Chapter 3
This statement must be in 12-point type and must be noticeable to the borrower.
"Your actual rate, payment, and costs could be higher. Get an official loan estimate before choosing a loan"
Terms that do not trigger disclosure
-5% annual percentage rate loan available here -easy monthly payments -FHA financing available -100% VA financing available -terms to fit your budget
The rules and regulations of RESPA applies to
-Conventional loans -FHA, VA, and other government sponsored loan -purchase loans -Reverse mrtgages - assumptions -Refinances -Property imrpvement lans -equity lines of credit.
Terms that require disclosure
-amount f the downpayment -amount of any payment -number of payments -Period of repayment -amount of any finance charge
If a consumer choses to to exercise the right to rescind, the mortgage is void and the creditor must return any money collected related to the loan within __________ ___________________ days.
20 calendar days
If the borrower is putting down less than ___________________________ percent, they need to add insurance.
20 percent
Appraisal Management Company
A business entity that for a management fee administers a network of certified and licensed appraisers to fulfill real estate appraisal assignments on behalf or mortgage lending institutions.
A lender may not use _______________ on the loan estimate A) N/A B) POD C) TBD D) UNK
A) N/A
Definitin of a complete application
Address Loan amount Income Estimated value of property Name and co-name Social security #
How many business days after closing does the consumer have the right to rescind a refinance of his personal residence A) 2 B) 3 C) 5 D) there is n right of recission
B) 3
According to the homeowners Protection Act, borrowers may request cancelation of their mortgage insurance preiums when the equity reaches A) 20% B) 22% C) 78% D) 80%
C) 78%
When a changed cisrcumstance has occurred to the loan product and the Closing Disclosure has been delivered to the borrower, the creditor must A) call the borrower and inform him of the fee change B) complete a valid changed circumstance form and have the borrower sign it. C) Deliver revised Closing Disclosure and apply a new 3 day waiting period before consummation D) make redisclsure
C) Deliver revised Closing Disclosure and apply a new 3 day waiting period before consummation
Which statement about loan origination fees on a Loan Estimate is FALSE A) the fee cannot change unless there is a changed circumstance B) the fee includes services performed by or on behalf of the MLO C) Lender and mortgage broker fees for the same transaction must be itemized D) Origination fees must be expressed as a lump sum
C) Lender and mortgage broker fees for the same transaction must be itemized
Which regulation mandates the use of closing Disclosure A) Regulation B B) Regulation C C) Regulation Z D) Regulation X
C) Regulation Z
Which of these circumstances would NOT be an acceptable reason to provide a revised Loan Estimate to a borrower? A) The borrower lost the income from a part-time job and as a result waas no longer elegible for the specific loan terms identified in the loan Estimate B) the borrower requested to change the loan term from 15 to 30 years C) The MLO regretted overlooking certain liabilities in order to qualify the borrower for a better interest rate D) The title company discovered a junior lien on the property that was not considered when preparing the Loan Estimate
C) The MLO regretted overlooking certain liabilities in order to qualify the borrower for a better interest rate
You can/cannot extort the appraisal
Cannot
No toxic loan features
Cannot have risky loan features, such as -terms that exceed 30 years -interest-only payments -negative amortization payments where the principal amount increases.
Sectin b of the loan estimate (services you cannot shop for)
Cannot increase but they can decrease Include -appraisal fee -credit report fee -flood determination fee -tax monitoring fee -tax status research fee
If a changed circumstance exists prior to loan consummation, a creditor may NOT provide a revised Loan Estimate to a consumer within ________ business day(s) of loan consumattion A) 1 B) 2 C) 3 D) 4
D) 4
With a revised Loan Estimate, a valid changed circumstance must exist. A valid change circumstance is considered to be all of the following EXCEPT A) A borrower requested change B) an event that is beynd the control of the borrower C) Information known at the time of the application but subsequently changed D) MLO neglected to charge an origination fee initially.
D) MLO neglected to charge an origination fee initially.
