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Question 1Federal Mortgage-Related Laws

Under the Real Estate Settlement Procedures Act (RESPA), which disclosure must a mortgage loan originator provide to a borrower at the time of application or with the application?

  1. The Servicing Transfer Statement
  2. The Loan Estimate Correct answer.
  3. The Affiliated Business Arrangement Disclosure
  4. The Closing Disclosure

Explanation

RESPA, as implemented by Regulation X, requires creditors to deliver the Loan Estimate within three business days of receiving a mortgage application. It summarizes the loan terms, projected payments, and closing costs so the borrower can compare offers. The Closing Disclosure comes much later, at least three business days before consummation.

Question 2Federal Mortgage-Related Laws

The Truth in Lending Act (TILA) is implemented primarily by which regulation?

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

Explanation

TILA is implemented by Regulation Z, which the Consumer Financial Protection Bureau administers. Regulation Z governs disclosure of credit terms, including the finance charge, annual percentage rate, and the loan originator compensation rules. Recognizing the regulation-to-statute mapping is fundamental for mortgage compliance.

Question 3Federal Mortgage-Related Laws

Under the Equal Credit Opportunity Act (ECOA) and Regulation B, how long must a creditor retain records relating to a mortgage application?

  1. Six months after final action
  2. Three years after final action
  3. Twelve months after the application is received
  4. Twenty-five months after the application is received Correct answer.

Explanation

Regulation B requires creditors to retain application records for twenty-five months after the date the application is received or the date the creditor takes final action, whichever is later. This retention period supports fair lending examinations and discrimination investigations. Shorter periods would impede regulators' ability to review lending practices.

Question 4Federal Mortgage-Related Laws

A lender denies a mortgage application. Under ECOA, what must the lender provide to the applicant?

  1. A verbal explanation of the decision only
  2. A copy of the appraiser's license
  3. A new Loan Estimate reflecting the denial
  4. A written notice of adverse action stating the specific reasons for denial Correct answer.

Explanation

ECOA and Regulation B require a creditor to provide a written notice of adverse action that includes the specific reasons for the denial or a statement of the applicant's right to request them. This notification must be given within thirty days of receiving a completed application. Verbal notice alone does not satisfy the requirement.

Question 5Federal Mortgage-Related Laws

Under the Home Mortgage Disclosure Act (HMDA) and Regulation C, which of the following is a reportable data point for a covered mortgage loan?

  1. The borrower's credit score
  2. The property's appraised value
  3. The loan originator's commission
  4. The ethnicity, race, and sex of the applicant Correct answer.

Explanation

Regulation C requires covered institutions to collect and report demographic information, including ethnicity, race, and sex, for mortgage applicants. This data supports fair lending enforcement and helps regulators identify discriminatory patterns. Credit scores, appraised values, and commissions are not HMDA reportable fields.

Question 6Federal Mortgage-Related Laws

Which federal law requires mortgage loan originators to be registered or licensed and to obtain a unique identifier through the Nationwide Multistate Licensing System?

  1. The Fair Credit Reporting Act
  2. The Homeowners Protection Act
  3. The Real Estate Settlement Procedures Act
  4. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) Correct answer.

Explanation

The SAFE Act, enacted in 2008, established minimum licensing and registration standards for mortgage loan originators and created the Nationwide Mortgage Licensing System and Registry. It requires originators to obtain a unique identifier and maintain it on covered documents. The other laws address settlement procedures, credit reporting, and mortgage insurance cancellation.

Question 7Federal Mortgage-Related Laws

Under the SAFE Act, a mortgage loan originator must complete annual continuing education of at least how many hours?

  1. Six hours
  2. Four hours
  3. Eight hours Correct answer.
  4. Ten hours

Explanation

The SAFE Act requires mortgage loan originators to complete at least eight hours of continuing education each year, including required topics such as federal law, ethics, and lending standards. This annual requirement maintains competency and keeps the originator's license or registration in good standing.

Question 8Federal Mortgage-Related Laws

The Fair Credit Reporting Act (FCRA) requires a lender to provide which of the following when an applicant is denied credit based in whole or in part on information in a consumer report?

