CMB - Certified Mortgage Banker Residential Loan Origination Questions and Answers

Question 1

A loan originator is structuring a compensation plan. According to Regulation Z, which of the following methods is permissible?

Accepted Answer

A commission that is a fixed percentage of the loan amount for all transactions.

Answer

Regulation Z (the Truth in Lending Act) prohibits loan originator compensation from being based on the terms of a loan, such as interest rate or inclusion of a prepayment penalty. Compensation may, however, be based on the amount of credit extended (the loan amount), as long as it's a fixed percentage. While contributions to certain tax-advantaged retirement plans can be made from a mortgage-related profit pool, direct cash bonuses tied to profitability are generally not allowed.

Question 2

Under the TILA-RESPA Integrated Disclosure (TRID) rule, when must a lender provide the Closing Disclosure (CD) to the borrower?

Accepted Answer

At least 3 business days before loan consummation.

Answer

The TRID rule mandates that the creditor must ensure the consumer receives the Closing Disclosure at least three business days prior to consummation of the loan. The Loan Estimate, not the Closing Disclosure, must be provided within three business days of the application.

Question 3

A borrower applies for a mortgage on Monday, January 4th. Assuming no federal holidays, what is the latest date the lender can provide the Loan Estimate (LE) to comply with TRID timing requirements?

Accepted Answer

Thursday, January 7th

Answer

The TILA-RESPA Integrated Disclosure (TRID) rule requires lenders to deliver or place the Loan Estimate in the mail no later than the third business day after receiving the consumer's completed loan application. Counting from the application on Monday (Day 0), the third business day would be Thursday.

Question 4

Which of the following is a key requirement of the Ability-to-Repay (ATR) rule?

Accepted Answer

Lenders must make a reasonable, good-faith determination that a consumer has the ability to repay the loan.

Answer

The core principle of the ATR rule is that a creditor must make a reasonable and good-faith determination, based on verified and documented information, that the consumer will have a reasonable ability to repay the loan according to its terms. While debt-to-income ratios are a factor, there is no absolute 36% cap for all loans, and the rule does not restrict loans to only 30-year fixed-rate products or completely prohibit points and fees.

Question 5

A loan officer receives a bonus for each loan originated that is subsequently sold on the secondary market with a service-released premium above a certain threshold. This compensation practice is likely a violation of which regulation?

Accepted Answer

Regulation Z's Loan Originator Compensation Rule

Answer

Regulation Z prohibits loan originator compensation from being based on a 'proxy' for a term of a transaction. The profitability on a secondary market sale, such as the service-released premium, is considered a proxy for the loan's terms (e.g., interest rate) and is therefore not a permissible basis for compensation.

CMB - Certified Mortgage Banker Practice Test

CMB - Certified Mortgage Banker Practice Test

CMB - Certified Mortgage Banker Residential Loan Origination Questions and Answers