Federal Law Test Questions

Question 1

What is an industry-standard Late Charge terms for a conventional loan?

A) 7 days late and 10% of the monthly payment
B) 3 business days late and 5% of the monthly payment
C) 10 days late and 10% of the monthly payment
D) 15 days late and 5% of the monthly payment You should have checked this.

Answer 1

D) 15 days late and 5% of the monthly payment

Late Charge terms are written on the TILA disclosure. For example, if the borrower is 15 days late they will be charged 5% of the monthly payment. 15 days and 5% is a standard in the industry for a conventional loan only.

Question 2

If loan officer Sam is creating an advertisement for his loan products in a local family newspaper, he should make sure to _____in order to comply with the Fair Housing Act?

A) Specify in words and pictures that young families living here are happier than other families
B)Say “Perfect for Families here, we have everything you need for your children”
C)Mention all of the protected classes in his advertising and say that all are welcome
D)Say nothing that indicates a limitation or preference based on being in a protected class

Answer 2

D. Say nothing that indicates a limitation or preference based on being in a protected class

It is illegal for anyone to: Advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act.

Question 3

A first lien of $250,000 will meet the APR trigger for a High-Cost loan if the APR exceeds the Average Prime Offer Rate by:
A) 8.50%
B) 7.50%
C) 6.50%
D) 5.50%

Answer 3

C. 6.5%

APR Triggers: Effective January 10, 2014 the HOEPA triggers are: (a) For a first lien loan, the APR exceeds the Average Prime Offer Rate by 6.5%; however, (b) For a first-lien transaction where the dwelling is personal property and the loan amount is less than $50,000 the trigger is when the APR exceeds the Average Prime Offer Rate by 8.5% percentage points:

Question 4

When a MLO orders an appraisal, which of the following is prohibited?

A) Requesting that the appraiser return a minimum value
B) Including the predetermined opinion of the mortgage professional in the appraisal
C) Including the borrower’s opinion of value
D) Providing the appraiser with a list of recent sales

Answer 4

A. Requesting that the appraiser return a minimum value

Uniform appraisal laws and standards promoted by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council, prohibit the requesting of a minimum value. This was a common element of fraud.

Question 5

RESPA does NOT specifically prohibit which of the following?

A) Fees from joint ventures.
B) Earning a kickback.
C) Making an unearned fee.
D) Earning a fee from a referral.

Answer 5

A) Fees from joint ventures

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback, or any item of value in exchange for referrals of settlement service business. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed; however, fees allocated to both MLOs and attorneys in a joint venture are not strictly prohibited unless it is considered a sham joint venture.

Question 6

An early lending prejudice towards women lead to the enactment of which law?

A) TILA- Truth In Lending Act
B) ADLP- Anti-Discriminatory C) Lending Practices
Fair Housing Act
D) ECOA- Equal Credit Opportunity Act

Answer 6

D) ECOA- Equal Credit Opportunity Act

Though not as common as it once was, in the mortgage industry, prejudices can cause unethical business practices whereby lenders will not give creditworthy borrowers credit. Some of the specific circumstances leading to the enactment of ECOA regarded women being unfairly discriminated against.

Question 7

Which law prohibits discrimination against mortgage applicants?

A) RESPA.
B) SAFE.
C) FCRA.
D) ECOA.

Answer 7

D) ECOA

ECOA (Equal Credit Opportunity Act) prohibits discrimination against mortgage applicants based on race, color, religion, national origin, age and whether they were recipients of welfare. RESPA establishes specific disclosure requirements in the real estate settlement process and prohibits specific practices such as kickbacks. FCRA is designed to promote accuracy and ensure the privacy of consumers with regard to credit report information. SAFE establishes consistent mortgage lender and broker licensing requirements.

Question 8

A married couple wants to complete a loan application for a refinance transaction in the husband’s name only. The MLO says the spouse must be added to the application. Is the MLO correct?

A) No. The spouse may sign a denial of fiduciary obligation letter to avoid applying jointly.
B) Yes. The MLO cannot risk denial and may feel that the husband will not qualify for the loan without the addition of his spouse.
C) Not likely. A lender should not require the spouse of a borrower to sign an application unless its a joint credit application or required to satisfy state law.
D) Yes. Married couples are considered one household and required to jointly apply for credit, or the loan may be denied.

Answer 8

C) Not likely. A lender should not require the spouse of a borrower to sign an application unless its a joint credit application or required to satisfy state law.

A lender should not require the spouse of a borrower to sign the application unless it is an application for joint credit or unless state laws make it necessary for a community property to be available as collateral. A lender cannot assume that the applicant is applying for a joint credit just by using the fact that the applicant submitted a joint financial statement. On the other hand, a joint application can be required from a spouse or additional parties if the borrower alone cannot satisfy the credit requirements.

Question 9

Which law is arguably one of the most important US consumer protection laws regarding borrowing?

A) Consumer Protection Act (CPA)
B) Truth In Lending Act (TILA)
C) Fair Credit Reporting Act (FCRA)
D) Home Ownership and Equity Protection Act (HOEPA)

Answer 9

B) Truth In Lending Act (TILA)

“TILA, as implemented by regulation Z, became effective in July of 1969. It is one of the most important US consumer protection laws with regard to borrowing. TILA laws and regulations are generally aimed at protecting consumers, borrowers and creditors.”

Question 10

Loan officer Sally is taking a loan application from a lovely couple with interesting foreign accents that she has not heard before. LO Sally says “Wow, your accents are amazing, where are you from”? Is this a violation of ECOA?

A) No
B) Yes, she cannot ask about the borrowers race or national origin
C) No, she can ask about an accent as this is not discrimination
D) Yes, she should have waited until they filled out the application and looked at the previous addresses instead

Answer 10

B) Yes, she cannot ask about the borrowers race or national origin

EQUAL CREDIT OPPORTUNITY ACT (REGULATION B) CFR 12 Part § 1002.4 (a)-(e) General rules say • You MAY NOT inquire about a borrower’s race, color, religion, national origin, or sex, unless: you are requesting information for monitoring purposes.

Question 11

What is the difference between FCRA and the FACTA amendment?

A) FCRA promotes accuracy and privacy of credit information while FACTA regulates lenders’ discriminatory practices related to property types.
B) FCRA promotes accuracy and privacy of credit report information while FACTA allows borrowers to receive documentation of their actual credit score.
C) FCRA promotes accuracy of credit information while FACTA focuses on privacy.
D) FCRA relates to the accuracy of credit information on mortgage transactions while FACTA is related to all credit application types.

Answer 11

B) FCRA promotes accuracy and privacy of credit report information while FACTA allows borrowers to receive documentation of their actual credit score.

FCRA promotes accuracy and privacy of credit report information. FACTA is an amendment to the FCRA, aims to stop identity theft and give consumers more access to more documentation than FCRA did prior to the amendment.

Question 12

A fraud scheme that usually involves one or more persons who abuse the ‘system’ for financial gain is known as:

A) Identity fraud
B) Fraud for housing
C) Skimming
D) Fraud for profit

Answer 12

D) Fraud for Profit

Fraud for Profit is sometimes referred to as ‘Industry Insider Fraud” and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties.

