Mortgage Loan Origination - ProSchools-Federal Truth in Lending Act-Lesson 1 and 2
Advertising of consumer credit is regulated and disclosures of interest rates and points are required by which regulation? Regulation Z of Truth in Lending Regulation B of ECOA Regulation X of RESPA Regulation C of HMDA
The correct answer is A. Regulation Z applies to advertising of consumer credit, requiring disclosure of all specific credit terms and use of the APR.
According to TILA, a variation up to what amount is permitted for the annual percentage rate in a regular fixed-rate mortgage transaction? 1/4% 1/2% 1/8% 3/4%
The correct answer is C. Under TILA and Regulation Z, the APR for a fixed-rate loan is permitted to vary up to 1/8 of 1% from the actual APR and still be considered accurate.
Amends TILA by adding disclosure requirements for certain loans
HOEPA
Loans covered are usually refinances or home equity loans
HOEPA
Prohibits interest rate that upon default is higher than pre-default rate
HOEPA
Provides that borrower has the right to request cancellation of PMI when a mortgage is paid down to 80% of the purchase price
Homeowners Protection Act (HPA)
Promotes informed use of credit
TILA
Provisions of act are implemented by Reg Z
TILA
Requires CHARM booklet for ARMs
TILA
Requires lender to disclose true APR
TILA
Which of the following options is an alternative to a piggyback second mortgage? Mortgage insurance Credit card advances Lower down payments Tax credits
The correct answer is A. A borrower wanting a loan with less than 20% down might choose between a loan with mortgage insurance and combination financing (or piggyback loans). Piggyback financing is an 80% first loan with either a 20% second loan, or a 15% second loan with a 5% down payment, or a 10% second loan with a 10% down payment.
A consumer who needs credit before the end of a TILA waiting period to meet a bona fide personal financial emergency may modify or waive either the seven-business-day waiting period or the three-business-day waiting period. modify or waive only the seven-business-day waiting period after the early TIL Disclosure. modify or waive only the three-business-day waiting period after a corrected TIL Disclosure. not modify or waive any waiting period.
The correct answer is A. A consumer who needs the credit before the end of the waiting period to meet a bona fide personal financial emergency may modify or waive the seven-business-day waiting period after the early disclosure or the three-business-day waiting period after a corrected disclosure.
May Bea is applying for a loan that is to be secured by her principal dwelling. The mortgage broker may do which of the following with regard to an appraisal of the property she is trying to purchase, which comes in $5,000 below her offering price? Ask the appraiser to provide additional information about the basis for a valuation. Refuse to compensate the appraiser because he did not value the dwelling at the amount needed for loan approval. Inform the appraiser of the minimum value needed for loan approval. Imply to the appraiser that his current or future retention depends on the amount at which he values the dwelling.
The correct answer is A. A mortgage broker may ask an appraiser, among other things, to provide additional information about the basis for a valuation. The broker may not coerce, influence, or otherwise encourage an appraiser to misstate or misrepresent the dwelling's value by implying that his current or future retention depends on the amount at which he values the dwelling, exclude him from consideration for future engagement because he reports a value that does not meet or exceed a minimum threshold, tell him a minimum reported value that is needed to approve the loan, fail to compensate him because he does not value the dwelling at or above a certain amount, or condition his compensation on loan consummation.
Before receiving a TIL Disclosure, a loan applicant may be charged a fee for a title search. an appraisal. a mortgage broker fee. a credit report.
The correct answer is D. The only fee a creditor or any other person may charge a consumer in connection with a mortgage loan application before he has received the TIL Disclosure is a reasonable and bona fide fee for a credit report.
HOEPA applies to which type of high-cost loan? Second mortgage secured by a principal residence Construction loan secured by a principal residence Reverse mortgage Open-end line of credit secured by a principal residence
The correct answer is A. The loans covered under HOEPA are usually refinances or home equity loans with high interest rates or high upfront costs. They may be called Section 32 loans because that is the section of Regulation Z in which they are defined. A Section 32 loan is defined as a closed-end loan secured by the borrower's principal residence (but not a reverse mortgage or a loan used for purchase or construction of the residence) with an APR that is more than 8% for a first lien loan, or 10% for a subordinate lien loan, above the yield on Treasury securities having comparable maturity periods; or with total fees and/or points that exceed the greater of 8% of the total loan amount or an annual minimum threshold set by the Federal Reserve Board.
The notice of the TILA right to rescind includes disclosure of all of the following EXCEPT the date the rescission period begins. instructions on how to rescind. the date the rescission period expires. the effects of rescission.
The correct answer is A. The notice of the TILA right to rescind includes disclosure of the retention or acquisition of a security interest in the consumer's principal dwelling; the consumer's right to rescind the transaction; how to exercise the right to rescind (including the rescission form and address of the creditor's place of business); the effects of rescission; and the date the rescission period expires.
An ARM disclosure includes all of the following EXCEPT the interest rate once the initial interest rate period expires. the length of the period of the initial interest rate. the period between adjustments. the initial interest rate.
The correct answer is A. The rate after the starting initial rate cannot be included in the disclosure, as it will not be determined until later. The lender must disclose the initial rate and the period for that rate, as well as the frequency of rate change.
The Truth in Lending Act requires disclosure of which of the following rates in response to an oral inquiry about the cost of credit? Annual percentage rate Federal funds rate Simple interest rate Federal Reserve discount rate
The correct answer is A. The rate that must be provided to consumers in any disclosure of credit terms is the annual percentage rate.
Why would a consumer wanting to buy a home with a 10% down payment get a first mortgage loan for 80% of the home's value and a home equity loan for 10% of the home's value? To avoid paying PMI So the interest rate for the home equity loan would be below current market rates. So he can get a second loan as soon as the 10% home equity loan is paid off. So the interest rate for the first mortgage loan would be below current market rates.
The correct answer is A. This describes a piggyback loan used to enable a borrower to obtain financing with less than 20% and still avoid paying for mortgage insurance.