  1. A notice of adverse action that identifies the credit reporting agency Correct answer.
  2. A refund of the application fee
  3. A new credit report at the lender's expense
  4. A copy of the entire consumer report

Explanation

FCRA requires that, when credit is denied based on a consumer report, the creditor provide an adverse action notice identifying the credit reporting agency that furnished the report. The notice also states that the consumer may obtain a free copy of the report and dispute its accuracy. The lender is not required to hand over the full report or refund fees.

Question 9Federal Mortgage-Related Laws

Under the Homeowners Protection Act, when must a borrower's private mortgage insurance be automatically terminated on a residential mortgage?

  1. Immediately upon the borrower's written request at any time
  2. When the loan is refinanced
  3. When the loan balance reaches 78 percent of the original value, based on the original amortization schedule Correct answer.
  4. When the loan balance reaches 80 percent of the original value, based on the original amortization schedule

Explanation

The Homeowners Protection Act requires automatic termination of private mortgage insurance when the principal balance reaches 78 percent of the original property value, based on the original amortization schedule, provided the borrower is current. Borrowers may also request cancellation at 80 percent under certain conditions, but automatic termination is keyed to 78 percent.

Question 10Federal Mortgage-Related Laws

A mortgage loan originator is compensated based on the interest rate of the loan: a higher rate yields higher compensation. Which federal rule does this violate?

  1. The escrow account rule under Regulation X
  2. The appraisal independence rule under Regulation B
  3. The loan originator compensation rule under Regulation Z Correct answer.
  4. The HMDA reporting rule under Regulation C

Explanation

Regulation Z prohibits compensating loan originators based on the terms or conditions of the transaction, such as the interest rate, because it creates an incentive to steer borrowers into costlier loans. This prohibition is part of the loan originator compensation rules. Compensating on rate is a classic steering violation.

Question 11Federal Mortgage-Related Laws

Under the Ability-to-Repay/Qualified Mortgage rule, which of the following is a required consideration when underwriting a covered mortgage loan?

  1. The borrower's religion
  2. The borrower's marital status
  3. The borrower's current and reasonably expected income and assets Correct answer.
  4. The borrower's membership in a credit union

Explanation

The Ability-to-Repay rule requires creditors to consider eight underwriting factors, including the borrower's current or reasonably expected income and assets, employment status, monthly payment obligations, and debt-to-income ratio. Marital status, religion, and credit union membership are not permissible underwriting factors and, in some cases, would violate fair lending laws.

Question 12Federal Mortgage-Related Laws

A borrower applies for a high-cost mortgage. Under the Home Ownership and Equity Protection Act (HOEPA), which disclosure must the lender provide at least three business days before closing?

  1. A HOEPA-specific disclosure warning the borrower that the loan is high-cost Correct answer.
  2. A servicing transfer notice
  3. A Closing Disclosure
  4. A Loan Estimate

Explanation

HOEPA requires that, for high-cost mortgages, the creditor provide a specific disclosure at least three business days before consummation that warns the borrower the loan is high-cost and identifies the features that make it high-cost. This advance notice gives the borrower time to reconsider. The Loan Estimate and Closing Disclosure serve different purposes.

Question 13Federal Mortgage-Related Laws

Under the Servicemembers Civil Relief Act (SCRA), what interest rate cap applies to pre-service mortgage obligations of active-duty servicemembers?

  1. Ten percent
  2. Eight percent
  3. Four percent
  4. Six percent Correct answer.

Explanation

The SCRA caps the interest rate on pre-service obligations, including mortgages, at six percent for the period of military service, upon written request by the servicemember. Amounts above six percent must be forgiven rather than deferred. This protection helps servicemembers focus on their duties without financial hardship.

Question 14Federal Mortgage-Related Laws

A servicemember receives permanent change of station orders and must relocate. Under the SCRA, what protection applies to a residential lease?

  1. The lease may be terminated with written notice and a copy of the orders Correct answer.
  2. The lease is automatically renewed
  3. The lease may only be terminated after the servicemember returns
  4. The landlord may charge a penalty equal to six months' rent

Explanation

The SCRA allows a servicemember who receives qualifying orders for a permanent change of station or deployment to terminate a residential lease by providing written notice and a copy of the orders. The termination is effective thirty days after the next rent due date. Penalties for early termination are prohibited.

Question 15Federal Mortgage-Related Laws

Under the Fair Housing Act, which of the following practices is prohibited in mortgage lending?

