Federal Regulations and Compliance Standards Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Federal Regulations and Compliance Standards flashcards as text
Under the Truth in Lending Act, the Annual Percentage Rate (APR) differs from the interest rate because it:
Answer: Reflects the true cost of credit including fees and finance charges spread over the loan term
The APR includes the interest rate plus certain fees and costs, providing a more complete measure of the loan's annual cost.
A borrower receives an ARM disclosure showing periodic adjustment caps of 2/2/5. What does the first '2' represent?
Answer: The maximum rate increase at the first adjustment
In a 2/2/5 cap structure, the first number is the maximum rate change allowed at the first (initial) adjustment.
Which federal law governs the privacy of nonpublic personal information collected by financial institutions and requires lenders to provide privacy notices?
Answer: Gramm-Leach-Bliley Act (GLBA)
The Gramm-Leach-Bliley Act requires financial institutions to explain their data-sharing practices and protect consumers' nonpublic personal information.
Under the CAN-SPAM Act and applicable mortgage marketing rules, a mortgage company must honor an opt-out request from a commercial email recipient within:
Answer: 10 business days
CAN-SPAM requires businesses to process opt-out requests within 10 business days and stop sending commercial emails to the requester.
When a mortgage broker receives yield spread premium (YSP) from a lender, it must be disclosed because:
Answer: It represents compensation paid by the lender that could create a conflict of interest for the broker
YSP disclosure is required because it represents additional broker compensation tied to placing borrowers in higher-rate loans, creating a potential conflict of interest.
The Bank Secrecy Act (BSA) requires mortgage companies to file a Suspicious Activity Report (SAR) when a transaction involves funds of at least how much that may involve money laundering?
Answer: $5,000
Non-bank mortgage lenders must file SARs for transactions of $5,000 or more involving suspected money laundering or illegal activity.
Under the Real Estate Settlement Procedures Act, an affiliated business arrangement (AfBA) is permissible if:
Answer: The consumer receives a disclosure, is not required to use the affiliated service, and the only thing of value exchanged is ownership interest or return on investment
RESPA allows AfBAs when the consumer gets a written disclosure, is free to use other providers, and the referring party receives only legitimate ownership returns rather than per-referral compensation.