A qualified mortgage, according to the Dodd-Frank Act, defines a mortgage loan's A) minimum loan amount B) Minimum loan term C) maximum loan amount D) Maximum loan term
D) Maximum loan term
A mortgage broker or banker who is writing an advertizment for the local newspaper; which will also be published on an internet website, should consider which regulatin to create a compliant ad? A) fair husing act B) Regulation B C) Regulation X D) Regulation Z
D) Regulation Z
Which law requires MLOs to provide borrowers with a Loan Estimate of closing costs A) FCRA B) HMDA C) RESPA D) TIlA
D) TILA
The Closing Disclosure discloses the settlement service provider charges the borrower will pay and all of the following EXCEPT A) assumption of the mortgage loan B) escrow account information C) negative amortization features D) rate lock in information
D) rate lock in information
Delivering the closing disclosure to the seller is the responsability of the A) creditor B) MLO C) mortgage broker D) settlement agent.
D) settlement agent.
The total amount of interest a consumer will pay over the loan term as a percentage of the loan amount is referred to as the A) annual percentage rate B) interest plus PMI charges C) total finance charges D) total interest percentages
D) total interest percentages
The loan estimate does not apply to all real estate loans. Exeptions include:
Home equity lines of credit Reverse mortgages Loans to securr a fractional interest in real estate (timeshares) Loans for mobile homes or dwellings not affixed to real property. Loans made by a person or entity that makes five or fewer mortgages in a calendar year
If a consumer obtains a Loan Estimate from a mortgage loan originator and does not provide an _______________________, the creditr may issue a revised Loan Estimate if the borrower returns after the expiration date of the Loan Estimate.
Intent to proceed
An appraiser is/is not prohibited from receiving a fee for doing an appraisal
Is not
The loan estimate can be delivered by
Mail, in person or electronic
Business days in loan origination
Mondays through saturday Exception is holidays and sundays
The right of rescission does not apply to
Purchase loans Constructin loans Commercial loans/ Investment properties Loans on vacations or second homes Refinancing and consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling unless the new amount financed exceeds the unpaid balance Transactions in which a state agency is a creditor.
Cap on how much income can go towards debt:
Qualified mrtgages generally will be provided to people who have debt-to-income ratios less than or equal to 43%
RESPA
Real Estate Settlement Prcedures Act
Servicing transfer statement
Required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer.
Section 10 of RESPA
Sets limits on the amounts a lender may require a brrower to put into an escrow account
Rescind means to
Take back or withdraw an offer or contract.
Section 1026.25 states
That the company must retain a copy for 3 years.
Finance charge
The cost of consumer credit as a dollar amount.
Closing
The final stage in a real estate transaction where ownership of real property is transferred from seller to buyer according to the terms and conditions set forth in a sales contract or escrow agreements.
Escrow Account
holds money that some mortgage lenders collect every month along with a mortgage payment.
The right of rescission as discussed in Regulation Z applies to any credit transaction involving the establishment of a security interest in a principal residence such as
-home equity loans - home improvement loans - refinances - home equity line of credit
As long the borrower makes a timely payment to the previous servicer within _________________ days of the servicing trasnfer, the borrower can not be penalized.
60 days
Loan consummation is the day that the A) borrwer becomes contractually obligated on the credit transaction B) borrower becomes contractually obligated to the seller to perform on the sales contract C) Mortgage Loan Funds D) refinance loan documents are fully executed
A) borrwer becomes contractually obligated on the credit transaction
For purposes of initial disclosures, the day on which the offices of the business entity are open to the public for carrying on substantially all the entity's business functions is known as A) business day B) legal holiday C) rescission day D) Work day
A) business day
Delivering the Closing Disclosure to the borrower is the responsability of the A) creditor B) MLO C) mortgage broker D) settlement agent.
