Federal Mortgage-Related Laws Flashcards
RESPA was enacted for all but what reason?
A. Regulate mortgage advertising standards and prohibit fraudulent abuse to consumers
B. Protect consumers from excessive settlement costs and unearned fees
C. Limit escrow funding requirements
D. Establish disclosures, policies, and procedures to facilitate timely communications between loan servicers and consumers
A. RESPA has nothing to do with advertising
Which act’s regulations are known as Regulation X?
A. ECOA
B. HOEPA
C. RESPA
D. TILA
C. Regulation X
Which of these DOES RESPA (Real Estate Settlement Procedures Act) apply to?
A. Loans for business, commercial, or agricultural purposes
B. Loans secured by vacant land
C. Loans made with funds insured by the federal government (e.g., FHA loans)
D. Loan assumptions which are permissible without lender approval
C. RESPA (Real Estate Settlement Procedures Act) applies to loans made with funds insured by the federal government (E.G., FHA loans)
What % of the principal amount of the loan does a bona fide discount point typically equal?
A 1%
B. 2%
C. 3%
D. 4%
A. A bona fide discount point typically equals 1% of the principal amount of the loan.
Fact: These are paid by the borrower to reduce the interest rate on a loan.
Markups are in violation of RESPA
True or False
False. So long as the difference is not split with another party, technically there are no violations. That said, it is recommended that service’s costs reflect the actual amount of service provided
The special information booklet (“Your home loan toolkit: A step by step guide”)is due no later than ___
A. 3 business days prior to consummation
B. 5 business days after consummation
C. Within 3 business days after a mortgage loan application is received or prepared
D. Within 5 business days after a mortgage loan application is received or prepared
C. The special information booklet (“Your home loan toolkit: A step-by-step guide”) is due within 3 days or receiving or preparing a borrowers credit application.
Fact: It is the lender’s responsibility to provide borrowers with this booklet, UNLESS the client goes through a brokerage, in which case the responsibility is passed to the brokerage.
Fact: In regards to spouses, only one booklet is necessary and can be given to either
HELOC (Home Equity Line of Credit) loans share the same special information booklet as a residential home purchase
True or False
False. A HELOC booklet, titled “What you should know about home equity lines of credit is due”
Fact: Lender turn that borrower down within the three-business-day period that a booklet was due? No booklet is due now
James, an MLO, refers a borrower he is working with to a settlement service provider in which he shares ownership, over the phone. James needs to notify his client with a written Affiliated business arrangement disclosure when?
A. 5-business days after receipt or completion of the credit application
B. Within 3-business days of the call
C. At the time of the call
D. 3-business days after receipt or completion of the credit application
B. The borrower must be notified in writing within 3-business days of the phone call if an affiliated business arrangement between service providers exists
Fact: If a lender REQUIRES the use of a particular settlement service provider, the disclosure is due at the time of the loan application
RESPA imposes a __ year record retention requirement for affiliated business arrangement disclosures.
A. 2
B. 5
C. 3
D. 7
B. RESPA imposes a 5 year record retention requirement
If a consumer sends an on-time payment to the transferor servicer during the 60-day period that begins on the effective date of the transfer, the payment may not be treated as late for any reason
True or False
True
Regulation X prevents loan servicers from overcharging for escrow payments in all but which way?
A. Requiring an annual escrow account analysis
B. Limiting the cushion that a borrower must maintain to cover unanticipated disbursements to one sixth of the estimated total annual disbursements
C. Limiting the cushion that a borrower must maintain to cover unanticipated disbursements to one eighth of the estimated total annual disbursements
D. Requiring the refund of any surpluses greater than or equal to $50 within 30 days after completion of the escrow account analysis that reveals a surplus
C. Limiting the cushion that a borrower must maintain to cover unanticipated disbursements to one eighth of the estimated total annual disbursements. The correct answer is one sixth of the estimated total annual disbursements
Fact: If the surplus is less than $50, the servicer may credit the amount towards the next year’s escrow payments.
When is the Initial escrow account statement due?
A. 30 days from settlement
B. 15 days from settlement
C. 45 days from settlement
D. 60 days from settlement
C. The initial escrow account statement is due 45 days from settlement
Fact: If a loan’s servicing is transferred to a new servicer, the new servicer must provide an initial escrow account statement within 60 days of the date on which the transfer occurs
When is the Annual escrow account statement due?
