Federal Law Course Info
1Hr Federal Law Material – Key – Click here to download PDF
Real Estate Settlement Procedures Act Questions
1. When must the good faith estimate be delivered to a borrower who has withdrawn their loan the day after an application has been received?
a. Within three days of application
b. Within one day of withdrawal
c. Never
d. Before consummation
2. Which of the following is not a violation of RESPA?
a. Giving a borrower a closing gift
b. Giving the borrower a thank you gift for referring their friends to you
c. A builder offering incentives if the borrower uses their affiliate
d. A builder throwing a huge party for potential buyers
3. Which of the following is true when the mortgage broker delivers the good faith estimate to the borrower?
a. The lender must also deliver the a good faith estimate
b. The mortgage broker is never required to deliver an additional good faith estimate
c. The mortgage broker must also deliver form 7306b in purchase transactions
d. The mortgage lender is not required to deliver a good faith estimate to the borrower within 3 days of receipt of the loan from the broker
4. Which of the following is true about a violation of RESPA section 8?
a. It is punishable by 30 years in prison and/or a $1,000,000 fine
b. It is punishable by 1 year in jail and/or a $10,000 fine
c. There is no physical punishment, but it is very frowned upon
d. It is considered worse than manslaughter in most states
5. Which entity enforces RESPA beginning in July of 2011?
a. HUD
b. FTC
c. FBI
d. The bureau of Consumer Financial Protection (CFPB)
6. According to RESPA who is responsible for choosing the title company in a purchase transaction?
a. The Broker
b. The Lender
c. The Seller
d. The Buyer
Truth in Lending Act Questions
7. What is the implementing regulation of the Truth in Lending Act?
a. Reg Z
b. Reg A
c. Reg X
d. Reg D
8. Which of the following is not a “trigger term” as defined by TILA?
a. “$1,300 monthly payment”
b. “10% down loans available”
c. “Great loans available”
d. “360 month loans available”
9. Which of the following agencies has the power to enforce the Truth in Lending Act?
a. HUD
b. FBI
c. FTC
d. LMNOP
10. Which of the following loans is regulated differently than the others under the Truth in Lending Act?
a. 30 year fixed
b. 2 year adjustable
c. LIBOR loans
d. Home equity lines of credit
11. Which document will merge with the truth in lending statement?
a. The privacy disclosure
b. The SAFE requirement disclosure
c. The advertising disclosures
d. The good faith estimate
12. Which of the following fees is always included in APR?
a. Notary fees
b. Title examination
c. Appraisal
d. Origination fees
Privacy Law Questions
13. Beginning in January of 2011, according to the Fair and Accurate Credit Transactions Act, what is one of the options for releasing credit information to a borrower?
a. Show the borrower what their credit score would be if they paid off all of their debt?
b. Show the borrower what the average credit score is for people who live in their zip code
c. Show the borrower what their credit score is and how it relates to the average score in America
d. Show the borrower the rates you would have given to the borrower if they had a no-money-down loan
14. Which website was created due to the Fair and Accurate Credit Transactions Act to give the borrowers access to their credit report for free?
15. Which of the following agencies is responsible for enforcing the Fair and Accurate Credit Transactions Act?
a. HUD
b. FTC
c. FCC
d. CSBS
16. Which of the following is not covered by the Gramm-Leach-Bliley Act?
a. Privacy policies
b. Business privacy
c. Safeguards
d. Pretexting
17. Which law was passed in 2003 and led the way to the red flags rule?
a. RESPA
b. TILA
c. FACTA
d. FCRA
18. What agency investigates identity theft related laws including the Gramm-Leach-Bliley act and the red flags rule?
a. FTC
b. FCC
c. HUD
d. OCC
Fed Compensation Change Questions
19. “A person who for compensation or other monetary gain, or in expectation of compensation or other monetary gain, arranges, negotiates, or otherwise obtains an extension of consumer credit for another person” is the definition of what job?
a. Mortgage broker
b. Mortgage Loan Originator
c. Mortgage lender
d. Branch manager
20. Compensation includes all of the following except:
a. Salaries
b. Trips
c. Prizes
d. Hugs
21. Which of the following is not considered a term by which an originator may not be paid differently?
a. Prepayment penalties
b. Loan to value
c. Credit score
d. Loan amount
22. Which of the following is not a permissible factor for basing compensation?
a. Hourly rate
b. APR
c. Existing customer
d. Pull-through ratio
23. Which of the following is not something that compensation can change based on?
a. Market conditions
b. Composition of race in affected area
c. Production volume
d. Loan performance
24. To enter the “Safe harbor” a loan originator must show the borrower all but the following:
a. Lowest rate of ARM’s and Fixed product
b. Lowest fees the originator has access to
c. Lowest rate without features like prepayment penalty
d. Lowest Rate of similar product
Dodd-Frank Questions
25. Which of the following agencies retained their enforcement power under the new CFPB changes?
a. HUD
b. FTC
c. OCC
d. NCUA
26. Which of the following is not an office of the bureau?
a. Office of research
b. Office of financial education
c. Office or mortgage regulation
d. Office of financial protection for older Americans
27. How often will the purchase booklet required by RESPA be updated for the consumers?
a. Every year
b. When necessary
c. Every 5 years
d. Never, it’s that good!
