CSLB General Building (B) — All Questions

A borrower submits a complete mortgage application on Monday. Under the TRID rule, what is the latest the lender may deliver or place the Loan Estimate in the mail?

• a.Within 24 hours of application
• b.By the end of the same business day
• c.No later than 3 business days after receiving the application✓
• d.At least 7 business days before closing

TRID requires the Loan Estimate to be delivered or mailed no later than 3 business days after the lender receives a complete application. The 7-business-day figure is the waiting period between delivering the LE and consummation, not the delivery deadline. Same-day or 24-hour delivery is not required.TRID

Under the TRID rule, the borrower must receive the Closing Disclosure no later than how many business days before consummation of the loan?

• a.1 business day
• b.3 business days✓
• c.7 business days
• d.10 business days

The Closing Disclosure must be received by the borrower at least 3 business days before consummation, giving time to compare it to the Loan Estimate. The 7-business-day rule applies to delivery of the initial Loan Estimate before consummation. One and ten business days are not TRID timing requirements.TRID

Three business days before closing, the borrower's annual percentage rate (APR) increases from 6.0% to 6.3% because the interest rate was locked higher. Under TRID, what must the lender do?

• a.Nothing; APR changes are always allowed at closing
• b.Provide a revised Loan Estimate only
• c.Proceed to close as scheduled with no delay
• d.Provide a corrected Closing Disclosure and observe a new 3-business-day waiting period✓

An APR increase beyond the tolerance (more than 1/8% for fixed-rate loans) is one of three changes that trigger a new corrected Closing Disclosure and a fresh 3-business-day waiting period. A change to a prepayment penalty or a change in loan product also triggers redisclosure. Minor changes generally do not restart the clock, but this APR change does.TRID

A mortgage broker refers borrowers to a specific title company and, in exchange, receives $50 for each referral. Under RESPA, this arrangement is:

• a.A prohibited kickback for the referral of settlement service business✓
• b.Permitted because the fee is under $100
• c.Permitted if disclosed on the Closing Disclosure
• d.Permitted because title services are exempt from RESPA

Section 8 of RESPA prohibits giving or accepting any fee, kickback, or thing of value for the referral of settlement service business involving a federally related mortgage loan. There is no dollar-amount safe harbor, and disclosure does not cure an illegal kickback. Title services are settlement services covered by RESPA.RESPA / Regulation X

After a lender takes adverse action on a completed mortgage application, within how many days must the applicant receive notice under ECOA?

• a.10 days
• b.15 days
• c.30 days✓
• d.60 days

ECOA (Regulation B) requires that a notice of adverse action on a completed application be provided within 30 days of the decision. The other intervals do not match the ECOA adverse action timing standard. This notice must include the reasons for denial or a statement of the right to request them.ECOA / Regulation B

During a loan interview, a loan originator asks a female applicant whether she plans to have children, implying it could affect her income. Under ECOA, this question is:

• a.Permitted if the applicant answers voluntarily
• b.A prohibited inquiry based on sex and potential childbearing✓
• c.Required for accurate income analysis
• d.Permitted only for conventional loans

ECOA prohibits discrimination based on sex and generally bars questions about birth control or childbearing plans because they can be used to discriminate. A creditor may not assume income will be reduced due to childbearing. Voluntary answers or loan type do not make the inquiry lawful.ECOA / Regulation B

Which of the following is NOT a protected basis under the Equal Credit Opportunity Act?

• a.Marital status
• b.Receipt of public assistance income
• c.National origin
• d.Educational attainment level✓

ECOA's protected bases are race, color, religion, national origin, sex, marital status, age, and the applicant's receipt of public assistance or exercise of rights under the Consumer Credit Protection Act. Educational attainment is not a protected class under ECOA. Marital status, public assistance income, and national origin are all protected.ECOA / Regulation B

In a refinance of a primary residence with a new lender, when does the borrower's right of rescission under TILA generally expire?

• a.Midnight of the third business day after the latest of consummation, delivery of the notice of the right to rescind, or delivery of material TILA disclosures✓
• b.Immediately upon signing the note
• c.Seven business days after closing
• d.Thirty days after the first payment is due

TILA gives a 3-business-day right of rescission on refinances secured by the borrower's principal dwelling; the clock runs from the latest of consummation, delivery of the rescission notice, or delivery of material disclosures. Purchase-money loans have no rescission right. Seven days and thirty days are not the rescission period.TILA / Regulation Z

The annual percentage rate (APR) disclosed under TILA is best described as:

• a.The same as the note interest rate
• b.The interest rate plus the monthly principal payment
• c.The cost of credit expressed as a yearly rate that includes interest and certain finance charges✓
• d.The rate charged only if the borrower prepays the loan

TILA's APR expresses the total cost of credit as a yearly percentage rate, reflecting the interest rate plus certain finance charges such as points and some fees. It is generally higher than the note rate because of those added costs. It is not simply the note rate, nor a prepayment or principal-based figure.TILA / Regulation Z

Under the Homeowners Protection Act, private mortgage insurance (PMI) on a residential loan must be automatically terminated when the loan balance reaches what percentage of the original property value, assuming payments are current?

• a.80% LTV
• b.78% LTV✓
• c.75% LTV
• d.70% LTV

The Homeowners Protection Act requires automatic termination of borrower-paid PMI when the loan-to-value ratio reaches 78% of the original value, provided the borrower is current on payments. At 80% LTV the borrower may request cancellation, but automatic termination is at 78%. Seventy-five and seventy percent are not the statutory thresholds.Homeowners Protection Act

A borrower with a current loan wants to cancel PMI early. Under the Homeowners Protection Act, a borrower generally may REQUEST cancellation of PMI once the loan balance reaches:

• a.80% of the original property value✓
• b.78% of the original property value
• c.90% of the original property value
• d.50% of the original property value

Under the HPA, a borrower may request PMI cancellation when the principal balance reaches 80% of the original value, subject to being current and meeting other conditions such as a good payment history. Automatic termination occurs at 78%. Ninety and fifty percent are not the request thresholds.Homeowners Protection Act

A lender denies a mortgage application partly because of information in the applicant's credit report. Under the Fair Credit Reporting Act, the lender must provide the applicant with:

• a.A copy of the lender's underwriting guidelines
• b.A refund of the application fee
• c.A risk-based pricing or adverse action notice identifying the credit reporting agency used✓
• d.A new credit report prepared by the lender

FCRA requires an adverse action notice when a credit report contributes to a denial or less favorable terms; it must identify the consumer reporting agency and inform the applicant of the right to a free report and to dispute inaccuracies. The lender need not disclose underwriting guidelines, refund fees, or generate its own report. This works alongside ECOA's adverse action requirements.FCRA

The primary purpose of the Home Mortgage Disclosure Act (HMDA) is to:

• a.Set maximum interest rates on home loans
• b.Require lenders to offer loans in every neighborhood
• c.Guarantee approval for low-income applicants
• d.Provide public loan data to help identify discriminatory lending and redlining patterns✓

HMDA requires covered institutions to collect and report data on mortgage applications and originations so regulators and the public can detect potential discrimination, redlining, and unmet housing needs. It does not cap interest rates, mandate lending in every area, or guarantee approvals. Its function is transparency and monitoring, not rate control.HMDA

Under the Gramm-Leach-Bliley Act (GLBA), a financial institution must provide consumers with a privacy notice that:

• a.Guarantees the institution will never share any information
• b.Explains its information-sharing practices and, in certain cases, offers the right to opt out✓
• c.Is required only for commercial loans
• d.Must be signed and notarized by the consumer

GLBA requires financial institutions to give consumers a privacy notice describing what nonpublic personal information is collected and shared, and to offer an opt-out for certain sharing with nonaffiliated third parties. It does not guarantee zero sharing, apply only to commercial loans, or require notarized signatures. The notice supports consumer control over personal financial data.Gramm-Leach-Bliley Act

Which of the following loans is generally EXEMPT from RESPA coverage?