A. Within 30 days of completion of the escrow account computation year
B. Within 15 days of completion of the escrow account computation year
C. Within 45 days of completion of the escrow account computation year
D. Within 60 days of completion of the escrow account computation year
A. The Annual escrow account statement is due within 30 days of completion of the escrow account computation year
Fact: After a transfer, the transferee servicer has 60 days to provide the borrower with an initial escrow account statement.
Which of the following does NOT require the GFE (Good Faith Estimate) and the HUD-1 Settlement Statement?
A. Reverse mortgages
B. HELOCs (Home Equity Lines of Credit)
C. Balloon Loans
D. Mortgages secured by a mobile home or other dwelling that is not attached to land
C. The GFE (Good Faith Estimate) and HUD-1 Statement are not used in Balloon loans
Within how many business days of receiving an application for a reverse mortgage, HELOC, or mortgage secured by a dwelling that is not attached to land is the broker or lender required to provide a GFE to a borrower?
A. 1
B. 5
C. 3
D. 15
C. The lender or broker is required to provide the borrower with a GFE within 3 days of receiving an application
Regarding the GFE (Good faith estimate), Regulation X defines an application as a loan applicant’s submission of what 7 items of information?
- Name
- Monthly income
- Social security number
- Address of the home that will secure the loan
- Estimated value of the home that will secure the loan
- Loan amount
- Other information deemed necessary by the loan originator
Fact: This streamlined process is designed to prevent unreasonable delays in offering a GFE (Good Faith Estimate) to applicants, and is not intended to prevent lenders from requesting other information needed to finalize they transactions, and they may request additional information after providing a GFE.
Of the following, which are allowed a 10% tolerance for differences between estimated and actual charges?
A. Lender-required settlement services performed by a provider chosen by the lender
B. Charges for locking an interest rate
C. Recording fees
D. Transfer taxes
E. Lender-required services and title and insurance services if the loan applicant uses a provider recommended by the lender
F. Origination charges
A, C, E. Lender-required services and recording fees are allowed a tolerable threshold of 10% between estimated and actual costs. Origination charges, charges for locking an interest rate, and transfer taxes are not allowed any threshold, and all other charges are allowed any threshold without limit.
Of the options below, which does not describe a Changed circumstance affecting settlement charges in relation to the GFE (Good Faith Estimate)?
A. Changes to or inaccuracies in information the lender relied on when preparing the GFE (Good Faith Estimate)
B. Acts of God, war, and other emergencies
C. New information about the borrower or the transaction
D. A handwritten request for revision
A, B C. A handwritten request for revision is not allowed UNLESS it results in an increase in estimated costs.
Fact: Regulation X states that Blocks 3, 6, and 11 of the GFE may be adapted based on the particular loan situation at hand
Which of the following is not a permitted reason to revise the GFE (Good Faith Estimate)?
A Changed circumstances affecting the loan
B. Borrower-requested changes (Unless it results in an increase in estimated costs)
C. Lender-requested changes
D. Expiration of the GFE (Good Faith Estimate)
E. Interest rate-dependent changes
C. Lender-requested changes without precedence will not be permitted
When a transaction will involve more than one mortgage loan, a separate GFE is required for each loan
True or False
True
When must the HUD-1 statement be provided to the borrower?
A. Within 3 business days of application receipt or completion
B. Within 5 business days of application receipt or completion
C. At least 1 business day prior to settlement
D. At least 3 business days prior to settlement
C. The HUD-1 statement must be provided to borrowers at least 1 business day prior to settlement
When violating violating regulations set by RESPA (Real Estate Settlement Procedures Act) and and Regulation X regarding referral fees, fee-splitting and so on, what are the criminal penalties one may face?
A. $5,000/2 years imprisonment
B. $10,000/1 year imprisonment
C. $25,000/2 years imprisonment
D. None of the above
A. Violations to RESPA (Real Estate Settlement Procedures Act) and Regulation X may result in penalties up to $10,000/2 years imprisonment.
Compensation for providing a referral to a borrower is allowable under RESPA so long as the cost is included in both the Loan estimate as well as the closing documentation, and an affiliated business disclosure has been signed
True or False
False. Requesting or accepting anything of value in relation to the referral of a settlement service is strictly prohibited my dude
Fee-splitting of settlement services is prohibited unless
A. The borrower is notified through disclosure of a pre-existing business relationship
B. Services are actually performed
C.. The borrower signs consent within 3 days of application receipt or completion
D. None of the above. Fee-splitting is expressly prohibited under any circumstance
B. Services must actually be performed
Servicers must retain any documents that relate to actions taken on a borrower’s mortgage for a period of __ year(s) after the date on which the loan is discharged?