Under the Truth in Lending Act, the borrower may have a right to rescind a loan within three business days. Those business days include any day but Sunday and federal legal holidays. any weekday or holiday. any day but federal and state legal holidays. Monday through Friday only.
The correct answer is A. Under TILA the definition of a business day with regard to the borrower is any day but Sunday and legal holidays. With regard to actions by the creditor, a business day is a day the creditor is open for business to the public.
The Truth in Lending Act allows a consumer to waive the right to rescind the loan transaction if the funds are needed for home improvements. to meet a personal financial emergency. to meet a business emergency. for purchase of a major item on sale before the end of the rescission period.
The correct answer is B. A borrower may modify or waive his right to rescind if credit is needed to meet a bona fide personal financial emergency before the end of the rescission period.
When a TIL Disclosure is mailed, the applicant is considered to have received it three calendar days after the mailing. three business days after the mailing. 48 hours after the mailing. on the day of mailing.
The correct answer is B. If the TIL Disclosure is mailed, the consumer is considered to have received it after three business days. (In this case, a business day is defined as any day but Sunday or federal holidays.)
The statement, "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application," is required by ECOA on every loan application. Regulation Z on TILA disclosures and redisclosures. RESPA for all GFEs. Regulation Z only on corrected TILA disclosures.
The correct answer is B. TILA disclosures and redisclosures must contain the following statement: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."
Which of the following federal agencies created the regulations for TILA? HUD Federal Reserve System Federal Trade Commission FHA
The correct answer is B. The Federal Reserve System (or Federal Reserve Board) was initially responsible for issuing the regulations pertinent to the Truth in Lending Act. TILA's regulations are known as Regulation Z. Effective July 1, 2011 the CFPB is responsible for TILA regulations.
In a fixed-rate mortgage loan, what percentage of the original value of the property must the homeowner's equity position reach for the PMI to be canceled automatically? 24% 22% 26% 20%
The correct answer is B. The Homeowners Protection Act provides that a borrower with a good payment history has the right to request in writing the cancellation of the PMI when he pays down his mortgage to the point that it equals 80% of the original purchase price or the appraised value of his home at the time the loan was obtained, whichever is less. Otherwise, PMI coverage is automatically canceled once the borrower pays down his mortgage to 78% of the value (so his equity is 22%) if the loan payments are current, or when a loan that is current reaches the midpoint of its amortization period (e.g., after 180 payments of a 30-year loan).
TILA restrictions for higher-priced mortgage loans limit any prepayment penalty to the first year. subordinate loans only. the first two years. the first three years.
The correct answer is C. The loan may include a prepayment penalty only if it will not apply after two years, if the source of the prepayment funds is not a refinancing by the creditor or its affiliate, and if the amount of the periodic payment of principal and/or interest will not change during the four-year period following consummation.
TILA requires that an ad offering an adjustable rate mortgage loan must disclose the fixed rate interest rate for various time periods. the actual interest rate for the first 12 months. the fact that the APR is subject to change. the anticipated interest rate for the first 12 months.
The correct answer is C. Under TILA, a lender may only advertise those rates and terms that will, in fact, be offered to the borrower. Any rate of finance charge advertised must be set forth and defined conspicuously in the advertisement as the APR. If an interest rate can change during the term of the loan, that fact must be contained in the advertisement. Any interest rate or periodic rate may be stated in the advertisement, but not more prominently than the APR.
When a consumer exercises his right to rescind a loan under TILA, all loan fees must be refunded within 10 days. 7 days. 20 days. 30 days.
The correct answer is C. Within 20 days after receiving notice that the borrower is canceling the transaction, the lender must return any money or property received by anyone in connection with the transaction and take appropriate steps to indicate that any security interest in the property is null and void.
For how long after the date disclosures are required to be made or action is required to be taken must a creditor retain evidence of compliance with Regulation Z? Five years One year Seven years Two years
The correct answer is D. A creditor must retain evidence of compliance with Regulation Z for two years after the date disclosures are required to be made or action is required to be taken.
For how long after the date disclosures are required to be made or action is required to be taken must a creditor retain evidence of compliance with Regulation Z? One year Seven years Five years Two years
The correct answer is D. A creditor must retain evidence of compliance with Regulation Z for two years after the date disclosures are required to be made or action is required to be taken.
TILA requires that a lender provide the borrower with new disclosures after the loan has been made in all of the following instances EXCEPT the loan, which has a variable rate, has its payments adjusted. the loan is refinanced. the loan is assumed. the loan is sold.
The correct answer is D. After consummation of the loan, the lender must provide the consumer with either a complete new set of disclosures or a disclosure of only those terms that vary from the original terms if the loan is refinanced, if it is assumed, or if it is a variable-rate loan that has its payments adjusted.
Loans covered under the Home Ownership and Equity Protection Act (HOEPA) are high interest rate loans. are closed-end loans secured by the borrower's residence. are subject to the borrower's right of rescission. All of the above
The correct answer is D. All of these are characteristics of loans covered under HOEPA.
Under HOEPA a lender is required to advise the borrower that he is not required to complete the transaction. advise the borrower that he may lose his home should he default on the loan. Neither A nor B are required Both A and B are required
The correct answer is D. Among other requirements, the lender is required to advise the borrower that he need not complete the transaction and that, in the event of default, he may lose his home.
If an advertisement states a rate of finance charge for a residential mortgage loan, it must state the rate as a daily percentage rate. a monthly percentage rate. an annual interest rate. an annual percentage rate.
The correct answer is D. If an advertisement states a rate of finance charge, it must state the rate as an annual percentage rate, using that term or the abbreviation "APR."
A home builder advertises that it will finance the homes it builds. What additional information must be in the ad in order to comply with the Truth in Lending Act? The annual percentage rate The down payment amount The repayment period None
The correct answer is D. No triggering term in included in the builder's ad, so no credit terms need to be included.
