulation Z Practice Questions

TILA & Regulation Z makes up 4 of every 50 questions on a Tigertest NMLS SAFE practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the NMLS SAFE MLO content outline. Original questions; 50 per test, weighted like the real 120-question test, 75% to pass. Not affiliated with NMLS.

1. 1. A homeowner refinances the mortgage on her principal dwelling with a new lender on a Thursday and receives every required disclosure at closing. Absent holidays, her right to rescind ends at midnight of:

   • A.The same Saturday
   • B.The following Monday
   • C.The following Sunday
   • D.The following Tuesday

   Answer: B. Regulation Z gives three business days, and for rescission a business day is every calendar day except Sundays and federal public holidays. Friday, Saturday and Monday are the three days, so the right expires at midnight Monday.

2. 2. Which transaction carries a Regulation Z right of rescission?

   • A.A loan to buy a rental property
   • B.A cash-out refinance of a vacation home
   • C.A purchase loan on a principal home
   • D.A cash-out refinance of a primary home

   Answer: D. Rescission applies to non-purchase credit secured by the consumer's principal dwelling. Purchase money loans (residential mortgage transactions) and loans on second homes or investment property are exempt.

3. 3. A borrower rescinds a home equity loan within the allowed period. Within how many calendar days must the creditor return all money paid and release its security interest?

   • A.20 days
   • B.10 days
   • C.3 days
   • D.30 days

   Answer: A. Once a valid notice of rescission is received, the creditor has 20 calendar days to return any money or property and take the steps needed to end its security interest.

4. 4. If the required rescission notice is never delivered, the consumer's right to rescind on a principal dwelling generally lasts up to:

   • A.One year after consummation
   • B.Until the loan is paid off
   • C.Three years after consummation
   • D.Three business days after closing

   Answer: C. When the notice or material disclosures are not delivered, the right to rescind is extended and expires three years after consummation, on transfer of the property, or on sale, whichever comes first.

5. 5. A first-lien mortgage on a principal dwelling has an APR 1.8 percentage points above the average prime offer rate for a comparable loan, and it is within the conforming loan limit. Under Regulation Z it is:

   • A.A qualified mortgage safe harbor loan
   • B.Exempt from any APR threshold
   • C.A higher-priced mortgage loan
   • D.A high-cost HOEPA loan

   Answer: C. A conforming first-lien loan is higher-priced when the APR is 1.5 points or more above APOR (2.5 for a jumbo first lien, 3.5 for a subordinate lien). HOEPA's rate trigger for a first lien is 6.5 points.

6. 6. For a higher-priced first-lien mortgage, the creditor must generally establish an escrow account for property taxes and insurance for at least:

   • A.Five years
   • B.The first 12 months
   • C.The life of the loan
   • D.Two years

   Answer: A. Regulation Z requires escrows on higher-priced first-lien loans for at least five years, after which the borrower may ask to cancel if the loan is no longer delinquent and the balance is under 80% of the original value.

7. 7. A lender makes a higher-priced mortgage to buy a home the seller bought for much less only four months earlier. Regulation Z generally requires:

   • A.A larger down payment from the borrower
   • B.A desk review of the first appraisal
   • C.An automated valuation instead
   • D.A second appraisal, free to the buyer

   Answer: D. For a higher-priced loan on a flipped property (resold within 180 days at a set price increase), the creditor must obtain a second interior appraisal and may not charge the consumer for it.

8. 8. Which feature would keep a closed-end loan from being a qualified mortgage under the ability-to-repay rule?

   • A.Monthly escrow for property taxes
   • B.Payments that cover interest only
   • C.A fixed rate for 30 years
   • D.A 15-year fully amortizing term

   Answer: B. A QM may not have negative amortization, interest-only payments, a term over 30 years or (outside narrow exceptions) a balloon payment. Fixed rates, shorter terms and escrows are all compatible.

9. 9. Under the ability-to-repay rule, which item must a creditor consider and verify before making a covered mortgage?

   • A.Prior home addresses
   • B.Current income or assets
   • C.Marital status
   • D.Age at application

   Answer: B. The eight ATR factors include current income or assets, employment, the monthly payment, simultaneous loans, mortgage-related obligations, other debts, DTI or residual income, and credit history. Marital status and age are not factors and are restricted under ECOA.

10. 10. A loan originator's commission plan pays a higher percentage on loans that carry a higher interest rate. Under Regulation Z this plan is:

    • A.Allowed if disclosed
    • B.Allowed for jumbo loans
    • C.Allowed if the borrower agrees
    • D.Prohibited

    Answer: D. The loan originator compensation rule bars compensation based on a loan's terms or a proxy for them, such as the rate. Paying a fixed percentage of the loan amount is permitted.