MLO Test Flashcards
Laws and stuff
What does TILA regulate?
It regulates credit disclosures and protects consumers from unfair lending practices.
What is the purpose of the Ability-to-Repay (ATR) rule under TILA?
To ensure lenders verify that borrowers can afford their mortgage payments.
What is the purpose of HOEPA (Home Ownership and Equity Protection Act)?
To prevent predatory lending practices in high-cost loans.
What is the maximum variation allowed between the Loan Estimate (LE) and Closing Disclosure (CD) for lender fees?
0% tolerance—lender fees cannot increase.
What document must be provided within 3 business days of a mortgage application?
The Loan Estimate (LE).
What does HOEPA amend?
The Truth in Lending Act (TILA).
Under TILA, how long must loan originators retain evidence of compliance?
2 years.
What is the penalty for a single willful violation of TILA?
Up to $5,000 per day.
What is the primary purpose of RESPA?
To prevent kickbacks, referral fees, and unearned fees in real estate transactions.
Which section of RESPA prohibits kickbacks and referral fees?
Section 8.
Which types of transactions are NOT covered by RESPA?
All-cash sales, commercial loans, and vacant land purchases.
What is the penalty for a RESPA violation?
Up to $10,000 fine and/or 1 year in prison per violation.
What does ECOA prohibit?
Discrimination in lending based on protected classes (race, gender, age, etc.).
How long does a lender have to send a notice of action taken under ECOA?
30 days from receiving a loan application.
Under ECOA, when must a lender provide a borrower with a copy of the appraisal report?
At least 3 days before closing.
Which protected class is covered under ECOA but NOT under the Fair Housing Act?
Marital status and age.
What is the penalty for a lender who violates ECOA?
Up to $10,000 per violation.
What is the purpose of HMDA?
To detect discriminatory lending practices by requiring lenders to report loan data.
What key borrower information must be collected under HMDA?
Race, ethnicity, and gender.
Where must HMDA data be reported annually?
The Loan Application Register (LAR).
What is the purpose of the FCRA?
To regulate how credit information is collected and used.
What does FACTA (Fair and Accurate Credit Transactions Act) provide consumers?
The right to one free credit report per year from each bureau.
Who enforces FCRA?
The Consumer Financial Protection Bureau (CFPB).
How long do bankruptcies remain on a credit report?
Up to 10 years.
What is the purpose of TRID?
To simplify mortgage disclosures and prevent hidden fees.
How many days before closing must the borrower receive the Closing Disclosure (CD)?
At least 3 business days before closing.
What replaced the HUD-1 Settlement Statement?
The Closing Disclosure (CD).
What replaced the Good Faith Estimate (GFE)?
The Loan Estimate (LE).
What does the SAFE Act require?
Mortgage loan originators (MLOs) to be licensed and registered.
Who maintains the National Mortgage Licensing System (NMLS)?
The Conference of State Bank Supervisors (CSBS).
What is the minimum required MLO exam score to pass?
75%.
How many hours of pre-licensing education are required for new MLOs?
20 hours.
What is the maximum fine for mortgage fraud under the Mortgage Fraud Penalties Act?
$5 million per violation.
What is a straw buyer?
A person who falsely represents themselves as the borrower for a loan.
What is occupancy fraud?
When a borrower falsely claims a property will be their primary residence.
What is a discount point?
An upfront fee paid to lower the loan’s interest rate.
What is a Yield Spread Premium (YSP)?
Compensation a lender pays to a broker for placing a loan at a higher interest rate.
What is a Qualified Mortgage (QM)?
A loan that meets ATR rules and limits risky features.
What is the maximum debt-to-income (DTI) ratio for a Qualified Mortgage?
43%.
What is a prepayment penalty?
A fee charged for paying off a loan early.
What is a balloon mortgage?
A loan with low initial payments followed by a large final payment.
What is a reverse mortgage?
A loan for homeowners 62+ that converts home equity into cash.
What is PMI (Private Mortgage Insurance)?
Insurance required for conventional loans with less than 20% down.
What is the maximum LTV for an FHA loan?
96.5% (requiring a 3.5% down payment).