A. 3
B. 5
C. 1
D. None above
C. The Servicer must retain any documents that relate to actions taken on a borrower’s mortgage for a period of 1 year after the date on which the loan is discharged (Paid in full and recorded in the land records)
How many days do Servicers have to return funds left in the escrow account of the borrower after the loan is paid in full?
A. 45
B. 15
C. 30
D. 20
D. Servicers have 20 days to return funds left in the escrow account after the loan is paid in full
When receiving a Qualified written request from a borrower regarding their loan, how many days (Excluding Saturdays, Sundays, and legal holidays) does the Servicer have to respond?
A. 5
B. 3
C. 15
D. 60
A. Servicers have 5 days (Excluding Saturdays, Sundays and legal holidays) to respond to a Qualified written request from a borrower
Servicers may charge a borrower for force-placed (Hazard) insurance if they have basis for believing that the borrower has failed to maintain this insurance themselves
True or False
True.
At least __ day(s) before the foreclosure sale date, the lender must serve the borrower with a notice of default and record a notice of default in the county where the property is located
A. 5
B. 30
C. 90
D. 120
D. 120 days
The lender must publish a notice of default once a week for four consecutive weeks, with the last notice appearing at least __ day(s) prior to the sale of the property
A. 30
B. 20
C. 60
D. 45
B. 20
After the final foreclosure notice posted by a lender, the borrower can no longer cure the default and the property must be sold at a private auction
True of False
False. The borrower can cure the default by paying all past due amounts prior to sale
RESPAs early intervention servicing rule requires live contact with a delinquent borrower by the __ day of the delinquency, as well as written notice no later than the __ day of delinquency
A. 30th/45th
B. 36th/60th
C. 60th/120th
D. 36th/45th
D. 36th/45th
Fact: The written notice must include:
- A statement urging the borrower to contact his or her servicer
- A telephone number to reach personnel assigned to work with the borrower and the servicer’s mailing address
- A description of loss mitigation options that may be available to the borrower
- Information on obtaining access to a list of CFPB- or HUD-approved home ownership counselors or counseling organizations
Civil penalties regarding Escrow account servicing is __ per failure to issue an escrow statement to a borrower as required and __ per intentional failure to issue an escrow statement to the borrower as required
A. $100/$150
B. $96/$193
C. $50/$125
D. $5,000/$10,000
B
Fact: Civil penalties under RESPA (Real Estate Settlement Procedures Act) are capped at $192,768, adjusted annually for inflation (This figure is valid as of January 15, 2020, which is the annual revision date)
Passed in 1974 by congress to eliminate discriminatory treatment of credit applicants, addressing practices such as redlining and reverse redlining
A. HUD (Housing and Urban Development)
B. TILA (Truth-in-Lending-Act)
C. HOEPA (Home Ownership and Equity Protection Act)
D. ECOA (Equal Credit Opportunity Act)
D. ECOA (Equal Credit Opportunity Act
Regulation B is also known as
A. HOEPA (Home Ownership and Equity Protection Act)
B. ECOA (Equal Credit Opportunity Act)
C. TILA (Truth-in-Lending-Act)
D. RESPA (Real Estate Settlement Procedures Act)
B.
Elderly is defined by ECOA (The Equal Credit Opportunity Act) as being __ or older
A. 64
B. 62
C. 64
D. 65
B
Fact:Negative factor or value is the utilization of a factor, value, or weight that is less favorable to elderly applicants than warranted by the creditor’s experience, or that is less favorable than the factor, value, or weight assigned to people who are non-elderly and are most favored by a creditor on the basis of age
Within __ day(s) of receipt of a loan or credit application, lenders must notify consumers in writing of action taken
A. 5
B. 15
C. 30
D. 60
C. 30 days
Fact: If the creditor takes Adverse Action on the application, the notice must provide a statement of the reasons for the unfavorable decision
Within __ day(s) of receipt of an application that lacks information that the applicant can provide, the creditor must provide a Notice of Action or a Notice of Incompleteness
A. 5
B. 15
C. 30
D. 60
C. 30 days
A notice of the right to receive a copy of all written appraisals associated with the transaction. This notice is due within __ business day(s) of receipt of a loan application
A. 5
B. 3
C. 45
D. 30
B.
