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NAMP CMLP practice questions

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Question 1Mortgage Loan Origination Practice and Ethics

Under the TILA-RESPA integrated disclosure rule, when must a creditor deliver or place in the mail the Loan Estimate after receiving a mortgage loan application?

  1. On the same business day the application is received
  2. No later than seven business days after receipt of the application
  3. No later than three business days after receipt of the application Correct answer.
  4. Within thirty calendar days of receipt of the application

Explanation

The Loan Estimate must be delivered or placed in the mail no later than three business days after the creditor receives the application. The seven-business-day figure is a separate waiting period that must pass before consummation, not the delivery deadline. The rule does not require same-day delivery, and thirty days is an ECOA adverse action timeline rather than a disclosure deadline.

Question 2Mortgage Loan Origination Practice and Ethics

Under the SAFE Act, a licensed mortgage loan originator must ensure that the originator's unique identifier appears on which of the following?

  1. Only the initial Loan Estimate delivered at application
  2. Only documents filed with the state mortgage regulator
  3. All residential mortgage loan documents and advertisements Correct answer.
  4. Only the final Closing Disclosure issued at consummation

Explanation

The SAFE Act requires the MLO's unique identifier to be clearly shown on residential mortgage loan application forms, solicitations, and advertisements, including business cards and websites. It is not limited to a single disclosure or to regulatory filings. This lets consumers and regulators identify the originator associated with a loan.

Question 3Mortgage Loan Origination Practice and Ethics

Which characteristic is a protected class under the Equal Credit Opportunity Act?

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

Explanation

ECOA prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, and good faith exercise of rights under the Consumer Credit Protection Act. Credit score, employment tenure, and loan-to-value ratio are underwriting or pricing factors, not protected classes. Treating a protected class differently in credit decisions violates fair lending law.

Question 4Mortgage Loan Origination Practice and Ethics

A borrower refinances the mortgage on her primary residence and signs the promissory note on Monday. Under TILA, when does her right to rescind expire?

  1. At the closing table when the borrower signs the promissory note
  2. Midnight of the seventh business day after the loan has been consummated
  3. Midnight of the third business day after the creditor receives the loan application
  4. Three business days after consummation or disclosure delivery, whichever is later Correct answer.

Explanation

TILA gives the borrower three business days to rescind a refinance or home equity loan secured by the principal dwelling. The period runs from consummation or delivery of the required rescission disclosures and notice, whichever is later. Purchase-money mortgages and loans on second homes are not subject to this right.

Question 5Mortgage Loan Origination Practice and Ethics

A mortgage applicant submits a complete application on March 1. The creditor denies the application on March 10. By what date must the creditor provide an adverse action notice?

  1. June 1, within 90 days after the initial application date
  2. March 31, within 30 days after receiving the complete application Correct answer.
  3. March 11, the next business day after the creditor issues its decision
  4. March 13, within three business days after the creditor denies the file

Explanation

ECOA and Regulation B require a creditor to notify an applicant of adverse action within 30 days after receiving a complete application. The notice must state the action taken and either the specific reasons or how to request them. The denial date does not restart a three-business-day clock.

Question 6Mortgage Loan Origination Practice and Ethics

A loan originator refers a borrower to a title company owned by the originator's spouse. The title company charges customary rates but pays the originator a monthly 'marketing' fee based on referrals. How should this be treated under RESPA?

  1. It is permitted only if the fee is paid after the closing
  2. It is a prohibited kickback because compensation is tied to referrals Correct answer.
  3. It is permitted because the title company charges customary rates
  4. It is permitted because the relationship was disclosed on the Loan Estimate

Explanation

RESPA Section 8 prohibits giving or receiving anything of value in exchange for referrals of settlement service business. A fee calculated on referrals is a kickback even when the title company's rates are customary, and disclosure alone does not cure the violation. An affiliated business arrangement requires a proper disclosure and must not include a referral fee.

Question 7Mortgage Loan Origination Practice and Ethics

Under the TILA-RESPA integrated disclosure rule, how long before consummation must the consumer receive the Closing Disclosure?

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

Explanation

The Closing Disclosure must be delivered to the consumer at least three business days before consummation. The seven-business-day period applies to the Loan Estimate waiting requirement before closing. Receiving the Closing Disclosure only on the day of consummation would not satisfy the rule.