Question 13

A disclosed finance charge that is not considered accurate will extend the right of rescission for 3 years. For a refinance cash-out transaction with a new creditor, an understatement is considered accurate if it is not more than:`

A) $100
B) The greater of $100 or 0.5% of the face amount of the note
C) $35
D) The greater of $100 or 1% of the face amount of the note

Answer 13

B) The greater of $100 or 0.5% of the face amount of the note

$100 is the accuracy tolerance for a violation but not for the right to rescind. The exception of the 1% rule is not met because the transaction is a cash out transaction. More specifically, if the required finance charge disclosures are out of tolerance or disclosures are not delivered, in addition to incurring a violation of TILA, the right to rescind is extended to three years. The finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) are considered accurate if the disclosed finance charge is either understated by no more than 0.5% of the face amount of the note or $100, whichever is greater; or is greater than the amount required to be disclosed. Overstatements are not violations. There is an exception in the case of a refinancing of a mortgage with a new creditor as long as there is no cash out and no consolidation of existing loans.

Question 14

Which of the following gave the FTC the authority to create the Do-Not-Call Registry?

A) Telemarketing Consumer Fraud and Abuse Prevention Act (Telemarketing Act).
B) Fair Credit Reporting Act (FCRA).
C) Equal Credit Opportunity Act (ECOA).
D) Home Mortgage Disclosure Act (HMDA).

Answer 14

A) Telemarketing Consumer Fraud and Abuse Prevention Act (Telemarketing Act).

The Telemarketing Consumer Fraud and Abuse Prevention Act or Telemarketing Act gave the FTC the authority to create the Do-Not-Call Registry. The act applies to any business or individual engaged in telemarketing.

Question 15

This loan type gave access to consumers who were not previously served by traditional credit markets:

A) FHA-Insured Loans
B) Subprime Loans
C) NACA Home Loans
D) Option ARM Loan Programs

Answer 15

B) Subprime Loans

Much of the recent increase in mortgage lending to previously underserved populations can be attributed to the development of the subprime mortgage market. This rapid growth has given access to consumers who were not previously served by credit markets, either because they had difficulty in meeting the underwriting criteria of prime lenders or for other reasons.

Question 16

Describe an example of “exploiting the elderly”

A) Offering the borrower a reverse mortgage loan
B) Recommending the borrower sign a power of attorney so that you, the mortgage officer, can sign documents for them because they are having difficulty seeing the documents
C) Showing the borrower how a home equity loan could allow them to purchase medicines and needed personal care and nursing services for an ill spouse
D) Advising the borrower to place a mortgage on a home for the purpose of investments or to buy insurance products

Answer 16

D) Advising the borrower to place a mortgage on a home for the purpose of investments or to buy insurance products

To use a mortgage for investment and insurance products does not fall within the advisory capacity of an MLO. The other choices show normal activities when working with elderly clients.

Question 17

A lender is reviewing a credit report and observes several medical collections. Should the lender seek more information regarding the applicant’s health status to determine the consumer’s ability to pay?

A) Yes. Any information on collections is critical to a lender’s decision and must be obtained.
B) Yes. If the applicant is willing to sign a medical release form, the lender can assess the impact of future health issues on income.
C) No. Any health status information cannot be used to determine credit eligibility, only the financial impact of the medical collections.
D) No. The lender cannot request this information, but can instead extrapolate from the monthly collections that the applicant’s health is deteriorating and incorporate that into the determination.

Answer 17

C) No. Any health status information cannot be used to determine credit eligibility, only the financial impact of the medical collections.

The creditor uses the medical information in a manner and to an extent that is no less favorable than they would use comparable information that is not medical information in a credit transaction, and the creditor does not take the consumer’s physical, mental, or behavioral health, condition or history, type of treatment, or prognosis into account as part of any such determination. Section 222.30(d). Even if the lender had health status information, it could not use that information in it’s determination.

Question 18

A mortgage applicant receives an adverse action notice. The applicant states that the denial was due to incorrect information on the credit report. How can the consumer ensure the credit profile is presented fairly?

A) By filing a letter of dispute, which gives the agency 30 days to correct the data after receipt of the letter.
B) By placing a statement on then credit report instructing lenders how to get updated information from the creditor.
C)The consumer does not have an option here. The regulatory presumption is that the credit reporting agency information is correct since agencies face hefty fines if a violation is found.
D) By disputing the inaccurate information with the agency, which will have 30 days to correct the error after the inaccuracy has been verified.

Answer 18

D) By disputing the inaccurate information with the agency, which will have 30 days to correct the error after the inaccuracy has been verified.

FCRA requires lenders to give applicants disclosures about their right to dispute credit agencies’ information. The consumer may dispute the information, though the consumer reporting agency may continue to report information it has verified as accurate; however, once the consumer reporting agency finds that the credit report information is inaccurate, incomplete or unverifiable, the agency then has 30 days to correct the error. The 30 day window does not begin until verification.

Question 19

Targeted consumers of predatory lending practices often held what common characteristics?

A) National Origin
B) Family size
C) Marital Status
D) Difficulty meeting underwriting criteria of prime lenders typically due to credit histories

Answer 19

D) Difficulty meeting underwriting criteria of prime lenders typically due to credit histories

This rapid growth has given access to consumers who were not previously served by credit markets, either because they had difficulty in meeting the underwriting criteria of prime lenders or for other reasons.

Question 20

Subpart E of TILA specifically includes rules related to:

A) Unsecured loans
B) HOEPA defined loans
C) Regulation X
D) All amendments to TILA

Answer 20

B) HOEPA defined loans

Subpart E includes coverage of: (a) HOEPA amendments (though not all amendments) (b) Requires certain disclosures for closed-end loans (1026.32 ) (c) Provides limitations for closed-end loans that have rates or fees above specified amounts (1026.33) (d) Prohibits specific acts and practices if the mortgage is subject to HOEPA (1026.4) (e) Higher-Priced Mortgages (f) Prohibits specific acts and practices for closed end higher-priced mortgages. (1026.35) (g) Prohibits specific acts and practices when extending credit secured by a dwelling. (1026.25)

Question 21

What is Mortgage-Price Low Balling?

A) Competing with other lenders and mortgage brokers on an internet-based mortgage-bidding site to offer the borrower the most competitive rate.
B) Offering the borrower the opportunity to negotiate rate down to a much lower rate if they are able to bring a substantially higher upfront fee and a longer repayment term
C) The act of pulling for a “mortgage ball” lottery that gave the borrower the opportunity to secure extremely low interest rates for their loan
D) Quoting lower YSP than a broker is willing to honor with the intent of changing before the loan closes

Answer 21

D) Quoting lower YSP than a broker is willing to honor with the intent of changing before the loan closes

Excessive yield spread premiums (kickbacks to brokers). Deliberately quoting lower yield spread premiums than the brokers are willing to honor. This practice is sometimes referred to as Mortgage Price Low-Balling.

Question 22

Amendments to which of the following federal laws created requirements for the verification and documentation of a borrower’s repayment ability?

A) RESPA
B) HOEPA
C) HMDA
D) ECOA

Answer 22

B) HOEPA

HOEPA Requires income verification.

Question 23

Illegal Discrimination in housing:

A) Causes values to go up
B) Is just part of doing business
C) Gives people more purchasing power
D) Has a negative impact on our communities

Answer 23

D) Has a negative impact on our communities

Discrimination in housing and real estate is having a negative impact on our country and communities. When people are not offered the same opportunities to equal access to the housing of their choice, it violates the principles of freedom and opportunity that we cherish as the cornerstone of our American Dream.

Question 24

ECOA regulates which group of industry professionals?

