RESPA 2
What is the amount of "cushion" allowed in the escrow account according to RESPA? -$50 over 1/6 of the annual disbursements -$500 over 1/16 of the annual disbursements -10% over 1/12 of the annual disbursements -Exactly 1/24 of the annual disbursements
The correct answer is "A" -$50 over 1/6 of the annual disbursements RESPA allows for a lender to maintain a "cushion" of no greater than one-sixth (1/6) of the estimated total annual disbursements from the escrow account. See http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res3500.10.
How much is allowed to be taken for the escrow account monthly according to RESPA law? -1/12 -1/24 -1/16 -10%
The correct answer is "A" -1/12 RESPA allows a servicer to charge the borrower a monthly sum equal to one-twelfth (1/12) of the total annual escrow payments which the servicer reasonably anticipates paying from the account. In addition, the servicer may add an amount to maintain a cushion no greater than one-sixth (1/6) of the estimated total annual payments from the account. See http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res3500.10.
The statement that tells a borrower what the "actual" settlement charges of the loan are: -HUD-1 -GFE -VOM -GSE
The correct answer is "A" -HUD-1 The HUD-1 is to be used as a statement of actual charges and adjustments to be given to the parties in connection with the settlement. See http://www.hud.gov/offices/hsg/ramh/res/resappa.cfm.
John is a Mortgage Loan Originator in Charlotte, North Carolina. Fred is a Mortgage Loan Originator in Florida. Fred called John and told him that he had a past client moving to the Charlotte area. Fred took the application and offered to give it and the referral of his customers to John for a 50% split of the origination fee. Should John do it? -Yes. Two licensed Mortgage Loan Originators can split a commission, even if they are licensed in different states. -Yes. Fred has worked on the loan by taking the application. Therefore it does not violate RESPA. It is found business and John should do it. -No. This is a violation of The Real Estate Settlement Procedures Act. John can take the referral but can not pay Fred because Fred has not done enough by the Department of Housing and Urban Development rules to get paid. -Both A and B. *LEARNING QUESTION! {See 'tips' for explanation}
The correct answer is "C" -No. This is a violation of The Real Estate Settlement Procedures Act. John can take the referral but can not pay Fred because Fred has not done enough by the Department of Housing and Urban Development rules to get paid. HUD has stated that it would be satisfied that sufficient origination work had been performed to justify a fee if the Mortgage Loan Originator took the application information (a., above) and performed at least five additional items from the list contained in HUD Statement of Policy 1999-1, Section C. Those items are: a. taking information from the borrower and filling out the application; b. analyzing the prospective borrower's income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford; c. educating the prospective borrower in the home-buying and - financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product; d. collecting financial information (tax returns, bank statements) and other related documents that are part of the application process; e. initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit); f. initiating/ordering requests for mortgage and other loan verifications; g. initiating/ordering appraisals; h. initiating/ordering inspections or engineering reports; i. providing disclosures (truth in lending, good faith estimate, others) to the borrower; j. assisting the borrower in understanding and clearing credit problems; k. maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed; l. ordering legal documents; m. determining whether the property was located in a flood zone or ordering such service; and n. participating in the loan closing. According to the Department of Housing and Urban Development, Fred has not done enough work to earn the commission split. John would be in violation for giving it. Fred would be in violation for taking it.
The estimate of loan costs given to the borrower within three days of application: -1003 -HUD-1 -1006 -GFE
The correct answer is "D" -GFE The Real Estate Settlement Procedures Act (RESPA) is about closing costs and settlement procedures. It requires that consumers receive disclosures at various times from the time the application is received throughout the life of the mortgage. A standard Good Faith Estimate (GFE) that discloses key loan terms and the closing costs a consumer is likely to pay at settlement. It is to be given to the applicant at the time of the application or within three business days of receiving the application. See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respamor#WI.
RESPA requires the following disclosures before settlement: -Affiliated Business Arrangement Disclosure -a preliminary copy of the HUD-1 upon request of the borrower -the projected amortization schedule of the loan -a & b
The correct answer is "D" -a & b More abut RESPA and the disclosures required by the Act may be accessed at www.hud.gov/respa.
RESPA dictates that the "Servicing Disclosure" be given: -At application -Before closing -At closing -After closing
The correct answer is "A" -At application RESPA requires that a "Servicing Disclosure Statement" be given at the time an application for a mortgage servicing loan is submitted or within 3 business days. It must indicate whether the servicing of the loan may be assigned, sold or transferred to any other person at any time while the loan is outstanding. See http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res3500.10.