For which type of loan must a lender, prior to consummation of the transaction, disclose that the borrower does not have to complete the loan agreement just because he applied for the loan and that he could lose his home if he does not make his payments? FHA ARM VA High-interest home equity loan
The correct answer is D. Not less than three business days prior to consummation of a transaction that is subject to HOEPA, a lender must give the following disclosure: "You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan."
If a borrower is current on his 30-year home mortgage, the earliest time his private mortgage insurance will automatically terminate is upon full repayment of the loan. when his loan balance is scheduled to be 20% of the property's original value. at the end of 10 years. when his loan balance is scheduled to be 78% of the property's original value.
The correct answer is D. PMI coverage is automatically canceled once the borrower pays down his mortgage to 78% of the value if the loan payments are current, or when a loan that is current reaches the midpoint of its amortization period (e.g., after 180 payments of a 30-year loan).
Which of the following would be considered prepaid finance charges in a transaction secured by real estate? Title insurance premium Flood determination and pest inspection Credit report charge Mortgage broker fees
The correct answer is D. Prepaid finance charges are finance charges paid prior to or at loan closing or withheld from the loan proceeds at any time. They include discount points, origination fees, mortgage broker fees, loan processing fees, and per diem interest paid at or before closing. In real estate loan transactions, prepaid finance charges do not include title insurance costs, notary public fees, credit report charges, appraisal fees, flood determination charges or pest inspection fees.
Which of the following are included in the finance charges for a real estate transaction? Prepaid reserves for taxes and insurance Flood certification fee Credit reports charges Mortgage insurance premiums
The correct answer is D. Prepaid finance charges include discount points; origination fees; mortgage broker fees; premiums for mortgage, credit life or similar insurance required by the creditor; loan processing fees; and per diem interest paid at or before closing. In real estate loan transactions, prepaid finance charges do not include title insurance costs, prepaid reserves in escrow, notary public fees, credit report charges, appraisal fees, flood determination charges or pest inspection fees.
Truth in Lending Act disclosures CANNOT be given by hand delivery. mail. fax. telephone.
The correct answer is D. The TIL Disclosure must be in writing and mailed, faxed or hand delivered.
The Truth in Lending Act is within which law? Fair Credit Reporting Act Equal Credit Opportunity Act Real Estate Settlement Procedures Act Consumer Credit Protection Act
The correct answer is D. The Truth in Lending Act is Title I of the Consumer Credit Protection Act. It was enacted in 1968 in order to promote the informed use of credit.
Which law requires distribution of the CHARM booklet to certain mortgage loan applicants? Consumer Protection Act Real Estate Settlement Procedures Act Equal Credit Opportunity Act Truth in Lending Act
The correct answer is D. The Truth in Lending Act requires the Consumer Handbook on Adjustable Rate Mortgages (CHARM) disclosure when the loan is an adjustable-rate mortgage.
An applicant received TILA disclosures in person on Monday, May 1, and then received corrected disclosures that were personally delivered on Wednesday, May 3. The earliest the transaction may be consummated is May 6. May 4. May 3. May 9.
The correct answer is D. The applicant must receive early disclosures no later than the seventh business day before consummation, and he must receive corrected disclosures no later than three business days before consummation. The loan cannot be consummated until both the seven-business-day waiting period and the three-business-day waiting period have expired. Although Saturday, May 6, is the third business day after the applicant received the corrected disclosures, consummation may not occur before Tuesday, May 9, the seventh business day following delivery or mailing of the early disclosures.
The early TIL Disclosure must be provided to a borrower at least how many business days prior to closing? 10 30 3 7
The correct answer is D. The early TIL Disclosure must be provided to a borrower at a time that is within three business days after the loan application is completed and at least seven business days prior to closing.
At least how many business days prior to closing must the borrower be given the early Truth in Lending Disclosure? Ten One Three Seven
The correct answer is D. The early TILA Disclosure must be delivered to the borrower within three business days of the application and at least seven business days prior to closing.
Interest, service charges, transaction charges, buyer's points, loan fees and mortgage insurance are examples of what is included in the dollar amount called the lease fee. the rate disclosure. the available credit. the finance charge.
The correct answer is D. The finance charge is the dollar amount charged for credit. It includes interest and other costs, such as service charges, transaction charges, buyer's points, loan fees and mortgage insurance. It also includes the premiums for credit life, accident and health insurance, if required, and for property insurance, unless the buyer may select the insurer.
The primary purpose of the Truth in Lending Act is to ensure equal credit opportunity. limit settlement costs. limit consumer interest rates. ensure consumers are given disclosures of credit terms.
The correct answer is D. The primary purpose of TILA is to assure that creditors provide accurate and truthful information to consumers relating to the cost and terms of the credit being offered so that they can more easily compare various credit offers.
In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a TILA Disclosure must be delivered or mailed within three business days after receipt of a written application and no later than the seventh business day before the transaction is consummated. the fifth business day before the transaction is consummated. the date the transaction is consummated. three business days before the transaction is consummated.
The correct answer is A. In a mortgage transaction subject to the RESPA that is secured by the consumer's dwelling, other than a home equity line of credit, a TIL Disclosure must be delivered or mailed within three business days (i.e., days on which the creditor's offices are open to the public for carrying on substantially all of its business functions) after receipt of a written application and no later than the seventh business day before the transaction is consummated.
TILA provides that the APR advertised for a mortgage loan can deviate from the actual rate being offered to customers by 0%. 1/2%. 1/8%. 1/4%.
The correct answer is A. Only credit or lease terms that are actually available to the consumer may be advertised. The advertised annual percentage rate must be the same rate as that offered the customers.
The private mortgage insurance disclosure states that PMI is required to be maintained for a mortgage loan as long as the loan is more than 80% of the original value of the property. as long as the loan is less than 80% of the original value of the property. if the property is more than 20 years old. if the borrower has chosen an adjustable mortgage rate.
The correct answer is A. PMI is required as long as the loan is more than 80% of the original value. The original value is the lesser of the purchase price or the appraised value of the property at the time the loan was closed. However, for refinancing, the original value is the appraised value relied on by the lender when approving the new loan.