A) creditor
Adjustable rate disclosures that are required to be signed at closing need only be provided to the borrower who A) expresses an. Interest in receiving a copy B) has primary responsability for the mortgage loan C) has the right to rescind D) is a co-signer for the mortgage loan
A) expresses an. Interest in receiving a copy
The TIlA-RESPA Integrated Disclosures were implemented to A) help consumers become better and more informed shoppers B) provide a new format for reverse mortgages C) provide new forms that will yield higher-cost loans D) save the MMLO document preparation time
A) help consumers become better and more informed shoppers
A loan generally _____________ be considered a qualified mortgage if the points and fees baid by the consumer exceed _______________% of the total loan amount
Cannot 3%
Third party fees, shown on the Loan Estimate, include all of the following EXCEPT A) a credit report fee B) a flood cert fee C) hazard insurance premiums D) a lock-in fee
D) a lock-in fee
The Loan Estimate
Holds a motgage broker or cresitor to the same standards regarding the collecting of advanced fees and disclosure.
Calculate total interest
Principal and interest (P&I) * 360=answer Answer-principal amount= total interest
The mortgage disclosure Improvement Act (the 3/7/3 Rule)
The initial disclosure must be given (or placed in the mail) within 3 BUSINESS DAYS of receipt of a complete application The earliest a loan may be consumated is on the 7TH BUSINESS DAY after disclosures are delivered/mailed. Any corrected Annual Percentage Rate, as shown on the Loan Estimate or Closing Disclosure that exceeds the tolerence threshold must be received by the consumer at least 3 BUSINESS DAYS before the loan is consumated.
Total interest Percentage (TIP)
Total amount of interest/loan amount
Charges included in the finance charge
-Interest, time price diferential, and any amoutn payable under an add-on or discount system of additional charges -Service, transaction, activity, and carrying charges, including any charge imposed ona a checking or other transaction accunt to the extent that the charge exceeeds the charge for a similar account without a credit feature -Points, loan fees, assumption fees, finder's fees, and similar charges (Anything on section A)
Valid changed circumstances
1. An event that is beyond the control of the creditor or the borrower that occurs, such as a NATURAL DISASTER 2. Information that was known or provided at the time of the applicatin changed subsequent to the application and caused a change in the INITIAL TERMS, like interest rates or settlement service providers charges. 3. New information regarding the borrower the loan that the creditor did not rely on when supplying the loan estimate, like BECOMING UNEMPLOYED.
Charges that may not change on the closing disclosure by any amount from the amounts disclosed on the loan estimate
1. Any charge paid to the creditor, mortgage broker, or affiliate of the creditor or mortgage broker for the rigination, processing, and closing of a mortgage loan. 2. Any charge paid to a non-affiliate for a settlement service that the borrower is not permitted to shop for 3. Fees paid to an unaffiliated third party if the borrower is not allowed to shp for the third party service. 4. Transfer taxes
A creditor must generally conider eight types of information when establishing the borrower's ability to repay a mortgage loan
1. Current income or assets 2. Current employment status 3. Borrower's credit history 4. Monthly payment for the mortgage 5. Borrower's monthly payments on other simultanious mortgage loans 6. Monthly payments for other mortgage related expenses (property taxes, hazard insurance, private mortgage insurance) 7. Other debts of the borrower (car payments, student loans, etc. by pulling credit report) 8. Monthly debt payments, including the mortgage, compared to the borrower's monthly income (debt-to-income ratio)
According to Regulation Z, the annual percentage rate is generally considered accurate if it does not vary above or below the APR initially disclosed by more than
1/8% (.125) for a regular transaction 1/4% (.25) for an irregular transaction
The estimate of the charges and terms for all settlements services must be available for at least ________________ busienss days from when the lan estimate is provided, but may remain available longer if the MLO extends the period of availability
10 business days
Charges for third party services or recording fees paid by r imposed n the consumer ( fees in section 3 of the Loan Estimate) are grouped together and subject to a ________________% ___________________________.
10% cumulative tolerance This means the creditor may charge the consumer mre than the amount disclosed on the Loan Estimate for any of these charges so long the as the total sum of the changes added together does not exceed the sum of all such charges disclosed on the loan estimate by more that 10%.
