CHCP Regulatory Compliance & Legal Issues 3 — Questions and Answers
Question 1: Under the USA PATRIOT Act, which requirement must financial institutions comply with during real estate closings to combat money laundering?
- File a Suspicious Activity Report (SAR) for all cash transactions
- Verify the identity of all parties through a Customer Identification Program (CIP) (Correct answer)
- Refuse to close any transaction involving foreign nationals
- Require wire transfers for all purchases above $10,000
Correct answer: Verify the identity of all parties through a Customer Identification Program (CIP)
The USA PATRIOT Act requires financial institutions to implement a Customer Identification Program (CIP) to verify the identity of all customers.
Question 2: A closing agent receives a cash payment of $11,000 from a buyer at the closing table. What federal form must be filed?
- Form 1099-S
- FinCEN Form 112 (Currency Transaction Report)
- Form 8300 (Correct answer)
- HUD-1 Addendum
Correct answer: Form 8300
IRS Form 8300 must be filed for cash payments exceeding $10,000 received in a trade or business transaction, including real estate closings.
Question 3: Which federal agency enforces the Real Estate Settlement Procedures Act (RESPA)?
- Federal Reserve Board
- Department of Housing and Urban Development (HUD) / CFPB (Correct answer)
- Federal Deposit Insurance Corporation (FDIC)
- Office of the Comptroller of the Currency (OCC)
Correct answer: Department of Housing and Urban Development (HUD) / CFPB
Enforcement of RESPA transferred from HUD to the Consumer Financial Protection Bureau (CFPB) when the CFPB was established under Dodd-Frank in 2011.
Question 4: An affiliated business arrangement (AfBA) disclosure under RESPA must be provided:
- Only at closing if the affiliated service is used
- At or before the time the referral is made (Correct answer)
- Within three days of the loan application
- Only when the consumer requests it
Correct answer: At or before the time the referral is made
RESPA requires the AfBA disclosure to be given to the consumer at or before the time of referral so the consumer can make an informed choice.
Question 5: Under the Home Mortgage Disclosure Act (HMDA), what is the primary purpose of collecting loan data?
- To set interest rate caps for residential mortgages
- To identify potential discriminatory lending patterns (Correct answer)
- To determine property tax assessment values
- To calculate mortgage insurance premiums
Correct answer: To identify potential discriminatory lending patterns
HMDA requires financial institutions to report mortgage data to help regulators identify and address discriminatory or predatory lending practices.
Question 6: A title company employee alters a HUD-1 to hide excess seller proceeds. This action most likely constitutes:
- A RESPA Section 9 violation only
- Mortgage fraud subject to criminal prosecution (Correct answer)
- A minor clerical error requiring correction
- A TRID tolerance violation only
Correct answer: Mortgage fraud subject to criminal prosecution
Deliberately altering settlement documents to conceal funds constitutes mortgage fraud, a federal crime carrying significant criminal penalties.
Question 7: Which law prohibits lenders from requiring buyers to purchase title insurance from a specific company as a condition of the loan?
- Fair Housing Act
- RESPA Section 9 (Correct answer)
- TILA Section 128
- Gramm-Leach-Bliley Act
Correct answer: RESPA Section 9
RESPA Section 9 prohibits sellers from requiring buyers to purchase title insurance from a particular company as a condition of the sale.
CHCP Regulatory Compliance & Legal Issues 3
Under the USA PATRIOT Act, which requirement must financial institutions comply with during real estate closings to combat money laundering?