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MLO Test 844 Affinity Facts > TILA REG Z > Flashcards

TILA REG Z Flashcards

1
Q
  1. The Truth-in-Lending Act (TILA) was passed by Congress in 1968 as part of the ____ ______ _____ ___
A

the Consumer Credit Protection Act.

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2
Q
  1. TILA is administered by the _______ ______ _____ _________
A

Consumer Financial Protection Bureau

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3
Q
  1. TILA was implemented by the Federal Reserve Board as Reg ___
A

Regulation Z

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4
Q
  1. TILA promotes the informed use of credit by disclosing finance charges in a uniform manner using the _____ _______ ______ .
A

Annual Percentage Rate (APR).

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5
Q
  1. TILA was enacted to protect consumers during ____ ______ .
A

credit transactions.

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6
Q
  1. TILA deals with ____,_____ and _____ of consumer loans.
A

credit, APR, & advertising

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7
Q
  1. Regulation Z applies to residential mortgages (1-4 units) and does not include _____ or other nonresidential loans
A

Not include Commercial Loans

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8
Q
  1. TILA applies to credit transactions payable in more than _____ installments.
A

four (4)

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9
Q
  1. TILA Disclosures include
A

Loan Estimate (LE), Closing Disclosure (CD), Consumer Handbook on Adjustable-Rate Mortgages (CHARM Booklet), the When Your Home is on the Line Booklet, ARM Disclosures, Notice of the Right to Rescind Disclosures ,and Balloon Payment disclosures.

An acronym is BRAWLCCT
B alloon Payment Disclosure
R ight to Reccision
A rm disclosures
W hen Your Home Is On The Line
L oan Estimate
C harm Booklet
C losing Disclosure
T ransfer of Mortgage

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10
Q
  1. Regulation Z covers three general areas:
A

1.disclosure of financing charges.

2.distribution of the Consumer Handbook on Adjustable-Rate Mortgages (CHARM) booklet

  1. the right of rescission.
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11
Q
  1. The CHARM booklet is required to be provided to the borrower when he/she received an _____ - ____ ______
A

adjustable-rate mortgage.

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12
Q
  1. The “When Your Home is on the Line” disclosure is required to be provided to the borrower if he/she received ________
A

a Home Equity Line of Credit (HELOC) or Home Equity Line of Credit Loan.

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13
Q
  1. The Transfer of Ownership Disclosure requires that .
A

entities that purchase or acquire
mortgage loans notify the borrower and provide the name, address, and telephone number of the new owner of the mortgage, within 30 days of acquisition

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14
Q
  1. The Transfer of Ownership Disclosure
A

only applies to primary mortgage.

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15
Q
  1. Do not confuse the Transfer of Ownership Disclosure with the Transfer of Servicing Disclosure.
A

The owner of the loan and the servicer of the loans are frequently separate entities

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16
Q
  1. ARM Disclosure - Some disclosures under TILA are specific to adjustable rate mortgage loans (ARMs). Loan servicers must provide a borrower with an ARM at least
A

60 days’ notice before an interest rate change occurs if that change will result in a new payment.

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17
Q
  1. The Loan Estimate (LE) is a ____ disclosure and is required to be provided to the borrower at or within three days of the initial application. It provided the borrower the potential/estimate of what the closing cost will be.
A

TILA

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18
Q
  1. According to TILA – a completed application requires use of a _____ page Loan Estimate, which discloses settlement service provider costs, the initial Annual Percentage Rate of the loan, Estimated Cash to Close the transaction, and other loan features.
A

3

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19
Q
  1. The Closing Disclosure (CD) is a _____ disclosure which is required to be provided to the borrower three days prior to loan settlement (doc signing), with a final copy of the CD provided at the actual settlement (doc signing). It provided the borrower with the actual closing cost.
A

TILA

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20
Q
  1. TILA requires the delivery of the five (5) page _____ ____ , which contains the final terms of the mortgage loan, loan costs, and various loan disclosures three (3)days prior to loan consummation. The Closing Disclosure combines the HUD 1Settlement Statement and the Final Truth in Lending disclosures
A

Closing Disclosure

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21
Q
  1. The ___ is not simply the interest rate that appears in the promissory note, known as the note rate. Rather it reflects certain finance charges associated with the loan, spread out over the life of the loan. Therefore, the ___ is generally higher than the note rate.
A

APR

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22
Q
  1. ___ disclosure must occur within 3 business days of receiving a signed loan application.
A

APR disclosure

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23
Q
  1. Another word used for APR is _______ ____.
A

Effective Rate.

