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Question 1Federal Mortgage-Related Laws

Under the TILA-RESPA integrated disclosure rules, a creditor must deliver or mail the Loan Estimate to the consumer within what time frame?

  1. At any time before the closing disclosure is issued
  2. Within three business days of receiving the application Correct answer.
  3. At least three business days before consummation
  4. Within seven business days after the application is complete

Explanation

Regulation Z requires the creditor to provide the Loan Estimate no later than the third business day after it receives the consumer's application. The three-business-day-before-consummation timing applies to the Closing Disclosure, not the Loan Estimate.

Question 2Federal Mortgage-Related Laws

Which of the following is a prohibited basis of discrimination under the Equal Credit Opportunity Act?

  1. Receipt of public assistance income Correct answer.
  2. A bankruptcy filing within the past two years
  3. Employment with the current employer for under two years
  4. A credit score below the lender's published minimum

Explanation

ECOA forbids discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or good-faith exercise of rights under the Consumer Credit Protection Act. A lender may not deny credit or vary terms because an applicant receives public assistance.

Question 3Federal Mortgage-Related Laws

Which of the following is a protected class under the federal Fair Housing Act but not under the Equal Credit Opportunity Act?

  1. Source of income
  2. Religion Correct answer.
  3. Marital status
  4. Age

Explanation

The Fair Housing Act protects race, color, religion, sex, national origin, familial status, and disability. Religion appears on the FHA list but is not one of ECOA's prohibited bases for credit.

Question 4Federal Mortgage-Related Laws

A federally regulated lender makes a loan secured by a dwelling located in a special flood hazard area. What does the Flood Disaster Protection Act require of the lender?

  1. Recommend flood insurance but not require it
  2. Require flood insurance for the life of the loan Correct answer.
  3. Require flood insurance only if the down payment is under 20 percent
  4. Require only contents coverage on the structure

Explanation

The Flood Disaster Protection Act requires regulated lenders to require flood insurance on improved structures in special flood hazard areas and to ensure coverage is maintained for the life of the loan. Coverage must be at least the lesser of the outstanding principal balance or the maximum available under the National Flood Insurance Program.

Question 5Federal Mortgage-Related Laws

Under the SAFE Act, an individual who takes a residential mortgage loan application and offers or negotiates loan terms for compensation must generally do what?

  1. Hold an active state real estate broker license
  2. Be licensed or registered through the Nationwide Multistate Licensing System Correct answer.
  3. Be employed by a federally insured depository institution
  4. Register with the county recorder where the property is located

Explanation

The SAFE Act requires mortgage loan originators to be licensed or registered, with records maintained in the NMLS registry. Depository-institution employees are registered rather than state-licensed, but they must still be in the registry.

Question 6Federal Mortgage-Related Laws

What is the primary purpose of the Home Mortgage Disclosure Act?

  1. License individual mortgage loan originators
  2. Set maximum interest rates on home loans
  3. Insure mortgages against borrower default
  4. Report mortgage application and origination data Correct answer.

Explanation

HMDA requires covered financial institutions to collect and report data about mortgage applications, originations, and purchases so regulators and the public can evaluate lending patterns. It is a data-collection statute, not a rate-setting or licensing law.

Question 7Federal Mortgage-Related Laws

Under the Homeowners Protection Act, borrower-paid private mortgage insurance on a residential mortgage must automatically terminate when the principal balance reaches what percentage of the original value, based on the amortization schedule?

  1. 78 percent Correct answer.
  2. 80 percent
  3. 90 percent
  4. 75 percent

Explanation

The Homeowners Protection Act requires automatic termination of PMI at 78 percent of the original property value based on the original amortization schedule. At 80 percent, cancellation may instead occur upon the borrower's request if the loan is current.

Question 8Federal Mortgage-Related Laws

For a covered refinance secured by a consumer's principal dwelling, when does the TILA right of rescission expire?

  1. When the borrower signs the promissory note at the closing table
  2. When the lender disburses the loan funds to the borrower
  3. Three days after the first scheduled payment date has passed
  4. At midnight of the third business day after consummation or delivery of the disclosures Correct answer.

Explanation

Regulation Z gives the consumer three business days after consummation or after delivery of the material disclosures and rescission notice, whichever occurs last, to rescind. The clock does not run from the first payment date.