Jenny took an application from the Browns for a loan to purchase a new home. The Browns could not get approved because of some past credit issues. During the loan process, Jenny found out that the Browns also needed a new car. So Jenny referred them to her friend, Melvin, at Super City Chevrolet Dealership. Melvin sold them a car and sent Jenny a check for $100. Can Jenny accept the check? Yes. It is not tied to real estate and therefore is not prohibited by The Real Estate Settlement Procedures Act. Yes. It is found money and times are tough. No. It violates The Real Estate Settlement Procedures Act because Jenny gathered the information during the processing of a real estate loan. Even though the loan wasn't done, Jenny can't take a referral fee. No. It
The correct answer is "A" -Yes. It is not tied to real estate and therefore is not prohibited by The Real Estate Settlement Procedures Act. There is no Federal law, including RESPA, that prohibits Jenny from accepting a referral fee from Melvin because it is not real estate related. Remember that the Real Estate Settlement Procedures Act (RESPA) only applies to a "federally related mortgage loan". NOTE WELL: Some states prohibit licensed Mortgage Loan Originators from operating outside of their licensed fields. Be sure to check with state law before you take money like Jenny.
RESPA requires that an escrow statement be sent to borrowers: -annually -monthly -at application -before closing
The correct answer is "A" -annually RESPA requires that for each escrow account an "Annual Escrow Account Statement" be submitted (annually) to the borrower within 30 days of the completion of the escrow account computation year. See http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res3500.10.
The Real Estate Settlement Procedures Act does not require escrow accounts. However, if a lender does provide one, The Real Estate Settlement Procedures Act regulates lender's escrow account activities. One of the provisions tells lenders they can keep a cushion of 1/6th of the disbursements for a given year. They are to perform an escrow analysis every year. Amounts over the 1/6th cushion must be rebated to the borrower if they are over: -$25 -$50 -$100 -$250
The correct answer is "B" -$50 Section 10 of RESPA sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan. During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account. Each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year. The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage. Any excess of $50 or more must be returned to the borrower. NOTE WELL: The Mortgage Disclosure Improvement Act (an amendment to the Truth in Lending Act effective in 2009) requires Escrow accounts on "Higher Cost Loans".
Dave took an application from the Monroe family. The Monroe's wish to purchase a home but have not yet selected the one they want to buy. They have come to Dave to find out how much they can spend on a house and get a prequalification issued. Which of the following statements is true? -Dave should disclose the Good Faith Estimate to the Monroes based upon his average charges. -Dave does not have to disclose the Good Faith Estimate to the Monroes because they have not yet selected a property. -Dave has to disclose the Good Faith Estimate to the Monroes. Even though The Real Estate Settlement Procedures Act does not apply, the Truth in Lending Act does. -None of the statements above apply to this scenario.
The correct answer is "B" -Dave does not have to disclose the Good Faith Estimate to the Monroes because they have not yet selected a property. Dave does not have to issue a Good Faith Estimate because the Monroes have not selected a house. Remember that RESPA is tied to real estate. No real estate is involved because the Monroes have not yet selected a house. Once they do select a house, Dave will have to issue a Good Faith Estimate.
Which disclosures does The Real Estate Settlement Procedures Act require to be given at closing? -The Truth in Lending Act and the HUD-1 -The Initial Escrow Statement and the HUD-1 -The GFE Disclosure and the HUD-1 -The HUD-1 and the Servicing Disclosure
The correct answer is "B" -The Initial Escrow Statement and the HUD-1 The Real Estate Settlement Procedures Act breaks disclosures into four parts: (1) Disclosures which are to be given at application or within three days of application, (2) Disclosures to be given before closing, (3) Disclosures to be given at closing, and (4) Disclosures to be given after closing. According to The Real Estate Settlement Procedures Act. The disclosures to be given at closing are the HUD-1 and the initial escrow statement which is due at closing or within 45 days of closing.
Which of the following disclosures are not required to be given at or within three days of application by The Real Estate Settlement Procedures Act? -The Good Faith Estimate -The TIL Statement -The Servicing Disclosure Statement
The correct answer is "B" -The TIL Statement The Truth in Lending Act statement is required by the Truth in Lending Act, not by The Real Estate Settlement Procedures Act. The Real Estate Settlement Procedures Act does require that the applicant be given the Servicing Disclosure Statement at application or within three days of application. It also requires that the Good Faith Estimate be given at application or within 3 days of application.
Which of the following is not covered by The Real Estate Settlement Procedures Act? -The purchase of a manufactured home and land. -The purchase of a house on 25 acres of land. -A second mortgage loan to put a roof on a primary residence. -A reverse Mortgage Loan.
The correct answer is "B" -The purchase of a house on 25 acres of land. All of the others are covered by The Real Estate Settlement Procedures Act.
