Federal Mortgage-Related Laws

HMDA can best be described as: A. A reporting law meant to discover discrimination by lenders B. Homeowners Mortgage Delinquency Act C. A section of RESPA which limits the amount of money that can be held in a borrower's escrow account D. A federal statute which states that borrowers have a right to a free copy of their credit report every 12 months

A. A reporting law meant to discover discrimination by lenders The answer is a reporting law meant to discover discrimination by lenders. The Home Mortgage Disclosure Act (HMDA) was enacted because of credit shortages in certain urban neighborhoods and the failure of certain financial institutions to provide adequate home financing to qualified applicants on reasonable terms. Its provisions allow for the determination of discriminatory lending patterns and to assist in enforcing fair lending laws.

Which of the following would not be considered a settlement service as defined by RESPA? A. Real estate brokerage services B. Title insurance services C. Appraisal services D. Loan modification services

D. Loan modification services Settlement service fees are charges incurred in the mortgage loan origination process. They include real estate brokerage services, title fees, appraisal costs, credit report fees, and costs related to the settlement, or closing, of the loan.

Within how many days of receipt of a loan application, as defined under federal rule, must a lender issue a Loan Estimate? A. Three banking days B. Three disclosure days C. Three calendar days D. Three business days

D. Three business days The answer is three business days. Pursuant to Regulation Z, the Loan Estimate must be provided to a loan applicant within three business days of a lender's receipt of a completed loan application and no less than seven business days prior to loan consummation.

Which line of the Loan Estimate would reflect any lender credits? A. Funds for Borrower B. Closing Costs Financed C. Adjustments and Other Credits D. Total Closing Costs

D. Total Closing Costs The answer is Total Closing Costs. The Total Closing Costs section totals the Loan Costs and Other Costs tables, plus the amount of any lender credits, on the Loan Estimate.

Under the Financial Privacy Rule of the Gramm-Leach-Bliley Act, a customer of Big Box Bank is entitled to a privacy notice: A. At the time he or she obtains a financial product from the bank and annually thereafter B. At any time the bank provides non-public personal information to a non-affiliated third party C. Every six months D. Annually

A. At the time he or she obtains a financial product from the bank and annually thereafter The answer is at the time he or she obtains a financial product from the bank​ and annually thereafter. A consumer is an individual who obtains or has obtained a financial product or service from a financial institution for personal, family, or household reasons. A consumer who has a continuing relationship with the institution is considered to be a customer; a customer is entitled to a privacy notice at the time a financial product is obtained and automatically every year for as long as the relationship lasts.

Under the Telemarketing Sales Rule, which of the following is true about an established business relationship? A. It is a relationship between a company and a consumer, based on a consumer's inquiry about an offered product or service within three months immediately preceding the date of a telemarketing call B. If a company and a consumer have an established business relationship, the company is never prohibited from making telemarketing sales calls to the consumer C.An established business relationship only exists if a consumer has purchased goods or services from the company D. An established business relationship would exist if a consumer made an inquiry of the company within six months of a telemarketing phone call

A. It is a relationship between a company and a consumer, based on a consumer's inquiry about an offered product or service within three months immediately preceding the date of a telemarketing call The answer is it is a relationship between a company and a consumer, based on a consumer's inquiry about an offered product or service within three months immediately preceding the date of a telemarketing call. An established business relationship is a relationship between the company and a consumer, based on the consumer's purchase, rental, or lease of the seller's goods or services, or a financial transaction between the consumer and seller, within the 18 months immediately preceding the date of a telemarketing call, or the consumer's inquiry or application regarding an offered product or service, within the three months (NOT six months) immediately preceding the date of a telemarketing call.

