Loan Officer Consumer Protection and Fair Lending Flashcards
6 cards from real Loan Officer Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Loan Officer Consumer Protection and Fair Lending flashcards as text
Under the Dodd-Frank Act, what is the Qualified Mortgage (QM) rule primarily designed to protect against?
Answer: Lenders originating loans without verifying a borrower's ability to repay
The Qualified Mortgage rule, part of the Ability-to-Repay (ATR) requirement, protects consumers by requiring lenders to verify that borrowers can actually afford to repay the loans they originate.
Which of the following loan features disqualifies a mortgage from being classified as a Qualified Mortgage (QM)?
Answer: Negative amortization
Negative amortization, where the loan balance increases rather than decreases over time, is one of several features that disqualify a mortgage from QM status under the Dodd-Frank Act.
What is the maximum debt-to-income (DTI) ratio generally allowed for a Qualified Mortgage?
Answer: 43%
Under the general QM definition, borrowers must have a total debt-to-income ratio of no more than 43% at the time of loan origination.
Under the Home Ownership and Equity Protection Act (HOEPA), what type of loans does it primarily regulate?
Answer: High-cost mortgages with high rates or fees
HOEPA regulates high-cost mortgages — loans with annual percentage rates or fees that exceed certain thresholds — by imposing additional disclosures and restricting certain loan terms.
What does the Real Estate Settlement Procedures Act (RESPA) prohibit lenders from accepting in connection with a mortgage transaction?
Answer: Kickbacks or referral fees from settlement service providers
RESPA prohibits lenders and settlement service providers from giving or accepting kickbacks, referral fees, or unearned fees in connection with a mortgage loan transaction.
Which disclosure must be provided to a borrower within 3 business days of receiving a mortgage application under TRID?
Answer: Loan Estimate
Under the TILA-RESPA Integrated Disclosure (TRID) rule, lenders must provide a Loan Estimate to borrowers within 3 business days of receiving a completed loan application.