Loan Officer Federal Laws: TILA Questions and Answers

Question 1

Under the Truth in Lending Act (TILA), which of the following fees is generally EXCLUDED from the calculation of the finance charge?

Accepted Answer

Third-party appraisal fee

Answer

The finance charge represents the cost of consumer credit as a dollar amount. While it includes charges like origination fees, broker fees, and points, bona fide third-party fees, such as for an appraisal or credit report, are generally excluded from the finance charge calculation.

Question 2

A loan applicant is refinancing their primary residence. They sign the closing documents on a Monday. According to TILA's right of rescission, what is the deadline for them to cancel the transaction?

Accepted Answer

Thursday at midnight

Answer

TILA provides a three-business-day right of rescission for most non-purchase money mortgage transactions on a principal residence. The rescission period begins the day after consummation and includes Saturdays but excludes Sundays and federal holidays. If closing is on Monday, the three days are Tuesday, Wednesday, and Thursday. The right to rescind expires at midnight on the third business day.

Question 3

An advertisement for a mortgage loan prominently features an attractive monthly payment amount. According to TILA (Regulation Z), what additional information MUST be disclosed in the advertisement?

Accepted Answer

The Annual Percentage Rate (APR) and the terms of repayment

Answer

Stating a specific payment amount in an advertisement is a 'triggering term' under Regulation Z. When a triggering term is used, the advertisement must also clearly and conspicuously disclose other key terms, including the Annual Percentage Rate (APR) and the full terms of repayment.

Question 4

A borrower receives a Closing Disclosure, and three days later, before consummation, the lender adds a prepayment penalty to the loan terms. What is the consequence of this change under the TILA-RESPA Integrated Disclosure (TRID) rules?

Accepted Answer

A new three-business-day waiting period is required after the borrower receives a corrected Closing Disclosure.

Answer

Under TRID rules, certain significant changes to the Closing Disclosure require a new three-business-day waiting period before the loan can be consummated. The addition of a prepayment penalty is one of these triggering events, along with a change that makes the APR inaccurate or a change to the loan product.

Question 5

Which of the following scenarios would classify a first-lien mortgage as a Higher-Priced Mortgage Loan (HPML)?

Accepted Answer

The APR is 1.5% or more above the Average Prime Offer Rate (APOR).

Answer

A loan is defined as a Higher-Priced Mortgage Loan (HPML) if its Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) by a specific threshold. For a first-lien mortgage, this threshold is 1.5 percentage points or more.

Loan Officer Exam Practice Test

Loan Officer Exam Practice Test

Loan Officer Federal Laws: TILA Questions and Answers