Mortgage Federal Mortgage-Related Laws 2 — Questions and Answers
Question 1: Under RESPA, within how many business days must a lender provide a Loan Estimate to a borrower after receiving a completed loan application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
RESPA (as implemented by TRID) requires lenders to deliver the Loan Estimate within 3 business days of receiving a completed loan application.
Question 2: Which federal law prohibits lenders from paying referral fees or kickbacks to settlement service providers for referring business?
- TILA
- ECOA
- RESPA (Correct answer)
- HMDA
Correct answer: RESPA
RESPA Section 8 specifically prohibits kickbacks and unearned fee arrangements between settlement service providers.
Question 3: The Closing Disclosure required under TRID must be provided to the borrower no later than how many business days before consummation?
- 1 business day
- 2 business days
- 3 business days (Correct answer)
- 5 business days
Correct answer: 3 business days
TRID rules require the Closing Disclosure to be received by the borrower at least 3 business days before loan consummation.
Question 4: RESPA's Section 10 limits the amount a lender can require a borrower to deposit into an escrow account. What is the maximum cushion allowed?
- One month's escrow payments
- Two months' escrow payments (Correct answer)
- Three months' escrow payments
- Six months' escrow payments
Correct answer: Two months' escrow payments
RESPA Section 10 allows a maximum escrow cushion of two months' worth of escrow payments.
Question 5: Under TILA, what is the right of rescission period for a refinance of a primary residence with a new lender?
- 24 hours
- 3 business days (Correct answer)
- 5 business days
- 10 calendar days
Correct answer: 3 business days
TILA grants borrowers a 3-business-day right of rescission for non-purchase refinance transactions secured by their primary residence.
Question 6: Which statement about RESPA's affiliated business arrangement (AfBA) disclosure is correct?
- AfBA disclosures are only required for commercial loans
- Lenders may require borrowers to use an affiliated provider without any restrictions
- Lenders must provide an AfBA disclosure and cannot mandate use of the affiliated provider (Correct answer)
- AfBA disclosures must be included in the Closing Disclosure only
Correct answer: Lenders must provide an AfBA disclosure and cannot mandate use of the affiliated provider
RESPA requires an AfBA disclosure when referring to affiliated settlement service providers, and lenders may not compel the borrower to use them.
Question 7: A borrower's annual percentage rate (APR) exceeds the stated interest rate on a fixed-rate mortgage primarily because the APR includes:
- Only the principal and interest payment
- Prepayment penalty estimates but not closing costs
- Certain fees and costs in addition to the interest rate (Correct answer)
- The escrow payment for taxes and insurance
Correct answer: Certain fees and costs in addition to the interest rate
APR, as disclosed under TILA, incorporates the interest rate plus certain fees and costs, giving a broader measure of borrowing cost.
Mortgage Federal Mortgage-Related Laws 2
Under RESPA, within how many business days must a lender provide a Loan Estimate to a borrower after receiving a completed loan application?