Question 8Mortgage Loan Origination Practice and Ethics

During a telephone application for a home purchase loan, the applicant declines to provide ethnicity, race, and sex information. What should the loan originator do under HMDA?

  1. Record that the applicant did not provide it and complete only as permitted Correct answer.
  2. Leave the government monitoring section blank with no notation
  3. Deny the application because the information is required
  4. Estimate the information and record it without telling the applicant

Explanation

HMDA requires lenders to collect government monitoring information, but an applicant may decline to provide it. The loan originator should note that the applicant did not provide the information and may complete the section based on visual observation or surname only where the regulation permits. The application cannot be denied for declining, and silent estimation is improper.

Question 9Mortgage Loan Origination Practice and Ethics

A consumer provides her name, Social Security number, monthly income, and the property address, but does not state a loan amount or estimated property value. Under Regulation X, has she submitted an application that triggers the Loan Estimate requirement?

  1. Yes, because the property address is the only required item
  2. No, because a loan amount is never part of an application
  3. Yes, because name and Social Security number alone always constitute an application
  4. No, because all six pieces of application information are not present Correct answer.

Explanation

Regulation X defines an application as receipt of six pieces of information: the borrower's name, income, Social Security number, property address, estimated property value, and loan amount. Missing the loan amount and estimated value means the creditor has not yet received a complete application. The Loan Estimate requirement is triggered only when all six items are present.

Question 10Mortgage Loan Origination Practice and Ethics

A loan processor notices that the purchase contract lists a buyer who has never spoken with the originator, the buyer's income is far below the stated housing payment, and the seller has agreed to pay the buyer's closing costs outside closing. Which concern is most directly raised?

  1. Potential straw buyer and occupancy fraud requiring escalation Correct answer.
  2. A permitted seller concession that is exempt from disclosure
  3. A routine transaction that needs no documentation beyond the contract
  4. A pricing issue that should be resolved by adjusting the interest rate

Explanation

An undisclosed buyer, an income-to-payment mismatch, and side payments outside closing are classic red flags for straw-buyer or occupancy fraud. The processor should escalate the file and verify the parties, source of funds, and occupancy intent before proceeding. These facts are not routine and are not resolved by a pricing adjustment.

Question 11Mortgage Loan Origination Practice and Ethics

A mortgage loan originator accepts a $300 payment from a title agency for each loan the originator refers to that agency. Under RESPA, this arrangement is:

  1. permissible if the amount is below the title agency's standard rate
  2. prohibited only if the title agency is an affiliate of the originator
  3. prohibited because it is a fee for the referral of settlement service business Correct answer.
  4. permissible if the payment is disclosed to the borrower on the Closing Disclosure

Explanation

RESPA Section 8 prohibits giving or receiving a thing of value under an agreement to refer settlement service business. A payment tied to referrals of title business is a kickback even if it is disclosed to the borrower, and no affiliate relationship is required for the prohibition to apply.

Question 12Mortgage Loan Origination Practice and Ethics

Under the SAFE Act, an applicant for an initial mortgage loan originator license must complete how many hours of pre-licensing education before being licensed?

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

Explanation

The SAFE Act requires 20 hours of pre-licensing education for an initial MLO applicant. The curriculum must include specified hours in federal law and regulations, ethics, and non-traditional mortgage lending.

Question 13Mortgage Loan Origination Practice and Ethics

When must a mortgage lender provide an initial privacy notice to a consumer who becomes its customer under the Gramm-Leach-Bliley Act?

  1. No later than when the customer relationship is established Correct answer.
  2. Only when the consumer requests a copy of the notice
  3. Within 30 days after the first loan payment is received
  4. At the same time the loan is funded

Explanation

GLBA requires an initial privacy notice at the time the customer relationship is established, not later. A lender may deliver it earlier, but delaying until funding, first payment, or a consumer request does not satisfy the rule.

Question 14Mortgage Loan Origination Practice and Ethics

A creditor receives information on Wednesday that qualifies as a valid changed circumstance affecting settlement charges. Under the TILA-RESPA integrated disclosure rule, the revised Loan Estimate must be delivered or placed in the mail no later than:

  1. 5 business days after receiving the information, and the consumer must receive it no later than 3 business days before consummation
  2. 3 business days after receiving the information, and the consumer must receive it no later than 7 business days before consummation
  3. 1 business day after receiving the information, and the consumer must receive it no later than 10 business days before consummation
  4. 3 business days after receiving the information, and the consumer must receive it no later than 4 business days before consummation Correct answer.

