Where do you actually stand?

Every question in this diagnostic

1. The Real Estate Settlement Procedures Act (RESPA) bars giving or accepting a thing of value under an agreement to do what?

   • A Refer settlement service business to a person Correct
   • B Set a price above the local market rate Pricing above the market is not the conduct barred, which is a thing of value tied to an agreement to refer business.
   • C Share an office with a settlement service provider Office sharing on its own is not an agreement that business will be referred.
   • D Advertise a settlement service to past clients Advertising to past clients exchanges nothing of value for referrals.

   Giving or accepting any fee, kickback or other thing of value under an agreement or understanding that settlement service business will be referred is barred. The agreement need not be written, since an oral one or any other kind counts.

   Regulation X, 12 CFR s. 1024.14(b)

2. Which characteristic is a prohibited basis under the Equal Credit Opportunity Act (ECOA) and Regulation B?

   • A Income from a public assistance program Correct
   • B Familial status, such as children in the home Familial status is a Fair Housing Act basis and does not appear on the list of prohibited bases in Regulation B.
   • C Physical handicap or disability of the applicant Handicap is a Fair Housing Act basis; the list in Regulation B does not carry it.
   • D The applicant's occupation and length of employment Occupation and job tenure are ordinary underwriting facts and are not on the list at all.

   Income from a public assistance program is a prohibited basis, along with race, color, religion, national origin, sex, marital status, age and the good faith exercise of a right under the Consumer Credit Protection Act. Handicap and familial status are not on this list; they belong to the Fair Housing Act.

   Regulation B, 12 CFR s. 1002.2(z)

3. Regulation B gives a creditor how long to notify an applicant of the action taken on a completed application?

   • A 30 days after receiving the completed application Correct
   • B 30 days after the first contact with the applicant The period runs from the completed application, so a first phone call or an incomplete file does not start it.
   • C 60 days after receiving the completed application Sixty days is not the notification period in this paragraph.
   • D 15 days after the credit decision is made The rule measures from receipt of the completed application, not from the day the decision is reached.

   Approval, counteroffer or adverse action must be communicated within 30 days after the creditor receives a completed application. The clock starts on completeness, not on the first contact with the applicant.

   Regulation B, 12 CFR s. 1002.9(a)(1)(i)

4. Under the Truth in Lending Act (TILA), each of these carries a right of rescission EXCEPT:

   • A A loan to buy the consumer's principal dwelling Correct
   • B A home equity line on the principal dwelling A home equity line on the principal dwelling does not finance its acquisition and is not on the exempt list.
   • C A cash-out refinance with a different creditor A refinance with a different creditor is fully rescindable, and only a same-creditor refinance is limited.
   • D A second mortgage taken out for home repairs A second mortgage on the principal dwelling does not finance its acquisition, so the purchase-money exemption does not cover it.

   A residential mortgage transaction, meaning the loan that finances the acquisition or initial construction of the consumer's principal dwelling, is on the list of transactions the right to rescind does not reach, while a refinance with a new creditor, a home equity line and a second mortgage on that dwelling all carry the right.

   Regulation Z, 12 CFR s. 1026.23(f)(1)

5. Which prepayment penalty term makes a loan a high-cost mortgage under Regulation Z?

   • A One chargeable more than 36 months after consummation Correct
   • B One chargeable more than 12 months after consummation The window in the coverage test is three years from consummation, not one.
   • C Any prepayment penalty on a first-lien loan A prepayment penalty is not a high-cost trigger by itself; its length or its size is what does it.
   • D One capped at 2% of the amount prepaid The size trigger is penalties that can exceed 2 percent of the amount prepaid, and a cap of 2 percent never exceeds it.

   A loan is a high-cost mortgage where the contract lets the creditor charge a prepayment penalty more than 36 months after consummation, or penalties that can total more than 2 percent of the amount prepaid, and a loan that becomes high cost on this test may then carry no prepayment penalty at all.

   Regulation Z, 12 CFR s. 1026.32(a)(1)(iii)

6. The Secure and Fair Enforcement for Mortgage Licensing Act encouraged the states to set up the national registry through which of these bodies?

   • A The Conference of State Bank Supervisors Correct
   • B The Department of Housing and Urban Development This department is a federal agency and is not one of the two state regulator associations the section names.
   • C The Consumer Financial Protection Bureau The Bureau is not named in this section among the bodies the states were encouraged to work through.
   • D The Federal Housing Finance Agency This federal agency is not one of the two associations of state regulators the section names.

   Two associations of state regulators, the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, are the bodies the states were encouraged to work through in setting up the registry. Neither one is a federal agency.

   SAFE Act, 12 USC s. 5101

7. Under the Secure and Fair Enforcement for Mortgage Licensing Act, which work is an administrative or clerical task?

   • A Gathering file information from the consumer Correct
   • B Advising the consumer which rate option suits her Counseling a consumer about which loan rate to take is outside the clerical definition and is originator work.
   • C Negotiating the loan terms with the consumer Negotiating terms is the activity the licensing requirement exists for, and the clerical definition does not reach it.
   • D Deciding whether the file meets underwriting guidelines The definition covers moving information around, not making the credit decision the information supports.

