Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

The correct answer is the yearly escrow analysis, which is mandated by the Real Estate Settlement Procedures Act (RESPA). This analysis is performed to ensure that the amounts collected in escrow accounts for property taxes, homeowners insurance, and other related charges are sufficient to cover the anticipated expenses. The yearly escrow analysis allows lenders to review the escrow account balance to determine if adjustments are needed in the escrow payments, ensuring that borrowers are neither overcharged nor undercharged based on actual expenses.

Maintaining accurate escrow accounts is critical for both the lender and the homeowner. If there are increases in property taxes or insurance costs, the escrow analysis helps identify the need for adjustments to the monthly payment to avoid a shortage. This process ultimately promotes transparency and ensures that borrowers are informed of any changes to their payment obligations throughout the life of their mortgage.

Other choices, such as property value assessment or annual loan review, do not align with RESPA guidelines related specifically to escrow accounts. Monthly payment rate adjustments pertain to the periodic recalibration of loan payments based on interest rate changes and other factors, rather than an annual review. Therefore, the yearly escrow analysis is the only annual review outlined specifically in RESPA.