Explanation

When a valid changed circumstance requires a revised Loan Estimate, the creditor must deliver or mail it within three business days of receiving the information. The consumer must receive the revised estimate no later than four business days before consummation.

Question 15Mortgage Loan Origination Practice and Ethics

A creditworthy applicant applies for a mortgage on her own and qualifies without her spouse's income or credit. The lender still requires the non-applicant spouse to sign the promissory note. Under ECOA, this requirement is:

  1. prohibited in every circumstance, including in community property states
  2. permissible because spousal signatures are always required when the property is jointly owned
  3. permissible if the spouse's credit score is higher than the applicant's
  4. generally prohibited unless the spouse has an ownership interest in the property or state law requires the signature Correct answer.

Explanation

Regulation B prohibits a creditor from requiring a spousal signature when the applicant qualifies without the spouse's income or credit. Exceptions exist when state law requires the signature or the spouse has an ownership interest needed to perfect the security interest.

Question 16Mortgage Loan Origination Practice and Ethics

At the annual escrow account analysis, a servicer determines that a surplus of $75 exists. Under RESPA, the servicer must:

  1. apply the entire surplus to the next 12 months of escrow payments
  2. refund the surplus to the borrower within 30 days Correct answer.
  3. retain the surplus until the loan is paid in full
  4. refund the surplus only if it exceeds $100

Explanation

Under RESPA and Regulation X, when an escrow analysis shows a surplus of $50 or more, the servicer must refund it to the borrower within 30 days. A surplus below that threshold may be credited instead.

Question 17Mortgage Loan Origination Practice and Ethics

An originator tells an appraiser, "I need this to come in at $450,000 or the deal dies," and hints that future orders depend on a favorable value. This conduct is:

  1. acceptable if the appraiser ultimately reaches an independent value
  2. acceptable because the originator did not promise a specific payment
  3. permissible if the conversation is documented in the loan file
  4. a violation of appraisal independence requirements because it seeks to influence the appraiser's valuation Correct answer.

Explanation

Appraisal independence rules prohibit an originator from coercing or improperly influencing an appraiser, including conditioning future business on a desired value. The attempt itself violates the rule even if the appraiser remains independent, and documentation does not cure the improper request.

Question 18Mortgage Loan Origination Practice and Ethics

Under Regulation B, when a creditor denies a mortgage application, the adverse action notice must include:

  1. the loan originator's unique identifier and license number
  2. the specific principal reasons for the denial or a disclosure of the applicant's right to request them Correct answer.
  3. an estimate of the closing costs the applicant would have paid
  4. a copy of the applicant's credit report

Explanation

Regulation B requires an adverse action notice to state the specific principal reasons for denial or disclose the applicant's right to request them. A credit report copy, NMLS identifier, and closing cost estimate are not the required content of the notice.

Question 19Mortgage Loan Origination Practice and Ethics

A lender pays a real estate brokerage a monthly "marketing services" fee, and in practice the fee equals $250 for each loan application the brokerage refers. Under RESPA, the arrangement is:

  1. permissible if the brokerage provides desk space in its office
  2. a prohibited referral fee because the compensation is tied to referrals Correct answer.
  3. permissible if the fee is disclosed on the Closing Disclosure
  4. permissible because the lender is purchasing marketing services

Explanation

RESPA Section 8 prohibits compensation that is contingent on the referral of settlement service business. Calling the payment a marketing fee does not change the analysis when the amount is calculated per referral; disclosure also does not cure a prohibited kickback.

Question 20Mortgage Loan Origination Practice and Ethics

A loan originator leaves one lender for another and wants to take her former employer's confidential client list and call those borrowers about refinancing. Under common industry ethics and confidentiality duties, she should:

  1. use the list because client contact information is never confidential
  2. share the list with her new employer because the employer owns all of her work product
  3. use the list only for borrowers whose loans closed more than one year ago
  4. refrain from using the former employer's confidential client list unless she has authorization or the information is lawfully obtained from another source Correct answer.

Explanation

Confidential client lists and nonpublic personal information remain protected after an originator changes employers. The originator should use the former employer's list only with authorization or when the information is lawfully obtained from an independent source.

Question 21Mortgage Loan Origination Practice and Ethics

Under the SAFE Act, a licensed mortgage loan originator must complete how many hours of continuing education each year to maintain the license?

