Truth in Lending (Reg Z) Flashcards
What MUST be included in mortgage training as it relates to TILA-RESPA Integrated Disclosure (TRID)?
A. Disclosures must be provided at the time of application
B. Disclosures must be provided within three business days of application
C. Disclosures must be provided within five days of application
D. Disclosures must be provided within seven business days of application
B. Disclosures must be provided within three business days of application
Under the TRID provisions of Regulation Z, a Loan Estimate disclosure must be provided (delivered or sent) within three business days of the lender’s receipt of an application.
Business day in this context means any days that the creditor’s offices are open for carrying out substantially all of its business functions.
The 3 business days for not-in person disclosure is satisfied when the lender sends the disclosure, not when the applicant receives it. However, you cannot charge any fees outside a credit report fee until the applicant receives the LE and provides intent to proceed.
Which of the following would be considered a potential finding for credit cards?
A. Account payments were credited on the date received
B. Account payoff quotes were good for five business days
C. An account was reported “past due” after 30 days of nonpayment
D. An account had a credit balance for more than 60 days
D. An account had a credit balance for more than 60 days
According to Regulation Z, credit balances must be returned to the consumer in no more than seven business days if requested by the consumer. A credit balance of more than 60 days has the potential to be in violation of this provision; thus, it is a finding. Each of the other choices is not a finding as there is no potential regulatory violation in any of them.
A loan officer makes a purchase-money mortgage loan to enable a newlywed couple to purchase a 4-unit residential building. The couple will live in one unit and rent the other three units to low- and moderate-income families. The loan is for $800,000 for five years. Regulation Z does NOT apply to this loan because the loan is:
A. Covered under CRA.
B. For only five years.
C. For a business purpose.
D. For a multi-family dwelling.
C. For a business purpose.
Which of the following is the MOST helpful when validating an APR understatement?
A. The disclosed APR and actual APR
B. Total amount of payments on the TIL
C. Amount of prepaid finance charges
D. Amount of the collateral pledged
A. The disclosed APR and actual APR
To determine whether an APR has been understated, the two obvious data points are the disclosed APR and actual APR. Only then can you determine whether the difference is a compliance issue under Regulation Z. examining the total payments on the TIL disclosure and amount of prepaid finance charges are not enough to make that determination. And the amount of collateral has no bearing at all on an APR understatement.
A bank posted a complete set of the credit card agreements offered to customers on its public website. The compliance professional discovered that the bank made changes to the customer credit card agreements on June 30 and followed all the change-in-terms requirements. What else needs to be done in this situation?
A. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 1
B. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 31
C. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after December 31
D. Update the customer credit card agreements on the public website; the bank is not required to submit the revised agreements to the CFPB as long as the CFPB has the original agreements
B. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 31, 2023
Regulation Z requires that banks post on their public websites all their current credit card agreements. If changes have been made to any of those agreements, the changed agreements must be posted as well as providing the revised agreements to the CFPB no later than July 31 (30 days later). This is the requirement, not immediately (July 1) or by the end of the year (December 31).
A bank’s attorneys have drafted a new security agreement containing a “dragnet clause” stating that collateral securing previous loans will also secure any new loan made by the bank to the same customer. Which of the following statements describes Regulation Z’s requirements concerning disclosure involving this type of language?
A. Regulation Z does not deal with this type of disclosure, since this is a matter of state law.
B. Each time a subsequent loan is made, the bank must list the loan number and collateral of the former loan on the disclosure statement, and the borrower must initial that section.
C. At the time a subsequent loan is made, the bank must disclose that collateral securing previous loans will also secure this loan.
D. Collateral securing other loans may not be pledged to secure subsequent loans as set forth in Regulation Z.
C. At the time a subsequent loan is made, the bank must disclose that collateral securing previous loans will also secure this loan.
When evaluating a new student loan product, the compliance professional needs to verify that the offer of credit is valid for at least how long?
A. 15 days
B. 30 days
C. 45 days
D. 60 days
B. 30 days
Under Regulation Z’s requirement for Private Education Loans (PELs), rates and terms must be valid for at least 30 days.
If a creditor plans to make changes to the terms of a credit card, what must the creditor do before the changes take effect? Select all that apply.
A. Give the consumer the option to cancel the card before the changes take effect
B. Give the cardholder 60 days advance notice
C. Give the cardholder 45 days advance notice
A and C
What are the institution’s responsibilities regarding credit balances on open-end loans?
Must make a good faith effort to return/refund the balance to the consumer if the credit is on the account for more than 6 months.
The bank must refund the credit balance within seven business days from receipt of a written request from the consumer.
True/False: Creditors can charge a fee based on different payment methods, for example, phone payments vs online payments.
False.
For credit card accounts under an open-end (not home-secured) consumer credit plan, a creditor may not impose a separate fee to allow consumers to make a payment by any method, such as mail, electronic, or telephone payments, unless such payment method involves an expedited service by a live customer service agent.
When is a loan considered a Private Education Loan?
If the loan is for closed-end, non-real estate secured loans in which any of the funds of the loan is to finance post secondary education.
What is a bona fide emergency?
Loss of home or loss of health are generally the only two permissible bona fide emergencies per regulators.
Are there APR or finance change tolerances for open end credit?
A. Yes for both
B. APR only
C. Finance charges only
D. No for both
B. APR only
The basic disclosure tolerance for both open-end and closed-end credit is 1/8% (0.125%) above or below the precise APR.
Lenders can charge a fee of up to $__, or $__ if the violation is a repeat violation on a credit card.
$32, $43
The limits apply to penalty fees other than late fees for all card issuers (small or large), as well as late fees imposed by smaller card issuers.
Repeat violations means occurring during the same billing cycle or in one of the next 6 billing cycles.
For purposes of calculating an APR, an “irregular transaction” includes:
A. Multiple advance construction loans
B. A single payment loan
C. A loan with a final balloon payment
D. A loan with quarterly payments
A. Multiple advance construction loans
Which of the following is incorrect regarding credit card disclosure requirements?
A. 30 days notice for change of terms (rate or other significant changes)
B. Minimum payment disclosures
C. Late payment disclosures
D. Renewal disclosures for change of terms
A. 30 days notice for change of terms (rate or other significant changes)
It’s 45 days.
True/False: Special early disclosure requirements for credit card solicitations and applications do NOT apply to lines of credit assessed solely by account numbers.
True
How many days does a consumer have to make payments on a credit card from when the institution mails the statement?
A. 7 days
B. 14 days
C. 21 days
D. 30 days
C. 21 days
An institution must send periodic statements on an open-end loan if there is a _____ on the account.
balance
If a credit card creditor plans to change terms, it must send the consumer a notice 45 days before:
A. Increasing the interest rate
B. Changing certain fees
C. Making other significant changes to the terms of the account.
D. All of the above.
D. All of the above.
Card issuers cannot impose a fee for:
A. Declining to authorize a transaction
B. Inactivity, such as when the consumer is no longer using the account
C. Closing or terminating the account
D. All of the above
D. All of the above
Rescission provisions do not apply to which types of loans?
Purchase money loans, as well as refinances of the loan with no new money.
If new money was included, the ROR rules would apply to the new money.
If the institution sells a loan, are there any disclosure requirements?
Yes, Notice of Sale or Transfer must be sent to all loans that are secured by a borrower’s principal dwelling if their loan has been sold or transferred.
The notice must be sent by the purchasing institution (not the transferrer).
It does not apply when the asset is sold to affiliates if there is no change in the payee, address to which payment must be delivered, account number, or amount of payment due.
Does the periodic rate have to appear on the periodic statement of an open-end account?
Yes. Any periodic rate that may be used to calculate the finance charge, the type of the transaction and the range of the balances to which it applies and the corresponding APR are all required on the statement, in addition to some other requirements.
What are the types of QM?
A. Safe harbor and rebuttable presumption
B. Safe harbor and seasoned
C. Standard and rebuttable presumption
D. Standard and seasoned
Safe harbor and rebuttable presumption
Higher rates disqualify loans from safe harbor but may still qualify as a rebuttal presumption QM. Safe harbor is less risky from a legal standpoint.
