RESPA (Reg X)

Question 1

If a mortgage servicer receives hazard insurance information, but not proof that the coverage is continuous, what are the servicer’s responsibilities?

Answer 1

The servicer must send a notice that requests proof of continuous coverage.

Question 2

Can fees be charged for completion of any RESPA or TILA disclosures?

Answer 2

No, neither a lender nor servicer can charge a fee specifically for completing the required disclosure forms, including the Loan Estimate and Closing Disclosure. The cost of preparing these documents should be factored into the overall loan costs and not presented as a separate fee to the borrower.

Question 3

Does the AfBA disclosure have to be retained in the loan file if a customer doesn’t get a settlement service from the affiliated party?

AFBA: Affiliated Business Arrangement Disclosure

Answer 3

Yes, it must be retained regardless.

Question 4

First National’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 a cushion not to exceed 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 a cushion not to exceed 1/12 of the amount owing for next year
D. Pay all taxes plus a cushion not to exceed 1/6 of the amount owing for the next year

Answer 4

D. Pay all taxes plus a cushion not to exceed 1/6 of the amount owing for the next year

Question 5

Does RESPA contain escrow accounting rules and disclosure requirements?

Answer 5

Yes, RESPA contains rules regarding how to calculate payment amounts (aggregate accounting) and statements.

The rules/requirements kick in when you have a RESPA covered escrow account (account that the servicer controls on the borrower’s behalf). There are a number of disclosures required, such as the initial escrow statement, annual statements and short-year statements (when the loan is sold or paid off).

Question 6

I have collected 5 pieces of information, but am waiting on the 6th and final piece of the application. Should I prepare the LE now?

LE: Loan Estimate replaces GFE: Good-faith Estimate

Answer 6

No, wait for all 6 pieces of customer information. Must have all six elements to prepare the LE.

Question 7

For error resolution, a servicer must provide copies of documentation to the borrower, at no charge, within __ business days of the borrower’s request.

Answer 7

15

Question 8

True/False: No error resolution extensions are allowed for errors related to payoffs or foreclosures.

Answer 8

True

Question 9

“Your Home Loan Toolkit” must be mailed or delivered to the applicant within __ business days of receiving the application for first lien purchase money loan applications.

Answer 9

3

Question 10

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 temporary construction financing for his home. The term of Loan A is 9 months. Once the home is build, 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 9 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?

Answer 10

Loan B

An interim construction loan is not covered by RESPA unless the lender has committed to provide permanent financing or unless it is for a term of 2 years or more. Therefore, Loan A is not covered. Loan B will convert to a permanent loan and is a RESPA transaction. Loan C is made to individuals for the purpose of acquiring rental property (a business purpose loan) and therefore is not covered by RESPA.

Question 11

Is temporary financing, such as interim construction loans or bridge loans, with a term of less than two years covered under RESPA?

Answer 11

No, unless the loan is used as or converted to a permanent loan with the same lender.

Question 12

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 amount 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 it is not more expensive than the original premium.

Answer 12

B. ACME may not force place a policy in this case, it must advance funds to the escrow amount to make the payment so the insurance will continue.

RESPA requires servicers to make timely disbursements from a borrower’s escrow account and to advance funds if necessary, as long as the borrower’s mortgage payment is not more than 30 days past due.

Question 13

True/False: Before each anniversary of the force placed policy, the servicer must mail a written notice. It isn’t required to be sent more than once per year. If mailing, the notice must be sent by using at least first class mail.

Answer 13

True

Question 14

Which of the following affiliated providers can a bank require a consumer to the use?

A. An attorney
B. An appraiser
C. A credit bureau
D. Any or all of the above

Answer 14

D. Any or all of the above

These are the only three exceptions.

Question 15

When must a servicer contact a delinquent borrower about available options?

A. Good faith effort to contact within 36 days, and provide a written notice within 90 days
B. Good faith effort to contact within 36 days, and provide a written notice within 45 days
C. Good faith effort to contact within 30 days, and provide a written notice within 45 days
D. Good faith effort to contact within 30 days, and provide a written notice within 90 days

Answer 15

B. Good faith effort to contact within 36 days, and provide a written notice within 45 days

Servicer must make a good faith effort to:
1. Make live contact with a delinquent borrower by the 36th day of delinquency
2. Provide a written notice to that delinquent borrower no later than the 45th day

Question 16

When must the lender provide the Servicing Disclosure Statement for reverse mortgages?

