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Question 1Federal Mortgage-Related Laws

Under the Real Estate Settlement Procedures Act, when must a lender provide a Loan Estimate to a mortgage loan applicant?

  1. No later than three business days after receiving the application Correct answer.
  2. At the closing table along with the Closing Disclosure
  3. Within thirty calendar days of the first payment due date
  4. Only after the property appraisal has been completed

Explanation

RESPA, as implemented by Regulation Z, requires the creditor to deliver or place in the mail a Loan Estimate no later than the third business day after receipt of an application. The disclosure must reflect the terms the consumer is likely to obtain.

Question 2Federal Mortgage-Related Laws

A borrower's Loan Estimate was delivered on Monday. Under the timing rules for the Closing Disclosure, the earliest consummation date is:

  1. Wednesday of the same week
  2. Friday of the same week
  3. Tuesday of the same week
  4. Thursday of the following week Correct answer.

Explanation

The consumer must receive the Closing Disclosure at least three business days before consummation. When the disclosure is delivered in person, the three-business-day waiting period begins the next business day, pushing consummation to Thursday of the following week in this example.

Question 3Federal Mortgage-Related Laws

Which statute is the primary source of the obligation to provide a borrower with an accurate disclosure of the total interest and settlement charges before closing?

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

Explanation

RESPA governs settlement costs and requires disclosures of loan terms and closing costs, including the Loan Estimate and Closing Disclosure under Regulation Z. It is the core federal statute addressing settlement charges in federally related mortgage loans.

Question 4Federal Mortgage-Related Laws

A mortgage loan originator takes an application where the borrower is a limited English proficiency applicant. Under the Equal Credit Opportunity Act, the creditor may:

  1. Require the applicant to bring a certified translator before accepting the application
  2. Charge a separate fee for translation of the disclosures
  3. Provide disclosures and services in the applicant's language if it chooses to do so Correct answer.
  4. Refuse the application because the applicant cannot read English disclosures

Explanation

ECOA and Regulation B permit, but do not require, creditors to provide disclosures and conduct business in languages other than English. A creditor may not refuse an application or impose translation fees because of language preference.

Question 5Federal Mortgage-Related Laws

Under the Home Mortgage Disclosure Act, which of the following is a primary purpose of the required data collection?

  1. To help determine whether financial institutions are serving their communities' housing needs Correct answer.
  2. To calculate each borrower's private mortgage insurance premium
  3. To set maximum interest rates for high-cost loans
  4. To establish credit score thresholds for loan approval

Explanation

HMDA requires lenders to collect and report data so regulators and the public can assess whether institutions are meeting community housing needs and to identify possible discriminatory lending patterns. It does not set rates, premiums, or credit thresholds.

Question 6Federal Mortgage-Related Laws

A mortgage broker receives a fee from the lender in exchange for referring a borrower to a higher-rate loan. Under the Real Estate Settlement Procedures Act, this arrangement is:

  1. Permitted for loans below the high-cost threshold
  2. Permitted if the borrower signs a waiver
  3. Prohibited as an unearned fee or kickback Correct answer.
  4. Permitted if disclosed on the Loan Estimate

Explanation

RESPA section 8 prohibits giving or receiving anything of value in exchange for the referral of settlement service business, including unearned fees. Disclosure or a borrower waiver does not cure a prohibited kickback.

Question 7Federal Mortgage-Related Laws

Which law requires mortgage lenders to provide a borrower with a notice of the right to receive a copy of the appraisal?

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

Explanation

RESPA and Regulation B together require creditors to notify applicants of the right to receive copies of appraisals and other written valuations. The notice must be provided promptly upon completion or no later than three business days before consummation.

Question 8Federal Mortgage-Related Laws

A lender denies a mortgage application. Under the Equal Credit Opportunity Act, the adverse action notice must include:

  1. The appraised value of the property
  2. The specific reasons for the denial or a statement of the right to request them Correct answer.
  3. The name of the loan officer who made the decision
  4. A copy of the applicant's full credit report

Explanation

ECOA requires a creditor that denies credit to provide a statement of action taken and either the specific reasons for the denial or a disclosure of the applicant's right to request the reasons within sixty days. The notice must be given within thirty days of receiving a completed application.

