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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)
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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)
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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)
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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)
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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)
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Which item, with the name, income, social security number, property address and loan amount, makes an application under the TILA-RESPA Integrated Disclosure rule (TRID)?
- A The property's estimated value Correct
- B A signed application form A signature is not one of the six items, so waiting for one does not hold the clock.
- C A credit report already pulled The number is given so that a credit report can be obtained; the report itself is not on the list.
- D Verified income documents Income is one of the six items, but verification of it is not.
Six pieces of information define an application for these disclosures: the name, income, social security number, property address, loan amount and an estimate of the property's value. Nothing has to be signed, pulled or verified first.
Regulation Z, 12 CFR s. 1026.2(a)(3)(ii)
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How long does a creditor have to deliver or mail the Loan Estimate after receiving the consumer's application?
- A No later than the third business day Correct
- B No later than the seventh business day The deadline after application is the third business day, not the seventh.
- C No later than three calendar days The period is counted in business days, not calendar days.
- D No later than the next business day Nothing in the rule demands next-day delivery; the window is three business days.
The creditor must deliver or place in the mail the Loan Estimate not later than the third business day after it receives the consumer's application, and the act that has to happen inside the window is delivery or mailing rather than the consumer's receipt.
Regulation Z, 12 CFR s. 1026.19(e)(1)(iii)(A)
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By when must the creditor ensure that the consumer receives the Closing Disclosure?
- A No later than three business days before consummation Correct
- B No later than three business days after consummation The disclosure has to be in the consumer's hands before consummation, which is the whole point of the waiting period.
- C No later than seven business days before consummation The Closing Disclosure has to be received three business days before consummation, and seven business days is not that timing.
- D At consummation, with the rest of the package Handing it over at the table gives the consumer none of the three-day period the rule requires.
The creditor must ensure the consumer receives the Closing Disclosure no later than three business days before consummation, and receipt is the standard here, unlike the Loan Estimate, where delivery or mailing is what has to happen in time.
Regulation Z, 12 CFR s. 1026.19(f)(1)(ii)(A)
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Two weeks after the Loan Estimate, the appraisal vendor raises its standard fee and the creditor issues a revised estimate. What happens to the tolerance?
- A It is not reset Correct
- B It resets for an unexpected event The event has to be specific to this consumer or this transaction, and a general price list is neither.
- C It resets with any revised estimate Issuing a revised estimate does nothing on its own; a stated ground for the revision has to exist first.
- D It resets once the consumer signs A consumer signature is not what resets a tolerance, and none is called for here.
A changed circumstance means an extraordinary or unexpected event, relied-on information that proved inaccurate, or new information specific to the consumer or transaction. A vendor repricing its standard fee is none of these, and a revised estimate issued on that ground does not reset the tolerance.
Regulation Z, 12 CFR s. 1026.19(e)(3)(iv)(A)
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A lender detects facts that may call for a suspicious activity report (SAR) and identifies no suspect. How long may it take to file?
- A Up to 60 calendar days from initial detection Correct
- B Up to 30 calendar days from initial detection That is the ordinary deadline, and it is extended by a further 30 days precisely because no suspect has been identified.
- C Up to 90 calendar days from initial detection No 90-day period appears in the rule; the outer limit is 60 calendar days.
- D Until a suspect is identified, with no outer limit The extension is capped, so a filer cannot wait indefinitely for a suspect to emerge.
A report is due no later than 30 calendar days after initial detection, and where no suspect has been identified the filer may take a further 30 days to find one, but the rule caps the total delay at 60 calendar days from that detection.
31 CFR s. 1029.320(b)(3)
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What is the stated purpose of the Truth in Lending Act (TILA)?
- A Meaningful disclosure so consumers can compare credit terms Correct
- B A ceiling on the interest rate a lender charges The Act regulates disclosure of the rate and says nothing about how high a rate may go.
- C A duty to approve a qualified borrower Nothing in the purpose clause obliges a lender to extend credit to anyone.
- D Standard settlement charges across every closing Standard settlement charges are not in the purpose clause, which is about meaningful disclosure of credit terms.
Meaningful disclosure of credit terms, so a consumer can compare credit terms more readily and avoid the uninformed use of credit, is TILA's stated purpose. It sets no rate ceiling and compels no lender to approve anyone.
