Arkansas Real Estate License Financing and Settlement Practices 2 — Questions and Answers
Question 1: Under RESPA, which of the following is NOT considered a settlement service?
- Title search
- Property appraisal
- Home inspection negotiation by buyer (Correct answer)
- Credit reporting
Correct answer: Home inspection negotiation by buyer
Negotiation by the buyer is not a settlement service under RESPA; services like title search, appraisal, and credit reporting are.
Question 2: A borrower applies for a mortgage in Arkansas. Under TRID, within how many business days must the lender deliver the Loan Estimate?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
TRID requires lenders to deliver the Loan Estimate within 3 business days of receiving a completed loan application.
Question 3: Which type of mortgage loan features a fixed interest rate but payments that increase at specified intervals?
- Reverse mortgage
- Graduated payment mortgage (Correct answer)
- Balloon mortgage
- Interest-only mortgage
Correct answer: Graduated payment mortgage
A graduated payment mortgage (GPM) has a fixed rate but scheduled payment increases over time, often used by borrowers expecting rising incomes.
Question 4: In Arkansas, the document that transfers legal title to real property at closing is called a:
- Promissory note
- Deed of trust
- Warranty deed (Correct answer)
- Closing disclosure
Correct answer: Warranty deed
A warranty deed conveys legal title and includes the grantor's guarantee against title defects.
Question 5: A lender charges a borrower 2 discount points on a $200,000 loan. How much does the borrower pay in discount points?
- $200
- $2,000
- $4,000 (Correct answer)
- $20,000
Correct answer: $4,000
Each discount point equals 1% of the loan amount, so 2 points on $200,000 = $4,000.
Question 6: Which federal law prohibits lenders from discriminating in mortgage lending based on the racial composition of a neighborhood?
- RESPA
- TILA
- ECOA
- HMDA/Fair Housing Act (redlining prohibition) (Correct answer)
Correct answer: HMDA/Fair Housing Act (redlining prohibition)
Redlining—denying loans based on neighborhood racial composition—is prohibited under the Fair Housing Act and reinforced by HMDA reporting requirements.
Question 7: Under Arkansas law, a deed of trust involves how many parties?
- Two
- Three (Correct answer)
- Four
- Five
Correct answer: Three
A deed of trust involves three parties: the trustor (borrower), the trustee (neutral third party), and the beneficiary (lender).
Arkansas Real Estate License Financing and Settlement Practices 2
Under RESPA, which of the following is NOT considered a settlement service?