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24
Q
  1. Other words used for Interest Rate are
A

Note Rate or Nominal Rate.

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25
Q
  1. Total Interest Percentage (TIP) ____________ _________ This is different from the APR, which is the total interest + all fees, expressed as a percentage.
A

total interest being charged on the loan expressed as a percentage.

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26
Q
  1. Whenever an MLO quotes an ____ _____ to a consumer – whether orally or inwriting, including advertisements, websites, etc. – TILA requires that the APR must be
    disclosed, even when the consumer simply calls for an interest rate quote.
A

Interest Rate

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27
Q
  1. The Mortgage Disclosure Improvement Act (MDIA) states that: Initial disclosures are required within 3 business days of receipt of completed application. Earliest consummation is on the 7th business day after disclosures delivered/mailed. If redisclosure is required, consumer must receive corrected disclosure at least 3 business days before loan can be consummated
A
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28
Q
  1. According to TILA – the soonest that a loan can close is
A

7 (seven) business days after the disclosures have been delivered.

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29
Q
  1. REDICLOSURE is usually triggered when there is a change in the ___. The ___ is considered accurate if it does not vary (increase or decrease) from the ___ initially disclosed by more than: 1/8% (.125) for a regular transaction (30yr fixed) or more than 1/4% (.25) for an irregular transaction (anything other than a 30yr fixed).
A

APR

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30
Q
  1. TILA deals with
A

“advertising” of consumer loans

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31
Q
  1. TILA states that in advertising of consumer loans, if any ______ ____ is specified then the APR and the amount and terms of repayment must also be disclosed.
A

triggering term

32
Q
  1. Examples of triggering terms include statements such as: $500 down payment,$1,500 monthly payment, 5% interest rate, etc.
A

Numbers expressed as a percentage or a dollar amount are triggering terms

33
Q
  1. If an advertisement contains the APR, no other disclosure is needed
A

(it does not “trigger” additional disclosures)

34
Q
  1. Examples of non-triggering terms include statements such as: 5% APR, easy monthly payments, terms to fit your budget, etc
A

APR is not a triggering term, Words not expressing dollar amounts or percentages are not triggering terms.

35
Q
  1. TILA is the law that established the ________ rule. This rule provides a 3-business day cooling-off period for a consumer who uses his primary residence as security for a refinance, home improvement loan, HELOC, or second mortgage loan.
A

“Right of Rescission’’ rule

36
Q
  1. According to TILA – there is “No Right of Rescission” on a _______, ______ or _______ ________ .
A

purchase, 2nd home or investment property.

37
Q
  1. According to TILA – each borrower must receive
A

two (2) copies of the notice/right to rescind.

38
Q
  1. If a borrower was not properly notified of their “right to rescind”, the rescission period could be extended for up to ____ _____ .
A

three years.

39
Q
  1. The rescission period expires at midnight of the ___ day. The day of signing “is not” day one – it’s the next day.
A

3rd

40
Q
  1. If money was collected and a borrower rescinds, escrow has
    How many days to return any money collected to the borrower?
A

20 days

41
Q
  1. The Truth-in-Lending Disclosure must be delivered at least ___ business days prior to
    funding for reverse mortgages, equity lines of credit, mortgages secured by a mobile home, and dwellings not attached to land
A

7

42
Q
  1. A finance charge is a fee the buyer would not pay if it were a cash deal.
A

For example, wire transfers and mortgage interest payments contribute to the calculation of the APR, while hazard insurance and home inspections do not