Question 9Federal Mortgage-Related Laws

A title company pays a lender's loan officer $200 for each loan referral the officer sends its way. How is this arrangement treated under RESPA?

  1. Prohibited as an unearned fee and kickback under RESPA Correct answer.
  2. Permitted because title services are settlement services under RESPA
  3. Prohibited only if the payment exceeds five hundred dollars
  4. Permitted as long as it is disclosed on the Closing Disclosure

Explanation

Section 8 of RESPA prohibits giving or accepting anything of value in exchange for the referral of settlement service business. Disclosure does not cure the violation, and there is no dollar threshold below which a referral fee becomes lawful.

Question 10Federal Mortgage-Related Laws

The ability-to-repay rule requires creditors to consider and verify eight underwriting factors. Which of the following is one of those factors?

  1. The compensation plan of the individual loan originator
  2. The size and value of the lender's servicing portfolio
  3. The borrower's credit score considered in isolation from other factors
  4. Current or reasonably expected income or assets Correct answer.

Explanation

Among the eight ATR factors is the consumer's current or reasonably expected income or assets, other than the value of the dwelling. The rule also requires consideration of debts, employment status, monthly payment on the loan, and simultaneous loans, among others.

Question 11Federal Mortgage-Related Laws

A first-lien closed-end mortgage becomes a high-cost mortgage under HOEPA when its annual percentage rate exceeds the average prime offer rate by more than what amount?

  1. 8.5 percentage points
  2. 1.5 percentage points
  3. 3.5 percentage points
  4. 6.5 percentage points Correct answer.

Explanation

HOEPA's rate trigger for a first-lien loan secured by a dwelling is an APR that exceeds the average prime offer rate by more than 6.5 percentage points. The comparable threshold for subordinate-lien loans is 8.5 percentage points.

Question 12Federal Mortgage-Related Laws

A consumer sends a dispute about a mortgage account directly to the lender that furnishes the information. Under the Fair Credit Reporting Act, the furnisher must generally do what?

  1. Conduct an investigation and respond within 30 days Correct answer.
  2. Investigate the dispute within 90 days of receiving it
  3. Report the dispute only to the consumer, not the credit bureau
  4. Delete the disputed item immediately without any investigation

Explanation

FCRA direct-dispute rules require the furnisher to investigate and respond within 30 days of receiving the consumer's dispute. If the information is found to be inaccurate or incomplete, the furnisher must modify, delete, or permanently block reporting of it.

Question 13Federal Mortgage-Related Laws

Under the Gramm-Leach-Bliley Act, a nonbank mortgage lender is required to do which of the following?

  1. Limit all data sharing to affiliated title companies only
  2. Maintain a written information security program Correct answer.
  3. Obtain a federal charter in order to share data with affiliates
  4. File customer data with the FTC each calendar quarter

Explanation

The GLBA Safeguards Rule requires covered financial institutions, including nonbank mortgage lenders, to develop, implement, and maintain a written information security program. The program must be appropriate to the institution's size and the sensitivity of the customer information it handles.

Question 14Federal Mortgage-Related Laws

A servicer receives a notice of error from a borrower regarding her escrow account. Under the RESPA servicing rules, the servicer must generally do what?

  1. Respond within sixty business days without sending any acknowledgment
  2. Take no action at all until the foreclosure process has begun
  3. Acknowledge within 5 business days and respond within 30 business days Correct answer.
  4. Acknowledge within 30 business days and respond within 60 business days

Explanation

Regulation X requires the servicer to send a written acknowledgment within five business days of receiving a notice of error and to make a substantive response within 30 business days, subject to a limited extension. The servicer must also refrain from certain collection and foreclosure activity while the request is pending.

Question 15Federal Mortgage-Related Laws

On a closed-end consumer mortgage subject to the integrated disclosure rules, when must the consumer receive the Closing Disclosure?

  1. At least seven business days before consummation
  2. No later than the day of consummation
  3. Within three business days after consummation
  4. At least three business days before consummation Correct answer.

Explanation

Regulation Z requires the consumer to receive the Closing Disclosure no later than three business days before consummation. If a changed circumstance requires a revised disclosure, additional waiting periods may apply.

Question 16Federal Mortgage-Related Laws

When a creditor obtains an appraisal in connection with a first-lien closed-end loan secured by a dwelling, what does Regulation Z require regarding the appraisal report?