The Truth in Lending Act does not include which of the following as finance charges in a residential loan transaction? Appraisal fees PMI Mortgage broker fees Settlement/closing fees
The correct answer is A. Property appraisal fees are not considered finance charges in a residential mortgage loan.
Under Truth-in-Lending, it is permissible to advertise which of the following statements without disclosing all the terms of the credit? Low down payment $2,000 down 3% down payment 10% interest
The correct answer is A. Regulation "Z" (Truth-in-Lending) requires creditors and arrangers of credit to disclose all terms of the loan if any specific terms (interest rate, down payment amount or percentage, dollar amount of any finance charge, number of installments or period of repayment, or amount of any installment payment) are used. All terms of financing need not be disclosed if only the APR is used, or only general terms ("low down payment," "reasonable rate," etc.) are used.
According to TILA, a loan cost paid separately before or at consummation of a transaction or withheld from the proceeds of a loan is a prepaid finance charge. a prepaid closing cost. an escrow account item. a POC item.
The correct answer is A. TILA defines the finance charge as the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as a condition of getting the loan. It includes interest paid over the life of the loan as well as prepaid finance charges. TILA defines a prepaid finance charge (e.g., points, origination fees and mortgage broker fees) as any finance charge paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time. Closing costs are the other costs of settlement of a real estate transaction, disclosed under RESPA.
A creditor advertising a 30-year mortgage with a 10% down payment must include all of the following information in the same advertisement EXCEPT? Estimate of settlement service charges Terms of repayment Annual percentage rate Amount or percentage of the down payment
The correct answer is A. TILA requires that if any trigger term (i.e., interest rate, down payment, etc.) is advertised, then the APR, the amount or percentage of the down payment and the terms of repayment must also be advertised.
According to the Truth in Lending Act, when does refinancing occur? When the APR is reduced When a single payment obligation is renewed with no change in terms. When an existing obligation is satisfied and replaced by a new obligation. When there is a change in the payment schedule of an existing obligation.
The correct answer is C. Refinancing occurs when an existing debt is satisfied and replaced by a new obligation.
In a loan transaction in which there are four co-owners of the property, what is the minimum number of co-owners who must request rescission for the request to be valid under TILA? One Four Three Two
The correct answer is A. A rescission by one consumer constitutes a rescission by all.
Under TILA, which of the following is true about a higher priced mortgage loan? If secured by a second lien on a principal dwelling, the creditor must establish an escrow account before consummation for payment of property taxes and premiums for any required mortgage-related insurance. The loan can be based on the value of the consumer's collateral without regard to the consumer's repayment ability. The creditor cannot charge a prepayment penalty if the source of the prepayment funds is a refinancing by the creditor or its affiliate. The loan may not include a prepayment penalty.
The correct answer is C. A creditor cannot make a higher-priced mortgage loan based on the value of the consumer's collateral without regard to the consumer's repayment ability as of consummation. The loan may include a prepayment penalty only if it will not apply after two years, the source of the prepayment funds is not a refinancing by the creditor or its affiliate, and the amount of the periodic payment of principal and/or interest will not change during the four-year period following consummation. If the loan is secured by a first lien on a principal dwelling, the creditor must establish an escrow account before consummation for payment of property taxes and premiums for any required mortgage-related insurance.
Which of the following is NOT a characteristic of a "higher priced mortgage loan" under TILA? An APR that exceeds the rate for a comparable transaction by at least 3.5% for loans secured by a subordinate lien on a dwelling An APR that exceeds the rate for a comparable transaction by at least 1.5% for loans secured by a first lien on a dwelling A bridge loan with a term of six months Secured by the consumer's principal dwelling
The correct answer is C. A higher priced mortgage loan is a consumer credit transaction secured by the consumer's principal dwelling with an APR that exceeds the average price offer rate for a comparable transaction as of the date the interest rate is set by at least 1.5% for loans secured by a first lien on a dwelling, or by at least 3.5% for loans secured by a subordinate lien on a dwelling. However, it does not include a transaction to finance the initial construction of a dwelling, a temporary or "bridge" loan with a term of 12 months or less (e.g., a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within 12 months), a reverse mortgage transaction, or a home equity line of credit.
When a TIL Disclosure is made inaccurate by a subsequent event, corrected disclosures are required if the APR at the time of consummation varies from the disclosed APR by any amount. more than 1/2% in an irregular transaction. more than 1/8% in a regular transaction. less than 1/8% in any transaction.
The correct answer is C. If disclosures are made inaccurate by a subsequent event prior to consummation, the creditor must provide corrected disclosures if the APR at the time of consummation varies from the disclosed APR by more than 1/8 of 1% in a regular transaction or by more than 1/4 of 1% in an irregular transaction.
TILA restrictions for higher-priced mortgage loans require an escrow account for a first or second lien on the borrower's principal residence. for any higher-priced mortgage loan. only if the loan is a first lien on the borrower's principal dwelling. only for taxes.
The correct answer is C. If the loan is secured by a first lien on a principal dwelling, the creditor must establish an escrow account before consummation for payment of property taxes and premiums for any required mortgage-related insurance (e.g., insurance against loss of or damage to property and/or against liability arising out of the ownership or use of the property, or insurance protecting the creditor against the consumer's default or other credit loss).
Which of the following is true about the right of rescission granted under the Truth in Lending Act? It applies only to a loan secured by the borrower's principal residence. It applies to first and second mortgages. It applies only to a residential mortgage transaction involving a loan to purchase a property. If there are multiple borrowers, only one can be designated as having the right to rescind.
The correct answer is A. A right to rescind applies only if the loan is secured by the borrower's principal residence and is a second mortgage, home improvement loan, home equity loan or line of credit or a refinance loan from a different lender. The right does not apply to a residential mortgage transaction (a loan to finance the acquisition or initial construction of the dwelling) or a refinancing or consolidation by the same creditor of a loan already secured by the borrower's principal dwelling, unless the amount refinanced exceeds the unpaid balance and finance charges on the existing loan and the costs of the refinancing or consolidation. Any consumer with an interest in the property may exercise the right to rescind.
