Free CMC Federal Regulations and Compliance Questions and Answers — Questions and Answers
Question 1: A mortgage broker has a desk rental agreement with a real estate agency. In addition to the market-rate rent, the broker provides the agency with high-quality leads on potential home sellers and pays for the agency's weekly catered lunches. In exchange, the real estate agents exclusively refer their buyer clients to the mortgage broker. Which federal regulation is most likely being violated?
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Equal Credit Opportunity Act (ECOA)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of RESPA prohibits kickbacks and unearned fees. Providing things of value, such as leads and catered lunches, in exchange for the referral of settlement service business (like mortgage origination) is a direct violation. TILA focuses on the disclosure of credit terms, ECOA prohibits discrimination in lending, and HMDA requires data collection and reporting.
Question 2: Under the TILA-RESPA Integrated Disclosure (TRID) Rule, a loan application is considered complete for the purpose of triggering the Loan Estimate disclosure requirement once the creditor has received six key pieces of information. Which of the following is NOT one of those six pieces?
- The borrower's stated income
- The property address
- The borrower's preferred loan product (Correct answer)
- An estimate of the property's value
Correct answer: The borrower's preferred loan product
The six pieces of information that constitute an application under TRID are: 1) The consumer's name, 2) The consumer's income, 3) The consumer's Social Security number to obtain a credit report, 4) The property address, 5) An estimate of the value of the property, and 6) The mortgage loan amount sought. The borrower's preferred loan product is not one of the six required items.
Question 3: A lender denies a mortgage application. According to the Equal Credit Opportunity Act (ECOA), how long does the lender have to notify the applicant of this adverse action after receiving a completed application?
- 15 days
- 60 days
- 90 days
- 30 days (Correct answer)
Correct answer: 30 days
Regulation B, which implements ECOA, requires a creditor to notify an applicant of adverse action within 30 days after receiving a completed application. The notice must be in writing and contain specific information about the reasons for the denial or inform the applicant of their right to request the reasons.
Question 4: The Ability-to-Repay (ATR) / Qualified Mortgage (QM) Rule under Regulation Z requires creditors to make a good-faith determination that a consumer can repay a loan. Which of the following is an underwriting factor that a creditor MUST consider under the ATR rule?
- The borrower's future potential earnings from a pending promotion.
- The monthly payment on any simultaneous loans secured by the same property. (Correct answer)
- The borrower's stated intention to sell other assets to make payments.
- The historical appreciation rate of properties in the subject neighborhood.
Correct answer: The monthly payment on any simultaneous loans secured by the same property.
The ATR rule specifies eight underwriting factors that must be considered. These include the monthly payment on any simultaneous loan that will be secured by the same property. While income and assets are considered, they must be current or reasonably expected, not speculative future earnings. A stated intention to sell assets is not sufficient without verification, and neighborhood appreciation is not one of the eight required factors.
Question 5: Which of the following is a primary purpose of the Home Mortgage Disclosure Act (HMDA), as implemented by Regulation C?
- To set maximum interest rates for high-cost mortgages.
- To standardize the loan application form used by all lenders.
- To help identify potential discriminatory lending patterns. (Correct answer)
- To require lenders to provide a booklet on settlement costs.
Correct answer: To help identify potential discriminatory lending patterns.
A primary purpose of HMDA is to provide the public and government officials with data that can be used to help determine whether financial institutions are serving the housing needs of their communities and to assist in identifying possible discriminatory lending patterns. Lenders are required to collect and report data on loan applications, which is then made publicly available.
Question 6: A licensed mortgage loan originator (MLO) completed an 8-hour NMLS-approved continuing education course for their license renewal last year. This year, the same course is offered again with identical content. According to the SAFE Act's rules, what is the implication of the MLO taking this same course again?
- The MLO will receive full credit as long as the course is still NMLS-approved.
- The MLO will only receive credit for the 3-hour federal law portion.
- The MLO will not receive credit for the course. (Correct answer)
- The MLO must get special permission from the state regulator to retake the course.
Correct answer: The MLO will not receive credit for the course.
The Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act includes a 'successive year' rule, which prohibits MLOs from taking the same approved course in the same or successive years to meet the annual continuing education requirements. Taking the identical course two years in a row would result in the MLO not receiving credit for their continuing education requirement.
Free CMC Federal Regulations and Compliance Questions and Answers
A mortgage broker has a desk rental agreement with a real estate agency.
In addition to the market-rate rent, the broker provides the agency with high-quality leads on potential home sellers and pays for the agency's weekly catered lunches.
In exchange, the real estate agents exclusively refer their buyer clients to the mortgage broker.
Which federal regulation is most likely being violated?