A. Before application
B. Within 3 business days after the applicant applies
C. At least 10 calendar days prior to closing
D. With the closing disclosure

Answer 16

B. Within 3 business days after the applicant applies

Three days (excluding legal public holidays, Saturdays, and Sundays) after receipt of the application

Question 17

For errors relating to foreclosures, a servicer must investigate and respond to a notice of error prior to the date of a foreclosure sale or within __ business days after the servicer receives the notice of error, whichever is earlier.

Answer 17

30

Question 18

Servicers are required to comply with the requirements for only ___ loss mitigation application(s) of a borrower’s mortgage loan account.

Answer 18

1

Question 19

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 action 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 application
D. Acknowledge the application in writing within 5 days of receipt of the application

Answer 19

D. Acknowledge the application in writing within 5 days of receipt of the application

Question 20

Can a seller condition the sale of a property that will be purchased on the buyer’s purchase of title insurance from a particular title company?

Answer 20

No

Question 21

Are loans secured by vacant land covered under RESPA?

Answer 21

No, unless a home, including a manufactured home, will be constructed or placed on the property using the loan proceeds within 2 years.

Question 22

A servicer must investigate and respond to a notice of a payoff error within __ business days after receipt.

Answer 22

7

Question 23

If a borrower submits an incomplete loss mitigation application, when must the creditor notify the borrower?

Answer 23

Within 5 weekdays

Question 24

A loan officer is making a first mortgage purchase-money loan to enable an individual borrower to purchase a triplex. The individual will live in the upper unit and plans to rent the lower two units of the triplex. The loan will be for $245,000 for 5 years. Why doesn’t RESPA apply to this loan?

A. The loan is covered by Reg 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

Answer 24

B. The loan is primarily for business purposes.

Business purpose loans are exempt from RESPA coverage.

Question 25

True/False: An appeal must be reviewed by a different person than the one(s) responsible for evaluating the application.

Answer 25

True

Question 26

The servicer must cancel a force placed policy within __ days of receiving evidence that the borrower has sufficient hazard insurance in place, and refund any premium charges or fees for the period of the overlap, if applicable.

Answer 26

15

Question 27

If a closed-end loan is secured by a second lien, does the Servicing Disclosure Statement need to appear on the Loan Estimate?

Answer 27

No, because this should only appear if the loan is secured by a first lien.

Question 28

True/False: RESPA requires that complete loss mitigation applications are evaluated before proceeding with a scheduled foreclosure sale.

Answer 28

True

Question 29

True/False: If a mortgage broker is used, the lender is responsible for delivering the “Your Home Loan Toolkit” booklet.

Answer 29

False, the broker is responsible.

Question 30

What are the statement timing requirements for covered escrow accounts?

Answer 30

Initial escrow account statement - within 45 days of settlement
Annual escrow statement - within 30 days of the completion of the escrow account computation year
Short year statement - within 60 days after receiving the payoff funds.

Question 31

What is “dual tracking” and is it permitted?

Answer 31

Simultaneously pursing loss mitigation and foreclosure solutions. Lenders must exhaust all loss mitigation solutions before commencing foreclosure process.

No, it is prohibited by RESPA.

Question 32

What are the six points that make an “application” under RESPA?

Answer 32

Submission of:

• Consumer’s name
• Consumer’s income
• Consumer’s SSN to obtain a credit report
• Property address
• Estimate of property value, and
• Mortgage loan amount sought

*There’s no more “catch all” category. The CFPB concluded that creditors can collect other information they deem necessary before obtaining the 6 items above (such as obtaining SSN last), but can’t delay receipt of the 6th item to delay delivery of the Loan Estimate.

Question 33

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 condo
C. A business loan to a corporation secured by a 1-4 family dwelling
D. A home improvement loan to a consumer

Answer 33

C. A business loan to a corporation secured by a 1-4 family dwelling

Loans made for business purpose that are secured by a 1-4 family dwelling are exempt from the coverage of RESPA

Question 34

True/False: Lenders may charge a late fee for the first 60 days after a servicing transfer if borrower made payments on time to the old servicer.

Answer 34

False. Lenders may NOT charge a late fee during this time.

Question 35

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 GFE.
D. No. The bank can’t require title insurance on mortgage loans.

Answer 35

B. No. The bank is receiving value in the below-market-rate CD, essentially a referral fee for settlement services

Question 36

Are there any disclosure requirements with an AfBA?

Answer 36

Yes, the Bank must give the proper AfBA disclosure and it MUST be acknowledged by the borrower (signed or initialed).