  1. 10 hours
  2. 6 hours
  3. 12 hours
  4. 8 hours Correct answer.

Explanation

The SAFE Act sets an annual continuing education requirement of 8 hours. Those hours must include at least 3 hours of federal law and regulation, 2 hours of ethics, 2 hours of non-traditional mortgage lending, and 1 hour of electives. State regulators may impose additional hours, but 8 is the federal minimum.

Question 22Mortgage Loan Origination Practice and Ethics

Under the ability-to-repay rule, which item must a creditor consider when underwriting a closed-end residential mortgage?

  1. The originator's total loan production volume for the prior year
  2. The borrower's length of membership in a professional association
  3. The borrower's current or reasonably expected income or assets Correct answer.
  4. The property's projected resale value in five years

Explanation

The ATR rule requires creditors to consider eight underwriting factors, beginning with the borrower's current or reasonably expected income or assets. Other required factors include current debt obligations, alimony and child support, employment status, and the monthly payment on the covered transaction. Loan production volume and membership affiliations are irrelevant to repayment ability.

Question 23Mortgage Loan Origination Practice and Ethics

Which data point is collected and reported under HMDA for a covered mortgage application?

  1. The applicant's credit score
  2. The applicant's savings account balance
  3. The applicant's age Correct answer.
  4. The applicant's debt-to-income ratio

Explanation

HMDA requires reporting of applicant age, along with ethnicity, race, sex, income, and loan-level pricing and property data. Credit score, debt-to-income ratio, and deposit balances are underwriting or asset details, not HMDA data fields. Age is reported using specific HMDA codes, including the code for applicants who do not provide it.

Question 24Mortgage Loan Origination Practice and Ethics

Which compensation arrangement for a mortgage loan originator is permissible under the loan originator compensation rule?

  1. A reduction in the originator's pay to cover the borrower's third-party closing costs
  2. A payment from the borrower that supplements compensation already paid by the creditor
  3. A fixed percentage of the loan amount paid by the creditor Correct answer.
  4. A bonus paid when the originator closes a loan at an interest rate above the posted par rate

Explanation

The rule bars compensation based on transaction terms such as the interest rate or APR, and it bars dual compensation from both the consumer and the creditor. Compensation may be based on the amount of credit extended, so a fixed percentage of the loan amount is permissible. Reductions tied to closing costs also impermissibly shift transaction terms into originator pay.

Question 25Mortgage Loan Origination Practice and Ethics

A homebuilder tells a buyer that the sale is contingent on the buyer using the builder's affiliated title company. Under RESPA, how should this condition be treated?

  1. Permissible if the title company charges rates customary for the area
  2. Prohibited as a condition of the sale Correct answer.
  3. Permissible if the affiliate's fees are disclosed on the Closing Disclosure
  4. Permissible if the buyer signs a separate waiver at closing

Explanation

RESPA Section 9 prohibits a seller from requiring a buyer to use a particular title company as a condition of the sale. Disclosure of the affiliate relationship or a closing waiver does not cure the condition. The builder may recommend a provider, but the buyer must be free to choose.

Question 26Mortgage Loan Origination Practice and Ethics

A creditor obtains an appraisal for a first-lien mortgage secured by the applicant's dwelling. When must the creditor provide the applicant with a copy of the appraisal?

  1. Within thirty days after the loan closes
  2. At the time the application is received
  3. Only if the applicant submits a written request after closing
  4. No later than three business days before consummation Correct answer.

Explanation

Regulation B requires a creditor to provide a copy of the appraisal promptly upon completion and, for a first-lien dwelling-secured loan, no later than three business days before consummation. The applicant does not have to request it. Charging the applicant for the copy is also restricted.

Question 27Mortgage Loan Origination Practice and Ethics

A creditor gives a consumer a written list of settlement service providers and permits shopping. The consumer selects a provider that is not on the list. How is that provider's charge treated under the TILA-RESPA integrated disclosure tolerances?

  1. The creditor must issue a revised Loan Estimate and treat the charge as zero tolerance
  2. The charge remains subject to the 10% cumulative tolerance because the service is required
  3. The creditor must refund the difference between the estimated and actual charge at closing
  4. The charge is not subject to the 10% cumulative tolerance Correct answer.

Explanation

When a consumer is permitted to shop and chooses a provider not on the creditor's written list, the charge is not subject to the 10% cumulative tolerance. The creditor may use the actual charge without a revised Loan Estimate for that item. Choosing a provider on the list keeps the charge within the 10% cumulative bucket.