  1. Redlining a neighborhood by refusing to lend based on the racial composition of the area Correct answer.
  2. Requiring documentation of income from all applicants
  3. Charging fees disclosed on the Loan Estimate
  4. Requiring a property appraisal

Explanation

The Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on race, color, religion, sex, disability, familial status, or national origin. Redlining, the practice of refusing to lend in neighborhoods based on their racial or ethnic composition, is a classic violation. Uniform documentation and appraisal requirements are legitimate practices.

Question 16Federal Mortgage-Related Laws

Under the Fair Housing Act, what is the seven-day rule regarding the timing of a discrimination complaint?

  1. A complaint must be filed within seven years of the discriminatory act
  2. A complaint may only be filed after seven days have passed
  3. A complaint may be filed with HUD within one year of the discriminatory act Correct answer.
  4. A complaint must be filed within seven days of the discriminatory act

Explanation

Under the Fair Housing Act, an aggrieved person may file a complaint with HUD within one year of the alleged discriminatory practice, or bring a civil action within two years. The seven-day figure is not a filing deadline under the Act. Recognizing the correct limitations period is important for advising consumers.

Question 17Federal Mortgage-Related Laws

Under the Truth in Lending Act, when must a creditor provide the Closing Disclosure to the borrower?

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

Explanation

TILA, as implemented by Regulation Z, requires the Closing Disclosure to be delivered at least three business days before consummation of the loan. This waiting period allows the borrower to review the final terms and compare them to the Loan Estimate. Delivery on or after consummation would defeat that purpose.

Question 18Federal Mortgage-Related Laws

A borrower's loan is sold and servicing is transferred to a new servicer. Under RESPA, when must the transferor servicer notify the borrower of the transfer?

  1. At least fifteen days before the effective date of the transfer Correct answer.
  2. At least thirty days before the effective date of the transfer
  3. Within thirty days after the transfer
  4. No notice is required if the loan is sold

Explanation

RESPA requires the transferor servicer to notify the borrower at least fifteen days before the effective date of a servicing transfer, and the transferee servicer to notify the borrower within fifteen days after the transfer. The notice must include the effective date and contact information for the new servicer. These notices protect borrowers during transitions.

Question 19Federal Mortgage-Related Laws

Under the Fair Credit Reporting Act, a consumer reporting agency must investigate a disputed item and respond within what period?

  1. Ninety days
  2. Thirty days Correct answer.
  3. Forty-five days
  4. Ten days

Explanation

FCRA requires a consumer reporting agency to conduct a reasonable reinvestigation of disputed information and generally complete it within thirty days of receiving the dispute. The period may be extended to forty-five days if the consumer provides additional information during the reinvestigation. Prompt investigation protects consumers from inaccurate data.

Question 20Federal Mortgage-Related Laws

Under the Equal Credit Opportunity Act, which of the following is a prohibited basis for discrimination in a credit transaction?

  1. The applicant's employment history
  2. The applicant's receipt of public assistance income Correct answer.
  3. The applicant's credit history
  4. The applicant's debt-to-income ratio

Explanation

ECOA prohibits discrimination on several bases, including race, color, religion, national origin, sex, marital status, age, and the receipt of income from public assistance programs. A creditor may not deny credit or vary terms because an applicant receives public assistance. Credit history, debt-to-income ratio, and employment history are permissible underwriting factors.

Question 21Federal Mortgage-Related Laws

Under the Home Mortgage Disclosure Act, which loans are generally exempt from reporting?

  1. Closed-end mortgage loans secured by a dwelling
  2. Loans made primarily for business or commercial purposes Correct answer.
  3. Open-end lines of credit secured by a dwelling
  4. Home purchase loans

Explanation

HMDA and Regulation C generally exempt loans made primarily for business or commercial purposes from reporting, as well as certain other categories such as agricultural loans. Closed-end mortgage loans and open-end lines of credit secured by a dwelling are typically reportable when the institution is a covered financial institution. Recognizing these exemptions helps ensure accurate data submission.

Question 22Federal Mortgage-Related Laws

A mortgage loan originator recommends a loan product that is more expensive than another product for which the borrower likely qualifies, and the originator receives greater compensation for the recommended product. Which standard is most directly implicated?