15 USC s. 1601(a)
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By when must a financial institution submit its annual loan/application register for the calendar year the data cover?
- A By March 1 of the following year Correct
- B By January 31 of the following year January 31 is not the date the paragraph sets.
- C Within 30 days of year end The deadline is a fixed calendar date rather than a count of days after year end.
- D Quarterly, within 60 days of each quarter The paragraph sets an annual register due by March 1, not quarterly filings.
The register goes to the appropriate federal agency by March 1 following the calendar year the data were collected for, and the institution must keep its own copy of that register for at least three years.
Regulation C, 12 CFR s. 1003.5(a)(1)(i)
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A borrower disputes a collection item in her credit file directly with the consumer reporting agency. What does the agency owe her?
- A A free reinvestigation within 30 days of receipt Correct
- B A reinvestigation within 30 days of the date she wrote The 30 days run from the agency's receipt of the dispute, not from the day the consumer wrote.
- C A paid reinvestigation within 30 days of receipt The reinvestigation is free of charge, which the statute says in terms.
- D Deletion of the item on request, without investigation Deletion is one possible outcome of the reinvestigation, not an alternative to doing one.
The agency must conduct a reasonable reinvestigation free of charge and either record the current status of the item or delete it, before the end of the 30 day period that begins when it receives the dispute.
15 USC s. 1681i(a)(1)(A)
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A borrower applies to a bank in March and the loan closes in May with the bank as servicer. Under the Gramm-Leach-Bliley Act (GLBA), when is the initial privacy notice due?
- A At the May closing Correct
- B At the March application At application there is no customer relationship yet, so the paragraph does not bite then.
- C 30 days after closing The paragraph fixes the deadline at establishment of the relationship, not a month after it.
- D With the first annual notice The initial notice is due no later than when the relationship is established, which is the May closing, not a later annual cycle.
An individual who becomes a customer must get a clear and conspicuous initial privacy notice no later than when the customer relationship is established, which on these facts is the May closing rather than the March application.
Regulation P, 12 CFR s. 1016.4(a)(1)
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Which aim is NOT one of the purposes Congress stated for the Real Estate Settlement Procedures Act (RESPA)?
- A More effective advance disclosure of settlement costs Advance disclosure of settlement costs to buyers and sellers is the first purpose the statute names.
- B Eliminating kickbacks and referral fees Ending kickbacks and referral fees that raise settlement costs is named as a purpose in the same paragraph.
- C Reducing the amounts placed in escrow accounts Cutting the amounts buyers must place in escrow for taxes and insurance is also a stated purpose.
- D Setting a national licensing standard for originators Correct
Four purposes make up the list: more effective advance disclosure of settlement costs, an end to kickbacks and referral fees that raise costs, a reduction in escrow amounts, and reform of local land title recordkeeping. A national licensing standard for originators is not among them.
12 USC s. 2601(b)
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Which terms must the Truth in Lending Act (TILA) disclosures show more conspicuously than the other terms of the transaction?
- A Annual percentage rate and finance charge Correct
- B Loan amount and monthly payment The loan amount and the payment are disclosed, but the statute gives neither the extra prominence it demands for two named terms.
- C Total of payments and amount financed The total of payments and the amount financed are ordinary disclosures rather than the two that must stand out.
- D Interest rate and loan term The rate the note carries and the loan term are not the terms the statute singles out; the annual percentage rate is the one that must stand out.
Annual percentage rate and finance charge are the two terms that must be disclosed more conspicuously than any other term, data or information, apart from the creditor's identity. The loan amount and the monthly payment get no such emphasis.
15 USC s. 1632(a)
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What is the stated purpose of the Home Mortgage Disclosure Act (HMDA)?
- A To show whether lenders serve housing needs Correct
- B To allocate credit to underserved neighborhoods The same section says the chapter is not intended to encourage unsound lending or the allocation of credit, so it publishes data rather than directing it.
- C To bar discrimination in mortgage lending Barring discrimination is not the purpose this section states.
- D To license the people who originate mortgage loans Licensing originators is not in the purpose clause, which is about information on housing needs.
The purpose is to give citizens and public officials enough information to judge whether depository institutions are serving the housing needs of their communities and to help officials direct public sector investment, and the same section says the law is not meant to encourage the allocation of credit.