If a loan is originated as a non-QM or as a rebuttal presumption but has a good payment history over the first 36 payment periods, the loan will then gain safe harbor QM status.
A credit card issuer cannot assess a fee on the consumer’s account for an over-the-limit transaction unless:
A. The card issuer gives notice describing the consumer’s right to consent or “opt in” to the payment of over-the-limit transactions
B. The creditor obtains the consumer’s consent to charge a fee to pay over-the-limit transactions.
C. Both A and B
C. Both A and B
If the loan meets the definition of HOEPA, what additional requirements are there? Select all that apply
A. Disclosure of HOEPA (warning and informs applicant they don’t have to go through with the transaction) 3 business days prior to closing
B. Prepayment penalty limitations, including a prohibition on penalties after 36 months since consummation
C. Fee limitations
D. Home ownership counseling
A, B, C, and D
When are appraisals required for Reg Z?
Consumer purpose home-secured loans.
What is a prepaid finance charge?
Finance charges paid at some point in time before repayment of the loan starts.
When must the appraisal disclosure for an HPML be delivered?
Disclosure must be delivered or mailed no later than 3 business days after application.
What private education loan requirement is a form from the school?
Certificate in the loan file from the college or university attended. This must be received prior to funding.
Are there any restrictions about credit card payment due dates?
Yes, it must be the same date each month (for example, the 15th or the last day of the month).
True/False: Consumer loans secured by the consumer’s principal dwelling, including HELOCs, are covered under HOEPA.
True
- TIP: There are 5 letters in HOEPA and HELOC.
When must a periodic statement for an open end loan (not a credit card) be delivered?
At least 14 days prior to the due date for the minimum payment.
If a grace period is applicable, periodic statements must be mailed or delivered at least 21 days before the grace period expires.
Among other things, a change-in-terms must contain:
A. A statement that the consumer has the right to opt out of the changes.
B. The date the changes are effective.
C. A statement that changes are being made to the account and a summary of those changes.
D. All of the above.
D. All of the above.
True/False: Prison time and fines can be handed out for Reg Z violations.
True
What is the prepayment penalties test for HOEPA?
More than _____ months after consummation or account opening OR in an amount more than ______% of the amount prepaid.
36 months, 2%
What is a Reg Z loan originator?
An individual that performs loan origination activities for compensation or other monetary gain.
Activities that make a LO:
- taking an application
- arranging a credit transaction
- assisting a consumer apply for credit
- offering or negotiating terms
- making an extension of credit
Is an application fee to all applicants a finance charge?
No, because this is paid regardless if the loan is originated or not.
Is a line of credit secured by a vacation rental considered a HELOC?
Yes
Who gets the Right of Rescission?
Anyone that has an ownership interest in the dwelling and who lives in the security property as their principal dwelling.
What disclosures are required at the time an application is provided or a non-refundable fee is paid on an ARM loan? What if it’s a telephone app?
CHARM booklet (Consumer Handbook on Adjustable Rate Mortgages) and Early ARM (program) disclosure.
if telephone app, must be delivered within 3 business days.
After being notified of a billing error, a creditor may continue to bill the consumer during the error resolution period only if the billing statement indicates that the disputed amount and related charges:
A. Will be refunded if the dispute is resolved in the cardholder’s favor.
B. Do not have to be paid before the situation is resolved.
B. Do not have to be paid before the situation is resolved.
Does a creditor have to consider the consumer’s ATR for credit cards?
Yes, but it’s not as rigorous as the mortgage ATR rules. Do not have to have reasonable documentation, can take a consumer’s word for it that they have the income.
What are the 8 minimum underwriting standards for ATR?
- Current or reasonably expected income or assets
- Current employment status
- Monthly payment on the covered transaction
- Monthly payment on any simultaneous loan
- Monthly payment for mortgage-related obligation
- Current debt obligations, alimony, child support
- Monthly DTI or residual income
- Credit history
What is the high fees test for HOEPA?
A. Total points-and-fees exceed 8% if the loan amount exceeds the threshold ($26,092), or 10% for smaller loans under the threshold.
B. Total points-and-fees exceed 8%.
C. Total points-and-fees exceed 5% if the loan amount exceeds the threshold ($26,092), or 8% for smaller loans under the threshold.
D. Total points-and-fees exceed 5%.
C. Total points-and-fees exceed 5% if the loan amount exceeds the threshold ($26,092), or 8% for smaller loans under the threshold.
When is an appraisal or credit report fee a finance charge?
A. Real property transaction
B. Residential mortgage transaction
C. All other transactions
C. All other transactions
Appraisals and credit report fees are finances charges if performed prior to closing (except for real property or residential mortgage transactions).
Which of the following are accurate disclosure requirements on a HELOC at the time of application? Select all that apply.
A. Provide program disclosures
B. Provide the booklet: What You Need to Know about Home Equity Lines of Credit.
C. Must be given at the time of application or within 3 business days if by phone.
D. Must be given prior to the application.
A, B, and C.
What is the rate for a safe harbor QM loan?
APR is lower than the QM threshold: 1.5% (first lien) or 3.5% (second lien) above APOR.
What is the false statement?
A. If a credit card has a variable rate tied to an index, the rate can go up whenever the index goes up without prior notification to the cardholder.
B. A change in credit insurance carriers need not be disclosed to the cardholder
C. If a creditor plans to decrease the credit limit, notification must be given before a penalty fee or rate increase can be imposed for exceeding the limit.
B. A change in credit insurance carriers need not be disclosed to the cardholder
Is an overdraft line of credit accessed by a debit card considered a credit card?
No
Which of the following are permitted compensation practices for Reg Z loan originators?
A. Receiving compensation based on interest rates or points
B. Receiving compensation from a lender or another party if the originator already received compensation from the consumer.
C. Directing or steering a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase a LO’s compensation.
D. Receiving compensation based on percentage of a loan amount.
D. Receiving compensation based on percentage of a loan amount.
What are the special appraisal requirements for a flipping loan that is also a HPML?
A. A second appraisal must be obtained, at no cost to the borrower, for homes purchased less than 90 days ago with a price raised by more than 10%, or for home purchased between 91 and 180 days ago with a price raised by more than 20%
B. A second appraisal must be obtained, at the borrower’s expense, for homes purchased less than 90 days ago with a price raised by more than 10%, or for home purchased between 91 and 180 days ago with a price raised by more than 20%
C. A second drive-by appraisal must be obtained, at no cost to the borrower, for homes purchased less than 90 days ago with a price raised by more than 10%, or for home purchased between 91 and 180 days ago with a price raised by more than 20%
D. A second appraisal must be obtained, at the borrower’s expense, for homes purchased less than 90 days ago with a price raised by more than 10%, or for home purchased between 91 and 180 days ago with a price raised by more than 15%
A. A second appraisal must be obtained, at no cost to the borrower, for homes purchased less than 90 days ago with a price raised by more than 10%, or for home purchased between 91 and 180 days ago with a price raised by more than 20%
If a consumer fails to pay the $10 minimum payment on their credit card, what is the maximum penalty fee the creditor can charge?
$10.
Reg Z prohibits penalty fees from exceeding the dollar amount associated with the violation.
Stan and Bernice Holland are joint account holders of a credit card with Citywide Financial. Stan has passed away. Is Citywide bound by Reg Z to notify the administrator of Stan Holland’s estate of the balance due on the credit card account?
No. Creditor notification is the executor’s duty. When someone dies, it is the executor of their estate who must notify all creditors, including credit card companies, about the death and outstanding debts.
Which of the following statements about Reg Z credit card rules is false?
A. A card issuer may never open a credit card account for a consumer under 21 years of age.
B. Reg Z prohibits credit card issuers from using two-cycle (or double-cycle) billing.
C. The total fees charged to a credit card account during its first year generally cannot exceed 25% of the initial credit limit.
A. A card issuer may never open a credit card account for a consumer under 21 years of age.
Individuals under the age of 21 can open a credit card account if they have a cosigner or show they are able to make payments on their own.
Double-cycle billing is a prohibited method of calculating credit card interest in which the interest is applied to the average of the prior two months’ outstanding balance.
