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Indiana MLO practice questions

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Question 1Federal Mortgage-Related Laws

Under Regulation X, when must a servicer provide the initial servicing disclosure statement to a consumer who submits a mortgage loan application?

  1. At the time of application, or by mail or delivery no later than three business days after the application is received Correct answer.
  2. With the first monthly payment statement issued after closing
  3. Within ten business days after the loan is consummated
  4. Only when the servicing rights are transferred to a different servicer

Explanation

Regulation X, 12 CFR 1024.33(a), requires the servicer to give the servicing disclosure statement to the applicant at the time of application or, if it is not provided then, to deliver or place it in the mail no later than three business days after the application is received. The statement explains that servicing may be transferred and that the applicant's loan payments may be assigned to another servicer.

Question 2Federal Mortgage-Related Laws

A creditor receives a completed mortgage loan application and decides to deny it. Under Regulation B, within what period must the creditor notify the applicant of the action taken?

  1. 45 days after receiving the completed application
  2. 30 days after receiving the completed application Correct answer.
  3. 60 days after receiving the completed application
  4. 15 days after receiving the completed application

Explanation

Regulation B, 12 CFR 1002.9(a)(1), requires a creditor to notify the applicant of action taken within 30 days after receiving a completed application for credit. The notice must include the specific reasons for denial or a statement of the applicant's right to request them.

Question 3Federal Mortgage-Related Laws

Under the TILA-RESPA integrated disclosure rules, when must a creditor deliver or place in the mail the initial Loan Estimate after receiving a consumer's mortgage application?

  1. Within ten business days after receiving the application
  2. Only after the consumer signs an intent to proceed with the lender
  3. At least four business days before the loan is consummated
  4. Within three business days after receiving the application Correct answer.

Explanation

12 CFR 1026.19(e)(1)(iii) requires the creditor to deliver the Loan Estimate or place it in the mail no later than three business days after receiving the consumer's application. The three-business-day clock begins when the creditor receives the six pieces of application information defined in the rule.

Question 4Federal Mortgage-Related Laws

A non-depository lender originated 30 closed-end, dwelling-secured mortgage loans in each of the two preceding calendar years. Under Regulation C, how is this lender treated for HMDA purposes?

  1. It is a covered institution subject to HMDA data collection and reporting Correct answer.
  2. It must report only if it is an insured depository institution
  3. It must report only if it also originated at least 500 open-end lines of credit
  4. It is exempt because it originated fewer than 100 closed-end loans in each year

Explanation

The Regulation C coverage threshold for closed-end mortgage loans is 25 loans in each of the two preceding calendar years, so 30 loans in both years makes the lender a covered institution. Although a lender at this volume may qualify for the partial exemption from certain data points, the partial exemption does not eliminate the obligation to collect and report HMDA data.

Question 5Federal Mortgage-Related Laws

A creditor approves a consumer's application for a first-lien, higher-risk mortgage loan secured by a principal dwelling. Under Regulation B, how must the creditor furnish the appraisal?

  1. Only if the consumer submits a written request after the loan closes
  2. At least seven business days before consummation
  3. Promptly upon completion and, in any event, no later than three business days before consummation Correct answer.
  4. Within thirty days after the loan is consummated

Explanation

12 CFR 1002.14(a)(1) requires a creditor to provide a free copy of each appraisal and other written valuation promptly upon completion, and in no case later than three business days before consummation. The consumer may waive the three-business-day timing only under the narrow conditions in the rule.

Question 6Federal Mortgage-Related Laws

An individual takes residential mortgage loan applications for a state-licensed, non-depository mortgage lender. Under the SAFE Act, what authorization must this individual hold?

  1. Registration as a registered loan originator through the employing institution's federal regulator
  2. A federal mortgage loan originator license issued directly by the CFPB
  3. A state real estate broker license in place of a mortgage loan originator license
  4. A state mortgage loan originator license and an active NMLSR registration Correct answer.