A) Everyone who participates in the decision to grant credit or in setting the terms of that credit.
B) Credit card issuers and mortgage lenders who participate in the decision to grant credit or in setting the terms of that credit.
C) Everyone in the financial services industry who offers loans to borrowers in an underserved area.
D) Real estate and mortgage brokers who offer loans to borrowers in an underserved location.

Answer 24

A) Everyone who participates in the decision to grant credit or in setting the terms of that credit.

The law applies to everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing.

Question 25

While verifying a payment arrangement with an applicant's medical facility, the broker learns that the borrower has a terminal illness. How should the broker react to finding out this information? A) The broker should ignore it. However, the applicant must document other income sources addressing how they will be able to repay the mortgage if they are no longer able to work due to the illness. B) The broker should terminate the application due to the "uncertainty of future income," which is allowed under FAAL (Fair Applicant Assessment by Lenders). C) The broker should inform the underwriter because this will affect the applicant's ability to make the mortgage payments. D) The broker should ignore it. Only the payment verification is to be considered in the application process.

Answer 25

D) The broker should ignore it. Only the payment verification is to be considered in the application process. Under FACTA, creditors must not use medical records to determine a consumer's eligibility for credit. Note that "medical records" pertains to the medical conditions of the patient; however, and this is an important differentiation, outstanding medical bills can be used as a part of credit assessment.

Question 26

When can a lender inquire about the credit of an applicant's spouse or former spouse? A) If the applicant's spouse is not authorized to use the line of credit. B) Never. The inquiry of information about a spouse or former spouse is prohibited. C) If the applicant does not reside in a community property state. D) If the applicant relies on child support to apply for credit.

Answer 26

D) If the applicant relies on child support to apply for credit. In general, the inquiry of information about a spouse or former spouse is prohibited. Exceptions include the following situations: if the spouse or former spouse is permitted to use the credit account; if the spouse or former spouse is liable on the account; if the applicant relies on income from a spouse or former spouse to qualify for credit (such as alimony, child support); and if the applicant resides in a community property state or is relying on property located in a community property states as a basis for repayment of the loan.

Question 27

An affiliate title company is allowed to collect fees for the service they provide if: A) The seller pays all closing costs since fees paid by a third party are not subject to these regulations. B) The arrangement is disclosed to the applicant through the AfBA and the fees are disclosed with an indication that the usage of these services is not required. C) There is disclosure through the AfBA and the disclosue includes a price range for fees disclosed. D) The applicant indicates in writing at the time of application a desire to use this provider.

Answer 27

B) The arrangement is disclosed to the applicant through the AfBA and the fees are disclosed with an indication that the usage of these services is not required. The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The only exception is that if the referral is made by phone, the disclosure can be sent to the borrower within 3 business days. This disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.

Question 28

Which of the following descriptions of an ARM appearing on an advertisement would NOT be a clear violation of TILA: A) "ARM with a standard payment period and using market rates" B) "3 years of fixed payments" C) "Fixed for 3 years and then adjustable based on market rates" D) "Variable rate mortgage with fixed payments for the first 3 years"

Answer 28

D) "Variable rate mortgage with fixed payments for the first 3 years" Adjustable-rate mortgage, or ARM, or variable-rate mortgage must be included before the word "fixed" in any advertisement covering ARMs. Terms cannot use acronyms.

Question 29

How can "Help Wanted" Ads assist participation in Mortgage Fraud schemes? A) Job applicants submit personal identifying information to the "want ad" and this is used to complete fictitious loan application B) Verbal agreement that borrower will be offered a job at the mortgage company once they close on the loan and this is an ineligible kick-back C) Borrowers who have "want ads" in their loan documentation may be hiding the fact that they have recently lost their job and unable to make the mortgage payment that they are seeking approval for D)Causes the borrower to relocate once hired and apply for new loan for new location

Answer 29

A) Job applicants submit personal identifying information to the "want ad" and this is used to complete fictitious loan application A fictitious/stolen identity is used on the loan application. The applicant may be involved in an identity theft scheme: the applicant's name, personal identifying information and credit history are used without the true person's knowledge.

Question 30

Which of the following is NOT an example of potential violation penalties by the FTC? A) Court settlement required mortgage company to pay $28 million for consumer redress, not misrepresent amounts consumers owe, and not charge unauthorized fees as documented in monthly report required by regulating agency B) Real Estate Agent fined $10,000 and given 1 year in jail for giving referrals to Loan Officer of $200 for each client C) Community Service providing educational services to consumers to deter them from the very activity that the business was found guilty of D) National Computer company ordered to pay $5 million for consumer redress and barred business from making misrepresentations in marketing

Answer 30

Criminal penalties can also be severe. For example, violation of RESPA with regards to kickbacks can result in up to one year in prison and revocation of a mortgage broker's license, along with any relevant fines. Certain violations of FCRA can also lead to criminal penalties. Compliance with these laws and conducting business ethically are key to avoiding potentially serious financial or criminal penalties, additional reporting, paperwork and compliance expenditures.

Question 31

RESPA requires which of the following disclosures after the loan closes? A) Mortgage repayment conditions. B) Finalized Closing Disclosure C) Escrow account statement. D) ECOA Notice.

Answer 31

C) Escrow account statement. Loan service providers must deliver an annual escrow statement to the borrowers once a year. This disclosure summarizes all monies coming in and out of the borrower's escrow account during the 12-month computation year and notifies the borrowers of any shortages or surpluses in the account. Also, if a loan servicer sells or assigns the servicing rights to the borrower's loan to another loan service, the loan servicer is required to deliver a Servicing Transfer Statement to the borrower 15 days before the effective date of the loan transfer.

Question 32

Fraud for Housing schemes often involve all of the following, except: A) Inflated property appraisals B) Gift funds and/or unsecured loans for down payment C) Falsified income tax returns D) Altered verifications of income

Answer 32

A) Inflated property appraisals Borrowers are not involved in the appraisal ordering process so are not involved in any fraud regarding the appraisal.

Question 33

Granting a loan to a consumer based on their equity in the property without considering their ability to repay the debt is referred to as: A) Churning B) No income verification loan program C) Flipping D) Asset based lending

Answer 33

D) Asset based lending HOEPA prohibits asset based lending.

Question 34

If a mortgage professional advertises a loan product at 6.25% APR according to TILA what other information must be provided? A) The payment period B) The finance charges C) No other information is required D) The monthly payment

Answer 34

C) No other information is required Advertising APR does not require additional information.

Question 35

Who enforces many of these ethical laws? A) Federal Trade Commission, Bank regulatory agencies, and National Credit Administration B) Local Law Enforcement C) S.A.F.E. D) National Association of Lending Administration (NALA)

Answer 35

A) Federal Trade Commission, Bank regulatory agencies, and National Credit Administration The Red Flag Rule is enforced by the Federal Trade Commission (FTC), the various federal bank regulatory agencies, and the National Credit Union Administration. This regulation covers a broad selection of financial institutions.

Question 36

Based on existing investigations and Mortgage Fraud reporting, approximately what percent of all reported fraud losses involve collaboration or collusion by industry insiders? A) 80 percent B) 20 percent C) 40 percent D) 60 percent

Answer 36

A) 80 percent The FBI estimates that 80 percent of all mortgage fraud involves collaboration or collusion by industry insiders.

