Mortgage Lending Regulations Quiz

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Questions and Answers

According to the CFPB, which of the following agreements are related to RESPA Section 8?

Social media

Marketing Service Agreements (correct)

Co-branding (correct)

Co-marketing (correct)

Which federal law mandates the disclosure of housing counseling information to borrowers by lenders?

Truth-in-Lending Act

Real Estate Settlement Procedures Act (correct)

Gramm-Leach-Bliley Act

Ability to Repay Act

What rule addresses the use of forged, counterfeit, lost, or stolen documents to obtain customer information?

The Disposal Rule

The Financial Privacy Rule

The Pretexting Rule (correct)

The Red Flags Rule

Which of the following practices is deemed unfair according to the provided information?

Asking a woman her ability to bear children (A) Signup and view all the answers

What is the primary role of government-sponsored enterprises (GSEs) in mortgage lending?

Standardizing conforming guidelines to increase investor cash flow (C) Signup and view all the answers

What is the allowed APR tolerance under TILA for a typical transaction?

0.25% (D) Signup and view all the answers

What is the purpose of the Negative Option ARM recast feature?

Capping adjustments to reduce payment shock (D) Signup and view all the answers

Which entity is responsible for managing mortgage loan collections and foreclosures?

Servicer (D) Signup and view all the answers

What is the regulation that requires lenders to disclose the costs associated with closing a mortgage?

RESPA (D) Signup and view all the answers

What is the term for money provided by a lender to help a borrower cover closing costs?

Lender credit (A) Signup and view all the answers

According to TILA, how many times must a lender extend credit in a calendar year to be considered a regular credit provider?

10 times (A) Signup and view all the answers

Which of the following actions would violate the Fair Housing Act?

Discouraging a potential borrower from making a loan application (B) Signup and view all the answers

What document clarifies the steering and loan originator compensation provisions within the Dodd-Frank Wall Street Reform and Consumer Protection Act?

Framework (D) Signup and view all the answers

When is it NOT necessary to disclose your Unique Identifier?

Marketing pieces (A) Signup and view all the answers

Who has the authority to make the final decision on a borrower's credit request?

Underwriter (B) Signup and view all the answers

Which statement about FHA mortgage limits is FALSE?

FHA mortgage limits are calculated every 3 years (D) Signup and view all the answers

How many years from the credit discharge date is a negative item allowed to remain on a credit report?

7 years from the credit discharge date (C) Signup and view all the answers

What is the maximum number of days allowed for disputing inaccurate credit information?

60 (C) Signup and view all the answers

When are funds disbursed for an owner-occupied residential loan?

After the three business-day right of rescission period has expired (C) Signup and view all the answers

Which of the following statements about the HOEPA counseling disclosure is NOT true?

The disclosure must be sent 3 days prior to consummation (D) Signup and view all the answers

Under what circumstances can a loan originator legally provide a copy of the consumer's credit report?

When the MLO's contract with the credit reporting agency does not prohibit it (B) Signup and view all the answers

What is the maximum back-end DTI for a manually underwritten conventional loan?

43% (C) Signup and view all the answers

For a 1/1 ARM with caps of 2/2/8, what would be the interest rate at 6 months with an initial rate of 4%, SOFR at 2%, and a margin of 1.25%?

6% (A) Signup and view all the answers

Which aspect is NOT considered when calculating a credit score?

Your monthly payment on all credit lines (A) Signup and view all the answers

Which of the following is most significant when qualifying the income of a sole proprietor borrower?

Schedule C net income plus non-cash expenses and depreciation (C) Signup and view all the answers

What happens to the yield spread premium after a loan closes?

The Lender benefits from it (B) Signup and view all the answers

When can a borrower repurchase again after a foreclosure according to FHA underwriting guidelines?

5 years from the deed transfer date (D) Signup and view all the answers

What is true when a deed of trust is recorded?

A lien is created (C) Signup and view all the answers

What is the permissible approach to asking borrowers about divorce?

Permissible only with documentation in the loan file (C) Signup and view all the answers

If borrower Jill reduces her loan-to-value ratio (LTV) from 95% to 90%, how will her private mortgage insurance (PMI) change?