  1. The steering provisions of the loan originator compensation rule Correct answer.
  2. The appraisal independence requirements
  3. The HMDA data reporting requirements
  4. The escrow account requirements of Regulation X

Explanation

The loan originator compensation rule under Regulation Z prohibits steering a consumer to a transaction that is not in the consumer's interest in order to increase the originator's compensation. Recommending a costlier product that benefits the originator at the borrower's expense is the essence of prohibited steering. The rule is designed to align originator incentives with borrower interests.

Question 23Federal Mortgage-Related Laws

Under the Secure and Fair Enforcement for Mortgage Licensing Act, which of the following is a minimum pre-licensing requirement for mortgage loan originators?

  1. Twenty hours of pre-licensing education including at least three hours on federal law Correct answer.
  2. Forty hours of pre-licensing education including at least ten hours on federal law
  3. No pre-licensing education if the originator has five years of experience
  4. A four-year college degree in finance

Explanation

The SAFE Act requires at least twenty hours of pre-licensing education for state-licensed mortgage loan originators, including at least three hours on federal law and three hours on ethics, plus other required topics. A four-year degree is not a SAFE Act requirement. Experience alone does not substitute for the education requirement.

Question 24Federal Mortgage-Related Laws

Under the Truth in Lending Act, what is the primary purpose of the Annual Percentage Rate (APR) disclosed to the borrower?

  1. To state the interest rate used to calculate the monthly payment
  2. To disclose the lender's internal profit margin
  3. To report the loan's total principal balance
  4. To express the cost of credit as a yearly rate, including certain finance charges Correct answer.

Explanation

The APR expresses the cost of credit on a yearly basis and incorporates certain finance charges beyond the nominal interest rate, allowing borrowers to compare loan offers on a consistent basis. It is not the same as the note rate used to compute the monthly payment. This distinction is central to TILA disclosure accuracy.

Question 25Federal Mortgage-Related Laws

Under the Fair Housing Act, which protected class is specifically included in the statute's prohibition on discrimination in housing-related transactions?

  1. Credit score
  2. Source of income
  3. Familial status Correct answer.
  4. Occupation

Explanation

The federal Fair Housing Act prohibits discrimination based on race, color, religion, sex, disability, familial status, and national origin. Familial status, which refers to households with children under eighteen or pregnant women, is a federally protected class. Source of income and occupation may be protected under some state or local laws but are not federal Fair Housing Act classes.

Question 26Federal Mortgage-Related Laws

Under the Real Estate Settlement Procedures Act (RESPA), which disclosure must a lender provide to a mortgage applicant within three business days of receiving the application, itemizing estimated settlement charges?

  1. The Closing Disclosure
  2. The HUD-1 Settlement Statement
  3. The Loan Estimate (formerly the Good Faith Estimate) Correct answer.
  4. The Affiliated Business Arrangement Disclosure

Explanation

RESPA, as integrated with TILA through the TILA-RESPA Integrated Disclosure rule, requires the Loan Estimate within three business days after the creditor receives the application. It itemizes estimated closing costs so borrowers can shop. The Closing Disclosure comes later, and the HUD-1 was replaced for most closed-end consumer mortgages.

Question 27Federal Mortgage-Related Laws

A lender receives a complete mortgage application on Monday. Under the TILA-RESPA Integrated Disclosure rule, by when must the Loan Estimate generally be delivered or placed in the mail?

  1. Within thirty calendar days
  2. By the end of that same business day
  3. Within three business days Correct answer.
  4. Within seven business days

Explanation

The creditor must provide the Loan Estimate no later than three business days after receiving the application, and delivery is deemed timely if placed in the mail by that deadline. The three-business-day window gives borrowers time to review costs before committing.

Question 28Federal Mortgage-Related Laws

Under the Equal Credit Opportunity Act (ECOA), which of the following is a permitted basis for a creditor to ask about an applicant's marital status?

  1. To apply a different interest rate to married applicants
  2. To determine whether the applicant can independently qualify
  3. To determine the applicant's legal obligation to support dependents Correct answer.
  4. To assess the likelihood of repayment based on household stability

Explanation

Regulation B permits inquiries about marital status only in limited circumstances, including when the applicant's obligation to support dependents must be determined or when the applicant resides in a community property state. Otherwise marital status inquiries are restricted under ECOA.