Question 37

Which law was enacted to regulate the use of consumer credit reports? A) TILA B) FCRA C) HMDA D) RESPA

Answer 37

B) FCRA Fair credit reporting act sets the guidelines for furnishing credit reports.

Question 38

A borrower refinancing a primary residence can rescind a transaction within how many days after consummation of the transaction? A) 7 days B) 3 business days C) 1 week D) 5 business days

Answer 38

B) 3 business days Consumers have 3 business days after consummation of the transaction to evaluate a transaction and terminate the agreement without any further financial obligation. Their reason can be as simple as just a change of heart. ‘Business day' refers to all calendar days except Sundays and the 10 legal public holidays. Specifically, according to Reg. Z, the consumer may exercise the right to rescind until midnight of the third business day following consummation of the transaction. If the mortgage closed on Monday, then this 3-business-day period ends at midnight on Thursday.

Question 39

TILA rules are generally enforced by: A) The Federal Housing Administration B) The Federal Reserve C) The Federal Trade Commission D) The Housing and Urban Development

Answer 39

C) The Federal Trade Commission TILA rules are generally enforced by the Federal Trade Commission (FTC).

Question 40

What is the minimum number of items that an MLO must review and verify under the Ability-to-Repay Rule to be confident that a borrower qualifies for a mortgage? A) 7 B) 6 C) 8 D) 9

Answer 40

C) 8 Under the Ability-to-Repay Rule an underwriter, MLO, creditor, or lender must review and verify financial documents and records. At a minimum, a lender must consider eight underwriting standards.

Question 41

Which of the following should raise a red flag for potential fraud in a loan transaction? A) Stated Income Loan B) Letter of Explanation completed by loan processor or loan originator explaining a scenario for the borrower C) Non-Occupying Co-Borrowers D) VORs and VOEs instead of paycheck or pay statements

Answer 41

B) Letter of Explanation completed by loan processor or loan originator explaining a scenario for the borrower The following is a list of some common mortgage fraud schemes, with brief explanations. Though many types of fraud involve multiple schemes, we have included relevant examples that focus on the specific scheme we are discussing. Also, most schemes include some types of basic criminal acts including: Submitting false information on documents (income, payment history, employment history, etc…); Submitting false documentation (VORs, VOEs, appraisals, credit reports, etc..); Forging signatures on documents (Sales agreements, loan applications, etc..); Receiving monies intended for someone else; Mail fraud; Wire fraud.

Question 42

Over recent years the concept of _________________________ has been identified as a major source of violations with respect to business ethics in the mortgage: A) Identity theft B) Automated underwriting C) Predatory lending D) No income verification loans

Answer 42

C) Predatory lending HOEPA attempts to eliminate predatory lending.

Question 43

Before a lender retrieves an applicant's credit report, they must do which of the following? A) Demonstrate they have requested the consumer's approval. B) Receive the applicant's approval. C) Ask for the applicant's race and national origin. D) Complete a credit disclosure for the consumer.

Answer 43

B) Receive the applicant's approval. A lender must receive the consumer's authorization to pull a credit report before the lender retrieves the report.

Question 44

A borrower completed the loan application on the 10th of the month. When is the earliest the transaction can close? A) One week after the date that the TILA disclosure and GFE delivered B) Seven business days after the date that the TILA disclosure and GFE delivered C) Five business days after the date that the TILA disclosure and GFE delivered D) Three business days after the date that the TILA disclosure and GFE delivered

Answer 44

B) Seven business days after the date that the TILA disclosure and GFE delivered For loans subject to MDIA, the 7-Business Day waiting period begins when the disclosure is mailed to the borrowers or if delivered electronically is deemed delivered. HELOCs are excluded from this requirement.

Question 45

The Civil Rights Act of 1866 extends what rights to citizens of the United Sates? A) The right to inherit and convey real and personal property whatever their race or color B) It does not extend any rights to citizens of the United States C) The right to vote D) The right to inherit, purchase, lease, sell, hold, and convey real and personal property whatever their race or color

Answer 45

D) The right to inherit, purchase, lease, sell, hold, and convey real and personal property whatever their race or color The act confers to them the right to inherit, purchase, lease, sell, hold, and convey real and personal property whatever their race or color. It extends equal benefit of all laws and proceedings for the security of person and property, as is enjoyed by white citizens. The Civil Rights Act of 1866 applies to all property, real or personal, including residential or commercial property.

Question 46

The TILA Loan Originator Compensation Rule states how a mortgage originator can be paid. On what things can a loan originator base their compensation? A) They can only be paid on the loan's terms and conditions B) They can be paid more for a borrower with poor credit. C) They can be paid less for a borrower taking a 15 year loan instead of a 30 year loan. D) They can only be paid on the amount of credit extended.

Answer 46

D) They can only be paid on the amount of credit extended. "The rule prohibits a creditor or any other person from paying, directly or indirectly, compensation to a mortgage broker or any other loan originator that is based on a mortgage transaction's terms or conditions, except the amount of credit extended."

Question 47

This law is a key instrument in preventing predatory lending. A) HOPE - Home Ownership Protection Act B) HOEPA- Home Ownership and Equal Protection Act C) RPPLA-Regulatory Prohibition of Predatory Lending Act D) PPLA- Preventing Predatory Lending Act

Answer 47

B) HOEPA- Home Ownership and Equal Protection Act Enacted in 1994, HOEPA, an amendment to TILA, is aimed to prevent situations where the primary victim of Mortgage Fraud is a borrower. The law is a key instrument in preventing predatory lending, but it also applies broadly.

Question 48

What is one special disclosure requirement for reverse mortgages? A) The fact that credit score will impact the applicant's ability to apply for the loan B) Cash flow scenarios based on life expectancy and house appreciation C) A side-by-side comparison to a comparable life insurance policy D) A list of 3 comparable loans in the prime, subprime and adjustable rate markets

Answer 48

B) Cash flow scenarios based on life expectancy and house appreciation There are additional special requirements for reverse mortgages loans. For example, the mortgage loan originator must show cash flow scenarios to applicants to show annual appreciation, actuarial life expectancy of youngest borrower and an assumed loan period of 2 years

Question 49

What are the ECOA protected classes? A) Race, color, national origin, religion, sex, familial status and disability B) Race, color, religion, national origin, sex, marital status or age, receipt of public assistance C) Race, color, religion, national origin, sex, marital status or age, receipt of public assistance and good faith rights under Consumer Protection Credit Act D) Race, color, religion, national origin, sex, marital status or age

Answer 49

C) Race, color, religion, national origin, sex, marital status or age, receipt of public assistance and good faith rights under Consumer Protection Credit Act Race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant's income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act."

Question 50

A code of ethics is best described as a set of: A) Guidelines B) Rules C) Standards D) Laws

Answer 50

C) Standards A code of ethics can best be defined as a set of standards.

Question 51

When was TILA enacted?

Answer 51

1968 Congress enacted TILA in 1968 at Title I of the Consumer Credit Protection ACT (CCPA) with the intent of protecting consumers in lending and credit transactions.

Question 52

YSP is disclosed to the borrower: A) On the GFE and HUD1 B) Only on high cost home loans C) On the GFE and TIL D) On section 35 loans

Answer 52

A) On the GFE and HUD1 SP is disclosed on RESPA disclosures GFE and HUD1.

Question 53

Which federal agency has traditionally been responsible for enforcing RESPA and implementing regulations? A) HUD B) HUD and the CFPB C) The CFPB D) HUD and the OCC

Answer 53

B) HUD and the CFPB HUD previously was fully responsible for enforcing RESPA violations. HUD has moved much of the enforcement and regulation implementation to the CFPB.