  1. Withhold the appraisal unless the borrower pays for a second copy
  2. Deliver the appraisal only after the loan has closed
  3. Deliver the appraisal only if the value supports the loan amount
  4. Provide a free copy no later than three days before closing Correct answer.

Explanation

Regulation Z requires the creditor to provide the consumer a free copy of each appraisal promptly upon completion and in any event no later than three days before consummation. The borrower does not have to request it.

Question 17Federal Mortgage-Related Laws

Which of the following is a defining feature of a VA-guaranteed home loan?

  1. A maximum loan term limited to twenty years
  2. A VA guaranty of up to 25 percent of the loan amount Correct answer.
  3. Monthly mortgage insurance premiums paid to the Department of Veterans Affairs
  4. A required down payment of at least five percent of the price

Explanation

VA guarantees a portion of the loan, generally up to 25 percent of the loan amount, which protects the lender against loss. The program is known for no required down payment for eligible veterans with sufficient entitlement and for a one-time funding fee rather than monthly mortgage insurance.

Question 18Federal Mortgage-Related Laws

An FHA-insured 30-year loan is originated with a loan-to-value ratio above 90 percent. What is true of the annual mortgage insurance premium?

  1. Remains for the life of the loan Correct answer.
  2. Ends automatically when the loan-to-value ratio reaches 80 percent
  3. Is refunded to the borrower at closing
  4. Is paid only for the first year of the loan

Explanation

For FHA loans with an original loan-to-value ratio above 90 percent, the annual mortgage insurance premium continues for the life of the loan. Loans at or below 90 percent LTV generally terminate the annual premium after 11 years.

Question 19Federal Mortgage-Related Laws

The TILA right of rescission applies to which of the following transactions?

  1. A purchase-money mortgage used to buy the consumer's new home
  2. A business-purpose loan secured by the borrower's inventory
  3. A loan secured by a rental property the consumer owns
  4. A refinance secured by the consumer's principal dwelling Correct answer.

Explanation

Rescission applies to closed-end consumer credit transactions secured by the consumer's principal dwelling, such as a refinance or a home equity loan. Purchase-money mortgages, business-purpose credit, and loans secured by non-principal dwellings are excluded.

Question 20Federal Mortgage-Related Laws

A first-lien loan secured by a dwelling qualifies as a higher-priced mortgage loan under Regulation Z. What must the creditor generally establish for that loan?

  1. An escrow account for taxes and insurance Correct answer.
  2. A balloon payment due at the end of five years
  3. A prepayment penalty clause enforceable for three years
  4. A mandatory 20 percent down payment from the borrower

Explanation

Regulation Z generally requires creditors to establish and maintain an escrow account for property taxes and mortgage-related insurance on first-lien higher-priced mortgage loans. Limited exemptions exist, such as the small-creditor rural or underserved exception and certain condominium or insurance-availability exceptions.

Question 21Federal Mortgage-Related Laws

Under the General Qualified Mortgage rule, a first-lien covered transaction exceeds the price-based threshold when its annual percentage rate exceeds the average prime offer rate by more than what amount?

  1. 2.25 percentage points Correct answer.
  2. 3.5 percentage points
  3. 6.5 percentage points
  4. 1.5 percentage points

Explanation

For first-lien covered transactions, the price-based threshold in the General QM definition is 2.25 percentage points above the average prime offer rate. A loan exceeding that spread falls outside the General QM category.

Question 22Federal Mortgage-Related Laws

Under Regulation Z's loan originator compensation rules, which of the following is permissible?

  1. Being paid more whenever the consumer accepts a higher interest rate
  2. Having compensation reduced because the loan is a high-cost mortgage
  3. Being paid a fixed percentage of the loan amount regardless of the loan's terms Correct answer.
  4. Receiving compensation from both the consumer and the creditor on the same transaction

Explanation

The loan originator may be compensated based on the loan amount as long as the amount is not based on the loan's terms or conditions. This is a common structure used by creditors to comply with the compensation restrictions.

Question 23Federal Mortgage-Related Laws

If a creditor fails to deliver the material disclosures and rescission notice required by TILA, the consumer's right to rescind a covered refinance may be extended for up to what period after consummation?