A lender decides that they will only give copies of appraisals to borrowers if requested. According to ECOA: A. This is not allowed B. This is allowed, as long as a written disclosure is given to the borrower at some point in the loan process C. This is allowed, as long as the borrower is given a disclosure at the time of loan application D. This is allowed, as long as the borrower is given a disclosure within three days of the time of loan application

A. This is not allowed Pursuant to the ECOA Valuations Rule, no later than the third business day after receipt of an application for credit to be secured by a first lien mortgage, a creditor must mail or provide a notice of the applicant's right to receive a copy of all written appraisals developed in connection with the application. A creditor is required to provide an applicant with a copy of all appraisals and other written valuations (i.e., any estimate of the value of a dwelling) developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A copy of each appraisal must be provided the earlier of promptly upon completion or, for a closed-end loan, three business days prior to consummation.

The stated purpose of the Truth-in-Lending Act is to: A. Protect consumers from unethical mortgage lenders by requiring use of the Good Faith Estimate for all mortgage loans B. Assist consumers in comparing credit to avoid the uninformed use of credit C. Restrict the interest rates charged by lenders D. Prevent discrimination based on protected class distinctions

B. Assist consumers in comparing credit to avoid the uninformed use of credit The Truth-in-Lending Act promotes the informed use of credit and protects borrowers from unethical lenders by requiring the clear and conspicuous disclosure of the terms and conditions of consumer loans offered.

Which of the following is most likely to issue a rule regarding TILA enforcement? A. State regulator B. CFPB C. HUD D. Congress

B. CFPB The answer is CFPB. The Consumer Financial Protection Bureau, created under the Dodd-Frank Act, is authorized to carry out the enforcement and rulemaking authority of the Truth-in-Lending Act and the Real Estate Settlement Procedures Act.

According to ECOA, a residential mortgage lender may ask a borrower about which of the following for compliance monitoring purposes? A. Child support income B. Ethnicity C. Alimony income D. Separate maintenance payments

B. Ethnicity In taking a loan application, a creditor may ask a loan applicant about his or her race, ethnicity and gender, provided that it is only for purposes of monitoring fair lending law compliance.

Which of the following is not considered one of the six essential pieces of information constituting an application under RESPA? A. Borrower Social Security Number B. Loan program C. Borrower monthly income D. Loan amount

B. Loan program The six essential pieces of a loan application are the borrower's name, Social Security Number and income, the address of the property which will act as collateral for the loan, the estimated value of the property, and the amount of the loan sought. The loan product for which the applicant is applying is NOT an essential piece of an application.

Which of the following statements about the Loan Estimate is NOT true? A. The lender is solely responsible for providing the Loan Estimate to the prospective borrower B. The Loan Estimate need not be provided if the borrower is seeking a refinance of an existing loan C. The Loan Estimate is not a loan guarantee D. The Loan Estimate must be provided to the applicant no more than three business days after submission of the application

B. The Loan Estimate need not be provided if the borrower is seeking a refinance of an existing loan The Loan Estimate need not be provided if the borrower is seeking a refinance of an existing loan. The Loan Estimate must be provided to a prospective borrower applying for any federally-regulated mortgage loan, including a refinance. It must be provided no more than three business days after the licensee receives an application. Although it need not be provided directly by the lender, it is the lender that is ultimately responsible for ensuring that the borrower has received the required disclosure.

Which of the following is NOT required to be disclosed in an advertisement which contains a trigger term as set forth in the Truth-in-Lending Act? A. The number of payments for the loan B. The amount of principal covered in each payment C. The annual percentage rate D. The amount or percentage of down payment

B. The amount of principal covered in each payment The answer is the amount of principal covered in each payment. If an advertisement contains a trigger term, the following additional disclosures must be made: the amount or percentage of the down payment, the payment schedule, including the number, timing, and amount of the payments (principal and interest), and the annual percentage rate.

Which of the following advertisements contains a term that would require additional disclosures under the Truth-in-Lending Act? A. "Buy for less than rent!" B. "Interest rates as low as 5.65% APR!" C. "Own for $700 per month!" D. "No origination fee charged!"

C. "Own for $700 per month!" The answer is "own for $700 per month!" Each of the following is a trigger term, requiring additional disclosures to the applicant: the amount or percentage of a down payment, the number of payments or term of the loan, the amount of any periodic payment, or the amount of any finance charge. Stating that a loan will have payments of $700 per month would require additional disclosures under the Truth-in-Lending Act.