• a.A loan secured by 25 acres of vacant land used primarily for business✓
• b.A purchase-money loan on a single-family home
• c.A refinance of a borrower's principal residence
• d.A home equity line of credit on an owner-occupied duplex

RESPA covers federally related mortgage loans secured by residential property (1-4 units). A loan on vacant land used primarily for a business or agricultural purpose is generally exempt. Purchase loans, refinances, and HELOCs on residential dwellings are covered transactions. The exemption turns on the property's non-residential, business nature.RESPA / Regulation X

After a borrower submits a written qualified written request (QWR) about a servicing error, RESPA requires the servicer to acknowledge receipt within how many business days?

• a.3 business days
• b.4 business days
• c.5 business days✓
• d.20 business days

Under RESPA/Regulation X, a servicer must acknowledge a qualified written request within 5 business days of receipt. The servicer then generally must respond substantively within 30 business days. Three and four days are incorrect, and twenty days is not the acknowledgment deadline.RESPA / Regulation X

Under Regulation Z, if an advertisement for a mortgage states a specific interest rate (a triggering rate) or trigger term, it must also disclose:

• a.The lender's total annual profit
• b.The names of all loan officers
• c.The borrower's credit score requirement
• d.The annual percentage rate (APR), and if the rate may increase, that fact✓

Regulation Z advertising rules require that when a trigger term (like a specific rate or payment amount) appears, the ad must also clearly state the APR and, for variable-rate loans, that the rate may increase after consummation. Profit figures, officer names, and credit score cutoffs are not required trigger-term disclosures. The rule prevents misleading rate advertising.TILA / Regulation Z

The Home Ownership and Equity Protection Act (HOEPA) primarily provides additional protections for borrowers obtaining:

• a.All conventional conforming loans
• b.High-cost mortgage loans that exceed certain APR, points-and-fees, or prepayment thresholds✓
• c.Only reverse mortgages
• d.Loans on commercial office buildings

HOEPA imposes extra disclosures and restrictions on high-cost mortgages that exceed defined thresholds for APR, points and fees, or prepayment penalties. Conforming loans that stay under those thresholds are not high-cost. HOEPA is not limited to reverse mortgages, and it applies to consumer residential loans, not commercial buildings.HOEPA

For purposes of TRID's 'application' definition that triggers the Loan Estimate, an application is considered received when the lender obtains which six pieces of information?

• a.Name, income, Social Security number, property address, estimated property value, and loan amount sought✓
• b.Name, employer, bank balance, credit score, down payment, and closing date
• c.Name, marital status, race, property address, loan amount, and appraisal
• d.Name, income, monthly debts, property taxes, insurance, and loan term

Under TRID, an application consists of six items: the consumer's name, income, Social Security number (to obtain a credit report), property address, an estimate of the property's value, and the loan amount sought. Once all six are received, the 3-business-day Loan Estimate clock starts. The other lists include items not part of the regulatory definition.TRID

Under TRID tolerance rules, which category of charges generally may NOT increase at all from the Loan Estimate to the Closing Disclosure (a zero-tolerance category)?

• a.Prepaid interest and property insurance premiums
• b.Services the borrower shops for from an unaffiliated provider
• c.The lender's own origination charges and transfer taxes✓
• d.Recording fees

Fees paid to the lender or broker, such as origination charges, and government transfer taxes are subject to zero tolerance and generally cannot increase without a valid change of circumstance. Prepaids and certain third-party services the borrower shops for fall in other tolerance categories. Recording fees fall under a 10% aggregate tolerance, not zero tolerance.TRID

A loan originator wants to make telemarketing calls to generate mortgage leads. Under the federal Telemarketing/Do-Not-Call rules, a number registered on the National Do-Not-Call Registry generally may still be called if:

• a.The call is made before 9:00 p.m. local time
• b.The consumer has an established business relationship with the company or gave prior express written consent✓
• c.The originator blocks caller ID
• d.The call lasts less than two minutes

Calls to numbers on the Do-Not-Call Registry are generally prohibited unless an exception applies, such as an established business relationship or the consumer's prior express written consent. Calling before 9 p.m., blocking caller ID, or keeping calls short does not create an exception, and blocking caller ID is itself prohibited. The relationship or consent is what permits the call.Do-Not-Call / TSR

Under the Mortgage Assistance Relief Services (MARS) rule (Regulation N), a company offering loan modification services to distressed homeowners is generally prohibited from:

• a.Advertising its services online
• b.Contacting the homeowner's lender
• c.Charging any fee at any time
• d.Collecting any fee before the consumer receives and accepts a written offer from the lender or servicer✓

The MARS rule (Regulation N) bars mortgage assistance relief providers from collecting advance fees; a fee may be charged only after the consumer receives and agrees to a written mortgage-relief offer from the lender or servicer. Advertising and contacting the lender are not themselves prohibited, and fees are not banned entirely, only advance fees. The rule targets upfront-fee foreclosure-rescue scams.MARS / Regulation N

A creditworthy married applicant applies individually for a mortgage in her own name and qualifies on her own income. Under ECOA, may the lender require her husband to co-sign?

• a.No; a lender may not require a spouse to co-sign if the applicant independently qualifies✓
• b.Yes; spouses must always be included on mortgage applications
• c.Yes, but only for FHA loans
• d.Only if the property is in a community property state

ECOA prohibits requiring a spouse's signature when the individual applicant qualifies on her own for the amount and terms requested. Marital status is a protected basis, and a lender cannot mandate spousal co-signing simply because the applicant is married. Loan type and community property status do not override this protection when she independently qualifies.ECOA / Regulation B

Regulation Z's ability-to-repay (ATR) rule generally requires a lender making a covered mortgage loan to:

• a.Approve any borrower with a 620 credit score
• b.Make a reasonable, good-faith determination that the borrower can repay based on verified income, assets, and obligations✓
• c.Rely solely on the borrower's stated income
• d.Ignore the borrower's other monthly debts

The ATR rule requires lenders to make a reasonable, good-faith determination of a borrower's ability to repay using verified information such as income, assets, employment, credit history, and monthly obligations. A fixed credit score does not satisfy ATR, and stated-income-only underwriting is not permitted. Ignoring existing debts would violate the rule.TILA / Regulation Z

Under Regulation Z's loan originator compensation rule, a loan originator's compensation generally may NOT be based on:

• a.The total dollar volume of loans originated over a year
• b.A fixed percentage of the loan amount consistently applied
• c.The terms of the transaction, such as the interest rate✓
• d.Whether the loan is a purchase or a refinance, if applied without steering

Regulation Z prohibits basing loan originator compensation on the terms of a transaction, such as the interest rate, to prevent steering borrowers into costlier loans. Compensation may be based on the loan amount or overall volume, and certain permissible factors are allowed. Rate-based or term-based pay is the prohibited practice this rule targets.TILA / Regulation Z

At or before settlement on a purchase loan requiring an escrow account, RESPA requires the servicer to provide the borrower with:

• a.A copy of the appraisal only
• b.The lender's internal loan file
• c.A promissory note guarantee
• d.An initial escrow account statement itemizing expected taxes, insurance, and other charges✓

RESPA requires an initial escrow account statement, provided at settlement or within 45 days of establishing the escrow account, itemizing the anticipated disbursements such as property taxes and insurance and the escrow payment amounts. It is not the appraisal, the internal file, or a note guarantee. This helps borrowers understand their escrow obligations.RESPA / Regulation X

Under ECOA/Regulation B, for how long must a creditor generally retain records related to a mortgage application after notifying the applicant of action taken?

