Federal Mortgage-Related Laws Flashcards

Under RESPA, within how many business days must a lender provide a Loan Estimate to a borrower after receiving a completed loan application?

Answer: 3 business days

RESPA (as implemented by TRID) requires lenders to deliver the Loan Estimate within 3 business days of receiving a completed loan application.

Which federal law prohibits lenders from paying referral fees or kickbacks to settlement service providers for referring business?

Answer: RESPA

RESPA Section 8 specifically prohibits kickbacks and unearned fee arrangements between settlement service providers.

The Closing Disclosure required under TRID must be provided to the borrower no later than how many business days before consummation?

Answer: 3 business days

TRID rules require the Closing Disclosure to be received by the borrower at least 3 business days before loan consummation.

RESPA's Section 10 limits the amount a lender can require a borrower to deposit into an escrow account. What is the maximum cushion allowed?

Answer: Two months' escrow payments

RESPA Section 10 allows a maximum escrow cushion of two months' worth of escrow payments.

Under TILA, what is the right of rescission period for a refinance of a primary residence with a new lender?

Answer: 3 business days

TILA grants borrowers a 3-business-day right of rescission for non-purchase refinance transactions secured by their primary residence.

Which statement about RESPA's affiliated business arrangement (AfBA) disclosure is correct?

Answer: Lenders must provide an AfBA disclosure and cannot mandate use of the affiliated provider

RESPA requires an AfBA disclosure when referring to affiliated settlement service providers, and lenders may not compel the borrower to use them.

A borrower's annual percentage rate (APR) exceeds the stated interest rate on a fixed-rate mortgage primarily because the APR includes:

Answer: Certain fees and costs in addition to the interest rate

APR, as disclosed under TILA, incorporates the interest rate plus certain fees and costs, giving a broader measure of borrowing cost.

Under ECOA, a creditor must notify a loan applicant of an adverse action within how many days of receiving a completed application?

Answer: 30 days

ECOA and Regulation B require creditors to provide an adverse action notice within 30 days of receiving a completed application.

Which protected class was added to the Fair Housing Act by the 1988 amendments?

Answer: Familial status and disability

The Fair Housing Amendments Act of 1988 added familial status and disability (handicap) to the original protected classes.

HMDA requires covered lenders to collect and report data on mortgage applications primarily to:

Answer: Detect and deter discriminatory lending patterns

HMDA data is used by regulators and the public to identify potential discriminatory or predatory lending practices across geographic areas.

Under the Fair Housing Act, which of the following lender actions is considered illegal steering?

Answer: Directing minority applicants toward higher-cost loan products without objective basis

Steering occurs when lenders direct borrowers to less favorable loan products based on a protected characteristic rather than creditworthiness.

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

Answer: Redlining and the failure of banks to serve low- and moderate-income communities

CRA was enacted in 1977 to encourage depository institutions to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods.

Which agency is primarily responsible for enforcing ECOA in the context of mortgage lending by non-bank mortgage companies?

Answer: Consumer Financial Protection Bureau (CFPB)

The CFPB has primary enforcement authority over ECOA (Regulation B) for non-depository mortgage lenders.

Under ECOA, a creditor MAY ask about an applicant's marital status in which situation?

Answer: When state property law directly affects the creditor's rights in the collateral

Regulation B allows creditors to ask about marital status when it is relevant to state law rights in the collateral securing the loan, such as in community property states.

Under HOEPA, a mortgage is classified as a 'high-cost mortgage' if the APR exceeds the Average Prime Offer Rate (APOR) by more than how many percentage points for a first-lien loan?

Answer: 6.5 percentage points

Under HOEPA as amended by Dodd-Frank, a first-lien loan is high-cost if its APR exceeds APOR by more than 6.5 percentage points.

The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good-faith determination that borrowers can repay their loans based on how many underwriting factors?

Answer: 8 factors

The ATR rule specifies eight underwriting factors lenders must consider, including income, assets, employment, credit history, and monthly debt obligations.

A Qualified Mortgage (QM) under Dodd-Frank generally prohibits a debt-to-income (DTI) ratio exceeding what threshold (under the General QM standard)?

Answer: 43%

The original General QM definition capped borrower DTI at 43%; later amendments shifted to a price-based threshold, but 43% remains a foundational benchmark.

Which feature is expressly prohibited in a Qualified Mortgage under the Dodd-Frank ATR/QM rule?

Answer: Balloon payment (for most QMs)

QMs generally cannot contain balloon payments (except for certain small creditor and rural/underserved area loans), negative amortization, or interest-only features.

Under the Homeowners Protection Act (PMI Cancellation Act), a borrower may request cancellation of PMI once the loan-to-value ratio reaches:

Answer: 80%

The Homeowners Protection Act allows borrowers to request PMI cancellation when LTV reaches 80% based on the original property value.

Under the Homeowners Protection Act, lenders must automatically terminate PMI when the LTV ratio reaches what level, based on original amortization schedule?

Answer: 78%

The Homeowners Protection Act requires automatic PMI termination when the loan balance reaches 78% LTV based on the original amortization schedule.