Question 54

Which of the following is NOT an example of a changed circumstance? A) Information that is particular to the borrower or transaction used to provide the LE and changed or is found to be inaccurate after the LE has been provided. B) The appraiser was changed midway through the process. C) An act of god, a war, a disaster or another other such emergency. D) New information particular to the borrower or transaction that was not used to provide the LE.

Answer 54

B) The appraiser was changed midway through the process. An application is the submission of a borrower's financial information in anticipation of a credit decision involving six factors: borrower's name, borrower's monthly income, borrower's social security number to obtain a credit report, property address, estimate of value of property, loan amount, and any other information deemed necessary by the MLO. While not all this information may be known and other information may be discovered or changed throughout the processing of that loan application, the MLOs must use their best effort to prepare a Loan Estimate of the approximate costs. Always be mindful of the required tolerances. Once the LE is provided, it is presumed that these six factors were known.

Question 55

When a lender rejects an applicant, what is one item that must be provided to the applicant? A) A description of how to appeal the decision. B) A list of qualified lenders who may provide credit. C) The Closing Disclosure D) Loan Estimate

Answer 55

A) A description of how to appeal the decision. A notification must be given to an applicant if their loan application is denied. The notification must be in writing and must contain a statement of action taken; the name and address of the lender to whom an appeal can be made; the ECOA Notice; the name and address of the federal agency that supervises that particular lender; and a statement of specific reasons for the action taken or a disclosure of the applicant's right to receive such a statement within 30 days. If the application is denied within the first three business days of submission, the MLO must send the adverse action notice to the applicant. However, if the loan is not denied within the first three business days of submission, the adverse action notice must be sent to the applicant along with the Loan Estimate disclosure.

Question 56

When was RESPA enacted? A) 2004 B) 2008 C) 1994 D) 1974

Answer 56

D) 1974 RESPA was enacted in 1974 to allow consumers to obtain the costs of closing so they can shop for settlement services and to protect consumers from excessive settlement costs and unearned fees.

Question 57

All of the following participants are involved in the loan process and have the potential to be involved in committing loan fraud, except: A) Appraisers B) Mortgage investor C) MLO D) Underwriters

Answer 57

B) Mortgage investor The mortgage investor purchases the loan after origination.

Question 58

In order to facilitate the borrower's ability to rescind the mortgage, what does TILA require the creditors to do? A) Require signature of a Rescission Disclosure at the time of application B) Re-disclose the loan terms C) Extend the rescission deadline if need be D) Deliver 2 copies of Notice of the Right to Rescind to each borrower who has the right to rescind

Answer 58

D) Deliver 2 copies of Notice of the Right to Rescind to each borrower Lenders must provide the borrowers with 2 copies of the "Notice of the Right to Rescind" form to every borrower who has the right to rescind, which will identify the date when the rescission period expires, the effect of the rescission and how the Borrowers can exercise their right to rescind.

Question 59

In the LE, which of the following can increase at settlement? A) The loan origination charge. B) The points for the specific interest rate chosen. C) Transfer taxes. D) The government recording charges.

Answer 59

D) The government recording charges. The LE spells out to the borrowers which fees cannot increase at settlement. These fees include the origination charge, a credit or charge for the specific interest rate chosen, the adjusted origination charges and transfer taxes. Fees that can increase up to 10% at settlement include required services that the lender selects; title services, lender's title insurance, owner's title insurance and required services that the borrower can shop for (if the borrower uses companies the lender identifies); and government recording charges. Charges that can change at settlement include required services that the borrower can shop for, title services, lender's and owner's title insurance (if the borrower does not use companies the lender identified); initial deposit for borrower's escrow account; daily interest charges and homeowner's insurance.

Question 60

A lender may NOT ask an applicant to do which of the following? A) Provide the address for designees of such accounts. B) Provide the names with which they have previously requested credit. C) Provide the name for designees of such accounts. D) List the accounts they are liable for.

Answer 60

B) Provide the names with which they have previously requested credit. A lender may ask the applicant to list any accounts they are liable for and to provide the name and address for designees of such accounts. An applicant may also be asked to provide the names with which they previously received credit. However, a lender may not ask for the names with which an applicant has previously requested credit.

Question 61

If a loan closes on a Friday and there are no holidays over the next week, the right of rescission ends at midnight on: A) Tuesday B) Monday C) Thursday D) Wednesday

Answer 61

A) Tuesday The right of rescission ends three business days after closing. 'Business days' are defined as every day except Sunday and public holidays. The right in this particular example would end at midnight on Tuesday.

Question 62

A key purpose of TILA is to: A) Standardize forms used by lenders for credit determination B) Limit access to private consumer data C) Ensure correct and sufficient disclosure of lending terms and costs D) Protect borrowers from discriminatory lending practices

Answer 62

C) Ensure correct and sufficient disclosure of lending terms and costs The TILA/RESPA Loan Estimate protects the interest of the consumer by requiring correct and sufficient disclosure of lending terms and costs on most types of consumer credit, including mortgage loans, auto loans and credit card borrowing. Additionally, for certain home equity line of credits, adjustable-rate mortgages, mortgages with high interest rates and reverse mortgages, the government imposes additional limitations.

Question 63

Under Regulation N records must be kept for: A) 1 year B) 18 months C) 36 months D) 24 months

Answer 63

D) 24 months

Question 64

What is the FCRA? A) Failed Consumer Regulatory Administration- regulates the activity of institutions that have repeatedly unfairly denied consumer applications B) Fair Credit Reporting Act- which ensures appropriate usage of information by credit reporting agencies C) Federal Compliance Reporting Authority- whose responsibility is to maintain a database for irresponsible and unethical mortgage professionals D) Federation of Consumer Regulation Authority- which works to eliminate consumer misrepresentation in financial transactions

Answer 64

B) Fair Credit Reporting Act- which ensures appropriate usage of information by credit reporting agencies Enacted in 1970, the primary purpose of the FCRA is to ensure the accuracy, fairness and privacy of personal information used by consumer reporting agencies.

Question 65

When was FCRA enacted?

Answer 65

1970

Question 66

Documents containing blanks should: A) Never be signed as this encourages or permits fraud B) Be signed if this will speed up the purchase process C) Be signed to avoid delays if, for example, the mortgage professional is due to go on holiday. D) Be signed to avoid delays if, for example, the borrower is due to go on holiday

Answer 66

A) Never be signed as this encourages or permits fraud

Question 67

For delivery of the Closing Disclosure business day means: A) Business weekdays, Monday through Friday B) All calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a) C) Any day the creditor's offices are open to the public for carrying out substantially all of its business functions D) All calendar days

Answer 67

B) All calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a)

Question 68

The Fair Housing Act has additional safeguards for which individuals beyond the protected classes: A) Anyone who is a parent or guardian of a minor child B) Anyone in the real estate industry C) All Federal employees D) Someone who has physical or mental disability

Answer 68

D) Someone who has physical or mental disability Additional safeguards exist for individuals who: Have a physical or mental disability (including hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS-Related Complex and mental retardation) that substantially limits one or more major activities of daily living. Have a record of such a disability or Are regarded as having such a disability Fair Housing And Equal Opportunity

Question 69

An applicant states it is illegal for a lender to request a credit report as this is discriminatory and refuses the request. He threatens legal action if the application is denied due to his refusal. Is this an accurate interpretation of the federal guidelines? A) Yes, according to ECOA, the applicant's credit history should not be used unless the applicant demonstrates inability to repay as determined by current income and assets. B) No, while the applicant can choose not to provide his credit report, the lender may deny the loan and the absence of a credit report can be the reason. C) No; however, the lender must tell the applicant what credit score is sufficient to qualify for the loan. D) Yes; in this case the lender could be liable if they deny the loan because the applicant did not authorize the request for a credit report.

