FREE CMC Mortgage Compliance Regulations Questions and Answers

Question 1

Under the Truth in Lending Act (TILA), what is the primary purpose of the Loan Estimate (LE) disclosure?

Accepted Answer

To provide borrowers with estimated costs and terms of a mortgage loan within three business days of application.

Answer

To confirm the final interest rate and monthly payment before closing.

Answer

To certify the property's value through an independent appraisal.

Answer

To disclose the lender's internal profit margin on the loan.

Question 2

A mortgage loan originator (MLO) is preparing to send marketing materials that include specific interest rates and payment examples. Which regulation primarily dictates the requirements for advertising accuracy and prohibits misleading statements in such materials?

Accepted Answer

The Truth in Lending Act (TILA), specifically Regulation Z

Answer

The Fair Housing Act (FHA)

Answer

The Equal Credit Opportunity Act (ECOA)

Answer

The Home Mortgage Disclosure Act (HMDA)

Question 3

Which of the following scenarios would most likely constitute a violation of the Equal Credit Opportunity Act (ECOA)?

Accepted Answer

A lender refuses to consider an applicant's disability income as a valid source of income.

Answer

A lender denies a loan application because the applicant's debt-to-income ratio exceeds established guidelines.

Answer

A lender charges a higher interest rate to an applicant due to a low credit score.

Answer

A lender requires a co-signer for an applicant with a limited credit history.

Question 4

Under the Real Estate Settlement Procedures Act (RESPA), what is prohibited regarding referral fees between settlement service providers?

Accepted Answer

Any unearned fee, kickback, or thing of value for the referral of business.

Answer

Payment of any fee for services actually performed by another party.

Answer

The exchange of goods or services of equal value between parties.

Answer

Discounts offered by a settlement service provider to a lender for bulk business.

Question 5

A lender is preparing to close a mortgage loan for a borrower. Which disclosure must be provided to the borrower at least three business days before consummation, as required by TRID?

Accepted Answer

The Closing Disclosure (CD)

Answer

The initial Loan Estimate (LE)

Answer

The Servicing Disclosure Statement

Answer

The Notice of Right to Cancel

Question 6

What is the primary objective of the Home Mortgage Disclosure Act (HMDA)?

Accepted Answer

To provide public information about mortgage lending patterns to identify potential discrimination and assess community development needs.

Answer

To ensure that all mortgage applicants receive an appraisal from an independent third party.

Answer

To set maximum interest rates and fees that lenders can charge on mortgage loans.

Answer

To require lenders to offer a minimum percentage of their loans to low-income borrowers.