The Truth in Lending Disclosure given to an applicant for a 30-year home loan must be supplemented by additional disclosures when the loan is an adjustable rate mortgage. the loan contains prepayment penalties. the mortgage broker must pay third-party providers. the interest rate is not locked in.
The correct answer is A. Additional disclosures are required for an adjustable-rate mortgage (ARM) loan secured by the borrower's principal place of residence, if it has a term exceeding one year and a rate that will fluctuate after settlement of the loan. These include the Consumer Handbook on Adjustable Rate Mortgages.
If a mortgage ad states "low down payment," what else is required in the ad? Nothing else The APR All key financing terms The monthly payment
The correct answer is A. As long as no specific number of dollars, payments or years is cited, no other disclosure is necessary.
All of the loans below are covered by HOEPA EXCEPT a home equity line of credit. a second mortgage where the APR exceeds by more than 10% the rates in U.S. Treasury securities of comparable maturity. a first mortgage with an APR which is 8 points higher than U.S.Treasury securities of comparable maturity. the total fees and points payable by the consumer at or before closing exceed the greater of $583 or 8% of the total loan amount.
The correct answer is A. HOEPA rules primarily affect refinancing and home equity installment loans that also meet the definition of a high-rate or high-fee loan. The rules do not cover loans to buy or build a home, reverse mortgages or open-end loans (e.g., home equity lines of credit).
An ad that shows the amount of a payment for a consumer loan must also show all of the following EXCEPT the finance charges. the terms of repayment. the APR. the down payment.
The correct answer is A. Regulation Z requires that any consumer credit ad containing a trigger term must also show the amount or percentage of the down payment; the terms of repayment (the payment schedule, including the number of payments, timing, amount of each payment, and any final balloon payment); and the APR.
All of the following must be included in the APR EXCEPT notary fees. discount points (prepaid interest). wire transfer fees. mortgage insurance premiums.
The correct answer is A. The APR represents the relationship of the total finance charge (including interest) to the total amount financed, as a yearly rate. The finance charge includes interest prepaid interest, and mortgage insurance premiums. It does not include closing costs, such as notary fees.
All of the following may be included in calculation of the APR EXCEPT property insurance premiums. discount points. interest. mortgage broker fees.
The correct answer is A. The APR represents the relationship of the total finance charge to the total amount financed, as a yearly rate. Finance charges that may be included in the calculation are loan origination fees; assumption fees; loan finder's fees; loan service fees; buyer's points; premiums for mortgage, credit life or similar insurance required by the creditor, wire transfer fees, and borrower-paid mortgage broker fees. Property insurance premiums paid at closing, like taxes, would be prepaid reserves, which are not related to the cost of the financing.
Regulation Z was issued to implement the Truth in Lending Act by the Board of Governors of the Federal Reserve System. the Interstate Commerce Commission. the Federal Home Loan Bank Board. the Department of Housing and Urban Development.
The correct answer is A. The Board of Governors of the Federal Reserve issued Regulation Z. Regulation Z and the Truth in Lending Act are now enforced by the Consumer Financial Protection Bureau created and implemented by the Dodd-Frank Act of 2010.
The HPA requires that a lender or servicer notify a consumer of his rights regarding PMI at the time of loan closing. monthly. when the loan amount is down to 80% of the property sales price. at the time of taking a loan application.
The correct answer is A. The HPA requires that a lender or servicer notify a consumer of his rights at loan closing, annually, and upon cancellation or termination of PMI.
Which of the following appears in the Truth in Lending Disclosure Statement? The loan term The anticipated ARM rates for the first five years The property purchase price The fully-indexed ARM rate
The correct answer is A. The TILA disclosure includes the features of the loan, including its term.
The Truth in Lending Disclosure Statement is an estimate of finance charges for a particular loan. a loan commitment. a loan agreement. a guarantee of finance charges.
The correct answer is A. The Truth in Lending Disclosure Statement shows the finance charge. This is the dollar amount the credit will cost the borrower. It includes any charge payable directly or indirectly by the borrower and imposed directly or indirectly by the creditor for the extension of credit.
In a transaction secured by a dwelling, any disclosed finance charge must be redisclosed if it is understated by $50. understated by more than $100. overstated by 1/2%. overstated by more than $100.
The correct answer is B. A disclosed finance charge is considered accurate if it is understated by $100 or less or if it is overstated, regardless of the amount.
Under TILA, a borrower's right to rescind is extended to three years if any of the following occurs EXCEPT the creditor fails to deliver the required notice and disclosures to all parties. the finance charge is overstated by $100. the finance charge is understated by $35 in the event of a foreclosure. the finance charge is understated by more than 0.5% of the credit transaction.
The correct answer is B. A disclosure is considered accurate if the disclosure overstates the finance charge, regardless of the amount. If a creditor fails to deliver the required notice and material disclosures, the borrower's right to rescind is extended to three years after the occurrence giving rise to the right of rescission. The period to rescind is also extended to three years if the creditor's disclosure of the finance charge is understated by more than 0.5% of the credit transaction, 1% of the credit transaction for certain refinancings, or $35 in the event of a foreclosure.
An APR must be disclosed within what percentage of the actual APR in a regular transaction? 1/2% 1/8% 1/4% 3/4%
The correct answer is B. An APR must be disclosed within 1/8 of 1% of the actual APR determined in a regular transaction.
Which of the following is true of rescission rights granted by TILA? The notice of the right to rescind must be on the first page of the note. Each consumer with an interest in the property must be given two copies of the notice of right to rescind. All consumers with a right to rescind must concur in the rescission for it to be valid. Only a person who signed the note has a right to rescind.