Explanation

The SAFE Act requires loan originators employed by non-depository, state-licensed entities to obtain a state mortgage loan originator license and maintain registration in the Nationwide Multistate Licensing System and Registry. Federal registration is reserved for employees of insured depository institutions and certain other regulated entities.

Question 7Federal Mortgage-Related Laws

Which single loan term, standing alone, causes a $60,000 mortgage loan to be classified as a high-cost mortgage under HOEPA and Regulation Z?

  1. An annual percentage rate that exceeds the average prime offer rate by 1.5 percentage points
  2. A balloon payment scheduled in the tenth year of the loan term
  3. Total points and fees that exceed 5 percent of the total loan amount Correct answer.
  4. A prepayment penalty equal to one percent of the amount prepaid

Explanation

12 CFR 1026.32(a)(1) sets three high-cost triggers: the APR spread over the average prime offer rate, points and fees exceeding the applicable percentage of the total loan amount, and prepayment penalties that exceed 3 percent of the amount prepaid or extend beyond 36 months. For a loan of this size, points and fees above 5 percent of the total loan amount satisfies the points-and-fees trigger.

Question 8Federal Mortgage-Related Laws

A lender denies a refinance application because the applicant's only income is Social Security disability benefits. How is this decision treated under the Fair Housing Act?

  1. It is permissible because the Fair Housing Act does not reach refinance transactions
  2. It is prohibited only if the applicant has reached retirement age
  3. It is prohibited discrimination because the decision is based on handicap Correct answer.
  4. It is permissible because disability benefits cannot be verified by a lender

Explanation

The Fair Housing Act bars discrimination in residential real estate-related transactions, which expressly include refinancing and home improvement lending, on the basis of handicap as well as race, color, religion, sex, familial status, and national origin. Refusing credit solely because income derives from disability benefits treats the applicant differently because of handicap; a lender may assess income reliability but not use disability itself as the reason for denial.

Question 9Federal Mortgage-Related Laws

A borrower refinances her principal dwelling with a lender that is not the original creditor and receives all required TILA disclosures plus two copies of the rescission notice at a closing held on Friday. No corrected disclosures or notice are later delivered. When does her right of rescission expire?

  1. At midnight on the following Wednesday
  2. At midnight on the following Saturday
  3. At midnight on the following Tuesday Correct answer.
  4. At midnight on the following Monday

Explanation

Under 12 CFR 1026.23(a)(3), the borrower has three business days after consummation, delivery of the required disclosures, or delivery of the notice of the right to rescind, whichever occurs last. For rescission purposes a business day is every calendar day except Sundays and federal holidays, so Saturday is day one, Sunday is excluded, Monday is day two, and the right expires at midnight on Tuesday.

Question 10Federal Mortgage-Related Laws

A creditor originates a first-lien general qualified mortgage whose APR exceeds the average prime offer rate by 1.75 percentage points. How is the loan classified?

  1. A safe harbor qualified mortgage because the spread is within 2.25 percentage points
  2. A rebuttable presumption qualified mortgage because the spread exceeds 1.5 percentage points Correct answer.
  3. A non-qualified mortgage because any spread above 1.5 percentage points disqualifies the loan
  4. A high-cost mortgage under HOEPA because the spread exceeds 1.5 percentage points

Explanation

Under the General QM price-based test, a first-lien covered transaction remains a qualified mortgage when its APR does not exceed the average prime offer rate by more than 2.25 percentage points. Within that band, a spread of 1.5 percentage points or less earns safe harbor status, while a spread above 1.5 and up to 2.25 points creates a rebuttable presumption of compliance.

Question 11Federal Mortgage-Related Laws

A lender makes a loan secured by an improved building located in a Special Flood Hazard Area. Under federal flood insurance requirements, what is the minimum amount of flood insurance the lender must require?

  1. The greater of the loan balance or the property's appraised market value
  2. The full replacement cost of the building
  3. The maximum NFIP coverage available regardless of loan balance
  4. The lesser of the loan balance or the maximum NFIP limit Correct answer.