Answer 69

B) No, while the applicant can choose not to provide his credit report, the lender may deny the loan and the absence of a credit report can be the reason. It is true that the applicant can choose not to authorize a credit report. The lender does not need to see a credit report to make a decision; however, without a credit report, one of the most critical pieces of information a lender needs to determine eligibility and creditworthiness of the applicant for loan approval. The lender does not have to determine an allowable credit history based on other pieces of information.

Question 70

The TRID Rule applies to what transaction types? A) Home purchase, refinance and home equity, Lot loans, loans secured by bare land, Loan secured, by more than 25 acres, Construction only loans, Temporary, closed end transactions, Loans extended to family or estate trust B) Home purchase, refinance and home equity, Lot loans, loans secured by bare land, Loan secured by more than 25 acres, Construction only loans, Temporary, closed end transactions C) Home purchase, refinance and home equity, Lot loans, loans secured by bare land, Loan secured, by more than 25 acres, Construction only loans, Temporary, closed end transactions, Home Equity lines of credit, Reverse Mortgages D) Home purchase, refinance and home equity, Lot loans, loans secured by bare land, Loan secured, by more than 25 acres, Construction only loans, Temporary, closed end transactions, Home Equity lines of credit, Reverse Mortgages, Some no interest second mort

Answer 70

A) Home purchase, refinance and home equity, Lot loans, loans secured by bare land, Loan secured, by more than 25 acres, Construction only loans, Temporary, closed end transactions, Loans extended to family or estate trust

Question 71

Mortgage Originators, Lenders and Creditors are allowed to charge the borrower more than the amount disclosed on the Loan Estimate for some fees, as long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10 percent for the following. What are the fees that have a 10% tolerance? A) Fees paid to an unaffiliated third party, if the MLO, Lender, Creditor, permitted the borrower to shop for the service and the borrower selects a third‐party service provider on the creditor's written list of service providers, The charge is not paid to the MLO, lender, creditor or their affiliate. B) Recording fees, Fees paid to an unaffiliated third party, if the MLO, Lender, Creditor, permitted the borrower to shop for the service and the borrower selects a third‐party service provider on the creditor's written list of service providers, The charge is not paid to the MLO, lender, creditor or their affiliate. C) All fees other than those that cannot increase are included in the 10% tolerance. D) Recording fees, Fees paid to an unaffiliated third party, if the MLO, Lender, Creditor, permitted the borrower to shop for the service and the borrower selects a third‐party service provider on the creditor's written list of service providers, The charge is paid to the MLO, lender, creditor or their affiliate.

Answer 71

B) Recording fees, Fees paid to an unaffiliated third party, if the MLO, Lender, Creditor, permitted the borrower to shop for the service and the borrower selects a third‐party service provider on the creditor's written list of service providers, The charge is not paid to the MLO, lender, creditor or their affiliate.

Question 72

What set of rules were created to prevent the malicious acquisition of personal information for misuse and financial gain? A) Fraud Flag Rules (FFR). B) FACTA disposal rules. C) The Red Flag Rules. D) Identity Theft Rules.

Answer 72

C) The Red Flag Rules. The Red Flag Rules aim at protecting consumer information and preventing identity theft by requiring financial institutions to develop and implement identity theft prevention programs.

Question 73

In what way does the GLB Act provide Consumer Protection? A) Aims to protect the privacy of a consumer's personal information B) Aims to allow consumers to decide if they want to disclose their ethnicity C) Intends to promote freedom of choice for who the consumer chooses to do business with D) Prohibits disclosure of the borrower's age to minimize further underwriter scrutiny

Answer 73

A) Aims to protect the privacy of a consumer's personal information Enacted in 1999, the GLB Act is aimed at protecting the privacy of a consumer's personal information.

Question 74

Complying with the Ability-to-Repay Rule requires which of the following? A) The borrower must prove that they have had a job for the past two years. B) The Lender or creditor must review and verify financial records and documents. C) The borrower must write a letter to the underwriter explaining why they can repay the loan. D) The lender must get references to verify that the borrower will be able to repay the loan.

Answer 74

B) The Lender or creditor must review and verify financial records and documents. Under the Ability-to-Repay Rule, there are certain requirements lenders have to follow to determine the ability of a borrower to repay the mortgage, both principal and interest over the long term. It does not set particular underwriting models but requires an underwriter, mortgage originator, creditor or lender to review and verify financial documents and records.

Question 75

The person to whom a "fiduciary" owes his duty is known as the: A) Principal B) Principle C) Trustee D) Nominee

Answer 75

A) Principal The person to whom a fiduciary owes his duty is known as the principal.

Question 76

This law is a key instrument in preventing predatory lending. A) PPLA- Preventing Predatory Lending Act B) HOEPA- Home Ownership and Equal Protection Act C) RPPLA-Regulatory Prohibition of Predatory Lending Act D) HOPE - Home Ownership Protection Act

Answer 76

B) HOEPA- Home Ownership and Equal Protection Act Enacted in 1994, HOEPA, an amendment to TILA, is aimed to prevent situations where the primary victim of Mortgage Fraud is a borrower. The law is a key instrument in preventing predatory lending, but it also applies broadly.

Question 77

TILA rules are generally enforced by: A) The Housing and Urban Development B) The Federal Housing Administration C) The Federal Trade Commission D) The Federal Reserve

Answer 77

C) The Federal Trade Commission TILA rules are generally enforced by the Federal Trade Commission (FTC).

Question 78

Which of the following federal agencies enforces TILA? A) HUD B) CFPB C) FHA D) Federal reserve board

Answer 78

B) CFPB The Consumer Financial protection Bureau enforces TILA.

Question 79

The Finance Charge is shown in an advertisement. The advertiser must also display the: A) Equivalent finance charge for an ARM and a disclaimer about tax implications. B) Annual Percentage Rate (cannot use only "APR"), Monthly payment and translation of any related text into the most prominent non-English regional language C) Downpayment amount, Monthly payment, Number of payment periods and Amount financed D) Downpayment amount or percentage, Terms of repayment, Annual Percentage Rate (cannot use only "APR") and Risk of rate increases

Answer 79

D) Downpayment amount or percentage, Terms of repayment, Annual Percentage Rate (cannot use only "APR") and Risk of rate increases f any of the following four items are mentioned in the ad: Amount of downpayment, Monthly payment, Number of Payment Periods, Finance Charge Then the advertiser must include the following as well: Downpayment amount or percentage, Terms of repayment, Annual Percentage Rate (not just "APR"), Risk of rate increases Remember that APR must be spelled out and is not acceptable if shown only as an acronym.

Question 80

ECOA specifically limits discrimination against borrowers on public assistance, disability, or child support, etc. from which of the following individuals, parties, or agencies? A) Credit card and mortgage lenders. B) Banks. C) Real estate and mortgage brokers. D) Parties who provide credit.