Which of the following are not covered by The Real Estate Settlement Procedures Act? -A timeshare purchase. -The purchase of a rental property -The purchase of a Condo -All of the above
The correct answer is "B" -The purchase of a rental property The following transactions are not covered by RESPA: an all cash sale, a sale where the individual home seller takes back the mortgage, a rental property transaction or other business purpose transaction. For more on The Real Estate Settlement Procedures Act see "FAQs About RESPA for Industry" at http://www.hud.gov/offices/hsg/ramh/res/resindus.cfm.
A past customer came to Don and asked him for a construction loan. In order to secure the construction loan Don had to issue a commitment for a permanent 30 year mortgage. Is the construction loan covered by The Real Estate Settlement Procedures Act? -Yes. Construction loans are covered by The Real Estate Settlement Procedures Act since they involve real estate. -Yes. Since Don is doing the construction loan and the take out loan (the permanent mortgage), the construction loan is covered by The Real Estate Settlement Procedures Act. He must issue the RESPA disclosures for the construction loan. -No. Construction loans are not covered by The Real Estate Settlement Procedures Act. -No. Since Don is doing both loans, the RESPA coverage for the take out loan (the permanent mortgage) suffices for the construction loan.
The correct answer is "B" -Yes. Since Don is doing the construction loan and the take out loan (the permanent mortgage), the construction loan is covered by The Real Estate Settlement Procedures Act. He must issue the RESPA disclosures for the construction loan. Since a commitment for the permanent loan is being issued by Don who is also doing the construction loan, the construction loan is covered by RESPA. For more scenarios on the application of The Real Estate Settlement Procedures Act see:
The Real Estate Settlement Procedures Act does not deal with which of the following: -Title Insurance -Escrows -Annual Percentage Rate -Land Sales
The correct answer is "C" -Annual Percentage Rate The Annual Percentage Rate is dealt with in the Truth in Lending Act. The Real Estate Settlement Procedures Act does not address it. The Real Estate Settlement Procedures Act does deal with Title Companies and Title Insurance. RESPA Section 9 says, (a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
Yvette is a licensed Mortgage Loan Originator. She regularly refers business to ABC Appraisal Company. ABC Appraisal Company normally charges $350 for an appraisal but gives Yvette a $50 discount because of the business she refers to them. Since $350 is the normal fee, Yvette enters that as the cost of the appraisal and pockets the difference. Is this an acceptable practice? -Yes. The discount was given to Yvette, not to her customers. The only way it benefits her is if she does it this way. -Yes. Yvette has the right to make a profit. -No. This violates The Real Estate Settlement Procedures Act, which clearly states that Yvette cannot mark up any services she personally did not perform. -No. Yvette cannot charge the retail price of the appraisal because she is not a licensed appraiser.
The correct answer is "C" -No. This violates The Real Estate Settlement Procedures Act, which clearly states that Yvette cannot mark up any services she personally did not perform. The Real Estate Settlement Procedures Act is clear Yvette can only charge her customers what she is charged. Any discounts the appraiser gives her must be passed along to the customer. See the Department of Housing and Urban Development's "Frequently Asked Questions about RESPA for Industry" http://www.hud.gov/offices/hsg/ramh/res/resindus.cfm, especially Question 25.
Which of the following sets of documents are required by The Real Estate Settlement Procedures Act to be given to the applicant at the time of a purchase money application? -The Truth in Lending Act statement, the Good Faith Estimate, and the HUD-1 -The Affiliated Business Arrangement (ABA) Disclosure, The Good Faith Estimate, and the Uniform Residential Loan Application (Form 1003) -The Special Information Booklet, the Good Faith Estimate, The Mortgage Servicing Disclosure Statement -The Consumer Handbook on Adjustable Rate Mortgages, the Good Faith Estimate, and the Truth in Lending Act disclosure
The correct answer is "C" -The Special Information Booklet, the Good Faith Estimate, The Mortgage Servicing Disclosure Statement When borrowers apply for a mortgage loan, mortgage brokers and/or lenders must give the borrowers: a Special Information Booklet, which contains consumer information regarding various real estate settlement services. (Required for purchase transactions only) and a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE. a Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution. If the borrowers don't get these documents at the time of application, the lender must mail them within three business days of receiving the loan application. If the lender turns down the loan within three days, however, then RESPA does not require the lender to provide these documents. For more on The Real Estate Settlement Procedures Act, consult the Department of Housing and Urban Development's The Real Estate Settlement Procedures Act page at: http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jerry is a licensed Mortgage Loan Originator with ABC Mortgage Bankers. He wants to leave some note pads with his contact information on them at real estate offices. Which of the following statements is true? -This is a violation of The Real Estate Settlement Procedures Act Section 8 which says you cannot give "any thing of value" for loan referrals. -This is a violation of the Federal Trade Commission advertising guidelines. -This practice is OK because it is not tied to a loan closing. -As long as the individual items do not exceed $50 in value, they are OK to give.
