Podcast
Questions and Answers
What is a lender required to do before charging a borrower?
What is a lender required to do before charging a borrower?
Which of the following is true regarding lender fees?
Which of the following is true regarding lender fees?
What is the only charge a lender may collect in advance?
What is the only charge a lender may collect in advance?
Which of the following fees may be adjusted due to a change in circumstances?
Which of the following fees may be adjusted due to a change in circumstances?
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What must lenders disclose regarding compensation paid to mortgage brokers?
What must lenders disclose regarding compensation paid to mortgage brokers?
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Which statement about required fees for services is accurate?
Which statement about required fees for services is accurate?
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In what situation can fees charged by lenders change?
In what situation can fees charged by lenders change?
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Which fee is rarely affected by changes in circumstances?
Which fee is rarely affected by changes in circumstances?
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What happens when costs increase more than the allowed limits without a valid change in circumstances?
What happens when costs increase more than the allowed limits without a valid change in circumstances?
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What is the time frame in which required tolerance cure refunds discovered after closing must be paid to the borrower?
What is the time frame in which required tolerance cure refunds discovered after closing must be paid to the borrower?
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Under RESPA section 8, what is true about referral fees?
Under RESPA section 8, what is true about referral fees?
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What is a requirement for funds held in escrow?
What is a requirement for funds held in escrow?
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Which of the following practices is prohibited under RESPA in regard to splitting fees?
Which of the following practices is prohibited under RESPA in regard to splitting fees?
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What occurs when a revised Loan Estimate is issued due to a change in circumstances?
What occurs when a revised Loan Estimate is issued due to a change in circumstances?
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What must lenders do if they hold advance payments for appraisals?
What must lenders do if they hold advance payments for appraisals?
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Which statement regarding escrow funds is correct?
Which statement regarding escrow funds is correct?
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What constitutes a violation related to referral fees?
What constitutes a violation related to referral fees?
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What is the primary purpose of a 'tolerance cure' refund?
What is the primary purpose of a 'tolerance cure' refund?
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Study Notes
Lender Financial Responsibility to Borrowers
- Lenders must disclose fees and third-party payments upfront (Loan Estimate).
- Lenders must disclose affiliate relationships and allow borrowers to shop for services.
- Quoted fees must be honored, except with justification for unforeseen changes in circumstances.
Permitted Lender Fees
- Lender fees are generally negotiable but some programs/rules have limitations (e.g., VA maximum 1% origination fee).
- ATR/QM rules limit fees for qualified mortgages.
- Credit report fees are the only charges allowed in advance.
- "Out-of-pocket" expenses (e.g., appraisal) can't be collected until after the borrower commits.
- Mortgage broker compensation must be disclosed and cannot vary based on lender profitability.
- Pre-agreed compensation limits apply.
Non-Adjustable Fees
- Only fees directly affected by change in circumstances can be adjusted and redisclosed.
- Changes in circumstances cannot justify adjusting unaffected fees.
- Some fees (lender, broker, affiliate fees, non-shoppable services) can only be adjusted with a legitimate change in circumstances.
- Transfer taxes are rarely affected by changes and are usually sale-price-dependent.
Loan Estimate (LE) and Fee Handling
- Loan Estimates are the initial baseline for non-adjustable fees.
- LE revisions due to unforeseen changes reset the baseline.
- Closing Disclosures reset the fee tolerance baseline.
- Subsequent LEs cannot be issued once a Closing Disclosure is given.
- Revised CDs can reset the baseline.
- Borrowers are entitled to "tolerance cure" refunds exceeding allowable limits if justified.
- Funds to refund borrower overages are typically provided to borrower at settlement.
- Refunds for tolerance cures discovered after closing need to occur within 60 days of settlement.
Escrow Funds & Settlement Scenarios
- Lenders/settlement agents may hold funds in escrow for transactions.
- Escrow funds cannot be commingled with other lender funds.
- Most states mandate separate accounts for escrow funds.
- Transactions requiring excess escrow fund holdings must be returned promptly
- Misuse of escrow funds is illegal.
Referral Fees & Splitting Fees
- Referral fees are generally prohibited in federally related loans.
- A "referral fee" is any compensation connected to a referral for services.
- Simple referrals of settlement services are not compensable.
- Companies providing settlement services cannot pay for referrals
- Fees cannot be split unless actual services are performed (i.e., real estate agent referral does not merit split).
- Duplicative, unearned fees for no or nominal service are violations.
- The source of payment does not determine compensability.
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Description
This quiz covers the financial responsibilities of lenders to borrowers, focusing on fee disclosures, permitted lender fees, and the rules regarding non-adjustable fees. Test your knowledge about regulatory guidelines, exceptions, and borrower protections in the lending process.
