Mortgage Loan Originator TILA and RESPA Compliance 1 — Questions and Answers
Question 1: Under TILA, what is the primary purpose of the Annual Percentage Rate (APR) disclosure?
- To show the lender's profit margin
- To provide a standardized measure of the true cost of credit (Correct answer)
- To indicate the monthly payment amount
- To disclose the loan origination fee only
Correct answer: To provide a standardized measure of the true cost of credit
APR under TILA provides a standardized cost measure that includes interest and certain fees, allowing borrowers to compare loan offers on equal footing.
Question 2: RESPA Section 8 prohibits which of the following?
- Charging origination fees
- Paying kickbacks or unearned fees for referrals of settlement services (Correct answer)
- Requiring escrow accounts
- Issuing Loan Estimates
Correct answer: Paying kickbacks or unearned fees for referrals of settlement services
RESPA Section 8 specifically prohibits giving or receiving anything of value in exchange for referrals of real estate settlement service business.
Question 3: The TRID rule (TILA-RESPA Integrated Disclosure) combined which two disclosure forms?
- HUD-1 and GFE
- Loan Estimate and Closing Disclosure (Correct answer)
- Truth-in-Lending and HUD-1
- Good Faith Estimate and Truth-in-Lending
Correct answer: Loan Estimate and Closing Disclosure
TRID replaced the Good Faith Estimate and early Truth-in-Lending with the Loan Estimate, and replaced the HUD-1 and final Truth-in-Lending with the Closing Disclosure.
Question 4: Under TRID, how many business days before consummation must the Closing Disclosure be received by the borrower?
- 1 business day
- 2 business days
- 3 business days (Correct answer)
- 5 business days
Correct answer: 3 business days
The Closing Disclosure must be received by the borrower at least three business days before loan consummation.
Question 5: Which tolerance category under TRID allows zero tolerance for increases from the Loan Estimate to the Closing Disclosure?
- Prepaid interest
- Required services where borrower may shop
- Lender fees and affiliated services (Correct answer)
- Recording fees
Correct answer: Lender fees and affiliated services
Lender charges and fees for required services where the borrower cannot shop fall in the zero-tolerance bucket, meaning they cannot increase from LE to CD.
Question 6: What does RESPA require lenders to provide within three business days of receiving a complete loan application?
- Closing Disclosure
- Appraisal report
- Loan Estimate (Correct answer)
- Credit report
Correct answer: Loan Estimate
Under RESPA/TRID, lenders must deliver or mail the Loan Estimate within three business days of receiving a completed loan application.
Mortgage Loan Originator TILA and RESPA Compliance 1
Under TILA, what is the primary purpose of the Annual Percentage Rate (APR) disclosure?