It would be lower (B) Signup and view all the answers

What are the terms of the 'cooling off' period under HOEPA?

Three business days after closing (B) Signup and view all the answers

After a Chapter 13 bankruptcy, when can a borrower repurchase again according to FHA Standard underwriting?

3 years from the discharge date (B) Signup and view all the answers

How long does MLO Jones have to notify Natasha of an adverse action if she does not accept the counteroffer?

30 calendar days (A) Signup and view all the answers

What is Safe Harbor called when a QM loan is not considered a higher-priced mortgage?

Presumption of Compliance (A) Signup and view all the answers

The daily interest for the borrower’s loan is $17.44. They close on the 15th of the month, and there are 15 days before the 1st of the next month. How much prepaid interest do they have to pay?

$279.04 (C) Signup and view all the answers

What source of down payment is NOT acceptable for Federal Housing Administration (FHA) financing?

unsourced funds (C) Signup and view all the answers

Which is considered a change of circumstance that allows a revised Loan Estimate?

Addition of flood insurance that does not cause a program or product change (A) Signup and view all the answers

When a veteran does not have sufficient tradelines on his credit report, what can be used to establish credit history?

alternative credit references (B) Signup and view all the answers

Which is NOT a key point when a mortgage lender reviews the borrower's source of funds to close?

is the financial institution federally insured (C) Signup and view all the answers

A new applicant for a mortgage loan originator license must complete how many hours of pre-licensing education prior to submitting an application?

25 (D) Signup and view all the answers

What is the funding fee percentage that a borrower will have to pay?

3.30% (D) Signup and view all the answers

How many days does a consumer have to correct a non-numeric clerical error on the Closing Disclosure?

20 days after consummation (A) Signup and view all the answers

What is the acquisition cost when the purchase price is $227,000 with $5,200 in closing costs and $1,000 paid by the seller on a $175,000 loan?

$231,200 (B) Signup and view all the answers

What is the condition under which a consumer can be charged an appraisal review fee?

If the appraiser requests a review appraisal be completed (B) Signup and view all the answers

Which of the following is NOT a characteristic of a State Housing Finance Agency?

Operates without state audit and review (B) Signup and view all the answers

Which of the following constitutes liability fraud?

Debts from the credit report do not transfer over to application (C) Signup and view all the answers

What type of mortgage is a wraparound mortgage?

A type of second mortgage (A) Signup and view all the answers

What will a lender obtain to ensure proper lien position?

A lender's title insurance policy (C) Signup and view all the answers

Study Notes

Test 1

The maximum percentage limit on the total obligation DTI ratio for a general qualified mortgage is 28%
Under ECOA, lenders must provide the reason for denial within 30 days.
A fraud scheme that involves "get rich quick" real estate seminars is generally categorized as illegal property flipping
Eligibility for a mortgage loan originator license application may be denied for various reasons, including a license revocation, felony conviction, foreclosure, or seriously delinquent accounts.
The Federal Credit Reform Act (FCRA) was enacted to improve access to credit information.
Consumers are entitled to a free copy of their credit score annually
An owner-occupied refinance transaction is one of the scenarios where the right of rescission applies.

Test 2

An attorney performing multiple settlement services who earns fees for their work violates RESPA
An employer paying employees for referrals violates RESPA
An MLO leasing space in a real estate office at above market rates violates RESPA
The proration amount for the June 1st rent paid was $300
HMDA was developed to address redlining
Steering and predatory lending were issues HMDA addressed
MLOs must disclose actions requiring a "Yes" response in their disciplinary actions
The MU4R disclosure requires official documentation to be uploaded as a PDF

Test 3

The industry standard for gross percentage adjustment in a residential property appraisal is 10%
A buydown is a situation where borrowers pay a fee to temporarily have a lower interest rate, but the rate eventually increases to the agreed fixed rate
The correct answer for the time Omar has to rescind his loan given he wasn't provided the right to rescind the information, is Omar now has 3 years to rescind his loan
The 7-year rule applies to FHA Standard underwriting when considering a repurchase after a Chapter 13 bankruptcy.
The conventional mortgage's back end DTI ratio for a manually underwritten loan is 28%
There is a need to disclose a housing counseling on high cost loans.
Asking about intentions relating to childbearing is an invalid question during a loan application.

