CMB - Certified Mortgage Banker Regulatory Compliance and Law Questions and Answers — Questions and Answers
Question 1: A mortgage company's recent marketing campaign for a new loan product exclusively used images of young, affluent couples in advertisements placed in magazines and on social media platforms popular with a similar demographic. Which of the following regulations is most likely violated by this campaign?
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA)
- Fair Housing Act (FHA) (Correct answer)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Fair Housing Act (FHA)
The Fair Housing Act prohibits any advertising that indicates a preference, limitation, or discrimination based on protected characteristics such as race, color, religion, sex, familial status, or national origin. Using models that are not inclusive and targeting media to exclude certain groups can be construed as discriminatory.
Question 2: A loan applicant is denied a mortgage. According to the Equal Credit Opportunity Act (ECOA), how long does the lender have to notify the applicant of the adverse action after receiving a completed application?
- 15 days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
Under the Equal Credit Opportunity Act (ECOA) and its implementing Regulation B, a creditor must notify an applicant of adverse action taken within 30 days after receiving a completed application.
Question 3: Under the TILA-RESPA Integrated Disclosure (TRID) rule, which of the following fees falls into the 'zero tolerance' category, meaning it cannot increase between the Loan Estimate (LE) and the Closing Disclosure (CD)?
- Prepaid interest
- Recording fees
- Fees paid to a creditor-required third-party service provider not chosen by the borrower (Correct answer)
- Property insurance premiums
Correct answer: Fees paid to a creditor-required third-party service provider not chosen by the borrower
The TRID rule has strict tolerance levels for fee changes. Fees paid to the creditor, mortgage broker, or an affiliate of either, along with fees paid to a third-party provider for a service the lender did not permit the borrower to shop for, have zero tolerance for increases.
Question 4: A commercial entity applies for a loan to purchase a 20-unit apartment building. For this loan to be reportable under the Home Mortgage Disclosure Act (HMDA), which of the following conditions must be met?
- The loan must be for an amount exceeding $1 million.
- The commercial entity must be a non-profit organization.
- The loan's purpose must be for home purchase, home improvement, or refinancing.
- The loan must be permanently financed by a government agency. (Correct answer)
Correct answer: The loan must be permanently financed by a government agency.
For a business or commercial-purpose loan secured by a dwelling (like an apartment building) to be reportable under HMDA, the purpose of the loan must be for home purchase, home improvement, or refinancing.
Question 5: A mortgage banker is reviewing a new loan file and notes that the applicant, a self-employed individual, has provided financial statements that show unusually large, sporadic deposits that are inconsistent with the stated nature of their business. This scenario represents a potential red flag for which area of regulatory compliance?
- Community Reinvestment Act (CRA)
- Gramm-Leach-Bliley Act (GLBA) Privacy Rule
- Bank Secrecy Act/Anti-Money Laundering (BSA/AML) (Correct answer)
- Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act
Correct answer: Bank Secrecy Act/Anti-Money Laundering (BSA/AML)
The Bank Secrecy Act (BSA) and related Anti-Money Laundering (AML) rules require financial institutions to monitor for and report suspicious activity. Unusually large or inconsistent transactions that do not align with a customer's known business profile are a common red flag for potential money laundering.
Question 6: A borrower's loan application is declined due to information obtained from a credit report. In addition to the ECOA adverse action notice, what specific disclosure is required under the Fair Credit Reporting Act (FCRA)?
- A copy of the borrower's complete loan file.
- The name and contact information of the underwriter who made the decision.
- A statement that the credit reporting agency did not make the credit decision and can't provide the reasons for it. (Correct answer)
- A list of alternative lenders who may approve the loan.
Correct answer: A statement that the credit reporting agency did not make the credit decision and can't provide the reasons for it.
When an adverse action is taken based on information from a consumer report, the FCRA requires the lender to provide the consumer with a notice that includes a statement that the consumer reporting agency did not make the decision and is unable to provide the specific reasons why the adverse action was taken.
CMB - Certified Mortgage Banker Regulatory Compliance and Law Questions and Answers
A mortgage company's recent marketing campaign for a new loan product exclusively used images of young, affluent couples in advertisements placed in magazines and on social media platforms popular with a similar demographic.
Which of the following regulations is most likely violated by this campaign?