28. What is the date of transfer for the bureau?
a. April 1, 2011
b. January 1, 2012
c. July 1, 2010
d. July 21, 2010
29. For how much is an originator liable in the case of a TILA violation under the new rules?
a. $10,000 and/or up to 1 year in prison
b. 3 times all costs obtained from the consumer
c. 3 times all compensation plus attorney fees
d. 30 years in a federal penitentiary
30. The definition of “Qualified mortgage” includes all of the following except:
a. Full doc
b. Not neg-am
c. 38/42 debt ratio
d. Points and fees less than 3%
31. Under the new Dodd-Frank act which lender policy is banned?
a. Mandatory escrow accounts
b. Mandatory origination fees
c. Mandatory arbitration
d. Mandatory payments
32. Under the Dodd-Frank bill if a borrower has an adjustable rate mortgage when must a borrower get their disclosures notifying them of adjustments?
a. 3 months before adjustment
b. At time of adjustment
c. 6 months prior to adjustment
d. At or before time of refinance
33. Under the new Dodd-Frank rules which of the following is not required on the borrower’s monthly bill if they have an adjustable rate mortgage?
a. The date of next adjustment
b. A description of any late payment fees
c. An email address where the borrower can get more information about their ARM
d. The corresponding fixed rate on the date of billing
34. According to the new Dodd-Frank changes what is the threshold for the APR on a jumbo loan to become a higher priced mortgage loan?
a. 1.5% above the Average Prime Offer Rate
b. 2.5% above the Average Prime Offer Rate
c. 3.5% above the Average Prime Offer Rate
d. 4.5% above the Average Prime Offer Rate
35. The new appraisal independence standards have replaced what past policy
a. Home valuation code of appraisal values
b. Home valuation code of conduct
c. Home value implementation rule
d. Home value decrease mandate
36. How long does a loan servicer have to release a payoff when requested?
a. 5 days
b. 15 days
c. 30 days
d. As long as it takes
Answer Key:
Real Estate Settlement Procedures Act Questions
RESPA can be found at 12 U.S.C. 2601 of the federal law. The rule and law can be referenced for further research at www.hud.gov/RESPA
1. When must the good faith estimate be delivered to a borrower who has withdrawn their loan the day after an application has been received?
a. Within three days of application
b. Within one day of withdrawal
c. Never
d. Before consummation
The withdrawal of the loan removes the requirement for a GFE. Keep in mind that disclosures that are required by other laws may still be necessary. Do not just delete the file. Check with the Equal Credit Opportunity Act 15 U.S.C. 1691 and implemented by Regulation B for more on these other law requirements.
2. Which of the following is not a violation of RESPA?
a. Giving a borrower a closing gift
b. Giving the borrower a thank you gift for referring their friends to you
c. A builder offering incentives if the borrower uses their affiliate
d. A builder throwing a huge party for potential buyers
Other state and federal laws should be reviewed before giving the borrower a closing gift. Some states outlaw it completely, while other states have no stance on the issue. A loan originator should ensure that they review IRS law as well for gifts. Finally, any gift that is used to induce the borrower to purchase the home, and not listed in the purchase agreement, could be seen as fraud by omission. A prime example would be if a car was included in the purchase of a house and not disclosed to the lender. If the underwriter would have changed their opinion based on this information then it could be mortgage fraud.
3. Which of the following is true when the mortgage broker delivers the good faith estimate to the borrower?
a. The lender must also deliver the a good faith estimate
b. The mortgage broker is never required to deliver an additional good faith estimate
c. The mortgage broker must also deliver form 7306b in purchase transactions
d. The mortgage lender is not required to deliver a good faith estimate to the borrower within 3 days of receipt of the loan from the broker
According to RESPA the requirement to deliver the good faith estimate lies with the broker. The creditor is required to deliver a GFE if they cannot prove that the mortgage broker did. More on this can be found in the frequently asked questions at www.hud.gov/respa
4. Which of the following is true about a violation of RESPA section 8?
a. It is punishable by 30 years in prison and/or a $1,000,000 fine
b. It is punishable by 1 year in jail and/or a $10,000 fine
c. There is no physical punishment, but it is very frowned upon
d. It is considered worse than manslaughter in most states
This information can be found in greater depth at http://www.hud.gov/offices/hsg/ramh/res/respamor.cfm
5. Which entity enforces RESPA beginning in July of 2011?
a. HUD
b. FTC
c. FBI
d. The bureau of Consumer Financial Protection (CFPB)
This is a new bureau that has been created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The bureau is created through Title X of this act.