Explanation

The mandatory purchase requirement calls for flood insurance in an amount at least equal to the lesser of the outstanding principal balance of the loan or the maximum coverage available under the National Flood Insurance Program. Coverage must be maintained for the life of the loan.

Question 12Federal Mortgage-Related Laws

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

  1. At any time the borrower asks, without lender conditions
  2. At 80% of original value with a good payment history Correct answer.
  3. Only after the loan is paid in full or refinanced
  4. At 90% of original value regardless of payment history

Explanation

The HPA gives the borrower a right to request PMI cancellation when the principal balance reaches 80 percent of the original value, provided the borrower has a good payment history and meets other lender conditions. The lender may require evidence of value.

Question 13Federal Mortgage-Related Laws

A mortgage lender refers a borrower to a title company owned by the lender's parent company. Under RESPA, what must the lender provide in connection with the referral?

  1. A new Loan Estimate disclosing the referral arrangement
  2. A revised Closing Disclosure reflecting the referral fee
  3. A notice of the borrower's right to rescind the loan
  4. A written affiliated business arrangement disclosure statement Correct answer.

Explanation

RESPA requires a written affiliated business arrangement disclosure when a settlement service provider refers business to an affiliated provider. The disclosure must describe the affiliation and state that the borrower is not required to use the affiliate.

Question 14Federal Mortgage-Related Laws

A creditor learns of a changed circumstance that increases the borrower's closing costs and decides to provide a revised Loan Estimate. Under TRID rules, when must the consumer receive the revised Loan Estimate?

  1. No later than 3 business days after consummation
  2. At least 7 business days before consummation
  3. No later than 4 business days before consummation Correct answer.
  4. On the same day the changed circumstance is discovered

Explanation

When a changed circumstance requires a revised Loan Estimate, the creditor must deliver or place it in the mail no later than four business days before consummation. The revised estimate must also be provided within three business days of receiving information about the change.

Question 15Federal Mortgage-Related Laws

A creditor approves a first-lien mortgage loan secured by a dwelling, and the borrower has paid for an appraisal. Under Regulation B, when must the creditor provide a copy of the appraisal?

  1. At least 10 days before the application is complete
  2. Only if the borrower requests it after closing
  3. Promptly upon completion, but no later than 3 business days before consummation Correct answer.
  4. Within 30 days after closing, only if the borrower asks in writing

Explanation

Regulation B requires the creditor to provide a copy of the appraisal promptly upon completion, but in any event no later than three business days before consummation. The borrower does not have to request it after closing.

Question 16Federal Mortgage-Related Laws

Under the ability-to-repay rule, a creditor must verify a consumer's income. Which source satisfies the verification requirement?

  1. A tax return transcript or other reasonably reliable third-party record Correct answer.
  2. An oral estimate from the loan originator
  3. A signed statement from the borrower alone, without supporting documents
  4. A credit report score

Explanation

The ATR rule requires creditors to consider and verify income using reasonably reliable third-party records. A tax return transcript is an example of an acceptable third-party record.

Question 17Federal Mortgage-Related Laws

A state-licensed mortgage loan originator must complete annual continuing education under the SAFE Act. What is the minimum number of hours required each year?

  1. 4 hours
  2. 8 hours Correct answer.
  3. 6 hours
  4. 12 hours

Explanation

The SAFE Act requires mortgage loan originators to complete at least eight hours of continuing education each year. The annual hours must include specific subject areas such as federal law and ethics.

Question 18Federal Mortgage-Related Laws

A servicer transfers the servicing of a federally related mortgage loan to a new servicer. Under Regulation X, when must the transferor servicer notify the borrower of the transfer?

  1. At least 60 days before the transfer effective date
  2. At least 15 days before the transfer effective date Correct answer.
  3. At least 3 business days before the transfer effective date
  4. At least 30 days after the transfer effective date

Explanation

Regulation X requires the transferor servicer to provide the borrower a notice of transfer at least 15 days before the effective date of the transfer. The notice explains the transfer and where payments should be sent.