Question 37

What explanation should a bank’s AfBA 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

Answer 37

D. The nature of the relationship between the referring party and the service provider

Question 38

Does a referral occur if the lender requires the borrower to use a particular provider of settlement service when the borrower will pay for the service?

Answer 38

Yes

Question 39

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 loan) 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
D. A bank paying a referral fee to an independent real estate agent who has generated new mortgage loan customers

Answer 39

C. A lender requiring a consumer to pay for the preparation of documents by a certain attorney

A lender may require the borrower to use and pay for a certain attorney to prepare or review the loan documents. However, if the bank receives a thing of value from the attorney in exchange for the business generated by this arrangement, the transaction is a violation of RESPA.

Question 40

The servicer must allow the borrower __ days to make a decision after an offer of a loan modification is extended.
A. 3
B. 10
C. 14
D. 30

Answer 40

C. 14

Question 41

A force-placed insurance notice reminder must be delivered or mailed to the borrower when?

A. At least 30 days before the fee is assessed and at least 15 days after the initial notice is sent.
B. At least 15 days before the fee is assessed and at least 15 days after the initial notice is sent.
C. At least 30 days before the fee is assessed and at least 30 days after the initial notice is sent.
D. At least 15 days before the fee is assessed and at least 30 days after the initial notice is sent.

Answer 41

D. At least 15 days before the fee is assessed and at least 30 days after the initial notice is sent.

Question 42

An AfBA disclosure is required if referrals are made by the lender to a service provider that is an affiliate or in which the lender has an ownership interest of more than __% in connection with a federally related mortgage loan.

Answer 42

1

Question 43

If a lender has has exhausted all loss mitigation efforts and solutions, how long until the bank can commence foreclosure proceedings?

A. Immediately
B. At least 30 days
C. At least 60 days
D. At least 120 days

Answer 43

D. At least 120 days

Question 44

Is “loan program” an element of an application?

Answer 44

No, although it is difficult to prep a Loan Estimate without the program. The CFPB has instructed creditors to “structure” or “sequence” the 6 data elements for application so that you have this information before preparing a Loan Estimate.

Question 45

What are the servicer’s responsibilities if a borrower’s complete loss mitigation application is denied for any trial or permanent loan modification option?

Answer 45

The servicer must send a notice to the borrower that states:
- the specific reasons for the determination and
- that the borrower wasn’t evaluated on any other criteria.

Question 46

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 AfBA 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 AfBA 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 AfBA disclosure is provided.

Answer 46

D. A bank can pay referral fees to its own employees when an AfBA disclosure is provided.

An institution may pay referral fees to its own employees

Question 47

True/False: Both the transferor servicer and transferee servicer must deliver a Notice of Transfer of Servicing disclosure to the borrower.

Answer 47

True

When any mortgage loan is assigned, sold or
transferred, the transferor (former servicer) must provide a disclosure at least 15 days before the effective date of the transfer. A transfer of servicing notice from the transferee (new servicer) must be provided not more than 15 days after the effective date of the transfer.

Both notices may be combined into one notice if delivered to the borrower at least 15 days before the effective date of the transfer.

Notices provided at the time of settlement satisfy both timing requirements.

Question 48

Other than the notice requirements, can any other information be included on the force-placed insurance notice?

Answer 48

No

Question 49

The lender must submit an initial escrow account statement to the borrower at settlement or within __ days of settlement.

A. 3
B. 10
C. 45
D. 90

Answer 49

C. 45

Question 50

During a review of the last RESPA examination report, the compliance professional discovers that violations have been cited with regard to early intervention for delinquent borrowers. The compliance professional is asked to draft the bank’s draft response. What is the BEST response?

A. The bank will ensure that attempts to make live contact will be made no later than the 45th day of delinquency, and a written notice will be provided no later than the 36th day of delinquency
B. The bank will ensure that attempts to make live contact will be made no later than the 36th day of delinquency, and a written notice will be provided no later than the 45th day of delinquency
C. The bank will ensure that attempts to make live contact will be made no later than the 30th day of delinquency, and a written notice will be provided no later than the 60th day of delinquency
D. The bank will waive all late fees for these delinquent loans and offer free loss-mitigation assistance

Answer 50

B. The bank will ensure that attempts to make live contact will be made no later than the 36th day of delinquency, and a written notice will be provided no later than the 45th day of delinquency

RESPA’s servicing provisions require servicers to attempt to make live contact with a delinquent borrower no later than the 36th day of delinquency and provide written notice no later than the 45th day of delinquency. Waivers of late fees and free loss-mitigation assistance are not required under RESPA.