12 USC s. 2801(b)
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Regulation Z, issued by the Consumer Financial Protection Bureau, implements which federal law?
- A Equal Credit Opportunity Act The Equal Credit Opportunity Act is carried out by Regulation B, not Regulation Z.
- B Truth in Lending Act Correct
- C Home Mortgage Disclosure Act The Home Mortgage Disclosure Act is carried out by Regulation C, not Regulation Z.
- D Fair Credit Reporting Act The Fair Credit Reporting Act is paired with Regulation V, not Regulation Z.
The Truth in Lending Act is the statute behind Regulation Z (12 CFR Part 1026): section 1026.1(a) states that the Consumer Financial Protection Bureau issues the regulation to implement that act. Equal credit, mortgage data reporting and credit reporting each sit under a different regulation.
Regulation Z, 12 CFR s. 1026.1(a)
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When may a borrower waive the three-day right to rescind under the Truth in Lending Act?
- A When the lender asks to close The waiver is the consumer's decision for the consumer's own emergency; a lender's scheduling request does not qualify.
- B When a rate lock is expiring An expiring rate lock is a pricing matter, not a bona fide personal financial emergency of the consumer.
- C When the seller must move A seller's moving date is someone else's timetable, and the rule allows a waiver only for the consumer's own financial emergency.
- D For a bona fide financial emergency Correct
A consumer may modify or waive the right to rescind only after deciding that the credit is needed to meet a bona fide personal financial emergency (Regulation Z, section 1026.23(e)). A lender's wish to close sooner, an expiring rate lock or a seller's moving date is not the consumer's own financial emergency.
Regulation Z, 12 CFR s. 1026.23(e)
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What does the Community Reinvestment Act encourage banks and other depository institutions to do?
- A Meet local credit needs Correct
- B Report loan data yearly Annual public disclosure of mortgage application and loan data is the Home Mortgage Disclosure Act's requirement.
- C Disclose loan costs Disclosing lending terms and costs to borrowers is the Truth in Lending Act's job, not the Community Reinvestment Act's.
- D Verify applicant identity The guide's account of the Community Reinvestment Act says nothing about checking an applicant's identity.
Depository institutions are encouraged to help meet the credit needs of their local communities, which is the aim the Community Reinvestment Act sets. Yearly loan data reporting and loan cost disclosure belong to other federal laws.
The Fed Explained, p. 124 Reference document, not law.
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If two co-owners borrow against the home they live in and only one sends a timely rescission notice, what happens?
- A The loan is rescinded for the sender only One consumer's rescission cannot leave the loan standing for the other; the rule makes it effective for everyone with the right.
- B The loan is rescinded for both Correct
- C The loan stays in force for both Only one of the consumers entitled to rescind has to act for the rescission to work.
- D The loan stands until the other agrees The other owner's agreement is not needed to rescind; it is needed only to waive the right.
Where several consumers each hold the right to rescind, 12 CFR 1026.23(a)(4) of Regulation Z lets a rescission by any one of them cancel the loan for everyone. Rescinding takes only one owner, while waiving the right takes the signature of every consumer entitled to rescind.
Regulation Z, 12 CFR s. 1026.23(a)(4)
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Which measure must a creditor consider in judging a consumer's ability to repay a mortgage under the Truth in Lending Act?
- A Loan-to-value ratio The loan's size against the home's value is not one of the listed ability-to-repay factors.
- B The consumer's age The consumer's age is not among the listed ability-to-repay factors.
- C Debt-to-income or residual income Correct
- D The home's appraised value The rule measures the consumer's income and debts, and it expressly leaves the value of the dwelling out of the income and assets considered.
Among the factors a creditor must consider, the ability-to-repay rule lists the consumer's monthly debt-to-income ratio or residual income. The ability-to-repay test looks at what the consumer earns and owes, not at the value of the home securing the loan.
Regulation Z, 12 CFR s. 1026.43(c)(2)(vii)
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Which item goes into a lender's Home Mortgage Disclosure Act data for an application it denies?
- A The principal reasons for denial Correct
- B The applicant's Social Security number The list of data points does not include the applicant's Social Security number.
- C The loan officer's commission The data points say nothing about what the loan officer is paid.
- D The applicant's employer's name The employer's name is not among the data points the lender records.
