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Question 1Federal Mortgage-Related Laws and Regulations

Under the Real Estate Settlement Procedures Act (RESPA), when must a lender deliver the Loan Estimate to a mortgage loan applicant?

  1. Within 24 hours of pulling the credit report
  2. At least seven business days before closing
  3. At any point before the consummation of the loan
  4. No later than three business days after receiving the application Correct answer.

Explanation

Regulation X requires the creditor to provide the Loan Estimate no later than the third business day after receiving the loan application. The disclosure must also be delivered or placed in the mail, not merely prepared, within that window.

Question 2Federal Mortgage-Related Laws and Regulations

A borrower's escrow account has a monthly payment of $1,200 for principal and interest and $300 for taxes and insurance. Which amount represents the escrow portion used for the RESPA escrow accounting analysis?

  1. $300 Correct answer.
  2. $1,200
  3. $900
  4. $1,500

Explanation

The escrow account analysis covers only the disbursements made from the escrow account, such as property taxes and hazard insurance, plus the required cushion. Principal and interest are not escrow items, so the $300 portion is the relevant escrow figure.

Question 3Federal Mortgage-Related Laws and Regulations

Which statute is the primary federal law requiring lenders to provide borrowers with disclosures about the true cost of credit?

  1. Truth in Lending Act Correct answer.
  2. Fair Housing Act
  3. Fair Credit Reporting Act
  4. Homeowners Protection Act

Explanation

The Truth in Lending Act, implemented by Regulation Z, requires disclosure of the annual percentage rate and other key credit terms so borrowers can compare the true cost of credit. The other statutes address discrimination, mortgage insurance cancellation, and consumer reporting, respectively.

Question 4Federal Mortgage-Related Laws and Regulations

Under the Homeowners Protection Act, when does the borrower's right to request cancellation of private mortgage insurance generally arise for a residential mortgage transaction?

  1. Only after the loan is fully repaid
  2. When the principal balance actually reaches 78 percent of the original value
  3. When the principal balance is first scheduled to reach 80 percent of the original value Correct answer.
  4. Immediately upon loan origination

Explanation

The Homeowners Protection Act gives borrowers the right to request PMI cancellation when the mortgage balance is first scheduled to reach 80 percent of the original value of the property, provided the loan is current. Automatic termination occurs later, at 78 percent based on the actual payment schedule.

Question 5Federal Mortgage-Related Laws and Regulations

Which regulation implements the Home Mortgage Disclosure Act and requires covered institutions to report loan application data?

  1. Regulation C Correct answer.
  2. Regulation B
  3. Regulation X
  4. Regulation Z

Explanation

Regulation C implements HMDA and sets out the data collection and reporting requirements for covered mortgage lenders. Regulation Z implements TILA, Regulation X implements RESPA, and Regulation B implements the Equal Credit Opportunity Act.

Question 6Federal Mortgage-Related Laws and Regulations

Under the Equal Credit Opportunity Act, which characteristic is a prohibited basis for discrimination in a mortgage lending decision?

  1. Employment tenure
  2. Credit score
  3. Marital status Correct answer.
  4. Loan-to-value ratio

Explanation

ECOA prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, and receipt of public assistance income. Credit score, loan-to-value ratio, and employment tenure are permissible underwriting factors.

Question 7Federal Mortgage-Related Laws and Regulations

A mortgage loan originator must register with the Nationwide Mortgage Licensing System and Registry under which federal statute?

  1. Real Estate Settlement Procedures Act
  2. Truth in Lending Act
  3. Flood Disaster Protection Act
  4. Secure and Fair Enforcement for Mortgage Licensing Act Correct answer.

Explanation

The SAFE Act, enacted in 2008, established the NMLS registration and licensing framework for mortgage loan originators. RESPA, TILA, and the flood statutes address settlement disclosures, credit cost disclosure, and flood insurance, respectively.

Question 8Federal Mortgage-Related Laws and Regulations

Under the Fair Housing Act, which practice constitutes illegal steering in a mortgage transaction?