Question 28Mortgage Loan Origination Practice and Ethics

Under the Gramm-Leach-Bliley Act Safeguards Rule, what must a mortgage lender do to protect customer information?

  1. Maintain a written information security program Correct answer.
  2. Encrypt every internal email that mentions a customer's name
  3. Obtain a signed consent from each customer before sharing data with any affiliate
  4. Conduct a public website privacy audit every quarter

Explanation

The Safeguards Rule requires covered financial institutions to develop, implement, and maintain a written information security program with administrative, technical, and physical safeguards. The program must be reasonably designed to protect customer information. It is not satisfied by a single encryption practice or a website audit.

Question 29Mortgage Loan Origination Practice and Ethics

A loan originator reviewing a file notices that a bank statement appears altered to inflate the borrower's balance. The borrower has not been asked about it. What is the most appropriate action under mortgage fraud and ethics standards?

  1. Submit the loan with a note describing the discrepancy in the file
  2. Escalate the matter to the lender's fraud or BSA unit under policy Correct answer.
  3. Report the borrower directly to the NMLS for mortgage fraud
  4. Ask the borrower to explain the discrepancy before submitting the file

Explanation

An originator who suspects fraud should follow the lender's escalation policy and route the file to the fraud or BSA unit. The originator should not confront the borrower or tip off anyone about a possible Suspicious Activity Report. Submitting a known suspicious file or making a direct NMLS report is not the proper channel.

Question 30Mortgage Loan Origination Practice and Ethics

A servicer receives a borrower's qualified written request disputing an escrow charge on Monday. Under RESPA, within what period must the servicer provide a written acknowledgment?

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

Explanation

RESPA requires a servicer to send a written acknowledgment of a notice of error or information request within five business days of receipt. The servicer then generally has thirty business days to respond substantively, with a possible fifteen-business-day extension. Ten days and thirty days do not match the acknowledgment deadline.

Question 31Mortgage Loan Origination Practice and Ethics

A mortgage loan originator takes a complete residential mortgage application on Monday. Under Regulation Z's TRID rules, by when must the creditor deliver or place in the mail the initial Loan Estimate?

  1. No later than one business day after receiving the application
  2. No later than three business days after receiving the application Correct answer.
  3. No later than five business days after receiving the application
  4. No later than seven business days after receiving the application

Explanation

Regulation Z requires the initial Loan Estimate to be delivered or placed in the mail no later than three business days after the creditor receives the application. The consumer must also receive the disclosure no later than seven business days before consummation. A one-, five-, or seven-business-day delivery deadline after application misstates the TRID timing rule.

Question 32Mortgage Loan Origination Practice and Ethics

Which mortgage transaction generally gives the borrower a three-business-day right of rescission under the Truth in Lending Act?

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

Explanation

The TILA right of rescission applies to refinances and home equity loans secured by the consumer's principal dwelling. It does not apply to a purchase-money mortgage, an investment property, or a business-purpose loan. The borrower may rescind within three business days after consummation or delivery of required disclosures.

Question 33Mortgage Loan Origination Practice and Ethics

Under the SAFE Act, where must a mortgage loan originator's unique identifier be clearly shown?

  1. Only on the originator's annual continuing education certificate
  2. On mortgage loan documents, including the note and security instrument Correct answer.
  3. Only on the originator's license certificate posted at the office
  4. Only in advertisements that state a loan rate or payment

Explanation

The SAFE Act requires an MLO's unique identifier to be clearly shown on mortgage loan documents, including the note and security instrument, and on any other documents required by regulators. The identifier allows consumers and regulators to track the originator through NMLS. Posting it only on a license, advertisement, or education certificate does not satisfy the loan-document requirement.

Question 34Mortgage Loan Origination Practice and Ethics

Under RESPA, when must a servicer provide the initial escrow account statement to a borrower at closing?

  1. Only after the first annual escrow analysis is completed
  2. At least 10 calendar days before settlement
  3. At settlement or within 45 calendar days after settlement Correct answer.
  4. Within 30 calendar days after the first escrow payment is due

Explanation

RESPA requires the servicer to provide the initial escrow account statement at settlement or within 45 calendar days after settlement. The statement estimates escrow payments, disbursements, and any cushion. A ten-day pre-closing deadline, a first-payment deadline, or a first-analysis deadline is not the RESPA rule for the initial statement.

