TILA

Question 1

What transactions are exempt from Regulation Z? (6)

However, generally exempt credit is subject to the requirements that govern the issuance of credit cards and liability for their unauthorized use. (credit cards cannot be issued on an unsolicited basis and if one is lost or stolen, the cardholder must not be held liable for more than $50 for the unauthorized used of the card).

Answer 1

Business, Commercial or Agricultural Credit

Credit extended to a non-natural person (govt agencies)

Public utility credit

Credit extended by a broker-dealer registered with the SEC involving securities or commodities accounts

Home fuel budget plans not subject to a finance charge

Certain Student loan programs.

Question 2

Does TILA apply to credit extended to a Trust?

What about to a successor in interest?

Answer 2

Yes, credit extended to trusts established for tax or estate planning purposes or to land trusts is considered to be extended to a natural person

Yes, confirmed successor in interests are considered consumers. (confirmed by the bank/servicer)

Question 3

True or False:

A creditor can furnish TILA disclosures to the consumer regardless if the transaction is covered by Reg. Z?

Answer 3

True.
In any event, the financial institution may routinely furnish disclosures to the consumer. Disclosure under such circumstances does not control whether the transaction is covered but can assure protection to the financial institution and compliance with the law.

Question 4

What are the 5 coverage considerations under Regulation Z?

Answer 4

Is the purpose of the credit for personal, family, or household use?

Is the consumer credit extended to a consumer?

Is the credit extended by a creditor?

Is the credit secured by real property, a coop unit, or a dwelling?

Is the amount financed or credit limit at or below the annual threshold limit? (66,400-2023)

Question 5

What is the definition of a finance charge?

Answer 5

Measure of the cost of consumer credit in dollars and cents and includes:

Any charges or fees payable directly or indirectly by the consumer and imposed directly or indirectly by the financial institution either as an incident to or as a condition of an extension of consumer credit.

Does not include any charge payable in a comparable cash transaction.

ex: charges imposed by required third parties, charges by required settlement or closing agents.

Question 6

Which credit transactions have finance charge legal accuracy tolerances?

If disclosed finance charges are legally accurate, it would not be subject to reimbursement.

Answer 6

Closed-end credit transactions permit various finance charge accuracy tolerances.

Open-end credit must be accurate since there is no tolerance for finance charge errors.

Question 7

What is the disclosed finance charge accuracy tolerance for credit secured by real property or a dwelling?

Answer 7

The disclosed finance charge is considered accurate if its not understated by more than $100.

Overstatements are not violations.

Question 8

What is the accuracy tolerance for Rescission rights after the 3 business day rescission period? (General rule, finance charge, and total of payments)

Answer 8

General rule: 1/2 of 1% Tolerance

Finance Charge: not understated by more than 1/2 of 1% of the credit extended or $100, whichever is greater.

Total of Payments for transactions: not understated by more than 1/2 of 1% of the face amount of the note or $100, whichever is greater.

Overstatements are not violations.

Question 9

What is the accuracy tolerance for refinances on residential loans at a new bank? (General rule, finance charge, total of payments)

Answer 9

General rule: 1% tolerance, when new loan is made at new bank. excl: HCML

Finance Charge: not understated by more than 1% of the credit extended or $100, whichever is greater.

Total of Payments for transactions: not understated by more than 1% of the face amount of the note or $100, whichever is greater.

Overstatements are not violations.

Excludes HCMLs that are new advances or new consolidations.

Question 10

Right to rescind. After the initiation of foreclosure on the consumer’s principal dwelling that secures the obligation, the consumer can rescind if?

Answer 10

A mortgage broker fee was not included as a finance charge or the creditor did not provide the properly completed model form from Appendix H, or a substantially similar notice or rescission.

Question 11

What are the FC & TP accuracy tolerances after the initiation of foreclosure on a consumer’s principal dwelling that secures the credit obligation?

Answer 11

Finance charge: not understated by more than $35

Total of Payments: not understated by more than $35

Overstatements are not violations.

Question 12

What is a prepaid finance charge?

Answer 12

A prepaid finance charge is any finance charge paid separately to the financial institution or to a third party, in cash or by check before or at closing, settlement, or consummation of a transaction, or withheld from the proceeds of the credit at any time.

Ex: points, loan origination fees, inspection fees, odd days’ interest, FHA mortgage guarantee insurance fees, PMI, credit report fees (non-real estate transactions).

Question 13

What is a precomputed finance charge?

Answer 13

A precomputed finance charge includes, for example, interest added to the note amount that is computed by the add-on, discount, or simple interest methods. If reflected in the face amount of the debt instrument as part of the consumer’s obligation, finance charges that are not viewed as prepaid finance charges are treated as precomputed finance charges that are earned over the life of the loan.

Question 14

What charges are always included as as a finance charge? (8)

Answer 14

Interest

Transaction fees

Loan origination fees, consumer points

Credit guarantee, insurance premiums

Charges imposed on the creditor for purchasing the loan, which are passed to the consumer.

Discounts for inducing payment by means other than credit.

Mortgage broker fees

Other examples: Fee for preparing TILA disclosures, construction loan inspection fees, post-consummation tax, flood service policy, required credit life insurance charges.

Question 15

What charges are never included as a finance charge? (8)

Answer 15

Charges payable in a comparable cash transaction.

Fees for unanticipated late payments.

Overdraft fees not agreed to in writing.

Sellers points.

Participation/membership fees.

Discounts offered by the seller to induce payment by cash or other means not involving the use of a credit card.

Interest forfeited from interest reduction by law.

Charges absorbed by the creditor as a cost of doing business.

Question 16

What charges are not considered finance charges as long as they are a bona fide and reasonable amount? (6)

(loans secured by real estate)

Answer 16

Fees for title insurance, title examination, property survey.

fees for preparing loan documents, mortgages, and other settlement docs.

Amounts required to be paid into escrow, if not otherwise included in the finance charge.

Notary fees

pre-consummation flood and pest inspection fees

Appraisal and credit report fees.

Question 17

What is APR?

How should it be disclosed for closed end credit?

Answer 17

APR is a measure of the cost of credit, expressed as a nominal yearly rate. It relates the amount and timing of value received by the consumer to the amount and timing of payments made.

Must be disclosed as a single rate only (regardless if the loan has a single interest rate, variable rate, or graduated payments) and it must appear with the segregated disclosures (grouped together and don’t contain any info not required under 1026.18).

Question 18

APR is a function of what? (3)

Answer 18

The amount financed (which is not equivalent to loan amount)

the finance charge (which is not equivalent to the total interest amount)

and the payment schedule (which is not always equal to P+I payments)

Question 19

True or False:

APR is not an interest rate.

Answer 19

True

Question 20

An incorrectly disclosed APR or finance charge would NOT be considered a violation under what circumstances? (3)

Answer 20

if it was due to a calculation error from a tool used in good faith by the institution.

if the bank stops using the calculation tool after discovering the error.

if the bank notifies the CFPB in writing of the error in the calculation tool.

Question 21

Which transactions are exempt from TRID? (3)

Which transactions have different timing requirements? (4)

Answer 21

HELOCs

Reverse Mortgages

Mortgages secured by a mobile home or a dwelling not attached to real property.

Only exempt from the timing requirements:
construction-only loans

vacant land loans

Credit extended to trusts for tax or estate planning

land loans secured by more than 25 acres.

Question 22

Which transactions are covered by TRID?

Answer 22

TRID must be given for most closed-end transactions secured by real property or a cooperative unit.

Question 23

When is a creditor required to mail or deliver the Loan estimate?

Answer 23

Must be mailed or delivered within 3 business days of receipt of the consumer’s loan application.

Question 24

When is a creditor required to mail or deliver the closing disclosure?

Answer 24

Must be mailed or delivered no later than 3 business days before loan consummation.

Question 25

What is the amount financed?

What is required to be disclosed for TRID?

Answer 25

Net amount of credit extended to a consumer.

Amount financed = total of payments - finance charge.

Disclosure: itemization of the amount financed.

Question 26

What is the amount financed from the example below?

A consumer signs a note secured by real property in the amount of $5,435. The note amount includes $5,000 in proceeds disbursed to the consumer, $400 in precomputed interest, $25 paid to a credit reporting agency for a credit report, and a $10 service charge. Additionally, the consumer pays a $50 loan fee separately in cash at consummation.

Answer 26

$4,975

The amount financed may be calculated by first subtracting all finance charges included in the note amount ($5,435 - $400 - $10 = $5,025). The $25 credit report fee is not a finance charge because the loan is secured by real property. The $5,025 is further reduced by the amount of prepaid finance charges paid separately, for an amount financed of $5,025 - $50 = $4,975.
The answer is the same whether finance charges included in the obligation are considered prepaid or precomputed finance charges.

Question 27

What is the payment schedule?

Answer 27

All payments scheduled to repay loan principal, interest, and post-consummation finance charges.

Any finance charges paid before or at consummation is not included in the payment schedule, but is considered a pre-paid finance charge.

Question 28

Is life-of-loan monitoring considered a finance charge?

What about flood determination fees?

Answer 28

Yes, Life of loan fees are finance charges because fees for services that will be performed periodically during the loan term are finance charges.

Determination fees are not unless a portion of the fee includes life of loan monitoring and if the bank is uncertain how to break out the fee, in which case the entire fee may be treated as a finance charge.

Question 29

How is reg Z formatted?

Subpart A,B,C,D,E,F,G

Answer 29

A: Open end and Closed end transactions, definitions and applicability, finance charges

B:Open-end, account opening disclosures, periodic statements, special day rules

C:Closed-end credit, disclosures, treatment of credit balances, APR calculation, rescission rights, advertising.

D: record retention, non English disclosures, exemptions, rate limitations.

E: Mortgage transactions, disclosures, periodic statements, small servicer exemption

F:Private education loans, disclosures, change in terms, right to cancel, marketing

G:Credit Card, disclosures, Ability to repay, finance charges, marketing.

Question 30

Does TILA tell banks how much interest they may charge or whether they must grant a consumer a loan?

Answer 30

No

Question 31

What is a successor in interest?

Answer 31

Person whom an ownership interest in a dwelling securing a closed-end credit is transferred from a consumer, provided the transfer is:

• by devise, descent, or operation of law on death of a joint tenant
• to a relative resulting from death of the consumer
• where spouse or or children become owner of the property
• from divorce, legal separation, settlement agreement, where spouse becomes the owner
• into an inter vivos trust where consumer becomes beneficiary and there are no transfer of rights of occupancy in the property.

Question 32

When determining whether credit is for consumer purposes the creditor must evaluate all of the following? (5)

Answer 32

• purpose of credit (vacation)
• consumer’s primary occupation and how it relates to use of the credit (purchase dental supplies with dental occupation=business purpose)
• personal management of the assets purchased from the proceeds. (money borrowed to purchase stock in company but consumer does not work there=consumer purpose)
• size of the transaction. Larger more likely business purpose. ($5MM RE loan)
• amount of income derived from property acquired by the loan proceeds relative to borrowers total income. (annual salary $100k and $500 annual dividends from acquired property=consumer)

Question 33

True or False: a checked box indicating the loan is for a business purpose is sufficient to determine the loan does not have a consumer purpose?

Answer 33

False. Absent of any documentation showing the intended use of the proceeds could be insufficient evidence that the loan did not have a consumer purpose. (could be mixed purpose)

Question 34

Can a creditor furnish disclosures to an entity exempt from TILA?

Answer 34

Yes. Disclosures do not control if the transaction is covered but can assure protection to the financial institution and compliance with the law.