  1. 180 days after consummation
  2. Three years after consummation Correct answer.
  3. Five years after consummation
  4. One year after consummation

Explanation

When required disclosures or the notice of the right to rescind are not delivered, the three-business-day period is replaced by a right that generally lasts up to three years after consummation. The extended period also ends upon transfer of the property or upon sale of the consumer's interest.

Question 24Federal Mortgage-Related Laws

A lender sets minimum loan amounts for its home purchase program that are attainable in most neighborhoods but effectively exclude nearly all majority-minority census tracts in its market. On what theory may this practice be challenged under the Fair Housing Act?

  1. Disparate impact, even without proof of discriminatory intent Correct answer.
  2. Safe harbor for business necessity without any need to justify the policy
  3. Reverse redlining against the lender's own shareholders
  4. Overt discrimination only, because no stated racial preference appears in the policy

Explanation

The Fair Housing Act reaches practices that have a disproportionately adverse effect on protected classes, even when no discriminatory intent is shown, unless the practice is supported by a legitimate business necessity that cannot be achieved with a less discriminatory alternative. Neutral-seeming loan amount or geographic policies that exclude minority neighborhoods are a classic disparate-impact scenario.

Question 25Federal Mortgage-Related Laws

Under the RESPA mortgage servicing rules, a servicer may not begin a foreclosure action until the borrower's delinquency exceeds what period?

  1. 120 days Correct answer.
  2. 90 days
  3. 60 days
  4. 180 days

Explanation

Regulation X prohibits a servicer from initiating a foreclosure action until the borrower is more than 120 days delinquent. This pre-foreclosure waiting period works alongside the loss mitigation procedures that must be completed before a referral to foreclosure.

Question 26Federal Mortgage-Related Laws

Under the SAFE Act, an individual who takes residential mortgage loan applications for a nonbank lender must do which of the following?

  1. Obtain a real estate broker license in the state where the property is located
  2. Hold and maintain a state MLO license through the NMLS registry Correct answer.
  3. Register with the Securities and Exchange Commission before taking an application
  4. Complete a HUD-approved housing counseling course every year

Explanation

The SAFE Act requires mortgage loan originators to be licensed or registered, and employees of nonbank lenders obtain state licenses tracked through the Nationwide Multistate Licensing System. Licensing involves pre-licensing education, testing, a criminal background check, and ongoing renewal requirements. Federal securities registration and real estate brokerage licenses are unrelated credentials.

Question 27Federal Mortgage-Related Laws

Which borrower characteristic is a prohibited basis for discrimination under the Equal Credit Opportunity Act?

  1. A low credit score
  2. A short employment history
  3. A high debt-to-income ratio
  4. Receipt of public assistance income Correct answer.

Explanation

ECOA and Regulation B prohibit discrimination on specified bases, including race, color, religion, national origin, sex, marital status, age, and receipt of income from any public assistance program. Credit scores, ratios, and employment tenure are legitimate underwriting variables when applied consistently. Treating public assistance income differently from other income is unlawful.

Question 28Federal Mortgage-Related Laws

Under Regulation Z, the finance charge on a closed-end consumer mortgage is best described as which of the following?

  1. The sum of all principal payments scheduled over the loan term
  2. The annual percentage rate restated in dollars
  3. The total cost of consumer credit expressed as a dollar amount Correct answer.
  4. The note rate multiplied by the loan amount

Explanation

Regulation Z defines the finance charge as the total cost of consumer credit stated as a dollar figure, including interest and certain other charges imposed as a condition of credit. The annual percentage rate is that cost expressed as a rate, not a dollar amount. Principal itself is not part of the finance charge.

Question 29Federal Mortgage-Related Laws

A lender makes a loan secured by a building located in a Special Flood Hazard Area of a participating community. What does federal flood law require of the lender?

  1. Keep the building covered by flood insurance for the loan's term Correct answer.
  2. Require flood insurance only when the loan is FHA-insured
  3. Notify the borrower of the flood hazard after closing
  4. Purchase a flood insurance policy on the borrower's behalf at closing

Explanation

The Flood Disaster Protection Act requires regulated lenders to obtain and maintain flood insurance in at least the lesser of the outstanding loan balance or the maximum NFIP limit for any improved building in an SFHA in a participating community. Coverage must be kept in force for the life of the loan, and the borrower must be notified at origination. Coverage is not limited to government-insured loans.

