CMA - Certified Mortgage Advisor Mortgage Regulations and Compliance Questions and Answers 1 — Questions and Answers
Question 1: Under the TILA-RESPA Integrated Disclosure (TRID) rule, which of the following events would trigger a new three-business-day waiting period for the Closing Disclosure?
- The borrower decides to take a smaller loan amount than originally disclosed.
- The seller agrees to a credit for repairs discovered during the final walk-through.
- The lender adds a prepayment penalty to the loan terms. (Correct answer)
- The annual percentage rate (APR) decreases slightly due to a minor fee adjustment.
Correct answer: The lender adds a prepayment penalty to the loan terms.
According to the TRID rule, a new three-business-day waiting period for the Closing Disclosure is required if there is a change to the loan product, the APR becomes inaccurate (generally a change of more than 1/8 of a percent for fixed-rate loans), or a prepayment penalty is added. A decrease in the loan amount, a seller credit, or a small decrease in the APR would not typically trigger a new waiting period.
Question 2: A mortgage company hosts a lavish, invitation-only dinner for the top-producing real estate agents in their area to thank them for their business. This activity is most likely a violation of which regulation?
- Equal Credit Opportunity Act (ECOA)
- Fair Housing Act (FHA)
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of RESPA prohibits giving or accepting a 'thing of value' in exchange for the referral of settlement service business. Providing expensive dinners and other incentives to real estate agents for referring clients could be considered an illegal kickback under RESPA.
Question 3: A loan applicant from a protected class under the Fair Housing Act is denied a mortgage. Which of the following is a permissible reason for the denial?
- The applicant's primary source of income is from public assistance.
- The applicant has a low credit score and high debt-to-income ratio. (Correct answer)
- The property is located in a neighborhood predominantly occupied by minorities.
- The applicant's familial status recently changed to include a newborn.
Correct answer: The applicant has a low credit score and high debt-to-income ratio.
The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, disability, or familial status. However, it does not prevent a lender from denying a loan based on legitimate, non-discriminatory financial factors like a poor credit history or an inability to repay the loan. Denying based on income from public assistance is a violation of ECOA.
Question 4: A borrower applies for a mortgage on Monday, June 1st. According to the TRID rule, what is the latest date the lender must provide the Loan Estimate, assuming no federal holidays?
- Tuesday, June 2nd
- Wednesday, June 3rd
- Thursday, June 4th (Correct answer)
- Friday, June 5th
Correct answer: Thursday, June 4th
The TRID rule requires lenders to provide the Loan Estimate to the borrower within three business days of receiving a complete loan application. If the application is received on Monday, the third business day would be Thursday.
Question 5: Under the Equal Credit Opportunity Act (ECOA), a lender must notify an applicant of an adverse action within how many days of receiving a completed application?
- 15 days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
ECOA and its implementing Regulation B require a creditor to notify an applicant of any adverse action within 30 days after receiving a completed application.
Question 6: Which of the following scenarios BEST describes a potential violation of the Fair Housing Act in mortgage lending?
- A lender offering different interest rates based on the applicant's credit score.
- A mortgage advisor refusing to work with an applicant who has a recent bankruptcy.
- A lender providing a lower loan amount because the property appraised for less than the sales price.
- A lender imposing stricter underwriting standards for properties located in a specific zip code with a high minority population. (Correct answer)
Correct answer: A lender imposing stricter underwriting standards for properties located in a specific zip code with a high minority population.
The Fair Housing Act prohibits discrimination in housing-related transactions, including mortgage lending, based on protected characteristics. Imposing different standards based on the racial composition of a neighborhood is a form of redlining, which is illegal. The other options represent legitimate, non-discriminatory lending practices based on creditworthiness and property value.
CMA - Certified Mortgage Advisor Mortgage Regulations and Compliance Questions and Answers 1
Under the TILA-RESPA Integrated Disclosure (TRID) rule, which of the following events would trigger a new three-business-day waiting period for the Closing Disclosure?