Federal Mortgage Related Laws practice questions

Answer: D) 1/8 of 1 percentage point

Regulation Z treats the APR as accurate if it is within 1/8 of 1 percentage point for regular transactions and within 1/4 of 1 percentage point for irregular transactions.

• AIncorrect. The 1/4-point tolerance applies to irregular transactions, such as those with multiple advances or irregular payment periods or amounts.
• BIncorrect. Regulation Z doesn't use a 1/2-point APR tolerance. The regular-transaction tolerance is 1/8 of 1 percentage point.
• CIncorrect. That is far wider than the Regulation Z tolerance of 1/8 point for regular transactions.
• DCorrect. Under §1026.22(a)(2), the APR in a regular transaction is accurate if it is not more than 1/8 of 1 percentage point above or below the correctly calculated APR.

Answer: C) Generally no

• AIncorrect. Rates do not decide rescission rights.
• BIncorrect. This refinance is generally exempt.
• CCorrect. Same-creditor refinances are exempt from rescission to the extent no new money is advanced.
• DIncorrect. Rescission concerns the principal dwelling.

Answer: A) The down payment, the terms of repayment, and the APR

Under 12 CFR 1026.24(d), stating a payment amount triggers disclosure of the down payment, the terms of repayment, and the APR. If the APR may increase after consummation, the ad must also say so.

• ACorrect. Under 1026.24(d)(2), a triggering term such as the amount of any payment requires the ad to disclose the down payment amount or percentage, the terms of repayment (including any balloon payment), and the APR. If the rate may increase after consummation, the ad must also say so.
• BIncorrect. The finance charge is itself a triggering term, not a required disclosure. The amount financed is not one of the terms required by 1026.24(d)(2).
• CIncorrect. The trigger rule requires the APR, using that term, not just the interest rate. The NMLS ID is not one of the additional terms required by 1026.24(d)(2).
• DIncorrect. The rule requires the terms of repayment and the APR, not the total of payments or the note rate.

Answer: A) No; required use is permitted only for an attorney, credit reporting agency or appraiser chosen to represent the lender

RESPA does not allow an affiliated business arrangement to require borrowers to use the affiliate. The exception is that a lender may require an attorney, credit reporting agency or appraiser it chooses to represent its own interest. A written disclosure or competitive pricing does not make required use acceptable.

• ACorrect. Under 12 CFR 1024.15(b)(2), the arrangement may not require use of the affiliate. The exception lets a lender require a borrower to pay for an attorney, credit reporting agency or real estate appraiser that the lender chooses to represent its own interest. A title agency is not on that list.
• BIncorrect. The disclosure is one of three separate conditions: disclosure, no required use, and limited compensation. Giving the disclosure does not permit required use.
• CIncorrect. Competitive pricing does not satisfy the prohibition on required use. The borrower must remain free to choose another provider.
• DIncorrect. This goes too far. The rule expressly lets a lender require an attorney, credit reporting agency or real estate appraiser that it chooses to represent its own interest.

Answer: A) Unsolicited fax ads, unless an established business relationship exists and the fax carries an opt-out notice

The Junk Fax Prevention Act bars unsolicited fax advertisements. A narrow exception applies when there is an established business relationship and the fax includes a compliant opt-out notice, and opt-out requests must be honored.

• ACorrect. 47 U.S.C. 227(b)(1)(C) bars unsolicited fax advertisements. The exception requires an established business relationship, a fax number that was voluntarily made available, and a compliant opt-out notice. Opt-out requests must be honored.
• BIncorrect. An advertisement sent with the recipient's prior express permission is not an 'unsolicited advertisement' under the statute, so it isn't prohibited.
• CIncorrect. The prohibition covers unsolicited ads sent to any telephone facsimile machine, including business fax machines.
• DIncorrect. The Act deals with unsolicited advertisements, not with protecting data in transaction documents. Privacy safeguards come from other laws, such as GLBA.

Answer: C) 3 years after consummation

• AIncorrect. It extends up to 3 years.
• BIncorrect. That's the normal period.
• CCorrect. It ends earlier if the property is sold.
• DIncorrect. It extends up to 3 years.

Answer: D) Reasons for denial

• AIncorrect. This is not required.
• BIncorrect. The full file is not required in the notice.
• CIncorrect. A counteroffer is optional.
• DCorrect. It gives specific reasons or tells the applicant how to request them.

Answer: C) A HELOC disclosure and the CFPB HELOC brochure

• AIncorrect. HELOCs are excluded from TRID.
• BIncorrect. HELOCs are excluded from TRID.
• CCorrect. HELOCs aren't covered by TRID forms.
• DIncorrect. HELOC disclosures are required.

Answer: C) Yes

• AIncorrect. The rule is not program-specific.
• BIncorrect. These inquiries are permitted.
• CCorrect. Regulation B permits inquiries about permanent residence and immigration status.
• DIncorrect. It may be asked during the application.

Answer: A) A pricing limit that compares the loan's APR with the average prime offer rate

The current General QM definition is price-based: QM status depends on how far the loan's APR exceeds APOR (generally less than 2.25 percentage points for most first liens). This replaced the former fixed 43% DTI limit.

• ACorrect. The General QM rule uses a price-based test. For most first-lien loans, the APR must exceed APOR for a comparable transaction by less than 2.25 percentage points, with higher thresholds for smaller loans and subordinate liens.
• BIncorrect. The 43% DTI limit was the former General QM test. The CFPB replaced it with the price-based APR/APOR limit. Creditors must still consider DTI or residual income, but there's no fixed cap.
• CIncorrect. The General QM definition has no LTV limit. LTV is a lender or investor guideline, not the QM test.
• DIncorrect. Regulation Z sets no minimum credit score for QM status. Credit score floors come from investor or program guidelines.