The correct answer is B. Any any consumer who has an interest in the property (even if he did not sign the note) may exercise the right to rescind, so each must be given two copies of a notice of the right to rescind. This means if a husband and wife are co-borrowers, each gets two copies of the notice. This notice (called a Notice of Right to Cancel or Notice of Right to Rescind) must be on a separate sheet of paper. A rescission by one consumer constitutes a rescission by all.
The Truth in Lending Act requires disclosure to an applicant of interest rates offered by the same lender to other borrowers. discount points to be paid to the lender. his credit score. interest rates offered by other lenders.
The correct answer is B. Discount points are a finance charge, and must be disclosed. The other items have nothing to do with a TILA disclosure.
The Truth in Lending Act provides that a lender refinancing a residential property must give the borrower nothing, as the law does not apply to refinancing. a new TIL Disclosure for the new loan. a new TIL Disclosure only if it is requested. a copy of the TIL Disclosure for the initial loan.
The correct answer is B. The law does apply. Because the request is for a new loan, a new disclosure must be provided.
All of the following are considered finance charges EXCEPT initial mortgage insurance premium. home inspection fee paid by the borrower. loan origination fee. discount points.
The correct answer is B. Finance charges are costs of obtaining the loan. They include all fees paid by the borrower to and kept by the lender, (e.g., the loan origination fee and discount points). They also include the cost of any mortgage broker fees and premiums for life insurance or mortgage insurance required by the lender. Fees charged a consumer by a settlement agent, attorney, or escrow or title company conducting the closing are finance charges only if the lender requires the particular services, requires the imposition of the charge, or retains a portion of the charge. They do not include other costs incurred to close the sale (e.g., home inspection fees).
Regulation Z requires that an ad stating the down payment for a closed-end mortgage must include a statement of the interest rates for the same loan with higher and lower down payments. terms of repayment of the loan. down payment amounts for other loans available from the lender. a statement of how that figure compares to others generally available.
The correct answer is B. If an ad for closed-end credit uses a triggering term such as the amount of the down payment, the amount of any payment, the number of payments or the period of repayment, or the amount of any finance charge, then it must also include the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate, using that term or the abbreviation "APR."
The Mortgage Disclosure Improvement Act amendments to TILA provide that for a regular mortgage transaction (other than a HELOC) that is subject to RESPA or secured by the consumer's principal dwelling, the consumer must receive corrected disclosures no later than three business days before consummation if the APR at the time of consummation varies from the APR previously disclosed by more than 1/16%. 1/8%. 1/4%. 1/2%.
The correct answer is B. If the APR at the time of consummation varies from the APR previously disclosed by more than 1/8 of 1% in a regular transaction or more than 1/4 of 1% in an irregular transaction, the borrower must receive a corrected disclosure no later than three business days prior to consummation or settlement.
All of the following are required disclosures under the Truth in Lending Act EXCEPT points. title charges. interest rate. loan fees.
The correct answer is B. Loan costs must be disclosed under TILA and Regulation Z. Title charges are closing costs disclosed under RESPA and Regulation X.
Which of the following would be included in the calculation of the APR for a closed-end loan? Credit report fee Loan origination fee Appraisal fee Title insurance premium
The correct answer is B. Money that is paid to and kept by a lender is a finance charge, included in the APR calculation. This includes the loan origination fee. With regard to real estate transactions, the other choices are closing costs reported under RESPA.
One purpose of Title I of the Consumer Credit Protection Act is to ensure that consumers are treated equally in the processing of their application. receive meaningful disclosures of credit terms. are provided with an estimate of settlement costs prior to closing. are not overcharged.
The correct answer is B. One of the purposes of Title I (the Truth in Lending Act) of the Consumer Credit Protection Act is to assure a meaningful disclosure of credit terms so consumers can compare more readily the various credit terms available.
The advantage of PMI to a lender is that it ensures that ensures the borrower will pay tax and insurance premium money to the insurer with his monthly payment. limits financial losses if the borrower defaults on payments and foreclosure occurs. ensures the property is insured against property damage losses. ensures the borrower cannot get a subordinate mortgage loan from another lender.
The correct answer is B. Private mortgage insurance is generally required by a lender when the down payment on the purchase of a home is less than 20% of the home's total value. It limits financial losses for the lender in the event the borrower defaults on his loan and foreclosure occurs.
The Truth in Lending Act applies to business loans. home loans. commercial loans. agricultural loans.
The correct answer is B. TILA applies only to loans for personal, residential and household use. It does not apply to business, commercial or agricultural loans.
The Truth in Lending Act does all of the following EXCEPT enable consumers to compare costs of obtaining credit. limit interest rates creditors may charge. allow consumers to rescind certain loans. impose restrictions on home equity lines of credit.
The correct answer is B. TILA does not set interest rates. It does require disclosures to enable consumers to compare costs of credit offered, provide rescission rights for some transactions, and impose restrictions on home equity lines of credit.
TILA provides for a rescission period of how many business days for subordinate loans secured by a principal dwelling? Five Three Two Four
The correct answer is B. TILA provides for a rescission period of three business days for subordinate loans secured by a principal dwelling.
The Truth in Lending Act requires disclosure of the property appraisal. key terms of the credit transaction. loan servicing practices. closing costs.
The correct answer is B. TILA requires a disclosure of the terms of the credit transactions, including costs and key provisions. RESPA requires disclosure of closing costs and loan servicing practices. ECOA requires disclosure of the appraisal.
When a homeowner's equity position reaches 20% of the original value of the property within 60 days of receipt of a cancellation request, the lender must cancel the insurance. the homeowner can request cancellation of the PMI. the PMI automatically cancels after 60 days. the lender must immediately cancel the PMI.
The correct answer is B. The Homeowners Protection Act provides that a borrower with a good payment history has the right to request in writing the cancellation of the PMI when he pays down his mortgage to the point that it equals 80% of the original purchase price or the appraised value of his home at the time the loan was obtained, whichever is less. Otherwise, PMI coverage is automatically canceled once the borrower pays down his mortgage to 78% of the value if the loan payments are current, or when a loan that is current reaches the midpoint of its amortization period (e.g., after 180 payments of a 30-year loan).
