Mortgage Federal Laws and Regulations Questions and Answers — Questions and Answers
Question 1: A mortgage loan originator gives a real estate agent a $100 gift card for each referred client who closes a loan. Which federal law is being violated?
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Equal Credit Opportunity Act (ECOA)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of RESPA prohibits giving or receiving any fee, kickback, or thing of value in exchange for the referral of settlement service business. The $100 gift card is a 'thing of value' given specifically for the referral, which is a direct violation.
Question 2: Under the Equal Credit Opportunity Act (ECOA), which of the following characteristics is NOT a prohibited basis for denying credit?
- National Origin
- Marital Status
- Credit History (Correct answer)
- Receipt of Public Assistance
Correct answer: Credit History
ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or because an applicant receives public assistance income. Lenders are, however, permitted and expected to evaluate an applicant's credit history and creditworthiness when making a lending decision.
Question 3: A borrower is applying for a mortgage for their primary residence. According to the Truth in Lending Act (TILA), which of the following is a key disclosure the lender must provide to the borrower within three business days of receiving the application?
- The Closing Disclosure
- The Loan Estimate (Correct answer)
- The Annual Escrow Statement
- The Notice of Right to Rescind
Correct answer: The Loan Estimate
The Truth in Lending Act (TILA), through Regulation Z, requires lenders to provide applicants with a Loan Estimate within three business days of receiving a mortgage application. This document provides a detailed estimate of the loan terms and settlement costs.
Question 4: The Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act requires state-licensed mortgage loan originators to complete a minimum of how many hours of pre-licensing education?
- 8 hours
- 15 hours
- 20 hours (Correct answer)
- 25 hours
Correct answer: 20 hours
The SAFE Act mandates that prospective state-licensed MLOs complete at least 20 hours of NMLS-approved pre-licensing education. This education must include specific hours on federal law, ethics, and non-traditional mortgage products.
Question 5: Which of the following federal laws requires lenders to collect and report data about mortgage loan applications, including applicant demographic information, for the purpose of identifying potential discriminatory lending patterns?
- Fair Housing Act (FHA)
- Home Mortgage Disclosure Act (HMDA) (Correct answer)
- Gramm-Leach-Bliley Act (GLBA)
- Real Estate Settlement Procedures Act (RESPA)
Correct answer: Home Mortgage Disclosure Act (HMDA)
The Home Mortgage Disclosure Act (HMDA) requires financial institutions to collect, report, and disclose data about mortgage applications. This data, which includes applicant ethnicity, race, sex, and income, is used to help determine whether lenders are serving the housing needs of their communities and to identify discriminatory lending patterns.
Question 6: A loan applicant mentions that a significant portion of their income comes from a public assistance program. According to the Equal Credit Opportunity Act (ECOA), how should the mortgage loan originator proceed?
- Disregard the public assistance income as it is not stable.
- Deny the loan because public assistance is not earned income.
- Consider the public assistance income in the same way as any other source of income. (Correct answer)
- Tell the applicant they must find a co-signer with traditional employment.
Correct answer: Consider the public assistance income in the same way as any other source of income.
ECOA explicitly prohibits discriminating against an applicant because all or part of their income derives from a public assistance program. The lender must consider this income and treat it the same as income from other sources, provided it can be verified as stable and likely to continue.
Mortgage Federal Laws and Regulations Questions and Answers
A mortgage loan originator gives a real estate agent a $100 gift card for each referred client who closes a loan.
Which federal law is being violated?