• a.25 months✓
• b.12 months
• c.6 months
• d.36 months

Regulation B generally requires creditors to retain mortgage application records for 25 months after notifying the applicant of the action taken (12 months for business credit in some cases). Six, twelve, and thirty-six months are not the standard consumer-credit retention period under Regulation B. This supports fair-lending examination and enforcement.ECOA / Regulation B

Under the Fair Credit Reporting Act, most negative information (such as late payments) may generally remain on a consumer's credit report for up to:

• a.3 years
• b.7 years✓
• c.10 years
• d.Indefinitely

FCRA generally allows most negative information to remain on a credit report for up to 7 years; Chapter 7 bankruptcies may remain up to 10 years. Three years is too short, ten years applies only to certain bankruptcies, and information cannot remain indefinitely. Time limits protect consumers from stale derogatory data.FCRA

A loan is classified as a 'higher-priced mortgage loan' (HPML) under Regulation Z. Which additional requirement generally applies?

• a.The loan must be interest-only
• b.No appraisal is ever required
• c.An escrow account for taxes and insurance is generally required for a minimum period, and a written appraisal with interior inspection is required✓
• d.The APR must be disclosed only orally

HPMLs trigger extra protections: lenders generally must establish an escrow account for property taxes and insurance for at least the first five years and obtain a written appraisal based on a physical interior inspection. HPMLs are not required to be interior-only or interest-only, and appraisals are required rather than waived. Oral APR disclosure is never sufficient.TILA / Regulation Z

A lender owns a partial interest in the title company it refers borrowers to. Under RESPA, this affiliated business arrangement is permitted only if:

• a.The lender pays the borrower a bonus
• b.The referral is kept secret from the borrower
• c.The borrower is required to use the affiliated company
• d.The relationship is disclosed, the borrower is not required to use the affiliate, and the only thing of value received is a return on ownership interest✓

RESPA permits affiliated business arrangements only when the arrangement is disclosed in writing, the consumer is not required to use the affiliated provider (except in limited cases), and no thing of value passes other than a return on the ownership interest. Secret referrals, mandatory use, or bonus payments would violate Section 8. Disclosure plus voluntariness is essential.RESPA / Regulation X

Which single disclosure form under TRID replaced both the old Truth-in-Lending disclosure and the HUD-1 Settlement Statement at closing?

• a.The Closing Disclosure✓
• b.The Loan Estimate
• c.The Good Faith Estimate
• d.The Notice of Right to Cancel

The Closing Disclosure combined the final Truth-in-Lending disclosure and the HUD-1 Settlement Statement into one form given before closing. The Loan Estimate replaced the early TIL disclosure and the Good Faith Estimate at application. The Notice of Right to Cancel is a separate rescission document and was not consolidated.TRID

Under RESPA, a lender may require a borrower to maintain an escrow cushion of no more than how much of the estimated annual escrow disbursements?

• a.One month
• b.Two months (one-sixth of annual disbursements)✓
• c.Three months
• d.Six months

RESPA/Regulation X limits the escrow cushion to no more than one-sixth of the estimated annual disbursements, which equals about two months of escrow payments. One month is below the allowed maximum, and three or six months exceeds the RESPA limit. This prevents servicers from over-collecting escrow funds.RESPA / Regulation X

Under Regulation Z, a 'finance charge' includes which of the following?

• a.The seller's real estate commission
• b.Title insurance chosen by the borrower
• c.Loan origination fees and points paid to obtain the loan✓
• d.Property taxes paid to the county

The finance charge under TILA is the cost of credit as a dollar amount and includes items like origination fees, points, and certain mortgage insurance and interest. Real estate commissions, borrower-selected title insurance, and property taxes are generally excluded from the finance charge. Correctly identifying finance charges is essential to computing the APR.TILA / Regulation Z

Data collected and reported under HMDA is compiled into a public dataset commonly known as:

• a.The Fair Lending Index
• b.The National Credit File
• c.The RESPA Register
• d.The Loan/Application Register (LAR)✓

Covered institutions record HMDA data on a Loan/Application Register (LAR), which is submitted to regulators and made available to the public. There is no 'Fair Lending Index,' 'National Credit File,' or 'RESPA Register' used for HMDA reporting. The LAR is the mechanism that supports transparency in mortgage lending patterns.HMDA

The Safeguards Rule under the Gramm-Leach-Bliley Act requires a mortgage company to:

• a.Develop, implement, and maintain a written information security program to protect customer data✓
• b.Report all loans to the IRS monthly
• c.Provide free credit monitoring to every applicant
• d.Store all files as paper copies only

The GLBA Safeguards Rule requires financial institutions to develop and maintain a written information security program with administrative, technical, and physical safeguards to protect customer information. It does not require monthly IRS reporting, free credit monitoring, or paper-only storage. Protecting nonpublic personal information from unauthorized access is the goal.Gramm-Leach-Bliley Act

Under ECOA, a lender may consider an applicant's age in a credit decision only when:

• a.The applicant is over 62 and the lender wants to deny the loan
• b.Age is used in an empirically derived, demonstrably sound credit scoring system, and the elderly are not assigned a negative factor✓
• c.The applicant is under 25
• d.Age is never permitted to be considered at all

ECOA generally bars age discrimination, but age may be used in an empirically derived, demonstrably and statistically sound credit scoring system, provided applicants 62 or older are not treated less favorably. A lender cannot use age simply to deny elderly or young applicants. Age is not absolutely barred; it is restricted to defined, non-discriminatory uses.ECOA / Regulation B

Under Regulation Z, the Home Equity Line of Credit (HELOC) program disclosures and a brochure must generally be provided to the consumer:

• a.Only at closing
• b.Within 30 days of opening the line
• c.At the time an application is provided to the consumer✓
• d.Never; HELOCs are exempt from disclosure

For HELOCs, Regulation Z requires that the early disclosures and the 'What You Should Know About Home Equity Lines of Credit' brochure be provided at the time the application is given to the consumer. Providing them only at closing or within 30 days after opening is too late, and HELOCs are not exempt from disclosure requirements. Early disclosure allows informed shopping.TILA / Regulation Z

A lender issues a Loan Estimate, and two days later the borrower's requested loan amount increases because the appraisal came in higher, allowing more cash out. Under TRID, this is:

