Ch 1,2,3,9 Quiz

Consumer Financial Protection Bureau (CFPB) states all of these for residential loans EXCEPT

• lenders must provide borrowers with a new loan estimate of closing costs.

• borrowers must receive information on settlement charges.

• a new loan closing disclosure must be used at new loan closings.

• the borrower may cancel the first home purchase loan transaction within three days after settlement.

Answer explanation

Explanation

A borrower has no rights to cancel a first or second home purchase loan but does have cancellation rights for other loans, such as those for refinancing or home equity. CFPB does require that lenders provide borrowers with a new loan closing disclosure that states all charges to be paid by the borrower and the seller at settlement of the loan. Lenders must provide a new loan estimate of closing costs no more than three business days after receiving a loan application, along with information on settlement costs.

Real estate firms are often affiliated with title insurance companies or mortgage brokers. Real Estate Settlement Procedures Act (RESPA) permits these business arrangements as long as

• consumers are unaware of these arrangements.

• consumers are required to use the services of the affiliated companies.

• companies disclose their relationships with one another to the consumer.

• companies pay referral fees between them.

Answer explanation

RESPA permits such arrangements as long as a consumer is clearly informed of the relationship among the affiliated companies and is provided information that the consumer may use other service providers for the same services. The companies may not require a consumer to use the services of any affiliated company. The companies may not pay one another referral fees.

The provisions of the Truth in Lending Act require all of these to be disclosed to a residential buyer EXCEPT

• the loan interest rate.

• discount points.

• a loan origination fee.

• the real estate brokerage commission.

Answer explanation

Explanation

The Truth in Lending Act has to do with disclosing details of the proposed loan to a potential purchaser. The Act does not deal with brokerage commissions. Discount points, loan origination fees, and the loan interest rate are required by Truth in Lending Act.

In the case of residential real estate transactions for refinancing a loan, which are covered by truth-in-lending laws, the borrower has how many days in which to rescind the transaction?

• 5 days

• 10 days

• 7 days

• 3 days

Answer explanation

Explanation

According to truth-in-lending laws, the borrower has three days to rescind the transaction by merely notifying the lender. The three-day right of rescission applies only to loans for refinancing and home equity loans. It does not apply to purchase or construction loans.

The federal Equal Credit Opportunity Act (ECOA) allows lenders to discriminate against potential borrowers on the basis of

• age.

• dependence on public assistance.

• amount of income.

• race.

Answer explanation

Explanation

Lenders may reject applicants who have insufficient income for the loans they are requesting or for their lack of ability to repay the loans. Lenders may not discriminate against potential borrowers on the basis of race, color, religion, national origin, sex, marital status, age, or dependence on public assistance.

According to TILA-RESPA Integrated Disclosure (TRID) rules, when must the Loan Estimate form be provided to consumers?

• No later than three business days before the closing

• No later than three calendar days before the closing

• No later than three business days after the loan application is received by the lender

• No later than three calendar days after the loan application is received by the lender

Answer explanation

A business day includes Saturdays if the lender is open for business.

The FICO^® score was designed to

• determine the property’s loan-to-value ratio.

• access borrower’s intelligence.

• determine maximum loan qualifications.

• measure borrowers’ creditworthiness.

Answer explanation

Explanation

The FICO^® Score was designed as a measure for lenders to assess a borrower's worthiness and ability to repay a loan. Lenders use other measures to determine a borrower's qualifications, maximum loan amounts, and property's value.

A lender will take certain factors into consideration when deciding whether to grant a borrower a mortgage loan. A decision based on which factor is a violation of the Equal Credit Opportunity Act (ECOA)?

• Age of the borrower

• Creditworthiness of the borrower

• Ability of the borrower to make the payments

• Amount of the borrower's income

Answer explanation

Explanation

ECOA prohibits lenders from discriminating against credit applicants on the basis of several factors, including age, race, sex, and marital status. A lender may consider a borrower's income, creditworthiness, and ability to make payments in determining whether or not to make a loan

The Consumer Financial Protection Bureau (CFPB) requires that

• real estate brokers and lenders must include the annual percentage rate (APR) and all charges in all real estate advertisements.

• lenders provide the borrower with a new loan estimate at the time of application or no more than three days after application.

• brokers be responsible for verifying that the new loan disclosure matches the new loan estimate.

• 
  lenders provide a closing statement to all purchasers of residential or commercial properties.

Answer explanation

Explanation

CFPB provides that the lender provide the borrower with a new loan estimate of the settlement costs no more than three business days after receiving the loan application. The law requires full disclosure of APR and terms if certain items are included in the advertisement; it does not apply to all ads. The law does not apply to the purchase of commercial properties. CFPB does not require brokers to verify that the new loan closing disclosure matches a new loan estimate as there may have been changes.

Buyers seeking a mortgage on a single-family residence would be LEAST likely to obtain the mortgage from

• a credit union.

• a commercial bank.

• a mutual savings bank.

• a life insurance company.

Answer explanation

Explanation

Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases. Mutual savings banks, credit unions, and commercial banks are all sources of mortgages for individual residences.