Question 19Federal Mortgage-Related Laws

A creditor establishes an escrow account for a first-lien higher-priced mortgage loan secured by a principal dwelling. Under Regulation Z, when may the creditor cancel the escrow account?

  1. Only after the loan is paid in full or refinanced
  2. At any time upon the borrower's written or oral request
  3. After 5 years, with good payment history and loan conditions met Correct answer.
  4. After 1 year, regardless of the borrower's payment history

Explanation

For a first-lien HPML, the creditor may cancel the escrow account after five years if the borrower has a good payment history, the loan is not in default, and other regulatory conditions are met. The borrower generally must request cancellation.

Question 20Federal Mortgage-Related Laws

Under Regulation Z, which practice is prohibited for a mortgage loan originator's compensation?

  1. Paying a flat fee per application
  2. Paying a commission based on the number of loans closed
  3. Paying a salary to a loan originator
  4. Basing pay on loan terms, such as the interest rate Correct answer.

Explanation

Regulation Z prohibits loan originator compensation that is based on the terms or conditions of the transaction, such as the interest rate or origination fee. Compensation may be a salary, flat fee, or based on the number of loans closed, provided it is not a proxy for loan terms.

Question 21Federal Mortgage-Related Laws

A real estate agent agrees to refer mortgage customers to a lender in exchange for a $400 payment for each closed loan. The agent performs no title, appraisal, or other settlement service for the payment. Under RESPA, the lender's payment is:

  1. permitted if the agent discloses the payment on the Closing Disclosure
  2. a lawful marketing fee because each loan actually closed
  3. permitted because real estate agents are exempt from RESPA
  4. a prohibited kickback unless it is for a service actually performed Correct answer.

Explanation

RESPA Section 8 prohibits giving or accepting anything of value in exchange for referrals of settlement service business. A payment to an agent who performs no actual settlement service is a kickback, and disclosure on the Closing Disclosure does not cure the violation.

Question 22Federal Mortgage-Related Laws

Under the SAFE Act, how must a mortgage loan originator's unique identifier appear in a mortgage loan transaction?

  1. On loan documents at origination, including the note and security instrument Correct answer.
  2. On the Closing Disclosure but not on the promissory note
  3. Only in the lender's internal personnel file
  4. Only on the MLO's business card and website

Explanation

The SAFE Act requires the MLO's unique identifier to be clearly shown on all mortgage loan documents at the time of origination, including the promissory note and security instrument. Keeping it only in advertising or internal records does not satisfy the requirement.

Question 23Federal Mortgage-Related Laws

A mortgage advertisement states a 3.25% annual percentage rate and a $1,200 monthly payment but gives no other credit terms. Under Regulation Z, the advertisement:

  1. must be filed with the CFPB before publication
  2. is exempt because it appears on a website
  3. must include additional credit terms because the APR and payment are triggering terms Correct answer.
  4. is permitted because the APR is stated to two decimal places

Explanation

Regulation Z treats an APR or a payment amount in a mortgage advertisement as a triggering term. When a triggering term appears, the advertisement must also disclose certain credit terms clearly and conspicuously, such as the down payment and repayment terms.

Question 24Federal Mortgage-Related Laws

A creditor takes a telephone application for a mortgage loan secured by a dwelling. The applicant declines to provide ethnicity, race, and sex information. Under Regulation B, what should the creditor do?

  1. Note the applicant's refusal and leave the information blank Correct answer.
  2. Complete the information based on the applicant's surname
  3. Complete the information based on the applicant's voice
  4. Refuse the application as incomplete

Explanation

Regulation B requires a creditor to request government monitoring information on dwelling-secured applications. If a telephone applicant refuses, the creditor notes the refusal; visual observation or surname may be used only for in-person applications, not telephone applications.