Question 51

Which of the following changes to the escrow provisions of the Real Estate Settlement Procedures Act (RESPA) should be properly reported in accordance with the bank’s compliance management program?

A. Changes that affect commercial escrow account opening balances
B. Changes that impact escrow accounts for consumer-purpose loans secured by vacant land
C. Changes in deficiency provisions for loans that are secured by manufactured homes without also the underlying real estate
D. Changes in rules that affect what must be done with surpluses discovered during annual account analyses

Answer 51

D. Changes in rules that affect what must be done with surpluses discovered during annual account analyses

RESPA does not apply to loans secured by vacant land or manufactured homes without the underlying real estate. Nor does it apply to commercial loans. Therefore, only the choice of dealing with surpluses is an appropriate choice to be reported under RESPA.

Question 52

The Loan Department received a written complaint from a mortgage loan customer alleging that the bank has made a number of errors in timely crediting loan payments to the borrower’s mortgage loan account. To comply with the RESPA mortgage servicing requirements, the bank must FIRST:

A. Request supporting documentation from the borrower to verify borrower’s identity
B. Acknowledge receipt of the complaint in writing within 10 days
C. Acknowledge receipt of the complaint in writing within 5 business days
D. Notify all consumer reporting agencies that the bank uses that a dispute has been filed on the account by the consumer

Answer 52

C. Acknowledge receipt of the complaint in writing within 5 business days

A requirement of the RESPA regulation when dealing with error notices is to first acknowledge receipt of the notice. This must be done within 5 business days. The servicer need not request supporting documentation from the borrower to verify his/her identity, nor must the servicer first notify consumer reporting agencies of the dispute.

Question 53

Which of the following is the MOST helpful when validating a finding of the bank neglecting to provide an Affiliated Business Arrangement (AfBA) disclosure when referring an applicant for a consumer-purpose mortgage loan to a non-affiliated law firm?

A. Nothing, as in this situation no Affiliated Business Arrangement (AfBA) disclosure is required
B. A review of each application where such a referral was provided to ensure there were no fees exchanged prior to closing
C. A log of the amounts charged by the law firm to ensure there is no violation of the prohibition against unearned fees under Section 8 of RESPA
D. A review of the bank’s policy of remediation involving missing disclosures to determine the next course of action

Answer 53

A. Nothing, as in this situation no Affiliated Business Arrangement (AfBA) disclosure is required

No AfBA is required when referring an applicant to a non-affiliated entity, such as a non-affiliated law firm. Thus, no validation of a finding is necessary. Any other choice suggesting an AfBA is necessary is false.

Question 54

A customer wishes to lock his mortgage loan interest rate for a $100 rate lock fee. The rate may:

A. Be locked, but a fee may not be charged until the Loan Estimate is provided.
B. Be locked and the fee charged before the Loan Estimate is provided.
C. Not be locked until the Loan Estimate is provided.
D. Not be locked until at least three days after the customer receives the Loan Estimate.

Answer 54

A. Be locked, but a fee may not be charged until the Loan Estimate is provided.

Question 55

A bank must provide the RESPA Special Information Booklet to applicants for which type of loans secured by a first lien on a single-family dwelling?

A. Interim construction loan
B. Home equity line of credit
C. Purchase-money mortgage loan
D. Assumption loan not requiring lender approval

Answer 55

C. Purchase-money mortgage loan

Special Information Booklet must be given in purchase money transactions

Question 56

During a compliance examination, the financial institution is cited for RESPA Section 8 violations. While drafting responses to examiners, what should the compliance professional ensure the business lines understand about the regulation?

A. A gift to a realtor is considered a thing of value.
B. Payments for services delivered should be processed timely.
C. A referral agreement for business transactions must be in writing.
D. Receiving discounted office rental space from a realtor is acceptable when business referrals are exchanged.

Answer 56

A. A gift to a realtor is considered a thing of value.

It is illegal to give or receive anything of value in return for a referral of a settlement service (including the loan itself)

Exceptions:
- Reasonable payments for work actually done (fee must be related to the amount of work done)
- Work done after the loan closes (secondary market fees, etc.)
- Work done by your own employees

Question 57

The bank is facing criticism from investors who purchase real estate loans that it did not obtain an appraisal in some situations. Particularly, in commercial loan situations where the loan amount is over $1,000,000, the bank did not obtain an appraisal when the real estate is taken as collateral out of an abundance of caution, so that the owner did not sell the property without prior permission of the bank. What is the NEXT step to take in this situation?