Question 29Federal Mortgage-Related Laws

A mortgage loan originator's compensation is set so that the originator earns more when the borrower accepts a higher interest rate. Under Regulation Z loan originator compensation rules, this arrangement is:

  1. Prohibited because compensation may not be based on the transaction's terms or conditions Correct answer.
  2. Permitted if the borrower signs a rate acknowledgment
  3. Prohibited only for high-cost mortgages
  4. Permitted if disclosed on the Loan Estimate

Explanation

Regulation Z bars compensating loan originators based on the terms or conditions of a transaction, such as the interest rate, because it creates a steering incentive. Compensation must instead be based on factors like the loan amount or a fixed percentage, and the rule applies broadly to closed-end consumer credit secured by a dwelling.

Question 30Federal Mortgage-Related Laws

Under the Homeowners Protection Act, a borrower may request cancellation of private mortgage insurance at what point in the loan's life, provided the loan is current and other conditions are met?

  1. Only when the loan is fully paid off
  2. At any time after the first year regardless of loan-to-value
  3. When the principal balance reaches 80 percent of the original value, at the borrower's request Correct answer.
  4. When the principal balance reaches 78 percent of original value, automatically

Explanation

The Homeowners Protection Act allows a borrower to request PMI cancellation when the principal balance is scheduled to reach 80 percent of the original property value, if the loan is current and good payment history requirements are satisfied. Automatic termination by the servicer generally occurs at 78 percent.

Question 31Federal Mortgage-Related Laws

A creditor denies a mortgage application based in part on information in a consumer report. Under the Fair Credit Reporting Act, what must the creditor provide to the applicant?

  1. An adverse action notice identifying the reporting agency and stating the applicant's right to dispute Correct answer.
  2. A copy of the consumer report without charge
  3. A referral to the creditor's internal appeals committee
  4. A new Loan Estimate reflecting the denial

Explanation

When credit is denied based on a consumer report, the FCRA requires an adverse action notice that identifies the consumer reporting agency, states that the agency did not make the decision, and explains the applicant's right to obtain and dispute the report. This supports the applicant's ability to correct inaccurate data.

Question 32Federal Mortgage-Related Laws

Under the Fair Housing Act, a lender's practice of requiring additional documentation from applicants of a particular national origin before approving a loan is best characterized as:

  1. Acceptable if applied uniformly to all applicants who lack a credit history
  2. Acceptable because underwriting discretion is reserved to the lender
  3. Prohibited discrimination based on national origin Correct answer.
  4. Prohibited only if the applicant is denied outright

Explanation

The Fair Housing Act prohibits discrimination in the terms and conditions of residential mortgage lending based on national origin, among other protected classes. Imposing extra documentation requirements on applicants of a particular national origin constitutes unequal treatment even without an outright denial.

Question 33Federal Mortgage-Related Laws

Under the Servicemembers Civil Relief Act, a servicemember who obtained a mortgage before entering active duty may request that interest above what rate be forgiven on pre-service obligations?

  1. Ten percent per year
  2. Six percent per year Correct answer.
  3. Twelve percent per year
  4. The contract rate, with no cap

Explanation

The SCRA caps the interest rate at six percent per year on pre-service obligations, including mortgage debt, during the period of military service and for one year afterward. Amounts above that cap must be forgiven rather than deferred.

Question 34Federal Mortgage-Related Laws

A servicemember receives military orders for a permanent change of station and holds a mortgage on a home purchased before active duty. Under the SCRA, what protection applies if the servicemember is unable to meet the obligation?

  1. The lender may accelerate the loan without court review
  2. The servicemember automatically receives a one-year payment holiday
  3. The lender must forgive the entire remaining balance
  4. A court may stay foreclosure proceedings and adjust the obligation upon the servicemember's request Correct answer.

Explanation

The SCRA allows a servicemember to request a court stay of foreclosure or other enforcement during military service, and the court may adjust the obligation to preserve the servicemember's interests. The protection is judicial relief, not automatic forgiveness or a payment holiday.

Question 35Federal Mortgage-Related Laws

Under the Home Mortgage Disclosure Act (HMDA), which of the following is generally required to be reported for a covered mortgage application?

  1. The applicant's marital status
  2. The applicant's religion
  3. The applicant's credit score
  4. The applicant's ethnicity, race, and sex Correct answer.