Question 25Federal Mortgage-Related Laws

A creditor must provide the Closing Disclosure for a closed-end, dwelling-secured mortgage loan so that the consumer receives it no later than:

  1. at consummation
  2. three business days before consummation Correct answer.
  3. one business day before consummation
  4. seven business days before consummation

Explanation

Under the TILA-RESPA integrated disclosure rules, the creditor must deliver or place in the mail the Closing Disclosure no later than three business days before consummation. The consumer is considered to receive a mailed disclosure three business days after mailing under the mailbox rule.

Question 26Federal Mortgage-Related Laws

A covered lender receives an application for a home improvement loan secured by a dwelling. Under Regulation C, the lender must:

  1. report the application only if the loan is approved
  2. treat the application as exempt because home improvement loans are not HMDA loans
  3. collect and report the application even if no credit is extended Correct answer.
  4. report the application only if the loan amount exceeds $100,000

Explanation

Regulation C requires covered institutions to report applications for dwelling-secured loans, not only loans that close. A home improvement loan secured by a dwelling is a reportable mortgage loan, and denied or withdrawn applications are reported with the appropriate action code.

Question 27Federal Mortgage-Related Laws

Which charge is included in the points-and-fees calculation for a high-cost mortgage under HOEPA?

  1. A fee paid to an affiliate of the creditor for a required settlement service Correct answer.
  2. Bona fide discount points paid by the borrower
  3. A fee for a service the borrower was not required to obtain
  4. The borrower's homeowner's insurance premium

Explanation

HOEPA's points-and-fees test includes finance charges, mortgage broker fees, and fees paid to affiliates of the creditor for required settlement services. Bona fide discount points, homeowner's insurance premiums, and fees for services the borrower was not required to obtain are excluded.

Question 28Federal Mortgage-Related Laws

Under the federal flood insurance statutes, when may a lender force-place flood insurance on a dwelling securing its loan?

  1. Whenever the lender decides the borrower's existing policy is too expensive
  2. After the borrower fails to maintain required coverage and the lender provides notice Correct answer.
  3. At any time without notice if the loan is in default
  4. Only if the property is in a Special Flood Hazard Area and there is no mortgage

Explanation

A lender may force-place flood insurance when the borrower fails to maintain the required amount of coverage on a property in a Special Flood Hazard Area. The lender must notify the borrower and may charge the cost of the coverage to the borrower.

Question 29Federal Mortgage-Related Laws

For a regular mortgage transaction, a disclosed annual percentage rate is considered accurate if it is understated by no more than:

  1. one percentage point
  2. one-eighth of one percentage point Correct answer.
  3. one-half of one percentage point
  4. one-quarter of one percentage point

Explanation

Regulation Z allows a tolerance of one-eighth of one percentage point for a regular transaction and one-quarter of one percentage point for an irregular transaction. An understatement beyond the applicable tolerance is a disclosure violation.

Question 30Federal Mortgage-Related Laws

Under the Homeowners Protection Act, when does private mortgage insurance automatically terminate on a residential mortgage loan?

  1. When the borrower requests cancellation at 80% of original value
  2. On the first day of the month after the principal balance is scheduled to reach 78% of original value, if the borrower is current Correct answer.
  3. When the borrower has made 24 consecutive on-time payments
  4. When the loan is refinanced by a different lender

Explanation

The Homeowners Protection Act provides for automatic termination of PMI when the principal balance is first scheduled to reach 78% of the original value under the amortization schedule, provided the borrower is current. Borrower-requested cancellation at 80% is a separate right.

Question 31Federal Mortgage-Related Laws

A creditor takes a completed application for a mortgage loan secured by a dwelling and denies the request. Under Regulation B, within what period must the creditor provide the applicant with notice of the adverse action?

  1. Within 10 days after receiving the completed application
  2. Within 45 days after receiving the completed application
  3. Within 30 days after receiving the completed application Correct answer.
  4. Within 60 days after receiving the completed application

Explanation

Regulation B requires a creditor to notify an applicant of adverse action within 30 days after receiving a completed application. A counteroffer that the applicant does not accept also triggers adverse action notice obligations. The notice must identify the action taken and include the required ECOA information.