The 25% credit limit on first year fees does not apply to penalty fees, such as late payment fees.
Formatting rules for periodic disclosures require that:
A. The due date must be disclosed on the first page of the statement
B. The amount of the late payment fee and the APR(s) must be stated in close proximity to the due date
C. The ending balance must be disclosed in close proximity to the minimum payment due.
D. All of the above
D. All of the above
Which of the following are true? Select all that apply.
In regard to credit card bills, generally, a credit card company must:
A. Mail or deliver a credit card bill at least 21 days before a payment due date
B. Use the same due date each month
C. Use a cut-off time for the due date that is no earlier than 5 pm
A, B, and C
True/False: Credit card creditors are NOT allowed to charge inactivity fees.
True. This is prohibited by Reg Z.
True/False: A card issuer cannot assess a fee for an over-the-limit transaction without obtaining the consumer’s consent to pay such transactions.
True
True/False: Creditors must provide account-opening disclosures in the form of a table with the headings, content and format substantially similar to the application and solicitation disclosures.
True
Rescission period runs until midnight of the third business day after:
A. Consummation of the loan
B. Delivery of 2 copies of the notice of the Right to Rescind to each eligible party
C. Delivery of material disclosures to each eligible party
D. Three business days from when all of the above are completed.
D. Three business days from when all of the above are completed.
If there’s a Change In Terms on an open-end account, when must the CIT be delivered to consumers?
At least 45 days before the adverse change.
For HELOCs, what early disclosures must be provided?
“What You Should Know About Home Equity Lines of Credit” and program disclosure.
These must be provided at the time of application. If the application is taken by phone, the Bank must send this disclosure within 3 business days.
True/False: A card issuer is prohibited from using offset on a cardholder’s deposit account to pay for or secure a credit card account unless the account was specifically secured by the deposit account when the credit card was created.
True
True/False: A disclosure pertaining to when an introductory rate may be revoked and the replacement rate (if applicable) must be included INSIDE the table on the account opening disclosures.
False. This information should appear directly below the table.
True/False: A creditor must credit a payment to the consumer’s account as of the date of receipt, except when a delay in crediting does not result in a finance or other charge.
True
If a credit card account has been opened, no increase in the credit limit may be made before the consumer attains the age of 21 unless a __ (who assumed liability at account opening) agrees in writing to assume liability on the increase.
A. Cosigner
B. Guarantor
C. Joint account holder
D. Any of the above.
D. Any of the above.
A woman is applying for an overdraft line of credit. She must receive account-opening disclosures:
A. Before she makes the first transaction of this open-end credit plan.
B. Before her institution sends the first periodic statement for this open-end credit plan.
C. Either of the above.
A. Before she makes the first transaction of this open-end credit plan.
What if the credit card payment due date lands on a weekend or holiday?
The cardholder has until the following business day to pay.
When are the account opening disclosures required to be delivered on an open-end account?
Before the first transaction.
What is the difference between a refinance and modification?
A refi requires new disclosures because it requires a new promissory note that replaces an existing one.
A modification means changes to the terms of an existing deal, but no new note or agreement.
True/False: In most cases, if an account holder makes more than the minimum payment on a periodic credit card bill, the card company must first apply the excess amount to the balance with the highest interest rate.
True
If the card issuer plans to make change to the terms of a credit card account, it must give the account holder:
A. Two weeks’ notice
B. One billing period to accept the changes
C. The option to cancel the card before the changes take effect.
D. All of the above.
C. The option to cancel the card before the changes take effect.
Is Saturday considered a business day for Right of Rescission?
Yes, regardless of whether the institution is open on Saturdays.
Can an institution delay funding of a rescindable loan after the third day until the bank is sure it won’t be rescinded?
Yes (subject to state law)
Generally, the total amount of fees charged during the first year of a credit card account cannot total more than __% of the initial credit limit.
25%
What are the three additional disclosures required for a private education loan?
A. Application disclosure
B. Approval disclosure
C. Loan estimate
D. Final Truth in Lending disclosure
A, B, and D
Application disclosure - at the time of application with general information about rates, terms, and fees, as well as an example of total loan cost
Approval disclosure - at the time of approval, with transaction specific information, including total repayment amount and maximum monthly payment
Final Truth in Lending disclosure - at closing with Right of Rescission language
True/False: Under no circumstances can a credit card issuer increase the interest rate for the first 12 month after an account is opened.
False
There are exceptions.
Can a creditor charge an over-the-limit fee?
Yes, but only if the credit card holder opts in to be charged (not only opts in for the coverage).
When must disclosures be provided on an open-end loan?
Before the first draw on the account
A card issuer must adopt reasonable procedures to ensure that periodic statements are mailed or delivered at least __ days prior to the payment due date disclosed on the statement
A. 10
B. 15
C. 21
D. 30
C. 21
True/False: If a consumer does not opt in to over-the-limit transactions and the credit card company allows such a transaction to go through, the issuer may still charge an over-the-limit fee.
False
What loan purpose is covered under Reg Z?
Loans primarily for personal, family or household purposes. If close to 50/50 consumer/commercial purpose, treat it as a consumer loan.
Which of the following is classified as a finance charge under Reg Z?
A. Voluntary credit life insurance
B. Construction loan inspection fee charged during the construction loan phase
C. Late charges
D. Initial flood determination fee
D. Initial flood determination fee
When must the billing error statement be provided to a consumer on an open-end account?
Annually or with periodic statements
A customer has just a received a periodic statement for a fixed-rate plan. Which of the following does NOT need to be included?
A. The account balance at the beginning of the billing cycle.
B. An identification of each credit transaction.
C. Any payments credited during the billing cycle.
D. A statement that the periodic rate may vary.
D. A statement that the periodic rate may vary.
Early application disclosures for credit card accounts must include which of the following in table format?
A. Annual or periodic fees
B. Balance transfer fees
C. The grace period
D. All of the above
D. All of the above
When must the Notice of Sale or Transfer be provided to the consumer?
Must be mailed or delivered on or before the 30th calendar day after the date of sale or transfer.
True/False: On periodic statements, it’s at the institution’s discretion whether to include any grace period offered.
False
Early disclosure requirements for credit card solicitations and applications apply to which of the following?
A. Telephone solicitations for credit cards
B. Applications for lines of credit accessed solely by account numbers
C. “Take one” brochures for credit cards
D. A and C
D. A and C
Closed end, non-mortgage: If there are multiple borrowers, does Reg Z require that disclosures be provided to each borrower?
No. Primary only if already determined.
A credit card company has increased the interest rate on an account after the first year. How does the new rate apply?
A. It applies only to new charges
B. It applies to new charges and the balance of the account
C. It applies only to the “protected balance”
A. It applies only to new charges
When must the appraisal for an HPML be delivered?
Copy of all written appraisals must be delivered no later than 3 business days before close. This waiting period cannot be waived, which is different than Reg B (Reg B can waive).
What is the definition of an ARM?
A. A mortgage with a variable rate that may go up, with a term of greater than 1 year.
B. A mortgage with a variable rate that may go up,secured by the borrower’s principal dwelling, with a term of greater than 1 year.
C. A mortgage with a variable rate that may go up, secured by the borrower’s principal dwelling if attached to real property, with a term of greater than 1 year.
D. A mortgage with a variable rate that may go up, secured by the borrower’s principal dwelling, with a term of greater than 5 years.
B. A mortgage with a variable rate that may go up, secured by the borrower’s principal dwelling, with a term of greater than 1 year.
What are the additional appraisal rules for HPMLs?
Appraisal must be done by a certified or licensed appraiser and include a physical inspection of the interior of the home, but not if the loan amount is $25,000 or less. The cost must be paid by the lender.
True/False: With a few exceptions, a credit card company cannot increase the interest rate for the first 12 months after a credit card account is opened.
True
Is an access card for a home equity line of credit a credit card?
No
What is the rate for a rebuttable presumption QM loan?
APR is higher than the QM threshold: 1.5% (first lien) or 3.5% (second lien) above APOR.
For purposes of rescission, a bank must use the following definition of a “business day:”
A. Monday through Sunday
B. Monday through Friday excluding federal legal holidays
C. Any day that the bank is open to the public for conducting substantially all of its business functions
D. Monday through Saturday excluding federal legal holidays
D. Monday through Saturday excluding federal legal holidays
What are the verification requirements for ATR?
