NMLS Compliance and Oversight 3 — Questions and Answers
Question 1: Under the Equal Credit Opportunity Act (ECOA), how long must a creditor retain records of adverse action notices?
- 6 months
- 12 months
- 25 months (Correct answer)
- 36 months
Correct answer: 25 months
ECOA requires creditors to retain records of adverse action notices and the credit application for 25 months after the action is taken.
Question 2: Which of the following is a key element of an effective Bank Secrecy Act (BSA) compliance program for a mortgage company?
- Requiring all borrowers to submit tax returns for five years
- Designating a compliance officer, establishing internal controls, and providing ongoing training (Correct answer)
- Obtaining a fidelity bond for all loan officers
- Filing quarterly reports with the Federal Reserve
Correct answer: Designating a compliance officer, establishing internal controls, and providing ongoing training
An effective BSA/AML compliance program must include a designated compliance officer, written internal controls, independent testing, and ongoing employee training.
Question 3: Under TRID, if a valid changed circumstance occurs, how many business days does a lender have to issue a revised Loan Estimate?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 10 business days
Correct answer: 3 business days
When a valid changed circumstance occurs, the lender must provide a revised Loan Estimate within three business days of receiving information supporting the change.
Question 4: What is 'disparate impact' in the context of fair lending compliance?
- Intentionally treating a protected class differently in loan terms
- A facially neutral policy that disproportionately affects a protected class without business justification (Correct answer)
- Failing to market loans in minority neighborhoods
- Charging higher fees to borrowers of a specific national origin
Correct answer: A facially neutral policy that disproportionately affects a protected class without business justification
Disparate impact occurs when a facially neutral lending policy disproportionately harms a protected class and cannot be justified by legitimate business necessity.
Question 5: Under the Homeowners Protection Act (HPA), when must a lender automatically cancel Private Mortgage Insurance (PMI) on a conventional loan?
- When the LTV reaches 85%
- When the LTV reaches 80% based on original value at the midpoint of the amortization schedule
- When the LTV reaches 78% based on original amortization schedule at original value (Correct answer)
- When the borrower's credit score improves above 720
Correct answer: When the LTV reaches 78% based on original amortization schedule at original value
The HPA requires automatic PMI cancellation when the loan balance reaches 78% of the original property value based on the original amortization schedule.
Question 6: Which agency enforces the Fair Housing Act's prohibition on discriminatory mortgage lending practices?
- OCC
- FDIC
- HUD and DOJ (Correct answer)
- FTC
Correct answer: HUD and DOJ
The Department of Housing and Urban Development (HUD) and the Department of Justice (DOJ) are the primary enforcers of the Fair Housing Act.
Question 7: What is the primary purpose of the NMLS Unique Identifier assigned to each mortgage loan originator?
- To track the MLO's credit history
- To provide a single identifier that follows the MLO across states and employers, enabling consumer lookup (Correct answer)
- To assign the MLO to a specific federal regulator
- To determine the MLO's licensing fee schedule
Correct answer: To provide a single identifier that follows the MLO across states and employers, enabling consumer lookup
The NMLS Unique Identifier allows consumers to look up an MLO's license status and disciplinary history, and follows the MLO regardless of state or employer changes.
NMLS Compliance and Oversight 3
Under the Equal Credit Opportunity Act (ECOA), how long must a creditor retain records of adverse action notices?