Question 32Federal Mortgage-Related Laws

Under the Truth in Lending Act, in which transaction does the borrower generally have a right to rescind?

  1. A refinance secured by the borrower's principal dwelling Correct answer.
  2. A mortgage secured by a vacation home the borrower will rent out
  3. A business-purpose loan secured by a commercial building
  4. A purchase-money mortgage used to buy the borrower's principal dwelling

Explanation

The TILA right of rescission applies to consumer credit transactions secured by the borrower's principal dwelling, including refinances and home equity loans. It does not apply to purchase-money mortgages for the initial acquisition of the home. Business-purpose loans and loans secured by second homes are also generally outside the rescission right.

Question 33Federal Mortgage-Related Laws

Under the SAFE Act, a state-licensed mortgage loan originator must complete how many hours of pre-licensing education?

  1. 20 hours Correct answer.
  2. 8 hours
  3. 12 hours
  4. 40 hours

Explanation

The SAFE Act requires 20 hours of pre-licensing education for state-licensed mortgage loan originators. That total includes required hours in federal law, ethics, and nondiscriminatory lending, plus elective hours. This is separate from the annual continuing education requirement.

Question 34Federal Mortgage-Related Laws

A servicer determines that a borrower has let hazard insurance lapse on a dwelling securing a federally related mortgage loan. The servicer intends to force-place insurance. Under Regulation X, when must the servicer send the first force-placed insurance notice?

  1. At least 30 days before charging the borrower
  2. At least 45 days before charging the borrower Correct answer.
  3. At least 10 days before charging the borrower
  4. At least 60 days before charging the borrower

Explanation

Regulation X requires the first force-placed insurance notice to be sent at least 45 days before the servicer assesses a premium or fee on the borrower. If the borrower still has not obtained coverage, a second notice is required before the charge. The notice must include the required disclosures about force-placed insurance and the borrower's options.

Question 35Federal Mortgage-Related Laws

A creditor receives an application for a closed-end mortgage loan secured by a dwelling and has the six pieces of information that trigger the Loan Estimate requirement. Under Regulation Z, when must the creditor deliver or place in the mail the Loan Estimate?

  1. No later than 3 business days after receiving the application Correct answer.
  2. No later than 10 business days after receiving the application
  3. No later than 7 business days after receiving the application
  4. On the same business day the application is received

Explanation

The Loan Estimate must be delivered or placed in the mail no later than 3 business days after the creditor receives the application. The creditor also must ensure the consumer receives the Loan Estimate at least 7 business days before consummation, but the issuance deadline is 3 business days. The six pieces of information include the loan amount and property address.

Question 36Federal Mortgage-Related Laws

A creditor is making a first-lien mortgage loan with a total loan amount of $100,000. For HOEPA, the loan becomes a high-cost mortgage if points and fees exceed which amount?

  1. $5,000 Correct answer.
  2. $3,000
  3. $8,000
  4. $6,500

Explanation

HOEPA's points-and-fees trigger is 5% of the total loan amount for loans of $20,000 or more. Five percent of $100,000 is $5,000, so points and fees exceeding $5,000 would make the loan high-cost. Other HOEPA triggers include the APR and prepayment penalty tests.

Question 37Federal Mortgage-Related Laws

A creditor is underwriting a first-lien covered transaction that it intends to sell as a general qualified mortgage. The loan is not eligible for the small creditor QM. Under Regulation Z, the loan's annual percentage rate may not exceed the average prime offer rate by more than:

  1. 3.50 percentage points
  2. 1.50 percentage points
  3. 6.50 percentage points
  4. 2.25 percentage points Correct answer.

