Mortgage Loan Application Disclosures

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Questions and Answers

According to RESPA, the requirement for a lender to disclose a Loan Estimate is initiated by which of these events?

Receipt by the lender of the six specific pieces of borrower information. (correct)

Receipt of the borrower's full credit report.

The lender's decision to proceed with the loan application.

The completion of the Uniform Residential Loan Application (URLA).

If a lender receives the six pieces of information required to trigger a Loan Estimate on a Monday, and there are no legal holidays that week, what is the last day the lender has to provide the Loan Estimate, using business days definitions?

The Following Friday.

The following Thursday. (correct)

The following Saturday.

The following Sunday.

What is the meaning of 'Par Rate' in the context of a mortgage loan?

The interest rate with discount points.

The interest rate the lender charges without discount points or lender credits. (correct)

The interest rate offered with lender credits.

The lowest available interest rate the lender offers

A borrower accepts a higher interest rate on a loan than the par rate, and in return is credited money back at closing; this credit is known as what?

Lender credit/premium. (C) Signup and view all the answers

When a borrower pays discount points, what is the main goal?

To lower their interest rate. (B) Signup and view all the answers

If a Loan Estimate shows that the interest rate is 'locked', what does this mean for the borrower?

The interest rate will not change between the time of the initial offer and closing. (A) Signup and view all the answers

Which of the following is an example of a temporary buydown program?

A 3-2-1 buydown where the rate is reduced by 3% in the first year, 2% in year two, and 1% in year three. (C) Signup and view all the answers

Besides the rate and price choices, what else does the Loan Estimate need to include concerning loan program choices?

Whether the loan is fixed or adjustable-rate (ARM), and the type of program, such as FHA or Conventional. (D) Signup and view all the answers

What is the primary purpose of collecting funds for escrow deposits at closing?

To establish an account for the loan servicer to pay property taxes, insurance, and mortgage insurance on the borrower's behalf. (B) Signup and view all the answers

Which of the followings is not a prepaid expense typically collected at closing?

Loan origination fee (D) Signup and view all the answers

A borrower is closing on a loan on July 15. How many days of per diem interest will be collected at closing, assuming that day is included?

16 days (D) Signup and view all the answers

If a lender has an ownership interest in a settlement service provider, which disclosure is required?

Affiliated Business Arrangement Disclosure (B) Signup and view all the answers

According to the content, what does the acronym CHARM stand for?

Consumer Handbook on Adjustable Rate Mortgages (C) Signup and view all the answers

A lender needs to deliver the required disclosures to a borrower. Which of the following methods is not an acceptable method for delivering the disclosures?

Fax (A) Signup and view all the answers

What is typically on the Loan Estimate (LE) as a discount point when a builder or seller provides a sales incentive?

The subsidy that is paid for the borrower (B) Signup and view all the answers

If a borrower is getting a purchase transaction, which document should be reviewed for sales concessions, proration of taxes, and other costs or credits?

The Purchase Contract (A) Signup and view all the answers

What happens to the Loan Estimate (LE) if a borrower does not indicate intent to proceed within 10 business days?

The LE expires, and the lender may offer revised terms. (C) Signup and view all the answers

How is the cost of Lender's Title Insurance typically determined?

By the loan amount. (D) Signup and view all the answers

What is the definition of 'floating' an interest rate in mortgage origination?

Starting the mortgage process without locking the interest rate, which can change due to market conditions. (D) Signup and view all the answers

Which of the following statement is correct regarding Private Mortgage Insurance (PMI) renewal premiums?

Renewal premiums are applied to the principal balance (C) Signup and view all the answers

What does a 'basis point' represent in the context of discount points?

One-hundredth of a point (D) Signup and view all the answers

In a 2-1 temporary buydown, what happens to the interest rate after the second year?

The interest rate reverts to its final note rate. (B) Signup and view all the answers

When must a Loan Estimate (LE) be delivered or placed in the mail?

At least 7 business days before consummation. (A) Signup and view all the answers

Which of the following costs is typically considered a one-time expense paid at closing?

Title insurance costs. (C) Signup and view all the answers

For a loan that is locked in prior to closing, what term will impact the pricing?

The lock-in term between lock date and closing date. (B) Signup and view all the answers

Why might a borrower choose to accept a higher interest rate?