Answer 80

D) Parties who provide credit. Specifically, ECOA states that it is unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex, marital status, race, color, religion, national origin, age, the receipt of public assistance, or, lastly, if an applicant has exercised a right under the Consumer Credit Protection Act.

Question 81

Which of the following laws was NOT implemented in part to help stem discrimination in mortgage lending? A) FCRA B) DNCIA. C) ECOA. D) HMDA.

Answer 81

B) DNCIA. DNCIA was implemented to is to protect consumer from unwanted calls from solicitation; however, the other laws were directly implemented to prevent lending discrimination. TILA was first introduced in 1968 and has been amended many times over the years. It protects consumers' interests by requiring correct and sufficient disclosure of lending terms and costs on most types of consumer credit. ECOA was enacted in 1974 and prohibits discrimination against mortgage applicants based on race, color, religion, national origin, age, and whether they were recipients of welfare. HMDA, enacted in 1975, established requirements for lenders to submit a mortgage applicant's data to the government so the government could monitor lending practices so they are available to everyone.

Question 82

The FTC's Disposal Rule aimed at preserving the confidentiality of consumer personal financial information is also known as? A) The Do Not Call Provision of the Telemarketing Sales Act B) ECOA's adverse action notice C) The Gramm Leach Bliley Safeguards Rule D) Reg Z's TIL Disclosure Statement

Answer 82

C) The Gramm Leach Bliley Safeguards Rule The GLB (Graham Leach Bliley) safeguards rule requires the permanent and safe disposal of all personal information.

Question 83

What is the dollar amount used to calculate the APR? A) The interest payment B) The amount financed C) Precomputed expenses D) The finance charge

Answer 83

D) The finance charge The Finance Charge IS BY DEFINITION the dollar amount used to calculate the APR. The finance charge is 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 an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction. A higher finance charge leads to a higher APR. The interest paid by the borrower on an on-going basis, mostly with each monthly payment, would be one clear finance charge. The loan origination fee charged by the mortgage loan originator upfront is also a key part of all finance charges.

Question 84

___ means the identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee's name and credit history to apply for a loan. A) Straw buyer B) Identity theft C) Straw loans D) Fraudulent identity

Answer 84

A) Straw buyer Straw buyer means the identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee's name and credit history to apply for a loan.

Question 85

Appraiser Independence Requirements (AIR) / Valuation Independence: A) Allows an MLO to discuss the outcome of an appraisal with the appraiser after the work has been done B) Prohibits lenders and third parties (particularly mortgage loan originators) from influencing the appraisal process and outcome through coercion or mischaracterization of value. C) Allows the borrower to order the appraiser themselves D) Requires appraisers to register with a National database

Answer 85

B) Prohibits lenders and third parties (particularly mortgage loan originators) from influencing the appraisal process and outcome through coercion or mischaracterization of value. Appraiser Independence Requirements (AIR) / Valuation Independence . TILA in subsection 1026.42 makes it illegal for a lender or originator to influence the outcome of an appraisal in any consumer transaction secured by a principal dwelling. Truth in Lending Act CFPB Section 12 CFR 1026.42 Valuation independence.

Question 86

What is an adverse action notice as stated in the FCRA? A) Notice to borrower when the lender is about to foreclose the property. B) Notice to borrower when the mortgage transaction failed to close. C) Notice to the lender when the borrower has failed to pay money into the escrow account. D) Notice to the borrower when the lender has denied the borrower's loan application.

Answer 86

D) Notice to the borrower when the lender has denied the borrower's loan application. It is a notification given to an applicant when adverse action is taken. It is required to be in writing. Note that ECOA also requires the delivery of an adverse action notices.

Question 87

Which law introduced restrictions on Higher Priced Mortgages?

Answer 87

HOEPA was designed as an amendment to the Truth in Lending Act (TILA) and was passed by Congress in 1994 in the midst of the rapid growth of subprime lending to help curb predatory lending. Subprime lending refers to entirely appropriate and legal lending to borrowers who do not qualify for prime rates. Due to the increased risk of lending to such Borrowers, the Lenders charge a higher percentage rate.

Question 88

Requirements of HOEPA Higher Priced Mortgages with regards to "Loose Lending" regulation includes that: A) Lenders need to rely on stated income if necessary B) Lenders need to verify the income of borrowers inclusive of future likely medical obligations C) Lenders need to verify the income of borrowers inclusive of property taxes D) Lenders need to verify the income of borrowers inclusive of future inheritance

Answer 88

C) Lenders need to verify the income of borrowers inclusive of property taxes "Loose" Lending is a part of the Section 35 Protections. Lenders must consider the borrower's ability to repay the loan and cannot rely on unverified income or assets. More specifically, ‘Loose' Lending. Prohibits a lender from engaging in a pattern or practice of lending without considering the borrowers' ability to repay the loans from sources other than the home's value. It also prohibits a lender from making a loan by relying on income or assets that are not verified.

Question 89

What does HOEPA do with regards to servicing and appraisals? A) Regulates appraisers and servicers in order to prevent certain unethical and dishonest practices B) Regulates appraisers and limits appraisal value C) Requires regulations that govern servicers D) Prohibits certain servicing and appraisal practices

Answer 89

D) Prohibits certain servicing and appraisal practices HOEPA does not regulate mortgage servicers or appraisers but HOEPA aims to limit the subset of lending practices that are unethical, abusive and illegal such as inflated appraisals and dishonest servicer practices.

Question 90

In order to facilitate the borrower's ability to rescind the mortgage, TILA requires the creditors to redisclose the loan terms False True

Answer 90

FALSE Lenders must provide the borrowers with 2 copies of the "Notice of the Right to Rescind" form to every borrower who has the right to rescind, which will identify the date when the rescission period expires, the effect of the rescission and how the Borrowers can exercise their right to rescind.

Question 91

Section 32 Mortgage rules cover which of the following: A) Home Equity Lines of Credits B) Home Purchase Loans C) Reverse Mortgages D) Refinancing loans

Answer 91

D) Refinancing loans Section 32 primarily affects refinancing (first lien loans) and home equity installment loans (second mortgages). The rules do not cover loans to buy or to build a home, reverse mortgages or home equity lines of credit.

Question 92

Loan types covered by the TILA include which of the following? A) Only mortgage transactions covered by RESPA B) Transactions secured by Manufactured Housing only C) Any transaction secured by the dwelling of a consumer D) HELOCs and HEL's

Answer 92

C) Any transaction secured by the dwelling of a consumer Now, the TILA disclosure is extended to cover any extension of credit secured by the dwelling of a consumer. This means that refinance mortgage and home equity loans are covered. Also, TILA disclosure is required whether or not the dwelling is the borrowers principal dwelling. HELOCs are excluded from this requirement.

Question 93

On the closing of a Section 32 High-Cost loan, Funds can be disbursed in whole to all of the following EXCEPT: A) The escrow agent, with some limitations B) The contractor C) The borrower D) The contractor, if jointly with the borrower

Answer 93

B) The contractor For Section 32 mortgages, proceeds for home improvement loans must be disbursed either directly to the borrower, jointly to the borrower and the home improvement contractor or, in some instances, to the escrow agent. Note that for the contractor this disbursement must be jointly with the borrower and there are limitations for the escrow agent. Nevertheless, this does not prevent them from receiving the disbursement while the MLO will not receive it.