Explanation

The general QM price-based threshold is 2.25 percentage points over the average prime offer rate for first-lien covered transactions. A subordinate-lien general QM uses a 3.5 percentage point threshold. A loan that exceeds the applicable threshold does not satisfy the general QM definition.

Question 38Federal Mortgage-Related Laws

A lender has a written policy of denying mortgage applications when the applicant's income includes public assistance. Under Regulation B, how should this policy be treated?

  1. It is permissible only if the loan is insured by a federal agency.
  2. It is permissible if the lender applies it uniformly to all applicants.
  3. It is permissible if the applicant also receives Social Security.
  4. It is unlawful because receipt of public assistance is a prohibited basis. Correct answer.

Explanation

Regulation B prohibits discrimination because all or part of an applicant's income derives from public assistance. A lender may consider whether income is likely to continue, but it cannot deny an application solely because the income is public assistance. Uniform application of an unlawful policy does not cure the discrimination.

Question 39Federal Mortgage-Related Laws

A servicer completes an annual escrow account analysis and determines that a borrower's escrow account has a surplus of $75. Under Regulation X, what is the servicer required to do?

  1. Refund the $75 only if the borrower submits a written request
  2. Retain the $75 surplus in escrow until the loan is paid off
  3. Credit the $75 surplus to the borrower's next monthly payment
  4. Refund the $75 surplus to the borrower within 30 days Correct answer.

Explanation

Under Regulation X, if an escrow account analysis shows a surplus of $50 or more, the servicer must refund the surplus to the borrower within 30 days. Surpluses of less than $50 may be credited to the next escrow analysis instead. The servicer cannot retain a qualifying surplus until payoff.

Question 40Federal Mortgage-Related Laws

A borrower sends a servicer a notice of error disputing an escrow account debit on a federally related mortgage loan. Under Regulation X, within how many business days must the servicer acknowledge receipt of the notice of error?

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

Explanation

Regulation X requires a servicer to acknowledge receipt of a notice of error within 5 business days, unless the servicer corrects the error and notifies the borrower within that period. The servicer generally must resolve the notice within 30 business days, with a possible 15-day extension in limited circumstances. The acknowledgment requirement applies to notices that meet the regulation's content and timing rules.

Question 41General Mortgage Knowledge

Under RESPA, which arrangement is prohibited in connection with a federally related mortgage loan?

  1. Charging a borrower for a settlement service that was actually performed
  2. Paying a fee to a real estate agent solely for referring a borrower Correct answer.
  3. Requiring a borrower to purchase flood insurance when the property is in a flood zone
  4. Paying an affiliate fair market value for title services

Explanation

RESPA Section 8 prohibits giving or receiving a thing of value under an agreement to refer settlement service business. Fees for settlement services must be for services actually rendered and must not be disguised referral payments. A referral fee paid to a real estate agent solely for sending the borrower is therefore prohibited.

Question 42General Mortgage Knowledge

A lender receives a complete consumer credit application on March 1 and takes adverse action on March 20. Under ECOA, by what date must the lender generally provide the adverse action notice?

  1. March 31 Correct answer.
  2. March 16
  3. April 30
  4. April 15

Explanation

Regulation B generally requires a creditor to notify an applicant of adverse action within 30 days after receiving a complete application. Because the complete application was received on March 1, the notice deadline is March 31. Taking action earlier does not extend that deadline.

Question 43General Mortgage Knowledge

For a conforming residential mortgage originated after July 29, 1999, automatic termination of private mortgage insurance generally occurs when the principal balance reaches what percentage of the original property value, assuming payments are current?

  1. 75%
  2. 80%
  3. 70%
  4. 78% Correct answer.

Explanation

The Homeowners Protection Act generally requires automatic termination of private mortgage insurance when the principal balance reaches 78% of the original property value. The borrower must be current on payments for automatic termination to occur. A borrower may separately request cancellation at 80% under the statute.

Question 44General Mortgage Knowledge

A mortgage broker receives a consumer's application for a closed-end residential mortgage on Monday. Assuming no business-day exceptions apply, by when must the Loan Estimate be delivered or placed in the mail?