   Receiving, collecting and distributing the information a file needs for processing or underwriting, and contacting the consumer to get it, is the clerical work the definition covers. Advising on a rate, negotiating terms and deciding whether the file qualifies are not.

   SAFE Act, 12 USC s. 5102(4)(C)

8. On a variable-rate loan, what does Regulation Z mean by the fully-indexed rate?

   • A The index plus the margin at consummation Correct
   • B The discounted rate the borrower starts on An introductory or discounted rate is what the borrower actually pays at first, which is a different figure.
   • C The maximum rate under the lifetime cap The lifetime cap sets the ceiling the rate may ever reach, not the rate the index and margin produce.
   • D The rate at the first scheduled adjustment The rate at the first adjustment turns on the index value on that later date, not on the value at consummation.

   The fully-indexed rate is the rate worked out from the index value and the margin at consummation, with no introductory discount applied. A lifetime cap only sets a ceiling, which is a different figure.

   Regulation Z, 12 CFR s. 1026.18(s)(7)(vi)

9. A borrower is offered a 5/1 adjustable-rate mortgage and asks when her rate can first move and how often after that. What do the two numbers tell her?

   • A The rate holds five years, then adjusts yearly Correct
   • B The rate holds one year, then adjusts every five This reverses the two numbers, and the first is the length of the initial rate period.
   • C The rate may adjust five times, once a year The second number is the adjustment period, not a count of how many adjustments the loan allows.
   • D The rate is capped at 5% for one year Neither number is a rate or a cap, because both describe timing.

   In a 5/1 adjustable-rate mortgage the first number is how long the initial rate lasts and the second is how often it changes afterward: five years fixed, then yearly adjustments. Reading the numbers the other way round gives one year fixed and a change every five.

   Consumer Handbook on Adjustable-Rate Mortgages, p. 4 Reference document, not law.

10. What kind of credit is a home equity line of credit, and what serves as the collateral for it?

    • A Revolving credit secured by the consumer's home Correct
    • B Closed-end credit secured by the consumer's home A closed-end loan is advanced once and then repaid, while a line lets the borrower draw again during the draw period.
    • C Revolving credit secured by the consumer's deposits The home is the collateral for these plans, and a deposit account is not.
    • D Closed-end credit advanced in a single unsecured sum A single unsecured advance describes a different product entirely.

    A home equity line of credit is revolving credit with the home as collateral, which lets the borrower draw, repay and draw again during the draw period. A closed-end loan, by contrast, is advanced once and then repaid.

    What You Should Know About Home Equity Lines of Credit, p. 6 Reference document, not law.

11. Under Regulation Z, when does the amount owed on a reverse mortgage become due, apart from default?

    • A On death, transfer or move-out Correct
    • B When the consumer reaches a stated age Reaching an age is not one of the three events that make the balance due.
    • C At the end of a fixed ten-year term The obligation is not written to a fixed maturity date of this kind.
    • D When the balance first exceeds the property's value The loan is nonrecourse, so a balance above the property's value does not by itself make it payable.

    A reverse mortgage transaction is a nonrecourse obligation on which principal, interest and any shared appreciation fall due, other than on default, only after the consumer dies, the dwelling is transferred, or the consumer stops occupying it as a principal dwelling.

    Regulation Z, 12 CFR s. 1026.33(a)(2)

12. Which three things set the principal and interest payment on a mortgage?

    • A The loan amount, the interest rate and the term Correct
    • B The loan amount, the credit score and the term A credit score helps price the interest rate, and it is not an input to the payment itself.
    • C The purchase price, the down payment and the taxes Property taxes are collected alongside the payment rather than forming part of the principal and interest.
    • D The interest rate, the credit score and the insurance Homeowner's insurance is a separate cost, and the credit score is not an input to this calculation.

    The principal and interest payment depends on the home loan amount, the interest rate, and the number of years it takes to repay the loan, so nothing else enters that part of the payment.

    Your Home Loan Toolkit, p. 5 Reference document, not law.

13. Who gathers the legal documents, closes the loan and handles the money involved in a home purchase?

    • A The closing agent Correct
    • B The loan processor The processor assembles the loan file for underwriting and does not run the closing or hold the money.
    • C The underwriter The underwriter decides whether the loan is approved, which happens before anyone reaches the closing table.
    • D The appraiser The appraiser reports on the value of the property and has no part in the closing itself.

    The closing agent does that work, and the title varies by region: in most of the country the person is a settlement agent, and in several western states the same role is called an escrow agent.

    Your Home Loan Toolkit, p. 17 Reference document, not law.