Question 9Federal Mortgage-Related Laws

Which of the following borrowers is protected by the Fair Housing Act in a residential mortgage lending transaction?

  1. Only borrowers who are United States citizens
  2. Borrowers based on race, color, religion, sex, disability, familial status, or national origin Correct answer.
  3. Only borrowers applying for government-insured loans
  4. Only borrowers purchasing a primary residence

Explanation

The Fair Housing Act prohibits discrimination in residential real estate-related transactions, including mortgage lending, on the basis of race, color, religion, sex, disability, familial status, and national origin. Coverage is not limited to purchases, citizens, or government-insured loans.

Question 10Federal Mortgage-Related Laws

A loan originator tells a borrower that applicants from a particular neighborhood always default, and discourages the application. This conduct is best described as:

  1. Redlining Correct answer.
  2. Reverse redlining
  3. Steering
  4. Pretextual underwriting

Explanation

Redlining is the practice of denying or discouraging credit to applicants based on the racial or ethnic composition of their neighborhood. Discouraging an applicant because of the area's demographics is a classic redlining violation under the Fair Housing Act and ECOA.

Question 11Federal Mortgage-Related Laws

Under the Truth in Lending Act, the finance charge disclosed on a mortgage loan must include:

  1. The borrower's homeowners insurance premium
  2. Points paid by the borrower to the creditor Correct answer.
  3. The recording fee paid to the county
  4. The property tax escrow deposit

Explanation

The finance charge represents the cost of credit and includes interest, points, and certain loan fees paid by the borrower. Escrow deposits, insurance premiums, and recording fees are generally excluded as third-party or escrow items.

Question 12Federal Mortgage-Related Laws

A mortgage loan is classified as a high-cost mortgage under the Home Ownership and Equity Protection Act. Which requirement applies?

  1. The loan is exempt from all disclosure requirements
  2. The loan automatically becomes a qualified mortgage
  3. The borrower may waive all HOEPA protections in writing
  4. The borrower must receive a pre-loan disclosure at least three business days before closing Correct answer.

Explanation

HOEPA requires creditors to provide a specific high-cost mortgage disclosure at least three business days before consummation. The disclosure warns the borrower about the loan's high cost and prohibited terms.

Question 13Federal Mortgage-Related Laws

Under the Fair Credit Reporting Act, a mortgage lender that takes adverse action based on a consumer report must:

  1. Wait sixty days before notifying the consumer
  2. Provide the consumer with a free copy of the report only after a lawsuit
  3. Notify the consumer and provide the name of the reporting agency Correct answer.
  4. Report the denial to the credit bureau

Explanation

FCRA requires a user of consumer reports to provide an adverse action notice identifying the reporting agency and stating that the consumer may obtain a free copy and dispute the information. The notice must be given at the time of the adverse action.

Question 14Federal Mortgage-Related Laws

Which federal law limits the amount a lender may require a borrower to deposit into an escrow account for taxes and insurance?

  1. The Real Estate Settlement Procedures Act Correct answer.
  2. The Fair Credit Reporting Act
  3. The Home Mortgage Disclosure Act
  4. The Truth in Lending Act

Explanation

RESPA section 10 and Regulation X limit escrow account deposits and require annual escrow statements. The rules cap the cushion and govern how surpluses, shortages, and deficiencies are handled.

Question 15Federal Mortgage-Related Laws

A servicer receives a qualified written request from a borrower disputing an escrow charge. Under RESPA, the servicer must:

  1. Forward the request to the credit bureau
  2. Acknowledge receipt within five business days and respond substantively within thirty business days Correct answer.
  3. Foreclose on the property within ten days
  4. Ignore the request unless it is notarized

Explanation

RESPA requires a servicer to acknowledge a qualified written request within five business days and to provide a substantive response within thirty business days, subject to a possible fifteen-day extension. Foreclosure is restricted during the response period.

Question 16Federal Mortgage-Related Laws

Which regulation implements the Truth in Lending Act and the Real Estate Settlement Procedures Act disclosure requirements for mortgage loans?

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

Explanation

Regulation Z implements the Truth in Lending Act, including the integrated mortgage disclosures under the TILA-RESPA rule. Regulation X implements RESPA's servicing and escrow provisions.

