Loan Estimate Disclosures Quiz

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Questions and Answers

What triggers the requirement to disclose a Loan Estimate?

The lender's receipt of a completed URLA

The lender's receipt of the six pieces of borrower information (correct)

The approval of the loan application

The borrower signing the Loan Estimate

Which of the following is NOT one of the six pieces of information required to trigger disclosure?

The borrower's name

The mortgage loan amount sought

The borrower's credit score (correct)

The property address

What is the maximum time frame for a lender to provide a Loan Estimate after receiving an application?

2 business days

3 business days (correct)

1 business day

5 business days

What is the interest rate a lender charges a borrower without discount points called?

Par Rate (B) Signup and view all the answers

How is a Lender Credit defined?

A premium given to the borrower for accepting an over-par interest rate (B) Signup and view all the answers

Which of the following best describes the term 'temporary buydowns'?

A fixed-rate program offering lower payments for initial years (D) Signup and view all the answers

What indicates whether a loan interest rate is locked or floating?

The Loan Estimate document (C) Signup and view all the answers

Which day is generally NOT considered a business day in the disclosure requirement timeline?

Public holiday (D) Signup and view all the answers

What is the primary purpose of collecting prepaid expenses at closing?

To ensure future expenses are paid in advance (C) Signup and view all the answers

How do you calculate the daily interest for per diem interest collection?

Divide the annual interest by 360 or 365, depending on policy (D) Signup and view all the answers

Which document includes the Mortgage Loan Servicing Disclosure for reverse mortgages?

Loan Estimate (LE) (B) Signup and view all the answers

What is the best method to ensure compliance with deadlines regarding disclosures?

Delivering documents through standard mail, postmarked appropriately (B) Signup and view all the answers

Which of the following is typically included in the escrow deposits at closing?

State-specific taxes and insurance (C) Signup and view all the answers

What is the purpose of the CFPB Home Loan Toolkit?

To serve as an educational resource for purchase transactions (B) Signup and view all the answers

When are per diem interest payments typically made?

At closing to cover days until month-end (B) Signup and view all the answers

What type of insurance might be collected as part of prepaid expenses at closing?

Both flood insurance and mortgage insurance if applicable (B) Signup and view all the answers

What happens if a Loan Estimate is not acted upon within 10 business days?

The lender can offer revised terms. (B) Signup and view all the answers

Which statement accurately describes floating an interest rate?

The mortgage origination process starts without locking the interest rate. (A) Signup and view all the answers

What must happen for a mortgage rate to be officially locked?

The closing date must be set. (B) Signup and view all the answers

How is the monthly payment determined when a loan is floating?

Based on the estimated interest rate and discount points. (C) Signup and view all the answers

What does the term 'lock-in' refer to?

Securing a mortgage interest rate prior to closing. (D) Signup and view all the answers

Which of the following is NOT a loan cost typically estimated at application?

Interest rate lock fees. (B) Signup and view all the answers

What happens to the Good Faith Estimate if the borrower withdraws their application?

It becomes irrelevant and no longer needs to be provided. (D) Signup and view all the answers

What is the cost structure for Private Mortgage Insurance (PMI) generally based on?

The loan's credit score and down payment amount. (C) Signup and view all the answers

How is the temporary buydown cost determined?

Based on the difference in payments during the buydown period. (A) Signup and view all the answers

What is a basis point in the context of discount points?

It represents one-hundredth of a percent. (C) Signup and view all the answers

In calculating the Lender Paid Mortgage Insurance (LPMI), what is it typically based on?

The loan amount as a percentage. (C) Signup and view all the answers

What is the initial premium in the context of Private Mortgage Insurance?

A one-time premium charged based on the loan amount at closing. (A) Signup and view all the answers

What is a common factor that affects title insurance costs?