  1. Declining a loan because of a documented derogatory credit history
  2. Directing applicants toward or away from loan products based on their national origin Correct answer.
  3. Requiring flood insurance on a property in a special flood hazard area
  4. Charging higher fees based on a lower credit score

Explanation

Steering involves guiding applicants toward or away from certain products or terms on a prohibited basis such as national origin, which violates the Fair Housing Act. The other practices reflect permissible, risk-based, or legally mandated decisions.

Question 9Federal Mortgage-Related Laws and Regulations

A lender receives a loan application on Monday and mails the Loan Estimate on Wednesday. Under Regulation Z, when may the loan generally be consummated?

  1. Immediately upon mailing the Loan Estimate
  2. On Friday of the same week
  3. No earlier than the following Thursday, seven business days after mailing Correct answer.
  4. As soon as the borrower signs the closing disclosure

Explanation

Regulation Z imposes a seven-business-day waiting period after the Loan Estimate is delivered or placed in the mail before consummation may occur. Counting begins when the disclosure is sent, so a Wednesday mailing pushes the earliest closing to the following Thursday.

Question 10Federal Mortgage-Related Laws and Regulations

Under Regulation Z, when must the Closing Disclosure be received by the consumer before consummation?

  1. At the closing table on the day of consummation
  2. At least seven business days before consummation
  3. At least three business days before consummation Correct answer.
  4. At least one business day before consummation

Explanation

The creditor must ensure the consumer receives the Closing Disclosure no later than three business days before consummation. This gives the borrower time to review final terms, and a revised disclosure may restart the waiting period if certain terms change.

Question 11Federal Mortgage-Related Laws and Regulations

A creditor changes the annual percentage rate on a mortgage loan after the Closing Disclosure was delivered, beyond the tolerance threshold. What is the required consequence under Regulation Z?

  1. Provide a revised Closing Disclosure without any new waiting period
  2. Provide a revised Closing Disclosure and restart the three-business-day waiting period Correct answer.
  3. No action is required if the borrower agrees verbally
  4. Deliver the change orally at closing

Explanation

If the APR changes beyond the permitted tolerance after delivery of the Closing Disclosure, the creditor must provide a corrected Closing Disclosure and the consumer must receive it at least three business days before consummation. This restarts the waiting period.

Question 12Federal Mortgage-Related Laws and Regulations

Under RESPA, a seller pays a referral fee to a real estate agent for sending a buyer to a specific settlement service provider. Which statement best describes the legality of this arrangement?

  1. It is permitted because the seller is not a settlement service provider
  2. It is permitted if the amount is reasonable
  3. It is permitted if the fee is disclosed on the Closing Disclosure
  4. It is prohibited because RESPA bans fees for the referral of settlement service business Correct answer.

Explanation

Section 8 of RESPA prohibits giving or receiving anything of value in exchange for the referral of settlement service business involving a federally related mortgage loan. Disclosure or reasonableness does not cure a prohibited referral fee.

Question 13Federal Mortgage-Related Laws and Regulations

Which activity is a permissible affiliated business arrangement under RESPA?

  1. A lender splits a referral fee with an affiliated appraiser
  2. A lender refers a borrower to an affiliated title company in which the borrower is given written disclosure of the affiliation and is not required to use it Correct answer.
  3. A lender requires the borrower to use an affiliated title company as a condition of loan approval
  4. A lender receives a fee for each borrower it refers to an affiliated insurer

Explanation

An affiliated business arrangement is permissible only if the referring party discloses the affiliation, the customer is not required to use the affiliate, and the only thing of value received is a return on ownership. Conditioning the loan on use of the affiliate or taking per-referral fees is prohibited.

Question 14Federal Mortgage-Related Laws and Regulations

Under HMDA, which loan is reportable by a covered financial institution?

  1. A closed-end mortgage loan secured by a dwelling that is originated or purchased Correct answer.
  2. A business-purpose loan not secured by a dwelling
  3. A loan secured solely by commercial real estate
  4. An open-end line of credit that is never drawn

Explanation

Regulation C requires reporting of closed-end mortgage loans secured by a dwelling that are originated or purchased, subject to applicable thresholds. Business-purpose loans not secured by a dwelling and loans secured solely by commercial real estate generally fall outside the reporting requirement.