Must obtain reasonably reliable supporting information to verify the information used to evaluate the 8 underwriting factors to determine the consumer’s ATR. Can’t rely on applicant’s word. Must verify.
True/False: If you offer a grace period on open-end accounts that are not credit cards, you may not treat a payment as late unless you send a periodic statement at least 21 days before the date on which any grace period expires.
True
Refinance or Modification? Changing the term from a variable rate to a fixed rate.
Refinance. Although we’re only changing a term, it requires redisclosure. This is an exception under Reg Z.
Credit card account-opening disclosures are required before:
A. The first transaction is made under the plan.
B. Any fee is collected.
C. An account that was closed is reopened.
D. All of the above.
D. All of the above.
When must a creditor provide a periodic statement for an open-end account?
At the end of each billing cycle in which the account has a finance charge, a debit, or a credit balance of at least $1.
What is the two-part analysis to determine if a fee is a finance charge?
- The lender requires the service. Can I get the loan without utilizing this service? Would the fee be required for a comparable cash transaction?
- The borrower pays the fee.
What is ATR? What does it mean?
Ability to Repay. The bank has to make a reasonable determination before the close of the loan to ensure the borrower has the ability to repay the loan.
Which of these changes requires a Change of Terms notice?
A. Increase of credit limit
B. Minimum periodic payment increased
C. One insurer substituted for another
D. Termination of credit priviledges
B. Minimum periodic payment increased
True/False: A creditor is prohibited from imposing a finance charge on any balances that were repaid within the grace period.
True
A card issuer that imposes an annual or other periodic fee to renew a credit card must mail or deliver written notice of the renewal to the cardholder ___ before a renewal fee is payable.
A. 30 days
B. One billing cycle
C. A or B, whichever is less
C. A or B, whichever is less
Generally, when is a TIL disclosure required for consumer credit to be used for personal, family, or household purposes?
A. When credit is subject to finance charges.
B. When credit is subject to finance charges or is to be repaid in 6 or more installments.
C. When credit is subject to finance charges or is to be repaid in 4 or more installments.
D. When credit is to be repaid in 12 or more installments.
C. When credit is subject to finance charges or is to be repaid in 4 or more installments.
Is setoff permitted on a credit card?
No, unless the consumer signed a prior agreement
If a bank originates certain high cost closed-end mortgage loans, it must be sure to avoid which of the following loan terms for such loans?
A. Due on sale clauses
B. Late charges
C. Adjustable rate
D. Negative amortization
D. Negative amortization
Closed end, non-mortgage: When must disclosures be provided?
Before or at the time of consummation
Delete What is the difference between a higher-priced covered transaction (HPCT) and an HPML?
A HPCT is a consumer credit transaction that is secured by a dwelling, including any real property that’s attached to a dwelling, in which the APR exceeds the APOR by 1.5% if a first-lien or 3.5% if a subordinate lien.
A HPML is a CLOSED-END consumer credit transaction that is secured by a PRINCIPAL dwelling, in which the APR exceeds the APOR by 1.5% if a first lien and 3.5% if a subordinate lien.
When a creditor makes a significant change in terms of a credit card account, the creditor must:
A. Provide affected consumers with a notice that includes a statement that the consumer may reject the change and continue to use the account for a period of 6 months under the existing terms
B. Provide affected consumers with a notice that includes a statement that the consumer may reject the change but the consumer’s ability to use the account for further advances will be terminated or suspended
C. Provide affected consumers with a notice that includes a demand for payment in full of the account balance with at least a 60 day grace period
D. Provide consumers with a statement of reasons for the change
B. Provide affected consumers with a notice that includes a statement that the consumer may reject the change but the consumer’s ability to use the account for further advances will be terminated or suspended
When comparing closing costs on the Loan Estimate form to the Closing Disclosure, which fees are subject to the zero tolerance?
A. Prepaid interest
B. Fees paid to unaffiliated third parties for services that the consumer is permitted to shop for
C. Origination charges
D. Recording fees
C. Origination charges
What does TILA cover?
Consumer credit that is subject to a finance charge or is payable in more than 4 installments.
If a loan is dual purpose, with 55% for business inventory and 45% for payment of personal credit cards, what percentage of the loan is subject to Reg Z?
0%
The lender determines the primary purpose of the loan. If more of the funds are for commercial needs, the primary purpose should be determined to be commercial – which is not subject to Reg Z. The entirety of the loan would be subject or not subject, depending on that primary purose.
Which of the following consumer loans is exempt from Reg Z?
A. $75,000 secured by a mobile home
B. $70,000 secured by a vacation home
C. $78,000 secured by a vacant property
D. $60,000 secured by primary dwelling
B. $70,000 secured by a vacation home
Consumer loans above the regulatory threshold ($69,500 for 2024) are exempt unless the loan is secured by a principal dwelling of the borrower or real estate. The principal dwelling can be a mobile home. Real estate means any land / ground / dirt.
Is there a maximum amount for loans secured by a principal dwelling property to be covered by Reg Z?
No
There is no maximum amount. If the loan is personal, family or household purpose, and to an individual and secured by real property or personal property that is used as the consumer’s principal dwelling, the amount could be anything and still be covered by Reg Z.
Which of the following are finance charges under Reg Z?
A. Car tax, tag & title if rolled into the car loan
B. Application fees paid if the applicant doesn’t get the loan
C. Interest on loan principal
D. Finders fees paid by seller
C. Interest on loan principal
What is the tolerance for Reg Z finance charge accuracy?
A. 2% of the amount financed
B. $5 if the financed amount is $1000 or less; $10 if more than $1000
C. 1% of the amount financed plus $10
D. $25 if the financed amount is $1000 or less; $50 if more than $1000
B. $5 if the financed amount is $1000 or less; $10 if more than $1000
What is the tolerance for Reg Z APR accuracy?
A. 1/8 of 1% for regular, 1/4 of 1% for irregular
B. 2% plus $5
C. 0.1%
D. $25 per year for regular, $35 of per year for irregular
A. 1/8 of 1% for regular, 1/4 of 1% for irregular
Which of the following loans are subject to the Ability to Repay (ATR) Rule?
A. A HELOC secured by a primary dwelling
B. Purchase of mobile home (not including land)
C. Reverse mortgage
D. Purchase of land for mobile home (not including mobile home)
B. Purchase of mobile home (not including land)
What rate cannot be exceeded for the safe harbor qualified mortgage?
A. 4 points above the average prime rate
B. 3.5 points and secured by a junior lien
C. 1.5 points if secured by a first lien, or 3.5 points if secured by a junior lien
D. 1.5 points and secured by a first lien
C. 1.5 points if secured by a first lien, or 3.5 points if secured by a junior lien
What loans are eligible to be a Qualified Mortgage?
A. A loan with an APR below threshold (1.5 points over APOR if secured by a first lien, or 3.5 points over APOR if secured by a junior lien)
B. Rebuttal presumption (above threshold but with a reasonable and good faith determination of ATR)
C. A seasoned loan with good payments over the first 36 months
D. A, B, and C
D. A, B, and C
The seasoned loan rule went into effect in March 2021; therefore, the first seasoned loans qualified in spring 2024.
Which of the following are the requirements to qualify as an Adjustable Rate Mortgage?
A. Secured by principal dwelling
B. Secured by any dwelling
C. Secured by principal dwelling and term is longer than 1 year
D. Secured by any dwelling and term is longer than 5 years
C. Secured by principal dwelling and term is longer than 1 year
The loan must be secured by the borrower’s principal residence, and the term of the loan is greater than one year
Are chattel dwelling loans (loans secured by mobile homes without land) subject to TRID?
No
TRID applies to closed-end consumer purpose loans that are secured by real estate or a co-op.
What information constitutes an application under TRID?