Question 30Federal Mortgage-Related Laws

Which loan feature is prohibited in a high-cost mortgage under HOEPA?

  1. A monthly escrow payment for taxes and insurance
  2. A late fee assessed after a 15-day grace period
  3. A balloon payment Correct answer.
  4. A fixed interest rate for the full loan term

Explanation

HOEPA bars several terms in high-cost mortgages, including balloon payments, negative amortization, increased interest rates after default, and most prepayment penalties. These restrictions target terms that strip equity or trap borrowers in unaffordable structures. Fixed rates, escrows, and reasonable late fees are not prohibited.

Question 31Federal Mortgage-Related Laws

The Servicemembers Civil Relief Act caps the interest rate on a mortgage obtained by a servicemember before entering active duty at what maximum?

  1. 10 percent
  2. 6 percent Correct answer.
  3. 4 percent
  4. 8 percent

Explanation

The SCRA entitles a servicemember to a 6 percent cap on interest, including certain fees, on obligations incurred before military service. The servicemember must request the benefit in writing and provide proof of service, and the reduction applies during the period of military service. Amounts above the cap are forgiven, not deferred.

Question 32Federal Mortgage-Related Laws

A lender denies a mortgage application because of information contained in a consumer report. What must the adverse action notice include under the Fair Credit Reporting Act?

  1. A statement that the applicant may reapply in 30 days
  2. Contact information for the consumer reporting agency relied on Correct answer.
  3. A copy of the consumer report
  4. The credit scoring model used and the weight of each factor in it

Explanation

When credit reporting information contributes to an adverse action, FCRA requires the notice to identify the consumer reporting agency, including its name, address, and telephone number, and to tell the applicant of the right to obtain a free report and dispute accuracy. Providing the report itself is not required, and scoring weights need not be disclosed.

Question 33Federal Mortgage-Related Laws

For a closed-end consumer mortgage covered by the integrated disclosure rules, the creditor must deliver or mail the Loan Estimate no later than which point?

  1. Three business days after receiving the application Correct answer.
  2. Three business days before consummation
  3. Seven business days after the application is received
  4. On the same day the application is received

Explanation

The Loan Estimate must be delivered or placed in the mail no later than the third business day after the creditor receives an application. The three-business-day-before-consummation deadline applies to the Closing Disclosure, not the Loan Estimate. Delivering only on the day of application is permitted but not required.

Question 34Federal Mortgage-Related Laws

Which event allows a creditor to provide a revised Loan Estimate on a pending mortgage application?

  1. The consumer asks the creditor to waive the appraisal
  2. A competing lender offers the consumer a lower rate
  3. Market interest rates fall after the original Loan Estimate was issued
  4. The consumer locks the rate after the original Loan Estimate was issued Correct answer.

Explanation

A revised Loan Estimate is permitted when a valid changed circumstance, changed borrower-requested term, or rate lock occurs after the original estimate was issued. A rate lock changes the interest-rate-dependent charges and justifies a revised estimate if provided on the day the rate is locked. General market movements or competitor offers do not qualify.

Question 35Federal Mortgage-Related Laws

When servicing of a mortgage loan is transferred, the transferee servicer must deliver the notice of transfer to the borrower no later than which time?

  1. On the transfer date
  2. 15 days before the effective date of the transfer Correct answer.
  3. 60 days before the effective date of the transfer
  4. 30 days after the transfer date

Explanation

RESPA requires the transferee servicer to give the borrower a notice of transfer not more than 15 days before the effective date of the transfer, and the transferor must give notice not more than 15 days before it as well. The notice must state the effective date, new servicer details, and that the transfer does not affect other loan terms.

Question 36Federal Mortgage-Related Laws

Under Regulation B, a creditor that takes adverse action on a completed mortgage application must notify the applicant within how many days?

  1. 10 days
  2. 30 days Correct answer.
  3. 90 days
  4. 60 days

Explanation

Regulation B requires notification of action taken within 30 days after receiving a completed application. If the creditor needs more time, it may send a notice of incompleteness or an extension notice within that period. The 30-day clock restarts when the missing information is supplied.

Question 37Federal Mortgage-Related Laws

Under the Homeowners Protection Act, at what point may a borrower request cancellation of private mortgage insurance based on the original value of the property?