Question 17Federal Mortgage-Related Laws

A lender's policy denies mortgage loans to applicants receiving public assistance income. Under the Equal Credit Opportunity Act, this policy is:

  1. Permitted if the income is below the median
  2. Permitted for loans above the conforming limit
  3. Prohibited because income from public assistance must be considered equally Correct answer.
  4. Permitted if the borrower has no other income

Explanation

ECOA prohibits discrimination on the basis of receipt of public assistance income. A creditor must consider public assistance income in the same manner as other income and may not automatically deny or discount it.

Question 18Federal Mortgage-Related Laws

Which of the following is a prohibited practice under the Fair Housing Act in mortgage lending?

  1. Offering the same loan terms to all qualified applicants
  2. Using a uniform underwriting checklist
  3. Charging different interest rates to applicants based on race Correct answer.
  4. Requiring documentation of income for all applicants

Explanation

The Fair Housing Act prohibits discriminating in the terms and conditions of residential real estate-related transactions, including setting different interest rates or fees based on a protected characteristic. Uniform documentation and underwriting practices are lawful.

Question 19Federal Mortgage-Related Laws

A borrower's loan is secured by a dwelling and the lender fails to provide the required high-cost mortgage disclosure. What is a potential consequence?

  1. The loan converts to a fixed-rate product
  2. The lender is exempt from TILA disclosure
  3. The borrower may have extended rescission rights and the lender may face liability Correct answer.
  4. The loan is automatically void

Explanation

Failure to provide required HOEPA disclosures can extend the borrower's right of rescission and expose the lender to statutory and actual damages. HOEPA violations do not automatically void the loan or change its rate structure.

Question 20Federal Mortgage-Related Laws

A mortgage lender uses a credit scoring model that has a disparate impact on a protected class. Under the Fair Housing Act, the lender may avoid liability by demonstrating:

  1. That the borrower signed a disclosure acknowledging the model
  2. That the model was purchased from a third-party vendor
  3. That the loan was sold on the secondary market
  4. That the policy is necessary to achieve a legitimate business objective and no less discriminatory alternative exists Correct answer.

Explanation

Disparate impact claims under the Fair Housing Act may be defended by showing the practice is necessary to achieve a legitimate, nondiscriminatory business objective and that no less discriminatory alternative would serve that objective equally well.

Question 21Federal Mortgage-Related Laws

Under the Truth in Lending Act, the annual percentage rate disclosed for a mortgage loan is intended to reflect:

  1. Only the nominal interest rate stated in the note
  2. The lender's internal cost of funds
  3. The property's appraised value divided by the loan amount
  4. The total cost of credit expressed as a yearly rate Correct answer.

Explanation

The APR expresses the total cost of credit as a yearly rate, incorporating the finance charge and the timing of payments. It enables borrowers to compare the true cost of different loan offers.

Question 22Federal Mortgage-Related Laws

A servicer receives a borrower's request for information about loan ownership. Under RESPA, the servicer must respond within:

  1. Thirty business days, with a possible fifteen-day extension Correct answer.
  2. Ten business days
  3. Five calendar days
  4. Ninety calendar days

Explanation

Regulation X requires a servicer to respond to a borrower's information request within thirty business days, with a possible fifteen-business-day extension if additional information is needed. Acknowledgment is required within five business days.

Question 23Federal Mortgage-Related Laws

Which law requires mortgage lenders to report the race, ethnicity, sex, and income of applicants?

  1. The Home Mortgage Disclosure Act Correct answer.
  2. The Real Estate Settlement Procedures Act
  3. The Fair Credit Reporting Act
  4. The Truth in Lending Act

Explanation

HMDA and Regulation C require covered financial institutions to collect and report applicant demographic and loan data, including race, ethnicity, sex, and income. This data supports fair lending monitoring.

Question 24Federal Mortgage-Related Laws

A lender denies a mortgage loan but does not provide the specific reasons for denial. Under the Equal Credit Opportunity Act, the borrower may request the reasons within:

  1. One year of the denial
  2. Sixty days of receiving the notice Correct answer.
  3. Ten days of the denial
  4. Thirty days of the denial

Explanation

When a creditor provides a notice of the right to request reasons, the applicant may request the specific reasons within sixty days of receiving the notice. The creditor must then provide the reasons within thirty days of the request.