Test 4

A borrower can have a loan with an LTV of 95%, and if 5% is paid down, then the PMI will either remain the same or decrease
In HOEPA terms, the “cooling off” period is three business days prior to closing
After the Great Recession, and per FHA Standard underwriting, a person who had a Chapter 13 bankruptcy would need to wait 7 years before they could repurchase a home again.
The time allowed to dispute inaccurate credit information is 60 days
An MLO's responsibility is to provide a copy of the credit report to the borrower at the borrower's request.
The back-end DTI on a manually underwritten conventional loan cannot exceed 43%
The calculation of Angela's interest rate at 6 months after a 1/1 ARM with caps of 2/2/8 would be 6%.

Test 5

The process of issuing a notice of the right to rescind must be provided twice, and to all owners involved on the property.
An initial escrow account statement must be given within 45 calendar days of settlement in accordance with RESPA.
An MLO must be licensed to discuss specifications of particular loan products, detailed information & collect other necessary information for the application for a potential borrower
An underwriter is looking at the borrower's credit inquiries for the past 12 months
A violation of TRID would involve disclosing all Zero and 10% Tolerance costs on a loan estimate, except Escrows, Realtor fees, and Discount Points.

Test 6

Fines, cease and desist orders and the refusal of a license renewal are acceptable actions for a regulatory authority.
The business income generated by a sole proprietorship is calculated using Schedule C.
The list of federal banking agencies would not include the director of the office of credit compliance.
The funding fee for a VA loan with a 10% downpayment would be 2.15%
You have 60 days to correct a nonnumeric error in the Closing Disclosure.
Acquisition cost would be $231,200 given the contract terms, and fees.
If an appraisal review is needed because the appraiser requests it, that is the situation in which the consumer is able to be charged an appraisal review fee.
The 7-year rule to wait before re-purchasing a home after experiencing a mortgage-related issue like a foreclosure or bankruptcy is a valid consideration.
Lender Liability fraud includes debts that don't match up with the documentation on file, borrowers not informing the lender about a property, and failing to disclose the details about their credit or finance status in relation to the property.
Asking about a borrower's ability to bear children during an application is considered forbidden.

Test 7

Practices, age and dependents can be questioned in a mortgage application if a co-borrower isn't involved.
Inquiries of the borrower, with regards to marital status (married/unmarried/separated/divorced) are permissible, but doing so without a co-borrower isn't possible
Funds, for closing costs, that have not been vested before the transaction date are not a permissible source of funding.
An adverse action needs to be notified to a borrower within 30 days.
The borrower would be required to pay the full amount of the interest calculated from the 15th of the month, to the 1st of the next month. This is also a higher price mortgage
FHA financing disallows the usage of a gift as the source of a down payment.
Veteran's purchasing homes are given a funding fee, the fee's amount is dependent on the down-payment.
It is acceptable for an MLO to offer a counter-offer, but notification of the adverse action should be within 30 days per Regulation Z.

Test 8

The pre-licensing education requirement for a mortgage loan originator is at least 10 hours.
If a lender disregards the ECOA when making applicant decisions based on factors the law prohibits, that's considered disparate treatment.
Federal laws like the Bank Secrecy Act/Anti-Money Laundering Act (BSA/AML) and the Gramm-Leach-Bliley Act require annual employee training.
TILA mandates a lender provide a lender credit or table funding if the loan's closing costs exceed the amount the borrower was prepared to pay.
A violation of the Fair Housing Act includes discouraging a prospective borrower from applying for a loan, and to not require a credit approval or appraisal
The Dodd-Frank Act made steering and compensation provisions more transparent.
An application to a lender is permissible to query a borrower, about their credit, but not their birth control policies.

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Description

Test your knowledge on key regulations related to mortgage lending, including RESPA, TILA, and the roles of government-sponsored enterprises. This quiz covers various aspects of borrower disclosures, unfair practices, and loan management. Perfect for those studying for licensing exams or seeking a deeper understanding of mortgage laws.