CRU Regulatory Framework & Compliance 3 — Questions and Answers
Question 1: Which regulation implements the Truth in Lending Act (TILA) and governs disclosure requirements for residential mortgage loans?
- Regulation B
- Regulation C
- Regulation Z (Correct answer)
- Regulation X
Correct answer: Regulation Z
Regulation Z implements TILA and requires creditors to disclose the cost of credit, including the APR, finance charges, and payment terms.
Question 2: Under HMDA, which institutions are required to collect and report mortgage loan data?
- Only federally chartered banks with assets over $500 million
- Depository and non-depository institutions meeting certain asset and loan volume thresholds (Correct answer)
- Only mortgage companies with CFPB licensure
- All residential mortgage lenders regardless of size
Correct answer: Depository and non-depository institutions meeting certain asset and loan volume thresholds
HMDA coverage extends to both depository institutions and non-depository lenders that meet specific asset size and loan volume thresholds.
Question 3: An underwriter reviewing a loan file notices the property appraisal was ordered by the loan officer who is also the borrower's brother-in-law. This situation most likely violates which regulation?
- The Equal Credit Opportunity Act (ECOA)
- The Appraisal Independence Requirements under Dodd-Frank (Correct answer)
- The Home Mortgage Disclosure Act (HMDA)
- The Real Estate Settlement Procedures Act (RESPA)
Correct answer: The Appraisal Independence Requirements under Dodd-Frank
Dodd-Frank's Appraisal Independence Requirements prohibit loan production staff from selecting, retaining, or influencing appraisers to ensure independence.
Question 4: What is the primary purpose of the Flood Disaster Protection Act as it applies to residential underwriting?
- Requiring borrowers to purchase flood insurance if the property is in a Special Flood Hazard Area (Correct answer)
- Mandating that lenders conduct flood zone determinations on all properties
- Prohibiting lending in areas designated as flood plains
- Requiring lenders to escrow flood insurance premiums for all loans
Correct answer: Requiring borrowers to purchase flood insurance if the property is in a Special Flood Hazard Area
The FDPA requires lenders to ensure borrowers obtain flood insurance when the property securing the loan is located in a Special Flood Hazard Area (SFHA).
Question 5: Under the ATR/QM rule, which of the following loan types is automatically considered a Qualified Mortgage without meeting the standard DTI and points-and-fees tests?
- Portfolio loans held by community banks under $10 billion in assets
- Loans eligible for purchase by Fannie Mae or Freddie Mac (GSE QM) (Correct answer)
- FHA-insured loans with LTV below 80%
- Jumbo loans with fixed interest rates
Correct answer: Loans eligible for purchase by Fannie Mae or Freddie Mac (GSE QM)
The GSE Patch (now transitioned to standard QM) allowed loans eligible for GSE purchase to qualify as QMs without meeting the standard 43% DTI requirement.
Question 6: Which of the following actions by a lender would constitute a violation of the Equal Credit Opportunity Act (ECOA)?
- Denying a loan because the property's appraised value is below the purchase price
- Requesting information about a co-applicant's income for a jointly held account
- Discouraging a loan applicant based on the applicant's national origin (Correct answer)
- Requiring a higher down payment for a borrower with a credit score below 620
Correct answer: Discouraging a loan applicant based on the applicant's national origin
ECOA prohibits creditors from discriminating against applicants based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
Question 7: A lender receives a mortgage application. Under Regulation B (ECOA), within how many days must the lender notify the applicant of the credit decision?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
Regulation B requires creditors to notify applicants of credit decisions within 30 days of receiving a completed application.
CRU Regulatory Framework & Compliance 3
Which regulation implements the Truth in Lending Act (TILA) and governs disclosure requirements for residential mortgage loans?