CMB - Certified Mortgage Banker Loan Administration and Servicing Questions and Answers — Questions and Answers
Question 1: A borrower with a federally related mortgage loan has failed to maintain the required hazard insurance on their property. According to RESPA, what is the first step a servicer must take before purchasing force-placed insurance?
- Send a written notice to the borrower at least 45 days before assessing any premium or fee. (Correct answer)
- Immediately purchase a new policy to avoid a lapse in coverage.
- Contact the borrower's insurance agent to inquire about the policy status.
- Increase the borrower's escrow payment to cover the anticipated new premium.
Correct answer: Send a written notice to the borrower at least 45 days before assessing any premium or fee.
Under RESPA (Regulation X, 12 C.F.R. § 1024.37), a servicer must have a reasonable basis to believe the borrower has failed to maintain hazard insurance. The first required action is to send a written notice to the borrower at least 45 days before charging the borrower for the force-placed insurance. A second reminder notice is also required later in the process.
Question 2: A mortgage servicer is performing the annual escrow analysis for a borrower's account and discovers a surplus of $75. According to RESPA's Regulation X, what is the servicer required to do?
- Apply the surplus to the next year's escrow payments to reduce the monthly amount.
- Hold the funds in the escrow account as an additional cushion.
- Refund the entire surplus to the borrower within 30 days of the analysis. (Correct answer)
- Use the surplus to make a principal curtailment on the loan.
Correct answer: Refund the entire surplus to the borrower within 30 days of the analysis.
RESPA's Regulation X stipulates that if an escrow account analysis reveals a surplus of $50 or more, the servicer must refund that amount to the borrower. The refund must be made within 30 days of the analysis. If the surplus is less than $50, the servicer has the option to either refund it or apply it to the next year's escrow payments.
Question 3: Which of the following is considered a home retention option in loss mitigation, designed to assist a borrower who has experienced a temporary, resolved hardship and can now resume their regular payments plus an additional amount to catch up on missed payments?
- Short Sale
- Deed-in-Lieu of Foreclosure
- Loan Modification
- Repayment Plan (Correct answer)
Correct answer: Repayment Plan
A repayment plan is a loss mitigation option where the borrower agrees to pay their regular monthly mortgage payment plus an additional amount over a specified period to cure the delinquency. This option is suitable when the hardship was temporary and has been resolved. A short sale and deed-in-lieu are liquidation options, and a loan modification permanently changes the loan terms.
Question 4: A mortgage servicing company is transferring the servicing of a loan to another company. Under RESPA, what is the standard timeframe for the transferor servicer to notify the borrower before the effective date of the transfer?
- At least 30 days
- Not less than 15 days (Correct answer)
- Within 5 business days
- Exactly 45 days
Correct answer: Not less than 15 days
According to RESPA (12 C.F.R. § 1024.33), the transferor servicer must provide the notice of transfer to the borrower not less than 15 days before the effective date of the servicing transfer. A combined notice from both the transferor and transferee servicer also meets this 15-day requirement.
Question 5: A borrower, facing a long-term financial hardship, can no longer afford their mortgage payment even with a modification. They agree to voluntarily transfer ownership of the property to the mortgage holder in exchange for being released from the loan obligation. This loss mitigation strategy is known as:
- Forbearance
- Reinstatement
- A Deed-in-Lieu of Foreclosure (Correct answer)
- Payment Deferral
Correct answer: A Deed-in-Lieu of Foreclosure
A Deed-in-Lieu of Foreclosure is a non-retention (liquidation) option where the borrower voluntarily transfers the property title to the lender to satisfy the mortgage debt and avoid foreclosure proceedings. Forbearance and payment deferral are temporary relief options, while reinstatement involves paying the full past-due amount at once.
Question 6: During the 60-day period following the effective date of a servicing transfer, a borrower mistakenly sends their mortgage payment to the old (transferor) servicer. The payment is received on time. According to RESPA, how must this payment be treated?
- The old servicer can charge a fee for forwarding the payment.
- The payment may be treated as late by the new servicer.
- The payment cannot be treated as late for any purpose. (Correct answer)
- The borrower must be charged a late fee by the old servicer.
Correct answer: The payment cannot be treated as late for any purpose.
RESPA provides a 60-day safe harbor period after a servicing transfer. During this time, if a borrower sends their payment to the transferor (old) servicer on or before the due date, the payment cannot be treated as late for any purpose, and no late fee can be charged.
CMB - Certified Mortgage Banker Loan Administration and Servicing Questions and Answers
A borrower with a federally related mortgage loan has failed to maintain the required hazard insurance on their property.
According to RESPA, what is the first step a servicer must take before purchasing force-placed insurance?