A. Name, SSN, income, property address, property value estimate, loan amount
B. Name, DOB, SSN, physical address, income, property address, property value estimate, loan amount
C. Name, SSN, physical address, property address, property value estimate, loan amount
D. Name, SSN, income, property address, loan amount, signature
A. Name, SSN, income, property address, property value estimate, loan amount
If an application for a TRID loan is received on a Thursday, when is the loan estimate due? Assume the bank’s teller windows are open on Saturdays, and the bank is closed on Sundays.
A. Following Thursday
B. Following Monday
C. Following Tuesday
D. Following Wednesday
C. Following Tuesday
The loan estimate has a three-day rule, which says that the creditor must deliver or mail that loan estimate no later than three business days after the creditor receives the application. Business days encompass the days that the creditor’s offices are open for carrying out substantially all of its business functions. At a minimum, the functions must include the availability of personnel to make loan disbursements, open new accounts, and handle credit transaction inquiries.
What methods can be used to calculate the LE receipt?
A. When you hand the LE to the applicant
B. Three mailing days after placing the LE in the mail
C. When the applicant tells you they received the LE
D. All of the above
D. All of the above
In-person receipt is assumed received upon delivery. If the LE is not provided in person, consumer is considered to have received it 3 business days after it is delivered (including electronic) or mailed (“mailing rule”). For non-in person delivery, business days means all days except Sundays and the legal public holidays (aka mailing days).
What is true about the mandated waiting period after the applicant’s receipt of the LE? Select all that apply.
A. 7 business days (mailing days) after mailing or delivery of the LE
B. Revised LE’s are not subject to a new 7-business (mailing) day waiting period
C. Applicant may request to waive or modify both periods (3 day receipt and 7 day waiting) based on a bona fide personal financial emergency
D. Lender can choose to accept or not accept applicant’s waiting period waiver request
A, B, C, and D: All of the above
The loan estimate has a seven-day rule that you have to deliver or mail the loan estimate, and then wait at least seven mailing days before you’re allowed to close the loan.
The applicant can waive the 3 and 7 day timing requirements in the event of a bona fide personal financial emergency. The lender can choose to accept the emergency and waive the requirements. The seven-day rule applies only to the provision of the original loan estimate.
True/False: The following are examples of valid change of circumstances that would allow for revised loan estimates without violating the tolerance requirements?
- Changed circumstances affecting settlement charges: such as a change in the borrower’s credit score or loan amount/program or property appraisal issues.
- Borrower-requested changes: such as change to the loan terms or a different settlement service provider.
- Extraordinary events: Unforeseen circumstances such as natural disasters, changes in tax laws, or regulatory changes that affect the cost of the loan or settlement charges.
- Information specific to the borrower or transaction: Newly discovered information about the borrower’s financial situation or the property being financed.
True
A “change of circumstance” refers to any event that affects the borrower’s eligibility for the loan or alters the terms or costs associated with the mortgage transaction. Valid changes of circumstance allow lenders to revise the Loan Estimate without violating the tolerance requirements under the TRID Rule.
The revised loan estimate must be issued within 3 days of when the changed circumstance became evident to the lender.
If you must cure a fee tolerance violation, what must you do? Select all that apply.
A. Refund the excess to the consumer within 30 calendar days.
B. Refund the excess to the consumer within 60 calendar days.
C. Deliver or mail a corrected closing disclosure within 5 business days of closing.
D. Deliver or mail a corrected closing disclosure within 60 calendar days of closing.
B and D
If the amount paid by the consumer at closing exceeds the amount disclosed on the LE beyond applicable tolerance threshold, the creditor must do the following:
- Refund the excess to the consumer no later than 60 calendar days after consummation, and
- Deliver or mail a corrected CD reflecting refund no later than 60 calendar days after consummation
What fees are subject to the zero tolerance under TRID rules? Select all that apply.
A. Transfer taxes
B. Lender fees
C. Fees paid to an affiliate of the lender
D. Fees paid to a third-party for a required service where the lender did not allow the borrower to choose a provider
A, B, C, and D - All of the above
What fees are subject to the 10% cumulative tolerance under TRID rules? Select all that apply.
A. Transfer taxes
B. Recording fees
C. Fees paid to a third-party for a required service where the borrower chose a provider from the lender’s list
D. Fees paid to a third-party for a required service where the lender did not allow the borrower to choose a provider
B and C
What fees are subject to unlimited tolerance under TRID rules? Select all that apply.
A. Prepaid interest
B. Property insurance premiums
C. Amounts in escrow account
D. Fees paid to a third-party for a required service where the borrower chose a provider from the lender’s list
A, B, and C
Third party fees that WOULD be subject to unlimited tolerance: Fees paid to a third-party for a required service where the lender did not select the provider
What the requirements for providing the closing disclosure? Select all that apply
A. The applicant and sellers must receive a CD
B. The mailing rule allows for 3 mailing days after putting the disclosure in the mail
C. The CD must be received 3 days prior to closing
D. You can make changes to the CD during the waiting period
A, B, C, and D
You can make changes to the CD, within the three days; however, some events require a new three-day waiting period.
John Doe applies for a mortgage loan to purchase a duplex townhome. He intends to rent the duplex and use it as a tax shelter for his full-time employment income. He states on the application that the purpose of the loan is investment, adding that the property will not be his primary residence. Which of the following laws or regulations does NOT apply to this transaction?
A. TILA/Regulation Z
B. ECOA/Regulation B
C. HMDA/Regulation C
D. Fair Housing Act (FHA)
A. TILA/Regulation Z
Reg Z does not apply in this situation, as the loan’s purpose is to purchase non-owner occupied rental property, and Regulation Z deems this to be a business purpose. ECOA applies to this loan, as fair lending principles apply to all extensions of credit, whether consumer- or business-purpose. Similarly, the Fair Housing Act applies to all housing-related extensions of credit, whether consumer- or business-purpose. And HMDA also applies, as the application would be HMDA-reportable as the loan is secured by a dwelling, and commercial-purpose loans are covered as well.
The compliance officer is tasked with responding to an examination report that contains findings alleging the bank did not properly address Regulation Z’s requirements applicable to higher-priced mortgage loans (HPMLs). When drafting the response, which of the following HPML requirements should the compliance officer address?
A. For HPMLs secured by first liens, the bank must escrow for taxes, insurance, and other costs for at least the first five years
B. For HPMLs secured by second liens, the bank must escrow for taxes, insurance, and other costs for at least the first year
C. For all HPMLs, the bank must escrow for taxes, insurance, and other costs for at least the first five years
D. For HPMLs secured by first liens but only the borrower’s principal dwelling, the bank must escrow for taxes, insurance, and other costs until the midpoint of the loan term
A. For HPMLs secured by first liens, the bank must escrow for taxes, insurance, and other costs for at least the first five years
The HPML provisions of Reg. Z require that for HPMLs secured by a first lien, the bank must escrow for at least the first five years. This requirement applies only to HPMLs secured by first liens, not all HPMLs. The requirement is for the first five years, not the midpoint of the mortgage loan term. And all HPMLs are secured by the borrower’s principal dwelling.
To determine whether your bank is a small servicer under Regulation Z’s definition of small servicer and thereby exempt from RESPA requirements for early intervention mortgage servicing notices, you should:
A. Determine your bank’s asset size as of December 31st of the prior calendar year
B. Determine the number of mortgage loans your bank originates together with any affiliates as of the current date
C. Determine the number of mortgage loans your bank services together with any affiliates as of the current date
D. Determine whether your bank is located in a rural or underserved county
C. Determine the number of mortgage loans your bank services together with any affiliates as of the current date
There are several requirements a servicer must meet to be considered a “small servicer” and thus exempt from providing early intervention notices. One of these is a volume test, meaning determining how many loans are serviced (not originated) by the bank and any affiliates. The asset size is relevant, but for each of the last calendar years, not just one. One of the loans serviced must be located in a rural or underserved area for the servicer to qualify, not the fact the bank may be located in one of these areas.
The compliance officer is formulating the business’s action plan to deal with issues related to the provision of periodic statements for home equity lines of credit. When monitoring to ensure statements are delivered timely, which of the following is an accurate statement of when HELOC statements must be provided to borrowers?
