FiCEP Housing and Mortgage Counseling 1 — Questions and Answers
Question 1: Which federal law requires lenders to provide a Loan Estimate to mortgage applicants within three business days of receiving a completed application?
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA)
- TILA-RESPA Integrated Disclosure (TRID) rule (Correct answer)
- Fair Housing Act
Correct answer: TILA-RESPA Integrated Disclosure (TRID) rule
The TRID rule, effective October 2015, requires lenders to provide a standardized Loan Estimate within three business days of a completed mortgage application.
Question 2: What is the primary purpose of a HUD-approved housing counseling agency in the mortgage process?
- To originate home loans on behalf of borrowers
- To provide unbiased education and counseling to help clients make informed housing decisions (Correct answer)
- To appraise property values for lenders
- To issue title insurance policies
Correct answer: To provide unbiased education and counseling to help clients make informed housing decisions
HUD-approved housing counselors provide neutral, educational guidance to help clients understand their options and make informed decisions about buying, renting, or avoiding foreclosure.
Question 3: A borrower's front-end debt-to-income (DTI) ratio compares which two figures?
- Total monthly debt payments to gross monthly income
- Monthly housing expenses to gross monthly income (Correct answer)
- Net monthly income to total outstanding debt
- Monthly savings to net monthly income
Correct answer: Monthly housing expenses to gross monthly income
The front-end DTI ratio divides monthly housing costs (principal, interest, taxes, insurance) by gross monthly income to assess housing affordability.
Question 4: Under the Equal Credit Opportunity Act (ECOA), a lender must notify an applicant of a credit decision within how many days of receiving a completed application?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
ECOA requires creditors to notify applicants of their credit decision, and any adverse action notice, within 30 days of a completed application.
Question 5: What does the term 'escrow' refer to in the context of a mortgage payment?
- The lender's profit margin on the loan
- Funds held by a third party to pay property taxes and insurance on behalf of the borrower (Correct answer)
- The borrower's down payment held until closing
- The penalty fee for paying off a mortgage early
Correct answer: Funds held by a third party to pay property taxes and insurance on behalf of the borrower
An escrow account collects monthly portions of property taxes and homeowners insurance so the lender can pay these bills on the borrower's behalf when they are due.
Question 6: Which program provides mortgage insurance for loans made by FHA-approved lenders to low-to-moderate income borrowers with down payments as low as 3.5%?
- VA Loan Guaranty Program
- USDA Rural Development Loan
- FHA Section 203(b) program (Correct answer)
- Fannie Mae HomeReady program
Correct answer: FHA Section 203(b) program
The FHA Section 203(b) program insures single-family mortgages, allowing approved lenders to offer loans with down payments as low as 3.5% to qualifying borrowers.
FiCEP Housing and Mortgage Counseling 1
Which federal law requires lenders to provide a Loan Estimate to mortgage applicants within three business days of receiving a completed application?