Question 25Federal Mortgage-Related Laws

A loan originator suggests that a borrower refinance into a higher-cost loan with no benefit to the borrower, in order to increase the originator's commission. Under federal law, this practice is:

  1. Prohibited as steering to a loan not in the borrower's interest Correct answer.
  2. Permitted for borrowers over age sixty-two
  3. Permitted if disclosed on the Closing Disclosure
  4. Permitted if the borrower signs a waiver

Explanation

Steering a borrower to a loan that is not in the borrower's interest to increase compensation is prohibited under federal mortgage rules, including the loan originator compensation and steering provisions. Disclosure or a waiver does not cure the practice.

Question 26Federal Mortgage-Related Laws

A mortgage loan originator is paid by the lender but also accepts a separate cash fee from the borrower for the same transaction without the borrower's knowledge. Which federal statute directly addresses this practice?

  1. The Real Estate Settlement Procedures Act Correct answer.
  2. The Servicemembers Civil Relief Act
  3. The Home Mortgage Disclosure Act
  4. The Fair Credit Reporting Act

Explanation

RESPA's anti-kickback provision prohibits giving or accepting any fee, kickback, or thing of value in exchange for the referral of settlement service business involving a federally related mortgage loan, and unearned fees are also barred. The other statutes listed govern disclosure of loan data, consumer reports, and servicemember protections, not referral fees.

Question 27Federal Mortgage-Related Laws

Under the Home Mortgage Disclosure Act, which federal agency is responsible for issuing the regulation that implements the law's data collection and reporting requirements?

  1. The Federal Housing Finance Agency
  2. The Consumer Financial Protection Bureau Correct answer.
  3. The Securities and Exchange Commission
  4. The Department of Housing and Urban Development

Explanation

HMDA is implemented by Regulation C, which is issued and interpreted by the Consumer Financial Protection Bureau. HUD, FHFA, and the SEC have other mortgage-market roles but do not write Regulation C.

Question 28Federal Mortgage-Related Laws

A mortgage servicer wants to assess a late fee on a delinquent loan secured by the borrower's principal dwelling. Which federal law sets the conditions under which such a fee may be charged?

  1. The Gramm-Leach-Bliley Act
  2. The Homeowners Protection Act
  3. The Fair Debt Collection Practices Act
  4. The Truth in Lending Act Correct answer.

Explanation

TILA, as implemented by Regulation Z, governs late charges on closed-end consumer credit secured by a dwelling, including when the fee may be imposed and its permissible amount. The other statutes address debt collection conduct, private mortgage insurance cancellation, and privacy of financial information.

Question 29Federal Mortgage-Related Laws

A lender that is subject to the Home Mortgage Disclosure Act identifies a mortgage loan as a reportable transaction. Which of the following characteristics of the loan must be reported under Regulation C?

  1. The borrower's credit score at closing
  2. The loan's interest rate spread over the benchmark rate Correct answer.
  3. The appraised value of the property
  4. The identity of the closing agent

Explanation

Regulation C requires reporting of the rate spread between the loan's annual percentage rate and the applicable benchmark for certain covered loans, along with other data such as loan type, purpose, and occupancy. Credit scores, appraised values, and closing agents are not HMDA data fields.

Question 30Federal Mortgage-Related Laws

A mortgage lender is covered by the Servicemembers Civil Relief Act and receives a valid written notice from a servicemember requesting interest-rate relief on a pre-service mortgage obligation. What must the lender do?

  1. Extend the loan term by the length of the deployment
  2. Suspend all payments on the loan until the servicemember is discharged
  3. Reduce the interest rate to six percent for the period of military service and refund excess interest Correct answer.
  4. Transfer the loan to a federal guaranty program

Explanation

The SCRA caps interest at six percent per year on pre-service obligations during the period of military service and requires the creditor to forgive interest above that cap, including a refund of excess amounts already paid. The statute does not suspend payments, extend the term, or move the loan to a guaranty program.

Question 31Federal Mortgage-Related Laws

A servicemember on active duty receives a foreclosure notice on a pre-service mortgage. Under the Servicemembers Civil Relief Act, what protection generally applies during military service?

