NMLS MLO Exam With Confidence Using Practice Dumps

Flood insurance coverage is required to cover the lesser of:

The outstanding principal balance of the loan, or

The maximum coverage limit available under the National Flood Insurance Program (NFIP), which is $250,000 for residential properties.

The purpose of flood insurance is to protect the lender's interest in the property, ensuring that the loan amount is covered in the event of a flood.

The appraised value of the home (A) and the property value on file with the county (D) are irrelevant in determining flood insurance requirements.

A subordinate lien (or junior lien) refers to any loan or claim against a property that is secondary to the first lien (the primary mortgage). Examples include second mortgages, home equity loans, or lines of credit.

“A subordinate lien is a mortgage or other lien that has a lower priority than a previous mortgage or lien.”

— SAFE MLO National Test Study Guide

The Fair Credit Reporting Act (FCRA) restricts the permissible purposes for which a credit report can be obtained. A mortgage loan originator may only pull a credit report for a bona fide mortgage loan transaction. Pulling a credit report for a non-mortgage transaction, even with the consumer’s consent, is not a permissible purpose.

“A person may obtain a consumer report only if the report is to be used for a permissible purpose under the FCRA. Permissible purposes include credit transactions initiated by the consumer.”

— 15 U.S.C. § 1681b; FCRA