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Federal Mortgage-Related Laws Exam
Questions And Correct Answers
The penalties for paying or accepting an illegal referral fee are: a. Fines of up to $5,000 and up to one year in prison b. Fines of up to $10,000 and up to one year in prison c. Fines of up to $10,000 and up to three years in prison d. Fines of up to $20,000 and up to one year in prison - answer b. Fines of up to $10, and up to one year in prison Finance charges always include which of the following? a. Mortgage broker fee b. Title insurance charges c. Document preparation fees d. Credit report fee - answer a. Mortgage broker fee For the purposes of rescinding a loan transaction, the phrase "business days" includes every day of the week except: a. Saturdays and Sundays b. Sundays c. Federal holidays d. Sundays and federal holidays - answer d. Sundays and federal holidays Five siblings have ownership rights to a property. If a refinance transaction affecting the property is subject to rescission, how many of these individuals must submit a rescission notice in order to void the loan? a. Any one of the five b. All five
c. A majority of the five d. At least two of the five - answer a. Any one of the five Who must receive a Notice of Right to Cancel in a refinance transaction? a. Anyone with ownership interest in the property b. Only parties who are signing the mortgage c. Only parties with 51% or more ownership in the property d. Only the primary borrower - answer a. Anyone with ownership interest in the property John and Jane Brown are co-owners of a property which is their principal residence and are entering into a refinance transaction that is subject to rescission. John is provided with one copy of the Notice of Right to Cancel, and Jane receives no disclosures. What is their deadline for rescission? a. Midnight on the third day following closing b. 72 hours after closing c. Three years after closing d. Three business days after closing - answer c. Three years after closing Which of the following fees is not included on the Good Faith Estimate? a. Loan origination fees b. Discount points c. Real estate taxes d. Real estate broker fees - answer d. Real estate broker fees The TIL Disclosure Statement for a regular loan transaction must be re-disclosed to a borrower if: a. The borrower rejects the APR stated on the initial TIL b. The APR changes by more than one quarter of 1% before closing c. The APR varies by more than one eighth of 1% before closing
application An initial servicing transfer notice must be provided to a borrower at least ____ days prior to the transfer of servicing on a loan. a. 15 b. 30 c. 45 d. 60 - answer a. 15 A lender has an affiliated business arrangement with a third-party service provider. Under what circumstances can the lender require a borrower to use particular services in a loan transaction? a. If there are no kickbacks or referral fees b. Only if the lender has an ownership interest of more than 1% c. If there are no kickbacks or referral fees and the service provider is an attorney, credit reporting agency, or appraiser d. Under no circumstances; this is strictly prohibited by RESPA - answer c. If there are no kickbacks or referral fees and the service provider is an attorney, credit reporting agency, or appraiser What is the primary purpose of the Truth-in-Lending Act? a. To ensure that creditors do not charge high interest rates on credit b. To ensure that third-party service providers do not charge high fees c. To ensure that creditors provide consumers clear disclosure of the terms of credit d. To ensure that applicants have equal opportunity to obtain credit from lenders - answer c. To ensure that creditors provide consumers clear disclosure of the terms of credit Which of the following is not true regarding RESPA's requirement to provide a list of homeownership counselors? a. The list may be no more than 60 days old b. The list must be obtained from the CFPB, or from HUD or CFPB data
c. It is the lender's responsibility to ensure that the applicant receives this list d. Reverse mortgage transactions and timeshare plans are exempt from this requirement - answer a. The list may be no more than 60 days old A lender is permitted to deny an applicant credit based on which of the following factors? a. The applicant receives public assistance b. The applicant has participated in a consumer credit counseling program c. The applicant lacks income stability d. The applicant is divorced - answer c. The applicant lacks income stability Under the Homeowners Protection Act, borrowers can request that lenders cancel PMI when their loan balance is less than ____, or a lender may collect PMI until ____ loan-to- value is reached. a. 65%; 50% b. 78%; 62% c. 80%; 65% d. 80%; 78% - answer d. 80%; 78% When must the TIL Disclosure be provided to the borrower? a. 30 days prior to closing b. Within three business days of application c. Within three days after closing d. At closing - answer b. Within three business days of application Which of the following documents discloses the annual percentage rate for a loan to a