Question 35

What must be met under the regulation in order for an entity to be considered a “Creditor”? (3)

Answer 35

• institution extends consumer credit regularly and the obligation is payable to the institution, and is in a written agreement with more than 4 installments or is subject to a finance charge.
• institution is a card issuer that extends closed-end credit that is subject to a finance charge or is payable by written agreement in more than 4 installments
• institution is not the card issuer, but imposes a finance charge at the time of honoring a credit card.

Question 36

in what situation would regulation Z still apply if the dwelling credit has an amount financed or credit limit at or below the annual threshold limit?

Answer 36

It does not apply, but may apply later if the loan is refinanced for an amount at or below the annual threshold limit.

Also, if the principal dwelling is taken as collateral after consummation, rescission rights will apply, and in the case of open-end credit, billing disclosures and other provisions will apply.

Question 37

What are the accuracy tolerances in a closed-end credit transaction other than a mortgage loan.

Answer 37

$5 if amount financed is less than or equal to $1,000.

$10 if amount financed exceeds $1,000.

Question 38

How do prepaid finance charges impact the consumer?

Answer 38

They effectively reduce the amount of funds available for the consumer’s use, usually before or at the time the transaction is consummated.

Question 39

What finance charges are included unless conditions are met? (8)

Answer 39

• Premiums for credit life, A&H, or loss of income insurance
• -Unless: insurance is not required, disclosures are made, and consumer authorizes.
• Debt cancellation fees
• -Unless: coverage is not required, disclosures are made, and consumer authorizes
• Premiums for property or liability insurance
• -Unless: consumer selects insurance company and disclosures are made
• Premiums for Vendor’s single interest insurance (VSI)
• -Unless: Insurer waives right of subrogation, consumer selects company, and disclosures are made
• Security interest charges (filing fees), insurance in lieu of filing fees, and certain notary fees
• -Unless: the fee is for lien purposes, prescribed by law, payable to a third public official and is itemized and disclosed
• charges imposed by third parties
• -unless: the use of the third party is not required and creditor does not retain the charge
• charges imposed by third party closing agents
• -unless: creditor does not require and does not retain the fee for the particular service
• appraisal and credit report fees
• -unless: charged to all applicants. Application fees may include appraisal and credit report fees, and if charges to all not a finance charge.

Question 40

What are the finance charges in the below examples?

the APR is 12 percent on a loan with an amount financed of $5,000 and 36 equal monthly payments of
$166.07 each.

the APR is 13.26% on a loan with an amount financed of $4,500 and 35 equal monthly payments of $152.18 each and a final payment of $152.22.

Answer 40

The finance charge is $978.52 in both cases.

The APRs on these example loans are not the same because an APR does not only reflect the finance charge, it relates the amount and timing of value received by the consumer to the amount and timing of payments made.

Question 41

When are periodic statements required to be mailed/delivered for credit card accounts?

For open-end consumer credit accounts with a grace period?

for non-credit card open-end consumer plans without a grace period?

Answer 41

At least 21 days prior to the payment due date disclosed on the periodic statement.

21 days prior to the date on which the grace period expires.

14 days prior to the date on which the required minimum periodic payment is due.

No finance charges or late fees can be charged if payment is received within the above time periods after mailing the periodic statements.

Question 42

For open end credit which change in terms require 45 day advance written notice to consumers? (5)

Answer 42

Advanced notice is required for significant changes in terms including:

• penalty fees
• transaction fees
• fees imposed for the issuance or availability of the open-end plan.
• grace period
• balance computation method

Question 43

For open end credit, which changes do not require advance notice to consumers?

Answer 43

• reductions of finance charges
• termination of account due to court proceedings
• increase of APR after period of time previously disclosed in writing
• increases in variable APRs according to an index not under the card issuers control
• rate increases from consumer’s failure/ completion of hardship agreement, which terms were disclosed prior to the arrangement.

Question 44

Can a customer reject significant changes in terms from open ended credit?

Answer 44

yes, the creditor must provide customers the right to reject the change. And if they do the creditor may not apply the change to the account.

When a customer rejects the change a creditor must not:

• impose a fee or charge, or treat the account in default as a result of the rejection
• require a repayment of the balance on the account using a method that is less beneficial to the consumer than:
• -the method of payment prior to the rejection
• -amort period no less than 5 years from date of rejection
• -minimum periodic payment including a percentage of the balance not more than 2x the percentage included prior to the date of rejection.

Question 45

How are finance charges disclosed for open-end credit?

Answer 45

they must be itemized. the aggregate total amount of the finance charge does not need to be disclosed.

Question 46

What are the three methods commonly used to determine the balance to which the periodic rate is applied to open-end credit?

Answer 46

• Previous balance method
• Daily balance method
• Average daily balance method

Question 47

What is the previous balance method?

Answer 47

The balance on which the
periodic finance charge is computed is based on the balance outstanding at the start of the billing cycle. The periodic rate is multiplied by this balance to compute the finance charge.

Question 48

What is the daily balance method?

Answer 48

A daily periodic rate is applied to either the balance on each day in the cycle or the sum of the balances on each of the days in the cycle. If a daily periodic rate is multiplied by the balance on each day in the billing cycle, the finance charge is the sum of the products. If the daily periodic rate is multiplied by the sum of all the daily balances, the result is the finance charge.

Question 49

What is the average daily balance method?

Answer 49

The average daily balance is the sum of the daily balances (either including or excluding current transactions) divided by the number of days in the billing cycle. A periodic rate is then multiplied by the average daily balance to determine the finance charge. If the periodic rate is a daily one, the product of the rate multiplied by the average balance is multiplied by the number of days in the cycle.

Question 50

For open end credit that uses 2 or more periodic rates in computing the finance charge. What must a bank disclose?

ex: one rate applies to balances up to a certain amount, another rate applied to balances above the first amount.

Answer 50

all rates and conditions
balances at which each rate applies.

Finance charge does not need to be broken into separate components based on different rates

Question 51

Within what range would an APR need to be considered accurate for open-end credit disclosures?

Answer 51

If it is within 1/8th of one percentage point.

Question 52

What is the basic method for determining the APR for open end credit transactions? and when can it be used?

What is the second method for calculating the APR? and when can it be used?

Answer 52

Multiplying each periodic rate by the number of periods in a year.

This method is used in all types of disclosures and is prospective as it does not involve any particular finance charge or periodic balance.

The other is the quotient method, which can be disclosed on periodic statements for HELOCs. It reflects the annualized rate that was actually applied during the cycle. It is also known as the effective APR and may include minimum, fixed, or transactional charges to the account.

Question 53

What if a creditor does not disclose the effective APR on a HELOC periodic statement?

Answer 53

It must instead disclose the charges (fees and interest) imposed on the account.

Question 54

What is the equation for the basic APR method on open-end credit?

Answer 54

Monthly rate x 12 =APR

Question 55

What is the equation for the effective APR that may be disclosed on HELOC statements only when periodic rates are imposed?

Answer 55

Monthly rate x 12=APR

OR

(total finance charge/sum of balances) x 12=APR

Question 56

What is the equation for effective APR when minimum or fixed charge, but not transaction charges are imposed?

Answer 56

(total finance charge/amount of applicable balance)x12=APR

the APR cannot be determined if the applicable
balance is zero.

Loan fees, points, or similar finance charges that relate to the opening of the
account must not be included in the calculation of the APR.

Question 57

What is the equation for effective APR when the finance charge includes a charge related to a specific transaction (cash advance fee), even if the total finance charge also include other minimum or fixed charge not calculated using a periodic rate?

Answer 57

(Total finance charge / (all balances + other amounts on which a finance charge was imposed during the billing cycle without duplication) x 12 = APR

The sum of the balances may include the average daily balance, adjusted
balance, or previous balance method.

The APR Cannot be less than the highest periodic rate applied, expressed as an APR. Loan fees, points, or similar finance charges that relate to the opening of the
account must not be included in the calculation of the APR.

Question 58

What is the equation for the effective APR when the finance charge imposed during the cycle includes a minimum or fixed charge that does not exceed 50cents for a monthly or longer billing cycle?

Answer 58

monthly rate x 12=APR

Question 59

What is the equation for the effective APR when daily periodic rates are applicable if only the periodic rate is imposed or when a minimum or fixed charge but not transactional charges is imposed?

Answer 59

1. (Total finance charge / average daily balance) x
   12 = APR

Or

2. (Total finance charge / sum of daily balances) x
   365 = APR

Question 60

If a bank changed any terms on a HELOC, when would they need to disclose/notify customers?

Answer 60

15 days advanced written notice of change in terms or when the minimum periodic payment increases.

But notice is not required if the change involves a reduction to any component of a finance charge or other charge or is the result of a court preceding.

Question 61

If a creditor prohibits additional extensions of credit or reduces the credit limit on a HELOC, when must they notify the customer? and what must the notice contain?

Answer 61

3 business days after the action is taken and must include the specific reasons for the action. Also must include if the creditor requires the consumer to request reinstatement of credit privileges.

Question 62

If the administrator of a trust request the amount of the balance on open-end credit, what is the creditor required to do and what are they prohibited from doing?

Answer 62

• The issuer is prohibited from imposing additional fees on the account;
• The issuer is required to disclose the amount of the balance to the administrator in a timely manner (safe harbor of 30 days); and
• If the balance is paid in full within 30 days after disclosure of the balance, the issuer must waive or rebate any trailing or residual interest charges that accrued on the balance
following the disclosure.

Question 63

When must payments be credited to an account for open end credit?

Answer 63

As of the date of receipt, except when a delay in crediting will not result in a finance or other charge.

if they fail to credit in time to prevent a charge the creditor must adjust the customers account so charges are credited back to the consumer during the next billing cycle.

Question 64

What if a credit card issuer changes the address for receiving payments or procedures for handling payments and such changes cause a material delay in the crediting of a payment to the consumers account?

Answer 64

the card issuer may not impose any late fees or charges for late payment during the 60 day period following the date the change took effect.

Question 65

A billing error notice for open end credit is a written notice from a consumer that: (3)

Answer 65

• Is received by a creditor at the address disclosed under 12 CFR 1026.7(a)(9) or (b)(9), as applicable, no later than 60 days after the creditor transmitted the first periodic statement that reflects the alleged billing error;
• Enables the creditor to identify the consumer’s name and account number; and
• To the extent possible, indicates the consumer’s belief and the reasons for the belief that a billing error exists, and the type, date, and amount of the error.

Question 66

What must a creditor do in response to a billing error notice for open end credit?

Answer 66

The creditor shall mail or deliver written acknowledgment to the
consumer within 30 days of receiving a billing error notice, unless the creditor has complied with the appropriate resolution
procedures within the 30 day period.

And must comply with the resolution procedures within two complete billing cycles but no later then 90 days after receiving the notice.

Question 67

Until a billing error (open-end) is resolved, the following rules apply: (3)

Answer 67

• customer need not pay any portion of payment related to the disputed portion of the bill. (creditor cannot try to collect the disputed portion, but can collect any undisputed portion, can reduce the credit limit for the disputed portion, can reflect the PENDING disputed portion and charges on a periodic statement)
• creditor is prohibited from making an adverse report on the consumer credit standing.
• creditor shall not accelerate any part of the consumers indebtedness or restrict or close the account because of the report.

Question 68

If a creditor determines that a billing error occurred as asserted (open end), it must within the applicable time limits: (2)

Answer 68

• Correct the billing error and credit the consumer’s account with any disputed amount and related finance or other charges, as applicable; and
• Mail or deliver notification of the correction to the
consumer.