14. About what share of a credit score rests on paying bills on time?

    • A 10% The booklet puts payment history well above this share, and names it as the largest component.
    • B 15% This is under the share the booklet gives payment history, which it puts above every other component.
    • C 30% The booklet puts about 30 percent on how much debt the borrower owes, which it names second.
    • D 35% Correct

    About 35 percent of a credit score rests on paying bills on time, which makes payment history the largest part the booklet names. How much debt is owed comes second, at about 30 percent.

    Your Home Loan Toolkit, p. 7 Reference document, not law.

15. What does the estimated total monthly payment on an adjustable-rate mortgage include?

    • A Principal, interest, taxes and insurance Correct
    • B Principal and interest only Principal and interest are only part of the figure, which is why the line is called the total monthly payment.
    • C Principal, interest and mortgage insurance Mortgage insurance is in the figure, but so are taxes, homeowners insurance and other escrow items.
    • D Principal, interest and property taxes Property taxes are in the figure, but so are mortgage insurance, homeowners insurance and other escrow items.

    The payments shown include mortgage insurance, property taxes, homeowners insurance and any additional property assessments or other escrow items, so comparing two offers on principal and interest alone leaves out part of the cost.

    Consumer Handbook on Adjustable-Rate Mortgages, p. 7 Reference document, not law.

16. A post-closing audit shows the borrower paid more than the zero tolerance rule allowed. What must the creditor do to cure it?

    • A Refund the excess within 30 days of closing Sixty days is the cure period here; 30 days belongs to corrected disclosures after a post-consummation event.
    • B Send corrected disclosures alone within 60 days A corrected disclosure without the money back leaves the consumer out of pocket, so it is not a cure.
    • C Refund and correct the disclosures within 60 days Correct
    • D Credit the excess against the first payment The rule pairs the refund with corrected disclosures delivered within 60 days, and this step sends none.

    The cure has two halves: the creditor must refund the excess to the consumer and must deliver corrected disclosures reflecting that refund, each no later than 60 days after consummation.

    Regulation Z, 12 CFR s. 1026.19(f)(2)(v)

17. If a borrower pays a mortgage broker directly at closing, when may the lender also pay the broker on that loan?

    • A Never Correct
    • B If the total stays reasonable The bar is absolute for that transaction and does not soften when the total looks reasonable.
    • C If the borrower is told Telling the borrower does not lift the bar, because the rule prohibits the second payment rather than a hidden one.
    • D After the loan closes Waiting until after closing does not help, since the ban reaches any payment in connection with the transaction.

    Once a loan originator receives compensation directly from the consumer on a dwelling-secured transaction, no one else may pay that originator anything in connection with it, and a person who knows of the consumer-paid compensation may not pay either. Telling the borrower does not lift the bar, since the second payment itself is what is barred.

    Regulation Z, 12 CFR s. 1026.36(d)(2)(i)(A)

18. An advertisement for credit states specific credit terms. Which terms may it state?

    • A Only terms the creditor is or will be offering Correct
    • B Any terms the consumer might qualify for elsewhere What a consumer could get from someone else is not a term this creditor is arranging or offering.
    • C Terms the creditor once offered but has discontinued A term that is no longer offered is not one that actually is or will be arranged.
    • D Terms the creditor could offer if the market improved A term the creditor might reach under better conditions is not one it actually is or will be offering.

    If an advertisement states specific credit terms it may state only those terms that actually are or will be arranged or offered by the creditor, which closes off the rate advertised to draw calls that nobody can get.

    Regulation Z, 12 CFR s. 1026.24(a)

19. Under the Truth in Lending Act (TILA), an advertisement that states the monthly payment must also state:

    • A Down payment, repayment terms and annual percentage rate Correct
    • B The annual percentage rate and total finance charge The amount of a finance charge is itself a triggering term rather than one of the additions the rule requires.
    • C Loan amount, closing costs and license number None of those three appears on the list of additional terms the rule requires.
    • D None, if no rate is stated The amount of a payment is a triggering term on its own, so stating no rate does not avoid the additions.

    Stating the amount of a payment means the ad must also give the amount or percentage of the down payment, the terms of repayment over the full loan term, and the annual percentage rate, using that term. Leaving the rate out of the ad does not avoid them.

    Regulation Z, 12 CFR s. 1026.24(d)

20. Which factors does the Fair Housing Act bar a lender from using to set a loan's rate or term?

    • A Race, color, religion, sex, handicap, familial status, national origin Correct
    • B Race, color, religion, age, marital status, national origin Age and marital status come from the Equal Credit Opportunity Act list, and handicap and familial status are missing here.
    • C Race, color, income source, sex, age, national origin Source of income and age are not on the list this rule names.
    • D Race, color, religion, sex, age, credit score, national origin A credit score is a lawful underwriting factor and not a protected characteristic.

    A lender may not set the type of loan, or fix its amount, interest rate, cost, duration or other terms, because of race, color, religion, sex, handicap, familial status or national origin. Age and marital status belong to a different list.

    24 CFR s. 100.130(b)(2)