For a denied application, the data include the principal reason or reasons the institution denied it. None of the other items is a data point at all, and only a lender with a partial exemption under 12 CFR 1003.3(d) may leave the denial reasons out.
Regulation C, 12 CFR s. 1003.4(a)(16)
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Familial status under the Fair Housing Act protects a household with a child under age:
- A 16 The definition does not stop at 16; it covers anyone who has not reached 18.
- B 18 Correct
- C 21 Twenty-one is not the cutoff; a person who has turned 18 is outside the definition.
- D 25 The definition covers only individuals under 18, so a 25 cutoff overstates it.
Familial status means one or more individuals who have not reached 18 living with a parent, a legal custodian or that person's designee, under 42 USC 3602(k). A household with a child who has turned 18 falls outside the definition, while a pregnant person or one securing custody of a minor is covered.
Fair Housing Act, 42 USC s. 3602(k)
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Under the Red Flags Rule, the initial written identity theft prevention program must be approved by:
- A The Federal Trade Commission The program is the company's own; no agency approves it.
- B A state licensing regulator The rule places approval inside the company, not with a regulator.
- C The company's outside auditor An auditor may review the program but does not approve it under the rule.
- D The board or a board committee Correct
A financial institution or creditor must obtain approval of the initial written program from its board of directors or an appropriate committee of the board. Ongoing oversight may later involve a senior manager, but the first approval sits with the board.
16 CFR s. 681.1(e)(1)
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Which booklet, or a suitable substitute, must a lender give an applicant for an adjustable-rate loan on her principal dwelling?
- A Your Home Loan Toolkit The toolkit is the special information booklet for purchase applications, not the booklet the adjustable-rate rule names.
- B What You Should Know About Home Equity Lines of Credit That brochure goes with home equity lines of credit, not closed-end adjustable-rate loans.
- C Consumer Handbook on Adjustable Rate Mortgages Correct
- D Buying Your Home: Settlement Costs The adjustable-rate rule names only the Consumer Handbook on Adjustable Rate Mortgages or a substitute.
For a loan on the consumer's principal dwelling with a term over one year whose rate may rise, 12 CFR 1026.19(b)(1) of Regulation Z requires the creditor to provide the Consumer Handbook on Adjustable Rate Mortgages or a suitable substitute. It explains how adjustable-rate loans work before the consumer commits.
Regulation Z, 12 CFR s. 1026.19(b)(1)
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For the appraisal copy it must give an applicant, a lender may charge:
- A A reasonable copying fee The rule bars any charge for providing the copy itself.
- B The full appraisal fee again The lender may recover the appraisal's cost once, but may not charge again for the copy.
- C Nothing for the copy Correct
- D Postage only Even postage may not be charged for providing the required copy.
Although a creditor may charge a reasonable fee to cover the cost of the appraisal itself, 12 CFR 1002.14(a)(3) of Regulation B bars any charge to an applicant for providing copies of appraisals and other written valuations. The copy is free, and only the appraisal work may be charged.
Regulation B, 12 CFR s. 1002.14(a)(3)
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An adjustable-rate qualified mortgage starts at 4 percent and can reach 7 percent in its first five years. What rate must the creditor underwrite to?
- A 4% The start rate can rise well before five years are up, so it is not the rate the definition names.
- B 7% Correct
- C The fully indexed rate The definition names the maximum rate in the first five years, not the fully indexed rate.
- D The first adjusted rate The definition names one rate, the maximum in the first five years, rather than the rate at any single adjustment.
Seven percent is the qualifying rate, because the general qualified mortgage definition makes the creditor underwrite using the maximum interest rate that may apply in the first five years after the first regular periodic payment is due. Underwriting at the 4 percent start rate understates the payment.
Regulation Z, 12 CFR s. 1026.43(e)(2)(iv)(A)
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What decides whether points are part of the finance charge under the Truth in Lending Act (TILA)?
- A Who pays them Correct
- B Whether they buy down the rate Buying down the rate does not decide whether points are a finance charge; who pays them does.
- C Whether they exceed 1% No percentage threshold decides this, because the exclusion is written by reference to who pays.
- D Whether the loan is a refinance The type of transaction does not change how points are treated.
Who pays the points decides it: points and loan fees are finance charges, while the list of excluded charges names seller's points. Whether the points buy down the rate does not change the answer.
Regulation Z, 12 CFR s. 1026.4(c)(5)