CMP - Certified Mortgage Processor Mortgage Compliance and Regulations Questions and Answers — Questions and Answers
Question 1: Under the TILA-RESPA Integrated Disclosure (TRID) rule, how soon must a mortgage processor ensure the Loan Estimate (LE) is delivered or placed in the mail after receiving a complete application?
- Within 3 business days (Correct answer)
- Within 7 calendar days
- Immediately upon receipt
- At least 3 business days before consummation
Correct answer: Within 3 business days
The TRID rule mandates that the Loan Estimate must be provided to the consumer no later than three business days after the creditor or mortgage broker receives the consumer's complete application. A complete application is defined by the submission of six key pieces of information: the consumer's name, income, Social Security number, the property address, an estimate of the property's value, and the mortgage loan amount sought.
Question 2: A real estate agent refers a client to a specific mortgage lender. To show gratitude, the lender's processor arranges for a gift basket worth $200 to be sent to the agent. Which regulation is most likely violated in this scenario?
- Equal Credit Opportunity Act (ECOA)
- Home Mortgage Disclosure Act (HMDA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Fair Credit Reporting Act (FCRA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits giving or accepting a 'thing of value' in exchange for the referral of settlement service business. The gift basket is considered a 'thing of value,' and providing it in exchange for a client referral constitutes an illegal kickback.
Question 3: Which of the following is NOT a protected class under the Equal Credit Opportunity Act (ECOA)?
- Race
- Marital Status
- Source of Income (Public Assistance)
- Credit Score (Correct answer)
Correct answer: Credit Score
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because an applicant receives income from a public assistance program. While a credit score is a critical factor in determining creditworthiness, it is not a protected class under ECOA. Lenders are permitted to use it as a basis for their lending decisions, provided it is used in a non-discriminatory manner.
Question 4: A borrower's appraisal comes in lower than expected, which changes their eligibility for the loan program they initially applied for. This necessitates a change in loan terms and costs. According to TRID, what is this event an example of?
- A tolerance cure violation
- An adverse action
- A valid changed circumstance (Correct answer)
- A prohibited fee increase
Correct answer: A valid changed circumstance
A valid changed circumstance under TRID is an event that affects the borrower's eligibility for the loan or alters the terms or costs associated with the mortgage transaction. A lower-than-expected appraisal is a perfect example of new information specific to the transaction that can affect the borrower's eligibility, allowing the lender to issue a revised Loan Estimate with updated costs.
Question 5: According to the Home Mortgage Disclosure Act (HMDA), which of the following pieces of information is a lender required to collect and report on the Loan/Application Register (LAR)?
- The applicant's preferred communication method
- The name of the applicant's employer
- The applicant's race, ethnicity, and sex (Correct answer)
- The applicant's educational background
Correct answer: The applicant's race, ethnicity, and sex
HMDA requires financial institutions to collect, report, and disclose data about mortgage applications and originations. This includes demographic information about the applicant, such as their race, ethnicity, and sex, to help identify potential discriminatory lending patterns.
Question 6: A lender denies a mortgage application. According to the Equal Credit Opportunity Act (ECOA), the lender must provide the applicant with an adverse action notice within how many days of receiving the completed application?
- 10 days
- 60 days
- 90 days
- 30 days (Correct answer)
Correct answer: 30 days
Under ECOA and Regulation B, a creditor must notify an applicant of an adverse action (such as a loan denial) within 30 days of receiving a completed credit application. This notice must provide the specific reasons for the denial or inform the applicant of their right to request the reasons.
CMP - Certified Mortgage Processor Mortgage Compliance and Regulations Questions and Answers
Under the TILA-RESPA Integrated Disclosure (TRID) rule, how soon must a mortgage processor ensure the Loan Estimate (LE) is delivered or placed in the mail after receiving a complete application?