CMPS Regulatory Compliance & Lending Guidelines 4 — Questions and Answers
Question 1: Under FHA guidelines, what is the maximum seller concession allowed on a purchase with less than 10% down payment?
- 3% of the purchase price
- 4% of the purchase price
- 5% of the purchase price
- 6% of the purchase price (Correct answer)
Correct answer: 6% of the purchase price
FHA allows seller concessions up to 6% of the sales price regardless of the down payment amount, unlike conventional loans which vary by LTV.
Question 2: Which of the following loan types is EXEMPT from the TRID (TILA-RESPA Integrated Disclosure) requirements?
- Conventional purchase mortgage on a primary residence
- FHA refinance on a rental property
- Home Equity Line of Credit (HELOC) (Correct answer)
- VA purchase loan
Correct answer: Home Equity Line of Credit (HELOC)
HELOCs are exempt from TRID requirements and instead use disclosures governed separately by TILA's Regulation Z rules for open-end credit.
Question 3: What does the Appraiser Independence Requirements (AIR) policy, established after the housing crisis, primarily prohibit?
- Appraisers from using comparable sales more than 6 months old
- Loan production staff from selecting, retaining, or influencing appraisers (Correct answer)
- Borrowers from being present during property appraisals
- Appraisers from appraising properties in multiple counties
Correct answer: Loan production staff from selecting, retaining, or influencing appraisers
AIR prohibits anyone with an interest in the loan transaction, including loan production staff, from improperly influencing appraisers or the appraisal process.
Question 4: A VA loan requires the veteran to pay the VA funding fee. Which borrower group is EXEMPT from this fee?
- First-time homebuyers using VA benefits
- Veterans with service-connected disabilities receiving compensation (Correct answer)
- Surviving spouses using the veteran's benefit
- Veterans using VA benefits for the second time
Correct answer: Veterans with service-connected disabilities receiving compensation
Veterans receiving VA compensation for service-connected disabilities are exempt from paying the VA funding fee on VA-guaranteed home loans.
Question 5: Under the Safe Mortgage Licensing Act (SAFE Act), a new MLO applicant must complete how many hours of pre-licensing education?
- 16 hours
- 20 hours (Correct answer)
- 24 hours
- 30 hours
Correct answer: 20 hours
The SAFE Act requires MLO license applicants to complete at least 20 hours of pre-licensing education covering federal and state mortgage law, ethics, and non-traditional products.
Question 6: Under USDA Rural Development loan guidelines, which of the following income is used to determine program ELIGIBILITY (not repayment ability)?
- Adjusted household income for all persons living in the household (Correct answer)
- Borrower's gross income only
- Borrower and co-borrower qualifying income only
- Net take-home pay of employed household members
Correct answer: Adjusted household income for all persons living in the household
USDA eligibility is based on adjusted annual household income for all persons living in the home, not just qualifying borrowers, which may include family members not on the loan.
Question 7: Which of the following best describes the purpose of the Loan Estimate's 'In 5 Years' row?
- Shows the total interest paid over the life of the loan
- Shows total paid and principal reduction in the first 5 years to aid loan comparison (Correct answer)
- Shows projected property value appreciation over 5 years
- Shows the estimated loan balance after 5 years of payments
Correct answer: Shows total paid and principal reduction in the first 5 years to aid loan comparison
The 'In 5 Years' row on the Loan Estimate shows total payments made and the principal paid down in 60 months, helping borrowers compare different loan products.
CMPS Regulatory Compliance & Lending Guidelines 4
Under FHA guidelines, what is the maximum seller concession allowed on a purchase with less than 10% down payment?