Question 35Mortgage Loan Origination Practice and Ethics

Under the TRID rules, when must a consumer receive the Closing Disclosure for a closed-end residential mortgage?

  1. No later than three business days before consummation Correct answer.
  2. No later than seven business days before consummation
  3. No later than one business day before consummation
  4. No later than five business days before consummation

Explanation

Under the TRID rules, the consumer must receive the Closing Disclosure no later than three business days before consummation. If the creditor delivers the disclosure by mail, additional waiting may be required. One, five, and seven business days are not the standard receipt deadline.

Question 36Mortgage Loan Origination Practice and Ethics

A creditor receives a completed mortgage application on March 1 and decides to deny it on March 10. Under Regulation B, by what date must the creditor notify the applicant of the adverse action?

  1. March 16, within 15 days after receiving the application
  2. May 10, within 60 days after receiving the application
  3. March 31, within 30 days after receiving the completed application Correct answer.
  4. April 9, within 30 days after the denial decision

Explanation

Regulation B requires a creditor to notify the applicant of adverse action within 30 days after receiving a completed application. The denial date does not restart a new 30-day period, and the notice deadline is not 15 or 60 days. March 31 is the correct date in this example.

Question 37Mortgage Loan Origination Practice and Ethics

An applicant's income includes Social Security disability benefits. The loan originator declines the file solely because the applicant receives public assistance income. Which federal law does this violate?

  1. The Real Estate Settlement Procedures Act
  2. The Home Mortgage Disclosure Act
  3. The Fair Credit Reporting Act
  4. The Equal Credit Opportunity Act Correct answer.

Explanation

The Equal Credit Opportunity Act prohibits creditors from discriminating because an applicant receives income from public assistance. Declining the file solely for that reason is unlawful. HMDA governs data reporting, FCRA governs credit reporting, and RESPA governs settlement practices.

Question 38Mortgage Loan Origination Practice and Ethics

A borrower is asked to sign a mortgage application with the income and asset fields left blank so the originator can complete them later. What is the most appropriate originator response?

  1. Refuse to have the borrower sign until all material fields are completed accurately Correct answer.
  2. Have the borrower sign and initial each blank field to show consent
  3. Complete the fields with estimates and disclose the estimates to the borrower
  4. Allow the signing because the borrower can verify the completed figures later

Explanation

A loan originator must not induce a borrower to sign an application with material fields left blank. Presenting a complete and accurate application protects the borrower and avoids fraud risk. Allowing blanks, initialing blanks, or inserting estimates without support is improper.

Question 39Mortgage Loan Origination Practice and Ethics

For a closed-end mortgage with a principal amount above the annual HOEPA threshold, high-cost mortgage status is triggered when points and fees exceed what percentage of the total loan amount?

  1. 3 percent
  2. 6 percent
  3. 4 percent
  4. 5 percent Correct answer.

Explanation

For a closed-end mortgage above the annual principal threshold, HOEPA high-cost status is triggered when points and fees exceed 5 percent of the total loan amount. Separate triggers include the APR exceeding the average prime offer rate by a set margin and certain prepayment penalties. Three, four, and six percent are not the points-and-fees trigger.

Question 40Mortgage Loan Origination Practice and Ethics

Under Regulation B, how long must a creditor retain records relating to a consumer mortgage application that it denied?

  1. Twelve months after the adverse action Correct answer.
  2. Twelve months after the application date
  3. Twenty-five months after the adverse action
  4. Six months after the application date

Explanation

Regulation B requires a creditor to retain records for a denied consumer credit application for 12 months after adverse action. The 25-month retention period applies to business credit, not consumer mortgages. Six months and twelve months after the application date are not the regulatory retention periods.

Question 41Federal Lending Regulations and Compliance

Under RESPA Section 8, which arrangement is prohibited?

  1. Paying a referral fee to an agent when no service is performed Correct answer.
  2. Collecting a fee for a settlement service that is fully disclosed on the Closing Disclosure
  3. Paying an affiliate fair market value for services actually rendered
  4. Charging the borrower the actual cost of a third-party credit report

Explanation

RESPA Section 8 prohibits giving or receiving anything of value for referrals of settlement service business and bars unearned fees. Payments for settlement services are permissible only when goods or services are actually performed and the charge is not a disguised referral fee.