The correct answer is "C" -This practice is OK because it is not tied to a loan closing. The Federal Trade Commission has no guidelines, which would prohibit advertisements to real estate agents. It does not violate Section 8 of The Real Estate Settlement Procedures Act because it is not given for the referral of business. There is no dollar limit on triggering Section 8. This practice is considered to be marketing activity and is permitted by The Real Estate Settlement Procedures Act. See the Industry Q&A at: http://www.hud.gov/offices/hsg/ramh/res/resindus.cfm especially Question 19 for more.
What types of transactions are generally not covered by RESPA? -All cash sale -A sale where the individual home seller takes back the mortgage -A rental property transaction or other business purpose transaction. -All of the above
The correct answer is "D" -All of the above RESPA covers transactions involving a federally related mortgage loan, which includes most loans secured by a lien (first or subordinate position) on residential property. This includes: home purchase loans, refinances, lender approved assumptions, property improvement loans, equity lines of credit, and reverse mortgages. The Department of Housing and Urban Development. But in the list where HUD details the transactions not covered A, B, and C are all listed.
The Real Estate Settlement Procedures Act applies to all "Federally Related Mortgage Loans". What is the definition of "Federally Related Mortgage Loans"? -Loans made by any creditor which in the aggregate total more than $1,000,000 annually. -Any loan made by or sold to Ginnie Mae, Freddie Mac, or Fannie Mae. -Any loan made in whole or in part by any lender, which is regulated by any agency of the Federal Government. -All of the above. *LEARNING QUESTION! {See 'tips' for explanation}
The correct answer is "D" -All of the above. Any loan that falls into any of the three categories above constitutes a "Federally Regulated Mortgage Loan". For more of what constitutes a "Federally Regulated Mortgage Loan" see The Real Estate Settlement Procedures Act at http://www.law.cornell.edu/uscode/12/usc_sup_01_12_10_27.html. Especially Section �2602.
According to RESPA law, the initial escrow statement must be given to the borrower: -At application -Before closing -At closing -At closing or within 45 days of closing
The correct answer is "D" -At closing or within 45 days of closing D is the most right answer. RESPA says, (g) Initial escrow account statement. (1) Submission at settlement, or within 45 calendar days of settlement. As noted in �3500.17(c)(2), the servicer shall conduct an escrow account analysis before establishing an escrow account to determine the amount the borrower shall deposit into the escrow account, subject to the limitations of �3500.17(c)(1)(i). After conducting the escrow account analysis for each escrow account, the servicer shall submit an initial escrow account statement to the borrower at settlement or within 45 calendar days of settlement for escrow accounts that are established as a condition of the loan." RESPA requires that an "Initial Escrow Account Statement" be provided to the borrower at settlement or within 45 days of settlement. See http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res3500.10. The Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the Escrow Account during the first twelve months of the loan. It lists the Escrow payment amount and any required cushion. Although the statement is usually given at settlement, the lender has 45 days from settlement to deliver it. See http://www.hud.gov/offices/hsg/ramh/res/respamor.cfm#GY
Fees paid to attorneys, appraisers, pest inspectors, etc. are disclosed at closing on the: -GFE -truth in lending statement -the funding fees disclosure -HUD settlement statement
The correct answer is "D" -HUD settlement statement The key phrase in this questions is "at closing". The Good Faith Estimate lists those projected charges at application. But the HUD-1 lists the exact charges at closing. NOTE WELL: The new Good Faith Estimate has three sets of categories of charges: (1) those that can not change, (2) those that have a 10% aggregate tolerance, and (3) those that have no limits on the amounts they can change.
RESPA requires the following disclosures after settlement: -an annual escrow loan statement summarizing the years deposits and payments -an exact amortization schedule -a servicing transfer statement if the servicing rights are transferred -a & c
The correct answer is "D" -a & c More abut RESPA and the disclosures required by the Act may be accessed at www.hud.gov/respa.
RESPA requires the following disclosure at the time of application or within 3 business days of application: -special information booklets -Good Faith Estimate -Mortgage Servicing Disclosure Statement -all of the above
The correct answer is "D" -all of the above RESPA was passed in 1974 to help lower the cost of settlement services. In order to accomplish this, it was charged with making shopping for settlement services easier for consumers. As a part of that charge, certain disclosures are required early in the borrowing process. Those include the special information booklet for homebuyers, the Good Faith Estimate for all applicants, and the Mortgage Servicing Disclosure for all applicants. For more see www.hud.gov/RESPA.
RESPA requires the following disclosure at settlement: -the final Good Faith Estimate with all charges since application -the HUD-1 Settlement Statement -an initial escrow statement at closing or within 45 days of closing -b & c
The correct answer is "D" -b & c More abut RESPA and the disclosures required by the Act may be accessed at www.hud.gov/respa.