Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
Conventional loans are not backed by any government agency — they are originated by private lenders and, if they meet certain standards, can be sold to Fannie Mae or Freddie Mac on the secondary market. Understanding conforming vs. non-conforming loans and their guidelines is essential for the NMLS exam.
- What Makes a Loan Conventional
- Not insured or guaranteed by any government agency — no FHA, VA, or USDA backing
- Subject to private lending standards rather than government program requirements
- Riskier for lenders without government backing — compensated through stricter underwriting
- Conforming Loans
A conforming loan meets the underwriting guidelines and loan limits set by Fannie Mae and Freddie Mac — the two government-sponsored enterprises (GSEs) that dominate the secondary mortgage market.