Question 15Federal Mortgage-Related Laws and Regulations

A borrower submits a complete loss mitigation application 40 days before a scheduled foreclosure sale. Under Regulation X, which protection applies?

  1. The servicer must transfer the loan to another servicer
  2. The servicer may proceed with the sale without evaluation
  3. The servicer must deny the application automatically
  4. The servicer must evaluate the borrower for all available loss mitigation options before proceeding with the sale Correct answer.

Explanation

When a complete loss mitigation application is received more than 37 days before a foreclosure sale, the servicer must evaluate the borrower for all available options and observe the dual-tracking restrictions. Proceeding to sale without evaluation would violate Regulation X.

Question 16Federal Mortgage-Related Laws and Regulations

Under ECOA, when must a creditor provide an adverse action notice to an applicant?

  1. Within 30 days after receiving a completed application Correct answer.
  2. Within 10 days after the loan closes
  3. Only if the applicant requests one in writing
  4. Within 90 days after receiving a completed application

Explanation

Regulation B requires creditors to notify an applicant of adverse action within 30 days after receiving a completed application. The notice must state the action taken and, where required, the specific reasons or a disclosure of the right to request them.

Question 17Federal Mortgage-Related Laws and Regulations

Which statement correctly describes the appraisal notice requirement under the Equal Credit Opportunity Act for a first-lien mortgage loan?

  1. The creditor must promptly provide a copy of the appraisal or written valuation to the applicant upon completion or before consummation Correct answer.
  2. The creditor is never required to provide the appraisal to the applicant
  3. The creditor may withhold the appraisal until the loan is fully repaid
  4. The creditor must provide the appraisal only if the borrower pays a separate fee

Explanation

Regulation B requires creditors to provide applicants for first-lien mortgage loans with a copy of the appraisal or other written valuation promptly upon completion or no later than consummation. The applicant does not need to request it or pay an additional fee.

Question 18Federal Mortgage-Related Laws and Regulations

Under the Flood Disaster Protection Act, what must a lender do before making a loan secured by a building in a special flood hazard area?

  1. Waive flood insurance if the loan-to-value ratio is below 80 percent
  2. Rely on the borrower's verbal assurance that the property is not in a flood zone
  3. Verify flood zone status and require flood insurance before closing Correct answer.
  4. Require flood insurance only after the first flood occurs

Explanation

Lenders must determine whether the building is in a special flood hazard area and, if so, require the borrower to obtain flood insurance before closing. The insurance must be maintained for the life of the loan.

Question 19Federal Mortgage-Related Laws and Regulations

A servicer receives a qualified written request from a borrower disputing an escrow account. Under RESPA, what is the servicer's obligation?

  1. Forward the request to the investor without response
  2. Acknowledge the request within five business days and respond substantively within 30 business days, with a possible 15-day extension Correct answer.
  3. Ignore the request unless it is notarized
  4. Respond only after the next escrow analysis cycle

Explanation

RESPA requires a servicer to acknowledge a qualified written request within five business days and provide a substantive response within 30 business days, with a possible 15-day extension for good cause. The response must address the borrower's dispute and correct any errors.

Question 20Federal Mortgage-Related Laws and Regulations

Under the Truth in Lending Act, which disclosure is designed to allow consumers to compare the cost of credit across different loan offers?

  1. The finance charge
  2. The annual percentage rate Correct answer.
  3. The total of payments
  4. The amount financed

Explanation

The annual percentage rate expresses the cost of credit as a yearly rate and is intended to give consumers a standardized basis for comparing offers. The other disclosures describe dollar amounts rather than a comparable rate.

Question 21Federal Mortgage-Related Laws and Regulations

A creditor's loan originator compensation plan pays a bonus based on the interest rate of the loans originated. Which statement best describes compliance with Regulation Z?

  1. The plan is permissible if the bonus is capped at 1 percent
  2. The plan violates the rule because compensation may not be based on the terms of the transaction Correct answer.
  3. The plan is permissible because the originator is not a creditor
  4. The plan is permissible if disclosed to the borrower

Explanation

Regulation Z prohibits compensating loan originators based on the terms or conditions of the transaction, such as the interest rate. Such a plan creates an incentive to steer borrowers into higher-cost loans and is prohibited regardless of disclosure or caps.