Generally, the loan servicer must notify the borrower _____________________ days before the effective date of a servicing transfer
15 days
The CFPB guidance allows a lender up to ____________ business days to issue a new Loan Estimate after the borrower locks the loan's interest
3 business days
To ensure the consumer receives the Closing Disclosure within the _______ business day requirement that is imposed, creditors must deliver the Closing Disclosure
3 business days Either in person directly to the borrower or by mailing or by other methods including email.
The latest you can provide a loan estimate for redisclosure of the loan estimate due to a valid changed circumstance
4 business days
Section 1026.25 Truth in Lending Act must retain a copy for
5 years
The borrower's right to t request cancelation of PMI when a mortgage is paid down to ______________% of its original appraised value t purchase price, whichever is less. Aditionally, a brrower requesting PMI cancellation must have
80 % - a good history of payment - not taken out any ther loans on the prperty - not experiencedx a decline in the value of the home
With a mortgage loan that is rescindable under the Truth in Lending Act, the Closing Disclosure must be delivered to A) all borrowers who have the right to rescind B) the borrower(s) with the primary responsability for the mortgage loan C) Co-signers for the mortgage loan D) The settlement agent for notarization
A) all borrowers who have the right to rescind
The TILA-RESPA Integrated Disclosures are designed to help cnsumers A) become better and mre informed shoppers for consumer loans B) know the methods available to file a consumer complaint C) understand property appraisals D) understand the right of rescission on a purchase
A) become better and mre informed shoppers for consumer loans
When a loan estimate is provided to a borrower, it is considered to be provided in good faith when the actual closing costs are lower as shown on the A) Closing Addendum B) Closing Disclosure C) Good Faith Estimate D) HUD 1 Settlement Statement
B) Closing Disclosure
The new Loan Estimate does not apply to all real estate loans. All of the following loan types are exempt from the new disclosures EXCEPT A) home equity line of credits B) Home equity loans C) reverse mortgages D) timeshare loans
B) Home equity loans
When providing the Loan Estimate or a revised Loan Estimate, a business day is considered to be A) All calendar days except sundays B) all calendar days except sundays and legal holidays C) the day a business entity is open for business to the public for the purpose of transacting substantially of the entity's business D) The day the loan estimate is prepared
B) all calendar days except sundays and legal holidays
Which fee can be collected prior to delivery of the loan estimate? A) Appraisal fee B) credit report fee C) origination fee D) no fees can be collected prir to delivery of the Loan Estimate
B) credit report fee
A loan estimate that is made in good faith is determined by the closing costs quoted on the loan Estimate and on the Closing Disclosure. For a loan Estimate to be made in good faith, the costs on the Loan Estimate should be A) Disclosed on a changed circumstance form. B) higher than what is charged on the Closing Disclosure C) lower than what is charged on the Closing Disclosure D) redisclosed on a revised Loan Estimate delivered to the brrower at least one business day before loan consummation
B) higher than what is charged on the Closing Disclosure
A Mortgage Servicing Disclosure Statement states all the following EXCEPT A) If the lender will engage in the servicing of the mortgage loan for which the applicant has applied B) the resolution of a servicing complaint C) a statement that such entity intends to assign, sell, or transfer servicing of such mortgage loan before the first payment is due D) whether the servicing of the loan may be assigned, sold, or transferred.
B) the resolution of a servicing complaint
The APR n a Loan Estimate for a 30-year fixed rate loan is 6.25%, and the APR on the Closing Disclosure is 6.5%. After redisclsure, how long must the borrower wait to close the loan? A) one business day B) three business days after the redisclosure C) seven business days after the redisclsure D) there is no waiting required since the difference is within the acceptable tolerance.
B) three business days after the redisclosure
No fee (with the exeption of a ___________________________________ and reasonalble ___________________________________ fee) may be received by the MLO or creditor until the borrower has received the ____________________________, ___________________________________________ and _____________________________________________
Bona fide, credit report fee, Loan estimate, List of HUD approved housing counselors, and the home loan toolkit.