If private mortgage insurance is paid by the lender, the lender must provide a written notice to the borrower, stating the cancellation date of PMI. the differences between lender-paid and borrower-paid PMI. the ways in which a yield spread premium affects PMI. the advantages of lender-paid PMI.
The correct answer is B. The lender may either allow private mortgage insurance to be paid by the borrower or require that it be paid by the lender. If lender-paid PMI is required, the lender must provide a disclosure explaining the differences between lender-paid and borrower-paid PMI.
The premium paid for private mortgage insurance is refunded when the insurance is canceled. added to the borrower's monthly mortgage payment. paid to the lender as part of its loan processing fee. shared by the lender and the mortgage broker.
The correct answer is B. The premium for mortgage insurance is added to the amount due for principal and interest and included in the loan payments. The lender then sends the premium to the insurance company.
Foreclosure is initiated on a consumer's principal dwelling that secures a credit obligation. At this time, the finance charge and other disclosures affected by the finance charge are considered accurate if they are above the amount required to be disclosed or if they are understated by no more than $100. $200. $35. $50.
The correct answer is C. After the initiation of foreclosure on a consumer's principal dwelling that secures the credit obligation, the finance charge and other disclosures affected by the finance charge are considered accurate if they are understated by no more than $35 or are greater than the amount required to be disclosed.
Advertising terms that would not trigger additional disclosures in the ad include closing costs below $400. $100 down. calls for free consultation. monthly payments under $1,000.
The correct answer is C. An ad must disclose a number of other credit terms if it contains a triggering term. A triggering term is any of the following specific credit terms: the amount or percentage of any down payment except when the amount of the down payment is zero; the number of payments or period of repayment the amount of any payment the amount of any finance charge.
When TILA provides a right of rescission in a loan transaction in which there are multiple co-borrowers and co-owners only one of the co-borrowers need be given the Notice of Right to Cancel. each co-borrower must be given one copy of the notice of the right to rescind. any consumer with an interest in the property may exercise the right to rescind. only a co-borrower who signed the note may rescind.
The correct answer is C. Any consumer who has an interest in the property (e.g., each spouse who is a co-owner) may exercise the right to rescind even if he did not sign the note. Therefore, each must be given two copies of a notice of the right to rescind.
In a comparison of annual percentage rates for two separate loan programs, which of the following should be the same? Interest rates Loan amounts The term of each loan Prepaid finance charges
The correct answer is C. Because an APR is based on the term of the loan, the APR for a 15-year loan cannot be compared to the APR for a 30-year loan. The APRs being compared must be for loans with the same term.
What type of loan could be subject to HOEPA? Reverse mortgage on a primary residence Refinance on an investment duplex Second mortgage on a primary residence Construction loan
The correct answer is C. HOEPA loans are usually refinances or home equity loans with high interest rates or high upfront costs. They are defined as closed-end loans secured by the borrower's principal residence (but not a reverse mortgage or a loan used for purchase or construction of the residence) in which either the APR is more than 8% for a first-lien loan or 10% for a subordinate-lien loan, above the yield on Treasury securities having comparable maturity periods; or the total fees and/or points exceed the either of 8% of the total loan amount or an annual minimum threshold set by the Federal Reserve Board, whichever is great.
TILA regulations would apply to a loan to open a restaurant. for the purchase of a vineyard. for the purchase of a family summer home. obtained to purchase an apartment building.
The correct answer is C. TILA applies only to credit to be used for personal, family or household purposes. The credit also must be offered by an entity that extends it to consumers on a regular basis, must be subject to a finance charge, and must be payable under a written contract in more than four installments. TILA does not apply to credit extended for business, commercial or agricultural purposes.
If a creditor advertises "$3,000 down" for a house on its website, the ad must include the annual property taxes. the estimated property insurance cost. the annual percentage rate. the property address.
The correct answer is C. TILA requires that when a triggering term (down payment, monthly payment, finance charge or number of payments) is advertised, the ad must include the amount or percentage of the down payment, the terms of repayment and the annual percentage rate.
A creditor must provide the TIL Disclosure within how many business days after receipt of a residential mortgage loan application? Seven Five Three One
The correct answer is C. TILA requires the Truth in Lending Disclosure be provided to an applicant within three business days of receipt of an application for a residential mortgage loan, corresponding with the RESPA disclosure requirements.
Which of the following documents provides the borrower with information about prepayment penalties? 1003 Loan Application Form Escrow analysis Truth in Lending Disclosure Statement HUD-1 Settlement Statement
The correct answer is C. The TIL Disclosure includes the creditor's name and address; amount financed; finance charge; APR; variable rate information, if applicable; payment schedule and the total of the payments; any demand feature; total sales price, if the seller is the creditor; prepayment penalty, if any; late payment policy; description of the secured property; insurance requirements; contract reference; assumption policy; and any required deposit.
A TIL Disclosure provided for a home loan shows all of the following EXCEPT the amount financed. the APR. the appraisal fee. the amount of the monthly payments.
The correct answer is C. The TILA disclosure shows the APR, monthly payments and amount financed (the loan amount less finance charges). For real property loans, it does not include property appraisal fees.
PMI protects a borrower against natural disasters. a borrower against lender bankruptcy. a lender against damage to the property. a lender against losses due to foreclosure.
The correct answer is D. A purchaser who borrows more than 80% of the value or price of a home (i.e., puts less than 20% down) generally must pay for mortgage insurance to protect the lender against loss in the event of default. For a conventional loan, the mortgage insurance is called private mortgage insurance.
All of the following are true of the Truth in Lending Disclosure Statement EXCEPT only one such statement can be made for each closed loan. it must include the terms for balloon payments. it must include any late charges. it must disclose the APR within 1/2 of 1% of the actual APR.
