Regulatory Compliance & Legal Considerations Flashcards
7 cards from real CRU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Legal Considerations flashcards as text
Under the Dodd-Frank Ability-to-Repay (ATR) rule, which of the following must a lender verify before consummating a covered residential mortgage?
Answer: Borrower's current income, assets, employment status, and credit history
The ATR rule requires lenders to verify eight factors including income, assets, employment, credit history, monthly payment obligations, and other financial commitments.
Which of the following loan features would disqualify a mortgage from Qualified Mortgage (QM) status under Dodd-Frank?
Answer: Negative amortization
QM loans may not feature negative amortization, interest-only payments, balloon payments (in most cases), or excessive points and fees.
Under HOEPA, a first-lien mortgage is classified as a 'high-cost mortgage' if its APR exceeds the Average Prime Offer Rate (APOR) by more than:
Answer: 6.5 percentage points
HOEPA's APR trigger for first-lien loans is when the loan's APR exceeds the APOR by more than 6.5 percentage points.
The Consumer Financial Protection Bureau (CFPB) was established by which legislation?
Answer: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
The CFPB was created by the Dodd-Frank Act of 2010 to consolidate consumer financial protection functions previously dispersed across multiple agencies.
Under Dodd-Frank's QM safe harbor provision, a non-higher-priced QM loan gives the lender:
Answer: An irrebuttable presumption of compliance with the ATR rule
A non-higher-priced QM provides an irrebuttable presumption (conclusive safe harbor) that the lender met the Ability-to-Repay requirements.
Which of the following practices is specifically prohibited for high-cost mortgages under HOEPA?
Answer: Imposing prepayment penalties
HOEPA prohibits prepayment penalties on high-cost mortgages as they can trap borrowers and inhibit refinancing into more favorable terms.
Under Dodd-Frank's risk retention rule, securitizers of residential mortgage-backed securities are generally required to retain at least what percentage of credit risk?
Answer: 5%
The Dodd-Frank risk retention rule requires securitizers to retain at least 5% of the credit risk, unless the assets qualify as Qualified Residential Mortgages (QRM).