A. The bank should immediately obtain an appraisal on the collateral real estate and provide a copy to the borrower and investor
B. The bank should immediately procure an evaluation on the collateral real estate and provide a copy to the investor
C. The bank should require immediate repayment from the borrower as the loan was made improperly
D. No action is necessary; no appraisal was necessary as the real estate was taken as collateral out of an abundance of caution

Answer 57

D. No action is necessary; no appraisal was necessary as the real estate was taken as collateral out of an abundance of caution

Appraisals or evaluations are not necessary when the real estate is taken out of an abundance of caution. There is no need to require immediate repayment of the loan, either.

Question 58

RESPA prohibits which of the following bank practices?

A. Paying referral fees to its employees
B. Paying fees to its affiliate’s employees for loan referrals if the employees performed a sufficient number of settlement services
C. Paying fees to brokers for loan referrals if the brokers performed a sufficient number of settlement services
D. Receiving complimentary flood certifications for its real estate portfolio when contracting for future flood determination services

Answer 58

D. Receiving complimentary flood certifications for its real estate portfolio when contracting for future flood determination services

Banks must be aware that services provided in connection with referrals of RESPA-covered loans cannot be based on the number of referrals made. Receiving complimentary flood certifications when contracting for future services is compensation for RESPA-covered settlement services, and is predicated on future business and therefore in violation of RESPA Section 8. Paying referral fees to bank employees is permitted since only compensating third parties is a violation. Payments to third parties, such as affiliates or brokers, are permitted if the third party performed sufficient work.

Question 59

The compliance officer is participating in a meeting with the bank’s examiners as part of a real estate lending examination. The examiner has some issues with the bank’s compensation practices for consumer mortgage loans. Which of the following would constitute a problematic Marketing Service Agreement under RESPA Section 8?

A. The bank shares office space with a real estate brokerage; the brokerage pays the bank normal rent plus a fixed advertising amount per month
B. The bank requires mortgage loan applicants to use the services of an affiliated law firm to draft the loan agreement documents; the borrower pays a flat fee for these services as part of closing costs
C. The bank does not disclose its affiliate relationship with a title company and does not inform mortgage loan applicants that they have the option to shop for title services before making the referral
D. The bank pays its employees a referral fee for every friend or family member sent to the bank and who closes a mortgage loan

Answer 59

C. The bank does not disclose its affiliate relationship with a title company and does not inform mortgage loan applicants that they have the option to shop for title services before making the referral

CFPB guidance provides that it is problematic for a bank to not disclose its affiliate relationship with a title company, and by not informing applicants that they have a choice to shop for title services. It is not a Section 8 violation to collect rent and a fixed advertising cost each month since the fee is not based on the number of referrals of RESPA-covered loans in any way. Banks may require the use of affiliated providers in the cases of an attorney (as here), appraisal, or credit bureau. It is also not a Section 8 violation to pay bank employees referral fees. Section 8 makes such fees illegal if paid to third parties.

Question 60

In a meeting with the audit department, it is brought up that a title insurance company entered into Marketing Service Agreements with the bank, where the fees paid by the company to the bank were based in part on the number of mortgage loan referrals it received, as well as the revenue generated by those referrals. What is the BEST response to this report?

A. Nothing needs to be done, as this agreement is not a violation of RESPA Section 8’s prohibition against kickbacks and unearned fees, and it may continue as-is
B. This is a violation of RESPA Section 8’s prohibition against kickbacks and unearned fees, and the bank will take steps to eliminate the referral-based compensation structure of the arrangement
C. This is not a violation of RESPA Section 8’s prohibition against kickbacks and unearned fees, but proper disclosure of the arrangement must be made in the future to all borrowers who utilize the services of the title company
D. An Affiliated Business Arrangement disclosure must be provided to customers who use the services of the title company to inform the borrower of the agreement between the bank and title company

Answer 60

B. This is a violation of RESPA Section 8’s prohibition against kickbacks and unearned fees, and the bank will take steps to eliminate the referral-based compensation structure of the arrangement

Section 8 of RESPA mandates that fees paid to third parties based on volumes of RESPA-covered loan business are an “unearned fee” or a “kickback.” Arrangements such as the one here, where the fee paid by the company varies depending on the number of referrals provided violate this provision. It does not matter if the arrangement is disclosed or not, through an Affiliated Business Arrangement or otherwise. It is still a violation of the rule.

Question 61

What types of loans require a servicing disclosure statement under RESPA?