• a.Never a valid reason to revise the Loan Estimate
• b.A reason to cancel the application entirely
• c.Grounds to skip the Closing Disclosure
• d.A valid changed circumstance that can justify issuing a revised Loan Estimate and resetting affected tolerances✓

TRID allows a revised Loan Estimate when a valid changed circumstance occurs, such as a borrower-requested change in the loan amount, which can reset applicable tolerances. It is not a reason to cancel the application or skip the Closing Disclosure, and revisions are permitted, not prohibited. The lender must issue the revised LE within the required timeframe to rely on the new figures.TRID

Before closing a high-cost mortgage subject to HOEPA, the lender must generally ensure the borrower receives:

• a.Homeownership counseling from a HUD-approved counselor and a special HOEPA disclosure at least three business days before closing✓
• b.A cash rebate equal to the points charged
• c.A guaranteed fixed interest rate for life
• d.Free title insurance

HOEPA requires that borrowers of high-cost mortgages receive homeownership counseling from a HUD-approved counselor and a special disclosure at least three business days before consummation. There is no requirement for a points rebate, a lifetime fixed rate, or free title insurance. These protections help ensure borrowers understand the risks of high-cost loans.HOEPA

Under RESPA, when a mortgage loan's servicing is transferred to a new servicer, the borrower must generally receive a notice of transfer from the transferor at least how many days before the effective date?

• a.5 days
• b.15 days✓
• c.30 days
• d.60 days

RESPA requires the transferor (old) servicer to send a servicing transfer notice at least 15 days before the effective date of transfer, and the transferee (new) servicer generally must send its notice within 15 days after. Five days is too short, and thirty or sixty days is not the required lead time. There is also a 60-day grace period during which payments to the old servicer cannot be treated as late.RESPA / Regulation X

A borrower is refinancing her primary home. On the third business day of the rescission period, she decides to cancel. Under TILA, what is the effect of a timely rescission?

• a.The borrower forfeits her earnest money
• b.The lender may still record the mortgage
• c.The security interest becomes void and the lender must return any fees paid within 20 days✓
• d.The borrower must pay a 5% penalty

When a borrower timely exercises the TILA right of rescission, the security interest is voided and the lender generally must return any money or property (fees paid) within 20 calendar days and take steps to reflect termination of the security interest. There is no forfeiture of earnest money, continued recording right, or 5% penalty. Rescission unwinds the transaction.TILA / Regulation Z

Under the FCRA, before a lender may obtain a consumer's credit report, it must have:

• a.A signed purchase contract
• b.The consumer's fingerprint
• c.Approval from the state regulator
• d.A permissible purpose, such as the consumer's application for credit✓

FCRA allows a consumer reporting agency to furnish a credit report only for a permissible purpose, such as in connection with a credit transaction initiated by the consumer. A purchase contract, fingerprint, or state approval is not the FCRA standard. Pulling a report without a permissible purpose violates the FCRA.FCRA

Under Regulation Z, for a closed-end mortgage a borrower may exercise the right of rescission for up to three years if:

• a.The lender failed to deliver the required rescission notice or material disclosures✓
• b.The borrower simply changes their mind after three days
• c.The property value declines
• d.Interest rates fall after closing

If the lender fails to provide the required notice of the right to rescind or material TILA disclosures, the rescission period is extended to up to three years from consummation instead of three business days. A mere change of mind after three days, a decline in value, or a rate drop does not extend rescission. The extended period penalizes disclosure failures.TILA / Regulation Z

Under ECOA, when a lender uses the borrower's application to make a mortgage loan decision, it may consider income from part-time employment or public assistance:

• a.Only if it comes from full-time work
• b.As long as the income is likely to continue, and it may not be discounted merely because of its source✓
• c.Never, because such income is unreliable
• d.Only for government-backed loans

ECOA requires that reliable income not be discounted simply because it comes from part-time work, public assistance, alimony, or similar sources; the key question is whether the income is likely to continue. A lender may not refuse to count such income solely due to its source. It is not limited to full-time work or government-backed loans.ECOA / Regulation B

Under Regulation Z, when a creditor receives a mortgage application, it must provide the applicant with a copy of any appraisal or valuation:

• a.Only if the borrower pays extra for it
• b.Only after the loan closes
• c.Promptly upon completion, or at least three business days before consummation, whichever is earlier✓
• d.Never, unless the loan is denied

Under the ECOA/Regulation B appraisal rule as harmonized with Regulation Z, creditors must provide copies of appraisals and other written valuations promptly upon completion or at least three business days before consummation, whichever is earlier, for first-lien dwelling loans. It is not conditioned on extra payment, delayed to after closing, or limited to denials. Borrowers may waive the three-day timing but still receive the copy.ECOA / Regulation B (12 CFR 1002.14)

Which of the following would most likely violate RESPA's Section 8 anti-kickback provisions?

• a.A title company giving a normal promotional pen to all visitors
• b.Paying a loan officer a salary for work actually performed
• c.A lender providing a borrower a required disclosure
• d.A homebuilder giving a real estate agent free vacations in exchange for steering buyers to the builder's affiliated lender✓

Giving something of value, such as free vacations, in exchange for referrals of settlement service business violates RESPA Section 8. Normal promotional items of nominal value, bona fide salaries for actual work, and providing required disclosures are permissible. The violation hinges on paying for referrals rather than for actual goods or services.RESPA / Regulation X

Under Regulation Z, a mortgage loan generally may include a prepayment penalty only if the loan is a qualified mortgage that is not higher-priced and the penalty:

• a.Is limited in amount and duration (no more than the first three years) and the borrower is offered an alternative loan without a penalty✓
• b.May last for the entire loan term
• c.Applies to all adjustable-rate mortgages automatically
• d.Is unlimited if disclosed

Regulation Z restricts prepayment penalties on covered mortgages: they are allowed only on certain qualified mortgages, are capped in amount, may not extend beyond the first three years, and the lender must offer an alternative loan without a prepayment penalty. Penalties cannot run the full term, apply automatically to all ARMs, or be unlimited merely because disclosed. These limits protect borrowers who refinance or pay early.TILA / Regulation Z

Under the Homeowners Protection Act, when private mortgage insurance is NOT canceled earlier, PMI must terminate at the latest by:

• a.The date the loan reaches 80% LTV
• b.The first day of the month after the midpoint of the loan's amortization period, if the borrower is current✓
• c.The final payment of the loan
• d.The tenth anniversary of the loan

The HPA provides a final termination point: if PMI has not otherwise ended, it must be canceled at the midpoint of the amortization schedule (for example, year 15 of a 30-year loan), provided the borrower is current. Eighty percent LTV is the borrower-request threshold, and the final payment or a tenth anniversary are not the statutory endpoints. This ensures PMI does not continue indefinitely.Homeowners Protection Act

Under Regulation N (Mortgage Acts and Practices Advertising Rule), which of the following mortgage advertising claims would be prohibited?