Question 22Federal Mortgage-Related Laws and Regulations

A lender's rate sheet offers a lower rate to borrowers who qualify for a specific affinity membership. Under fair lending laws, which concern is most relevant?

  1. Compliance with the Homeowners Protection Act
  2. Compliance with the Secure and Fair Enforcement Act
  3. Compliance with the Flood Disaster Protection Act
  4. Disparate impact on protected classes if the membership criteria correlate with a prohibited basis Correct answer.

Explanation

Pricing or eligibility criteria that appear neutral but disproportionately exclude or disadvantage members of a protected class may create disparate impact liability under the Fair Housing Act and ECOA. The lender should assess whether the affinity criteria correlate with a prohibited basis.

Question 23Federal Mortgage-Related Laws and Regulations

A servicer receives a complete loss mitigation application 20 days before a scheduled foreclosure sale. Under Regulation X, which statement best describes the servicer's obligations?

  1. The servicer must cancel the foreclosure sale indefinitely
  2. The servicer is not subject to the full evaluation requirements but must still comply with applicable foreclosure protections Correct answer.
  3. The servicer may ignore the application entirely
  4. The servicer must evaluate the borrower for all options before the sale

Explanation

The 37-day rule triggers full evaluation obligations for applications received more than 37 days before a sale. An application received only 20 days before the sale falls outside that window, so the full evaluation and dual-tracking protections do not apply, though other foreclosure protections may still govern.

Question 24Federal Mortgage-Related Laws and Regulations

A creditor uses a pricing model that charges higher rates to borrowers with limited English proficiency, citing higher servicing costs. Which legal exposure is most significant?

  1. Violation of the Flood Disaster Protection Act
  2. Disparate impact liability under the Fair Housing Act and ECOA Correct answer.
  3. Violation of the SAFE Act
  4. Violation of the Homeowners Protection Act

Explanation

Pricing that disadvantages borrowers based on a characteristic closely associated with national origin may create disparate impact liability under the Fair Housing Act and ECOA. The creditor would need to demonstrate that the practice is justified by a legitimate business necessity with no less discriminatory alternative.

Question 25Federal Mortgage-Related Laws and Regulations

Under Regulation Z, a loan originator steers a borrower into a higher-cost loan when the borrower qualifies for a lower-cost option, and the originator receives greater compensation. Which statement best describes the compliance issue?

  1. The practice is permissible because the originator disclosed the compensation
  2. The practice violates the steering prohibition because the originator did not present a lower-cost option for which the borrower likely qualified Correct answer.
  3. The practice is permissible if the higher-cost loan has a lower APR
  4. The practice is permissible if the borrower signs a waiver at closing

Explanation

Regulation Z prohibits loan originators from steering consumers to transactions that provide greater compensation when the consumer likely qualifies for a less costly alternative. A closing waiver or disclosure of compensation does not cure the violation.

Question 26Federal Mortgage-Related Laws and Regulations

Under the Home Mortgage Disclosure Act, a covered depository institution must compile and report its loan data for a calendar year. By what date must the institution submit that data to its supervisory agency?

  1. By March 1 of the following calendar year Correct answer.
  2. By April 15 of the following calendar year
  3. By June 30 of the following calendar year
  4. By December 31 of the reporting year

Explanation

Regulation C requires covered institutions to record HMDA data throughout the year and submit the compiled loan/application register to the appropriate federal agency by March 1 of the year following the reporting year. The data covers activity from the prior calendar year.

Question 27Federal Mortgage-Related Laws and Regulations

A mortgage broker takes a loan application from a borrower and, in the same transaction, is the lender's only originator. Under the SAFE Act, the individual loan originator must be registered or licensed through which system?

  1. The Consumer Financial Protection Bureau's complaint portal
  2. The Nationwide Mortgage Licensing System and Registry Correct answer.
  3. The Federal Housing Administration's Lender Insurance program
  4. The Securities and Exchange Commission's EDGAR database

Explanation

The SAFE Act requires individual mortgage loan originators to be registered or licensed through the Nationwide Mortgage Licensing System and Registry, obtaining a unique identifier that is disclosed to consumers. This applies to originators employed by covered institutions and licensed non-bank originators alike.

