Mortgage Mortgage Federal Mortgage-Related Laws Questions and Answers 2 — Questions and Answers
Question 1: Under the Equal Credit Opportunity Act (ECOA), which factor may a lender legally consider when evaluating a mortgage application?
- Applicant's race
- Applicant's marital status
- Applicant's income and employment history (Correct answer)
- Applicant's national origin
Correct answer: Applicant's income and employment history
ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, or age, but lenders may evaluate creditworthiness factors such as income and employment history.
Question 2: What is the primary purpose of the Home Mortgage Disclosure Act (HMDA)?
- To set maximum interest rates on mortgages
- To require lenders to report lending data for fair lending analysis (Correct answer)
- To establish minimum down payment requirements
- To regulate mortgage servicer escrow accounts
Correct answer: To require lenders to report lending data for fair lending analysis
HMDA requires financial institutions to collect and publicly disclose mortgage lending data so regulators and the public can monitor whether lenders are serving community housing needs and practicing fair lending.
Question 3: Under RESPA, which of the following is prohibited?
- Charging a loan origination fee
- Requiring an escrow account for taxes and insurance
- Paying or receiving kickbacks for referrals of settlement services (Correct answer)
- Providing a Loan Estimate within three business days
Correct answer: Paying or receiving kickbacks for referrals of settlement services
RESPA Section 8 strictly prohibits kickbacks, referral fees, and unearned fees in connection with real estate settlement services.
Question 4: The Homeowners Protection Act (HPA) of 1998 primarily addresses which borrower concern?
- Predatory lending practices
- Automatic termination of private mortgage insurance (PMI) (Correct answer)
- Disclosure of adjustable-rate mortgage terms
- Protection against foreclosure during natural disasters
Correct answer: Automatic termination of private mortgage insurance (PMI)
The HPA establishes rules for automatic termination and borrower-requested cancellation of PMI on residential mortgages, protecting homeowners from paying unnecessary insurance premiums.
Question 5: Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a mortgage application?
- Truth in Lending Act (TILA)
- Real Estate Settlement Procedures Act (RESPA)
- TILA-RESPA Integrated Disclosure (TRID) rule (Correct answer)
- Fair Housing Act
Correct answer: TILA-RESPA Integrated Disclosure (TRID) rule
The TRID rule, which integrates TILA and RESPA disclosures, requires lenders to provide a standardized Loan Estimate within three business days of application.
Question 6: Under the Fair Housing Act, which of the following actions by a mortgage lender would constitute illegal discrimination?
- Denying a loan due to insufficient collateral value
- Offering a higher interest rate to a borrower with a low credit score
- Refusing to lend in a neighborhood based on its racial composition (Correct answer)
- Requiring flood insurance in a FEMA-designated flood zone
Correct answer: Refusing to lend in a neighborhood based on its racial composition
Refusing to lend based on the racial or ethnic composition of a neighborhood is redlining, which is prohibited under the Fair Housing Act.
Mortgage Mortgage Federal Mortgage-Related Laws Questions and Answers 2
Under the Equal Credit Opportunity Act (ECOA), which factor may a lender legally consider when evaluating a mortgage application?