43
Q
  1. Finance Charges for the purposes of calculating the APR: Interest, time, price differential and any amount payable under an add-on or discount system of additional charges. Also, may include service, transaction, activity and carrying charges, including any charge imposed on a checking or other transaction account to the extent that the charge exceeds the charge for a similar account without a credit feature. Points, loan fees, assumption fees, finder’s fees and similar charges are also considered finance charges
A
44
Q
  1. Finance Charges are the
A

costs of obtaining credit paid by the consumer, expressed as a dollar amount

45
Q
  1. Finance Charges for the purposes of calculating the APR do not include Seller’s points, Interest forfeited because of an interest reduction required by law on a time deposit used as security for an extension of credit.• Also does not include fees in a transaction secured by real property or in a residential mortgage transaction, if bona fide and a reasonable amount, including fees for title examination, abstract of title, title insurance, property survey and similar purposes.• In addition, fees for preparing loan-related documents, such as deeds, mortgages and reconveyance or settlement documents, notary and credit report fees, property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest infestation or flood hazard determinations are not included.
A

I hope you read that

46
Q
  1. According to the Truth-in-Lending Act, the term refinance applies to
A

the satisfaction of an existing obligation and its replacement by a new obligation.

47
Q
  1. According to the Truth-in-Lending Act, a dwelling is defined as
A

a residential structure which contains between one and four units.
(The units do not need to be attached to real property. A dwelling may also be an individual condominium unit or cooperative unit.)

48
Q
  1. According to the Truth-in-Lending Act, prepaid finance charges are charges which are
A

paid separately before or at the time of consummation or which are with held from the proceeds of the loan.

49
Q
  1. The Home Ownership and Equity Protection Act of 1994 (HOEPA) amends the Truth in-Lending Act and establishes requirements for
A

certain loans with high rates and/or high fees..

50
Q
  1. APOR – Average Prime Offer Rate.
A

Used to determine if loan is a Section 32 (High Cost) or a Section 35 (High Priced) loan.

(The loan’s APR is compared to the APOR to see if it triggers it to be a Section 32 or Section 35 loan.)

51
Q
  1. A loan will be considered a High Cost (Section 32) loan if its APR exceeds the APOR by more than
A

6.5% for a first lien OF $50,000 or higher,

8.5% on a first lien LESS THAN $50,000, and or 8.5% for a subordination lien,

52
Q
  1. In addition, a loan will be considered a Hight Cost (Section 32) loan if the points and fees exceed the following thresholds:
A

5% of the loan amount for loans equal to or greater than $21,549 or 8% of the total loan amount or $1077 for loan mounts less than $20,579.

53
Q
  1. A loan will be considered a High Priced (Section 35) loan if its APR exceeds the APOR by more than
A

1.5%, 2.5% for jumbo first-lien loans, and 3.5% for subordinate liens

54
Q
  1. Section 35 Loans (High Priced Loans) are sometimes referred to as
A

“HPML” loans –High Priced Mortgage Loans.

55
Q
  1. Section 35 High Priced loans require the following:
A

impound account for the first five years, no prepayment penalty (unless it is limited to the first two years of the loan)and the lender must verify the borrower’s ability to repay the loan.

56
Q
  1. HIGH-COST (Section 32) home loans have the following restrictions: most balloon mortgages are prohibited, the borrowers must prove an ability to repay the loan, and the borrower must speak to a HUD-approved housing counselor.
A
57
Q
  1. Prepayment penalties are strictly prohibited in
A

high-cost loan.

58
Q
  1. In a HIGH-PRICED loan (Section 35) - Lenders must require a property tax and hazard insurance escrow account to be maintained for a minimum of five years if there is a first-lien high-priced home loan. The account can be canceled after five years if the LTV is 80 percent or less, and the borrower is current on the mortgage payments.
A
59
Q
  1. Prepayment penalties generally prohibited on higher-priced loans unless -
A

unless it is limited to the first two years of the loan.