Question 28Federal Mortgage-Related Laws and Regulations

Under the Fair Housing Act, which statement accurately describes the scope of the prohibition on discrimination in residential real estate-related transactions?

  1. It applies only to lenders that are federally insured depositories
  2. It applies only to rental transactions and not to mortgage lending
  3. It applies only to transactions involving federally related mortgage loans
  4. It applies to the making and purchasing of loans and the provision of other financial assistance secured by residential real estate Correct answer.

Explanation

Section 805 of the Fair Housing Act prohibits discrimination in residential real estate-related transactions, which includes making or purchasing loans and providing other financial assistance secured by residential real estate. It is broader than federally related mortgage loans and covers non-depository lenders as well.

Question 29Federal Mortgage-Related Laws and Regulations

A creditor must provide a copy of each appraisal or other written valuation to a mortgage applicant. Under Regulation B, when must the creditor deliver it?

  1. Within 30 days after the loan is sold on the secondary market
  2. Promptly upon completion, or at least three business days before consummation, whichever is earlier Correct answer.
  3. Only if the applicant's loan is denied
  4. Only when the applicant submits a written request after closing

Explanation

Regulation B requires creditors to provide applicants with copies of appraisals and other written valuations promptly upon completion, or no later than three business days before consummation, whichever occurs first. The applicant can waive the three-day timing only in limited circumstances.

Question 30Federal Mortgage-Related Laws and Regulations

Under the Homeowners Protection Act, when may a borrower request cancellation of private mortgage insurance on a residential mortgage loan?

  1. At any time after closing, regardless of the loan-to-value ratio
  2. Only after the loan has been refinanced
  3. On or after the date the principal balance is first scheduled to reach 80 percent of the original value of the property, based on the initial amortization schedule Correct answer.
  4. Only when the borrower has made 24 consecutive on-time payments

Explanation

The Homeowners Protection Act lets a borrower request PMI cancellation once the loan reaches the date the principal balance is scheduled to reach 80 percent of the original property value under the initial amortization schedule, provided the loan is current. The servicer must also terminate PMI automatically at 78 percent on that schedule.

Question 31Federal Mortgage-Related Laws and Regulations

A borrower's escrow account is subject to RESPA. Under Regulation X, what is the maximum cushion a servicer may maintain in the escrow account above the amount needed to pay taxes and insurance for the coming year?

  1. One-half of the estimated total annual payments
  2. One-twelfth of the estimated total annual payments Correct answer.
  3. Two months of the estimated total annual payments
  4. One-sixth of the estimated total annual payments

Explanation

Regulation X permits a servicer to maintain a cushion of no more than one-sixth of the estimated total annual escrow payments, which equals about two months of payments. The cushion is computed on the annual disbursements, not on the loan balance.

Question 32Federal Mortgage-Related Laws and Regulations

A mortgage lender is subject to the Home Mortgage Disclosure Act and is deciding how to report a loan's rate spread. Which statement best describes the purpose of the rate spread field in HMDA reporting?

  1. It reports the borrower's credit score band at origination
  2. It records the lender's internal profit margin for the loan
  3. It identifies whether the loan is a high-cost mortgage under HOEPA
  4. It captures the difference between the loan's annual percentage rate and a benchmark average prime offer rate to help identify higher-priced loans Correct answer.

Explanation

The rate spread field reports the difference between the loan's APR and the applicable average prime offer rate, allowing regulators and the public to identify higher-priced mortgage lending patterns. It is a reporting and fair lending analysis tool, not a HOEPA high-cost determination.

Question 33Federal Mortgage-Related Laws and Regulations

A creditor is evaluating an application for a mortgage loan and considers the applicant's receipt of public assistance income. Under Regulation B, how must the creditor treat that income?

  1. It may consider the income only if the applicant has children
  2. It must discount the income by 50 percent before using it
  3. It must consider the income in the same manner as other income, provided it is derived from a public assistance program Correct answer.
  4. It may disregard the income because public assistance is not stable

Explanation

Regulation B prohibits discrimination on the basis of receipt of public assistance income and requires creditors to consider that income in the same manner as other income when it is derived from a public assistance program. Arbitrary discounting or disregard of such income can constitute unlawful discrimination.

