Mortgage Federal Laws and Regulations 3 — Questions and Answers
Question 1: Under the SAFE Act, a mortgage loan originator who moves from a bank to a non-bank entity must:
- Reapply for a new Social Security number
- Pass a new background check only
- Obtain a state MLO license through NMLS (Correct answer)
- File a dual registration with the OCC
Correct answer: Obtain a state MLO license through NMLS
Bank employees are federally registered, but when moving to a non-bank, they must obtain a state license through the NMLS under the SAFE Act.
Question 2: Which rule requires lenders to provide a Loan Estimate within three business days of receiving a completed mortgage application?
- RESPA standalone
- TILA-RESPA Integrated Disclosure (TRID) (Correct answer)
- HMDA
- ECOA
Correct answer: TILA-RESPA Integrated Disclosure (TRID)
TRID, effective 2015, requires a Loan Estimate to be delivered within three business days of a completed application.
Question 3: A mortgage servicer must acknowledge a borrower's written qualified written request (QWR) within how many business days?
- 3 business days
- 5 business days (Correct answer)
- 10 business days
- 30 business days
Correct answer: 5 business days
Under RESPA, servicers must acknowledge a QWR within 5 business days and resolve it within 30 business days.
Question 4: The Community Reinvestment Act (CRA) was enacted primarily to address:
- Predatory lending by payday lenders
- Redlining and exclusion of low-income communities from credit (Correct answer)
- Appraisal fraud in high-cost markets
- Excess fees charged at mortgage closing
Correct answer: Redlining and exclusion of low-income communities from credit
The CRA was passed in 1977 to combat redlining and encourage banks to serve low- and moderate-income areas.
Question 5: Under Regulation Z, which disclosure must be provided at least three business days before consummation of a mortgage loan?
- Good Faith Estimate
- Loan Estimate
- Closing Disclosure (Correct answer)
- Servicing Transfer Notice
Correct answer: Closing Disclosure
The Closing Disclosure must be provided at least three business days before the loan closes, giving borrowers time to review final terms.
Question 6: Which federal rule limits prepayment penalty periods for qualified mortgages?
- Dodd-Frank ATR/QM rule (Correct answer)
- RESPA Section 8
- FIRREA
- Equal Credit Opportunity Act
Correct answer: Dodd-Frank ATR/QM rule
The Dodd-Frank ATR/QM rule restricts prepayment penalties on qualified mortgages to the first three years and caps their amount.
Question 7: A lender charges a borrower a fee for a credit report but keeps the overage rather than applying it toward costs. This most likely violates:
- TILA
- RESPA Section 9
- RESPA Section 8 (Correct answer)
- ECOA
Correct answer: RESPA Section 8
RESPA Section 8 prohibits unearned fee arrangements, which includes pocketing overages from third-party service charges.
Mortgage Federal Laws and Regulations 3
Under the SAFE Act, a mortgage loan originator who moves from a bank to a non-bank entity must: