Mortgage Federal Lending Regulations Questions and Answers — Questions and Answers
Question 1: A mortgage loan originator gives a real estate agent a $50 gift card for each referral that results in a closed loan. Which federal regulation is being violated?
- Equal Credit Opportunity Act (ECOA)
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
- Home Mortgage Disclosure Act (HMDA)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. The $50 gift card is considered a 'thing of value' given for a referral.
Question 2: Under the TILA-RESPA Integrated Disclosure (TRID) rule, which of the following events would require a new 3-day waiting period for the Closing Disclosure?
- A minor typographical error is found on the disclosure.
- The annual percentage rate (APR) becomes inaccurate. (Correct answer)
- The seller's real estate commission changes.
- The borrower decides to purchase homeowner's insurance from a different provider.
Correct answer: The annual percentage rate (APR) becomes inaccurate.
According to the TRID rule, a new three-business-day waiting period is triggered only by specific significant changes: 1) the APR becomes inaccurate, 2) the loan product changes, or 3) a prepayment penalty is added. Other changes can be addressed with a revised Closing Disclosure provided at or before consummation without a new waiting period.
Question 3: A loan applicant is denied a mortgage. According to the Equal Credit Opportunity Act (ECOA), which of the following actions is the lender required to take?
- Provide the applicant with a copy of their credit report automatically.
- Suggest an alternative lender who may approve the loan.
- Disclose the applicant's credit score to them.
- Provide a written statement of the specific reasons for the denial. (Correct answer)
Correct answer: Provide a written statement of the specific reasons for the denial.
The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, requires creditors to provide an applicant with a notification of the action taken. If the action is an adverse one (like a denial), the notice must provide a statement of the specific reasons for the decision or disclose the applicant's right to request the reasons.
Question 4: Which of the following is NOT a protected class under the Equal Credit Opportunity Act (ECOA)?
- Marital Status
- Source of Income (as long as it's legal)
- Disability Status (Correct answer)
- Age
Correct answer: Disability Status
While the Fair Housing Act prohibits discrimination based on disability, the Equal Credit Opportunity Act (ECOA) does not list disability as a protected class. ECOA's protected classes are race, color, religion, national origin, sex, marital status, age, and receipt of public assistance income.
Question 5: A consumer is refinancing their primary residence with a new lender. Under the Truth in Lending Act (TILA), they have a right to rescind the loan. How long is this rescission period?
- 24 hours after closing
- 3 business days after closing (Correct answer)
- 7 calendar days after closing
- There is no right of rescission on a refinance.
Correct answer: 3 business days after closing
The Truth in Lending Act (TILA), through Regulation Z, gives borrowers a three-business-day right of rescission for certain mortgage transactions, including the refinance of a principal dwelling. This allows the borrower to cancel the transaction for any reason within three business days following consummation.
Question 6: According to the SAFE Act, what is the minimum number of hours of continuing education a state-licensed mortgage loan originator must complete annually?
- 10 hours
- 20 hours
- 8 hours (Correct answer)
- 12 hours
Correct answer: 8 hours
The Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act requires state-licensed MLOs to complete at least 8 hours of NMLS-approved continuing education annually. This must include 3 hours of Federal law, 2 hours of ethics, and 2 hours of non-traditional mortgage training.
Mortgage Federal Lending Regulations Questions and Answers
A mortgage loan originator gives a real estate agent a $50 gift card for each referral that results in a closed loan.
Which federal regulation is being violated?