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Federal Mortgage-Related Laws Flashcards

7 cards from real Mortgage 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 Mortgage-Related Laws flashcards as text

  1. Under HOEPA, a mortgage is classified as a 'high-cost mortgage' if the APR exceeds the Average Prime Offer Rate (APOR) by more than how many percentage points for a first-lien loan?

    Answer: 6.5 percentage points

    Under HOEPA as amended by Dodd-Frank, a first-lien loan is high-cost if its APR exceeds APOR by more than 6.5 percentage points.

  2. The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good-faith determination that borrowers can repay their loans based on how many underwriting factors?

    Answer: 8 factors

    The ATR rule specifies eight underwriting factors lenders must consider, including income, assets, employment, credit history, and monthly debt obligations.

  3. A Qualified Mortgage (QM) under Dodd-Frank generally prohibits a debt-to-income (DTI) ratio exceeding what threshold (under the General QM standard)?

    Answer: 43%

    The original General QM definition capped borrower DTI at 43%; later amendments shifted to a price-based threshold, but 43% remains a foundational benchmark.

  4. Which feature is expressly prohibited in a Qualified Mortgage under the Dodd-Frank ATR/QM rule?

    Answer: Balloon payment (for most QMs)

    QMs generally cannot contain balloon payments (except for certain small creditor and rural/underserved area loans), negative amortization, or interest-only features.

  5. Under the Homeowners Protection Act (PMI Cancellation Act), a borrower may request cancellation of PMI once the loan-to-value ratio reaches:

    Answer: 80%

    The Homeowners Protection Act allows borrowers to request PMI cancellation when LTV reaches 80% based on the original property value.

  6. Under the Homeowners Protection Act, lenders must automatically terminate PMI when the LTV ratio reaches what level, based on original amortization schedule?

    Answer: 78%

    The Homeowners Protection Act requires automatic PMI termination when the loan balance reaches 78% LTV based on the original amortization schedule.

  7. HOEPA's high-cost mortgage provisions apply to which type of transaction?

    Answer: Refinances and home equity loans, not purchase money mortgages

    HOEPA (as amended by Dodd-Frank) covers refinances, closed-end home equity loans, and HELOCs — but not purchase money mortgages.