Question 34Federal Mortgage-Related Laws and Regulations

A lender's loan officer tells a borrower that the lender will waive the appraisal fee if the borrower closes by a certain date, and the loan officer's compensation is reduced by the amount of the waiver. Under Regulation Z, which statement is correct?

  1. The waiver is permissible because it benefits the consumer
  2. The waiver is permissible if the borrower signs a written acknowledgment
  3. The waiver is prohibited because loan originator compensation may not be reduced based on the terms of the transaction Correct answer.
  4. The waiver is permissible only if disclosed on the Loan Estimate

Explanation

Regulation Z prohibits compensating loan originators based on the terms of the transaction and prohibits reducing originator compensation to fund a change in transaction terms, such as a fee waiver. The rule prevents incentives to steer consumers toward particular loan features.

Question 35Federal Mortgage-Related Laws and Regulations

A servicer receives a borrower's complete loss mitigation application 45 days before a scheduled foreclosure sale and has not previously reviewed a complete application. Under Regulation X, which action must the servicer take?

  1. Proceed with the foreclosure sale because the application was incomplete at first submission
  2. Refer the borrower to the FHA because the loan is in default
  3. Evaluate the borrower for all available loss mitigation options and not conduct the sale until the evaluation is complete and any appeal period has run Correct answer.
  4. Require the borrower to reinstate the loan before any evaluation

Explanation

When a complete loss mitigation application is received more than 37 days before a foreclosure sale, the servicer must evaluate the borrower for all available options and may not conduct the sale unless the borrower is ineligible and any appeal period has expired. The 45-day timing places the application within the full review track.

Question 36Federal Mortgage-Related Laws and Regulations

A lender's pricing policy charges a higher interest rate to applicants whose primary language is not English, explaining that these borrowers require more staff time. Under the Equal Credit Opportunity Act, how should this policy be characterized?

  1. Permissible, if the lender offers the same rate to all borrowers who use an interpreter
  2. Permissible, because the pricing reflects a legitimate cost of doing business
  3. Permissible, if the lender discloses the policy on the Loan Estimate
  4. Impermissible, because national origin is a prohibited basis and cost justifications do not cure disparate treatment Correct answer.

Explanation

ECOA and Regulation B prohibit discrimination on the basis of national origin, and pricing that varies by language or ethnicity constitutes disparate treatment that cannot be justified by generalized cost assumptions. Lenders may not use language as a proxy for national origin.

Question 37Federal Mortgage-Related Laws and Regulations

A lender is a covered financial institution under HMDA and originates a loan secured by a dwelling for the purpose of home improvement. Which statement best describes the loan's reportability?

  1. It is reportable because it is a dwelling-secured loan that meets the regulation's coverage criteria Correct answer.
  2. It is reportable only if the lender is a bank
  3. It is not reportable because it is not a purchase or refinance loan
  4. It is reportable only if the loan is insured by the FHA

Explanation

HMDA coverage turns on whether the loan is a closed-end or open-end dwelling-secured loan that meets the regulation's purpose and coverage criteria, which include home improvement loans. The lender's charter type and FHA insurance status are not the determining factors.

Question 38Federal Mortgage-Related Laws and Regulations

A creditor denies a mortgage application and provides an adverse action notice. Under Regulation B, which item must the notice contain?

  1. The lender's internal underwriting guidelines in full
  2. The name of the loan officer who made the decision
  3. The projected interest rate the borrower would have received
  4. The borrower's credit score and the name of the credit reporting agency, when a credit score was used Correct answer.

Explanation

When a creditor denies credit based in whole or in part on information from a consumer reporting agency, the adverse action notice must disclose that fact and, where a credit score was used, provide the score and related information. The notice must also state the reasons for denial or the right to request them.

Question 39Federal Mortgage-Related Laws and Regulations

A lender makes a loan secured by a building located in a special flood hazard area and the borrower declines to purchase flood insurance. Under the Flood Disaster Protection Act, what is the lender's obligation?