Question 69

If, after conducting a reasonable investigation, a creditor determines that no billing error occurred (open-end) or that a different billing error occurred from that asserted, the creditor must within the applicable time limits: (3)

Answer 69

• Mail or deliver to the consumer an explanation that sets forth the reasons for the creditor’s belief that the billing error alleged by the consumer is incorrect in whole or in part;
• Furnish copies of documentary evidence of the consumer’s indebtedness, if the consumer so requests; and
• If a different billing error occurred, correct the billing error and credit the consumer’s account with any disputed amount and related finance or other charges, as applicable.

Question 70

What must be disclosed on periodic statements for credit card accounts regarding minimum payments? (3)

Answer 70

• estimate of amount of time and total cost (P&I) involved in paying the balance in fully by making the minimum payment
• estimate of the monthly payment amount required to pay off the balance in 36 months and total cost (P&I) of repaying in that time.
• disclose a minimum payment warning and estimate of total interest consumer would save if they repaid the balance in 36 months instead of making minimum payments.

Question 71

If an advertisement for open end credit states specific credit terms, it must state only those terms that actually are or will be arranged or offered by the creditor. If any finance charges or other charges are set forth in an advertisement, the advertisement must also clearly and conspicuously state the following: (3)

Answer 71

• any minimum, fixed, transaction, activity or similar charge that is a finance charge
• any periodic rate that may be applied expressed as an APR. and if the rate is variable
• any membership or participation fee that could be imposed

Question 72

True or false: it is deceptive to advertise that a credit card rate is fixed if the rate is actually variable?

Answer 72

True, this would be considered a deceptive or misleading practice and is banned.

Question 73

In advertisements for HELOCs, if any finance charges or other charges or payment terms are included in the ad, then the ad must also include? (3)

Answer 73

• any loan fee that is the percentage of the credit limit under the plan and an estimate of any other fees imposed for opening the plan (dollar amount or range)
• any periodic rate used to compute the finance charge expressed as an APR
• max APR that may be imposed in a variable rate plan.

Question 74

If a loan subject to TRID is a purchase transaction, what must be provided within 3 business days of receipt of the consumers application?

Answer 74

The special information booklet, along with the standard requirement of the LE.

Question 75

What are the timing requirements and what disclosures must be provided for reverse mortgages under TRID?

Answer 75

Disclosures must be mailed or delivered no later than the 3rd business day after receiving a written loan application.

Must provide the good faith estimate, HUD-1 settlement statement, and other TILA disclosures

Question 76

What are the timing requirements and what disclosures must be provided for Chattel dwelling loans under TRID?

Answer 76

disclosures must be provided prior to consummation of the loan.

TIL disclosures (GFE and HUD 1 not required)

Question 77

Can TRID disclosures contain estimates?

Answer 77

Yes if the information required is unknown, the creditor can provide a reasonable estimate, but the disclosure must clearly mark that this is an estimate.

Question 78

What are the disclosure requirements for variable rate closed end loans subject to TRID? (4)

Answer 78

• disclosures must be provided for the full term of the loan and must be based on the terms in effect at the time of consummation.
• if the transaction includes a seller or consumer buy down, the disclosed APR should be a composite rate based on the lower rate for the buy down period and the rate that is for the remainder of the term.
• if the initial rate is not determined by the index/formula used for later rate adjustments, the disclosed APR must reflect a composite rate based on the initial rate for as long as its applied and the fully indexed rate for the remainder of the term.
• if the initial interest rate is set according to index/formula used for later adjustments but set before consummation, disclosures should be based on the initial interest rate, even though the index may have changed by consummation.

Question 79

What are the primary disclosures required under TRID for dwelling secured loans? (4)

Answer 79

• finance charge
• amount financed
• payment schedule (total of payments)
• APR

Question 80

If a consumer pays for a charge separately in cash (this charge is not in the note amount or finance charge) then should it be included in the amount financed for a TRID Loan?

Answer 80

No it should be subtracted out and is not required to be disclosed.

Question 81

If a creditor includes amounts beyond the amount financed and finance charge (RE escrow taxes) in the payment schedule for a RE TRID loan, how should the APR be disclosed?

Answer 81

When calculating the APR, the creditor must disregard such amounts.

Question 82

If the obligation is a renewable balloon payment instrument that unconditionally obligates the financial institution to renew the short-term loan at the consumer’s option or to renew the loan subject to conditions within the consumer’s control, the payment schedule must be disclosed how?

Answer 82

If the obligation is a renewable balloon payment instrument that unconditionally obligates the financial institution to renew the short-term loan at the consumer’s option or to renew the loan subject to conditions within the consumer’s control, the payment schedule must be disclosed using the longer term of the renewal period or periods. The loan must be disclosed with a variable rate feature.

Question 83

The APR must be calculated using one of the following ways?(2)

Answer 83

• actuarial method

- U.S Rule (accrual method)

Question 84

What is the accuracy tolerance for an APR on regular closed end transactions? (single advance transactions with equal payment periods or an irregular first or last payment)

Answer 84

If the disclosed APR is within 1/8th of 1 percentage point of the APR calculated

Question 85

What is the accuracy tolerance for an APR on irregular closed end transactions? (multiple advance transactions)

Answer 85

If the disclosed APR is within 1/4 of 1 percentage point of the APR calculated.

Question 86

What is the accuracy tolerance for an APR on mortgage transactions? (4)

Answer 86

• If the disclosed APR is within 1/8th of 1 percentage point of the APR calculated
• if the rate results from a disclosed finance charge that is considered accurate or accurate for purposes of rescission
• if the rate results from a disclosed finance charge that is understated and the disclosed APR is also understated but is closer to the actual APR
• If the rate results from a disclosed finance charge that is overstated and the APR is also overstated but is closer to the actual APR

Question 87

Is the the disclosed APR considered accurate in the following example?

actual APR is 9%
disclosed APR is 8.65%
rate is considered accurate at 8.5% due to the omission of $75 from the finance charge. (special mortgage rules 1026.22(a)(4))

What if the disclosed APR was 8.4% or 9.3%?

Answer 87

Yes the disclosed APR is considered accurate as the rate is considered accurate at 8.5%. However a disclosed APR below 8.5% or above 9.25% would not be considered accurate.

The tolerance is 1/4th of 1 percentage point for irregular transactions.

Question 88

For construction only and construction to permanent loans can the APR be estimated?

How should the advances be disclosed?

Answer 88

Yes based on information reasonably available at the time of disclosure.

the advance of funds can be disclosed either separately or together. if the loan is construction to perm and will be funded by the same creditor the construction phase and permanent phase can be treated as one or more transactions. (this choice impacts calculations)

Question 89

What is an interest reserve?

is an interest reserve considered a prepaid finance charge?

Answer 89

in a multiple advance construction loan, a creditor may establish an “interest reserve” to ensure that interest is paid as it accrues by designating a portion of the loan amount for that interest payment purpose.

Not a prepaid finance charge.

Question 90

What are the disclosure requirements for interest reserves in construction or construction to perm loans?

Answer 90

If a creditor requires the establishment of an interest reserve and automatically deducts interest payments from the reserve amount rather than allow the consumer to make interest payments as they become due, the fact that interest will accrue on those interest payments as well as the other loan proceeds must be reflected in the calculations and disclosures.

The creditor can use the formula in Appendix D

Question 91

For a construction to perm loan, how should a creditor disclose fees and charges if they choose to disclose multiple transactions?

Answer 91

The construction loan must have allocated finance charges, points, and fees that would not be imposed on the other transactions. The amounts must be disclosed for the construction phase.

Points finance charges and fees for the permanent phase must be separate from the construction phase and vice versa. They should be allocated to the phase in which they are charged.

Question 92

How should a creditor disclose this:

charges an origination fee for construction financing only, but charges a greater origination fee for construction-perm financing.

Answer 92

the difference between the two fees must be allocated to the permanent phase. All other finance charges, points, fees must be allocated to perm phase. Fees and charges not used to compute the finance charge, points, or fees may be allocated between the transactions in any manner the creditor chooses.

Question 93

True or false: TILA requires the use of one method of interest computation.

Answer 93

False: The reg does not require you use 360 or 365 when calculating interest. I t does however allow creditors to disregard that months have different number of days when calculating and making disclosures.

Question 94

Can creditors calculate disclosures based on a 360 day year with 30 day months even if they collect interest by applying a factor of 1/365 of the annual interest rate to the actual days?

Answer 94

Yes, creditors can base their disclosures on calculation tools that assume all months have an equal number of days even if the practice is different.

Question 95

Can creditors apply daily interest factors to a loan based on a 360 day year to the actual number of days between payments. Without disclosing so?

Answer 95

No this would be a violation. if the creditor must disclose the higher values of the finance charge, the APR , and the payment schedule resulting from this practice.

Question 96

Is this a violation?

APR disclosed at 12%
Finance charge disclosed is $1,200 (.12 x 10M)
Daily rate is .033333 (simple interest/360)
No charges imposed except interest
amount financed is the same as the loan amount, applying a daily rate on a daily basis for a 365 day year on a $10M one year single payment unsecured loan.

Answer 96

Yes

APR calculated is 12.17% (.033333 x 365 = .121667)
Finance charge calculated is $1,216.67 (.121667 x 10M=1216.67)

However, if there are no other charges except interest, the application of a 360-day year daily rate over 365 days on a regular loan would not result in an APR in excess of the one eighth of one percentage point APR tolerance unless the nominal interest rate is greater than 9 percent. For irregular loans, with one-quarter of 1 percentage point APR tolerance, the nominal interest rate would have to be greater than 18 percent to exceed the tolerance.

Question 97

Is a required deposit as a condition of credit considered a finance charge?

does it need to be reflected in the APR?

Answer 97

The effect of a required deposit is not reflected in the APR. Also, a required deposit is not a finance charge since it is eventually released to the consumer. A deposit that earns at least
5 percent per year need not be considered a required deposit.

Question 98

What loan types are exempt from TRID? (5)

What disclosures do they get instead?

Answer 98

• Reverse mortgages
• HELOCs
• Chattel dwelling loans
• Dwellings not attached to real property
• loans made by a creditor who makes 5 or fewer loans a year

They get the GFE, HUD-1, and Servicing disclosures under TILA or RESPA.

Question 99

What loan types are exempt from the requirement to provide the GFE, HUD-1, and servicing disclosures?

Answer 99

• TRID subject loans (closed end loans secured by real property/cooperative units)
• Certain no-interest loans secured by subordinate liens for the purpose of down payment assistance, homebuyer assistance, rehabilitation assistance, energy efficiency assistance, or foreclosure prevention.

Question 100

Can a creditor use the TRID disclosures in lieu of the GFE, HUD-1, and servicing disclosures for TRID exempt loans?

Answer 100

No the TIL and RESPA forms are required for those loans.

Question 101

What loan types are subject to TRID?

Answer 101

Most closed-end mortgage loans including

• construction only loans
• loans secured by vacant land or by 25 or more acres.

Question 102

What disclosures must be provided for TRID loans? (4)

Answer 102

• Loan Estimate
• Closing Disclosure
• Special information booklet
• CHARM booklet for ARM loans

Question 103

When is the loan estimate required to be provided?

Answer 103

Within 3 business days after receiving the application and no later than 7 business days before consummation (placed in the mail date counts)

Question 104

What is an application as defined by TRID? (6)

Answer 104

• consumers name
• consumers income
• SSN for credit report
• property address
• estimated value of property
• loan amount requested

Question 105

When are the timing requirements triggered for providing the loan estimate?