c. Hand-deliver or mail the Good Faith Estimate and Affiliated Business Disclosure d. Hand-deliver or mail the Good Faith Estimate and TIL Disclosure - answer d. Hand- deliver or mail the Good Faith Estimate and TIL Disclosure When must a lender advise loan applicants about the status of their application? a. Within one week b. Within three days c. Within 30 days d. Within 90 days - answer c. Within 30 days What must be provided to a borrower if his/her loan application is turned down due to the credit score not meeting lender guidelines? a. Adverse action notice b. Copy of his/her credit report c. Loan options for - answer a. Adverse action notice What kind of loan transaction requires disclosure of the Settlement Cost Booklet? a. A new home purchase b. A reverse mortgage origination c. Refinance transaction d. Subordinate financing - answer a. A new home purchase The Gramm-Leach-Bliley Act specifies that a consumer must be given _________ to opt out before personal financial information is disclosed to a third party. a. Seven business days
b. 30 days c. A reasonable opportunity d. 90 days - answer c. A reasonable opportunity Which of the following scenarios would violate Section 8 of RESPA and its prohibition against unearned fees? a. A broker accepts a loan origination fee b. A broker charges $50 for obtaining a $50 credit report c. An attorney accepts payment for performing a title search d. A title company pays a mortgage broker $100 per client for referral of settlement business - answer d. A title company pays a mortgage broker $100 per client for referral of settlement business A borrower may request a copy of the HUD-1 how many business days prior to settlement? a. Seven b. Five c. Three d. One - answer d. One The APR must be re-disclosed on a regular loan if: a. It is more than 1% greater than it was at the time of its initial disclosure b. It varies by more than one eighth of 1% from its initial disclosure c. It varies by more than one half of 1% from its initial disclosure d. 30 days have elapsed since the time of the initial disclosure - answer b. It varies by more than one eighth of 1% from its initial disclosure
b. HMDA c. TILA d. RESPA - answer b. HMDA According to federal fair lending laws, which of the following facts cannot be considered when qualifying an applicant for a loan? a. A female applicant is four months pregnant and might not continue working once her baby is born b. A female applicant's credit report and application show gaps of several months between jobs over the past two years c. A disabled applicant's credit report shows several instances of 60- and 90-day late credit card payments d. A minority applicant does not have sufficient funds for a down payment - answer a. A female applicant is four months pregnant and might not continue working once her baby is born A borrower has applied for a refinance and is reading his TIL disclosure. When he asks why the APR and interest rate for the loan are different, his loan originator will tell him that: a. They should be the same, and a correction will be made b. The APR shows the rate before discount points are applied c. The APR reflects the interest rate plus the costs of obtaining the loan d. The numbers are accurate if they are only .25% apart - answer c. The APR reflects the interest rate plus the costs of obtaining the loan Under the Fair Credit Reporting Act, which of the following entities has the burden of protecting a consumer's privacy when his/her credit information is being reported? a. Mortgage broker
b. Credit reporting agency c. HUD d. The consumer - answer b. Credit reporting agency Settlement fees and other charges related to a loan transaction must be recorded on the HUD-1 Settlement Statement as: a. Actual percentages of the loan amount b. Estimated percentages of the loan amount c. Actual dollar amounts d. Estimated dollar amounts - answer c. Actual dollar amounts Which of the following is true of PMI? a. It is required on all loans b. It is required for VA and FHA loans c. The PMI disclosures are the same for fixed- and adjustable-rate loans d. Loan servicers must give borrowers an annual disclosure stating that they may have the right to cancel their PMI - answer d. Loan servicers must give borrowers an annual disclosure stating that they may have the right to cancel their PMI Flood insurance costs are included in which section of the GFE and HUD-1? a. Prepaid items and deposits b. Items payable in connection with the loan c. Title charges d. Additional settlement charges - answer a. Prepaid items and deposits
c. Five d. Ten - answer c. Five An attorney and a lender entered into an agreement in which the attorney's car loan payments are paid by the lender in return for the names of potential loan applicants. Who has violated RESPA? a. The attorney b. The lender c. Both the attorney and the lender d. Neither the attorney nor the lender - answer c. Both the attorney and the lender Which of the following payments is a violation of RESPA? a. A mortgage broker pays a fee to determine if a property is located in a flood zone b. A mortgage broker refers a borrower to an affiliated title company and immediately provides an affiliated business arrangement disclosure c. A title company charges a market fee for examination and evaluation of title evidence d. A mortgage broker accepts a fee for sending its customers to a title company - answer d. A mortgage broker accepts a fee for sending its customers to a title company Under provisions of the Truth-in-Lending Act, what is the maximum tolerance for an understated finance charge? a. $ b. $ c. $ d. $150 - answer c. $
