Real Estate Settlement Procedures Act RESPA Flashcards
Which of the following practices is NOT prohibited by RESPA?
a. A lender requiring the borrower to pay a fee for the preparation of a HUD-1 settlement statement
b. A seller conditioning a property sale (that involves a federally related mortgage) on the buyer’s purchase of title insurance from a certain title company
c. A lender requiring a consumer to pay for the preparation of documents by a certain attorney to represent the lender’s interest in a real estate transaction
d. A bank paying a referral fee to an independent real estate agent who has generated new mortgage loan customers
c. A lender requiring a consumer to pay for the preparation of documents by a certain attorney to represent the lender’s interest in a real estate transaction
Title Co., Inc., has a business relationship with First National Bank in that Title Co. keeps a large certificate of deposit at the bank at an interest rate substantially below the market rate. In return, the bank refers to Title Co. its mortgage loan borrowers for settlement services and to purchase required title insurance. Title Co.’s rates are very competitive. If the bank discloses the relationship to the borrower, is this arrangement legal under RESPA?
a. Yes. Borrowers would pay the same price for title insurance and settlement at another title company anyway.
b. No. The bank is receiving value in the below-market-rate CD, essentially a referral fee for settlement services.
c. Yes. The bank discloses the relationship on the Good Faith Estimate.
d. No. The bank cannot require title insurance on mortgage loans.
b. No. The bank is receiving value in the below-market-rate CD, essentially a referral fee for settlement services.
Of the following loans, which one would NOT be considered a federally related mortgage under RESPA?
a. A purchase loan to a consumer secured by a mobile home and lot
b. A purchase loan to a consumer secured by a condominium
c. A business loan to a corporation secured by a 1- to 4-family dwelling
d. A home improvement loan to a consumer secured by a dwelling
c. A business loan to a corporation secured by a 1- to 4-family dwelling
Assuming the loan is not a TRID-covered loan, a HUD-1 Settlement Statement must be given to the borrower at the time of settlement in a RESPA transaction under which of the following conditions?
a. When the borrower waives the right to receive a statement
b. When the borrower does not attend the settlement
c. When the borrower prepays all settlement costs
d. When there is no settlement meeting between the parties
c. When the borrower prepays all settlement costs
First National Bank has a mortgage lending department that finances conventional mortgage loans and construction loans for individuals.
Loan A is a loan to Mr. Jones for purchase of a lot and temporary construction financing for his home. The term of Loan A is nine months. Once the home is built, Loan A will be paid by the funding of a new permanent mortgage to Mr. Jones. First National has no commitment to Mr. Jones to fund the permanent loan. Loan B is made to Mr. and Mrs. Williams, also for the construction of a home. Loan B is structured so advances will be made on the loan for nine months, the expected construction period. At the end of that time, Loan B will automatically convert to a permanent mortgage. Loan C is a loan to Mr. and Mrs. Danvers for the purchase of a home that
will be used as a rental property. The loan will be secured by the home. Which of these loans is covered by RESPA (and subject to TRID)?
a. Loan A
b. Loan B
c. Loan C
d. Loans A and B
d. Loans A and B
Which of the following is the lender’s responsibility if a lender does NOT conduct the settlement of a RESPA transaction?
a. The lender must obtain a copy of both the buyer’s and seller’s statements and keep them for five years after the settlement date.
b. The lender need not obtain or keep any HUD-1 Settlement Statements.
c. The lender must obtain a copy of the buyer’s HUD-1 Settlement Statement and keep it for two years after the settlement date.
d. The lender must prepare the HUD-1 Settlement Statement and send it to the person conducting the settlement.
a. The lender must obtain a copy of both the buyer’s and seller’s statements and keep them for five years after the settlement date.
First National Bank makes many loans that are covered by RESPA. Most are closed at a title company identified by First National Bank. First National’s staff prepares the Good Faith Estimate. The title company generally prepares the HUD-1 Settlement Statement. First National’s compliance officer conducted an audit of the real estate files and found that, in a significant number of cases, the title-related charges on the Good Faith Estimates varied from those on the subsequently provided HUD-1s by more than 20 percent, causing all of the charges within its category of settlement costs to be greater at closing by 12 percent to 17 percent. Is this a problem for the bank?
a. Yes, title-related fees should not vary by more than 15 percent.
b. Yes, these disclosures should be exactly the same.
c. Yes, this category of fees should not vary by more than 10 percent.
d. No. It is generally understood that the amounts in the Good Faith Estimate are initial numbers only, and they are expected to change.
c. Yes, this category of fees should not vary by more than 10 percent.