Answer 105

As soon as the bank receives the 6 pieces of information to be considered an application.

This does not necessarily mean the applicant has to have completed the written application form for the bank.

Question 106

What if the creditor determines within the 3 business day period that the consumers application will not be approved, or if the consumer withdrawals within that 3 day period? Do they still have to provide the LE?

Answer 106

No they do not. However, if it does not provide the LE and later consummates the transaction on the terms originally applied for, then they will be in violation.

if a consumer amends an application and is approved, the LE is required within 3 business days of the amended application.

Question 107

What is a business day for purposes of the LE?

Answer 107

day on which the creditor’s offices are open to the public for carrying out substantially all of its business function.

Question 108

What is a business day for the closing disclosure?

This applies to most other timing requirements under TRID.

Answer 108

Calendar days except Sundays and public holidays.

Question 109

Is the LE still required in 3 business days if some information is not reasonably available at the time the LE is made?

Answer 109

Yes, because a creditor can use estimates even if more precise info will be available later.

Question 110

Can a consumer waive the 7 bus day waiting period?

if so, When?

Answer 110

Yes, if the loan is needed to meet a bona fide personal financial emergency.

Consumer must proved a dated written statement describing the emergency, they they waive the waiting period, and is signed by all applicants.

ex: imminent sale of home due to foreclosure

Question 111

What charges are considered Zero Tolerance? (2)

These charges cannot exceed the amount disclosed on the LE unless a revised LE was provided.

Answer 111

• Fees for required services
• Fees paid to an unaffiliated third party if they could not shop for a third party, settlement service, or transfer taxes.

Question 112

What charges are considered 10% cumulative tolerance? (2)

The creditor may charge the consumer more than disclosed on the LE as long as the sum total of the charges does not exceed 10% of the sum disclosed.

Answer 112

• recording fees
• charges for third party services if:
• -the charge is not paid to the creditor or affiliate, and
• -the consumer is permitted to shop for the service

Question 113

What charges have variances that are permitted without tolerance limits?

Can charge more than the amount disclosed on the LE, but only if the disclosed charge was based on the best information available at the time of disclosure.

Answer 113

• Prepaid interest
• Property insurance premiums
• amounts placed in escrow, impound, reserve or similar account
• charges paid to third party service providers for services required by the creditor if the consumer can shop and selects a provider not on the provider list
• Property taxes, other charges paid to third party service providers for services not required by the creditor.

Question 114

When is a list of service providers required to be provided?

What is required to be on the list?

Answer 114

If a consumer is permitted to shop for a settlement service the creditor must provide this list no later than 3 business days after receiving the application.

The list must:

• identify at least one available settlement service provider for each service.
• state that the consumer may choose a different provider for the service.

Question 115

Can a revised list of service providers be issued to consumers?

Answer 115

Yes a creditor may issue a revised list when a settlement service is added as a result of a reason provided under 1026.19(e)(3)(iv)

Question 116

What if the amounts paid by the consumer at closing exceed the amounts disclosed on the LE beyond the tolerance allowed?

Answer 116

Then the excess must be refunded within 60 calendar days after consummation:

zero tolerance-any amount excess must be refunded

10% tolerance - the excess of the sum amount must be refunded.

Question 117

Can a creditor provide a revised LE for informational purposes?

Answer 117

Yes

Question 118

In what circumstances can a creditor provide a revised LE to reset tolerances? (6)

Answer 118

• Changed circumstances causing increased settlement charges above tolerances (ex: natural disaster adds closing costs due to damages, title insurer goes out of business so estimate no longer valid, new information provided that was not relied on at time of disclosure.)
• Changed circumstances that affect the consumers eligibility for the terms applied or for the value of the security for the loan. This in turn results in increased cost for settlement services beyond the tolerances. (ex: underwriting determines annual income is less than listed on app, co applicants where combined income was used to approve the loan but one borrower subsequently becomes unemployed.
• revisions requested by the customer (consumer grants power of attorney to consummate the transaction resulting in a new fee)
• rate locks after initial LE (rate lock changes interest dependent fees/terms)
• expiration of the LE
• construction loans

Question 119

When must a revised LE be provided after a rate lock?

What if the rate lock is on or after the closing disclosure is provided?

Answer 119

Within 3 business days after the interest rate is locked

A corrected CD must be provided at or before consummation.

Question 120

When does a LE expire?

Answer 120

if the customer does not indicate an intent to proceed within 10 business days (or any additional days provided by the creditor) after the LE was delivered/mailed

Question 121

When can a revised LE be provided for Construction loans?

Answer 121

If the loan involves financing of new construction and the creditor reasonably expects the settlement will occur more than 60 calendar days after the LE was provided

And if the LE clearly stated that any time prior to the 60 days the creditor may issue revised disclosures.

Question 122

Are creditors permitted to provide revised LEs for technical errors, miscalculations, or understatements of charges?

Answer 122

No these are not reasons for which creditors are permitted to provide revised LEs

Question 123

When must a creditor provide a revised LE for any of the permitted reasons?

Answer 123

Within 3 business days after receiving the info sufficient to establish that one of the permitted reasons has occurred.

Question 124

Can a creditor provide a revised LE on or after the creditor has provided the closing disclosure?

Answer 124

No, instead the creditor may used the initial or a corrected closing disclosure to reset tolerances provided the reason is permitted.

Question 125

Can a creditor impose a fee on consumer in connection with an application under TRID?

Answer 125

It depends.

A fee cannot be imposed until the consumer has received the LE and has indicated intent to proceed.

Question 126

What types of fees are restricted from being charged if the borrower has not received the LE or given intent to proceed?

What fees are allowed by exception?

Answer 126

• application fees
• appraisal fees
• underwriting fees
• other fees

The only exception to this exclusion is for a bona fide and reasonable fee for obtaining a credit report

Question 127

How can intent to proceed be documented for TRID?

Answer 127

One of the following ways unless the creditor requires a specific means of communication:

• Oral in person after LE delivery
• Oral over phone, email, signing a pre-printed form after receipt of the LE

Question 128

Is a consumers silence indicative of intent to proceed?

Answer 128

NO

Question 129

Can a creditor provide estimated terms to the consumer prior to the consumer receiving the LE?

Answer 129

Yes if at the top of the front page of the written estimate in 12 pt font it reads:

Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing the loan.

The written estimate cannot look like an LE or CD.

Question 130

Can a creditor condition providing the LE on a consumer submitting documents verifying the information related to the mortgage loan application?

Answer 130

NO

Question 131

When is a creditor required to provide the closing disclosure?

Answer 131

The customer must receive the CD no later than 3 business days before consummation of the loan.

Question 132

If a creditor mails the CD 6 business days prior to consummation, can you assume it was received on time?

Answer 132

Yes you can assume it was received 3 business days after sending.

Question 133

Can a creditor use estimates on the CD?

Answer 133

Yes as long as they use the best information reasonably available and act in good faith and use due diligence in obtaining the info.

However, the creditor must provide a corrected disclosure containing the actual terms at or before consummation.

Question 134

When must a creditor provide a corrected CD?

Answer 134

if any of the terms or costs of the transaction change prior to consummation. It must be corrected to contain the actual terms of the transaction.

It must be provided at or before consummation unless the correction requires a new waiting period.

Question 135

In what circumstance would there be a new waiting period from issuing a corrected CD? and what is the waiting period?

Answer 135

The creditor must provide the consumer with an additional 3business day waiting period prior to consummation if the APR becomes inaccurate, the loan product changes, or a prepayment penalty is added to the transaction.

Question 136

When is Consummation under TRID?

Answer 136

It occurs when the consumer becomes contractually obligated to the creditor on the loan, not when the consumer becomes contractually obligated to a seller in a RE transaction. This timing depends on state law

Question 137

When must the creditor provide the CD for timeshare transactions?

Answer 137

No later than consummation.

Question 138

In a transaction with multiple consumers, who should the creditor provide the CD to?

Answer 138

In non rescindable transactions, It may be provided to the consumer with primary liability.

In rescindable transactions, the creditor must provide the CD separately and meet the timing requirements for each consumer who has the right to rescind.

Question 139

Can a creditor use a mortgage broker or settlement agent to provide disclosures under TRID?

Answer 139

Yes as long as there is a contract and provided the third party complies with all relevant requirements for content, timing, and accuracy of the disclosures.

However, the creditor is still legally responsible for any errors or defects.

Question 140

What is the three day waiting period for TRID loans?

Answer 140

a loan may not be consummated less than 3 business days after the CD is received by the consumer.

However, this waiting period can be waived if the consumer has a bona fide personal financial emergency and requests to waive the waiting period.

Question 141

What is an average charge under TRID?

Answer 141

In general, the amount imposed on the consumer for any settlement service must not exceed the amount
the settlement service provider actually received for that service.

However, an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies the required conditions

Question 142

What are the conditions that must be satisfied to allow an average charge to be imposed? (4)

Answer 142

• charge is no more than the average amount paid for the service by or on behalf of all consumers and sellers for a class of transactions
• creditor or settlement service provider defines the class based on period of time, geographic area, and loan type
• they use the same average charge for every transaction in the class
• do not use the average charge for insurance, charge based on the loan amount or property value, or if doing so is otherwise prohibited

Question 143

What are the three categories of changes that require a corrected Closing disclosure?

Answer 143

• changes before consummation that require a new waiting period
• changes before consummation that do not require a new waiting period
• changes that occur after consummation.

Question 144

What changes before consummation would require a new waiting period?

Answer 144

If one of the following occurs after the original CD was provided and before consummation:

• Disclosed APR becomes inaccurate (if APR and finance charge are overstated because the interest rate decreased, APR is considered accurate and no new waiting period)
• The loan product changes
• Prepayment penalty is added

The updated CD must be provided within 3 days before consummation (new waiting period)

Question 145

In what circumstance would a creditor need to provide a new CD after consummation?

Any exceptions?

What are the timing requirements?

Answer 145

If an event in connection with the settlement occurs during the 30 calendar day period after consummation that caused the CD to be come inaccurate and results in a change in the amount paid by the customer.

Exception if the only changes were to per-diem interest. A corrected CD is not required in this case unless the change impacted more than per diem interest, then those changes and the per diem interest changes would need to be re disclosed.

Must be provided no later than 30 calendar days after receiving info sufficient to establish an event has occurred.

Question 146

When must a creditor provide a corrected CD due to non-numerical clerical errors?

Answer 146

No later than 60 calendar days after consummation.

An error is clerical if it does not affect a numerical disclosure, timing, delivery, or other requirements.

Question 147

How can a creditor cure a tolerance violation under TRID?

Answer 147

if the bank self identifies a tolerance violation, they can cure it by providing a refund to the consumer and providing a corrected CD that reflects the refund no later than 60 calendar days after consummation.

Question 148

What is the special information booklet, and in what circumstance must it be provided?

Answer 148

This is known as the home buying information booklet (your home loan toolkit: a step by step guide). Helps mortgage applicants understand the nature and cost of RE services.

And must be provided for loans using the LE and CD forms and is generally required for all consumer credit transactions secured by real property.

Question 149

In what circumstances does the creditor not need to provide the special information booklet for RE secured loans?

Answer 149

If the consumer is applying for a HELOC, they can provide the “what you should know about HELOCs” brochure

-or if the the consumer is applying for a RE transaction that does not have a purpose of purchasing a 1-4 family. (Refinancing, closed end subordinate lien, reverse mortgage)

Question 150

When must a creditor provide the special information booklet?