60
Q
  1. The Loan Originator Compensation Rule is an amendment to the _____ __ ______ ___ and was written by the Consumer Finance Protection Board to address issues regarding loan originators’ compensation, expand the SAFE Act and implement additional issues identified in the Dodd-Frank Act
A

Truth-in-Lending Act

61
Q
  1. The Loan Originator Compensation Rule is an amendment to the _____ __ ______ ___ and was written by the Consumer Finance Protection Board to address issues regarding loan originators’ compensation, expand the SAFE Act and implement additional issues identified in the Dodd-Frank Act
A

Truth-in-Lending Act

62
Q
  1. The Loan Originator Compensation rule prohibits
A

dual compensation.

( Dual compensation means that a LO is restricted to getting paid by either the borrower OR the lender – but NOT BOTH.)

63
Q
  1. The Loan Originator Compensation rule YSP (yield-spread premium) as a form of compensation. This is a form of compensation wherein brokers and originators were able to increase their compensation by providing the borrower an interest rate higher than that which they qualified. Based on the RULE – compensation cannot be based on the loan terms the borrower receives.
A
64
Q
  1. A qualified mortgage is one that follows stated guidelines intended to - .
A

reduce a lender’s potential liability.

65
Q
  1. A qualified mortgage is a home loan that meets certain standards set forth by the federal government - one in which creditors are presumed to have met Ability-to Repay (ATR) requirements if they make a Qualified Mortgage.
A
66
Q
  1. A qualified mortgage has no excess points and fees. Points and fees paid by the borrower must not exceed ___% of the total amount borrowed, in order to be considered a qualified mortgage.
A

Must not exceed 3% of the amount borrowed

67
Q
  1. A qualified mortgage has no -
A

toxic features. No interest-only loans, no negative amortization loans, no balloon payments.

68
Q
  1. A qualified mortgage no terms beyond 30 years.
A

A qualified mortgage must have terms of 30 years or less.

69
Q
  1. A qualified mortgage limits the 𝙙𝙚𝙗𝙩-𝙩𝙤-𝙞𝙣𝙘𝙤𝙢𝙚 𝙧𝙖𝙩𝙞𝙤 – qualified mortgages granted to borrowers must 𝗡𝗢𝗧 have a back-end debt-to-income ratio 𝗵𝗶𝗴𝗵𝗲𝗿 𝘁𝗵𝗮𝗻 𝟰𝟯%.
A
70
Q
  1. Qualified Mortgage create safer loans by prohibiting certain high-risk products and features.
A
71
Q
  1. The eight (8) items that a lender must consider determining if a borrower meets the ability-to-repay (ATR) requirements include an evaluation of the following:
A

Current income or assets, current employment status, borrower’s credit history, monthly payment for the mortgage, borrower’s monthly payment on simultaneous mortgage loans, monthly payment on other mortgage related expenses (property taxes, insurance, etc.), other debts of the borrower, and his/her debt-to-income ratios.

72
Q
  1. Penalties for violation of TILA -
A

$5,000 per day for a single violation, $25,000 per day for reckless violations, $1,000,000 per day for knowingly violating TRID rules.

73
Q
  1. Business day: All calendar days except Sundays and legal public holidays (According to TILA)
A

-except for the Loan Estimate, which defines a business day as ANY day that the creditors office is open for business. For example, if a creditor’s offices are open to the public on Sundays and every Veterans Day, these days are considered business days.

74
Q
  1. Prepaid finance charges are used to calculate the APR. The following prepaid finance charges ARE included in the calculation:
A

• Origination fees• Discount points• Tax service fees• Underwriting fees/Processing fees• Prepaid/per diem interest• Mortgage insurance premium• Mortgage insurance impounds/reserves• Warehouse fees• VA funding fees• FHA UFMIP• Buydown• Flood certification fees• Closing fees• Courier fees (Lender)

75
Q
  1. Some fees ARE NOT included in the prepaid finance charges used in APR calculations:• Title Insurance• Escrows for taxes and insurance• Notary fees• Appraisal fees• Termite inspection fees• Credit report charges
A

MLO Test 844 Affinity Facts (15 decks)

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