Mortgage Federal Laws and Regulations 5 — Questions and Answers
Question 1: A mortgage broker receives a yield spread premium (YSP) tied to placing a borrower in a higher-rate loan. Under CFPB LO compensation rules, this practice is:
- Permitted with full TILA disclosure
- Prohibited as a form of steering (Correct answer)
- Allowed only on jumbo loans over $1 million
- Permitted if the borrower signs a written acknowledgment
Correct answer: Prohibited as a form of steering
CFPB's loan originator compensation rules prohibit compensation that varies based on a loan's interest rate or other terms, eliminating rate-based YSPs.
Question 2: Which federal statute requires lenders to disclose the transfer of mortgage servicing rights to borrowers?
- HMDA
- ECOA
- RESPA (Correct answer)
- TILA
Correct answer: RESPA
RESPA requires servicing transfer disclosures at application and mandates 15-day advance notice to borrowers before a servicing transfer occurs.
Question 3: Under the Home Ownership and Equity Protection Act (HOEPA), loans exceeding the rate or fee thresholds are subject to:
- Automatic denial by Fannie Mae
- Enhanced disclosures and restrictions on loan terms (Correct answer)
- Mandatory referral to HUD counseling only
- Unlimited right of rescission for any reason
Correct answer: Enhanced disclosures and restrictions on loan terms
HOEPA-covered loans trigger additional disclosures and restrictions on balloon payments, prepayment penalties, and negative amortization.
Question 4: Under Regulation X's 2014 servicing rules, servicers must make live contact with delinquent borrowers by the:
- 15th day of delinquency
- 21st day of delinquency
- 36th day of delinquency (Correct answer)
- 60th day of delinquency
Correct answer: 36th day of delinquency
The 2014 RESPA servicing rules require servicers to make live contact with delinquent borrowers by the 36th day of delinquency to discuss loss mitigation options.
Question 5: Under ECOA, a lender must provide an adverse action notice within how many days of a credit decision?
- 10 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
ECOA and Regulation B require lenders to notify applicants of adverse actions within 30 days of receiving a completed application.
Question 6: Which provision of the Dodd-Frank Act created the Ability-to-Repay and Qualified Mortgage standards?
- Section 941 — Risk Retention
- Section 1411 — ATR and QM Standards (Correct answer)
- Section 1031 — Prohibition on Abusive Acts
- Section 165 — Systemic Risk
Correct answer: Section 1411 — ATR and QM Standards
Dodd-Frank Section 1411 amended TILA to establish the Ability-to-Repay requirement and authorized the CFPB to define Qualified Mortgage standards.
Question 7: Under TILA, discount points paid by the borrower to reduce the interest rate are classified as:
- Non-finance charges excluded from the APR
- Finance charges included in the APR calculation (Correct answer)
- Third-party fees excluded from the APR
- Escrow charges outside TILA coverage
Correct answer: Finance charges included in the APR calculation
Discount points are prepaid interest and therefore finance charges that must be included in the APR calculation under TILA.
Mortgage Federal Laws and Regulations 5
A mortgage broker receives a yield spread premium (YSP) tied to placing a borrower in a higher-rate loan.
Under CFPB LO compensation rules, this practice is: