Loan Officer Exam Loan Officer Consumer Protection and Fair Lending 1 — Questions and Answers
Question 1: What does HMDA stand for in the context of mortgage lending?
- Home Mortgage Disclosure Act (Correct answer)
- Housing and Mortgage Default Agreement
- Home Market Data Authorization
- Housing Mortgage Distribution Act
Correct answer: Home Mortgage Disclosure Act
HMDA stands for the Home Mortgage Disclosure Act, which requires lenders to collect and report data on mortgage loan applications and originations.
Question 2: Under the Fair Housing Act, which of the following is NOT a protected class?
- Race
- National origin
- Occupation (Correct answer)
- Familial status
Correct answer: Occupation
Occupation is not a protected class under the Fair Housing Act; protected classes include race, color, national origin, religion, sex, familial status, and disability.
Question 3: What is 'redlining' in the context of fair lending?
- Marking loan documents with corrections in red ink
- The illegal practice of denying services to residents of certain areas based on race or ethnicity (Correct answer)
- A method for calculating mortgage interest
- A type of adjustable-rate mortgage feature
Correct answer: The illegal practice of denying services to residents of certain areas based on race or ethnicity
Redlining is the illegal discriminatory practice of denying or limiting financial services to people in specific geographic areas based on the racial or ethnic composition of those areas.
Question 4: Which federal law prohibits discrimination in credit transactions, including mortgage loans, based on race, sex, national origin, and other factors?
- The Fair Housing Act
- The Equal Credit Opportunity Act (ECOA) (Correct answer)
- The Community Reinvestment Act (CRA)
- The Truth in Lending Act (TILA)
Correct answer: The Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in all credit transactions, including mortgage lending, based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
Question 5: What is 'steering' as a fair lending violation?
- Directing borrowers toward loan products less favorable than those they qualify for based on a protected characteristic (Correct answer)
- Helping borrowers select the best available mortgage product
- Reviewing a borrower's credit report to determine eligibility
- Assisting borrowers with the application process
Correct answer: Directing borrowers toward loan products less favorable than those they qualify for based on a protected characteristic
Steering is the illegal practice of directing borrowers toward less favorable loan products based on a protected characteristic, even when they qualify for better terms.
Question 6: Under HMDA, which data point must lenders collect and report regarding loan applicants?
- The applicant's political affiliation
- The applicant's race, ethnicity, and sex (Correct answer)
- The applicant's religion
- The applicant's employment history beyond 2 years
Correct answer: The applicant's race, ethnicity, and sex
HMDA requires lenders to collect and report demographic data including the applicant's race, ethnicity, and sex to enable regulators to monitor for discriminatory lending patterns.
Loan Officer Exam Loan Officer Consumer Protection and Fair Lending 1
What does HMDA stand for in the context of mortgage lending?