A lender is prohibited from asking about income received from alimony by: A. The GLB Act B. Privacy laws C. ECOA D. Regulation Z

C. ECOA A loan originator is precluded from making certain inquiries, in order to prevent discrimination against a loan applicant based on his or her age or marital status. Asking whether an applicant receives alimony or child support if such payments are not necessary to qualify the applicant for the loan is prohibited. However, if such payments are to be included in the applicant's qualifying income, he or she may be asked to provide proof of its regular receipt.

Which of the following best describes the Homeowners Protection Act? A. Regulates higher-priced mortgage loans B. Sets forth Section 32 loan rules C. Establishes PMI requirements D. Implements the Home Ownership and Equity Protection Act

C. Establishes PMI requirements The answer is establishes PMI requirements. The provisions of the Homeowners Protection Act regulate when and how a homeowner may cancel and/or terminate private mortgage insurance.

Which of the following would not need to be contained in a privacy notice? A. Categories of information collected B. Categories of affiliates with whom information is shared C. Names of affiliates with whom information is shared D. Categories of information disclosed

C. Names of affiliates with whom information is shared The answer is names of affiliates with whom information is shared. A privacy notice must clearly, conspicuously, and accurately state the company's privacy practices, including what information the company collects and discloses about its consumers and customers, the types of entities with which it shares the information, and how it protects or safeguards the information.

According to ECOA, discrimination based upon age is: A. Allowed if the borrower does not have legal capacity B. Allowed only if disclosed to the borrower C. Never allowed D. Allowed if the individual is the co-borrower rather than the borrower

C. Never allowed Under the Equal Credit Opportunity Act, discrimination based on a loan applicant's age is never permitted. Refusing to engage in a transaction with a consumer because he or she does not have legal capacity to engage in a contract (i.e., he or she is a minor) is not discrimination.

Which of the following is NOT true about an Affiliated Business Arrangement Disclosure Statement? A. It must be provided to the prospective borrower at or before the time a third-party service provider referral is made B. It must specify the nature of any relationship between a settlement service provider and the referring licensee C. The disclosure may be provided instead of the list of third-party service providers from which the borrower can shop for services D. A person that has a 2% interest in a settlement service provider to which the person is referring a borrower has an affiliated business arrangement with the referred-to entity

C. The disclosure may be provided instead of the list of third-party service providers from which the borrower can shop for services An affiliated business arrangement is an arrangement in which a person is in a position to refer real estate settlement service business for a federally-related mortgage loan and has either an affiliate relationship with, or a direct or beneficial ownership interest of more than 1% in, a provider of settlement services and refers business to, or influences the selection of, that provider. The Affiliated Business Arrangement Disclosure Statement must be provided on a separate piece of paper to the borrower at or before the time of a face-to-face referral or a referral made in writing or by electronic media, within three business days of a telephone referral, or, if referred by the lender, at the time the Loan Estimate is provided.

Assume an application is taken on Monday. Assuming no federal holidays, by which day must the Loan Estimate be issued? A. Tuesday B. Wednesday C. Thursday D. Friday

C. Thursday The answer is Thursday. Pursuant to Regulation Z, the Loan Estimate must be provided to a loan applicant within three business days of a lender's receipt of a completed loan application and no less than seven business days prior to loan consummation. If a completed application is received on Monday, the Loan Estimate must be provided no later than the following Thursday.

The Disposal Rule, a part of the Fair and Accurate Credit Transactions Act, is intended to prevent: A. Abuse of covered loans B. Predatory use of prepayment penalties C. Abuse of mandatory arbitration clauses D. Acts of fraud such as identity theft

D. Acts of fraud such as identity theft The answer is acts of fraud such as identity theft. The Disposal Rule seeks to protect the privacy of consumer information and reduce the risk of fraud and identity theft. Under the Rule, businesses are required to take reasonable and appropriate measures to dispose of sensitive information derived from consumer reports and records to protect against "unauthorized access to or use of the information."