Question 94

Which part of HOEPA provides stricter definitions on the usage of the word "fixed"? A) Advertising Limitations B) Servicer Limitations C) Disclosure Requirement D) Unaffordable loans

Answer 94

A) Advertising Limitations

Question 95

For a loan covered under HOEPA Section 35, which of the following statements are true regarding prepayment penalties? A) They are allowed in the first 2 years of the mortgage assuming the term does not apply after 2 years B) They are allowed up to the first 5 years of the mortgage C) They are allowed if the lender demonstrates a fraudulent attempt to flip a property D) They are not allowed

Answer 95

A) They are allowed in the first 2 years of the mortgage assuming the term does not apply after 2 years prepayment penalties are generally prohibited, but there are some exceptions. One exception is if the prepayment occurs within 2 years of closing. More specifically, they are generally prohibited with the following exceptions: (a) The penalty will not apply after the two-year period following consummation (b) The penalty will not apply if the source of the prepayment funds is a refinancing by the creditor or an affiliate of the creditor (c) The amount of the periodic payment of principal or interest or both may not change during the four-year period following consummation.

Question 96

If the face amount of a note is $100,000 and the full finance charge is disclosed, which of the following would violate TILA? A) The finance charge was overstated by $1250 B) The finance charge was understated by $75 C) The finance charge was overstated by $50 D) The finance charge was understated by $250

Answer 96

D) The finance charge was understated by $250 Overstatements are not violations. Understatements are a violation of over $100. The percentage rules apply to rescission rights. The disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) are considered accurate if the amount disclosed as the finance charge is either understated by no more than $100 or is greater than the amount required to be disclosed.

Question 97

A borrower with a HOEPA loan wants to refinance into a new lower cost mortgage. HOEPA Servicer Limitations tell the servicer of their loan that They must provide the payoff statement within a reasonable amount of time and can charge a fee for the service and payoff statement. False True

Answer 97

FALSE A. Servicer Limitations: Prohibits certain servicing practices, such as failing to credit a payment to a consumer's account when the servicer receives it, failing to provide a payoff statement within a reasonable period of time, and ‘pyramiding' late fees. As a note, HELOCs are excluded from this regulation.

Question 98

Which of the following shows an inaccurate disclosure according to TILA? A) Total finance charges are $395 while the initial disclosure reflects $290 B) Total finance charges are $2300 while the initial disclosure reflects $2399 C) The initial disclosure shows a note rate of 9% while the actual note rate at settlement is 8% D) The initial disclosure shows an APR of 7.875% while the actual APR at settlement 7.125%

Answer 98

A) Total finance charges are $395 while the initial disclosure reflects $290 For a mortgage secured by a dwelling (closed-end credit only): The disclosed finance charge is considered accurate if it does not vary from the actual finance charge by more than $100. Overstatements are not a violation.

Question 99

Subpart E of TILA specifically includes rules related to

Answer 99

(HOEPA defined loans )Correct answer: HOEPA defined loans (a) HOEPA amendments (though not all amendments) (b) Requires certain disclosures for closed-end loans (1026.32 ) (c) Provides limitations for closed-end loans that have rates or fees above specified amounts (1026.33) (d) Prohibits specific acts and practices if the mortgage is subject to HOEPA (1026.4) (e) Higher-Priced Mortgages (f) Prohibits specific acts and practices for closed end higher-priced mortgages. (1026.35) (g) Prohibits specific acts and practices when extending credit secured by a dwelling. (1026.25)

Question 100

After TRID implementation, which of the following would still require a servicing disclosure? A) Home purchase loans that include teaser rates. B) Refinancing of fixed-rate mortgages going into ARMs. C) Construction Loans. D) Reverse mortgages.

Answer 100

D) Reverse mortgages. The servicing transfer disclosure will be discontinued on all loans except Reverse Mortgages.

Question 101

RESPA does NOT require which of the following documents? A) A mortgage servicing disclosure statement on reverse mortgages B) A Rescission Disclosure Statement. C) An Affiliated Business Arrangement Disclosure. D) A loan estimate

Answer 101

B) A Rescission Disclosure Statement. The Rescission Disclosure Statement is a requirement of the Truth-in-Lending Act, while the mortgage servicing disclosure, the Affiliated Business Arrangement Disclosure, the initial escrow statement, and the LE are disclosure requirements of RESPA.

Question 102

A mortgage servicing disclosure must be given for Reverse mortgages. False True

Answer 102

TRUE When borrowers apply for a reverse mortgage loan, lenders must give the borrowers several important disclosures. These include the mortgage servicing disclosure, 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.

Question 103

What is the difference between the note rate and the APR? (check all that apply) 1) With respect to ARMs, the note rate is used to calculate interest payments for the first year. After that, annual payments are calculated using the APR. 2) Both rates are nearly identical for all loan types except that the note rate does not change throughout the loan while the APR will. 3) The note rate is the interest rate applied to the principal. You correctly checked this. The note rate is the interest The APR takes into account all fees and charges associated with a loan 4) The note rate is the rate used to calculate the maximum DTI a borrower can have for a specific loan program, while the APR is the final rate approved by the underwriter

Answer 103

3) The note rate is the interest rate applied to the principal. You correctly checked this. The note rate is the interest The APR takes into account all fees and charges associated with a loan You correctly checked this. 4) The note rate is the rate used to calculate the maximum DTI a borrower can have for a specific loan program, while the APR is the final rate approved by the underwriter Note Rate is just the interest rate applied to the unpaid balance of the loan. APR is the acronym for Annual Percentage Rate. The APR is a rate that takes into account all fees and charges associated with a loan. Unlike the Note Rate which is just the interest rate applied to the unpaid balance of the loan, the APR, takes into account associated fees such as origination fees or commissions. For example, a mortgage may have a 9% interest/note rate but, if the borrower has to pay some fees upfront, then the APR would be higher than 9% because the total cost of the mortgage is higher than 9%. As you can imagine, unscrupulous mortgage loan originators might be tempted to offer and advertise a loan at a low Note Rate though the loan comes with all sorts of hidden extra charges. The disclosure of APR gives the consumer a full picture of the overall cost of the loan.

Question 104

After filling out an application and prior to delivery of the standard disclosures, the client pays a charge to the MLO for ________.

Answer 104

credit report

Question 105

Which of the following is true concerning receiving referral business with regards to a mortgage transaction? A) It is only a violation to receive a referral if the item received can be resold. B) Referral business is allowed as long as a letter of consent is produced and kept in the loan file. C) Referrals are prohibited if the referrer receives a "thing of value." D) Referrals are prohibited unless any fees given do not exceed .10% of the standard comparable fee.

Answer 105

C) Referrals are prohibited if the referrer receives a "thing of value." Section 8 of RESPA prohibits a person from giving or accepting anything of value for the referral of settlement service business. It also prohibits a person from giving or accepting any part of a charge for services that are unearned or not performed.

Question 106

A borrower files a written complaint with the servicer regarding a fee and the servicer acknowledges the complaint. The borrower can sue under RESPA: A) If the complaint is still not resolved one year later. B) Assuming at least three years pass with no satisfactory resolution. C) If the lawsuit is filed within 40 days of the written complaint. D) If the complaint is not resolved within 20 days of the filing.

Answer 106

A) If the complaint is still not resolved one year later. The servicer must acknowledge the complaint in writing within 20 days of receipt of the complaint. Within 60 days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Borrowers may bring a private lawsuit or a class action suit against a servicer for up to three years after the initial complaint.