6. According to RESPA who is responsible for choosing the title company in a purchase transaction?
a. The Broker
b. The Lender
c. The Seller
d. The Buyer
This information can be found in section 9 of RESPA
Truth in Lending Act Questions
The Truth in Lending Act can be found at 15 U.S.C. 1601-1667f. You may also reference all rules at this website: http://www.fdic.gov/regulations/laws/rules/6500-1400.html
7. What is the implementing regulation of the Truth in Lending Act?
a. Reg Z
b. Reg A
c. Reg X
d. Reg D
8. Which of the following is not a “trigger term” as defined by TILA?
a. “$1,300 monthly payment”
b. “10% down loans available”
c. “Great loans available”
d. “360 month loans available”
This one comes from regulation Z Subpart C, 226.24 (d)
9. Which of the following agencies has the power to enforce the Truth in Lending Act?
a. HUD
b. FBI
c. FTC
d. LMNOP
10. Which of the following loans is regulated differently than the others under the Truth in Lending Act?
a. 30 year fixed
b. 2 year adjustable
c. LIBOR loans
d. Home equity lines of credit
Note: The Home Equity Line of Credit (HELOC) is regulates as an open end line of credit.
11. Which document will merge with the truth in lending statement?
a. The privacy disclosure
b. The SAFE requirement disclosure
c. The advertising disclosures
d. The good faith estimate
This change is due to the Dodd-Frank Act referenced above.
12. Which of the following fees is always included in APR?
a. Notary fees
b. Title examination
c. Appraisal
d. Origination fees
An excellent source for this information is page220 of this handbook from the OCC website: http://www.occ.gov/static/publications/handbook/truth-in-lending-handbook.pdf
Privacy Law Questions
The privacy laws covered here are:
The Fair and Accurate Credit Transactions Act of 2003 and the red flags rule amended the Fair Credit Reporting Act – 15 U.S.C. § 1681
The Gramm Leach Bliley Act can be found at: 15 USC 6801. Further references can be found here: http://www.ffiec.gov/ffiecinfobase/resources/elect_bank/con-15usc_6801_6805-gramm_leach_bliley_act.pdf
13. Beginning in January of 2011, according to the Fair and Accurate Credit Transactions Act, what is one of the options for releasing credit information to a borrower?
a. Show the borrower what their credit score would be if they paid off all of their debt?
b. Show the borrower what the average credit score is for people who live in their zip code
c. Show the borrower what their credit score is and how it relates to the average score in America
d. Show the borrower the rates you would have given to the borrower if they had a no-money-down loan
This change is a further implementation of the FACT ACT referenced above
14. Which website was created due to the Fair and Accurate Credit Transactions Act to give the borrowers access to their credit report for free?
This is part of the FACT Act
15. Which of the following agencies is responsible for enforcing the Fair and Accurate Credit Transactions Act?
a. HUD
b. FTC
c. FCC
d. CSBS
The agency will actually keep their responsibility to monitor this law instead of it going to the bureau of consumer financial protection
16. Which of the following is not covered by the Gramm Leach Bliley Act?
a. Privacy policies
b. Business privacy
c. Safeguards
d. Pretexting
The Gramm-Leach-Bliley Act was written to protect private consumer info. It does not protect business information.
17. Which law was passed in 2003 and led the way to the red flags rule?
a. RESPA
b. TILA
c. FACTA
d. FCRA
This refers to the Fair and Accurate Credit Transactions Act of 2003
18. What agency investigates identity theft related laws including the Gramm-Leach-Bliley act and the red flags rule?
a. FTC
b. FCC
c. HUD
d. OCC
Again, they keep most of their power under the Dodd-Frank changes.
Fed Compensation Change questions
All of the federal compensation changes, including the rule and preamble can be found here: http://www.federalreserve.gov/newsevents/press/bcreg/20100816d.htm and are a change to the Truth in Lending Act 15 U.S.C. 1601-1667f
19. “A person who for compensation or other monetary gain, or in expectation of compensation or other monetary gain, arranges, negotiates, or otherwise obtains an extension of consumer credit for another person” is the definition of what job?
a. Mortgage broker
b. Mortgage Loan Originator
c. Mortgage lender
d. Branch manager
This is the SAFE Act definition that is being used by more and more legislators when writing laws. It will be nice when they all have the same definition. Unfortunately, the new rules include the company in this definition.
20. Compensation includes all of the following except:
a. Salaries
b. Trips
c. Prizes
d. Hugs
This one is a funny answer but it is in there to show that the Federal Reserve thought of just about everything when they wrote this. It doesn’t matter what you call it. Compensation is compensation.
