NMLS Federal Mortgage-Related Laws Questions and Answers — Questions and Answers
Question 1: A mortgage loan originator advertises a loan product with a "7% APR." According to the Truth in Lending Act (TILA), which of the following is also required to be included in the advertisement clearly and conspicuously?
- The loan originator's unique identifier
- The maximum possible interest rate for the loan's term
- A statement that the APR may increase after consummation, if applicable (Correct answer)
- The contact information for the Consumer Financial Protection Bureau (CFPB)
Correct answer: A statement that the APR may increase after consummation, if applicable
TILA (Regulation Z) requires that if an advertisement states a rate of finance charge, it must be stated as an "annual percentage rate" or "APR." If the APR may increase after the loan is closed (for example, on an adjustable-rate mortgage), that fact must be disclosed.
Question 2: A real estate agent receives a quarterly bonus from a mortgage company, and the bonus amount is based on the number of clients the agent referred to that company. Which federal law is most likely being violated?
- Home Mortgage Disclosure Act (HMDA)
- Equal Credit Opportunity Act (ECOA)
- Fair Housing Act (FHA)
- Real Estate Settlement Procedures Act (RESPA) (Correct answer)
Correct answer: Real Estate Settlement Procedures Act (RESPA)
Section 8 of RESPA prohibits giving or accepting any fee, kickback, or thing of value in exchange for the referral of settlement service business. A bonus based on referral volume is considered a "thing of value" and is a direct violation of this provision.
Question 3: Under the Equal Credit Opportunity Act (ECOA), a lender must notify an applicant of the action taken on their completed application within how many days?
- 15 days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, requires creditors to notify applicants of the action taken on their application (whether it's approved, denied, or a counteroffer is made) within 30 days of receiving a completed application.
Question 4: Which of the following laws has the primary purpose of helping to detect and prevent discriminatory lending practices by requiring financial institutions to collect, report, and disclose data about their mortgage lending activity?
- Gramm-Leach-Bliley Act (GLBA)
- Homeowners Protection Act (HPA)
- Home Mortgage Disclosure Act (HMDA) (Correct answer)
- Fair Credit Reporting Act (FCRA)
Correct answer: Home Mortgage Disclosure Act (HMDA)
The Home Mortgage Disclosure Act (HMDA) was enacted to provide the public and public officials with information to help determine if financial institutions are serving the housing credit needs of their communities, to assist in identifying possible discriminatory lending patterns, and to help enforce antidiscrimination statutes.
Question 5: A prospective borrower who is single and pregnant applies for a mortgage. It would be a violation of the Fair Housing Act and ECOA for the lender to consider which of the following in their underwriting decision?
- The applicant's credit score
- The applicant's debt-to-income ratio
- The applicant's familial status (Correct answer)
- The appraised value of the property
Correct answer: The applicant's familial status
The Fair Housing Act prohibits discrimination based on familial status, which includes being pregnant or having children under 18. ECOA also prohibits discrimination based on marital status. Therefore, considering the applicant's pregnancy or single status as a factor in the credit decision would be illegal.
Question 6: The Gramm-Leach-Bliley Act (GLBA) contains the Safeguards Rule, which requires financial institutions to take which of the following actions?
- Provide a Loan Estimate to all applicants within three business days.
- Disclose the credit score used in the lending decision.
- Develop a written information security plan to protect customer information. (Correct answer)
- Notify the applicant of an adverse action within 30 days.
Correct answer: Develop a written information security plan to protect customer information.
The Safeguards Rule, a key component of the GLBA, mandates that financial institutions design, implement, and maintain a comprehensive written information security program to protect the confidentiality and integrity of customer information.
NMLS Federal Mortgage-Related Laws Questions and Answers
A mortgage loan originator advertises a loan product with a "7% APR." According to the Truth in Lending Act (TILA), which of the following is also required to be included in the advertisement clearly and conspicuously?