To generate lender credit to reduce closing costs. (D) Signup and view all the answers

If Lender's Title Insurance costs $4 per $1,000 in loan amount, what would be the cost for a $200,000 loan?

$800 (B) Signup and view all the answers

Which of the following is NOT an example of Lender Flat Fees?

Title Insurance costs (B) Signup and view all the answers

How is the subsidy amount calculated in a temporary buydown?

As the total difference between the note rate P&I payments and the reduced P&I payments during the buydown period. (D) Signup and view all the answers

Which of these statements best describes the relationship between the Loan Estimate (LE) and reverse mortgages?

The LE is not applicable for reverse mortgages; a Good Faith Estimate is provided instead. (B) Signup and view all the answers

What is the value of one discount point on a $200,000 loan?

$2,000 (A) Signup and view all the answers

Study Notes

Application Disclosures

Application triggers disclosure requirements
Disclosures may be issued by the MLO, processor, or other personnel, depending on the lender
Loan Estimate disclosure triggered by RESPA and lender receiving six pieces of information
Six pieces: borrower's name, gross monthly income, Social Security number, property address, property value estimate, and mortgage loan amount
Disclosures required at application or within 3 business days
Business days exclude Sundays and public holidays; Saturdays may or may not be included based on lender schedule
Loan Estimate (LE) details in Chapter 1 TRID section
Interest rates quoted on LE, based on MLO options from lender(s)
Loan choices include terms (30-year, 15-year), interest rates, discount points/lender credits, and 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: lender credited to borrower for accepting over-par interest rate
Temporary buydowns: lower payments in first few years, then final note rate applies
Rate lock (lock-in): interest rate unchangeable between initial offer and closing, dependent on closing time frame and application terms
Floating rate: interest rate can change until locked or closing date determined
Lock-in term: number of days between lock date and closing date
LE expires if borrower doesn't proceed within 10 business days; lender can offer revised terms
Monthly payments calculated by software based on interest rate and loan amount
LE must be delivered/mailed at least 7 business days before consummation (doesn't apply to reverse mortgages)
LE not needed if borrower withdraws application or adverse action taken before 3-day RESPA window

Loan Costs

Mortgage insurance/guarantee costs
Private Mortgage Insurance (PMI) costs depend on LTV, credit score, term, program
PMI premium quoted when commitment issued; estimated at application if cost unknown
PMI premiums typically initial and renewal premiums
Lender Paid Mortgage Insurance (LPMI) or upfront borrower-paid PMI: percentage of loan amount (like discount points)
FHA upfront and monthly MIP: consistent based on term and down payment, may vary with loan changes
VA Funding Fees, USDA Guarantee Fee (vary for veterans' service status/program use), should be known upfront; may adjust with new information
Credit report cost, tax service fee, flood certification
Title insurance costs: one-time expense at closing based on loan amount
Lender flat fees: underwriting, processing, administration fee, loan origination fee (percentage or flat), discount points, lender credit, temporary buydown cost
Discount points and lender credit in points (1% = 1 point); basis points (1/100th of a point)
Lender credit may be flat amount
Buydown period determines temporary buydown cost
Examples used in study guide

Escrow Deposits

Escrow account for taxes, insurance, mortgage insurance payment, if relevant
Funding for escrow account collected at closing
Property and insurance costs: collected for two months in advance

Per Diem Interest

Mortgage interest paid in arrears
Lender collects interest from funding date to end of closing month
Calculation steps provided for determining per diem interest

Additional Disclosures

Mortgage Loan Servicing disclosure, optional for reverse mortgages
Consumer Handbook on Adjustable Rate Mortgages (CHARM) for ARM
CFPB Home Loan Toolkit for purchase transactions
List of settlement service providers
Applicant's right to appraisal review
Affiliated business arrangement disclosure required if lender has ownership interest
Homeownership counseling disclosure with available local counseling services

Disclosure Methods

Electronic if agreed upon
In-person
Standard mail (must meet RESPA, TILA deadlines)
Overnight delivery

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Description

This quiz explores the essential disclosures required during a mortgage loan application process, including specific requirements triggered by the MLO and regulatory guidelines. Understand the Loan Estimate disclosure and the six key pieces of information necessary for compliance. Dive into the importance of the RESPA guidelines and different loan options available.