Question 42Federal Lending Regulations and Compliance

Under the federal Fair Housing Act, which characteristic is a protected class?

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

Explanation

The federal Fair Housing Act protects race, color, religion, sex, disability, familial status, and national origin. Age, marital status, and source of income are not federal FHA protected classes, although state or local law may add them.

Question 43Federal Lending Regulations and Compliance

Under TRID, how many business days before consummation must the consumer receive the Closing Disclosure?

  1. Seven business days
  2. Two business days
  3. Three business days Correct answer.
  4. One business day

Explanation

Under the TILA-RESPA Integrated Disclosure rules, the creditor must ensure the consumer receives the Closing Disclosure no later than three business days before consummation. The waiting period allows the borrower to review final loan terms and costs.

Question 44Federal Lending Regulations and Compliance

Under Regulation B, within how many days after receiving a completed application must a creditor notify the applicant of adverse action?

  1. 15 days
  2. 10 days
  3. 45 days
  4. 30 days Correct answer.

Explanation

Regulation B implements ECOA and requires a creditor to notify an applicant of adverse action within 30 days after receiving a completed application. The notice must state the action taken and the principal reasons for the decision.

Question 45Federal Lending Regulations and Compliance

Under the Homeowners Protection Act, at what loan-to-original-value level may a borrower with good payment history request PMI cancellation?

  1. 90 percent
  2. 80 percent Correct answer.
  3. 75 percent
  4. 85 percent

Explanation

The Homeowners Protection Act lets a borrower with a good payment history request PMI cancellation when the principal balance reaches 80 percent of the home's original value based on actual payments. Automatic termination generally occurs at 78 percent under the amortization schedule.

Question 46Federal Lending Regulations and Compliance

When is flood insurance generally required for a mortgage loan under the Flood Disaster Protection Act?

  1. When the borrower's down payment is less than 20 percent
  2. When the property is a second home regardless of location
  3. When improved collateral lies in a participating community's SFHA Correct answer.
  4. When the loan amount exceeds the conforming loan limit

Explanation

The Flood Disaster Protection Act requires flood insurance when improved real property securing a loan is located in a special flood hazard area of a participating community. The lender must also provide flood notice and ensure adequate coverage.

Question 47Federal Lending Regulations and Compliance

Which transaction generally carries a three-business-day right of rescission under TILA?

  1. A purchase-money mortgage for a primary residence
  2. A construction loan for a new primary residence
  3. A refinance secured by the borrower's principal dwelling Correct answer.
  4. A mortgage secured by an investment property

Explanation

TILA's three-business-day right of rescission applies to certain refinances and home-equity loans secured by the consumer's principal dwelling. It does not generally apply to purchase-money mortgages, construction loans, or loans on investment property.

Question 48Federal Lending Regulations and Compliance

Which borrower information is a covered lender required to collect and report under HMDA?

  1. Ethnicity, race, and sex Correct answer.
  2. Religion and marital status
  3. Employment history for ten years
  4. Credit score and credit history

Explanation

Regulation C implements HMDA and requires covered lenders to collect and report borrower ethnicity, race, sex, age, and gross annual income, among other data. Credit score, religion, and marital status are not HMDA-reportable fields.

Question 49Federal Lending Regulations and Compliance

A processor receives information on Monday sufficient to establish a valid changed circumstance affecting TRID settlement charges. By when must the creditor provide a revised Loan Estimate?

  1. Within seven business days of receiving the information
  2. Only at consummation with the Closing Disclosure
  3. Within three business days of receiving the information Correct answer.
  4. At least one business day before consummation

Explanation

When a valid changed circumstance affects settlement charges, the creditor must provide a revised Loan Estimate within three business days after receiving information sufficient to establish the change. Waiting until the Closing Disclosure can violate the timing rule.

Question 50Federal Lending Regulations and Compliance

A nonbank residential mortgage lender detects a $7,500 suspicious transaction and cannot identify a suspect. By when must it file a SAR under FinCEN rules?

  1. Within 30 calendar days of initial detection
  2. Within 120 calendar days of initial detection
  3. Within 60 calendar days of initial detection Correct answer.
  4. Within 90 calendar days of initial detection

Explanation

FinCEN rules for nonbank residential mortgage lenders require a SAR for suspicious transactions of at least $5,000. The filing is generally due within 30 calendar days, but the deadline extends to 60 calendar days when no suspect has been identified.