CMPS Regulatory Compliance & Lending Guidelines 3 — Questions and Answers
Question 1: Under the Fair Housing Act, which of the following is NOT a protected class at the federal level?
- National origin
- Familial status
- Sexual orientation (Correct answer)
- Religion
Correct answer: Sexual orientation
Sexual orientation is not a protected class under the federal Fair Housing Act, though many states and localities have added it through their own laws.
Question 2: The three-day right of rescission under TILA applies to which type of mortgage transaction?
- Purchase of a primary residence
- Refinance of a primary residence with a new lender (Correct answer)
- Purchase of an investment property
- Refinance of a vacation home
Correct answer: Refinance of a primary residence with a new lender
The three-day right of rescission under TILA applies to non-purchase refinance transactions secured by the borrower's primary residence.
Question 3: A mortgage loan officer who works for a federally insured depository institution must register under which system?
- NMLS Consumer Access
- Nationwide Mortgage Licensing System (NMLS) Registry (Correct answer)
- Federal Reserve MLO Registry
- CFPB Mortgage License Database
Correct answer: Nationwide Mortgage Licensing System (NMLS) Registry
MLOs employed by federally insured depository institutions must register with the NMLS Registry under the SAFE Act, while those at non-bank lenders must obtain a state license.
Question 4: What is the maximum prepayment penalty period allowed under the Qualified Mortgage rule?
- 12 months
- 24 months
- 36 months (Correct answer)
- No prepayment penalties are allowed on QMs
Correct answer: 36 months
Qualified Mortgages may include prepayment penalties only for up to 36 months after consummation, and only on fixed-rate or step-rate QMs.
Question 5: Under Regulation Z, the finance charge disclosure in a mortgage must be delivered to the borrower how many business days before consummation?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
TRID requires the Closing Disclosure to be delivered to the borrower at least 3 business days before consummation of the loan.
Question 6: A pattern of denying mortgage applications in minority neighborhoods regardless of individual creditworthiness is known as:
- Steering
- Redlining (Correct answer)
- Blockbusting
- Churning
Correct answer: Redlining
Redlining is the illegal practice of refusing to provide mortgage loans or insurance in specific geographic areas based on the racial or ethnic composition of those neighborhoods.
Question 7: The Community Reinvestment Act (CRA) was enacted primarily to address which issue?
- Predatory lending practices targeting elderly borrowers
- Discriminatory credit practices that denied services to low-income neighborhoods (Correct answer)
- Excessive fees charged on subprime mortgages
- Lack of disclosure in adjustable-rate mortgage products
Correct answer: Discriminatory credit practices that denied services to low-income neighborhoods
The CRA was enacted in 1977 to encourage depository institutions to meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods.
CMPS Regulatory Compliance & Lending Guidelines 3
Under the Fair Housing Act, which of the following is NOT a protected class at the federal level?