Answer 150

No later than 3 business days after receiving the consumer’s loan application

Unless the creditor denies the application or the consumer withdraws before the end of the 3 day period.

Question 151

What are the requirements for providing the special information booklet if there are multiple applicants?

Answer 151

The creditor may provide a copy to just one of them

Question 152

Are creditors allowed to make changes to the special information booklet or provide their own version?

Answer 152

no they are required to provide the one by the CFPB and can only make limited changes.

They should however insure they are always providing the most updated version of the booklet.

Question 153

Are creditors required to comply with TRID for disclosure of construction loans?

Answer 153

Yes as long as they are secured by real property or a cooperative unit.

Question 154

What are the two phases of a construction loan?

Answer 154

The first phase usually is an interest only period with several disbursements of funds until the construction is completed. Usually construction only loans the obligation is paid at this point.

If not then it is a construction to perm and it enters the second phase, where permanent financing is amortized as a standard mortgage transaction.

Question 155

For construction loans, can a series of advances be considered as one transaction under TRID?

What about for construction to permanent loans?

Answer 155

Yes as long as the agreement specifies up to a certain amount. In this case the bank can treat and disclose all advances as one transaction or as multiple.

The same is true for construction to perm loans. they can be treated and disclosed as one or two transactions.

Question 156

In a transaction that finances a dwelling that may be permanently financed by the same creditor, the construction financing phase and the permanent financing phase can be disclosed in what 3 ways?

Answer 156

• as a single transaction, with one disclosure combining both phases
• as 2 separate transactions, one disclosure each phase
• as more than 2 transaction, with one disclosure for each advance and one for the perm phase.

Question 157

What are the timing requirements for LE disclosures for Construction loans?

Answer 157

The same, within 3 business days of receiving the application and not later than 7 business days before consummation.

However, this would depend on if the bank is disclosing the applications as one transaction or multiple.

Ex: if the creditor receives an application for construction financing on one day and perm financing on another day, or if both are received on the same day.

Question 158

What are creditors required to provide to consumers applying for a closed end loan not subject to TRID?

Answer 158

The TIL disclosure.

ex: specified housing assistance programs for LMI loans not secured by real property like mobile home loans.

Question 159

What does the TIL disclosure include?

Answer 159

Payment schedule that must

• reflect all components of the finance charge. (amount financed, finance charge, APR, schedule of payments, etc. )
• all payments scheduled to repay principal
• interest
• any other finance charge payable by the consumer after consummation.

Question 160

Does the payment schedule, which is part of the TIL disclosure, include finance charges paid before or at consummation? (eg. odd days interest)

Answer 160

No these are considered prepaid finance charges and are not part of the payment schedule. They only are reflected as a deduction in the amount financed.

Question 161

Can the payment schedule, which is part of the TIL disclosure, include components beyond the amount financed and finance charge? (eg. insurance premiums, escrow taxes)

Answer 161

Yes these can be included at the creditors option, but when calculating the APR the creditor must disregard such amounts.

Question 162

Disclosures for variable rate loans must be given for what term of the transaction and what time period are disclosures based off of?

Answer 162

Disclosures must be given for the full term of the transaction and must be based on the terms in effect at the time of consummation.

Question 163

When must a creditor/servicer provide a consumer with an ARM adjustment notice after the initial rate changes (rate did not change payment amount)?

What if the first rate adjustment is less than a year from consummation?

Answer 163

They must provide the individual disclosure between 210 and 240 days before the first payment at the adjusted rate is due.

If the first payment at a new rate is due within the first 210 days after consummation, the creditor must provide the rate change disclosure at consummation.

Question 164

Can a creditor provide the rate adjustment notice to consumers with estimates of the new rate?

Answer 164

Yes if the new rate is unknown, the creditor can provide an estimate, but the notice must mention that its an estimate and it must be based on the index within 15 business days prior to the date of the disclosure.

Question 165

What types of loans are applicable to receiving rate change notices after consummation?

Answer 165

ARMs secured by the consumers principal dwelling with terms of more than a year.

Question 166

What is the rate change (no payment change) notice required to disclose?

Answer 166

1026.20(d)

Question 167

When must the rate change disclosures be provided for ARMs where the payment changes along with a rate change?

Answer 167

between 60-120 days before the first payment at the new amount is due.

Question 168

When must the rate change disclosures be provided for ARMs where the payment changes in connection with a uniformly scheduled rate change occurring every 60 days or more frequently?

Answer 168

Between 25-120 days before the first payment at the new amount is due.

Question 169

When must the rate change disclosure be provided for ARMs originated prior to January 10, 2015, in which
the contract requires the adjusted interest and payment to be calculated based on an index that is available on a date less
than 45 days prior to the adjustment date?

Answer 169

Between 25-120 days before the first payment at the new amount is due.

Question 170

When must the rate change disclosures be provided for ARMs where the first adjustment occurs within 60 days of consummation and the new interest rate disclosed at the time was an estimate?

Answer 170

As soon as practicable but no less than 25 days before the first payment at the new amount is due.

Question 171

What must the disclosures contain for a rate and payment change to an ARM loan?

Answer 171

1026.20 (c)

Question 172

What is the following considered:

When an obligation is satisfied and replaced by a new obligation to the original financial institution (or a holder or servicer of the original obligation) and is undertaken by the same consumer

are disclosures required in this situation?

Answer 172

A refinancing

and yes a complete set of new disclosures is required in this situation.

Question 173

What must the disclosure include on a refinance regarding the previous obligation finance charge?

Answer 173

The finance charge on the new disclosures must include any unearned portion of the old finance charge that is not credited to the exiting obligation.

Question 174

What transactions are not considered a refinance even if the existing obligation is satisfied an replaced by a new obligation? (5)

Answer 174

• renewal of an obligation with a single payment of P&I or with periodic interest payments and a final payment of principal with no change in the original terms.
• An APR reduction with a corresponding change in the payment schedule
• an agreement involving a court proceeding
• change in credit terms resulting from a consumers default or delinquency
• renewal of optional insurance purchased by the consumer and added to an existing transaction, if required disclosures were provided for the initial purchase of insurance.

Question 175

If the refinance is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor? (2)

Answer 175

• increases the rate based on a variable rate feature that was not previously disclosed
• adds a variable rate feature to the obligation.

Question 176

If at the time a loan is renewed, the rate is increased, is the increase considered a variable rate feature?

Answer 176

No this is just the cost of renewal as long as the new rate remains fixed during the remaining life of the loan.

Question 177

Are new disclosures required if the original debt is not cancelled in connection with a loan renewal?

Answer 177

No this is not considered a refinance.

Question 178

Is changing the index of a variable rate transaction to a comparable index considered adding a variable rate feature?

Answer 178

no

Question 179

What is the escrow closing notice?

Answer 179

Before cancelling an escrow account, an escrow closing notice must be provided to any consumers for whom an escrow account was established in connection with a closed-end consumer credit transaction secured by a first lien on a real property or dwelling, except reverse mortgages.

Question 180

What are the two exceptions to providing an escrow closing notice?

Answer 180

• if the escrow account that is being canceled was established in connection with the consumers delinquency or default on an underlying debt obligation.
• if the underlying debt obligation for which the escrow account was established is terminated through repayment, refinancing, rescission, or foreclosure.

Question 181

What are the timing requirements for providing an escrow closing notice if the borrower requests the cancellation?

Answer 181

The creditor or servicer must ensure the consumer receives the notice no later than 3 business days before the account is canceled.

Question 182

What are the timing requirements for providing the escrow closing notice if the account is cancelled by the creditor without request from the borrower?

Answer 182

They must ensure the customer receives the notice no later than 30 business days before the closure of the account.

Question 183

What must the escrow closing notice disclose?

Answer 183

(12 CFR 1026.20(e)(1)-

(2)):

Question 184

What are the requirements if an advertisement for closed end credit states specific credit terms?

Answer 184

It must only state those terms that actually or will be arranged or offered by the creditor.

The disclosure must be made clearly and conspicuously.

Question 185

What is required to meet the closed end advertising requirements that disclosures must be made clearly and conspicuously?

what about for dwelling secured credit ads?

Answer 185

To meet this standard in general, credit terms
need not be printed in a certain type size nor appear in any particular place in the advertisement.

For advertisements for credit secured by a dwelling, a clear and conspicuous disclosure means that the required information is disclosed with equal prominence and in close proximity to the advertised rates or payments triggering the required disclosures.

Question 186

If an ad for closed end credit states a rate of finance charge is must disclose?

Answer 186

The rate as an “annual percentage rate”. If it could increase after consummation, the ad must state that.

Question 187

Can ads for credit not dwelling secured list other rates besides the APR (interest rate)?

What if the credit is dwelling secured?

Answer 187

The ad must not state any other rate, except that a simple annual rate or periodic rate that is applied to an unpaid balance may be stated in conjunction with but not more conspicuously than the APR.

dwelling secured: It may not state a periodic rate, other than a simple annual rate, that is applied to the unpaid balance. The rate cant be more conspicuous than the APR.

Question 188

What are the triggering terms for closed end credit ads that required additional disclosures? (4)

Answer 188

• amount/% down payment
• amount/% any payment
• amount/% finance charge
• number of payment or period of repayment

Question 189

What must closed end credit ads state if it contains a triggering term? (3)

Answer 189

• amount/% of Down payment
• terms of repayment over full term of the loan including balloon payments
• the “annual percentage rate”, and if the rate may increase after consummation.

Question 190

What is required to be states for ads for the following: (3)

Ads for dwelling secured credit, other than radio or TV ads, that sate a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the advertised loan

Answer 190

• each simple rate of interest that will apply. In variable rate transactions, a rate determined by adding an index and margin must be disclose based on current info
• period of time during which each simple annual rate of interest will apply
• APR of the loan

Question 191

What 7 deceptive or misleading acts or practices are prohibited in advertisements for closed-end mortgage loans?

Answer 191

• Stating rates or payments for loans are “fixed” when they are not and are not disclosed as being fixed for only a limited period of time
• making comparisons between actual or hypothetical credit payments or rates when they are not available for that product or for the full term of the loan.
• endorsing a product as sponsored by the govt when they are not.
• displaying the name of the consumers current mortgage lender, unless the ad also prominently discloses that the ad is from a creditor not affiliated with the consumers mortgage lender.
• making claims of debt elimination if the product advertised would merely replace one debt obligation with another
• creating a false impression that the mortgage broker or lender is a “counselor” for the consumer
• in foreign language ads, using a low introductory “teaser” rate in a foreign language, while providing required disclosures in English.

Question 192

What are the general record retention requirements under TILA?

What about for mortgage loans?

Answer 192

two years after the date disclosures are required to be made or action is required to be taken

3 years, 5 for the CD

Question 193

What are the three coverage tests to determine if a loan is a high cost mortgage loan?

Answer 193

• the APR will exceed the average prime offer rate (APOR) as of date the interest rate is set by
• -6.5 for first lien
• -8.5% for first lien loans less than $50M or sub lien transaction
• The total points and fees exceed
• -5% of total loan amount for loans more than $20M
• -the lesser of 8% of total loan amount or $1M for loans less than $20M

-There is a prepayment penalty more than 36 months after consummation. Or the penalty exceeds more than 2% of the amount prepaid

Question 194

How do you calculate total loan amount?