  1. When the balance is scheduled to reach 80 percent of original value Correct answer.
  2. Only after the loan is fully repaid
  3. When the balance is scheduled to reach 78 percent of original value
  4. When the balance is scheduled to reach 90 percent of original value

Explanation

Borrower-requested cancellation is available when the principal balance is scheduled to reach 80 percent of the original property value, provided the borrower has a good payment history, requests cancellation, and satisfies any lender-required evidence of value. Automatic termination occurs later, at 78 percent of original value. Ninety percent is too early for either mechanism.

Question 38Federal Mortgage-Related Laws

An annual escrow account analysis shows a surplus of $75. What must the servicer do under RESPA?

  1. Apply the surplus to the next 12 monthly payments
  2. Retain the surplus until the loan is paid off
  3. Credit the surplus only if it exceeds $100
  4. Refund the surplus to the borrower within 30 days Correct answer.

Explanation

RESPA requires a servicer to refund any escrow surplus of $50 or more to the borrower within 30 days of the annual escrow analysis. Smaller surpluses may be credited to the next escrow computation year. Surpluses may not be held until payoff.

Question 39Federal Mortgage-Related Laws

Before charging a borrower for force-placed hazard insurance, what must a servicer do under the RESPA servicing rules?

  1. Report the borrower to a credit bureau
  2. Send a notice at least 45 days before the charge Correct answer.
  3. Cancel the borrower's existing policy
  4. Obtain the borrower's written consent

Explanation

The servicer must send a written notice at least 45 days before assessing a force-placed insurance charge, and a second reminder notice at least 30 days after the first if the borrower still has not obtained coverage. The notice must describe the borrower's obligation, the proposed cost, and how to avoid the charge. Borrower consent is not a precondition.

Question 40Federal Mortgage-Related Laws

What is the maximum building coverage available under a standard NFIP flood insurance policy for a one-to-four family residential building?

  1. $100,000
  2. $350,000
  3. $250,000 Correct answer.
  4. $500,000

Explanation

The NFIP caps building coverage at $250,000 for a one-to-four family residential building and $100,000 for contents in a residential unit. Lenders may require coverage above that limit, but the excess must come from a private or excess flood policy. Commercial buildings have a higher $500,000 building limit.

Question 41Federal Mortgage-Related Laws

An applicant's income and assets are sufficient to repay the requested mortgage without another party. Under Regulation B, the creditor may do which of the following?

  1. Require the applicant's spouse to sign a quitclaim deed
  2. Not require the applicant's spouse to sign the note Correct answer.
  3. Require the spouse's signature on all loan documents
  4. Include the spouse's income in the underwriting analysis without consent

Explanation

Regulation B bars a creditor from requiring a spouse's signature on the note when the applicant independently qualifies for the amount and type of credit requested. A creditor may require a spouse's signature on the security instrument to perfect a lien in some circumstances, but not as a condition of approval. Spousal income may be counted only if the applicant asks the creditor to consider it.

Question 42Federal Mortgage-Related Laws

Under the RESPA servicing rules, how quickly must a servicer acknowledge receipt of a borrower's loss mitigation application?

  1. 5 business days Correct answer.
  2. 45 days
  3. 30 days
  4. 10 days

Explanation

A servicer must send a written notice acknowledging receipt of a loss mitigation application within 5 business days. If the application is incomplete, the notice must identify the missing information and a reasonable deadline for supplying it. For a complete application received more than 37 days before foreclosure, the servicer must evaluate the borrower for all available options.

Question 43Federal Mortgage-Related Laws

Under HMDA, how often must a covered financial institution submit its loan/application register data to its supervisory agency?

  1. Quarterly
  2. Annually, by March 1 of the following calendar year Correct answer.
  3. Monthly
  4. Every three years

Explanation

HMDA requires covered institutions to compile a loan/application register for the calendar year and submit it to the appropriate federal agency by March 1 of the following year. Modified reporting rules allow some institutions to report a sample of entries rather than the full register, but the annual submission deadline still applies.

Question 44Federal Mortgage-Related Laws

A closed-end loan satisfies the General Qualified Mortgage requirements and is a higher-priced covered transaction. What protection does the creditor receive against ability-to-repay claims?

