CMA Mortgage Regulations and Compliance 3 — Questions and Answers
Question 1: Under the Ability-to-Repay (ATR) rule, which of the following is NOT one of the eight factors lenders must consider?
- Current or reasonably expected income
- Credit history
- Monthly payment on the covered transaction
- The borrower's intended use of loan proceeds (Correct answer)
Correct answer: The borrower's intended use of loan proceeds
The ATR rule's eight factors include income, assets, employment, credit history, monthly payment, other debt obligations, debt-to-income ratio, and simultaneous loans — not intended use.
Question 2: A Qualified Mortgage (QM) under the General QM definition caps the debt-to-income ratio at:
- 36%
- 41%
- 43% (Correct answer)
- 45%
Correct answer: 43%
The original General QM definition set a 43% DTI ceiling; however, the 2021 General QM rule replaced the DTI limit with a price-based limit (APR vs. APOR spread).
Question 3: Which provision of the Dodd-Frank Act created the Consumer Financial Protection Bureau?
- Title I
- Title X (Correct answer)
- Title XIV
- Title XVII
Correct answer: Title X
Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the CFPB.
Question 4: Under TRID, the Loan Estimate must be delivered to the applicant within how many business days of receiving a complete application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
Lenders must deliver or mail the Loan Estimate within 3 business days of receiving the consumer's application.
Question 5: The SAFE Act requires mortgage loan originators to complete how many hours of pre-licensure education before obtaining a state license?
- 8 hours
- 20 hours (Correct answer)
- 30 hours
- 40 hours
Correct answer: 20 hours
The SAFE Mortgage Licensing Act mandates a minimum of 20 hours of NMLS-approved pre-licensure education for state-licensed MLOs.
Question 6: Under ECOA and Regulation B, a lender must notify an applicant of a credit decision within how many days for a mortgage application?
- 10 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
ECOA requires lenders to notify applicants of action taken on a mortgage application within 30 days of receiving a completed application.
Question 7: A lender charges a higher interest rate to a borrower because the property is located in a flood zone. Under fair lending laws, this practice is:
- Prohibited as racial steering
- Permitted as a legitimate risk-based factor (Correct answer)
- Prohibited under RESPA Section 8
- Permitted only with CFPB approval
Correct answer: Permitted as a legitimate risk-based factor
Pricing based on objective property risk factors like flood zone designation is a legitimate, non-discriminatory business practice under fair lending laws.
CMA Mortgage Regulations and Compliance 3
Under the Ability-to-Repay (ATR) rule, which of the following is NOT one of the eight factors lenders must consider?