Nationwide Mortgage Licensing System (NMLS) Practice Exam

Who is referred to as the lender in a mortgage agreement?

1. Borrower

2. Lender

3. Closing agent

4. Mortgage broker

The correct answer is: Lender

In a mortgage agreement, the lender is the organization or individual that provides the funds to the borrower for the purpose of purchasing property. This role involves offering a loan secured by the real estate in question, which serves as collateral. The lender typically evaluates the borrower's creditworthiness, financial history, and ability to repay the loan before issuing the mortgage. The lender is responsible for setting the terms of the loan, including the interest rate, repayment schedule, and any associated fees. This financial institution, which could be a bank, credit union, or private lender, has a vested interest in ensuring that the borrower complies with the terms of the loan because their investment is at risk. In contrast, the borrower is the individual or entity receiving the loan, who seeks financing for a real estate purchase. The closing agent facilitates the final transaction between the buyer and seller but does not provide the loan. The mortgage broker acts as an intermediary between the borrower and lender but is not the lender themselves. Thus, the lender is distinctly identified as the party that provides the loan in a mortgage agreement.