The state-approved rates set by title insurers. (D) Signup and view all the answers

Study Notes

Application Disclosures

Application triggers disclosure requirements, fulfilled by the MLO, processor, or other staff, per lender practices.
Loan Estimate (LE) disclosure is triggered by RESPA and lender receipt of six pieces of information: borrower's name, gross monthly income, Social Security number, property address, property value estimate, and loan amount.
Disclosures are required within 3 business days of application. Business days exclude Sundays and legal holidays; Saturdays may or may not be considered business days.
LE (detailed in TRID section 1) must include: interest rate, MLO's offered rates/prices/programs, loan terms (e.g., 30-year fixed), interest rates and discount points or lender credit combinations, and loan programs (ARM, fixed, FHA, Conventional).
Par Rate: interest rate without discount points or lender credits.
Discount Points/Buydown Points: borrower-paid to reduce interest rate.
Lender Credit/Premium/Over-par pricing: credited to the borrower for accepting a higher interest rate.
Temporary Buydowns: fixed-rate programs offering lower payments initially (e.g., 2-1 buydown).
Loan rates can be locked (fixed) or floating (adjustable).
Rate Lock/Lock-in: prevents interest rate changes between initial offer and closing, within stipulated timeframe and conditions.
Floating Rate: interest rate can change due to market conditions until locked or closing date.
Loan lock-in term affects pricing. Lock-in term: number of days between lock date and closing date.
LE expires in 10 business days if borrower doesn't proceed; lender can offer revised terms.
Monthly payments calculated by software based on interest rate and loan amount.
Requires amortization software, financial calculator, or online tool for monthly payment calculations (for mortgage loans).
LE delivery: at least 7 business days before consummation.
Not applicable for reverse mortgages (Good Faith Estimate instead).

Loan Costs

Loan Estimate includes detailed cost information.
Mortgage Insurance (PMI): cost based on Loan-to-Value ratio (LTV), credit score, loan term, or program; quoted when commitment issued.
PMI typically includes; initial; first renewal, and second renewal premiums (applied to the unpaid principal balance).
Lender Paid Mortgage Insurance (LPMI): a percentage of the loan amount (e.g., 2.225% premium on $175,000 loan).
FHA MIP: consistent and based on term and down payment.
VA Funding Fees: vary according to veteran's service, status, and prior use of program.
USDA Guarantee Fee: consistent, known upfront.
Credit report, tax service, flood certification costs.
Title insurance: one-time cost at closing, determined by loan amount (e.g., 4per4 per 4per1,000 in loan amount). Could include endorsements for additional coverage.
Owner's title insurance is optional.
Settlement fee, appraisal cost, inspection fee, recording fees, transfer tax.

Lender Fees

Lender flat fees: underwriting, processing, administration fees.
Loan origination fee: may be a percentage or flat fee.
Discount points or lender credit cost: one point = 1% of loan amount (calculated similarly to discount points).
Lender credits can be flat amounts (e.g. $1,000 toward closing costs).
Temporary buydown cost varies by period.

Temporary Buydowns

Temporary buydown cost = total subsidy amount (difference between payments at different rates) across the buydown period.

Prepaid Expenses

Expenses collected at closing before due date, based on contract; sales concessions, tax and other cost prorations.

Escrow Deposits

Collected at closing to pay borrower taxes, insurance, and mortgage insurance when due.
Property Taxes: typically at least two months' collection.
Estimated insurance costs: usually two months' coverage.
Property/Flood/Mortgage insurance amount.

Per Diem Interest

Interest paid in arrears; lender collects interest to the end of the closing month.
Calculation: days remaining in month after funding date; multiply loan amount x interest rate = annual interest; annual interest / 365 (or 360) = daily interest; daily interest x number of remaining days.

Other Disclosures

Mortgage Loan Servicing Disclosure
CFPB Home Loan Toolkit
Settlement Service Providers List
Notice of Applicant's Right to Receive a Copy of the Appraisal
Affiliated Business Arrangement Disclosure; if lender has ownership interest.
Adjustable Rate Program Disclosure (if ARM), CHARM booklet
Homeownership Counseling Disclosure
Disclosures can be delivered electronically, in person, or via standard mail.

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Description

Test your knowledge on the disclosure requirements associated with loan applications, including the Loan Estimate (LE) and its components. This quiz covers the role of various personnel in fulfilling these disclosures and the specifics required within three business days of application. Prepare to dive into the regulations surrounding interest rates and loan terms.