SAFE - Certified Secure and Fair Enforcement Mortgage Loan Originator TILA and RESPA Regulations Questions and Answers

Question 1

A borrower receives a Closing Disclosure on Tuesday. Two days later, on Thursday, the lender discovers the loan product is changing from a fixed-rate to a variable-rate mortgage. According to TILA/RESPA regulations, what is the impact of this change?

Accepted Answer

The loan cannot close until three business days after the borrower receives a revised Closing Disclosure.

Answer

Under the TILA-RESPA Integrated Disclosure (TRID) rule, certain significant changes to the loan terms after the Closing Disclosure is delivered require a new three-business-day waiting period. These changes include: 1) a change that makes the APR inaccurate, 2) a change in the loan product, or 3) the addition of a prepayment penalty. Since the loan product changed, the lender must issue a revised Closing Disclosure, and the closing cannot occur until three business days after the borrower is considered to have received it.

Question 2

Under RESPA Section 10, what is the maximum cushion that a lender can require a borrower to maintain in an escrow account?

Accepted Answer

An amount equal to one-sixth of the total estimated annual disbursements.

Answer

RESPA Section 10 specifies that a lender can require a borrower to pay into an escrow account to cover anticipated disbursements like taxes and insurance. However, it limits the cushion, or reserve, that the lender can hold. This cushion is restricted to an amount equal to one-sixth (which is equivalent to two months) of the total estimated annual disbursements from the account.

Question 3

In a real estate-secured transaction, which of the following is generally EXCLUDED from the finance charge calculation under the Truth in Lending Act (TILA)?

Accepted Answer

Bona fide and reasonable title insurance fees.

Answer

TILA requires the disclosure of the finance charge, which is the cost of credit as a dollar amount. While it includes many fees like origination fees, points, and broker fees, TILA provides a special rule for real estate-secured loans. It excludes certain bona fide and reasonable third-party fees, such as those for title examination, title insurance, and credit reports, from the finance charge calculation.

Question 4

A home seller's purchase contract requires the buyer to use a specific title insurance company that is owned by the seller's brother. The buyer will pay for both the owner's and lender's title policies. This practice is a violation of which federal regulation?

Accepted Answer

RESPA Section 9

Answer

RESPA Section 9 prohibits a seller from requiring a home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale when the buyer is paying for the coverage. A violation of this section can make the seller liable to the buyer for an amount equal to three times all charges made for the title insurance.

Question 5

For the purposes of the right of rescission under TILA, how is a 'business day' defined?

Accepted Answer

All calendar days except Sundays and federal legal holidays.

Answer

Regulation Z provides two definitions for 'business day'. The 'general' definition is any day the creditor is open for business. However, for specific purposes, including the right of rescission, a more precise definition applies: all calendar days except for Sundays and the legal public holidays specified in 5 U.S.C. 6103(a). This means Saturday is always counted as a business day for rescission purposes.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

SAFE - Certified Secure and Fair Enforcement Mortgage Loan Originator TILA and RESPA Regulations Questions and Answers