Random Need to Knows

Question 1

Regulation B states that a creditor must provide a copy of an appraisal or other written valuation promptly upon completion or three business days prior to consummation of the transaction (for closed-end credit) or account opening (for open-end credit). An applicant may waive the timing of this requirement and agree to receive any copy at or before consummation or account opening, except where otherwise prohibited by law. Any such waiver must be obtained at least three business days prior to consummation or account opening unless the waiver pertains solely to the applicant’s receipt of a copy of an appraisal or other written valuation that contains only clerical changes from a previous version of the appraisal or other written valuation provided to the applicant three or more business days prior to consummation or account opening.

Answer 1

three business days prior to consummation of the transaction

Question 2

The Equal Credit Opportunity Act (ECOA) sets forth that lenders must notify applicants of their credit status and reasons for action taken within 30 days of receiving a complete application concerning the lender’s approval of, counteroffer to, or adverse action on the application.

Answer 2

Equal Credit Opportunity Act (ECOA)/30 days

Question 3

For recession purposes, business day is defined as a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.

Answer 3

all calendar days except Sundays and the legal public holidays

Question 4

Per TILA, as implemented by Regulation Z, among other things, seller’s points are not included in the finance charge. The other choices are included in the finance charge.

Answer 4

seller’s points are not included in the finance charge

Question 5

Under the Truth in Lending Act, consumers have the right to rescind any credit transaction involving the establishment of a security interest (usually a mortgage) in their principal residence, except for the initial purchase or construction of a home.

Question 6

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in granting credit on the basis of marital status. To ensure one complies with ECOA, an MLO is to inquire about a borrower’s marital status by asking if s/he is married, unmarried, or separated. Be sure to include all three not just one or two of these words.

Question 7

One of the most important concepts to remember about TILA is the requirement to provide a uniform method of finance charge disclosure. Regulation Z defines finance charge as the cost of consumer credit as a dollar amount including fees charged by a mortgage broker (including fees paid by the consumer directly to the broker or to the creditor for delivery to the broker), even if the creditor does not require the consumer to use a mortgage broker and even if the creditor does not retain any portion of the charge. Finance charge = $, APR = %. Both are the total cost of borrowing money, and regulations require that all borrowers receive the cost of borrowing money displayed as both $ (finance charge) and % (APR).

Answer 7

Regulation Z defines finance charge as the cost of consumer credit as a dollar amount including fees charged by a mortgage broker

Question 8

Each consumer entitled to rescind must be given two physical copies of the rescission notice and the material disclosures. In a transaction involving joint owners, if both owners are entitled to rescind a transaction, each must receive two copies of the rescission notice (one copy to each if the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act) and one copy of the disclosures. The required recession notice need not be given before consummation of the transaction. The creditor may deliver the notice after the transaction is consummated, but the rescission period will not begin to run until the notice is given.

Question 9

Since the property is being used as collateral for the loan, certain determinations are made based on the accuracy of the appraisal. Property condition and loan-to-value are dependent on accuracy and the Equal Credit Opportunity Act (ECOA) allows the borrower to challenge that information.

ECOA/ECOA/ECOA

Answer 9

What federal legislation allows the borrower to challenge the value stated within an appraisal report?

Question 10

In this scenario, the recession period ends Tuesday Jan. 5 (day 3) and the funds can be disbursed Wednesday Jan. 6 (day 4). For transactions subject to the Regulation Z right of recession, consumers can exercise the right to rescind until midnight of the third business day following loan consummation, delivery of the required rescission notice, or delivery of all material disclosures, whichever occurs last. For recession purposes, business day is defined as a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.

Answer 10

Borrower Juanita signs the note and mortgage for a refinance on her principal residence on Thursday, Dec. 31. As set forth by TILA and implemented by Regulation Z, what is the earliest day the funds for this loan can be disbursed?

Question 11

Per ECOA, and as implemented by Regulation B, lenders must notify applicants of their credit status and reasons for action taken within 30 days of receiving a complete application concerning the lender’s approval of, counteroffer to, or adverse action on the application.

Question 12

Regulation X sets forth that a servicer that receives a loss mitigation application at least 45 days before a foreclosure sale must promptly review the application to determine if it is complete. The servicer must also notify the borrower in less than five days (excluding legal public holidays, Saturdays, and Sundays) that it has received the application and state whether it is complete or incomplete.

Answer 12

45 days before a foreclosure sale

Question 13

The Real Estate Settlement Procedures Act (RESPA) sets forth specific procedures and guidelines related to real estate closing and settlement. One purpose of RESPA is to help consumers become better shoppers for settlement services.

Question 14

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in granting credit and prohibits a creditor from discouraging someone from applying for a loan on the basis of receipt of public assistance. Considering the borrower’s receipt of public assistance if the applicant adequately met all other criteria is disparate treatment that is a violation of ECOA. All people must be considered for credit equally on the basis of income adequacy, sufficient net worth, job stability, and satisfactory credit rating.

Question 15

A high-cost mortgage must not include a balloon payment unless the loan has a maturity of 12 months or less because it is being used as a bridge loan connected with the acquisition or construction of a dwelling intended to become the consumer’s principal dwelling.

Question 16

Although prepayment penalties with high-cost mortgage loans are generally prohibited by HOEPA, the prepayment penalty is not one of the triggers used to identify a high-cost mortgage loan.

Answer 16

APR, Points and Fees, Total Finance charge are the Triggers

Question 17

The Truth in Lending Act, as implemented by Regulation Z, applies to one-to-four family residential loans with more than four payments.

