Federal Lending Regulations Flashcards

Under RESPA, what is the maximum tolerance for increases in third-party settlement charges in the 'zero tolerance' category?

Answer: 0%

Zero tolerance charges cannot increase at all from the Loan Estimate to the Closing Disclosure; any increase is a tolerance violation requiring a cure.

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

Answer: Identify possible discriminatory lending patterns

HMDA data is used by regulators and the public to identify fair lending issues and discriminatory patterns in mortgage lending.

Which federal law prohibits a lender from discriminating based on race, color, religion, national origin, sex, familial status, or disability in residential mortgage lending?

Answer: Fair Housing Act

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in residential real estate transactions including mortgage lending.

A lender charges a borrower a fee not disclosed on the Loan Estimate for a service the lender controls. Under TRID, this is most likely a violation of which tolerance category?

Answer: Zero tolerance — lender-controlled fees cannot increase

Fees for services provided by the lender or required services where the borrower cannot shop fall in the zero-tolerance category.

Under ECOA, within how many days must a creditor notify an applicant of action taken on a completed credit application?

Answer: 30 days

ECOA requires creditors to notify applicants of the credit decision within 30 days of receiving a completed application.

The Dodd-Frank Act created which agency specifically to protect consumers in financial transactions, including mortgages?

Answer: Consumer Financial Protection Bureau (CFPB)

The CFPB was established by the Dodd-Frank Act of 2010 and has primary authority to enforce federal consumer financial protection laws including mortgage regulations.

Under the Ability-to-Repay (ATR) rule, which of the following is NOT one of the eight underwriting factors a lender must consider?

Answer: Borrower's credit score tier preference

The eight ATR factors include income, assets, employment, payment amounts, debts, DTI, credit history, and alimony/child support — not a borrower's preferred credit score tier.

Under TILA, the Annual Percentage Rate (APR) must be disclosed to within how many basis points for a regular mortgage transaction?

Answer: 1/8 of 1% (12.5 bps)

For regular mortgage transactions, TILA requires the APR to be accurate within 1/8 of 1 percentage point (0.125%).

Which regulation implements the Real Estate Settlement Procedures Act (RESPA)?

Answer: Regulation X

Regulation X is the Federal Reserve/CFPB regulation that implements RESPA, governing settlement services and disclosures.

A lender requires a borrower to use a specific title company affiliated with the lender without disclosing the relationship. This most likely violates:

Answer: RESPA's affiliated business arrangement disclosure requirements

RESPA requires lenders to disclose affiliated business arrangements and prohibits mandatory use of affiliated settlement service providers.

Under the SAFE Act, a state-licensed mortgage loan originator must pass a national test with a minimum score of:

Answer: 75%

The SAFE Act requires MLOs to pass the NMLS national test with a minimum score of 75% to obtain licensure.

HOEPA (Home Ownership and Equity Protection Act) applies to which type of mortgage loans?

Answer: High-cost home loans exceeding APR and points/fees thresholds

HOEPA triggers when a loan's APR or points and fees exceed specific thresholds, classifying it as a high-cost mortgage with additional consumer protections.

Under TRID, the Closing Disclosure must be received by the borrower at least how many business days before consummation?

Answer: 3 business days

TRID requires borrowers to receive the Closing Disclosure at least three business days before the loan closes.

Which act requires federally chartered depository institutions to meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods?

Answer: Community Reinvestment Act (CRA)

The CRA of 1977 requires banks to serve the credit needs of entire communities, including LMI areas, and regulators examine and rate CRA performance.

Under Regulation Z, a refinance on a primary residence gives the borrower a right of rescission period of:

Answer: 3 business days

Borrowers have three business days after closing, delivery of the Notice of Right to Rescind, or delivery of the required disclosures — whichever is latest — to rescind a non-purchase mortgage on their primary home.

A mortgage loan originator who takes a loan application and offers or negotiates terms without holding a license is violating which federal law?

Answer: The SAFE Mortgage Licensing Act

The SAFE Act requires all MLOs who take applications and negotiate loan terms to be either state-licensed or federally registered.

Under the Gramm-Leach-Bliley Act (GLBA), mortgage lenders must provide a privacy notice to consumers:

Answer: At account opening and annually thereafter

GLBA requires financial institutions to deliver an initial privacy notice when a customer relationship is established and annually every year the relationship continues.

RESPA Section 8 prohibits which of the following practices?

Answer: Paying or receiving kickbacks for referrals of settlement services

RESPA Section 8 specifically prohibits giving or accepting anything of value in exchange for referrals of federally related mortgage settlement services.

Under the ATR/QM rule, a Qualified Mortgage generally cannot have a debt-to-income ratio exceeding:

Answer: 43%

Under the original QM rule, a maximum DTI of 43% was the general limit, though GSE-eligible loans had a temporary safe harbor; new price-based QM rules replaced DTI caps in 2021.

Which federal regulation specifically prohibits a lender from requiring a borrower to purchase credit life insurance as a condition of obtaining a mortgage?

Answer: Regulation Z (TILA)

TILA/Regulation Z prohibits tying the granting of credit to the purchase of credit insurance, and requires disclosure when such insurance is voluntarily chosen.