Answer 194

The “total loan amount” (using the face amount of the note) for closed-end credit is calculated by taking the amount financed and deducting any cost listed in 12 CFR 1026.32(b)(1)(iii), (iv), or (vi) that is both included in points and fees and financed by the creditor. That includes all RE related fees (title examination, credit report, loan doc prep, escrow, notary fees, appraisal), credit insurance (life, property, loss of income, etc), and any prepayment penalty.

The “total loan amount” for open-end credit is the credit plan limit when the account is opened.

Question 195

Are prepayment penalties prohibited for high cost mortgages?

Answer 195

12 CFR 1026.32(d)(6) prohibits prepayment penalties for high-cost mortgages. However, if a mortgage loan has a
prepayment penalty that may be imposed more than 36 months after consummation or account opening or that is greater than 2 percent of the amount prepaid, the loan is a high-cost mortgage
regardless of interest rate or fees. Therefore, the prepayment penalty coverage test above effectively bans transactions of the types subject to HOEPA coverage that permit creditors to charge prepayment penalties that exceed the prescribed limits.

Question 196

What transactions are exempt from HOEPA coverage?

Answer 196

• Reverse mortgage transactions
• A transaction that finances the initial construction of a
dwelling;
• A transaction originated by a Housing Finance Agency,
where the Housing Finance Agency is the creditor for the transaction; or
• A transaction originated pursuant to the U.S. Department of Agriculture’s Rural Development Section 502 Direct Loan Program.

Question 197

What is the APR based on for HOEPA coverage?

since APR used to determine if a mortgage is high cost is different than that in TILA disclosures.

Answer 197

• If the APR will not vary during the length of the loan or credit plan (i.e., for fixed-rate transactions), the interest rate in effect as of the date the interest rate for the transaction is set
• If the interest rate may vary during the term of the loan or credit plan in accordance with an index, the interest rate that results from adding the maximum margin permitted at any time during the term of the loan or credit plan to the index rate in effect as of the date the interest rate for the
transaction is set, or to the introductory interest rate,
whichever is greater; or
• If the interest rate may or will vary during the term of the loan or credit plan other than as described above (i.e., as in a step-rate transaction), the maximum interest rate that may
be imposed during the life of the loan or credit plan

Question 198

what is a prepayment penalty?

Answer 198

Closed end: Charge imposed for paying all or part of the transaction’s principal before the date on which the principal is due

Open-end: charge imposed by the creditor if the consumer terminates the credit plan prior to the end of its term.

Question 199

For high cost mortgage loans, what is required to be disclosed before account opening/consummation in addition to the other applicable TILA disclosures? (5)

Answer 199

-notice including required language from 1026.31(c)(1)

• APR
• regular or minimum periodic payment and amount of any balloon payment
• for variable rate transaction, statement that the interest and monthly payment may increase, and the amount of the single max monthly payment based on the max interest rate required to be included in the contract
• the total amount borrowed for closed-end credit transactions or the credit limit (open end)
• -(closed end) if the amount borrowed includes charges to be financed, this fact must be stated and will be accurate if its not more than $100 above or below the amount required to be disclosed.

Question 200

What loan terms are prohibited under high cost mortgage loans? (3)

Answer 200

• negative amortization
• interest rate increases after default
• prepayment penalties

Question 201

What loan terms are restricted under high cost mortgages? (2)

Answer 201

• balloon payments

- due on demand clauses

Question 202

what types of balloon payments are permitted and restricted under high cost mortgage loans?

Answer 202

-Balloon payments more than 2x regular period payment are generally restricted except:

closed end:

• loan has payment schedule adjusted seasonally
• “bridge” loan maturing in 12 mos or less
• small creditor is rural underserved area

open end:
where the terms of the
plan provide for a draw period where no payment is
required, followed by a repayment period where no
further draws may be taken, the initial payment required after conversion to the repayment phase of the
credit plan is not considered a “balloon” payment.

However, if the terms of an open-end credit plan do
not provide for a separate draw period and repayment
period, the balloon payment limitation applies

Question 203

When are acceleration clauses or demand features permitted for high cost mortgages? (3)

Answer 203

• fraud
• consumer failed to repay/default
• action or inaction by consumer that threatens security interest of loan (failure to pay taxes)

Question 204

Can a creditor refinance a consumer’s high cost mortgage into a second high cost mortgage within one year of originating the first loan?

Answer 204

Not unless the second high cost mortgage is in the consumers interest.

Question 205

True or false: a creditor does not have to asses a consumers ability to repay for a high cost mortgage loan?

Answer 205

False: a creditor cannot make such loans without regard for the consumers repayment ability including the consumer’s current and reasonably expected income, employment, assets other than collateral, and current obligations, including any mortgage related obligations.

For both closed and open end credit.

Question 206

In addition to disclosures and confirming ability to repay, what else are creditors required to ensure consumers have for high cost mortgage loans?

Answer 206

They must receive written clarification that the consumer has obtained counseling on the advisability of the mortgage from a HUD approved counselor. Counseling must occur after the consumer receives the good faith estimate or initial TILA disclosure.

Question 207

What are the Late fee requirements for high cost mortgages?

Answer 207

Must be permitted by the loan terms and may not exceed 4% of the amount of the payment that is past due.

These charges are only permitted if the payment is not received by the end of the 15-day period beginning on the day the payment is due or, where interest on each installment is paid in advance, by the end of the 30-day period beginning on the day the payment is due

Creditors are also prohibited from pyramiding late fees (fee on fee).

Question 208

When must a creditor /servicer provide a payoff statement for a high cost mortgage loan?

Can they charge a fee for that statement?

Answer 208

Within 5 business days after receiving request for the statement

They cannot charge a fee for providing the statement but can charge a processing fee to cover the cost of providing the statement by fax or courier. This fee must be disclosed in advance with the option that other means would not result in a fee.

Question 209

What is a reverse mortgage?

Answer 209

non-recourse transaction secured by the consumer’s principal dwelling that ties repayment (other than upon
default) to the homeowner’s death or permanent move from, or transfer of the title of, the home

Question 210

What is a Higher priced mortgage loan? (3)

Answer 210

A closed end consumer credit transaction secured by the consumer’s principal dwelling with an APR that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by:

• 1.5 or more %pts for 1st lien loans with a principal that does not exceed the max set by Freddie Mac
• 2.5 or more %pts for 1st lien loans where the principal exceeds the max set by Freddie Mac
• 3.5 or more %pts for sub lien loans

Question 211

What is the Average Prime Offer Rate?

Answer 211

an APR that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgages that have low-risk pricing characteristics.

Table with APORs published by CFPB at least weekly. Available on FFIEC website.

Question 212

What are the main requirements subject to higher priced mortgage loans?

Answer 212

• verify consumer’s ability to repay
• Escrow requirement
• Appraisal requirement

Question 213

What is the escrow requirement for Higher Priced mortgage loans?

exceptions? (6)

Answer 213

a creditor may not extend a HPML secured by a first lien on a principal dwelling unless and escrow account is established before consummation for payment of taxes and mortgage insurance.

exceptions:

• transaction secured by shares in a cooperative
• transaction to finance the initial construction of a dwelling
• temp or bridge loans with a term of 12mos or less
• reverse mortgage
• creditors that operate in rural/underserved areas

Limited exception to establish escrow for property taxes only on loans secured by dwelling in a “common interest community” (master insurance policy community)

Question 214

What is the definition of a rural area?

Answer 214

A rural area is a county that is neither in a metropolitan statistical area or a
micropolitan statistical area that is adjacent to a metropolitan statistical area; or a census block that is not in an urban area, as defined by the U.S. Census Bureau
using the latest decennial census of the United States; or a county or a census
block that has been designated as “rural” by the CFPB pursuant to the application process established in 2016.

Question 215

What is a underserved area?

Answer 215

An underserved area is a county defined by using Home Mortgage Disclosure Act data for the preceding year to determine whether it is a county in which no more
than two creditors extended covered transactions secured by first liens on
properties in the county five or more times.

Question 216

To be considered a creditor that operates in a rural or underserved area, a creditor must? (4)

Answer 216

• during the preceding calendar year, must have made a covered transaction secured by a first lien property located in a rural or underserved area.
• must not have extended more than 2M covered transactions in the preceding calendar year
• have less than $2B in total assets as of the preceding Dec 31st
• creditor must not maintain escrow accounts for consumer credit secured by real property or a dwelling

Question 217

Can a creditor cancel an escrow account for a HPML?

Answer 217

Yes only upon the earlier of termination of the underlying loan or a cancellation request from the consumer 5 years or later after consummation.

However, cancellation cannot happen unless the unpaid principal balance of the HPML is less than 80% of the original value of the property securing the loan and the consumer is not currently delinquent or in default on the loan.

Question 218

What is the appraisal requirement for an HPML?

exemption? (8)

Answer 218

A creditor must not extend a HPML without first obtaining a written appraisal of the property to be mortgaged. The appraisal must be performed by a licensed appraiser and must include a physical visit of the interior of the dwelling.

exceptions:

• qualified mortgages under TILA, HUD, VA or USDA.
• extension of credit equal to or less than the applicable threshold amount (annually adjusted) 2021-$27,200
• secured by mobile home, boat or trailer
• for initial construction of dwelling
• loan with maturity of 12 mos or less (bridge loans)
• reverse mortgage
• refinancing as long as it meets 1026.20(a)
• secured by a manufactured home (conditions apply)

Question 219

What are the requirements for a refinance of an HPML to be exempt from the appraisal requirement? (3)

Answer 219

• credit risk is is retained by the person who held the credit risk for the existing obligation
• the regular periodic payments do not cause principal balance to increase, allow the consumer to defer repayment of principal, result in a balloon payment
• proceeds from refinancing are used solely to satisfy the existing obligation and amounts attributed solely to the cost of refinancing.

Question 220

What are the requirements for a manufactured HPML to be exempt from the appraisal requirement? (2)

Answer 220

• transaction is for a new manufactured home and land (appraiser does not need to physically visit the home)
• if the transaction is for the home and not the land as long as the creditor obtains invoice for the home, cost estimate of value, valuation is performed by an independent party.
• transactions secured by a used manufactured home and land are not exempt from the appraisal requirement.

Question 221

What is the safe harbor for appraisals on HPMLs?

Answer 221

A creditor may obtain a safe harbor for compliance with 12 CFR 1026.35(c)(3)(i) by ordering that the appraisal be completed in conformity with USPAP and the requirements applicable to appraisers in Title IX of FIRREA and its implementing regulations, verifying that the appraiser is certified or licensed through the National Registry; and confirming that the written appraisal contains the elements listed in Appendix N of Regulation Z.

Question 222

In what two instances would the creditor need to obtain additional appraisals before extending HPMLs?

Answer 222

• if the secured dwelling was acquired by the seller 90 or fewer days prior to the customer’s agreement to purchase the property and the price of the property has increased more than 10%
• When the dwelling was acquired by the seller between 91 and 180 days prior to agreement to purchase the property and the price has increased more then 20%

Unless the creditor can prove that circumstances do not require an additional appraisal (record of deed or property tax bill)

Question 223

What is required of a creditor if an additional appraisal is required on an HPML? (3)

Answer 223

• the additional written appraisal must be conducted by a different appraiser
• creditor can only charge for one of the two appraisals
• must contain an analysis of the price change due to market conditions.