  1. The mortgage is automatically forgiven after one year of service
  2. Foreclosure requires a court order and the servicemember may seek a stay of proceedings Correct answer.
  3. The lender must convert the loan to an interest-free obligation
  4. The property is exempt from all state property taxes

Explanation

The SCRA requires a court order before foreclosure on a pre-service mortgage during military service, and the servicemember may request a stay of the proceedings. The statute does not forgive the debt, eliminate interest entirely, or grant property tax exemptions.

Question 32Federal Mortgage-Related Laws

A mortgage lender reports a borrower's payment history to a consumer reporting agency. Which federal law primarily governs the accuracy and dispute of that reported information?

  1. The Fair Credit Reporting Act Correct answer.
  2. The Equal Credit Opportunity Act
  3. The Homeowners Protection Act
  4. The Real Estate Settlement Procedures Act

Explanation

The Fair Credit Reporting Act regulates consumer reporting agencies and the furnishers of information, including requirements for accuracy and the handling of consumer disputes. RESPA, ECOA, and the Homeowners Protection Act address settlement disclosures, credit discrimination, and mortgage insurance cancellation respectively.

Question 33Federal Mortgage-Related Laws

Under the Fair Credit Reporting Act, a mortgage lender that obtains a consumer report for a credit transaction must make which disclosure to the consumer?

  1. The complete credit scoring algorithm used by the agency
  2. The consumer's raw credit file in its original format
  3. The identities of all other lenders that requested the consumer's report
  4. The name of the credit reporting agency that supplied the report Correct answer.

Explanation

When a consumer report is used in connection with a credit transaction, the user must disclose to the consumer the name and address of the consumer reporting agency that furnished the report. Proprietary scoring models and other users' identities are not disclosed.

Question 34Federal Mortgage-Related Laws

A mortgage lender's underwriting policy applies different credit standards to applicants based on their receipt of income from a public assistance program. Which federal law is most directly implicated?

  1. The Flood Disaster Protection Act
  2. The Home Mortgage Disclosure Act
  3. The Equal Credit Opportunity Act Correct answer.
  4. The Real Estate Settlement Procedures Act

Explanation

ECOA prohibits discrimination in credit transactions on the basis of receipt of income from a public assistance program, and a creditor may not discount or exclude such income in underwriting. HMDA, RESPA, and the flood insurance statutes do not prohibit this form of credit discrimination.

Question 35Federal Mortgage-Related Laws

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

  1. The applicant's length of residence
  2. The applicant's debt-to-income ratio
  3. The applicant's marital status Correct answer.
  4. The applicant's employment history

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. Employment history, debt-to-income ratio, and length of residence are permissible underwriting factors.

Question 36Federal Mortgage-Related Laws

A mortgage lender provides a loan estimate to an applicant. Under the TILA-RESPA integrated disclosure rules, which document must the borrower receive at least three business days before consummation?

  1. The initial escrow analysis
  2. The servicing transfer notice
  3. The closing disclosure Correct answer.
  4. The escrow account statement

Explanation

The TILA-RESPA integrated disclosure rule requires the creditor to deliver the Closing Disclosure at least three business days before consummation so the borrower can review final loan terms and costs. The other documents serve different purposes and different timing rules.

Question 37Federal Mortgage-Related Laws

A mortgage lender fails to provide the Loan Estimate within the required three business days after receiving an application. Under the TILA-RESPA integrated disclosure rule, what is a likely consequence?

  1. The loan automatically becomes a high-cost mortgage
  2. The loan must be reunderwritten from the beginning
  3. The application is deemed withdrawn by operation of law
  4. The creditor may be subject to civil liability and regulatory enforcement for the disclosure violation Correct answer.

Explanation

Failure to deliver the Loan Estimate within three business days of application is a violation of Regulation Z's integrated disclosure requirements, exposing the creditor to civil liability and supervisory enforcement. The rule does not declare the loan high-cost, force full reunderwriting, or treat the application as withdrawn.

Question 38Federal Mortgage-Related Laws

A borrower's mortgage loan is secured by a dwelling and the lender charges a fee that is not a bona fide discount point or third-party charge. Under the Truth in Lending Act, how must that fee generally be treated?

