Federal Laws and Regulations Flashcards

Under RESPA, which practice is prohibited between settlement service providers?

Answer: Paying or receiving kickbacks for referrals

RESPA Section 8 prohibits kickbacks and fee-splitting arrangements between settlement service providers for referrals.

The Home Mortgage Disclosure Act (HMDA) requires lenders to collect and report data primarily to:

Answer: Identify possible discriminatory lending patterns

HMDA data is used by regulators and the public to identify and address discriminatory or predatory lending practices.

Which federal law establishes the right of rescission for certain mortgage transactions?

Answer: TILA

The Truth in Lending Act (TILA) grants borrowers a three-business-day right to rescind certain non-purchase mortgage transactions.

A lender denies a loan application citing the applicant's receipt of public assistance income as the reason. This most likely violates:

Answer: ECOA

ECOA prohibits discrimination based on the fact that income derives from a public assistance program.

Under Dodd-Frank, which agency has primary supervisory authority over large non-bank mortgage servicers?

Answer: CFPB

The Consumer Financial Protection Bureau (CFPB) has supervisory and enforcement authority over large non-bank mortgage servicers under Dodd-Frank.

The Homeowners Protection Act requires automatic cancellation of PMI when the loan balance reaches what percentage of the original property value?

Answer: 78%

The HPA mandates automatic PMI cancellation when the loan-to-value ratio drops to 78% of the original purchase price based on the amortization schedule.

Which federal regulation implements ECOA's requirements as they apply to mortgage lending?

Answer: Regulation B

Regulation B implements ECOA, which prohibits discrimination in credit transactions including mortgage lending.

Under the SAFE Act, a mortgage loan originator who moves from a bank to a non-bank entity must:

Answer: Obtain a state MLO license through NMLS

Bank employees are federally registered, but when moving to a non-bank, they must obtain a state license through the NMLS under the SAFE Act.

Which rule requires lenders to provide a Loan Estimate within three business days of receiving a completed mortgage application?

Answer: TILA-RESPA Integrated Disclosure (TRID)

TRID, effective 2015, requires a Loan Estimate to be delivered within three business days of a completed application.

A mortgage servicer must acknowledge a borrower's written qualified written request (QWR) within how many business days?

Answer: 5 business days

Under RESPA, servicers must acknowledge a QWR within 5 business days and resolve it within 30 business days.

The Community Reinvestment Act (CRA) was enacted primarily to address:

Answer: Redlining and exclusion of low-income communities from credit

The CRA was passed in 1977 to combat redlining and encourage banks to serve low- and moderate-income areas.

Under Regulation Z, which disclosure must be provided at least three business days before consummation of a mortgage loan?

Answer: Closing Disclosure

The Closing Disclosure must be provided at least three business days before the loan closes, giving borrowers time to review final terms.

Which federal rule limits prepayment penalty periods for qualified mortgages?

Answer: Dodd-Frank ATR/QM rule

The Dodd-Frank ATR/QM rule restricts prepayment penalties on qualified mortgages to the first three years and caps their amount.

A lender charges a borrower a fee for a credit report but keeps the overage rather than applying it toward costs. This most likely violates:

Answer: RESPA Section 8

RESPA Section 8 prohibits unearned fee arrangements, which includes pocketing overages from third-party service charges.

Under the Ability-to-Repay (ATR) rule, a lender must verify a borrower's income using:

Answer: Reasonably reliable third-party records

The ATR rule requires lenders to verify financial information using reasonably reliable third-party records such as tax returns, W-2s, and bank statements.

The Servicemembers Civil Relief Act (SCRA) limits mortgage interest rates for active-duty servicemembers to a maximum of:

Answer: 6%

The SCRA caps mortgage interest rates at 6% per year for obligations incurred before active-duty military service.

A lender requires a borrower to use a specific title company owned by the lender's affiliate. Under RESPA, this is permissible only if:

Answer: An affiliated business arrangement (AfBA) disclosure is provided and use is not required

RESPA allows affiliated business arrangements only when the lender provides a written disclosure and does not require use of the affiliate.

Under TILA, the Annual Percentage Rate (APR) differs from the interest rate because it includes:

Answer: Certain fees and costs of credit

The APR reflects the true cost of borrowing by incorporating the interest rate plus certain fees such as points and origination charges.

Which act prohibits lenders from discriminating based on a neighborhood's racial composition, a practice known as redlining?

Answer: Fair Housing Act

The Fair Housing Act of 1968 prohibits discrimination in residential real estate transactions, including redlining based on neighborhood racial composition.

FIRREA was enacted primarily in response to:

Answer: The savings and loan crisis of the 1980s

FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) was passed in 1989 to address widespread savings and loan association failures.