CMPS Regulatory Compliance & Lending Guidelines 5 — Questions and Answers
Question 1: The Mortgage Disclosure Improvement Act (MDIA) added a requirement that borrowers must receive the initial Truth-in-Lending disclosure within how many business days of application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
MDIA requires lenders to provide the initial TIL disclosure within 3 business days of receiving a completed loan application.
Question 2: Under conventional Fannie Mae/Freddie Mac guidelines, what is the standard maximum debt-to-income (DTI) ratio for a manually underwritten loan without compensating factors?
- 36%
- 41%
- 45% (Correct answer)
- 50%
Correct answer: 45%
Conventional guidelines generally allow a maximum DTI of 45% for manually underwritten loans, though DU/LP may approve higher DTIs with strong compensating factors.
Question 3: A lender who steers a creditworthy borrower into a subprime loan when they qualify for a prime product may violate which law?
- The Community Reinvestment Act
- The Equal Credit Opportunity Act
- The Fair Housing Act and ECOA anti-steering provisions under Regulation Z (Correct answer)
- The Homeowners Protection Act
Correct answer: The Fair Housing Act and ECOA anti-steering provisions under Regulation Z
Anti-steering provisions under Regulation Z (implementing Dodd-Frank) prohibit steering borrowers toward non-QM or higher-cost loans when they qualify for better products.
Question 4: Under the Servicemembers Civil Relief Act (SCRA), what is the maximum interest rate a lender can charge on a mortgage taken out before active duty military service?
- 4% per annum
- 6% per annum (Correct answer)
- 8% per annum
- The original contract rate applies regardless
Correct answer: 6% per annum
The SCRA caps interest rates at 6% per annum on pre-service obligations, including mortgages, while a servicemember is on active duty.
Question 5: Which disclosure must a lender provide if the APR on a revised Loan Estimate increases by more than 1/8 of 1% from the initial estimate?
- A corrected Good Faith Estimate
- A revised Loan Estimate, triggering a new 3-business-day waiting period (Correct answer)
- A change of circumstance addendum with no new waiting period
- A new Closing Disclosure
Correct answer: A revised Loan Estimate, triggering a new 3-business-day waiting period
Under TRID, if a valid changed circumstance causes the APR to increase by more than 1/8%, the lender must issue a revised Loan Estimate and restart the 3-business-day waiting period.
Question 6: The Private Mortgage Insurance (PMI) Cancellation Act (Homeowners Protection Act) requires automatic termination of PMI when the borrower's LTV reaches what level based on the original amortization schedule?
- 80% LTV
- 78% LTV (Correct answer)
- 75% LTV
- 70% LTV
Correct answer: 78% LTV
The Homeowners Protection Act requires automatic PMI cancellation when the loan balance reaches 78% LTV based on the original amortization schedule and original property value.
Question 7: A lender operating in multiple states must comply with which regulation when determining how to handle conflicting state and federal disclosure requirements?
- Federal law always preempts state law in mortgage lending
- State law always applies if it provides greater consumer protection than federal law
- Federal chartered banks follow OCC preemption rules; state-chartered lenders follow state law unless federally preempted (Correct answer)
- CFPB arbitrates all conflicts between state and federal mortgage law
Correct answer: Federal chartered banks follow OCC preemption rules; state-chartered lenders follow state law unless federally preempted
Federally chartered banks may invoke OCC preemption of state laws under certain conditions, while state-chartered institutions generally must comply with both state and applicable federal requirements.
CMPS Regulatory Compliance & Lending Guidelines 5
The Mortgage Disclosure Improvement Act (MDIA) added a requirement that borrowers must receive the initial Truth-in-Lending disclosure within how many business days of application?