A. Statements must be delivered at least 14 days before the payment due date
B. Statements must be delivered at least 21 days before the payment due date
C. Statements must be delivered at least 30 days before the payment due date
D. Statements need not be provided if the borrower agrees to electronic provision of late notices
A. Statements must be delivered at least 14 days before the payment due date
Under Reg. Z’s open-end credit provision, periodic statements must be delivered at least 14 days before the payment due date. Credit card statements must be provided at least 21 days before the due date. There is no provision excusing the provision of statements if the borrower agrees to electronic provision of late (or any other) notices.
A bank’s credit standards for evaluating a consumer’s ability to repay a real estate mortgage loan should include:
A. Consideration of the number of deposit accounts held at other institutions
B. Consideration of the length of the deposit relationship with the institution
C. Consideration of the value of the property securing the loan
D. Consideration of the consumer’s monthly payment on any simultaneous loan
D. Consideration of the consumer’s monthly payment on any simultaneous loan
There are eight pieces of information a creditor must consider when evaluating the borrower’s ability to repay a covered mortgage loan, including consideration of the consumer’s monthly payment on any simultaneous loan. The number of deposit accounts at other institutions, length of any deposit relationship, and value of the collateral property are not included in these eight factors.
During an examination, it was discovered a bank did not send Regulation Z servicing letters when the bank merged with another bank. When should the business unit update the procedures to include this notice?
A. On the effective date of the transfer
B. At least 15 days before the effective date of the transfer
C. On or before 30 calendar days following the date of transfer
D. Within 60 days of the date of transfer
C. On or before 30 calendar days following the date of transfer
Regulation Z guidelines for updating the ARM program disclosures require the disclosures to be revised how often?
A. Annually, with the revision completed before October 1 of each year
B. Annually, as soon as reasonably possible after the new index becomes available
C. Every two years, before the expiration date printed on the disclosure statement
D. At the time the index rate changes by more than 2%, or semi-annually, whichever is more frequent
B. Annually, as soon as reasonably possible after the new index becomes available
A bank made a loan to two consumers entitled to the right to rescind the transaction under Regulation Z. One borrower requested that the bank allow him to waive the right of rescission. He signed a statement certifying that he needs the funds immediately to stop the foreclosure of his parent’s home. The other borrower did not sign a similar waiver. What can the bank do?
A. Accept the waiver, if the other borrower orally approves the waiver
B. Accept the waiver, since there is a bona fide financial emergency as set forth in Regulation Z
C. Not accept the waiver, unless both parties who have the right to rescind have executed the written statement
D. Not accept the waiver, unless the mother signs a statement certifying that she will lose her home if the disbursement is not made immediately
C. Not accept the waiver, unless both parties who have the right to rescind have executed the written statement
Can the right to rescind be waived?
Yes, but only under certain circumstances:
“Bona fide personal financial emergency”: loss of home or medical emergency are generally the only accepted events by the regulators
Get a written statement from the borrower (or both borrowers, if applicable) stating what the emergency is and that they understand that the right to rescind is being waived.
A customer wishes to lock his mortgage loan interest rate for a $100 rate lock fee. The rate may:
A. Be locked, but a fee may not be charged until the Loan Estimate is provided.
B. Be locked and the fee charged before the Loan Estimate is provided.
C. Not be locked until the Loan Estimate is provided.
D. Not be locked until at least three days after the customer receives the Loan Estimate.
A. Be locked, but a fee may not be charged until the Loan Estimate is provided.
The only fee a lender can charge before providing a loan estimate is for a credit report.
A compliance professional was recently asked to conduct compliance training on the TILA-RESPA Integrated Disclosure (TRID) enhancements. Which employees should be trained in detail on the closing disclosures and loan estimates?
A. Internal auditors
B. All loan originators
C. New account officers
D. The director of compliance
B. All loan originators
You learn that one branch is answering the phone with the tag line, “Come in and see us today about boat loans. Our current interest rate is 10%.” Which of the following describes your appropriate response?
A. Congratulate the branch for being creative in its attempt to generate more business.
B. The tag line must be discontinued immediately.
C. The tag line contains a trigger term but it falls under the regulatory exemption and is permissible.
D. The tag line does not contain a trigger term and no further action is required.
B. The tag line must be discontinued immediately.
Which of the following are permissible under Reg Z for a credit card? Select all that apply.
A. Rounding a $28.51 fee up to $29
B. Rounding a $28.49 fee up to $29
C. Rounding a $29 fee up to $30
D. Rounding a $28.49 fee down to $28
A and D
A card issuer may round any fee to the nearest whole dollar. For example, if a late payment fee is $21.50, the card issuer may round that amount up to the nearest whole dollar and impose a late payment fee of $22. However, if the late payment fee is $21.49, the card issuer may not round that amount up to $22, although they could round that amount down to $21.
Which requirements are correct regarding credit card balances with multiple interest rates? Select all that apply.
A. If you make more than the minimum payment on your credit card bill, the credit card company must apply the excess amount to the balance with the highest interest rate.
B. If you made a purchase under a deferred interest plan, the credit card company must let you choose to apply extra amounts to the deferred interest balance before other balances.
C. For two billing cycles prior to the end of a deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.
A and C
If you made a purchase under a deferred interest plan, the credit card company MAY allow you choose to apply extra amounts to the deferred interest balance before other balances.
True or False: An appraisal waiver can be granted for higher risk mortgage.
False. It cannot be waived. Copy of any written appraisal performed must be provided no later than 3 business days prior to close.
What can a loan originator’s compensation vary based on?
Amount of loan
NOT rate or points
What are the requirements for a private education loan?
A. 30 day guaranteed terms; Disclosures at application and upon approval; Disclosure with right to cancel at closing; Borrower certification form from college
B. 45 day guaranteed terms; Disclosures at application and upon approval; Disclosure with right to cancel at closing; Borrower certification form from college
C. 90 day guaranteed terms; Disclosures at application, upon approval, and at closing; Borrower certification form from college
D. 30 day guaranteed terms; Disclosure at application; Disclosure with right to cancel at closing; Borrower certification form from college
A. 30 day guaranteed terms; Disclosures at application and upon approval; Disclosure with right to cancel at closing; Borrower certification form from college
What loans are NOT subject to recision?
Home purchases or refinances of the same loan at the same bank with no new money.
Who has right to rescind?
Individual must have both:
- -principal dwelling
- -ownership interest
When does the recision period start running?
After the promissory note has been signed and all borrowers have received:
- 2 copies of recision notice
- final Closing Disclosure (Truth in lending disclosure)
How many days does borrower have to rescind a mortgage refinance?
3 days
If you’re buying a home with a mortgage, you don’t have a right to cancel the loan once the closing documents are signed. If you’re refinancing a mortgage, you have until midnight of the 3rd business day after the transaction to rescind the mortgage contract.
The three-day clock doesn’t start until all of the following occur:
1. You sign the credit contract (usually known as the Promissory Note)
2. You receive a Truth in Lending disclosure (in most circumstances, this will be your Closing Disclosure form)
3. You receive two copies of a notice explaining your right to rescind
The first business day after the last of these events counts as day one. For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays. For example, if the last of the above three events occurs on a Friday, and there are no legal public holidays in between, then you have until midnight on the following Tuesday to rescind.
You may use the form provided to you by the lender or write a letter. Whatever form of written notice you use, make sure it is mailed or delivered before midnight of the third business day.
If recision requirements are not met, how long does customer have to rescind?
3 years
If a borrower didn’t receive a Truth in Lending disclosure or the notice of right to rescind, or if they were incorrect, the borrower may be able to rescind up to three years from the date of closing.
Can recision period be wavied?
Yes, if the lender approves a bona fide personal financial emergency request in writing from all individuals with the right to rescind.
True or False: A bank cannot delay funding past 3rd day to ensure not rescinded.
False
They can delay and charge interest. Best practice is to get a signed copy of rescission notice prior to funding.
Consumer High Cost Mortgage loans are subject to certain limitations, including which of the following?
A. No variable rates of interest
B. No negative amortization
C. No escrowed accounts for taxes and insurance
D. Points and fees not to exceed 3 percent of the loan amount
B. No negative amortization
Per Reg Z, negative amortization is not permitted for any high-cost mortgage loan or line of credit. Variable interest rates are permitted, as are escrow arrangements. The points and fees limitation is generally 5%, not 3%.