Fact: These requirements do not apply to second liens, other subordinate loans, and loans that are not secured by a dwelling (e.g., loans secured solely by land).
A copy of all appraisals and other written valuations is due “promptly” after they are completed or at least __ business day(s) prior to consummation, whichever is earlier
A. 5
B. 3
C. 45
D. 30
B. Promptly or at least three business days prior to consummation
Fact: These requirements do not apply to second liens, other subordinate loans, and loans that are not secured by a dwelling (e.g., loans secured solely by land).
A. Internal documents that merely restate a dwelling’s estimated value as listed in the appraisal or written valuation that will be given to the applicant
B. Publicly-available government agency statements of appraised value
C. Publicly-available lists of valuations
D. Manufacturers’ invoices for manufactured homes
E. Reports reflecting property inspections that do not provide, and are not used to develop, an estimate of the property’s value
F. Appraisal reviews that do not include the appraiser’s estimate of the property’s value or opinion of value
G. An appraisal review that does not itself state an estimate that is different from the appraisal
H. All of the above are exceptions to ECOA regulation of valuations
H. Got a little lazy there but Christ that’s a lot of stuff
Creditors must deliver a copy of an appraisal “promptly upon completion” or __ business day(s) prior to consummation, whichever is earlier
A. 5
B. 3
C. 45
D. 30
B.
Fact: The timing requirement may be waived by the borrower, who must submit an oral or written request to the creditor three business days prior to consummation
If the creditor denies the loan application, they must provide copies of the valuation within 30 days of the date on which the creditor determined the transaction will not proceed
__ is a federal fair lending law that was enacted with the goal of discouraging redlining. It accomplishes this by monitoring the mortgage lending practices of depository and non-depository institutions.
A. ECOA (Equal Credit Opportunity Act)
B. FHA (Fair Housing Administration)
C. RESPA (Real Estate Settlement Procedures Act)
D. HMDA (Home Mortgage Disclosure Act)
D. The HMDA (Home Mortgage Disclosure Act)
For at least __ months after notifying an applicant of action taken or of incompleteness, the creditor must retain the following records:
- Any application that it receives
- Any information required to be obtained concerning the applicant’s characteristics for the purposes of monitoring ECOA compliance
- Any other written or recorded information used in evaluating the application and not returned to the applicant
- A copy of:
- The Notice of Action Taken
- The statement of specific reasons for adverse
action taken
- Any written statement submitted by the
applicant alleging a violation of ECOA or
Regulation B
A. 24
B. 36
C. 25
D. 12
C. 25 months after notifying an applicant of action taken or of incompleteness
ECOA (Equal Credit Opportunity Act) authorizes actual and punitive damages. Regulation B limits punitive damages to:
$10,000 for individual actions The lesser of $500,000 or 1% of a creditor’s net worth in class actions
A. $10,000/$500,000 or 1%
B. $5,000/$250,000 or 1%
C. $10,000/$300,000 or 2%
D. $25,000/$450,000 or 2%
A
Fact: If a consumer is successful in an action for an ECOA (Equal Credit Opportunity Act) violation, the statute of limitations to file a claim for a violation of ECOA is Five Years from the date on which the alleged violation occurred. This is the same for class and Attorney General actions as well.
Congress enacted ____ in 1968 as Title I of the CCPA (Consumer Credit Protection Act). The ultimate goal was to promote the informed use of credit by consumers
A. ECOA (Equal Credit Opportunity Act)
B. RESPA (Real Estate Settlement Procedures Act)
C. TILA (Truth-in-Lending Act)
D. HOEPA (Home Ownership and Equity Protection Act)
C. TILA
Regulation Z is also known as
A. TILA (Truth in Lending Act)
B. ECOA (Equal Credit Opportunity Act)
C. HOEPA (Home Ownership and Equity Protection Act)
D. RESPA (Real Estate Settlement Procedures Act)
A.
What does FTC stand for?