• a.Stating an accurate APR with required disclosures
• b.Noting that rates are subject to change
• c.Falsely implying the ad is from or affiliated with a government agency✓
• d.Providing the lender's licensing information

Regulation N (the MAP Rule) prohibits material misrepresentations in mortgage advertising, including falsely suggesting government affiliation or endorsement. Accurately stating the APR, noting rates may change, and providing licensing information are truthful and permitted. The rule targets deceptive claims that mislead consumers about mortgage products.MARS / Regulation N

Under TRID, if a lender delivers the Closing Disclosure by mail rather than in person or electronically with confirmed receipt, when is the borrower presumed to have received it for purposes of the 3-business-day waiting period?

• a.Three business days after the disclosure is placed in the mail✓
• b.The same day it is mailed
• c.Seven business days after mailing
• d.On the actual date the borrower signs for it

When the Closing Disclosure is mailed, TRID presumes the borrower received it three business days after it is placed in the mail, so the additional 3-business-day waiting period is measured from that presumed receipt. Same-day receipt is only presumed for in-person or confirmed electronic delivery. Seven business days is unrelated, and the rule uses a presumption rather than the actual signature date unless earlier receipt is shown.TRID

A residential mortgage loan originator notices a borrower structuring a large cash down payment into several deposits just under the reporting threshold. Under the Bank Secrecy Act, where must the company file a report of this suspicious activity?

• a.With the local police department
• b.With the Consumer Financial Protection Bureau
• c.With the Financial Crimes Enforcement Network (FinCEN)✓
• d.With the Federal Reserve Board

Suspicious Activity Reports (SARs) required under the BSA are filed with FinCEN, the bureau of the U.S. Treasury that administers anti-money laundering rules. Since 2012, non-bank residential mortgage lenders and originators must maintain an AML program and file SARs. The CFPB and police are not the recipients of SAR filings.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

After detecting activity that appears suspicious, within how many calendar days must a covered mortgage company generally file a Suspicious Activity Report?

• a.Within 10 calendar days
• b.Within 30 calendar days✓
• c.Within 90 calendar days
• d.Within 180 calendar days

FinCEN rules generally require a SAR to be filed no later than 30 calendar days after the date the company initially detects facts that may constitute a basis for filing. If no suspect is identified, the deadline may be extended an additional 30 days, but never beyond 60 days total.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

A borrower asks a loan officer directly whether the company filed a Suspicious Activity Report about his transaction. What is the loan officer permitted to do under the Bank Secrecy Act?

• a.Confirm the SAR was filed but not share its contents
• b.Tell the borrower only if a supervisor approves
• c.Read the SAR aloud to reassure the borrower
• d.Neither confirm nor deny that a SAR was filed✓

The BSA imposes strict confidentiality: no person involved may disclose to any party involved in the transaction that a SAR has been filed or even considered. This 'no tipping off' rule protects investigations. Disclosing the existence of a SAR is itself a federal violation.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

A Currency Transaction Report (CTR) under the Bank Secrecy Act must generally be filed when a person conducts currency transactions exceeding what amount in a single business day?

• a.More than $10,000✓
• b.More than $5,000
• c.More than $25,000
• d.More than $50,000

The BSA requires a CTR for currency (physical cash) transactions totaling more than $10,000 in a single business day by or on behalf of one person. This is distinct from a SAR, which is triggered by suspicion rather than a fixed dollar amount. Structuring transactions to evade the CTR threshold is itself illegal.Bank Secrecy Act (Currency Transaction Report rules)

Which of the following is a required 'pillar' of an anti-money laundering compliance program for a covered non-bank mortgage lender?

• a.Offering the lowest interest rate in the market
• b.Paying loan originators a flat salary
• c.Designating a compliance officer to oversee the AML program✓
• d.Filing a CTR for every loan application

An effective AML program must include, among its pillars, a designated compliance officer, internal policies and controls, ongoing employee training, and independent testing (audit). These structural requirements apply to covered non-bank residential mortgage lenders and originators. Interest rates and compensation structure are unrelated to AML pillars.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

Under the Loan Originator Compensation Rule, a loan originator's compensation may NOT be based on which of the following?

• a.The total dollar amount of credit extended
• b.The interest rate of the loan✓
• c.A fixed hourly wage
• d.The number of loans closed over a year at a flat per-loan amount

Reg Z 1026.36 prohibits compensating a loan originator based on a term of a transaction, and the interest rate is a loan term. Compensation may be based on the loan amount (as a fixed percentage), hourly pay, or a flat amount per loan. Basing pay on the rate would incentivize steering borrowers into costlier loans.Loan Originator Compensation Rule (Reg Z 1026.36)

A loan originator is paid a commission by the borrower directly on a transaction. On that same transaction, the originator also wants to collect a commission from the lender. What does the LO Compensation Rule say about this?

• a.It is allowed if both amounts are disclosed
• b.It is allowed if the total does not exceed 3% of the loan
• c.It is allowed with the borrower's written consent
• d.It is prohibited dual compensation✓

Reg Z 1026.36 generally bans dual compensation: if a loan originator receives compensation directly from the consumer, no other person may pay the originator on that transaction, and vice versa. Disclosure or consent does not cure the violation. The rule prevents a borrower from unknowingly paying twice.Loan Originator Compensation Rule (Reg Z 1026.36)

A loan originator has two loan products available for a qualified borrower. Product A pays the originator a higher commission but carries a higher rate; Product B is cheaper for the borrower. The originator directs the borrower to Product A to earn more. This practice is best described as:

• a.Prohibited steering✓
• b.Permissible cross-selling
• c.An affiliated business arrangement
• d.A qualified mortgage

Reg Z 1026.36's anti-steering provision prohibits directing a consumer to a loan based on the fact that it produces greater compensation for the originator, unless the loan is in the consumer's interest. Steering a borrower into a costlier product to increase pay violates the rule. This is unrelated to affiliated business or QM status.Loan Originator Compensation Rule (Reg Z 1026.36)

Under Reg Z, which arrangement for changing a loan originator's compensation is generally permitted?

• a.Reducing the originator's pay to cover a pricing concession the borrower requested
• b.Increasing pay when the borrower accepts a higher interest rate
• c.Paying more for adjustable-rate loans than fixed-rate loans✓
• d.Paying compensation based on a fixed percentage of the loan amount

Compensation based on a fixed percentage of the loan amount is expressly permitted because the loan amount is not treated as a prohibited transaction term for this purpose. Tying pay to interest rate or loan type (ARM vs. fixed) is prohibited. Reducing an originator's own compensation to absorb a cost is only allowed in limited circumstances, not as a general practice.Loan Originator Compensation Rule (Reg Z 1026.36)

The anti-steering safe harbor under Reg Z is satisfied when the loan originator presents the consumer with loan options that include the loan with the lowest interest rate, the loan with the lowest total dollar amount for origination points/fees, and:

• a.The loan with the highest available loan amount
• b.The loan with the lowest interest rate without risky features such as prepayment penalties or negative amortization✓
• c.The loan the originator personally recommends
• d.The loan with the shortest term

The safe harbor requires presenting, for each loan type the consumer expresses interest in, the loan with the lowest interest rate, the loan with the lowest rate that lacks risky features (e.g., negative amortization, balloon, prepayment penalty), and the loan with the lowest total dollar amount of origination points and fees. Meeting these presentation requirements protects the originator from steering claims.Loan Originator Compensation Rule (Reg Z 1026.36)

The Ability-to-Repay rule requires a creditor to make a reasonable, good-faith determination of the consumer's ability to repay. Which of the following is NOT one of the underwriting factors the rule requires the creditor to consider and verify?