In an audit of the institution’s adjustable rate mortgage loan portfolio you should test for:
A. CHARM Booklets provided to all borrowers at closing
B. CHARM Booklets provided to all applicants at the time of application
C. CHARM Booklets provided to all applicants at the time an application form is provided or before a nonrefundable fee is paid, whichever is earlier
D. CHARM Booklets provided to all borrowers within 3 business days of receiving a completed application
C. CHARM Booklets provided to all applicants at the time an application form is provided or before a nonrefundable fee is paid, whichever is earlier
As prescribed by Reg Z, when a consumer applies for an adjustable-rate mortgage (ARM), the CHARM booklet must be provided at the time of application or when a nonrefundable fee is paid, whichever is earlier, not at closing, just at application if the consumer paid a nonrefundable fee earlier, or within 3 days of receiving a completed application.
Which of the following represents the required method for providing a consumer with the insurance consumer protection disclosures in connection with a loan transaction?
A. At the time of loan application
B. Included in the Truth-in-Lending disclosures
C. In a separate written disclosure at loan closing
D. With the required settlement service provider disclosure
A. At the time of loan application
A bank is considering changing its business hours of operation. Currently, branches are not open on Saturdays and Sundays. The bank is considering opening all branches on Saturdays from 9:00 am to 11:00 am for routine teller transactions through the drive-up windows. The loan operations manager asks the compliance manager how this change will impact the process for mailing consumer loan disclosures to customers for mortgage loans. The compliance manager responds by explaining that:
A. The change will require the bank to consider Saturday as a business day for purposes of delivering Loan Estimates to consumers after receipt of an application
B. The change will not affect the timing of delivery of Loan Estimates to consumers after receipt of an application
C. The change will affect the timing of delivery of Revised Loan Estimates to consumers after receipt of an application
D. The change will require the bank to consider Saturday as a business day for purposes of the 7 day waiting period prior to loan consummation
B. The change will not affect the timing of delivery of Loan Estimates to consumers after receipt of an application
To be a “business day” under Regulation Z’s rules for delivery or mailing of the Loan Estimate, the bank must be open and carrying on substantially all of its business functions. Simply opening the drive-up windows for routine teller transactions is not enough to consider Saturday a “business day” for disclosure purposes, or any other related Regulation Z purpose.
First National Bank provided a Loan Estimate to Mary and Bill Johnson after receiving their mortgage loan application. The information on the Loan Estimate was based on information provided by the Johnsons on their application. Two weeks later, the bank is sending the Johnsons a Revised Loan Estimate. Under which of the following changed circumstances is the bank permitted to issue a revised Loan Estimate?
A. The customer had originally requested a rate lock, but the bank had neglected to disclose the rate lock fee
B. The bank disclosed $200 for an appraisal fee, but the affiliated appraiser that the bank usually uses is not available and the only appraiser that will conduct the appraisal charges $350
C. The borrower subsequently decides to lock the rate when the advertised rate falls 20 basis points
D. The bank provided the original estimate based on an application that did not include the property address, and now that the borrower has provided the property address, a revised estimate is necessary
C. The borrower subsequently decides to lock the rate when the advertised rate falls 20 basis points
Regulation Z permits a bank to provide a revised Loan Estimate in any circumstance if for “informational purposes,” but a revised Loan Estimate is required when a floating rate is locked. Errors by the lender, such as neglecting to disclose the rate lock fee or mis-disclosing the appraisal fee, are not considered changed circumstances. And provision of a property address does not necessitate the provision of a revised Loan Estimate.
You are concerned that the bank is disbursing funds before the right-of-rescission period has expired. Which of the following BEST describes the types of loans that you should examine for compliance?
A. Purchase-money mortgages
B. Refinancings of installment loans when no new money has been advanced
C. Home equity and ARM second mortgages
D. Renewals of home equity lines of credit with no new advances
C. Home equity and ARM second mortgages
Mr. and Mrs. Miller want a loan to purchase a 2-unit property. If the Millers plans to use one unit as a vacation property, how many days per year do they have to stay in the rental property for the loan to be Reg Z?
A. 30 days
B. 45 days
C. 15 days
D. 21 days
C. 15 days (More than 14)
Regulation Z has a rental property exception as follows:
If the property is non-owner occupied (14 days or fewer per year) and the purpose is to acquire, improve, or maintain the property, the loan is considered business purpose and is not covered by Regulation Z.
If the property is owner occupied (more than 14 days per year) and the loan is to acquire a property with 1 or 2 units, the loan is considered consumer credit and Regulation Z applies. If there are more than 2 units, the loan is considered business credit and is exempt from Regulation Z.
Mr. and Mrs. Miller want a loan to improve a 5-unit property. If the Millers plans to use one unit as a vacation property for a month a year, is the loan subject to Reg Z?
A. Yes, they met the owner-occupied standard.
B. No, they did not meet the owner-occupied standard.
C. No, the loan is business purpose.
D. The lender must decide if the loan is consumer or business purpose.
C. No, the loan is business purpose.
If a property has more than 4 units, the loan is considered business credit and is exempt from Regulation Z.
If the property is owner occupied (more than 14 days per year) and the purpose is to improve or maintain the property, 1 to 4 units are considered consumer credit which is subject to Regulation Z.
True/False: A loan to pay off consumer credit cards but secured by a 5-unit rental property is not subject to Reg Z.
False. The purpose is consumer.
When must a disclosure be provided for closed-end credit loans that are not subject to specific disclosure timings (such as HOEPA, ARM, education loans, etc)?
A. 3 days prior to closing
B. 10 days prior to closing
C. Before or at consummation
D. Within 15 days of consummation
C. Before or at consummation
What information must be included in the Fed Box for Reg Z closed-end loans?
A. APR, Finance charges, Amount financed, Total number of payments
B. APR, Finance charges, Amount financed, Total amount of payments
C. APR, Finance charges, Amount financed, Total amount of payments, Total number of payments
D. APR, Finance charges, Amount financed, Total amount of payments, First payment due date
B. APR, Finance charges, Amount financed, Total amount of payments
If a $40 loan application fee is withheld from the loan check given as closing, is the fee considered prepaid?
Yes, because it’s not being paid over the life of the loan.
Which loans are subject to the Ability to Repay provisions?
A. A construction loan to build a 4-unit rental property, if a dwelling is used as collateral
B. A construction loan to build a primary residence
C. A mortgage loan for a mobile home without the underlying land
D. A mortgage loan for a 5-unit property if one will be owner-occupied for more than 14 days/year
C. A mortgage loan for a mobile home without the underlying land
ATR is only applicable to closed-end loans that are secured by a dwelling, or a 1-4 family residential structure, whether or not attached to the underlying real estate. So, a loan to purchase a mobile home without the underlying land is subject to the ATR standard. HELOC and other open-end loans are not applicable. Business purpose loans aren’t applicable under Reg Z at all. Temporary loans or construction loans don’t need an ATR analysis either.
Must reasonably reliable third-party information used to validate an ATR analysis come directly from the third party?
No. The document must have been created by the third-party, but the applicant can provide it to you.
How can a lender make a reasonable and good faith determination that the consumer will have a reasonable ability to repay a loan according to its terms?
A. Collect 8 minimum underwriting factors with reasonably reliable third-party information
B. Finance a nonstandard mortgage loan to a standard loan
C. Make a qualified mortgage
D. All of the above
D. All of the above
What constitutes an adjustable rate mortgage?
A. Variable rate, secured by a dwelling, term is greater than 1 year
B. Variable rate, secured by the borrower’s principal residence, term is greater than 5 years
C. Variable rate, secured by the borrower’s principal residence with real estate, term is greater than 5 years
D. Variable rate, secured by the borrower’s principal residence, term is greater than 1 year
D. Variable rate, secured by the borrower’s principal residence, term is greater than 1 year
When must the ARM disclosures be given to a borrower?
