CHCP Regulatory Compliance & Legal Issues 2 — Questions and Answers
Question 1: Under RESPA, which of the following is prohibited when a lender requires a borrower to use a specific title company?
- Charging a premium for the service
- Accepting a kickback or fee-splitting arrangement (Correct answer)
- Disclosing the affiliated business relationship
- Providing a HUD-1 settlement statement
Correct answer: Accepting a kickback or fee-splitting arrangement
RESPA Section 8 prohibits kickbacks and fee-splitting arrangements between settlement service providers as they increase consumer costs without adding value.
Question 2: A closing agent discovers that a property's legal description on the deed does not match the survey. What is the MOST appropriate immediate action?
- Proceed with closing and note the discrepancy in the file
- Close the transaction and record a corrective deed later
- Halt the closing and notify all parties to resolve the discrepancy (Correct answer)
- Obtain a quitclaim deed from the seller to cover any gap
Correct answer: Halt the closing and notify all parties to resolve the discrepancy
A mismatch between the deed's legal description and the survey is a title defect that must be resolved before closing to ensure the buyer receives clear title.
Question 3: Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application?
- RESPA
- TILA
- TRID (TILA-RESPA Integrated Disclosure) (Correct answer)
- ECOA
Correct answer: TRID (TILA-RESPA Integrated Disclosure)
TRID, effective October 2015, replaced the GFE and TIL disclosure with the Loan Estimate, which must be delivered within three business days of application.
Question 4: The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against applicants based on all of the following EXCEPT:
- Race or national origin
- Credit score and payment history (Correct answer)
- Sex or marital status
- Receipt of public assistance income
Correct answer: Credit score and payment history
ECOA prohibits discrimination based on protected characteristics, but lenders may lawfully use creditworthiness factors like credit score and payment history.
Question 5: Under the Dodd-Frank Act, what is the maximum permissible points-and-fees threshold for a Qualified Mortgage on a loan of $100,000?
- 2%
- 3% (Correct answer)
- 4%
- 5%
Correct answer: 3%
For a Qualified Mortgage, points and fees generally cannot exceed 3% of the total loan amount for loans of $100,000 or more.
Question 6: A buyer's closing disclosure shows a higher interest rate than what was locked. Which regulation governs the permissible tolerance for this change?
- RESPA Section 10
- TRID tolerance rules (Correct answer)
- HMDA Regulation C
- Fair Housing Act Section 804
Correct answer: TRID tolerance rules
TRID establishes zero tolerance for increases in the interest rate when the rate was locked, requiring a revised Loan Estimate if the rate changes.
Question 7: Which document must be provided to borrowers at least three business days before consummation under TRID?
- Initial Loan Estimate
- HUD-1 Settlement Statement
- Closing Disclosure (Correct answer)
- Affiliated Business Arrangement Disclosure
Correct answer: Closing Disclosure
TRID requires the Closing Disclosure to be received by the borrower at least three business days before loan consummation.
CHCP Regulatory Compliance & Legal Issues 2
Under RESPA, which of the following is prohibited when a lender requires a borrower to use a specific title company?