21. Which of the following is not considered a term by which an originator may not be paid differently?
a. Prepayment penalties
b. Loan to value
c. Credit score
d. Loan amount
This one has a tricky double negative that can throw you off on first read. The MLO may be compensated differently on loan amounts based on a percentage.
22. Which of the following is not a permissible factor for basing compensation?
a. Hourly rate
b. APR
c. Existing customer
d. Pull-through ratio
A, C, and D are fine. APR would be incorrect. This is in the list of permissible factors in the Federal Reserve Compensation Rule.
23. Which of the following is not something that compensation can change based on?
a. Market conditions
b. Composition of race in affected area
c. Production volume
d. Loan performance
This deals with fair lending. Watch for future lawsuits based on “Disparate Impact” with the new pricing structures. If it is determined that a company has compensated based on geographic location, and that location has a disproportionate percentage of a minority population, then that could be grounds for a major lawsuit.
24. To enter the “Safe harbor” a loan originator must show the borrower all but the following:
a. Lowest rate of ARM’s and Fixed product
b. Lowest fees the originator has access to
c. Lowest rate without features like prepayment penalty
d. Lowest Rate of similar product
This is found in the “Safe Harbor” section of the rule.
Dodd-Frank Questions
The “Dodd-Frank” references are referring to HR 4172, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. All of the questions in this section come from Title X and XIV of the act.
25. Which of the following agencies retained their enforcement power under the new CFPB changes?
a. HUD
b. FTC
c. OCC
d. NCUA
The FTC has very little rulemaking authority. They are mainly an enforcement arm of the federal government, thus they retained their powers for the most part. They are losing some of their staff to the bureau, but otherwise they are intact.
26. Which of the following is not an office of the bureau?
a. Office of research
b. Office of financial education
c. Office or mortgage regulation
d. Office of financial protection for older Americans
The offices were created through Title X of the Dodd-Frank Act.
27. How often will the purchase booklet required by RESPA be updated for the consumers?
a. Every year
b. When necessary
c. Every 5 years
d. Never, it’s that good!
This is new and mandated by the Dodd-Frank.
28. What is the date of transfer for the bureau?
a. April 1, 2011
b. January 1, 2012
c. July 1, 2010
d. July 21, 2010
This date was mandated by congress as one year after the act passed.
29. For how much is an originator liable in the case of a TILA violation under the new rules?
a. $10,000 and/or up to 1 year in prison
b. 3 times all costs obtained from the consumer
c. 3 times all compensation plus attorney fees
d. 30 years in a federal penitentiary
Again, this is a Dodd-Frank adjustment. Another interesting fact is that the Dodd-Frank Act made the front line mortgage loan originator liable for Truth in Lending Act violations instead of the liability ending with the creditor.
30. The definition of “Qualified mortgage” includes all of the following except:
a. Full doc
b. Not neg-am
c. 38/42 debt ratio
d. Points and fees less than 3%
This is the foundation of the new definition of “Qualified Mortgage” from Section 15G(e)(4). Minimum debt ratios have not been established yet.
31. Under the new Dodd-Frank act which lender policy is banned?
a. Mandatory escrow accounts
b. Mandatory origination fees
c. Mandatory arbitration
d. Mandatory payments
From section 1414(e) of the Dodd-Frank Act. “ARBITRATION.—‘‘(1) IN GENERAL.—No residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer may include terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.”
32. Under the Dodd-Frank bill if a borrower has an adjustable rate mortgage when must a borrower get their disclosures notifying them of adjustments?
a. 3 months before adjustment
b. At time of adjustment
c. 6 months prior to adjustment
d. At or before time of refinance
From Section 1418 of Dodd-Frank
33. Under the new Dodd-Frank rules which of the following is not required on the borrower’s monthly bill if they have an adjustable rate mortgage?
a. The date of next adjustment
b. A description of any late payment fees
c. An email address where the borrower can get more information about their ARM
d. The corresponding fixed rate on the date of billing
Also from section 1418
34. According to the new Dodd-Frank changes what is the threshold for the APR on a jumbo loan to become a higher priced mortgage loan?
a. 1.5% above the Average Prime Offer Rate
b. 2.5% above the Average Prime Offer Rate
c. 3.5% above the Average Prime Offer Rate
d. 4.5% above the Average Prime Offer Rate
From section 1461 of Dodd-Frank
35. The new appraisal independence standards have replaced what past policy
a. Home valuation code of appraisal values
b. Home valuation code of conduct
c. Home value implementation rule
d. Home value decrease mandate
This comes from section 1472 of Dodd Frank which adds paragraph (j) to section 129e of the Truth in Lending Act
36. How long does a loan servicer have to release a payoff when requested?
a. 5 days
b. 15 days
c. 30 days
d. As long as it takes
This comes from the Dodd-Frank Amendment to 128(t)(2) of the Truth in Lending Act