  1. As a refundable deposit held in escrow
  2. As part of the finance charge Correct answer.
  3. As a tax-deductible closing cost
  4. As a separate settlement service cost excluded from the finance charge

Explanation

Under TILA and Regulation Z, charges imposed by the creditor as an incident to the extension of credit are part of the finance charge unless specifically excluded. Fees that are not bona fide discount points or third-party charges generally must be included in the finance charge calculation.

Question 39Federal Mortgage-Related Laws

A mortgage loan meets the points-and-fees coverage test for a high-cost mortgage under the Home Ownership and Equity Protection Act. Which additional restriction applies to such a loan?

  1. The lender may not require any documentation of income
  2. The loan must carry a fixed interest rate for its entire term
  3. The loan must be assumable by any subsequent buyer
  4. Prepayment penalties are prohibited in most circumstances Correct answer.

Explanation

HOEPA imposes restrictions on high-cost mortgages, including limits on prepayment penalties, balloon payments, and late fees, and requires enhanced disclosures. It does not eliminate documentation requirements, mandate assumability, or require a fixed rate for the full term.

Question 40Federal Mortgage-Related Laws

A mortgage servicer receives a borrower's request for information under RESPA. Within what timeframe must the servicer generally respond?

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

Explanation

Under RESPA and Regulation X, a servicer must respond to a borrower's request for information within five business days of receipt, acknowledging the request and either providing the information or explaining why it is unavailable. The longer periods apply to certain qualified written requests and notices of error.

Question 41Federal Mortgage-Related Laws

A mortgage servicer receives a notice of error from a borrower regarding a payment that was misapplied. Under RESPA and Regulation X, what must the servicer do?

  1. Refer the dispute to the credit reporting agency for resolution
  2. Immediately foreclose to preserve the lender's security interest
  3. Suspend all servicing activity until the borrower withdraws the notice
  4. Acknowledge receipt and investigate, then respond with the results within the applicable period Correct answer.

Explanation

Regulation X requires a servicer to acknowledge a notice of error, conduct a reasonable investigation, and respond with the results and any correction within the prescribed timeframes. It does not authorize immediate foreclosure, delegate the dispute to a credit reporting agency, or require suspension of all servicing.

Question 42Federal Mortgage-Related Laws

A creditor extends a mortgage loan secured by the borrower's principal dwelling. Under Regulation Z, the creditor must assess the consumer's ability to repay the loan. Which practice is generally required as part of that assessment?

  1. Using only the property's appraised value as the repayment source
  2. Verifying income and debt obligations using reasonably reliable third-party records Correct answer.
  3. Assuming continued appreciation of the home to support repayment
  4. Relying solely on the borrower's stated income without verification

Explanation

The ability-to-repay rule requires creditors to consider and verify income, assets, employment, and debt obligations using reasonably reliable third-party records such as tax returns and payroll documentation. Stated-income underwriting without verification, reliance on collateral alone, and assumptions of appreciation do not satisfy the rule.

Question 43Federal Mortgage-Related Laws

A creditor originates a loan that qualifies as a qualified mortgage under the general ability-to-repay definition. What legal protection does qualified mortgage status generally provide?

  1. Exemption from all disclosure requirements under TILA
  2. Complete immunity from all state and federal consumer protection laws
  3. Automatic federal insurance of the loan against default
  4. A safe harbor or rebuttable presumption of compliance with the ability-to-repay rule Correct answer.

Explanation

Qualified mortgage status provides a safe harbor or, for higher-priced loans, a rebuttable presumption that the creditor complied with the ability-to-repay requirement. It does not immunize the creditor from all laws, insure the loan against default, or excuse TILA disclosures.

Question 44Federal Mortgage-Related Laws

A mortgage lender is subject to the Homeowners Protection Act. Under that law, when may a borrower generally request cancellation of private mortgage insurance based on the original value of the home?

  1. Only after the loan reaches 90 percent of the original value
  2. When the loan balance reaches 80 percent of the original property value Correct answer.
  3. Only after the loan is fully repaid
  4. When the loan is first originated

Explanation

The Homeowners Protection Act allows a borrower to request cancellation of private mortgage insurance when the principal balance reaches 80 percent of the original value of the property, subject to conditions such as a satisfactory payment history. Automatic termination generally occurs at 78 percent of original value.