A. For The Crown
B. Find Those Crows
C. Federal Trade Commission
D. Fry The Crepe
C. FTC stands for Federal Trade Commission
TILA (Truth-in-Lending Act) applies to all credit transactions which meet the following four conditions
- The credit is offered to consumers
- The offer or extension of credit is made regularly
- The credit includes a finance charge or a written agreement stating that the loan may be repaid in more than four installments
- The credit is primarily for personal, family, or household purposes
TILA (Truth-in-Lending Act) DOES NOT apply to all credit transactions which meet the following conditions
- Transactions for business, agricultural, or organizational credit
- Credit in excess of a threshold amount that is adjusted annually (this threshold does not apply to transactions that are secured by real property or a dwelling)
- Public utility credit
- Credit extended by a broker registered with the Securities and Exchange Commission or the
- Commodity Futures Trading Commission
- Home fuel budget plans
- Student loans made, insured, or guaranteed by the federal government, or
- Employment-sponsored retirement plans
Application according to TILA:
- The consumer’s name
- Social Security Number, which is used to obtain a credit report
- Income
- The address of the property to secure the loan
- An estimate of the value of the property securing the loan
- The loan amount sought
____ is defined as the time that a consumer becomes contractually obligated on a credit transaction
Consummation
Fact: Due to conflicting state definitions, it’s safe to assume that consummation occurs at the time of closing
___ Is defined as a residential structure that contains one to four units, whether or not the structure is attached to real property. The definition of this term includes an individual condominium unit, cooperative unit, mobile home, or trailer, if used as a residence
Dwelling
____ is defined by Regulation Z as the cost of credit as a dollar amount.
The finance charge
____ Is defined by Regulation Z as a measure of the cost of credit
The annual percentage rate
For closed-end transactions, a finance charge is considered accurate if it is not understated by more than __
A. $200
B. $150
C. $100
D. $300
C. $100
Fact: OR, if the amount stated is greater than the amount required to be disclosed
Inaccurate disclosures of the finance charge or the annual percentage rate give consumers a basis for exercising the right to rescind a loan up to __ years after consummation
A. 1
B. 2
C. 3
D. 4
C. 3 years
Which fee ISN’T excluded from finance and APR calculations?
A. Escrow fees B. Notary fees C. Appraisal and credit report fees D. Title fees E. Origination fees F. Document preparation fees
E. Origination fees
Which fee ISN’T included in the calculation of the finance charge
A. PMI (Private mortgage insurance) or MIP (Mortgage insurance premium)
B. Discount points and mortgage broker fees
C.Origination fees
D. Escrow fees
E. Processing fees, and
F. Underwriting fees
D. Escrow fees
Regulation Z says that an APR is accurate if it is not more than __ of one percentage point above or below the APR is calculated using the actuarial method
A. 1/16th
B. 1/12th
C. 1/8th
D. 1/4th
C. 1/8th of one percentage point
Fact: Regarding irregular loans, the threshold is 1/4th of one percentage point
Another Fact: An error in the disclosure of the APR is not in violation of Regulation Z if the error came from a defective calculation tool, and if that tool is discontinued with a letter of error being sent to the Bureau
The CHARM (Consumer handbook on adjustable-rate mortgages) booklet is due __ business day(s) after a consumer submits an application for a loan that will be secured by his/her principal dwelling.
A. 15
B. 3
C. 5
D. 1
B. The CHARM booklet is due 3 business days after a consumer submits an application for a loan that will be secured by his/her principal dwelling
Fact: Each disclosure must include, as applicable:
- A statement that the interest rate, payment, or loan term can change
- Identification of the index or formula used to make adjustments
- An explanation of how the interest rate and payment will be determined
- A recommendation that the borrower ask about the current margin value and current interest rate
- A notation that the interest rate will be discounted and a recommendation that the loan applicant ask about the amount of the discount
- The frequency of interest rate and payment changes
- The rules relating to index, interest rate, and payment amount, such as the use of rate and payment caps
- A statement, when applicable, of the fact that negative amortization can occur
- An explanation of how to calculate payments for the loan amount
- A reminder that the loan contains a demand feature
- A statement of the type of information that will be provided in notices of interest rate adjustments and an indication of when these notices will arrive
- An indication that disclosure forms are available for other variable-rate loan programs
- At the option of the creditor, an example based on a $10,000 loan:
- A historical example that shows how payments and loan balances are impacted by interest rates, based on the most recent 15 years of index values, or
- The maximum interest rate and payment for a $10,000 loan at the initial interest rate, based on the index and volume, and “…in effect as of an identified month and year for the loan program disclosure assuming maximum periodic increases in rates and payments under the program…”