• a.Current or reasonably expected income or assets
• b.Current debt obligations, alimony, and child support
• c.Employment status
• d.The consumer's race or national origin✓

Reg Z 1026.43 lists eight underwriting factors, including income/assets, employment status, monthly mortgage payment, other debts, current obligations such as alimony/child support, monthly debt-to-income ratio or residual income, and credit history. A consumer's race or national origin is never a permissible underwriting factor and considering it would violate fair lending laws.Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)

For a Qualified Mortgage of $100,000 or more, the total points and fees generally may not exceed what percentage of the total loan amount?

• a.3 percent✓
• b.5 percent
• c.8 percent
• d.10 percent

For a QM with a loan amount of $100,000 or more (thresholds are adjusted annually for inflation), total points and fees generally cannot exceed 3% of the total loan amount. Smaller loans are allowed higher percentage caps because fixed costs are a larger share. Exceeding the applicable cap disqualifies the loan from QM status and its liability protections.Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)

Which loan feature is generally NOT permitted in a Qualified Mortgage?

• a.A fully amortizing 30-year term
• b.Negative amortization that increases the principal balance✓
• c.A fixed interest rate
• d.Verified income documentation

A QM cannot have negative-amortization, interest-only, or balloon-payment features (with narrow exceptions for certain small-creditor loans), and its term cannot exceed 30 years. Negative amortization, which increases the principal over time, is expressly prohibited. Fully amortizing fixed-rate loans with verified income are hallmarks of a QM.Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)

When underwriting an adjustable-rate Qualified Mortgage, the monthly payment used to evaluate the consumer's ability to repay must generally be calculated using:

• a.The initial teaser rate only
• b.The lowest possible rate over the loan's life
• c.The maximum interest rate that could apply in the first five years (or the fully indexed rate, whichever is greater)✓
• d.The average of all rates over the loan term

For ATR/QM purposes, the payment on an adjustable-rate mortgage must be calculated using the greater of the fully indexed rate or the introductory rate, and a monthly payment that fully amortizes the loan; for many ARMs the rule requires using the maximum rate in the first five years. Using only the low teaser rate would understate the true payment burden and is not permitted.Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)

A loan originator calls an appraiser before the report is finished and says the deal needs the home to appraise at least at the contract price to close. Under the appraisal independence requirements, this communication is:

• a.Acceptable, because the originator is explaining the loan terms
• b.Acceptable, because the value is only a suggestion
• c.Acceptable if the appraiser agrees in writing
• d.Prohibited coercion of the appraiser✓

Appraisal independence rules under TILA/Reg Z prohibit coercing, influencing, or otherwise encouraging an appraiser to reach a predetermined or target value. Telling an appraiser what value is 'needed' to close is exactly the kind of pressure the rule bans. Legitimate communication about factual property details is allowed, but pressuring for a target value is not.Appraisal Independence Requirements (TILA / Reg Z 1026.42)

The Home Valuation Code of Conduct (HVCC) was largely superseded by which framework establishing appraisal independence?

• a.The appraisal independence provisions of the Dodd-Frank Act codified in TILA✓
• b.The Bank Secrecy Act
• c.The Real Estate Settlement Procedures Act
• d.The Fair Credit Reporting Act

The HVCC was an interim agreement that was largely replaced when the Dodd-Frank Act added appraisal independence requirements to TILA, implemented in Reg Z. These provisions prohibit coercion and require customary and reasonable compensation for fee appraisers. RESPA, the BSA, and FCRA address different subject matter.Appraisal Independence Requirements (TILA / Reg Z 1026.42)

Which of the following is permitted under appraisal independence rules?

• a.Selecting an appraiser because the originator knows he will 'hit' the value
• b.Asking an appraiser to consider additional comparable sales and correct factual errors✓
• c.Withholding payment until the appraiser raises the value
• d.Promising future business if the value comes in high

Appraisal independence rules do not prohibit legitimate steps such as asking an appraiser to consider additional appropriate comparable properties, correct factual errors, or provide further support for the valuation. What is banned is coercion, value targeting, and conditioning pay or future work on a particular result. Choosing an appraiser for his tendency to hit values is prohibited.Appraisal Independence Requirements (TILA / Reg Z 1026.42)

A property securing a federally related mortgage is located in a Special Flood Hazard Area. What must the lender require?

• a.That the borrower waive all flood coverage
• b.That the property be relocated
• c.That the borrower obtain and maintain flood insurance✓
• d.That the loan be denied automatically

Under the Flood Disaster Protection Act, a lender making a loan secured by improved real property in a Special Flood Hazard Area of a community participating in the NFIP must require the borrower to obtain and maintain flood insurance. Being in an SFHA does not require denying the loan, only that flood coverage be in place.Flood Disaster Protection Act / National Flood Insurance Program

The required amount of flood insurance on a residential building is generally the least of the outstanding principal balance, the insurable value of the building, or:

• a.The full purchase price
• b.Twice the loan amount
• c.The county's median home price
• d.The maximum coverage available under the NFIP✓

Required flood coverage generally equals the least of: the outstanding principal balance of the loan, the maximum limit of coverage available under the NFIP for the property type, or the insurable (replacement) value of the building. Land value is excluded because land does not wash away. For residential buildings the NFIP maximum is a fixed statutory cap.Flood Disaster Protection Act / National Flood Insurance Program

A borrower lets required flood insurance lapse. After proper notice, the servicer purchases coverage and charges the borrower. This is known as:

• a.Force-placed (lender-placed) flood insurance✓
• b.A qualified mortgage
• c.An affiliated business arrangement
• d.A right of rescission

When a borrower fails to maintain required flood insurance, the servicer may obtain force-placed (lender-placed) coverage and charge the cost to the borrower, but only after sending the borrower notice and allowing at least 45 days to obtain coverage. If the borrower later provides proof of their own coverage, the servicer must terminate the force-placed policy and refund overlapping premiums.Flood Disaster Protection Act / National Flood Insurance Program

Under the Mortgage Acts and Practices Advertising Rule (Regulation N), which advertising practice is prohibited?

• a.Stating the actual annual percentage rate clearly
• b.Misrepresenting that a mortgage product is endorsed or affiliated with a government agency when it is not✓
• c.Listing the lender's NMLS unique identifier
• d.Disclosing that rates are subject to change

Regulation N prohibits any material misrepresentation in commercial communications about mortgage credit products, including false claims of government endorsement or affiliation. Truthful statements of the APR, disclosure that rates may change, and listing the NMLS ID are all proper. The rule targets deceptive advertising that could mislead consumers.Mortgage Acts and Practices Advertising Rule (Reg N, 12 CFR 1014)

An advertisement states 'Fixed 3.5% payment for life!' when in fact only the minimum payment is fixed and the interest rate adjusts, causing the balance to grow. Under Regulation N this ad is:

• a.Compliant because a number is disclosed
• b.Compliant because payments are technically fixed
• c.A prohibited misrepresentation about the existence or amount of payments✓
• d.Exempt because it is a teaser rate