  1. An exemption from the ability-to-repay rule
  2. No protection unless the loan is also a high-cost mortgage
  3. A safe harbor against ability-to-repay claims
  4. A rebuttable presumption of ability-to-repay compliance Correct answer.

Explanation

A General QM loan that is a higher-priced covered transaction receives only a rebuttable presumption of compliance, which the borrower may overcome with evidence that the borrower lacked a reasonable ability to repay. A QM loan that is not higher-priced gets the stronger safe harbor. High-cost status adds restrictions rather than protection.

Question 45Federal Mortgage-Related Laws

Under the SAFE Act, the minimum annual continuing education for a licensed mortgage loan originator is which of the following?

  1. 8 hours, including 3 hours on federal law and regulation Correct answer.
  2. 4 hours, all on state law
  3. 12 hours, including 6 hours of ethics
  4. 20 hours, including 3 hours of federal law

Explanation

Licensed MLOs must complete at least 8 hours of continuing education each year, including 3 hours on federal law and regulation, 2 hours on ethics, 2 hours on non-traditional mortgage lending, and 1 hour of elective content. The 20-hour requirement applies to pre-licensing education, not annual renewal.

Question 46Federal Mortgage-Related Laws

A consumer timely rescinds a covered mortgage transaction. Within 20 days after receiving the rescission notice, what must the creditor do?

  1. Refund amounts paid and release the security interest Correct answer.
  2. Keep the loan in force until the consumer sells the home
  3. Record a new mortgage at the same terms
  4. Begin foreclosure to recover the loan amount

Explanation

When a consumer rescinds, the creditor must within 20 days return any money or property the consumer gave and take steps to terminate the security interest, eventually recording a release or satisfaction. The consumer then must tender the loan proceeds or the property's value. Rescission unwinds the transaction rather than preserving it.

Question 47Federal Mortgage-Related Laws

Under federal flood insurance law as amended by Biggert-Waters, what must a lender generally do for a residential loan secured by improved real estate in a Special Flood Hazard Area?

  1. Require the borrower to sign a waiver of flood coverage
  2. Escrow the flood insurance premiums for the life of the loan Correct answer.
  3. Purchase a flood policy for the borrower at closing
  4. Rely on federal disaster assistance instead of flood insurance

Explanation

Biggert-Waters generally requires regulated lenders to escrow flood insurance premiums and fees for residential improved real estate loans, subject to exceptions such as small lenders and certain business, agricultural, or subordinate-lien loans. The escrow requirement parallels the tax and insurance escrow concept and cannot be avoided by waiver. A lender force-places coverage only after a lapse and required notices.

Question 48Federal Mortgage-Related Laws

Under the Military Lending Act, which cost is included when calculating the Military Annual Percentage Rate on covered credit?

  1. Federal income tax withholdings
  2. Premiums for credit insurance sold with the credit Correct answer.
  3. The borrower's monthly utility payments
  4. State vehicle registration fees

Explanation

The Military Annual Percentage Rate combines finance charges with credit insurance premiums, debt cancellation fees, and fees for ancillary products sold with the credit, and it may not exceed 36 percent. Certain bona fide, non-financed third-party fees such as appraisal or title costs are excluded. Unrelated household expenses are never part of the calculation.

Question 49General Mortgage Knowledge

Under the SAFE Act, a mortgage loan originator's license is issued and renewed by which of the following?

  1. The U.S. Department of Housing and Urban Development
  2. The state regulatory agency where the MLO is licensed Correct answer.
  3. The Nationwide Multistate Licensing System
  4. The Consumer Financial Protection Bureau

Explanation

The SAFE Act establishes a state-based licensing system, and each state's regulatory agency issues and renews MLO licenses. The NMLS is the national database and system of record that supports that process but does not itself grant licenses. Federal agencies register certain MLOs but do not license them.

Question 50General Mortgage Knowledge

Which of the following is included in the monthly PITI payment on a mortgage loan?

  1. Discount points paid by the seller
  2. Origination fee charged at closing
  3. Title insurance premium
  4. Hazard insurance premium Correct answer.

Explanation

PITI stands for principal, interest, taxes, and insurance, so the hazard insurance premium is part of the monthly payment. Taxes and insurance are typically collected through an escrow account. Origination fees, discount points, and title premiums are closing costs, not recurring monthly components.