CRU Regulatory Framework & Compliance 2 — Questions and Answers
Question 1: Under RESPA, which of the following is considered a prohibited kickback arrangement?
- A lender paying a referral fee to a real estate agent for sending mortgage business (Correct answer)
- A title company offering discounted rates to repeat customers
- A lender charging an origination fee disclosed on the Loan Estimate
- An appraiser charging a flat fee regardless of property value
Correct answer: A lender paying a referral fee to a real estate agent for sending mortgage business
RESPA Section 8 prohibits any fee, kickback, or thing of value exchanged for referrals of settlement service business.
Question 2: Which federal agency has primary supervisory authority over federally chartered savings associations for mortgage lending compliance?
- Federal Reserve Board
- Office of the Comptroller of the Currency (OCC)
- Office of Thrift Supervision (now OTS functions absorbed by OCC) (Correct answer)
- Consumer Financial Protection Bureau (CFPB)
Correct answer: Office of Thrift Supervision (now OTS functions absorbed by OCC)
The OTS historically supervised federal savings associations, and after Dodd-Frank its functions were transferred to the OCC.
Question 3: A lender's policy of requiring higher down payments in neighborhoods with predominantly minority residents, without a legitimate credit-related justification, is an example of:
- Redlining (Correct answer)
- Reverse redlining
- Steering
- Blockbusting
Correct answer: Redlining
Redlining is the discriminatory practice of denying or limiting financial services to specific geographic areas based on their racial or ethnic composition.
Question 4: Under the Dodd-Frank Act, what is the maximum prepayment penalty period allowed for a Qualified Mortgage?
- 1 year
- 2 years
- 3 years (Correct answer)
- 5 years
Correct answer: 3 years
QM rules prohibit prepayment penalties beyond 3 years after consummation of the loan.
Question 5: Which of the following best describes the purpose of the Homeowners Protection Act (HPA)?
- Requiring lenders to disclose all settlement costs before closing
- Mandating automatic cancellation of PMI when a borrower reaches 20% equity (Correct answer)
- Prohibiting discrimination in residential lending
- Setting maximum interest rate caps on adjustable-rate mortgages
Correct answer: Mandating automatic cancellation of PMI when a borrower reaches 20% equity
The HPA requires lenders to automatically cancel PMI when the borrower's LTV reaches 78% of the original purchase price.
Question 6: Under the Community Reinvestment Act (CRA), banks are evaluated on their performance in serving low- and moderate-income communities in which of the following areas?
- Lending, investment, and service (Correct answer)
- Lending, marketing, and pricing
- Appraisal, underwriting, and servicing
- Origination, processing, and closing
Correct answer: Lending, investment, and service
CRA evaluations assess banks across three performance tests: lending, investment, and service to LMI communities.
Question 7: A borrower applies for a mortgage and the underwriter discovers the borrower previously filed bankruptcy that was discharged 2 years ago. Under FHA guidelines, how many years must typically elapse after a Chapter 7 discharge before the borrower is eligible?
- 1 year
- 2 years (Correct answer)
- 3 years
- 4 years
Correct answer: 2 years
FHA guidelines generally require a minimum 2-year waiting period after a Chapter 7 bankruptcy discharge before a borrower can obtain FHA financing.
CRU Regulatory Framework & Compliance 2
Under RESPA, which of the following is considered a prohibited kickback arrangement?