Explanation

HMDA requires covered financial institutions to collect and report demographic information, including ethnicity, race, and sex, for mortgage applications. This data supports fair lending monitoring and public accountability for housing credit patterns.

Question 36Federal Mortgage-Related Laws

A mortgage broker receives a fee from the lender and also charges the borrower a separate fee for the same origination service. Under RESPA Section 8, this arrangement is:

  1. Permitted if both fees are disclosed on the Loan Estimate
  2. Permitted only if the total fees fall below a regulatory cap
  3. Prohibited as an unearned fee or kickback Correct answer.
  4. Permitted when the borrower consents in writing

Explanation

RESPA Section 8 prohibits giving or receiving anything of value for referrals of settlement service business and prohibits charging unearned fees. Charging both parties for the same service without additional services performed is an unearned fee. Disclosure does not cure the violation.

Question 37Federal Mortgage-Related Laws

Under the Truth in Lending Act, the Annual Percentage Rate disclosed to a mortgage borrower is intended to express:

  1. The cost of credit as a yearly rate, reflecting finance charges and certain related costs Correct answer.
  2. The total dollar amount of interest the borrower will pay over the loan term
  3. The lender's internal cost of funds
  4. The interest rate stated in the promissory note without adjustment

Explanation

The APR expresses the cost of credit on a yearly basis and incorporates finance charges and certain closing costs, allowing borrowers to compare credit offers on a consistent basis. It differs from the note rate, which reflects only the stated interest.

Question 38Federal Mortgage-Related Laws

Under the Ability-to-Repay rule, a creditor must consider and verify eight underwriting factors. Which of the following is one of those required factors?

  1. The property's future appreciation potential
  2. The borrower's employment history over the prior ten years
  3. The borrower's total monthly payment on the covered transaction and any simultaneous loans Correct answer.
  4. The borrower's credit score alone

Explanation

Regulation Z requires creditors to consider and verify specified factors, including the consumer's monthly payment on the covered transaction and any simultaneous loans, income and assets, and debt obligations. Credit score alone is not a substitute for the full analysis.

Question 39Federal Mortgage-Related Laws

A borrower is applying for a high-cost mortgage covered by HOEPA. Which of the following protections applies?

  1. The borrower may waive all HOEPA protections at closing
  2. Prepayment penalties are permitted without limit
  3. The lender may finance points and fees without restriction
  4. The loan may not include a balloon payment unless certain narrow conditions are met Correct answer.

Explanation

HOEPA restricts high-cost mortgage terms, including limits on balloon payments, prepayment penalties, and the financing of points and fees. These protections cannot be waived by the borrower at closing.

Question 40Federal Mortgage-Related Laws

Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), a mortgage loan originator's unique identifier is intended primarily to:

  1. Allow consumers to access the originator's employment and disciplinary history through a nationwide registry Correct answer.
  2. Set the originator's compensation level
  3. Determine the originator's eligibility for federal housing programs
  4. Replace the state license number

Explanation

The SAFE Act created the Nationwide Multistate Licensing System and Registry so that each MLO has a unique identifier that consumers can use to look up the originator's licensing and disciplinary record. The identifier supports transparency and accountability, not compensation or program eligibility.

Question 41Federal Mortgage-Related Laws

A mortgage loan originator recommends a higher-cost loan when a lower-cost loan for which the borrower qualifies is available, and the originator benefits financially from the recommendation. Under the Consumer Financial Protection Act, this conduct may be challenged as:

  1. A permissible exercise of underwriting discretion
  2. An abusive practice that takes unreasonable advantage of the borrower Correct answer.
  3. A state licensing issue only
  4. A disclosure violation curable by a corrected Loan Estimate

Explanation

The Consumer Financial Protection Act prohibits unfair, deceptive, or abusive acts or practices. Taking unreasonable advantage of a consumer's lack of understanding of costs to steer them into a costlier product can constitute an abusive practice, exposing the originator to liability.

Question 42Federal Mortgage-Related Laws

Under the Fair Housing Act, a lender's advertising that describes a neighborhood as unsuitable for families with children is:

  1. Permitted when the advertisement is targeted to investors
  2. Prohibited only if the lender also denies a loan
  3. Prohibited because it discriminates on the basis of familial status Correct answer.
  4. Permitted if the statement is factually accurate

Explanation

The Fair Housing Act prohibits discriminatory statements in advertising based on protected classes, including familial status. A statement discouraging families with children from a neighborhood violates the statute regardless of accuracy or whether a loan denial follows.