First National Bank’s mortgage department has a large escrow operation for taxes and insurance. At closing what may the bank require of the borrowers?
a. Pay all taxes due plus one full year of taxes in advance
b. Pay only the taxes due on the date of the closing
c. Pay the taxes due plus one-twelfth of the amount owing for the next year
d. Pay all taxes due plus one-sixth of the amount owing for the next year
d. Pay all taxes due plus one-sixth of the amount owing for the next year
A bank proposes to pay a $50 referral fee to bank employees for referring home mortgage loan applicants to an affiliated mortgage company by providing a mortgage application and an Affiliated Business Arrangement disclosure. What does RESPA permit that makes this practice acceptable?
a. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees for an originated loan.
b. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees if an Affiliated Business Arrangement disclosure is approved.
c. A bank can pay nominal referral fees to its own employees because a bona fide service is being performed based on an application being provided.
d. A bank can pay referral fees to its own employees when an Affiliated Business Arrangement disclosure is provided.
d. A bank can pay referral fees to its own employees when an Affiliated Business Arrangement disclosure is provided.
A loan officer is making a first mortgage purchase-money loan to enable an
individual borrower to purchase a triplex which is 3500 sq. ft. in total area. The individual will live in the upper unit (500 sq. ft.) and plans to rent the lower two units of the triplex (1500 sq. ft. each). The loan will be for $245,000 for five years. Why does RESPA NOT apply to this loan?
a. The loan is covered by Regulation Z
b. The loan is primarily for business purposes
c. The loan is for an amount that exceeds $25,000
d. The loan is secured by a first lien on a multifamily dwelling
b. The loan is primarily for business purposes
What explanation should a bank’s Affiliated Business Arrangement disclosure statement include?
a. A consumer’s rights to file a complaint with HUD against the lender
b. The mortgage services dispute resolution procedures under RESPA
c. The Computer Loan Origination (CLO) system
d. The nature of the relationship between the referring party and the service provider
d. The nature of the relationship between the referring party and the service provider
Acme Mortgage Company owns and services a mortgage loan for John Smith.
The company received a statement from Mr. Smith’s insurance company indicating that the premium on the hazard insurance has not been paid and that it will be cancelled soon if not paid. Mr. Smith’s escrow account has insufficient funds to make the insurance payment. Under what circumstances may Acme Mortgage Company force place hazard insurance on Mr. Smith’s property and charge him for the premium?
a. Once they notify Mr. Smith and give him an opportunity to make the payment, Acme can force place a policy.
b. Acme may not force place a policy in this case, it must advance funds to the escrow account to make the payment so the insurance will continue.
c. Acme does not have to give advance notice; once the policy is finally cancelled, they can force place a policy.
d. Acme can force place a policy as long as it is not more expensive than the original premium.
b. Acme may not force place a policy in this case, it must advance funds to the escrow account to make the payment so the insurance will continue.
Acme Mortgage has filed a foreclosure action on the property securing John
Doe’s mortgage. The foreclosure sale will be held in 120 days. If Acme receives an application for a loss mitigation option from Mr. Doe 100 days from the foreclosure date, which of the following actions must Acme take?
a. Withdraw the foreclosure action within 30 days of the receipt of the application
b. Notify the borrower of the decision on the completed application within 14 days of the receipt of the application
c. Notify the borrower of any missing information within 10 days of the receipt of the application
d. Acknowledge the application in writing within 5 days of receipt of the application
d. Acknowledge the application in writing within 5 days of receipt of the application
Acme Mortgage is open for business Monday-Saturday. On Tuesday,
March 22nd, Acme Mortgage received an application from Mr. and Mrs. Jack Smith which contained their names, social security numbers, income, place of employment, amount of mortgage loan they wanted, and an estimate of the value of the property they were wanting to purchase. On Friday, March 25th, the Smith’s had their realtor deliver the purchase agreement which contained the property address to Acme. Acme is required to provide the Smiths with an estimate of their closing costs when and in what format?
a. By Friday, March 25th, Acme should deliver or place in the mail a Good Faith Estimate to the Smiths.
b. By Friday, March 25th, Acme should deliver or place in the mail a Loan Estimate as required by Regulation Z.
c. By Tuesday, March 29th, Acme should deliver or place in the mail a Loan Estimate as required by Regulation Z.
d. By Wednesday, March 30th, Acme should deliver or place in the mail a Good Faith Estimate.
c. By Tuesday, March 29th, Acme should deliver or place in the mail a Loan Estimate as required by Regulation Z.
Mr. Smith receives a notice from First National Bank, his mortgage loan servicer, that his mortgage loan payment for March 1 is past-due. However, Mr. Smith made an on-line payment to First National Bank on March 1 which is reflected on his bank statement for his deposit account. Mr. Smith notifies First National Bank of this fact via written notice. A correct response for First National Bank would be to:
a. Notify Mr. Smith in writing within five business days that his notice has been received and that this issue will be investigated; then respond by notifying Mr. Smith that the error has been resolved within 30 days of receipt of the notification.
b. Correct the error within five business days of receipt of Mr. Smith’s notice and notify Mr. Smith that the error has been corrected.
c. Notify Mr. Smith within five business days that his notice has been received. After First National Bank begins investigating the error, it is realized that additional time is going to be needed for research, so First National Bank notifies Mr. Smith that it has extended the response time by 15 days (so a resolution will occur within 45 days from receipt of Mr. Smith’s notification.
d. All of the above would be correct.
d. All of the above would be correct.
