CMC Federal Regulations and Compliance Questions and Answers — Questions and Answers
Question 1: A mortgage consultant places an advertisement that reads: 'Incredibly low monthly payments! Only $1,200 per month for your dream home. Call now!' Under the Truth in Lending Act (TILA), what additional information MUST be included in this advertisement?
- The name of the appraiser the company uses.
- The loan originator's license number.
- The amount or percentage of the down payment, the terms of repayment, and the Annual Percentage Rate (APR). (Correct answer)
- A statement that the interest rate is not guaranteed to lock.
Correct answer: The amount or percentage of the down payment, the terms of repayment, and the Annual Percentage Rate (APR).
The Truth in Lending Act (TILA), implemented by Regulation Z, requires that if an advertisement contains a 'triggering term,' such as a specific payment amount, it must also clearly and conspicuously disclose other key terms of the loan. These required disclosures include the amount or percentage of the down payment, the full terms of repayment (like the number of payments or the loan term), and the Annual Percentage Rate (APR).
Question 2: A loan applicant from a protected class under the Fair Housing Act believes they were discriminated against because they were offered a higher interest rate than other similarly qualified applicants. Which of the following is NOT a protected class under the federal Fair Housing Act?
- Religion
- Source of Income (Correct answer)
- Familial Status
- National Origin
Correct answer: Source of Income
The federal Fair Housing Act prohibits discrimination in housing-related transactions, including mortgage lending, based on seven protected classes: race, color, religion, national origin, sex, disability, and familial status. While some state or local laws may offer protection based on source of income, it is not a protected class under the federal Fair Housing Act.
Question 3: A mortgage company receives a completed loan application from a consumer on Monday, June 1st. According to the TILA-RESPA Integrated Disclosure (TRID) rule, what is the latest date the company must deliver or place the Loan Estimate in the mail?
- Tuesday, June 2nd
- Wednesday, June 3rd
- Thursday, June 4th (Correct answer)
- Monday, June 8th
Correct answer: Thursday, June 4th
The TRID rule requires creditors or mortgage brokers to provide the Loan Estimate to the consumer no later than three business days after receiving the consumer's completed loan application. Counting from Monday, June 1st, the third business day would be Thursday, June 4th.
Question 4: Under the Equal Credit Opportunity Act (ECOA), a lender must notify an applicant of its credit decision within 30 days of receiving a completed application. If the decision is an adverse action, which of the following must the notice contain?
- A copy of the applicant's full credit report.
- The loan officer's personal contact information.
- A referral to another specific lender.
- A statement of the specific reasons for the action taken or a disclosure of the applicant's right to request the reasons. (Correct answer)
Correct answer: A statement of the specific reasons for the action taken or a disclosure of the applicant's right to request the reasons.
When taking adverse action on a consumer credit application, ECOA (Regulation B) requires creditors to provide the applicant with a written notification. This notice must include a statement of the specific reasons for the denial or a disclosure that the applicant has the right to request the specific reasons within 60 days. It must also include the creditor's name and address and an ECOA notice.
Question 5: A title company representative offers a mortgage consultant a flat fee of $200 for every client they refer who closes a loan with that title company. This arrangement is a violation of which federal regulation?
- Truth in Lending Act (TILA)
- Fair Housing Act (FHA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. The $200 fee for a referral is a classic example of an illegal kickback.
Question 6: A non-bank residential mortgage lender becomes aware of a series of transactions by a borrower that appear designed to conceal the source of their down payment funds, potentially involving money laundering. Under the Bank Secrecy Act (BSA), what action is the lender required to take?
- Close the borrower's loan application immediately.
- Report the activity to the local police department.
- File a Suspicious Activity Report (SAR) with FinCEN. (Correct answer)
- Advise the borrower to restructure their transactions.
Correct answer: File a Suspicious Activity Report (SAR) with FinCEN.
The Financial Crimes Enforcement Network (FinCEN) requires non-bank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and file Suspicious Activity Reports (SARs) for transactions they suspect involve funds derived from illegal activity. The SAR must be filed within 30 days of becoming aware of the suspicious activity.
CMC Federal Regulations and Compliance Questions and Answers
A mortgage consultant places an advertisement that reads: 'Incredibly low monthly payments! Only $1,200 per month for your dream home.
Call now!' Under the Truth in Lending Act (TILA), what additional information MUST be included in this advertisement?