Question 43Federal Mortgage-Related Laws

Under the Truth in Lending Act, a consumer has how long after consummation of a mortgage refinance to exercise the right of rescission in a covered transaction?

  1. Seven calendar days
  2. Thirty calendar days
  3. Fourteen business days
  4. Three business days Correct answer.

Explanation

TILA gives the consumer three business days after consummation to rescind certain credit transactions secured by the consumer's principal dwelling, such as a refinance. The cooling-off period allows the consumer to reconsider the transaction.

Question 44Federal Mortgage-Related Laws

A loan servicer receives a qualified written request from a borrower disputing an escrow charge. Under RESPA, the servicer must acknowledge receipt within what period?

  1. Ten business days
  2. Three business days
  3. Five business days Correct answer.
  4. Thirty business days

Explanation

RESPA requires a servicer to acknowledge a qualified written request within five business days of receipt. The servicer must then conduct an investigation and respond substantively within the statutory timeframe.

Question 45Federal Mortgage-Related Laws

A creditor receives a mortgage application and must provide a notice of the right to receive a copy of any appraisal. Under ECOA and Regulation B, when must the creditor deliver the appraisal copy if the applicant requests it?

  1. Within a reasonable time after the request, before consummation Correct answer.
  2. Within ninety days of the request
  3. Only if the loan is denied
  4. Only after the loan closes

Explanation

Regulation B requires creditors to provide copies of appraisals and other written valuations promptly upon request, and in any event before consummation for applications that proceed. The requirement applies regardless of whether the loan is approved or denied.

Question 46Federal Mortgage-Related Laws

Under the Homeowners Protection Act, automatic termination of private mortgage insurance on a residential mortgage generally occurs when the principal balance reaches what percentage of the original value of the property?

  1. Eighty-five percent
  2. Ninety percent
  3. Eighty percent
  4. Seventy-eight percent Correct answer.

Explanation

The Homeowners Protection Act requires servicers to automatically terminate PMI when the principal balance is first scheduled to reach 78 percent of the original value, provided the borrower is current. Borrower-requested cancellation is available earlier at 80 percent.

Question 47Federal Mortgage-Related Laws

A mortgage lender's policy of charging higher origination fees to applicants receiving public assistance income is most directly prohibited by which federal law?

  1. The Secure and Fair Enforcement for Mortgage Licensing Act
  2. The Equal Credit Opportunity Act Correct answer.
  3. The Real Estate Settlement Procedures Act
  4. The Home Mortgage Disclosure Act

Explanation

ECOA and Regulation B prohibit discrimination in credit transactions based on receipt of public assistance income, among other prohibited bases. Charging different fees on that basis is unlawful discrimination in the terms of credit.

Question 48Federal Mortgage-Related Laws

Under the Fair Credit Reporting Act, a consumer reporting agency must generally investigate a disputed item and respond to the consumer within what period?

  1. Forty-five days
  2. Ten days
  3. Sixty days
  4. Thirty days Correct answer.

Explanation

The FCRA generally requires a consumer reporting agency to conduct a reasonable reinvestigation and notify the consumer of the results within thirty days of receiving a dispute. The period may be extended to forty-five days when the consumer provides additional information during the reinvestigation.

Question 49Federal Mortgage-Related Laws

A mortgage loan originator is employed by a non-bank lender. Under the SAFE Act, which of the following is a required pre-licensing element for the originator?

  1. Completion of at least 20 hours of pre-licensing education including specified topics Correct answer.
  2. A federal banking charter
  3. A bachelor's degree in finance
  4. Five years of prior mortgage experience

Explanation

The SAFE Act requires at least 20 hours of pre-licensing education covering federal law and regulation, ethics, and lending standards, along with a written test and other requirements. A degree, prior experience, or a charter is not a statutory prerequisite.

Question 50Federal Mortgage-Related Laws

Under the Fair Housing Act, which of the following is a protected class specifically enumerated in the statute's prohibition on discrimination in the sale or rental of housing?

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

Explanation

The Fair Housing Act enumerates race, color, religion, sex, national origin, familial status, and disability as protected classes. Source of income, age, and marital status are not among the seven federal protected classes, though some state or local laws add them.