Mortgage Federal Lending Regulations 2 — Questions and Answers
Question 1: Under RESPA, what is the maximum tolerance for increases in third-party settlement charges in the 'zero tolerance' category?
- 0% (Correct answer)
- 10%
- 15%
- 25%
Correct answer: 0%
Zero tolerance charges cannot increase at all from the Loan Estimate to the Closing Disclosure; any increase is a tolerance violation requiring a cure.
Question 2: The Home Mortgage Disclosure Act (HMDA) primarily requires lenders to collect and report data to:
- Identify possible discriminatory lending patterns (Correct answer)
- Calculate average mortgage interest rates nationally
- Set conforming loan limits annually
- License mortgage loan originators
Correct answer: Identify possible discriminatory lending patterns
HMDA data is used by regulators and the public to identify fair lending issues and discriminatory patterns in mortgage lending.
Question 3: Which federal law prohibits a lender from discriminating based on race, color, religion, national origin, sex, familial status, or disability in residential mortgage lending?
- Fair Housing Act (Correct answer)
- Equal Credit Opportunity Act
- Community Reinvestment Act
- Home Ownership and Equity Protection Act
Correct answer: Fair Housing Act
The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in residential real estate transactions including mortgage lending.
Question 4: A lender charges a borrower a fee not disclosed on the Loan Estimate for a service the lender controls. Under TRID, this is most likely a violation of which tolerance category?
- Zero tolerance — lender-controlled fees cannot increase (Correct answer)
- 10% tolerance — aggregate limit applies
- Unlimited tolerance — lender fees are exempt
- 5% tolerance — applies to all third-party fees
Correct answer: Zero tolerance — lender-controlled fees cannot increase
Fees for services provided by the lender or required services where the borrower cannot shop fall in the zero-tolerance category.
Question 5: Under ECOA, within how many days must a creditor notify an applicant of action taken on a completed credit application?
- 30 days (Correct answer)
- 3 business days
- 7 business days
- 60 days
Correct answer: 30 days
ECOA requires creditors to notify applicants of the credit decision within 30 days of receiving a completed application.
Question 6: The Dodd-Frank Act created which agency specifically to protect consumers in financial transactions, including mortgages?
- Consumer Financial Protection Bureau (CFPB) (Correct answer)
- Federal Housing Finance Agency (FHFA)
- Office of the Comptroller of the Currency (OCC)
- Federal Deposit Insurance Corporation (FDIC)
Correct answer: Consumer Financial Protection Bureau (CFPB)
The CFPB was established by the Dodd-Frank Act of 2010 and has primary authority to enforce federal consumer financial protection laws including mortgage regulations.
Question 7: Under the Ability-to-Repay (ATR) rule, which of the following is NOT one of the eight underwriting factors a lender must consider?
- Borrower's credit score tier preference (Correct answer)
- Current income and assets
- Monthly payment on the covered transaction
- Monthly debt obligations
Correct answer: Borrower's credit score tier preference
The eight ATR factors include income, assets, employment, payment amounts, debts, DTI, credit history, and alimony/child support — not a borrower's preferred credit score tier.
Mortgage Federal Lending Regulations 2
Under RESPA, what is the maximum tolerance for increases in third-party settlement charges in the 'zero tolerance' category?