Question 18

An escrow account is not prohibited - it is allowed - and is considered most safe. Escrow accounts are generally positive for the borrower to ensure taxes and insurance already due are paid timely. The other terms listed are specifically prohibited when the loan triggers high-cost mortgage loan restrictions set forth in Section 32 of Regulation Z.

Question 19

A loan is considered a high-cost mortgage loan if the first lien on the property has an APR that exceeds the value of the APOR Index (as of the loan lock-in date) by more than 6.5 percentage points; or a second mortgage has an APR that exceeds the value of the APOR Index (as of the loan lock-in date) by more than 8.5 percentage points. Additionally, a loan is high-cost if: The total loan amount for a transaction is equal or greater than a set loan amount that is adjusted annually by the CFPB (based on changes in the Consumer Price Index) and the points and fees amount exceeds 5% of the total loan amount; or, the total loan amount for a transaction is less than a set loan amount that is adjusted annually by the CFPB (based on changes in the Consumer Price Index) and the points and fees amount exceeds the lesser of the adjusted points and fees dollar trigger of $1,103 or 8% of the total loan amount.

Question 20

Under the TILA and Regulation Z, finance charge disclosures for open-end credit must be accurate since there is no tolerance for finance charge errors. However, both the TILA and Regulation Z permit various finance charge accuracy tolerances for closed-end credit. For credit secured by real property or a dwelling (closed-end credit only), the disclosed finance charge is considered accurate if it is not understated by more than $100. Overstatements are not violations.

Answer 20

$100 (Closed End)

Question 21

Regulation Z implements the Truth in Lending Act (TILA). Both set forth provisions specific to a borrower’s right of rescission.

Question 22

The Truth in Lending Act requires that the APR be quoted along with the interest rate.

Answer 22

Greg calls to ask about an advertised mortgage loan offer. How does TILA require that an MLO quote an interest rate to him?

Question 23

Mortgage insurance is not a requirement for a HOEPA loan. An appraisal, escrow account, and 3-day “cooling-off” period prior to closing are required when the loan triggers high-cost mortgage loan restrictions set forth in Section 32 of Regulation Z and HOEPA.

Question 24

The Truth in Lending Act (TILA) sets forth that advertising triggering terms are specific information such as the amount of the down payment, amount or number of payments, the period of repayment, or the amount of any finance charge. Speaking literally, “zero down payment” is a trigger but “no down payment” is not as “no” is not a specific number.

Question 25

A late fee is allowed but it is capped at 4% of the past due payment (as opposed to the standard 5% FNMA cap.) All of the other fees listed are specifically prohibited.

Answer 25

Which fee can be included in the terms of a mortgage loan that must adhere to the loan term restrictions of Regulation Z, Section 32 and/or Section 35?

Question 26

There are three triggers for HOEPA. There is an APR test, a points and fees test, and a prepayment penalty test. For loan amounts in excess of $20,000, HOEPA is triggered when points and fees exceed 5% of the loan amount. Mortgage broker fees are included in this computation. Since Bobbi has applied for a $300,000 loan, HOEPA would be triggered once the points and fees exceed $15,000. Subtracting $10,000 from this amount leaves $5,000 available for broker fees before triggering HOEPA.

Answer 26

triggered when points and fees exceed 5% of the loan amount.

Question 27

If a borrower’s first loan is going to be high-cost under Section 32 - and it’s her first ever loan - HUD counseling is mandatory prior to closing instead of just being recommended.

Answer 27

First Loan, High cost, HUD counseling is Mandatory

Question 28

The provisions of TILA, as implemented by Regulation Z, apply to each lender who offers or extends credit to consumers (people, not companies) for personal, family, or household purposes. Under the Act, the definition of credit includes all real estate loans made to consumers–no matter what the amount–if the loan is for other than business or commercial purposes. Reg Z does not apply to all purchase transactions because it does not apply to purchase transactions that are an all-cash sale that do not have a loan.

Answer 28

Reg Z Applies to all Personal Real estate Credit transactions

Question 29

The Consumer Financial Protection Bureau enforces the Truth in Lending Act (TILA) through Regulation Z.

Question 30

Seller contributions may be used for closing costs, prepaid costs, or discount points but not for down payment amounts. Seller contributions/concessions are limited based on the loan type and the amount put down on the loan. For example, for all FHA-insured mortgage loans, the seller and other interested parties can contribute up to 6% of the sales price or toward closing costs, prepaid expenses, discount points, and other financing concessions. If the appraised home value is less than the purchase price, the seller may still contribute 6% of the value.

Question 31

The purpose of the Truth in Lending Act (TILA) is to promote the informed use of consumer credit by requiring disclosures about its terms and cost, to ensure that consumers are provided with greater and more timely information on the nature and costs of the residential real estate settlement process, and to effect certain changes in the settlement process for residential real estate that will result in more effective advance disclosure to home buyers and sellers of settlement costs. The regulation also includes substantive protections. It gives consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes.

Question 32

TILA indicates that if advertising an adjustable-rate mortgage that has a fixed term, the word “fixed” must be accompanied by an equally prominent and closely proximate statement of the fixed time period and the fact that the rate may vary or the payment may increase after that period.

Answer 32

When Advertising “Fixed” Rate

Question 33

Annual percentage rate (APR) is a measure of the cost of credit, expressed as a nominal yearly rate (percentage). It relates the amount and timing of value received by the consumer to the amount and timing of payments made. Finance charge in general = $, APR = %. Both are the total cost of borrowing money and regulations require that all borrowers receive the cost of borrowing money displayed as both $ (finance charge) and % (APR). “Expressed as a percentage” in the question clearly enough indicates APR.