Question 224

The additional appraisal requirements for HPMLs do not apply to the extension of credit that finance the acquisition of a property that is? (7)

Answer 224

• from a govt agency
• through foreclosure, deed in lieu, or other judicial procedures
• from a nonprofit as part of a govt program to acquire through foreclosure, etc.
• through inheritance or court order (divorce)
• from an employer or relocation agency
• from a servicemember who received a deployment or change in station after purchase
• located in a federal disaster area if FIRREA has been waived
• located in a rural county

Question 225

What are the disclosure and timing requirements for an appraisal on an HPML?

Answer 225

• disclosures no later than the 3rd business day after the creditor receives the application, or no later than 3 business days after the loan request becomes an HPML (ECOA disclosures or the LE model form after 2015 meets both ECOA and TRID requirements)
• copy of appraisal at no cost to the consumer no later than 3 business days prior to consummation of the loan. if it will not be consummated no later than 30 days after the creditor determines that the loan will not be consummated.

Question 226

What is a loan originator?

Answer 226

The term “loan originator” means a person who, in expectation of direct or indirect compensation or other monetary gain or for direct or indirect compensation or other monetary gain, performs any of the following activities:

• Takes an application, offers, arranges, assists a consumer in obtaining or applying to obtain, negotiates, or otherwise obtains or makes an extension of consumer credit for another person; or
• Through advertising or other means of communication represents to the public that such person can or will perform any of these activities.

Question 227

What type of loan originator compensation is prohibited? (3)

exemptions? (2)

Answer 227

They cannot receive compensation in connection with closed-end consumer credit transactions secured by a dwelling based on the term of a transaction. (term of a transaction: any right or obligation of the parties to a credit transaction)

Amount of credit is not a term of a transaction, provided such compensation is based on a fixed percentage of the amount of credit extended.

• dual compensation-additional compensation in connection with a transaction (from third party)
• prohibition on steering to loans based on the fact an originator will receive better compensation.

Exemptions: HELOCs, timeshare secured credit

Question 228

What type of loan officer compensation is permitted?

Answer 228

• compensation from a contribution/benefit plan that is a designated tax advantage plan
• compensation under a non-deferred profits based compensation plan that does not exceed 10% of total compensation and the LO was the originator of 10 or fewer transitions during the last 12 mos

Question 229

Is Negative amortization counselling required?

Answer 229

Yes a creditor may not extend a negative amortizing loan to a first time borrower in connection with a closed-end credit transaction secured by a dwelling, unless the creditor receives documentation the consumer has received home ownership counselling through HUD.

Question 230

When is the recipient of a transferred mortgage required to notify the consumer of a new owner?

Answer 230

No later than 30 calendar days after the date on which the mortgage loan is acquired or otherwise sold.

Question 231

What must the notice of new ownership contain? (6)

Answer 231

In writing in a form they may keep:

• identification of the loan that was sold, assigned, or transferred
• Name address and telephone number of new owner
• date of transfer
• name, address and telephone of agent or party who has right to receive notice of right to rescind and resolve payment issues on behalf of the new owner
• Location where transfer of ownership of the debt to the new owner is or may be recorded in public record, or that it has not been recorded yet.
• any other information the new owner would like to convey

Question 232

In what circumstances is a notice of new owner required?

Answer 232

Sale or Transfer for any consumer credit secured by principal dwelling and closed end consumer credit secured by a dwelling or real property.

open end HELOCs covered under first part.

Question 233

How should the notice of new owner be provided if there are multiple new owners?

Answer 233

In a joint acquisition, they must provide a single disclosure that lists all new owners. But can only list one owner for applicable disclosures that only pertain to one entity.

Question 234

What are the exceptions to providing the notice of new owner? (3)

Answer 234

• new owner sells, assigns, or transfers the mortgage loan on or before the 30th calendar day following the day they acquired the loan.
• transfer is in connection with a repurchase agreement
• new owner acquires only a partial interest in the mortgage and the party authorized to receive recession notices does not change.

Question 235

As part of the notice of new ownership (loan transfer), the creditor must provide what additional disclosures?

and what must they include? (4)

Answer 235

Information on the new owner’s partial payment policy. including:

• Heading “partial payment”
• if partial payments are accepted, a statement that the lender may apply them to the loan
• if partial payments are not applied to the loan, that the lender my hold partial payment in a separate account until the consumer pays the remainder of the payment before applying it to the loan
• if the lender does not accept partial payments
• statement that if the loan is sold, a new lender may have a different policy

Question 236

Who is required to provide periodic statements to the borrower for residential mortgage loans?

when are they required to be provided?

Answer 236

Creditors, assignees, or servicers my decide among themselves which of them will provide the required disclosures. However, a relationship where one party agrees to provide disclosures on behalf of other parties does not absolve other parties from legal obligations.

They must be provided within a reasonably prompt time after the payment is due or at the end of any courtesy period from the pervious billing cycle. Delivering, emailing, or mailing within 4 days of the closing of the courtesy period is generally acceptable.

Question 237

Periodic statements for residential mortgage loans are not required for? (7)

Answer 237

• reverse mortgages
• time share secured loans
• fixed rate loans where the servicer currently provides consumers with coupon books that contain account info, contact info, delinquency info, info obtain more about account
• small servicers
• mortgage loan while consumer is a debtor in bankruptcy
• charged off loans
• successor in interest if they have confirmed and assumed the loan

Question 238

What is a small servicer? (3)

What if they not longer are a small servicer?

Answer 238

As of January 1 for the remainder of the calendar year:

• services 5,000 or fewer mortgage loans
• meets the definition of a housing finance agency
• or is a nonprofit entity that services 5,000 or fewer mortgage loans

If a servicer no longer qualifies as a small servicer they have the later of 6 months from the time it ceases to qualify or until January 1 to come into compliance with requirements.

Question 239

What are servicers required to include on periodic statements? (7)

Answer 239

• Amount due (amount and explanation of amount)
• Past Payment Breakdown
• Transaction Activity
• Partial payment information (if applicable)
• Contact Info
• Account Information
• Delinquency info (if applicable)

Question 240

Servicers are required to include what on a periodic statement as part of the “amount due?”

Answer 240

They must include the due date, amount of any late payment fee, date fees may be assessed and the amount due which must be more prominent than other disclosures.

They must also include an explanation of the amount due, including monthly payment amount with a breakdown of what will apply to principal, interest, escrow, the total sum of fees/charges since the last statement, and any payment amounts past due.

-if there are multiple payment options the amount due must be disclosed for every payment option including the explanation.

Question 241

How must servicers disclose the amount due on a periodic statement when the mortgage loan has been accelerated?

What about the explanation of amount due?

Answer 241

If servicer will accept a lesser amount to reinstate an accelerated loan then:

-should indicate the amount due is only accurate for a specified period of time (as of, good through) and that they will reinstate the loan as of that date.

• On front page of statement explanation should list the reinstatement amount and the accelerated amount.
• -The monthly payment is not required to be disclosed.
• -statement indicating when the reinstatement amount will be accepted as of date (good through) and any special instructions.

Question 242

How must servicers disclose the amount due and explanation on a periodic statement when the loan is part of a temp loss mitigation program.

Answer 242

If the consumer has agreed to the program:
-amount due may identify either the payment amount due under the loss mitigation program or the amount due according to the loan

If the amount due identifies the amount under the temp program:
-the explanation must include both the amount due according to the loan contract and the payment amount under the temp program and that the amount due is disclosed different due to the temp program

Question 243

How must servicers disclose the amount due for permanent loan modifications on a periodic statement?

Answer 243

If the loan contract has been permanently modified, the amount due must identify only the amount due under the modified loan contract

Question 244

What must be included as part of the past payment breakdown on a periodic statement?

Answer 244

The total of all payments received since the last statement and the total of all payments received since the start of the calendar year, including, for each payment, a breakdown of how the payment(s) was applied to principal, interest, escrow, and/or fees and charges, and any amount held in a suspense or unapplied funds account (if applicable)

Question 245

What must be included as part of the transaction activity on a periodic statement?

Answer 245

A list of transaction activity (including dates, a brief
description, and amount) for the current billing cycle,
including any credits or debits that affect the current
amount due, with the date, amount, and brief description of each transaction;

Question 246

What must be included as part of the Partial payment information on a periodic statement?

Answer 246

If a statement reflects a past partial payment held in a suspense or unapplied funds account, information explaining what the consumer must do to have the payment applied to the mortgage. Information must be on the front page or a separate page of the statement or separate letter

Question 247

What must be included as part of the contact information on a periodic statement?

Answer 247

Contact information for the servicer, including a toll-free
telephone number and email address (if applicable) that the consumer may use to obtain information regarding the account. Contact information must be on the front page of the statement;

Question 248

What must be included as part of the account information on a periodic statement?

Answer 248

Account information, including the outstanding principal balance, the current interest rate, the date after which the interest rate may change if the loan is an ARM, and any prepayment penalty, as well as the web address for CFPB’s or HUD’s list of homeownership counselors or counseling organizations and the HUD toll-free telephone number to
contact the counselors or counseling organizations.

Question 249

How is the length of a consumers delinquency measured?

When would a consumer be considered delinquent?

Answer 249

As of the date of the periodic statement or the date of the written notice provided under 1026.41 (e)(3)(iv))

A consumer’s delinquency begins on the date an amount sufficient to cover a periodic payment of principal, interest, and escrow, if applicable, becomes due and unpaid, even if the consumer is
afforded a period after the due date to pay before the servicer assesses a late fee.

A consumer is delinquent if one or more periodic payments of principal, interest, and escrow, if
applicable, are due and unpaid

Question 250

When are servicers required to provide additional disclosures on the periodic statements regarding delinquency info?

what must they provide additionally? (7)

Answer 250

Servicers must provide consumers that are more than 45 days delinquent on past payments additional information including:

• Length of delinquency
• note on possible risks of being delinquent (foreclosure)
• An account history for either the previous six months or the period since the last time the account was current (whichever is shorter), which details the amount past due from each billing cycle and the date on which payments were credited to the account as fully paid;
• if applicable any loss mitigation that consumer has agreed to
• notice whether the servicer has initiated foreclosure process
• total payments required to bring account current
• a reference to homeownership counseling info.

The info should be grouped together and set off from other groupings of items (this can be accomplished through boxes)

Question 251

Can creditors add to the required disclosures for delinquency on the periodic statements?

Answer 251

yes as long as the additional info does not overwhelm or obscure the required disclosures. ex: escrow information may be included.

Question 252

Are servicers required to provide periodic statements to consumers in mortgage loan bankruptcy?

exemptions?

Answer 252

Yes, servicers are required to send modified periodic statements or coupon books while any consumer on a mortgage loan is a debtor in bankruptcy or if they have discharged personal liability for the mortgage loan under chapter 7, 11, 12, or 13 bankruptcy.

exemptions:

• if the debtor falls into the categories above and requests in writing that the servicer cease providing periodic statements
• if they surrendered the dwelling, provides avoidance of the lien or does not pay for the pre-bankruptcy arrearage

Question 253

What do the ability to repay requirements apply to?

exemptions?

Answer 253

ATRQM applies to most closed end mortgage loans

exclusions:

• HELOCs (unless for High cost mortgage, then required)
• timeshare mortgages
• reverse mortgages
• temp bridge loan (12 mos or less)
• Construction phase of loan
• loan made under the economic stabilization act of 2008.

Question 254

What 8 underwriting factors must creditors consider when determining a consumer’s ability to repay?

Answer 254

• current or reasonably expected income/assets
• current employment status if income is used for ATR
• monthly payments on any simultaneous loan loans secured by the same dwelling (HELOC consummated at the same time)
• monthly payment for mortgage obligations including property taxes
• current debt obligation, alimony and child support
• monthly DTI or residual income
• consumer’s credit history

Question 255

How should a creditor calculated the monthly mortgage payment on a covered transaction under ATR?