At what point during a transaction may a consumer withdraw their consent to receive disclosures electronically? A. After the initial consent but before actual delivery of the documents B. After the initial consent but before e-signatures are placed on documents C. A consumer may not withdraw consent once it has been given D. Any time during the transaction

D. Any time during the transaction The answer is any time during the transaction. Pursuant to the E-Sign Act, a borrower may withdraw consent to receive documents electronically at any time during the course of the transaction. If a consumer later withdraws consent to electronic delivery, the validity or enforceability of an existing contract made prior to the withdrawal of consent may not be affected.

A borrower is refinancing the loan on the home in which he lives. The borrower's father was a co-signer on the loan but has never lived in the home. Who must receive the proper rescission notice? A. Either the occupying borrower or the father B. Occupying borrower and father C. Father only D. Borrower only

D. Borrower only The answer is occupying borrower and father. Any consumer who has an interest in the property, even if he or she did not sign the note, may exercise the right of rescission. Therefore, each person must be given two copies of a notice of the right to rescind. A rescission by one consumer constitutes a rescission by all.

Which of the following is not a requirement of the E-Sign Act? A. Establish a process for withdrawing consent to e-delivery of documents B. Establish a process to ensure that the consumer is able to use applicable technology C. Provide notice to consumer of their right to receive documents in paper form D. Obtain written consent from consumer to utilize electronic signatures

D. Obtain written consent from consumer to utilize electronic signatures The answer is obtain written consent from consumer to utilize electronic signatures. The E-Sign Act allows for the use of electronic records to satisfy any law, regulation, or rule that requires information be provided in writing, as long as the consumer consents to electronic delivery. The consumer must be advised that he or she has the option to receive information in a non-electronic form, the right to subsequently opt out of electronic delivery, and the right to be provided with information about the hardware and software required to allow him or her to access and retain the electronic records. The consumer's consent to electronic delivery must be provided in a way that reasonably shows that he or she can access information in the electronic form that will be used.

Which of the following does not apply to a high-cost home loan? A. Section 32 of Regulation Z B. TILA C. Home Ownership and Equity Protection Act D. Section 32 of RESPA

D. Section 32 of RESPA The answer is section 32 of RESPA. The Home Ownership and Equity Protection Act, the Truth-in-Lending Act, and 12 C.F.R. 1026.32 (Section 32 of Regulation Z) all pertain to high-cost home loans.

Which of the following is true if a borrower effectively rescinds on a refinance transaction on their primary residence? A. Borrowers can only rescind on investment properties and second homes B. The borrower is entitled to damages from the lender C. The borrower must reimburse the lender for third-party fees spent D. The borrower is entitled to a refund of their prepaid appraisal fee

D. The borrower is entitled to a refund of their prepaid appraisal fee The answer is the borrower is entitled to a refund of their prepaid appraisal fee. Within 20 days after a borrower properly rescinds a credit transaction, the creditor must return any money or property received by any person in connection with the transaction and take appropriate steps to show that the mortgage or trust deed is voided and the consumer has no responsibility for the loan or any finance charges associated with it.

A borrower submits all six pieces of information to a lender which constitute a loan application. However, the borrower refuses to tell the lender which loan program he prefers. Which of the following is true regarding the lender's obligation to issue a Loan Estimate? A.The lender is not required to issue the Loan Estimate B. The lender is required to issue the Loan Estimate without disclosing a loan program C. The lender is not allowed to issue a Loan Estimate D. The lender is required to issue a Loan Estimate and may guess regarding the loan program

D. The lender is required to issue a Loan Estimate and may guess regarding the loan program The answer is the lender is required to issue a Loan Estimate and may guess regarding the loan program. Upon receipt of a completed loan application, a lender must, within three business days of receipt, issue a Loan Estimate to the applicant. The Loan Estimate must provide a good faith estimate of the costs of the credit and the terms of the transaction based on the best information available at the time the disclosure is made.