Regulation N specifically bars misrepresentations about the terms, amounts, payments, or existence of fees, including implying a fixed payment or rate that is not truly fixed. Advertising a 'payment for life' that hides negative amortization deceives consumers about the true cost. The presence of a number does not cure a misleading impression.Mortgage Acts and Practices Advertising Rule (Reg N, 12 CFR 1014)

A title company pays a mortgage broker $200 for each borrower the broker refers, regardless of any services performed. Under RESPA, this arrangement is:

• a.Permitted as a marketing expense
• b.Permitted if under $500
• c.Permitted if disclosed at closing
• d.A prohibited kickback for referrals✓

RESPA Section 8(a) prohibits giving or accepting any fee, kickback, or thing of value for the referral of settlement service business involving a federally related mortgage. Paying for referrals themselves is illegal regardless of amount or disclosure. Only payments for goods or services actually furnished at reasonable market value are permitted.Real Estate Settlement Procedures Act (RESPA Section 8)

For an Affiliated Business Arrangement to fall within RESPA's exception to the anti-kickback rule, the person making the referral must generally do all of the following EXCEPT:

• a.Guarantee the affiliate will offer the lowest price✓
• b.Disclose the affiliate relationship to the consumer
• c.Not require the consumer to use the affiliated provider
• d.Limit the return received to a return on ownership interest

The Affiliated Business Arrangement exception requires written disclosure of the relationship, that the consumer not be required to use the affiliate (with narrow exceptions), and that the only thing of value received be a return on the ownership interest. There is no requirement to guarantee the lowest price, and promising that would not satisfy the exception.Real Estate Settlement Procedures Act (RESPA Section 8)

Which payment is generally permitted under RESPA Section 8?

• a.A gift card to a real estate agent for sending a buyer
• b.A payment to an appraiser for an appraisal actually performed at market value✓
• c.A fee split with a broker who did no work
• d.A finder's fee for a referral

RESPA Section 8(c) permits payments for goods or facilities actually furnished or services actually performed, as long as the payment bears a reasonable relationship to market value. Paying an appraiser for a real appraisal is legitimate. Gifts, finder's fees, and split fees for referrals with no work performed are prohibited kickbacks.Real Estate Settlement Procedures Act (RESPA Section 8)

A homeowner refinances the mortgage on her principal dwelling with a new lender. Under TILA, how long is her right to rescind the transaction after receiving the required disclosures and notice of the right to rescind?

• a.Until the loan funds
• b.Until noon the next day
• c.Until midnight of the third business day✓
• d.Until the end of 30 days

For a refinance or other non-purchase-money loan secured by the consumer's principal dwelling, TILA gives a right to rescind until midnight of the third business day following consummation, delivery of the material disclosures, or delivery of the rescission notice, whichever occurs last. Business days for this purpose include Saturdays but not Sundays or federal holidays.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

Which of the following transactions carries a TILA right of rescission?

• a.A loan to purchase a new primary home
• b.A loan secured by an investment rental property
• c.A loan to purchase a vacation second home
• d.A refinance that increases the loan on the borrower's primary residence✓

The TILA right of rescission applies to consumer credit transactions in which a security interest is taken in the consumer's principal dwelling, but it does NOT apply to residential mortgage transactions used to acquire or construct that dwelling (purchase-money loans). A refinance of the primary residence is subject to rescission; purchase loans and loans on non-principal dwellings are not.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

If a lender never provides the required material TILA disclosures or notice of the right to rescind on a rescindable refinance, the borrower's right of rescission may be extended for up to:

• a.Three years from consummation✓
• b.Six months from consummation
• c.One year from consummation
• d.Ten years from consummation

When the required material disclosures or the notice of the right to rescind are not delivered, the standard three-business-day period is extended, and the right to rescind can last up to three years after consummation (or until the property is sold, whichever comes first). This gives lenders a strong incentive to deliver accurate disclosures promptly.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

On a rescindable transaction, when may the lender disburse loan funds?

• a.Immediately at signing
• b.Only after the three-business-day rescission period has expired without rescission✓
• c.Within 24 hours of application
• d.Only after 30 days

On a transaction subject to the right of rescission, the creditor generally may not disburse funds, and no work may be performed, until the three-business-day rescission period has expired and the lender is reasonably satisfied the consumer has not rescinded. Disbursing early would defeat the consumer's protected right to cancel.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

A borrower sends her servicer a written notice claiming a payment was misapplied. Under Reg X error-resolution rules, within how many business days must the servicer acknowledge receipt of the notice of error?

• a.Within 2 business days
• b.Within 3 business days
• c.Within 5 business days✓
• d.Within 15 business days

Under RESPA's Regulation X, a servicer must provide a written acknowledgment of a notice of error within 5 business days of receiving it. The servicer must then investigate and respond, generally within 30 business days (extendable by 15 business days in some cases). These timelines protect borrowers from unresolved servicing errors.Real Estate Settlement Procedures Act (Reg X servicing rules)

Under Reg X, before a servicer may charge a borrower for force-placed hazard insurance, it must generally send an initial notice and then wait at least how long before charging?

• a.10 days
• b.15 days
• c.30 days
• d.45 days✓

Regulation X requires a servicer to deliver an initial notice at least 45 days before charging for force-placed insurance, and a second reminder notice no earlier than 30 days after the first, before assessing any premium. If the borrower provides proof of their own hazard coverage, the servicer must cancel the force-placed policy and refund duplicate charges.Real Estate Settlement Procedures Act (Reg X servicing rules)

A borrower becomes 45 days delinquent. Under Reg X's early intervention requirements, the servicer must generally:

• a.Make good-faith efforts to establish live contact and provide information about loss mitigation options✓
• b.Immediately begin foreclosure
• c.Sell the loan to another servicer
• d.File a Suspicious Activity Report

Regulation X's early intervention rules require servicers to make good-faith efforts to establish live contact with delinquent borrowers by the 36th day of delinquency and to provide written information about available loss mitigation options by the 45th day. These rules are meant to help borrowers avoid foreclosure, not accelerate it.Real Estate Settlement Procedures Act (Reg X servicing rules)

An applicant provides identity documents that appear altered, then abruptly withdraws the application when asked for verification. The loan officer suspects fraud. What is the most appropriate first step under the company's AML program?

• a.Approve the loan to avoid conflict
• b.Report the concern internally so the company can evaluate filing a SAR with FinCEN✓
• c.Call the applicant's employer directly
• d.Post about the applicant online

Under an AML program, employees who detect suspicious activity should escalate the concern through internal channels (such as the designated compliance officer) so the company can evaluate whether a SAR must be filed with FinCEN. Loan originators are typically not the ones who file directly, but they must recognize and report red flags. Confronting third parties or ignoring the issue is improper.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

Under Reg Z 1026.36, which of the following is generally required of individual loan originators?

• a.They must always work for the lowest-cost lender
• b.They must guarantee loan approval
• c.They must meet qualification standards including character, fitness, and criminal background checks✓
• d.They must personally fund the loans they originate

Reg Z 1026.36 requires that individual loan originators meet qualification requirements, including standards of character and general fitness and criminal background checks comparable to those required under the SAFE Act, and be properly identified with NMLS unique identifiers. It does not require originators to fund loans, guarantee approval, or work for the cheapest lender.Loan Originator Compensation Rule (Reg Z 1026.36)

Which statement about a 'Qualified Mortgage' is accurate?