A. First or second lien, closed-end transactions
B. First lien, closed-end transactions
C. First lien, closed or open-end transactions
D. Any lien position, closed or open-end transactions

Answer 61

B. First lien, closed-end transactions

Question 62

What type of property falls under RESPA? Select all that apply

A. 1-4 unit residential property
B. Owner-occupied
C. Second lien
D. 25 acres or less

Answer 62

A, B, and D

The property must be owner occupied, 4 units or under, and not sit on more than 25 acres of land.

Question 63

What does RESPA not cover?

Answer 63

ABCTV
Agriculture (25+ acres)
Business Loans
Commercial Loans
Temporary Financing
Vacant Land

Question 64

What loan types still receive the Good Faith Estimate and HUD1 Settlement Statement instead of the Loan Estimate?

A. Home Equity Lines of Credit
B. Reverse Mortgages
C. Home Equity Lines of Credit and Reverse Mortgages
D. None

Answer 64

C. Home Equity Lines of Credit and Reverse Mortgages

Question 65

How long do you have to provide the Loan Estimate after receiving the application?

A. At the time of application
B. Within 3 business days
C. Within 7 business days
D. Within 10 calendar days

Answer 65

B. Within 3 business days

Question 66

What are the consequences of any violation of Section 8 of RESPA?

A. $10,000 per violation plus 2 years in prison
B. $1,000 per violation plus restitution
C. $5,000 per violation plus 1 year in prison
D. $10,000 per violation plus 1 year in prison plus restitution

Answer 66

D. $10,000 per violation plus 1 year in prison plus restitution

Question 67

What is the restitution charge related to a violation of Section 8 of RESPA?

A. $1,000
B. 3x the original fee
C. The original fee
D. 2x the original fee plus $1,000

Answer 67

B. 3x the original fee

Question 68

How is restitution determined for RESPA section 8 violations?

A. Both jointly and individually for borrower and violator
B. Jointly for borrower and violator
C. Individually for borrower and violator
D. Individually and jointly per borrower and individually per violator

Answer 68

A. Both jointly and individually for borrower and violator

Question 69

Are any of the following violations of RESPA Section 8? Select all that apply.

A. Jointly-held educational activities
B. Payments for goods or services actually provided
C. Affiliated business arrangements
D. Lunch paid for by the MLO with a prospective real estate agent

Answer 69

None

Jointly-held educational activities are acceptable if each party pays their own or a proportional amount.

Payments for goods and services need to be equal to the market value. Anything in excess would be a violation.

Affiliated business arrangements must be disclosed.

Lunch to introduce oneself and the services you provide is considered marketing.

Question 70

Can you rent a conference room from the real estate agent to perform a closing?

Answer 70

Yes, if you pay market value for the room.

Question 71

When must a servicer acknowledge receipt of a qualified request or notice of error from a borrower?

A. 5 business days from receiving a request
B. 7 calendar days from receiving a request
C. 15 calendar days from postmark
D. 3 business days from receiving a request

Answer 71

A. 5 business days from receiving a request

Question 72

How long does a servicer have to provide a complete response to a notice of error?

A. 30 calendar days
B. 30 business days
C. 45 calendar days
D. 90 calendar days

Answer 72

B. 30 business days

Question 73

Can a servicer extend the amount of time it has to respond to a notice of error?

Answer 73

Yes, they can extend the 30 business days by an additional 15 business days, for a combined deadline of 45 business days. The servicer must provide written notice of the extension and reasons to the borrower.

Question 74

What timeframe is considered untimely for a notice of error from the borrower?

A. More than 60 days from the loan’s discharge or transfer to another servicer
B. More than 5 years from the loan’s discharge
C. More than 1 year from the loan’s discharge or transfer to another servicer
D. More than 6 months from the loan’s discharge or transfer to another servicer

Answer 74

C. More than 1 year from the loan’s discharge or transfer to another servicer

Question 75

True/False: HUD established 14 services that are normally performed in loan originations:

Complete the borrower’s application
Analyze the borrower’s income and debt
Educate the borrower on the home buying/financing process
Collect financial information
Order verification of employment and deposits
Order mortgage loan verifications
Order appraisals
Order inspections or engineering reports
Provide various required disclosures
Counsel the borrower on credit problems
Maintain contact with various parties to the process
Order legal documents
Determine flood zone coverage
Participate in the loan closing

Answer 75

True. You can qualify for compensation, if you take the application information and perform at least five additional services.

Note that performing only counseling-type activities will be subject to greater scrutiny.