A lender is gathering information on loans for the purposes of HMDA reporting. Loans made on which of the following property types may be left out of the lender's reports? a. Duplexes b. Apartment buildings c. Travel trailers d. Vacation homes - answer c. Travel trailers What is the purpose of Regulation B? a. To prohibit discriminatory treatment of credit applicants b. To require disclosure of settlement costs c. To regulate referral fees d. To prohibit misleading advertisements for mortgage loans - answer a. To prohibit discriminatory treatment of credit applicants Which of the following documents shows the cost of a loan expressed as an annual percentage rate? a. Consumer Caution Notice b. HUD- c. TIL Disclosure d. HOEPA - answer c. TIL Disclosure If a loan applicant chooses not to disclose his or her race on a loan application, what recourse does a mortgage professional have? a. Note that the applicant has declined to answer and select a race based on visual observation b. Inform the applicant of implications of the FBI Mortgage Fraud Warning Notice
Which of the following reasons for denying an applicant a loan is a violation of fair lending laws, such as ECOA? a. The applicant's income does not meet the required level for repayment of the loan b. The applicant's age is below the minimum age for executing a contract c. The applicant's recent marital status may lead to a change in employment d. The applicant's credit history includes defaults on many credit payments - answer c. The applicant's recent marital status may lead to a change in employment A mortgage broker pays for title services on behalf of a developer. In return, the developer agrees to refer prospective buyers to the mortgage broker. Who has violated RESPA? a. The mortgage broker b. The developer c. Both the mortgage broker and the developer d. Neither the broker nor the developer - answer c. Both the mortgage broker and the developer When calculating finance charges in compliance with TILA, all of the following are included, except: a. Settlement fees b. Broker fees c. Private mortgage insurance premium d. Appraisal fees - answer d. Appraisal fees RESPA does not apply to: a. Federally related mortgage loans
b. Loans for business, commercial, and agricultural purposes c. Loans secured by a lien on a principal dwelling d. Subprime mortgage loans - answer b. Loans for business, commercial, and agricultural purposes If a mortgage professional advertises a loan product at "7.25% APR for the first six months," what (if any) additional disclosure does TILA require? a. The finance charges for the loan b. The APR in effect after the introductory rate expires c. The monthly payment for the loan d. No other information is required - answer d. No other information is required According to TILA, what margin of error is permitted for the annual percentage rate in a regular fixed-rate mortgage transaction? a. One eighth of 1% b. One quarter of 1% c. One half of 1% d. Three quarters of 1% - answer a. One eighth of 1% Which of the following facts about the Settlement Cost Booklet is not true? a. It can be reproduced in any form b. It can be included in a larger document c. It can be translated into other languages d. It can be stamped with the company name of a mortgage professional - answer b. It can be included in a larger document
b. Both service providers have a written agreement in place to split fees c. The service providers are separate entities and not affiliated in any way d. The consumer is aware the service providers are splitting fees - answer a. Service provider B has performed bona fide services to earn the fee Mr. Jones's loan application has been denied and he is provided with an Adverse Action Notice as required by ECOA. Which of the following pieces of information would not be included on the notice? a. Information on the credit reporting agency if the adverse action is based on his credit report b. Reasons for the denial of credit c. A description of credit he requested d. His credit score - answer d. His credit score According to fair lending laws, which of the following may loan applicants be asked to disclose for HMDA data collection purposes? a. Their religion b. Their race c. If they will stop working once they have children d. If they plan to have more than one child - answer b. Their race When must loan applicants receive an Adverse Action Notice if they do not qualify for a loan? a. Within 15 days of loan application b. Within 30 days of loan application c. Within 60 days of loan application
d. Within 90 days of loan application - answer b. Within 30 days of loan application Under ECOA, when is a notice concerning the right to obtain a copy of the appraisal due to a consumer? a. Within three business days of loan application b. Within 90 days of loan application c. Within 30 days closing d. At the time of Notice of Action Taken - answer a. Within three business days of loan application Jack has applied for a refinance of his mortgage, which is secured by a first lien on his home. He asks if he can see the appraisal report that his lender ordered. Jack learns that: a. He is only entitled to a copy of the appraisal if his loan application is denied b. He must file a written request for a copy of the appraisal c. The lender will provide a copy of the appraisal at closing d. The lender must provide a copy of the appraisal upon completion or three business days prior to consummation, whichever is earlier - answer d. The lender must provide a copy of the appraisal upon completion or three business days prior to consummation, whichever is earlier Which of the following is defined as the cost of credit expressed as a dollar amount? a. APR b. Finance charge c. Loan-to-value d. Debt ratios - answer b. Finance charge