• a.A QM guarantees the borrower cannot default
• b.A QM eliminates the need to verify income
• c.A QM must have a balloon payment
• d.A QM provides the lender certain protections from ability-to-repay liability✓

A Qualified Mortgage is a category of loan that meets specific product and underwriting criteria and, in return, gives the creditor a presumption of compliance (safe harbor or rebuttable presumption) with the ability-to-repay requirement. A QM does not guarantee against default, does not waive income verification, and generally cannot have balloon or risky features.Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)

Two loan officers agree that each will send the other's spouse's insurance agency referrals in exchange for cash per closed deal. Under RESPA, this reciprocal referral-for-fee agreement is:

• a.A prohibited kickback arrangement✓
• b.Allowed because it is reciprocal
• c.Allowed because both are licensed
• d.Allowed if under $1,000 per year

RESPA Section 8 prohibits any agreement or understanding to refer settlement service business in exchange for a thing of value. Reciprocity, licensing, or a dollar threshold does not make the arrangement legal; paying per referral is exactly what the statute forbids. Only payment for services actually performed at reasonable value is allowed.Real Estate Settlement Procedures Act (RESPA Section 8)

On a rescindable refinance, how many copies of the notice of the right to rescind must generally be given to each consumer who has the right to rescind?

• a.One copy
• b.Two copies✓
• c.Four copies
• d.No copies are required

Reg Z generally requires that each consumer entitled to rescind receive two copies of the notice of the right to rescind, so that one can be kept and one used to exercise the right if desired. All consumers with an ownership interest in the principal dwelling have the right to rescind, and any one of them exercising it cancels the transaction for all.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

Regulation N (the MAP Advertising Rule) applies to commercial communications about mortgage credit products made by which of the following?

• a.Only federally chartered banks
• b.Only real estate agents
• c.A broad range of persons, including mortgage brokers, lenders, servicers, and advertisers✓
• d.Only appraisers

The Mortgage Acts and Practices Advertising Rule (Regulation N) applies broadly to persons who advertise mortgage credit products, including mortgage brokers, lenders, servicers, advertising agencies, and others involved in such commercial communications. Its prohibition on material misrepresentations is not limited to a single category of entity.Mortgage Acts and Practices Advertising Rule (Reg N, 12 CFR 1014)

Before closing a loan secured by improved real estate, a lender must obtain a determination of whether the property is located in a Special Flood Hazard Area. This determination is documented on:

• a.The Loan Estimate
• b.A Suspicious Activity Report
• c.The appraisal report
• d.The Standard Flood Hazard Determination Form✓

Federal flood rules require lenders to complete the Standard Flood Hazard Determination Form (SFHDF) to document whether the property securing the loan is in a Special Flood Hazard Area. This determination drives whether flood insurance is required. The Loan Estimate, appraisal, and SAR serve entirely different purposes.Flood Disaster Protection Act / National Flood Insurance Program

A borrower submits a complete loss mitigation application 40 days before a scheduled foreclosure sale. Under Reg X, the servicer generally must:

• a.Evaluate the application and not proceed to foreclosure sale while it is pending review✓
• b.Ignore the application because foreclosure has started
• c.Immediately deny all options
• d.Charge a review fee before evaluating

Regulation X's loss mitigation procedures generally prohibit a servicer from proceeding to a foreclosure sale (the 'dual tracking' prohibition) while a complete loss mitigation application submitted more than 37 days before the sale is pending evaluation. The servicer must review the application and give the borrower an opportunity to accept or appeal an offer before moving forward.Real Estate Settlement Procedures Act (Reg X servicing rules)

A branch manager proposes paying originators an extra bonus on any loan that closes with a rate at least 0.25% above par. Under the LO Compensation Rule, this bonus structure is:

• a.Permitted because bonuses are always allowed
• b.Prohibited because it bases compensation on a transaction term (the interest rate)✓
• c.Permitted if the bonus is under $500
• d.Permitted if disclosed on the Closing Disclosure

Basing any part of an originator's compensation on the interest rate is prohibited because the rate is a term of the transaction. A bonus tied to closing above-par-rate loans directly incentivizes charging consumers higher rates and violates Reg Z 1026.36. Neither a dollar cap nor disclosure would make it compliant.Loan Originator Compensation Rule (Reg Z 1026.36)

Which of the following best describes 'structuring' as a red flag under anti-money laundering rules?

• a.Buying flood insurance in installments
• b.Refinancing to a lower rate
• c.Breaking a large cash transaction into smaller amounts to evade reporting thresholds✓
• d.Paying off a loan early

Structuring means deliberately breaking up a large currency transaction into multiple smaller transactions to keep each one below the reporting threshold and avoid triggering a Currency Transaction Report. It is a recognized money-laundering red flag and is itself a federal crime. Legitimate activities like refinancing or early payoff are not structuring.Bank Secrecy Act / Anti-Money Laundering (FinCEN rules)

Under appraisal independence rules, a person who prepares a valuation must generally be compensated at:

• a.The lowest fee the lender can negotiate
• b.A fee set entirely by the loan originator
• c.No fee at all
• d.A rate that is customary and reasonable for the geographic market✓

The Dodd-Frank appraisal independence provisions require that fee appraisers be paid a rate that is customary and reasonable for appraisal services performed in the geographic market where the property is located. This protects appraiser independence by preventing pressure through artificially low fees. Loan originators cannot unilaterally suppress the fee.Appraisal Independence Requirements (TILA / Reg Z 1026.42)

A borrower validly exercises the right of rescission on a home equity refinance within the three-day window. What is the effect on the security interest?

• a.The security interest becomes void and the lender must return fees within 20 days✓
• b.The borrower still owes all fees immediately
• c.The lender may keep the loan proceeds
• d.The rescission has no legal effect

When a consumer rescinds, the security interest becomes void and the consumer is not liable for any amount, including finance charges. Within 20 calendar days after receiving the rescission notice, the creditor must return any money or property and take action to reflect that the security interest is terminated. The consumer then tenders the loan proceeds.Truth in Lending Act (Right of Rescission, Reg Z 1026.23)

Under Reg X, a servicer generally may not make the first notice or filing required for a foreclosure until the borrower is more than how many days delinquent?

• a.30 days
• b.120 days✓
• c.60 days
• d.90 days

Regulation X generally prohibits a servicer from making the first notice or filing for a foreclosure process until the borrower's mortgage loan obligation is more than 120 days delinquent. This waiting period gives borrowers time to pursue loss mitigation options before foreclosure proceedings begin.Real Estate Settlement Procedures Act (Reg X servicing rules)

A lender wants to keep records of its mortgage advertisements to comply with Regulation N. Which practice best supports compliance?

• a.Deleting ads immediately after they run
• b.Relying only on verbal approval of ad copy
• c.Retaining copies of commercial communications and materially different versions for the required period✓
• d.Advertising only rates that are lower than actually offered

Regulation N includes recordkeeping requirements directing covered persons to retain copies of materially different commercial communications, sales scripts, and related materials regarding mortgage credit products for a set period (generally 24 months). Good recordkeeping demonstrates that advertisements were not deceptive. Deleting ads or advertising unavailable rates undermines compliance.Mortgage Acts and Practices Advertising Rule (Reg N, 12 CFR 1014)