The correct answer is D. An APR must be disclosed within 1/8 of 1% of the actual APR determined in a regular transaction. It must be within 1/4 of 1% of the actual APR determined in an irregular transaction.
Which of the following in an ad for residential mortgage financing would trigger additional disclosures? "VA financing available" "Affordable payments" "5.75% APR" "5% down payment"
The correct answer is D. An advertisement must disclose a number of other credit terms if it contains a trigger term. A trigger term is the amount or percentage of any down payment; the number of payments or period of repayment; the amount of any payment; or the amount of any finance charge. If an ad shows only a rate stated as the APR, no other credit information need be included because the APR is not a trigger term.
The practice of advertising an adjustable-rate mortgage as a fixed-rate mortgage is a violation that is termed underwriting. flipping. refinancing. bait and switch.
The correct answer is D. Bait-and-switch credit promotions involve advertising a loan at very attractive terms, and then informing potential customers that the advertised loan is not available, but that a substitute is. For example, an advertisement may not present an adjustable-rate mortgage as a fixed-rate mortgage or state that a specific installment payment or a specific down payment can be arranged unless the creditor is prepared to make those arrangements.
In a closed-end transaction secured by real property or a dwelling, the disclosed finance charge and any disclosure affected by the finance charge (e.g., the APR) are considered accurate if the finance charge is not understated by more than $50. $5. $150. $100.
The correct answer is D. In a closed-end transaction secured by real property or a dwelling, the disclosed finance charge and any disclosure affected by the finance charge (e.g., the APR) are considered accurate if the finance charge is understated by $100 or less or if it is overstated.
How may a borrower rescind a loan under the Truth in Lending Act? By written notice to the loan originator In person with the loan originator By phone to the lender By written notice to the lender
The correct answer is D. In order to rescind, the borrower must forward a completed rescission form to the lender, no later than midnight of the third day following either the consummation of the transaction, delivery of all material TILA disclosures, or delivery of notice of the right to rescind, whichever occurs last.
In order to avoid having private mortgage insurance, a homebuyer must put down at least what percentage of the lesser of the home's appraised value or price? 25% 10% 30% 20%
The correct answer is D. Private mortgage insurance is generally required by a lender when the down payment on the purchase of a home is below 20% of the lesser of the home's total value or the purchase price.
Which of the following documents shows the cost of a loan expressed as an annual percentage rate? HUD-1 HOEPA Consumer Caution Notice TIL Disclosure
The correct answer is D. TILA requires that consumers receive disclosure of the cost of credit expressed as a finance charge and as an annual percentage rate. These costs are disclosed on the Truth in Lending Disclosure that is due within three business days of loan application.
A limit on the amount of interest or loan fees a creditor may charge is imposed by fair lending laws. TILA. RESPA. state usury laws.
The correct answer is D. The only laws limiting the amount of interest or loan fees a creditor may charge are state usury laws.
A borrower has a right of rescission under TILA when he applies for a loan secured by his home if the loan is any of the following EXCEPT refinancing by the same lender for more than the amount owed on his current loan. a home improvement loan. a home equity loan. to buy his home.
The correct answer is D. The right to rescind applies only if the loan is secured by the borrower's principal residence and is a second mortgage, home improvement loan, home equity loan or line of credit, or a refinance loan. The right does not apply to a residential mortgage transaction (a loan to finance the acquisition or initial construction of the dwelling) or a refinancing or consolidation by the same creditor of a loan already secured by the borrower's principal dwelling, unless the amount refinanced exceeds the unpaid balance and finance charges on the existing loan and the costs of the refinancing or consolidation.
The place on the Truth in Lending Disclosure where the required disclosures are grouped together and shown separately from any other information is called the good faith estimate. the HUD-1. the transmittal summary. the Federal Box.
The correct answer is D. Truth in Lending disclosures must be grouped together and segregated from any other information not directly related to the required disclosures. The place on the document where they are located is referred to as the Federal Box. The Good Faith Estimate has disclosure of closing costs required by RESPA.
According to the Truth in Lending Act, a loan applicant does NOT have the right to rescind a loan transaction if his home is used to guarantee repayment and the loan refinances the loan to buy the home. is a second mortgage. is a home equity line of credit. is used to purchase the home.
The correct answer is D. Under TILA, in certain loan transactions involving a borrower's principal residence as a guarantee for repayment, the borrower may rescind the transaction, for whatever reason, within a specified period of time. This right does not apply to a first mortgage in which the credit is used to buy the residence (or any extension or renegotiation of the mortgage). It does apply to second mortgages, home improvement loans, home equity loans or lines of credit, and refinancing.
Which of the following informs a customer about his rights under the Truth in Lending Act to cancel a loan? GFE Mortgage servicing disclosure AfBA disclosure Notice of right to rescind
The correct answer is D. Under TILA, in certain transactions involving a consumer's principal residence, the borrower has a period of time in which he may choose to cancel the transaction for whatever reason. This is called the right of rescission. The lender is required to provide to the borrower information on this right in the form of two copies of a notice of the right to rescind, as well as a copy of the disclosure statement.
Which of the following would be considered part of the finance charge when figuring the annual percentage rate under the Truth-in-Lending Act (Regulation Z)? Credit report fee Notary fee Title insurance premium Discount points
The correct answer is D. Under Truth in Lending, the lender must disclose all finance charges which might include buyer's points, loan fees, finder's fees paid to the person bringing the borrower to the lender, service charges, mortgage insurance premiums and interest. He must add these charges together and calculate them as a percentage of the loan balances during the term of the loan to arrive at the APR. Actual costs not retained by lenders (title fees, legal fees, closing costs, property taxes, appraisal fees, recording fees, notary fees, etc.) are not considered finance charges and are not included in the APR.
Regulation Z requires that an ad showing "5.125% APR" must also show the loan term. the total finance charge for the loan. the down payment. None of these, as the APR by itself does not trigger further disclosures
The correct answer is D. When the APR is the only figure advertised, no other credit terms need to be advertised. The APR is not a triggering term.