A. Within 3 days of the application
B. At least 5 business days prior to closing
C. At least 3 business days prior to closing, unless the borrower signs a waiver
D. Before consummation
A. Within 3 days of the application
The CHARM booklet (Consumer Handbook on Adjustable Rate Mortgages) and program disclosure must be given at the time of application for in-person or online applications. For telephone applications for ARM loans, you have three days to deliver the disclosures to the applicant.
The CHARM booklet is the Consumer Handbook on Adjustable Rate Mortgages.
The program disclosure has all the details around the particulars of the variable rate plan in which the applicant expresses interest.
Which of the following represents the required method for providing a consumer with the insurance consumer protection disclosures in connection with a loan transaction?
A. At the time of loan application
B. Included in the Truth-in-Lending disclosures
C. In a separate written disclosure at loan closing
D. With the required settlement service provider disclosure
A. At the time of loan application
Can non-TRID TILA disclosures be combined with other disclosures?
No, they must be separate.
True/False: The following loans do not require TRID disclosures:
– HELOCs
– Chattel dwelling (e.g. mobile home without land) loans
– Reverse mortgages
– Loans made by a creditor who makes 5 or fewer mortgages in a year
True
How can you estimate the delivery of the loan estimate for mailed LE’s?
A. Five more precise business days (aka mail delivery days) after the LE is mailed
B. Three more precise business days (aka mail delivery days) after the LE is mailed
C. 5 calendar days after mailing
D. 3 calendar days after mailing
B. Three more precise business days (aka mail delivery days) after the LE is mailed
What Closing Disclosure change would trigger a new 3-business day waiting period after receipt?
A. A change to the APR
B. The loan product information has become inaccurate
C. The addition of a prepayment penalty
D. All of the above
D. All of the above
Which of the following is NOT true regarding appraisal requirements for a high-priced mortgage loan?
A. The special appraisal requirements only apply to HPML’s that are not qualified mortgages
B. Transactions less than $32,400 are exempt
C. Drive-by appraisals are not acceptable
D. HPML’s qualify for the under-$400,000 threshold exemption
D. HPML’s qualify for the under-$400,000 threshold exemption
HPML Appraisal Rules:
– Applies to HPMLs that are not QMs
– Appraisal by a certified or licensed appraiser is required
– Must include a physical inspection of interior of the property
– Transactions less than $32,400 (for 2024) are exempt
Can a borrower waive the requirement that the appraisal be provided no later than 3 business days prior to closing?
No
True/False: HPML appraisal rules contain the following timing requirements:
– An appraisal notice must be delivered no later than 3 days after the application is received
– A copy of the appraisal must be provided to the borrower no later than 3 business days prior to closing
True
Which of the below are exempt from Reg Z flip appraisal requirements? Select all that apply.
A. Government agency sales
B. Foreclosures
C. Non-profit sales
D. Rural areas
E. Federal disaster areas
A, B, C, D, and E
What is the points-and-fees dollar trigger for high-cost mortgage loans?
$1,305 in 2024
As of January 1, 2024, the points-and-fees dollar trigger for a high-cost mortgage loan is $1,305 if the loan amount is less than $26,092. If the loan amount is greater than or equal to $26,092, the points and fees must not exceed 5% of the total loan amount.
What is the upper threshold for a post-secondary education loan to be Reg Z applicable?
No threshold
True/False: PLE loans under Reg Z include open-end credit, real estate-secured, federal education loans, and those with at least 50% education purposes.
False. Open-end credit, real estate-secured, and federal education loans are all excluded. A mixed-purpose loan made for education purposes in any amount or percentage is included.
True/False: Purchase money loans are exempt from the right to rescind.
True. If the purpose of the loan is to purchase or construct the dwelling, the right to rescind does not apply.
Which of the following is a rescindable transaction?
A. Refinance with no new money
B. Cash-out refinance
C. Home equity loan
D. B and C
D. B and C
Which of the following is NOT correct regarding the right to rescind?
A. The borrower may rescind until midnight of the third business day following the closing.
B. The borrower must notify the lender of the rescission in writing.
C. When more than one consumer has the right to rescind, the exercise of the right by one consumer shall be effective as to all consumers.
D. Non-borrowers do not have a right to rescind a Reg Z transaction, even if they have an ownership interest in the property being used as security for the loan.
D. Non-borrowers do not have a right to rescind a Reg Z transaction, even if they have an ownership interest in the property being used as security for the loan.
To have the Right to Rescind, you must both own and live in the property.
In the following circumstance, who should receive the right to rescind notice?
Mother and son own a home.
Mother and daughter live in the home.
Son and daughter applied for credit, securing the loan with the home.
The mother only.
In a credit transaction in which a security interest is or will be retained or acquired in a consumer’ s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction.
The daughter doesn’t have an ownership interest, and the son isn’t using his primary residence as collateral.
Can the right to rescind period be waived upon the demonstration of a bonafide personal financial emergency?
A. No
B. Yes, if the creditor agrees.
C. Yes, if each consumer entitled to rescind signs a waiver.
D. Yes, if the creditor agrees and each consumer entitled to rescind signs a waiver.
D. Yes, if the creditor agrees and each consumer entitled to rescind signs a waiver.
Can a lender charge interest during the 3 day rescission period?
Yes, under Reg Z.
State law may be different.
What size dwelling can be collateral for a HELOC? Select all that apply.
A. A single family home
B. A 1-4 family residential structure
C. A vacation home that is not owner occupied
D. A 50-unit apartment building
A, B, and C
Do HELOC disclosures have to be in a form the consumer can keep?
Yes
Which of the following locations is prohibited from providing incentive or tangible items in return for a credit card application?
A. A college campus
B. A jointly-sponsored college event
C. Near the college campus
D. All of the above
D. All of the above
Under what age do you have to either require a cosigner or determine that the borrower has the independent ability to repay the loan?
A. 18
B. 21
C. 23
D. 25
B. 21
True/False: For open end credit, if you say finance charge, APR, or any other charges, you must disclose the transaction or other activity charges, the APR and if it is variable, and any participation fee (such as a membership fee).
True
True/False: For closed end credit, if you say downpayment information (in a credit sale), payment amount, number of payments or repayment period, or any finance charges, you must also disclose downpayment information (in a credit sale), terms of repayment, membership fees, and the APR and if it can vary.
False. You do not have to disclose membership fees.
Is a change from a fixed rate to a variable rate considered a refinance under Reg Z?
Yes, even if a new promissory note is not signed.
What are the APR tolerances?
A. 1/4%
B. 1/6%
C. 1/8% for fixed rate loans, 1/4% for adjustable rate loans
D. 1/6% for fixed rate loans, 1/4% for adjustable rate loans
C. 1/8% for fixed rate loans, 1/4% for adjustable rate loans
When is the Final Truth in Lending Statement due for HELOCs and reverse mortgages?
At closing or 1 day prior, if requested
What percentages qualify as a high cost loan pursuant to HOEPA?
A. First lien: more than 3.5% above prime; Second lien: more than 5.5% above prime; Total points-and-fees above 5%
B. First lien: more than 6.5% above prime; Second lien: more than 8.5% above prime; Total points-and-fees above 5%
C. First lien: more than 6.5% above prime; Second lien: more than 8% above prime; Total points-and-fees above 7%
D. First lien: more than 1.5% above prime; Second lien: more than 3.5% above prime; Total points-and-fees above 3%
B. First lien: more than 6.5% above prime; Second lien: more than 8.5% above prime; Total points-and-fees above 5%
When must the CFPB’s Home Loan Toolkit be provided to borrowers?
At application or within 3 business days if mailed.
The loan originator is not required to provide the booklet if the application is denied before the three-business-day period ends.
When is the Initial Interest Rate Adjustment disclosure due for ARM loans?
210-240 days before first rate adjustment
Must include:
Information regarding servicer
Effective date of new interest rate
New payment amount
When is the Ongoing Interest Rate Adjustment disclosure due for ARM loans?
Due 60 to 120 days before rate adjustment
Must include:
Information regarding servicer
Effective date of new interest rate
New payment amount
Are the TRID requirements applicable to banks that don’t fund more than 5 loans in a calendar year?
No
What is the cap for HOEPA loan late fees?
A. $15
B. $42
C. 4% of the past due payment
D. 6% of the past due payment
C. 4% of the past due payment