Answer 255

using the greater of the fully indexed rate or any introductory interest rate, and the monthly fully amortizing payments that are substantially equal during the loan term.

Question 256

What is considered a non-standard mortgage under ATR? (3)

Is it considered a covered transaction?

Answer 256

• an adjustable rate mortgage with an introductory fixed interest period of one year or longer
• interest only loan
• negative amortization loan

They are considered covered transactions.

Question 257

What is considered a standard mortgage under ATR? (5)

Is this a covered transaction?

Answer 257

• Periodic payments that do not cause the principal balance to increase, do not defer repayment of principal, or result in balloon payments
• Total points and fees not more than allowed
• term no greater than 40 years
• interest rate fixed for the first 5 years of loan
• proceeds used solely to pay off outstanding principal on non-standard mortgage and closing or settlement costs

These are considered covered transactions

Question 258

Holders of non-standard mortgages can refinance into standard mortgages without considering ATR requirements if what conditions are met? (3)

Answer 258

All must be met:

• The standard mortgage has a monthly payment materially lower than the non-standard
• creditor receives a written application no later than 2 months after the non-standard is recast
• customers made no more than 1 payment 30 days late on the non-standard mortgage during the last year. An no late payments more than 30 days in the last 6 months of the holder receiving the application for a standard mortgage.

Question 259

True or false:

Qualified mortgages that are higher priced covered transactions receive a safe harbor under the ability to repay provisions, which means the presumption of compliance cannot be rebutted.

Answer 259

False: this is only true for qualified mortgages that are NOT higher priced covered transactions.

Higher priced qualified mortgages receive a rebuttable presumption of compliance. The loan is presumed to comply with ATR, but the consumer would have the opportunity to rebut in future ability to repay litigation.

Question 260

What can a qualified mortgage not have? (5)

Answer 260

• negative amortization
• interest only payments
• balloon payments
• terms exceeding 30 years

For loans greater than or equal to $100M
-cannot have points and fees paid by the consumer that exceed 3% of the total loan amount

Question 261

What is the underwriting criteria for Qualified mortgages? (2)

What must they consider when calculating the DTI?

Answer 261

• monthly payment calculated based on the higher payment that will apply in the first 5 years of the loan after the date on which the 1st periodic payment is due
• total (back-end) DTI is less than or equal to 43%

DTI must consider and verify the consumer’s current debt obligations, alimony, and child support.

Question 262

Can portfolio loans be considered qualified mortgages?

Answer 262

Yes for certain small creditors, as long as they meet all the requirements (prohibitions). However, the creditor must verify the consumers income and debt obligations. But may do so without regard for Appendix Q or the 43% DTI threshold.

And for creditors with less than $10B in assets (covered institution) under EGRRCPA

Question 263

What is a private education loan? (3)

Answer 263

extension of credit:

• not made, insured, or guaranteed under Title 5 of the Higher education act
• expressly in whole or in part for postsecondary educational expenses regardless if the loan is provided to the educational institution
• does not include open end credit or any loan secured by real property or dwelling.

Question 264

Private education loan does not include an extension of credit in which the covered educational institution is the creditor if? (2)

Answer 264

• the term is 90 days or less
• an interest rate will not be applied to the credit balance, and the term of the extension of credit is one year or less

Question 265

What are the three stages of disclosures that must be provided for private education loans?

Answer 265

• application or solicitation disclosures
• approval disclosures
• final disclosures which must be provided at least 3 business days prior to the disbursement of loan funds.

Question 266

What rights of the consumer must be disclosed for private education loans? (3)

Answer 266

• if approved, consumer has right to accept the loan on the terms approved for up to 30 calendar days
• rate and terms of the loan will not change during that period, except for changes to the rate based on adjustments to the index used
• consumer has right to cancel the loan, without penalty, until midnight of the 3rd business day following the date the consumer receives the final disclosures.

Question 267

What is co-branding and how is it prohibited in private education loans?

Answer 267

Regulation Z prohibits creditors from using the name, emblem, mascot, or logo of a covered institution (or other words, pictures, or symbols readily identified with a covered institution) in the marketing of private education loans in a way
that implies endorsement by the educational institution.

Unless there is an equally prominent and close proximity disclosure that the educational institution does not endorse the creditors loans and is unaffiliated.

Question 268

What are the private education loan protections for students and cosigners in the event of death or bankruptcy? (3)

Answer 268

Loans agreed after 11/24/2018:

• creditor may not declare default or accelerate debt against a student based on bankruptcy or death of cosigner
• must release cosigners of their obligations related to the loan in death or bankruptcy of student (must notify and conduct in reasonable time)
• must give student the option to designate legal authority to someone in the event of their death.

Question 269

When are creditors required to assess a consumer’s ability to repay for a credit card? (2)

Answer 269

before opening a new account

increasing the credit limit on an existing account

Question 270

When assessing ATR for a credit card, TILA requires that issuers consider at least one of the following? (3)

Answer 270

• DTI
• Debt to assets
• income after paying debt obligations (residual income)

Question 271

Are credit card issuer’s required to assess a consumers ability to make the required payments, even though the minimum payment is unknown at account opening?

Answer 271

Yes, they are also required to maintain policies and procedures to consider a consumer’s income, assets, and current obligations. Issuer’s must use a reasonable method to estimate a consumer’s minimum payment. There are also safe harbors for this situation.

Question 272

What are the safe harbors for card issuers to estimate the required minimum periodic payment? (2)

Answer 272

• assume utilization, from 1st day of billing cycle, of the full credit line
• uses a minimum payment formula that includes interest charges and any mandatory fees

Both must match the account, interest, fees and product type associated with the account.

Question 273

TILA prohibits the issuance of a credit card to any consumer ____ or younger, unless what? (2)

Answer 273

-21 or younger

unless creditor has:

• information indicating that the underage consumer has independent ability to make the required payment
• the account has a cosigner, guarantor, or joint applicant who is over 21 and has the ability to repay

Question 274

What is required to increase a credit line on a credit card account for an individual under 21? (2)

Answer 274

• if account was opened based on the underage consumer’s independent ability to repay, increases must also assess the consumer’s independent ability to repay at the new credit limit or get a co-signer, etc.
• if the account was opened with a cosigner, the creditor must get written agreement from the cosigner before increasing the credit limit.

Question 275

What are the fee limitations on credit card accounts during the first year after account opening?

(account opening is the first day the account is available to use)

Answer 275

During the first year after account opening, issuers are prohibited from requiring consumers to pay fees that in aggregate exceed 25% of the initial credit limit at opening.

Fees for late payments, returned payments, pre consummation fees, and exceeding the credit limit are excluded.

Question 276

What are the penalty fee limitations on credit card accounts? (5)

Adjusted annually 2021

Answer 276

• $29 for paying late or violating account terms for first time
• $40 for additional violation of the same type during same billing cycle or 1 of next 6 cycles
• 3% of the delinquent balance on the charge card account that requires payment of outstanding balances in full at the end of each billing cycle if payment has not been received for 2 or more billing cycles.
• Penalty fees cannot exceed the dollar amount associated with the consumers violation (ex: charging $40 fee for not making a $20 min payment)
• Penalty fees cannot be assessed when there is no dollar amount associated with a violation, like inactivity fees, or declined transaction fees.

Question 277

How are payments required to be allocated for credit card accounts with different rates that apply to different balances?

Answer 277

allocate payments in excess of the minimum payment first to the balance with the highest APR and then to any remaining portion to the other balances in descending order based on the applicable APR.

-for deferred interest programs, payment must go to amount with deferred interest first.

Question 278

Are credit card issuers permitted to increase the APR during the first year of account opening?

What about after the first year?

Answer 278

No, but after the first year they can as long as they comply with the 45-day advance notice requirement.

Question 279

What is the consumer consent requirement for credit card accounts?

Answer 279

TILA requires an issuer obtain a consumer’s consent (opt in) before they can impose any fees on a consumer account for making an extension of credit that exceeds the account’s credit limit.

Issuer’s must disclose any fees or increased rates to the consumer when providing them the option to opt in.

Question 280

True or false: An issuer can only charge 1 over the limit fee per billing cycle on a credit card

Answer 280

True, also the issuer cannot impose an over the limit fee for the same transaction in more than 3 billing cycles.

Question 281

What 3 UDAP are there in connection with credit cards?

Answer 281

• Assessing an over-the-limit fee because the creditor failed to promptly replenish the consumer’s available credit;

• Conditioning the amount of available credit on the consumer’s consent to the payment of over-the-limit
transactions (e.g., opting in to an over-the-limit service to obtain a higher credit limit); and

• Imposing any over-the-limit fee if the credit limit is exceeded solely because of the issuer’s assessment of
accrued interest charges or fees on the consumer’s account.

Question 282

What are the special rules regarding marketing credit cards to students (2)?

Answer 282

• the marketing of a covered separate credit feature accessible by a hybrid prepaid-credit card and prepaid account and a prepaid account where a covered separate credit feature accessible by a hybrid prepaid-credit card may be added in the future, to students at an institution of higher education
• Limitations on the creditors ability to offer a college student tangible items to open an credit card account on or near the campus (1000ft) or at a campus sponsored event.

Question 283

Are credit card issuer’s required to disclose their card agreements online?

Answer 283

Yes issuers must post credit card agreements on their websites and submit them to the CFPB unless there are fewer than 10,000 open accounts

Question 284

Are credit card issuers required to reevaluate rate increases?

Answer 284

Yes, accounts subject to a rate increase must be reviewed no less frequently than once each 6 mos and if appropriate reduce the APR within 45 days after the evaluation. This could be from a rate increase due to creditworthiness, market conditions, based on factors not specific to the consumer.

Question 285

What is a hybrid prepaid-credit card?

Answer 285

A prepaid card that can be used to access the separate credit feature where the following two conditions are both satisfied:

• the card can be used to draw, transfer, or authorize either from a separate credit feature in the course of completing transactions to obtain goods, services, cash or P2P transfers
• The separate credit feature is offered by the prepaid account issuer, affiliate or business partner.

Question 286

True or false: The regulation prohibits structuring a hybrid prepaid-credit card to access credit through a negative balance on the asset feature of a prepaid account

Answer 286

true generally although there are some exceptions.

Question 287

What is the right of rescission period for credit secured by a consumer’s principal dwelling?

Answer 287

3 business days after becoming obligated on the debt

Question 288

What is required to be disclosed regarding rescission? (5)

Answer 288

Notice explaining:
-the creditor has a security interest in the home

• that the consumer may rescind,
• how they may do so,
• the effects of doing so, and
• the date the rescission period expires.

Question 289

To rescind a transaction, a consumer must notify the creditor in writing by midnight of the third business day after the latest of what three events?

Answer 289

• consummation of the transaction
• delivery of material TILA disclosures
• receipt of the required notice of the right to rescind

Question 290

Can a creditor disburse the monies prior to the end of the 3 day rescission period?

Answer 290

No, they cannot until they are reasonably satisfied that the consumer has not rescinded.

Question 291

What is a creditor required to do if a consumer rescinds a transaction?

Answer 291

creditor must refund all amounts paid by the consumer and terminate its security interest in the home (this includes any funds to third parties)

Question 292

True or false:

if the right to rescission notice or material TILA disclosures are not delivered or are inaccurate, the consumer’s right to rescind cannot be extended?

Answer 292

False: in this situation the right to rescind may be extended from three days up to three years.