  1. The lender must require flood insurance as a condition of the loan and may not make the loan without it Correct answer.
  2. The lender may proceed without insurance if the borrower signs a waiver
  3. The lender must purchase a policy and add the premium to the loan balance
  4. The lender must notify the borrower that federal disaster assistance may be unavailable and may not require insurance if the borrower declines in writing

Explanation

The Flood Disaster Protection Act requires regulated lenders to require flood insurance as a condition of making a loan secured by a building in a special flood hazard area. If the borrower does not obtain coverage, the lender cannot make the loan, though it may later force-place insurance if coverage lapses.

Question 40Federal Mortgage-Related Laws and Regulations

A creditor provides a consumer with a Loan Estimate for a mortgage loan. Under Regulation Z, when may the consumer be charged fees before the Loan Estimate is delivered?

  1. Fees may be charged only after the Closing Disclosure is delivered
  2. After the consumer provides the six pieces of information needed for an application, the creditor may charge all fees
  3. The consumer may be charged a bona fide and reasonable fee for obtaining a credit report before the Loan Estimate is delivered Correct answer.
  4. Fees may be charged once the consumer orally agrees to proceed

Explanation

Regulation Z permits a creditor to collect a bona fide and reasonable fee for obtaining a credit report before delivering the Loan Estimate; all other fees are restricted until the consumer receives the Loan Estimate. The rule prevents consumers from being locked into a loan before seeing required disclosures.

Question 41Federal Mortgage-Related Laws and Regulations

A servicer receives a borrower's qualified written request disputing the servicing of a federally related mortgage loan. Under RESPA, by when must the servicer provide a substantive response?

  1. Within 20 business days of receipt, extendable by 15 business days in certain circumstances Correct answer.
  2. Within 60 business days of receipt
  3. Within 5 business days of receipt
  4. Within 90 days of receipt

Explanation

RESPA requires a servicer to acknowledge a qualified written request within 5 business days and provide a substantive response within 20 business days, with a possible 15-business-day extension if the servicer notifies the borrower. The response must address the dispute and correct any errors found.

Question 42Federal Mortgage-Related Laws and Regulations

A creditor's loan originator steers a borrower into a higher-cost loan even though the borrower qualifies for a lower-cost loan offered by the same creditor. Under Regulation Z, which statement is correct?

  1. Steering is permitted if the borrower signs a disclosure acknowledging the higher cost
  2. Steering is prohibited when the consumer qualifies for a less costly loan, and the originator may be liable for the violation Correct answer.
  3. Steering is permitted if the higher-cost loan has a lower monthly payment
  4. Steering is prohibited only if the borrower's credit score is below 620

Explanation

Regulation Z prohibits a loan originator from steering a consumer to a transaction that is less favorable than a transaction the consumer qualifies for, unless the less favorable transaction is in the consumer's interest. Violations can create liability for the originator and the creditor.

Question 43Federal Mortgage-Related Laws and Regulations

A creditor uses a pricing model that charges higher rates to borrowers with limited English proficiency, citing higher servicing costs. Under fair lending principles, which statement best characterizes this practice?

  1. It is permissible if the creditor can show the servicing costs are real
  2. It is impermissible because it is disparate treatment based on national origin, which cost justifications do not excuse Correct answer.
  3. It is permissible if the creditor applies the same model to all borrowers regardless of language
  4. It is permissible if the rate difference is disclosed on the Closing Disclosure

Explanation

Pricing that varies based on language ability constitutes disparate treatment on the basis of national origin under ECOA and the Fair Housing Act. Generalized cost justifications do not cure intentional differential treatment based on a prohibited characteristic.

Question 44Federal Mortgage-Related Laws and Regulations

A mortgage loan originator is employed by a non-bank lender and is not licensed in the state where the borrower's property is located. Under the SAFE Act and state licensing requirements, which statement is correct?

  1. The originator may originate the loan because federal registration preempts state licensing
  2. The originator may originate the loan if the borrower is represented by an attorney
  3. The originator generally may not originate the loan because individual licensing is required in the state where the loan is originated Correct answer.
  4. The originator may originate the loan if the lender is licensed in the state

Explanation

The SAFE Act establishes a framework in which individual mortgage loan originators must be licensed by the states in which they operate, and federal registration does not preempt state licensing for non-bank originators. Originating without required state licensure can violate state law and the SAFE Act framework.

