Mortgage Federal Laws and Regulations 2 — Questions and Answers
Question 1: Under RESPA, which practice is prohibited between settlement service providers?
- Sharing client contact information
- Paying or receiving kickbacks for referrals (Correct answer)
- Advertising joint services
- Offering bundled closing packages
Correct answer: Paying or receiving kickbacks for referrals
RESPA Section 8 prohibits kickbacks and fee-splitting arrangements between settlement service providers for referrals.
Question 2: The Home Mortgage Disclosure Act (HMDA) requires lenders to collect and report data primarily to:
- Calculate default risk scores
- Identify possible discriminatory lending patterns (Correct answer)
- Verify borrower income accuracy
- Determine maximum loan limits
Correct answer: Identify possible discriminatory lending patterns
HMDA data is used by regulators and the public to identify and address discriminatory or predatory lending practices.
Question 3: Which federal law establishes the right of rescission for certain mortgage transactions?
- RESPA
- HMDA
- TILA (Correct answer)
- ECOA
Correct answer: TILA
The Truth in Lending Act (TILA) grants borrowers a three-business-day right to rescind certain non-purchase mortgage transactions.
Question 4: A lender denies a loan application citing the applicant's receipt of public assistance income as the reason. This most likely violates:
- RESPA
- ECOA (Correct answer)
- TILA
- FIRREA
Correct answer: ECOA
ECOA prohibits discrimination based on the fact that income derives from a public assistance program.
Question 5: Under Dodd-Frank, which agency has primary supervisory authority over large non-bank mortgage servicers?
- OCC
- FDIC
- CFPB (Correct answer)
- HUD
Correct answer: CFPB
The Consumer Financial Protection Bureau (CFPB) has supervisory and enforcement authority over large non-bank mortgage servicers under Dodd-Frank.
Question 6: The Homeowners Protection Act requires automatic cancellation of PMI when the loan balance reaches what percentage of the original property value?
- 85%
- 80%
- 78% (Correct answer)
- 75%
Correct answer: 78%
The HPA mandates automatic PMI cancellation when the loan-to-value ratio drops to 78% of the original purchase price based on the amortization schedule.
Question 7: Which federal regulation implements ECOA's requirements as they apply to mortgage lending?
- Regulation B (Correct answer)
- Regulation C
- Regulation X
- Regulation Z
Correct answer: Regulation B
Regulation B implements ECOA, which prohibits discrimination in credit transactions including mortgage lending.
Mortgage Federal Laws and Regulations 2
Under RESPA, which practice is prohibited between settlement service providers?