Question 45Federal Mortgage-Related Laws

A mortgage lender uses a statistical model to evaluate applicants, and the model's outcomes disproportionately exclude members of a protected class without a business justification. Under the Fair Housing Act, how is this practice characterized?

  1. It may constitute unlawful disparate impact discrimination Correct answer.
  2. It is lawful because the model is applied uniformly to all applicants
  3. It is governed only by the FCRA and not by fair housing law
  4. It is lawful because the model does not mention a protected class

Explanation

The Fair Housing Act prohibits practices with an unjustified discriminatory effect, even when the policy is facially neutral. A model that disproportionately excludes a protected class without a legitimate business necessity and no less discriminatory alternative may be challenged as disparate impact discrimination.

Question 46Federal Mortgage-Related Laws

A mortgage broker steers a borrower into a loan with a higher interest rate than the borrower qualifies for, in exchange for a yield spread premium, without disclosing the arrangement. Which federal law most directly prohibits this conduct?

  1. The Home Mortgage Disclosure Act
  2. The Servicemembers Civil Relief Act
  3. The Flood Disaster Protection Act
  4. The Real Estate Settlement Procedures Act Correct answer.

Explanation

RESPA prohibits giving or accepting fees or things of value for the referral of settlement service business and prohibits unearned fees, which covers undisclosed yield spread premiums tied to steering borrowers into costlier loans. HMDA, the SCRA, and the flood insurance statutes do not address broker compensation.

Question 47Federal Mortgage-Related Laws

A lender is subject to the Flood Disaster Protection Act and makes a loan secured by a building located in a special flood hazard area in a participating community. What is required?

  1. Flood insurance must be obtained and maintained for the life of the loan Correct answer.
  2. The loan must be sold to a federal agency
  3. The borrower must relocate the building outside the hazard area
  4. The lender must waive all closing costs

Explanation

The Flood Disaster Protection Act requires flood insurance for improved real property in a special flood hazard area securing a federally related loan, and coverage must be maintained for the life of the loan. The statute does not require relocation, closing cost waivers, or sale of the loan.

Question 48Federal Mortgage-Related Laws

A mortgage lender subject to the Gramm-Leach-Bliley Act shares a borrower's nonpublic personal information with a nonaffiliated third party. What must the lender generally provide?

  1. A copy of the borrower's tax returns
  2. An escrow analysis of the borrower's account
  3. A written guarantee that the third party will never market products
  4. A privacy notice and an opportunity for the consumer to opt out of certain sharing Correct answer.

Explanation

The Gramm-Leach-Bliley Act requires financial institutions to provide privacy notices describing information-sharing practices and to give consumers an opportunity to opt out of certain disclosures to nonaffiliated third parties. Tax returns, marketing guarantees, and escrow analyses are unrelated to this requirement.

Question 49Federal Mortgage-Related Laws

A mortgage loan originator employed by a nonbank lender must be registered under the Secure and Fair Enforcement for Mortgage Licensing Act. Which statement describes the SAFE Act registration framework?

  1. It applies only to employees of federally chartered banks
  2. It requires registration through the Nationwide Multistate Licensing System and Registry with minimum standards for licensure Correct answer.
  3. It eliminates all state licensing requirements for mortgage brokers
  4. It permits originators to operate without any state or federal registration

Explanation

The SAFE Act establishes minimum national standards for the licensing and registration of mortgage loan originators, with records maintained through the Nationwide Multistate Licensing System and Registry. It does not eliminate registration, and it applies beyond federally chartered banks.

Question 50Federal Mortgage-Related Laws

A mortgage lender is subject to the Home Mortgage Disclosure Act. Which of the following is a purpose of the law's data collection requirements?

  1. To set the maximum interest rate a lender may charge
  2. To help determine whether financial institutions are serving the housing needs of their communities Correct answer.
  3. To require lenders to insure every loan against default
  4. To establish the appraisal standards for federally related transactions

Explanation

HMDA requires covered institutions to collect and report data on mortgage applications and originations so regulators and the public can assess whether institutions are meeting community housing needs and to identify potentially discriminatory lending patterns. It does not set interest-rate caps, require default insurance, or establish appraisal standards.