  1. Within ten business days
  2. Same business day
  3. Within three business days Correct answer.
  4. Within seven business days

Explanation

Under the TILA-RESPA integrated disclosure rules, the creditor or mortgage broker must deliver the Loan Estimate or place it in the mail no later than three business days after receiving the application. The timing runs from receipt of the application, not from approval or processing.

Question 45General Mortgage Knowledge

A revised Loan Estimate is required because the annual percentage rate increases beyond the applicable tolerance. When must the revised Loan Estimate generally be provided to the consumer?

  1. On the day of consummation
  2. At least four business days before consummation Correct answer.
  3. At least seven business days before consummation
  4. At least three business days before consummation

Explanation

When a revised Loan Estimate is required because the APR increases beyond the tolerance, the creditor must provide it no later than four business days before consummation. The consumer must also receive it no later than three business days before consummation. A revised disclosure provided on the day of consummation would not satisfy the timing rule.

Question 46General Mortgage Knowledge

For a 30-year FHA-insured loan with an original loan-to-value ratio above 90%, how long is annual mortgage insurance premium generally required?

  1. 5 years
  2. The life of the loan Correct answer.
  3. 11 years
  4. Until the loan-to-value ratio reaches 78%

Explanation

FHA annual mortgage insurance premium is generally required for the life of the loan when the original LTV exceeds 90% on a 30-year loan. Loans with an original LTV at or below 90% may have a shorter premium duration. The 78% threshold is associated with private mortgage insurance termination, not this FHA premium rule.

Question 47General Mortgage Knowledge

What percentage of the loan amount does the VA generally guarantee on a VA-guaranteed home loan?

  1. 100 percent
  2. 10 percent
  3. 50 percent
  4. 25 percent Correct answer.

Explanation

The VA generally guarantees 25% of the loan amount, which protects the lender against a portion of loss if the borrower defaults. The borrower's available entitlement determines whether the lender can make the loan without a down payment. A 100% guarantee would mean the VA bears the entire loss, which is not how the program works.

Question 48General Mortgage Knowledge

Which loan is generally reportable under HMDA?

  1. A business-purpose loan made to a corporation for working capital
  2. A closed-end mortgage secured by a dwelling Correct answer.
  3. A consumer installment loan secured by a vehicle
  4. An agricultural loan used to purchase farmland

Explanation

HMDA generally covers closed-end mortgage loans secured by a dwelling, as well as certain open-end lines of credit. Business-purpose loans, agricultural loans, and vehicle loans are generally not reportable because they fall outside the dwelling-secured consumer mortgage coverage.

Question 49General Mortgage Knowledge

For an adjustable-rate mortgage, when must the servicer generally provide the initial interest rate adjustment notice to the borrower?

  1. At least 15 days before the first payment at the new rate
  2. At least 60 days before the first payment at the new rate Correct answer.
  3. At least 30 days before the first payment at the new rate
  4. At least 120 days before the first payment at the new rate

Explanation

Regulation Z requires the servicer to provide an initial interest rate adjustment notice at least 60 days before the first payment at the new rate. Subsequent rate adjustment notices generally have a shorter advance timing requirement. The notice must include the new rate, payment amount, and related information.

Question 50General Mortgage Knowledge

At the end of an escrow computation year, a servicer determines that a borrower's escrow account has a surplus of $75. What must the servicer generally do under RESPA?

  1. Refund any surplus of $10 or more within 60 days
  2. Refund any surplus of $100 or more within 45 days
  3. Refund any surplus of $50 or more within 30 days Correct answer.
  4. Retain the surplus if the account is within the cushion

Explanation

Under RESPA, if an escrow account has a surplus of $50 or more at the end of the computation year, the servicer generally must refund the surplus to the borrower within 30 days. If the surplus is less than $50, the servicer may credit it to the next year's escrow account or refund it. A $75 surplus therefore triggers the refund requirement.