A valid change circumstance also includes a
Borrower-requested change to the interest rate or loan terms. Ex: a borrower requesting cash out loan at a higher loan-to-value as a result of a higher than anticipated appraised value.
A changed circumstance for the purpose of the loan estimate can be any of the following EXCEPT A) an event that is beyond the control of the creditor or borrower B) information that was known or provided at the time of application but changed after the application, altering the interest rate of the loan C) The mortgage loan originator neglected to inform the borrower of the additional cost and necessity of a review appraisal when requested D) new information regarding the borrower or the loan that the creditor did not rely on when providing the original loan estimate
C) The mortgage loan originator neglected to inform the borrower of the additional cost and necessity of a review appraisal when requested
The purpose of the Ability-to-Repay regulation is to (select all correct responses) A) allow a borrwer to obtain a stated income loan B) allow a brrower to sue the lender in Federal District court to cancel the loan C) allow a presumption that the lender followed ability to repay guidelines if certain requirements are made. D) protect the borrower from a loan the may not be able to afford.
C) allow a presumption that the lender followed ability to repay guidelines if certain requirements are made. D) protect the borrower from a loan the may not be able to afford.
The definition of a "Complete Application" includes all of the following EXCEPT A) address of the subject property B) Gross monthly income C) most recent two months of bank statements D) Name of the borrower
C) most recent two months of bank statements
When you think about RESPA rules and regulations, all of the following are part of the urpose of the rules and regulations EXCEPT to help consumers A) become better-informed borrowers B) compare available options C) obtain the lowest interest rate D) shop for settlement services.
C) obtain the lowest interest rate
If a revised Loan Estimate is emailed to the borrower (with his permission), it is considered received A) the day the email is sent B) the next business day after the disclosure is emailed C) three business days after the email is sent if not informed of receipt by the borrower sooner. D) the seventh busienss day after the email is sent
C) three business days after the email is sent if not informed of receipt by the borrower sooner.
Section c of loan estimate ( services yu can shop for)
Can increase up to 10% Include -pest infections fee -survey fee - title insurance binder -title lenders title policy -Title settlement agent fee -title search
Underwriting fee (can/cannot) be changed
Cannot
Real Estate Settlement Prcedures Act (RESPA)
Created to help consumers become better shoppers for settlement services and to eliminate unnecessary increases in the cost of certain settlement services due to ickbacks and referral fees.
According to RESPA, al of the following are considered settlement service providers EXCEPT A) appraisers B) attorney who prepares loan documents C) escrow agents D) landscaping cmpanies
D) landscaping cmpanies
When a numerical error has ocurred to Closing Disclosure and the initial Closing Disclosure has been delivered to the borrower, the creditor must A) Call the borrower and inform him of the fee change B) Complete a valid changed circumstance form and have the brrower sign it C) deliver a revised closing disclosure and apply a new 3 day waiting period before consummation D) make redisclosure
D) make redisclosure
If an advertisement discloses only the APR, what additional disclosures are required? A) amunt of finance charges B) percentage of downpaymet C) terms of repayment D) no additional disclosures required
D) no additional disclosures required
Under what circumstances does RESPA allowed a salee to be conditioned on the use of a particular title company chosen by the seller A) if full disclosure is made B) if no kickbacks are involved C) if no unearned fees are invlved D) Under no circumstances
D) under no circumstance
Section 9 of respa prohibits
Prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirecftly, as a condition of the sale. Buyers may sue a seller who violates this provision for an amount equal or three times all charges made for the title insurance .
Section 8 of RESPA
Prohibits giving or accepting a fee, kickback, or anything of value in exchange for referrals or settlement services involving a federally related mortgage loan Minimal value: $25+ Thing of value to include: monies, things, discounts, salaries, commissions, fees, duplicate payment of charge, stock, dividends, distribution of partnership property, franchise royalties and more
Affiliated business arrangement
Situation where a person in aposition to refer settlement services (or an associate of that person) has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1% in a provider of settlement services and who then refers business t that provider or in some way influences the selection of that provider.