Question 45Federal Mortgage-Related Laws and Regulations

A lender's fair lending review shows that its underwriting model uses a credit history variable that has a disparate impact on applicants in majority-minority census tracts. The variable is not necessary to predict default. Under ECOA and Regulation B, how should the lender proceed?

  1. Retain the variable because disparate impact claims are not recognized under ECOA
  2. Retain the variable but disclose its use in the adverse action notice
  3. Retain the variable because the lender did not intend to discriminate
  4. Remove or revise the variable because it produces a disparate impact that is not justified by a legitimate business necessity Correct answer.

Explanation

ECOA and Regulation B prohibit practices with an unjustified disparate impact on a prohibited basis, even absent discriminatory intent. A variable that produces disparate impact and is not necessary to a legitimate business purpose should be removed or revised.

Question 46Federal Mortgage-Related Laws and Regulations

A servicer receives a complete loss mitigation application 25 days before a scheduled foreclosure sale. Under Regulation X, which statement correctly describes the servicer's obligations?

  1. The servicer may proceed with the sale but must evaluate the borrower for at least one option
  2. The servicer is not required to evaluate the borrower for any loss mitigation options before the sale Correct answer.
  3. The servicer must evaluate the borrower for all loss mitigation options and may not conduct the sale until the evaluation is complete
  4. The servicer must evaluate the borrower for all options and may not conduct the sale until the borrower has appealed

Explanation

Under Regulation X, if a complete loss mitigation application is received 37 days or fewer before a foreclosure sale, the servicer is not required to evaluate the borrower for loss mitigation before conducting the sale, though it must still comply with other applicable requirements. The 25-day timing falls within that limited-review window.

Question 47Federal Mortgage-Related Laws and Regulations

A creditor's rate sheet offers a lower interest rate to borrowers who are members of a particular ethnic affinity organization. Under fair lending law, which statement best characterizes this pricing practice?

  1. It is permissible if the organization is open to all applicants
  2. It is permissible if the creditor offers the same benefit to all affinity organizations
  3. It is permissible because affinity pricing is a common industry practice
  4. It is impermissible because offering a pricing benefit based on ethnicity constitutes disparate treatment on a prohibited basis Correct answer.

Explanation

Pricing benefits tied to ethnicity constitute disparate treatment on a prohibited basis under ECOA and the Fair Housing Act. Industry custom or the organization's openness does not cure the discriminatory nature of the pricing benefit.

Question 48Federal Mortgage-Related Laws and Regulations

A creditor is subject to HMDA and must report the action taken on each application. Which combination best describes how the creditor should report an application that was approved but not accepted by the borrower?

  1. Report it as an originated loan
  2. Report it as approved but not accepted Correct answer.
  3. Report it as an application denied
  4. Report it as withdrawn by the applicant

Explanation

HMDA requires the creditor to report the action taken using the prescribed categories, including approved but not accepted when the creditor approved the application and the borrower declined to proceed. This category is distinct from denials and withdrawals.

Question 49General Mortgage Knowledge

On a conventional loan, private mortgage insurance (PMI) is generally required when the borrower's down payment is less than what percentage of the purchase price?

  1. 5 percent
  2. 10 percent
  3. 25 percent
  4. 20 percent Correct answer.

Explanation

Conventional lenders typically require PMI whenever the loan-to-value ratio exceeds 80 percent, which corresponds to a down payment below 20 percent. Once the borrower reaches 20 percent equity under the original amortization schedule, the borrower may request cancellation.

Question 50General Mortgage Knowledge

Which federal law requires mortgage lenders to provide a Loan Estimate within three business days of receiving a complete application?

  1. Home Mortgage Disclosure Act
  2. Real Estate Settlement Procedures Act Section 8
  3. Truth in Lending Act / Regulation Z Correct answer.
  4. Fair Credit Reporting Act

Explanation

The TILA-RESPA Integrated Disclosure rules under Regulation Z require the Loan Estimate within three business days of application. The Loan Estimate replaced the early Truth in Lending and Good Faith Estimate forms.